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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

 

FORM 10-Q

 

(Mark One)

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended June 30, 2022 

 

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from                      to                     

Commission File Number 001-38783

 

VILLAGE FARMS INTERNATIONAL, INC.

(Exact name of Registrant as Specified in its Charter)

 

 

Canada

 

98-1007671

(State or other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

4700-80th Street

Delta, British Columbia Canada

V4K 3N3

(Address of Principal Executive Offices) (Zip Code)

(604) 940-6012

Issuer’s phone number, including area code

N/A

(Former name, former address and former fiscal year, if changed since last report).

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Shares, without par value

 

VFF

 

The Nasdaq Stock Market LLC

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.    Yes      No      Not Applicable  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer”, “small reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

  

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of August 9, 2022, 88,571,929 shares of common stock were outstanding.

```````1



 

 

 

TABLE OF CONTENTS

 

 

 

 

Page

PART I - FINANCIAL INFORMATION

 

 

Item 1.

 

Condensed Consolidated Interim Financial Statements (Unaudited)

 

 

 

 

Condensed Consolidated Interim Statements of Financial Position

 

2

 

 

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

 

3

 

 

Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity

 

4

 

 

Condensed Consolidated Interim Statements of Cash Flows

 

5

 

 

Notes to Condensed Consolidated Interim Financial Statements

 

6

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

16

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

35

Item 4.

 

Controls and Procedures

 

36

 

PART II - OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

38

Item 1A.

 

Risk Factors

 

38

Item 6.

 

Exhibits

 

38

 

 

 

 

 

 

 

Signatures

 

39

 

 

 


PART 1 – FINANCIAL STATEMENTS

Item 1.  Financial Statements

 

 

Forward Looking Statement

As used in this Quarterly Report on Form 10-Q, the terms “Village Farms”, “Village Farms International”, the “Company”, “we”, “us”, “our” and similar references refer to Village Farms International, Inc. and our consolidated subsidiaries, and the term “Common Shares” refers to our common shares, no par value. Our financial information is presented in U.S. dollars and all references in this Quarterly Report on Form 10-Q to “$” means U.S. dollars and all references to “C$” means Canadian dollars.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is subject to the safe harbor created by those sections. This Quarterly Report on Form 10-Q also contains “forward-looking information” within the meaning of applicable Canadian securities law. We refer to such forward-looking statements and forward-looking information collectively as “forward-looking statements”. Forward-looking statements may relate to the Company’s future outlook or financial position and anticipated events or results and may include statements regarding the financial position, business strategy, budgets, expansion plans, litigation, projected production, projected costs, capital expenditures, financial results, taxes, plans and objectives of or involving the Company. Particularly, statements regarding future results, performance, achievements, prospects or opportunities for the Company, the greenhouse vegetable industry or the cannabis industry are forward-looking statements. In some cases, forward-looking information can be identified by such terms as “outlook”, “may”, “might”, “will”, “could”, “should”, “would”, “occur”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “try”, “estimate”, “predict”, “potential”, “continue”, “likely”, “schedule”, “objectives”, or the negative or grammatical variation thereof or other similar expressions concerning matters that are not historical facts. The forward-looking statements in this Quarterly Report on Form 10-Q are subject to risks that may include, but are not limited to: our limited operating history, including that of Pure Sunfarms and our operations of growing hemp in the United States; the legal status of Pure Sunfarms cannabis business; risks relating to obtaining additional financing, including our dependence upon credit facilities; potential difficulties in achieving and/or maintaining profitability; variability of product pricing; risks inherent in the cannabis, hemp and agricultural businesses; the ability of Pure Sunfarms to cultivate and distribute cannabis in Canada; existing and new governmental regulations, including risks related to regulatory compliance and licenses (e.g., Pure Sunfarms ability to maintain licenses for its Delta 2 and Delta 3 greenhouse facilities under the Canadian act respecting cannabis to amend to the Controlled Drugs and Substances Act, the Criminal Code and other Acts, S.C. 2018, c. 16 (Canada)), and changes in our regulatory requirements; risks relating to conversion of our greenhouses to cannabis production for Pure Sunfarms; risks related to rules and regulations at the U.S. federal (including Food and Drug Administration and United States Department of Agriculture), state and municipal levels with respect to produce and hemp; retail consolidation, technological advances and other forms of competition; transportation disruptions; product liability and other potential litigation; retention of key executives; labor issues; uninsured and underinsured losses; vulnerability to rising energy costs; environmental, health and safety risks, foreign exchange exposure, risks associated with cross-border trade; difficulties in managing our growth; restrictive covenants under our credit facilities; natural catastrophes; the ongoing and developing COVID-19 pandemic; and tax risks.

The Company has based these forward-looking statements on factors and assumptions about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. Although the forward-looking statements contained in this Quarterly Report on Form 10-Q are based upon assumptions that management believes are reasonable based on information currently available to management, there can be no assurance that actual results will be consistent with these forward-looking statements. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond the Company’s control, that may cause the Company’s or the industry’s actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the factors contained in the Company’s filings with securities regulators, including this Quarterly Report on Form 10-Q. In particular, we caution you that our forward-looking statements are subject to the ongoing and developing circumstances related to the COVID-19 pandemic, which may have a material adverse effect on our business, operations and future financial results.

When relying on forward-looking statements to make decisions, the Company cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future results, performance, achievements, prospects and opportunities. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events or information as of the date on which the statements are made in this Quarterly Report on Form 10-Q. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

 

1


 

 

 

Village Farms International, Inc.

Condensed Consolidated Interim Statements of Financial Position

(In thousands of United States dollars, except share data)

(Unaudited)

 

 

 

 

June 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,189

 

 

$

53,417

 

Restricted cash

 

 

6,810

 

 

 

5,250

 

Trade receivables

 

 

37,119

 

 

 

34,360

 

Inventories

 

 

76,588

 

 

 

68,677

 

Other receivables

 

 

506

 

 

 

616

 

Income tax receivable

 

 

1,831

 

 

 

2,430

 

Prepaid expenses and deposits

 

 

9,966

 

 

 

10,209

 

Total current assets

 

 

159,009

 

 

 

174,959

 

Non-current assets

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

218,004

 

 

 

215,704

 

Investment in minority interests

 

 

2,109

 

 

 

2,109

 

Note receivable - joint venture

 

 

 

 

 

3,256

 

Goodwill

 

 

92,643

 

 

 

117,533

 

Intangibles

 

 

20,956

 

 

 

26,394

 

Deferred tax asset

 

 

28,710

 

 

 

16,766

 

Right-of-use assets

 

 

7,224

 

 

 

7,609

 

Other assets

 

 

5,637

 

 

 

2,581

 

Total assets

 

$

534,292

 

 

$

566,911

 

LIABILITIES

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Line of credit

 

$

6,892

 

 

$

7,760

 

Trade payables

 

 

26,634

 

 

 

22,597

 

Current maturities of long-term debt

 

 

10,063

 

 

 

11,416

 

Accrued sales taxes

 

 

13,876

 

 

 

3,899

 

Accrued loyalty program

 

 

1,828

 

 

 

2,098

 

Accrued liabilities

 

 

17,561

 

 

 

14,168

 

Lease liabilities - current

 

 

1,437

 

 

 

962

 

Income tax payable

 

 

985

 

 

 

 

Other current liabilities

 

 

1,576

 

 

 

1,413

 

Total current liabilities

 

 

80,852

 

 

 

64,313

 

Non-current liabilities

 

 

 

 

 

 

 

 

Long-term debt

 

 

47,621

 

 

 

50,419

 

Deferred tax liability

 

 

17,193

 

 

 

18,657

 

Lease liabilities - non-current

 

 

6,383

 

 

 

6,711

 

Other liabilities

 

 

1,652

 

 

 

1,973

 

Total liabilities

 

 

153,701

 

 

 

142,073

 

Commitments and contingencies

 

 

 

 

 

 

 

 

MEZZANINE EQUITY

 

 

 

 

 

 

 

 

Redeemable non-controlling interest

 

 

16,119

 

 

 

16,433

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Common stock, no par value per share - unlimited shares authorized; 88,571,929 shares issued and outstanding at June 30, 2022 and 88,233,929 shares issued and outstanding at December 31, 2021.

 

 

365,737

 

 

 

365,561

 

Additional paid in capital

 

 

11,463

 

 

 

9,369

 

Accumulated other comprehensive income

 

 

3,565

 

 

 

6,696

 

Retained earnings

 

 

(16,293

)

 

 

26,779

 

Total shareholders’ equity

 

 

364,472

 

 

 

408,405

 

Total liabilities, mezzanine equity and shareholders’ equity

 

$

534,292

 

 

$

566,911

 

 

The accompanying notes are an integral part of these Condensed Consolidated Interim Statements of Financial Position.

2


 

 

Village Farms International, Inc.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

(In thousands of United States dollars, except per share data)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Sales

 

$

82,903

 

 

$

70,374

 

 

$

153,059

 

 

$

122,770

 

Cost of sales

 

 

(76,580

)

 

 

(65,109

)

 

 

(136,832

)

 

 

(115,198

)

Gross margin

 

 

6,323

 

 

 

5,265

 

 

 

16,227

 

 

 

7,572

 

Selling, general and administrative expenses

 

 

(17,402

)

 

 

(9,025

)

 

 

(34,373

)

 

 

(17,117

)

Share-based compensation

 

 

(1,114

)

 

 

(1,887

)

 

 

(2,078

)

 

 

(3,885

)

Interest expense

 

 

(665

)

 

 

(598

)

 

 

(1,348

)

 

 

(1,339

)

Interest income

 

 

 

 

 

46

 

 

 

110

 

 

 

49

 

Foreign exchange (loss) gain

 

 

(527

)

 

 

193

 

 

 

(208

)

 

 

(311

)

Other (expense) income

 

 

(30

)

 

 

(166

)

 

 

(38

)

 

 

(235

)

Write-off of joint venture loan

 

 

(592

)

 

 

 

 

 

(592

)

 

 

 

Impairments

 

 

(29,799

)

 

 

 

 

 

(29,799

)

 

 

 

Loss on disposal of assets

 

 

 

 

 

(40

)

 

 

 

 

 

(40

)

Loss before taxes and loss from equity method investments

 

 

(43,806

)

 

 

(6,212

)

 

 

(52,099

)

 

 

(15,306

)

Recovery of income taxes

 

 

9,714

 

 

 

1,781

 

 

 

11,380

 

 

 

3,620

 

Loss from equity method investments

 

 

(2,615

)

 

 

(86

)

 

 

(2,667

)

 

 

(213

)

Loss including non-controlling interests

 

 

(36,707

)

 

 

(4,517

)

 

 

(43,386

)

 

 

(11,899

)

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

 

 

152

 

 

 

 

 

 

314

 

 

 

 

Net loss attributable to Village Farms International, Inc.

 

$

(36,555

)

 

$

(4,517

)

 

$

(43,072

)

 

$

(11,899

)

Basic loss per share attributable to Village Farms International, Inc. shareholders

 

$

(0.41

)

 

$

(0.06

)

 

$

(0.49

)

 

$

(0.15

)

Diluted loss per share attributable to Village Farms International, Inc. shareholders

 

$

(0.41

)

 

$

(0.06

)

 

$

(0.49

)

 

$

(0.15

)

Weighted average number of common shares used in the

   computation of net loss per share (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

88,567

 

 

 

81,071

 

 

 

88,472

 

 

 

78,560

 

Diluted

 

 

88,567

 

 

 

81,071

 

 

 

88,472

 

 

 

78,560

 

Loss including non-controlling interests

 

$

(36,707

)

 

$

(4,517

)

 

$

(43,386

)

 

$

(11,899

)

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

 

 

152

 

 

 

 

 

 

314

 

 

 

 

Net loss attributable to Village Farms International, Inc.

 

$

(36,555

)

 

$

(4,517

)

 

$

(43,072

)

 

$

(11,899

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

151

 

 

 

2,366

 

 

 

612

 

 

 

4,077

 

Comprehensive loss

 

$

(36,404

)

 

$

(2,151

)

 

$

(42,460

)

 

$

(7,822

)

 

The accompanying notes are an integral part of these Condensed Consolidated Interim Statements of Loss and Comprehensive Loss.

3


 

 

Village Farms International, Inc.

Condensed Consolidated Interim 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,

 

 

 

Number of Common

Shares (in thousands)

 

 

Common Stock

 

 

Additional Paid in

Capital

 

 

Accumulated Other

Comprehensive

(Loss) Income

 

 

Retained Earnings

 

 

Total Shareholders’

Equity

 

 

Mezzanine Equity

 

Balance at April 1, 2022

 

 

88,562

 

 

$

365,737

 

 

$

10,333

 

 

$

10,225

 

 

$

20,262

 

 

$

406,557

 

 

$

16,271

 

Shares issued on exercise of stock options

 

 

10

 

 

 

 

 

 

16

 

 

 

 

 

 

 

 

 

16

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

1,114

 

 

 

 

 

 

 

 

 

1,114

 

 

 

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(6,660

)

 

 

 

 

 

(6,660

)

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(36,555

)

 

 

(36,555

)

 

 

(152

)

Balance at June 30, 2022

 

 

88,572

 

 

$

365,737

 

 

$

11,463

 

 

$

3,565

 

 

$

(16,293

)

 

$

364,472

 

 

$

16,119

 

 

 

 

Three Months Ended June 30, 2021

 

 

 

Number of Common

Shares (in thousands)

 

 

Common Stock

 

 

Additional paid in

capital

 

 

Accumulated Other

Comprehensive Loss

 

 

Retained Earnings

 

 

Total Shareholders’

Equity

 

Balance at April 1, 2021

 

 

81,191

 

 

$

301,092

 

 

$

9,353

 

 

$

7,966

 

 

$

28,476

 

 

$

346,887

 

Shares issued on exercise of warrants

 

 

143

 

 

 

1,307

 

 

 

(475

)

 

 

 

 

 

 

 

 

832

 

Shares issued on exercise of stock options

 

 

58

 

 

 

98

 

 

 

(37

)

 

 

 

 

 

 

 

 

61

 

Share re-purchases

 

 

(428

)

 

 

 

 

 

(3,980

)

 

 

 

 

 

 

 

 

(3,980

)

Share-based compensation

 

 

 

 

 

 

 

 

1,887

 

 

 

 

 

 

 

 

 

1,887

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

2,366

 

 

 

 

 

 

2,366

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,517

)

 

 

(4,517

)

Balance at June 30, 2021

 

 

80,964

 

 

$

302,497

 

 

$

6,748

 

 

$

10,332

 

 

$

23,959

 

 

$

343,536

 

 

 

 

Six Months Ended June 30, 2022

 

 

 

 

 

 

 

Number of

Common

Shares

 

 

Common

Stock

 

 

Additional

paid in

capital

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Retained

Earnings

 

 

Total

Shareholders’

Equity

 

 

Mezzanine Equity

 

Balance at January 1, 2022

 

 

88,234

 

 

$

365,561

 

 

$

9,369

 

 

$

6,696

 

 

$

26,779

 

 

$

408,405

 

 

$

16,433

 

Shares issued on exercise of stock options

 

 

338

 

 

 

176

 

 

 

16

 

 

 

 

 

 

 

 

 

192

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

2,078

 

 

 

 

 

 

 

 

 

2,078

 

 

 

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(3,131

)

 

 

 

 

 

(3,131

)

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(43,072

)

 

 

(43,072

)

 

 

(314

)

Balance at June 30, 2022

 

 

88,572

 

 

$

365,737

 

 

$

11,463

 

 

$

3,565

 

 

$

(16,293

)

 

$

364,472

 

 

$

16,119

 

 

 

 

Six Months Ended June 30, 2021

 

 

 

Number of

Common

Shares

 

 

Common

Stock

 

 

Additional paid

in capital

 

 

Accumulated Other

Comprehensive

(Loss) Income

 

 

Retained

Earnings

 

 

Total

Shareholders’

Equity

 

Balance at January 1, 2021

 

 

66,912

 

 

$

145,668

 

 

$

17,502

 

 

$

6,255

 

 

$

35,858

 

 

$

205,283

 

Shares issued in public offering, net of issuance costs

 

 

10,887

 

 

 

127,489

 

 

 

 

 

 

 

 

 

 

 

 

127,489

 

Warrants issued in public offering

 

 

3,188

 

 

 

29,050

 

 

 

(10,555

)

 

 

 

 

 

 

 

 

18,495

 

Shares issued on exercise of stock options

 

 

162

 

 

 

290

 

 

 

(104

)

 

 

 

 

 

 

 

 

186

 

Share re-purchases

 

 

(428

)

 

 

 

 

 

(3,980

)

 

 

 

 

 

 

 

 

(3,980

)

Share-based compensation

 

 

243

 

 

 

 

 

 

3,885

 

 

 

 

 

 

 

 

 

3,885

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

4,077

 

 

 

 

 

 

4,077

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,899

)

 

 

(11,899

)

Balance at June 30, 2021

 

 

80,964

 

 

$

302,497

 

 

$

6,748

 

 

$

10,332

 

 

$

23,959

 

 

$

343,536

 

 

 

The accompanying notes are an integral part of these Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity and Mezzanine Equity.

4


 

 

Village Farms International, Inc.

Condensed Consolidated Interim Statements of Cash Flows

(In thousands of United States dollars)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Cash flows used in operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(43,072

)

 

$

(11,899

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

6,332

 

 

 

6,536

 

Amortization of deferred charges

 

 

126

 

 

 

166

 

Share of loss from joint ventures

 

 

2,667

 

 

 

213

 

Interest expense

 

 

1,348

 

 

 

1,339

 

Interest income

 

 

(110

)

 

 

(49

)

Interest paid on long-term debt

 

 

(1,855

)

 

 

(1,909

)

Unrealized foreign exchange gain/loss

 

 

115

 

 

 

161

 

Impairments

 

 

29,799

 

 

 

 

Write-off of joint venture loan

 

 

592

 

 

 

 

Loss on disposal of assets

 

 

 

 

 

40

 

Non-cash lease expense

 

 

29

 

 

 

(255

)

Share-based compensation

 

 

2,078

 

 

 

3,885

 

Deferred income taxes

 

 

(16,134

)

 

 

(3,199

)

Changes in non-cash working capital items

 

 

9,064

 

 

 

(10,239

)

Net cash used in operating activities

 

 

(9,021

)

 

 

(15,210

)

Cash flows used in investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(10,232

)

 

 

(11,355

)

Advances to joint ventures

 

 

 

 

 

(12

)

Notes receivable

 

 

(3,449

)

 

 

(1,001

)

Net cash used in investing activities

 

 

(13,681

)

 

 

(12,368

)

Cash flows provided by financing activities:

 

 

 

 

 

 

 

 

Proceeds from borrowings

 

 

4,000

 

 

 

4,227

 

Repayments on borrowings

 

 

(6,490

)

 

 

(6,026

)

Proceeds from issuance of common stock and warrants

 

 

 

 

 

135,000

 

Issuance costs

 

 

 

 

 

(7,511

)

Proceeds from exercise of stock options

 

 

192

 

 

 

186

 

Proceeds from exercise of warrants

 

 

 

 

 

18,495

 

Share re-purchases

 

 

 

 

 

(3,980

)

Payments on capital lease obligations

 

 

(612

)

 

 

(310

)

Payment of note payable related to acquisition

 

 

 

 

 

(15,498

)

Net cash (used in) provided by financing activities

 

 

(2,910

)

 

 

124,583

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(56

)

 

 

502

 

Net (decrease) increase in cash and cash equivalents

 

 

(25,668

)

 

 

97,507

 

Cash and cash equivalents, beginning of period

 

 

58,667

 

 

 

25,679

 

Cash and cash equivalents, end of period

 

$

32,999

 

 

$

123,186

 

 

The accompanying notes are an integral part of these Condensed Consolidated Interim Statements of Cash Flows.

 

 

 

5


 

 

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

(In thousands of United States dollars, except per share amounts, unless otherwise noted)

1

DESCRIPTION OF BUSINESS

Village Farms International, Inc. (“VFF” and, together with its subsidiaries, the “Company”, “we”, “us”, or “our”) is incorporated under the Canada Business Corporations Act. VFF’s principal operating subsidiaries as of June 30, 2022 are Village Farms Canada Limited Partnership, Village Farms, L.P., Pure Sunfarms Corp. (“Pure Sunfarms”), and Balanced Health Botanicals, LLC (“Balanced Health”). VFF also owns a 70% interest in Rose LifeScience Inc. (“Rose”).

The address of the registered office of VFF is 4700-80th Street, Delta, British Columbia, Canada, V4K 3N3.  

The Company’s shares are listed on Nasdaq Capital Market (“Nasdaq”) under the symbol “VFF”.

Village Farms owns and operates sophisticated, highly intensive agricultural greenhouse facilities in British Columbia and Texas, where it produces, markets and sells premium-quality tomatoes, bell peppers, and cucumbers. Its wholly owned subsidiary, Pure Sunfarms, is a vertically integrated licensed producer and supplier of cannabis products to be sold to other licensed providers and provincial governments across Canada and internationally. Through its 70% ownership 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, Balance Health, develops and sells high-quality, cannabidiol (“CBD”) based products including ingestible, edible and topical applications.

2

BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended June 30, 2022 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for fair presentation have been included. Operating results for the three and six months ended June 30, 2022 are subject to seasonal variations and accordingly are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. For further information, refer to the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the fiscal years ended December 31, 2021 and 2020.

In the opinion of management, these financial statements include all adjustments, which are of a normal recurring nature, necessary for a fair statement of the financial position, results of operations, comprehensive loss, cash flows and the change in equity for the periods presented.

There have been no changes to our significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022 that have had a material impact on our condensed consolidated interim financial statements and related notes.

The condensed consolidated interim financial statements reflect the accounts of the Company and its majority-owned and controlled subsidiaries. All intercompany accounts and transactions between our consolidated operations have been eliminated.

 

3

NEW ACCOUNTING PRONOUNCEMENTS

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying GAAP to debt instruments, derivatives, and other contracts that reference LIBOR or other reference rates expected to be discontinued as a result of reference rate reform. This guidance is optional and may be elected through December 31, 2022 using a prospective application on all eligible contract modifications. The Company has a line of credit that incorporates LIBOR as a referenced interest rate. It is difficult to predict what effect, if any, the phase-out of LIBOR and the use of alternative benchmarks may have on the Company’s business or on the overall financial markets. The Company has not adopted any of the optional expedients or exceptions through June 30, 2022 but will continue to evaluate the possible adoption of any such expedients or exceptions.

 

6


VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

(In thousands of United States dollars, except per share amounts, unless otherwise noted)

 

 

4

INVENTORIES

Inventories consisted of the following as of:

 

Classification

 

June 30, 2022

 

 

December 31, 2021

 

Cannabis:

 

 

 

 

 

 

 

 

Raw materials

 

$

1,814

 

 

$

2,071

 

Work-in-progress

 

 

8,245

 

 

 

5,056

 

Finished goods

 

 

45,907

 

 

 

32,161

 

Packaging

 

 

5,927

 

 

 

5,877

 

Produce and Energy:

 

 

 

 

 

 

 

 

Crop inventory

 

 

12,958

 

 

 

19,475

 

Purchased produce inventory

 

 

1,597

 

 

 

2,485

 

Spare parts inventory and packaging

 

 

140

 

 

 

1,552

 

Inventory

 

$

76,588

 

 

$