EX-99.5 6 acb_ex99-5.htm EXHIBIT 99.5 Exhibit










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AURORA CANNABIS INC.

Consolidated Financial Statements




For the years ended June 30, 2019 and 2018
(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) Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
 
Note 1
Nature of Operations
 
Note 15
Share Capital
Note 2
Significant Accounting Policies and Judgments
 
Note 16
Share-Based Compensation
Note 3
Accounts Receivable
 
Note 17
(Loss) Earnings Per Share
Note 4
Strategic Investments
 
Note 18
Other Income, Net
Note 5
Marketable Securities and Derivatives
 
Note 19
Supplementary Cash Flow Information
Note 6
Investments in Associates and Joint Ventures
 
Note 20
Income Taxes
Note 7
Biological Assets
 
Note 21
Related Party Transactions
Note 8
Inventory
 
Note 22
Commitments and Contingencies
Note 9
Property, Plant and Equipment
 
Note 23
Revenue
Note 10
Business Combinations
 
Note 24
Segmented Information
Note 11
Non-Controlling Interests
 
Note 25
Fair Value of Financial Instruments
Note 12
Intangible Assets and Goodwill
 
Note 26
Financial Instruments Risk
Note 13
Convertible Debentures
 
Note 27
Capital Management
Note 14
Loans and Borrowings
 
Note 28
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 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 10, 2019


“Terry Booth”
 
“Glen Ibbott”
Terry Booth
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, 2019, the related consolidated statements of comprehensive (loss) income, changes in equity, and cash flows for the year then ended, 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, 2019, and the results of its operations and its cash flows for the year then ended, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

The consolidated financial statements of the Company, as at June 30, 2018, and for the year then ended, were audited by another auditor, in accordance with Canadian generally accepted auditing standards, whose report dated September 24, 2018, expressed an unmodified audit opinion on those consolidated financial statements.

Changes in Accounting Principles
As discussed in Note 2 to the consolidated financial statements, the Company has changed its accounting for revenue recognition and financial instruments in 2019 due to the adoption of IFRS 15 - Revenue from Contracts with Customers and IFRS 9 - Financial Instruments.

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 audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit 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 audit 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 audit provides a reasonable basis for our opinion.

/s/ KPMG LLP
Chartered Professional Accountants
We have served as the Company’s auditor since 2019.
Vancouver, Canada
September 10, 2019




AURORA CANNABIS INC.
Consolidated Statements of Financial Position
As at June 30, 2019 and June 30, 2018
(Amounts reflected in thousands of Canadian dollars)

 
Notes
June 30, 2019

June 30, 2018

 
 
$

$

Assets
 
 
 
Current
 
 
 
Cash and cash equivalents
 
172,727

76,785

Restricted cash
19
46,066

13,398

Accounts receivable
3, 26(a)
103,493

15,096

Income taxes receivable
 
8,833

—

Marketable securities
5(a)
143,248

59,188

Biological assets
7
51,836

13,620

Inventory
8
113,641

29,595

Prepaids and other current assets
 
24,323

7,594

Assets held for distribution to owners
 
—

4,422

 
 
664,167

219,698

 
 
 
 
Property, plant and equipment
9
765,567

246,352

Derivatives
5(b)
86,409

124,942

Deposits
 
6,926

—

Investments in associates and joint ventures
6
118,845

334,442

Intangible assets
12
688,366

200,332

Goodwill
12
3,172,550

760,744

Total assets
 
5,502,830

1,886,510

 
 
 
 
Liabilities
 
 
 
Current
 
 
 
Accounts payable and accrued liabilities
26(b)
152,884

47,456

Income taxes payable
 
—

1,659

Deferred revenue
 
749

2,266

Convertible debentures
13
235,909

—

Loans and borrowings
14
13,758

2,451

Contingent consideration payable
25
28,137

21,333

Deferred gain on derivatives
 
728

—

Provisions
22(b)
4,200

—

 
 
436,365

75,165

 
 
 
 
Convertible debentures
13
267,672

191,528

Loans and borrowings
14
127,486

9,232

Derivative liability
13(v)
177,395

—

Deferred gain on derivatives
 
—

2,254

Other long-term liability
 
11,979

—

Deferred tax liability
20
91,886

55,405

Total liabilities
 
1,112,783

333,584

 
 
 
 
Shareholders’ equity
 
 
 
Share capital
15
4,673,118

1,466,433

Reserves
 
139,327

(5,285
)
Accumulated other comprehensive loss
 
(143,170
)
(533
)
(Deficit) retained earnings
 
(283,638
)
87,749

Total equity attributable to Aurora shareholders
 
4,385,637

1,548,364

Non-controlling interests
11
4,410

4,562

Total equity
 
4,390,047

1,552,926

Total liabilities and equity
 
5,502,830

1,886,510


Nature of Operations (Note 1)
Strategic Investments (Note 4)
Commitments and Contingencies (Note 22)
Subsequent Events (Note 28)

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

4

AURORA CANNABIS INC.
Consolidated Statements of Comprehensive (Loss) Income
Years ended June 30, 2019 and 2018
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 
Notes
2019

2018

 
 
$

$

Revenue from sale of goods
23
271,105

46,975

Revenue from provision of services
 
9,992

8,221

Gross revenue
 
281,097

55,196

Excise taxes
23
(33,158
)
—

Net revenue
 
247,939

55,196

 
 
 
 
Cost of sales
 
112,526

19,603

 
 
 
 
Gross profit before fair value adjustments
 
135,413

35,593

 
 
 
 
Changes in fair value of inventory sold
 
72,129

17,624

Unrealized gain on changes in fair value of biological assets
7
(96,531
)
(25,550
)
 
 
 
 
Gross profit
 
159,815

43,519

 
 
 
 
Expense
 
 
 
General and administration
 
172,365

42,965

Sales and marketing
 
99,289

29,445

Acquisition costs
 
17,217

15,664

Research and development
 
14,778

1,679

Depreciation and amortization
9, 12
63,371

12,088

Share-based compensation
16(a)(b)
107,039

37,450

 
 
474,059

139,291

 
 
 
 
Loss from operations
 
(314,244
)
(95,772
)
 
 
 
 
Other (expense) income
 
 
Interest and other income
 
3,679

2,515

Finance and other costs
 
(41,025
)
(11,762
)
Foreign exchange loss
 
(3,814
)
(1,038
)
Other income, net
18
109,464

183,384

Impairment of investment in associates
6
(73,289
)
—

Impairment of intangible assets and goodwill
 
(9,002
)
—

 
 
(13,987
)
173,099

 
 
 
 
(Loss) income before taxes
 
(328,231
)
77,327

 
 
 
 
Income tax recovery (expense)
 
 
 
 Current
20
7,050

(1,659
)
Deferred, net
20
23,257

(6,441
)
 
 
30,307

(8,100
)
 
 
 
 
Net (loss) income
 
(297,924
)
69,227

 
 
 
 
Other comprehensive (loss) income that will not be reclassified to net (loss) income
 
 
 
Deferred tax recovery (expense)
 
11,948

(55
)
Unrealized losses on marketable securities
5(a)
(78,837
)
(6,616
)
 
 
(66,889
)
(6,671
)
 
 
 
 
Other comprehensive (loss) income that may be reclassified to net (loss) income
 
 
 
Share of income from investment in associates
 
352

—

Foreign currency translation (loss) gain
 
(5,629
)
86

 
 
(5,277
)
86

Total other comprehensive loss
 
(72,166
)
(6,585
)
 
 
 
 
Comprehensive (loss) income
 
(370,090
)
62,642

 
 
 
 

5

AURORA CANNABIS INC.
Consolidated Statements of Comprehensive (Loss) Income
Years ended June 30, 2019 and 2018
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

(Continued)
 
Notes
2019

2018

 
 
$

$

Net (loss) income attributable to:
 
 
 
Aurora Cannabis Inc.
 
(290,837
)
71,936

Non-controlling interests
 
(7,087
)
(2,709
)
 
 
 
 
Comprehensive (loss) income attributable to:
 
 
 
Aurora Cannabis Inc.
 
(362,962
)
65,351

Non-controlling interests
 
(7,128
)
(2,709
)
 
 
 
 
Net (loss) earnings per share
 
 
 
Basic
17

($0.29
)

$0.16

Diluted
17

($0.29
)

$0.15


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

6

AURORA CANNABIS INC.
Consolidated Statements of Changes in Equity
Years ended June 30, 2019 and 2018
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 
 
Share Capital
 
Reserves
 
AOCI
 
 
 
 
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, 2018
 
568,113,131

1,466,433

 
38,335

307

41,792

(85,719
)
(5,285
)
 
(539
)
(55
)
—

61

(533
)
87,749

4,562

1,552,926

Shares issued for business combinations & asset acquisitions
15(b)(i)
431,325,634

3,060,894

 
75,490

27,111

—

—

102,601

 
—

—

—

—

—

—

—

3,163,495

Shares released for earn out payments
 
243,726

18,227

 
—

—

—

—

—

 
—

—

—

—

—

—

—

18,227

Conversion of notes
 
331,328

1,539

 
—

—

(520
)
—

(520
)
 
—

—

—

—

—

—

—

1,019

Deferred tax on convertible notes
 
—

—

 
—

—

413

—

413

 
—

—

—

—

—

—

—

413

Exercise of stock options
16(a)
14,426,904

108,150

 
(60,776
)
—

—

—

(60,776
)
 
—

—

—

—

—

—

—

47,374

Exercise of warrants
15(c)
2,252,224

13,903

 
—

(1,964
)
—

—

(1,964
)
 
—

—

—

—

—

—

—

11,939

Exercise of compensation options
15(d)
3,609

38

 
—

(21
)
—

—

(21
)
 
—

—

—

—

—

—

—

17

Exercise of RSUs
16(b)
742,188

2,482

 
(2,482
)
—

—

—

(2,482
)
 
—

—

—

—

—

—

—

—

Forfeited options
16(a)
—

—

 
(674
)
—

—

—

(674
)
 
—

—

—

—

—

674

—

—

Share-based compensation
16(a)(b)
—

—

 
94,054

15,062

—

—

109,116

 
—

—

—

—

—

—

—

109,116

Contribution from NCI
11
—

—

 
—

—

—

—

—

 
—

—

—

—

—

—

5,854

5,854

Change in ownership interests in subsidiaries
11
—

—

 
—

—

—

(1,081
)
(1,081
)
 
—

—

—

—

—

—

1,081

—

Australis Capital first tranche private placement proceeds
4(k)
—

7,800

 
—

—

—

—

—

 
—

—

—

—

—

—

—

7,800

Australis Capital NCI reclass on loss of control
 
—

(6,348
)
 
—

—

—

—

—

 
—

—

—

—

—

—

6,348

—

Spin-out of Australis Capital
4(k)
—

—

 
—

—

—

—

—

 
—

—

—

—

—

(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
)
(290,837
)
(7,087
)
(370,090
)
Balance, June 30, 2019
 
1,017,438,744

4,673,118

 
143,947

40,495

41,685

(86,800
)
139,327

 
(156,249
)
18,295

352

(5,568
)
(143,170
)
(283,638
)
4,410

4,390,047

(1) 
As at June 30, 2019, there are 723,255 shares in escrow (June 30, 2018 - 2,822,512 common shares). These securities were originally deposited in escrow on November 30, 2017 in connection with the acquisition of H2 (Note 10(c)). The escrowed common shares are to be released upon receipt of relevant licenses to cultivate and sell cannabis. During the year ended June 30, 2019, the Company released 2,099,257 escrowed common shares on achievement of the milestones (June 30, 2018 - 238,044 common shares).

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

7

AURORA CANNABIS INC.
Consolidated Statements of Changes in Equity
Years ended June 30, 2019 and 2018
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

(Continued)
 
 
Share Capital
 
Reserves
 
AOCI
 
 
 
 
 
 
Common Shares

Amount

 
Share-Based
Compensation

Compensation
Options/
Warrants

Convertible Notes

Change in
Ownership
Interest

Total
Reserves

 
Fair
Value

Deferred
Tax

Foreign Currency Translation

Total
AOCI

Retained
Earnings
(Deficit)
 
Non-Controlling Interests

Total

 
 
#

$

 
$

$

$

$

$

 
$

$

$

$

$
 
$

$

Balance, June 30, 2017
 
366,549,244

221,447

 
7,591

3,420

9,734

—

20,745

 
6,077

(885
)
(25
)
5,167

(28,426
)
—

218,933

Shares issued for business combinations & asset acquisitions
15(b)(i)
78,769,707

825,085

 
—

—

—

—

—

 
—

—

—

—

—
 
—

825,085

Warrants issued for acquisition
 
—

—

 
—

136

—

—

136

 
—

—

—

—

—
 
—

136

Shares issued for earn out payments
 
5,318,044

16,321

 
—

—

—

—

—

 
—

—

—

—

—
 
—

16,321

Shares issued for equity financings
15(b)(ii)
25,000,000

75,000

 
—

—

—

—

—

 
—

—

—

—

—
 
—

75,000

Share issue costs
 
—

(6,646
)
 
—

2,285

—

—

2,285

 
—

—

—

—

—
 
—

(4,361
)
Conversion of notes
 
42,473,435

177,127

 
—

—

(37,061
)
—

(37,061
)
 
—

—

—

—

—
 
—

140,066

Equity component of convertible notes
 
—

—

 
—

—

76,201

—

76,201

 
—

—

—

—

—
 
—

76,201

Deferred tax on convertible notes
 
—

2,540

 
—

—

(7,082
)
—

(7,082
)
 
—

—

—

—

—
 
—

(4,542
)
Exercise of stock options
16(a)
4,809,443

12,006

 
(6,175
)
—

—

—

(6,175
)
 
—

—

—

—

—
 
2,027

7,858

Exercise of warrants
15(c)
43,200,881

136,293

 
—

(3,680
)
—

—

(3,680
)
 
—

—

—

—

—
 
1,669

134,282

Exercise of compensation options
15(d)
1,865,249

6,051

 
—

(1,854
)
—

—

(1,854
)
 
—

—

—

—

—
 
—

4,197

Exercise of RSUs
16(b)
127,128

1,209

 
(351
)
—

—

—

(351
)
 
—

—

—

—

—
 
—

858

Forfeited options
16(a)
—

—

 
(531
)
—

—

—

(531
)
 
—

—

—

—

531
 
—

—

Share-based compensation
16(a)(b)
—

—

 
37,801

—

—

—

37,801

 
—

—

—

—

—
 
—

37,801

Non-controlling interest from acquisitions
 
—

—

 
—

—

—

—

—

 
—

—

—

—

—
 
38,577

38,577

Change in ownership interests in subsidiaries
 
—

—

 
—

—

—

(85,719
)
(85,719
)
 
—

—

—

—

—
 
(35,002
)
(120,721
)
Unrealized gain on Cann Group marketable securities
 
—

—

 
—

—

—

—

—

 
43,442

—

—

43,442

—
 
—

43,442

Cann Group marketable securities transferred to investment in associates
4(a)
—

—

 
—

—

—

—

—

 
(50,463
)
—

—

(50,463
)
50,463
 
—

—

Deferred tax for marketable securities transferred to investment in associates
 
—

—

 
—

—

—

—

—

 
—

830

—

830

(6,755
)
—

(5,925
)
Unrealized gain on CanniMed marketable securities
5(a)
—

—

 
—

—

—

—

—

 
10,423

—

—

10,423

—
 
—

10,423

CanniMed marketable securities derecognized upon acquisition of control
10(b)(iv)
—

—

 
—

—

—

—

—

 
(10,423
)
—

—

(10,423
)
10,423
 
—

—

Comprehensive income (loss) for the period
 
—

—

 
—

—

—

—

—

 
405

—

86

491

61,513
 
(2,709
)
59,295

Balance, June 30, 2018
 
568,113,131

1,466,433

 
38,335

307

41,792

(85,719
)
(5,285
)
 
(539
)
(55
)
61

(533
)
87,749
 
4,562

1,552,926


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

8

AURORA CANNABIS INC.
Consolidated Statements of Cash Flows
Years ended June 30, 2019 and 2018
(Amounts reflected in thousands of Canadian dollars)

 
Notes
2019

2018

 
 
$

$

Operating activities
 
 
 
Net (loss) income for the year
 
(297,924
)
69,227

Adjustments for non-cash items:
 
 
 
Unrealized gain on changes in fair value of biological assets
7
(96,531
)
(25,550
)
Changes in fair value included in inventory sold
 
72,129

17,624

Depreciation of property, plant and equipment
9
45,366

8,004

Amortization of intangible assets
12
42,893

4,256

Share-based compensation
16(a)(b)
107,039

37,450

Non-cash acquisition costs
 
4,243

—

Impairment of investment in associate
6
73,289

—

Impairment of intangible assets and goodwill
12
9,002

—

Accrued interest and accretion expense
13, 14
22,798

9,735

Interest and other income
 
(63
)
(78
)
Deferred tax expense (recovery)
 
(23,257
)
6,441

Other income, net
18
(109,464
)
(183,384
)
Foreign exchange loss
 
(3,813
)
—

Changes in non-cash working capital
19
(37,952
)
(25,392
)
Net cash used in operating activities
 
(192,245
)
(81,667
)
 
 
 
 
Investing activities
 
 
 
Marketable securities, derivatives and convertible debenture investments
5
(50,584
)
(63,437
)
Proceeds from disposal of marketable securities
5
46,975

—

Purchase of property, plant and equipment
9
(414,298
)
(136,945
)
Disposal of property, plant and equipment
 
—

—

Acquisition of businesses, net of cash acquired
10
114,213

(107,232
)
Acquisition of assets, net of cash acquired
10(c)
—

(587
)
Acquisition of non-controlling interest
 
—

(10,158
)
Payment of contingent consideration
 
(4,112
)
—

Loans assumed on acquisition
 
—

(308
)
Dividends received
4(d)
828

—

Deposits
 
(5,453
)
—

Investments in associates
6
134

(218,183
)
Net cash used in investing activities
 
(312,297
)
(536,850
)
 
 
 
 
Financing activities
 
 
 
Proceeds from long-term loans
 
605,104

345,000

Repayment of long-term loans
 
(21,126
)
—

Repayment of short-term loans
 
(238
)
(184
)
Restricted cash
 
(32,668
)
(13,398
)
Financing fees
 
(18,709
)
(11,873
)
Shares issued for cash, net of share issue costs
 
59,331

215,606

Capital contribution from non-controlling interest
 
5,854

—

Net cash provided by financing activities
 
597,548

535,151

Effect of foreign exchange on cash and cash equivalents
 
2,936

355

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

(83,011
)
Cash and cash equivalents, beginning of year
 
76,785

159,796

Cash and cash equivalents, end of year
 
172,727

76,785

Supplemental cash flow information (Note 19)
The accompanying notes are an integral part of these Consolidated Financial Statements.

9

AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2019 and 2018
(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 of British Columbia on December 21, 2006. 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 Suite 500 – 10355 Jasper Avenue, Edmonton, Alberta, Canada, T5J 1Y6. The Company’s registered and records office address is Suite 1500 - 1055 West Georgia Street, Vancouver, BC V6E 4N7.

The Company’s principal business is the production, distribution and sale of cannabis products in Canada and internationally. Aurora conducts the following key business activities in the countries listed below:

•
Production, distribution and sale of medical and consumer cannabis products in Canada pursuant to the Cannabis Act;
•
Distribution of wholesale medical cannabis in the European Union (“EU”) pursuant to the German Medicinal Products Act and German Narcotic Drugs Act;
•
Production of medical cannabis in Denmark pursuant to the Danish Medicines Act; and
•
Production and distribution of cannabis in Uruguay pursuant to Law N° 19,172 Cannabis and its derivatives: state control and regulation of the importation, production, acquisition, storage, marketing and distribution.

Through recent acquisitions (Note 10), the Company has expanded its business to include research and development and the production and sale of hemp related products.

Aurora does not engage in any federally illegal U.S. cannabis-related activities and will only conduct business activities related to growing or processing cannabis in jurisdictions where it is federally permissible to do so. Entities in which the Company holds securities may operate in the United States cannabis industry, however, our investment in such entities has been structured such that we hold nonparticipating, non-voting securities that are only exercisable or exchangeable upon cannabis becoming legal or permissible in the United States under federal law.  While the Company previously held an interest in a U.S. based company, Australis Holdings LLP (“Australis Holdings” or “AHL”), AHL did not engage in any cannabis-related activities for the periods presented, prior to being spun out to Aurora shareholders as part of the Australis Capital Inc. spin-out transaction completed on September 19, 2018(Note 4(k)).

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 new accounting standards, which have been adopted during 2019, 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 6), biological assets (Note 7), inventory (Note 8), estimated useful lives of property, plant and equipment and intangible assets (Note 9 and 12), business combinations and asset acquisitions (Note 10), goodwill and intangible asset impairment (Note 12), convertible debentures (Note 13), share-based compensation (Note 16), deferred tax assets (Note 20), segmented information (Note 24) and the fair value of financial instruments (Note 25).

(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”). Unless otherwise noted, all amounts are presented in Canadian dollars and thousands of Canadian dollars, except share and per share data.

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) income to conform with current period’s presentation.

These consolidated financial statements were approved and authorized for issue by the Board of Directors of the Company on September 10, 2019.

(b)
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.


10

AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2019 and 2018
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 

The Company’s principal wholly owned 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
ICC Labs Inc. (“ICC”)
100%
U.S. Dollar
MedReleaf Corp. (“MedReleaf”)
100%
Canadian Dollar
Peloton Pharmaceuticals Inc. (“Peloton” or “Aurora Vie”)
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.

(c)
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) income.

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) income and accumulated in equity.

(d)
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.

(e)
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.

(f)
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.

(g)
Adoption of New Accounting Pronouncements

(i)
IFRS 15 Revenue from Contracts with Customers

The IASB replaced IAS 18 Revenue in its entirety with IFRS 15 Revenue from Contracts with Customers. The standard uses a five-step model for revenue recognition that applies to contracts with customers and two approaches to recognizing revenue, at a point in time or over time, the assessment of which requires judgment. The Company adopted IFRS 15 using the modified retrospective approach, where the cumulative impact of adoption was required to be recognized in retained earnings as of July 1, 2018 and comparatives were not required to be restated. The adoption of this new standard had no impact on the amounts recognized in the Company’s consolidated financial statements.


11

AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2019 and 2018
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 

(ii)    IFRS 9 Financial Instruments

IFRS 9 Financial Instruments replaced IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The Company adopted IFRS 9 using the retrospective approach where the cumulative impact of adoption was recognized in retained earnings as at July 1, 2018 and comparatives were not restated.

The adoption of IFRS 9 did not have an impact on the Company’s classification and measurement of financial assets and liabilities except for equity instruments which are classified as marketable securities on the consolidated statement of financial position. The Company designates its marketable securities as financial assets at FVTOCI, where they are initially recorded at fair value. This designation is made on an instrument-by-instrument basis and if elected, subsequent changes in fair value are recognized in other comprehensive income only and are not transferred into profit or loss upon disposition.

Classification of Financial Instruments

IFRS 9 uses a single approach to determine whether a financial asset is classified and measured at amortized cost or at fair value. The classification and measurement of financial assets is based on the Company’s business models for managing its financial assets and whether the contractual cash flows represent solely payments of principal and interest (“SPPI”). Financial assets are initially measured at fair value and are subsequently measured at either (i) amortized cost; (ii) fair value through other comprehensive income (“FVTOCI”), or (iii) at fair value through profit or loss (“FVTPL”).

•
Financial assets that are held for the purpose of collecting contractual cash flows that are SPPI are classified as amortized cost. Amortized cost financial assets are initially recognized at their fair value and are subsequently measured at amortized cost using the effective interest rate method. Transaction costs of financial instruments classified as amortized cost are capitalized and amortized into profit or loss on the same basis as the financial instrument.

•
Financial assets that are held for both the purpose of collecting contractual cash flows and selling financial assets that have contractual cash flows that are SPPI are classified as FVTOCI. FVTOCI financial instruments are recognized at fair value at initial recognition and at each reporting date, with gains and losses accumulating in other comprehensive (loss) income until the asset is derecognized, at which point the cumulative gains or losses are reclassified to profit or loss. IFRS 9 provides an election to designate equity instruments at FVTOCI that would otherwise be classified as FVTPL. Equity instruments designated at FVTOCI must be made on an instrument-by-instrument basis and if elected, subsequent changes in fair value are recognized in other comprehensive income only and are not transferred into profit or loss upon disposition.

•
Financial assets that are not measured at amortized cost or at FVTOCI are measured at FVTPL. FVTPL financial assets are recognized at fair value at initial recognition and at each reporting date, with gains and losses recognized in profit or loss on the statement of comprehensive (loss) income. Transaction costs of financial assets classified as FVTPL are recognized in profit or loss as they are incurred.

Consistent with IAS 39, financial liabilities under IFRS 9 are generally classified and measured at fair value at initial recognition and subsequently measured at amortized cost, except for financial liabilities, such as derivatives, that are always measured at FVTPL.

The following table summarizes the classification of the Company’s financial instruments under IAS 39 and IFRS 9:
 
IAS 39 Classification
IFRS 9 Classification
 
 
 
Financial assets
 
 
Cash and cash equivalents
Loans and receivables
Amortized cost
Restricted cash
Loans and receivables
Amortized cost
Short-term investments
Loans and receivables
Amortized cost
Accounts receivable excluding taxes receivable
Loans and receivables
Amortized cost
Marketable securities
Available-for-sale
FVTOCI
Derivatives
FVTPL
FVTPL
 
 
 
Financial liabilities
 
 
Accounts payable and accrued liabilities
Amortized cost
Amortized cost
Loans and borrowings
Amortized cost
Amortized cost
Convertible debentures
Amortized cost
Amortized cost
Contingent consideration payable
FVTPL
FVTPL
Derivative liability
FVTPL
FVTPL

IFRS 9 uses an expected credit loss (“ECL”) impairment model as opposed to an incurred credit loss model under IAS 39. The impairment model is applicable to financial assets measured at amortized cost where any expected future credit losses are provided for, irrespective of whether a loss event has occurred as at the reporting date (Note 3). The adoption of the new ECL impairment model had a negligible impact on the carrying amounts of financial assets recognized at amortized cost.


12

AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2019 and 2018
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 

(h)
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)
IFRS 16 Leases

In January 2016, the IASB issued IFRS 16 Leases, which will replace IAS 17 Leases. This standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term greater than twelve months, unless the underlying asset’s value 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 will continue to classify leases as operating or finance, with lessor accounting remaining substantially unchanged from the preceding guidance under IAS 17, Leases.

Management is currently executing its implementation plan and has completed the initial scoping phase to identify material lease contracts. However, the analysis of such contracts to quantify the transitional impact is still in progress. The most significant impact of IFRS 16 will be our initial recognition of the present value of unavoidable future lease payments as right-of-use assets under property, plant and equipment and the concurrent recognition of a lease liability on the consolidated statement of financial position. Majority of our property leases, which are currently treated as operating leases, are expected to be impacted by the new standard which will result in lower rent expense, higher depreciation expense and higher finance costs related to accretion and interest expense of the lease liability. IFRS 16 will also impact the presentation of the consolidated statement of cash flows by decreasing operating cash flows and increasing financing cash flows.

The standard will be effective for the Company for the fiscal year commencing July 1, 2019. The Company will be adopting the standard retrospectively by recognizing the cumulative impact of initial adoption in opening retained earnings (i.e. the difference between the right-of-use asset and the lease liability). The Company will measure the right-of-use asset at an amount equal to the lease liability on July 1, 2019, apply a single discount rate to leases with similar remaining lease terms for similar classes of underlying assets and will not separate non-lease components from lease components for certain classes of underlying assets. Consistent with the guidance, the Company will not apply this standard to short-term leases and leases for which the underlying asset is of low value.

(ii)
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 is currently evaluating the potential impact of these amendments on the Company’s consolidated financial statements.

(iii)
Uncertainty Over Income Tax Treatments (“IFRIC 23”)

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 no, the entity should reflect the effect of uncertainty in determining its accounting tax position. IFRIC 23 is effective for annual periods beginning on or after January 1, 2019 and is to be applied retrospectively, or on a cumulative retrospective basis. The Company does not expect the application of IFRIC 23 will have a material impact on the Company’s consolidated financial statements.


13

AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2019 and 2018
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 

Note 3    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) income. 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, 2019

June 30, 2018

 
 
$

$

Trade receivables
 
85,232

8,634

Dividends receivable
 
—

828

Sales taxes receivable
 
18,261

5,634

 
 
103,493

15,096


Note 4    Strategic Investments

(a)
Cann Group Limited (“Cann Group”)

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

On December 11, 2017, the Company acquired an additional 7,200,000 common shares of Cann Group at A$2.50 per share for a cost of $17.6 million (A$18.0 million), increasing the Company’s total Cann Group shareholdings to 28,762,314 common shares, representing a 22% ownership interest. The Company obtained significant influence over Cann Group and as a result, the $56.4 million fair value of the previously held 21,562,314 Cann Group shares at December 11, 2017 were reclassified from marketable securities (Note 5) to investment in associates (Note 6). The cumulative unrealized gains of $50.5 million on the marketable securities at December 11, 2017 was reclassified from other comprehensive income to deficit. On January 4, 2018, the Company also acquired an additional 3,194,033 shares at a cost of $8.0 million (A$8.0 million) included in investments in associates (Note 6).

As of June 30, 2019, the Company held an aggregate of 31,956,347 shares in Cann Group (June 30, 2018 – 31,956,347), representing a 23% ownership interest (June 30, 2018 – 23%). During the year ended June 30, 2019, management finalized its estimate of the value of the Company’s share of the fair value of identifiable net assets acquired. There were no significant changes during the period to the initial carrying amount recognized for the value of the investment.

Based on Cann Group’s closing stock price of A$1.96 on June 30, 2019, the 31,956,347 shares classified under investment in associates have a fair value of approximately $57.0 million (A$62.0 million). During the year ended June 30, 2019, the Company assessed the carrying value of the investment against the estimated recoverable amount, and as a result, recognized an impairment charge of $18.2 million which has been recognized through the statement of comprehensive (loss) income (Note 6).

(b)
Micron Waste Technologies Inc. (“Micron”)

Micron is a public company listed on the Canadian Securities Exchange (“CSE”). Micron is a leading organic waste technology company based in Canada. Micron has developed and commercialized an on-site treatment system that can turn organic waste into clean water. MWM also produces solutions to handle organic waste created by marijuana cultivators.

On January 10, 2018, the Company subscribed to 4,411,765 units of Micron at $0.34 per unit for a total cost of $1.5 million. Each unit consisted of one common share and one common share purchase warrant exercisable at $0.50 per share expiring January 12, 2020. The fair value of the investment differed from the transaction price at initial recognition. At inception, the fair value of the shares of $3.1 million was based on a quoted market price of $0.71 per share, and the warrants had a fair value of $1.8 million which was estimated using the Binomial model and historical volatility, which is a Level 3 input. As such, the $2.2 million unrealized gain at inception for the shares was recognized immediately through profit or loss, and the $1.2 million unrealized gain at inception for the warrants was deferred over the term of the warrants.


14

AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2019 and 2018
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 

At June 30, 2019, the common shares had a fair value of $1.1 million (June 30, 2018 - $2.4 million) resulting in an unrealized loss of $1.3 million for the year ended June 30, 2019 (year ended June 30, 2018 - $1.5 million unrealized gain).

At June 30, 2019, the warrants had a fair value of $0.1 million (June 30, 2018 - $1.0 million), resulting in an unrealized loss of $0.9 million for the year ended June 30, 2019 (year ended June 30, 2018 - $0.5 million unrealized gain). The fair value of the warrants was estimated using the Binomial model with the following assumptions: risk-free interest rate of 1.52% (June 30, 2018 - 2.16%); dividend yield of 0% (June 30, 2018 - 0%); historical stock price volatility of 89.02% (June 30, 2018 - 81.18%); and an expected life of 0.54 years (June 30, 2018 - 1.54 years). If the estimated volatility increases or decreases by 10%, the estimated fair value would increase or decrease by a nominal amount.

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

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

On February 13, 2017, the Company purchased a $2.0 million unsecured, 10% convertible debenture of Radient, convertible into units at $0.14 per unit. Each unit consisted of one common share and one warrant exercisable at a price of $0.33 per share expiring February 13, 2019. On July 28, 2017, the Company converted the outstanding principal and interest and received 14,467,421 units of Radient. Upon conversion, the Company recognized an unrealized gain of $0.8 million on the debentures and fully amortized the then outstanding deferred inception gain of $6.1 million. The $11.9 million fair value of the debenture on conversion was estimated by measuring the fair value of the shares at a quoted market price of $0.53 and the warrants using the Binomial model with the following assumptions: risk-free interest rate of 1.57%; dividend yield of 0%; stock price volatility of 91.53%; and an expected life of 1.57 years.

On December 11, 2017, by way of private placement, the Company purchased 4,541,889 units of Radient at $1.37 per unit for a total cost of $6.2 million. Each unit consisted of one common share and one common share purchase warrant exercisable at $1.71 per share expiring December 11, 2019.

On December 11, 2017, the Company exercised an aggregate of 15,856,321 warrants of Radient for a total cost of $5.8 million. For the period ended June 30, 2018, the Company recorded unrealized gains on changes in fair value of these derivatives of $19.1 million and fully amortized the deferred inception gains of $4.4 million on the warrants. The aggregate fair value of the exercised warrants of $23.7 million was estimated using the Binomial model with the following weighted average assumptions: share price of $1.83; risk-free interest rate of 1.70%; dividend yield of 0%; historical stock price volatility of 96.70%; and an expected life of 1.19 years.

At June 30, 2019, the Company held an aggregate of 37,643,431 shares of Radient with a fair value of $30.9 million (June 30, 2018 - $44.0 million) resulting in an unrealized loss of $13.2 million for the year ended June 30, 2019 (year ended June 30, 2018 - $1.4 million unrealized gain).

At June 30, 2019, the Company held an aggregate of 4,541,889 warrants of Radient with a fair value of $0.1 million (June 30, 2018 - $1.4 million) resulting in an unrealized loss of $1.3 million for the year ended June 30, 2019 (year ended June 30, 2018 - $17.4 million unrealized gain). The fair value of the warrants was estimated using the Binomial model with the following assumptions: risk-free interest rate of 1.52% (June 30, 2018 - 2.14%); dividend yield of 0% (June 30, 2018 - 0%); historical stock price volatility of 75.10% (June 30, 2018 - 80.37%); and an expected life of 0.45 years (June 30, 2018 - 1.45 years). If the estimated volatility increases or decreases by 10%, the estimated fair value would increase or decrease by a nominal amount.

(d)
Alcanna Inc., formerly Liquor Stores N.A. Ltd. (“Alcanna”)

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

On February 14, 2018, the Company subscribed to Alcanna’s non-brokered private placement for 6,900,000 common shares at $15.00 per share for a total cost of $103.5 million, representing a 19.9% interest in Alcanna. The Company also subscribed to 2,300,000 subscription receipts of Alcanna at $15.00 per subscription receipt for a total cost of $34.5 million which was converted to common shares on May 9, 2018, increasing the Company’s ownership to approximately 25% on an undiluted basis. As part of the consideration transferred, the Company also received 11,880,000 share purchase warrants of Alcanna, which are made up of 10,130,000 warrants that expire on August 14, 2019 and 1,750,000 warrants that expire on January 31, 2022.

As a result of this investment, the Company obtained significant influence over Alcanna and uses the equity method of accounting to recognize its investment interest (Note 6). The total transaction price of $138.0 million was allocated first to the common shares and subscription receipts based on Alcanna’s closing market price of $11.95 as of February 14, 2018, resulting in total cost of $109.9 million allocated to the investment in associate and $28.1 million being the implied fair value of the warrants. The warrants are recognized as derivatives and are measured at fair value through profit or loss (Note 5(b)).


15

AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2019 and 2018
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 

(i)
Common Shares and Investment in Associate

As of June 30, 2019, the Company held an aggregate of 9,200,000 shares in Alcanna (June 30, 2018 – 9,200,000) representing a 24.8% ownership interest with a fair value of $54.9 million (June 30, 2018 – $84.1 million) based on the closing stock price of $5.97 (June 30, 2018 – $9.14). During the year ended June 30, 2019, the Company assessed the carrying value of the investment against the estimated recoverable amount and as a result, recognized an impairment charge of $68.7 million. At June 30, 2019, the Company recognized an impairment reversal of $15.6 million as the recoverable amount had increased and exceeded the carrying amount. The impairment and impairment reversal have been recognized through the statement of comprehensive (loss) income (Note 6).

During the year ended June 30, 2019, management finalized its estimate of the Company’s share of the fair value of identifiable net assets acquired. There were no significant changes during the period to the initial carrying amount recognized for the value of the investment in associate.

(ii)
Warrants

At June 30, 2019, the Company’s 11,880,000 warrants in Alcanna (June 30, 2018 - 11,880,000) had a fair value of $0.4 million (June 30, 2018 - $2.4 million) resulting in a net unrealized loss of $2.0 million for the year ended June 30, 2019 (year ended June 30, 2018 - $25.7 million) (Note 5(b)). The fair value of the warrants was estimated using the Binomial model with the following weighted average assumptions: risk-free interest rate of 1.93% (June 30, 2018 - 2.12%); dividend yield of 0% (June 30, 2018 - 0%); historical stock price volatility of 46.32% (June 30, 2018 – 30.15%); and an expected life of 0.49 years (June 30, 2018 – 1.49 years). If the estimated volatility increased or decreased by 10%, the estimated fair value would increase or decrease by approximately $0.5 million.

(e)
CTT Pharmaceuticals Inc. (“CTT”)

CTT is an Ontario-based public company which is listed on the OTC under the symbol “CTTH”. CTT is in the business of developing dose specific, fast dissolving oral thin film wafers that provide dose specific, smoke-free delivery of medical cannabis or other active ingredients.

As at June 30, 2019, the Company held 3,731,343 common shares and 20,779,972 warrants of CTT, which if converted and exercised,
would increase the Company’s ownership interest to 35.9% on a fully diluted basis (Note 5(b) and 6). The background and history of our holdings is described below.

(i)
Convertible Debenture

On May 20, 2018, the Company purchased a $1.3 million (US $1.0 million) unsecured 5% convertible debenture of CTT with a term of 3 years, convertible at the option of the holder into common shares at US $0.268 per share. Pursuant to the terms of the convertible debenture, the Company also received 20,779,972 share purchase warrants, which expires on May 20, 2021, of CTT allowing it to increase its pro rata interest to approximately 42.5% on a fully diluted basis (Note 5(b)). As of June 30, 2018, the Company held a 0% non-diluted ownership interest in CTT. Based on the Company’s potential voting rights of up to 42.5% and other qualitative factors, the Company has determined that it holds significant influence in CTT and has accounted for its investment under the equity method. As the Company had no present voting interest in CTT as of May 20, 2018 and June 30, 2018, the compound financial instrument was measured as a financial asset at fair value through profit or loss.

On August 20, 2018, the Company fully converted the US $1.0 million debenture into 3,731,343 common shares of CTT resulting in an approximate 8% ownership interest. On conversion, the carrying value of the debenture was adjusted from its June 30, 2018 fair value of $4.6 million to $3.4 million based on the quoted share price of US $0.70. This resulted in the recognition of a $1.2 million fair value loss during the year ended June 30, 2019. The $3.4 million fair value of the investment was reclassified on conversion from derivatives (Note 5(b)) into investment in associates (Note 6).

(ii)
Warrants

At June 30, 2019, the 20,779,972 share purchase warrants had a fair value that is negligible (June 30, 2018 - $15.5 million) and the Company recognized an aggregate unrealized fair value loss of $16.7 million for the year ended June 30, 2019 (Note 5(b)) (June 30, 2018 - $15.2 million unrealized gain). The fair value of the derivative was estimated using the Binomial model with the following weighted average assumptions: share price of US $0.21 (June 30, 2018 – US $0.89); risk-free interest rate of 1.81% (June 30, 2018 - 2.85%); dividend yield of 0% (June 30, 2018 - 0%); stock price volatility of 20.0% (June 30, 2018 - 20.0%); and an expected life of 1.89 years (June 30, 2018 – 2.89 years).

(iii)
Common Shares

Based on CTT’s closing stock price of US$0.21 on June 30, 2019, the 3,731,343 shares classified under investment in associates, represent an 7.9% ownership interest and have a fair value of $1.0 million (US$0.8 million). During the year ended June 30, 2019, the Company assessed the carrying value of the investment against the estimated recoverable amount and as a result, recognized an impairment charge of $2.1 million (Note 6).


16

AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2019 and 2018
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 

(f)
Capcium Inc. (“Capcium”)

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

On June 6, 2018, the Company acquired a 20% ownership interest in Capcium by subscribing to 8,828,662 common shares. The consideration was paid through the issuance of 1,144,481 common shares of Aurora with a fair value of $10.8 million and $0.5 million in cash consideration. Based on the Company’s voting rights and other qualitative factors, the Company determined that it holds significant influence in Capcium and has accounted for its investment under the equity method. As of June 30, 2019, the Company held 8,828,662 shares (June 30, 2018 – 8,828,662) in Capcium representing a 20% ownership interest. During the year ended June 30, 2019, management finalized its estimate of the value of the Company’s share of the fair value of identifiable net assets acquired. There were no significant changes during the period to the initial carrying amount recognized for the value of the investment.

On September 7, 2018, the Company also 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 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 two years from the completion of a Liquidity Event. A Liquidity Event is 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.

At June 30, 2019, the convertible debentures were fair valued to $7.5 million, of which $0.7 million related to the additional debentures, thus resulting in an unrealized gain of $2.6 million for the year ended June 30, 2019 (Note 5(b)). 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; risk-free rate of 1.83%; dividend yield of 0%; stock price volatility of 46%; an expected life of 1.44 years; adjusted for a credit spread of 26% and a probability factor of 80% for the Liquidity Event. If the estimated volatility increased or decreased by 10%, the estimated fair value would increase or decrease by approximately $0.5 million.

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

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

On January 4, 2018, the Company invested in 33,333,334 subscription receipts of TGOD at $1.65 per subscription receipt for a cost of $55.0 million. Each subscription receipt was converted into units of TGOD consisting of one common share and one-half of one share purchase warrant, with each whole warrant exercisable at $3.00 per share expiring February 28, 2021. The common shares and warrants are subject to a lock-up period for six and twelve months, respectively. In connection with the subscription receipt investment, the Company entered into an Investor Rights Agreement with TGOD where the Company received milestone options and a participation right for future TGOD equity financings. The milestone options allow the Company to increase its pro rata interest to over 50% and to purchase the shares at a 10% discount to the listed market price upon achievement of certain milestones. The Company elected to measure the subscription receipts and milestone options together as a single compound financial instrument at fair value through profit or loss.

Pursuant to the participation right, the Company subscribed to TGOD’s IPO of 6,341,250 units at a price of $3.65 per unit for a total investment of $23.1 million. Each unit consisted of one common share and one-half of one share purchase warrant of TGOD. Each whole warrant is exercisable at $7.00 per share expiring on May 20, 2020, subject to accelerated expiry if TGOD’s shares trade at or above a VWAP of $9.00 for any 10 consecutive trading day period.

Upon closing of TGOD’s IPO on May 2, 2018, the Company received 39,674,584 common shares and 19,837,292 share purchase warrants and milestone options. Based on potential and existing voting rights as well as other qualitative factors, the Company concluded that it had significant influence in TGOD at that time. As a result, on May 2, 2018 the aggregate $133.2 million fair value of the common shares was reclassified from derivatives as subscription receipts to investment in associates and the TGOD share purchase warrants and milestone options were recognized as derivatives at fair value through profit or loss.

Of the 19,837,292 share purchase warrants, 16,666,667 subscription receipt warrants are exercisable into an equivalent number of common shares of TGOD at $3.00 per share expiring February 28, 2021, and 3,170,625 participation right warrants are exercisable into an equivalent number of common shares of TGOD at $7.00 per share expiring May 2, 2020. The Company also held milestone options which, upon TGOD’s achievement of the specified milestones, entitle the Company to increase its ownership interest in TGOD to over 50% and are exercisable at a 10% discount to the listed market price.

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 Aurora’s equity investment was derecognized from investment in associates (Note 6) and reclassified to marketable securities (Note 5(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 during the year ended June 30, 2019.


17

AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2019 and 2018
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 

During the year ended June 30, 2019, the Company sold an aggregate of 10,841,250 common shares of TGOD for gross proceeds of $47.4 million at an average price of $4.37 per share. As a result, the Company recognized a realized loss of $28.3 million during the year ended June 30, 2019 based on the deemed cost of $6.94 per share which represents the September 27, 2018 quoted market price. As at June 30, 2019, the Company held 28,833,334 shares (June 30, 2018 - 39,674,584) in TGOD with a fair value of $93.1 million (Note 5(a)), based on the stock price of $3.23, which resulted in an unrealized loss of $135.2 million for the year ended June 30, 2019 (Note 5(b)).

At June 30, 2018, the $95.0 million fair value of the 16,666,667 subscription receipt warrants and milestone options (Note 5(b)) was estimated using the Binomial model with the following weighted average assumptions: share price of $6.47; risk-free interest rate of 2.30%; dividend yield of 0%; stock price volatility of 60%; and an expected life of $2.52 years. During the year ended June 30, 2019, Aurora’s milestone options expired unexercised which resulted in a loss of $27.6 million. At June 30, 2019, the $23.5 million fair value of the remaining 16,666,667 subscription receipt warrants (Note 5(b)) was estimated using the quoted market price of $1.41, contributing to a total fair value loss of $71.5 million for the subscription receipt warrants and expired milestone options for the year ended June 30, 2019.

At June 30, 2019, the $0.6 million (June 30, 2018 - $4.5 million) fair value of the 3,170,625 participation right warrants was estimated using the Monte-Carlo model with the following weighted average assumptions: share price of $3.23 (June 30, 2018 - $6.47); risk-free interest rate of 1.77% (June 30, 2018 - 2.21%); dividend yield of 0% (June 30, 2018 - 0%); stock price volatility of 74.56% (June 30, 2018 - 60.00%); and an expected life of 0.84 years (June 30, 2018 – 1.84 years). In connection with the valuation of the participation right warrants, the Company recognized a fair value loss of $3.8 million during the year ended June 30, 2019.

(h)
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 June 12, 2018, the Company subscribed to 9,859,155 common shares of Choom at $0.71 per share for a total cost of $7.0 million, representing an 8% ownership interest. The $9.3 million fair value of the shares at initial recognition was based on a quoted market price of $0.94 per share which differed from the transaction price resulting in an unrealized gain of $2.3 million recognized at inception immediately through profit and loss for the year ended June 30, 2018.

On November 2, 2018, the Company subscribed to a $20.0 million unsecured convertible debenture in Choom bearing interest at 6.5% per annum and maturing on November 2, 2022. 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 a 9.9% ownership interest in licensed retailers. As a result, Aurora’s ability to convert its convertible debentures and exercise its share purchase warrants is subject to this 9.9% ownership restriction.

As at June 30, 2019, the 9,859,155 shares in Choom have a fair value of $4.4 million (June 30, 2018 - $12.7 million) based on the $0.45 stock price (June 30, 2018 - $1.29) (Note 5(a)). During the year ended June 30, 2019, the Company recognized unrealized fair value losses of $8.3 million (June 30, 2018 - $3.5 million unrealized fair value gains) through other comprehensive (loss) income (Note 5(a)).

At June 30, 2019, the convertible debenture had a fair value of $19.3 million resulting in an unrealized loss of $0.6 million since initial recognition (Note 5(b)). The fair value of the convertible debenture was estimated using the FINCAD model based on the following assumptions: share price of $0.45; credit spread of 8.24%; dividend yield of 0%; stock price volatility of 84.48% and an expected life of 3.35 years.

At June 30, 2019, the 96,464,248 share purchase warrants with a nominal fair value resulting in an unrealized loss of $0.1 million since initial recognition (Note 5(b)). The fair value of the warrants was estimated using the binomial tree model based on the following weighted average assumptions: share price of $0.45; risk-free interest rate of 1.85%; dividend yield of 0%; stock price volatility of 84%; and an expected life of 1.35 years.

(i)
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, 2019, the convertible debenture had a fair value of $14.3 million (US $11.0 million) (Note 5(b)). The Company recognized unrealized gains of $0.9 million for the year ended June 30, 2019 (Note 5(b)). The fair value was estimated using two coupled Black-Scholes models based on the following assumptions: estimated share price of $3.71; risk-free interest rate of 1.75%; dividend yield of 0%; stock price volatility of 34.00%; credit spread of 1.13% and an expected life of 4.01 years. If the estimated volatility increases or decreases

18

AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2019 and 2018
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 

by 10%, the estimated fair value would increase or decrease by approximately $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.

(j)
High Tide Inc. (“High Tide”)

High Tide is an Alberta based, retail focused cannabis and lifestyle accessories company. High Tide 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 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, 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.

On June 14, 2019, the Company invested $1.0 million in unsecured convertible debentures and warrants of High Tide. The convertible debentures bear interest of 10.0% per annum, payable annually in advance in common shares of High Tide, maturing in two years from the date of issuance. The 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. Aurora received 1,333,333 warrants, each warrant entitling the Company to acquire one common share at an exercise price of $0.85 per share for a period of two years. The conversion of the convertible debentures and exercise of the warrants 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.

At June 30, 2019, the convertible debentures had a fair value of $10.2 million, resulting in an unrealized loss of $0.8 million for the year ended June 30, 2019 (Note 5(b)). The fair value of the convertible debenture was estimated using the FINCAD model with the following assumptions: share price of $0.36; risk-free rate of 13.54%; dividend yield of 0%; stock price volatility of 70.00% and an expected life of 1.46 years.

(k)
Australis Capital Inc. (“ACI”)

At June 30, 2018, ACI was a wholly-owned subsidiary of Aurora and Aurora held a 50% interest in Australis Holdings LLP.

On September 19, 2018, the Company distributed the shares and warrants that it owned in ACI to the Company’s shareholders through a spin-out transaction. As part of the spin-out, ACI completed a two-tranche private placement on July 5, 2018 and August 3, 2018, which resulted in reductions of Aurora’s ownership interest in ACI to 47% and 24%, respectively.

Following the completion of the first private placement on July 5, 2018, Aurora no longer had the ability to exercise control over ACI and ACI was deconsolidated. The Company accounted for its remaining 26,802,364 ACI shares held as an investment in associate (Note 6) and the 26,802,364 ACI warrants held as derivatives (Note 5(b)). The shares had an estimated fair value of $5.4 million on July 5, 2018 based on the private placement subscription price of $0.20 per share and the warrants had a fair value of $0.7 million estimated using the Binomial model with the following assumptions: share price of $0.20; risk-free rate of 1.90%; volatility of 50.67%; dividend yield of 0%; and an expected life of 1 year. As a result of loss of control and deconsolidation, during the year ended June 30, 2019 the Company recognized a $0.4 million gain in the statement of comprehensive (loss) income.

Following the completion of the second private placement on August 3, 2018, Aurora no longer had ACI Board representation, no interchange of managerial personnel, and had received shareholder approval for the spin-out. As such, Aurora no longer held significant influence in ACI and the $5.4 million (Note 6) fair value of the 26,802,364 ACI shares were reclassified to marketable securities (Note 5(a)).

The Company also received 1,341,391 units in ACI in exchange for funding of $0.3 million of ACI’s transaction costs prior to the spin-out. Each unit consisted of one common share and one warrant exercisable at $0.25 per share for a period of one year. Upon receipt of these units, $0.23 million was allocated to the shares (Note 5(a)) and $0.04 million was allocated to the warrants (Note 5(b)).

On September 19, 2018, the Company held a total 28,143,755 shares and 28,143,755 warrants in ACI which were spun-out to shareholders and ACI became a separate, publicly traded company. At the time of the spin-out, the shares and warrants had a fair value of $82.5 million (Note 5(a)) and $69.2 million (Note 5(b)), respectively, estimated based on ACI’s quoted closing market price on September 19, 2018 of $2.93 and $2.46, respectively. In accordance with IFRS, the Company was required to remeasure these interests to fair value and as a result, recognized an unrealized gain of $76.9 million in other comprehensive income on the shares (Note 5(a)), and an unrealized gain of $68.5 million in income on the warrants (Note 5(b)). As a result of the spin-out, the Company recognized a dividend of $151.7 million to retained earnings, which equated to the fair value of the ACI shares and warrants distributed to Aurora shareholders.

As part of the spin-out of ACI and pursuant to the June 14, 2018 Funding Agreement, the Company received the following restricted back-in right warrants in exchange for $0.5 million:

(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 of ACI’s shares and has an expiration date of September 19, 2028.


19

AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2019 and 2018
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
 
 
 

Aurora is restricted from exercising the back-in right warrants unless all of ACI’s business operations in the U.S. are legal 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, 2019, the warrants remain un-exercisable.

As of June 30, 2019, the warrants had a fair value of $10.1 million estimated using the Binomial model with the following assumptions: share price of $0.92; risk-free interest rate of 1.81%; dividend yield of 0%; stock price volatility of 48.97%; an expected life of 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 $9.6 million unrealized gain on fair value during the year ended June 30, 2019 (Note 5(b)).

(l)
SubTerra LLC (“SubTerra”) and 10647594 Canada Inc. (“10647594 Canada”)

On March 15, 2018, pursuant to the acquisition of CanniMed (Note 10(b)(iv)), the Company acquired a 19.9% interest in SubTerra, a Michigan limited liability company, and a 19.9% interest in 10647594 Canada for an aggregate consideration of $212.

On May 18, 2018, the Company sold its 19.9% interest in SubTerra to CanniMed’s former Chief Executive Officer in exchange for $78 cash. Additionally, in exchange for the cancellation of $4,665 (US $3,580) promissory notes and receivables from SubTerra, the Company received the following assets with an estimated fair value of $1,400:

(a)
5% of any gross revenues of SubTerra earned annually from the sale of cannabis and cannabis-based products grown and/or processed at its facility for the period commencing June 1, 2018 and ending May 31, 2028; and
(b)
a payment of $150 annually for the period commencing June 1, 2018 and ending May 31, 2028.

The promissory notes and receivables from SubTerra were previously written off prior to Aurora’s acquisition of CanniMed. As such, the Company recognized a recovery of $1,400 upon receipt of the above assets.

As part of the sale agreement, the Company also received a two-year option to purchase a parcel of land located in White Pine, Michigan for US $3.

On September 19, 2018, the revenue royalty, annuity payment and land purchase option were spun-out as part of the ACI spin-out transaction (Note 4(k)).

(m)
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. 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 unrealized fair value gains of $2.6 million through other comprehensive (loss) income for the year ended June 30, 2019 (Note 5(a)).


20

AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2019 and 2018
(Tabular amounts in thousands of Canadian dollars, except share and per share amounts)
 
 
 

Note 5    Marketable Securities and Derivatives

(a)
Marketable securities
Accounting Policy

Marketable securities are initially measured at fair value and are subsequently measured at FVTPL or are designated at 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.

At June 30, 2019, the Company held the following marketable securities:
Financial asset hierarchy level
Level 1

Level 1

Level 1

Level 1

Level 1

Level 1

Level 1

Level 1

Level 3

 
Marketable securities designated at FVTOCI
Cann Group

CanniMed

Micron

Radient

TGOD

ACI

Choom

EnWave

Other immaterial investments

Total

Note 4(a)

 
Note 4(b)

Note 4(c)

Note 4(g)

Note 4(k)

Note 4(h)

Note 4(m)

 
$

$

$

$

$

$

$

$

$

$

Balance, June 30, 2017
13,433

—

—

1,412

—

—

—

—

—

14,845

Additions
—

16,144

962

4,199

—

—

7,000

—

—

28,305

Unrealized gain recognized at inception
—

—

2,170

3,700

—

—

2,268

—

—

8,138

Unrealized gain (loss) on changes in fair value
42,934

10,423

(706
)
(2,340
)
—

—

3,451

—

—

53,762

Transfer to investment in associates
(56,367
)
—

—

—

—

—

—

—

—

(56,367
)
Acquisition of control
—

(26,567
)
—

—

—

—

—

—

—

(26,567
)
Conversion of debenture
—

—

—

7,571

—

—

—

—

—

7,571

Exercise of warrants
—

—

—

29,501

—

—

—

—

—

29,501

Balance, June 30, 2018
—

—

2,426

44,043

—

—

12,719

—

—

59,188

Additions (disposals)
—

—

—

—

(46,663
)
228

—

10,000

1,091

(35,344
)
Transfer from investment in associates
—

—

—

—

275,342

5,360

—

—

—

280,702

Unrealized gain (loss) 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

 
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities
 
 
 
 
 
 
 
 
 
 
Year ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
Profit & loss unrealized gain (1)
—

10,423

2,170

3,700

—

—

2,268

—

—

18,561

OCI unrealized gain (loss)
(7,021
)
—

(706
)
(2,340
)
—

—

3,451

—

—

(6,616
)
 
 
 
 
 
 
 
 
 
 
 
Year ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
OCI unrealized gain (loss)
—

—

(1,278
)
(13,177
)
(135,547
)
76,873

(8,331
)
2,619

4

(78,837
)
(1)  
In addition to the $18,561 profit & loss unrealized gain on marketable securities, the Company recognized an additional $1,522 unrealized gain at inception for TGOD’s participation right common shares (Note 4(g)).


21

AURORA CANNABIS INC.
Notes to the Consolidated Financial Statements
Years ended June 30, 2019 and 2018
(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 26 for significant judgments in determining the fair value of derivative financial instruments.

At June 30, 2019, the Company held the following derivative investments:
Financial asset hierarchy level
Level 3

Level 3

Level 3

Level 2

Level 2

Level 1

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 4(b)

Note 4(c)

Note 4(d)

Note 4(e)

Note 4(f)

Note 4(g)

Note 4(k)

Note 4(h)

Note 4(i)

Note 4(j)

 
 
 
$

$

$

$

$

$

$

$

$

$

$

$

Balance, June 30, 2017
—

11,363

—

—

—

—

—

—

—

—

—

11,363

Additions
538

2,083

28,060

1,319

—

55,000

—

—

—

—

1,333

88,333

Unrealized gain at inception
1,213

1,837

—

—

—

—

—

—

—

—

—

3,050

Unrealized gain (loss) on changes in fair value
(723
)
17,423

(25,660
)
18,821

—

153,043

—

—

—

—

(842
)
162,062