What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-10 compared with 2026-05-11 · 276 added, 141 removed, 275 unchanged (60% of the section changed)

18 unchanged sentences

Through our ownership of VFN, we hold one of ten licenses to cultivate and distribute cannabis legally in the Netherlands under that country’s Controlled Cannabis Supply Chain Experiment.

In the U.S., Balanced Health is our industry-leading cannabinoid business, extending our portfolio into cannabidiol (“CBD”) and hemp-derived consumer products, and the Company also owns 2.2 million square feet of advanced greenhouse facilities in Texas which may be converted to cannabis production in the future if and when permissible by all regulatory authorities.

In the U.S., Balanced Health is our industry-leading cannabinoid business, extended our portfolio into cannabidiol (“CBD”) and hemp-derived consumer products, and the Company also owns 2.2 million square feet of advanced greenhouse facilities in Texas which may be converted to cannabis production in the future if and when permissible by all regulatory authorities.

Our focus for Cannabis 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.

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As a result of the typically higher margins in international markets (predominantly due to lower taxation compared with Canada), we expect international expansion to enhance our profitability while expanding our brand and experience into emerging legal cannabis markets.

We also cultivate tomatoes and market them through Village Farms Fresh (a Vanguard Holdings Company) under the Village Farms Fresh (“VF Fresh”) brand, which sells to mass retail grocery stores and food distribution companies.

We also cultivate tomatoes and market them through Village Farms Fresh (a Verdexa Holdings Company) under the Village Farms Fresh (“VF Fresh”) brand, which sells to mass retail grocery stores and food distribution companies.

Change in Our Operating Segments

During the first quarter of 2026, the Company realigned our structure toward a unified cannabis operating model, including changes and additions to our leadership team, to gain operational efficiencies and better align our resources with customer and market opportunities.

During the first quarter of 2026, the Company realigned its structure toward a unified cannabis operating model, including changes and additions to our leadership team, to gain operational efficiencies and better align our resources with customer and market opportunities.

As a result of the reorganization, the Company revised its reportable segment structure to reflect how the Chief Executive Officer, as chief operating decision maker ("CODM"), manages the business, allocates resources, and assesses performance.

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Our Cannabis segment includes wholly owned Pure Sunfarms, VFN, Balanced Health, and an 86.6% 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 owns several of the leading flower brands in Canada.

Pure Sunfarms is one of the single largest cannabis growing operations in the world, one of the lowest-cost greenhouse producers, fully EU-GMP certified, and owns several of the leading flower brands in Canada and Germany.

We leverage 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.

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Recent Developments and Updates

• Surpassed the high end of its targeted gross margin range for cannabis of 30-40% for the fourth consecutive quarter;

and recorded positive EPS from continuing operations for the fourth consecutive quarter.

• Maintained a top five overall market share position in the Canadian market, and continued to hold the number one market share position in dried flower.

The Company’s Pure Sunfarms brand expanded its market share position for the 15th consecutive month in April, reflecting improving consumer preference for the Company’s strains following recent introductions of packaging innovations that showcase the Company’s flower quality and aromas 1 .

• International export sales from Canada increased 171% year-over-year to a record high of $14.6 million.

The Company believes it remains the largest exporter of medical cannabis to Europe, with three of the top five leading cultivars in Germany and four of the top 10 through our distribution partners 2 .

• The Company recently completed facility upgrades at its 4.8 million square foot production campus in Delta, British Columbia, the Company now believes it operates the world’s largest EU-GMP certified cannabis facility.

• Began planting the first half of its Delta 2 greenhouse expansion in Canada, which is expected to begin contributing to sales late in the second quarter of 2026.

The full expansion is expected to yield an incremental 40 metric tonnes of annualized cannabis production, expanding Canadian capacity by approximately 33% once completed in 2027.

• The Company expects to commence all operations at its Phase II facility in the Netherlands during Q2 and ramp to full capacity by the end of 2026.

Once operating at full capacity, the Phase II facility is expected to quintuple total Netherlands production to approximately 10 metric tonnes annually.

• Maintained the Company’s top five overall market share position in the Canadian market and expanded its market share in vapes and infused pre-rolls, now positioning the Company’s brand portfolio among the top 10 nationally in all major product categories 1 .

• Achieved record production from the Company’s Delta, British Columbia facilities during the first half of 2026.

Increased yields and greater operating efficiencies led to lower production costs during Q2, and favorable sales mix helped drive nine percentage points of year-over-year cannabis segment gross margin expansion.

• International export sales increased 74% year-over-year and 43% sequentially to a record high of $20.9 million.

The Company believes it remains the largest exporter of medical cannabis to Europe with a leading market share position in Germany.

• The Company commenced cultivation at its Phase II facility in Groningen, Netherlands during Q2.

The Groningen facility will bring the Company’s maximum annualized production capacity in the Netherlands to approximately 10 metric tonnes and is expected to ramp to full production into early 2027.

• During Q2 the Company harvested its first crop from the first half of its Delta 2 greenhouse expansion, and announced that it is accelerating technology upgrades quicker than previously anticipated due to increasing global demand.

The Delta 2 expansion is expected to yield approximately 15 metric tonnes of dried, trimmed flower during the second half of 2026.

The Delta 2 expansion is expected to ramp to its full production capacity of 40 metric tonnes by mid-2027, bringing total production capacity from the Delta campus to approximately 160 metric tonnes of dried, trimmed flower annually.

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

Based on Company estimates and rankings compiled by German outlet Flowzz.

Corporate and Other

• Began a succession planning process for our Chief Financial Officer, Steve Ruffini, who will remain as CFO until a permanent replacement has been identified.

Ruffini will remain an employee of the Company to help ensure a smooth transition of his CFO responsibilities, and he is expected to be appointed to a new leadership position focused on evaluating strategic M&A opportunities.

• Favorably amended and extended its loan with its long-term lender, Farm Credit Canada (FCC).

The Company improved the interest rate on the loan by 50 basis points and extended the maturity date by four years to February 3, 2031.

loan carries a variable interest rate currently below 7.0%, with a current balance of US $15.4 million.

All other material terms of the loan remain unchanged.

• On April 23, 2026, President Trump issued an executive order to (1) immediately place both FDA-approved products containing marijuana and marijuana products regulated by a state medical marijuana license in Schedule III of the Controlled Substances Act, and (2) initiate an expedited administrative hearing process to consider the broader rescheduling of marijuana from Schedule I to Schedule III, which is expected to commence on June 29, 2026.

We believe we are poised to benefit from President Trump's Executive Order, which, if the broader rescheduling is enacted as anticipated, would represent a consequential step in modernizing U.S.

cannabis policy and support the development of a regulatory framework more aligned with international drug policies.

• On June 8, 2026, the Company closed a registered direct offering (the “Offering”) of 7,500,000 Common Shares at a price of US$2.00 per Common Share.

The gross proceeds from the Offering were approximately US$15 million before deducting placement agent fees and other offering expenses payable by the Company.

The proceeds from the Offering are being used for working capital and general corporate purposes.

• On June 2, 2026, John R.

McLernon stepped down from his position as Chairman of the Company's Board of Directors.

Concurrently with Mr.

McLernon’s resignation, the Board appointed Christopher Woodward as Chairman.

McLernon continues to serve as a member of the Board of Directors.

• On May 27, 2026 the Company was awarded “Producer of the Year” at the 2026 Business of Cannabis Awards in London.

The award recognizes excellence and innovation in cannabis cultivation practices, techniques, and product quality, and celebrates cultivators who have demonstrated exceptional skill, dedication, and expertise in producing high-quality cannabis while adhering to best practices in sustainability, compliance, and safety.

Presentation of Financial Results

Our results of operations for the three months ended March 31, 2026 and 2025 presented below reflect the operations of our consolidated wholly-owned subsidiaries and our 80% ownership interest in Rose LifeScience.

Our results of operations for the three and six months ended June 30, 2026 and 2025 presented below reflect the operations of our consolidated wholly-owned subsidiaries and our 80% ownership interest in Rose LifeScience through May 21, 2026, and 86.6% ownership after May 21, 2026.

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 March 31, 2026, March 31, 2025, and December 31, 2025.

The assets and liabilities of our foreign operations are translated into dollars at the exchange rate in effect as of June 30, 2026, June 30, 2025, and December 31, 2025.

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

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dollars is shown below:

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

December 31, 2025

Three-month period ended

Six-month period ended

Consolidated Results of Operations

1 unchanged sentence

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Cost of sales

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Foreign exchange (loss) gain

Other (loss) income

Income (loss) before taxes and equity method investment income

Other income (expense)

Income before taxes and equity method investment income

Provision for income taxes

Equity method investment income, net of tax

Income (loss) from continuing operations

(Loss) Income from discontinued operations, net of tax

Income (loss) including non-controlling interests

Income from continuing operations

Income from discontinued operations, net of tax

Income including non-controlling interests

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

Net income (loss) attributable to Village Farms International, Inc.

Net income attributable to Village Farms International, Inc.

Adjusted EBITDA from continuing operations

Basic income (loss) per share attributable to Village Farms International, Inc.

Basic income per share attributable to Village Farms International, Inc.

shareholders from:

1 unchanged sentence

Discontinued operations

Basic income (loss) per share attributable to Village Farms International, Inc.

Diluted income (loss) per share attributable to Village Farms International, Inc.

Basic income per share attributable to Village Farms International, Inc.

Diluted income per share attributable to Village Farms International, Inc.

shareholders from:

1 unchanged sentence

Discontinued operations

Diluted income (loss) per share attributable to Village Farms International, Inc.

Diluted income per share attributable to Village Farms International, Inc.

Segment Results of Operations

During the first quarter of 2026, the Company revised its reportable segment structure - Cannabis - to reflect how the CODM manages the business, allocates resources, and assesses performance.

During the first quarter of 2026, the Company revised its reportable segment structure to reflect how the CODM manages the business, allocates resources, and assesses performance.

The Company's operations are now organized, managed, and classified into one reportable segment - Cannabis.

The Company’s remaining operations are not reportable segments, as defined by the applicable accounting standard, and are classified as Other.

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

The Cannabis segment, which is comprised of the previously reported Canadian Cannabis, U.

The Cannabis segment, which is comprised of the previously reported Canadian Cannabis, U.S.

Cannabis, and Cannabis - Netherlands segments, produces and supplies cannabis and CBD-based health and wellness products to be sold to consumers via provincial governments, coffee shops, licensed providers, and direct to consumers in the United States.

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

For The Three Months Ended March 31, 2026

For The Three Months Ended June 30, 2026

Cost of sales

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Income (loss) including non-controlling interests

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

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

Net income (loss)

2 unchanged sentences

Diluted income (loss) per share

For The Three Months Ended March 31, 2025

For The Three Months Ended June 30, 2025

Cost of sales

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Diluted income (loss) per share

For The Six Months Ended June 30, 2026

Cost of sales

Selling, general and administrative expenses

Other expense, net

Income (loss) before taxes and equity method investment income

Provision for income taxes

Equity method investment income, net of tax

Income (loss) from continuing operations

Income from discontinued operations, net of tax

Income (loss) including non-controlling interests

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

Net income (loss)

Adjusted EBITDA from continuing operations (1)

Basic income (loss) per share from continuing operations

Basic income per share from discontinued operations

Basic income (loss) per share

Diluted income (loss) per share from continuing operations

Diluted income per share from discontinued operations

Diluted income (loss) per share

For The Six Months Ended June 30, 2025

Cost of sales

Selling, general and administrative expenses

Other expense (income), net

Income (loss) before taxes and equity method investment income

Provision for income taxes

Equity method investment income, net of tax

Income (loss) from continuing operations

Income from discontinued operations net of tax

Income (loss) including non-controlling interests

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

Net income (loss)

Adjusted EBITDA from continuing operations (1)

Basic (loss) income per share from continuing operations

Basic loss per share from discontinued operations

Basic (loss) income per share

Diluted (loss) income per share from continuing operations

Diluted loss per share from discontinued operations

Diluted (loss) income per share

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

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Management believes that Adjusted EBITDA from continuing operations 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 from continuing operations includes the Company’s 80% interest in Rose LifeScience.

We caution that our results of operations for the three months ended March 31, 2026 and 2025 may not be indicative of our future performance.

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Sales for the three months ended March 31, 2026 and 2025 were as follows:

Adjusted EBITDA from continuing operations includes the Company’s 80% interest in Rose LifeScience through May 21, 2026, and our 86.6% interest in Rose LifeScience after May 21, 2026.

We caution that our results of operations for the three and six months ended June 30, 2026 and 2025 may not be indicative of our future performance.

Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025

Sales for the three months ended June 30, 2026 and 2025 were as follows:

Classification

March 31, 2026

March 31, 2025

Canadian Branded (1)

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(1) Canadian Branded revenues are shown net of excise tax on products.

Excise tax on products was $15,903 and $13,947 for the three months ended March 31, 2026 and 2025, respectively.

Excise tax on products was $14,909 and $14,812 for the three months ended June 30, 2026 and 2025, respectively.

The increase in consolidated revenues of $4,078, or 7%, was primarily due to an increase in International Exports of $8,917, or 74%, driven by continued growth in export volumes to Germany, partially offset by a decrease in the net average selling price of 16% due to a shift in product mix in favor of bulk flower over packaged flower.

For the three months ended March 31, 2026, International Export sales represented 29% of revenue, compared with 14% of revenue for the three months ended March 31, 2025.

Canadian Branded Sales increased by $1,087, or 5%, to $23,848, or 47% of sales, from $22,761, or 57% of sales, primarily due to an increase in volume while the average net selling price remained in line with the prior period.

Netherlands Branded sales increased by $2,177 over the prior year, as the prior year only had one month of sales.

Canadian Non-Branded sales decreased by $902, or 14%, due to a decrease in volume.

For the three months ended June 30, 2026, International Export sales represented 33% of revenue, compared with 20% of revenue for the three months ended June 30, 2025.

Canadian Branded Sales decreased by $1,945, or 8%, to $23,017, or 36% of sales, from $24,962, or 42% of sales, primarily due to a decrease in volume of value brands, while the average net selling price increased 5% over the prior period.

Netherlands Branded sales increased by $862 over the prior year, due to an increase in volume.

Canadian Non-Branded sales decreased by $4,037, or 57%, due to a shift in volume towards International Exports.

Sales for U.S.

Cannabis decreased by $617, or 16%, due to lower direct-to-consumer sales resulting from the proliferation of unregulated hemp-derived products on the market and the continuing effect of changes in state regulations restricting sales.

We continue to pay a burdensome excise tax on our Canadian Branded sales (sales to provincial distributors).

For the three months ended March 31, 2026, the Company incurred excise duties of $15,903, or 40% of gross Canadian Branded sales, compared with $13,947, or 38% of gross Canadian Branded sales, for the three months ended March 31, 2025.

The increase of $1,961, or 14%, was due to an increase in kilograms sold in the Canadian Branded channel.

For the three months ended June 30, 2026, the Company incurred excise duties of $14,909, or 39% of gross Canadian Branded sales, compared with $14,812, or 37% of gross Canadian Branded sales, for the three months ended June 30, 2025.

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

Cost of Sales

Cost of sales for the three months ended March 31, 2026 were $29,252 compared with $25,501 for the three months ended March 31, 2025.

The increase of $3,751, or 15%, was primarily due to a 27% increase in sales, partially offset by a favorable shift in International Export sales mix in favor of bulk flower, which has a lower average cost per gram over other packaged products.

Gross profit for the three months ended March 31, 2026 was $20,986 compared with $14,179 for the three months ended March 31, 2025.

The increase of $6,807, or 48%, was primarily due to higher sales volumes of International Exports as well as lower sales of value brands within the branded sales category.

Cost of sales for the three months ended June 30, 2026 were $34,004 compared with $37,557 for the three months ended June 30, 2025.

The decrease of $3,553, or 9%, was primarily due to improved yields and a favorable shift in sales mix towards bulk flower, from packaged flower, within our International Export sales, which has a lower average cost per gram over other packaged products.

Gross profit for the three months ended June 30, 2026 was $29,973, or a 47% gross margin, compared with $22,342, or a 37% gross margin, for the three months ended June 30, 2025.

The increase in gross margin of 10 percentage points, was primarily due to higher sales volumes of International Exports as well as lower sales of value brands within the branded sales category.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended March 31, 2026 were $15,942 (32% of sales) compared with $14,619 (37% of sales) for the three months ended March 31, 2025.

Selling, general and administrative expenses for the three months ended June 30, 2026 were $18,811 (29% of sales) compared with $15,411 (26% of sales) for the three months ended June 30, 2025.

Cannabis SG&A increased by approximately $3,597, or 24%, primarily due to higher commercial and marketing expenses and an update to the Company's transfer pricing policies.

Interest Expense

Interest expense for the three months ended March 31, 2026 was $523 compared with $701 for the three months ended March 31, 2025 due to a decrease in the average debt balance and a decrease in interest rates from the prior year.

Interest expense for the three months ended June 30, 2026 was $477 compared with $814 for the three months ended June 30, 2025 due to a decrease in the average debt balance and a decrease in interest rates from the prior year.

Interest Income

Interest income for the three months ended March 31, 2026 and was $608 compared with $75 for the three months ended March 31, 2025 due primarily to an increase in the average cash, cash equivalents, and restricted cash.

Other (Loss) Income

Other income for the three months ended March 31, 2026 was $173 compared with other loss of $22 for the three months ended March 31, 2025.

Interest income for the three months ended June 30, 2026 was $343 compared with $109 for the three months ended June 30, 2025 due primarily to an increase in the average cash, cash equivalents, and restricted cash.

Other income for the three months ended June 30, 2026 was $24 compared to $4,430 for the three months ended June 30, 2025.

Other income for the three months ended June 30, 2025 included a favorable vendor settlement relating to the partial recovery of prior period operational losses from the ToBRFV infestation.

Income Before Taxes and Equity Method Investment Income

Income before taxes for the three months ended June 30, 2026 was $10,455 compared with $12,448 for the three months ended June 30, 2025.

The decrease of $1,993 was primarily due to the favorable vendor settlement in 2025, offset by the improved gross profit for the three months ended June 30, 2026.

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,

Loss from discontinued operations, net of tax

Gain on sale of assets, net of tax

Net income (loss) from discontinued operations, net of tax

Net Income Attributable to Village Farms International, Inc.

Net income attributable to Village Farms International, Inc.

shareholders for the three months ended June 30, 2026 was $7,145 compared with $26,497 for the three months ended June 30, 2025.

The decrease of $19,352 was primarily due to $16,294 from discontinued operations resulting from the sale of the Texas greenhouses and a favorable vendor settlement in 2025.

This was partially offset by higher sales and an improved gross margin during the three months ended June 30, 2026.

Adjusted EBITDA from Continuing Operations

Adjusted EBITDA from Continuing Operations for the three months ended June 30, 2026 was $15,411 compared with $17,111 for the three months ended June 30, 2025.

The decrease of $1,700, or 10%, was driven primarily by the favorable vendor settlement in 2025, partially offset by higher sales and higher margins during the three months ended June 30, 2026.

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

Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025

Sales for the six months ended June 30, 2026 and 2025 were as follows:

For the Six Months Ended June 30,

Classification

Canadian Branded (1)

Canadian Non-Branded

International Exports

Netherlands Branded

Total Cannabis

Total Revenue

(1) Canadian Branded revenues are shown net of excise tax on products.

Excise tax on products was $30,812 and $28,759 for the six months ended June 30, 2026 and 2025, respectively.

The increase in consolidated revenues of $14,636, or 15%, was primarily due to an increase in International Exports of $18,110, or 104%, driven by continued growth in export volumes to Germany, partially offset by a decrease in the net average selling price of 15% due to a shift in product mix in favor of bulk flower over packaged flower.

For the six months ended June 30, 2026, International Export sales represented 31% of revenue, compared with 17% of revenue for the six months ended June 30, 2025.

Canadian Branded Sales decreased by $848, or 2%, to $46,865, or 41% of sales, from $47,713, or 48% of sales, primarily due to a decrease in volume of value brands, while the average net selling price remained in line with the prior period.

Netherlands Branded sales increased by $3,039 over the prior year period, as the prior year only had four months of sales.

Canadian Non-Branded sales decreased by $4,950, or 37%, due to a shift in volume to International Exports.

Sales for U.S.

Cannabis decreased by $1,388, or 18%, due to lower direct-to-consumer sales resulting from the proliferation of unregulated hemp-derived products on the market and the continuing effect of changes in state regulations restricting sales.

We continue to pay a burdensome excise tax on our Canadian Branded sales (sales to provincial distributors).

For the six months ended June 30, 2026, the Company incurred excise duties of $30,812, or 40% of gross Canadian Branded sales, compared with $28,759, or 38% of gross Canadian Branded sales, for the six months ended June 30, 2025.

The increase of $2,053, or 7%, was due to an increase in Cannabis 2.0 products sold in the Canadian Branded channel, which have a higher proportional excise tax.

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

Cost of Sales

Cost of sales for the six months ended June 30, 2026 were $63,256 compared with $63,057 for the six months ended June 30, 2025.

During the six months ended June 30, 2026, the increase in volume was offset by shift to bulk flower, from packaged flower, within our International Exports sales, lower sales of value brands within the branded sales category, as well as an improvement in year over year yields leading to a lower cost per gram.

Gross profit for the six months ended June 30, 2026 was $50,959 compared with $36,522 for the six months ended June 30, 2025.

The increase of $14,437, or 40%, was primarily due to a shift in sales mix towards bulk flower, from packaged flower, within our International Exports sales, lower sales of value brands within the branded sales category, as well as an improvement in year-over-year yields leading to a lower cost per gram.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six months ended June 30, 2026 were $34,753 (30% of sales) compared with $30,030 (30% of sales) for the six months ended June 30, 2025.

Cannabis SG&A increased by approximately $6,681, or 29%, primarily due to higher commercial and marketing expenses and an update to the Company's transfer pricing policies.

Interest Expense

Interest expense for the six months ended June 30, 2026 was $1,000 compared with $1,516 for the six months ended June 30, 2025 due to a decrease in the average debt balance and a decrease in interest rates from the prior year.

Interest Income

Interest income for the six months ended June 30, 2026 was $951 compared with $184 for the six months ended June 30, 2025 due primarily to an increase in the average cash, cash equivalents, and restricted cash.

Other (Expense) Income

Other expense for the six months ended June 30, 2026 was $159 compared with other income of $4,451 for the six months ended June 30, 2025.

Other income for the six months ended 2025 included a favorable vendor settlement relating to the partial recovery of operational losses from the ToBRFV infestation.

Income (Loss) Before Taxes and Equity Method Investment Income

Income before taxes for the three months ended March 31, 2026 was $4,397 compared with a loss before taxes of $1,128 for the three months ended March 31, 2025.

Income before taxes for the six months ended June 30, 2026 was $14,853 compared with $11,319 for the six months ended June 30, 2025.

The change of $3,534 was primarily due to the improved gross profit.

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Income (loss) from discontinued operations, net consists of the following:

For the Three Months Ended March 31,

(Loss) income from discontinued operations, net of tax

Net (loss) income from discontinued operations, net of tax

Net Income (Loss) Attributable to Village Farms International, Inc.

For the Six Months Ended June 30,

Loss from discontinued operations, net of tax

Gain on sale of assets, net of tax

Net income (loss) from discontinued operations, net of tax

Net Income Attributable to Village Farms International, Inc.

shareholders for the three months ended March 31, 2026 was $2,917 compared with a net loss of $6,703 for the three months ended March 31, 2025.

The increase of $9,620 was primarily due to the higher sales and the improved gross margin during the three months ended March 31, 2026, as well as the negative impact of the loss from discontinued operations in 2025 of $5,004, partially offset by an increase in the provision for income taxes of $1,360.

Net income attributable to Village Farms International, Inc.

shareholders for the six months ended June 30, 2026 was $10,062 compared with $19,794 for the six months ended June 30, 2025.

The decrease of $9,732 was primarily due to $11,291 from discontinued operations resulting from the sale of the Texas greenhouses and a favorable vendor settlement in 2025.

This was partially offset by higher sales and an improved gross margin during the six months ended June 30, 2026.

Adjusted EBITDA from Continuing Operations

Adjusted EBITDA from Continuing Operations for the three months ended March 31, 2026 was $9,890 compared with $4,546 for the three months ended March 31, 2025.

The increase of $5,344, or 118%, was driven primarily by higher sales and higher margins in Cannabis.

Adjusted EBITDA from Continuing Operations for the six months ended June 30, 2026 was $25,311 compared with $20,560 for the six months ended June 30, 2025.

The increase of $4,751, or 23%, was driven primarily by higher sales and higher margins in Cannabis, partially offset by the favorable vendor settlement in 2025.

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Capital Resources

At March 31, 2026, cash, cash equivalents, and restricted cash were $55,527 and working capital was $88,828, compared with cash and cash equivalents of $86,252 and working capital of $95,851 at December 31, 2025.

At June 30, 2026, cash, cash equivalents, and restricted cash were $72,931 and working capital was $109,718, compared with cash, cash equivalents, and restricted cash of $86,252 and working capital of $95,851 at December 31, 2025.

We believe that our existing cash, cash generated from our operating activities and the availability under our Pure Sunfarms Revolving Credit Facility (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 March 31, 2026

Outstanding as of June 30, 2026

FCC Term Loan

Pure Sunfarms Term Loan Facility

Pure Sunfarm Revolving Credit Facility

The Company is required to comply with financial covenants.

At March 31, 2026, the Company was compliant with all of its 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.

Pure Sunfarms Revolving Credit Facility

At June 30, 2026, the Company was in compliance with all of its financial covenants.

We can provide no assurance that, in the future, 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, 2026 and December 31, 2025 was $172 and $166, respectively.

Accrued interest payable on the FCC Term Loan and Pure Sunfarms Secured Credit Facilities (as defined below) as of June 30, 2026 and December 31, 2025 was $211 and $166, respectively.

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

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On March 30, 2026, the Company extended the maturity date of the FCC Term Loan to February 3, 2031 and reduced the applicable margin on the annual interest rate by 50 basis points.

The non-revolving variable rate term loan has a balance of $15,365 on March 31, 2026 and $15,855 on December 31, 2025.

The non-revolving variable rate term loan has a balance of $14,875 on June 30, 2026 and $15,855 on December 31, 2025.

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 February 3, 2031.

As of March 31, 2026 and December 31, 2025, borrowings under the FCC Term Loan agreement were subject to an interest rate of 6.84% and 7.45% per annum, respectively.

As of June 30, 2026 and December 31, 2025, borrowings under the FCC Term Loan agreement were subject to an interest rate of 6.86% and 7.45% 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 March 31, 2026 and December 31, 2025 was $66,682 and $84,653, respectively.

The carrying value of the assets and securities pledged as collateral as of June 30, 2026 and December 31, 2025 was $77,157 and $84,653, respectively.

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

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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”).

Pure Sunfarms Secured Credit Facilities

On April 17, 2025, the Company entered into a secured credit facility with a Canadian chartered bank as administrative agent 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 are being used for working capital and other general corporate purposes, and was also 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.

On February 20, 2026, the Company amended and extended its Pure Sunfarms Secured Credit Facility, which increased loan commitments with existing lenders by C$15 million and extending maturities one year to February 2029.

The incremental debt financing comes in the form of a delayed draw term loan, from which the Company drew an initial CAD $5 million on February 20, 2026.

Amounts drawn under the Pure Sunfarms Secured Credit Facilities are being used for working capital and other general corporate purposes, and were also used to replace and repay remaining outstanding balances on the Company’s previously outstanding debt.

On February 20, 2026, the Company amended and extended its Pure Sunfarms Term Loan Facility, which increased loan commitments with existing lenders by C$15 million and extended maturities one year to February 2029.

The incremental debt financing comes in the form of a delayed draw term loan, from which the Company drew an initial CAD $5 million on February 20, 2026 and C$8.3M on June 30, 2026.

All other terms of the credit facility loans remain unchanged.

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 $20,384 as of March 31, 2026 and is repayable, on a quarterly basis, in an amount equal to C$1.07 million.

The outstanding amount of the Pure Sunfarms Term Loan Facility was $25,087 as of June 30, 2026 and is repayable, on a quarterly basis, in an amount equal to C$1.2 million.

Any amount remaining unpaid will be due and payable in full on the maturity date, which is on February 7, 2029.

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 Pure Sunfarms Revolving Credit Facility can be drawn for advances of up to C$10.0 million, none of which is currently drawn.

Outstanding amounts drawn 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.

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Summary of Cash Flows

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(in Thousands)

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Operating Activities - Continuing Operations

For the three months ended March 31, 2026 and 2025, cash used in operating activities were ($16,763) and ($3,767), respectively.

The operating activities for the three months ended March 31, 2026 consisted of ($24,390) in changes in non-cash working capital items and $7,672 in changes before non-cash working capital items, while operating activities for the three months ended March 31, 2025 consisted of ($5,729) in changes in non-cash working capital items and $1,962 in changes before non-cash working capital items.

The decrease when comparing the change in non-cash working capital items for 2026 with 2025 was primarily due to income tax payments of approximately $15 million.

For the six months ended June 30, 2026 and 2025, cash used in and provided by operating activities was ($7,884) and $22,265, respectively.

The operating activities for the six months ended June 30, 2026 consisted of ($28,435) in changes in non-cash working capital items and $20,551 in changes before non-cash working capital items, while 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.

The decrease when comparing the change in non-cash working capital items for 2026 with 2025 was primarily due to income tax payments of approximately $18 million and an increase in inventory.

Investing Activities - Continuing Operations

For the three months ended March 31, 2026 and 2025, cash used in investing activities were ($9,227) and ($1,549), respectively.

The increase in investing activities for the three months ended March 31, 2026 was primarily due to capital expenditures made for the conversion of the Delta 2 greenhouse for cannabis cultivation and VFN Phase II indoor cultivation facility in the town of Groningen.

For the six months ended June 30, 2026 and 2025, cash used in investing activities was ($15,462) and ($5,289), respectively.

The increase in investing activities for the six months ended June 30, 2026 was primarily due to capital expenditures made for the conversion of the Delta 2 greenhouse for cannabis cultivation and the VFN Phase II indoor cultivation facility in the town of Groningen.

Financing Activities - Continuing Operations

For the three months ended March 31, 2026 and 2025, cash used in financing activities were ($3,704) and ($1,384), respectively.

For the three months ended March 31, 2026, cash used in financing activities consisted of share repurchases of ($6,368) and debt repayments of ($1,208), partially offset by proceeds from borrowings of $3,589 and $469 in proceeds from the exercise of warrants and options.

For the three months ended March 31, 2025, cash flows used in financing activities consisted of debt repayments of ($1,384).

For the six months ended June 30, 2026 and 2025, cash provided by and used in financing activities was $12,540 and ($4,986), respectively.

For the six months ended June 30, 2026, cash provided by financing activities primarily consisted of proceeds from the issuance of Common Shares of $15,000, less issuance costs of ($958), and proceeds from borrowings of $8,952, partially offset by share repurchases of ($6,787), debt repayments of ($2,387), and acquisition of non-controlling interest of ($1,280).

For the six months ended June 30, 2025, cash flows used in financing primarily activities consisted of debt repayments of ($4,554).

Contractual Obligations and Commitments

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In addition, we present below “Adjusted EBITDA from continuing operations – Constant Currency” which excludes the effect of foreign currency rate fluctuations.

See “—Constant Currency” below.

See “Adjusted EBITDA from Continuing Operations—Constant Currency” below.

Adjusted EBITDA from continuing operations and Adjusted EBITDA from continuing operations - Constant Currency are measures of operating performance that are not recognized under GAAP and do not have a standardized meaning prescribed by GAAP.

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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.

Reconciliation of Adjusted EBITDA from Continuing Operations to Net Income (Loss)

The following table reflects a reconciliation of Adjusted EBITDA from continuing operations to net income (loss), as presented by the Company:

For the Three Months Ended March 31,

Reconciliation of Net Income from Continuing Operations to Adjusted EBITDA from Continuing Operations

The following table reflects a reconciliation of net income from continuing operations Adjusted EBITDA from continuing, as presented by the Company:

For the Three Months Ended June 30,

For the Six Months Ended June 30,

(in thousands of U.S.

Net income (loss) from continuing operations

Net income from continuing operations

Amortization and depreciation

Foreign currency exchange loss (gain)

Interest (income) expense, net

Interest expense, net

Provision for income taxes

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Deferred financing fees

Loss on disposal of assets

(Gain) loss on disposal of assets

Adjustments attributable to non-controlling interest

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Reconciliation of Adjusted EBITDA from Continuing Operations for the Cannabis Segment to Segmented Net Income (Loss) for the Cannabis Segment

The following table reflects a reconciliation of Adjusted EBITDA from Continuing Operations for the Cannabis segment to net income (loss) for the Cannabis segment, as well as reconciliation to such measures for the Company on a Consolidated basis:

For The Three Months Ended March 31, 2026

Reconciliation of Cannabis Segment to Segmented Net Income for the Cannabis Segment to Adjusted EBITDA from Continuing Operations for the Cannabis Segment

The following table reflects a reconciliation of net income from continuing operations for the Cannabis segment to Adjusted EBITDA from Continuing Operations for the Cannabis segment, as well as reconciliation to such measures for the Company on a Consolidated basis:

For The Three Months Ended June 30, 2026

(in thousands of U.S.

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Amortization and depreciation

Foreign currency exchange gain

Foreign currency exchange (gain) loss

Interest expense (income), net

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Deferred financing fees

Loss on disposal of assets

Gain on disposal of assets

Adjustments attributable to non-controlling interest

Adjusted EBITDA from continuing operations (1)

For The Three Months Ended March 31, 2025

For The Three Months Ended June 30, 2025

(in thousands of U.S.

Net (loss) income from continuing operations

Net income (loss) from continuing operations

Amortization and depreciation

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Share-based compensation

Deferred financing fees

Other Impairments

Adjustments attributable to non-controlling interest

Adjusted EBITDA from continuing operations (1)

For The Six Months Ended June 30, 2026

(in thousands of U.S.

Net income (loss) from continuing operations

Amortization and depreciation

Foreign currency exchange gain

Interest expense (income), net

Provision for income taxes

Share-based compensation

Deferred financing fees

Loss (gain) on disposal of assets

Adjustments attributable to non-controlling interest

Adjusted EBITDA from continuing operations (1)

For The Six Months Ended June 30, 2025

(in thousands of U.S.

Net income (loss) from continuing operations

Amortization and depreciation

Foreign currency exchange (gain) loss

Interest expense (income), net

Provision for income taxes

Share-based compensation

Deferred financing fees

Other impairments

Adjustments attributable to non-controlling interest

Adjusted EBITDA from continuing operations (1)

(1) Adjusted EBITDA from continuing operations 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), income (loss) from continuing operations, income (loss) from consolidated entities, net income (loss), and Adjusted EBITDA from continuing operations for the three months ended March 31, 2026, 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), income (loss) from continuing operations, income (loss) from consolidated entities, net income (loss), and Adjusted EBITDA from continuing operations for the three and six months ended June 30, 2026, 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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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 months ended March 31, 2026 compared with the three months ended March 31, 2025 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 and six months ended June 30, 2026 compared with the three and six months ended June 30, 2025 on an as reported and constant currency basis (in thousands):

As Adjusted for Constant Currency

For the Three Months Ended March 31,

For the Three Months Ended June 30,

As Reported Change

For the Three Months Ended March 31,

For the Three Months Ended June 30,

Constant Currency Change

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Other (expense) income, net

Income (loss) before taxes and equity method investment income

Income (loss) from continuing operations

Income (loss) from discontinued operations, net of tax

Income (loss) including non-controlling interests

Net income (loss) attributable to Village Farms International, Inc.

Income before taxes and equity method investment income

Income from continuing operations

Income from discontinued operations, net of tax

Income including non-controlling interests

Net income attributable to Village Farms International, Inc.

Adjusted EBITDA - Constant Currency (1)

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

Cost of sales

Selling, general and administrative expenses

Other (expense) income, net

Income before taxes and equity method investment income

Income from continuing operations

Income from discontinued operations, net of tax

Income including non-controlling interests

Net income attributable to Village Farms International, Inc.

Adjusted EBITDA - Constant Currency (1)

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

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Our accounting policies and critical accounting estimates are reviewed periodically by the Audit Committee of the Board of Directors.

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, 2026 and 2025, the Company considered qualitative factors in assessing for impairment indicators for the Canadian Cannabis reporting unit.

As described in Note 6, 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, 2026 and 2025, the Company considered qualitative factors in assessing for impairment indicators for the Canadian Cannabis reporting unit.

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

At March 31, 2026, 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 operating unit to be below their carrying amounts.

At March 31, 2026, the carrying value of goodwill associated with our Canadian Cannabis reporting unit was $43.7 million and the carrying value of intangible assets associated with our Cannabis reporting unit was $22.5 million.

At June 30, 2026, the Company concluded that no events or circumstances occurred that would, more likely than not, reduce the fair value of the goodwill and intangible assets for its operating unit to be below their carrying amounts.

At June 30, 2026, the carrying value of goodwill associated with our Canadian Cannabis reporting unit was $42.8 million and the carrying value of intangible assets associated with our Cannabis reporting unit was $21.1 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 March 31, 2026, 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 March 31, 2026, we had approximately $35,749 in aggregate principal amounts of our Term Loans with a weighted average interest rate of 5.7%.

The current interest rates for outstanding revolving loans under our Credit Facility and Term Loans reflect basis point decreases of approximately 2.1% over the comparable period in 2025.

As of June 30, 2026, our variable interest rate debt was primarily related to our Pure Sunfarms Secured Credit Facilities and FCC Term Loan.

Outstanding borrowings under our Pure Sunfarms Secured Credit Facility and FCC Term Loan 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, 2026, we had approximately $39,962 in aggregate principal amounts of our Pure Sunfarms Secured Credit Facilities and FCC Term Loan with a weighted average interest rate of 5.7%.

The current interest rates for outstanding revolving loans under our Pure Sunfarms Credit Facility and FCC Term Loan reflect basis point decreases of approximately 1.2% over the comparable period in 2025.

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.

Our variable interest rate debt subjects us to risk from increases in prevailing interest rates.

This risk increases in the current inflationary environment, in which the Federal Reserve may increase 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 $43 and $50 for the three months ended March 31, 2026.

An additional 50 basis point increase in the applicable interest rates under our Pure Sunfarms Credit Facility and FCC Term Loan would have increased our interest expense by approximately $46 and $92 for the three and six months ended June 30, 2026, respectively, and $50 and $100 for the three and six months ended June 30, 2025, 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 March 31, 2026 and 2025, the Canadian/U.S.

As of June 30, 2026 and 2025, the Canadian/U.S.

foreign exchange rate was C$1.00 = US$0.7033 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 March 31, 2026 and 2025 with the net foreign exchange gain or loss directly impacting comprehensive income (loss):

March 31, 2026

March 31, 2025

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, 2026 and 2025 with the net foreign exchange gain or loss directly impacting comprehensive income (loss):

June 30, 2026

June 30, 2025

Financial assets

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Trade receivables

Prepaid and deposits

Prepaid expenses and deposits

Financial liabilities

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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