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 November 2022

Commission File No. 001-38691

AURORA CANNABIS INC.
(Translation of registrant's name into English)

 

500-10355 Jasper Avenue,

Edmonton, Alberta,

Canada T5J 1Y6
(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  [X]

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)  [ ]

 

This Form 6-K is hereby filed and incorporated by reference in the registrant’s Registration Statements on Form F-10 (File Nos. 333-249680 and 333-254096).

 

 

 

 

 
 

 

 

 

SUBMITTED HEREWITH

 

Exhibits Description 
99.1   Condensed Consolidated Interim Financial Statements for the three months ended September 30, 2022
99.2   Interim Management’s Discussion and Analysis for the three months ended September 30, 2022
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.

/s/ Glen Ibbott

 


Glen Ibbott
Chief Financial Officer

Date: November 10, 2022

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AURORA CANNABIS INC.

Condensed Consolidated Interim Financial Statements (Unaudited)

 

 

 

For the three months ended September 30, 2022 and 2021 (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 Loans and Borrowings 21
Note 2 Significant Accounting Policies and Judgments 9 Note 16 Lease Liabilities 21
Note 3 Accounts Receivable 11 Note 17 Share Capital 22
Note 4 Government Grant 11 Note 18 Share-Based Compensation 23
Note 5 Marketable Securities and Derivatives 12 Note 19 Loss per share 25
Note 6 Investments in Associates and Joint Ventures 12 Note 20 Other Gains (Losses 26
Note 7 Biological Assets 13 Note 21 Supplemental Cash Flow Information 26
Note 8 Inventory 15 Note 22 Commitments and Contingencies 27
Note 9 Property, Plant and Equipment 16 Note 23 Revenue 28
Note 10 Assets and Liabilities Held for Sale 17 Note 24 Segmented Information 29
Note 11 Business Combinations 17 Note 25 Fair Value of Financial Instruments 30
Note 12 Non-controlling Interests 19 Note 26 Financial Instruments Risk 30
Note 13 Intangible Assets and Goodwill 19 Note 27 Subsequent Events 32
Note 14 Convertible Debentures 20      

 

 

 

 

 

 

 

 

 

AURORA CANNABIS INC.
Condensed Consolidated Interim Statements of Financial Position

As at September 30, 2022 and June 30, 2022

Amounts reflected in thousands of Canadian dollars)

 

 

   Notes  September 30, 2022  June 30, 2022
         $    $ 
Assets               
Current               
Cash and cash equivalents        369,278    437,807 
Restricted cash   21    58,950    50,972 
Accounts receivable   3, 4, 26(a)    45,841    46,995 
Income taxes receivable        100    57 
Marketable securities   5(a)    375    1,331 
Biological assets   7    19,735    23,827 
Inventory   8    126,507    116,098 
Prepaids and other current assets        5,395    6,539 
Assets held for sale   10    55,645    61,495 
         681,826    745,121 
Property, plant and equipment   9    320,194    233,465 
Derivatives   5(b)    25,611    26,283 
Deposits        2,860    3,134 
Loan receivable        776    16 
Investments in associates and joint ventures   6    1,237    1,207 
Lease receivable        4,391    4,434 
Intangible assets   13    99,747    70,696 
Goodwill   13    18,750    —   
Deferred tax assets   11    14,535    —   
Total assets        1,169,927    1,084,356 
Liabilities               
Current               
Accounts payable and accrued liabilities   26(b)    96,664    69,874 
Income taxes payable        4,757    167 
Deferred revenue   23    3,984    3,850 
Convertible debentures   14    29,826    26,854 
Loans and borrowings   15    3,342    —   
Lease liabilities   16    6,336    6,150 
Provisions        4,156    5,410 
Other current liabilities   4    12,572    12,564 
Liabilities held for sale   10    5,996    5,988 
         167,633    130,857 
Convertible debentures   14    213,781    199,650 
Loans and borrowings   15    36,910    —   
Lease liabilities   16    35,372    36,837 
Derivative liability   14, 17(c)    38,109    37,297 
Contingent consideration payable   11, 26(b)    17,478    14,371 
Other long-term liability   11    48,751    128 
Deferred tax liability   11    17,396    2,862 
Total liabilities        575,430    422,002 
Shareholders’ equity               
Share capital   17    6,764,621    6,754,626 
Reserves        151,231    157,213 
Accumulated other comprehensive loss        (209,147)   (211,721)
Deficit        (6,150,250)   (6,038,275)
Total equity attributable to Aurora shareholders        556,455    661,843 
Non-controlling interests   12    38,042    511 
Total equity        594,497    662,354 
Total liabilities and equity        1,169,927    1,084,356 
                
Nature of Operations (Note 1)                
Commitments and Contingencies (Note 22)               
Subsequent Events (Note 27)               

 

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

  3 
AURORA CANNABIS INC.
Condensed Consolidated Interim Statements of Comprehensive Loss

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

   Three months ended September 30,
   Notes  2022  2021
         $    $ 
Revenue from sale of goods   23    55,373    69,477 
Revenue from provision of services   23    362    449 
Excise taxes   23    (6,472)   (9,818)
Net revenue        49,263    60,108 
Cost of sales   8    47,824    33,363 
Gross profit before fair value adjustments        1,439    26,745 
Changes in fair value of inventory sold   8    24,263    12,642 
Unrealized gain on changes in fair value of biological assets   7    (21,116)   (11,345)
Gross (loss) profit        (1,708)   25,448 
Expense
General and administration
        29,373    30,305 
Sales and marketing        12,807    15,455 
Acquisition costs        1,914    175 
Research and development        1,603    3,671 
Depreciation and amortization   9, 13    3,556    12,370 
Share-based compensation   18(a)(b)(c)    2,863    2,847 
         52,116    64,823 
Loss from operations        (53,824)   (39,375)
Other (expense) income               
Legal settlement and contract termination fees   22(a), (b)(i)    (639)   (89)
Interest and other income        4,067    451 
Finance and other costs   26(b)    (10,570)   (15,340)
Foreign exchange (“FX”) (loss) gain        (1,182)   448 
Other (losses) gain   20    (1,679)   43,146 
Restructuring charges        (37)   (1,333)
         (10,040)   27,283 

 

 

Loss from operations before taxes

        (63,864)   (12,092)
Income tax (expense) recovery           
Current        (2,958)   (173)
Deferred, net   11    14,935    381 
         11,977    208 

 

Net loss

        (51,887)   (11,884)

 

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

  4 
AURORA CANNABIS INC.
Condensed Consolidated Interim Statements of Comprehensive Loss

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 
(Continued)
 

 

Three months ended September 30,
   Notes  2022  2021
         $    $ 
Other comprehensive (loss) income (“OCI”) that will not be reclassified to net loss               
Unrealized gain on marketable securities   5(a)    (753)   (916)
         (753)   (916)

 

Other comprehensive (loss) income that may be reclassified to net loss

               
Share of loss from investment in associates   6    —      (2)
Foreign currency translation loss (gain)        3,327    (2,308)
         3,327    (2,310)
Total other comprehensive loss (gain)        2,574    (3,226)

 

Comprehensive loss

        (49,313)   (15,110)

 

Net loss attributable to:

               
Aurora Cannabis Inc.        (51,604)   (11,884)
Non-controlling interests   12    (283)   —   

 

Comprehensive loss attributable to:

               
Aurora Cannabis Inc.        (49,030)   (15,110)
Non-controlling interests        (283)   —   

 

Loss per share - basic and diluted

               
Total operations   19   ($0.17)  ($0.06)

 

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

  5 
AURORA CANNABIS INC.
Condensed Consolidated Interim Statements of Changes in Equity

Three months ended September 30, 2022
( Amounts reflected in thousands of Canadian dollars, except share amounts)

 

 

      Share Capital  Reserves  AOCI         
   Note  Common Shares  Amount  Share-Based Compensation  Compensation Options/Warrants/ Shares to be Issued  Convertible Notes  Change in Ownership Interest  Obligation to Issue Shares  Total Reserves  Fair Value  Deferred Tax  Associate OCI Pick-up  Foreign Currency Translation  Total AOCI  Deficit  Non-Controlling Interests  Total
         #    $    $    $    $    $    $    $    $    $    $    $    $    $    $    $ 
Balance, June 30, 2022        297,772,238    6,754,626    206,244    37,350    419    (86,800)   —      157,213    (213,394)   18,919    208    (17,454)   (211,721)   (6,038,275)   511    662,354 
Shares issued/issuable for business combinations   11, 17(b)    2,614,995    9,683    —      (9,683)   —      —      —      (9,683)   —      —      —      —      —      —      —      —   
Shares issued through equity financing   17(b)    —      —      —      —      —      —      1,448    1,448    —      —      —      —      —      —      —      1,448 
Equity financing transaction costs        —      (119)   —      —      —      —      —      —      —      —      —      —      —      —      —      (119)
Deferred tax on transaction costs        —      (179)   —      —      —      —      —      —      —      —      —      —      —      —      —      (179)
Exercise of RSUs, PSUs and DSUs   18(b)    50,200    610    (610)   —      —      —      —      (610)   —      —      —      —      —      —      —      —   
Share-based compensation   18    —      —      2,863    —      —      —      —      2,863    —      —      —      —      —      —      —      2,863 
NCI contribution   12    —      —      —      —      —      —      —      —      —      —      —      —      —      —      25,891    25,891 
Recognition of put option liability   11    —      —      —      —      —      —      —      —      —      —      —      —      —      (48,448)   —      (48,448)
Change in ownership interests in net assets   12    —      —      —      —      —      —      —      —      —      —      —      —      —      (11,923)   11,923    —   
Comprehensive loss for the period        —      —      —      —      —      —      —      —      (753)   —      —      3,327    2,574    (51,604)   (283)   (49,313)
Balance, September 30, 2022        300,437,433    6,764,621    208,497    27,667    419    (86,800)   1,448    151,231    (214,147)   18,919    208    (14,127)   (209,147)   (6,150,250)   38,042    594,497 

 

 

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

  6 
AURORA CANNABIS INC.
Condensed Consolidated Interim Statements of Changes in Equity

Three months ended September 30, 2022
( 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  Deficit  Non-Controlling Interests  Total
         #    $    $    $    $    $    $    $    $    $    $    $    $    $    $ 
Balance, June 30, 2021        198,068,923    6,424,296    200,214    27,667    419    (86,800)   141,500    (211,327)   18,919    210    (14,813)   (207,011)   (4,321,085)   —      2,037,700 
Equity financing transaction costs        —      (84)   —      —      —      —      —      —      —      —      —      —      —      —      (84)
Deferred tax on transaction costs        —      (381)   —      —      —      —      —      —      —      —      —      —      —      —      (381)
Exercise of RSUs and DSUs   18(b)   11,675    342    (342)   —      —      —      (342)   —      —      —      —      —      —      —       
Share-based compensation   18    —      —      2,847    —      —      —      2,847    —      —      —      —      —      —      —      2,847 
NCI Contribution   12    —      —      —      —      —      —      —      —      —      —      —      —      —      —      —   
Shares issued from treasury        44,390    —      —      —      —      —      —      —      —      —      —      —      —      —      —   
Comprehensive income (loss) for the period        —      —      —      —      —      —      —      (916)   —      (2)   (2,308)   (3,226)   (11,884)   —      (15,110)
Balance, September 30, 2021        198,124,988    6,424,173    202,719    27,667    419    (86,800)   144,005    (212,243)   18,919    208    (17,121)   (210,237)   (4,332,969)   —      2,024,972 

 

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

  7 
AURORA CANNABIS INC.
Condensed Consolidated Interim Statements of Cash Flows

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars)

     Three months ended September 30, 2021
   Notes  2022  2021
         $    $ 
Operating activities               
Net loss from continuing operations        (51,887)   (11,884)
Adjustments for non-cash items:               
Unrealized gain on changes in fair value of biological assets   7    (21,116)   (11,345)
Changes in fair value included in inventory sold   8    24,263    12,642 
Depreciation of property, plant and equipment   9    9,778    16,170 
Amortization of intangible assets   13    181    8,417 
Share-based compensation        2,863    2,847 
Accrued interest and accretion expense   14    2,898    2,525 
Interest and other expense (income)        2    (337)
Deferred tax recovery        (14,935)   (381)
Other losses (gains)   20    1,679    (28,734)
Foreign exchange (gain) loss        6,110    (519)
Restructuring charges        37    813 
Changes in non-cash working capital   21    8,989    (12,886)
Net cash used in operating activities        (31,138)   (22,672)

 

Investing activities

               
Investment in derivatives        203    —   
Loan receivable        (760)   (2,849)
Purchase of property, plant and equipment and intangible assets        (5,555)   (4,104)
Disposal of property, plant and equipment        5,573    7,157 
Acquisition of businesses, net of cash acquired   11    (38,790)   —   
Deposits (paid) received        (2,602)   155 
Net cash provided by (used in) investing activities        (41,931)   359 

 

Financing activities

               
Proceeds from long term loans        842    —   
Repayment of short-term loans        (701)   —   
Payments of principal portion of lease liabilities   16    (1,678)   (1,551)
Restricted cash        (7,978)   (32,116)
Shares issued for cash, net of share issue costs        (119)   (84)
Net cash used in financing activities        (9,634)   (33,751)
Effect of foreign exchange on cash and cash equivalents        14,174    7,398 
Decrease in cash and cash equivalents        (68,529)   (48,666)
Cash and cash equivalents, beginning of period        437,807    421,457 
Cash and cash equivalents, end of period        369,278    372,791 
Supplemental cash flow information (Note 21)               
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.      

 

  8 
 AURORA CANNABIS INC.
 Notes to the Condensed Consolidated Interim Financial Statements
 

Three months ended September 30, 2022 and 2021
(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 Nasdaq Global Select Market (“Nasdaq”) 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 500 - 10355 Jasper Avenue, Edmonton, Alberta, Canada, T5J 1Y6. The Company’s registered and records office address is Suite 1700, 666 Burrard Street , Vancouver, British Columbia, V6C 2X8.

 

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 of wholesale medical cannabis in various international markets, including Australia, the Caribbeans, South America and Israel;

 

On August 25, 2022, the Company acquired a 50.1% controlling interest in Bevo Agtech Inc. (“Bevo”), the sole parent of Bevo Farms Ltd. in order to support the Company’s principal cannabis operations. Bevo is one of the largest suppliers of propagated vegetables and ornamental plants in North America.

 

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” (“IAS 34”) 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 Company has reclassified certain comparative balances to conform with the current period’s presentation.

 

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 (Note 2(c) and (d)). 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 condensed consolidated interim financial statements should be read in conjunction with our annual audited consolidated financial statements as at and for the year ended June 30, 2022, including the accompanying notes thereto.

 

(b)Basis of Consolidation

 

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

 

The Company’s principal subsidiaries during the three months ended September 30, 2022 are as follows:

  9 
 AURORA CANNABIS INC.
 Notes to the Condensed Consolidated Interim Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

 

     
Major subsidiaries Percentage Ownership Functional Currency
1769474 Alberta Ltd. (“1769474”) 100% Canadian Dollar
2105657 Alberta Inc. (“2105657”) 100% Canadian Dollar
Aurora Cannabis Enterprises Inc. (“ACE”) 100% Canadian Dollar
Aurora Deutschland GmbH (“Aurora Deutschland”) 100% European Euro
Aurora Nordic Cannabis A/S (“Aurora Nordic”) 100% Danish Krone
Reliva, LLC (“Reliva”) 100% United States Dollar
TerraFarma Inc. 100% Canadian Dollar
Whistler Medical Marijuana Corporation (“Whistler”) 100% Canadian Dollar
Bevo Agtech Inc. 50.1% Canadian Dollar
CannaHealth Therapeutics Inc. 100% Canadian Dollar
ACB Captive Insurance Company Inc. 100% Canadian Dollar

 

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

 

(c)       New Accounting Policy

Put Option Liability

The Company has entered into a put option with certain non-controlling interest shareholders of Bevo such that the Company is required to purchase their shareholding under certain conditions as of the exercise date. When accounting for options related to non-controlling interests, the Company applies IFRS 10, Consolidated Financial Statements, and the terms of the contracts are analyzed to assess whether they provide the Company or the non-controlling interest with access to the risks and rewards associated with the actual ownership of the shares. The Company has elected the present-access method of accounting for non-controlling interests. As a result, the Company has recognized a financial liability at the present value of the amount payable on exercise of the put option. Remeasurement adjustments are recorded in defict.

 

(d)       Adoption of New Accounting Pronouncements

Amendments to IAS 41: Agriculture

As part of its 2018-2020 annual improvements to IFRS standards process, the IASB issued amendments to IAS 41. The amendment removes the requirement for entities to exclude taxation cash flow when measuring the fair value of a biological asset using a present value technique. This will ensure consistency with the requirements in IFRS 13. The amendment is effective for annual reporting periods beginning on or after January 1, 2022. The Company adopted the Amendments to IFRS 41 effective July 1, 2022 which did not have a material impact to the Company’s consolidated financial statements.

 

Amendments to IFRS 9: Financial Instruments

 

As part of its 2018-2020 annual improvements to IFRS standards process, the IASB issued amendments to IFRS 9. The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. An entity applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment. The amendment is effective for annual reporting periods beginning on or after January 1, 2022 with earlier adoption permitted. The Company adopted the Amendments to IFRS 9 effective July 1, 2022 which did not have a material impact to 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 adopted the amendments to IAS 37 effective July 1, 2022 which did not have a material impact to the Company’s consolidated financial statements.

 

(e)New Accounting Pronouncements Not Yet Adopted

 

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.

  10 
 AURORA CANNABIS INC.
 Notes to the Condensed Consolidated Interim Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

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, 2023. The Company is currently evaluating the potential impact of these amendments on the Company’s consolidated financial statements.

 

IFRS 17 - Insurance Contracts

 

IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the standard. The objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts. The standard is effective for annual periods beginning on or after January 1, 2023. The Company is currently evaluating the potential impact of this standard on the Company’s consolidated financial statements.

 

Note 3 Accounts Receivable               
    Notes    September 30, 2022    June 30, 2022 
         $    $ 
Trade receivables   26(a)    35,796    32,465 
Sales taxes receivable        748    3,137 
Lease receivable   26(a)    1,995    1,883 
Consideration receivable from divestiture        2,321    2,361 
Government grant receivable   4    1,913    6,088 
Other receivables (1)        3,068    1,061 
         45,841    46,995 

(1)       Includes interest receivable from the convertible debenture investments (Note 14).

 

Note 4 Government Grant

 

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 months ended September 30, 2022, the Company has recognized no government grant income (September 30, 2021 - $14.4 million), within other gains (losses) in the statement of comprehensive loss. Estimation uncertainty arises when interpreting certain definitions as prescribed by CEWS. For the three months ended September 30, 2022, the Company received no cash (June 30, 2022 - $19.5 million) from CEWS. As at September 30, 2022, $12.4 million (June 30, 2022 - $12.4 million) is recognized as other current liabilities on the statement of financial position.

 

For the three months ended September 30, 2022, the Company received a $3.3 million government grant related to the co-generation project at the Aurora River facility to further offset the capital expenditures.

  11 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

Note 5 Marketable Securities and Derivatives

 

(a)Marketable securities

 

At September 30, 2022, the Company held the following marketable securities:

 

 

 

 

Financial asset hierarchy level  Level 1  Level 1  Level 1   
Marketable securities designated at fair value through other comprehensive income (“FVTOCI”)  Radient  Choom  CTT
Pharmaceutical
Holdings
 

 

Total

   $  $  $  $
Balance, June 30, 2022   1,128    —      203    1,331 
Disposals   —      —      (203)   (203)
Unrealized loss on changes in fair value   (753)   —      —      (753)
Balance, September 30, 2022   375    —      —      375 
                     
 Unrealized gain (loss) on marketable securities                    
Three months ended September 30, 2022                    
OCI unrealized gain   (753)   —      —      (753)
Three months ended September 30, 2021                    
OCI unrealized gain (loss)   (753)   (99)   (64)   (916)

 

 

(b)Derivatives

At September 30, 2022, the Company held the following derivative investments:

 

Financial asset hierarchy level  Level 2  Level 2  Level 3  Level 2  Level 3   
Derivatives and convertible debentures at fair value through profit or loss (“FVTPL”)  ACI  Choom  Investee-B  High Tide  Investee-C  Total
   $  $  $  $  $  $
Balance, June 30, 2022   1,418    —      13,961    8,442    2,462    26,283 
Repayment   —      —      —      (537)   —      (537)
Unrealized gain (loss) on changes in fair value   (934)   —      (63)   (40)   27    (1,010)
Foreign exchange   —      —      875    —      —      875 
Balance, September 30, 2022   484    —      14,773    7,865    2,489    25,611 

 

Unrealized gain (loss) on derivatives (Note 20)

Three months ended September 30, 2022

                              
Foreign exchange   —      —      875    —      —      875 
Unrealized gain (loss) on changes in fair value   (934)   —      (63)   (40)   27    (1,010)
    (934)   —      812    (40)   27    (135)
Three months ended September 30, 2021                              
Foreign exchange   —      —      397    —      —      397 
value   (2,009)   202    (334)   (2,899)   (4)   (5,044)
    (2,009)   202    63    (2,899)   (4)   (4,647)

 

Note 6 Investments in Associates and Joint Ventures

 

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

 

 

      Venn Cannabis
   Note   
      $
 Balance, June 30, 2022         1,207 
 Share of net income(1)    20    30 
 Balance, September 30, 2022         1,237 

(1)       Represents an estimate of the Company’s share of net income based on the latest available information of each investee.

  12 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

Note 7 Biological Assets

   
The following is a breakdown of biological assets:   
    
   September 30, 2022  June 30, 2022
    $    $ 
Indoor cannabis production facilities   14,131    23,367 
Outdoor cannabis production facilities   1,651    460 
Non-cannabis production facilities   3,953    —   
    19,735    23,827 

 

a) Indoor cannabis production facilities

          

 

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 indoor cannabis 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
Weighted average effective yield Represents the estimated percentage of harvested product that meets specifications in order to be sold as a dried cannabis product. If the weighted average effective yield were higher (lower), the 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 grown at indoor cannabis production facilities:

 

   Range of inputs     Impact on fair value
Significant inputs & assumptions  September 30,  June 30,  Sensitivity  September 30,  June 30,
   2022  2022     2022  2022
Average selling price per gram  $4.31   $5.18   Increase or decrease of $1.00 per gram  $4,603   $9,813 
Weighted average yield (grams per plant)   45.00    39.16   Increase or decrease by 5 grams per plant  $1,620   $3,219 
Weighted average effective yield   85%   89%  Increase of decrease by 5%  $746   $1,104 
Cost per gram to complete production  $1.28   $1.52   Increase or decrease of $1.00 per gram  $4,705   $6,607 

 

As of September 30, 2022, the weighted average fair value less cost to complete and cost to sell a gram of dried cannabis produced at its indoor cannabis cultivation facilities was $2.48 per gram (June 30, 2022 - $3.12 per gram).

 

During the three months ended September 30, 2022, the Company’s indoor cannabis biological assets produced 16,873 kilograms of dried cannabis (September 30, 2021 - 17,220 kilograms). As at September 30, 2022, it is expected that the Company’s indoor cannabis biological assets will yield approximately 10,755 kilograms (June 30, 2022 - 14,754 kilograms) of dried cannabis when harvested. As of September 30, 2022, the weighted average stage of growth for indoor biological assets was 53% (June 30, 2022 - 50%).

  13 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

 

b)Outdoor cannabis production facilities

 

Inputs and assumptions Description Correlation between inputs and fair value
Average selling price per unit of extract finished goods Represents the average selling price per unit of extract finished goods 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 unit were higher (lower), estimated fair value would increase (decrease).
Conversion ratio of bulk harvest fresh frozen grams to finished goods Represents the average conversion ratio of harvested bulk fresh frozen grams to finished good units produced and sold. If the conversion ratio were higher (lower), estimated fair value would decrease (increase).
Expected yield per harvest Represents the expected yield of the seasonal harvest. If the expected yield 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 fresh frozen grams expected to be 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 sixteen 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 grown at outdoor cannabis production facilities:

 

 

   Range of inputs     Impact on fair value
Significant inputs & assumptions  September 30,
2022
  June 30,
2022
  Sensitivity  September 30,
2022
  June 30,
2022

Average selling price per unit of extract finished

goods

  $18.24   $18.58  

Increase or decrease of $5.00 per unit of

extract finished goods

  $482   $136 

Conversion ratio of bulk harvest fresh frozen

grams to finished goods

   0.027    0.021   Increase or decrease by 10%  $655   $198 
Cost per fresh frozen gram to complete production  $0.32   $0.25  

Increase or decrease of $1.00 per wet

weight gram

  $306   $86 

 

As of September 30, 2022, the weighted average fair value less cost to complete and cost to sell a gram of fresh frozen cannabis produced at its outdoor cannabis cultivation facilities was $0.17 per gram (June 30, 2022 - $0.13).

 

During the three months ended September 30, 2022, the Company’s outdoor cannabis biological assets produced 6,111 kilograms (September 30, 2021 - nil) of fresh frozen weight of cannabis. As at September 30, 2022, it is expected that the Company’s outdoor cannabis biological assets will yield approximately 10,213 kilograms (June 30, 2022 - 9,075 kilograms) of fresh frozen weight of cannabis when harvested. As of September 30, 2022, the weighted average stage of growth for the outdoor biological assets was 95% (June 30, 2022 - 38% ).

 

c)Non-cannabis production facilities

 

Inputs and assumptions Description Correlation between inputs and fair value
Average selling price per plant Represents average selling price per plant, which is based on actual orders received from customers. If average selling price per plant were higher (lower), estimated fair value would increase (decrease).
Stage of completion in the production process Calculated by taking the number of days in production over the promised date less the propagation date. If the number of days in production was higher (lower), estimated fair value would increase (decrease).

 

  14 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

 

The following table highlights the sensitivities and impact of changes in significant assumptions on the fair value of biological assets grown at non-cannabis production facilities:

 

 

   Range of inputs     Impact on fair value
Significant inputs & assumptions  September 30,
2022
  June 30,
2022
  Sensitivity  September 30,
2022
  June 30,
2022
Average selling price per vegetable plant  $1.47    n/a   Increase or decrease by 10%  $61    n/a 
Average selling price per floral/bedding plant  $6.32    n/a   Increase or decrease by 10%  $311    n/a 
Average stage of completion in the production process   55%   n/a   Increase or decrease by 10%  $665    n/a 

 

As of September 30, 2022, the weighted average fair value per non-cannabis plant was $1.67 per plant.

 

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, 2022 23,827
Production costs capitalized 21,468
Biological assets acquired through business combinations (Note 11) 4,873
Sale of biological assets (3,215)
Foreign currency translation (12)
Changes in fair value less cost to sell due to biological transformation 21,116
Transferred to inventory upon harvest (48,322)
Balance, September 30, 2022 19,735

 

Note 8 Inventory

 

The following is a breakdown of inventory:

 

   September 30, 2022  June 30, 2022
   Capitalized
cost
  Fair value
adjustment
  Carrying
value
  Capitalized
cost
  Fair value
adjustment
  Carrying
value
Harvested cannabis   $    $    $    $    $    $ 
                               
Work-in-process   38,495    27,987    66,482    40,285    27,297    67,582 
Finished goods   14,653    3,932    18,585    9,151    2,444    11,595 
    53,148    31,919    85,067    49,436    29,741    79,177 
                               
Extracted cannabis                              
Work-in-process   9,601    1,943    11,544    13,577    2,348    15,925 
Finished goods   8,645    738    9,383    8,257    650    8,907 
    18,246    2,681    20,927    21,834    2,998    24,832 
                               
Supplies and consumables   19,260    —      19,260    10,817    —      10,817 
                               
Merchandise and accessories   1,253    —      1,253    1,272    —      1,272 
                               
Ending balance   91,907    34,600    126,507    83,359    32,739    116,098 

 

During the period ended September 30, 2022, inventory expensed to cost of goods sold was $72.1 million (September 30, 2021 - $46.0 million), which included $24.3 million (September 30, 2021 - $12.6 million) of non-cash expense related to the changes in fair value of inventory sold.

  15 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

During the period ended September 30, 2022, the Company recognized $47.5 million (September 30, 2021 - $0.7 million) in inventory impairment losses consisting of $22.4 million (September 30, 2021 - $5.5 million) recognized in changes in fair value of inventory sold and $25.1 million (September 30, 2021 - $(4.8) million) recognized in cost (recovery) of sales.

 

Note 9 Property, Plant and Equipment

 

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

 

September 30, 2022  June 30, 2022
   Cost  Accumulated depreciation 

 

Impairment

  Net book
value
 

 

Cost

  Accumulated depreciation 

 

Impairment

  Net book
value
Owned assets                                        
Land   34,894         —      34,894    14,351    —      (1,224)   13,127 
Real estate   229,040    (78,516)   —      150,524    396,848    (76,010)   (224,034)   96,804 
Construction in progress   28,115    —      —      28,115    34,260    —      (9,168)   25,092 
Computer software & equipment   30,875    (28,481)   —      2,394    31,960    (28,244)   (555)   3,161 
Furniture & fixtures   7,398    (4,979)   —      2,419    10,057    (5,818)   (1,558)   2,681 
Production & other equipment   157,310    (85,917)   —      71,393    168,829    (86,287)   (22,080)   60,462 
Total owned assets   487,632    (197,893)   —      289,739    656,305    (196,359)   (258,619)   201,327 
Right-of-use lease assets                                        
Land   7,280    (1,217)   —      6,063    7,443    (1,192)   —      6,251 
Real estate   39,435    (15,850)   —      23,585    40,530    (14,990)   (496)   25,044 
Production & other equipment   5,248    (4,441)   —      807    5,087    (4,244)   —      843 
Total right-of-use lease assets   51,963    (21,508)   —      30,455    53,060    (20,426)   (496)   32,138 
Total property, plant and equipment   539,595    (219,401)   —      320,194    709,365    (216,785)   (259,115)   233,465 

 

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

 

  

Balance,

June 30,
2022

  Additions 

Additions from

 business combinations

  Disposals  Other (1)  Depreciation  Foreigncurrency translation  Balance, September 30, 2022

Owned assets

Land

   13,127    —      21,770    —      —      —      (3)   34,894 
Real estate   96,804    525    52,350    —      3,916    (3,068)   (3)   150,524 
Construction in progress   25,092    2,205    1,134    —      (735)   —      419    28,115 
Computer software & equipment   3,161    161    —      —      (690)   (240)   2    2,394 
Furniture & fixtures   2,681    25    —      —      (862)   558    17    2,419 
Production & other equipment   60,462    813    17,633    —      (2,422)   (5,542)   449    71,393 
Total owned assets   201,327    3,729    92,887    —      (793)   (8,292)   881    289,739 

Right-of-use leased assets

                                    

Land

   6,251    —      —      (29)   —      (162)   3    6,063 
Real estate   25,044    57    —      (473)   —      (1,127)   84    23,585 
Production & other equipment   843    235    —      —      (72)   (197)   (2)   807 
Total right-of-use lease assets   32,138    292    —      (502)   (72)   (1,486)   85    30,455 
Total property, plant and equipment   233,465    4,021    92,887    (502)   (865)   (9,778)   966    320,194 

(1)Includes reclassification of construction in progress cost when associated projects are complete. Includes the transfer of facilities to assets held for sale as at September 30, 2022 (Note 10).

 

Depreciation relating to manufacturing equipment and production facilities for owned and right-of-use leased assets is capitalized into biological assets and inventory, and is expensed to cost of sales upon the sale of goods. During the three months ended September 30, 2022, the Company recognized $8.3 million (September 30, 2021 - $14.5 million) of depreciation expense of which $4.7 million (September 30, 2021 - $9.3 million) was reflected in cost of sales.

  16 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

Note 10 Assets and Liabilities Held for Sale

 

Assets held for sale are comprised of the following:

 

   Colombia Property

Aurora Sun

 

Valley

 

Polaris

  Whistler Alpha
Lake
 

Total

   $  $  $        $
Balance, June 30, 2022   1,925    34,404    5,850    18,678    638    61,495 
Net proceeds from disposal   —      —      (5,573)   —      —      (5,573)
Loss on disposal (1)   —      —      (277)   —      —      (277)
Balance, September 30, 2022   1,925    34,404    —      18,678    638    55,645 

 

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

 

Liabilities held for sale are comprised of the following:      
   September 30, 2022  June 30, 2022

 

Aurora Sun

  $  $
Accounts payable and accrued liabilities   19    11 
Provisions   2,000    2,000 
Total   2,019    2,011 
Polaris          
Lease Liability   3,977    3,977 
           
Total Liabilities Held for Sale   5,996    5,988 

 

Aurora Sun

 

During the year ended June 30, 2022, the Company entered into a share purchase agreement (the “Agreement”) to sell 2105657 Alberta Ltd., a wholly-owned subsidiary which owns the Aurora Sun facility located in Alberta. The assets and liabilities of the subsidiary were reclassified to assets and liabilities held for sale following the execution of the Agreement. The closing of the transaction was subject to certain standard closing conditions for both parties. During the three months ended September 30, 2022, the Company has given notice to terminate the agreement due to the prospective buyer’s failure to fulfill closing conditions.

 

Valley

 

In connection with the restructuring announced during the year ended June 30, 2022, the Company sold its Valley facility for net proceeds of $5.6 million. As a result, the Company recognized a $0.3 million loss on disposal which is recognized in other gains (losses) in the statement of comprehensive loss (Note 20).

 

Note 11 Business Combinations

 

Bevo Agtech Inc. (“Bevo”)

On August 25, 2022, a wholly-owned subsidiary of the Company acquired a 50.1% controlling interest in Bevo, the sole parent of Bevo Farms Ltd., one of the largest suppliers of propagated vegetables and ornamental plants in North America. The transaction included initial consideration of $44.8 million consisting of $38.8 million paid in cash, $3.0 million paid into escrow for indemnity holdback, and $3.0 million paid into escrow relating to performance holdbacks which are releasable upon Bevo meeting certain financial targets (the “Performance Holdback”). The Performance Holdback payable was measured at fair value of $2.2 million. The total cash consideration of $6.0 million paid into escrow has been recognized as an increase in restricted cash, with a corresponding increase of $3.0 million in accounts payable and accrued liabilities related to the indemnity holdback; $2.2 million in contingent consideration payable related to the Performance Holdback and $0.8 million in goodwill on the consolidated statement of financial position.

Additional consideration of up to $12.0 million in potential earnout amount is payable in cash or Common Shares at the election of the Company, subject to Bevo successfully achieving certain financial milestones at its Site One facility in Langley, British Columbia. The additional consideration was measured at fair value and recognized as an increase of $0.7 million in contingent consideration payable, with a corresponding increase in goodwill, on the consolidated financial statement of financial position. In connection with the potential earnout, the Company has pledged 6,596,761 of Bevo Common Shares owned by the Company as security to the non-controlling shareholders of Bevo.

  17 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

The transaction includes call options such that the Company and certain non-controlling shareholders of Bevo may acquire additional Common Shares of Bevo based on Bevo’s EBITDA performance and in the event of an Adverse Change of Control, as defined in the Bevo shareholders agreement. The call options are derivative instruments measured at fair value on the date of acquisition with subsequent changes recognized in net loss. The fair value of the call options at the date of acquisition were determined to be nominal in the provisional purchase price allocation. In addition, the transaction includes a put option with certain non-controlling shareholders of Bevo such that the Company is required to purchase up to an additional 40.4% of the Common Shares of Bevo based of Bevo’s EBITDA performance. As a result, the Company has recognized a financial liability of $48.0 million on the date of acquisition at the present value of the amount payable on exercise of the put option. At September 30, 2022 the present value of the amount payable on exercise of the put option was $48.4 million which resulted in the change of $0.4 million recorded in deficit.

 

 

Preliminary Fair Value of Consideration Transferred

Cash paid

 

38,844

Performance holdback 2,153
Indemnity holdback 3,000
Contingent consideration 749
  44,746

 

Preliminary Fair Value of net identifiable assets

Cash

 

 

54

Accounts receivables 3,317
Biological assets 4,873
Inventories 4,366
Prepaid expenses and deposits 749
Property, plant and equipment 92,887

Intangible assets

Customer relationships

 

5,600

Software 247
  112,093
Accounts payable and accruals 3,699
Income taxes payable 1,660
Deferred revenue 151
Loans and borrowings 39,934
Deferred tax liability 14,762
  60,206

 

Provisional purchase price allocation

Net identifiable assets acquired

 

 

51,887

Non-controlling interest (25,891)
Goodwill 18,750
  44,746

 

Net cash outflows

Cash consideration paid

 

 

(38,844)

Cash acquired 54
  (38,790)

 

Goodwill arising from the acquisition represents future income and growth, and other intangibles that do not qualify for separate recognition. The goodwill arising on this acquisition is expected to be fully deductible for tax purposes.

Management continues to gather relevant information that existed at the acquisition date to determine the fair value of the net identifiable assets acquired and liabilities assumed. As such the initial purchase price was provisionally allocated based on the Company’s estimated fair value of the identifiable assets acquired and the liabilities assumed on the acquisition date. The values assigned are, therefore, preliminary and subject to change. Management continues to refine and finalize its purchase price allocation for the fair value of identifiable property, plant, and equipment, intangible assets and the allocation of goodwill.

  18 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

For the three months ended September 30, 2022, Bevo accounted for $3.3 million in revenue and $0.7 million in net loss since the August 25, 2022 acquisition date. If the acquisition had been completed on July 1, 2022, the Company estimates that Bevo would have accounted for $5.3 million in revenue and $1.2 million in net loss for the three months ended September 30, 2022.

 

In connection with the acquisition of Bevo, the Company recognized non-controlling interests in Bevo of $25.9 million, which represents the non- controlling interest portion of 49.9% of the fair value of the net identifiable assets acquired.

 

As a result of the transaction, the Company recognized a deferred tax asset of $14.5 million with a corresponding recovery of deferred taxes on the consolidated statement of comprehensive loss.

 

Included in acquisition costs expense for the three months ended September 30, 2022, are $1.0 million of transaction costs related to the acquisition of Bevo.

 

Note 12 Non-controlling Interest (“NCI”)

 

The change in non-controlling interest is as follows:

 

  

 

Bevo

 

 

Other

 

 

Total

   $  $  $
Balance, June 30, 2022   —      511    511 
Acquired through business acquisitions (Note 11)   25,891    —      25,891 
Change in ownership interests in net assets   11,923    —      11,923 
Share of (loss) profit for the period   (365)   82    (283)
Balance, September 30, 2022   37,449    593    38,042 

 

The Company entered into an agreement to sell its Aurora Sky facility in Edmonton, Alberta and related assets and liabilities to Bevo through the sale of one of the Company’s wholly-owned subsidiaries (the “Aurora Sky Transaction”). Up to $25.0 million could be payable over time by Bevo to the Company in connection with the Aurora Sky Transaction, based on Bevo successfully achieving certain financial milestones at the Aurora Sky Facility. The Aurora Sky Transaction closed on September 30, 2022. The Company recognized the transfer of net assets to Bevo at cost and recorded an increase in non-controlling interest equal to the non-controlling interest’s proportionate share of the carrying value of the net assets transferred of $11.9 million with a corresponding decrease to deficit on the consolidated statement of financial position.

 

Note 13 Intangible Assets and Goodwill

 

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

 

   September 30, 2022  June 30, 2022
   Cost  Accumulated amortization  Impairment  Net book
value
  Cost  Accumulated amortization  Impairment  Net book
value
Definite life intangible assets:                                        
Customer relationships   68,724    (41,224)   —      27,500    89,626    (48,975)   (40,651)   —   
Permits and licenses   94,437    (80,247)   —      14,190    116,966    (38,888)   (63,724)   14,354 
Patents   1,199    (1,064)   —      135    1,957    (777)   (1,053)   127 
Intellectual property and know- how   28,221    (28,221)   —      —      78,099    (49,878)   (28,221)   —   
Software   24,443    (22,693)        1,750    42,639    (16,618)   (26,021)   —   
Indefinite life intangible assets:                                        
Brand   36,200    —      —      36,200    157,499    —      (121,300)   36,199 
Permits and licenses   19,972    —      —      19,972    23,973    —      (3,957)   20,016 
Total intangible assets   273,196    (173,449)   —      99,747    510,759    (155,136)   (284,927)   70,696 
Goodwill   18,750    —      —      18,750    914,275    —      (914,275)   —   
Total   291,946    (173,449)   —      118,497    1,425,034    (155,136)   (1,199,202)   70,696 

 

 

 

  19 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

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

 

   Balance, June 30, 2022  Additions from acquisitions  Additions  Other  Amortization  Foreign currency translation  Balance, September 30, 2022
Definite life intangible assets:                     
Customer relationships and other   —      5,600    21,900    —      —      —      27,500 
Permits and licenses   14,354    —      —      —      (169)   5    14,190 
Patents   127    —      20    —      (12)   —      135 
Intellectual property and know-how   —      —      —      —      —      —      —   
Software   —      247    1,503    —      —      —      1,750 
Indefinite life intangible assets:                                   
Brand   36,199    —      —      —      —      1    36,200 
Permits and licenses (1)   20,016    —      —      —      —      (44)   19,972 
Total intangible assets   70,696    5,847    23,423    —      (181)   (38)   99,747 
Goodwill   —      18,750    —      —      —      —      18,750 
Total   70,696    24,597    23,423    —      (181)   (38)   118,497 

 

(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.

 

On September 20, 2022, the Company acquired all of the issued and outstanding shares of CannaHealth Therapeutics Inc., a company with assets in the Canadian medical aggregator space, for $21.9 million payable in cash. The Company accounted for this purchase as an asset acquisition and allocated the purchase consideration to intangible assets and deferred compensation with a corresponding increase to accounts payable and accrued liabilities on the consolidated statement of financial position.

 

As at September 30, 2022, $36.2 million and $20.0 million indefinite life intangibles were allocated to the group of cash generating units (“CGUs”) that comprise the Canadian Cannabis Segment and the International Cannabis Segment, respectively (June 30, 2022 - $36.2 million and $20.0 million respectively).

 

Note 14 Convertible Debentures

 

   $

 

Balance, June 30, 2022

   226,504 
Interest paid   (7,501)
Accretion   6,444 
Accrued interest   3,779 
Unrealized loss on foreign exchange   14,381 
Balance, September 30, 2022   243,607 
Current portion   (29,826)
Long-term portion   213,781 

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. As of September 30, 2022, $286.1 million (US$208.9 million) principal amount of the Senior Notes are outstanding.

 

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 are 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 September 30, 2022, the conversion option had a fair value of $0.0 million (June 30, 2022 - $0.0 million) and the Company recognized an unrealized gain of $0.0 million for the three months ended September 30, 2022 (three months ended September 30, 2021 - $1.8 million) on the derivative liability. The fair value of the conversion option was determined based on the Kynex valuation model with the following assumptions: share price of US$1.22 (June 30, 2022 - US$1.32), volatility of 82% (June 30, 2022 - 82%), implied credit spread of 663 bps (June 30, 2022 - 903 bps), and assumed stock borrow rate of 10% (June 30, 2022 - 10%). As of September 30, 2022, the Company has accrued interest payable of

$2.9 million (June 30, 2022 - $6.6 million) on these Senior Notes.

  20 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

Note 15 Loans and Borrowings

 

On August 25, 2022, through the acquisition of Bevo (Note 11), the Company acquired term loans under Bevo’s credit facility (the “Credit Agreement”).

 

The changes in the carrying value of current and non-current term loan credit facilities are as follows:  
  Term loan credit facilities
Balance, June 30, 2022  
Acquired through business combination (Note 11) 39,934
Additions 842
Accretion 176
Interest payments (186)
Principal repayments (515)
Balance, September 30, 2022 40,251
Current portion (3,342)
Long-term portion 36,909

 

The term loans consist of the following access to funds under the credit facility:
i. a $47.8 million term loan (“Term Loan”); and
ii. a $8.0 million revolving line of credit (“Revolver”)

 

 

Under the terms of the Credit Agreement, the Company is subject to certain customary financial and non-financial covenants and restrictions. In addition, the Credit Agreement is secured by a first-ranking security interest over substantially all the property of Bevo Farms Ltd. and its subsidiaries. As at September 30, 2022, the Company was in compliance with all covenants relating to the Credit Agreement.

 

Term loan

 

As at September 30, 2022, advances under the Term Loan were made in two tranches, with interest payments based on prime rate plus a margin. As at September 30, 2022, the borrowing rate was 4.905%. Each tranche is scheduled to mature on January 21, 2025. Any remaining principal balance will be due at maturity.

 

Details regarding the tranches are further discussed below:

 

i.Tranche A provided available borrowings of $33.7 million by a way of a single advance. Under the Credit Agreement, Interest is due monthly and the principal balance is repayable in equal quarterly installments of 1/60th of the amount borrowed. An additional $1.1 million was added to the loan balance when the credit agreement was revised in June 2021. As at September 30, 2022, $27.9 million of Tranche A remains unpaid and total interest accrued and paid during the period ended September 30, 2022 was $0.1 million.

 

ii.Tranche B provided available borrowings of $13.0 million. Interest is due monthly, and the principal balance is repayable in equal quarterly installments of 1/60th of the amount beginning on the last day of each fiscal quarter commencing September 30, 2019. As at September 30, 2022, $10.8 million remains unpaid and total interest accrued and paid during the period ended September 30, 2022 was $0.1 million.

 

Revolver

 

The Revolver provided available aggregate borrowings of up to $8.0 million. Interest payments are based on prime plus a margin that ranges between 0.25% and 1.75%. As at September 30, 2022, $1.2 million was withdrawn from the revolver loan.

 

Total loans and borrowings principal repayments as at September 30, 2022 are as follows:  
   
 

Next 12 months 3,342
Over 1 year to 2 years 2,061
Over 2 years to 5 years 6,184
Over 5 years 28,344
Total long-term debt repayments 39,931

  21 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

Note 16 Lease liabilities

 

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

 
  $

 

Balance, June 30, 2022

 

42,987

Lease additions 304
Disposal of leases (49)
Lease payments (2,291)
Lease term reduction and other items 6
Changes due to foreign exchange rates 107
Interest expense on lease liabilities 644
Balance, September 30, 2022 41,708
Current portion (6,336)
Long-term portion 35,372

 

Note 17 Share Capital

 
(a)  Authorized  
The authorized share capital of the Company is comprised of the following:  

 

i.       Unlimited number of common voting shares without par value.

i.Unlimited number of Class “A” Shares each with a par value of $1.00. As at September 30, 2022, no Class “A” Shares were issued and outstanding.
i.Unlimited number of Class “B” Shares each with a par value of $5.00. As at September 30, 2022, no Class “B” Shares were issued and outstanding.

 

(b) Shares Issued and Outstanding

 

At September 30, 2022, 300,437,433 Common Shares (June 30, 2022 - 297,772,238) were issued and fully paid.

 

As at September 30, 2022, the Company was obligated to issue 835,824 Common Shares for $1.4 million in proceeds from the ATM.

 

(c) Share Purchase Warrants

 

A summary of warrants outstanding is as follows:

   
  

 

Warrants

  Weighted average exercise price
    #    $ 
Balance, June 30, 2022   89,124,788    6.72 
Balance, September 30, 2022   89,124,788    7.09 

 

In accordance with IAS 32 - Financial Instruments: Presentation, the June 2022 Offering Warrants were determined to be derivative liabilities as the proceeds receivable upon exercise may vary due to fluctuations in the foreign exchange rates. The June 2022 Offering Warrants are recognized at their fair values based on quoted market prices with gains and losses recognized in other gains (losses) (Note 20) on the statement of comprehensive loss

 

In accordance with IAS 32 - Financial Instruments: Presentation, the November 2020 and January 2021 Offering Warrants, which are denominated in U.S. Dollars, were determined to be derivative liabilities as the proceeds receivable upon exercise may vary due to fluctuations in the foreign exchange rates. The Offering Warrants are recognized at their fair values based on quoted market prices with gains and losses recognized in other (losses) gains (Note 20) on the statement of comprehensive loss.

  22 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

The following summarizes the warrant derivative liabilities: 

 

                        US$ equivalent  
    

November

2020

Offering

    

January

2021

Offering

    

June

2022

Offering

    Total    

November

2020

Offering

    

January

2021

Offering

    

June

2022

Offering

    Total 
    $    $         $    $    $         $ 
Balance, June 30, 2022   4,014    1,531    31,752    37,297    3,113    1,188    24,644    28,945 
Additions   —      —      —      —      —      —      —      —   
Unrealized (loss) gain on derivative liability   (3,024)   (1,079)   4,886    783    (2,391)   (858)   2,112    (1,137)

 

Balance, September 30, 2022

   990    452    36,638    38,080    722    330    26,756    27,808 

 

The following table summarizes the warrants that remain outstanding as at September 30, 2022:

 

Exercise Price ($) Expiry Date Warrants (#)
4.38 - 41.88 (2) January 26, 2024 - November 30, 2025 88,596,596
112.46 - 116.09 (1) August 9, 2023 to August 22, 2024 528,192
    89,124,788

(1)       Includes the November 2020 and January 2021 Offering Warrants exercisable at US$9.00 and US$12.60, respectively.

(2)       Includes the June 2022 Offering Warrants exercisable at US$3.20.

 

Note 18 Share-Based Compensation

 

(a) Stock Options

 

A summary of stock options outstanding is as follows:

 
  Stock Options Weighted Average Exercise Price
  # $
Balance, June 30, 2022 4,279,283 53.97
Granted 3,384,998 1.86
Exercised (1)  -  -
Expired (425,636) 54.38
Forfeited (73,582) 32.72
Balance, September 30, 2022 7,165,063 29.54

(1)       No stock options were exercised during the three months ended September 30, 2022 or the three months ended September 30, 2021.

 

The following table summarizes the stock options that are outstanding as at September 30, 2022:

 

 

Exercise Price ($)

 

Expiry Date

Weighted Average Remaining Life

 

Options Outstanding (#)

 

Options Exercisable (#)

1.67 - 30.00 August 8, 2022 - May 31, 2027 4.49 5,543,911 1,482,504
31.92 - 99.60 August 10, 2022 - January 28, 2025 1.07 586,850 577,109
100.80 - 133.80 January 15, 2023 - March 13, 2026 2.79 880,053 880,053
135.00 - 163.56 January 2, 2023 - May 21, 2024 0.86 154,249 154,249
    3.86 7,165,063 3,093,915

 

During the three months ended September 30, 2022, the Company recorded aggregate share-based compensation expense of $0.9 million (three months ended September 30, 2021 - $0.8 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.

 

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

  23 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

  

   Three months ended Sep 30,
   2022  2021
Risk-free annual interest rate (1)   3.70%   0.60%
Expected annual dividend yield   —  %   —  %
Expected stock price volatility (2)   86.86%   83.49%
Expected life of options (years) (3)   2.54    2.50 
Forfeiture rate   20.65%   20.08%

(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 volatilities of the Company and certain competitors.

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

 

The weighted average fair value of stock options granted during the three months ended September 30, 2022 was $1.86 per option (three months ended September 30, 2021 - $4.07 per option).

 

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

 

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, 2022   1,314,534    10.26 
Issued   115,267    1.67 
Vested, released and issued   (232,805)   12.72 
Expired   (210)   94.92 
Forfeited   (44,743)   9.98 
Balance, September 30, 2022   1,152,043    8.93 

(1)       As of September 30, 2022, there were 822,805 RSUs and 329,238 DSUs outstanding (June 30, 2022 - 1,100,563 RSUs and 213,971 DSUs).

 

During the three months ended September 30, 2022, the Company recorded share-based compensation of $1.6 million (three months ended September 30, 2021 - $1.7 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 months ended September 30, 2022 was $1.67 per unit (three months ended September 30, 2021 - $8.22 per unit).

 

The following table summarizes the RSUs and DSUs that are outstanding as at September 30, 2022:

 

Weighted Average Issue Price ($)  Expiry Date  Outstanding (#)  Vested (#)
$1.67 - $24.96  Feb 10, 2023 - May 17, 2025   1,145,510    547,233 
$33.48 - $58.32  Oct 15, 2022 - Mar 13, 2023   2,404    —   
$90.12 - $113.16  N/A   4,129    4,129 
       1,152,043    551,362 
           

(c) Performance Share Units (“PSUs”)

          
           
A summary of the PSUs outstanding is as follows:          
       

 

PSUs

    

Weighted Average Issue

Price of PSUs

 
       #    $ 
Balance, June 30, 2022      694,371    8.80 
Issued      1,725,010    1.87 
Vested, released and issued      (167)   8.22 
Forfeited      (42,242)   8.98 
Balance, September 30, 2022      2,376,972    3.77 

  24 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

The following table summarizes the PSUs that are outstanding as at September 30, 2022:

 

Weighted Average Issue Price ($)  Expiry Date  Outstanding (#)  Vested (#)
 $3.32 - $12.96   Sep 10, 2023 - May 17, 2025   2,373,693    302 
 $13.35 - $23.96   Dec 8, 2023 - Feb 11, 2024   3,279    —   
         2,376,972    302 

 

During the three months ended September 30, 2022, the Company recorded share-based compensation of $0.4 million (three months ended September 30, 2021 - $0.3 million) 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 three months ended September 30, 2022 were fair valued based on the following weighted average assumptions:

 

 

  Three months ended September 30, 2022
Risk-free annual interest rate (1) 3.99%
Dividend yield  - %
Expected stock price volatility (2) 94.04%
Expected stock price volatility of peer group (2) 86.71%
Expected life of options (years) (3) 3
Forfeiture rate 6.08%
Equity correlation against peer group (4) 49.74 %

(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.

 

The weighted average fair value of PSUs granted during the three months ended September 30, 2022 was $1.05 per unit (three months ended September 30, 2021 - $10.39 per unit).

 

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 Sep 30,
  2022 2021
Net loss attributable to Aurora shareholders ($51,604) ($11,884)
Weighted average number of Common Shares outstanding 300,437,433 198,073,693
Basic loss per share ($0.17) ($0.06)

 

Diluted loss per share is the same as basic loss per share as the issuance of shares on the exercise of convertible debentures, RSU, DSU, PSU, warrants and share options is anti-dilutive.

  25 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

Note 20 Other (Losses) Gains               
         Three months ended Sep 30, 
    Note    2022    2021 
         $    $ 
Share of net income (loss) from investment in associates   6    30    (733)
(Loss) on extinguishment of derivative investment        —      (9,096)
Unrealized loss on derivative investments   5(b)    (135)   (4,647)
Unrealized loss gain on derivative liability   14, 17(c)    (812)   40,349 
Unrealized loss on changes in contingent consideration fair value   25    —      (3)
(Loss) gain on disposal of assets held for sale and property, plant and equipment        (277)   1,344 
Government grant income   4    —      14,412 
Other (losses) gains        (485)   1,520 
Total other (losses) gains        (1,679)   43,146 

 

Note 21 Supplemental Cash Flow Information

               
The changes in non-cash working capital are as follows:               
         Three months ended Sep 30,

 
         2022    

2021

 
         $    $ 
Accounts receivable        6,444    182 
Biological assets        (18,241)   (17,538)
Inventory        18,005    (1,905)
Prepaid and other current assets        1,736    5,089 
Accounts payable and accrued liabilities        (542)   (2,947)
Income taxes payable        2,887    518 
Deferred revenue        (17)   2,420 
Provisions        (1,291)   —   
Other current liabilities        8    1,295 
Changes in operating assets and liabilities        8,989    (12,886)

 

Additional supplementary cash flow information is as follows:

               
         Three months ended Sep 30, 
         2022    2021 
         $    $ 
Property, plant and equipment in accounts payable        793    1,006 
Right-of-use asset additions        292    1,658 
Amortization of prepaids        4,767    7,795 
Interest paid        8,130    12,615 
Interest received        (333)   230 

Included in restricted cash as of September 30, 2022 is $3.4 million (September 30, 2021 - $4.3 million) attributed to collateral held for letters of credit and corporate credit cards, $6.0 million (September 30, 2021 - $0.0 million) related to the Bevo acquisition, $15.0 million (September 30, 2021 - $15.0 million) for self- insurance, $0.1 million (September 30, 2021 - $0.1 million) attributed to international subsidiaries, and $34.4 million (September 30, 2021 - $32.1 million) of funds reserved for the segregated cell program for insurance coverage.

  26 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

Note 22 Commitments and Contingencies

 

(a)Claims and Litigation

 

From time to time, the Company and/or its subsidiaries may become defendants in legal actions and the Company intends to 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.

 

On November 21, 2019, a purported class action proceeding was commenced in the United States District Court for the District of New Jersey against the Company and certain of its current and former directors and officers on behalf of persons or entities who purchased, or otherwise acquired, publicly traded Aurora securities between October 23, 2018 and February 6, 2020. An amended complaint was filed on September 21, 2020 which alleges, inter alia, that the Company and certain of its current and former officers and directors violated the federal securities laws by making false or misleading statements, materially overstated the demand and potential market for the Company’s consumer cannabis products; that the Company’s ability to sell products had been materially impaired by extraordinary market oversupply, that the Company’s spending growth and capital commitments were slated to exceed our revenue growth; that the Company had violated German law mandating that companies receive special permission to distribute medical products exposed to regulated irradiation techniques, and that the foregoing, among others, had negatively impacted the Company’s business, operations, and prospects and impaired the Company’s ability to achieve profitability. A motion to dismiss was filed on November 20, 2020 and granted by the court on July 7, 2021, however, the plaintiffs were given an opportunity to file a second amended complaint no later than September 7, 2021. Pursuant to the July 7, 2021 order, the plaintiffs filed a second amended complaint on September 7, 2021 which included new allegations pertaining to certain alleged financial misrepresentation and improper revenue recognition by the Company. The Company subsequently filed a motion to dismiss on December 6, 2021 and, and a reply to plaintiffs’ opposition on March 25, 2022. Judgement dated September 23, 2022 has been granted for the second motion to dismiss the case again in favour the Company. The motion was granted without prejudice. The Plaintiff’s counsels have re-filed a third statement of claim on November 7, 2022 and the re-stated claim was received by Aurora formally on November 8, 2022. The Company is currently assessing next steps. While this matter is ongoing, the Company disputes the allegations and intends to continue 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, the Company is 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. No provision has been recognized as at September 30, 2022 (September 30, 2021 - nil).

 

The Company and its subsidiary, ACE, have been named in a purported class action proceeding which commenced on June 16, 2020 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. While this matter is ongoing, the Company disputes the allegations and intends 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, the Company is 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. No provision has been recognized as at September 30, 2022 (September 30, 2021 - nil).

 

A claim was commenced by a party to a former term sheet on June 15, 2020 with the Queen's Bench of Alberta against Aurora and a former officer alleging a claim of breach of obligations under said term sheet, with the plaintiff seeking $18.0 million in damages. While this matter is ongoing, the Company believes the action to be without merit and intends to defend the claim. No provision has been recognized as of September 30, 2022 (September 30, 2021 - nil).

 

On August 10, 2020, a purported class action lawsuit was filed with the Queen's Bench of Alberta against Aurora and certain executive officers in the Province of Alberta on behalf of persons or entities who purchased, 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. Chambers appointment has been scheduled for December 6, 2022 to set a hearing date. The Company disputes the allegations and intends 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, the Company is 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. No provision has been recognized as at September 30, 2022 (September 30, 2021 - nil).

 

On January 4, 2021, a civil claim was filed with the Queen’s Bench of Alberta against Aurora and Hempco by a former landlord regarding unpaid rent in the amount of $8.9 million, representing approximately $0.4 million for rent in arrears and costs, plus $8.5 million for loss of rent and remainder of the term. The Company filed a statement of defense on March 24, 2021. While this matter is ongoing, the Company intends to continue to defend against the claims. No provision has been recognized as of September 30, 2022 (September 30, 2021 - nil).

 

The Company is subject to litigation and similar claims in the ordinary course of our business, including claims related to employment, human resources, product liability and commercial disputes. The Company has 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 or 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 not provided for through insurance or otherwise, would have a material effect on the consolidated financial statements, other than the claims described above. No provision has been recognized as of September 30, 2022 (September 30, 2021 - nil).

  27 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

(b)Commitments

 

(i)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. The Company expects to meet the purchase minimum for calendar 2022.

 

(ii)The Company has various lease commitments related to various office space, production equipment, vehicles, facilities and warehouses expiring up to June 2033. The Company has certain leases with optional renewal terms that the Company may exercise at its option.

 

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 two years and thereafter:

 

   $
Next 12 months   2,936 
Over 1 year to 2 years   3,099 
    6,035 

 

 

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 $0.7 million for the three months ended September 30, 2022 (three months ended September 30, 2021 - $0.7 million). The estimated variable consideration is based on historical experience and management’s expectation of future returns and price adjustments. As of September 30, 2022, the net return liability for the estimated variable revenue consideration was $1.6 million (June 30, 2022 - $2.3 million) and is included in deferred revenue on the condensed consolidated interim statements of financial position.

 

Three Months Ended September 30, 2022  Point-in-time  Over-time  Total
    $    $    $ 
Cannabis               
Revenue from sale of goods   52,076    —      52,076 
Revenue from provision of services   —      362    362 
Excise taxes   (6,472)   —      (6,472)
Cannabis Net Revenue
Bevo
   45,604    362    45,966 
Revenue from sale of goods   3,297    —      3,297 
Net Revenue   48,901    362    49,263 
                
Three Months Ended September 30, 2021   Point-in-time    Over-time    Total 
    $    $    $ 
Cannabis               
Revenue from sale of goods   69,477    —      69,477 
Revenue from provision of services   —      449    449 
Excise taxes   (9,818)   —      (9,818)
Net Revenue   59,659    449    60,108 

  28 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

Note 24 Segmented Information

 

Operating Segments  Canadian
Cannabis
  International
Cannabis
  Bevo  Corporate (1)  Total

 

Three months ended September 30, 2022

               
Net revenue   37,209    8,758    3,296    —      49,263 
Gross profit before fair value adjustments   (1,610)   2,984    72    (7)   1,439 
Selling, general, and administrative expense   33,791    4,401    259    3,729    42,180 
Income (loss) from operations before taxes and discontinued operations   (39,907)   (7,842)   (731)   (15,384)   (63,864)

 

Three months ended September 30, 2021

                         
Net revenue   43,830    16,278    —      —      60,108 
Gross profit before fair value adjustments   18,234    8,511    —      —      26,745 
Selling, general and administrative expense   38,489    5,249    —      2,022    45,760 
Income (loss) from operations before taxes and discontinued operations   (17,430)   (1,153)   —      6,491    (12,092)

(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.

 

 

Geographical Segments  Canada  EU  Other  Total
    $    $    $    $ 
Non-current assets other than financial instruments                    
September 30, 2022   384,211    41,515    17,062    442,788 
June 30, 2022   247,633    41,080    19,789    308,502 

 

Three months ended September 30, 2022

Net revenue

   40,505    7,351    1,407    49,263 
Gross profit before fair value adjustments   (1,545)   3,862    (878)   1,439 

 

Three months ended September 30, 2021

Net revenue

   43,830    15,859    419    60,108 
Gross profit (loss) before fair value adjustments   18,234    8,943    (432)   26,745 

 

Included in net revenue arising from the Canadian Cannabis operating segment for the three months ended September 30, 2022 are net revenues of approximately $4.8 million from Customer A (three months ended September 30, 2021 - Customer A - $6.8 million, Customer D -

$6.6 million), each contributing 10% or more to the Company’s net revenue. All of these customers are government bodies for sales of cannabis in the consumer market.

 

No other single customer contributed 10 per cent or more to the Company’s net revenue during the three months ended September 30, 2022 and 2021.

  29 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

Note 25 Fair Value of Financial Instruments

 

The carrying values of the financial instruments at September 30, 2022 are summarized in the following table:
   Amortized cost  FVTPL  Designated FVTOCI  Total
    $    $    $    $ 
Financial Assets                    
Cash and cash equivalents   369,278    —      —      369,278 
Restricted cash   58,950    —      —      58,950 
Accounts receivable, excluding sales taxes and lease receivable   43,098    —      —      43,098 
Marketable securities   —      —      375    375 
Derivatives   —      25,611    —      25,611 
Loans receivable   776    —      —      776 
Lease receivable   6,386    —      —      6,386 
Financial Liabilities                    
Accounts payable and accrued liabilities   96,664    —      —      96,664 
Convertible debentures   243,607    —      —      243,607 
Contingent consideration payable   —      17,478    —      17,478 
Other current liabilities   12,572    —      —      12,572 
Lease liabilities   41,708    —      —      41,708 
Derivative liability   —      38,109    —      38,109 
Loans and borrowings   40,252    —      —      40,252 
Other long-term liabilities   48,751    —      —      48,751 
.
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 September 30, 2022                         
Marketable securities   5(a)    375    —      —      375 
Derivative assets   5(b)    —      8,349    17,262    25,611 
Contingent consideration payable        —      —      17,478    17,478 
Derivative liability   14, 17(c)    38,109    —      —      38,109 

 

As at June 30, 2022

                         
Marketable securities   5(a)    1,331    —      —      1,331 
Derivative assets   5(b)    —      9,860    16,423    26,283 
Contingent consideration payable        —      —      14,371    14,371 
Derivative liability   14, 17(c)    37,297    —      —      37,297 

 

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

 

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. Certain restricted funds in the amount of $32.4 million are retained by an insurer under the Segregated Accounts Companies Act governed by the Bermuda Monetary Authority. 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 Guaranteed Investment Certificates

  30 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

(“GICs”). The Company mitigates the credit risk associated with the loans receivable by managing and monitoring the underlying business relationship.

 

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 September 30, 2022, $18.8 million of accounts receivable, net of allowances, are from non-government wholesale customers (June 30, 2022 -

$22.5 million). As of September 30, 2022, the Company recognized a $4.2 million provision for expected credit losses (June 30, 2022 - $4.1 million).

 

The Company’s aging of trade receivables was as follows:   
   September 30, 2022  June 30, 2022
    $    $ 
0 - 60 days   22,986    27,563 
61+ days   12,810    4,902 
    35,796    32,465 

The Company’s contractual cash flows from lease receivables is as follows:

        
    Note    September 30, 2022 

 

Next 12 months

       $2,198 
Over 1 year to 2 years        2,285 
Over 2 years to 3 years        1,070 
Over 3 years to 4 years        584 
Over 4 years to 5 years        558 
Thereafter        94 
Total undiscounted lease payments receivable        6,789 
Unearned finance income        (403)
Total lease receivable        6,386 
Current   3    (1,995)
Long-term        4,391 

 

(b) Liquidity risk

          
The composition of the Company’s accounts payable and accrued liabilities was as follows:      
    September 30, 2022    June 30, 2022 
    $    $ 
Trade payables   18,206    13,858 
Accrued liabilities   59,736    34,810 
Payroll liabilities   15,500    18,851 
Excise tax payable   2,261    960 
Other payables   961    1,395 
    96,664    69,874 

  31 
 AURORA CANNABIS INC.
 Notes to the Consolidated Financial Statements
 

Three months ended September 30, 2022 and 2021
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)

 

In addition to the commitments outlined in Note 22, the Company has the following undiscounted contractual obligations as at September 30, 2022, 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   96,664    96,664    —      —      —   
Convertible notes and interest (1)(2)   312,575    15,734    296,841    —      —   
Lease liabilities (2)   54,121    8,669    20,638    13,926    10,888 
Loans and borrowings   39,931    3,342    2,061    6,184    28,344 
Contingent consideration payable (3)   17,478    —      14,576    2,902    —   
    520,769    124,409    334,116    23,012    39,232 

(1)Assumes the principal balance of the debentures outstanding at September 30, 2022 remains unconverted and includes the estimated interest payable until the maturity date.

(2)       Includes interest payable until maturity date.

(3)       Relates to acquired businesses. Payable in cash, shares, or a combination of both at Aurora’s sole discretion.

 

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, 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.

 

As of September 30, 2022, the Company has access to the following capital resources available to fund operations and obligations:

 

$369.3 million cash and cash equivalents; and
Access to the 2021 Shelf Prospectus filed on March 30, 2021 (the “2021 Shelf Prospectus”) for future financings or issuances of securities, including US$185.1 million remaining securities for sale under the 2021 at-the-market (ATM) program (the “ATM Program”). 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 2021 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 2021 Shelf Prospectus are adequate to fund operating activities and cash commitments for investing, financing and strategic activities for the foreseeable future.

 

Note 27 Subsequent Events

 

Subsequent to September 30, 2022, the Company repurchased a total of $31.5 million (US $23.0 million) in principal amount of Senior Notes (Note 14) at a total cost, including accrued interest, of $30.0 million (US $21.8 million).

 

Subsequent to September 30, 2022, the Company issued 23,708,653 common shares under the ATM Program for gross proceeds of $40.2 million (US $29.4 million).

 

 

 

 

 

 

  32 

Exhibit 99.2

 

 

 

AURORA CANNABIS INC.

Interim Management’s Discussion & Analysis (Unaudited)

 

 

For the three months ended September 30, 2022 and 2021 (in Canadian Dollars)

 

 

Interim Management’s Discussion & Analysis

Table of Contents

Business Overview 3
Condensed Statement of Comprehensive Loss 7
Key Quarterly Financial and Operating Results 7
Key Developments During and Subsequent to the Three Months Ended September 30, 2022 8
Financial Review 9
Liquidity and Capital Resources