EX-99.2 3 ex992.htm Q2 MANAGEMENT'S DISCCUSION AND ANALYSIS

Exhibit 99.2

AURORA CANNABIS INC.

Interim Management’s Discussion & Analysis

(Unaudited)

For the three and six months ended December 31, 2021 and 2020

(in Canadian Dollars)

Interim Management’s Discussion & Analysis

Table of Contents

Business Overview	3
Condensed Statement of Comprehensive Loss	6
Key Quarterly Financial and Operating Results	7
Key Developments During and Subsequent to the Three Months Ended December 31, 2021	7
Financial Review	9
Liquidity and Capital Resources	15
Related Party Transactions	18
Critical Accounting Estimates	18
Change in Accounting Policies	19
Recent Accounting Pronouncements	20
Financial Instruments	20
Financial Instruments Risk	22
Summary of Outstanding Share Data	22
Historical Quarterly Results	23
Risk Factors	24
Internal Controls Over Financial Reporting	25
Cautionary Statement Regarding Forward-Looking Statements	25
Cautionary Statement Regarding Certain Non-GAAP Performance Measures	26

| AURORA CANNABIS

Q2 2022 MD&A

Interim Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three and Six Months Ended December 31, 2021

The following Interim Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) of Aurora Cannabis Inc. (“Aurora” or the “Company”) should be read in conjunction with both the Company’s annual audited consolidated financial statements as at and for the year ended June 30, 2021, and the condensed consolidated interim financial statements as at and for the three and six months ended December 31, 2021 and the accompanying notes thereto (the “Financial Statements”), which have been prepared in accordance with International Accounting Standards 34 - Interim Financial Reporting (“IAS 34”) of International Financial Reporting Standards (“IFRS”). The MD&A has been prepared as of February 9, 2022 pursuant to the disclosure requirements under National Instrument 51-102 - Continuous Disclosure Obligations (“NI 51-102”) of the Canadian Securities Administrators (“CSA”). Under the United States (“U.S.”) / Canada Multijurisdictional Disclosure System, we are permitted to prepare the MD&A in accordance with Canadian disclosure requirements which may differ from U.S. disclosure requirements.

Given the Company’s recent business transformation initiatives to realign its operational footprint and increase financial flexibility, this MD&A provides comparative disclosures for the second quarter ended December 31, 2021 (“Q2 2022”) to the second quarter ended December 31, 2020 (“Q2 2021”) and to the first quarter ended September 30, 2021 (“Q1 2022”). Management believes that these comparatives provide relevant and current information.

In Q4 2021, the Company identified a non-material prior period error for the valuation of biological assets and inventory. Additionally, the Company revised certain key inputs used in determining fair value less costs to sell (“FVLCS”), including the incorporation of an effective yield factor based on the potency of cannabis produced. Management has applied the change retrospectively. Refer to the Financial Statements Note 2.

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

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

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

Business Overview

Aurora was incorporated under the Business Corporations Act (British Columbia) on December 21, 2006 as Milk Capital Corp. Effective October 2, 2014, the Company changed its name to Aurora Cannabis Inc. The Company’s shares are listed on the 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 1500 - 1055 West Georgia Street, Vancouver, British Columbia V6E 4N7.

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

•

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

•

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

•

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

Our Strategy

Aurora’s strategy is to leverage our diversified and scaled platform, our leadership in global medical markets, and our cultivation, science and genetics expertise and capabilities to drive profitability in our core Canadian and international operations in order to build sustainable, long-term shareholder value.

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Q2 2022 MD&A

Medical leadership

Our established leadership in the profitable Canadian and International medical markets positions us well for new regulated medical market openings such as Israel, as well as potential US federal legalization of medical cannabis. At the core of Aurora’s objective to achieve near term positive EBITDA is our focus on maintaining and growing our industry leading Canadian and international medical cannabis operations.

Our Canadian medical platform is characterized by leading market share, high barriers to entry through regulatory expertise, investment in technology and distribution, and unwavering commitment to science, testing and compliance. Our Canadian medical operations allow for a direct-to-patient sales channel that does not rely on provincial wholesalers or private retailers to get product to patients. This direct-to-patient model allows Aurora to achieve sustainable gross profit margins of approximately 60% with substantially better pricing power relative to the Canadian adult-use segment.

Our leadership in International medical cannabis flower provides us with a high growth, highly profitable business segment that consistently delivers cash gross margins exceeding 60% (62% in Q2 2022). Our expertise in managing the complexity of multiple jurisdictions’ regulatory frameworks and relationships, as well as providing export and in-country EU GMP and other key certificated cannabis production, are capabilities that allow us to win new businesses as new medical - and recreational - markets open. For example, Aurora is one of the very few successful exporters of medical cannabis to Israel with what we believe are several of the single largest legal international cannabis shipments ever in July and December 2021. Additionally, in early November 2021, we announced an investment in Growery B.V. (“Growery”), one of 10 successful applicants for a cannabis production license in the Netherlands, the first federally regulated recreational market in Europe.

Science leadership: Genetics, Breeding, Biosynthetics

We believe that our scientific leadership and ongoing investment provides Aurora with a strong position to win in premium consumer categories driven by what we believe to be our industry leading genetics and breeding program. The breeding program, located at Aurora Coast, the state-of-the-art facility in Vancouver Island’s Comox Valley, is expected to drive revenues by injecting rotation and variety into our product pipeline, and has screened over 7,000 unique cultivars in 2021. In August and September 2021, Aurora launched the first three new proprietary cannabis cultivars - Stonefruit Sunset, Driftwood Diesel, and Lemon Rocket, all of which have the distinctive terpene profiles and high THC potency (in the mid 20% range) that are highly desired by cannabis consumers. The genetics and breeding program is also expected, over time, to generate incremental, capital efficient revenue through license agreements for these genetic innovations to other licensed producers. In November 2021, we further strengthened our leadership with the launch our new genetics licensing business unit - Occo.

Finally, we also believe that our intellectual property includes the most efficient path for cannabinoid biosynthetic production, which puts us in what we believe to be a pivotal position with most biosynthetics work being undertaken in the cannabis industry, which we are actively working to build, partner, enforce, and protect.

Global and U.S. expansion

We believe that the global expansion of cannabis medical and recreational markets is just beginning. The Company believes its strengths in navigating complex regulatory environments, compliance, testing and product quality are essential skills that create a repeatable, credible and portable process to new market development. These strengths drive our leadership in international medical markets which should allow us to win as new medical markets emerge and potentially transition to recreational markets. For instance, Aurora and its partner won three of nine awarded tenders, representing all of the available dry flower tenders, in the French medical cannabis trial program. In addition, Aurora has invested in Growery B.V. located in the Netherlands, as that country opens the first federally regulated recreational market in Europe.

We also believe that the U.S. cannabis market will eventually be federally regulated, with states’ rights respected, in a framework similar to every other comparable industry. The timeframe for this is unknown but Aurora is well positioned to create significant value for our shareholders once that federal permissibility allows. Our strategic strengths of medical and regulatory expertise in a federal framework, and our scientific expertise, including genetics, breeding, and biosynthetics, position us as a partner of choice and with a continuing strong position to win in lucrative components of the cannabis value chain.

Leadership in a rapidly maturing industry

Aurora believes that profitable growth, smart capital allocation and balance sheet health are critical success factors in such a dynamic and rapidly developing global industry. Our medical business, with country diversification, growth, and strong gross margins provide the foundation for profitability. To complete the progression to profitability, Aurora is continuing to right size SG&A costs, centralize and optimize production facilities, and shift the Company’s portfolio in the Canadian consumer business to the higher quality, higher margin segments of the market.

Aurora has one of the strongest balance sheets in the Canadian industry with approximately $445 million of cash on hand as of February 9, 2022 with no term debt, and access to a US$1.0 billion shelf prospectus, which includes a US$300 million ATM available to be used for strategic purposes of which Aurora has utilized US$89.7 million as at February 9, 2022. Cash flow continues to improve with $20.3 million used in operations and working capital in Q2 2022, and minimal levels of capital expenditures.

Key Q2 Results

Revenue and Gross Margin Update

Aurora’s leading medical businesses in Canada and Europe continued to perform exceptionally well in Q2 2022 and delivered 76% of the Company’s revenue and 89% of adjusted gross profit.

The Canadian consumer business continues to be challenged reflecting the ongoing macro challenges of the market, including significant industry-wide excess inventory and increased pressure on older SKUs, which together have resulted in price compression. Aurora has focused on maximizing gross margins and profitability by leveraging the Company’s low-cost production facilities, and selectively entering categories that have higher margins.

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Q2 2022 MD&A

Total cannabis net revenue, net of provisions, increased slightly to $60.6 million in Q2 2022, compared to $60.1 million in Q1 2022.

Total Q2 2022 medical cannabis net revenues of $45.7 million continue to deliver an adjusted gross margin on medical cannabis net revenue in the mid 60% range, with 62% in Q2 2022 (Q1 2022 - 64%, Q2 2021 - 56%). This strong margin profile continues to remain steady in the Company’s target range above 60% and is an important gross profit driver that distinguishes Aurora from its major competitors.

In Q2 2022, Aurora’s International medical cannabis net revenue of $19.8 million (Q2 2021 - $11.9 million) showed 67% growth versus the prior year comparative quarter and 24% versus the previous quarter. The sequential revenue increase was primarily a result of the $10.9 million of sales generated from our Israel supply agreement in Q2 2022 compared to $7.9 million) in the previous quarter. Offsetting the growth was a provision recorded against Q2 2022 international revenue of $2.4 million for certain current and prior period international shipments that were either above or below target THC potency ranges. Management does not expect this level of provision to recur. Year over year growth, excluding the provision, was 87%.

The Canadian medical cannabis net revenue of $26.0 million in Q2 2022 has remained a consistent performer even in the face of the continued consumer retail industry roll-out, up 4% compared to Q1 2022 (Q1 2022 - $25.1 million; Q2 2021 - $27.0 million).

In Q2 2022, consumer cannabis net revenue was $14.8 million (Q1 2022 - $19.1 million, Q2 2021 - $28.6 million) with an adjusted gross margin of 24% (Q1 2022 - 32%, Q2 2021 - 27%). Sequentially, the decline in consumer cannabis net revenue is due mainly to industry-wide pricing pressures across our portfolio and an 18% decrease of 1,199 kilograms and equivalent sold compared to the prior quarter. This was partially offset by a positive 5% mix shift in the Company’s brand mix from Daily Special to San Rafael ’71, as the company continues to pivot towards premium offerings.

Gross margin before fair value adjustments on cannabis net revenue was negative 18% in Q2 2022 as compared to 44% in Q1 2022 which reflects the impact of a $31.6 million inventory impairment provision (Q2 2021 - $4.8 million impairment recovery) for cannabis aging out of the consumer channel and NRV adjustments reflecting the continued downward pricing pressure in the consumer industry. Included in Q2 2022 cannabis gross margin before fair value adjustments are also $11.5 million (Q2 2021 - $9.3 million) depreciation charges in cost of sales.

Excluding the inventory impairment provisions noted above, adjusted gross margin before fair value adjustments (“adjusted gross margin”) on cannabis net revenue for Q2 2022 remained strong and steady, and well above the industry average, at 53% compared to 54% in Q1 2022 and 44% in Q2 2021.

Medical gross margin: Adjusted gross margin before FV adjustments on medical cannabis net revenue was 62% in Q2 2022 compared to 64% in the prior quarter, showing the continued strength of the direct-to-patient model in Canada, and the increasing prominence of our high margin international medical business.

Consumer gross margin: Adjusted gross margin before FV adjustments on consumer cannabis net revenue was 24% for Q2 2022 compared to 32% in the prior quarter. The decrease of 8% from Q1 2022 was due to 6% related to industry-wide pricing compression, offset by 2% improvement from Aurora’s continuing shift toward a premium product portfolio. A further 4% decrease reflects the clear-out of aging and low potency consumer cannabis through bulk wholesale channels. Excluding the discounted bulk sales, which are not expected to recur regularly, the Company’s consumer adjusted gross margin would be 28%. The Company does not remove the impact of these bulk sales from adjusted EBITDA.

SG&A Update

SG&A and research and development (“R&D”) expense was $44.6 million in Q2 2022 (Q1 2022 - $49.4 million, Q2 2021 - $44.4 million) which includes $2.5 million of restructuring related costs and $1.2 million of prior period employee- related accruals (Q1 2022 - $4.8 million, Q2 2021 - $1.3 million).

Excluding the non-routine items noted above, SG&A and R&D continued to be well controlled and declining at $40.9 million during Q2 2022 (Q1 2022 - $44.0 million, Q2 2021 - $43.3 million).

Capital Expenditures Update

Aurora reported approximately $12.7 million in capital expenditures for Q2 2022 which includes additions to intangible assets of $3.1 million (Q1 2022 - $1.6 million) and cash from the disposal of property, plant and equipment of $1.2 million (Q1 2022 - $7.2 million).

No government grants related to capital expenditures were received in Q2 2022. In Q4 2021, the Company received a $3.6 million government grant related to the co-generation project at the Aurora River facility to further offset the capital expenditures. Management expects the project to qualify for an additional $5.8 million government grant related to the co-generation project during this fiscal year.

Adjusted EBITDA

Adjusted EBITDA is defined in the “Cautionary Statement Regarding Certain Non-GAAP Performance Measures” section of this MD&A. Refer to the “Adjusted EBITDA” section of this MD&A for the reconciliation.

Aurora reported an Adjusted EBITDA loss of $9.0 million in Q2 2022 (Q1 2022 - $11.5 million, Q2 2021 - $11.2 million). The decrease in Adjusted EBITDA loss as compared to the previous quarter is primarily driven by a $3.1 million decrease in SG&A and R&D expenses, excluding restructuring and prior period employee-related expenses, as part of our business transformation plan.

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Q2 2022 MD&A

Liquidity Update

As of February 9, 2022 the Company had approximately $445 million of cash on hand with no term debt. The Company believes its cash on hand is sufficient to fund operations until the company is cash flow positive. Additionally, the Company has access to a US$1.0 billion shelf prospectus (the “2021 Shelf Prospectus”), including the balance of a US$300 million at-the-market (ATM) facility available and earmarked by management to be used for strategic purposes (the “ATM Program”). Subsequent to December 31, 2021, the Company issued 19,595,000 common shares for gross proceeds of US$89.7 million under the US$300 million available securities for sale under the 2021 ATM Program.

At December 31, 2021, the Company reported $383.8 million (Q1 2022 - $424.3 million) of cash and cash equivalents, including $51.3 million (Q1 2022 - $51.5 million) of restricted cash.

During Q2 2022, the Company utilized cash in the following categories:

•

Operations used net cash of $20.3 million, including working capital changes and $2.5 million in restructuring and severance payments;

•

Investing activities used $9.7 million, including investment in capital assets and intangibles of approximately $12.7 million, offset by $1.2 million in proceeds from asset divestitures; and

•

Financing activities used $7.4 million, including $5.7 million for early repurchase of convertible debt at an average of 84.7% of face value.

Subsequent to December 31, 2021, the Company issued 19,595,000 common shares under the ATM Program for gross proceeds of US$ 89.7 million, and repurchased a total of US$10.6 million in principal amount of Convertible Senior Notes due 2024 (the “Senior Notes”) at a total cost, including accrued interest, of US$9.3 million.

COVID-19 Update

The COVID-19 pandemic has impacted revenue in the Canadian consumer market. As at the date of this report, all of the Company’s facilities in Canada and internationally continue to be operational and we continue to work closely with local, national and international government authorities to ensure that we are following the required protocols and guidelines related to COVID-19 within each region. Due to the rapid developments and uncertainty surrounding COVID-19, it is not possible to predict the impact that COVID-19 will have on the Company’s business, financial position and operating results in the future and as such, the Company cannot provide assurance that there will not be disruptions to its operations in the future. Refer to the “Risk Factors” section in the Annual MD&A for the year ended June 30, 2021 for further discussion on the potential impacts of COVID-19.

Condensed Statement of Comprehensive Loss

	Three months ended			Six months ended
($ thousands)	December 31, 2021	September 30, 2021	December 31, 2020⁽¹⁾⁽²⁾	December 31, 2021	December 31, 2020⁽¹⁾⁽²⁾
Net revenue ⁽³⁾	$60,586	$60,108	$67,673	$120,694	$135,266
Gross profit before FV adjustments	($11,067)	$26,745	$17,167	$15,678	$39,312
Gross profit	$5,580	$25,448	$12,213	$31,028	$47,233
Operating expenses	$61,373	$64,823	$64,342	$126,196	$132,926
Loss from operations	($55,793)	($39,375)	($52,129)	($95,168)	($85,693)
Other income (expense)	($19,718)	$27,283	($244,926)	$7,565	($309,412)
Net loss from continuing operations	($75,143)	($11,884)	($300,222)	($87,027)	($398,883)
Net income (loss) from discontinuing operations, net of taxes	—	—	$2,298	—	($433)
Net loss	($75,143)	($11,884)	($297,924)	($87,027)	($399,316)

⁽¹⁾

Amounts have been retroactively recast for the biological assets and inventory non-material prior period error. Refer to the “Change in Accounting Policies and Estimates” section below for further detail.

⁽²⁾

As a result of the Company’s dissolution and divestment of its wholly owned subsidiaries, Hempco Food and Fiber Inc. (“Hempco”) and Aurora Hemp Europe (“AHE”) during the year ended June 30, 2021, the operations of Hempco and AHE have been presented as discontinued operations and the Company’s operational results have been retroactively restated, as required. Refer to Note 12(b) of the Financial Statements and Note 12(b) of the audited consolidated financial statements for the year ended June 30, 2021 for more information about the divestitures.

⁽³⁾

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

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Q2 2022 MD&A

Key Quarterly Financial and Operating Results

($ thousands, except Operational Results)	Q2 2022	Q2 2021⁽¹⁾⁽²⁾	$ Change	% Change	Q1 2022	$ Change	% Change
Financial Results
Total net revenue ⁽³⁾	$60,586	$67,673	($7,087)	(10%)	$60,108	$478	1%
Medical cannabis net revenue ^(3)(4a)	$45,748	$38,856	$6,892	18%	$40,984	$4,764	12%
Consumer cannabis net revenue ^(3)(4a)	$14,838	$28,573	($13,735)	(48%)	$19,124	($4,286)	(22%)
Adjusted gross margin before FV adjustments on cannabis net revenue ^(4b)	53%	44%	N/A	9%	54%	N/A	(1%)
Adjusted gross margin before FV adjustments on medical cannabis net revenue ^(4b)	62%	56%	N/A	6%	64%	N/A	(2%)
Adjusted gross margin before FV adjustments on consumer cannabis net revenue ^(4b)	24%	27%	N/A	(3%)	32%	N/A	(8%)
SG&A expense	$42,961	$41,961	$1,000	2%	$45,760	($2,799)	(6%)
R&D expense	$1,625	$2,432	($807)	(33%)	$3,671	($2,046)	(56%)
Adjusted EBITDA ^(4c)	($9,040)	($11,185)	$2,145	19%	($11,542)	$2,502	22%

Balance Sheet
Working capital	$481,574	$592,519	($110,945)	(19%)	$532,612	($51,038)	(10) %
Cannabis inventory and biological assets ⁽⁵⁾	$139,625	$179,275	($39,650)	(22%)	$139,103	$522	0 %
Total assets	$2,485,384	$2,829,963	($344,579)	(12%)	$2,560,316	($74,932)	(3) %

Operational Results - Cannabis
Average net selling price of dried cannabis excluding bulk sales ⁽⁴⁾	$4.20	$4.45	($0.25)	(6%)	$4.67	($0.47)	(10) %
Kilograms sold ⁽⁶⁾	$13,043	$15,253	(2,210)	(14%)	$12,484	559	4 %

⁽¹⁾

Amounts have been retroactively recast for the biological assets and inventory non-material prior period error. Refer to the “Change in Accounting Policies and Estimates” section below for further detail.

⁽²⁾

As a result of the Company’s dissolution and divestment of its wholly-owned subsidiaries, Hempco and AHE, during the year ended June 30, 2021, the operations of Hempco and AHE have been presented as discontinued operations and the Company’s operational results have been retroactively restated, as required. Refer to Note 12(b) of the Financial Statements and Note 12(b) of the annual audited consolidated financial statements for the year ended June 30, 2021 for additional information.

⁽³⁾

Includes the impact of actual and expected product returns and price adjustments (Q2 2022 - $1.3 million; Q1 2022 - $0.7 million; Q2 2021 - $2.7 million).

⁽⁴⁾

These terms are defined in the “Cautionary Statement Regarding Certain Non-GAAP Performance Measures” section of this MD&A. Refer to the following sections for reconciliation of non-GAAP measures to the IFRS equivalent measure:

^a.

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

^b.

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

^c.

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

⁽⁴⁾

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

⁽⁵⁾

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

Key Developments During and Subsequent to the Three Months Ended December 31, 2021

Operational Updates

Launch of First Medical CBD Product and Sale of Uruguay Consumer Production Facility

The Company launched Bidiol, the first medial cannabis oil in Uruguay that is wholly produced domestically. The CBD oil is available in 3% and 10% concentrations and comes in 10ml and 30ml bottles, available in pharmacies across the country. CBD oil is authorized by the Ministry of Public Health of Uruguay for the treatment of refractory epilepsy in children and adolescents. Aurora is continuing to develop its CBD oil product line in Uruguay, with plans to expand its portfolio in the coming months. In Q2 2022, the Company also signed a distribution agreement for Bidiol in Brazil, which provides for sales to begin in the last half of calendar 2022, following regulatory approvals.

Additionally, after extensive negotiations with the responsible regulatory agency, IRCAA, the Company has decided not to renew its license for the provision of cannabis to the consumer-use market and exited this unprofitable segment in order to focus on the higher margin medical segment and the launch of its CBD oil products in the Uruguayan and adjacent markets. In October 2021, the Company executed an agreement to sell its consumer use production facility in Uruguay and related inventory for gross proceeds of US$1.0 million.

Acquisition of Equity Stake in Growery B.V.

On November 8, 2021, the Company announced that Aurora Nederland B.V., a wholly owned indirect subsidiary of the Company, had entered into an agreement to invest in a significant equity stake in Netherlands-based Growery, one of the few license holders entitled to participate in the Controlled Cannabis Supply Chain Experiment (the “CCSC”). The agreement is subject to the regulatory notification procedure.

Aurora’s investment in Growery is structured such that the Company invested an immaterial cash amount up front, with the remainder dependent on Growery achieving certain milestones. Under the terms, Aurora will provide a secured loan to Growery to construct a facility, fund early operations and provide technical and operational support through its Netherlands-based research facility for medical cannabis, established in 2018. Aurora has consolidated the operational results through the investment into Growery under the applicable IFRS.

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Q2 2022 MD&A

The CCSC is scheduled to be in effect for a minimum of four years, during which the Dutch government will evaluate if the rules of the CCSC should be expanded nationally. Anticipated demand during the CCSC is approximately 30,000 kilograms of dried flower annually. Should the CCSC be expanded nationally (from approximately 80 coffee shops in 10 selected municipalities to the nearly 600 coffee shops that exist today), government estimates are that the Netherlands would require approximately 200,000 kilograms of dried flower annually to fulfill demand.

Genetics and Licensing Business - Launch of Occo

On November 16, 2021, the Company announced the naming of its new genetics licensing business unit - Occo - a leading innovator in the scientific discovery and commercial advancement of novel cannabis cultivars, backed by the Company’s state-of-the-art breeding and genetics facility in Comox, British Columbia. With the largest catalogue of high-quality genetics available for licensing in Canada, Occo is aptly positioned to reach it goals of further development the scientific understanding of cannabis, commercializing high-quality products, providing value for cannabis growers, and helping to realize the full potential of the cannabis plant.

Intellectual Property Licensing Deal

On December 14, 2021, the Company, together with 22^nd Century Group, announced a three-party non-exclusive agreement to license biosynthesis intellectual property to Cronos Group Inc. The licensing deal is intended to assist in the advancement of research and development on the biosynthesis of cannabinoids. Through licensing agreements, the Company and 22^nd Century Group together share the global IP rights to commercialize key aspects of cannabinoid biosynthesis in plants and micro-organisms.

Sale and Assignment of Facilities

On December 23, 2021, the Company entered into an asset purchase agreement to sell a shuttered semi-complete facility in Europe for approximately $7.5 million in gross proceeds. The asset purchase agreement is subject to obtaining final approval by the local government authorities.

Delivery of Cannabis Shipment to Israel

In December 2021, the Company delivered its largest shipment of cannabis to Israel valued at approximately $10 million, and what is believed to be the largest export of medical Cannabis into the Israel market, a key market as the Company continues to strengthen its international presence.

Convertible Debt Buy Back

During December 2021, the Company repurchased a total of $7.1 million (US$5.5 million) in principal amount of Senior Notes at a total cost, including accrued interest, of $6.1 million (US$4.8 million). Subsequent to December 31, 2021, the Company repurchased an additional $13.4 million (US$10.6 million) in principal amount of Senior Notes at a total cost, including accrued interest, of $11.8 million (US$9.3 million). Aurora may, from time to time and subject to market conditions, repurchase its convertible notes, including in open market purchases and privately negotiated transactions.

At-The-Market (ATM) Program

Subsequent to December 31, 2021, the Company issued 19,595,000 common shares for gross proceeds of US$89.7 million under the ATM Program. As disclosed previously, management considers the ATM Program to be available to be utilized for strategic purposes.

Corporate Updates

Appointment of New Independent Director

On January 4, 2022, Chitwant Kohli was appointed to the Company’s Board of Directors.

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Q2 2022 MD&A

Financial Review

Net Revenue

The Company primarily operates in the cannabis market. The table below outlines the revenue attributed to medical, consumer and bulk sales channels for the three and six months ended December 31, 2021 and the comparative periods.

($ thousands)	Three months ended			Six months ended
($ thousands)	December 31, 2021	September 30, 2021	December 31, 2020⁽²⁾	December 31, 2021	December 31, 2020^(2)[1][2]
Medical cannabis net revenue
Canada dried cannabis	13,483	13,184	14,248	26,667	29,626
Canada cannabis derivatives ⁽¹⁾	12,494	11,909	12,752	24,403	24,171
Canadian medical cannabis net revenue	25,977	25,093	27,000	51,070	53,797
International dried cannabis	21,432	15,425	11,211	36,857	17,585
International cannabis derivatives ⁽¹⁾	714	466	645	1,180	729
International cannabis provisions	(2,375)	—	—	(2,375)	—
International medical cannabis net revenue	19,771	15,891	11,856	35,662	18,314
Total medical cannabis net revenue	45,748	40,984	38,856	86,732	72,111

Consumer cannabis net revenue
Dried cannabis	12,293	14,062	19,628	26,355	45,052
Cannabis derivatives ⁽¹⁾	3,835	5,791	11,484	9,626	21,183
Net revenue provisions	(1,290)	(729)	(2,539)	(2,019)	(3,324)
Total consumer cannabis net revenue	14,838	19,124	28,573	33,962	62,911

Wholesale bulk cannabis net revenue
Dried cannabis	—	—	244	—	244
Wholesale bulk cannabis net revenue	—	—	244	—	244

Total net revenue	60,586	60,108	67,673	120,694	135,266

⁽¹⁾

Cannabis derivative net revenue includes cannabis oils, capsules, softgels, sprays, topicals, edibles, vaporizer net revenue and U.S. CBD product sales.

⁽²⁾

As a result of the Company’s dissolution and divestment of its wholly-owned subsidiaries Hempco and AHE during the year ended June 30, 2021, the operations of Hempco and AHE have been presented as discontinued operations and the Company’s operational results have been retroactively restated, as required. Refer to Note 12(b) of the Financial Statements and Note 12(b) of the annual audited consolidated financial statements for the year ended June 30, 2021 for more information about the divestitures.

Medical Cannabis Net Revenue

For the three months ended December 31, 2021, the Company’s medical cannabis net revenue increased by $4.8 million, or 12%, as compared to the prior quarter. The increase was primarily attributable to our international medical cannabis sales which generated an increase of $3.9 million, or 24%, in net revenue. Excluding the impact of sales to Israel each quarter, our international medical cannabis net revenue, prior to provisions, was up 41% in Q2 2022 compared to Q1 2022.

For the three and six months ended December 31, 2021, the Company’s medical cannabis net revenue increased by $6.9 million and $14.6 million, respectively, compared to the same periods in the prior year. The increase was primarily attributable to an increase in international cannabis net revenue of $7.9 million, or 67%, and $17.3 million or 95%, for the three and six months ended December 31, 2021, respectively, as a result of the continued growth of important new markets including Poland, the UK, and Australia.

Consumer Cannabis Net Revenue

During the three and six months ended December 31, 2021, consumer cannabis net revenue decreased by $13.7 million and $28.9, respectively. as compared to the same periods in the prior year. The decrease is primarily attributed to price adjustments in our core and premium offerings to improve competitiveness and sales velocity, partially offset by a positive 5% mix shift in the Company’s brand mix from Daily Special to San Rafael ’71, as the company continues to pivot towards premium offerings.

| AURORA CANNABIS

Q2 2022 MD&A

Cost of Sales and Gross Margin

	Three months ended			Six months ended
($ thousands)	December 31, 2021	September 30, 2021	December 31, 2020⁽¹⁾⁽²⁾	December 31, 2021	December 31, 2020⁽¹⁾⁽²⁾
Net revenue	60,586	60,108	67,673	120,694	135,266
Cost of sales	(71,653)	(33,363)	(50,506)	(105,016)	(95,954)
Gross profit before FV adjustments ⁽³⁾	(11,067)	26,745	17,167	15,678	39,312
Changes in fair value of inventory sold	(25,304)	(12,642)	(29,566)	(37,946)	(48,228)
Unrealized gain on changes in fair value of biological assets	41,951	11,345	24,612	53,296	56,149
Gross profit	5,580	25,448	12,213	31,028	47,233
Gross margin	9%	42%	18%	26%	35%

⁽¹⁾

Amounts have been retroactively recast for the biological assets and inventory non-material prior period error. Refer to the “Change in Accounting Policies and Estimates” section below for further details.

⁽²⁾

⁽³⁾

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

During the three months ended December 31, 2021, gross profit decreased by $6.6 million, or 54%, as compared to the same period in the prior year. The decrease was primarily driven by a $31.6 million inventory impairment charge in FY22 Q2, partially attributed to the facility rationalization efforts to position Aurora towards profitability. This was partially offset by an increase in unrealized gain on changes in fair value of biological assets of $17.3 million and change in fair value of $4.3 million.

During the three months ended December 31, 2021, gross profit decreased by $19.9 million, or 78%, as compared to the prior quarter. The decrease was primarily driven by a $31.6 million inventory impairment charge in FY22 Q2, partially attributed to the facility rationalization efforts to position Aurora towards profitability. This was partially offset by an increase in unrealized gain on changes in fair value off biological assets of $30.6 million and change in fair value of ($12.7) million.

| AURORA CANNABIS

Q2 2022 MD&A

Adjusted Gross Margin

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

($ thousands)	Medical Cannabis	Consumer Cannabis	Total
*Three months ended December 31, 2021*
Gross revenue	48,716	20,244	68,960
Excise taxes	(2,968)	(5,406)	(8,374)
Net revenue	45,748	14,838	60,586
Cost of sales	(34,434)	(37,219)	(71,653)
Gross profit (loss) before FV adjustments ⁽¹⁾	11,314	(22,381)	(11,067)
Depreciation	6,093	5,424	11,517
Inventory impairment and out-of-period adjustments in cost of sales ⁽⁴⁾	11,090	20,467	31,557
Adjusted gross profit (loss) before FV adjustments ⁽¹⁾	28,497	3,510	32,007
Adjusted gross margin before FV adjustments ⁽¹⁾	62%	24%	53%

*Three months ended September 30, 2021*
Gross revenue	43,910	26,016	69,926
Excise taxes	(2,926)	(6,892)	(9,818)
Net revenue	40,984	19,124	60,108
Cost of sales	(17,810)	(15,553)	(33,363)
Gross profit (loss) before FV adjustments ⁽¹⁾	23,174	3,571	26,745
Depreciation	4,425	4,835	9,260
Inventory impairment and out-of-period adjustments in cost of sales ⁽⁴⁾	(1,165)	(2,353)	(3,518)
Adjusted gross profit (loss) before FV adjustments ⁽¹⁾	26,434	6,053	32,487
Adjusted gross margin before FV adjustments ⁽¹⁾	64%	32%	54%

*Three months ended December 31, 2020 ⁽²⁾⁽³⁾*
Gross revenue	41,872	37,703	79,575
Excise taxes	(3,016)	(8,886)	(11,902)
Net revenue	38,856	28,817	67,673
Cost of sales	(23,812)	(26,694)	(50,506)
Gross profit before FV adjustments ⁽¹⁾	15,044	2,123	17,167
Depreciation	6,189	4,283	10,472
Inventory impairment and out-of-period adjustments in cost of sales ⁽⁴⁾	461	1,363	1,824
Adjusted gross profit before FV adjustments ⁽¹⁾	21,694	7,769	29,463
Adjusted gross margin before FV adjustments ⁽¹⁾	56%	27%	44%

⁽¹⁾

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

⁽²⁾

⁽³⁾

⁽⁴⁾

Included in out-of-period adjustments is: Q1 2022 - $1.3 million related to prior year bonus accruals (Q4 2021 - $0.9 million out-of-period revenue adjustment to reclassify prior period rebates against net revenue, $5.5 million cost of sales adjustment related to a catch-up of prior year raw material count reconciliations, offset by $0.3 million reallocated bonus accruals recognized in the current period; Q1 2021 - $0.3 million out-of-period revenue adjustment to reclassify prior period rebates against net revenue and $0.3 million reallocated bonus accruals recognized in the current period).

Medical Cannabis Gross Margin

Adjusted gross margin before FV adjustments on medical cannabis net revenue was 62% for the three months ended December 31, 2021 as compared to 64% in the prior quarter and 56% for same period of the prior year. The continued strength of the Company’s medical adjusted gross margins reflect the direct-to-patient model in Canada, and the increasing prominence of our high margin international medical business.

| AURORA CANNABIS

Q2 2022 MD&A

Consumer Cannabis Gross Margin

Adjusted gross margin before FV adjustments on consumer cannabis net revenue was 24% for the three months ended December 31, 2021, compared to 32% in the prior quarter and 27% in the comparable prior year period. The decrease of 8% from Q1 2022 was 6% related to industry-wide pricing compression, offset by 2% improvement from Aurora’s continuing shift toward a premium product portfolio. A further 4% decrease reflects the clear out of aging and low potency consumer cannabis through bulk wholesale channels. Excluding the discounted bulk sales, which are not expected to recur regularly, the Company’s consumer adjusted gross margin was 28%.

Adjusted Gross Margin

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

($ thousands)	Medical Cannabis	Consumer Cannabis	Total
*Six months ended December 31, 2021*
Gross revenue	92,626	46,260	138,886
Excise taxes	(5,894)	(12,298)	(18,192)
Net revenue	86,732	33,962	120,694
Cost of sales	(52,244)	(52,772)	(105,016)
Gross profit before FV adjustments ⁽¹⁾	34,488	(18,810)	15,678
Depreciation	10,518	10,259	20,777
Inventory impairment and out-of-period adjustments in cost of sales ⁽⁴⁾	9,925	18,114	28,039
Adjusted gross profit before FV adjustments ⁽¹⁾	54,931	9,563	64,494
Adjusted gross margin before FV adjustments ⁽¹⁾	63%	28%	53%

*Six months ended December 31, 2020 ^(2,3)*
Gross revenue	78,185	83,837	162,022
Excise taxes	(6,074)	(20,682)	(26,756)
Net revenue	72,111	63,155	135,266
Cost of sales	(42,425)	(53,529)	(95,954)
Gross profit (loss) before FV adjustments ⁽¹⁾	29,686	9,626	39,312
Depreciation	9,564	9,639	19,203
Inventory impairment and out-of-period adjustments in cost of sales ⁽⁴⁾	977	3,273	4,250
Adjusted gross profit before FV adjustments ⁽¹⁾	40,227	22,538	62,765
Adjusted gross margin before FV adjustments ⁽¹⁾	56%	36%	46%

⁽¹⁾

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

⁽²⁾

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

⁽³⁾

⁽⁴⁾

Medical Cannabis Gross Margin

Adjusted gross margin before FV adjustments on medical cannabis net revenue was 63% for the six months ended December 31, 2021 as compared to 56% for same period of the prior year. The increase in adjusted gross margin before FV adjustments was a result of (i), a reduction in cost of sales due plant yield improvements and asset rationalization ii) strong sales mix towards high margin international markets.

Consumer Cannabis Gross Margin

Adjusted gross margin before FV adjustments on consumer cannabis net revenue decreased to 28% for the six months ended December 31, 2021 as compared to 36% for same period of the prior year, which was a result of continued downward pricing pressures in the consumer market partially offset by improved plant yields and cost improvements within the production network, and a continuing shift in the Company’s product portfolio toward higher margin premium segments.

| AURORA CANNABIS

Q2 2022 MD&A

Operating Expenses

	Three months ended			Six months ended
($ thousands)	December 31, 2021	September 30, 2021	December 31, 2020⁽¹⁾	December 31, 2021	December 31, 2020⁽¹⁾
General and administration	28,698	30,305	27,823	59,003	56,917
Sales and marketing	14,263	15,455	14,138	29,718	29,132
Acquisition costs	209	175	—	384	1,104
Research and development	1,625	3,671	2,432	5,296	5,015
Depreciation and amortization	12,678	12,370	13,962	25,048	27,910
Share-based compensation	3,900	2,847	5,987	6,747	12,848

⁽¹⁾

As a result of the Company’s dissolution and divestment of its wholly owned subsidiaries, Hempco and AHE, during the year ended June 30, 2021, the operations of Hempco and AHE have been presented as discontinued operations and the Company’s operational results have been retroactively restated, as required. Refer to Note 12(b) of the Financial Statements and Note 12(b) of the annual audited consolidated financial statements for the year ended June 30, 2021 for more information about the divestiture.

General and administration (“G&A”)

During the three months ended December 31, 2021, G&A expenses decreased by $1.6 million and was $0.9 million higher, as compared to the prior quarter and to the same period in the prior year, respectively. Included in Q2 2022 G&A is $2.2 million in restructuring, severance and benefits related to the wind down of certain production facilities as part of our business transformation plan (three months ended December 31, 2020 - $1.3 million), and $1.2 million of accrued prior period employee costs. Excluding these impacts, G&A for the three months ended December 31, 2021, September 30, 2021 and December 31, 2020 would have been $25.3 million, $25.5 million, and $26.5 million, respectively. Management continues to control spending in connection with its business transformation plan.

During the six months ended December 31, 2021, G&A expenses increased by $2.1 million as compared to the same six month period in the prior year. Included in G&A is $8.2 million in restructuring, severance and benefits, and prior year bonus accruals (six months ended December 31, 2020 - $5.4 million). Excluding these impacts, G&A for the six months ended December 31, 2021 and 2020 would have been $50.8 million and $51.5 million, respectively.

Sales and marketing (“S&M”)

During the three months ended December 31, 2021, S&M decreased by $1.2 million as compared to the prior quarter. Included in S&M is $0.2 million in restructuring and severance (three months ended September 30, 2021 - $0.6). Excluding these impacts, S&M for the three months ended December 31, 2021 and September 30, 2021 would have been $14.1 million and $14.9 million, respectively, and consistent with the prior quarter. Management continues to control spending in connection with its business transformation plan.

During the three and six months ended December 31, 2021, S&M remained relatively consistent, experiencing a slight increase by $0.1 million and $0.6 million respectively, as compared to the prior year.

Research and development (“R&D”)

During the three months ended December 31, 2021, R&D expenses decreased by $2.0 million as compared to the prior quarter, as the Nordic production facility completed its ramp-up phase.

Depreciation and amortization

Depreciation and amortization expense for the three months ended December 31, 2021 has not changed materially from comparative periods as the Company’s operating capital base has remained relatively consistent during these periods.

Share-based compensation

During the three months ended December 31, 2021, share-based compensation expense decreased by $2.1 million as compared to the same period in the prior year. The decrease was primarily due to forfeitures and headcount reduction from our business transformation plan.

During the six months ended December 31, 2021, share-based compensation expense decreased by $6.1 million for the reasons noted above.

Other income (expense)

For the three months ended December 31, 2021, other income (expense) was $(19.7) million and consisted mainly of: (i) $(3.2) million income from government grants; (ii) $4.4 million net loss on the disposal of property, plant and equipment and assets held for sale; (iii) $15.9 million finance and other costs; (iv) $5.4 million unrealized fair value losses on derivative investments; (v) $2.4 million loss in foreign exchange; (vi) $4.3 million impairment of property, plant and equipment; and (vii) $0.5 million restructuring charges, partially offset by (viii) $13.7 million unrealized fair value gains on derivative liabilities.

| AURORA CANNABIS

Q2 2022 MD&A

For the six months ended December 31, 2021, income (expense) was $7.6 million and consisted of: (i) $54.0 million unrealized fair value gains on derivative liabilities; (ii) $11.2 million income from government grants; offset by (iii) $3.0 million net loss on the disposal of property, plant and equipment and assets held for sale; (iv) $31.2 million finance and other costs; (v) $10.0 million unrealized fair value losses on derivative investments; (vi) $1.9 million loss in foreign exchange; (vii) $4.3 million impairment of property, plant and equipment; (viii) $1.9 million restructuring charges; and (ix) 9.1 million loss on extinguishment of a derivative investment.

Refer to Notes 7(b), 14 and 16(c) of the Financial Statements for the three months ended December 31, 2021 for a summary of the Company’s derivative investments, convertible debentures, and share purchase warrants, respectively.

Adjusted EBITDA

The following is the Company’s adjusted EBITDA:

($ thousands)	Three months ended			Six months ended
($ thousands)	December 31, 2021	September 30, 2021	December 31, 2020⁽¹⁾⁽²⁾	December 31, 2021	December 31, 2020⁽¹⁾⁽²⁾
Net income (loss) from continuing operations	(75,143)	(11,884)	(300,222)	(87,027)	(398,883)
Non-operating expense (income) ⁽³⁾	14,779	(27,184)	10,318	(12,405)	26,682
Income tax expense (recovery)	(368)	(208)	3,167	(576)	3,778
Depreciation and amortization	24,195	21,630	24,463	45,825	47,114
Inventory and biological assets fair value adjustments	(16,647)	1,297	4,954	(15,350)	(7,921)
Share-based compensation	3,900	2,847	5,987	6,747	12,848
Acquisition costs	209	175	—	384	1,104
Restructuring related charges ⁽⁴⁾	3,023	1,894	5,645	4,917	53,236
Out-of-period adjustments ⁽⁵⁾	1,174	4,699	374	5,873	(282)
Asset impairments	35,838	(4,808)	234,129	31,030	240,599
Adjusted EBITDA ⁽⁶⁾	(9,040)	(11,542)	(11,185)	(20,582)	(21,725)

⁽¹⁾

⁽²⁾

⁽³⁾

Non-operating expense (income) includes: interest and other income; finance and other costs; foreign exchange gain (loss); government grant income; and fair value changes on derivative investments, derivative liabilities, contingent consideration, loss on extinguishment of derivative investment, and (gain) loss on the modification of debt. Refer to Note 19 of the Financial Statements.

⁽⁴⁾

Restructuring related charges includes legal contract termination fees, restructuring charges and severance associated with the business transformation plan and revenue provisions as a result of Company initiated product swap to replace low quality product with higher potency product at the provinces.

⁽⁵⁾

Included in out-of-period adjustments in Q2 2022 are $1.2 million related to prior period payroll related expenses; Q1 2022 are $6.3 million expenses related to the prior year employee bonuses offset by $1.6 million other gains related to prior periods.

⁽⁶⁾

Adjusted EBITDA is a non-GAAP financial measure and is not a recognized, defined, or standardized measure under IFRS. Refer to “Cautionary Statement Regarding Certain Non-GAAP Performance Measures” section of the MD&A. In order to provide more direct comparability to industry peers, management has captured restructuring and out of period costs for prior periods, as well as the current period, in this reconciliation. Previously management reported these costs separately as a further adjustment to EBITDA.

Adjusted EBITDA loss decreased by $2.5 million, or 22%, for the three months ended December 31, 2021 as compared to the prior quarter. The decrease is primarily attributable to a $3.1 million decrease in SG&A and R&D expenses, excluding restructuring out-of-period related expenses.

Adjusted EBITDA loss decreased by $2.1 million, or 19%, and $1.1 million or 6%, for the three and six months ended December 31, 2021, respectively, as compared to the same periods in the prior year. The decrease is primarily driven $1.2 million decrease in SG&A and R&D expenses, excluding restructuring related charges and out-of period adjustments noted above.

| AURORA CANNABIS

Q2 2022 MD&A

Liquidity and Capital Resources

($ thousands)	December 31, 2021	June 30, 2021
Cash and cash equivalents	332,404	421,457
Marketable securities	1,677	3,751

Working capital	481,574	549,517
Total assets	2,485,384	2,604,731
Total non-current liabilities	407,863	450,656

*Capitalization*
Convertible notes	348,753	327,931
Lease liabilities	65,698	71,619
Total debt	414,451	399,550
Total equity	1,954,656	2,037,700
Total capitalization	2,369,107	2,437,250

During the three and six months ended December 31, 2021, the Company primarily financed its operations, capital expenditures and growth initiatives through the generation of net revenue and working capital, and cash on hand. For more information on key cash flows related to operations, investing and financing activities during the quarter, refer to the “Cash Flow Highlights” discussion below.

The Company’s objective when managing its liquidity and capital resources is to maintain sufficient liquidity to support financial obligations when they come due, while executing operating and strategic plans. The Company manages liquidity risk through the management of its capital structure and resources to ensure that it has sufficient liquidity to settle obligations and liabilities when they are due. Our ability to fund our operating requirements depends on future operating performance and cash flows, which are subject to economic, financial, competitive, business and regulatory conditions, and other factors, some of which are beyond our control, such as the potential impact of COVID-19. Our primary short-term liquidity needs are to fund our net operating losses, capital expenditures to maintain existing facilities, 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 December 31, 2021, the Company has access to the following capital resources available to fund operations and obligations:

•

$332.4 million cash and cash equivalents; and

•

US$1.0 billion securities registered for sale under the 2021 Shelf Prospectus for future financings or issuances of securities, including US$300 million available securities for sale under 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 and financing activities for the foreseeable future.

Equity Financings

On March 30, 2021, the Company filed the 2021 Shelf Prospectus in Canada and a corresponding 2021 Registration Statement with the Securities and Exchange Commission (“SEC”) in the U.S. The 2021 Shelf Prospectus and the 2021 Registration Statement allow the Company to make offerings of up to US$1.0 billion in common shares, warrants, options, subscription receipts, debt securities or any combination thereof during the 25-month period that the 2021 Shelf Prospectus remains effective. As of December 31, 2021, all US$1.0 billion remained available for use. Subsequent to December 31, 2021, the Company issued 19,595,000 common shares under the ATM Program for gross proceeds of US$89.7 million.

Cash Flow Highlights

The table below summarizes the Company’s cash flows for the six months ended December 31, 2021 and the comparative periods:

($ thousands)	Three months ended		Six months ended
($ thousands)	December 31, 2021	December 31, 2020 ⁽¹⁾	December 31, 2021	December 31, 2020
Cash used in operating activities	(21,586)	(63,320)	(44,229)	(172,593)
Cash used in investing activities	(9,713)	(7,554)	(9,354)	(23,569)
Cash (used in) provided by financing activities	(7,423)	320,596	(41,174)	416,667
Effect of foreign exchange	(1,665)	986	5,704	1,702
(Decrease) increase in cash and cash equivalents	(40,387)	250,708	(89,053)	222,207

⁽¹⁾

Amounts have been recast for the biological assets and inventory non-material prior period error. Refer to the “Change in Accounting Policies and Estimates” section below for further detail.

| AURORA CANNABIS

Q2 2022 MD&A

Cash used in operating activities for the three months ended December 31, 2021 decreased by $41.7 million as compared to the same period in the prior year. The decrease was primarily due to a $56.2 million change in non-cash working capital. The decrease in non-cash working capital over prior year was mainly driven a $37.7 million decrease in biological assets and inventory and a $21.8 million increase in accounts payable and accrued liabilities, partially offset by a $12.0 million increase in accounts receivable.

Cash used in investing activities for the three months ended December 31, 2021 increased by $2.2 million as compared to the same period in the prior year. The increase was primarily due to a $6.1 million lower proceeds from the sale of marketable securities, partially offset by a $4.2 million decrease in loan receivable.

Cash used in financing activities for the three months ended December 31, 2021 decreased by $328.0 million as compared to the same period in the prior year. The decrease was primarily due to a $378.0 million decrease in cash generated from share issuances, partially offset by a $50.2 million decrease in restricted cash.

Cash used in operating activities for the six months ended December 31, 2021 has decreased by $128.4 million as compared to the same period in the prior year. The decrease was primarily due to $51.0 million in prior year’s severance, restructuring and legal settlement charges and $77.4 million changes in non-cash working capital over prior year. The decrease in non-cash working capital over prior year was mainly driven by $41.8 million decrease in biological asses and inventory, and a $21.3 million increase in accounts payable and accrued liabilities.

Cash used in investing activities for the six months ended December 31, 2021 decreased by $14.2 million as compared to the same period in the prior year. The decrease was primarily attributable to a $12.8 million decrease in property, plant and equipment expenditures and a $2.8 million increase in disposal of property, plant and equipment.

Cash provided by financing activities for the six months ended December 31, 2021 decreased by $457.8 million as compared to the same period in the prior year. The decrease was primarily attributable to a $492.4 million decrease in cash generated from share issuances, partially offset by a $22.5 million decrease in repayment of long-term loans as the Company fully settled its BMO Credit Facility in the prior fiscal year

Capital Expenditures

The Company’s major capital expenditures for the six months ended December 31, 2021 primarily consisted of construction activities at its German production facility and enhancements at existing core facilities. The Company is simplifying its network and focusing on core sites to transform Aurora into a company that delivers earnings both in the short-term and long-term. During the three months ended December 31, 2021, capital expenditures including intangible assets was $12.7 million, offset by $1.2 million proceeds from disposals. Additionally, the Company has applied for a $9.4 million grant related to the Company’s co-generation project at the Aurora River facility to offset capital expenditures, of which $3.6 million was previously received and reported in Q4 2021.

Contractual Obligations

As at December 31, 2021, the Company had the following contractual obligations:

($ thousands)	Total	≤ 1 year	Over 1 year to 3 years	Over 3 years to 5 years	> 5 years
Accounts payable and accrued liabilities	52,802	52,802	—	—	—
Convertible notes and interest ⁽¹⁾	492,308	23,918	468,390	—	—
Lease liabilities ⁽²⁾	119,039	9,824	25,733	20,555	62,927
Contingent consideration payable ⁽³⁾	227	227	—	—	—
Capital commitments ⁽⁴⁾	1,824	1,824	—	—	—
Purchase commitments ⁽⁵⁾	7,575	2,066	4,132	1,377	—
Business acquisition retention payments	4,913	1,727	3,186	—	—
Total contractual obligations	678,688	92,388	501,441	21,932	62,927

⁽¹⁾

Assumes the remaining principal balance outstanding at December 31, 2021 remains unconverted and includes the estimated interest payable until the maturity date.

⁽²⁾

Includes interest payable until maturity date.

⁽³⁾

Includes $0.1 million payable in cash, with the remainder payable in cash, shares, or a combination of both at Aurora’s sole discretion.

⁽⁴⁾

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

⁽⁵⁾

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

Contingencies

From time to time, the Company and/or its subsidiaries may become 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, 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 December 31, 2021 (September 30, 2021 - nil).

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Q2 2022 MD&A

The Company and its subsidiary, ACE, have been named in a purported class action proceeding which commenced on June 18, 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 December 31, 2021 (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 December 31, 2021 (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. 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 December 31, 2021 (September 30, 2021 - nil).

On October 2, 2020, a purported class action lawsuit was commenced in the United States District Court for the District of New Jersey against the Company and certain current and former executive officers on behalf of persons or entities who purchased or otherwise acquired Aurora securities between February 13, 2020 and September 4, 2020. The complaint alleges, inter alia, that the Company and certain current and former executive officers violated the federal securities laws by making false and/or misleading statements and/or failing to disclose that the Company had significantly overpaid for previous acquisitions and experienced degradation in certain assets, including its production facilities and inventory; the Company’s business transformation plan and cost reset failed to mitigate the foregoing issues; it was foreseeable that the Company would record significant goodwill and asset impairment charges; and as a result, the Company’s public statements were materially false and misleading. The Company disputes the allegations. On November 2, 2021, the plaintiffs voluntarily dismissed this action without prejudice as to all claims. This matter is now concluded. No provision has been recognized as at December 31, 2021 (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 December 31, 2021 (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.

Off-balance sheet arrangements

As at the date of this MD&A, the Company has $1.6 million letters of credit outstanding with BMO. There are no other material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the financial performance or financial condition of the Company.

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Q2 2022 MD&A

Related Party Transactions

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

($ thousands)	Three months ended		Six months ended
($ thousands)	December 31, 2021	December 31, 2020	December 31, 2021	December 31, 2020
Short-term employment benefits ⁽¹⁾	2,144	802	4,027	2,424
Long-term employment benefits	14	—	29	—
Termination benefits	—	—	—	450
Directors’ fees ⁽²⁾	85	132	165	281
Share-based compensation ⁽³⁾	2,491	3,150	4,898	6,392
Total management compensation ⁽⁴⁾	4,734	4,084	9,119	9,547

⁽¹⁾

Short-term employment benefits include salaries, wages, and bonuses. Short-term employment benefits are measured at the exchange value, being the amounts agreed to by each party.

⁽²⁾

Includes meeting fees and committee chair fees.

⁽³⁾

Share-based compensation represent the contingent consideration, and the fair value of options, restricted share units, deferred share units and performance share units granted and vested to key management personnel and directors of the Company under the Company’s share-based compensation plans (refer to Note 17 of the Financial Statements).

⁽⁴⁾

As of December 31, 2021, $2.2 million is payable or accrued for key management compensation (June 30, 2021 - $0.8 million).

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

($ thousands)	Three months ended		Six months ended
($ thousands)	December 31, 2021	December 31, 2020	December 31, 2021	December 31, 2020
Production costs ⁽¹⁾	733	1,111	1,147	1,782

⁽¹⁾

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

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

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

($ thousands)	December 31, 2021	December 31, 2020
Equipment loan receivable from investments in associates ⁽¹⁾	10,504	10,096
Debenture and interest receivable from investment in associate ⁽²⁾	6,097	17,170
Production costs with investments in associates ⁽³⁾⁽⁴⁾	131	—
	16,732	27,266

⁽¹⁾

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

⁽²⁾

Represents the $6.0 million secured convertible debenture in Choom Holdings Inc. (“Choom”) plus interest receivable bearing interest at 7.0% per annum and maturing on December 23, 2024. Balance at June 30, 2021 represents the $20.0 million unsecured convertible debenture in Choom plus interest receivable, bearing interest at 6.5% per annum and was to mature on November 2, 2022. Refer to Note 6(e) of the Financial Statements for further details.

⁽³⁾

Production costs incurred with (i) Capcium Inc., a company that manufactures our softgels and in which Aurora holds significant influence; and (ii) Sterigenics which provides cannabis processing services to the Company and is party to a common joint venture in Auralux. Pursuant to a manufacturing agreement with Capcium Inc., the Company is contractually committed to purchase a minimum number of softgels during each calendar year from 2020 and thereafter. If the Company fails to meet the required purchase minimum, then it is required to pay a penalty fee equal to the difference between the actual purchased quantity and the required purchase minimum multiplied by the cost of the softgels. The Company is committed to purchase 42.7 million capsules in calendar 2020, and 20.0 million capsules per calendar year until December 31, 2026.

⁽⁴⁾

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

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

Critical Accounting Estimates

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

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

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Q2 2022 MD&A

Other than the estimates used in restructuring provisions (Note 3 in the Financial Statements), there have been no changes in Aurora's critical accounting estimates during the six months ended December 31, 2021. For additional information on the Company’s accounting policies and key estimates, refer to the note disclosures in the annual consolidated financial statements and MD&A as at and for the year ended June 30, 2021.

Change in Accounting Policy and Estimates

New Accounting Policy

Segregated Cell Insurance

Insurance coverage for the Company’s directors and officers has been secured through a segregated cell program (“Segregated Cell”). The Segregated Cell was effected by entering into a participation agreement with a registered Segregated Accounts Company for the purposes of holding and supporting the Company’s insurance risk transfer strategies. The Company applies IFRS 10 Consolidated Financial Statements in its assessment of control as it relates to the Segregated Cell and the Company’s accounting policy is to consolidate the Segregated Cell. The funds held in the Segregated Cell are held as cash with the possibility of reinvestment. As the funds cannot be transferred to other parts of the group, the funds are disclosed as Restricted Cash.

Change in Estimates

Biological Assets and Inventory Non-Material Prior Period Error

During the year ended June 30, 2021, a non-material error was identified in the valuation methodology for biological assets. As part of the fair value measurement, management incorporated the cannabis plant’s stage of growth in determining the fair value less costs to sell (“FVLCS”). In the period of harvest, the balance in biological assets was transferred directly to inventory at the average 48% stage of growth without adjusting for the incremental fair value to grow the plant through the full lifecycle. The Company now includes the incremental fair value of the plants in the valuation and transfers the biological assets to inventory at the full stage of growth at the point of harvest. Additionally, the Company revised certain key inputs used in determining FVLCS, including the incorporation of an effective yield factor based on the potency of cannabis produced. These changes primarily impacted unrealized fair value gains on biological assets and changes in fair value of inventory sold, both of which are non-cash impacts and are not material to the Company.

Management evaluated the materiality of the errors, both quantitatively and qualitatively, and concluded that the changes were not material to the annual consolidated financial statements taken as a whole for any prior period. The Company has revised opening deficit and corrected the error by recasting the prior period information in these condensed consolidated interim financial statements. The following is a summary of the impacts to the statement of comprehensive loss and the statement of cash flows for the three months ended December 31, 2020, prior to the impact of discontinued operations:

($ thousands)	Three months ended December 31, 2020 As previously reported	Biological Assets and Inventory Adjustments	Three months ended December 31, 2020 Recasted
*Consolidated Statement of Comprehensive Loss*
Cost of sales	50,644	(138)	50,506
Gross profit (loss) before fair value adjustments	17,029	138	17,167

Changes in fair value of inventory sold	5,942	23,624	29,566
Unrealized gain on changes in fair value of biological assets	(6,262)	(18,350)	(24,612)
Gross profit (loss)	17,349	(5,136)	12,213

Deferred tax recovery	3,285	—	3,285

Net loss from continuing operations	(292,788)	(5,136)	(297,924)
Net loss attributable to Aurora shareholders	(292,788)	(5,136)	(297,924)
Loss per share (basic and diluted)	($1.74)	($0.03)	($1.77)

The following is a summary of the impacts to the statement of cash flows for the three months ended December 31, 2020:

($ thousands)	Three months ended December 31, 2020 As previously reported	Biological Assets and Inventory Adjustments	Three months ended December 31, 2020 Recasted
*Consolidated Statement of Cash Flows*
Unrealized gain on changes in fair value of biological assets	(6,262)	(18,350)	(24,612)
Changes in fair value of inventory sold	5,942	23,624	29,566
Deferred tax recovery	3,167	—	3,167
Changes in non-cash working capital	(27,388)	(138)	(27,526)
Net cash used in operating activities	(64,141)	—	(64,141)

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Q2 2022 MD&A

Recent Accounting Pronouncements

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

Amendments to 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 is currently evaluating the potential impact of these amendments on the Company’s consolidated financial statements.

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

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

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

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

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 in paragraph 22 of IAS 41 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 is currently evaluating the potential impact of these amendments on the Company’s consolidated financial statements.

Financial Instruments

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

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

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Q2 2022 MD&A

Summary of Financial Instruments

The carrying values of the financial instruments at December 31, 2021 are summarized in the following table:

($ thousands)	Amortized Cost	FVTPL	Designated FVTOCI	Total
Financial Assets
Cash and cash equivalents	332,404	—	—	332,404
Restricted cash	51,349	—	—	51,349
Accounts receivable, excluding sales taxes receivable	47,239	—	—	47,239
Marketable securities	—	—	1,677	1,677
Derivatives	—	36,737	—	36,737
Loans receivable	13,080	—	—	13,080
Lease receivable	6,294	—	—	6,294
Financial Liabilities
Accounts payable and accrued liabilities	52,802	—	—	52,802
Convertible debentures ⁽¹⁾	348,753	—	—	348,753
Contingent consideration payable	—	227	—	227
Other current liabilities	16,852	—	—	16,852
Lease liabilities	65,698	—	—	65,698
Derivative liability	—	37,894	—	37,894
Other long-term liabilities	119	—	—	119

⁽¹⁾

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

Fair Value Hierarchy

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

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

The following is a summary of financial instruments measured at fair value segregated based on the various levels of inputs as at December 31, 2021:

($ thousands)	Level 1	Level 2	Level 3	Total
As at December 31, 2021
Marketable securities ⁽¹⁾	1,677	—	—	1,677
Derivative assets ⁽¹⁾	—	20,480	16,257	36,737
Contingent consideration payable	—	—	227	227
Derivative liability ⁽²⁾	37,461	433	—	37,894

As at June 30, 2021
Marketable securities	3,751	—	—	3,751
Derivative assets	—	42,477	16,905	59,382
Contingent consideration payable	—	—	374	374
Derivative liability	88,860	3,079	—	91,939

⁽¹⁾

For a reconciliation of realized and unrealized gains and losses applicable to financial assets measured at fair value for the three months ended December 31, 2021, refer to Notes 7(a) and (b) in the Financial Statements.

⁽²⁾

For a reconciliation of unrealized gains and losses applicable to financial liabilities measured at fair value for the three months ended December 31, 2021, refer to Note 14 and Note 16(c) in the Financial Statements.

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

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Q2 2022 MD&A

Financial Instruments Risk

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

Credit risk

Credit risk is the risk of a potential loss to the Company if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company is moderately exposed to credit risk from its cash and cash equivalents, 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 $32.1 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 (“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 December 31, 2021, $12.3 million of accounts receivable are from non-government wholesale customers (June 30, 2021 - $7.0 million). As of December 31, 2021, the Company recognized a $4.4 million provision for expected credit losses (June 30, 2021 - $5.4 million).

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

($ thousands)	December 31, 2021	June 30, 2021

0 - 60 days	22,802	36,195
61+ days	5,238	5,835
	28,040	42,030

Liquidity risk

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

Summary of Outstanding Share Data

The Company had the following securities issued and outstanding as at January 31, 2022:

Securities ⁽¹⁾	Units Outstanding
Issued and outstanding common shares	214,773,000
Stock options	3,686,692
Warrants	18,447,389
Restricted share units	1,270,977
Deferred share units	85,593
Performance share units	777,043
Convertible debentures	3,914,718

⁽¹⁾

Refer to Note 14 “Convertible Debentures”, Note 16 “Share Capital” and Note 17 “Share-Based Compensation” in the Company’s Financial Statements for a detailed description of these securities.

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Q2 2022 MD&A

Historical Quarterly Results

($ thousands, except earnings per share and Operational Results)	Q2 2022	Q1 2022	Q4 2021	Q3 2021 ⁽¹⁾⁽²⁾
Financial Results
Net revenue ⁽²⁾	$60,586	$60,108	$54,825	$55,161
Adjusted gross margin before FV adjustments on cannabis net revenue ⁽³⁾	53%	54%	54%	44%
Loss from continuing operations attributable to common shareholders	($74,776)	($11,884)	($133,969)	($160,625)
(Loss) earnings from discontinued operations attributable to common shareholders	$ —	$ —	($1,179)	$ —
Loss attributable to common shareholders	($74,776)	($11,884)	($135,148)	($160,625)
Basic and diluted loss per share from continuing operations	($0.38)	($0.06)	($0.68)	($0.83)
Basic and diluted loss per share	($0.38)	($0.06)	($0.68)	($0.83)

Balance Sheet
Working capital	$481,574	$532,612	$549,517	$646,310
Cannabis inventory and biological assets ⁽⁴⁾	$139,625	$139,103	$120,297	$102,637
Total assets	$2,485,384	$2,560,316	$2,604,731	$2,839,155

Operational Results - Cannabis
Average net selling price of dried cannabis ⁽³⁾	$4.20	$4.67	$5.11	$5.00
Kilograms sold	13,043	12,484	11,346	13,520

	Q2 2021 ⁽¹⁾⁽²⁾	Q1 2021 ⁽¹⁾⁽²⁾	Q4 2020 ⁽¹⁾⁽²⁾	Q3 2020 ⁽¹⁾⁽²⁾
Financial Results
Net revenue ⁽²⁾	$67,673	$67,593	$68,426	$72,217
Adjusted gross margin before FV adjustments on cannabis net revenue ⁽³⁾	44%	49%	49%	41%
Loss from continuing operations attributable to common shareholders	($300,222)	($97,197)	($1,839,435)	($131,188)
Loss from discontinued operations attributable to common shareholders	$2,298	($2,731)	($15,721)	($16,965)
Loss attributable to common shareholders	($297,924)	($99,928)	($1,855,156)	($148,153)
Basic and diluted loss per share from continuing operations	($1.79)	($0.83)	($16.52)	($1.31)
Basic and diluted loss per share	($1.77)	($0.85)	($16.66)	($1.48)

Balance Sheet
Working capital	$592,519	$206,335	$145,258	$416,108
Cannabis inventory and biological assets ⁽⁴⁾	$179,275	$171,086	$135,973	$212,782
Total assets	$2,829,963	$2,762,181	$2,779,921	$4,685,952

Operational Results - Cannabis
Average net selling price of dried cannabis ⁽³⁾	$4.45	$3.86	$3.60	$4.64
Kilograms sold	15,253	16,139	16,748	12,729

⁽¹⁾

Certain previously reported amounts have been restated to exclude the results related to discontinued operations and recast for the biological assets and inventory non-material prior period error. For further details on discontinued operations, refer to Note 12(b) of the Financial Statements and Note 12(b) of the annual audited consolidated financial statements for the year ended June 30, 2021. For further details on the recast for biological asset and inventory, refer to the “Change in Accounting Policies and Estimates” section above.

⁽²⁾

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

⁽³⁾

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

⁽⁴⁾

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

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Q2 2022 MD&A

Risk Factors

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

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

•

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

•

Our business is reliant on the good standing of our licenses.

•

Our Canadian licenses are reliant on our established sites.

•

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

•

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

•

Failure to comply with anti-money laundering laws and regulation could subject us to penalties and other adverse consequences.

•

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

•

The possibility of, and timing for, federal legalization of cannabis in the United States is not predictable and we may be subject to increased competition when it occurs.

•

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

•

We may not be able to realize our growth targets.

•

The continuance of our contractual relations with provincial and territorial governments cannot be guaranteed.

•

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

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Any default under our existing debt that is not waived by the applicable lenders could materially adversely impact our results of operations and financial results and may have a material adverse effect on the trading price of our Common Shares.

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

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

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Restrictions on branding and advertising may negatively impact our ability to attract and retain customers.

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The cannabis business may be subject to unfavorable publicity or consumer perception.

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

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There may be unknown health impacts associated with the use of cannabis and cannabis derivative products.

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

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Our success will depend on attracting and retaining key personnel.

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Certain of our directors and officers may have conflicts of interests due to other business relationships.

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Future execution efforts may not be successful.

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

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Our business may be affected by political and economic instability.

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We rely on international advisors and consultants in foreign jurisdictions.

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

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We may be subject to uninsured or uninsurable risks.

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We may be subject to product liability claims.

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Our cannabis products may be subject to recalls for a variety of reasons.

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We may become party to litigation, mediation, and/or arbitration from time to time.

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The transportation of our products is subject to security risks and disruptions.

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Our business is subject to the risks inherent in agricultural operations.

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Our operations are subject to various environmental and employee health and safety regulations.

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Climate change may have an adverse effect on demand for our products or on our operations.

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We may not be able to protect our intellectual property.

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

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We may be subject to risks related to our information technology systems, including cyber-attacks.

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

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

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

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

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

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

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There is no assurance we will continue to meet the listing standards of the Nasdaq and the TSX.

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

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We are a Canadian company and shareholder protections may differ from shareholder protections in the United States and elsewhere.

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

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

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

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Our business may be subject to disruptions as a result of the COVID-19 pandemic.

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

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The controversy surrounding vaporizers and vaporizer products may materially and adversely affect the market for vaporizer products and expose us to litigation and additional regulation.

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Future research may lead to findings that vaporizers, electronic cigarettes and related products are not safe for their intended use.

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We must rely largely on our own market research and internal data to forecast sales and market demand and market prices which may differ from our forecasts.

For additional information regarding the risks that the Company is exposed to, please refer to the disclosures provided under the heading “Risk Factors” in the Company’s AIF dated September 27, 2021, which is available on the SEDAR website at www.sedar.com.

Internal Controls over Financial Reporting

Disclosure Controls and Procedures

As required by National Instrument 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings and Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, we have evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2021. Disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the CSA and SEC.

Based upon the evaluation, our CEO and CFO have concluded that, as a result of the material weaknesses in the Company’s internal control described in our Annual MD&A for the year ended June 30, 2021, as of such date, the Company’s DCP were not effective.

Changes in Internal Controls over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15(d)-5(f) under the Exchange Act) during the three and six months ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Management continues to perform additional account reconciliations and other analytical and substantive procedures to ensure reliable financial reporting and the preparation of financial statements in accordance with IFRS. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Cautionary Statement Regarding Forward-Looking Statements

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

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

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expectations regarding production capacity, costs and yields;

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statements made under the heading “Our Strategy”;

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statements made with respect to the anticipated disposition of legal claims disclosed under the heading “Contingencies”;

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the Company’s ability to execute on its business transformation plan and path to Adjusted EBITDA profitability;

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anticipated cost savings and planned cost efficiencies, including the execution of the Company’s costs savings plan, including, but not limited to, asset consolidation, operational and supply chain efficiencies and other reductions in SG&A expenses;

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expectations related to increased legalization of consumer markets, including the United States;

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growth opportunities including the expansion into additional international markets;

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consumer demand for products containing CBD derived from hemp plants and the associated growth and market opportunities;

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competitive advantages and strengths in medical, scientific leadership and multi-jurisdictional regulatory expertise;

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product portfolio and innovation, and associated revenue growth;

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licensing of genetic innovations to other Licensed Producers and associated revenue growth;

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expectations regarding biosynthetic production and associated intellectual property;

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the use of proceeds generated from the ATM Program;

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the recovery of the Company’s domestic adult recreational segment;

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future strategic plans including M&A; and

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

Forward looking information or statements contained in this document have been developed based on assumptions management considers to be reasonable. Material factors or assumptions involved in developing forward-looking statements include, without limitation, publicly available information from governmental sources as well as from market research and industry analysis and on assumptions based on data and knowledge of this industry which the Company believes to be reasonable.

Such forward-looking statements are estimates reflecting the Company’s best judgment based upon current information and involve a number of risks and uncertainties, and there can be no assurance that other factors will not affect the accuracy of such forward-looking statements. These risks include, but are not limited to, the ability to retain key personnel, the ability to continue investing in infrastructure to support growth, the ability to obtain financing on acceptable terms, the continued quality of our products, customer experience and retention, the development of third party government and non-government consumer sales channels, management’s estimates of consumer demand in Canada and in jurisdictions where the Company exports, expectations of future results and expenses, the availability of additional capital to complete construction projects and facilities improvements, the risk of successful integration of acquired business and operations, management’s estimation that SG&A will grow only in proportion of revenue growth, the ability to expand and maintain distribution capabilities, the impact of competition, the general impact of financial market conditions, the yield from cannabis growing operations, product demand, changes in prices of required commodities, competition, and the possibility for changes in laws, rules, and regulations in the industry, epidemics, pandemics or other public health crises, including the current outbreak of COVID-19,and other risks as set out under “Risk Factors” contained herein. Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating the forward-looking statements.

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

Cautionary Statement Regarding Certain Non-GAAP Performance Measures

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

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

Medical cannabis net revenue represents Canadian and international cannabis net revenue for medical cannabis sales only.

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

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

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

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

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Average net selling price per gram and gram equivalent is calculated by taking cannabis net revenue and removing the impact of cost of sales net against revenue in agency relationships, which is then divided by total grams and grams equivalent of cannabis sold in the period. Average net selling price per gram and gram equivalent is further broken down as follows:

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

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

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

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

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

Management believes the average net selling price per gram or gram equivalent measures provide more specific information about the pricing trends over time by product and market type. Under an agency relationship, revenue is recognized net of cost of sales in accordance with IFRS. Management believes the removal of agency cost of sales in determining the average net selling price per gram and gram equivalent is more reflective of our average net selling price generated in the marketplace.

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Gross profit before FV adjustments on cannabis net revenue is calculated by subtracting (i) cost of sales, before the effects of changes in FV of biological assets and inventory, and (ii) cost of sales from non-cannabis ancillary support functions, from total cannabis net revenue. Gross margin before FV adjustments on cannabis net revenue is calculated by dividing gross profit before FV adjustments on cannabis net revenue divided by cannabis net revenue. Management believes that these measures provide useful information to assess the profitability of our cannabis operations as it excludes the effects of non-cash FV adjustments on inventory and biological assets, which are required by IFRS.

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

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

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

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

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

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

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Adjusted EBITDA is calculated as net income (loss) excluding interest income (expense), accretion, income taxes, depreciation, amortization, changes in fair value of inventory sold, changes in fair value of biological assets, share-based compensation, acquisition costs, foreign exchange, share of income (losses) from investment in associates, government grant income, fair value gains and losses on financial instruments, gains and losses on deemed disposal, losses on disposal of assets, restructuring charges, onerous contract provisions, out-of-period adjustments, and non-cash impairments of deposits, property, plant and equipment, equity investments, intangibles, goodwill, and other assets. Adjusted EBITDA is intended to provide a proxy for the Company’s operating cash flow and is widely used by industry analysts to compare Aurora to its competitors, and derive expectations of future financial performance for Aurora, and excludes out-of-period adjustments that are not reflective of current operating results. Adjusted EBITDA increases comparability between comparative companies by eliminating variability resulting from differences in capital structures, management decisions related to resource allocation, and the impact of FV adjustments on biological assets and inventory and financial instruments, which may be volatile and fluctuate significantly from period to period.

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

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