2015 - Aphria

[Pages:29]2015

Annual Report

For the year ended May 31, 2015

PAGE

01

?????????????????????? Chief Executive Officer Message

PAGE

02

?????????????????????? Health Canada Market Data

PAGE

04

?????????????????????? Officers and Directors

PAGE

06

?????????????????????? Staff Members

PAGE

08

?????????????????????? Management's Discussion & Analysis

PAGE

09

?????????????????????? Notice Concerning Forward-looking Statements

PAGE

10

?????????????????????? Company Overview

PAGE

11

?????????????????????? Highlights

PAGE

12

?????????????????????? Recent Developments

PAGE

13

?????????????????????? Selected Financial Information

PAGE

20

?????????????????????? Disclosure of Outstanding Share Data

PAGE

21

?????????????????????? Risk Factors

III

At Aphria, our talented and dedicated researchers and staff strive to improve the lives of countless patients.

Our research and scientific knowledge allows for constant growth and production of quality products.

1050

730

427

10

Dec 2014

35

Jan 2015

247

Feb 2015

Mar 2015

Number of

Apr 2015

Registered Patients

May 201V5

"Beyond the foundation of regulatory standards, Aphria believes that processes and procedures need to be established and technology needs to be adopted to ensure " utmost quality.

Gary Leong CHIEF SCIENTIFIC OFFICER

$499,890

$51,540

Q3 2015

Q4 2015

Sales By Quarter

$950,740

Q1 2016

VII

"I am confident in our vision for Aphria as we chart our way through a future " full of possibilities.

Vic Neufeld MBA, CPA, CEO

CHIEF EXECUTIVE OFFICER MESSAGE

It was a beautiful spring day in late May 2014 as I was driving to the Aphria greenhouse facility in Leamington, Ontario. It was my first day as CEO, and my mind was consumed with many exciting ideas and strategies.

I had recently completed a 21 year tenure as the CEO of Canada's largest nutraceutical company and was ready for my next career challenge. However, I remained somewhat reserved and uncertain of how the future would unfold for this relatively new industry.

Aphria was in its infancy and the Canadian medical cannabis industry had undergone a significant regulatory change under Health Canada's Marihuana for Medical Purposes Regulations just two months prior. At the time, thirteen other companies had become approved Licensed Producers, with several already publicly traded or in the midst of going public.

As we planned for our "go-to-market" strategies, Aphria immediately adopted the profile of a pharmaceutical company. We needed to differentiate ourselves from other Licensed Producers and combat the stigma attached to cannabis. And so, with a quality-minded philosophy, we started to execute on this model. Our cannabis strains were named after Canadian lakes rather than using their street nicknames, and we developed Standard Operating Procedures and stringent quality requirements to produce high quality products.

A year later, I am proud of Aphria's many accomplishments. We have built a solid, passionate team that excels in Production, Quality and Patient Care. Our products are 100% greenhouse grown and our advanced growing techniques leverage the many benefits of natural sunlight in our climate controlled greenhouses. The agricultural skills and experience of Aphria's co-founders, together with our Master Growers and Quality team, have proven the viability of growing medical cannabis in a greenhouse. Today, due to our greenhouse growing advantages, Aphria is able to maintain lower costs of production and retail pricing flexibility.

Thank you for your continued support and interest in Aphria. We are well positioned to continue our growth story, and now after many months of driving to the Leamington greenhouse facility, I am confident in our vision for Aphria as we chart our way through a future full of possibilities.

- Vic Neufeld

President, Chief Executive Officer and Director

2015 APHRIA INC. ANNUAL REPORT

1

Health Canada Market Data

Based on market data, overall there is sufficient supply of marijuana for medical purposes to meet the current access needs of registered clients. Please note that amounts produced do not reflect the full production capacity authorized to licensed producers.

Marihuana for Medical Purposes Regulations market data

Amount of marijuana for medical purposes produced during quarter (kilograms)

Amount of marijuana for medical purposes sold to clients (kilograms)

Amount of marijuana for medical purposes in licensed producers' inventories at end of quarter (kilograms)1

Average amount of marijuana for medical purposes authorized per client (grams/day)

Average amount of marijuana for medical purposes per client shipment (grams/day)

Total number of clients registered at end of quarter

April 1, 2014 to June 30,

2014

July 1, 2014 to September 30,

2014

October 1, 2014 to

December 31, 2014

1,020

1,435

1,809

408

596

789

1,134

2,021

2,994

4 1 7,914

4 1 12,409

4 1 15,545

January 1, 2015 to

March 31, 2015 1,786

979

4,810

4

1

18,512

Total 6,049 2,771 4,810

4 1 18,512

1 C hanges in inventories may be a result of amounts of marijuana for medical purposes sold, produced, destroyed and imported.

OPERATING BURN COST AS % OF REVENUE

Operating Burn and as a Percentage of Revenue

$2,000,000

200.0%

$1,500,000

150.0%

$1,000,000

100.0%

$500,000

50.0%

$

0.0%

APH

Industry Average

Operating Burn

Cost as % of Revenue

Source: Company reports, Dundee Capital Markets

3

"Government and regulatory bodies set the baseline standards for medicines like medical marijuana. These standards are generally the bare minimum needed to ensure adequate product. Aphria believes " adequate is not good enough.

Gary Leong CHIEF SCIENTIFIC OFFICER

OFFICERS AND DIRECTORS

APR 2014

MMPR

VIC NEUFELD, CPA, CA President, Chief Executive Officer and Director

Vic Neufeld is the President and Chief Executive Officer of Aphria. Vic is the former CEO of Jamieson Laboratories ("Jamieson") Canada's largest manufacturer and distributor of natural vitamins, minerals, concentrated food supplements, herbs and botanical medicines.

Vic brings 15 years experience as a chartered accountant and partner with Ernst & Young and 21 years leading Jamieson. When Vic began his career with Jamieson in 1993, the top five leading nutrition brands each had 7% market share respectively. Under Vic's leadership, Jamieson outpaced the competition and increased its market share to 27%. During his tenure with Jamieson, Vic led the company from $20 million in annual sales to over $250 million and expanded the company's distribution network to over 40 countries, building Jamieson to a globally recognized brand name.

GARY LEONG Chief Scientific Officer

Gary Leong, Aphria's Chief Scientific Officer, has a personal background in quality assurance, quality control, quality system audits, international and domestic regulatory affairs and product research and development. Gary's commitment to research and scientific knowledge of the medical marijuana industry allows us here at Aphria to produce a cost effective and quality product.

Gary's educational background began with a Bachelor of Science in Chemistry and has taken him most recently to an MBA in Quality Management from City University of Bellevue Washington. Gary is currently affiliated with The Life Sciences Working Team of Windsor-Essex Economic Development Corporation. In the past, he was a member of the Natural Health Products Directorate Program Advisory Committee and a board member of the Ontario Ginseng Innovation and Research Consortium.

JOHN CERVINI Chief Agronomist Officer and Director

John Cervini, Aphria's co-Chair and founder, comes from fourth generation growers in southwestern Ontario with hydroponic agricultural experience. Together with his father and brother, John helped established Lakeside Produce, one of North America's leading sales and marketing companies selling fresh produce from Canada to multinational retailers throughout North America. John is a leading innovator in greenhouse growing technology and has also overseen greenhouse expansion to Carpinteria, California and Guadalajara, Mexico.

COLE CACCIAVILLANI Chief Operating Officer and Director

Cole Cacciavillani, Aphria's co-chair and founder, is an industrial engineer with 35 years of experience in the agricultural and greenhouse industry. Cole has accumulated expertise gained over generations of how to best utilize nature's light and organic properties combined with proprietary growing techniques and technologies produces a superior, safe and cost effective product. Cole sits on a number of charitable and associative boards including serving as: Chairman of the Board for Leamington Memorial District Hospital as well as serving on the Hospital's Foundation Board.

JONATHAN LEONG, CPA, CA, CBV Chief Financial Officer

Jonathan Leong has been involved in a number of public and private market transactions, including business acquisitions and reverse take-overs, for both domestic and international entities. Mr. Leong is a Chartered Professional Accountant, Chartered Accountant and Chartered Business Valuator with experience working in a variety of financial reporting, audit, advisory, M&A and valuation engagements. Mr. Leong articled with Grant Thornton LLP and obtained his Master of Accounting from the University of Waterloo.

DENNIS STAUDT, CPA, CA Director

Dennis Staudt, Director, has over 35 years experience providing business advice to private companies in Southwestern Ontario, having spent most of his career with PricewaterhouseCoopers LLP ("PwC"), including 22 years as a partner in the Audit and Assurance Group. Prior to being admitted to partnership, Dennis spent almost two years with PwC Germany in their Duesseldorf office.

DR. PHILIP WADDINGTON Director

Dr. Philip Waddington, Director is a trained naturopathic physician and a leader in the field of regulating natural health products. From January 2000 to August 2008. Dr. Waddington served as the inaugural Director General of the Natural Health Products Directorate (NHPD) of Health Canada.

CARL MERTON, CPA, CA, FCBV Director

Carl Merton, Director, has over 20 years of financial and business experience, having spent almost 12 years combined with Ernst & Young LLP and KPMG LLP prior to serving as Vice-President, Special Projects at Atlas Tube Canada ULC and his current position as Chief Financial Officer of Reko International Group Inc. ("Reko") (TSX VENTURE:REK) since October 2007.

2015 APHRIA INC. ANNUAL REPORT

5

STAFF MEMBERS 7

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download