Mr. Vic Neufeld reports

APHRIA RECORDS FIFTH CONSECUTIVE QUARTER OF PROFITABILITY

Aphria Inc. has released its third quarter results, for the three and nine months ended Feb. 28, 2017.

                            FINANCIAL HIGHLIGHTS

                                                     Q3 2017       Q3 2016

Revenue                                          $ 5,118,516   $ 2,679,878
Gross profit                                     $ 3,568,069   $ 1,883,225
Adjusted gross profit                            $ 3,582,312   $ 1,968,048
Adjusted gross margin                                  70.0%         73.4%
Earnings before tax                              $ 4,950,250       $ 3,720
EBITDA                                           $ 1,005,073     $ 423,350

                                                     Q3 2017       Q2 2017

Kilograms (or kilogram equivalents) sold               652.7         639.0
Revenue                                          $ 5,118,516   $ 5,226,589
EBITDA                                           $ 1,005,073   $ 1,198,620
Cash cost to produce/gram                             $ 1.73        $ 1.31
All-in cost of goods sold/gram                        $ 2.23        $ 1.85
Cash and cash equivalents on hand               $ 84,351,132  $ 98,614,981
Working capital                                $ 123,144,983 $ 102,438,357
Investment in capital and intangible assets     $ 23,419,877   $ 5,029,872

Business highlights

• Fifth consecutive quarter of profitability;
• Over $3.2-million of year-to-date earnings before interest, taxes, depreciation and amortization;
• Increased capacity expectations for Part 2 (to 8,000 kilograms), Part 3 (to 22,000 kg) and to Part 4 (75,000 kg);
• Invested $1-million in Resolve Digital Health Inc.;
• Invested $1-million in Tetra Bio Pharma Inc., which was subsequently increased to $2.3-million after exercising warrants in the subsequent events period;
• Secured 200 acres of serviced farm land in Leamington, Ont., for $6.24-million as a secondary site to the company's existing campus;
• Invested an additional $1.3-million (U.S.) in Copperstate Farms Investors LLC, which was subsequently increased by a further $3-million (U.S.) investment in the subsequent events period;
• Invested $8.4-million in Canabo Medical Inc.;
• Received board approval to commence Part 4 expansion with a $137-million capital budget;
• Committed $2-million in investment to Green Acres Capital Fund, advancing $300,000;
• Invested just over $2-million in Kalytera Therapeutics Ltd.;
• Raised $53,869,357 in a bought deal financing which closed on Feb. 24, 2017;
• Received final approval to list on the Toronto Stock Exchange. Shares commenced trading on the TSX and were delisted from the TSX Venture Exchange on March 22, 2017.

"With five consecutive quarters of profitability and further growth in our production capacity, Aphria continued to build strong, positive momentum in the third quarter," said Vic Neufeld, chief executive officer, Aphria. "Despite unusual weather conditions that temporarily added to our growing costs for the quarter, we continue to report costs per gram that are among the lowest in the industry. At the same time, we are making strategic investments that will increase our supply of high-quality cannabis and position Aphria to drive further growth in our medical-grade cannabis business, meet future demand for recreational cannabis, and drive strong, sustainable shareholder value creation."

Financial highlights

For the fifth consecutive quarter, the company reported profitability. In the last five quarters, the company reported income before tax of $3,720, $102,164, $895,269, $945,678 and $4,950,250, respectively. The increased pretax profitability is primarily a result of the increase in fair value of long-term investment portfolio.

The company continued to report strong EBITDA levels, reporting $1,005,073 of EBITDA in the quarter. This is the company's third consecutive quarter with EBITDA greater than $1-million. Reported EBITDA levels reflect the company's continued focus on low-cost producer status and industry-leading patient care service.

Revenue for the three months ended Feb. 28, 2017, was $5,118,516, representing a 2-per-cent decrease over the prior quarter's revenue of $5,226,589. The decrease in revenue for the quarter was consistent with expectations and was primarily a result of the $8.50 per gram cap placed on the price of medical cannabis for veterans. The impact of the price cap on revenue was offset by increased revenue per gram for non-veterans, primarily a result of selling less wholesale product and the continued growth of the company's cannabis oils.

Adjusted gross profit for the third quarter was $3,582,312 with an adjusted gross margin of 70.0 per cent, generated from both retail and wholesale shipments of medical cannabis. The decrease in the adjusted gross margin from the prior quarter is consistent with the reduction in revenues in the quarter.

During the quarter, the company's all-in costs of dried cannabis per gram increased from $1.79 in the prior quarter to $2.23 in the current quarter, representing a 44-cent increase. The increase largely related to abnormal winter weather conditions in Leamington but also included costs related to preparing for its Part 2 expansion.

This winter the Leamington area experienced unusual conditions related to the amount of sunlight it received. The most common measure of light intensity is referred to as lumens. During the quarter, the Leamington area received approximately 80 per cent of the historical three-year average of lumens for this period. More specifically, the month of January was 67 per cent of the three-year lumen average and the month of February was 76 per cent of the three-year lumen average. This reduced lumen measure directly led to: (i) lower yields on individual cannabis plants during the quarter which caused a 20-cent increase in the company's all-in costs of dried cannabis per gram; and (ii) increased heating and electrical costs, which caused a 14-cent increase in the company's all-in costs of dried cannabis per gram.

The remaining 10 cents per gram related to incremental labour costs as the company added greenhouse staff during the quarter so they would be fully trained to work in the Part 2 expansion, the moment the area is approved by Health Canada. As the company moves from Health Canada's approval to use its Part 2 expansion toward the first sale from that area, it will continue to incur incremental labour costs in its vault and packaging staff. These incremental costs will be directly tied to revised head counts as the company properly trains staff in advance of additional product flow that will result from the increase in its annual harvest from 2,600 kg to 8,000 kg.

Net income for the three months ended Feb. 28, 2017, was $4,950,250 or four cents per share as opposed to a net income of $3,720 or nil per share in the same quarter in the previous year and an income before tax of $945,678 or one cent per share in the previous quarter.

EBITDA for the third quarter was $1,005,516, compared with an EBITDA of $423,350 in the same period of the prior year and EBITDA of $1,198,620 in the previous quarter.

The company has a good thing growing.

About Aphria Inc.

Aphria produces, supplies and sells medical cannabis. Located in Leamington, Ont., the greenhouse capital of Canada, Aphria is truly powered by sunlight, allowing for the most natural growing conditions available. The company is the first public licensed producer to report positive cash flow from operations and the first to report positive earnings in consecutive quarters.

We seek Safe Harbor.