Management s Discussion & Analysis. For the six months ended September 30, AgriMarine Holdings Inc.

Transcription

1 Management s Discussion & Analysis For the six months ended September 30, 2012 AgriMarine Holdings Inc. November 28, 2012

2 The following ( MD&A ) for the six months ended September 30, 2012 was prepared by management on November 28, 2012 for AgriMarine Holdings Inc. and its subsidiaries (collectively, AgriMarine or the Company ). The MD&A should be read in conjunction with the corresponding interim financial statements of the Company and related notes attached thereto (collectively, the Interim Financial Statements ), as well as the audited annual financial statements and MD&A for the year ended March 31, All dollar amounts in this MD&A are in Canadian dollars unless stated otherwise. The financial statements upon which this MD&A is based have been prepared in conformity with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ) and require management to make estimates and assumptions that affect amounts reported and disclosed in such financial statements and related notes. The Audit Committee of the Board of Directors has reviewed the MD&A and other publicly reported financial information for usefulness, reliability and accuracy. Additional information relevant to the Company is available for review on SEDAR at 1. Forward-Looking Statements Certain statements contained in this MD&A constitute forward-looking statements. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as seek, anticipate, plan, continue, estimate, expect, may, will, project, predict, potential, targeting, intend, could, might, should, believe and similar expressions. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Based on current available information, the Company believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that those expectations will prove to be correct. The forward-looking statements in this MD&A are expressly qualified by this statement, and readers are advised not to place undue reliance on the forward-looking statements. While the Company may elect to, the Company does not undertake to update this information at any particular time except as required in accordance with applicable securities legislation. 2. Description of Business AgriMarine Holdings Inc. is a Canadian-based aquaculture technology company which uses its proprietary solid-wall containment systems to produce fish commercially and develop licensing opportunities utilizing this technology. The Company s technology addresses many of the environmental issues that plague net cage fish rearing practices worldwide, offers a better farm management system with added environmental benefits and meets consumer and retailer demands for sustainable aquaculture practices and products. AgriMarine Holdings Inc. commenced trading on the TSX Venture Exchange (the Exchange ) on June 3, 2009 under the stock ticker symbol FSH. Shares of the Company are also listed on the Frankfurt Stock Exchange (trading symbol: A2G) and on the OTCQX, the premier tier of the OTC market in the US (trading symbol: AGMHF). The Company is a reporting issuer in the provinces of British Columbia and Alberta.

3 2.1 Organizational Structure As at September 30, 2012, the Company wholly owned four subsidiary companies directly and indirectly and held a 50% share interest in AgriMarine Norway AS, a jointly controlled entity, as reflected in the organizational chart below: AgriMarine Industries Inc. oversees technology design and development, farm operations and business development opportunities in Canada. This subsidiary is also a Consortium Member of the Middle Bay Project along with the Middle Bay Sustainable Aquaculture Institute and the Gordon and Betty Moore Foundation. This subsidiary holds Benxi AgriMarine Industries Inc., registered as a Wholly Foreign Owned Enterprise in China for the commercial application of its technology for rearing trout and salmon at its production facility in Benxi County located in Liaoning Province. The Company incorporated a subsidiary under the name of AgriMarine (Asia) Limited under the Hong Kong Special Administrative Region of China for business development purposes within the Asia-Pacific region. In August 2012 the shares of AgriMarine Aquaculture Technologies (Beijing) Co. Ltd. were transferred to AgriMarine (Asia) Ltd. with the intent of consolidating all Asian operations under one subsidiary. AgriMarine Aquaculture Technologies (Beijing) Co. Ltd., located in Beijing, was incorporated as a Foreign-Invested Commercial Enterprise ( FICE ) in order to provide local support to distributors and expand sales of its fish products in China. This subsidiary functions as an investment arm of the Company for the purposes of identifying business development opportunities and forming strategic relationships to expand operations throughout China. The Company incorporated AgriMarine Norway AS ( AgriNor ), together with two arm s length parties, to serve as a vehicle for the licensing of its technology, supply of proprietary rearing tanks and know-how throughout salmon-producing countries in Northern Europe. AgriMarine holds a 50% interest in AgriNor and has representation on the board of directors pursuant to a shareholders agreement. 2

4 2.2 Company Strategy The Company is in the business of developing proprietary solid-wall closed containment technologies and related systems (the AgriMarine System ) to address sustainability and husbandry issues in fin fish aquaculture and to improve the efficiency and performance of fin fish production. Through its operating subsidiaries, the Company is demonstrating the superiority of its farming technologies by building and operating showcase facilities based on the AgriMarine System. Based on the proven sustainability and economic performance advantages demonstrated at these farms, the Company intends to optimize the value extracted from sales and licensing agreements for its proprietary intellectual property. Recent trends in fin fish production practices and related legislation in various geographic jurisdictions are favoring a move to closed containment technology from traditional net pen production. The Company intends to demonstrate that it has the lowest cost and highest operational efficiency for making this transition. The Company anticipates revenue generation under one or more of the following business models: Technology Licensing and Tank Sales under this model AgriMarine licenses its technology for specific geographic regions and/or fish species to third parties for their internal use or resale purpose. Revenues may take the form of tank sales, provision of ancillary services to customers and/or a production royalty on fish harvested using its technology. Farm Operations under this model the Company provides the capital and operating costs associated with fish production and collects proceeds from the sale of harvested fish. Joint Venture under this model the Company and one or more joint venture partners share the capital and operating costs associated with fish production with the Company as operator. Proceeds from the sale of harvested fish are shared among the partners. Potential revenue streams from any of the above business initiatives may be recurring from long-term ongoing operating contracts or license agreements. 2.3 Global Market for Aquaculture Aquaculture has emerged as an increasingly important contributor to the supply of global demand for fish and seafood over the last 15 years as levels of most wild stocks around the world have either reached a plateau or are in decline. The United Nations Food and Agriculture Organization ( FAO ) estimates that as much as 84 percent of global marine fish stocks are now fully exploited, over-exploited or depleted, confirming a consistent decrease since 1974 in marine fish stocks with little or no potential for further exploitation. 1 Over the last three decades ( ), world food fish production through aquaculture has expanded at an average annual rate of 8.8 percent. World aquaculture production (excluding aquatic plants and non-food products) attained an all-time high in 2010 at 79 million tonnes with an estimated total value of US$125 billion. 1 Food and Agriculture Organization of the United Nations: The State of World Fisheries and Aquaculture 2012 World Review of Fisheries and Aquaculture, 3

5 According to FAO, the world s growing population will significantly increase the demand for fish and seafood by World per capita fish consumption increased from an average of 14.4 kg in the 1990s to 18.6 kg (estimated) in Driven by growing domestic income and an increase in the diversity of fish available, annual per capita fish consumption in China has also increased dramatically, reaching about 31.9 kg in 2009, with an average annual increase of 6 percent over the period from Aquaculture is set to overtake wild fisheries as a source of food fish and the sector is growing at an average annual rate of 6.6 per cent. Aquaculture is an alternative avenue for mitigating the threats to the world s fisheries. Fish farms can protect and offset the damage to wild fish stocks due to overfishing and climate change, while supporting employment in the industry and meeting global food demands. The Company s proprietary floating solid wall containment systems bridge the gap between traditional methods of cage-based fish farming and high-cost land based systems, and utilizes cutting edge technology to produce fish sustainably, without ecological damage and a minimal footprint on the surrounding marine environment. 2.4 Salmon Pricing Over 50% of the world s fresh Atlantic salmon is produced in Norway and Europe. Spot market price and derivatives contracts for Atlantic salmon are set and traded on FishPool ASA, an international commodity exchanged based in Bergen, Norway. Salmon prices exhibit a great deal of volatility, as shown in the chart below. This volatility is reflective of regional production-specific risks such as disease outbreaks and environmental variations (water temperature), changes in exchange rates in target markets and fluctuations in production inputs such as feed and energy cost. Fluctuations in wild catch salmon can also contribute to supply/demand imbalance. Due to the length of the growth cycle, producers are unable to scale their operations to match market demand during periods of under- or over-supply. In the case of marketing of fresh fish, volatility is compounded by the short shelf life of the product and the ability of the market to accept given quantities of the product within that window. 2 Ibid 1, p.4 4

6 In 2009, the Chilean salmon industry was devastated by an outbreak of infectious salmon anemia (ISA) virus which resulted in the culling of over 70 percent of the country s production. Accordingly, prices rose and producers in Europe and Canada expanded operations to take advantage of this disruption in capacity. Source: FAO Food Outlook Global Market Analysis May 2012 Farmed Atlantic Salmon Prices (Norway) The second half of 2011 saw the return of Chilean production onto world markets with a vengeance (260,000 tonnes, up 50% over 2010) which increased global supply volumes by almost 20% - almost 70,000 tonnes 3 - and a corresponding precipitous decline in spot price. Spot prices for 2012 are projected to remain soft in the first half of the year but are expected to stabilize as demand catches up to supply. Global demand for salmon continues to grow at a projected rate of 9% annually 4 (outpacing the historical average year over year growth of 6.6 percent), largely through expansion into new markets in BRIC countries and Asia. Clearly, medium to long term consumption trends continue to be positive. AgriMarine s product is less vulnerable to pricing fluctuations in the spot commodity market in China due to a number of factors. Because of its proximity to market and population centers in China, AgriMarine s salmon is recognized for its quality and freshness, its environmentally sustainable rearing practices and the Company s ability to deliver freshly harvested fish to major cities overnight. In contrast, fresh salmon imported into China from Norway or Scotland must be transported by air and is subject to delays in customs, inspections and quarantines. The Company is in discussion with several major retailers in China to secure fixed price supply contracts to further protect its salmon production from commodity price fluctuations. The Company s salmon supply in Canada is already protected under a similar contract. 3 source: Kontali Analyse Norwegian Seafood Export Council (NSEC) 5

7 3. Business Activity China Operations The Company has a fully functional farm in the Guanmenshan Reservoir in Liaoning Province with the corporate and hatchery infrastructure to support further development in northern China. The Company has a well-defined strategy for rapid expansion in China, the world s fastest growing economy. Because of its innovative clean technology, AgriMarine was able to establish a strong foothold in China as the only domestic commercial producer of salmon based on scalable floating closed containment. AgriMarine is positioned to benefit from the growing middle class in China that consumes salmon as a luxury item. Salmon products continue to gain market acceptance in China with increasing consumption every year. In addition to the environmental advantages of the Company s rearing process, the constant circulation of fresh water in the tank result in fish with firmer flesh quality and less inter-muscular fat than ocean-reared salmon or net-cage farmed fish. In China, aquaculture products are marketed in live form so as to meet consumer preferences for live fish and fishery products. AgriMarine can deliver freshly harvested fish next day to major Chinese markets, and benefits from no import taxes or high air freight charges. Typically, imported fresh salmon takes up to four days (unless subject to additional quarantine procedures) to arrive at Chinese markets after being flown in from Europe or the Americas. Since December 2010, salmon imported from Norway has been subject to additional inspections, resulting in lengthy quarantines. Benxi Hatchery The Company began the commercial application of its solid wall containment technology with the purchase of a cold water hatchery to supply fry for the grow-out of fish in In conjunction with the hatchery purchase, the Company was granted extensive water rights in the Benxi region of Liaoning Province for integrated closed containment rearing of market size fish. The hatchery has significant warm artesian ground water which provides an optimal temperature range for early culture of ova and fry. The Company began importing fertilized trout and salmon (Chinook and Coho) eggs from Canada in 2008 under a series of import certificates from China and export approvals from Canadian regulatory agencies. Benxi AgriMarine will continue to import ova until it develops its own brood stock in China. The Canadian based ova were selected from well-known high performance Canadian west coast fish stocks. The Benxi Hatchery took delivery of 1 million Coho salmon ova in December 2011 and a further 500 thousand Chinook ova in February 2012, in anticipation of rapid expansion of farming operations in 2013 and

8 Work continues on completing the recirculating aquaculture system (RAS) at the hatchery. The final phase of construction will provide additional biosecurity and an increase in production capacity to well over 2 million fry annually. Benxi Farm The Company s first solid-wall containment system was installed at Guanmenshan power reservoir in September 2009 and stocked with a trial crop of steelhead trout, which has now expanded to five tanks with a rearing capacity of between 50,000 to 75,000 fish per tank. A sixth tank is on site and being assembled. Working through distributors in China, the Company has sold fresh and frozen salmon trout products into 5- Star hotels and restaurants as well as prominent state guesthouses (complexes used exclusively to house and entertain visiting foreign dignitaries and provincial government officials) located in the Tier 1 cities of Beijing, Shanghai, Guangzhou, Shenzhen, Qingdao and Dalian. The Company plans to expand its live-fish sales and target Tier 2 cities such as Xi'An, Chongqing, Chengdu, Urumgi, and Zhengzhou. Harvest of the Chinook salmon commenced in September 2012 with delivery to Ito-Yokado. The next generation of salmon fry (both Pacific Chinook and Coho) were transferred from the hatchery to the farm during this quarter. These fish will be ready for harvest beginning in the Q2 of Sales and Distribution On August 27th, the Company announced that it had entered into an agreement with the Ito-Yokado grocery retail chain for the supply of locally produced fresh Chinook salmon. AgriMarine s salmon will be available initially at Ya Yun Cun Beijing Huatang Ito-Yokado with in-store promotions and marketing programs developed in cooperation with AgriMarine s Beijing sales staff. These programs will involve the branding of the product as Chinese produced in pristine waters of the northeast regions. The Company plans to ramp up deliveries to supply all 15 Ito-Yokado retail stores in the near future. Canadian Operations In Canada, progress continues to be made with projects in Northern British Columbia and Ontario. The Company continues to pursue its interests under the Memorandum of Understanding with the Serpent River First Nation of Cutler, Ontario with the near-completion of a feasibility study and a due-diligence visit by Chief Isadore Day. Site environmental assessments are ongoing, and a Band Council Resolution, which would allow the project to move to the next stage of development, is being sought. Middle Bay Demonstration Project The Company is demonstrating the application of its technology in a marine environment at the Company s marine research facility in Middle Bay at Campbell River, BC. The Company entered a commercial and technology agreement with Middle Bay Sustainable Aquaculture Institute ( MBSAI ), a not-for-profit organization, for the construction and operation of a 4-tank commercial scale marine farm utilizing the technology. MBSAI and AgriMarine subsequently signed a consortium agreement with the Gordon and Betty Moore Foundation and Sustainable Development Technology Canada ( SDTC ) for grants in support of the project. In August 2011, SDTC increased their contribution to the project to $5,769 thousand as a result of an increase in the total project budget to $17,600 thousand. 7

9 Operation of the Middle Bay Project began with the commissioning of the world s first marine based, commercial scale solid-wall containment system in January 2011 and subsequent stocking with Pacific Chinook smolts. The tank suffered severe damage during a violent windstorm in March 2012 and an early harvest of the fish was conducted. Flesh quality and texture proved to be excellent, and parasitic sea lice, which are endemic in local waters in both farms and on wild salmon were observed to be at very low numbers. This is a demonstrable advantage of using closed containment technology for salmon farming, particularly in Norway and Scotland, where sea lice infestations are a significant and recurring problem. Based on the lessons learned from the manufacturing experience of the six tanks constructed to date and the challenges experienced in the first high energy marine site application, a new generation of tank design was developed. A patent application has been filed for this new tank system designed to better withstand a high energy marine environment and to radically simplify manufacture, lower the cost of shipment and reduce the difficulty of assembly. This new design, also displacing 3,000 cubic meters, utilizes an improved vacuum resin transfer technology developed for the initial prototype design but has improved geometry to improve inherent structural strength and hydro-dynamic performance to better withstand high energy marine environments and conformance with Norwegian marine certification standards. During the period, the Company announced the completion and manufacture of two tanks based on a new design and signing of a long term manufacturing agreement with Janicki Industries of Washington, USA. Janicki has over 20 years of experience in large scale composite work and in designing precision molds, tooling and fabricating parts for highly technical equipment for a variety of industries such as aircraft parts and high-end yachts. Europe AgriMarine Norway AS was incorporated in Norway and appointed the exclusive sales agent of the AgriMarine System to European salmon producing countries in July In October 2011 the Company announced the signing of Letters of Intent with smolt producer Smøla Klekkeri og Settefisk AS ( Smøla ) and with fish farming producer Lingalaks AS ( Lingalaks ), each of Norway, in connection with applications to the Norwegian Directorate of Fisheries for research and development projects incorporating aspects of closed containment rearing systems and techniques. In February 2012 the Company announced the signing of a Letter of Intent with Marine Harvest (Norway) SA, one of the largest salmon producers in the world, for a demonstration project using AgriMarine s core technology to increase production capacity in rearing salmon up to 1 kg. Each of these projects is under various stages of review by their respective government and environmental authorities and corporate and academic committees. Other Initiatives 1. Global Licensing Strategy The Company is also actively pursuing expansion into other key salmon producing markets, particularly in South America, through licensing agreements, royalty agreements and joint venture partnerships. 2. Ongoing Research & Development Over $16.7 million dollars has been invested over a ten-year period in developing and refining AgriMarine s solid-wall containment technology to the point where it is now commercially scalable and economically feasible. AgriMarine will continue to refine and optimize the technology with a view to further enhancing fish health and reducing operating and manufacturing costs to remain a leader in the field of sustainable aquaculture. 8

10 4. Outlook 2012 was a year of transition at AgriMarine. During the year, management carried out a detailed analysis of the business to clearly define AgriMarine s key strengths and weaknesses and the most significant opportunities and challenges facing the organization. Management is working to develop a strategy that will focus on enabling AgriMarine to transition from a technology development company to commercialization which will meet shareholders expectations regarding growth and profitability. Having demonstrated the commercial viability of its technology in its active production farms in China, the Company is now in a position to benefit from sales and licensing of its technology systems to salmon and other commercial finfish producers around the world. One key element of AgriMarine s new strategy is the development of a more focused and proactive commercial approach with respect to monetizing the investments it has made in developing the world s foremost solution for scalable closed containment culture of finfish. Going forward, it is management s intention that the Company will enhance its focus on Technology Sales and License Development activities. Management is very optimistic about AgriMarine s prospects over the coming years. The opportunities in front of the Company are significant and attainable. While the full impact of some of the organizational and commercial changes that have recently been made will take time given the lengthy sales cycles that exist in the target markets, management is confident that the Company will demonstrate definitive commercial progress in 2013 and beyond. 5. Subsequent Events Subsequent to the period end, the Company announced the execution of a binding letter agreement (the Agreement ) with Akvatech AS ( Akvatech ), a Norwegian Private Equity Group, to advance the adoption of the Company s closed containment fish rearing technology (the AgriMarine System ) in Norway, the world s largest salmon producing nation, and in other countries. The Agreement contemplates the execution of a series of definitive agreements (collectively, the Transaction ), the commercial terms of which include: a) A secured loan from Akvatech to the Company s subsidiary AgriMarine Industries Inc. ( Industries ) in the amount of CAD $2.5 Million. The loan will be used strictly for the purpose of retiring existing secured debt. b) Purchase of the Company s IP rights and know-how within certain Northern European countries, including Norway c) Technology and sales licenses to certain countries in Southern Europe, Middle East/Mediterranean region, and South America d) Sale of two (2) 24m AgriMarine System marine tanks for use at a demonstration project in Norway e) Development and patent protection of a 30m tank design with capacity of 5,500 cubic meters Secured Loan Pursuant to the Transaction, Industries will enter into a Loan Agreement with Akvatech for a loan of $2.5 Million (the "Loan"). The Loan will have a maturity date of eighteen months from the date of execution. The Loan will be used to retire all existing secured debt and will be secured by a charge over all of Industries property and assets and guaranteed by the Company. 9

11 Purchase and Licensing of the AgriMarine System Pursuant to the Transaction, Industries will enter into an IP and Licensing Agreement, under which Akvatech shall purchase from Industries the right, title and interest in the AgriMarine System fish-rearing technology for use in Norway and certain Northern European countries for an aggregate purchase price of CAD$1.5 Million. The Company will grant Akvatech a license to use the AgriMarine System fish-rearing technology within certain South American, Middle Eastern, North African and Southern European countries, with future acquisition rights for additional considerations. AgriMarine retains full and exclusive rights in Canada, US and China. The Agreement includes a provision for royalty payments to be made to the Company, in perpetuity, from future sales of the AgriMarine System tanks in those territories in which the technology is licensed. Sale of 24m Tanks for Demonstration Project In connection with the Transaction, Akvatech will arrange for the sale of two (2) 24m AgriMarine System Version 2 marine tanks manufactured by Janicki Industries Inc. for use at a demonstration project in Norway. This marks the first sale of AgriMarine s technology and establishes the Company as a supplier of closed containment technology. The demonstration project is expected to be jointly financed by a consortium of industry players and salmon farmers, as well as Innovation Norway, the Norwegian Government s innovation and development arm. Development of 30m Tanks The Agreement contains a provision for joint technology development whereby Akvatech will fund the continued design and development of a 30m tank based on AgriMarine s Version 2 marine system design. It is expected that the definitive agreements contemplated under the Transaction will be completed on or before December 7, 2012, or on such date as mutually agreeable to both parties, with Closing of the Transaction to occur shortly thereafter. 6. Summary of Quarterly Financial Information The results for the three and six months ended September 30, 2012 are prepared in accordance with International Financial Reporting Standards ( IFRS ). The comparative financial information for the corresponding period in 2011 has been restated in accordance with IFRS. The following table summarizes selected financial information from the Company s past eight quarters: Three months ended Sales Revenue Operating Expenses Net Loss $'000 $'000 $'000 September 30, June 30, March 31, ,494 1,858 December 31, ,341 September 30, ,456 1,491 June 30, ,111 1,162 March 31, ,730 3,261 December 31, ,384 1,563 10

12 7. Comparison of Results for the three and six months ended September 30, 2012 and 2011 Revenue Revenue for the three months and six months ended September 30, 2012 was generated solely by Benxi AgriMarine, our farming operation in China. The AgriMarine System has been in active production in China since 2010 and there are five tanks currently installed with a sixth tank in process of being installed. Given that this farm is rearing fish in the stable operating environment of a contained freshwater reservoir, there is no expectation of crop loss due to storm-related events. AgriMarine's farm at Benxi is considered to be in active production stage and is a long-term revenue generating unit that is expected to generate improved economic performance as knowledge from operational experience is applied to continuous improvements in operational efficiencies and scale and market conditions both improve over time. Benxi AgriMarine conducted the first harvest in Benxi from September to November 2010, and commenced the second harvest in July In Q2 2013, Benxi AgriMarine generated revenue of $130 thousand, an increase of $18 thousand (i.e. 16%), compared to Q The sales volume increased by 16 thousand kg (i.e. 89%), while the unit selling price decreased by $2.36/kg (i.e. 38%) in Q compared to Q For the six months ended September 30, 2012, Benxi AgriMarine generated revenue of $263 thousand, an increase of $146 thousand (i.e. 125%), compared to the six months ended September 30, The sales volume increased by 42 thousand kg (i.e. 224%), while the unit selling price decreased by $1.86/kg (i.e. 30%) for the six months ended September 20, 2012 compared to the same prior year period. The sales volume increased as a result of the establishment of sales team and development of new customers during the three and six months ended September 30, 2012 compared to the same prior year periods. The decrease in the unit selling price in the three months and six months ended September 30, 2012 compared to the same prior year periods is primarily attributed to the following two factors: first and foremost, the local market price of salmon and trout, both fresh and frozen, declined in response to the oversupply of salmon globally and in line with the drop in spot commodity price. Second, frozen fish made up a higher percentage of sales in the three and six months ended September 30, 2012 in comparison to the same prior year periods. Typically fresh fish command a premium of about $1.75/kg over that of frozen. Management expects the sales ratio of fresh to frozen fish to revert to earlier levels as supply chain relationships are established with distributors and end consumers and sales emphasis is placed on fresh supply. Significant progress has been made to establish supply relationships directly with retail chains at substantially better prices. Our efforts currently underway to focus on branded Canadian Pacific Salmon are also anticipated to assist with both demand and pricing based on positive product differentiation in the market. Cost of goods sold Cost of goods sold in Q was $279 thousand, an increase of $187 thousand compared to Q The unit cost increased by $3.10/kg (i.e. 61%) in Q ($8.17 per kg), when compared to Q ($5.06 per kg). Cost of goods sold was $535 thousand, an increase of $437 thousand compared to the six months ended September 30, The unit cost increased by $3.65/kg (i.e.72%) in the six months ended September 30, 2012 ($8.74 per kg), when compared to the same prior year period ($5.09 per kg). 11

13 The increase in cost of goods sold for the three and six months ended September 30, 2012 is mainly caused by the extended length of rearing cycle of this particular crop of trout, and as a result, the feed conversion ratio (i.e. conversion ratio between the amounts of feed consumed to the growth of fish weight) is much higher in the three and six months ended September 30, 2012 compared to the same prior year periods. As well, the increase in cost of goods sold in Q partially due to the increase in the write-down of biological assets and inventory in Q of $23 thousand ($88 ), compared to $nil thousand in Q ($nil thousand for the six months ended September 30, 2011). The planned transition to Pacific Chinook and Coho Salmon and improvements in the sales and distribution chain are expected to correct both the cost issues and improve the selling price. Gross profit Gross profit in Q was -$150 thousand compared to $20 thousand in Q For the six months ended September 30, 2012, gross profit was -$272 thousand compared to $20 in the same prior year period. The decrease is because the combined effect of higher sales quantity and decreased gross margin per kg. The gross margin per kg in Q was -$4.38 per kg in Q compared to $1.09 in Q For the six months ended September 30, 2012, the gross margin per kg was -$4.44 per kg compared to $1.08 in the same prior year period. The change in gross margin represent the decline in selling price and increased production costs in the three and six months ended September 30, 2012, compared to the same prior year periods. As the Company transitions from producing trout to salmon products, profitability is expected to improve. Salmon is perceived by the consumer as a superior product to trout and unit pricing is expected to increase, having a positive effect on revenue generation. As well, the Company will strengthen its sales force and establish broader distribution relationship with retailers and end consumers (with sales emphasis on fresh product) to make sure that the fish will be harvested as soon as they grow to maturity (i.e. 3-4kg), when the most effective feed conversion ratio is reached. As a result, the rearing costs can be controlled under $4 per kg, as projected. General and administrative expenses General and administrative ( G&A ) expenses amounted to $544 thousand in Q2 2013, a decrease of $730 thousand, or 57%, compared to Q The decrease is mainly due to $nil stock-based compensation expenses incurred in Q compared to $450 thousand in Q For the six months ended September 30, 2012, G&A expenses were $1,352 thousand compared to $2,029 thousand in the same prior year period. Again the decrease is primarily attributed to reduction in stock based compensation, and additionally, business expense reduction efforts implemented during the three and six months ended September 30, Significant items included in G&A expenses in Q and the six months ended September 30, 2012, respectively, are as follows: Three months ended September 30, Six months ended September 30, $ $ $ $ Salary and employee benefits Management fee Depreciation Rent and utilities Stock-based compensation Legal and accounting fees Travel Business development Others Total G&A expenses 544 1,274 1,352 2,029 12

14 Research and development expenses Research and development ( R&D ) expenses incurred in Q were $252 thousand, increasing by $70 thousand (38%) compared to those in the amount of $182 thousand in Q The increase is mainly attributable to the higher engineering costs and costs directly associated with R&D compared to the same prior year period. For the six months ended September 30, 2012, R&D expenses were $870 thousand compared to $538 thousand in the same prior year period. The increase is mainly because more efforts were required for the development of AgriMarine System in the three and six months ended September 30, 2012 compared to the same prior year periods. As the technology development is closer to advance stage, the Company expects to spend less on R&D expenses. Significant items included in G&A expenses in Q and the six months ended September 30, 2012, respectively, are as follows: Three months ended September 30, Six months ended September 30, $ $ $ $ Engineering costs Salaries and employee benefits Rent and facilities Other overhead costs directly associated with R&D Total R&D expenses Finance costs Finance costs incurred in Q were $93 thousand, increasing by $16 thousand when compared to $77 thousand in Q Finance costs incurred in the six months ended September 30, 2012 were $227 thousand, an increasing by $38 thousand when compared to $189 thousand in the same prior year period. The increase in finance costs is due to higher interest expenses in the three and six months ended September 30, 2012 compared to the same prior year periods as a result of higher long-term loans balance as at September 30, The long-term loans balance as at September 30, 2012 is $2,997 thousand compared to $2,929 thousand as at September 30, Fair value adjustment on biological assets Under IFRS, biological assets are required to be recorded at fair market value and are re-measured each reporting period. In accordance with the Company s accounting policy regarding the biological assets, the trout over 1kg and salmon over 1.5kg were measured at fair market value, while the fish under the designated threshold was valued at cost. The change in fair value for Q was a gain of $6 thousand versus a gain of $18 thousand for Q The change in fair value for the six months ended September 30, 2012 was a gain of $20 thousand versus a gain of $144 thousand for the same prior year period. Other income Other income for Q was -$3 thousand, decreasing by $23 thousand when compared to an income of $20 thousand in Q The decrease is mainly due to the Company incurred a loss of $49 thousand from sale of equipment, which is offset by the income of $46 thousand from the management services provided to a related party. For the six months ended September 30, 2012, other income was $692 thousand, increasing by $736 thousand when compared to the same prior year period. The increase is primarily due to $688 thousand insurance proceeds received in relation to the tank damage by severe windstorm in Campbell River site incurred during the year ended March 31,

15 8. Capital Commitments According to the approval of the Foreign Business Bureau of Beijing on November 16, 2010, the total registered capital of US$1,000 thousand is required to be contributed in form of cash to Beijing AgriMarine, a wholly owned subsidiary of the Company, before November 15, The Company has contributed the full amount of the required registered capital of $1,000 thousand as at September 30, According to the approval of the Foreign Business Bureau of Benxi city on December 28, 2010, the total registered capital of Benxi AgriMarine increased from US$4,000 thousand to US$5,000 thousand in May 2011 and further to US$7,000 thousand in February The contribution to the registered capital is required to be fulfilled by February 28, The Company has made contribution amounting to US$5,870 thousand with a balance of US$1,130 thousand outstanding as at September 30, Results from Operations Three months ended September 30, Six months ended September 30, In thousands of Canadian dollars, except per share figures $ $ $ $ Sales Cost of goods sold (279) (92) (535) (96) Gross profit (149) 20 (272) 21 Research and development expenses (252) (182) (870) (538) General and administrative expenses (544) (1,274) (1,352) (2,029) Fair value adjustment on biological assets Finance costs (93) (77) (227) (189) Foreign exchange loss (5) (17) 7 (18) Other income (3) (44) Loss before income taxes (1,040) (1,492) (2,002) (2,653) Income taxes Net loss (1,040) (1,492) (2,002) (2,653) Net loss per share - basic and diluted (0.01) (0.02) (0.01) (0.02) Net loss (1,040) (1,492) (2,002) (2,653) Add back (deduct) significant non-cash items Non-cash finance costs Fair value adjustment on biological assets (6) (18) (20) (144) Share based compensation Adjusted net loss (953) (983) (1,720) (2,085) Financial Position As at September 30, 2012 As at March 31, 2012 Total Assets 8,516 9,203 Total liabilities 6,787 5,475 14

16 10. Financial Condition Review Total assets were $8,516 thousand as at September 30, 2012, representing a decrease of $687 thousand (-7%) from the total assets of $9,203 thousand as at March 31, The decrease is mainly due to the decrease of $2,490 thousand in cash balance, which is then offset by the increase in biological assets and property and equipment accounts. Total liabilities increased by $1,312 thousand (+24%), from $5,475 thousand at March 31, 2012 to $6,787 thousand at September 30, The increase is primarily due to an increase of $1,265 thousand in accounts payable and accrued liabilities in the six months ended September 30, The increase is then offset by the decrease in customer advance balance due to the Company has incurred costs related to design and construction of the tank in the amount of $142 thousand in the six months ended September 30, As a result, the customer advance received from MBSAI is reduced to $1,149 as at September 30, Please refer to section 13 Related Party Transactions of this MD&A as well as note 10 of the Company s unaudited interim consolidated financial statements for details. 11. Outstanding Securities As at September 30, 2012, there were 108,258 thousand common shares outstanding. In addition, there were 7,975 thousand stock options outstanding with an exercise price per share ranging between $0.10 and $0.53, and 42,381 thousand share purchase warrants outstanding with a weighted average price of $0.36. Detailed information regarding these instruments is set out in note 13 of the Company s Interim Financial Statements. 12. Working Capital, Liquidity and Capital Resources As at September 30, 2012, the Company had cash of $62 thousand, as compared to $2,552 thousand at March 31, The Company s primary source of cash flow is from a combination of debt financing (e.g. long-term borrowing) and equity financing (e.g. sale of securities). The primary use of proceeds from financing activities is for R&D activities carried on at AgriMarine Industries; operational expenditures of head office to raise capital and for strategic business development purposes; and operational and capital expenditures in Benxi AgriMarine in China, including the purchases of additional raw materials for rearing fish and installation of additional tanks and other equipment as required to maintain and increase production. Net cash provided by operating activities in Q was $594 thousand, an increase of $381 thousand, from $213 thousand in Q For the six months ended September 30, 2012, cash flows used in operating activities were -$175 thousand compared to -$2,024 thousand in the same prior year period. Significant changes in cash flow provided by/used in operating activities in the three months and six months ended September 30, 2012 are as follows: (a) Changes in items not involving cash in Q and six months ended September 30, 2012 was $212 thousand and $413 thousand (Q2 2012: $551 thousand; six months ended September 30, 2012: $641 thousand) (b) Changes in accounts receivable and other receivables in Q and six months ended September 30, 2012 was $2 thousand and $314 thousand (Q2 2012: $26 thousand; six months ended September 30, 2011: $128 thousand) 15

17 (c) Changes in prepaid expenses in Q and six months ended September 30, 2012 was $105 thousand and $35 thousand (Q2 2012: $101 thousand; six months ended September 30, 2011: -$382 thousand) (d) Changes in inventories and biological assets in Q and six months ended September 30, 2012 was -$45 thousand and -$438 thousand (Q2 2012: -$536 thousand; six months ended September 30, 2011: -$1,189 thousand) (e) Changes in due from/to related parties in Q and six months ended September 30, 2012 was $437 thousand and $255 thousand (Q2 2012: $220 thousand; six months ended September 30, 2011: $286 thousand) (f) Changes in customer deposit for tank supply in Q and six months ended September 30, 2012 was $nil thousand and $nil thousand (Q2 2012: $1,100 thousand; six months ended September 30, 2011: $1,100 thousand) (g) Changes in accounts payable and accrued liabilities in Q and six months ended September 30, 2012 was $923 thousand and $1,248 thousand (Q2 2012: $243 thousand; six months ended September 30, 2011: $45 thousand) Net cash used in investing activities in Q amounted to $960 thousand, an increase of $247 thousand, compared to Q For the six months ended September 30, 2012, net cash used in investing activities was $2,325 thousand compared to $841 in the same prior year period. The change reflects the increases in the purchases of fixed assets. Cash used in investing activities is mainly related to the construction of tank 3 and 4 at Campbell River and the construction and installation of tanks 5 and 6 at Benxi AgriMarine. Cash flows provided by financing activities were $nil thousand in Q compared to $nil thousand in Q For the six months ended September 30, 2012, cash flows provided by financing activities were $nil thousand compared to $2,844 thousand in the same prior year period as a result of the issuances of the common shares for $3,169 thousand. The amount is offset by the repayment of long-term loan of $292 thousand. The Company has not been profitable since inception. The Company continues to devote significant financial resources to its R&D activities in improving and refining the AgriMarine System. Management is confident that it will be able to show positive cash flow as soon as the Company launches the commercial sales of the AgriMarine System or licencing its technology throughout the world, and as the Company gains more experience in husbandry management and further develops its presence in the retail salmon market in China and other Asian countries. As of September 30, 2012, the Company s long-term loans include a senior loan at a principal amount of $2,250 thousand with interest in arrears of $361 thousand and a convertible loan totaling $747 thousand with interest in arrears of $138 thousand. The senior loan was matured on April 15, 2012 and the last two tranches of the convertible loan were matured on September 28, and November 12, 2011 respectively. The Company is conducting amicable negotiations regarding the terms of repayment with the Lender of the senior loan and with the Lender of the convertible loan respectively. Future operating and capital expenditures and the settlement of debt in excess of the Company s currently available resources are expected to be satisfied through a combination of debt and equity, with the relative proportion to be determined based on the Company s operating performance from time to time, as well as the conditions, cost, and availability of capital in debt and equity markets. 16

18 13. Contractual Obligations The Company s contractual obligations comprise of commitments and financial liabilities as listed as follows: Contractual Obligations Total Less than 1 year 1-5 years (3) After 5 years Commitments ($'000) ($'000) ($'000) ($'000) Operating Leases (1) Financial Liabilities Accounts payable and accrued liabilities 2,387 2, Customer advance (2) 1,149 1, Due to related parties Long-term loans 2,997 2, Total Contractual Obligations 7,112 6, (1) The operating leases are mainly related to the office rental and equipment leases. (2) Customer advance is the deposit made by MBSAI for construction of tank 2. See section 15(a) of this MD&A. (3) Given that the amount is immaterial, the amounts for the year 1-3 years and 4-5 years were not separated. 14. Related Party Transactions As at September 30, 2012, a director and officer of the Company was also a member of MBSAI and a director of MBPI. Therefore, MBSAI and MBPI are identified as related parties of the Company. (a) Transaction with MBSAI Under a Consortium Agreement signed in October 2007, AgriMarine Industries partnered with MBSAI, MBPI, Middle Bay Limited Partnership Inc. and the Gordon and Betty Moore Foundation to undertake a project to demonstrate and commercialize the closed containment salmon rearing technology developed by the Company (the Project ). In October 2008, Canada Foundation for Sustainable Development Technology ( SDTC ) and MBSAI entered into a Contribution Agreement, through which SDTC will provide a funding contribution in the amount of $2,386 for MBSAI (the Eligible Recipient ) to perform the Project. The Contribution Agreement was modified in July 2011 to increase the funding from $2,386 to $5,769. Under both the Consortium Agreement and modified Contribution Agreement, the Company is expected to build and operate four containment aquaculture tanks with an estimated cost of $17,600 for the Project and is responsible for project management, information collection, project documentation and other related tasks. In August 2011, the Company and MBSAI entered into a Design-Build Stipulated Price Contract for the design and construction of the second closed containment aquaculture tank at Middle Bay for a fixed price of $2,400 plus the applicable taxes. The Company received the first installment of $1,227 and the second installment of $1,000 from MBSAI for the design and construction of the tank on August 31, 2011 and October 26, 2011 respectively. On July 30, 2012, the Company received $144 tax refunds from Canada Revenue Agency for HST paid by MBSAI. As at September 30, 2012, the Company has incurred costs related to design and construction of the tank in the amount of $1,222. The customer advance received from MBSAI is reduced from $2,371 to $1,149 as of September 30, (b) Transaction with MBPI The Company entered into a commercial lease agreement with MBPI on January 1, 2009 to lease a marine site and adjacent land owned by MBPI to build facilities for the research, development and commercialization of closed containment salmon rearing technology with an annual rent of $120 for five years. In January 2009, the Company entered into an agreement to provide accounting and management services to MBPI, with a monthly fee of $

19 Related party balances not disclosed elsewhere in these financial statements are as follows: September 30, 2012 March 31, 2012 Amount due from MBSAI: $ $ Aquaculture tank project receivable (a) Other receivables - 62 Amount due from a director Amount due to MBPI (b) Amount due to directors (c) Deposit received from MBSAI (a) 1,149 1,291 (c) Compensation of Key Management Personnel Three month ended September 30, Six month ended September 30, $ $ $ $ Salaries for key management personnel Note Note: salaries of key management personnel include consulting and managements fees. For the three and six months ended September 30, 2012, the Company incurred the cost of $140 and $301, respectively (three and six months ended September 30, 2011: $106 and $251, respectively) to the directors of the Company for management services. These amounts are included in salaries for key management personnel in note 10 (c). As at September 30, 2012, consulting fees of $207 (as at September 30, $nil) has not been paid. 15. Significant Accounting Estimates and Judgments The preparation of financial statements in accordance with IFRS requires management to make certain accounting judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. The estimates and underlying assumptions are based on past experience and other factors perceived to be relevant and probable when the estimates were made. Estimates are reviewed on an ongoing basis and the changes to the accounting estimates are accounted for prospectively. Significant areas involving critical judgments in applying accounting policies, key assumptions and sources of estimation uncertainty that have the most significant effect on the amounts recognized in the financial statements are listed as follows: (a) Biological Assets The estimate of fair value of the biological assets relies on assumptions of biomass volume and market prices. The Company utilizes a fish growth model populated with industry-wide standard inputs (e.g. feed conversion rate, growth rate) to project the biomass volume for the whole life cycle of fish in each rearing tank. The Company measures the deviation in biomass volume by comparing the estimates with the actual results obtained when the tank is emptied or harvested out. The Company counts and weighs samples of the fish on a regular basis and the growth model is tracked and reviewed on a daily basis, and therefore, the biomass volume deviation is relatively insignificant. The market price is used for the estimation of the fair value of live fish over 1kg. The Company derives the market price based on the average of the most recent selling prices or recent contracts entered into. 18

20 The biological assets valued at accumulated cost are assessed for impairment. In the process of the projection of the accumulated cost to rear the fish to harvest, uncertainties will arise with regards to feed prices, other input costs and biological development, including estimated future mortality. The selling price at the harvest is estimated based on the historical price achieved, which may differ materially from the actual price realized for the future. (b) Inventory The inventory is valued at the lower of cost and net realizable value ( NRV ). The major portions of the inventory are feed and frozen fish. The purchase price of the feed in the subsequent period is a good indicator of the NRV. For the frozen fish, the net realizable value is estimated based on the average of the most recent selling price; and therefore, there is an uncertainty that how well the historical selling price can represent the future selling price. (c) Property and Equipment A significant portion of the Company s property and equipment is its tank rearing systems and tank moulds. The use of closed-containment rearing systems to farm fish on a commercial scale is unprecedented in the fish farming industry. Therefore, industry benchmarks are unavailable for reference in terms of estimating the useful lives and recoverable amounts of these assets. The Company uses available information related to the tank s technical design and materials used to make its best estimates. (d) Accounting for Joint Venture Under IAS 31 Joint Venture, a joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. In addition, joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control. The Company reviews the terms stipulated in the agreement binding the joint venture arrangement with regards to the process of the strategic financial and operating decisions being made to determine whether the Company shares joint control over an entity. The Company takes into account the substance of the profit (loss) sharing that apply in each reporting period in determine its share of profit (loss) of the joint venture. 16. Management of Capital The Company s objective of capital management is to safeguard the Company s assets and ensure its ability to continue as a going concern while at the same time maximizing the growth of its business and the return to its shareholders. This objective is achieved by prudently managing the capital generated through internal growth and external fund raising, optimizing the use of lower cost capital and raising share capital when required to fund growth initiatives. The Company s capital includes notes payable, long-term loans, due to related parties and share capital, contributed surplus and deficit. There were no changes in the Company s approach to its capital management during the six months ended September 30, The Company s total managed capital as at September 30, 2012 was as follows: 19

21 September 30, 2012 March 31, 2012 $ $ Due to related parties Share capital 24,857 24,857 Contributed surplus 4,013 3,938 Deficit (27,262) (25,260) 1,862 6,597 There are no externally imposed capital requirements and the Company intends to maintain a flexible capital structure, which is consistent with the objectives stated above and to respond to changes in economic conditions and the risk characteristics of underlying assets. In order to maintain or adjust its capital structure, the Company may issue new shares, raise debt (secured, unsecured, convertible and/or other types of available debt instruments) or refinance existing debt with different characteristics. 17. Risks and Uncertainties Due to the nature of the Company s business and present stage of development, the Company is subject to significant risks. Risk factors relating to the Company include, but are not limited to, risks relating to reliance on the Chinese market for initial sales of large fish in a culture principally familiar with smaller live fish, major customers and key personnel, reliance on banking facilities and dependence on sustainability of customer orders, the risk that the Company s business plan may fail, risks relating to operations, risks related with compliance with environmental protection regulations, risks related to uninsurable or uninsured risks, risks related to the start-up of The Company s technology business and risks related to conflicts of interest of directors and officers. What follows below is an abbreviated discussion of certain of the above noted risk factors. A more comprehensive discussion of the risks and uncertainties of the Company s business are described in detail in the MD&A for the year ended March 31, 2012 as filed on SEDAR and on the Company s website, agrimarine.com Technology Failures AgriMarine s farms rely on several low and high technology systems that govern the operations of the facility. A failure of one or more of these systems over a short period of time could adversely affect the fish crop under production. The failures could range from computer software problems to a complete power outage, which could potentially happen at any time. The Company has built redundancy and fail-safe protocols into all of its key operational systems. These protocols are monitored, alarmed and manned on location on a 24/7 basis. The Company has experienced no life support system failures over the past 10 years during the operation of fish hatcheries, at its previous land-based pilot closed containment research facility, or at its current production facilities in China and Canada. Crop Failure All fish farming operations are vulnerable to failure to produce a crop. Most salmon crop failures are a direct result of escapes, disease, plankton infestation and/or contamination of the fish population from outside sources. Fish health may also be adversely affected by a failure to properly oxygenate their rearing habitat. The Company has taken exhaustive steps, through the design of its facilities and through the monitoring and management of fish stocks, to ensure that none of these conditions could cause the wholesale loss of an entire crop. Each of the life support systems is backed up with alternate supply facilities and the separation of groups of fish in the rearing containers will minimize the impact of any adverse event that may affect the fish populations. Feed conversions and feed quality may affect the production of biomass which could lower the yield of and size of cultured salmon, resulting in lower than anticipated harvest size and lower revenue. 20

22 Operating Hazards and Risk The Company s current business involves risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Operations in which the Company has a direct or indirect interest will be subject to hazards and risks normally incidental to its operations, any of which could result in work stoppages, damage to or destruction of property, loss of life and environmental damage. Early Stage Development The Company is at an early stage of development and subject to start-up risks and will therefore be subject to the risks associated with early stage companies, including startup losses, lack and uncertainty of revenues, markets and profitability and the need to raise additional funding. Foreign Currency Exchange Risk The Company is subject to foreign currency exchange rate risks in particular risk relating to the fluctuation in value between the Canadian Dollar and Chinese Renminbi ( RMB ). The Company s major operating expenses and fixed assets in China are denominated in RMB. Consequently, the Company s profitability and value of assets are subject to exchange rates risks among Canadian Dollars and RMB. A rising RMB relative to the Canadian Dollar would increase operating costs and thus affect the profitability of the Company. Dependence on, and Protection of, Key Personnel The Company is dependent upon the continued support and involvement of its directors and officers to develop its business and operations. If the Company were to lose their services, the Company s ability to implement its business plans could be severely curtailed or delayed. Liquidity Concerns and Future Financing Requirements The Company may require additional financing in order to fund its plan of operations. The Company s ability to arrange such financing in the future will depend in part upon prevailing capital market conditions, as well as the Company s resulting business success. There can be no assurance that the Company will be successful in its efforts to arrange additional financing on terms satisfactory to the same. If additional financing is raised by the issuance of common shares from treasury, control of the Company may change and existing shareholders may suffer additional dilution. If adequate funds are not available, or are not available on acceptable terms, the Company may not be able to take advantage of other opportunities, curtail business operations or cancel planned projects, or otherwise remain in business. Events in the equity market may impact the Company s ability to raise additional capital in the future. 21

23 Head Office W. Hastings Street Vancouver, BC V6C 2W2 T: F: Operations - Canada Campbell River 4193 Middle Point Road Campbell River, BC V9H 1N6 T: F: Operations China Agrimarine Aquaculture Technologies (Beijing) Co. Ltd. Room B703, Winterless B No. 1 West Dawang Road Chaoyang District Beijing , P. R. China T: F: Benxi AgriMarine Industries Rm 1208, No 25 Tielu Street Pingshan District, Benxi Liaoning , China T: F: Management and Board of Directors Richard B. Buchanan Chairman and Audit Committee Chair Sean Wilton President & Chief Executive Officer John H. Buchanan, CA Chief Financial Officer Media & Shareholder Inquiries Alexia Helgason Media Relations and Marketing alexia@agrimarine.com Travis Schneider Corporate Affairs travis@agrimarine.com Legal Counsel McMillan LLP W Georgia Street Vancouver, BC V6E 4N7 T: F: Transfer Agent Computershare Investor Services 2nd Floor, 510 Burrard St. Vancouver, BC V6C 3B9 Auditors Ernst & Young LLP Chartered Accountants W Georgia Street Vancouver, BC V7Y 1C7 Phone: