What changed in this filing

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Item 1. Financial Statements

2024-08-08 compared with 2024-05-08 · 147 added, 66 removed, 279 unchanged (43% of the section changed)

3 unchanged sentences

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

March 31, 2024

June 30, 2024

December 31, 2023

3 unchanged sentences

Trade receivables

Income tax receivable

Other receivables

22 unchanged sentences

Total liabilities

Commitments and contingencies

MEZZANINE EQUITY

2 unchanged sentences

Common stock, no par value per share - unlimited shares authorized;

110,248,929 shares issued and outstanding at March 31, 2024 and December 31, 2023.

111,727,953 shares issued and outstanding at June 30, 2024 and 110,248,929 shares issued and outstanding at December 31, 2023.

Additional paid in capital

10 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Cost of sales

2 unchanged sentences

Interest income

Foreign exchange loss, net

Other income (expense)

Foreign exchange (loss) gain

Goodwill and intangible asset impairments

Loss before taxes

1 unchanged sentence

Loss including non-controlling interests

net (income) loss attributable to non-controlling interests, net of tax

net loss (income) attributable to non-controlling interests, net of tax

Net loss attributable to Village Farms International, Inc.

6 unchanged sentences

Foreign currency translation adjustment

Comprehensive loss including non-controlling interests

Comprehensive (loss) gain including non-controlling interests

Comprehensive loss (income) attributable to non-controlling interests

Comprehensive loss attributable to Village Farms International, Inc.

Comprehensive (loss) gain attributable to Village Farms International, Inc.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

2 unchanged sentences

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

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Number of Common

4 unchanged sentences

Non-controlling Interest

Total Shareholders’ Equity

Total Shareholders’

Mezzanine Equity

Balance January 1, 2024

Balance April 1, 2024

Share-based compensation

Acquisition of Redeemable non-controlling interest

Cumulative translation adjustment

Net (loss) income

Balance at March 31, 2024

Three Months Ended March 31, 2023

Balance at June 30, 2024

Three Months Ended June 30, 2023

Number of Common

7 unchanged sentences

Mezzanine Equity

Balance at April 1, 2023

Share-based compensation

Cumulative translation adjustment

Net (loss) income

Balance at June 30, 2023

Six Months Ended June 30, 2024

Number of Common

Additional Paid in

Accumulated Other

Comprehensive Loss

Retained Earnings

Non-controlling Interest

Total Shareholders’ Equity

Mezzanine Equity

Balance at January 1, 2024

Share-based compensation

Acquisition of Redeemable non-controlling interest

Cumulative translation adjustment

Net (loss) income

Balance at June 30, 2024

Six Months Ended June 30, 2023

Number of Common

Additional Paid in

Accumulated Other

Comprehensive Income (Loss)

Retained Earnings

Non-controlling Interest

Total Shareholders’

Mezzanine Equity

Balance at January 1, 2023

Shares issued in public offering, net of issuance costs

3 unchanged sentences

Cumulative translation adjustment

Balance at March 31, 2023

Net (loss) income

Balance at June 30, 2023

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands of United States dollars)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows provided by (used in) operating activities:

4 unchanged sentences

Amortization of deferred charges

Net loss attributable to non-controlling interest

Net gain (loss) attributable to non-controlling interest

Interest expense

1 unchanged sentence

Unrealized foreign exchange loss

Loss on disposal of assets

Goodwill and intangible asset impairments

Non-cash lease expense

2 unchanged sentences

Changes in non-cash working capital items

Net cash used in operating activities

Cash flows used in investing activities:

Net cash provided by (used in) operating activities

Cash flows (used in) provided by investing activities:

Purchases of property, plant and equipment

Purchases of intangibles

Repayment of note receivable

Net cash used in investing activities

1 unchanged sentence

Repayments on borrowings

Acquisitions, net

Proceeds from issuance of common stock and warrants

14 unchanged sentences

(“VFF” and, together with its subsidiaries, the “Company”, “we”, “us”, or “our”) is a corporation existing under the Ontario Business Corporations Act.

VFF’s principal operating subsidiaries as of March 31, 2024 are Village Farms Canada Limited Partnership, Village Farms, L.P., Pure Sunfarms Corp.

(“Pure Sunfarms”), and Balanced Health Botanicals, LLC (“Balanced Health”) and VF Clean Energy, Inc.

VFF also owns a 70 % interest in Rose LifeScience Inc.

VFF’s principal operating subsidiaries as of June 30, 2024 were Village Farms Canada Limited Partnership, Village Farms, L.P., Pure Sunfarms Corp.

(“Pure Sunfarms”), Balanced Health Botanicals, LLC (“Balanced Health”) and VF Clean Energy, Inc.

VFF also owns an 80 % interest in Rose LifeScience Inc.

(“Rose”) and an 85 % interest in Leli Holland B.V.

3 unchanged sentences

Its wholly owned subsidiary, Pure Sunfarms, is a vertically integrated Licensed Producer ("LP") and supplier of cannabis products sold to customers throughout Canada and internationally.

The Company’s wholly owned subsidiary, Balanced Health, develops and sells high-quality, cannabidiol (“CBD”) based products including ingestible, edible and topical applications within the US.

The Company’s wholly owned subsidiary, Balanced Health, develops and sells high-quality, cannabidiol (“CBD”) based products including ingestible, edible and topical applications within the U.S.

Through its 80 % ownership of Rose, the Company has a substantial presence in the Province of Quebec as a cannabis supplier, producer and commercialization expert.

28 unchanged sentences

All other accounts are remeasured at current exchange rates.

Gains or losses from remeasurement are included in foreign exchange loss, net.

Currency gains or losses resulting from transactions executed in currencies other than the functional currency are included in foreign exchange gain (loss).

Gains or losses from remeasurement are included in foreign exchange (loss) gain.

Currency gains or losses resulting from transactions executed in currencies other than the functional currency are included in foreign exchange (loss) gain.

In these condensed consolidated financial statements, “$” means U.S.

4 unchanged sentences

General Economic, Regulatory and Market Conditions

The Company has experienced, and may continue to experience, direct and indirect negative effects on its business and operations from negative economic, regulatory and market conditions, including recent inflationary effects on fuel prices, labor and materials costs, rising interest rates, potential recessionary impacts and supply chain disruptions that could negatively affect demand for new projects and/or delay existing project timing or cause increased project costs.

The Company has experienced, and may continue to experience, direct and indirect negative effects on its business and operations from negative economic, regulatory and market conditions, including recent inflationary effects on fuel prices, labor and materials costs, elevated interest rates, potential recessionary impacts and supply chain disruptions that could negatively affect demand for new projects and/or delay existing project timing or cause increased project costs.

The extent to which general economic, regulatory and market conditions could affect the Company’s business, operations and financial results is uncertain as it will depend upon numerous evolving factors that management may not be able to accurately predict, and, therefore, any future impacts on the Company’s business, financial condition and/or results of operations cannot be quantified or predicted with specificity.

3 unchanged sentences

Classification

March 31, 2024

June 30, 2024

December 31, 2023

7 unchanged sentences

Classification

March 31, 2024

June 30, 2024

December 31, 2023

4 unchanged sentences

Property, plant and equipment, net

Depreciation expense on property, plant and equipment, was $ 3,728 and $ 3,204 for the three months ended March 31, 2024 and 2023 , respectively.

Depreciation expense on property, plant and equipment, was $ 4,020 and $ 7,748 for the three and six months ended June 30, 2024, respectively and $ 2,953 and $ 6,157 for the three and six months ended June 30, 2023 , respectively.

On May 29, 2024 , the Company entered into a Share Purchase Agreement with Rose and non-controlling shareholders for the acquisition of an additional 10 % interest in Rose for a total cash purchase price of approximately $ 3,016 , which resulted in a reduction of mezzanine equity of ($ 5,209 ) and an increase in additional paid in capital of $ 2,193 .

The Company's ownership interest in Rose is now 80 %.

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

GOODWILL AND INTANGIBLE ASSETS

The following table presents the changes in the carrying value of goodwill by reportable segment for the three months ended March 31, 2024:

The following table presents the changes in the carrying value of goodwill by reportable segment for the six months ended June 30, 2024:

Cannabis - Canada

2 unchanged sentences

Foreign currency translation adjustment

Balance as of March 31, 2024

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

Balance as of June 30, 2024

Intangible Assets

Intangibles consisted of the following as of:

Intangible assets consisted of the following as of:

Classification

March 31, 2024

June 30, 2024

December 31, 2023

5 unchanged sentences

* Indefinite-lived intangible assets

The expected future amortization expense for definite-lived intangible assets as of March 31, 2024 was as follows:

The expected future amortization expense for definite-lived intangible assets as of June 30, 2024 was as follows:

Fiscal period

2 unchanged sentences

Assessment for Indicators of Impairment

During the three months ended March 31, 2024 and 2023, the Company considered qualitative factors in assessing for impairment indicators for the Company’s U.S.

At the end of each reporting period, the Company assesses whether events or changes in circumstances have occurred that would indicate an impairment.

The Company considers external and internal factors, including overall financial performance and relevant entity-specific factors, as part of this assessment.

During the six months ended June 30, 2024 and 2023, the Company considered qualitative factors in assessing for impairment indicators for the Company’s U.S.

and Canadian Cannabis segments.

As part of this assessment, the Company considered both external and internal factors, including overall financial performance and outlook.

At March 31, 2024 , the Company concluded that no impairment indicators existed as no events or circumstances occurred that would, more likely than not, reduce the fair value of the reporting units to be below their carrying amounts.

Cannabis - U.S.

At June 30, 2024 , when the Company considered qualitative factors in assessing impairment indicators it concluded that the Company's U.S.

- Cannabis segment more likely than not was impaired.

The Company reviewed the reporting segment's assets, including goodwill and intangible assets.

Based on recent historical performance during the quarter which has underperformed relative to budget, a revised June 30, 2024 forecast which shows a shortfall compared to the March 31, 2024 forecast, the new restrictions on CBD sales in an additional eight states at July 1, 2024, and the proliferation of unregulated hemp-derived products on the market which continues to challenge market share for the CBD industry, the Company concluded that as of June

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

30, 2024, the fair value of the brand intangible asset and goodwill was fully impaired and an impairment charge to intangibles of $ 1,900 and goodwill of $ 10,039 was allocated to the U.S.

Cannabis reporting unit.

Cannabis - U.S.

The fair value of the reporting unit was determined based on a discounted cash flow projection using projections for 2024 to 2028 with an average revenue growth rate of 6 % between 2025 to 2028 , followed by a terminal growth rate of 2 %.

Management concluded that as of June 30, 2024, the fair value was lower than its carrying amount and as a result, an impairment charge to goodwill of $ 10,039 was allocated to the reporting unit.

The significant assumptions applied to the determination of the fair value are described below:

Post-tax discount rate:

A market participant post-tax discount rate applied to the after-tax forecast cash flows was 12 %.

A decrease of 1 % to the discount rate, would not result in a material change to the impairment charge.

Terminal growth rate:

An increase of 1 % in the terminal growth rate would not result in a material change to the impairment charge.

Future cash flows:

An increase in future cash flows by 10 % would not result in a material change to the impairment charge.

Cannabis – U.S.

The fair value of the brand was determined based on a discounted cash flow projection.

Specifically, the Company utilized a relief from royalty valuation technique to arrive at the fair value of the brand.

Management concluded that as of June 30, 2024, the fair value was lower than its carrying value of $ 1,900 as the notional brand maintenance costs exceeded the incremental royalty of 3.5 %.

Therefore, an impairment charge to the brand intangible of $ 1,900 was allocated to the reporting unit.

Cannabis - Canada

When the Company considered qualitative factors in assessing impairment indicators for Canadian Cannabis it concluded that no impairment indicators existed as no events or circumstances occurred that would, more likely than not, reduce the fair value of the reporting units to be below their carrying amounts.

At June 30, 2023 , the Company concluded that no impairment indicators existed as no events or circumstances occurred that would, more likely than not, reduce the fair value of the reporting units to be below their carrying amounts.

LINE OF CREDIT AND LONG-TERM DEBT

The following table provides details for the carrying values of debt as of:

March 31, 2024

June 30, 2024

December 31, 2023

6 unchanged sentences

BDC Facility - Pure Sunfarms - non-revolving demand loan repayable by monthly principal payments of C$ 52 and accrued interest at a rate of 10.95 %, matures December 31, 2031

The Company’s line of credit with Bank of Montreal ("Operating Loan") had $ 4,000 amount drawn on the facility as of June 30, 2024 and December 31, 2023.

The carrying value of the assets and securities pledged as collateral for the FCC Loan as of June 30, 2024 and December 31, 2023 was $ 80,400 and $ 117,293 , respectively.

VILLAGE FARMS INTERNATIONAL, INC.

1 unchanged sentence

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

The Company’s line of credit ("Operating Loan") had $ 4,000 amount drawn on the facility as of March 31, 2024 and December 31, 2023.

The carrying value of the assets and securities pledged as collateral for the FCC Loan as of March 31, 2024 and December 31, 2023 was $ 97,614 and $ 117,293 , respectively.

The carrying value of the assets pledged as collateral for the Operating Loan as of March 31, 2024 and December 31, 2023 was $ 30,032 and $ 28,034 , respectively.

The Pure Sunfarms line of credit had a balance of $ 0 as of March 31, 2024 and December 31, 2023, respectively.

The carrying value of the assets pledged as collateral for the Operating Loan as of June 30, 2024 and December 31, 2023 was $ 23,359 and $ 28,034 , respectively.

The Pure Sunfarms line of credit had a balance of $ 0 as of June 30, 2024 and December 31, 2023, respectively.

The Company is required to comply with financial covenants, measured either quarterly or annually depending on the covenant.

The Company was in compliance with all its credit facility covenants as of March 31, 2024.

The weighted average annual interest rate on short-term borrowings as of March 31, 2024 and December 31, 2023 was 9.73 % and 9.44 % , respectively.

Accrued interest payable on all long-term debt as of March 31, 2024 and December 31, 2023 was $ 442 and $ 390 , respectively, and these amounts are included in accrued liabilities in the Condensed Consolidated Statements of Financial Position.

The Company was in compliance with all its credit facility covenants as of June 30, 2024.

The weighted average annual interest rate on short-term borrowings as of June 30, 2024 and December 31, 2023 was 9.73 % and 9.44 % , respectively.

Accrued interest payable on all long-term debt as of June 30, 2024 and December 31, 2023 was $ 347 and $ 390 , respectively, and these amounts are included in accrued liabilities in the Condensed Consolidated Statements of Financial Position.

The aggregate annual principal maturities of long-term debt for the remainder of 2024 and thereafter are as follows:

7 unchanged sentences

The Company leases its Rose office building from a company employee who also owns a minority interest in Rose.

For the three months ended March 31, 2024 and 2023, the Company paid C$ 39 and C$ 45 , respectively, to lease this office space.

One of the Company’s employees is related to a member of the Company’s executive management team and received approximately $ 30 in salary and benefits during the three months ended March 31, 2024 and 2023 , respectively.

The Company has recorded a provision for income taxes of ($ 320 ) for the three months ended March 31, 2024, compared with a provision for income taxes of ($ 634 ) for the same period last year.

For the three and six months ended June 30, 2024, the Company paid C $ 151 and C $ 190 and for the three and six months ended June 30, 2023 the Company paid C $ 47 and C $ 92 , respectively, to lease this office space.

One of the Company’s employees is related to a member of the Company’s executive management team and received approximately $ 85 and $ 61 in salary and benefits during the six months ended June 30, 2024 and 2023, respectively.

On May 29, 2024, the Company entered into a Share Purchase Agreement with Rose and non-controlling shareholders, which includes two company employees, for the acquisition of an additional 10 % interest in Rose for a total cash purchase price of approximately $ 3,016 .

The Company has recorded a provision for income taxes of ($ 260 ) and ($ 580 ) for the three and six months ended June 30, 2024, respectively, compared with a provision for income taxes of ($ 1,299 ) and ($ 1,933 ) for the same periods last year.

The Company’s income tax provision is based on management’s estimate of the effective tax rate for the full year.

2 unchanged sentences

In order to fully utilize the net deferred tax assets, the Company will need to generate sufficient taxable income in future years.

The Company analyzed all positive and negative evidence to determine if, based on the weight of available evidence, it is more likely than not to realize the benefit of the net deferred tax assets.

The recognition of the net deferred tax assets and related tax benefits is based upon the Company’s conclusions regarding, among other considerations, estimates of future earnings based on

VILLAGE FARMS INTERNATIONAL, INC.

1 unchanged sentence

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

The Company analyzed all positive and negative evidence to determine if, based on the weight of available evidence, it is more likely than not to realize the benefit of the net deferred tax assets.

The recognition of the net deferred tax assets and related tax benefits is based upon the Company’s conclusions regarding, among other considerations, estimates of future earnings based on information currently available and current and anticipated customers, contracts, and product introductions, as well as historical operating results and certain tax planning strategies.

information currently available and current and anticipated customers, contracts, and product introductions, as well as historical operating results and certain tax planning strategies.

Based on the analysis of all available evidence, both positive and negative, the Company has concluded that it does not have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax assets.

Accordingly, the Company established a valuation allowance of $ 40,203 as of March 31, 2024 and $ 39,530 as of December 31, 2023.

Accordingly, the Company established a valuation allowance of $ 45,571 as of June 30, 2024 and $ 39,530 as of December 31, 2023.

The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax assets may be deemed appropriate in the future.

If the Company incurs future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of March 31, 2024.

As of March 31, 2024 , the Company’s net deferred tax assets totaled approximately $ 4,201 and were primarily derived from net operating loss carryforwards.

If the Company incurs future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of June 30, 2024.

As of June 30, 2024, the Company’s net deferred tax assets totaled $ 4,201 and were primarily derived from net operating loss carryforwards.

SEGMENT AND GEOGRAPHIC INFORMATION

Segment reporting is prepared on the same basis that the Company’s Chief Executive Officer, who is the Company’s Chief Operating Decision Maker, manages the business, makes operating decisions and assesses performance.

As of March 31, 2024 , the Company’s four segments are as follows:

As of June 30, 2024 , the Company’s four segments are as follows:

The Produce segment produces, markets, and sells premium quality tomatoes, bell peppers and cucumbers.

3 unchanged sentences

The Cannabis – United States segment develops and sells high-quality, CBD-based health and wellness products including ingestible, edible and topical applications.

The Energy business produces renewable natural gas that it sells per a long-term contract to one customer.

The Energy business receives a royalty from a renewable natural gas facility that is located at the Company's Delta facility.

The Company’s primary operations are in the United States and Canada.

Segment information is summarized below:

Three months ended March 31,

Three months ended June 30,

Six Months Ended June 30,

Cannabis - Canada

7 unchanged sentences

Basic and diluted net loss per common share is calculated as follows:

Three months ended March 31,

Three months ended June 30,

Six Months Ended June 30,

Net loss attributable to Village Farms International, Inc.

5 unchanged sentences

SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

Share-based compensation expense for the three months ended March 31, 2024 was $ 405 , and $ 1,732 for the three months ended March 31, 2023, respectively.

Stock option activity for the three months ended March 31, 2024 was as follows:

Share-based compensation expense was $ 2,196 and $ 2,601 for the three and six months ended June 30, 2024, respectively, and $ 656 and $ 2,388 for the three and six months ended June 30, 2023, respectively.

Stock option activity for the six months ended June 30, 2024 was as follows:

Exercise Price

1 unchanged sentence

Forfeited/expired

Outstanding at March 31, 2024

Exercisable at March 31, 2024

Outstanding at June 30, 2024

Exercisable at June 30, 2024

Restricted shares activity for the six months ended June 30, 2024 was as follows:

Performance-based

Restricted Share Units

Weighted Average Grant Date Fair Value

Outstanding at January 1, 2024

Vested and Issued

Outstanding at June 30, 2024

Exercisable at June 30, 2024

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

CHANGES IN NON-CASH WORKING CAPITAL ITEMS

Three Months Ended March 31,

Six Months Ended June 30,

Trade receivables

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements