Investor Presentation September 2018 September 2017 Forward - - PowerPoint PPT Presentation

September 2017 Investor Presentation

September 2018

Forward Looking Statements

This presentation contains certain "forward looking statements". These statements relate to future events or future performance and reflect the Company's expectations regarding its growth, results of operations, performance, business prospects, opportunities or industry performance and trends. These forward looking statements reflect the Company's current internal projections, expectations or beliefs and are based on information currently available to the Company. In some cases, forward looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict" , "potential", "continue" or the negative of these terms or other comparable terminology. A number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, you should specifically consider various factors, including, but not limited to, such risks and uncertainties as availability of resource, competitive pressures and changes in market activity, risks associated with U.S. and Canadian sales and foreign exchange, regulatory requirements and all of the other "Risk Factors" set out in the Company's current annual information form for the year ended December 31, 2017 and the most recent management's discussion and analysis for the quarter ended June 30, 2018, which is available electronically at www.sedar.com. Actual results may differ materially from any forward looking

• statement. Although the Company believes that the forward looking statements contained in this presentation are

based upon reasonable assumptions, you cannot be assured that actual results will be consistent with these forward looking statements. These forward looking statements are made as of the date of this presentation, and other than as specifically required by applicable law, the Company assumes no obligation to update or revise them to reflect new events or circumstances. 2

Market Facts

PRICE

TSX:VFF OTCQX: VFFIF C$7.79

MARKET CAPITALIZATION

~ C $347 M

(basic)

SHARES OUTSTANDING

44.5 M

(basic)

48.0 M

(diluted)

52-WEEK HIGH/LOW

C $9.80 C $1.87

MANAGEMENT & BOARD OWNERSHIP

~25%

3

LISTING SYMBOL

(As of September 21, 2018)

~ C $374 M

(diluted) Listed on the TSX since 2006

Industry Leader in Large-Scale, High Tech, Low-Cost Greenhouse Growing

10.5 M

(240 ACRES) OF GREENHOUSE CAPACITY

TECHNOLOGICALLY ADVANCED

GREENHOUSE FACILITIES

IN PRODUCT QUALITY & SAFETY

750 YEARS

OF EXPERIENCE

• sq. ft.

30 YEARS

IN OPERATION 2017 REVENUE1 2017 EBITDA1

C$206 M C$9.6 M

4

• 1. Converted to Canadian dollars at $0.77.

MASTER GROWER TEAM WITH INDUSTRY LEADER OWN

Vertically-integrated provider of premium produce to grocers across North America

Greenhouse growing produces a more consistent, higher quality product that customers demand and that commands a premium price Exclusive varieties address consumer demand in the specialty growth segment Strategically located greenhouses and logistics and distribution chain ensure the freshest, highest quality produce Marquee customers across the U.S. and Canada

Premium Produce Grown In the Most Sustainable, Resource-Efficient Manner

5

Strategically Located Operations and Distribution Network

3 facilities / 110 acres (4.8 M sq. ft.)

British Columbia

VF Owned 4 facilities / 130 acres (5.7 M sq. ft.)

Texas

VF Owned

Ontario

Our logistics and distribution chain ensures the freshest, highest-quality produce reaches consumers across Canada and the U.S.

6

Partner Greenhouses

Ontario: 70 acres British Columbia: 35 acres Mexico: 70 acres

Mexico

Financial Profile

7

(All figures in Canadian dollars unless otherwise stated)

At June 30, 2018

Cash: C$17.1 M (US$12.9 M) Long-Term Debt: C$49.7 M (US$37.6 M)

FY 2017

Revenue: C$206 M (US$158 M) EBITDA: C$9.6 M (US$7.4 M) Margin: 5%

EBITDA (C$ MILLIONS)

$13.8 $10.1 $14.1 $12.6 $9.6 $0 $5 $10 $15 2013 2014 2015 2016 2017

REVENUE (C$ MILLIONS)

$147.2 $158.9 $196.9 $209.1 $205.7 $0 $50 $100 $150 $200 $250 2013 2014 2015 2016 2017

2017 Net Income of C$5.0 M and EPS of C$0.13

A TRANSFORMATIONAL OPPORTUNITY:

Creating One of Canada’s Largest Vertically Integrated Cannabis Suppliers

Projected shortfall of supply based on current capacity and market demand Apply low-cost, high tech greenhouse growin ing expertis ise

4.8 M sq. ft. of existing

greenhouse capacity (potential yield of 300,000 kg)

• 1. “Legalized Cannabis: Fiscal Considerations” – Office of the Parliamentary Budget Officer, Government of Canada (2016)

Market Need Transformational Opportunity

Canadian Cannabis demand estimated to grow to

~734,000 kg by 20211

Potential to address substantial portion of the market

9

Ability to Capitalize on Market Opportunity

Complementary Partners

Initial Contribution:

1.1 M sq. ft. (25 acre) greenhouse (leased to Pure Sunfarms)

50% Ownership Initial Contribution:

C$20 M cash

High-tech, low-cost greenhouse growing & agricultural product safety expertise Cannabis industry compliance and licensing expertise

A vertically integrated large- scale, low-cost supplier of high- quality cannabis

50% Ownership

Options for an additional 3.7 M sq. ft. (85 acres) of growing capacity

10

Cannabis IP, including portfolio

• f high-quality genetics

Leaders in High-Tech, Low-Cost Greenhouse Growing

750 years of combined master

grower experience from around the world

Cannabis is an agricultural product like any other

11

30-year proven track record of

• perating mega-scale greenhouses

Decades as an industry leading,

fully integrated produce distributor

Extensive experience developing, launching and ramping up new crop

• perations (with record yields)

The Pure Sunfarms Advantage

Long-established, experienced workforce

• f ~600 at BC facilities

Proven operating systems and decades of experience managing the local climate

12

Use of existing, state-of-the-art greenhouses lowers costs and provides speed to market Agricultural product safety expertise/North America leader in pesticide registrations Access to low-cost electricity and no requirement to build co-generation

Pure Sunfarms greenhouses will be operated by veteran Village Farms personnel

Significantly de-risked production ramp up and ongoing operations

Ingrained culture of high-quality, low-cost production built over decades Greenhouse growing provides significant capital and operating cost efficiencies

• Lower energy needs
• Greater economies of scale
• Allows for greater scale

GOAL: Be the Low-Cost, High-Quality Cannabis Producer in Canada

Conversion of existing state-of-the-art greenhouses with significant scale minimize capital costs

conservative target of

<$1.00/gram

Village Farms is one of the lowest-cost greenhouse growers

• f tomatoes & cucumbers in Canada/U.S.

13

Phase 1: Delta 3 Greenhouse

>50%

1.1 M sq. ft. of greenhouse capacity

75,000 kg annually

projected EBITDA margins of

• vs. mid-single digits for

produce in Canada

potential to generate revenue of

10-15x that of produce

Significantly more profitable use of existing greenhouse assets

14 (25 acres)

conservative projected yield of

Commercial Production and Sales Underway

15

Have consistently achieved key milestones on or ahead of schedule

June 2017

File Cultivation License Application

September 2017 March 2018

Initiate Cultivation License Process Commence Conversion

• f Delta 3 to

Cannabis Licensing Standards

October 2017

✓ ✓ ✓

Obtain Cultivation License Complete Conversion

• f Full

250,000 ft2 (Quadrant 1)

• f Delta 3

April 2018

Commence Commercial- Scale Production

✓ ✓

Obtain Selling License

✓

May 2018 Summer 2018

✓

Delta 3 Greenhouse: 17 Individual Flower Rooms

Configured for continuous weekly harvesting year round

16

Meticulous attention to the growing environment and systems, processing areas and production ramp up Growing system with automation proven in different crops to provide optimal efficiencies Industry-leading HVAC systems based on extensive climate management experience, with technically advanced data systems High-tech light deprivation/supplementation systems Nursery capable of supplying Delta 3 facility plus other facilities and producers

Nearing Full Commercial Production at Delta 3

17

775,000 sq. ft. 1.1 M ft2 550,000 sq. ft. 225,000 sq. ft.

August 2018 December 2018

2018

7,000 – 8,000 kg

2019

46,000 – 52,000 kg

2020

75,000 kg

Targeted Annual Production 1.1 M sq. ft.1

• 1. Conversion of 1.1 M sq. ft. completed. Production in Quadrant 1 temporarily suspended

from October to March for installation of supplemental lighting.

Targeted Production Area Ramp Up

Significant Expansion Opportunity

Pure Sunfarms has options for Delta 1 and Delta 2

18 Estimated Existing Industry Capacity:

~395,000 kg

Estimated Demand by 2021:

~734,000 kg1

• 1. “Legalized Cannabis: Fiscal Considerations” – Office of the Parliamentary Budget Officer, Government of Canada (2016)

.

D3: 1.1 M ft2 (24 MW secured) D2: 1.1 M ft2 (24 MW secured) D1: 2.4 M ft2

Pure Sunfarms has options for Delta 1 and Delta 2 to potentially address ~1/2 of overall market

300,000 329,250 290,000 260,500 157,000 113,000 108,000 99,000 70,100 57,000 45,000 Pure Sunfarms

Positioned to be a Leading Producer in Canada

Pure Sunfarms will be a large-scale producer of cannabis

Existing and Announced Future Capacity of Top 10 Public LPs by Funded Future Capacity

At Sept. 21/18. Market cap fully diluted. Source: Research analyst estimates/company filings based on last reported capacity and disclosed growth strategy.

Market Cap (C$M) n/a $33,970 $12,041 $5,102 $2,838 $994 $1,933 $1,449 $871 $11,070 $3,440 Capacity Growth 3x 7x 8x 157x 3x 4x 4x 117x 7x 7x

Existing Capacity (kg) Future Capacity (kg)

Existing LPs will attempt to meet demand through greenfield development requiring hundreds of millions of dollars Pure Sunfarms can quickly become one of the largest producers of cannabis in Canada

19

(VFF JV)

Compelling Value Proposition

PLUS produce business Comparative Value: 2020 Planned Production Capacity

37,500 kg

50% of Delta 3 production

~$374 M ~$10.00 ~$48.20

average

~$7,370 M

average

~153,000 kg

average

• 1. Fully diluted. At Sept. 21, 2018.
• 2. WEED, ACB, APH, HEXO, TRST, OGI, TLRY, CRON, TGOD, XLY.

Planned Production Market Cap1 Market Cap/Gram of Planned Production

Top 10 LPs (planned 2020 produciton2)

20

150,000 kg

50% of production at all three facilities

~$374 M ~$2.50

Creating One of Canada’s Largest Vertically Integrated Products Companies

21

Appointed Mandesh Dosanjh as Pure Sunfarms’ President and CEO

• LCBO: SVP, Supply Chain and Wholesale
• Developed and managed LCBO’s supply chain and

wholesale strategy as it prepared for legalization

• f adult-use cannabis

Will aggressively pursue product development, branding and marketing strategies

Positioned to Lead a Federally Legalized US Cannabis Industry

22

Potential US Cannabis Opportunity is a Free Option Will only pursue if and when cannabis is federally legalized in US

4 facilities - 5.5M sq. ft. – Existing, state-of-the-art, mega-scale produce

• perations in best growing climate in US (5,000 ft. elev., most sunlight in US)

NOT PART of Canadian JV 20+ years of operating history (600 employees) Can be rapidly converted to be largest US cannabis producer Will benefit from cannabis experience in Canada

Investment Proposition: A Significantly De-Risked Cannabis Opportunity

Positioned to be one of the largest producers in Canada with the goal and capability to be the low-cost producer

23

Use of existing greenhouse facilities for cannabis production provides advantage of speed to market to address near-term supply shortfall Positioned to be a Leading Vertically Integrated Supplier Potential US cannabis opportunity is a free option Key JV Metrics Annual Output: Delta 3 Facility: 75,000 kg All Facilities: 300,000 kg Production Cost: <$1.00/gram EBITDA Margin: >50% 50% Ownership of Pure Sunfarms 30 –year track record of success as a large-scale, low- cost grower of high-value agricultural products

September 2017 Investor Presentation

September 2018