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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 September 30, 2023

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)

 

Ontario

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 November 8, 2023, 110,238,929 common shares of the registrant were outstanding.

 

 


 

 

TABLE OF CONTENTS

 

 

 

Page

PART I - FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements

 

 

 

 

Condensed Consolidated Statements of Financial Position

 

2

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

 

3

 

 

Condensed Consolidated Statements of Changes in Shareholders’ Equity and Mezzanine Equity

 

4

 

 

Condensed Consolidated Statements of Cash Flows

 

5

 

 

Notes to Condensed Consolidated Financial Statements

 

6

Item 2.

 

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

 

14

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

36

Item 4.

 

Controls and Procedures

 

36

 

PART II - OTHER INFORMATION

 

38

Item 1.

 

Legal Proceedings

 

38

Item 1A.

 

Risk Factors

 

38

Item 2.

 

Unregistered Sale of Securities and Use of Proceeds

 

38

Item 3.

 

Defaults Upon Senior Securities

 

38

Item 4.

 

Mine Safety Disclosures

 

38

Item 5.

 

Other Information

 

38

Item 6.

 

Exhibits

 

39

 

 

 

 

 

 

 

Signatures

 

40

 

 

 


 

Forward Looking Statements

 

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 U.S. 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 laws. 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 or produce industry, the cannabis industry and market and our energy segment are forward-looking statements. In some cases, forward-looking information can be identified by such terms as "can", "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 in the cannabis and cannabinoids industry, including that of Pure Sunfarms, Inc. (“Pure Sunfarms”), Rose LifeScience Inc. (“Rose” or “Rose LifeScience”) and Balanced Health Botanicals, LLC (“Balanced Health”); the limited operational history of the Delta RNG Project in our energy segment; the legal status of the cannabis business of Pure Sunfarms and Rose and the hemp business of Balanced Health and uncertainty regarding the legality and regulatory status of cannabis in the United States; risks relating to the integration of Balanced Health and Rose into our consolidated business; risks relating to obtaining additional financing on acceptable terms, including our dependence upon credit facilities and dilutive transactions; potential inability to remain listed on the Nasdaq Capital Market (“Nasdaq”) if we do not regain compliance with Nasdaq’s minimum bid price requirement by April 15, 2024; potential difficulties in achieving and/or maintaining profitability; variability of product pricing; risks inherent in the cannabis, hemp, CBD, cannabinoids, and agricultural businesses; our market position and competitive position; our ability to leverage current business relationships for future business involving hemp and cannabinoids; the ability of Pure Sunfarms and Rose to cultivate and distribute cannabis in Canada; existing and new governmental regulations, including risks related to regulatory compliance and regarding obtaining and maintaining licenses required under the Cannabis Act (Canada), the Criminal Code and other Acts, S.C. 2018, C. 16 (Canada) for its Canadian operational facilities, and changes in our regulatory requirements; legal and operational risks relating to expected conversion of our greenhouses to cannabis production in Canada and in the United States; risks related to rules and regulations at the U.S. Federal (Food and Drug Administration and United States Department of Agriculture), state and municipal levels with respect to produce and hemp, cannabidiol-based products commercialization; 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; inflationary effects on costs of cultivation and transportation; recessionary effects on demand of our products; 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; rising interest rates; 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, which 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 and the Company’s most recently filed annual report on Form 10-K.

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


 

 

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Village Farms International, Inc.

Condensed Consolidated Statements of Financial Position

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

(Unaudited)

 

 

 

 

September 30, 2023

 

 

December 31, 2022

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

35,483

 

 

$

16,676

 

Restricted cash

 

 

5,000

 

 

 

5,000

 

Trade receivables

 

 

28,541

 

 

 

27,558

 

Inventories

 

 

77,059

 

 

 

70,582

 

Other receivables

 

 

332

 

 

 

309

 

Income tax receivable, net

 

 

2

 

 

 

6,900

 

Prepaid expenses and deposits

 

 

6,747

 

 

 

5,959

 

Total current assets

 

 

153,164

 

 

 

132,984

 

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

 

202,198

 

 

 

207,701

 

Investments

 

 

2,109

 

 

 

2,109

 

Goodwill

 

 

66,118

 

 

 

66,225

 

Intangibles

 

 

34,955

 

 

 

37,157

 

Deferred tax asset

 

 

4,201

 

 

 

4,201

 

Right-of-use assets

 

 

13,069

 

 

 

9,132

 

Other assets

 

 

1,888

 

 

 

5,776

 

Total assets

 

$

477,702

 

 

$

465,285

 

LIABILITIES

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Line of credit

 

$

4,000

 

 

$

7,529

 

Trade payables

 

 

19,378

 

 

 

24,894

 

Current maturities of long-term debt

 

 

9,284

 

 

 

9,646

 

Accrued sales taxes

 

 

14,029

 

 

 

11,594

 

Accrued loyalty program

 

 

1,817

 

 

 

2,060

 

Accrued liabilities

 

 

15,895

 

 

 

13,064

 

Lease liabilities - current

 

 

1,955

 

 

 

1,970

 

Other current liabilities

 

 

2,529

 

 

 

1,458

 

Total current liabilities

 

 

68,887

 

 

 

72,215

 

Non-current liabilities

 

 

 

 

 

 

Long-term debt

 

 

39,811

 

 

 

43,821

 

Deferred tax liability

 

 

18,992

 

 

 

19,756

 

Lease liabilities - non-current

 

 

11,804

 

 

 

7,785

 

Other liabilities

 

 

1,869

 

 

 

1,714

 

Total liabilities

 

 

141,363

 

 

 

145,291

 

Commitments and contingencies

 

 

 

 

 

 

MEZZANINE EQUITY

 

 

 

 

 

 

Redeemable non-controlling interest

 

 

15,238

 

 

 

16,164

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Common stock, no par value per share - unlimited shares authorized;
110,238,929 shares issued and outstanding at September 30, 2023 and 91,788,929 shares issued and outstanding at December 31, 2022.

 

 

386,719

 

 

 

372,429

 

Additional paid in capital

 

 

25,635

 

 

 

13,372

 

Accumulated other comprehensive loss

 

 

(8,187

)

 

 

(8,371

)

Retained earnings

 

 

(83,682

)

 

 

(74,367

)

Total Village Farms International, Inc. shareholders’ equity

 

 

320,485

 

 

 

303,063

 

Non-controlling interest

 

 

616

 

 

 

767

 

Total shareholders’ equity

 

 

321,101

 

 

 

303,830

 

Total liabilities, mezzanine equity and shareholders’ equity

 

$

477,702

 

 

$

465,285

 

 

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

2


 

 

Village Farms International, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

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

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Sales

 

$

69,510

 

 

$

71,056

 

 

$

211,378

 

 

$

224,115

 

Cost of sales

 

 

(54,889

)

 

 

(62,682

)

 

 

(172,958

)

 

 

(199,514

)

Gross margin

 

 

14,621

 

 

 

8,374

 

 

 

38,420

 

 

 

24,601

 

Selling, general and administrative expenses

 

 

(15,822

)

 

 

(17,794

)

 

 

(49,980

)

 

 

(54,245

)

Interest expense

 

 

(988

)

 

 

(982

)

 

 

(3,532

)

 

 

(2,330

)

Interest income

 

 

262

 

 

 

60

 

 

 

741

 

 

 

129

 

Foreign exchange loss, net

 

 

(971

)

 

 

(1,963

)

 

 

(302

)

 

 

(2,171

)

Other (expense) income

 

 

(19

)

 

 

(10

)

 

 

5,613

 

 

 

(7

)

Write-off of joint venture loan

 

 

 

 

 

 

 

 

 

 

 

(592

)

Impairments

 

 

 

 

 

 

 

 

 

 

 

(29,799

)

Loss before taxes and loss from equity method investments

 

 

(2,917

)

 

 

(12,315

)

 

 

(9,040

)

 

 

(64,414

)

Recovery of (provision for) income taxes

 

 

1,664

 

 

 

3,183

 

 

 

(269

)

 

 

14,563

 

Loss from equity method investments

 

 

 

 

 

 

 

 

 

 

 

(2,667

)

Loss including non-controlling interests

 

 

(1,253

)

 

 

(9,132

)

 

 

(9,309

)

 

 

(52,518

)

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

 

 

(46

)

 

 

387

 

 

 

(6

)

 

 

701

 

Net loss attributable to Village Farms International, Inc. shareholders

 

$

(1,299

)

 

$

(8,745

)

 

$

(9,315

)

 

$

(51,817

)

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

 

$

(0.01

)

 

$

(0.10

)

 

$

(0.09

)

 

$

(0.59

)

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

 

$

(0.01

)

 

$

(0.10

)

 

$

(0.09

)

 

$

(0.59

)

Weighted average number of common shares used
   in the computation of net loss per share (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

110,239

 

 

 

88,684

 

 

 

108,214

 

 

 

88,543

 

Diluted

 

 

110,239

 

 

 

88,684

 

 

 

108,214

 

 

 

88,543

 

Loss including non-controlling interests

 

$

(1,253

)

 

$

(9,132

)

 

$

(9,309

)

 

$

(52,518

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(5,986

)

 

 

(14,780

)

 

 

(899

)

 

 

(17,911

)

Comprehensive loss including non-controlling interests

 

 

(7,239

)

 

 

(23,912

)

 

 

(10,208

)

 

 

(70,429

)

Comprehensive (income) loss attributable to non-controlling interests

 

 

353

 

 

 

1,499

 

 

 

(50

)

 

 

1,929

 

Comprehensive loss attributable to Village Farms International, Inc. shareholders

 

$

(6,886

)

 

$

(22,413

)

 

$

(10,258

)

 

$

(68,500

)

 

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 September 30, 2023

 

 

 

Number of Common
Shares

 

 

Common Stock

 

 

Additional Paid in
Capital

 

 

Accumulated Other
Comprehensive Loss

 

 

Retained Earnings

 

 

Non-controlling Interest

 

 

Total Shareholders’
Equity

 

 

Mezzanine Equity

 

Balance at July 1, 2023

 

 

110,239

 

 

$

386,719

 

 

$

24,888

 

 

$

(3,284

)

 

$

(82,383

)

 

$

668

 

 

$

326,608

 

 

$

16,223

 

Share-based compensation

 

 

 

 

 

 

 

 

747

 

 

 

 

 

 

 

 

 

 

 

 

747

 

 

 

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(4,903

)

 

 

 

 

 

29

 

 

 

(4,874

)

 

 

(1,111

)

Net (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,299

)

 

 

(81

)

 

 

(1,380

)

 

 

126

 

Balance at September 30, 2023

 

 

110,239

 

 

$

386,719

 

 

$

25,635

 

 

$

(8,187

)

 

$

(83,682

)

 

$

616

 

 

$

321,101

 

 

$

15,238

 

 

 

 

Three Months Ended September 30, 2022

 

 

 

Number of Common
Shares

 

 

Common Stock

 

 

Additional Paid in
Capital

 

 

Accumulated Other
Comprehensive Income (Loss)

 

 

Retained Earnings

 

 

Non-controlling Interest

 

 

Total Shareholders’
Equity

 

 

Mezzanine Equity

 

Balance at July 1, 2022

 

 

88,572

 

 

$

365,737

 

 

$

11,463

 

 

$

3,565

 

 

$

(16,293

)

 

$ —

 

 

$

364,472

 

 

$

16,119

 

Proceeds from issuance of common stock

 

 

450

 

 

 

824

 

 

 

 

 

 

 

 

 

 

 

824

 

 

 

Share-based compensation

 

 

7

 

 

 

 

 

926

 

 

 

 

 

 

 

 

 

926

 

 

 

Recognition of non-controlling interest on acquisition

 

 

 

 

 

 

 

 

 

 

 

 

767

 

 

 

767

 

 

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

(14,780

)

 

 

 

 

 

 

(14,780

)

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

(8,745

)

 

 

 

 

(8,745

)

 

 

(387

)

Balance at September 30, 2022

 

 

89,029

 

 

$

366,561

 

 

$

12,389

 

 

$

(11,215

)

 

$

(25,038

)

 

$

767

 

 

$

343,464

 

 

$

15,732

 

 

 

 

Nine Months Ended September 30, 2023

 

 

 

Number of Common
Shares

 

 

Common Stock

 

 

Additional Paid in
Capital

 

 

Accumulated Other
Comprehensive Loss

 

 

Retained Earnings

 

 

Non-controlling Interest

 

 

Total Shareholders’
Equity

 

 

Mezzanine Equity

 

Balance at January 1, 2023

 

 

91,789

 

 

$

372,429

 

 

$

13,372

 

 

$

(8,371

)

 

$

(74,367

)

 

$

767

 

 

$

303,830

 

 

$

16,164

 

Shares issued in public offering, net of issuance costs

 

 

18,350

 

 

 

14,207

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,207

 

 

 

 

Warrants issued in public offering

 

 

 

 

 

 

 

 

9,128

 

 

 

 

 

 

 

 

 

 

 

 

9,128

 

 

 

 

Shares issued on exercise of stock options

 

 

100

 

 

 

83

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

83

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

3,135

 

 

 

 

 

 

 

 

 

 

 

 

3,135

 

 

 

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

184

 

 

 

 

 

 

29

 

 

 

213

 

 

 

(1,111

)

Net (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,315

)

 

 

(180

)

 

 

(9,495

)

 

 

185

 

Balance at September 30, 2023

 

 

110,239

 

 

$

386,719

 

 

$

25,635

 

 

$

(8,187

)

 

$

(83,682

)

 

$

616

 

 

$

321,101

 

 

$

15,238

 

 

 

 

 

Nine Months Ended September 30, 2022

 

 

 

Number of Common
Shares

 

 

Common Stock

 

 

Additional Paid in
Capital

 

 

Accumulated Other
Comprehensive Income (Loss)

 

 

Retained Earnings

 

 

Non-controlling Interest

 

 

Total Shareholders’
Equity

 

 

Mezzanine Equity

 

Balance at January 1, 2022

 

 

88,234

 

 

$

365,561

 

 

$

9,369

 

 

$

6,696

 

 

$

26,779

 

 

$ —

 

 

$

408,405

 

 

$

16,433

 

Proceeds from issuance of common stock

 

 

450

 

 

 

824

 

 

 

 

 

 

 

 

 

 

 

824

 

 

 

Shares issued on exercise of stock options

 

 

345

 

 

 

176

 

 

 

16

 

 

 

 

 

 

 

 

 

192

 

 

 

Share-based compensation

 

 

 

 

 

 

3,004

 

 

 

 

 

 

 

 

 

3,004

 

 

 

Recognition of non-controlling interest on acquisition

 

 

 

 

 

 

 

 

 

 

 

 

767

 

 

 

767

 

 

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

(17,911

)

 

 

 

 

 

 

(17,911

)

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

(51,817

)

 

 

 

 

(51,817

)

 

 

(701

)

Balance at September 30, 2022

 

 

89,029

 

 

$

366,561

 

 

$

12,389

 

 

$

(11,215

)

 

$

(25,038

)

 

$

767

 

 

$

343,464

 

 

$

15,732

 

 

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

4


 

 

Village Farms International, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands of United States dollars)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

Cash flows provided by (used in) operating activities:

 

 

 

 

 

 

Net loss attributable to Village Farms International, Inc. shareholders

 

$

(9,315

)

 

$

(51,817

)

Adjustments to reconcile net loss attributable to Village Farms International, Inc. shareholders to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

11,726

 

 

 

11,061

 

Amortization of deferred charges