Village Farms International, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report and the Management’s Discussion and Analysis of Financial Condition and Results of Operations and consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2025 (our "Annual Report on Form 10-K"). This discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on assumptions and estimates that are inherently subject to significant risks and uncertainties, and our actual results could differ materially from the results anticipated by our forward-looking statements. We encourage you to review the risks and uncertainties described in “Risk Factors” in Part I, Item 1A in our Annual Report on Form 10-K, and in Part II, Item 1A of this Quarterly Report. These risks and uncertainties could cause actual results to differ materially from those projected or implied by our forward-looking statements contained in this report. These forward-looking statements are made as of the date of this management’s discussion and analysis, and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by law. EXECUTIVE OVERVIEW Village Farms International, Inc. (“VFF”, together with its subsidiaries, the “Company”, “Village Farms”, “we”, “us” or “our”) is a corporation existing under the Business Corporations Act (Ontario). The Company’s principal operating subsidiaries are Pure Sunfarms Corp. (“Pure Sunfarms” or “PSF”), Balanced Health Botanicals, LLC (“Balanced Health”), Rose LifeScience Inc. (“Rose LifeScience” or “Rose”), Village Farms International B.V. (“VFN”), Village Farms Canada Limited Partnership (“VFCLP”), Village Farms L.P. (“VFLP”), and VF Clean Energy, Inc. (“VFCE”). Village Farms' mission is to apply decades of innovation in intensive agriculture to lead a sustainable path forward for the global cannabis industry. To do so, we leverage a proven track record of asset investment and development and cultivation expertise and experience in controlled environment agriculture to produce branded and wholesale cannabis products for global markets with legally permissible regulatory frameworks. In Canada, we converted two large-scale, advanced greenhouse facilities to cannabis production to serve the Canadian legal adult use (recreational) market and international medical markets through exportation. 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, 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. This market positioning, combined with our cultivation expertise, has enabled us to evolve into a leading producer of dried flower nationally and one of the few Canadian licensed producers with consistently strong operating results. Through strategic and disciplined organic growth, expansion of export markets and/or acquisitions, we intend to participate in other international markets where cannabis attains legal status. In September 2021, our Canadian Cannabis business began exporting cannabis products to Australia for that country’s medical market. In March 2022, our Canadian business received European Union Good Manufacturing Practice (“EU GMP”) certification for our 1.1 million square foot Delta 3 cannabis facility located in Delta, British Columbia (“B.C.”) which permits us to export EU GMP-certified medical cannabis to importers and distributors in international markets that require EU GMP certification. In late 2022, we commenced exports to Israel. In 2023, we began exporting cannabis products to Germany and the United Kingdom for the medical markets in those countries. In 2025, we began exporting cannabis products to New Zealand. 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 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 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. 20 Cannabis Segment 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, 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. Our long-term objective for Canada is to be the leading low-cost, high-quality cannabis producer. Our Netherlands cannabis reporting unit is comprised of wholly owned subsidiary, VFN. Through VFN, we hold one of ten licenses to cultivate and distribute recreational cannabis legally in the Netherlands under that country’s Closed Supply Chain Experiment program, with sales commencing in February 2025. Rose is one of the top-selling licensed producers of cannabis in the Province of Quebec, as well as a prominent cannabis products commercialization expert in Quebec, acting as the exclusive, direct-to-retail sales, marketing and distribution entity for some of the best-known brands in Canada, as well as Quebec-based micro and craft growers. Balanced Health is one of the leading cannabinoid brands and e-commerce platforms in the United States. Balanced Health develops and sells high-quality CBD and hemp-based health and wellness products, distributing its diverse portfolio of consumer products through its top-ranked e-commerce platform, CBDistillery™. Corporate and Other 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 our reporting units. Recent Developments and Updates Cannabis • 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. 1. Based on estimated retail sales from HiFyre, other third parties and provincial boards. Corporate and Other • 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$15 million before deducting placement agent fees and other offering expenses payable by the Company. The proceeds from the Offering are being used for working capital and general corporate purposes. • On June 2, 2026, John R. McLernon stepped down from his position as Chairman of the Company's Board of Directors. Concurrently with Mr. McLernon’s resignation, the Board appointed Christopher Woodward as Chairman. Mr. McLernon continues to serve as a member of the Board of Directors. 21 • On May 27, 2026 the Company was awarded “Producer of the Year” at the 2026 Business of Cannabis Awards in London. The award recognizes excellence and innovation in cannabis cultivation practices, techniques, and product quality, and celebrates cultivators who have demonstrated exceptional skill, dedication, and expertise in producing high-quality cannabis while adhering to best practices in sustainability, compliance, and safety. Presentation of Financial Results Our results of operations for the three and six months ended June 30, 2026 and 2025 presented below reflect the operations of our consolidated wholly-owned subsidiaries and our 80% ownership interest in Rose LifeScience through May 21, 2026, and 86.6% ownership after May 21, 2026. Foreign Currency Exchange Rates All currency amounts in this Quarterly Report are stated in U.S. dollars, which is our reporting currency, unless otherwise noted. All references to “dollars” or “$” are to U.S. dollars. The assets and liabilities of our foreign operations are translated into dollars at the exchange rate in effect as of June 30, 2026, June 30, 2025, and December 31, 2025. Transactions affecting the shareholders’ equity (deficit) are translated at historical foreign exchange rates. The condensed consolidated statements of operations and comprehensive income (loss) and condensed consolidated statements of cash flows of our foreign operations are translated into dollars by applying the average foreign exchange rate in effect for the reporting period. The exchange rates used to translate from Canadian dollars to U.S. dollars is shown below: As of June 30, 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 22 Consolidated Results of Operations (In thousands of U.S. dollars, except per share amounts, and unless otherwise noted) 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 (expense) 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 Adjusted EBITDA from continuing operations $ 15,411 $ 17,111 $ 25,311 $ 20,560 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 Segment Results of Operations 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.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. 23 Corporate expenses reflect the operations costs that are not allocated to our reporting units. (In thousands of U.S. dollars, except per share amounts, and unless otherwise noted) For The Three Months Ended June 30, 2026 Cannabis Other Corporate Consolidated Sales $ 53,523 $ 10,454 $ — $ 63,977 Cost of sales (26,246 ) (7,758 ) — (34,004 ) Selling, general and administrative expenses (15,203 ) (712 ) (2,896 ) (18,811 ) Other expense, net (207 ) (204 ) (296 ) (707 ) Income (loss) before taxes and equity method investment income 11,867 1,780 (3,192 ) 10,455 Provision for income taxes (3,216 ) (46 ) — (3,262 ) Equity method investment income, net of tax — — — — Income (loss) including non-controlling interests 8,651 1,734 (3,192 ) 7,193 Less: net income attributable to non-controlling interests, net of tax (48 ) — — (48 ) Net income (loss) $ 8,603 $ 1,734 $ (3,192 ) $ 7,145 Adjusted EBITDA from Continuing Operations (1) $ 15,273 $ 2,776 $ (2,638 ) $ 15,411 Basic income (loss) per share $ 0.08 $ 0.01 $ (0.03 ) $ 0.06 Diluted income (loss) per share $ 0.08 $ 0.01 $ (0.03 ) $ 0.06 For The Three Months Ended June 30, 2025 Cannabis Other Corporate Consolidated Sales $ 50,842 $ 9,057 $ — $ 59,899 Cost of sales (29,502 ) (8,055 ) — (37,557 ) Selling, general and administrative expenses (11,606 ) (843 ) (2,962 ) (15,411 ) Other (expense) income, net (507 ) 4,471 1,553 5,517 Income (loss) before taxes and equity method investment income 9,227 4,630 (1,409 ) 12,448 Provision for income taxes (2,387 ) (135 ) 19 (2,503 ) Equity method investment income, net of tax — — — — Income (loss) from continuing operations 6,840 4,495 (1,390 ) 9,945 Income from discontinued operations net of tax — 16,294 — 16,294 Income (loss) including non-controlling interests 6,840 20,789 (1,390 ) 26,239 Less: net loss attributable to non-controlling interests, net of tax 258 — — 258 Net income (loss) $ 7,098 $ 20,789 $ (1,390 ) $ 26,497 Adjusted EBITDA from continuing operations (1) $ 13,123 $ 6,833 $ (2,845 ) $ 17,111 Basic income (loss) per share from continuing operations $ 0.06 $ 0.04 $ (0.01 ) $ 0.09 Basic income per share from discontinued operations $ - $ 0.15 $ - $ 0.15 Basic income (loss) per share $ 0.06 $ 0.19 $ (0.01 ) $ 0.24 Diluted income (loss) per share from continuing operations $ 0.06 $ 0.05 $ (0.01 ) $ 0.10 Diluted income per share from discontinued operations $ - $ 0.14 $ - $ 0.14 Diluted income (loss) per share $ 0.06 $ 0.19 $ (0.01 ) $ 0.24 24 For The Six Months Ended June 30, 2026 Cannabis Other Corporate Total Sales $ 103,267 $ 10,948 $ — $ 114,215 Cost of sales (54,682 ) (8,574 ) — (63,256 ) Selling, general and administrative expenses (30,023 ) (1,224 ) (3,506 ) (34,753 ) Other expense, net (517 ) (426 ) (410 ) (1,353 ) Income (loss) before taxes and equity method investment income 18,045 724 (3,916 ) 14,853 Provision for income taxes (4,801 ) (129 ) — (4,930 ) Equity method investment income, net of tax — — — — Income (loss) from continuing operations 13,244 595 (3,916 ) 9,923 Income from discontinued operations, net of tax — — — — Income (loss) including non-controlling interests 13,244 595 (3,916 ) 9,923 Less: net loss attributable to non-controlling interests, net of tax 139 — — 139 Net income (loss) $ 13,383 $ 595 $ (3,916 ) $ 10,062 Adjusted EBITDA from continuing operations (1) $ 25,479 $ 2,753 $ (2,921 ) $ 25,311 Basic income (loss) per share from continuing operations $ 0.12 $ - $ (0.03 ) $ 0.09 Basic income per share from discontinued operations — — — — Basic income (loss) per share $ 0.12 $ - $ (0.03 ) $ 0.09 Diluted income (loss) per share from continuing operations $ 0.11 $ - $ (0.03 ) $ 0.08 Diluted income per share from discontinued operations — — — — Diluted income (loss) per share $ 0.11 $ - $ (0.03 ) $ 0.08 For The Six Months Ended June 30, 2025 Cannabis Other Corporate Total Sales $ 90,069 $ 9,510 $ — $ 99,579 Cost of sales (53,460 ) (9,597 ) — (63,057 ) Selling, general and administrative expenses (23,342 ) (1,586 ) (5,102 ) (30,030 ) Other expense (income), net (709 ) 3,943 1,593 4,827 Income (loss) before taxes and equity method investment income 12,558 2,270 (3,509 ) 11,319 Provision for income taxes (3,282 ) (204 ) — (3,486 ) Equity method investment income, net of tax — — — — Income (loss) from continuing operations 9,276 2,066 (3,509 ) 7,833 Income from discontinued operations net of tax — 11,291 — 11,291 Income (loss) including non-controlling interests 9,276 13,357 (3,509 ) 19,124 Less: net loss attributable to non-controlling interests, net of tax 670 — — 670 Net income (loss) $ 9,946 $ 13,357 $ (3,509 ) $ 19,794 Adjusted EBITDA from continuing operations (1) $ 20,012 $ 5,404 $ (4,856 ) $ 20,560 Basic (loss) income per share from continuing operations $ 0.09 $ 0.02 $ (0.03 ) $ 0.08 Basic loss per share from discontinued operations $ - $ 0.10 $ - $ 0.10 Basic (loss) income per share $ 0.09 $ 0.12 $ (0.03 ) $ 0.18 Diluted (loss) income per share from continuing operations $ 0.09 $ 0.02 $ (0.03 ) $ 0.08 Diluted loss per share from discontinued operations $ - $ 0.10 $ - $ 0.10 Diluted (loss) income per share $ 0.09 $ 0.12 $ (0.03 ) $ 0.18 (1) Adjusted EBITDA from continuing operations is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA from continuing operations may not be comparable to similar measures presented by other issuers. 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 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. 25 RESULTS Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025 Sales Sales for the three months ended June 30, 2026 and 2025 were as follows: 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 (1) Canadian Branded revenues are shown net of excise tax on products. 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 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 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 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 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 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 26 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 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 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, 2026 2025 Loss from discontinued operations, net of tax $ — (2,826 ) Gain on sale of assets, net of tax — 19,120 Net income (loss) from discontinued operations, net of tax $ — $ 16,294 Net Income Attributable to Village Farms International, Inc. Shareholders 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 Sales for the six months ended June 30, 2026 and 2025 were as follows: 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 27 (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 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 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. Income (Loss) from Discontinued Operations, Net of Tax Income (loss) from discontinued operations, net consists of the following: 28 For the Six Months Ended June 30, 2026 2025 Loss from discontinued operations, net of tax $ — $ (7,829 ) Gain on sale of assets, net of tax — 19,120 Net income (loss) from discontinued operations, net of tax $ — $ 11,291 Net Income Attributable to Village Farms International, Inc. Shareholders 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 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. 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”. Liquidity and Capital Resources Capital Resources 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. An additional potential source of liquidity is access to capital markets for additional equity or debt financing. We intend to use our cash on hand for daily operational funding requirements. (in thousands of U.S. dollars unless otherwise noted) Maximum Availability Outstanding as of June 30, 2026 FCC Term Loan $ 14,875 $ 14,875 Pure Sunfarms Term Loan Facility $ 26,277 $ 25,087 Pure Sunfarms Revolving Credit Facility C$ 10,000 $ — 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 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. FCC Term Loan The Company has a term loan financing agreement with Farm Credit Canada ("FCC"), a Canadian creditor (the “FCC Term Loan”). 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 $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 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 June 30, 2026 and December 31, 2025 was $77,157 and $84,653, respectively. 29 On April 10, 2025, the Company entered into the A&R Credit Agreement with respect to the FCC Term Loan. Among other things, the A&R Credit Agreement (i) adds the Company as a new borrower, (ii) adds VF Clean Energy, Inc. as a new guarantor, and (iii) replaces the fixed charged ratio covenant with a more favorable liquidity ratio covenant. Pure Sunfarms 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. 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 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 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. The Pure Sunfarms Secured Credit Facilities also contain customary covenants, customary representations and warranties, affirmative covenants, financial covenants and events of default. Summary of Cash Flows For the Six Months Ended June 30, (in Thousands) 2026 2025 Cash, beginning of period $ 86,252 $ 24,631 Net cash flow provided by (used in): Operating activities (7,884 ) 22,265 Investing activities (15,462 ) (5,289 ) Financing activities 12,540 (4,986 ) Discontinued operations — 27,892 Net cash decrease for the period (10,806 ) 39,882 Effect of exchange rate changes on cash (2,515 ) 475 Cash, end of the period $ 72,931 $ 64,988 Operating Activities - Continuing Operations 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 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. 30 Financing Activities - Continuing Operations 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 We expect to meet our contractual obligations and commitments using our working capital and our other resources described under “Capital Resources” above. Other than with respect to our long-term debt described above and our Canadian and Netherlands expansion projects, we currently do not have any material cash requirements in the near future. Non-GAAP Measures References in this Management’s Discussion and Analysis to “Adjusted EBITDA from continuing operations” are to earnings before interest, taxes, depreciation, and amortization (“EBITDA”), as further adjusted to exclude foreign currency exchange gains and losses, share-based compensation, gains and losses on asset sales and the other adjustments set forth in the table below. In addition, we present below “Adjusted EBITDA from continuing operations – Constant Currency” which excludes the effect of foreign currency rate fluctuations. 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. Therefore, these non-GAAP measures may not be comparable to similar measures presented by other issuers. Investors are cautioned that our non-GAAP measures should not be construed as an alternative to net income or loss determined in accordance with GAAP as an indicator of our performance. Our non-GAAP measures are used as additional measures to evaluate our operating and financial performance. 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 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. dollars) 2026 2025 2026 2025 Net income from continuing operations $ 7,145 $ 10,203 $ 10,062 $ 8,503 Add: Amortization and depreciation 4,279 5,068 8,582 8,410 Foreign currency exchange loss (gain) 389 (1,743 ) 937 (1,761 ) Interest expense, net 134 705 59 1,332 Provision for income taxes 3,262 2,503 4,930 3,486 Share-based compensation 293 123 669 268 Deferred financing fees 67 47 139 47 (Gain) loss on disposal of assets (31 ) 217 87 217 Adjustments attributable to non-controlling interest (127 ) (12 ) (154 ) 58 Adjusted EBITDA from continuing operations (1) 15,411 17,111 25,311 20,560 (1) Adjusted EBITDA from continuing operations is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA from continuing operations presented may not be comparable to similar measures presented by other issuers. 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 the underlying business performance of the Company. 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: 31 For The Three Months Ended June 30, 2026 (in thousands of U.S. dollars) Cannabis Other Corporate Total Net income (loss) from continuing operations $ 8,603 $ 1,734 $ (3,192 ) $ 7,145 Add: Amortization and depreciation 3,483 777 19 4,279 Foreign currency exchange (gain) loss (60 ) 43 406 389 Interest expense (income), net 35 207 (108 ) 134 Provision for income taxes 3,216 46 — 3,262 Share-based compensation 56 — 237 293 Deferred financing fees 67 — — 67 Gain on disposal of assets — (31 ) — (31 ) Adjustments attributable to non-controlling interest (127 ) — — (127 ) Adjusted EBITDA from continuing operations (1) $ 15,273 $ 2,776 $ (2,638 ) $ 15,411 For The Three Months Ended June 30, 2025 (in thousands of U.S. dollars) Cannabis Other Corporate Total Net income (loss) from continuing operations $ 7,098 $ 4,495 $ (1,390 ) $ 10,203 Add: Amortization and depreciation 3,117 1,913 38 5,068 Foreign currency exchange loss (gain) (84 ) (130 ) (1,529 ) (1,743 ) Interest expense (income), net 316 414 (25 ) 705 Provision for (recovery of) income taxes 2,387 135 (19 ) 2,503 Share-based compensation 37 6 80 123 Deferred financing fees 47 — — 47 Other Impairments 217 — — 217 Adjustments attributable to non-controlling interest (12 ) — — (12 ) Adjusted EBITDA from continuing operations (1) 13,123 6,833 (2,845 ) 17,111 For The Six Months Ended June 30, 2026 (in thousands of U.S. dollars) Cannabis Other Corporate Total Net income (loss) from continuing operations $ 13,383 $ 595 $ (3,916 ) $ 10,062 Add: Amortization and depreciation 6,985 1,554 43 8,582 Foreign currency exchange gain 15 123 799 937 Interest expense (income), net 64 383 (388 ) 59 Provision for income taxes 4,801 129 — 4,930 Share-based compensation 128 — 541 669 Deferred financing fees 139 — — 139 Loss (gain) on disposal of assets 118 (31 ) — 87 Adjustments attributable to non-controlling interest (154 ) — — (154 ) Adjusted EBITDA from continuing operations (1) 25,479 2,753 (2,921 ) 25,311 For The Six Months Ended June 30, 2025 (in thousands of U.S. dollars) Cannabis Other Corporate Total Net income (loss) from continuing operations $ 9,946 $ 2,066 $ (3,509 ) $ 8,503 Add: Amortization and depreciation 6,055 2,273 82 8,410 Foreign currency exchange (gain) loss (135 ) (82 ) (1,544 ) (1,761 ) Interest expense (income), net 457 924 (49 ) 1,332 Provision for income taxes 3,282 204 — 3,486 Share-based compensation 85 19 164 268 Deferred financing fees 47 — — 47 Other impairments 217 — — 217 Adjustments attributable to non-controlling interest 58 — — 58 Adjusted EBITDA from continuing operations (1) 20,012 5,404 (4,856 ) 20,560 32 (1) Adjusted EBITDA from continuing operations is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA from continuing operations presented may not be comparable to similar measures presented by other issuers. 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 the underlying business performance of the Company. Adjusted EBITDA from Continuing Operations – Constant Currency To supplement the consolidated financial statements presented in accordance with U.S. GAAP, we have presented constant currency adjusted financial measures for sales, cost of sales, selling, general and administrative, other income (expense), income (loss) from continuing operations, income (loss) from consolidated entities, net income (loss), and Adjusted EBITDA 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. To present this information, current and comparative prior period income statement results in currencies other than U.S. dollars are converted into U.S. dollars using the average exchange rates from the three month comparative period in 2025 rather than the actual average exchange rates in effect during the current period. All growth comparisons relate to the corresponding period in 2025. We have provided this non-GAAP financial information to aid investors in better understanding our performance without taking into account the effect of exchange rate fluctuations. The non-GAAP financial measures presented in this Quarterly Report should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with U.S. GAAP. The tables below set forth certain measures of consolidated results from continuing operations on a constant currency basis for the three and six months ended June 30, 2026 compared with the three and six months ended June 30, 2025 on an as reported and constant currency basis (in thousands): As Reported As Adjusted for Constant Currency For the Three Months Ended June 30, As Reported Change For the Three Months Ended June 30, Constant Currency Change 2026 2025 $ % 2026 $ % Sales $ 63,977 $ 59,899 $ 4,078 7 % $ 64,535 $ 4,636 8 % Cost of sales (34,004 ) (37,557 ) 3,553 9 % (34,276 ) 3,281 9 % Selling, general and administrative expenses (18,811 ) (15,411 ) (3,400 ) (22 %) (18,950 ) (3,539 ) (23 %) Other (expense) income, net (707 ) 5,517 (6,224 ) 113 % (709 ) (6,226 ) 113 % Income before taxes and equity method investment income 10,455 12,448 (1,993 ) 16 % 10,600 (1,848 ) 15 % Income from continuing operations 7,193 9,945 (2,752 ) 28 % 7,299 (2,646 ) 27 % Income from discontinued operations, net of tax — 16,294 (16,294 ) 100 % - (16,294 ) 100 % Income including non-controlling interests 7,193 26,239 (19,046 ) 73 % 7,299 (18,940 ) 72 % Net income attributable to Village Farms International, Inc. shareholders 7,145 26,497 (19,352 ) 73 % 7,144 (19,353 ) 73 % Adjusted EBITDA - Constant Currency (1) 15,411 17,111 (1,700 ) 10 % 15,516 (1,595 ) 9 % 33 As Reported As Adjusted for Constant Currency For the Six Months Ended June 30, As Reported Change For the Six Months Ended June 30, Constant Currency Change 2026 2025 $ % 2026 $ % Sales $ 114,215 $ 99,579 $ 14,636 15 % $ 115,553 $ 15,974 16 % Cost of sales (63,256 ) (63,057 ) (199 ) (0 %) (63,970 ) (913 ) (1 %) Selling, general and administrative expenses (34,753 ) (30,030 ) (4,723 ) (16 %) (35,097 ) (5,067 ) (17 %) Other (expense) income, net (1,353 ) 4,827 (6,180 ) 128 % (1,360 ) (6,187 ) 128 % Income before taxes and equity method investment income 14,853 11,319 3,534 (31 %) 15,127 3,808 (34 %) Income from continuing operations 9,923 7,833 2,090 (27 %) 10,122 2,289 (29 %) Income from discontinued operations, net of tax — 11,291 (11,291 ) 100 % - (11,291 ) 100 % Income including non-controlling interests 9,923 19,124 (9,201 ) 48 % 10,122 (9,002 ) 47 % Net income attributable to Village Farms International, Inc. shareholders 10,062 19,794 (9,732 ) 49 % 10,263 (9,531 ) 48 % Adjusted EBITDA - Constant Currency (1) 25,311 20,560 4,751 23 % 25,677 5,117 25 % (1) Adjusted EBITDA from continuing operations - Constant Currency is not a recognized earnings measure and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA from continuing operations - Constant Currency may not be comparable to similar measures presented by other issuers. Management believes that Adjusted EBITDA - Constant Currency is a useful supplemental measure in evaluating the performance of the Company because it excludes non-recurring and other items that do not reflect the underlying business performance of the Company. Recent Accounting Pronouncements Not Yet Adopted No accounting pronouncements recently issued or newly effective have had, or are expected to have, a material impact on the Company’s condensed consolidated financial statements. Critical Accounting Estimates and Judgments Our discussion and analysis of our financial condition and results of operations are based upon our Unaudited Condensed Consolidated Interim Financial Statements, which have been prepared in accordance with U.S. GAAP and are included in Part I of this Quarterly Report on Form 10-Q. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, including the potential future effects of macroeconomic trends and events, such as inflation and interest rate levels; supply chain disruptions; uncertainty from potential recessionary effects; climate-related matters; market, industry and regulatory factors; global events, and public health matters. These estimates form the basis for making judgments about our operating results and the carrying values of assets and liabilities, that are not readily apparent from other sources. Given that management estimates, by their nature, involve judgments regarding future uncertainties, actual results could differ materially from these estimates if conditions change or if certain key assumptions used in making these estimates ultimately prove to be inaccurate. Our accounting policies and critical accounting estimates are reviewed periodically by the Audit Committee of the Board of Directors. 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 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. Actual results could differ from the estimates we use in applying our critical accounting policies. We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported. 34 Item 3. Quantitative and Qualitati ve Disclosures About Market Risk Interest Rate Risk 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 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 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 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 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 Cash and cash equivalents $ 4,840 $ 1,535 Trade receivables 3,862 4,180 Inventories 5,319 5,626 Prepaid expenses and deposits 331 176 Financial liabilities Trade payables and accrued liabilities (4,621 ) (4,334 ) Loan payable (2,865 ) (2,750 ) Net foreign exchange gain $ 6,866 $ 4,433 Our exposure to foreign exchange risk and the impact of foreign exchange rates are monitored by the Company’s management, but generally the Company tries to match its sales (trade receivables) and vendor payments (trade payables) such that the net impact is not material. Other than the interest rate risk and foreign exchange risk discussed above, there have been no material changes to our market risks from those disclosed in Part II, Item 7A of our Annual Report on Form 10-K.