What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-12 compared with 2024-11-07 · 254 added, 484 removed, 285 unchanged (72% of the section changed)

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Our focus for our Canadian Cannabis segment is to produce high quality cannabis, leveraging our low-cost production to provide preferred products at an attractive price that address the preferred consumer segments in the market.

This market positioning, combined with our cultivation expertise, has enabled us to evolve into the second best-selling producer nationally and one of the few Canadian licensed producers with consistently strong operating results.

This market positioning, combined with our cultivation expertise, has enabled us to evolve into the top-five best-selling producer nationally and one of the few Canadian licensed producers with consistently strong operating results.

Additionally, through organic growth, exports and/or acquisitions, we have a strategy to participate in other international markets where cannabis attains legal status.

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In March 2022, our Canadian Cannabis business received European Union Good Manufacturing Practice (“EU GMP”) certification for Pure Sunfarms’ 1.1 million square foot Delta 3 cannabis facility located in Delta, British Columbia (“B.C.”) which permits Pure Sunfarms to export EU GMP-certified medical cannabis to importers and distributors in international markets that require EU GMP certification.

In late 2022, Pure Sunfarms commenced exports to Israel and in 2023, Pure Sunfarms began exporting cannabis products to Germany and the United Kingdom for the medical markets in those countries.

In late 2022, Pure Sunfarms commenced exports to Israel, in 2023 Pure Sunfarms began exporting cannabis products to Germany and the United Kingdom for the medical markets in those countries, and in 2025 it began exporting cannabis products to New Zealand.

As a result of the typically higher margins in international medical markets, we expect international expansion to enhance our profitability while expanding our brand and experience into emerging legal cannabis markets.

Through our ownership of Leli Holland, we hold one of ten licenses to cultivate cannabis legally in the Netherlands under that country’s Closed Supply Chain Experiment program, with cultivation beginning in October of 2024.

In the U.S., Balanced Health is our industry-leading cannabinoid business, extending our portfolio into cannabidiol (“CBD”) consumer products.

During the fourth quarter of 2024, we completed our acquisition of Leli Holland.

Through our ownership of Leli Holland, we hold one of ten licenses to cultivate and distribute cannabis legally in the Netherlands under that country’s Controlled Cannabis Supply Chain Experiment, with sales beginning in the first quarter of 2025.

In the U.S., Balanced Health is our industry-leading cannabinoid business, extending our portfolio into cannabidiol (“CBD”) and hemp-derived consumer products.

We also operate a large, well-established, produce business (primarily tomatoes) under the Village Farms Fresh (“VF Fresh”) brand which sells to food distribution companies and mass retail stores.

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and source produce from our growing partners, in Mexico and Canada.

Our intention is to use our assets, expertise and experience (across cannabis, CBD and produce) to participate in the U.S.

Our intention is to use our assets, expertise and experience (across cannabis, hemp, CBD and produce ecosystems) to participate in the U.S.

Cannabis market subject to compliance with applicable U.S.

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Canadian Cannabis Segment

Our Canadian Cannabis segment is composed of Pure Sunfarms and an 80% ownership in Rose LifeScience.

Village Farms Canadian Cannabis has one of the single largest cannabis cultivation and processing operations in the world, one of the lowest-cost greenhouse producers and has maintains three of the best-selling flower brands in Canada.

Pure Sunfarms leverages our 30 years of experience as a vertically integrated greenhouse grower to grow, produce and sell cannabis products throughout Canada and for export to markets where permissible by law.

Rose is a top two licensed producer of cannabis in the Province of Quebec, as well as a prominent cannabis products commercialization expert in Quebec, acting as the exclusive, direct-to-retail sales, marketing and distribution entity for some of the best-known brands in Canada, as well as Quebec-based micro and craft growers.

Our long-term objective for our Canadian Cannabis segment is to garner and sustain the leading retail market share in Canada stemming from our leading position as the low-cost, high-quality cannabis producer in Canada and expand our Canadian success into the growing foreign cannabis medicinal markets across the globe.

Our Canadian Cannabis segment includes wholly owned Pure Sunfarms and an 80% ownership interest in Rose LifeScience.

Pure Sunfarms is one of the single largest cannabis growing operations in the world, one of the lowest-cost greenhouse producers and one of the leading flower brands in Canada.

Pure Sunfarms leverages our 30 years of experience as a vertically integrated greenhouse grower for cannabis growth opportunities in Canada with commercial distribution in all Canadian provinces and territories.

Our long-term objective for Pure Sunfarms is to be the leading low-cost, high-quality cannabis producer in Canada.

Rose is one of the top-selling licensed producers of cannabis in the Province of Quebec, as well as a prominent cannabis products commercialization expert in Quebec, acting as the exclusive, direct-to-retail sales, marketing and distribution entity for some of the best-known brands in Canada, as well as Quebec-based micro and craft growers.

Our long-term objective for our Canadian Cannabis segment is to garner and sustain a leading retail market share in Canada, as well as a leading exporter of medicinal cannabis, stemming from our position as a leading low-cost, high-quality cannabis producer in Canada and expand our Canadian success into growing international cannabis markets across the globe by becoming a leading exporter of medicinal cannabis.

Netherlands Cannabis Segment (Leli Holland)

Our Netherlands Cannabis operating segment is comprised of wholly owned subsidiary, Leli Holland.

Through Leli, we hold one of ten licenses to cultivate and distribute recreational cannabis legally in the Netherlands under that country’s Closed Supply Chain Experiment program, with sales commencing in February 2025.

Cannabis Segment

Cannabis segment is composed of Balanced Health.

Cannabis segment includes wholly owned subsidiary, Balanced Health.

Balanced Health is one of the leading cannabinoid brands and e-commerce platforms in the United States.

Balanced Health develops and sells high-quality CBD and hemp-based health and wellness products, distributing its diverse portfolio of consumer products through its top-ranked e-commerce platform, CBDistillery and third-party retailers.

Produce Segment

Our Produce segment is composed of VF Fresh, which currently consists of VFLP and VFCLP.

VF Fresh, grows, markets and distributes premium-quality, greenhouse-grown produce in North America.

Through VF Fresh, we grow, market and distribute premium-quality, greenhouse-grown produce in North America.

These premium products are grown in sophisticated, highly intensive agricultural greenhouse facilities located in British Columbia and Texas.

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We primarily market and distribute under our Village Farms® brand name to retail supermarkets and dedicated fresh food distribution companies throughout the United States and Canada.

Energy Segment

Our Energy segment is composed of VF Clean Energy Inc.

VFCE has partnered with Terreva Renewables (formerly Mas Energy) for the Delta RNG Project based on VFCE’s 20-year contract (including a five-year option to extend) with the City of Vancouver to capture landfill gas at the Delta, B.C.

Clean Energy Segment

Our Clean Energy segment is comprised of wholly owned subsidiary, VF Clean Energy Inc.

VFCE, which has partnered with Terreva Renewables (formerly Mas Energy) for the Delta RNG Project based on VFCE’s 20-year contract (including a five-year option to extend) with the City of Vancouver to capture landfill gas at the Delta, B.C.

landfill site (the "Delta RNG Project").

The Delta RNG Project, which commenced operations in 2024, converts VFCE’s previous landfill gas-to-electricity business into a state-of-the-art landfill gas to high-demand renewable natural gas ("RNG") facility.

The Delta RNG Project, which commenced operations in 2024, converts VFCE’s landfill gas into high-demand renewable natural gas ("RNG") through a state-of-the-art facility.

Terreva Renewables sells the renewable natural gas and VFCE receives a portion of the revenue in the form of a royalty.

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Canadian Cannabis

• Was the fastest growing producer year-over year by market share;

• Further expanded its number one national market share position in dried flower 1 ;

• Continued to hold the number two producer position in Canada;

• Continued to hold the number two national market share position in the pre-roll category 1 ;

• Achieved the number one market share in Quebec;

maintained the number one market share in Ontario;

• Super Toast remained the third fastest growing brand nationally in Q3 2024;

• Launched Neon Lambo cultivar to strong reception in Q4 2024;

new category launches planned through the remainder of Q4 2024 and Q1 2025;

• Currently hold the #1 and #3 cultivars in the German market through a supply agreement 2 ;

• Saw year-over-year increases in international medicinal sales to each of Australia, Germany and the United Kingdom for Q3 and year-to-date 2024 (reported within Canadian Cannabis).

1.For the third quarter of 2024.

• Maintained top three overall market share in Canada 1 and number two position in dried flower during the first quarter despite planned reductions in sales of lower margin branded products;

• Returned to the high end of its targeted gross margin range of 30-40% and delivered its highest quarter of adjusted EBITDA performance in three years;

• Subsequent to quarter end, refinanced its syndicated Pure Sunfarms Term Loans, consolidating its three previous loans into one credit facility with two of its existing lenders.

The new Canadian cannabis credit facility carries a variable interest rate that is currently below 8.0 percent, reflecting a 50 basis point improvement to the previous interest rate, as well as improved financial covenants and a maturity date of February 7, 2028, replacing its previous credit facilities maturing on February 7, 2026.

For the first quarter of 2025.

Based on estimated retail sales from HiFyre, other third parties and provincial boards.

2.Based on estimates from Flowzz.

• The Company was one of 25 participants, and the only operator, selected to participate in the Drug Enforcement Administration’s (DEA) upcoming Administrative Law Judge (ALJ) hearing regarding the proposed rescheduling of marijuana in the United States from a Schedule I to a Schedule III drug under the Controlled Substances Act, which is currently expected to take place sometime in January or February 2025;

• The proliferation of unregulated hemp-derived products in the U.S.

market, continues to challenge market share for the CBD industry and is causing certain states to impose significant restrictions on intoxicating hemp derived products;

International Medical Cannabis (Reported Within Canadian Cannabis)

• International sales increased 285% year-over-year in the first quarter with continued growth in shipment volumes to Australia, Germany and the United Kingdom;

• Continue to hold leading cultivars in the German market through third-party distributors 1 ;

• During the first quarter, expanded international medical cannabis distribution to New Zealand through a supply agreement with Medleaf Therapeutics, an established New Zealand-based medical cannabis company with a comprehensive distribution network;

• The Company continues to expect that international medical export sales will triple in fiscal year 2025, as compared to fiscal year 2024.

Based on rankings compiled by German outlet Flowzz

Netherlands Cannabis (Leli Holland)

• Commenced sales to Dutch coffeeshops in February 2025, consistent with the Company’s previously-disclosed timeline;

• Broke ground on a Phase II indoor cultivation facility in the town of Groningen.

The Phase II facility is expected to be complete in Q1 2026 and quintuple annual production capacity.

• Balanced Health Botanicals' CBDistillery announced that its full range of hemp-derived gummies are now manufactured in-house at its GMP-certified facility south of Denver, Colorado.

Internalization of manufacturing is expected to enable greater innovation, operational flexibility, and inventory control in the future;

• The Company's application for a Texas medicinal marijuana license remains pending review by the Department of Public Services.

If awarded, the Company plans to work with its listing authority to structure an acceptable ownership structure.

If awarded, the Company plans to work with its listing authority to structure an acceptable ownership structure and comply with all applicable regulatory requirements.

VF Fresh (Produce)

• Continued improvement in our Texas greenhouse operations resulting in a year-over-year decrease in cost per pound due to ongoing labor efficiencies and increased yields;

• Implementing new cultivation t echnologies, including artificial intelligence, to drive further operational improvements;

• The Company has an ongoing sale process for its Monahans (Permian Basin, Texas) greenhouse facility.

It is also evaluating other uses for the site and facility, some of which are outside its historical produce business.

• Acquired the remaining equity ownership interest in Leli, which holds one of 10 licenses to participate in the Dutch recreational cannabis program, to increase our ownership of Leli to 100 percent from 85 percent;

• Completed construction of the Company’s first indoor cultivation facility in the town of Drachten, Netherlands.

The Drachten facility has five flower rooms and additional space for drying, manufacturing, and packaging of finished goods for distribution to approximately 80 Dutch coffeeshops in participating jurisdictions;

• The Company began cultivating in October 2024 and continues to expect its first sales to begin during the first quarter of 2025.

Village Farms Clean Energy

• In April 2024, the Delta, British Columbia Renewable Natural Gas Project began operations, which immediately began contributing incremental profit to the Company;

• During the third quarter of 2024, Village Farms Clean Energy produced net income of $0.3 million through royalty payments received from its clean energy partner.

• Following the conclusion of an evaluation managed by the Audit Committee of the Board of Directors (the “Board”) of the Company, the Board approved the appointment of KPMG LLP as the Company’s independent registered public accounting firm effective August 8, 2024;

• Received notification from Nasdaq that the Company is not in compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market (Nasdaq Listing Rule 5550(a)(2)) (the "Minimum Bid Requirement”) as the bid price for the Company closed below US$1.00 from September 6, 2024 to October 17, 2024 (the “Notification”).

The Notification has no immediate effect on the listing of the Common Shares on the Nasdaq Capital Market.

Under Nasdaq Listing Rule 5810(c)(3)(A), the Company has until April 16, 2025 (a period of 180 calendar days from the date of Notification) to regain compliance with the Minimum Bid Requirement.

• Subsequent to quarter end, announced a transformative transaction to privatize certain assets and operations of its Fresh Produce segment.

Under the terms of the agreement, the Company will privatize Produce segment operations, including its Marfa II and Fort Davis greenhouses, and all of its produce distribution centers, through a series of asset and lease transfers, for total consideration of $40 million and a 37.9% equity ownership interest in Vanguard Food LP, a new, private-equity-backed joint venture with private investment firms including Sweat Equities.

• Vanguard is expected to be backstopped by additional capital commitments to execute a M&A roll-up strategy of other produce brands and assets in North America.

The transaction is expected to close during the second quarter of 2025.

• Village Farms will retain ownership of all its Canadian greenhouse assets, and Texas-based Marfa I and Monahans greenhouse assets for potential future cannabis market optionality.

• Appointed Yvonne Trupiano, who has led human resources functions for public and private companies across various industries and sizes, with the majority of her career at Fortune 500 global companies, as Executive Vice President and Global Chief Human Resources Officer;

• Subsequent to quarter end, the Nasdaq approved the Company’s request for a 180-calendar day extension (the “Extension”) to regain compliance with the minimum closing bid price of US$1.00 per share listing requirement (NASDAQ Listing Rule 5550(a)(2).

As a result of the Extension, the Company now has until October 13, 2025 to regain compliance with the Minimum Bid Requirement;

• Subsequent to quarter end, the Company amended its loan with Farm Credit Canada (“FCC Loan”) to among other things, replace the fixed charge ratio covenant with a more favorable liquidity coverage ratio covenant.

This amendment was a result of the Company’s considerable expansion and growth of Village Farms’ business since entering into the original credit agreement in 2013, as well a recognition of the Company’s stronger strategic focus on its growing cannabis business.

Presentation of Financial Results

Our consolidated results of operations for the three and nine months ended September 30, 2024 and 2023 presented below reflect the operations of our consolidated wholly-owned subsidiaries, our 70% ownership in Rose LifeScience through March 31, 2024, our 80% ownership in Rose LifeScience beginning on April 1, 2024, our 85% ownership in Leli through September 22, 2024, and our 100% ownership in Leli beginning on September 23, 2024.

Our consolidated results of operations for the three months ended March 31, 2025 and 2024 presented below reflect the operations of our consolidated wholly-owned subsidiaries, our 70% ownership interest in Rose LifeScience through March 31, 2024, our 80% ownership interest in Rose LifeScience beginning on April 1, 2024, our 85% ownership interest in Leli through September 22, 2024, and our 100% ownership interest in Leli beginning on September 23, 2024.

Foreign currency exchange rates

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All references to “dollars” or “$” are to U.S.

The assets and liabilities of our foreign operations are translated into dollars at the exchange rate in effect as of September 30, 2024, September 30, 2023, and December 31, 2023.

The assets and liabilities of our foreign operations are translated into dollars at the exchange rate in effect as of March 31, 2025, March 31, 2024, and December 31, 2024.

Transactions affecting the shareholders’ equity (deficit) are translated at historical foreign exchange rates.

The condensed consolidated statements of operations and comprehensive income (loss) and condensed consolidated statements of cash flows of our foreign operations are translated into dollars by applying the average foreign exchange rate in effect for the reporting period.

The exchange rates used to translate from Canadian dollars ("C") to dollars is shown below:

September 30, 2024

September 30, 2023

The exchange rates used to translate from Canadian dollars to U.S.

dollars is shown below:

March 31, 2025

March 31, 2024

December 31, 2024

Three-month period ended

Nine-month period ended

RESULTS OF OPERATIONS

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dollars, except per share amounts, and unless otherwise noted)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Cost of sales

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Interest income

Foreign exchange gain (loss)

Other income (loss)

Goodwill and intangible asset impairments (1)

Foreign exchange loss

Loss before taxes

(Provision for) recovery of income taxes

Provision for income taxes

Loss including non-controlling interests

net income 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.

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Diluted loss per share

(1) Reflects impairment to goodwill and intangibles of $11,939 in U.S.

Cannabis that was based on recent historical performance, near-term forecasts, and the state of the CBD industry in the United States.

See “Critical Accounting Estimates and Judgments” below for more information .

(1) Adjusted EBITDA is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP.

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Adjusted EBITDA includes the Company’s 70% interest in Rose LifeScience through March 31, 2024, 80% interest in Rose LifeScience beginning on April 1, 2024, 85% interest in Leli through September 22, 2024, and our 100% interest in Leli beginning on September 23, 2024.

We caution that our results of operations for the three and nine months ended September 30, 2024 and 2023 may not be indicative of our future performance.

We caution that our results of operations for the three months ended March 31, 2025 and 2024 may not be indicative of our future performance.

Discussion of Financial Results

A discussion of our consolidated results for the three and nine months ended September 30, 2024 and 2023 is included below.

The consolidated results include all four of our operating segments:

A discussion of our consolidated results for the three months ended March 31, 2025 and 2024 is included below.

The consolidated results include all five of our operating segments:

Produce, Canadian Cannabis, U.

Cannabis, and Energy, along with public company expenses.

Cannabis, Cannabis Netherlands, and Clean Energy, along with public company expenses.

For a discussion of our segmented results, please see “Segmented Results of Operations” below.

CONSOLIDATED RESULTS

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Sales for the three months ended September 30, 2024 were $83,368 compared with $69,510 for the three months ended September 30, 2023.

The increase of $13,858, or 20%, was primarily due to an increase in Canadian Cannabis sales of $7,653 and an increase in VF Fresh sales of $7,058, partially offset by a decrease in U.S.

Cannabis sales of $1,045.

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

Sales for the three months ended March 31, 2025 were $77,074 compared with $78,077 for the three months ended March 31, 2024.

The decrease of $1,003, or 1%, was primarily due to a decrease in Canadian Cannabis sales of $2,609 resulting from an unfavorable impact of exchange rate fluctuations, and a decrease in U.S.

Cannabis sales of $633, partially offset by an increase in VF Fresh sales of $1,327.

For additional information, refer to “Segmented Results of Operations” below.

Cost of Sales

Cost of sales for the three months ended September 30, 2024 was ($67,660) compared with ($54,889) for the three months ended September 30, 2023.

The increase of $12,771, or 23%, was primarily due to an increase in Canadian Cannabis cost of sales of $7,998 and VF Fresh cost of sales of $5,069, partially offset by a decrease in U.S.

Cost of sales for the three months ended March 31, 2025 were $65,734 compared with $62,564 for the three months ended March 31, 2024.

The increase of $3,170, or 5%, was primarily due to an increase in VF Fresh cost of sales of $8,919, partially offset by a decrease in both Canadian Cannabis cost of sales of $5,576 and U.S.

Cannabis cost of sales of $531.

For additional information, refer to “Segmented Results of Operations” below.

Gross profit for the three months ended September 30, 2024 was $15,708 compared with $14,621 for the three months ended September 30, 2023.

The increase of $1,087, or 7%, was primarily due to an increase in gross profit at VF Fresh of $1,989, partially offset by a decrease in gross profit at Canadian Cannabis of $345 and U.S.

Cannabis of $685.

Gross profit for the three months ended March 31, 2025 was $11,340 compared with $15,513 for the three months ended March 31, 2024.

The decrease of $4,173, or 27%, was primarily due to a decrease in gross profit at VF Fresh of $7,592, partially offset by an increase in gross profit at Canadian Cannabis of $2,967.

For additional information, refer to “Segmented Results of Operations” below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended September 30, 2024 were ($16,540) (20% of sales) compared with ($15,822) (23% of sales) for the three months ended September 30, 2023.

Selling, general and administrative expenses for the three months ended March 31, 2025 were $16,779 (22% of sales) compared with $16,387 (21% of sales) for the three months ended March 31, 2024.

The increase of $392, or 2%, was primarily due to an increase in operating expenses for Canadian Cannabis of $1,058 and VF Fresh of $182, partially offset by a decrease in U.S.

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For additional information, refer to “Segmented Results of Operations” below.

For the Three Months Ended September 30,

Selling, general and administrative expenses

Share-based compensation

Total selling, general and administrative expenses

Interest Expense

Interest expense for the three months ended September 30, 2024 was ($784) compared with ($988) for the three months ended September 30, 2023.

The decrease of $204, or 21%, was due to a decrease in the average outstanding debt balance under our credit facilities.

Interest Income

Interest income for the three months ended September 30, 2024 was $229 compared with $262 for the three months ended September 30, 2023.

Other Income (loss)

Other income (loss) for the three months ended September 30, 2024 was $379 compared with ($19) for the three months ended September 30, 2023.

The increase was primarily attributable to a favorable fee adjustment for VFCE in the three months ended September 30, 2024.

Loss Before Taxes

Loss before taxes for the three months ended September 30, 2024 was ($656) compared with ($2,917) for the three months ended September 30, 2023.

The decrease of $2,261 was primarily due to the improved gross margins in VF Fresh and Canadian Cannabis and a gain on foreign currency for the three months ended September 30, 2024 compared to a loss for the three months ended September 30, 2023, partially offset by higher selling, general, and administrative expenses.

Net Loss Attributable to Village Farms International, Inc.

Net loss attributable to Village Farms International, Inc.

shareholders for the three months ended September 30, 2024 was ($820) compared with ($1,299) for the three months ended September 30, 2023.

The decrease of $479 was primarily due to the improved gross margins in VF Fresh and Canadian Cannabis and a gain on foreign currency for the three months ended September 30,

2024 compared to a loss for the three months ended September 30, 2023, partially offset by higher selling, general, and administrative expenses.

Adjusted EBITDA

Adjusted EBITDA for the three months ended September 30, 2024 was $5,302 compared with $3,248 for the three months ended September 30, 2023.

The improvement was mainly driven by stronger performance from VF Fresh.

For additional information, refer to the reconciliation of Adjusted EBITDA to net (loss) income in “Non-GAAP Measures—Reconciliation of Net Loss to Adjusted EBITDA”.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Sales for the nine months ended September 30, 2024 were $253,627 compared with $211,378 for the nine months ended September 30, 2023.

The increase of $42,249, or 20%, was primarily due to an increase in Canadian Cannabis sales of $32,667 and an increase in VF Fresh sales of $11,758, partially offset by a decrease in U.S.

Cannabis sales of $2,489.

For additional information, refer to "Segmented Results of Operations" below.

Cost of Sales

Cost of sales for the nine months ended September 30, 2024 were ($213,158) compared with ($172,958) for the nine months ended September 30, 2023.

The increase of $40,200, or 23%, was primarily attributable to an increase in Canadian Cannabis cost of sales of $31,969 due to higher volume, and an increase in VF Fresh cost of sales of $8,477.

For additional information, refer to "Segmented Results of Operations" below.

Gross profit for the nine months ended September 30, 2024 was $40,469, compared with $38,420 for the nine months ended September 30, 2023.

The increase of $2,049, or 5%, was primarily attributable to an increase in gross profit at VF Fresh of $3,281 and Canadian Cannabis of $698, partially offset by a decrease in gross profit at U.S.

Cannabis of $2,157.

For additional information, refer to "Segmented Results of Operations" below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine months ended September 30, 2024 increased $2,613, or 5%, to ($52,593) (21% of sales), compared with ($49,980) (24% of sales), for the nine months ended September 30, 2023.

The increase was primarily attributable to an increase in Canadian Cannabis of $2,163 and VF Fresh of $1,160, partially offset by a decrease in U.S.

Cannabis of $1,040.

For additional information, refer to "Segmented Results of Operations" below.

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Selling, general and administrative expenses

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Interest Expense

Interest expense for the nine months ended September 30, 2024 was ($2,606) compared with ($3,532) for the nine months ended September 30, 2023.

The decrease of $926, or 26%, was due to a decrease in the average outstanding debt balance under our credit facilities.

Interest expense for the three months ended March 31, 2025 was $706 compared with $917 for the three months ended March 31, 2024.

The decrease of $211, or 23%, was due to a decrease in the overall borrowing base and a decrease in the Company's interest rates on its various debt instruments.

Interest Income

Interest income for the nine months ended September 30, 2024 was $757 compared with $741 for the nine months ended September 30, 2023.

Other income for the nine months ended September 30, 2024 was $528 compared with $5,613 for the nine months ended September 30, 2023.

The decrease in other income was primarily due to the partial recovery of operational losses from the Tomato Brown Rugose Fruit Virus infestation (the "ToBRFV Legal Settlement") of $5,584 that was recorded in the nine months ended September 30, 2023 within VF Fresh.

Interest income for the three months ended March 31, 2025 and was $75 compared with $206 for the three months ended March 31, 2024.

Other income for the three months ended March 31, 2025 was $22 compared with $104 for the three months ended March 31, 2024.

Loss Before Taxes

Loss before taxes for nine months ended September 30, 2024 was ($26,313) compared with ($9,040) for the nine months ended September 30, 2023.

The increase of ($17,273), or (191%), was primarily due to an impairment of goodwill and intangible

assets of ($11,939) in the U.S.

Cannabis segment during the nine months ended September 30, 2024 and higher selling, general, and administrative expenses.

The nine months ended September 30, 2023 also included the ToBRFV Legal Settlement of $5,584.

Loss before taxes for the three months ended March 31, 2025 was ($6,132) compared with ($2,359) for the three months ended March 31, 2024.

The increase of $3,773 was primarily due to the lower gross margins in VF Fresh, partially offset by the improved margins on Canadian Cannabis.

Net Loss Attributable to Village Farms International, Inc.

Net loss attributable to Village Farms International, Inc.

shareholders for the nine months ended September 30, 2024 was ($27,221) as compared with ($9,315) for the nine months ended September 30, 2023, an increase of ($17,906), or (192%), primarily due to an impairment of goodwill and intangible assets of ($11,939) in the U.S.

Cannabis segment during the nine months ended September 30, 2024 and higher selling, general, and administrative expenses.

The nine months ended September 30, 2023 also included the ToBRFV Legal Settlement of $5,584 for VF Fresh.

shareholders for the three months ended March 31, 2025 was ($6,703) compared with ($2,852) for the three months ended March 31, 2024.

The decrease of $3,851 was primarily due to lower gross margins in VF Fresh and higher selling, general, and administrative expenses in Canadian Cannabis, partially offset by the improved margins on Canadian Cannabis.

Adjusted EBITDA

Adjusted EBITDA for the nine months ended September 30, 2024 was $5,334 compared with $8,243 for the nine months ended September 30, 2023.

The year over year decrease of $2,909 was mainly driven by the inclusion of the ToBRFV Legal Settlement of $5,584 at VF Fresh during the nine months ended September 30, 2023 and higher selling, general, and administrative costs for the nine months ended September 30, 2024.

Adjusted EBITDA for the three months ended March 31, 2025 was $81 compared with $3,591 for the three months ended March 31, 2024.

The change was mainly driven by decreased profitability of VF Fresh offset by improved margins on Canadian Cannabis.

For additional information, refer to the reconciliation of Adjusted EBITDA to net (loss) income in “Non-GAAP Measures—Reconciliation of Net Loss to Adjusted EBITDA”.

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dollars, except per share amounts, and unless otherwise noted)

For The Three Months Ended September 30, 2024

Cannabis Canada

Cannabis U.S.

Cost of sales

Selling, general and administrative expenses

Other expense, net

Operating income (loss)

(Provision for) recovery of income taxes

Income (loss) from consolidated entities

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

Net income (loss)

Adjusted EBITDA (2)

Basic income (loss) per share

Diluted income (loss) per share

For The Three Months Ended September 30, 2023

For The Three Months Ended March 31, 2025

Cannabis Canada

Cannabis U.S.

Cannabis Netherlands

Cost of sales

Selling, general and administrative expenses

Other expense, net

Other (expense) income, net

Operating (loss) income

Recovery of income taxes

Provision for income taxes

(Loss) income from consolidated entities

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

net loss attributable to non-controlling interests, net of tax

Net (loss) income

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Diluted (loss) income per share

For The Nine Months Ended September 30, 2024

For The Three Months Ended March 31, 2024

Cannabis Canada

Cannabis U.S.

Cannabis Netherlands

Cost of sales

Selling, general and administrative expenses

Other expense (loss)

Goodwill and intangible asset impairments (1)

Operating (loss) income

Other expense, net

Operating income (loss)

(Provision for) recovery of income taxes

(Loss) income from consolidated entities

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

Net (loss) income

Adjusted EBITDA (2)

Basic (loss) income per share

Diluted (loss) income per share

For The Nine Months Ended September 30, 2023

Cannabis Canada

Cannabis U.S.

Cost of sales

Selling, general and administrative expenses

Other income (expense) net

Operating (loss) income

Recovery of (provision for) income taxes

(Loss) income from consolidated entities

Income (loss) from consolidated entities

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

Net (loss) income

Net income (loss)

Adjusted EBITDA (1)

Basic (loss) income per share

Diluted (loss) income per share

(1) Reflects impairment to goodwill and intangibles of $11,939 in U.S.

Cannabis that was based on recent historical performance, near-term forecasts, and the state of the CBD industry in the United States.

See “Critical Accounting Estimates and Judgments” below for more information .

Basic income (loss) per share

Diluted income (loss) per share

(1) Adjusted EBITDA is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP.

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The Canadian Cannabis segment consists of Pure Sunfarms and Rose LifeScience.

The comparative analysis for Canadian Cannabis is based on the consolidated results of Pure Sunfarms and our interest in Rose LifeScience for the three and nine months ended September 30, 2024 and 2023.

The comparative analysis for Canadian Cannabis is based on the consolidated results of Pure Sunfarms and our interest in Rose LifeScience for the three months ended March 31, 2025 and 2024.

Beginning on April 1, 2024, our interest in Rose LifeScience increased from 70% to 80%, which is reflected in the results presented below.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Canadian Cannabis net sales for the three months ended September 30, 2024 were $36,463 compared with $28,810 for the three months ended September 30, 2023.

The increase of $7,653, or 27%, was due primarily to a 18% increase in net branded sales and a 66% increase in non-branded sales.

The increase in net branded sales was due to market share gain across the flower, pre-roll and milled categories, driven by successful new product launches, the expansion of a rapidly growing brand, and rising demand for value-based product offerings.

The increase in non-branded sales resulted from improved industry supply dynamics and pricing supported by a shift of many producers toward asset-light models and sales of non-brand-spec inventory.

International sales increased by 94% primarily due to higher sales to Germany, the United Kingdom, and Australia.

The Canadian Cannabis business continues to pay a burdensome excise duty (also known as excise tax) on its branded sales (sales to provincial distributors).

For the three months ended September 30, 2024, the Company incurred excise duties of $17,674

(C$24,109), or 39% of gross branded sales, compared with $14,396 (C$19,314), or 38% of gross branded sales, for the three months ended September 30, 2023.

The increase of $3,278 (C$4,795), or 23%, was due to an increase in kilograms sold in the branded channel.

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

Canadian Cannabis net sales for the three months ended March 31, 2025 were $34,837 compared with $37,446 for the three months ended March 31, 2024.

The decrease of $2,609, or 7%, was primarily driven by unfavorable exchange rate fluctuations of

approximately $2,258 and a decrease in net branded sales, reflecting a planned shift away from value-based product offerings, which was partially offset by an increase in international sales of 259%, primarily driven by continued strength in export volumes to Germany.

Canadian Cannabis continues to pay a burdensome excise tax on its branded sales (sales to provincial distributors).

For the three months ended March 31, 2025, the Company incurred excise duties of $13,937 (C$20,016), or 38% of gross branded sales, compared with $19,703 (C$26,565), or 40% of gross branded sales, for the three months ended March 31, 2024.

The decrease of $5,766 (C$6,259), or 29%, was due to a decrease in kilograms sold in the branded channel and the impact of exchange rate fluctuations.

The Canadian excise duty is our single largest cost of participating in the branded adult-use market in Canada.

For the three months ended September 30, 2024, 75% of net sales were generated from branded flower, pre-rolls and cannabis derivative products compared with 80% for the three months ended September 30, 2023.

Non-branded, international, and other sales accounted for 25% of Canadian Cannabis net sales for the three months ended September 30, 2024, as compared with 20% for the three months ended September 30, 2023.

The following table presents sales by Canadian Cannabis revenue stream, together with the impact of the excise tax, in U.S.

dollars and Canadian dollars, for the three months ended September 30, 2024 and 2023:

For the Three Months Ended September 30,

(in thousands of U.S.

Branded sales

Non-branded sales

International sales

For the Three Months Ended September 30,

(in thousands of Canadian dollars)

Branded sales

Non-branded sales

International sales

Cost of Sales

Canadian Cannabis cost of sales for the three months ended September 30, 2024 was ($26,864) compared with ($18,866) for the three months ended September 30, 2023.

The increase of $7,998, or 42%, was primarily due to an increase in volume (kilograms) packaged and sold of branded products, as well as an increase in non-branded kilograms sold.

Gross Profit/Margin

Canadian Cannabis gross profit for the three months ended September 30, 2024 was $9,599 compared with $9,944 for the three months ended September 30, 2023.

Canadian Cannabis gross margin for the three months ended September 30, 2024 was 26% compared with 35% for the three months ended September 30, 2023.

The decrease in gross margin percentage was due to an unfavorable mix, with higher sales volume of non-brand-spec inventory within the non-branded sales channel, as well as higher sales of value brands within the branded sales channel.

Selling, General and Administrative Expenses

Canadian Cannabis selling, general and administrative expenses for the three months ended September 30, 2024 were ($7,983), or 22%, of sales compared with ($7,598), or 26%, of sales for the three months ended September 30, 2023.

The increase of $385 was primarily due to higher commercial and marketing expenses.

Canadian Cannabis net income for the three months ended September 30, 2024 was $1,168 compared with net income of $2,863 for the three months ended September 30, 2023.

The decrease in net income was primarily due to an increase in the tax provision expense of $1,342 and an increase in selling, general and administrative expenses.

Adjusted EBITDA

Adjusted EBITDA for Canadian Cannabis for the three months ended September 30, 2024 was $4,752 compared with $4,585 for the three months ended September 30, 2023.

For additional information, refer to the reconciliation of Adjusted EBITDA to net (loss) income in “Non-GAAP Measures—Reconciliation of Net Loss to Adjusted EBITDA”.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Canadian Cannabis net sales for the nine months ended September 30, 2024 were $114,654 compared with $81,987 for the nine months ended September 30, 2023.

The increase of $32,667, or 40%, was due primarily to a 30% increase in net branded sales and a 128% increase in non-branded sales.

The increase in net branded sales was due to market share gain across the flower, pre-roll and milled categories, driven by high quality cultivation and new product launches.

The increase in non-branded sales resulted from improved industry supply conditions and pricing supported by a shift of many producers toward asset light models and sales of non-brand-spec inventory.

The Canadian Cannabis business continues to pay a burdensome excise duty on its branded sales (sales to provincial distributors).

For the nine months ended September 30, 2024, the Company incurred excise duties of $57,193 (C$77,788), or 40% of our gross branded sales, compared to $41,724 (C$56,145), or 38% of our gross branded sales for the nine months ended September 30, 2023.

The increase of $15,469 (C$21,643), or 37%, in excise duties was due to an increase in kilograms sold in the branded channel.

The Canadian excise duty is our single largest cost of participating in the adult-use (branded) market in Canada.

For the nine months ended September 30, 2024, 76% of net sales were generated from branded flower, pre-rolls and cannabis derivative products compared with 82% for the nine months ended September 30, 2023.

Non-branded, international, and other sales accounted for 24% of Canadian Cannabis net sales for the nine months ended September 30, 2024, as compared with 18% for the nine months ended September 30, 2023.

For the three months ended March 31, 2025, 65% of net sales were generated from branded flower, pre-rolls and cannabis derivative products compared with 77% for the three months ended March 31, 2024.

Non-branded, international, and other sales accounted for 35% of Canadian Cannabis net sales for the three months ended March 31, 2025, as compared with 23% for the three months ended March 31, 2024.

The net average selling price of branded flower and pre-roll formats increased in 2025 compared to 2024.

Excluding pre-roll formats, the average net selling price of branded flower increased by 11% in 2025 due to a lower ratio of sales for our value brand Fraser Valley Weed Co.

The net average selling price of bulk non-branded flower increased by 33% and bulk trim increased by 43% in 2025, largely due to an increase in the market price, as well as a reduced need to move aged flower inventory compared to 2024.

The following table presents sales by Canadian Cannabis revenue stream, together with the impact of the excise tax, in U.S.

dollars and Canadian dollars, for the nine months ended September 30, 2024 and 2023:

For the Nine Months Ended September 30,

dollars and Canadian dollars, for the three months ended March 31, 2025 and 2024:

For the Three Months Ended March 31,

(in thousands of U.S.

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International sales

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(in thousands of Canadian dollars)

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Cost of Sales

Canadian Cannabis cost of sales for the nine months ended September 30, 2024 was ($84,842) compared with ($52,873) for the nine months ended September 30, 2023.

The increase of $31,969, or 60%, was primarily due to an increase in volume (kilograms) packaged and sold of branded products, as well as an increase in non-branded kilograms sold.

Gross Profit/Margin

Canadian Cannabis gross profit for the nine months ended September 30, 2024 was $29,812 compared with $29,114 for the nine months ended September 30, 2023.

The increase of $698, or 2%, was driven by higher sales in the first nine months of 2024.

Canadian Cannabis gross margin for the nine months ended September 30, 2024 was 26% compared with 36% for the nine months ended September 30, 2023, with the decrease due to unfavorable mix, with higher sales volume of non-brand-spec inventory within the non-branded sales channel as well as higher sales of value brands within the branded sales channel.

Canadian Cannabis cost of sales for the three months ended March 31, 2025 was $22,362 compared with $27,938 for the three months ended March 31, 2024.

The decrease of $5,576, or 20%, was primarily due to a decrease in volume (kilograms) packaged and sold of our branded and non-branded products and the impact of exchange rate fluctuations.

Canadian Cannabis gross profit for the three months ended March 31, 2025 was $12,475, a 31% increase compared to $9,508 for the three months ended March 31, 2024.

Canadian Cannabis gross margin for the three months ended March 31, 2025 was 36% compared with 25% for the three months ended March 31, 2024.

The increase in gross margin was due to higher sales volume of international and non-brand flower, as well as lower sales of value brands within the branded sales category.

Selling, General and Administrative Expenses

Canadian Cannabis selling, general and administrative expenses for the nine months ended September 30, 2024 increased $2,163 to ($24,436), or 21% of sales compared with ($22,273), or 27% of sales for the nine months ended September 30, 2023.

The increase in selling, general and administrative expenses was primarily due to higher commercial and marketing expenses.

Canadian Cannabis net income for the nine months ended September 30, 2024 was $3,399 compared with net income of $3,932 for the nine months ended September 30, 2023.

The decrease in net income was primarily due to an increase in selling, general and administrative expenses for the first nine months of 2024 as compared to the first nine months of 2023.

Canadian Cannabis selling, general and administrative expenses for the three months ended March 31, 2025 were $8,762, or 25%, of sales compared with $7,704, or 21%, of sales for the three months ended March 31, 2024.

The increase of $1,058 was primarily due to higher commercial and marketing expenses and incremental integration costs.

Canadian Cannabis net income for the three months ended March 31, 2025 was $3,032 compared with net income of $847 for the three months ended March 31, 2024.

The increase in net income was primarily due to the improved margins, partially offset by an increase in the tax provision expense of $562 and an increase in selling, general and administrative expenses.

Adjusted EBITDA

Adjusted EBITDA for Canadian Cannabis for the nine months ended September 30, 2024 was $13,643 compared with $13,273 for the nine months ended September 30, 2023.

Adjusted EBITDA for Canadian Cannabis for the three months ended March 31, 2025 was $6,698 compared with $4,073 for the three months ended March 31, 2024.

The increase of $2,695, or 64%, between periods was primarily due to improved margins in the Canadian Cannabis segment.

For additional information, refer to the reconciliation of Adjusted EBITDA to net (loss) income in “Non-GAAP Measures—Reconciliation of Net Loss to Adjusted EBITDA”.

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Cannabis segment consists of Balanced Health.

For the three and nine months ended September 30, 2024 and 2023, U.S.

For the three months ended March 31, 2025 and 2024, U.S.

Cannabis financial results are based on the results of Balanced Health.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Cannabis net sales for the three months ended September 30, 2024 was $3,943 compared with $4,988 for the three months ended September 30, 2023.

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

Cannabis net sales for the three months ended March 31, 2025 was $3,904 compared with $4,537 for the three months ended March 31, 2024.

The decrease of $633, or 14%, was primarily due to new restrictions on CBD sales in an additional eight states beginning July 1, 2024 and lower direct-to-consumer sales resulting from the proliferation of unregulated hemp-derived products on the market.

Cannabis sales were generated in the United States, with gross sales composed of 92% e-commerce sales, 7% retail sales and 1% miscellaneous.

Cannabis sales were generated in the United States, with gross sales composed of 94% e-commerce sales and 6% retail sales.

Cost of Sales

Cannabis cost of sales for the three months ended September 30, 2024 was ($1,443) compared with ($1,803) for the three months ended September 30, 2023.

The decrease of $360, or 20%, was primarily due to lower sales.

Gross Profit/Margin

U.S Cannabis gross profit for the three months ended September 30, 2024 decreased $685, or 22%, to $2,500, or a 63% gross margin, compared with $3,185, or a 64% gross margin, for the three months ended September 30, 2023.

Cannabis cost of sales for the three months ended March 31, 2025 was $1,311 compared with $1,842 for the three months ended March 31, 2024.

The decrease of $531, or 29%, was primarily due to cost efficiencies from the internalization of our gummy manufacturing and lower sales.

U.S Cannabis gross profit for the three months ended March 31, 2025 decreased $102, or 4%, to $2,593, or a 66% gross margin, compared with $2,695, or a 59% gross margin, for the three months ended March 31, 2024.

Selling, General and Administrative Expenses

Cannabis selling general and administrative expenses for the three months ended September 30, 2024 were ($2,692) compared with ($3,095) for the three months ended September 30, 2023.

Cannabis selling general and administrative expenses for the three months ended March 31, 2025 were $2,535 compared with $3,406 for the three months ended March 31, 2024.

The decrease of $871, or 26%, is due to more efficient marketing and brand spending and contract renegotiation.

Net (Loss) Income

Cannabis net loss for the three months ended September 30, 2024 was ($192) compared with net income of $79 for the three months ended September 30, 2023.

The decrease of $271 was primarily due to the lower sales.

Net Income (Loss)

Cannabis net income for the three months ended March 31, 2025 was $58 compared with net loss of ($711) for the three months ended March 31, 2024.

The increase of $769 was primarily due to the lower selling, general, and administrative expenses.

Adjusted EBITDA

Cannabis adjusted EBITDA for the three months ended September 30, 2024 was ($159) compared with $221 for the three months ended September 30, 2023.

The decrease of $380 was due to lower sales.

Cannabis adjusted EBITDA for the three months ended March 31, 2025 was $114 compared with ($615) for the three months ended March 31, 2024.

The improvement of $729 was primarily due to the lower selling, general, and administrative expenses.

For additional information, refer to the reconciliation of Adjusted EBITDA to net (loss) income in “Non-GAAP Measures—Reconciliation of Net Loss to Adjusted EBITDA”.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Cannabis net sales for the nine months ended September 30, 2024 decreased $2,489, or 16%, to $12,777 compared with $15,266 for the nine months ended September 30, 2023.

The decrease was primarily due to lower direct-to-consumer sales was primarily due to new restrictions on CBD sales in an additional eight states beginning July 1, 2024 and the proliferation of unregulated hemp-derived products on the market.

Cannabis sales were generated in the United States, with gross sales composed of 91% e-commerce sales, 7% retail sales and 2% miscellaneous.

NETHERLANDS CANNABIS SEGMENT RESULTS

The Netherlands Cannabis segment consists of Leli Holland.

Leli Holland commenced sales during the first quarter of 2025.

Leli Holland was not operational during the comparable quarter of 2024 and, as a result, comparative financial performance to the prior-year quarter is not meaningful.

Net sales for the three months ended March 31, 2025 was $486.

Cost of Sales

Cannabis cost of sales for the nine months ended September 30, 2024 was ($4,953) compared with ($5,285) for the nine months ended September 30, 2023.

The 6% decrease was primarily due lower sales and a shift in product mix as consumers moved to gummies and away from the higher margin tincture products.

Gross Profit/Margin

U.S Cannabis gross profit for the nine months ended September 30, 2024 decreased $2,157 to $7,824, or a 61% gross margin, compared with $9,981, or a 65% gross margin, for the nine months ended September 30, 2023.

Cost of sales for the three months ended March 31, 2025 was $285.

Selling, General and Administrative Expenses

Cannabis selling general and administrative expenses for the nine months ended September 30, 2024 were ($9,058) compared with ($10,098) for the nine months ended September 30, 2023.

The decrease of $1,040, or 10%, is due to more efficient marketing and brand spending and contract renegotiation.

Cannabis net loss for the nine months ended September 30, 2024 was ($13,173) compared with a net loss of ($125) for the nine months ended September 30, 2023.

The change was primarily due to the 2024 impairment charge of ($11,939) and lower sales at a lower gross margin.

Selling General and Administrative Expenses for the three months ended March 31, 2025 was $439.

Gross profit for the three months ended March 31, 2025 was $201, or a 41% gross margin.

Net loss for the three months ended March 31, 2025 was $242.

Adjusted EBITDA

Cannabis adjusted EBITDA for the nine months ended September 30, 2024 was ($1,014) compared with $424 for the nine months ended September 30, 2023 due to lower sales and a lower gross margin.

For additional information, refer to the reconciliation of Adjusted EBITDA to net (loss) income in “Non-GAAP Measures—Reconciliation of Net Loss to Adjusted EBITDA”.

Adjusted EBITDA for the three months ended March 31, 2025 was $77.

PRODUCE SEGMENT RESULTS – VF FRESH

The produce segment, VF Fresh, consists of VFLP and VFCLP.

VF Fresh’s comparative analysis are based on the consolidated results of VFLP and VFCLP for the three and nine months ended September 30, 2024 and 2023.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

VF Fresh sales for the three months ended September 30, 2024 were $42,770 compared with $35,712 for the three months ended September 30, 2023.

The increase of $7,058, or 20%, was primarily due to a 25% increase in pounds sold from Company-owned greenhouses and a 6% increase in volume from supply partners.

The increase in sales from Company-owned greenhouses of 25% was due to additional production from the Delta 2 facility, which was partially converted to produce in 2024.

This was partially offset by the Permian Basin facility not being used for production in 2024.

The average selling price for all produce sold during the three months ended September 30, 2024 compared with the three months ended September 30, 2023 was as follows:

VF Fresh’s comparative analysis are based on the consolidated results of VFLP and VFCLP for the three months ended March 31, 2025 and 2024.

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

VF Fresh sales for the three months ended March 31, 2025 were $37,421 compared with $36,094 for the three months ended March 31, 2024.

The increase of $1,327, or 4%, was primarily due to a 39% increase in volume from supply partners.

This was partially offset by a lower average selling price due to weaker market prices.

The average selling price for all produce sold during the three months ended March 31, 2025 compared with the three months ended March 31, 2024 was as follows:

tomatoes changed (15%), peppers changed (34%), cucumbers changed (9%), and mini cucumbers changed (1%).

Cost of Sales

VF Fresh cost of sales for the three months ended September 30, 2024 increased by $5,069, or 15%, to ($39,289) compared with ($34,220) for the three months ended September 30, 2023.

VF Fresh cost of sales for the three months ended March 31, 2025 increased by $8,919, or 27%, to $41,703 compared with $32,784 for the three months ended March 31, 2024.

The increase was primarily due to an increase from Company-owned greenhouses of $4,306, an increase from supply partners of $3,565, and an increase in freight expense of $1,048.

The increase in VF Fresh-owned greenhouses cost of sales was due to a 25% increase in pounds sold and the increase in supply partner cost of sales was due to an increase of 6% in product volume.

Gross Profit/Margin

VF Fresh gross profit for the three months ended September 30, 2024 was $3,481 compared with $1,492 for the three months ended September 30, 2023.

Gross margin for the three months ended September 30, 2024 was 8% compared with 4% for the three months ended September 30, 2023.

The increases in both gross profit and gross margin percentage were due to an increase in pounds sold at a lower cost per pound.

Selling, General and Administrative Expenses

VF Fresh selling, general and administrative expenses for the three months ended September 30, 2024 increased by $624, or 30%, to ($2,690) (6% of sales) compared with ($2,066) (6% of sales) for the three months ended September 30, 2023 due to higher accounting and legal fees.

Net Income (Loss)

VF Fresh net income for the three months ended September 30, 2024 was $376 compared with a net loss of ($951) for the three months ended September 30, 2023.

The increase of $1,327 was primarily due to higher volume at a stronger gross margin for the three months ended September 30, 2024.

Adjusted EBITDA

VF Fresh Adjusted EBITDA for the three months ended September 30, 2024 was $2,331 compared with $774 for the three months ended September 30, 2023.

The increase of $1,557 in Adjusted EBITDA was primarily due to an improvement in gross margin for the reasons described above.

For additional information, refer to the reconciliation of Adjusted EBITDA to net (loss) income in “Non-GAAP Measures—Reconciliation of Net Loss to Adjusted EBITDA”.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

VF Fresh sales for the nine months ended September 30, 2024 was $125,883, compared with $114,125 for the nine months ended September 30, 2023.

The increase in sales of $11,758, or 10%, was primarily due to an increase of 12% in pounds sold and an increase in supply partner average selling price, partially offset by a decrease in the average selling price from Company-owned greenhouses.

The average selling price for all produce sold during the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023 was as follows:

tomatoes changed (3%), peppers changed 23%, cucumbers changed (6%) and mini cucumbers changed (11%).

Cost of Sales

VF Fresh cost of sales for the nine months ended September 30, 2024 increased by $8,477, or 7%, to ($123,256) compared with ($114,779) for the nine months ended September 30, 2023.

The increase is primarily due to an increase from supply partners of $7,895, and an increase from Company-owned greenhouses of $1,104, partially offset by a decrease of lower freight expenses of $522.

The increase in supply partner costs is due to a 8% increase in pounds sold.

The increase in Company-owned greenhouse costs was due to a 15% increase in pounds sold partially offset by a lower cost per pound.

The decrease in freight costs is due to increased available drivers and decreases in fuel prices.

Gross Profit (Loss)/Margin

VF Fresh gross profit for the nine months ended September 30, 2024 was $2,627 compared with a gross loss of ($654) for the nine months ended September 30, 2023.

Gross margin for the nine months ended September 30, 2024 was 2% compared with (1%) for the nine months ended September 30, 2023.

The improvements in both gross profit and gross margin percentage were due to an increase from Company-owned greenhouse sales, an increase in supply partner sales, a decrease from Company-owned greenhouse cost per pound, and a decrease in freight costs.

The increase in VF Fresh-owned greenhouses cost of sales was due to a negative impact to the overall crop resulting from dust storms that occurred in March 2025, the increase in supply partner costs were due to higher spot price contract commitments, and the increased freight costs were due to the increase in product volume.

Gross (Loss) Profit

VF Fresh gross loss for the three months ended March 31, 2025 was ($4,282) compared with a gross profit of $3,310 for the three months ended March 31, 2024.

Gross margin for the three months ended March 31, 2025 was (11%) compared with 9% for the three months ended March 31, 2024.

The decreases in both gross profit and gross margin percentage were due to the increase in cost of sales at the Company-owned greenhouses and lower margins on supply partner volumes, whereas during the prior year, the decreases in both gross profit and gross margin percentage were due to unfavorable market prices.

Selling, General and Administrative Expenses

VF Fresh selling, general and administrative expenses for the nine months ended September 30, 2024 increased by $1,160, or 15%, to ($8,996) (7% of sales) compared with ($7,836) (7% of sales) for the nine months ended September 30, 2023 due to higher consulting, accounting, and legal fees.

VF Fresh net loss for the nine months ended September 30, 2024 was ($7,810) compared with a net loss of ($4,268) for the nine months ended September 30, 2023.

The change was primarily due to the ToBRFV Legal Settlement of $5,584 during the nine months ended September 30, 2023 that was not present in current-year period, partially offset by an increase in sales and improved margins for the nine months ended September 30, 2024.

VF Fresh selling, general and administrative expenses for the three months ended March 31, 2025 increased by $182, or 7%, to $2,875 (8% of sales) compared with $2,693 (7% of sales) for the three months ended March 31, 2024.

Net (Loss) Income

VF Fresh net loss for the three months ended March 31, 2025 was ($7,757) compared with a net income of $114 for the three months ended March 31, 2024.

The decrease of $7,871 was primarily due to a lower gross margin.

Adjusted EBITDA

VF Fresh Adjusted EBITDA decreased to ($1,991) for the nine months ended September 30, 2024 compared with $1,110 for the nine months ended September 30, 2023.

The change in Adjusted EBITDA was primarily due to the ToBRFV Legal Settlement of $5,584 during the nine months ended September 30, 2023, partially offset by the improved gross margin for the reasons identified above.

VF Fresh Adjusted EBITDA for the three months ended March 31, 2025 was ($5,122) compared with $2,028 for the three months ended March 31, 2024.

The decrease of $7,150 in Adjusted EBITDA was primarily due to a lower gross margin for the reasons described above.

For additional information, refer to the reconciliation of Adjusted EBITDA to net (loss) income in “Non-GAAP Measures—Reconciliation of Net Loss to Adjusted EBITDA”.

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Capital Resources

At September 30, 2024, cash and cash equivalents were $28,696 and working capital was $65,441, compared with cash, cash equivalents and restricted cash of $35,291 and working capital of $79,612 at December 31, 2023.

At March 31, 2025, cash and cash equivalents were $15,125 and working capital was $50,313, compared with cash and cash equivalents of $24,631 and working capital of $53,800 at December 31, 2024.

We believe that our existing cash, cash generated from our operating activities and the availability under our Operating Loan and Pure Sunfarms Loans (each as defined below), will provide us with sufficient liquidity to meet our working capital needs, repayments of our long-term debt and future contractual obligations and fund our planned capital expenditures for the next 12 months.

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Maximum Availability

Outstanding as of September 30, 2024

Outstanding as of March 31, 2025

Operating Loan

2 unchanged sentences

Pure Sunfarms Revolving Line of Credit

The Company’s borrowings under the FCC Term Loan (as defined below) and the Operating Loan (as defined below) (collectively the “Credit Facilities”) are subject to certain positive and negative covenants, including debt ratios, and the Company is required to maintain certain minimum working capital.

As of September 30, 2024, the Company was in compliance with all of its covenants under its Credit Facilities.

The Company was not in compliance with one financial covenant under the FCC Term Loan as of December 31, 2023, for which the Company received a waiver.

FCC measures our financial covenants once a year on the last calendar day of the year and our next annual testing date will be on December 31, 2024.

We can provide no assurance that we will be in compliance, or receive a waiver, for any non-compliance as of the next annual testing date.

Accrued interest payable on the Credit Facilities and Pure Sunfarms Loans as of September 30, 2024 and December 31, 2023 was $405 and $390, respectively.

The Company is required to comply with financial covenants.

At December 31, 2024, the Company was not in compliance with financial covenants related to the fixed charge coverage ratio under the FCC Term Loan (as defined below) and the PSF Term Loan (as defined below), for which the Company received waivers.

The covenants were reinstated at the end of the first quarter for the PSF Term Loan and at the end of the fiscal year for the FCC Term Loan.

On April 10, 2025, the Company entered into an Amended and Restated Credit Agreement (the “A&R Credit Agreement”) with FCC as the lender, which amended and restated the FCC Term Loan.

Among other things, the A&R Credit Agreement replaced the current financial covenants with more favorable financial covenants .

Under the Pure Sunfarms Secured Credit Facilities entered into on April 17, 2025, the Company is also required to maintain certain financial covenants.

We can provide no assurance that we will be in compliance, or receive a waiver, for any non-compliance of the financial covenants.

See “Risk Factors—Business and Operational Risk Factors—We are subject to restrictive covenants under our Credit Facilities” in our most recently filed Annual Report on Form 10-K.

Accrued interest payable on the Credit Facilities and Pure Sunfarms Loans as of March 31, 2025 and December 31, 2024 was $353 and $271, respectively.

These amounts are included in accrued liabilities in the accompanying Condensed Consolidated Statements of Financial Position.

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The Company has a term loan financing agreement with Farm Credit Canada ("FCC"), a Canadian creditor (the “FCC Term Loan”).

The non-revolving variable rate term loan has a maturity date of May 3, 2027 and a balance of $21,312 on September 30, 2024 and $22,788 on December 31, 2023.

The non-revolving variable rate term loan has a maturity date of May 3, 2027 and a balance of $20,329 on March 31, 2025 and $20,821 on December 31, 2024.

The outstanding balance is repayable by way of monthly installments of principal and interest, with the balance and any accrued interest to be paid in full on May 3, 2027.

As of September 30, 2024, borrowings under the FCC Term Loan agreement were subject to an interest rate of 8.81% per annum.

As of March 31, 2025 and December 31, 2024, borrowings under the FCC Term Loan agreement were subject to an interest rate of 7.87% and 8.12% per annum, respectively.

As collateral for the FCC Term Loan, the Company has provided promissory notes, a first mortgage on the VFF-owned Delta 1 and Texas greenhouse facilities, and general security agreements over its assets.

In addition, the Company has provided full recourse guarantees and has granted security interests in respect of the FCC Term Loan.

The carrying value of the assets and securities pledged as collateral as of September 30, 2024 and December 31, 2023 was $74,942 and $117,293, respectively.

The carrying value of the assets and securities pledged as collateral as of March 31, 2025 and December 31, 2024 was $69,613 and $77,682, respectively.

On April 10, 2025, the Company entered into the A&R Credit Agreement with respect to the FCC Term Loan.

Among other things, the A&R Credit Agreement (i) adds the Company as a new borrower, (ii) adds VF Clean Energy, Inc.

as a new guarantor, and (iii) replaces the fixed charged ratio covenant with a more favorable liquidity ratio covenant.

Operating Loan

The Company has a revolving line of credit agreement with Bank of Montreal (the "Operating Loan").

On March 13, 2023, the Company entered into a Note Modification Agreement (the “Modification”) to the Operating Loan.

The Modification eliminated the use of LIBOR as a basis to determine certain interest rates under the Operating Loan and transitioned to the Secured Overnight Financing Rate (“SOFR”) for such purposes.

The Company does not expect the Modification to materially change the amount of interest payable under the Operating Loan.

On May 24, 2024, the Company entered into an amendment to the Operating Loan, which extended the maturity date of the Operating Loan to May 24, 2027.

The Operating Loan is subject to margin requirements stipulated by the lender.

The Operating Loan had an outstanding balance of $4,000 and future availability of $4,556 on September 30, 2024.

The Operating Loan had an outstanding balance of $5,000 and future availability of $2,844 on March 31, 2025.

As collateral for the Operating Loan, the Company has provided promissory notes and a first priority security interest over its accounts receivable and inventory.

In addition, the Company has granted full recourse guarantees and security therein.

The carrying value of the assets pledged as collateral as of September 30, 2024 and December 31, 2023 was $23,233 and $28,034, respectively.

The carrying value of the assets pledged as collateral as of March 31, 2025 and December 31, 2024 was $23,755 and $27,136, respectively.

Pure Sunfarms Loans

Pure Sunfarms has a credit facility with the Business Development Bank of Canada (the "BDC Credit Facility"), a non-revolving credit facility (the “PSF Non-Revolving Facility”) and a term loan (the “PSF Term Loan”) with two Canadian chartered banks (collectively, with the BDC Credit Facility, the PSF Non-Revolving Facility, and the PSF Term Loan the “Pure Sunfarms Loans”).

As of March 31, 2025, Pure Sunfarms had a credit facility with the Business Development Bank of Canada (the "BDC Facility"), a non-revolving credit facility (the “PSF Non-Revolving Facility”) and a term loan (the “PSF Term Loan”) with two Canadian chartered banks (collectively, with the BDC Facility, the PSF Non-Revolving Facility, and the PSF Term Loan the “Pure Sunfarms Loans”).

In addition, Pure Sunfarms has a revolving line of credit (the “PSF Revolving Line of Credit”) with a Canadian chartered bank.

The PSF Revolving Line of Credit can be drawn for advances of up to C$15,000 and had an outstanding balance of $0 as of September 30, 2024 and December 31, 2023.

Interest under the PSF Revolving Line of Credit is payable at the Canadian prime rate plus an applicable margin per annum, payable monthly.

The PSF Non-Revolving Facility is secured by the Delta 2 and Delta 3 greenhouse facilities and contains customary financial and restrictive covenants.

As of September 30, 2024, Pure Sunfarms was in compliance with these financial covenants.

The outstanding amount on the PSF Non-Revolving Facility was $7,028 on September 30, 2024 and $8,298 on December 31, 2023.

Interest under the PSF Non-Revolving Facility is payable at the Canadian prime rate plus an applicable margin per annum, 8.45% as of September 30, 2024, payable quarterly.

Amounts outstanding under the PSF Non-Revolving Facility mature on February 7, 2026.

The outstanding amount on the PSF Term Loan was $11,560 on September 30, 2024 and $13,201 on December 31, 2023.

Interest under the PSF Term Loan is payable at the Canadian prime rate plus an applicable margin per annum, 8.45% as of September 30, 2024, payable quarterly.

The PSF Term Loan matures on February 7, 2026.

The outstanding amount under the BDC Credit Facility, a demand loan included in current liabilities as of September 30, 2024 and December 31, 2023, was $3,353 on September 30, 2024 and $3,771 on December 31, 2023.

Interest under the BDC Credit Facility is payable at an interest rate of 10.20%, payable monthly, and the amount outstanding matures on December 31, 2031.

Equity Offerings

On January 30, 2023, the Company issued and sold 18,350,000 Common Shares under a registered direct equity offering, at a price of $1.35 per share, resulting in net proceeds for approximately $23,300 after deducting commissions and offering expenses (the "January 2023 Equity Offering").

As part of the January 2023 Equity Offering the Company also issued 18,350,000 Common Warrants at an exercise price of $1.65 per share.

The Common Warrants became exercisable on July 31, 2023, and expire on July 30, 2028.

As described below, on April 17, 2025, Pure Sunfarms replaced the Pure Sunfarms Loans and the PSF Revolving Line of Credit with the Pure Sunfarms Secured Credit Facilities (as defined below).

As of March 31, 2025, the PSF Revolving Line of Credit could be drawn for advances of up to C$15,000 and had an outstanding balance of $0 as of March 31, 2025 and December 31, 2024.

Interest under the PSF Revolving Line of Credit was payable at the Canadian prime rate plus an applicable margin per annum, payable monthly.

As of March 31, 2025, the PSF Non-Revolving Facility was secured by the Delta 2 and Delta 3 greenhouse facilities and contains customary financial and restrictive covenants.

As of March 31, 2025, Pure Sunfarms was in compliance with these financial covenants.

The outstanding amount on the PSF Non-Revolving Facility was $5,921 on March 31, 2025 and $6,262 on December 31, 2024.

Interest under the PSF Non-Revolving Facility was payable at the Canadian prime rate plus an applicable margin per annum, 6.95% as of March 31, 2025, payable quarterly.

Amounts outstanding under the PSF Non-Revolving Facility would have matured on February 7, 2026.

The outstanding amount on the PSF Term Loan was $10,014 on March 31, 2025 and $10,436 on December 31, 2024.

Interest under the PSF Term Loan was payable at the Canadian prime rate plus an applicable margin per annum, 6.95% as of March 31, 2025, payable quarterly.

The PSF Term Loan would have matured on February 7, 2026.

The outstanding amount under the BDC Facility, a demand loan included in current liabilities was $2,939 on March 31, 2025 and $3,043 on December 31, 2024.

Interest under the BDC Facility was payable at an interest rate of 8.70%, payable monthly, and the amount outstanding would have matured on December 31, 2031.

On April 17, 2025, the Company entered into a secured credit facility with a Canadian chartered bank as administrative agent with an aggregate borrowing capacity of C$37.4 million, consisting of a maximum C$10.0 million revolving credit facility (the “Pure Sunfarms Revolving Credit Facility”), and a C$27.4 million term loan facility (the “Pure Sunfarms Term Loan Facility”, and collectively with the Pure Sunfarms Revolving Credit Facility, the “Pure Sunfarms Secured Credit Facilities”).

The Pure Sunfarms Secured Credit Facilities are secured by the Delta 2 and Delta 3 greenhouse facilities.

The Pure Sunfarms Secured Credit Facilities will be used for working capital and other general corporate purposes, and was used to replace, and repay remaining outstanding balances on, the Company’s (i) Pure Sunfarms Loans and (ii) the PSF Revolving Line of Credit.

The credit and guarantee agreements related to the Pure Sunfarms Loans and the PSF Revolving Line of Credit were likewise terminated.

The Pure Sunfarms Secured Credit Facilities can be drawn for advances of up to C$10.0 million.

The outstanding amount of the Pure Sunfarms Term Loan Facility will be repayable, on a quarterly basis, in an amount equal to C$1.0 million.

Any amount remaining unpaid will be due and payable in full on the maturity date, which is on February 7, 2028.

The loans under the Pure Sunfarms Secured Credit Facilities will accrue interest at a rate equal to, at the Company’s option, (a) the Canadian Prime Rate plus the applicable margin, or (b) the Canadian Overnight Repo Rate Average plus the applicable margin.

The applicable margin for the Pure Sunfarms Secured Credit Facility is determined based upon the leverage ratio.

The Pure Sunfarms Secured Credit Facilities also contain customary covenants, customary representations and warranties, affirmative covenants, financial covenants and events of default.

Summary of Cash Flows

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(in Thousands)

Cash, beginning of period

Net cash flow provided by (used in):

Net cash flow used in:

Operating activities

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Financing activities

Net cash (decrease) increase for the period

Net cash decrease for the period

Effect of exchange rate changes on cash

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Operating Activities

For the nine months ended September 30, 2024 and 2023, cash provided by operating activities were $9,936 and $6,805, respectively.

The operating activities for the nine months ended September 30, 2024 consisted of $5,302 in changes in non-cash working capital items and $4,634 in changes before non-cash working capital items, while operating activities for the nine months ended September 30, 2023 consisted of ($2,191) in changes in non-cash working capital items and $8,996 in changes before non-cash working capital items.

The improvement when comparing the change in before non-cash working capital items for 2024 with 2023 was primarily due to a reduction in Canadian Cannabis inventory as a result of higher sales in 2024 compared with 2023.

For the three months ended March 31, 2025 and 2024, cash used in operating activities were ($6,376) and ($50), respectively.

The operating activities for the three months ended March 31, 2025 consisted of ($4,209) in changes in non-cash working capital items and ($2,167) in changes before non-cash working capital items, while operating activities for the three months ended March 31, 2024 consisted of ($3,290) in changes in non-cash working capital items and $3,240 in changes before non-cash working capital items.

The reduction when comparing the change in before non-cash working capital items for 2025 with 2024 was primarily due to a decrease in VF Fresh gross margin partially offset by improvements in Canadian Cannabis gross margin in 2025 compared with 2024.

Investing Activities

For the nine months ended September 30, 2024 and 2023, cash used in investing activities were ($8,227) and ($3,523), respectively.

The increase in investing activities for the nine months ended September 30, 2024 was primarily due to capital expenditures to support the build out of our first Netherlands-based cannabis production facility.

Additional capital expenditures were made to support VF Fresh, Canadian Cannabis, and U.S.

For the three months ended March 31, 2025 and 2024, cash used in investing activities were ($2,839) and ($1,876), respectively.

The increase in investing activities for the three months ended March 31, 2025 was primarily due to capital expenditures made to support VF Fresh, Canadian Cannabis, and U.S.

Cannabis operations.

Financing Activities

For the nine months ended September 30, 2024 and 2023, cash (used in) provided by financing activities were ($8,118) and $15,560, respectively.

For the nine months ended September 30, 2024, cash used in financing activities consisted of debt repayments of ($4,301) and cash used for the acquisition of an additional 10% ownership interest in Rose LifeScience and additional 15% ownership interest in Leli.

For the nine months ended September 30, 2023, cash flows provided by financing activities consisted of $23,335 in net proceeds from the issuance of Common Shares, $83 in proceeds from the exercise of stock options and net repayments of debt of ($7,858) due to repayment of PSF's revolving line of credit.

For the three months ended March 31, 2025 and 2024, cash used in financing activities were ($384) and ($1,442), respectively.

For the three months ended March 31, 2025, cash (used in) provided by financing activities consisted of debt repayments of ($1,384) and a draw of $1,000 from the Operating Loan.

For the three months ended March 31, 2024, cash flows used by financing activities consisted of debt repayments of ($1,442).

Contractual Obligations and Commitments

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The following table reflects a reconciliation of net loss to Adjusted EBITDA, as presented by the Company:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(in thousands of U.S.

Amortization and depreciation

Foreign currency exchange (gain) loss

Interest expense, net

Provision for (recovery of) income taxes

Provision for income taxes attributable to non-controlling interest

Provision for income taxes

Share-based compensation

Interest expense for NCI's

Amortization for NCI's

Foreign currency exchange gain for NCI's

Share-based compensation for NCI's

Other expense, net for NCI's

Deferred financing fees

Goodwill and intangible asset impairments (1)

Other expense, net

Other expenses

Adjustments attributable to non-controlling interest

Adjusted EBITDA (1)

(1) Reflects impairment to goodwill and intangibles of $11,939 in U.S.

Cannabis that was based on recent historical performance, near-term forecasts, and the state of the CBD industry in the United States.

See “Critical Accounting Estimates and Judgments” below for more information .

(1) Adjusted EBITDA is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP.

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The following table reflects a reconciliation of segmented net loss to Adjusted EBITDA, as presented by the Company:

For The Three Months Ended September 30, 2024

(in thousands of U.S.

Cannabis Canada

Cannabis U.S.

Net income (loss)

Foreign currency exchange loss (gain)

Interest expense, net

Provision for (recovery of) income taxes

Provision for income taxes attributable to non-controlling interest

Share-based compensation

Interest expense for NCI's

Amortization for NCI's

Foreign currency exchange gain for NCI's

Share-based compensation for NCI's

Adjusted EBITDA (2)

For The Nine Months Ended September 30, 2024

For The Three Months Ended March 31, 2025

(in thousands of U.S.

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Cannabis U.S.

Cannabis Netherlands

Net (loss) income

Foreign currency exchange loss (gain)

Amortization and depreciation

Foreign currency exchange gain (loss)

Interest expense, net

Provision for (recovery of) income taxes

Provision for income taxes attributable to non-controlling interest

Provision for income taxes

Share-based compensation

Interest expense for NCI's

Amortization for NCI's

Foreign currency exchange gain for NCI's

Share-based compensation for NCI's

Other expense, net for NCI's

Deferred financing fees

Goodwill and intangible asset impairments (1)

Adjustments attributable to non-controlling interest

Adjusted EBITDA (1)

For The Three Months Ended September 30, 2023

For The Three Months Ended March 31, 2024

(in thousands of U.S.

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Cannabis U.S.

Net (loss) income

Foreign currency exchange loss

Cannabis Netherlands

Net income (loss)

Amortization and depreciation

Foreign currency exchange gain

Interest expense (income), net

Recovery of income taxes

Provision for (recovery of) income taxes

Share-based compensation

Interest expense for NCI's

Amortization for NCI's

Foreign currency exchange loss for NCI's

Share-based compensation for NCI's

Other expenses for NCI's

Deferred financing fees

Other expenses

Adjusted EBITDA (2)

For The Nine Months Ended September 30, 2023

(in thousands of U.S.

Cannabis Canada

Cannabis U.S.

Net (loss) income

Foreign currency exchange loss (gain)

Interest expense, net

(Recovery of) provision for income taxes

Share-based compensation

Interest expense for NCI's

Amortization for NCI's

Foreign currency exchange loss for NCI's

Share-based compensation for NCI's

Other expenses for NCI's

Deferred financing fees

Other expense, net

Adjustments attributable to non-controlling interest

Adjusted EBITDA (1)

(1) Reflects impairment to goodwill and intangibles of $11,939 in U.S.

Cannabis that was based on recent historical performance, near-term forecasts, and the state of the CBD industry in the United States.

See “Critical Accounting Estimates and Judgments” below for more information .

(1) Adjusted EBITDA is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP.

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To supplement the consolidated financial statements presented in accordance with U.S.

GAAP, we have presented constant currency adjusted financial measures for sales, cost of sales, selling, general and administrative, other income (expense), operating (loss) income, loss from consolidated entities, net loss, and Adjusted EBITDA for the three and nine months ended September 30, 2024, which are considered non-GAAP financial measures.

GAAP, we have presented constant currency adjusted financial measures for sales, cost of sales, selling, general and administrative, other income (expense), operating (loss) income, loss from consolidated entities, net loss, and Adjusted EBITDA for the three months ended March 31, 2025, which are considered non-GAAP financial measures.

We present constant currency information to provide a framework for assessing how our underlying operations performed excluding the effect of foreign currency rate fluctuations.

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dollars are converted into U.S.

dollars using the average exchange rates from the three and nine month comparative periods in 2023 rather than the actual average exchange rates in effect during the respective current periods.

dollars using the average exchange rates from the three month comparative period in 2024 rather than the actual average exchange rates in effect during the current period.

All growth comparisons relate to the corresponding period in 2024.

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The non-GAAP financial measures presented in this Quarterly Report should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with U.S.

The tables below set forth certain measures of consolidated results from continuing operations on a constant currency basis for the three and nine months ended September 30, 2024 compared with the three and nine months ended September 30, 2023 on an as reported and constant currency basis (in thousands):

The tables below set forth certain measures of consolidated results from continuing operations on a constant currency basis for the three months ended March 31, 2025 compared with the three months ended March 31, 2024 on an as reported and constant currency basis (in thousands):

As Adjusted for Constant Currency

For the Three Months Ended September 30,

For the Three Months Ended March 31,

As Reported Change

For the Three Months Ended September 30,

For the Three Months Ended March 31,

Constant Currency Change

1 unchanged sentence

Selling, general and administrative expenses

Other (expense) income, net

Other expense, net

Operating loss

1 unchanged sentence

Adjusted EBITDA - Constant Currency (1)

As Adjusted for Constant Currency

For the Nine Months Ended September 30,

As Reported Change

For the Nine Months Ended September 30,

Constant Currency Change

Cost of sales

Selling, general and administrative expenses

Other (expense) income, net

Goodwill and intangible asset impairments (1)

Operating (loss) income

Loss including non-controlling interests

Adjusted EBITDA - Constant Currency (2)

(1) Reflects impairment to goodwill and intangibles of $11,939 in U.S.

Cannabis that was based on recent historical performance, near-term forecasts, and the state of the CBD industry in the United States.

See “Critical Accounting Estimates and Judgments” below for more information .

(1) Adjusted EBITDA - Constant Currency is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP.

Therefore, Adjusted EBITDA - Constant Currency presented for these segments may not be comparable to similar measures presented by other issuers.

Therefore, Adjusted EBITDA - Constant Currency may not be comparable to similar measures presented by other issuers.

Management believes that Adjusted EBITDA - Constant Currency is a useful supplemental measure in evaluating the performance of the Company because it excludes non-recurring and other items that do not reflect the underlying business performance of the Company.

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The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses and related disclosure of contingent assets and liabilities.

As described in Note 5, Goodwill and Intangible Assets, in our Unaudited Condensed Consolidated Interim Financial Statements included in Part 1 of this Quarterly Report on Form 10-Q, during the three and nine months ended September 30, 2024 and 2023, the Company considered qualitative factors in assessing for impairment indicators for the Company’s U.S.

As described in Note 5, Goodwill and Intangible Assets, in our Unaudited Condensed Consolidated Interim Financial Statements included in Part 1 of this Quarterly Report on Form 10-Q, during the three months ended March 31, 2025 and 2024, 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.

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 underperformed relative to budget, a revised June 30, 2024 forecast which resulted in 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 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 recorded to the U.S.

Cannabis reporting unit.

Cannabis - U.S.

At June 30, 2024, 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 recorded 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 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

At September 30, 2024, 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 September 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.

At March 31, 2025, 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 goodwill and intangible assets for its reporting units to be below their carrying amounts.

At March 31, 2025, the carrying value of goodwill associated with our Cannabis – Canada segment was $42.4 million and the carrying value of intangible assets associated with our Cannabis – Canada segment was $20.9 million.

We believe that the estimates, assumptions and judgments involved in the accounting policies described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies.

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Interest Rate Risk

As of September 30, 2024, our variable interest rate debt was primarily related to our Credit Facilities and Term Loans.

As of March 31, 2025, our variable interest rate debt was primarily related to our Credit Facilities and Term Loans.

Outstanding borrowings under our Credit Facility and Term Loans bear interest at either the (a) Secured Overnight Financing Rate (“SOFR”) or (b) Canadian Prime Rate, as defined in the agreement, plus an applicable margin.

As of September 30, 2024, we had approximately $4,000 aggregate principal amount of outstanding revolving loans under our Operating Loan with an interest rate of 7.8% and we had approximately $43,253 in aggregate principal amounts of our Term Loans with a weighted average interest rate of 8.8%.

As of March 31, 2025, we had approximately $5,000 aggregate principal amount of outstanding revolving loans under our Operating Loan with an interest rate of 8.0% and we had approximately $39,203 in aggregate principal amounts of our Term Loans with a weighted average interest rate of 7.8%.

The current interest rates for outstanding revolving loans under our Credit Facility and Term Loans reflect basis point increases of approximately 0.7% over the comparable period in 2024.

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This risk increases in the current inflationary environment, in which the Federal Reserve has increased interest rates, resulting in an increase in our variable interest rates and related interest expense.

An additional 50 basis point increase in the applicable interest rates under our Credit Facility and Term Loan would have increased our interest expense by approximately $57 and $171 for the three and nine months ended September 30, 2024 and $65 and $131 for the three and nine months ended September 30, 2023.

An additional 50 basis point increase in the applicable interest rates under our Credit Facility and Term Loan would have increased our interest expense by approximately $50 for the three months ended March 31, 2025 and $59 for the three months ended March 31, 2024.

While we cannot predict our ability to refinance existing debt or the significance of the impact that interest rate movements will have on our existing debt, management evaluates our financial position on an ongoing basis.

Foreign Exchange Risk

As of September 30, 2024 and 2023, the Canadian/U.S.

As of March 31, 2025 and 2024, the Canadian/U.S.

foreign exchange rate was C$1.00 = US$0.6966 and C$1.00 = US$0.7383, respectively.

If all other variables remain constant, an increase of $0.10 in the Canadian dollar would have the following impact on the ending balances of certain statements of financial position items at September 30, 2024 and 2023 with the net foreign exchange gain or loss directly impacting net income (loss):

September 30, 2024

September 30, 2023

If all other variables remain constant, an increase of $0.10 in the Canadian dollar would have the following impact on the ending balances of certain statements of financial position items at March 31, 2025 and 2024 with the net foreign exchange gain or loss directly impacting net income (loss):

March 31, 2025

March 31, 2024

Financial assets

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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 2. Management’s Discussion and Analysis