Village Farms International (VFF) DRS Draft registration statement

Exhibit 99.11

Village Farms International, Inc.

Condensed Consolidated Interim Financial Statements

Three Months Ended

March 31, 2017 and 2016

(Unaudited)

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the interim financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management.

The Company’s independent auditor has not performed a review of these interim financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity’s auditor.

Village Farms International, Inc.

Condensed Consolidated Interim Statements of Financial Position

(In thousands of United States dollars)

	March 31, 2017			December 31, 2016
	(Unaudited)			(Audited)
ASSETS
Current assets
Cash and cash equivalents	$	3,869		$	5,373
Trade receivables		9,722			10,187
Other receivables		207			263
Inventories (note 4)		18,427			16,108
Income taxes receivable		246			246
Prepaid expenses and deposits		993			676
Biological asset (note 5)		6,285			4,446
Total current assets		39,749			37,299
Non-current assets
Property, plant and equipment (note 6)		94,636			96,135
Other assets		1,587			1,531
Total assets	$	135,972		$	134,965
LIABILITIES
Current liabilities
Trade payables	$	10,109		$	12,711
Accrued liabilities		3,424			3,586
Operating loan (note 7)		5,000			—
Current maturities of long-term debt (note 7)		3,278			3,291
Current maturities of capital lease obligations		24			33
Total current liabilities		21,835			19,621
Non-current liabilities
Long-term debt (note 7)		41,138			41,929
Long-term maturities of capital lease obligations		83			87
Deferred tax liability		4,637			4,987
Deferred compensation		1,028			954
Total liabilities		68,721			67,578
SHAREHOLDERS’ EQUITY
Share capital		24,954			24,954
Contributed surplus		1,433			1,392
Revaluation surplus (note 6)		6,132			6,132
Accumulated other comprehensive loss		(528	)		(541	)
Retained earnings		35,260			35,450
Total shareholders' equity		67,251			67,387
Total liabilities and shareholders' equity	$	135,972		$	134,965

The accompanying notes are an integral part of these condensed consolidated interim financial statements

3

Village Farms International, Inc.

Condensed Consolidated Interim Statements of Changes in Shareholders' Equity

For the Three Months Ended March 31, 2017 and 2016

(In thousands of United States dollars, except for shares outstanding)

(Unaudited)

	Number of Common Shares		Share Capital		Contributed Surplus		Revaluation Surplus		Accumulated Other Comprehensive Loss			Retained Earnings			Total Shareholders' Equity
Balance at January 1, 2016		38,807,345	$	24,903	$	1,197	$	—	$	(602	)	$	37,433		$	62,931
Share-based compensation (note 15)		—		—		43		—		—			—			43
Cumulative translation adjustment		—		—		—		—		132			—			132
Net loss		—		—		—		—		—			(241	)		(241	)
Balance at March 31, 2016		38,807,345		24,903		1,240		—		(470	)		37,192			62,865
Balance at January 1, 2017		38,882,945		24,954		1,392		6,132		(541	)		35,450			67,387
Share-based compensation (note 15)		—		—		41		—		—			—			41
Cumulative translation adjustment		—		—		—		—		13			—			13
Net loss		—		—		—		—		—			(190	)		(190	)
Balance at March 31, 2017		38,882,945	$	24,954	$	1,433	$	6,132	$	(528	)	$	35,260		$	67,251

The accompanying notes are an integral part of these condensed consolidated interim financial statements

4

Village Farms International, Inc.

Condensed Consolidated Interim Statements of Income (Loss) and Comprehensive Loss

For the Three Months Ended March 31, 2017 and 2016

(In thousands of United States dollars, except per share data)

(Unaudited)

	Three Months Ended March 31,
	2017			2016
Sales (note 12)	$	31,277		$	31,708
Cost of sales (note 9)		(27,320	)		(26,650	)
Change in biological asset (note 5)		(645	)		(1,830	)
Selling, general and administrative expenses (note 9)		(3,224	)		(3,427	)
Income (loss) from operations		88			(199	)
Interest expense		632			557
Foreign exchange loss (gain)		14			(19	)
Other (income) expense		(26	)		27
Loss on sale of assets		8			12
Loss before income taxes		(540	)		(776	)
Recovery of income taxes		(350	)		(535	)
Net loss	$	(190	)	$	(241	)
Basic loss per share (note 13)	$	(0.00	)	$	(0.01	)
Diluted loss per share (note 13)	$	(0.00	)	$	(0.01	)
Other comprehensive loss:
Foreign currency translation adjustment		13			132
Comprehensive loss	$	(177	)	$	(109	)

The accompanying notes are an integral part of these condensed consolidated interim financial statements

5

Village Farms International, Inc.

Condensed Consolidated Interim Statements of Cash Flows

For the Three Months Ended March 31, 2017 and 2016

(In thousands of United States dollars)

(Unaudited)

	Three Months Ended March 31,
	2017			2016
Cash flows from operating activities:
Net loss	$	(190	)	$	(241	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,951			2,063
Amortization of deferred charges		18			—
Loss on sale of assets		8			12
Unrealized foreign exchange gain		—			(19	)
Interest paid		610			551
Share-based compensation		41			43
Deferred income taxes		(350	)		(536	)
Change in biological asset		645			1,830
Changes in non-cash working capital items (note 11)		(7,346	)		(5,038	)
Net cash used in operating activities		(4,613	)		(1,335	)
Cash flows from investing activities:
Purchases of property, plant and equipment		(431	)		(646	)
Net cash used in investing activities		(431	)		(646	)
Cash flows from financing activities:
Proceeds from borrowings		5,000			3,000
Repayments on borrowings		(838	)		(1,098	)
Interest paid on long-term debt		(610	)		(551	)
Payments on capital lease obligations		(13	)		(7	)
Net cash provided by financing activities		3,539			1,344
Effect of exchange rate changes on cash and cash equivalents		1			19
Net decrease in cash and cash equivalents		(1,504	)		(618	)
Cash and cash equivalents, beginning of period		5,373			4,957
Cash and cash equivalents, end of period	$	3,869		$	4,339
Supplemental cash flow information:
Income taxes paid	$	—		$	862

The accompanying notes are an integral part of these condensed consolidated interim financial statements

6

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements for the Three Months Ended March 31, 2017 and 2016

(In thousands of United States dollars, except per share amounts and unless otherwise noted)

(Unaudited)

1 NATURE OF OPERATIONS

Village Farms International, Inc. (“VFF” the parent company, together with its subsidiaries, the “Company”) is incorporated under the Canada Business Corporation Act. VFF’s principal operating subsidiaries as at March 31, 2017 are Village Farms Canada Limited Partnership (“VFCLP”), Village Farms, L.P. (“VFLP”), and VF Clean Energy, Inc (“VFCE”). The address of the registered office of VFF is 4700 80^th Street, Delta, British Columbia, Canada, V4K 3N3.

The Company’s shares are listed on the Toronto Stock Exchange under the symbol VFF and are also traded in the United States on the OTCQX^® Best Market under the symbol VFFIF.

The Company, through its subsidiaries VFCLP and VFLP, owns and operates sophisticated, highly intensive agricultural greenhouse facilities in British Columbia and Texas, where it produces, markets and sells premium-quality tomatoes, bell peppers, and cucumbers. The Company also markets and sells third party produce through its subsidiaries. The Company, through its subsidiary VFCE, owns and operates a 7.0 MW power plant that generates electricity.

2 BASIS OF PRESENTATION

Statement of Compliance

The Company’s unaudited condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and its interpretations, as issued by the International Accounting Standards Board (“IASB”). These condensed consolidated interim financial statements are prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting. They do not include all of the information required for full annual financial statement disclosures, and should be read in conjunction with the Company’s audited annual consolidated financial statements for the year ended December 31, 2016, which were prepared in accordance with IFRS.

Basis of Presentation

The condensed consolidated interim financial statements are prepared on a going concern basis. The accounting policies have been applied consistently in all material respects. These condensed consolidated interim financial statements have been prepared by applying the same accounting policies, assessments of estimates and judgments, and methods of computation as compared with the most recent annual consolidated financial statements.

Basis of Measurement

The condensed consolidated interim financial statements (“interim financial statements”) have been prepared on the historical cost basis except for the following material items in the condensed consolidated interim statements of financial position (“interim statements of financial position”) and in the condensed consolidated interim statements of income (loss) and comprehensive loss (“interim statements of income”):

• Available-for-sale financial assets are measured at fair value;

• Biological assets are measured at fair value less costs to sell; and

• Land is valued at fair market value.

7

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements for the Three Months Ended March 31, 2017 and 2016

(In thousands of United States dollars, except per share amounts and unless otherwise noted)

(Unaudited)

Functional and Presentation Currency

These interim financial statements are presented in United States dollars (“U.S. dollars”), which is the Company’s primary functional currency. VFCE’s functional currency is Canadian dollars and conversion to U.S. dollars is performed in accordance with IAS 21, The Effects of Changes in Foreign Exchange Rates. All financial information presented in U.S. dollars has been rounded to the nearest thousands, except per share amounts.

3 CHANGES IN ACCOUNTING POLICIES

The Company has adopted the following new and revised standards and changes in accounting policies, along with any consequential amendments as at January 1, 2016. These changes were made in accordance with the applicable transitional provisions.

• The IASB issued Disclosure Initiative, Amendments to IAS 1 in December 2014. The Amendments clarify materiality and disclosures within the financial statements and footnotes. These Amendments are effective for annual periods beginning on January 2016, and did not have a material impact on the Company’s interim financial statements.

• The IASB issued Amendments to IAS 16, Property, Plant and Equipment, and IAS 41, Agriculture, in June 2014 with the publication of Agriculture: Bearer Plants. The amendments change the financial reporting for bearer plants, which are used solely to grow produce, into the scope of IAS 16 so that they are accounted for in the same way as property, plant, and equipment. The amendments are effective for annual periods beginning on or after January 1, 2016. The Company adopted these amendments effective January 1, 2016, and management has determined that these Amendments did not have an impact to the Company.

• IAS 16, Property, Plant and Equipment, allows for a policy choice for subsequent measurement of property, plant, and equipment to be based on historical cost or fair value. The Company has historically carried its land at historical cost. For year ended December 31, 2016, the Company changed its policy so that land is initially measured at historical cost but subsequently measured at fair value. Management concluded that given significant changes in the fair market value of the Company’s land assets, the revaluation method of accounting for land used in production is a more appropriate accounting policy than historical cost. IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, allows for prospective application of this policy change and therefore the policy change has been applied to year ended December 31, 2016 only.

Accounting Standards Issued and Not Applied

IFRS 9, Financial Instruments, addresses classification and measurement of financial assets and financial liabilities, and replaces the multiple category and measurement models in IAS 39, Financial Instruments-Recognition and Measurement. The required adoption date for IFRS 9 has been extended to annual periods beginning on or after January 1, 2018, with early adoption permitted. IFRS 9 is not expected to have a material impact on amounts recorded in the interim financial statements of the Company.

IFRS 15, Revenue from Contracts with Customers, replaces IAS 18, Revenue, and IAS 11, Construction Contracts, and the related Interpretations on revenue recognition. IFRS 15, issued in May 2014, establishes the requirements for recognizing revenue that apply to all contracts with customers, except for contracts that are within the scope of the Standards on leases, insurance contracts, and financial instruments. IFRS 15 is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. Management is currently evaluating the impact of IFRS 15.

8

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements for the Three Months Ended March 31, 2017 and 2016

(In thousands of United States dollars, except per share amounts and unless otherwise noted)

(Unaudited)

IFRS 16, Leases, issued in January 2016, replaces IAS 17, Leases, and related Interpretations. IFRS 16 establishes the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, ie the customer (lessee) and the supplier (lessor). IFRS 16 is effective for annual periods beginning on or after January 1, 2019, with early adoption permitted only if the company also applies IFRS 15. Management is currently assessing the impact on the Company’s consolidated interim financial statements along with the timing of adoption of IFRS 16. Management expects that IFRS 16 will result in the following: a) an increase in assets and liabilities as fewer leases will be expensed as payments are made; b) an increase in depreciation expenses; and c) an increase in cash flow from operating activities as these lease payments will be recorded as financing outflows in the cash flow statements.

Further details of new accounting standards and potential impact on the Company can be found in the Company’s consolidated financial statements for the year ended December 31, 2016.

4 INVENTORIES

	March 31, 2017			December 31, 2016
Deferred crop costs	$	22,920		$	17,847
Purchased produce inventory		420			689
Biological asset adjustment (note 5)		(5,000	)		(2,516	)
Clean Energy inventory		87			88
	$	18,427		$	16,108

The cost of inventories recognized as expense and included in cost of sales for the three months ended March 31, 2017 amounted to $21,636 (2016 – $22,238). The biological asset adjustment reclassifies actual costs incurred for the biological asset from inventories to biological asset on the interim statements of financial position.

5 BIOLOGICAL ASSET

Information about the biological asset presented on the interim statements of financial position and in the interim statements of income is as follows:

	March 31, 2017			December 31, 2016			March 31, 2016
Estimated sales value – biological asset	$	13,477		$	8,196		$	15,657
Less
Estimated remaining costs to complete		6,493			3,257			7,634
Estimated selling costs		699			493			802
Fair value of biological asset less costs to sell		6,285			4,446			7,221
Less actual costs (note 4)		5,000			2,516			5,620
Increase in fair value of biological asset over cost		1,285			1,930			1,601
Fair value over cost of harvested and sold biological asset – beginning of year		1,930			3,431			3,431
Change in biological asset	($	645	)	($	1,501	)	($	1,830	)

9

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements for the Three Months Ended March 31, 2017 and 2016

(In thousands of United States dollars, except per share amounts and unless otherwise noted)

(Unaudited)

6 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	Land		Leasehold and land improve- ments			Buildings			Machinery and Equipment			Construction in process			Total
At December 31, 2016
Cost	$	11,864	$	3,820		$	82,937		$	65,563		$	295		$	164,479
Accumulated depreciation		—		(2,128	)		(32,420	)		(33,796	)		—			(68,344	)
Net book value	$	11,864	$	1,692		$	50,517		$	31,767		$	295		$	96,135
Three months ended March 31, 2017
Opening net book value	$	11,864	$	1,692		$	50,517		$	31,767		$	295		$	96,135
Additions/(Transfers)		—		—			(416	)		416			431			431
Placed in service		—		—			—			296			(296	)		—
Disposals		—		—			—			(11	)		—			(11	)
Accum Depr on Disposals		—		—			—			3			—			3
Depreciation expense		—		(25	)		(736	)		(1,190	)		—			(1,951	)
FX translation adjustment		—		—			3			26			—			29
Closing net book value	$	11,864	$	1,667		$	49,368		$	31,307		$	430		$	94,636
At March 31, 2017
Cost	$	11,864	$	3,820		$	82,525		$	66,297		$	430		$	164,936
Accumulated depreciation		—		(2,153	)		(33,157	)		(34,990	)		—			(70,300	)
Net book value	$	11,864	$	1,667		$	49,368		$	31,307		$	430		$	94,636

Depreciation related to the greenhouse facilities and equipment is expensed in cost of sales. Land is the only item of property, plant and equipment that is stated at fair values. During the year ended December 31, 2016, the Company changed its policy from cost method to revalue land used in production at fair market value every three years using an external revaluation method performed by an independent appraiser. As at December 31, 2016, land was determined to have increased in value from $4.7 million historical cost to $11.9 million fair market value, resulting in a land revaluation gain of $7.2 million. The gain of $7.2 million had a tax impact to deferred taxes of $1.1 million, resulting in net revaluation surplus in shareholders’ equity on the interim statements of financial position of $6.1 million.

7 DEBT

	March 31, 2017			December 31, 2016
Long-term debt:
Opening balance	$	45,534		$	49,187
Repayment of debt		(838	)		(3,718	)
Foreign Currency Translation		17			65
Closing balance	$	44,713		$	45,534
Current portion		3,278			3,291
Non-current portion		41,435			42,243
Less: Unamortized deferred transaction costs		(297	)		(314	)
	$	44,416		$	45,220

Credit Facilities:

The Company has a Term Loan financing agreement with a Canadian creditor (“FCC Loan”). The non-revolving variable rate term loan was amended in March 2016 and has a maturity date of May 1, 2021

10

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements for the Three Months Ended March 31, 2017 and 2016

(In thousands of United States dollars, except per share amounts and unless otherwise noted)

(Unaudited)

and a balance of $42,969 as at March 31, 2017. The outstanding balance is repayable by way of monthly installments of principal and interest based on an amortization period of 15 years, with the balance and any accrued interest to be paid in full on May 1, 2021. Monthly principal payments are $347 through May 1, 2016, and $253 effective June 1, 2016. As at March 31, 2017, borrowings under the FCC Loan agreement are subject to an interest rate of 5.53456% (December 31, 2016 – 5.38094%). The Company’s interest rate on the FCC Loan is determined based on the Company’s Debt to EBITDA ratio and the applicable LIBOR rate.

The Company’s subsidiary VFCE has a loan agreement with a Canadian Chartered Bank. The non-revolving fixed rate loan of CA$3.0 million has a maturity date of June 2023, fixed interest rate of 4.98%, and monthly payments of CA$36. As at March 31, 2017, the balance was US$1,744 (December 31, 2016 – US$1,806). VFCE has an outstanding letter of credit totaling CA$38.

The Company has a line of credit agreement with a Canadian Chartered Bank ( “Operating Loan”). The revolving Operating Loan was amended in May 2016 and has a line of credit up to CA$13,000 and variable interest rates with a maturity date on May 31, 2021, and is subject to margin requirements stipulated by the bank. As at March 31, 2017, $5,000 was drawn on this facility (December 31, 2016 – $nil), which is available to a maximum of CA$13,000, less outstanding letters of credit totaling $320 and CA$38.

The Amendments to the Company’s FCC Loan and Operating Loan have been accounted for as modifications of the existing debt in accordance with IAS 39 Financial Instruments: Recognition and Measurement.

The Company’s borrowings (“Credit Facilities”) are subject to certain positive and negative covenants. As at March 31, 2017, the Company was in compliance with all covenants on its Credit Facilities.

Accrued interest payable on the credit facilities and loans as at March 31, 2017 was $198 (December 31, 2016 – $202) and these amounts are included in accrued liabilities in the interim statements of financial position.

As security for the FCC Loan, the Company has provided promissory notes, a first mortgage on the greenhouse properties, and general security agreements over its assets. In addition, the Company has provided full recourse guarantees and has granted security therein. The carrying value of the assets and securities pledged as collateral as at March 31, 2017 was $131,883 (December 31, 2016 – $130,700).

Transaction costs incurred in connection with these financing activities are deferred and amortized over the terms of the related financing agreement. Total deferred financing costs, net of accumulated amortization, are netted against long-term debt on the interim statements of financial position, and total $297 as at March 31, 2017 (December 31, 2016 – $314).

The aggregate annual maturities of long-term debt as at March 31, 2017 are as follows:

Remaining 2017	$	2,456
2018		3,287
2019		3,299
2020		3,313
2021		31,889
Thereafter		469
	$	44,713

11

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements for the Three Months Ended March 31, 2017 and 2016

(In thousands of United States dollars, except per share amounts and unless otherwise noted)

(Unaudited)

8 FINANCIAL INSTRUMENTS

The following table summarizes the carrying and fair value of the Company’s financial instruments:

	March 31, 2017		December 31, 2016
Cash and cash equivalents	$	3,869	$	5,373
Trade receivables	$	9,722	$	10,187
Other receivables	$	986	$	1,047
Other financial liabilities	$	64,084	$	62,591

Interest income, expense and gains/losses from loans, receivables and other financial liabilities are recognized in the interim statements of income. The following table summarizes interest income and expense for the three months ended March 31:

	2017		2016
Interest income earned on cash/cash equivalents	$	nil	$	nil
Interest expense from other financial liabilities	$	632	$	557

The Company classifies financial assets and liabilities that are recognized on the interim statements of financial position at fair value in a hierarchy that is based on significance of the inputs used in making the measurements. The levels in the hierarchy are:

• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices)

• Level 3 – Inputs for the asset or liability that are not based on observable market data (i.e., unobservable inputs).

Management of financial risks

The Company, through its financial assets and liabilities, is exposed to various risks. The following provides a measurement of some of these risks as at March 31, 2017. The Company uses financial instruments only for risk management purposes, not for generating trading profits.

i) Credit risk

Credit risk is the risk that the Company will incur a loss due to the failure by its customers or other parties to meet their contractual obligations. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, trade receivables and other receivables. The Company limits its exposure to credit risk by placing its cash and cash equivalents with high credit quality financial institutions.

The Company’s trade receivables had three customers that each represented more than 10% of the balance of trade receivables, representing 14.5%, 12.4%, and 10.6% of the balance of trade receivables as at March 31, 2017 (2016 – two customers, 19.3% and 12.1%). The Company believes that its trade receivables risk is limited due to the high credit quality of its customers and the protection afforded to the Company by the Perishable Agricultural Commodities Act (the “PACA”) for its sales in the United States, which represent approximately 85% of the Company’s annual sales. The PACA protection gives a claim filed under the PACA first lien on all PACA assets (which include cash and trade receivables). The PACA fosters trading practices in the marketing of fresh and frozen fruits and vegetables in interstate and foreign commerce. It prohibits unfair and fraudulent practices and provides a means of enforcing contracts. Historical write-offs have represented less than one-half of one percent of sales. The maximum amount of credit risk exposure is limited to the carrying amount of the balances on the interim financial statements.

12

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements for the Three Months Ended March 31, 2017 and 2016

(In thousands of United States dollars, except per share amounts and unless otherwise noted)

(Unaudited)

Trade receivables for each customer were evaluated for collectability and an allowance for doubtful accounts has been estimated. At March 31, 2017, the allowance for doubtful accounts balance was $50 (December 31, 2016 – $50). The Company has not recorded a bad debt expense during the three months ended March 31, 2017 (2016 – $nil).

At March 31, 2017, 94.8% (December 31, 2016 – 87.4%) of trade receivables were outstanding less than 30 days, 3.6% (December 31, 2016 – 9.5%) were outstanding between 30 and 90 days and the remaining 1.6% (December 31, 2016 – 3.1%) were outstanding for more than 90 days. Trade receivables are considered past due based on the contract terms agreed to with a customer. Aged receivables that are past due are not considered impaired unless customer specific information indicates otherwise.

ii) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its long-term debt, for which the interest rates charged fluctuate based on the 90-day LIBOR rate. If interest rates had been 50 basis points higher, the net loss before taxes during the three months ended March 31, 2017 would have been higher by $54. This represents $54 in increased interest expense (2016 – $58).

iii) Foreign exchange risk

At March 31, 2017, the Canadian/U.S. foreign exchange rate was CA$1.00 = US$0.7502 (December 31, 2016 – US$0.7437). Assuming that all other variables remain constant, an increase of $0.10 in the Canadian dollar would have the following impact on the ending balances of certain interim statements of financial position items at March 31, 2017 and December 31, 2016 with the net foreign exchange gain or loss directly impacting net income for the period.

	March 31, 2017			December 31, 2016
Financial assets
Cash and cash equivalents	$	37		$	93
Trade receivables		177			222
Financial liabilities
Trade payables and accrued liabilities		(229	)		(229	)
Loan payable		(232	)		(240	)
Net foreign exchange (loss)	($	247	)	($	154	)

iv) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The following are the contractual maturities of financial liabilities as at March 31, 2017:

Financial liabilities	Total		1 year		2-3 years		4-5 years		More than 5 years
Long-term debt, net of fees	$	44,416	$	3,278	$	6,593	$	34,197	$	348
Operating loan		5,000		5,000		—		—		—
Trade payables		10,109		10,109		—		—		—
Accrued liabilities		3,424		3,424		—		—		—
Obligations under capital lease		107		24		83		—		—
Other liabilities		1,028		—		1,028		—		—
Total	$	64,084	$	21,835	$	7,704	$	34,197	$	348

13

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements for the Three Months Ended March 31, 2017 and 2016

(In thousands of United States dollars, except per share amounts and unless otherwise noted)

(Unaudited)

It is the Company’s intention to meet these obligations through the collection of current accounts receivable and cash from sales. If the current resources and cash generated from operations are insufficient to satisfy its obligations, the Company may seek to issue additional equity or to arrange debt or other financing. In addition, the Company has an operating loan of up to CA$13,000, less an outstanding balance of $5,000 and outstanding letters of credit totaling $320 and CA$38.

v) Fair values

The carrying amount of short-term financial instruments, less provisions for impairment if applicable, is consistent with the fair value of such instruments. The Company’s debt bears a variable interest rate tied to market rates and therefore its carrying value approximates its fair value.

9 EXPENSES BY NATURE

The following table outlines the Company’s significant expenses by nature:

Cost of sales	Three Months Ended March 31, 2017		Three Months Ended March 31, 2016
Purchased produce	$	9,521	$	8,314
Raw materials and consumables used		4,308		5,515
Depreciation and amortization		1,915		2,016
Transportation and storage		4,367		3,390
Employee compensation and benefits		7,209		7,415
	$	27,320	$	26,650

Selling, general and administrative expenses	Three Months Ended March 31, 2017		Three Months Ended March 31, 2016
Employee compensation and benefits	$	2,115	$	2,305
Marketing		84		58
Professional services		245		372
Office expenses		374		345
Other		406		347
	$	3,224	$	3,427

Employee compensation and benefits	Three Months Ended March 31, 2017		Three Months Ended March 31, 2016
Salaries and short-term employee benefits	$	9,283	$	9,677
Share-based compensation		41		43
	$	9,324	$	9,720

10 DEFERRED INCOME TAXES

Income tax expense is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual rate used for the three months ended March 31, 2017 was 30%, excluding the change in biological asset as reported on the interim statements of income, and 30% for the three months ended March 31, 2016.

14

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements for the Three Months Ended March 31, 2017 and 2016

(In thousands of United States dollars, except per share amounts and unless otherwise noted)

(Unaudited)

11 CHANGES IN NON-CASH WORKING CAPITAL ITEMS

	Three Months Ended March 31,
	2017			2016
Trade receivables	$	467		($	1,126	)
Inventories		(2,319	)		(829	)
Inventories reclassified to biological asset		(2,484	)		(2,972	)
Other receivables		56			192
Prepaid expenses and deposits		(315	)		(526	)
Trade payables		(2,595	)		(216	)
Accrued liabilities		(174	)		385
Other assets/other liabilities, net		18			54
	($	7,346	)	($	5,038	)

12 SEGMENT AND GEOGRAPHIC INFORMATION

The Company’s two reporting segments include the Produce business and the Energy business. The Produce business produces, markets, and sells the product group which consists of premium quality tomatoes, bell peppers and cucumbers. The Energy business produces power that it sells per a long-term contract to its one customer.

The Company’s primary operations are in the United States and Canada. Net sales by the countries in which its customers are located are as follows:

	Three Months Ended March 31,
	2017		2016
Net Sales
United States	$	28,177	$	29,106
Canada		2,614		2,076
Energy – Canada		486		526
	$	31,277	$	31,708

The Company’s property, plant and equipment, net of accumulated depreciation, are located as follows:

	March 31, 2017		December 31, 2016
United States	$	50,182	$	51,459
Canada		40,692		40,976
Energy – Canada		3,762		3,700
	$	94,636	$	96,135

The depreciation and amortization charges for the three months ended March 31, 2017 in the Produce business were $1,765 (2016 – $1,951) and $186 (2016 – $112) in the Energy business.

15

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements for the Three Months Ended March 31, 2017 and 2016

(In thousands of United States dollars, except per share amounts and unless otherwise noted)

(Unaudited)

13 EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net income attributable to owners of the Company by the weighted average number of common shares in issue during the year excluding common shares purchased by the Company and held as treasury shares.

	Three Months Ended March 31,
	2017			2016
Net loss attributable to owners of the Company	($	190	)	($	241	)
Weighted average number of common shares outstanding (thousands)		38,883			38,807
Basic loss per share	($	0.00	)	($	0.01	)

	Three Months Ended March 31,
	2017			2016
Net loss attributable to owners of the Company	($	190	)	($	241	)
Weighted average number of common shares outstanding (thousands)		38,883			38,807
Adjustment for:
Share options (thousands)		559			90
Weighted average number of common shares outstanding for diluted earnings per share (thousands)		39,442			38,897
Diluted loss per share	($	0.00	)	($	0.01	)

14 CAPITAL DISCLOSURES

The Company’s capital comprises net debt and equity:

	March 31, 2017			December 31, 2016
Total bank debt	$	49,713		$	45,534
Less cash and cash equivalents		(3,869	)		(5,373	)
Net debt		45,844			40,161
Total equity		67,251			67,387
	$	113,095		$	107,548

It is the Company’s intention to meet its obligations through the collection of current accounts receivable and cash. As at March 31, 2017, the Company has an available operating loan up to CA$13,000, with $5,000 drawn on the loan and $320 and CA$38 outstanding letters of credit (as at December 31, 2016, $nil was outstanding on the operating loan, and $333 and CA$38 outstanding on the letters of credit). As at March 31, 2017, the operating loan borrowing base was $6,844 based on a percentage of the Company’s outstanding accounts receivable less the issued letters of credit. If the current resources and cash generated from operations are insufficient to satisfy its obligations, the Company may seek to issue additional equity or to arrange debt or other financing.

15 SHARE-BASED COMPENSATION PLAN

The Company has a share-based compensation plan. The maximum number of common shares that can be issued upon the exercise of options granted is equal to 10% of the aggregate number of common shares issued and outstanding from time to time. The term during which an option may be exercised is 10 years from the date of the grant. Options vest at a rate of 33% per year, beginning one year following the grant date of the options. Share-based compensation expense for the three months ended March 31, 2017 of $41 (2016 – $43) was recorded in selling, general and administrative expenses and the corresponding amount credited to contributed surplus.

16

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements for the Three Months Ended March 31, 2017 and 2016

(In thousands of United States dollars, except per share amounts and unless otherwise noted)

(Unaudited)

The following table presents the assumptions used to establish the fair value assigned to the options issued using the Black-Scholes valuation model:

	June 2016			March 2016			November 2015			October 2015
Expected volatility		51.9	%		52.5	%		53.3	%		53.6	%
Dividend	$	nil		$	nil		$	nil		$	nil
Risk-free interest rate		1.26	%		1.52	%		1.39	%		1.49	%
Expected life		6.5 years			6.5 years			6.5 years			6.5 years
Fair value	$	0.795		$	0.738		$	0.421		$	0.439

Expected volatility was based on three years of historical data.

The following table summarizes stock options granted and stock option forfeitures for the three months ended March 31, 2017 and 2016.

	Three Months Ended March 31,
	2017					2016
	Stock options			Weighted average exercise price		Stock options			Weighted average exercise price
Beginning of period		2,116,065		CA$	1.19		1,899,999		CA$	1.14
Granted		—			—		250,000		CA$	1.43
Forfeitures		(6,666	)	CA$	1.48		(3,334	)	CA$	1.48
End of period		2,109,399		CA$	1.19		2,146,665		CA$	1.18

The following table summarizes stock options outstanding and granted as at March 31, 2017:

Exercise price	Number outstanding		Remaining contractual life (years)		Number of exercisable options
CA$0.70		199,399		2.8		199,399
CA$1.24		565,000		4.1		565,000
CA$1.27		150,000		5.0		150,000
CA$0.85		100,000		6.0		100,000
CA$1.10		240,000		6.5		240,000
CA$1.48		360,000		7.0		360,000
CA$0.94		100,000		8.0		66,667
CA$0.83		45,000		8.5		15,002
CA$0.80		50,000		8.6		16,667
CA$1.43		250,000		9.0		83,333
CA$1.55		50,000		9.3		Nil
		2,109,399

17

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements for the Three Months Ended March 31, 2017 and 2016

(In thousands of United States dollars, except per share amounts and unless otherwise noted)

(Unaudited)

No options were exercised for the three months ended March 31, 2017 and 2016. Share options outstanding as at March 31, 2017 have the following expiry dates and exercise prices:

	Exercise price in CA$ per share		March 31, 2017		December 31, 2016
Expiry date – January 13, 2020		0.70		199,399		199,399
Expiry date – May 20, 2021		1.24		565,000		565,000
Expiry date – March 13, 2022		1.27		150,000		150,000
Expiry date – March 13, 2023		0.85		100,000		100,000
Expiry date – September 26, 2023		1.10		240,000		240,000
Expiry date – March 18, 2024		1.48		360,000		366,666
Expiry date – March 19, 2025		0.94		100,000		100,000
Expiry date – October 6, 2025		0.83		45,000		45,000
Expiry date – November 16, 2025		0.80		50,000		50,000
Expiry date – March 29, 2026		1.43		250,000		250,000
Expiry date – June 30, 2026		1.55		50,000		50,000
				2,109,399		2,116,065

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