AURORA CANNABIS INC.
FORM 2A
AMENDED LISTING STATEMENT
DATE: December 9, 2014
{W0264474.DOC}
1. TABLE OF CONTENTS
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GLOSSARY OF TERMS ......................................................................................................... 3
CORPORATE STRUCTURE ................................................................................................... 7
GENERAL DEVELOPMENT OF THE BUSINESS .................................................................. 8
NARRATIVE DESCRIPTION OF THE BUSINESS ............................................................... 11
SELECTED CONSOLIDATED FINANCIAL INFORMATION ................................................ 20
MANAGEMENT’S DISCUSSION AND ANALYSIS ............................................................... 22
MARKET FOR SECURITIES ................................................................................................ 22
CONSOLIDATED CAPITALIZATION .................................................................................... 22
OPTIONS TO PURCHASE SECURITIES ............................................................................. 22
DESCRIPTION OF THE SECURITIES ............................................................................. 25
ESCROWED SECURITIES ............................................................................................... 28
PRINCIPAL SHAREHOLDERS ......................................................................................... 29
DIRECTORS AND OFFICERS .......................................................................................... 30
CAPITALIZATION.............................................................................................................. 35
EXECUTIVE COMPENSATION ........................................................................................ 40
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS ................................. 44
RISK FACTORS ................................................................................................................ 44
PROMOTERS .................................................................................................................... 50
LEGAL PROCEEDINGS ................................................................................................... 51
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS .......... 51
AUDITORS, TRANSFER AGENTS AND REGISTRARS.................................................. 51
MATERIAL CONTRACTS ................................................................................................. 51
INTEREST OF EXPERTS ................................................................................................. 53
OTHER MATERIAL FACTS .............................................................................................. 53
FINANCIAL STATEMENTS ............................................................................................... 54
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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GLOSSARY OF TERMS
Aurora means Aurora Marijuana Inc., a corporation existing under the laws of the Province of
Alberta, with an office at 14613-137 Avenue, Edmonton, Alberta, T5L 4S9 which operates
through its two wholly-owned subsidiaries, Aurora Cannabis Enterprises Inc. (formerly “1755517
Alberta Ltd.”) and 1769474 Alberta Ltd.;
Aurora Class A Warrants means the aggregate of 15,000,000 share purchase warrants of
Aurora held by certain holders as set out in the Share Exchange Agreement, that were
exchanged for the Pubco Class A Warrants and Pubco Performance Class A Warrants on a pro
rata basis;
Aurora Class C Warrants means the aggregate of 10,200,000 share purchase warrants of
Aurora held by certain holders as set out in the Share Exchange Agreement, that were
exchanged for 10,200,000 warrants of Pubco exercisable at a price of $0.50 per Pubco Share for
a period of three years;
Aurora Options means the 4,000,000 outstanding stock options of Aurora granted to an
employee which options are exercisable for 4,000,000 Class "D" Shares of Aurora at a price of
$0.001 per Class "D" Share of Aurora, replaced with the Pubco Options;
Aurora Shareholders means the all of the shareholders of Aurora subject to the Share
Exchange Agreement;
Aurora Warrantholders means the all of the holders of Aurora Class A Warrants and Aurora
Class C Warrants subject to the Share Exchange Agreement;
BCBCA means the Business Corporations Act (British Columbia);
Computershare means Computershare Investor Services Inc.;
CSE means the Canadian Securities Exchange;
Finder’s Fee Shares means 3,000,000 Pubco Shares that were issued immediately upon closing
of the Share Exchange to an unrelated third party as consideration for assistance in closing the
Share Exchange;
Funding Milestone means when:
1. the holders the Pubco Performance Class A Warrants raising the following amount of
equity or debt financing for Pubco:
a. $1,500,000 on or before November 28, 2014; and
b. $8,500,000 on or before the 60th calendar day after Aurora Cannabis Enterprises
Inc. receives a licence from Health Canada to allow it to produce seed to dried
marijuana, which does not include any financing prior to October 30, 2014. For
clarity, the licence may be received by Aurora Cannabis Enterprises Inc. prior to
receipt of an unconditional Production License;
(collectively, the “Raises” and, each, a “Raise”);
2. Aurora has been provided with access to the records of Pubco and independently verified
each Raise and verified the source of such funds for each Raise; and
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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3. for any Raises prior to the closing of the transaction contemplated by the Share
Exchange Agreement, upon the written request of Pubco, the funds from such Raises are
lent from Pubco to Aurora on the same terms and conditions as previous loans between
Pubco and Aurora.
For clarity:
4. the Raises may be achieved by a combination of funds raised by the holders the Pubco
Performance Class A Warrants. Additionally, funds raised from parties introduced to
Pubco by the holders the Pubco Performance Class A Warrants, and their
respective representatives shall contribute towards the Raises;
5. when determining the amount of each Raise, Pubco shall count the gross proceeds of the
Raises. Notwithstanding the foregoing, the maximum amount of the costs for finders’ fees,
commissions, or warrants that may be associated with each Raise are expected to be 8%
or less of the Raise. If such finders’ fees or commissions are greater than 8% of the
Raise, then the amount that the costs are greater than 8% shall be deducted from the
Raise; and
6. funds raised prior to October 30, 2014 shall not be counted towards the funding
milestone.
Listing Statement means this CSE Form 2A;
MMPR means the Marihuana for Medical Purposes Regulations pursuant to the Controlled Drugs
and Substances Act (Canada);
NEO’s means a Named Executive Officers of Pubco. The NEO’s are identified as the individual
who acted as a Chief Executive Officer (“CEO”) or Chief Financial Officer (“CFO”) or each of the
three most highly compensated executive officers, or the three most highly compensated
individuals acting in a similar capacity, other than the CEO and CFO, at the end of the most
recently completed financial year whose total compensation was, individually, more than
$150,000, for that financial year;
Performance Milestone means the:
1. receipt by Aurora of the Production License; and
2. registration of 2,000 patients under the Production License of Aurora.
Performance Shares means an aggregate of 20,000,000 Resulting Issuer Shares to be issued
to the Aurora Shareholders on a pro-rata basis upon achievement of the Performance Milestone;
Production License means the full license to be issued by Health Canada under section 25 of
the MMPR permitting Aurora to undertake the following activities in connection with medicinal
marijuana:
1. production;
2. sale;
3. possession;
4. transport; and
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
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5. destruction;
Pubco means Aurora Cannabis Inc. prior to completing the Share Exchange, a corporation
existing under the laws of the Province of British Columbia and halted for trading on the CSE;
Pubco Class A Warrants means 11,250,000 warrants to purchase Pubco Shares at $0.02 per
Pubco Share for a term of five years exercisable on issuance;
Pubco Class C Warrants means 10,200,000 warrants to purchase Pubco Shares at $0.50 per
Pubco Share for a term of three years exercisable on issuance;
Pubco Options means, pursuant to the Share Exchange Agreement, an aggregate of 4,000,000
incentive stock options of Pubco having an exercise price of $0.001 per Pubco Share for a term
of five years on grant that were issued to the holder of the Aurora Options in replacement of the
Aurora Options, which Pubco Options shall vest on the following schedule:
1. 1,600,000 Pubco Options on December 21, 2014;
2. 1,600,000 Pubco Options on June 21, 2015; and
3. 800,000 Pubco Options on December 21, 2015;
Pubco Performance Class A Warrants means 3,750,000 warrants to purchase Pubco Shares
at $0.02 per Pubco Share for a term of five years exercisable on completion of the Funding
Milestone;
Pubco Shares means the common shares of Pubco;
Pubco Warrants means the Pubco Class A Warrants, Pubco Performance Class A Warrants and
the Pubco Class C Warrants;
Related Person means an insider, which has the meaning set forth in the Securities Act (British
Columbia):
1. A director or senior officer of the issuer;
2. A director or senior officer of the Resulting Issuer that is an insider or subsidiary of the
issuer;
3. A person who beneficially owns or controls, directly or indirectly, voting shares carrying
more than 10% of the voting rights attached to all outstanding voting shares of the issuer;
or
4. The issuer if it holds any of its own securities;
Resulting Issuer means Pubco having acquired Aurora on close of the Share Exchange with
Aurora and Aurora Shareholders on December 9, 2014;
Resulting Issuer Shares means the common shares of Pubco following the completion of the
Share Exchange with Aurora and the Aurora Shareholders;
Right of First Refusal means the right granted to Pubco pursuant to the Share Exchange
Agreement that gives the right to Pubco to purchase all or any of the Pubco Shares or Resulting
Issuer Shares issued pursuant to the Share Exchange, on exercise of the Pubco Warrants, at any
time during the 36 months following close of the Share Exchange, if an Aurora Shareholder or
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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Aurora Warrantholder receives an offer from a third party to purchase all or any of the Pubco
Shares or Resulting Issuer Shares issued pursuant to the Share Exchange, on exercise of the
Pubco Options or Pubco Warrants;
Share Exchange means the transaction closed on December 9, 2014 pursuant to the Share
Exchange Agreement among Pubco, Aurora and Aurora Shareholders by which Pubco shall
acquire all of the issued and outstanding securities of Aurora from the Aurora Shareholders and
Aurora Warrantholders and the Right of First Refusal in exchange for the:
(1) issuance an aggregate of:
a. 60,000,000 Pubco Shares on a pro-rata basis to the Aurora Shareholders;
b. 10,200,000 Pubco Class C Warrants on a pro-rata basis to the holders of the
Aurora Class C Warrants;
c. 4,000,000 Pubco Options to the holder of the Aurora Options; and
d. 11,250,000 Pubco Class A Warrants on a pro-rata basis to the holders of the
Aurora Class A Warrants;
(2) reservation of the Pubco Performance Class A Warrants and issuance on a pro-rata
basis to holders of Aurora Class A Warrants upon completion of the Funding Milestone;
(3) assumption debt of $1,500,000 outstanding with no interest and convertible into common
shares of Pubco for a price of $0.125 owed by Aurora to two creditors;
(4) reservation of the Performance Shares and issuance of the Performance Shares on
completion of the Performance Milestone; and
(5) issuance of the Finder’s Fee Shares; and
Share Exchange Agreement means the agreement dated September 9, 2014, as amended by
agreements on September 10, 2014 and October 30, 2014, regarding the Share Exchange
among Pubco, Aurora and all of the Aurora Shareholders.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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2. CORPORATE STRUCTURE
Head and Registered Office
The Resulting Issuer has a head office located at 507 – 700 West Pender Street, Vancouver, BC
V6C 1G8 and its registered office is located at Suite 700 – 1199 West Hastings Street, Vancouver,
BC V6E 3T5.
Incorporation
The Resulting Issuer was incorporated under the BCBCA on December 21, 2006 under the name
“Milk Capital Corp.”. On September 3, 2010, the Resulting Issuer changed its name to “Prescient
Mining Corp.”. On October 2, 2014, the Resulting Issuer changed its name to “Aurora Cannabis
Inc.”.
Subsidiaries
Upon close of the Share Exchange on December 9, 2014 (as described below), Aurora is a
subsidiary of the Resulting Issuer. Aurora has two wholly-owned subsidiaries:
(1) Aurora Cannabis Enterprises Inc. (formerly “1755517 Alberta Ltd.”), incorporated under
the Business Corporations Act (Alberta); and
(2) 1769474 Alberta Ltd., incorporated under the Business Corporations Act (Alberta).
Requalifying – Fundamental Change Description
On September 9, 2014, Pubco entered into the Share Exchange Agreement. Pursuant to the
Share Exchange Agreement, the parties completed the Share Exchange on December 9, 2014,
whereby Pubco acquired all of the issued and outstanding securities of Aurora from the Aurora
Shareholders and Aurora Warrantholders and the Right of First Refusal in exchange for the:
(1) issuance an aggregate of:
a. 60,000,000 Pubco Shares on a pro-rata basis to the Aurora Shareholders;
b. 10,200,000 Pubco Class C Warrants on a pro-rata basis to the holders of the
Aurora Class C Warrants;
c. 4,000,000 Pubco Options to the holder of the Aurora Options; and
d. 11,250,000 Pubco Class A Warrants on a pro-rata basis to the holders of the
Aurora Class A Warrants;
(2) reservation of the Pubco Performance Class A Warrants and issuance on a pro-rata
basis to holders of Aurora Class A Warrants upon completion of the Funding Milestone;
(3) assumption debt of $1,500,000 outstanding with no interest and convertible into common
shares of Pubco for a price of $0.125 owed by Aurora to two creditors;
(4) reservation of the Performance Shares and issuance of the Performance Shares on
completion of the Performance Milestone; and
(5) issuance of the Finder’s Fee Shares.
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Aurora has two wholly-owned subsidiaries:
(1) Aurora Cannabis Enterprises Inc. (formerly “1755517 Alberta Ltd.”), incorporated under
the Business Corporations Act (Alberta); and
(2) 1769474 Alberta Ltd., incorporated under the Business Corporations Act (Alberta).
On the closing of the Share Exchange, Aurora is the wholly-owned subsidiary of the Resulting
Issuer.
Pre-Share Exchange Structure:
Shareholders of Aurora
Cannabis Inc.
Aurora Shareholders
100%
100%
Aurora Cannabis Inc.
Aurora Marijuana Inc.
100%
Aurora Cannabis
Enterprises Inc.
100%
1769474 Alberta Ltd.
(1)
Post-Share Exchange Structure
Shareholders of Aurora
Cannabis Inc.
Aurora Shareholders
59.5%
40.5%
Aurora Cannabis Inc.
100%
Aurora Marijuana Inc.
100%
100%
Aurora Cannabis
Enterprises Inc.
(1)
1769474 Alberta Ltd.
On an undiluted basis and prior to the completion of the Performance Milestone.
3. GENERAL DEVELOPMENT OF THE BUSINESS
History and Development of the Business since Inception
During the three most recently completed financial years, the Resulting Issuer was in the
business of acquiring and exploring mineral properties.
On November 16, 2009, the Resulting Issuer entered into a letter agreement with Full Metal
Minerals Ltd. (“Full Metal”) whereby the Resulting Issuer had the option to earn a 60% interest in
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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Full Metal’s Angie Property. During the year ended June 30, 2011, The Resulting Issuer decided
not to pursue its option agreement with Full Metal and the Resulting Issuer was no longer
obligated to make any further cash payments, share issuances nor incur further exploration costs
on the Angie Property.
On April 12, 2012, the Resulting Issuer entered into an option agreement with Geomode Mineral
Exploration Ltd. (“Geomode”) for the exclusive right and option to acquire a 100% interest in the
Hook Lake property (the “Property”), a prospective uranium project located in Saskatchewan.
During the quarter ended May 31, 2014, the Resulting Issuer decided not to pursue its option
agreement with Geomode and the Resulting Issuer was no longer obligated to make further cash
payments, share issuances nor incur further exploration costs on the Angie Property pursuant to
the terms of the option agreement.
The Resulting Issuer is now in the process of becoming a licensed producer of medical marijuana
in Canada (a “Licensed Producer”) having closed the Share Exchange with Aurora and Aurora
Shareholders. On the close of the Share Exchange, Aurora is the wholly-owned subsidiary of the
Resulting Issuer. Currently, Aurora is in the process of applying to Health Canada for a medical
marijuana production and distribution license (a “Production License”) under the recently
enacted MMPR, which came into full effect on April 1, 2014.
The business of the Resulting Issuer is based on the acquisition of Aurora, an established
company in Edmonton, Alberta, that holds a pre-license approval granted by Health Canada and
is in the final stages of obtaining a Licensed Producer designation from Health Canada under the
MMPR. The licensed producer inspection of Aurora was completed on August 26, 2014.
Significant Acquisitions and Dispositions
Pursuant to the Share Exchange Agreement entered into with Pubco, Aurora and Aurora
Shareholders on September 9, 2014, Pubco acquired all of the issued and outstanding securities
of Aurora from the Aurora Shareholders and Aurora Warrantholders and the Right of First Refusal
in exchange for the:
(1) issuance an aggregate of:
a. 60,000,000 Pubco Shares on a pro-rata basis to the Aurora Shareholders;
b. 10,200,000 Pubco Class C Warrants on a pro-rata basis to the holders of the
Aurora Class C Warrants;
c. 4,000,000 Pubco Options to the holder of the Aurora Options; and
d. 11,250,000 Pubco Class A Warrants on a pro-rata basis to the holders of the
Aurora Class A Warrants;
(2) reservation of the Pubco Performance Class A Warrants and issuance on a pro-rata
basis to holders of Aurora Class A Warrants upon completion of the Funding Milestone;
(3) assumption debt of $1,500,000 outstanding with no interest and convertible into common
shares of Pubco for a price of $0.125 owed by Aurora to two creditors;
(4) reservation of the Performance Shares and issuance of the Performance Shares on
completion of the Performance Milestone; and
(5) issuance of the Finder’s Fee Shares.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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Pursuant to the Share Exchange Agreement, Steve Dobler, a director and President of Aurora,
and Terry Booth, a director of Aurora, were appointed to the following positions and offices with
the Resulting Issuer on close of the Share Exchange:
(1) Steve Dobler – Director and President; and
(2) Terry Booth – Director and Chief Executive Officer.
Immediately after close of the Share Exchange, the Aurora Shareholders hold approximately
57.1% of all issued and outstanding the Resulting Issuer Shares.
As of November 20, 2013, Aurora has leased 160 acres of property at northwest of Cremona,
Alberta for a term of 12 months. The lease is automatically renewed after 12 months for two
successive terms of five years unless prior notice is given by Aurora. In the same month, Aurora
began construction on a custom 54,000 square foot indoor growing, production and distribution
facility (the “Facility”). Construction of the growing facility will be completed in approximately two
months from the date of this Listing Statement. The Facility will be 100% compliant with the
MMPR.
The Resulting Issuer wishes to apply Aurora’s management’s extensive and highly successful
history of growing and producing agricultural products with the Resulting Issuer’s management’s
venture capital experience, and administration, engineering and marketing expertise to producing
medical marijuana under a Production License.
To date, Aurora has filed its application for approval to take the first step in gaining a Production
License application, which is the Health Canada building license application to build a growing
facility. Aurora believes that the application answers and addresses all of the criteria imposed on
applicants and hopes to receive approval. Following building approval and completion of the
growing facility, Aurora will apply for approval to begin step two of the process to obtain a
Production License. Given Aurora’s experience in the industry and anticipating that at this point
Aurora will have completed construction of the Facility, Aurora hopes to receive approval for a
Production License in November, 2014. In the event that Aurora is granted a Production License,
Aurora plans to be cultivating and harvesting dried marijuana by the first half of 2015.
On close of the Share Exchange, the Resulting Issuer’s next immediate step in development is to
raise the capital required in order to go into production to finance the final stages of construction
of the Facility, initiate marketing campaigns and pay initial employee salaries. The construction of
the Facility is almost complete and will run in conjunction with this listing.
Material Trends, Commitments, Events and Uncertainties
As a developing company without revenues, the Resulting Issuer will typically need more capital
than it has available to it or can expect to generate through the sale of its products. In the past,
the Resulting Issuer had raised, by way of equity financing, considerable funds to meet its capital
needs. There is no guarantee that the Resulting Issuer will be able to continue to raise funds
needed for its business. Failure to raise the necessary funds in a timely fashion will limit the
Resulting Issuer’s growth.
Although the Resulting Issuer believes that the Aurora is a good candidate for a Production
License, it is uncertain and not foreseeable whether Aurora will be granted such a license. Denial
of Aurora’s application for a Production License is reasonably expected to materially affect the
Resulting Issuer’s business, financial condition and operations.
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4. NARRATIVE DESCRIPTION OF THE BUSINESS
Description of the Business
On close of the Share Exchange, the Resulting Issuer is in the business of becoming a Licensed
Producer.
Once the Facility is completed in December, 2014 pursuant to the specifications detailed in the
Production License application of the Resulting Issuer, the Resulting Issuer will be producing and
selling medicinal marijuana in Canada.
Although the Production License limits production to 5,500 kilograms of marijuana per year, the
Facility can produce up to 7,000 kilograms per year. The Resulting Issuer then can produce
enough marijuana to supply between 3,000 and 6,000 patients per year, or approximately 4% to
10% of the 2012 market.
The Resulting Issuer believes that there is plenty of room for expansion as marijuana continues to
gain a proper foothold in society as a legal, proven, dependable alternative to other medicinal
products. Marijuana has been tested and provides a number of benefits to patients with
neuropathic pain, diabetes, Crohn’s disease, ALS, Alzheimer’s and more.
The MMPR aims to treat marijuana as much as possible like any other narcotic used for medical
purposes by creating conditions for a new, commercial industry that is responsible for its
production and distribution. The regulations will provide access to quality-controlled marijuana for
medical purposes, produced under secure and sanitary conditions, to those patients who need it,
while strengthening the safety of Canadian communities. In addition, the MMPR will also enable
more options to patients for different strains of marijuana.
Medicinal marijuana is presently legal in 23 U.S states with many more proposed, plus Colorado
and Washington State have actually legalized the recreational use of marijuana. The Resulting
Issuer will look forward to being at the forefront as Canada changes the medicinal marijuana laws
and regulations.
The Canadian government, through Health Canada, dramatically revised the regulation that
governs the production, sale and distribution of medicinal marijuana. A number of reasons
precipitated this change including the fact that only a single strain of marijuana was available for
purchase from Health Canada. Other stakeholders such as law enforcement and fire departments
have expressed health, safety, and security concerns relating to the production of marijuana by
individuals in homes and communities. Their specific concerns relate to the diversion of
marijuana to the illicit market due to limited security requirements, the risk of violent home
invasion, fire hazards due to faulty or overloaded electrical installations, and humidity that causes
dangerous molds. Individual producers who are ill may be more vulnerable to health risks
associated with such molds.
Rapid growth in the number of authorized users also had significant implication for the
administration of the program leading sometimes to long application processing times and higher
program administration costs for Health Canada. Subsequently, over the years Canadian courts
have determined various parts of the old regulation to be invalid, resulting in changes that impact
program delivery.
Under the MMPR, a small number of select companies will be vetted and licensed to grow and
sell medicinal marijuana. Aurora is at the forefront of this new system.
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Aurora is already ahead of most of the competition by having been granted a pre-license by
Health Canada (ie. a ready to build license). Aurora already has land secured, zoned, permitted,
contracted and construction on the Facility is 95% complete.
Additionally, Aurora has ordered and installed most of the hydroponics, security, electrical,
mechanical and grow equipment. Aurora also has an experienced management team in place,
experienced marijuana growers, an experienced pharmaceutical quality assurance manager and
team, a solid construction schedule, firm budget plan and a marketing plan.
Aurora is using automated proven equipment wherever possible, including the irrigation and
nutrient supply system, the security cameras, and production lighting grids. Lastly, Aurora has
determined a database that will handle inventory, POS and patient data in accordance with
Health Canada’s requirements.
Principal Product or Services
Aurora is nearing the completion of the construction of the Facility that can efficiently grow
marijuana under the MMPR. Aurora has and the Resulting Issuer will have specific strains of
marijuana that are able to treat various ailments in a variety of patients, as well as strains that will
appeal to the more discerning patients with high tolerances and large daily consumption amounts.
Aurora already has made contacts throughout the industry, including other growers, compassion
clubs and a marketing plan for the Resulting Issuer, under the brand of Aurora.
Significant Events or Milestones
In order to achieve the foregoing business objectives, the milestones that the Resulting Issuer
must achieve and expected timelines to achieve them are as follows:
Milestone
Timing
Estimated Cost to
Complete ($)
Obtain a Production License and all other permits.
December 2014
Nil
Obtain approval from the CSE for listing
December 2014
Nil
Add expertise to management and staff
December 2014
100,000
Increase advertising and implement new marketing
January 2014
200,000
Complete construction of the Facility
December 2014
2,000,000
Begin production of marijuana at the Facility
January 2014
500,000
strategies
Total Funds Available, Breakdown of Funds and Principal Purposes of Use
As at September 30, 2014, Pubco had a working deficit of approximately $4,637,530 and Aurora
had a working capital of approximately $4,543,839.
At September 30, 2014, Pubco’s cash balance was approximately $1,725,717 and Aurora’s cash
balance was approximately $477,820.
The Resulting Issuer estimates that it will have total funds available as described in the following
table:
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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Available Funds
Estimated working capital (or deficiency) at September 30, 2014 (the most recent month-end prior
to the date of this Listing Statement) is $4,637,530.
Principal Purposes
Following are estimates of cash usage for a 12-month period
Description:
($)
Professional, regulatory, transfer agent and shareholder information
59,000
fees
Office, rent and administration, travel and promotional expenses
137,050
Consulting and management fees
68,000
Construction of the Facility
1,000,000
Start-up salaries of employees
600,000
Raw grow product costs
800,000
Marketing and search engine optimization costs
400,000
Legal, accounting (audit), transfer agent
60,000
CSE Maintenance Fees
6,000
Lease of the property for the Facility
5,000
Operation of the Facility (eg. utilities, maintenance, security, insurance,
600,000
labour).
Total
$3,735,050
The Resulting Issuer plans to raise up to an additional $2,500,000 through the sale of new
common shares subject to the filing of this this Listing Statement. There cannot be any
assurances that we will be able to raise such additional capital at all, or on terms that are
satisfactory to our management.
Marketing Plan
The Resulting Issuer intends to sell directly to patients who are experiencing a variety of ailments,
which involves education of the medical community. The doctor or nurse practitioner will write a
medical document for a patient, who then goes online to the Health Canada website which lists all
Licensed Producers and provides links to the producers’ websites the patient will then submit the
medical document along with a patient registration form to a Licensed Producer that the patient
chooses.
In connection with the closing of the Share Exchange, Pubco changed its name to “Aurora
Cannabis Inc.”. When patients click on the company name, they get directed to the website of
the Resulting Issuer. The website of the Resulting Issuer will offer the patients a variety of
products for a variety of ailments. The ordering and re-ordering process is made as easy as
possible. The Resulting Issuer will provide a clean, healthy product at a fair price and consistent
customer service throughout the process.
The Resulting Issuer will also look at selling to other Licensed Producers if there is extra product.
This will be at a wholesale price, but the Resulting Issuer will have less time spent on the order.
The margins will be lower on wholesales, but it is a method to move large quantities of product at
once.
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The main barriers are:
•
Accessing land that can be zoned for growing this product – completed by Aurora.
•
Gaining a pre-license - completed by Aurora. Construction of the Facility will result in the
grant of the full Production License.
•
Access to capital - there are huge rewards, but there is also large capital that is required
to build these facilities, which we are in the process of sourcing.
Health Canada expects pricing to be around $7.60/gram in 2014 and increasing to $8.80/gram as
the new system becomes more stable.
The first Licensed Producer is currently selling marijuana for between $10.00/gram and
$12.00/gram. Additionally, current prices for compassion clubs range between $5.00/gram and
$25.00/gram, with the average being around $8.00/gram.
The Resulting Issuer can sell our product at below $5.00/gram and still be profitable. So the
target of the Resulting Issuer is to sell its products around the price of $8.00 to $10.00/gram. The
Resulting Issuer will also have deluxe strains of marijuana to be sold at $20.00/gram.
Licensed Producers cannot advertise directly to patients, but can educate people and get their
story out through social media, open houses, seminars, trade shows, seminars for physicians and
public news stories.
According to government statistics, one average year-round patient buys 0.67 kg of marijuana at
a value of approximately $5,000.
Based on this and 60,000 current customers at approximately $5,000 per year per customer, this
equals a $300 million market. If this market were to be split evenly between 20 to 50 growers, that
would be amount to sales of $6 million to $15 million per grower per year. The Facility is expected
to be able to produce up to $50 million of marijuana per year. In discussions with Health Canada,
the Facility is one of the largest facilities that have been proposed.
As there are a limited number of growers that are allowed, most growers will be able to turn a
strong profit. Additionally, Aurora and the Resulting Issuer intend on providing “premium” strains
of marijuana and providing strong customer service at fair prices.
Distribution Plan
Health Canada will only allow Licensed Producers to sell to the patients by the mail. The
Resulting Issuer will endeavour to be first at the front of doctors’ minds when choosing their
supplier.
The Resulting Issuer will also consider selling directly to other Licensed Producers that may need
product.
With the mail delivery style of service becoming the norm under the MMPR, Aurora and Pubco
see an opportunity to create a nationally recognized brand. Like other companies, Aurora and the
Resulting Issuer will actively recruit doctors as referral partners. Medical professionals such as
doctors and nurses are the primary source of patient referrals and, as such, are the starting point
of the marketing strategy. Additionally, Aurora and the Resulting Issuer will also solicit interest
groups for endorsements and seek alliances from the likes of medical associations, treatment
centres, mental health groups, and health and wellness professionals and their respective clinics.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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Aurora and the Resulting Issuer also plan to use online technology to stimulate business. This will
be accomplished by using its website and telecommunications services to provide customer
service and support.
Licenses and Permits
Under the MMPR, a business that wishes to commercially produce and/or distribute medical
marijuana must obtain a Production License to operate as a Licensed Producer. In order to obtain
such a license, the applicant must:
1. show that they are an adult who ordinarily resides in Canada, or a corporation that has its
head office in Canada or operates a branch office in Canada and whose officers and
directors are all adults;
2. designate one senior person in charge of overall management of the activities carried out
by the Licensed Producer;
3. designate one responsible person in charge to work at the Licensed Producer’s site and
have responsibility for supervising regulatory compliance of the Licensed Producer’s
activities;
4. submit:
a. details around the identity of the person or company applying for the license as
well as the location and contact information for each proposed production site
and each building within the site if applicable;
b. the proposed activities to be conducted at each site, the purpose of the proposed
activities, and the substance(s) in respect of which the activities are to be
conducted;
c.
a detailed description of the security measures at the proposed site;
d. a detailed description of the proposed record-keeping method;
e. the maximum quantity of dried marijuana to be produced under the license and
the production period;
f.
the maximum quantity of dried marijuana to be sold or provided by the applicant
under the license;
g. a report written by a quality assurance person establishing that the buildings,
equipment and sanitation program to be used in the license activities complies
with the MMPR’s Good Production Practices requirements; and
5. gain security clearance for the senior person in charge, the responsible person in charge,
the individual licensee if the Production License is issued to an individual, and each
officer and director of the corporation licensee if the Production License is issued to a
corporation.
Prior to submitting an application for a Production License under the MMPR, the applicant must
provide written notice to the local government, the local fire authority, and the local police force or
the Royal Canadian Mounted Police in the area in which the production site is located.
A Production License is valid for the period indicated on that particular license, which is
determined by the issuing Minister at the time of issuance, and must not be later than three years
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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after the effective date of the license. Prior to the expiry date of a Production License, the
licensee who wishes to renew their Production License must submit an application for renewal to
Health Canada that contains the original of the Production License, and a declaration that all of
the information shown on the Production License is correct and complete, subsequent to which
the Minister must issue a renewed Production License subject to any of the grounds for refusal in
section 26.
A Licensed Producer may engage in the following activities:
1. possessing, producing, selling, providing, shipping, delivering, transporting and
destroying marijuana;
2. possessing and producing cannabis, other than marijuana, solely for the purpose of
conducting in vitro testing that is necessary to determine the percentages of
cannabinoids in dried marijuana;
3. selling, providing, shipping, delivering, transporting and destroying cannabis, other than
marijuana, that was obtained or produced solely for the purpose of conducting the
aforementioned in vitro testing;
4. shipping dried marijuana to a health care practitioner in the case referred to in
subparagraph 108(1)(f)(iii) of the MMPR;
5. importing marijuana in accordance with an import permit issued under s. 75 of the
MMPR; and
6. possessing and exporting marijuana in accordance with an export permit issued under s.
83 of the MMPR.
A Licensed Producer may sell or provide marijuana and cannabis that was obtained or produced
solely for the purpose of conducting the aforementioned in vitro testing to:
1. another Licensed Producer;
2. a Licensed Dealer;
3. the Minister; or
4. a person to whom an exemption relating to the substance has been granted under s. 56
of the Controlled Drugs and Substances Act (the “CDSA”).
A Production License may sell or provide dried marijuana to:
1. a client of that Production License or an individual who is responsible for the client;
2. a hospital employee, if the purpose of their possession of the dried marijuana is in
connection with their employment; or
3. a person to whom an exemption relating to the dried marijuana has been granted under
s. 56 of the CDSA.
The MMPR allows doctors or nurse practitioners to write a one-page prescription for up to a
year’s supply of dried medical marijuana with a maximum shipment size of 150 grams per month.
All approved Licensed Producers are listed on a Health Canada website for doctor referral.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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Patients send the original prescription to their preferred supplier, who then ships product directly
to them or their doctor for pick-up; however, no retail sales are permitted.
Division 3 of the MMPR, “Security Measures” sets out physical security requirements that are
necessary to secure sites where Licensed Producers conduct activities with marijuana other than
storage, and Health Canada’s Directive on Physical Security Requirements for Controlled
Substances provides technical detail as to how to meet these security requirements. The
government of Canada outlines the following measures to meet MMPR requirements:
•
signage and physical barriers (eg. a fence) indicating unauthorized access is prohibited;
•
minimized entrances to reduce security threats, and reinforced doors where cannabis is
present;
•
glazing panel security and sensory monitoring systems of the same;
•
video surveillance systems of site perimeter and cannabis storage areas;
•
backup systems for all security measures;
•
key-coded, electronic access control systems to perimeter and any areas cannabis is
located;
•
intrusion detection system with personal or remotely accessible monitoring;
•
records of security monitoring;
•
contingency plans for security breaches;
•
power supply to maintain continuous operation of all security programs; and
•
air filtration systems that control release of pollen, odours and all other particles from
facility.
Aurora and the Resulting Issuer will implement security measures to ensure the physical security
of the premises and staff that is compliant with the above requirements.
Legislative Changes
Health Canada is the department of the federal government of Canada responsible for helping
Canadians maintain and improve their health, while respecting individual choices and
circumstances. Health Canada has committed to providing reasonable access to marijuana for
medicinal purposes, while protecting public safety.
In 2001, the first government regulations were introduced under the Marihuana Medical Access
Regulations (“MMAR”). In the first year that MMAR came into effect, the number of people
authorized to possess marijuana for medical purposes stood at less than 100. In time that number
has grown to approximately 40,000. As a result, the federal government found that the MMAR
was not equipped to handle rapid growth of the industry.
The MMAR allowed registered persons to grow marijuana in private homes, which has resulted in
increased risks to health, safety and security. For example, the high value of marijuana on the
illicit market increases the risks of home invasion and diversion. As a result, Health Canada’s
newer MMPR model attempts to change the regulation of marijuana to treat it like other narcotic
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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drugs used for medical purposes by only allowing prescribed dosages from medical
professionals.
The change in regulation structure has resulted in litigation against the government from people
registered under the MMAR who grow their own marijuana. On March 21, 2014, the decision in
Allard v Canada 2014 FC 280 was released and the federal court granted an interim injunction
against the federal government's plans to end the practice of “grow-your-own medical marijuana”
under the MMAP. As a result of the injunction, current growers of their own medicinal marijuana
under the MMAR are exempted from the MMPR until a final order is made. The trial is expected
to be heard sometime in 2015. Even with the pending litigation and uncertainty arising from what
the Federal Court will decide, Health Canada is continuing to implement the MMPR and has been
accepting new licensing applications.
Target Market
In 2012, the total number of persons who held an authorization to possess dried marijuana in
Canada was 28,115.
•
18,063 patients who grew their own supply;
•
3,405 patients who used a designated grower;
•
5,283 patients who used Health Canada (from Prairie Plant Systems Incorporated);
•
1,364 patients were unaccounted for as to their supply source
In addition, there were over 30,000 patients who were buying from compassion clubs.
Health Canada forecasts these numbers to rise dramatically over the next few years to 450,000
patients.
The Resulting Issuer will sell to patients across Canada. The aim of the Resulting Issuer is to
appeal to all patients with solid products and the variety of strains of marijuana that the Resulting
Issuer will produce that appeals to a wide range of patients. Some patients need pain relief but
want to remain alert; other patients need pain relief and want to sleep, while others want to gain
an appetite and reduce nausea etc.
There are over 70 different cannabinoids that have been identified so far in marijuana. The best
known one is tetrahydrocannabinol (“THC”), but it is becoming increasingly clear that lesser
known cannabinoids may have therapeutic use for certain medical conditions. The most important
example of this is cannabidiol (“CBD”), which has shown potent anti-cancer and anti-psychotic
effects. Other cannabinoids which are under investigation include cannabigerol and
tetrahydrocannabivarin.
Different strains of marijuana have different levels of THC and CBD, and have different effects on
patients and can therefore provide different medicinal relief for a variety of ailments.
Number of Employees
On close of the Share Exchange, the Resulting Issuer has 10 employees and 15 consultants.
Further, the Resulting Issuer plans on hiring additional consultants and employees in the areas of
agriculture, marketing, distribution, security and technology, legal, accounting, and
communications. The Resulting Issuer also intends to hire additional employees in the areas of
technology support, customer service, and accounting to facilitate the growth of our business.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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Foreign Operations Risks
N/A
Competitors
Currently there are numerous growers in Canada. There are legal growers like Designated
Growers and Licensed Home Growers under the old MMAR. Additionally, there are illegal
growers that grow for compassion clubs, organized crime, unregistered home users and others.
Together, the growers number in the several thousands. In British Columbia alone, the estimates
of illegal grow ops range from 12,000 to 15,000.
One of the main goals of the new regulation is to minimize the number of growers so that they
can be managed, audited and controlled much more effectively. Also, the police will know who
the legal growers are and, thus, they will know that everyone else is illegal.
Based on the feedback received from Health Canada, the Resulting Issuer expects approximately
20 to 50 growers will be Licensed Producers in Canada under the MMPR. With only such a
number of growers legally licensed, Licensed Producers should be able to enter the market.
The biggest competitors that we see now, are the previous Health Canada provider (ie. Prairie
Plant Systems) and the provider for Netherlands (ie. Bedrocan). Prairie Plant Systems has a poor
reputation under the old MMAR, and in fact now operate under a new name to try and shake their
old image. They will have a head start in the new system, but they have done nothing but lose
market share under the MMAR and we expect that to continue. Both Aurora and the Resulting
Issuer expect some resistance to a foreign player coming into the Canadian market. In either
case, there is such a large market in Canada that neither company will be able to handle more
than 10% to start, and if Aurora or the Resulting Issuer gains entry into the market as a Licensed
Producer, Aurora and the Resulting Issuer expect to be a strong competitor.
Many of our competitors may have greater resources, more established reputations, a broader
range of content and products and services, longer operating histories and more established
relationships with their patients than we do. Those other companies can use their experience and
resources against Aurora or the Resulting Issuer in a variety of competitive ways, including
developing ways to attract and maintain users. These factors may allow the competitors of
Aurora or the Resulting Issuer to respond more effectively than Aurora or the Resulting Issuer to
new or emerging products and changes in market requirements. Our competitors may develop
products or services that are similar to Aurora or the Resulting Issuer or that achieve greater
market acceptance, undertake more far-reaching and successful efforts at marketing campaigns,
or may adopt more aggressive pricing policies.
As Aurora or the Resulting Issuer introduce new products, and as other companies introduce new
products and services, Aurora or the Resulting Issuer expect to become subject to additional
competition.
Competitive Advantages
The Resulting Issuer intends to largely rely on the experience that its management team brings in
agriculture, engineering, permitting, finance, distribution and marketing. This experience has
already enabled Aurora and the Resulting Issuer to identify some of the shortcomings of
competitors in the medical marijuana industry.
The Aurora and Resulting Issuer’s strengths include:
•
A management team that brings a depth of technical, marketing, strategic and financial
experience that sets it apart from many competitors;
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 19
•
Financial wherewithal (assuming completion of the planned financing) to stay the
strategic course and not force monetization of production of marijuana too soon; and
•
The Resulting Issuer is not materially dependent upon licenses and other agreements
with third parties relating to product development.
•
There are a limited number of competitors.
•
Health Canada expects the market to grow by 25% each year for the next 10 years.
•
The opportunity to expand the operations, productions and the Facility as the Facility is
built on a quarter section of land.
•
Focused and knowledgeable key personnel: Master Grower, Q.A. Manager, management
team.
•
Already have land use approval.
•
Already have the ‘pre-license’, so as long as the Resulting Issuer builds as the Resulting
Issuer has told the government, the Resulting Issuer will be one of the few selected
growers in Canada that can participate in this new industry.
The main barriers are to the industry are:
•
Access to land that can be zoned for growing this product - which we have. Gaining a
pre-license - which we have.
•
Access to capital - there is a large capital cost that is required to build these facilities for
the Licensed Producers;
•
Unproven industry and business format.
•
Direct government oversight and greater regulation, which may result in bureaucracy and
time inefficiencies; and
•
Caution of investors due to the inherent risks due to changes in government regulation;
•
Larger competitors.
5. SELECTED CONSOLIDATED FINANCIAL INFORMATION
Annual Information
Pubco was incorporated on December 21, 2006. The following tables set out certain financial
information for Pubco from June 30, 2012 to June 30, 2014. The following financial information is
derived from Pubco’s audited financial statements for the years indicated. This summary is
qualified by, and should be read in conjunction with, the financial statements Pubco, including the
notes thereto and the accompanying management’s discussion and analysis, included elsewhere
in this Listing Statement. The audited financial statements for Pubco for the period ended June
30, 2014 are included in this Listing Statement as Schedule “B” hereto. Pubco has established
June 30 as its fiscal year-end.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 20
Total Revenues (Interest Income)
Total Profit (Loss)
Basic and Diluted Profit (Loss) per
share
Total Assets
Total Long-Term Financial Liabilities
Cash Dividends per Share
Financial
Year from
July 1, 2013
to June 30,
2014
$
(Audited)
7,855
(399,705)
Financial
Year from
July 1, 2012
to June 30,
2013
$
(Audited)
9,389
(393,489)
Financial
Year from
July 1, 2011
to June 30,
2012
$
(Audited)
15,025
(315,760)
(0.02)
1,887,349
Nil
Nil
(0.02)
718,545
Nil
Nil
(0.02)
1,121,220
Nil
Nil
The increase in loss of $6,216 during the financial year ended June 30, 2014 compared to the
financial year ended June 30, 2013 was mostly due to increases in management fees, office
administration, professional fees, regulatory fees and share based payments. Share based
payments increased by $82,519.
During the fiscal year ended June 30, 2014, Pubco generated no revenue and incurred total
expenses of $306,485 compared to generating no revenue and incurring total expenses of
$402,902 during the year ended June 30, 2013. Expenses in the fiscal year ended June 30, 2014
consisted of among other things, consulting fees of $10,000, professional fees of $31,263,
transfer agent and filing fees of $8,725, office and miscellaneous expenses of $122,252, travel
expenses of $4,245 and regulatory fees of $24,232.
Quarterly Information
Total Revenue
(Interest
Income)
Total Profit
(Loss)
Basic and
Diluted Profit
(Loss) per
Share
Q4
Jun 30,
2014
3,006
Q3
Mar 31,
2014
$1,577
Q2
Dec 31,
2013
$1,676
Q1
Sep 30,
2013
$1,596
Q4
Jun 30,
2013
$1,833
Q3
March
31, 2013
$2,152
Q2
Dec 31,
2012
$2,369
Q1
Sep 30,
2012
$3,035
(237,897)
($92,963)
($29,100)
($39,745)
($105,414)
($73,054)
($68,105)
($146,916)
($0.01)
-
-
-
($0.01)
-
-
($0.01)
Dividends
There are no restrictions that could prevent Pubco or the Resulting Issuer from paying dividends.
Pubco has not paid dividends in the past and does not anticipate paying dividends in the near
future. Pubco expects to retain any earnings to finance future growth and, when appropriate,
retire debt.
Foreign GAAP
N/A.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
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6. MANAGEMENT’S DISCUSSION AND ANALYSIS
Annual MD&A
Management’s discussion and analysis of the financial statements of Pubco for June 30, 2014 is
included in this Listing Statement as Schedule “A”.
Management’s discussion and analysis of the financial statements of Aurora for June 30, 2014 is
included in this Listing Statement as Schedule “C”.
7. MARKET FOR SECURITIES
The Resulting Issuer’s securities were previously listed and posted for trading on the TSX
Venture Exchange. The Resulting Issuer delisted its securities from the TSX Venture Exchange
and currently has its securities halted on the CSE under the trading symbol “PMC”. When the
Resulting Issuer resumes listing on the CSE, the trading symbol will be “ACB” to better reflect the
change of the Resulting Issuer’s name to “Aurora Cannabis Inc.”.
8. CONSOLIDATED CAPITALIZATION
The following table details material changes to the share and loan capital of the Resulting Issuer
from the date of the financial statements for the Resulting Issuer’s most recently completed
financial year-end to the date of this Listing Statement.
Designation of
Security
Number
Authorized
Common Shares
Unlimited, no par
value
Outstanding as at date of
this Listing Statement
Number
105,000,471
For further details about the Resulting Issuer’s issued securities, see Section 10 – Prior Sales.
9. OPTIONS TO PURCHASE SECURITIES
Stock Option Plan
Pubco adopted a stock option plan (the “Plan”) under which it may grant incentive stock options
(“Options”) to its directors, officers, employees and consultants or any affiliate thereof.
The purpose of the Plan is to provide Pubco with a share-related mechanism to attract, retain and
motivate qualified executives, employees and consultants, to incent such individuals to contribute
toward the long-term goals of Pubco, and to encourage such individuals to acquire shares of
Pubco as long-term investments. Pubco was halted on the CSE (which has been halted in
connection with the Share Exchange Agreement) and has adopted a “rolling” stock option plan
reserving a maximum of 10% of the issued shares of Pubco at the time of the stock option grant.
As a “rolling” stock option plan, the Plan is required to be approved by the shareholders each
year at Pubco’s annual general meeting.
Policy 6 of the CSE and the terms of the Plan authorize the Board of Directors of the Resulting
Issuer to grant stock options to optionees on the following terms:
1. With no options granted with an exercise price lower than the greater of the closing
market prices of the underlying securities on:
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 22
a. the trading day prior to the date of grant of the stock options; and
b. the date of grant of the stock options;
2. The Resulting Issuer must comply with the provisions of Multilateral Instrument 45-503
Trades to Employees, Senior Officers, Directors and Consultants (“MI 45-105”) and any
successor instrument. For clarity, the Resulting Issuer is or is deemed to be a “non-listed
issuer” for purposes of MI 45-105;
3. The Resulting Issuer must post the notice of stock option grant or amendment (Form 11
of the CSE) immediately following each grant of stock options;
4. Upon the first grant of options under a plan, the Resulting Issuer must provide the CSE
with an opinion of counsel that all the securities issuable under the plan will be duly
issued and be outstanding as fully paid and non-assessable shares. For options granted
outside of a plan, the opinion must be provided with each grant of options; and
5. The terms of an option may not be amended once issued. If an option is cancelled prior
to its expiry date, the Resulting Issuer must post notice of the cancellation and shall not
grant new options to the same person until 30 days have elapsed from the date of
cancellation.
Options to Purchase Securities
As at the date of this Listing Statement, a total of 2,778,000 incentive stock options were
outstanding as follows:
Number of Options
473,333
503,334
144,000
84,000
140,000
183,333
250,000
1,000,000
2,778,000
(1)
(2)
Exercise Price
$0.05
$0.05
$0.15
$0.05
$0.05
$0.05
$0.70
$1.01
Expiry Date
March 22, 2015
October 29, 2017
October 29, 2017
April 1, 2020
May 31, 2021
March 19, 2024
(1)
September 2, 2019
(2)
September 18, 2019
Vesting 25%of the aggregate amount of options every three months over a period of one year.
Vesting as to 25% on the date of grant and 12.5% every three months thereafter over a period of
18 months.
The 2,778,000 incentive stock options were held by optionees as follows:
Type of Optionee
Executive officers and past executive
officers of the Resulting Issuer
Directors and past directors of the Resulting
Issuer
Employees and past employees of the
Resulting Issuer
Consultants of the Resulting Issuer
Any other person
Total
(1)
Number of
Optionees
Aggregate Number
of Options
2
125,000
(1)
5
(2)
1,411,667
3
48,333
13
2
799,000
144,000
2,778,000
Marc Levy who is a director of Pubco is also the CEO and President of Pubco.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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On close of the Share Exchange, an aggregate of 4,000,000 Pubco Options will be exchanged for
the Aurora Options. The Pubco Options will have an exercise price of $0.001 per Pubco Share
for a term of five years on grant to be issued to the holder of the Aurora Options in replacement of
the Aurora Options, which Pubco Options shall vest on the following schedule:
1. 1,600,000 Pubco Options on December 21, 2014;
2. 1,600,000 Pubco Options on June 21, 2015; and
3. 800,000 Pubco Options on December 21, 2015.
Warrants
On June 27, 2014, Pubco closed its first tranche of the non-brokered private placement for
9,500,000 Pubco Shares at a price of $0.10 for gross proceeds of $950,000.
Pubco paid an aggregate of $76,000 and issued an aggregate of 760,000 share purchase
warrants of Pubco as finders' fees in connection with the financing. Each warrant entitles the
holder, on exercise, to purchase an additional Pubco Share at a price of $0.10 per Pubco Share
for a period of two years.
On July 11, 2014, Pubco closed the final tranche of its non-brokered private placement
announced on June 30, 2014. Under this tranche, Pubco raised gross proceeds of $650,000
through the issuance of 6,500,000 Pubco Shares at a price of $0.10 per Pubco Share.
Pubco paid $52,000 and issue 520,000 share purchase warrants of Pubco as finders' fees in
connection with this portion of the financing. Each warrant entitles the finder, on exercise, to
purchase one Pubco Share at a price of $0.10 per Pubco Share for a period of two years
following closing of the private placement.
All securities to be issued under this tranche of the private placement will be subject to a fourmonth hold period from the date of closing pursuant to applicable Canadian securities laws.
On September 18, 2014, Pubco entered into a consulting fee agreement (the “Consulting
Agreement”) with Canaccord Genuity Ltd. for prior consulting services rendered to Pubco.
Pursuant to the consulting agreement, in exchange for the prior consulting services, Pubco
issued 250,000 Pubco Share purchase warrants that are exercisable at $1.01 per Pubco Share
and for a period of 12 months from issue.
Warrants to Purchase Common Shares
As at the date of this Listing Statement, a total of 1,530,000 warrants were outstanding as follows:
Number of Warrants
(1)
760,000
(2)
520,000
250,000
(1)
(2)
Exercise Price
$0.10
$0.10
$1.01
Expiry Date
June 27, 2016
July 15, 2016
September 18, 2015
In connection with a private placement that closed on June 27, 2014, Pubco paid total finder’s fees
of $76,000 and issued 760,000 share purchase warrants of Pubco. Each Warrant entitles the
finder to purchase a Pubco Share at a price of $0.10 per share for two years after the closing.
In connection with a private placement that closed on July 11, 2014, Pubco paid total finder’s fees
of $52,000 and issued 520,000 share purchase warrants of Pubco. Each Warrant entitles the
finder to purchase a Pubco Share at a price of $0.10 per share for two years after the closing.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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The aggregate of 1,530,000 warrants were held by warrantholders as follows:
Type of Warrantholder
Executive officers and past executive officers of
Pubco
Directors and past directors of Pubco
Employees and past employees of Pubco
Consultants of Pubco
Any other person
Total
Number of
Warrantholders
0
Aggregate Number
of Warrants
0
0
0
0
2
0
0
0
1,530,000
1,530,000
Convertible Debenture
Pubco entered into a subscription agreement with a purchaser dated November 24, 2014
pursuant to which Pubco agreed to sell and the purchaser agreed to purchase a secured
convertible debenture (the “November Debenture”) in the aggregate amount of $1,000,000 that
may be converted into Pubco Shares at a price of $1.01 per Pubco Share during the term of the
November Debenture and bearing 8% interest per annum due November 24, 2015 secured
against all present and after acquired property of Pubco. On a fully converted basis, the
November Debenture is convertible into 990,099 Pubco Shares.
Pubco entered into a subscription agreement with a purchaser dated December 1, 2014 pursuant
to which Pubco agreed to sell and the purchaser agreed to purchase a secured convertible
debenture (the “December Debenture”) in the aggregate amount of $250,000 that may be
converted into Pubco Shares at a price of $1.01 per Pubco Share during the term of the
December Debenture and bearing 8% interest per annum due December 1, 2015 secured
against all present and after acquired property of Pubco. On a fully converted basis, the
December Debenture is convertible into 247,525 Pubco Shares.
10. DESCRIPTION OF THE SECURITIES
Common Shares
The Resulting Issuer has one class of shares outstanding: common shares. The Resulting Issuer
is authorized to issue an unlimited number of common shares without par value. As at the date of
this Listing Statement, a total of 105,000,471 common shares were issued and outstanding.
All of the common shares of the Resulting Issuer rank equally as to voting rights, participation in a
distribution of the assets of the Resulting Issuer on a liquidation, dissolution or winding-up of the
Resulting Issuer and the entitlement to dividends. The holders of the common shares are entitled
to receive notice of all meetings of shareholders and to attend and vote the shares at the
meetings. Each common share carries with it the right to one vote.
In the event of the liquidation, dissolution or winding-up of the Resulting Issuer or other
distribution of its assets, the holders of the common shares will be entitled to receive, on a pro
rata basis, all of the assets remaining after the Resulting Issuer has paid out its liabilities.
Distribution in the form of dividends, if any, will be set by the board of directors.
Class “A” Shares
The Resulting Issuer is authorized to issue an unlimited number of Class “A” Shares with a par
value of $1.00 per share. The Board of Directors may issue such Class “A” Shares in one or more
series, determine the maximum number of shares of that series that the Resulting Issuer is
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 25
authorized to issue, create an identifying name for the shares of that series and attach special
rights or restrictions to the shares of that series. Except for such rights relating to the election of
directors on a default in payment of dividends as may be attached to any series of Class “A”
Shares, holders of Class “A” Shares shall not be entitled, as such, to receive notice of, or to
attend or vote at, any general meeting of shareholders of the Resulting Issuer. No Class “A”
Shares have been issued by the Resulting Issuer.
Class “B” Shares
The Resulting Issuer is authorized to issue an unlimited number of Class “B” Shares with a par
value of $5.00 per share. The Board of Directors may issue such Class “B” Shares in one or more
series, determine the maximum number of shares of that series that the Resulting Issuer is
authorized to issue, create an identifying name for the shares of that series and attach special
rights or restrictions to the shares of that series. Except for such rights relating to the election of
directors on a default in payment of dividends as may be attached to any series of Class “B”
Shares, holders of Class “B”
Shares shall not be entitled, as such, to receive notice of, or to attend or vote at, any general
meeting of shareholders of the Resulting Issuer. No Class “B” Shares have been issued by the
Resulting Issuer.
Right of First Refusal
Pursuant to the Share Exchange Agreement, at any time during the 36 months following close of
the Share Exchange, if an Aurora Shareholder or Aurora Warrantholder (an "Offeror") receives
an offer to acquire all or any of the Resulting Issuer Shares issued pursuant to the Share
Exchange, on exercise of the Pubco Warrants (the “Right of First Refusal Shares”), the
Resulting Issuer or its nominees or assignees (the “Offeree”) shall have a first right to acquire
such Resulting Issuer Shares (the "Right of First Refusal").
An Offeror intending to transfer all or any portion of the Right of First Refusal Shares shall
promptly notify the Offeree of its intentions (the “Notice”). The Offeree shall have 60 days from
the date of the Notice is delivered to notify the Offeror whether the Offeree elects to acquire the
Right of First Refusal Shares at the same price and on the same terms and conditions (or their
monetary equivalent) as set forth in the Notice. If the Offeree does so elect, the transaction shall
be consummated promptly and within 30 days after the notice of such election is delivered to the
Offeror.
If the Offeree fails to elect to exercise its first right within the period specified, the Offeror shall
have 60 days following the expiration of such period to consummate the transfer of the Right of
First Refusal Shares to the third party at a price and on terms no less favourable than those
offered by the Offeror to the Offeree in the Notice.
If the Offeror fails to consummate the transfer the Right of First Refusal Shares to the third party
within the period specified, the Right of First Refusal of the Offeree regarding such Right of First
Refusal Shares shall be deemed to be revived. Any subsequent proposal to transfer such Right
of First Refusal Shares shall be conducted in accordance with the procedures set forth pursuant
to the Right of First Refusal.
Modification of Terms
Subject to the BCBCA, the directors of the Resulting Issuer may by ordinary resolution create
special rights or restrictions for and attach those special rights or restrictions to, or vary or delete
any special rights or restrictions attached to, the shares of any class or series of shares, whether
or not any or all of those shares have been issued, and alter its Notice of Articles and Articles
accordingly.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 26
Other Attributes
Subject to the special rights and restrictions attached to the shares of any class or series and the
BCBCA, and provided the Resulting Issuer is not insolvent or making the payment or providing
the consideration would not render the Resulting Issuer insolvent, the Resulting Issuer may, if
authorized by the directors, purchase or otherwise acquire any of its shares at the price and upon
the terms determined by the directors.
Prior Sales
During the 12 months preceding and including the date of this Listing Statement, the Resulting
Issuer issued the following Pubco Shares and the Resulting Issuer Shares:
Date of
Issuance
October 15, 2014
September 10,
2014
August 22, 2014
July 11, 2014
June 27, 2014
July 7, 2014
April 24, 2014
Total
(1)
(2)
(3)
(4)
Type of
Security
Issued(1)
Number of
Securities
Issued
Price per
Security
Total Cash
Consideration
Common Shares
Common Shares
1,176,471
60,000
$0.85
$0.05
$1,000,000
$3,000
Common Shares
Common Shares
Common Shares
Common Shares
Common Shares
8,000,000
6,500,000
9,500,000
714,000
10,000
24,784,000
$0.25
$0.10
$0.10
$0.14
$0.05
$2,000,000
(2)
$650,000
(3)
$950,000
(4)
$99,960
$500
(1)
Pubco paid total finder’s fees of $98,920, representing 8% of the gross proceeds received from
certain subscribers.
Pubco paid total finder’s fees of $52,000 and issued 520,000 share purchase warrants of Pubco.
Each Warrant entitles the finder to purchase a common share of Pubco at a price of $0.10 per
share for two years after the closing.
Pubco paid total finder’s fees of $76,000 and issued 760,000 share purchase warrants of Pubco.
Each Warrant entitles the finder to purchase a common share of Pubco at a price of $0.10 per
share for two years after the closing.
Unsecured loan agreement with a lender dated June 27, 2014 for a loan of $500,000 to Pubco at
8% interest per annum compounded monthly due December 27, 2014. As consideration for this
loan, Pubco issued 714,000 Pubco Shares at a deemed price of $0.14 to the lender.
Stock Exchange Price
The following table provides information with respect to Pubco’s trading history on the TSX
Venture Exchange from January 1, 2012 to May 21, 2014 and on the CSE on May 22, 2014 to
the date of this Listing Statement:
Period
Price Range ($)
Low
High
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
January - March 2014
n/a
n/a
0.66
0.47
0.14
0.03
0.03
0.03
0.03
n/a
n/a
1.07
0.69
0.75
0.15
0.07
0.04
0.05
Volume Traded
n/a
n/a
2,602,687
2,642,378
11,255,612
2,745,667
167,000
60,000
299,500
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 27
October– December
2013
July – September
2013
April - June 2013
January – March 2013
October – December
2012
July - September
2012
0.025
0.025
65,000
0.03
0.035
0.05
0.035
0.05
0.07
167,500
125,000
233,333
0.055
0.15
462,500
0.06
0.075
148,500
11. ESCROWED SECURITIES
On close of the Share Exchange, an escrow agreement dated September 18, 2014 with
Computershare Trust Company of Canada (“Computershare”), the Resulting Issuer and
principal holders of all of the Pubco Shares or Resulting Issuer Shares issued pursuant to the
Share Exchange, on exercise of the Pubco Options or Pubco Warrants (the “Escrowed Shares”)
became effective as described in the table below (the “Escrow Agreement”):
Stockholder Name
1771472
Alberta
Ltd.
Lola Ventures Inc.
Nicholas Booth
Brittany Aker
Janette Booth
Dale Lesack
Chris Mayerson
1694818
Alberta
Ltd.
Westmar
Investments Ltd.
Kelly Moroz
Ed Moroz
1275414
Alberta
Ltd.
Brad Liptak
David Farion
Thomas Colquhoun
Chinuke
Investments Ltd.
Finley Mah
Cannavest Capital
Corp.
Open
Market
Investments Ltd.
Number of
Resulting
Issuer
Shares in
Escrow on
close of the
Share
Exchange
% of
Resulting
Issuer
Shares in
Escrow on
close of the
Share
(1)
Exchange
Number of Resulting
Issuer Shares in
Escrow on
completion of the
Performance
(2)
Milestone (diluted)
% of Resulting
Issuer Shares
in Escrow on
completion of
the
Performance
Milestone
(3)
(diluted)
19,350,000
16,350,000
1,800,000
600,000
600,000
3,000,000
3,000,000
18.43%
15.57%
1.71%
(6)
0.57%
(6)
0.57%
2.86%
2.86%
25,800,000
21,800,000
2,400,000
800,000
800,000
4,000,000
4,000,000
16.15%
13.65%
1.50%
0.50%
0.50%
2.50%
2.50%
3,000,000
2.86%
6,000,000
3.76%
3,000,000
300,000
6,600,000
2.86%
(6)
0.29%
6.29%
6,000,000
600,000
13,200,000
3.76%
0.38%
8.26%
600,000
600,000
300,000
300,000
0.57%
(6)
0.57%
(6)
0.29%
(6)
0.29%
(6)
1,200,000
1,200,000
600,000
600,000
0.75%
0.75%
0.38%
0.38%
240,000
360,000
0.23%
(6)
0.34%
(6)
480,000
720,000
0.30%
0.45%
Nil
Nil
12,000,000
7.51%
Nil
Nil
3,000,000
1.88%
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 28
Daniel Petrov
Total:
(1)
(2)
(3)
(4)
(5)
(6)
Nil
60,000,000
Nil
57.14%
4,000,000
109,200,000
2.50%
68.36%
The percentage is based on the issued and outstanding common shares being 105,000,471.
Number of shares only includes the Resulting Issuer Shares issued pursuant to the close of the
Share Exchange.
The percentage is based on the diluted issued and outstanding common shares being 159,
746,095assuming:
(a) exercise of all 2,778,000 outstanding stock options of the Resulting Issuer;
(b) exercise of all 1,530,000 outstanding warrants of the Resulting Issuer;
(c) issuance of the Performance Shares;
(d) conversion of the November Debenture and December Debenture; and
(e) exercise of all outstanding Pubco Options and Pubco Warrants.
1771472 Alberta Ltd. is a private company that is wholly owned and controlled by Steve Dobler.
Lola Ventures Inc. is a private company that is wholly owned and controlled by Terry Booth.
Pursuant to the terms of the Share Exchange Agreement, although these persons will hold less
than 1% of the issued and outstanding Resulting Issuer Shares, these persons have voluntarily
agreed to escrow their respective Resulting Issuer Shares in accordance with the Escrow
Agreement.
The Escrowed Shares will be held by Computershare and will be released on a schedule that is
expected to be in accordance with the conditions and release schedule provided by Form 46201F1 as provided for in National instrument 46-201 Escrow for Initial Public Offerings – being:
1. 10% of the Escrowed Shares on the date that the Resulting Issuer Shares are issued on
close of the Share Exchange;
2. 1/6 of the remaining Escrowed Shares in six months thereafter;
3. 1/6 of the remaining Escrowed Shares in 12 months thereafter;
4. 1/6 of the remaining Escrowed Shares in 18 months thereafter;
5. 1/6 of the remaining Escrowed Shares in 24 months thereafter;
6. 1/6 of the remaining Escrowed Shares in 30 months thereafter; and
7. 1/6 of the remaining Escrowed Shares in 36 months thereafter.
12. PRINCIPAL SHAREHOLDERS
The following table lists 10% or more shareholders as of the date of this Listing Statement and
immediately after close of the Share Exchange:
Name
(3)
1771472 Alberta Ltd.
(4)
Lola Ventures Inc.
(1)
(2)
Number and
percentage of
Resulting Issuer
Shares immediately
after close of
(1)
the Share Exchange
19,350,000 / 18.43%
16,350,000 / 15.57%
The percentage is based on the issued and outstanding Resulting Issuer Shares being
105,000,471.
1771472 Alberta Ltd. is a private company that is wholly owned and controlled by Steve Dobler.
Upon completion of the Performance Milestone by the Resulting Issuer, 1771472 Alberta Ltd. will
be issued an additional 6,450,000 Resulting Issuer Shares resulting in a holding of an aggregate of
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 29
(3)
25,800,000 Resulting Issuer Shares pursuant to the Share Exchange Agreement, which will
represent 16.28% of the issued and outstanding Resulting Issuer Shares.
Lola Ventures Inc. is a private company that is wholly owned and controlled by Terry Booth. Upon
completion of the Performance Milestone by the Resulting Issuer, Lola Ventures Inc. will be issued
an additional 5,450,000 Resulting Issuer Shares resulting in a holding of an aggregate of
21,800,000 Resulting Issuer Shares pursuant to the Share Exchange Agreement, which will
represent 13.75% of the issued and outstanding Resulting Issuer Shares.
13. DIRECTORS AND OFFICERS
Management Experience
To the knowledge of the Resulting Issuer, the following table sets out information regarding each
of the Resulting Issuer’s directors and executive officers, including the names, municipality of
residence, the position and office held and the period of time served in this position, their principal
occupation for the preceding five years, and the number and percentage of voting securities
beneficially owned, directly or indirectly, or over which control or direction is exercised, as of the
date of this Listing Statement:
Name of Nominee,
Age, Municipality and
Country of Residence
and Current Position
with the Resulting
Issuer
Terry Booth
Edmonton, Alberta
Director and CEO
Marc E. Levy
Vancouver, BC,
Canada
Director
Isaac Moss
Vancouver, BC,
Canada
Director
John M. Bean
Blaine, Washington,
USA
Chief Financial
Officer
Principal Occupation, Business of
Employment of the last Five Years and
Educational Background
Owns and is the President of safety
codes permitting companies in Alberta,
Superior Safety Codes Inc. and Trans
True Vehicle Safety Inc. A partner in
Chinuke Investments Ltd., a bridge
finance company. The former
president and owner of Alberta Permit
Pro.
President of Mosam Ventures Inc.,
October 2004 to present; President
and Chief Executive Officer of Pubco,
December 2006 to December 2014;
President and Chief Executive Officer
of Avarone Metals Inc. (formerly
Remstar Resources Ltd.), August 2006
to present; President and Chief
Executive Officer of Lornex Capital Inc.
from May 2008 to August 2013;
President and Chief Executive Officer
of Metropolitan Energy Corp. from
September 2011 to May 2013.
Director and Chief Financial Officer of
Syntaris Power Corporation, 2008 to
2012; Chief Financial Officer, director &
Secretary of Virdis Energy Inc.,
December 2009 to August 2011; CFO
of Cheetah Oil and Gas Ltd., July 2006
to July 2008; Director of Kariana
Resources Inc., June 2013 to
December 2013.
Chartered Accountant. Chief Financial
Officer of Western Canadian Properties
Group, February 2014 to present; Chief
Financial Officer of Underground
Energy Corporation, January 2013 to
Director Since
December 9,
2014 to Present
16,350,000
December 21,
2006 to Present
1,449,223
March 17, 2014
to Present
400,000
March 17, 2014
to Present
Nil
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 30
Shares
Beneficially
Owned or
Controlled
(1)
(3)
(2)
August 2013; Vice President of
Finance of Underground Energy
Corporation, March 2011 to January
2013; President of InSpire Consulting
Services Ltd., April 1997 to April 2012;
Chief Financial Officer of Monexa
Technologies Corp. from August 2009
to March 2010; Chief Financial Officer
of Argon Security Technologies Inc.
from December 2004 to August 2009.
Steve Dobler
A Professional Engineer with previous
December 9,
19,350,000
Edmonton, Alberta
public company experience. He has
2014 to Present
Director and
been involved in numerous private
President
company acquisitions, integrations,
and operations.
(4)
William Macdonald
Lawyer, February 1999 to present;
September 18,
Nil
Vancouver, BC,
Blackbird Energy Inc., May 2008 to
2014 to Present
Canada
present; First Americas Gold Corp.,
Corporate Secretary
April 2008 to present; Benz Capital
Corp., April 2013 to present; Viscount
Mining Corp., October 2011 to present;
and Black Springs Capital Corp.,
October 2011 to present.
(1)
Mr. Levy holds an additional 403,334 options exercisable into Pubco Shares at $0.05 per Pubco
Share expiring on October 29, 2017 and 60,000 options exercisable at $0.05 expiring on May 31,
2021.
(2)
Mr. Moss holds an additional 90,000 options exercisable into Pubco Shares at $1.01 per Pubco
Share expiring on September 18, 2019 and 85,000 options exercisable into Pubco Shares at $0.05
per Pubco Share expiring on March 19, 2024.
(3)
Mr. Bean holds an additional 90,000 options exercisable into Pubco Shares at $1.01 per Pubco
Share expiring on September 18, 2019 and 85,000 options exercisable into Pubco Shares at $0.05
per Pubco Share expiring on March 19, 2024.
(4)
Mr. Macdonald holds an additional 50,000 options exercisable into Pubco Shares at $1.01 per
Pubco Share expiring on September 18, 2019.
As a group, the directors and executive officers own directly, or indirectly, or exercise control or
direction over an aggregate of 37,549,223 shares, or approximately 35.8%, of the Resulting
Issuer’s issued and issued and outstanding shares as of the date of this Listing Statement.
Directors hold their offices until the next annual meeting of shareholders or until their successors
are appointed.
Pursuant to the Share Exchange Agreement, Steve Dobler, a director and President of Aurora,
and Terry Booth, a director of Aurora, were appointed to the following positions and offices with
the Resulting Issuer on close of the Share Exchange:
(1) Steve Dobler – Director and President; and
(2) Terry Booth – Director and Chief Executive Officer.
Board Committees
The Resulting Issuer has one board committee, the Audit Committee, comprised of Marc Levy,
Isaac Moss and John Bean.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 31
Penalties, Sanctions and Bankruptcy
Except for as disclosed herein, to the knowledge of the Resulting Issuer, none of the Resulting
Issuer’s directors, officers or principal shareholders are, or have been within the last 10 years,
directors or officers of any other issuer that, while that person was acting in that capacity, was the
subject of a cease trade or similar order or an order that denied the issuer access to any statutory
exemptions for a period of more than 30 consecutive days or became bankrupt, made a proposal
under any legislation relating to bankruptcy or insolvency or was subject to or instituted any
proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or
trustee appointed to hold the assets of that issuer.
Mr. Bean was an officer of Underground Energy Corporation (“UGE”) when he became the
subject of a cease trade order issued by the British Columbia Securities Commission dated May
2, 2013 for UGE’s failure to file a comparative financial statement for the financial year ended
December 31, 2012 and a management’s discussion and analysis for the period ended
December 31, 2012. As at the date hereof, the cease trade order remains in effect.
Mr. Bean was an officer of UGE when on March 4, 2013, Underground Energy, Inc. (the
“Operating Subsidiary”), the wholly-owned subsidiary of UGE, voluntarily filed for Chapter 11
creditor protection in the U.S. Federal Court. The filing was made in response to liens filed by
creditors against the Operating Subsidiary’s principal properties. UGE decided to seek Chapter
11 protection in order to give UGE time to structure a court approved plan which, if approved and
implemented, would potentially permit UGE to emerge from Chapter 11 protection and develop its
principal properties. At this time, the Operating Subsidiary is in the process of structuring a plan
for presentation to the U.S. Bankruptcy Court.
To the knowledge of the Resulting Issuer, none of the Resulting Issuer’s directors, officers or
principal shareholders are, or have been within the last 10 years, the subject of any penalties or
sanctions imposed by a court relating to Canadian securities legislation or by a Canadian
securities regulatory authority or has entered into a settlement agreement with a Canadian
securities regulatory authority or been subject to any other penalties or sanctions imposed by a
court or regulatory body that would be likely to be considered important to a reasonable investor
making an investment decision.
To the knowledge of the Resulting Issuer, none of the Resulting Issuer’s directors, officers or
principal shareholders, or any personal holding company of such persons, has, within the last 10
years, become bankrupt or made a proposal under any legislation relating to bankruptcy or
insolvency or been subject to or instituted any proceedings, arrangement or compromise with
creditors or had a receiver, receiver manager or trustee appointed to hold his, her or its assets.
Potential Conflicts
The directors of the Resulting Issuer are required by law to act honestly and in good faith with a
view to the best interests of the Resulting Issuer and to disclose any interests, which they may
have in any project or opportunity of the Resulting Issuer. If a conflict of interest arises at a
meeting of the board of directors, any director in a conflict will disclose his interest and abstain
from voting on such matter.
To the best of the Resulting Issuer's knowledge, and other than disclosed herein, there are no
known existing or potential conflicts of interest between the Resulting Issuer and its directors and
officers except that certain of the directors and officers may serve as directors and/or officers of
other companies, and therefore it is possible that a conflict may arise between their duties to the
Resulting Issuer and their duties as a director or officer of such other companies.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 32
Management
Marc Levy, age 45, has been a director of the Resulting Issuer since December 2006 and its chief
executive officer and president since August 2008 to December 2014. Mr. Levy has been
President of Mosam Ventures Inc., a private venture capital firm specialized in providing earlystage financial resources, investment expertise, marketing, administration and IR services, since
October 2004.
Mr. Levy has been President and CEO of Avarone Metals Inc., a public natural resource
exploration company since April 2008. Mr. Levy was President and CEO of Lornex Capital Inc., a
public mineral exploration company, from May 2008 to September 2013. Mr. Levy has over 20
years of management and leadership experience in business. He has held numerous
management and senior management positions with both private and public companies.
Mr. Levy will be devoting about 30% of his business time to the affairs of the Resulting Issuer. Mr.
Levy has not entered into a non-competition or a non-disclosure agreement with the Resulting
Issuer.
Isaac Moss, age 61, has been a director of the Resulting Issuer since March 2014. Mr. Moss has
30 years of experience in international corporate finance, public markets and business. As an
independent financial advisor, Mr. Moss currently specializes in multi-jurisdictional corporate
finance transactions, mergers and acquisitions as well as management advisory services. Mr.
Moss was a director and Chief Financial Officer of Syntaris Power Corporation, a private green
energy company, from 2008 - 2012. He was also a director, and briefly Chief Financial Officer
and Secretary of Viridis Energy Inc., a public alternative energy company specializing in the
agricultural and wood waste biomass, from December 2009 to August 2011. Mr. Moss was CFO
of Cheetah Oil and Gas Ltd., a public oil and gas company, from July 2006 to July 2008. Mr.
Moss holds a Master of Public Administration (M.P.A.) and a Bachelor of Social Sciences from
the University of Cape Town.
Mr. Moss will be devoting about 30% of his business time to the affairs of the Resulting Issuer.
Mr. Moss has not entered into a non-competition or a non-disclosure agreement with the
Resulting Issuer.
John Bean, age 62, is the Chief Financial Officer of the Resulting Issuer and was a director of the
Resulting Issuer since March 2014 to December 9, 2014. Mr. Bean is a Canadian chartered
accountant and holds a Bachelor of Commerce degree in finance and accounting from the
University of British Columbia. Mr. Bean has held executive positions with various public
companies for more than 20 years. Mr. Bean is currently the Chief Financial Officer of Western
Canadian Properties Group. Mr. Bean was Chief Financial Officer of Underground Energy
Corporation, an oil and gas exploration and production company, from January 2013 to August
2013 and prior to that VP Finance of the same company from March 2011 to January 2013. Mr.
Bean was President of InSpire Consulting Services Ltd., a private company providing bridge
management services and senior executive counsel to CEOs in areas of business strategy, sales
& marketing, business development, financial management and general management, from April
1997 to April 2012. Mr. Bean was Chief Financial Officer of Monexa Technologies Corp., a public
company providing internet application services, from August 2009 to March 2010. Prior thereto
Mr. Bean was Chief Financial Officer of Argon Security Technologies, Inc., a private company
developing and selling a wireless video surveillance system to law enforcement and to the US
government, from December 2004 to August 2009.
Mr. Bean will be devoting about 10% of his business time to the affairs of the Resulting Issuer.
Mr. Bean has not entered into a non-competition or a non-disclosure agreement with the
Resulting Issuer.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 33
William Macdonald, age 47, is a founder and principal of Macdonald Tuskey, Corporate and
Securities Lawyers, a boutique securities and corporate finance firm located in Vancouver, British
Columbia, which was established in April 2008. From February 1998 to April 2008, Mr.
Macdonald was a partner with Clark Wilson LLP and a member of the firm's Corporate Finance /
Securities Practice Group. Mr. Macdonald has been the President and a director of Blackbird
Energy Inc., an oil and gas company listed on the TSX Venture Exchange, since May 2008.
Additionally, he has been a member of the Law Society of British Columbia since February 1999
and a member of the New York State Bar since February 2002. Mr. Macdonald obtained his
Bachelor of Law degree from the University of Western Ontario in 1997 and his Bachelor of Arts
degree from Simon Fraser University in 1993.
Mr. Macdonald will be devoting about 5% of his business time to the affairs of the Resulting
Issuer. Mr. Macdonald has not entered into a non-competition or a non-disclosure agreement with
the Resulting Issuer.
Steve Dobler, age 50, became a Director and President of the Resulting Issuer on close of the
Share Exchange. Mr. Dobler obtained his Professional Engineering designation in 1988 and is a
Professional Engineer with previous public company experience. He has been involved in
numerous private company acquisitions, integrations, operations and successful exits.
Mr. Dobler will be devoting about 95% of his business time to the affairs of the Resulting Issuer.
Mr. Dobler has not entered into a non-competition or a non-disclosure agreement with the
Resulting Issuer.
Terry Booth, age 50, became a Director and Chief Executive Officer of the Resulting Issuer on
close of the Share Exchange.
Mr. Booth has been in the industrial permitting and governmental regulatory sector - for over 20
years. He owns and is the President of safety codes permitting companies in Alberta, Superior
Safety Codes Inc. and Trans True Vehicle Safety Inc., which holds contracts with Municipal,
Provincial and Federal governments. Additionally, he is a partner in Chinuke Investments Ltd., a
bridge finance company. Mr. Booth is a career professional with 20 years of experience in the
privatized safety codes industry. He is the former president and owner of Alberta Permit Pro that
was responsible for growing the company to 100 employees and 80% market share in the
Province of Alberta.
Mr. Booth will be devoting about 95% of his business time to the affairs of the Resulting Issuer.
Mr. Booth has not entered into a non-competition or a non-disclosure agreement with the
Resulting Issuer.
Conflict of Interest
The directors of the Resulting Issuer are required by law to act honestly and in good faith with a
view to the best interest of the Resulting Issuer and to disclose any interests which they may
have in any project or opportunity of the Resulting Issuer. If a conflict of interest arises at a
meeting of the board of directors, any director in a conflict will disclose his interest and abstain
from voting on such matter. In determining whether or not the Resulting Issuer will participate in
any project or opportunity, that director will primarily consider the degree of risk to which the
Resulting Issuer may be exposed and its financial position at that time.
To the best of our knowledge, there are no known existing or potential conflicts of interest among
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 34
the Resulting Issuer and its promoters, directors, officers or other members of management as a
result of their outside business interests except that certain of the directors, officers, promoters
and other members of management serve as directors, officers, promoters and members of
management of other public companies, and therefore it is possible that a conflict may arise
between their duties as a director, officer, promoter or member of management of such other
companies.
14. CAPITALIZATION
14.1
The following chart indicates each class of securities to be listed:
Issued Capital
Number of
Securities
(non(1)
diluted)
Number of
Securities
(fully
(2)
diluted)
% of
Issued
(non(1)
diluted)
% of
Issued
(fully
diluted)
Total outstanding (A)
105,000,471
159, 746,095
100%
100%
Held by Related Persons or
employees of the Resulting Issuer
or Related Person of the
Resulting Issuer, or by persons or
companies who beneficially own
or control, directly or indirectly,
more than a 5% voting position in
the Resulting Issuer (or who
would beneficially own or control,
directly or indirectly, more than a
5% voting position in the
Resulting Issuer upon exercise or
conversion of other securities
held) (B)
44,379,223
84,449,890
42.3%
52.9%
Total Public Float (A-B)
60,621,248
75,296,205
47.7%
47.1%
(2)
Public Float
(1)
(2)
The number is based on the Resulting Issuer Shares issued and outstanding as of immediately
after the close of the Share Exchange but prior to the completion of the Performance Milestone.
The number of shares assumes the:
(a) exercise of all 2,778,000 outstanding stock options of the Resulting Issuer;
(b) exercise of all 1,530,000 outstanding warrants of the Resulting Issuer;
(c) issuance of the Performance Shares;
(d) conversion of the November Debenture and December Debenture; and
(e) exercise of all of the Pubco Options and Pubco Warrants.
Freely-Tradeable Float
Number of outstanding securities
subject to resale restrictions,
including restrictions imposed by
pooling or other arrangements or
in a shareholder agreement and
securities held by control block
(1)
88,950,471
(2)
143,696,095
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 35
84.7%
90.0%
holders (C)
Total Tradeable Float (A-C)
(1)
(2)
16,050,000
16,050,000
15.3%
10.0%
The number is based on the Resulting Issuer Shares issued and outstanding as of immediately
after the close of the Share Exchange but prior to the completion of the Performance Milestone.
Includes the exercise of:
a. 1,530,000 warrants to purchase Pubco Shares (see: section 9 - “Options to Purchase
Securities”);
b. issuance of the Performance Shares;
c. exercise of all of the Pubco Options and Pubco Warrants;
d. conversion of the November Debenture and December Debenture; and
e. 2,778,000 options (see: section 9 - “Options to Purchase Securities”).
Public Securityholders (Registered)
For the purposes of this report, "public security holders" are persons other than persons
enumerated in section (B) of the previous chart. Registered holders listed only. The table below is
also as of immediately after the close of the Share Exchange (but prior to the completion of the
Performance Milestone or exercise of any convertible securities).
Class of Security: Common Shares
Size of Holding
Number of Holders
Total number of
securities
1 – 499 securities
Nil
Nil
500 – 999 securities
Nil
Nil
1,000 – 1,999 securities
6
6,000
2,000 – 2,999 securities
1
2,650
3,000 – 3,999 securities
Nil
Nil
4,000 – 4,999 securities
1
4,000
5,000 or more securities
54
Total
62
(1)
(1)
60,608,598
60,621,248
Includes aggregates of 19,700,000 and 15,667,334 common shares of the Resulting Issuer that
are held by Canaccord Genuity Corp. and CDS & Co., respectively.
Public Securityholders (Beneficial)
Included:
1. beneficial holders holding securities in their own name as registered shareholders; and
2. beneficial holders holding securities through an intermediary where the Resulting Issuer
has been given written confirmation of shareholdings.
For the purposes of this section, it is sufficient if the intermediary provides a breakdown by
number of beneficial holders for each line item below; names and holdings of specific beneficial
holders do not have to be disclosed. If an intermediary or intermediaries will not provide details of
beneficial holders, give the aggregate position of all such intermediaries in the last line. The table
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 36
below is also as of immediately after the close of the Share Exchange (but prior to the completion
of the Performance Milestone or exercise of any convertible securities).
Class of Security: Common Shares
Size of Holding
Number of holders
Total number of securities
1 – 499 securities
1
277
500 – 999 securities
1
850
1,000 – 1,999 securities
8
8,000
2,000 – 2,999 securities
1
2,650
3,000 – 3,999 securities
1
3,000
4,000 – 4,999 securities
1
4,000
5,000 or more securities
103
76,048,764
1
9,153,707
Unable to confirm
Total
(1)
(2)
(1)
(2)
85,221,248
Includes an aggregate of 19,700,000 common shares of the Resulting Issuer that are held by
Canaccord Genuity Corp.
Includes an aggregate of 9,153,707 common shares of the Resulting Issuer that are held by CDS &
Co. that no details of beneficial holders were available.
Non-Public Securityholders (Registered)
Instruction: For the purposes of this report, "non-public securityholders" are persons
enumerated in section (B) of the issued capital chart. The table below is also as of immediately
after the close of the Share Exchange (but prior to the completion of the Performance Milestone
or exercise of any convertible securities).
Class of Security
Size of Holding
1 – 499 securities
500 – 999 securities
1,000 – 1,999 securities
2,000 – 2,999 securities
3,000 – 3,999 securities
4,000 – 4,999 securities
5,000 or more securities
Number of holders
Nil
Nil
Nil
Nil
Nil
Nil
6
Total number of securities
Nil
Nil
Nil
Nil
Nil
Nil
44,379,233
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 37
14.2
Securities convertible or exchangeable into any class of listed securities
Description of Security
Incentive stock options. Each option
is exercisable to purchase one
Resulting Issuer Share at a price of
$0.05 per Resulting Issuer Share at
any time on or before March 22,
2014.
Incentive stock options. Each option
is exercisable to purchase one
Resulting Issuer Share at a price of
$0.05 per Resulting Issuer Share at
any time on or before October 29,
2017.
Incentive stock options. Each option
is exercisable to purchase one
Resulting Issuer Share at a price of
$0.15 per Resulting Issuer Share at
any time on or before October 29,
2017.
Incentive stock options. Each option
is exercisable to purchase one
Resulting Issuer Share at a price of
$0.70 per Resulting Issuer Share at
any time on or before September 2,
2019 vesting 25% of the aggregate
amount of options every three
months over a period of one year.
Incentive stock options. Each option
is exercisable to purchase one
Resulting Issuer Share at a price of
$0.05 per Resulting Issuer Share at
any time on or before April 1, 2020.
Incentive stock options. Each option
is exercisable to purchase one
Resulting Issuer Share at a price of
$0.05 per Resulting Issuer Share at
any time on or before May 31, 2021.
Incentive stock options. Each option
is exercisable to purchase one
Resulting Issuer Share at a price of
$0.05 per Resulting Issuer Share at
any time on or before March 19,
2024.
Incentive stock options. Each option
is exercisable to purchase one
Resulting Issuer Share at a price of
$1.01 per Resulting Issuer Share at
any time on or before September 18,
2019 and vesting as to 25% on the
date of grant and 12.5% every three
Number of
Convertible
Securities
Outstanding
473,333
Number of Listed
Securities
Issuable Upon
Exercise
473,333
503,334
503,334
144,000
144,000
250,000
250,000
84,000
84,000
140,000
140,000
183,333
183,333
1,000,000
1,000,000
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 38
months thereafter over a period of
18 months.
Warrants. Each Warrant entitles the
finder to purchase a Resulting Issuer
Share at a price of $0.10 per
Resulting Issuer Share for two years
Warrants. Each Warrant entitles the
finder to purchase a Resulting Issuer
Share at a price of $0.10 per
Resulting Issuer Share for two years
(1)
Incentive stock options. Each
option is exercisable to purchase
one Resulting Issuer Share at a
price of $0.001 per Resulting Issuer
Share at any time for a period of five
years and are to vest on the
following schedule:
520,000
520,000
760,000
760,000
4,000,000
4,000,000
250,000
250,000
990,099
990,099
247,525
247,525
1. 1,600,000 Pubco Options on
December 21, 2014;
2. 1,600,000 Pubco Options on
June 21, 2015; and
3. 800,000 Pubco Options on
December 21, 2015.
Warrants. Each Warrant entitles the
holder to purchase a Resulting
Issuer Share at a price of $1.01 per
Resulting Issuer Share for 12
months.
Secured convertible debenture. The
Secured
convertible
debenture
dated November 24, 2014 in the
aggregate amount of $1,000,000
may be converted into Resulting
Issuer Shares at a price of $1.01 per
Resulting Issuer Share within the
term of the debenture and bears 8%
interest per annum due November
24, 2015 is secured against all
present and after acquired property
of the Resulting Issuer.
Secured convertible debenture. The
Secured
convertible
debenture
dated December 1, 2014 in the
aggregate amount of $250,000 may
be converted into Resulting Issuer
Shares at a price of $1.01 per
Resulting Issuer Share within the
term of the debenture and bears 8%
interest per annum due December 1,
2015 is secured against all present
and after acquired property of the
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 39
Resulting Issuer.
Total
(1)
14.3
8,555,525
To be issued on close of the Share Exchange.
8,555,525
Listed securities reserved for issuance that are not included in section 14.2.
N/A.
15. EXECUTIVE COMPENSATION
Compensation to be paid to the officers and directors of the Resulting Issuer is determined by the
board of directors of the Resulting Issuer.
Compensation Discussion and Analysis
During the fiscal year ended June 30, 2014, Pubco had two NEOs, namely Marc Levy, who was
appointed president and CEO on August 1, 2008, and Nilda Rivera, who was appointed CFO on
January 21, 2010 and resigned on December 9, 2014.
Pubco’s NEOs were compensated for their contributions to Pubco during the fiscal year, which
included cash compensation pursuant to certain agreements with Pubco.
Pubco had an arrangement with Mosam Ventures Inc., a private company controlled by Mr. Levy,
pursuant to which Mr. Levy, in his capacity as CEO of Pubco, provided general management
services to Pubco for a fee of $1,500 per month. During the year ended June 30, 2014, Pubco
paid or accrued a total of $28,500 to Mosam Ventures Inc. in management fees (see:
“Management’s Discussion and Analysis ‘Related Party Transactions’”).
Subsequent to the year ended June 30, 2013, effective April 1, 2014, the monthly fee payable to
Mosam Ventures Inc. was increased to $5,000 per month. Cash compensation amounts to
executive officers are determined solely by board discussion without any formal objectives,
criteria or analysis. Option based awards to executive officers are determined by the board which
considers both the past and future expected contributions of the individual officers, previous
grants of stock options, and the number of available stock options.
Summary Compensation Table
The following table sets out all compensation awarded to, earned by or paid to the Named
Executive Officers for each of the last three fiscal years. No other executive officer’s total salary
and bonus during such periods exceeded $150,000. The Resulting Issuer relies on the board of
directors in determining compensation to executive officers.
Name Year
and
Position
Salary
($)
Marc
2014
Levy
2013
President 2012
&
CEO
28,500
(1)
17,500
(1)
17,000
(1)
Share
based
awards
($)
Nil
Nil
Nil
Optionbased
awards
($)
29,059
Nil
Nil
Non-equity incentive
plan compensation
($)
Annual
Long- Pension
All other
Total
incentive
term
value compensation compensation
plans
incentive
($)
($)
($)
plans
Nil
Nil
Nil
Nil
57,559
Nil
Nil
Nil
Nil
17,500
Nil
Nil
Nil
Nil
17,000
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 40
Nilda
(2)
Rivera
CFO
2014
2013
2012
(1)
(2)
(3)
Nil
Nil
Nil
Nil
Nil
Nil
4,680
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
(3)
Nil
Nil
Nil
28,800
(3)
21,600
(3)
14,000
33,480
21,600
14,000
Fees for management services provided by Mr. Levy through Mosam Ventures Inc. (see:
“Management’s Discussion and Analysis ‘Related Party Transactions’”).
Ms. Rivera ceased to be the CFO of the Resulting Issuer on December 9, 2014.
Fees for services provided by Ms. Rivera through Avarone Metals Inc. (formerly Remstar
Resources Ltd.) (see: “Management’s Discussion and Analysis ‘Related Party
Transactions’”).
Incentive Plan Awards
Management of the Resulting Issuer believes that awards of equity in the Resulting Issuer serve
an important function in furnishing directors, officers, employees and consultants of the Resulting
Issuer (collectively, the “Eligible Parties”) an opportunity to invest in the Resulting Issuer in a
simple and effective manner and better aligning the interests of the Eligible Parties with those of
the Resulting Issuer and its shareholders through ownership of the Resulting Issuer Shares.
The following table provides for each NEO for all awards outstanding at the end of the most
recently completed financial year (of June 30, 2014) and includes awards granted before the
most recently completed financial year (of June 30, 2014).
Name
Option-based Awards
Number of
Option
Option
securities
exercise expiration
underlying
price ($)
date
unexercised
options (#)
(1)
Value of
unexercised
in-themoney
options
($)
(2)
Share-based Awards
Number
Market
of
or
shares
payout
or units
value of
of
share –
shares
based
that
awards
have not
that
vested
have not
(#)
vested
($)
N/A
N/A
N/A
N/A
Market /
payout
value of
vested
sharebased
awards
not paid
out or
distributed
($)
N/A
N/A
Marc Levy
403,334
$0.05
Oct. 29/17
Nil
(1)
(2)
President &
60,000
$0.05
May 31/21
Nil
CEO
(1)
(2)
Nilda
50,000
$0.05
Apr. 1/20
Nil
N/A
N/A
(3)
(1)
(2)
Rivera
25,000
$0.05
May 31/21
Nil
N/A
N/A
CFO
(1)
Subsequent to the financial year ended June 30, 2013 the exercise price of the options
was reduced to $0.10 per share, following which all outstanding options were cancelled
and re-granted with an exercise price of $0.05 per share.
(2)
The closing market price of the Resulting Issuer Shares on June 30, 2014 was $0.14.
None of the unexercised options were “in-the-money” as at June 30, 2014.
(3)
Ms. Rivera ceased to be the CFO of the Resulting Issuer on December 9, 2014.
Incentive Plan Awards – Value Vested or Earned During the Year
The following table sets out the value of option or stock based awards that vested during the most
recently completed financial year and the value of non-equity incentive plan compensation earned
during the most recently completed financial year for each NEO.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 41
N/A
N/A
Name
Option-based
awards – Value
vested during the
year ($)
(b)
29,059
Share-based awards
– Value vested
during the year ($)
Non-equity incentive
plan compensation –
Value earned during
the year ($)
(d)
N/A
(a)
(c)
Marc Levy
N/A
President & CEO
(1)
Nilda Rivera
4,680
N/A
N/A
CFO
(1)
Ms. Rivera ceased to be the CFO of the Resulting Issuer on December 9, 2014.
Termination and Change of Control Benefits
The Resulting Issuer does not have any contract, agreement, plan or arrangement that provides
for payments to an NEO at, following or in connection with any termination (whether voluntary,
involuntary or constructive), resignation, retirement, a change in control of the company or a
change in an NEO’s responsibilities.
Director Compensation Table
The following table sets out details of compensation provided to the directors who are not NEOs
for the Resulting Issuer’s most recently completed financial year.
Name
Fees
earned
($)
(a)
Isaac
Moss
John
Bean
Edward
(2)
Kelly
Gordon
(3)
Addie
(1)
(2)
(3)
Optionbased
(1)
Awards
($)
(d)
2,000
Non-equity
incentive plan
compensation
($)
(e)
Nil
Pension
value
($)
All other
compensation
($)
Total
($)
(b)
Nil
Sharebased
awards
($)
(c)
Nil
(f)
Nil
(g)
Nil
(h)
2,000
Nil
Nil
2,000
Nil
Nil
Nil
2,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
28,632
Nil
Nil
Nil
28,632
Value of option-based awards calculated using Black-Scholes model.
Mr. Kelly ceased to be a director of Pubco effective March 17, 2014.
Mr. Addie ceased to be a director of Pubco effective March 24, 2014.
Narrative Discussion
During the most recently completed fiscal year, there were no arrangements, standard or
otherwise, for cash or non-cash compensation pursuant to which directors were compensated by
the Resulting Issuer for their attendance at board meetings or in their capacity as directors. The
directors may be reimbursed for actual expenses reasonably incurred in connection with the
performance of their duties as directors.
Share-based awards, option-based awards and non-equity incentive plan
compensation
Outstanding share-based awards and option-based awards
The following table sets out all stock options and share based awards granted or awarded to,
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 42
earned by or paid to the Resulting Issuer’s directors who are not NEOs that are outstanding at the
end of the most recently completed financial year.
Option-based Awards
Number of
Option
Option
securities
exercise
expiration
underlying
price
date
unexercised
($)
options
(#)
Name
(a)
Isaac
Moss
John Bean
Gordon
Addie
(1)
(2)
(3)
Value of
unexercised
in-themoney
options
($)
(b)
85,000
(c)
0.05
(d)
Mar. 19/24
(e)
(3)
Nil
85,000
473,333
0.05
(1)
$0.05
Mar. 19/24
Mar.
(2)
22/15
Nil
(3)
Nil
Share-based Awards
Number
Market
of
or
shares
payout
or units value of
of
share –
shares
based
that
awards
have
that
not
have
vested
not
(#)
vested
($)
(f)
(g)
Nil
Nil
(3)
Nil
Nil
Market /
payout
value of
vested
sharebased
awards
not paid
out or
distributed
($)
Nil
Nil
Subsequent to the financial year ended June 30, 2013, the exercise price of the options was
reduced to $0.10 per share.
Subsequent to the financial year ended June 30, 2013, Mr. Addie ceased to be a director of Pubco
effective March 24, 2014 and consequently Mr. Addie’s options will expire on March 22, 2015.
The closing market price of Pubco Shares on June 30, 2014 was $0.14. None of the unexercised
options were “in-the-money” as at June 30, 2014.
Incentive plan awards – value vested or earned during the year
The following table sets out the value of option or stock based awards that vested during the most
recently completed financial year and the value of non-equity incentive plan compensation earned
during the most recently completed financial year for each director.
Name
(a)
Isaac Moss
John Bean
(1)
Edward Kelly
(2)
Gordon Addie
(1)
(2)
Option-based
Awards –
Value vested
during the
(1)
year
($)
(b)
2,000
2,000
Nil
28,632
Share-based
awards – Value
vested during the
year
($)
(c)
Nil
Nil
Nil
Nil
Non-equity
incentive plan
compensation –
Value earned during
the year
($)
(d)
Nil
Nil
Nil
Nil
Mr. Kelly ceased to be a director of Pubco effective March 17, 2014 and consequently Mr. Kelly’s
options were cancelled as of June 15, 2014.
Mr. Addie ceased to be a director of Pubco effective March 24, 2014 and consequently Mr. Addie’s
options will expire on March 22, 2015.
Intended Material Changes to Executive Compensation
N/A.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 43
(h)
Nil
Nil
Nil
Pension Plan Benefits
Neither Pubco nor the Resulting Issuer does not currently provide any pension plan benefits to its
executive officers, directors, or employees.
16. INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
No director or executive officer of the Resulting Issuer, or associate or affiliate of any such
director or officer, is or has been indebted to the Resulting Issuer since the date of incorporation.
No director or executive officer of the Resulting Issuer, or associate or affiliate of any such
director or officer, or has been indebted to the Resulting Issuer since the beginning of the last
completed financial year of the Resulting Issuer.
17. RISK FACTORS
This section discusses factors relating to the Resulting Issuer’s business that should be
considered by both existing and potential investors. The information in this section is intended to
serve as an overview and should not be considered comprehensive and the Resulting Issuer may
face risks and uncertainties not discussed in this section, or not currently known to the
management of the Resulting Issuer, or that we deem to be immaterial. All risks to the Resulting
Issuer’s business have the potential to influence its operations in a materially adverse manner.
Forward Looking Information
Certain information set out in this Listing Statement includes or is based upon expectations,
estimates, projections or other “forward looking information”. Such forward looking information
includes projections or estimates made by the Resulting Issuer about its future business
operations. While such forward looking statements and the assumptions underlying them are
made in good faith and reflect the Resulting Issuer’s current judgment regarding the direction of
their business, actual results will almost certainly vary (sometimes materially) from any estimates,
predictions, projections, assumptions or other type of performance suggested here.
Market Risk for Securities
Aurora is a private company whose common shares are not listed for trading on a stock
exchange. There can be no assurance that an active trading market for the Resulting Issuer
Shares will be established and sustained after the Share Exchange. Upon the close of the Share
Exchange and/or listing, the market price for the Resulting Issuer Shares could be subject to wide
fluctuations. Factors such as commodity prices, government regulation, interest rates, share price
movements of peer companies and competitors, as well as overall market movements, may have
a significant impact on the market price of the Resulting Issuer Shares. The stock market has
from time to time experienced extreme price and volume fluctuations, which have often been
unrelated to the operating performance of particular companies.
Reliance on Licensing
The ability of the Resulting Issuer to successfully grow, store and distribute medical marijuana in
Canada will depend on success of the Resulting Issuer in acquiring a Production License. Health
Canada has received over 800 Production License applications to date, the number of
submissions continues to grow, and there are indications that the approval process is becoming
elongated. Once a license is obtained, any failure to comply with the terms of the Production
License, or any failure to renew the Production License after its expiry date, would have a
material adverse impact on the financial condition and operations of our business.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 44
No Operating History Risk
As the Resulting Issuer will be start-up companies, there are limited operating histories. Aurora
has not entered the production, sales and distribution stage. The Resulting Issuer will be subject
to all of the business risks and uncertainties associated with any new business enterprise,
including the risks that it will be unable to acquire the necessary Production License, successfully
produce commercial marijuana, or establish a market for our product. The Resulting Issuer
anticipates positive cash flow from operations by the earliest of January 2015. There can be no
assurance that consumer demand for the products will be as anticipated, or that the Resulting
Issuer will become profitable.
Change in Law, Regulations and Guidelines
The Resulting Issuer’s business will be subject to particular laws, regulations, and guidelines. The
production and distribution of medical marijuana is a highly regulated field, and although the
Resulting Issuer intends to comply with all laws and regulations, there is no guarantee that the
governing laws and regulations will not change which will be outside of the Resulting Issuer’s
control. On March 21, 2014, the Federal Court of Canada issued an order allowing certain
individuals to continue under their MMAR licenses, thereby affecting the repeal of the MMAR. As
of the date of this Listing Statement the Government of Canada has decided to appeal the order;
however, it is unclear what a final ruling on this issue may be, and how it may affect the Resulting
Issuer’s business. It is possible that a ruling in favour of the original order could allow persons
who had a license under the MMAR to opt out of the new MMPR regime, thereby decreasing the
size of the market for the Resulting Issuer’s business, and potentially materially and adversely
affecting the Resulting Issuer’s business, its financial condition and operations. A detailed
description of this order can be found under Section 4 - “Narrative Description of the Business”.
Availability of Seed Supply and Skilled Labour
The Resulting Issuer’s ability to commence and continue operations will be dependent on its
ability to acquire starting materials. There are four legal sources of starting materials under the
MMPR:
1.
2.
3.
4.
Health Canada;
Personal-Use Production License holders under the MMAR regime;
Designated-Person Production License holders under the MMAR regime; and
Importation.
There is no guarantee that Resulting Issuer will be able to acquire seeds from such sources.
Further, the Resulting Issuer’s ability to maintain operations will be dependent on access to
skilled labour. There is no guarantee that the Resulting Issuer will be successful in maintaining its
supply of skilled labour, and a failure to do so would limit the Resulting Issuer’s ability to produce
the predicted amounts of product. This would have an adverse effect on the Resulting Issuer’s
operations and financial results.
Negative Publicity or Consumer Perception
The success of the medical marijuana industry may be significantly influenced by the public’s
perception of marijuana’s medicinal applications. Medical marijuana is a controversial topic, and
there is no guarantee that future scientific research, publicity, regulations, medical opinion and
public opinion relating to medical marijuana will be favourable. The medical marijuana industry is
an early-stage business that is constantly evolving with no guarantee of viability. The market for
medical marijuana is uncertain, and any adverse or negative publicity, scientific research, limiting
regulations, medical opinion and public opinion relating to the consumption of medical marijuana
may have a material adverse effect on our operational results, consumer base and financial
results.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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Competitive Risk
Although the market for the Resulting Issuer’s product does appear to be sizeable, the Resulting
Issuer expects significant competition from other companies due to the recent nature of the
MMPR regime. A large number of companies, possibly more than 800, appear to be applying for
Production Licenses, some of which may have significantly greater financial, technical, marketing
and other resources, may be able to devote greater resources to the development, promotion,
sale and support of their products and services, and may have more extensive customer bases
and broader customer relationships.
Should the size of the medical marijuana market increase as projected, the demand for product
will increase as well, and if the Resulting Issuer hopes to be competitive it will need to invest
significantly in research and development, marketing, production expansion, new client
identification, and client support. If the Resulting Issuer is not successful in achieving sufficient
resources to invest in these areas, the Resulting Issuer’s ability to compete in the market may be
adversely affected, which could materially and adversely affect the Resulting Issuer’s business,
its financial condition and operations.
Advertising and Promotional Risk
The Resulting Issuer’s future growth and profitability will depend on the effectiveness and
efficiency of advertising and promotional costs, including the Resulting Issuer’s ability to (i) create
brand recognition for its products; (ii) determine appropriate advertising strategies, messages and
media; and (iii) maintain acceptable operating margins on such costs. There can be no assurance
that advertising and promotional costs will result in revenues for the Resulting Issuer’s business
in the future, or will generate awareness of the Resulting Issuer’s Product. In addition, no
assurance can be given that the Resulting Issuer will be able to manage the Resulting Issuer’s
advertising and promotional costs on a cost-effective basis.
Uninsured or Uninsurable Risk
The Resulting Issuer may become subject to liability for risks against which it cannot insure or
against which the Resulting Issuer may elect not to insure due to the high cost of insurance
premiums or other factors. The payment of any such liabilities would reduce the funds available
for the Resulting Issuer’s usual business activities. Payment of liabilities for which the Resulting
Issuer does not carry insurance may have a material adverse effect on the Resulting Issuer’s
financial position and operations.
Conflicts of Interest Risk
Certain of the Resulting Issuer’s directors and officers are also directors and operators in other
companies. Situations may arise in connection with potential acquisitions or opportunities where
the other interests of these directors and officers conflict with or diverge from the Resulting
Issuer’s interests. In accordance with the BCBCA, directors who have a material interest in any
person who is a party to a material contract or a proposed material contract are required, subject
to certain exceptions, to disclose that interest and generally abstain from voting on any resolution
to approve the contract.
In addition, the directors and the officers are required to act honestly and in good faith with a view
to our best interests. However, in conflict of interest situations, the Resulting Issuer’s directors
and officers may owe the same duty to another company and will need to balance their
competing interests with their duties to the Resulting Issuer. Circumstances (including with
respect to future corporate opportunities) may arise that may be resolved in a manner that is
unfavourable to the Resulting Issuer.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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Key Personnel Risk
The Resulting Issuer’s success will depend on its directors’ and officers’ ability to develop the
Resulting Issuer’s business and manage its operations, and on the Resulting Issuer’s ability to
attract and retain key quality assurance, scientific, sales, public relations and marketing staff or
consultants once operations begin. The loss of any key person or the inability to find and retain
new key persons could have a material adverse effect on the Resulting Issuer’s business.
Competition for qualified technical, sales and marketing staff, as well as officers and directors can
be intense and no assurance can be provided that the Resulting Issuer will be able to attract or
retain key personnel in the future, which may adversely impact the Resulting Issuer’s operations.
Speculative Nature of Investment Risk
An investment in the Resulting Issuer’s common shares carries a high degree of risk and should
be considered as a speculative investment by purchasers. The Resulting Issuer has no history of
earnings, limited cash reserves, a limited operating history, has not paid dividends, and is unlikely
to pay dividends in the immediate or near future. The Resulting Issuer is in the development and
planning phases of its business and has not started commercialization of its products and
services. The Resulting Issuer’s operations are not yet sufficiently established such that the
Resulting Issuer can mitigate the risks associated with the Resulting Issuer’s planned activities.
No Established Market for Shares Risk
There is currently no established consistent trading market through which common shares in the
Resulting Issuer’s authorized capital may be sold. Even if a trading market develops, there can be
no assurance that such market will continue in the future. Any investor of Pubco or the Resulting
Issuer may lose their entire investment.
Agricultural Operations Risk
Since the Resulting Issuer’s business will revolve mainly around the growth of medical marijuana,
an agricultural product, the risks inherent with agricultural businesses will apply. Such risks may
include disease and insect pests, among others. Although the Resulting Issuer expects to grow
the its product in a climate controlled, monitored, indoor location, there is not guarantee that
changes in outside weather and climate will not adversely affect production. Further, any rise in
energy costs may have a material adverse effect on the Resulting Issuer’s ability to produce
medical marijuana.
Building Construction Risk
Since Aurora has yet to complete the construction of its production facility, there may be
unforeseeable events which cause an increase in the projected buildings or maintenance costs.
Such an increase in costs may require the Resulting Issuer to re-allocate funds from other areas
of its business; may require the Resulting Issuer to raise more funding than originally anticipated;
and may delay the Resulting Issuer’s ability to go into production. Such delay may have a
material adverse effect on our business and its financial results.
Transportation Risk
As a business revolving mainly around the growth of an agricultural product, the ability to obtain
speedy, cost-effective and efficient transport services will be essential to the prolonged
operations of the Resulting Issuer’s business. Should such transportation become unavailable for
prolonged periods of time, there may be a material adverse effect on the Resulting Issuer’s
business, financial situation, and operations.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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Liquidity and Future Financing Risk
Aurora is and the Resulting Issuer will be in the development stage, having not started operating
and has not generated any revenue. The Resulting Issuer will likely operate at a loss until its
business becomes established and therefore may require additional financing in order to fund
future operations and expansion plans. The Resulting Issuer’s ability to secure any required
financing to sustain its operations will depend in part upon prevailing capital market conditions, as
well as the Resulting Issuer’s business success. There can be no assurance that the Resulting
Issuer will be successful in its efforts to secure any additional financing or additional financing on
terms satisfactory to the Resulting Issuer’s management. If additional financing is raised by
issuing Resulting Issuer Shares, control may change and shareholders may suffer additional
dilution. If adequate funds are not available, or are not available on acceptable terms, the
Resulting Issuer may be required to scale back its business plan or cease operating.
Going-Concern Risk
The financial statements of Pubco and Aurora have been prepared on a going concern basis
under which an entity is considered to be able to realize its assets and satisfy its liabilities in the
ordinary course of business. The Resulting Issuer’s future operations are dependent upon the
identification and successful completion of equity or debt financing and the achievement of
profitable operations at an indeterminate time in the future. There can be no assurances that the
Resulting Issuer will be successful in completing equity or debt financing or in achieving
profitability. The financial statements do not give effect to any adjustments relating to the carrying
values and classification of assets and liabilities that would be necessary should the Resulting
Issuer be unable to continue as a going concern.
Global Economy Risk
An economic downturn of global capital markets has been shown to make the raising of capital by
equity or debt financing more difficult. The the Resulting Issuer will be dependent upon the capital
markets to raise additional financing in the future, while it establishes a user base for its products.
As such, the Resulting Issuer is subject to liquidity risks in meeting its development and future
operating cost requirements in instances where cash positions are unable to be maintained or
appropriate financing is unavailable. These factors may impact the Resulting Issuer’s ability to
raise equity or obtain loans and other credit facilities in the future and on terms favourable to the
Resulting Issuer and its management. If uncertain market conditions persist, the Resulting
Issuer’s ability to raise capital could be jeopardized, which could have an adverse impact on the
Resulting Issuer’s operations and the trading price of the Resulting Issuer Shares on the CSE.
Dividend Risk
Aurora and Pubco have not paid dividends in the past and the Resulting Issuer does not
anticipate paying dividends in the near future. The Resulting Issuer expects to retain its earnings
to finance further growth and, when appropriate, retire debt.
Share Price Volatility Risk
It is anticipated that the Resulting Issuer Shares will be re-listed for trading on the CSE. As such,
external factors outside of the Resulting Issuer’s control such as announcements of quarterly
variations in operating results, revenues and costs, and sentiments toward the medical marijuana
sector stocks may have a significant impact on the market price of the Resulting Issuer Shares.
Global stock markets, including the CSE, have from time to time experienced extreme price and
volume fluctuations that have often been unrelated to the operations of particular companies.
There can be no assurance that an active or liquid market will develop or be sustained for the
common shares.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 48
Increased Costs of Being a Publicly Traded Company
As the Resulting Issuer will have publicly-traded securities, the Resulting Issuer will incur
significant legal, accounting and filing fees not presently incurred by Aurora. Securities legislation
and the rules and policies of the CSE requires listed companies to, among other things, adopt
corporate governance and related practices, and to continuously prepare and disclose material
compliance costs.
Value of Aurora, Pubco and the Resulting Issuer.
Aurora, Pubco and the Resulting Issuer’s assets are of indeterminate value. For further
particulars see the financial statements scheduled hereto.
Negative Cash Flow
Aurora and Pubco had negative cash flows from operating activities in their respective most
recent financial years being the year ended June 30, 2014.
Fluctuating Prices of Raw Materials May Adversely Affect the Resulting Issuer.
The Resulting Issuer’s revenues, if any, are expected to be in large part derived from the
production, sale and distribution of marijuana. The price of those commodities has fluctuated
widely, particularly in recent years, and is affected by numerous factors beyond the Resulting
Issuer’s control including international, economic and political trends, expectations of inflation,
currency exchange fluctuations, interest rates, global or regional consumptive patterns,
speculative activities and increased production due to new production and distribution
developments and improved production and distribution methods. The effect of these factors on
the price of product produced by the Resulting Issuer and, therefore the economic viability of any
of the Resulting Issuer’s business, cannot accurately be predicted.
Changing Environmental Regulations May Adversely Affect the Resulting Issuer.
All phases of the Resulting Issuer’s operations are subject to environmental regulation in the
various jurisdictions in which it operates. Environmental legislation is evolving in a manner which
will require stricter standards and enforcement, increased fines and penalties for noncompliance,
more stringent environmental assessments of proposed projects and a heightened degree of
responsibility for companies and their officers, directors and employees. There is no assurance
that future changes in environmental regulation, if any, will not adversely affect the Resulting
Issuer’s operations.
Political and Economic Instability May Adversely Affect the Resulting Issuer
The Resulting Issuer may be affected by possible political or economic instability. The risks
include, but are not limited to, terrorism, military repression, extreme fluctuations in currency
exchange rates and high rates of inflation. Changes in medicine and agriculture development or
investment policies or shifts in political attitude in certain countries may adversely affect the
Resulting Issuer’s business. Operations may be affected in varying degrees by government
regulations with respect to restrictions on production, distribution, price controls, export controls,
income taxes, expropriation of property, maintenance of assets, environmental legislation, land
use, land claims of local people and water use. The effect of these factors cannot be accurately
predicted.
Lack of Share Liquidity.
Pubco Shares and the Resulting Issuer Shares are subject to certain trade restrictions, which
may include a hold period restricting the trading of the securities.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 49
Limited Operating History and No Assurance of Profitability
Prior to the close of the Share Exchange, Aurora operated as a private company since its
inception on September 5, 2013. The brand is young, while growing, is still comparatively modest,
owing in part to the industry, inability to aggressively execute our business plan because of a lack
of working capital. The listing on the CSE and, if any, capital raise is designed to provide the
Resulting Issuer with the working capital we need to more fully implement the business objectives
of the Resulting Issuer.
We are subject to all of the risks and uncertainties associated with any new business, including
the risk that we will be unable to establish a market for our products and services, achieve our
growth objectives, and/or ultimately become profitable.
Intellectual Property
The success of the Resulting Issuer’s business depends in part on its ability to protect its ideas
and technology. Aurora and the Resulting Issuer have no patented technology or trademarked
business methods at this time nor have Pubco, Aurora or the Resulting Issuer registered any
patents, trademarks or copyrights.
Even if the Resulting Issuer moves to protect its technology with trademarks, patents, copyrights
or by other means, the Resulting Issuer is not assured that competitors will not develop similar
technology, business methods or that the Resulting Issuer will be able to exercise its legal rights.
Other countries may not protect intellectual property rights to the same standards as does
Canada. Actions taken to protect or preserve intellectual property rights may require significant
financial and other resources such that said actions have a meaningfully impact our ability to
successfully grow our business.
Significant Ownership Interest of Management and Directors
As of the date of this Listing Statement and on close of the Share Exchange, officers and
directors of the Resulting Issuer owned an aggregate of 37,549,223 shares or approximately
35.8% of the issued and outstanding Resulting Issuer Shares. As a group, these individuals could
exercise substantial control over matters requiring shareholder approval, such as election of
directors, approval of transactions, and changes to share structure. Until further rounds of
financing are completed, other shareholders may be limited in their ability to exercise control over
important corporate decisions.
Marketing Effectiveness
The Resulting Issuer’s ability to grow its business and achieve positive earnings will depend in
part on the effectiveness of advertising and other forms of promotion that, among other objectives,
would seek to build brand awareness and meaningfully increase our user base. There can be no
assurance that advertising and promotional expenditures will achieve these objectives.
18. PROMOTERS
Pubco entered into an investor relations agreement dated August 31, 2014 with Momentum
Premium Services Inc. (“Momemtum”). Pursuant to the agreement, Momentum will provide
Pubco with investor relation and strategic business development services in exchange for a fee of
$15,000 (plus tax) beginning on September 1, 2014 and 250,000 options to purchase Pubco
Shares at $0.70 per Pubco share for a period of five years and vesting 25% of the aggregate
amount of options every three months over a period of one year. The term of the agreement is
for three months.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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19. LEGAL PROCEEDINGS
As of the date of this Listing Statement, the Resulting Issuer is not a party to any material legal
proceedings or any regulatory actions. The Resulting Issuer does not contemplate any material
legal proceedings and is not aware of any material legal proceedings to be contemplated against
it.
20. INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Except as set out above in section 6.10 above, the directors, senior officers and principal
shareholders of the Resulting Issuer or any associate or affiliate of the foregoing have had no
material interest, direct or indirect, in any transactions in which the Resulting Issuer has
participated within the three year period prior to the date of this Listing Statement, or will have any
material interest in any proposed transaction, which has materially affected or will materially affect
the Resulting Issuer.
21. AUDITORS, TRANSFER AGENTS AND REGISTRARS
Auditors
Pubco’s auditor was WDM Chartered Accountants, located at Suite 420, 1501 West Broadway,
Vancouver, British Columbia, V6J 4Z6. On June 6, 2014, the Resulting Issuer changed its
auditor to Morgan & Company, LLP, Chartered Accountants, located at 1488 - 700 West Georgia
Street, Vancouver, British Columbia, V7Y 1A1.
Transfer Agent and Registrar
The transfer agent and registrar of the Resulting Issuer’s common shares is Computershare Trust
Company of Canada, located at 510 Burrard Street, 2nd Floor, Vancouver, British Columbia, V6C
3B9.
22. MATERIAL CONTRACTS
The following are the contracts within the last two years of the date of this Listing Agreement
which are material to the Resulting Issuer:
1. A lease between Aurora and David and Veronica Ramsay dated November 20, 2013.
This lease is for 160 acres of property at northwest of Cremona, Alberta for a term of 12
months. The lease is automatically renewed after 12 months for two successive terms of
five years unless prior notice is given by Aurora. Pursuant to this lease, Aurora was also
granted an option to purchase the property. The monthly gross rent under this lease is
$5,000 per month plus all assessed taxes on the property.
2. A finder’s fee agreement dated June 10, 2014 between Pubco and an unrelated third
party pursuant to which the finder is to be paid 5% of the total share consideration under
the Share Exchange with respect to the acquisition of Aurora.
3. A letter agreement dated June 20, 2014 between Pubco and Aurora granting Pubco the
exclusive right to acquire Aurora.
4. Pubco entered into a secured loan agreement with Aurora dated November 27, 2014
pursuant to which Pubco loaned Aurora an aggregate of $6,010,000, which was
transferred in several installments as of June 19, 2014, bearing 8% interest per annum
due April 30, 2015 secured against all present and after acquired property of Aurora.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
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5. Unsecured loan agreement with Riva Dubrofsky (the “Lender”) dated June 27, 2014 for a
loan of $500,000 to Pubco at 8% interest per annum compounded monthly due
December 27, 2014. As consideration for this loan, Pubco issued 714,000 Pubco Shares
at a deemed price of $0.14 to the Lender.
6. Pubco entered into an investor relations agreement dated August 31, 2014 with
Momentum. Pursuant to the agreement, Momentum will provide Pubco with investor
relation and strategic business development services in exchange for a fee of $15,000
(plus tax) beginning on September 1, 2014 and 250,000 options to purchase Pubco
Shares at $0.70 per Pubco share for a period of five years and vesting 25% of the
aggregate amount of options every three months over a period of one year. The term of
the agreement is for three months.
7. The Share Exchange Agreement dated September 9, 2014 among Pubco, Aurora and all
of the Aurora Shareholders. Pursuant to the Share Exchange Agreement, Pubco shall
acquire all of the issued and outstanding securities of Aurora from the Aurora
Shareholders and Aurora Warrantholders and the Right of First Refusal in exchange for
the:
a. issuance an aggregate of:
i. 60,000,000 Pubco Shares on a pro-rata basis to the Aurora
Shareholders;
ii. 10,200,000 Pubco Class C Warrants on a pro-rata basis to the holders of
the Aurora Class C Warrants;
iii. 4,000,000 Pubco Options to the holder of the Aurora Options; and
iv. 11,250,000 Pubco Class A Warrants on a pro-rata basis to the holders of
the Aurora Class A Warrants;
b. reservation of the Pubco Performance Class A Warrants and issuance on a prorata basis to holders of Aurora Class A Warrants upon completion of the Funding
Milestone;
c.
assumption debt of $1,500,000 outstanding with no interest and convertible into
common shares of Pubco for a price of $0.125 owed by Aurora to creditors;
d. reservation of the Performance Shares and issuance of the Performance Shares
on completion of the Performance Milestone; and
e. issuance of the Finder’s Fee Shares.
8. The Escrow Agreement dated September 18, 2014 where 10% of the escrowed shares
will be released from escrow on the date that the common shares of Pubco are re-listed
on the CSE, and 15% every six months thereafter, subject to acceleration provisions
provided for in National Policy 46-201 – Escrow for Initial Public Offerings, and subject to
the approval of the CSE.
9. Pubco entered into a subscription agreement with a purchaser dated November 24, 2014
pursuant to which Pubco agreed to sell and the purchaser agreed to purchase a secured
convertible debenture in the aggregate amount of $1,000,000 that may be converted into
Pubco Shares at a price of $1.01 per Pubco Share during the term of the debenture and
bearing 8% interest per annum due November 24, 2015 secured against all present and
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 52
after acquired property of Pubco.
10. Pubco entered into a subscription agreement with a purchaser dated December 1, 2014
pursuant to which Pubco agreed to sell and the purchaser agreed to purchase a secured
convertible debenture in the aggregate amount of $250,000 that may be converted into
Pubco Shares at a price of $1.01 per Pubco Share during the term of the debenture and
bearing 8% interest per annum due December 1, 2015 secured against all present and
after acquired property of Pubco.
23. INTEREST OF EXPERTS
The persons or companies whose profession or business gives authority to a statement made by
such person or company and who is named in this Listing Statement as having prepared or
certified a part of this Listing Statement or a report or valuation described or included in this
Listing Statement, are as follows:
(a) The audited financial statements of Pubco included in this Listing Statement have been
included in reliance upon the report of Morgan & Company, LLP, Chartered Accountants,
and upon the authority of such firm as experts in accounting and auditing and their audit
report is included herein. Morgan & Company, LLP have advised that they are
independent with respect to Pubco within the meaning of the Rules of Professional
Conduct of the Institute of Chartered Accountants of British Columbia; and
(b) The audited financial statements of Aurora included in this Listing Statement have been
included in reliance upon the report of MNP, LLP, Chartered Accountants, and upon the
authority of such firm as experts in accounting and auditing and their audit report is
included herein. MNP, LLP have advised that they are independent with respect to
Aurora within the meaning of the Rules of Professional Conduct of the Institute of
Chartered Accountants of British Columbia.
Based on information provided by the relevant persons, none of those persons or companies or
any director, officer, employee or partner thereof has received or will receive any direct or indirect
interest in our property or the property of any associate or affiliate of us, nor has any beneficial
ownership, direct or indirect, in any securities issued by us. None of those persons is or is
expected to be elected, appointed, or employed as a director or employee of us.
24. OTHER MATERIAL FACTS
There are no other material facts other than as disclosed therein.
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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25. FINANCIAL STATEMENTS
The audited financial years ended June 30, 2014, 2013, and 2012 are attached hereto as
Schedule “B”.
Additionally, the following is attached hereto:
(1) audited financial statement for the fiscal year end of June 30, 2014 for Aurora prepared in
accordance with the requirements of National Instrument 41-101 General Prospectus
Requirements (attached as Schedule “D”); and
(2) pro-forma consolidated financial statements of the Resulting Issuer giving effect to the
Share Exchange (attached as Schedule “E”).
CERTIFICATE OF THE ISSUER
Pursuant to a resolution duly passed by its Board of Directors, Aurora Cannabis Inc. hereby
applies for the listing of the above mentioned securities on the CSE. The foregoing contains full,
true, and plain disclosure of all material information relating to Aurora Cannabis Inc. It contains no
untrue statement of a material fact and does not omit to state a material fact that is required to be
stated or that is necessary to prevent a statement that is made from being false or misleading in
light of the circumstances in which it was made.
th
Dated at the City of Vancouver, British Columbia, this 9 day of December, 2014.
“Steve Dobler”
Steve Dobler
President and Director
“Terry Booth”
Terry Booth
CEO and Director
“Marc Levy”
Marc Levy
Director
“Isaac Moss”
Isaac Moss
Director
“John Bean”
John Bean
CFO
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 54
CERTIFICATE OF THE TARGET
The foregoing contains full, true and plain disclosure of all material information relating to Aurora
Marijuana Inc. It contains no untrue statement of a material fact and does not omit to state a
material fact that is required to be stated or that is necessary to prevent a statement that is made
from being false or misleading in light of the circumstances in which it was made.
th
Dated at the City of Vancouver, British Columbia, this 9 day of December, 2014.
“Steve Dobler”
Steve Dobler
President and Director
“Terry Booth”
Terry Booth
CEO and Director
{W0264474.DOC}FORM 2A – LISTING STATEMENT
December 9, 2014
Page 55
SCHEDULE “A”
Management’s Discussion and Analysis of Pubco for the Fiscal Year End of June 30, 2014
{W0264474.DOC}FORM 2A – LISTING STATEMENT
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PRESCIENT MINING CORP.
Management’s Discussion and Analysis
For the fiscal year ended June 30, 2014
GENERAL
Prescient Mining Corp. (the “Company”) was incorporated under the Business Corporations Act (British
Columbia) on December 21, 2006 and is engaged in the acquisition, exploration and development of
mineral properties. The Company is listed for trading on the Canadian Securities Exchange (the “CSE”)
under the symbol “PMC”.
This management’s discussion and analysis (“MD&A”) reports on the operating results and financial
condition of the Company for the year ended June 30, 2014 and is prepared as October 9, 2014. The
MD&A should be read in conjunction with the Company’s audited financial statements for the years
ended June 30, 2014 and 2013 the notes thereto which were prepared in accordance with the International
Financial Reporting Standards (the “IFRS”).
All dollar amounts referred to in this MD&A are expressed in Canadian dollars except where indicated
otherwise.
FORWARD LOOKING STATEMENTS
This document may contain “forward-looking information” within the meaning of Canadian securities
legislation (“forward-looking statements”). These forward-looking statements are made as of the date of
this document and 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 and include, but are not limited to, the
Company and its operations, its planned exploration activities, the adequacy of its financial resources and
statements with respect to the estimation of mineral reserves and mineral resources, the realization of
mineral reserve estimates, the timing and amount of estimated future production, costs of production,
capital expenditures, success of mining operations, environmental risks, unanticipated reclamation
expenses, title disputes or claims and limitations on insurance coverage. 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. In this document, certain forward-looking statements
are identified by words including “may”, “future”, “expected”, “intends” and “estimates”. 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
forwardlooking statements. Such factors include, among others, risks related to actual results of current
exploration activities; changes in project parameters as plans continue to be refined; future prices of
resources; possible variations in ore reserves, grade or recovery rates; accidents, labour disputes and other
risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion
of development or construction activities; as well as those factors detailed from time to time in the
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
Company’s interim and annual financial statements and management’s discussion and analysis of those
statements, all of which are filed and available for review under the Company’s profile on SEDAR at
www.sedar.com. Although the Company has attempted to identify important factors that could cause
actual actions, events or results to differ materially from those described in forward-looking statements,
there may be other factors that cause actions, events or results not to be as anticipated, estimated or
intended. 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.
OVERVIEW
In fiscal year 2011, the Company entered into an option agreement with Geomode Mineral Exploration
Ltd. for the exclusive right and option to acquire a 100% undivided interest in the Hook Lake Project, a
prospective uranium project, located in the Athabasca Basin, Saskatchewan. The project consists of a
5,052-hectare mineral disposition on the outer eastern edge of the Athabasca basin, adjacent to JNR
Resources' Way Lake uranium project.
In consideration of the grant of option, the Company paid $15,000 and issued 150,000 common shares of
the Company on July 30, 2012. The Company may exercise the option by incurring a total of $871,248 in
exploration and development expenditures on the project over a period of three years and paying an
additional sum of $1-million to the vendor on the third anniversary of the TSX Venture Exchange
approval date.
On August 12, 2014, the Company terminated the option agreement.
The Company is now in the process of becoming a licensed producer of medical marijuana in Canada (a
“Licensed Producer”) by closing a share exchange (the “Share Exchange”) with Aurora Marijuana Inc.
(“Aurora”), a company incorporated under the Business Corporations Act (Alberta), and the shareholders
of Aurora (the “Shareholders”). On close of the Share Exchange, Aurora will be the wholly-owned
subsidiary of the Company. Currently, Aurora is in the process of applying to Health Canada for a
medical marijuana production and distribution license (a “Production License”) under the recently
enacted MMPR, which came into full effect on April 1, 2014.
The business of the Company is now based on the acquisition of Aurora, an established company in
Edmonton, Alberta, that holds a pre-license approval granted by Health Canada and is in the final stages
of obtaining a Licensed Producer designation from Health Canada under the MMPR. The licensed
producer inspection of Aurora was completed on August 26, 2014.
RISK FACTORS
This section discusses factors relating to the business of Company or the Company after the Share
Exchange (the “Resulting Issuer”) that should be considered by both existing and potential investors.
The information in this section is intended to serve as an overview and should not be considered
comprehensive and the Company or the Resulting Issuer may face risks and uncertainties not discussed in
this section, or not currently known to us, or that we deem to be immaterial. All risks to the Company or
the Resulting Issuer’s business have the potential to influence its operations in a materially adverse
manner.
2
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
Forward Looking Information
Certain information set out in this MD&A includes or is based upon expectations, estimates, projections
or other “forward looking information”. Such forward looking information includes projections or
estimates made by the Company or the Resulting Issuer about its future business operations. While such
forward looking statements and the assumptions underlying them are made in good faith and reflect the
Company or the Resulting Issuer’s current judgment regarding the direction of their business, actual
results will almost certainly vary (sometimes materially) from any estimates, predictions, projections,
assumptions or other type of performance suggested here.
Market Risk for Securities
Aurora is a private company whose common shares are not listed for trading on a stock exchange. There
can be no assurance that an active trading market for the Resulting Issuer Shares will be established and
sustained after the Share Exchange. Upon the close of the Share Exchange and/or listing, the market price
for the common shares of the Resulting Issuer (the “Resulting Issuer Shares”) could be subject to wide
fluctuations. Factors such as commodity prices, government regulation, interest rates, share price
movements of peer companies and competitors, as well as overall market movements, may have a
significant impact on the market price of the Resulting Issuer Shares. The stock market has from time to
time experienced extreme price and volume fluctuations, which have often been unrelated to the operating
performance of particular companies.
Reliance on Licensing
The ability of the Resulting Issuer to successfully grow, store and distribute medical marijuana in Canada
will depend on success of the Resulting Issuer in acquiring a Production License. Health Canada has
received over 800 applications for Production Licenses to date, the number of submissions continues to
grow, and there are indications that the approval process is becoming elongated. Once a license is
obtained, any failure to comply with the terms of the Production License, or any failure to renew the
Production License after its expiry date, would have a material adverse impact on the financial condition
and operations of our business.
No Operating History Risk
As Aurora and the Company and the Resulting Issuer will be start-up companies, there are limited
operating histories. Aurora has not entered the production, sales and distribution stage. The Company and
the Resulting Issuer will be subject to all of the business risks and uncertainties associated with any new
business enterprise, including the risks that it will be unable to acquire the necessary Production License,
successfully produce commercial marijuana, or establish a market for our product. The Company and
Aurora anticipate positive cash flow from operations by the earliest of January 2015. There can be no
assurance that consumer demand for the products will be as anticipated, or that the Resulting Issuer will
become profitable.
Change in Law, Regulations and Guidelines
The Resulting Issuer’s business will be subject to particular laws, regulations, and guidelines. The
production and distribution of medical marijuana is a highly regulated field, and although the Resulting
3
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
Issuer intends to comply with all laws and regulations, there is no guarantee that the governing laws and
regulations will not change which will be outside of the Resulting Issuer’s control. On March 21, 2014,
the Federal Court of Canada issued an order allowing certain individuals to continue under their MMAR
licenses, thereby affecting the repeal of the MMAR. As of the date of this MD&A the Government of
Canada has decided to appeal the order; however, it is unclear what a final ruling on this issue may be,
and how it may affect the Resulting Issuer’s business. It is possible that a ruling in favour of the original
order could allow persons who had a license under the MMAR to opt out of the new MMPR regime,
thereby decreasing the size of the market for the Resulting Issuer’s business, and potentially materially
and adversely affecting the Resulting Issuer’s business, its financial condition and operations.
Availability of Seed Supply and Skilled Labour
The Resulting Issuer’s ability to commence and continue operations will be dependent on its ability to
acquire starting materials. There are four legal sources of starting materials under the MMPR:
1.
2.
3.
4.
Health Canada;
Personal-Use Production License holders under the MMAR regime;
Designated-Person Production License holders under the MMAR regime; and
Importation.
There is no guarantee that Resulting Issuer will be able to acquire seeds from such sources. Further, the
Resulting Issuer’s ability to maintain operations will be dependent on access to skilled labour. There is no
guarantee that the Resulting Issuer will be successful in maintaining its supply of skilled labour, and a
failure to do so would limit the Resulting Issuer’s ability to produce the predicted amounts of product.
This would have an adverse effect on the Resulting Issuer’s operations and financial results.
Negative Publicity or Consumer Perception
The success of the medical marijuana industry may be significantly influenced by the public’s perception
of marijuana’s medicinal applications. Medical marijuana is a controversial topic, and there is no
guarantee that future scientific research, publicity, regulations, medical opinion and public opinion
relating to medical marijuana will be favourable. The medical marijuana industry is an early-stage
business that is constantly evolving with no guarantee of viability. The market for medical marijuana is
uncertain, and any adverse or negative publicity, scientific research, limiting regulations, medical opinion
and public opinion relating to the consumption of medical marijuana may have a material adverse effect
on our operational results, consumer base and financial results.
Competitive Risk
Although the market for the Resulting Issuer’s product does appear to be sizeable, the Resulting Issuer
expects significant competition from other companies due to the recent nature of the MMPR regime. A
large number of companies, possibly more than 800, appear to be applying for Production Licenses, some
of which may have significantly greater financial, technical, marketing and other resources, may be able
to devote greater resources to the development, promotion, sale and support of their products and services,
and may have more extensive customer bases and broader customer relationships.
Should the size of the medical marijuana market increase as projected, the demand for product will
4
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
increase as well, and if the Resulting Issuer hopes to be competitive it will need to invest significantly in
research and development, marketing, production expansion, new client identification, and client support.
If the Resulting Issuer is not successful in achieving sufficient resources to invest in these areas, the
Resulting Issuer’s ability to compete in the market may be adversely affected, which could materially and
adversely affect the Resulting Issuer’s business, its financial condition and operations.
Advertising and Promotional Risk
The Resulting Issuer’s future growth and profitability will depend on the effectiveness and efficiency of
advertising and promotional costs, including the Resulting Issuer’s ability to (i) create brand recognition
for its products; (ii) determine appropriate advertising strategies, messages and media; and (iii) maintain
acceptable operating margins on such costs. There can be no assurance that advertising and promotional
costs will result in revenues for the Resulting Issuer’s business in the future, or will generate awareness of
the Resulting Issuer’s Product. In addition, no assurance can be given that the Resulting Issuer will be
able to manage the Resulting Issuer’s advertising and promotional costs on a cost-effective basis.
Uninsured or Uninsurable Risk
The Resulting Issuer may become subject to liability for risks against which it cannot insure or against
which the Resulting Issuer may elect not to insure due to the high cost of insurance premiums or other
factors. The payment of any such liabilities would reduce the funds available for the Resulting Issuer’s
usual business activities. Payment of liabilities for which the Resulting Issuer does not carry insurance
may have a material adverse effect on the Resulting Issuer’s financial position and operations.
Conflicts of Interest Risk
Certain of the Company and the Resulting Issuer’s directors and officers are also directors and operators
in other companies. Situations may arise in connection with potential acquisitions or opportunities where
the other interests of these directors and officers conflict with or diverge from the Company and the
Resulting Issuer’s interests. In accordance with the BCBCA, directors who have a material interest in any
person who is a party to a material contract or a proposed material contract are required, subject to certain
exceptions, to disclose that interest and generally abstain from voting on any resolution to approve the
contract.
In addition, the directors and the officers are required to act honestly and in good faith with a view to our
best interests. However, in conflict of interest situations, the Company and the Resulting Issuer’s directors
and officers may owe the same duty to another company and will need to balance their competing
interests with their duties to the Company and the Resulting Issuer. Circumstances (including with respect
to future corporate opportunities) may arise that may be resolved in a manner that is unfavourable to the
Company and the Resulting Issuer.
Key Personnel Risk
The Company and the Resulting Issuer’s success will depend on its directors’ and officers’ ability to
develop the Company and the Resulting Issuer’s business and manage its operations, and on the Company
and the Resulting Issuer’s ability to attract and retain key quality assurance, scientific, sales, public
relations and marketing staff or consultants once operations begin. The loss of any key person or the
5
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
inability to find and retain new key persons could have a material adverse effect on the Company and the
Resulting Issuer’s business. Competition for qualified technical, sales and marketing staff, as well as
officers and directors can be intense and no assurance can be provided that the Company and the
Resulting Issuer will be able to attract or retain key personnel in the future, which may adversely impact
the Company and the Resulting Issuer’s operations.
Speculative Nature of Investment Risk
An investment in the Company or the Resulting Issuer’s common shares carries a high degree of risk and
should be considered as a speculative investment by purchasers. The Company or the Resulting Issuer has
no history of earnings, limited cash reserves, a limited operating history, has not paid dividends, and is
unlikely to pay dividends in the immediate or near future. The Company or the Resulting Issuer is in the
development and planning phases of its business and has not started commercialization of its products and
services. The Company or the Resulting Issuer’s operations are not yet sufficiently established such that
the Company or the Resulting Issuer can mitigate the risks associated with the Company or the Resulting
Issuer’s planned activities.
No Established Market for Shares Risk
There is currently no established consistent trading market through which common shares in the
Company or the Resulting Issuer’s authorized capital may be sold. Even if a trading market develops,
there can be no assurance that such market will continue in the future. Any investor of the Company or
the Resulting Issuer may lose their entire investment.
Agricultural Operations Risk
Since the Resulting Issuer’s business will revolve mainly around the growth of medical marijuana, an
agricultural product, the risks inherent with agricultural businesses will apply. Such risks may include
disease and insect pests, among others. Although the Resulting Issuer expects to grow the its product in a
climate controlled, monitored, indoor location, there is not guarantee that changes in outside weather and
climate will not adversely affect production. Further, any rise in energy costs may have a material adverse
effect on the Resulting Issuer’s ability to produce medical marijuana.
Building Construction Risk
Since Aurora has yet to complete the construction of its production facility, there may be unforeseeable
events which cause an increase in the projected buildings or maintenance costs. Such an increase in costs
may require the Resulting Issuer to re-allocate funds from other areas of its business; may require the
Resulting Issuer to raise more funding than originally anticipated; and may delay the Resulting Issuer’s
ability to go into production. Such delay may have a material adverse effect on our business and its
financial results.
Transportation Risk
As a business revolving mainly around the growth of an agricultural product, the ability to obtain speedy,
cost-effective and efficient transport services will be essential to the prolonged operations of the Resulting
Issuer’s business. Should such transportation become unavailable for prolonged periods of time, there
6
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
may be a material adverse effect on the Resulting Issuer’s business, financial situation, and operations.
Liquidity and Future Financing Risk
Aurora and the Company are and the Resulting Issuer will be in the development stage, having not started
operating and has not generated any revenue. The Resulting Issuer will likely operate at a loss until its
business becomes established and therefore may require additional financing in order to fund future
operations and expansion plans. The Resulting Issuer’s ability to secure any required financing to sustain
its operations will depend in part upon prevailing capital market conditions, as well as the Resulting
Issuer’s business success. There can be no assurance that the Resulting Issuer will be successful in its
efforts to secure any additional financing or additional financing on terms satisfactory to the Resulting
Issuer’s management. If additional financing is raised by issuing Resulting Issuer Shares, control may
change and shareholders may suffer additional dilution. If adequate funds are not available, or are not
available on acceptable terms, the Resulting Issuer may be required to scale back its business plan or
cease operating.
Going-Concern Risk
The financial statements of the Company have been prepared on a going concern basis under which an
entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary course of
business. The Resulting Issuer’s future operations are dependent upon the identification and successful
completion of equity or debt financing and the achievement of profitable operations at an indeterminate
time in the future. There can be no assurances that the Company or Resulting Issuer will be successful in
completing equity or debt financing or in achieving profitability. The financial statements do not give
effect to any adjustments relating to the carrying values and classification of assets and liabilities that
would be necessary should the Company or Resulting Issuer be unable to continue as a going concern.
Global Economy Risk
An economic downturn of global capital markets has been shown to make the raising of capital by equity
or debt financing more difficult. The Company and the Resulting Issuer will be dependent upon the
capital markets to raise additional financing in the future, while it establishes a user base for its products.
As such, the Company and the Resulting Issuer is subject to liquidity risks in meeting its development
and future operating cost requirements in instances where cash positions are unable to be maintained or
appropriate financing is unavailable. These factors may impact the Resulting Issuer’s ability to raise
equity or obtain loans and other credit facilities in the future and on terms favourable to the Company and
the Resulting Issuer and its management. If uncertain market conditions persist, the Company and the
Resulting Issuer’s ability to raise capital could be jeopardized, which could have an adverse impact on the
Company or the Resulting Issuer’s operations and the trading price of the Company or Resulting Issuer
Shares on the CSE.
Dividend Risk
Aurora and the Company have not paid dividends in the past and does not anticipate paying dividends in
the near future. The Company and the Resulting Issuer expects to retain its earnings to finance further
growth and, when appropriate, retire debt.
7
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
Share Price Volatility Risk
It is anticipated that the Company and the Resulting Issuer Shares will be re-listed for trading on the CSE.
As such, external factors outside of the Company and the Resulting Issuer’s control such as
announcements of quarterly variations in operating results, revenues and costs, and sentiments toward the
medical marijuana sector stocks may have a significant impact on the market price of the Company and
the Resulting Issuer Shares. Global stock markets, including the CSE, have from time to time experienced
extreme price and volume fluctuations that have often been unrelated to the operations of particular
companies. There can be no assurance that an active or liquid market will develop or be sustained for the
common shares.
Increased Costs of Being a Publicly-Traded Company
As the Company and the Resulting Issuer will have publicly-traded securities, the Company and the
Resulting Issuer will incur significant legal, accounting and filing fees not presently incurred by Aurora.
Securities legislation and the rules and policies of the CSE requires listed companies to, among other
things, adopt corporate governance and related practices, and to continuously prepare and disclose
material compliance costs.
Value of Aurora, the Company and the Resulting Issuer.
Aurora, the Company and the Resulting Issuer’s assets are of indeterminate value. For further particulars
see the financial statements scheduled hereto.
Negative Cash Flow
Aurora and the Company had negative cash flows from operating activities in their respective most recent
financial years being the year ended June 30, 2014.
Fluctuating Prices of Raw Materials May Adversely Affect the Resulting Issuer.
The Company and the Resulting Issuer’s revenues, if any, are expected to be in large part derived from
the production, sale and distribution of marijuana. The price of production, sale and distribution of
marijuana will fluctuate widely due to the how young the marijuana industry is and is affected by
numerous factors beyond the Company or Resulting Issuer’s control including international, economic
and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or
regional consumptive patterns, speculative activities and increased production due to new production and
distribution developments and improved production and distribution methods. The effect of these factors
on the price of product produced by the Company or Resulting Issuer and, therefore the economic
viability of any of the Resulting Issuer’s business, cannot accurately be predicted.
Changing Environmental Regulations May Adversely Affect the Resulting Issuer.
All phases of the Resulting Issuer’s operations will be subject to environmental regulation in the various
jurisdictions in which it operates. Environmental legislation is evolving in a manner which will require
stricter standards and enforcement, increased fines and penalties for noncompliance, more stringent
environmental assessments of proposed projects and a heightened degree of responsibility for companies
8
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
and their officers, directors and employees. There is no assurance that future changes in environmental
regulation, if any, will not adversely affect Aurora, the Company or the Resulting Issuer’s operations.
Political and Economic Instability May Adversely Affect the Resulting Issuer
The Resulting Issuer may be affected by possible political or economic instability. The risks include, but
are not limited to, terrorism, military repression, extreme fluctuations in currency exchange rates and high
rates of inflation. Changes in medicine and agriculture development or investment policies or shifts in
political attitude in certain countries may adversely affect the Resulting Issuer’s business. Operations may
be affected in varying degrees by government regulations with respect to restrictions on production,
distribution, price controls, export controls, income taxes, expropriation of property, maintenance of
assets, environmental legislation, land use, land claims of local people and water use. The effect of these
factors cannot be accurately predicted.
Lack of Share Liquidity
Common shares of the Company and the Resulting Issuer Shares are subject to certain trade restrictions,
which may include a hold period restricting the trading of the securities.
Limited Operating History and No Assurance of Profitability
Prior to the close of the Share Exchange, Aurora operated as a private company since its inception on
September 5, 2013. The brand is young, while growing, is still comparatively modest, owing in part to
the industry, inability to aggressively execute our business plan because of a lack of working capital. The
listing on the CSE and, if any, capital raise is designed to provide the Resulting Issuer with the working
capital we need to more fully implement the business objectives of the Resulting Issuer.
We are subject to all of the risks and uncertainties associated with any new business, including the risk
that we will be unable to establish a market for our products and services, achieve our growth objectives,
and/or ultimately become profitable.
Intellectual Property
The success of the Company and Resulting Issuer’s business depends in part on its ability to protect its
ideas and technology. Aurora and the Company have no patented technology or trademarked business
methods at this time nor have the Company, Aurora or the Resulting Issuer applied to register any patents,
trademarks or copyrights or applied to register the trademark “Aurora”.
Even if the Company, Aurora and the Resulting Issuer moves to protect its technology with trademarks,
patents, copyrights or by other means, Aurora and the Resulting Issuer are not assured that competitors
will not develop similar technology, business methods or that Aurora and the Resulting Issuer will be able
to exercise their respective legal rights. Other countries may not protect intellectual property rights to the
same standards as does Canada. Actions taken to protect or preserve intellectual property rights may
require significant financial and other resources such that said actions have a meaningfully impact our
ability to successfully grow our business.
Significant Ownership Interest of Management and Directors
9
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
As of the date of this MD&A, officers and directors of the Company own an aggregate of 2,079,223
shares, or approximately 5.1%, of all issued and outstanding share of the Company. As a group, these
individuals could exercise substantial control over matters requiring shareholder approval, such as
election of directors, approval of transactions, and changes to share structure. Until further rounds of
financing are completed, other shareholders may be limited in their ability to exercise control over
important corporate decisions.
On close of the Share Exchange, officers and directors of the Resulting Issuer will own an aggregate of
37,549,223 shares or approximately 37.5% of the issued and outstanding Resulting Issuer Shares. As a
group, these individuals could exercise substantial control over matters requiring shareholder approval,
such as election of directors, approval of transactions, and changes to share structure. Until further rounds
of financing are completed, other shareholders may be limited in their ability to exercise control over
important corporate decisions.
Marketing Effectiveness
The Resulting Issuer’s ability to grow its business and achieve positive earnings will depend in part on the
effectiveness of advertising and other forms of promotion that, among other objectives, would seek to
build brand awareness and meaningfully increase our user base. There can be no assurance that
advertising and promotional expenditures will achieve these objectives.
SELECTED ANNUAL INFORMATION
The following selected financial data with respect to the Company’s financial condition and results of
operations has been derived from the audited financial statements of the Company for the years ended
June 30, 2014, 2013 and 2012 prepared in accordance with IFRS. The selected financial data should be
read in conjunction with those financial statements and the notes thereto.
Interest income
Net loss and comprehensive loss
Loss per share
Total assets
Total long term liabilities
Cash dividends declared per share
for each class of share
2014
$7,855
$399,705
$0.02
$1,887,349
Nil
Nil
2013
$9,389
$393,489
$0.02
$718,545
Nil
Nil
2012
$15,025
$315,760
$0.02
$1,121,220
Nil
Nil
RESULTS OF OPERATIONS
At June 30, 2014, the Company had not yet achieved profitable operations and had a net loss of $399,705
resulting in a basic and diluted loss per share of $0.02. The increase in loss of $6,216 resulted primarily
from increases in professional fees , office, rent and administration, financing fees, regulatory fees and
share-based payments.
During the year ended June 30, 2014, the Company recorded a financing fee of $99,960 from the issuance
of 714,000 bonus shares for the $500,000 loan received during the year. No such cost was incurred in the
prior year.
10
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
The increases in professional fees of $13,027, office, rent and administration of $41,293 and regulatory
fees of $13,437 during the year ended June 30, 2014 resulted from increased corporate activity related to
the listing on the CSE and due diligence and other costs related to the Share Exchange.
During the year ended June 30, 2014, the Company recorded $45,615 for the grant of 183,333 options at
$0.05 per share to directors and employee expiring March 19, 2024, 1,260,667 options at $0.05 per share
to directors and employee expiring from March 22, 2015 to May 31, 2021 and $38,791 for the
amendment in the terms of 1,420,667 previously granted options whereby the exercise price of the
options has been reduced to $0.05.
Project evaluation costs decreased by $151,327 as during the prior year, the Company incurred legal and
travel expenditures related to a project evaluation of a potential resource asset acquisition. The proposed
transaction did not complete and no such expenditures were incurred during the year ended June 30, 2014.
The exploration and evaluation expenditures of $88,250 incurred during the year ended June 30, 2013
consisted of option payments made for the Hook Lake property. No exploration expenditures were
incurred during the current year and the option agreement related to this property has been terminated
subsequent to June 30, 2014.
At June 30, 2014 and 2013, the Company had no continuing source of operating revenues and related
expenditures. The Company has not paid any dividends on its common shares nor does it have any
present intention of paying dividends on its common shares, as it anticipates that all available funds
obtained in the foreseeable future will be invested to finance its business activities.
Summary of Quarterly Results
The following table presents selected financial information from continuing operations for the most recent
eight quarters:
Quarter ended
June 30, 2014
March 31, 2014
December 31, 2013
September 30, 2013
June 30, 2013
March 31, 2013
December 31, 2012
September 30, 2012
Finance Income
$3,006
$1,577
$1,676
$1,596
$1,833
$2,152
$2,369
$3,035
Income (Loss)
($237,897)
($92,963)
($29,100)
($39,745)
($105,414)
($73,054)
($68,105)
($146,916)
Earnings (Loss) per
share
$(0.01)
Nil
Nil
Nil
($0.01)
NIl
Nil
($0.01)
The variation seen over such previous quarters was primarily dependent upon the success of the
Company’s ongoing property evaluation program and the timing and results of the Company’s
exploration activities on its then current property, none of which are possible to predict with any accuracy.
There are no general trends regarding the Company’s quarterly results and the Company’s business of
resource exploration is not seasonal, as it can work on its property on a year-round basis (funding
permitting). Past quarterly results may vary significantly depending mainly on the Company’s exploration
11
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
activities or whether the Company has incurred evaluation costs on potential projects or granted any stock
options, and these are the factors that account for material variations in the Company’s quarterly net
income (losses), none of which are predictable.
One of the major factors which may cause a material variation in net loss on a quarterly basis is the grant
of stock options due to the resulting share-based payments which may be significant when they arise.
Quarterly results can also vary significantly depending on whether the Company has incurred acquisition
and exploration expenditures on its properties as may be seen during the quarters ended June 30, 2012 and
September 30, 2012. Project evaluation costs and other related costs can have a material effect on
quarterly results as and when they occur, as for example, in the quarters ended June 30, 2012, September
30, 2012, December 31, 2012, March 31, 2013 and June 30, 2013.
General and administrative costs tend to be quite similar from period to period except in certain cases
when there is an increase in corporate activities. The variation in income is related solely to the interest
earned on funds held by the Company.
LIQUIDITY, FINANCIAL POSITION, AND CAPITAL RESOURCES
The Company has no revenue generating operations from which it can internally generate funds. The
Company has financed its operations and met its capital requirements primarily through the issuance of
capital stock by way of private placements.
The Company reported working capital of $1,352,655 at June 30, 2014 as compared to working capital of
$693,191 at June 30, 2013, representing an increase in working capital by $659,464. Net cash and cash
equivalents on hand increased by $234,706 from $644,713 as at June 30, 2013 to $879,419 as at June 30,
2014. The increase in cash was mainly attributable to cash provided by common shares of the Company
issued for net cash of $874,000 and cash provided by a third party loan of $500,000. As at June 30, 2014,
the Company had a balance of Nil in guaranteed investments certificates (“GICs”) compared to $647,800
in GICs at June 30, 2013.
During the year ended June 30, 2014, the Company completed the first tranche of a non-brokered private
placement of 9,500,000 common shares at a price of $0.10 per share for gross proceeds of $950,000. The
Company paid finder’s fees of $76,000 and 760,000 share purchase warrants at a fair value of $83,645.
Each finder’s warrant entitles the finder to purchase a common share of the Company at a price of $0.10
per share expiring June 27, 2016.
Subsequent to June 30, 2014, the Company closed the following non-brokered private placement
financings:
1. The second and final tranche consisting of 6,500,000 common shares at a price of $0.10 per share
for gross proceeds of $650,000. The Company paid finders’ fees of $52,000 and 520,000 share
purchase warrants. Each finder’s warrant entitles the finder to purchase a common share of the
Company at a price of $0.10 per share expiring July 15, 2016; and
2. 8,000,000 common shares at a price of $0.25 per share for gross proceeds of $2,000,000. The
Company paid aggregate finders’ fees of $98,920 on a portion of the private placement.
12
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
Subsequent to June 30, 2014, the Company has arranged for a non-brokered private placement of
2,353,000 common shares at a price of $0.85 per share for gross proceeds of $2,000,050. The Company
received shares subscriptions of $997,750 pursuant to this financing.
Pursuant to the Share Exchange, the Company entered into loan agreements with Aurora and advanced an
aggregate of $3,860,000 as of the date of this MD&A. The loans have a term of six months from the dates
of advances, bear interest at 8% per annum and are secured by a general security agreement dated June 19,
2014, granting the Company security over all present and after acquired property of Aurora.
As of the date of this MD&A, financing for the Company’s operations is also potentially available
through the exercise of vested stock options (See below “Summary of Outstanding Share Data”).
However, there can be no assurance that any of these outstanding convertible securities will be exercised,
particularly if the trading price of the common shares on the CSE does not exceed, by an material amount
and for a reasonable period, the exercise price of such convertible securities at some time prior to their
expiry dates.
The Company has not entered into any long-term lease commitments.
The Company presently has sufficient available funds to meet its operating cash requirements for the next
twelve months. However, if the Company’s plans change (as, for example, the Share Exchange) or its
current assumptions change or prove inaccurate, the Company may be required to seek additional
financing through the issuance of shares. Although the Company has previously been successful in raising
the funds required for its operations, there can be no assurance that the Company will have sufficient
financing to meet its future capital requirements or that additional financing will be available on terms
acceptable to the Company in the future.
The Company’s overall success will be affected by its current or future business activities. The Company
is in the process of closing the Share Exchange.
OFF BALANCE SHEET ARRANGEMENTS
The Company did not have any off-balance sheet arrangements as at June 30, 2014 or as of the date of
this report.
RELATED PARTY TRANSACTIONS
The Company has entered into certain transactions with related parties during the year ended June 30,
2014. A description of the related party transactions is as follows:
Name and Relationship
to Company
Transaction
Three months
ended June 30,
Years ended June 30,
2014
2014
2013
$
$
$
13
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
Mosam Ventures Inc., a
company controlled by
a director and an officer
of the Company
Management
fees
15,000
28,500
17,500
377
1,151
43,272
27,050
99,100
58,750
Max Pinsky Personal
Law Corporation,
a company with a
common officer
Avarone Metals Inc.
(formerly Remstar
Resources Ltd.), a
company with a
common director and a
common officer
Legal fees
Office, rent and
administration(1)
Ultra Lithium Inc., a
company with common
directors and officers
Rent (2)
-
-
11,000
ProspectOre Capital
Corp., a company with
a common director
Consulting
-
-
3,000
(1)
The Company entered into a month-to-month arrangement for the rental of office premises and the
provision of accounting, financial reporting and administrative services with Avarone Metals Inc., a
public company related by a common director and a common officer. Of the fees paid to Avarone
Metals Inc., $28,800 (2013 – $21,600) was allocated to the services of Nilda Rivera, CFO of the
Company.
(2)
The Company entered into a month-to-month arrangement for the rental of office premises with Ultra
Lithium Inc., a public company related by a common director and a common officer.
Included in prepaid expenses is a rent deposit and prepaid rent of $1,500 (2013 - $1,500) paid to
companies having a director and an officer in common.
Included in accounts payable and accrued liabilities was the amount of $5,250 (2013 - $12,327) paid to
companies controlled by directors and an officer of the Company.
These transactions are in the normal course of business operations and are measured at the exchange
amount, which is the amount of consideration established and agreed to by the related parties.
14
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
Fourth Quarter
During the fourth quarter of June 30, 2014, the Company reported a net loss of $237,897 as compared to a
net loss of $105,414 during the fourth quarter in the prior fiscal year, representing an increase in loss by
$132,483. The increase in loss was primarily attributable to an increase in operating expenses of $132,718.
The Company recorded a financing fee of $99,960 from the issuance of 714,000 bonus shares for a
$500,000 loan received from a third party during the fourth quarter of the year. No such cost was incurred
in the fourth quarter last year.
The increases in professional fees of $19,311, office, rent and administration of $10,538 and regulatory
fees of $13,407 during the fourth quarter resulted from increased corporate activity related to the
Company’s listing on the CSE and due diligence and other costs related to the Share Exchange. No such
costs were incurred in the fourth quarter last year.
During the fourth quarter in last year, the Company paid for cost of geophysics of $62,000 on the Hook
Lake property. No work was done on this property and no costs were incurred during the fourth quarter of
the current year. The option agreement on this property was terminated subsequent to June 30, 2014.
During the three months ended June 30, 2014, the Company recorded share-based payments of $41,301
for stock options granted to the directors, consultants and employee of the Company. No options were
granted and no share-based payment was recorded in the fourth quarter last year.
As a developing stage company, there is no source of operating income and losses are expected to
continue.
CRITICAL ACCOUNTING ESTIMATES
In the application of the Company’s accounting policies which are described in Note 2 to the Company’s
audited financial statements for the year ended June 30, 2014, management is required 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.
Significant judgments, estimates and assumptions that have the most significant effect on the amounts
recognized in the financial statements are described below.
(a) Share-Based Payments
The Company grants stock options to directors, officers, employees, and consultants of the Company
under its incentive stock option plan. The fair value of stock options is estimated using the BlackScholes option pricing model and are expensed over their vesting periods. In estimating fair value,
management is required to make certain assumptions and estimates such as the life of options,
volatility, and forfeiture rates.
15
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
Changes in assumptions used to estimate fair value could result in materially different results.
(b) Deferred Tax Assets
Deferred tax assets, including those arising from tax loss carry-forwards, require management to
assess the likelihood that the Company will generate sufficient taxable earnings in future periods in
order to utilize recognized deferred tax assets. Assumptions about the generation of future taxable
profits depend on management’s estimates of future cash flows. In addition, future changes in tax
laws could limit the ability of the Company to obtain tax deductions in future periods. To the extent
that future cash flows and taxable income differ significantly from estimates, the ability of the
Company to realize the net deferred tax assets recorded at the reporting date could be impacted.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(a) Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, interest receivable, loans
receivable, accounts payable and accrued liabilities and loans payable. The carrying values of these
financial instruments approximate their fair values because of their short term nature and/or the
existence of market related interest rates on the instruments.
IFRS requires disclosures about the inputs to fair value measurements, including their classification
within a hierarchy that prioritizes the inputs to fair value measurement. 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 Company has no financial instrument assets or liabilities recorded in the statements of financial
position at fair value as at June 30, 2014 and 2013.
(b) Financial Instruments Risk
The Company is exposed in varying degrees to a variety of financial instrument related to risks. The
Board approves and monitors the risk management processes:
(i) Credit Risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument
fails to meet its contractual obligations. The Company is subject to credit risk on the cash
balances at the bank, its short-term bank GICs and interest receivable. Cash and cash equivalents
consisting of GICs have been invested with Schedule 1 banks or equivalents, with its cash held in
Canadian based banking institutions, authorized under the Bank Act to accept deposits, which
may be eligible for deposit insurance provided by the Canadian Deposit Insurance Corporation.
Management considers that risks related to credit are minimal.
16
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
(ii) Liquidity Risk
The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to
settle obligations and liabilities when due. As at June 30, 2014, the Company had cash and cash
equivalents of $879,419 to settle current liabilities of $533,988 which mainly consisted of
accounts payable of $33,550 and loans payable of $500,438 that were considered short term and
settled within 30 days.
The Company is dependent on the availability of credit from its suppliers and its ability to
generate sufficient funds from equity and debt financing to meet current and future obligations.
There can be no assurance that such financing will be available on terms acceptable to the
Company. See note 1 to the Company’s audited financial statements for the year ended June 30,
2014.
(iii) Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates.
The Company’s short-term investments are invested in GICs with greater than 90 day terms but
not greater than one year. These GICs have a fixed interest rate for the term of the deposit. The
interest on cash and GICs is typical of Canadian banking rates, which are low at present and the
conservative investment strategy mitigates the risk of deterioration to the investment. A change
of 100 basis points in the interest rates would not be material to the financial statements.
CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION
The following IFRS standard has been recently issued by the IASB or the IFRIC. The Company is
assessing the impact of this new standard, but does not expect it to have a significant effect on the
financial statements. Pronouncements that are not applicable or do not have a significant impact to the
Company have been excluded herein.
IFRS 9, Financial Instruments
The IASB has issued a new standard, IFRS 9, “Financial Instruments” (“IFRS 9”), which will replace
IAS 39, “Financial Instruments: Recognition and Measurement” (“IAS 39”). IFRS 9 will replace the
multiple classification and measurement models in IAS 39 with a single model that has only two
classification categories: amortized cost and fair value. The new standard also requires a single
impairment method to be used, provides additional guidance on the classification and measurement of
financial liabilities, and provides a new general hedge accounting standard.
The mandatory effective date has tentatively been set for January 1, 2018; however, early adoption of the
new standard is permitted. The Company currently does not intend to early adopt IFRS 9. The adoption
of IFRS 9 is currently not expected to have a material impact on the financial statements as the
classification and measurement of the Company’s financial instruments is not expected to change given
the nature of the Company’s operations and the types of financial instruments that it currently holds.
17
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
DISCLOSURE OF DATA FOR OUTSTANDING COMMON SHARES, OPTIONS AND
WARRANTS
Common Shares
The Company is authorized to issue an unlimited number of voting common shares without par value.
As at June 30, 2014, the Company had 25,550,000 common shares issued and outstanding (2013 –
16,040,000). As at the date of this MD&A, there are 40,824,000 common shares issued and outstanding.
Stock Options
Number of Options
Exercise Price
Expiry Date
Number exercisable
473,333
$0.05
March 22, 2015
473,333
503,334
$0.05
October 29, 2017
503,334
144,000
$0.15
October 29, 2017
144,000
84,000
$0.05
April 1, 2020
84,000
140,000
$0.05
May 31, 2021
140,000
183,333
$0.05
March 19, 2024
183,333
250,000
$0.70
September 2, 2019
62,500
1,000,000
$1.01
September 18, 2019
250,000
(1)
(1)
Of these options, 144,000 were granted to two charitable organizations.
Share Purchase Warrants
Number of Warrants
Exercise Price
Expiry Date
760,000
$0.10
June 27, 2016
520,000
$0.10
July 15, 2016
SUBSEQUENT EVENTS
The following events occurred subsequent to June 30, 2014:
1.
The Company closed the second and final tranche of a non-brokered private placement of 6,500,000
common shares at a price of $0.10 per share for gross proceeds of $650,000. The Company paid
finders’ fees of $52,000 and 520,000 share purchase warrants. Each finder’s warrant entitles the
finder to purchase a common share of the Company at a price of $0.10 per share expiring July 15,
2016.
18
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
2.
The Company closed a non-brokered private placement of 8,000,000 common shares at a price of
$0.25 per share for gross proceeds of $2,000,000. The Company paid aggregate finders’ fees of
$98,920 on a portion of the private placement.
3.
The Company granted stock options to purchase 1,000,000 common shares of the Company at a price
of $1.01 per share for a period of 5 years.
4.
The Company has arranged for a non-brokered private placement of 2,353,000 common shares at a
price of $0.85 per share for gross proceeds of $2,000,050. The Company received shares
subscriptions of $997,750 pursuant to this private placement.
5.
60,000 common shares were issued at $0.05 per share for gross proceeds of $3,000 on exercise of
stock options.
6.
On August 31, 2014, the Company entered into an Investor Relations Consulting Agreement (the
“Agreement”) for investor and financial relations services. The term of the Agreement is for a period
of 3 months commencing September 1, 2014. Pursuant to the Agreement, the Company agreed to pay
a monthly fee of $15,000 and grant stock options to purchase 250,000 common shares of the
Company at a price of $0.70 per share for a period of 5 years. The stock options will vest as to 25%
every 3 months up to a period of 12 months. The Agreement is subject to the approval of the
Exchange.
7.
On September 9, 2014, the Company entered into a Share Exchange Agreement with Aurora. See
“Proposed Transaction” below.
8.
On September 18, 2014, the Company entered into a consulting agreement pursuant to which the
Company shall issue 250,000 broker warrants to the consultant. Each broker warrant entitles the
consultant to acquire a common share of the Company at $1.01 per share for a period of 1 year.
9.
The Company changed its name to Aurora Cannabis Inc.
PROPOSED TRANSACTION
On September 9, 2014, the Company entered into a Share Exchange Agreement with Aurora and the
shareholders of Aurora (the “Agreement”). Pursuant to the terms of the Agreement, the Company will
acquire all of the issued and outstanding shares of Aurora in exchange for an aggregate of 60,000,000
common shares of the Company (the "Transaction Shares").
In addition, the Company will also issue to former respective warrant and option holders of Aurora on a
pro-rata basis the following:
1. An aggregate of 21,450,000 replacement warrants comprised of:
a. 10,200,000 warrants exercisable at a price of $0.50 per share for a period of 3 years; and
b. 11,250,000 warrants exercisable at a price of $0.02 per share for a period of 5 years.
19
PRESCIENT MINING CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended June 30, 2014 and 2013
2. 4,000,000 replacement stock options exercisable at a price of $0.001 per share for a period of 5
years.
(collectively, the "Replacement Securities").
The Company will also assume Aurora's currently outstanding 5 year, non-interest bearing convertible
debt in the principal amount of $1,500,000 that is convertible at $0.125 per common share.
Upon the achievement of the key milestone of Aurora achieving the registration of a minimum of 2,000
patients under the Health Canada MMPR program, the Company shall issue:
1. an aggregate of 20,000,000 common shares of the Company (the “Pubco Shares”) on a pro-rata
basis to former shareholders of Aurora; and
2. an aggregate of 3,750,000 warrants exercisable at $0.02 per share to certain former warrant
holders of Aurora.
All Transaction Shares and Replacement Securities to be issued above are subject to strict escrow
provisions and a right of first refusal (the "ROFR") pursuant to the terms of the Share Exchange
Agreement for a period of 36 months. The replacement stock options are also subject to an 18 month
vesting period and ROFR. The replacement stock options are also subject to an 18 month vesting period
and ROFR. The transaction is contingent on the Company resuming listing on the CSE.
In connection with the proposed transaction, the Company entered into a finder’s fee agreement and will
issue 3,000,000 common shares to the finder, being 5% of the total shares to be issued under the
Agreement.
As of the most current date, the Company advanced an aggregate of $3,860,000 to Aurora pursuant to
loan and security agreements.
The transaction is subject to the approval of the CSE.
Additional disclosures pertaining to the Company are available on the SEDAR website at
www.sedar.com.
20
SCHEDULE “B”
Audited Financial Statement of Pubco from Inception to June 30, 2014, 2013 and 2012
{W0251953.DOC}FORM 2A – LISTING STATEMENT
October 10, 2014
Page 53
AUDITOR’S CONSENT
To: Prescient Mining Corp.
We have read the Form 2A – listing statement of Prescient Mining Corp. (the “Company”) dated
October 10, 2014 relating to the Share Exchange Agreement between the Company and Aurora
Marijuana Inc. We have complied with Canadian generally accepted standards for an auditors’
involvement with offering documents.
We consent to being named and to the use, in the above-mentioned Form 2A, of our report to
the shareholders of the Company on the statement of financial position as at June 30, 2014,
and the statements of changes in equity, comprehensive loss and cash flows for the year then
ended. Our report is dated October 9, 2014.
Vancouver, Canada
October 10, 2014
Chartered Accountants
PO Box 10007, 1488 – 700 West Georgia Street, Vancouver, British Columbia, Canada V7Y 1A1
Tel: (604) 687 – 5841
Fax: (604) 687 – 0075
Email: [email protected]
PRESCIENT MINING CORP.
For the years ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
•
Independent Auditor’s Report
•
Statements of Financial Position
•
Statements of Changes in Equity
•
Statements of Comprehensive Loss
•
Statements of Cash Flows
•
Notes to the Financial Statements
INDEPENDENT AUDITOR'S REPORT
To the Shareholders of
Prescient Mining Corp.
Report on the financial statements
We have audited the accompanying financial statements of Prescient Mining Corp., which comprise the statement of financial
position as at June 30, 2014, and the statements of changes in equity, comprehensive loss and cash flows for the year then
ended, and a summary of significant accounting policies and other explanatory information.
Management’s responsibility for the financial statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with
International Financial Reporting Standards, and for such internal control as management determines is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in
accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, these financial statements present fairly, in all material respects, the financial position of Prescient Mining Corp.
as at June 30, 2014, and its financial performance and its cash flows for the year then ended in accordance with International
Financial Reporting Standards.
Emphasis of matter
Without qualifying our opinion, we draw attention to Note 1 in the financial statements which describes matters and conditions
that indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a
going concern.
Other matters
The financial statements of Prescient Mining Corp. for the year ended June 30, 2013, were audited by another auditor who
expressed an unmodified opinion on those statements on October 15, 2013.
Vancouver, Canada
October 9, 2014
“Morgan & Company LLP”
Chartered Accountants
PO Box 10007, 1488 – 700 West Georgia Street, Vancouver, British Columbia, Canada V7Y 1A1
Tel: (604) 687 – 5841
Fax: (604) 687 – 0075
Email: [email protected]
2
PRESCIENT MINING CORP.
Statements of Financial Position
(Expressed in Canadian Dollars)
Note
June 30,
2014
$
June 30,
2013
$
879,419
4,080
1,644
1,000,000
1,500
644,713
5,835
4,748
62,240
1,886,643
717,536
706
1,009
1,887,349
718,545
33,550
500,438
24,345
-
533,988
24,345
ASSETS
CURRENT
Cash and cash equivalents
GST recoverable
Interest receivable
Loans receivable
Prepaid expenses and deposits
6
5 & 9(c)
Equipment
LIABILITIES
CURRENT
Accounts payable and accrued liabilities
Loan payable
9(c)
7
SHAREHOLDERS’ EQUITY
Share capital
Reserves
Deficit
8
2,640,575
246,727
(1,533,941)
1,848,395
175,358
(1,329,553)
1,353,361
694,200
1,887,349
718,545
Nature of operations and going concern (Note 1)
Exploration and evaluation assets (Note 5)
Subsequent events (Notes 5, 6, 7 & 13)
The accompanying notes are an integral part of these financial statements.
Approved on behalf of the Board of Directors:
“Marc Levy”
Marc Levy, Director
“Isaac Moss”
Isaac Moss, Director
3
PRESCIENT MINING CORP.
Statements of Changes in Equity
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
Share Capital
Note
Balance, June 30, 2012
Net loss for the year
Shares issued for exploration and
evaluation assets
Forfeited options
Share-based payments
5
8(d)
8(d)
Balance, June 30, 2013
Net loss for the year
Private placements
Share issuance costs
Shares issuable for loan
Forfeited options
Exercise of stock options
Share-based payments
Balance, June 30, 2014
8
8
7
8(d)
8
8(d)
Reserves
Share-Based
Payment
Warrant
Reserve
Reserve
$
$
Common
Shares
#
Amount
$
Obligation
to Issue
Shares
$
15,890,000
1,837,145
-
174,226
-
-
-
150,000
-
11,250
-
16,040,000
Total
$
Deficit
$
Total
$
-
174,226
(936,819)
1,074,552
-
-
-
(393,489)
(393,489)
-
(755)
1,887
-
(755)
1,887
755
-
11,250
1,887
1,848,395
-
175,358
-
175,358
(1,329,553)
694,200
9,500,000
10,000
-
950,000
(159,645)
1,825
-
99,960
-
(195,317)
(1,325)
84,406
83,645
-
83,645
99,960
(195,317)
(1,325)
84,406
(399,705)
195,317
-
(399,705)
950,000
(76,000)
99,960
500
84,406
25,550,000
2,640,575
99,960
63,122
83,645
246,727
(1,533,941)
1,353,361
The accompanying notes are an integral part of these financial statements.
4
PRESCIENT MINING CORP.
Statements of Comprehensive Loss
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
Note
2014
$
2013
$
303
10,000
942
28,500
122,252
31,263
(8,383)
24,232
84,406
8,725
4,245
432
29,600
88,250
17,500
80,959
18,236
142,944
10,795
1,887
7,815
3,674
(306,485)
(402,092)
(101,075)
7,855
(786)
9,389
(93,220)
8,603
EXPENSES
Depreciation
Consulting fees
Exploration and evaluation
Management fees
Office, rent and administration
Professional fees
Project evaluation costs
Regulatory fees
Share-based payments
Transfer agent and shareholder information
Travel and promotion
5
9(b)
9(a),9(b)
9(a)
9(a)
8(d),9(b)
LOSS BEFORE OTHER INCOME (EXPENSES)
Finance and other costs
Interest income
10
NET LOSS AND COMPREHENSIVE LOSS
FOR THE YEAR
(399,705)
(393,489)
BASIC AND DILUTED LOSS PER SHARE
(0.02)
(0.02)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
16,145,973
16,028,082
The accompanying notes are an integral part of these financial statements.
5
PRESCIENT MINING CORP.
Statements of Cash Flows
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
2014
$
2013
$
CASH WAS PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net loss for the year
(399,705)
(393,489)
Adjustments for non-cash items
Depreciation
Shares issued for exploration and evaluation assets
Shares issuable for loan
Share-based payments
303
99,960
84,406
432
11,250
1,887
Changes in non-cash working capital accounts
Interest receivable
GST recoverable
Prepaid expenses and deposits
Accounts payable and accrued liabilities
3,542
1,755
60,740
9,205
4,614
4,390
(54,605)
(22,323)
(139,794)
(447,844)
INVESTING ACTIVITY
Loans receivable
(1,000,000)
-
950,500
(76,000)
500,000
-
FINANCING ACTIVITIES
Shares issued for cash
Share issuance costs
Proceeds from loan
1,374,500
(447,844)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
234,706
Cash and cash equivalents, beginning of year
644,713
1,092,557
CASH AND CASH EQUIVALENTS, END OF YEAR
879,419
644,713
879,419
-
(3,087)
647,800
879,419
644,713
-
-
CASH AND CASH EQUIVALENTS CONSISTS OF:
Cash on hand (cheques written in excess of cash on hand)
Guaranteed Investment Certificates
SUPPLEMENTARY INFORMATION:
Interest paid
Income taxes paid
The accompanying notes are an integral part of these financial statements.
6
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 1 – NATURE OF OPERATIONS AND GOING CONCERN
Prescient Mining Corp. (the “Company”) was incorporated on December 21, 2006, under the laws of the Business
Corporations Act (British Columbia). The Company’s shares are traded on the Canadian Securities Exchange (the
“Exchange”) under the symbol “PMC.”
The head office, principal address, and records office of the Company are located at Suite 507 – 700 West Pender
Street, Vancouver, BC, Canada, V6C 1G8. The Company’s registered office address is located at Suite 1780 – 400
Burrard Street, Vancouver, British Columbia, Canada, V6C 3A6.
The Company was engaged in the acquisition, exploration, and development of resource properties. The Company’s
ability to continue as a going concern is dependent upon the ability of the Company to raise additional financing in
order to complete the acquisition and development of a medical marijuana production and sales business, and the
attainment of future operations. The outcome of these matters cannot be predicted at this time.
These financial statements have been prepared in accordance with International Financial Reporting Standards on
the basis that the Company is a going concern and will be able to meet its obligations and continue its operations for
at least the next 12 months. There is no assurance that it will be able to obtain additional financing, if any, on
reasonable terms. These factors may cast significant doubt on the applicability of the use of the going concern
assumption. These financial statements do not include any adjustments to the amounts and classification of assets
and liabilities that might be necessary should the Company be unable to continue as a going concern. Any such
adjustments could be material.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
The financial statements were authorized for issue on October 9, 2014, by the Directors of the Company. The
accounting policies set out below have been applied consistently to all periods presented in these financial
statements.
(a) Statement of Compliance and Basis of Presentation
The financial statements of the Company have been prepared on a historical basis in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”) and the International Financial Reporting Interpretations Committee (“IFRIC”).
(b) Functional and Presentation of Foreign Currency
The financial statements are presented in Canadian dollars unless otherwise noted. The functional currency and
presentation currency of the Company is the Canadian dollar.
7
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Cash and Cash Equivalents
Cash and cash equivalents consist of cash balances and short-term highly liquid investments which are readily
convertible into cash and that are subject to an insignificant risk of changes in value.
For the purpose of the statements of cash flows, total cash and cash equivalents include cash and Guaranteed
Investment Certificates (“GIC”) with maturities of less than one year and redeemable anytime at the option of
the holder.
(d) Equipment and Depreciation
Equipment is carried at acquisition cost less accumulated depreciation.
Depreciation is calculated on a declining-balance basis to write off the cost of the assets to their residual values
over their estimated useful lives, except in the year of acquisition, when half of the rate is used. The annual rate
used to compute depreciation is as follows:
Computer hardware
30%
(e) Exploration and Evaluation Assets and Expenditures
Exploration and evaluation activity begins when the Company obtains legal rights to explore a specific area and
involves the search for mineral reserves, the determination of technical feasibility and the assessment of
commercial viability of an identified mineral resource. Expenditures incurred in the exploration and evaluation
phase include the cost of acquiring interests in mineral rights, licenses and properties, and the costs of the
Company’s exploration activities, such as researching and analyzing existing exploration data, gathering data
through geological studies, exploratory drilling, trenching, sampling, and certain feasibility studies.
Exploration and evaluation expenditures incurred prior to the determination of commercially viable mineral
resources, the feasibility of mining operations, and a positive development decision, are expensed as incurred.
Mineral property acquisition costs and development expenditures incurred subsequent to such a determination
are capitalized and amortized over the estimated life of the property following the commencement of
commercial production or are written off if the property is sold, allowed to lapse, abandoned, or when an
impairment is determined to have occurred.
(f) Decommissioning Obligations
A liability for a decommissioning obligation, such as site reclamation costs, is recorded when a legal or
constructive obligation exists and is recognized in the period in which it is incurred. The Company records the
estimated present value of future cash flows associated with site reclamation as a liability when the liability is
incurred and increases the carrying value of the related assets for that amount. Subsequently, these capitalized
decommissioning costs will be amortized to expense over the life of the related assets using the units-ofproduction method. The liability is accreted to reflect the passage of time and adjusted to reflect changes in the
timing and amount of estimated future cash flows.
As at June 30, 2014 and 2013, the Company has determined that it does not have any material decommissioning
obligations.
8
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
(g) Impairment of Financial Assets
A financial asset not carried at fair value through profit or loss is reviewed at each reporting date to determine
whether there is any indication of impairment. A financial asset is impaired if objective evidence indicates that a
loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on
the estimated future cash flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows discounted at the assets'
original effective interest rate. Losses are recognized in profit or loss with a corresponding reduction in the
financial asset, or in the case of amounts receivable are reflected in an allowance account against receivables.
When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is
reversed through profit or loss.
(h) Share Capital
Transaction costs directly attributable to the issuance of common shares are recognized as a deduction from
equity. The proceeds from the exercise of stock options or warrants together with amounts previously recorded
in reserves over the vesting periods are recorded as share capital. Share capital issued for non-monetary
consideration is recorded at an amount based on fair market value of the shares on the date of issue.
(i) Share-Based Payments
The Company has an employee stock option plan. Share-based payments to employees are measured at the fair
value of the stock options at the grant date and amortized to expense over the vesting periods.
Share-based payments to non-employees are measured at the fair value of goods or services received or the fair
value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be
reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is
recorded to the share-based payment reserve.
The fair value of options is determined using the Black–Scholes option pricing model which incorporates all
market vesting conditions. The number of options expected to vest is reviewed and adjusted at the end of each
reporting period such that the amount recognized for services received as consideration for the equity
instruments granted shall be based on the number of equity instruments that eventually vest. Amounts recorded
for forfeited or expired unexercised options are transferred to deficit in the year of forfeiture or expiry.
Upon the exercise of stock options, consideration received on the exercise of these equity instruments is
recorded as share capital and the related share-based payment reserve is transferred to share capital.
9
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
(j) Loss per Share
The Company calculates basic loss per share using the weighted average number of common shares outstanding
during the year. Diluted loss per share is the same as basic loss per share, as the issuance of shares on the
exercise of stock options and share purchase warrants is anti-dilutive.
(k) Income Taxes
Tax expense recognized in profit or loss comprises the sum of current and deferred taxes not recognized in other
comprehensive income or directly in equity.
(i) Current Income Tax
Current income tax assets and/or liabilities comprise those claims from, or obligations to, fiscal authorities
relating to the current or prior reporting periods that are unpaid at the reporting date. Current tax is payable
on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is
based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting
period.
(ii) Deferred Income Tax
Deferred income taxes are calculated using the liability method on temporary differences between the
carrying amounts of assets and liabilities and their tax bases. Deferred tax assets and liabilities are
calculated, without discounting, at tax rates that are expected to apply to their respective period of
realization, provided they are enacted or substantively enacted by the end of the reporting period. Deferred
tax liabilities are always provided for in full.
Deferred tax assets are recognized to the extent that it is probable that they will be able to be utilized
against future taxable income. Deferred tax assets and liabilities are offset only when the Company has a
right and intention to offset current tax assets and liabilities from the same taxation authority.
Changes in deferred tax assets or liabilities are recognized as a component of tax income or expense in
profit or loss, except where they relate to items that are recognized in other comprehensive income or
directly in equity, in which case the related deferred tax is also recognized in other comprehensive income
or equity, respectively.
(l) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument to another entity. Financial assets and financial liabilities are recognized on the statements of
financial position at the time the Company becomes a party to the contractual provisions of the financial
instrument.
Financial instruments are initially measured at fair value. Measurement in subsequent periods is dependent on
the classification of the financial instrument. The Company classifies its financial instruments in the following
categories: at fair value through profit or loss, loans and receivables, held-to-maturity, available-for-sale, and
other financial liabilities.
10
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
(l) Financial Instruments (Continued)
(i) Financial Assets and Liabilities at Fair Value Through Profit or Loss
Financial assets and liabilities at fair value through profit or loss are either ‘held-for-trading’ or classified at
fair value through profit or loss. They are initially and subsequently recorded at fair value and changes in
fair value are recognized in profit or loss for the period.
The Company does not have any financial assets and liabilities at fair value through profit or loss.
(ii) Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. Such assets are recognized initially at fair value and subsequently on an
amortized cost basis using the effective interest method, less any impairment losses. They are included in
current assets, except for maturities greater than 12 months after the end of the reporting period, which are
classified as non-current assets.
The Company has designated its cash and cash equivalents, interest receivable and loans receivable as
loans and receivables.
(iii) Held-to-Maturity
Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or
determinable payments, and it is the Company’s intention to hold these investments to maturity. They are
initially recorded at fair value and subsequently measured at amortized cost.
The Company does not have any held-to-maturity financial assets.
(iv) Available-For-Sale
Available-for-sale financial assets are non-derivative financial assets that are designated as available-forsale or are not classified in any other financial asset categories. They are initially and subsequently
measured at fair value and the changes in fair value, other than impairment losses are recognized in other
comprehensive income (loss) and presented in the fair value reserve in shareholders’ equity. When the
financial assets are sold or an impairment write-down is required, losses accumulated in the fair value
reserve recognized in shareholders’ equity are included in profit or loss.
The Company does not have any available-for-sale financial assets.
(v) Other Financial Liabilities
Other financial liabilities are recognized initially at fair value plus any directly attributable transaction costs
on the date at which the Company becomes a party to the contractual provisions of the instrument.
Subsequent to initial recognition, the Company’s financial liabilities are measured at amortized cost using
the effective interest method. The Company derecognizes a financial liability when its contractual
obligations are discharged, cancelled, or expired.
The Company’s non-derivative financial liabilities are its accounts payable and accrued liabilities and loan
payable, which are designated as other liabilities.
11
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 3 – SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
In the application of the Company’s accounting policies which are described in Note 2, management is required 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.
Significant judgments, estimates and assumptions that have the most significant effect on the amounts recognized in
the financial statements are described below.
(a) Share-Based Payments
The Company grants stock options to directors, officers, employees, and consultants of the Company under its
incentive stock option plan. The fair value of stock options is estimated using the Black-Scholes option pricing
model and are expensed over their vesting periods. In estimating fair value, management is required to make
certain assumptions and estimates such as the life of options, volatility, and forfeiture rates.
Changes in assumptions used to estimate fair value could result in materially different results.
(b) Deferred Tax Assets
Deferred tax assets, including those arising from tax loss carry-forwards, require management to assess the
likelihood that the Company will generate sufficient taxable earnings in future periods in order to utilize
recognized deferred tax assets. Assumptions about the generation of future taxable profits depend on
management’s estimates of future cash flows. In addition, future changes in tax laws could limit the ability of
the Company to obtain tax deductions in future periods. To the extent that future cash flows and taxable income
differ significantly from estimates, the ability of the Company to realize the net deferred tax assets recorded at
the reporting date could be impacted.
NOTE 4 – RECENT ACCOUNTING PRONOUNCEMENTS
The following IFRS standard has been recently issued by the IASB or the IFRIC. The Company is assessing the
impact of this new standard, but does not expect it to have a significant effect on the financial statements.
Pronouncements that are not applicable or do not have a significant impact to the Company have been excluded
herein.
IFRS 9, Financial Instruments
The IASB has issued a new standard, IFRS 9, “Financial Instruments” (“IFRS 9”), which will replace IAS 39,
“Financial Instruments: Recognition and Measurement” (“IAS 39”). IFRS 9 will replace the multiple classification
and measurement models in IAS 39 with a single model that has only two classification categories: amortized cost
and fair value. The new standard also requires a single impairment method to be used, provides additional guidance
on the classification and measurement of financial liabilities, and provides a new general hedge accounting standard.
12
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 4 – RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
IFRS 9, Financial Instruments (Continued)
The mandatory effective date has tentatively been set for January 1, 2018; however, early adoption of the new
standard is permitted. The Company currently does not intend to early adopt IFRS 9. The adoption of IFRS 9 is
currently not expected to have a material impact on the financial statements as the classification and measurement of
the Company’s financial instruments is not expected to change given the nature of the Company’s operations and the
types of financial instruments that it currently holds.
NOTE 5 – EXPLORATION AND EVALUATION ASSETS
Cumulative expenditures incurred by the Company on its properties are summarized as follows:
Hook Lake property
Saskatchewan, Canada
$
Balance, June 30, 2012
Acquisition costs:
Option Payment – Cash
Option Payment – Common Shares Issued
Exploration costs:
Geophysics
19,075
15,000
11,250
62,000
88,250
Balance, June 30, 2013
Exploration costs:
Geophysics
Balance, June 30, 2014
107,325
942
108,267
On April 12, 2012, the Company entered into an option agreement with Geomode Mineral Exploration Ltd.
(“Geomode”) for the exclusive right and option to acquire a 100% interest in the Hook Lake property, a prospective
uranium project located in Saskatchewan. As consideration, the Company agreed to pay an aggregate of
$1,015,000, issue 150,000 common shares and incur in exploration and development expenditures a total of
$871,248 or pay to Geomode a further $871,248 over a period of 3 years as follows:
13
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 5 – EXPLORATION AND EVALUATION ASSETS (Continued)
Cash
$
Within 5 days of Exchange approval
(July 27, 2012)
On or before July 27, 2013
On or before July 27, 2014
On or before July 27, 2015
(1)
Common
shares
#
15,000 (paid)
-
150,000 (issued)
-
1,000,000
-
1,015,000
150,000
Work Commitment
or cash payments to
Geomode
$
60,624 (incurred)
75,780 (1)
750,000
886,404
Effective December 1, 2013, the Ministry increased the work requirement for the claims from $60,624 to
$75,780. The Company currently has total work assessment credits of $61,905 and was required to submit work
assessment of not less than $13,875 or to pay a deficiency deposit in same amount to the Saskatchewan
Ministry of Energy and Resources (the “Ministry”) before June 2, 2015.
A 1% net smelter return (“NSR”) shall be reserved to Geomode which may be purchased at any time by the
Company for $1,000,000 less all amounts previously received by Geomode as NSR payments.
Subsequent to June 30, 2014, the Company terminated the option agreement.
NOTE 6 – LOANS RECEIVABLE
On May 9, 2014, the Company entered into a letter agreement and subsequently, on September 9, 2014, into a Share
Exchange Agreement (the “Agreement”) with Aurora Marijuana Inc. (“Aurora”) pursuant to which the Company
will acquire all of the issued and outstanding securities of Aurora in consideration for securities of the Company
(Note 13). Pursuant to the letter agreement, the Company entered into the following loan agreements with Aurora:
(a) Loan agreement dated June 19, 2014, in the aggregate principal amount of $1,500,000. The Company advanced
an aggregate of $1,000,000 to Aurora during June 2014 and another $500,000 on July 14, 2014. The Company
accrued $1,644 in interest on the advances during the year ended June 30, 2014.
(b) Loan agreements subsequent to June 30, 2014:
(i) dated July 29, 2014, in the aggregate principal amount of $1,000,000;
(ii) dated August 29, 2014, in the principal amount of $500,000;
(iii) dated September 25, 2014, in the principal amount of $360,000; and
(iv) dated October 2, 2014 in the principal amount of $500,000.
The loans have a term of six months from the dates of advances, bear interest at 8% per annum and are secured by a
general security agreement dated June 19, 2014, granting the Company security over all present and after acquired
property of Aurora.
14
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 7 – LOAN PAYABLE
The Company entered into a loan agreement dated June 27, 2014 with an arm’s length party (the “Lender”) in the
principal amount of $500,000. The loan is unsecured, bears interest at 8% per annum and matures on December 27,
2014. In consideration for the loan, the Company issued 714,000 common shares to the Lender subsequent to June
30, 2014 at a fair value of $99,960. During the year ended June 30, 2014, the Company paid or accrued $438 in
interest on this loan.
NOTE 8 – SHARE CAPITAL
(a) Authorized
The Company is authorized to issue an unlimited number of voting common shares without par value, an
unlimited number of Class “A” shares with a par value of $1.00, and an unlimited number of Class “B” shares
with a par value of $5.00.
(b) Issued Share Capital
At June 30, 2014, there were 25,550,000 issued and fully paid common shares (2013 – 16,040,000).
(c) Share Issuance
During the year ended June 30, 2014, the Company closed a non-brokered private placement of 9,500,000
common shares at a price of $0.10 per share for gross proceeds of $950,000. The Company paid finder’s fees of
$76,000 and 760,000 share purchase warrants at a fair value of $83,645. Each finder’s warrant entitles the
finder to purchase a common share of the Company at a price of $0.10 per share expiring June 27, 2016. The
fair value of the finder’s warrants of $83,645 has been charged to share issue costs with a corresponding
increase to warrant reserve. The fair value of the finder’s warrants was determined using the Black-Scholes
option pricing model using the following weighted average assumptions: expected dividend yield - 0.00%;
expected stock price volatility - 160.08%; risk-free interest rate - 1.10%; expected life - 2 years. The weighted
average fair value of the finder’s warrants issued during the year ended June 30, 2014 was $0.11 per warrant.
During the year ended June 30, 2014, 10,000 stock options at a price of $0.05 per share were exercised for gross
proceeds of $500. Non-cash compensation charges of $1,325 were reclassified from reserves to share capital on
the exercise of these options.
During the year ended June 30, 2013, 150,000 common shares valued at $11,250 were issued for exploration
and evaluation assets (Note 5).
(d) Stock Options
The Company has an incentive stock option plan, which provides that the Board of Directors of the Company
may from time to time, at its discretion, and in accordance with the Exchange requirements, grant to directors,
officers, employees, and consultants of the Company, non-transferable options to purchase common shares,
provided that the number of common shares reserved for issuance will not exceed 10% of the issued and
outstanding common shares of the Company.
15
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 8 – SHARE CAPITAL (Continued)
(d) Stock Options (Continued)
A summary of the status of the options outstanding follows:
Weighted
Average
Exercise Price
$
Number of
Options
1,733,000
Balance, June 30, 2012
0.06
(10,000) (i)
0.05
Balance, June 30, 2013
Granted
Exercised
Expired unexercised
Forfeited
1,723,000
1,444,000
(10,000)
(138,333)(ii)
(1,430,667) (ii)
0.06
0.05
0.05
0.05
0.05
Balance, June 30, 2014
1,588,000
0.06
Forfeited
(i)
During the year ended June 30, 2013, the fair value of 10,000 forfeited options of $755 was reclassified
from reserves to deficit.
(ii)
During the year ended June 30, 2014, the fair values of 138,333 expired unexercised options of $24,371
and 1,430,667 forfeited options of $170,946 were reclassified from reserves to deficit.
The following table summarizes the stock options outstanding as at June 30, 2014:
Exercise
Price
$
0.05
0.05
0.15
0.05
0.05
0.05
Number of Options
Outstanding
473,333
503,334
144,000
104,000
180,000
183,333
(i)
Expiry Date
Number of Options
Exercisable
March 22, 2015
October 29, 2017
October 29, 2017
April 1, 2020
May 31, 2021
March 19, 2024
473,333
503,334
144,000
104,000
180,000
183,333
1,588,000
(i)
1,588,000
These stock options are held by two charitable organizations.
As at June 30, 2014, stock options outstanding have a weighted average remaining contractual life of 3.86 years.
16
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 8 – SHARE CAPITAL (Continued)
(d) Stock Options (Continued)
During the year ended June 30, 2014, the Company amended the terms of an aggregate of 1,420,667 stock
options previously granted to employees, directors and consultants of the Company. These options with original
exercise prices between $0.10 and $0.15 per share and expiry dates between 2017 and 2021 were amended to
have an exercise price of $0.05 per share. The repricing of these options resulted in the recognition of additional
share-based payments of $38,791 during the year ended June 30, 2014.
During the year ended June 30, 2014, the Company recognized share-based payments of $45,615 (2013 –
$1,887) for stock options granted and vested during the year.
The fair value of stock options used to calculate share-based payments has been estimated using the BlackScholes option pricing model using the following weighted average assumptions:
Risk-Free Annual Interest Rate
Expected Annual Dividend Yield
Expected Stock Price Volatility
Expected Life of Options and Warrants
2014
2013
1.16%
0%
159%
2.28 years
-
The weighted average fair value of stock options granted during the year ended June 30, 2014 was $0.03 (2013
- $Nil) per option.
(e) Share Purchase Warrants
Each whole warrant entitles the holder to purchase one common share of the Company. A summary of the
status of the warrants outstanding follows:
Number of
Warrants
Weighted
Average
Exercise Price
$
-
Balance, June 30, 2013 and 2012
-
Granted
760,000
0.10
Balance, June 30, 2014
760,000
0.10
The following table summarizes the warrants outstanding as at June 30, 2014:
Exercise Price
$
0.10
Warrants
#
760,000
Expiry Date
June 27, 2016
As at June 30, 2014, share purchase warrants outstanding have a weighted average remaining contractual life of
2.00 years.
17
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 9 – RELATED PARTY TRANSACTIONS
(a) Related Party Transactions
The Company incurred the following transactions with companies having directors and officers in common:
Office, rent and administration costs paid or accrued to companies
having directors and officers in common (i)
Legal fees and share issuance costs paid or accrued to a company
controlled by an officer of the Company
Project evaluation costs paid or accrued to a companies controlled
by a director and an officer of the Company
(i)
2014
$
2013
$
99,100
69,750
1,151
8,005
-
38,267
100,251
116,022
Of these fees, $28,800 was paid to the CFO of the Company (2013 - $21,600) (Note 9(b)(i)).
(b) Compensation of Key Management Personnel
The Company’s key management personnel have authority and responsibility for planning, directing, and
controlling the activities of the Company and consist of its Directors, Chief Executive Officer, and Chief
Financial Officer.
Short-term benefits – Management fees (i)
Share-based payments (ii)
2014
$
2013
$
57,300
61,083
39,100
1,661
118,383
40,761
(i)
Short-term benefits include consulting and management fees.
(ii)
Share-based payments is the fair value of options granted and vested to key management personnel under
the Company’s stock option plan (Note 8(d)).
(c) Related Party Balances
The following related party amounts are included in (i) accounts payable and accrued liabilities and (ii) prepaid
expenses and deposits:
(i) Companies controlled by directors and an officer of the
Company
(ii) Companies having a director and officers in common
June 30,
2014
$
June 30,
2013
$
5,250
1,500
12,327
1,500
Any amounts due to related parties are unsecured, non-interest bearing, and have no specific repayment terms.
18
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 10 – FINANCE AND OTHER COSTS
2014
$
2013
$
99,960
438
677
786
101,075
786
Financing fees (Note 7)
Interest expense (Note 7)
Bank charges
NOTE 11 – INCOME TAXES
(a) Reconciliation of Effective Tax Rate
Income tax recovery differs from the amounts computed by applying the combined federal and provincial
income tax rate of 26% (2013 – 25%) to pre-tax loss as a result of the following:
2014
$
2013
$
Loss before income taxes
(399,705)
(393,489)
Expected income tax recovery
Change in tax assets not recognized
Change in tax rates
Permanent differences and other
(104,000)
102,000
2,000
(99,000)
110,000
(12,000)
1,000
-
-
2014
$
2013
$
375,000
16,000
42,000
1,000
305,000
26,000
1,000
434,000
332,000
(434,000)
(332,000)
-
-
Deferred income tax recovery
(b) Deferred Income Tax Assets
Deferred tax assets have not been recognized in respect of the following items:
Non-capital losses carry-forward
Share issuance cost
Exploration and evaluation assets
Equipment
Less: Tax benefits not recognized
Net deferred tax assets
19
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 11 – INCOME TAXES (Continued)
(c) Non-Capital Losses
As at June 30, 2014, the Company has non-capital losses of approximately $1,440,000 (2013 - $1,111,000),
which may be applied to reduce taxable income of future years. These non-capital losses expire as follows:
Year
$
2026
2027
2028
2029
2030
2031
2032
2033
2034
2,000
46,000
19,000
109,000
80,000
215,000
337,000
303,000
329,000
1,440,000
The Company has not recognized deferred income tax assets as it is not probable that there will be sufficient
taxable income to realize the benefits.
In addition, the Company has Canadian resource pools of approximately $163,000 (2013 - $162,000), which
can be carried forward indefinitely to offset future taxable income.
NOTE 12 – FINANCIAL RISK MANAGEMENT
(a) Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, interest receivable, loans receivable,
accounts payable and accrued liabilities and loan payable. The carrying values of these financial instruments
approximate their fair values because of their short term nature and/or the existence of market related interest
rates on the instruments.
IFRS requires disclosures about the inputs to fair value measurements, including their classification within a
hierarchy that prioritizes the inputs to fair value measurement. 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 Company has no financial instrument assets or liabilities recorded in the statements of financial position at
fair value as at June 30, 2014 and 2013.
20
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 12 – FINANCIAL RISK MANAGEMENT (Continued)
(b) Financial Instruments Risk
The Company is exposed in varying degrees to a variety of financial instrument related to risks. The Board
approves and monitors the risk management processes:
(i) Credit Risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to
meet its contractual obligations. The Company is subject to credit risk on the cash balances at the bank, its
short-term bank Guaranteed Investment Certificates (“GICs”), and interest receivable. Cash and cash
equivalents consisting of GICs have been invested with Schedule 1 banks or equivalents, with its cash held
in Canadian based banking institutions, authorized under the Bank Act to accept deposits, which may be
eligible for deposit insurance provided by the Canadian Deposit Insurance Corporation. Management
considers that risks related to credit are minimal.
(ii) Liquidity Risk
The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to settle
obligations and liabilities when due. As at June 30, 2014, the Company had cash and cash equivalents of
$879,419 to settle current liabilities of $533,988 which mainly consisted of accounts payable of $33,550
and loan payable of $500,438 that were considered short term and settled within 30 days.
The Company is dependent on the availability of credit from its suppliers and its ability to generate
sufficient funds from equity and debt financing to meet current and future obligations. There can be no
assurance that such financing will be available on terms acceptable to the Company (Note 1).
(iii) Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates.
The Company’s short-term investments are invested in GICs with greater than 90 day terms but not greater
than one year. These GICs have a fixed interest rate for the term of the deposit. The interest on cash and
GICs is typical of Canadian banking rates, which are low at present and the conservative investment
strategy mitigates the risk of deterioration to the investment. A change of 100 basis points in the interest
rates would not be material to the financial statements.
(c) Capital Management
The Company manages its share capital as capital, which as at June 30, 2014, totaled $2,640,575 (2013 –
$1,848,395).
The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a going
concern such that it can continue to provide returns for shareholders and benefits for other stakeholders. The
management of the capital structure is based on the funds available to the Company in order to support the
acquisition, exploration, and development of mineral properties and to maintain the Company in good standing
with the various regulatory authorities. In order to maintain or adjust its capital structure, the Company may
issue new shares or debt, or dispose of assets.
21
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 12 – FINANCIAL RISK MANAGEMENT (Continued)
(c) Capital Management (Continued)
The Company’s historical sources of capital have consisted of the sale of equity securities and interest income.
In order for the Company to carry out planned exploration and development and pay for administrative costs,
the Company will spend its working capital and expects to raise additional amounts externally as needed.
The Company is not subject to externally imposed capital requirements.
There were no changes in the Company’s management of capital during the year ended June 30, 2014.
NOTE 13 – SUBSEQUENT EVENTS
The following events occurred subsequent to June 30, 2014:
(a) The Company closed the second and final tranche of a non-brokered private placement of 6,500,000 common
shares at a price of $0.10 per share for gross proceeds of $650,000. The Company paid finders’ fees of $52,000
and 520,000 share purchase warrants. Each finder’s warrant entitles the finder to purchase a common share of
the Company at a price of $0.10 per share expiring July 15, 2016.
(b) The Company closed a non-brokered private placement of 8,000,000 common shares at a price of $0.25 per
share for gross proceeds of $2,000,000. The Company paid aggregate finders’ fees of $98,920 on a portion of
the private placement.
(c) The Company granted stock options to purchase 1,000,000 common shares of the Company at a price of $1.01
per share for a period of 5 years.
(d) The Company has arranged for a non-brokered private placement of 2,353,000 common shares at a price of
$0.85 per share for gross proceeds of $2,000,050. The Company received shares subscriptions of $997,750
pursuant to this private placement.
(e) 60,000 common shares were issued at $0.05 per share for gross proceeds of $3,000 on exercise of stock options.
(f) On August 31, 2014, the Company entered into an Investor Relations Consulting Agreement (the “Agreement”)
for investor and financial relations services. The term of the Agreement is for a period of 3 months
commencing September 1, 2014. Pursuant to the Agreement, the Company agreed to pay a monthly fee of
$15,000 and grant stock options to purchase 250,000 common shares of the Company at a price of $0.70 per
share for a period of 5 years. The stock options will vest as to 25% every 3 months up to a period of 12 months.
The Agreement is subject to the approval of the Exchange.
(g) On September 9, 2014, the Company entered into a Share Exchange Agreement with Aurora pursuant to which
the Company will acquire all of the issued and outstanding securities of Aurora in consideration for securities of
the Company (the “Agreement”), which will constitute a reverse takeover of the Company by the shareholders
of Aurora, as follows:
(i) Issuance of the following securities of the Company to Aurora shareholders:
• 60,00,000 common shares;
•
An aggregate of 21,450,000 warrants, being 10,200,000 warrants exercisable at a price of $0.50 per
share for a period of 3 years and 11,250,000 warrants exercisable at a price of $0.02 per share for a
period of 5 years; and
•
4,000,000 options exercisable at a price of $0.001 per share for a period of 5 years.
22
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2014 and 2013
(Expressed in Canadian Dollars)
NOTE 13 – SUBSEQUENT EVENTS (Continued)
(ii) Assumption of Aurora’s convertible shareholder loan of $1,500,000. The loan has a term of 5 years, is
unsecured and convertible into common shares of the Company at a price of $0.125 per share at any time
during the term.
(iii) Issuance of 20,000,000 performance shares and 3,750,000 performance warrants on completion of a
performance milestone.
The Company entered into a finder’s fee agreement and will issue 3,000,000 common shares to the finder, being
5% of the total shares to be issued under the Agreement.
As of the most current date, the Company advanced an aggregate of $3,860,000 to Aurora pursuant to loan and
security agreements (Note 6).
In connection with the transaction, the Company changed its name to Aurora Cannabis Inc. The transaction and
the name change are subject to the approval of the Exchange.
(h) On September 18, 2014, the Company entered into a consulting agreement pursuant to which the Company will
issue 250,000 broker’s warrants to the consultant. Each broker’s warrant entitles the consultant to acquire a
common share of the Company at $1.01 per share for a period of 1 year.
23
AUDITORS’ CONSENT
We have read the Listing Statement of Aurora Cannabis Inc. (“Aurora”), formerly Prescient
Mining Corp., dated October 10, 2014. We have complied with Canadian Generally
Accepted Standards for an auditors’ involvement with offering documents.
We consent to the use, through incorporation by reference, in the above mentioned Listing
Statement of our report to the shareholders of Aurora on the statements of financial position
of Aurora as at June 30, 2013 and 2012, and the statements of changes in shareholders’
equity, comprehensive loss, and cash flows for the years then ended. Our report is dated
October 15, 2013.
Vancouver, British Columbia
October 15, 2014
PRESCIENT MINING CORP.
June 30, 2013 and 2012
(Expressed in Canadian Dollars)
•
Independent Auditors’ Report
•
Statements of Financial Position
•
Statements of Changes in Equity
•
Statements of Comprehensive Loss
•
Statements of Cash Flows
•
Notes to the Financial Statements
Independent Auditors’ Report
To the Shareholders of:
PRESCIENT MINING CORP.
We have audited the accompanying financial statements of Prescient Mining Corp. which comprise the
statements of financial position as at June 30, 2013 and 2012, the statements of changes in equity,
comprehensive loss, and cash flows for the years then ended, and a summary of significant accounting
policies and other explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards and for such internal control as management
determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity's preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
Prescient Mining Corp. as at June 30, 2013 and 2012, and its financial performance and its cash flows for
the years then ended, in accordance with International Financial Reporting Standards.
Emphasis of Matter – Going Concern
In forming our opinion, which is not qualified, we have considered the adequacy of the disclosures made
in Note 1 to the financial statements concerning the ability of Prescient Mining Corp. to continue as a
going concern. The company incurred a net loss of $393,489 during the year ended June 30, 2013, and as
of that date, had accumulated losses since inception of $1,329,553. These conditions, along with other
matters explained in Note 1 of the financial statements, indicate the existence of material uncertainties
that raise substantial doubt about the Company’s ability to continue as a going concern. The financial
statements do not include the adjustments that would result if Prescient Mining Corp. was unable to
continue as a going concern.
“WDM Chartered Accountants”
Vancouver, B.C., Canada
October 15, 2013
2
PRESCIENT MINING CORP.
Statements of Financial Position
(Expressed in Canadian Dollars)
Note
June 30,
2013
$
June 30,
2012
$
644,713
4,748
5,835
62,240
1,092,557
9,362
10,225
7,635
717,536
1,119,779
1,009
1,441
718,545
1,121,220
24,345
46,668
ASSETS
CURRENT
Cash and cash equivalents
Interest receivable
GST/HST recoverable
Prepaid expenses and deposits
Equipment
6 & 8(c)
5
LIABILITY
CURRENT
Accounts payable and accrued liabilities
8(c)
SHAREHOLDERS’ EQUITY
Share capital
Share-based payment reserve
Deficit
7
1,848,395
175,358
(1,329,553)
1,837,145
174,226
(936,819)
694,200
1,074,552
718,545
1,121,220
Nature of operations (Note 1)
Exploration and evaluation assets (Note 6)
The accompanying notes are an integral part of these financial statements.
Approved on Behalf of the Board:
“Marc Levy”
Marc Levy, Director
“Gordon Addie”
Gordon Addie, Director
3
PRESCIENT MINING CORP.
Statements of Changes in Equity
For the Years Ended June 30, 2013 and 2012
(Expressed in Canadian Dollars)
Note
Balance, June 30, 2011
Comprehensive loss for the year
Share-based payments
7(d)
Balance, June 30, 2012
Comprehensive loss for the year
Shares issued for exploration and
evaluation asset
Forfeited options
Share-based payments
Balance, June 30, 2013
6
7(d)
Number of
Common
Shares
Share
Capital
$
Share-Based
Payment
Reserve
$
Deficit
$
Total
$
15,890,000
1,837,145
156,540
(621,059)
1,372,626
-
-
17,686
(315,760)
-
(315,760)
17,686
15,890,000
1,837,145
174,226
(936,819)
1,074,552
-
-
-
(393,489)
(393,489)
150,000
-
11,250
-
(755)
1,887
755
-
11,250
1,887
16,040,000
1,848,395
175,358
(1,329,553)
694,200
The accompanying notes are an integral part of these financial statements.
4
PRESCIENT MINING CORP.
Statements of Comprehensive Loss
For the Years Ended June 30, 2013 and 2012
(Expressed in Canadian Dollars)
Note
2013
$
2012
$
432
29,600
88,250
17,500
81,745
18,236
142,944
10,795
1,887
7,815
3,674
422
34,050
19,075
17,000
58,751
28,670
74,822
12,204
17,686
6,839
61,266
(402,878)
(330,785)
9,389
15,025
NET LOSS AND COMPREHENSIVE LOSS
FOR THE YEAR
(393,489)
(315,760)
BASIC AND DILUTED LOSS PER SHARE
(0.02)
(0.02)
16,028,082
15,890,000
EXPENSES
Depreciation
Consulting fees
Exploration and evaluation
Management fees
Office, rent and administration
Professional fees
Project evaluation costs
Regulatory fees
Share-based payments
Transfer agent and shareholder information
Travel and promotion
6
8(b)
8(a),8(b)
8(a)
8(a)
7(d),8(b)
LOSS BEFORE OTHER ITEM
Interest income
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
The accompanying notes are an integral part of these financial statements.
5
PRESCIENT MINING CORP.
Statements of Cash Flows
For the Years Ended June 30, 2013 and 2012
(Expressed in Canadian Dollars)
2013
$
2012
$
(393,489)
(315,760)
432
11,250
1,887
422
17,686
4,614
4,390
(54,605)
(22,323)
1,336
(6,753)
(6,135)
31,225
(447,844)
(277,979)
-
(910)
DECREASE IN CASH AND CASH EQUIVALENTS
(447,844)
(278,889)
Cash and cash equivalents, beginning of year
1,092,557
1,371,446
644,713
1,092,557
(3,087)
647,800
(30,743)
1,123,300
644,713
1,092,557
-
-
CASH WAS PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net loss for the year
Adjustments for non-cash items
Depreciation
Shares issued for exploration and evaluation asset
Share-based payments
Changes in non-cash working capital accounts
Interest receivable
HST/GST recoverable
Prepaid expenses and deposits
Accounts payable and accrued liabilities
INVESTING ACTIVITY
Purchase of equipment
CASH AND CASH EQUIVALENTS, END OF YEAR
CASH AND CASH EQUIVALENTS CONSISTS OF:
Cheques written in excess of cash on hand
Guaranteed Investment Certificates
SUPPLEMENTARY INFORMATION:
Interest paid
Income taxes paid
The accompanying notes are an integral part of these financial statements.
6
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2013 and 2012
NOTE 1 – NATURE OF OPERATIONS
Prescient Mining Corp. (the “Company”) was incorporated on December 21, 2006, under the laws of the
Business Corporations Act (British Columbia). The Company’s shares are traded on the TSX Venture
Exchange (the “Exchange”) under the symbol “PMC.”
The head office, principal address, and records office of the Company are located at Suite 507 – 700 West
Pender Street, Vancouver, BC, Canada, V6C 1G8. The Company’s registered office address is located at Suite
1780 – 400 Burrard Street, Vancouver, British Columbia, Canada, V6C 3A6.
The Company is engaged in the acquisition, exploration, and development of resource properties. The
Company’s ability to continue as a going concern is dependent upon the ability of the Company to raise
additional financing in order to complete the acquisition, exploration, and development of its resource
properties, the discovery of economically recoverable reserves, and the attainment of future profitable
production or proceeds from disposition of the Company’s resource properties. The outcome of these matters
cannot be predicted at this time.
These financial statements have been prepared in accordance with International Financial Reporting Standards
on the basis that the Company is a going concern and will be able to meet its obligations and continue its
operations for its next fiscal year.
The Company will require additional financing as it acquires mineral properties or interests therein. There is
no assurance that it will be able to obtain such financing, if any, on reasonable terms. These financial
statements do not include any adjustments to the amounts and classification of assets and liabilities that might
be necessary should the Company be unable to continue as a going concern.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
The financial statements were authorized for issue on October 15, 2013, by the Directors of the Company. The
accounting policies set out below have been applied consistently to all periods presented in these financial
statements.
(a) Statement of Compliance
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
These consolidated financial statements were approved and authorized for issue by the Board of Directors
on October 15, 2013.
(b) Basis of Presentation
These financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and
interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).
The financial statements of the Company have been prepared on a historical cost basis.
(c) Functional and Presentation of Foreign Currency
The financial statements are presented in Canadian dollars unless otherwise noted. The functional
currency and presentation currency of the Company is the Canadian dollar.
7
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2013 and 2012
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
(d) Cash and Cash Equivalents
Cash and cash equivalents consists of cash balances and short-term highly liquid investments which are
readily convertible into cash and that are subject to an insignificant risk of changes in value.
For the purpose of the statements of cash flows, total cash and cash equivalents include cash and
guaranteed investment certificates (“GIC”) with maturities of less than one year and redeemable anytime
at the option of the holder.
(e) Equipment and Depreciation
Equipment is carried at acquisition cost less accumulated depreciation.
Depreciation is calculated on a declining-balance basis to write off the cost of the assets to their residual
values over their estimated useful lives, except in the year of acquisition, when half of the rate is used.
The annual rate used to compute depreciation is as follows:
Computer hardware
30%
(f) Exploration and Evaluation Assets and Expenditures
Exploration and evaluation activity begins when the Company obtains legal rights to explore a specific
area and involves the search for mineral reserves, the determination of technical feasibility and the
assessment of commercial viability of an identified mineral resource. Expenditures incurred in the
exploration and evaluation phase include the cost of acquiring interests in mineral rights, licenses and
properties, and the costs of the Company’s exploration activities, such as researching and analyzing
existing exploration data, gathering data through geological studies, exploratory drilling, trenching,
sampling, and certain feasibility studies.
Exploration and evaluation expenditures incurred prior to the determination of commercially viable
mineral resources, the feasibility of mining operations, and a positive development decision, are expensed
as incurred. Mineral property acquisition costs and development expenditures incurred subsequent to
such a determination are capitalized and amortized over the estimated life of the property following the
commencement of commercial production or are written off if the property is sold, allowed to lapse,
abandoned, or when an impairment is determined to have occurred.
(g) Decommissioning Obligations
A liability for a decommissioning obligation, such as site reclamation costs, is recorded when a legal or
constructive obligation exists and is recognized in the period in which it is incurred. The Company
records the estimated present value of future cash flows associated with site reclamation as a liability
when the liability is incurred and increases the carrying value of the related assets for that amount.
Subsequently, these capitalized decommissioning costs will be amortized to expense over the life of the
related assets using the units-of-production method. The liability is accreted to reflect the passage of
time and adjusted to reflect changes in the timing and amount of estimated future cash flows.
As at June 30, 2013 and June 30, 2012, the Company has determined that it does not have material
decommissioning obligations.
8
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2013 and 2012
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
(h)
Impairment of Financial Assets
A financial asset not carried at fair value through profit or loss is reviewed at each reporting date to
determine whether there is any indication of impairment. A financial asset is impaired if objective
evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss
event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the
difference between its carrying amount and the present value of the estimated future cash flows
discounted at the assets' original effective interest rate. Losses are recognized in profit or loss with a
corresponding reduction in the financial asset, or in the case of amounts receivable are reflected in an
allowance account against receivables. When a subsequent event causes the amount of impairment loss to
decrease, the decrease in impairment loss is reversed through profit or loss.
(i) Share Capital
Transaction costs directly attributable to the issuance of common shares are recognized as a deduction
from equity. The proceeds from the exercise of stock options or warrants together with amounts
previously recorded in reserves over the vesting periods are recorded as share capital. Share capital
issued for non-monetary consideration is recorded at an amount based on fair market value of the shares
on the date of issue.
(j) Share-Based Payments
The Company has an employee stock option plan. Share-based payments to employees are measured at
the fair value of the instruments issued and amortized to expense over the vesting periods.
Share-based payments to non-employees are measured at the fair value of goods or services received or
the fair value of the equity instruments issued, if it is determined the fair value of the goods or services
cannot be reliably measured, and are recorded at the date the goods or services are received. The
corresponding amount is recorded to the share-based payment reserve.
The fair value of options is determined using the Black–Scholes option pricing model which incorporates
all market vesting conditions. The number of shares and options expected to vest is reviewed and
adjusted at the end of each reporting period such that the amount recognized for services received as
consideration for the equity instruments granted shall be based on the number of equity instruments that
eventually vest. Amounts recorded for forfeited or expired unexercised options are transferred to deficit
in the year of forfeiture or expiry.
Upon the exercise of stock options, consideration received on the exercise of these equity instruments is
recorded as share capital and the related share-based payment reserve is transferred to share capital.
9
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2013 and 2012
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
(k) Income Taxes
Tax expense recognized in profit or loss comprises the sum of current and deferred taxes not recognized
in other comprehensive income or directly in equity.
(i)
Current Income Tax
Current income tax assets and/or liabilities comprise those claims from, or obligations to, fiscal
authorities relating to the current or prior reporting periods that are unpaid at the reporting date.
Current tax is payable on taxable profit, which differs from profit or loss in the financial
statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or
substantively enacted by the end of the reporting period.
(ii)
Deferred Income Tax
Deferred income taxes are calculated using the liability method on temporary differences between
the carrying amounts of assets and liabilities and their tax bases. Deferred tax assets and
liabilities are calculated, without discounting, at tax rates that are expected to apply to their
respective period of realization, provided they are enacted or substantively enacted by the end of
the reporting period. Deferred tax liabilities are always provided for in full.
Deferred tax assets are recognized to the extent that it is probable that they will be able to be
utilized against future taxable income. Deferred tax assets and liabilities are offset only when the
Company has a right and intention to offset current tax assets and liabilities from the same
taxation authority.
Changes in deferred tax assets or liabilities are recognized as a component of tax income or
expense in profit or loss, except where they relate to items that are recognized in other
comprehensive income or directly in equity, in which case the related deferred tax is also
recognized in other comprehensive income or equity, respectively.
(l) Loss per Share
The Company calculates basic loss per share using the weighted average number of common shares
outstanding during the year. Diluted loss per share is the same as basic loss per share, as the issuance of
shares on the exercise of stock options and share purchase warrants is anti-dilutive.
(m) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument to another entity. Financial assets and financial liabilities are recognized on
the statements of financial position at the time the Company becomes a party to the contractual
provisions of the financial instrument.
Financial instruments are initially measured at fair value. Measurement in subsequent periods is
dependent on the classification of the financial instrument. The Company classifies its financial
instruments in the following categories: at fair value through profit or loss, loans and receivables, held-tomaturity, available-for-sale, and other financial liabilities.
10
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2013 and 2012
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
(n)
Financial Instruments (Continued)
(i)
Financial Assets and Liabilities at Fair Value Through Profit or Loss
Financial assets and liabilities at fair value through profit or loss are either ‘held-for-trading’ or
classified at fair value through profit or loss. They are initially and subsequently recorded at fair
value and changes in fair value are recognized in profit or loss for the period.
The Company does not have any financial assets and liabilities at fair value through profit or loss.
(ii)
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. Such assets are recognized initially at fair value and
subsequently on an amortized cost basis using the effective interest method, less any impairment
losses. They are included in current assets, except for maturities greater than 12 months after the
end of the reporting period, which are classified as non-current assets.
The Company has designated its cash and cash equivalents and interest receivable as loans and
receivables.
(iii)
Held-to-Maturity
Held-to-maturity investments are non-derivative financial assets that have fixed maturities and
fixed or determinable payments, and it is the Company’s intention to hold these investments to
maturity. They are initially recorded at fair value and subsequently measured at amortized cost.
The Company does not have any held-to-maturity financial assets.
(iv)
Available-For-Sale
Available-for-sale financial assets are non-derivative financial assets that are designated as
available-for-sale or are not classified in any other financial asset categories. They are initially
and subsequently measured at fair value and the changes in fair value, other than impairment
losses are recognized in other comprehensive income (loss) and presented in the fair value
reserve in shareholders’ equity. When the financial assets are sold or an impairment write-down
is required, losses accumulated in the fair value reserve recognized in shareholders’ equity are
included in profit or loss.
The Company does not have any available-for-sale financial assets.
(v)
Other Financial Liabilities
Other financial liabilities are recognized initially at fair value plus any directly attributable
transaction costs on the date at which the Company becomes a party to the contractual provisions
of the instrument. Subsequent to initial recognition, the Company’s financial liabilities are
measured at amortized cost using the effective interest method. The Company derecognizes a
financial liability when its contractual obligations are discharged, cancelled, or expired.
The Company’s non-derivative financial liabilities are its accounts payable and accrued
liabilities, which are designated as other liabilities.
11
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2013 and 2012
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
(o)
Flow-Through Shares
The Company finances a portion of its exploration activities through the issuance of flow-through shares.
Canadian tax legislation permits a company to issue flow-through instruments whereby the deduction for
tax purposes relating to qualified resource expenditures is claimed by the investors rather than the
Company. Common shares issued on a flow-through basis typically include a premium because of the tax
benefits provided to the investor. At the time of issue, the Company estimates the proportion of the
proceeds attributable to the premium and the common shares. The premium is estimated as the excess of
the subscription price over the value of common shares on the date of the transaction and is recorded as a
deferred liability. The Company recognizes a pro rata amount of the premium through the statement of
comprehensive loss as other income with a corresponding reduction to the flow through premium liability
as the flow-through expenditures are incurred and renounced.
When the flow-through expenditures are incurred and renounced, the Company records the tax effect as a
change to profit or loss and an increase to deferred income tax liabilities. To the extent that the Company
has deferred income tax assets that were not recognized in previous periods, a deferred income tax
recovery is recorded to offset the liability resulting from the renunciation.
NOTE 3 – SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
In the application of the Company’s accounting policies which are described in Note 2, management is
required 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.
Significant judgments, estimates and assumptions that have the most significant effect on the amounts
recognized in the financial statements are described below.
(a)
Share-Based Payments
The Company grants stock options to directors, officers, employees, and consultants of the Company
under its incentive stock option plan. The fair value of stock options is estimated using the BlackScholes option pricing model and are expensed over their vesting periods. In estimating fair value,
management is required to make certain assumptions and estimates such as the life of options, volatility,
and forfeiture rates.
Changes in assumptions used to estimate fair value could result in materially different results.
12
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2013 and 2012
NOTE 3 – SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
(Continued)
(b)
Decommissioning and Restoration Provision
The decommissioning and restoration provision is based on future cost estimates using information
available at the reporting date. The decommissioning and restoration provision is adjusted at each
reporting period for changes to factors such as the expected amount of cash flows required to discharge
the liability, the timing of such cash flows, and the discount rate. The decommissioning and restoration
provision requires other significant estimates and assumptions such as requirements of the relevant legal
and regulatory framework, and the timing, extent and costs of required decommissioning and restoration
activities. Actual costs may differ from these estimates.
As at June 30, 2013 and 2012, the Company has no material decommissioning and restoration provision.
(c)
Deferred Tax Assets
Deferred tax assets, including those arising from tax loss carry-forwards, require management to assess
the likelihood that the Company will generate sufficient taxable earnings in future periods in order to
utilize recognized deferred tax assets. Assumptions about the generation of future taxable profits depend
on management’s estimates of future cash flows. In addition, future changes in tax laws could limit the
ability of the Company to obtain tax deductions in future periods. To the extent that future cash flows
and taxable income differ significantly from estimates, the ability of the Company to realize the net
deferred tax assets recorded at the reporting date could be impacted.
NOTE 4 – RECENT ACCOUNTING PRONOUNCEMENTS
The following IFRS standards have been recently issued by the IASB or the IFRIC. The Company is assessing
the impact of these new standards, but does not expect them to have a significant effect on the financial
statements. Pronouncements that are not applicable or do not have a significant impact to the Company have
been excluded herein.
(a)
IFRS 7, Financial Instruments: Disclosures, and IAS 32, Financial Instruments: Presentation
The IASB has issued amendment to IFRS 7, Financial Instruments: Disclosures (“IFRS 7”) and IAS 32,
Financial Instruments: Presentation (“IAS 32”), requiring incremental disclosures regarding transfers of
financial assets and clarity of an entity’s ability to offset financial assets and financial liabilities. The
amendments to IFRS 7 are effective for annual periods beginning on or after July 1, 2013, and the
amendments to IAS 32 are effective for annual periods beginning on or after July 1, 2014. The Company
will apply the amendment at the beginning of its 2013 financial year. The Company does not expect the
implementation to have a significant impact on the Company’s disclosures.
(b)
IFRS 9, Financial Instruments
The IASB has issued a new standard, IFRS 9, “Financial Instruments” (“IFRS 9”), which will replace
IAS 39, “Financial Instruments: Recognition and Measurement” (“IAS 39”). The replacement of IAS 39
is a multi-phase project with the objective of improving and simplifying the reporting for financial
instruments and the issuance of IFRS 9 is part of the first phase of this project. IFRS 9 uses a single
approach to determine whether a financial asset or liability is measured at amortized cost or fair value,
replacing the multiple rules in IAS 39.
13
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2013 and 2012
NOTE 4 – RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
(b) IFRS 9, Financial Instruments (Continued)
For financial assets, the approach in IFRS 9 is based on how an entity manages its financial instruments in
the context of its business model and the contractual cash flow characteristics of the financial assets. IFRS
9 requires a single impairment method to be used, replacing multiple impairment methods in IAS 39. For
financial liabilities measured at fair value, fair value changes due to changes in an entity’s credit risk are
presented in other comprehensive income. IFRS 9 is effective for annual periods beginning on or after
January 1, 2015. The Company does not expect the implementation to have a significant impact on the
Company’s results of operations, financial position, and disclosures.
(c) IFRS 13, Fair Value Measurement
IFRS 13, Fair Value Measurement (“IFRS 13”) is effective for annual periods beginning on or after
January 1, 2013. IFRS 13 defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. The
standard also establishes a framework for measuring fair value and sets out disclosure requirements for
fair value measurements to provide information that enables financial statement users to assess the
methods and inputs used to develop fair value measurements and, for recurring fair value measurements
that use significant unobservable inputs (Level 3), the effect of the measurements on profit or loss or other
comprehensive income. The Company does not expect the implementation to have a significant impact on
the Company’s results of operations, financial position, and disclosures.
(d) IAS 32, Financial Instruments
Presentation was amended to address inconsistencies in current practice when applying the offsetting
criteria in IAS 32. Under this amendment, the meaning of “currently has a legally enforceable right of setoff” was clarified as well as providing clarification that some gross settlement systems may be considered
equivalent to net settlement. This amendment is effective for annual periods beginning on or after January
1, 2014 and is not expected to have a significant impact on the Company.
NOTE 5 – EQUIPMENT
$
COST
Balance, June 30, 2011
Additions
3,269
910
Balance, June 30, 2012
Additions - None
4,179
-
Balance, June 30, 2013
4,179
ACCUMULATED DEPRECIATION
Balance, June 30, 2011
Depreciation
2,316
422
Balance, June 30, 2012
Depreciation
2,738
432
Balance, June 30, 2013
3,170
NET BOOK VALUE
June 30, 2012
1,441
June 30, 2013
1,009
14
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2013 and 2012
NOTE 6 – EXPLORATION AND EVALUATION ASSETS
Cumulative expenditures incurred by the Company on its properties are summarized as follows:
Hook Lake property
Saskatchewan, Canada
$
-
Balance, June 30, 2011
Acquisition costs:
Professional and regulatory fees
Geology
9,318
9,757
19,075
Balance, June 30, 2012
Acquisition costs:
Option Payment – Cash
Option Payment – Common Shares Issued
Exploration costs:
Geophysics
15,000
11,250
62,000
88,250
107,325
Balance, June 30, 2013
On April 12, 2012, the Company entered into an option agreement with Geomode Mineral Exploration Ltd.
(“Geomode”) for the exclusive right and option to acquire a 100% interest in the Hook Lake property, a
prospective uranium project located in Saskatchewan. As consideration, the Company agreed to pay an
aggregate of $1,015,000, issue 150,000 common shares, and incur in exploration and development
expenditures a total of $871,248 or pay to Geomode a further $871,248 over a period of 3 years as follows:
Cash
$
Within 5 days of Exchange approval
(July 27, 2012)
On or before July 27, 2013
On or before July 27, 2014
On or before July 27, 2015
15,000 (paid)
-
Common
shares
#
150,000 (issued)
-
1,000,000
-
1,015,000
150,000
Work Commitment
or cash payments to
Geomode
$
60,624 (incurred)
60,624
750,000
871,248
Included in prepaid expenses and deposits is a deficiency cash deposit of $60,624 paid to the Saskatchewan
Ministry of Energy and Resources (“Ministry”) towards a 6 month extension on the work requirement for the
claims. The amount is refundable upon the Company’s filing of assessment work with the Ministry on or
before March 3, 2014.
A 1% net smelter return (“NSR”) shall be reserved to Geomode which may be purchased at any time by the
Company for $1,000,000 less all amounts previously received by Geomode as NSR payments.
15
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2013 and 2012
NOTE 7 – SHARE CAPITAL
(a) Authorized
The Company is authorized to issue an unlimited number of voting common shares without par value.
(b) Issued Share Capital
At June 30, 2013, there were 16,040,000 issued and fully paid common shares (2012 - 15,890,000).
(c) Escrow Shares
As of June 30, 2013, the Company has Nil common shares held in escrow (2012 – 920,000).
(d) Share-Based Payments
The Company has an incentive stock option plan, which provides that the Board of Directors of the
Company may from time to time, at its discretion, and in accordance with the Exchange requirements, grant
to directors, officers, employees, and consultants to the Company, non-transferable options to purchase
common shares, provided that the number of common shares reserved for issuance will not exceed 10% of
the issued and outstanding common shares of the Company.
A summary of the status of the options outstanding follows:
Weighted
Average
Exercise Price
$
Number of
Options
1,733,000
Balance, June 30, 2012 and June 30, 2011
Forfeited
(10,000)
1,723,000
Balance, June 30, 2013
(i)
0.14
(i)
0.11
0.14
During the year ended June 30, 2013, the fair value of 10,000 forfeited options of $755 was
reclassified from reserves to deficit.
The following table summarizes the stock options outstanding as at June 30, 2013:
Exercise
Price
$
0.21
0.15
0.15
0.10
0.11
Number of Options
Outstanding
138,333
926,667
144,000
139,000
375,000
(i)
Expiry Date
Number of Options
Exercisable
August 1, 2013
October 29, 2017
October 29, 2017
April 1, 2020
May 31, 2021
138,333
926,667
144,000
139,000
375,000
1,723,000
(i)
1,723,000
These stock options were granted to two charitable organizations.
During the year ended June 30, 2013, the Company recognized share-based payments of $1,887 (2012 –
$17,686) for stock options vested during the year. The weighted average contractual life remaining for the
outstanding stock options as at June 30, 2013, is 4.95 years.
16
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2013 and 2012
NOTE 7 – SHARE CAPITAL (Continued)
(e) Share Purchase Warrants
Each whole warrant entitles the holder to purchase one common share of the Company. A summary of the
status of the warrants outstanding follows:
Balance, June 30, 2011
Expired
Number of
Warrants
Weighted
Average
Exercise Price
$
1,389,999
0.12
(1,389,999)
0.12
-
Balance, June 30, 2013 and June 30, 2012
-
NOTE 8 – RELATED PARTY TRANSACTIONS
(a) Related Party Transactions
The Company incurred the following transactions with companies having directors and officers in
common:
Office, rent and administration costs paid or accrued to companies
having directors and officers in common (i)
Legal fees and share issuance costs paid or accrued to a company
controlled by an officer of the Company
Project evaluation costs paid or accrued to a companies controlled
by a director and an officer of the Company
(i)
2013
$
2012
$
69,750
45,000
8,005
14,018
38,267
30,220
116,022
89,238
Of these fees, $21,600 was paid to the CFO of the Company (2012 - $14,400) (Note 8(b)(i)).
(b) Compensation of Key Management Personnel
The Company’s key management personnel have authority and responsibility for planning, directing, and
controlling the activities of the Company and consist of its Directors, Chief Executive Officer, and Chief
Financial Officer.
Short-term benefits – Management Fees (i)
Share-based payments (ii)
(i)
$
$
39,100
1,661
31,400
12,791
40,761
44,191
Short-term benefits include consulting and management fees.
17
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2013 and 2012
NOTE 8 – RELATED PARTY TRANSACTIONS (Continued)
(b) Compensation of Key Management Personnel (Continued)
(ii)
Share-based payments is the fair value of options granted and vested to key management personnel
under the Company’s stock option plan (Note 7(d)).
(c) Related Party Balances
The following related party amounts are included in (i) accounts payable and accrued liabilities and (ii)
prepaid expenses and deposits:
(i) Companies controlled by directors and an officer of the
Company
(ii) Companies having a director and officers in common
June 30,
2013
$
June 30,
2012
$
12,327
24,441
1,500
6,500
These transactions are in the normal course of operations and are measured at the fair value amount of
consideration established and agreed to by the related parties. Any amounts due to related parties are
unsecured, non-interest bearing, and have no specific repayment terms.
NOTE 9 – INCOME TAXES
(a) Reconciliation of Effective Tax Rate
Income tax expense (recovery) differs from the amounts computed by applying the combined federal and
provincial income tax rate of 25.25% (2012 – 25.75%) to pre-tax loss as a result of the following:
Loss before income taxes
Computed expected income tax recovery
Deferred tax assets not recognized
Effect of change in tax rates
Permanent difference
Other
Income tax expense (recovery)
2013
$
2012
$
(393,489)
(315,760)
(99,356)
110,412
(11,804)
638
110
(81,308)
98,929
2,968
5,973
(26,562)
-
-
18
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2013 and 2012
NOTE 9 – INCOME TAXES (Continued)
(b) Deferred Income Tax Assets and Liabilities
Deferred tax assets have not been recognized in respect of the following items:
2013
$
2012
$
Non-capital losses carry-forward
Share issuance cost
Exploration and evaluation assets
Equipment
305,334
246
25,985
712
202,284
473
18,423
684
Unrecognized deferred tax assets
332,277
221,864
(c) Non-Capital Losses
As at June 30, 2013, the Company has non-capital losses of $1,174,363 which may be applied to reduce
taxable income of future years. These non-capital losses expire as follows:
Year
$
2026
2027
2028
2029
2030
2031
2032
2033
1,933
46,286
19,493
109,260
80,088
215,212
336,865
365,226
1,174,363
Future tax benefits which may arise as a result of these losses have not been recognized in these financial
statements and have been offset by a valuation allowance due to the uncertainty of their realization.
In addition, the Company has cumulative resource pools of $99,941 which can be carried forward
indefinitely to offset future resource profits.
19
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2013 and 2012
NOTE 10 – FINANCIAL RISK MANAGEMENT
(a) Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, interest receivable, and
accounts payable and accrued liabilities. The carrying values of these financial instruments approximate
their fair values because of their short term nature and/or the existence of market related interest rates on
the instruments.
IFRS requires disclosures about the inputs to fair value measurements, including their classification within
a hierarchy that prioritizes the inputs to fair value measurement. 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 Company has no financial instrument assets or liabilities recorded in the statements of financial
position at fair value as at June 30, 2013 and 2012.
(b) Financial Instruments Risk
The Company is exposed in varying degrees to a variety of financial instrument related to risks. The
Board approves and monitors the risk management processes:
(i)
Credit Risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails
to meet its contractual obligations. The Company is subject to credit risk on the cash balances at the
bank, its short-term bank Guaranteed Investment Certificates (“GICs”), and interest receivable. Cash
and cash equivalents consisting of GICs have been invested with Schedule 1 banks or equivalents,
with its cash held in Canadian based banking institutions, authorized under the Bank Act to accept
deposits, which may be eligible for deposit insurance provided by the Canadian Deposit Insurance
Corporation. Management considers that risks related to credit are minimal.
(ii)
Liquidity Risk
The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to
settle obligations and liabilities when due. As at June 30, 2013, the Company had cash and cash
equivalents of $644,713 to settle current liabilities of $24,345 which mainly consisted of accounts
payable that were considered short term and settled within 30 days.
The Company is dependent on the availability of credit from its suppliers and its ability to generate
sufficient funds from equity and debt financing to meet current and future obligations. There can be
no assurance that such financing will be available on terms acceptable to the Company (Note 1).
20
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2013 and 2012
NOTE 10 – FINANCIAL RISK MANAGEMENT (Continued)
(b) Financial Instruments Risk (Continued)
(iii) Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates.
The Company’s short-term investments are invested in GICs with greater than 90 day terms but not
greater than one year. These GICs have a fixed interest rate for the term of the deposit. The interest
on cash and GICs is typical of Canadian banking rates, which are low at present and the conservative
investment strategy mitigates the risk of deterioration to the investment. A change of 100 basis
points in the interest rates would not be material to the financial statements.
(c) Capital Management
The Company manages its share capital as capital, which as at June 30, 2013, totaled $1,848,395 (2012 –
$1,837,145).
The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a
going concern such that it can continue to provide returns for shareholders and benefits for other
stakeholders. The management of the capital structure is based on the funds available to the Company in
order to support the acquisition, exploration, and development of mineral properties and to maintain the
Company in good standing with the various regulatory authorities. In order to maintain or adjust its
capital structure, the Company may issue new shares or debt, or dispose of assets.
The Company’s historical sources of capital have consisted of the sale of equity securities and interest
income. In order for the Company to carry out planned exploration and development and pay for
administrative costs, the Company will spend its working capital and expects to raise additional amounts
externally as needed.
The Company has no debt and is not subject to externally imposed capital requirements.
There were no changes in the Company’s management of capital during the years ended June 30, 2013.
21
PRESCIENT MINING CORP.
June 30, 2012 and 2011
•
Independent Auditors’ Report
•
Statements of Financial Position
•
Statements of Changes in Equity
•
Statements of Comprehensive Loss
•
Statements of Cash Flows
•
Notes to the Financial Statements
Independent Auditors’ Report
To the Shareholders of:
PRESCIENT MINING CORP.
We have audited the accompanying financial statements of Prescient Mining Corp. which comprise the
statements of financial position as at June 30, 2012, June 30, 2011, and July 1, 2010, the statements of
changes in equity, comprehensive loss, and cash flows for the years ended June 30, 2012 and 2011, and a
summary of significant accounting policies and other explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards and for such internal control as management
determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity's preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
Prescient Mining Corp. as at June 30, 2012, June 30 2011, and July 1, 2010, and its financial performance
and cash flows for the years ended June 30, 2012 and 2011, in accordance with International Financial
Reporting Standards.
Emphasis of Matter – Going Concern
In forming our opinion, which is not qualified, we have considered the adequacy of the disclosures made
in Note 1 to the financial statements concerning the ability of Prescient Mining Corp. to continue as a
going concern. The company incurred a net loss of $315,760 during the year ended June 30, 2012, and as
of that date, had accumulated losses since inception of $936,819. The financial statements do not include
the adjustments that would result if Prescient Mining Corp. was unable to continue as a going concern.
“Watson Dauphinee & Masuch”
Chartered Accountants
Vancouver, B.C., Canada
October 26, 2012
2
PRESCIENT MINING CORP.
Statements of Financial Position
June 30,
2012
$
June 30,
2011
(Note 11)
$
1,092,557
9,362
10,225
7,635
1,371,446
10,698
3,472
1,500
1,646,924
5,521
1,539
1,500
1,119,779
1,387,116
1,655,484
1,441
953
1,362
1,121,220
1,388,069
1,656,846
46,668
15,443
15,322
Notes
July 1,
2010
(Note 11)
$
ASSETS
CURRENT
Cash and cash equivalents
Interest receivable
HST/GST recoverable
Prepaid expenses and deposits
Equipment
8(c)
5
LIABILITY
CURRENT
Accounts payable and accrued liabilities
8(c)
SHAREHOLDERS’ EQUITY
Share capital
Share-based payment reserve
Deficit
7
1,837,145
174,226
(936,819)
1,837,145
156,540
(621,059)
1,837,145
203,039
(398,660)
1,074,552
1,372,626
1,641,524
1,121,220
1,388,069
1,656,846
Nature of operations (Note 1)
Exploration and evaluation assets (Note 6)
The accompanying notes are an integral part of these financial statements.
Approved on Behalf of the Board:
“Marc Levy”
Marc Levy, Director
“Gordon Addie”
Gordon Addie, Director
3
PRESCIENT MINING CORP.
Statements of Changes in Equity
For the Years Ended June 30, 2012 and 2011
Balance, July 1, 2010
Comprehensive loss for the year
Expired options
Share-based payments
Notes
Number of
Common
Shares
11
15,890,000
1,837,145
203,039
(398,660)
1,641,524
-
-
(58,685)
12,186
(281,084)
58,685
-
(281,084)
12,186
15,890,000
1,837,145
156,540
(621,059)
1,372,626
-
-
17,686
(315,760)
-
(315,760)
17,686
15,890,000
1,837,145
174,226
(936,819)
1,074,552
7(d)
Balance, June 30, 2011
Comprehensive loss for the year
Share-based payments
Balance, June 30, 2012
7(d)
Share
Capital
$
Share-Based
Payment
Reserve
$
Deficit
$
Total
$
The accompanying notes are an integral part of these financial statements.
4
PRESCIENT MINING CORP.
Statements of Comprehensive Loss
For the Years Ended June 30, 2012 and 2011
2012
Notes
$
2011
(Note 11)
$
EXPENSES
Depreciation
Consulting fees
Exploration and evaluation
Management fees
Office, rent and administration
Professional fees
Project investigation costs
Regulatory fees
Share-based payments
Transfer agent and shareholder information
Travel and promotion
6
8(b)
8(a)
8(a)
8(a)
7(d),8(b)
8(a)
422
34,050
19,075
17,000
58,751
28,670
74,822
12,204
17,686
6,839
61,266
409
38,700
94,568
72,775
18,587
11,197
12,186
29,255
18,970
(330,785)
(296,647)
15,025
15,563
NET LOSS AND COMPREHENSIVE LOSS
FOR THE YEAR
(315,760)
(281,084)
BASIC AND DILUTED LOSS PER SHARE
(0.02)
(0.02)
15,890,000
15,890,000
LOSS BEFORE OTHER ITEM
Interest income
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
The accompanying notes are an integral part of these financial statements.
5
PRESCIENT MINING CORP.
Statements of Cash Flows
For the Years Ended June 30, 2012 and 2011
2012
$
2011
$
(315,760)
(281,084)
Adjustments for non-cash items
Depreciation
Share-based payments
422
17,686
409
12,186
Changes in non-cash working capital accounts
Interest receivable
HST/GST recoverable
Prepaid expenses and deposits
Accounts payable and accrued liabilities
1,336
(6,753)
(6,135)
31,225
(5,177)
(1,933)
121
(277,979)
(275,478)
(910)
-
DECREASE IN CASH AND CASH EQUIVALENTS
(278,889)
(275,478)
Cash and cash equivalents, beginning of year
1,371,446
1,646,924
CASH AND CASH EQUIVALENTS, END OF YEAR
1,092,557
1,371,446
(30,743)
1,123,300
21,446
1,350,000
1,092,557
1,371,446
-
-
CASH WAS PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net loss for the year
INVESTING ACTIVITY
Purchase of equipment
CASH AND CASH EQUIVALENTS CONSISTS OF:
(Cheques written in excess of cash on hand) Cash
Guaranteed Investment Certificates
SUPPLEMENTARY INFORMATION:
Interest paid
Income taxes paid
The accompanying notes are an integral part of these financial statements.
6
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 1 – NATURE OF OPERATIONS
Prescient Mining Corp. (the “Company”) was incorporated on December 21, 2006, under the laws of the
Business Corporations Act (British Columbia) under the name Milk Capital Corp. On September 3, 2010, the
Company changed its name to Prescient Mining Corp. The Company’s shares are traded on the TSX Venture
Exchange (the “Exchange”) under the symbol “PMC.”
The head office, principal address, and records office of the Company are located at Suite 507 – 700 West
Pender Street, Vancouver, BC, Canada, V6C 1G8. The Company’s registered office address is located at Suite
1780 – 400 Burrard Street, Vancouver, British Columbia, Canada, V6C 3A6.
The Company is engaged in the acquisition, exploration, and development of resource properties. The
Company’s ability to continue as a going concern is dependent upon the ability of the Company to raise
additional financing in order to complete the acquisition, exploration, and development of its resource
properties, the discovery of economically recoverable reserves, and the attainment of future profitable
production or proceeds from disposition of the Company’s resource properties. The outcome of these matters
cannot be predicted at this time.
These financial statements have been prepared in accordance with International Financial Reporting Standards
on the basis that the Company is a going concern and will be able to meet its obligations and continue its
operations for its next fiscal year.
The Company will require additional financing as it acquires mineral properties or interests therein. There is
no assurance that it will be able to obtain such financing, if any, on reasonable terms. These financial
statements do not include any adjustments to the amounts and classification of assets and liabilities that might
be necessary should the Company be unable to continue as a going concern.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
The financial statements were authorized for issue on October 26, 2012, by the Directors of the Company. The
accounting policies set out below have been applied consistently to all periods presented in these financial
statements.
(a)
Statement of Compliance
The financial statements represent the first annual financial statements of the Company prepared in
accordance with International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards (“IASB”) and the interpretations of the International Financial Reporting
Interpretations Committee (“IFRIC”).
The disclosures related to the transition from Canadian Generally Accepted Accounting Principles
(“GAAP”) to IFRS are included in Note 11 to these financial statements. Note 11 contains
reconciliations and descriptions of the effect of the transition from GAAP to IFRS on previously reported
statements of financial position as at June 30, 2011 and July 1, 2010 and statements of comprehensive
loss and cash flows for the year ended June 30, 2011. The first date at which IFRS was applied was July
1, 2010.
(b)
Basis of Presentation
The financial statements of the Company have been prepared on a historical cost basis.
7
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c)
Functional and Presentation of Foreign Currency
The financial statements are presented in Canadian dollars unless otherwise noted.
currency and presentation currency of the Company is the Canadian dollar.
(d)
The functional
Cash and Cash Equivalents
Cash and cash equivalents consists of cash balances and short-term highly liquid investments which are
readily convertible into cash and that are subject to an insignificant risk of changes in value.
For the purpose of the statements of cash flows, total cash and cash equivalents include cash and
guaranteed investment certificates (“GIC”) with maturities of less than one year and redeemable anytime
at the option of the holder.
(e)
Equipment and Depreciation
Equipment is carried at acquisition cost less accumulated depreciation.
Depreciation is calculated on a declining-balance basis to write off the cost of the assets to their residual
values over their estimated useful lives, except in the year of acquisition, when half of the rate is used.
The annual rate used to compute depreciation is as follows:
Computer hardware
(f)
30%
Exploration and Evaluation Assets
Exploration and evaluation activity begins when the Company obtains legal rights to explore a specific
area and involves the search for mineral reserves, the determination of technical feasibility and the
assessment of commercial viability of an identified mineral resource. Expenditures incurred in the
exploration and evaluation phase include the cost of acquiring interests in mineral rights, licenses and
properties, and the costs of the Company’s exploration activities, such as researching and analyzing
existing exploration data, gathering data through geological studies, exploratory drilling, trenching,
sampling, and certain feasibility studies.
Exploration and evaluation expenditures incurred prior to the determination of commercially viable
mineral resources, the feasibility of mining operations, and a positive development decision, are expensed
as incurred. Mineral property acquisition costs and development expenditures incurred subsequent to
such a determination are capitalized and amortized over the estimated life of the property following the
commencement of commercial production or are written off if the property is sold, allowed to lapse,
abandoned, or when an impairment is determined to have occurred.
(g)
Decommissioning Obligations
A liability for a decommissioning obligation, such as site reclamation costs, is recorded when a legal or
constructive obligation exists and is recognized in the period in which it is incurred. The Company
records the estimated present value of future cash flows associated with site reclamation as a liability
when the liability is incurred and increases the carrying value of the related assets for that amount.
Subsequently, these capitalized decommissioning costs will be amortized to expense over the life of the
related assets using the units-of-production method. The liability is accreted to reflect the passage of
time and adjusted to reflect changes in the timing and amount of estimated future cash flows.
8
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
(g)
Decommissioning Obligations (Continued)
As at June 30, 2012, June 30, 2011, and July 1, 2010, the Company has determined that it does not have
material decommissioning obligations.
(h)
Impairment of Financial Assets
A financial asset not carried at fair value through profit or loss is reviewed at each reporting date to
determine whether there is any indication of impairment. A financial asset is impaired if objective
evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss
event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the
difference between its carrying amount and the present value of the estimated future cash flows
discounted at the assets' original effective interest rate. Losses are recognized in profit or loss with a
corresponding reduction in the financial asset, or in the case of amounts receivable are reflected in an
allowance account against receivables. When a subsequent event causes the amount of impairment loss to
decrease, the decrease in impairment loss is reversed through profit or loss.
(i)
Share Capital
Transaction costs directly attributable to the issuance of common shares are recognized as a deduction
from equity. The proceeds from the exercise of stock options or warrants together with amounts
previously recorded in reserves over the vesting periods are recorded as share capital. Share capital
issued for non-monetary consideration is recorded at an amount based on fair market value of the shares
on the date of issue.
(j)
Share-Based Payments
The Company has an employee stock option plan. Share-based payments to employees are measured at
the fair value of the instruments issued and amortized to expense over the vesting periods.
Share-based payments to non-employees are measured at the fair value of goods or services received or
the fair value of the equity instruments issued, if it is determined the fair value of the goods or services
cannot be reliably measured, and are recorded at the date the goods or services are received. The
corresponding amount is recorded to the share-based payment reserve.
The fair value of options is determined using the Black–Scholes option pricing model which incorporates
all market vesting conditions. The number of shares and options expected to vest is reviewed and
adjusted at the end of each reporting period such that the amount recognized for services received as
consideration for the equity instruments granted shall be based on the number of equity instruments that
eventually vest. Amounts recorded for forfeited or expired unexercised options are transferred to deficit
in the year of forfeiture or expiry.
Upon the exercise of stock options, consideration received on the exercise of these equity instruments is
recorded as share capital and the related share-based payment reserve is transferred to share capital.
9
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
(k)
Income Taxes
Tax expense recognized in profit or loss comprises the sum of current and deferred taxes not recognized
in other comprehensive income or directly in equity.
(i)
Current Income Tax
Current income tax assets and/or liabilities comprise those claims from, or obligations to, fiscal
authorities relating to the current or prior reporting periods that are unpaid at the reporting date.
Current tax is payable on taxable profit, which differs from profit or loss in the financial
statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or
substantively enacted by the end of the reporting period.
(ii)
Deferred Income Tax
Deferred income taxes are calculated using the liability method on temporary differences between
the carrying amounts of assets and liabilities and their tax bases. Deferred tax assets and
liabilities are calculated, without discounting, at tax rates that are expected to apply to their
respective period of realization, provided they are enacted or substantively enacted by the end of
the reporting period. Deferred tax liabilities are always provided for in full.
Deferred tax assets are recognized to the extent that it is probable that they will be able to be
utilized against future taxable income. Deferred tax assets and liabilities are offset only when the
Company has a right and intention to offset current tax assets and liabilities from the same
taxation authority.
Changes in deferred tax assets or liabilities are recognized as a component of tax income or
expense in profit or loss, except where they relate to items that are recognized in other
comprehensive income or directly in equity, in which case the related deferred tax is also
recognized in other comprehensive income or equity, respectively.
(l)
Loss per Share
The Company calculates basic loss per share using the weighted average number of common shares
outstanding during the year. Diluted loss per share is the same as basic loss per share, as the issuance of
shares on the exercise of stock options and share purchase warrants is anti-dilutive.
(m) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument to another entity. Financial assets and financial liabilities are recognized on
the statements of financial position at the time the Company becomes a party to the contractual
provisions of the financial instrument.
Financial instruments are initially measured at fair value. Measurement in subsequent periods is
dependent on the classification of the financial instrument. The Company classifies its financial
instruments in the following categories: at fair value through profit or loss, loans and receivables, held-tomaturity, available-for-sale, and other financial liabilities.
10
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
(m) Financial Instruments (Continued)
(i)
Financial Assets and Liabilities at Fair Value Through Profit or Loss
Financial assets and liabilities at fair value through profit or loss are either ‘held-for-trading’ or
classified at fair value through profit or loss. They are initially and subsequently recorded at fair
value and changes in fair value are recognized in profit or loss for the period.
The Company does not have any financial assets and liabilities at fair value through profit or loss.
(ii)
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. Such assets are recognized initially at fair value and
subsequently on an amortized cost basis using the effective interest method, less any impairment
losses. They are included in current assets, except for maturities greater than 12 months after the
end of the reporting period, which are classified as non-current assets.
The Company has designated its cash and cash equivalents and interest receivable as loans and
receivables.
(iii)
Held-to-Maturity
Held-to-maturity investments are non-derivative financial assets that have fixed maturities and
fixed or determinable payments, and it is the Company’s intention to hold these investments to
maturity. They are initially recorded at fair value and subsequently measured at amortized cost.
The Company does not have any held-to-maturity financial assets.
(iv)
Available-For-Sale
Available-for-sale financial assets are non-derivative financial assets that are designated as
available-for-sale or are not classified in any other financial asset categories. They are initially
and subsequently measured at fair value and the changes in fair value, other than impairment
losses are recognized in other comprehensive income (loss) and presented in the fair value
reserve in shareholders’ equity. When the financial assets are sold or an impairment write-down
is required, losses accumulated in the fair value reserve recognized in shareholders’ equity are
included in profit or loss.
The Company does not have any available-for-sale financial assets.
(v)
Other Financial Liabilities
Other financial liabilities are recognized initially at fair value plus any directly attributable
transaction costs on the date at which the Company becomes a party to the contractual provisions
of the instrument. Subsequent to initial recognition, the Company’s financial liabilities are
measured at amortized cost using the effective interest method. The Company derecognizes a
financial liability when its contractual obligations are discharged, cancelled, or expired.
The Company’s non-derivative financial liabilities are its accounts payable and accrued
liabilities, which are designated as other liabilities.
11
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Continued)
(n)
Flow-Through Shares
The Company finances a portion of its exploration activities through the issuance of flow-through shares.
Canadian tax legislation permits a company to issue flow-through instruments whereby the deduction for
tax purposes relating to qualified resource expenditures is claimed by the investors rather than the
Company. Common shares issued on a flow-through basis typically include a premium because of the tax
benefits provided to the investor. At the time of issue, the Company estimates the proportion of the
proceeds attributable to the premium and the common shares. The premium is estimated as the excess of
the subscription price over the value of common shares on the date of the transaction and is recorded as a
deferred liability. The Company recognizes a pro rata amount of the premium through the statement of
comprehensive loss as other income with a corresponding reduction to the flow through premium liability
as the flow-through expenditures are incurred and renounced.
When the flow-through expenditures are incurred and renounced, the Company records the tax effect as a
change to profit or loss and an increase to deferred income tax liabilities. To the extent that the Company
has deferred income tax assets that were not recognized in previous periods, a deferred income tax
recovery is recorded to offset the liability resulting from the renunciation.
NOTE 3 – SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
In the application of the Company’s accounting policies which are described in Note 2, management is
required 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.
Significant judgments, estimates and assumptions that have the most significant effect on the amounts
recognized in the financial statements are described below.
(a)
Share-Based Payments
The Company grants stock options to directors, officers, employees, and consultants of the Company
under its incentive stock option plan. The fair value of stock options is estimated using the BlackScholes option pricing model and are expensed over their vesting periods. In estimating fair value,
management is required to make certain assumptions and estimates such as the life of options, volatility,
and forfeiture rates.
Changes in assumptions used to estimate fair value could result in materially different results.
12
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 3 – SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
(Continued)
(b)
Decommissioning and Restoration Provision
The decommissioning and restoration provision is based on future cost estimates using information
available at the reporting date. The decommissioning and restoration provision is adjusted at each
reporting period for changes to factors such as the expected amount of cash flows required to discharge
the liability, the timing of such cash flows, and the discount rate. The decommissioning and restoration
provision requires other significant estimates and assumptions such as requirements of the relevant legal
and regulatory framework, and the timing, extent and costs of required decommissioning and restoration
activities. Actual costs may differ from these estimates.
As at June 30, 2012 and 2011, the Company has no material decommissioning and restoration provision.
(c)
Deferred Tax Assets
Deferred tax assets, including those arising from tax loss carry-forwards, require management to assess
the likelihood that the Company will generate sufficient taxable earnings in future periods in order to
utilize recognized deferred tax assets. Assumptions about the generation of future taxable profits depend
on management’s estimates of future cash flows. In addition, future changes in tax laws could limit the
ability of the Company to obtain tax deductions in future periods. To the extent that future cash flows
and taxable income differ significantly from estimates, the ability of the Company to realize the net
deferred tax assets recorded at the reporting date could be impacted.
NOTE 4 – RECENT ACCOUNTING PRONOUNCEMENTS
The following IFRS standards have been recently issued by the IASB or the IFRIC. The Company is assessing
the impact of these new standards, but does not expect them to have a significant effect on the financial
statements. Pronouncements that are not applicable or do not have a significant impact to the Company have
been excluded herein.
(a)
IFRS 7, Financial Instruments: Disclosures, and IAS 32, Financial Instruments: Presentation
The IASB has issued amendment to IFRS 7, Financial Instruments: Disclosures (“IFRS 7”) and IAS 32,
Financial Instruments: Presentation (“IAS 32”), requiring incremental disclosures regarding transfers of
financial assets and clarity of an entity’s ability to offset financial assets and financial liabilities. The
amendments to IFRS 7 are effective for annual periods beginning on or after July 1, 2013, and the
amendments to IAS 32 are effective for annual periods beginning on or after July 1, 2014. The Company
will apply the amendment at the beginning of its 2013 financial year. The Company does not expect the
implementation to have a significant impact on the Company’s disclosures.
(b)
IFRS 9, Financial Instruments
The IASB has issued a new standard, IFRS 9, “Financial Instruments” (“IFRS 9”), which will replace
IAS 39, “Financial Instruments: Recognition and Measurement” (“IAS 39”). The replacement of IAS 39
is a multi-phase project with the objective of improving and simplifying the reporting for financial
instruments and the issuance of IFRS 9 is part of the first phase of this project. IFRS 9 uses a single
approach to determine whether a financial asset or liability is measured at amortized cost or fair value,
replacing the multiple rules in IAS 39.
13
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 4 – RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
(b) IFRS 9, Financial Instruments (Continued)
For financial assets, the approach in IFRS 9 is based on how an entity manages its financial instruments in
the context of its business model and the contractual cash flow characteristics of the financial assets. IFRS
9 requires a single impairment method to be used, replacing multiple impairment methods in IAS 39. For
financial liabilities measured at fair value, fair value changes due to changes in an entity’s credit risk are
presented in other comprehensive income. IFRS 9 is effective for annual periods beginning on or after
January 1, 2015. The Company does not expect the implementation to have a significant impact on the
Company’s results of operations, financial position, and disclosures.
(c) IFRS 13, Fair Value Measurement
IFRS 13, Fair Value Measurement (“IFRS 13”) is effective for annual periods beginning on or after
January 1, 2013. IFRS 13 defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. The
standard also establishes a framework for measuring fair value and sets out disclosure requirements for
fair value measurements to provide information that enables financial statement users to assess the
methods and inputs used to develop fair value measurements and, for recurring fair value measurements
that use significant unobservable inputs (Level 3), the effect of the measurements on profit or loss or other
comprehensive income. The Company does not expect the implementation to have a significant impact on
the Company’s results of operations, financial position, and disclosures.
(d) IAS 1, Presentation of Items of Other Comprehensive Income
The IASB has issued an amendment to IAS 1, Presentation of Financial Statements (“IAS 1”), which
requires entities to group items presented in other comprehensive income (OCI) on the basis of whether
they might at some point be reclassified from OCI to profit or loss at a later date when specified conditions
are met. By requiring items of OCI to be grouped on this basis, their potential effect on profit or loss in
future periods will be clearer. This amendment is effective for annual periods beginning on or after
January 1, 2012 and requires full retrospective application. The Company does not expect the amendment
to have a material impact on the financial statements.
NOTE 5 – EQUIPMENT
Computer
$
COSTS:
Balance, June 30, 2010, and June 30, 2011
Additions
3,269
910
Balance, June 30, 2012
4,179
ACCUMULATED DEPRECIATION:
Balance, June 30, 2010
Depreciation
Balance, June 30, 2011
Depreciation
1,907
409
2,316
422
Balance, June 30, 2012
2,738
14
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 5 – EQUIPMENT (Continued)
$
NET BOOK VALUE:
June 30, 2010
June 30, 2011
June 30, 2012
1,362
953
1,441
NOTE 6 – EXPLORATION AND EVALUATION ASSETS
Cumulative expenditures incurred by the Company on its properties are summarized as follows:
Hook Lake Project
Saskatchewan,
Canada
(a)
$
Angie Property
Yukon,
Canada
(b)
$
Balance, June 30, 2010
-
72,688
Exploration Costs
Consulting and geological fees
Equipment and related costs
Field costs
Travel and accommodation
Wages and contract work
-
10,157
54,278
3,705
4,801
21,627
-
94,568
-
167,256
9,757
9,318
-
19,075
-
19,075
167,256
Balance, June 30, 2011
Acquisition costs
Consulting and geological fees
Professional and regulatory fees
Balance, June 30, 2012
(a) Hook Lake Project, Saskatchewan, Canada
On April 12, 2012, the Company entered into an option agreement with Geomode Mineral Exploration
Ltd. (“Geomode”) for the exclusive right and option to acquire a 100% interest in the Hook Lake property,
a prospective uranium project located in Saskatchewan. As consideration, the Company agreed to pay an
aggregate of $1,015,000, issue 150,000 common shares, and incur in exploration and development
expenditures a total of $871,248 or pay to Geomode a further $871,248 over a period of 3 years as
follows:
15
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 6 – EXPLORATION AND EVALUATION ASSETS (Continued)
(a) Hook Lake Project, Saskatchewan, Canada (Continued)
Within 5 days of Exchange approval
On or before April 12, 2013
On or before April 12, 2014
On or before April 12, 2015
(1)
Cash
$
15,000
-
Number of
Common
shares
(1)
150,000
-
(1)
Work
commitment
or cash
payments to
Geomode
$
60,624
1,000,000
-
60,624
750,000
1,015,000
150,000
871,248
Paid and issued subsequent to June 30, 2012, upon approval of the Exchange on July 27, 2012.
A 1% net smelter return (“NSR”) shall be reserved to Geomode which may be purchased at any time by
the Company for $1,000,000 less all amounts previously received by Geomode as NSR payments.
(b) Angie Property, Yukon, Canada
On November 16, 2009, the Company entered into a Letter Agreement with Full Metal Minerals Ltd.
(“Full Metal”) whereby the Company may earn a 60% interest in Full Metal’s Angie Property comprising
of 200 mining claims located in the Yukon Territory. As consideration, the Company agreed to pay
$150,000, issue 400,000 common shares and incur aggregate exploration expenditures of $3,000,000 over
a period of four years. During the year ended June 30, 2010, the Company paid $25,000 and issued
100,000 common shares to Full Metal valued at $11,000. In addition, the Company incurred $36,688 of
professional and regulatory expenses related to this transaction.
During the year ended June 30, 2011, the Company decided not to pursue its option agreement with Full
Metal. The Company is no longer obligated to make further cash payments, share issuances nor incur
further exploration costs on the Angie Property pursuant to the terms of the option agreement.
NOTE 7 – SHARE CAPITAL
(a) Authorized
The Company is authorized to issue an unlimited number of voting common shares without par value.
(b) Issued Share Capital
At June 30, 2012, there were 15,890,000 issued and fully paid common shares (June 30, 2011 –
15,890,000; July 1, 2010 – 15,890,000).
(c) Escrow Shares
As of June 30, 2012, the Company has 920,000 common shares held in escrow (June 30, 2011 – 1,851,000;
July 1, 2010 – 2,771,000).
16
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 7 – SHARE CAPITAL (Continued)
(d) Share-Based Payments
The Company has an incentive stock option plan, which provides that the Board of Directors of the
Company may from time to time, at its discretion, and in accordance with the Exchange requirements, grant
to directors, officers, employees, and consultants to the Company, non-transferable options to purchase
common shares, provided that the number of common shares reserved for issuance will not exceed 10% of
the issued and outstanding common shares of the Company.
A summary of the status of the options outstanding follows:
Number of
Options
Weighted
Average
Exercise Price
$
Balance, June 30, 2010
1,733,000
0.16
Granted
Expired
385,000
(385,000)
0.11
0.19
Balance, June 30, 2012 and 2011
1,733,000
0.14
The following table summarizes the stock options outstanding as at June 30, 2012:
Exercise
Price
$
0.15
0.15
0.21
0.10
0.11
Number of
Options
Outstanding
(i)
926,667
144,000
138,333
139,000
385,000
Expiry Date
Number of
Options
Exercisable
October 29, 2017
October 29, 2017
August 1, 2013
April 1, 2020
May 31, 2021
926,667
144,000
138,333
139,000
288,750
1,733,000
(i)
1,636,750
These stock options were granted to two charitable organizations.
During the year ended June 30, 2012, the Company recognized share-based payments of $17,686 (2011 –
$12,186) for stock options vested during the year.
The weighted average contractual life remaining for the outstanding stock options as at June 30, 2012, is
5.95 years.
17
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 7 – SHARE CAPITAL (Continued)
(d) Share-Based Payments (Continued)
The fair values of the stock options granted were estimated using the Black-Scholes option pricing model
with the following weighted average assumptions:
Risk free interest rate
Expected dividend yield
Expected stock price volatility
Expected life
2012
2011
-
2.18%
0%
94.85%
5.38 years
Option pricing models require the input of highly subjective assumptions. The volatility assumption is
based on an analysis of historical volatility over a period equivalent to the expected life of the equity
instruments. Changes in the subjective input assumptions can materially affect the fair value estimate, and
therefore the existing models may not necessarily provide a single reliable measure of the fair value of
stock options.
(e) Share Purchase Warrants
Each whole warrant entitles the holder to purchase one common share of the Company. A summary of the
status of the warrants outstanding follows:
Balance, June 30, 2011 and 2010
Expired
Balance, June 30, 2012
Number of
Warrants
Weighted
Average
Exercise Price
$
1,389,999
0.12
(1,389,999)
0.12
-
-
18
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 8 – RELATED PARTY TRANSACTIONS
(a) Related Party Transactions
The Company incurred the following transactions with companies having directors and officers in
common:
Office, rent and administration costs paid or accrued to
companies having directors and officers in common (i)
Legal fees and share issuance costs paid or accrued to a
company controlled by an officer of the Company
Shareholder communications paid to a company having a
director and officers in common
Project evaluation costs paid or accrued to a company
controlled by a director of the Company
(i)
2012
$
2011
$
45,000
56,800
14,018
6,485
-
20,602
30,220
-
89,238
83,887
Of these fees, $14,400 was paid to the CFO of the Company (Note 8(b)(i)).
(b) Compensation of Key Management Personnel
The Company’s key management personnel have authority and responsibility for planning, directing, and
controlling the activities of the Company and consist of its Directors, Chief Executive Officer, and Chief
Financial Officer.
Short-term benefits – Management Fees (i)
Share-based payments (ii)
31,400
12,791
5,931
44,191
5,931
(i)
Short-term benefits include consulting and management fees.
(ii)
Share-based payments is the fair value of options granted and vested to key management personnel
under the Company’s stock option plan (Note 7(d)).
19
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 8 – RELATED PARTY TRANSACTIONS (Continued)
(c) Related Party Balances
The following related party amounts are included in (i) accounts payable and accrued liabilities and (ii)
prepaid expenses and deposits:
(i) Companies controlled by directors and an officer of the
Company
(ii) Companies having a director and officers in common
June 30,
2012
$
June 30,
2011
$
24,441
-
6,500
1,500
These transactions are in the normal course of operations and are measured at the fair value amount of
consideration established and agreed to by the related parties. Any amounts due to related parties are
unsecured, non-interest bearing, and have no specific repayment terms.
NOTE 9 – INCOME TAXES
(a) Reconciliation of Effective Tax Rate
Income tax expense (recovery) differs from the amounts computed by applying the combined federal and
provincial income tax rate of 25.75% (2011 – 27.50%) to pre-tax loss as a result of the following:
Loss before income taxes
Computed expected income tax recovery
Deferred tax assets not recognized
Effect of Change in Tax Rates
Permanent difference
Other
Income tax expense (recovery)
2012
$
2011
$
(315,760)
(281,084)
(81,308)
98,929
2,968
5,973
(26,562)
(77,298)
34,825
3,482
4,588
34,403
-
-
20
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 9 – INCOME TAXES (Continued)
(b) Deferred Income Tax Assets and Liabilities
Deferred tax assets have not been recognized in respect of the following items:
2012
$
2011
$
Non-capital losses carry-forward
Share issuance cost
Exploration and evaluation assets
Equipment
202,284
473
18,423
684
99,896
11,920
10,539
579
Unrecognized deferred tax assets
221,864
122,934
(c) Non-Capital Losses
As at June 30, 2012, the Company has non-capital losses of $809,137 which may be applied to reduce
taxable income of future years. These non-capital losses expire as follows:
Year
$
2026
2027
2028
2029
2030
2031
2032
1,933
46,286
19,493
109,260
80,088
215,212
336,865
809,137
Future tax benefits which may arise as a result of these losses have not been recognized in these financial
statements and have been offset by a valuation allowance due to the uncertainty of their realization.
In addition, the Company has cumulative resource pools of $73,691 which can be carried forward
indefinitely to offset future resource profits.
21
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 10 – FINANCIAL RISK MANAGEMENT
(a) Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, interest receivable, and
accounts payable and accrued liabilities. The carrying values of these financial instruments approximate
their fair values because of their short term nature and/or the existence of market related interest rates on
the instruments.
IFRS requires disclosures about the inputs to fair value measurements, including their classification within
a hierarchy that prioritizes the inputs to fair value measurement. 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 Company has no financial instrument assets or liabilities recorded in the statements of financial
position at fair value.
The following table summarizes the classification, carrying values and fair value hierarchy of the
Company’s financial instruments:
Carrying value
Fair value
hierarchy
Amortized cost
Amortized cost
N/A
N/A
June 30,
2012
$
June 30,
2011
$
July 1,
2010
$
1,092,557
9,362
1,371,446
10,698
1,646,924
5,521
1,101,919
1,382,144
1,652,445
46,668
15,443
15,322
Financial assets
Loans and receivables
Cash and cash equivalents
Interest receivable
Financial liabilities
Other financial liabilities
Accounts payable and accrued
liabilities
Amortized cost
N/A
(b) Financial Instruments Risk
The Company is exposed in varying degrees to a variety of financial instrument related to risks. The
Board approves and monitors the risk management processes:
(i)
Credit Risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails
to meet its contractual obligations. The Company is subject to credit risk on the cash balances at the
bank, its short-term bank Guaranteed Investment Certificates (“GICs”), and interest receivable. Cash
and cash equivalents consisting of GICs have been invested with Schedule 1 banks or equivalents,
with its cash held in Canadian based banking institutions, authorized under the Bank Act to accept
deposits, which may be eligible for deposit insurance provided by the Canadian Deposit Insurance
Corporation. Management considers that risks related to credit are minimal.
22
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 10 – FINANCIAL RISK MANAGEMENT (Continued)
(b) Financial Instruments Risk (Continued)
(ii)
Liquidity Risk
The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to
settle obligations and liabilities when due. As at June 30, 2012, the Company had cash and cash
equivalents of $1,092,557 to settle current liabilities of $46,668 which mainly consisted of accounts
payable that were considered short term and settled within 30 days.
The Company is dependent on the availability of credit from its suppliers and its ability to generate
sufficient funds from equity and debt financing to meet current and future obligations. There can be
no assurance that such financing will be available on terms acceptable to the Company (Note 1).
(iii) Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates.
The Company’s short-term investments are invested in GICs with greater than 90 day terms but not
greater than one year. These GICs have a fixed interest rate for the term of the deposit. The interest
on cash and GICs is typical of Canadian banking rates, which are low at present and the conservative
investment strategy mitigates the risk of deterioration to the investment. A change of 100 basis
points in the interest rates would not be material to the financial statements.
(c) Capital Management
The Company manages its share capital as capital, which as at June 30, 2012, totaled $1,837,145 (2011 –
$1,837,145).
The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a
going concern such that it can continue to provide returns for shareholders and benefits for other
stakeholders. The management of the capital structure is based on the funds available to the Company in
order to support the acquisition, exploration, and development of mineral properties and to maintain the
Company in good standing with the various regulatory authorities. In order to maintain or adjust its
capital structure, the Company may issue new shares or debt, or dispose of assets.
The Company’s historical sources of capital have consisted of the sale of equity securities and interest
income. In order for the Company to carry out planned exploration and development and pay for
administrative costs, the Company will spend its working capital and expects to raise additional amounts
externally as needed.
The Company has no debt and is not subject to externally imposed capital requirements.
There were no changes in the Company’s management of capital during the years ended June 30, 2012 and
2011.
23
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 11 – TRANSITION TO IFRS
The Company adopted IFRS on July 1, 2011, with the transition date of July 1, 2010, representing the
Company’s opening IFRS balance sheet. Prior to the adoption of IFRS, the Company prepared its financial
statements in accordance with Canadian GAAP. The accounting policies set out in Note 2 have been applied
in preparing the financial statements for the years ended June 30, 2012 and 2011, and in the preparation of the
opening IFRS balance sheet as at July 1, 2010.
The Company applied IFRS 1, First-time Adoption of IFRS, in preparing these first IFRS financial statements.
In preparing the opening IFRS statement of financial position, the Company adjusted amounts previously
reported in the financial statements prepared in accordance with GAAP. This note explains the principal
adjustments made by the Company in restating its GAAP balance sheet as at July 1, 2010, and its previously
published GAAP financial statements for the year ended June 30, 2011.
Elected exemption from full retrospective application:
IFRS generally requires first-time adopters to retrospectively apply all IFRS standards and interpretations
currently in effect; however, IFRS 1 provides certain exceptions and exemptions to this general principle. On
adoption of IFRS 1, the Company elected to apply the following transition exemption to full retrospective
application of IFRS:
IFRS 2 – Share-Based Payment
IFRS 1 provides an exemption that allows first-time adopters to not apply standards for share-based
payments under IFRS for equity instruments that were granted prior to November 7, 2002 and to
equity instruments that were granted after November 7, 2002 that have vested prior to transition to
IFRS. The Company has elected to utilize this exemption and did not apply IFRS 2 to awards that
vested prior to July 1, 2010, which have been accounted for in accordance with GAAP.
Mandatory exception to retrospective application:
IFRS 1 also outlines specific guidelines that a first-time adopter must adhere to under certain circumstances.
The Company has applied the following guidelines to its opening statement of financial position as at July 1,
2010:
Estimates
In accordance with IFRS 1, an entity’s estimates under IFRS at the date of transition to IFRS must be
consistent with estimates made for the same date under previous GAAP applied, unless there is
objective evidence that those estimates were in error. The Company’s IFRS estimates as at July 1,
2010, are consistent with its previous estimates under GAAP for the same date.
Reconciliation between GAAP and IFRS:
IFRS 1 requires reconciliation disclosures that explain how the transition from GAAP to IFRS has affected the
Company’s previously reported financial statements prepared in accordance with previous GAAP for the year
ended June 30, 2011. An explanation of how the transition from previous GAAP to IFRS has affected the
Company’s financial position is set out in the following notes and accompanying tables:
(a)
Reserves
Under GAAP, amounts recorded in relation to the fair value of stock options granted and warrants
issued were recorded to contributed surplus. Under IFRS, these amounts have been reclassified within
equity as reserves.
24
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 11 – TRANSITION TO IFRS (Continued)
(b) Flow-Through Shares
Under GAAP, the full proceeds received from the issuance of the flow-through shares was recorded to
share capital and a share issuance expense related to the deferred tax liability was recorded at the time the
eligible expenditures were renounced to investors.
Under IFRS, the premium paid for flow-through shares in excess of the value of common shares with no
flow-through feature is credited to a deferred liability account. As eligible expenditures are incurred, the
deferred gain is amortized into earnings for the period.
Additionally, a deferred tax liability and expense are recorded as the eligible expenditures are incurred and
renounced to the flow-through shareholders. At the same time as the deferred tax liability is recorded, the
Company releases a corresponding amount of its deferred income tax asset valuation allowance resulting
in an equal and offsetting reduction to the deferred tax liability and expense.
The effect of the change to June 30, 2011, was to increase share capital and deficit by $31,275.
The Company has sufficient deferred tax assets, primarily loss carry-forwards, to reduce the tax effect of
the renunciations to $Nil at June 30, 2011.
There was no impact at July 1, 2010.
(c) Share-Based Payments
Under GAAP, the Company recognized an expense related to share-based payments on a straight-line
basis through the date of full vesting and did not incorporate a forfeiture multiple on the grant date.
Under IFRS, the Company is required to recognize the expense over the individual vesting periods for the
graded vesting awards and estimate a forfeiture rate. The Company elected to use the IFRS exemption
whereby the liabilities for share-based payments that had vested or settled prior to July 1, 2010, were not
required to be retrospectively restated. As at July 1, 2010, the impact of share-based payments for
unvested stock options was assessed as insignificant and accordingly, no fair value adjustment was made.
Subsequent to transition, the Company has assessed the impact of share-based payments being
insignificant at June 30, 2011 and no adjustments were made.
(d) Forfeited or Expired Options and Warrants
Under GAAP, the Company’s policy was to leave the value recorded for forfeited or expired unexercised
stock options and warrants in contributed surplus.
On transition to IFRS, the Company elected to change its accounting policy for the treatment of forfeited
or expired unexercised options and warrants whereby amounts recorded for forfeited or expired
unexercised stock options and warrants are transferred to deficit or share capital.
Accordingly, upon conversion to IFRS at July 1, 2010, the value assigned to forfeited options of $39,612
and expired agents’ options of $64,300 had been reclassified from reserves to deficit and share capital,
respective. Subsequent to transition, the value assigned to forfeited options of $58,685 had been
reclassified from reserves to deficit as at June 30, 2011.
25
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 11 – TRANSITION TO IFRS (Continued)
(e)
Exploration and Evaluation of Mineral Resources
Under GAAP, the Company capitalized the costs of acquiring interests in mineral rights and exploration
and evaluation expenditures in respect of projects that are in the exploration or pre-development stage.
On transition to IFRS, the Company elected to change its accounting policy to expense exploration and
evaluation expenditures, the costs of acquiring interests in mineral rights and administrative and land
use costs incurred prior to commercial feasibility of mining operations being established. As a result of
this change, capitalized exploration and evaluation assets decreased and deficit increased by $72,688 as
at July 1, 2010, as compared to amounts previously reported.
26
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 11 – TRANSITION TO IFRS (Continued)
IFRS Reconciliation of the Statements of Financial Position
As at July 1, 2010
IFRS
$
Canadian
GAAP
$
Effect of
Transition
to IFRS
$
IFRS
$
-
1,646,924
5,521
1,539
1,371,446
10,698
3,472
-
1,371,446
10,698
3,472
1,500
-
1,500
1,500
-
1,500
1,655,484
-
1,655,484
1,387,116
-
1,387,116
1,362
-
1,362
953
-
953
72,688
(72,688)
-
-
-
-
74,050
(72,688)
1,362
953
-
953
1,729,534
(72,688)
1,656,846
1,388,069
-
1,388,069
15,322
-
15,322
15,443
-
15,433
(b),(d)
(a),(d)
1,772,845
-
64,300
203,039
1,837,145
203,039
1,741,570
-
95,575
156,540
1,837,145
156,540
(a)
(b),(d),(e)
306,951
(365,584)
(306,951)
(33,076)
(398,660)
319,137
(688,081)
(319,137)
67,022
(621,059)
1,714,212
(72,688)
1,641,524
1,372,626
-
1,372,626
1,729,534
(72,688)
1,656,846
1,388,069
-
1,388,069
Note
ASSETS
CURRENT
Cash and cash
equivalents
Interest receivable
HST/GST recoverable
Prepaid expenses and
deposits
Equipment
Exploration and
evaluation asset
(e)
LIABILITY
CURRENT
Accounts payable and
accrued liabilities
Canadian
GAAP
$
Effect of
Transition
to IFRS
$
1,646,924
5,521
1,539
As at June 30, 2011
SHAREHOLDERS’ EQUITY
Share capital
Reserves
Contributed surplus
Deficit
27
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 11 – TRANSITION TO IFRS (Continued)
IFRS Reconciliation of the Statement of Comprehensive Loss
Year ended June 30, 2011
GAAP
$
Effect of
Transition
to IFRS
$
IFRS
$
409
38,700
72,775
18,587
11,197
12,186
29,255
18,970
94,568
-
409
38,700
94,568
72,775
18,587
11,197
12,186
29,255
18,970
(202,079)
(94,568)
(296,647)
15,563
(167,256)
167,256
15,563
-
(353,772)
72,688
(281,084)
31,275
(31,275)
-
NET LOSS AND COMPREHENSIVE LOSS
(322,497)
41,431
(281,084)
BASIC AND DILUTED LOSS PER SHARE
(0.02)
-
(0.02)
15,890,000
-
15,890,000
Note
EXPENSES
Depreciation
Consulting fees
Exploration and evaluation
Office, rent and administration
Professional fees
Regulatory fees
Share-based payments
Transfer agent and shareholder information
Travel and promotion
(e)
LOSS BEFORE OTHER ITEM
Interest income
Impairment of exploration and evaluation asset
(e)
LOSS BEFORE INCOME TAXES
Future income tax recovery
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
(b)
28
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 11 – TRANSITION TO IFRS (Continued)
IFRS Reconciliation of the Statement of Cash Flow
Year ended June 30, 2011
Note
GAAP
$
Effect of
Transition
to IFRS
$
IFRS
$
(322,497)
41,413
(281,084)
409
12,186
(31,275)
167,256
31,275
(167,256)
409
12,186
-
(5,177)
(1,933)
121
-
(5,177)
(1,933)
121
(180,910)
(94,568)
(275,478)
(94,568)
94,568
-
DECREASE IN CASH AND CASH
EQUIVALENTS
(275,478)
-
(275,478)
Cash and cash equivalents, beginning of year
1,646,924
-
1,646,924
CASH AND CASH EQUIVALENTS,
END OF YEAR
1,371,446
-
1,371,446
CASH WAS PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net loss for the year
Adjustments for non-cash items
Depreciation
Share-based payments
Future income tax recovery
Impairment of exploration and evaluation asset
Changes in non-cash working capital accounts
Interest receivable
HST/GST recoverable
Accounts payable and accrued liabilities
(b)
(e)
INVESTING ACTIVITIES
Exploration and evaluation assets
29
PRESCIENT MINING CORP.
Notes to the Financial Statements
For the Years Ended June 30, 2012 and 2011
NOTE 12 – COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform to the presentation adopted in the current year.
Short-term investments of $1,123,300 (June 30, 2011 – $1,350,000) were reclassified to cash and cash
equivalents as the nature of these investments comply with the accounting policy.
30
SCHEDULE “C”
Management’s Discussion and Analysis of Aurora for the Fiscal Year End of June 30, 2014
{W0251953.DOC}FORM 2A – LISTING STATEMENT
October 10, 2014
Page 54
AURORA MARIJUANA INC.
Management Discussion and Analysis
for the Period from Inception
(September 5, 2013) to June 30, 2014
as of October 8, 2014
This Management’s Discussion and Analysis (“MD&A”) relates to the financial condition and
results of operations of Aurora Marijuana Inc. (the “Company”) as of June 30, 2014, and is
intended to supplement and complement the Company’s audited consolidated financial
statements for the period from inception (September 5, 2013) to June 30, 2014. Readers are
cautioned that this MD&A contains forward-looking statements and that actual events may vary
from management’s expectations. The consolidated audited financial statements and MD&A are
presented in Canadian dollars (“CAD”), except where noted, and have been prepared in
accordance with International Financial Reporting Standards (“IFRS”). This discussion
addresses matters that the Company considers important for an understanding of the financial
condition of the Company and results of operations as of and for the period from inception
(September 5, 2013) to June 30, 2014.
The MD&A contains forward-looking statements and should be read in conjunction with the risks
discussed herein and those set out under the heading “Risk and Uncertainties”. Please also
refer to the “Cautionary Statement on Forward-Looking Information” at the end of this MD&A.
Description of Business
The Company was incorporated in under the Business Corporations Act (Alberta) on September
5, 2013. The Company’s registered and records office and head office are located at 2200,
10155 - 102 Street, Commerce Place, Edmonton, Alberta T5J 4G8.
The Company has two subsidiaries:
(1) 1755517 Alberta Ltd., incorporated under the Business Corporations Act (Alberta); and
(2) 1769474 Alberta Ltd, incorporated under the Business Corporations Act (Alberta).
The Company holds a pre-license approval granted by Health Canada and is in the final stages
of obtaining a Licensed Producer designation from Health Canada under the Marihuana for
Medical Purposes Regulations pursuant to the Controlled Drugs and Substances Act (Canada).
To date, the Company has filed its application for approval to take the first step in gaining a
Production License application, which is the Health Canada building license application to build
a growing facility. As of November 20, 2013, the Company has leased 160 acres of property at
northwest of Cremona, Alberta for a term of 12 months. The lease is automatically renewed
after 12 months for two successive terms of five years unless prior notice is given by the
Company. In the same month, the Company began construction on a custom 54,000 square
foot indoor growing, production and distribution facility (the “Facility”). Construction of the
growing facility will be completed in approximately two months from the date of this MD&A. The
Facility will be 100% compliant with the MMPR.
{W0253761.DOCX}1
The Company believes that the application answers and addresses all of the criteria imposed on
applicants and hopes to receive approval. Following building approval and completion of the
growing facility, the Company will apply for approval to begin step two of the process to obtain a
full license to be issued by Health Canada under section 25 of the MMPR (the “Production
License”). Given the management’s experience in the industry and anticipating that at this point
the Company will have completed construction of the Facility, the Company hopes to receive
approval for a Production License in October, 2014. In the event that the Company is granted a
Production License, the Company plans to be cultivating and harvesting dried marijuana by the
first half of 2015.
On September 9, 2014 the Company entered into a definitive share exchange agreement with
Aurora Cannabis Inc. (“Pubco”), a publicly listed corporation under the law of British Columbia,
and the shareholders of the Company (the “Share Exchange Agreement”). Pursuant to the
terms of the agreement, Pubco will acquire all of the issued and outstanding shares of the
Company from the shareholders of the Company in exchange for an aggregate of 60,000,000
common shares of Pubco (the "Transaction Shares") at the time of closing of the transaction
(the “Share Exchange”).
Upon the achievement of the key milestone of the Company achieving the registration of a
minimum of 2,000 patients under the Health Canada MMPR program, Pubco shall issue:
1. an aggregate of 20,000,000 common shares of Pubco (the “Pubco Shares”) on a prorata basis to the former shareholders of the Company; and
2. an aggregate of 3,750,000 warrants exercisable at $0.02 per Pubco Share to certain
former warrant holders of the Company.
As such this transaction will constitute a reverse take-over, a key result of the transaction will be
the shareholders of the Company owning publicly listed shares.
In addition, Pubco will also issue to former respective warrant and option holders of the
Company on a pro-rata basis the following:
1. an aggregate of 21,450,000 replacement warrants comprised of:
a. 10,200,000 warrants exercisable into Pubco Shares at a price of $0.50 per
Pubco Share; and
b. 11,250,000 warrants exercisable into Pubco Shares at a price of $0.02 per
Pubco Share; and
2. 4,000,000 replacement stock options exercisable into Pubco Shares at a price of $0.001
per Pubco Share
(collectively, the "Replacement Securities").
Pubco will also assume the Company's currently outstanding non-interest bearing convertible
debt in the principal amount of $1,500,000 that is convertible at $0.125 per common share.
{W0253761.DOCX}2
All Transaction Shares and Replacement Securities to be issued above are subject to strict
escrow provisions and a right of first refusal (the "ROFR") pursuant to the terms of the Share
Exchange Agreement for a period of 36 months. The replacement stock options are also subject
to the ROFR and vesting on the following schedule:
1. 1,600,000 Pubco Options on December 21, 2014;
2. 1,600,000 Pubco Options on June 21, 2015; and
3. 800,000 Pubco Options on December 21, 2015.
Overall Performance and Outlook
Outlook
The Company’s immediate objective is to raise adequate capital and to strengthen its
operational capabilities by adding technical staff and allocating a marketing budget in order to
grow and produce marijuana under the Production License and gain clientele. The primary
near-term objective is the completion of the Facility. At present, the Facility is approximately
95% complete.
While the Company seeks to manage the level of risk associated with its business, many of the
factors affecting these risks are beyond the Company’s control. There can be no assurance that
additional capital or other types of financing will be available to the Company if needed or that, if
available, the terms of such financing will be on terms favourable to the Company.
Going Concern
The Company’s ability to continue as a going concern is dependent upon its ability to
commence profitable operations and generate funds there from, and to continue to obtain
borrowings or raise equity from third parties sufficient to meet current and future obligations
and/or restructure the existing debt and payables. These conditions, combined with the loss
incurred for the period from inception (September 5, 2013) to June 30, 2014, indicate the
existence of a material uncertainty that may cast doubt about the Company's ability to continue
as a going concern. The audited consolidated financial statements do not reflect the
adjustments or reclassification of assets and liabilities which would be necessary if the
Company were unable to continue its operations. The Company has financial uncertainties that
cast significant doubt on its ability to continue as a going concern.
Developments
Subsequent to June 30, 2014, the Company issued 4,000,000 Class D stock options
member of management of the Company. The options are exercisable for one Class
each at a price of $0.001 per share for a period of three years. The options vest
tranches, 1,600,000 vest on December 21, 2014, 1,600,000 on June 21, 2015
remaining 800,000 vest December 21, 2015.
to a key
D share
in three
and the
On August 29 2014, the Company issued a non-interest bearing, unsecured, $1,500,000
convertible debenture to companies controlled by ultimate shareholders of the Company as
{W0253761.DOCX}3
settlement of the advances from related party that are unsecured, non-interest bearing, and
have no fixed terms. The debenture matures August 29, 2019 and is convertible at that time at
the option of the holder into Class A shares of the Company at a price of $0.125 per share.
Additionally, on September 9, 2014 the Company entered into the Share Exchange Agreement.
Pursuant to the terms of the agreement, Pubco will acquire all of the issued and outstanding
shares of the Company from the shareholders of the Company in exchange for the Transaction
Shares at the time of closing of the transaction.
Upon the achievement of the key milestone of the Company achieving the registration of a
minimum of 2,000 patients under the Health Canada MMPR program, Pubco shall issue:
1. an aggregate of 20,000,000 Pubco Shares on a pro-rata basis to the former
shareholders of the Company; and
2. an aggregate of 3,750,000 warrants exercisable at $0.02 per Pubco Share to certain
former warrant holders of the Company.
In addition, Pubco will also issue to former respective warrant and option holders of the
Company on a pro-rata basis the Replacement Securities.
Pubco will also assume the Company's currently outstanding non-interest bearing convertible
debt in the principal amount of $1,500,000 that is convertible at $0.125 per common share.
All Transaction Shares and Replacement Securities to be issued above are subject to strict
escrow provisions and the ROFR pursuant to the terms of the Share Exchange Agreement for a
period of 36 months. The replacement stock options are also subject to an 18 month vesting
period and ROFR.
Selected Annual Information
Overall Performance
During the period from inception (September 5, 2013) to June 30, 2014, the Company incurred
a net loss of $1,823,535. At June 30, 2014, the Company had cash and cash equivalents of
$916,767 and a working capital of $2,471,362.
Summary of Results from inception (September 5, 2013) to June 30, 2014
Operations:
Total revenue
Net income (loss)
Comprehensive income (loss)
Net income (loss) per share-diluted
Dividends per share
Balance Sheet:
Working capital (deficit)
Total assets
Total liabilities
Nil
($1,823,535)
($1,823,535)
n/a
Nil
$2,471,362
$5,491,867
$3,722,652
{W0253761.DOCX}4
(Audited)
Inception
(September 5,
2013) to June 30,
2014
Administrative expenses:
Consulting fees
Salaries, wages and benefits
Advertising and promotion
Professional fees
Travel and entertainment
Utilities
Rental
Meals and entertainment
Insurance
Donations
Telephone, fax and internet
Courier and delivery
Vehicle expenses
Miscellaneous
Compensation expense
Comprehensive loss for the period
$326,154
$109,900
$81,561
$59,646
$51,628
$43,651
$40,000
$15,166
$11,599
$5,650
$5,360
$4,620
$4,106
$788
$1,063,706
$1,823,535
Discussions of Operations – for the period from inception (September 5, 2013) to June
30, 2014
•
•
•
•
The Company recorded a loss of $1,823,535 for the period from inception (September 5,
2013) to June 30, 2014. The loss from the period was mainly due to start-up costs that
included consulting fees and salaries of employees.
Consulting expenses of the Company were $326,154 for the period from inception
(September 5, 2013) to June 30, 2014. The consulting expenses include an aggregate of
$217,187 that was paid to Delcon Industries and Evolve Concrete, which are controlled
by Dale Lesack and Chris Mayerson, respectively. Mr. Lesack and Mr. Mayerson each
hold 4,000,000 Class D common shares in the Company through the acquisition of
1755517 Alberta Ltd. The aggregate of $217,187 of these consulting fees were paid to
these two companies (for Delcon Industries and Evolve Concrete’s time working on the
construction of the Facility). The remainder of the consulting expenses were to various
other unrelated consultants.
Advertising and promotion expenses were $81,561 for the period from inception
(September 5, 2013) to June 30, 2014.
Professional fees were $59,646 for the period from inception (September 5, 2013) to
June 30, 2014 for legal and tax matters for corporate setup, and equity structure.
Summary of Quarterly Results
Not applicable as the company had not prepared financial statements for those quarters prior to
the date of this MD&A.
{W0253761.DOCX}5
Liquidity and Capital Resources
As at June 30, 2014, the Company had total assets of $5,491,867 comprising of:
1. Cash of $916,767;
2. Goods and services tax receivable of $244,523;
3. Share subscriptions receivable of $90,000;
4. Property and equipment of $4,238,047; and
5. Receivable from a shareholder of $2,530.
The Company had a working capital of $2,471,362 at June 30, 2014.
The Company will require significant cash funding to complete construction of the Facility and
begin the production and distribution programs, meet its administrative overhead costs, and
maintain its production license. This will require the Company to obtain additional financing.
During the period from inception to June 30, 2014, the Company received cash of $2,550,000
by issuing 20,400,000 shares and 10,200,000 warrants. The Company also issued 59,600,000
shares for non-cash consideration of 1,000,200 through roll-over transactions (see below
“Disclosure of Outstanding Share Data”). In addition, related parties provided $845,725.
The Company’s main source of funding has been through equity issuances. The Company will
continue to consider all sources of financing reasonably available to it, including, equity, debt,
and the sale of assets or parts of assets, including the Facility and equipment related to the
facility. There can be no assurance of continued access to finance in the future and an inability
to secure financing may require the Company to reduce or defer marijuana production activities.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Transactions between Related Parties
Key management compensation
During the current period, the Company paid consulting fees to companies owned by
management personnel who are also ultimate shareholders. Of the $217,187 of consulting fees
incurred in the current period, $37,601 is included in trade and other payables at period-end.
On May 1, 2014, the Company acquired 100% of the issued and outstanding shares of 1755517
Alberta Ltd., a private company (the "Transaction") in exchange for 8,000,000 Class D
common shares of the Company. The consideration of 8,000,000 Class D common shares was
valued at $1,000,000 and paid to the same parties as above. At May 1, 2014, 175517 Alberta
Ltd. had a net deficit of $21,156, creating a net compensation expense of $1,021,156 as a result
of this transaction.
{W0253761.DOCX}6
Transactions with ultimate shareholders
During the current period, the Company incurred various expenses totaling $267,804 from a
company owned by ultimate shareholders.
During the current period, the Company capitalized $330,742 of building costs, $5,616 of
computer software and $4,941 of computer equipment for property, plant and equipment
purchased from companies owned by ultimate shareholders.
Advances from related party are owing to a company controlled by ultimate shareholders of the
Company. Advances are unsecured, non-interest bearing, and have no fixed terms of
repayment.
Proposed Transactions
On August 29 2014, the Company issued a non-interest bearing, unsecured, $1,500,000
convertible debenture to companies controlled by ultimate shareholders of the Company as
settlement of the advances from related party that are unsecured, non-interest bearing, and
have no fixed terms. The debenture matures August 29, 2019 and is convertible at that time at
the option of the holder into Class A shares of the Company at a price of $0.125 per share.
Additionally, on September 9, 2014 the Company entered into the Share Exchange Agreement.
Pursuant to the terms of the agreement, Pubco will acquire all of the issued and outstanding
shares of the Company from the shareholders of the Company in exchange for the Transaction
Shares at the time of closing of the transaction.
Upon the achievement of the key milestone of the Company achieving the registration of a
minimum of 2,000 patients under the Health Canada MMPR program, Pubco shall issue:
1. an aggregate of 20,000,000 Pubco Shares on a pro-rata basis to the former
shareholders of the Company; and
2. an aggregate of 3,750,000 warrants exercisable at $0.02 per Pubco Share to certain
former warrant holders of the Company.
In addition, Pubco will also issue to former respective warrant and option holders of the
Company on a pro-rata basis the Replacement Securities.
Pubco will also assume the Company's currently outstanding non-interest bearing convertible
debt in the principal amount of $1,500,000 that is convertible at $0.125 per common share.
All Transaction Shares and Replacement Securities to be issued above are subject to strict
escrow provisions and the ROFR pursuant to the terms of the Share Exchange Agreement for a
period of 36 months. The replacement stock options are also subject to an 18 month vesting
period and ROFR. The transaction is contingent on Pubco resuming listing on the Canadian
Securities Exchange (the “CSE”).
{W0253761.DOCX}7
Critical Accounting Estimates
The preparation of the Company’s consolidated financial statements requires management to
make judgments, estimates and assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date.
However, uncertainties about these assumptions and estimates could result in outcomes that
would require a material adjustment to the carrying amount of the asset or liability affected in the
future.
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 revision
affects only that period, or in the period of the revision and future periods if the revision affects
both current and future periods.
In particular, information about significant areas of estimation uncertainty and critical judgments
in applying accounting policies that have the most significant effect on the amount recognized in
the consolidated financial statements are as follows:
Share purchase warrants
The fair value of share purchase warrants are estimated using the Black-Scholes option pricing
model. This valuation model requires the input of highly subjective assumptions including the
expected stock price volatility, expected lives of the options, expected dividends to be paid by
the Company and risk-free interest rates. The assumptions used are described in Note 11 of the
Company’s consolidated financial statements. As the Company’s warrants have characteristics
significantly different from those of traded instruments and because changes in the input
assumptions can materially affect the fair value estimate, such value is subject to measurement
uncertainty.
Acquisition of 1755517 Alberta Ltd.
Note 6 of the Company’s consolidated financial statements details the Company's transaction
with 1755517 Alberta Ltd. Management's significant judgements in relation to this transaction
include the determination of whether 1755517 Alberta Ltd. constitutes a business in accordance
with IFRS 3; whether the transaction was with employees or those providing similar services in
accordance with IFRS 2; and whether the transaction resulted in the acquisition of intangible
assets in accordance with IAS 38.
Future income taxes
The calculation of future income tax is based on assumptions, which are subject to uncertainty
as to timing and which tax rates are expected to apply when temporary differences reverse.
Future income tax recorded is also subject to uncertainty regarding the magnitude on noncapital losses available for carry forward and of the balances in various tax pools as the
corporate tax returns have not been prepared as of the date of financial statement preparation.
By their nature, these estimates are subject to measurement uncertainty, and the effect on the
consolidated financial statements from changes in such estimates in future periods could be
material. The value of tax losses at June 30, 2014 has not been recognized in these
{W0253761.DOCX}8
consolidated financial statements due to uncertainty of future utilization. Further details are
contained in Note 13 of the Company’s consolidated financial statements.
Property, plant and equipment
Capitalization of development cost of property, plant and equipment is based on management’s
judgment of eligibility of expenditures made relating to the construction of the building in relation
to IAS 16. In determining the amounts to be capitalized, management estimates the amount of
certain expenditures incurred to be capitalized as opposed to recognized as a period cost.
Changes in Accounting Policies
Refer to the audited consolidated financial statements for the period from inception (September
5, 2013) to June 30, 2014 for a summary of significant accounting policies.
Standards issued but not yet effective
The Company has not yet applied the following new standards, interpretations and amendments
that have been issued as at June 30, 2014 but were not yet effective. Unless otherwise stated,
the Company does not plan to early adopt any of these new or amended standards and
interpretations.
IFRS 9 Financial instruments
IFRS 9 was issued in November 2009 and subsequently amended as part of an ongoing project
to replace IAS 39 Financial instruments: Recognition and measurement. The standard requires
classification of financial assets into two measurement categories based on the entity’s
business model for managing its financial instruments and the contractual cash flow
characteristics of the instrument. The categories are those measured at fair value and those
measured at amortized cost.
The classification and measurement of financial liabilities is primarily unchanged from IAS 39.
However, for financial liabilities measured at fair value, changes in the fair value attributable to
changes in an entity’s “own credit risk” is now recognized in other comprehensive income
instead of loss. This new standard will also impact disclosures provided under IFRS 7 Financial
instruments: disclosures. The Company has not yet determined the impact of this amendment
on its consolidated financial statements.
In November 2013, the IASB amended IFRS 9. The amendments result in significant changes
to hedge accounting. In addition, an entity can now apply the “own credit requirement” in
isolation without the need to change any other accounting for financial instruments. The
mandatory effective date of January 1, 2015 has been removed to provide sufficient time for
preparers of financial statements to make the transition to the new requirements. The Company
has not yet determined the impact of this amendment on its consolidated financial statements.
IFRS 2 Share-based payment
The amendment to IFRS 2, issued in December 2013, clarifies the definition of “vesting
conditions”, and separately defines a “performance condition” and a “service condition”. A
{W0253761.DOCX}9
performance condition requires the counterparty to complete a specified period of service and to
meet a specified performance target during the service period. A service condition solely
requires the counterparty to complete a specified period of service. The amendments are
effective for share-based payment transactions for which the grant date is on or after July 1,
2014. The Company has not yet determined the impact of this amendment on its consolidated
financial statements.
IFRS 3 Business combinations
The amendment to IFRS 3, issued in December 2013 clarify the accounting for contingent
consideration in a business combination. At each reporting period, an entity measures
contingent consideration classified as an asset or a financial liability at fair value, with changes
in fair value recognized in loss. The amendments are effective for business combinations for
which the acquisition date is on or after July 1, 2014. The Company has not yet determined the
impact of this amendment on its consolidated financial statements.
IAS 16 Property, plant and equipment and IAS 38 Intangible assets
The amendments to IAS 16 and IAS 38, issued in December 2013, clarify how an entity
calculates the gross carrying amount and accumulated depreciation when a revaluation is
performed. The amendments are effective for annual periods beginning on or after July 1, 2014.
The Company has not yet determined the impact of this amendment on its consolidated
financial statements.
IAS 24 Related party disclosures
The amendments to IAS 24, issued in December 2013, clarify that a management entity, or any
member of a group of which it is a part, that provides key management services to a reporting
entity, or its parent, is a related party of the reporting entity. The amendments also require an
entity to disclose amounts incurred for key management personnel services provided by a
separate management entity. This replaces the more detailed disclosure by category required
for other key management personnel compensation. The amendments will only affect disclosure
and are effective for annual periods beginning on or after July 1, 2014.
IAS 36 Impairment of assets
The amendments to IAS 36, issued in May 2013, require:
• Disclosure of the recoverable amount of impaired assets; and
• Additional disclosures about the measurement of the recoverable amount when the
recoverable amount is based on fair value less costs of disposal, including the discount
rate when a present value technique is used to measure the recoverable amount.
The amendments will only affect disclosure and are effective for annual periods beginning on or
after January 1, 2014.
Financial Instruments and Other Instruments
The Company as part of its operations carries a number of financial instruments. It is
management's opinion that the Company is not exposed to significant interest, currency or
credit risks arising from these financial instruments except as otherwise disclosed.
{W0253761.DOCX}10
Credit risk
Credit risk is the risk of financial loss because a counter party to a financial instrument fails to
discharge its contractual obligations.
The carrying amount of the Company’s financial instruments best represents the maximum
exposure to credit risk.
Fair value of financial instruments
Cash and cash equivalents are stated at fair value and classified within Level 1 of the fair value
hierarchy. The fair value of share subscriptions receivable, receivable from shareholders,
accounts payable and accrued liabilities and advances from related party is approximated by
their carrying amount due to their short term nature.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations
associated with financial liabilities that are settled by delivery of cash or another financial asset.
The Company enters into transactions to purchase goods and services on credit and borrow
funds from related party creditors for which repayment is required at various maturity dates.
Liquidity risk is measured by reviewing the Company’s future net cash flows for the possibility of
negative net cash flow.
The Company manages its liquidity risk monitoring cash flows and ensuring adequate resources
are available from creditors to meet current needs.
Basis of Presentation
Basis of measurement
The consolidated financial statements have been prepared in the historical basis except for
certain financial instruments measured at fair value.
Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars, which is the
Company’s functional currency. All financial information presented in Canadian dollars has been
rounded to the nearest dollar.
Significant accounting judgments, estimates and assumptions
The preparation of the Company’s consolidated financial statements requires management to
make judgments, estimates and assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date.
However, uncertainties about these assumptions and estimates could result in outcomes that
{W0253761.DOCX}11
would require a material adjustment to the carrying amount of the asset or liability affected in the
future.
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 revision
affects only that period, or in the period of the revision and future periods if the revision affects
both current and future periods.
In particular, information about significant areas of estimation uncertainty and critical judgments
in applying accounting policies that have the most significant effect on the amount recognized in
the consolidated financial statements are as follows:
Share purchase warrants
The fair value of share purchase warrants are estimated using the Black-Scholes option pricing
model. This valuation model requires the input of highly subjective assumptions including the
expected stock price volatility, expected lives of the options, expected dividends to be paid by
the Company and risk-free interest rates. The assumptions used are described in Note 11. As
the Company’s warrants have characteristics significantly different from those of traded
instruments and because changes in the input assumptions can materially affect the fair value
estimate, such value is subject to measurement uncertainty.
Acquisition of 1755517 Alberta Ltd.
The management's significant judgments in relation to this transaction include the determination
of whether 1755517 Alberta Ltd. constitutes a business in accordance with IFRS 3; whether the
transaction was with employees or those providing similar services in accordance with IFRS 2;
and whether the transaction resulted in the acquisition of intangible assets in accordance with
IAS 38.
Future income taxes
The calculation of future income tax is based on assumptions, which are subject to uncertainty
as to timing and which tax rates are expected to apply when temporary differences reverse.
Future income tax recorded is also subject to uncertainty regarding the magnitude on noncapital losses available for carry forward and of the balances in various tax pools as the
corporate tax returns have not been prepared as of the date of financial statement preparation.
By their nature, these estimates are subject to measurement uncertainty, and the effect on the
consolidated financial statements from changes in such estimates in future periods could be
material. The value of tax losses at June 30, 2014 have not been recognized in these
consolidated financial statements due to uncertainty of future utilization. Further details are
contained in Note 13.
Property, plant and equipment
Capitalization of development cost of property, plant and equipment is based on management’s
judgment of eligibility of expenditures made relating to the construction of the building in relation
to IAS 16. In determining the amounts to be capitalized, management estimates the amount of
certain expenditures incurred to be capitalized as opposed to recognized as a period cost.
{W0253761.DOCX}12
Other MD&A Requirements
Additional Information
Additional information relating to the Company will be available on the Company’s website at
www.auroramj.com.
Directors and Officers (as at June 30, 2014):
• Stephen Dobler, President and Director.
• Terry Booth, Chief Executive Officer and Director.
Company Contact:
Terry Booth at telephone: 1 (844) 928-7672 or by email at [email protected]
Approval
The Board of Directors of the Company has approved the disclosure contained in this MD&A. A
copy of this MD&A will be provided to anyone who requests it from the Company.
Disclosure of Outstanding Share Data
The Company has authorized an unlimited number of the following classes of shares:
1. Class A, B, C, D, E, F and G voting common shares;
2. Class H, I, J, K, L and M non-voting common shares; and
3. Class N, O, P, Q, R and S non-voting preferred shares.
As at June 30, 2014, there were 80,000,000 common shares issued and outstanding comprising
of:
1.
2.
3.
4.
Class E shares = 25,800,000;
Class F shares = 25,800,000;
Class D shares = 8,000,000; and
Class C shares = 20,400,000.
Balance at June 30, 2014 is an aggregate of 80,000,000 common shares of Class E, F
D, and C.
As of June 30, 2014, the Company has granted 15,000,000 Class A warrants for consulting
services provided and 10,200,000 warrants to Class C shareholders.
The Class A warrants are exercisable for a period of five years from issuance to purchase one
Class A share of the Company at a price of $0.02 per share. The Class A warrants vest at the
time at which the Company achieves certain performance milestones, estimated to be one year
from the date of issuance.
{W0253761.DOCX}13
The Class C warrants are exercisable for a period of three years from issuance to purchase one
Class C share of the Company at a price of $0.50 per share.
As at June 30, 2014, all the issued warrants remain outstanding, though only the 10,200,000
Class C warrants were exercisable.
Investors Relations
The Company is committed to adhering to best investor relations corporate practices. The
Company continues to communicate with current and prospective investors. Currently, the
Company is not utilizing any North American-based investor relations external consultants.
Additionally, the Company has minimized North American public relations and advertising
initiatives.
Risks and Uncertainties
The activities of the Company are subject to risks normally encountered in a start-up business,
including: negative cash flow; lack of adequate capital; liquidity concerns and future financing
requirements to sustain operations; dilution; no history of operations and revenues, and no
history of earnings or dividends; competition; economic changes; and uninsured risks.
An investment in the securities of the Company should be considered speculative due,
generally, to the nature of the business in which the Company is engaged, the limited extent of
the Company’s assets, the Company’s state of development and the degree of its reliance upon
the expertise of management.
Prior to making an investment decision, investors should consider the investment risks set out
below and those described elsewhere in this document, which are in addition to the usual risks
associated with an investment in a business at an early stage of development. The directors of
the Company consider the risks set out below to be the most significant to potential investors of
the Company, but not all of the risks associated with an investment in Shares of the Company
may be described below. If any of these risks materialize into actual events or circumstances or
other possible additional risks and uncertainties of which the directors are currently unaware or
which they consider not to be material in relation to the Company’s business, actually occur, the
Company’s assets, liabilities, financial conditions, results of operations (including future results
of operations), business and business prospects, are likely to be materially and adversely
affected. In such circumstances, the price of the Company’s Shares could decline and any
investors may lose all or part of their investment.
Market Risk for Securities
The Company is a private company whose common shares are not listed for trading on a stock
exchange. There can be no assurance that an active trading market for the Company or the
Resulting Issuer Shares will be established and/or sustained after the Share Exchange. Upon
close of the Share Exchange and listing on the CSE, the market price for the Resulting Issuer
Shares could be subject to wide fluctuations. Factors such as commodity prices, government
regulation, interest rates, share price movements of peer companies and competitors, as well as
overall market movements, may have a significant impact on the market price of the Resulting
Issuer Shares. The stock market has from time to time experienced extreme price and volume
fluctuations, which have often been unrelated to the operating performance of particular
{W0253761.DOCX}14
companies.
Reliance on Licensing
The ability of the Company or the Resulting Issuer to successfully grow, store and distribute
medical marijuana in Canada will depend on success of the Company or the Resulting Issuer in
acquiring a Production License. Health Canada has received over 800 Production License
applications to date, the number of submissions continues to grow, and there are indications
that the approval process is becoming elongated. Once a license is obtained, any failure to
comply with the terms of the License, or any failure to renew the License after its expiry date,
would have a material adverse impact on the financial condition and operations of our business.
No Operating History Risk
As the Company, Pubco and the Resulting Issuer are start-up companies, there are limited
operating histories. The Company has not entered the sales and distribution stage. The
Company and the Resulting Issuer will be subject to all of the business risks and uncertainties
associated with any new business enterprise, including the risks that it will be unable to acquire
the necessary Production License, successfully produce commercial marijuana, or establish a
market for our Product. The Resulting Issuer anticipates positive cash flow from operations by
the earliest of January 2015. There can be no assurance that consumer demand for our
products will be as anticipated, or that we will become profitable.
Change in Law, Regulations and Guidelines
The Company and the Resulting Issuer’s business will be subject to particular laws, regulations,
and guidelines. The production and distribution of medical marijuana is a highly regulated field,
and although the Company and the Resulting Issuer intend to comply with all laws and
regulations, there is no guarantee that the governing laws and regulations will not change which
will be outside of the Company and the Resulting Issuer’s control. On March 21, 2014, the
Federal Court of Canada issued an order allowing certain individuals to continue under their
MMAR licenses, thereby affecting the repeal of the MMAR. As of the date of this MD&A the
Government of Canada has decided to appeal the order; however, it is unclear what a final
ruling on this issue may be, and how it may affect the Company and the Resulting Issuer’s
business. It is possible that a ruling in favour of the original order could allow persons who had a
license under the MMAR to opt out of the new MMPR regime, thereby decreasing the size of the
market for the Company and the Resulting Issuer’s business, and potentially materially and
adversely affecting the Company and the Resulting Issuer’s business, its financial condition and
operations.
Availability of Seed Supply and Skilled Labour
The Company and the Resulting Issuer’s ability to commence and continue operations will be
dependent on its ability to acquire starting materials. There are four legal sources of starting
materials under the MMPR:
1.
2.
3.
4.
Health Canada;
Personal-Use Production License holders under the MMAR regime;
Designated-Person Production License holders under the MMAR regime; and
Importation.
{W0253761.DOCX}15
There is no guarantee that Company or the Resulting Issuer will be able to acquire seeds from
such sources. Further, the Company or the Resulting Issuer’s ability to maintain operations will
be dependent on access to skilled labour. There is no guarantee that the Company or the
Resulting Issuer will be successful in maintaining its supply of skilled labour, and a failure to do
so would limit the Company or the Resulting Issuer’s ability to produce the predicted amounts of
product. This would have an adverse effect on the Company or the Resulting Issuer’s
operations and financial results.
Negative Publicity or Consumer Perception
The success of the medical marijuana industry may be significantly influenced by the public’s
perception of marijuana’s medicinal applications. Medical marijuana is a controversial topic, and
there is no guarantee that future scientific research, publicity, regulations, medical opinion and
public opinion relating to medical marijuana will be favourable. The medical marijuana industry
is an early-stage business that is constantly evolving with no guarantee of viability. The market
for medical marijuana is uncertain, and any adverse or negative publicity, scientific research,
limiting regulations, medical opinion and public opinion relating to the consumption of medical
marijuana may have a material adverse effect on our operational results, consumer base and
financial results.
Competitive Risk
Although the market for the Company or the Resulting Issuer’s product does appear to be
sizeable, the Resulting Issuer expects significant competition from other companies due to the
recent nature of the MMPR regime. A large number of companies, possibly more than 800,
appear to be applying for Production Licenses, some of which may have significantly greater
financial, technical, marketing and other resources, may be able to devote greater resources to
the development, promotion, sale and support of their products and services, and may have
more extensive customer bases and broader customer relationships.
Should the size of the medical marijuana market increase as projected, the demand for product
will increase as well, and if the Company and the Resulting Issuer hopes to be competitive it will
need to invest significantly in research and development, marketing, production expansion, new
client identification, and client support. If the Company or the Resulting Issuer is not successful
in achieving sufficient resources to invest in these areas, the Company or the Resulting Issuer’s
ability to compete in the market may be adversely affected, which could materially and
adversely affect the Company or the Resulting Issuer’s business, its financial condition and
operations.
Advertising and Promotional Risk
The Company or the Resulting Issuer’s future growth and profitability will depend on the
effectiveness and efficiency of advertising and promotional costs, including the Company or the
Resulting Issuer’s ability to (i) create brand recognition for its products; (ii) determine
appropriate advertising strategies, messages and media; and (iii) maintain acceptable operating
margins on such costs. There can be no assurance that advertising and promotional costs will
result in revenues for the Company or the Resulting Issuer’s business in the future, or will
generate awareness of the Company or the Resulting Issuer’s product. In addition, no
assurance can be given that the Resulting Issuer will be able to manage the Company or the
Resulting Issuer’s advertising and promotional costs on a cost-effective basis.
{W0253761.DOCX}16
Uninsured or Uninsurable Risk
The Company or the Resulting Issuer may become subject to liability for risks against which it
cannot insure or against which the Company or the Resulting Issuer may elect not to insure due
to the high cost of insurance premiums or other factors. The payment of any such liabilities
would reduce the funds available for the Company or the Resulting Issuer’s usual business
activities. Payment of liabilities for which the Company or the Resulting Issuer does not carry
insurance may have a material adverse effect on the Resulting Issuer’s financial position and
operations.
Conflicts of Interest Risk
Certain of the Company or the Resulting Issuer’s directors and officers are also directors and
operators in other companies. Situations may arise in connection with potential acquisitions or
opportunities where the other interests of these directors and officers conflict with or diverge
from the Company or the Resulting Issuer’s interests. In accordance with the corporate laws of
British Columbia and Alberta, directors who have a material interest in any person who is a
party to a material contract or a proposed material contract are required, subject to certain
exceptions, to disclose that interest and generally abstain from voting on any resolution to
approve the contract.
In addition, the directors and the officers are required to act honestly and in good faith with a
view to our best interests. However, in conflict of interest situations, the Company or the
Resulting Issuer’s directors and officers may owe the same duty to another company and will
need to balance their competing interests with their duties to the Company or the Resulting
Issuer. Circumstances (including with respect to future corporate opportunities) may arise that
may be resolved in a manner that is unfavourable to the Company or the Resulting Issuer.
Key Personnel Risk
The Company or the Resulting Issuer’s success will depend on its directors’ and officers’ ability
to develop the Company or the Resulting Issuer’s business and manage its operations, and on
the Company or the Resulting Issuer’s ability to attract and retain key quality assurance,
scientific, sales, public relations and marketing staff or consultants once operations begin. The
loss of any key person or the inability to find and retain new key persons could have a material
adverse effect on the Company or the Resulting Issuer’s business. Competition for qualified
technical, sales and marketing staff, as well as officers and directors can be intense and no
assurance can be provided that the Company or the Resulting Issuer will be able to attract or
retain key personnel in the future, which may adversely impact the Company or the Resulting
Issuer’s operations.
Speculative Nature of Investment Risk
An investment in the Company or the Resulting Issuer’s common shares carries a high degree
of risk and should be considered as a speculative investment by purchasers. The Company or
the Resulting Issuer has no history of earnings, limited cash reserves, a limited operating
history, has not paid dividends, and is unlikely to pay dividends in the immediate or near future.
The Company or the Resulting Issuer is in the development and planning phases of its business
and has not started commercialization of its products and services. The Company or the
Resulting Issuer’s operations are not yet sufficiently established such that the Company or the
Resulting Issuer can mitigate the risks associated with the Company or the Resulting Issuer’s
{W0253761.DOCX}17
planned activities.
No Established Market for Shares Risk
There is currently no established consistent trading market through which common shares in the
Company’s authorized capital may be sold. Even if a trading market develops, there can be no
assurance that such market will continue in the future. Any investor of the Company, Pubco or
the Resulting Issuer may lose their entire investment.
Agricultural Operations Risk
Since the Company or the Resulting Issuer’s business will revolve mainly around the growth of
marijuana, an agricultural product, the risks inherent with agricultural businesses will apply.
Such risks may include disease and insect pests, among others. Although the Company and the
Resulting Issuer expects to grow the its product in a climate controlled, monitored, indoor
location, there is not guarantee that changes in outside weather and climate will not adversely
affect production. Further, any rise in energy costs may have a material adverse effect on the
Company or the Resulting Issuer’s ability to produce medical marijuana.
Building Construction Risk
Since the Company has yet to complete the construction of its production facility, there may be
unforeseeable events which cause an increase in the projected buildings or maintenance costs.
Such an increase in costs may require the Company or the Resulting Issuer to re-allocate funds
from other areas of its business; may require the Company or the Resulting Issuer to raise more
funding than originally anticipated; and may delay the Company or the Resulting Issuer’s ability
to go into production. Such delay may have a material adverse effect on our business and its
financial results.
Transportation Risk
As a business revolving mainly around the growth of an agricultural product, the ability to obtain
speedy, cost-effective and efficient transport services will be essential to the prolonged
operations of the Company or the Resulting Issuer’s business. Should such transportation
become unavailable for prolonged periods of time, there may be a material adverse effect on
the Company or the Resulting Issuer’s business, financial situation, and operations.
Liquidity and Future Financing Risk
The Company is and the Resulting Issuer will be in the development stage, having not started
operating and has not generated any revenue. The Company and the Resulting Issuer will likely
operate at a loss until its business becomes established and therefore may require additional
financing in order to fund future operations and expansion plans. The Company or the Resulting
Issuer’s ability to secure any required financing to sustain its operations will depend in part upon
prevailing capital market conditions, as well as the Company or the Resulting Issuer’s business
success. There can be no assurance that the Company or the Resulting Issuer will be
successful in its efforts to secure any additional financing or additional financing on terms
satisfactory to the Company or the Resulting Issuer’s management. If additional financing is
raised by issuing Company or the Resulting Issuer Shares, control may change and
shareholders may suffer additional dilution. If adequate funds are not available, or are not
available on acceptable terms, the Company or the Resulting Issuer may be required to scale
{W0253761.DOCX}18
back its business plan or cease operating.
Going-Concern Risk
The financial statements of the Company have been prepared on a going concern basis under
which an entity is considered to be able to realize its assets and satisfy its liabilities in the
ordinary course of business. The Company’s future operations are dependent upon the
identification and successful completion of equity or debt financing and the achievement of
profitable operations at an indeterminate time in the future. There can be no assurances that the
Company or the Resulting Issuer will be successful in completing equity or debt financing or in
achieving profitability. The financial statements do not give effect to any adjustments relating to
the carrying values and classification of assets and liabilities that would be necessary should the
Company be unable to continue as a going concern.
Global Economy Risk
An economic downturn of global capital markets has been shown to make the raising of capital
by equity or debt financing more difficult. The Resulting Issuer will be dependent upon the
capital markets to raise additional financing in the future, while it establishes a user base for its
products. As such, the Resulting Issuer is subject to liquidity risks in meeting its development
and future operating cost requirements in instances where cash positions are unable to be
maintained or appropriate financing is unavailable. These factors may impact the Resulting
Issuer’s ability to raise equity or obtain loans and other credit facilities in the future and on terms
favourable to the Company or the Resulting Issuer and its management. If uncertain market
conditions persist, the Company or the Resulting Issuer’s ability to raise capital could be
jeopardized, which could have an adverse impact on the Company or the Resulting Issuer’s
operations and the trading price of the Resulting Issuer Shares on the CSE.
Dividend Risk
The Company has not paid dividends in the past and does not anticipate paying dividends in the
near future. The Resulting Issuer expects to retain its earnings to finance further growth and,
when appropriate, retire debt.
Share Price Volatility Risk
It is anticipated that the Resulting Issuer Shares will be re-listed for trading on the CSE. As
such, external factors outside of the Resulting Issuer’s control such as announcements of
quarterly variations in operating results, revenues and costs, and sentiments toward the medical
marijuana sector stocks may have a significant impact on the market price of the Resulting
Issuer Shares. Global stock markets, including the CSE, have from time to time experienced
extreme price and volume fluctuations that have often been unrelated to the operations of
particular companies. There can be no assurance that an active or liquid market will develop or
be sustained for the common shares.
Increased Costs of Being a Publicly Traded Company
As the Resulting Issuer will have publicly-traded securities, the Resulting Issuer will incur
significant legal, accounting and filing fees not presently incurred by the Company. Securities
legislation and the rules and policies of the CSE requires listed companies to, among other
things, adopt corporate governance and related practices, and to continuously prepare and
{W0253761.DOCX}19
disclose material compliance costs.
Value of the Company, Pubco and the Resulting Issuer
The Company, Pubco and the Resulting Issuer’s assets are of indeterminate value. For further
particulars see the financial statements scheduled hereto.
Negative Cash Flow
The Company and Pubco had negative cash flows from operating activities in their respective
most recent financial years being the year ended June 30, 2014.
Fluctuating Prices of Raw Materials May Adversely Affect the Resulting Issuer
The Company and the Resulting Issuer’s revenues, if any, are expected to be in large part
derived from the production, sale and distribution of marijuana. The price of production, sale and
distribution of marijuana will fluctuate widely due to the how young the marijuana industry is and
is affected by numerous factors beyond the Company or Resulting Issuer’s control including
international, economic and political trends, expectations of inflation, currency exchange
fluctuations, interest rates, global or regional consumptive patterns, speculative activities and
increased production due to new production and distribution developments and improved
production and distribution methods. The effect of these factors on the price of product
produced by the Company or Resulting Issuer and, therefore the economic viability of any of the
Resulting Issuer’s business, cannot accurately be predicted.
Changing Environmental Regulations May Adversely Affect the Resulting Issuer
All phases of the Company are or the Resulting Issuer’s operations will be subject to
environmental regulation in the various jurisdictions in which it operates. Environmental
legislation is evolving in a manner which will require stricter standards and enforcement,
increased fines and penalties for noncompliance, more stringent environmental assessments of
proposed projects and a heightened degree of responsibility for companies and their officers,
directors and employees. There is no assurance that future changes in environmental
regulation, if any, will not adversely affect the Company, Pubco or the Resulting Issuer’s
operations.
Political and Economic Instability May Adversely Affect the Company or the Resulting
Issuer
The Company or the Resulting Issuer may be affected by possible political or economic
instability. The risks include, but are not limited to, terrorism, military repression, extreme
fluctuations in currency exchange rates and high rates of inflation. Changes in medicine and
agriculture development or investment policies or shifts in political attitude in certain countries
may adversely affect the Resulting Issuer’s business. Operations may be affected in varying
degrees by government regulations with respect to restrictions on production, distribution, price
controls, export controls, income taxes, expropriation of property, maintenance of assets,
environmental legislation, land use, land claims of local people and water use. The effect of
these factors cannot be accurately predicted.
{W0253761.DOCX}20
Lack of Share Liquidity
Pubco Shares are and the Resulting Issuer Shares will be subject to certain trade restrictions,
which may include a hold period restricting the trading of the securities.
Limited Operating History and No Assurance of Profitability
Prior to the close of the Share Exchange, the Company operated as a private company since its
inception on September 5, 2013. The brand is young, while growing, is still comparatively
modest, owing in part to the industry, inability to aggressively execute our business plan
because of a lack of working capital. The close of the Share Exchange and the listing on the
CSE and, if any, capital raise is designed to provide the Resulting Issuer with the working
capital we need to more fully implement the business objectives of the Resulting Issuer.
We are subject to all of the risks and uncertainties associated with any new business, including
the risk that we will be unable to establish a market for our products and services, achieve our
growth objectives, and/or ultimately become profitable.
Intellectual Property
The success of the Company and Resulting Issuer’s business depends in part on its ability to
protect its ideas and technology. The Company and Pubco have no patented technology or
trademarked business methods at this time nor have the Company, Pubco or the Resulting
Issuer applied to register any patents, trademarks or copyrights or applied to register the
trademark “Aurora”.
Even if the Company, Pubco and the Resulting Issuer moves to protect its technology with
trademarks, patents, copyrights or by other means, the Company, Pubco and the Resulting
Issuer are not assured that competitors will not develop similar technology, business methods or
that the Company, Pubco and the Resulting Issuer will be able to exercise their respective legal
rights. Other countries may not protect intellectual property rights to the same standards as
does Canada. Actions taken to protect or preserve intellectual property rights may require
significant financial and other resources such that said actions have a meaningfully impact our
ability to successfully grow our business.
Significant Ownership Interest of Management and Directors
As of the date of this MD&A, the two officers and directors of the Company own an aggregate of
47,600,000 common shares, or approximately 59.5%, of all issued and outstanding common
shares of the Company. As a group, these individuals could exercise substantial control over
matters requiring shareholder approval, such as election of directors, approval of transactions,
and changes to share structure. Until further rounds of financing are completed, other
shareholders may be limited in their ability to exercise control over important corporate
decisions.
On close of the Share Exchange, officers and directors of the Resulting Issuer will own an
aggregate of 37,549,223 shares or approximately 37.5% of the issued and outstanding
Resulting Issuer Shares. As a group, these individuals could exercise substantial control over
matters requiring shareholder approval, such as election of directors, approval of transactions,
and changes to share structure. Until further rounds of financing are completed, other
shareholders may be limited in their ability to exercise control over important corporate
{W0253761.DOCX}21
decisions.
Marketing Effectiveness
The Company or the Resulting Issuer’s ability to grow its business and achieve positive
earnings will depend in part on the effectiveness of advertising and other forms of promotion
that, among other objectives, would seek to build brand awareness and meaningfully increase
our user base. There can be no assurance that advertising and promotional expenditures will
achieve these objectives.
This list is not exhaustive of the factors that may affect the Company’s forward-looking
information. These and other factors should be considered carefully and readers should not
place undue reliance on such forward-looking information. Investors should carefully consider
the risks discussed in this MD&A.
{W0253761.DOCX}22
SCHEDULE “D”
Audited Financial Statements of Aurora for the Fiscal Year End of June 30, 2014
{W0251953.DOC}FORM 2A – LISTING STATEMENT
October 10, 2014
Page 55
October 10, 2014
British Columbia Securities Commission
Ontario Securities Commission
Dear Sirs/Madams:
Re: Aurora Cannabis Inc.
We refer to the Form 2A – Listing Statement of Aurora Cannabis Inc. (the “Company”) dated
October 10, 2014 relating to the exchange of common shares of the Company and Aurora
Marijuana Inc. (“Aurora”).
We consent to being named and to the use in the above-mentioned Form 2A – Listing Statement,
of our report dated October 3, 2014, to the shareholders of Aurora Marijuana Inc. on the
consolidated statement of financial position as at June 30, 2014 and the consolidated statements
of loss and comprehensive loss, changes in equity, and cash flows and the notes to the
consolidated financial statements for the period from September 5, 2013 (date of incorporation) to
June 30, 2014.
We report that we have read the Form 2A – Listing Statement and have no reason to believe that
there are any misrepresentations in the information contained therein that are derived from the
financial statements upon which we have reported or that are within our knowledge as a result of
our audit of such financial statements. We have complied with Canadian generally accepted
standards for an auditor’s consent to the use of a report of the auditor included in an offering
document, which does not constitute an audit or review of the prospectus as these terms are
described in the CPA Canada Handbook – Assurance.
Yours truly,
MNP LLP
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Accounting › onsulting › x
Suite 400, 10104 - 103 enue W; d onton ; 5J 0 8
1-800-661-7778 P: 780-451-4406 F: 780-454-1908 www.M P.ca
Aurora Marijuana Inc.
Consolidated Financial Statements
June 30, 2014
Independent Auditors’ Report
To the Shareholders of Aurora Marijuana Inc.:
We have audited the accompanying consolidated financial statements of Aurora Marijuana Inc. and its subsidiaries, which comprise
the consolidated statement of financial position as at June 30, 2014, and the consolidated statements of loss and comprehensive loss,
changes in equity and cash flows for the period from September 5, 2013 (date of incorporation) to June 30, 2014, and a summary of
significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in
accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement
of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Aurora Marijuana Inc.
and its subsidiaries as at June 30, 2014 and their financial performance and their cash flows for the period from September 5, 2013
(date of incorporation) to June 30, 2014 in accordance with International Financial Reporting Standards.
Emphasis of Matters
Without modifying our opinion, we draw attention to Note 3 to the financial statements which describes that the Company has prepared
these consolidated financial statements on the basis applicable for a going concern. The Company has yet to attain commercial
operations and has incurred a loss which, along with other matters as set forth in Note 3, indicates the existence of a material
uncertainty that may cast doubt about the Company's ability to continue as a going concern.
Edmonton, Alberta
October 3, 2014
Suite 400, 10104 - 103 Avenue NW, Edmonton, Alberta, T5J 0H8, Phone: (780) 451-4406, 1 (800) 661-7778
Chartered Accountants
Aurora Marijuana Inc.
Consolidated Statement of Financial Position
As at June 30, 2014
2014
Assets
Current
Cash and cash equivalents
Goods and services tax receivable
Share subscriptions receivable (Note 10)
916,767
244,523
90,000
1,251,290
Non-current
Property, plant and equipment (Note 7), (Note 12)
Receivable from shareholders (Note 8)
4,238,047
2,530
5,491,867
Liabilities
Current
Accounts payable and accrued liabilities
Notes payable
Advances from related party (Note 9)
1,876,927
1,000,000
845,725
3,722,652
Going concern (Note 3)
Events after the reporting period (Note 16)
Equity
Share capital (Note 10)
3,368,640
Warrants (Note 11)
224,110
Deficit
(1,823,535)
1,769,215
5,491,867
Approved on behalf of the Board
signed "Terry Booth"
Director
signed "Steve Dobler"
Director
The accompanying notes are an integral part of these consolidated financial statements
1
Aurora Marijuana Inc.
Consolidated Statement of Loss and Comprehensive Loss
For the period from September 11, 2013 (date of incorporation) to June 30, 2014
2014
Operating expenses (Note 12)
Consulting fees (Note 12)
Salaries, wages and benefits
Advertising and promotion
Professional fees
Travel and entertainment
Utilities
Rental
Meals and entertainment
Insurance
Donations
Telephone, fax and internet
Courier and delivery
Vehicle expenses
Miscellaneous
326,154
109,900
81,561
59,646
51,628
43,651
40,000
15,166
11,599
5,650
5,360
4,620
4,106
788
759,829
Other expense
Compensation expense (Note 6), (Note 11)
(1,063,706)
Loss and comprehensive loss for the period
(1,823,535)
The accompanying notes are an integral part of these consolidated financial statements
2
Aurora Marijuana Inc.
Consolidated Statement of Changes in Equity
For the period from September 11, 2013 (date of incorporation) to June 30, 2014
Share
capital
Warrants
Net loss for the period
Shares issued at incorporation (Note 10)
Acquisition of 1755517 Alberta Ltd. (Note 6)
-
200
-
-
1,000,000
(181,560)
3,368,640
The accompanying notes are an integral part of these consolidated financial statements
3
(1,823,535)
-
-
Balance June 30, 2014
(1,823,535)
200
2,550,000
Fair value of Class C warrants issued (Note 11)
Total equity
1,000,000
Class A agent warrants issued
Class C shares issued for cash (Note 10)
Deficit
42,550
181,560
224,110
-
42,550
-
2,550,000
(1,823,535)
1,769,215
Aurora Marijuana Inc.
Consolidated Statement of Cash Flows
For the period from September 11, 2013 (date of incorporation) to June 30, 2014
2014
Cash provided by (used for) the following activities
Operating activities
Loss and comprehensive loss for the period
Non-cash compensation expense
(1,823,535)
1,063,706
(759,829)
(244,523)
39,246
Goods and services tax receivable
Accounts payable and accrued liabilities
(965,106)
Financing activities
Advances from related party
Advances to shareholders
Proceeds from issuance of common shares and warrants
Proceeds from notes payable
845,725
(2,530)
2,460,200
1,000,000
4,303,395
Investing activities
Purchases of property, plant and equipment
(2,421,522)
Cash resources, end of period
916,767
The accompanying notes are an integral part of these consolidated financial statements
4
Aurora Marijuana Inc.
Notes to the Consolidated Financial Statements
For the period from September 11, 2013 (date of incorporation) to June 30, 2014
1.
Reporting entity
Aurora Marijuana Inc. ("Aurora") was incorporated under the Alberta Business Corporations Act on September 11, 2013 as
1770415 Alberta Ltd. and renamed on April 16, 2014. Aurora is domiciled in Canada. The consolidated financial statements
of Aurora as at and for the period ended June 30, 2014 comprise Aurora and its wholly owned subsidiaries 1769474 Alberta
Ltd. and 1755517 Alberta Ltd. (together referred to as the “Company”). The Company is primarily involved in developing a
marijuana for medicinal purposes facility for future operation.
The address of the Company’s registered office is 2200, 10155 - 102 Street NW, Edmonton, Alberta.
The consolidated financial statements were approved by the board of directors and authorized for issue on October 3, 2014.
2.
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRSs”) as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International
Financial Reporting Centre ("IFRIC") in effect for the period ended June 30, 2014.
3.
Going concern
These consolidated financial statements have been prepared on a going concern basis which contemplates the realization
of assets and the payment of liabilities in the ordinary course of business. Should the Company be unable to continue as a
going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due.
The Company’s ability to continue as a going concern is dependent upon its ability to commence profitable operations and
generate funds there from, and to continue to obtain borrowings or raise equity from third parties sufficient to meet current
and future obligations and/or restructure the existing debt and payables. These conditions, combined with the loss incurred
for the period ended June 30, 2014, indicate the existence of a material uncertainty that may cast doubt about the
Company's ability to continue as a going concern. These consolidated financial statements do not reflect the adjustments or
reclassification of assets and liabilities which would be necessary if the Company were unable to continue its operations.
4.
Basis of preparation
Basis of measurement
The consolidated financial statements have been prepared in the historical basis except for certain financial instruments
measured at fair value.
Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars, which is the Company’s functional currency. All
financial information presented in Canadian dollars has been rounded to the nearest dollar.
Significant accounting judgments, estimates and assumptions
The preparation of the Company’s consolidated financial statements requires management to make judgments, estimates
and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of
contingent liabilities, at the reporting date. However, uncertainties about these assumptions and estimates could result in
outcomes that would require a material adjustment to the carrying amount of the asset or liability affected in the future.
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 revision affects only that period, or in the period of the revision
and future periods if the revision affects both current and future periods.
In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting
policies that have the most significant effect on the amount recognized in the consolidated financial statements are as
follows:
5
Aurora Marijuana Inc.
Notes to the Consolidated Financial Statements
For the period from September 11, 2013 (date of incorporation) to June 30, 2014
4.
Basis of preparation (Continued from previous page)
Share purchase warrants
The fair value of share purchase warrants are estimated using the Black-Scholes option pricing model. This valuation model
requires the input of highly subjective assumptions including the expected stock price volatility, expected lives of the
options, expected dividends to be paid by the Company and risk-free interest rates. The assumptions used are described in
Note 11. As the Company’s warrants have characteristics significantly different from those of traded instruments and
because changes in the input assumptions can materially affect the fair value estimate, such value is subject to
measurement uncertainty.
Acquisition of 1755517 Alberta Ltd.
Note 6 details the Company's transaction with 1755517 Alberta Ltd. ("1755517"). Management's significant judgements in
relation to this transaction include the determination of whether 1755517 constitutes a business in accordance with IFRS 3;
whether the transaction was with employees or those providing similar services in accordance with IFRS 2; and whether the
transaction resulted in the acquisition of intangible assets in accordance with IAS 38.
Future income taxes
The calculation of future income tax is based on assumptions, which are subject to uncertainty as to timing and which tax
rates are expected to apply when temporary differences reverse. Future income tax recorded is also subject to uncertainty
regarding the magnitude on non-capital losses available for carry forward and of the balances in various tax pools as the
corporate tax returns have not been prepared as of the date of financial statement preparation. By their nature, these
estimates are subject to measurement uncertainty, and the effect on the consolidated financial statements from changes in
such estimates in future periods could be material. The value of tax losses at June 30, 2014 has not been recognized in
these consolidated financial statements due to uncertainty of future utilization. Further details are contained in Note 13.
Property, plant and equipment
Capitalization of development cost of property, plant and equipment is based on management’s judgment of eligibility of
expenditures made relating to the construction of the building in relation to IAS 16. In determining the amounts to be
capitalized, management estimates the amount of certain expenditures incurred to be capitalized as opposed to recognized
as a period cost.
5.
Summary of significant accounting policies
The following principle accounting policies have been adopted in the preparation of these consolidated financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries. The
following subsidiaries have been included in the consolidated financial statements:
Entity
1769474 Alberta Ltd.
1755517 Alberta Ltd.
Ownership %
100
100
Subsidiaries are entities controlled by the Company. Control is achieved where the Company is exposed, or has rights, to
variable returns from its involvement with the investee and it has the ability to affect those returns through its power over the
investee. In assessing control, only rights which give the Company the current ability to direct the relevant activities and that
the Company has the practical ability to exercise, is considered.
The results of subsidiaries acquired or disposed of during the period are included in these consolidated financial statements
from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Revenue recognition
Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have been
transferred to the buyer and collection is reasonably assured.
6
Aurora Marijuana Inc.
Notes to the Consolidated Financial Statements
For the period from September 11, 2013 (date of incorporation) to June 30, 2014
5.
Summary of significant accounting policies (Continued from previous page)
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, demand deposits and short-term highly liquid investments with original
maturities of three months or less that are readily convertible into to known amounts of cash and which are subject to an
insignificant risk of changes in value.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. Cost includes
expenditures that are directly attributable to the acquisition of the asset. When parts of an item of property, plant and
equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to
bringing the asset to a working condition for its intended use, and the cost of dismantling and removing the items and
restoring the site on which they are located.
All assets having limited useful lives are depreciated using the straight-line method over their estimated useful lives. Assets
are depreciated from the date of acquisition. Internally constructed assets are depreciated from the time an asset is
available for use. As at June 30, 2014 all assets were not yet available for use and therefore depreciation rates have not
been determined.
The residual value, useful life and depreciation method applied to each class of assets are reassessed at each reporting
date.
Impairment of non-financial assets
The Group assesses its property, plant and equipment for impairment at each reporting period or when events and
circumstances warrant such a review. An impairment loss is recognized when the carrying amount excees the fair value of
the assets. Impairment losses are reversed in future periods should there be changes in estimates utilized for determination
of the recoverable amount subsequent to the recognition of the impairment loss.
Income taxes
Taxation on the loss for the year consists of current and deferred tax.
Taxation is recognized in comprehensive loss except to the extent that the tax arises from a transaction or event which is
recognized either in other comprehensive income or directly in equity, or a business combination.
Current tax is the expected tax payable on the taxable income for the year using rates enacted or substantially enacted at
the year end, and includes any adjustments to tax payable in respect of previous years.
Deferred taxes
Deferred tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated statement financial position. Deferred tax is calculated using tax
rates and laws that have been enacted or substantively enacted at the end of the reporting period, and which are expected
to apply when the related deferred tax asset is realized or the deferred tax liability is settled.
Deferred tax liabilities are generally recognized for all taxable temporary differences.
Deferred tax assets are recognized to the extent it is probable that taxable profits will be available against which the
deductible temporary differences can be utilized and are reviewed at the end of the reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax liabilities and assets are offset when there is a legally enforceable right to offset current tax assets and
liabilities when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are
offset where the entity has a legally enforceable right to offest and intends to settle on a net basis, or to realize the asset
and settle the liability simultaneously.
Deferred tax assets and liabilities are not recognized in respect of temporary differences that arise on initial recognition of
assets and liabilities acquired other than in a business combination.
7
Aurora Marijuana Inc.
Notes to the Consolidated Financial Statements
For the period from September 11, 2013 (date of incorporation) to June 30, 2014
5.
Summary of significant accounting policies (Continued from previous page)
Earnings per share
Basic earnings per share is calculated using the weighted-average number of shares outstanding during the period. Diluted
earnings per share is calculated using the treasury stock method whereby all options, warrants and equivalents are
assumed if in-the-money, to have been excercised at the beginning of the period and the proceeds from the exercise are
assumed to have been used to purchase common shares at the average market price during the period.
Share-based payments
Non-employees and employees of the Company receive remuneration in the form of share-based payment transactions,
whereby non-employees and employees render services as consideration for equity instruments (‘equity-settled sharebased payments’).
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of
the equity instruments at the grant date. Refer to Note 11 for information on how the fair value of the equity instruments is
measured.
The fair value of the equity instruments granted is recognized as an expense over the estimated vesting period with a
corresponding increase to warrants equity (for warrants) or contributed surplus (for options).
Non-market vesting conditions are taken into account by adjusting the number of equity instruments included in the
measurement of the transaction. The estimate of the number of equity instruments expected to vest is revised if subsequent
information indicates that the number of equity instruments expected to vest differs from previous estimates. The impact of
the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense and equity
account reflects the revised estimate.
Equity-settled share-based payment transactions with parties other than employees or those providing similar services, are
measured at the fair value of the goods or services received, except where the fair value cannot be estimated reliably, in
which case they are measured indirectly at the fair value of the equity instruments granted.
Financial instruments
Financial assets at fair value through profit or loss:
The Company has classified the following financial assets at fair value through loss: cash and cash equivalents.
The Company has designated cash and cash equivalents on initial recognition at fair value through loss. This is in
accordance with the Company’s risk management strategy. The Company’s financial assets at fair value through loss are
initially recognized at their fair value. Fair value is determined by published price quotations in an active market.
Transactions to purchase or sell these items are recorded on the trade date.
Financial assets at fair value through loss are subsequently measured at their fair value. Net gains and losses arising from
changes in fair value are recognized immediately in loss and comprehensive loss.
Loans and receivables:
The Company has classified the following financial assets as loans and receivables: goods and services tax receivable and
receivable from shareholders. These assets are initially recognized at their fair value. Fair value is approximated by the
instrument’s initial cost in a transaction between the parties. Transactions to purchase or sell these items are recorded on
the trade date.
Loans and receivables are subsequently measured at their amortized cost, using the effective interest method. Under this
method, estimated future cash receipts are exactly discounted over the asset’s expected life, or other appropriate period, to
its net carrying value. Amortized cost is the amount at which the financial asset is measured at initial recognition less
principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference
between that initial amount and the maturity amount, and less any reduction for impairment or uncollectability. Net gains
and losses arising from changes in fair value are recognized in loss and comprehensive loss upon derecognition or
impairment.
8
Aurora Marijuana Inc.
Notes to the Consolidated Financial Statements
For the period from September 11, 2013 (date of incorporation) to June 30, 2014
5.
Summary of significant accounting policies (Continued from previous page)
Financial liabilities measured at amortized cost:
The Company has classified the following financial liabilities as financial liabilities measured at amortized cost: trade and
other payables and advances from related party. These liabilities are initially recognized at their fair value. Fair value is
determined by reference to recent arm’s length market transactions for the same instrument. Transactions to purchase or
sell these items are recorded on the trade date and transaction costs directly attributable to their issue are included in the
fair value cost of these liabilities, while transaction costs arising from their disposal are immediately recognized in loss and
comprehensive loss. Total interest expense, calculated using the effective interest rate method, is recognized in loss and
comprehensive loss.
Financial liabilities measured at amortized cost are subsequently measured at amortized cost using the effective interest
method. Under this method, estimated future cash payments are exactly discounted over the liability’s expected life, or other
appropriate period, to its net carrying value. Amortized cost is the amount at which the financial liability is measured at initial
recognition less principal repayments, and plus or minus the cumulative amortization using the effective interest method of
any difference between that initial amount and the maturity amount. Net gains and losses arising from changes in fair value
are recognized in loss and comprehensive loss upon derecognition.
Financial asset impairment
The Company assesses impairment of all its financial assets, except those classified at fair value through loss.
Management considers whether the issuer is having significant financial difficulty in determining whether objective evidence
of impairment exists. Impairment is measured as the difference between the asset’s carrying value and its fair value. Any
impairment, which is not considered temporary, is included in current period loss.
The Company reverses impairment losses on financial assets carried at amortized cost when the decrease in impairment
can be objectively related to an event occurring after the impairment loss was recognized.
Comprehensive loss
Comprehensive loss includes all changes in equity of the Company, except those resulting from investments by owners and
distributions to owners. Comprehensive loss is the total of loss and other comprehensive loss. Other comprehensive loss
comprises revenues, expenses, gains and losses that, in accordance with International Financial Reporting Standards,
require recognition, but are excluded from loss. The Company does not have any items giving rise to other comprehensive
loss.
Fair value measurements
The Company classifies fair value measurements recognized in the statement of financial position using a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Quoted prices (unadjusted) are available in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices in active markets that are observable for the asset or liability, either
directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the Company to develop its
own assumptions.
Fair value measurements are classified in the fair value hierarchy based on the lowest level input that is significant to that
fair value measurement. This assessment requires judgment, considering factors specific to an asset or a liability and may
affect placement within the fair value hierarchy.
9
Aurora Marijuana Inc.
Notes to the Consolidated Financial Statements
For the period from September 11, 2013 (date of incorporation) to June 30, 2014
5.
Summary of significant accounting policies (Continued from previous page)
Standards issued but not yet effective
The Company has not yet applied the following new standards, interpretations and amendments that have been issued as
at June 30, 2014 but are not yet effective. Unless otherwise stated, the Company does not plan to early adopt any of these
new or amended standards and interpretations.
IFRS 9 Financial instruments
IFRS 9 was issued in November 2009 and subsequently amended as part of an ongoing project to replace IAS 39 Financial
instruments: Recognition and measurement. The standard requires classification of financial assets into two measurement
categories based on the entity’s business model for managing its financial instruments and the contractual cash flow
characteristics of the instrument. The categories are those measured at fair value and those measured at amortized cost.
The classification and measurement of financial liabilities is primarily unchanged from IAS 39. However, for financial
liabilities measured at fair value, changes in the fair value attributable to changes in an entity’s “own credit risk” is now
recognized in other comprehensive income instead of loss. This new standard will also impact disclosures provided under
IFRS 7 Financial instruments: disclosures. The Company has not yet determined the impact of this amendment on its
consolidated financial statements.
In November 2013, the IASB amended IFRS 9. The amendments result in significant changes to hedge accounting. In
addition, an entity can now apply the “own credit requirement” in isolation without the need to change any other accounting
for financial instruments. The mandatory effective date of January 1, 2015 has been removed to provide sufficient time for
preparers of financial statements to make the transition to the new requirements. The Company has not yet determined the
impact of this amendment on its consolidated financial statements.
IFRS 2 Share-based payment
The amendment to IFRS 2, issued in December 2013 clarify the definition of “vesting conditions”, and separately define a
“performance condition” and a “service condition”. A performance condition requires the counterparty to complete a
specified period of service and to meet a specified performance target during the service period. A service condition solely
requires the counterparty to complete a specified period of service. The amendments are effective for share-based payment
transactions for which the grant date is on or after July 1, 2014. The Company has not yet determined the impact of this
amendment on its consolidated financial statements.
IFRS 3 Business combinations
The amendment to IFRS 3, issued in December 2013 clarify the accounting for contingent consideration in a business
combination. At each reporting period, an entity measures contingent consideration classified as an asset or a financial
liability at fair value, with changes in fair value recognized in loss. The amendments are effective for business combinations
for which the acquisition date is on or after July 1, 2014. The Company has not yet determined the impact of this
amendment on its consolidated financial statements.
IAS 16 Property, plant and equipment and IAS 38 Intangible assets
The amendments to IAS 16 and IAS 38, issued in December 2013, clarify how an entity calculates the gross carrying
amount and accumulated depreciation when a revaluation is performed. The amendments are effective for annual periods
beginning on or after July 1, 2014. The Company has not yet determined the impact of this amendment on its consolidated
financial statements.
IAS 24 Related party disclosures
The amendments to IAS 24, issued in December 2013, clarify that a management entity, or any member of a group of which
it is a part, that provides key management services to a reporting entity, or its parent, is a related party of the reporting
entity. The amendments also require an entity to disclose amounts incurred for key management personnel services
provided by a separate management entity. This replaces the more detailed disclosure by category required for other key
management personnel compensation. The amendments will only affect disclosure and are effective for annual periods
beginning on or after July 1, 2014.
10
Aurora Marijuana Inc.
Notes to the Consolidated Financial Statements
For the period from September 11, 2013 (date of incorporation) to June 30, 2014
5.
Summary of significant accounting policies (Continued from previous page)
IAS 36 Impairment of assets
The amendments to IAS 36, issued in May 2013, require:

Disclosure of the recoverable amount of impaired assets; and

Additional disclosures about the measurement of the recoverable amount when the recoverable amount is based
on fair value less costs of disposal, including the discount rate when a present value technique is used to measure
the recoverable amount.
The amendments will only affect disclosure and are effective for annual periods beginning on or after January 1, 2014.
6.
Acquisition of 1755517 Alberta Ltd.
On May 1, 2014, the Company acquired 100% of the issued and outstanding shares of 1755517 Alberta Ltd., a private
company (the "Transaction") in exchange for 8,000,000 Class D common shares.
Management determined that 1755517 does not qualify as a business according to the definition in IFRS 3, therefore the
Transaction does not constitute a business combination; rather, it is treated as an issuance of shares by the Company for
the net assets of 1755517 and has been accounted for in accordance with IFRS 2 Share-based payments.
As the consideration paid by the Company to acquire 1755517 was ultimately to individuals providing services similar to
employees, management has determined that the transaction should be measured at the fair value of the equity
instruments given up, and not the value of net assets received in accordance with IFRS 2. The 8,000,000 Class D common
shares issued have a fair value of $1,000,000. As the individuals are not party to a long-term contractual arrangement with
the Company and 1755517 does not own resources meeting the definition of intangible assets per IAS 38, any excess of
consideration paid over net assets received is considered a current period compensation expense.
At May 1, 2014, 175517 Alberta Ltd. had a net deficit of $21,156, creating a net compensation expense of $1,021,156 as a
result of this transaction.
7.
Property, plant and equipment
Buildings
Computer
equipment
Computer
software
Total
Cost
Additions
4,245,291
4,941
31,782
4,282,014
Net book value at June 30, 2014
4,201,324
4,941
31,782
4,238,047
As at June 30, 2014, no assets were available for use, therefore no provision for depreciation was recorded for the period.
8.
Receivable from shareholders
Advances to the shareholders are unsecured, non-interest bearing, and have no fixed terms of repayment.
9.
Advances from related party
Advances from related party are owing to a company controlled by ultimate shareholders of the Company. Advances are
unsecured, non-interest bearing, and have no fixed terms of repayment.
11
Aurora Marijuana Inc.
Notes to the Consolidated Financial Statements
For the period from September 11, 2013 (date of incorporation) to June 30, 2014
10.
Share capital
The Company has authorized an unlimited number of the following classes of shares:
Class A, B, C, D, E, F & G voting common shares
Class H, I, J, K, L & M non-voting common shares
Class N, O, P, Q, R & S non-voting preferred shares
Issued share capital:
2014
20,400,000 Class C common shares
8,000,000 Class D common shares
25,800,000 Class E common shares
25,800,000 Class F common shares
2,368,440
1,000,000
100
100
80,000,000 Common shares
3,368,640
Common shares
Number of shares
['000s]
Share capital
[Cdn '000s]
Class A shares issued at incorporation
Class B shares issued at incorporation
Cancellation of Class A shares
Cancellation of Class B shares
Issuance of Class E shares
Issuance of Class F shares
Issuance of Class D shares (Note 6)
Class C shares issued for cash
Fair value of Class C warrants issued
360,000
360,000
(360,000)
(360,000)
25,800,000
25,800,000
8,000,000
20,400,000
-
100
100
(100)
(100)
100
100
1,000,000
2,550,000
(181,560)
Balance at June 30, 2014
80,000,000
3,368,640
On May 1, 2014, the Class A and B shareholders entered into share exchange agreements pursuant to Section 86 of the
Income Tax Act (Canada) (the "Act") whereby the 360,000 Class A and 360,000 Class B shares outstanding were
exchanged for 25,800,000 Class E and 25,800,000 Class F shares.
Subsequently on May 1, 2014, the Company entered into rollover agreements pursuant to Subsection 85(1) of the Act with
the shareholders of 1755517 Alberta Ltd. as described in Note 6. The Company issued 8,000,000 Class D shares in
consideration of acquiring all the outstanding shares of 1755517 Alberta Ltd. The fair value of the Class D shares issued
was determined by reference to the consideration paid by third parties for equity instruments with similar features.
On May 30, 2014, the Company issued 20,400,000 common share units consisting of one Class C common share and onehalf warrant to purchase a Class C common share for $0.50 for a period of three years for consideration of $0.125 per unit.
The Class C shares issued have been recorded at the net of the subscription price of $0.125 less the fair value of the onehalf warrant issued (Note 11). At June 30, 2014, proceeds for 720,000 common share units ($90,000) remain receivable
from the subscriber.
12
Aurora Marijuana Inc.
Notes to the Consolidated Financial Statements
For the period from September 11, 2013 (date of incorporation) to June 30, 2014
11.
Share purchase warrants
During the period, the Company has granted 15,000,000 Class A warrants for consulting services provided and 10,200,000
warrants to Class C shareholders as described in Note 10.
The Class A warrants are exercisable for a period of five years from issuance to purchase one Class A share of the
Company at a price of $0.02 per share. The Class A warrants vest at the time at which the Company achieves certain
performance milestones, estimated to be one year from the date of issuance. The fair value of these warrants has been
estimated as $0.0043 per warrant based on the following assumptions:
Volatility rate
Risk-free interest rate
Dividend yield rate
Weighted average life
70%
1.67%
0.00%
5 years
Of the aggregate fair value for the Class A warrants of $64,658, $42,550 has been recognized as compensation expense in
the period from September 5, 2013 (date of incorporation) to June 30, 2014.
The Class C warrants are exercisable for a period of three years from issuance to purchase one Class C share of the
Company at a price of $0.50 per share. The fair value of these warrants has been estimated as $0.0178 per warrant based
on the following assumptions:
Volatility rate
Risk-free interest rate
Dividend yield rate
Weighted average life
70%
1.52%
0.00%
3 years
The aggregate fair value of the Class C warrants of $181,560 has been fully recognized in equity as at June 30, 2014.
As at June 30, 2014, all the issued warrants remain outstanding, though only the 10,200,000 Class C warrants were
exercisable. The average remaining useful life at June 30, 2014 of the 25,200,000 warrants is 3.81 years at a weighted
average exercise price of $0.21.
12.
Related party transactions
Key management compensation
During the current period, the Company paid consulting fees to companies owned by management personnel who are also
ultimate shareholders. Of the $217,187 of consulting fees incurred in the current period, $37,601 is included in trade and
other payables at period-end. During the current period, consideration of 8,000,000 Class D common shares valued at
$1,000,000, as disclosed in Note 6, was also paid to these companies.
Transactions with ultimate shareholders
During the current period, the Company incurred various expenses totalling $267,804 from a company owned by ultimate
shareholders.
During the current period, the Company capitalized $330,742 of building costs, $5,616 of computer software and $4,941 of
computer equipment for property, plant and equipment purchased from companies owned by ultimate shareholders.
13.
Income tax
As at June 30, 2014, the Company and its subsidiaries have non-capital losses for income tax purposes of approximately
$770,000. The deferred income tax impact of these non-capital losses has not been recognized as the future use of these
losses is uncertain as at June 30, 2014.
13
Aurora Marijuana Inc.
Notes to the Consolidated Financial Statements
For the period from September 11, 2013 (date of incorporation) to June 30, 2014
14.
Capital management
The Company’s objective when managing capital is to safeguard the entity’s ability to continue as a going concern, so that it
can commence providing returns for shareholders and benefits for other stakeholders.
The Company sets the amount of capital in proportion to risk and manages the capital structure and makes adjustments to
it in light of changes to economic conditions and the risk characteristics of the underlying assets. In order to maintain or
adjust the capital structure, the Company may issue new shares or seek financing.
The Company manages the following as capital:
2014
Cash and cash equivalents
Share capital
Warrants
Deficit
916,767
3,368,640
224,110
(1,823,585)
2,685,932
The Company monitors capital on the basis of its ability to fund construction of the building.
15.
Financial instruments
The Company as part of its operations carries a number of financial instruments. It is management's opinion that the
Company is not exposed to significant interest, currency or credit risks arising from these financial instruments except as
otherwise disclosed.
Credit risk
Credit risk is the risk of financial loss because a counter party to a financial instrument fails to discharge its contractual
obligations.
The carrying amount of the Company’s financial instruments best represents the maximum exposure to credit risk.
Fair value of financial instruments
Cash and cash equivalents are stated at fair value and classified within Level 1 of the fair value hierarcy. The fair value of
share subscriptions receivable, receivable from shareholders, accounts payable and accrued liabilities and advances from
related party is approximated by their carrying amount due to their short term nature.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities
that are settled by delivery of cash or another financial asset. The Company enters into transactions to purchase goods and
services on credit and borrow funds from related party creditors for which repayment is required at various maturity dates.
Liquidity risk is measured by reviewing the Company’s future net cash flows for the possibility of negative net cash flow.
The Company manages its liquidity risk monitoring cash flows and ensuring adequate resources are available from creditors
to meet current needs.
14
Aurora Marijuana Inc.
Notes to the Consolidated Financial Statements
For the period from September 11, 2013 (date of incorporation) to June 30, 2014
16.
Events after the reporting period
Subsequent to the reporting date, the Company issued 4,000,000 Class D stock options to a key member of management
of the Company. The options are exercisable for one Class D share each at a price of $0.001 per share for a period of three
years. The options vest in three tranches, 1,600,000 vest on December 21, 2014, 1,600,000 on June 21, 2015 and the
remaining 800,000 vest December 21, 2015. The estimated fair value of these options is $460,400.
On August 29 2014, the Company issued a non-interest bearing, unsecured, $1,500,000 convertible debenture to
companies controlled by ultimate shareholders of the Company as settlement of the advances from related party as
described in Note 9. The debenture matures August 29, 2019 and is convertible at that time at the option of the holder into
Class A shares of the Company at a price of $0.125 per share.
Additionally, on September 9, 2014 the Company entered into a definititve share exchange agreement with Prescient Mining
Corp. ("Prescient"). Pursuant to the terms of the agreement, Prescient will acquire all of the issued and outstanding shares
of Aurora from the shareholders of the Company in exchange for an aggregate of 60,000,000 common shares of Prescient
("Transaction Shares") at the time of closing of the transaction. 20,000,000 performance shares and 3,750,000 warrants
have also been reserved for issuance based on a key milestone of Aurora achieving the registration of a minimum of 2,000
patients under the Health Canada MMPR program. Subsequent to this exchange and the issuance of the performance
shares, Aurora shareholders will own approximately 66% of the common voting shares of Prescient. As such this
transaction will constitute a reverse take-over, with a key result of the transaction being Aurora shareholders owning publicly
listed shares.
In addition, Prescient will also issue a total of 25,200,000 replacement warrants and 4,000,000 replacement stock options
(collectively, the "Replacement Securities") to current holders of Aurora warrants and options and assume Aurora's currently
outstanding non-interest bearing convertible debt in the principal amount of $1,500,000.
All Transaction Shares and Replacement Warrants to be issued above are subject to strict escrow provisions and a right of
first refusal ("ROFR") pursuant to the terms of the Share Exchange Agreement for a period of 36 months. The replacement
stock options are also subject to an 18 month vesting period and ROFR.
15
SCHEDULE “E”
Pro-forma Consolidated Financial Statements of the Resulting Issuer
{W0251953.DOC}FORM 2A – LISTING STATEMENT
October 10, 2014
Page 56
AURORA CANNABIS INC.
(Formerly Prescient Mining Corp.)
PRO-FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited)
(Expressed in Canadian Dollars)
AUGUST 31, 2014
{W0254418.DOC}
AURORA CANNABIS INC.
(Formerly Prescient Mining Corp.)
Pro-Forma Consolidated Statement of Financial Position
As at August 31, 2014
(Unaudited)
Prescient
Aurora
Mining Corp. Marijuana Inc.
$
$
Pro-forma
adjustments
$
Note
4
Pro-forma
Consolidated
$
ASSETS
Current assets:
Cash and cash equivalents
Goods and services taxes recoverable
Interest receivable
Share subscriptions receivable
Prepaid expenses
Advances to related parties
Advances to Aurora Marijuana Inc.
Property, plant and equipment
Receivable from shareholders
1,181,972
5,684
29,838
25,000
1,500
3,000,000
4,243,994
(8,314)
349,976
43,808
385,470
1,894,050
(29,838)
(3,000,000)
(1,135,788)
706
-
6,301,207
2,530
4,244,700
6,689,207
(1,135,788)
17,573
500,000
517,573
1,015,763
3,000,000
4,015,763
(29,838)
(3,000,000)
(3,029,838)
517,573
745,765
4,761,528
(3,029,838)
(a),(h), (i)
(j)
(j)
-
3,067,708
355,660
25,000
1,500
43,808
3,493,676
6,301,913
2,530
9,798,119
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued
liabilities
Loan payable
Due to Prescient Mining Corp.
Convertible debenture
(j)
(j)
1,003,498
500,000
1,503,498
745,765
2,249,263
Shareholders’ equity:
Share capital
Reserves
Deficit
4,897,581
3,368,640
487,637
1,096,815
(1,658,091)
3,727,127
(2,537,776)
1,927,679
4,244,700
6,689,207
(a), (b), (c),
(d), (e), (f),
5,264,371
(i)
(b), (d), (e),
12,378,308 (g), (i), (k)
(b), (c), (d),
(e), (g), (h),
(15,748,629)
(k)
1,894,050
(1,135,788)
The accompanying notes are an integral part of these pro-forma consolidated financial statements.
{W0254418.DOC}
13,530,592
13,962,760
(19,944,496)
7,548,856
9,798,119
AURORA CANNABIS INC.
(Formerly Prescient Mining Corp.)
Notes to the Pro-Forma Consolidated Statement of Financial Position
August 31, 2014
(Unaudited)
1.
Basis of Presentation
The unaudited pro-forma consolidated statement of financial position of Aurora Cannabis Inc. (“Aurora
Cannabis” or the “Company”) as at August 31, 2014 has been prepared by management using
accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by
the International Accounting Standards Board (“IASB”). The unaudited pro-forma consolidated
statement of financial position has been prepared for inclusion in a listing statement of the Company
dated October 10, 2014, relating to Prescient Mining Corp.’s (“Prescient”) reverse acquisition of all of
the issued and outstanding capital stock of Aurora Marijuana Inc. (“Aurora”).
The unaudited pro-forma consolidated statement of financial position as at August 31, 2014 was
compiled from the unaudited statement of financial position of Prescient as at August 31, 2014 and the
unaudited statement of financial position of Aurora as at August 31, 2014, and includes all adjustments
which, in the opinion of management, are necessary for the fair presentation, in all material respects, of
the unaudited pro-forma consolidated statement of financial position as if the transactions described in
Note 4 had occurred as at August 31, 2014.
The unaudited pro-forma consolidated statement of financial position is not necessarily indicative of the
combined results or financial position that would have been attained had the transactions actually taken
place at the dates indicated and do not purport to be indicative of the effects that may be expected to
occur in the future.
2.
Summary of Significant Accounting Policies
The unaudited pro-forma consolidated statement of financial position has been compiled using the
significant accounting policies as set out in the audited financial statements of Prescient and Aurora as
at and for the year ended June 30, 2014.
3.
Proposed Transaction
On September 9, 2014, Prescient and Aurora entered into a Share Exchange Agreement (the
“Agreement”) pursuant to which Prescient will acquire all of the issued and outstanding securities of
Aurora in consideration for securities of Prescient, which will constitute a reverse takeover of Prescient
by Aurora shareholders (the “Transaction”) as follows:
(a)
(b)
Issuance of the following securities of Prescient to Aurora shareholders and warrant and option
holders:
i.
ii.
60,000,000 common shares;
21,450,000 warrants; and
iii.
4,000,000 options.
Assumption of Aurora’s non-interest bearing, unsecured shareholder loan of $1,500,000
convertible into common shares of the Company at a price of $0.125 per share at any time
during the 5 year term; and
{W0254418.DOC}1 | P a g e
AURORA CANNABIS INC.
(Formerly Prescient Mining Corp.)
Notes to the Pro-Forma Consolidated Statement of Financial Position
August 31, 2014
(Unaudited)
3.
Proposed Transaction (Continued)
(c)
4.
Issuance of 20,000,000 performance shares and 3,750,000 performance warrants at $0.02 per
share for a term of 5 years exercisable on completion of a performance milestone.
Pro-Forma Adjustments and Assumptions
The unaudited pro-forma consolidated statement of financial position incorporates the following proforma assumptions:
(a)
The completion subsequent to August 31, 2014, of a non-brokered private placement of
2,353,000 common shares at a price of $0.85 per share for gross proceeds of $2,000,050.
(b)
The acquisition of Aurora by Prescient constitutes a reverse asset acquisition as Prescient does
not meet the definition of a business, as defined in IFRS 3, Business Combinations.
Accordingly, as a result of the Transaction, the consolidated statement of financial position has
been adjusted for the elimination of Prescient’s share capital of $4,897,581, reserves of
$487,637 and accumulated deficit of $1,658,091, all within shareholders’ equity.
(c)
As a result of this reverse asset acquisition, a listing expense of $16,904,884 has been recorded.
This reflects the difference between the estimated fair value of the Aurora shares to the
Prescient shareholders less the net fair value of the assets of Prescient acquired.
In accordance with reverse acquisition accounting:
i.
The assets and liabilities of Aurora were included in the pro-forma consolidated
statement of financial position at their carrying values;
ii.
The net assets of Prescient were included at their fair value of $3,727,127 (equal to the
carrying value of the assets);
iii.
The net assets have been allocated as follows:
Cash and cash equivalents
Goods and services taxes recoverable
Interest receivable
Share Subscriptions receivable
Prepaid expenses
Advances to Aurora
Equipment
Accounts payable and accrued liabilities
Loan payable
$ 1,181,972
5,684
29,838
25,000
1,500
3,000,000
706
(17,573 )
(500,000 )
Estimated fair value of net assets
$ 3,727,127
{W0254418.DOC}2 | P a g e
AURORA CANNABIS INC.
(Formerly Prescient Mining Corp.)
Notes to the Pro-Forma Consolidated Statement of Financial Position
August 31, 2014
(Unaudited)
4.
Pro-Forma Adjustments and Assumptions (Continued)
iv.
(d)
The listing expense of $16,904,884 was determined as follows:
•
The number of Prescient shares held by Aurora shareholders outstanding prior to
the financing is estimated to be 60,000,000 or 59.5% of the combined entities.
•
The estimated fair value of Aurora is $51,000,000 based on the financing price of
$0.85 per share.
•
The number of outstanding shares of Prescient prior to the Transaction and
financing is determined to be 40,764,000 or 40.5% of the combined entities.
•
The portion of Aurora’s fair value attributed to Prescient is $20,632,011 calculated
as 40.45% of Aurora’s fair value.
•
The difference between the fair value of $20,632,011 attributed to Prescient and the
estimated fair value of the net assets of Prescient of $3,727,127 amounts to a listing
expense of $16,904,884.
The issuance of an aggregate of 21,450,000 warrants of Prescient to warrant holders of Aurora
as follows:
i.
10,200,000 warrants exercisable at a price of $0.50 per share for a period of 3 years; and
ii. 11,250,000 warrants exercisable at a price of $0.02 per share for a period of 5 years.
The warrants have an estimated fair value of $12,656,822 and were calculated using the BlackSholes pricing model with the following weighted average assumptions: expected dividend
yield – 0%; expected stock price volatility – 219.65%; risk-free interest rate – 1.09%; expected
life – 1.5 years. The fair value of these warrants was recorded as a capital transaction, with a
charge to share capital and reserves.
The 21,450,000 warrants of Aurora have been cancelled and the value of these warrants of
$181,560 was reclassified from reserves to share capital and $53,415 from reserves to deficit.
(e)
The grant of 4,000,000 stock options of Prescient to an option holder of Aurora exercisable at a
price of $0.001 per share for a period of 5 years. 1,600,000 of the options shall vest on
December 21, 2014, 1,600,000 on June 21, 2015 and 800,000 on December 21, 2015. Sharebased payments of $144,237 were recorded for vested options. The fair value of the options was
estimated using the Black-Sholes pricing model with the following weighted average
assumptions: expected dividend yield – 0%; expected stock price volatility – 253.77%; risk-free
interest rate – 1.09%; expected life – 1 year.
The 4,000,000 options of Aurora have been cancelled and the value of these options of
$107,605 was reclassified from reserves to deficit.
{W0254418.DOC}3 | P a g e
AURORA CANNABIS INC.
(Formerly Prescient Mining Corp.)
Notes to the Pro-Forma Consolidated Statement of Financial Position
August 31, 2014
(Unaudited)
(f)
4.
5.
3,000,000 common shares at a price of $0.85 are issuable as a finder’s fee at a value of
$2,550,000, which was included in share issue costs.
Pro-Forma Adjustments and Assumptions (Continued)
(g)
The grant of 1,000,000 stock options of Prescient on September 18, 2014, at a price of $1.01 per
share for a period of 5 years. The options vest as to 25% on the date of grant and 12.5% every
three months thereafter over a period of 18 months. Share-based payments of $208,287 were
recorded for vested options. The fair value of the options was estimated using the Black-Sholes
pricing model with the following weighted average assumptions: expected dividend yield – 0%;
expected stock price volatility – 155.06%; risk-free interest rate – 1.59%; expected life – 3 years.
(h)
Total transaction costs which are expected to be incurred for the reverse asset acquisition
amount to $109,000 which includes exchange fees, professional and consulting fees.
(i)
The exercise of 60,000 stock options and the issuance of 60,000 common shares for gross
proceeds of $3,000, subsequent to August 31, 2014. $2,153 was transferred from reserves to
share capital on exercise of these options.
(j)
Aggregate loans and interests from Prescient to Aurora of $3,029,838 were eliminated on
consolidation.
(k)
The issuance of 250,000 broker’s warrants to a consultant for services rendered in connection
with the Transaction. Each broker warrant entitles the consultant to acquire a common share of
the Company at a price of $1.01 per share for a period of 1 year. Share-based payments of
$201,332 were recorded for these warrants. The fair value of the warrants was estimated using
the Black-Sholes pricing model with the following weighted average assumptions: expected
dividend yield – 0%; expected stock price volatility – 254.15%; risk-free interest rate – 1.16%;
expected life – 1 year.
Pro-Forma Share Capital
(a)
Authorized
Unlimited number of voting common shares without par value;
Unlimited number of Class “A” shares with a par value of $1.00; and
Unlimited number of Class “B” shares with a par value of $5.00.
{W0254418.DOC}4 | P a g e
AURORA CANNABIS INC.
(Formerly Prescient Mining Corp.)
Notes to the Pro-Forma Consolidated Statement of Financial Position
August 31, 2014
(Unaudited)
5.
Pro-Forma Share Capital (Continued)
(b)
The share capital of Aurora Cannabis Inc. will be as follows:
Shares
#
Opening balance of Prescient
Opening balance of Aurora
Private placement
Eliminate equity of Prescient
Prescient shares issued to Aurora
shareholders
Prescient warrants issued to Aurora
warrant holders
Cancellation of Aurora warrants
Prescient options issued to Aurora
option holders
Cancellation of Aurora options
Aurora shares exchanged pursuant to
the Transaction
Finder’s fee shares
Share issue costs
Share-based payments
Exercise of stock options
(c)
Share Capital
$
40,764,000
80,000,000
2,353,000
-
4,897,581
3,368,640
2,000,050
(4,897,581)
60,000,000
20,632,011
-
Reserves
$
487,637
1,096,815
(487,637)
-
(12,656,822)
181,560
12,656,822
(234,975)
-
(80,000,000)
3,000,000
60,000
2,550,000
(2,550,000)
5,153
106,177,000
13,530,592
144,237
(107,605)
409,619
(2,153)
13,962,760
Stock Options:
On completion of the Transaction, the following stock options will be outstanding:
Stock Options
#
Opening balance of Prescient
Stock options issued
Issuance of Prescient options to Aurora option holders
Exercise of options
1,694,000
1,000,000
4,000,000
(60,000)
6,634,000
{W0254418.DOC}5 | P a g e
AURORA CANNABIS INC.
(Formerly Prescient Mining Corp.)
Notes to the Pro-Forma Consolidated Statement of Financial Position
August 31, 2014
(Unaudited)
5.
Pro-Forma Share Capital (Continued)
(d)
Warrants:
On completion of the Transaction, the following warrants and agent’s warrants will be
outstanding:
Warrants
#
Opening balance of Prescient
Issuance of Prescient warrants to Aurora warrant holders
Issuance of broker’s warrants
1,280,000
21,450,000
250,000
22,980,000
{W0254418.DOC}6 | P a g e