PREMIUM MEDICAL CANNABIS POWERED BY … · PREMIUM MEDICAL CANNABIS POWERED BY SUN Q2 2018 Investor...

PREMIUM MEDICAL CANNABIS

POWERED BY SUNLIGHT

PREMIUM MEDICAL CANNABIS

POWERED BY SUN

Q2 2018 Investor Presentation

January 10, 2018

This documentation is a presentation (the “Presentation”) of general background information about Aphria Inc.’s (“Aphria”) activities current as of January 10, 2018, unless stated otherwise. It is information in a summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice, when deciding if an investment is appropriate.

This Presentation does not constitute or form part of any offer for sale or solicitation of any offer to buy or subscribe for securities nor shall it or any part of it form the basis of or be relied on in connection with, or act as any inducement to enter into, any contract or commitment whatsoever. Recipients of this Presentation who are considering acquiring securities of Aphria are reminded that any such purchase or subscription must not be made on the basis of the information contained in this Presentation but are referred to the entire body of publicly disclosed information regarding Aphria.

The information contained in this Presentation is derived solely from management of Aphria and otherwise publicly available information concerning Aphria and does not purport to be all-inclusive or to contain all the information that an investor may desire to have in evaluating whether or not to make an investment in Aphria. The information has not been independently verified and is subject to material updating, revision and further amendment, and is qualified entirely by reference to Aphria’s publicly disclosed information.

No representation or warranty, express or implied, is made or given by or on behalf of Aphria or any of its affiliates, directors, officers or employees as to the accuracy, completeness or fairness of the information or opinions contained in this Presentation and no responsibility or liability is accepted by any person for such information or opinions. Aphria does not undertake or agree to update this Presentation or to correct any inaccuracies in, or omissions from, this Presentation that may become apparent. No person has been authorized to give any information or make any representations other than those contained in this Presentation and, if given and/or made, such information or representations must not be relied upon as having been so authorized. The information and opinions contained in this Presentation are provided as at the date of this Presentation. The contents of this Presentation are not to be construed as legal, financial or tax advice. Each prospective investor should contact his, her or its own legal adviser, independent financial adviser or tax adviser for legal, financial or tax advice.

Certain statements in this Presentation may constitute forward-looking information, including future-oriented financial information and financial outlooks, within the meaning of applicable securities laws. Forward-looking information may relate to Aphria’s future outlook and anticipated events or results and may include statements regarding Aphria’s financial results, future financial position, expected growth of cash flows, business strategy, budgets, projected costs, projected capital expenditures, taxes, plans, objectives, potential synergies, industry trends and growth opportunities. Often but not always, forward-looking information can be identified by the use of words such as “anticipate”, “believe”, “expect”, “project”, “estimate”, “likely”, “intend”, “should”, “could”, “may”, “might”, “target”, “plan” and other similar expressions or variations (including negative variations) of such words and phrases. Forward-looking information contained in this Presentation is based on certain assumptions regarding expected growth, results of operations, performance, industry trends and growth opportunities.

While management considers these assumptions to be reasonable, based on information available, they may prove to be incorrect. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Aphria to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to risks associated with general economic conditions; adverse industry events; marketing costs; loss of markets; future legislative and regulatory developments involving medical marijuana; inability to access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favourable terms; the medical marijuana industry in Canada generally, income tax and regulatory matters; the ability of Aphria to implement its business strategies; competition; crop failure; currency and interest rate fluctuations, and the other risks discussed under the heading “Risk Factors” in Aphria’s Annual Information Form dated January 10, 2018. The foregoing factors are not intended to be exhaustive.

Although Aphria 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 to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date hereof and Aphria and its directors, officers and employees disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be 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, you should not place undue reliance on forward-looking statements due to the inherent uncertainty therein. All forward-looking information is expressly qualified in its entirety by this cautionary statement.

Forward-looking information and other information contained herein concerning management’s general expectations concerning the medical marijuana industry are based on estimates prepared by management using data from publicly available industry sources as well as from market research and industry analysis and on assumptions based on data and knowledge of this industry which management believes to be reasonable. However, this data is inherently imprecise, although generally indicative of relative market positions, market shares and performance characteristics. While management is not aware of any misstatements regarding any industry data presented herein, industry data is subject to change based on various factors.

This Presentation may not be reproduced, further distributed or published in whole or in part by any other person. Neither this Presentation nor any copy of it may be taken or transmitted into or distributed in any other jurisdiction which prohibits the same except in compliance with applicable laws. Any failure to comply with this restriction may constitute a violation of applicable securities law. Recipients are required to inform themselves of, and comply with, all such restrictions or prohibitions and Aphria does not accept liability to any person in relation thereto.

DISCLAIMER

1APHRIA INC. | Q2 INVESTORS PRESENTATION

Investment highlights

High growth potential

Well capitalized

License to sell medical marijuana

provides critical barrier to entry

Largest footprint in the industry

Low costs underpin

attractive cash flow potential

Significant near and mid-term

opportunities for growth

Established operations and experienced management


TECHNOLOGY

GROWINGOPERATIONS

SCIENCE

BRANDING

INVESTMENT

INNOVATION

Leamington, ON (269 acres)265 Talbot Road (36)269 Talbot Road (11)239 Talbot Road (5)521 Mersea Road 8 (100)336 Mersea Road 3 (16)225 Talbot Road (1)GrowCo - Double Diamond (100)

Duncan, BC (5 acres)Broken Coast

Arizona (40 acres)Copperstate Farms (10%)

MassRootsResolve Digital Health

Broken CoastTokyo Smoke

Oil capsulesTopicalsNutraceuticals

CannaRoyalty

Copperstate Farms

Green Acre Capital

Liberty Health Sciences, Inc.

Nuuvera Corp.

Resolve Digital Health, Inc.

Scientus Pharma

TS BrandCo Holdings, Inc.(Tokyo Smoke)

Tetra Bio-Pharma (TBP)CannPalMedlab (Australia)PhyTo Pain (TBP)

Aphria at a glance


Highly experienced management team


Vic NeufeldChief Executive Officer

20+Years in pharma

CEO of Jamieson Laboratories 1993-2014

Demonstrated vision, growth & performance

Cole CacciavillaniCo-Founder &VP. Growing Operations

35+Years in agri-business

Greenhouse industry pioneer and veteran

First-hand knowledge of Aphria’s greenhouses

John CerviniCo-Founder &VP. Infrastructure + Technology

20+Years in agri-business

Fourth generation greenhouse grower

Proven growth and expansion track record

Seed shares represent ~ 15% of outstanding float

All-in costs equal to cost of sales (excluding any fair value of biological assets adjustments) divided by grams sold in quarter. Cash costs equal to cost of sales less amortization reported in cost of sales, all divided by grams sold in quarter.

One of the lowest cost producers in the Canadian industry

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Q2 - 17 Q3 - 17

Cash All-in

1.31

1.731.85

2.23

Q4 - 17

1.11

1.67

Q1 - 18

0.95

1.61

Q2 - 18

1.45

2.13

APHRIA INC. | Q2 INVESTORS PRESENTATION 5APHRIA INC. | Q2 INVESTORS PRESENTATION

Unique drivers of cost savings

CAPEX benefit

Production Costs

APHRIA INC. | Q2 INVESTORS PRESENTATION

NEW GREENHOUSE BUILD OR RETROFIT

$55 square foot

INDOOR GROW

$250 - $300 square foot

* - Ontario based 6APHRIA INC. | Q2 INVESTORS PRESENTATION

=FERTILIZER SAVINGS• Aphria’s cost - $0.005 / L

• Competitor’s fertilizer cost - $0.22 / L

• Aphria’s costs are 2% of our competitors

ELECTRICAL SAVINGS• Aphria’s annual electrical

costs $5.50 / sq. ft.

• Indoor grower’s annual electrical costs $65.00 / sq. ft.

• Aphria’s costs are 8% of our competitors*

3X – hours usage 2X – light density 2X – Cooling

THEM APHRIA

Focus on quality and safety

Our Seed-to-Sale Certified quality promise is our commitment to protecting the health and safety of Canadians by ensuring that we only sell clean, safe and pure cannabis 100% of the time. No exceptions.

Our comprehensive quality management program has over 500 steps and was adopted from the highly restricted and regulated NHP and OTC industries and go above and beyond the GPP requirements of the ACMPR.



Ample capacity to meet growing demand

Strategic relationship with Double Diamond Farms• Created GrowCo (51% owned by Aphria,

49% owned by Double Diamond)

• To purchase 100 acre farm owned by Double Diamond

• Almost 32 acres of state-of-the-art, Dutch style newly built greenhouses plus 72,000 square feet of infrastructure (first planted crop will be cannabis)

• Supply agreement to supply at least 120,000 kgs of dried cannabis to Aphria

• Requires $80 - $100 million in capital to purchase farm (at appraised value) plus retrofits for growing cannabis, funded by $20 million in seed capital by the Parties. Remainder to financed by loans from a commercial lender, with Aphria to lend any shortfall.

GrowCo


Overview ofBroken Coast


Established in 2015, Broken Coast is a profitable Licensed Producer based in British Columbia with a proven track record of premium cannabis production

ESTABLISHED BRAND AND HIGHLY-REGARDED PREMIUM PRODUCT • Consistently top ranked on well-known review

site Lift.co; has won multiple product and customer service based awards at the Canadian Cannabis Awards

EXTENSIVE STRAIN LIBRARY • World-class bank of genetics with

+1,000 seeds available for commercialization

PROPRIETARY HYDROPONICS PROCESS • Fully licensed, purpose-built, indoor facility

with a highly automated grow system

LOW-COST, INDOOR CULTIVATION • High margin production with all-in cost

per gram1 of $2.20

POSITIVE ADJUSTED EBITDA SINCE 20151

LOYAL AND RAPIDLY GROWING REPEAT CUSTOMER BASE • Over 10,000 registered

patients with 1,000 net new applications each month

WELL-POSITIONED FOR FUTURE RECREATIONAL MARKET • Plans for over 10,500 kg

of premium indoor production capacity

1 Non-GAAP measure defined in the Company’s Management Discussion & Analysis

Significant expansion of premium production


500

1,000

1,500

2,000

2,500

3,000

Timing of expansion plans based on when production is anticipated to be available.

2.5mm

FACI

LITY

SQU

ARE

FOOT

AGE

(000

s)

10126

44

104

301

2,401

50,000

100,000

150,000

200,000

250,000

2.3mm

PROD

UCTI

ON C

APAC

ITY

(Kg

PER

YEAR

)

9,0002,400

4,500

10,500

30,000

220,000

Aphria Broken Coast

FYE = Fiscal Year-End (Aphria – May 31)

CURRENT FYE 18 FYE 19 CURRENT FYE 18 FYE 19

Proforma marketpositioning

$70,000

$60,000

$50,000

$40,000

$30,000

$20,000

$10,000

$0

TRAILING REVENUE (C$000s)

Trailing revenue represents the last twelve months revenue derived from each Company’s ongoing regular business activities and does not include interest income or fair value changes in investments

COMPETITOR #4 COMPETITOR #3 COMPETITOR #2 COMPETITOR #5 COMPETITOR #1APHRIA PROFORMA

$15,000

$10,000

$5,000

$0

-$5,000

-$10,000

-$15,000

-$20,000

TRAILING ADJUSTED EBITDA (C$000s)

Adjusted EBITDA is a non-GAAP measure de�ned in the Company’s Management Discussion & Analysis. Trailing adjusted EBITDA represents the last twelve months adjusted EBITDA derived from each Company’s ongoing regular business activities and does not include interest income or fair value changes in investments

COMPETITOR #1 COMPETITOR #2 COMPETITOR #4 COMPETITOR #5 PROFORMACOMPETITOR #3 APHRIA


All calculated values used within the below charts are based on cumulative totals from each

company’s financials for their respective most recently reported operating periods available on SEDAR as

of January 10, 2018. Proforma numbers are, in part, based on management’s estimate of Broken Coast’s

revenue and adjusted EBITDA for the period ending Dec 31, 2017.

Leveraging two-pronged sales strategy

RETAIL• Strong distribution foundation

• Increasing patient sales

• Highly profitable (~ 70% margin with 30% costs below the line)


Unique cost structure enables Aphria to capitalize on wholesale advantages

WHOLESALE

• Sale of bulk product to other H.C. Licensed Producers and Licensed Dealers

• (~50% margin but no costs below the line)

Investment highlights

High growth potential

Well capitalized

License to sell medical marijuana

provides critical barrier to entry

Largest footprint in the industry

Low costs underpin

attractive cash flow potential

Significant near and mid-term

opportunities for growth

Established operations and experienced management



APPENDIX A Financials

Q2 - 2018 Q1 - 2018

Revenue (000’s) $ 8,504 $ 6,120

Kilograms sold 1,237.0 852.0

“All-in” cost of goods sold / gram $ 2.13 $ 1.61

Cash cost to produce / gram(Aphria’s definition)

$ 1.45 $ 0.95

Adjusted gross margin 68% 78%

Q2 Results


Revenue $ 8,504

Production costs 2,746

Gross profit before fair value adjustments 5,758

Fair value adjustment on sale of inventory 2,671

Fair value adjustment on growth of biological assets (3,115)

Gross profit 6,202

Expenses

General and administrative 1,973

Share-based compensation 2,200

Selling, marketing and promotion 2,819

Amortization 276

Research and development 80

7,348

Income of operations (1,146)

Other Items 7,898

Net Income before income taxes 6,752

Income taxes 297

Net income $ 6,455

Weighted average number of common shares – basic 138,839,530

Earnings per share – basic $ 0.05

Reconciling net income and earnings per share(Quarter 2 - ended November 30, 2017) (Unaudited - In thousands of Canadian dollars)


Under IFRS margins are 72.9% after excluding non-cash IFRS adjustments Gross Margins are 67.7%

Percentage of cash deployed on OPEX cash burn


APHRIA COMPETITOR #1 COMPETITOR #2 COMPETITOR #3 COMPETITOR #4

OPEX cash burn represents the net amount of cash used in order to fund the Company’s ongoing regular business activities

The Percentage of cash deployed on OPEX represents the net amount of cash used to-date in order to fund the Company's ongoing regular business activities as a percentage of the total cash deployed

All calculated values used within the table above are based on cumulative totals from each company's first publicly reported financials through their most recently reported operating period available on SEDAR as of January 10, 2018

1.3%

48.7%

22.3%

13%

25.4%

EquitySTRONG WELL-CAPITALIZED BALANCE SHEET

(Quarter 2 - ended November 30, 2017)

STRONG BALANCE SHEET WITH $171.9 MILLION IN CASH AND NEAR CASH POSITION

CAPITAL STRUCTURE


• Working capital: $178.8 million

• Inventory: 2,346 Kilograms (or kilogram equivalents)

Amount Percentage Expiration

Common Shares Outstanding 151,871,247 93.1% -

Stock Options @ $0.60 2,500,000 1.5% June 2, 2019Stock Options @ $0.85 - $1.19 855,000 0.5% October 2017 to September 2020Stock Options @ $1.20 - $1.67 621,669 0.4% November 2018 to June 2021Warrants - RTO @ $1.50 2,880,550 1.8% December 2, 2019Warrants - Bought Deal @ $1.75 387,503 0.2% December 10, 2018Warrants @ $3.14 200,000 0.1% September 26, 2021Stock Options @$3.00 - $9.05 3,886,367 2.4% November 2, 2019 to June 2022

Fully Diluted Shares as at November 30, 2017 163,202,336 100.0%Bought Deal 8,363,651Shares issued on purchase of Broken Coast 14,579,191 Fully Diluted Shares as at January 15, 2018 186,145,178

PREMIUM MEDICAL CANNABIS POWERED BY … · PREMIUM MEDICAL CANNABIS POWERED BY SUN Q2 2018 Investor...

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