EX-99.5 6 fs20200630.htm EXHIBIT 99.5 Exhibit









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AURORA CANNABIS INC.

Consolidated Financial Statements




For the years ended June 30, 2020 and 2019
(In Canadian Dollars)



Table of Contents

Management’s Responsibility for Financial Reporting
Report of Independent Registered Public Accounting
Consolidated Statements of Financial Position
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
 
Note 1
Nature of Operations
 
Note 16
Loans and Borrowings
Note 2
Significant Accounting Policies and Judgments
 
Note 17
Share Capital
Note 3
Restructuring Provision
 
Note 18
Share-Based Compensation
Note 4
Accounts Receivable
 
Note 19
(Loss) Earnings Per Share
Note 5
Strategic Investments
 
Note 20
Other (Losses) Gains
Note 6
Marketable Securities and Derivatives
 
Note 21
Supplementary Cash Flow Information
Note 7
Investments in Associates and Joint Ventures
 
Note 22
Income Taxes
Note 8
Biological Assets
 
Note 23
Related Party Transactions
Note 9
Inventory
 
Note 24
Commitments and Contingencies
Note 10
Property, Plant and Equipment
 
Note 25
Revenue
Note 11
Assets Held for Sale and Discontinued Operations
 
Note 26
Segmented Information
Note 12
Business Combinations
 
Note 27
Fair Value of Financial Instruments
Note 13
Non-Controlling Interests
 
Note 28
Financial Instruments Risk
Note 14
Intangible Assets and Goodwill
 
Note 29
Capital Management
Note 15
Convertible Debentures
 
Note 30
Subsequent Events




Management’s Responsibility


To the Shareholders of Aurora Cannabis Inc.:

Management is responsible for the preparation and presentation of the consolidated financial statements and accompanying note disclosures in accordance with International Financial Reporting Standards. This responsibility includes selection of appropriate accounting policies and principles as well as decisions related to significant estimates and areas of judgment.

In discharging its responsibilities to support the integrity and fairness of the consolidated financial statements, management designs and maintains the necessary accounting systems and related internal controls to provide reasonable assurance that transactions are authorized, assets are safeguarded, and financial records are properly maintained to provide reliable information.

The Board of Directors and Audit Committee are primarily composed of independent Directors. The Board is responsible for the oversight of management in the performance of its financial reporting responsibilities and approval of the financial information included in the annual report. The Board fulfills these responsibilities by reviewing the financial information prepared by management and discussing relevant matters with management and the external auditors. The Audit Committee is also responsible for recommending the appointment of the Company’s external auditors.

KPMG LLP, an independent firm of Chartered Professional Accountants, has been appointed by the Company’s shareholders to audit the consolidated financial statements and report directly to them. The external auditors have full and free access to the Audit Committee and management to discuss their audit findings.


September 24, 2020


“Miguel Martin”
 
“Glen Ibbott”
Miguel Martin
Chief Executive Officer
 
Glen Ibbott
Chief Financial Officer



1







Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Aurora Cannabis Inc.:

Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Aurora Cannabis Inc. (the Company) as of June 30, 2020 and 2019, the related consolidated statements of comprehensive loss, changes in equity, and cash flows for each of the years in the two-year period ended June 30, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two‑year period ended June 30, 2020, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated September 24, 2020 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting Principles
As discussed in Note 2(h) to the consolidated financial statements, the Company has elected to change its method of accounting for inventory costing of by-products as of July 1, 2018. As discussed in Note 2(i) to the consolidated financial statements, the Company has changed its method of accounting for leases as of July 1, 2019 due to the adoption of IFRS 16, Leases.

Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.










Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of goodwill and intangible assets in the cannabis operating segment
As discussed in Note 14 to the consolidated financial statements, the goodwill and intangible asset balances as of June 30, 2020 were in total $1,340,699 thousand, which included goodwill and intangibles related to the Cannabis operating segment. The Company performs impairment testing on an annual basis or whenever events or changes in circumstances indicate that the carrying value of a cash generating unit (“CGU”) might exceed its recoverable amount, which is determined using the fair value less costs of disposal method. The significant assumptions were determined to be estimated sales volumes, selling prices, operating costs and discount rates.
We identified the assessment of the fair value of goodwill and intangible assets in the Cannabis operating segment as a critical audit matter. There was a high degree of auditor judgment required to evaluate the significant assumptions used in determining the recoverable amount which required the use of professionals with specialized skills and knowledge. The sensitivity of reasonably possible changes to those assumptions could have a significant impact on the determination of the recoverable amount of the Cannabis operating segment and the Company’s assessment of impairment.
The following are the primary procedures we performed to address this critical audit matter. We compared the Company’s historical forecasts to actual results to assess the Company’s ability to accurately estimate sales volumes, selling prices and operating costs. We evaluated the reasonableness of the Company’s estimated sales volumes used in estimating the fair value, by comparing the estimated sales volumes to historical actual results of the Company, planned business initiatives, and external industry reports. We tested the estimated selling prices by comparing to actual sales prices realized in the fourth quarter and subsequent to year end. We assessed the reasonableness of operating costs by comparing the fourth quarter actual operating costs to the forecasted operating costs. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:
evaluating the discount rates used in the impairment analyses by comparing them to discount rate ranges that were independently developed using publicly available market data for comparable entities; and
performing sensitivity analyses over the discount rates to assess their impact on the determination of fair value.
Measurement of fair value of biological assets
As discussed in note 8 and 9 to the consolidated financial statements, the Company measures biological assets, defined as cannabis plants up to the point of harvest, at fair value less costs to sell. As at June 30, 2020, the recorded value of the Company’s biological assets was $35,435 thousand. Biological assets are transferred from biological assets to cannabis inventory at their carrying value at the point of harvest, which becomes the deemed cost as cannabis inventory. The fair value of biological assets is measured using the income approach, which calculates the present value of expected future cash flows from the Company’s biological assets. The significant assumptions used to measure the biological assets are, average yield per plant, average selling price per gram, and the allocation of indirect costs, which form part of the standard cost per gram to complete production, are considered significant assumptions.
We identified the assessment of the measurement of the fair value of biological assets as a critical audit matter as a high degree of auditor judgment was required to evaluate the significant assumptions.








The following are the primary procedures we performed to address this critical audit matter. We performed sensitivity analyses over the Company’s significant assumptions used to determine the fair value of biological assets to assess the impact of changes in those assumptions on the Company’s determination of fair value. We tested the average yield per plant by observing post-harvest weigh ins and by selecting harvested batches from the final inventory count listings and, as appropriate, comparing to subsequent sales transaction invoices, shipping documents, and purchase orders. We tested the average selling price per gram by comparing to actual sales prices per gram as set out in actual sales documents for transactions in the fourth quarter and subsequent to year end. We tested management’s allocation of indirect costs, which form part of production costs, by assessing the allocation method, recalculating the allocations and on a selection basis comparing the underlying allocation to source documents.

/s/ KPMG LLP
We have served as the Company’s auditor since 2019.
Vancouver, Canada
September 24, 2020









Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Aurora Cannabis Inc.:

Opinion on Internal Control Over Financial Reporting
We have audited Aurora Cannabis Inc.’s (the Company) internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Company as of June 30, 2020 and 2019, the related consolidated statements of comprehensive loss, changes in equity, and cash flows for each of the years in the two-year period ended June 30, 2020, and the related notes (collectively, the consolidated financial statements), and our report dated September 24, 2020 expressed an unqualified opinion on those consolidated financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses related to an ineffective continuous risk assessment process and insufficient resources to adequately assess risk and implement controls, pervading control deficiencies within information technology general and application controls, insufficient evaluation of controls maintained by service organizations, ineffective control activities surrounding certain complex spreadsheets, and a lack of segregation of duties and ineffective controls over the preparation, review and approval, and associated documentation of journal entries have been identified and included in management’s assessment. The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2020 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.
The Company acquired Reliva LLC during 2020, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2020, Reliva LLC’s internal control over financial reporting associated with approximately 0.7% of the Company’s current assets, 0.2% of total assets, 0.4% of current liabilities, 0.2% of total liabilities, as well as 0.2% of net revenues and 0% of net loss included in the consolidated financial statements of the Company as of and for the year ended June 30, 2020. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Reliva LLC.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Assessment on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included








obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP
Vancouver, Canada
September 24, 2020





AURORA CANNABIS INC.
Consolidated Statements of Financial Position
As at June 30, 2020 and June 30, 2019
(Amounts reflected in thousands of Canadian dollars)

 
 
 
Restated - Note 2(h)

 
Notes
June 30, 2020

June 30, 2019

 
 
$

$

Assets
 
 
 
Current
 
 
 
Cash and cash equivalents
 
162,179

172,727

Restricted cash
 

46,066

Accounts receivable
4, 28(a)
54,110

103,493

Income taxes receivable
 

8,833

Marketable securities
6(a)
7,066

143,248

Derivatives
6(b)
11,791


Biological assets
8
35,435

50,567

Inventory
9
121,827

111,321

Prepaids and other current assets
 
22,137

24,323

Assets held for sale
11(a)
6,194


 
 
420,739

660,578

 
 
 
 
Property, plant and equipment
10
946,380

765,567

Derivatives
6(b)
41,791

86,409

Deposits
 
12,329

6,926

Loan receivable
23
3,643


Investments in associates and joint ventures
7
18,114

118,845

Intangible assets
14
412,267

688,366

Goodwill
14
928,432

3,172,550

Total assets
 
2,783,695

5,499,241

 
 
 
 
Liabilities
 
 
 
Current
 
 
 
Accounts payable and accrued liabilities
28(b)
95,574

152,884

Deferred revenue
 
3,505

749

Convertible debentures
15
32,110

235,909

Loans and borrowings
16
120,508

13,758

Contingent consideration payable
27
19,604

28,137

Deferred gain on derivatives
 
20

728

Provisions
3, 24
1,485

4,200

 
 
272,806

436,365

 
 
 
 
Convertible debentures
15
294,928

267,672

Loans and borrowings
16
83,701

127,486

Derivative liability
15(iii)
1,827

177,395

Other long-term liability
 
37

11,979

Deferred tax liability
22
3,946

90,970

Total liabilities
 
657,245

1,111,867

 
 
 
 
Shareholders’ equity
 
 
 
Share capital
17
5,785,395

4,673,118

Reserves
 
145,395

139,327

Accumulated other comprehensive loss
 
(187,197
)
(143,170
)
Deficit
 
(3,592,787
)
(286,311
)
Total equity attributable to Aurora shareholders
 
2,150,806

4,382,964

Non-controlling interests
13
(24,356
)
4,410

Total equity
 
2,126,450

4,387,374

Total liabilities and equity
 
2,783,695

5,499,241


Nature of Operations (Note 1)
Strategic Investments (Note 5)
Commitments and Contingencies (Note 24)
Subsequent Events (Note 5(d), Note 30)

The accompanying notes are an integral part of these Consolidated Financial Statements.

7


AURORA CANNABIS INC.
Consolidated Statements of Comprehensive Loss
Years ended June 30, 2020 and 2019
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 
 
Years ended June 30,
 
 
 
 
 
 
Restated - Note 2(h)

 
Notes
2020

2019

 
 
$

$

Revenue from sale of goods
25
323,201

271,105

Revenue from provision of services
25
5,002

7,589

Excise taxes
25
(49,297
)
(33,158
)
Net revenue
 
278,906

245,536

 
 
 
 
Cost of sales
 
277,234

123,778

 
 
 
 
Gross profit before fair value adjustments
 
1,672

121,758

 
 
 
 
Changes in fair value of inventory sold
 
91,825

71,821

Unrealized gain on changes in fair value of biological assets
8
(56,614
)
(92,503
)
 
 
 
 
Gross (loss) profit
 
(33,539
)
142,440

 
 
 
 
Expense
 
 
 
General and administration
 
205,276

159,069

Sales and marketing
 
91,271

99,272

Acquisition costs
 
6,493

17,217

Research and development
 
26,070

14,778

Depreciation and amortization
10, 14
68,414

63,343

Share-based compensation
18(a)(b)
59,899

107,039

 
 
457,423

460,718

 
 
 
 
Loss from operations
 
(490,962
)
(318,278
)
 
 
 
 
Other (expense) income
 
 
Interest and other income
 
4,990

3,679

Finance and other costs
 
(77,538
)
(39,409
)
Foreign exchange (“FX”) loss
 
(12,779
)
(5,147
)
Other (losses) gains
20
(28,643
)
110,797

Restructuring charges
3
(1,947
)

Impairment of property, plant and equipment
10, 11(a)
(157,838
)

Impairment of investment in associates
7
(75,035
)
(73,289
)
Impairment of intangible assets and goodwill
14
(2,544,144
)
(9,002
)
 
 
(2,892,934
)
(12,371
)
 
 
 
 
Loss from operations before taxes and discontinued operations
 
(3,383,896
)
(330,649
)
 
 
 
 
Income tax recovery
 
 
 
Current
22
5,100

6,000

Deferred, net
22
78,303

23,909

 
 
83,403

29,909

 
 
 
 
Net loss from continuing operations
 
(3,300,493
)
(300,740
)
 
 
 
 
Net (loss) income from discontinued operations, net of tax
 
(9,844
)
144

 
 
 
 
Net loss
 
(3,310,337
)
(300,596
)

8


AURORA CANNABIS INC.
Consolidated Statements of Comprehensive Loss
Years ended June 30, 2020 and 2019
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

(Continued)
 
 
Year ended June 30,
 
 
 
 
 
 
Restated - Note 2(h)

 
Notes
2020

2019

 
 
$

$

Other comprehensive (loss) income (“OCI”) that will not be reclassified to net loss
 
 
 
Deferred tax recovery
 
624

11,948

Unrealized losses on marketable securities
6(a)
(43,613
)
(78,837
)
 
 
(42,989
)
(66,889
)
 
 
 
 
Other comprehensive (loss) income that may be reclassified to net loss
 
 
 
Share of (loss) income from investment in associates
7
(379
)
352

Foreign currency translation loss
 
(5,884
)
(5,629
)
 
 
(6,263
)
(5,277
)
 
 
 
 
Total other comprehensive loss
 
(49,252
)
(72,166
)
 
 
 
 
Comprehensive loss from continuing operations
 
(3,349,745
)
(372,906
)
Comprehensive (loss) income from discontinued operations
 
(9,844
)
144

 Comprehensive loss
 
(3,359,589
)
(372,762
)
 
 
 
 
Net loss from continuing operations attributable to:
 
 
 
Aurora Cannabis Inc.
 
(3,273,827
)
(293,653
)
Non-controlling interests
 
(26,666
)
(7,087
)
 
 
 
 
Net (loss) income from discontinued operations attributable to:
 
 
 
Aurora Cannabis Inc.
 
(9,844
)
144

Non-controlling interests
 


 
 
 
 
Comprehensive loss attributable to:
 
 
 
Aurora Cannabis Inc.
 
(3,330,913
)
(360,332
)
Non-controlling interests
 
(28,676
)
(12,430
)
 
 
 
 
Net loss per share - basic and diluted
 
 
 
Continuing operations
19

($33.84
)

($3.66
)
Discontinued operations
19

($0.10
)

$0.00

Total operations
19

($33.94
)

($3.66
)

The accompanying notes are an integral part of these Consolidated Financial Statements.

9


AURORA CANNABIS INC.
Consolidated Statements of Changes in Equity
Years ended June 30, 2020 and 2019
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 
 
Share Capital(1)
 
Reserves
 
AOCI
Restated - Note 2(h)

 
 
 
Note
Common Shares

Amount

 
Share-Based
Compensation

Compensation
Options/
Warrants

Convertible
Notes

Change in
Ownership
Interest

Total
Reserves

 
Fair
Value

Deferred
Tax

Associate OCI Pick-up

Foreign Currency Translation

Total
AOCI

Retained
Earnings
(Deficit)

Non-Controlling Interests

Total

 
 
#

$

 
$

$

$

$

$

 
$

$

$

$

$

$

$

$

Balance, June 30, 2019
 
84,786,562

4,673,118

 
143,947

40,495

41,685

(86,800
)
139,327

 
(156,249
)
18,295

352

(5,568
)
(143,170
)
(286,311
)
4,410

4,387,374

Shares issued for business combinations & asset acquisitions
17(b)(i)
2,689,933

57,420

 





 







57,420

Shares released for earn out payments
 
614,513

15,992

 

(7,871
)


(7,871
)
 







8,121

Shares issued through equity financing
17(b)(ii)
21,009,339

585,146

 





 







585,146

Share issuance costs
 

(12,507
)
 





 







(12,507
)
Deferred tax on share issuance costs
 

2,231

 





 







2,231

Conversion of convertible debentures
15(ii)
5,761,260

433,177

 


(41,266
)

(41,266
)
 







391,911

Deferred tax on convertible debentures
 

1,703

 





 





82


1,785

Exercise of stock options
18(a)
103,841

6,382

 
(3,588
)



(3,588
)
 







2,794

Exercise of warrants
17(c)
986

102

 

(29
)


(29
)
 







73

Exercise of RSUs
18(b)
44,823

2,268

 
(2,268
)



(2,268
)
 








Share-based compensation (2)(3)
18(a)(b)


 
50,712

10,378



61,090

 







61,090

Change in ownership interests in subsidiaries
13
217,554

20,363

 





 





(18,263
)
(2,100
)

Choom marketable securities transferred to investment in associate
5(f)


 





 
5,225

(601
)


4,624

(4,624
)


Comprehensive income (loss) for the period
 


 





 
(43,613
)
1,225

(379
)
(5,884
)
(48,651
)
(3,283,671
)
(26,666
)
(3,358,988
)
Balance, June 30, 2020
 
115,228,811

5,785,395

 
188,803

42,973

419

(86,800
)
145,395

 
(194,637
)
18,919

(27
)
(11,452
)
(187,197
)
(3,592,787
)
(24,356
)
2,126,450

(1) 
Common share amounts have been retrospectively restated for all prior periods to reflect the Share Consolidation effected on May 11, 2020 (Note 2(a)).
(2) 
Included in share-based compensation is $10.4 million (June 30, 2019 - $15.1 million) expense relating to milestone payments for the year ended June 30, 2020 of which $5.4 million (June 30, 2019 - $7.4 million) relates to Anandia Laboratories Inc. (Note 12(b)(ii)), $4.5 million (June 30, 2019 - $7.6 million) relates to Whistler Medical Marijuana Corporation (Note 12(b)(v)), and $0.4 million (June 30, 2019 - $0.1 million) relates to an immaterial acquisition.
(3) 
Of the total $61.1 million share-based compensation reserve, $1.2 million was capitalized to property, plant and equipment for the year ended June 30, 2020 (June 30, 2019 - $2.1 million).

As at June 30, 2020, there are 50,282 shares in escrow (June 30, 2019 - 60,271 common shares). These securities were originally deposited in escrow on November 30, 2017 in connection with the acquisition of H2 Biopharma Inc. The escrowed common shares are to be released upon receipt of relevant licenses to cultivate and sell cannabis. During the year ended June 30, 2020, the Company released 9,989 escrowed common shares upon receipt of these licenses (year ended June 30, 2019 - 174,938 common shares).

The accompanying notes are an integral part of these Consolidated Financial Statements.

10


AURORA CANNABIS INC.
Consolidated Statements of Changes in Equity
Years ended June 30, 2020 and 2019
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)


(Continued)
 
 
Share Capital
 
Reserves
 
AOCI
Restated - Note 2(h)

 
 
 
 
Common Shares

Amount

 
Share-Based
Compensation

Compensation
Options/
Warrants

Convertible Notes

Change in
Ownership
Interest

Total
Reserves

 
Fair
Value

Deferred
Tax

Associate OCI Pick-up

Foreign Currency Translation

Total
AOCI

Retained Earnings
(Deficit)

Non-Controlling Interests

Total

 
 
#

$

 
$

$

$

$

$

 
$

$

 
$

$

 
$

$

Balance, June 30, 2018
 
47,342,761

1,466,433

 
38,335

307

41,792

(85,719
)
(5,285
)
 
(539
)
(55
)

61

(533
)
87,748

4,562

1,552,925

Shares issued for business combinations & asset acquisitions
17(b)(i)
35,943,803

3,060,894

 
75,490

27,111



102,601

 







3,163,495

Shares issued for earn out payments
 
20,311

18,227

 





 







18,227

Conversion of convertible debentures
 
27,611

1,539

 


(520
)

(520
)
 







1,019

Deferred tax on convertible debentures
 


 


413


413

 







413

Exercise of stock options
18(a)
1,202,242

108,150

 
(60,776
)



(60,776
)
 







47,374

Exercise of warrants
17(c)
187,685

13,903

 

(1,964
)


(1,964
)
 







11,939

Exercise of compensation options
17(d)
300

38

 

(21
)


(21
)
 







17

Exercise of RSUs
18(b)
61,849

2,482

 
(2,482
)



(2,482
)
 








Forfeited options
 


 
(674
)



(674
)
 





674



Share-based compensation
18(a)(b)


 
94,054

15,062



109,116

 







109,116

Contribution from non-controlling interest
13


 





 






5,854

5,854

Change in ownership interests in subsidiaries
13


 



(1,081
)
(1,081
)
 






1,081


Australis Capital first tranche private placement proceeds
5(i)

7,800

 





 







7,800

Australis Capital NCI reclass on loss of control
 

(6,348
)
 





 






6,348


Spin-out of Australis Capital
5(i)


 





 





(151,695
)
(6,348
)
(158,043
)
Reclass gain from Australis Capital shares on derecognition upon spin-out
 


 





 
(76,873
)
6,402



(70,471
)
70,471



Comprehensive income (loss) for the period
 


 





 
(78,837
)
11,948

352

(5,629
)
(72,166
)
(293,509
)
(7,087
)
(372,762
)
Balance, June 30, 2019
 
84,786,562

4,673,118

 
143,947

40,495

41,685

(86,800
)
139,327

 
(156,249
)
18,295

352

(5,568
)
(143,170
)
(286,311
)
4,410

4,387,374


The accompanying notes are an integral part of these Consolidated Financial Statements.

11


AURORA CANNABIS INC.
Consolidated Statements of Cash Flows
Years ended June 30, 2020 and 2019
(Amounts reflected in thousands of Canadian dollars)

 
 
Year ended June 30,
 
 
 
 
Restated - Note 2(h)

 
Notes
2020

2019

 
 
$

$

Operating activities
 
 
 
Net loss from continuing operations
 
(3,300,493
)
(300,740
)
Adjustments for non-cash items:
 
 
 
Unrealized gain on changes in fair value of biological assets
8
(56,614
)
(92,503
)
Changes in fair value included in inventory sold
 
91,825

71,821

Depreciation of property, plant and equipment
10
74,314

45,362

Amortization of intangible assets
14
40,577

42,893

Share-based compensation
18(a)(b)
59,899

107,039

Non-cash acquisition costs
 

4,243

Impairment of property, plant and equipment
10
157,838


Impairment of investment in associate
7
75,035

73,289

Impairment of intangible assets and goodwill
14
2,544,144

9,002

Accrued interest and accretion expense
15, 16
18,591

22,798

Interest and other income
 
(4,835
)
(265
)
Deferred tax expense (recovery)
 
(78,303
)
(23,909
)
Other (losses) gains, net
20
28,643

(109,464
)
Foreign exchange loss
 
12,779

(3,814
)
Changes in non-cash working capital
21
7,643

(37,285
)
Net cash used in operating activities from discontinued operations
 
(8,995
)
(712
)
Net cash used in operating activities
 
(337,952
)
(192,245
)
 
 
 
 
Investing activities
 
 
 
Marketable securities and derivative investments
6
(2,000
)
(50,584
)
Proceeds from disposal of marketable securities and derivatives
6
90,843

46,975

Purchase of property, plant and equipment, and intangible assets
10
(355,006
)
(414,190
)
Disposal of property, plant and equipment
10
3,739


Acquisition of businesses, net of cash acquired
12
280

114,213

Payment of contingent consideration
 
(1,993
)
(4,112
)
Loan receivable
 
(3,643
)

Dividends received
 

828

Deposits
 
(17,744
)
(5,452
)
Proceeds from disposal of investment in associates
5(c)
27,600

134

Net cash used in investing activities from discontinued operations
 
8,441

(109
)
Net cash used in investing activities
 
(249,483
)
(312,297
)
 
 
 
 
Financing activities
 
 
 
Proceeds from long-term loans
 
86,394

605,104

Repayment of long-term loans
 
(115,130
)
(21,126
)
Repayment of short-term loans
 

(238
)
Repayment of convertible debenture
 
(2,306
)

Payments of principal portion of lease liabilities
 
(7,788
)

Proceeds from lease inducements
 
1,746


Restricted cash
 
46,066

(32,668
)
Financing fees
 
(1,789
)
(18,709
)
Shares issued for cash, net of share issue costs
 
575,506

59,331

Capital contribution from non-controlling interest
 

5,854

Net cash used in financing activities from discontinued operations
 
(137
)

Net cash provided by financing activities
 
582,562

597,548

Effect of foreign exchange on cash and cash equivalents
 
(5,675
)
2,936

Increase (decrease) in cash and cash equivalents
 
(10,548
)
95,942

Cash and cash equivalents, beginning of year
 
172,727

76,785

Cash and cash equivalents, end of year
 
162,179

172,727

Supplemental cash flow information (Note 21)
The accompanying notes are an integral part of these Consolidated Financial Statements.

12


AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2020 and 2019
(Tabular amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 


Note 1
Nature of Operations

Aurora Cannabis Inc. (the “Company” or “Aurora”) was incorporated under the Business Corporations Act (British Columbia) on December 21, 2006 as Milk Capital Corp. Effective October 2, 2014, the Company changed its name to Aurora Cannabis Inc. The Company’s shares are listed on the New York Stock Exchange (“NYSE”) and the Toronto Stock Exchange (“TSX”) under the trading symbol “ACB”, and on the Frankfurt Stock Exchange (“FSE”) under the trading symbol “21P”.

The Company’s head office and principal address is 4818 31 Street East, Edmonton International Airport, Alberta, Canada, T9E 0V6. The Company’s registered and records office address is Suite 1500 – 1055 West Georgia Street, Vancouver, BC, Canada, V6E 4N7.

The Company’s principal strategic business lines are focused on the production, distribution and sale of cannabis and cannabis related products in Canada and internationally. Aurora currently conducts the following key business activities in the jurisdictions listed below:

Production, distribution and sale of medical and consumer cannabis products in Canada pursuant to the Cannabis Act; and
Distribution of wholesale medical cannabis in the European Union (“EU”) pursuant to the German Medicinal Products Act and German Narcotic Drugs Act.

The United States (“U.S”) represents the largest cannabis and hemp-derived cannabidiol (“CBD”) market globally and as such, Aurora continues
to evaluate its alternatives to establishing an operating footprint in the U.S. During the year ended June 30, 2020 the Company acquired Reliva, LLC (Note 12(a)(i)) as an entry into this market. As part of the U.S market strategy, we continue to consider how various state and federal regulations affect the Company’s business prospects. The Company is committed to only engage in activities which are permissible under both state and federal laws.

During the year ended June 30, 2020, the Company announced a business transformation plan intended to better align the business financially with the current realities of the cannabis market in Canada while maintaining a sustainable platform for long-term growth. These actions include the rationalization of selling, general and administrative expenses through a reduction in corporate and production staff. The Company has also initiated a plan to wind down and close operations at five Canadian facilities including Aurora Prairie, Aurora Mountain, Aurora Ridge, Aurora Vie, and Aurora Eau. Refer to Note 3 for further details regarding these restructuring actions.

Note 2
Significant Accounting Policies and Judgments

IFRS requires management to make judgments, estimates, and assumptions that affect the carrying values of certain assets and liabilities and the reported amounts of income and expenses during the period. Actual results may differ from these judgments, estimates, and assumptions.

Significant accounting policies, which affect the consolidated financial statements as a whole, as well as key accounting estimates and areas of significant judgment are highlighted in this section. This note also describes change in accounting policies, new accounting standards, which have been adopted during 2020, and new accounting pronouncements, which are not yet effective but are expected to impact the Company’s consolidated financial statements in the future. Accounting policies, estimates, or judgments that have a significant effect on the amounts recognized in the financial statements include investment in associates and joint ventures (Note 7), biological assets (Note 8), inventory (Note 9), estimated useful lives of property, plant and equipment and intangible assets (Note 10 and 14), impairment of non-financial assets (Note 10 and 14), business combinations (Note 12), convertible debentures (Note 15), share-based compensation (Note 18), deferred tax assets (Note 22), segmented information (Note 26) and the fair value of financial instruments (Note 27).

(a)
Basis of Presentation and Measurement

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”).

For comparative purposes, the Company has reclassified certain immaterial items on the comparative consolidated statement of financial position and the consolidated statement of comprehensive loss to conform with current period’s presentation.

On May 11, 2020, the Company completed a one-for-twelve (1:12) reverse share split of all of its issued and outstanding common shares (“Share Consolidation”), resulting in a reduction in the issued and outstanding shares from 1,321,072,394 to 110,089,377. Shares reserved under the Company’s equity and incentive plans were adjusted to reflect the Share Consolidation. All share and per share data presented in the Company’s consolidated financial statements have been retroactively adjusted to reflect the Share Consolidation unless otherwise noted.

These consolidated financial statements were approved and authorized for issue by the Board of Directors of the Company on September 24, 2020.

(b)
COVID-19 Estimation Uncertainty

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. Government measures to limit the spread of COVID-19, including the closure of non-essential businesses, did not materially disrupt the Company’s operations during the year ended June 30, 2020. The production and sale of cannabis have been recognized as essential services across Canada and Europe. As of June 30, 2020, we have also not observed any material impairments of our assets or a significant change in the fair value of assets due to the COVID-19 pandemic.

Due to the rapid developments and uncertainty surrounding COVID-19, it is not possible to predict the impact that COVID-19 will have on our business, financial position and operating results in the future. In addition, it is possible that estimates in the Company’s financial statements will change in the near term as a result of COVID-19 and the effect of any such changes could be material, which could result in, among other things,

13


AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2020 and 2019
(Tabular amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 


impairment of long-lived assets including intangibles and goodwill. The Company is closely monitoring the impact of the pandemic on all aspects of its business.

(c)    Basis of Consolidation

The consolidated financial statements include the financial results of the Company and its subsidiaries. Subsidiaries include entities which are wholly-owned as well as entities over which Aurora has the authority or ability to exert power over the investee’s financial and/or operating decisions (i.e. control), which in turn may affect the Company’s exposure or rights to the variable returns from the investee. The consolidated financial statements include the operating results of acquired or disposed entities from the date control is obtained or the date control is lost, respectively. All intercompany balances and transactions are eliminated upon consolidation.

The Company’s principal subsidiaries are as follows:
Major subsidiaries
Percentage Ownership
Functional Currency
1769474 Alberta Ltd. (“1769474”)
100%
Canadian Dollar
2105657 Alberta Inc. (“2105657”)
100%
Canadian Dollar
Aurora Cannabis Enterprises Inc. (“ACE”)
100%
Canadian Dollar
Aurora Deutschland GmbH (“Aurora Deutschland”)
100%
European Euro
Aurora Nordic Cannabis A/S (“Aurora Nordic”)
51%
Danish Krone
Cannimed Therapeutics Inc. (“CanniMed”)
100%
Canadian Dollar
H2 Biopharma Inc. (“H2” or “Aurora Eau”)
100%
Canadian Dollar
MedReleaf Corp. (“MedReleaf”)
100%
Canadian Dollar
Peloton Pharmaceuticals Inc. (“Peloton” or “Aurora Vie”)
100%
Canadian Dollar
Whistler Medical marijuana Corporation (“Whistler”)
100%
Canadian Dollar

All shareholdings are of ordinary shares or other equity. Other subsidiaries, while included in the consolidated financial statements, are not material and have not been reflected in the table above.

(d)
Foreign Currency Translation

The Company’s functional currency is the Canadian dollar. Transactions undertaken in foreign currencies are translated into Canadian dollars at daily exchange rates prevailing when the transactions occur. Monetary assets and liabilities denominated in foreign currencies are translated at period-end exchange rates and non-monetary items are translated at historical exchange rates. Realized and unrealized exchange gains and losses are recognized in the consolidated statements of comprehensive loss.

The assets and liabilities of foreign operations are translated into Canadian dollars using the period-end exchange rates. Income, expenses, and cash flows of foreign operations are translated into Canadian dollars using average exchange rates. Exchange differences resulting from the translation of foreign operations into Canadian dollars are recognized in other comprehensive loss and accumulated in equity.

(e)
Cash and Cash Equivalents

Cash and cash equivalents are financial assets that are measured at amortized cost, which approximate fair value. Cash and cash equivalents, cash deposits in financial institutions and other deposits that are highly liquid and readily convertible into cash. Restricted cash represents the minimum cash and cash equivalents balance that the Company must maintain pursuant to the terms of the secured credit agreement with the Bank of Montreal (Note 16(a)).

(f)
Government Grants

The Company is entitled to certain Canadian federal and provincial tax incentives for qualified expenditures. These investment tax credits (“ITCs”) are recorded as a reduction to the related expenditures in the fiscal period when there is reasonable assurance that such credits will be realized.

Investment tax credits, whether or not recognized in the financial statements, may be carried forward to reduce future Canadian federal and provincial income taxes payable. The Company applies judgment when determining whether the reasonable assurance threshold has been met to recognize ITCs in the financial statements. The Company must interpret eligibility requirements in accordance with Canadian income tax laws and must assess whether future taxable income will be available against which the ITCs can be utilized. Any changes in these interpretations and assessments could have an impact on the amount and timing of ITCs recognized in the financial statements.

(g)
Provisions

The Company recognizes provisions if there is a present obligation as a result of a past event, it is probable that the Company will be required to settle that obligation and the obligation can be reliably estimated. The amount recognized as a provision reflects management’s best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation.


14


AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2020 and 2019
(Tabular amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 


(h)
Change in Accounting Policy

Effective April 1, 2020, the Company elected to change its accounting policy for inventory costing of by-products. The process of growing and harvesting dried cannabis produces trim, which is now considered to be a by-product. Inventories of harvested cannabis, which now excludes trim, are transferred from biological assets to inventory at fair value less costs to sell at the point of harvest, which becomes the deemed cost. Historically, the Company pro-rated this deemed cost of inventory based on the total grams harvested. The Company now measures by-products at their net realizable value at point of harvest and deducts this value from the total deemed cost to derive a net cost for the main product. Additionally, the Company has elected to change its accounting policy with respect to the allocation of production management staff salaries, previously charged to general administrative expense, and now charged to inventory and cost of sales. The Company now allocates and capitalizes a portion of these salaries to inventory as opposed to expensing them directly in sales and marketing, and general and administrative expenses. The Company believes that the revised policies and presentation provides more accurate and relevant financial information to users of the consolidated financial statements. See Note 9 for the Company’s revised accounting policy on inventory costing.

Management has applied the change in accounting policy retrospectively. The consolidated financial statements for the year ended June 30, 2019 have been restated to reflect adjustments made as a result of this change in accounting policy. The following is a summary of the impacts to the statement of financial position, the statement of comprehensive loss, and the statement of cash flows for the year ended June 30, 2019:
June 30, 2019
As previously reported
 
Inventory Adjustments

Discontinued Operations
(Note 11(b))

June 30, 2019
Restated

Consolidated Statement of Financial Position
 
 
 
 
Biological assets
51,836

(1,269
)

50,567

Inventory
113,641

(2,320
)

111,321

Deferred tax liability
91,886

(916
)

90,970

Deficit
(283,639
)
(2,672
)

(286,311
)
Year ended
June 30, 2019
As previously reported
 
Inventory Adjustments

Discontinued Operations
(Note 11(b))

Year ended
June 30, 2019
Restated

Consolidated Statement of Comprehensive Loss
 
 
 
 
Cost of sales
112,526

11,252


123,778

Gross profit before fair value adjustments
135,413

(11,252
)
(2,403
)
121,758

 
 
 
 
 
Changes in fair value of inventory sold
72,129

(308
)

71,821

Unrealized gain on changes in fair value of biological assets
(96,531
)
4,028


(92,503
)
Gross profit
159,815

(14,972
)
(2,403
)
142,440

 
 
 
 
 
General and administration
172,365

(11,384
)
(1,912
)
159,069

 
 
 
 
 
Deferred tax (recovery) expense
(23,257
)
(916
)
264

(23,909
)
 
 
 
 
 
Net loss from continuing operations
(297,924
)
(2,672
)
(144
)
(300,740
)
Net loss attributable to Aurora shareholders
(290,837
)
(2,672
)

(293,509
)
Loss per share (basic and diluted)
(3.63
)
(0.03
)
n/a

(3.66
)
Year ended
June 30, 2019
As previously reported
 
Inventory Adjustments

Discontinued Operations
(Note 11(b))

Year ended
June 30, 2019
Restated

Consolidated Statement of Cash Flows
 
 
 
 
Unrealized gain on changes in fair value of biological assets
(96,531
)
4,028


(92,503
)
Changes in fair value of inventory sold
72,129

(308
)

71,821

Deferred tax expense (recovery)
(23,257
)
(916
)
264

(23,909
)
Changes in non-cash working capital
(37,952
)
(211
)
878

(37,285
)
Net cash used in operating activities
(192,245
)


(192,245
)

(i)
Adoption of New Accounting Pronouncements

(i)
IFRS 16 Leases

In January 2016, the IASB issued IFRS 16, Leases (“IFRS 16”), which replaces IAS 17, Leases (“IAS 17”) and related interpretations. The standard introduces a single lessee accounting model and requires lessees to recognize assets and liabilities for all leases with a term exceeding 12 months, unless the underlying asset is insignificant. 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. Lessors continue to classify leases as operating or finance, with lessor accounting remaining substantially unchanged from the preceding guidance under IAS 17. The Company adopted the standard on July 1, 2019 using the modified retrospective method, with the cumulative effect initially recognized in retained earnings, and no restatement of prior comparative periods.


15


AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2020 and 2019
(Tabular amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 


Under IAS 17, a lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership to the Company. A lease 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 equipment or the lease term.

The majority of our property leases, which were previously treated as operating leases, were impacted by IFRS 16. The adoption of IFRS 16 has resulted in:

i)
higher non-current assets related to the initial recognition of the present value of our unavoidable future lease payments as right-of-use assets under property, plant and equipment, adjusted by the amount of any prepaid or accrued lease payments relating to the lease recognized in the balance sheet as at July 1, 2019;
ii)
higher current and non-current liabilities related to the concurrent recognition of lease liabilities, which are measured at the present value of the remaining fixed lease payments, discounted by our weighted average incremental borrowing rate of 5.62% as of July 1, 2019;
iii)
replacement of rent expense previously recorded in cost of goods sold, general and administration, and sales and marketing expenses with depreciation expense of these right-of-use assets and higher finance costs related to the accretion and interest expense of the corresponding lease liabilities; and
iv)
variable lease payments and non-lease components are expensed as incurred.

The new standard does not change the amount of cash transferred between the lessor and lessee but impacts the presentation of the operating and financing cash flows presented on the Company’s consolidated statement of cash flows by decreasing operating cash flows and increasing financing cash flows.

The Company elected to apply the following recognition exemptions and practical expedients, as described under IFRS 16:

i)
recognition exemption of short-term leases;
ii)
recognition exemption of low-value leases;
iii)
application of a single discount rate to a portfolio of leases with similar characteristics on transition;
iv)
exclusion of initial direct costs from the measurement of the right-of-use assets upon transition;
v)
application of hindsight in determining the applicable lease term at the date of transition; and
vi)
election to not separate non-lease components from lease components, and instead account for each lease component and any associated non-lease components as a single lease component.

The following table summarizes the adjustments to opening balances resulting from the initial adoption of IFRS 16:
As at July 1, 2019
As previously reported under IAS 17

IFRS 16 transition adjustments

Inventory restatement adjustments
(Note 2(h))

As reported under
IFRS 16

 
$

$

 
$

Prepaid deposits
24,323

(585
)

23,738

Property, plant and equipment
765,567

96,049


861,616

Current loans and borrowings
(13,758
)
(6,630
)

(20,388
)
Non-current loans and borrowings
(127,486
)
(88,834
)

(216,320
)
Deficit
283,639


2,672

286,311


The following table reconciles the operating lease commitments as at June 30, 2019 to the opening balance of lease liabilities as at July 1, 2019:
Operating lease commitments as at June 30, 2019
$
94,780

Add: finance lease liabilities recognized as at June 30, 2019
1,326

Add: adjustments as a result of a different treatment for extension and termination options
94,829

Effect of discounting using the lessee's incremental borrowing rate
(88,767
)
Less: lease commitments not yet in effect
(4,068
)
Less: short-term, low-value asset leases and others
(1,318
)
Lease liabilities recognized as at July 1, 2019
$
96,782


As a result of adopting IFRS 16, the Company updated its lease accounting policies as follows:

The Company assesses whether a contract is or contains a lease at inception of the contract. A lease is recognized as a right-of-use asset and corresponding liability at the commencement date. Each lease payment included in the lease liability is apportioned between the repayment of the liability and a finance cost. The finance cost is recognized in “finance and other costs” in the consolidated statement of comprehensive loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability. Lease liabilities represent the net present value of fixed lease payments (including in-substance fixed payments); variable lease payments based on an index, rate, or subject to a fair market value renewal condition; amounts expected to be payable by the lessee under residual value guarantees, the exercise

16


AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2020 and 2019
(Tabular amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 


price of a purchase option if the lessee is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if it is probable that the lessee will exercise that option.

The Company’s lease liability is recognized net of lease incentives receivable. The lease payments are discounted using the interest rate implicit in the lease or, if that rate cannot be determined, the lessee’s incremental borrowing rate. The period over which the lease payments are discounted is the expected lease term, including renewal and termination options that the Company is reasonably certain to exercise.

Payments associated with short-term leases and leases of low-value assets are recognized as an expense on a straight-line basis in general and administration and sales and marketing expense in the consolidated statement of comprehensive loss. Short-term leases are defined as leases with a lease term of 12 months or less. Variable lease payments that do not depend on an index, rate, or subject to a fair market value renewal condition are expensed as incurred and recognized in costs of goods sold, general and administration, or sales and marketing expense, as appropriate given how the underlying leased asset is used, in the consolidated statement of comprehensive loss.

Right-of-use assets are measured at cost, which is calculated as the amount of the initial measurement of lease liability plus any lease payments made at or before the commencement date, any initial direct costs and related restoration costs. The right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the useful life of the underlying asset. The depreciation is recognized from the commencement date of the lease.

If the right-of-use asset is subsequently leased to a third party (a “sublease”), the Company will assess the classification of the sublease as to whether it is a finance or operating lease. Subleases that are classified as an operating lease will recognize lease income while a financing lease will recognize a lease receivable and de-recognize the carrying value of the right-of-use asset, with the difference recorded in profit of loss.

(ii)    IFRIC 23 Uncertainty Over Income Tax Treatments

IFRIC 23 provides guidance that adds to the requirements in IAS 12, Income Taxes by specifying how to reflect the effects of uncertainty in accounting for income taxes. IFRIC 23 requires an entity to determine whether uncertain tax positions are assessed separately or as a group; and assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be used, by an entity in its income tax filings. If yes, the entity should determine its accounting tax position consistently with the tax treatment used or planned to be used in its income tax filings. If not, the entity should reflect the effect of uncertainty in determining its accounting tax position. The Company adopted IFRIC 23 effective July 1, 2019 and was applied using the modified retrospective approach without restatement of comparative information. There was no material impact on the Company’s consolidated financial statements.

(iii)    Amendments to IFRS 16: COVID-19 Related Rent Concessions

The amendment exempts lessees from having to consider individual lease contracts to determine whether rent concessions occurring as a direct consequence of the COVID-19 pandemic are lease modifications and allows lessees to account for such rent concessions as if they were not lease modifications. It applies to COVID-19-related rent concessions that reduce lease payments due on or before June 30, 2021. The amendment is effective June 1, 2020 but, to ensure the relief is available when needed most, lessees can apply the amendment immediately in any financial statements not yet authorized for issue. The Company adopted this amendment during the year ended June 30, 2020, however it did not have a material impact to the Company’s consolidated financial statements.

(j)
New Accounting Pronouncements

The following IFRS standards have been recently issued by the IASB. Pronouncements that are irrelevant or not expected to have a significant impact have been excluded.

(i)    Amendments to IFRS 3: Definition of a Business

In October 2018, the IASB issued “Definition of a Business (Amendments to IFRS 3)”. The amendments clarify the definition of a business, with the objective of assisting entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition. The amendment provides an assessment framework to determine when a series of integrated activities is not a business. The amendments are effective for business combinations occurring on or after the beginning of the first annual reporting period beginning on or after January 1, 2020. The Company has evaluated the potential impact of these amendments and concluded that there is no impact to the Company’s consolidated financial statements.

(ii)    Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform

The amendments revise the existing requirements for hedge accounting and are designed to support the provision of useful financial information by companies during the period of uncertainty arising from the phasing out of interest-rate benchmarks such as Interbank Offered Rates (“IBOR”). The amendments modify some specific hedge accounting requirements to provide relief from potential effects of the uncertainty caused by the IBOR reform. In addition, the amendments require companies to provide additional information to investors about their hedging relationships which are directly affected by these uncertainties. The amendments are effective for annual periods beginning on or after January 1, 2020, with earlier application permitted. The Company is currently evaluating the potential impact of these amendments and does not expect significant impacts on the Company’s consolidated financial statements.


17


AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2020 and 2019
(Tabular amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 


(iii)    Amendments to IAS 1: Classification of Liabilities as Current or Non-current

The amendment clarifies the requirements relating to determining if a liability should be presented as current or non-current in the statement of financial position. Under the new requirement, the assessment of whether a liability is presented as current or non-current is based on the contractual arrangements in place as at the reporting date and does not impact the amount or timing of recognition. The amendment applies retrospectively for annual reporting periods beginning on or after January 1, 2022. The Company is currently evaluating the potential impact of these amendments on the Company’s consolidated financial statements.

(iv) Amendments to IAS 37: Onerous Contracts and the cost of Fulfilling a Contract

The amendment specifies that ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract or an allocation of other costs that relate directly to fulfilling contracts. The amendment is effective for annual periods beginning on or after January 1, 2022 with early application permitted. The Company is currently evaluating the potential impact of these amendments on the Company’s consolidated financial statements.

Note 3    Restructuring Provision
Accounting Policy

A restructuring provision is recognized when the Company has developed a detailed formal plan for the restructuring and has raised a valid expectation that it will carry out the restructuring by starting to implement the plan or announcing its main features to those individuals who are affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which reflect amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity.

As described in Note 1, during the year ended June 30, 2020, the Company initiated a plan to close operations at certain production facilities in order to focus on production and manufacturing at the Company’s larger scale facilities. Additionally, the Company reduced the number of corporate and production level employees across the organization in an effort to reduce spending. The Company recorded restructuring charges of $1.9 million for the year ended June 30, 2020 relating to workforce reductions.

The provisions for restructuring and other charges represent the present value of the best estimate of the future outflow of economic benefits that will be required to settle the expected liabilities and may vary as a result of new events affecting the severances that will need to be paid.
 
Total

 
$

Initial recognition
1,947

Payments
(1,390
)
Balance at June 30, 2020
557


Note 4    Accounts Receivable
Accounting Policy

Accounts receivable are recognized initially at fair value and subsequently measured at amortized cost, less any provisions for impairment. Financial assets measured at amortized cost are assessed for impairment at the end of each reporting period. Impairment provisions are estimated using the expected credit loss impairment model where any expected future credit losses are provided for, irrespective of whether a loss event has occurred at the reporting date.

Estimates of expected credit losses take into account the Company’s collection history, deterioration of collection rates during the average credit period, as well as observable changes in and forecasts of future economic conditions that affect default risk. Where applicable, the carrying amount of a trade receivable is reduced for any expected credit losses through the use of an allowance for doubtful accounts (“AFDA”) provision. Changes in the AFDA provision are recognized in the statement of comprehensive loss. When the Company determines that no recovery of the amount owing is possible, the amount is deemed irrecoverable and the financial asset is written off.

 
 
June 30, 2020

June 30, 2019

 
 
$

$

Trade receivables
Note 28(a)
45,199

83,877

Sales taxes receivable
 
5,912

18,261

Other receivables(1)
 
2,999

1,355

 
 
54,110

103,493

(1) 
Includes interest receivable from the secured convertible debenture held in Choom Holdings Inc. and unsecured convertible debentures held in High Tide (Note 5(f) and 5(h))


18


AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2020 and 2019
(Tabular amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 


Note 5    Strategic Investments

(a)
Cann Group Limited (“Cann Group”)

Cann Group is a public company listed on the Australian Stock Exchange and is licensed in Australia for research and cultivation of medical cannabis for human use.

As of June 30, 2020, the Company held an aggregate of 31,956,347 shares in Cann Group (June 30, 201931,956,347), representing a 22.4% ownership interest (June 30, 201922.5%). Given that the Company has significant influence over Cann Group, the investment has been accounted for under the equity method (Note 7). Based on Cann Group’s closing stock price of A$0.79 on June 30, 2020 (June 30, 2019 – A$1.96), the 31,956,347 shares classified under investment in associates have a fair value of approximately $23.4 million (A$25.0 million) (June 30, 2019 – $57.0 million (A$62.0 million)). During the year ended June 30, 2020, the Company assessed the carrying value of the investment against the estimated recoverable amount. As a result, the Company recognized $37.2 million of impairment charges for the year ended June 30, 2020 (year ended June 30, 2019 $18.2 million impairment loss) through the statement of comprehensive loss (Note 7).

(b)
Radient Technologies Inc. (“Radient”)

Radient is a public company listed on the TSXV. Radient provides industrial-scale manufacturing solutions for premium natural ingredients and products.

As of June 30, 2020, the Company held an aggregate of 37,643,431 shares in Radient (June 30, 2019 37,643,431) with a fair value of $6.0 million (June 30, 2019 - $30.9 million) resulting in an unrealized loss of $24.8 million for the year ended June 30, 2020 (year ended June 30, 2019 - $13.2 million unrealized fair value loss).

During the year ended June 30, 2020, the Company’s 4,541,889 warrants in Radient expired unexercised, resulting in the recognition of an unrealized loss of $0.1 million. At June 30, 2019, the 4,541,889 warrants had a fair value of $0.1 million resulting in an unrealized loss of $1.3 million for the year ended June 30, 2019. The June 30, 2019 fair value of the warrants were estimated using the Binomial model with the following assumptions: risk-free interest rate of 1.52%; dividend yield of 0%; historical stock price volatility of 75.10%; and an expected life of 0.45 years.

(c)
Alcanna Inc. (“Alcanna”)

Alcanna is an Alberta based public company listed on the TSX. Its principal business activity is the retailing of wines, beers and spirits in Canada. Alcanna has also developed and launched a retail cannabis business in Alberta and Ontario, and has advanced plans to develop and launch a retail cannabis business in other Canadian jurisdictions where private retailing is permitted.

(i)
Common Shares and Investment in Associate

During the year ended June 30, 2020, the Company disposed of its investment in Alcanna, representing 9,200,000 common shares or a 24.8% ownership interest. The Company received gross proceeds of $27.6 million at an average price of $3.00 per share and recognized a $12.0 million accounting gain on disposal. The proceeds were used to repay a portion of the Credit Facility (Note 16(a)). Prior to the disposal, management had significant influence over Alcanna and accounted for the investment using the equity method (Note 7). During the year ended June 30, 2020, the Company assessed the carrying value of the investment against the estimated recoverable amount. As a result, the Company recognized $27.7 million of impairment charges for the year ended June 30, 2020 (year ended June 30, 2019 – $68.7 million impairment loss). As of June 30, 2020, the Company no longer holds any shares of Alcanna.

(ii)
Warrants

During the year ended June 30, 2020, 10,130,000 warrants expired unexercised and 1,750,000 warrants were canceled. As at June 30, 2020 the Company has no warrants in Alcanna (June 30, 201911,880,000).

(d)
Capcium Inc. (“Capcium”)

Capcium is a Montreal-based private company which is in the business of manufacturing soft-gels.

On September 7, 2018, the Company purchased 4,883 convertible debentures for a total cost of $4.9 million. The 4,883 convertible debentures bear interest at 8% per annum and mature on September 5, 2020. The debentures are convertible at the option of Aurora upon the occurrence of a Liquidity Event (as defined below) into units of Capcium at the lesser of (i) the price that is 20% discount to the Liquidity Event Price; and (ii) the price determined based on a pre-money value of $80.0 million at the time of the Liquidity Event. Each unit consists of one common share and one common share purchase warrant exercisable into one common share at a price that is 50% greater than the conversion price for 2 years from the completion of a Liquidity Event. A Liquidity Event is defined as the occurrence of either a public offering, a reverse take-over or a merger transaction which results in the common shares of Capcium being listed on a recognized stock exchange. On June 30, 2019, as Capcium had not completed a Liquidity Event, the Company received 488 additional convertible debentures for no additional consideration in accordance with the terms under the original agreement.

As at June 30, 2020, the convertible debentures had a nil fair value (June 30, 2019 $7.5 million)(Note 6(b)), which resulted in an unrealized loss of $7.5 million for the year ended June 30, 2020 (year ended June 30, 2019 $2.6 million). The fair value of the convertible debenture was estimated using the Monte-Carlo and FINCAD model with the following assumptions: share price of $1.13 (June 30, 2019 $1.13); risk-free rate of 1.96% (June 30, 2019 1.83%); dividend yield of 0% (June 30, 2019 0%); stock price volatility of 39.0% (June 30, 2019 46.0%); an expected life of

19


AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2020 and 2019
(Tabular amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 


0.20 years (June 30, 2019 1.44 years); adjusted for a credit spread of 26% (June 30, 2019 26%) and a probability factor of 0% (June 30, 2019 80%) for the Liquidity Event. The Company also considers the probability of collection in its assessment of fair value. If the estimated volatility increased or decreased by 10%, the estimated change in fair value would be negligible.

As of June 30, 2020, the Company held 8,828,662 common shares (June 30, 20198,828,662) in Capcium representing a 19% ownership interest (June 30, 201920.0%). Given that the Company has significant influence over Capcium, the investment has been accounted for under the equity method (Note 7). During the year ended June 30, 2020, the Company identified indicators of impairment within its investment in Capcium and as such assessed the carrying value of the investment against the estimated recoverable amount. The recoverable amount of the investment in Capcium was determined using a value-in-use calculation by discounting the most recent expected future net cash flows to the Company from the investment in Capcium. As a result, the Company recognized $9.0 million of impairment charges for the year ended June 30, 2020 (year ended June 30, 2019 nil), which has been recognized through the statement of comprehensive loss.

In July 2020, the convertible debenture was converted into 5,371,300 Class A preferred shares. In addition, the Company subscribed to 1,851,086 Class B preferred shares in Capcium for $1.9 million as part of the amendment to the March 29, 2019 manufacturing agreement, to reduce the annual minimum purchase commitment by 20.0 million capsules.

(e)
The Green Organic Dutchman Holdings Ltd. (“TGOD”)

TGOD is an Ontario based licensed producer of cannabis in Canada, which is publicly listed on the TSX.

On September 27, 2018, due to the resignation of Aurora’s Board representative from TGOD’s Board of Directors and other qualitative factors, the Company no longer held significant influence in TGOD. As a result, the $131.0 million carrying value of the 39,674,584 common shares held in TGOD was derecognized from investment in associates (Note 7) and reclassified to marketable securities (Note 6(a)) at its fair value of $275.3 million, calculated based on the September 27, 2018 quoted market price of $6.94. This resulted in the recognition of a $144.4 million fair value gain on the deemed disposal of the equity investment during the year ended June 30, 2019.

During the year ended June 30, 2020, the Company sold its remaining 28,833,334 common shares (year ended June 30, 201910,841,250) of TGOD for gross proceeds of $86.5 million (year ended June 30, 2019$47.4 million) at an average price of $3.00 per share (year ended June 30, 2019$4.37). As a result, the Company recognized a realized loss of $115.3 million during the year ended June 30, 2020 (year ended June 30, 2019$28.3 million), of which $6.7 million were losses recognized during the year ended June 30, 2020. The realized loss was calculated based on the deemed cost of $6.94 per share which represents the September 27, 2018 quoted market price at the time the Company lost significant influence. As at June 30, 2020, the Company no longer holds any shares of TGOD, however, the Company continues to hold 16,666,667 subscription receipt warrants.

As of June 30, 2020, the $1.1 million fair value (June 30, 2019 – $23.5 million) of the remaining 16,666,667 subscription receipt warrants (Note 6(b)) was estimated using the quoted market price of $0.065 (June 30, 2019 $1.41), contributing to a fair value loss of $22.4 million for the year ended June 30, 2020. During the year ended June 30, 2019, Aurora’s milestone options in TGOD expired unexercised which resulted in a total fair value loss of $71.5 million, of which $43.9 million and $27.6 million was attributed to the subscription receipt warrants and milestone options, respectively.

During the year ended June 30, 2020, 3,170,625 participation right warrants in TGOD expired unexercised resulting in an unrealized loss of $0.6 million. As at June 30, 2019, the 3,170,625 participation right warrants had a fair value of $0.6 million which was estimated using the Monte-Carlo model with the following weighted average assumptions: share price of $3.23; risk-free interest rate of 1.77%; dividend yield of 0%; stock price volatility of 74.56%; and an expected life of 0.84 years.

(f)
Choom Holdings Inc. (“Choom”)

Choom is an emerging consumer cannabis company that is developing retail networks across Canada. Choom is publicly listed on the Canadian Securities Exchange.

On November 2, 2018, the Company subscribed for a $20.0 million unsecured convertible debenture in Choom bearing interest at 6.5% per annum and maturing on November 2, 2022. As at June 30, 2020, the interest receivable balance from Choom was $1.5 million (June 30, 2019 - $0.8 million) (Note 4). The debenture is convertible into common shares of Choom at $1.25 per share after March 3, 2019. In connection with the debenture, the Company also received an aggregate of 96,464,248 share purchase warrants in Choom. The share purchase warrants are exercisable between $1.25 and $2.75 per share beginning November 2, 2018 and expire on November 2, 2020. Per the terms of the arrangement and in accordance with the Cannabis Retail Regulations in Ontario, licensed producers are subject to an ownership interest in licensed retailers. On December 12, 2019, the Cannabis Retail Regulations in Ontario was amended increasing the ownership restriction to 25% from 9.9%.

On June 24, 2020, the Company executed an amendment to the convertible debenture which grant the Company a second ranking security interest over Choom’s present and after-acquired property. Furthermore, the conversion price of the debenture has been reduced from $1.25 to $0.65 per share.

(i)
Common Shares and Investment in Associate

As a result of the amendment to the Cannabis Retail Regulations in Ontario, the Company now has the right to acquire up to 25% of the voting rights in Choom, resulting in the Company obtaining significant influence in Choom effective December 12, 2019, being the date of the amendment. The 9,859,155 common shares had a fair value of $1.8 million based on a quoted market price of $0.18 and was reclassified from marketable securities (Note 6(a)) to investment in associates (Note 7). The Company recognized an unrealized loss of $2.6 million for the year ended June 30,

20


AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2020 and 2019
(Tabular amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 


2020, and the cumulative unrealized loss of $5.2 million as at December 12, 2019 was reclassified from other comprehensive loss to deficit. As of June 30, 2020, the Company held 9,859,155 (June 30, 20199,859,155) common shares in Choom, representing a 4.37% (June 30, 2019 8.0%) ownership interest with a fair value of $1.4 million (June 30, 2019 – $4.4 million) based on the closing stock price of $0.14 (June 30, 2019 – $0.45). During the year ended June 30, 2020, the Company assessed the carrying value of the investment against the estimated recoverable amount and as a result, recognized an impairment charge of $0.4 million (year ended June 30, 2019 nil) which has been recognized through the statement of comprehensive loss.

(ii)
Convertible Debenture

As of June 30, 2020, the convertible debenture had a fair value of $20.5 million (June 30, 2019 $19.3 million) resulting in an unrealized gain of $1.1 million for the year ended June 30, 2020 (year ended June 30, 2019 $0.6 million unrealized loss). The fair value of the convertible debenture was estimated using the FINCAD model based on the following assumptions: share price of $0.14 (June 30, 2019 – $0.45); credit spread of 8.58% (June 30, 20198.24%); dividend yield of 0% (June 30, 20190%); stock price volatility of 121.88% (June 30, 201984.48%); and an expected life of 2.34 years (June 30, 20193.35 years).

(iii)
Warrants

As of June 30, 2020, the 96,464,248 share purchase warrants had a negligible fair value (June 30, 2019 - negligible) resulting in a negligible unrealized loss for the year ended June 30, 2020 (year ended June 30, 2019 – $0.1 million unrealized loss).

(g)
Investee-B

Investee-B is a private Canadian company that cultivates, manufactures and distributes medical cannabis products in Jamaica. On July 2, 2018, the Company subscribed to a $13.4 million (US $10.0 million) convertible debenture in Investee-B. 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 Investee-B at US $4.9585 at Aurora’s option until July 2, 2023.

The Company also entered into an Investor Rights Agreement, under which Aurora has the right to: (i) participate in any future equity offerings of Investee-B to enable Aurora to maintain its percentage ownership interest, and (ii) to nominate a director to Investee-B’s Board of Directors as long as the Company owns at least a 10% interest.

As of June 30, 2020, the convertible debenture had a fair value of $16.1 million (US $11.9 million) (June 30, 2019 $14.3 million (US $11.0 million))(Note 6(b)). The Company recognized unrealized gains of $1.5 million for the year ended June 30, 2020 (year ended June 30, 2019 $0.4 million unrealized loss)(Note 6(b)). The fair value was estimated using two coupled Black-Scholes models based on the following assumptions: estimated share price of $3.71 (June 30, 2019 $3.71); risk-free interest rate of 2.88% (June 30, 2019 1.75%); dividend yield of 0% (June 30, 2019 0%); stock price volatility of 44.45% (June 30, 2019 34.00%); credit spread of 74.90% (June 30, 2019 1.13%) and an expected life of 3.01 years (June 30, 2019 4.01 years). If the estimated volatility increases or decreases by 10%, the estimated fair value would increase or decrease by approximately $0.2 million (June 30, 2019 $0.2 million). If the estimated share price increases or decreased by 10%, the estimated fair value would increase or decrease by approximately $0.3 million (June 30, 2019 $0.3 million).

(h)
High Tide Inc. (“High Tide”)

High Tide is an Alberta based, retail focused cannabis and lifestyle accessories company and is publicly listed on the Canadian Securities Exchange.

On December 12, 2018, the Company invested $10.0 million in unsecured convertible debentures bearing an interest rate of 8.5% per annum and maturing on December 12, 2020 (the “December 2018 Debentures”). The December 2018 Debentures are convertible into common shares of High Tide at $0.75 per share at the option of the Company at any time after June 12, 2019.

On June 14, 2019, the Company invested $1.0 million in unsecured convertible debentures of High Tide bearing interest of 10.0% per annum, payable annually in advance in common shares of High Tide and maturing in two years from the date of issuance (the “June 2019 Debentures”). The June 2019 Debentures are convertible into common shares of High Tide at $0.75 per share at the option of the Company at any time after December 14, 2019.

On November 14, 2019, the Company invested $2.0 million in senior unsecured convertible debentures of High Tide bearing an interest rate of 10% per annum and maturing on November 14, 2021 (the “November 2019 Debentures”). The November 2019 Debentures are convertible into common shares of High Tide at $0.252 per share at the option of the Company any time after May 14, 2020.

The conversion of the December 2018 Debentures, June 2019 Debentures, and November 2019 Debentures are subject to Aurora holding no more than a 9.9% ownership interest in High Tide in accordance with the ownership restriction applicable to licensed producers under the Cannabis Retail Regulations in Ontario.

As of June 30, 2020, the convertible debentures had a fair value of $12.7 million (June 30, 2019 $10.2 million), resulting in an unrealized loss of $0.4 million for the year ended June 30, 2020 (year ended June 30, 2019 $0.8 million)(Note 6(b)). The fair value of the convertible debentures was estimated using the FINCAD model with the following assumptions: share price of $0.16 (June 30, 2019 $0.36); credit spread of 12.3% (June 30, 2019 13.5%); dividend yield of 0% (June 30, 2019 0%); stock price volatility of 106.0% (June 30, 2019 70.0%) and an expected life of 0.63 years (June 30, 2019 1.51 years).


21


AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2020 and 2019
(Tabular amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 


(i)
Australis Capital Inc. (“ACI”)

ACI is a public company that is focused on acquisitions in the cannabis space and more specifically, in technology supporting the cannabis industry, with a view of developing the infrastructure required to meet the demands of the growing United States cannabis market. ACI was previously wholly-owned by Aurora and was spun-out to Aurora shareholders on September 19, 2018. As of June 30, 2020 and June 30, 2019, the Company held the following restricted back-in right warrants:

(a)
22,628,751 warrants exercisable at $0.20 per share expiring September 19, 2028; and
(b)
The number of warrants equal to 20% of the number of common shares issued and outstanding in ACI as of the date of exercise. The warrants are exercisable at the five-day volume weighted average trading price (“VWAP”) of ACI’s shares and have an expiration date of September 19, 2028.

Aurora is restricted from exercising the back-in right warrants unless all of ACI’s business operations in the U.S. are permitted under applicable U.S. federal and state laws and Aurora has received consent of the TSX and any other stock exchange on which Aurora may be listed, as required. As of June 30, 2020, the warrants remain un-exercisable.

As of June 30, 2020, the warrants had a fair value of $3.2 million (June 30, 2019 $10.1 million) estimated using the Binomial model with the following assumptions: share price of $0.22 (June 30, 2019 $0.92); risk-free interest rate of 0.93% (June 30, 2019 1.81%); dividend yield of 0% (June 30, 2019 0%); stock price volatility of 116.01% (June 30, 2019 48.97%); an expected life of 8.23 years (June 30, 2019 9.23 years); and adjusted for a probability factor of legalization of cannabis in the U.S. under federal and certain state laws. As a result, the Company recognized a $6.9 million unrealized loss on fair value during the year ended June 30, 2020 (year ended June 30, 2019 – unrealized gain of $9.6 million)(Note 6(b)).

(j)
EnWave Corporation (“EnWave’)

EnWave is a Vancouver-based advanced technology company that has developed Radiant Energy Vacuum (“REV™”) – a proprietary method for the precise dehydration of organic materials. Enwave is publicly listed on the TSX Venture Exchange.

On April 25, 2019, the Company purchased 5,302,227 common shares of EnWave, representing a 4.9% ownership interest, in exchange for 840,576 common shares of Aurora with a fair value of $10.0 million. The $10.0 million fair value of the shares at initial recognition was based on a 5-day volume weighted average trading price of Aurora’s shares on the closing day.

On April 29, 2020, the Company sold the 5,302,227 common shares of EnWave Corporation at $0.80 per share for net proceeds of $4.1 million. Based on the deemed cost of $1.89 per share, which represents the April 25, 2019 quoted market price, the transaction resulted in a realized loss of $5.9 million. Of the $5.9 million realized loss, $8.5 million of fair value losses were recognized during the year ended June 30, 2020

As of June 30, 2020, the Company no longer holds any shares in Enwave. As at June 30, 2019, the 5,302,227 common shares in EnWave had a fair value of $12.6 million based on the $2.38 closing stock price and the Company recognized an unrealized fair value gain of $2.6 million through other comprehensive loss for the year ended June 30, 2019 (Note 6(a)).

22


AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2020 and 2019
(Tabular amounts in thousands of Canadian dollars, except share and per share amounts)
 
 
 

Note 6    Marketable Securities and Derivatives

(a)
Marketable securities
Accounting Policy

Marketable securities are initially measured at fair value and are subsequently measured at fair value through profit or loss (“FVTPL”) or are designated at fair value through other comprehensive income (loss) (“FVTOCI”). The Company designates its marketable securities as financial assets measured at FVTOCI. This designation is made on an instrument-by-instrument basis and if elected, subsequent changes in fair value are recognized in other comprehensive (loss) income only and not through profit or loss upon disposition.

As at June 30, 2020, the Company held the following marketable securities:
Financial asset hierarchy level
Level 1

Level 1

Level 1

Level 1

Level 1

Level 1

Level 3

 
Marketable securities designated at FVTOCI
Micron

Radient

TGOD

ACI

Choom

EnWave

Other immaterial investments

Total

 
Note 5(b)

Note 5(e)

Note 5(i)

Note 5(f)

Note 5(j)

 
$

$

$

$

$

$

$

$

Balance, June 30, 2018
2,426

44,043



12,719



59,188

(Disposals) additions


(46,663
)
228


10,000

1,091

(35,344
)
Transfer from investment in associates


275,342

5,360




280,702

Unrealized (loss) gain on changes in fair value
(1,278
)
(13,177
)
(135,547
)
76,873

(8,331
)
2,619

4

(78,837
)
Spin-out



(82,461
)



(82,461
)
Balance, June 30, 2019
1,148

30,866

93,132


4,388

12,619

1,095

143,248

Disposals
(191
)

(86,465
)


(4,138
)

(90,794
)
Transfer to investment in associates




(1,775
)


(1,775
)
Unrealized loss on changes in fair value
(957
)
(24,845
)
(6,667
)

(2,613
)
(8,481
)
(50
)
(43,613
)
Balance, June 30, 2020

6,021





1,045

7,066

 
 
 
 
 
 
 
 
 
Unrealized (loss) gain on marketable securities
 
 
 
 
 
 
 
 
Year ended June 30, 2019
 
 
 
 
 
 
 
 
OCI unrealized (loss) gain
(1,278
)
(13,177
)
(135,547
)
76,873

(8,331
)
2,619

4

(78,837
)
 
 
 
 
 
 
 
 
 
Year ended June 30, 2020
 
 
 
 
 
 
 
 
OCI unrealized loss
(957
)
(24,845
)
(6,667
)

(2,613
)
(8,481
)
(50
)
(43,613
)



23


AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2020 and 2019
(Tabular amounts in thousands of Canadian dollars, except share and per share amounts)
 
 
 

(b)
Derivatives
Accounting Policy

Derivatives are initially measured at fair value and are subsequently measured at FVTPL. If the transaction price does not equal to fair value at the point of initial recognition, management measures the fair value of each component of the investment and any unrealized gains or losses at inception are either recognized in profit or loss or deferred and recognized over the term of the investment, 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. Transaction costs, which are directly attributable to the acquisition of the investment, are expensed as incurred. Refer to Note 27 for significant judgments in determining the fair value of derivative financial instruments.

As of June 30, 2020, the Company held the following derivative investments:
Financial asset hierarchy level
Level 3

Level 3

Level 3

Level 2

Level 2

Level 2

Level 2

Level 2

Level 3

Level 2

Level 2

 
Derivatives and convertible debentures at FVTPL
Micron

Radient

Alcanna

CTT

Capcium

TGOD

ACI

Choom

Investee-B

High Tide

Namaste

Total

 
Note 5(b)

Note 5(c)

 
Note 5(d)

Note 5(e)

Note 5(i)

Note 5(f)

Note 5(g)

Note 5(h)

 
 
 
$

$

$

$

$

$

$

$

$

$

$

$

Balance, June 30, 2018
1,028

1,412

2,400

20,140


99,471





491

124,942

Additions




4,883


541

20,000

13,403

11,000


49,827

Transfer on loss of control of subsidiary






679





679

Unrealized (loss) gain on changes in fair value
(944
)
(1,347
)
(1,975
)
(16,694
)
2,635

(75,309
)
78,097

(631
)
(420
)
(759
)
(378
)
(17,725
)
Transfer to investment in associates (Note 7)



(3,413
)







(3,413
)
Spin-out






(69,234
)




(69,234
)
Foreign exchange








1,333



1,333

Balance, June 30, 2019
84

65

425

33

7,518

24,162

10,083

19,369

14,316

10,241

113

86,409

(Disposals) additions


(49
)






2,000


1,951

Unrealized (loss) gain on changes in fair value
(84
)
(65
)
(376
)
(33
)
(7,518
)
(23,030
)
(6,905
)
1,130

1,465

419

(102
)
(35,099
)
Foreign exchange








321



321

Balance, June 30, 2020





1,132

3,178

20,499

16,102

12,660

11

53,582

Current portion





(1,132
)



(10,659
)

(11,791
)
Long-term portion






3,178

20,499

16,102

2,001

11

41,791

 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized (loss) gain on derivatives (Note 20)

Year ended June 30, 2019