AURORA CANNABIS INC (Form: 6-K, Received: 02/11/2021 16:48:47)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO

RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of February 2021

Commission File No. 001-38691

AURORA CANNABIS INC.

(Translation of registrant's name into English)

4818 31 Street East

Edmonton International Airport

Edmonton, Alberta,
Canada T9E 0V6

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F

Form 20-F ☐ Form 40-F ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7) ☐

SUBMITTED HEREWITH

Exhibits		Description
99.1		Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2020 and 2019
99.2		Interim Management’s Discussion and Analysis for the three and six months ended December 31, 2020
99.3		Certification of Chief Executive Officer
99.4		Certification of Chief Financial Officer

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AURORA CANNABIS INC.

(signed) Glen Ibbott

Glen Ibbott
Chief Financial Officer

Date: February 11, 2021

Exhibit 99.1

AURORA CANNABIS INC.

Condensed Consolidated Interim Financial Statements

(Unaudited)

For the three and six months ended December 31, 2020 and 2019

(in Canadian Dollars)

Table of Contents

Condensed Consolidated Interim Statements of Financial Position	3
Condensed Consolidated Interim Statements of Comprehensive Loss	4
Condensed Consolidated Interim Statements of Changes in Equity	6
Condensed Consolidated Interim Statements of Cash Flows	8
Notes to the Condensed Consolidated Interim Financial Statements

Note 1	Nature of Operations	9	Note 15	Convertible Debentures	25
Note 2	Significant Accounting Policies and Judgments	9	Note 16	Loans and Borrowings	25
Note 3	Accounts Receivable	12	Note 17	Share Capital	27
Note 4	Government Grant	12	Note 18	Share-Based Compensation	29
Note 5	Strategic Investments	13	Note 19	Loss Per Share	32
Note 6	Marketable Securities and Derivatives	16	Note 20	Other (Losses) Gains	32
Note 7	Investments in Associates and Joint Ventures	18	Note 21	Supplemental Cash Flow Information	33
Note 8	Biological Assets	18	Note 22	Commitments and Contingencies	33
Note 9	Inventory	19	Note 23	Revenue	35
Note 10	Property, Plant and Equipment	20	Note 24	Segmented Information	36
Note 11	Assets Held for Sale and Discontinued Operations	21	Note 25	Fair Value of Financial Instruments	37
Note 12	Business Combinations	22	Note 26	Financial Instruments Risk	39
Note 13	Non-Controlling Interests	22	Note 27	Subsequent Events	41
Note 14	Intangible Assets and Goodwill	23

AURORA CANNABIS INC.

Condensed Consolidated Interim Statements of Financial Position

As at December 31, 2020 and June 30, 2020

(Unaudited – Amounts reflected in thousands of Canadian dollars)

	Notes		December 31, 2020			June 30, 2020
				$			$
Assets
Current
Cash and cash equivalents				384,386			162,179
Restricted cash		16(a)		50,000			—
Accounts receivable		3, 26(a)		76,520			54,110
Income taxes receivable				29			—
Marketable securities		6(a)		4,268			7,066
Derivatives		6(b)		381			11,791
Biological assets		8		17,403			35,435
Inventory		9		183,412			121,827
Prepaids and other current assets				24,255			22,137
Assets held for sale		11(a)		1,925			6,194
				742,579			420,739

Property, plant and equipment		10		712,190			946,380
Derivatives		6(b)		47,359			41,791
Deposits				3,143			12,329
Loan receivable				8,469			3,643
Investments in associates and joint ventures		7		906			18,114
Intangible assets		14		392,179			412,267
Goodwill		14		923,365			927,882
Total assets				2,830,190			2,783,145

Liabilities
Current
Accounts payable and accrued liabilities		26(b)		69,002			95,574
Income taxes payable				16			—
Deferred revenue		23		3,938			3,505
Convertible debentures		15		32,828			32,110
Loans and borrowings		16		41,793			120,508
Contingent consideration payable		25		256			19,054
Deferred gain on derivatives				—			20
Provisions		22(b)(v)		2,000			1,485
				149,833			272,256

Convertible debentures		15		288,727			294,928
Loans and borrowings		16		130,025			83,701
Derivative liability		15, 17(c)		60,318			1,827
Other long-term liability				37			37
Deferred tax liability				4,069			3,946
Total liabilities				633,009			656,695

Shareholders’ equity
Share capital		17		6,289,374			5,785,395
Reserves				137,807			145,395
Accumulated other comprehensive loss				(204,914	)		(187,197	)
Deficit				(4,025,086	)		(3,592,787	)
Total equity attributable to Aurora shareholders				2,197,181			2,150,806
Non-controlling interests		13		—			(24,356	)
Total equity				2,197,181			2,126,450
Total liabilities and equity				2,830,190			2,783,145

Nature of Operations (Note 1)

Strategic Investments (Note 5)

Commitments and Contingencies (Note 22)

Subsequent Events (Notes 27)

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

AURORA CANNABIS INC.

Condensed Consolidated Interim Statements of Comprehensive Loss

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

		Three months ended December 31,					Six months ended December 31,
					Restated - Note 2(e) and 11(b)					Restated - Note 2(e) and 11(b)
	Notes		2020		2019			2020		2019
			$		$			$		$
Revenue from sale of goods	23		79,025		62,778			161,092		144,560
Revenue from provision of services	23		550		1,355			1,149		3,199
Excise taxes			(11,902	)	(8,995	)		(26,756	)	(18,907	)

Net revenue			67,673		55,138			135,485		128,852

Cost of sales			50,644		36,937			93,938		71,080

Gross profit before fair value adjustments			17,029		18,201			41,547		57,772

Changes in fair value of inventory sold			5,942		13,223			9,246		34,528
Unrealized gain on changes in fair value of biological assets	8		(6,262	)	(7,932	)		(11,669	)	(33,831	)

Gross profit			17,349		12,910			43,970		57,075

Expense
General and administration			27,834		58,429			57,123		108,980
Sales and marketing			14,138		28,872			29,173		50,727
Acquisition costs			—		2,059			1,104		3,023
Research and development			2,432		6,775			5,016		12,823
Depreciation and amortization	10, 14		14,006		20,739			28,080		38,717
Share-based compensation	18(a)(b)(c)		5,987		19,694			12,848		44,251
			64,397		136,568			133,344		258,521

Loss from operations			(47,048	)	(123,658	)		(89,374	)	(201,446	)

Other (expense) income
Legal settlement and contract termination fees	22(a), (b)(i)		(800	)	—			(44,072	)	—
Interest and other income			1,865		1,997			3,132		2,886
Finance and other costs			(18,872	)	(23,833	)		(33,563	)	(41,709	)
Foreign exchange (“FX”) gain (loss)			(527	)	(961	)		6,900		(3,901	)
Other (losses) gains	20		8,065		(168,807	)		(2,638	)	(41,151	)
Restructuring charges			—		—			(210	)	—
Impairment of deposits			(10,266	)	—			(10,266	)	—
Impairment of property, plant and equipment	10, 11(a)		(221,643	)	(44,897	)		(222,302	)	(44,897	)
Impairment of investment in associates	6		—		(46,226	)		—		(46,226	)
Impairment of intangible assets and goodwill	14		(395	)	(920,926	)		(3,777	)	(920,926	)
			(242,573	)	(1,203,653	)		(306,796	)	(1,095,924	)

Loss from operations before taxes and discontinued operations			(289,621	)	(1,327,311	)		(396,170	)	(1,297,370	)

Income tax recovery (expense)
Current			118		123			225		4,702
Deferred, net			(3,285	)	25,013			(4,003	)	1,730
			(3,167	)	25,136			(3,778	)	6,432

Net loss from continuing operations			(292,788	)	(1,302,175	)		(399,948	)	(1,290,938	)
Net loss from discontinued operations, net of tax			—		(9,943	)		(2,366	)	(13,743	)

Net loss			(292,788	)	(1,312,118	)		(402,314	)	(1,304,681	)

AURORA CANNABIS INC.

Condensed Consolidated Interim Statements of Comprehensive Loss

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

(Continued)

		Three months ended December 31,						Six months ended December 31,
						Restated - Note 2(e) and 11(b)						Restated - Note 2(e) and 11(b)
	Notes		2020			2019			2020			2019
			$			$			$			$
Other comprehensive (loss) income (“OCI”) that will not be reclassified to net loss
Deferred tax recovery			—			1,179			—			3,085
Unrealized loss on marketable securities	6(a)		(6,744	)		(11,481	)		(14,100	)		(30,555	)
			(6,744	)		(10,302	)		(14,100	)		(27,470	)

Other comprehensive (loss) income that may be reclassified to net loss
Share of income (loss) from investment in associates	7		(15	)		69			250			(23	)
Foreign currency translation loss			(2,191	)		(3,701	)		(3,867	)		(5,497	)
			(2,206	)		(3,632	)		(3,617	)		(5,520	)
Total other comprehensive loss			(8,950	)		(13,934	)		(17,717	)		(32,990	)

Comprehensive loss from continuing operations			(301,738	)		(1,316,138	)		(418,203	)		(1,323,980	)
Comprehensive loss from discontinued operations			—			(9,914	)		(1,828	)		(13,691	)
Comprehensive loss			(301,738	)		(1,326,052	)		(420,031	)		(1,337,671	)

Net loss from continuing operations attributable to:
Aurora Cannabis Inc.			(292,788	)		(1,282,406	)		(398,484	)		(1,268,783	)
Non-controlling interests			—			(19,769	)		(1,464	)		(22,155	)

Net loss from discontinued operations attributable to:
Aurora Cannabis Inc.	11(b)		—			(9,943	)		(2,366	)		(13,743	)
Non-controlling interests			—			—			—			—

Comprehensive loss attributable to:
Aurora Cannabis Inc.			(301,738	)		(1,306,184	)		(419,362	)		(1,315,509	)
Non-controlling interests			—			(19,868	)		(669	)		(22,162	)

Net loss per share - basic and diluted
Continuing operations	19	($	1.74	)	($	14.14	)	($	2.79	)	($	14.43	)
Discontinued operations	19	$	—		($	0.11	)	($	0.02	)	($	0.16	)
Total operations	19	($	1.74	)	($	14.25	)	($	2.81	)	($	14.59	)

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

AURORA CANNABIS INC.

Condensed Consolidated Interim Statements of Changes in Equity

Six months ended December 31, 2020

(Unaudited - Amounts reflected in thousands of Canadian dollars, except 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, 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
Shares released for earn out payments		17(b)		2,639,172			35,152			—			(15,792	)		—		—			(15,792	)		—			—		—			—			—			—			—			19,360
Shares issued for services				44,094			552			—			—			—		—			—			—			—		—			—			—			—			—			552
Shares issued through equity financing		17(b)		65,359,118			471,154			—			—			—		—			—			—			—		—			—			—			—			—			471,154
Equity financing transaction costs				—			(16,948	)		—			—			—		—			—			—			—		—			—			—			—			—			(16,948	)
Deferred tax on transaction costs				—			3,777			—			—			—		—			—			—			—		—			—			—			—			—			3,777
Exercise of stock options		18(a)		5,084			30			(11	)		—			—		—			(11	)		—			—		—			—			—			—			—			19
Exercise of RSUs and DSUs		18(b)		104,404			4,633			(4,633	)		—			—		—			(4,633	)		—			—		—			—			—			—			—			—
Share-based compensation ⁽¹⁾		18		—			—			11,568			1,280			—		—			12,848			—			—		—			—			—			—			—			12,848
Shares returned to treasury				(50,282	)		—			—			—			—		—			—			—			—		—			—			—			—			—			—
Change in ownership interests in subsidiaries		13		830,287			5,629			—			—			—		—			—			—			—		—			—			—			(31,449	)		25,820			—
Comprehensive income (loss) for the period				—			—			—			—			—		—			—			(14,100	)		—		250			(3,867	)		(17,717	)		(400,850	)		(1,464	)		(420,031	)
Balance, December 31, 2020				184,160,688			6,289,374			195,727			28,461			419		(86,800	)		137,807			(208,737	)		18,919		223			(15,319	)		(204,914	)		(4,025,086	)		—			2,197,181

⁽¹⁾

Included in share-based compensation is nil and $1.3 million expense relating to milestone payments for the three and six months ended December 31, 2020, respectively (three and six months ended December 31, 2019 - $2.4 million and $8.0 million). Of the total $12.8 million share-based compensation reserve, nil was capitalized to property, plant and equipment for the three and six months ended December 31, 2020 (three and six months ended December 31, 2019 - $0.4 million and $1.1 million).

As at December 31, 2020, there were no common shares in held escrow (June 30, 2020 - 50,282 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 were to be released upon receipt of relevant licenses to cultivate and sell cannabis, both of which were obtained, and milestones were met, during the year ended June 30, 2020. During the three and six months ended December 31, 2020, the Company cancelled and returned to treasury 50,282 escrowed common shares remaining (three and six months ended December 31, 2019 - released 9,989 common shares upon achievement of milestones).

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

AURORA CANNABIS INC.

Condensed Consolidated Interim Statements of Changes in Equity

Six months ended December 31, 2019

(Unaudited - Amounts reflected in thousands of Canadian dollars, except share amounts)

	Share Capital ⁽¹⁾					Reserves															AOCI
	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			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 earn out payments		27,411		4,075			—			(2,893	)		—			—			(2,893	)		—			—		—			—			—			—			—			1,182
Shares issued through equity financing		6,458,991		325,183			—			—			—			—			—			—			—		—			—			—			—			—			325,183
Equity financing transaction costs		—		(7,101	)		—			—			—			—			—			—			—		—			—			—			—			—			(7,101	)
Conversion of convertible notes		5,761,260		433,177			—			—			(41,266	)		—			(41,266	)		—			—		—			—			—			—			—			391,911
Deferred tax on convertible notes		—		688			—			—			1,888			—			1,888			—			—		—			—			—			—			—			2,576
Exercise of stock options		78,189		6,092			(3,468	)		—			—			—			(3,468	)		—			—		—			—			—			—			—			2,624
Exercise of warrants		986		102			—			(29	)		—			—			(29	)		—			—		—			—			—			—			—			73
Exercise of RSUs		18,194		921			(921	)		—			—			—			(921	)		—			—		—			—			—			—			—			—
Share-based compensation		—		—			37,840			7,983			—			—			45,823			—			—		—			—			—			—			—			45,823
Choom marketable securities transferred to investment in associate		—		—			—			—			—			—			—			5,225			—		—			—			5,225			(5,225	)		—			—
Change in ownership interests in subsidiaries		217,554		20,363			—			—			—			—			—			—			—		—			—			—			(18,263	)		(2,100	)		—
Comprehensive income (loss) for the period		—		—			—			—			—			—			—			(30,555	)		3,085		(23	)		(5,497	)		(32,990	)		(1,282,526	)		(22,155	)		(1,337,671	)
Balance, December 31, 2019		97,349,147		5,456,618			177,398			45,556			2,307			(86,800	)		138,461			(181,579	)		21,380		329			(11,065	)		(170,935	)		(1,592,325	)		(19,845	)		3,811,974

⁽¹⁾

Common share amounts have been adjusted for all prior periods to reflect the Share Consolidation effected on May 11, 2020. Refer to Note 2(a) - Basis of Presentation and Measurement for more information.

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

AURORA CANNABIS INC.

Condensed Consolidated Interim Statements of Cash Flows

Six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars)

		Six months ended December 31,
					Restated - Note 2(e) and 11(b)
	Notes		2020		2019
			$		$
Operating activities
Net loss from continuing operations			(399,948	)	(1,290,938	)
Adjustments for non-cash items:
Unrealized gain on changes in fair value of biological assets	8		(11,669	)	(33,831	)
Changes in fair value included in inventory sold			9,246		34,528
Depreciation of property, plant and equipment	10		28,953		39,858
Amortization of intangible assets	14		18,374		21,121
Share-based compensation			12,848		44,251
Impairment of deposits			10,266		—
Impairment of property, plant and equipment	10		222,302		44,897
Impairment of investment in associate	7		—		46,226
Impairment of intangible assets and goodwill	14		3,777		920,926
Accrued interest and accretion expense	15, 16		14,475		9,636
Interest and other income			(191	)	—
Deferred tax expense			3,778		(6,432	)
Other losses	20		2,638		41,151
Foreign exchange (gain) loss			(20,944	)	3,900
Changes in non-cash working capital	21		(63,339	)	(95,670	)
Net cash used in operating activities from discontinued operations			(3,238	)	(9,238	)
Net cash used in operating activities			(172,672	)	(229,615	)

Investing activities
Investment in derivatives			—		(2,000	)
Proceeds from disposal of marketable securities	6		6,135		84,770
Loan receivable			(4,826	)	(3,312	)
Purchase of property, plant and equipment and intangible assets	10		(29,661	)	(233,633	)
Disposal of property, plant and equipment			5,844		2,100
Payment of contingent consideration			—		(1,607	)
Deposits			(2,169	)	(15,874	)
Net cash provided by investing activities from discontinued operations			1,698		8,485
Net cash used in investing activities			(22,979	)	(161,071	)

Financing activities
Proceeds from long-term loans			—		64,394
Repayment of long-term loans			(22,542	)	(3,750	)
Payments of principal portion of lease liabilities	16(b)		(2,840	)	(6,327	)
Restricted cash			(50,000	)	1,064
Financing fees			(1,389	)	(941	)
Shares issued for cash, net of share issue costs			493,438		320,779
Net cash used in financing activities from discontinued operations			—		(164	)
Net cash provided by financing activities			416,667		375,055
Effect of foreign exchange on cash and cash equivalents			1,191		(762	)
Increase (decrease) in cash and cash equivalents			222,207		(16,393	)
Cash and cash equivalents, beginning of period			162,179		172,727
Cash and cash equivalents, end of period			384,386		156,334

Supplemental cash flow information (Note 21)

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

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – 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 V6E 4N7.

The Company’s principal strategic business lines are focused on the production, distribution and sale of 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;

•

Distribution of wholesale medical cannabis in the European Union (“EU”) pursuant to the German Medicinal Products Act and German Narcotic Drugs Act; and

•

Distribution and sale of hemp-derived CBD products in the United States (“U.S.”) market.

The 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, a U.S Company based in Massachusetts specialized in the sale of hemp-derived CBD (Note 12) as an entry into this market. As part of the U.S. market strategy, we are considering how various state and federal regulations will 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 four Canadian facilities including Aurora Prairie, Aurora Mountain, Aurora Vie, and Aurora Eau.

Note 2 Significant Accounting Policies and Judgments

(a) Basis of Presentation and Measurement

The condensed consolidated interim financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and International Accounting Standards 34, “Interim Financial Reporting” (“IAS34”) 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 thousands of Canadian dollars, except share and per share data.

The condensed consolidated interim financial statements are presented in Canadian dollars and are prepared in accordance with the same accounting policies, critical estimates and methods described in the Company’s annual consolidated financial statements, except for the adoption of new accounting policies and estimates for provisions (Notes 2(d) and 22(b)(v)), government grant (Note 4), impairment of property, plant and equipment (Note 10), impairment testing of cash generating units and goodwill (Note 14), and share purchase warrants (Note 17(c)). Given that certain information and footnote disclosures, which are included in the annual audited consolidated financial statements, have been condensed or excluded in accordance with IAS 34, these financial statements should be read in conjunction with our annual audited consolidated financial statements as at and for the year ended June 30, 2020, including the accompanying notes thereto.

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 adjusted to reflect the Share Consolidation unless otherwise noted.

(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 six months ended December 31, 2020 and the year ended June 30, 2020. The production and sale of cannabis have been recognized as essential services across Canada and Europe. As of December 31, 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, 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.

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

(c) Basis of Consolidation

The condensed consolidated interim 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 condensed consolidated interim 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”) ⁽¹⁾	100%	Canadian Dollar
Aurora Deutschland GmbH (“Aurora Deutschland”)	100%	European Euro
Aurora Nordic Cannabis A/S (“Aurora Nordic”)	100%	Danish Krone
H2 Biopharma Inc. (“H2” or “Aurora Eau”)	100%	Canadian Dollar
Peloton Pharmaceuticals Inc. (“Peloton” or “Aurora Vie”)	100%	Canadian Dollar
Whistler Medical Marijuana Corporation (“Whistler”)	100%	Canadian Dollar

⁽¹⁾

Effective July 1, 2020, ACE amalgamated with MedReleaf Corp. and CanniMed Therapeautics Inc. with ACE being the surviving entity.

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

(d) Provision

The Company recognizes a provision if there is a present legal or constructive 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.

An onerous contract provision is recorded when the Company has a contract under which it is more likely than not that the unavoidable costs of meeting the contractual obligations will be greater than the economic benefits that the Company expects to receive under the contract. An onerous contract provision represents the lesser of the cost of exiting from the contract and the cost of fulfilling it.

(e) 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 general and administrative expenses. The Company believes that the revised policies and presentation provides more accurate and relevant financial information to users of the condensed consolidated interim financial statements.

Management has applied the change in accounting policy retrospectively. The following is a summary of the impacts to the statement of comprehensive loss for the three months ended December 31, 2019:

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

December 31, 2019 As previously reported			Inventory Adjustments			Discontinued Operations (Note 11(b))			December 31, 2019 Restated
Condensed Consolidated Interim Statement of Comprehensive Loss
Cost of sales	33,214			3,830			(107	)		36,937
Gross profit (loss) before fair value adjustments	22,813			(3,830	)		(782	)		18,201

Changes in fair value of inventory sold	22,778			(9,555	)		—			13,223
Unrealized gain on changes in fair value of biological assets	(29,880	)		21,948			—			(7,932	)
Gross profit (loss)	29,915			(16,223	)		(782	)		12,910

General and administration	70,751			(7,879	)		(4,443	)		58,429

Income tax (recovery) expense	(24,279	)		(2,124	)		1,267			(25,136	)

Net loss from continuing operations	(1,305,898	)		(6,220	)		9,943			(1,302,175	)
Net loss attributable to Aurora shareholders	(1,286,129	)		(6,220	)		—			(1,292,349	)
Loss per share (basic and diluted) ⁽¹⁾	(14.18	)		(0.07	)		—			(14.25	)

⁽¹⁾

Loss per share (basic and diluted) has been recalculated to reflect the Share Consolidation effected on May 11, 2020. Refer to Note 2(a) - Basis of Presentation and Measurement for more information.

The following is a summary of the impacts to the statement of comprehensive loss and the statement of cash flows for the six months ended December 31, 2019:

December 31, 2019 As previously reported			Inventory Adjustments			Discontinued Operations (Note 11(b))			December 31, 2019 Restated
Condensed Consolidated Interim Statement of Comprehensive Loss
Cost of sales	65,953			6,800			(1,673	)		71,080
Gross profit (loss) before fair value adjustments	65,319			(6,800	)		(747	)		57,772

Changes in fair value of inventory sold	41,312			(6,784	)		—			34,528
Unrealized gain on changes in fair value of biological assets	(59,616	)		25,785			—			(33,831	)
Gross profit (loss)	83,623			(25,801	)		(747	)		57,075

General and administration	129,872			(13,523	)		(7,369	)		108,980

Income tax (recovery) expense	(5,038	)		(3,125	)		1,731			(6,432	)

Net loss from continuing operations	(1,295,528	)		(9,153	)		13,743			(1,290,938	)
Net loss attributable to Aurora shareholders	(1,273,373	)		(9,153	)		—			(1,282,526	)
Loss per share (basic and diluted) ⁽¹⁾	(14.48	)		(0.11	)		—			(14.59	)

⁽¹⁾

December 31, 2019 As previously reported			Inventory Adjustments			Discontinued Operations (Note 11(b))		December 31, 2019 Restated
Condensed Consolidated Interim Statement of Cash Flows
Unrealized gain on changes in fair value of biological assets	(59,616	)		25,785			—		(33,831	)
Changes in fair value of inventory sold	41,312			(6,784	)		—		34,528
Income tax expense	(5,038	)		(3,125	)		1,731		(6,432	)
Changes in non-cash working capital	(91,369	)		(6,723	)		2,422		(95,670	)
Net cash used in operating activities	(229,615	)		—			—		(229,615	)

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

(f)

Adoption of New Accounting Pronouncements

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 adopted the Amendments to IFRS 3 effective July 1, 2020 with no impact to the Company’s condensed consolidated interim financial statements.

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 adopted the Amendments to IFRS 9, IAS 39 and IFRS 7 effective July 1, 2020 with no impact to the Company’s condensed consolidated interim financial statements.

(g) 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.

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.

Amendments to IAS 37: Onerous Contracts and the Cost of Fulfilling a Contract

The amendment specifies that the ‘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 Accounts Receivable

	Notes		December 31, 2020		June 30, 2020
				$		$
Trade receivables		26(a)		44,390		45,199
Sales taxes receivable				3,476		5,912
Consideration receivable from divestiture		11(b)		2,022		—
Government grant receivable		4		23,678		—
Other receivables ⁽¹⁾				2,954		2,999
				76,520		54,110

⁽¹⁾

Includes interest receivable from the secured convertible debenture held in Choom Holdings Inc. and High Tide (Note 5(e) and 5(c)).

Note 4 Government Grant

Accounting Policy

The Company recognizes government grants when there is reasonable assurance that it will comply with the conditions required to qualify for the grant, and that the grant will be received. Government grants related to income are recognized as other (losses) gains in the statement of comprehensive loss while government grants related to assets, including non-monetary grants at fair value, are recognized as a reduction to the related asset’s carrying amount.

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

In April 2020, the Government of Canada announced the Canada Emergency Wage Subsidy (“CEWS”) program. CEWS provides a wage subsidy on eligible remuneration, subject to limits per employee, to eligible employers based on certain criteria, including the demonstration of revenue declines. The Company has determined that it has qualified for this subsidy and has applied for CEWS. For the three and six months ended December 31, 2020, the Company has recognized $23.7 million in government grant income within other (losses) gains in the statement of comprehensive loss.

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. On July 23, 2020, the Company no longer held significant influence over Cann Group, as the Company’s percentage ownership interest was diluted to approximately 18% (June 30, 2020 - 22.4%). As a result, the $17.0 million carrying value of the Company’s equity investment was derecognized from investment in associates (Note 7) and reclassified to marketable securities (Note 6(a)) at its fair value of $15.5 million, calculated based on the July 23, 2020 quoted market price of A$0.51. This resulted in the recognition of a nil and $1.4 million loss on the deemed disposal of the investment in associate during the three and six months ended December 31, 2020, respectively (Note 20).

On October 9, 2020, the Company sold all of its 31,956,347 common shares held in Cann Group at A$0.20 per share for net proceeds of $5.9 million. The fair value of the Cann Group shares on October 9, 2020 was $6.0 million, which resulted in a cumulative loss of $6.8 million and $9.5 million recognized through OCI during the three and six months ended December 31, 2020.

(b)

Capcium Inc. (“Capcium”)

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

During the six months ended December 31, 2020, the Company subscribed to 1,851,086 Series B preferred shares in Capcium for $1.9 million. In the event of a Liquidity Event, which is the occurrence of a merger or consolidation and a sale, lease, transfer, exclusive license or other disposal of all or substantially all of the assets of Capcium, Series B preferred shareholders shall receive a cash payment equal to twice the initial investment and the Series B preferred shares shall automatically convert into a number of common stock based on the fair market value at that time. In the event of an IPO Liquidity Event, which is the occurrence of either a public offering or a reverse take-over, the Series B preferred shares shall automatically convert into a number of common stock based on the fair market value at that time. In conjunction with the Company’s investment, the parties amended an existing manufacturing agreement to reduce the Company’s annual minimum purchase commitment by 20.0 million capsules (Note 22(b)(ii)). As at December 31, 2020, the Series B preferred shares had a nominal fair value resulting in an unrealized loss of nil and $1.9 million for the three and six months ended December 31, 2020, respectively.

During the six months ended December 31, 2020, the Company converted its existing convertible debentures with a principal investment of $5.4 million and a fair value of nil (June 30, 2020 - nil), into 5,371,300 Series A preferred shares. The Series A preferred shares accrue an annual per share dividend of 8% and rank subordinate to the Series B preferred shares. In the event of a Liquidity Event, the Series A preferred shares shall automatically convert into a number of common stock equal to fifteen percent of the issued and outstanding common stock on a fully diluted basis. As at December 31, 2020, the Series A preferred shares had a nominal fair value resulting in an unrealized loss of nil for the three and six months ended December 31, 2020.

(c)

High Tide Inc. (“High Tide”)

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

On July 23, 2020, the Company entered into an amended restated secured convertible debenture (the “July 2020 Debenture”) agreement for its $10.8 million unsecured convertible debentures originally bearing an interest rate of 8.5% per annum, 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 and maturing on December 12, 2020 (the “December 2018 Debentures”). Under the terms of the amendment, the July 2020 Debenture is secured against the assets and properties of High Tide, bear no interest, are convertible into common shares of High Tide at $0.425 per share at the option of the Company at any time, and mature on January 1, 2025. The Company has also entered into a debt restructuring agreement whereby High Tide will pay a 0.5% royalty payment on all non-Aurora product revenue generated by High Tide beginning November 1, 2021, with an automatic increase of an additional 0.5% each subsequent year. Payments under the July 2020 Debentures can be offset against other obligations between Aurora and High Tide. The conversion of the July 2020 Debenture is subject to Aurora holding no more than a 25% ownership interest in High Tide in accordance with the ownership restriction applicable to licensed producers under the Cannabis Retail Regulations in Ontario.

As of December 31, 2020, the convertible debentures had a fair value of $13.7 million (June 30, 2020 - $12.7 million) resulting in an unrealized gain of $2.5 million and $1.2 million for the three and six months ended December 31, 2020, respectively (three and six months ended December 31, 2019 - $0.0 million and $0.6 million). The fair value of the convertible debentures were estimated using the FINCAD model based on the following weighted average assumptions: share price of $0.25 (June 30, 2020 - $0.16); dividend yield of 0% (June 30, 2020 - 0%); stock price volatility of 96.2% (June 30, 2020 - 106.0%); credit spread of 11.9% (June 30, 2020 - 12.3%); and an expected life of 3.25 years (June 30, 2020 - 0.63 years).

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

(d)

Australis Capital Inc. (“ACI”)

ACI is a public company that is focused on investments and acquisitions in the cannabis space and more specifically, investment in the growing U.S. cannabis market. ACI was previously wholly-owned by Aurora and was spun-out to Aurora shareholders on September 19, 2018. As of December 31, 2020, the Company holds 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 December 31, 2020, the warrants remain un-exercisable.

As of December 31, 2020, the warrants had a fair value of $2.9 million (June 30, 2020 - $3.2 million) estimated using the Binomial model with the following assumptions: share price of $0.17 (June 30, 2020 - $0.22); risk-free interest rate of 1.05% (June 30, 2020 - 0.93%); dividend yield of 0% (June 30, 2020 - 0%); stock price volatility of 113.92% (June 30, 2020 - 116.01%); an expected life of 7.72 years (June 30, 2020 - 8.23 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 $1.3 million unrealized gain and a $0.3 million unrealized loss on fair value during the three and six months ended December 31, 2020, respectively (three and six months ended December 31, 2019 - $2.8 million and $4.7 million) (Note 6(b)).

(e)

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.

(i)

Common Shares and Investment in Associate

As of December 31, 2020, the Company held an aggregate of 9,859,155 common shares in Choom (June 30, 2020 - 9,859,155) representing a 3.4% (June 30, 2020 - 4.4%) ownership interest with a fair value of $0.7 million (June 30, 2020 - $1.4 million) based on the closing stock price of $0.07 (June 30, 2020 - $0.14).

(ii)

Convertible Debenture

As of December 31, 2020, the secured convertible debenture had a fair value of $15.9 million (June 30, 2020 - $20.5 million) resulting in an unrealized loss of $0.2 million and $4.6 million for the three and six months ended December 31, 2020, respectively (three and six months ended December 31, 2019 - $0.2 million and $0.8 million) (Note 6(b)). The fair value of the convertible debenture was estimated using the FINCAD model based on the following assumptions: share price of $0.07 (June 30, 2020 - $0.14); credit spread of 20.33% (June 30, 2020 - 8.58%); dividend yield of 0% (June 30, 2020 - 0%); stock price volatility of 99.41% (June 30, 2020 - 121.88%); and an expected life of 1.84 years (June 30, 2020 - 2.34 years).

(iii)

Share Purchase Warrants

On November 2, 2020, the Company’s 96,464,248 share purchase warrants in Choom with a fair value of nil (June 30, 2020 - nil) expired unexercised.

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

Note 6 Marketable Securities and Derivatives

(a)

Marketable securities

At December 31, 2020, the Company held the following marketable securities:

Financial asset hierarchy level	Level 1			Level 1			Level 3			Level 3
Marketable securities designated at fair value through other comprehensive income (“FVTOCI”)	Radient			Cann Group Note 5(a)			Capcium Note 5(b)			Other immaterial investments			Total
		$			$			$			$			$
Balance, June 30, 2020		6,021			—			—			1,045			7,066
Additions (disposals)		—			(6,013	)		1,851			(61	)		(4,223	)
Transfer from investment in associates		—			15,525			—			—			15,525
Unrealized (loss) gain on changes in fair value		(2,823	)		(9,512	)		(1,851	)		86			(14,100	)
Balance, December 31, 2020		3,198			—			—			1,070			4,268

Unrealized (loss) gain on marketable securities
Three months ended December 31, 2020
OCI unrealized (loss) gain		—			(6,769	)		—			25			(6,744	)

Three months ended December 31, 2019
OCI unrealized loss		(8,093	)		—						(3,388	)		(11,481	)

Six months ended December 31, 2020
OCI unrealized (loss) gain		(2,823	)		(9,512	)		(1,851	)		86			(14,100	)

Six months ended December 31, 2019
OCI unrealized loss		(14,869	)		—			—			(15,686	)		(30,555	)

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

(b)

Derivatives

At December 31, 2020, the Company held the following derivative investments:

Financial asset hierarchy level	Level 2			Level 2			Level 2			Level 3			Level 2			Level 2
Derivatives and convertible debentures at fair value through profit or loss (“FVTPL”)	TGOD			ACI Note 5(d)			Choom Note 5(e)			Investee-B			High Tide Note 5(c)			Other immaterial investments			Total
		$			$			$			$			$			$			$
Balance, June 30, 2020		1,132			3,178			20,499			16,102			12,660			11			53,582
Repayment		—			—			—			—			(236	)		—			(236	)
Unrealized (loss) gain on changes in fair value		(751	)		(294	)		(4,626	)		(177	)		1,240			(11	)		(4,619	)
Foreign exchange		—			—			—			(987	)		—			—			(987	)
Balance, December 31, 2020		381			2,884			15,873			14,938			13,664			—			47,740
Current portion		(381	)		—			—			—			—			—			(381	)
Long-term portion		—			2,884			15,873			14,938			13,664			—			47,359

Unrealized (loss) gain on derivatives
Three months ended December 31, 2020
Foreign exchange		—			—			—			(683	)		—			—			(683	)
Unrealized (loss) gain on changes in fair value		(84	)		1,253			(165	)		37			2,456			—			3,497
		(84	)		1,253			(165	)		(646	)		2,456			—			2,814

Three months ended December 31, 2019
Foreign exchange		—			—			—			24			—			—			24
Inception gains amortized		—			—			—			—			—			324			324
Unrealized (loss) gain on changes in fair value		(10,175	)		(2,759	)		(210	)		(44	)		634			(7,907	)		(20,461	)
		(10,175	)		(2,759	)		(210	)		(20	)		634			(7,583	)		(20,113	)

Six months ended December 31, 2020
Foreign exchange		—			—			—			(987	)		—			—			(987	)
Unrealized (loss) gain on changes in fair value		(751	)		(294	)		(4,626	)		(177	)		1,240			(11	)		(4,619	)
		(751	)		(294	)		(4,626	)		(1,164	)		1,240			(11	)		(5,606	)

Six months ended December 31, 2019
Foreign exchange		—			—			—			24			—			—			24
Inception gains amortized		—			—			—			—			—			709			709
Unrealized (loss) gain on changes in fair value		(22,112	)		(4,742	)		(847	)		126			640			(8,029	)		(34,964	)
		(22,112	)		(4,742	)		(847	)		150			640			(7,320	)		(34,231	)

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

Note 7 Investments in Associates and Joint Ventures

The carrying value of investments in associates and joint ventures consist of:

	Cann Group			CTT Pharmaceutical			Choom
	Note 5(a)			Holdings Inc.			Note 5(e)			Total
		$			$			$			$
Balance, June 30, 2020		16,917			381			816			18,114
Share of net loss⁽¹⁾		(226	)		(33	)		(231	)		(490	)
Disposition / reclassification		(16,968	)		—			—			(16,968	)
OCI FX and share of OCI income (loss)		277			(27	)		—			250
Balance, December 31, 2020		—			321			585			906

⁽¹⁾

Represents an estimate of the Company’s share of net loss based on the latest available information of each investee.

Note 8 Biological Assets

The following inputs and assumptions are all categorized within Level 3 on the fair value hierarchy and were used in determining the fair value of biological assets:

Inputs and assumptions	Description	Correlation between inputs and fair value
Average selling price per gram	Represents the average selling price per gram of dried cannabis net of excise taxes, where applicable, for the period for all strains of cannabis sold, which is expected to approximate future selling prices.	If the average selling price per gram were higher (lower), estimated fair value would increase (decrease).
Average attrition rate	Represents the weighted average number of plants culled at each stage of production.	If the average attrition rate was lower (higher), estimated fair value would increase (decrease).
Weighted average yield per plant	Represents the weighted average number of grams of dried cannabis inventory expected to be harvested from each cannabis plant.	If the weighted average yield per plant was higher (lower), estimated fair value would increase (decrease).
Standard cost per gram to complete production	Based on actual production costs incurred divided by the grams produced in the period.	If the standard cost per gram to complete production was lower (higher), estimated fair value would increase (decrease).
Stage of completion in the production process	Calculated by taking the weighted average number of days in production over a total average grow cycle of approximately twelve weeks.	If the number of days in production was higher (lower), estimated fair value would increase (decrease).

The following table highlights the sensitivities and impact of changes in significant assumptions on the fair value of biological assets:

		Range of inputs					Impact on fair value
Significant inputs & assumptions		December 31, 2020		June 30, 2020	Sensitivity		December 31, 2020		June 30, 2020
Average selling price per gram	$	5.50	$	4.78	Increase or decrease of $1.00 per gram	$	6,346	$	14,070
Weighted average yield (grams per plant)		40.65		52.73	Increase or decrease by 5 grams per plant	$	2,121	$	3,756
Standard cost per gram to complete production	$	2.21	$	1.73	Increase or decrease of $1.00 per gram	$	8,012	$	19,318

The Company’s estimates are, by their nature, subject to change, and differences from the anticipated yield will be reflected in the gain or loss on biological assets in future periods.

The changes in the carrying value of biological assets during the period are as follows:

	$
Balance, June 30, 2020	35,435
Production costs capitalized	30,240
Changes in fair value less cost to sell due to biological transformation	11,669
Transferred to inventory upon harvest	(59,941)
Balance, December 31, 2020	17,403

As of December 31, 2020, the weighted average fair value less cost to complete and cost to sell a gram of dried cannabis was $2.18 per gram (June 30, 2020 - $1.88 per gram).

During the three and six months ended December 31, 2020, the Company’s biological assets produced 33,685 kilograms and 80,559 kilograms of dried cannabis, respectively (three and six months ended December 31, 2019 - 30,691 kilograms and 72,127 kilograms). As at December 31, 2020, it is expected that the Company’s biological assets will yield approximately 15,280 kilograms (June 30, 2020 - 41,653 kilograms) of cannabis when harvested. As of December 31, 2020, the weighted average stage of growth for the biological assets was 52% (June 30, 2020 - 48%).

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

Note 9 Inventory

The following is a breakdown of inventory:

	December 31, 2020						June 30, 2020
	Capitalized cost		Fair value adjustment		Carrying value		Capitalized cost		Fair value adjustment		Carrying value
		$		$		$		$		$		$
Harvested cannabis
Work-in-process		71,531		23,316		94,847		29,737		16,708		46,445
Finished goods		16,205		2,238		18,443		11,826		1,735		13,561
		87,736		25,554		113,290		41,563		18,443		60,006
Extracted cannabis
Work-in-process		24,838		5,507		30,345		21,608		4,995		26,603
Finished goods		16,998		1,466		18,464		15,758		1,396		17,154
		41,836		6,973		48,809		37,366		6,391		43,757
Hemp products
Raw materials		794		—		794		929		—		929
Work-in-process		—		—		—		235		—		235
Finished goods		—		—		—		107		—		107
		794		—		794		1,271		—		1,271

Supplies and consumables		19,306		—		19,306		16,125		—		16,125

Merchandise and accessories		1,213		—		1,213		668		—		668

Ending balance		150,885		32,527		183,412		96,993		24,834		121,827

During the three and six months ended December 31, 2020, inventory expensed to cost of goods sold was $56.6 million and $103.2 million, respectively (three and six months ended December 31, 2019 - $50.2 million and $105.6 million), which included $5.9 million and $9.2 million, respectively (three and six months ended December 31, 2019 - $13.2 million and $34.5 million) of non-cash expense related to the changes in fair value of inventory sold, and $0.7 million inventory impairment charges for the three and six months ended December 31, 2020 (three and six months ended December 31, 2019 - nil).

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

Note 10 Property, Plant and Equipment

The following summarizes the carrying values of property, plant and equipment for the periods reflected:

	December 31, 2020										June 30, 2020
	Cost		Accumulated depreciation			Impairment			Net book value		Cost		Accumulated depreciation			Impairment			Net book value
Owned assets
Land		31,744		—			(2,341	)		29,403		31,485		—			(893	)		30,592
Real estate		414,405		(66,017	)		—			348,388		515,264		(51,867	)		(82,721	)		380,676
Construction in progress		361,249		—			(215,796	)		145,453		349,274		—			(37,741	)		311,533
Computer software & equipment		32,103		(18,373	)		(552	)		13,178		30,947		(12,687	)		(108	)		18,152
Furniture & fixtures		12,196		(4,593	)		(12	)		7,591		9,888		(3,635	)		(139	)		6,114
Production & other equipment		162,366		(66,071	)		(2,314	)		93,981		187,512		(46,856	)		(24,216	)		116,440
Total owned assets		1,014,063		(155,054	)		(221,015	)		637,994		1,124,370		(115,045	)		(145,818	)		863,507

Right-of-use lease assets
Land		27,850		(1,210	)		—			26,640		27,862		(787	)		—			27,075
Real estate		56,425		(10,330	)		—			46,095		63,548		(7,729	)		(2,416	)		53,403
Production & other equipment		4,584		(3,123	)		—			1,461		5,591		(3,196	)		—			2,395
Total right-of-use lease assets		88,859		(14,663	)		—			74,196		97,001		(11,712	)		(2,416	)		82,873

Total property, plant and equipment		1,102,922		(169,717	)		(221,015	)		712,190		1,221,371		(126,757	)		(148,234	)		946,380

The following summarizes the changes in the net book values of property, plant and equipment for the periods presented:

	Balance, June 30, 2020		Additions		Disposals			Other ⁽¹⁾⁽²⁾			Depreciation			Impairment			Foreign currency translation			Balance, December 31, 2020
Owned assets
Land		30,592		112		—			1,122			—			(2,341	)		(82	)		29,403
Real estate		380,676		—		(12	)		(20,592	)		(11,986	)		—			302			348,388
Construction in progress		311,533		28,171		(52	)		21,142			—			(215,796	)		455			145,453
Computer software & equipment		18,152		356		—			(339	)		(4,440	)		(552	)		1			13,178
Furniture & fixtures		6,114		143		(228	)		2,524			(957	)		(12	)		7			7,591
Production & other equipment		116,440		182		(98	)		(7,069	)		(12,941	)		(2,314	)		(219	)		93,981
Total owned assets		863,507		28,964		(390	)		(3,212	)		(30,324	)		(221,015	)		464			637,994

Right-of-use leased assets
Land		27,075		—		—			—			(425	)		—			(10	)		26,640
Real estate		53,403		1,917		(5,182	)		(532	)		(3,411	)		—			(100	)		46,095
Production & other equipment		2,395		—		(261	)		(106	)		(590	)		—			23			1,461
Total right-of-use lease assets		82,873		1,917		(5,443	)		(638	)		(4,426	)		—			(87	)		74,196
Total property, plant and equipment		946,380		30,881		(5,833	)		(3,850	)		(34,750	)		(221,015	)		377			712,190

⁽¹⁾

Includes reclassification of construction in progress cost when associated projects are complete. Includes the $3.2 million transfer of the Colombia land to assets held for sale as at December 31, 2020 (Note 11).

⁽²⁾

During the six months ended December 31, 2020, the Company recorded a non-material correction to re-classify $1.4 million of net book value into land, $25.1 million of net book value out of real estate, $30.2 million of net book value into construction in progress, $2.5 million of net book value into fixtures & furniture, and $9.0 million of net book value out of production & other equipment.

During the three and six months ended December 31, 2020, nil and $2.1 million in borrowing costs were capitalized, respectively (three and six months ended December 31, 2019 - $4.8 million and $13.8 million), to construction in progress at a weighted average interest rate of 13% (three and six months ended December 31, 2019 - 18% and 16%).

As of December 31, 2020, $74.0 million (June 30, 2020 - $216.0 million) of property, plant and equipment were temporarily idle as the Company continues to evaluate all capital projects and investments to prioritize core cannabis operations. Of the $74.0 million idle property, plant, and equipment, $36.6 million relates to the Aurora Sun facility, $33.0 million relates to the planned closure of our facilities as part of the business transformation plan, $4.3 million relates to the Nordic Sky Facility (June 30, 2020 - $212.1 million, nil, and $3.9 million, respectively).

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

Depreciation relating to manufacturing equipment and production facilities for owned and right-of-use lease assets is capitalized into biological assets and inventory, and is expensed to cost of sales upon the sale of goods. During the three and six months ended December 31, 2020, the Company recognized $16.9 million and $34.8 million of depreciation expense, respectively (three and six months ended December 31, 2019 - $21.3 million and $40.2 million), of which $10.9 million and $19.2 million was reflected in cost of sales, respectively (three and six months ended December 31, 2019 - $6.0 million and $11.8 million).

Asset Specific Impairments

During the six months ended December 31, 2020, the Company initiated a plan to consolidate the operations in Europe with corporate office closures in Portugal, Spain and Italy. As a result, the Company recognized a $0.7 million impairment loss relating to certain European property, plant and equipment.

During the six months ended December 31, 2020, the Company halted construction at the Aurora Sun facility which is an indicator of impairment. The fair value of the Aurora Sun facility was determined based on a third-party appraisal using a fair value less cost of disposal (“FVLCD”) approach including market and cost approaches in the context of an orderly liquidation process. Consideration is given to information from manufacturers, historical data and industry standards which constitute both observable and unobservable inputs (level 2 and level 3). As a result, the Company recognized a $220.8 million impairment loss for Aurora Sun for the three and six months ended December 31, 2020. The Aurora Sun facility, and the corresponding impairment loss, is allocated to the cannabis operating segment (Note 24).

Note 11 Assets Held for Sale and Discontinued Operations

(a) Assets Held for Sale

	Jamaica Property			Uruguay Properties			Colombia Property			Total
		$			$			$			$
Balance, June 30, 2020		4,173			2,021			—			6,194
Transferred from property, plant and equipment		—			—			3,212			3,212
Impairment		—			—			(1,287	)		(1,287	)
Foreign exchange		—			(101	)		—			(101	)
Net proceeds from disposal		(4,006	)		(1,448	)		—			(5,454	)
Loss on disposal ⁽¹⁾		(167	)		(472	)		—			(639	)
Balance, December 31, 2020		—			—			1,925			1,925

⁽¹⁾ The loss on disposal is recognized in other (losses) gains (Note 20) in the statement of comprehensive income.

Colombia Property

In connection with the Company’s business transformation plan, during the six months ended December 31, 2020, the Company listed for sale its Colombian land which had a carrying value of $3.2 million. The fair value of the land was estimated using a market approach resulting in a FVLCD of $1.9 million. As a result, the Company recognized an impairment loss of $1.3 million for the three and six months ended December 31, 2020 (three and six months ended December 31, 2019 - nil). The impairment loss was included in impairment of property, plant and equipment in the statement of comprehensive income.

(b)

Discontinued Operations

Sale of Aurora Hemp Europe (“AHE”)

On July 23, 2020, the Company divested its wholly owned Lithuanian subsidiary, AHE, to the subsidiary’s President and former owner. Aurora Hemp Europe provided hemp seed contracting and processing. The sale was a result of hemp-based consumer packaged goods no longer aligning with the Company’s strategy to focus on core cannabis operations. AHE was sold for gross consideration of $3.0 million which shall be paid in 12 equal quarterly installments beginning on June 30, 2022. The $1.9 million fair value of the consideration receivable on the disposal date (Note 3) was determined by the present value of principal and interest payments, discounted at a rate of 15% which represents managements best estimate of the rate that a similar interest bearing loan receivable with similar terms and risk would earn. As a result of the divestiture, the Company recognized a nil and $1.9 million loss on disposal during the three and six months ended December 31, 2020.

Sale of Aurora Larssen Projects Inc. (“ALPS”)

On May 11, 2020, the Company divested its wholly owned subsidiary, ALPS, back to the subsidiary’s former founding owner. This disposal is consistent with the Company’s long-term strategy to streamline operations and improve profitability. As ALPS represented a separate line of business of the Company, the revenue, expenses and cash flows related to ALPS’ operations have been presented in these consolidated financial statements as discontinued operations on a retroactive basis. ALPS was sold for a nominal amount and the Company recognized a $2.8 million loss on disposal during the year ended June 30, 2020.

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

The following table summarizes Company's consolidated discontinued operations for the three and six months ended December 31, 2020 and 2019:

	Three and six months ended December 31, 2020			Three months ended December 31, 2019			Six months ended December 31, 2019
Revenue		498			889			2,420

Cost of sales		544			107			1,673
General and administration expenses		470			4,443			7,369
Sales and marketing		16			259			415
Other expenses (income)		(34	)		7,290			8,437
Loss on disposal of discontinued operations		1,868			—			—
Net loss from discontinued operations, before taxes		(2,366	)		(11,210	)		(15,474	)
Income tax recovery		—			1,267			1,731
Net loss from discontinued operations, net of taxes		(2,366	)		(9,943	)		(13,743	)

Note 12 Business Combinations

Reliva LLC (“Reliva”)

On May 28, 2020, the Company acquired Reliva, a U.S. company based in Massachusetts specialized in the sale of hemp-derived CBD products. The acquisition marked the Company’s entry into the U.S. CBD market.

The Company acquired all of the issued and outstanding shares of Reliva for aggregate consideration of $52.5 million comprised of 2,480,810 Aurora common shares at a price of US$15.34 per share with a fair value of $52.4 million (US$38.1 million) and $0.1 million held in escrow. In addition, the Company agreed to US$45.0 million in gross consideration to be paid out contingent upon Reliva achieving certain Earnings Before Interest, Depreciation and Amortization (“EBITDA”) targets over the twelve months ending December 31, 2020 and December 31, 2021. The contingent consideration is payable in Aurora common shares, cash, or any combination thereof at Aurora’s sole discretion. The December 31, 2020 EBITDA target was not met and no consideration was paid for this milestone.

During the six months ended December 31, 2020, management finalized the purchase price allocation of Reliva based on the Company’s estimated fair value of the identifiable assets acquired and the liabilities assumed on the acquisition date. As required by IFRS, the preliminary acquisition date values were retrospectively adjusted to reflect the changes effective as of the acquisition date, as follows:

	Provisional allocation at acquisition		Adjustments			Final
		$		$			$
Consideration paid		53,068		(550	)		52,518
Goodwill		38,178		(550	)		37,628

Note 13 Non-Controlling Interests (“NCI”)

Aurora Nordic is a company located in Odense, Denmark, which is in the business of cultivation, production, distribution and sale of medical cannabis. On September 25, 2020, the Company issued 830,287 shares for the acquisition of the remaining 49% of common shares in Aurora Nordic not previously owned by Aurora. As Aurora previously controlled Aurora Nordic with a 51% ownership interest, the transaction resulted in a change to Aurora’s ownership interest and was accounted for as an equity transaction. The $31.4 million difference between the deficit of $25.8 million attributable to NCI and the $5.6 million fair value of consideration paid was recognized directly in deficit.

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

Note 14 Intangible Assets and Goodwill

The following is a continuity schedule of intangible assets and goodwill:

	December 31, 2020										June 30, 2020
	Cost		Accumulated amortization			Impairment			Net book value		Cost		Accumulated amortization			Impairment			Net book value
Definite life intangible assets:
Customer relationships		96,885		(33,077	)		—			63,808		104,807		(29,209	)		(4,203	)		71,395
Permits and licenses		108,947		(31,378	)		—			77,569		216,220		(29,260	)		(105,345	)		81,615
Patents		1,895		(568	)		—			1,327		1,895		(477	)		—			1,418
Intellectual property and know-how		78,098		(31,467	)		—			46,631		82,500		(25,308	)		(4,401	)		52,791
Software		38,808		(6,153	)		(3,777	)		28,878		35,137		(3,472	)		—			31,665
Indefinite life intangible assets:
Brand		146,699		—			—			146,699		148,399		—			(1,700	)		146,699
Permits and licenses		27,267		—			—			27,267		170,098		—			(143,414	)		26,684
Total intangible assets		498,599		(102,643	)		(3,777	)		392,179		759,056		(87,726	)		(259,063	)		412,267
Goodwill		923,365		—			—			923,365		3,212,963		—			(2,285,081	)		927,882
Total		1,421,964		(102,643	)		(3,777	)		1,315,544		3,972,019		(87,726	)		(2,544,144	)		1,340,149

The following summarizes the changes in the net book value of intangible assets and goodwill for the periods presented:

	Balance, June 30, 2020		Additions		Disposals			Amortization			Impairment			Foreign currency translation			Balance, December 31, 2020
Definite life intangible assets:
Customer relationships		71,395		—		—			(6,990	)		—			(597	)		63,808
Permits and licenses		81,615		—		(1,594	)		(2,452	)		—			—			77,569
Patents		1,418		—		—			(91	)		—			—			1,327
Intellectual property and know-how		52,791		—		—			(6,160	)		—			—			46,631
Software		31,665		3,671		—			(2,681	)		(3,777	)		—			28,878
Indefinite life intangible assets:																		—
Brand		146,699		—		—			—			—			—			146,699
Permits and licenses ⁽¹⁾		26,684		—		—			—			—			583			27,267
Total intangible assets		412,267		3,671		(1,594	)		(18,374	)		(3,777	)		(14	)		392,179
Goodwill ⁽²⁾		927,882		—		—			—			—			(4,517	)		923,365
Total		1,340,149		3,671		(1,594	)		(18,374	)		(3,777	)		(4,531	)		1,315,544

⁽¹⁾

Indefinite life permits and licenses are predominantly held by the Company’s foreign subsidiaries. Given that these permits and licenses are connected to the subsidiary rather than a specific asset, there is no foreseeable limit to the period over which these assets are expected to generate future cash inflows for the Company.

⁽²⁾

In accordance with IFRS 3 - Business Combinations, acquisition date fair values assigned to goodwill have been adjusted, within the applicable measurement period, where new information is obtained about facts and circumstances that existed at the acquisition date (Note 12).

As at December 31, 2020, all of the $174.0 million indefinite life intangibles (June 30, 2020 - $173.4 million) are allocated to the group of cash generating units (“CGUs”) that comprise the cannabis segment. As at December 31, 2020, $888.7 million (June 30, 2020 - $890.4 million) of goodwill was allocated to the cannabis operating segment and $34.7 million (June 30, 2020 - $37.5 million) was allocated to the U.S. CBD CGU.

Asset Specific Impairments

During the six months ended December 31, 2020, the Company identified certain enterprise resource planning projects that will be discontinued as part of the Company’s ongoing business transformation plan. The recoverable amount of the projects are estimated by using a Fair Value Less Cost of Disposal (“FVLCD”) approach which resulted in a nominal value. As a result, the Company recognized $0.4 million and $3.8 million impairment loss relating to these intangible assets for the three and six months ended December 31, 2020, respectively (three and six months ended December 31, 2019 - nil). The impairment loss was allocated to the cannabis operating segment (Note 24).

CGU and Goodwill Impairments

At the end of each reporting period, the Company assesses whether there were events or changes in circumstances that would indicate that a CGU or group of CGUs were impaired. The Company considers external and internal factors, including overall financial performance and relevant entity-specific factors, as part of this assessment.

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

As at December 31, 2020, management had noted indicators of impairment present within its Canadian Cannabis CGU and as a result performed an indicator-based impairment test as at December 31, 2020. The following factor was identified as an impairment indicator for the Canadian Cannabis CGU as at December 31, 2020:

•

Change in strategic plans - During the three months ended December 31, 2020, the Company announced its shift towards a more variable cost structure in cultivation by expanding its network of external supply and scaling back production from its existing fixed asset network. As part of this plan, the Company formally terminated construction activity and closed the Aurora Sun facility and scaled back production at Aurora Sky to 25% of its previous capacity.

As the Canadian Cannabis CGU is allocated to the cannabis operating segment, management also tested the Cannabis Operating Segment which contains $888.7 million of goodwill as at December 31, 2020.

The recoverable amount of the Canadian Cannabis CGU and the Cannabis Operating Segment were determined based on FVLCD using Level 3 inputs in a discounted cash flow analysis. As the Cannabis Operating Segment is comprised of the Canadian Cannabis CGU, management tested the Canadian Cannabis CGU for impairment before the cannabis operating segment. Where applicable, the Company uses its market capitalization and comparative market multiples to corroborate discounted cash flow results. The significant assumptions applied in the determination of the recoverable amount are described below:

Cash flows: Estimated cash flows were projected based on actual operating results from internal sources as well as industry and market trends. Estimated cash flows are primarily driven by sales volumes, selling prices and operating costs. The forecasts are extended to a total of five years (and a terminal year thereafter);

ii.

Terminal value growth rate: The terminal growth rate was based on historical and projected consumer price inflation, historical and projected economic indicators, and projected industry growth;

iii.

Post-tax discount rate: The post-tax discount rate is reflective of the CGUs Weighted Average Cost of Capital (“WACC”). The WACC was estimated based on the risk-free rate, equity risk premium, beta adjustment to the equity risk premium based on a direct comparison approach, an unsystematic risk premium, and after-tax cost of debt based on corporate bond yields; and

iv.

Tax rate: The tax rates used in determining the future cash flows were those substantively enacted at the respective valuation date.

The following table outlines the key assumptions used in calculating the recoverable amount for each CGU and operating segment tested for impairment as at December 31, 2020:

	Canadian Cannabis CGU			Cannabis Operating Segment
December 31, 2020
Terminal value growth rate		3.0	%		3.0	%
Discount rate		14.5	%		14.5	%
Budgeted revenue growth rate (average of next five years)		41.8	%		42.4	%
Fair value less cost to dispose	$	1,759,421		$	2,205,098
June 30, 2020
Terminal value growth rate		3.0	%		3.0	%
Discount rate		16.1	%		16.1	%
Budgeted revenue growth rate (average of next five years)		44.9	%		45.4	%
Fair value less cost to dispose	$	1,956,844		$	2,188,056

CGU impairments

Canadian Cannabis CGU

The Company’s Canadian Cannabis CGU represents its operations dedicated to the cultivation and sale of cannabis products within Canada and forms part of the Company’s cannabis operating segment. Management concluded that the recoverable amount was higher than the carrying value as at December 31, 2020, and no impairment was recognized within the Canadian Cannabis CGU (three and six months ended December 31, 2019 - nil).

Operating segment impairments

Management concluded that the recoverable amount was higher than the carrying value as at December 31, 2020, and no impairment was recognized within the Cannabis Operating Segment (three and six months ended December 31, 2019 - $762.2 million).

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

Note 15 Convertible Debentures

	$
Balance, June 30, 2020		327,038
Interest paid		(12,439	)
Accretion		15,013
Accrued interest		12,571
Unrealized gain on foreign exchange		(20,628	)
Balance, December 31, 2020		321,555
Current portion		(32,828	)
Long-term portion		288,727

On January 24, 2019, the Company issued $460.6 million (US$345.0 million) in aggregate principal amount of Convertible Senior Notes due 2024 (“Senior Notes”) issued at par value. Holders may convert all or any portion of the Senior Notes at any time. The Senior Notes are unsecured, mature on February 28, 2024 and bear cash interest semi-annually at a rate of 5.5% per annum. The initial conversion rate for the Senior Notes is 11.53 common shares per US$1,000 principal amount of Senior Notes, equivalent to an initial conversion price of approximately US$86.72 per common share.

In accordance with IFRS 9, the equity conversion option embedded in the Senior Notes was determined to be a derivative liability, which has been recognized separately at its fair value. Subsequent changes in the fair value of the equity conversion option will be recognized through profit and loss (i.e. FVTPL). The equity conversion option was classified as an option liability as it can be settled through the issuance of a variable number of shares, cash or a combination thereof, based on the exchange rate and or trading price at the time of settlement.

As of December 31, 2020, the conversion option had a fair value of $1.7 million (June 30, 2020 - $1.8 million) and the Company recognized a $1.6 million unrealized loss and $0.1 million unrealized gain on the derivative liability for the three and six months ended December 31, 2020, respectively (three and six months ended December 31, 2019 - $25.1 million and $168.9 million). The fair value of the conversion option was determined based on the Kynex valuation model with the following assumptions: share price of US$8.31 (June 30, 2020 - US$12.42), volatility of 85% (June 30, 2020 - 75%), implied credit spread of 1,633 bps (June 30, 2020 - 3,297 bps), and assumed stock borrow rate of 25% (June 30, 2020 - 50%). As of December 31, 2020, the Company has accrued interest payable of $8.8 million (June 30, 2020 - $8.6 million) on these Senior Notes.

Note 16 Loans and Borrowings

As at December 31, 2020, the Company had the following loans and borrowings:

	Note		December 31, 2020			June 30, 2020
				$			$
Term loan credit facilities		16(a)		91,001			113,921
Debentures				18			4
Lease liabilities		16(b)		80,799			90,284
Total loans and borrowings				171,818			204,209
Current portion				(41,793	)		(120,508	)
Long-term				130,025			83,701

(a)

Credit facilities

The changes in the carrying value of current and non-current term loans are as follows:

	Term loan credit facilities
		$
Balance, June 30, 2020		113,921
Deferred financing fee		(1,387	)
Gain on debt modification		(221	)
Accretion		3,889
Interest payments		(2,659	)
Principal repayments		(22,542	)
Balance, December 31, 2020		91,001
Current portion		(36,538	)
Long-term portion		54,463

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

Under the terms of the amended Credit Facility (the “First Amendment to the First Amended and Restated Credit Agreement”) with Bank of Montreal (“BMO”) and certain lenders, the Company had an overall borrowing capacity of C$264.4 million in funds that were available through a $50.0 million revolving credit facility (“Facility A”), a $150.0 million non-revolving facility (“Facility B”) and a $64.4 million non-revolving facility (“Facility C”).

As at December 31, 2020, the Company had a total of $1.9 million of letters of credit outstanding under its revolving Facility A and $95.0 million principal outstanding under Facility B. Facility C was fully repaid and extinguished in August 2020. In accordance with IFRS 9, the amounts outstanding under the amended Credit Facility were initially recorded at fair value and subsequently accounted for at amortized cost based on the effective interest rate.

Under the terms of the First Amendment to the First Amended and Restated Credit Agreement, the Company was subject to certain customary financial and non-financial covenants and restrictions. The credit facility had a maturity date of August 29, 2021 and has a first ranking general security interest in the assets of Aurora and the loans can be repaid at any time without penalty at Aurora’s discretion. Interest and standby fees are accrued at variable rates based on the Company’s borrowing elections and certain financial metrics.

On September 9, 2020, the Company executed an amendment to the First Amendment to the First Amended and Restated Credit Agreement (the “Second Amendment to the First Amendment to the First Amended and Restated Credit Agreement”) which restructures existing financial covenants. Under the Second Amendment to the First Amendment to the First Amended and Restated Credit Agreement, the Company is required to meet the following financial covenants:

•

Total funded debt to shareholders’ equity is not to exceed 0.28:1 for the quarters ending June 30, 2020 and September 30, 2020 and shall be reduced to 0.25:1 for the quarter ending December 31, 2020 onwards. For the purposes of calculating the total funded debt to shareholders’ equity ratio, shareholders’ equity excludes the $172.3 million loss from the induced conversion of the March 2018 Debentures recognized in the prior year;

•

Total senior funded debt to Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) is not to exceed 3.00:1 at June 30, 2021. Total senior funded debt is defined as total funded debt of the Aurora and its subsidiaries, other than subordinated debt and such convertible notes as agreed to be excluded by the Lenders;

•

Maintenance of a minimum $35.0 million unrestricted cash balance at any time; and

•

Achievement of quarterly minimum EBITDA thresholds beginning in the quarter ended September 30, 2020. For the purposes of this calculation, EBITDA is defined as the consolidated net income (loss) of the Company excluding the following: extraordinary or non-recurring income (expenses) and gains (losses), non-cash gains (losses) (such as unrealized foreign exchange gains (losses)) and income of the unsecured subsidiaries (except to the extent that dividends in respect of such income have been paid in cash by such unsecured subsidiaries to a secured company); plus the following amounts (to the extent such amounts were deducted in determining such consolidated net income, and without duplication): (a) interest, fees and expenses paid in connection with permitted funded debt; (b) income and capital taxes; (c) depreciation and amortization; (d) non-cash charges and expenses such as unrealized foreign exchange losses and charges relating to the impairment of goodwill and other intangible assets; (e) non-cash share-based compensation; (f) extraordinary non-recurring expenses or losses to the extent approved by the lenders in writing; and (g) any other expenses approved in writing by the lenders in their discretion. The minimum thresholds are as follows:

(i) for the fiscal quarter ended September 30,2020: $(11.0) million;

(ii) for the fiscal quarter ended December 31,2020: $4.0 million;

(iii) for the fiscal quarter ended March 31, 2021: $10.0 million;

(iv) for the fiscal quarter ended June 30, 2021: $17.0 million; and

(v) for the twelve month fiscal period ending June 30, 2021: $20.0 million.

On December 17, 2020, the Company executed a second amended Credit Facility (the “Second Amended and Restated Credit Agreement”) which restructures existing financial covenants, extends the credit facility maturity date and adjusts certain repayment terms. Under the Second Amended and Restated Credit Agreement, the key amended terms are as follows:

•

An extension of the maturity date from August 29, 2021 to December 31, 2022;

•

A requirement to maintain a restricted cash balance of $50.0 million that can be used to repay, at any time at the Company’s discretion, the outstanding principal on Facility B on a 1:1 basis with a corresponding reduction in the restricted cash balance requirement;

•

100% of net proceeds received from the sale of certain Canadian facilities will be used to repay the outstanding principal on Facility B up to a maximum of $36.5 million; these repayments will reduce the quarterly principal repayments evenly over the remaining term post June 30, 2021. 75% of net proceeds received in excess of $5.0 million from the sale of other properties will be used to repay the outstanding principal on Facility B; and

•

A single financial covenant requiring a minimum unrestricted cash balance of the lesser of i) $75 million or ii) 225% of the outstanding principal on Facility B less any cash collateral.

Under the terms of both the First Amendment to the First Amended and Restated Credit Agreement and the Second Amended and Restated Credit Agreement, the Company elected, at its sole discretion, to receive advances under Facility B and Facility C through certain availment options, which includes prime rate loans and bankers’ acceptances with monthly maturity dates that at the direction of the Company, roll over upon their maturities unless Aurora elects to convert the then outstanding principal and interest into prime rate loans at any time before December 31, 2022. During the three and six months ended December 31, 2020, the Company continued to roll the majority of the advances under Facility B and C on a monthly basis through bankers’ acceptances with an average interest rate of 4.33%. In accordance with IFRS 9, the loan conversions and the December 17, 2020 loan amendment were determined to be non-substantial modification of the loan terms. As a result, the Company recognized a gain of $0.9 million and $0.2 million for the three and six months ended December 31, 2020, respectively (three and six months ended December 31, 2019 - $0.4 million loss and $0.1 million gain in other (losses) gains (Note 20) in the statement of comprehensive income, with a corresponding adjustment to the carrying value of the Credit Facility. The gains and losses were determined based on the difference between the original contractual cash flows and the modified expected cash flows, which was discounted at the original effective interest rate.

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

As at December 31, 2020, $13.1 million of total borrowing capacity remains undrawn under Facility A and is available to the Company. As of December 31, 2020, the Company had an unrestricted cash balance of $360.9 million under the BMO Credit Facility and is in compliance with all covenants under the Second Amended and Restated Credit Agreement.

(b)

Lease liabilities

The changes in the carrying value of current and non-current lease liabilities are as follows:

	$
Balance, June 30, 2020		90,284
Lease additions		1,917
Disposal of leases		(7,905	)
Lease payments		(5,319	)
Lease term reduction and other items		(682	)
Changes due to foreign exchange rates		25
Interest expense on lease liabilities		2,479
Balance, December 31, 2020		80,799
Current portion		(5,237	)
Long-term portion		75,562

Note 17 Share Capital

Accounting Policy

Share Purchase Warrants

Warrants issued in foreign currencies are classified as derivative liabilities. Upon exercise, in exchange for a fixed amount of common shares, the expected cash receivable is variable due to changes in foreign exchange rates. The Company measures derivative financial liabilities at fair value through profit or loss at initial recognition and in subsequent reporting periods. Fair value gains or losses are recognized in other (losses) gains on the statement of comprehensive income. The fair value of foreign currency share purchase warrants is determined using the quoted market price on the valuation date, which is a Level 1 input. Transaction costs, which are directly attributable to the offering, are allocated to equity and classified as equity financing transaction costs.

(a)

Authorized

The authorized share capital of the Company is comprised of the following:

Unlimited number of common voting shares without par value.

ii.

Unlimited number of Class “A” Shares each with a par value of $1.00. As at December 31, 2020, no Class “A” Shares were issued and outstanding.

iii.

Unlimited number of Class “B” Shares each with a par value of $5.00. As at December 31, 2020, no Class “B” Shares were issued and outstanding.

(b)

Shares Issued and Outstanding

At December 31, 2020, 184,160,688 common shares (June 30, 2020 - 115,228,811) were issued and fully paid.

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

The Company issued the following under its At-the-Market (“ATM”) program (Note 26(b)):

									US$ equivalence
	Three months ended December 31,				Six months ended December 31,				Three months ended December 31,				Six months ended December 31,
	2020		2019		2020		2019		2020		2019		2020		2019

Gross proceeds	$	167,568	$	267,733	$	284,138	$	325,183	$	127,115	$	202,009	$	214,662	$	245,258
Commission	$	3,355	$	5,358	$	5,642	$	6,512	$	2,545	$	4,043	$	4,298	$	4,908
Net proceeds	$	164,213	$	262,375	$	278,496	$	318,671	$	124,570	$	197,966	$	210,364	$	240,350
Average gross price	$	6.15	$	45.93	$	6.71	$	50.35	$	4.67	$	34.66	$	5.07	$	37.97

Number of shares issued		27,231,460		5,829,120		42,359,118		6,458,991

On November 16, 2020, the Company completed an offering of 23,000,000 units (“Unit Offering”), including an over-allotment of 3,000,000 units, for gross proceeds of $226.2 million (US$172.5 million). The Company paid commission of $11.4 million for net proceeds of $214.8 million. Each unit consists of one common share and one-half of one common share purchase warrant (“Offering Warrant”) of the Company. Each whole Offering Warrant entitles the holder to purchase one common share of the Company at a price of US$9.00 per warrant share until March 16, 2024 (Note 17(c)).

During the three and six months ended December 31, 2020, the Company issued 467,817 and 2,639,172 common shares for milestone payments in connection with the acquisition of Anandia Laboratories Inc. (“Anandia”) and Whistler (three and six months ended December 31, 2019 - nil and 27,411 common shares in connection with the acquisition of Anandia).

(c)

Share Purchase Warrants

A summary of warrants outstanding is as follows:

	Warrants			Weighted average exercise price
		#			$
Balance, June 30, 2020		1,078,747			77.36
Issued		11,733,908			11.46
Exercised		—			—
Expired		(473,766	)		48.00
Balance, December 31, 2020		12,338,889			15.82

In accordance with IAS 32 - Financial Instruments: Presentation, the Offering Warrants issued in connection with the Unit Offering (Note 17(b)) were determined to be derivative liabilities, which were initially recognized at their fair value of $39.2 million (US$29.9 million) based on the quoted market price of US$2.60 on November 16, 2020. The Offering Warrants were classified as a derivative liability as the proceeds receivable upon exercise of the warrants, which is based on the exercise price of US$9.00 per warrant, may vary due to fluctuations in the foreign exchange rate. As at December 31, 2020, the Offering Warrants had a fair value of $58.6 million (US$46.0 million) based on the quoted market price of US$4.00. As a result, the Company recognized a $19.4 million (US$16.1 million) unrealized loss on fair value for the three and six months ended December 31, 2020 and is included in other (losses) gains (Note 20) on the statement of comprehensive income.

The following table summarizes the warrants that remain outstanding as at December 31, 2020:

Exercise Price ($)	Expiry Date	Warrants (#)
11.11 - 16.36 ⁽¹⁾	March 16, 2024 - November 30, 2025	11,810,697
112.46 - 116.09	August 9, 2023 to August 22, 2024	528,192
		12,338,889

⁽¹⁾

Includes the Offering Warrants exercisable at US$9.00.

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

Note 18 Share-Based Compensation

Accounting Policy

Performance Share Units (“PSUs”)

PSUs are equity-settled share-based payments and have both a service and market condition. PSUs are measured at their fair value on the grant date and is recognized as share-based compensation expense over the vesting period with a corresponding credit to share reserves. The fair value of PSUs is calculated using the Monte Carlo model which factors in the probability of achieving the market-based performance target. When determining the fair value, management is required to make certain assumptions and estimates related to volatility, risk-free rate, equity correlations between Aurora and a peer group of companies, future stock prices, and estimated forfeitures. The amount recognized for services received as consideration for the PSUs granted is based on the number of equity instruments that eventually vest. Upon the release of PSUs, the related share reserve is transferred to share capital.

(a)

Stock Options

A summary of stock-options outstanding is as follows:

	Stock Options			Weighted Average Exercise Price
		#			$
Balance, June 30, 2020		5,748,503			88.60
Granted		410,167			11.97
Exercised ⁽¹⁾		(5,084	)		3.60
Expired		(4,768	)		138.13
Forfeited ⁽²⁾		(1,925,434	)		101.61
Balance, December 31, 2020		4,223,384			75.32

⁽¹⁾

The weighted average share price on the date stock options were exercised during the six months ended December 31, 2020 was $14.16 (three and six months ended December 31, 2019 - $46.68 and $62.64). There were no stock options exercised during the three months ended December 31, 2020.

⁽²⁾

Included are the 1,039,672 forfeited options relating to the resignation of the Company’s strategic advisor, Nelson Peltz, as detailed below.

The following table summarizes the stock options that are outstanding as at December 31, 2020:

Exercise Price ($)	Expiry Date	Weighted Average Remaining Life	Options Outstanding (#)	Options Exercisable (#)
3.60 - 30.00	May 20, 2021 - December 9, 2025	3.48	1,406,662	555,993
30.72 - 99.60	January 19, 2022 - January 17, 2025	2.58	1,284,666	889,192
100.80 - 133.80	January 2, 2023 - March 13, 2026	4.07	1,209,138	959,408
135.00 - 198.18	January 2, 2023 - May 28, 2024	2.83	322,918	191,709
		3.32	4,223,384	2,596,302

During the three and six months ended December 31, 2020, the Company recorded aggregate share-based compensation expense of $4.0 million and $8.4 million, respectively (three and six months ended December 31, 2019 - $15.7 million and $33.7 million), for all stock options granted and vested during the period. This expense is reflected in the share-based compensation line on the statement of comprehensive loss.

On September 25, 2020, Aurora’s strategic advisor resigned which resulted in the forfeiture of 1,039,672 incentive stock options. No share-based compensation expense was recognized for the three and six months ended December 31, 2020 (three and six months ended December 31, 2019 - $0.8 million and $3.8 million). As at December 31, 2020, the former strategic advisor had 623,808 vested stock options that remain outstanding.

Stock options granted during the respective periods highlighted below were fair valued based on the following weighted average assumptions:

	Three months ended December 31,						Six months ended December 31,
	2020			2019			2020			2019
Risk-free annual interest rate ⁽¹⁾		0.27	%		1.59	%		0.27	%		1.56	%
Expected annual dividend yield		0	%		0	%		0	%		0	%
Expected stock price volatility ⁽²⁾		108.41	%		81.37	%		96.06	%		79.27	%
Expected life of options (years) ⁽³⁾		2.39			2.34			2.37			2.31
Forfeiture rate		18.25	%		10.67	%		17.35	%		10.05	%

⁽¹⁾

The risk-free rate is based on Canada government bonds with a remaining term equal to the expected life of the options.

⁽²⁾

Volatility was estimated by using the average historical volatility of the Company.

⁽³⁾

The expected life in years represents the period of time that options granted are expected to be outstanding.

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

The weighted average fair value of stock options granted during the three and six months ended December 31, 2020 was $8.73 and $6.01 per option, respectively (three and six months ended December 31, 2019 - $24.36 and $42.84 per option).

(b)

Restricted Share Units (“RSU”) and Deferred Share Units (“DSU”)

The Company amended its RSU plan and DSU plan, as approved by the shareholders at the Company’s November 12, 2020 Annual General Meeting (“AGM”), which increased the maximum reserve under the plans to 3,000,000 and 500,000 common shares, respectively.

A summary of the RSUs and DSUs outstanding are as follows:

	RSUs and DSUs	Weighted Average Issue Price of RSUs and DSUs
	#	$
Balance, June 30, 2020	376,296	44.06
Issued	712,197	10.65
Vested, released and issued	(104,404)	44.38
Forfeited	(48,494)	23.30
Balance, December 31, 2020	935,595	19.67

⁽¹⁾

As of December 31, 2020, there were 906,928 RSUs and 28,667 DSUs outstanding (June 30, 2020 - 360,098 RSUs and 16,198 DSUs).

During the three and six months ended December 31, 2020, the Company recorded share-based compensation of $1.8 million and $3.0 million, respectively (three and six months ended December 31, 2019 - $1.9 million and $3.0 million) for RSUs and DSUs granted and vested during the period. This expense is included in the share-based compensation line on the statement of comprehensive loss.

The weighted average fair value of RSUs and DSUs granted in the three and six months ended December 31, 2020 was $12.59 and $10.65 per unit, respectively (three and six months ended December 31, 2019 - $42.72 and $87.84 per unit).

The following table summarizes the RSUs and DSUs that are outstanding as at December 31, 2020:

Weighted Average Issue Price ($)	Expiry Date	Outstanding (#)	Vested (#)
6.25 - 24.96	February 10, 2023 - February 10, 2025	866,695	43,615
33.48 - 88.68	August 3, 2021 - March 13, 2023	18,965	6,605
90.12 - 123.84	July 12, 2021 - January 15, 2023	49,935	22,845
		935,595	73,065

(c)

Performance Share Units (“PSUs”)

The Company adopted a PSU plan approved by Aurora shareholders at the November 12, 2020 AGM. Under the terms of the PSU plan, the Board of Directors may from time to time, in its discretion, and in accordance with the TSX requirements, grant to directors, officers, employees and consultants, non-transferable PSUs. The maximum number of common shares issuable pursuant to the PSU and RSU plan together shall not exceed 3,000,000 common shares. The number of units earned is determined at the end of the three year term based on Aurora’s three year Total Shareholder Return (“TSR”) relative to a peer group of companies and can vary from 0.0 to 2.0 times the number of PSUs granted.

A summary of the PSUs outstanding is as follows:

	PSUs			Weighted Average Issue Price of PSUs
		#			$
Balance, June 30, 2020		—			—
Issued		433,921			10.15
Forfeited		(11,767	)		10.09
Balance, December 31, 2020		422,154			10.15

The following table summarizes the PSUs that are outstanding as at December 31, 2020:

Weighted Average Issue Price ($)	Expiry Date	Outstanding (#)	Vested (#)
10.09	September 10, 2023	414,172	26
13.35 - 13.59	December 8 - December 9, 2023	7,982	—
		422,154	26

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

During the three and six months ended December 31, 2020, the Company recorded share-based compensation of $0.2 million (three and six months ended December 31, 2019 - nil) for PSUs granted during the period. This expense is included in the share-based compensation line on the statement of comprehensive loss.

PSUs granted during the period were fair valued based on the following weighted average assumptions:

	Three and six months ended December 31, 2020

Risk-free annual interest rate ⁽¹⁾		0.63	%
Dividend yield		0	%
Expected stock price volatility ⁽²⁾		47.70	%
Expected stock price volatility of peer group ⁽²⁾		27.37	%
Expected life of options (years) ⁽³⁾		2.83
Forfeiture rate		18.25	%
Equity correlation against peer group ⁽⁴⁾		47.70	%
Weighted average fair value of PSUs granted		$9.39

⁽¹⁾

The risk-free rate is based on Canada government bonds with a remaining term equal to the expected life of the PSUs.

⁽²⁾

Volatility was estimated by using the 20-day VWAP historical volatility of Aurora and the peer group of companies

⁽³⁾

The expected life in years represents the period of time that the PSUs granted are expected to be outstanding.

⁽⁴⁾

The equity correlation is estimated by using 1-year historical equity correlations for the Company and the peer group of companies.

Note 19 Loss Per Share

The following is a reconciliation of basic and diluted loss per share:

Basic and diluted loss per share

	Three months ended December 31,						Six months ended December 31,
	2020			2019			2020			2019
Net loss from continuing operations attributable to Aurora shareholders		($292,788	)		($1,282,406	)		($398,484	)		($1,268,783	)
Net loss from discontinued operations attributable to Aurora shareholders		$—			($9,943	)		($2,366	)		($13,743	)
Net loss attributable to Aurora shareholders		($292,788	)		($1,292,349	)		($400,850	)		($1,282,526	)

Weighted average number of common shares outstanding		168,002,477			90,716,535			142,787,528			87,918,429

Basic and diluted loss per share, continuing operations		($1.74	)		($14.14	)		($2.79	)		($14.43	)
Basic and diluted loss per share, discontinued operations		$—			($0.11	)		($0.02	)		($0.16	)
Basic and diluted loss per share		($1.74	)		($14.25	)		($2.81	)		($14.59	)

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

Note 20 Other (Losses) Gains

			Three months ended December 31,						Six months ended December 31,
	Note		2020			2019			2020			2019
				$			$			$			$
Share of loss from investment in associates		7		(117	)		(1,930	)		(490	)		(4,322	)
Loss on deemed disposal of significant influence investment		5(a)		—			—			(1,443	)		—
Loss on induced conversion of debenture		15		—			(172,291	)		—			(172,291	)
Unrealized gain (loss) on derivative investments		6(b)		2,814			(20,113	)		(5,606	)		(34,231	)
Unrealized (loss) gain on derivative liability		15, 17(c)		(21,013	)		25,111			(19,278	)		168,925
Unrealized gain (loss) on changes in contingent consideration fair value		25		32			778			(12	)		715
Gain (loss) on debt modification		15		858			(362	)		221			53
Gain on disposal of assets held for sale and property, plant and equipment				3,317			—			2,395			—
Government grant income		4		23,678			—			23,678			—
Provisions		22(b)(v)		(2,000	)		—			(2,000	)		—
Other gains (losses)				496			—			(103	)		—
Total other (losses) gains				8,065			(168,807	)		(2,638	)		(41,151	)

Note 21 Supplemental Cash Flow Information

The changes in non-cash working capital are as follows:

	Six months ended December 31,
	2020			2019
		$			$
Accounts receivable		2,650			20,416
Biological assets		(30,504	)		(47,795	)
Inventory		(4,524	)		(19,264	)
Prepaid and other current assets		(4,676	)		(12,734	)
Accounts payable and accrued liabilities		(26,222	)		(40,968	)
Income taxes payable		86			3,503
Deferred revenue		407			5,372
Provisions		(556	)		(4,200	)
Changes in operating assets and liabilities		(63,339	)		(95,670	)

Additional supplementary cash flow information is as follows:

	Six months ended December 31,
	2020		2019
		$		$
Property, plant and equipment in accounts payable		9,318		45,248
Right-of-use asset additions		1,917		6,824
Capitalized borrowing costs		—		13,804
Interest paid		15,661		28,408
Interest received		915		1,004

Note 22 Commitments and Contingencies

(a)

Claims and Litigation

From time to time, the Company and/or its subsidiaries may become parties to legal proceedings and the Company will take appropriate action with respect to any such legal actions, including by defending itself against such legal claims as necessary. Other than the claims described below, as of the date of this report, Aurora is not aware of any other material or significant claims against the Company.

The Company and certain of its current and former directors and officers are subject to a purported class action proceeding in the United States District Court for the District of New Jersey on behalf of persons or entities who purchased, or otherwise acquired, publicly traded Aurora securities between October 23, 2018 and February 6, 2020. Lead plaintiffs have been appointed and an amended complaint was filed and served on September 21, 2020. On November 20, 2020 and January 19, 2021, the Company filed a Motion to Dismiss and the plaintiffs filed their Opposition Brief, respectively. The amended complaint alleges, inter alia, that we and certain of our current and former officers and directors violated the federal securities laws by making false and/or misleading statements and/or failing to disclose that the Company’s ability to sell products had been materially impaired by market oversupply, including oversupply that was the product of the Company’s own aggressive ramp in production capacity; the Company’s ability to distribute products to customers had been materially impaired by the drastically inadequate number of retail stores in Ontario, Quebec and British Columbia; the Company had materially overstated the potential market for the Company’s consumer cannabis products due to the strength of the illegal black market in Canada; demand generated by the cannabis market was not as large as the Company had claimed; and that all of the foregoing had negatively impacted the Company’s business, operations, and prospects, and impaired the Company’s ability to achieve profitability as represented by the Company. We dispute the allegations in the amended complaint and intend to vigorously defend against the claims. Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult, particularly where the matters involve indeterminate claims for monetary damages and are in the stages of the proceedings where key factual and legal issues have not been resolved. For these reasons, we are currently unable to predict the ultimate timing or outcome of or reasonably estimate the possible losses or a range of possible losses resulting from the matters described above. As such, no provision has been recognized as at December 31, 2020.

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

The Company and its subsidiary, ACE, have been named in a purported class action proceeding in the Province of Alberta in relation to the alleged mislabeling of cannabis products with inaccurate THC/CBD content. The class action involves a number of other parties including Aleafia Health Inc., Hexo Corp, Tilray Canada Ltd., among others, and alleges that upon laboratory testing, certain cannabis products were found to have lower THC potency than the labeled amount, suggesting, among other things, that plastic containers may be leeching cannabinoids. We dispute the allegations and intend to vigorously defend against the claims. Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult, particularly where the matters involve indeterminate claims for monetary damages and are in the stages of the proceedings where key factual and legal issues have not been resolved. For these reasons, we are currently unable to predict the ultimate timing or outcome of or reasonably estimate the possible losses or a range of possible losses resulting from the matter described above. As such, no provision has been recognized as at December 31, 2020.

A claim was commenced on June 15, 2020 against Aurora and a former officer alleging a claim of breach of obligations under a term sheet, with the plaintiff seeking $18.0 million in damages. The Company believes the action to be without merit and has filed a statement of defense and counterclaim. Due to the uncertainty of the timing and the amount of estimated future cash outflows relating to this claim, no provision has been recognized as of December 31, 2020.

A claim was commenced on June 17, 2020 against Aurora by a former consultant of MedReleaf regarding stock options that were believed by the plaintiff to be granted prior to MedReleaf’s IPO. These options were not on the records of MedReleaf at the time of due diligence or acquisition and, as such, no options were granted on closing of the acquisition. We expect to proceed to mediation to resolve this matter and have determined that any potential payment that may result would be immaterial.

On August 10, 2020, a purported class action lawsuit was filed against Aurora and certain executive officers in the Province of Alberta on behalf of persons or entities who purchase, or otherwise acquired, publicly traded Aurora securities and suffered losses as a result of Aurora releasing statements containing misrepresentations during the period of September 11, 2019 and December 21, 2019. We dispute the allegations and intend to vigorously defend against the claims. Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult, particularly where the matters involve indeterminate claims for monetary damages and are in the stages of the proceedings where key factual and legal issues have not been resolved. For these reasons, we are currently unable to predict the ultimate timing or outcome of or reasonably estimate the possible losses or a range of possible losses resulting from the matter described above. As such, no provision has been recognized as at December 31, 2020.

On October 2, 2020, a purported class action proceeding was commenced in the United States District Court for the District of New Jersey against the Company and certain executive officers on behalf of persons or entities who purchased or otherwise acquired Aurora securities between February 13, 2020 and September 4, 2020. The complaint alleges, inter alia, that the Company and certain executive officers violated the federal securities laws by making false and/or misleading statements and/or failing to disclose that the Company had significantly overpaid for previous acquisitions and experienced degradation in certain assets, including its production facilities and inventory; the Company’s business transformation plan and cost reset failed to mitigate the foregoing issues; it was foreseeable that the Company would record significant goodwill and asset impairment charges; and as a result, the Company’s public statements were materially false and misleading. Motions for the appointment of a lead plaintiff have been filed and awaits ruling. We dispute the allegations in the complaint and intend to vigorously defend against the claims. Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult, particularly where the matters involve indeterminate claims for monetary damages and are in the stages of the proceedings where key factual and legal issues have not been resolved. For these reasons, we are currently unable to predict the ultimate timing or outcome of or reasonably estimate the possible losses or a range of possible losses resulting from the matters described above. As such, no provision has been recognized as at December 31, 2020.

The Company was party to an arbitration matter with a third party with respect to a break fee believed to be due by Aurora under an agreement. Binding arbitration in favor of the other company was awarded on September 13, 2020 in the amount of $3.0 million plus interest and costs, and the payment was made by the Company on October 13, 2020.

We are subject to litigation and similar claims in the ordinary course of business, including claims related to employment, human resources, product liability and commercial disputes. We have received notice of, or are aware of, certain possible claims against us where the magnitude of such claims is negligible or it is not currently possible for us to predict the outcome of such claims, possible claims and lawsuits due to various factors including: the preliminary nature of some claims; an incomplete factual record; and the unpredictable nature of opposing parties and their demands. Management is of the opinion, based upon legal assessments and information presently available, that it is unlikely that any of these claims would result in liability to the Company, to the extent non provided for through insurance or otherwise, would have a material effect on our consolidated financial statements, other than the claims described above.

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

(b)

Commitments

(i)

On September 8, 2020, the Company and the Ultimate Fighting Championship (“UFC”) mutually terminated its partnership. The Company paid $40.2 million as a contract termination fee.

(ii)

Pursuant to a manufacturing agreement, the Company is contractually committed to purchase a minimum number of softgels each calendar year. If the Company fails to meet the required purchase minimum, then it is required to pay a penalty fee equal to the difference between the actual purchased quantity and the required purchase minimum multiplied by cost of the softgels. As of December 31, 2020, the Company did not meet the minimum purchase quantity, and such paid penalty over the calendar year 2020.

(iii)

The Company has various lease commitments related to various office space, production equipment, vehicles, facilities and warehouses expiring between January 2021 and June 2033. The Company has certain leases with optional renewal terms that the Company may exercise at its option. The Company also has an option to purchase lands located in Cremona, Alberta which was leased during the three and six months ended December 31, 2020.

(iv)

In connection with the acquisition of MedReleaf, the Company previously had an obligation to purchase certain intangible assets on December 8, 2020 for $3.0 million through the issuance of common shares contingent upon the seller meeting specified revenue targets. On December 14, 2020, the Company amended the terms of the original agreement where the obligation to purchase the December 2020 intangible asset was replaced with commission fees payable to the counterparty. Under the amended agreement, the Company will pay a quarterly commission fee until May 1, 2023 by way of common shares or cash, at the discretion of the Company. Commission fees are based on revenue referred to Aurora by the counterparty. As of December 31, 2020, $0.4 million was accrued for commission fees.

(v)

During the three months ended December 31, 2020, the Company indefinitely halted construction at the Aurora Sun facility. The facility had an existing utility supply contract which included annual minimum energy consumption commitments. As at December 31, 2020, this contract met the definition of an onerous contract and the Company recognized a $2.0 million (June 30, 2020 - nil) onerous contract provision which represents the lesser of the costs of exiting the contract and the cost of fulfilling it. The related loss has been included in other (losses) gains on the statements of comprehensive loss (Note 20).

In addition to lease liability commitments disclosed in Note 26(b), the Company has the following future capital commitments and purchase commitments payments, which are due in the next five years and thereafter:

	$
Next 12 months	13,980
Over 1 year to 2 years	2,066
Over 2 years to 3 years	2,066
Over 3 years to 4 years	2,066
Over 4 years to 5 years	861
Thereafter	-
	21,039

Note 23 Revenue

The Company generates revenue from the transfer of goods and services over time and at a point-in-time from the revenue streams below. Net revenue from sale of goods is reflected net of actual returns and estimated variable consideration for future returns and price adjustments of $2.7 million and $3.4 million for the three and six months ended December 31, 2020, respectively (three and six months ended December 31, 2019 - $10.6 million). The estimated variable consideration is based on historical experience and management’s expectation of future returns and price adjustments. As of December 31, 2020, the return liability for the estimated variable revenue consideration was $3.7 million (June 30, 2020 - $2.1 million) and is included in deferred revenue on the condensed consolidated interim statements of financial position.

Three Months Ended December 31, 2020	Point-in-time			Over-time		Total
		$			$		$
Cannabis
Revenue from sale of goods		79,025			—		79,025
Revenue from provision of services		—			550		550
Excise taxes		(11,902	)		—		(11,902	)
Net Revenue		67,123			550		67,673

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

Three Months Ended December 31, 2019	Point-in-time			Over-time		Total
		$			$		$
Cannabis
Revenue from sale of goods		62,413			—		62,413
Revenue from provision of services		—			1,355		1,355
Other
Revenue from sale of goods		365			—		365
Excise taxes		(8,995	)		—		(8,995	)
Net Revenue		53,783			1,355		55,138

Six months ended December 31, 2020	Point-in-time			Over-time		Total
		$			$		$
Cannabis
Revenue from sale of goods		161,092			—		161,092
Revenue from provision of services		—			1,149		1,149
Excise taxes		(26,756	)		—		(26,756	)
Net Revenue		134,336			1,149		135,485

Six months ended December 31, 2019	Point-in-time			Over-time		Total
		$			$		$
Cannabis
Revenue from sale of goods		143,765			—		143,765
Revenue from provision of services		—			3,199		3,199
Other
Revenue from sale of goods		795			—		795
Excise taxes		(18,907	)		—		(18,907	)
Net Revenue		125,653			3,199		128,852

Note 24 Segmented Information

Operating Segments	Cannabis			Horizontally Integrated Businesses			Corporate ⁽¹⁾			Total
		$			$			$			$
Three months ended December 31, 2020
Net revenue		67,673			—			—			67,673
Gross profit		17,349			—			—			17,349
Net loss before taxes and discontinued operations		(247,356	)		—			(42,265	)		(289,621	)

Three months ended December 31, 2019
Net revenue		54,773			365			—			55,138
Gross profit (loss)		13,029			(119	)		—			12,910
Net loss before taxes and discontinued operations		(1,037,282	)		(1,320	)		(288,709	)		(1,327,311	)

Six months ended December 31, 2020
Net Revenue		135,485			—			—			135,485
Gross profit		43,970			—			—			43,970
Net loss before taxes and discontinued operations		(273,027	)		(9	)		(123,134	)		(396,170	)

Six months ended December 31, 2019
Net Revenue		128,057			795			—			128,852
Gross profit		56,781			294			—			57,075
Net loss before taxes and discontinued operations		(1,082,083	)		(1,530	)		(213,757	)		(1,297,370	)

⁽¹⁾

Net (loss) income under the Corporate allocation includes fair value gains and losses from investments in marketable securities, derivatives and investment in associates. Corporate and administrative expenditures such as regulatory fees, share based compensation and financing expenditures relating to debt issuances are also included under Corporate.

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

Geographical Segments	Canada		EU		Other			Total
		$		$		$			$
Non-current assets other than financial instruments
December 31, 2020		1,864,857		84,668		82,258			2,031,783
June 30, 2020		2,139,765		81,927		95,280			2,316,972

Three months ended December 31, 2020
Net revenue		59,423		6,897		1,353			67,673
Gross profit (loss)		13,957		3,817		(425	)		17,349

Three months ended December 31, 2019
Net revenue		53,216		1,770		152			55,138
Gross profit		12,066		783		61			12,910

Six months ended December 31, 2020
Net revenue		118,520		13,681		3,284			135,485
Gross profit		37,045		6,155		770			43,970

Six months ended December 31, 2019
Net revenue		122,285		6,228		339			128,852
Gross profit (loss)		51,177		5,932		(34	)		57,075

Included in net revenue arising from the Canadian cannabis operating segment for the three months ended December 31, 2020 are net revenues of approximately $10.6 million from Customer A, $8.1 million from Customer B, and $7.1 million from Customer C (three months ended December 31, 2019 - Customer B $7.1 million, Customer C $9.0 million, and Customer D $8.6 million), each contributing 10 per cent or more to the Company’s net revenue.

There were no customers contributing 10 per cent or more to the Company’s net revenues from the Canadian cannabis operating segment for the six months ended December 31, 2020 (six months ended December 31, 2019 - Customer C $17.8 million and Customer D $14.6 million).

Note 25 Fair Value of Financial Instruments

Financial instruments are measured either at fair value or at amortized cost. The table below lists the valuation methods used to determine the fair value of each financial instrument.

	Fair Value Method
*Financial Instruments Measured at Fair Value*
Marketable securities	Closing market price of common shares as of the measurement date (Level 1)
Derivatives	Closing market price (Level 1) or Black-Scholes, Binomial, Monte-Carlo & FINCAD valuation model (Level 2 or 3)
Contingent consideration payable	Discounted cash flow model (Level 3)
Derivative liability	Closing market price of warrants (Level 1) or Kynex valuation model (Level 2)
*Financial Instruments Measured at Amortized Cost*
Cash and cash equivalents, restricted cash, accounts receivable, loans receivable	Carrying amount (approximates fair value due to short-term nature)
Accounts payable and accrued liabilities	Carrying amount (approximates fair value due to short-term nature)
Convertible debentures, loans and borrowings	Carrying value discounted at the effective interest rate which approximates fair value

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

The carrying values of the financial instruments at December 31, 2020 are summarized in the following table:

	Amortized cost		FVTPL		Designated FVTOCI		Total
		$		$		$		$
Financial Assets
Cash and cash equivalents		384,386		—		—		384,386
Restricted cash		50,000		—		—		50,000
Accounts receivable, excluding sales taxes receivable		73,044		—		—		73,044
Marketable securities		—		—		4,268		4,268
Derivatives		—		47,740		—		47,740
Loans receivable		8,469		—		—		8,469
Financial Liabilities
Accounts payable and accrued liabilities		69,002		—		—		69,002
Convertible debentures ⁽¹⁾		321,555		—		—		321,555
Contingent consideration payable		—		256		—		256
Loans and borrowings		171,818		—		—		171,818
Derivative liability		—		60,318		—		60,318

⁽¹⁾

The fair value of convertible notes includes both the debt and equity components.

The following is a summary of financial instruments measured at fair value segregated based on the various levels of inputs:

	Note		Level 1		Level 2		Level 3		Total
				$		$		$		$
As at December 31, 2020
Marketable securities		6(a)		3,268		—		1,000		4,268
Derivative assets		6(b)		—		32,802		14,938		47,740
Contingent consideration payable				—		—		256		256
Derivative liability		15, 17(c)		58,604		1,714		—		60,318

As at June 30, 2020
Marketable securities		6(a)		6,066		—		1,000		7,066
Derivative assets		6(b)		—		37,480		16,102		53,582
Contingent consideration payable				—		—		19,054		19,054
Derivative liability		15		—		1,827		—		1,827

There have been no transfers between fair value categories during the period.

The following is a continuity schedule of contingent consideration payable:

	Note		Whistler			Reliva ⁽¹⁾			Immaterial transactions		Total
Balance, June 30, 2020				18,766			138			150		19,054
Unrealized loss on changes in contingent consideration fair value		20		44			(32	)		—		12
Payments				(18,810	)		—			—		(18,810	)
Balance, December 31, 2020				—			106			150		256

⁽¹⁾

In accordance with IFRS 3 - Business Combinations, acquisition date fair values assigned to the Reliva purchase price allocation and goodwill have been adjusted, within the applicable measurement period, where new information is obtained about facts and circumstances that existed at the acquisition date (Note 12).

The Company’s contingent consideration payable is measured at fair value based on unobservable inputs and is considered a Level 3 financial instrument. The determination of the fair value of these liabilities is primarily driven by the Company’s expectations of the respective subsidiaries achieving certain milestones. The expected milestones were assigned probabilities and the expected related cash flows were discounted to derive the fair value of the contingent consideration. If the probabilities of achieving the milestones decreased by 10%, the estimated fair value of the contingent consideration would decrease by a nominal amount (June 30, 2020 - $1.9 million). If the discount rates increased or decreased by 5%, the estimated fair value of contingent consideration would increase or decrease by a nominal amount (June 30, 2020 - $0.2 million).

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

Note 26 Financial Instruments Risk

The Company is exposed to a variety of financial instrument related risks. The Board mitigates these risks by assessing, monitoring and approving the Company’s risk management processes.

(a)

Credit risk

Credit risk is the risk of a potential loss to the Company if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company is moderately exposed to credit risk from its cash and cash equivalents, accounts receivable and loans receivable. The risk exposure is limited to their carrying amounts reflected on the statement of financial position. The risk for cash and cash equivalents is mitigated by holding these instruments with highly rated Canadian financial institutions. As the Company does not invest in asset-backed deposits or investments, it does not expect any credit losses. The Company periodically assesses the quality of its investments and is satisfied with the credit rating of the financial institutions and the investment grade of its GICs. The Company mitigates the credit risk associated with the loans receivable by managing and monitoring the underlying business relationship.

Accounts receivable primarily consist of trade accounts receivable and sales tax receivable. The Company provides credit to certain customers in the normal course of business and has established credit evaluation and monitoring processes to mitigate credit risk. Credit risk is generally limited for receivables from government bodies, which generally have low default risk. Credit risk for non-government wholesale customers is assessed on a case-by-case basis and a provision is recorded where required. As of December 31, 2020, $1.4 million of accounts receivable are from non-government wholesale customers (June 30, 2020 - $2.2 million). As of December 31, 2020, the Company recognized a $6.6 million provision for expected credit losses (June 30, 2020 - $1.7 million).

The Company’s aging of trade receivables was as follows:

	December 31, 2020	June 30, 2020
	$	$
0 - 60 days	35,109	34,167
61+ days	9,281	11,032
	44,390	45,199

(b)

Liquidity risk

The composition of the Company’s accounts payable and accrued liabilities was as follows:

	December 31, 2020	June 30, 2020
	$	$
Trade payables	20,611	19,706
Accrued liabilities	31,474	42,910
Payroll liabilities	13,951	23,752
Excise tax payable	2,665	6,770
Other payables	301	2,436
	69,002	95,574

Liquidity risk is the risk that the Company will not be able to meet its financial obligations associated with its financial liabilities when they are due. The Company manages liquidity risk through the management of its capital structure and resources to ensure that it has sufficient liquidity to settle obligations and liabilities when they are due. Our ability to fund our operating requirements depends on future operating performance and cash flows, which are subject to economic, financial, competitive, business and regulatory conditions, and other factors, some of which are beyond our control, such as the potential impact of COVID-19. Our primary short-term liquidity needs are to fund our net operating losses, capital expenditures to maintain existing facilities, debt repayments, and lease payments. Our medium-term liquidity needs primarily relate to debt repayments and lease payments. Our long-term liquidity needs primarily relate to potential strategic plans.

In an effort to manage liquidity prudently while the Company moves toward profitability and positive cash flow, Aurora has taken the following steps:

•

During the six months ended December 31, 2020, the Company raised net proceeds of $278.5 million (US$210.4 million) under its ATM program (Note 17(b)). As at December 31, 2020, the Company had no remaining available room under the ATM;

•

On October 9, 2020, the Company sold all of its 31,956,347 common shares held in Cann Group at A$0.20 per share for net proceeds of $5.9 million (Note 5(a));

•

On October 29, 2020, the Company filed a short form base shelf prospectus (“2020 Shelf Prospectus”) and a corresponding shelf registration statement on Form-10 (the “Registration Statement”) with the United States Securities and Exchange Commission (the “SEC”). The 2020 Shelf Prospectus and the Registration Statement was declared effective on October 29, 2020 and allows the Company to make offerings of up to US$500 million in common shares, preferred shares, warrants, subscription receipts and debt securities, or any combination thereof during the 25-month period that the 2020 Shelf Prospectus remains effective. Should the Company decide to offer securities during this period, the specific terms, including the use of proceeds from any offering, will be set forth in a related prospectus supplement to the 2020 Shelf Prospectus, which will be filed with the applicable Canadian securities regulatory authorities and the SEC;

AURORA CANNABIS INC.

Notes to the Condensed Consolidated Interim Financial Statements

Three and six months ended December 31, 2020 and 2019

(Unaudited – Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

•

In November 2020, the Company filed a supplement under the 2020 Shelf Prospectus (“Unit Offering”) and raised $226.2 million (US$172.5 million) through the issuance of 23,000,000 units at US$7.50 per unit (Note 17(b));

As of December 31, 2020, the Company has access to the following capital resources available to fund operations and obligations:

•

$384.4 million cash and cash equivalents of which the Company must maintain a minimum unrestricted cash balance of the lesser of i) $75 million or ii) 225% of the outstanding principal on Facility B less any cash collateral (Note 16(a));

•

A remaining $110.0 million Credit Facility with BMO, of which $1.9 million letters of credit and $95.0 million of principal is outstanding under Facility B (Note 16(a)), with $13.1 million of total borrowing capacity undrawn under Facility A and available to the Company; and

•

Subsequent to December 31, 2020, the Company completed a second unit offering under the 2020 Shelf Prospectus (“January 2021 Prospectus Supplement”) and raised $175.2 million (US$137.9 million) through the issuance of 13,200,000 units at US$10.45 per unit, including the over-allotment option (Note 27).

We intend to use the net proceeds from any offerings under the 2020 Shelf Prospectus to support our short-term liquidity needs, debt repayments, general corporate purposes, working capital requirements and potential acquisitions. Volatility in the cannabis industry, stock market and the Company’s share price may impact the amount and our ability to raise financing under the 2020 Shelf Prospectus.

From time-to-time, management may also consider the sale of its marketable securities and shares held in publicly traded investments in associates to support near term cash and liquidity needs.

Based on all of the aforementioned factors, the Company believes that its reduction of operating costs, current liquidity position, and access to the 2020 Shelf Prospectus are adequate to fund operating activities and cash commitments for investing and financing activities for the foreseeable future.

In addition to the commitments outlined in Note 22, the Company has the following undiscounted contractual obligations as at December 31, 2020, which are expected to be payable in the following respective periods:

	Total		≤1 year		Over 1 year - 3 years		Over 3 years - 5 years		> 5 years
		$		$		$		$		$
Accounts payable and accrued liabilities		69,002		69,002		—		—		—
Convertible notes and interest ⁽¹⁾		524,139		24,174		48,348		451,617		—
Lease liabilities ⁽²⁾		158,831		10,142		28,754		24,042		95,893
Loans and borrowings excluding lease liabilities ⁽²⁾		101,106		38,376		62,730		—		—
Contingent consideration payable ⁽³⁾		32,000		32,000		—		—		—
		885,078		173,694		139,832		475,659		95,893

⁽¹⁾

Assumes the principal balance of the notes outstanding at December 31, 2020 remains unconverted and includes the estimated interest payable until the maturity date.

⁽²⁾

Includes interest payable until maturity date.

⁽³⁾

Contingent consideration is payable in Aurora common shares, cash, or a combination of both, at the sole discretion of Aurora.

Note 27 Subsequent Events

In January 2021, the Company completed a unit offering and raised gross proceeds of $175.2 million (US$137.9 million) through the issuance of 13,200,000 units, including the over-allotment option, at US$10.45 per unit. Each unit consists of one common share and one-half of one common share purchase warrant of the Company. Each whole warrant entitles the holder to purchase one common share of the Company at a price of US$12.60 per warrant share for 36 months from the issue date.

AURORA CANNABIS INC.

Interim Management’s Discussion & Analysis

(Unaudited)

For the three and six months ended December 31, 2020 and 2019

(in Canadian Dollars)

Interim Management’s Discussion & Analysis

Table of Contents

Business Overview	3
Condensed Statement of Comprehensive (Loss) Income	6
Key Quarterly Financial and Operating Results	6
Financial Highlights	7
Key Developments During and Subsequent to the Three Months Ended December 31, 2020	8
Financial Review	9
Liquidity and Capital Resources	16
Related Party Transactions	20
Critical Accounting Estimates	21
Change in Accounting Policies	21
New or Amended Standards Effective July 1, 2020	22
Recent Accounting Pronouncements	23
Financial Instruments	23
Financial Instruments Risk	24
Summary of Outstanding Share Data	25
Historical Quarterly Results	26
Risk Factors	27
Internal Controls Over Financial Reporting	28
Cautionary Statement Regarding Forward-Looking Statements	29
Cautionary Statement Regarding Certain Non-GAAP Performance Measures	30

2 | AURORA CANNABIS INC.

Q2 2021 MD&A

Interim Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three and Six Months Ended December 31, 2020

The following Interim Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) of Aurora Cannabis Inc. (“Aurora” or the “Company”) should be read in conjunction with the Company’s condensed consolidated interim financial statements as at and for the three and six months ended December 31, 2020 and the accompanying notes thereto (the “Financial Statements”), which have been prepared in accordance with International Accounting Standards 34 - Interim Financial Reporting (“IAS 34”) of International Financial Reporting Standards (“IFRS”). The MD&A has been prepared as of February 10, 2021 pursuant to the disclosure requirements under National Instrument 51-102 - Continuous Disclosure Obligations (“NI 51-102”) of the Canadian Securities Administrators (“CSA”). Under the United States (“U.S.”) / Canada Multijurisdictional Disclosure System, we are permitted to prepare the MD&A in accordance with Canadian disclosure requirements which may differ from U.S. disclosure requirements.

Given the Company’s recent business transformation initiatives to realign its operational footprint and increase financial flexibility, this MD&A provides additional comparative disclosures related to the second quarter ended December 31, 2020 (“Q2 2021”) and the first quarter ended September 30, 2020 (“Q1 2021”). Management believes that these comparatives provide relevant and current information. The Company has also reclassified certain items, which are not material, on the condensed consolidated interim statement of comprehensive loss to conform with the current period’s presentation and improve comparability.

Effective April 1, 2020, the Company elected to change its accounting policy for inventory costing of by-products. Additionally, the Company has elected to change its accounting policy with respect to the allocation of production management staff salaries, previously charged to general and administration, they are now charged to cost of sales. Management has applied the change in accounting policy retrospectively. The condensed consolidated interim financial statements for the three and six months ended December 31, 2019 and previously reported metrics in this MD&A have been restated to reflect adjustments made as a result of these changes in accounting policy. Refer to “Change in Accounting Policies” section of this MD&A and Note 2(e) of the Financial Statements.

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 condensed consolidated interim financial statements and this MD&A have been retroactively adjusted to reflect the Share Consolidation unless otherwise noted.

All dollar amounts are expressed in thousands of Canadian dollars, except for share and per share amounts, and where otherwise indicated.

This MD&A contains forward-looking information within the meaning of applicable securities laws, and the use of non-GAAP measures. Refer to “Cautionary Statement Regarding Forward-Looking Statements” and “Cautionary Statement Regarding Certain Non-GAAP Performance Measures” included within this MD&A.

This MD&A, the condensed consolidated interim financial statements, and the Company’s most recent annual audited consolidated financial statements, annual information form (“AIF”) and press releases have been filed in Canada on SEDAR at www.sedar.com and in the U.S. on EDGAR at www.sec.gov/edgar. Additional information can also be found on the Company’s website at www.auroramj.com.

Business Overview

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”.

Aurora is a Canadian-headquartered cannabis company focused on producing, innovating, and selling consistent, high quality cannabis and cannabis products for both the global medical and consumer use markets. The Company has differentiated itself through:

•

Purpose-built growing facilities, which we believe are the most technologically advanced indoor agricultural growing facilities in the world. These facilities consistently produce high-quality cannabis at scale, lower the risk of crop failure, and provide low per-unit production costs.

•

Research and innovation in plant genetics, cultivation, consumer insights, and product development.

•

A broad and growing portfolio of successful brands that align to the needs of consumers and patients in segments from discount to ultra premium.

•

Global leadership in consumer and medical markets that have significant and near-term profit potential.

•

A transformed cost structure that provides a path to near-term, sustainable, and growing positive earnings before interest, taxes, depreciation and amortization (“EBITDA”) and cash flow.

The Company’s principal strategic business lines are focused on the production, distribution and sale of cannabis and cannabis-derivative products in Canada and internationally. The Company’s primary market opportunities are as follows:

•

Global medical cannabis market: Production, distribution and sale of pharmaceutical-grade cannabis products in countries around the world where permitted by government legislation. Currently, there are approximately 50 countries that have implemented regimes for some form of access to cannabis for medical purposes. The Company’s current principal medical markets are in Canada and Germany. Aurora has established a leading market position in these countries;

3 | AURORA CANNABIS INC.

Q2 2021 MD&A

•

Global consumer use cannabis market: Currently, only Canada and Uruguay have implemented federally-regulated consumer use of cannabis regimes and the Company has primarily focused on the opportunities in Canada. Aurora has established one of the leading market positions in the Canadian consumer market overall. Longer-term, the Company believes that the increasing success of medical cannabis regimes globally may lead to increased legalization of adult-use consumer markets; and

•

Global hemp-derived cannabidiol (“CBD”) market: The Company expects consumer demand for products containing CBD derived from hemp plants to be an exciting growth opportunity in the coming years. The Company believes that the most important near-term market opportunity for hemp-derived CBD is in the U.S. On May 28, 2020, the Company acquired Reliva, LLC (“Reliva”), a U.S. company based in Massachusetts, which specializes in the distribution and sale of hemp-derived CBD products and has established a leading brand in the U.S. market.

Business Transformation Plan Update

Aurora announced a business transformation plan in February 2020 intended to align the Company with current market realities and to focus on higher margin growth opportunities, profitability, and positive cash flow.

A year later, Aurora has made significant progress on all fronts. High margin businesses have shown strong growth, selling, general and administrative expenses (“SG&A”) and capital expenditures have been markedly reduced, and the Company’s cash utilization and balance sheet has never been better. Work continues but Aurora is well positioned as a long-term player in the global cannabinoid market and to deliver value for shareholders over the long run.

The transformation began with senior management changes, a substantial workforce and overhead expense reduction, and, to align production with market demand, significant facility closures and a material decrease in capital expenditure plans.

With Miguel Martin’s appointment as CEO of Aurora in September 2020, the Company moved to the next phase of the transformation intended to pivot Aurora toward proven consumer packaged goods (“CPG”) strategy and tactics with 1) a focus on product quality and cultivation of higher-value cultivars; 2) leveraging product development and innovation expertise to launch novel and innovative products to market; 3) a focus on core and premium brands across all major consumer categories; 4) the utilization of classic CPG marketing and sales executions to drive revenue growth; and 5) improvement in operational agility and business flexibility by shifting more costs from fixed to variable.

In Q2 2021 and early Q3 2021, the Company executed further steps to align cultivation with current market demand and expectations by terminating construction at Aurora Sun, ramping down utilization at Aurora Sky by 75%, and refocusing the facility on premium quality production. Management also contracted Great North Distributors Inc. to be the exclusive national representative for Aurora’s leading portfolio of brands in the Canadian consumer market to shift costs from a fixed sales force to variable contract sales and create an incentive structure to drive revenue growth.

The Company believes that in a nascent industry like cannabis, having sufficient financial resources to be strategically opportunistic and recession proof is critically important. Beginning in Q2 2021, the Company executed a number of initiatives designed to strengthen the balance sheet. These measures included closing a $226.2 million (US$172.5) million equity offering in November 2020 and a $175.2 million (US$137.9 million) equity offering in January 2021, amending the existing credit agreement to extend the maturity date to December 2022 and eliminate financial performance covenants, and continuing to demonstrate improved cash utilization across the business.

As of the date of this report, the Company has approximately $565 million of cash and cash equivalents on hand, including restricted cash.

Revenue Update

Aurora’s medical business provides an important and clear differentiation from its peers. The medical business is the underpinning of continued global expansion. Aurora’s commitment to science, compliance, testing, European Union Good Manufacturing Practice (“EU GMP”) compliant cultivation and our ability to operate in a highly regulated framework provides us with transferable knowledge as we enter new markets globally.

In Q2 2021, this advantage was clear as Aurora’s International medical cannabis net revenues of $11.9 million showed 562% growth versus the prior year comparative period and 84% sequentially. This included the Company’s first shipment to Israel, potentially an important new medical market, and continued growth in Europe. The Canadian medical cannabis net revenue of $27.0 million was up 5% versus Q2 2020, a strong performance in the face of consumer retail industry roll-out. Total medical cannabis net revenues of $38.9 million continue to deliver normalized gross margins in the mid 60% range. This strong margin profile has held steady for several years and is an important gross profit driver that distinguishes Aurora from other major LPs.

In the Canadian consumer market, the Company successfully expanded product offerings into major categories, such as vapes, pre-rolls and certain key edible markets, but saw market share erosion in the flower segment during Q2 2021 primarily attributable to the Daily Special value brand. Q2 2021 consumer cannabis net revenue of $28.6 million includes $2.5 million in actual net returns, price adjustments and provisions as the Company pro-actively pulled low-potency product back from certain provincial distributors to open room for the higher potency and quality flower the Company is now producing (“Product Swap”). The product quality improvement reflects the decisions that management has made to focus the Company on premium and consistently high-quality products across all brands. The Company expects these actions to provide support for brand development and to meaningfully accelerate product sales in the future.

Gross Margins Update

Gross margin before fair value adjustments on cannabis net revenue was 25% in Q2 2021, as compared to 37% in Q2 2020 and 36% in Q1 2021. Included in Q2 2021 cost of sales is an inventory impairment charge of $0.7 million (Q2 2020 and Q1 2021 - nil) and depreciation charges of $10.9 million (Q2 2020 - $6.0 million; Q1 2021 - $8.4 million).

4 | AURORA CANNABIS INC.

Q2 2021 MD&A

Adjusted gross margin before fair value adjustments on cannabis net revenue (“Adjusted gross margin”) for Q2 2021, which excludes the impacts of depreciation and inventory impairment, was 42% compared to 48% in both Q2 2020 and Q1 2021. Adjusted gross margin was negatively impacted by the purposeful reduction in production levels at Sky resulting in a $6.0 million increase in cash cost of sales due to the under-utilization of capacity. Also impacting adjusted gross margin was a $1.8 million increase in actual net returns, price adjustments and provisions primarily relating to company-initiated product returns meant to open channels to newer, higher-potency flower that Aurora is now producing. Normalizing for these impacts, adjusted gross margin was 52%.

SG&A and R&D Update

SG&A and research and development (“R&D”) expense, combined, was $44.4 million ($42.3 million excluding restructuring costs) during Q2 2021 as compared to $94.1 million in Q2 2020 and $46.9 million ($42.8 million excluding restructuring costs) in Q1 2021. Management continues to manage the business to the current target of combined SG&A and R&D in the low $40 million range, representing a 55% reduction in SG&A and R&D, excluding restructuring costs, over the course of the past year.

Capital Expenditures Update

For 2021, management has approved capital spending plans currently expected to total less than $40 million in net cash outlays for the full fiscal year. Aurora reported approximately $17.3 million in capital expenditures in Q2 2021 ($8.8 million net cash outlays) which includes additions to intangible assets and excludes the impact of capitalized borrowing costs and share-based compensation. Most of the capital spending occurred in the first two quarters of fiscal 2021 with the latter half of the fiscal year expected to be lower.

Adjusted EBITDA

Aurora reported an Adjusted EBITDA loss of $16.8 million in Q2 2021. Excluding $2.9 million restructuring payments for employee severance, legal and contract termination costs (Q1 2021 - $47.4 million) and $1.8 million increase in actual net returns, price adjustments and provisions as a result of the Company initiated product swap, Adjusted EBITDA loss is $12.1 million (Q2 2020 - $69.9 million; Q1 2021 - $10.5 million).

The $1.6 million increase in the loss as compared to the prior quarter was primarily driven by the $5.0 million increase in cash gross profit mainly attributed to the under-utilization of capacity at Aurora Sky as we scaled back production to test new processes and cultivation methods, and to align overall Company production with current demand.

Liquidity Update

Aurora continues to improve cash use materially. At September 30, 2020, the Company reported $133.7 million of cash. During Q2 2021, the Company raised cash from:

•

Net proceeds of $379.2 million under the At-the-Market (“ATM”) program and the November 2020 Unit Offering; and

•

Net proceeds of $6.1 million from the sale of investments.

During Q2 2021, the Company utilized cash in the following categories:

•

Operations used net cash of $36.8 million, excluding net investment in working capital, and includes restructuring and employee termination payments of $2.9 million;

•

Net investment in working capital required $30.4 million, of which $10.0 million relates to the increase in biological assets and inventory, a significant improvement over prior quarters;

•

Capital assets, net of $5.1 million proceeds received on disposals, used approximately $8.8 million, which includes invoices paid related to work done in Q1 2021; and

•

Debt and lease obligation payments required approximately $8.6 million.

Accordingly, as at December 31, 2020, the Company had $434.4 million of cash and cash equivalents, comprised of $384.4 million of cash and cash equivalents and $50.0 million in restricted cash securing the Company’s term debt.

Reflecting the Company’s January 2021 equity raise (refer to the Key Developments During and Subsequent to the Three Months Ended December 31, 2020 section below) of gross proceeds of $175.2 million (US$137.9 million), as of the date of this report, the Company has approximately $565 million of cash and cash equivalents on hand, including restricted cash.

In December 2020, Aurora announced a renegotiated arrangement with its term debt syndicate including an extension of the maturity of the debt to December 2022 and the elimination of the quarterly EBITDA covenants. As at December 31, 2020, Aurora remains compliant with all financial covenants under the amended and restated BMO credit facility and has approximately $95.0 million principal outstanding under its credit facility.

5 | AURORA CANNABIS INC.

Q2 2021 MD&A

Coronavirus (“COVID-19”) Update

For the six months ended December 31, 2020, the COVID-19 pandemic did not materially disrupt the Company’s operations but has impacted the rate of growth in certain Canadian consumer markets as governments impose retail access restrictions. As at the date of this report, the production and sale of medical and consumer cannabis have been recognized as essential services across Canada and Europe. All of the Company’s facilities in Canada and internationally continue to be operational and we continue to work closely with local, national and international government authorities to ensure that we are following the required protocols and guidelines related to COVID-19 within each region. Revenue growth in the Canadian consumer market has been impacted to a non-quantifiable extent as certain provinces, Ontario in particular, have restricted retail sales to curbside pickup at points during the pandemic. Although there have not been any material impacts to the Company’s production operations to date, the Company cannot provide assurance that there will not be disruptions to its operations in the future. Refer to the “Risk Factors” section in the Annual MD&A for the year ended June 30, 2020 for further discussion on the potential impacts of COVID-19.

Condensed Statement of Comprehensive (Loss) Income

	Three months ended			Six months ended
($ thousands)	December 31, 2020	September 30, 2020	December 31, 2019 ⁽¹⁾⁽²⁾	December 31, 2020	December 31, 2019 ⁽¹⁾⁽²⁾
Net revenue ⁽³⁾	$67,673	$67,812	$55,138	$135,485	$128,852
Gross profit before fair value (“FV”) adjustments	$17,029	$24,518	$18,201	$41,547	$57,772
Gross profit	$17,349	$26,621	$12,910	$43,970	$57,075
Operating expenses	$64,397	$68,947	$136,568	$133,344	$258,521
Loss from operations	($47,048)	($42,326)	($123,658)	($89,374)	($201,446)
Other expense	($242,573)	($64,223)	($1,203,653)	($306,796)	($1,095,924)
Net loss from continuing operations	($292,788)	($107,160)	($1,302,175)	($399,948)	($1,290,938)
Net loss from discontinuing operations, net of taxes	-	($2,366)	($9,943)	($2,366)	($13,743)
Net loss	($292,788)	($109,526)	($1,312,118)	($402,314)	($1,304,681)

⁽¹⁾

Amounts have been retroactively restated for the change in accounting policy for inventory costing relating to by-products and the allocation of production management staff salaries. Refer to the “Change in Accounting Policies” section below for further detail.

⁽²⁾

As a result of the Company’s divestment of its wholly owned subsidiaries, Aurora Larssen Projects Inc. (“ALPS”) and Aurora Hemp Europe (“AHE”), the operations of ALPS and AHE have been presented as discontinued operations and the Company’s operational results have been retroactively restated, as required. Refer to Note 11(b) of the Financial Statements for more information about the divestitures.

⁽³⁾

Net revenue represents our total revenue exclusive of excise taxes levied by the Canada Revenue Agency (“CRA”) on the sale of medical and consumer cannabis products.

Key Quarterly Financial and Operating Results

($ thousands, except Operational Results)	Q2 2021		Q1 2021		$ Change	% Change		Q2 2020 ⁽⁷⁾		$ Change	% Change
Financial Results
Total net revenue ⁽¹⁾	$67,673		$67,812		($139)	0	%	$55,138		$12,535	23	%
Cannabis net revenue ^(1)(2)(3a)	$67,673		$67,812		($139)	0	%	$52,676		$14,997	28	%
Medical cannabis net revenue ^(2)(3a)	$38,856		$33,474		$5,382	16	%	$27,386		$11,470	42	%
Consumer cannabis net revenue ^(1)(2)(3a)	$28,573		$34,338		($5,765)	(17)	%	$22,906		$5,667	25	%
Wholesale bulk cannabis net revenue ^(2)(3a)	$244		$ -		$244	N/A		$2,384		($2,140)	(90)	%
Adjusted gross margin before FV adjustments on cannabis net revenue ^(2)(3b)	42	%	48	%	N/A	(6)	%	48	%	N/A	(6)	%
Adjusted gross margin before FV adjustments on medical cannabis net revenue ^(2)(3b)	56	%	59	%	N/A	(3)	%	59	%	N/A	(3)	%
Adjusted gross margin before FV adjustments on consumer cannabis net revenue ^(2)(3b)	27	%	38	%	N/A	(11)	%	33	%	N/A	(6)	%
Adjusted gross margin before FV adjustments on wholesale bulk cannabis net revenue ^(2)(3b)	(305)	%	N/A		N/A	N/A		61	%	N/A	(366)	%
SG&A expense	$41,972		$44,324		($2,352)	(5)	%	$87,301		($45,329)	(52)	%
R&D expense	$2,432		$2,584		($152)	(6)	%	$6,775		($4,343)	(64)	%
Adjusted EBITDA ^(2)(3c)	($16,802)		($57,891)		$41,089	(71)	%	($69,857)		$53,055	(76)	%

Balance Sheet
Working capital ⁽⁶⁾	$592,746		$201,425		$391,321	194	%	$400,070		$192,676	48	%
Cannabis inventory and biological assets ⁽²⁾⁽⁴⁾	$179,502		$166,178		$13,324	8	%	$200,868		($21,366)	(11)	%
Total assets ⁽⁶⁾	$2,830,190		$2,757,272		$72,918	3	%	$4,656,046		($1,825,856)	(39)	%

Operational Results - Cannabis
Average net selling price of dried cannabis ⁽²⁾	$4.00		$3.72		$0.28	8	%	$4.69		($0.69)	(15)	%
Kilograms sold ⁽⁵⁾	15,253		16,139		(886)	(5)	%	9,501		5,752	61	%

(1)

Includes the impact of actual and expected product returns and price adjustments (Q2 2021 - $2.7 million; Q1 2021 - $0.8 million; Q2 2020 - $10.6 million).

(2)

These terms are defined in the “Cautionary Statement Regarding Certain Non-GAAP Performance Measures” section of this MD&A.

6 | AURORA CANNABIS INC.

Q2 2021 MD&A

⁽³⁾

Refer to the following sections for reconciliation of non-GAAP measures to the IFRS equivalent measure:

^a.

Refer to the “Revenue” section for a reconciliation of cannabis net revenue to the IFRS equivalent.

^b.

Refer to the “Cost of Sales and Gross Margin” section for reconciliation to the IFRS equivalent.

^c.

Refer to the “Adjusted EBITDA” section for reconciliation to the IFRS equivalent.

⁽⁴⁾

Represents total biological assets and cannabis inventory, exclusive of merchandise, accessories, supplies and consumables.

⁽⁵⁾

The kilograms sold is offset by the grams returned during the period.

⁽⁶⁾

⁽⁷⁾

Financial Highlights

Revenue

Q2 2021 cannabis net revenue was up 28% compared to Q2 2020 and remained consistent compared to Q1 2021. The Company saw continued strength within the medical market with a $5.4 million increase over the prior quarter. The increase is attributable to the International medical market which had a net revenue increase of 84%, or $5.4 million, of which $3.2 million is attributable to Aurora’s first shipment of medical cannabis to Cantek Holdings (“Cantek”) under the Israeli Medical Supply Agreement. This was offset by a $5.8 million decrease in consumer cannabis net revenue over prior quarter as a result of (i) a $5.8 million decrease on dried flower sales as the Company lost market share during Q2 2021 primarily attributable to the Company’s Daily Special value brand; (ii) $1.8 million increase in actual net returns, price adjustments and provisions from the Company initiated product swap; offset by (iii) a $1.7 million increase in our consumer derivative net revenue. As outlined above, the Company pro-actively pulled low-potency product back from certain provincial distributors to open room for the higher potency and quality flower the Company is now producing. Aurora is currently focused on executing a tactical plan intended to regain and grow Aurora’s market share in key profitable Canadian consumer categories, including leveraging Aurora’s premium brands across all major consumer categories, enhancement of a consumer-led innovation system, and a focus on consumer categories and sub-categories that have the potential to both deliver meaningful profit and are a space where Aurora has the strengths and capabilities to be a competitive leader in the marketplace.

Gross Margins and Cultivation Costs

Adjusted gross margin before fair value adjustments on cannabis net revenue, which excludes the impacts of depreciation and inventory impairment, was 42% in Q2 2021 compared to 48% in both Q2 2020 and Q1 2021. The decrease in adjusted gross margin before fair value adjustments was mainly driven by (i) $6.0 million in cash cost of sales attributable to the under-capitalization of fixed overhead costs due to the reduction the Company’s operational footprint at Aurora Sky, and (ii) a $1.8 million increase in actual net returns, price adjustments and net revenue provisions resulting from the product swap. Excluding actual net returns, price adjustments and net revenue provisions, adjusted gross margin before fair value adjustments on cannabis net revenue would have been 45% in Q2 2021 compared to 57% in Q2 2020 and 49% in Q1 2021.

SG&A and R&D Expenditures

During Q2 2021, SG&A and R&D was $44.4 million and decreased from $94.1 million in Q2 2020 and $46.9 million in Q1 2021, attributable to the continued efforts of the business transformation plan. Included in SG&A and R&D for Q2 2021 and Q1 2021 is $2.1 million and $4.1 million, respectively, related to restructuring charges, severance and benefits related to the wind down of certain production facilities as part of our business transformation plan. Excluding these charges, SG&A and R&D would have been $42.3 million, compared to $94.1 million in Q2 2020 and $42.8 million in Q1 2021.

Net Loss

During Q2 2021, net loss was $292.8 million, as compared to $109.5 million in Q1 2021. The quarter-over-quarter increase in net loss is primarily due to (i) $221.6 million impairment charges to property, plant and equipment; (ii) $10.3 million impairment charges to deposits; and (iii) a $4.2 million increase in finance and other costs. These were offset by (i) a decrease of $42.5 million of legal settlement and contract termination fees compared to the prior quarter; and (ii) a $3.0 million decrease in impairment loss on software intangible assets.

Adjusted EBITDA

The Company defines Adjusted EBITDA as net income (loss) excluding interest income (expense), accretion, income taxes, depreciation, amortization, changes in fair value of inventory sold, changes in fair value of biological assets, share-based compensation, acquisition costs, foreign exchange, share of income (losses) from investment in associates, government grant income, fair value gains and losses on financial instruments, gains and losses on deemed disposal, losses on disposal of assets, restructuring charges, onerous contract provision, and non-cash impairments of deposits, intangibles, goodwill, inventory, property, plant and equipment and other assets.

The Adjusted EBITDA loss for Q2 2021 was $16.8 million as compared to $69.9 million in Q2 2020 and $57.9 million in Q1 2021. Included in the Q2 2021 Adjusted EBITDA loss is (i) $0.8 million (Q2 2020 - nil, Q1 2021 - $43.3 million) legal settlement and contract termination fees; (ii) $2.1 million (Q2 2020 - nil, Q1 2021 - $4.1 million) related restructuring charges, severance and benefits associated with the business transformation plan; and (iii) a $1.8 million increase in actual net returns, price adjustments and provisions relating to the Company proactively pulling low-potency products back from certain provincial distributors to open room for the higher potency and quality flower the Company is now producing. Excluding these impacts, Adjusted EBITDA loss is $12.1 million (Q2 2020 - $69.9 million, Q1 2021 - $10.5 million). The $57.8 million improvement in Adjusted EBITDA loss from Q2 2020 to Q2 2021 was primarily driven by a $49.7 million decrease in SG&A and R&D costs as the Company executed its business transformation plan. The $1.6 million increase in the loss as compared to Q1 2021 was primarily driven by a $5.0 million increase in cash gross profit mainly due to the under-utilization of costs at Aurora Sky as we scaled back production to test new processes and cultivation methods, and to align overall Company production with current demand.

7 | AURORA CANNABIS INC.

Q2 2021 MD&A

Key Developments During and Subsequent to the Three Months Ended December 31, 2020

Financing Activities

Sale of Cann Group Limited (“Cann Group”) Common Shares

On October 9, 2020, the Company sold all of its common shares held in Cann Group for net proceeds of $5.9 million.

Short Form Base Shelf Prospectus and Unit Offerings

On October 29, 2020, the Company filed a short form base shelf prospectus (the “2020 Shelf Prospectus”) and a corresponding shelf registration statement on Form F-10 (the “2020 Registration Statement”) with the United States Securities and Exchange Commission (the “SEC”). The 2020 Shelf Prospectus and 2020 Registration Statement allows the Company to make offerings of up to US$500 million of common shares, preferred shares, warrants, subscription receipts and debt securities, or any combination thereof during the 25-month period that the 2020 Shelf Prospectus remains effective. The previous shelf prospectus filed on April 2, 2019 (the “2019 Shelf Prospectus”) and At-the-Market (“ATM”) supplement were fully utilized with no available room remaining.

In connection with the 2020 Shelf Prospectus, on November 16, 2020, the Company completed an offering of 23,000,000 units (“November 2020 Prospectus Supplement”), including an over-allotment of 3,000,000 units, at US$7.50 per unit for total gross proceeds of $226.2 million (US$172.5 million). Each unit consists of one common share and one-half of one common share purchase warrant of the Company (“November 2020 Offering Warrant”). Each whole November 2020 Offering Warrant entitles the holder to purchase one common share of the Company at US$9.00 per warrant share until March 16, 2024.

In January 2021, the Company completed a second offering of 13,200,000 units (“January 2021 Prospectus Supplement”), including an over-allotment of 1,200,000 units, at US$10.45 per unit for gross proceeds of $175.2 million (US$137.9 million). Each unit consists of one common share and one-half of one common share purchase warrant of the Company (“January 2021 Offering Warrant”). Each whole January 2021 Offering Warrant entitles the holder to purchase one common share of the Company at a price of US$12.60 per warrant share until January 26, 2024.

Amendment of Bank of Montreal (“BMO”) Credit Facility

On December 17, 2020, the Company executed an amendment to its credit facility with BMO (the “Second Amended and Restated Credit Agreement”) which extends the credit facility maturity date to December 2022, adjusts certain repayment terms, and restructures existing financial covenants. The amendment transitions the Company from a minimum EBITDA covenant to a minimum liquidity covenant which provides Aurora with the financial flexibility to execute its strategic plan.

Operational Updates

Supply Agreement with Cantek Holdings

On November 25, 2020, the Company announced it had entered into a supply agreement (the “Israeli Medical Supply Agreement”) with Cantek, a provider of medical cannabis in Israel. Under the terms of the agreement, Aurora will supply Cantek with dried bulk flower over a two-year period, with the option to extend. Subject to compliance with importation regulations, the Company intends to provide Cantek with a minimum of 4,000 kilograms of bulk dried flower annually, which will be processed into finished product, and co-branded under the Aurora and Cantek brand names for the Israeli market with the potential for additional international market sales. Having secured all necessary export and import permits, the initial shipment of cannabis under the agreement occurred during the week of November 16, 2020.

Facility Update

In December 2020, the Company halted construction at the Aurora Sun facility and reduced production levels at the Aurora Sky facility by 75%. Production at the Aurora Sky facility was reduced in order to test new processes and cultivation methods utilized at our other facilities to improve quality of product, and to align production with current demand. As demand increases, the Company intends to fulfill that demand through a hybrid model of internal production, utilizing existing capacity and external supply.

Sale of Facilities

In January 2021, the Company entered into agreements to sell two of its production facilities for an aggregate of up to $24.6 million, subject to certain closing conditions. Upon closing, the Company will receive approximately 50% of the proceeds with the remaining 50% receivable upon, and subject to, the purchaser obtaining certain licenses. The closure of these facilities was announced in June 2020 in connection with our business transformation plan, intended to better align production levels with demand and the current realities of the cannabis market in Canada.

Corporate Updates

Retirement of our Chief Science Officer

Effective December 18, 2020, Dr. Jonathan Page retired from his role as Aurora’s Chief Science Officer. He remains a Senior Strategic Consultant exclusive to the Company.

8 | AURORA CANNABIS INC.

Q2 2021 MD&A

Financial Review

Revenue

The Company primarily operates in the cannabis market. The table below outlines the reconciliation from the Company’s total net revenue to its cannabis net revenue metric for the three and six months ended December 31, 2020 and the comparative periods.

($ thousands)	Three months ended			Six months ended
($ thousands)	December 31, 2020	September 30, 2020	December 31, 2019 ⁽²⁾⁽³⁾	December 31, 2020	December 31, 2019 ⁽²⁾⁽³⁾
Medical cannabis net revenue
Canada dried cannabis	14,248	15,597	14,803	29,845	29,685
Canada cannabis derivatives ⁽¹⁾	12,752	11,419	10,791	24,171	21,397
Canadian medical cannabis net revenue	27,000	27,016	25,594	54,016	51,082
International dried cannabis	11,329	6,374	1,758	17,703	6,311
International cannabis derivatives ⁽¹⁾	645	84	34	729	443
International cannabis provisions	(118)	-	-	(118)	-
International medical cannabis net revenue	11,856	6,458	1,792	18,314	6,754
Total medical cannabis net revenue	38,856	33,474	27,386	72,330	57,836

Consumer cannabis net revenue
Dried cannabis	19,628	25,424	28,778	45,052	55,667
Cannabis derivatives ⁽¹⁾	11,484	9,699	4,693	21,183	7,826
Net revenue provisions	(2,539)	(785)	(10,565)	(3,324)	(10,565)
Total consumer cannabis net revenue	28,573	34,338	22,906	62,911	52,928

Wholesale bulk cannabis net revenue
Canada dried cannabis	244	-	2,352	244	9,784
Canada cannabis derivatives ⁽¹⁾	-	-	32	-	2,904
International dried cannabis	-	-	-	-	-
Wholesale bulk cannabis net revenue	244	-	2,384	244	12,688

Total cannabis net revenue	67,673	67,812	52,676	135,485	123,452
Ancillary net revenue	-	-	2,462	-	5,400
Total net revenue	67,673	67,812	55,138	135,485	128,852

⁽¹⁾

Cannabis derivative net revenue includes cannabis oils, capsules, softgels, sprays, topicals, edibles and vaporizer net revenue.

⁽²⁾

⁽³⁾

As a result of the Company’s divestment of its wholly owned subsidiaries ALPS and AHE, the operations of ALPS and AHE have been presented as discontinued operations and the Company’s operational results have been retroactively restated, as required. Refer to Note 11(b) of the Financial Statements for more information about the divestitures. Discontinued operations, from AHE, had incurred ancillary net revenue of $0.9 million and $2.4 million for the three and six months ended December 31, 2019, respectively. ALPS generated no net revenue in the three and six months ended December 31, 2019.

Medical Cannabis Net Revenue

For the three months ended December 31, 2020, the Company’s medical cannabis net revenue increased by $5.4 million, or 16%, as compared to the prior quarter. The increase is primarily attributable to:

•

Continuing strength in Aurora’s international medical cannabis business with a 84%, or $5.4 million, increase in net revenue over the prior quarter driven by a continued increase in kilograms sold within the European market. Of the $5.4 million increase, $3.2 million is attributable to Aurora’s first shipment of medical cannabis to Cantek Holdings under the Israeli Medical Supply Agreement; and

•

Consistent and stable demand within the Canadian medical cannabis market.

For the three and six months ended December 31, 2020, the Company’s medical cannabis net revenue increased by $11.5 million and $14.5, respectively, as compared to the same periods in the prior year. The increase was primarily attributable to (i) a $10.1 million and $11.6 million, respectively, or 562% and 171%, respectively, increase in international cannabis net revenue as a result of an increase in kilograms sold and average net selling price of international cannabis; and (ii) an increase of $2.0 million and $2.8 million, respectively, in Canadian cannabis extracts net revenue as compared to the same periods in the prior year.

9 | AURORA CANNABIS INC.

Q2 2021 MD&A

Consumer Cannabis Net Revenue

During the three months ended December 31, 2020, consumer cannabis net revenue decreased by $5.8 million, or 17%, compared to the prior quarter. The decrease is primarily attributed to:

•

a $5.8 million decrease in consumer dried cannabis revenue driven primarily by a decrease in sales of the Company’s Daily Special value brand as the Company lost market share, after a strong launch, as further competition entered the discount flower category;

•

a $1.8 million increase in actual net returns, price adjustments and provisions; and offset by

•

a $1.7 million increase in consumer cannabis derivatives net revenue as the Company looks to expand beyond the value flower segment and prioritizes higher average net selling price products including cannabis-derivative products.

During the three and six months ended December 31, 2020, consumer cannabis net revenue increased by $5.7 million and $10.0 million, respectively, compared to the same periods in the prior year. The increase was primarily attributed to (i) the increase of $6.8 million and $13.4 million, respectively, in consumer cannabis derivative revenue as a result of the ramp up of Cannabis 2.0 product sales after the legalization in Canada in October 2019; (ii) reduction of $8.0 million and $7.2 million, respectively, in actual net returns, price adjustments and provisions, offset by (iii) a reduction of $9.2 million and $10.6 million, respectively, in consumer dried cannabis revenue. Included in the three and six months ended December 31, 2020 consumer cannabis net revenue is $1.0 million and $2.7 million of U.S. CBD net revenue following the acquisition of Reliva in May 2020.

Wholesale Bulk Cannabis Net Revenue

The Company generates revenue from wholesale bulk cannabis from time-to-time when opportunities exist and pricing and terms are deemed appropriate by the Company. During the three and six months ended December 31, 2020 the Company realized $0.2 million wholesale bulk cannabis net revenue from the sale of low potency product.

Cost of Sales and Gross Margin

	Three months ended						Six months ended
($ thousands)	December 31, 2020		September 30, 2020		December 31, 2019 ⁽²⁾⁽³⁾		December 31, 2020		December 31, 2019 ⁽²⁾⁽³⁾
Net revenue	67,673		67,812		55,138		135,485		128,852
Cost of sales	(50,644)		(43,294)		(36,937)		(93,938)		(71,080)
Gross profit before FV adjustments ⁽¹⁾	17,029		24,518		18,201		41,547		57,772
Changes in fair value of inventory sold	(5,942)		(3,304)		(13,223)		(9,246)		(34,528)
Unrealized gain on changes in fair value of biological assets	6,262		5,407		7,932		11,669		33,831
Gross profit	17,349		26,621		12,910		43,970		57,075
Gross margin	26	%	39	%	23	%	32	%	44	%

⁽¹⁾

Gross profit (loss) before fair value adjustments is a non-GAAP measure. Refer to “Cautionary Statement Regarding Certain Non-GAAP Performance Measures” section of this MD&A.

⁽²⁾

⁽³⁾

As a result of the Company’s divestment of its wholly owned subsidiary, ALPS and AHE, the operations of ALPS and AHE have been presented as discontinued operations and the Company’s operational results have been retroactively restated, as required. Refer to Note 11(b) of the Financial Statements for more information about the divestiture. Discontinued operations, from AHE, had incurred a gross profit of $0.8 million and $0.7 million during the three and six months ended December 31, 2019. ALPS generated no gross profit (loss) in the three and six months ended December 31, 2019.

During the three months ended December 31, 2020, gross profit decreased by $9.3 million, or 35%, as compared to the prior quarter. The decrease was primarily driven by a $7.4 million, or 17%, increase in cost of sales as compared to the prior quarter. Of this increase, $6.0 million is related to having under-utilized capacity at the Aurora Sky facility as a result of scaling back production to 25% of its previous capacity intended to transform the Sky facility into a high-value cultivation center for our premium strains. The remaining increase is driven by $1.0 million related to the sale of low potency product at nominal margins and a $0.7 million inventory impairment charge during the three months ended December 31, 2020 recognized through cost of sales. Additionally, actual net returns, price adjustments and provisions increased by $1.8 million due to the Company-initiated product swap with the provinces. Excluding the $9.5 million impacts described above, gross profit and gross margin would have been $26.5 million and 38%, a slight decrease as compared to the prior quarter.

During the three months ended December 31, 2020, gross profit increased by $4.4 million, or 34%, as compared to the same period in the prior year. The increase was primarily driven by a $5.6 decrease in changes in fair value of inventory sold and unrealized gain on changes in fair value of biological assets as compared to the same period in the prior year. This increase was offset by the $7.7 million additional cost of sales described above.

During the six months ended December 31, 2020, gross profit decreased by $13.1 million, or 23%, as compared to the same period in the prior year. This decrease is primarily driven by (i) the $7.7 million additional cost of sales described above which were not present in the comparative period, and (ii) $5.2 million of additional cost of sales incurred due to the ramp up of Aurora Nordic which received its sales license in Denmark in Q1 2021 and has not yet reached maximum capacity and economies of scale.

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Q2 2021 MD&A

Adjusted Gross Margin

The table below outlines adjusted gross profit and margin before fair value adjustments for the indicated three month periods.

($ thousands)	Medical Cannabis		Consumer Cannabis		Wholesale Bulk Cannabis		Ancillary Support Functions		Total
*Three months ended December 31, 2020*
Gross revenue	41,872		37,459		244		-		79,575
Excise taxes	(3,016)		(8,886)		-		-		(11,902)
Net revenue	38,856		28,573		244		-		67,673
Cost of sales	(23,946)		(25,681)		(1,017)		-		(50,644)
Gross profit (loss) before FV adjustments ⁽¹⁾	14,910		2,892		(773)		-		17,029
Depreciation	6,376		4,472		29		-		10,877
Inventory impairment in cost of sales	333		406		-		-		739
Adjusted gross profit (loss) before FV adjustments ⁽¹⁾	21,619		7,770		(744)		-		28,645
Adjusted gross margin before FV adjustments ⁽¹⁾	56	%	27	%	(305)	%	-	%	42	%

*Three months ended September 30, 2020*
Gross revenue	36,532		46,134		-		-		82,666
Excise taxes	(3,058)		(11,796)		-		-		(14,854)
Net revenue	33,474		34,338		-		-		67,812
Cost of sales	(18,150)		(25,144)		-		-		(43,294)
Gross profit before FV adjustments ⁽¹⁾	15,324		9,194		-		-		24,518
Depreciation	4,587		3,783		-		-		8,370
Adjusted gross profit before FV adjustments ⁽¹⁾	19,911		12,977		-		-		32,888
Adjusted gross margin before FV adjustments ⁽¹⁾	59	%	38	%	-	%	-	%	48	%

*Three months ended December 31, 2019 ⁽²⁾⁽³⁾*
Gross revenue	30,665		28,622		2,384		2,462		64,133
Excise taxes	(3,279)		(5,716)		-		-		(8,995)
Net revenue	27,386		22,906		2,384		2,462		55,138
Cost of sales	(14,099)		(18,129)		(1,169)		(3,540)		(36,937)
Gross profit (loss) before FV adjustments ⁽¹⁾	13,287		4,777		1,215		(1,078)		18,201
Depreciation	2,992		2,793		233		-		6,018
Adjusted gross profit (loss) before FV adjustments ⁽¹⁾	16,279		7,570		1,448		(1,078)		24,219
Adjusted gross margin before FV adjustments ⁽¹⁾	59	%	33	%	61	%	(44)	%	44	%

⁽¹⁾

These terms are defined in the “Cautionary Statement Regarding Certain Non-GAAP Performance Measures” section of this MD&A.

⁽²⁾

⁽³⁾

As a result of the Company’s divestment of its wholly owned subsidiary, ALPS and AHE, the operations of ALPS and AHE have been presented as discontinued operations and the Company’s operational results have been retroactively restated, as required. Refer to Note 11(b) of the Financial Statements for more information about the divestiture. Discontinued operations, from ALPS and AHE, had incurred an adjusted gross profit before FV adjustments of $0.8 million for the three months ended December 31, 2019. ALPS generated no adjusted gross profit before FV adjustments in the three months ended December 31, 2019.

Medical Cannabis Gross Margin

Adjusted gross margin before FV adjustments on medical cannabis net revenue was 56% for the three months ended December 31, 2020 as compared to 59% for the prior quarter. The decrease in adjusted gross margin before FV adjustments is primarily attributable to:

(i)

$2.7 million increase in cost of sales due to under-utilization of overhead costs as described above; offset by

(ii)

a 60% increase in the medical cannabis sales mix attributed to our international sales, which yield higher margins, from 18% in Q1 2021 to 28% in Q2 2021.

Adjusted gross margin before FV adjustments on medical cannabis net revenue was 56% for the three months ended December 31, 2020 as compared to 59% for same period of the prior year. The decrease in adjusted gross margin before FV adjustments was a result of:

(i)

$2.7 million increase in cost of sales due to under-utilization of overhead costs as described above; offset by

(ii)

a 385%, or $10.1 million increase in the medical cannabis sales mix attributed to our international sales, which yield higher margins, in the current quarter, from 6% in Q2 2020 to 28% in Q2 2021; and

11 | AURORA CANNABIS INC.

Q2 2021 MD&A

(iii)

a 2% increase in the average net selling price per gram of medical cannabis primarily attributable to a $10.1 million increase in international dried cannabis and cannabis extract net revenue.

The Company does not pass the cost of excise taxes onto medical patients. Of the $11.9 million excise taxes incurred during the three months ended December 31, 2020 (three months ended September 30, 2020 and December 31, 2019 - $14.9 million and $9.0 million, respectively), $3.0 million (three months ended September 30, 2020 and December 31, 2019 - $3.1 million and $3.3 million, respectively) relates to excise taxes levied on cannabis products that we sold to medical patients in Canada. As such, these excise taxes on medical cannabis net revenue directly impacted our bottom line and decreased our adjusted gross margin before FV adjustments on medical cannabis net revenue by 3% for the three months ended December 31, 2020 (three months ended September 30, 2020 and December 31, 2019 - 4% and 5%, respectively). Excluding the impact of excise taxes on medical cannabis net revenue, our adjusted gross margin before FV adjustments on medical cannabis would have been 59%, 63% and 64% for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively.

Consumer Cannabis Gross Margin

Adjusted gross margin before FV adjustments on consumer cannabis net revenue decreased to 27% for the three months ended December 31, 2020 as compared to 38% in the prior quarter, which was a result of:

(i)

$3.3 million increase in cost of sales due to under-utilization of overhead costs as described above;

(ii)

a $1.8 million increase in actual net returns, price adjustments and net revenue provisions attributed to the Company initiated product swap. Excluding actual net returns, price adjustments and net revenue provisions, the adjusted gross margin before FV adjustments on consumer cannabis for current quarter would have been 33% compared to 39% for the prior quarter; offset by

(iii)

a 6% increase in the average net selling price per gram driven by a reduced sales mix attributed to our Daily Special value brand in the current quarter.

Adjusted gross margin before FV adjustments on consumer cannabis net revenue decreased to 27% for the three months ended December 31, 2020 as compared to 33% in the same period in the prior year, which was a result of:

(i)

$3.3 million increase in cost of sales due to under-utilization of overhead costs as described above;

(ii)

net revenue generated from our Daily Special value brand which was not present in the prior comparative period, which contributed to the decrease of our overall average net selling price per gram of consumer cannabis from $4.76 per gram in Q2 2020 to $2.97 per gram in Q2 2021; and offset by

(iii)

a $8.0 million decrease in actual net returns, price adjustments and net revenue provisions.

Wholesale Bulk Cannabis Gross Margin

During the three months ended December 31, 2020, the Company capitalized on opportunities to sell lower potency product at reduced margins. The Company generates revenue from wholesale bulk cannabis from time-to-time when pricing and terms are appropriate..

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Q2 2021 MD&A

The table below outlines adjusted gross profit and margin before fair value adjustments for the indicated six month periods.

($ thousands)	Medical Cannabis		Consumer Cannabis		Wholesale Bulk Cannabis		Ancillary Support Functions		Total
*Six months ended December 31, 2020*
Gross revenue	78,404		83,593		244		-		162,241
Excise taxes	(6,074)		(20,682)		-		-		(26,756)
Net revenue	72,330		62,911		244		-		135,485
Cost of sales	(42,096)		(50,825)		(1,017)		-		(93,938)
Gross profit before FV adjustments ⁽¹⁾	30,234		12,086		(773)		-		41,547
Depreciation	10,963		8,255		29		-		19,247
Adjusted gross profit before FV adjustments ⁽¹⁾	41,197		20,341		(744)		-		60,794
Adjusted gross margin before FV adjustments ⁽¹⁾	57	%	32	%	(305)	%	-	%	45	%

*Six months ended December 31, 2019 ⁽²⁾⁽³⁾*
Gross revenue	64,253		65,418		12,688		5,400		147,759
Excise taxes	(6,417)		(12,490)		-		-		(18,907)
Net revenue	57,836		52,928		12,688		5,400		128,852
Cost of sales	(26,130)		(34,240)		(5,431)		(5,279)		(71,080)
Gross profit (loss) before FV adjustments ⁽¹⁾	31,706		18,688		7,257		121		57,772
Depreciation	5,191		5,619		1,025		-		11,835
Adjusted gross profit before FV adjustments ⁽¹⁾	36,897		24,307		8,282		121		69,607
Adjusted gross margin before FV adjustments ⁽¹⁾	64	%	46	%	65	%	2	%	54	%

⁽¹⁾

These terms are defined in the “Cautionary Statement Regarding Certain Non-GAAP Performance Measures” section of this MD&A.

⁽²⁾

⁽³⁾

As a result of the Company’s divestment of its wholly owned subsidiary, ALPS and AHE, the operations of ALPS and AHE have been presented as discontinued operations and the Company’s operational results have been retroactively restated, as required. Refer to Note 11(b) of the Financial Statements for more information about the divestiture. Discontinued operations, from ALPS and AHE, had incurred an adjusted gross profit before FV adjustments of $0.7 million for the six months ended December 31, 2019. ALPS generated no adjusted gross profit before FV adjustments in the six months ended December 31, 2019.

Medical Cannabis Gross Margin

Adjusted gross margin before FV adjustments on medical cannabis net revenue was 57% for the six months ended December 31, 2020 as compared to 64% for same period of the prior year. The decrease in adjusted gross margin before FV adjustments was a result of (i) $5.2 million of additional cost of sales incurred due to the ramp up of Aurora Nordic which received its sales license in Denmark in Q1 2021 and has not yet reached maximum capacity and economies of scale, and (ii) a $2.7 million increase in cost of sales due to under-utilized capacity as described above.

The Company does not pass the cost of excise taxes onto medical patients. Of the $26.8 million excise taxes incurred during the six months ended December 31, 2020 (six months ended December 31, 2019 - $18.9 million), $6.1 million (six months ended December 31, 2019 - $6.4 million) relates to excise taxes levied on cannabis products that we sold to medical patients in Canada. As such, these excise taxes on medical cannabis net revenue directly impacted our bottom line and decreased our adjusted gross margin before FV adjustments on medical cannabis net revenue by 3% for the six months ended December 31, 2020 (six months ended December 31, 2019 - 3%). Excluding the impact of excise taxes on medical cannabis net revenue, our adjusted gross margin before FV adjustments on medical cannabis would have been 60% and 67% for the six months ended December 31, 2020 and 2019, respectively.

Consumer Cannabis Gross Margin

Adjusted gross margin before FV adjustments on consumer cannabis net revenue decreased to 32% for the six months ended December 31, 2020 as compared to 46% for same period of the prior year, which was a result of (i) $3.3 million increase in cost of sales due to under-utilized capacity as described above. and (ii) net revenue generated from our Daily Special value brand which was not present in the prior comparative period, which contributed to the decrease of our overall average net selling price per gram of consumer cannabis from $5.04 per gram to $2.89 per gram for the six months ended December 31 2020 and 2021, respectively.

Wholesale Bulk Cannabis Gross Margin

During the six months ended December 31, 2020, the Company capitalized on opportunities to sell lower potency product at reduced margins. The Company generates revenue from wholesale bulk cannabis from time-to-time when pricing and terms are appropriate.

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Q2 2021 MD&A

Operating Expenses

	Three months ended			Six months ended
($ thousands)	December 31, 2020	September 30, 2020	December 31, 2019 ⁽¹⁾⁽²⁾	December 31, 2020	December 31, 2019 ⁽¹⁾⁽²⁾
General and administration	27,834	29,289	58,429	57,123	108,980
Sales and marketing	14,138	15,035	28,872	29,173	50,727
Acquisition costs	-	1,104	2,059	1,104	3,023
Research and development	2,432	2,584	6,775	5,016	12,823
Depreciation and amortization	14,006	14,074	20,739	28,080	38,717
Share-based compensation	5,987	6,861	19,694	12,848	44,251

⁽¹⁾

⁽²⁾

^(a)

During the three and six months ended December 31, 2019, discontinued operations had incurred a total of $4.4 million and $7.4 million of general and administration expense, respectively, of which $1.8 million and $3.1 million, respectively, was attributable to AHE, and $2.6 million and $4.3 million, respectively, was attributable to ALPS.

^(b)

During the three and six months ended December 31, 2019, discontinued operations had incurred a total of $0.3 million and $0.4 million of sales and marketing expense, respectively, and was primarily attributable to AHE.

General and administration (“G&A”)

During the three months ended December 31, 2020, G&A expenses remained relatively consistent, experiencing a slight decrease of $1.5 million as compared to the prior quarter. Included in G&A for the three months ended December 31, 2020 and September 30, 2020 is $2.1 million and $4.1 million, respectively, related to restructuring charges, severance and benefits related to the wind down of certain production facilities as part of our business transformation plan. Excluding these impacts, G&A for the three months ended December 31, 2020 would have been consistent with the prior quarter.

During the three and six months ended December 31, 2020, G&A expenses decreased by $30.6 million and $51.9 million, respectively, as compared to the same periods in the prior year. The decrease was primarily attributable to higher salaries, wages and benefit costs associated with a larger headcount base in the prior year, as well as higher professional and consulting fees related to general corporate matters, travel and entertainment expenses and corporate and office charges prior to implementing our business transformation plan.

Sales and marketing (“S&M”)

During the three months ended December 31, 2020, S&M expenses remained relatively consistent, experiencing a slight decrease by $0.9 million as compared to prior quarter as the impact of the Company’s business transformation associated with S&M was primarily finalized in the beginning of Q1 2021.

During the three and six months ended December 31, 2020, S&M decreased by $14.7 million and $21.6 million, respectively, as compared to the prior year. The decrease was primarily due to (i) reduction of $8.9 million and 14.1 million, respectively, in promotional activities and travel expenses as a result of COVID-19; (ii) reduction of $2.3 million and a $4.2 million, respectively, in payroll as a result of our business transformation plan; and (iii) reduction of $1.3 million and $2.6 million, respectively, in UFC sponsorship fees as a result of the mutual partnership termination.

Research and development (“R&D”)

During the three months ended December 31, 2020, R&D expenses remained relatively consistent, experiencing a slight decrease of $0.2 million as compared to the prior quarter as the impact of the Company’s business transformation associated with R&D was primarily finalized in the beginning of Q1 2021.

During the three and six months ended, R&D expenses decreased by $4.3 million and $7.8 million, respectively, as compared to the prior year. The decrease was primarily due to (i) a decrease of $1.7 million and $3.4 million, respectively, in payroll expenses as a result of the restructuring and business transformation plan; and (ii) a decrease of $1.3 million and $2.6 million, respectively, in UFC sponsorship fees as a result of the mutual partnership termination.

Depreciation and amortization

Depreciation and amortization expense for the three months ended December 31, 2020 remained relatively consistent, experiencing a slight decrease of $0.1 million as compared to the prior quarter.

Depreciation and amortization expense for the three and six months ended December 31, 2020 decreased by $6.7 million and $10.6 million, respectively, as compared to the same periods in the prior year. The decrease was primarily due to the impairment in property, plant and equipment and definite life intangible assets recorded subsequent to December 31, 2019.

14 | AURORA CANNABIS INC.

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Share-based compensation

During the three months ended December 31, 2020, share-based compensation expense decreased by $0.9 million as compared to the prior quarter. The decrease was primarily due the headcount reduction from our business transformation plan.

During the three and six months ended December 31, 2020, share-based compensation expense decreased by $13.7 million and $31.4 million, respectively, as compared to the same periods in the prior year. The decrease was primarily due to the headcount reduction from our business transformation plan, a reduction in post-combination contingent consideration share-based payments relating to business combinations completed in the prior year, as well as a reduction in the fair value of both options previously issued to our former independent strategic advisor and new options issued during the respective periods. The decline in fair value is directly attributable to the decline in the Company’s stock price.

Other (expense) income

For the three months ended December 31, 2020, other expense was $242.6 million and consisted of (i) $233.1 million losses attributable to the indefinite pause of operations at Aurora Sun; (ii) $21.0 million fair value loss on our derivative liabilities related to the November 2020 Offering Warrants and the US$345 million convertible debenture; (iii) $18.9 million finance and other costs; (iv) $0.8 million impairment on property, plant and equipment; offset by (v) $23.7 million government grant income; (vi) $3.3 million gain on disposal of property, plant and equipment and assets held for sale; and (vii) $2.8 million unrealized fair value gain on our derivative investments. Of the $233.1 million losses attributable to Aurora Sun, $220.8 million was recognized on the impairment of property, plant and equipment, $10.3 million on the impairment of deposits, and $2.0 million from the onerous contract provision.

For the six months ended December 31, 2020, other expense was $306.8 million and consisted of (i) $233.1 million losses attributable to the indefinite pause of operations at Aurora Sun; (ii) $44.1 million of legal settlement and contract termination fees; (iii) $33.6 million finance and other costs; (iv) $19.3 million fair value loss on our derivative liabilities related to the November 2020 Offering Warrants and the US$345 million convertible debenture; (v) $5.6 million of fair value losses on derivative investments; (vi) $3.8 million impairment to intangible assets; (vii) $1.5 million impairment of property, plant and equipment; offset by (viii) $23.7 million government grant income; and (ix) a $6.9 million gain in foreign exchange.

Refer to Notes 6(b), 15 and 17(c) of the Financial Statements for the three and six months ended December 31, 2020 for a summary of the Company’s derivative investments, convertible debentures, and share purchase warrants, respectively.

Adjusted EBITDA

The following is the Company’s adjusted EBITDA:

($ thousands)	Three months ended			Six months ended
($ thousands)	December 31, 2020	September 30, 2020 ⁽²⁾	December 31, 2019 ⁽¹⁾⁽²⁾	December 31, 2020 ⁽²⁾	December 31, 2019 ⁽¹⁾⁽²⁾
Net (loss) income from continuing operations	(292,788)	(107,160)	(1,302,175)	(399,948)	(1,290,938)
Finance costs	18,872	14,691	23,833	33,563	41,709
Interest (income) expense	(1,865)	(1,267)	(1,997)	(3,132)	(2,886)
Income tax expense (recovery)	3,167	611	(25,136)	3,778	(6,432)
Depreciation and amortization	24,883	22,444	26,757	47,327	50,552
EBITDA	(247,731)	(70,681)	(1,278,718)	(318,412)	(1,207,995)
Changes in fair value of inventory sold	5,942	3,304	13,223	9,246	34,528
Unrealized gain on changes in fair value of biological assets	(6,262)	(5,407)	(7,932)	(11,669)	(33,831)
Share-based compensation	5,987	6,861	19,694	12,848	44,251
Acquisition costs	-	1,104	2,059	1,104	3,023
Foreign exchange loss (gain)	527	(7,427)	961	(6,900)	3,901
Share of loss from investment in associates	117	373	1,930	490	4,322
Government grant income	(23,678)	-	-	(23,678)	-
Losses (gains) on financial instruments ⁽³⁾	17,309	7,366	166,877	24,675	36,829
Losses (gains) on deemed disposal of significant influence investment	-	1,443	-	1,443	-
Gains (losses) on disposal of assets held for sale and property, plant, and equipment	(3,317)	922	-	(2,395)	-
Restructuring charges	-	210	-	210	-
Onerous contract provision	2,000	-	-	2,000	-
Impairment of deposit, inventory, investment in associate, property, plant and equipment, intangibles, and goodwill	232,304	4,041	1,012,049	236,345	1,012,049
Adjusted EBITDA ⁽⁴⁾	(16,802)	(57,891)	(69,857)	(74,693)	(102,923)

(1)

15 | AURORA CANNABIS INC.

Q2 2021 MD&A

⁽²⁾

As a result of the Company’s divestment of its wholly owned subsidiaries ALPS and AHE, the operations of ALPS and AHE have been presented as discontinued operations and the Company’s operational results have been retroactively restated, as required. Refer to Note 11(b) of the Financial Statements for more information about the divestiture. Including the results of ALPS and AHE, adjusted EBITDA loss would have been $58.4 million and $71.2 million for the three months ended September 30, 2020 and December 31, 2019, respectively, and $75.2 million and $105.6 million for the six months ended December 31, 2020 and 2019, respectively.

⁽³⁾

Includes fair value changes on derivative investments, derivative liabilities, contingent consideration, and (gain) loss on the modification of debt. Refer to Note 20 of the Financial Statements.

⁽⁴⁾

Adjusted EBITDA is a non-GAAP financial measure and is not a recognized, defined, or standardized measure under IFRS. Refer to “Cautionary Statement Regarding Certain Non-GAAP Performance Measures” section of the MD&A.

Included in the three months ended December 31, 2020 Adjusted EBITDA loss is $0.8 million (three months ended September 30, 2020 - $43.3 million) legal settlement and contract termination fees, $2.1 million (three months ended September 30, 2020 - $4.1 million) related restructuring charges, severance and benefits associated with the business transformation plan, and $1.8 million increase in revenue provisions as a result of our Company initiated product swap to replace low quality product with higher potency product at the provinces. Excluding these impacts, Adjusted EBITDA loss is $12.1 million (three months ended September 30, 2020 - $10.5 million).

Adjusted EBITDA loss decreased by $41.1 million, or 71%, for the three months ended December 31, 2020 as compared to the prior quarter. The decrease is primarily attributable to a reduction in the legal settlement and contract termination fees, costs associated to ongoing severance and benefits associated with the business transformation plan, and the increase in revenue provisions from the Company initiated product swap described above. Excluding these impacts, Adjusted EBITDA loss increased by $1.6 million primarily driven by a $5.0 million increase in cash gross profit in the current quarter mainly due to the under-utilization of costs as described above.

Adjusted EBITDA loss decreased by $53.1 million, or 76%, for the three months ended December 31, 2020 as compared to the same quarter in the prior year. The decrease is primarily attributable to (i) $3.7 million increase in cash gross profit; and (ii) $49.7 million reduction in SG&A and R&D expense.

Adjusted EBITDA loss decreased by $28.2 million, or 27%, for the six months ended December 31, 2020 as compared to the prior year. The decrease is primarily attributable to (i) $81.2 million decrease in SG&A and R&D expenses; offset by (ii) $44.1 million legal settlement and contract termination fees; and (iii) a $8.8 million decrease in cash gross profit in the current period.

Liquidity and Capital Resources

($ thousands)	December 31, 2020	June 30, 2020
Cash and cash equivalents ⁽¹⁾	384,386	162,179
Marketable securities	4,268	7,066

Working capital ⁽²⁾	592,746	148,483
Total assets ⁽²⁾	2,830,190	2,783,145
Total non-current liabilities	483,176	384,439

*Capitalization*
Convertible notes	321,555	327,038
Loans and borrowings	171,818	204,209
Total debt	493,373	531,247
Total equity	2,197,181	2,126,450
Total capitalization	2,690,554	2,657,697

⁽¹⁾

Included in cash and cash equivalents is a requirement to maintain a minimum unrestricted cash balance of the lessor of $75 million, or 225% of outstanding principal of Facility B less of any cash collateral balance. Refer to the “Credit Facility” discussion below.

⁽²⁾

During the three and six months ended December 31, 2020, the Company primarily financed its operations, capital expenditures and growth initiatives through the generation of net revenue and equity financing. For more information on key cash flows related to operations, investing and financing activities during the quarter, refer to the “Cash Flow Highlights” discussion below.

The Company’s objective when managing its liquidity and capital resources is to maintain sufficient liquidity to support financial obligations when they come due, while executing operating and strategic plans. The Company manages liquidity risk through the management of its capital structure and resources to ensure that it has sufficient liquidity to settle obligations and liabilities when they are due. Our ability to fund our operating requirements depends on future operating performance and cash flows, which are subject to economic, financial, competitive, business and regulatory conditions, and other factors, some of which are beyond our control, such as the potential impact of COVID-19. Our primary short-term liquidity needs are to fund our net operating losses, capital expenditures to maintain existing facilities, debt repayments, and lease payments. Our medium-term liquidity needs primarily relate to debt repayments and lease payments. Our long-term liquidity needs primarily relate to potential strategic plans.

In an effort to manage liquidity prudently while the Company moves towards profitability and positive cash flow, Aurora has taken the following steps:

•

During the three months ended December 31, 2020, the Company raised net proceeds of $278.5 million (US$210.4 million) under its ATM program. As at December 31, 2020, the Company had no remaining available room under the ATM;

•

On October 9, 2020, the Company sold all of its common shares held in Cann Group for net proceeds of $5.9 million;

16 | AURORA CANNABIS INC.

Q2 2021 MD&A

•

On October 29, 2020, the Company filed the 2020 Shelf Prospectus and a corresponding 2020 Registration Statement with the SEC, allowing the Company to make offerings of up to US$500 million in common shares, preferred shares, warrants, subscription receipts and debt securities, or any combination thereof during the 25-month period that the 2020 Shelf Prospectus remains effective (refer to Key Developments During and Subsequent to the Three Months Ended December 31, 2020);

•

In November 2020, the Company filed the November 2020 Prospectus Supplement and raised US$172.5 million through the issuance of 23,000,000 units at US$7.50 per unit.

These initiatives are expected to provide the Company with increased liquidity and flexibility to meet its financial commitments, including its near-term obligations of $187.7 million (refer to the “Contractual Obligations” table below). As of December 31, 2020, the Company has access to the following capital resources available to fund operations and obligations:

•

A remaining $110.0 million Credit Facility with BMO, of which $1.9 million letters of credit and $95.0 million of principal is outstanding under Facility A and Facility B, respectively (Note 16(a) of the Financial Statements), with $13.1 million of total borrowing capacity undrawn under Facility A and available to the Company.

Subsequent to December 31, 2020, the Company filed a second supplement under the 2020 Shelf Prospectus (“January 2021 Prospectus Supplement”) and raised US$137.9 million through the issuance of 13,200,000 units at US$10.45 per unit, including the over-allotment option. As of the date of this report, the Company has approximately $565 million in cash, including restricted cash.

We intend to use the net proceeds from any offerings under the 2020 Shelf Prospectus to support our short-term liquidity needs, debt repayments, general corporate purposes, working capital requirements and potential acquisitions. Volatility in the cannabis industry, stock market and Company’s share price may impact the amount and our ability to raise financing under the 2020 Shelf Prospectus.

From time-to-time, management may also consider the sale of its marketable securities and shares held in publicly traded investments in associates to support near term cash and liquidity needs.

Credit Facility

•

An extension of the maturity date from August 29, 2021 to December 31, 2022;

•

A single financial covenant requiring a minimum unrestricted cash balance of the lesser of i) $75 million or ii) 225% of the outstanding principal on Facility B less any cash collateral.

As at December 31, 2020, the Company had a total of $1.9 million of letters of credit under its revolving Facility A with an additional $13.1 million of total borrowing capacity available under the revolver, and $95.0 million principal outstanding under Facility B. As of December 31, 2020, the Company had an unrestricted cash balance of $360.9 million under the BMO Credit Facility and is in compliance with all covenants under the Second Amended and Restated Credit Agreement. Refer to Note 16(a) of the Financial Statements for the three and six months ended December 31, 2020.

Equity Financings

On April 2, 2019, the Company filed a Shelf Prospectus (the “2019 Shelf Prospectus”) with the securities regulators in each province of Canada, except for the Province of Quebec, and a corresponding shelf registration statement on Form F-10 (the “Registration Statement”) with the SEC. The 2019 Shelf Prospectus and Registration Statement allowed the Company to make offerings of common shares, debt securities, subscription receipts, units, warrants or any combination thereof of up to US$750.0 million during the 25-month period that the 2019 Shelf Prospectus is effective. The Company filed two prospectus ATM supplements which together provided for the sale of up to US$650 million of common shares by registered dealers on behalf of Aurora at prevailing market prices at the time of sale. During the three months ended December 31, 2020, the Company issued 27,231,460 common shares under the ATM program for US$127 million gross proceeds, with no remaining available room under the ATM.

On October 29, 2020, the Company filed the 2020 Shelf Prospectus and a corresponding 2020 Registration Statement with the SEC. The 2020 Shelf Prospectus and 2020 Registration Statement will allow the Company to make offerings of common shares, preferred shares, warrants, subscription receipts and debt securities, or any combination thereof of up to US$500 million during the 25-month period that the 2020 Shelf Prospectus remains effective. During the three months ended December 31, 2020, the Company completed the November 2020 Prospectus Supplement and raised gross proceeds of US$172.5 million (Refer to Key Developments During and Subsequent to the Three Months Ended December 31, 2020).

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Q2 2021 MD&A

Subsequent to December 31, 2020, the Company completed the January 2021 Prospectus Supplement and raised gross proceeds of US$137.9 million (Refer to Key Developments During and Subsequent to the Three Months Ended December 31, 2020).

Cash Flow Highlights

The table below summarizes the Company’s cash flows for the three and six months ended December 31, 2020 and the comparative periods:

($ thousands)	Three months ended		Six months ended
($ thousands)	December 31, 2020	December 31, 2019	December 31, 2020	December 31, 2019
Cash used in operating activities	(64,141)	(134,707)	(172,672)	(229,615)
Cash used in investing activities	(10,179)	(131,608)	(22,979)	(161,071)
Cash provided by financing activities	320,596	271,217	416,667	375,055
Effect of foreign exchange	4,432	(1,094)	1,191	(762)
Increase (decrease) in cash and cash equivalents	250,708	3,808	222,207	(16,393)

Cash used in operating activities for the three months ended December 31, 2020 decreased by $70.6 million as compared to the same period in the prior year. The decrease was primarily due to a reduction in operational spending and a lower headcount as a result of the business transformation plan, and a $22.6 million decrease in changes in non-cash working capital over prior year. The decrease in non-cash working capital over prior year was mainly driven by (i) $28.7 million decrease in biological assets and inventory; (ii) $8.4 million decrease in accounts receivable; offset by (iii) $16.1 million increase in cash used for prepaids and other current assets as compared to 2019.

Cash used in operating activities for the six months ended December 31, 2020 decreased by $56.9 million as compared to the same period in the prior year. The decrease was primarily attributable to a reduction in operational spending and a lower headcount as a result of the business transformation plan, and a $32.3 million decrease in changes in non-cash working capital over prior year. The decrease in non-cash working capital was mainly driven by (i) $32.0 million decrease in biological assets and inventory; (ii) $14.7 million increase in changes in accounts payable and accrued liabilities; (iii) $8.1 million decrease in prepaids and other current assets; offset by (iv) $17.8 million increase in changes in accounts receivable over the prior year.

Cash used in investing activities for the three months ended December 31, 2020 decreased by $121.4 million as compared to the same period in the prior year. The decrease was primarily due to (i) a $113.0 million decrease in property, plant and equipment expenditures; (ii) $6.1 million increase in proceeds from the disposal of marketable securities; (iii) $5.8 decrease in cash used for deposits; offset by (iv) $1.0 million increase in loans receivable.

Cash used in investing activities for the six months ended December 31, 2020 decreased by $138.1 million as compared to the same period in the prior year. The decrease was primarily attributable to (i) a $204.0 million decrease in property, plant and equipment expenditures; (ii) $13.7 million decrease in cash used for deposits; offset by (iii) a $78.6 million decrease in proceeds generated from disposals of marketable securities.

Cash provided by financing activities for the three months ended December 31, 2020 increased by $49.4 million as compared to the same period in the prior year. The increase was primarily due to (i) a $116.8 million increase cash generated from share issuances; (ii) $2.0 million decrease in lease principal repayments; offset by (iii) $50.0 million increase in restricted cash; (iv) $14.4 million decrease in proceeds received from long term loans; and (v) $4.4 million increase in the repayment of long term loans.

Cash provided by financing activities for the six months ended December 31, 2020 increased by $41.6 million as compared to the same period in the prior year. The increase was primarily attributable to (i) $172.7 million increase in cash generated from share issuances; (ii) $3.5 million decrease in lease principal repayments; offset by (iii) $64.4 million decrease in proceeds received from long term loans; (iv) $51.1 million increase in restricted cash; and (v) $18.8 increase in repayments of long term loans.

Capital Expenditures

The Company’s major capital expenditures for the three months ended December 31, 2020 mainly consisted of (i) construction activities at the German production facility, (ii) activities to prepare the Polaris facility for manufacturing and distribution, and (iii) the co-generation project at the Aurora River Facility. In December 2020, the Company formally terminated construction activity and closed its Aurora Sun facility. We are simplifying our network and focusing on our core sites to transform Aurora into a company that delivers earnings both in the short-term and long-term.

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Q2 2021 MD&A

Contractual Obligations

As at December 31, 2020, the Company had the following contractual obligations:

($ thousands)	Total	≤ 1 year	Over 1 year to 3 years	Over 3 years to 5 years	> 5 years
Accounts payable and accrued liabilities	69,002	69,002	-	-	-
Convertible notes and interest ⁽¹⁾	524,139	24,174	48,348	451,617	-
Lease liabilities ⁽²⁾	158,831	10,142	28,754	24,042	95,893
Loans and borrowings excluding lease liabilities ⁽²⁾	101,106	38,376	62,730	-	-
Contingent consideration payable ⁽³⁾	32,000	32,000	-	-	-
Capital commitments ⁽⁴⁾	11,914	11,914	-	-	-
Purchase commitments ⁽⁵⁾	9,125	2,066	4,132	2,927	-
Total contractual obligations	906,117	187,674	143,964	478,586	95,893

⁽¹⁾

Assumes the principal balance outstanding at December 31, 2020 remains unconverted and includes the estimated interest payable until the maturity date.

⁽²⁾

Includes interest payable until maturity date. Refer to Note 16(a) of the Financial Statements for discussion of the terms of the Credit Facility.

⁽³⁾

Payable in cash, shares, or a combination of both at Aurora’s sole discretion.

⁽⁴⁾

Relates to remaining commitments that the Company has made to vendors for equipment purchases and capital projects pertaining to existing construction.

⁽⁵⁾

Relates to a manufacturing agreement with Capcium for the encapsulation of softgels.

Contingencies

From time to time, the Company and/or its subsidiaries may become parties to legal proceedings and the Company will take appropriate action with respect to any such legal proceedings, including by defending itself against such legal claims as necessary. Other than the claims described below, as of the date of this report, Aurora is not aware of any other material or significant claims against the Company.

A claim was commenced on June 15, 2020 against Aurora and a former officer alleging a claim of breach of obligations under a term sheet, with the plaintiff seeking $18.0 million in damages. The Company believes the action to be without merit and has filed a statement of defence and counterclaim. Due to the uncertainty of the timing and the amount of estimated future cash outflows relating to this claim, no provision has been recognized as of December 31, 2020.

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Q2 2021 MD&A

Off-balance sheet arrangements

As at the date of this MD&A, the Company has $1.9 million letters of credit outstanding under Facility A of its BMO Credit Agreement. There are no other material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the financial performance or financial condition of the Company

Related Party Transactions

The Company’s key management personnel have the authority and responsibility for planning, directing and controlling the activities of the Company and consists of the Company’s executive management team and management directors. Compensation expense for key management personnel was as follows:

	Three months ended		Six months ended
($ thousands)	December 31, 2020	December 31, 2019	December 31, 2020	December 31, 2019
Short-term employment benefits ⁽¹⁾	802	2,274	2,424	5,195
Termination benefits	-	900	450	900
Directors’ fees ⁽²⁾	132	128	281	255
Share-based compensation ⁽³⁾	3,150	6,574	6,392	11,203
Total management compensation ⁽⁴⁾	4,084	9,876	9,547	17,553

⁽¹⁾

Short-term employment benefits include salaries, wages, bonuses and non-monetary benefits such as subsidized vehicle costs. Short-term employment benefits are measured at the exchange value, being the amounts agreed to by each party.

⁽²⁾

Includes meeting fees and committee chair fees.

⁽³⁾

Share-based compensation represent the contingent consideration, and the fair value of options, restricted share units, deferred share units and performance share units granted and vested to key management personnel and directors of the Company under the Company’s share-based compensation plans (refer to Note 18 of the Financial Statements).

⁽⁴⁾

As of December 31, 2020, $0.2 million is payable or accrued for key management compensation (June 30, 2020 - $3.8 million).

The following is a summary of the significant transactions with related parties:

	Three months ended		Six months ended
($ thousands)	December 31, 2020	December 31, 2019	December 31, 2020	December 31, 2019
Production costs ⁽¹⁾	524	1,510	1,782	3,168

⁽¹⁾

Production costs incurred with (i) Capcium Inc. (“Capcium”), a company where Aurora holds significant influence; and (ii) Iotron Industries Canada Inc. (“Iotron”), an associate of the Company’s joint venture company. Aurora does not have the authority or ability to exert power over either Capcium or Iotron’s financial and/or operating decisions (i.e. control).

During the six months ended December 31, 2020, the Company sold AHE to the subsidiary’s President and former owner.

20 | AURORA CANNABIS INC.

Q2 2021 MD&A

The following amounts were receivable from (payable to) related parties:

($ thousands)	December 31, 2020	June 30, 2020
Equipment loan receivable from investments in associates ⁽¹⁾	7,715	3,242
Debenture and interest receivable from investment in associate ⁽²⁾	21,460	21,980
Production costs with investments in associates ⁽³⁾⁽⁴⁾	(54)	(1,365)
	29,121	23,857

⁽¹⁾

Relates to the purchase of production equipment on behalf of the Company’s joint venture, Auralux Enterprises Ltd. The loan bears interest at 5% per annum, payable monthly. The loan is to be repaid in installments on an annual basis in an amount equal to 50% of the associate’s EBITDA. The unpaid balance of the loan matures 10 years from the funding date.

⁽²⁾

Represents the $20.0 million unsecured convertible debenture in Choom Holdings Inc. plus interest receivable. The debenture bears interest at 6.5% per annum and matures on November 2, 2022.

⁽³⁾

Production costs incurred with (i) Capcium Inc., a company that manufactures our softgels and where Aurora holds significant influence in; and (ii) Iotron Industries Canada Inc. who provides cannabis processing services to the Company and is party to a common joint venture with Iotron Industries Canada Inc. Pursuant to a manufacturing agreement with Capcium Inc., the Company is contractually committed to purchase a minimum number of softgels during each calendar year 2020 and thereafter. If the Company fails to meet the required purchase minimum, then it is required to pay a penalty fee equal to the difference between the actual purchased quantity and the required purchase minimum multiplied by cost of the softgels. The Company is committed to purchase 42.7 million capsules in calendar 2020, and 20.0 million capsules per calendar year until December 31, 2026. The Company believes that it is more likely than not that the minimum purchase quantity, and such paid a penalty over the calendar year 2020.

⁽⁴⁾

Amounts are due upon the issuance or receipt of invoices, are unsecured and non-interest bearing.

These transactions are in the normal course of operations and are measured at the exchange value, being the amounts agreed to by the parties.

Critical Accounting Estimates

The preparation of the Company’s Financial Statements under IFRS requires management to make judgments, estimates, and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

Other than the estimates used in provision (Note 22(b)(v) in the Financial Statements), government grant (Note 4 in the Financial Statements), impairment of property, plant and equipment (Note 10 in the Financial Statements), impairment testing for cash generating units and goodwill (Note 14 in the Financial Statements), and share purchase warrants (refer to Note 17(c) in the Financial Statements), there have been no changes in Aurora's critical accounting estimates during the six months ended December 31, 2020. For additional information on the Company’s accounting policies and key estimates, refer to the note disclosures in the annual consolidated financial statements and MD&A as at and for the year ended June 30, 2020.

Change in Accounting Policy

21 | AURORA CANNABIS INC.

Q2 2021 MD&A

Management has applied the change in accounting policy retrospectively. The following is a summary of the impacts to the statement of comprehensive loss for the three months ended December 31, 2019:

December 31, 2019 As previously reported		Inventory Adjustments	Discontinued Operations	December 31, 2019 Restated
*Condensed Consolidated Interim Statement of Comprehensive Loss*
Cost of sales	33,214	3,830	(107)	36,937
Gross profit (loss) before fair value adjustments	22,813	(3,830)	(782)	18,201

Changes in fair value of inventory sold	22,778	(9,555)	-	13,223
Unrealized gain on changes in fair value of biological assets	(29,880)	21,948	-	(7,932)
Gross profit (loss)	29,915	(16,223)	(782)	12,910

General and administration	70,751	(7,879)	(4,443)	58,429

Income tax (recovery) expense	(24,156)	(2,124)	1,267	(25,013)

Net loss from continuing operations	(1,305,898)	(6,220)	9,943	(1,302,175)
Net loss attributable to Aurora shareholders	(1,286,129)	(6,220)	-	(1,292,349)
Loss per share (basic and diluted) ⁽¹⁾	(14.18)	(0.07)	-	(14.25)

⁽¹⁾

Loss per share (basic and diluted) has been recalculated to reflect the Share Consolidation effected on May 11, 2020. Refer to Note 2(a) on the Financial Statements

The following is a summary of the impacts to the statement of comprehensive loss and the statement of cash flows for the six months ended December 31, 2019:

December 31, 2019 As previously reported		Inventory Adjustments	Discontinued Operations	December 31, 2019 Restated
*Condensed Consolidated Interim Statement of Comprehensive Loss*
Cost of sales	65,953	6,800	(1,673)	71,080
Gross profit (loss) before fair value adjustments	65,319	(6,800)	(747)	57,772

Changes in fair value of inventory sold	41,312	(6,784)	-	34,528
Unrealized gain on changes in fair value of biological assets	(59,616)	25,785	-	(33,831)
Gross profit (loss)	83,623	(25,801)	(747)	57,075

General and administration	129,872	(13,523)	(7,369)	108,980

Income tax (recovery) expense	(5,038)	(3,125)	1,731	(6,432)

Net loss from continuing operations	(1,295,528)	(9,153)	13,743	(1,290,938)
Net loss attributable to Aurora shareholders	(1,273,373)	(9,153)	-	(1,282,526)
Lossper share (basic and diluted) ⁽¹⁾	(14.48)	(0.11)	-	(14.59)

⁽¹⁾

Loss per share (basic and diluted) has been recalculated to reflect the Share Consolidation effected on May 11, 2020. Refer to Note 2(a) on the Financial Statements

December 31, 2019 As previously reported		Inventory Adjustments	Discontinued Operations	December 31, 2019 Restated
*Condensed Consolidated Interim Statement of Cash Flows*
Unrealized gain on changes in fair value of biological assets	(59,616)	25,785	-	(33,831)
Changes in fair value of inventory sold	41,312	(6,784)	-	34,528
Income tax expense (recovery)	(5,038)	(3,125)	1,731	(6,432)
Changes in non-cash working capital	(91,369)	(6,723)	2,422	(95,670)
Net cash used in operating activities	(229,615)	-	-	(229,615)

New or Amended Standards Effective July 1, 2020

Amendments to IFRS 3: Definition of a Business

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

Recent 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.

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

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.

Financial Instruments

Financial instruments are measured either at fair value or at amortized cost. The table below lists the valuation methods used to determine the fair value of each financial instrument.

	Fair Value Method
*Financial Instruments Measured at Fair Value*
Marketable securities	Closing market price of common shares as of the measurement date (Level 1)
Derivatives	Closing market price (Level 1) or Black-Scholes, Binomial, Monte-Carlo & FINCAD valuation model (Level 2 or 3)
Contingent consideration payable	Discounted cash flow model (Level 3)
Derivative liability	Closing market price of warrants (Level 1) or Kynex valuation model (Level 2)
*Financial Instruments Measured at Amortized Cost*
Cash and cash equivalents, restricted cash, accounts receivable, loans receivable	Carrying amount (approximates fair value due to short-term nature)
Accounts payable and accrued liabilities	Carrying amount (approximates fair value due to short-term nature)
Convertible debentures, loans and borrowings	Carrying value discounted at the effective interest rate which approximates fair value

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Summary of Financial Instruments

The carrying values of the financial instruments at December 31, 2020 are summarized in the following table:

($ thousands)	Amortized Cost	FVTPL	Designated FVTOCI	Total
Financial Assets
Cash and cash equivalents	384,386	-	-	384,386
Restricted cash	50,000	-	-	50,000
Accounts receivable, excluding sales taxes receivable	73,044	-	-	73,044
Marketable securities	-	-	4,268	4,268
Derivatives	-	47,740	-	47,740
Loans receivable	8,469	-	-	8,469
Financial Liabilities
Accounts payable and accrued liabilities	69,002	-	-	69,002
Convertible debentures ⁽¹⁾	321,555	-	-	321,555
Contingent consideration payable	-	256	-	256
Loans and borrowings	171,818	-	-	171,818
Derivative liability	-	60,318	-	60,318

⁽¹⁾

The fair value of convertible notes includes both the debt and equity components.

Fair Value Hierarchy

Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects the significance of the inputs to fair value measurements. The three levels of hierarchy are:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2	Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; and
Level 3	Inputs for the asset or liability that are not based on observable market data.

The following is a summary of financial instruments measured at fair value segregated based on the various levels of inputs as at December 31, 2020:

($ thousands)	Level 1	Level 2	Level 3	Total
As at December 31, 2020
Marketable securities ⁽¹⁾	3,268	-	1,000	4,268
Derivative assets ⁽¹⁾	-	32,802	14,938	47,740
Contingent consideration payable ⁽²⁾	-	-	256	256
Derivative liability ⁽²⁾	58,604	1,714	-	60,318

As at June 30, 2020
Marketable securities	6,066	-	1,000	7,066
Derivative assets	-	37,480	16,102	53,582
Contingent consideration payable ⁽³⁾	-	-	19,054	19,054
Derivative liability ⁽²⁾	-	1,827	-	1,827

⁽¹⁾

For a reconciliation of realized and unrealized gains and losses applicable to financial assets measured at fair value for the three months ended December 31, 2020, refer to Notes 6(a) and (b) in the Financial Statements.

⁽²⁾

For a reconciliation of unrealized gains and losses applicable to financial liabilities measured at fair value for the three months ended December 31, 2020, refer to Note 15, Note 17(c) and Note 25 in the Financial Statements.

⁽³⁾

There have been no transfers between fair value levels during the period.

Financial Instruments Risk

The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board mitigates these risks by assessing, monitoring and approving the Company’s risk management processes.

Credit risk

Credit risk is the risk of a potential loss to the Company if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company is moderately exposed to credit risk from its cash and cash equivalents, restricted cash, accounts receivable and loans receivable. The risk exposure is limited to their carrying amounts reflected on the statement of financial position. The risk for cash and cash equivalents is mitigated by holding these instruments with highly rated Canadian financial institutions. As the Company does not invest in asset-backed deposits or investments, it does not expect any credit losses. The Company periodically assesses the quality of its investments and is satisfied with the credit rating of the financial institutions and the investment grade of its GICs. The Company mitigates the credit risk associated with the loans receivable by managing and monitoring the underlying business relationship.

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The Company’s aging of trade receivables was as follows:

($ thousands)	December 31, 2020	June 30, 2020

0 - 60 days	35,109	34,167
61+ days	9,281	11,032
	44,390	45,199

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations associated with its financial liabilities when they are due. The Company’s objective is to manage liquidity risk through the management of its capital structure and resources to ensure that it has sufficient liquidity to settle obligations and liabilities when they are due, while executing on its operating and strategic plans. Refer to “Liquidity and Capital Resources” section of this MD&A for detailed discussion.

Summary of Outstanding Share Data

The Company had the following securities issued and outstanding as at January 31, 2021:

Securities ⁽¹⁾	Units Outstanding
Issued and outstanding common shares	197,392,034
Stock options	4,138,499
Warrants	12,338,889
Restricted share units	899,715
Deferred share units	28,667
Performance share units	424,169
Convertible debentures	3,978,138

⁽¹⁾

Refer to Note 15 “Convertible Debentures”, Note 17 “Share Capital” and Note 18 “Share-Based Compensation” in the Company’s Financial Statements for a detailed description of these securities.

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Historical Quarterly Results

($ thousands, except earnings per share and Operational Results)	Q2 2021		Q1 2021		Q4 2020		Q3 2020
Financial Results
Net revenue ⁽²⁾	$67,673		$67,812		$68,728		$73,541
Adjusted gross margin before FV adjustments on cannabis net revenue ⁽³⁾	42	%	48	%	50	%	43	%
Loss from continuing operations attributable to common shareholders	($292,788)		($105,696)		($1,846,480)		($136,359)
Loss from discontinued operations attributable to common shareholders	$ -		($2,366)		($11,958)		($5,811)
Loss attributable to common shareholders	($292,788)		($108,062)		($1,858,438)		($142,170)
Basic and diluted loss per share from continuing operations	($1.74)		($0.90)		($16.58)		($1.36)
Basic and diluted loss per share	($1.74)		($0.92)		($16.69)		($1.42)

Balance Sheet
Working capital ⁽⁶⁾	$592,746		$201,425		$148,483		$429,293
Cannabis inventory and biological assets ⁽⁴⁾	$179,502		$166,178		$139,198		$225,966
Total assets ⁽⁶⁾	$2,830,190		$2,757,272		$2,783,145		$4,699,137

Operational Results - Cannabis
Average net selling price of dried cannabis ⁽³⁾	$4.00		$3.72		$3.60		$4.64
Kilograms sold	15,253		16,139		16,748		12,729

	Q2 2020		Q1 2020		Q4 2019 ⁽⁵⁾		Q3 2019
Financial Results
Net revenue ⁽²⁾	$55,138		$73,714		$96,749		$63,059
Adjusted gross margin before FV adjustments on cannabis net revenue ⁽³⁾	48	%	62	%	63	%	54	%
(Loss) earnings from continuing operations attributable to common shareholders	($1,282,406)		$13,623		($1,351)		($154,801)
(Loss) earnings from discontinued operations attributable to common shareholders	($9,943)		($3,800)		$1,139		($2,001)
Earnings (loss) attributable to common shareholders	($1,292,349)		$9,823		($212)		($156,802)
Basic and diluted earnings (loss) per share from continuing operations	($14.14)		$0.16		($0.02)		($1.85)
Basic and diluted earnings (loss) per share	($14.25)		$0.12		$0.00		($1.88)

Balance Sheet
Working capital	$400,070		$116,228		$224,213		$467,076
Cannabis inventory and biological assets ⁽⁴⁾	$200,868		$171,225		$140,687		$115,370
Total assets	$4,656,046		$5,599,277		$5,499,241		$5,547,127

Operational Results - Cannabis
Average net selling price of dried cannabis ⁽³⁾	$4.69		$4.90		$4.91		$5.86
Kilograms sold	9,501		12,463		17,793		9,160

⁽¹⁾

Certain previously reported amounts have been restated to exclude the results related to discontinued operations and change in accounting policy for the valuation of inventory costing relating to by-products. For further detail, refer to Note 11(b) of the Financial Statements and “Change in Accounting Policies” section above, respectively.

⁽²⁾

Net revenue represents our total gross revenue net of excise taxes levied by the CRA on the sale of medical and consumer use cannabis products. Given that our gross revenue figures exclude excise taxes that were levied and billed back to customers, as reflected in accordance with IFRS 15, we believe that the presentation of net revenue more accurately reflects the level of revenue earned during the relevant period.

⁽³⁾

Refer to “Cautionary Statement Regarding Certain Non-GAAP Performance Measures” section of this MD&A for the defined terms.

⁽⁴⁾

Represents total biological assets and cannabis inventory, exclusive of merchandise, accessories, supplies and consumables.

⁽⁵⁾

During the three months ended June 30, 2019, the Company recorded non-material year end corrections to: (i) capitalize certain payroll, share-based compensation and borrowing costs, related to the construction of our production facilities that were incorrectly expensed in prior periods; and (ii) reverse items that had been over-accrued in prior periods. The net impact of these adjustments to the three months ended June 30, 2019 Adjusted EBITDA was a $14.9 million reduction in reported operating expenses.

⁽⁶⁾

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Risk Factors

In addition to the other information included in this report, readers should consider carefully the following factors, which describe the risks, uncertainties and other factors that may materially and adversely affect our business, products, financial condition and operating results. There are many factors that affect our business and our results of operations, some of which are beyond our control. The following is a description of important factors that may cause our actual results of operations in future periods to differ materially from those currently expected or discussed in the forward-looking statements (“FLS”) set forth in this report relating to our financial results, operations and business prospects. Except as required by law, we undertake no obligation to update any such FLS to reflect events or circumstances after the date of this MD&A.

These risks include, but are not limited to the following:

•

we have a limited operating history and there is no assurance we will be able to achieve or maintain profitability;

•

our business is reliant on the good standing of our licenses;

•

our Canadian licenses are reliant on our established sites;

•

we operate in a highly regulated business and any failure or significant delay in obtaining applicable regulatory approvals could adversely affect our ability to conduct our business;

•

a failure to maintain our licenses and remain in compliance with regulations could adversely affect our ability to conduct our business;

•

change in the laws, regulations, and guidelines that impact our business may cause adverse effects on our operations;

•

we compete for market share with a number of competitors and expect even more competitors to enter our market, and many of our current and future competitors may have longer operating histories, more financial resources, and lower costs than us;

•

selling prices and the cost of cannabis production may vary based on a number of factors outside of our control;

•

we may not be able to realize our growth targets;

•

the continuance of our contractual relations with provincial and territorial governments cannot be guaranteed;

•

our continued growth may require additional financing, which may not be available on acceptable terms or at all;

•

any default under our existing debt that is not waived by the applicable lenders could materially adversely impact our results of operations and financial results and may have a material adverse effect on the trading price of our common shares;

•

we may not be able to successfully develop new products or find a market for their sale;

•

we may not have supply continuity given the asset rationalization initiative;

•

as the cannabis market continues to mature, our products may become obsolete, less competitive, or less marketable;

•

restrictions on branding and advertising may negatively impact our ability to attract and retain customers;

•

the cannabis business may be subject to unfavorable publicity or consumer perception;

•

third parties with whom we do business may perceive themselves as being exposed to reputational risk by virtue of their relationship with us and may ultimately elect to discontinue their relationships with us;

•

there may be unknown health impacts associated with the use of cannabis and cannabis derivative products;

•

we may enter into strategic alliances or expand the scope of currently existing relationships with third parties that we believe complement our business, financial condition and results of operation and there are risks associated with such activities;

•

our success will depend on attracting and retaining key personnel;

•

certain of our directors and officers may have conflicts of interests due to other business relationships;

•

future expansion efforts may not be successful;

•

we have expanded and intend to further expand our business and operations into jurisdictions outside of Canada, and there are risks associated with doing so;

•

we may have challenges in accessing banks and/or financial institutions in jurisdictions where cannabis is not yet federally regulated;

•

our business may be affected by political and economic instability;

•

we rely on international advisors and consultants in foreign jurisdictions;

•

failure to comply with the Corruption of Foreign Public Officials Act (Canada) (“CFPOA”) and the Foreign Corrupt Practices Act (United States) (“FCPA”), as well as the anti-bribery laws of the other nations in which we conduct business, could subject us to penalties and other adverse consequences;

•

we may be subject to uninsured or uninsurable risks;

•

we may be subject to product liability claims;

•

our cannabis products may be subject to recalls for a variety of reasons;

•

we may become party to litigation, mediation, and/or arbitration from time to time;

•

the transportation of our products is subject to security risks and disruptions;

•

our business is subject to the risks inherent in agricultural operations;

•

our operations are subject to various environmental and employee health and safety regulations;

•

we may not be able to protect our intellectual property;

•

we may experience breaches of security at our facilities or in respect of electronic documents and data storage and may face risks related to breaches of applicable privacy laws;

•

we may be subject to risks related to our information technology systems, including cyber-attacks;

•

we may not be able to successfully identify and execute future acquisitions or dispositions, or to successfully manage the impacts of such transactions on our operations;

•

as a holding company, Aurora Cannabis Inc. is dependent on its operating subsidiaries to pay dividends and other obligations;

•

the price of our Common Shares has historically been volatile. This volatility may affect the value of your investment in Aurora, the price at which you could sell our Common Shares and the sale of substantial amounts of our Common Shares could adversely affect the price of our Common Shares and the value of our convertible debentures/notes;

•

future sales or issuances of equity securities could decrease the value of our Common Shares, dilute investors’ voting power, and reduce our earnings per share;

•

our management will have substantial discretion concerning the use of proceeds from future share sales and financing transactions;

•

the regulated nature of our business may impede or discourage a takeover, which could reduce the market price of our Common Shares and the value of any outstanding convertible debentures/notes;

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•

there is no assurance we will continue to meet the listing standards of the NYSE and the TSX;

•

failure to develop and maintain an effective system of internal controls increases the risk that we may not be able to accurately and reliably report our financial results or prevent fraud, which may harm our business, the trading price of our Common Shares and market value of other securities;

•

the Company is a Canadian company and shareholder protections may differ from shareholder protections in the United States and elsewhere;

•

the Company is a foreign private issuer within the meaning of the rules under the U.S. Exchange Act, and as such is exempt from certain provisions applicable to United States domestic issuers;

•

our employees and counterparties may be subject to potential U.S. entry restrictions as a result of their relationship with us;

•

participants in the cannabis industry may have difficulty accessing the service of banks and financial institutions, which may make it difficult for us to operate;

•

our business may be subject to disruptions as a result of the COVID-19 pandemic; and

•

Reliva’s operations in the United States may be impacted by regulatory action and approvals from the Food and Drug Administration.

Cybersecurity Risks and Incidents

In December 2020, the Company was the target of a cybersecurity incident that involved the theft of company information. The subsequent investigation identified that certain personally identifiable information of its employees and consumers was compromised. It also confirmed that the Company’s patient database was not compromised, and the Company’s performance and financial information was not impacted. All impacted individuals have been notified, as have all required government privacy offices. It is possible that further analysis will identify additional individuals affected or additional types of data accessed, which could result in additional notifications and negative publicity. Globally, cybersecurity incidents have increased in number and severity and it is expected that these external trends will continue. In response to this incident, or any potential future incident, we may incur substantial costs which may include:

•

remediation costs, such as liability for stolen information, repairs to system or data damage, or implementation of new security measures in response to the evolving security landscape; and

•

legal expenses, including costs related to litigation, regulatory actions or penalties.

For additional information regarding the risks that the Company is exposed to, refer to the disclosures provided under the heading “Risk Factors” in the Company’s AIF dated September 24, 2020, which is available on the SEDAR website at www.sedar.com.

Internal Controls over Financial Reporting

Disclosure Controls and Procedures

As required by National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, and Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), Management, under the supervision of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) (“DCPs”) as of December 31, 2020. Disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the CSA and SEC.

Based upon the evaluation of the Company’s DCPs as of December 31, 2020, our CEO and CFO have concluded that, as a result of the material weaknesses in the Company's internal control described in our Annual MD&A for the year ended June 30, 2020, as of such date, the Company's DCPs were not effective.

Remediation of Material Weakness in ICFR

As previously described in our Annual MD&A for the year ended June 30, 2020, Management, with the oversight from the Audit Committee, has initiated, and will continue to implement, remediation measures related to analyzing changes in the business and assessing key controls that are responsive to those changes. Remediation of key controls related to access, monitoring, segregation of duties, and manual controls to address gaps in assurance over third-party controls are ongoing. Additionally, further training is being provided to ensure Management has a full and robust understanding of their internal control responsibilities.

As it relates to the IT environment, the Company continues to work internally, and with third party specialists, to effectively remediate the impacted processes and associated systems controls. The Company continues to decommission various legacy systems with ineffective controls as part of the Company’s business transformation plan.

The material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Controls over Financial Reporting

Other than with respect to the remediation efforts described above, there have been no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) and 15(d)-5(f) under the Exchange Act) during the three and six months ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Management continues to perform additional account reconciliations and other analytical and substantive procedures to ensure reliable financial reporting and the preparation of financial statements in accordance with IFRS.

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Aurora has limited the scope of its evaluation of disclosure controls and procedures and ICFR to exclude controls, policies, and procedures over entities were acquired by the Company not more than 365 days before the end of the financial period. The only entity controlled by Aurora but that was scoped out of the evaluation of disclosure controls and procedures and ICFR was Reliva (acquired May 28, 2020).

Excluding goodwill and intangible assets, Reliva constitutes approximately 0.2% of the Company’s current assets, 0.1% of total assets, 0.3% of current liabilities and 0.1% of total liabilities, as well as 2.0% of net revenue and 0.4% of net loss as at and for the six months ended December 31, 2020.

Cautionary Statement Regarding Forward-Looking Statements

This MD&A contains certain statements which may constitute “forward-looking information” and “forward-looking statements” within the meaning of Canadian securities law requirements (collectively, “forward-looking statements” or “FLS”). These forward-looking statements are made as of the date of this MD&A and the Company does not intend, and does not assume any obligation, to update these FLS, except as required under applicable securities legislation. FLS relate to future events or future performance and reflect Company management’s expectations or beliefs regarding future events. In certain cases, FLS can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved” or the negative of these terms or comparable terminology. In this document, certain forward-looking statements are identified by words including “may”, “future”, “expected”, “intends” and “estimates”. By their very nature FLS involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the FLS. The Company provides no assurance that FLS will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on FLS. Certain FLS in this MD&A include, but are not limited to the following:

•

pro forma measures including revenue, adjusted gross margin beforee fair value adjustments, expected SG&A run-rates, and grams produced;

•

the completion of construction of production facilities, associated costs, and receipt of licenses from Health Canada to produce and sell cannabis and cannabis related products from these facilities;

•

strategic investments and capital expenditures, and related benefits;

•

future strategic plans;

•

growth in the global consumer use cannabis market;

•

expectations regarding production capacity, costs and yields;

•

product sales expectations and corresponding forecasted increases in revenues; and

•

the impact of the COVID-19 pandemic on the Company’s business, operations, capital resources and/or financial results.

The above and other aspects of the Company’s anticipated future operations are forward-looking in nature and, as a result, are subject to certain risks and uncertainties. Although the Company believes that the expectations reflected in these FLS are reasonable, undue reliance should not be placed on them as actual results may differ materially from the forward-looking statements. Such FLS are estimates reflecting the Company’s best judgment based upon current information and involve a number of risks and uncertainties, and there can be no assurance that other factors will not affect the accuracy of such forward-looking statements. These risks include, but are not limited to, the ability to retain key personnel, the ability to continue investing in infrastructure to support growth, the ability to obtain financing on acceptable terms, the continued quality of our products, customer experience and retention, the development of third party government and non-government consumer sales channels, management’s estimates of consumer demand in Canada and in jurisdictions where the Company exports, expectations of future results and expenses, the availability of additional capital to complete construction projects and facilities improvements, the risk of successful integration of acquired business and operations, management’s estimation that SG&A will grow only in proportion of revenue growth, the ability to expand and maintain distribution capabilities, the impact of competition, the general impact of financial market conditions, the yield from marijuana growing operations, product demand, changes in prices of required commodities, competition, and the possibility for changes in laws, rules, and regulations in the industry, epidemics, pandemics or other public health crises, including the current outbreak of COVID-19, the “Risk Factors” section of the MD&A, as well as updates provided herein. Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such information. The Company is under no obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable securities law.

Should one or more of these risks or uncertainties materialize, or should underlying factors or assumptions prove incorrect, actual results may vary materially from those described in forward looking statements. Material factors or assumptions involved in developing forward-looking statements include, without limitation, publicly available information from governmental sources as well as from market research and industry analysis and on assumptions based on data and knowledge of this industry which the Company believes to be reasonable.

Although the Company believes that the expectations conveyed by the forward-looking statements are reasonable based on the information available to the Company on the date hereof, no assurance can be given as to future results, approvals or achievements. Forward-looking statements contained in this MD&A and in the documents incorporated by reference herein are expressly qualified by this cautionary statement. The Company disclaims any duty to update any of the forward-looking statements after the date of this MD&A except as otherwise required by applicable law.

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Cautionary Statement Regarding Certain Non-GAAP Performance Measures

This MD&A contains certain financial performance measures that are not recognized or defined under IFRS (termed “Non-GAAP Measures”). As a result, this data may not be comparable to data presented by other licensed producers of cannabis and cannabis companies. For an explanation of these measures to related comparable financial information presented in the consolidated financial statements prepared in accordance with IFRS, refer to the discussion below. The Company believes that these Non-GAAP Measures are useful indicators of operating performance and are specifically used by management to assess the financial and operational performance of the Company. These Non-GAAP Measures include, but are not limited, to the following:

•

Cannabis net revenue represents revenue from the sale of cannabis products, excluding excise taxes. Cannabis net revenue is further broken down as follows:

◦

Medical cannabis net revenue represents Canadian and international cannabis net revenue for medical cannabis sales only, excluding wholesale bulk cannabis net revenue.

◦

Consumer cannabis net revenue represents cannabis net revenue for consumer cannabis sales only.

◦

Wholesale bulk cannabis net revenue represents cannabis net revenue for wholesale bulk cannabis only.

◦

Ancillary net revenue represents non-cannabis net revenue for ancillary support functions only.

Management believes the cannabis net revenue measures provide more specific information about the net revenue purely generated from our core cannabis business and by market type.

•

Average net selling price per gram and gram equivalent is calculated by taking cannabis net revenue divided by total grams and grams equivalent of cannabis sold in the period. Average net selling price per gram and gram equivalent is further broken down as follows:

◦

Average net selling price per gram of dried cannabis represents the average net selling price per gram for dried cannabis sales only, excluding wholesale bulk cannabis sold in the period.

◦

Average net selling price per gram of international dried cannabis represents the average net selling price per gram for international dried cannabis sales only, excluding wholesale bulk cannabis sold in the period.

◦

Average net selling price per gram and gram equivalent of Canadian medical cannabis represents the average net selling price per gram and gram equivalent for for dried cannabis and cannabis extracts sold in the Canadian medical market.

◦

Average net selling price per gram and gram equivalent of medical cannabis represents the average net selling price per gram and gram equivalent for dried cannabis and cannabis extracts sold in the medical market.

◦

Average net selling price per gram and gram equivalent of consumer cannabis represents the average net selling price per gram and gram equivalent for dried cannabis and cannabis extracts sold in the consumer market.

Management believes the average net selling price per gram or gram equivalent measures provide more specific information about the pricing trends over time by product and market type.

•

Gross profit before FV adjustments on cannabis net revenue is calculated by subtracting (i) cost of sales, before the effects of changes in FV of biological assets and inventory, and (ii) cost of sales from non-cannabis ancillary support functions, from total cannabis net revenue. Gross margin before FV adjustments on cannabis net revenue is calculated by dividing gross profit before FV adjustments on cannabis net revenue divided by cannabis net revenue.

Management believes that these measures provide useful information to assess the profitability of our cannabis operations as it excludes the effects of non-cash FV adjustments on inventory and biological assets, which are required by IFRS.

•

Adjusted gross profit before FV adjustments on cannabis net revenue represents cash gross profit and gross margin on cannabis net revenue and is calculated by subtracting from total cannabis net revenue (i) cost of sales, before the effects of changes in FV of biological assets and inventory; (ii) cost of sales from non-cannabis ancillary support functions; and removing (iii) depreciation in cost of sales; and (iv) cannabis inventory impairment. Adjusted gross margin before FV adjustments on cannabis net revenue is calculated by dividing adjusted gross profit before FV adjustments on cannabis net revenue divided by cannabis net revenue. Adjusted gross profit and gross margin before FV adjustments on cannabis net revenue is further broken down as follows:

◦

Adjusted gross profit and gross margin before FV adjustments on medical cannabis net revenue represents gross profit and gross margin before FV adjustments on sales generated in the medical market only.

◦

Adjusted gross profit and gross margin before FV adjustments on consumer cannabis net revenue represents gross profit and gross margin before FV adjustments on sales generated in the consumer market only.

◦

Adjusted gross profit and gross margin before FV adjustments on wholesale bulk cannabis net revenue represents gross profit and gross margin before FV adjustments on sales generated from wholesale bulk cannabis only.

◦

Adjusted gross profit and gross margin before FV adjustments on ancillary net revenue represents gross profit and gross margin before FV adjustments on sales generated from ancillary support functions only.

Management believes that these measures provide useful information to assess the profitability of our cannabis operations as it represents the cash gross profit and margin generated from cannabis operations and excludes the effects of non-cash FV adjustments on inventory and biological assets, which are required by IFRS.

•

Adjusted EBITDA is calculated as net income (loss) excluding interest income (expense), accretion, income taxes, depreciation, amortization, changes in fair value of inventory sold, changes in fair value of biological assets, share-based compensation, acquisition costs, foreign exchange, share of income (losses) from investment in associates, government grant income, fair value gains and losses on financial instruments, gains and losses on deemed disposal, losses on disposal of assets, restructuring charges, onerous contract provisions, and non-cash impairments of deposits, property, plant and equipment, equity investments, intangibles, goodwill, and other assets. Adjusted EBITDA is intended to provide a proxy for the Company’s operating cash flow and is widely used by industry analysts to compare Aurora to its competitors, and derive expectations of future financial performance for Aurora. Adjusted EBITDA increases comparability between comparative companies by eliminating variability resulting from differences in capital structures, management decisions related to resource allocation, and the impact of FV adjustments on biological assets and inventory and financial instruments, which may be volatile and fluctuate significantly from period to period.

30 | AURORA CANNABIS INC.

Q2 2021 MD&A

Non-GAAP measures should be considered together with other data prepared accordance with IFRS to enable investors to evaluate the Company’s operating results, underlying performance and prospects in a manner similar to Aurora’s management. Accordingly, these non-GAAP measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

31 | AURORA CANNABIS INC.

Q2 2021 MD&A

Exhibit 99.3

Form 52-109F2

Certification of Interim Filings

Full Certificate

I, Miguel Martin, Chief Executive Officer of Aurora Cannabis Inc., certify the following:

Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Aurora Cannabis Inc. (the “issuer”) for the interim period ended December 31, 2020.

No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a)

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i)

material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii)

information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b)

designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1

Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control - Integrated Framework (COSO Framework 2013) published by The Committee of Sponsoring Organization of the Treadway Commission (COSO).

5.2

ICFR - material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period

(a)

a description of the material weakness;

(b)

the impact of the material weakness on the issuer’s financial reporting and its ICFR; and

(c)

the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.

5.3

Limitation on scope of design: The issuer has disclosed in its interim MD&A

(a)

the fact that the issuer’s other certifying officer(s) and I have limited the scope of our design of DC&P and ICFR to exclude controls, policies and procedures of

(i)

N/A;

(ii)

N/A;

(iii)

a business that the issuer acquired not more than 365 days before the last day of the period covered by the interim filings; and

(b)

summary financial information about the proportionately consolidated entity, special purpose entity or business that the issuer acquired that has been proportionately consolidated or consolidated in the issuer’s financial statements.

Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on October 1, 2020 and ended on December 31, 2020 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: February 11, 2021

(signed) Miguel Martin

Miguel Martin

Chief Executive Officer

Exhibit 99.4

Form 52-109F2

Certification of Interim Filings

Full Certificate

I, Glen Ibbott, Chief Financial Officer of Aurora Cannabis Inc., certify the following:

(a)

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i)

material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii)

(b)

5.1

5.2

ICFR - material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period

(a)

a description of the material weakness;

(b)

the impact of the material weakness on the issuer’s financial reporting and its ICFR; and

(c)

the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.

5.3

Limitation on scope of design: The issuer has disclosed in its interim MD&A

(a)

the fact that the issuer’s other certifying officer(s) and I have limited the scope of our design of DC&P and ICFR to exclude controls, policies and procedures of

(i)

N/A;

(ii)

N/A;

(iii)

a business that the issuer acquired not more than 365 days before the last day of the period covered by the interim filings; and

(b)

Date: February 11, 2021

(signed) Glen Ibbott

Glen Ibbott

Chief Financial Officer