UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the quarterly period ended
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
(Exact name of Registrant as Specified in its Charter)
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(State or other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
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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 |
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Name of each exchange on which registered |
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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.
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.
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 |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
As of November 8, 2023,
TABLE OF CONTENTS
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Page |
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PART I - FINANCIAL INFORMATION |
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Item 1. |
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Financial Statements |
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2 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
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3 |
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Condensed Consolidated Statements of Changes in Shareholders’ Equity and Mezzanine Equity |
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4 |
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5 |
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6 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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14 |
Item 3. |
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36 |
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Item 4. |
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36 |
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Item 1. |
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38 |
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Item 1A. |
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38 |
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Item 2. |
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38 |
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Item 3. |
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38 |
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Item 4. |
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38 |
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Item 5. |
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38 |
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Item 6. |
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39 |
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40 |
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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)
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September 30, 2023 |
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December 31, 2022 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Trade receivables |
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Inventories |
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Other receivables |
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Income tax receivable, net |
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Prepaid expenses and deposits |
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Total current assets |
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Non-current assets |
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Property, plant and equipment |
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Investments |
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Goodwill |
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Intangibles |
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Deferred tax asset |
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Right-of-use assets |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES |
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Current liabilities |
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Line of credit |
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$ |
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$ |
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Trade payables |
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Current maturities of long-term debt |
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Accrued sales taxes |
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Accrued loyalty program |
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Accrued liabilities |
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Lease liabilities - current |
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Other current liabilities |
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Total current liabilities |
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Non-current liabilities |
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Long-term debt |
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Deferred tax liability |
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Lease liabilities - non-current |
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Other liabilities |
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Total liabilities |
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MEZZANINE EQUITY |
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Redeemable non-controlling interest |
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SHAREHOLDERS’ EQUITY |
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Common stock, |
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Additional paid in capital |
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Accumulated other comprehensive loss |
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( |
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( |
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Retained earnings |
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( |
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( |
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Total Village Farms International, Inc. shareholders’ equity |
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Non-controlling interest |
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Total shareholders’ equity |
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Total liabilities, mezzanine equity and shareholders’ equity |
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$ |
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$ |
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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)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Sales |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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( |
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( |
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( |
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Gross margin |
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Selling, general and administrative expenses |
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( |
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( |
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( |
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( |
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Interest expense |
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( |
) |
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( |
) |
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( |
) |
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( |
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Interest income |
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Foreign exchange loss, net |
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( |
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( |
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( |
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( |
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Other (expense) income |
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( |
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( |
) |
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( |
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Write-off of joint venture loan |
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— |
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— |
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— |
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( |
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Impairments |
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— |
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— |
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— |
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( |
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Loss before taxes and loss from equity method investments |
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( |
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( |
) |
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( |
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( |
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Recovery of (provision for) income taxes |
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( |
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Loss from equity method investments |
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— |
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— |
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— |
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( |
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Loss including non-controlling interests |
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( |
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( |
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( |
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( |
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Less: net (income) loss attributable to non-controlling interests, net of tax |
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( |
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( |
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Net loss attributable to Village Farms International, Inc. shareholders |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Basic loss per share attributable to Village Farms International, Inc. shareholders |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Diluted loss per share attributable to Village Farms International, Inc. shareholders |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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Weighted average number of common shares used |
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Basic |
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Diluted |
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Loss including non-controlling interests |
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$ |
( |
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$ |
( |
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$ |
( |
) |
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$ |
( |
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Other comprehensive income (loss): |
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Foreign currency translation adjustment |
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( |
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( |
) |
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( |
) |
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( |
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Comprehensive loss including non-controlling interests |
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( |
) |
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( |
) |
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( |
) |
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( |
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Comprehensive (income) loss attributable to non-controlling interests |
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( |
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Comprehensive loss attributable to Village Farms International, Inc. shareholders |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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$ |
( |
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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)
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Three Months Ended September 30, 2023 |
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Number of Common |
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Common Stock |
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Additional Paid in |
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Accumulated Other |
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Retained Earnings |
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Non-controlling Interest |
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Total Shareholders’ |
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Mezzanine Equity |
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Balance at July 1, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
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$ |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Cumulative translation adjustment |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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( |
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Net (loss) income |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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( |
) |
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Balance at September 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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$ |
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Three Months Ended September 30, 2022 |
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Number of Common |
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Common Stock |
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Additional Paid in |
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Accumulated Other |
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Retained Earnings |
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Non-controlling Interest |
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Total Shareholders’ |
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Mezzanine Equity |
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Balance at July 1, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
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$ — |
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$ |
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$ |
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Proceeds from issuance of common stock |
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— |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Recognition of non-controlling interest on acquisition |
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— |
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— |
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— |
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— |
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— |
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— |
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Cumulative translation adjustment |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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( |
) |
|||||
Balance at September 30, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
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$ |
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||||||
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Nine Months Ended September 30, 2023 |
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Number of Common |
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Common Stock |
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Additional Paid in |
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Accumulated Other |
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Retained Earnings |
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Non-controlling Interest |
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Total Shareholders’ |
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Mezzanine Equity |
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||||||||
Balance at January 1, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
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$ |
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||||||
Shares issued in public offering, net of issuance costs |
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— |
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— |
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— |
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— |
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— |
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Warrants issued in public offering |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares issued on exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Cumulative translation adjustment |
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— |
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— |
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— |
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— |
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|
|
|
( |
) |
|||
Net (loss) income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Balance at September 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
Nine Months Ended September 30, 2022 |
|
|||||||||||||||||||||||||||||
|
|
Number of Common |
|
|
Common Stock |
|
|
Additional Paid in |
|
|
Accumulated Other |
|
|
Retained Earnings |
|
|
Non-controlling Interest |
|
|
Total Shareholders’ |
|
|
Mezzanine Equity |
|
||||||||
Balance at January 1, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ — |
|
|
$ |
|
|
$ |
|
||||||||
Proceeds from issuance of common stock |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
||||||||
Shares issued on exercise of stock options |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
||||||||
Share-based compensation |
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
||||||||
Recognition of non-controlling interest on acquisition |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
||||||||
Cumulative translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
||||||
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
|
( |
) |
|
|
( |
) |
|||||
Balance at September 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
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 |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss attributable to Village Farms International, Inc. shareholders to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Amortization of deferred charges |
|
|
|
|
|
|
||
Share of loss from joint ventures |
|
|
— |
|
|
|
|
|
Net loss attributable to non-controlling interest |
|
|
|
|
|
(701 |
) |
|
Interest expense |
|
|
|
|
|
|
||
Interest income |
|
|
( |
) |
|
|
( |
) |
Interest paid on long-term debt |
|
|
( |
) |
|
|
( |
) |