Village Farms International, Inc. 10-Q

Item 1. FINANCIAL STATEMENTS Village Farms International, Inc. Condensed Consolidated Sta tements of Financial Position (In thousands of United States dollars, except share data) (Unaudited) June 30, 2026 December 31, 2025 ASSETS Current assets Cash and cash equivalents $ 72,931 $ 81,189 Restricted cash — 5,063 Trade receivables, net 32,406 23,151 Inventories, net 46,669 41,519 Other receivables 1,397 324 Prepaid expenses and deposits 6,923 3,191 Total current assets 160,326 154,437 Non-current assets Property, plant and equipment, net 190,058 185,712 Investments 6,276 6,276 Goodwill 42,775 44,365 Intangibles, net 21,137 23,647 Deferred tax asset 564 694 Right-of-use assets 5,388 4,066 Other assets 1,943 3,899 Total assets $ 428,467 $ 423,096 LIABILITIES Current liabilities Trade payables $ 17,587 $ 15,747 Current maturities of long-term debt 5,249 4,885 Accrued sales taxes 7,068 8,695 Accrued liabilities 16,699 13,960 Lease liabilities - current 1,169 1,198 Income tax payable — 12,151 Other current liabilities 2,836 1,950 Total current liabilities 50,608 58,586 Non-current liabilities Long-term debt 34,713 28,769 Deferred tax liability 17,329 18,494 Lease liabilities - non-current 5,058 3,855 Other non-current liabilities 2,111 3,330 Total liabilities 109,819 113,034 MEZZANINE EQUITY Redeemable non-controlling interest 6,447 10,164 SHAREHOLDERS’ EQUITY Common shares, no par value per share - unlimited shares authorized; 121,844,464 shares issued and outstanding at June 30, 2026 and 115,722,312 common shares issued and outstanding at December 31, 2025. 407,031 392,380 Additional paid in capital 24,931 29,374 Accumulated other comprehensive loss ( 17,248 ) ( 9,281 ) Retained earnings ( 102,513 ) ( 112,575 ) Total shareholders’ equity 312,201 299,898 Total liabilities, mezzanine equity and shareholders’ equity $ 428,467 $ 423,096 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 2 Village Farms International, Inc. Condensed Consolidated Statements of O perations and Comprehensive Income (Loss) (In thousands of United States dollars, except per share data) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Sales $ 63,977 $ 59,899 $ 114,215 $ 99,579 Cost of sales ( 34,004 ) ( 37,557 ) ( 63,256 ) ( 63,057 ) Gross profit 29,973 22,342 50,959 36,522 Selling, general and administrative expenses ( 18,811 ) ( 15,411 ) ( 34,753 ) ( 30,030 ) Interest expense ( 477 ) ( 814 ) ( 1,000 ) ( 1,516 ) Interest income 343 109 951 184 Foreign exchange (loss) gain ( 597 ) 1,792 ( 1,145 ) 1,708 Other income (loss) 24 4,430 ( 159 ) 4,451 Income before taxes and equity method investment income 10,455 12,448 14,853 11,319 Provision for income taxes ( 3,262 ) ( 2,503 ) ( 4,930 ) ( 3,486 ) Equity method investment income, net of tax — — — — Income from continuing operations 7,193 9,945 9,923 7,833 Income from discontinued operations, net of tax — 16,294 — 11,291 Income including non-controlling interests 7,193 26,239 9,923 19,124 Less: net (income) loss attributable to non-controlling interests, net of tax ( 48 ) 258 139 670 Net income attributable to Village Farms International, Inc. shareholders $ 7,145 $ 26,497 $ 10,062 $ 19,794 Basic income per share attributable to Village Farms International, Inc. shareholders from: Continuing operations $ 0.06 $ 0.09 $ 0.09 $ 0.08 Discontinued operations - 0.15 - 0.10 Basic income per share attributable to Village Farms International, Inc. shareholders $ 0.06 $ 0.24 $ 0.09 $ 0.18 Diluted income per share attributable to Village Farms International, Inc. shareholders from: Continuing operations $ 0.06 $ 0.10 $ 0.08 $ 0.08 Discontinued operations - 0.14 - 0.10 Diluted income per share attributable to Village Farms International, Inc. shareholders $ 0.06 $ 0.24 $ 0.08 $ 0.18 Weighted average number of common shares used in the computation of net income (loss) per share (in thousands): Basic 116,192 112,347 115,728 112,342 Diluted 124,721 112,736 125,824 112,607 Income including non-controlling interests $ 7,193 $ 26,239 $ 9,923 $ 19,124 Other comprehensive income (loss): Foreign currency translation adjustment ( 4,665 ) 9,870 ( 8,196 ) 10,835 Comprehensive loss including non-controlling interests 2,528 36,109 1,727 29,959 Comprehensive loss (income) attributable to non-controlling interests 72 ( 239 ) 418 100 Comprehensive income attributable to Village Farms International, Inc. shareholders $ 2,600 $ 35,870 $ 2,145 $ 30,059 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 3 Village Farms International, Inc. Condensed Consolidated Statements of Changes in Shareholders’ Equity and Mezzanine Equity (In thousands of United States dollars, except for shares outstanding) (Unaudited) Three Months Ended June 30, 2026 Number of Common Shares (in thousands) Common Shares Additional Paid in Capital Accumulated Other Comprehensive Loss Retained Earnings Total Shareholders’ Equity Mezzanine Equity Balance April 1, 2026 114,048 $ 392,898 $ 23,382 $ ( 12,654 ) $ ( 109,658 ) $ 293,968 $ 9,819 Net proceeds from issuance of common shares 7,500 14,054 — — — 14,054 — Shares repurchased ( 149 ) — ( 419 ) — — ( 419 ) — Share-based compensation — — 293 — — 293 — Shares issued on vesting of restricted share awards, net of tax witholding 356 — ( 394 ) — — ( 394 ) — Shares issued on exercise of options 89 79 — — — 79 — Acquisition of redeemable non-controlling interest — — 2,069 — — 2,069 ( 3,349 ) Cumulative translation adjustment — — — ( 4,594 ) — ( 4,594 ) ( 71 ) Net income — — — — 7,145 7,145 48 Balance at June 30, 2026 121,844 $ 407,031 $ 24,931 $ ( 17,248 ) $ ( 102,513 ) $ 312,201 $ 6,447 Three Months Ended June 30, 2025 Number of Common Shares (in thousands) Common Shares Additional Paid in Capital Accumulated Other Comprehensive (Loss) income Retained Earnings Total Shareholders’ Equity Mezzanine Equity Balance at April 1, 2025 112,337 $ 387,349 $ 30,749 $ ( 18,042 ) $ ( 151,719 ) $ 248,337 $ 9,616 Share-based compensation 306 — 123 — — 123 — Shares issued on exercise of warrants 1 1 6 — — 7 Cumulative translation adjustment — — — 9,373 — 9,373 497 Net income (loss) — — — — 26,497 26,497 ( 258 ) Balance at June 30, 2025 112,644 $ 387,350 $ 30,878 $ ( 8,669 ) $ ( 125,222 ) $ 284,337 $ 9,855 Six Months Ended June 30, 2026 Number of Common Shares Common Shares Additional Paid in Capital Accumulated Other Comprehensive (loss) income Retained Earnings Total Shareholders’ Equity Mezzanine Equity Balance January 1, 2026 115,722 $ 392,380 $ 29,374 $ ( 9,281 ) $ ( 112,575 ) $ 299,898 $ 10,164 Net proceeds from issuance of common shares 7,500 14,054 — — — 14,054 — Shares Repurchased ( 2,214 ) — ( 6,787 ) — — ( 6,787 ) — Share-based compensation — — 669 — — 669 — Shares issued on vesting of restricted share awards, net of tax witholding 356 — ( 394 ) — — ( 394 ) — Shares issued on exercise of warrants 221 389 — — — 389 — Shares issued on exercise of options 259 208 — — — 208 — Acquisition of redeemable non-controlling interest — — 2,069 — — 2,069 ( 3,349 ) Cumulative translation adjustment — — — ( 7,967 ) — ( 7,967 ) ( 229 ) Net income (loss) — — — — 10,062 10,062 ( 139 ) Balance at June 30, 2026 121,844 $ 407,031 $ 24,931 $ ( 17,248 ) $ ( 102,513 ) $ 312,201 $ 6,447 4 Six Months Ended June 30, 2025 Number of Common Shares Common Shares Additional Paid in Capital Accumulated Other Comprehensive Loss Retained Earnings Total Shareholders’ Equity Mezzanine Equity Balance January 1, 2025 112,337 $ 387,349 $ 30,604 $ ( 18,932 ) $ ( 145,016 ) $ 254,005 $ 9,953 Share-based compensation 306 — 268 — — 268 — Shares issued on exercise of warrants 1 1 6 — — 7 Cumulative translation adjustment — — — 10,263 — 10,263 572 Net income (loss) — — — — 19,794 19,794 ( 670 ) Balance at June 30, 2025 112,644 $ 387,350 $ 30,878 $ ( 8,669 ) $ ( 125,222 ) $ 284,337 $ 9,855 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 5 Village Farms International, Inc. Condensed Consolidated Statements of Cash Flows (In thousands of United States dollars) (Unaudited) Six Months Ended June 30, 2026 2025 Cash flows provided by (used in) operating activities: Income from continuing operations including non-controlling interests $ 9,923 $ 7,833 Adjustments to reconcile net income attributable to Village Farms International, Inc. shareholders to net cash used in operating activities of continuing operations: Depreciation and amortization 8,582 8,410 Amortization of deferred charges 139 47 Interest expense 1,000 1,516 Interest paid on long-term debt ( 757 ) ( 1,613 ) Unrealized foreign exchange loss (gain) 217 ( 87 ) Loss on disposal of assets 87 — Non-cash lease expense 491 619 Share-based compensation 669 268 Deferred income taxes 200 ( 935 ) Changes in non-cash working capital items ( 28,435 ) 6,207 Net cash (used in) provided by operating activities from continuing operations ( 7,884 ) 22,265 Cash flows used in investing activities: Purchases of property, plant and equipment ( 15,462 ) ( 5,289 ) Net cash used in investing activities from continuing operations ( 15,462 ) ( 5,289 ) Cash flows provided by (used in) financing activities: Proceeds from issuance of common shares 15,000 — Issuance costs ( 958 ) — Proceeds from borrowings 8,952 — Repayments on borrowings ( 2,387 ) ( 4,554 ) Share repurchases ( 6,787 ) — Acquisition of redeemable non-controlling interest ( 1,280 ) Proceeds from exercise of warrants and options 182 — Other financing activities ( 182 ) ( 432 ) Net cash provided by (used in) financing activities from continuing operations 12,540 ( 4,986 ) Discontinued Operations Net cash (used in) provided by operating activities from discontinued operations — ( 6,818 ) Net cash (used in) provided by investing activities from discontinued operations — 38,710 Net cash (used in) provided by financing activities from discontinued operations — ( 4,000 ) Net cash flows provided by discontinued operations — 27,892 Effect of exchange rate changes on cash and cash equivalents ( 2,515 ) 475 Net (decrease) increase in cash, cash equivalents and restricted cash ( 13,321 ) 40,357 Cash, cash equivalents and restricted cash, beginning of period 86,252 24,631 Cash, cash equivalents and restricted cash, end of period $ 72,931 $ 64,988 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 6 VILLAGE FARMS INTERNATIONAL, INC. Notes to Condensed Consolidated Financial Statements (In thousands of United States dollars, except per share amounts, unless otherwise noted) 1. BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Nature of Business Village Farms International, Inc. (“VFF” and, together with its subsidiaries, the “Company”, “we”, “us”, or “our”) is a corporation existing under the Ontario Business Corporations Act. VFF’s principal operating subsidiaries as of June 30, 2026 were Pure Sunfarms Corp. (“Pure Sunfarms”), Balanced Health Botanicals, LLC (“Balanced Health”), Village Farms International, B.V. (“VFN”), Village Farms Canada Limited Partnership ("VFCLP"), Village Farms, L.P., and VF Clean Energy, Inc. (“VFCE”). VFF also owns an 86.6 % interest in Rose LifeScience Inc. (“Rose”). The address of the registered office of VFF is 79 Wellington Street West, Suite 3300, Toronto, Ontario, Canada, M5K 1N2. The address of the principal executive office of VFF is 90 Colonial Center Parkway, Lake Mary, Florida, United States, 32746. The common shares of the Company (the "Common Shares") are listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “VFF”. VFF's wholly owned subsidiary, Pure Sunfarms, is a vertically integrated licensed producer and supplier of cannabis products sold to customers throughout Canada and internationally. Through its 86.6 % ownership interest of Rose, the Company has a substantial presence in the Province of Quebec as a cannabis supplier, producer and commercialization expert. The Company’s wholly owned subsidiary, Balanced Health, develops and sells high quality, cannabidiol (“CBD”) based products including ingestible, edible and topical applications within the U.S. Its wholly owned subsidiary, VFN, is a vertically integrated licensed producer and supplier of cannabis products sold to coffee shops in the Netherlands. VFF also owns and operates a sophisticated, highly intensive agricultural greenhouse facility in British Columbia, where it produces premium-quality tomatoes. Basis of Presentation The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and footnote disclosures normally included in the annual audited consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying Condensed Consolidated Statement of Financial Position as of December 31, 2025 is derived from the Company’s audited financial statements as of that date. Because certain information and footnote disclosures have been condensed or omitted, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2025 contained in the Company’s 2025 Annual Report on Form 10-K. In management’s opinion, all normal and recurring adjustments considered necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented have been included. When necessary, certain prior year amounts have been reclassified to conform with the current period presentation. Interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. The Company believes that the disclosures made in these condensed consolidated financial statements are adequate to make the information not misleading. As of May 30, 2025, the Company determined that certain assets that had been disposed of met the criteria for discontinued operations presentation. For the three and six month periods ended June 30, 2025, the operating results associated with the assets disposed of have been reclassified into income (loss) from discontinued operations, net of tax, in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and the cash flows from the Company’s discontinued operations are presented in the Condensed Consolidated Statements of Cash Flows for all periods presented. The notes to the condensed consolidated financial statements are presented on a continuing operations basis unless otherwise noted. Refer to Note 8 Discontinued Operations and Disposals for additional information on the Company's discontinued operations. Principles of Consolidation The accompanying condensed consolidated financial statements include Village Farms International, Inc. and its subsidiaries and include the accounts of all majority-owned subsidiaries over which the Company exercises control and, when applicable, entities in which the Company has a controlling financial interest. All significant intercompany balances and transactions have been eliminated in consolidation. Other parties’ interests in entities that the Company consolidates are reported as non-controlling interests within equity, except for mandatorily redeemable non-controlling interests, which are recorded within mezzanine equity. Net income or loss attributable to non-controlling interests is reported as a separate line item below net income or loss. The Company applies the equity method of accounting for its investments in entities for which it does not have a controlling financial interest, but over which it has the ability to exert significant influence. Translations of Foreign Currencies 7 VILLAGE FARMS INTERNATIONAL, INC. Notes to Condensed Consolidated Interim Financial Statements (In thousands of United States dollars, except per share amounts, unless otherwise noted) The assets and liabilities of foreign subsidiaries with a functional currency other than the U.S. dollar are translated into U.S. dollars at period-end exchange rates, with resulting translation gains or losses included within other comprehensive income or loss. Revenue and expenses are translated into U.S. dollars at average rates of exchange during the applicable period. Substantially all of the Company’s foreign operations use their local currency as their functional currency. For foreign operations for which the local currency is not the functional currency, the operation’s non-monetary assets are remeasured into U.S. dollars at historical exchange rates. All other accounts are remeasured at current exchange rates, with both gains or losses from remeasurement and currency gains or losses from transactions executed in currencies other than the functional currency included in foreign exchange (loss) gain. In these condensed consolidated financial statements, “$” means U.S. dollars and “C$” means Canadian dollars, unless otherwise noted. The exchange rates used to translate from Canadian dollars to U.S. dollars are shown below: As of June 30, 2026 June 30, 2025 December 31, 2025 Spot rate 0.7033 0.7310 0.7294 Three-month period ended 0.7222 0.7308 N/A Six-month period ended 0.7256 0.7363 N/A General Economic, Regulatory and Market Conditions The Company has experienced, and may continue to experience, direct and indirect negative effects on its business and operations from negative economic, regulatory and market conditions, including inflationary effects on fuel prices, labor and materials costs, elevated interest rates, tariffs, potential recessionary impacts and supply chain disruptions that could negatively affect demand for new projects and/or delay existing project timing or cause increased project costs. The extent to which general economic, regulatory and market conditions could affect the Company’s business, operations and financial results is uncertain as it will depend upon numerous evolving factors that management may not be able to accurately predict, and, therefore, any future impacts on the Company’s business, financial condition and/or results of operations cannot be quantified or predicted with specificity. Recent Accounting Pronouncements 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. 2. INVENTORIES Inventories consisted of the following as of: Classification June 30, 2026 December 31, 2025 Cannabis: Raw materials $ 4,357 $ 5,852 Work-in-progress 8,463 10,599 Finished goods 26,734 20,227 Packaging 4,523 2,965 Produce: Crop inventory 2,592 1,876 Inventory $ 46,669 $ 41,519 3. REVENUES The Company’s revenue transactions consist of a single performance obligation to transfer promised goods at a fixed price. Quantities to be delivered to the customer are determined at a point near the date of delivery through purchase orders received from the customer. The Company recognizes revenue when it has fulfilled a performance obligation, which is typically when the customer receives the goods. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring the goods. The amount of revenue recognized is measured at the fair value of the consideration received or receivable, reduced for excise duty, returns, and other customer credits, such as trade discounts and volume rebates. Payment terms are consistent with terms standard to the markets the Company serves. The following tables disaggregate the Company’s net revenues from continuing operations by major source. 8 VILLAGE FARMS INTERNATIONAL, INC. Notes to Condensed Consolidated Interim Financial Statements (In thousands of United States dollars, except per share amounts, unless otherwise noted) For the Three Months Ended June 30, Classification 2026 2025 Cannabis: Canadian Branded (1) $ 23,017 $ 24,962 Canadian Non-Branded 3,040 7,077 International Exports 20,897 11,980 U.S. Cannabis 3,224 3,841 Netherlands Branded 3,345 2,483 Other — 499 Total Cannabis 53,523 50,842 Other Produce 10,185 8,574 Clean Energy 269 483 Total Revenue $ 63,977 $ 59,899 For the Six Months Ended June 30, Classification 2026 2025 Cannabis: Canadian Branded (1) $ 46,865 $ 47,713 Canadian Non-Branded 8,417 13,367 International Exports 35,478 17,368 U.S. Cannabis 6,357 7,745 Netherlands Branded 6,008 2,969 Other 142 907 Total Cannabis 103,267 90,069 Other Produce 10,293 8,601 Clean Energy 655 909 Total Revenue $ 114,215 $ 99,579 (1) Canadian Branded revenues are shown net of excise tax on products. Excise tax on pro ducts was $ 14,909 and $ 30,812 for t he three and six months ended June 30, 2026, respe ctively, and $ 14,812 and $ 28,759 for the three and six months ended June 30, 2025, respe ctively. 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following as of: Classification June 30, 2026 December 31, 2025 Land $ 13,649 $ 14,040 Leasehold and land improvements 9,204 9,388 Buildings 188,275 188,464 Machinery and equipment 59,287 58,672 Construction in progress 31,458 22,410 Less: Accumulated depreciation ( 111,815 ) ( 107,262 ) Property, plant and equipment, net $ 190,058 $ 185,712 Depreciation expense on property, plant and equipment, was $ 3,175 and $ 3,796 for the three months ended June 30, 2026 and 2025, respectively, and $ 6,971 and $ 6,779 for the six months ended June 30, 2026 and 2025, respectively. Capitalized interest was $ 92 and $ 0 for the six months ended June 30, 2026 and 2025 , respectively. 5. ACQUISITIONS Rose Acquisition On May 21, 2026 , the Company entered into a Share Purchase Agreement with one of the non-controlling shareholders for the acquisition of an additional 6.6 % interest in Rose for a total cash purchase price of approximately $ 1,280 , which resulted in a 9 VILLAGE FARMS INTERNATIONAL, INC. Notes to Condensed Consolidated Interim Financial Statements (In thousands of United States dollars, except per share amounts, unless otherwise noted) reduction of mezzanine equity of $ 3,349 and an increase in additional paid-in capital of $ 2,069 . The Company's ownership interest in Rose is now 86.6 %. 6. GOODWILL AND INTANGIBLE ASSETS Goodwill The following table presents the changes in the carrying value of goodwill by reportable segment for the six months ended June 30, 2026: Cannabis Balance as of December 31, 2025 $ 44,365 Foreign currency translation adjustment ( 1,590 ) Balance as of June 30, 2026 $ 42,775 Intangible Assets Intangible assets consisted of the following as of: Classification June 30, 2026 December 31, 2025 Licenses $ 17,896 $ 18,508 Brands and trademarks* 12,555 12,678 Customer relationships 12,666 13,137 Computer software 424 1,621 Other* 144 144 Less: Accumulated amortization ( 13,298 ) ( 13,191 ) Less: Impairments* ( 9,250 ) ( 9,250 ) Intangibles, net $ 21,137 $ 23,647 * Includes indefinite-lived intangible assets The expected future amortization expense for definite-lived intangible assets as of June 30, 2026 was as follows: Fiscal period Remainder of 2026 $ 1,584 2027 3,171 2028 1,834 2029 1,831 2030 1,791 Thereafter 7,477 Intangibles, net $ 17,688 Amortization expense was $ 802 and $ 837 for the three months ended June 30, 2026 and 2025, respectively, and $ 1,611 and $ 1,631 for the six months ended June 30, 2026 and 2025, respectively. Assessment for Indicators of Impairment At the end of each reporting period, the Company assesses whether events or changes in circumstances have occurred that would indicate an impairment. The Company considers external and internal factors, including overall financial performance and relevant entity-specific factors, as part of this assessment. During the six months ended June 30, 2026 and 2025, the Company considered qualitative factors in assessing impairment indicators for the Canadian Cannabis reporting unit. At June 30, 2026 and 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 reporting unit to be below its carrying amounts. 10 VILLAGE FARMS INTERNATIONAL, INC. Notes to Condensed Consolidated Interim Financial Statements (In thousands of United States dollars, except per share amounts, unless otherwise noted) 7 . LINE OF CREDIT AND LONG-TERM DEBT The following table provides details for the carrying values of debt as of: June 30, 2026 December 31, 2025 Term Loan - (“FCC Term Loan”) - repayable by monthly principal payments of $ 164 and accrued interest at Secured Overnight Financing Rate (“SOFR” ) plus an applicable margin per annum ( 6.86 % at June 30, 2026); matures February 3, 2031 $ 14,875 $ 15,855 Term loans - ("Pure Sunfarms Term Loan Facility") - C$ 42.4 M - repayable by quarterly principal payments of C$ 1.2 million and accrued interest at Canadian prime rate or Canadian Overnight Repo Rate Average ("CORRA" ) plus an applicable margin ( 4.86 % at June 30, 2026), matures February 7, 2029 . 25,087 17,799 Total $ 39,962 $ 33,654 Less current maturities 5,249 4,885 Total long-term debt $ 34,713 $ 28,769 As collateral for the FCC Term Loan, the Company has provided promissory notes and a first priority security interest over its accounts receivable and inventory. In addition, the Company has granted full recourse guarantees and security therein. The carrying value of the assets and securities pledged as collateral for the FCC Term Loan as of June 30, 2026 and December 31, 2025 was $ 77,157 and $ 84,653 , respectively. On April 10, 2025, the Company entered into an Amended and Restated Credit Agreement (the “A&R Credit Agreement”) with Farm Credit Canada (“FCC”) as the lender, which amended and restated the terms of 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) provides more favorable financial covenants. 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 Company has 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. 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 extended maturities by one year to February 20 29 . The incremental debt financing comes in the form of a delayed draw term loan, from which the Company drew an initial C$ 5 million on February 20, 20 26 and C$ 8.3 million on June 30, 2026. All oth er terms of the credit facility loans remain unchanged. The loans under the Pure Sunfarms Secured Credit Facilities will accrue interest at a rate equal to, at the Company's option, (a) the Canadian Prime Rate plus the applicable margin, or (b) the Canadian Overnight Repo Rate Average plus the applicable margin. The applicable margin for the Pure Sunfarms Secured Credit Facility is determined based upon Pure Sunfarms leverage ratio. The Pure Sunfarms Secured Credit Facilities can be drawn for advances of up to C$ 10.0 million. The Pure Sunfarms Secured Credit Facilities also contain customary covenants, customary representations and warranties, affirmative covenants, financial covenants and events of default. At June 30, 2026, the Company was compliant with all of its financial covenants. The weighted average annual interest rate on short-term borrowings as of June 30, 2026 and December 31, 2025 was 5.7 % and 8.2 % , respectively. Accrued interest payable on all long-term debt as of June 30, 2026 and December 31, 2025 was $ 211 and $ 166 , respectively, and these amounts are included in accrued liabilities in the Condensed Consolidated Statements of Financial Position. 11 VILLAGE FARMS INTERNATIONAL, INC. Notes to Condensed Consolidated Interim Financial Statements (In thousands of United States dollars, except per share amounts, unless otherwise noted) The aggregate annual principal maturities of long-term debt for the remainder of 2026 and thereafter are as follows: Remainder of 2026 $ 2,622 2027 5,244 2028 5,244 2029 18,844 2030 1,961 After 6,047 Total $ 39,962 8. DI SCONTINUED OPERATIONS AND DISPOSALS On May 30, 2025, the Company closed on a transaction with a newly-formed holding company, Verdexa L. P. (formally Vanguard Food, L. P.) (“Verdexa”), backed by private investment firms, to privatize certain assets and operations of its Produce operations (the "Transaction"). As part of the Transaction, the Company received $ 40 million in cash proceeds, subject to working capital adjustments, and common units representing a 37.9 % equity ownership interest in Verdexa with an estimated fair value of $ 3.5 million. In accordance with ASC 810-10-40, the Company recognized a gain upon deconsolidation of the Produce operations, based on the fair value of consideration received and fair value of Verdexa common units, less the carrying amount of net assets dispo sed. The following table outlines the calculation of the gain on sale of the Transaction: Cash proceeds $ 35,000 Cash held in indemnity escrow (Restricted cash released May 31, 2026) 5,000 Fair value of Verdexa common units 3,530 Carrying value of lease to Verdexa 1,245 Estimated future distributions for working capital adjustments and other obligations ( 4,290 ) Less: Carrying value of net assets disposed ( 20,500 ) Gain on sale $ 19,985 The Company concluded the Transaction met the criteria under ASC 205-20 to be classified as discontinued operations because the Transaction represented a strategic shift in the Company's business model that had a major effect on the Company’s operations and financial results. Accordingly, the Condensed Consolidated Statements of Operations and Comprehensive Income (loss) have been adjusted for the prior period to reflect the historical results as discontinued operations. Details of the income from discontinued operations, net of tax, were as follows for the: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Sales $ — $ 25,358 $ — $ 62,753 Cost of sales — ( 25,613 ) — ( 65,846 ) Gross loss — ( 255 ) — ( 3,093 ) Selling, general and administrative expenses — ( 2,568 ) — ( 4,729 ) Interest expense — ( 3 ) — ( 7 ) Gain on sale of assets — 19,985 — 19,985 Income from discontinued operations before income taxes — 17,159 — 12,156 Provision for income taxes — ( 865 ) — ( 865 ) Income from discontinued operations, net of tax $ - $ 16,294 $ - $ 11,291 9. EQUITY INVESTMENTS On May 30, 2025, the Company closed on the Transaction with Verdexa (Note 8 ). As part of the Transaction, the Company received a 37.9 % equity ownership interest in Verdexa with an estimated fair value of $ 3,530 , included in investments within the Condensed Consolidated Statements of Financial Position . We account for our investment in Verdexa under the equity method of accounting in accordance with ASC 323, Investments – Equity Method and Joint Ventures . Under the equity method of accounting, the initial investment is recorded at cost and the investment is subsequently adjusted for, among other things, its proportionate share of earnings or losses. However, given the capital structure of the Verdexa arrangement, we apply the 12 VILLAGE FARMS INTERNATIONAL, INC. Notes to Condensed Consolidated Interim Financial Statements (In thousands of United States dollars, except per share amounts, unless otherwise noted) Hypothetical Liquidation Book Value ("HLBV") method to determine the allocation of profits and losses since our liquidation rights and priorities, as defined by the Amended and Restated Limited Partnership Agreement of Vanguard Food LP (the "Vanguard LPA"), differ from our underlying ownership interest. The HLBV method calculates the proceeds that would be attributable to each partner in an investment based on the liquidation provisions of the Vanguard LPA if the partnership were to be liquidated at book value as of the balance sheet date. Each partner’s allocation of income or loss in the period is equal to the change in the amount of net equity they are legally able to claim based on a hypothetical liquidation of the entity at the end of a reporting period compared to the beginning of that period, adjusted for any capital transactions. Based on the terms of the Vanguard LPA and related Transaction documents, we recorded income on equity method investments attributable to Verdexa of $ 0 for the three and six months ended June 30, 2026 and 2025 . 10. FINANCIAL INSTRUMENTS Financial assets and liabilities are recognized on the Condensed Consolidated Statements of Financial Position at fair value in a hierarchy for those assets and liabilities measured at fair value on a recurring basis. At June 30, 2026 and December 31, 2025, the Company’s financial instruments included cash and cash equivalents, restricted cash, trade receivables, other receivables, line of credit, trade payables, income tax payables, accrued liabilities, lease liabilities, and long-term debt. The carrying value of cash, cash equivalents, and restricted cash, trade receivables, other receivables, trade payables, income tax payables, and accrued liabilities approximate their fair values due to the short-term maturity of these financial instruments. The carrying value of line of credit, lease liabilities, and long-term debt approximate their fair values due to the short-term nature of these instruments or the use of market interest rates for debt instruments. There were no financial instruments categorized as Level 3 at June 30, 2026 and December 31, 2025. There were no transfers of assets or liabilities between levels during the six months ended June 30, 2026 and 2025 . 11. RELATED PARTY TRANSACTIONS AND BALANCES The Company leases its Rose office building from a former Company employee who also owns a minority interest in Rose. For the three and six months ended June 30, 2026, the Company paid C $ 44 and C $ 80 , respectively, and for the three and six months ended June 30, 2025, the Company paid C $ 78 and C $ 114 , respectively, to lease this office space. The Company has entered into a Transition Services Agreement with Village Fresh, a Verdexa subsidiary, to provide certain transition services for specified fees and a multi-year Sales, Marketing & Distribution Agreement with Village Fresh, which sets forth the terms, conditions, rights and obligations governing the sales, marketing and distribution by Village Fresh of all hydroponically grown tomatoes produced at VFCLP's British Columbia greenhouse growing facilities. The price paid by Village Fresh to the Company is based on amounts paid by Village Fresh’s customers, net of a marketing fee. Under this agreement, the Company recorded revenues of $ 10,185 and $ 10,293 for the three and six months ended June 30, 2026 , respectively, and $ 4,207 and $ 4,207 for the three and six months ended June 30, 2025, respectively. The Company had outstanding receivables under this agreement of $ 3,420 as of June 30, 2026 and $ 637 as of December 31, 2025. 12. INCOME TAXES The Company has recorded a provision for income taxes of $ 3,262 and $ 4,930 for the three and six months ended June 30, 2026, compared with a provision for income taxes of $ 2,503 and $ 3,486 for the same periods last year. The Company’s income tax provision is based on management’s estimate of the effective tax rate for the full year. The tax (provision) benefit in any period will be affected by, among other things, permanent, as well as discrete items, differences in the deductibility of certain items, changes in the valuation allowance related to net deferred tax assets, in addition to changes in tax legislation. As a result, the Company may experience significant fluctuations in the effective book tax rate (that is, tax expense divided by pre-tax book income) from period to period. In order to fully utilize the net deferred tax assets, the Company will need to generate sufficient taxable income in future years. The Company analyzed all positive and negative evidence to determine if, based on the weight of available evidence, it is more likely than not to realize the benefit of the net deferred tax assets. The recognition of the net deferred tax assets and related tax benefits is based upon the Company’s conclusions regarding, among other considerations, estimates of future earnings based on information currently available and current and anticipated customers, contracts, and product introductions, as well as historical operating results and certain tax planning strategies. Based on the analysis of all available evidence, both positive and negative, the Company has concluded that it does not have the ability to generate sufficient taxable income in the necessary periods to utilize the entire benefit for its deferred tax assets. Accordingly, the Company established a valuation allowance o f $ 47,850 as of June 30, 2026 and $ 47,425 as of December 31, 13 VILLAGE FARMS INTERNATIONAL, INC. Notes to Condensed Consolidated Interim Financial Statements (In thousands of United States dollars, except per share amounts, unless otherwise noted) 2025. The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax assets may be deemed appropriate in the future. As of June 30, 2026, the Company’s net defer red tax assets totaled $ 564 . 13. SEGMENT AND GEOGRAPHIC INFORMATION The Company regularly monitors its reportable segments to determine if changes in facts and circumstances would indicate whether changes in the determination or aggregation of operating segments are necessary. 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. Therefore, 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. We have recast certain prior period amounts to conform to the way we internally manage and monitor our business. 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.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. Other is comprised of the previously reported Produce and Clean Energy segments and includes operations that are not reported in the Company’s Cannabis segment. Corporate expenses reflect the operations costs that are not allocated to the Company's operating units. The accounting policies of the Cannabis segment are the same as those described in the summary of business, basis of presentation and significant accounting policies. The Company evaluates segment performance based on segment operating income (loss). The CODM uses segment operating income (loss) to allocate resources (including employees, property, and financial or capital resources), predominantly in the annual budget and forecasting process. The CODM considers budget-to-actual variances and current-to-prior year variances on a monthly basis for the operating income (loss) when making decisions about allocating capital and personnel to the Cannabis segment. Discontinued operations are no t included in the applicable reportable segment. The following tables reflect the reconciliation of segment revenue and significant segment expenses from continuing operations recon ciled to the consolidated income (loss) from continuing operations before income taxes and equity method investments: For the Three Months Ended June 30, 2026 Cannabis Segment Totals Other Corporate (3) Total Sales to external customers $ 53,523 $ 53,523 $ 10,454 - $ 63,977 Cost of sales ( 26,246 ) ( 26,246 ) ( 7,758 ) - ( 34,004 ) Selling, general and administrative expenses ( 15,203 ) ( 15,203 ) ( 712 ) ( 2,896 ) ( 18,811 ) Segment operating income (loss) $ 12,074 $ 12,074 $ 1,984 $ ( 2,896 ) $ 11,162 Reconciliation of segment operating income (loss) to income from continuing operations before taxes and income from equity method investments (1) Other expense, net (2) ( 707 ) Income from continuing operations before taxes and equity method investments $ 10,455 14 VILLAGE FARMS INTERNATIONAL, INC. Notes to Condensed Consolidated Interim Financial Statements (In thousands of United States dollars, except per share amounts, unless otherwise noted) For the Three Months Ended June 30, 2025 Cannabis Segment Totals Other Corporate (3) Total Sales to external customers $ 50,842 $ 50,842 $ 9,057 - $ 59,899 Cost of sales ( 29,502 ) ( 29,502 ) ( 8,055 ) - ( 37,557 ) Selling, general and administrative expenses ( 11,606 ) ( 11,606 ) ( 843 ) ( 2,962 ) ( 15,411 ) Segment operating income (loss) $ 9,734 $ 9,734 $ 159 $ ( 2,962 ) $ 6,931 Reconciliation of segment operating income (loss) to loss from continuing operations before taxes and income from equity method investments (1) Other income, net (2) 5,517 Income from continuing operations before taxes and equity method investments $ 12,448 For the Six Months Ended June 30, 2026 Cannabis Segment Totals Other Corporate (3) Total Sales to external customers $ 103,267 $ 103,267 $ 10,948 $ — $ 114,215 Cost of sales ( 54,682 ) ( 54,682 ) ( 8,574 ) — ( 63,256 ) Selling, general and administrative expenses ( 30,023 ) ( 30,023 ) ( 1,224 ) ( 3,506 ) ( 34,753 ) Segment operating income (loss) $ 18,562 $ 18,562 $ 1,150 $ ( 3,506 ) $ 16,206 Reconciliation of segment operating income to income from continuing operations before taxes and income from equity method investments (1) Other expense, net (2) ( 1,353 ) Income from continuing operations before taxes and equity method investments $ 14,853 For the Six Months Ended June 30, 2025 Cannabis Segment Totals Other Corporate (3) Total Sales to external customers $ 90,069 $ 90,069 $ 9,510 $ — $ 99,579 Cost of sales ( 53,460 ) ( 53,460 ) ( 9,597 ) — ( 63,057 ) Selling, general and administrative expenses ( 23,342 ) ( 23,342 ) ( 1,586 ) ( 5,102 ) ( 30,030 ) Segment operating income (loss) $ 13,267 $ 13,267 $ ( 1,673 ) $ ( 5,102 ) $ 6,492 Reconciliation of segment operating income to loss from continuing operations before taxes and income from equity method investments (1) Other income, net (2) 4,827 Income from continuing operations before taxes and equity method investments $ 11,319 (1) The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker. (2) Other income (expense), net is comprised of interest expense, interest income, foreign exchange (loss) gain, other income (expense). (3) Other corporate expenses are comprised of expenses related to centralized corporate functions such as accounting, treasury, information technology, legal, human services, and internal audit expenses. 15 VILLAGE FARMS INTERNATIONAL, INC. Notes to Condensed Consolidated Interim Financial Statements (In thousands of United States dollars, except per share amounts, unless otherwise noted) The following tables summarize our interest income, interest expense, depreciation and amortization, other significant noncash items, and expenditures for capital assets by reportable segment: For the Six Months Ended June 30, 2026 Cannabis Segment Totals Other Corporate Consolidated Totals Interest income $ 414 $ 414 $ 149 $ 388 $ 951 Interest expense $ 468 $ 468 $ 532 $ - $ 1,000 Depreciation and amortization $ 6,985 $ 6,985 $ 1,560 $ 37 $ 8,582 Share based compensation $ 134 $ 134 $ - $ 535 $ 669 Other significant noncash items: Non-cash lease expense $ 377 $ 377 $ 114 $ - $ 491 Expenditures for segment assets $ 14,215 $ 14,215 $ 1,247 $ - $ 15,462 For the Six Months Ended June 30, 2025 Cannabis Segment Totals Other Corporate Consolidated Totals Interest income $ 134 $ 134 $ 1 $ 49 $ 184 Interest expense $ 592 $ 592 $ 924 $ - $ 1,516 Depreciation and amortization $ 6,055 $ 6,055 $ 2,273 $ 82 $ 8,410 Share based compensation $ 85 $ 85 $ 19 $ 164 $ 268 Other significant noncash items: Non-cash lease expense $ 534 $ 534 $ 85 $ - $ 619 Expenditures for segment assets $ 4,581 $ 4,581 $ 708 $ - $ 5,289 The following tables summarize our total assets by reportable segment: June 30, 2026 December 31, 2025 Assets Cannabis $ 346,323 $ 335,428 Total assets for reportable segment $ 346,323 $ 335,428 Other 46,915 49,038 Corporate 35,229 38,630 Consolidated total assets from continuing operations $ 428,467 $ 423,096 The Company’s primary operations are in the United States, Canada, and the Netherlands. The following tables summarize our assets by geographic location: Total assets from continuing operations June 30, 2026 December 31, 2025 United States $ 29,283 $ 36,039 Canada 367,036 363,702 Netherlands 32,148 23,355 $ 428,467 $ 423,096 Long-lived assets from continuing operations June 30, 2026 December 31, 2025 United States $ 27,300 $ 28,970 Canada 212,223 218,582 Netherlands 28,618 21,107 $ 268,141 $ 268,659 16 VILLAGE FARMS INTERNATIONAL, INC. Notes to Condensed Consolidated Interim Financial Statements (In thousands of United States dollars, except per share amounts, unless otherwise noted) 14. INCOME (LOSS) PER SHARE Basic and diluted net income (loss) per common share is calculated as follows: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Numerator: Net income attributable to Village Farms International, Inc. shareholders from continuing operations $ 7,145 $ 10,203 $ 10,062 $ 8,503 Income from discontinued operations, net of tax $ — $ 16,294 $ — $ 11,291 Denominator: Weighted average number of common shares - basic 116,192 112,347 115,728 112,342 Effect of dilutive securities - share-based employee options and awards 8,529 389 10,096 265 Weighted average number of common shares - diluted 124,721 112,736 125,824 112,607 Antidilutive options and awards 14,308 6,501 12,741 6,625 Net income per common share: Basic income per share attributable to Village Farms International, Inc. shareholders from: Continuing operations $ 0.06 $ 0.09 $ 0.09 $ 0.08 Discontinued operations - 0.15 - 0.10 Basic income per share attributable to Village Farms International, Inc. shareholders $ 0.06 $ 0.24 $ 0.09 $ 0.18 Diluted income per share attributable to Village Farms International, Inc. shareholders from: Continuing operations $ 0.06 $ 0.10 $ 0.08 $ 0.08 Discontinued operations - 0.14 - 0.10 Diluted income per share attributable to Village Farms International, Inc. shareholders $ 0.06 $ 0.24 $ 0.08 $ 0.18 15. SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION 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. Share-based compensation Share-based compensation expense was $ 293 and $ 123 for the three months ended June 30, 2026 and 2025, respectively, and $ 669 and $ 268 for the six months ended June 30, 2026 and 2025, respectively. Stock option activity for the six months ended June 30, 2026 was as follows: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value Outstanding at December 31, 2025 6,462,746 $ 3.42 5.36 $ 10,869 Granted — $ — — $ — Exercised ( 280,001 ) $ 1.07 Forfeited/expired ( 255,000 ) $ 5.59 Outstanding at June 30, 2026 5,927,745 $ 3.42 5.09 $ 3,740 Exercisable at June 30, 2026 5,124,041 $ 3.82 5.13 $ 2,857 17 VILLAGE FARMS INTERNATIONAL, INC. Notes to Condensed Consolidated Interim Financial Statements (In thousands of United States dollars, except per share amounts, unless otherwise noted) Restricted Common Share activity for the six months ended June 30, 2026 was as follows: Number of Restricted Share Grants Weighted Average Grant Date Fair Value Outstanding at December 31, 2025 2,545,524 $ 0.73 Granted — — Vested and issued ( 495,560 ) 0.60 Forfeited ( 439,148 ) 0.60 Outstanding at June 30, 2026 1,610,816 $ 0.80 Exercisable at June 30, 2026 — $ - Common Share buyback program On September 29, 2025, the Board of Directors authorized a $ 10 million Common Share repurchase program for up to 5,687,000 Common Shares. Such purchases may be made on the open market, in private transactions and/or pursuant to purchase plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The Company is not obligated to repurchase any specific number of Common Shares, and the timing and actual number of Common Shares repurchased will depend on a variety of factors, including the Company’s Common Share price, general economic, business and market conditions, and alternative investment opportunities. The Company may discontinue any repurchases of its Common Shares at any time without prior notice. During the six months ended June 30, 2026, the Company repurchased 2,213,855 Common Shares for an aggregate amount of $ 6,787 (excluding the 2 % Canadian tax on stock repurchases). As of June 30, 2026 , $ 242 remains available for repurchases. Common Shares repurchased by the Company are accounted for when the transaction is settled. As of June 30, 2026, there were no unsettled Common Share repurchases. Direct costs incurred to acquire the Common Shares are included in the total cost of such shares. Warrants Warrant activity for the six months ended June 30, 2026 was as follows: Number of Shares Underlying the Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Outstanding at December 31, 2025 15,533,900 $ 1.65 2.50 Exercised ( 235,000 ) $ 1.65 Issued — $ - - Expired — $ - - Outstanding at June 30, 2026 15,298,900 $ 1.65 2.00 16. CHANGES IN NON-CASH WORKING CAPITAL ITEMS AND SUPPLEMENTAL CASH FLOW INFORMATION Six Months Ended June 30, 2026 2025 Trade receivables $ ( 7,188 ) $ ( 4,180 ) Inventories ( 6,929 ) 3,473 Lease liabilities ( 607 ) ( 506 ) Other receivables ( 27 ) 3 Prepaid expenses and deposits ( 3,811 ) ( 1,628 ) Trade payables 713 546 Accrued liabilities 5,286 4,433 Taxes payable ( 12,030 ) 5,355 Other assets, net of other liabilities ( 3,842 ) ( 1,289 ) $ ( 28,435 ) $ 6,207 The Company paid income taxes of $ 17,988 and $ 0 for the six months ended June 30, 2026 and 2025 , respectively. 18 VILLAGE FARMS INTERNATIONAL, INC. Notes to Condensed Consolidated Interim Financial Statements (In thousands of United States dollars, except per share amounts, unless otherwise noted) 17. SUBSEQUENT EVENTS The Company evaluated subsequent events an d transactions that occurred after the balance sheet date up to the date the condensed consolidated financial statements were available to be issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements. 19