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AGRIMARINE HOLDINGS INC.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

Three and six months ended September 30, 2014 and 2013

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MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying unaudited condensed consolidated interim financial statements of AgriMarine Holdings Inc. (the "Company") are the responsibility of management and the Board of Directors of the Company. These unaudited condensed consolidated interim financial statements have been prepared by management, on behalf of the Board of Directors, in accordance with the accounting policies disclosed in the notes to the unaudited condensed consolidated interim financial statements. Where necessary, management has made informed judgments and estimates in accounting for transactions which were not complete at the date of the statement of financial position. In the opinion of management, these unaudited condensed consolidated interim financial statements have been prepared within acceptable limits of materiality and are in accordance with International Accounting Standard 34 – Interim Financial Reporting (“IAS 34”). Management has established processes to provide it with sufficient knowledge to support management representations that it has exercised reasonable diligence that (i) these unaudited condensed consolidated interim financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of, and for the periods presented by, these unaudited condensed consolidated interim financial statements; and (ii) these unaudited condensed consolidated interim financial statements fairly present in all material respects the financial position, financial performance and cash flows of the Company, as of the date hereof and for the periods presented by these unaudited condensed consolidated interim financial statements. The Board of Directors is responsible for reviewing and approving the unaudited condensed consolidated interim financial statements together with other financial information of the Company and for ensuring that management fulfills its financial reporting responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the financial reporting process and the unaudited condensed consolidated interim financial statements together with other financial information of the Company. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the unaudited condensed consolidated interim financial statements together with other financial information of the Company for issuance to the shareholders. Management recognizes its responsibility for conducting the Company’s affairs in compliance with established financial reporting standards and applicable laws and regulations, and for maintaining proper standards of conduct for its activities. Sean Wilton Orest Zajcew Chief Executive Officer Chief Financial Officer Vancouver, Canada November 10, 2014

NOTICE TO READER

The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of management of the Company. The unaudited condensed consolidated interim financial statements for the three and six months ended September 30, 2014 and 2013 have not been reviewed by the Company’s auditors.

AGRIMARINE HOLDINGS INC. UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Three and six months ended September 30, 2014 and 2013

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TABLE OF CONTENTS

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION.............................................................................. 3 CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS ......................................................... 4 CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS........................................................................................... 5 CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY .............................................................................. 6 NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS ...................................................................... 7-18

AGRIMARINE HOLDINGS INC. UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION (In thousands of Canadian dollars)

The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.

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Note September 30, 2014 March 31, 2014

(note 20)

$ $

ASSETS

Current assets

Cash 942 4,640

Prepaid expenses 1,098 239

Accounts receivable and other receivables 536 466

Inventories 4 817 865

Biological assets 5 4,734 4,798

8,127 11,008

Long-term assets

Restricted cash 49 10

Property and equipment 6 15,264 11,632

Intangible asset 7 1,100 1,100

16,413 12,742

TOTAL ASSETS 24,540 23,750

LIABILITIES

Current liabilities

Accounts payable and accrued liabilities 3,663 3,994

Customer advance 10 11

Loans - current portion 9 10,753 25,801

14,426 29,806

Long term liabilities

Loans - long-term portion 9 62 73

Deferred tax liability 726 1,175

788 1,248

TOTAL LIABILITIES 15,214 31,054

EQUITY

Share capital 14 45,620 24,857

Reserves 4,013 4,013

Deficit (40,941) (36,749)

Accumulated other comprehensive income 634 575

9,326 (7,304)

TOTAL LIABILITIES AND EQUITY 24,540 23,750

Going concern 1

Commitments 16

Contingencies 8

Subsequent events 19

Approved by the Board of Directors and authorized for issue on November 10, 2014.

“Sean Wilton" ”Orest Zajcew“

Director Director

AGRIMARINE HOLDINGS INC. UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (In thousands of Canadian dollars, except share and per share amounts)


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Note 2014 2013 2014 2013

$ $ $ $

Revenue 1,626 71 3,394 134

Cost of goods sold 11 (2,748) (141) (4,370) (317)

Gross loss (1,122) (70) (976) (183)

Research and development expenses 12 (42) (59) (155) (149)

Selling, general and administrative expenses 13 (1,245) (726) (2,449) (1,369)

Fair value adjustment on biological assets 5(a) (427) (82) (266) (193)

Finance costs (226) (408) (887) (688)

Foreign exchange gain (loss) 167 (33) 83 (41)

Other income - 3 9 18

Loss before income taxes (2,895) (1,375) (4,641) (2,605)

Deferred tax recovery 449 - 449 -

Net loss (2,446) (1,375) (4,192) (2,605)

Other comprehensive income (loss)

Exchange differences on translating foreign operations 143 (67) 59 90 Comprehensive loss (2,303) (1,442) (4,133) (2,515)

Net loss per share - basic and diluted (0.02) (0.19) (0.07) (0.36)

Weighted average number of shares - basic and diluted (in

thousands) (1) 108,594 7,217 58,182 7,217

Six months ended September 30,

(1) All per share amounts have been adjusted to reflect the 15-to-1 share consolidation that occurred during the year ended March 31, 2014

(see note 14(a(ii i))).

Three months ended September

AGRIMARINE HOLDINGS INC. UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (In thousands of Canadian dollars)


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2014 2013

(note 20)

$ $

Cash flows from operating activities

Net loss (4,192) (2,605)

Items not involving cash:

Interest expenses 885 -

Deferred income tax recovery (449) -

Depreciation 440 169

Fair value adjustment on biological assets 266 193

Biological assets write-down 1,162 -

Inventory write-down (recovery) 74 3

Unrealized foreign exchange loss (gain) (66) 7

(1,880) (2,233)

Changes in operating assets and liabilities:

Prepaid expenses (854) 33

Accounts receivable and other receivables (68) (219)

Inventories (22) (33)

Biological assets (1,347) (271)

Accounts payable and accrued liabilities 743 (820)

Customer advance - (376)

Provision for tank disposal - (59)

Cash used in operating activities (3,428) (3,978)

Cash flows from investing activities

Restricted cash (39) -

Purchase of property and equipment (3,691) (1,755)

Cash used in investing activities (3,730) (1,755)

Cash flows from financing activities

Proceeds from loans 3,480 16,700

Repayment of loans (10) -

Repayment of related party loans - (92)

Interest paid (2) -

Cash provided by (used in) financing activities 3,468 16,608

Effect of exchange rate changes on cash (8) (10)

Net increase (decrease) in cash (3,698) 10,865

Cash, beginning of period 4,640 484

Cash, end of period 942 11,349

Six months ended September 30,

AGRIMARINE HOLDINGS INC. UNAUDITED CONDENSED CONSOLIDATED IINTERIM STATEMENTS OF CHANGE IN EQUITY (In thousands of Canadian dollars, except share amounts)


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Warrants Options

Contributed

surplus

$ $ $ $ $ $ $

Balance as at March 31, 2013 7,217 24,857 1,177 1,958 878 (31,179) 299 (2,010)

Expired warrants - - (1,177) - 1,177 - - -

Other comprehensive income

- foreign currency translation - - - - - - 90 90

Net loss - - - - - (2,605) - (2,605)

Balance as at September 30, 2013 7,217 24,857 - 1,958 2,055 (33,784) 389 (4,525)

Balance as at March 31, 2014 7,217 24,857 - 483 3,530 (36,749) 575 (7,304)

Conversion of convertible debt 102,491 20,763 - - - - - 20,763

Expired options - - - (13) 13 - - -

Other comprehensive loss

- foreign currency translation - - - - - - 59 59

Net loss - - - - - (4,192) - (4,192)

Balance as at September 30, 2014 109,708 45,620 - 470 3,543 (40,941) 634 9,326

(1) The number of issued shares have been adjusted to reflect the 15-to-1 share consolidation that occurred during the year ended March 31,

2014 (see note 14(a(iii))).

Deficit

Number of

issued shares

(In thousands) (1)

Share

capital

Reserves Accumulated

other

comprehensive

income Total

AGRIMARINE HOLDINGS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the three and six months ended September 30, 2014 and 2013 (Tabular amounts in thousands of Canadian dollars, except for per share amounts)

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1. CORPORATE INFORMATION AND GOING CONCERN

AgriMarine Holdings Inc. (the “Company”) incorporated under the laws of the Province of British Columbia is headquartered at 1401-1130 West Pender Street, Vancouver, British Columbia, Canada. The Company was listed on the TSX Venture Exchange (“TSXV”) up to April 25, 2014 and since then listed on the Canadian Securities Exchange (“CSE”). Dundee Corporation has control over the Company through equity ownership and the conversion features attached to the loans granted to the Company through Dundee Corporation’s wholly owned subsidiary Dundee Agriculture Corporation (“DAC”). On July 2, 2014, DAC exercised its common share conversion rights with respect to the bridge loan and convertible notes in the amount of $18,529,000 plus accrued interest of $2,234,000 (notes 9 and 14a(ii)). In December 2013, the Company acquired all of the issued and outstanding shares of West Coast Fishculture (Lois Lake) Ltd., a steelhead trout producer operating in Powell River, British Columbia. The Company’s primary business activity is farming steelhead trout in Powell River, Canada through its wholly owned subsidiary West Coast Fishculture (Lois Lake) Ltd. and Pacific salmon in Benxi, Peoples Republic of China (“China”) through its wholly owned subsidiary Benxi AgriMarine Industries Inc. (“Benxi AgriMarine”). These condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that the Company will be able to continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. For the six months ended September 30, 2014, the Company incurred a net loss of $4,192,000. As at September 30, 2014, the Company had negative working capital of $6,299,000. Additionally, the Company was in default on its secured loan (the “Secured Loan”, with $2,250,000 in principal (note 9) owing to the Company’s controlling shareholder, DAC. These conditions indicate existence of a material uncertainty that casts significant doubt about the ability of the Company to meet its obligations as they become due and, accordingly, its ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on the continued financial support of DAC and achieving profitable operations from its aquaculture operations in Powell River and Benxi, neither of which can be assured at this time. These condensed consolidated interim financial statements do not reflect the adjustments to the carrying values of assets and liabilities, the reported revenues and expenses, and the balance sheet classifications that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of Compliance These unaudited condensed consolidated interim financial statements of the Company as at and for the three and six months ended September 30, 2014 (“September 2014 Interim Consolidated Financial Statements”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), and with interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”) which the Canadian Accounting Standards Board has approved for incorporation into Part 1 of the CPA Canada Handbook – Accounting, as applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”. The September 2014 Interim Consolidated Financial Statements should be read in conjunction with the Company’s audited consolidated financial statements as at and for the year ended March 31, 2014, which were prepared in accordance with IFRS as applicable for annual financial statements. The September 2014 Interim Consolidated Financial Statements were authorized for issuance by the Board of Directors on November 10, 2014. The September 2014 Interim Consolidated Financial Statements follow the same accounting principles and methods of application as those disclosed in note 2 to the 2014 Audited Consolidated Financial Statements, except as described in note 2(d) below. (b) Basis of Consolidation The September 2014 Interim Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries outlined below. All material intercompany balances and transactions have been eliminated in preparing these condensed consolidated interim financial statements.


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Details of the Company’s subsidiaries at September 30, 2014 are as follows:

On September 5, 2014, the Company voluntarily dissolved West Coast Fishculture Ltd. This subsidiary was no longer carrying out business and at the time of dissolution, had no assets or liabilities. (c) Significant Accounting Estimate and Judgements The preparation of the September 2014 Interim Consolidated Financial Statements requires management to make judgments in applying its accounting policies and estimates and assumptions about the future. These judgments, estimates and assumptions affect the Company’s reported amounts of assets, liabilities, revenues and other items in net earnings, and the related disclosure of contingent assets and liabilities, if any. The Company evaluates its estimates on an ongoing basis. Such estimates are based on historical experience and on various other assumptions that the Company believes are reasonable under the circumstances, and these estimates form the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and other items in net earnings that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no significant changes in accounting judgments, estimates and assumptions made by the Company in the preparation of the September 2014 Interim Consolidated Financial Statements from those judgments, estimates and assumptions disclosed in note 3 to the audited consolidated financial statements as at and for the year ended March 31, 2014. (d) Adoption of New Accounting Standards IAS 32 Financial Instruments: Presentation (“IAS 32”) - IAS 32 was amended to clarify requirements for offsetting financial assets and financial liabilities on the statement of financial position. IAS 36 Impairment of Assets (“IAS 36”) - the IASB made amendments to the disclosure requirements of IAS 36, which require that the Company discloses, if appropriate, the recoverable amount of an asset or cash generating unit, and the basis for the determination of fair value less costs of disposal, when an impairment loss is recognized or when an impairment loss is subsequently reversed. Effective April 1, 2014, the Company adopted all of the above standards. The adoption of these standards did not have a material impact on the Company’s condensed consolidated interim financial statements.

3. FUTURE IFRS STANDARDS AND INTERPETATIONS ISSUED BUT NOT YET EFFECTIVE

Certain pronouncements were issued by the IASB or the IFRS Interpretations Committee (“IFRS IC”) that are mandatory for accounting periods after March 31, 2015 or later periods. Many that are not applicable have been excluded from the list below. The following standards and interpretations have not yet been adopted and are being evaluated to determine their impact on the Company. IFRS 9 Financial Instruments (“IFRS 9”) - In November 2009, the IASB issued IFRS 9, replacing IAS 39, “Financial Instruments: Recognition and Measurement” (“IAS 39”). The first part of IFRS 9 was issued in November 2009 and addresses classification and measurement of financial assets. IFRS 9 has two measurement categories for financial assets: amortized cost and fair value, and replaces the multiple category and measurement models in IAS 39. The approach in IFRS 9 focuses on how an entity manages its financial instruments in the context of its business model, as well as the contractual cash flow characteristics of the financial assets.

Subsidiary Place of Incorporation Interest % Principal Activity

AgriMarine Industries Inc. ("AgriMarine Industries") British Columbia, Canada 100% Holding company

West Coast Fishculture (Lois Lake) Ltd. ("WCFC") British Columbia, Canada 100%Fish acquaculture production

and sales

AgriMarine Technologies Inc. ("AgriMarine Technologies") British Columbia, Canada 100% Research and development

AgriMarine (Asia) Limited ("AgriAsia") Hong Kong, China 100% Inactive

Benxi AgriMarine Industries Inc. Liaoning, China 100%Fish aquaculture production

and sales

AgriMarine Aquaculture Technologies (Beijing) Co. Ltd.

("Beijing AgriMarine")Beijing, China 100% Inactive


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All equity instruments are measured at fair value. A debt instrument is at amortized cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. Otherwise it is at fair value through profit or loss. Financial liabilities are measured at either at fair value through profit and loss or amortized cost. After 2009, additional amendments to IFRS 9 include a substantially reformed approach to hedge accounting and requirements to recognize gains or losses that relate to the effect of the Company’s own credit risk in measuring liabilities elected to be measured at fair value outside of profit or loss. In July 2014, the IASB issued final amendments to IFRS 9. These amendments to IFRS 9 introduce a single, forward-looking ‘expected loss’ impairment model for financial assets which will require more timely recognition of expected credit losses, and a fair value through other comprehensive income category for financial assets that are debt instruments. IFRS 9 is effective for annual periods beginning on or after January 1, 2018 with early adoption permitted. IFRS 15 Revenue from Contracts with Customers (“IFRS 15”) - In May 2014, the IASB issued IFRS 15, which supersedes IAS 18, “Revenue”, IAS 11 “Construction Contracts” and other interpretive guidance associated with revenue recognition. IFRS 15 provides a single model to determine how and when an entity should recognize revenue, requiring entities to provide more informative, relevant disclosures in respect of its revenue recognition criteria. IFRS 15 is to be applied prospectively and is effective for annual periods beginning on or after January 1, 2017, with earlier application permitted. IAS 16 Property, Plant and Equipment (“IAS 16”) and IAS 38 Intangible Assets (“IAS 38”) - In May 2014, the IASB issued amendments to IAS 16 and IAS 38 to clarify acceptable methods of depreciation and amortization. The amended IAS 16 eliminates the use of a revenue-based depreciation method for items of property, plant and equipment. Similarly, amendments to IAS 38 eliminate the use of a revenue-based amortization model for intangible assets except in certain specific circumstances. The amendments are to be applied prospectively and are effective for annual periods beginning on or after January 1, 2016, with earlier application permitted. IAS 16 and IAS 41 Agriculture (“IAS 41”) - In June 2014, the IASB issued amendments to IAS 16 and IAS 41 which require biological assets that meet the definition of a bearer plant to be accounted for as property, plant and equipment in accordance with IAS 16. The amendments are to be applied prospectively and are effective for annual periods beginning on or after January 1, 2016, with earlier application permitted.

4. INVENTORIES

Raw materials include feed, packaging materials and other materials and supplies. Finished goods are comprised of frozen fish and fertilizer.

5. BIOLOGICAL ASSETS

(a) Reconciliation of Changes in Carrying Amount of Biological Assets at Fair Value

During the six months ended September 30, 2014, the Company wrote down the biological assets by $1,162,000 largely due to extraordinary mortalities of steelhead trout at Lois Lake caused by the unusually high surface temperatures in the lake over the summer.

September 30, March 31, 2014

$ $

Raw materials 611 586

Finished goods 206 279

817 865

$

Carrying amount as at March 31, 2014 4,798

Increase due to production 3,855

Fair value adjustment on biological assets (266)

Decrease due to harvest (2,508)

Write-down of fish (1,162)

Currency translation differences 17

Carrying amount as at September 30, 2014 4,734


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(b) Biomass Status

Fish with an approximate weight at or above 1.65 kilograms (“kg”) are considered harvestable. Fish with an approximate weight below 1.65 kg are considered non-harvestable.

During the six months ended September 30, 2014, the Company harvested 468,000 kg (gross weight) of fish with a fair value less costs to sell of $3,175,000 (2013 – 33,000 kg, $123,000) at the time of harvest. 24,000 kg (net weight) of harvested fish was transferred to frozen fish inventory at a fair value less costs to sell of $21,000 (2013 – 11,000 kg, $9,000) at the time of harvest.

6. PROPERTY AND EQUIPMENT

During the three and six months ended September 30, 2014, the Company capitalized borrowing costs of $177,000 and $275,000, respectively, at an interest rate of 12.68% in Construction in Progress (2013 - $nil).

7. INTANGIBLE ASSET

As a part of the acquisition of West Coast Fishculture (Lois Lake) Ltd. (“WCFC”) on December 6, 2013, the Company acquired one farming and one hatchery licence (the “Licenses”) with an estimated fair value of $1,100,000, which was determined using the Greenfield method. As at September 30, 2014, the carrying amount of the licences was $1,100,000 (March 31, 2014 - $1,100,000).

Amounts in thousand kg September 30, 2014 March 31, 2014

Non-harvestable 492 697

Harvestable 251 4

743 701

Land and

Land Use

Right

Building &

Building

Improvement

Production

Equipment &

Tank Mould

Tank Rearing

System

Other

Equipment &

Vehicles

Construction

in Progress Total

$ $ $ $ $ $ $

Cost

As at March 31, 2014 1,298 597 3,239 1,856 773 5,272 13,035

Additions - 133 230 - 85 3,516 3,964

Disposal - - - - - - -

Reclassification - - (85) - 85 - -

Write-off - - - - - - -

Foreign currency translation 30 8 34 50 10 3 135

As at September 30, 2014 1,328 738 3,418 1,906 953 8,791 17,134

Accumulated depreciation

As at March 31, 2014 (74) (139) (679) (229) (282) - (1,403)

Additions (11) (22) (264) (38) (105) - (440)

Disposal - - - - - - -

Reclassification - - - - - - -

Write-off - - - - - - -

Foreign currency translation (2) (2) (11) (8) (4) - (27)

As at September 30, 2014 (87) (163) (954) (275) (391) - (1,870)

Net book value as at:

March 31, 2014 1,224 458 2,560 1,627 491 5,272 11,632

September 30, 2014 1,241 575 2,464 1,631 562 8,791 15,264


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8. CONTINGENCIES

(a) MBSAI Claim

During the year ended March 31, 2014, the Company received a demand letter from MBSAI for approximately $2,900,000, in which MBSAI alleged that the Company had failed to perform certain obligations under the Design Build Stipulated Price Contracts between the two parties. The Company replied to MBSAI denying these alleged failures to perform and rejecting all claims of amounts owing. Subsequent to September 30, 2014, the demand letter was withdrawn by MBSAI (note 19). (b) Wrongful Dismissal Claim

During the year ended March 31, 2014, the Company was served a Notice of Civil Claim which was filed in the Supreme Court of British Columbia by a former officer of the Company alleging, among other things, wrongful dismissal, and seeking relief of approximately $300,000. The Company believes the claim to be without merit and intends to vigorously defend against the claim. The Company has filed a defence and counterclaim alleging breach of contract and seeking dismissal of the plaintiff's claim and relief for general, special, aggravated and punitive damages. As of September 30, 2014, the final outcomes of the claim and the counterclaim were unknown.

9. LOANS

September 30, 2014 March 31, 2014

$ $

Current portion:

Secured Loan (a) 2,250 2,250

Bridge Loan (b) - 3,529

Convertible Notes (c) - 15,000

Short-term Loan (d) 8,480 5,000

WCFC loan (e) 23 22 10,753 25,801

Long-term portion:

WCFC loan (e) 62 73

(a) Secured Loan The Secured Loan bears interest at a rate of 10% per annum with an original maturity in December 2010. On November 28, 2010, the maturity date was extended to April 15, 2012. All assets of AgriMarine Industries are pledged as collateral. On January 14, 2013, the Secured Loan was acquired in full by DAC without any change to the original terms and conditions of the loan. On February 7, 2013, in connection with the issue of the Bridge Loan (refer to note 9(b) below) DAC acquired an option, at its sole and absolute discretion to convert all or any part of the Secured Loan into common shares of the Company, subject to applicable regulatory approval. The value of the conversion feature was estimated to be nil at initial recognition and has been classified as a financial liability. Therefore, the full amount of funds received was allocated to the loan amount. Given that DAC is a wholly-owned subsidiary of Dundee, which has control over the Company, the indebtedness is considered to be from a related party. The Secured Loan is in default as at the date of issuance of these consolidated financial statements, and the Company remains in negotiation with DAC on the terms and method of repayment.


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(b) Bridge Loan On February 7, 2013, a loan was advanced from DAC in the amount of $1,750,000 to AgriMarine Industries. The Bridge Loan bore interest at a rate of 12.68% per annum, was payable on demand, and secured by all of the assets of the Company. On June 14, 2013, the Company received an additional $1,700,000 advance and made certain amendments to the Bridge Loan. The amendments were evidenced by a restated promissory note in the principal amount of $3,529,000 (consisting of $1,750,000 principal amount on the Bridge Loan, $79,000 of accrued interest on the Bridge Loan and an additional advance of $1,700,000). The Bridge Loan, as amended, continued to bear interest at a rate of 12.68% per annum and was payable by the earlier of June 10, 2018 or at any time on demand. DAC held an option, at its sole and absolute discretion, to convert the principal balance of the Bridge Loan into common shares of the Company at any time at a price of $0.18 per share post-consolidation, subject to applicable regulatory approval. The value of the conversion feature was estimated to be nil at initial recognition. Therefore, the full amount of funds received was allocated to the loan amount. On July 2, 2014, the principal and accrued interest of the Bridge Loan were converted into the Company’s common shares (note

14).

(c) Convertible Notes The Company issued convertible notes to DAC in the principal amounts of $5,000,000 and $10,000,000 on April 22, 2013 and September 20, 2013, respectively. Each of the Convertible Notes was secured against all of the assets of the Company and of its subsidiaries and bore interest at a rate of 12.68% per annum. Subject to applicable regulatory approval, DAC could elect to convert the principal amount of the Convertible Notes into common shares of the Company at any time at a price of $0.225 and $0.23 per share respectively. As the Secured Loan was already in default based on the terms in the Convertible Notes agreement, the Convertible Notes were payable on demand. The value of the conversion feature was therefore estimated to be nil at initial recognition. Therefore, the full amount of funds received was allocated to the loan amount. On July 2, 2014, the principal and accrued interest of the Convertible Notes were converted into the Company’s common shares

(note 14).

(d) Short-term Loans

On February 13, July 25, and August 7, 2014, the Company received loans advanced from DAC in the amounts of $5,000,000, $500,000, and $2,980,000, respectively. The Loans bear interest at a rate of 12.68% per annum, are collateralized by all of the assets of the Company and its subsidiaries, and mature one year from the respective dates of issuance. (e) WCFC Loan The WCFC loan bears interest at a rate of 6.1% per annum, repayable in equal monthly installments of $2,000 and maturing on April 15, 2018. A mobile plant is pledged as collateral for the loan.

10. RELATED PARTY TRANSACTIONS

During the six months ended September 30, 2014, the Company had the following related party transactions: (a) Loans from Related Party As at September 30, 2014, the Company had $10,730,000 of loans payable to the controlling shareholder, DAC. Refer to notes 9(a)-(d) for further disclosure. (b) Advances from Directors of Benxi AgriMarine During the year ended March 31, 2013, Benxi AgriMarine received advances in the total amount of $205,000 (RMB1,257,000) from two directors of Benxi AgriMarine. As at September 30, 2014, $73,000 (RMB400,000) was payable to these directors (March 31, 2014 – $71,000, RMB400,000) and was included in accounts payable and accrued liabilities. These advances are unsecured, non-interest bearing, and repayable on demand.


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(c) Compensation of Key Management Personnel

Key management personnel include the Chief Executive Officer, the Chief Financial Officer, and the directors of the Company:

2014 2013 2014 2013

$ $ $ $ Salaries for key management personnel 78 78 156 156

Directors' fees 9 9 18 9

87 87 174 165

Six months ended September 30,Three months ended September 30,

(d) Consulting Fees

Consulting fees paid to a former director and officer of the Company during the three and six months ended September 30, 2014 were $nil (2013 - $nil, $50,000).

11. COST OF GOODS SOLD

2014 2013 2014 2013

$ $ $ $

Salary and employee benefits 431 14 649 41

Depreciation and amortization 103 30 163 75

Feed costs 643 75 1,373 161

Other production costs 335 22 949 37

Biological assets and inventory write-down 1,236 - 1,236 3

2,748 141 4,370 317

Three months ended September 30, Six months ended September 30,

12. RESEARCH AND DEVELOPMENT EXPENSES

2014 2013 2014 2013

$ $ $ $

Engineering costs - 13 - 37

Salaries and employee benefits 142 29 142 64

Rent and util ities - 2 - 2

Other overhead costs directly associated with R&D (100) 15 13 46

42 59 155 149


13. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

2014 2013 2014 2013

$ $ $ $

Sell ing expenses 144 1 302 2

Salary and employee benefits 310 316 940 570

Consulting fees 205 52 228 103

Depreciation 48 11 80 23

Rent and util ities 43 41 78 97

Legal and accounting fees 260 197 315 287

Regulatory fi l ing fees 10 37 23 93

Office and general expenses 103 24 198 60

Travel 61 40 129 110

Business development 49 - 109 -

Other 12 7 47 24

1,245 726 2,449 1,369

Six months ended September 30,Three months ended September 30,


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14. SHARE CAPITAL

(a) Common Shares (i) Authorized The Company is authorized to issue an unlimited number of common shares at no par value and an unlimited number of preferred shares at no par value. (ii) Issuance of common shares The Company had 109,707,900 outstanding common shares in the amount of $45,620,000 as at September 30, 2014. The Company issued 102,490,753 common shares to DAC pursuant to the conversion of the Bridge Loan and Convertible Notes during the six months ended September 30, 2014. (iii) Share consolidation During the year ended March 31, 2014, the Company completed a share consolidation of the Company’s issued and outstanding common shares on the basis of one (1) new common share for fifteen (15) common shares issued and outstanding. As required under IFRS, all common shares, options and loss per share amounts have been restated to give retrospective effect to the share consolidation. (b) Warrants As at September 30, 2014, all share purchase warrants have expired. The following table summarizes the changes in the Company’s share purchase warrants outstanding:

Number of Warrants

(in thousands)Weighted Average Exercise

Price ($)

Balance at March 31, 2013 2,006 5.57

Expired (786) 4.59

Balance at September 30, 2013 1,220 5.57

Expired (784) 4.55

Balance at March 31, 2014 436 7.50

Expired (436) 7.50

Balance at September 30, 2014 - 0.00 (c) Stock Options The Company has a 10% rolling share option plan under which the number of shares reserved for issuance on exercise of options may not exceed 10% of the current issued and outstanding common shares of the Company. The Company may grant options to directors, officers, employees, consultants or other personnel of the Company. Options are non-transferrable, have a maximum term of ten years and terminate in ninety days (or such other time, not to exceed one year, as determined by the Board) following cessation of the optionee’s position with the Company. If the cessation of office, directorship, or technical consulting arrangement was by reason of death, the option may be exercised within a maximum period of one year after such death, subject to the expiry date of such option. For the three and six months ended September 30, 2014 and 2013, no stock-based compensation expense was incurred.


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(i) As at September 30, 2014 the Company had the following outstanding and exercisable stock options:

Expiry Date

Number of Options

Outstanding

(in thousands)

Number of Options

Exercisable

(in thousands) Exercise Price ($)

Apr-15 2 2 4.50

Sep-15 15 15 3.45

Oct-15 17 17 4.50

Feb-16 8 8 7.95

Sep-16 41 41 4.50

Jun-17 5 5 3.00

88 88 4.55

(ii) The following table summarizes the changes in stock options outstanding for the six months ended September 30, 2014 and

2013:

15. SEGMENT INFORMATION

The Company has two business units: Aquaculture Technology and Fish Farming. The Aquaculture Technology unit currently focuses on technology design and development and providing engineering and consulting services to the aquaculture industry. The Fish Farming unit conducts fish production and sales, and it includes farming operations in Canada and China. The segment information is reported to and evaluated by management on a regular basis and is used by management in making operating decisions. There are no comparatives for the segment operating results and segment assets and liabilities as the Company previously reported as a single-segment entity. (a) Segment operating results

Aquaculture

Technology Corporate

Six months ended September 30, 2014 Canada Canada China Canada

$ $ $ $

Revenue - 3,250 144 - 3,394

Cost of goods sold - (4,074) (296) - (4,370)

Gross profit (loss) - (824) (152) - (976)

Research and development expenses (155) - - - (155)

Sell ing, general and administrative expenses (617) (651) (171) (1,010) (2,449)

Fair value adjustment on biological assets - (72) (194) - (266)

Finance costs (157) (2) - (728) (887)

Foreign exchange gain (loss) (5) (1) 87 2 83

Other income (expenses) - - 9 - 9

Net loss (934) (1,550) (421) (1,736) (4,641)

Fish Farming

Total

Number of Options

(in thousands)

Weighted Average

Exercise Price ($)


Balance at September 30, 2013 165 4.05

Forfeited (31) 3.95


Expired (40) 3.00

Forfeited (6) 4.50

Balance at September 30, 2014 88 4.55


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Aquaculture


Three months ended September 30, 2014 Canada Canada China Canada

$ $ $ $

Revenue - 1,532 94 - 1,626

Cost of goods sold - (2,526) (222) - (2,748)

Gross profit (loss) - (994) (128) - (1,122)

Research and development expenses (42) - - - (42)

Sell ing, general and administrative expenses (324) (300) (92) (529) (1,245)

Fair value adjustment on biological assets - (272) (155) - (427)

Finance costs (81) (1) - (144) (226)

Foreign exchange gain - - 165 2 167

Net loss (447) (573) (82) (671) (2,895)

Fish Farming

Total

(b) Segment assets and liabilities

Aquaculture


As at September 30, 2014 Canada Canada China Canada

$ $ $ $

Biological assets - 4,182 552 - 4,734

Other current assets 1,153 1,221 483 536 3,393

Long-term assets 9,246 3,029 4,064 74 16,413

Total assets 10,399 8,432 5,099 610 24,540

Total l iabilities (3,662) (2,154) (98) (9,300) (15,214)

Total

Fish Farming

(c) Segment revenue by geographic location

2014 2013 2014 2013

$ $ $ $

Revenue from external customers

Canada 1,504 - 3,218 -

United States 28 - 32 -

China 94 71 144 134

1,626 71 3,394 134


16. COMMITMENTS

The Company has operating leases for its offices and office equipment in Vancouver and Powell River, Canada and in Benxi, China, which expire in various years up to 2028. Future minimum lease payments under non-cancellable operating leases are as follows:

17. FINANCIAL INSTRUMENTS AND RISK

(a) Fair Value of Financial Instruments IFRS 13, Fair Value Measurement, established a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 - inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).


$ $

Less than 1 year 130 80

1 to 5 years 338 127

More than 5 years 345 98

813 305


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The Company’s financial instruments include cash, restricted cash, accounts receivable and other receivables, due from related parties, accounts payable and accrued liabilities, loans and due to related parties. The carrying value of cash, restricted cash, accounts receivable and other receivables and due from related parties approximates their fair value due to their short-term nature. The fair value of accounts payable and accrued liabilities, due to related parties and loans cannot be determined at this time due to the difficult financial situation of the Company. The fair values of the conversion features that are attached to the Company’s loans are determined using the Black-Scholes model. (b) Risk Exposure and Management

The Company is exposed to various risks associated with its financial instruments. These risks include: credit risk, foreign currency risk, interest rate risk, market risk and liquidity risk. (i) Credit risk

Credit risk is the risk of financial loss caused by a counterparty by failing to discharge an obligation. Financial instruments that are subject to credit risk include cash, restricted cash, and accounts receivable and other receivables. The maximum exposure to credit risk is equal to the carrying value of the financial assets. Management mitigates this risk by placing cash in financial institutions with no publicly known credit issues. The majority of the Company’s sales are made through one broker who takes on the credit risk related to the end-customers. The Company routinely assesses the financial strength of this broker. As a result, the Company believes that its accounts receivable credit risk exposure is limited and has not experienced significant write-downs in its accounts receivable balances. Management believes the risk associated with accounts receivable and other receivables is not significant, as the Company receives advance payments on the sales of fish, and the remaining balance is mainly related to the Goods and Services Tax (“GST”) receivable and the Scientific Research and Experimental Development (“SR&ED”) receivable in Canada. (ii) Foreign currency risk

The Company operates in Canada and China. The functional currency of the parent company is the Canadian dollar. The assets, liabilities, revenues and expenses of Chinese operations are denominated in RMB, which is not a freely convertible currency. The Company has sales and purchase contracts denominated in US dollars (“USD”). The Company is exposed to foreign exchange risks arising from the fluctuation of exchange rates between foreign currencies and the Canadian dollar. The Company does not hedge its exposure to currency fluctuation. As at September 30, 2014 and March 31, 2014, the Company is exposed to currency risk through fluctuations in the foreign exchange rate with respect to the following financial assets and liabilities, excluding intercompany balances:


$ $

Cash 132 735

Accounts receivable and other receivables 75 53

Accounts payable and accrued liabil ities (98) (72)

Net exposure 109 716


$ $

Cash 114 100

Accounts receivable - 12

Accounts payable (271) (1)

Net exposure (157) 111

Financial instruments denominated in RMB

Financial instruments denominated in USD

Based on the above net exposure at September 30, 2014, and assuming all other variables remain constant, a 10% depreciation or appreciation of the Canadian dollar against RMB would result in a change of $11,000 in the Company’s other comprehensive income (loss) (March 31, 2014 – $72,000). A 10% depreciation or appreciation of the Canadian dollar against USD would result in a change of $16,000 in the Company’s other comprehensive income (loss) (March 31, 2014 – $11,000).


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(iii) 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. Interest rate risk arises from interest bearing financial liabilities of the Company. The Company is not exposed to interest rate risk, as the Company currently only has fixed interest rate debt instruments. (iv) Liquidity risk

Liquidity risk is the risk that the Company is not able to meet its financial obligations as they become due. The Company’s is financed mainly through borrowings under existing credit facilities, issuance of promissory notes, convertible debentures and common shares. The Company establishes budget and cash flow projections and manages liquidity risk by continuously monitoring actual cash flows against its projections to ensure it has the necessary funds to fulfill its obligations. As at September 30, 2014, the Company had a cash balance of $942,000 (March 31, 2014 - $4,640,000) to settle current liabilities of $14,426,000 (March 31, 2014 - $29,806,000). Refer to note 1 for further disclosure.

18. 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 managing the capital generated through operation and external fund raising, optimizing the use of lower cost capital and raising share capital when required to fund growth initiatives. There were no changes in the Company’s approach to its capital management during the six months ended September 30, 2014. The Company’s capital consists of debt (including loans) and equity (including share capital, reserves and deficit):


$ $

Loans 10,815 25,874

Share capital 45,620 24,857

Reserves 4,013 4,013

Deficit (40,941) (36,749)

19,507 17,995 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.

19. SUBSEQUENT EVENTS

(a) Credit Facility

Subsequent to September 30, 2014, the Company entered into an agreement for a draw down credit facility from DAC in the amount of up to $4,359,000 (the “Facility”). Funds drawn will bear interest at a rate of 12.68% per annum calculated pro rata as to the date of such advance. The Facility will mature one year from the date of issue and is secured by all of the assets of the Company and its subsidiaries. No finder’s fees or other consideration were paid in connection with the Facility. As at the date of issuance of the September 2014 Interim Consolidated Financial Statements, $3,000,000 has been drawn down.

(b) Withdrawal of MBSAI Demand Letter

Subsequent to September 30, 2014, MBSAI withdrew its demand letter in the amount of $2,900,000, as originally announced on July 29, 2013.

20. COMPARATIVE FIGURES

Certain figures of the prior period have been reclassified to conform to the current period consolidated financial statements presentation.

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