AURORA CANNABIS INC.
Condensed Consolidated Interim Financial Statements
(Unaudited)
For the three and six months ended September 30, 2023 and 2022
(in Canadian Dollars)
Table of Contents
Condensed Consolidated Interim Statements of Financial Position | |||||
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss | |||||
Condensed Consolidated Interim Statements of Changes in Equity | |||||
Condensed Consolidated Interim Statements of Cash Flows | |||||
Notes to the Condensed Consolidated Interim Financial Statements |
Note 1 | Nature of Operations | Note 10 | Loss per share | |||||||||||||||||
Note 2 | Significant Accounting Policies and Judgments | Note 11 | Other Gains (Losses) | |||||||||||||||||
Note 3 | Biological Assets | Note 12 | Supplemental Cash Flow Information | |||||||||||||||||
Note 4 | Inventory | Note 13 | Commitments and Contingencies | |||||||||||||||||
Note 5 | Property, Plant and Equipment | Note 14 | Revenue | |||||||||||||||||
Note 6 | Assets Held for Sale and Discontinued Operations | Note 15 | Segmented Information | |||||||||||||||||
Note 7 | Convertible Debentures | Note 16 | Fair Value of Financial Instruments | |||||||||||||||||
Note 8 | Loans and Borrowings | Note 17 | Financial Instruments Risk | |||||||||||||||||
Note 9 | Share Capital | Note 18 | Subsequent Events | |||||||||||||||||
AURORA CANNABIS INC.
Condensed Consolidated Interim Statements of Financial Position
As at September 30, 2023 and March 31, 2023
(Amounts reflected in thousands of Canadian dollars)
Note | September 30, 2023 | March 31, 2023 | |||||||||
$ | $ | ||||||||||
Assets | |||||||||||
Current | |||||||||||
Cash and cash equivalents | 128,917 | 234,942 | |||||||||
Restricted cash | 12 | 63,896 | 65,900 | ||||||||
Accounts receivable | 17(a) | 39,720 | 41,345 | ||||||||
Biological assets | 3 | 28,935 | 22,690 | ||||||||
Inventory | 4 | 110,292 | 106,132 | ||||||||
Prepaids and other current assets | 7,888 | 8,280 | |||||||||
Assets held for sale | 6 | 8,333 | 638 | ||||||||
387,981 | 479,927 | ||||||||||
Property, plant and equipment | 5 | 306,840 | 322,969 | ||||||||
Derivative assets | 8,151 | 7,249 | |||||||||
Deposits and other long-term assets | 13,734 | 15,786 | |||||||||
Lease receivable | 17(a) | 7,498 | 6,496 | ||||||||
Intangible assets | 60,124 | 59,680 | |||||||||
Goodwill | 18,715 | 18,715 | |||||||||
Deferred tax assets | 15,328 | 15,500 | |||||||||
Total assets | 818,371 | 926,322 | |||||||||
Liabilities | |||||||||||
Current | |||||||||||
Accounts payable and accrued liabilities | 17(b) | 50,703 | 75,986 | ||||||||
Deferred revenue | 1,348 | 1,739 | |||||||||
Convertible debentures | 7 | 28,406 | 132,571 | ||||||||
Loans and borrowings | 8 | 13,421 | 9,571 | ||||||||
Lease liabilities | 5,223 | 5,413 | |||||||||
Contingent consideration payable | 16, 17(b) | 13,805 | — | ||||||||
Provisions | 4,978 | 4,453 | |||||||||
Other current liabilities | 14 | 88 | 12,572 | ||||||||
117,972 | 242,305 | ||||||||||
Loans and borrowings | 8 | 34,586 | 36,163 | ||||||||
Lease liabilities | 45,375 | 43,804 | |||||||||
Derivative liability | 9(c), 16 | 3,920 | 9,634 | ||||||||
Contingent consideration payable | 16, 17(b) | — | 12,487 | ||||||||
Other long-term liability | 50,896 | 48,047 | |||||||||
Deferred tax liability | 16,574 | 16,745 | |||||||||
Total liabilities | 269,323 | 409,185 | |||||||||
Shareholders’ equity | |||||||||||
Share capital | 9 | 6,898,891 | 6,841,234 | ||||||||
Reserves | 157,912 | 154,040 | |||||||||
Accumulated other comprehensive loss | (211,429) | (212,365) | |||||||||
Deficit | (6,341,593) | (6,296,833) | |||||||||
Total equity attributable to Aurora Cannabis Inc. shareholders | 503,781 | 486,076 | |||||||||
Non-controlling interests | 45,267 | 31,061 | |||||||||
Total equity | 549,048 | 517,137 | |||||||||
Total liabilities and equity | 818,371 | 926,322 |
Nature of Operations (Note 1)
Commitments and Contingencies (Note 13)
Subsequent Events (Note 18)
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.
3
AURORA CANNABIS INC.
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
Three months ended September 30, | Six months ended September 30, | ||||||||||||||||
Note | 2023 | 2022(1) | 2023 | 2022(1) | |||||||||||||
$ | $ | $ | $ | ||||||||||||||
Revenue | 14 | 70,482 | 55,120 | 151,981 | 112,998 | ||||||||||||
Excise taxes | 14 | (7,064) | (6,472) | (13,530) | (13,811) | ||||||||||||
Net revenue | 63,418 | 48,648 | 138,451 | 99,187 | |||||||||||||
Cost of sales | 4 | 44,692 | 47,273 | 105,016 | 92,136 | ||||||||||||
Gross profit before fair value adjustments | 18,726 | 1,375 | 33,435 | 7,051 | |||||||||||||
Changes in fair value of inventory and biological assets sold | 4 | 18,730 | 24,282 | 36,271 | 46,631 | ||||||||||||
Unrealized gain on changes in fair value of biological assets | 3 | (34,453) | (23,815) | (63,326) | (48,472) | ||||||||||||
Gross profit | 34,449 | 908 | 60,490 | 8,892 | |||||||||||||
Expense | |||||||||||||||||
General and administration | 22,744 | 28,862 | 44,305 | 58,664 | |||||||||||||
Sales and marketing | 12,617 | 12,492 | 25,294 | 28,549 | |||||||||||||
Acquisition costs | 563 | 1,914 | 789 | 5,634 | |||||||||||||
Research and development | 946 | 1,170 | 2,047 | 3,161 | |||||||||||||
Depreciation and amortization | 5 | 4,058 | 3,428 | 6,919 | 14,970 | ||||||||||||
Share-based compensation | 4,568 | 2,863 | 6,849 | 6,335 | |||||||||||||
45,496 | 50,729 | 86,203 | 117,313 | ||||||||||||||
Loss from operations | (11,047) | (49,821) | (25,713) | (108,421) | |||||||||||||
Other income (expense) | |||||||||||||||||
Legal settlement and contract termination fees | (428) | (639) | (522) | (1,570) | |||||||||||||
Interest and other income | 3,247 | 4,068 | 6,598 | 4,729 | |||||||||||||
Finance and other costs | (4,224) | (10,630) | (9,556) | (25,559) | |||||||||||||
Foreign exchange gain (loss) | 2,011 | 737 | (1,626) | 1,836 | |||||||||||||
Other gains (losses) | 11 | 12,524 | (1,145) | 12,677 | (8,188) | ||||||||||||
Restructuring charges | (469) | (37) | (901) | (1,013) | |||||||||||||
Impairment of property, plant and equipment | 5, 6(a) | (1,230) | — | (1,230) | (78,724) | ||||||||||||
Impairment of intangible assets and goodwill | — | — | — | (453,797) | |||||||||||||
11,431 | (7,646) | 5,440 | (562,286) | ||||||||||||||
Income (loss) before taxes | 384 | (57,467) | (20,273) | (670,707) | |||||||||||||
Income tax (expense) recovery | |||||||||||||||||
Current | (224) | (2,958) | (439) | (2,535) | |||||||||||||
Deferred, net | 96 | 14,935 | 215 | 15,875 | |||||||||||||
(128) | 11,977 | (224) | 13,340 | ||||||||||||||
Net income (loss) from continuing operations | 256 | (45,490) | (20,497) | (657,367) | |||||||||||||
Net loss from discontinued operations, net of tax | 6(b) | (2,383) | (6,396) | (9,961) | (13,296) | ||||||||||||
Net loss | (2,127) | (51,886) | (30,458) | (670,663) | |||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.
(1) Comparative information has been re-presented due to discontinued operations see Note 6(b).
4
AURORA CANNABIS INC.
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
(Continued)
Three months ended September 30, | Six months ended September 30, | ||||||||||||||||
Note | 2023 | 2022(1) | 2023 | 2022(1) | |||||||||||||
$ | $ | $ | $ | ||||||||||||||
Net income (loss) from continuing operations | 256 | (45,490) | (20,497) | (657,367) | |||||||||||||
Net loss from discontinued operations, net of tax | 6(b) | (2,383) | (6,396) | (9,961) | (13,296) | ||||||||||||
Net loss | (2,127) | (51,886) | (30,458) | (670,663) | |||||||||||||
Other comprehensive loss (“OCI”) that will not be reclassified to net loss | |||||||||||||||||
Unrealized gain on marketable securities | — | (753) | — | (1,735) | |||||||||||||
Other comprehensive income (loss) that may be reclassified to net loss | |||||||||||||||||
Foreign currency translation gain (loss) | (893) | 3,327 | 936 | (330) | |||||||||||||
Comprehensive loss from continuing operations | (637) | (42,916) | (19,561) | (659,432) | |||||||||||||
Comprehensive loss from discontinued operations | (2,383) | (6,396) | (9,961) | (13,296) | |||||||||||||
Comprehensive loss | (3,020) | (49,312) | (29,522) | (672,728) | |||||||||||||
Net income (loss) from continuing operations attributable to: | |||||||||||||||||
Aurora Cannabis Inc. | 1,860 | (45,207) | (17,460) | (657,095) | |||||||||||||
Non-controlling interests | (1,604) | (283) | (3,037) | (272) | |||||||||||||
Net loss from discontinued operations attributable to: | |||||||||||||||||
Aurora Cannabis Inc. | 6(b) | (2,383) | (6,396) | (9,961) | (13,296) | ||||||||||||
Non-controlling interests | — | — | — | — | |||||||||||||
Comprehensive loss attributable to: | |||||||||||||||||
Aurora Cannabis Inc. | (1,416) | (49,029) | (26,485) | (672,456) | |||||||||||||
Non-controlling interests | (1,604) | (283) | (3,037) | (272) | |||||||||||||
Loss per share - basic and diluted | |||||||||||||||||
Continuing operations | 10 | $0.00 | ($0.15) | ($0.05) | ($2.39) | ||||||||||||
Discontinued operations | 10 | ($0.01) | ($0.02) | ($0.03) | ($0.05) | ||||||||||||
Total operations | 10 | ($0.00) | ($0.17) | ($0.08) | ($2.44) |
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.
(1) Comparative information has been re-presented due to discontinued operations see Note 6(b).
5
AURORA CANNABIS INC.
Condensed Consolidated Interim Statements of Changes in Equity
Six months ended September 30, 2023
(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 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, March 31, 2023 | 345,269,310 | 6,841,234 | 212,340 | 27,667 | 419 | (86,800) | 414 | 154,040 | (214,599) | 18,919 | 208 | (16,893) | (212,365) | (6,296,833) | 31,061 | 517,137 | |||||||||||||||||||||||||||||||||||||||||||
Shares issued to repurchase convertible debentures | 7 | 72,593,292 | 54,680 | — | — | — | — | — | — | — | — | — | — | — | — | — | 54,680 | ||||||||||||||||||||||||||||||||||||||||||
Shares issued through equity financing | 2,580,350 | 2,271 | — | — | — | — | (414) | (414) | — | — | — | — | — | — | — | 1,857 | |||||||||||||||||||||||||||||||||||||||||||
Share issuance costs | — | (722) | — | — | — | — | — | — | — | — | — | — | — | — | — | (722) | |||||||||||||||||||||||||||||||||||||||||||
Deferred tax on transaction costs | — | (215) | — | — | — | — | — | — | — | — | — | — | — | — | — | (215) | |||||||||||||||||||||||||||||||||||||||||||
Share issued under RSU, PSU and DSU plans | 166,189 | 1,643 | (1,643) | — | — | — | — | (1,643) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | 5,929 | — | — | — | — | 5,929 | — | — | — | — | — | — | — | 5,929 | |||||||||||||||||||||||||||||||||||||||||||
Put option liability | — | — | — | — | — | — | — | — | — | — | — | — | — | (2,668) | — | (2,668) | |||||||||||||||||||||||||||||||||||||||||||
Change in ownership interests in net assets | 5, 6(b) | — | — | — | — | — | — | — | — | — | — | — | — | — | (14,671) | 17,243 | 2,572 | ||||||||||||||||||||||||||||||||||||||||||
Comprehensive loss for the period | — | — | — | — | — | — | — | — | — | — | — | 936 | 936 | (27,421) | (3,037) | (29,522) | |||||||||||||||||||||||||||||||||||||||||||
Balance, September 30, 2023 | 420,609,141 | 6,898,891 | 216,626 | 27,667 | 419 | (86,800) | — | 157,912 | (214,599) | 18,919 | 208 | (15,957) | (211,429) | (6,341,593) | 45,267 | 549.048 |
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
Six 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 | 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, March 31, 2022 | 224,329,745 | 6,570,995 | 203,877 | 27,667 | 419 | (86,800) | — | 145,163 | (212,412) | 18,919 | 208 | (13,797) | (207,082) | (5,419,488) | 500 | 1,090,088 | |||||||||||||||||||||||||||||||||||||||||||
Shares issued/issuable for business combinations | 5,082,416 | 18,913 | — | — | — | — | — | — | — | — | — | — | — | — | — | 18,913 | |||||||||||||||||||||||||||||||||||||||||||
Shares issued through equity financing | 70,897,389 | 184,443 | — | — | — | — | 1,448 | 1,448 | — | — | — | — | — | — | — | 185,891 | |||||||||||||||||||||||||||||||||||||||||||
Share issuance costs | — | (10,251) | — | — | — | — | — | — | — | — | — | — | — | — | — | (10,251) | |||||||||||||||||||||||||||||||||||||||||||
Deferred tax on transaction costs | — | (1,119) | — | — | — | — | — | — | — | — | — | — | — | — | (1,119) | ||||||||||||||||||||||||||||||||||||||||||||
Exercise of RSUs, PSUs, and DSUs | 127,883 | 1,640 | (1,640) | — | — | — | — | (1,640) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | 6,260 | — | — | — | — | 6,260 | — | — | — | — | — | — | — | 6,260 | |||||||||||||||||||||||||||||||||||||||||||
NCI Contribution | — | — | — | — | — | — | — | — | — | — | — | — | — | 25,891 | 25,891 | ||||||||||||||||||||||||||||||||||||||||||||
Recognition of put option liability | — | — | — | — | — | — | — | — | — | — | — | — | — | (48,448) | — | (48,448) | |||||||||||||||||||||||||||||||||||||||||||
Change in ownership interests in subsidiaries | — | — | — | — | — | — | — | — | — | — | — | — | — | (11,923) | 11,923 | — | |||||||||||||||||||||||||||||||||||||||||||
Comprehensive loss for the period | — | — | — | — | — | — | — | — | (1,735) | — | — | (330) | (2,065) | (670,391) | (272) | (672,728) | |||||||||||||||||||||||||||||||||||||||||||
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.
7
AURORA CANNABIS INC.
Condensed Consolidated Interim Statements of Cash Flows
Six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars)
Three months ended September 30, | Six months ended September 30, | ||||||||||||||||
Note | 2023 | 2022(1) | 2023 | 2022(1) | |||||||||||||
$ | $ | ||||||||||||||||
Operating activities | |||||||||||||||||
Net income (loss) from continuing operations | 256 | (45,490) | (20,497) | (657,367) | |||||||||||||
Adjustments for non-cash items: | |||||||||||||||||
Unrealized gain on changes in fair value of biological assets | 3 | (34,453) | (23,815) | (63,326) | (48,472) | ||||||||||||
Changes in fair value of inventory and biological assets sold | 4 | 18,730 | 24,282 | 36,271 | 46,631 | ||||||||||||
Depreciation of property, plant and equipment | 5 | 7,255 | 9,339 | 17,018 | 21,974 | ||||||||||||
Amortization of intangible assets | 274 | 181 | 519 | 8,500 | |||||||||||||
Share-based compensation | 4,568 | 2,863 | 6,849 | 6,335 | |||||||||||||
Impairment of property, plant and equipment | 5, 6(a) | 1,230 | — | 1,230 | 78,724 | ||||||||||||
Impairment of intangible assets and goodwill | — | — | — | 453,797 | |||||||||||||
Net interest accrual and accretion | 7 | 1,732 | 2,914 | 5,284 | 22,155 | ||||||||||||
Deferred tax recovery | (4) | (14,935) | (74) | (15,875) | |||||||||||||
Other (gains) losses | 11 | (12,524) | 1,233 | (12,677) | 4,579 | ||||||||||||
Foreign exchange (gain) loss | (988) | 6,087 | 1,141 | 2,945 | |||||||||||||
Restructuring provisions | — | 37 | — | 2,768 | |||||||||||||
Deferred compensation amortization | 952 | — | 1,904 | — | |||||||||||||
Cash used by operating activities before changes in non-cash working capital and discontinued operations | (12,972) | (37,304) | (26,358) | (73,306) | |||||||||||||
Changes in non-cash working capital | 12 | (14,781) | 9,346 | (12,770) | 23,877 | ||||||||||||
Net cash used in operating activities from discontinued operations | (3,129) | (3,180) | (2,991) | (8,370) | |||||||||||||
Net cash used in operating activities | (30,882) | (31,138) | (42,119) | (57,799) | |||||||||||||
Investing activities | |||||||||||||||||
Proceeds from investment in derivatives | — | 203 | — | 203 | |||||||||||||
Loan receivable | — | (760) | — | (776) | |||||||||||||
Purchase of property, plant and equipment and intangible assets | 5 | (4,186) | (4,476) | (8,483) | (10,376) | ||||||||||||
Proceeds from disposal of property, plant and equipment and assets held for sale | 6(a) | 207 | 5,573 | 2,601 | 635 | ||||||||||||
Acquisition of businesses, net of cash acquired | — | (38,790) | — | (63,257) | |||||||||||||
Payment of contingent consideration | — | — | — | (98) | |||||||||||||
Deposits (paid) received | — | (2,602) | — | (3,757) | |||||||||||||
Net cash used by investing activities from discontinued operations | — | (1,079) | (255) | (4,241) | |||||||||||||
Net cash used in investing activities | (3,979) | (41,931) | (6,137) | (81,667) | |||||||||||||
Financing activities | |||||||||||||||||
Proceeds from long-term loans | 8 | 3,982 | 842 | 3,982 | 842 | ||||||||||||
Repayment of long-term loans | 8 | (516) | (701) | (1,032) | (701) | ||||||||||||
Repayment of convertible debenture | 7 | — | — | (61,867) | (145,650) | ||||||||||||
Net payments of principal portion of lease liabilities | (1,316) | (1,606) | (2,754) | (3,451) | |||||||||||||
Restricted cash | 12 | 1,759 | (7,978) | 2,004 | (8,292) | ||||||||||||
Shares issued for cash, net of share issue costs | (174) | (119) | 1,548 | 209,814 | |||||||||||||
Net cash used in financing activities from discontinued operations | — | (72) | (89) | (157) | |||||||||||||
Net cash provided by (used in) financing activities | 3,735 | (9,634) | (58,208) | 52,405 | |||||||||||||
Effect of foreign exchange on cash and cash equivalents | 2,188 | 14,174 | 439 | 26,445 | |||||||||||||
Increase (decrease) in cash and cash equivalents | (28,938) | (68,529) | (106,025) | (60,616) | |||||||||||||
Cash and cash equivalents, beginning of period | 157,855 | 437,807 | 234,942 | 429,894 | |||||||||||||
Cash and cash equivalents, end of period | 128,917 | 369,278 | 128,917 | 369,278 |
Supplemental cash flow information (Note 12)
The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.
(1) Comparative information has been re-presented due to discontinued operations see Note 6(b).
8
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(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 Capital Market (“Nasdaq”) and the Toronto Stock Exchange (“TSX”) under the trading symbol “ACB”, and on the Frankfurt Stock Exchange (“FSE”) under the trading symbol “21P1”.
The Company’s head office and principal address is 2207 90B St. SW Edmonton, Alberta T6X 1V8. The Company’s registered and records office address is Suite 1700, 666 Burrard Street, Vancouver, British Columbia, Canada, 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 Caribbean, South America and Israel.
•
The Company has a 50.1% controlling interest in Bevo Agtech Inc. (“Bevo”), the sole parent of Bevo Farms Ltd., 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 interim consolidated interim financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) Accounting Standards and International Accounting Standards (“IFRS”) 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 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(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 March 31, 2023, including the accompanying notes thereto.
(b) Basis of Consolidation
The condensed consolidated interim financial statements include the financial results of the Company and its subsidiaries. Subsidiaries include entities which are wholly-owned as well as entities over which Aurora has the authority or ability to exert power over the investee’s financial and/or operating decisions (i.e. control), which in turn may affect the Company’s exposure or rights to the variable returns from the investee. The consolidated interim financial statements include the operating results of acquired or disposed entities from the date control is obtained or the date control is lost, respectively. All intercompany balances and transactions are eliminated upon consolidation.
The Company’s principal subsidiaries during the three and six months ended September 30, 2023 are as follows:
Major subsidiaries | Percentage Ownership | Functional Currency | ||||||
Aurora Cannabis Enterprises Inc. (“ACE”) | 100% | Canadian Dollar | ||||||
Aurora Deutschland GmbH (“Aurora Deutschland”) | 100% | European Euro | ||||||
TerraFarma Inc. | 100% | Canadian Dollar | ||||||
Whistler Medical Marijuana Corporation (“Whistler”) | 100% | Canadian Dollar | ||||||
Bevo Agtech Inc. (“Bevo”) | 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.
9
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
(c) Discontinued operations
The Company reports financial results for discontinued operations separately from continuing operations to distinguish the financial impact of disposal transactions from ongoing operations. Discontinued operations reporting occurs when the disposal of a component or a group of components of the Company represents a strategic shift that will have an impact on the Company’s operations and financial results, and where the operations and cash flows can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company.
The results of discontinued operations are excluded from both continuing operations and business segment information in the condensed consolidated interim financial statements and the notes to the consolidated financial statements, unless otherwise noted, and are presented net of tax in the condensed consolidated interim statements of loss and comprehensive loss for the current and comparative periods. Refer to Note 6(b) Discontinued Operations.
(d) Adoption of New Accounting Pronouncements
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 does not currently have any contracts to be accounted for under this standard. The Company, however has a wholly owned captive insurance entity that is required to adopt this standard when reporting on a standalone basis. The impact of the captive insurance company adopting IFRS 17 was immaterial to the Company’s condensed consolidated interim 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.
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 will make this assessment as required at the end of each reporting date.
Amendments to IAS 1: Covenants
The amendment that clarify how an entity classifies debt and other financial liabilities as current or non-current in particular circumstances. The amendments applies retrospectively for annual periods beginning on or after January 1, 2024. Management will perform this assessment each reporting period as required and evaluate the potential impact of this standard on the Company’s consolidated financial statements.
Note 3 Biological Assets
The following is a breakdown of biological assets:
September 30, 2023 | March 31, 2023 | |||||||
$ | $ | |||||||
Indoor cannabis production facilities | 15,934 | 8,428 | ||||||
Outdoor cannabis production facilities | 3,899 | — | ||||||
Plant propagation production facilities | 9,102 | 14,262 | ||||||
28,935 | 22,690 |
10
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
The changes in the carrying value of biological assets during the period are as follows:
$ | ||||||||
Balance, March 31, 2023 | 22,690 | |||||||
Production costs capitalized | 37,254 | |||||||
Sale of biological assets | (20,517) | |||||||
Impairment related to discontinued operations | (1,032) | |||||||
Foreign currency translation | (10) | |||||||
Changes in fair value less cost to sell due to biological transformation | 63,326 | |||||||
Transferred to inventory upon harvest | (72,776) | |||||||
Balance, September 30, 2023 | 28,935 |
a) Indoor cannabis production facilities
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:
Significant inputs & assumptions | Range of inputs | Sensitivity | Impact on fair value | ||||||||||||||
September 30, 2023 | March 31, 2023 | September 30, 2023 | March 31, 2023 | ||||||||||||||
Average selling price per gram | $4.56 | $4.42 | Increase or decrease of $1.00 per gram | $4,432 | $3,360 | ||||||||||||
Weighted average yield (grams per plant) | 63.79 | 38.80 | Increase or decrease by 5 grams per plant | $1,213 | $1,438 | ||||||||||||
Weighted average effective yield | 97 | % | 91 | % | Increase or decrease by 5% | $797 | $395 | ||||||||||
Cost per gram to complete production | $1.02 | $1.65 | Increase or decrease of $1.00 per gram | $4,537 | $3,427 |
As of September 30, 2023, the weighted average fair value less cost to complete and cost to sell a gram of dried cannabis produced at the Company’s indoor cannabis cultivation facilities was $3.33 per gram (March 31, 2023 - $2.43 per gram).
During the three and six months ended September 30, 2023, the Company’s indoor cannabis biological assets produced 12,692 and 22,277 kilograms of dried cannabis, respectively (three and six months ended September 30, 2022 - 16,873 and 32,983 kilograms, respectively). As at September 30, 2023, it is expected that the Company’s indoor cannabis biological assets will yield approximately 9,934 kilograms (March 31, 2023 – 7,667 kilograms) of dried cannabis when harvested and the weighted average stage of growth for indoor biological assets was 47% (March 31, 2023 – 44%).
b) Plant propagation production facilities
The following table highlights the sensitivities and impact of changes in significant assumptions on the fair value of biological assets grown at plant propagation production facilities:
Significant inputs & assumptions | Range of inputs | Sensitivity | Impact on fair value | ||||||||||||||
September 30, 2023 | March 31, 2023 | September 30, 2023 | March 31, 2023 | ||||||||||||||
Average selling price per floral/bedding plant | $4.02 | $7.58 | Increase or decrease by 10% | $364 | $1,682 | ||||||||||||
Average stage of completion in the production process | 53 | % | 56 | % | Increase or decrease by 10% | $639 | $2,295 |
As of September 30, 2023, the weighted average fair value less cost to complete and cost to sell per propagation plant was $2.39 per plant (March 31, 2023 - $2.35).
During the three and six months ended September 30, 2023, biological assets relating to the plant propagation segment was expensed to cost of goods sold was $6.0 million and $20.5 million, respectively (three and six months ended September 30, 2022 - $3.2 million and $3.2 million, respectively, which included $2.7 million and $4.3 million, respectively (three and six months ended September 30, 2022 - $1.0 million and $1.0 million, respectively) of non-cash expense related to the changes in fair value of biological assets sold.
11
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
Note 4 Inventory
The following is a breakdown of inventory:
September 30, 2023 | March 31, 2023 | |||||||||||||||||||
Capitalized cost | Fair value adjustment | Carrying value | Capitalized cost | Fair value adjustment | Carrying value | |||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||
Harvested cannabis | ||||||||||||||||||||
Work-in-process | 29,897 | 25,255 | 55,152 | 30,936 | 14,756 | 45,692 | ||||||||||||||
Finished goods | 13,554 | 4,448 | 18,002 | 13,518 | 1,777 | 15,295 | ||||||||||||||
43,451 | 29,703 | 73,154 | 44,454 | 16,533 | 60,987 | |||||||||||||||
Extracted cannabis | ||||||||||||||||||||
Work-in-process | 10,270 | 3,409 | 13,679 | 11,566 | 2,753 | 14,319 | ||||||||||||||
Finished goods | 7,656 | 459 | 8,115 | 8,786 | 561 | 9,347 | ||||||||||||||
17,926 | 3,868 | 21,794 | 20,352 | 3,314 | 23,666 | |||||||||||||||
Supplies and consumables | 13,278 | — | 13,278 | 19,923 | — | 19,923 | ||||||||||||||
Merchandise and accessories | 2,066 | — | 2,066 | 1,556 | — | 1,556 | ||||||||||||||
Ending balance | 76,721 | 33,571 | 110,292 | 86,285 | 19,847 | 106,132 |
During the three and six months ended September 30, 2023, inventory expensed to cost of goods sold was $57.5 million and $120.8 million respectively (three months ended September 30, 2022 - $68.3 million and $135.6 million, respectively), which included $16.1 million and $31.9 million, respectively (three and six months ended September 30, 2022 - $23.3 million and $45.7 million, respectively) related to the changes in fair value of inventory sold.
During the three and six months ended September 30, 2023, the Company recognized $20.0 million and $38.4 million, respectively in impairment losses (three and six months ended September 30, 2022 - $47.5 million and $74.1 million, respectively) consisting of cost of sales of $11.1 million and $19.1 million, respectively (three and six months ended September 30, 2022 - $25.1 million and $36.4 million, respectively) and consisting of changes in fair value of inventory sold of $8.9 million and $19.3 million, respectively (three and six months ended September 30, 2022 - $22.4 million and $37.7 million, respectively).
Note 5 Property, Plant and Equipment
The following summarizes the carrying values of property, plant and equipment for the periods reflected:
September 30, 2023 | March 31, 2023 | |||||||||||||||||||||||||
Cost | Accumulated depreciation | Impairment | Net book value | Cost | Accumulated depreciation | Impairment | Net book value | |||||||||||||||||||
Owned assets | ||||||||||||||||||||||||||
Land | 42,069 | — | — | 42,069 | 52,077 | — | (1,820) | 50,257 | ||||||||||||||||||
Buildings | 240,408 | (91,653) | — | 148,755 | 239,353 | (83,888) | (3,842) | 151,623 | ||||||||||||||||||
Construction in progress | 27,085 | — | (645) | 26,440 | 37,563 | — | (11,945) | 25,618 | ||||||||||||||||||
Computer software & equipment | 31,220 | (29,944) | — | 1,276 | 31,313 | (29,570) | (20) | 1,723 | ||||||||||||||||||
Furniture & fixtures | 7,857 | (6,110) | — | 1,747 | 7,434 | (5,596) | (42) | 1,796 | ||||||||||||||||||
Production & other equipment | 144,442 | (93,232) | — | 51,210 | 146,960 | (87,425) | (1,686) | 57,849 | ||||||||||||||||||
Total owned assets | 493,081 | (220,939) | (645) | 271,497 | 514,700 | (206,479) | (19,355) | 288,866 | ||||||||||||||||||
Right-of-use lease assets | ||||||||||||||||||||||||||
Land | 13,890 | (1,473) | — | 12,417 | 14,859 | (1,345) | (969) | 12,545 | ||||||||||||||||||
Buildings | 38,969 | (16,409) | — | 22,560 | 36,789 | (15,836) | — | 20,953 | ||||||||||||||||||
Production & other equipment | 5,196 | (4,830) | — | 366 | 5,343 | (4,738) | — | 605 | ||||||||||||||||||
Total right-of-use lease assets | 58,055 | (22,712) | — | 35,343 | 56,991 | (21,919) | (969) | 34,103 | ||||||||||||||||||
Total property, plant and equipment | 551,136 | (243,651) | (645) | 306,840 | 571,691 | (228,398) | (20,324) | 322,969 |
12
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
The following summarizes the changes in the net book values of property, plant and equipment for the periods presented:
Balance, March 31, 2023 | Additions | Disposals | Other (1) | Depreciation | Impairment | Foreign currency translation | Balance, September 30, 2023 | ||||||||||||||||||||||
Owned assets | |||||||||||||||||||||||||||||
Land | 50,257 | — | — | (7,978) | — | — | (210) | 42,069 | |||||||||||||||||||||
Buildings | 151,623 | 456 | — | 2,551 | (6,315) | — | 440 | 148,755 | |||||||||||||||||||||
Construction in progress | 25,618 | 6,229 | — | (4,585) | (145) | (645) | (32) | 26,440 | |||||||||||||||||||||
Computer software & equipment | 1,723 | 15 | — | (3) | (453) | — | (6) | 1,276 | |||||||||||||||||||||
Furniture & fixtures | 1,796 | 375 | — | 127 | (535) | — | (16) | 1,747 | |||||||||||||||||||||
Production & other equipment | 57,849 | 232 | (234) | 2,602 | (9,282) | — | 43 | 51,210 | |||||||||||||||||||||
Total owned assets | 288,866 | 7,307 | (234) | (7,286) | (16,730) | (645) | 219 | 271,497 | |||||||||||||||||||||
Right-of-use leased assets | |||||||||||||||||||||||||||||
Land | 12,545 | — | — | — | (128) | — | — | 12,417 | |||||||||||||||||||||
Buildings | 20,953 | 5,232 | (1,886) | — | (1,625) | — | (114) | 22,560 | |||||||||||||||||||||
Production & other equipment | 605 | — | (68) | — | (163) | — | (8) | 366 | |||||||||||||||||||||
Total right-of-use lease assets | 34,103 | 5,232 | (1,954) | — | (1,916) | — | (122) | 35,343 | |||||||||||||||||||||
Total property, plant and equipment | 322,969 | 12,539 | (2,188) | (7,286) | (18,646) | (645) | 97 | 306,840 |
(1)Includes reclassification of construction in progress cost when associated projects are complete. Includes the transfer of land and equipment of $8.3 million to assets held for sale as at September 30, 2023 (Note 6).
Depreciation relating to manufacturing equipment and production facilities for owned and right-of-use leased assets is capitalized to inventory and is expensed to cost of sales upon the sale of goods. During the three and six months ended September 30, 2023, the Company recognized $8.9 million and $18.6 million, respectively (three and six months ended September 30, 2022 - $9.7 million and $23.9 million, respectively) of depreciation expense of which $5.1 million and $10.6 million, respectively (three and six months ended September 30, 2022 - $4.7 million and $11.5 million, respectively) was reflected in cost of sales.
The Company entered into an agreement to sell its Aurora Sun facility in Medicine Hat, Alberta and related assets and liabilities to Bevo through the sale of one of the Company’s wholly-owned subsidiaries (the “Aurora Sun Transaction”). Up to $15.0 million could be payable over time by Bevo to the Company in connection with the Aurora Sun Transaction, based on Bevo successfully achieving certain financial milestones at the Aurora Sun Facility. If certain other operational and financial milestones are met, up to an additional $1.0 million could be payable by Bevo to Aurora. The Aurora Sun Transaction closed on July 21, 2023. 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 at $14.7 million with a corresponding decrease to deficit on the consolidated statement of financial position.
Note 6 Assets Held for Sale and Discontinued Operations
(a) Assets Held for Sale
Assets held for sale are comprised of the following:
Whistler Alpha Lake | European R&D Facility & Land | Total | |||||||||||||||||||||||||||
Balance, March 31, 2023 | 638 | — | 638 | ||||||||||||||||||||||||||
Transfer from property, plant, and equipment | — | 8,919 | 8,919 | ||||||||||||||||||||||||||
Impairment | — | (585) | (585) | ||||||||||||||||||||||||||
Foreign exchange | — | (1) | (1) | ||||||||||||||||||||||||||
Proceeds from disposal | (2,270) | — | (2,270) | ||||||||||||||||||||||||||
Gain on disposal | 1,632 | — | 1,632 | ||||||||||||||||||||||||||
Balance, September 30, 2023 | — | 8,333 | 8,333 |
13
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
Whistler Alpha Lake
In connection with the restructuring announced during the year ended June 30, 2022, the Company listed its Whistler Alpha Lake facility for sale. As a result, the Company reclassified property, plant, and equipment of $0.6 million to assets held for sale. During the six months ended September 30, 2023, the facility was sold for net proceeds of $2.3 million. The Company recognized a gain of $1.6 million on disposal, which is recognized in other gains (losses) in the condensed consolidated interim financial statements of loss and comprehensive loss (Note 11).
European R&D Facility and Land
During the six months ended September 30, 2023, the Company decided to sell a European R&D Facility and to exit the agreement with its partners in Growery B.V. (“Growery”), one of the license holders entitled to participate in the Netherlands’ still-pending Controlled Cannabis Supply Chain Experiment. As a result, the Company reclassified the related property, plant, and equipment of $8.9 million to assets held for sale. On November 3, 2023, the Company sold its interest in Aurora Netherland B.V., a subsidiary that owns the R&D facility and related assets of Growery for gross proceeds of approximately $8.3 million (Euro 5.8 million). Refer to Note 18 Subsequent Events. As a result, the Company recognized an impairment loss of $0.6 million (Euro 0.4 million) during the six months ended September 30, 2023.
b) Discontinued Operations
During the three months ended September 30, 2023, the Company formally made the decision to wind down its Reliva operations, based on recent pronouncements by the U.S. Food Drug Administration (“FDA”) regarding potential CBD regulation pathways and timelines. The Company does not expect to incur any additional expenses in connection with the wind down.
During the three months ended June 30, 2023, the Company formally made the decision to close its Aurora Nordic facility (“Nordic”), located in Denmark due to a number of operational and regulatory challenges.
In connection with the closures of Nordic, Growery and Reliva, the Company has reported these as discontinued operations as the operations and cash flows can be clearly distinguished, operationally and for financial reporting purposes from the rest of the Company.
The following table summarizes the Company's consolidated discontinued operations for the respective periods:
Three months ended September 30, | Six months ended September 30, | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
Revenue | 120 | 615 | 275 | 291 | ||||||||||
Cost of sales | 1,784 | 551 | 5,524 | 2,948 | ||||||||||
Changes in fair value of inventory and biological assets sold | 5,175 | (19) | 5,449 | 2,831 | ||||||||||
Unrealized (loss) gain on changes in fair value of biological assets | (5,175) | 2,699 | (4,411) | 722 | ||||||||||
General and administration expenses | 562 | 511 | 1,334 | 1,223 | ||||||||||
Sales and marketing | 240 | 315 | 438 | 635 | ||||||||||
Research and development | 175 | 433 | 301 | 898 | ||||||||||
Depreciation | — | 128 | (350) | 338 | ||||||||||
Interest | 200 | — | 200 | — | ||||||||||
Finance costs | 37 | (60) | (183) | (218) | ||||||||||
Foreign exchange | 60 | 1,919 | 42 | 15 | ||||||||||
Impairment of property, plant, and equipment | — | — | 85 | — | ||||||||||
Impairment of goodwill | — | — | — | 3,661 | ||||||||||
Other (gain) loss | (609) | 534 | (609) | 534 | ||||||||||
Current tax | 5 | — | 5 | — | ||||||||||
Deferred tax | 49 | — | — | — | ||||||||||
Loss on disposal of discontinued operations | — | — | 2,411 | — | ||||||||||
2,503 | 7,011 | 10,236 | 13,587 | |||||||||||
Net loss from discontinued operations | (2,383) | (6,396) | (9,961) | (13,296) | ||||||||||
14
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
Note 7 Convertible Debentures
$ | ||||||||||||||
Balance, March 31, 2023 | 132,571 | |||||||||||||
Interest paid | (2,703) | |||||||||||||
Accretion | 4,643 | |||||||||||||
Accrued interest | 1,999 | |||||||||||||
Amortized cost of debt repurchased | (107,588) | |||||||||||||
Unrealized gain on foreign exchange | (516) | |||||||||||||
Balance, September 30, 2023 | 28,406 | |||||||||||||
During the three and six months ended September 30, 2023 the Company repurchased a total of $41.2 million and $118.0 million, respectively (US$30.5 million and US$87.5 million) (three and six months ended September 30, 2022 - nil and $155.3 million (nil and US$120.0 million) ) in principal amount of the Senior Notes at a total cost, including accrued interest, of $41.3 million and $117.0 million, respectively (US$30.6 million and US$86.8 million) (three and six months ended September 30, 2022 - nil and $149.2 million (nil and US$115.3 million)) and recognized a loss of $2.0 million and $7.9 million (three and six months ended September 30, 2022 - nil and $18.3 million) within other gains (losses) in the condensed consolidated interim financial statements of loss and comprehensive loss. Refer to Note 18 Subsequent Events.
During the three months ended September 30, 2023, the convertible senior notes were repurchased at a 0.61% average discount to par value, for aggregate consideration of 53,901,522 Common Shares (September 30, 2022 - nil).
During the six month ended September 30, 2023, the convertible senior notes, were repurchased at a 2.3% (September 30, 2022 - 5.2%) average discount to par value, for aggregate cash consideration of approximately $61.9 million (U.S$46.0 million) and the issuance of 72,593,292 Common Shares (September 30, 2022 - cash consideration of $145.7 million (U.S$120.0 million).
Note 8 Loans and Borrowings
The changes in the carrying value of current and non-current term loan credit facilities are as follows:
Term loan credit facilities | ||||||||
$ | ||||||||
Balance, March 31, 2023 | 45,734 | |||||||
Drawings | 3,982 | |||||||
Interest accretion | 907 | |||||||
Interest payments | (1,584) | |||||||
Principal repayments | (1,032) | |||||||
Balance, September 30, 2023 | 48,007 | |||||||
Current portion | (13,421) | |||||||
Long-term portion | 34,586 |
On April 11, 2023, the Credit Agreement was amended to reduce the amounts available to be drawn from the Term Loan by $9.7 million to $38.1 million and increase the amounts available to be drawn from the Revolver by $4.0 million to $12.0 million. There were nominal costs incurred for the amendments, which were recognized immediately to finance and other costs in the condensed consolidated interim statements of loss and comprehensive loss.
Under the terms of the amended 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, 2023, the Company was in compliance with all covenants relating to the Credit Agreement.
Term loan
During the three and six months ended September 30, 2023, total interest expense of $0.8 million and $1.6 million, respectively (three and six months ended September 30, 2022 - $0.8 million and $1.3 million) was recognized as finance and other costs in the condensed consolidated interim statements of loss and comprehensive loss. As at September 30, 2023, the total term loan payable is $36.6 million. Refer to Note 18 - Subsequent Events.
Revolver
The Revolver provides available aggregate borrowings of up to $12.0 million. As at September 30, 2023, $11.3 million (March 31, 2023 - $7.5 million) was drawn from the revolver loan.
15
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
Note 9 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.
ii.Unlimited number of Class “A” Shares each with a par value of $1.00. As at September 30, 2023, no Class “A” Shares were issued and outstanding.
iii.Unlimited number of Class “B” Shares each with a par value of $5.00. As at September 30, 2023, no Class “B” Shares were issued and outstanding.
(b) Shares Issued and Outstanding
At September 30, 2023, 420,609,141 Common Shares (March 31, 2023 – 345,269,310) were issued and fully paid. Refer to Note 18 for subsequent events.
(c) Share Purchase Warrants
A summary of warrants outstanding is as follows:
Warrants | Weighted average exercise price | |||||||
# | $ | |||||||
Balance, March 31, 2023 | 89,124,788 | 7.09 | ||||||
Balance, September 30, 2023 | 88,610,302 | 6.43 |
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, March 31, 2023 | 75 | 45 | 9,514 | 9,634 | 54 | 33 | 7,041 | 7,128 | |||||||||||||||||||||
Unrealized (loss) gain on derivative liability | 1 | — | (6,644) | (6,643) | — | — | (4,928) | (4,928) | |||||||||||||||||||||
Balance, September 30, 2023 | 76 | 45 | 2,870 | 2,991 | 54 | 33 | 2,113 | 2,200 | |||||||||||||||||||||
The following table summarizes the warrants that remain outstanding as at September 30, 2023:
Exercise Price ($) | Expiry Date | Warrants (#) | ||||||
4.35 - 41.88 (2) | January 26, 2024 - November 30, 2025 | 88,596,596 | ||||||
116.09 - 116.09 (1) | August 9, 2023 to August 22, 2024 | 13,706 | ||||||
88,610,302 |
(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.
16
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
Note 10 Loss Per Share
The following is a reconciliation of basic and diluted loss per share:
Basic and diluted loss per share
Three months ended September 30, | Six months ended September 30, | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
Net income (loss) from continuing operations attributable to Aurora shareholders | $1,860 | ($45,207) | ($17,460) | ($657,095) | ||||||||||
Net loss from discontinued operations attributable to Aurora shareholders | ($2,383) | ($6,396) | ($9,961) | ($13,296) | ||||||||||
Net loss attributable to Aurora shareholders | ($523) | ($51,603) | ($27,421) | ($670,391) | ||||||||||
Weighted average number of Common Shares outstanding | 383,970,662 | 300,205,395 | 368,764,643 | 274,639,255 | ||||||||||
Basic loss per share, continuing operations | $0.00 | ($0.15) | ($0.05) | ($2.39) | ||||||||||
Basic loss per share, discontinued operations | ($0.01) | ($0.02) | ($0.03) | ($0.05) | ||||||||||
Basic loss per share | ($0.00) | ($0.17) | ($0.07) | ($2.44) |
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 are anti-dilutive.
Note 11 Other Gains (Losses)
Three months ended September 30, | Six months ended September 30, | ||||||||||||||||
Note | 2023 | 2022 | 2023 | 2022 | |||||||||||||
$ | $ | $ | $ | ||||||||||||||
Share of net income from investment in associates | — | 30 | — | 81 | |||||||||||||
Unrealized gain (loss) on derivative investments | 488 | (135) | 876 | (3,484) | |||||||||||||
Unrealized gain (loss) on derivative liability | 9(c) | 2,723 | (812) | 6,643 | 14,936 | ||||||||||||
Unrealized loss on changes in contingent consideration fair value | (756) | — | (1,170) | (2) | |||||||||||||
Gain (loss) on disposal of assets held for sale and property, plant and equipment | 5, 6(a) | (205) | (277) | 1,426 | 3,752 | ||||||||||||
Government grant income (expense) (1) | 12,547 | — | 12,547 | (867) | |||||||||||||
Provisions | — | — | 200 | (3,372) | |||||||||||||
Realized loss on repurchase of convertible debt | 7 | (1,973) | — | (7,914) | (18,348) | ||||||||||||
Other (losses) gains | (300) | 49 | 69 | (884) | |||||||||||||
Total other gains (losses) | 12,524 | (1,145) | 12,677 | (8,188) |
(1) During the three months ended September 30, 2023, a provision of $12.4 million recorded in other current liabilities was reversed as a result a Canadian Revenue Agency audit over CEWS payments with no proposed audit adjustments. The provision was established to account for uncertainty with respect to eligibility of the government grant that was expeditiously rolled out in response to the Covid-19 pandemic.
17
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
Note 12 Supplemental Cash Flow Information
The changes in non-cash working capital are as follows:
Three months ended September 30, | Six months ended September 30, | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
$ | $ | |||||||||||||
Accounts receivable | (7,265) | 4,598 | 954 | 8,518 | ||||||||||
Biological assets | (12,389) | (17,996) | (16,726) | (35,788) | ||||||||||
Inventory | 14,976 | 19,340 | 29,853 | 39,515 | ||||||||||
Prepaid and other current assets | 2,130 | 1,868 | 437 | 1,785 | ||||||||||
Accounts payable and accrued liabilities | (11,386) | (26) | (27,018) | 8,635 | ||||||||||
Income taxes payable | (285) | 2,887 | — | 2,376 | ||||||||||
Deferred revenue | (562) | (43) | (333) | (1,652) | ||||||||||
Provisions | — | (1,290) | — | 922 | ||||||||||
Other current liabilities | — | 8 | 63 | (434) | ||||||||||
Changes in operating assets and liabilities | (14,781) | 9,346 | (12,770) | 23,877 |
Additional supplementary cash flow information is as follows:
Three months ended September 30, | Six months ended September 30, | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
$ | $ | |||||||||||||
Property, plant and equipment in accounts payable | 221 | (615) | (1,839) | (2,702) | ||||||||||
Right-of-use asset additions | — | 154 | — | (205) | ||||||||||
Amortization of prepaids | 3,769 | 8,656 | 8,753 | 15,590 | ||||||||||
Interest paid | 4,506 | 3,773 | 6,922 | 3,498 | ||||||||||
Interest received | (661) | (587) | (1,524) | (786) |
Included in restricted cash as of September 30, 2023 is $3.4 million (March 31, 2023 - $3.4 million) attributed to collateral held for letters of credit and corporate credit cards, $3.0 million (March 31, 2023 - $6.0 million) related to the Bevo acquisition, $20.4 million (March 31, 2023 - $20.7 million) for self- insurance, $0.1 million (March 31, 2023 - $0.1 million) attributed to international subsidiaries, and $37.0 million (March 31, 2023 - $35.7 million) of funds reserved for the segregated cell program for insurance coverage.
18
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
Note 13 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. The judge rendered a decision on August 24, 2023 on Aurora’s motion to dismiss. On September 8, 2023, the Plaintiffs filed a motion for reconsideration as to the stock drop that occurred following Aurora’s September 2019 financials. Both parties have agreed to potential mediation and will exchange names of mediators in order to schedule mediation promptly. 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.
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. 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.
A claim was commenced by a party to a former term sheet on June 15, 2020 with the King'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.
On August 10, 2020, a purported class action lawsuit was filed with the King'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. 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.
On January 4, 2021, a civil claim was filed with the King’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. While this matter is ongoing, the Company intends to continue to defend against the claims.
The Company, its subsidiary ACE, and MedReleaf Corp. (which amalgamated with ACE in July 2020) have been named in a purported class action proceeding commenced on November 15, 2022 in the Ontario Superior Court of Justice. The purported class action claims that the Company failed to warn of certain risks purported to be associated with the consumption of cannabis. The Company disputes the allegations and intends to defend against the claims.
On May 5, 2022, Aurora Cannabis Inc. acquired all issued and outstanding shares of Terrafarma Inc. Terrafarma Inc. is now a wholly owned subsidiary of Aurora Cannabis Inc. Prior to Aurora’s acquisition of Terrafarma, a former employee of Terrafarma commenced a claim for wrongful dismissal seeking damages in the amount $1.0 million plus additional damages relating to certain options and unpaid bonus. The Company disputes the allegations and intends to defend against the claims.
A claim was commenced by a former employee of Aurora against Aurora Cannabis Enterprises Inc. and another former employee of Aurora (the “Defendant Employee”). The plaintiffs claim that the Defendant Employee entered a lease for a property owned by the plaintiffs in January 2017 and states that Aurora was a guarantor for the Defendant Employee. The claim states that the Defendant Employee left the property and caused damage. The plaintiffs further claim outstanding rent and legal fees. The Company disputes the allegations and intends to defend against the claims.
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.
In respect of the aforementioned claims, as at September 30, 2023 the Company has recognized total provisions of $1.0 million (March 31, 2023 - $1.0 million) in provisions on the condensed consolidated statements of financial position and a settlement accrual for nil (March 31, 2023 - $1.0 million) in accounts payable and accrued liabilities on the condensed consolidated interim statements of financial position.
19
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
(b)Commitments
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 17(b) and loans and borrowing repayments in Note 8, the Company has $2.2 million in future capital commitments and purchase commitments payments, which are due over the next 12 months.
Note 14 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 $— million and $0.7 million for the three and six months ended September 30, 2023 (three and six months ended September 30, 2022 - $0.7 million and $0.2 million, respectively). The estimated variable consideration is based on historical experience and management’s expectation of future returns and price adjustments. As of September 30, 2023, the net return liability for the estimated variable revenue consideration was $1.2 million (March 31, 2023 - $1.6 million) and is included in deferred revenue on the condensed consolidated interim statements of financial position.
Three Months Ended September 30, 2023 | Point-in-time | Over-time | Total | ||||||||
$ | $ | $ | |||||||||
Cannabis | |||||||||||
Revenue from sale of goods | 63,193 | — | 63,193 | ||||||||
Revenue from provision of services | — | 135 | 135 | ||||||||
Excise taxes | (7,064) | — | (7,064) | ||||||||
Cannabis Net Revenue | 56,129 | 135 | 56,264 | ||||||||
Plant Propagation | |||||||||||
Revenue from sale of goods | 7,154 | — | 7,154 | ||||||||
Net revenue | 63,283 | 135 | 63,418 |
Three Months Ended September 30, 2022 | Point-in-time | Over-time | Total | ||||||||
$ | $ | $ | |||||||||
Cannabis | |||||||||||
Revenue from sale of goods | 51,461 | — | 51,461 | ||||||||
Revenue from provision of services | — | 362 | 362 | ||||||||
Excise taxes | (6,472) | — | (6,472) | ||||||||
Cannabis Net Revenue | 44,989 | 362 | 45,351 | ||||||||
Plant Propagation | |||||||||||
Revenue from sale of goods | 3,297 | — | 3,297 | ||||||||
Net revenue | 48,286 | 362 | 48,648 |
Six months ended September 30, 2023 | Point-in-time | Over-time | Total | ||||||||
$ | $ | $ | |||||||||
Cannabis | |||||||||||
Revenue from sale of goods | 124,645 | — | 124,645 | ||||||||
Revenue from provision of services | — | 278 | 278 | ||||||||
Excise taxes | (13,530) | — | (13,530) | ||||||||
Cannabis Net Revenue | 111,115 | 278 | 111,393 | ||||||||
Plant Propagation | |||||||||||
Revenue from sale of goods | 27,058 | — | 27,058 | ||||||||
Net Revenue | 138,173 | 278 | 138,451 |
20
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
Six Months Ended September 30, 2022 | Point-in-time | Over-time | Total | ||||||||
$ | $ | $ | |||||||||
Cannabis | |||||||||||
Revenue from sale of goods | 109,012 | — | 109,012 | ||||||||
Revenue from provision of services | — | 689 | 689 | ||||||||
Excise taxes | (13,811) | — | (13,811) | ||||||||
Cannabis Net Revenue | 95,201 | 689 | 95,890 | ||||||||
Plant Propagation | |||||||||||
Revenue from sale of goods | 3,297 | — | 3,297 | ||||||||
Net Revenue | 98,498 | 689 | 99,187 |
Note 15 Segmented Information
Operating Segments | Canadian Cannabis | EU Cannabis | Plant Propagation | Corporate (1) | Total | ||||||||||||
$ | $ | $ | $ | ||||||||||||||
Three months ended September 30, 2023 | |||||||||||||||||
Net revenue | 46,567 | 9,697 | 7,154 | — | 63,418 | ||||||||||||
Gross profit before fair value adjustments | 12,472 | 5,999 | 255 | — | 18,726 | ||||||||||||
Selling, general, and administrative expense | 27,525 | 3,777 | 713 | 3,346 | 35,361 | ||||||||||||
Net income (loss) before taxes from continuing operations | 8,490 | 1,411 | (815) | (8,702) | 384 | ||||||||||||
Three months ended September 30, 2022 | |||||||||||||||||
Net revenue | 37,865 | 7,487 | 3,296 | — | 48,648 | ||||||||||||
Gross profit (loss) before fair value adjustments | (2,665) | 3,969 | 71 | — | 1,375 | ||||||||||||
Selling, general, and administrative expense | 34,015 | 3,351 | 259 | 3,729 | 41,354 | ||||||||||||
Net loss before taxes from continuing operations | (41,179) | (173) | (731) | (15,384) | (57,467) | ||||||||||||
Operating Segments | Canadian Cannabis | EU Cannabis | Plant Propagation | Corporate (1) | Total | ||||||||||||
Six months ended September 30, 2023 | |||||||||||||||||
Net revenue | 91,386 | 20,007 | 27,058 | — | 138,451 | ||||||||||||
Gross profit before fair value adjustments | 20,468 | 11,759 | 1,208 | — | 33,435 | ||||||||||||
Selling, general, and administrative expense | 54,349 | 7,566 | 1,151 | 6,533 | 69,599 | ||||||||||||
Net (loss) income before taxes from continuing operations | 2,945 | 2,917 | (1,198) | (24,937) | (20,273) | ||||||||||||
Six months ended September 30, 2022 | |||||||||||||||||
Net revenue | 76,787 | 19,060 | 3,296 | 44 | 99,187 | ||||||||||||
Gross profit (loss) before fair value adjustments | (3,972) | 10,930 | 71 | 22 | 7,051 | ||||||||||||
Selling, general, and administrative expense | 70,411 | 7,192 | 259 | 9,351 | 87,213 | ||||||||||||
Net loss before taxes from continuing operations | (557,203) | (21,877) | (731) | (90,896) | (670,707) |
(1)Net income (loss) 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.
21
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
Geographical Segments | Canada | EU | Other | Total | ||||||||||
$ | $ | $ | $ | |||||||||||
Non-current assets other than financial instruments | ||||||||||||||
September 30, 2023 | 355,951 | 43,462 | — | 399,413 | ||||||||||
March 31, 2023 | 375,179 | 41,866 | 105 | 417,150 | ||||||||||
Three months ended September 30, 2023 | ||||||||||||||
Net revenue | 53,422 | 9,697 | 299 | 63,418 | ||||||||||
Gross profit before fair value adjustments | 12,680 | 5,999 | 47 | 18,726 | ||||||||||
Three months ended September 30, 2022 | ||||||||||||||
Net revenue | 41,161 | 7,487 | — | 48,648 | ||||||||||
Gross profit (loss) before fair value adjustments | (2,594) | 3,969 | — | 1,375 | ||||||||||
Six months ended September 30, 2023 | ||||||||||||||
Net revenue | 117,691 | 20,084 | 676 | 138,451 | ||||||||||
Gross profit (loss) | 22,614 | 11,759 | (938) | 33,435 | ||||||||||
Six months ended September 30, 2022 | ||||||||||||||
Net revenue | 80,549 | 19,210 | (572) | 99,187 | ||||||||||
Gross profit (loss) | (3,125) | 11,056 | (880) | 7,051 |
Included in net revenue for the three months ended September 30, 2023 are net revenues of approximately $6.7 million from Customer F (three months ended September 30, 2022 - Customer F $3.7 million) in the Canadian Cannabis segment, contributing 10 per cent or more to the Company’s net revenue.
Included in net revenues for the six months ended September 30, 2023 are net revenues of approximately $18.3 million from Customer G (six months ended September 30, 2022 - Customer G nil) in the Plant Propagation segment, contributing 10 per cent or more to the Company’s net revenue.
22
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
Note 16 Fair Value of Financial Instruments
The carrying values of the financial instruments at September 30, 2023 are summarized in the following table:
Amortized cost | FVTPL | Designated FVTOCI | Total | |||||||||||
$ | $ | $ | $ | |||||||||||
Financial Assets | ||||||||||||||
Cash and cash equivalents | 128,917 | — | — | 128,917 | ||||||||||
Restricted cash | 63,896 | — | — | 63,896 | ||||||||||
Accounts receivable, excluding sales taxes and lease receivable | 36,508 | — | — | 36,508 | ||||||||||
Derivative assets | — | 8,151 | — | 8,151 | ||||||||||
Lease receivable | 10,001 | — | — | 10,001 | ||||||||||
Financial Liabilities | ||||||||||||||
Accounts payable and accrued liabilities | 50,703 | — | — | 50,703 | ||||||||||
Convertible debentures | 28,406 | — | — | 28,406 | ||||||||||
Contingent consideration payable | — | 13,805 | — | 13,805 | ||||||||||
Other current liabilities | 88 | — | — | 88 | ||||||||||
Lease liabilities | 50,598 | — | — | 50,598 | ||||||||||
Derivative liabilities | — | 3,920 | — | 3,920 | ||||||||||
Loans and borrowings | 48,007 | — | — | 48,007 | ||||||||||
Other long-term liabilities | 50,896 | — | — | 50,896 |
.
The following is a summary of financial instruments measured at fair value segregated based on the various levels of inputs:
Notes | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
$ | $ | $ | $ | ||||||||||||||
As at September 30, 2023 | |||||||||||||||||
Derivative assets | — | 8,151 | — | 8,151 | |||||||||||||
Contingent consideration payable | — | — | 13,805 | 13,805 | |||||||||||||
Derivative liabilities | 7, 9(c) | 3,580 | 340 | — | 3,920 | ||||||||||||
As at March 31, 2023 | |||||||||||||||||
Derivative assets | — | 7,114 | 135 | 7,249 | |||||||||||||
Contingent consideration payable | — | — | 12,487 | 12,487 | |||||||||||||
Derivative liabilities | 7, 9(c) | 9,634 | — | — | 9,634 |
There have been no transfers between fair value categories during the period.
Derivative Liabilities
As at September 30, 2023, derivative liabilities include amounts related to Deferred Share Units (“DSUs”) and Performance Share Units (“PSUs”) that will be settled in cash, pursuant to the Performance Share Unit and Restricted Share Unit Long-Term Cash Settled Plan and Non-Employee Directors Deferred Share Unit Cash Plan, respectively.
The DSUs subject to cash settlement are initially measured at fair value and recorded as a derivative liability. DSUs are issued in recognition of past service for Directors and are therefore recorded at the full amount to share-based compensation expense. The DSUs are remeasured each reporting period with the difference going through share-based compensation expense. Upon settlement, the DSU’s are remeasured and the derivative liability is extinguished at the remeasured amount. During the three and six months ended September 30, 2023, the Company recognized $0.4 million and $0.6 million, respectively (three and six months ended September 30, 2022 - nil and nil, respectively) in share based compensation expense in the condensed consolidated statements of loss and comprehensive loss. The DSU’s are classified as a level one financial instrument measured at fair value through profit and loss.
The PSUs subject to cash settlement are initially measured at fair value using a Monte Carlo simulation model and recorded as a derivative liability. The PSUs have a service requirement of three years and are amortized ratably over that period. The PSUs are remeasured each reporting period with the change in value reflected in the share-based compensation expense. During the three and six months ended September 30, 2023, the Company recognized $0.3 million and $0.3 million, respectively (three and six months ended September 30, 2022 - nil and nil, respectively) in share based compensation expense in the condensed consolidated statements of loss and comprehensive loss. The PSU’s are classified as a level two financial instrument measured at fair value through profit and loss.
23
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
Note 17 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 consolidated statements 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 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 (“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, 2023, $20.4 million of accounts receivable, net of allowances, are from non-government wholesale customers (March 31, 2023 - $20.9 million). As of September 30, 2023, the Company recognized a $1.3 million provision for expected credit losses (March 31, 2023 - $3.4 million).
The Company’s aging of trade receivables, net was as follows:
September 30, 2023 | March 31, 2023 | |||||||
$ | $ | |||||||
0 – 60 days | 30,716 | 28,355 | ||||||
61+ days | 4,594 | 6,661 | ||||||
35,310 | 35,016 |
The Company’s contractual cash flows from lease receivables is as follows:
September 30, 2023 | ||||||||
$ | ||||||||
Next 12 months | 2,997 | |||||||
Over 1 year to 2 years | 2,431 | |||||||
Over 2 years to 3 years | 1,944 | |||||||
Over 3 years to 4 years | 1,919 | |||||||
Over 4 years to 5 years | 1,191 | |||||||
Thereafter | 994 | |||||||
Total undiscounted lease payments receivable | 11,476 | |||||||
Unearned finance income | (1,475) | |||||||
Total lease receivable | 10,001 | |||||||
Current | (2,503) | |||||||
Long-term | 7,498 |
24
AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
(b) Liquidity risk
The composition of the Company’s accounts payable and accrued liabilities was as follows:
September 30, 2023 | March 31, 2023 | |||||||
$ | $ | |||||||
Trade payables | 14,678 | 21,942 | ||||||
Accrued liabilities | 22,375 | 38,176 | ||||||
Payroll liabilities | 10,903 | 12,610 | ||||||
Excise tax payable | 1,842 | 2,611 | ||||||
Income tax payable | 613 | 161 | ||||||
Other payables | 292 | 486 | ||||||
50,703 | 75,986 |
In addition to the commitments outlined in Note 13, the Company has the following undiscounted contractual obligations as at September 30, 2023, 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 | 50,703 | 50,703 | — | — | — | ||||||||||||
Convertible notes and interest (1) | 30,337 | 30,337 | — | — | — | ||||||||||||
Lease liabilities (2) | 100,090 | 8,421 | 22,460 | 15,711 | 53,498 | ||||||||||||
Loans and borrowings | 48,007 | 13,421 | 2,639 | 6,766 | 25,181 | ||||||||||||
Contingent consideration payable (3) | 13,805 | 3,006 | 10,799 | — | — | ||||||||||||
242,942 | 105,888 | 35,898 | 22,477 | 78,679 |
(1)Assumes the principal balance of the debentures outstanding at September 30, 2023 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. Our primary short-term liquidity needs are to fund our net operating losses, capital expenditures to maintain existing facilities, convertible debenture repayment and lease payments. Our medium-term liquidity needs primarily relate lease payments and our long-term liquidity needs primarily relate to potential strategic plans.
As of September 30, 2023, the Company has access to the following capital resources available to fund operations and obligations:
•$128.9 million cash and cash equivalents; and
•access to the 2023 Shelf Prospectus (as defined below). The Company currently has access to securities registered for sale under the 2023 Shelf Prospectus currently covering US$650.0 million of issuable securities. Of the US$650 million of securities registered under the 2023 Shelf Prospectus and corresponding registration statement on form F-10 filed with the U.S. Securities and Exchange Commission in the U.S., approximately U.S.$409 million is allocated to the potential exercise of currently outstanding warrants issued in financing transactions from 2020 to 2022. As a result, approximately U.S$212.7 million is available for potential new issuances of Common Shares, warrants, options, subscription receipts, debt securities or any combination thereof during the 25-month period that the 2023 Shelf Prospectus remains effective. 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 2023 Shelf Prospectus.
Based on all of the aforementioned factors, the Company believes that its reduction of operating costs, current liquidity position, and access to the 2023 Shelf Prospectus are adequate to fund operating activities and cash commitments for investing, financing and strategic activities for the foreseeable future. In addition, the Company could access restricted cash of $57.4 million relating to its self-insurance policy, if necessary.
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AURORA CANNABIS INC.
Notes to the Condensed Consolidated Interim Financial Statements
Three and six months ended September 30, 2023 and 2022
(Amounts reflected in thousands of Canadian dollars, except share and per share amounts)
Note 18 Subsequent Events
On October 3, 2023, the Company closed a bought deal offering of 53,187,500 common shares of the Company at $0.73 per common share, for gross proceeds of approximately $38.8 million. Transactions costs were approximately $2.2 million resulting in net proceeds of $36.7 million. Following the bought deal offering the amount available for potential new issuances of Common Shares, warrants, options, subscription receipts, debt securities or any combination thereof during the 25-month period that the 2023 Shelf Prospectus remains effective was reduced to approximately $212.7 million
Subsequent to September 30, 2023, the Company repurchased approximately $23.1 million (U.S$17.0 million) aggregate principal amount of convertible senior notes at a 0.125% average discount to par value, for aggregate consideration, including accrued interest, of approximately $23.2 million (U.S$17.1 million). The remaining convertible debenture balance is approximately $7.3 million (U.S$5.3 million).
On November 3, 2023, the Company sold its interest in Aurora Netherland B.V., a wholly-owned subsidiary for gross proceeds of approximately $8.3 million (Euro 5.8 million). Following the sale, the Company no longer has any commercial interests in the Netherlands.
Subsequent to September 30, 2023, the Company amended the terms of its Credit Agreement to include an additional term loan with multiple advances for up to $16.0 million and a maturity date of October 20, 2026. Advances of $0.6 million have been withdrawn against this facility as of the date hereto. The increase in borrowing capacity is dedicated to fund capital expenditures at the Company’s Sky and Sun facilities.
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