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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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 7, 2024,
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 Income (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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15 |
Item 3. |
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35 |
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Item 4. |
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35 |
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Item 1. |
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37 |
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Item 1A. |
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37 |
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Item 2. |
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37 |
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Item 3. |
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37 |
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Item 4. |
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37 |
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Item 5. |
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37 |
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Item 6. |
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38 |
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39 |
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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, Corp. (“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 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; risks related to the start-up of international production at our Netherlands operations under Leli Holland B.V. (“Leli”); risks relating to maintaining an active, liquid and orderly trading market for Common Shares as a result of the Company’s potential inability to regain compliance with the Nasdaq Stock Market’s listing rules; 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; elevated 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, 2024 |
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December 31, 2023 |
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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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— |
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Trade receivables |
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Inventories |
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Income tax receivable |
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— |
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Other receivables |
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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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Income tax payable |
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— |
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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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2024 |
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2023 |
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2024 |
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2023 |
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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 profit |
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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 gain (loss) |
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( |
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( |
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( |
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Other income (loss) |
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( |
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Goodwill and intangible asset impairments |
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— |
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— |
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( |
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— |
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Loss before taxes |
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( |
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( |
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( |
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( |
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(Provision for) recovery of income taxes |
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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 attributable to non-controlling interests, net of tax |
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( |
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( |
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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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Comprehensive gain (loss) including non-controlling interests |
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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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( |
) |
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Comprehensive gain (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, 2024 |
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Number of Common |
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Common Stock |
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Additional Paid in Capital |
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Accumulated Other Comprehensive (Loss) gain |
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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 July 1, 2024 as previously reported |
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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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Adjustments |
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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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Balance July 1, 2024 |
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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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Acquisition of non-controlling interest |
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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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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 |
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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, 2024 |
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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, 2023 |
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Number of Common |
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Common Stock |
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Additional Paid in Capital |
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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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||||||
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Nine Months Ended September 30, 2024 |
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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’ Equity |
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Mezzanine Equity |
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Balance at January 1, 2024 as previously reported |
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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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Adjustments |
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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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Balance January 1, 2024 |
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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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Acquisition of Redeemable non-controlling interest |
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— |
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— |
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— |
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— |
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— |
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( |
) |
||
Acquisition of non-controlling interest |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
||||
Cumulative translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Net (loss) income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Balance at September 30, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||||
|
|
Nine Months Ended September 30, 2023 |
|
|||||||||||||||||||||||||||||
|
|
Number of Common |
|
|
Common Stock |
|
|
Additional Paid in |
|
|
Accumulated Other |
|
|
Retained Earnings |
|
|
Non-controlling Interest |
|
|
Total Shareholders’ |
|
|
Mezzanine Equity |
|
||||||||
Balance at January 1, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Shares issued in public offering, net of issuance costs |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
||||||||
Warrants issued in public offering |
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
||||||
Shares issued on exercise of stock options |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|||||||
Share-based compensation |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
||||||
Cumulative translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|||||||
Net (loss) income |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|||||
Balance at September 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||
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, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
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 |
|
|
|
|
|
|
||
Net income attributable to non-controlling interest |
|
|
|
|
|
|
||
Interest expense |
|
|
|
|
|
|
||
Interest paid on long-term debt |
|
|
( |
) |
|
|
( |
) |
Unrealized foreign exchange loss |
|
|
|
|
|
|
||
Goodwill and intangible asset impairments |
|
|
|
|
|
— |
|
|
Non-cash lease expense |
|
|
|
|
|
|
||
Share-based compensation |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
|
|
|
|
||
Changes in non-cash working capital items |
|
|
|
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
Cash flows (used in) provided by investing activities: |
|
|
|
|
|
|
||
Purchases of property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
Purchases of intangibles |
|
|
( |
) |
|
|
— |
|
Repayment of note receivable |
|
|
— |
|
|
|
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows (used in) provided by financing activities: |
|
|
|
|
|
|
||
Repayments on borrowings |
|
|
( |
) |
|
|
( |
) |
Purchase of Non-controlling interest |
|
|
( |
) |
|
|
— |
|
Proceeds from issuance of common stock and warrants |
|
|
— |
|
|
|
|
|
Issuance costs |
|
|
— |
|
|
|
( |
) |
Proceeds from exercise of stock options |
|
|
— |
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash, end of period |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5
VILLAGE FARMS INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(In thousands of United States dollars, except per share amounts, unless otherwise noted)
Nature of Business
Village Farms International, Inc. (“VFF” and, together with its subsidiaries, the “Company”, “we”, “us”, or “our”) is a corporation existing under the Business Corporations Act (Ontario). VFF’s principal operating subsidiaries as of September 30, 2024 were Village Farms Canada Limited Partnership, Village Farms, L.P.(together, “Village Farms Fresh” or “VF Fresh”), Pure Sunfarms Corp. (“Pure Sunfarms”), Balanced Health Botanicals, LLC (“Balanced Health”) and VF Clean Energy, Inc. ("VFCE") and Leli Holland B. V. ("Leli"). VFF also owns an
The address of the registered office of VFF is 79 Wellington Street West, Suite 3300, Toronto, Ontario, Canada, M5K 1N2.
The address of the principal executive office of VFF is 90 Colonial Center Pkwy, Lake Mary, Florida, United States, 32746.
The Company’s shares are listed on Nasdaq Capital Market (“Nasdaq”) under the symbol “VFF”.
Village Farms Fresh owns and operates sophisticated, highly intensive agricultural greenhouse facilities in British Columbia and Texas, where it produces, markets and sells premium-quality tomatoes, bell peppers and cucumbers. Its wholly owned subsidiary, Pure Sunfarms, is a vertically integrated Licensed Producer and supplier of cannabis products sold to customers throughout Canada and internationally. The Company’s wholly owned subsidiary, Balanced Health, develops and sells high-quality, cannabidiol (“CBD”) based products including ingestible, edible and topical applications within the U.S. Through its
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and footnote disclosures normally included in the annual audited consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying condensed consolidated statement of financial position as of December 31, 2023 is derived from the Company’s audited financial statements as of that date. Because certain information and footnote disclosures have been condensed or omitted, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2023 contained in the Company’s 2023 Annual Report on Form 10-K. In management’s opinion, all normal and recurring adjustments considered necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented have been included. When necessary, certain prior year amounts have been reclassified to conform with the current period presentation. Interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. The Company believes that the disclosures made in these condensed consolidated financial statements are adequate to make the information not misleading.
Principals of Consolidation
The accompanying condensed consolidated financial statements include Village Farms International, Inc. and its subsidiaries and include the accounts of all majority-owned subsidiaries over which the Company exercises control and, when applicable, entities in which the Company has a controlling financial interest. All significant intercompany balances and transactions have been eliminated in consolidation. Other parties’ interests in entities that the Company consolidates are reported as non-controlling interests within equity, except for mandatorily redeemable non-controlling interests, which are recorded within mezzanine equity. Net income or loss attributable to non-controlling interests is reported as a separate line item below net income or loss. The Company applies the equity method of accounting for its investments in entities for which it does not have a controlling financial interest, but over which it has the ability to exert significant influence. For equity investees in which the Company has an undivided interest in the assets, liabilities and profits or losses of an unconsolidated entity, but does not exercise control over the entity, the Company consolidates its proportional interest in the accounts of the entity.
Translations of Foreign Currencies
The assets and liabilities of foreign subsidiaries with a functional currency other than the U.S. dollar are translated into U.S. dollars at period-end exchange rates, with resulting translation gains or losses included within other comprehensive income or loss. Revenue and expenses are translated into U.S. dollars at average rates of exchange during the applicable period. Substantially all of the Company’s foreign operations use their local currency as their functional currency. For foreign operations for which the local currency is not the functional currency, the operation’s non-monetary assets are remeasured into U.S. dollars at historical exchange rates. All other accounts are remeasured at current exchange rates, with both gains or losses from remeasurement and currency gains or losses from transactions executed in currencies other than the functional currency included in foreign exchange (loss) gain.
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)
In these condensed consolidated financial statements, “$” means U.S. dollars and "C$" means Canadians dollars, unless otherwise noted.
Revision of Prior-Period Consolidated Financial Statements
In connection with the preparation of our third quarter 2024 condensed consolidated interim financial statements, the Company identified an immaterial misstatement in its estimate of its deferred tax asset valuation allowance as of the year ended December 31, 2023.
As a result, we recorded a decrease to deferred tax assets as of December 31, 2023 and increase in income tax expense for the year ended December 31, 2023 for $
Our revision had no impact to the Company’s consolidated statement of cash flows. Additionally, our revision had no impact to the Company’s segment profit measure, compliance with debt covenants, or performance metrics used in the calculation of executive compensation as the impacted line items are excluded from these calculations.
We evaluated the materiality of the impact quantitatively and qualitatively and concluded it was not material to any of the prior periods.
General Economic, Regulatory and Market Conditions
The Company has experienced, and may continue to experience, direct and indirect negative effects on its business and operations from negative economic, regulatory and market conditions, including inflationary effects on fuel prices, labor and materials costs, elevated interest rates, potential recessionary impacts and supply chain disruptions that could negatively affect demand for new projects and/or delay existing project timing or cause increased project costs. The extent to which general economic, regulatory and market conditions could affect the Company’s business, operations and financial results is uncertain as it will depend upon numerous evolving factors that management may not be able to accurately predict, and, therefore, any future impacts on the Company’s business, financial condition and/or results of operations cannot be quantified or predicted with specificity.
Recent Accounting Pronouncements
No accounting pronouncements recently issued or newly effective have had, or are expected to have, a material impact on the Company’s condensed consolidated financial statements.
2. INVENTORIES
Inventories consisted of the following as of:
Classification |
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Cannabis: |
|
|
|
|
|
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work-in-progress |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Packaging |
|
|
|
|
|
|
||
Produce: |
|
|
|
|
|
|
||
Crop inventory |
|
|
|
|
|
|
||
Purchased produce inventory |
|
|
|
|
|
|
||
Inventory |
|
$ |
|
|
$ |
|
||
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following as of:
Classification |
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Land |
|
$ |
|
|
$ |
|
||
Leasehold and land improvements |
|
|
|
|
|
|
||
Buildings |
|
|
|
|
|
|
||
Machinery and equipment |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Less: Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property, plant and equipment, net |
|
$ |
|
|
$ |
|
||
7
VILLAGE FARMS INTERNATIONAL, INC.
Notes to Condensed Consolidated Interim Financial Statements
(In thousands of United States dollars, except per share amounts, unless otherwise noted)
Depreciation expense on property, plant and equipment, was $
Capitalized interest was $
4. ACQUISITIONS
On
On
5. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table presents the changes in the carrying value of goodwill by reportable segment for the nine months ended September 30, 2024:
|
Cannabis - Canada |
|
|
Cannabis - United States |
|
|
Total |
|
|||
Balance as of January 1, 2024 |
$ |
|
|
$ |
|
|
$ |
|
|||
Impairments |
|
- |
|
|
|
( |
) |
|
|
( |
) |
Foreign currency translation adjustment |
|
( |
) |
|
|
- |
|
|
|
( |
) |
Balance as of September 30, 2024 |
$ |
|
|
$ |
- |
|
|
$ |
|
||
Intangible Assets
Intangible assets consisted of the following as of:
Classification |
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Licenses |
|
$ |
|
|
$ |
|
||
Brand and trademarks* |
|
|
|
|
|
|
||
Customer relationships |
|
|
|
|
|
|
||
Computer software |
|
|
|
|
|
|
||
Other* |
|
|
|
|
|
|
||
Less: Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
Less: Impairments* |
|
|
( |
) |
|
|
( |
) |
Intangibles, net |
|
$ |
|
|
$ |
|
||
* Includes indefinite-lived intangible assets
The expected future amortization expense for definite-lived intangible assets as of September 30, 2024 was as follows:
Fiscal period |
|
|
|
|
Remainder of 2024 |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Thereafter |
|
|
|
|
Intangibles, net |
|
$ |
|
|
Assessment for Indicators of Impairment
At the end of each reporting period, the Company assesses whether events or changes in circumstances have occurred that would indicate an impairment. The Company considers external and internal factors, including overall financial performance and relevant entity-specific factors, as part of this assessment.
8
VILLAGE FARMS INTERNATIONAL, INC.
Notes to Condensed Consolidated Interim Financial Statements
(In thousands of United States dollars, except per share amounts, unless otherwise noted)
During the nine months ended September 30, 2024 and 2023, the Company considered qualitative factors in assessing for impairment indicators for the Company’s U.S. and Canadian Cannabis segments.
Cannabis - U.S.
At June 30, 2024, when the Company considered qualitative factors in assessing impairment indicators, it concluded that the Company's U.S. - Cannabis segment more likely than not was impaired. The Company reviewed the reportable segment's assets, including goodwill and intangible assets. Based on recent historical performance during the quarter which underperformed relative to budget, a revised June 30, 2024 forecast which resulted in a shortfall compared to the March 31, 2024 forecast, the new restrictions on CBD sales in an additional eight states at July 1, 2024, and the proliferation of unregulated hemp-derived products on the market which continues to challenge market share for the CBD industry, the Company concluded that as of June 30, 2024, the fair value of the brand intangible asset and goodwill was fully impaired and an impairment charge to goodwill of $
Cannabis - U.S. - Goodwill
The fair value of the reporting unit was determined based on a discounted cash flow projection using projections for the remainder of