Aphria - Q1 2018 FS [FINAL] · PDF fileMarketable securities 5 80,501,420 87,346,787 ... Capital assets 11 92,358,204 ... Unrealized gain on long-term investments 26 (19,081,556)

AphriaInc.

CONDENSEDINTERIMCONSOLIDATEDFINANCIALSTATEMENTSFORTHETHREEMONTHSENDEDAUGUST31,2017ANDAUGUST31,2016

(Unaudited,expressedinCanadianDollars,unlessotherwisenoted)NoticeofNoAuditorReviewofInterimFinancialStatementsUnderNationalInstrument51-102,Part4,subsection4.3(3)(a),ifanauditorhasnotperformedareviewoftheinterimfinancialstatements,theymustbeaccompaniedbyanoticeindicatingthatthefinancialstatementshavenotbeenreviewedbyanauditor.Theaccompanyingcondensedinterimconsolidatedfinancialstatementsofthecompanyhavebeenpreparedbyandaretheresponsibilityofthecompany’smanagement.Thecompany’sindependentauditorhasnotperformedanauditorreviewofthesecondensedinterimconsolidatedfinancialstatements inaccordancewithstandardsestablishedbytheCanadian InstituteofCharteredProfessionalAccountants.

AphriaInc.CondensedInterimConsolidatedStatementsofFinancialPosition(Unaudited)

Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements

2

August31, May31, Note 2017 2017ASSETS Currentassets Cashandcashequivalents $38,229,855 $79,910,415Marketablesecurities 5 80,501,420 87,346,787Accountsreceivable 1,261,775 825,511Otherreceivables 6 6,200,506 4,511,639Inventory 7 5,968,503 3,886,607Biologicalassets 8 3,434,505 1,362,749Prepaidassets 2,198,743 1,059,624Duefromrelatedparties 9 -- 463,916Notereceivable 10 834,898 --Landavailableforsale 11 3,160,426 --Currentportionofconvertiblenotesreceivable 13 2,507,200 -- 144,297,831 179,367,248

Capitalassets 11 92,358,204 72,500,148Intangibleassets 12 1,739,451 1,891,237Convertiblenotesreceivable 13 8,424,974 1,360,548Embeddedderivatives 13 5,155,750 173,000Interestinequityaccountedinvestee 14 27,430,588 28,376,092Long-terminvestments 15 50,502,630 27,787,578Deferredtaxasset 4 -- 3,314,570Goodwill 1,200,000 1,200,000 331,109,428 315,970,421

LIABILITIES Currentliabilities Accountspayableandaccruedliabilities $4,647,009 $5,872,962Incometaxespayable 4 365,148 --Deferredgainonsaleofintellectualproperty 2,566,667 2,800,000Currentportionofpromissorynotepayable 17 814,840 877,500Currentportionoflong-termdebt 18 776,523 765,224 9,170,187 10,315,686

Long-termliabilities Promissorynotepayable 17 135,807 365,625Long-termdebt 18 31,223,545 31,420,230Deferredtaxliability 4 86,634 -- 40,616,173 42,101,541

Shareholders’equity Sharecapital 19 274,800,753 274,316,548Warrants 20 444,912 444,912Share-basedpaymentreserve 21 5,650,329 3,229,929Accumulatedothercomprehensiveloss (1,320,398) --Retainedearnings(deficit) 10,917,659 (4,122,509) 290,493,255 273,868,880 $331,109,428 $315,970,421

Natureofoperations(Note1)Commitments(Note30)Subsequentevents(Note31)

ApprovedonbehalfoftheBoard:

“JohnCervini” “ColeCacciavillani”Signed:Director Signed:Director

AphriaInc.CondensedInterimConsolidatedStatementsofIncomeandComprehensiveIncome(Loss)(Unaudited)

Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements3

Forthethreemonthsended August31 Note 2017 2016

Revenue $6,120,359 $4,375,512

Productioncosts 7 1,346,162 1,053,916

Grossprofitbeforefairvalueadjustments 4,774,197 3,321,596

Fairvalueadjustmentonsaleofinventory 7 1,135,535 1,339,538Fairvalueadjustmentongrowthofbiologicalassets 8 (4,265,779) (1,800,087)

Grossprofit 7,904,441 3,782,145

Expenses: Generalandadministrative 23 1,735,217 959,592Share-basedcompensation 24 2,508,901 203,095Selling,marketingandpromotion 1,947,586 1,380,647Amortization 238,648 201,670Researchanddevelopment 90,367 249,313 6,520,719 2,994,317

1,383,722 787,828Non-operatingitems: Consultingrevenue 292,478 --Foreignexchangeloss (150,702) --Lossonmarketablesecurities 5 (1,746,367) --(Loss)gainonsaleofcapitalassets 11 (7,260) 11,367Gainondilutionofownershipinequityaccountedinvestee 14 7,551,158 --Lossfromequityaccountedinvestee 14 (8,840,264) --Deferredgainonsaleofintellectualpropertyrecognized 14 233,333 --Financeincome,net 25 479,719 96,074Unrealizedgainonembeddedderivatives 13 532,750 --Unrealizedgainonlong-terminvestments 26 19,081,556 -- 17,426,401 107,441

Incomebeforeincometaxes 18,810,123 895,269

Incometaxes 4 3,769,955 --

Netincome 15,040,168 895,269

Othercomprehensiveloss: Othercomprehensivelossfromequityaccountedinvestee 14 (1,320,398) --

Netcomprehensiveincome $13,719,770 $895,269

Weightedaveragenumberofcommonshares–basic 138,711,674 73,784,801

Weightedaveragenumberofcommonshares–diluted 145,731,500 82,075,224

Earningspershare–basic 27 $0.11 $0.01Earningspershare–diluted 27 $0.10 $0.01

AphriaInc.CondensedInterimConsolidatedStatementsofChangesinEquity(Deficiency)(Unaudited)


Numberofcommon

sharesSharecapital(Note19)

Warrants(Note20)

Share-basedpaymentreserve

(Note21)

Accumulatedothercomprehensiveincome(loss)

Retainedearnings(deficit)

Total

BalanceatMay31,2016 70,053,933 $40,916,880 $693,675 $1,723,903 $-- $(8,320,964) $35,013,494Shareissuance–August2016boughtdeal 17,250,000 31,968,824 -- -- -- -- 31,968,824Shareissuance–warrantsexercised 2,626,253 3,874,568 (105,534) -- -- -- 3,769,034Shareissuance–optionsexercised 266,353 289,872 -- (69,571) -- -- 220,301Share-basedpayments -- -- -- 203,095 -- -- 203,095Netincomefortheperiod -- -- -- -- -- 895,269 895,269BalanceatAugust31,2016 90,196,539 $77,050,144 $588,141 $1,857,427 $-- $(7,425,695) $72,070,017

Numberofcommon

sharesSharecapital(Note19)

Warrants(Note20)

Share-basedpaymentreserve

(Note21)

Accumulatedothercomprehensive

loss

Retainedearnings(deficit)

Total

BalanceatMay31,2017 138,628,704 $274,316,548 $444,912 $3,229,929 $-- $(4,122,509) $273,868,880Shareissuance–warrantsexercised 228,467 343,951 -- -- -- -- 343,951Shareissuance–optionsexercised 31,419 37,747 -- (19,712) -- -- 18,035Share-basedpayments -- -- -- 2,440,112 -- -- 2,440,112Shareissuancecostsincurred -- (13,596) -- -- -- -- (13,596)Incometaxrecoveryonshareissuancecosts -- 3,603 -- -- -- -- 3,603Sharesheldinescrowearnedinexchangeforservices -- 112,500 -- -- -- -- 112,500Netincomefortheperiod -- -- -- -- (1,320,398) 15,040,168 13,719,770BalanceatAugust31,2017 138,888,590 $274,800,753 $444,912 $5,650,329 $(1,320,398) $10,917,659 $290,493,255

AphriaInc.

CondensedInterimConsolidatedStatementsofCashFlows

(Unaudited)


Threemonthsended

August31, August31,

Note 2017 2016

Cashgeneratedfrom(usedin)operatingactivities:

Netincomefortheperiod $15,040,168 $895,269

Adjustmentsfor:

Incometaxes 4 3,769,955 --

Fairvalueadjustmentonsaleofinventory 7 1,135,535 1,339,538

Fairvalueadjustmentongrowthofbiologicalassets 8 (4,265,779) (1,800,087)

Lossonsaleofmarketablesecurities 5 131,000 --

Unrealizedlossonmarketablesecurities 5 1,615,367 --

Unrealizedforeignexchangegainonnotesreceivable (2,064) --

Unrealizedforeignexchangegainonconvertiblenotesreceivable 13 (6,200) --

Amortization 11,12 627,771 454,878

Loss(gain)onsaleofcapitalassets 11 7,260 (11,367)

Dispositionandusageofbearerplants 11 2,761 --

Accruedinterestonconvertiblenotereceivable 13 (14,426) --

Unrealizedgainonembeddedderivatives 13 (532,750) --

Lossfromequityaccountedinvestee 14 8,840,264 --

Gainondilutionofownershipinequityaccountedinvestee 14 (7,551,158) --

Deferredgainonsaleofintellectualpropertyrecognized 14 (233,333) --

Consultingrevenue 17 (292,478) --

Amortizationoffinancefeesonlong-termdebt 1,250 833

Share-basedcompensation 24 2,508,901 203,095

Unrealizedgainonlong-terminvestments 26 (19,081,556) --

Changeinnon-cashworkingcapital 28 (5,501,608) 444,544

(3,801,120) 1,526,703

Cashprovidedbyfinancingactivities:

Sharecapitalissued,netofcashissuancecosts (13,596) 31,968,824

Sharecapitalissuedonwarrantsexercised 343,951 3,769,034

Sharecapitalissuedonstockoptionsexercised 18,035 220,301

Advancesfromrelatedparties 9 1,583,079 195,368

Repaymentofamountsduetorelatedparties 9 (1,087,455) (195,368)

Proceedsfromlong-termdebt 18 -- 7,825,000

Repaymentoflong-termdebt 18 (186,636) (98,837)

657,378 43,684,322

Cashusedininvestingactivities:

Repaymentofpromissorynotesreceivable -- 376,569

Investmentincapitalassets 11 (23,694,817) (6,230,625)

Proceedsfromdisposalofcapitalassets 11 199,650 32,823

Investmentinintangibleassets,netofsharesissued 12 (9,321) (1,285,042)

Notesadvanced 10 (832,834) --

Convertiblenotesadvanced 13 (14,001,000) --

Investmentinmarketablesecurities 5 (5,000,000) --

Proceedsfromdisposalofmarketablesecurities 5 10,099,000 --

Investmentinlong-terminvestments 15 (5,297,496) (1,125,000)

(38,536,818) (8,231,275)

(Decrease)increaseincashandcashequivalents (41,680,560) 36,979,750

Cashandcashequivalents,beginningoftheperiod 79,910,415 16,472,664

Cashandcashequivalents,endoftheperiod: $38,229,855 $53,452,414

AphriaInc.

NotestotheCondensedInterimConsolidatedFinancialStatements

ForthethreemonthsendedAugust31,2017andAugust31,2016

(Unaudited)

6

1. Natureofoperations

AphriaInc.(the"Company"or“Aphria”)wascontinuedinOntario.

PureNaturesWellness Inc.(o/aAphria)(“PNW”),awholly-ownedsubsidiaryoftheCompany, is licensedto

produce and sellmedicalmarijuana under the provisions of theAccess to Cannabis forMedical PurposesRegulations (“ACMPR”). The registered office is located at 5300 Commerce Court West, 199 Bay Street,

Toronto,Ontario.

TheCompany’scommonsharesarelistedunderthesymbol“APH”ontheTorontoStockExchange(“TSX”)and

underthesymbol“APHQF”ontheUnitedStatesOTCQBVentureMarketexchange.

TheseconsolidatedfinancialstatementswereapprovedbytheCompany’sBoardofDirectorsonOctober12,

2017.

2. Basisofpreparation

(a) Statementofcompliance

The Company’s condensed interim consolidated financial statements have been prepared in

accordancewith IAS34,“InterimFinancialReporting”.These financial statementsdonot includeall

notesofthetypenormallyincludedwithintheannualfinancialreportandshouldbereadinconjunction

withtheauditedfinancialstatementsoftheCompanyfortheyearendedMay31,2017,whichhave

beenpreparedinaccordancewithInternationalFinancialReportingStandards(“IFRS”)asissuedbythe

InternationalAccountingStandardsBoardandInterpretationsoftheIFRSInterpretationsCommittee.

(b) Basisofmeasurement

Thesefinancialstatementshavebeenpreparedonthegoingconcernbasis,underthehistoricalcost

conventionexceptforcertainfinancialinstrumentsthataremeasuredatfairvalueandbiologicalassets

thataremeasuredatfairvaluelesscoststosell,asdetailedintheCompany’saccountingpolicies.

(c) Functionalcurrency

The Company and its subsidiaries’ functional currency, as determined by management is Canadian

dollars.TheseconsolidatedfinancialstatementsarepresentedinCanadiandollars.

(d) Basisofconsolidation

SubsidiariesareentitiescontrolledbytheCompany.ControlexistswhentheCompanyhasthepower,

directlyandindirectly,togovernthefinancialandoperatingpoliciesofanentityandbeexposedtothe

variable returns from its activities. The financial statements of subsidiaries are included in the

consolidatedfinancialstatements fromthedatethatcontrolcommencesuntil thedatethatcontrol

ceases.

Whollyownedsubsidiaries Jurisdictionofincorporation

PureNaturesWellnessInc.(o/aAphria) Ontario

Aphria(Arizona)Inc. Arizona

Intragroup balances, and any unrealized gains and losses or income and expenses arising from

transactionswithjointlycontrolledentitiesareeliminatedtotheextentoftheCompany’sinterestinthe

AphriaInc.



(Unaudited)

7

entity.Unrealizedlossesareeliminatedtotheextentofthegains,butonlytotheextentthatthereisno

evidenceofimpairment.

TheCompanytreatstransactionswithnon-controllingintereststhatdonotresultinalossofcontrolas

transactionswithequityownersoftheCompany.Achangeinownershipinterestresultsinanadjustment

betweenthecarryingamountsof thecontrollingandnon-controlling interests toreflect their relative

interests in thesubsidiary. Anydifferencebetweentheamountof theadjustment tonon-controlling

interests and any consideration paid or received is recognized in a separate reserve within equity

attributabletotheownersoftheCompany.

(e) Amalgamation

EffectiveJune1,2017,CannWayPharmaceuticalsLtd. (“CannWay”),awholly-ownedsubsidiaryof the

company,wasamalgamatedwithPureNaturesWellnessInc.(o/aAphria).TheCompanyhashistorically

presentedallbalancesandactivitiesofCannWayasa fullyconsolidatedentity for financialstatement

presentationpurposes.Asofthedateofamalgamation,CannWaydidnothaveanyassetsoroutstanding

liabilities. There are no material changes to be considered prospectively or to the comparative

consolidatedstatementsasaresultoftheamalgamation.

(f) Interestinequity-accountedinvestees

TheCompany’sinterestinequityaccountedinvesteesiscomprisedofitsinterestinassociates.

Equityaccountedinvestee Jurisdictionofincorporation

LibertyHealthSciencesInc.

(formerlyDFMMJInvestments,Ltd.)BritishColumbia

InaccordancewithIFRS10,associatesarethoseinwhichtheCompanyhassignificantinfluence,butnot

controlorjointcontroloverthefinancialandaccountingpolicies.

InterestsinassociatesareaccountedforusingtheequitymethodinaccordancewithIAS28.Theyare

recognized initiallyatcost,which includestransactioncosts.After initial recognition, theconsolidated

financialstatementsincludetheCompany’sshareoftheprofitorlossandothercomprehensiveincome

(“OCI”)ofequityaccountedinvesteesuntilthedateonwhichsignificantinfluenceceases.

IftheCompany’sshareoflossesinanequity-accountedinvestmentequalsorexceedsitsinterestinthe

entity,includinganyotherunsecuredlong-termreceivables,thegroupdoesnotrecognizefurtherlosses,

unlessithasincurredobligationsormadepaymentsonbehalfoftheotherentity.

UnrealizedgainsontransactionsbetweentheCompanyanditsassociatesareeliminatedtotheextentof

theCompany’s interest in theseentities. Unrealized lossesarealsoeliminatedunless thetransaction

providesevidenceofanimpairmentoftheassettransferred.

Thecarryingamountofequity-accountedinvestmentsistestedforimpairmentinaccordancewiththe

policydescribedintheannualauditedfinancialstatements.

3. Significantaccountingpolicies

These condensed interim consolidated financial statements havebeenprepared following the same

accountingpoliciesusedinthepreparationoftheauditedfinancialstatementsoftheCompanyforthe

yearendedMay31,2017.

AphriaInc.



(Unaudited)

8

NewstandardsapplicableduringthereportingperiodIFRS 5 – Non-current Assets Held for Sale; Assets and liabilities held for disposal are no longer

depreciatedandarepresentedseparately inthestatementof financialpositionatthe loweroftheir

carryingamountandfairvaluelesscoststosell.Anassetisregardedasheldforsaleifitscarryingamount

willberecoveredprincipallythroughasaletransaction,ratherthanthroughcontinuinguse.Forthisto

bethecase,theassetmustbeavailableforimmediatesaleanditssalemustbehighlyprobable.

Newstandardsandinterpretationsissuedbutnotyetadopted:

IFRS9-FinancialInstruments;ClassificationandMeasurement,effectiveforannualperiodsbeginning

on or after January 1, 2018, with early adoption permitted, introduces new requirements for the

classification, measurement and derecognition of financial instruments and introduces a new

impairmentmodel for financialassets. TheCompany isassessing the impactof the standardon its

convertible notes receivable and its investments where it holds less than significant influence. The

Companyhasdeterminedthattherewillnoimpactoncashandcashequivalents,marketablesecurities,

accounts receivable, other receivables, promissory notes receivable, accounts payable and accrued

liabilitiesandpromissorynotespayable.Convertiblenotesreceivablearecurrentlyrecordedasavailable

for sale. Investments are currently recorded at fair value. Upon implementation of IFRS 9, these

investmentswill need tobe recordedat fair value and theCompany is currently assessing available

informationandmethodstodeterminetheirfairvalue.Basedoninvestmentsalreadyreflectedatfair

value,nosignificantimpactisanticipatedfromthenewstandard.

The new standard also introduces expanded disclosure requirements and changes in presentation.

TheseareexpectedtochangethenatureandextentoftheCompany’sdisclosuresaboutitsfinancial

instrumentsparticularlyintheperiodoftheadoptionofthenewstandard.

TheCompanywillapplythenewrulesretrospectivelyfromJune1,2018withthepracticalexpedients

permittedunderthestandards.Comparativeswillnotberestated.

IFRS15-RevenuefromContractswithCustomers;effectiveforannualperiodsbeginningonorafter

January 1, 2018, with early adoption permitted, specifies how andwhen to recognize revenue and

enhancesrelevantdisclosurestobeappliedtoallcontractswithcustomers.TheCompanycontinuesto

assesstheimpactofthestandardonitsinvesteeswithafocusonconsultingcontractsandroyaltyfees.

TheCompanyisstillconsideringtheimpactonitscustomerloyaltyprogramme,whichiscurrentlyunder

reconsideration.Thenewstandardwillrequirethatthetotalconsiderationreceivedbeallocatedtothe

pointsandgoodsbasedonrelativestand-alonesellingpricesratherthanbasedontheresidualmethod.

TheCompanyintendstoadoptthestandardusingthemodifiedretrospectiveapproachwhichmeans

thatthecumulativeimpactofadoptionwillberecognizedinretainedearningsasofJune1,2018and

thatcomparativeswillnotberestated.

IFRS16–Leases; inJanuary2016,the IASB issuedIFRS16,whichspecifieshowanIFRSreporterwill

recognise, measure, present and disclose leases. The standard provides a single lessee accounting

model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12

monthsorlessortheunderlyingassethasalowvalue.Lessorscontinuetoclassifyleasesasoperating

orfinance,withIFRS16’sapproachtolessoraccountingsubstantiallyunchangedfromitspredecessor,

IAS17. IFRS16 iseffectiveforannualreportingperiodsbeginningonorafterJanuary1,2019,anda

lesseeshalleitherapplyIFRS16withfullretrospectiveeffectoralternativelynotrestatecomparative

informationbutrecognisethecumulativeeffectofinitiallyapplyingIFRS16asanadjustmenttoopening

AphriaInc.



(Unaudited)

9

equityatthedateof initialapplication.Earlyadoptionispermittedif IFRS15hasalsobeenadopted.

Basedonitscurrentassets,interestsandinvestments,nosignificantimpactisanticipatedfromthenew

standard.

Therearenootherstandardsthatarenotyeteffectiveandthatwouldbeexpectedtohaveamaterialimpact

ontheCompanyinthecurrentorfuturereportingperiodsandonforeseeablefuturetransactions.

TheCompanyhasreclassifiedcertainimmaterialitemsonthecomparativeconsolidatedstatementsofincome

andcomprehensiveincometoimproveclarity.

4. Incometaxesanddeferredincometaxes

Areconciliationofincometaxesatthestatutoryratewiththereportedtaxesisasfollows:

ForthethreemonthsendedAugust31,

2017 2016

Incomebeforeincometaxes $18,810,123 $895,269

Statutoryrate 26.5% 26.5%

Expectedincometaxrecoveryatcombinedbasicfederaland

provincialtaxrate 4,984,683 237,246

Effectonincometaxesof:

Non-deductibleshare-basedcompensationandotherexpenses (1,194,497) 59,929

Utilizationoftaxattributesnotpreviouslyrecognized -- (978,718)

Other (20,231) (80,651)

Taxassetsnotrecognized -- 762,194

$3,769,955 $--

Incometaxexpenseiscomprisedof:

Current $365,148 $--

Future 3,404,807 --

$3,769,955 $--

Thefollowingtablesummarizesthecomponentsofdeferredtax:

August31, May31,

2017 2017

Deferredtaxassets

Non-capitallosscarryforward $1,361,332 $1,312,849

Capitallosscarryforward 397,719 380,362

Shareissuanceandfinancingfees 3,254,859 3,448,332

Other 50,058 34,138

Deferredtaxliabilities

Netbookvalueinexcessofundepreciatedcapitalcost (178,040) (164,027)

Intangibleassetsinexcessoftaxcosts (165,998) (193,890)

Unrealizedgain (3,387,875) (914,019)

Biologicalassetsandinventoryinexcessoftaxcosts (1,418,689) (589,175)

Netdeferredtax(liabilities)assets $(86,634) $3,314,570

AphriaInc.



(Unaudited)

10

5. Marketablesecurities

Marketablesecuritiesareclassifiedasfairvaluethroughprofitorloss,andarecomprisedof:

S&Prating

atpurchaseInterestrate

Maturity

date

August31,

2017

May31,

2017

GuaranteedInvestmentCertificate(GIC):

VancouverCitySavingsCreditUnion 1.150% 06/08/18 $5,013,233 $--

FixedIncome:

MolsonCoorsBrewingCompany BBB- 3.950% 10/06/17 1,119,919 1,116,524

FordMotorCreditCo.LLC BBB 3.320% 12/19/17 2,023,830 1,988,184

GoldmanSachs&Co.LLC A+ 3.375% 02/01/18 -- 5,078,194

TheManufacturer’sLifeInsuranceCompany AA- 2.819% 02/26/18 1,458,832 1,471,818

CanadianWesternBank A- 2.531% 03/22/18 3,047,200 3,038,997


SobeysInc. BB+ 3.520% 08/08/18 3,030,672 3,078,141

RoyalBankofCanada AA- 2.770% 12/11/18 -- 5,179,711


SunLifeFinancialInc. A 2.770% 05/13/19 3,053,076 3,063,816


CanadianNaturalResourcesLtd. BBB+ 3.050% 06/19/19 2,041,744 2,053,607


LaurentianBankofCanada BBB 2.500% 01/23/20 6,032,347 6,098,888

EnercareSolutionsInc. BBB 4.600% 02/03/20 3,973,131 4,007,550

EnbridgeInc. BBB+ 4.530% 03/09/20 5,352,461 5,394,630

Central1CreditUnion A 1.870% 03/16/20 4,997,072 5,020,565

ChoicePropertiesREIT BBB 3.600% 04/20/20 5,202,690 5,236,870

PenskeTruckLeasingCo.,L.P. BBB 2.950% 06/12/20 5,111,419 5,145,483

WestcoastEnergyInc. BBB+ 4.570% 07/02/20 5,342,167 5,429,820

BankofMontreal(USD) A+ 1.400% 04/10/18 3,780,666 4,051,775

CitigroupInc.(USD) BBB+ 2.050% 12/17/18 3,790,925 4,081,546

RoyalBankofCanada(USD) AA- 1.625% 04/15/19 3,775,989 4,039,998

WellsFargo&Company(USD) A 2.150% 01/30/20 3,677,531 3,964,760

$80,501,420 $87,346,787

ThecostofmarketablesecuritiesasatAugust31,2017was$78,064,435(May31,2017–$87,138,224).During

theperiod, thecompanydivestedofcertainmarketablesecurities in itsCanadianportfolio forproceedsof

$10,099,000,resultinginalossof$131,000ondisposal(2016-$nil),andre-invested$5,000,000inashort-

term GIC. During the period, the Company recognized a loss of $1,746,367 on its marketable securities

portfolio,ofwhich$1,615,367(2016-$nil)representedunrealizedfairvalueadjustments.

6. Otherreceivables

Otherreceivablesarecomprisedof:

August31, May31,

2017 2017

HSTreceivable $5,361,703 $3,675,188

Accruedinterest 493,063 700,827

Creditcardreceivable 123,923 103,004

Other 221,817 32,620

$6,200,506 $4,511,639

AphriaInc.



(Unaudited)

11

7. Inventory

Inventoryiscomprisedof:

Capitalized

Cost

Fairvalue

adjustment

August31,

2017

May31,

2017

Harvestedcannabis $943,904 $1,761,552 $2,705,456 $2,506,963

Harvestedcannabistrim 394,434 849,624 1,244,058 420,322

Cannabisoil 586,192 987,327 1,573,519 682,056

Packagingandsupplies 445,470 -- 445,470 277,266

$2,370,000 $3,598,503 $5,968,503 $3,886,607

During the period, the Company recorded $1,346,162 (2016 - $1,053,916) related to production costs.

IncludedinproductioncostsfortheperiodendedAugust31,2017is$40,915ofcannabisoilconversioncosts

(2016 - $14,940) and $36,966 related to the cost of accessories (2016 - $nil). Included in cost of sales is

amortizationof$389,123(2016-$253,208)relatedtocapitalassetsutilizedinproduction.Duringtheperiod,

theCompanyexpensed$1,135,535(2016–$1,339,538)offairvalueadjustmentsonthesaleofitsbiological

assetsincludedininventory.

TheCompanyholds721.5kilogramsofharvestedcannabis (May31,2017–668.5kgs),414.7kilogramsof

harvested cannabis trim (May31, 2017–140.1 kgs) and2,517.6 litresof cannabisoils or419.1 kilograms

equivalent(May31,2017–1,091.3litresor181.9kilogramsequivalent)atAugust31,2017.

8. Biologicalassets

Biologicalassetsarecomprisedof:

Amount

BalanceasatMay31,2017 $1,362,749

Changesinfairvaluelesscoststosellduetobiologicaltransformation 4,265,779

Productioncostscapitalized 1,434,869

Transferredtoinventoryuponharvest (3,610,566)

Transferredtocapitalassets (18,326)

BalanceasatAugust31,2017 $3,434,505

TheCompanyvaluesmedicalcannabisplantsatcostfromthedateofinitialclippingfrommotherplantsuntil

theendofthetwelfthweekofitsgrowingcycle.Measurementofthebiologicalassetatfairvaluelesscosts

tosellandcoststocompletebeginsatthethirteenthweekuntilharvest.TheCompanyhasdeterminedthe

fairvaluelesscoststosellofharvestedcannabistobe$3.75pergram.TheCompanyhasdeterminedthefair

valuelesscoststosellofitsharvestedcannabistrimtobe$3.00pergram,uponharvest.

Theneteffectofthefairvaluelesscosttoselloverandabovehistoricalcostwasanincreaseinnon-cashvalue

of biological assets and inventory of $4,265,779 during the threemonths endedAugust 31, 2017 (2016 –

increaseof$1,800,087). Indeterminingthefairvalueofbiologicalassets,managementisrequiredtomake

several estimates, including: the expected cost required to grow the cannabis up to the point of harvest;

harvestingcosts;sellingcosts;salesprice;and,expectedyieldsforthecannabisplant.Allofwhichrepresent

Level 3 on the fair value hierarchy. These estimates are subject to volatility inmarket prices and several

uncontrollablefactors,whichcouldsignificantlyaffectthefairvalueofbiologicalassetsinfutureperiods.

AphriaInc.



(Unaudited)

12

9. Relatedpartytransactions

Priortogoingpublic,theCompanyfundedoperationsthroughthesupportofrelatedparties.Sincegoingpublic,

the Company has continued to leverage the purchasing power of these related parties for certain of its

operatingexpenditures.ThebalanceowingfromrelatedpartiesasatAugust31,2017was$nil(May31,2017

- $463,916). These parties are related as they are corporations that are controlled by certain officers and

directorsoftheCompany.

DuringthethreemonthsendedAugust31,2017,relatedpartycorporationschargedorincurredexpenditures

onbehalfoftheCompany(includingrent)totaling$38,595(2016-$195,368).Includedinthisamountwasrent

of$8,178chargedduringthethreemonthsendedAugust31,2017(2016-$24,855).

The Company funded the start-up costs and operations of Liberty Health Sciences Inc. (formerly DFMMJ

Investments,Ltd.),arelatedpartythroughanequityinvestment.

Amount

Balancedueto(from)relatedpartiesasatMay31,2017 $(463,916)

Relatedpartychargesintheperiod 38,595

Paymentstorelatedpartiesintheperiod (38,595)

Non-cashpaymentsmadeonbehalfofarelatedpartyintheperiod (31,708)

Paymentsmadeonbehalfofrelatedpartiesintheperiod (1,048,860)

Repaymentsmadebyrelatedpartiesintheperiod 1,544,484

Balancedueto(from)relatedpartiesasatAugust31,2017 $--

During theprioryear, theCompanypurchased36acresof farm land,with9acresofgreenhouses located

thereon, fromF.M.andCacciavillani Farms Ltd., a company controlledbyadirector, for$6.1million. The

purchasepricewasallocatedasfollows:(i)$1.3milliontoland;(ii)$3.55milliontogreenhouseinfrastructure;

and,(iii)$1.25milliontolicensesandpermits–intangibleassets.

Keymanagementpersonnelcompensationwascomprisedof:


2017 2016

Salaries $306,030 $212,309

Short-termemploymentbenefits(includedinofficeandgeneral) 18,105 11,015

Share-basedcompensation 1,758,422 95,979

$2,082,557 $319,303

DirectorsandofficersoftheCompanycontrol12.8%or17,832,066ofthevotingsharesoftheCompany.

AphriaInc.



(Unaudited)

13

10. Notereceivable

May31,

2017Additions Payments

August31,

2017

CopperstateFarmsInvestors,LLC-

$666,000USD($832,834),non-interest

bearing,nosettermsofrepayment$-- $834,898 $-- $834,898

$-- $834,898 $-- $834,898

11. Capitalassets

LandGreenhouse

infrastructure

Bearer

plantsEquipment

Leasehold

improvements

Construction

inprocess

Totalcapital

assets

Cost

AtMay31,2016 $-- $-- $-- $3,499,528 $4,812,153 $64,806 $8,376,487

Additions 10,724,551 4,018,080 112,225 1,699,989 16,129 49,957,556 66,528,530

Transfers 104,283 12,151,836 -- 173,834 (4,565,987) (7,863,966) --

Disposals -- -- (66,613) (32,823) -- -- (99,436)

AtMay31,2017 10,828,834 16,169,916 45,612 5,340,528 262,295 42,158,396 74,805,581

Additions 1,548,713 -- 18,326 624,654 -- 21,503,124 23,694,817

Transfers (3,160,426) 169,362 -- -- -- (169,362) (3,160,426)

Disposals -- (206,910) (2,761) -- -- -- (209,671)

AtAug31,2017 $9,217,121 $16,132,368 $61,177 $5,965,182 $262,295 $63,492,158 $95,130,301

Accumulated

amortization

AtMay31,2016 $-- $-- $-- $554,401 $512,866 --$1,067,267

Amortization -- 457,891 -- 717,207 74,435 -- 1,249,533

Transfers -- 524,749 -- -- (524,749) -- --

Disposals -- -- -- (11,367) -- -- (11,367)

AtMay31,2017 -- 982,640 -- 1,260,241 62,552 -- 2,305,433

Amortization -- 206,791 -- 252,345 7,528 -- 466,664

AtAug31,2017 $-- $1,189,431 $-- $1,512,586 $70,080 $-- $2,772,097

Netbookvalue

AtMay31,2016 $-- $-- $-- $2,945,127 $4,299,287 $64,806 $7,309,220

AtMay31,2017 $10,828,834 $15,187,276 $45,612 $4,080,287 $199,743 $42,158,396 $72,500,148

AtAug31,2017 $9,217,122 $14,942,937 $61,177 $4,452,596 $192,215 $63,492,158 $92,358,204

Duringtheperiod,theCompanysoldassetsthatwerenotyetinusepriortodisposalwithacostof$206,910

andanetbookvalueof$206,910, forproceedsof$199,650,resulting ina lossonsaleofcapitalassetsof

$7,260.

OnAugust9,2017,theCompanyenteredintoaseriesofagreementswithNuuveraCorp.(“Nuuvera”).Under

thetermsofoneoftheagreements,theCompanyagreedtosell100acresoflandownedonMerseaRoad8

Leamington,Ontario inexchange for$4,000,000. Theagreement is subject to standard closing conditions,

including the severanceof the100acres fromtheoverall siteownedby theCompanyonMerseaRoad8,

Leamington,Ontario.TheCompanyexpectsthetransactiontoclosebeforethefiscalyear-end.Asaresultof

theagreement,theCompanyreclassified$3,160,426ofcostincludedinlandtoassetsavailableforsale.

AphriaInc.



(Unaudited)

14

12. Intangibleassets

Corporate

website

Licenses&

permits

Patents&

trademarks

TokyoSmoke

licensing

agreement

CannWay

brand

Total

intangible

assets

Cost

AtMay31,2016 $161,700 $-- $-- $-- $4,428,000 $4,589,700

Additions 56,120 1,250,000 -- 459,480 -- 1,765,600

AtMay31,2017 217,820 1,250,000 -- 459,480 4,428,000 6,355,300

Additions -- -- 9,321 -- -- 9,321

AtAugust31,2017 $217,820 $1,250,000 $9,321 $459,480 $4,428,000 $6,364,621

Accumulatedamortization

AtMay31,2016 $87,520 $-- $-- $-- $184,500 $272,020

Amortization 67,845 152,879 -- 56,939 414,380 692,043

Impairment -- -- -- -- 3,500,000 3,500,000

AtMay31,2017 155,365 152,879 -- 56,939 4,098,880 4,464,063

Amortization 13,803 41,894 156 22,974 82,280 161,107

AtAugust31,2017 $169,168 $194,773 $156 $79,913 $4,181,160 $4,625,170

Netbookvalue

AtMay31,2016 $74,180 $-- $-- $-- $4,243,500 $4,317,680

AtMay31,2017 $62,455 $1,097,121 $-- $402,541 $329,120 $1,891,237

AtAugust31,2017 $48,652 $1,055,227 $9,165 $379,567 $246,840 $1,739,451

13. Convertiblenotesreceivable

Notesreceivable Embeddedderivatives

August31,

2017

May31,

2017

August31,

2017

May31,

2017

CannaRoyaltyCorp. $1,374,974 $1,360,548 $705,750 $173,000

CopperstateFarmsInvestors,LLC 2,507,200 -- -- --

HydRxFarmsLtd.(d/b/aScientusPharma) 7,050,000 -- 4,450,000 --

10,932,174 1,360,548 5,155,750 173,000

Deduct–principalportionincludedincurrentassets (2,507,200) -- -- --

$8,424,974 $1,360,548 $5,155,750 $173,000

CannaRoyaltyCorp.

OnOctober19,2016,Aphrialoaned$1,500,000toCannaRoyaltyCorp.(“CR”)asaconvertibledebenture.The

convertibledebenturebearsinterestat5%,paidannually,maturesinthreeyearsandincludestherighttoconvert

thedebentureintocommonsharesofCRat$2.00percommonshareatanytimebeforematurity.CRmaintains

the option of forced conversion of the convertible debenture if the common shares of CR trade on a stock

exchangeatavalueof$4.00ormore.

Theoptiontosettlepaymentsincommonsharesrepresentsanembeddedderivativeintheformofacalloption

totheCompany.Thefairvalueofthederivativeassetrelatedtotheconvertiblenoteis$705,750atAugust31,

2017.

Duringtheperiod,theCompany’snotereceivablefromCRincreasedby$14,426representingtherecognitionof

accruedinterestonthenoteandtheembeddedderivative,representingthefairvalueoftheconversionfeature

onthenote,increasedby$532,750.

AsatAugust31,2017,theconvertiblenotereceivabletotalled$2,080,724.

AphriaInc.



(Unaudited)

15

CopperstateFarmsInvestors,LLC

Effective August 31, 2017, the Company lent Copperstate Farms Investors, LLC (“CSF”) $2,000,000 USD

($2,501,000CAD)inexchangeforaseniorsecuredconvertibleloan.Theconvertibledebenturebearsinterestat

9%,isdueonMay15,2018(“MaturityDate”).Theloanispre-payableatanytimebyCSF,howevernoprincipal

paymentsareduepriortotheMaturityDate. Ifat least$500,000USDoftheoutstanding loanbalance isnot

repaidbyFebruary28,2018,thenanautomaticconversionwouldbetriggeredfor$500,000USDplusanyaccrued

butunpaidinterest,netofanyrepaymentstowardstheprincipal,oftheloanbalanceat$500USDperunit.Ifthe

outstanding loan balance has not been repaid before theMaturity Date, an automatic conversionwould be

triggeredfortheremainingloanbalanceat$500USDperunit.Theconvertibleloanissecuredbyafirstcharge

onCSF’sgreenhouseassetsandrealpropertylocatedinSnowflake,Arizona.Sincetheoptiontosettlepayments

inmembershipunitsissolelyatthediscretionofCSF,noembeddedderivativehasbeenrecognized.


HydRxFarmsLtd.(d/b/aScientusPharma)

On August 14, 2017, Aphria lent $11,500,000 to Scientus Pharma (“SP”) as a convertible debenture. The

convertibledebenturebearsinterestat8%,paidsemi-annually,maturesintwoyearsandincludestherightto

convertthedebentureintocommonsharesofSPat$2.75percommonshareatanytimebeforematurity.SP

maintainstheoptionofforcedconversionoftheconvertibledebentureifthecommonsharesofSPtradeona

stockexchangeatavalueof$3.02ormorefor30consecutivedays. Theoptiontosettlepaymentsincommonsharesrepresentsanembeddedderivativeintheformofacalloption

totheCompany.Thefairvalueofthederivativeassetrelatedtotheconvertiblenoteis$4,450,000atAugust31,

2017.


ThefairvaluefortheembeddedderivativeswasdeterminedusingtheBlackScholesoptionpricingmodelusing

thefollowingassumptions:therisk-freerateof1.12-1.15%;expectedlifeoftheconvertiblenote;volatilityof70%

based on comparable companies; forfeiture rate of nil; dividend yield of nil; and, the exercise price of the

respectiveconversionfeature.

14. Interestinequityaccountedinvestee

August31, May31,

2017 2017

Associatedcompany

LibertyHealthSciencesInc.(formerlyDFMMJInvestments,Ltd.) $27,430,588 $28,376,092

LibertyHealthSciencesInc.(formerlyDFMMJInvestments,Ltd.)

OnApril5,2017AphriaannouncedastrategicinvestmentinDFMMJInvestments,Ltd.("DFMMJ"),whereDFMMJ,

throughasubsidiary,acquiredallorsubstantiallyalloftheassetsofChestnutHillTreeFarmLLC(“Chestnut”)and

wouldsubsequentlyamalgamateintoasubsidiaryofSecureComMobileInc.(“SecureCom”),aspartofabusiness

combination.Aspartofthestepsinvolvedinthebusinesscombination,Aphriafirstexchangedrightstouseits

intellectualproperty,Aphria’sKnow-How-System,toDFMMJaspartofa licensingagreement inexchangefor

commonshares,whichthroughanarm’slengthnegotiation,wasdeterminedtohaveafairvalueof$5,000,000.

As a result of this in-kind transaction, Aphriawas issued 192,400,000 common shares in DFMMJ. Aphria is

AphriaInc.



(Unaudited)

16

deemedtohavesignificantinfluenceoverDFMMJduetoitsresultingequityinterest(44.0%,atApril5,2017),

wherebytheinvestmentisvaluedundertheequitymethod.Foraccountingpurposes,theCompanyrecordedthe

transaction as deferred revenueof $2,800,000, representing its non-owned interest in the equity accounted

investee.Managementdeterminedthattheintellectualpropertywouldhaveausefullifeof3yearsandtherefore

thedeferredincomewillberecognizedstraight-lineoveritsremainingusefullife.Forthereportingperiodended

August31,2017,theCompanyrecognized$233,333ofthedeferredincome.

OnMay24,2017,theCompanyreleased$25,311,794,comprisedof$625,000CADand$18,340,857USD,which

itself was comprised of $24,375,000 CAD converted into USD in March 2017 as required in the business

combination agreement ($24,686,794CAD), fromescrow toDFMMJ, after satisfactionof the escrow release

conditions.Inaddition,theCompanyincurred$53,898oftransactionfeesrelatedtotheinvestment.Inexchange,

the Company received 120,192,308 common shares of DFMMJ. Concurrently, DFMMJ issued a further

120,192,308 common shares to third parties in exchange for $25,000,000 CAD in cash. As a result of these

transactions,theCompanyowned312,592,308commonsharesinDFMMJ,representingapproximately46.1%of

DFMMJ’sissuedandoutstandingcommonshares,atMay31,2017.

On July 20, 2017, as part of the business combinationDFMMJ received an investment froma third party of

$9,149,997for43,990,370subscriptionsharesat$0.208pershare.Asaresult,theCompany’sinterestinDFMMJ

wasdilutedfrom46.1%to43.3%,withtheCompanyrealizingadilutiongainof$1,961,383fromthechangein

equityinterest.

Further on July 20 2017, DFMMJ completed its business combinationwith SecureCom. After amalgamation,

SecureCom changed its name to Liberty Health Sciences Inc. (“LHS”) and remained the resulting issuer.

ManagementdeterminedtheCompanyshouldaccountforitsinvestmentinthenewlyconsolidatedLHSusing

theequitymethodasacontinuationofthetreatmentpreviouslyappliedtoitsinvestmentinDFMMJ.Priortothe

transaction,theCompanyheld8,000,000sharesdirectlyinSecureCom,whichhavebeenhistoricallytreatedasa

Level 1 Long-Term Investment. As a result of the business combination, the 130,044,447 total outstanding

common shares of SecureCom were added to the share base of LHS, and the fair value of the Company’s

investmentinSecureCom($1,664,000)wasaddedtothecarryingvalueofitsinterestintheequityaccounted

investee.Uponcompletionofthebusinesscombination,all852,063,664outstandingshareswereconsolidated

forConsiderationShares in LHS.Asa result, theCompanyheld320,592,308 (37.6%)of the totaloutstanding

shares of LHS. Due to the dilution of ownership in the combined entity, the Company recognized a further

unrealizedgainondilutionwithrespecttotheoutstandingsharesownedbythirdpartiesof$5,589,775anda

correspondingincreasetothecostbaseofitsinvestmentbythesamevalue.

ForthethreemonthsendedAugust31,2017,theCompanyreportedatotalgainondilutionofownership in

equityaccountedinvesteeof$7,551,158(2016-$nil).Uponthecompletionofthetransaction,LHSconsolidated

itsissuedandoutstandingcommonshares,brokerwarrantsandexistingstockoptionsonthebasisofthreepre-

consolidationcommonsharesheldforonepost-consolidationcommonshare.Asaresultofthethree-for-one

exchange,Aphrianowholds106,864,102commonsharesofLHS,representinga37.6%ownership,wherenonew

shareswereissuedandtherewasnofurtherdilutionofownership.

ForthefourmonthsendedAugust31,2017fortheinvestee,LHSreportedanetlossof$23,492,596andanet

comprehensive lossof$27,001,494onitsfinancialstatements. Inaccordancewiththeequitymethod,Aphria

recordeda lossof$8,840,264andanothercomprehensivelossof$1,320,398fromits investeerelativeto its

ownershipoftheoutstandingcommonsharesatthetime.

AphriaInc.



(Unaudited)

17

Thefollowingtablesummarizes,inaggregate,thefinancialinformationoftheCompany’sassociateasincluded

intheirownfinancialstatements.Thetablealsoreconcilesthesummarizedfinancialinformationtothecarrying

amountoftheCompany’sinterestasatAugust31,2017:

August31,

2017

April30,

2017

Currentassets $12,994,492 $5,723,960

Non-currentassets 50,612,784 5,000,000

Currentliabilities (433,115) --

Non-currentliabilities (20,457) --

Netassets 63,153,704 10,723,960

August31,

2017

May31,

2017

Reconciliationtocarryingamount:

Openingnetassets 56,438,400 --

Intangibleassetcontributed -- 5,000,000

Cashcontributions,netofshareissuancecosts 5,987,404 50,960,200

Share-basedpayments 663,242 --

Contributionsonbusinesscombination 27,066,152 --

Netcomprehensive(loss)incomeforthereportingperiod (27,001,494) 478,200

Closingnetassets 63,153,704 56,438,400

Company’ssharein% 37.6% 46.1%

Company’sshareofnetassets $23,764,739 $26,018,102

Fairvalueadjustmentduetoprofitelimination -- (2,200,000)

Goodwill 3,665,849 4,557,990

Carryingamountofinterestinassociate $27,430,588 $28,376,092

Basedonitsclosingsharepriceof$0.85asatAugust31,2017,theLHSsharesheldbyAphriahaveafairvalueof

approximately$90,834,487.

August31,

2017

May31,

2017

Reconciliationtocarryingamount:

Openingbalance $28,376,092 $--

Investment -- 28,165,692

TransferoffairvalueofSecureComsharesonreversetakeover 1,664,000 --

Gainonaccountofdilutionofownership 7,551,158 --

Shareofreportednet(loss)income (8,840,264) 210,400

Shareofreportedcomprehensiveloss (1,320,398) --

Closingbalance $27,430,588 $28,376,092

AphriaInc.



(Unaudited)

18

15. Long-terminvestments

Cost

May31,2017

Fairvalue

May31,2017Investment

Divestiture/

Transfer

Subtotal

August31,

2017

Changeinfair

value

Fairvalue

August31,

2017

Level1onfairvaluehierarchy

CannaRoyaltyCorp. $1,379,488 $1,793,000 $-- $-- $1,793,000 $671,000 $2,464,000

KalyteraTherapeutics,Inc. 3,014,320 1,110,960 -- -- 1,110,960 (339,460) 771,500

MassRoots,Inc. 508,425 562,275 -- -- 562,275 (114,867) 447,408

SecureComMobileInc. 520,000 1,664,000 -- (1,664,000) -- -- --

TetraBio-PharmaInc. 2,300,000 9,500,000 -- -- 9,500,000 (2,500,000) 7,000,000

CanaboMedicalInc. 1,159,426 316,000 -- -- 316,000 (16,000) 300,000

ScythianBiosciencesInc. -- -- -- 2,000,000 2,000,000 (527,500) 1,472,500

8,881,659 14,946,235 -- 336,000 15,282,235 (2,826,827) 12,455,408


CopperstateFarms,LLC 1,755,000 1,755,000 -- -- 1,755,000 5,488,018 7,243,018

CopperstateFarmInvestors,LLC 7,538,940 7,560,000 1,868,167 -- 9,428,167 16,700,304 26,128,471

ResolveDigitalHealthInc. 718,000 1,000,012 -- -- 1,000,012 (282,012) 718,000

ResolveDigitalHealthInc. 282,000 242,000 -- -- 242,000 (22,000) 220,000

GreenAcreCapitalFund 300,000 284,331 400,000 -- 684,331 24,073 708,404

ScythianBiosciencesInc. 2,000,000 2,000,000 -- (2,000,000) -- -- --

TSBrandCoHoldingsInc. -- -- 1,000,000 -- 1,000,000 -- 1,000,000

NuuveraCorp. -- -- 2,029,329 -- 2,029,329 -- 2,029,329

12,593,940 12,841,343 5,297,496 (2,000,000) 16,038,839 21,908,383 38,047,222

$21,475,599 $27,787,578 $5,297,496 $(1,664,000) $31,321,074 $19,081,556 $50,502,630

ThefairvalueattachedtowarrantsinbothLevel1andLevel3weredeterminedusingtheBlack-Scholesoption

pricingmodel.

CannaRoyaltyCorp.

AsofJune1,2016theCompanyhad1,500,000sharesand750,000warrantswithacostbasis$1,510,200.On

September9,2016,theCompanyexercised750,000warrants,issuedbyCRtoacquire750,000commonshares

ofCRfor$1,125,000andsubsequentlypurchasedanadditional250,000commonsharesofCRfor$500,000on

September27,2016.InDecember2016,theCompanysold1,300,000sharesfortotalproceedsof$3,539,050,

throughthreeseparatetransactions,realizingagainof$1,908,746ondisposal.OnMay17,2017,Aphriasold

100,000sharesfortotalproceedsof$198,000,realizingagainof$72,592ondisposal.OnAugust31,2017,CR

sharesclosedtradingat$2.24.Asaresultofthesetransactions,theCompanyholds1,100,000commonshares

atacostof$1,379,488,withafairvalueof$2,464,000asatAugust31,2017.

KalyteraTherapeutics,Inc.

OnNovember7,2016,AphriaenteredintoasubscriptionagreementwithKalyteraTherapeutics,Inc.(“Kalytera”).

TheCompanypurchased2,500,000subscriptionreceiptsatapriceof$0.40perreceiptforatotalof$1,000,000.

OnDecember30,2016,theCompany’ssubscriptionreceiptsconvertedintocommonsharesofKalyteraonaone-

for-onebasis.OnJanuary31,2017,Aphriasubscribedforanadditional2,222,000commonsharesofKalyterafor

apurchasepriceof$999,900pursuanttoaprivateplacementwhichclosedonFebruary7,2017.OnFebruary

22,2017,theCompanypurchasedanadditional1,450,000commonsharesofKalyterainthesecondarymarket

atapriceof$0.70pershareforatotalof$1,014,420.OnAugust31,2017,Kalyterasharesclosedtradingat

$0.13pershare.Asaresultofthesetransactions,theCompanyowns6,172,000commonsharesinKalyterafor

aggregatecostsof$3,014,320andafairvalueof$771,500asatAugust31,2017.

MassRoots,Inc.

On October 18, 2016, Aphria purchased 500,000 common shares of MassRoots, Inc. (“MassRoots”) for an

aggregatepurchaseprice of $250,000USD ($337,500CAD) and receivedwarrants to purchase an additional

500,000commonsharesat$0.90USDpercommonshare,expiringOctober17,2019.SubsequenttoOctober

18, 2016,Aphriadivested itself of its 500,000 common sharesofMassRoots for total proceedsof $600,599,

AphriaInc.



(Unaudited)

19

realizingagainof$263,099ondisposal. OnMarch30,2017,theCompanyexercisedits500,000warrantsheld

inMassRoots for the aggregate price of $450,000 USD ($607,500 CAD) and received an additional 500,000

commonshares,subjecttoasix-monthholdunderMassRootslong-termincentiveplan.DuringAprilandMay,

theCompanysold150,000commonsharesfortotalproceedsof$123,395,realizingagainof$24,320.OnAugust

31, 2017,MassRoots shares closed trading at $0.42USD ($0.53 CAD). As a result of these transactions, the

Companyholds850,000sharesatacostof$508,425,withafairvalueof$447,408asatAugust31,2017.

SecureComMobileInc.

OnNovember23,2016,Aphria invested$200,000 inSecureComMobile Inc. (“SecureCom”)viaanunsecured

convertibledebenture.Thedebentureboreinterestat12%andwasconvertibleintoequityat$0.05pershare,

andincludedtherighttoawarrantforeachshareofequityonconversion,pricedat$0.08.Thewarrantexpired

onDecember1,2019andtheconversionrightexpiredNovember20,2018.OnMarch31,2017,theCompany

exerciseditsconversionrightsunderthedebentureandreceived4,000,000sharesand4,000,000warrantspriced

at$0.08. Concurrently, theCompanyexercised itswarrantsatacostof$320,000andreceivedanadditional

4,000,000shares.

On July 20, 2017, SecureCom amalgamated with DFMMJ and was re-named LHS. As a result, the Company

transferred the fair valueof its investment inSecureCom into its investment in LHS recognizedas Interest in

equityaccountedinvestee(note14).

TetraBio-PharmaInc.

OnDecember6,2016,Aphriapurchased5,000,000commonsharesofTetraBio-PharmaInc.(“TBP”)atapriceof

$0.20pershareforanaggregatepurchasepriceof$1,000,000,pursuanttoaprivateplacement.Aspartofthe

transaction,Aphriaalsoreceived5,000,000warrants,eachforconversionintoonecommonshare,atapriceof

$0.26perwarrantforaperiodofthreeyears.ThewarrantsweresubjecttoanacceleratedexpiryifTBP’sshares

tradedabove$0.45for30consecutivetradingdaysatwhichtimethewarrantsbecamesubjecttoa30-dayexpiry

periodifnotexercised.OnMarch20,2017,theCompanyexercisedits5,000,000warrantsheldinTBPforthe

aggregatepriceof$1,300,000.OnAugust31,2017,TBPsharesclosedtradingat$0.70pershare.Asaresultof

thesetransactions,theCompanyowns10,000,000commonsharesatacostof$2,300,000,withafairvalueof

$7,000,000asatAugust31,2017.

CanaboMedicalInc.

OnDecember23,2016,Aphriapurchased6,000,000commonsharesofCanaboMedicalInc.atapriceof$1.40

per common share for an aggregate price of $8,483,333, including issuance costs, pursuant to a private

placement.OnMarch9,2017,theCompanysold500,000sharesheldinCanaboMedicalInc.fornetproceeds

ofapproximately$340,000,realizinga lossof$360,000,whichweresubjecttoamandatory4-monthholding

period,expiringApril23,2017.TheCompanypurchased500,000sharesonMarch13,2017foranaggregate

purchasepriceof$370,700.InMay2017,theCompanysold5,200,000sharesheldinCanaboMedicalInc.for

netproceedsof approximately $2,345,000, realizing a lossof $4,649,607 ondisposal. OnAugust 31, 2017,

CanaboMedical Inc.closedtradingat$0.38pershare. Asa resultof these transactions, theCompanyowns

800,000commonshareswithacostof$1,159,426andafairvalueof$300,000asatAugust31,2017.

ScythianBiosciencesInc.

On March 17, 2017, the Company entered into a subscription agreement with Scythian Biosciences Inc.

(“Scythian”). The Company purchased 5,000,000 subscription receipts at a price of $0.40 per receipt for

$2,000,000.OnAugust2,2017,theCompany’ssubscriptionreceiptsconvertedtocommonshares.Aspartofthe

conversion,Scythianconsolidateditssharesona20:1basis.OnAugust8,2017,Scythianbegantradingonthe

TSX-VentureExchange. OnAugust31,2017, Scythianclosed tradingat$5.89per share.Asa resultof these

transactions, the Company owns 250,000 common shares at a total cost of $2,000,000,with a fair value of

$1,472,500asatAugust31,2017.

AphriaInc.



(Unaudited)

20

CopperstateFarms

OnOctober27,2016,Aphriaenteredintoanintellectualproperty(“IP”)transferagreementwithCopperstate

Farms,LLC(‘‘Copperstate’’).Underthetermsoftheagreement,AphrialicenseditsIPtoCopperstateinexchange

for 5,000 membership units in Copperstate through a consulting agreement which will be used to forgive

payments otherwise owing on a $1,300,000USD ($1,755,000 CAD) promissory note in eight equal quarterly

installmentsbeginninginFebruary2017(note17).Onthesamedate,Aphriamadeadirectcashcontributionof

$1,300,000 USD ($1,755,000 CAD) to Copperstate Farms Investors, LLC (“CSF”), the parent company of

Copperstate,inreturnfor2,600membershipunits.OnDecember20,2016,Aphriamadeafurtherinvestment

of$1,300,000USD ($1,733,940CAD) inCSF for2,600membershipunits. OnMarch27,2017, theCompany

purchasedanadditional6,000additionalmembershipunitsfor$3,000,000USD($4,050,000CAD).OnJuly26,

2017,theCompanypurchasedanadditional2,668additionalmembershipunitsfor$1,334,000USD($1,668,167

CAD).TheCompanycontractedanindependentthirdpartytoperformaformalvaluationofbothCopperstate

andCSFasatAugust31,2017todeterminethefairvalueofitsinvestmentinbothentities.Asaresultofthese

transactions, the Company owns 5,000 membership units in Copperstate for total cost of $1,300,000 USD

($1,755,000CAD),withafairvalueof$7,243,018andowns13,868membershipunitsinCSFforatotalcostof

$7,093,936USD($9,407,107CAD)withafairvalueof$26,128,471asatAugust31,2017.

ResolveDigitalHealthInc.

OnDecember1,2016,Aphriapurchased10,432commonsharesofResolveDigitalHealthInc.(‘‘Resolve’’)and

anequivalentnumberofcommonsharepurchasewarrantsforgrossproceedsof$1,000,000.Followingastock

split in January 2017, Aphria now owns 2,000,024 common shares and 2,000,024 common share purchase

warrantsofResolve,exercisableat$0.65perwarrantatanytimeforaperiodexpiringfiveyearsfromthedate

ofissuance.ThewarrantscontainaforcedconversionprovisionifResolvetradesonapublicstockexchangeata

priceofmore than$1.30 foraperiodofat least30days. TheCompanyhasdetermined thatdue to recent

financingatthesamepriceandResolvestillbeingpre-revenue,theCompany’scarryingvalueofthesharesis

equaltoitsfairvalue.ThefairvalueofthewarrantshavebeenvaluedusingtheBlackScholesmodel.Asaresult

ofthesetransactions,theCompanyowns2,000,024commonsharesand2,000,024warrantsatatotalcostof

$1,000,000,withafairvalueof$938,000asatAugust31,2017.

GreenAcreCapitalFund

OnJanuary23,2017,Aphriaagreedto invest inGreenAcreCapitalFund. In relationto itsparticipation, the

Companycommitted$2,000,000totheexpected$30,000,000fundandasofthebalancesheetdatehasfunded

$700,000. At August 31, 2017, the Company determined that the fair value of its investment, based on its

proportionateshareofnetassets,was$708,404asatAugust31,2017.

TSBrandCoHoldingsInc.

OnJune28,2017,theCompanyenteredintoasubscriptionagreementwithTSBrandCoHoldingsInc.(“Tokyo

Smoke”) for the purchase of 140,845 common shares, for a total cost of $1,000,000. The Company has

determinedthat,duetotherecentequityfinancingwiththirdpartiesatthesameprice,theCompany’scarrying

valueapproximatesitsfairvalueasatAugust31,2017.

NuuveraCorp.

OnAugust92017,theCompanyenteredintoasubscriptionagreementwithNuuveraCorp.forthepurchaseof

2,000,000commonshares, fora totalcostof$2,029,329.TheCompanyhasdeterminedthat,due to recent

financingatthesameprice,theCompany’scarryingvalueapproximatesitsfairvalueasatAugust31,2017.

AphriaInc.



(Unaudited)

21

16. Bankindebtedness

The Company secured an operating line of credit in the amount of $1,000,000which bears interest at the

lender’sprimerateplus75basispoints.Asoftheendoftheyear,theCompanyhasnotdrawnonthelineof

credit.Theoperatinglineofcreditissecuredbyfirstchargeon265TalbotSt.West,Leamington,Ontario,anda

firstrankingpositiononageneralsecurityagreement.

17. Promissorynotepayable

August31,2017 May31,2017

NotepayabletoCopperstateFarms,LLC-$1,300,000USD($1,755,000),

openingbalance.bearingnominalinterest,two-yearterm,forgivablein

eightquarterlyinstalmentsof$162,500USD

$1,243,125 $1,538,333

ReductionofPromissorynotepayablebalancewithrespecttoconsulting

servicesprovided(292,478) (295,208)

Balanceremaining 950,647 1,243,125

Deduct–principalportionincludedincurrentliabilities(814,840) (877,500)

$135,807 $365,625

18. Long-termdebt

August31,2017 May31,2017

Termloan–$25,000,000–3.95%,compoundedmonthly,15-year

amortization,dueinApril2022.$25,000,000 $25,000,000

Termloan–$1,250,000–3.99%,5-yearterm,witha10-year

amortization,repayableinequalmonthlyinstalmentsof$12,630

includinginterest,dueinJuly2021.

1,137,698 1,163,971

Mortgagepayable–$3,750,000–3.95%,5-yearterm,witha20-year

amortization,repayableinequalmonthlyinstalmentsof$22,562

includinginterest,dueinJuly2021.

3,613,447 3,645,240

Vendortake-backmortgageowedtorelatedparty–$2,850,000–6.75%,

5-yearterm,repayableinequalmonthlyinstalmentsof$56,097including

interest,dueinJune2021

2,268,090 2,396,660

$32,019,235 $32,205,871

Deduct–unamortizedfinancefees (19,167) (20,417)

–principalportionincludedincurrentliabilities (776,523) (765,224)

$31,223,545 $31,420,230

Totallong-termdebtrepaymentsareasfollows:

YearendingAugust31,

Next12months $776,523

2years 823,496

3years 873,456

4years 4,545,760

5years 25,000,000

Balanceofobligation $32,019,235

AphriaInc.



(Unaudited)

22

The term loan of $25,000,000 was entered into onMay 9, 2017 and is secured by a first charge on the

Company'srealestateholdings,afirstpositiononageneralsecurityagreement,certaincashsecurityandan

assignmentoffireinsurancetothelender.

Themortgagepayableof$3,613,447andtermloanof$1,137,698wereenteredintoonJuly22,2016andare

securedbyafirstchargeonthepropertyat265TalbotSt.West,Leamington,Ontarioandafirstpositionona

generalsecurityagreement.

Thevendortake-backmortgagepayableof$2,268,090,owedtoadirectoroftheCompany,wasenteredinto

onJune30,2016inconjunctionwiththeacquisitionofthepropertyat265TalbotSt.West.Themortgageis

securedbyasecondchargeonthepropertyat265TalbotSt.West.

19. Sharecapital

The Company is authorized to issue an unlimited number of common shares. As at August 31, 2017, the

Companyhas issued138,888,590shares,ofwhich600,000shareswereheldandsubjecttovariousescrow

agreements.

CommonShares NumberofShares Amount

BalanceatMay31,2017 138,628,704 $274,316,548

Warrantsexercised 228,467 343,951

Optionsexercised 31,419 37,747

Additionalshareissuancecostsincurred -- (13,596)

Incometaxrecoveryonshareissuancecosts -- 3,603

Sharesheldinescrowearnedinexchangeforservices -- 112,500

BalanceatAugust31,2017 138,888,590 $274,800,753

a) Throughout theperiod,228,467warrantswithexerciseprices ranging from$1.50 to$1.75were

exercisedfor$343,951.

b) Throughouttheperiod,31,419stockoptionswithexercisepricesrangingfrom$0.90to$3.90were

exercisedfor$37,747.

c) InJanuary2017,theCompany issued150,000commonshares inescrowpursuanttoathirdparty

consultingagreementforgreenhouserelatedservices,netofcashissuancecosts.Thesesharesare

earnedstraight-lineover12monthsandreleasedtothethirdpartyonaquarterlybasis.AtAugust31,

2017,137,500commonsharesofthetotalsharesinescrowhavebeenreleased.

Thefollowingtablepresentsthemaximumnumberofsharesthatwouldbeoutstandingifallthedilutive“in

themoney”instrumentsoutstandingasatAugust31,2017wereexercised:

CommonsharesoutstandingatAugust31,2017 138,888,590

Warrantsoutstandingand“inthemoney” 3,657,441

Optionsoutstandingand“inthemoney” 7,015,869

FullydilutedbalanceatAugust31,2017 149,561,900

AphriaInc.



(Unaudited)

23

20. Warrants

ThewarrantdetailsoftheCompanyareasfollows:

Typeofwarrant ExpirydateNumberof

warrants

Weighted

average

price

Amount

Compensationwarrant/option December10,2018 106,157 $1.75 $85,432

Warrant December11,2018 322,923 $1.75 --

Warrant December2,2019 3,028,361 $1.50 --

Warrant September26,2021 200,000 $3.14 359,480

BalanceatAugust31,2017 3,657,441 $1.62 $444,912

August31,2017 May31,2017

Numberof

Warrants

Weighted

Average

Exercise

Price

Numberof

Warrants

Weighted

Average

Exercise

Price

Outstanding,beginningoftheperiod 3,885,908 $1.61 18,721,987 $1.51

Expiredduringtheperiod -- -- (50,305) 1.20

Issuedduringtheperiod -- -- 465,391 2.35

Exercisedduringtheperiod (228,467) 1.51 (15,251,165) 1.51

Outstanding,endofperiod 3,657,441 $1.62 3,885,908 $1.61

TheCompanyusedtheBlackScholesoptionpricingmodeltodeterminethefairvalueofwarrantsgranted

usingthefollowingassumptions:risk-freerateof0.44-1.56%onthedateofgrant;expectedlifeof3and5

years;volatilityof70%basedoncomparablecompanies;forfeiturerateofnil;dividendyieldofnil;and,the

exercisepriceoftherespectivewarrant.

21. Share-basedpaymentreserve

Share-basedpaymentreserveiscomprisedof:

August31, May31, 2017 2017

Balance,beginningofperiod $3,229,929 $1,723,903

Amountsdeductedfromshare-basedpaymentreserveinrespect

ofstockoptionsexercisedduringtheperiod (19,712) (558,183)

Amountschargedtoshare-basedpaymentreserveinrespectof

share-basedcompensation 2,440,112 2,064,209

Balance,endoftheperiod $5,650,329 $3,229,929

22. Stockoptions

TheCompanyadoptedastockoptionplanunderwhichitisauthorizedtograntoptionstoofficers,directors,

employeesandconsultantsenablingthemtoacquirecommonsharesoftheCompany.Themaximumnumber

ofcommonsharesreservedforissuanceofstockoptionsthatAugustbegrantedundertheplanis10%ofthe

issuedandoutstandingcommonsharesoftheCompany. Theoptionsgrantedcanbeexercisedforuptoa

AphriaInc.



(Unaudited)

24

maximumof10yearsandvestasdeterminedbytheBoardofDirectors. Theexercisepriceofeachoption

Augustnotbelessthanthemarketpriceofthecommonsharesonthedateofgrant.

TheCompanyrecognizedashare-basedcompensationexpenseof$2,440,112duringthethreemonthsended

August31,2017(2016-$203,095).Thetotalfairvalueofoptionsgrantedduringtheperiodwas$3,103,674

(2016-$354,669).

August31,2017 May31,2017

Numberof

Options

Weighted

Average

Exercise

Price

Numberof

Options

Weighted

Average

Exercise

Price

Outstanding,beginningoftheperiod 5,926,001 $1.99 4,975,000 $0.84

Exercisedduringtheperiod (31,419) 1.20 (1,121,999) 1.05

Issuedduringtheperiod 1,265,000 5.28 2,253,000 3.99

Cancelledduringtheperiod (3,713) 1.09 (180,000) 1.09

Outstanding,endoftheperiod 7,155,869 $2.58 5,926,001 $1.99

Exercisable,endoftheperiod 4,806,029 $2.00 3,919,542 $1.36

InJune2017,theCompanyissued250,000stockoptionsatanexercisepriceof$5.44pershare,exercisable

for5yearstoofficersofthecompany.83,333vestimmediatelyandtheremaindervestover2years.

InJuly2017,theCompanyissued1,015,000stockoptionsatanexercisepriceof$5.24pershare,exercisable

for 3 years to employees, officers and consultants of the company. 688,333 vest immediately and the

remaindervestover2years.

TheoutstandingoptiondetailsoftheCompanyareasfollows:

Expirydate Exerciseprice Numberofoptions Vestedandexercisable

November2017 $1.10 30,000 30,000

December2017 $1.10 650,000 114,240

October2018 $1.17 20,000 13,333

November2018 $1.49 20,000 20,000

December2018 $1.30 170,000 170,000

April2019 $1.67 30,000 30,000

June2019 $0.60 2,500,000 2,500,000

September2019 $3.00 75,000 36,465

October2019 $3.49–3.70 70,000 56,666

November2019 $3.90 994,867 328,023

December2019 $5.25 500,000 166,665

January2020 $5.72 45,000 14,998

April2020 $7.92 140,000 44,999

July2020 $5.24 1,015,000 705,642

September2020 $0.85 185,000 185,000

November2020 $1.19 50,000 50,000

June2021 $1.40 271,002 176,665

June2021 $1.48 30,000 30,000

June2022 $5.44 250,000 83,333

July2021 $1.64 110,000 50,000

BalanceatAugust31,2017 $2.57 7,155,869 4,806,029

AphriaInc.



(Unaudited)

25

TheCompanyusedtheBlackScholesoptionpricingmodeltodeterminethefairvalueofoptionsgrantedusing

thefollowingassumptions:risk-freerateof0.44-1.56%onthedateofgrant;expectedlifeof3and5years;

volatility of 62-70%based on comparable companies; forfeiture rate of 5%; dividend yield of nil; and, the

exercisepriceoftherespectiveoption.

23. Generalandadministrativeexpenses


2017 2016

Executivecompensation $306,030 $212,309

Consultingfees 94,421 44,765

Officeandgeneral 553,523 291,144

Professionalfees 216,641 106,007

Salariesandwages 407,731 224,648

Travelandaccommodation 136,393 72,566

Rent 20,478 8,153

$1,735,217 $959,592

24. Share-basedcompensation

Share-basedcompensationiscomprisedof:


2017 2016

Amounts charged to share-basedpayment reserve in respectof

share-basedcompensation $2,440,112 $203,095

Share-basedcompensationaccruedinthepriorperiod (44,000) --

Share-basedcompensationissuedonbehalfofarelatedparty (31,708) --

Sharesforservicescompensation 112,500 --

Deferredshareunitsexpensedintheperiod 31,997 --

Totalshare-basedcompensation $2,508,901 $203,095

Duringtheperiod,theCompanyissued4,860deferredshareunitstocertaindirectorsofthecompany,under

thetermsoftheCompany’sDeferredShareUnitPlan.

25. Financeincome,net

Financeincome,net,iscomprisedof:


2017 2016

Interestincome $815,871 $144,626

Interestexpense (336,152) (48,552)

$479,719 $96,074

AphriaInc.



(Unaudited)

26

26. Unrealizedgainonlong-terminvestments

Unrealizedgainonlong-terminvestmentsforthethreemonthsendedAugust31,2017iscomprisedof:

Investment Proceeds CostRealizedgain

(loss)ondisposal

Changeinfair

valueTotal


Realizedgain–saleofshares $-- $-- $-- $-- $--

Long-terminvestments(Note15) -- -- -- 19,081,556 19,081,556

ThreemonthsendedAugust31,2017 $-- $-- $-- $19,081,556 $19,081,556

27. Earningspershare

ThecalculationofearningspershareforthethreemonthsendedAugust31,2017wasbasedonthenetincome

attributabletocommonshareholdersof$15,040,168(2016–$895,269)andaweightedaveragenumberof

commonsharesoutstandingof138,711,674(2016–73,784,801)calculatedasfollows:

2017 2016

Basicearningspershare:

Netincomefortheperiod $15,040,168 $895,269

Averagenumberofcommonsharesoutstandingduringtheperiod 138,711,674 73,784,801

Earningspershare $0.11 $0.01

2017 2016

Dilutedearningspershare:

Netincomefortheyear $15,040,168 $895,269

Averagenumberofcommonsharesoutstandingduringtheperiod 138,711,674 73,784,801

“Inthemoney”warrantsoutstandingduringtheperiod 2,552,470 5,133,469

“Inthemoney”optionsoutstandingduringtheperiod 4,467,356 3,156,954

145,731,500 82,075,224

Earningspershare $0.10 $0.01

28. Changeinnon-cashworkingcapital

Changeinnon-cashworkingcapitaliscomprisedof:

Forthethreemonthsended

August31, 2017 2016

Decrease(increase)inaccountsreceivable $(436,264) $(760,831)

Increaseinotherreceivables (1,688,867) (66,099)

Decrease(increase)ininventory,netoffairvalueadjustment (3,217,431) (180,300)

Decrease(increase)inbiologicalassets,netoffairvalueadjustment 2,194,023 195,143

Increaseinprepaidassets (1,139,119) (156,724)

Increase(decrease)inaccountspayableandaccruedliabilities (1,213,950) 1,413,355

$(5,501,608) $444,544

AphriaInc.



(Unaudited)

27

29. Financialriskmanagementandfinancialinstruments

Financialinstruments

TheCompanyhasclassifieditscashandcashequivalents,marketablesecuritiesandlong-terminvestments,

withtheexceptionofthedebenturesinCannaRoyaltyCorp.,CopperstateFarmsInvestors,LLCandHydRxLtd.

(d/b/aScientusPharma)andembeddedderivativesasfairvaluethroughprofitorloss,accountsreceivableand

other receivables as loans and receivables, and accounts payable and accrued liabilities, promissory notes

payable,andlong-termdebtasotherfinancialliabilities.ThedebenturesinCannaRoyaltyCorp.,Copperstate

FarmsInvestors,LLCandHydRxLtd.(d/b/aScientusPharma)areaccountedforonanamortizedcostbasis.

Thecarryingvaluesofaccountsreceivableandotherreceivables,accountspayableandaccruedliabilities,and

promissorynotespayableapproximatetheirfairvaluesduetotheirshortperiodstomaturity.

TheCompany’s long-termdebtof$32,019,235 issubjecttofixed interestrates. TheCompany’s long-term

debtisvaluedbasedondiscountingthefuturecashoutflowsassociatedwiththelong-termdebt.Thediscount

rateisbasedontheincrementalpremiumabovemarketratesforGovernmentofCanadasecuritiesofsimilar

duration. In each period thereafter, the incremental premium is held constant while the Government of

Canadasecurityisbasedonthethencurrentmarketvaluetoderivethediscountrate.Thefairvalueofthe

Company’slong-termdebtinrepaymentasatAugust31,2017was$31,863,057.

Fairvaluehierarchy

Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects the

significanceofinputsusedinmakingthemeasurements.CashandcashequivalentsareLevel1.Thehierarchy

issummarizedasfollows:

Level1 quotedprices(unadjusted)inactivemarketsforidenticalassetsandliabilities

Level2 inputsthatareobservablefortheassetorliability,eitherdirectly(prices)orindirectly(derivedfrom

prices)fromobservablemarketdata

Level3 inputsforassetsandliabilitiesnotbaseduponobservablemarketdata

Level1 Level2 Level3 August31,2017

FinancialassetsatFVTPL

Cashandcashequivalents $38,229,855 $-- $-- $38,229,855

Marketablesecurities 80,501,420 -- -- 80,501,420

Embeddedderivatives -- -- 5,155,750 5,155,750

Long-terminvestments 12,455,408 -- 38,047,222 50,502,630

$131,186,683 $-- $43,202,972 $174,389,655

Level1 Level2 Level3 May31,2017

FinancialassetsatFVTPL

Cashandcashequivalents $79,910,415 $-- $-- $79,910,415

Marketablesecurities 87,346,787 -- -- 87,346,787

Embeddedderivative -- -- 173,000 173,000

Long-terminvestments 14,946,235 -- 12,841,343 27,787,578

$182,203,437 $-- $13,014,343 $195,217,780

AphriaInc.



(Unaudited)

28

Thefollowingtablepresentsthechangesinlevel3itemsfortheperiodsendedAugust31,2017andAugust

31,2016:

Unlistedequity

securities

Trading

derivatives

Total

OpeningbalanceAugust31,2016 $1,560,200 $-- $1,560,200

Acquisitions 12,593,940 173,000 12,766,940

Disposals (50,000) -- (50,000)

ReclassificationtoLevel1 (1,510,200) -- (1,510,200)

Unrealizedgainonfairvalue 247,403 -- 247,403

ClosingbalanceMay31,2017 $12,841,343 $173,000 $13,014,343

Acquisitions 5,297,496 4,450,000 10,215,996

Disposals -- -- --

ReclassificationtoLevel1 (2,000,000) -- (2,000,000)

Unrealizedgainonfairvalue 21,908,383 532,750 22,441,133

ClosingbalanceAugust31,2017 $38,047,222 $5,155,750 $43,671,472

Investments in Scythian Biosciences Inc. originally classified as a level 3 investments were reclassified

subsequenttotheinvesteegoingpublic.

Financialriskmanagement

TheCompanyhasexposuretothefollowingrisksfromitsuseoffinancialinstruments:creditrisk;liquidity;

currencyrate;and,interestratepricerisk.

(a) Creditrisk

ThemaximumcreditexposureatAugust31,2017isthecarryingamountofcashandcashequivalents,

marketablesecurities,accountsreceivableandotherreceivablesandpromissorynotesreceivable.The

Companydoesnothavesignificantcreditriskwithrespecttocustomers.Allcashandcashequivalents

are placed withmajor Canadian financial institutions. Marketable securities are placed withmajor

Canadianinvestmentbanksandarerepresentedbyinvestmentgradecorporatebonds.

TheCompanymitigatesitscreditriskandvolatilityonitsmarketablesecuritiesthroughitsinvestment

policy,whichpermitsinvestmentsinFederalorProvincialgovernmentsecurities,Provincialutilitiesor

bankinstitutionsandInvestmentgradecorporatebonds.

Total 0-30days 31-60days 60-90days 90+days

Tradereceivables $1,261,775 $915,757 $233,625 $6,531 $105,862

73% 18% 1% 8%

(b) Liquidityrisk

As at August 31, 2017, the Company’s financial liabilities consist of accounts payable and accrued

liabilities,whichhascontractualmaturitydateswithinoneyear,promissorynotepayable,whichhasa

contractualmaturitywithin15monthsandlong-termdebt,whichhascontractualmaturitiesoverthe

next five years. The Companymanages its liquidity risk by reviewing its capital requirements on an

ongoing basis. Based on the Company’s working capital position at August 31, 2017, management

regardsliquidityrisktobelow.

AphriaInc.



(Unaudited)

29

(c) Currencyraterisk

AsatAugust31,2017,aportionoftheCompany’sfinancialassetsandliabilitiesheldinUSDconsistof

marketable securities, convertible notes receivable, long-term investments and a promissory note

payable.TheCompany’sobjectiveinmanagingitsforeigncurrencyriskistominimizeitsnetexposure

to foreign currency cash flows by transacting, to the greatest extent possible, with third parties in

Canadiandollars.TheCompanydoesnotcurrentlyuseforeignexchangecontractstohedgeitsexposure

ofitsforeigncurrencycashflowsasManagementhasdeterminedthatthisriskisnotsignificantatthis

pointintime.

(d) Interestratepricerisk

TheCompanymanagesinterestrateriskbyrestrictingthetypeofinvestmentsandvaryingthetermsof

maturityandissuersofmarketablesecurities.Varyingthetermstomaturityreducesthesensitivityof

theportfoliototheimpactofinterestratefluctuations.

(e) Capitalmanagement

TheCompany’sobjectiveswhenmanagingitscapitalaretosafeguarditsabilitytocontinueasagoing

concern,tomeetitscapitalexpendituresforitscontinuedoperations,andtomaintainaflexiblecapital

structure which optimizes the cost of capital within a framework of acceptable risk. The Company

manages its capital structure and adjusts it in light of changes in economic conditions and the risk

characteristicsoftheunderlyingassets.Tomaintainoradjustitscapitalstructure,theCompanymay

issue new shares, issue new debt, or acquire or dispose of assets. The Company is not subject to

externallyimposedcapitalrequirements.

Management reviews its capital management approach on an ongoing basis and believes that this

approach,giventherelativesizeof theCompany, is reasonable.Therehavebeennochangestothe

Company’s capital management approach in the period. The Company considers its cash and cash

equivalentsandmarketablesecuritiesascapital.

30. Commitments

TheCompanyhasaleasecommitmentuntilDecember31,2018forrentalofofficespacefromarelatedparty.

TheCompanyhasanoptiontoextendthisleasefortwoadditional5yearperiods.InJulyof2016,theCompany

terminated its leaseofgreenhouseandwarehouseproperty inconjunctionwith theacquisitionof the265

TalbotStreetWestproperty.TheCompanyhasaleasecommitmentsfortheuseoftwomotorvehiclesexpiring

September2019andAugust2020intheamountspayableof$9,313and$19,599,respectively,annuallyand

leasedofficespace inTorontofor$4,500permonthuntilSeptember2017. InAprilof2017,theCompany

indemnified the landlord of the office space leased by Liberty Health Sciences Inc. (formerly DFMMJ

Investments,Ltd.).Asdisclosedinnote15,theCompanyhasagreedtocontributeanadditional$1,300,000to

GreenAcreCapitalFund.TheCompanyhascommittedpurchaseordersoutstandingatAugust31,2017related

tocapitalassetexpansionof$42,449,735,ofwhich$38,382,048areexpectedtobepaidwithinthenextyear.

Minimumpaymentspayableoverthenextfiveyearsareasfollows:

PeriodsendingAugust31,

2018 $38,748,171

2019 5,107,502

2020 17,966

2021 --

2022 --

$43,873,639

AphriaInc.



(Unaudited)

30

31. Subsequentevents

OnSeptember28,2017theCompanyreceivedfullrepaymentontheoutstandingnotereceivable(note10).

OnSeptember29,2017theCompanyreceivedapprovalforitsrecentlycompletedfourLevel9vaults,each

withamaximumallowablestoragecapacityof3,125kgs.

OnOctober6,2017,NuuveraCorp.,aLevel3fairvaluehierarchyinvestee,announceditsplantocompletea

reversetakeover(“RTO”)withMiraIXAcquisitionCorp.

Documents

Aphria - Q1 2018 FS [FINAL] · PDF fileMarketable securities 5 80,501,420 87,346,787 ... Capital assets 11 92,358,204 ... Unrealized gain on long-term investments 26 (19,081,556)