Village Farms International, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report and the Management’s Discussion and Analysis of Financial Condition and Results of Operations and consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2024 (our "Annual Report on Form 10-K"). This discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on assumptions and estimates that are inherently subject to significant risks and uncertainties, and our actual results could differ materially from the results anticipated by our forward-looking statements. We encourage you to review the risks and uncertainties described in “Risk Factors” in Part I, Item 1A in our Annual Report on Form 10-K, and in Part II, Item 1A of this Quarterly Report. These risks and uncertainties could cause actual results to differ materially from those projected or implied by our forward-looking statements contained in this report. These forward-looking statements are made as of the date of this management’s discussion and analysis, and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by law. EXECUTIVE OVERVIEW Village Farms International, Inc. (“VFF”, together with its subsidiaries, the “Company”, “Village Farms”, “we” “us” or “our”) is a corporation existing under the Business Corporations Act (Ontario). The Company’s principal operating subsidiaries are Village Farms Canada Limited Partnership (“VFCLP”), Village Farms L.P. (“VFLP”), Pure Sunfarms Corp. (“Pure Sunfarms” or “PSF”), Balanced Health Botanicals, LLC (“Balanced Health”), Rose LifeScience Inc. (“Rose LifeScience” or “Rose”), Leli Holland B. V. (“Leli” or “Leli Holland”), and VF Clean Energy, Inc. (“VFCE”). The Company’s vision is to be recognized as an international leader in consumer products developed from plants, whereby we produce and market value-added products that are consistently preferred by consumers. To do so, we leverage decades of cultivation expertise, investment, and experience in fresh produce into branded and wholesale cannabis products within markets with legally permissible opportunities. In Canada, we converted two produce facilities to grow cannabis for the Canadian legal adult use (recreational) market. 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 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. In September 2021, our Canadian Cannabis business began exporting cannabis products to Australia for that country’s medical market. 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, 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. During September 2024, we completed our acquisition of the remaining 15% equity ownership interest in 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 cultivate tomatoes and market them through Village Farm Fresh (a Vanguard Holdings Company) under the Village Farms Fresh (“VF Fresh”) brand which sells to food distribution companies and mass retail stores. Our intention is to use our assets, expertise and experience (across cannabis, hemp, CBD and produce ecosystems) to participate in the global cannabis market subject to compliance with all applicable national laws and applicable stock exchange rules. Our Operating Segments Canadian Cannabis Segment Our Canadian Cannabis segment includes wholly owned Pure Sunfarms and an 80% ownership interest in Rose LifeScience. 21 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. U.S. Cannabis Segment Our U.S. 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™. Produce Segment Our Produce segment currently consists of VFCLP after the sales transfer with Vanguard Holdings in May 2025. Through our produce segment, we grow premium-quality, greenhouse-grown produce in Canada. These premium products are grown in sophisticated, highly intensive agricultural greenhouse facilities located in British Columbia. On May 30, 2025 the Company closed on the transformative transaction to privatize certain assets and operations of its Produce segment,, including its Marfa II and Fort Davis greenhouses, and all of its produce distribution centers, through a series of asset and lease transfers. The Company determined that the assets that had been disposed of met the criteria for discontinued operations presentation. For all periods presented, the operating results associated with the assets disposed of have been reclassified into net income (loss) from discontinued operations, net of income taxes, in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The associated assets and liabilities have been reflected as current and long-term assets and liabilities of discontinued operations in the Condensed Consolidated Statements of Financial Position, and the cash flows from the Company’s discontinued operations are presented in the Condensed Consolidated Statements of Cash Flows for all periods presented. For further information on the Transaction please refer to our Form 8-K filed with the SEC on June 5, 2025. The information contained within such Form 8-K is incorporated by reference herein. 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 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. Recent Developments and Updates Canadian Cannabis • Maintained a top three overall market share position in Canada and the number one position in dried flower year-to-date through the month of July, despite planned reductions in sales of lower-margin SKUs1; • Achieved the high end of its targeted gross margin range of 30-40% for the second consecutive quarter, with its strongest adjusted EBITDA performance in six years; • Refinanced its syndicated Canadian Cannabis Term Loans, consolidating three previous loans into one credit facility with two of its existing lenders. The new credit facility carries a variable interest rate below 6.0 percent, reflecting a 250 basis 22 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; • Subsequent to quarter end, published groundbreaking peer-reviewed research in Scientific Reports (Nature Portfolio), highlighting the natural variability of THC potency within cannabis plants, reinforcing a need for a greater focus on product quality versus potency and more transparent and accurate labeling across the industry; • Subsequent to quarter end, the Company launched innovative new windowed packaging for its flower products in the Canadian market, enabling consumers to see product quality in the package before purchase • Subsequent to quarter end, the Company announced that its Board of Directors unanimously approved an investment to expand cannabis cultivation capacity at its Delta, BC production campus to meet increasing demand in Canadian and International markets. The expansion will be funded with existing cash on hand, and is expected to yield an incremental 40 metric tonnes of annualized cannabis production once completed. 1. Based on estimated retail sales from HiFyre, other third parties and provincial boards. International Medical Cannabis (Reported Within Canadian Cannabis) • International export sales increased 690% year-over-year in the second quarter and 116% sequentially, driven by new customer relationships as well as increased sales from existing customers; • The Company achieved its previous full-year sales outlook for International export sales during the first six months of the year, and expects similar international export sales performance in the second half of 2025; • As a result of continued strength of sales during the third quarter, the Company now believes it has become one of the largest importers of medical cannabis to Europe 1 • Company continues to hold leading cultivars in Germany through third-party distribution partners 2 1. Based on German government data and Company estimates 2. Based on Company estimates and rankings compiled by German outlet Flowzz Netherlands Cannabis (Leli Holland) • Operations in the Company’s Phase I facility in Drachten continued to ramp toward full capacity during the second quarter, while demonstrating strong profitability and cash flow generation; • Leli Holland products are now represented in 66 of 80 participating coffeeshops; representing market penetration of 82.5%; • The Company has continued to introduce new product categories into the market and expects to launch hash products during the fourth quarter; • Construction of the Company’s Phase II facility in Groningen remains on track to be operational in Q1 2026. • Once completed, the Phase II facility is expected to quintuple total annualized production capacity. U.S. Cannabis • 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 and comply with all applicable regulatory requirements. Produce • On May 30, 2025 the Company closed on the previously-announced transaction to privatize certain assets and operations of its Produce segment. Under the terms of the agreement, the Company privatized Produce segment operations, including its Marfa II, Marfa I and Fort Davis greenhouses, and all of its produce distribution centers, as well as its third party produce distribution business, 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 partnership; • During the second quarter, the Company entered into service and supply agreements with Vanguard Food LP for produce production in its Delta 1 and Delta 2 greenhouses, which will continue supplying produce to Vanguard for a multi-year term. The Company’s Produce segment financial results are now predominantly comprised of activities related to operation of the Delta 1 and Delta 2 greenhouses. Following completion of the 2025 tomato crop, the Delta 2 greenhouse will no longer supply produce to Vanguard. Corporate 23 • During the second quarter, the Company regained compliance with the Nasdaq minimum closing bid price of US$1.00 per share listing requirement (NASDAQ Listing Rule 5550(a)(2). • Subsequent to quarter end, appointed Michael Carey as Corporate Treasurer. Presentation of Financial Results Our consolidated results of operations for the three and six months ended June 30, 2025 and 2024 presented below reflect the operations of our consolidated wholly-owned subsidiaries, our 70% ownership interest in Rose LifeScience through March 31, 2024, our 80% ownership interest in Rose LifeScience beginning on April 1, 2024, our 85% ownership interest in Leli through September 22, 2024, and our 100% ownership interest in Leli beginning on September 23, 2024. Foreign currency exchange rates All currency amounts in this Quarterly Report are stated in U.S. dollars, which is our reporting currency, unless otherwise noted. All references to “dollars” or “$” are to U.S. dollars. The assets and liabilities of our foreign operations are translated into dollars at the exchange rate in effect as of June 30, 2025, June 30, 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 to U.S. dollars is shown below: As of June 30, 2025 June 30, 2024 December 31, 2024 Spot rate 0.7324 0.7310 0.6957 Three-month period ended 0.7226 0.7308 N/A Six-month period ended 0.7096 0.7363 N/A 24 RESULTS OF OPERATIONS Consolidated Financial Performance (In thousands of U.S. dollars, except per share amounts, and unless otherwise noted) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Sales $ 59,899 $ 53,597 $ 99,579 $ 95,584 Cost of sales (37,557 ) (39,960 ) (63,057 ) (70,730 ) Gross profit 22,342 13,637 36,522 24,854 Selling, general and administrative expenses (15,411 ) (17,056 ) (30,030 ) (31,306 ) Interest expense (814 ) (901 ) (1,516 ) (1,815 ) Interest income 109 322 184 528 Foreign exchange gain (loss) 1,792 (403 ) 1,708 (1,281 ) Other income 4,430 45 4,451 149 Goodwill and intangible asset impairments — (11,939 ) — (11,939 ) Income (loss) before taxes and equity method investment income 12,448 (16,295 ) 11,319 (20,810 ) Provision for income taxes (2,503 ) (260 ) (3,486 ) (580 ) Equity method investment income, net of tax — — — — Income (loss) from continuing operations 9,945 (16,555 ) 7,833 (21,390 ) Income (loss) from discontinued operations, net of tax 16,294 (7,003 ) 11,291 (4,847 ) Income (loss) including non-controlling interests 26,239 (23,558 ) 19,124 (26,237 ) Less: net loss (income) attributable to non-controlling interests, net of tax 258 9 670 (164 ) Net income (loss) attributable to Village Farms International, Inc. shareholders $ 26,497 $ (23,549 ) $ 19,794 $ (26,401 ) Adjusted EBITDA from continuing operations $ 17,111 $ 2,914 $ 20,560 $ 3,830 Adjustments attributable to discontinued operations (3,851 ) (6,473 ) (7,219 ) (3,798 ) Adjusted EBITDA (1) $ 13,260 $ (3,559 ) $ 13,341 $ 32 Basic income (loss) per share attributable to Village Farms International, Inc. shareholders from: Continuing operations $ 0.09 $ (0.15 ) $ 0.08 $ (0.20 ) Discontinued operations 0.15 (0.06 ) 0.10 (0.04 ) Basic income (loss) per share attributable to Village Farms International, Inc. shareholders $ 0.24 $ (0.21 ) $ 0.18 $ (0.24 ) Diluted income (loss) per share attributable to Village Farms International, Inc. shareholders from: Continuing operations $ 0.10 $ (0.15 ) $ 0.08 $ (0.20 ) Discontinued operations $ 0.14 $ (0.06 ) $ 0.10 $ (0.04 ) Diluted income (loss) per share attributable to Village Farms International, Inc. shareholders $ 0.24 $ (0.21 ) $ 0.18 $ (0.24 ) (1) Adjusted EBITDA is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA may not be comparable to similar measures presented by other issuers. Management believes that Adjusted EBITDA is a useful supplemental measure in evaluating the performance of the Company because it excludes non-recurring and other items that do not reflect our business performance. 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 six months ended June 30, 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 six months ended June 30, 2025 and 2024 is included below. The consolidated results include all five of our operating segments: Canadian Cannabis, U. S. Cannabis, Cannabis Netherlands, Produce, 25 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 June 30, 2025 Compared to Three Months Ended June 30, 2024 Sales Sales for the three months ended June 30, 2025 were $59,899 compared with $53,597 for the three months ended June 30, 2024. The increase of $6,302, or 12%, was primarily due to an increase in Canadian Cannabis sales of $3,773, first year sales from Leli of $2,483, and an increase in Produce sales of $140, partially offset by a decrease in U.S. Cannabis sales of $456. For additional information, refer to “Segmented Results of Operations” below. Cost of Sales Cost of sales for the three months ended June 30, 2025 were $37,557 compared with $39,960 for the three months ended June 30, 2024. The decrease of $2,403, or 6%, was primarily due to a decrease in Canadian Cannabis cost of sales of $2,990, a decrease in U.S. Cannabis cost of sales of $263 and a decrease in Produce cost of sales of $234 partially offset by the cost of first year sales of Leli of $1,047. For additional information, refer to “Segmented Results of Operations” below. Gross Profit Gross profit for the three months ended June 30, 2025 was $22,342 compared with $13,637 for the three months ended June 30, 2024. The increase of $8,705, or 64%, was primarily due to an increase in gross profit at Canadian Cannabis of $6,763, the gross profit on first year sales of Leli of $1,436, and an increase in gross profit at Produce of $374. 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 June 30, 2025 were $15,411 (26% of sales) compared with $17,056 (32% of sales) for the three months ended June 30, 2024. The decrease of $1,645, or 10%, was primarily due a decrease in share based compensation of $2,073. For additional information, refer to “Segmented Results of Operations” below. For the Three Months Ended June 30, 2025 2024 Selling, general and administrative expenses $ 15,288 $ 14,860 Share-based compensation 123 2,196 Total selling, general and administrative expenses $ 15,411 $ 17,056 Interest Expense Interest expense for the three months ended June 30, 2025 was $814 compared with $901 for the three months ended June 30, 2024. Interest Income Interest income for the three months ended June 30, 2025 and was $109 compared with $322 for the three months ended June 30, 2024. Other Income Other income for the three months ended June 30, 2025 was $4,430 compared with $45 for the three months ended June 30, 2024. Other income is primarily attributable to favorable vendor settlements relating to the partial recovery of operational losses from the Tomato Brown Rugose Fruit Virus (“ToBRFV”) infestation. Goodwill and Intangible Asset Impairments Goodwill and Intangible Assets Impairments for the three months ended June 30, 2025 was $0 compared to $11,939 for the three months ended June 30, 2024. The impairment was primarily related to the U.S. Cannabis reporting unit as a result of 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. Income (Loss) Before Taxes and Equity Method Investment Income Income before taxes for the three months ended June 30, 2025 was $12,448 compared with a loss before taxes of $16,295 for the three months ended June 30, 2024. The change of $28,743 was primarily due to the improved gross margins and a favorable 26 vendor settlement during the three months ended June 30, 2025 and an impairment charge of $11,939 during the three months ended June 30, 2024. Income (loss) from discontinued operations, net of tax Income (loss) from discontinued operations, net consists of the following: For the Three Months Ended June 30, 2025 2024 Loss from discontinued operations, net of tax $ (2,826 ) $ (7,003 ) Gain on sale of assets, net of tax 19,120 — Net income (loss) from discontinued operations, net of tax $ 16,294 $ (7,003 ) Net Income (Loss) Attributable to Village Farms International, Inc. Shareholders Net income attributable to Village Farms International, Inc. shareholders for the three months ended June 30, 2025 was $26,497 compared with a net loss of $23,549 for the three months ended June 30, 2024. The increase of $50,046 was primarily due to the improved gross margins, a favorable vendor settlement during the three months ended June 30, 2025, an improvement on income (loss) from discontinued operations, net of tax of $23,297, and an impairment charge of $11,939 during the three months ended June 30, 2024. Adjusted EBITDA Adjusted EBITDA for the three months ended June 30, 2025 was $13,260 compared with ($3,559) for the three months ended June 30, 2024. The change was mainly driven by improved margins on Canadian Cannabis and the favorable vendor settlement in Produce. 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”. Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 Sales Sales for the six months ended June 30, 2025 were $99,579 compared with $95,584 for the six months ended June 30, 2024. The increase of $3,995, or 4%, was primarily due to an increase in Canadian Cannabis sales of $1,164, first year sales from Leli of $2,969, and Produce sales of $163, partially offset by a decrease in U.S. Cannabis sales of $1,089, For additional information, refer to “Segmented Results of Operations” below. Cost of Sales Cost of sales for the six months ended June 30, 2025 were $63,057 compared with $70,730 for the six months ended June 30, 2024. The decrease of $7,673, or 11%, was primarily due to a decrease in both Canadian Cannabis cost of sales of $8,566 and U.S. Cannabis cost of sales of $794, partially offset by the cost of first year sales on Leli of $1,332 and an increase in Produce cost of sales of $245. For additional information, refer to “Segmented Results of Operations” below. Gross Profit Gross profit for the six months ended June 30, 2025 was $36,522 compared with $24,854 for the six months ended June 30, 2024. The increase of $11,668, or 47%, was primarily due to an increase in gross profit at Canadian Cannabis of $9,730, and gross margin on first year sales of Leli of $1,637, partially offset by a decrease in gross profit at US Cannabis of $295. For additional information, refer to “Segmented Results of Operations” below. Selling, General and Administrative Expenses Selling, general and administrative expenses for the six months ended June 30, 2025 were $30,030 (30% of sales) compared with $31,306 (33% of sales) for the six months ended June 30, 2024. The decrease of $1,276, or 4% was primarily due a decrease in share based compensation of $2,333. For additional information, refer to “Segmented Results of Operations” below. For the Six Months Ended June 30, 2025 2024 Selling, general and administrative expenses $ 29,762 $ 28,705 Share-based compensation 268 2,601 Total selling, general and administrative expenses $ 30,030 $ 31,306 Interest Expense 27 Interest expense for the six months ended June 30, 2025 was $1,516 compared with $1,815 for the six months ended June 30, 2024. The decrease of $299, or 16%, 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 six months ended June 30, 2025 and was $184 compared with $528 for the six months ended June 30, 2024. Other Income Other income for the six months ended June 30, 2025 was $4,451 compared with $149 for the six months ended June 30, 2024. Other income is primarily attributable to favorable vendor settlements relating to the partial recovery of operational losses from the ToBRFV infestation. Goodwill and Intangible Asset Impairments Goodwill and Intangible Assets Impairments for the six months ended June 30, 2025 was $0 compared to $11,939 for the six months ended June 30, 2024. The impairment was primarily related to the U.S. Cannabis reporting unit as a result of 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. Income (Loss) Before Taxes and Equity Method Investment Income Income before taxes for the six months ended June 30, 2025 was $11,319 compared with a loss before taxes of $20,810 for the six months ended June 30, 2024. The change of $32,129 was primarily due to the improved gross margins and a favorable vendor settlement during the six months ended June 30, 2025 and an impairment charge of $11,939 during the six months ended June 30, 2024. Income (loss) from discontinued operations, net of tax Income (loss) from discontinued operations, net consists of the following: For the Six Months Ended June 30, 2025 2024 Loss from discontinued operations, net of tax $ (7,829 ) $ (4,847 ) Gain on sale of assets, net of tax 19,120 — Net income (loss) from discontinued operations, net of tax $ 11,291 $ (4,847 ) Net Income (Loss) Attributable to Village Farms International, Inc. Shareholders Net income attributable to Village Farms International, Inc. shareholders for six months ended June 30, 2025 was $19,794 compared with a net loss of $26,401 for the six months ended June 30, 2024. The change of $46,195 was primarily due to the improved gross margins and a favorable vendor settlement during the six months ended June 30, 2025, an improvement on income (loss) from discontinued operations, net of tax of $16,138, and an impairment charge of $11,939 during the six months ended June 30, 2024. Adjusted EBITDA Adjusted EBITDA for the six months ended June 30, 2025 was $13,341 compared with $32 for the six months ended June 30, 2024. The change was mainly driven by improved margins on Canadian Cannabis and the favorable vendor settlement in Produce. 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”. 28 SEGMENTED RESULTS OF OPERATIONS (In thousands of U.S. dollars, except per share amounts, and unless otherwise noted) For The Three Months Ended June 30, 2025 Produce Cannabis Canada Cannabis U.S. Clean Energy Cannabis Netherlands Corporate Total Sales $ 8,574 $ 44,518 $ 3,841 $ 483 $ 2,483 $ — $ 59,899 Cost of sales (7,975 ) (27,050 ) (1,405 ) (80 ) (1,047 ) — (37,557 ) Selling, general and administrative expenses (870 ) (8,604 ) (2,445 ) 27 (557 ) (2,962 ) (15,411 ) Other income (expense), net 4,471 (290 ) (217 ) — — 1,553 5,517 Income (loss) before taxes and equity method investment income 4,200 8,574 (226 ) 430 879 (1,409 ) 12,448 (Recovery of) provision for income taxes 69 (2,343 ) — (204 ) (44 ) 19 (2,503 ) Equity method investment income, net of tax — — — — — — — Income (loss) from continuing operations 4,269 6,231 (226 ) 226 835 (1,390 ) 9,945 Income from discontinued operations net of tax 16,294 — — — — — 16,294 Income (loss) including non-controlling interests 20,563 6,231 (226 ) 226 835 (1,390 ) 26,239 Less: net loss attributable to non-controlling interests, net of tax — 258 — — — — 258 Net income (loss) $ 20,563 $ 6,489 $ (226 ) $ 226 $ 835 $ (1,390 ) $ 26,497 Adjusted EBITDA from continuing operations $ 6,403 $ 11,860 $ 45 $ 430 $ 1,218 $ (2,845 ) $ 17,111 Adjustments attributable to discontinued operations (3,851 ) - - - - - (3,851 ) Adjusted EBITDA (1) $ 2,552 $ 11,860 $ 45 $ 430 $ 1,218 $ (2,845 ) $ 13,260 Basic income (loss) per share from continuing operations $ 0.03 $ 0.06 $ - $ - $ 0.01 $ (0.01 ) $ 0.09 Basic income per share from discontinued operations $ 0.15 $ - $ - $ - $ - $ - $ 0.15 Basic income (loss) per share $ 0.18 $ 0.06 $ - $ - $ 0.01 $ (0.01 ) $ 0.24 Diluted income (loss) per share from continuing operations $ 0.04 $ 0.06 $ - $ - $ 0.01 $ (0.01 ) $ 0.10 Diluted income per share from discontinued operations $ 0.14 $ - $ - $ - $ - $ - $ 0.14 Diluted income (loss) per share $ 0.18 $ 0.06 $ - $ - $ 0.01 $ (0.01 ) $ 0.24 29 For The Three Months Ended June 30, 2024 Produce Cannabis Canada Cannabis U.S. Clean Energy Cannabis Netherlands Corporate Total Sales $ 8,434 $ 40,745 $ 4,297 $ 121 $ — $ — $ 53,597 Cost of sales (8,209 ) (30,040 ) (1,668 ) (43 ) — — (39,960 ) Selling, general and administrative expenses (1,003 ) (8,749 ) (2,960 ) (17 ) (341 ) (3,986 ) (17,056 ) Other expense, net (523 ) (270 ) — — — (144 ) (937 ) Goodwill and intangible asset impairments — — (11,939 ) — — — (11,939 ) Income (loss) before taxes and equity method investment income (1,301 ) 1,686 (12,270 ) 61 (341 ) (4,130 ) (16,295 ) Recovery of (provision for) income taxes 4 (259 ) — — — (5 ) (260 ) Equity method investment income, net of tax — — — — — — — (Loss) income from continuing operations (1,297 ) 1,427 (12,270 ) 61 (341 ) (4,135 ) (16,555 ) Loss from discontinued operations net of tax (7,003 ) — — — — — (7,003 ) (Loss) income including non-controlling interests (8,300 ) 1,427 (12,270 ) 61 (341 ) (4,135 ) (23,558 ) Less: net (income) loss attributable to non-controlling interests, net of tax — (43 ) — — 52 — 9 Net (loss) income $ (8,300 ) $ 1,384 $ (12,270 ) $ 61 $ (289 ) $ (4,135 ) $ (23,549 ) Adjusted EBITDA from continuing operations $ 123 $ 4,818 $ (240 ) $ 61 $ (23 ) $ (1,825 ) $ 2,914 Adjustments attributable to discontinued operations (6,473 ) - - - - - (6,473 ) Adjusted EBITDA (1) $ (6,350 ) $ 4,818 $ (240 ) $ 61 $ (23 ) $ (1,825 ) $ (3,559 ) Basic (loss) income per share from continuing operations $ (0.01 ) $ 0.01 $ (0.11 ) $ - $ - $ (0.04 ) $ (0.15 ) Basic loss per share from discontinued operations $ (0.06 ) $ - $ - $ - $ - $ - $ (0.06 ) Basic (loss) income per share $ (0.07 ) $ 0.01 $ (0.11 ) $ - $ - $ (0.04 ) $ (0.21 ) Diluted (loss) income per share from continuing operations $ (0.01 ) $ 0.01 $ (0.11 ) $ - $ - $ (0.04 ) $ (0.15 ) Diluted loss per share from discontinued operations $ (0.06 ) $ - $ - $ - $ - $ - $ (0.06 ) Diluted (loss) income per share $ (0.07 ) $ 0.01 $ (0.11 ) $ - $ - $ (0.04 ) $ (0.21 ) 30 For The Six Months Ended June 30, 2025 Produce Cannabis Canada Cannabis U.S. Clean Energy Leli Corporate Total Sales $ 8,601 $ 79,355 $ 7,745 $ 909 $ 2,969 $ — $ 99,579 Cost of sales (9,444 ) (49,412 ) (2,716 ) (153 ) (1,332 ) — (63,057 ) Selling, general and administrative expenses (1,585 ) (17,366 ) (4,980 ) (1 ) (996 ) (5,102 ) (30,030 ) Other income (expense), net 3,943 (492 ) (217 ) — — 1,593 4,827 Income (loss) before taxes and equity method investment income 1,515 12,085 (168 ) 755 641 (3,509 ) 11,319 Provision for income taxes — (3,234 ) — (204 ) (48 ) — (3,486 ) Equity method investment income, net of tax — — — — — — — Income (loss) from continuing operations 1,515 8,851 (168 ) 551 593 (3,509 ) 7,833 Income from discontinued operations net of tax 11,291 — — — — — 11,291 Income (loss) including non-controlling interests 12,806 8,851 (168 ) 551 593 (3,509 ) 19,124 Less: net loss attributable to non-controlling interests, net of tax — 670 — — — — 670 Net income (loss) $ 12,806 $ 9,521 $ (168 ) $ 551 $ 593 $ (3,509 ) $ 19,794 Adjusted EBITDA from continuing operations $ 4,649 $ 18,558 $ 159 $ 755 $ 1,295 $ (4,856 ) $ 20,560 Adjustments attributable to discontinued operations (7,219 ) - - - - - (7,219 ) Adjusted EBITDA (1) $ (2,570 ) $ 18,558 $ 159 $ 755 $ 1,295 $ (4,856 ) $ 13,341 Basic (loss) income per share from continuing operations $ 0.01 $ 0.08 $ - $ 0.01 $ 0.01 $ (0.03 ) $ 0.08 Basic (loss) income per share from discontinued operations $ 0.10 $ - $ - $ - $ - $ - $ 0.10 Basic (loss) income per share $ 0.11 $ 0.08 $ - $ 0.01 $ 0.01 $ (0.03 ) $ 0.18 Diluted (loss) income per share from continuing operations $ 0.01 $ 0.08 $ - $ 0.01 $ 0.01 $ (0.03 ) $ 0.08 Diluted (loss) income per share from discontinued operations $ 0.10 $ - $ - $ - $ - $ - $ 0.10 Diluted (loss) income per share $ 0.11 $ 0.08 $ - $ 0.01 $ 0.01 $ (0.03 ) $ 0.18 31 For The Six Months Ended June 30, 2024 Produce Cannabis Canada Cannabis U.S. Clean Energy Cannabis Netherlands Corporate Total Sales $ 8,438 $ 78,191 $ 8,834 $ 121 $ — $ — $ 95,584 Cost of sales (9,199 ) (57,978 ) (3,510 ) (43 ) — — (70,730 ) Selling, general and administrative expenses (1,559 ) (16,453 ) (6,366 ) (37 ) (704 ) (6,187 ) (31,306 ) Other expense, net (1,023 ) (671 ) — — — (725 ) (2,419 ) Goodwill and intangible asset impairments — — (11,939 ) — — — (11,939 ) Income (loss) before taxes and equity method investment income (3,343 ) 3,089 (12,981 ) 41 (704 ) (6,912 ) (20,810 ) Recovery of (provision for) income taxes 4 (588 ) — — — 4 (580 ) Equity method investment income, net of tax — — — — — — — (Loss) income from continuing operations (3,339 ) 2,501 (12,981 ) 41 (704 ) (6,908 ) (21,390 ) Loss from discontinued operations net of tax (4,847 ) — — — — — (4,847 ) (Loss) income including non-controlling interests (8,186 ) 2,501 (12,981 ) 41 (704 ) (6,908 ) (26,237 ) Less: net (income) loss attributable to non-controlling interests, net of tax — (270 ) — — 106 — (164 ) Net (loss) income $ (8,186 ) $ 2,231 $ (12,981 ) $ 41 $ (598 ) $ (6,908 ) $ (26,401 ) Adjusted EBITDA from continuing operations $ (524 ) $ 8,891 $ (855 ) $ 41 $ (65 ) $ (3,658 ) $ 3,830 Adjustments attributable to discontinued operations (3,798 ) - - - - - (3,798 ) Adjusted EBITDA (1) $ (4,322 ) $ 8,891 $ (855 ) $ 41 $ (65 ) $ (3,658 ) $ 32 Basic (loss) income per share from continuing operations $ (0.03 ) $ 0.02 $ (0.12 ) $ - $ (0.01 ) $ (0.06 ) $ (0.20 ) Basic loss per share from discontinued operations $ (0.04 ) $ - $ - $ - $ - $ - $ (0.04 ) Basic (loss) income per share $ (0.07 ) $ 0.02 $ (0.12 ) $ - $ (0.01 ) $ (0.06 ) $ (0.24 ) Diluted (loss) income per share from continuing operations $ (0.03 ) $ 0.02 $ (0.12 ) $ - $ (0.01 ) $ (0.06 ) $ (0.20 ) Diluted loss per share from discontinued operations $ (0.04 ) $ - $ - $ - $ - $ - $ (0.04 ) Diluted (loss) income per share $ (0.07 ) $ 0.02 $ (0.12 ) $ - $ (0.01 ) $ (0.06 ) $ (0.24 ) (1) Adjusted EBITDA is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA may not be comparable to similar measures presented by other issuers. Management believes that Adjusted EBITDA is a useful supplemental measure in evaluating the performance of the Company because it excludes non-recurring and other items that do not reflect our business performance. 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. CANADIAN CANNABIS SEGMENT RESULTS 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 six months ended June 30, 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 June 30, 2025 Compared to Three Months Ended June 30, 2024 Sales Canadian Cannabis net sales for the three months ended June 30, 2025 were $44,518 compared with $40,745 for the three months ended June 30, 2024. The increase of $3,773, or 9%, was primarily driven by an increase in international sales of $10,475, primarily driven by continued strength in export volumes to Germany, partially offset by a decrease in net branded sales of $5,573, reflecting a planned shift away from value-based product offerings, and a decrease in non-branded sales of $1,189. Canadian Cannabis continues to pay a burdensome excise tax on its branded sales (sales to provincial distributors). For the three months ended June 30, 2025, the Company incurred excise duties of $14,812 (C$20,504), or 37% of gross branded sales, compared with $19,815 (C$27,114), or 39% of gross branded sales, for the three months ended June 30, 2024. The decrease of $5,003 (C$6,610), or 25%, was due to a decrease in kilograms sold in the branded channel. The Canadian excise duty is our single largest cost of participating in the branded adult-use market in Canada. 32 For the three months ended June 30, 2025, 57% of net sales were generated from branded flower, pre-rolls and cannabis derivative products compared with 75% for the three months ended June 30, 2024. Non-branded, international, and other sales accounted for 43% of Canadian Cannabis net sales for the three months ended June 30, 2025, as compared with 25% for the three months ended June 30, 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 38%, due to a reduced need to move aged flower inventory compared to 2024. Bulk trim decreased by 16% in 2025, due to a large sales at above average price in Q2 2024, offset by higher potencies driving slightly higher average prices during 2025. The net average selling price of International sales decreased by 8% due to a shift in product mix favoring bulk flower over packaged flower. 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 June 30, 2025 and 2024: For the Three Months Ended June 30, (in thousands of U.S. dollars) 2025 2024 Branded sales $ 39,774 $ 50,350 Non-branded sales 7,077 8,266 International sales 11,980 1,505 Other 499 439 Less: excise taxes (14,812 ) (19,815 ) Net Sales $ 44,518 $ 40,745 For the Three Months Ended June 30, (in thousands of Canadian dollars) 2025 2024 Branded sales $ 55,041 $ 68,896 Non-branded sales 9,613 11,314 International sales 16,579 2,059 Other 690 601 Less: excise taxes (20,504 ) (27,114 ) Net Sales $ 61,419 $ 55,756 Cost of Sales Canadian Cannabis cost of sales for the three months ended June 30, 2025 was $27,050 compared with $30,040 for the three months ended June 30, 2024. The decrease of $2,990, or 10%, was primarily due to a decrease in volume (kilograms) packaged and sold of our branded and non-branded products and a shift in International sales mix favoring bulk flower which has a lower average cost per gram over packaged flower. Gross Profit Canadian Cannabis gross profit for the three months ended June 30, 2025 was $17,468, a 63% increase compared to $10,705 for the three months ended June 30, 2024. Canadian Cannabis gross margin for the three months ended June 30, 2025 was 39% compared with 26% for the three months ended June 30, 2024. The increase in gross margin was due to higher sales volume of bulk flower in International sales, 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 three months ended June 30, 2025 were $8,604, or 19%, of sales compared with $8,749, or 21%, of sales for the three months ended June 30, 2024. Net Income Canadian Cannabis net income for the three months ended June 30, 2025 was $6,489 compared with net income of $1,384 for the three months ended June 30, 2024. The increase in net income was primarily due to the improved margins, partially offset by an increase in the tax provision expense of $2,084. Adjusted EBITDA Adjusted EBITDA for Canadian Cannabis for the three months ended June 30, 2025 was $11,860 compared with $4,818 for the three months ended June 30, 2024. The increase of $7,042, or 146%, between periods was primarily due to higher sales at 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”. 33 Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 Sales Canadian Cannabis net sales for the six months ended June 30, 2025 were $79,355 compared with $78,191 for the six months ended June 30, 2024. The increase of $1,164, or 1%, was primarily driven by an increase in international sales of $14,365, primarily driven by continued strength in export volumes to Germany, partially offset by a decrease in net branded sales, reflecting a planned shift away from value-based product offerings. Canadian Cannabis continues to pay a burdensome excise tax on its branded sales (sales to provincial distributors). For the six months ended June 30, 2025, the Company incurred excise duties of $28,759 (C$40,520), or 38% of gross branded sales, compared with $39,518 (C$53,679), or 40% of gross branded sales, for the six months ended June 30, 2024. The decrease of $10,759 (C$13,159), or 27%, 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 six months ended June 30, 2025, 60% of net sales were generated from branded flower, pre-rolls and cannabis derivative products compared with 76% for the six months ended June 30, 2024. Non-branded, international, and other sales accounted for 40% of Canadian Cannabis net sales for the six months ended June 30, 2025, as compared with 24% for the six months ended June 30, 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 45%, due primarily to a reduced need to move aged flower inventory compared to 2024. Bulk trim pricing increased by 12% in 2025, largely due to an increase in the market price and higher potencies leading to higher average prices offset by large sales at above average price in Q2 2024. The net average selling price of International sales decreased by 11% due to a shift in product mix favoring bulk flower over packaged flower. 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 six months ended June 30, 2025 and 2024: For the Six Months Ended June 30, (in thousands of U.S. dollars) 2025 2024 Branded sales $ 76,472 $ 99,073 Non-branded sales 13,367 14,736 International sales 17,368 3,003 Other 907 896 Less: excise taxes (28,759 ) (39,518 ) Net Sales $ 79,355 $ 78,191 For the Six Months Ended June 30, (in thousands of Canadian dollars) 2025 2024 Branded sales $ 107,726 $ 134,589 Non-branded sales 18,622 20,046 International sales 24,314 4,080 Other 1,277 1,218 Less: excise taxes (40,520 ) (53,679 ) Net Sales $ 111,419 $ 106,254 Cost of Sales Canadian Cannabis cost of sales for the six months ended June 30, 2025 was $49,412 compared with $57,978 for the six months ended June 30, 2024. The decrease of $8,566, or 15%, was primarily due to a decrease in volume (kilograms) packaged and sold of our branded and non-branded products and a shift in International sales mix favoring bulk flower which has a lower average cost per gram over packaged flower. Gross Profit Canadian Cannabis gross profit for the six months ended June 30, 2025 was $29,943, a 48% increase compared to $20,213 for the six months ended June 30, 2024. Canadian Cannabis gross margin for the six months ended June 30, 2025 was 38% compared with 26% for the six months ended June 30, 2024. The increase in gross margin was due to higher sales volume of bulk flower in International sales, as well as lower sales of value brands within the branded sales category. 34 Selling, General and Administrative Expenses Canadian Cannabis selling, general and administrative expenses for the six months ended June 30, 2025 were $17,366, or 22%, of sales compared with $16,453, or 21%, of sales for the six months ended June 30, 2024. The increase of $913 was primarily due to higher commercial and marketing expenses and incremental integration costs. Net Income Canadian Cannabis net income for the six months ended June 30, 2025 was $9,521 compared with net income of $2,231 for the six months ended June 30, 2024. The increase in net income was primarily due to the improved margins, partially offset by an increase in the tax provision expense of $2,646 and an increase in selling, general and administrative expenses. Adjusted EBITDA Adjusted EBITDA for Canadian Cannabis for the six months ended June 30, 2025 was $18,558 compared with $8,891 for the six months ended June 30, 2024. The increase of $9,667, or 109%, 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”. U.S. CANNABIS SEGMENT RESULTS The U.S. Cannabis segment consists of Balanced Health. For the three and six months ended June 30, 2025 and 2024, U.S. Cannabis financial results are based on the results of Balanced Health. Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 Sales U.S. Cannabis net sales for the three months ended June 30, 2025 was $3,841 compared with $4,297 for the three months ended June 30, 2024. The decrease of $456, or 11%, was primarily due to new restrictions on CBD sales in an additional eight states commencing July 1, 2024 and lower direct-to-consumer sales resulting from the proliferation of unregulated hemp-derived products on the market. All U.S. Cannabis sales were generated in the United States, with gross sales composed of 94% e-commerce sales and 6% retail sales. Cost of Sales U.S. Cannabis cost of sales for the three months ended June 30, 2025 was $1,405 compared with $1,668 for the three months ended June 30, 2024. The decrease of $263, or 16%, was primarily due to lower sales and cost efficiencies from the internalization of our gummy manufacturing. Gross Profit U.S Cannabis gross profit for the three months ended June 30, 2025 decreased $193, or 7%, to $2,436, or a 63% gross margin, compared with $2,629, or a 61% gross margin, for the three months ended June 30, 2024. Selling, General and Administrative Expenses U.S. Cannabis selling general and administrative expenses for the three months ended June 30, 2025 were $2,445 compared with $2,960 for the three months ended June 30, 2024. The decrease of $515, or 17%, was due to more efficient marketing and brand spending and contract renegotiation. Net Loss U.S. Cannabis net loss for the three months ended June 30, 2025 was $226 compared with net loss of $12,270 for the three months ended June 30, 2024. The increase of $12,044 was primarily due to an impairment charge on goodwill and intangible assets taken in the three months ended June 30, 2024 of ($11,939) that did not recur in 2025. Adjusted EBITDA U.S. Cannabis adjusted EBITDA for the three months ended June 30, 2025 was $45 compared with ($240) for the three months ended June 30, 2024. The improvement of $285 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”. Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 Sales U.S. Cannabis net sales for the six months ended June 30, 2025 was $7,745 compared with $8,834 for the six months ended June 30, 2024. The decrease of $1,089, or 12%, was primarily due to new restrictions on CBD sales in an additional eight states 35 beginning July 1, 2024 and lower direct-to-consumer sales resulting from the proliferation of unregulated hemp-derived products on the market. All U.S. Cannabis sales were generated in the United States, with gross sales composed of 94% e-commerce sales and 6% retail sales. Cost of Sales U.S. Cannabis cost of sales for the six months ended June 30, 2025 was $2,716 compared with $3,510 for the six months ended June 30, 2024. The decrease of $794, or 23%, was primarily due to lower sales and cost efficiencies from the internalization of our gummy manufacturing. Gross Profit U.S Cannabis gross profit for the six months ended June 30, 2025 decreased $295, or 6%, to $5,029, or a 65% gross margin, compared with $5,324, or a 60% gross margin, for the six months ended June 30, 2024. Selling, General and Administrative Expenses U.S. Cannabis selling general and administrative expenses for the six months ended June 30, 2025 were $4,980 compared with $6,366 for the six months ended June 30, 2024. The decrease of $1,386, or 22%, is due to more efficient marketing and brand spending and contract renegotiation. Net Loss U.S. Cannabis net loss for the six months ended June 30, 2025 was $168 compared with net loss of $12,981 for the six months ended June 30, 2024. The increase of $12,813 was primarily due to an impairment charge on goodwill and intangible assets taken in the six months ended June 30, 2024 of ($11,939) that did not recur in 2025. Adjusted EBITDA U.S. Cannabis adjusted EBITDA for the six months ended June 30, 2025 was $159 compared with ($855) for the six months ended June 30, 2024. The improvement of $1,014 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”. 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. Three Months Ended June 30, 2025 Sales Net sales for the three months ended June 30, 2025 was $2,483. Cost of Sales Cost of sales for the three months ended June 30, 2025 was $1,047. Gross Profit Gross profit for the three months ended June 30, 2025 was $1,436, or a 58% gross margin. Selling, General and Administrative Expenses Selling, general and administrative expenses for the three months ended June 30, 2025 was $557. Net Income Net income for the three months ended June 30, 2025 was $835. Adjusted EBITDA Adjusted EBITDA for the three months ended June 30, 2025 was $1,218. Six Months Ended June 30, 2025 Sales Net sales for the six months ended June 30, 2025 was $2,969. Cost of Sales 36 Cost of sales for the six months ended June 30, 2025 was $1,332. Gross Profit Gross profit for the six months ended June 30, 2025 was $1,637, or a 55% gross margin. Selling, General and Administrative Expenses Selling, general and administrative expenses for the six months ended June 30, 2025 was $996. Net Income Net income for the six months ended June 30, 2025 was $593. Adjusted EBITDA Adjusted EBITDA for the six months ended June 30, 2025 was $1,295. PRODUCE SEGMENT RESULTS The produce segment consists of VFCLP. Produce’s comparative analysis are based on the consolidated results from continuing operations of VFLP and VFCLP for the three and six months ended June 30, 2025 and 2024. Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 Sales Produce sales for the three months ended June 30, 2025 were $8,574 compared with $8,434 for the three months ended June 30, 2024, an increase of $140, or 2%. Cost of Sales Produce cost of sales for the three months ended June 30, 2025 decreased by $234, or 3%, to $7,975 compared with $8,209 for the three months ended June 30, 2024. Gross Profit Produce gross profit for the three months ended June 30, 2025 was $599 compared with a gross profit of $225 for the three months ended June 30, 2024. Gross margin for the three months ended June 30, 2025 was 7% compared with 3% for the three months ended June 30, 2024. Selling, General and Administrative Expenses Produce selling, general and administrative expenses for the three months ended June 30, 2025 decreased by $133, or 13%, to $870 (10% of sales) compared with $1,003 (12% of sales) for the three months ended June 30, 2024. Net Income (Loss) From Continuing Operations Produce Income from continuing operations for the three months ended June 30, 2025 was $4,269 compared with a loss from continuing operations of $1,297 for the three months ended June 30, 2024. The change of $5,566 was primarily attributable to a favorable vendor settlements relating to the partial recovery of prior period operational losses from the ToBRFV infestation. Net Income (Loss) Produce net income for the three months ended June 30, 2025 was $20,563 compared with a net loss of $8,300 for the three months ended June 30, 2024. The increase of $28,863 was primarily attributable to an improvement on income (loss) from discontinued operations, net of tax of $23,297 and a favorable vendor settlement relating to the partial recovery of operational losses from the ToBRFV infestation. Adjusted EBITDA Produce Adjusted EBITDA for the three months ended June 30, 2025 was $2,552 compared with ($6,350) for the three months ended June 30, 2024. The increase of $8,902 in Adjusted EBITDA was primarily attributable to a favorable vendor settlement relating to the partial recovery of operational losses from the ToBRFV infestation. 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”. 37 Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 Sales Produce sales for the six months ended June 30, 2025 were $8,601 compared with $8,438 for the six months ended June 30, 2024, an increase of $163, or 2%. Cost of Sales Produce cost of sales for the six months ended June 30, 2025 increased by $245, or 3%, to $9,444 compared with $9,199 for the six months ended June 30, 2024. Gross (Loss) Profit Produce gross loss for the six months ended June 30, 2025 was $843 compared with $761 for the six months ended June 30, 2024. Gross margin for the six months ended June 30, 2025 was (10%) compared with (9%) for the six months ended June 30, 2024. Selling, General and Administrative Expenses Produce selling, general and administrative expenses for the six months ended June 30, 2025 increased by $26, or 2%, to $1,585 (18% of sales) compared with $1,559 (18% of sales) for the six months ended June 30, 2024. Net Income (Loss) From Continuing Operations Produce income from continuing operations for the six months ended June 30, 2025 was $1,515 compared with a loss from continuing operations of $3,339 for the six months ended June 30, 2024. The change of $4,854 was primarily attributable to a favorable vendor settlements relating to the partial recovery of prior period operational losses from the ToBRFV infestation. Net Income (Loss) Produce net income for the six months ended June 30, 2025 was $12,806 compared with a net loss of $8,186 for the six months ended June 30, 2024. The change of $20,992 was primarily attributable to an improvement on income (loss) from discontinued operations, net of tax of $16,138 and a favorable vendor settlement relating to the partial recovery of operational losses from the ToBRFV infestation. Adjusted EBITDA Produce Adjusted EBITDA for the six months ended June 30, 2025 was ($2,570) compared with ($4,322) for the six months ended June 30, 2024. The change of $1,752 in Adjusted EBITDA was primarily due to the favorable legal settlement. 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”. Liquidity and Capital Resources Capital Resources At June 30, 2025, cash, cash equivalents, and restricted cash were $64,988 and working capital was $85,753, 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 Pure Sunfarms Revolving Credit Facility, 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. An additional potential source of liquidity is access to capital markets for additional equity or debt financing. We intend to use our cash on hand for daily operational funding requirements. (in thousands of U.S. dollars unless otherwise noted) Maximum Availability Outstanding as of June 30, 2025 FCC Term Loan $ 19,837 $ 19,837 Pure Sunfarms Term Loan Facility $ 19,266 $ 19,266 Pure Sunfarm Revolving Credit Facility C$ 10,000 $ — 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 38 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 June 30, 2025 and December 31, 2024 was $209 and $271, respectively. These amounts are included in accrued liabilities in the accompanying Condensed Consolidated Statements of Financial Position. FCC Term Loan 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 $19,837 on June 30, 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 June 30, 2025 and December 31, 2024, borrowings under the FCC Term Loan agreement were subject to an interest rate of 7.83% 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 Monahans greenhouses, 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 June 30, 2025 and December 31, 2024 was $90,997 and $101,068, 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. Pure Sunfarms Loans 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 Revolving Credit Facility can be drawn for advances of up to C$10.0 million. The outstanding amount of the Pure Sunfarms Term Loan Facility was $19,266 as of June 30, 2025 and is 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 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. 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. 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). 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 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. The outstanding amount on the PSF Non-Revolving Facility was $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. The outstanding amount on the PSF Term Loan was $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. The outstanding amount under the BDC Facility, a demand loan included in current liabilities was $3,043 on December 31, 2024. Interest under the BDC Facility was payable at an interest rate of 8.70%, payable monthly. 39 Summary of Cash Flows For the Six Months Ended June 30, (in Thousands) 2025 2024 Cash, beginning of period $ 24,631 $ 35,291 Net cash flow provided by (used in): Operating activities 22,265 (3,713 ) Investing activities (5,289 ) (2,813 ) Financing activities (4,986 ) (5,886 ) Discontinued operations 27,892 7,219 Net cash increase (decrease) for the period 39,882 (5,193 ) Effect of exchange rate changes on cash 475 (441 ) Cash, end of the period $ 64,988 $ 29,657 Operating Activities - Continuing Operations For the six months ended June 30, 2025 and 2024, cash provided by (used in) operating activities were $22,265 and ($3,713), respectively. The operating activities for the six months ended June 30, 2025 consisted of $6,207 in changes in non-cash working capital items and $16,058 in changes before non-cash working capital items, while operating activities for the six months ended June 30, 2024 consisted of ($6,021) in changes in non-cash working capital items and $2,308 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 improvements in Canadian Cannabis gross margins in 2025 compared with 2024. Investing Activities - Continuing Operations For the six months ended June 30, 2025 and 2024, cash used in investing activities were ($5,289) and ($2,813), respectively. The increase in investing activities for the six months ended June 30, 2025 was primarily due to capital expenditures made for the Leli Phase II indoor cultivation facility in the town of Groningen. Financing Activities - Continuing Operations For the six months ended June 30, 2025 and 2024, cash used in financing activities were ($4,986) and ($5,886), respectively. For the six months ended June 30, 2025, cash used in financing activities consisted of debt repayments of ($4,554). For the six months ended June 30, 2024, cash flows used in financing activities consisted of debt repayments of ($2,870) and cash used for the acquisition of an additional 10% ownership of Rose LifeScience. Contractual Obligations and Commitments We expect to meet our contractual obligations and commitments using our working capital and our other resources described under “Capital Resources” above. Other than with respect to our long-term debt described above, we currently do not have any material cash requirements in the near future. Non-GAAP Measures References in this Management’s Discussion and Analysis to “Adjusted EBITDA” are to earnings before interest, taxes, depreciation, and amortization (“EBITDA”), as further adjusted to exclude foreign currency exchange gains and losses, share-based compensation, gains and losses on asset sales and the other adjustments set forth in the table below. In addition, we present below “Adjusted EBITDA – Constant Currency” which excludes the effect of foreign currency rate fluctuations. See “—Constant Currency” below. Adjusted EBITDA and Adjusted EBITDA - Constant Currency are measures of operating performance that are not recognized under GAAP and do not have a standardized meaning prescribed by GAAP. Therefore, these non-GAAP measures may not be comparable to similar measures presented by other issuers. Investors are cautioned that our non-GAAP measures should not be construed as an alternative to net income or loss determined in accordance with GAAP as an indicator of our performance. Our non-GAAP measures are used as additional measures to evaluate the operating and financial performance of our segments. Management believes that our non-GAAP measures are important measures in evaluating the historical performance of the Company because it excludes non-recurring and other items that do not reflect our business performance. 40 Reconciliation of Net Loss to Adjusted EBITDA The following table reflects a reconciliation of net loss to Adjusted EBITDA, as presented by the Company: For the Three Months Ended June 30, For the Six Months Ended June 30, (in thousands of U.S. dollars) 2025 2024 2025 2024 Net income (loss) from continuing operations $ 10,203 $ (16,546 ) $ 8,503 $ (21,554 ) Add: Amortization and depreciation 5,068 4,314 8,410 8,356 Foreign currency exchange (gain) loss (1,743 ) 349 (1,761 ) 1,124 Interest expense, net 705 579 1,332 1,287 Provision for income taxes 2,503 260 3,486 580 Share-based compensation 123 2,196 268 2,601 Deferred financing fees 47 — 47 10 Goodwill and intangible impairments — 11,939 — 11,939 Other impairments 217 — 217 — Other expenses — 35 — — Adjustments attributable to non-controlling interest (12 ) (212 ) 58 (513 ) Adjusted EBITDA from continuing operations 17,111 2,914 20,560 3,830 Adjustments attributable to discontinued operations (3,851 ) (6,473 ) (7,219 ) (3,798 ) Adjusted EBITDA (1) $ 13,260 $ (3,559 ) $ 13,341 $ 32 (1) Adjusted EBITDA is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA presented for these segments may not be comparable to similar measures presented by other issuers. Management believes that Adjusted EBITDA 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. Reconciliation of Segmented Net Loss to Adjusted EBITDA The following table reflects a reconciliation of segmented net loss to Adjusted EBITDA, as presented by the Company: For The Three Months Ended June 30, 2025 (in thousands of U.S. dollars) Produce Cannabis Canada Cannabis U.S. Clean Energy Cannabis Netherlands Corporate Total Net income (loss) from continuing operations $ 4,269 $ 6,489 $ (226 ) $ 226 $ 835 $ (1,390 ) $ 10,203 Add: Amortization and depreciation 1,913 2,729 49 — 339 38 5,068 Foreign currency exchange gain (130 ) (84 ) — — — (1,529 ) (1,743 ) Interest expense, net 414 316 — — — (25 ) 705 Provision for (recovery of) income taxes (69 ) 2,343 — 204 44 (19 ) 2,503 Share-based compensation 6 32 5 — — 80 123 Deferred financing fees — 47 — — — — 47 Other impairments — — 217 — — — 217 Adjustments attributable to non-controlling interest — (12 ) — — — — (12 ) Adjusted EBITDA from continuing operations 6,403 11,860 45 430 1,218 (2,845 ) 17,111 Adjustments attributable to discontinued operations (3,851 ) — — — — — (3,851 ) Adjusted EBITDA (2) $ 2,552 $ 11,860 $ 45 $ 430 $ 1,218 $ (2,845 ) $ 13,260 41 For The Three Months Ended June 30, 2024 (in thousands of U.S. dollars) Produce Cannabis Canada Cannabis U.S. Clean Energy Cannabis Netherlands Corporate Total Net income (loss) from continuing operations $ (1,297 ) $ 1,384 $ (12,270 ) $ 61 $ (289 ) $ (4,135 ) $ (16,546 ) Add: Amortization and depreciation 821 3,084 50 — 313 46 4,314 Foreign currency exchange loss (gain) 29 (9 ) — — — 329 349 Interest expense, net 574 188 — — — (183 ) 579 (Recovery of) provision for income taxes (4 ) 259 — — — 5 260 Share-based compensation — 42 41 — — 2,113 2,196 Goodwill and intangible impairments (1) — — 11,939 — — — 11,939 Other expenses — 35 — — — — 35 Adjustments attributable to non-controlling interest — (165 ) — — (47 ) — (212 ) Adjusted EBITDA from continuing operations 123 4,818 (240 ) 61 (23 ) (1,825 ) 2,914 Adjustments attributable to discontinued operations (6,473 ) — — — — — (6,473 ) Adjusted EBITDA (2) $ (6,350 ) $ 4,818 $ (240 ) $ 61 $ (23 ) $ (1,825 ) $ (3,559 ) For The Six Months Ended June 30, 2025 (in thousands of U.S. dollars) Produce Cannabis Canada Cannabis U.S. Clean Energy Cannabis Netherlands Corporate Total Net income (loss) from continuing operations $ 1,515 $ 9,521 $ (168 ) $ 551 $ 593 $ (3,509 ) $ 8,503 Add: Amortization and depreciation 2,273 5,303 98 — 654 82 8,410 Foreign currency exchange gain (82 ) (135 ) — — — (1,544 ) (1,761 ) Interest expense, net 924 457 — — — (49 ) 1,332 Provision for income taxes — 3,234 — 204 48 — 3,486 Share-based compensation 19 73 12 — — 164 268 Deferred financing fees — 47 — — — — 47 Other impairments — — 217 — — — 217 Adjustments attributable to non-controlling interest — 58 — — — — 58 Adjusted EBITDA from continuing operations 4,649 18,558 159 755 1,295 (4,856 ) 20,560 Adjustments attributable to discontinued operations (7,219 ) — — — — — (7,219 ) Adjusted EBITDA (2) $ (2,570 ) $ 18,558 $ 159 $ 755 $ 1,295 $ (4,856 ) $ 13,341 42 For The Six Months Ended June 30, 2024 (in thousands of U.S. dollars) Produce Cannabis Canada Cannabis U.S. Clean Energy Cannabis Netherlands Corporate Total Net income (loss) from continuing operations $ (3,339 ) $ 2,231 $ (12,981 ) $ 41 $ (598 ) $ (6,908 ) $ (21,554 ) Add: Amortization and depreciation 1,639 5,880 104 — 627 106 8,356 Foreign currency exchange loss 38 22 — — — 1,064 1,124 Interest expense, net 1,142 482 — — — (337 ) 1,287 (Recovery of) provision for income taxes (4 ) 588 — — — (4 ) 580 Share-based compensation — 97 83 — — 2,421 2,601 Deferred financing fees — 10 — — — — 10 Goodwill and intangible impairments (1) — — 11,939 — — — 11,939 Adjustments attributable to non-controlling interest — (419 ) — — (94 ) — (513 ) Adjusted EBITDA from continuing operations (524 ) 8,891 (855 ) 41 (65 ) (3,658 ) 3,830 Adjustments attributable to discontinued operations (3,798 ) — — — — — (3,798 ) Adjusted EBITDA (2) $ (4,322 ) $ 8,891 $ (855 ) $ 41 $ (65 ) $ (3,658 ) $ 32 (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. (2) Adjusted EBITDA is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA presented for these segments may not be comparable to similar measures presented by other issuers. Management believes that Adjusted EBITDA 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. Adjusted EBITDA – Constant Currency 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), income (loss) from continuing operations, income (loss) from consolidated entities, net income (loss), and Adjusted EBITDA for the three and six months ended June 30, 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. To present this information, current and comparative prior period income statement results in currencies other than U.S. dollars are converted into U.S. 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. We have provided this non-GAAP financial information to aid investors in better understanding the performance of our segments without taking into account the effect of exchange rate fluctuations. 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. GAAP. The tables below set forth certain measures of consolidated results from continuing operations on a constant currency basis for the three and six months ended June 30, 2025 compared with the three and six months ended June 30, 2024 on an as reported and constant currency basis (in thousands): 43 As Reported As Adjusted for Constant Currency For the Three Months Ended June 30, As Reported Change For the Three Months Ended June 30, Constant Currency Change 2025 2024 $ % 2025 $ % Sales $ 59,899 $ 53,597 $ 6,302 12 % $ 60,403 $ 6,806 13 % Cost of sales (37,557 ) (39,960 ) 2,403 6 % (37,863 ) 2,097 5 % Selling, general and administrative expenses (15,411 ) (17,056 ) 1,645 10 % (15,508 ) 1,548 9 % Other (expense) income, net 5,517 (937 ) 6,454 689 % 5,514 6,451 688 % Goodwill and intangible asset impairments (1) — (11,939 ) 11,939 100 % — 11,939 100 % Income (loss) before taxes and equity method investment income 12,448 (16,295 ) 28,743 176 % 12,545 28,840 177 % Income (loss) from continuing operations 9,945 (16,555 ) 26,500 160 % 10,015 26,570 160 % Income (loss) from discontinued operations, net of tax 16,294 (7,003 ) 23,297 333 % 16,294 23,297 333 % Income (loss) including non-controlling interests 26,239 (23,558 ) 49,797 211 % 26,309 49,867 212 % Net income (loss) attributable to Village Farms International, Inc. shareholders 26,497 (23,549 ) 50,046 213 % 26,570 50,119 213 % Adjusted EBITDA - Constant Currency (2) 13,260 (3,559 ) 16,819 473 % 13,394 16,953 476 % As Reported As Adjusted for Constant Currency For the Six Months Ended June 30, As Reported Change For the Six Months Ended June 30, Constant Currency Change 2025 2024 $ % 2025 $ % Sales $ 99,579 $ 95,584 $ 3,995 4 % $ 102,601 $ 7,017 7 % Cost of sales (63,057 ) (70,730 ) 7,673 11 % (64,923 ) 5,807 8 % Selling, general and administrative expenses (30,030 ) (31,306 ) 1,276 4 % (30,684 ) 622 2 % Other (expense) income, net 4,827 (2,419 ) 7,246 300 % 4,808 7,227 299 % Goodwill and intangible asset impairments (1) — (11,939 ) 11,939 100 % — 11,939 100 % Income (loss) before taxes and equity method investment income 11,319 (20,810 ) 32,129 154 % 11,802 32,612 157 % Income (loss) from continuing operations 7,833 (21,390 ) 29,223 137 % 8,187 29,577 138 % Income (loss) from discontinued operations, net of tax 11,291 (4,847 ) 16,138 333 % 11,291 16,138 333 % Income (loss) including non-controlling interests 19,124 (26,237 ) 45,361 173 % 19,478 45,715 174 % Net income (loss) attributable to Village Farms International, Inc. shareholders 19,794 (26,401 ) 46,195 175 % 20,173 46,574 176 % Adjusted EBITDA - Constant Currency (2) 13,341 32 13,309 41591 % 14,068 14,036 43863 % (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. (2) 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 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. Recent Accounting Pronouncements Not Yet Adopted No accounting pronouncements recently issued or newly effective have had, or are expected to have, a material impact on the Company’s condensed consolidated financial statements. Critical Accounting Estimates and Judgments Our discussion and analysis of our financial condition and results of operations are based upon our Unaudited Condensed Consolidated Interim Financial Statements, which have been prepared in accordance with U.S. GAAP and are included in Part I of this 44 Quarterly Report on Form 10-Q. 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 six months ended June 30, 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. At June 30, 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 June 30, 2025, the carrying value of goodwill associated with our Cannabis – Canada segment was $44.5 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. Actual results could differ from the estimates we use in applying our critical accounting policies. We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported. 45 Item 3. Quantitative and Qualitati ve Disclosures About Market Risk Interest Rate Risk As of June 30, 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 June 30, 2025, we had approximately $39,103 in aggregate principal amounts of our Term Loans with a weighted average interest rate of 6.9%. The current interest rates for outstanding revolving loans under our Credit Facility and Term Loans reflect basis point decreases of approximately 2.6% over the comparable period in 2024. Our interest expense is affected by the overall interest rate environment. Our variable rate interest debt subjects us to risk from increases in prevailing interest rates. 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 $50 and $100 for the three and six months ended June 30, 2025, respectively, and $58 and $116 for the three and six months ended June 30, 2024, respectively. 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 June 30, 2025 and 2024, the Canadian/U.S. foreign exchange rate was C$1.00 = US$0.7324 and C$1.00 = US$0.7310, 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 June 30, 2025 and 2024 with the net foreign exchange gain or loss directly impacting net income (loss): June 30, 2025 June 30, 2024 Financial assets Cash and cash equivalents $ 3,166 $ 2,847 Trade receivables 3,707 3,853 Inventories 4,735 6,760 Prepaid and deposits 494 285 Financial liabilities Trade payables and accrued liabilities (4,591 ) (4,306 ) Loan payable (2,665 ) (3,153 ) Net foreign exchange gain $ 4,846 $ 6,286 Our exposure to foreign exchange risk and the impact of foreign exchange rates are monitored by the Company’s management but generally the Company tries to match its sales (trade receivables) and vendor payments (trade payables) such that the net impact is not material. Other than the interest rate risk and foreign exchange risk discussed above, there have been no material changes to our market risks from those disclosed in Part II, Item 7A of our Annual Report on Form 10-K.