EXPANSION
INTEGRATION
DIVERSIFICATION
2018 ANNUAL REPORT
The Cannabis Industry’s Fastest
Pro-forma Revenue Development
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$33.1 Million
PRO-FORMA Q4 2018 REVENUE1
Despite receiving its license from Health Canada 18 months after its largest competitors, Aurora
has dramatically scaled production capacity and total revenue through a mix of rapid organic growth
and strategic acquisitions that have produced the preeminent global cannabis leader.
1 Pro-forma revenue includes Aurora, CanniMed, and MedReleaf for all periods presented.
Aurora Cannabis Inc.
2018 Annual Report
1
Rapid Revenue Development
Across All Verticals
Through carefully targeted acquisitions and the rapid development of its production facilities,
Aurora has quickly expanded its total revenue base while broadening and diversifying its high-
margin product offerings.
Today, Aurora’s growth is driven by a broad mix of revenues from across the cannabis industry
value chain, including: Dried Flower, Oil, Patient Counselling, Hemp Products, Home Cultivation,
Accessories and Facility Construction.
Aurora will continue to expand its portfolio of products by leveraging the industry’s most
experienced science, and research and development teams, created through the combination
of the teams at Aurora, CanniMed, MedReleaf and Anandia.
206%
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Oil
Counselling Services
Other1
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1 Other reported revenue includes Hempco, BC Northern Lights, Urban Cultivator Inc. and Aurora Larssen Projects Ltd.
2
Aurora Cannabis Inc.
2018 Annual Report
A Strong, Complementary Portfolio
of Accretive Assets Creating
Significant Shareholder Value
ABOUT
STRATEGIC
RATIONALE
TSX: CLIQ Alcanna retails adult beverages
including beer, wine, spirits, and after
October 17, 2018, adult consumer use
cannabis products
Rapid development of a
Canadian, cannabis retail
network
TSX/V: RTI Radient extracts compounds from
biological material using a patented
platform that provides superior purity,
yield, and cost outcomes
Consistent, efficient and
high-quality cannabis ex-
tract production
TSX/V: N Namaste distributes vaporizers and
smoking accessories through e-com-
merce sites in 26 countries with five
global distribution hubs
Expands Aurora’s smoke-
free product offering for
customers
TSX/V: HEMP Hempco manufactures and sells
hemp seed food products for human
and animal consumption.
ASX: CAN Cann Group is building a world-class
Australian business to take advan-
tage of opportunities in the emerging
medicinal cannabis industry.
Provides access to a low-
cost raw material for the
potential production of CBD
extracts
Develops Aurora’s inter-
national operations in
Australia
Private Capcium is a contract manufacturing
platform specializing in softgel encap-
sulation, providing high-value, high
quality cannabis product
Expands Aurora’s differenti-
ated, higher-margin product
offerings
OTC: CTTH CTT provides safe, flexible, simple
and innovative drug delivery systems
for pain management therapies and
treatments
CSE: MWM Micron Waste is a leading organic
waste technology company that de-
veloped an on-site system that turns
organic waste into clean water
CSE: CHOO Choom delivers elevated experiences
through curated retail environments,
handcrafted cannabis supply, and
brand diversity for consumers
TSX: TGOD TGOD is a Canadian licensed pro-
ducer, growing high quality, organic,
medical cannabis with sustainable,
all-natural principles
Provides exclusive access to
CTT’s product development
pipeline, including oral thin
film wafers
Cost efficient and environ-
mentally friendly waste
disposal technology
Positions Aurora to par-
ticipate in the emerging
craft cultivation market and
Chooms Western Canada
retail strategy
Aurora has the right to pur-
chase up to 20% of TGOD’s
annual production of organic
cannabis from TGOD’s
Ancaster and Valleyfield
facilities
TOTAL AMOUNT INVESTED TO DATE
$326.6
MILLION
FAIR MARKET VALUE (JUNE 30, 2018)
$698.6
MILLION
UNREALIZED GAIN ON INVESTMENT
$372.0
MILLION
Aurora Cannabis Inc.
2018 Annual Report
3
Through the construction of its 11 technologically advanced production facilities, Aurora has
developed a strong and growing ability to produce high-quality, low-cost cannabis to service both
the international and domestic medical markets as well as the emerging Canadian adult consumer
use market.
Aurora remains committed to servicing the medical needs of its expanding base of registered
patients gained through the combination of Aurora, CanniMed & MedReleaf. The additional
production capacity coming online within the next 12-18 months will ensure Aurora can continue
to meet the demand of its patients while capitalizing on the significant opportunities ahead in the
domestic and global cannabis industry.
The Global Leader in Medical
Cannabis Production and Patient
Counselling Support Services
1
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1 Grams of Dried Flower Equivalents Produced and Sold is a pro forma figure; and includes contributions of CanniMed and MedReleaf.
2 Registered Medical Patients is a pro-forma figure; and includes patients gained through the acquisition of CanniMed and MedReleaf.
4
Aurora Cannabis Inc.
2018 Annual Report
CASH COST TO PRODUCE1
CASH COST TO SELL1
$1.91
Q4 2017
$2.09
Q4 2017
11%
11%
$1.70
Q4 2018
$1.87
Q4 2018
Industry Leading Production Capacity
Providing Significant Scale and Long
Term Cost Savings
DENMARK
AURORA NORDIC
>500,000
kg/year
FUNDED PRODUCTION CAPACITY
CANADA
AURORA SKY
AURORA
MOUNTAIN
CANNIMED
AURORA SUN
AURORA EAU
AURORA VIE
MEDRELEAF EXETER
MEDRELEAF MARKHAM
MEDRELEAF BRADFORD
1 Cash Cost to Produce and Cash Cost to Sell are non-IFRS measures and are not a recognized, defined or a standardized measure under IFRS.
These measures as well as other non-IFRS financial measures reported by Aurora are in the “Non-IFRS Measures” section of the Financial Review.
Aurora Cannabis Inc.
2018 Annual Report
5
Embracing International
Opportunities Through a Rapidly
Expanding Global Footprint
CANADA
SPAIN2
MEXICO
CAYMAN ISLANDS
COLUMBIA
Sales and operations
across five continents
BRAZIL
URUGUAY2
6
6
Aurora Cannabis Inc.
Aurora Cannabis Inc.
2018 Annual Report
2018 Annual Report
AURORA SUN
Medicine Hat, Alberta
SCHEDULED FOR COMPLETION IN 2020
DENMARK1
SPAIN2
LITHUANIA
GERMANY
ITALY
MALTA
ISRAEL
SOUTH AFRICA
AUSTRALIA
1 Aurora Nordic will focus on the cultivation and sales of cannabis in Denmark, Sweden, Norway, Finland and Iceland through
Aurora’s wholly-owned subsidiary, Aurora Deutschland GmbH.
2 Through the planned acquisition of ICC Labs, Aurora gains entry to Uruguay and Spain.
Aurora Cannabis Inc.
2018 Annual Report
7
AURORA SKY
Edmonton, Alberta
800,000 square feet,
100,000+ kg/ year
cultivation capacity
Closed system with
complete environmental
control
World’s most
technologically advanced
cannabis facility
Unprecedented automation
delivering optimized yields,
plant health and product
Sustainable production costs
well below $1.00 per gram
8
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Aurora Cannabis Inc.
Aurora Cannabis Inc.
2018 Annual Report
2018 Annual Report
Aurora continues to pursue an aggressive and targeted growth strategy, aided by an unwavering
commitment to maintain its rapid pace of execution. The completion of these transactions has
created Canada’s premier cannabis company with a fully-aligned strategic vision and production
philosophy, as well as complementary assets, distribution networks, products, and capabilities.
Today, Aurora is vertically integrated and horizontally diversified across every key segment of the
cannabis value chain, from facility engineering and design to cannabis breeding, genetics research,
production, derivatives, high value-add product development, home cultivation, wholesale and
retail distribution.
Unrivaled Pace of Execution:
15 acquisitions and 12 strategic
investments completed
or in progress to date
JUNE 2017
SEPT 2017
DEC 2017
MAR 2017
JUNE 2018
SEPT 2018
Aurora Cannabis Inc.
2018 Annual Report
9
Dear fellow shareholders,
Fiscal 2018 was a year of tremendous progress in
We recognized at an early stage that effectively
which Aurora continued to execute consistently on
integrating acquisitions would be key to our success;
its high-paced expansion strategy. We have worked
and, as a result, integration is now one of our core
tirelessly and with clear focus towards establishing a
competencies. As a measure of our effectiveness,
company that meets what we believe are the critical
the integration of CanniMed was completed within
success factors in becoming a scale and margin
the targeted 90 days; and, we have now started to
leader in the cannabis industry. We believe we are
accelerate its patient registration, improve cultivation
exceptionally well positioned to capitalize on the
techniques to increase yield, grow revenue, and
enormous opportunity presented by the domestic
further product development and international
and international cannabis markets.
expansion. This same focus on execution is now being
To further demonstrate our successful execution,
this time last year, we had one fully-licensed
operational facility, two facilities under construction,
a funded capacity of 108,500 kg of cannabis per
year, and were active in three countries. Presently,
we have seven facilities licensed for production
and five sales licenses. We are on target to have 11
applied to the integrations of both MedReleaf and
Anandia; creating a seamlessly vertically integrated
cannabis company. These transactions enable us
to capture margin throughout the value chain, with
an unparalleled ability to access new and restrictive
markets with a growing portfolio of innovative high-
margin products and services.
facilities with a combined funded capacity in excess
While scale is important, we believe that scale
of 500,000 kg of cannabis per year. We expanded
internationally with operations, investments and/or
sales on six continents. We have a rapidly growing
and well diversified portfolio of high-quality value
add products; as well as a robust product pipeline,
multiple medical and recreational brands, and an
industry leading science and innovation team.
transforms into sustainable leadership only when
combined with the ability to consistently produce the
highest quality products at very low production costs.
To this end, we are developing what we call Sky Class
facilities, named after Aurora Sky, the world’s most
technologically advanced cannabis production facility
to date. These facilities are best described as massive
scale, indoor facilities with a specialty glass roof.
We have grown significantly from a human resource
The closed system nature of the facilities enables
perspective organically by recruiting at a rapid pace
full control of all environmental variables, ensuring
and through several transformational acquisitions. At
consistently high product quality, while a high degree
this time last year, we employed 300 people; and are
of automation and other yield optimizing technologies
now exceeding 1,400.
While continuing to rapidly grow organically, mergers
and acquisitions are a core element of our strategy
that has enabled us to grow from a company that
was over 18 months behind our competitors from
obtaining our first sales license, to now being an
industry leader. We have completed 20 transactions
in the past two years starting with the acquisition of
CanvasRx, the country’s leading patient counselling
deliver substantial economies of scale. To illustrate
this point, at Aurora Mountain, Canada’s first purpose
built indoor facility, produces some 4,800 kg per year
of cannabis, requiring approximately 125 people.
Aurora Sky, once up to full capacity, will produce
some 100,000 kg per year of high quality cannabis,
using only approximately 380 people to do so. As a
result, we anticipate that our Sky Class facilities will
have production costs of well below $1 per gram.
and physician education outreach organization,
Aurora Sky is now nearly fully operational, and we
through to our most recent major acquisitions of
are ramping up to full capacity, anticipating that the
CanniMed, MedReleaf and Anandia Labs, three key
facility will produce more than 8,000 kg each month
players in the international cannabis sector.
by the beginning of 2019. In addition, we are in the
10
Aurora Cannabis Inc.
2018 Annual Report
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HORIZONTALLY DIVERSIFIED
process of developing two further Sky Class facilities,
We have a strong focus on increasing margins while
Aurora Sun and Aurora Nordic, with a combined
at the same time offering competitively priced
anticipated production capacity of around 270,000
products. This strategic objective is spearheaded
kg per year. With a sales license for Aurora Vie, the
by the industry’s most experienced science, and
addition of the CanniMed and the two MedReleaf
research and development team resulting in an
facilities, and with plants in Aurora Nordic Phase I, we
expanding portfolio of products, such as topicals,
are dramatically increasing production and therefore
capsules, gel caps, soft gels, pre-rolls. We are
our revenue generating potential while realizing
developing a robust pipeline of marketable IP, novel
economies of scale.
We have developed our key distribution channels
with multiple agreements to supply Provincial
buyers upon the commencement of adult consumer
use on October 17, 2018. We will supply Canada’s
largest pharmacy chains, such as Shoppers Drug
Mart and Pharmasave, which are anticipated to
drug delivery technologies and additional form
factors. The combination of the teams at Aurora,
CanniMed, MedReleaf and Anandia creates not just
the world leading cannabis science team, it creates
capabilities throughout the value chain, enabling us to
accelerate development of the company and support
our goal of becoming the margin leader.
become important sales channels in the Canadian
Today, Aurora is vertically integrated and horizontally
cannabis markets.
We have also invested in Alcanna, Canada’s largest
alcohol retailer, to establish a large network of
cannabis retail stores. Alcanna is well positioned to
open the maximum allowed number of 37 stores in
Alberta in year one of adult-use; and, is planning
to open additional stores throughout the country in
provinces where private retail will be permitted.
Beyond our borders, the international medical
opportunity promises to be huge. With external
analysts estimating the global medical market
to grow to approximately 10 million kg per year,
dwarfing the currently announced funded capacity
of the entire cannabis industry. We recognized the
potential of the international markets early; and
have made great progress in leveraging our first
mover advantage by entering a large and growing
number of international markets. We are the
diversified across every key segment of the cannabis
value chain, from facility engineering and design, to
cannabis breeding, genetics research, production,
derivatives, high value-add product development,
home cultivation, wholesale and retail distribution.
We are focused on all the critical success factors
that we believe will make Aurora the pre-eminent
cannabis company globally.
We have also made a number of strategic
investments, which have generated both
competitive advantages and substantial value for
our shareholders. Our portfolio includes The Green
Organic Dutchman, Cann Group Limited, Alcanna,
Radient Technologies, Choom Holdings, Micron
Waste, Wagner Dimas, Evio, CTT Pharmaceuticals
and Capcium. In fact, our total unrealized gain
on investment in public companies approaches
$360 million as at June 30, 2018.
European Union’s (EU) largest distributor of medical
Looking to 2019, we will continue to execute on
cannabis providing access to restrictive markets
our aggressive growth strategy supported by the
which generally require EU Good Manufacturing
incredible dedication and hard work of our people.
Practices (GMP) certified facilities. We own three of
Through them, Aurora’s standards continue to set
the world’s seven designated facilities. We are now
the industry benchmarks for execution; and I look
active in six continents; and, are actively targeting
forward to sharing new and exciting developments
additional markets.
with you as we reach new milestones on our journey.
On behalf of the Aurora team, I want to thank you for
your ongoing support.
“Signed”
Terry Booth, CEO
Aurora Cannabis Inc.
2018 Annual Report
11
Aurora intends to be a leader in the domestic adult consumer use market as well as the domestic
and international medical cannabis space, both in terms of scale and profitability. To achieve this,
the Company has identified a number of factors it deems critical in driving its strategy.
Consequently, Aurora has been executing on an aggressive growth strategy that is focused on
developing a vertically integrated company with a diversified portfolio offering.
Meeting the Critical Success Factors:
Capturing Margin Throughout the
Cannabis Value Chain
This dynamic growth strategy focuses on the following areas to ultimately better enable Aurora
to capture greater margin across the entire cannabis industry value chain:
SCIENCE
Develop and acquire mar-
ketable intellectual property
while strengthening our global
medical brand and generating
increased visibility
DIVERSIFICATION
Develop a broad portfolio of
high value-add products to
deliver higher margins.
SCALE
Develop large scale, highly
efficient production capacity
in diverse geographic markets
to serve the global demand for
medical cannabis.
COST OF
PRODUCTION
Adopt a purpose-built,
high-technology, automated,
yield optimized facility model
that is replicable across the
Company’s different markets,
ensuring consistently high-
quality cannabis products,
produced at low costs.
DISTRIBUTION
Develop strong domestic and
international distribution part-
ners and networks to ensure a
broad market reach
INNOVATION
Develop, adopt and acquire
innovations across the entire
cannabis industry value chain
to deliver efficiencies and cre-
ate competitive advantages.
BRANDS
Create unique brands and
customer experiences that
resonate both with the medical
community and the adult
consumer use market to help
capture market share.
12
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Aurora Cannabis Inc.
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2018 Annual Report
2018 Annual Report
HORIZONTALLY DIVERSIFIED
11
>500,0001 kg/year
Production
Facilities
Funded
Capacity
Rapid Facility Development
Driving Scale
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LOCATION
SIZE
CAPACITY
STATUS
LICENSE
CULTIVATION
SALE
Aurora
Mountain
Aurora
Vie
Aurora
Eau
Aurora
Sky
Aurora
Sun
Aurora
Nordic 1
Aurora
Nordic 2
CanniMed
MedReleaf
Markham
MedReleaf
Bradford
Mountain View,
Alberta, Canada
Pointe Claire,
Quebec, Canada
Lachute, Quebec,
Canada
Edmonton,
Alberta, Canada
Medicine Hat,
Alberta, Canada
Odense,
Denmark
Odense,
Denmark
Saskatoon,
Saskatchewan,
Canada
Markham,
Ontario, Canada
Bradford,
Ontario, Canada
55,200 ft2
4,800 kg/year
40,000 ft2
4,000 kg/year
Operating since 2015
• •
Operating since June 2018 • •
48,000 ft2
4,500 kg/year
Facility construction
completed
800,000 ft2
>100,000 kg/year Full facility to be completed
by end of 2018
1,200,000 ft2
>150,000 kg/year Currently under construc-
•
•
100,000 ft2
8,000 kg/year
tion. Estimated completion
H1 2020
Construction complete.
First harvest expected fall
2018
1,000,000 ft2
>120,000 kg/year Currently under construc-
97,000 ft2
19,000 kg/year
tion. Estimated completion
H1 2020
Operating since 2004.
Upgrading to EU GMP
specifications
55,000 ft2
7,000 kg/year
Operating since 2014
210,000 ft2
28,000 kg/year
Expansion underway from
9,500 kg to 28,000 kg/ year.
Expected to be completed
by end of 2018
Land and building
purchased
• •
• •
• •
MedReleaf
Exeter
Exeter, Ontario,
Canada
1,000,000 ft2
105,000 kg/year
1 The sum of Aurora’s announced funded capacity is 500,000+ kg per year, which includes Aurora’s proportionate share of TGOD’s funded
capacity of 23,000 kg per year.
Aurora Cannabis Inc.
2018 Annual Report
13
Driving Down the Per Gram
Costs of Production
Aurora’s “Sky Class” facilities
incorporate the latest technolog-
ical advances including precision
environmental controls and a high
degree of automation. Coupled
with large scale facilities and low
labour requirements allows Aurora
to reliably produce the lowest-cost,
highest quality cannabis in the
industry.
• Mobile bench system and
automated plant movement
• Harvest to dry provides small-
batch quality with mass scale
throughput
• Custom process flow supports
efficient production under strict
GMP/GPP
• Forced air with MERV 14
filtration
• Design supports unsurpassed
light availability and penetration
• Best-in-class uniform climate
control & specialized irrigation
system
• Fully integrated computer
control and monitoring
14
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Aurora Cannabis Inc.
Aurora Cannabis Inc.
2018 Annual Report
2018 Annual Report
HORIZONTALLY DIVERSIFIED
CanvasRx, a wholly owned subsidiary of Aurora, is Canada’s trusted resource and marketplace,
enabling you to develop a better understanding of medical marijuana and its various strains and
uses, as well as information on licensed producers in Canada. With 28 facilities in operation
nationwide, CanvasRx is a leading Canadian network of cannabis counseling and outreach centres.
To date CanvasRx has assisted over 42,200 patients. Over 9,500 medical doctors across Canada have
referred patients to CanvasRx and its affiliated medical clinics.
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Diverse and Expansive Domestic
Medical Distribution Networks
Aurora has entered into agreements to collaborate with PharmaChoice, Pharmasave and Shoppers
Drug Mart on the distribution, sale and marketing of medical cannabis products through their
respective networks of pharmacies, subject to Health Canada approval.
This collaboration will see Aurora produce and deliver accredited pharmacy education programs
to Canadian pharmacists and eventually distribute medical cannabis through pharmacists
across Canada.
Management’s Discussion & Analysis
15
Aurora continues to execute on its international expansion strategy and is currently active in 9
countries outside of Canada. Through a combination of strategic investments, domestic production,
and supply agreements, Aurora has amassed a strong early mover advantage in a growing number
of key international markets.
With the EU GMP certification of Aurora Mountain, MedReleaf Markham and Pedanios GmbH,
Aurora is one of only a handful of companies globally with this pharma-grade designation across
both production and distribution facilities in Canada and Germany respectively, allowing it to sell
into the most restrictive and promising markets in the EU, such as Italy.
International Distribution
ACTIVE INTERNATIONAL MEDICAL MARKETS:
AUSTRALIA
BRAZIL
CAYMAN ISLANDS
COLUMBIA
DENMARK
GERMANY
ITALY
MALTA
SOUTH AFRICA
Reflecting the importance of the European market, Aurora has established a pan-European
company, Aurora Europe GmbH, headquartered in Berlin, Germany. Furthermore, the Company
has incorporated a number of local subsidiaries, an important step towards becoming part of
the cannabis infrastructure in each of these countries.
Pedanios GmbH, Europe’s largest distributor of cannabis, will henceforth operate as Aurora
Deutschland GmbH, while the Company has also formed Aurora Italia, Aurora Malta and
Aurora Denmark, as well as a number of other, local companies. Aurora currently employs
over 70 people in Europe and anticipates this number to grow substantially over the coming
quarters as the Company expands its business activities across the continent.
EUROPE
DENMARK
DEUTSCHLAND
MALTA
ITALIA
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Aurora has completed and is in the process of completing agreements with provincial regulators to
supply cannabis for the entire Canadian adult consumer market, once legalized. Under the terms
of these current and prospective agreements, Aurora will supply the provinces with a wide variety
of premium product from its facilities. Supply quantities will be determined based on demand on an
HORIZONTALLY DIVERSIFIED
ongoing basis.
NORTHWEST TERRITORIES
YUKON
BRITISH COLUMBIA
ALBERTA
SASKATCHEWAN
NEWFOUNDLAND
MANITOBA
ONTARIO
QUÉBEC
NOVA SCOTIA
PEI
NEW BRUNSWICK
Adult Consumer-Use Market
Distribution Platforms
TAILORED CONSUMER RETAIL EXPERIENCES
Aurora and Alcanna have created a unique and engaging, state-of-the-art consumer retail concept
that aims to deliver an inviting, inclusive, and educational experience. The stores will feature a
variety of brands, including Aurora, MedReleaf and CanniMed as well as a selection of products
from other Canadian Licensed Producers. As permitted, Alcanna intends to open additional retail
stores across Canada. In Alberta, Alcanna anticipates opening 37 stores, starting October 17, 2018.
• Alcanna will build, own and operate the new cannabis stores, leveraging its experience and
expertise as a responsible retailer of controlled substances.
• Alcanna is currently converting several of its existing liquor stores into cannabis retail outlets and
will work with commercial landlords to secure a multitude of locations where permitted.
• Alcanna will retain Aurora through CanvasRx, CanniMed and MedReleaf, which have deep
experience working with cannabis users, and unparalleled data regarding efficacy and customer
experience to assist in training its in-store associates known as Category Specialists.
Aurora Cannabis Inc.
2018 Annual Report
17
Industry Leading Science &
Research Teams
+
+
+
Our Objective: Developing marketable IP and high margin products,
while enhancing cultivation efficiencies
CORE RESEARCH THEMES
01
ANALYTICAL SCIENCE
Cannabinoid and terpene profiling,
isolation & purification
03
DISCOVERY SCIENCE
Pre-clinical studies
Cannabinoid application
02
04
PLANT SCIENCE
Anandia + growth experiments,
plant health, extraction
CLINICAL SCIENCE
Health outcomes, economic impact,
targeted indications and clinical trials
INNOVATION & DIVERSIFICATION THROUGH HIGH VALUE PRODUCTS & PARTNERSHIPS
Launched Aurora Frost
Introduced hard and soft shell
capsules
Developed Innovative cream
based topical products
Launched new oil types
Developing exciting beverage
and edible products in
advance of future legislation
Processing technology (extraction)
Product diversification, source of low-cost CBD
Novel drug delivery (sublingual)
Softgel production technology
hydroponic home grow systems and supplies
Patented pre-roll technology
18
18
Aurora Cannabis Inc.
Aurora Cannabis Inc.
2018 Annual Report
2018 Annual Report
HORIZONTALLY DIVERSIFIED
Strong Medical & Adult
Consumer Use Brands
Aurora has secured a broadly diversified portfolio of three recognizable and well- established
cannabis brands, including Aurora, CanniMed and MedReleaf, and consumer and wellness brands,
such as San Rafael ‘71, Woodstock and AltaVie.
These brands are backed by award-winning products, detailed consumer and marketplace insights
and advanced analytical frameworks.
V
E
R
T
I
C
A
L
L
Y
I
N
T
E
G
R
A
T
E
D
DATA DRIVEN DEVELOPMENT • EXPERT GUIDED EXECUTION
Aurora Cannabis Inc.
2018 Annual Report
19
Building a Global Leader with
Expertise Across the Entire
Cannabis Value Chain
Today, Aurora is exceptionally well positioned, through its diverse acquisitions and strategic
initiatives completed to date, to capitalize on the enormous opportunity across the entire
cannabis industry value chain in both domestic and international markets.
MAR 2018
JUNE 2018
JULY 2018
AUG 2018
SEP 2018
SEP 2018
ACQUISITIONS
AUG 2016
MAR 2017
MAY 2017
OCT 2017
OCT 2017
DEC 2017
DEC 2017
01
BUILDING
02
03
CULTIVATION &
EXTRACTION
PLANT SCIENCE &
PRODUCT R&D
04
DISTRIBUTION
05
CONSUMER
ENGAGEMENT &
BRANDS
DEC 2016
MAR 2017
JUNE 2017
SEP 2017
JAN 2018
JAN 2018
MAY 2018
JUNE 2018
FEB 2018
JUNE 2018
JULY 2018
STRATEGIC INVESTMENTS
20
20
Aurora Cannabis Inc.
Aurora Cannabis Inc.
2018 Annual Report
2018 Annual Report
MANAGEMENT’S DISCUSSION AND ANALYSIS
Table Of Contents
Non-IFRS Financial Measures
About Aurora
Financial Results
Key Developments During the Fourth Quarter 2018
Key Developments Subsequent to June 30, 2018
Financial Review
Liquidity and Capital Resources
Transactions with Related Parties
Critical Accounting Estimates
New Accounting Pronouncements
Financial Instruments and Other Instruments
Financial Instruments Risk
Summary of Outstanding Share Data
Risk Factors
Internal Controls Over Financial Reporting
Forward-Looking Statements
22
23
24
26
28
33
38
41
41
44
45
47
49
49
59
60
Management’s Discussion & Analysis
21
This Management’s Discussion and Analysis (“MD&A”) reports on the consolidated financial
condition and operating results of Aurora Cannabis Inc. (the “Company” or “Aurora”) for the three
and twelve-month periods ended June 30, 2018 and has been prepared pursuant to the MD&A
disclosure requirements under National Instrument 51-102 - Continuous Disclosure Obligations
(“NI 51-102”) of the Canadian Securities Administrators. The Company’s continuous disclosure
documents, including Annual Information Form, are available on SEDAR at www.sedar.com.
The MD&A should be read in conjunction with the Company’s audited Consolidated Financial
Statements for the year ended June 30, 2018 and notes thereto (the “Financial Statements”) which
have been prepared in accordance with International Financial Reporting Standards (“IFRS”).
The Financial Statements include the accounts of the Company and its wholly-owned subsidiaries,
Aurora Cannabis Enterprises Inc. (“ACE”), Aurora Deutschland GmbH (“Aurora Deutschland”),
CanniMed Therapeutics Inc. (“CanniMed”), Aurora Larssen Projects Ltd. (“ALPS”), CanvasRX Inc.
(“CanvasRX”), Peloton Pharmaceuticals Inc. (“Peloton” or “Aurora Vie”), H2 Biopharma Inc. (“H2”
or “Aurora Eau”), B.C. Northern Lights Enterprises Ltd. (“BCNL”), Urban Cultivator Inc. (“UCI”), and
Hempco Food and Fiber Inc. (“Hempco”). All significant intercompany balances and transactions
have been eliminated on consolidation.
The Company has reclassified certain immaterial items on the comparative consolidated statement
of comprehensive loss to conform with current period’s presentation and improve clarity.
All dollar amounts referred to in this MD&A are expressed in thousands of Canadian dollars, except
for share and per share amounts, and where otherwise indicated.
This MD&A has been prepared as of September 24, 2018.
NON-IFRS FINANCIAL MEASURES
The Financial Review contains certain financial performance measures that are not defined by IFRS,
and are used by management to assess the financial and operational performance of the Company.
These include, but are not limited to, the following:
• Cash cost of sales per gram of dried cannabis sold
• Cash cost to produce per gram of dried cannabis sold
• Gross profit on medical cannabis before fair value adjustments
• Gross margin on medical cannabis before fair value adjustments
The Company believes that these non-IFRS financial measures, in addition to conventional
measures prepared in accordance with IFRS, enable investors to evaluate the Company’s operating
results, underlying performance and prospects in a manner similar to Aurora’s management. These
non-IFRS financial performance measures are defined in the following sections.
As there are no standardized methods of calculating these non-IFRS measures, the Company’s
approaches may differ from those used by others, and accordingly, the use of these measures
may not be directly comparable. Accordingly, these non-IFRS measures are intended to provide
additional information and should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS.
22
Aurora Cannabis Inc.
2018 Annual Report
ABOUT AURORA
Aurora Cannabis Inc. (the “Company” or “Aurora”) was incorporated under the Business
Corporations Act (British Columbia) on December 21, 2006. The Company’s shares are listed on
the Toronto Stock Exchange (“TSX” or the “Exchange”) under the symbol “ACB” and on the OTCQX
under the symbol “ACBFF”.
The Company’s principal business is the production and distribution of medical cannabis in Canada
and internationally. The Company produces and distributes dried medical cannabis and cannabis
oils in Canada pursuant to the Access to Cannabis for Medical Purposes Regulations (“ACMPR”) and
through its wholly-owned subsidiary, Aurora Cannabis Enterprises Inc. (“ACE”), distributes whole-
sale medical cannabis in the European Union pursuant to the German Medicinal Products Act and
German Narcotic Drugs Act, and in Italy through the January 2018 tender process.
Aurora does not engage in any U.S. cannabis-related activities as defined in Canadian Securities
Administrators Staff Notice 51-352. While the Company has held an interest in Australis Holdings
LLP (“Australis Holdings” or “AHL”), a U.S. based company, as at June 30, 2018, AHL has not
engaged in any cannabis-related activities for the periods ended. Additionally, AHL was spun-out to
Aurora shareholders subsequent to June 30, 2018.
Aurora is one of the world`s largest and fastest growing cannabis companies and has created a
growing constellation of subsidiaries and strategic partnerships that provide differentiation in terms
of geographic reach, production, technology, product offering, and execution.
With a growing number of countries adopting medical cannabis legislation, the Company has
embarked on an aggressive international expansion strategy that currently sees Aurora with opera-
tions and investments in Germany, Denmark, Italy, Australia, Cayman Islands, Malta, Lithuania, and
South Africa.
Management’s Discussion & Analysis
23
FINANCIAL RESULTS
Summarized Key Quarterly Results
(in thousands except as otherwise noted)
Financial Results
Revenue
Gross margin on medical cannabis (1)
Earnings (loss)
Balance Sheet
Cannabis inventory and biological assets
Total assets
Operational Results - Medical Cannabis
Cash cost of sales per gram of dried
cannabis sold (2)
Cash cost to produce per gram of dried
cannabis sold (2)
Active registered patients
Average net selling price of dried cannabis (3)
Average net selling price of cannabis oil (3)
Kilograms produced
Kilograms sold
Q4
Q3
Q2
Q1
Total
2018
$
$
19,147
74%
79,268
$
16,100
59%
(20,795)
$
11,700
63%
7,194
$
8,249
58%
3,560
55,196
65%
69,227
41,031
1,910,716
29,162
1,671,400
17,325
732,394
16,846
347,834
41,031
1,910,716
$
$
$
$
1.87
$
1.80
$
1.74
$
2.16
n/a
$
$
$
1.70
43,308
8.02
13.52
2,212
1,617
$
$
$
1.53
45,776
7.30
12.83
1,206
1,353
$
$
$
1.41
21,718
7.86
13.35
1,204
1,162
1.87
19,280
7.32
16.41
1,010
890
$
$
n/a
n/a
7.65
13.68
5,632
5,022
(1) Represents the gross margin on medical cannabis before fair value adjustments.
(2) Represents the cash cost of sales per gram of dried cannabis and cash cost to produce per gram of dried cannabis sold
for dried cannabis produced by Aurora.
(3) Represents the net average selling price per gram of dried cannabis or per gram of dried cannabis equivalent.
(in thousands except as otherwise noted)
Medical cannabis segment revenue
Canadian dried cannabis
Canadian cannabis oils
European dried cannabis
Medical cannabis revenue
Patient counselling services
Design, engineering and construction services
Other
Total medical cannabis segment revenue
Other segment revenues
Total revenue
Q4 2018
Q3 2018
$
$
7,529
4,710
2,641
14,880
1,553
1,239
85
17,757
1,390
19,147
$
$
6,304
2,178
2,331
10,813
591
2,979
97
14,480
1,620
16,100
The Company’s financial results for the fourth quarter continued to show strong growth in medical
dried cannabis and cannabis oil sales. Compared to the prior quarter, medical cannabis revenue
increased by 38%, while at the same time allowing for a significant increase in inventory. Cannabis
inventory and biological assets increased 41% from the prior quarter in preparation for the com-
mencement of the Canadian adult-use market on October 17, 2018.
Compared to Q4 2017, total revenue increased by 223%, primarily due to an increase in the number
of active registered patients, increased product availability and the consolidation of the results
of acquisitions.
Aurora experienced a strong increase in margins mostly due to a continuing shift of dried cannabis
sales to cannabis oils for Aurora products, and the consolidation of CanniMed revenues, which also
had a strong oil component. Compared to the prior quarter, sales of oil products as a percentage
of medical cannabis revenue increased from 20% to 32%. A planned reduction in new patient
promotional discounts also contributed to improved margins in the quarter.
Aurora’s Mountain facility continued to produce high quality cannabis at optimal levels. However,
with additional production from new facilities just coming online, the Company chose to constrain
international sales to properly serve the Canadian medical market, while also building inventory in
24
Aurora Cannabis Inc.
2018 Annual Report
anticipation of the legalization of the Canadian adult-use market. With Aurora Vie, Sky, and MedReleaf
facilities now operational, and with CanniMed yield improvements, this was a short-term constraint.
Cash cost of sales per gram of dried cannabis sold and cash cost to produce per gram of dried
cannabis sold increased by $0.07 and $0.17 respectively from the prior quarter, mainly due to the
inclusion of CanniMed’s higher per unit production costs, partially offset by lower utility costs in
the summer months. The Company has continued to drive yield and efficiency improvements at
CanniMed and is now realizing significant rewards.
Production costs per gram are expected to decrease significantly once Aurora Sky is fully opera-
tional and the efficiencies from automation, scale and yield expertise are also realized in the
CanniMed facilities and other newly acquired Aurora facilities. Management expects that cash costs
to produce a gram of cannabis at a Sky Class facility will be well below $1.00 per gram.
During the fourth quarter of 2018, Aurora continued to ramp up investments in infrastructure and
talent required to realize the tremendous opportunities in the Canadian and international medical
cannabis markets, and the upcoming Canadian adult-use market. Across the company, headcount
increased from 300 at June 30, 2018 to over 1,400 currently.
General and administration costs increased primarily due to professional fees related to the signifi-
cant volume of strategic corporate transactions, compliance, and other general corporate matters;
travel costs resulting from increased market development and integration activities; and higher
wages and benefits from additional headcount to support the Company’s growth and strategic
objectives. The inclusion of CanniMed’s general and administrative cost accounted for 25% of the
increase overall.
Sales and marketing costs also increased compared to the third quarter of fiscal 2018. The increase
was primarily due to significant investment in the Company’s overall brand building initiatives,
including consumer education and engagement activities in preparation for the impending adult-
use market in Canada. The inclusion of CanniMed’s sales and marketing cost accounted for 19% of
the increase overall.
The Company continued to invest heavily in production facilities and strategic assets. Aurora is
building a diversified and vertically integrated company that can realize the tremendous opportunity
of the global cannabis markets.
In June 2017, Aurora estimated the cost of construction of the Sky facility to be approximately
$120 million. Because this was the first time these advanced technologies had been brought
together in one agricultural production facility, the Company and its advisors took a “Design-Build”
approach to the project. As Aurora moved through the construction phases of the facility, design
changes and improvements were made as additional information became available. During the
project, the Company implemented several improvements and enhancements to the technologies,
workflow, and size of this world class facility. As the project nears full completion, the Company
expects that the total budget for construction and equipment will be approximately $150 million.
At full scale production of at least 100,000 kgs per year, and assuming average pricing and margins
on sales to provinces, the Company expects a full payback on this project in a very short number of
months. The Company anticipates that future Sky Class facilities, Aurora Sun and Aurora Nordic,
will have a lower per square foot cost than Aurora Sky due to refined engineering requirements,
project workflow enhancements, and a reduced need for certain corporate and infrastructure
facilities to be incorporated into the design of these facilities.
During fiscal 2018, Aurora made a number of investments in publicly traded companies that
provide a significant strategic advantage for the company. These companies include TGOD, Radient,
Management’s Discussion & Analysis
25
Alcanna, and Cann Group, as well as a number of others. The Company reflects these invest-
ments in its IFRS financial statements as either Marketable Securities, Derivatives, Investments in
Associates and/or Joint Ventures. However, under IFRS, these are not necessarily all reflected at
current market value. For the publicly traded companies that Aurora has invested in, the market
value of the shares, and “in-the-money” warrants and options at June 30, 2018 was $697.6 million.
KEY DEVELOPMENTS DURING THE FOURTH QUARTER 2018
Strategic Investments
(a) Strategic Investment in Hempco Food and Fiber Inc. (“Hempco”)
On May 7, 2018, Aurora exercised its right under a private option agreement to purchase an
aggregate of 10,754,942 additional common shares of Hempco, increasing its ownership interest
to 52.3%. This investment secures Aurora access to low-cost raw material for the potential
production of CBD extracts.
(b) Strategic Investment in CTT Pharmaceuticals Inc. (“CTT”)
On May 20, 2018, the Company acquired an initial 9.14% ownership interest in CTT. The Company
also holds 20,779,972 warrants in CTT, enabling Aurora to increase its ownership to 42.5%.
CTT is developing a fast dissolving, oral thin film wafer that will provide a dose specific, smoke-
free delivery of medical cannabis or other active ingredients. This investment will provide the
Company with global exclusivity to develop, manufacture and market CTT’s novel oral wafers.
(c) Strategic Investments in Choom Holdings Inc. (“Choom”)
On June 12, 2018, the Company subscribed to 9,859,155 common shares of Choom, representing
an 8% ownership interest. Subsequent to the initial investment, Choom acquired Specialty
Medijuana Products Inc. This investment positions the Company to participate in the emerging
craft cultivation market, as well as in an exciting Western Canada retail strategy with products
that are anticipated to resonate strongly with the adult-use market.
(d) Strategic Investment in Capcium Inc. (“Capcium”)
On June 6, 2018, the Company acquired 8,828,662 common shares in Capcium, representing a
19.99% ownership interest. Capcium, an emerging leader in softgel manufacturing, has devel-
oped expertise that is ready to be applied to the cannabis industry and deliver high-volume
production capacity.
(e) Strategic Investment in The Green Organic Dutchman Holdings Ltd. (“TGOD”)
On May 2, 2018, the Company participated in the initial public officering of TGOD, purchasing
6,341,250 units at $3.65 per unit for a total investment of $23,146. This followed an earlier
strategic investment in January 2018. As at June 30, 2018, the Company held a total of 39,674,584
common shares and 19,837,292 warrants, representing an ownership interest of 17% on an
undiluted basis with options to increase ownership interest to 50%.
TGOD is currently completing a 14,000 kg per year facility in Ancaster, and constructing an
820,000 square foot, 104,000 kg per annum, high-technology cannabis facility in Valleyfield,
Quebec. Aurora currently has rights to 20% of the production output from these two facilities.
(f) Spin-out of Australis Capital Inc. (“ACI”)
In June 2018, the Company began reorganizing for the spin-out of ACI and its United States
(“U.S.”) assets, and filed a prospectus for the listing of ACI on the Canadian Stock Exchange
(“CSE”). On June 13, 2018, the Company completed a series of intercorporate transactions
resulting in Aurora holding a direct interest in 100% of the outstanding shares and warrants
of ACI, and ACI holding all the U.S. assets of Aurora and its subsidiaries. The assets primarily
26
Aurora Cannabis Inc.
2018 Annual Report
consisted of the Company’s 50% joint venture interest in Australis Holdings, which was subse-
quently increased to 100% for US$500, and rights to a number of SubTerra assets.
On June 14, 2018, the Company entered into a Funding Agreement pursuant to which Aurora
advanced $500,000 to ACI, in consideration for which ACI provided Aurora with the Restricted
Back-in Right, by issuing to Aurora:
(i)
(ii)
a warrant to purchase 20% of the issued and outstanding shares of ACI at an exercise price
of $0.20 per share; and
a warrant to purchase 20% of the issued and outstanding shares of ACI at an exercise price
equal to the five-day volume weighted average trading price of ACI’s shares on the CSE.
Aurora will be prohibited from exercising the Restricted Back-in Right unless all of ACI’s
business operations in the U.S. are legal under federal and state laws, and Aurora has received
the consent of the TSX and any other stock exchange on which Aurora may be listed.
Subsequent to June 30, 2018, the Company completed the spin-out of ACI and distributed to
Aurora shareholders, as a return of capital, units of ACI on the basis of one unit for every thirty-
four Aurora shares. Each unit consists of one unit share and one warrant exercisable at $0.25
per warrant for a period of one year.
Supply Agreements and Partnerships
(g) Supplier Agreement with Pharmasave
On April 4, 2018, CanniMed, a wholly owned subsidiary of Aurora, entered into a Letter of Intent
with Pharmasave, one of Canada’s leading independent community pharmacy chains, to become
a preferred supplier of medical cannabis. With more than 650 independently owned pharma-
cies within the Pharmasave network, CanniMed and Aurora will supply and distribute medical
cannabis across Canada through Pharmasave pharmacists.
(h) Supplier Agreement with Société des Alcools du Québec (“SAQ”)
On April 11, 2018, Aurora completed an agreement with SAQ to supply a minimum of 5,000 kg of
cannabis per annum for the Quebec adult-use market, once legalized.
Aurora will supply SAQ with a wide variety of premium product from its facilities in Quebec, and
elsewhere based on consumer demand. Supply quantities will be determined based on demand
with no set maximum, and a minimum of 5,000 kg for the first year.
Acquisitions
(i) Acquisition of CanniMed Therapeutics Inc. (“CanniMed”)
On May 1, 2018, the Company completed the acquisition of CanniMed by acquiring the remaining
4.1% interest for $28,679, comprised of $1,746 cash and the issuance of 3,417,951 common
shares with a fair value of $26,933. The CanniMed Shares were de-listed from the TSX as at the
close of business on May 1, 2018.
The transaction creates strong strategic synergies, in particular for the domestic and interna-
tional medical cannabis markets, in terms of distribution, product development, and branding.
Integration of CanniMed into Aurora is complete and acceleration of CanniMed’s production and
other operations has commenced.
Management’s Discussion & Analysis
27
International Developments
(j) Exporting to Italy
On April 13, 2018, Aurora completed the first ever successful delivery of privately exported
medical cannabis from Canada to the Italian government through its wholly-owned German
subsidiary Aurora Deutschland GmbH (“Aurora Deutschland,” formerly Pedanios GmbH).
This export followed Aurora and Aurora Deutschland’s success in winning a highly-competitive
EU-wide public tender to supply medical cannabis to the Italian government through the Italian
Ministry of Defense, who oversee medical cannabis production and distribution in Italy.
(k) Accelerating Growth and Market Penetration in Germany
On May 28, 2018, Aurora, through Aurora Deutschland, signed a collaboration agreement with
Heinrich Klenk GmbH & Co. KG (“Klenk”), one of Europe’s largest medicinal plant companies.
Klenk’s products are carried in over 25,000 pharmacies throughout Germany and Europe. Under
the terms of the agreement, Aurora launched a new cannabis brand called “Cannabis Klenk”
which is produced in Canada, imported by Aurora Deutschland, and sold to German pharmacies
through Klenk’s existing and wide-reaching pharmaceutical wholesale distribution network.
(l) Market Penetration in Malta
On June 25, 2018, Aurora’s wholly owned German subsidiary Aurora Deutschland, became the
first licensed supplier of medical cannabis to patients in Malta. The import license, issued by
Malta Medicines Authority, was received on June 5, 2018, and Aurora Deutschland received their
export license from German authorities on June 21, 2018, making Malta the third European Union
member country where Aurora Deutschland currently sells medical cannabis.
Facility Development
(m) Aurora Sun
On April 16, 2018, Aurora acquired approximately 71 acres of land in Medicine Hat, Alberta, for
the construction of “Aurora Sun”, a highly automated cannabis production facility with ultra-low
operating costs and robust margins. The facility will be 1,200,000 square feet, 50% larger than
Aurora Sky.
(n) Sales License for Aurora Vie
On June 29, 2018, eight months after receiving its cultivation license, the Aurora Vie production
facility in Pointe-Claire, Quebec, was granted its Health Canada sales license. The facility, now in
full commercial operation, is on target to produce at a rate of 4,000 kg per year by October 2018.
Multiple harvests have been completed to date.
KEY DEVELOPMENTS SUBSEQUENT TO JUNE 30, 2018
Strategic Investments
(a) Investment in Evio Beauty Group Ltd (“Evio Beauty”)
On July 10, 2018, the Company entered into a Product Development and Distribution Agreement
with Evio Beauty, pursuant to which both companies have agreed to collaborate to develop and
manufacture a line of at least 3 co-branded topical cosmetic products formulated with a can-
nabinoid or cannabinoids. Aurora will earn a 10% royalty on sales of all non-infused products,
and Evio Beauty will earn a 10% royalty on sales of all infused products in any geographical area
in which Aurora operates.
(b) License Agreement with CannaRoyalty Corp. (“CannaRoyalty”)
On August 1, 2018, the Company and CannaRoyalty entered into an assignment and assumption
agreement where CannaRoyalty assigned to Aurora all of its rights, title and interest in an exclusive
license for a technology for creating machine-rolled cannabis developed by Wagner Dimas Inc.
28
Aurora Cannabis Inc.
2018 Annual Report
In consideration, Aurora paid to CannaRoyalty $7,000 through the issuance of 756,348 common
shares at $9.255 per share. The Wagner technology has now been installed at Aurora, and the
large-scale production of pre-rolled product has commenced in preparation to filling orders
received from provincial buyers who will be supplying the adult consumer user market.
c) Spin-out of Australis Capital Inc. (“ACI”)
On September 19, 2018, the Company completed the spin-out of ACI, an independent company,
and distributed to Aurora shareholders, as a return of capital, units of ACI on the basis of one
unit for every 34 Aurora shares. The units commenced trading on the Canadian Stock Exchange
on September 19, 2018. ACI is an investment company with a focus on the U.S. cannabis market,
which is characterized by large fragmentation and limited access to capital. ACI’s management,
board and advisory teams have deep experience and relationships within the cannabis industry,
and believe they will be able to secure investments to build significant shareholder value.
Supply Agreements and Partnerships
(d) Supply Agreements
On July 5, 2018, Aurora entered into an agreement with the Alberta Gaming Liquor & Cannabis
Commission (“AGLC”) to supply high-quality cannabis products for the adult-use market in
Alberta. The AGLC is responsible for regulating private retail cannabis licensing, distribution of
cannabis to retail stores, and operation of an online cannabis store for the Albertan market.
On August 21, 2018, Aurora and its wholly-owned subsidiary, MedReleaf, entered into supply
agreements with Ontario Cannabis Stores, a key market in the Company’s adult-use strategy.
When government-run online sales commence on October 17, Aurora and MedReleaf will supply
a broad range of dried flower and higher margin products, such as pre-rolls, oils and capsules.
Acquisitions
(e) Completion of CanniMed Integration
The integration of CanniMed Therapeutics into Aurora was successfully completed as of July 6,
2018, combining Aurora’s execution and agility with CanniMed’s strong medical brand, assets and
exceptionally experienced team of scientists and operational cannabis professionals.
Opportunities to increase Aurora’s and CanniMed’s international reach are also being pursued
through CanniMed’s relationships in South Africa, the Cayman Islands, and Australia. CanniMed
continues to ship oils to both of the latter jurisdictions.
(f) Acquisition of MedReleaf Corp. (“MedReleaf”)
On July 25, 2018, Aurora and MedReleaf closed the world’s largest cannabis industry transac-
tion agreement whereby Aurora acquired all of the issued and outstanding common shares of
MedReleaf. Completion of the transaction created a cannabis industry leader with a total funded
capacity of more than 500,000 kg per year. With MedReleaf, Aurora has gained two facilities built
to EU GMP specifications, which will increase product availability for international markets.
Under the terms of the Amended Arrangement Agreement dated May 23, 2018, holders of
MedReleaf common shares received 3.575 common shares of Aurora and $0.000001 cash for
each MedReleaf common share held. The Company issued an aggregate of 370,120,238 common
shares with a fair value of $2,568,634 and 14,033,784 replacement stock options. The exercise
price of the stock options is based on the exercise price per MedReleaf stock options adjusted for
the Exchange Ratio.
Management’s Discussion & Analysis
29
(g) Acquisition of HotHouse Consulting Inc.
On August 7, 2018, Aurora entered into a Letter of Intent whereby it intends to acquire the
cannabis business of HotHouse, a provider of advanced greenhouse consulting services with a
focus on large scale cannabis production.
(h) Acquisition of Anandia Laboratories Inc. (“Anandia”)
On August 8, 2018, the Company acquired all of the issued and outstanding common shares of
Anandia in exchange for 12,716,482 common shares and 6,358,210 share purchase warrants of
Aurora. The warrants are exercisable at $9.3717 per share until August 9, 2023. Pursuant to the
terms of the acquisition, upon the achievement of future milestones, Aurora will pay an additional
$10,000 by way of the issuance of additional shares and warrants.
Anandia is a global leader in cannabis science (genetics, breeding) and analytical product
testing. The transaction enables the Company to develop new strains with specific terpene/can-
nabinoid profiles for targeted product applications, as well as strains with improved cultivation
characteristics. Management believes these activities will lead to both the development of new,
higher-margin products and a further increase in efficiency of its cultivation processes.
(i) Acquisition of ICC Labs Inc. (“ICC”)
On September 10, 2018, Aurora entered into a definitive agreement pursuant to which Aurora
intends to acquire all of the issued and outstanding common shares of ICC (for $1.95 per share)
payable in common shares of Aurora. The transaction reflects an aggregate purchase price of
approximately $290 million.
The Transaction, once approved, creates a strong foundation for expansion and will leverage ICC’s
first mover advantage in South America, bringing significant low-cost production capacity of both
THC and CBD based products in both Uruguay and Colombia. ICC presently has over 70% market
share in Uruguay, the first country in the world to legalize cannabis for adult use. In addition,
ICC has extensive distribution channels throughout South America and internationally.
j) Acquisition of Agropro UAB (“Agropro”) and Borela UAB (“Borela”)
On September 10, 2018, the Company acquired 100% of the issued and outstanding shares of
Europe’s largest producer, processor and supplier of certified organic hemp and hemp products,
Agropro, as well as hemp processor and distributor Borela for total cash consideration of €6,418
of which €960 was paid through the issuance of 170,834 common shares. In addition, the Company
paid a finder’s fee of €1,517, which was paid through the issuance of 270,024 common shares, and
will also refinance Agropro’s existing debt totaling €2,076.
This acquisition is anticipated to yield significant quantities of CBD for extraction, and is expected
to create further synergies through the Company’s CBD and hemp product value chain, which
includes majority ownership of Hempco Food and Fiber.
International Developments
(k) Approval for Malta’s First Cannabis Cultivation Facility
On July 24, 2018, Aurora received a Letter of Intent issued from Maltese authorities, approving
its application for the establishment of the first seed-to-pharma cannabis operation in Malta,
subject to certain conditions.
The project includes the construction of a hybrid cultivation, manufacturing, and distribution facility,
with operations to be carried out by a new subsidiary, Aurora Malta, to be formed with Aurora’s
local Maltese partner, Cherubino Ltd., the largest pharmaceutical wholesaler in the country. Aurora
will be the majority shareholder in the new venture. The Company anticipates the facility, to be
30
Aurora Cannabis Inc.
2018 Annual Report
designed by Aurora Larssen Projects, to be focused on the production of higher margin derivative
products, aimed at serving the domestic Maltese and Southern European markets.
(l) Commenced Cultivation at Aurora Nordic
On August 13, 2018, Aurora completed the successful shipment of cultivars from its Mountain
facility to Denmark to commence populating the Phase I Aurora Nordic facility, a 100,000 square
foot, retrofitted hybrid greenhouse, which will be ramping up to full production capacity of 8,000 kg
per year over the coming months. Aurora Nordic is a 51% Aurora owned subsidiary, owned in part-
nership with Alfred Pederson & Son. Both the Phase I facility and Phase II, a 1,000,000 square foot,
hybrid greenhouse facility with a capacity of more than 120,000 kg per year, have been designed by
Aurora Larssen Projects Ltd. and will be completed to EU GMP standards.
(m) New EU GMP Certification
On August 13, 2018, Aurora’s wholly-owned subsidiary MedReleaf received full EU GMP certi-
fication for its Markham facility. The certification of the Markham facility will increase product
availability for the rapidly growing, higher-margin and heavily regulated EU market. All of the
Company’s facilities are being designed and built to EU GMP standards.
(n) Establishing Aurora Europe
On August 13, 2018 Aurora established a pan-European company, Aurora Europe GmbH, head-
quartered in Berlin, Germany. Pedanios GmbH, Europe’s largest distributor of cannabis, will
henceforth operate as Aurora Deutschland GmbH, while the Company has also formed Aurora
Italia, Aurora Nordic (Denmark), and a number of other local companies. Aurora currently
employs over 70 people in Europe and anticipates this number to grow substantially over the
coming months as the Company expands its business activities across the European continent.
o) MED Colombia
Through the acquisition of MedReleaf, the Company now owns MED Colombia, a licensed
cannabis company in Colombia with substantial grow potential and a strong portfolio of genetics.
Upon successful completion of the ICC acquisition, MED Colombia will become part of Aurora’s
South American platform.
p) Australia
Aurora recently exported oil products to Australia, which were supplied to patients through
its partially-owned strategic partner Cann Group. Cann Group has announced it will be con-
structing an ALPS (Aurora Larssen Projects) designed high-technology, hybrid cultivation
facility at the Melbourne International Airport. Aurora and its wholly-owned subsidiary Anandia
have also successfully exported plant tissue culture derived genetics for Cann Group to
enhance its cultivation program.
Facility Licensing
(q) Capsules Licenses Granted
On July 3, 2018, Aurora’s wholly owned subsidiary, CanniMed, received Health Canada approval
to commence sales of CanniMed Capsules, a line of vegan capsules which became available to
patients on August 22, 2018.
Aurora received its Health Canada license to produce encapsulated oil at its Mountain facility.
Aurora intends to produce unique, integral hard shells for the medical markets, as well as for
the adult-use market, once legalized.
Management’s Discussion & Analysis
31
(r) Health Canada Dealer’s License for Aurora Mountain
On July 30, 2018, Aurora obtained a Health Canada Dealer’s License under the Controlled Drugs
and Substances Act for its EU GMP certified Aurora Mountain facility in Alberta. The new license
will allow Aurora additional opportunities to produce, assemble, and sell cannabis oils and future
novel, derivative products from Aurora Mountain. Furthermore, the license provides additional
opportunities to export cannabis to international markets and the potential to carryout research
with cannabinoids not covered under an ACMPR license.
(s) Approval for Softgel Capsules
On August 22, 2018, Aurora received Health Canada authorization to produce cannabis softgel
capsules at its state-of-the-art Aurora Vie facility in Pointe-Claire, Québec. Immediately fol-
lowing the approval, Aurora started production of softgel capsules in partnership with Capcium
Inc. Aurora holds a 19.99 % ownership stake in Capcium, and they are Aurora’s exclusive
manufacturer of cannabis softgel products in North America.
Financing Activities
(t) Bank of Montreal (“BMO”) Debt Facility
On August 29, 2018, the Company finalized a $200,000 debt facility with BMO consisting of a
$150,000 term loan and a $50,000 revolving credit facility, both of which will mature in 2021. The
Company also has an option to upsize the facility to a total of $250,000, subject to certain condi-
tions. The debt facility will be primarily secured by Aurora’s production facilities and can be repaid
without penalty at Aurora’s discretion. The interest rate for the debt facility and revolving credit
facility is a set margin over the BMO CAD Prime Rate or a Bankers’ Acceptance of appropriate term.
32
Aurora Cannabis Inc.
2018 Annual Report
FINANCIAL REVIEW
Consolidated Key Quarterly Results
(in thousands except as otherwise noted)
Financial Results
Revenue
Gross margin on medical cannabis (1)
Earnings (loss)
Earnings (loss) attributable to
Aurora Cannabis Inc.
Balance Sheet
Working capital
Cannabis inventory and biological assets
Total assets
Operational Results - Medical Cannabis
Cash cost of sales per gram of dried
cannabis sold (2)
Cash cost to produce per gram of dried
cannabis sold (2)
Active registered patients
Average net selling price of dried cannabis (3)
Average net selling price of cannabis oil (3)
Kilograms produced
Kilograms sold
Financial Results
Revenue
Gross margin on medical cannabis (1)
Earnings (loss)
Earnings (loss) attributable to
Aurora Cannabis Inc.
Balance Sheet
Working capital
Cannabis inventory and biological assets
Total assets
Operational Results - Medical Cannabis
Cash cost of sales per gram of dried
cannabis sold (2)
Cash cost to produce per gram of dried
cannabis sold (2)
Active registered patients
Average net selling price of dried cannabis (3)
Average net selling price of cannabis oil (3)(4)
Kilograms produced
Kilograms sold
Q4
Q3
Q2
Q1
Total
2018
$
$
19,147
74%
79,268
$
16,100
59%
(20,795)
$
11,700
63%
7,194
$
8,249
58%
3,560
55,196
65%
69,227
$
79,870
$
(19,215) $
7,721
$
3,560
$
71,936
144,533
41,031
1,910,716
338,476
29,162
1,671,400
302,526
17,325
732,394
169,674
16,846
347,834
144,533
41,031
1,910,716
$
$
$
$
1.87
$
1.80
$
1.74
$
2.16
n/a
$
$
$
1.70
43,308
8.02
13.52
2,212
1,617
$
$
$
1.53
45,776
7.30
12.83
1,206
1,353
$
$
$
1.41
21,718
7.86
13.35
1,204
1,162
1.87
19,280
7.32
16.41
1,010
890
$
$
n/a
n/a
7.65
13.68
5,632
5,022
Q4
Q3
Q2
Q1
Total
2017
$
$
5,936
58%
(4,816)
$
5,175
58%
139
$
3,885
54%
(2,678)
$
3,071
53%
(5,613)
18,067
56%
(12,968)
(4,816)
139
(2,678)
(5,613)
(12,968)
170,142
11,791
322,679
126,530
8,694
197,065
60,060
5,718
98,219
23,213
3,103
56,769
170,142
11,791
322,679
$
$
$
$
2.09
$
2.31
$
2.56
$
3.89
n/a
$
$
1.91
16,400
6.79
17.91
1,165
755
$
$
1.91
13,110
6.64
n/a
847
653
$
$
2.13
12,200
5.96
n/a
670
538
3.89
8,200
6.32
n/a
355
436
$
$
n/a
n/a
6.47
17.91
3,037
2,382
(1) Represents the gross margin on medical cannabis before fair value adjustments.
(2) Represents the cash cost of sales per gram of dried cannabis sold and cash cost to produce per gram of dried cannabis
produced by Aurora.
(3) Represents the average net selling price per gram of dried cannabis or per gram of dried cannabis equivalent.
(4) The Company received its license to sell cannabis oils in January 2017 and commenced sales of cannabis oils in Q4 2017.
Management’s Discussion & Analysis
33
Selected Annual Information
(in thousands except share and per share amounts)
Revenue
Earnings (loss)
Earnings (loss) attributable to Aurora Cannabis Inc.
Earnings (loss) per Common Share:
Basic earnings per share (basic EPS)
Diluted
Total assets
Total non-current financial liabilities
Cash dividends per share
Medical Cannabis
$
2018
55,196
69,227
71,936
$
2017
18,067
(12,968)
(12,968)
$
$
$
0.16
0.15
1,910,716
200,760
Nil
$
$
(0.05) $
(0.05) $
322,679
63,818
Nil
2016
1,439
(5,723)
(5,723)
(0.04)
(0.04)
18,396
4,440
Nil
Revenue
The Company primarily operates in the medical cannabis market which includes auxiliary support
functions such as CanvasRX patient counselling services, and Aurora Larssen Projects Ltd. (“ALPS”)
design, engineering and construction services.
(in thousands except as
otherwise noted)
Medical cannabis
segment revenue
Canadian dried cannabis
Canadian cannabis oils
European dried cannabis
Medical cannabis revenue
Patient counselling services
Design, engineering and
construction services
Other
Total medical cannabis
segment revenue
Other segment revenues
Total revenue
2018
Q4
Q3
Q2
Q1
Total
$
$
7,529
4,710
2,641
14,880
1,553
1,239
85
$
6,304
2,178
2,331
10,813
591
2,979
97
$
5,757
1,508
2,483
9,748
866
-
32
$
4,641
1,439
1,235
7,315
923
-
11
24,231
9,835
8,690
42,756
3,933
4,218
225
$
2017
Total
14,679
804
439
15,922
2,145
-
-
17,757
1,390
19,147
$
14,480
1,620
16,100
$
10,646
1,054
11,700
$
8,249
-
8,249
$
51,132
4,064
55,196
$
18,067
-
18,067
$
Medical cannabis revenue increased $4,067, or 38%, over the prior quarter. The increase in revenue
was primarily due to higher volumes of both dried cannabis and cannabis oils sold coupled with
higher average selling prices relative to the prior quarter, both domestically and internationally,
due to the following factors:
• Both dried cannabis and cannabis oils sold increased over the previous quarter by 85,063 grams
and 178,611 grams equivalents respectively. The inclusion of CanniMed’s sales in the quarter ac-
counted for 422,771 grams, or 33%, of total dried cannabis sold and 221,240 grams equivalents,
or 64%, of total cannabis oil gram equivalents sold. This was partially offset by lower bulk sales
as the Company increased its inventory reserves for the impending legalization of the adult-use
market in Canada.
• The average net selling price of dried cannabis increased by $0.72 per gram over the prior quar-
ter primarily due to higher prices charged on bulk orders as well as lower promotional discounts
offered to new patients. The average net selling price of cannabis oils increased by $0.69 per
gram equivalent primarily due to lower promotional discounts for new patients.
• International dried cannabis sales increased by $310, or 25,935 grams, over the prior quarter.
On April 13, 2018, the Company completed the first ever private export of medical cannabis to
Italy following its win of the highly competitive EU-wide public tender to supply medical cannabis
to the Italian government. On June 25, 2018, the Company became the first licensed supplier of
34
Aurora Cannabis Inc.
2018 Annual Report
medical cannabis to patients in Malta and have since successfully completed its first exports of
medical cannabis.
Design, engineering and consulting services decreased by $1,740 due to the timing of services
provided.
Consolidated medical cannabis segment revenues for fiscal 2018 increased by $33,065, or 183%,
over the prior year primarily attributable to:
• Significant increase in Company’s combined active registered patients of 26,908 due to growth in
registered patients through CanvasRX’s patient counselling services of 5,538, and the integration
of CanniMed’s registered patients of 21,370;
• Increase in dried cannabis produced and sold both domestically and internationally of $17,803, or
1,965,827 grams, including CanniMed sales of $3,300, or 459,821 grams;
• Increase in cannabis oils sold domestically of $9,031, or 673,752 grams, including CanniMed sales
of $3,456, or 252,950 in cannabis oil gram equivalents;
• Increase in design, engineering and consulting service revenue of $4,218 from the acquisition of
ALPS (formerly known as Larssen Ltd.); and
• Increase in CanvasRX patient counselling services of $1,788 from Licensed Producer referral fees.
Gross Margin
(in thousands except as
otherwise noted)
Medical cannabis
segment revenue
Medical cannabis segment
cost of sales
Gross profit on medical cannabis
segment before fair value
adjustments (1)
Less: non-medical cannabis
revenue
Add: non-medical cannabis cost
of sales
Gross profit on medical cannabis
before fair value adjustments (1)
Gross margin on medical
cannabis before fair value
adjustments (1)
2018
Q4
Q3
Q2
Q1
Total
2017
Total
$
17,757
$
14,480
$
10,646
$
8,249
$
51,132
$
18,067
4,702
4,757
3,680
3,072
16,211
7,876
13,055
9,723
6,966
5,177
34,921
10,191
(2,792)
(3,570)
(866)
(923)
(8,151)
(2,145)
747
277
25
29
1,078
71
11,010
6,430
6,125
4,283
27,848
8,117
74%
59%
63%
58%
65%
56%
(1) Gross profit on medical cannabis is a non-IFRS financial measure and is calculated by taking the medical cannabis
segment gross profit excluding the effects of revenues and cost of sales from patient counselling services and design,
engineering, and construction services. These are considered auxiliary support services for the medical cannabis market
and do not directly relate to the production of cannabis.
Gross margin on medical cannabis before the effect of changes in fair value for the three months
ended June 30, 2018, was 74% compared to 59% for the prior quarter. The increase was primarily
due to a higher average selling price per gram and a change in the sales ratio of cannabis oils to
dried cannabis, as cannabis oils have higher profit margin relative to dried cannabis. For the three
months ended June 30, 2018, cannabis oils comprised 32% of total medical cannabis revenues
compared to 20% of total medical cannabis sales in the prior quarter.
The inclusion of CanniMed’s sales in the quarter accounted for an additional 225,410 grams, or 18%,
of total dried cannabis sold and an additional 221,240 grams, or 64%, of total cannabis oil gram
equivalents sold. Furthermore, there was an increase in the selling prices of bulk sales of both
dried cannabis and cannabis oils compared to the previous quarter.
Management’s Discussion & Analysis
35
Gross margin on medical cannabis before the effect of changes in fair value for the twelve months
ended June 30, 2018, was 65% compared to 56% in the prior year. The increase is mostly attribut-
able to an increase in the average selling price per gram; from lower cost of sales per gram as the
Company realized further economies of scale from the full ramp up of its Aurora Mountain facility;
and a change in the sales ratio of cannabis oils to dried cannabis. Cannabis oils made up 23%
of medical cannabis revenues in the twelve months ended June 30, 2018, compared to 5% in the
prior year.
In accordance with IFRS, the Company is required to record its biological assets at fair value.
As biological assets move through the production process, capitalized production costs and the fair
value on the eventual sale of the cannabis from the plants are both recognized based on the stage
of completion of the biological assets. The fair value portion of the biological assets is recognized as
unrealized gains from the change in fair value of biological assets in the statement of operations for
the reporting period. At the time of harvest, the biological assets are transferred to inventory and
include capitalized production costs to date and the related fair value portion, which is adjusted to
the lower of cost or inventory net realizable value. On the eventual sale of inventory, the fair value
portion is relieved through unrealized loss on change in fair value on sale of inventory reported in
the results of operations.
Cash Cost of Sales of Dried Cannabis and Cash Cost to Produce Dried Cannabis Sold – Aurora Produced
Medical Cannabis
(in thousands except as otherwise noted)
Total consolidated cost of sales
Adjustments:
Non-medical cannabis cost of sales (1)
Oil and extracts conversion costs (2)
Cost of cannabis purchased
Cost of consumable raw materials
Depreciation
Cash cost of sales of dried cannabis sold (3)
Packaging costs
Cash cost to produce dried cannabis sold (3)
Grams of dried cannabis sold - Aurora produced
Cash cost of sales per gram of dried
cannabis sold (3)
Cash cost to produce per gram of dried
cannabis sold (3)
Q4
4,867
$
Q3
6,827
$
Q2
4,837
$
Q1
3,072
$
Total
19,603
$
135
(1,534)
(108)
(511)
(301)
2,548
(221)
2,327
1,366
$
$
(2,993)
(862)
(568)
(350)
(293)
1,761
(265)
1,496
979
$
$
(1,889)
(451)
(536)
(267)
(203)
1,491
(283)
1,208
856
$
$
(908)
(217)
(211)
(197)
(125)
1,414
(295)
1,119
653
$
$
(5,655)
(3,064)
(1,423)
(1,325)
(922)
7,214
(1,064)
6,150
3,854
1.87
$
1.80
$
1.74
$
2.17
$
1.87
1.70
$
1.53
$
1.41
$
1.71
$
1.60
$
$
$
$
(1) Non-medical cost of sales consists of patient counselling services and design, engineering and construction services.
These are considered auxiliary support services as they are not directly related to the production of medical cannabis.
(2) Oil and extracts conversion costs are costs attributable to the post-production processing of dried cannabis into
cannabis derivatives.
(3) Cash cost of sales per gram of dried cannabis sold and cash cost to produce per gram of dried cannabis sold represent
the cash cost per gram sold by Aurora, including CanniMed’s costs in Q4 2018.
Cash cost of sales per gram of dried cannabis sold and cash cost to produce per gram of dried
cannabis sold increased by $0.07 and $0.17 respectively from the prior quarter, mainly due to the
inclusion of CanniMed, partially offset by lower utility costs in the summer months.
Production costs per gram are expected to decrease significantly once Aurora Sky is fully opera-
tional and the efficiencies from automation, scale and yield expertise are also realized in the
CanniMed facilities and other newly acquired Aurora facilities.
Grams of Dried Cannabis and Grams Equivalent of Oil Produced – Medical Cannabis
Grams of dried cannabis produced in the period refers to the grams of dried cannabis harvested
from plants in the period. The Company calculates grams produced in the period based on the
36
Aurora Cannabis Inc.
2018 Annual Report
final recorded weight of dried harvested buds that have completed the drying stage net of any
weight loss during the drying process.
Grams equivalent of oil produced represents the equivalent number of dried grams that would
be used to produce the cannabis oils. The dried cannabis is first extracted into a bulk concentrate
which is then diluted into cannabis oil. The “grams equivalent” measure is used to disclose the
volume in grams of oil sold and (or) produced in the period as opposed to milliliters. The actual
grams used in the production of cannabis oils can vary depending on the strain of dried cannabis
used which yields a different potency and strength in the oil. The Company estimates and converts
its cannabis oil inventory to equivalent grams based on the tetrahydrocannabinol (“THC”) and
cannabidiol (“CBD”) content in the cannabis oils.
Other Segments
The Company’s other reportable segments include its horizontally integrated businesses and
operating expenses.
Revenue
Other segment revenue of $4,067 relates to sales of hemp and home cultivation products,
attributable to acquisitions in the year.
Operating Expenses
(in thousands except as
otherwise noted)
General and administration
Sales and marketing
Acquisition costs
Depreciation and amortization
Research and development
Share-based payments
Total operating expenses
$
$
2018
Q4
22,557
14,761
8,025
10,121
923
11,636
68,023
$
$
Q3
9,847
5,880
5,543
873
477
15,872
38,492
$
$
Q2
7,568
5,136
1,756
460
172
7,456
22,548
$
$
Q1
2,993
3,668
340
634
107
2,486
10,228
Total
42,965
$
29,445
$
15,664
$
12,088
$
1,679
$
$
37,450
$ 139,291
$
$
2017
Total
6,813
10,270
1,551
716
314
7,584
27,248
General and administration costs increased by $12,710, or 129%, compared to the prior quarter.
The increase was primarily due to increased audit, legal and accounting fees relating to external
financial reporting, audit and tax fees, as well as consulting and legal fees related to the acqui-
sition of CanniMed. Travel costs increased due to market development, as well as CanniMed
integration activities. Wages and benefits increased as a result of growth in Aurora’s workforce
to support its corporate strategy. The inclusion of CanniMed’s general and administrative cost
accounted for $3,171, or 25%, of the increase overall.
Sales and marketing cost increased by $8,881, or 151%, compared to the third quarter of fiscal
2018. The increase was mainly due to continued investment in the Company’s brand building
initiatives, including consumer education and engagement programs, such as our Illumination
Concert Series. The inclusion of CanniMed’s sales and marketing cost accounted for $1,715, or
19%, of the increase overall.
Acquisition cost increased $2,482, or 45%, compared to the prior quarter mainly due to pro-
fessional, banking, and legal fees incurred in relation to the successful completion of the
acquisitions of both CanniMed and MedReleaf.
Depreciation and amortization expense increased by $9,248, or 1,059%, from the third quarter of
fiscal 2018 primarily due to the increase in assets in use at the Aurora Sky facility as well as the
consolidation of CanniMed’s depreciation and amortization expense in the quarter.
Management’s Discussion & Analysis
37
Annual operating expenses were $112,043 higher than the prior year primarily due to an increase
in the following:
• General and administrative expenses of $36,152 in wages and benefits expense due to in-
creased headcount to support the growth of various aspects of the Company; professional and
transfer agent fees relating to strategic corporate transactions and general corporate matters;
and corporate office charges related to the expansion of operations and business functions;
• Sales and marketing expense of $19,175 due to increased brand, public relations and trade-
show activities;
• Acquisition costs of $14,113 related to horizontally diversified and vertically integrated business
acquisitions;
• Depreciation and amortization expense of $11,372 from additional capital assets in operational
use within Aurora Sky and other facilities; and
• Share-based payments of $29,866 from the issuance of stock options.
The inclusion of CanniMed’s results accounted for 9% of the annual increase in general and
administrative expenses and 9% of the annual increase in sales and marketing expense.
LIQUIDITY AND CAPITAL RESOURCES
During the twelve months ended June 30, 2018, the Company generated revenue of $55,196 from
operations, and financed its current operations, growth initiatives, and met its capital require-
ments from debt and equity financings. The Company’s objectives when managing its liquidity and
capital resources are to ensure sufficient liquidity to support its financial obligations and execute its
operating and strategic plans while maintaining healthy liquidity reserves and access to capital for
at least the next twelve months.
The Company manages its liquidity risk by monitoring its operating requirements and preparing
budgets and cash forecasts to ensure it has sufficient funds to fulfill obligations.
The table below sets out cash and working capital as at June 30, 2018, and 2017:
(In thousands except as otherwise noted)
Cash and cash equivalents
Working capital
$
2018
89,193
144,533
$
2017
159,715
170,142
As at June 30, 2018, the Company maintained $89,193 in cash and cash equivalents in contrast to
$159,715 in cash and cash equivalents as at June 30, 2017.
The Company’s working capital as of June 30, 2018 was $144,533 compared to $170,142 as at
June 30, 2017. The decrease in working capital of $25,609 was largely attributable to an increase
in the accounts payable and accrued liabilities balance from the timing of payables related to
construction of our production facilities.
The table below summarizes total capitalization as at June 30, 2018, and 2017:
(in thousands except as otherwise noted)
Convertible notes
Loans and borrowings
Total debt
Total equity
Total capitalization
2018
$ 191,528
11,683
203,211
1,563,131
$ 1,766,342
$
$
2017
63,536
351
63,887
218,933
282,820
Total capitalization increased $1,483,522 compared to the prior year mostly due to an increase in
equity of $1,344,198 from the issuance of shares relation to strategic acquisitions as well as from
38
Aurora Cannabis Inc.
2018 Annual Report
the exercise and conversion of stock options, warrants and convertible debentures throughout
fiscal 2018.
On August 29, 2018, the Company closed a $200,000 debt facility with Bank of Montreal, consisting
of a $150,000 term loan and a $50,000 revolving credit facility, both of which will mature in 2021.
The new debt facility will shift the capital structure of the Company to include more traditional debt
financing which will lower the cost of capital. The Company anticipates that it will have sufficient
liquidity and capital resources to meet its planned expenditures for the next twelve months.
The table below summarizes the Company’s cash flows for the years ended June 30, 2018, and 2017:
(in thousands except as
otherwise noted)
Cash used in operating activities $
Cash used in investing activities
Cash provided by (used in)
financing activities
Effect of foreign exchange
(Decrease) increase in cash and
cash equivalents
2018
Q4
(45,121) $
Q3
(26,915) $
Q2
(4,657) $
Q1
(4,974) $
Total
(81,667) $
(105,548)
(323,821)
(79,958)
(28,432)
(537,759)
2017
Total
(13,378)
(49,341)
8,418
502
230,873
45
307,979
(438)
1,279
246
548,549
355
221,985
190
$ (141,749) $
(119,818) $
222,926
$
(31,881) $
(70,522) $
159,456
Operating activities
For the twelve months ended June 30, 2018, cash used in operating activities resulted primarily
from cash inflows of $35,593 from gross profit before the effect of changes in fair value, offset by
cash flows used for operating expenses of $84,717, finance and other costs of $7,159 and cash
outflows of $25,384 related to changes in non-cash working capital.
Cash used in operating activities in the prior year resulted primarily from cash inflows of $10,192
from gross profit before the effect of changes in fair value, offset by cash flows used for operating
expenses of $18,825, finance and other costs of $2,288 and cash outflows of $1,242 related to
changes in non-cash working capital.
Investing activities
For the twelve months ended June 30, 2018, cash used in investing activities were primarily for
the purchase of production equipment building improvements and construction of other facili-
ties of $136,945, investments of $63,437 in marketable securities and derivatives, investment
in associates of $218,183, and the acquisition of assets and business combinations, net of cash,
for $108,329.
Investing activities in the prior year consisted primarily of cash outflows of $25,718 for the
purchase of equipment and the construction of Aurora Sky, $13,665 for asset acquisitions and
business combinations net of cash acquired, and $7,877 from investments in marketable securi-
ties and derivatives.
Financing activities
For the twelve months ended June 30, 2018, cash provided by financing activities were primarily
generated from the November 2017 bought deal financing for net proceeds of $70,639, the
November 2017 special warrant financing for net proceeds of $110,922, the March 2018 convert-
ible debenture financing for net proceeds of $222,205, and the exercise of warrants, options and
compensation options for $144,967.
Financing activities in the prior year were primarily generated from equity financings for net
proceeds of $91,727, net proceeds from convertible debentures of $109,973, and the exercise of
warrants, options and compensation options for $29,096.
Management’s Discussion & Analysis
39
Capital Resource Measures
The Company’s major capital expenditures during the three months ended June 30, 2018 mainly
consisted of the construction of Aurora Sky and the commencement of construction at Aurora
Sun. Subsequent to June 30, 2018, the Company finalized its $200,000 debt facility with BMO.
The Company believes it has sufficient cash and resources to fund the Company’s operations and
complete construction of its announced facilities for at least the next fiscal year. See “Facilities”
for Aurora’s operating, under construction and announced production facilities.
Contractual Obligations
The Company had the following contractual obligations as of June 30, 2018:
(In thousands except as otherwise noted)
Accounts payable and accrued liabilities
Loans and borrowings
Contingent consideration payable
Operating lease
Convertible notes and interest (1)
Office lease
Capital projects (2)
Total contractual obligations
Total
$
47,456 $
11,747
23,742
83
251,356
47,257
38,474
$ 420,115
$
Less than
1 year
47,456
2,482
14,438
60
11,604
5,332
38,474
119,846
$
$
1 to 3 years
- $
3 to 5 years
-
6,754
-
-
2,103
27,161
-
$
36,018
2,511
9,304
23
237,649
14,764
-
264,251
(1) Assumes the principal balance outstanding at June 30, 2018 remains unconverted and includes the estimated interest
payable until the maturity date.
(2) Relates to capital commitments that the Company has made to specific vendors for capital projects pertaining to
on-going construction projects.
Contingencies
On November 29, 2017, a claim was commenced against the Company regarding 300,000 stock
options with an exercise price of $0.39 per share issued to a consultant pursuant to an agree-
ment dated March 16, 2015. The agreement was terminated on March 8, 2016, and in accordance
to the Company’s stock option plan, the unexercised options expired 90 days from the date of the
termination of the agreement.
The option holder is attempting to enforce exercise rights which the Company believes do not exist.
The Company believes the action to be without merit and intends to defend this claim vigorously.
Due to the uncertainty of timing and the amount of estimated future cash outflows relating to this
claim, no provision had been recognized.
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.
40
Aurora Cannabis Inc.
2018 Annual Report
TRANSACTIONS WITH RELATED PARTIES
Goods and services
The Company incurred the following transactions with related parties during the years ended
June 30, 2018 and 2017:
“
Name and Relationship to the Company”
Transaction
Year ended June 30,
At as June 30,
2018
2017
Related Party Transactions
2018
2017
Balance Payable (Receivable) (1)
Canadian Cannabis Clinics (“CCC”), a
company where Joseph del Moral, is
a common director
Colour Media Inc., a company
partially owned by an officer of the
Company, Savior Joseph
Belot Business Consulting Corp,
a company controlled by Neil
Belot, Chief Global Business
Development Office
Australis Holdings Limited (“AHL”), a
50% owned joint venture company
The Green Organic Dutchman
Holdings Ltd., an associate of
the Company
Cann Group Limited, an associate
of the Company
Service fees (2)
$
4,957
$
3,659
$
- $
(72)
Marketing fees
2,210
-
-
Consulting fees (3)
Interest income (4)
Design, engineering and
construction consulting
services (5)
Design, engineering and
construction consulting
services (5)
358
49
240
239
780
24
41
(3,444)
(2,096)
-
-
(620)
(50)
-
-
-
-
(1) The amounts are unsecured, non-interest bearing and have no specific repayment terms.
(2) CCC provides operational, administrative and consulting services to CanvasRx.
(3) Consulting fees paid related to the CanvasRx acquisition.
(4) Interest income earned on loans receivable from AHL.
(5) Profit margin generated from services provided to the Company’s associates, based on the Company’s ownership interest
at June 30, 2018.
These transactions are in the normal course of operations and are measured at the exchange value
being the amounts agreed to by the parties.
Key management personnel compensation
The Company’s key management personnel have the authority and responsibility for planning,
directing and controlling the activities of the Company and consists of the Company’s executive
management team and management directors.
(in thousands except as otherwise noted)
Management compensation
Directors’ fees (1)
Share-based payments (2)
2018
5,284
210
14,608
20,102
$
$
$
$
$
$
2017
1,934
258
6,431
8,623
(1) Includes meeting fees and committee chair fees.
(2) Share-based payments are the fair value of options granted and vested to key management personnel and directors of
the Company under the Company’s stock option plan.
As at June 30, 2018, the amount payable to the directors and officers and a former director and
officer of the Company is $1,128 (2017 - $565).
CRITICAL ACCOUNTING ESTIMATES
The preparation of the Company’s Financial Statements in conformity with IFRS requires manage-
ment to make judgements, estimates, and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The estimates and associated assump-
tions are based on historical experience and other factors that are considered to be relevant. Actual
results may differ from these estimates.
Management’s Discussion & Analysis
41
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 judgements, estimates and assumptions that have the most significant effect on the
amounts recognized in the Financial Statements are as follows:
Biological assets
Determination of the fair values of the biological assets requires the Company to make assumptions
about how market participants assign fair values to these assets. These assumptions primarily
relate to the level of effort required to bring the cannabis up to the point of harvest, costs to convert
the harvested cannabis to finished goods, sales price, risk of loss, expected future yields from the
cannabis plants and estimating values during the growth cycle. The average grow cycle of plants up
to the point of harvest is approximately twelve weeks.
Inventory
The valuation of biological assets at the point of harvest is the cost basis for all cannabis-based
inventory and thus any critical estimates and judgements related to the valuation of biological
assets are also applicable for inventory. The valuation of work-in-process and finished goods also
requires the estimate of conversion costs incurred, which become part of the carrying amount for
the inventory. The Company must also determine if the cost of any inventory exceeds its net realiz-
able value, such as cases where prices have decreased, or inventory has spoiled or has otherwise
been damaged.
Estimated useful lives and depreciation of property, plant and equipment
Depreciation of property, plant and equipment is dependent upon estimates of useful lives and
residual values which are determined through the exercise of judgement. 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.
Investments in associates and joint ventures
The Company uses judgement in its assessment of whether the Company has significant influence.
Significant influence is the power to participate in the financial and operating policy decisions of
the investee, including but not limited to, the ability to exercise significant influence through board
representation, material transactions with the investee, provision of technical information, and
the interchange of managerial personnel. Whether an investment is classified as an investment in
associate can have a significant impact on the entries made on and after acquisition.
Business combinations and asset acquisitions
Classification of an acquisition as a business combination or an asset acquisition depends on
whether the assets acquired constitute a business, which can be a complex judgement. Whether an
acquisition is classified as a business combination or asset acquisition can have a significant impact
on the entries made on and after acquisition.
In determining the fair value of all identifiable assets, liabilities and contingent liabilities
acquired, the most significant estimates relate to contingent consideration and intangible assets.
Management exercises judgement in estimating the probability and timing of when earn-outs are
expected to be achieved which is used as the basis for estimating fair value. For any intangible asset
identified, depending on the type of intangible asset and the complexity of determining its fair value,
an independent valuation expert or management may develop the fair value, using appropriate
valuation techniques, which are generally based on a forecast of the total expected future net cash
42
Aurora Cannabis Inc.
2018 Annual Report
flows. The evaluations are linked closely to the assumptions made by management regarding the
future performance of these assets and any changes in the discount rate applied.
Disposal group held for distribution
The Company held a revenue royalty and an annuity receivable from SubTerra LLC. These assets
were held in Australis Capital Inc. which was classified as a disposal group held for distribution to
Aurora shareholders. The Company used judgement in estimating the fair value of the SubTerra
assets. In determining the fair value of the revenue royalty, management exercised judgement
in determining the likelihood of SubTerra generating revenues from the sale of cannabis-based
products. The fair value of the annuity receivable was estimated using the effective interest method
using a ten-year corporate debt yield at the measurement date.
Goodwill and intangible asset impairment
Amortization of intangible assets is dependent upon estimates of useful lives and residual values
which are determined through the exercise of judgement.
Goodwill is allocated to cash generating units (“CGUs”) which are expected to benefit from the syn-
ergies of the business combination. CGUs are determined based on the smallest identifiable group
of assets that generates cash inflows that are largely independent of cash inflows from other assets
or group of assets. Management has exercised judgement in this assessment and determined the
Company’s CGUs to be: the production and sale of medical cannabis; patient counselling services;
design, engineering and construction consulting services; the production and sale of indoor
cultivators; and the production and sale of hemp related food products.
Convertible instruments
The identification of convertible notes components is based on interpretations of the substance of
the contractual arrangement and therefore requires judgement 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.
Share-based payments
In estimating fair value of warrants using the Binomial model, management is required to make
certain assumptions and estimates such as the expected life of warrants, volatility of the Company’s
future share price, risk free rate, and future dividend yields. Changes in assumptions used to
estimate fair value could result in materially different results.
In estimating fair value of options using the Black-Scholes option pricing model, 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 forfei-
tures at the initial grant date. Changes in assumptions used to estimate fair value could result in
materially different results.
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.
Management’s Discussion & Analysis
43
Fair value of financial instruments
The individual fair values attributed to the different components of a financing transaction, notably
investment in equity in securities, derivative financial instruments, convertible debt and loans, are
determined using valuation techniques. The Company uses judgement to select the methods used
to make certain assumptions and in performing the fair value calculations in order to determine
(a) the values attributed to each component of a transaction at the time of their issuance; (b) the fair
value measurements for certain instruments that require subsequent measurement at fair value on
a recurring basis; and (c) for disclosing the fair value of financial instruments subsequently carried
at amortized cost. These valuation estimates could be significantly different because of the use of
judgement and the inherent uncertainty in estimating the fair value of these instruments that are
not quoted in an active market.
NEW ACCOUNTING PRONOUNCEMENTS
There were no new standards effective July 1, 2017, that had an impact on the Company’s consoli-
dated 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 transi-
tion 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. The Company intends to adopt the amendments to
IFRS 7 on July 1, 2018, and does not expect the implementation will result in a significant effect to
the financial statements.
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.
The Company intends to adopt IFRS 9 on July 1, 2018, retrospectively where the cumulative impact of
adoption will be recognized in retained earnings as of July 1, 2018; comparatives will not be restated.
The Company has conducted a preliminary assessment of the impact from this new standard.
IFRS 9 introduces new requirements to determine the measurement basis of financial assets,
involving the cash flow characteristics of assets and the business models under which they are
managed. Accordingly, the basis of measurement for the Company’s financial assets may change.
IFRS 9 affects the accounting for available-for-sale equity securities, requiring a designation, on an
instrument-by-instrument basis, between recording both unrealized and realized gains and losses
either through (i) OCI with no recycling to profit and loss or (ii) profit and loss. The Company will
be electing to classify its available-for-sale equity investments at Fair Value through OCI as these
equity investments are for strategic purposes. The FVOCI election is made upon initial recognition,
on an instrument-by-instrument basis and once made is irrevocable. Gains and losses on these
instruments including when derecognized or sold are recorded in OCI and are not subsequently
reclassified to the Consolidated Statement of Comprehensive Income (Loss).
For other financial instruments, the Company does not expect the implementation will result in a
significant change in the classification and measurement of the Company’s financial assets.
44
Aurora Cannabis Inc.
2018 Annual Report
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. IFRS 15 is effective for annual periods beginning on or after January 1, 2018, with early
application permitted.
The Company intends to adopt IFRS 15 on July 1, 2018, using the modified retrospective approach
where the cumulative impact of adoption will be recognized in retained earnings as of July 1, 2018;
comparatives will not be restated.
The Company has conducted a preliminary assessment of the impact from this new standard.
Under IFRS 15, revenue from the sale of medicinal cannabis would be recognized at a point in time
when control over the goods have been transferred to the customer. The Company transfers control
and satisfies its performance obligation upon delivery and acceptance by the customer, which is
consistent with the Company’s current revenue recognition policy under IAS 18.
Referral revenues earned from Licensed Producers through CanvasRx are recognized over a period
of time as the referred patients remain active with the Licensed Producers. This is consistent with
the Company’s current revenue recognition policy under IAS 18 where revenue is recognized on a
monthly basis over a specified period of time that the referred patient remains an active purchaser
of medical cannabis with the Licensed Producer.
Based on the Company’s preliminary assessment, the adoption of this new standard is not expected
to have a material impact on its consolidated financial statements.
IFRS 16 Leases
In January 2016, the IASB issued IFRS 16 Leases, which will replace IAS 17 Leases. This standard
introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities
for all leases with a term of more than twelve months, unless the underlying asset is of low value.
A lessee is required to recognize a right-of-use asset representing its right to use the underlying
asset and a lease liability representing its obligation to make lease payments. The standard will be
effective for annual periods beginning on or after January 1, 2019, with earlier application permitted
for entities that apply IFRS 15 Revenue from Contracts with Customers at or before the date of
initial adoption of IFRS 16. The Company intends to adopt IFRS 16 on July 1, 2019, and is assessing
the impact of this new standard on its consolidated financial statements.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
Fair Value Hierarchy
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.
Significant Judgement
The individual fair values attributed to the different components of a financing transaction, notably
investment in equity in securities, derivative financial instruments, convertible debt and loans, are
determined using valuation techniques. The Company uses judgement to select the methods used
to make certain assumptions and in performing the fair value calculations in order to determine
Management’s Discussion & Analysis
45
(a) the values attributed to each component of a transaction at the time of their issuance; (b) the fair
value measurements for certain instruments that require subsequent measurement at fair value on
a recurring basis; and (c) for disclosing the fair value of financial instruments subsequently carried
at amortized cost. These valuation estimates could be significantly different because of the use of
judgement and the inherent uncertainty in estimating the fair value of these instruments that are
not quoted in an active market.
Summary of Financial Instruments
The carrying values of the financial instruments at June 30, 2018, are summarized in the
following table:
(in thousands except as otherwise noted)
Financial Assets
Cash and cash equivalents
Short-term investments
Accounts receivable
Marketable securities
Derivatives
Financial Liabilities
Accounts payable (1)
Convertible notes (2)
Contingent consideration
Loans and borrowings
Available-
for-sale
financial
assets
Loans and
receivables
Held-for-
trading
derivative
assets at
FVTPL
Financial
assets
designated
as FVTPL
Other
financial
liabilities
Financial
liabilities at
FVTPL
Total
$
- $ 89,193
990
-
15,096
-
-
59,188
-
-
$
- $
-
-
-
5,331
- $
-
-
-
119,611
- $
-
-
-
-
- $ 89,193
990
-
15,096
-
59,188
-
124,942
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47,456
191,528
-
11,683
-
-
21,333
-
47,456
191,528
21,333
11,683
(1) Balance includes interest rate swaps of $63 which are included in accounts payable and accrued liabilities on the
Statement of Financial Position.
(2) The fair value of convertible notes, including both the debt and equity components.
Fair value hierarchy
The following is a summary of financial assets measured at fair value segregated based on the
various levels of inputs:
(in thousands except as otherwise noted)
Marketable securities
Derivative assets
$
Level 1
59,188
-
Level 2
Level 3
$
- $
- $
120,102
4,840
Total
59,188
124,942
There have been no transfers between fair value levels during the period.
Changes in level 3 financial assets
Changes in the carrying value of level 3 financial assets for the period were as follows:
(in thousands except as otherwise noted)
Opening, June 30, 2017
Additions
Unrealized gain at inception
Unrealized gain (loss)
Conversion of debenture
Exercise of warrants
Ending balance
46
Aurora Cannabis Inc.
2018 Annual Report
$
$
Convertible
Debenture
11,071
-
-
830
(11,901)
-
- $
Warrant
Derivatives
292
30,681
3,050
(9,790)
4,330
(23,723)
4,840
$
Total
11,363
30,681
3,050
(8,960)
(7,571)
(23,723)
4,840
$
$
Unrealized gains (losses) on level 3 financial assets
For the year ended June 30, 2018, the Company recognized unrealized gains (losses) on level 3
financial assets as follows:
(in thousands except as otherwise noted)
Gain (loss) on changes in fair value
Amortized deferred inception gains
Unrealized gains (losses) on level 3 financial assets
Convertible
Debenture
830
6,107
6,937
$
$
Warrant
Derivatives
$
$
(9,790) $
5,217
(4,573) $
Total
(8,960)
11,324
2,364
Deferred gains
Changes in deferred gains on convertible debenture and derivatives measured at fair value and
included in level 3 of the fair value hierarchy were as follows:
(in thousands except as otherwise noted)
Opening, June 30, 2017
Additions
Conversion of debenture
Unrealized gains amortized
Ending balance
$
Convertible
Debenture
10,206
-
(4,099)
(6,107)
$
Warrant
Derivatives
321
3,051
4,099
(5,217)
2,254
$
- $
Total
10,527
3,051
-
(11,324)
2,254
$
$
Contingent consideration
The following is a continuity of contingent consideration liability:
(in thousands except as otherwise noted)
Opening, June 30, 2017
Additions from acquisitions
Unrealized (gain) loss from change in fair value
Payments
Ending balance
BCNL UCI
$
- $
1,119
123
-
1,242
$
$
CanvasRx
13,221
-
6,703
(14,040)
5,884
H2
$
- $
14,957
1,018
(1,768)
14,207
$
$
Total
13,221
16,076
7,844
(15,808)
21,333
The Company’s contingent consideration liability was measured at fair value based on unobserv-
able inputs and was considered a level 3 financial instrument. The fair value of these liabilities
determined by this analysis was primarily driven by the Company’s expectations of the subsidiaries’
achieving their milestones. The expected milestones were assessed probabilities by management
which were discounted to present value in order to derive a fair value of the contingent consider-
ation. The primary inputs of the calculation were the probabilities of achieving the milestones and a
discount rate.
FINANCIAL INSTRUMENTS RISK
The Company is exposed in varying degrees to a variety of financial instrument related risks.
The Board mitigates these risks by assessing, monitoring and approving the Company’s risk
management processes:
Credit risk
Credit risk is the risk of a potential loss to the Company if a customer or third party to a financial
instrument fails to meet its contractual obligations. The Company is moderately exposed to credit
risk from its cash and cash equivalents, trade and other receivables, short-term GIC investments,
and advances receivable. The risk exposure is limited to their carrying amounts at the statement
of financial position date. The risk for cash and cash equivalents is mitigated by holding these
instruments with highly rated Canadian financial institutions. The Company does not invest in
asset-backed deposits or investments and does not expect any credit losses. The Company periodi-
cally assesses the quality of its investments and is satisfied with the credit rating of the financial
institutions and the investment grade of its guaranteed investment certificates. Trade and other
receivables primarily consist of trade accounts receivable and goods and services taxes recoverable
Management’s Discussion & Analysis
47
(“GST”). Credit risk from the advances receivable arises from the possibility that principal and/or
interest due may become uncollectible. The Company mitigates this risk by managing and
monitoring the underlying business relationships.
The Company provides credit to its customers in the normal course of business and has estab-
lished credit evaluation and monitoring processes to mitigate credit risk but has limited risk as the
majority of sales are transacted with credit cards.
As at June 30, 2018 and 2017, the Company’s aging of receivables was approximately as follows:
(in thousands except as otherwise noted)
0 – 60 days
61 – 120 days
2018
13,569
1,527
15,096
$
$
$
$
2017
1,534
778
2,312
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations associ-
ated with financial liabilities. The Company manages liquidity risk through the management of its
capital structure. The Company has access to CanniMed’s Canadian and U.S. operating lines of
credit with a maximum of $1,000 and US$500, respectively. The Canadian and U.S. operating lines
of credit bear interest at bank prime rate plus 0.75% and at U.S. base rate plus 0.75%, respec-
tively. The lines of credit are secured by a general security agreement covering all assets of the
Company and can be accessed to the lesser of the maximum available credit or the aggregate of
90% of Government of Canada receivables, 85% of undoubted receivables and 75% of acceptable
receivables, less intercompany and priority claim amounts. These operating lines of credit were
undrawn as of June 30, 2018. Subsequent to June 30, 2018, the Company also secured a $200,000
debt facility with BMO. The Company’s approach to managing liquidity is to ensure that it will have
sufficient liquidity to settle obligations and liabilities when due.
Market risk
(a) Currency risk
The operating results and financial position of the Company are reported in Canadian dollars.
As the Company operates in an international environment, some of the Company’s financial
instruments and transactions are denominated in currencies other than the Canadian dollar. The
results of the Company’s operations are subject to currency transaction and translation risks.
The Company holds cash in Canadian dollars, U.S. dollars, Danish Krone and Euros, and invest-
ments in Australian and U.S. dollars. The Company’s main risk is associated with fluctuations
in the Euros, Danish Krone and Australian and U.S. dollars. Assets and liabilities are translated
based on the foreign currency translation policy.
The Company has determined that an effect of a 10% increase or decrease in Euros, Danish
Krone, Australian dollar, and U.S. dollar against the Canadian dollar on financial assets and
liabilities, as at June 30, 2018, would result in an increase or decrease of approximately $79
(2017 - $1,430) to the net loss and comprehensive loss for the year ended June 30, 2018.
At June 30, 2018, the Company had no hedging agreements in place with respect to foreign
exchange rates. The Company has not entered into any agreements or purchased any
instruments to hedge possible currency risks at this time.
(b) 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 investments and convertible notes have fixed rates of interest.
48
Aurora Cannabis Inc.
2018 Annual Report
The majority of the Company’s loans and borrowings have floating interest rates. The Company
holds interest rate swaps to fix its exposure to variable interest rates on approximately one half of
its loans and borrowings.
(c) Price risk
Price risk is the risk of variability in fair value due to movements in equity or market prices. The
Company’s marketable securities and investments are susceptible to price risk arising from
uncertainties about their future values. The fair value of marketable securities is based on quoted
market prices for which the shares of the investments can be exchanged.
If the fair value of these financial assets were to increase or decrease by 10%, the Company
would incur an associated increase or decrease in net loss and comprehensive loss of approxi-
mately $28,221 (2017 - $2,823). See Note 8 for additional details regarding the fair value of
investments and marketable securities.
SUMMARY OF OUTSTANDING SHARE DATA
The Company had the following securities issued and outstanding as at September 24, 2018:
Securities (1)
Issued and outstanding common shares
Stock options
Warrants
Restricted share units
Convertible debentures
Units
Outstanding
960,962,079
42,824,768
23,019,275
2,718,527
17,892,131
(1) See the Company’s Consolidated Financial Statements Note 17 “Convertible Debentures”, Note 19 “Share Capital and
Warrants”, and Note 20 “Share-based Payments” for a detailed description of these securities.
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 Licensing
The ability of Aurora to continue its business of growth, storage and distribution of medical mari-
juana is dependent on the good standing of all licenses, including the licenses to produce and sell
cannabis oil products, and adherence to all regulatory requirements related to such activities. Any
failure to comply with the terms of the licenses, or to renew the licenses after their expiry dates,
would have a material adverse impact on the financial condition and operations of the business of
the Company. Although the Company believes that it will meet the requirements of the ACMPR for
future extensions or renewals of the licenses, there can be no assurance that Health Canada will
extend or renew the licenses, or if extended or renewed, that they will be extended or renewed on
the same or similar terms. Should Health Canada not extend or renew the licenses, or should they
renew the licenses on different terms, the business, financial condition and operating results of the
Company would be materially adversely affected.
Change in Law, Regulations and Guidelines
Aurora’s business is subject to a variety of laws, regulations and guidelines relating to marketing,
acquisition, manufacture, management, transportation, storage, sale and disposal of medical mari-
juana but also laws and regulations relating to health and safety, the conduct of operations and the
Management’s Discussion & Analysis
49
protection of the environment. Changes to such laws, regulations and guidelines may cause adverse
effects to the Company’s operations.
The Liberal Party of Canada, which has formed the current federal Government of Canada, has
made electoral commitments to legalize, regulate and tax recreational cannabis use in Canada.
On April 13, 2017, the Government of Canada introduced the Cannabis Act. On June 19, 2018,
Prime Minister Justin Trudeau announced that the Cannabis Act and its regulations will come
into force in Canada on October 17, 2018, on order to provide the provinces and territories time to
prepare for retail sales. The Cannabis Act passed its final legislative step and received Royal Assent
on June 21, 2018.
The legislative framework pertaining to the Canadian recreational cannabis market will be subject
to significant provincial and territorial regulation, which will vary across provinces and territories
and result in an asymmetric regulatory and market environment, different competitive pressures
and significant additional compliance and other costs and/or limitations on the Company’s ability to
participate in such market.
Regulatory Risk
Achievement of the Company’s business objectives are contingent, in part, upon compliance with
the regulatory requirements, including those imposed by Health Canada, enacted by these gov-
ernment authorities and obtaining all regulatory approvals, where necessary, for the sale of its
products. Aurora 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 government
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 operation and financial condition.
Limited Operating History and No Assurance of Profitability
The Company is subject to all of the business risks and uncertainties associated with any early-
stage enterprise, including under-capitalization, cash shortages, limitation with respect to
personnel, financial and other resources, and lack of revenues.
The Company has incurred operating losses in recent periods. The Company may not be able
to achieve or maintain profitability and may continue to incur significant losses in the future. In
addition, the Company expects to continue to increase operating expenses as it implements initia-
tives to grow its business. If the Company’s revenues do not increase to offset these expected
increases in costs and operating expenses, the Company will not be profitable. There is no assur-
ance that the Company will be successful in achieving a return on shareholders’ investments and
the likelihood of success must be considered in light of the early stage of operations.
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.
50
Aurora Cannabis Inc.
2018 Annual Report
Competition
The market for the Company’s products does appear to be sizeable and Health Canada has only
issued a limited number of licenses under the ACMPR to produce and sell medical marijuana. As a
result, the Company expects significant competition from other companies due to the recent nature
of the ACMPR 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 products will
increase as well, and in order for the Company to be competitive it will need to invest significantly
in research and development, market development, marketing, production expansion, new client
identification, distribution channels and client support. 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
conditions and operations.
Realization of Growth Targets
The Company’s ability to continue production of marijuana is affected by a number of factors,
including plant design errors, non-performance by third party contractors, increases in materials
or labour costs, construction performance falling below expected levels of output or efficiency,
environmental pollution, contractor or operator errors, breakdowns, aging or failure of equipment
or processes, labour disputes, as well as factors specifically related to indoor agricultural practices,
such as reliance on provision of energy and utilities to the facility, and potential impacts of major
incidents or catastrophic events on the facility, such as fires, explosions, earthquakes or storms.
Additional Financing
There is no guarantee that the Company will be able to execute on its strategy. The continued devel-
opment of the Company may require additional financing. The failure to raise such capital could
result in the delay or indefinite postponement of current business strategy or the Company ceasing
to carry on business. There can be no assurance that additional capital or other types of financing
will be available if needed or that, if available, the terms of such financing will be favorable to the
Company. If additional funds are raised through issuances of equity or convertible debt securities,
existing shareholders could suffer significant dilution. In addition, from time to time, the Company
may enter into transactions to acquire assets or the shares of other companies. These transactions
may be financed wholly or partially with debt, which may temporarily increase the Company’s debt
levels above industry standards. Any debt financing secured in the future could involve restrictive
covenants relating to capital raising activities and other financial and operational matters, which
may make it more difficult for the Company to obtain additional capital and to pursue business
opportunities, including potential acquisitions. Debt financings may contain provisions, which, if
breached, may entitle lenders to accelerate repayment of loans and there is no assurance that the
Company would be able to repay such loans in such an event or prevent the enforcement of security
granted pursuant to such debt financing. The Company may require additional financing to fund its
operations to the point where it is generating positive cash flows. Negative cash flow may restrict
the Company’s ability to pursue its business objectives.
Uninsured or Uninsurable Risk
The Company may be 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 normal
Management’s Discussion & Analysis
51
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 and execute on
the Company’s business strategies and manage its ongoing operations, and on the Company’s ability
to attract and retain key quality assurance, scientific, sales, public relations and marketing staff or
consultants now that production and selling operations have begun. The loss of any key personnel 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.
Jurisdictions Outside of Canada
The Company intends to expand its operations and business into jurisdictions outside of Canada.
There can be no assurance that any market for the Company’s products will develop in any such
foreign jurisdiction. The Company may face new or unexpected risks or significantly increase its
exposure to one or more existing risk factors, including economic instability, changes in laws and
regulations and the effects of competition. These factors may limit the Company’s capability to suc-
cessfully expand its operations and may have a material adverse effect on the Company’s business,
financial condition and results of operations.
Strategic Alliances
The Company currently has, and may in the future enter into, strategic alliances with third parties
that the Company believes will complement or augment its existing business. Aurora’s ability to
complete strategic alliances is dependent upon, and may be limited by, the availability of suitable
candidates and capital. In addition, strategic alliances could present unforeseen integration obsta-
cles or costs, may not enhance our business, and may involve risks that could adversely affect the
Company, including significant amounts of management time that may be diverted from operations
in order to pursue and complete such transactions or maintain such strategic alliances. Future
strategic alliances could result in the incurrence of additional debt, costs and contingent liabilities,
and there can be no assurance that future strategic alliances will achieve, or that the Company’s
existing strategic alliances will continue to achieve, the expected benefits to the Company’s
business or that the Company will be able to consummate future strategic alliances on satisfac-
tory terms, or at all. Any of the foregoing could have a material adverse effect on the Company’s
business, financial condition and results of operations.
Product Liability Claims
As a manufacturer and distributor of products designed to be ingested by humans, the Company
faces an inherent risk of exposure to product liability claims, regulatory action and litigation if its
products are alleged to have caused significant loss or injury. In addition, the manufacture and sale
of cannabis products for medical purposes involves the risk of injury to consumers due to tampering
by unauthorized third parties or product contamination. Previously unknown adverse reactions
resulting from human consumption of cannabis products alone or in combination with other medi-
cations or substances could occur. The Company may be subject to various product liability claims,
including, among others, that the products produced by the Company caused or contributed to
injury or illness, include inadequate instructions for use or include inadequate warnings concerning
possible side effects or interactions with other substances. A product liability claim or regulatory
action against the Company could result in increased costs, could adversely affect the Company’s
reputation and goodwill with its patients and consumers generally, and could have a material
adverse effect on the Company’s business, financial condition and results of operations. There can
52
Aurora Cannabis Inc.
2018 Annual Report
be no assurances that the Company will be able to obtain or maintain product liability insurance on
acceptable terms or with adequate coverage against potential liabilities. Such insurance is expen-
sive and may not be available in the future on acceptable terms, or at all. The inability to obtain
sufficient insurance coverage on reasonable terms or to otherwise protect against potential product
liability claims could prevent or inhibit the commercialization of products.
Product Recalls and Returns
Manufacturers and distributors of products are sometimes subject to the recall or return of their
products for a variety of reasons, including product defects, such as contamination, unintended
harmful side effects or interactions with other substances, packaging safety and inadequate or
inaccurate labeling disclosure. If any of the products produced by the Company are recalled due
to an alleged product defect or for any other reason, the Company could be required to incur the
unexpected expense of the recall and any legal proceedings that might arise in connection with
the recall. The Company may lose a significant amount of sales and may not be able to replace
those sales at an acceptable margin or at all. In addition, a product recall may require significant
management attention. Although Aurora has detailed procedures in place for testing finished
products, there can be no assurance that any quality, potency or contamination problems will be
detected in time to avoid unforeseen product recalls, regulatory action or lawsuits, whether frivo-
lous or otherwise. Additionally, if any of the products produced by Aurora were subject to recall,
the reputation and goodwill of that product and/or the Company could be harmed. A recall for any
of the foregoing reasons could lead to decreased demand for products produced by Aurora and
could have a material adverse effect on the Company’s business, financial condition and results of
operations. Additionally, product recalls may lead to increased scrutiny of the operations of Aurora
by Health Canada or other regulatory agencies, requiring further management attention, increased
compliance costs and potential legal fees, fines, penalties and other expenses. Furthermore, any
product recall affecting the medical cannabis industry more broadly could lead consumers to lose
confidence in the safety and security of the products sold by Licensed Producers generally, which
could have a material adverse effect on the Company’s business, financial condition and results
of operations.
New Product Development
The medical cannabis industry is, and the recreational cannabis industry will be, in its early stages
of development and it is likely that the Company, and its competitors, will seek to introduce new
products in the future. In attempting to keep pace with any new market developments, the Company
may need to expend significant amounts of capital in order to successfully develop and generate
revenues from new products introduced by the Company. As well, the Company may be required
to obtain additional regulatory approvals from Health Canada and any other applicable regula-
tory authority, which may take significant amounts of time. The Company may not be successful
in developing effective and safe new products, bringing such products to market in time to be
effectively commercialized, or obtaining any required regulatory approvals, which, together with
any capital expenditures made in the course of such product development and regulatory approval
processes, may have a material adverse effect on the Company’s business, financial condition and
results of operations.
Conflict of Interest
Certain of the Company’s directors and officers are also directors and officers 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.
Management’s Discussion & Analysis
53
Litigation
The Company may become party to litigation, mediation and/or arbitration from time to time in the
ordinary course of business which could adversely affect its business. Monitoring and defending
against legal actions, whether or not meritorious, can be time-consuming, divert management’s
attention and resources and cause the Company to incur significant expenses. In addition, legal fees
and costs incurred in connection with such activities may be significant and we could, in the future,
be subject to judgements or enter into settlements of claims for significant monetary damages.
While the Company has insurance that may cover the costs and awards of certain types of litigation,
the amount of insurance may not be sufficient to cover any costs or awards. Substantial litigation
costs or an adverse result in any litigation may adversely impact the Company’s business, operating
results or financial condition.
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 no 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.
Transportation Disruptions
The Company will depend on fast, cost-effective and efficient courier services to distribute its
product. Any prolonged disruption of this courier service could have an adverse effect on the finan-
cial condition and results of operations of the Company. Rising costs associated with the courier
service used by the Company to ship its products may also adversely impact the business of the
Company and its ability to operate profitably.
Fluctuating Prices of Raw Materials
The Company’s revenues are in a 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
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 activi-
ties 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 con-
cerning, 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.
54
Aurora Cannabis Inc.
2018 Annual Report
Intellectual Property
The success of the Company’s business depends in part on its ability to protect its ideas and tech-
nology. Aurora has applied for a patent for Aurora Envoy™ in August 2017. AMI has also applied
to register the trademark “AURORA” and has received an approval notice from the Canadian
Intellectual Property Office. CanvasRx has registered a trademark for “CanvasRx”. 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 or 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 intel-
lectual property rights may require significant financial and other resources such that said actions
have a meaningful impact our ability to successfully grow our business.
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 restric-
tions 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.
Growth Expansion Efforts
There is no guarantee that the Company’s intentions to acquire and/or construct additional cannabis
production and manufacturing facilities in Canada and in other jurisdictions with federal legal
cannabis markets, and to expand the Company’s marketing and sales initiatives will be successful.
Any such activities will require, among other things, various regulatory approvals, licenses and
permits (such as additional site licenses from Health Canada under the ACMPR, as applicable) and
there is no guarantee that all required approvals, licenses and permits will be obtained in a timely
fashion or at all. There is also no guarantee that the Company will be able to complete any of the
foregoing activities as anticipated or at all. The failure of the Company to successfully execute its
expansion strategy (including receiving required regulatory approvals and permits) could adversely
affect the Company’s business, financial condition and results of operations and may result in
the Company failing to meet anticipated or future demand for its cannabis-based pharmaceutical
products, when and if it arises.
In addition, the construction of Aurora Sky, Aurora Sun and Aurora Nordic 2 is subject to various
potential problems and uncertainties, and may be delayed or adversely affected by a number of
factors beyond its control, including the failure to obtain regulatory approvals, permits, delays in
the delivery or installation of equipment by our suppliers, difficulties in integrating new equipment
with its existing facilities, shortages in materials or labor, defects in design or construction, diver-
sion of management resources, or insufficient funding or other resource constraints. Moreover,
actual costs for construction may exceed the Company’s budgets. As a result of construction delays,
cost overruns, changes in market circumstances or other factors, the Company may not be able
to achieve the intended economic benefits from the construction of the new facilities, which in
turn may materially and adversely affect its business, prospects, financial condition and results
of operations.
Execution of Future Acquisitions or Dispositions
Material acquisitions, dispositions and other strategic transactions involve a number of
risks, including: (i) potential disruption of the Company’s ongoing business; (ii) distraction of
Management’s Discussion & Analysis
55
management; (iii) the Company may become more financially leveraged; (iv) the anticipated benefits
and cost savings of those transactions may not be realized fully or at all or may take longer to
realize than expected; (v) increasing the scope and complexity of the Company’s operations, and (vi)
loss or reduction of control over certain of the Company’s assets.
The presence of one or more material liabilities of an acquired company that are unknown to the
Company at the time of acquisition could have a material adverse effect on the results of opera-
tions, business prospects and financial condition of the Company. A strategic transaction may result
in a significant change in the nature of the Company’s business, operations and strategy. In addition,
the Company may encounter unforeseen obstacles or costs in implementing a strategic transaction
or integrating any acquired business into the Company’s operations.
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 experi-
enced 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 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 require-
ments 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 Exchange.
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.
Volatile Market Price for Company Common Shares
The market price for Common Shares may be volatile and subject to wide fluctuations in response
to numerous factors, many of which are beyond the Company’s control, including the following:
• actual or anticipated fluctuations in the Company’s quarterly results of operations;
• recommendations by securities research analysts;
• changes in the economic performance or market valuations of companies in the industry in which
the Company operates;
• addition or departure of the Company’s executive officers and other key personnel;
• release or expiration of transfer restrictions on outstanding Company Common Shares;
• sales or perceived sales of additional Company Common Shares;
• operating and financial performance that vary from the expectations of management, securities
analysts and investors;
• regulatory changes affecting the Company’s industry generally and its business and operations;
56
Aurora Cannabis Inc.
2018 Annual Report
• announcements of developments and other material events by the Company or its competitors;
• fluctuations to the costs of vital production materials and services;
• changes in global financial markets and global economies and general market conditions, such
as interest rates and pharmaceutical product price volatility;
• significant acquisitions or business combinations, strategic partnerships, joint ventures or capital
commitments by or involving the Company or its competitors;
• operating and share price performance of other companies that investors deem comparable to
the Company or from a lack of market comparable companies; and
• news reports relating to trends, concerns, technological or competitive developments, regulatory
changes and other related issues in the Company’s industry or target markets.
Financial markets have recently experienced significant price and volume fluctuations that have
particularly affected the market prices of equity securities of companies and that have often been
unrelated to the operating performance, underlying asset values or prospects of such companies.
Such volatility has been particularly evident with regards to the share prices of medical cannabis
companies that are public issuers in Canada. Accordingly, the market price of Company Common
Shares may decline even if the Company’s operating results, underlying asset values or pros-
pects have not changed. Additionally, these factors, as well as other related factors, may cause
decreases in asset values that are lasting and not temporary, which may result in impairment
losses. There can be no assurance that continuing fluctuations in share 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 Company Common Shares may be materially
adversely affected.
Breaches of Security
Given the nature of the Company’s product and its lack of legal availability outside of channels
approved by the Government of Canada, as well as the concentration of inventory in its facilities,
despite meeting or exceeding Health Canada’s security requirements, there remains a risk of
shrinkage as well as theft. A security breach at one of the Company’s facilities could expose the
Company to additional liability and to potentially costly litigation, increase expenses relating to the
resolution and future prevention of these breaches and may deter potential patients from choosing
the Company’s products.
In addition, Aurora collects and stores personal information about its patients and is responsible for
protecting that information from privacy breaches. A privacy breach may occur through procedural
or process failure, information technology malfunction, or deliberate unauthorized intrusions.
Theft of data for competitive purposes, particularly patient lists and preferences, is an ongoing
risk whether perpetrated via employee collusion or negligence or through deliberate cyber-attack.
Any such theft or privacy breach would have a material adverse effect on the Company’s business,
financial condition and results of operations.
Furthermore, there are a number of federal and provincial laws protecting the confidentiality of
certain patient health information, including patient records, and restricting the use and disclo-
sure of that protected information. In particular, the privacy rules under the Personal Information
Protection and Electronics Documents Act (Canada) (“PIPEDA”) protect medical records and
other personal health information by limiting their use and disclosure of health information to the
minimum level reasonably necessary to accomplish the intended purpose. If the Company was
found to be in violation of the privacy or security rules under PIPEDA or other laws protecting the
confidentiality of patient health information, it could be subject to sanctions and civil or criminal
penalties, which could increase its liabilities, harm its reputation and have a material adverse effect
on the business, results of operations and financial condition of the Company.
Management’s Discussion & Analysis
57
Information Technology Risks
The Company has entered into agreements with third parties for hardware, software, telecom-
munications and other information technology (“IT”) services in connection with its operations.
The Company’s operations depend, in part, on how well it and its suppliers protect networks, equip-
ment, IT systems and software against damage from a number of threats, including, but not limited
to, cable cuts, damage to physical plants, natural disasters, intentional damage and destruction,
fire, power loss, hacking, computer viruses, vandalism and theft. The Company’s operations also
depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems
and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and
other events could result in information system failures, delays and/or increase in capital expenses.
The failure of information systems or a component of information systems could, depending on the
nature of any such failure, adversely impact the Company’s reputation and results of operations.
The Company has not experienced any material losses to date relating to cyber-attacks or other
information security breaches, but there can be no assurance that the Company will not incur such
losses in the future. The Company’s risk and exposure to these matters cannot be fully mitigated
because of, among other things, the evolving nature of these threats. As a result, cyber security
and the continued development and enhancement of controls, processes and practices designed
to protect systems, computers, software, data and networks from attack, damage or unauthorized
access is a priority. As cyber threats continue to evolve, the Company may be required to expend
additional resources to continue to modify or enhance protective measures or to investigate and
remediate any security vulnerabilities.
Holding Company Status
The Company is a holding company and essentially all of its operating assets are the capital stock
of its subsidiaries. As a result, investors in the Company are subject to the risks attributable to its
subsidiaries. As a holding company, the Company conducts substantially all of its business through its
subsidiaries, which generate substantially all of its revenues. Consequently, the Company’s cash flows
and ability to complete current or desirable future enhancement opportunities are dependent on the
earnings of its subsidiaries and the distribution of those earnings to the Company. The ability of these
entities to pay dividends and other distributions will depend on their operating results and will be
subject to applicable laws and regulations which require that solvency and capital standards be main-
tained by such companies and contractual restrictions contained in the instruments governing their
debt. In the event of a bankruptcy, liquidation or reorganization of any of the Company’s subsidiaries,
holders of indebtedness and trade creditors will generally be entitled to payment of their claims from
the assets of those subsidiaries before any assets are made available for distribution to the Company.
Integration of MedReleaf
It is expected that the acquisition of MedReleaf will result in enhanced production capacity,
increased earnings and cost savings by taking advantage of operating and other synergies to be
realized from the consolidation of MedReleaf and the Company and enhanced growth opportunities
for the combined company. These anticipated benefits will depend in part on whether MedReleaf
and the Company’s operations can be integrated in an efficient and effective manner. The integra-
tion of the two companies will present challenges to management, including the integration of
systems and personnel of the two companies, and special risks, including possible unanticipated
liabilities, unanticipated costs, and the loss of key employees. The performance of operations
acquired from the Company from the acquisition of MedReleaf could be adversely affected if the
combined company cannot retain key employees to assist in the integration and operation of the
Company and MedReleaf. As a result of these factors, it is possible that the cost reductions and
synergies expected from the combination of MedReleaf the Company will not be realized.
58
Aurora Cannabis Inc.
2018 Annual Report
INTERNAL CONTROLS OVER FINANCIAL REPORTING
In accordance with National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and
Interim Filings (“NI 52-109”), the establishment and maintenance of Disclosure Controls and
Procedures (“DCP”) and Internal Control Over Financial Reporting (“ICFR”) is the responsibility
of management. The DCP and ICFR have been designed by management based on the 2013
Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (“COSO”) to provide reasonable assurance that the Company’s financial
reporting is reliable and that its financial statements have been prepared in accordance with IFRS.
Pursuant to NI 52-109, the Company has limited the scope of the design of DCP and ICFR to exclude
controls, policies and procedures over entities acquired by the Company not more than 365 days
before the end of the financial period. These recently acquired entities include BCNL and UCI
(acquired September 29, 2017), Hempco Food and Fiber Inc. (acquired November 14, 2017 with
52.3% interest held at June 30, 2018), H2 Biopharma Inc. (acquired November 30, 2017), Larssen
Ltd. (acquired December 4, 2017), Aurora Nordic Cannabis A/S (51% interest acquired February 12,
2018) and CanniMed Therapeutics Inc. (acquired March 15, 2018). Additionally, the Company does
not have a reasonable basis for making the representations on the adequacy of internal controls
for Hempco, which is proportionately consolidated based on the Company’s percentage ownership
interest as of June 30, 2018, as it does not have sufficient access to design and evaluate those
controls, policies and procedures carried out by that subsidiary. Excluding goodwill and intangible
assets generated from these acquisitions, on a combined basis, BCNL, UCI, Hempco, H2, Larssen,
Aurora Nordic and CanniMed represent approximately 22% of the Company’s current assets, 6%
of total assets, 14% current liabilities, 11% total liabilities, 35% revenue, and 12% net loss for the
twelve months ended June 30, 2018.
Regardless of how well the DCP and ICFR are designed, internal controls have inherent limitations
and can only provide reasonable assurance that the controls are meeting the Company’s objectives
in providing reliable financial reporting information in accordance with IFRS. These inherent limita-
tions include, but are not limited to, human error and circumvention of controls and as such, there
can be no assurance that the controls will prevent or detect all misstatements due to errors or
fraud, if any.
Based on the COSO control framework, the CEO and CFO concluded that the design and opera-
tion of DCP and ICFR as at June 30, 2018 were effective and provides reasonable assurance that
material information relating to the Company is made known to them, information required to
be disclosed by the Company is reported within the required time periods as specified in such
legislation, and that the Company’s financial reporting is reliable and its financial statements have
been prepared in accordance with IFRS. The CEO and CFO are also responsible for disclosing any
changes to the Company’s internal controls during the most recent period that have materially
affected, or are reasonably likely to materially affect, its internal control over financial reporting.
There have been no changes to the Company’s internal control over financial reporting during the
three months ended June 30, 2018 that have materially affected, or are likely to materially affect,
the Company’s internal control over financial reporting.
Management’s Discussion & Analysis
59
FORWARD-LOOKING STATEMENTS
This MD&A may contain “forward-looking information” within the meaning of Canadian securi-
ties legislation (“forward-looking statements”). These forward-looking statements are made as
of the date of this MD&A and the Company does not intend, and does not assume any obligation,
to update these forward-looking statements, except as required under applicable securities leg-
islation. Forward-looking statements relate to future events or future performance and reflect
Company management’s expectations or beliefs regarding future events. 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”, “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. 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 following:
• pro forma measures including revenue, registered medical patients and grams produced;
• the completion of construction of production facilities, associated costs, and receipt of licenses from
Health Canada to produce and sell cannabis and cannabis related products from these facilities;
• the successful integration of CanniMed and MedReleaf into Aurora’s operations;
• strategic investments and capital expenditures, and related benefits;
• future growth expansion plans;
• expectations regarding production capacity, costs and yields; and
• product sales expectation and corresponding forecasted increase in revenue.
The above and other aspects of the Company’s anticipated future operations are forward-looking
in nature and, as a result, are subject to certain risks and uncertainties. Although the Company
believes that the expectations reflected in these forward-looking statements are reasonable, undue
reliance should not be placed on them as actual results may differ materially from the forward-
looking statements. Such forward-looking statements are estimates reflecting the Company’s best
judgement based upon current information and involve a number of risks and uncertainties, and
there can be no assurance that other factors will not affect the accuracy of such forward-looking
statements. Such factors include but are not limited to the Company’s ability to obtain the necessary
financing and the general impact of financial market conditions, the yield from marijuana growing
operations, product demand, changes in prices of required commodities, competition, government
regulations and other risks as set out under “Risk Factors” in the Company’s Annual Information
Form dated September 24, 2018 filed on SEDAR at www.sedar.com.
60
Aurora Cannabis Inc.
2018 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
Table Of Contents
Management’s Responsibility for Financial Reporting
Independent Auditors’ Report
Consolidated Statements of Financial Position
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
62
63
64
65
66
68
70
Financial Statements
61
Management’s Responsibility for Financial Reporting
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 judgements 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 appro-
priate accounting principles and methods, and making decisions affecting the measurement of
transactions in which objective judgement is required.
In discharging its responsibilities for the integrity and fairness of the consolidated financial state-
ments, 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 manage-
ment 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 share-
holders 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.
September 24, 2018
“Terry Booth”
Terry Booth
“Glen Ibbott”
Glen Ibbott
Chief Executive Officer
Chief Financial Officer
62
Aurora Cannabis Inc.
2018 Annual Report
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
June 30, 2018 and 2017
(In thousands of Canadian dollars)
Assets
Current
Cash and cash equivalents
Short term investments
Accounts receivable
Marketable securities
Biological assets
Inventory
Prepaids and other current assets
4
5
6, 24(c), 29(a)
8
9
10
Notes
June 30, 2018
$
June 30, 2017
$
Note 3
89,193
990
15,096
59,188
13,620
29,595
7,594
215,276
4,422
219,698
246,352
-
124,942
334,442
256,232
729,050
1,910,716
47,456
1,659
2,266
2,451
21,333
75,165
191,528
9,232
-
2,254
69,406
347,585
1,466,433
4,920
(533)
87,749
1,558,569
4,562
1,563,131
1,910,716
159,715
81
2,312
14,845
4,088
7,703
3,126
191,870
1,736
193,606
45,523
11,071
292
-
31,087
41,100
322,679
8,753
-
1,421
69
13,221
23,464
63,536
282
10,206
321
5,937
103,746
221,447
20,745
5,167
(28,426)
218,933
-
218,933
322,679
Assets held for distribution to owners
15, 24(c)
Property, plant and equipment
Convertible debenture investment
Derivatives
Investment in associates and joint venture
Intangible assets
Goodwill
Total assets
Liabilities
Current
Accounts payable and accrued liabilities
Income taxes payable
Deferred revenue
Loans and borrowings
Contingent consideration payable
Convertible notes
Loans and borrowings
Deferred gain on convertible debenture
Deferred gain on derivatives
Deferred tax liability
Total liabilities
Shareholders’ equity
Share capital
Reserves
Accumulated other comprehensive income (loss)
Retained earnings (deficit)
Total equity attributable to shareholders of Aurora
Non-controlling interest
Total equity
Total liabilities and equity
Nature of Operations (Note 1)
Commitments and Contingencies (Note 25)
Subsequent Events (Notes 12(a), 15, 18(a) and 31)
11
7
8
12
16
16
24(c), 29(b)
18
28(e)
17
18
7, 28(d)
8, 28(d)
23
19
13(a)(ii)(iv), 14
The accompanying notes are an integral part of these Consolidated Financial Statements.
64
Aurora Cannabis Inc.
2018 Annual Report
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Years ended June 30, 2018 and 2017
(In thousands of Canadian dollars, except per share amounts)
Revenue from sale of goods
Revenue from provision of services
Total revenue
Cost of sales
Gross profit before fair value adjustments
Changes in fair value of inventory sold
Unrealized gain on changes in fair value of biological assets
Gross profit
Expense
General and administration
Sales and marketing
Acquisition costs
Depreciation and amortization
Research and development
Share-based payments
Loss from operations
Other income (expense)
Interest and other income
Finance and other costs
Foreign exchange
Recovery of receivables
Share of loss from investment in associate
Unrealized loss on changes in contingent consideration
fair value
Unrealized gain (loss) on debenture
Unrealized gain on marketable securities
Unrealized gain (loss) on derivatives
Income (loss) before income taxes
Income tax recovery (expense)
Current
Deferred, net
Net income (loss)
Other comprehensive income (loss)
Deferred tax
Unrealized gain (loss) on marketable securities
Foreign currency translation gain (loss)
Comprehensive income (loss)
Net income (loss) attributable to:
Aurora Cannabis Inc.
Non-controlling interests
Comprehensive income (loss) attributable to:
Aurora Cannabis Inc.
Non-controlling interests
Earnings (loss ) per share
Basic
Diluted
Notes
9
24(a)
11, 16
20(a)(b), 24(b)
22
12(d)
12
28(e)
7, 28(c)
8
8
23
23
8
2018
$
46,975
8,221
55,196
19,603
35,593
17,624
(25,550)
43,519
42,965
29,445
15,664
12,088
1,679
37,450
139,291
(95,772)
2,514
(13,162)
(1,038)
1,400
(2,242)
(7,844)
6,937
20,083
166,450
173,098
77,326
(1,659)
(6,441)
(8,100)
69,227
(55)
(6,616)
86
(6,585)
62,642
71,936
(2,709)
65,351
(2,709)
21
21
$
$
0.16
0.15
$
$
2017
$
15,922
2,145
18,067
7,875
10,192
16,908
(22,772)
16,056
6,813
10,270
1,551
716
314
7,584
27,248
(11,192)
861
(6,582)
(215)
-
-
-
(1,135)
1,334
(335)
(6,072)
(17,264)
19
4,277
4,296
(12,968)
(885)
6,077
(25)
5,167
(7,801)
(12,968)
-
(7,801)
-
(0.05)
(0.05)
The accompanying notes are an integral part of these Consolidated Financial Statements.
Financial Statements
65
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Years ended June 30, 2018 and 2017
(In thousands of Canadian dollars, except share amounts)
Share Capital
Reserves
AOCI
Note
Common
Shares
Amount
Share-
Based
Compen-
sation
Compen-
sation
Options/
Warrants
Con-
vertible
Notes
Change in
Ownership
Interest
Total
Reserves
Fair
Value
Deferred
Tax
Foreign
Currency
Translation
Total
AOCI Deficit
Non-
Controlling
Interests
#
$
$
$
$
366,549,244
221,447
7,591
3,420
9,734
$
$
$
$
$
$
20,745
6,077
(885)
(25)
5,167 (28,426)
-
136
-
-
2,285
(37,061)
76,201
(7,082)
-
(6,175)
(3,680)
(1,854)
(351)
(531)
37,801
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(75,514)
(75,514)
- 43,442
- (50,463)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 43,442
-
-
-
-
-
-
-
-
-
-
-
-
-
531
-
-
-
-
- (50,463) 50,463
Balance,
June 30, 2017
Shares issued
for acquisitions
and investment in
associates
Warrants issued
for acquisition
Shares issued
for contingent
consideration
19(b)(i)
78,769,707
825,085
13(a)(i)
-
-
Private placements
19(b)(iii)
25,000,000
19(b)(ii)
5,318,044
16,321
75,000
Share issue costs
19(b)(iii)
-
(6,646)
Conversion of notes
19(b)(iv)
42,473,435
177,127
Equity component of
convertible notes
Deferred tax on
convertible notes
Deferred tax on
share issuance and
convertible debenture
costs
-
-
-
-
-
2,540
Exercise of
stock options
19(b)(iv),
13(a)(ii)
4,809,443
12,006
(6,175)
Exercise of warrants
19(b)(iv)
43,200,881
136,293
19(b)(iv)
1,865,249
6,051
19(b)(iv)
127,128
1,209
Exercise of
compensation options/
warrants
Exercise of restricted
share units
Forfeited options
Share-based payments
20
Non-controlling interest
from acquisitions
13(a)(ii)
(iv), 14
Change in ownership
interests in subsidiaries
13(a)
(ii)(iv)
Unrealized gain on
Cann Group marketable
securities
Cann Group marketable
securities transferred
to investments in
associates, net tax
Deferred tax for
marketable securities
transferred to
investment in
associates
Unrealized gain on
CanniMed marketable
securities
CanniMed marketable
securities derecognized
upon acquisition of
control
Comprehensive income
(loss) for the year
Balance,
June 30, 2018
8(a)
8(a),
12(b)
8(b)
8(b)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
136
-
-
2,285
-
-
-
-
-
-
-
(3,680)
(1,854)
(351)
(531)
37,801
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(37,061)
76,201
(7,082)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The accompanying notes are an integral part of these Consolidated Financial Statements.
66
Aurora Cannabis Inc.
2018 Annual Report
-
-
830
-
830
(6,755)
- 10,423
- (10,423)
-
405
-
-
-
- 10,423
-
- (10,423) 10,423
86
491
61,513
(2,709)
59,295
568,113,131 1,466,433
38,335
307
41,792
(75,514)
4,920
(539)
(55)
61
(533) 87,749
4,562 1,563,131
Total
$
218,933
825,085
136
16,321
75,000
(4,361)
140,066
76,201
(7,082)
2,540
$
-
-
-
-
-
-
-
-
-
-
2,027
7,858
1,669
134,282
-
-
-
-
4,197
858
-
37,801
38,577
38,577
(35,002)
(110,516)
-
43,442
-
-
-
-
-
(5,925)
10,423
-
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
Years ended June 30, 2018 and 2017
(In thousands of Canadian dollars, except share amounts)
Share Capital
Reserves
AOCI
Note
Common
Shares
Amount
Obligation
to Issue
Shares
Share-
Based
Compen-
sation
Compen-
sation
Options/
Warrants
Related
Party
Loans
Convert-
ible Notes
Total
Reserves
Fair
Value
Deferred
Tax
Foreign
Currency
Translation
#
$
$
$
$
$
$
$
$
$
$
Total
AOCI
$
135,576,365
17,148
2,335
608
1,184
1,403
200
5,730
Share issue costs 19(b)(iii)
Balance,
June 30, 2016
Shares issued for
acquisitions
Shares issued
for contingent
consideration
Private
placements
Deferred tax on
share issue costs
Conversion of
notes
Equity component
of convertible
notes
Equity component
of convertible
note transaction
costs
Deferred tax on
convertible notes
Warrants issued
on amendment of
convertible notes
Exercise of
stock options
Exercise of
warrants
Exercise of
compensation
option/warrants
Forfeited options
& warrants
Shares issued for
compensation
Performance
shares
Shares issued for
loan
Transfer from
derivative
liabilities
Reclassification
upon repayment
of related
party loans
Share-based
payments
Comprehensive
income (loss) for
the year
Balance,
June 30, 2017
19(b)(i)
27,091,007
34,540
19(b)(ii)
2,926,103
7,408
19(b)(iii)
90,837,500
98,009
-
-
(10,913)
1,846
19(b)(iv)
29,020,319
38,037
-
-
-
-
-
-
-
-
19(b)(iv)
2,001,700
1,399
19(b)(iv)
54,936,306
28,648
19(b)(iv)
4,084,434
2,966
-
19(b)(v)
25,510
-
13
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(13)
19(b)(v)
20,000,000
2,322
(2,322)
19(b)(v)
50,000
24
-
-
-
-
-
-
-
-
366,549,244
221,447
20(a)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(578)
-
-
-
-
-
4,630
-
-
-
-
-
877
-
(2,046)
(1,292)
(23)
(32)
-
-
-
-
-
7,584
-
-
-
-
99
-
-
-
7,591
3,420
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,403)
-
-
-
-
-
-
-
-
-
-
-
4,630
-
(4,800)
(4,800)
20,587
20,587
(900)
(900)
(5,353)
(5,353)
877
(578)
(2,046)
(1,292)
(55)
(13)
(2,322)
-
99
(1,403)
7,584
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Deficit
$
Total
$
(16,916)
5,962
-
-
-
-
-
-
-
-
-
-
-
-
-
55
-
-
-
-
34,540
7,408
98,009
(6,283)
1,846
33,237
20,587
(900)
(5,353)
877
821
26,602
1,674
-
-
-
24
99
1,403
-
-
7,584
-
6,077
(885)
(25)
5,167
(12,968)
(7,801)
9,734
20,745
6,077
(885)
(25)
5,167
(28,426)
218,933
The accompanying notes are an integral part of these Consolidated Financial Statements.
Financial Statements
67
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30, 2018 and 2017
(In thousands of Canadian dollars)
Cash provided by (used in) Operating activities
Net income (loss) for the year
Adjustments for non-cash items
Unrealized gain on changes in fair value of biological assets
Changes in fair value included in inventory sold
Depreciation of property, plant and equipment
Amortization of intangible assets
Share-based payments
Share of loss from investment in associate
Unrealized (gain) loss on debentures
Unrealized (gain) loss on derivatives
Unrealized gain on marketable securities
Loss on changes in fair value of contingent consideration
Recovery of receivables
Accrued interest and accretion expense
Interest and other income
Deferred tax expense (recovery)
Changes in non-cash working capital
GST recoverable
Accounts receivable
Biological assets
Inventory
Prepaid and other current assets
Accounts payable and accrued liabilities
Income taxes payable
Deferred revenue
Net cash used in operating activities
Investing activities
Short-term investments
Marketable securities and derivatives
Convertible debenture
Purchase of property, plant and equipment
Acquisition of businesses, net of cash acquired
Acquisition of assets
Acquisition of non-controlling interest
Loans assumed on acquisition
Additions in investment in associates
Net cash used in investing activities
Financing activities
Loans and borrowings
Proceeds of convertible notes
Repayment of short term loans
Repayment of long term loans
Financing fees
Shares issued for cash, net of share issue costs
Net cash provided by financing activities
Effect of foreign exchange on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Notes
9
11
16
20
12
7, 28(c)
8
8
28(e)
12(d)
5
8
7
11
13
13
12
17
2018
$
2017
$
69,227
(12,968)
(25,550)
17,624
8,004
4,256
37,450
2,242
(6,937)
(166,450)
(20,083)
7,844
(1,400)
11,135
(78)
6,441
(6,470)
(5,887)
1,447
(10,437)
(8,236)
3,105
1,659
(573)
(81,667)
(399)
(63,437)
-
(136,945)
30,393
(138,722)
(10,158)
(308)
(218,183)
(537,759)
97
345,000
(281)
-
(11,873)
215,606
548,549
355
(70,522)
159,715
89,193
(22,772)
16,908
1,087
-
7,584
-
1,135
335
(1,334)
-
-
3,459
(78)
(4,277)
(963)
(654)
-
(1,679)
(2,224)
2,610
-
453
(13,378)
(81)
(7,877)
(2,000)
(25,718)
(6,917)
(6,748)
-
-
-
(49,341)
(193)
115,000
(6,215)
(4,000)
(3,430)
120,823
221,985
190
159,456
259
159,715
68
Aurora Cannabis Inc.
2018 Annual Report
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years ended June 30, 2018 and 2017
(In thousands of Canadian dollars)
Notes
Cash and cash equivalents consist of:
Cash
Restricted cash
Supplementary information:
Property, plant and equipment in accounts payable
Capitalized borrowing costs
Interest paid
Interest received
2018
$
75,795
13,398
16,294
5,710
7,066
2,295
2017
$
159,715
-
4,383
1,370
471
485
The accompanying notes are an integral part of these Consolidated Financial Statements.
Financial Statements
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Table Of Contents
Note 1. Nature of Operations
Note 2. Significant Accounting Policies and Significant Judgements
Note 3. Change in Accounting Policy
Note 4. Cash and Cash Equivalents
Note 5. Short-term Investments
Note 6. Accounts Receivable
Note 7. Convertible Debenture Investment
Note 8. Marketable Securities and Derivatives
Note 9. Biological Assets
Note 10. Inventory
Note 11. Property, Plant and Equipment
Note 12. Investments in Associates and Joint Venture
Note 13. Business Combinations and Asset Acquisitions
Note 14. Controlling Interest in Aurora Nordic Cannabis A/S (“Aurora Nordic”)
Note 15. Assets Held for Distribution to Owners
Note 16. Intangible Assets and Goodwill
Note 17. Convertible Debentures
Note 18. Loans and Borrowings
Note 19. Share Capital
Note 20. Share-based Payments
Note 21. Earnings (Loss) Per Share
Note 22. Finance and Other Costs
72
72
76
76
77
77
77
78
84
86
87
89
94
105
106
107
110
112
114
119
122
123
70
Aurora Cannabis Inc.
2018 Annual Report
Note 23. Income Taxes
Note 24. Related Party Transactions
Note 25. Commitments and Contingencies
Note 26. Construction Contracts
Note 27. Segmented Information
Note 28. Fair Value of Financial Instruments
Note 29. Financial Instruments Risk
Note 30. Capital Management
Note 31. Subsequent Events
123
125
127
128
128
129
132
134
134
Notes to Financial Statements
71
1. NATURE OF OPERATIONS
Aurora Cannabis Inc. (the “Company” or “Aurora”) was incorporated under the Business
Corporations Act (British Columbia) on December 21, 2006. The Company’s shares are listed on
the Toronto Stock Exchange (the “Exchange”) under the symbol “ACB” and on the OTCQX under the
symbol “ACBFF”.
The head office and principal address of the Company is Suite 500 – 10355 Jasper Avenue,
Edmonton, Alberta, Canada, T5J 1Y6. The Company’s registered and records office address is
Suite 1500 - 1055 West Georgia Street, Vancouver, BC V6E 4N7.
The Company’s principal business is the production and distribution of medical cannabis in Canada
pursuant to the Access to Cannabis for Medical Purposes Regulations (“ACMPR”) and the distri-
bution of wholesale medical cannabis in the European Union pursuant to the German Medicinal
Products Act and German Narcotic Drugs Act. During the year ended June 30, 2018, the Company
expanded its business to include the production and sale of indoor cultivation systems and hemp
related food products through its recent acquisitions (Note 13).
Aurora does not engage in any U.S. cannabis-related activities as defined in Canadian Securities
Administrators Staff Notice 51-352. While the Company has held an interest in Australis Holdings
LLP (“Australis Holdings” or “AHL”)(Note 12(a)), a U.S. based company, as at June 30, 2018, AHL
has not engaged in any cannabis-related activities for the periods ended. Additionally, AHL was
spun-out to Aurora shareholders as part of the Australis Capital Inc. spin-out completed subse-
quent to June 30, 2018 (Note 15 and 31).
2. SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS
Certain of the Company’s accounting policies that relate to the consolidated financial statements
as a whole, as well as estimates and judgements it has made and how they affect the amounts
reported in the consolidated financial statements, are incorporated in this section. This note also
describes new standards, amendments or interpretations that are effective and applied by the
Company during 2018 or are not yet effective. Where an accounting policy, estimate, or judgement
is applicable to a specific note to the accounts, it is described within that note.
(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, 2018.
The Company has reclassified certain immaterial items on the comparative consolidated statement
of financial position and statement of comprehensive income (loss) to conform with current period’s
presentation.
These consolidated financial statements were approved and authorized for issue by the Board of
Directors of the Company on September 24, 2018.
72
Aurora Cannabis Inc.
2018 Annual Report
2. SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS (CONTINUED)
(b) Basis of consolidation
These consolidated financial statements include the accounts of the Company and its subsidiaries
with intercompany balances and transactions eliminated on consolidation. Subsidiaries are those
entities over which Aurora has the power over the investee, is exposed, or has rights, to variable
returns from its involvement with the investee, and has the ability to use its power to affect its
returns. As of June 30, 2018, major subsidiaries over which the Company has control include:
Major subsidiaries
Aurora Cannabis Enterprises Inc. (“ACE”)
Aurora Deutschland GmbH (“Aurora Deutschland”, formerly Pedanios GmbH)
CanniMed Therapeutics Inc. (“CanniMed”)
Aurora Nordic Cannabis A/S (“Aurora Nordic”)
Aurora Larssen Projects Ltd. (“ALPS”)
CanvasRx Inc. (“CanvasRx”)
Peloton Pharmaceuticals Inc. (“Peloton” or “Aurora Vie”)
H2 Biopharma Inc. (“H2” or “Aurora Eau”)
B.C. Northern Lights Enterprises Ltd. (“BCNL”)
Urban Cultivator Inc. (“UCI”)
Hempco Food and Fiber Inc. (“Hempco”)
Percentage ownership
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
52.33%
(c) Basis of measurement
The consolidated financial statements have been prepared on a historical cost basis except for
certain financial instruments, biological assets and acquisition related contingent consideration
which are measured at fair value.
(d) Functional and presentation of foreign currency
The consolidated financial statements are presented in Canadian dollars unless otherwise noted.
The functional currencies of the Company, its subsidiaries and associates are as follows:
Aurora Deutschland GmbH and CanniMed Germany are the European Euro;
Aurora Nordic Cannabis A/S is the Danish Krone;
Australis Holdings LLP, SubTerra LLC and CTT Pharmaceutical Holdings Ltd.
are the US dollar;
Cann Group Limited is the Australian dollar; and
Aurora and its remaining subsidiaries and associates are 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 income (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.
The assets and liabilities of foreign operations are translated into Canadian dollars at period end
exchange rates. Income and expenses, and cash flows of foreign operations are translated into
Canadian dollars using average exchange rates. Exchange differences resulting from the transla-
tion of foreign operations are recognized in other comprehensive income (loss) and accumulated
in equity.
Notes to Financial Statements
73
2. SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS (CONTINUED)
(f) Revenue recognition
Revenue is recognized at the fair value of 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 delivered the product to customers.
Referral revenue from Licensed Producers through CanvasRx are recognized when the amount of
revenue can be measured reliably, it is probable that the economic benefits associated with the
transaction will flow to the entity, the stage of completion of the transaction at the end of the period
can be measured reliably, and the costs incurred for the transaction and the costs to complete the
transaction can be measured reliably. The stage of completion is generally determined based on
the passage of time as services are rendered over time. See Note 26 for the accounting policy for
revenue generated from design, engineering and construction consulting services.
(g) Significant accounting judgements, estimates and assumptions
The preparation of the Company’s consolidated financial statements in conformity with
IFRS requires management to make judgements, estimates, and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other sources. The esti-
mates 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 judgements, estimates and assumptions that have the most significant effect on the
amounts recognized in the financial statements include accounts receivable (Note 6), biological
assets (Note 9), inventory (Note 10), estimated useful lives and depreciation of property, plant and
equipment (Note 11) and intangible assets (Note 16), investment in associates and joint ventures
(Note 12), business combinations and assets acquisitions (Note 13), disposal group held for distribu-
tion (Note 15), goodwill and intangible asset impairment (Note 16), convertible instruments (Note 17),
fair value of share purchase warrants (Note 19), share-based payments (Note 20), deferred tax assets
(Note 23), segmented information (Note 27) and the fair value of financial instruments (Note 28).
(h) Recent accounting pronouncements
There were no new standards effective July 1, 2017 that had an impact on the Company’s consoli-
dated 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.
(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. The Company intends to adopt the
amendments to IFRS 7 on July 1, 2018 and does not expect the implementation will result in a
significant effect to the financial statements.
74
Aurora Cannabis Inc.
2018 Annual Report
2. SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS (CONTINUED)
(h) Recent accounting pronouncements (Continued)
(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 applica-
tion permitted. The Company intends to adopt IFRS 9 on July 1, 2018 retrospectively where the
cumulative impact of adoption will be recognized in retained earnings as of July 1, 2018 and
comparatives will not be restated.
The Company has completed its assessment of the impact from this new standard. IFRS 9
introduces new requirements to determine the measurement basis of financial assets, involving
the cash flow characteristics of assets and the business models under which they are managed.
Accordingly, the basis of measurement for the Company’s financial assets may change. IFRS 9
affects the accounting for available-for-sale equity securities, requiring a designation, on an
instrument-by-instrument basis, between recording both unrealized and realized gains and
losses either through (i) other comprehensive income (“OCI”) with no recycling to profit and loss
or (ii) profit and loss. The Company will be electing to classify its available-for-sale equity invest-
ments at Fair Value through OCI (“FVOCI”) as these equity investments are for strategic purposes.
The FVOCI election is made upon initial recognition, on an instrument-by-instrument basis and
once made is irrevocable. Gains and losses on these instruments including when derecognized or
sold are recorded in OCI and are not subsequently reclassified to the consolidated statement of
comprehensive income (loss).
For other financial instruments, there are no significant changes in the classification and
measurement of the Company’s financial assets.
(iii) 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. IFRS 15 is effective for annual periods beginning on or after January 1,
2018, with early application permitted.
The Company intends to adopt IFRS 15 on July 1, 2018 using the modified retrospective approach
where the cumulative impact of adoption will be recognized in retained earnings as of July 1,
2018 and comparatives will not be restated.
The Company has completed its assessment of the impact from this new standard. Under
IFRS 15, revenue from the sale of medicinal cannabis would be recognized at a point in time when
control over the goods have been transferred to the customer. The Company transfers control
and satisfies its performance obligation upon delivery and acceptance by the customer, which is
consistent with the Company’s current revenue recognition policy under IAS 18.
Referral revenues earned from Licensed Producers through CanvasRx Inc. are recognized over
a period of time as the referred patients remain active with the Licensed Producers. This is
consistent with the Company’s current revenue recognition policy under IAS 18 where revenue is
Notes to Financial Statements
75
2. SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT JUDGEMENTS (CONTINUED)
(h) Recent accounting pronouncements (Continued)
(iii) IFRS 15 Revenue from Contracts with Customers (Continued)
recognized on a monthly basis over a specified period of time that the referred patient remains an
active purchaser of medical cannabis with the Licensed Producer.
Construction contract revenues earned through Aurora Larssen Projects Ltd. are recognized
over a period of time as the performance obligations for design, engineering and construc-
tion consulting services are completed. This is consistent with the Company’s current revenue
recognition policy under IAS 11 where revenue is recognized based on the stage of completion.
Based on the Company’s assessment, the adoption of this new standard does not have a material
impact on its consolidated financial statements.
(iv) IFRS 16 Leases
In January 2016, the IASB issued IFRS 16 Leases, which will replace IAS 17 Leases. This standard
introduces a single lessee accounting model and requires a lessee to recognize assets and liabili-
ties for all leases with a term of more than twelve months, unless the underlying asset is of low
value. A lessee is required to recognize a right-of-use asset representing its right to use the under-
lying asset and a lease liability representing its obligation to make lease payments. The standard
will be effective for annual periods beginning on or after January 1, 2019, with earlier application
permitted for entities that apply IFRS 15 Revenue from Contracts with Customers at or before the
date of initial adoption of IFRS 16. The Company intends to adopt IFRS 16 on July 1, 2019 and is
assessing the impact of this new standard on its consolidated financial statements.
3. CHANGE IN ACCOUNTING POLICY
Effective July 1, 2017, the Company elected to change its accounting policy for step acquisitions of
significant influence investments, where the investment classification changes from available-for-sale
marketable securities to investment in associates. Previously, the Company had transferred the cost
of the equity securities into investments in associates in accordance with IAS 28. IAS 28 allows entities
to make an accounting policy choice to transfer in the equity securities at either cost or at fair value.
Management determined that the transfer of equity securities at fair value into investment in associ-
ates would provide more relevant information as it better reflects the fair value of the investment at
the time of the transaction. As such, management changed the accounting policy to transfer equity
securities from marketable securities to investment in associates at fair value.
See Note 12 for the Company’s revised accounting policy on step acquisitions of significant influence
investments, from available-for-sale marketable securities to investments in associates.
There was no impact of this voluntary change in accounting policy on prior period amounts.
4. CASH AND CASH EQUIVALENTS
Accounting Policy
Cash and cash equivalents are classified as loans and receivable financial assets and are measured initially
at fair value and subsequently on an amortized cost basis. Cash and cash equivalents include restricted
cash, cash deposits in financial institutions and other deposits that are readily convertible into cash.
As of June 30, 2018, the Company held $13,398 (2017 - $nil) restricted cash in a legal trust relating
to an investment in a private company (Note 31).
76
Aurora Cannabis Inc.
2018 Annual Report
5. SHORT-TERM INVESTMENTS
Accounting Policy
Short-term investments are classified as loans and receivable financial assets and are recognized initially
at fair value and subsequently on an amortized cost basis using the effective interest method, less any
impairment losses.
Short-term investments held at June 30, 2018 consist of an aggregate of $990 (2017 - $81) in
guaranteed investment certificates (“GIC”) with maturity dates between October 3, 2018 and July 9,
2019, bearing annual interest rates ranging from prime less 2.10% to prime less 2.60%. The GICs
are restricted and held as security against the Company’s corporate credit cards.
6. ACCOUNTS RECEIVABLE
Accounting Policy
Accounts receivables are classified as loans and receivable financial assets. Accounts receivables are
recognized initially at fair value and subsequently measured at amortized cost, less any provisions for
impairment. When an accounts receivable is uncollectible, it is written off against the provision. Subsequent
recoveries of amounts previously written off are credited to the consolidated statements of comprehensive
income (loss).
Significant Judgement
The determination of when amounts are deemed uncollectible requires judgement.
Trade receivables
Construction contract receivables
Dividends receivable (Note 12(c))
GST recoverable
7. CONVERTIBLE DEBENTURE INVESTMENT
June 30, 2018
$
6,665
1,969
828
5,634
15,096
June 30, 2017
$
1,346
-
-
966
2,312
Accounting Policy
Convertible debenture investments are hybrid instruments which were elected to be classified as financial
assets at fair value through profit or loss. Upon initial recognition, the investment is recognized at fair value
with directly attributable transaction costs expensed as incurred. If the transaction price does not equal
fair value, management measures the fair value of each component of the investment and any unrealized
gains or losses at inception is either recognized in profit or loss or deferred and recognized over the term
of the financial instrument, depending on whether the valuation inputs are based on observable market
data. Subsequent changes in fair value are recognized in profit or loss. Refer to Note 28 for significant
judgements in determining the fair value of the convertible debenture instruments.
Notes to Financial Statements
77
7. CONVERTIBLE DEBENTURE INVESTMENT (CONTINUED)
The Company held the following convertible debenture at June 30, 2018:
Financial asset hierarchy level 3
Balance, June 30, 2016
Additions at cost
Unrealized gain recognized at inception
Unrealized loss on changes in fair value
Balance, June 30, 2017
Unrealized gain on changes in fair value
Conversion of debenture
Balance, June 30, 2018
Radient
$
-
2,000
12,564
(3,493)
11,071
830
(11,901)
-
On February 13, 2017, the Company purchased a $2,000 unsecured 10% convertible debenture of
Radient Technologies Inc. (“Radient”), convertible into units at $0.14 per unit. Each unit consisted of
one common share and one warrant exercisable at a price of $0.33 per share expiring February 13,
2019. During the year ended June 30, 2017, the Company recognized an aggregate $1,135 unreal-
ized loss on the debenture comprised of $3,493 unrealized loss on changes in fair value and $2,358
unrealized gain on the amortization of deferred inception gains.
On July 28, 2017, the Company received 14,285,714 units of Radient pursuant to the mandatory
conversion of the debenture. The Company also received an aggregate of 181,707 units of Radient
for its interest payments of $91. On conversion, the Company recognized an unrealized gain of $830
on the debentures and fully amortized the remaining deferred inception gain balance of $6,107 on
the share portion of the debenture (Note 28(c)). The convertible debenture was classified as a level 3
financial asset and the $11,901 fair value on conversion was estimated by measuring the fair value
of the shares at a quoted market price of $0.53 and the warrants using the Binomial model with the
following assumptions: risk-free interest rate of 1.57%; dividend yield of 0%; stock price volatility of
91.53%; and an expected life of 1.57 years (Note 8(d)).
8. MARKETABLE SECURITIES AND DERIVATIVES
Accounting Policy
Available-for-sale
The Company classifies investments in common shares as available-for-sale financial assets. 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 compre-
hensive 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 reclassified to profit or loss. Refer to Note 28 for significant
judgements in determining the fair value of available-for-sale financial instruments.
78
Aurora Cannabis Inc.
2018 Annual Report
The Company held the following convertible debenture at June 30, 2018:
Financial asset hierarchy level 3
Balance, June 30, 2016
Additions at cost
Unrealized gain recognized at inception
Unrealized loss on changes in fair value
Balance, June 30, 2017
Unrealized gain on changes in fair value
Conversion of debenture
Balance, June 30, 2018
Radient
$
-
2,000
12,564
(3,493)
11,071
830
(11,901)
-
On February 13, 2017, the Company purchased a $2,000 unsecured 10% convertible debenture of
Radient Technologies Inc. (“Radient”), convertible into units at $0.14 per unit. Each unit consisted of
one common share and one warrant exercisable at a price of $0.33 per share expiring February 13,
2019. During the year ended June 30, 2017, the Company recognized an aggregate $1,135 unreal-
ized loss on the debenture comprised of $3,493 unrealized loss on changes in fair value and $2,358
unrealized gain on the amortization of deferred inception gains.
On July 28, 2017, the Company received 14,285,714 units of Radient pursuant to the mandatory
conversion of the debenture. The Company also received an aggregate of 181,707 units of Radient
for its interest payments of $91. On conversion, the Company recognized an unrealized gain of $830
on the debentures and fully amortized the remaining deferred inception gain balance of $6,107 on
the share portion of the debenture (Note 28(c)). The convertible debenture was classified as a level 3
financial asset and the $11,901 fair value on conversion was estimated by measuring the fair value
of the shares at a quoted market price of $0.53 and the warrants using the Binomial model with the
following assumptions: risk-free interest rate of 1.57%; dividend yield of 0%; stock price volatility of
91.53%; and an expected life of 1.57 years (Note 8(d)).
8. MARKETABLE SECURITIES AND DERIVATIVES
Accounting Policy
Available-for-sale
The Company classifies investments in common shares as available-for-sale financial assets. 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 compre-
hensive 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 reclassified to profit or loss. Refer to Note 28 for significant
judgements in determining the fair value of available-for-sale financial instruments.
8. MARKETABLE SECURITIES AND DERIVATIVES (CONTINUED)
Accounting Policy (Continued)
Available-for-sale (Continued)
The Company applies the residual method in allocating the investment cost of unit private placements to
the underlying common share and warrant components, unless the transaction price does not approxi-
mate fair value. In such cases, each component of the investment is measured at fair value with the
difference between fair value at initial recognition and the transaction price recognized in either profit
or loss or deferred, depending on whether the valuation inputs are based on observable market data.
The resulting unrealized gain at inception on the share component is recognized in profit and loss and
subsequent changes in fair value recognized in other comprehensive income.
Impairment on available-for-sale investments
The Company reviews these investments for other-than-temporary declines in fair value. When there
is a significant or prolonged decline in the value of an investment, the cumulative loss that had been
recognized in other comprehensive income (loss) is reclassified from equity to profit or loss.
Derivatives
The Company classifies derivative investments as financial assets at fair value through profit or loss
(“FVTPL”). At initial recognition, the investment is recognized at fair value. If the transaction price does
not equal to fair value, management measures the fair value of each component of the investment and
any unrealized gains or losses at inception is either recognized in profit or loss or deferred, depending on
whether the valuation inputs are based on observable market data. The resulting unrealized gain or loss
at inception and subsequent changes in fair value are recognized in profit or loss for the period. Directly
attributable transaction costs on acquisition are expensed as incurred. Refer to Note 28 for significant
judgements in determining the fair value of derivative financial instruments.
The Company held the following marketable securities at June 30, 2018:
Financial asset hierarchy level 1
Marketable securities
Balance, June 30, 2016
Additions
Unrealized gain recognized at inception
Unrealized gain (loss) on changes in fair value
Balance, June 30, 2017
Additions
Unrealized gain recognized at inception
Unrealized gain (loss) on changes in fair value
Reclass to investment in associates
(Note 12(b))
Acquisition of control (Note 13(a)(iv))
Conversion of debenture (Note 7)
Exercise of warrants
Balance, June 30, 2018
Cann Group
(a)
$
-
6,627
-
6,806
13,433
-
-
42,934
CanniMed
(b)
$
-
-
-
-
-
16,144
-
10,423
(56,367)
-
-
-
-
-
(26,567)
-
-
-
Micron
(c)
$
-
-
-
-
-
962
2,170
(706)
-
-
-
-
2,426
Radient
(d)
$
-
1,023
1,334
(945)
1,412
4,199
3,700
(2,340)
-
-
7,571
29,501
44,043
Choom
(f)
$
-
-
-
-
-
7,000
2,268
3,451
-
-
-
-
12,719
Unrealized gain (loss) on marketable
securities
June 30, 2017
Profit & loss unrealized gain
OCI unrealized gain (loss)
June 30, 2018
Profit & loss unrealized gain (1)
OCI unrealized gain (loss)
-
7,021
-
(7,021)
-
-
-
-
1,334
(945)
-
-
10,423
-
2,170
(706)
3,700
(2,340)
2,268
3,451
Total
$
-
7,650
1,334
5,861
14,845
28,305
8,138
53,762
(56,367)
(26,567)
7,571
29,501
59,188
1,334
6,077
18,561
(6,616)
(1) In addition to the $18,561 profit & loss unrealized gain on marketable securities, the Company recognized an additional
$1,522 unrealized gain at inception for TGOD’s participation right common shares (Note 8(e)).
Notes to Financial Statements
79
8. MARKETABLE SECURITIES AND DERIVATIVES (CONTINUED)
The Company held the following derivative investments designated at FVTPL at June 30, 2018 on
level 2 of the fair value hierarchy:
Financial asset hierarchy level 2
Derivative investments designated at FVTPL
Balance, June 30, 2017
Additions
Unrealized gain on changes in fair value
Reclass to investment in associates (Note 12(g))
Balance, June 30, 2018
TGOD
(e)
$
-
55,000
153,043
(108,572)
99,471
CTT
(i)
$
-
1,319
18,821
-
20,140
The Company held the following held-for-trading derivative investments at June 30, 2018:
Financial asset hierarchy
Held-for-trading derivative investments
Balance, June 30, 2016
Additions
Unrealized gain recognized at inception
Unrealized loss on changes in fair value
Balance, June 30, 2017
Additions
Unrealized gain recognized at inception
Unrealized gain (loss) on changes in fair value
Conversion of debenture (Note 7)
Exercise of warrants
Balance, June 30, 2018
Level 3
Micron
(c)
$
-
-
-
-
-
538
1,213
(723)
-
-
1,028
Level 3
Radient
(d)
$
-
306
380
(394)
292
2,083
1,837
16,593
4,330
(23,723)
1,412
Level 3
Alcanna
(g)
$
-
-
-
-
-
28,060
-
(25,660)
-
-
2,400
Level 2
Namaste
(h)
$
-
-
-
-
-
1,333
-
(842)
-
-
491
The following is a summary of derivative instrument investments and a reconciliation of the
unrealized gain (loss) on changes in fair value of derivatives:
Total derivative instruments
Derivative investments – Level 2
Derivative investments – Level 3
Unrealized gain (loss) on changes in fair value of derivatives
Inception gains amortized
Derivative investments – Level 3
Changes in fair value
Derivative investments – Level 2
Derivative investments – Level 3
June 30,
2018
$
119,611
5,331
124,942
5,217
171,023
(9,790)
166,450
Total
$
-
56,319
171,864
(108,572)
119,611
Total
$
-
306
380
(394)
292
32,014
3,050
(10,632)
4,330
(23,723)
5,331
June 30,
2017
$
-
292
292
59
-
(394)
(335)
(a) Cann Group Limited (“Cann Group”)
On April 25, 2017, the Company subscribed to the initial public offering (“IPO”) of Cann Group on
the Australian Securities Exchange for 21,562,314 fully paid ordinary shares at a price of A$0.30 per
share for a total investment of $6,627 (A$6,469).
As at June 30, 2017, the fair market value of the shares of $13,433 (A$13,476) was based on a
quoted market price of A$0.625 and an unrealized gain of $6,806 in the fair value of marketable
securities was recognized during the year ended June 30, 2017, comprised of $7,021 unrealized
gain on changes in fair value and $215 foreign exchange losses.
80
Aurora Cannabis Inc.
2018 Annual Report
8. MARKETABLE SECURITIES AND DERIVATIVES (CONTINUED)
(a) Cann Group Limited (“Cann Group”) (Continued)
On December 11, 2017, the Company acquired an additional 7,200,000 shares of Cann Group, bringing
the Company’s total ownership interest to 21.8%. As a result, the Company obtained significant influence
in Cann Group and the investment was accounted for under the equity method. The 21,562,314 shares
had a fair value of $56,367 (A$58,218) based on a quoted market price of A$2.70 and was reclassified
to investment in associates (Note 12(b)). The cumulative unrealized gains of $50,463 at December 11,
2017 was reclassified from other comprehensive income to deficit. Subsequent to obtaining significant
influence, the Company further increased its ownership interest to 22.9% (Note 12(b)).
(b) CanniMed Therapeutics Inc. (“CanniMed”)
On November 24, 2017, the Company formally commenced an offer to purchase all of CanniMed’s
issued and outstanding common shares. During the year ended June 30, 2018 and prior to obtaining
control on March 15, 2018, the Company purchased an aggregate of 700,600 common shares of
CanniMed at an average price of $23.043 per share for $16,144.
On March 15, 2018, the Company acquired control of CanniMed and the shares had a fair value
of $26,567. On acquisition of control, the fair value of the shares was reclassified to the invest-
ment in CanniMed and included as part of the determination of goodwill on the acquisition date
(Note 13(a)(iv)). The Company recognized in the statement of comprehensive income (loss) a realized
gain on the cumulative changes in fair value of $10,423 for the CanniMed marketable securities.
(c) Micron Waste Technologies Inc. (“Micron”)
On January 10, 2018, the Company subscribed to 4,411,765 units of Micron at $0.34 per unit for a
total cost of $1,500. Each unit consisted of one common share and one common share purchase
warrant exercisable at $0.50 per share expiring January 12, 2020.
The fair value of the investment differed from the transaction price at initial recognition. At incep-
tion, the fair value of the shares of $3,132 was based on a quoted market price of $0.71 per share,
and the warrants had a fair value of $1,751 which was estimated using the Binomial model using
historical volatility, which is a Level 3 input. As such, the $2,170 unrealized gain at inception for
the shares was recognized immediately through profit or loss, and the $1,213 unrealized gain at
inception for the warrants was deferred over the term of the warrants.
At June 30, 2018, the fair value of the shares of $2,426 was based on quoted market prices of
$0.55 and the $1,028 fair value of the warrants was estimated using the Binomial model with the
following assumptions: risk-free interest rate of 2.16% (inception – 2.11%); dividend yield of 0%
(inception – 0%); historical stock price volatility of 81.18% (inception – 85.65%); and an expected
life of 1.54 years (inception – 2 years). If the estimated volatility increases or decreases by 10%,
the estimated fair value would increase or decrease by approximately $97.
(d) Radient Technologies Inc. (“Radient”)
The Company acquired the following securities of Radient:
Date
March 9, 2017
May 13, 2017
July 28, 2017
July 28, 2017
Dec 11, 2017
Dec 11, 2017
Transactions
Private placement of units @ $0.45 per unit
Convertible debenture interests (Note 7)
Convertible debenture interests (Note 7)
Debentures converted (Note 7)
Private placement of units @ $1.37 per unit
Exercise of warrants
Cost
($)
1,250
50
41
2,000
6,222
5,778
15,341
Shares
(#)
2,777,800
104,167
77,540
14,285,714
4,541,889
15,856,321
37,643,431
Warrants
(#)
1,388,900
104,167
77,540
14,285,714
4,541,889
(15,856,321)
4,541,889
Warrant
Exercise
Price ($)
0.70
0.48
0.53
0.33
1.71
0.36
Notes to Financial Statements
81
8. MARKETABLE SECURITIES AND DERIVATIVES (CONTINUED)
(d) Radient Technologies Inc. (“Radient”) (Continued)
As at June 30, 2017, the Company held an aggregate of 2,881,967 common shares and 1,493,067
warrants of Radient. At June 30, 2017, the $1,412 fair value of these shares was based on a quoted
market price of $0.49 per share (inception - $0.83) and the $292 fair value of the warrants was
estimated using the Black-Scholes pricing model with the following weighted average assumptions:
risk-free interest rate of 1.10% (inception – 0.82%); dividend yield of 0% (inception – 0%); stock price
volatility of 99.05% (inception – 101.40%); and an expected life of 1.69 years (inception – 2.00 years).
On December 11, 2017, the Company exercised an aggregate of 15,856,321 warrants of Radient for
a total cost of $5,778. For the period ended June 30, 2018, the Company recorded unrealized gains
on changes in fair value of these derivatives of $19,083 and fully amortized the deferred inception
gains of $4,421 on the warrants. The aggregate fair value of the exercised warrants of $23,723 was
estimated using the Binomial model with the following weighted average assumptions: share price
of $1.83; risk-free interest rate of 1.70%; dividend yield of 0%; historical stock price volatility of
96.70%; and an expected life of 1.19 years.
As at June 30, 2018, the 37,643,431 common shares had a fair value of $44,043 based on a quoted
market price of $1.17 per share and the 4,541,889 warrants had a fair value of $1,412 which was
estimated using the Binomial model with the following weighted average assumptions: risk-free
interest rate of 2.14%; dividend yield of 0%; historical stock price volatility of 80.37%; and an
expected life of 1.45 years. If the estimated volatility increases or decreases by 10%, the estimated
fair value would increase or decrease by approximately $251.
(e) The Green Organic Dutchman Holdings Ltd. (“TGOD”)
On January 4, 2018, the Company invested in 33,333,334 subscription receipts of TGOD at $1.65 per
subscription receipt for a cost of $55,000. Each subscription receipt was converted into units of
TGOD consisting of one common share and one-half of one share purchase warrant, with each
whole warrant exercisable at $3.00 per share expiring February 28, 2021. The common shares and
warrants are subject to a lock-up period for six and twelve months, respectively. In connection with
the subscription receipt investment, the Company entered into an Investor Rights Agreement with
TGOD where the Company received milestone options and a participation right for future TGOD
equity financings. The milestone options allow the Company to increase its pro rata interest to over
50% and to purchase the shares at a 10% discount to the listed market price upon achievement
of certain milestones. The Company elected to measure the subscription receipts and milestone
options together as a single compound financial instrument at fair value through profit or loss.
Pursuant to the participation right, the Company subscribed to TGOD’s IPO of 6,341,250 units at
a price of $3.65 per unit for a total investment of $23,146. Each unit consisted of one common
share and one-half of one share purchase warrant of TGOD. Each whole warrant is exercisable at
$7.00 per share expiring on May 20, 2020, subject to accelerated expiry if TGOD’s shares trade at or
above a VWAP of $9.00 for any 10 consecutive trading day period.
On May 2, 2018, TGOD completed its IPO and the Company obtained significant influence upon
conversion of the subscription receipts and receipt of the participation right common shares and
warrants. The subscription receipts and milestone options had a fair value of $155,358 of which
$108,572, $31,016 and $15,770 was allocated to the common shares, warrants and milestone
options, respectively. The $108,572 fair value of the common shares was estimated based on a
quoted market price of $3.89 per share, offset by the $21,095 fair value of the common share
lock-up period which was estimated using the Binomial model with the following assumptions:
82
Aurora Cannabis Inc.
2018 Annual Report
8. MARKETABLE SECURITIES AND DERIVATIVES (CONTINUED)
(e) The Green Organic Dutchman Holdings Ltd. (“TGOD”) (Continued)
risk-free interest rate of 1.84%; dividend yield of 0%; stock price volatility of 60%; and an expected
life of 0.50 years. The aggregate $46,786 fair value of the warrants and milestone options
were also estimated using the Binomial model based on assumptions detailed below. Prior to
conversion, the Company recognized an unrealized gain of $100,358 on the derivative instrument.
The $108,572 fair value of the 33,333,334 subscription receipt common shares was reclassified to
investment in associates, while the $24,667 fair value of the 6,341,250 participation right common
shares, estimated based on a quoted market price of $3.89 per share, was recognized directly to
investment in associates (Note 12(g)). The participation right warrants had a fair value of $1,631 at
inception estimated using the Binomial model based on assumptions detailed below. The Company
recognized an unrealized gain at inception of $1,522 and $1,631 on the participation right common
shares and warrants, respectively.
The 19,837,292 share purchase warrants and milestone options held by the Company were
measured as a single derivative instrument measured at fair value through profit or loss.
At June 30, 2018, the warrants and milestone options had an aggregate fair value of $99,471
(May 2, 2018 - $48,417) resulting in an unrealized gain of $51,054. As of June 30, 2018, none of
the milestone options were exercisable.
At June 30, 2018, the $95,009 (May 2, 2018 - $46,786) fair value of the subscription receipt warrants
and milestone options were estimated using the Binomial model with the following weighted
average assumptions: share price of $6.47 (May 2, 2018 - $3.89); risk-free interest rate of 2.30%
(May 2, 2018 – 2.37%); dividend yield of 0% (May 2, 2018 - 0%); stock price volatility of 60% (May
2, 2018 - 60%); and an expected life of 2.52 years (May 2, 2018 – 2.68 years). The share price input
relating to the milestone options was also adjusted for the 10% discount to the listed market price
upon achievement of the milestones, as well as the weighted average probability of 61% (May 2,
2018 - 61%) on the achievement of the milestones.
At June 30, 2018, the $4,462 (inception - $1,631) fair value of the participation right warrants was
estimated using the Monte-Carlo model with the following weighted average assumptions: share
price of $6.47 (inception - $3.89); risk-free interest rate of 2.21% (inception – 2.42%); dividend yield of
0% (inception - 0%); stock price volatility of 60% (inception - 60%); and an expected life of 1.84 years
(inception – 2.00 years).
(f) Choom Holdings Inc. (“Choom”)
On June 12, 2018, the Company subscribed to 9,859,155 common shares of Choom at $0.71 per
share for a total cost of $7,000, representing an 8% ownership interest. The $9,268 fair value of the
shares at initial recognition was based on a quoted market price of $0.94 per share and differed
from the transaction price. As such, the unrealized gain of $2,268 at inception for the shares was
recognized immediately through profit or loss. At June 30, 2018, the fair value of the 9,859,155
common shares of $12,719 was based on a quoted market price of $1.29 per share.
(g) Alcanna Inc. (“Alcanna”, formerly Liquor Stores N.A. Ltd.)
As part of the consideration paid for the investment in Alcanna (Note 12(c)), the Company received
an aggregate of 11,880,000 share purchase warrants of Alcanna allowing it to increase its pro rata
interest to approximately 40%. The share purchase warrants are exercisable between $15.00 and
$15.75 per share beginning May 9, 2018 and expire between August 14, 2019 and January 31, 2022.
Notes to Financial Statements
83
8. MARKETABLE SECURITIES AND DERIVATIVES (CONTINUED)
(g) Alcanna Inc. (“Alcanna”, formerly Liquor Stores N.A. Ltd.) (Continued)
At June 30, 2018, the 11,880,000 warrants had a fair value of $2,400 (inception - $28,060) resulting
in an unrealized loss of $25,660 since initial recognition. The fair value of the warrants was esti-
mated using the Binomial model with the following weighted average assumptions: share price of
$9.14 (inception – $11.95); risk-free interest rate of 2.12% (inception – 2.12%); dividend yield of 0%
(inception – 0%); historical stock price volatility of 30.15% (inception – 52.03%); and an expected life
of 1.49 years (inception – 1.86 years). If the estimated volatility increases or decreases by 10%, the
estimated fair value would increase or decrease by approximately $3,012.
(h) Namaste Technologies Inc. (“Namaste”)
Namaste issued 500,000 stock options to the Company exercisable at $3.35 per share expiring
December 27, 2021, vesting quarterly over 12 months. At June 30, 2018, the options had a fair value
of $491 (inception - $1,333) resulting in an unrealized loss of $842 since initial recognition. The
fair value of the options was estimated using the Black-Scholes pricing model with the following
weighted average assumptions: share price of $1.49 (inception – $3.35); risk-free interest rate
of 2.39% (inception – 2.21%); dividend yield of 0% (inception – 0%); stock price volatility of 125%
(inception – 125%); and an expected life of 3.50 years (inception 4.00 years).
(i) CTT Pharmaceuticals Inc. (“CTT”)
On May 20, 2018, the Company purchased a $1,319 (US$1,000) unsecured 5% convertible deben-
ture of CTT with a term of 3 years, convertible at the option of the holder into common shares at
US$0.268 per share. Pursuant to the terms of the convertible debenture, the Company also received
20,779,972 share purchase warrants of CTT allowing it to increase its pro rata interest to approxi-
mately 42.5% on a fully diluted basis (Note 12(e)). Each warrant is exercisable into one common
share of CTT at US$0.35 per share until May 20, 2021.
The convertible debenture and warrants were accounted for as a single compound instrument with
embedded derivatives classified as fair value through profit or loss financial assets. At June 30, 2018,
the compound instrument had a fair value of $20,140 (inception - $1,319) resulting in an unrealized
gain of $18,821. The fair value of the compound instrument was estimated using the Binomial model
with the following weighted average assumptions: share price of US$0.89 (inception - US$0.27);
risk-free interest rate of 2.85% (inception – 2.90%); dividend yield of 0% (inception – 0%); stock price
volatility of 20% (inception - 20%); and an expected life of 2.89 years (inception – 3.00 years).
9. BIOLOGICAL ASSETS
Accounting Policy
The Company’s biological assets consist of medical cannabis plants and are valued using the income
approach. Production costs are capitalized to biological assets and include all direct and indirect costs
relating to biological transformation. The Company measures and adjusts the biological assets to the 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. Unrealized gains or losses arising from the changes in fair value less cost to sell
during the period are included in the results of operations for the related period.
84
Aurora Cannabis Inc.
2018 Annual Report
9. BIOLOGICAL ASSETS (CONTINUED)
Significant Judgement
Determination of the fair values of the biological assets requires the Company to make assumptions about
how market participants assign fair values to these assets. These assumptions primarily relate to the level
of effort required to bring the cannabis up to the point of harvest, costs to convert the harvested cannabis
to finished goods, sales price, risk of loss, expected future yields from the cannabis plants and estimating
values during the growth cycle. The average grow cycle of plants up to the point of harvest is approximately
twelve weeks.
The Company’s biological assets consist of cannabis plants. The changes in the carrying value of
biological assets are as follows:
Balance at June 30, 2016
Changes in fair value less cost to sell due to biological transformation
Transferred to inventory upon harvest
Balance at June 30, 2017
Production costs capitalized
Biological assets acquired from CanniMed (Note 13(a)(iv))
Changes in fair value less cost to sell due to biological transformation
Transferred to inventory upon harvest
Balance at June 30, 2018
$
1,845
22,772
(20,529)
4,088
9,902
2,535
25,550
(28,455)
13,620
As of June 30, 2018, the weighted average fair value less cost to complete and cost to sell was $6.46
per gram (2017 - $6.52 per gram).
The fair value of biological assets is categorized within Level 3 on the fair value hierarchy. The
inputs and assumptions used in determining the fair value of biological assets include:
(a)
(b)
(c)
(d)
(e)
Selling price per gram;
Attrition rate;
Average yield per plant;
Standard cost per gram to compete production
Cumulative stage of completion in production process
Level 3 input
Level 3 input
Level 3 input
Level 3 input
Level 3 input
Significant unobservable assumptions used in the valuation of biological assets, including the
sensitivities on changes in these assumptions and their effect on the fair value of biological assets,
are as follows:
Significant inputs & assumptions
Selling price per gram (1)
Average yield per plant (2)
Range of inputs
$7.25 to $8.96
20 to 51 grams
Sensitivity
Increase or decrease of $1.00 per gram
Increase or decrease by 5 grams per plant
(1) Selling price per gram is based on average selling prices for the period.
(2) Average yield per plant includes yields for new facilities that recently started production.
Effect on fair value
June 30,
2017
$599
$529
June 30,
2018
$1,763
$1,999
The Company’s estimates are, by their nature, subject to change and differences from the
anticipated yield will be reflected in the gain or loss on biological assets in future periods.
As of June 30, 2018, the biological assets were on average 45% complete (2017 – 43%). During
the year ended June 30, 2018, the Company’s biological assets produced 5,631,913 grams of
dried cannabis (2017 – 3,036,829 grams). As of June 30, 2018, it was expected that the Company’s
Notes to Financial Statements
85
9. BIOLOGICAL ASSETS (CONTINUED)
biological assets would yield approximately 3,794,770 grams (June 30, 2017 – 599,245 grams) of
medical cannabis when harvested.
10. INVENTORY
Accounting Policy
Inventories of purchased 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 biolog-
ical 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 lower of cost
and net realizable value. The Company reviews inventory for obsolete, redundant and slow-moving goods
and any such inventory are written-down to net realizable value.
Significant Judgement
The valuation of biological assets at the point of harvest is the cost basis for all cannabis-based inventory
and thus any critical estimates and judgements related to the valuation of biological assets (Note 9) are also
applicable for inventory. The valuation of work-in-process and finished goods also requires the estimate of
conversion costs incurred, which become part of the carrying amount for the inventory. The Company must
also determine if the cost of any inventory exceeds its net realizable value, such as cases where prices have
decreased, or inventory has spoiled or has otherwise been damaged.
The following is a breakdown of inventory at June 30, 2018:
Harvested cannabis
Work-in-process
Finished goods
Cannabis oils
Work-in-process
Finished goods
Capsules
Finished goods
Indoor cultivation systems and hemp seed food products
Raw materials
Work-in-process
Finished goods
Accessories, supplies and consumables
Balance, June 30, 2018
Capitalized
cost
$
Fair value
adjustment
$
Carrying
value
$
2,215
5,637
7,852
550
1,099
1,649
166
1,160
701
323
2,184
1,429
13,280
6,337
7,742
14,079
782
1,364
2,146
90
-
-
-
-
-
16,315
8,552
13,379
21,931
1,332
2,463
3,795
256
1,160
701
323
2,184
1,429
29,595
86
Aurora Cannabis Inc.
2018 Annual Report
10. INVENTORY (CONTINUED)
The following is a breakdown of inventory at June 30, 2017:
Harvested cannabis
Work-in-process
Finished goods
Cannabis oils
Work-in process
Finished goods
Supplies and consumables
Balance, June 30, 2017
Capitalized
cost
$
Fair value
adjustment
$
Carrying
value
$
304
2,332
2,636
342
147
489
182
3,307
373
2,836
3,209
790
397
1,187
-
4,396
677
5,168
5,845
1,132
544
1,676
182
7,703
During the year ended June 30, 2018, the Company recognized $37,227 (2017 - $24,783) of inventory
expensed to cost of goods sold including $17,624 (2017 - $16,908) non-cash expense relating to the
changes in fair value of inventory sold.
11. PROPERTY, PLANT AND EQUIPMENT
Accounting Policy
Property, plant and equipment is measured at cost less accumulated depreciation, residual values and
impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the
asset. The cost of self-constructed assets includes the cost of materials and direct labor, any other costs
directly attributable to bringing the asset to a working condition for the intended use and borrowing costs
on qualifying assets. During their construction, items of property, plant and equipment are classified as
construction in progress. When the asset is available for use, it is transferred from construction in progress
to the appropriate category of property, plant and equipment and depreciation on the item commences.
Depreciation is calculated on a straight-line basis over the following estimated useful lives:
Computer software and equipment
Production equipment
Furniture and fixtures
Building and 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.
The Company capitalizes borrowing costs on capital invested in projects under construction. Upon the
asset becoming available for use, capitalized borrowing costs, as a portion of the total cost of the asset,
are depreciated over the estimated useful life of the related asset.
Notes to Financial Statements
87
11. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Accounting Policy (Continued)
Impairment of property, plant and equipment
The Company assesses impairment on property, plant and equipment when an indication of impairment
occurs, such as evidence of obsolescence or physical damage. In assessing impairment, the Company
compares the carrying amount to the recoverable amount which is determined as the higher of the
asset’s fair values less costs of disposal and its value in use. Value in use is assessed based on the
estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. An impair-
ment loss is recognized whenever the carrying amount of the asset exceeds its recoverable amount and
is recorded in the consolidated statements of comprehensive income (loss).
Significant Judgement
Depreciation of property, plant and equipment is dependent upon estimates of useful lives and residual
values which are determined through the exercise of judgement. 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.
Building &
Improve-
ments
$
Construc-
tion in
progress
$
Computer
Software &
Equipment
$
Furniture
& Fixtures
$
Production
& Other
Equipment
$
Finance
Lease
Equipment
$
10,831
1,944
-
26,571
4,407
-
17,182
16,896
45,404
(397)
-
79,085
616
438
-
1,054
1,435
(53)
-
2,436
-
-
26,571
115,653
4,323
-
-
146,547
-
-
-
-
888
-
-
888
444
398
63
-
905
3,333
588
(753)
5
4,078
162
221
-
383
403
(206)
4
584
109
149
34
-
292
2,859
615
(289)
-
3,477
19
40
-
59
364
(74)
-
349
1,020
778
364
(12)
2,150
12,750
5,405
(1,087)
4
19,222
237
351
(2)
586
2,052
(188)
-
2,450
-
544
-
-
544
-
247
-
-
791
-
39
-
39
102
-
-
141
Total
$
12,404
30,384
4,868
(12)
47,644
151,491
56,582
(2,526)
9
253,200
1,034
1,089
(2)
2,121
5,244
(521)
4
6,848
16,128
76,649
26,571
145,659
522
3,494
233
3,128
1,564
16,772
505
650
45,523
246,352
Cost
Balance, June 30, 2016
Additions
Additions from business
combinations and
asset acquisitions
Disposals
Balance, June 30, 2017
Additions
Additions from
business combinations
and asset acquisitions
Disposals
Foreign currency
translation
Balance, June 30, 2018
Accumulated Depreciation
Balance, June 30, 2016
Depreciation
Disposals
Balance, June 30, 2017
Depreciation
Disposals
Foreign currency
translation
Balance, June 30, 2018
Net Book Value
June 30, 2017
June 30, 2018
88
Aurora Cannabis Inc.
2018 Annual Report
As at June 30, 2018, costs related to the construction of production facilities were capitalized as
construction in progress and not amortized. Amortization will commence when construction is
completed, and the facility is available for its intended use.
During the year ended June 30, 2018, $5,710 (2017 - $1,370) in borrowing costs were capitalized to
construction in progress at a weighted average rate of 20% (2017 – 22%).
12. INVESTMENTS IN ASSOCIATES AND JOINT VENTURE
Accounting Policy
Associates are companies over which Aurora has significant influence and are accounted for under the
equity method. Significant influence is assumed when the Company has 20%-49% ownership interest,
unless qualitative factors overcome this assumption. In assessing significant influence, potential voting
rights that are currently exercisable are taken into account.
Joint ventures are joint arrangements whereby the parties that have joint control of the arrangement have
rights to the net assets of the arrangement.
Investments in associates and joint ventures are accounted for using the equity method and are initially
recognized at cost, excluding financial assets that are not in-substance common shares and inclusive
of transaction costs. When the Company holds available-for-sale or derivative financial assets and
subsequently obtains significant influence in that investee, the fair value of the financial instruments are
reclassified to investments in associates as the deemed cost with the cumulative unrealized gains or losses
in other comprehensive income (loss), if any, transferred to deficit. For each additional acquisition of owner-
ship interest within the investment in associate classification and prior to obtaining control, the difference
between the cost of the incremental investment acquired and the investee’s fair value of identifiable net
assets is allocated to goodwill. The carrying amount of goodwill arising from the acquisition of associates
and joint ventures is included in the carrying amount of the investments in associates and joint ventures.
The consolidated financial statements include the Company’s share of the income and expenses and equity
movement of equity accounted investees. In accordance with IFRS, the investee’s most recent available
financial statements are used in the application of the equity method. Where the investee’s reporting period
differs from the Company’s, the investee prepares financial information as of the same period end as the
Company, unless it is impracticable to do so. Otherwise, the Company will adjust for its share of income
and expenses and equity movement based on the investee’s most recently completed financial statements,
adjusted for the effects of significant transactions. The Company does not recognize losses exceeding the
carrying value of its interest in the associate or joint venture.
Impairment
The entire carrying amount of the investment is assessed for indicators of impairment annually. An
impairment test is performed when there is objective evidence of impairment, such as significant
adverse changes in the environment in which the equity-accounted investee operates or a significant or
prolonged decline in the fair value of the investment below its carrying amount. An impairment loss is
recorded when the recoverable amount becomes lower than the carrying amount.
Notes to Financial Statements
89
12. INVESTMENTS IN ASSOCIATES AND JOINT VENTURE (CONTINUED)
Significant Judgement
The Company uses judgement in its assessment of whether the Company has significant influence.
Significant influence is the power to participate in the financial and operating policy decisions of the
investee, including but not limited to, the ability to exercise significant influence through board represen-
tation, material transactions with the investee, provision of technical information, and the interchange
of managerial personnel. Whether an investment is classified as an investment in associate can have a
significant impact on the entries made on and after acquisition.
The carrying value of investments in associates and joint ventures consist of:
Note
%
Interest
Australis Holdings
Cann Group Limited
Alcanna Inc.
SubTerra LLC
10647594 Canada
CTT Pharmaceutical
Capcium Inc.
TGOD
(a)
(b)
(c)
(d)
(d)
(e)
(f)
(g)
50%
23%
25%
0%
20%
0%
20%
17%
Balance,
Jun 30,
2017
$
-
-
-
-
-
-
-
-
-
Additions
$
-
81,927
109,940
78
134
-
11,270
133,239
336,588
Trans-
action
costs
$
-
-
1,586
-
-
-
-
-
1,586
Dividend
income
$
-
-
(1,449)
-
-
-
-
-
(1,449)
Dis-
position
$
-
-
-
(78)
-
-
-
-
(78)
Share of
net
income
(loss)
$
-
(781)
(500)
-
-
-
(14)
(947)
(2,242)
OCI
foreign
exchange
gain
(loss)
$
-
37
-
-
-
-
-
-
37
Balance,
Jun 30,
2018
$
-
81,183
109,577
-
134
-
11,256
132,292
334,442
The following is a summary of aggregate financial information for the Company’s associates and
joint ventures:
Statement of financial position
Cash and cash equivalents
Current assets
Non-current assets
Current financial liabilities,
excluding trade and other payables
and provisions
Current liabilities
Non-current financial liabilities
Non-current liabilities
Statement of comprehensive
income (loss)
Revenue
Depreciation and amortization
Interest income
Interest expense
Income tax recovery
Loss from continued operations
Loss from discontinued operations,
net tax
Other comprehensive income
Total comprehensive loss
Cann
Group
(b)
$
48,243
79,225
5,258
Alcanna
(c)
$
Capcium
(f)
$
TGOD
(g)
$
78,595
197,131
252,262
252
11,935
6,701
261,816
270,712
48,078
Other
$
1,317
1,319
3,029
June 30,
2018
Total
$
June 30,
2017
Other
$
390,223
560,322
315,328
4
887
16
16
1,380
54,263
72,697
131,561
-
1,293
18,583
18,583
-
13,992
-
-
1,737
2,087
2,057
2,057
3,121
72,522
93,353
152,217
552
-
-
(7)
-
(3,334)
-
-
(3,334)
223,991
(4,455)
-
(1,916)
751
(2,108)
(242)
1,402
(974)
104
-
-
-
-
(69)
-
-
(69)
-
(121)
381
(32)
-
(5,578)
-
-
(5,578)
-
-
-
(57)
-
(471)
-
-
(471)
224,647
(4,576)
381
(2,012)
751
(11,560)
(242)
1,402
(10,426)
107
1
2,300
283
283
2,415
2,415
-
-
-
(110)
-
(183)
-
-
(183)
90
Aurora Cannabis Inc.
2018 Annual Report
12. INVESTMENTS IN ASSOCIATES AND JOINT VENTURE (CONTINUED)
(a) Australis Holdings
On April 7, 2015, the Company’s wholly-owned subsidiary, Australis Capital Inc. (“ACI”), entered
into a Limited Liability Partnership Agreement with AJR Builders Group LLC (“AJR”) and formed
Australis Holdings LLP (“Australis Holdings” or “AHL”), a Washington Limited Liability Partnership.
Each of ACI and AJR holds a 50% interest in Australis Holdings. Australis Holdings purchased
two parcels of land in 2015 totaling approximately 24.5 acres (the “Property”) in Whatcom County,
Washington for US$2,300, with the initial intention to construct a new cannabis production and
processing facility.
Pursuant to a promissory note dated April 10, 2015, the Company through ACI loaned $1,645 to
Australis Holdings to fund the purchase of the Property. The note bears interest at a rate of 5% per
annum and had an original maturity date of October 31, 2017 which was extended to October 31, 2018.
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 Australis
Holdings. As of June 30, 2018, the loan had a carrying amount of $1,785 (2017 - $1,736) including
accrued interest of $140 (2017 - $91). During the year ended June 30, 2018, the Company accrued
interest of $49 (2017 - $41) related to this loan. The loan plus accrued interest were reclassified to
assets held for distribution to owners (Note 15).
The Company has advances of $1,659 to Australis Holdings (2017 - $360), of which $1,235
(2017 - $nil) was held by ACI and reclassified to assets held for distribution to owners (Note 15).
The advances are unsecured, non-interest bearing and have no fixed terms of repayment.
As of June 30, 2018, the carrying value of the investment is $nil (2017 - $nil). The Company’s share
of losses in AHL is recognized only to the extent of reducing the carrying value of the investment to
$nil. Total unrecognized share of AHL’s losses for the year ended June 30, 2018 and unrecognized
cumulative losses was $98 and $243, respectively.
Subsequent to June 30, 2018, the Company acquired the remaining 50% interest in AHL from AJR
(Note 31), as well as completed the spin-out of ACI and the AHL investment to Aurora shareholders
(Notes 15 and 31).
(b) Cann Group Limited (“Cann Group”)
Cann Group is a public company listed on the Australian Securities Exchange and its principal
activities consist of the cultivation of medicinal cannabis for both medicinal and research purposes
and commercializing the outputs for medicinal uses in Australia.
On December 11, 2017, the Company obtained significant influence in Cann Group through the
acquisition of an additional 7,200,000 shares at A$2.50 per share for a cost of $17,577 (A$18,000).
As a result, the $56,367 fair value of the previously held 21,562,314 shares in Cann Group were
reclassified from marketable securities to investment in associates as the deemed cost (Note 8(a)).
On January 4, 2018, the Company also acquired an additional 3,194,033 shares at a cost of $7,983
(A$7,985). As of June 30, 2018, the Company held an aggregate of 31,956,347 shares of Cann Group
with a carrying value of $81,182 in investment in associates, representing a 22.9% ownership
interest. Management continues to work on refining the estimate of the Company’s share of the fair
value of identifiable net assets acquired. As such, the allocation of the purchase price to the various
assets acquired is subject to change.
Notes to Financial Statements
91
12. INVESTMENTS IN ASSOCIATES AND JOINT VENTURE (CONTINUED)
(b) Cann Group Limited (“Cann Group”) (Continued)
Based on Cann Group’s closing price of A$3.50 on June 30, 2018, the shares held by the Company
have a fair value of approximately $108,861 (A$111,847).
(c) Alcanna Inc. (“Alcanna”)
On February 14, 2018, the Company subscribed to Alcanna’s non-brokered private placement for
6,900,000 common shares at $15.00 per share for a total cost of $103,500, representing a 19.9%
interest in Alcanna. The Company also subscribed to 2,300,000 subscription receipts of Alcanna
at $15.00 per subscription receipt for a total cost of $34,500 which was converted to common
shares on May 9, 2018, increasing the Company’s ownership to approximately 25% on an undi-
luted basis. As part of the consideration transferred, the Company also received 11,880,000 share
purchase warrants of Alcanna. The total transaction price of $138,000 was allocated first to the
common shares and subscription receipts based on Alcanna’s closing market price of $11.95 as of
February 14, 2018, resulting in total cost of $109,940 allocated to the investment in associate and
$28,060 being the implied fair value of the warrants. The warrants are recognized as derivatives
measured at fair value through profit or loss (Note 8(g)). The Company also recognized $1,586
transaction costs and $1,449 dividends to investment in associates. Of the $1,449 dividends,
$828 remains receivable as of June 30, 2018 (Note 6). Management continues to work on refining
the estimate of the Company’s share of the fair value of identifiable net assets acquired. As such,
the allocation of the purchase price to the various assets acquired is subject to change.
Alcanna is an Alberta based public company listed on the TSX and its principal activity is the
retailing of wines, beers and spirits in Canada and the United States of America. Alcanna also has
advanced plans to develop and launch a retail cannabis business in Canadian jurisdictions where
private retailing will be permitted upon legalization. Management determined that the Company has
significant influence over Alcanna and accounts for the investment under the equity method.
Based on Alcanna’s closing price of $9.14 on June 30, 2018, the shares held by the Company have
a fair value of $84,088. The Company assessed the carrying value of the investment against the
estimated recoverable amount and determined that no impairment was necessary on the investment.
(d) SubTerra LLC (“SubTerra”) and 10647594 Canada Inc. (“10647594 Canada”)
Pursuant to the acquisition of CanniMed (Note 13(a)(iv)), the Company acquired a 19.9% interest in
SubTerra, a Michigan limited liability company, and a 19.9% interest in 10647594 Canada which hold
certain assets known as the Interleukin 37 protein.
On May 18, 2018, the Company sold its 19.9% interest in SubTerra to CanniMed’s former Chief
Executive Officer in exchange for $78 cash. Additionally, in exchange for the cancellation of $4,665
(US$3,580) promissory notes and receivables from SubTerra, the Company received the following
assets with an estimated fair value of $1,400:
(i)
(ii)
5% of any gross revenues of SubTerra earned annually from the sale of cannabis and
cannabis-based products grown and/or processed at its facility for the period commencing
June 1, 2018 and ending May 31, 2028; and
a payment of $150 annually for the period commencing June 1, 2018 and ending
May 31, 2028.
The promissory notes and receivables from SubTerra were previously written off prior to Aurora’s
acquisition of CanniMed. As such, the Company recognized a recovery of $1,400 upon receipt of the
above assets.
92
Aurora Cannabis Inc.
2018 Annual Report
12. INVESTMENTS IN ASSOCIATES AND JOINT VENTURE (CONTINUED)
(d) SubTerra LLC (“SubTerra”) and 10647594 Canada Inc. (“10647594 Canada”) (Continued)
As part of the sale agreement, the Company also received a two-year option to purchase a parcel of
land located in White Pine, Michigan for US$3.
No income or loss was recognized on the investment in associate from acquisition date to disposition.
Subsequent to June 30, 2018, the revenue royalty, annuity payment and land purchase option were
spun-out as part of the ACI spin-out transaction (Notes 15 and 31).
(e) CTT Pharmaceutical Holdings Ltd. (“CTT”)
The Company holds securities of CTT which if converted and exercised would increase the
Company’s ownership interest to 42.5% on a fully diluted basis (Note 8(i)).
As of June 30, 2018, the Company held 0% non-diluted ownership interest in CTT. Based on the
Company’s potential voting rights of up to 42.5% and other qualitative factors, the Company has
determined it holds significant influence in CTT and has accounted for its investment under the
equity method. As the Company has no present voting interest in CTT, the compound financial
instrument is measured as a financial asset at fair value through profit or loss (Note 8(i)).
CTT is Ontario based and is in the business of developing dose specific fast dissolving oral thin
film wafers that provide a dose specific, smoke-free delivery of medical cannabis or other active
ingredients. CTT’s common shares are listed on the OTC under the symbol “CTTH“.
(f) Capcium Inc. (“Capcium”)
On June 6, 2018, the Company acquired a 19.99% ownership interest in Capcium by subscribing to
8,828,662 common shares. The consideration was paid through the issuance of 1,144,481 common
shares of Aurora with a fair value of $10,770 and $500 cash. Capcium is a Montreal-based private
company in the business of manufacturing soft-gels.
Based on the Company’s voting rights and other qualitative factors, the Company has deter-
mined it holds significant influence in Capcium and has accounted for its investment under the
equity method.
(g) The Green Organic Dutchman Holdings Ltd. (“TGOD”)
TGOD is an Ontario based licensed producer of medical cannabis in Canada. The Company’s invest-
ments in TGOD consist of compound instruments which were classified as derivatives at fair value
through profit or loss. On closing of TGOD’s IPO and the conversion of subscription receipts into
common shares and common share purchase warrants, based on the Company’s 18% ownership
interest and other qualitative factors, the Company obtained significant influence in TGOD and the
aggregate $133,239 fair value of the 39,674,584 common shares were reclassified to investment in
associates (Note 8(e)). Management continues to work on refining the estimate of the Company’s
share of the fair value of identifiable net assets acquired. As such, the allocation of the purchase
price to the various assets acquired is subject to change.
Based on TGOD’s closing price of $6.47 on June 30, 2018, the shares held by the Company have a
fair value of approximately $256,695.
Notes to Financial Statements
93
13. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS
Accounting Policy
Business combinations
A business combination is a transaction or event in which an acquirer obtains control of one or more
businesses and is accounted for using the acquisition method. The total consideration paid for the
acquisition is the aggregate of the fair values of assets given, liabilities incurred or assumed, and equity
instruments issued in exchange for control of the acquiree at the acquisition date. The acquisition date
is the date where the Company obtains control of the acquiree. The identifiable assets acquired and
liabilities assumed are recognized at their acquisition date fair values, except for deferred taxes and
share-based payment awards where IFRS provides exceptions to recording the amounts at fair value.
Acquisition costs are expensed to profit or loss.
Contingent consideration is measured at its acquisition-date fair value and included as part of the
consideration transferred in a business combination. Contingent consideration that is classified as equity
is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within
equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent
reporting dates in accordance with IAS 39, or IAS 37 Provisions, Contingent Liabilities and Contingent
Assets, as appropriate, with the corresponding gain or loss being recognized in profit or loss.
Non-controlling interest in the acquiree, if any, is recognized either at fair value or at the non-controlling
interest’s proportionate share of the acquiree’s net assets, determined on an acquisition-by-acquisition
basis. For each acquisition, the excess of total consideration, the fair value of previously held equity
interest prior to obtaining control and the non-controlling interest in the acquiree, over the fair value of
the identifiable net asset acquired, is recorded as goodwill.
Certain fair values may be estimated at the acquisition date pending confirmation or completion of the
valuation process. Where provisional values are used in accounting for a business combination, they
may be adjusted retrospectively in subsequent periods. The measurement period is the period from
the acquisition date to the date complete information about facts and circumstances that existed as of
the acquisition date is received. However, the measurement period does not exceed one year from the
acquisition date.
Asset acquisitions
Acquisitions that do not meet the definition of a business combination are accounted for as an asset
acquisition. Consideration paid for an asset acquisition is allocated to the individual identifiable assets
acquired and liabilities assumed based on their relative fair values. Asset acquisitions do not give rise
to goodwill.
94
Aurora Cannabis Inc.
2018 Annual Report
13. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS (CONTINUED)
Significant Judgement
Classification of an acquisition as a business combination or an asset acquisition depends on whether the
assets acquired constitute a business, which can be a complex judgement. Whether an acquisition is clas-
sified as a business combination or asset acquisition can have a significant impact on the entries made on
and after acquisition.
In determining the fair value of all identifiable assets, liabilities and contingent liabilities acquired, the
most significant estimates relate to contingent consideration and intangible assets. Management exercises
judgement in estimating the probability and timing of when earn-outs are expected to be achieved which
is used as the basis for estimating fair value. For any intangible asset identified, depending on the type of
intangible asset and the complexity of determining its fair value, an independent valuation expert or man-
agement may develop the fair value, using appropriate valuation techniques, which are generally based on
a forecast of the total expected future net cash flows. The evaluations are linked closely to the assumptions
made by management regarding the future performance of these assets and any changes in the discount
rate applied.
Notes to Financial Statements
95
13. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS (CONTINUED)
(a) Business combinations
Completed during the year ended
June 30, 2018
Total consideration
Cash paid
Common shares issued
Share purchase warrants issued
Loan settlement
Contingent consideration
Net identifiable assets (liabilities) acquired
Cash
Accounts receivables
Short-term investments
Biological assets
Inventories
Prepaid expenses and deposits
Investments in associates
Property, plant and equipment
Intangible assets
Customer relationships
Permits and licenses
Brand
Patents
Deferred tax asset
Accounts payable and accruals
Income taxes payable
Deferred revenue
Loans and borrowings
Deferred tax liability
Purchase price allocation
Net identifiable assets acquired
Fair value of previously held equity interest
Non-controlling interests
Goodwill
Non-controlling interest at acquisition (%)
Net cash outflows
Cash consideration paid
Cash acquired
Acquisition costs expensed
Year ended June 30, 2018
Net accounts receivables acquired
Gross contractual receivables acquired
Receivables expected to be uncollectible
Net accounts receivables acquired
BCNL / UCI
(i)
$
Hempco
(ii)
$
Larssen
(iii)
$
CanniMed
(iv)
$
3,294
248
136
716
1,119
5,513
138
394
-
-
874
55
-
149
105
-
654
521
-
2,890
(818)
(26)
(86)
-
(335)
1,625
1,625
-
-
3,888
5,513
0%
3,294
(138)
3,156
65
504
(110)
394
946
-
-
2,301
-
3,247
908
1,388
511
-
1,875
178
-
2,876
-
-
-
-
-
7,736
(968)
-
-
-
-
6,768
6,768
-
(5,935)
2,414
3,247
77.7%
946
(908)
38
71
1,420
(32)
1,388
3,500
-
-
-
-
3,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,500
3,500
0%
3,500
-
3,500
30
-
-
-
Total
$
139,435
707,122
136
3,017
1,119
850,113
39,929
2,768
511
2,535
13,018
456
212
48,341
7,105
65,100
127,654
2,221
11,663
321,513
(26,120)
(46)
(86)
(11,825)
(58,418)
225,018
225,018
(26,567)
(38,521)
690,183
850,113
138,719
(39,929)
98,790
130,979
706,874
-
-
-
837,853
38,883
986
-
2,535
10,269
223
212
45,316
7,000
65,100
127,000
1,700
11,663
310,887
(24,334)
(20)
-
(11,825)
(58,083)
216,625
216,625
(26,567)
(32,586)
680,381
837,853
12.8%
130,979
(38,883)
92,096
7,235
7,401
986
-
986
2,910
(142)
2,768
(i) BC Northern Lights Enterprises Ltd. (“BCNL”) and Urban Cultivator Inc. (“UCI”)
On September 29, 2017, the Company acquired BCNL and UCI to cater to the home grow
cannabis market. BCNL is in the business of the production and sale of proprietary systems for
the safe, efficient and high-yield indoor cultivation of cannabis and UCI is in the business of the
production and sale of state-of-the-art indoor gardening appliances for the cultivation of organic
microgreens, vegetables and herbs in home kitchens. The transaction was accounted for as a
business combination.
96
Aurora Cannabis Inc.
2018 Annual Report
13. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS (CONTINUED)
(a) Business combinations (Continued)
(i) BC Northern Lights Enterprises Ltd. (“BCNL”) and Urban Cultivator Inc. (“UCI”) (Continued)
The Company acquired all of the issued and outstanding shares of BCNL and UCI for aggregate
consideration of $5,513 comprised of $3,294 cash consideration, settlement of $716 loan receiv-
able, 89,107 common shares with a fair value of $248, share purchase warrants with a fair value
of $136 exercisable at $2.8056 per share until September 29, 2020, and $1,119 contingent con-
sideration representing the estimated fair value of the $4,000 gross consideration to be paid in
cash or common shares at the election of Aurora over a period of 3 years on the achievement of
future milestones related to aggregate earnings before interest, taxes, depreciation and amor-
tization (“EBITDA”). As of June 30, 2018, the fair value of contingent consideration was $1,242
(Note 28(e)).
At the date of acquisition, management was in the process of gathering the relevant informa-
tion that existed as at the acquisition date to determine the fair value of net identifiable assets
acquired. As such, the initial purchase price was provisionally allocated based on the Company’s
estimated fair value of the identifiable assets acquired and the liabilities assumed on the acquisi-
tion date. Subsequently, the Company finalized the purchase price allocation and has adjusted
the values for the working capital holdback pursuant to the acquisition agreement, contingent
consideration, intangible asset and goodwill. Accordingly, the purchase price allocation has been
retrospectively adjusted to reflect changes to the assets acquired and liabilities assumed at the
acquisition date as follows:
Net identifiable assets acquired
Goodwill
Provisional allocation
at acquisition
$
846
6,551
7,397
Adjustments
$
779
(2,663)
(1,884)
Final
$
1,625
3,888
5,513
Goodwill represents expected synergies, future income and growth, and other intangibles that
do not qualify for separate recognition, as well as the deferred tax liability recognized for all
taxable temporary differences. None of the goodwill arising on this acquisition is expected to be
deductible for tax purposes.
For the year ended June 30, 2018, BCNL and UCI accounted for $2,424 in revenues and $1,379
in net loss since September 29, 2017. If the acquisition had been completed on July 1, 2017, the
Company estimates it would have recorded an increase of $1,062 in revenues and an increase of
$41 in net loss for the year ended June 30, 2018.
(ii) Hempco Food and Fiber Inc. (“Hempco”)
On November 14, 2017, the Company acquired a 22.3% ownership interest in Hempco by sub-
scribing to its private placement of 10,558,676 units at $0.3075 per unit for gross proceeds of
$3,247. Each unit consisted of one common share and one warrant exercisable at $0.41 per share
for a period of two years, subject to accelerated expiry if Hempco’s shares trade at or above a
VWAP of $0.65 for any 30-day period. The gross proceeds paid were offset against the $2,301 loan
principal and accrued interest receivable from Hempco.
The Company also entered into a call option agreement to acquire up to an aggregate of
10,754,942 shares from the majority owners of Hempco, which upon exercise would bring the
Company’s total ownership interest in Hempco to over 50.1% on a fully diluted basis. As a result,
due primarily to potential voting rights, the Company has control over Hempco, and the results
of Hempco have been consolidated in these financial statements. The non-controlling interest
Notes to Financial Statements
97
13. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS (CONTINUED)
(a) Business combinations (Continued)
(ii) Hempco Food and Fiber Inc. (“Hempco”) (Continued)
recognized at the acquisition date was recorded at its proportionate share of Hempco’s fair value
of identifiable net assets.
Hempco, a Canadian public company listed on the TSX Venture Exchange, is a producer of indus-
trial hemp products and is developing hemp foods, hemp fiber and hemp nutraceuticals. The
Company anticipates regulations preventing industrial hemp producers from harvesting leaves,
flowers and buds, which contain Cannabidiols (“CBD”) will be revised to allow for processing of
CBDs which Aurora intends to use for the production of capsules, oils and topicals.
At the date of acquisition, management was in the process of gathering the relevant informa-
tion that existed as at the acquisition date to determine the fair value of net identifiable assets
acquired. As such, the initial purchase price was provisionally allocated based on the Company’s
estimated fair value of the identifiable assets acquired and the liabilities assumed on the
acquisition date. Management continues to work on finalizing the purchase price allocation and
identifying the fair value of identifiable net assets acquired.
Net identifiable assets acquired
Non-controlling interest at acquisition (77.7%)
Goodwill
Provisional allocation
at acquisition
$
7,499
(6,503)
2,251
3,247
Adjustments
$
(731)
568
163
-
Adjusted
balance
$
6,768
(5,935)
2,414
3,247
Goodwill represents expected synergies, future income and growth, and other intangibles that do
not qualify for separate recognition. None of the goodwill arising on this acquisition is expected to
be deductible for tax purposes.
If the acquisition had been completed on July 1, 2017, the Company estimates that it would have
recorded an increase of $305 in revenues and an increase of $329 in net loss based on its 22.3%
initial interest in Hempco upon obtaining control.
Non-controlling interest
Non-controlling interest has been recognized at the non-controlling interest’s proportionate
share of the acquiree’s net assets. On March 22, 2018 and May 7, 2018, the Company increased
its ownership interest in Hempco to 35.12% and 52.3% through the exercise of 10,558,676 share
purchase warrants at $0.41 for a cost of $4,329, and the exercise of its call option to purchase
10,754,942 shares from two founders at $0.40 per share for a cost of $4,302, respectively. As
a result, the non-controlling interest was reduced proportionately for Aurora’s increase in
ownership. The $1,941 difference between the $2,361 proportionate change in non-controlling
interest and the $4,302 fair value of consideration paid was recognized in equity attributable to
the Aurora. The $4,329 fair value consideration paid for the exercise of Hempco warrants was
eliminated upon consolidation.
98
Aurora Cannabis Inc.
2018 Annual Report
13. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS (CONTINUED)
(a) Business combinations (Continued)
(ii) Hempco Food and Fiber Inc. (“Hempco”) (Continued)
The following is a continuity of Hempco’s non-controlling interest:
Balance, June 30, 2017
Non-controlling interest arising on acquisition of Hempco
Non-controlling interest relating to outstanding Hempco vested share options and warrants at acquisition (1)
Non-controlling interest relating to exercised Hempco share options and warrants (1)
Non-controlling interest transferred to Aurora for increase in ownership
Share of loss for the year
Balance, June 30, 2018
$
-
2,905
3,030
3,649
(2,361)
(2,376)
4,847
(1) As at the acquisition date of November 14, 2017, directors, officers, employees and consultants of Hempco held
options to purchase 2,851,000 common shares of Hempco which expire between April 2019 and April 2022, of which
777,917 of the outstanding stock options had vested. Hempco also had 2,505,120 warrants outstanding exercisable
into common shares which expire between November 2017 and March 2019.
$3,030 represents the market-based measure of these vested options and warrants in accordance with IFRS at the
date of acquisition. During the year ended June 30, 2018, the Company recognized share-based payments of $1,519
for Hempco’s stock options vested during the period from the date of acquisition.
During the year ended June 30, 2018, 667,000 stock options and 12,850,709 warrants were exercised into common
shares of Hempco. Of the 12,850,709 warrants exercised, 10,558,676 were exercised by Aurora. Accordingly, the
Company recognized total stock option reserves of $1,738 and warrant reserves of $588 which were allocated to
non-controlling interest (Note 19(b)(iv)).
(iii) Larssen Ltd. (“Larssen”)
On December 4, 2017, the Company, through its wholly-owned subsidiary, Aurora Larssen
Projects Inc., completed the acquisition of Larssen, a Canadian company that provides consulting
on the design, engineering and construction oversight for advanced greenhouse cultivation
facilities. The Company brought Larssen’s expertise in-house to construct Aurora’s production
facilities as well as facilities for the Company’s strategic partners.
The Company acquired all of the issued and outstanding shares of Larssen for aggregate consid-
eration of $3,500 cash. As part of the acquisition agreement, an aggregate of $4,000 gross cash
contingent consideration is to be paid out on the first and second anniversaries of the acquisition
date subject to the continued employment of the President and Owner of Larssen. Additionally,
the acquisition agreement included an aggregate $6,000 gross project contingent consideration
to be paid out on achievement of future performance milestones related to construction projects
completed by Larssen. The project contingent consideration can be satisfied at the election of
Aurora in cash or common shares based on the VWAP of the Company’s shares for the first
five trading days of the next calendar year when a milestone is met. Both the cash and project
contingent consideration are accounted for as post-combination services and expensed through
profit and loss. During the year ended June 30, 2018, the Company accrued $1,250 compensa-
tion expense for the cash contingent consideration. None of the project milestones were met at
June 30, 2018.
Notes to Financial Statements
99
13. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS (CONTINUED)
(a) Business combinations (Continued)
(iii) Larssen Ltd. (“Larssen”) (Continued)
The transaction was accounted for as a business combination. At the date of acquisition,
management was in the process of gathering the relevant information that existed as at the
acquisition date to determine the fair value of net identifiable assets acquired. As such, the initial
purchase price was provisionally allocated based on the Company’s estimated fair value of the
identifiable assets acquired and the liabilities assumed on the acquisition date. Subsequently,
the Company finalized the purchase price allocation and has adjusted the fair value of contingent
consideration. Accordingly, the purchase price allocation has been retrospectively adjusted to
reflect changes to the assets acquired and liabilities assumed at the acquisition date as follows:
Net identifiable assets acquired
Goodwill
Provisional allocation
at acquisition
$
-
9,724
9,724
Adjustments
$
-
(6,224)
(6,224)
Final
$
-
3,500
3,500
Goodwill represents expected operational synergies, future income and growth, and other intan-
gibles that do not qualify for separate recognition. None of the goodwill arising on this acquisition
is expected to be deductible for tax purposes.
For the year ended June 30, 2018, Larssen generated revenues of $4,218 and accounted for
$3,000 in net income since December 4, 2017.
(iv) CanniMed Therapeutics Inc. (“CanniMed”)
On March 15, 2018, the Company acquired an 87.2% ownership interest in CanniMed pursuant
to an offer (the “Offer”) to acquire all of the issued and outstanding CanniMed Shares not owned
by Aurora. The Offer provided CanniMed shareholders with the right to elect to receive for each
CanniMed share:
(a)
(b) $0.43 in cash; or
(c)
any combination of common shares and cash, subject to proration of a maximum aggregate
cash amount of $140,000.
3.40 common shares of Aurora;
Total consideration paid upon acquisition of control was $837,853 comprised of $130,979 cash
and 62,833,216 common shares with a fair value of $706,874. The Company acquired CanniMed to
increase production capacity, international presence, research and development portfolio, patient
count and revenue growth. CanniMed is a Canadian company previously listed on the TSX and is
in the business of production and distribution of medical cannabis pursuant to the ACMPR.
At the date of acquisition, management was in the process of gathering the relevant informa-
tion that existed as at the acquisition date to determine the fair value of net identifiable assets
acquired. As such, the initial purchase price was provisionally allocated based on the Company’s
estimated fair value of the identifiable assets acquired and the liabilities assumed on the acquisi-
tion date. Management continues to work on finalizing the purchase price allocation for the fair
value of intangible assets acquired and the allocation of goodwill.
100
Aurora Cannabis Inc.
2018 Annual Report
13. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS (CONTINUED)
(a) Business combinations (Continued)
(iv) CanniMed Therapeutics Inc. (“CanniMed”) (Continued)
Net identifiable assets acquired
Fair value of previously held equity interest (Note 8(b))
Non-controlling interest at acquisition (12.8%)
Goodwill
Provisional allocation
at acquisition
$
54,204
(26,567)
(6,971)
817,187
837,853
Adjustments
$
162,421
-
(25,615)
(136,806)
-
Adjusted
Balance
$
216,625
(26,567)
(32,586)
680,381
837,853
Goodwill represents expected synergies, future income and growth, and other intangibles that do
not qualify for separate recognition. None of the goodwill arising on this acquisition is expected to
be deductible for tax purposes.
On both a consolidated basis and stand-alone entity basis before the elimination of intercompany
transactions, for the year ended June 30, 2018, CanniMed generated $6,715 in revenues and
accounted for $3,250 in net and comprehensive loss since March 15, 2018. If the acquisition had
been completed on July 1, 2017, the Company estimates that it would have recorded an increase
of $11,710 in revenues and an increase of $37,640 in net loss based on its initial 87.2% interest
in CanniMed.
Non-controlling interest
Non-controlling interest has been recognized at the non-controlling interest’s proportionate share
of CanniMed’s fair value of identifiable net assets. On March 26, 2018 and May 1, 2018, the Company
increased its ownership interest in CanniMed by 8.7% and 4.1%, respectively, and obtained 100%
interest in CanniMed. The Company paid $106,214 for the additional 12.8% interest comprised of
$14,304 in cash and 9,913,630 common shares of Aurora with a fair value of $91,910. As a result,
the non-controlling interest was reduced proportionately for Aurora’s increase in ownership. The
$73,573 difference between the $32,641 proportionate change in non-controlling interest and the
$106,214 fair value of consideration paid was recognized in equity attributable to the Aurora.
The following is a continuity of CanniMed’s non-controlling interest:
Balance, June 30, 2017
Non-controlling interest arising on acquisition of CanniMed
Non-controlling interest relating to outstanding CanniMed vested share options at acquisition (1)
Non-controlling interest relating to exercised CanniMed share options (1)
Non-controlling interest adjustment for Aurora’s increase in ownership
Share of income in the period
Balance, June 30, 2018
$
-
32,568
18
47
(32,641)
8
-
(1) As at the March 15, 2018 acquisition date, a CanniMed employee held fully vested options to purchase 10,000 CanniMed
common shares expiring October 31, 2018. $18 represents the market-based measure of these vested options in
accordance with IFRS at the date of acquisition. During the year ended June 30, 2018, the remaining 10,000 stock
options were exercised into CanniMed common shares and accordingly, the Company recognized total stock option
reserves of $47 which was allocated to the non-controlling interest.
Notes to Financial Statements
101
13. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS (CONTINUED)
(a) Business combinations (Continued)
(iv) CanniMed Therapeutics Inc. (“CanniMed”) (Continued)
At June 30, 2018, CanniMed held $30,360 current assets, $34,833 non-current assets,
$4,042 current liabilities and $8,986 non-current liabilities before the elimination of
intercompany transactions.
Completed during the year ended June 30, 2017
Consideration paid
Cash
Common shares
Loan
Patient milestones achieved
Cash
Common shares
Other liabilities assumed
Contingent consideration
Net identifiable assets (liabilities) acquired
Cash
Accounts receivables
Inventories
Prepaid expenses and deposits
Office, furniture, equipment
Intangible assets
Customer relationships
Permits and licenses
Accounts payable and accruals
Deferred revenue
Deferred tax liability
Purchase price allocation
Net identifiable assets acquired
Goodwill
Net cash outflows
Cash consideration paid
Bank overdraft (cash acquired)
Acquisition costs expensed
Year ended June 30, 2017
Year ended June 30, 2018
Net accounts receivables acquired
Gross contractual receivables acquired
Receivables expected to be uncollectible
Net accounts receivables acquired
CanvasRx
(v)
$
Pedanios
(vi)
$
1,825
-
450
1,575
11,440
18
21,819
37,127
-
251
-
-
-
4,250
-
4,501
(109)
(939)
(836)
2,617
2,617
34,510
37,127
3,400
18
3,418
1,022
884
251
-
251
3,019
20,709
-
-
-
-
-
23,728
743
358
328
6
13
-
22,544
23,992
(264)
-
(6,590)
17,138
17,138
6,590
23,728
3,019
(743)
2,276
243
28
358
-
358
Total
$
4,844
20,709
450
1,575
11,440
18
21,819
60,855
743
609
328
6
13
4,250
22,544
28,493
(373)
(939)
(7,426)
19,755
19,755
41,100
60,855
6,419
(725)
5,694
1,265
912
609
-
609
(v) CanvasRx Inc. (“CanvasRx”)
On August 17, 2016, the Company completed the acquisition of all of the issued and outstanding
shares of CanvasRx pursuant to a Share Purchase Agreement dated August 9, 2016, as amended
and restated on August 16, 2016 for a total consideration of $37,127 comprised of $1,825 cash,
$11,440 fair value of 17,875,000 common shares and $1,575 cash for performance milestones
achieved related to patients, $450 loan to CanvasRx, $18 other liabilities assumed and $21,819
contingent consideration. The Company is indemnified from any tax liability arising from
pre-acquisition transactions of CanvasRx through adjustments to the purchase consideration.
102
Aurora Cannabis Inc.
2018 Annual Report
13. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS (CONTINUED)
(a) Business combinations (Continued)
(v) CanvasRx Inc. (“CanvasRx”) (Continued)
Goodwill represents the expected benefit of future market share, future income growth, and
other intangibles that do not qualify for separate recognition. None of the goodwill arising on this
acquisition is deductible for tax purposes.
Contingent consideration represents the estimated discounted value of the $26,750 gross consid-
eration to be paid out over three years on achievement of future performance milestones related
to new counseling rooms opened, patient accruals and revenue targets. This consideration may
be satisfied, at the Company’s sole discretion, in cash or common shares at a 15% discount to
the market price at the date of issuance, unless the market price of the Company’s share is $0.47
or below, at which point the consideration is convertible into a fixed number of shares. In any
case, the issuance of the Company’s shares should not result in former CanvasRx shareholders
accumulating 50% or more of the Company’s shares. If the consideration payments cannot be
satisfied in cash and the issuance of shares would result in the former shareholders of CanvasRx
accumulating 50% or more of the Company’s shares, a convertible debenture will be issued.
During the year ended June 30, 2018, certain patient and counselling room performance mile-
stones were achieved, and the Company paid $Nil cash (2017 – $2,608) and issued 5,318,044
shares (2017 – 2,926,103 shares) at a weighted average price of $2.71 per share (2017 – $2.532
per share) to the former shareholders of CanvasRx. As of June 30, 2018, the fair value of
remaining contingent consideration was $5,884 (2017 - $13,221).
The Company acquired CanvasRx to access its database on cannabis strains and related efficacy
data, as well as information on physician preferences and ordering patterns. CanvasRx is a coun-
seling and outreach service provider with over 24 physical locations in the provinces of Ontario
and Alberta, Canada. The transaction was accounted for as a business combination.
For the year ended June 30, 2017, CanvasRx accounted for $1,702 in net loss since August 17,
2016, including revenues of $2,145. If the acquisition had been completed on July 1, 2016, the
Company estimates it would have recorded an increase of $159 in revenues and an increase
of $920 in net loss for the year ended June 30, 2017. Acquisition costs of $884 incurred in the
current year (2017 - $1,022) related to certain contingent consideration and post-closing costs
were excluded from the consideration transferred and were recognized as an expense in the
current period.
(vi) Pedanios GmbH (“Pedanios”), Renamed Aurora Deutschland GmbH (“Aurora Deutschland”)
On May 30, 2017, the Company completed the acquisition of Pedanios, a registered wholesale
importer, exporter and distributor of medical cannabis in Germany. The acquisition positions the
Company to seize on opportunities in Germany and the EU’s emerging cannabis industry. The
Company acquired all of the issued and outstanding shares of Pedanios for a total consideration
of $23,728 comprised of €2,000 cash and 8,316,782 common shares with a fair value of $20,709.
The transaction was accounted for as a business combination.
Goodwill reflects the deferred tax liability recognized for all taxable temporary differences. None
of the goodwill arising on this acquisition is deductible for tax purposes.
For the year ended June 30, 2017, Pedanios accounted for $294 in net loss since May 30, 2017,
including revenues of $439. If the acquisition had been completed on July 1, 2016, the Company
estimates it would have recorded an increase of $1,702 in revenues and an increase of $18 in net
loss for the year ended June 30, 2017.
Notes to Financial Statements
103
13. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS (CONTINUED)
(b) Asset acquisitions
Completed during the year ended
Consideration paid
Cash paid
Common shares issued
Cash acquisition costs paid
Shares issued for acquisition costs
Loan settlement
Contingent consideration
Net identifiable assets (liabilities) acquired
Cash
Accounts receivables
Property, plant and equipment
Intangible assets – Permits and licenses
Accounts payable and accruals
June 30, 2018
H2
(i)
$
June 30, 2017
Peloton
(ii)
$
-
15,283
636
-
3,000
14,957
33,876
205
369
8,304
27,165
36,043
(2,167)
33,876
4,717
1,486
2,186
905
-
-
9,294
-
-
4,846
4,448
9,294
-
9,294
(i) H2 Biopharma Inc. (“H2” or “Aurora Eau”)
On November 30, 2017, the Company acquired 100% of the net assets of H2 for a total consid-
eration of $33,876 comprised of 1,910,339 common shares with a fair value of $15,283, of which
181,622 were placed in escrow, settlement of $3,000 loan receivable, $14,957 contingent con-
sideration payable and $636 acquisition costs. The contingent consideration payable represents
the discounted value of the $15,028 gross consideration to be paid out over a five-year period
on achievement of future performance milestones related to completing the construction of
the facility and obtaining the relevant licenses to cultivate and sell cannabis. This consideration
is to be paid in common shares based on the VWAP of the Company’s shares for the last five
trading days immediately prior to the Company confirming that the particular milestone has been
achieved. On closing, the Company issued and deposited 2,878,934 common shares into escrow
for the contingent consideration. As of June 30, 2018, the fair value of contingent consideration
was $14,207 (Note 28(e)).
During the year ended June 30, 2018, 238,044 common shares with a fair value of $1,904 were
released from escrow upon the achievement of milestones (Note 19(b)(ii) and 19(c)).
At acquisition, H2 was completing a purpose-built 48,000 square foot cannabis production facility,
which upon completion, is projected to produce approximately 4,500 kilograms of cannabis per
annum. The facility is located on 46 acres of land located in Lachute, Quebec which H2 has the
right to acquire for $136.
The facility, known as Aurora Eau, completed construction and received both its cultivation and
sales license from Health Canada in September 2018.
(ii) Peloton Pharmaceuticals Inc. (“Peloton” or “Aurora Vie”)
On April 28, 2017, the Company, through its wholly-owned subsidiary, 10094595 Canada Inc.,
acquired 100% of the net assets of Peloton, a late-stage ACMPR applicant, out of bankruptcy pro-
tection. The transaction was accounted for as an asset acquisition. The Company acquired all of
the common shares of Peloton for a total consideration of $9,294 comprised of 573,707 common
104
Aurora Cannabis Inc.
2018 Annual Report
13. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS (CONTINUED)
(b) Asset acquisitions (Continued)
(ii) Peloton Pharmaceuticals Inc. (“Peloton” or “Aurora Vie”) (Continued)
shares with a fair value of $1,486, $4,717 cash, and acquisition costs of $3,091 of which $2,186
was paid in cash and $905 was paid through the issuance of 325,518 common shares.
In October 2017, the Company completed construction of the former Peloton 40,000 square foot
cannabis production facility located in Pointe Claire, Quebec. The facility, known as Aurora Vie,
received its cultivation and sales license from Health Canada on October 27, 2017 and June 29,
2018, respectively.
14. CONTROLLING INTEREST IN AURORA NORDIC CANNABIS A/S (“AURORA NORDIC”)
On February 12, 2018, the Company and Alfred Pederson & Søn (“APS”) formed Aurora Nordic, a
company located in Odense, Denmark. Pursuant to an agreement with APS, the Company and APS
contributed $58 (DKK 255,000) and $56 (DKK 245,000) for the initial capital contribution, resulting in
51% and 49% ownership interest, respectively. $100,000 in total additional capital is to be contrib-
uted on a pro rata basis to fund the design, development and construction of a production facility
in Denmark. Based on majority voting rights and other qualitative factors, the Company controls
Aurora Nordic and has consolidated its results in these financial statements.
Aurora Nordic is in the business of cultivation, production, distribution and sale of medical cannabis.
Aurora Nordic is retrofitting an existing 100,000 square foot greenhouse and will be constructing a
new 1,000,000 square foot production facility.
Non-controlling interest
The non-controlling interest recognized at inception was recorded at its proportionate share of
Aurora Nordic’s initial capital contribution.
Balance, June 30, 2017
Non-controlling interest on initial capital contribution
Share of profit (loss) for the period
Share of other comprehensive income (loss) for the period
Balance, June 30, 2018
$
-
56
(337)
(4)
(285)
As of June 30, 2018, Aurora Nordic held $419 current assets, $2,896 non-current assets, $993
current liabilities, and $2,905 non-current liabilities before the elimination of intercompany trans-
actions. For the year ended June 30, 2018, Aurora Nordic generated $nil revenues and incurred
$688 net and comprehensive loss before the elimination of intercompany transactions.
Notes to Financial Statements
105
15. ASSETS HELD FOR DISTRIBUTION TO OWNERS
Accounting Policy
Non-current assets held for sale and disposal groups are presented separately in the current section of the
balance sheet when management is committed to immediately distributing the asset or disposal group in
its present condition, and this distribution is highly probable and expected to be completed within one year.
Immediately before the initial classification of the assets and disposal groups as held for sale or for
distribution, the carrying amounts of the assets, or all the assets and liabilities in the disposal groups, are
measured in accordance with the applicable accounting policy:
Current assets
Loans receivable from AHL
SubTerra assets
Current liabilities
Amortized cost
Loans and receivable at amortized cost
Fair value at initial recognition and subsequently at
amortized cost
Other financial liabilities at amortized cost
Assets held for sale and disposal groups are subsequently measured at the lower of their carrying amount
and fair value less cost to sell. Assets held for sale are no longer amortized or depreciated.
Significant Judgement
The Company used judgement in estimating the fair value of the SubTerra assets at initial recognition. In
determining the fair value of the revenue royalty, management exercised judgement in determining the
likelihood of SubTerra generating revenues from the sale of cannabis-based products. The fair value of the
annuity receivable was estimated using the effective interest method using a ten-year corporate debt yield
at the measurement date.
In June 2018, the Company began reorganizing the Company for the spin-out of ACI and its
United States (“U.S.”) assets, and filed a prospectus for the listing of ACI on the Canadian Stock
Exchange (“CSE”). As part of the reorganization, on June 13, 2018, the Company completed a
series of intercorporate transactions involving Aurora and its subsidiaries resulting in Aurora
holding a direct interest in 100% of the outstanding shares and warrants of ACI, and ACI holding
all of the U.S. assets of Aurora and its subsidiaries, consisting of the following:
• a 50% joint venture interest in Australis Holdings (Note 12(a)); and
• the SubTerra assets (Note 12(d)).
On June 14, 2018, the Company and ACI entered into a Funding Agreement pursuant to which
Aurora advanced $500,000 to ACI, in consideration for which ACI provided Aurora with a Restricted
Back-in Right, by issuing to Aurora:
(i)
(ii)
a warrant to purchase a number of ACI shares equal to 20% of the issued and outstanding
shares as of the date on which ACI shares commence trading on the CSE, exercisable for a
period of ten years from the date of issue at an exercise price of $0.20 per share; and
a warrant to purchase a number of ACI shares equal to 20% of the issued and outstanding
shares as of the date of exercise, exercisable for a period of ten years from the date of issue
at an exercise price equal to the five-day volume weighted average trading price of ACI’s
shares on the CSE or such other stock exchange on which the shares may then be listed.
Aurora will be prohibited from exercising the Restricted Back-in Right unless all of ACI’s business
operations in the U.S. are legal under applicable federal and state laws, and Aurora has received the
consent of the TSX and any other stock exchange on which Aurora may be listed, as required.
106
Aurora Cannabis Inc.
2018 Annual Report
15. ASSETS HELD FOR DISTRIBUTION TO OWNERS (CONTINUED)
The assets reclassified for distribution to owners at June 30, 2018 are part of the medical cannabis
segment and is comprised of the following:
Total and net assets held for distribution to owners
Current assets
Loans receivable from AHL
SubTerra assets
Note
June 30, 2018
$
June 30, 2017
$
12(a)
12(d)
2
3,020
1,400
4,422
-
1,736
-
1,736
Subsequent to June 30, 2018, the Company completed the spin-out of ACI (Note 31).
16. INTANGIBLE ASSETS AND GOODWILL
Accounting Policy
Intangible assets
Intangible assets are recorded at cost less accumulated amortization and impairment losses, if any.
Intangible assets acquired in a business combination are measured at fair value at the acquisition date.
Amortization of definite life intangibles is provided on a straight-line basis over their estimated useful
lives, which do not exceed the contractual period, if any, over the following terms:
Customer relationships
2 – 7 years
Patents
10 years
Health Canada licenses
Useful life of the facility or lease term
The estimated useful lives, residual values, and amortization methods are reviewed at each year end,
and any changes in estimates are accounted for prospectively. Intangible assets with an indefinite life or
not yet available for use are not subject to amortization. The Company’s indefinite life intangible assets
are comprised of brands and the Aurora Deutschland licenses and permits. The Aurora Deutschland
licenses and permits do not expire, and as such, there is no foreseeable limit to the period over which
these assets are expected to generate future cash inflows to the Company.
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
development to use or sell the asset. Other development expenditures are recognized as research and
development expenses on the consolidated statement of comprehensive income (loss) as incurred.
Capitalized deferred development costs are internally generated intangible assets.
Goodwill
Goodwill represents the excess of the purchase price paid for the acquisition of an entity over the fair
value of the net tangible and intangible assets acquired. Goodwill is allocated to the cash generating unit
(“CGU”) or group of CGUs which are expected to benefit from the synergies of the combination.
Impairment of intangible assets and goodwill
Goodwill and intangible assets with an indefinite life or not yet available for use are tested for impair-
ment annually, and whenever events or circumstances make it more likely than not that an impairment
may have occurred, such as a significant adverse change in the business climate or a decision to sell or
dispose all or a portion of a reporting unit. Finite life intangible assets are tested when there is an indica-
tion of impairment.
Notes to Financial Statements
107
16. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
Accounting Policy (Continued)
Impairment of intangible assets and goodwill (Continued)
The Company has selected June as our annual test date. For the purpose of impairment testing, goodwill
and indefinite life intangible assets have been allocated to CGUs representing the lowest level that the
assets are monitored for internal reporting purposes. Goodwill and indefinite life intangible assets are
tested for impairment by comparing the carrying value of each CGU containing the assets to its recover-
able amount. An impairment loss is recognized for the amount by which the asset’s carrying amount
exceeds it recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs
of disposal and value-in-use.
Impairment losses recognized in respect of a CGU are first allocated to the carrying value of goodwill
and any excess is allocated to the carrying amount of assets in the CGU. Any impairment is recorded
in profit and loss in the period in which the impairment is identified. A reversal of an impairment loss
for a CGU is allocated to the assets of the unit, except for goodwill, pro rata with the carrying amount of
those assets. In allocating a reversal of an impairment loss, the carrying amount of an asset shall not
be increased above the lower of its recoverable amount and the carrying amount that would have been
determined had no impairment loss ben recognized for the asset in prior period. Impairment losses on
goodwill are not subsequently reversed.
Significant Judgement
Amortization of intangible assets is dependent upon estimates of useful lives and residual values which are
determined through the exercise of judgement.
CGUs are determined based on the smallest identifiable group of assets that generates cash inflows that
are largely independent of cash inflows from other assets or group of assets. Management has exercised
judgment in this assessment and determined the Company’s CGUs to be: the production and sale of
medical cannabis; patient counselling services; design, engineering and construction consulting services;
the production and sale of indoor cultivators; and the production and sale of hemp related food products.
108
Aurora Cannabis Inc.
2018 Annual Report
16. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
The following is a continuity of intangible assets and goodwill:
Definite life intangibles subject to amortization
Customer
Relation-
ships
Notes
13(a)(i)(iv)
(v)
$
Permits
and
Licenses
Notes
13(a)(iv), (b)
(i)(ii)
$
Total
Definite Life
Intangibles
$
Patents
Notes
13(a)(i)(iv)
$
-
4,250
4,250
7,105
11,355
-
-
-
2,224
2,224
-
4,293
4,293
92,421
96,714
-
-
-
1,943
1,943
-
-
-
2,221
2,221
-
-
-
89
89
-
8,543
8,543
101,747
110,290
-
-
-
4,256
4,256
Indefinite life intangibles
Permits
and
Licenses
Note 13(a)
(vi)
$
Total
Indefinite
Life
Intangibles
$
-
22,544
22,544
-
22,544
-
22,544
22,544
127,654
150,198
Brand
Notes 13(a)
(i)(iv)
$
-
-
-
127,654
127,654
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
Intangible
Assets
$
-
31,087
31,087
229,401
260,488
-
-
-
4,256
4,256
Goodwill
Note
13(a)
$
-
41,100
41,100
687,950
729,050
-
-
-
-
-
Total
Intangible
Assets and
Goodwill
$
-
72,187
72,187
917,351
989,538
-
-
-
4,256
4,256
4,250
9,131
4,293
94,771
-
2,132
8,543
106,034
-
127,654
22,544
22,544
22,544
150,198
31,087
256,232
41,100
729,050
72,187
985,282
Cost
Balance, June 30, 2016
Additions from acquisitions
Balance, June 30, 2017
Additions from acquisitions
Balance, June 30, 2018
Accumulated amortization
Balance, June 30, 2016
Amortization
Balance, June 30, 2017
Amortization
Balance, June 30, 2018
Net book value
June 30, 2017
June 30, 2018
Permits and licenses of $22,544 were acquired from Pedanios (Note 13(a)(vi)) and are classified
as indefinite life intangible assets as they do not have an expiration date. The remaining permits
and license are amortized over the life of the production facilities when they are available for use
as intended.
The $22,544 licenses and permits acquired from Pedanios and $127,000 of the brand indefinite
life intangibles acquired from CanniMed (Note 13(a)(iv)) are allocated to the group of CGUs that
comprise the medical cannabis segment. The remaining $654 of the brand intangibles are allocated
to the indoor cultivation CGU (Note 13(a)(i)).
Amortization of intangible assets is included in depreciation and amortization in the statement of
comprehensive income (loss).
For the purposes of impairment testing, goodwill associated with the B.C. Northern Lights
Enterprises Ltd. and Urban Cultivator Inc. acquisitions belong to the indoor cultivation CGU,
goodwill associated with the Hempco Food and Fiber Inc. acquisition belong to the hemp related
food products CGU, and goodwill associated for all remaining acquisitions belong to the group of
CGUs that comprise the medical cannabis segment. Of the $729,050 goodwill balance at June 30,
2018, $724,981 is allocated to the medical cannabis segment. The remaining $4,069 balance in
goodwill is attributable to the indoor cultivation and hemp related food product CGUs.
The Company estimated the recoverable amount of goodwill and indefinite life intangible assets
based on the value-in-use method which was higher than the carrying value at June 30, 2018. The
key assumptions used in the calculation of the recoverable amount include sales growth per year,
changes in cost of sales and capital expenditures based on internal forecasts which were projected
out 3 years with a terminal growth rate of 2%. The range of weighted average cost of capital was
determined to be approximately 15% - 25% based on a risk-free rate, an equity risk premium
Notes to Financial Statements
109
16. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
adjusted for betas of comparable publicly traded companies, an unsystematic risk premium, and an
after-tax cost of debt. The Company believes that a slight change in the key assumptions would not
cause the recoverable amount to decrease below the carrying value.
17. CONVERTIBLE DEBENTURES
Accounting Policy
Convertible notes are compound financial instruments which are accounted for separately by their compo-
nents: 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.
Transaction costs are apportioned to the debt liability and equity components in proportion to the allocation
of proceeds as a reduction to the carrying amount of the liability and equity component.
The liability component of the convertible notes was valued using Company specific interest rates assuming
no conversion features existed. The resulting 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.
Significant Judgement
The identification of convertible note components is based on interpretations of the substance of the
contractual arrangement and therefore requires judgement 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.
Balance, June 30, 2016
Issued
Equity portion
Conversion
Interest paid
Financing fees
Accretion
Accrued interest
Balance, June 30, 2017
Issued
Equity portion
Conversion
Interest paid
Financing fees
Accretion
Accrued interest
Balance, June 30, 2018
May 2016
(a)
$
1,281
-
-
(2,135)
(2)
637
117
102
-
-
-
-
-
-
-
-
-
Sep 2016
(b)
$
-
15,000
(2,107)
(12,605)
(55)
(606)
241
132
-
-
-
-
-
-
-
-
-
Nov 2016
(c)
$
-
25,000
(5,271)
(16,745)
(989)
(899)
1,277
996
3,369
-
-
(3,688)
(148)
-
218
249
-
May 2017
(d)
$
-
75,000
(13,209)
(122)
(849)
(2,622)
1,094
875
60,167
-
-
(63,102)
(2,131)
-
2,768
2,298
-
Nov 2017
(e)
$
-
-
-
-
-
-
-
-
-
115,000
(39,408)
(73,082)
(1,025)
(2,680)
809
1,023
637
Mar 2018
(f)
$
-
-
-
-
-
-
-
-
-
230,000
(39,530)
(195)
(3,604)
(6,455)
6,845
3,830
190,891
Total
$
1,281
115,000
(20,587)
(31,607)
(1,895)
(3,490)
2,729
2,105
63,536
345,000
(78,938)
(140,067)
(6,908)
(9,135)
10,640
7,400
191,528
(a) In May 2016, the Company completed a non-brokered private placement of 10% unsecured convertible debentures in the
principal amount of $2,050. The debentures were convertible into common shares of the Company at $0.53 per share for
a period of 18 months. In September 2016, the Company issued an aggregate of 5,674,542 shares on the conversion of
$2,050 principal amount of debentures (Note 19(b)(iv)).
110
Aurora Cannabis Inc.
2018 Annual Report
17. CONVERTIBLE DEBENTURES (CONTINUED)
(b) On September 28, 2016, the Company closed a non-brokered private placement of 10% unsecured convertible debentures
in the aggregate principal amount of $15,000. The debentures were convertible into common shares of the Company at a
price of $1.15 per share subject to a forced conversion if the VWAP of the Company’s common shares equals or exceeds
$2.00 per share for 10 consecutive trading days. On closing, the Company paid the Agent a commission of $600 and legal
fees and expenses of $105.
On October 20, 2016, the Company converted all the debentures and accrued interest pursuant to the forced conversion
related to the VWAP mentioned above. During the period ended June 30, 2017, the Company issued 13,110,184 common
shares on the conversion of $15,000 principal amount of debentures (Note 19(b)(iv)).
(c) On November 1, 2016, the Company completed a brokered private placement of two-year unsecured convertible
debentures in the aggregate principal amount of $25,000. The debentures bore interest at 8% per annum, payable semi-
annually. The principal amount of the debentures was convertible into common shares of the Company at a price of $2.00
per share subject to a forced conversion if the VWAP of the Company’s common shares equaled or exceeded $3.00 per
share for 10 consecutive trading days. On closing, the Company paid the Agent a commission of $1,000 and legal fees and
expenses of $139.
On November 6, 2017, the Company elected to exercise its right pursuant to the forced conversion and converted all
of the principal amount outstanding of the remaining debentures. During the year ended June 30, 2018, the Company
issued 2,310,000 common shares (2017 – 10,190,000 shares) on the conversion of $4,620 principal amount of debentures
(2017 - $20,380) (Note 19(b)(iv)).
(d) On May 2, 2017, the Company completed a private placement of two-year unsecured convertible debentures in the
aggregate principal amount of $75,000. The debentures bore interest at 7% per annum, payable semi-annually. The
debentures were convertible into common shares of the Company at a price of $3.29 per share subject to a forced
conversion if the VWAP of the Company’s common shares exceeded $4.94 per share for 10 consecutive trading days.
On closing, the Company paid the agent a commission of $2,893 and legal fees and expenses of $289.
On November 16, 2017, the Company elected to exercise its right pursuant to the forced conversion and converted all
of the principal amount outstanding of the remaining debentures. During the year ended June 30, 2018, the Company
issued 22,750,747 common shares (2017 – 45,593 shares) on the conversion of $74,850 principal amount of debentures
(2017 - $150) (Note 19(b)(iv)).
(e) On November 28, 2017, the Company completed an offering of 115,000 special warrants exercisable into convertible
debentures for gross proceeds of $115,000. The Company paid financing fees of $4,077 comprised of underwriters’
commissions of $3,734, legal fees of $304 and regulatory and transfer agent fees of $39.
On January 12, 2018, the special warrants were exercised into $115,000 principal amount of convertible debentures. The
debentures are unsecured, bear interest at 6% per annum and mature on November 28, 2022. The principal amount of
the debentures is convertible into common shares of the Company at $6.50 per share subject to a forced conversion if
after 4 months and 1 day following closing, the VWAP of the Company’s common shares equals or exceeds $9.00 per
share for 10 consecutive trading days.
During the year ended June 30, 2018, the Company issued 17,394,146 common shares on partial conversion of $113,062
principal amount of debentures (Note 19(b)(iv)).
(f) On March 9, 2018, the Company completed a private placement of two-year unsecured convertible debentures in the
aggregate principal amount of $230,000. The debentures bear interest at 5% per annum, payable semi-annually. The
debentures are convertible into common shares of the Company at a price of $13.05 per share subject to a forced
conversion if the VWAP of the Company’s common shares exceeded $17.00 per share for 10 consecutive trading days. On
closing, the Company paid the agent a commission and expenses of $7,473, legal fees of $304 and regulatory fees of $18.
During the year ended June 30, 2018, the Company issued 18,542 common shares on partial conversion of $242 principal
amount of debentures (Note 19(b)(iv)).
Notes to Financial Statements
111
18. LOANS AND BORROWINGS
Accounting Policy
Loans and borrowings are classified as other financial liabilities and are measured at fair value at initial
recognition and subsequently at amortized cost. Transactions costs are amortized over the term of
the liability.
A lease of property, plant and equipment is classified as a finance lease if it transfers substantially all the
risks and rewards incidental to ownership to the Company. A lease of property, plant and equipment is
classified as an operating lease whenever the terms of the lease do not transfer substantially all of the risks
and rewards of ownership to the lessee. Finance leases are capitalized at the commencement of the lease
at the lower of the fair value of the leased property and the present value of the minimum lease payments.
Property acquired under a finance lease is depreciated over the shorter of the period of expected use on the
same basis as other similar property, plant and equity or the lease term.
The changes in the carrying value of loans and borrowings are as follows:
Opening balance
Additions
Assumed on acquisition (Note 13(a)(iv))
Principal payments
Ending balance
As at June 30, 2018, the Company had the following loans and borrowings:
Term loans
Debentures
Finance leases
Total loans and borrowings
Current portion
Long-term
(a)
(b)
(c)
June 30,
2018
$
351
-
11,825
(493)
11,683
June 30,
2018
$
9,971
1,264
448
11,683
(2,451)
9,232
June 30,
2017
$
-
374
-
(23)
351
June 30,
2017
$
-
-
351
351
(69)
282
(a) Term loans
The term loans were acquired through the CanniMed acquisition (Note 13(a)(iv)) and consist of
the following:
Capital loan, due for renewal November 2019
(interest rate of Bank Prime Rate plus 1.75%)
Capital loan, payable in blended monthly instalments of $60, due for renewal November 2019
(5.20%, based on Bank Prime Rate plus 1.75% per annum).
Current portion
June 30,
2018
$
June 30,
2017
$
7,800
2,171
9,971
(1,111)
8,860
-
-
-
-
-
The term loans are secured by a general security agreement covering all of CanniMed’s assets.
Subsequent to June 30, 2018, the Company repaid the full balance of the term loans.
112
Aurora Cannabis Inc.
2018 Annual Report
18. LOANS AND BORROWINGS (CONTINUED)
(a) Term loans (Continued)
Covenants
As of June 30, 2018, the Company had met all covenants on its term loans.
(b) Debentures
The debentures were acquired through the CanniMed acquisition (Note 13(a)(iv)) and consist of
the following:
Debentures
Debentures
Current portion
Prescribed
Rate
Maturity Date
5%
12%
December 1, 2018
January 31, 2022
June 30,
2018
$
1,091
173
1,264
(1,138)
126
June 30,
2017
$
-
-
-
-
-
The debentures are secured by all present and after-acquired property of CanniMed and are
subordinate to all of CanniMed’s other loans and borrowings.
(c) Finance leases
In September 2016, the Company entered into finance lease agreements related to three production
equipment transactions totaling $543, of which down payments of $169 were made. The finance
leases are repayable over a period of 3 to 4 years expiring January 2021 and December 2021.
As part of the CanniMed acquisition (Note 13(a)(iv)), the Company acquired a finance lease with
monthly principal payments of $10. All amounts outstanding under this lease are repayable on
demand, unless and until otherwise demanded, in monthly installments of principal plus interest
at prime rate plus 1.00% per annum. Each advance under the finance lease is repayable in full
48 months after the initial advance.
Less than 1 year
Between 1 and 5 years
Total minimum lease payments (Note 29(b))
Less: amount representing interest at approximately 8.19% to 20.26%
Present value of minimum lease payments
Less: current portion
June 30,
2018
$
232
279
511
(63)
448
(202)
246
June 30,
2017
$
108
344
452
(101)
351
(69)
282
Notes to Financial Statements
113
19. SHARE CAPITAL
Accounting Policy
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. 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.
The Company issues share purchase warrants and determines the fair value using the Binomial model.
The fair value of broker warrants are recognized as share issue costs and recorded to reserves.
Significant Judgement
In estimating the fair value of warrants using the Binomial model, management is required to make certain
assumptions and estimates such as the expected life of warrants, volatility of the Company’s future share
price, risk free rate, and future dividend yields. Changes in assumptions used to estimate fair value could
result in materially different results.
(a) Authorized
The authorized share capital of the Company is comprised of the following:
(i)
(ii)
Unlimited number of common voting shares without par value
Each Common Share carries the right to attend and vote at all general meetings of share-
holders. Holders of Common Shares are entitled to receive on a pro rata basis such dividends,
if any, as and when declared by the Board at its discretion from funds legally available for
the payment of dividends and upon the liquidation, dissolution or winding up of the Company
and are entitled to receive on a pro rata basis the net assets of the Company after payment
of debts and other liabilities, in each case subject to the rights, privileges, restrictions and
conditions attaching to any other series or class of shares ranking senior in priority to or on
a pro rata basis with the holders of Common Shares with respect to dividends or liquidation.
The Common Shares do not carry any pre-emptive, subscription, redemption or conversion
rights, nor do they contain any sinking or purchase fund provisions.
Unlimited number of Class “A” Shares each with a par value of $1.00
Class A shares may be issued from time to time in one or more series, and the directors
may fix from time to time before such issue the number of Class A shares of each series
and the designation, rights and restrictions attached thereto including any voting rights,
dividend rights, redemption, purchase or conversion rights, sinking fund or other provi-
sions. The Class A shares rank in priority over Common Shares and any other shares
ranking by their terms junior to the Class A shares as to dividends and return of capital
upon liquidation, dissolution or winding up of the Company or any other return of capital or
distribution of the assets of the Company. No Class A Shares were issued and outstanding.
(iii)
Unlimited number of Class “B” Shares each with a par value of $5.00
Class B shares may be issued from time to time in one or more series, and the direc-
tors may fix from time to time before such issue the number of Class B shares of each
series and the designation, rights and privileges attached thereto including any voting
rights, dividend rights, redemption, purchase or conversion rights, sinking fund or other
114
Aurora Cannabis Inc.
2018 Annual Report
19. SHARE CAPITAL (CONTINUED)
(a) Authorized (Continued)
provisions. The Class B shares rank in priority over Common Shares and any other shares
ranking by their terms junior to the Class B shares as to dividends and return of capital
upon liquidation, dissolution or winding up of the Company or any other return of capital or
distribution of the assets of the Company. No Class B Shares were issued and outstanding.
(b) Issued and outstanding
At June 30, 2018, 568,113,131 common shares (2017 – 366,549,244) were issued and fully paid.
(i) Shares for business combinations, asset acquisitions and investment in associates
During the years ended June 30, 2018 and 2017, the Company issued the following shares for
business combinations, asset acquisitions and investment in associates:
Fiscal 2018
Acquisition of BCNL and UCI
Acquisition of CanniMed
Acquisition of H2
Investment in Capcium
Fiscal 2017
Acquisition of CanvasRx
Acquisition of Pedanios
Acquisition of Peloton
Note
13(a)(i)
13(a)(iv)
13(b)(i)
12(f)
13(a)(v)
13(a)(vi)
13(b)(ii)
Number of
shares
issued Share capital
$
#
89,107
72,746,846
4,789,273
1,144,481
78,769,707
17,875,000
8,316,782
899,225
27,091,007
248
798,784
15,283
10,770
825,085
11,440
20,709
2,391
34,540
(ii) Shares for earn out payments
During the years ended June 30, 2018 and 2017, the Company issued the following shares for
earn out payments:
Fiscal 2018
CanvasRx earn out payments
H2 earn out payments (1)
Fiscal 2017
CanvasRx earn out payments
Note
13(a)(v)
13(b)(i)
Number of
shares
issued Share capital
$
#
5,318,044
-
5,318,044
14,417
1,904
16,321
13(a)(v)
2,926,103
7,408
(1) On November 30, 2017, 3,060,556 common shares were issued for the H2 acquisition and were placed in escrow pending
achievement of milestones. During the year ended June 30, 2018, 238,044 common shares with a fair value of $1,904
were released from escrow upon the achievement of milestones (Note 13(b)(i)).
Notes to Financial Statements
115
19. SHARE CAPITAL (CONTINUED)
(b) Issued and outstanding (Continued)
(iii) Shares for equity financings
During the years ended June 30, 2018 and 2017, the Company completed equity financings and
issued the following shares:
Fiscal 2018
November 2, 2017 (1)
Gross issuance
Cash share issuance costs
Compensation warrants
Fiscal 2017
August 17, 2016 (2)
Gross issuance
Cash share issuance costs
Compensation warrants
February 28, 2017 (3)
Gross issuance
Cash share issuance costs
Compensation warrants
Number of
shares
issued Share capital
$
#
Reserves
$
25,000,000
-
-
25,000,000
57,500,000
-
-
33,337,500
-
-
90,837,500
75,000
(4,361)
(2,285)
68,354
23,000
(1,804)
(1,848)
75,009
(4,479)
(2,782)
87,096
-
-
2,285
2,285
-
-
1,848
-
-
2,782
4,630
(1) The Company issued 25,000,000 units at $3.00 per unit. Each unit consisted of one common share and one warrant
exercisable at a price of $4.00 per share for a period of three years. An aggregate of 1,333,980 compensation warrants
were issued to the underwriters. The compensation warrants are exercisable into one common share at an exercise price
of $3.00 per share and expire on November 2, 2020. The fair value of the compensation warrants at the date of grant was
estimated at $1.71 per warrant based on the following weighted average assumptions: Stock price volatility – 85.49%;
Risk-free interest rate – 1.40%; Dividend yield - 0.00%; and Expected life - 3 years.
(2) The Company issued 57,500,000 subscription receipts in conjunction with the acquisition of CanvasRx. Each subscription
receipt was converted into units of the Company at $0.40 per unit upon the satisfaction of the conditions precedent to
the acquisition. Each unit consisted of one common share and one-half of one common share purchase warrant of the
Company. Each whole warrant is exercisable into one common share of the Company at an exercise price of $0.55 per
share expiring August 9, 2018. A portion of the net proceeds from the Offering was used to satisfy the cash component of
the acquisition. An aggregate of 3,775,000 compensation options were issued to the agents. The compensation options
have the same terms as the private placement and expired August 9, 2018. The fair value of the compensation options at
the date of grant was estimated at $0.33 per warrant based on the following weighted average assumptions: Stock price
volatility - 79%; Risk-free interest rate - 0.70%; Dividend yield - 0.00%; and Expected life - 2 years.
(3) The Company issued 33,337,500 units at $2.25 per unit. Each unit consisted of one common share and one-half of one
share purchase warrant. Each warrant is exercisable into one common share at $3.00 per share for two years, subject to
a forced exercise provision if the Company’s VWAP equals or exceeds $4.50 for 10 consecutive trading days. An aggregate
of 1,865,249 compensation options were issued to the underwriters. The compensation options have the same terms
as the private placement and expire February 28, 2019. The fair value of the compensation options at the date of grant
was estimated at $0.99 per warrant based on the following weighted average assumptions: Stock price volatility - 79%;
Risk-free interest rate - 0.70%; Dividend yield - 0.00%; and Expected life - 2 years.
116
Aurora Cannabis Inc.
2018 Annual Report
19. SHARE CAPITAL (CONTINUED)
(b) Issued and outstanding (Continued)
(iv) Shares for convertible debentures, options, warrants, compensation warrants and RSUs
During the years ended June 30, 2018 and 2017, the Company issued the following shares on the
conversion of convertible debentures, exercise of options, warrants and compensation warrants,
and vesting of restricted share units (“RSUs”):
Fiscal 2018
Conversion of convertible debentures
Exercise of options (1)
Exercise of warrants (2)
Exercise of compensation warrants
Vesting of RSUs
Fiscal 2017
Conversion of convertible debentures
Exercise of options
Exercise of warrants
Exercise of compensation warrants
Note
17(c)-(f)
17(a)-(d)
Number of
shares issued
#
Share capital
$
Reserves
$
42,473,435
4,809,443
43,200,881
1,865,249
127,128
92,476,136
29,020,319
2,001,700
54,936,306
4,084,434
90,042,759
177,127
12,006
136,293
6,051
1,209
332,686
38,037
1,399
28,648
2,966
71,050
(37,061)
(6,175)
(3,680)
(1,854)
(351)
(49,121)
(4,800)
(578)
(2,046)
(1,292)
(8,716)
(1) Included in reserves for the exercise of options is $1,738 reserves for the exercise of 667,000 Hempco stock options
(Note 13(a)(ii)).
(2) Included in reserves for the exercise of warrants is $588 reserves for the exercise of 2,292,033 Hempco warrants,
excluding the warrants exercised by Aurora (Note 13(a)(ii)).
(v) Other shares issued
During the year ended June 30, 2017, the Company also issued the following shares:
Fiscal 2017
Issued for compensation
Performance shares
Issued for loan
Number of
shares issued
#
25,510
20,000,000
50,000
20,075,510
Share capital
$
Reserves
$
13
2,322
24
2,359
(13)
(2,322)
-
(2,335)
(c) Escrow securities
A summary of the status of the escrowed securities outstanding follows:
Balance, June 30, 2016
Issued (Exercised)
Forfeited
Released
Balance, June 30, 2017
Issued
Released
Balance, June 30, 2018
Shares
#
29,812,500
20,000,000
-
(36,875,000)
12,937,500
3,060,556
(13,175,544)
2,822,512
Warrants
#
9,000,000
(8,000,000)
(1,000,000)
-
-
-
-
-
(i)
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. In addition,
warrants at $0.02 per share expiring December 9, 2019 and stock options at $0.001 per
share expiring December 1, 2019 were also subject to the escrow agreement. Under the
Notes to Financial Statements
117
19. SHARE CAPITAL (CONTINUED)
(c) Escrow securities (Continued)
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% were released every six months
thereafter over a period of 36 months. As of June 30, 2018, all of these shares had been
released from escrow.
(ii)
Pursuant to an escrow agreement dated November 30, 2017, 3,060,556 common shares of
the Company were deposited into escrow with respect to the acquisition of H2 (Note 13(b)(i))
The escrowed common shares are to be released upon achievement of certain milestones
relating to the completion of construction of the H2 facility and receipt of relevant licenses
to cultivate and sell medical cannabis.
(d) 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, 2016
Issued
Forfeited
Exercised
Balance, June 30, 2017
Issued
Exercised
Balance, June 30, 2018
Warrants
#
28,750,590
50,173,466
(1,000,000)
(54,936,306)
22,987,750
27,355,709
(43,200,881)
7,142,578
Weighted average
exercise price
$
0.40
1.36
0.02
0.48
2.32
3.91
3.08
3.81
During the year ended June 30, 2018, the Company recorded share-based payments of $2,285
(2017 - $nil) for 1,333,980 broker warrants with a fair value of $1.71 per broker warrant issued
related to the financing (Note 19(b)(iii)). The 25,000,000 warrants attached to the financing units
(Note 19(b)(iii)) have a fair value of $1.52 per unit warrant and was determined using the Binomial
Tree model with the following assumptions: risk-free interest rate of 1.88%; dividend yield of 0%;
stock price volatility of 85.49%; and an expected life of 3 years.
The following table summarizes the warrants that remain outstanding as at June 30, 2018:
Exercise Price
$
0.55
0.55
2.81
3.00
4.00
Warrants
#
61,500
301,000
89,107
633
6,690,338
7,142,578
Expiry Date
August 9, 2018
August 17, 2018
September 29, 2020
November 2, 2020
November 2, 2020
118
Aurora Cannabis Inc.
2018 Annual Report
19. SHARE CAPITAL (CONTINUED)
(e) Compensation options
Each compensation option entitles the holder to purchase one common share and one-half of
one share purchase warrant of the Company. Each whole warrant is exercisable into one addi-
tional common share of the Company for a period of two years. A summary of the status of the
compensation options outstanding follows:
Balance, June 30, 2016
Issued
Exercised (1)
Balance, June 30, 2017
Exercised (1)
Balance, June 30, 2018
Compensation
options
#
309,434
5,640,249
(4,084,434)
1,865,249
(1,865,249)
-
Weighted average
exercise price
$
0.53
1.01
0.41
2.25
2.25
-
(1) The weighted average share price at the time of exercise was $4.43 (2017 - $2.26).
20. SHARE-BASED PAYMENTS
Accounting Policy
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.
Significant Judgement
In estimating fair value of options using the Black-Scholes option pricing model, 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.
Stock options and restricted share units
On September 25, 2017, the Board adopted a “rolling maximum” or “evergreen” plan which fixed a
maximum number of shares issuable thereunder at 10% of the issued and outstanding securities
of the Company. The Board of Directors 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 and restricted share units, provided that the
number of common shares reserved for issuance under the plan and all other share compensation
arrangements of the Company will not exceed 10% of the issued and outstanding common shares of
the Company.
Notes to Financial Statements
119
20. SHARE-BASED PAYMENTS (CONTINUED)
(a) Stock options
A summary of the status of the options outstanding follows:
Balance, June 30, 2016
Granted
Exercised (1)
Forfeited
Balance, June 30, 2017
Granted
Exercised (1)
Forfeited
Balance, June 30, 2018
Stock
Options
#
5,309,834
12,170,000
(2,001,700)
(244,568)
15,233,566
18,530,000
(4,809,443)
(798,004)
28,156,119
Weighted Average
Exercise Price
$
0.37
2.21
0.41
0.74
1.84
7.16
1.91
2.66
5.36
(1) The weighted average share price during the period was $9.05 (2017 - $2.31).
The following table summarizes the stock options that remain outstanding as at June 30, 2018:
Expiry Date
September 2018
May 2020
August 2020
March 2021
May 2021
August 2021
September 2021
January 2022
March 2022
May 2022
August 2022
September 2022
November 2022
December 2022
January 2023
February 2023
March 2023
April 2023
May 2023
June 2023
Options Outstanding
(#)
63,112
113,300
418,627
200,000
500,000
1,731,666
704,569
1,850,000
2,500,000
2,142,501
1,151,667
2,949,507
2,713,336
1,337,834
2,525,000
2,425,000
925,000
850,000
2,030,000
1,025,000
28,156,119
Exercise Price
($)
0.30
0.34
0.295 – 0.30
0.58
0.46
2.25
1.30
2.56
2.27
2.49
2.39
2.76
4.64
7.00 – 7.10
9.60 – 13.63
10.13 – 11.53
9.03 – 11.74
7.72 – 9.07
7.20 – 8.38
8.18 – 9.99
Options Exercisable
(#)
63,112
113,300
306,960
200,000
100,000
1,731,666
704,569
1,062,500
1,041,667
354,168
210,417
963,257
400,836
212,834
577,084
210,415
77,083
-
-
-
8,329,868
During the year ended June 30, 2018, the Company recorded aggregate share-based payments of
$34,062 (2017 - $7,584) for all stock options granted and vested during the period including Hempco
stock options vested from the acquisition date (Note 13(a)(ii)).
The fair value of stock options granted during the period was determined using the following
weighted average assumptions at the time of grant using the Black-Scholes option pricing model:
Risk-Free Annual Interest Rate
Expected Annual Dividend Yield
Expected Stock Price Volatility
Expected Life of Options
Forfeiture Rate
2018
1.73%
0%
81.02%
2.97 years
4.59%
2017
0.68%
0%
79.0%
3.03 years
5%
Volatility was estimated by using the average historical volatility of the Company. The expected
life in years represents the period of time that options granted are expected to be outstanding.
120
Aurora Cannabis Inc.
2018 Annual Report
20. SHARE-BASED PAYMENTS (CONTINUED)
(a) Stock options (Continued)
The risk-free rate is based on Canada government bonds with a remaining term equal to the
expected life of the options.
The weighted average fair value of stock options granted during the year ended June 30, 2018 was
$4.11 (2017 - $1.15) per option. As at June 30, 2018, stock options outstanding have a weighted
average remaining contractual life of 4.13 years (2017 – 4.22 years).
(b) Restricted Share Units (“RSU”)
Accounting Policy
RSUs are measured at fair value on the date of grant based on the closing price of the Company’s shares on
the date prior to the grant, and is recognized as share-based compensation expense on a straight-line basis
over the vesting period. The corresponding amount is recorded to the share-based payment reserve. Upon
the exercise of RSUs, the related share-based payment reserve is transferred to share capital.
On September 25, 2017, the Company adopted a RSU plan for directors, officers, employees and
consultants of the Company (“Participants”). Under the terms of the plan, RSUs are granted to
Participants and the shares issued vest over a period of up to three years from the date of grant.
Each RSU gives the Participant the right to receive one common share of the Company. The
Company has reserved 10,000,000 common shares for issuance under this plan.
On September 29, 2017, the Company granted 2,127,128 RSUs to directors, officers, employees
and consultants of the Company, of which 127,128 relate to fiscal 2017 which vested immediately.
The rest of the RSUs vest annually.
On January 15, 2018, the Company granted 150,000 RSUs to an officer of the Company vesting
annually over 3 years.
A summary of the status of the RSUs outstanding is as follows:
Balance, June 30, 2017
Issued
Vested
Balance, June 30, 2018
RSUs
#
-
2,277,128
(127,128)
2,150,000
Weighted average
exercise price
$
-
3.26
6.75
3.29
The weighted average fair value of RSUs granted in the year ended June 30, 2018 was $3.29. During
the year ended June 30, 2018, the Company recorded share-based payments of $3,739 for 2,150,000
RSUs granted and vested during the period. Share-based payments of $351 for 127,128 RSUs were
accrued during the year ended June 30, 2017.
The following table summarizes the RSUs that remain outstanding as at June 30, 2018:
RSUs Outstanding
RSUs Vested
Expiry
525,000
1,475,000
150,000
2,150,000
-
-
-
-
September 29, 2018
September 29, 2020
January 15, 2021
Weighted Average Price per Share
$
2.76
2.76
10.32
3.29
Notes to Financial Statements
121
20. SHARE-BASED PAYMENTS (CONTINUED)
(b) Restricted Share Units (“RSU”) (Continued)
Employee Share Purchase Plan (“ESPP”)
On September 25, 2017, the Company adopted an ESPP whereby eligible employees may
contribute to the ESPP at least 1% but no more than 10% of their annual gross salary up to
a maximum of $10,500, to purchase common shares of the Company in the open market at
prevailing market prices. The Company contributes an amount equal to 50% of the employee’s
contributions which are expensed as incurred as there are no vesting provisions.
The Company contributed $58 to the ESPP during the year ended June 30, 2018.
21. EARNINGS (LOSS) PER SHARE
Accounting Policy
The Company calculates basic earnings (loss) per share by dividing net income (loss) by the weighted
average number of common shares outstanding during the year. Diluted earnings per share is deter-
mined by adjusting profit or loss attributable to common shareholders and the weighted average number
of common shares outstanding, adjusted for the effects of all dilutive potential common shares, which
comprise convertible debentures, restricted share units, warrants and share options issued.
The following is a reconciliation for the calculation of basic and diluted earnings (loss) per share:
Basic earnings (loss) per share
Net income (loss) attributable to Aurora shareholders
Weighted average number of common shares outstanding
Basic earnings (loss) per share
Diluted earnings (loss) per share
Net income (loss) attributable to Aurora shareholders
Dilutive effect on income
Adjusted net income (loss) attributable to Aurora shareholders
Weighted average number of common shares outstanding - basic
Dilutive effect of options outstanding
Dilutive effect of warrants outstanding
Dilutive effect of RSUs outstanding
Dilutive effect of convertible debentures outstanding
Weighted average number of common shares outstanding - diluted
Diluted earnings (loss) per share
2018
71,936 $
459,782,532
0.16 $
2017
(12,968)
279,029,226
(0.05)
2018
71,936 $
-
71,936 $
2017
(12,968)
-
(12,968)
$
$
$
$
459,782,532
7,121,278
3,211,970
1,202,699
18,232
471,336,711
$
0.15 $
279,029,226
-
-
-
-
279,029,226
(0.05)
Diluted loss per share is the same as basic loss per share as the issuance of shares on the
exercise of convertible debentures, restricted share units, warrants and share options is
anti-dilutive.
Subsequent to June 30, 2018, the Company issued shares for business acquisitions, the exercise
of options and warrants, and the conversion of convertible debentures which would change the
number of ordinary shares or potential ordinary share outstanding at the end of the period and
would affect the calculation of basic and dilutive loss per share (Note 31).
122
Aurora Cannabis Inc.
2018 Annual Report
22. FINANCE AND OTHER COSTS
Accretion expense
Bank charges
Financing fees
Interest expense
23. INCOME TAXES
Years ended June 30,
2018
$
10,641
214
25
2,282
13,162
2017
$
3,570
28
1,692
1,292
6,582
Accounting Policy
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.
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 at the end
of the reporting period.
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 at 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.
Significant Judgement
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.
Notes to Financial Statements
123
23. INCOME TAXES (CONTINUED)
The net tax provision differs from that expected by applying the combined federal and provincial tax
rates of 26.5% (2017 - 26%) to income (loss) before income tax for the following reasons:
Income (loss) before tax
Combined federal and provincial rate
Expected tax recovery
Change in estimates from prior year
Non-deductible expenses
Non-deductible portion of capital gains
Permanent portion of rate difference on capital items
Difference in statutory tax rate
Effect of change in tax rates
Changes in deferred tax benefits not recognized
Income tax expense (recovery)
2018
$
77,327
26.5%
20,492
(244)
13,557
(623)
(23,751)
(126)
488
(1,693)
8,100
2017
$
(17,264)
26%
(4,489)
(205)
2,294
-
-
(16)
(21)
(1,859)
(4,296)
The statutory combined federal and provincial tax rate increased from 26% to 26.5% due to an
increase in the provincial tax rate on January 1, 2018.
Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of
asset and liabilities for financial reporting purposes and their tax values. Movements in deferred tax
assets (liabilities) at June 30, 2018 and 2017 are comprised of the following:
Deferred
tax assets
(liabilities)
assumed from
acquisition
$
Recovered
through
(charged to)
earnings
$
Recovered
through
(charged to)
other com-
prehensive
income
$
Recovered
through
(charged to)
equity
$
10,207
1,075
381
-
11,663
-
885
(903)
-
(1,778)
(31,882)
(425)
(16,275)
(4,637)
(2,877)
(325)
(58,217)
(46,554)
-
(46,554)
14,612
759
137
657
16,165
347
(3,841)
(3,540)
(15,573)
231
657
-
(1,218)
2,997
(424)
(1,626)
(21,990)
(5,825)
(616)
(6,441)
-
-
-
-
-
-
(55)
-
-
-
-
-
-
-
-
-
(55)
(55)
-
(55)
-
2,533
-
-
2,533
(7,082)
-
(5,870)
-
-
-
-
-
-
-
-
(12,952)
(10,419)
-
(10,419)
As of
June 30,
2017
$
7,637
3,520
75
-
11,232
(4,170)
(788)
-
43
(1,126)
-
-
(6,617)
(98)
(1,672)
(1,088)
(15,516)
(4,284)
(1,653)
(5,937)
As of
June 30,
2018
$
32,456
7,887
593
657
41,593
(10,905)
(3,799)
(10,313)
(15,530)
(2,673)
(31,225)
(425)
(24,110)
(1,738)
(4,973)
(3,039)
(108,730)
(67,137)
(2,269)
(69,406)
Deferred tax assets
Non-capital losses
Finance costs
Investment tax credit
Others
Total deferred tax assets
Deferred tax liabilities
Convertible debenture
Marketable securities
Investment in associates
Derivatives
Customer relationships
Brand
Patents
License and federal permits
Property, plant and equipment
Inventory
Biological assets
Total deferred tax liabilities
Net deferred tax assets (liabilities)
Deferred tax assets not recognized
124
Aurora Cannabis Inc.
2018 Annual Report
23. INCOME TAXES (CONTINUED)
Deferred tax assets
Non-capital losses
Finance costs
Investment tax credit
Total deferred tax assets
Deferred tax liabilities
Convertible debenture
Marketable securities
Derivatives
Customer relationships
License and federal permits
Property, plant and equipment
Inventory
Biological assets
Total deferred tax liabilities
Net deferred tax assets (liabilities)
Deferred tax assets not recognized
As of
June 30,
2016
$
3,240
232
-
3,472
(195)
-
-
-
-
(158)
(313)
(498)
(1,164)
2,308
(2,308)
-
Deferred
tax assets
(liabilities)
assumed from
acquisition
$
Recovered
through
(charged to)
earnings
$
Recovered
through
(charged to)
other com-
prehensive
income
$
Recovered
through
(charged to)
equity
$
321
-
-
321
-
-
-
(1,126)
(6,617)
(4)
-
-
(7,747)
(7,426)
-
(7,426)
4,076
238
75
4,389
(226)
97
43
-
-
64
(1,359)
(590)
(1,971)
2,418
1,859
4,277
-
-
-
-
-
(885)
-
-
-
-
-
-
(885)
(885)
-
(885)
As of
June 30,
2017
$
7,637
3,520
75
11,232
(4,170)
(788)
43
(1,126)
(6,617)
(98)
(1,672)
(1,088)
(15,516)
(4,284)
(1,653)
(5,937)
2017
$
(449)
(1,204)
(1,653)
-
3,050
-
3,050
(3,749)
-
-
-
-
-
-
-
(3,749)
(699)
(1,204)
(1,903)
2018
$
(2,269)
-
(2,269)
Deferred tax assets have not been recognized with respect to the following items:
Non-capital losses carried forward
Share issue costs
The Company has income tax loss carryforwards of approximately $122,369 (2017 - $32,605) which
are predominately from Canada and, if unused, will expire between 2031 to 2038.
24. RELATED PARTY TRANSACTIONS
Accounting Policy
The Company considers a person or entity as a related party if they are a member of key management
personnel including their close relatives, an associate or joint venture, those having significant influence
over the Company, as well as entities that are controlled by related parties.
Notes to Financial Statements
125
24. RELATED PARTY TRANSACTIONS (CONTINUED)
(a) Goods and services
The Company incurred the following transactions with related parties during the year ended
June 30, 2018:
Operational, administrative and service fees paid or accrued pursuant to an agreement
between CanvasRx and a company having a former director in common with the Company
Consulting fees paid or accrued related to the CanvasRx acquisition to a company owned by an
officer of the Company
Marketing fees paid or accrued to a company partially owned by an officer of the Company
Interest income earned from a 50% owned joint venture company (Note 12(a))
Years ended June 30,
2017
$
2018
$
4,957
358
2,210
49
7,574
3,659
780
-
41
4,480
During the year ended June 30, 2018 and based on the Company’s existing interest in associates,
the Company generated $239 profit margin from design, engineering and construction consulting
services to Cann Group (Note 12(b)) and $240 profit margin from TGOD (Note 12(g)).
These transactions are in the normal course of operations and are measured at the exchange value
being the amounts agreed to by the parties.
(b) Compensation of key management personnel
The Company’s key management personnel have the authority and responsibility for planning,
directing and controlling the activities of the Company and consists of the Company’s executive
management team and management directors.
Management compensation
Directors’ fees (1)
Share-based payments (2)
Years ended June 30,
2018
$
5,284
210
14,608
20,102
2017
$
1,934
258
6,431
8,623
(1) Includes meeting fees and committee chair fees.
(2) Share-based payments are the fair value of options granted and vested to key management personnel and directors of
the Company under the Company’s stock option plan (Note 20).
(c) Related party balances
The following related party amounts were included in (i) accounts receivable, (ii) accounts payable
and accrued liabilities, and (iii) note receivable:
(i) A company having a director in common (1)
(i) Associates where the Company holds significant influence (2)
(ii) Companies controlled by directors and officers of the Company (1)
(ii) Directors and officers and a former director and officer of the Company (1)
(ii) A company partially owned by an officer (1)
(iii) A 50% owned joint venture company (Note 12(a))
(1) The amounts are unsecured, non-interest bearing and have no specific repayments term.
(2) Amounts are due upon the issuance of the invoice, are non-interest bearing and unsecured.
June 30,
2018
$
-
1,554
24
1,128
1,976
3,444
June 30,
2017
$
72
-
-
565
-
2,096
126
Aurora Cannabis Inc.
2018 Annual Report
25. COMMITMENTS AND CONTINGENCIES
(a) Office and operating leases
The Company is committed under lease and sublease agreements with respect to various office
premises, facilities and warehouses located in Canada expiring between October 31, 2018 and
April 30, 2032, office premise lease located in Berlin, Germany expiring December 31, 2022, and
sublease agreements with respect to clinics located across Canada expiring between August 1, 2019
and December 1, 2023, as follows:
2019
2020
2021
2022
2023
Thereafter
$
5,332
5,337
4,778
4,649
4,355
22,806
47,257
The Company has certain operating leases with renewal options ranging from one to eight options,
with each option extending the lease for an additional five years. The Company also has an option to
purchase lands located in Cremona, Alberta which are currently being leased.
(b) Claims and litigation
From time to time, the Company and/or its subsidiaries may become defendants in legal actions
and the Company intends to defend itself vigorously against all legal claims. Other than the stock
option claim described below, as of the date of this report, Aurora is not aware of any claims against
the Company.
On November 29, 2017, a claim was commenced against the Company regarding 300,000 stock
options with an exercise price of $0.39 per share issued to a consultant pursuant to an agree-
ment dated March 16, 2015. The agreement was terminated on March 8, 2016, and in accordance
to the Company’s stock option plan, the unexercised options expired 90 days from the date of the
termination of the agreement. The option holder is attempting to enforce exercise rights which the
Company believes do not exist. The Company believes the action to be without merit and intends to
defend this claim vigorously. Due to the uncertainty of timing and the amount of estimated future
cash outflows relating to this claim, no provision had been recognized.
(c) Capital project commitments
The Company has capital project commitments of approximately $38,474 expected to be paid in the
next year.
Notes to Financial Statements
127
26. CONSTRUCTION CONTRACTS
Accounting Policy
Construction contracts include contracts for the rendering services which are directly related to the
construction of the asset, including services of project managers. Revenue from a construction contract
is recognized when the total contract revenue can be measured reliably, it is probable that the economic
benefits associated with the contract will flow to the Company, both the contract costs to complete the
contract and the stage of completion at the end of the period can be measured reliably, and the contract
costs attributable to the contract can be clearly identified and measured reliably so that actual contract
costs incurred can be compared with prior estimates. The Company generates construction contract
revenue from design and construction consulting services. The stage of completion is determined based
on the level of completion of each phase of design and construction. If the outcome of the construction
contract cannot be estimated reliably, revenue is recognized only to the extent of contract costs incurred
that is probable that will be recoverable, and contract costs are recognized as an expense in the period they
are incurred.
The following is a summary of construction contract revenues and contracts currently in progress:
Construction contract revenue
Gross accounts receivable
Contracts in progress
Recognized profits
Costs incurred
27. SEGMENTED INFORMATION
June 30,
2018
$
4,218
2,179
3,276
942
June 30,
2017
$
-
-
-
-
Accounting Policy
Operating segments are components of the Company that engages in business activities from which they
earn revenues and incur expenses (including revenues and expenses related to transactions with other
components of the Company), the operations of which can be clearly distinguished, and the operating
results of which are regularly reviewed by the chief operating decision maker (“CODM”) for the purposes of
resource allocation and assessing its performance.
As part of the integration of the Company’s recently acquired businesses, the CODM has revised the manner
in which they review the operations and business performance of the Company. Key measures used by the
CODM in assessing performance and in making resource allocation decisions include revenues, gross profit
and net income (loss). The Company’s operating results are divided into two reportable operating segments
plus corporate. The two reportable operating segments are medical cannabis and horizontally-integrated
businesses and other. The Company primarily operates in the medical cannabis segment which includes
support services such as CanvasRx patient counselling services and design, engineering and construction
consulting services. Comparative historical segmented information has been restated to conform with the
organization of segments in the current period.
Significant Judgement
Operating segments are determined based on internal reports used in making strategic decisions that are
reviewed by the CODMs. The Company’s CODMs are the Chief Executive Officer, Chief Operating Officer and
the Chief Financial Officer.
128
Aurora Cannabis Inc.
2018 Annual Report
27. SEGMENTED INFORMATION (CONTINUED)
Operating Segments
Year ended June 30, 2018
Revenue
Gross profit
Net income (loss)
Year ended June 30, 2017
Revenue
Gross profit
Net loss
Geographical Segments
Year ended June 30, 2018
Non-current assets
Revenue
Gross profit
Year ended June 30, 2017
Non-current assets
Revenue
Gross profit
Medical
Cannabis
$
51,129
42,845
(1,622)
Medical
Cannabis
$
18,067
16,056
(1,051)
Canada
$
1,658,793
44,061
39,654
Canada
$
122,469
17,628
15,916
Horizontally Integrated
Businesses and Other
$
4,067
674
(7,239)
Horizontally Integrated
Businesses and Other
$
-
-
-
European Union
$
32,225
8,690
3,459
European Union
$
6,604
439
140
Corporate
$
-
-
78,088
Corporate
$
-
-
(11,917)
Other
$
-
2,445
406
Other
$
-
-
-
Total
$
55,196
43,519
69,227
Total
$
18,067
16,056
(12,968)
Total
$
1,691,018
55,196
43,519
Total
$
129,073
18,067
16,056
28. FAIR VALUE OF FINANCIAL INSTRUMENTS
Accounting Policy
Fair Value Hierarchy
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.
Significant Judgement
The individual fair values attributed to the different components of a financing transaction, notably invest-
ments in available-for-sale equity securities, derivative financial instruments, convertible debt and loans,
are determined using valuation techniques. The Company uses judgement to select the methods used to
make certain assumptions and in performing the fair value calculations in order to determine (a) the values
attributed to each component of a transaction at the time of their issuance; (b) the fair value measurements
for certain instruments that require subsequent measurement at fair value on a recurring basis; and (c) for
disclosing the fair value of financial instruments subsequently carried at amortized cost. These valuation
estimates could be significantly different because of the use of judgement and the inherent uncertainty in
estimating the fair value of these instruments that are not quoted in an active market.
Notes to Financial Statements
129
28. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Financial instruments are measured either at fair value or at amortized cost. The table below lists
the valuation methods used to determine fair value of each financial instrument.
Financial Instruments Measured at Fair Value
Marketable securities
Convertible debenture investment
Derivatives
Contingent consideration
Financial Instruments Measured at Amortized Cost
Cash and cash equivalents, short-term investments,
accounts receivable, accounts receivable
Accounts payable and deferred revenue
Finance lease, convertible notes, loans
and borrowings
Fair Value Method
Closing market price of common shares as of the measurement date
(Level 1)
Discounted cash flow model
Binomial and Monte Carlo valuation model (Level 2 or Level 3)
Discounted cash flow model
Carrying amount (approximates fair value due to short-term nature)
Carrying amount (approximates fair value due to short-term nature)
Carrying value at the effective interest rate which approximates
fair value
The carrying values of the financial instruments at June 30, 2018 are summarized in the
following table:
Available-for-
sale financial
assets
$
Loans and
receivables
$
Financial Assets
Cash and cash equivalents
Short-term investments
Accounts receivable
Marketable securities
Derivatives
Financial Liabilities
Accounts payable (1)
Convertible notes (2)
Contingent consideration
Loans and borrowings
-
-
-
59,188
-
-
-
-
-
89,193
990
15,096
-
-
-
-
-
-
Held-for-
trading
derivative
assets
at FVTPL
$
-
-
-
-
5,331
-
-
-
-
Financial
assets
designated
as FVTPL
$
-
-
-
-
119,611
Other
financial
liabilities
$
Financial
liabilities at
FVTPL
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47,456
191,528
-
11,683
-
-
21,333
-
Total
$
89,193
990
15,096
59,188
124,942
47,456
191,528
21,333
11,683
(1) Balance includes interest rate swaps of $63 and are included in accounts payable on the Statement of Financial Position.
(2) The fair value of convertible notes includes both the debt and equity components.
(a) Fair value hierarchy
The following is a summary of financial assets measured at fair value segregated based on the
various levels of inputs (Note 7 and 8):
Marketable securities
Derivative assets
Level 1
$
59,188
-
Level 2
$
-
120,102
Level 3
$
-
4,840
Total
$
59,188
124,942
There have been no transfers between fair value levels during the year.
130
Aurora Cannabis Inc.
2018 Annual Report
28. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(b) Changes in level 3 financial assets
Changes in the carrying value of level 3 financial assets for the year were as follows:
Opening, June 30, 2017
Additions
Unrealized gain at inception
Unrealized gain (loss)
Conversion of debenture
Exercise of warrants
Ending, June 30, 2018
Convertible
Debenture
$
11,071
-
-
830
(11,901)
-
-
Warrant
Derivatives
$
292
30,681
3,050
(9,790)
4,330
(23,723)
4,840
Total
$
11,363
30,681
3,050
(8,960)
(7,571)
(23,723)
4,840
(c) Unrealized gains (losses) on level 3 financial assets
For the year ended June 30, 2018, the Company recognized unrealized gains (losses) on level 3
financial assets as follows:
Gain (loss) on changes in fair value
Amortized deferred inception gains
Unrealized gains (losses) on level 3 financial assets
Convertible
Debenture
$
830
6,107
6,937
Warrant
Derivatives
$
(9,790)
5,217
(4,573)
Total
$
(8,960)
11,324
2,364
(d) Deferred gains
Changes in deferred gains on convertible debenture and derivatives measured at fair value and
included in level 3 of the fair value hierarchy were as follows:
Opening balance
Additions
Conversion of debenture
Unrealized gains amortized
Ending balance
(e) Contingent consideration payable
The following is a continuity of contingent consideration payable:
Convertible
Debenture
$
10,206
-
(4,099)
(6,107)
-
Warrant
Derivatives
$
321
3,051
4,099
(5,217)
2,254
Balance, June 30, 2017
Additions from acquisitions
Unrealized loss from changes in fair value
Payments
Balance, June 30, 2018
BCNL UCI
Note
13(a)(i)
$
-
1,119
123
-
1,242
CanvasRx
Note
13(a)(v)
$
13,221
-
6,703
(14,040)
5,884
H2
Note
13(b)(i)
$
-
14,957
1,018
(1,768)
14,207
Total
$
10,527
3,051
-
(11,324)
2,254
Total
$
13,221
16,076
7,844
(15,808)
21,333
The Company’s contingent consideration payable is measured at fair value based on unobservable
inputs and is considered a level 3 financial instrument. The fair value of these liabilities determined
by this analysis was primarily driven by the Company’s expectations of the subsidiaries achieving
their milestones. The expected milestones were assessed probabilities by management which
were discounted to present value in order to derive a fair value of the contingent consideration.
At June 30, 2018, the probability of achieving the milestones was estimated to be 100% and the
Notes to Financial Statements
131
28. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(e) Contingent consideration payable (Continued)
discount rates were estimated to range between 15% and 36%. If the probability of achieving the
milestones decreased by 10%, the estimated fair value of contingent consideration would decrease by
approximately $2,034. If the discount rate increased or decreased by 5%, the estimated fair value of
contingent consideration would increase or decrease by approximately $356.
29. FINANCIAL INSTRUMENTS RISK
The Company is exposed in varying degrees to a variety of financial instrument related risks.
The Board mitigates these risks by assessing, monitoring and approving the Company’s risk
management processes.
(a) Credit risk
Credit risk is the risk of a potential loss to the Company if a customer or third party to a financial
instrument fails to meet its contractual obligations. The Company is moderately exposed to credit
risk from its cash and cash equivalents, trade and other receivables and short-term GIC invest-
ments. The risk exposure is limited to their carrying amounts at the statement of financial position
date. The risk for cash and cash equivalents is mitigated by holding these instruments with highly
rated Canadian financial institutions. The Company does not invest in asset-backed deposits or
investments and does not expect any credit losses. The Company periodically assesses the quality
of its investments and is satisfied with the credit rating of the financial institutions and the invest-
ment grade of its GICs. Trade and other receivables primarily consist of trade accounts receivable
and goods and services taxes recoverable (“GST”).
The Company provides credit to its customers in the normal course of business and has estab-
lished credit evaluation and monitoring processes to mitigate credit risk but has limited risk as the
majority of sales are transacted with credit cards.
As at June 30, 2018, the Company’s aging of receivables was approximately as follows:
0 – 60 days
61 – 120 days
June 30,
2018
$
13,569
1,527
15,096
June 30,
2017
$
1,534
778
2,312
(b) 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 has access to CanniMed’s Canadian and U.S. operating lines of credit with a
maximum of $1,000 and US$500, respectively. The Canadian and U.S. operating lines of credit bear
interest at bank prime rate plus 0.75% and at U.S. base rate plus 0.75%, respectively. The lines of
credit are secured by a general security agreement covering all assets of the Company and can be
accessed to the lesser of the maximum available credit or the aggregate of 90% of Government of
Canada receivables, 85% of undoubted receivables and 75% of acceptable receivables, less intercom-
pany and priority claim amounts. These operating lines of credit were undrawn as of June 30, 2018.
Subsequent to June 30, 2018, the Company also secured a $200,000 debt facility with BMO (Note 31).
The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to settle
obligations and liabilities when due.
132
Aurora Cannabis Inc.
2018 Annual Report
29. FINANCIAL INSTRUMENTS RISK (CONTINUED)
(b) Liquidity risk (Continued)
In addition to the commitments outlined in Note 25, the Company has the following gross
contractual obligations subject to liquidity risk:
Accounts payable and accrued liabilities
Convertible notes and interest (1)
Loans and borrowings (2)
Contingent consideration payable
> 5 years
Total
$
$
-
47,456
-
251,356
5,339
11,747
-
23,742
5,339
334,301
(1) Assumes the principal balance outstanding at June 30, 2018 remains unconverted and includes the estimated interest
1 - 3 years
$
-
237,649
2,511
9,304
249,464
3 - 5 years
$
-
2,103
1,415
-
3,518
<1 year
$
47,456
11,604
2,482
14,438
75,980
payable until the maturity date.
(2) The term loan balance of $9,971 at June 30, 2018 was fully repaid subsequent to year-end (Note 18(a)).
(c) Market risk
(i) Currency risk
The operating results and financial position of the Company are reported in Canadian dollars. As
the Company operates in an international environment, some of the Company’s financial instru-
ments and transactions are denominated in currencies other than the Canadian dollar. The results
of the Company’s operations are subject to currency transaction and translation risks.
The Company’s main risk is associated with fluctuations in Euros, Danish Krone, Australian and
U.S. dollars as the Company holds cash in Canadian dollars, U.S. dollars, Danish Krone and
Euros, and investments in Australian and U.S. dollars. The Company’s main risk is associated
with fluctuations in the Euros, Danish Krone, and Australian and U.S. dollars. Assets and liabili-
ties are translated based on the foreign currency translation policy.
The Company has determined that as at June 30, 2018, an effect of a 10% increase or decrease in
Euros, Danish Krone, Australian dollars and U.S. dollars against the Canadian dollar on financial
assets and liabilities would result in an increase or decrease of approximately $79 (2017 - $1,430)
to net income and comprehensive income for the year ended June 30, 2018.
At June 30, 2018, the Company had no hedging agreements in place with respect to foreign
exchange rates. The Company has not entered into any agreements or purchased any instruments
to hedge possible currency risks at this time.
(ii) 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 investments and convertible notes have fixed rates of interest. The
majority of the Company’s loans and borrowings have floating interest rates. The Company holds
interest rate swaps to fix its exposure to variable interest rates on approximately one half of its
loans and borrowings.
(iii) Price risk
Price risk is the risk of variability in fair value due to movements in equity or market prices.
The Company’s marketable securities and investments are susceptible to price risk arising from
uncertainties about their future values. The fair value of marketable securities is based on quoted
market prices for which the shares of the investments can be exchanged.
Notes to Financial Statements
133
29. FINANCIAL INSTRUMENTS RISK (CONTINUED)
(c) Market risk (Continued)
If the fair value of these financial assets were to increase or decrease by 10%, the Company
would incur an associated increase or decrease in net and comprehensive income (loss) of
approximately $29,502 (2017 - $2,823). See Note 8 for additional details regarding the fair value
of marketable securities and derivatives.
30. 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 funding to support its ongoing 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 $1,766,342 (2017 – $282,820) in shareholders’
equity and debt. 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.
The Company plans to use existing funds, as well as funds from the future sale of products to fund
operations and expansion activities.
As disclosed in Note 18, the Company has various loan facilities in place. Certain loans have finan-
cial covenants which are generally in the form of leverage and liquidity ratios. During the years
ended June 30, 2018 and 2017, the Company was in compliance with all covenants. The Company
does not have any other externally imposed capital requirements.
31. SUBSEQUENT EVENTS
The following events occurred subsequent to June 30, 2018:
(a)
On July 2, 2018, the Company subscribed to a US$10,000,000 convertible debenture in a
private company (“Investee Company”) which if fully converted would provide the Company
with a 14.3% interest. The debentures bear interest at 1.5% per annum payable in cash or
common shares equal to the fair value of shares at the time of issuance. The debentures
are convertible into common shares of the Investee Company at US$4.9585 at the option of
the Aurora until July 2, 2023. The Company had advanced the funds to a legal trust account
as of June 30, 2018 (Note 4).
The Company also entered into an Investor Rights Agreement where Aurora has the right
to participate in any future offerings of equity of the Investee Company to allow Aurora to
maintain its percentage ownership interest, as well as the right to nominate a director to the
Investee Company’s Board of Directors as long as the Company owns at least 10% interest.
(b)
On July 10, 2018, the Company entered into a Product Development and Distribution
Agreement with Evio Beauty Group Ltd. (“Evio”) pursuant to which both companies have
agreed to collaborate to develop and manufacture a line of at least 3 co-branded topical
cosmetic products formulated with a cannabinoid or cannabinoids. The agreement has
an initial term for 6 years and following expiry of the term, unless renewed, neither party
shall continue to sell the products. Aurora will earn a 10% royalty on sales of all non-
infused products, and Evio will earn a 10% royalty on sale of all infused products in any
geographical area in which Aurora operates.
134
Aurora Cannabis Inc.
2018 Annual Report
31. SUBSEQUENT EVENTS (CONTINUED)
The Company also entered into an Investor Rights Agreement where Aurora has the right
to participate in any future offerings of equity or debt convertible into equity of Evio to allow
Aurora to maintain its ownership interest.
On July 17, 2018, the Company acquired the remaining 50% interest in AHL from AJR for
US$500 (Note 12(a)).
On July 25, 2018, Aurora completed the acquisition of all of the issued and outstanding
common shares of MedReleaf Corp. (“MedReleaf”). Under the terms of the Amended
Arrangement Agreement dated May 23, 2018, holders of MedReleaf common shares
received 3.575 common shares of Aurora and $0.000001 cash for each MedReleaf common
share held (the “Exchange Ratio”). The Company issued an aggregate of 370,120,238
common shares with a fair value of $2,568,634 and 14,033,784 replacement stock options
and 10,278,125 replaced warrants. The exercise price of the stock options are based on the
exercise price per MedReleaf stock options adjusted for the Exchange Ratio.
On August 1, 2018, the Company and CannaRoyalty entered into an assignment and
assumption agreement where CannaRoyalty assigned to Aurora all of its right, title and
interest in an exclusive license for a technology for creating machine-rolled cannabis devel-
oped by Wagner. In consideration, Aurora paid to CannaRoyalty $7,000 through the issuance
of 756,348 common shares at $9.255 per share.
Pursuant to the spin-out transaction (Note 15), ACI completed a non-brokered private
placement financing in two tranches on July 5, 2018 and August 3, 2018. ACI issued
85,000,000 shares at $0.20 per share for gross proceeds of $17,000.
On August 7, 2018, the Company entered into a Letter of Intent to acquire HotHouse
Consulting Inc. (“HotHouse”), a provider of advanced greenhouse consulting services,
for $2,000 to be paid in common shares of Aurora.
On August 8, 2018, the Company completed the acquisition of Anandia Laboratories Inc.
(“Anandia”), a private company that holds a Dealer’s License by Health Canada and provides
analytical testing services to Licensed Producers and patients. Anandia was acquired for
its research and development portfolio, including the exclusive rights to a number of key
genes in the cannabinoid pathway, patents pending for genetic markers, as well as its
product testing and product development facilities. Aurora acquired all of the issued and
outstanding common shares of Anandia in exchange for 12,716,482 common shares and
6,358,210 share purchase warrants of Aurora. The warrants are exercisable at $9.3717
per share until August 9, 2023. Pursuant to the terms of the acquisition, upon the achieve-
ment of future milestones, Aurora will pay an additional $10,000 by way of the issuance of
additional shares and warrants.
On August 20, 2018, the Company fully converted its US$1,000 debenture into common
shares of CTT (Notes 8(i) and 12(e)).
On August 29, 2018, the Company closed a $200,000 debt facility with Bank of Montreal
(“BMO”) consisting of a $150,000 term loan and a $50,000 revolving credit facility, both of which
will mature in 2021. The Company also has an option to upsize the facility to a total of $250,000,
subject to certain conditions. The debt facility will be primarily secured by Aurora’s production
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Notes to Financial Statements
135
31. SUBSEQUENT EVENTS (CONTINUED)
facilities and can be repaid without penalty at Aurora’s discretion. The interest rate for the debt
facility and revolving credit facility is a set margin over the BMO CAD Prime Rate or a Bankers’
Acceptance of appropriate term. Based on the current BMO CAD Prime Rate, the interest
payable is expected to be in the mid to high 4% per annum range over the term of the loans.
On September 10, 2018, the Company announced it had entered into a definitive arrange-
ment agreement pursuant to which Aurora intends to acquire all of the issued and
outstanding common shares of ICC Labs Inc. (“ICC”) for $1.95 per share, payable in
common shares of Aurora valued at the VWAP during the 20-day trading period ending
the second to last trading day on the TSX prior to the effective date. The transaction
will be effected by way of a plan of arrangement under the Business Corporations Act
(British Columbia).
On September 10, 2018, the Company acquired 100% of the issued and outstanding shares
of Agropro UAB (“Agropro”) and Borela UAB (“Borela”) for total consideration of €6,418
of which €960 was paid through the issuance of 170,834 common shares. In addition, the
Company paid a finder’s fee of €1,517, which was paid through the issuance of 270,024
common shares, and will also refinance Agropro’s existing debt totaling €2,076. Agropro
is a hemp seed contracting and processing company, and its sister company, Borela, is a
processor and distributor of organic hulled hemp seeds, hemp seed protein, hemp flour and
hemp seed oil.
On September 19, 2018, the Company completed the spin-out of ACI and distributed to
Aurora shareholders, as a return of capital, units of ACI on the basis of one unit for every
thirty-four Aurora shares outstanding on the August 24, 2018 record date (Note 15). Each
unit consisted of one common share and one warrant exercisable at $0.25 per warrant
for a period of one year. The results of ACI were deconsolidated from the Company upon
completion of the spin-out.
8,043,385 common shares were issued on the exercise of 8,043,385 stock options for gross
proceeds of $21,336.
759,638 common shares were issued on the exercise of 759,638 warrants for gross
proceeds of $2,659.
11,999 common shares were issued on the conversion of $77,994 principal amount of
debentures (Note 17(c)).
(k)
(l)
(m)
(n)
(o)
(p)
136
Aurora Cannabis Inc.
2018 Annual Report
Corporate Directory
DIRECTORS
Michael Singer
Chairman
Norma Beauchamp
Director
Terry Booth
CEO, Aurora Cannabis
Steve Dobler
President, Aurora Cannabis
Dr. Jason Dyck
Director
Ronald Funk
Director
OFFICERS
Terry Booth
CEO
Steve Dobler
President
Neil Belot
CBDO
Cam Battley
CCO
Glen Ibbott
CFO
Allan Cleiren
COO
Diane Jang
CEO, Hempco Food and Fiber Inc.
Adam Szweras
Director
Darryl Vleeming
CIO
Debra Wilson
CHRO
SHAREHOLDER INFORMATION
INVESTOR CONTACTS
Stock Exchange Listing
TSX: ACB
Registrar and Transfer Agent
Computershare Ltd. Vancouver
510 Burrard St, 3rd Floor
Vancouver, BC V6C 3B9
Tel.: 1-604-661-9400
Fax: 1-604-661-9549
Auditors
MNP LLP, Vancouver
Phone: 1-855-279-4652
Email: ir@auroramj.com
Robert Kelly
Director of Investor Relations
Aurora
Marc Lakmaaker
Vice President, Investor Relations and
Corporate Development
Aurora
Aurora Cannabis Inc.
2018 Annual Report
23
www.auroramj.com