10-Q | 2020-09-30 | Filed 2020-11-13 |
10-Q | 2020-06-30 | Filed 2020-08-13 |
10-Q | 2020-03-31 | Filed 2020-05-14 |
10-K | 2019-12-31 | Filed 2020-04-01 |
8-K | 2020-11-13 | |
8-K | 2020-11-10 | |
8-K | 2020-11-05 | |
8-K | 2020-11-02 | |
8-K | 2020-09-10 | |
8-K | 2020-09-08 | |
8-K | 2020-08-12 | |
8-K | 2020-08-05 | |
8-K | 2020-07-13 | |
8-K | 2020-07-01 | |
8-K | 2020-06-25 | |
8-K | 2020-06-24 | |
8-K | 2020-06-01 | |
8-K | 2020-05-25 | |
8-K | 2020-05-14 | |
8-K | 2020-05-06 | |
8-K | 2020-04-30 | |
8-K | 2020-04-22 | |
8-K | 2020-03-30 | |
8-K | 2020-03-30 | |
8-K | 2020-03-24 | |
8-K | 2020-03-19 | |
8-K | 2020-03-09 | |
8-K | 2020-03-03 | |
8-K | 2020-01-16 |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
Item 4. Controls and Procedures |
Part II. - Other Information |
Item 1. Legal Proceedings |
Item 1A. Risk Factors |
Item 6. Exhibits |
EX-31.1 | vff-ex311_8.htm |
EX-31.2 | vff-ex312_6.htm |
EX-32.1 | vff-ex321_9.htm |
EX-32.2 | vff-ex322_7.htm |
Balance Sheet | Income Statement | Cash Flow |
---|---|---|
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, 2020
☐ | 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 |
| ☐ |
|
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|
| |||
Non-accelerated filer |
| ☒ |
| 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 ☐ No ☒
As of November 12, 2020, 66,059,810 shares of common stock were issued and outstanding.
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| Page | |
PART I - FINANCIAL INFORMATION |
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| ||
Item 1. |
| Condensed Consolidated Interim Financial Statements (Unaudited) |
|
|
|
| Condensed Consolidated Interim Statements of Financial Position |
| 1 |
|
| Condensed Consolidated Interim Statements of Income (Loss) and Comprehensive Income (Loss) |
| 2 |
|
| Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity |
| 3 |
|
|
| 4 | |
|
| Notes to Condensed Consolidated Interim Financial Statements |
| 5 |
Item 2. |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| 17 |
Item 3. |
|
| 31 | |
Item 4. |
|
| 31 | |
| ||||
| 32 | |||
Item 1. |
|
| 32 | |
Item 1A. |
|
| 32 | |
Item 6. |
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| 32 | |
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| 33 | |
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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 start-up 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 obtain licenses for its Delta 2 greenhouse facility as well as additional licenses 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) for its Delta 3 greenhouse facility), 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 (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.
Village Farms International, Inc.
Condensed Consolidated Interim Statements of Financial Position
(In thousands of United States dollars, except share data)
(Unaudited)
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 54,666 |
|
| $ | 11,989 |
|
Trade receivables |
|
| 10,498 |
|
|
| 8,997 |
|
Inventories |
|
| 15,301 |
|
|
| 15,918 |
|
Amounts due from joint ventures |
|
| 10,954 |
|
|
| 15,418 |
|
Other receivables |
|
| 637 |
|
|
| 342 |
|
Income tax receivable |
|
| 440 |
|
|
| 713 |
|
Prepaid expenses and deposits |
|
| 934 |
|
|
| 1,259 |
|
Total current assets |
|
| 93,430 |
|
|
| 54,636 |
|
Non-current assets |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
| 59,663 |
|
|
| 63,158 |
|
Investment in joint ventures |
|
| 63,164 |
|
|
| 41,334 |
|
Investment in in minority interests |
|
| 1,226 |
|
|
| — |
|
Notes receivable - joint ventures |
|
| 10,713 |
|
|
| 10,865 |
|
Deferred tax asset |
|
| 9,693 |
|
|
| 7,999 |
|
Right-of-use assets |
|
| 4,111 |
|
|
| 3,582 |
|
Other assets |
|
| 1,827 |
|
|
| 1,834 |
|
Total assets |
| $ | 243,827 |
|
| $ | 183,408 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Line of credit |
| $ | 3,000 |
|
| $ | 2,000 |
|
Trade payables |
|
| 9,667 |
|
|
| 12,653 |
|
Current maturities of long-term debt |
|
| 2,294 |
|
|
| 3,423 |
|
Accrued liabilities |
|
| 6,676 |
|
|
| 3,017 |
|
Operating lease liabilities - current |
|
| 1,711 |
|
|
| 875 |
|
Finance lease liabilities - current |
|
| 34 |
|
|
| 61 |
|
Total current liabilities |
|
| 23,382 |
|
|
| 22,029 |
|
Non-current liabilities |
|
|
|
|
|
|
|
|
Long-term debt |
|
| 27,793 |
|
|
| 28,966 |
|
Deferred tax liability |
|
| 2,211 |
|
|
| 1,873 |
|
Operating lease liabilities - non-current |
|
| 2,465 |
|
|
| 2,690 |
|
Finance lease liabilities - non-current |
|
| 12 |
|
|
| 34 |
|
Other liabilities |
|
| 1,437 |
|
|
| 1,357 |
|
Total liabilities |
|
| 57,300 |
|
|
| 56,949 |
|
Commitments and contingencies (note 15) |
|
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Common stock, no par value per share - unlimited shares authorized; 65,959,810 shares issued and outstanding at September 30, 2020 and 52,656,669 shares issued and outstanding at December 31, 2019. |
|
| 141,310 |
|
|
| 98,333 |
|
Additional paid in capital |
|
| 16,892 |
|
|
| 4,351 |
|
Accumulated other comprehensive loss |
|
| (516 | ) |
|
| (475 | ) |
Retained earnings |
|
| 28,841 |
|
|
| 24,250 |
|
Total shareholders’ equity |
|
| 186,527 |
|
|
| 126,459 |
|
Total liabilities and shareholders’ equity |
| $ | 243,827 |
|
| $ | 183,408 |
|
The accompanying notes are an integral part of these Condensed Consolidated Interim Statements of Financial Position.
1
Village Farms International, Inc.
Condensed Consolidated Interim Statements of Income (Loss) and Comprehensive Income (Loss)
(In thousands of United States dollars, except per share data, unless otherwise noted)
(Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Sales |
| $ | 43,037 |
|
| $ | 38,293 |
|
| $ | 122,722 |
|
| $ | 111,512 |
|
Cost of sales |
|
| (37,418 | ) |
|
| (38,904 | ) |
|
| (112,809 | ) |
|
| (114,418 | ) |
Gross margin |
|
| 5,619 |
|
|
| (611 | ) |
|
| 9,913 |
|
|
| (2,906 | ) |
Selling, general and administrative expenses |
|
| (4,942 | ) |
|
| (3,739 | ) |
|
| (12,676 | ) |
|
| (11,899 | ) |
Share-based compensation |
|
| (472 | ) |
|
| (666 | ) |
|
| (1,329 | ) |
|
| (2,663 | ) |
Interest expense |
|
| (299 | ) |
|
| (655 | ) |
|
| (1,273 | ) |
|
| (2,018 | ) |
Interest income |
|
| 101 |
|
|
| 304 |
|
|
| 577 |
|
|
| 651 |
|
Foreign exchange (loss) gain |
|
| (484 | ) |
|
| (183 | ) |
|
| (880 | ) |
|
| 338 |
|
Gain on settlement agreement |
|
| — |
|
|
| — |
|
|
| 4,681 |
|
|
| — |
|
Other income |
|
| 27 |
|
|
| 69 |
|
|
| 92 |
|
|
| 219 |
|
(Loss) gain on disposal of assets |
|
| — |
|
|
| (8 | ) |
|
| (6 | ) |
|
| 13,558 |
|
Loss before taxes and earnings from unconsolidated entities |
|
| (450 | ) |
|
| (5,489 | ) |
|
| (901 | ) |
|
| (4,720 | ) |
(Provision for) recovery of income taxes |
|
| (336 | ) |
|
| 1,266 |
|
|
| 607 |
|
|
| 114 |
|
Loss from consolidated entities after income taxes |
|
| (786 | ) |
|
| (4,223 | ) |
|
| (294 | ) |
|
| (4,606 | ) |
Equity earnings from unconsolidated entities |
|
| 1,306 |
|
|
| 3,519 |
|
|
| 4,885 |
|
|
| 14,115 |
|
Net income (loss) |
| $ | 520 |
|
| $ | (704 | ) |
| $ | 4,591 |
|
| $ | 9,509 |
|
Basic income (loss) per share |
| $ | 0.01 |
|
| $ | (0.01 | ) |
| $ | 0.08 |
|
| $ | 0.20 |
|
Diluted income (loss) per share |
| $ | 0.01 |
|
| $ | (0.01 | ) |
| $ | 0.08 |
|
| $ | 0.19 |
|
Weighted average number of common shares used in the computation of net income (loss) per share (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 58,536 |
|
|
| 48,845 |
|
|
| 55,946 |
|
|
| 48,650 |
|
Diluted |
|
| 60,440 |
|
|
| 48,845 |
|
|
| 57,778 |
|
|
| 50,451 |
|
Net income (loss) |
| $ | 520 |
|
| $ | (704 | ) |
| $ | 4,591 |
|
| $ | 9,509 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
| 31 |
|
|
| (22 | ) |
|
| (41 | ) |
|
| 58 |
|
Comprehensive income (loss) |
| $ | 551 |
|
| $ | (726 | ) |
| $ | 4,550 |
|
| $ | 9,567 |
|
The accompanying notes are an integral part of these Condensed Consolidated Interim Statements of Income (Loss) and Comprehensive Income (Loss).
2
Village Farms International, Inc.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
(In thousands of United States dollars, except for shares outstanding)
(Unaudited)
|
| Three Months Ended September 30, 2020 |
| |||||||||||||||||||||
|
| Number of Common Shares |
|
| Common Stock |
|
| Additional paid in capital |
|
| Accumulated Other Comprehensive (Loss) Income |
|
| Retained Earnings |
|
| Total Shareholders’ Equity |
| ||||||
Balance at July 1, 2020 |
|
| 56,402,418 |
|
| $ | 105,829 |
|
| $ | 5,128 |
|
| $ | (547 | ) |
| $ | 28,321 |
|
| $ | 138,731 |
|
Shares issued in public offering, net of issuance costs |
|
| 9,396,226 |
|
|
| 35,275 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 35,275 |
|
Warrants issued in public offering |
|
| — |
|
|
| — |
|
|
| 11,369 |
|
|
| — |
|
|
| — |
|
|
| 11,369 |
|
Shares issued on exercise of stock options |
|
| 161,166 |
|
|
| 206 |
|
|
| (77 | ) |
|
| — |
|
|
| — |
|
|
| 129 |
|
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 472 |
|
|
| — |
|
|
| — |
|
|
| 472 |
|
Cumulative translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 31 |
|
|
| — |
|
|
| 31 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 520 |
|
|
| 520 |
|
Balance at September 30, 2020 |
|
| 65,959,810 |
|
| $ | 141,310 |
|
| $ | 16,892 |
|
| $ | (516 | ) |
| $ | 28,841 |
|
| $ | 186,527 |
|
|
| Three Months Ended September 30, 2019 |
| |||||||||||||||||||||
|
| Number of Common Shares |
|
| Common Stock |
|
| Additional paid in capital |
|
| Accumulated Other Comprehensive Loss |
|
| Retained Earnings |
|
| Total Shareholders’ Equity |
| ||||||
Balance at July 1, 2019 |
|
| 49,273,786 |
|
| $ | 76,435 |
|
| $ | 3,101 |
|
| $ | (482 | ) |
| $ | 32,138 |
|
| $ | 111,192 |
|
Shares issued in public offering, net of issuance costs |
|
| — |
|
|
| (60 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (60 | ) |
Shares issued on exercise of stock options |
|
| 31,216 |
|
|
| 109 |
|
|
| (78 | ) |
|
| — |
|
|
| — |
|
|
| 31 |
|
Share-based compensation |
|
| 35,333 |
|
|
| — |
|
|
| 666 |
|
|
| — |
|
|
| — |
|
|
| 666 |
|
Cumulative translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22 | ) |
|
| — |
|
|
| (22 | ) |
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (704 | ) |
|
| (704 | ) |
Balance at September 30, 2019 |
|
| 49,340,335 |
|
| $ | 76,484 |
|
| $ | 3,689 |
|
| $ | (504 | ) |
| $ | 31,434 |
|
| $ | 111,103 |
|
|
| Nine Months Ended September 30, 2020 |
| |||||||||||||||||||||
|
| Number of Common Shares |
|
| Common Stock |
|
| Additional paid in capital |
|
| Accumulated Other Comprehensive Loss |
|
| Retained Earnings |
|
| Total Shareholders’ Equity |
| ||||||
Balance at January 1, 2020 |
|
| 52,656,669 |
|
| $ | 98,333 |
|
| $ | 4,351 |
|
| $ | (475 | ) |
| $ | 24,250 |
|
| $ | 126,459 |
|
Shares issued in public offering, net of issuance costs |
|
| 12,989,976 |
|
|
| 42,569 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 42,569 |
|
Warrants issued in public offering |
|
| — |
|
|
| — |
|
|
| 11,369 |
|
|
| — |
|
|
| — |
|
|
| 11,369 |
|
Shares issued on exercise of stock options |
|
| 313,165 |
|
|
| 408 |
|
|
| (157 | ) |
|
| — |
|
|
| — |
|
|
| 251 |
|
Share-based compensation |
|
| — |
|
|
| — |
|
|
| 1,329 |
|
|
| — |
|
|
| — |
|
|
| 1,329 |
|
Cumulative translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (41 | ) |
|
| — |
|
|
| (41 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,591 |
|
|
| 4,591 |
|
Balance at September 30, 2020 |
|
| 65,959,810 |
|
| $ | 141,310 |
|
| $ | 16,892 |
|
| $ | (516 | ) |
| $ | 28,841 |
|
| $ | 186,527 |
|
|
| Nine Months Ended September 30, 2019 |
| |||||||||||||||||||||
|
| Number of Common Shares |
|
| Common Stock |
|
| Additional paid in capital |
|
| Accumulated Other Comprehensive (Loss) Income |
|
| Retained Earnings |
|
| Total Shareholders’ Equity |
| ||||||
Balance at January 1, 2019 |
|
| 47,642,672 |
|
| $ | 60,872 |
|
| $ | 2,198 |
|
| $ | (562 | ) |
| $ | 21,925 |
|
| $ | 84,433 |
|
Shares issued in public offering, net of issuance costs |
|
| 1,000,000 |
|
|
| 13,866 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,866 |
|
Shares issued on exercise of stock options |
|
| 83,998 |
|
|
| 224 |
|
|
| (116 | ) |
|
| — |
|
|
| — |
|
|
| 108 |
|
Share-based compensation |
|
| 313,665 |
|
|
| 908 |
|
|
| 1,755 |
|
|
| — |
|
|
| — |
|
|
| 2,663 |
|
Shares issued on exercise of warrants |
|
| 300,000 |
|
|
| 614 |
|
|
| (148 | ) |
|
| — |
|
|
| — |
|
|
| 466 |
|
Cumulative translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 58 |
|
|
| — |
|
|
| 58 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,509 |
|
|
| 9,509 |
|
Balance at September 30, 2019 |
|
| 49,340,335 |
|
| $ | 76,484 |
|
| $ | 3,689 |
|
| $ | (504 | ) |
| $ | 31,434 |
|
| $ | 111,103 |
|
The accompanying notes are an integral part of these Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity.
3
Village Farms International, Inc.
Condensed Consolidated Interim Statements of Cash Flows
(In thousands of United States dollars)
(Unaudited)
|
| Nine Months Ended September 30, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Cash flows provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Net income |
| $ | 4,591 |
|
| $ | 9,509 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 4,540 |
|
|
| 5,587 |
|
Amortization of deferred charges |
|
| 57 |
|
|
| 57 |
|
Share of income from joint ventures |
|
| (4,885 | ) |
|
| (14,115 | ) |
Interest expense |
|
| 1,273 |
|
|
| 2,018 |
|
Interest income |
|
| (577 | ) |
|
| (651 | ) |
Interest paid on long-term debt |
|
| (1,318 | ) |
|
| (2,013 | ) |
Gain on settlement agreement |
|
| (4,681 | ) |
|
| — |
|
Loss (gain) on disposal of assets |
|
| 6 |
|
|
| (13,558 | ) |
Non-cash lease expense |
|
| (935 | ) |
|
| (778 | ) |
Interest paid on finance leases |
|
| (3 | ) |
|
| (6 | ) |
Share-based compensation |
|
| 1,329 |
|
|
| 2,663 |
|
Deferred income taxes |
|
| (321 | ) |
|
| (749 | ) |
Changes in non-cash working capital items |
|
| 4,938 |
|
|
| 4,149 |
|
Net cash provided by (used) in operating activities |
|
| 4,014 |
|
|
| (7,887 | ) |
Cash flows used in investing activities: |
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment, net of rebate |
|
| (1,076 | ) |
|
| (1,630 | ) |
Advances to joint ventures |
|
| (133 | ) |
|
| (9,499 | ) |
Proceeds from sale of asset |
|
| — |
|
|
| 52 |
|
Investment in joint ventures |
|
| (11,713 | ) |
|
| (13 | ) |
Investment in minority interests |
|
| (1,226 | ) |
|
| — |
|
Net cash used in investing activities |
|
| (14,148 | ) |
|
| (11,090 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from borrowings |
|
| 3,000 |
|
|
| 3,000 |
|
Repayments on borrowings |
|
| (4,326 | ) |
|
| (3,591 | ) |
Proceeds from issuance of common stock |
|
| 46,388 |
|
|
| 13,868 |
|
Issuance costs |
|
| (3,819 | ) |
|
| — |
|
Proceeds from exercise of stock options |
|
| 251 |
|
|
| 109 |
|
Payments on capital lease obligations |
|
| (51 | ) |
|
| (69 | ) |
Proceeds from exercise of warrants |
|
| 11,369 |
|
|
| 466 |
|
Net cash provided by financing activities |
|
| 52,812 |
|
|
| 13,783 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
| (1 | ) |
|
| — |
|
Net increase (decrease) in cash and cash equivalents |
|
| 42,677 |
|
|
| (5,194 | ) |
Cash and cash equivalents, beginning of period |
|
| 11,989 |
|
|
| 11,920 |
|
Cash and cash equivalents, end of period |
| $ | 54,666 |
|
| $ | 6,726 |
|
The accompanying notes are an integral part of these Condensed Consolidated Interim Statements of Cash Flows.
4
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 | NATURE OF OPERATIONS |
Village Farms International, Inc. (“VFF” the parent company, together with its subsidiaries, the “Company”) is incorporated under the Canada Business Corporation Act. VFF’s principal operating subsidiaries as of September 30, 2020 are Village Farms Canada Limited Partnership (“VFCLP”), Village Farms, L.P. (“VFLP”), and VF Clean Energy, Inc. (“VFCE”). The address of the registered office of VFF is 4700 80th Street, Delta, British Columbia, Canada, V4K 3N3. VFF owns a 65% equity interest in Village Fields Hemp USA LLC (“VF Hemp”) and a 58.7% equity interest in Pure Sunfarms Corp. (“Pure Sunfarms”), both of which are recorded as equity investments (note 7).
The Company’s shares are listed on the Toronto Stock Exchange under the symbol VFF and are also listed in the United States on the Nasdaq Capital Market (“Nasdaq”) under the symbol VFF.
The Company owns and operates sophisticated, highly intensive agricultural greenhouse facilities in British Columbia (“B.C.”) and Texas, where it produces, markets and sells premium-quality tomatoes, bell peppers, and cucumbers. The Company, through its subsidiary VFCE, owns and operates a 7.0 MW power plant that generates electricity. The Company’s joint venture, Pure Sunfarms, is a licensed producer and supplier of cannabis products to be sold to other licensed providers and provincial governments across Canada and internationally. The Company’s joint venture, VF Hemp is a cultivator of high cannabidiol (“CBD”) hemp in multiple states throughout the United States.
Coronavirus pandemic (“COVID-19”)
In March 2020, the World Health Organization declared the outbreak of the COVID-19 virus a global pandemic. This outbreak continues to cause major disruptions to businesses and markets worldwide as the virus continues to spread. A number of countries as well as certain states and cities within the United States and Canada have enacted temporary closures of businesses, issued quarantine or shelter-in-place orders and taken other restrictive measures in response to COVID-19.
To date, all of the Company’s operations are operating normally, however, the extent to which COVID-19 and the related global economic crisis affect the Company’s business, results of operations and financial condition, will depend on future developments that are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and any recovery period, future actions taken by governmental authorities, central banks and other third parties (including new financial regulation and other regulatory reform) in response to the pandemic, and the effects on our produce, clients, vendors and employees. Village Farms continues to service its customers amid uncertainty and disruption linked to COVID-19 and is actively managing its business to respond to the impact.
2 | BASIS OF PRESENTATION |
The accompanying unaudited Condensed Consolidated Interim Financial Statements for the three and nine months ended September 30, 2020 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 nine months ended September 30, 2020 are subject to seasonal variations and accordingly are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. 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, 2019 and 2018.
Other than as described below, there were no changes to our significant accounting policies described in our annual financial statements that had a material impact on our financial statements and related notes.
3 | NEW ACCOUNTING PRONOUNCEMENTS |
Not Yet Adopted
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.” The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying United States Generally Accepted Accounting Principles (“GAAP”) to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modification made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company believes this guidance will not have a material impact on its financial statements.
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)
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820)—Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 removes the disclosure requirement for the amount and reasons for transfers between Level 1 and Level 2 fair value measurements as well as the process for Level 3 fair value measurements. In addition, the ASU adds the disclosure requirements for changes in unrealized gains and losses included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period as well as the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Company adopted ASU 2018-13 on January 1, 2020. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses.” The standard, including subsequently issued amendments, requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The Company adopted ASU 2016-13 on January 1, 2020. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.
4 | INVENTORIES |
Inventories, consisting of crop inventory, purchased produce inventory and spare parts inventory, are valued at the lower of cost or net realizable value. Cost is determined using the weighted average cost method. Costs included in crop inventory include but are not limited to raw material, packaging, direct labor, overhead, and the depreciation of growing equipment and facilities determined at normal capacity. These costs are expensed as cost of sales when the crops are sold.
Inventories consisted of the following as of:
Classification |
| September 30, 2020 |
| December 31, 2019 |
| ||
Crop inventory |
| $ | 13,757 |
| $ | 15,281 |
|
Purchased produce inventory |
|
| 1,432 |
|
| 530 |
|
Spare parts inventory |
|
| 112 |
|
| 107 |
|
Inventories |
| $ | 15,301 |
| $ | 15,918 |
|
5 | PROPERTY, PLANT AND EQUIPMENT |
Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is allocated between cost of sales and selling, general and administrative expenses depending on the type of asset and is determined using the straight-line method over the estimated useful lives of the assets. Land is not depreciated. Leasehold improvements are amortized using the straight-line method over the remaining life of the lease or useful life of the asset, whichever is shorter. Maintenance and repairs are charged to cost of sales when incurred. Significant expenditures, which extend the useful lives of assets, are capitalized. The estimated useful lives of the class of assets for the current and comparative periods are as follows:
Classification |
| Estimated Useful Lives |
Leasehold and land improvements |
| 5-20 years |
Greenhouses and other buildings |
| 4-30 years |
Greenhouse equipment |
| 3-30 years |
Machinery and equipment |
| 3-12 years |
Construction in process reflects the cost of assets under construction, which are not depreciated until placed into service.
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)
Property, plant and equipment consisted of the following:
Classification |
| September 30, 2020 |
|
| December 31, 2019 |
| |||
Land |
| $ | 3,204 |
|
| $ | 3,204 |
| |
Leasehold and land improvements |
|
| 3,820 |
|
|
| 3,820 |
| |
Greenhouses and other buildings |
|
| 72,902 |
|
|
| 72,772 |
| |
Machinery and equipment |
|
| 62,770 |
|
|
| 61,871 |
| |
Construction in progress |
|
| 1,568 |
|
|
| 1,697 |
| |
Less: Accumulated depreciation |
|
| (84,601 | ) |
|
| (80,206 | ) | |
Property, plant and equipment |
| $ | 59,663 |
|
| $ | 63,158 |
|
6 | LEASES |
The Company leases a parcel of land in Marfa, Texas that one of its greenhouses resides on as well as two distribution centers located in Fort Worth, Texas and Surrey, British Columbia. The Company also leases production related equipment at its greenhouses in Texas and British Columbia. In January 2020, the Company commenced leasing of an office building located in Lake Mary, Florida for its corporate headquarters.
The components of lease related expenses are as follows:
|
| Three months ended September 30, |
|
| Nine months ended September 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Operating lease expense (a) |
| $ | 533 |
|
| $ | 588 |
|