Good morning, ladies and gentlemen. Welcome to Village Farms International's Second Quarter 2018 Financial Results Conference Call. Yesterday, Village Farms issued a news release reporting its financial results for the second quarter ended June 30, 2018. That news release, along with the company's financial statements, are available on SEDAR and on the company's website at villagefarms.com, under the Investors heading. Please note, that today's call is being broadcast live over the Internet and will be archived for replay both by telephone and via the Internet beginning approximately 1 hour following completion of the call. Details of how to access the replays are available in yesterday's news release. Before we begin, let me remind you that forward-looking statements may be made today, during or after the formal part of this conference call. Certain material assumptions were applied in providing these statements, many of which are beyond our control. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in forward-looking statements. A summary of these underlying assumptions, risks and uncertainties is contained in our various securities filings, including Village Farms' current annual information form for the year ended December 31, 2017, and MD&A for the quarter ended June 30, 2018. These forward-looking statements are made as of today's date, and except as required by applicable securities law, we undertake no obligation to publicly update or revise any such statements. I would now like to turn the call over to Michael DeGiglio, Chief Executive Officer of Village Farms International. Please go ahead, Mr. DeGiglio.

Thank you, Stephanie. Thanks, everyone, for joining us both by telephone and Internet. With me today for the call is Village Farms' Chief Executive Officer (sic) [ Chief Financial Officer ], Stephen Ruffini. In terms of the agenda for today's call, I'll begin with an update on the continuing process at Pure Sunfarms, our joint venture for large-scale, high-quality, low-cost cannabis production in Canada. Steve will then do a brief review of our second quarter financial results, and I'll return for some concluding comments before Steve and I take your questions. So beginning with Pure Sunfarms. It's been a very busy and productive summer so far, as our cannabis joint venture achieved several important milestones on or ahead of our planned schedule. As I discussed in our last call in May, Pure Sunfarms received its first amendment to the cultivation license for the 1.1 million square foot, Delta 3 facility in Delta, British Columbia, which enabled the Pure Sunfarms' team to begin commercial scale production on the first 130,000 square feet. Just a month and half later, Pure Sunfarms received its second amendment, enabling to expand production at Delta 3 -- at the Delta 3 facility to 225,000 square feet. By the end of July, all of the flower rooms and the license area were fully planted out and in production. On July 27, Pure Sunfarms received its sales license from Health Canada for the Delta 3 facility. We are incredibly proud of the speed, at which Pure Sunfarms is able to achieve this, especially given the magnitude of the operation with ongoing construction and management employee ramp-up, just 144 days from receipt of the cultivation license, to our understanding about twice as fast as the average. It's a testament to the value of the decades of operational experience that…

Thanks, Mike. Our complete second quarter and year-to-date 2018 financial results and discussion are available on SEDAR, albeit, they were not posted till this morning due to SEDAR system-wide issues that all filers experienced yesterday. I'm happy to go into more detail in the Q&A at the end of the call. I will remind you that most of the numbers I will discuss are in U.S. dollars and when I discuss Pure Sunfarms I will discuss Canadian dollars. Sales for the second quarter of 2017, as Mike said, $42 million, down 8%, the decline is primarily due to lower volumes, Mike has already discussed. Overall cost of sales for Q2 decreased 3%, to $41.2 million, $42.8 million primarily, due to the decrease in volumes as well as the decrease in third-party contract sales costs, which was offset by, as Mike said, increased freight expense and increased labor costs at both our Texas and BC facilities. Selling and other general and administrative expenses for Q2 increased 5% to $3.4 million from $3.2 million, primarily related to higher public company related activities, such as Investor Relations, legal and listing fees, in the second quarter of 2018 versus '17. We reported a net loss of second quarter of 2018 of $2.3 million or a loss of $0.05 per share compared to a net profit of $4.3 million or $0.11 per share in Q2 of last year. Last year was primarily, profitability was primarily driven by an $8.6 million book gain recognized on the contribution of the Delta 3 facility, to Pure Sunfarms in June of 2017. Our EBITDA for Q2 was a negative $1.3 million compared to a positive $1.3 million in the same period last year. Since our full finances were not posted until this morning, in all likelihood, no one has…

Thanks, Steve. We are now just 62 days from federal legalization of adult-use cannabis in Canada, Village Farms through our 50% of ownership of what will soon to be one of the largest cannabis production operations in Canada and perhaps is well on the verge of transforming its earnings trajectory in the process. In many ways we have taken a differential path to get where we are today. We entered the industry later than many of the other large LPs. We entered the industry underpinned by $200 million a year produce business. We've been very capital efficient, converting existing greenhouse facility operations and pursuing a partnership model. As a result, we've had limited shareholder dilution, I'm proud to be able to say that Village Farms has been able to achieve everything it has, in terms of Pure Sunfarms without hiring a single additional person within the organization. All of this, we believe, will contribute significantly to shareholder value, as we expand production and drive revenue and cash flows in Pure Sunfarms. Pure Sunfarms has had to prove itself every step of the way, conversion, licensing, production and sales, all within less than a year. As we continue to do so, we will continue to ramp production up, as we ramp-up sales and as we begin to generate positive cash flow, which we expect to do shortly. I'm confident that Pure Sunfarms and Village Farms as an owner will begin to recognize for the significant long-term value, what is being generated. With that, I'd like to open up the call to any questions.

[Operator Instructions] Your first question comes from Russell Stanley with Echelon Wealth Partners.

I guess my first question, with respect to quality and yield. Can you talk about, I guess, what your current yields are? And how that reflects or inputs your -- informs your production estimates for this year and next?

Well, I think, the second part of question, I'll answer the second part, I mean, we feel very confident about the production yields we have put out for both this year and next year. So what we're seeing makes us feel extremely confident, but we're in the midst of conversion and it's very hard to put out yields based on 1 harvest. As you remember, we're doing 85, once we ramp-up, it'll be 85 harvest a year and 17 grow rooms roughly 5 to 5.5per room. So we really need to get a lot more traction before we can look at where the yields will start leveling off at that point. But I can say that we are confident in exceeding our expectations that we put out.

Excellent. And with respect to quality, I guess, can you comment or provide some color as to how you're measuring that against what you were expecting?

Well, it's still early in the game, but I mean out -- what we have -- we have had 100% harvest of meeting out specifications and what we anticipate the specifications in the market. Though basically, we are harvesting everything we're growing, and it's meeting the spec, we have had, even to our, sort of surprise, we've had no shrink whatsoever, and that quality spec is being met. So -- and if we judge it from what we're hearing from the customers we are selling, there is no issues at this point in time. And keep in mind that we have to go through a whole year cycle, because they're growing in the summer or during the summer is much different than growing in the fall and winter. So we really need to get some more traction again, where we can say that with confidence on a full year cycle. We also are-- we are increasing out strains that we're growing, to have a good choice on where we want to focus, and what strains we want to focus on, both THC strains and CBD strains, but we definitely need more time to get through that, Russell.

Okay, that's helpful. And just, I guess, switching gears to the sale side. I am not sure what detail you can provide, but any color on who you are selling to at this point?

At this point, we are selling to other LPs. Obviously, Emerald is included on that list. We've announced that supply agreement. We are selling to other LPs, my word and a spot basis, as the product is available. People are essentially bidding for it. With respect to, everyone has seen, BC has announced a new RP proposal. So Pure Sunfarms now has the sales license, will potentially be putting in products in -- by the end of the month as requested by the BC Liquor Board. So we are looking forward to selling products to them based on; however, the roll out goes in BC.

Great. And I guess, that dovetails into my last question, you mentioned BC, I guess, can you talk a little bit about beyond that where your geographic sales priorities are at this point, as far as the provinces are concerned. I am assuming Ontario is there, but can you, I guess, elaborate on where else you might be looking?

Yes, we're ramping up and as Mike mentioned, the executive for Pure Sunfarms is getting close, and he and his sales and product development team will be making those decisions, as we go forward.

Right. And keep in mind, we still have as we've projected for 2018 about 7,000, 8,000 kilograms that we don't start to ramp-up really till we get into 2019. So we certainly don't want to be out there, overcommitting till we have the quality of the product. So working in BC where we are located makes the most sense at this point in time.

[Operator Instructions] Your next question comes from Bruce Schindler with Stockbridge Associates.

Want to congratulate you on the great progress and this incredible timing on the sales license that it came so fast. I'm an investor in other companies and I know they're waiting 8 to 12, and in some cases over a year for that sales license. I would also like to congratulate you on increasing with Great Northern the value of that working relationship. In particular, I'd like to in the Echelon report that I'm sure you read that came out, I believe, on Monday, it talks about this 40% that Emerald has committed to. I'd like to know, is this cast in stone and in writing and part of your JV that Emerald gets off the top 40% of production of the smaller amount in '18 and of the larger amount in '19. Is that cast in stone?

It -- Bruce, this is Steve. It's not in the shareholder agreement. It's a separate supply agreement that we entered into on behalf of Pure Sunfarms for the periods 2018 and '19, but it's not a requirement of shareholder agreement. It was a separate arms-length transaction, between essentially two LPs, Pure Sunfarms and Emerald.

Okay. And next, I'd like to ask about the next 25 acres potentially. I am sure, you have enough on your plate obviously, in expanding all the footage in Delta 3, I guess, is what it is, but can you give any insight into the 25 acres and how those conversations might be coming along?

I can. Well, first of all, the Village Farms gave Pure Sunfarms an option for the existing -- other existing facilities Delta 1 and 2, 1 being -- Delta 2 being 25 acres or another 1.1 million square feet and Delta 1 being 60 acres or almost 3 million square feet. Those options cannot be triggered under the shareholder agreement, till such time that Delta 3 has its full cultivation license for the full 1.1 million square feet whereas, we've said, we're looking at year-end for that to occur, but Village Farms view is that we have opened those discussions up, because we can provide a waiver to Pure Sunfarms, should they want to move on that option sooner. And all I can say is we have put that forward and there's been no decision as of yet.

Okay. It just seems to me that -- we believe, Emerald is having any financial problems or anything since it was clear in research that nothing is going to happen in the Richmond facility, they have been turned down twice. One of our group at Stockbridge can figure out what they did in Quebec and…

Well, I can say that, Bruce, that has nothing to do with Pure Sunfarms and nothing to do with Village Farms. So I really don't know what -- you would have to refer to Emerald, because we have no knowledge or information of that and I would rather not discuss, it's their business. So I know that I can say that Pure Sunfarms is -- looking down the road, it's not restricted to operate in any other country as an entity. And it is also looking at opportunities within Canada as well to what we're doing in Delta, or may do in Delta. So that's what I'll really say about that at this point.

Okay, that's very enlightening. I have some questions. Some of the figures I have seen, is when this 1.1 million feet is built out based upon projections only, that would equal about 5% of the grow in Canada and that was done by a fellow at Pacific, I forget the exact name of the research house. Do you concur with that? If you had seen that report about, I think, it was out about 3 months ago.

Yes, I've seen that report, but I guess, really, it really depends where the market is going to be in 2 years. So -- but I would say within 5% is probably a good number based on what we think our ramp-up will be in 2020.

There are no further questions at this time.

Okay. I want to thank everybody for joining this conference call and we look forward to reporting on our progress over the next couple of months going forward. Thank you.

Thank you. This concludes today's conference call. You may now disconnect.