Aurora Cannabis (CSE:ACB) (OTC:ACBFF) reported its first quarter of sales since receiving its Health Canada license in late November, having commenced sales in early January. The press release issued May 30th after the Canadian market closed covered information that had been previously disclosed after the close on Friday, May 27th in its filings at www.sedar.com. The company reported Q3 (3/31/16) sales of $219K, which represented almost 57K grams sold at an average of $3.86 per gram, a realized price that was depressed by a $50 credit for the first 420 customers.
Aurora reported a net income of $2.53mm, which was over 11X the amount of sales. The company is just getting started, and this was certainly a respectable initial quarter, but the “profit” reported by the company doesn’t jibe with reality. To the company’s credit, it is just following the accounting rules, which require it to account for changes in the value of its biological assets. In this case, the company benefitted by $4.8mm in this write-up, which also boosted the balance sheet assets. Had the company not enjoyed this accounting adjustment, it would have reported a large loss:
Excluding the biological assets valuation change, the company had a negative gross margin of $617K and would have reported an operating loss of $3.3mm. Assets jumped dramatically too, reflecting the change in biological assets as well as inventory:
Aurora’s year-end is June 30th, and the company has added a substantial number of patients since Q3. The company is likely to report sharply higher sales for Q4, and the operating loss excluding any unrealized gain on changes in fair value of biological assets is likely to decline.
Aurora’s price has decreased by about 1/3 since the company received its license to sell in late November:
