UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 2)

(Mark one)

☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023.

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-38783

VILLAGE FARMS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Ontario	98-1007671
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4700-80th Street

Delta, British Columbia Canada

V4K 3N3

(Address of principal executive offices)

(604) 940-6012

(Registrant’s telephone number, including area code)

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

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☒ No ☐

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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☒

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the other registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the voting stock and nonvoting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of June 30, 2023 was $57,432,429.
 

As of March 6, 2024, the registrant had 110,248,929 Common Shares outstanding.

PCAOB: 271 Auditor Name: PricewaterhouseCoopers LLP Auditor Location: Vancouver, British Columbia, Canada

EXPLANATORY NOTE

This Amendment No. 2 on Form 10-K/A (this “Amendment No. 2”) amends the Annual Report on Form 10-K of Village Farms International, Inc. (the “Company”) for the year ended December 31, 2023, originally filed with the Securities and Exchange Commission on March 13, 2024 (the “Original 10-K”) and amended to include Part III information on April 26, 2024 (“Amendment No. 1”). The purpose of this Amendment no. 2 is to file an amended version of the Report of Independent Registered Public Accounting Firm that had appeared on pages 81 and 82 of the Original 10-K. Accordingly, this Amendment No. 2 amends and restates Item 8, “Financial Statements and Supplementary Data” of Part II of the Original 10-K in its entirety. No changes have been made to the financial statements included under that item in the Original 10-K.

In addition, this Amendment No. 2 amends and restates Item 15, “Exhibits, Financial Statement Schedules” of Part IV of Amendment No. 1 in its entirety. The Company is including in this Amendment No. 2 updated certifications from its Chief Executive Officer and Chief Financial Officer as required by Sections 302 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.5 and 31.6, respectively, and updated certifications from its Chief Executive Officer and Chief Financial Officer as required by Sections 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 32.3 and 32.4, respectively. The Company is also filing as Exhibit 23.2 hereto an updated consent of its Independent Registered Public Accounting Firm.

Except as described above, no other changes have been made to the Original 10-K or Amendment No. 1. This Amendment No. 2 does not reflect events that may have occurred subsequent to such date, and does not modify or update in any way disclosures made in the Original 10-K or Amendment No. 1.

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PART II

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required by this item are included beginning on page 7 of this Amendment No. 2 to our Annual Report on Form 10-K. See also Item 15, “Exhibits, Financial Statement Schedules.”

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PART IV.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as part of this report.

1. Financial Statements.

	Page
Management’s Report on Internal Controls Over Financial Controls	7
Report of Independent Registered Public Accounting Firm	8
Consolidated Statements of Financial Position	11
Consolidated Statements of Operations and Comprehensive Income (Loss)	12
Consolidated Statements of Changes in Shareholders’ Equity and Mezzanine Equity	13
Consolidated Statements of Cash Flows	14
Notes to Financial Statements	15

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2. Financial Statement Schedules.

All schedules are omitted because they are not applicable, or the required information is shown in the Financial Statements or notes thereto.

(b) Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this report:

  3.1 Articles of Continuance (incorporated by reference to Exhibit 3.1 of the Company’s Annual Report on Form 10-K filed on March 9, 2023).

3.2	By-Law No. 4 of Village Farms International, Inc. (incorporated by reference to Appendix D of the Company's Proxy Statement, filed on April 19, 2022)
4.1	Description of Common Shares (incorporated by reference to Exhibit 4.1 of the Company's Annual Report on Form 10-K filed on March 9, 2023).
4.2	Securityholders’ Agreement, as amended and restated on December 31, 2009 (incorporated by reference to Exhibit 4.3 of the Company’s Annual Report on Form 10-K filed on April 1, 2020)
4.3	Form of Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 10, 2020).
4.4	Form of Warrant (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on January 30, 2023).
10.1	Controlled Equity OfferingSM Sales Agreement, dated August 9, 2022, between Village Farms International, Inc. and Cantor Fitzgerald & Co. and A.G.P./Alliance Global Partners (incorporated by reference to Exhibit 1.1 of the Company’s Current Report on Form 8-K filed on August 9, 2022).
10.2	Credit Facility Agreement by and between Village Farms Canada Limited Partnership and Farm Credit Canada, dated March 28, 2013 (incorporated by reference to Exhibit 10.2 of the Company’s Annual Report on Form 10-K filed on April 1, 2020)
10.3	Credit Agreement by and between Village Farms Canada Limited Partnership and Village Farms, L.P. and Bank of Montreal, dated August 29, 2013 (incorporated by reference to Exhibit 10.3 of the Company’s Annual Report on Form 10-K filed on April 1, 2020)
10.4	Amendment to Credit Agreement by and between Village Farms Canada Limited Partnership and Village Farms, L.P. and Farm Credit Canada, dated March 24, 2016 (incorporated by reference to Exhibit 10.4 of the Company’s Annual Report on Form 10-K filed on April 1, 2020)
10.5	Second Amendment to Credit Agreement by and between Village Farms Canada Limited Partnership and Village Farms, L.P. and Bank of Montreal, dated May 31, 2016 (incorporated by reference to Exhibit 10.5 of the Company’s Annual Report on Form 10-K filed on April 1, 2020)
10.6*	Form of Indemnification Agreement. + ^
10.7	Credit Agreement, dated as of February 7, 2019, by and between Pure Sun Farms Corp., Bank of Montreal and Farm Credit Canada. (incorporated by reference to Exhibit 10.10 of the Company’s Annual Report on Form 10-K filed on March 16, 2021).
10.8	First Amended and Restated Credit Agreement, dated as of March 30, 2020, by and between Pure Sun Farms Corp., Bank of Montreal, Farm Credit Canada and Canada Imperial Bank of Commerce. (incorporated by reference to Exhibit 10.11 of the Company’s Annual Report on Form 10-K filed on March 16, 2021).
10.9	Second Amendment and Restated Credit Agreement, dated as of June 30, 2020, by and between Pure Sunfarms Corp., Bank of Montreal, Farm Credit Canada and Canada Imperial Bank of Commerce. (incorporated by reference to Exhibit 10.12 of the Company’s Annual Report on Form 10-K filed on March 16, 2021).
10.10	Third Amended and Restated Credit Agreement, dated as of March 15, 2021, by and between Pure Sunfarms Corp., Bank of Montreal, Farm Credit Canada and Canadian Imperial Bank of Commerce. (Incorporated by reference to Exhibit 10.17 of the Company's Annual Report on Form 10-K/A on March 18, 2021).

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10.11	Fourth Amended and Restated Credit Agreement, dated as of May 5, 2023, by and between Pure Sunfarms Corp., Bank of Montreal, Farm Credit Canada and Canadian Imperial Bank of Commerce (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q filed on May 10, 2023).
10.12	First Supplemental Credit Agreement, dated May 30, 2020, by and between Pure Sunfarms Corp., Bank of Montreal and Farm Credit Canada. (incorporated by reference to Exhibit 10.13 of the Company’s Annual Report on Form 10-K filed on March 16, 2021).
10.13	First Supplemental Credit Agreement, dated October 30, 2020, by and between Pure Sunfarms Corp., Bank of Montreal and Farm Credit Canada. (incorporated by reference to Exhibit 10.14 of the Company’s Annual Report on Form 10-K filed on March 16, 2021).
10.14	BDC Loan Agreement, dated December 30, 2020, by and between Pure Sunfarms Corp. and Bank of Montreal. (incorporated by reference to Exhibit 10.15 of the Company’s Annual Report on Form 10-K filed on March 16, 2021).
10.15	Membership Interest Purchase Agreement by and among Village Farms International, Inc. Balanced Health Botanicals, LLC and the Members of Balanced Health Botanicals, LLC, dated August 16, 2021 (incorporated by reference to Exhibit 10.17 of the Company's Annual Report on Form 10-K/A filed on March 13, 2022).^
10.16	Share Purchase Agreement by and among Village Farms International, Inc., ROSE LifeScience Inc. and the shareholders of ROSE LifeScience, dated November 15, 2021 (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on November 19, 2021). ^
10.17	Unanimous Shareholder Agreement by and among Village Farms International, Inc., ROSE LifeScience Inc. and the shareholders of ROSE LifeScience, dated November 15, 2021 (incorporated by reference to Exhibit 2.2 of the Company’s Current Report on Form 8-K filed on November 19, 2021) ^
10.18	First Amendment to Unanimous Shareholder Agreement by and among Village Farms International, Inc., ROSE LifeScience Inc. and the shareholders of ROSE LifeScience, dated November 15, 2021 (incorporated by reference to Exhibit 10.18 of the Company's Annual Report on Form 10-K filed on March 9, 2023).
10.19	Amended and Restated Share-based Compensation Plan dated March 15, 2021 and adopted June 10, 2021 (incorporated by reference to Appendix D of the Company's Proxy Statement filed on May 7, 2021).+
10.20	Village Farms International, Inc. Share-based Compensation Plan adopted on December 31, 2009 (incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K filed on April 1, 2020).+
10.21	Employment Agreement, dated as of September 1, 2023, by and between Stephen C. Ruffini and the Company (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on November 8, 2023).+
10.22	Employment Agreement, dated as of July 13, 2020, by and between Michael A. DeGiglio and the Company (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on July 14, 2020).+
10.23	Employment Agreement by and between Bret Wiley and the Company (incorporated by reference to Exhibit 10.9 of the Company's Annual Report on Form 10-K filed on April 1, 2020).+
10.24	Employment Agreement, dated as of October 20, 2023, by and between Orville Bovenschen and the Company (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q filed on November 8, 2023).+
10.25	Employment Agreement dated as of February 7, 2022, by and between Ann Gillin Lefever and the Company (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q filed on May 10, 2023).+
19.1*	Insider Trading Policy.
21.1*	List of Subsidiaries.
23.1*	Consent of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP
23.2	Consent of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP (in respect of this Amendment No. 2 to the Original 10-K)
24.1*	Powers of Attorney (included on signature page to the Original 10-K).
31.1*	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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31.2*	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3**	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (in respect of Amendment No. 1 to the Original 10-K).
31.4**	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (in respect of Amendment No. 1 to the Original 10-K).
31.5	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (in respect of this Amendment No. 2 to the Original 10-K).
31.6	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (in respect of this Amendment No. 2 to the Original 10-K).
32.1*	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.3	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (in respect of this Amendment No. 2 to the Original 10-K).
32.4	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (in respect of this Amendment No. 2 to the Original 10-K).
97.1*	Clawback Policy.
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104	Cover page formatted as inline XBRL and contained in Exhibit 101

* Previously filed as an exhibit to the Original 10-K filed on March 13, 2024.

** Previously filed as an exhibit to Amendment No. 1 to the Original 10-K filed on April 26, 2024.

+ Indicates management contract or compensatory plan.

^ Certain confidential portions of this exhibit have been redacted pursuant to Item 601(b)(10) of Regulation S-K. The Company agrees to furnish to the Securities and Exchange Commission a copy of any omitted portions of the exhibit upon request.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 24th day of June 2024.

Village Farms International, Inc.
By:	/s/ Michael A. DeGiglio
	Name:	Michael A. DeGiglio
	Title:	Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on June 24, 2024.

Signature	Title
/s/ Michael A. DeGiglio Michael A. DeGiglio	Chief Executive Officer and Director (Principal Executive Officer)
* Stephen C. Ruffini	Chief Financial Officer and Director (Principal Financial and Accounting Officer)
* John R. McLernon	Director, Chair
* John P. Henry	Director
* David Holewinski	Director
* Christopher C. Woodward	Director

By: /s/ Michael A. DeGiglio

Name: Michael A. DeGiglio

Title: Attorney-in-fact

6

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

As of December 31, 2023, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). Based on this assessment, our management concluded that, as of December 31, 2023, our internal control over financial reporting was not effective due to errors in the calculation of the fair value of its goodwill and intangible assets, which was subsequently modified, resulting in no change in management’s determination of the fair value of its goodwill and intangible assets but, based on the COSO criteria, has been deemed to be a material weakness in internal control over financial reporting.

A material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement in the annual or interim financial statements will not be prevented or detected on a timely basis.

The control over the determination of the fair value of the Company’s goodwill and intangible assets is an annual control that operates prior to filing. The control is dependent on a key spreadsheet that relies on inputs and assumptions and contains formulas and calculations. The precision and timeliness of the review did not prevent or detect potential material errors in valuation of goodwill or indefinite lived intangibles and the related disclosures. The Company implemented remediation measures in 2023 but they were not sufficient to deem the prior material weakness remediated. In 2024, management will continue to enhance the precision of this control including involving third party valuation specialists in order to remediate the material weakness. The material weakness will be fully remediated when, in the opinion of the company’s management, the revised control procedures are appropriately operated for a sufficient period of time to provide reasonable assurance as to their effectiveness.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Village Farms International, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of Village Farms International, Inc. and its subsidiaries (together, the Company) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive income (loss), of changes in shareholders’ equity and mezzanine equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Impairment assessment of goodwill for the Cannabis – U.S. reporting unit

As described in Notes 1 and 6 to the consolidated financial statements, the Company’s goodwill balance for the Cannabis – U.S. reporting unit was $10.0 million as of December 31, 2023. Goodwill is tested for impairment annually as of December 31 each year and when events or changes in circumstances indicate that the carrying value of a reporting unit exceeds its fair value. If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The fair value of the reporting unit was determined

8

based on a discounted cash flow projection (the model). Management’s discounted cash flow projection for the reporting unit included significant assumptions relating to future cash flows, terminal growth rate and post-tax discount rate. Management concluded that, as of December 31, 2023, the fair value of the Cannabis – U.S. reporting unit was lower than its carrying amount, resulting in an impairment charge to goodwill of $11.3 million.

The principal considerations for our determination that performing procedures relating to the impairment assessment of goodwill for the Cannabis – U.S. reporting unit is a critical audit matter are (i) a high degree of auditor judgment and subjectivity in performing procedures relating to the fair value of the reporting unit due to the judgment by management when developing the fair value estimate; (ii) the significant audit effort in evaluating management’s significant assumptions related to the future cash flows, terminal growth rate and post-tax discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) testing management’s process for developing the fair value of the reporting unit; (ii) evaluating the appropriateness of the approach; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating the reasonableness of the significant assumptions used by management, including the future cash flows, terminal growth rate and post-tax discount rate. Evaluating management’s significant assumption related to the future cash flows involved evaluating whether the significant assumption used by management was reasonable considering (i) the current and past performance of the reporting unit; (ii) consistency with external market and industry data; and (iii) whether the significant assumption was consistent with evidence obtained in other areas of the audit, as applicable. Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the model and the reasonableness of the significant assumptions related to the terminal growth rate and post-tax discount rate.

Impairment assessment of goodwill for the Cannabis – Canada reporting unit

As described in Notes 1 and 6 to the consolidated financial statements, the Company’s goodwill balance for the Cannabis – Canada reporting unit was $45.8 million as of December 31, 2023. Goodwill is tested for impairment annually as of December 31 each year and when events or changes in circumstances indicate that the carrying value of a reporting unit exceeds its fair value. If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The fair value of the reporting unit was determined based on a discounted cash flow projection (the model). Management’s discounted cash flow projection for the reporting unit included significant assumptions relating to future cash flows, terminal growth rate, post-tax discount rate and net working capital. Management concluded that the fair value of the Cannabis – Canada reporting unit was higher than its carrying amount as of December 31, 2023 and therefore no impairment to goodwill was required.

The principal considerations for our determination that performing procedures relating to the impairment assessment of goodwill for the Cannabis – Canada reporting unit is a critical audit matter are (i) a high degree of auditor judgment and subjectivity in performing procedures relating to the fair value of the reporting unit due to the judgment by management when developing the fair value estimate; (ii) the significant audit effort in evaluating management’s significant assumptions related to the future cash flows, terminal growth rate, post-tax discount rate and net working capital; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) testing management’s process for developing the fair value of the reporting unit; (ii) evaluating the appropriateness of the approach; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating the reasonableness of the significant assumptions used by management, including the future cash flows, terminal growth rate, post-tax discount rate and net working capital. Evaluating management’s significant assumptions related to the future cash flows and net working capital involved evaluating whether the significant assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit; (ii) the consistency with external market and industry data; and (iii) whether these significant assumptions were consistent with evidence obtained in other areas of the audit, as applicable. Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the model and the reasonableness of the significant assumptions related to the terminal growth rate and post-tax discount rate.

/s/PricewaterhouseCoopers LLP

9

Chartered Professional Accountants

Vancouver, Canada

March 13, 2024

We have served as the Company’s auditor since 2006.

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Village Farms International, Inc.

Consolidated Statements of Financial Position

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

	December 31, 2023			December 31, 2022
ASSETS
Current assets
Cash and cash equivalents	$	30,291		$	16,676
Restricted cash		5,000			5,000
Trade receivables		30,561			27,558
Inventories		78,472			70,582
Other receivables		294			309
Income tax receivable, net		—			6,900
Prepaid expenses and deposits		7,150			5,959
Total current assets		151,768			132,984
Non-current assets
Property, plant and equipment		205,613			207,701
Investments		2,656			2,109
Goodwill		55,918			66,225
Intangibles		32,275			37,157
Deferred tax asset		4,201			4,201
Right-of-use assets		12,596			9,132
Other assets		1,962			5,776
Total assets	$	466,989		$	465,285
LIABILITIES
Current liabilities
Line of credit	$	4,000		$	7,529
Trade payables		21,753			24,894
Current maturities of long-term debt		9,133			9,646
Accrued sales taxes		15,941			11,594
Accrued loyalty program		1,773			2,060
Accrued liabilities		15,076			13,064
Lease liabilities - current		2,112			1,970
Income tax payable		28			—
Other current liabilities		2,340			1,458
Total current liabilities		72,156			72,215
Non-current liabilities
Long-term debt		38,925			43,821
Deferred tax liability		23,730			19,756
Lease liabilities - non-current		11,335			7,785
Other liabilities		1,902			1,714
Total liabilities		148,048			145,291
Commitments and contingencies (note 11)
MEZZANINE EQUITY
Redeemable non-controlling interests		15,667			16,164
SHAREHOLDERS’ EQUITY
Common stock, no par value per share - unlimited shares authorized; 110,248,929 shares issued and outstanding at December 31, 2023 and 91,788,929 shares issued and outstanding at December 31, 2022.		386,719			372,429
Additional paid in capital		25,611			13,372
Accumulated other comprehensive loss		(3,540	)		(8,371	)
Retained earnings		(106,165	)		(74,367	)
Total Village Farms International, Inc. shareholders' equity		302,625			303,063
Non-controlling interest		649			767
Total shareholders' equity		303,274			303,830
Total liabilities, mezzanine equity and shareholders’ equity	$	466,989		$	465,285

The accompanying notes are an integral part of these consolidated financial statements.

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Village Farms International, Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Years Ended December 31, 2023, 2022 and 2021

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

	2023			2022			2021
Sales	$	285,603		$	293,572		$	268,020
Cost of sales		(236,177	)		(266,075	)		(222,841	)
Gross margin		49,426			27,497			45,179
Selling, general and administrative expenses		(65,501	)		(72,265	)		(53,917	)
Interest expense		(4,509	)		(3,244	)		(2,835	)
Interest income		1,018			207			126
Foreign exchange gain (loss)		602			(2,255	)		(476	)
Other income (expense)		5,616			(115	)		(420	)
Write-off of joint venture loan		—			(592	)		—
Impairments		(14,020	)		(43,299	)		—
Loss before taxes and loss from equity method investments		(27,368	)		(94,066	)		(12,343	)
(Provision for) recovery of income taxes		(4,451	)		(4,681	)		3,526
Loss from equity method investments		—			(2,668	)		(308	)
Loss including non-controlling interests		(31,819	)		(101,415	)		(9,125	)
Less: net loss attributable to non-controlling interests, net of tax		21			269			46
Net loss attributable to Village Farms International, Inc. shareholders	$	(31,798	)	$	(101,146	)	$	(9,079	)
Basic loss per share attributable to Village Farms International, Inc. shareholders	$	(0.29	)	$	(1.13	)	$	(0.11	)
Diluted loss per share attributable to Village Farms International, Inc. shareholders	$	(0.29	)	$	(1.13	)	$	(0.11	)
Weighted average number of common shares used    in the computation of loss per share (in thousands):
Basic		108,728			89,127			82,161
Diluted		108,728			89,127			82,161
Loss including non-controlling interests	$	(31,819	)	$	(101,415	)	$	(9,125	)
Other comprehensive income (loss):
Foreign currency translation adjustment		4,237			(15,460	)		441
Comprehensive loss including non-controlling interests		(27,582	)		(116,875	)		(8,684	)
Less: comprehensive (income) loss attributable to non-controlling interests		(436	)		1,432			(63	)
Comprehensive loss attributable to Village Farms International, Inc. shareholders	$	(28,018	)	$	(115,443	)	$	(8,747	)

The accompanying notes are an integral part of these consolidated financial statements.

12

Village Farms International, Inc.

Consolidated Statements of Changes in Shareholders’ Equity and Mezzanine Equity

For the Years Ended December 31, 2023, 2022 and 2021

(In thousands of United States dollars, except for shares outstanding)

	Number of Common Shares (in thousands)			Common Stock		Additional Paid In Capital			Accumulated Other Comprehensive (Loss) Income			Retained Earnings			Non-controlling Interest			Total Permanent Shareholders’ Equity			Mezzanine Equity
Balance at January 1, 2021		66,912		$	145,668	$	17,502		$	6,255		$	35,858		$	—		$	205,283		$	—
Shares issued in public offering, net of issuance costs		10,887			127,489		—			—			—			—			127,489			—
Shares issued in acquisition		7,118			63,044		—			—			—			—			63,044			—
Shares issued on exercise of warrants		3,188			29,050		(10,555	)		—			—			—			18,495			—
Shares issued on exercise of stock options		177			310		(111	)		—			—			—			199			—
Share re-purchases		(535	)		—		(5,000	)		—			—			—			(5,000	)		—
Share-based compensation		487			—		7,533			—			—			—			7,533			—
Recognition of non-controlling interest on acquisition		—			—		—			—			—			—			—			16,479
Cumulative translation adjustment		—			—		—			441			—			—			441			—
Net loss		—			—		—			—			(9,079	)		—			(9,079	)		(46	)
Balance at December 31, 2021		88,234		$	365,561	$	9,369		$	6,696		$	26,779		$	—		$	408,405		$	16,433
Net proceeds from issuance of common stock		3,175			6,692		—			393			—			—			7,085			—
Shares issued on exercise of stock options		180			176		16			—			—			—			192			—
Share-based compensation		200			—		3,987			—			—			—			3,987			—
Recognition of non-controlling interest on acquisition		—			—		—			—			—			767			767			—
Cumulative translation adjustment		—			—		—			(15,460	)		—			—			(15,460	)		—
Net loss		—			—		—			—			(101,146	)		—			(101,146	)		(269	)
Balance at December 31, 2022		91,789		$	372,429	$	13,372		$	(8,371	)	$	(74,367	)	$	767		$	303,830		$	16,164
Shares issued in public offering, net of issuance costs		18,350			14,207		—			—			—			—			14,207			—
Warrants issued in public offering		—			—		9,128			—			—			—			9,128			—
Shares issued on exercise of stock options		100			83		—			—			—			—			83			—
Share-based compensation		10			—		3,111			—			—			—			3,111			—
Cumulative translation adjustment		—			—		—			4,831			—			72			4,903			(666	)
Net (loss) income		—			—		—			—			(31,798	)		(190	)		(31,988	)		169
Balance at December 31, 2023		110,249		$	386,719	$	25,611		$	(3,540	)	$	(106,165	)	$	649		$	303,274		$	15,667

The accompanying notes are an integral part of these consolidated financial statements.

13

Village Farms International, Inc.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2023, 2022 and 2021

(In thousands of United States dollars)

	2023			2022			2021
Cash flows provided by (used in) operating activities:
Net loss attributable to Village Farms International, Inc. shareholders	$	(31,798	)	$	(101,146	)	$	(9,079	)
Adjustments to reconcile net loss attributable to Village Farms International, Inc. shareholders to net cash provided by (used in) operating activities:
Depreciation and amortization		15,926			13,054			12,709
Amortization of deferred charges		136			214			300
Share of loss from joint venture		—			2,668			308
Net income (loss) attributable to non-controlling interest		(21	)		(269	)		—
Interest expense		4,509			3,244			2,835
Interest income		—			(207	)		(126	)
Interest paid on long-term debt		(4,700	)		(3,420	)		(3,306	)
Unrealized foreign exchange loss		64			83			—
Impairments		14,020			43,299			—
Inventory impairment		—			11,038			—
Write-off of joint venture loan		—			592			—
Loss (gain) on disposal of assets		7			(7	)		259
Non-cash lease expense		2,103			(604	)		(1,351	)
Other		—			—			366
Share-based compensation		3,111			3,987			7,533
Deferred income taxes		4,046			9,831			(2,866	)
Changes in non-cash working capital items		(2,088	)		(2,246	)		(47,149	)
Net cash provided by (used in) operating activities		5,315			(19,889	)		(39,567	)
Cash flows (used in) provided by investing activities:
Purchases of property, plant and equipment		(6,518	)		(14,292	)		(21,656	)
Advances to joint ventures		—			—			(20	)
Acquisitions, net		—			(5,873	)		(40,685	)
Equity investment		(548	)		—			(1,109	)
Issuance of note receivable		—			(734	)		—
Repayment of note receivable		835			—			—
Net cash used in investing activities		(6,231	)		(20,899	)		(63,470	)
Cash flows provided by (used in) financing activities:
Proceeds from borrowings		—			7,321			19,669
Repayments on borrowings		(9,281	)		(9,709	)		(9,454	)
Proceeds from issuance of common stock and warrants		24,772			6,898			135,000
Issuance costs		(1,437	)		(206	)		(7,511	)
Proceeds from exercise of stock options		83			192			199
Proceeds from exercise of warrants		—			—			18,495
Share re-purchases		—			—			(5,000	)
Payments on capital lease obligations		—			—			(17	)
Payment of note payable related to acquisition		—			—			(15,498	)
Net cash provided by financing activities		14,137			4,496			135,883
Effect of exchange rate changes on cash and cash equivalents		394			(699	)		142
Net increase (decrease) in cash, cash equivalents and restricted cash		13,615			(36,991	)		32,988
Cash, cash equivalents and restricted cash, beginning of period		21,676			58,667			25,679
Cash, cash equivalents and restricted cash, end of period	$	35,291		$	21,676		$	58,667
Supplemental disclosure of non-cash activities:
Non-Cash - investing and financing activities
Shares issued for acquisitions	$	—		$	—		$	63,044
Operating lease right-of-use assets	$	5,578		$	—		$	—
Operating lease liabilities	$	5,578		$	—		$	—
Supplemental cash flow information:
Income taxes paid	$	—		$	—		$	1,801

The accompanying notes are an integral part of these consolidated financial statements.

14

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

1. BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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 Ontario Business Corporations Act. VFF’s principal operating subsidiaries as of December 31, 2023 are Village Farms Canada Limited Partnership, Village Farms, L.P., Pure Sunfarms Corp. (“Pure Sunfarms”), and Balanced Health Botanicals, LLC (“Balanced Health”). VFF also owns a 70% interest in Rose LifeScience Inc. (“Rose”) and an 85% interest in Leli Holland B.V. ("Leli").

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

The Company’s shares are listed on Nasdaq Capital Market (“Nasdaq”) under the symbol “VFF”. On April 21, 2023, the Company received notification from Nasdaq that it is not in compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market (Nasdaq Listing Rule 5550(a)(2)) (the “Minimum Bid Requirement”) as the bid price for the Company’s common shares (the “Common Shares”) closed below US$1.00 from March 7, 2023 to April 19, 2023.

On October 18, 2023, the Company received notification from Nasdaq that Nasdaq has approved the Company’s request for a 180-calendar day extension (the “Extension”) to regain compliance with the Minimum Bid Requirement. The Extension follows the expiration on October 17, 2023 of the initial 180-calendar day period to regain compliance with the Minimum Bid Requirement. As a result of the Extension, the Company now has until April 15, 2024 (the “New Compliance Period”) to regain compliance with the Minimum Bid Requirement.

The Extension has no immediate effect on the listing of the Common Shares on the Nasdaq Capital Market. During the New Compliance Period, the Common Shares will continue to trade on the Nasdaq Capital Market. If at any time before the end of the New Compliance Period, the bid price of the Common Shares closes at or above US$1.00 per share for a minimum of 10 consecutive business days, it is expected that Nasdaq would notify the Company that it has regained compliance with the Minimum Bid Requirement.

In the event the Company does not regain compliance with the Minimum Bid Requirement by the end of the New Compliance Period, the Company may be subject to delisting of its Common Shares from the Nasdaq Capital Market, at which time the Company may request a review of the delisting determination by a Nasdaq Hearings Panel.

We can provide no assurance that the Company would receive a favorable decision from a Nasdaq Hearing Panel after the end of the New Compliance Period or that the Common Shares will not be delisted from Nasdaq.

Village Farms owns and operates sophisticated, highly intensive agricultural greenhouse facilities in British Columbia and Texas, where it produces, markets and sells premium-quality tomatoes, bell peppers and cucumbers. Its wholly owned subsidiary, Pure Sunfarms, is a vertically integrated licensed producer and supplier of cannabis products sold to other licensed providers and provincial governments across 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. Through its 70% ownership of Rose, the Company has a substantial presence in the Province of Quebec as a cannabis supplier, producer and commercialization expert.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP), and include VFF 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 VFF consolidates are reported as non-controlling interests within equity, except for mandatorily redeemable non-controlling interests, which are classified as temporary mezzanine equity. Net income or loss attributable to non-controlling interests is reported as a separate line item below net income or loss. Investments in entities for which the Company does not have a controlling financial interest, but over which it has the ability to exert significant influence, are accounted for under the equity method of accounting. For equity investees in which the Company has an undivided interest in the assets, liabilities and profits or losses of an unincorporated entity, but does not exercise control over the entity, the Company consolidates its proportional interest in the accounts of the entity. When appropriate, prior year amounts are reclassified to conform with the current period presentation. For the years ended December

15

31, 2022 and 2021, share-based compensation has been reclassified to selling, general and administrative expenses on the consolidated Statements of Operations and Comprehensive Income (Loss) to conform with the current period presentation.

Translation 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. Gains or losses from remeasurement are included in foreign exchange loss, net. Currency gains or losses resulting from transactions executed in currencies other than the functional currency are included in foreign exchange gain (loss).

In these consolidated financial statements, “$” means U.S. dollars unless otherwise noted.

Management Estimates

The preparation of consolidated financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates are based on historical experience and various other assumptions that management believes to be reasonable under the circumstances, including the potential future effects of macroeconomic trends and events, such as inflation and interest rate levels; supply chain disruptions; uncertainty from potential recessionary effects; climate-related matters; market, industry and regulatory factors, including permitting issues; global events, such as the ongoing military conflict in Ukraine; and public health matters. These estimates form the basis for making judgments about the Company’s operating results and the carrying values of assets and liabilities that are not readily apparent from other sources. While management believes that such estimates are reasonable when considered in conjunction with the Company’s consolidated financial position and results of operations taken as a whole, actual results could differ materially from these estimates.

Significant Accounting Policies

The following is a summary of significant accounting policies followed in the preparation of the accompanying consolidated financial statements.

Revenue Recognition

The Company’s produce revenue transactions consist of single performance obligations to transfer promised goods at a fixed price. Quantities to be delivered to the customer are determined at a point near the date of delivery through purchase orders received from the customer. The Company recognizes revenue when it has fulfilled a performance obligation, which is typically when the customer receives the goods. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring the goods. The amount of revenue recognized is reduced for estimated returns and other customer credits, such as discounts and rebates, based on the expected value to be realized. Payment terms are consistent with terms standard to the markets the Company serves. Revenue from the sale of cannabis inventories in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts, volume rebates and excise duty. The Company recognizes revenue when it has fulfilled the performance obligation to the customer through the delivery and transfer of control of the promised goods.

Direct-to-consumer product sales for loyalty members contain two distinct performance obligations for which the Company allocates the transaction price based on the relative stand-alone value of each performance obligation, such that both revenue related to the delivery of the underlying purchased goods and deferred revenue for loyalty points issued to the customer are recognized based on the allocated consideration of value, after giving consideration to loyalty point breakage. The loyalty liability represents a performance obligation to provide goods for free or at a discount to loyalty members in exchange for the redemptions of points earned from past activities.

Judgment is required in determining whether the Company is the principal or agent in certain transactions. We evaluate the presentation of revenue on a gross or net basis based on whether we control the service provided to the end-user and are the principal (i.e. “gross”), or we arrange for other parties to provide the service to the end-user and are an agent (i.e. “net”).

For each identified performance obligation in the contract with the customer, we assess whether our agency or the third-party supplier is the principal or agent. We control the specified services before transferring those services to the customer and act as the principal if we are primarily responsible for fulfilling the promise to provide the specified good or service, have inventory risk, or discretion in establishing pricing. For performance obligations in which we act as principal, we record the gross amount billed to the customer within total revenue and the related incremental direct costs incurred as billable expenses.

If the third-party supplier, rather than the Company, is primarily responsible for the performance and deliverable to our customer, then we generally act as the agent and solely arrange for the third-party supplier to provide services to the customer. For performance

16

obligations for which we act as the agent, we record our revenue as the net amount of our gross billings less pass-through expenses charged to a customer.

Revenue received from shipping and handling fees is reflected in net sales. Shipping and handling costs are included in cost of sales as incurred or at the time revenue is recognized for the related goods, whichever comes first.

Redeemable Non-Controlling Interest

Non-controlling interest (“NCI”) in subsidiaries that are redeemable for cash or other assets outside of our control are classified as temporary mezzanine equity, outside of equity and liabilities. Initial measurement is at acquisition date fair value and subsequent measurement is at the greater of the carrying value or the redemption value. Changes in the redemption value are recognized immediately as they occur and the carrying amount of the redeemable NCI is adjusted to equal the redemption value at the end of each reporting period. This method views the end of the reporting period as if it were also the redemption date for the instrument. Increases or decreases in the estimated redemption amount are recorded with corresponding adjustments against equity and are reflected in the computation of earnings per share. However, the amount presented in temporary equity should be no less than the initial amount reported in temporary equity for the instrument.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Temporary differences arising between the tax basis of an asset or liability and its carrying amount on the Consolidated Statement of Financial Position are used to calculate future income tax assets and liabilities. This method also requires the recognition of deferred tax benefits, such as net operating loss carryforwards. Valuation allowances are recorded as appropriate to reduce deferred tax assets to the amount considered likely to be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the taxable income (losses) in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment of the change. A tax benefit from an uncertain tax position is recognized only if we believe it is more likely than not that the position will be sustained on its technical merits. If the recognition threshold for the tax position is met, only the portion of the tax benefit that we believe is greater than 50 percent likely to be realized is recorded.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash deposits held with banks, and other highly liquid short-term interest-bearing securities with maturities at the date of purchase of three months or less.

Restricted Cash

Restricted cash, as of December 31, 2023 and 2022 includes a cash deposit required by the Company’s directors’ and officers’ insurance policy which is managed by an insurer and held as a cell captive within a Bahamas-based financial institution.

Trade Receivables

Trade receivables, net of the allowance for doubtful accounts, represent their estimated net realizable value, which approximates fair value. Provisions for doubtful accounts are recorded based on historical collection experience and the age of the receivables. Receivables are written off when they are deemed uncollectible.

Inventories

Inventories are valued at the lower of cost or net realizable value. The cost of inventory includes capitalized production costs, including labor, materials, post-harvest costs and depreciation. Inventoriable costs are expensed to cost of goods sold on the Consolidated Statement of Operations in the same period as finished products are sold. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period when the write-down or loss occurs.

Long-Lived Assets

The Company’s long-lived assets consist primarily of property, plant and equipment and finite-lived intangible assets. Purchased property and equipment is recorded at cost, or, if acquired in a business combination, at the acquisition date fair value. Depreciation and amortization of property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are depreciated over the shorter of the term of the lease or the estimated useful lives of the improvements. Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for betterments and major improvements that extend the life of the related assets are capitalized and depreciated over the remaining useful lives of the assets. The carrying amounts of assets sold or retired and the related accumulated depreciation are eliminated in the year of disposal. Gains or losses, net, from the sale of property and equipment are included within other income (expense). Depreciation of property, plant and equipment is determined on the straight-line method over the following useful lives of the assets:

17

Classification	Estimated Useful Lives
Leasehold and land improvements	5-20 years
Buildings	4-30 years
Machinery and equipment	3-30 years

The Company’s intangible assets are purchased and acquired through business combinations and have both finite and infinite useful lives. Finite-lived intangible assets are amortized over their useful lives, which are generally based on contractual or legal rights, using the straight-line method. Amortization of finite-lived intangible assets is determined on the straight-line method over the following useful lives of the assets:

Classification	Estimated Useful Lives
Licenses	5-22 years
Brand and trademarks	Indefinite
Customer relationships	10 years
Computer software	3-5 years

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Long-lived assets are grouped with other assets to the lowest level to which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Management assesses the recoverability of the carrying cost of the assets based on a review of projected undiscounted cash flows. If an asset is held for sale, management reviews its estimated fair value less cost to sell. Fair value is determined using pertinent market information, including appraisals or broker’s estimates, and/or projected discounted cash flows. In the event an impairment loss is identified, it is recognized based on the amount by which the carrying value exceeds the estimated fair value of the long-lived asset.

During the three years in the period ended December 31, 2023, 2022 and 2021 there were no material impairments of long-lived assets.

Business Combinations

The determination of the fair value of net assets acquired in a business combination requires estimates and judgments of future cash flow expectations for the acquired business and the related identifiable tangible and intangible assets. Fair values of net assets acquired are calculated using expected cash flows and industry-standard valuation techniques. For current assets and current liabilities, book value is generally assumed to equal fair value. Goodwill is the amount by which consideration paid exceeds the fair value of acquired net assets. A bargain purchase gain results when the fair value of an acquired business’ net assets exceeds its purchase price. Acquisition costs are expensed as incurred and are included within general and administrative expenses in the consolidated statements of operations.

Due to the time required to gather and analyze the necessary data for each acquisition, U.S. GAAP provides a “measurement period” of up to one year in which to finalize these fair value determinations. During the measurement period, preliminary fair value estimates may be revised if new information is obtained about the facts and circumstances existing as of the date of acquisition, or based on the final net assets and working capital of the acquired business, as prescribed in the applicable purchase agreement. Such adjustments may result in the recognition of, or an adjustment to the fair values of, acquisition-related assets and liabilities and/or consideration paid, and are referred to as “measurement period” adjustments. Measurement period adjustments are recorded to goodwill. Other revisions to fair value estimates that relate to facts and circumstances that occurred subsequent to the date of acquisition are reflected as income or expense, as appropriate.

For business combinations achieved in stages, the Company’s previously held interest in the acquiree is remeasured at its acquisition date fair value, with the resulting gain or loss recorded in the Statements of (Loss) Income. For a pre-existing relationship between the Company and the acquiree, that is not extinguished on the business combination, such a relationship is considered effectively settled as part of the business combination even if it is not legally cancelled. At the acquisition date, it becomes an intercompany relationship and is eliminated upon consolidation.

Leases

In the ordinary course of business, the Company enters into agreements that provide financing for machinery and equipment and for other of its facility, vehicle and equipment needs, including related party leases. The Company reviews all agreements to determine if a leasing arrangement exists. When a leasing arrangement is identified, a determination is made at inception as to whether the lease is an operating or a finance lease. A lease exists when a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In determining whether a lease exists, the Company considers whether a contract provides both the right to obtain substantially all of the economic benefits from the use of an asset and the right to direct the use of the asset. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of the minimum future lease

18

payments over the expected term of the lease. The Company’s lease assets are primarily concentrated in vehicles, machinery and equipment.

Leases with an initial term of twelve months or less are classified as short-term leases and are not recognized in the consolidated balance sheets unless the lease contains a purchase option that is reasonably certain to be exercised, or unless it is reasonably certain that the equipment will be leased for greater than twelve months. The volume of lease activity for leases with an initial term of twelve months or less varies depending upon the number of ongoing projects at a given time, as well as the location and type of equipment required in connection with those projects. Lease payments for short-term leases are recognized on a straight-line basis over the lease term, and primarily relate to equipment used on construction projects, for which the rentals are based on daily, weekly or monthly rental rates, and typically contain termination for convenience provisions. Lease determinations are reassessed in the event of a change in lease terms. The Company has a limited number of sublease, equipment and other leasing arrangements, which are not considered material to the consolidated financial statements.

As of December 31, 2023, the Company’s leases have remaining lease terms of up to 6 years. Lease agreements may contain renewal clauses, which, if elected, generally extend the term of the lease for one to five years for both equipment and facility leases. Certain lease agreements may also contain options to purchase the leased property and/or options to terminate the lease. In addition, lease agreements may include periodic adjustments to payment amounts for inflation or other variables, or may require payments for taxes, insurance, maintenance or other expenses, which are generally referred to as non-lease components. The Company accounts for non-lease components together with the related lease components for all classes of leased assets. The Company’s lease agreements do not contain significant residual value guarantees or material restrictive covenants.

Lease term, discount rate, variable lease costs and future minimum lease payment determinations require the use of judgment, and are based on the facts and circumstances of each lease. Economic incentives, intent, past history and business need are among the factors considered to determine if renewal and/or purchase options are reasonably certain to be exercised. The majority of the Company’s lease agreements do not explicitly state the discount rate implicit in the lease, therefore, the Company generally uses an incremental borrowing rate to determine the value of its lease obligations. The incremental borrowing rate represents the rate of interest that would be paid to borrow on a collateralized basis over a similar term. The Company determines its incremental borrowing rate using a portfolio approach based on information available as of the lease commencement date, including applicable lease terms and the current economic environment.

Finance Leases

Finance lease assets are recorded within property and equipment, with a corresponding amount recorded within the Company’s debt obligations. Finance lease expense is composed of depreciation expense on the leased asset and interest on the lease liability. Additions to finance leases are included within the supplemental disclosures of non-cash information in the consolidated statements of cash flows.

Operating Leases

Operating lease right-of-use assets and liabilities are recorded on the consolidated balance sheets, with the related lease expense recognized over the term of the lease on a straight-line basis. Operating lease expense is recorded as rent expense, primarily within costs of revenue, excluding depreciation and amortization. Fixed costs for operating leases are composed of initial base rent amounts plus any fixed annual increases. Variable costs for operating leases consist primarily of common area maintenance expenses and taxes for facility leases. Certain of the Company’s operating leases contain purchase options, for which the purchase option price is generally considered to be at fair market value. From time to time, the Company may terminate a lease before the end of the lease term. Payments related to such early lease terminations are generally recorded within general and administration expenses.

Goodwill and Indefinite-Lived Intangible Assets

The Company has goodwill and indefinite-lived intangible assets that have been recorded in connection with its acquisitions of businesses. Goodwill and indefinite-lived intangibles are allocated to reporting units and tested for impairment annually as of December 31 each year and when events or changes in circumstances indicate that the carrying value of a reporting unit exceeds its fair value. The Company generally elects to utilize the optional qualitative assessment for goodwill to determine whether it is more likely than not that the carrying value of a reporting unit is higher than its fair value. If it is determined that the fair value is more likely than not to be lower than the carrying value, a quantitative goodwill impairment test is performed by determining the fair value of the reporting unit. The fair value of a reporting unit is determined using either the income approach utilizing estimates of discounted future cash flows or the market approach utilizing recent transaction activity for comparable properties. These approaches are considered level 3 fair value measurements. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. During the years ended December 31, 2023 and 2022, the Company recorded impairment charges against goodwill and indefinite-lived intangible assets. For additional information refer to Note 6. Goodwill and Intangible Assets.

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Segment Reporting

Our operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer (“CEO”). The Company has identified four operating segments – Produce, Cannabis-Canada, Cannabis-U.S. and Energy.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We utilize a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in markets that are not active.

Level 3: Unobservable inputs that reflect our own assumptions.

Share-Based Compensation

The Company grants stock options and performance-based restricted stock (“RS”) to certain employees and directors.

Compensation costs for awards of stock-based compensation settled in shares are determined based on the fair value of the share-based instrument at the time of grant and are recognized as expense over the vesting period of the share-based instrument. The Company recognizes forfeitures as they occur.

Stock options generally vest over three years (33% per year following the grant date) and expire after ten years. Each tranche in an award is considered a separate award with its own vesting period. The fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model. Compensation expense is recognized over the tranche’s vesting period by increasing additional paid-in capital based on the number of awards expected to vest. The number of awards expected to vest is reviewed at least annually, with any impact recognized immediately.

RS grants will be settled using the Company’s own equity and issued from treasury if the performance standard is met. The equity-settled share-based compensation is measured at the fair value of the Company’s Common Shares as at the grant date in accordance with the terms of the Company’s Stock Compensation Plan. The fair value determined at the grant date is charged to income when performance-based vesting conditions are met, based on the number of RS that will eventually be converted to Common Shares, with a corresponding increase in equity.

Advertising

Advertising costs are presented within selling, general and administrative costs in the Consolidated Statements of Operations. The Company supports its products with advertising to build brand awareness of the Company’s various products in addition to other marketing programs executed by the Company’s marketing teams. Advertising costs for the years ended December 31, 2023 and 2022 were $4,942 and $6,122, respectively.

Other Income (Expense)

Other income for the year ended December 31, 2023 includes a $5,585 favorable settlement relating to the partial recovery of operational losses from the Tomato Brown Rugose Fruit Virus infestation.

Comprehensive Income (Loss)

Comprehensive income or loss is a measure of net income and other changes in equity that results from transactions other than those with shareholders. Comprehensive income or loss and related accumulated comprehensive income or loss balances consist of net income, foreign currency translation adjustments, primarily from fluctuations in foreign currency exchange rates of the Company’s foreign subsidiaries with a functional currency other than the U.S. dollar and net income or loss attributable to non-controlling interests.

New Accounting Pronouncements

Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures

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about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker (CODM). The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. We expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows and financial condition.

Income Taxes (Topic 740): Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid. ASU No. 2023-09 requires a public business entity (PBE) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For PBEs, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all period presented. We expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows, and financial condition.

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VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

2. INVENTORIES

Inventories consisted of the following:

Classification	December 31, 2023		December 31, 2022
Cannabis:
Raw materials	$	985	$	1,089
Work-in-process		6,543		10,872
Finished goods		47,084		36,094
Packaging		7,641		6,909
Produce and Energy:
Crop inventory		15,492		14,886
Purchased produce inventory		727		599
Spare parts inventory and packaging		—		133
Inventory	$	78,472	$	70,582

During the fourth quarter of 2023 and 2022, the Company recognized $- and $11,038 of inventory impairments, respectively, relative to its net realizable value. There were no inventory impairments recognized for the year ended December 31, 2021.

3. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

Classification	December 31, 2023			December 31, 2022
Land	$	14,641		$	13,411
Leasehold and land improvements		5,525			5,372
Buildings		217,384			214,146
Machinery and equipment		86,674			82,396
Construction in progress		13,619			10,033
Less: Accumulated depreciation		(132,230	)		(117,657	)
Property, plant and equipment, net	$	205,613		$	207,701

Depreciation expense on property, plant and equipment, was $12,785, $10,795 and $12,709 for the years ending December 31, 2023, 2022 and 2021, respectively.

4. ACQUISITIONS

Rose Acquisition - Put/Call Option

On November 15, 2021, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”), with Rose and other parties, including the shareholders of Rose (collectively, the “Rose Sellers”), for the acquisition of a 70% interest in Rose pursuant to the terms of the Purchase Agreement.

Two of the co-founders of Rose (the “Management Shareholders”), who were among the Rose Sellers of Rose in the Acquisition, have remained in their current roles with Rose post-Acquisition and have retained a non-voting 30% interest in Rose (the “Retained Interest”). In conjunction with the Acquisition, Village Farms and the Management Shareholders entered into a unanimous shareholders agreement (the “USA”) providing Village Farms with a call option to acquire the Retained Interest between December 31, 2024 and March 31, 2025 or upon the occurrence of certain liquidity events with respect to Village Farms (the “Call Option”). As part of the Call Option, Village Farms can also acquire 34% of the Retained Interest between December 31, 2023 and March 31, 2024. A put right has also been granted to the Management Shareholders to require Village Farms to complete the acquisition of the Retained Interest upon their death or disability or the occurrence of certain liquidity events with respect to Village Farms (the “Put Option”, and together with the Call Option, the “Put/Call Option”). The price for the Put/Call Option was set at a multiple solely based on Rose’s adjusted EBITDA performance of the applicable prior calendar year. If exercised upon a liquidity event, the Option Price is subject to a minimum amount which varies depending on the year on which it is exercised.

The consideration for the acquisition of the Retained Interest may, at Village Farms’ sole discretion, be payable solely in cash or in a pre-determined combination of cash and Village Farms shares based on a formula similar to that used for the issuance of the Village Farms shares comprising part of the Purchase Price.

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VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

Leli Holland B.V. ("Leli")

In September 2021, the Company entered into an option agreement whereby the Company received the irrevocable right to acquire an 80% ownership interest (the “Option Agreement”) in Netherlands-based Leli Holland B.V. (“Leli”) upon payment of EUR50,000 (the “Option”). The Option Agreement allowed for the Company to acquire 80% of Leli’s shares for EUR3,950,000, of which EUR950,000 was due and payable to Leli’s shareholders upon the exercise of the Option and the remainder due in three equal installments subject to the achievement of certain project development milestones. The option was exercisable at the sole discretion of the Company.

On July 7, 2022, Leli received a license to cultivate cannabis legally in the Netherlands under the Dutch Closed Supply Chain Experiment program ("the Program"). On July 19, 2022, the Company exercised the Option to purchase 80% of Leli, plus an additional 5% interest, for total cash consideration of $4,693.

The acquisition has been accounted for as an asset acquisition and the full consideration paid has been allocated to the license and accounted for as an intangible asset that will be amortized over a period of 5 years which is consistent with the term of the program. There were no other assets or liabilities acquired in the acquisition.

5. INVESTMENTS

Village Fields Hemp USA LLC

The net assets of VF Hemp were $0 as of December 31, 2023 and 2022, respectively. The Company's net loss for the years ended December 31, 2023, 2022 and 2021 were $0, $2,668, and $308, respectively. Included in the losses for the year ended December 31, 2022, is a loss of $2,284 which represents the Company’s share of losses from the impairment of inventory at VF Hemp. In conjunction with the inventory write-off, the Company also wrote-off the remaining balance of its loan to VF Hemp in the amount of $592, which has been recorded as a loss on joint venture loan in the consolidated statement of loss and comprehensive loss for the year ended December 31, 2022.

Altum

On February 10, 2022, the Company entered into an AUD 1 million (US$719) convertible promissory note with Altum (the “Note”). Interest accrues at a rate of 12% per annum, calculated monthly. Unless earlier repaid, or converted into ordinary shares of Altum, the principal and accrued interest of the Note will be due and payable on August 10, 2023. As of December 31, 2023 and 2022, the balance of the Note including accrued interest was $0 and $791, respectively. Altum repaid the note, including accrued interest, in June 2023.

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VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

6. GOODWILL AND INTANGIBLES ASSETS

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. Throughout 2023 and 2022, the Company recognized macroeconomic challenges, decreases in market capitalization, decreases in transaction multiples, and continued ambiguity in federal regulations with respect to the U.S. CBD market.

During the years ended December 31, 2023 and 2022, the Company considered qualitative factors in assessing for impairment indicators for the Company’s U.S. and Canadian Cannabis segments. As part of this assessment, the Company considered both external and internal factors, including overall financial performance and outlook.

Year Ended December 31, 2023

As of December 31, 2023, 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 tested that segment’s assets, including goodwill and intangible assets for impairment.

Cannabis - U.S. - Goodwill

The fair value of the reporting unit was determined based on a discounted cash flow projection from budgets approved by senior management for 2024 to 2029 with an average revenue growth rate of 8% over 6 years, followed by terminal growth rate of 4.1%. Management concluded that as of December 31, 2023, the fair value was lower than its carrying amount and as a result, an impairment charge to goodwill of $11,300 was allocated to the reporting unit.

The significant assumptions applied to the determination of the fair value are described below:

•Post-tax discount rate: A market participant post-tax discount rate applied to the after-tax forecast cash flows was 11%. An increase of 1% to the discount rate, would increase the impairment by approximately $1,700.

•Terminal growth rate: A decrease of 0.5% in the terminal growth rate would increase the impairment by approximately $700.

•Future cash flows: A decrease in future cash flows by 10% would increase the impairment by approximately $1,300.

Cannabis – U.S. – Brand

The fair value of the brand was determined based on a discounted cash flow projection. Specifically, the Company utilized a relief from royalty valuation technique to arrive at the fair value of the brand. An average revenue growth rate of 8% was used over 6 years, followed by terminal growth rate of 4.1%. Management concluded that as of December 31, 2023, the fair value value was lower than its carrying amount and as a result, an impairment charge to the brand intangible of $2,720 was allocated to the reporting unit.

The significant assumptions applied to the determination of the fair value are described below:

•Post-tax discount rate: A market participant post-tax discount rate applied to the after-tax forecast cash flows was 11%. An increase of 1% to the discount rate, would increase the impairment by approximately $200.

•Royalty rate: An incremental royalty rate of 3.5% of revenues was applied to brand-specific revenues. A decrease to the incremental royalty rate by 0.5% would increase the impairment to brand by $1,600.

•Future revenues: A decrease in future revenues by 10% would increase the impairment by approximately $200.

Cannabis – Canada – Goodwill

The fair value of the reporting unit was determined based on a discounted cash flow projection from budgets approved for 2024, which was extended to 2027 with a compound annual revenue growth rate of 16% from 2024 to 2027, followed by terminal growth rate of 4%. Management concluded that the fair value was higher than its carrying amount by approximately $2,565 as of December 31, 2023 and therefore no impairment to goodwill was required.

The significant assumptions applied to the determination of the fair value are described below:

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VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

•Post-tax discount rate: An increase of approximately 0.07% in the discount rate would result in the fair value being equal to the carrying value, and each additional 0.5% increase would result in an additional impairment of approximately $18,858.

•Terminal growth rate: A decrease in approximately 0.1% in the terminal growth rate would result in the fair value being equal to the carrying value, and each additional 0.5% decrease would result in an additional impairment of approximately $17,350.

•Future cash flows: A decrease in the future cash flows before net working capital by approximately 1.0% would result in the fair value being equal to the carrying value, and each additional 5% decrease would result in an additional impairment of approximately $16,595.

•Net working capital: Net working capital ranges between 40% and 45% of revenue. An increase of 6% in net working capital investment would result in the fair value being equal to the carrying value, and each additional 5% increase would result in an additional impairment of approximately $3,017.

Cannabis – Canada – Brand

The fair value of the brand was determined based on a discounted cash flow projection, covering a four-year period. Specifically, the Company utilized a relief from royalty valuation technique to arrive at the fair value of the brand. Management concluded that the fair value was higher than its carrying value of $3,545 by approximately $453 as of December 31, 2023 and therefore, no impairment to brand was allocated to the reporting unit.

The significant assumptions applied to the determination of the fair value are described below:

•Post-tax discount rate: An increase in the discount rate by 1% would result in the fair value being equal to the carrying value, and each additional 1% increase in the discount rate would result in an impairment of approximately $302.

•Royalty rate: An incremental royalty rate of 3.5% of revenues was applied to brand-specific revenues. A decrease to the incremental royalty rate by 0.12% would result in the recoverable amount being equal to the carrying value.

•Future revenues: A decrease in future revenues by 12% would result in the fair value being equal to the carrying value, and each additional 10% decrease in the future revenues would result in an impairment of approximately $317.

Year Ended December 31, 2022

As of June 30, 2022, when the Company considered these qualitative factors in assessing impairment indicators it concluded that the Company's U.S. - Cannabis segment more likely than not was impaired. The Company tested that segment’s assets, including goodwill and intangible assets for impairment.

Cannabis – U.S. – Goodwill

The fair value of the reporting unit was determined based on a transaction multiple of somewhat similar CBD-based companies. Management concluded that as of June 30, 2022, the fair value was lower than its carrying amount and as a result, an impairment charge to goodwill of $25,169 was allocated to the reporting unit.

The significant assumptions applied to the determination of the fair value are described below:

•Transaction multiples: A market-based revenue multiple of 1.6x was utilized to determine the fair value. A decrease in the multiple of .25x, would increase the impairment to goodwill by $7,000.

Cannabis – U.S. - Brand

The fair value of the brand was determined based on a discounted cash flow projection. Specifically, the Company utilized a relief from royalty valuation technique to arrive at the fair value of the brand. Management concluded that as of June 30, 2022, the fair value was lower than its carrying value of $9,250 and as a result, an impairment charge to the brand intangible of $4,630 was allocated to the reporting unit.

The significant assumptions applied to the determination of the fair value are described below:

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VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

•Post-tax discount rate: A market participant post-tax discount rate applied to the after-tax forecast cash flows was 11%. An increase of 1% to the discount rate, would increase the impairment by approximately $530.

•Royalty rate: An incremental royalty rate of 4.0% of revenues was applied to brand-specific revenues. A decrease to the incremental royalty rate by 0.5% would increase the impairment to brand by $1,490.

•Future revenues: A decrease in future revenues by 10% would increase the impairment by approximately $470.

Cannabis – Canada – Goodwill

The fair value of the reporting unit was determined based on a discounted cash flow projection from budgets approved by senior management covering a three-year period. Management concluded that the fair value was higher than its carrying amount by approximately $17,196 as of December 31, 2022 and therefore no impairment to goodwill was required.

The significant assumptions applied to the determination of the fair value are described below:

•Post-tax discount rate: An increase in 0.5% in the discount rate would result in the fair value being equal to the carrying value, and each additional 1% increase would result in an additional impairment of approximately $29,299.

•Terminal growth rate: A decrease in 0.7% in the terminal growth rate would result in the fair value being equal to the carrying value, and each additional 1% decrease would result in an additional impairment of approximately $18,229.

•Future cash flows: A decrease in the future cash flows by 5.5% would result in the fair value being equal to the carrying value, and each additional 5.0% decrease would result in an additional impairment of approximately $15,126.

Cannabis – Canada – Brand

The fair value of the brand was determined based on a discounted cash flow projection, covering a three-year period Specifically, the Company utilized a relief from royalty valuation technique to arrive at the fair value of the brand. Management concluded that the fair value was higher than its carrying value of $3,420 by approximately $1,033 as of December 31, 2022 and therefore, no impairment to brand was allocated to the reporting unit.

The significant assumptions applied to the determination of the fair value are described below:

•Post-tax discount rate: An increase in the discount rate by 2% would result in the fair value being equal to the carrying value, and each additional 1% increase in the discount rate would result in an impairment of approximately $308.

•Royalty rate: An incremental royalty rate of 3.5% of revenues was applied to brand-specific revenues. A decrease to the incremental royalty rate by 0.5% would result in an impairment of approximately $3,469.

•Future revenues: A decrease in future revenues by 20% would result in the fair value being equal to the carrying value. Any further decreases to future revenues would result in the value of the brand being written down to $nil.

Cannabis – Canada – Definite-Lived Intangible

At December 31, 2022, the Company also evaluated the recoverability of its definite-lived intangible assets which includes customer relationship and license intangibles. The Company concluded the undiscounted cash flows of the asset group exceeded its carrying value of $24,969 at December 31, 2022 and therefore no impairment to the definite-lived intangibles was required.

Cannabis – U.S. - Goodwill

The fair value of the reporting unit was determined based on a discounted cash flow projection from budgets approved by senior management covering a three-year period. Management concluded that as of December 31, 2022, the fair value was lower than its carrying amount and as a result, an impairment charge to goodwill of $13,500 was allocated to the reporting unit.

The significant assumptions applied to the determination of the fair value are described below:

•Post-tax discount rate: A market participant post-tax discount rate applied to the after-tax forecast cash flows was 10%, which reflects market participant assumptions. An increase of 1% to the discount rate, would increase the impairment to goodwill by $4,100.

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VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

•Terminal growth rate: The forecast cash flows beyond a three-year period are extrapolated using a 4.1% growth rate. A decline of 1% in the terminal growth rate, would increase the impairment to goodwill by $2,900.

•Future cash flows: A decrease in future cash flows by 10% would increase the impairment by approximately $2,500.

U.S. Cannabis - Brand

The fair value of the brand was determined based on a discounted cash flow projection. Specifically, the Company utilized a relief from royalty valuation technique to arrive at the fair value of the brand. Management concluded the fair value was higher than its carrying value of $4,620 by approximately $380 as of December 31, 2022, and therefore, no impairment charge to the brand was allocated to the reporting unit.

The significant assumptions applied to the determination of the fair value are described below:

•Royalty rate: An increase to the incremental royalty rate of 0.05% would result in the fair value being equal to the carrying value, and each additional 0.5% decrease would result in an additional impairment of approximately $3,320.

•Future revenues: A decrease in future revenues by 8% would result in the fair value being equal to the carrying value, and each additional decrease of 5% would result in an impairment of $220.

•Post-tax discount rate: An increase in the discount rate of 0.5% would result in the fair value being equal to the carrying value, and each increase of 0.5% would result in an additional impairment of $420.

Goodwill

The following table presents the changes in the carrying value of goodwill by reportable segment:

	Cannabis - Canada			Cannabis - United States			Total
Balance as of January 1, 2022	$	57,525		$	60,008		$	117,533
Purchase price adjustment		3,755			—			3,755
Reclassification to intangible assets		(14,170	)		—			(14,170	)
Foreign currency translation adjustment		(2,224	)		—			(2,224	)
Impairments		—			(38,669	)		(38,669	)
Balance as of December 31, 2022	$	44,886		$	21,339		$	66,225
Foreign currency translation adjustment		993			—			993
Impairments		—			(11,300	)		(11,300	)
Balance as of December 31, 2023	$	45,879		$	10,039		$	55,918

Intangible Assets

Intangibles consisted of the following:

Classification	December 31, 2023			December 31, 2022
Licenses	$	18,540		$	17,691
Brand and trademarks*		12,795			12,719
Customer relationships		13,586			13,291
Computer software		1,974			1,955
Other*		144			144
Less: Accumulated amortization		(7,414	)		(4,013	)
Less: Impairments		(7,350	)		(4,630	)
Intangibles, net	$	32,275		$	37,157

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The expected future amortization expense for definite-lived intangible assets as of December 31, 2023 is as follows:

Fiscal period
2024	$	3,386
2025		3,297
2026		3,206
2027		3,206
2028		1,921
Thereafter		11,670
Intangibles, net	$	26,686

Amortization expense for intangibles for the years ended December 31, 2023, 2022 and 2021 were $3,141, $2,259 and $916, respectively.

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

*Indefinite-lived intangible assets.

7. ACCRUED LIABILITIES

	December 31, 2023		December 31, 2022
Received not invoiced	$	4,510	$	6,252
Accrued payroll		3,193		2,766
Accrued grower partner payables		1,991		824
Other		5,382		3,222
	$	15,076	$	13,064

8. LEASES

The Company’s operating leases consist of a parcel of land in Marfa, Texas that one of its greenhouses resides on, two distribution centers located in Fort Worth, Texas and Surrey, British Columbia, and production-related equipment at its greenhouses in Texas and British Columbia. The Company also leases an office building located in Lake Mary, Florida for its corporate headquarters, and office and manufacturing space in Denver, Colorado for BHB’s headquarters and operations. Rose owns land and leases a building for headquarters and operations in Montreal, Quebec.

The components of lease related expenses are as follows:

	Year ended December 31,
	2023		2022
Operating lease expense (a)	$	4,879	$	4,434

(a)Includes short-term and variable lease costs of $1,986 and $999 for the years ended December 31, 2023 and 2022, respectively.

Cash paid for amounts included in the measurement of lease liabilities:

	Year ended December 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows (fixed payments)	$	2,704	$	2,505
Operating cash flows (liability reduction)	$	1,893	$	1,783
ROU assets obtained in exchange for lease obligations:
Operating leases	$	5,578	$	3,221

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Maturities of lease liabilities as of December 31, 2023 were as follows:

	Operating leases
2024	$	3,001
2025		3,238
2026		3,318
2027		2,734
2028		2,275
Thereafter		1,718
Total minimum lease payments		16,284
Less amounts representing interest		(2,837	)
Total lease obligation, net of interest		13,447
Less current portion		(2,112	)
Long-term portion of lease obligations, net of interest	$	11,335

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

Other information related to operating leases was as follows:

	December 31, 2023
Weighted average remaining lease term:
Operating leases		5.40
Weighted average discount rate:
Operating leases		7.75	%

9. LINE OF CREDIT AND LONG-TERM DEBT

	Balance outstanding as of December 31,
	2023		2022
Term Loan - ("FCC Loan") - repayable by monthly principle of payments of $164 and accrued interest at a rate of 8.96%; matures May 3, 2027	$	22,788	$	24,755
Term Loan - Pure Sunfarms - C$19.0M - Canadian prime interest rate plus an applicable margin, repayable in quarterly payments equal to 2.50% of the outstanding principal amount, interest rate of 8.95%; matures February 2026		8,298		9,664
Term loan - Pure Sunfarms - C$25.0 - Canadian prime interest rate plus an applicable margin, repayable in quarterly payments equal to 2.50% of the outstanding principal amount starting June 30, 2021, interest rate of 8.95%; matures February 2026		13,201		14,867
BDC Facility - Pure Sunfarms - non-revolving demand loan repayable by monthly principal payments of C$52 and accrued interest at a rate of 10.95%, matures December 31, 2031		3,771		4,181
Total	$	48,058	$	53,467

On March 13, 2023, the Company entered into a Note Modification Agreement (the “Modification”) for its line of credit ("Operating Loan"). The Modification eliminated the use of LIBOR as a basis to determine certain interest rates and transitioned to the Secured Overnight Financing Rate (“SOFR”) for such purposes. This Modification did not have a material effect on the Company's results of operations or its financial position. The Company’s Operating Loan had $4,000 amount drawn on the facility as of December 31, 2023 and December 31, 2022.

The carrying value of the assets and securities pledged as collateral for the FCC Loan as of December 31, 2023 and 2022 was $117,293 and $113,159, respectively.

The carrying value of the assets pledged as collateral for the Operating Loan as of December 31, 2023 and 2022 was $28,034 and $26,666, respectively.

29

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

The Pure Sunfarms line of credit had $0 and $3,529 outstanding as of December 31, 2023 and December 31, 2022, respectively. As of December 31, 2023 and December 31, 2022, Pure Sunfarms had an outstanding letter of credit issued to BC Hydro against the revolving line of credit of $0 and C$4,145, respectively.

The Company is required to comply with financial covenants, measured either quarterly or annually depending on the covenant. The Company was not in compliance with one financial covenant under the FCC Loan. Subsequent to December 31, 2023 the Company received a waiver from FCC for the annual test on December 31, 2023 for one financial covenant. Unless amended, the covenant will be reinstated for fiscal year 2024. FCC measures the Company's financial covenants once a year on the last day of the year.

Village Farms was in compliance with all of its remaining covenants under its other credit facilities.

The weighted average interest rate on short-term borrowings as of December 31, 2023 and 2022 was 9.44% and 9.12%, respectively.

Accrued interest payable on the Credit Facilities and loans as of December 31, 2023 and 2022 was $390 and $398, respectively, and these amounts are included in accrued liabilities in the statements of financial position.

The aggregate annual principal maturities of long-term debt for the next five years and thereafter are as follows:

2024	$	5,833
2025		5,833
2026		17,148
2027		17,358
2028		471
Thereafter		1,415
	$	48,058

10. FINANCIAL INSTRUMENTS

Financial assets and liabilities are recognized on the consolidated statements of financial position at fair value in a hierarchy for those assets and liabilities measured at fair value on a recurring basis.

At December 31, 2023 and 2022, the Company’s financial instruments included cash and cash equivalents, trade receivables, minority investments, line of credit, trade payables, accrued liabilities, lease liabilities, note payables and debt. The carrying value of cash and cash equivalents, trade receivables, trade payables, and accrued liabilities approximate their fair values due to the short-term maturity of these financial instruments. The carrying value of line of credit, lease liabilities, notes payable, and debt approximate their fair values due to insignificant changes in credit risk.

There were no financial instruments categorized as Level 3 at December 31, 2023 and December 31, 2022, other than the minority investments discussed below. There were no transfers of assets or liabilities between levels during the years ended December 31, 2023 and 2022, respectively.

For its investments, the Company has elected the practicability exception to fair value measurement, under which the investment is measured at cost, less impairment, plus or minus any observable price changes of an identical or similar investment.

11. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company and its subsidiaries may become defendants in certain employment claims and other litigation. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. The Company is not involved in any defendant legal proceedings other than routine litigation arising in the normal course of business, none of which the Company believes will have a material adverse effect on the Company’s business, financial condition or results of operations.

30

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

12. RELATED PARTY TRANSACTIONS AND BALANCES

The Company leases its Rose office building from a company employee who also owns a minority interest in Rose. For the years ended December 31, 2023, 2022 and 2021, the Company paid C$213, C$163 and C$30, respectively to lease this office space.

One of the Company's employees is related to a member of the Company’s executive management team and received approximately $118, $115 and $114 in salary and benefits during the years ended December 31, 2023, 2022 and 2021, respectively.

13. INCOME TAXES

The components of the provision for (recovery of) income tax for the years ended December 31, 2023, 2022 and 2021 are as follows:

	2023
	Current		Deferred		Total
US Federal	$	—	$	—	$	—
US State		34		—		34
Canadian		371		4,046		4,417
	$	405	$	4,046	$	4,451

	2022
	Current			Deferred			Total
US Federal	$	—		$	14,650		$	14,650
US State		72			(2,085	)		(2,013	)
Canadian		(5,222	)		(2,734	)		(7,956	)
	$	(5,150	)	$	9,831		$	4,681

	2021
	Current			Deferred			Total
US Federal	$	—		$	(3,278	)	$	(3,278	)
US State		135			(176	)		(41	)
Canadian		(795	)		588			(207	)
	$	(660	)	$	(2,866	)	$	(3,526	)

The (recovery of) provision for income taxes reflected in the consolidated statements of (loss) income for the years ended December 31, 2023, 2022 and 2021 differs from the amounts computed at the federal statutory tax rates. The principal differences between the statutory income tax (recovery) and the effective provision for (recovery of) income taxes are summarized as follows:

	Year Ended December 31,
	2023			2022			2021
(Loss) income before income taxes	$	(27,368	)	$	(96,734	)	$	(12,651	)
Tax (recovery) calculated at US domestic tax rates		(5,747	)		(20,339	)		(2,592	)
State tax adjustments		(457	)		(1,799	)		(230	)
Non-deductible items		1,100			928			1,516
True up of prior year income tax estimates		318			—			(648	)
Deferred adjustment		32			(3,324	)		(2,429	)
Tax rate differences on deferred items		(34	)		308			397
Foreign rate differentials		—			88			86
Change in tax rates		135			5			5
Change in valuation allowance		9,111			28,684			57
Other		(7	)		130			312
Recovery of income taxes	$	4,451		$	4,681		$	(3,526	)

31

The statutory tax rate in effect in Canada and the United States for the year ended December 31, 2023, 2022 and 2021 was 27%, 21%, respectively.

The blended effective tax rate for 2023 was (16.3%) compared to (4.8%) and 27.9% in 2022 and 2021, respectively.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The deferred tax assets and liabilities presented on the consolidated statements of financial position are net amounts corresponding to their reporting jurisdiction. The deferred tax assets and liabilities presented in the note disclosure are grouped based on asset and liability classification without consideration of their corresponding reporting jurisdiction.

Significant components of the Company’s net deferred income taxes at December 31, 2023 and 2022 are as follows:

	2023			2022
Deferred tax assets:
Other assets	$	6,636		$	5,536
Long-term debt		824			943
Tax losses: Non-capital and farm losses		37,665			33,579
Provisions: Debt and unit issuance costs		1,058			1,683
Tax losses: Valuation allowance		(39,530	)		(30,419	)
		6,653			11,322
Deferred tax liabilities:
Joint venture shares		(2,464	)		(2,406	)
Cash adjustment		(15,356	)		(12,861	)
Property, plant and equipment		(8,362	)		(11,610	)
		(26,182	)		(26,877	)
Net tax assets	$	(19,529	)	$	(15,555	)

In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon available positive and negative evidence and future taxable income, the Company has recorded a valuation allowance on its deferred tax assets for the years ended December 31, 2023 and 2022 of $39,530 and $30,419, respectively.

Included in the schedule of deferred tax assets and liabilities above are US federal net operating loss carryforwards of approximately $111,831 and $106,428 as of December 31, 2023 and 2022, respectively, which will begin to expire in 2031. At the state level, the Company has a combined state net operating loss carry forwards of approximately $43,554 and $42,768 as of December 31, 2023 and 2022, respectively, which started to expire in 2023. The Canadian Federal Non-Capital Loss carry forwards are $56,009 and $43,829 as of December 31, 2023 and 2022, respectively. The Canadian Provincial Non-Capital Loss carry forwards are $13,158 and $15,974, as of December 31, 2023 and 2022, respectively.

At December 31, 2023 and 2022, the balance of uncertain tax benefits is zero. The Company does not anticipate that the amount of the uncertain tax benefit will significantly increase within the next 12 months. The Company recognizes accrued interest related to uncertain tax benefits and penalties as income tax expense. As of December 31, 2023 and 2022, there are no recognized liabilities for interest or penalties.

The Company is subject to taxation in the U.S. and various states, as well as Canada and its provinces. As of December 31, 2023, the Company’s tax years for 2020, 2021 and 2022 are subject to examination by the tax authorities. With few exceptions, as of December 31, 2023, the Company is no longer subject to U.S. federal, state or local examinations by tax authorities for years before 2020 due to the expiration of the statute of limitations.

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

14. SEGMENT AND GEOGRAPHIC INFORMATION

Segment reporting is prepared on the same basis that the Company’s Chief Executive Officer, who is the Company’s Chief Operating Decision Maker, manages the business, makes operating decisions and assesses performance. Management has determined that the Company operates in four segments. The Company’s four segments include Produce, Cannabis-Canada, Cannabis-U.S. and Energy. The Produce segment produces, markets and sells premium quality tomatoes, bell peppers and

32

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

cucumbers. The Cannabis-Canada segment produces and supplies cannabis products to be sold to other licensed providers and provincial governments across Canada and internationally. The Cannabis-U.S. segment develops and sells high-quality, CBD-based health and wellness products including ingestible, edible and topical applications. The Energy business produces power that it sells pursuant to a long-term contract to its one customer.

For years ended December 31, 2023, 2022 and 2021, approximately 54%, 51% and 48%, respectively, of the Company’s total sales were in the United States. In 2023, the Company had one customer that individually represented more than 10% of total sales, comprising of 11.9%. In 2022, the Company had one customer that individually represented more than 10% of total sales, comprising of 14.6%. In 2021, the Company had two customers that individually represented more than 10% of its sales, comprising of 20.1% and 10.6% of sales, respectively.

As of December 31, 2023, the Company’s trade receivables had two customers that represented more than 10% of the balance of trade receivables, representing 21.1% and 10.2% of the balance, respectively. As of December 31, 2022, the Company’s trade receivables had one customer that represented more than 10% of the balance of trade receivables, representing 19.1% of the balance. As of December 31, 2021, the Company’s trade receivables had one customer that represented more than 10% of the balance of trade receivables, representing 29.0% of the balance.

The Company’s primary operations are in the United States and Canada. Segment information as of and for the years ended December 31, 2023, 2022 and 2021:

	2023			2022			2021
Sales
Produce	$	151,243		$	160,252		$	159,778
Cannabis – Canada		114,030			109,882			96,434
Cannabis – United States		20,330			23,302			11,345
Energy		—			136			463
	$	285,603		$	293,572		$	268,020
Interest expense
Produce	$	2,332		$	1,472		$	561
Cannabis – Canada		2,177			1,768			2,236
Cannabis – United States		—			—			1
Energy		—			4			37
	$	4,509		$	3,244		$	2,835
Interest income
Corporate	$	837		$	196		$	117
Cannabis – Canada		157			11			9
Cannabis – United States		24			—			—
	$	1,018		$	207		$	126
Depreciation and amortization
Produce	$	5,386		$	5,044		$	5,238
Cannabis – Canada		9,124			7,445			5,875
Cannabis – United States		335			565			299
Energy		—			—			1,297
Cannabis – Netherlands		1,081			—			—
	$	15,926		$	13,054		$	12,709
Gross margin
Produce	$	179		$	(17,382	)	$	1,474
Cannabis – Canada		35,940			29,388			37,209
Cannabis – United States		13,328			15,659			7,947
Energy		(21	)		(168	)		(1,451	)
	$	49,426		$	27,497		$	45,179

33

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

Total assets	2023		2022
United States	$	103,345	$	113,497
Canada		357,499		346,126
Netherlands		6,145		5,662
	$	466,989	$	465,285
Property, plant and equipment, net	2023		2022
United States	$	37,847	$	37,780
Canada		166,762		169,921
Netherlands		1,004		—
	$	205,613	$	207,701

15. LOSS PER SHARE

Basic net loss per share is computed using the weighted average number of Common Shares outstanding for the period. Basic and diluted net income per ordinary share is calculated as follows:

	For the Years Ended December 31,
(shares in thousands)	2023			2022			2021
Numerator:
Net loss including non-controlling interests	$	(31,819	)	$	(101,415	)	$	(9,125	)
Less: Net (income) loss attributable to non-controlling interests		21			269			46
Net loss attributable to Village Farms International, Inc. shareholders	$	(31,798	)	$	(101,146	)	$	(9,079	)
Denominator:
Weighted average number of common shares – basic		108,728			89,127			82,161
Effect of dilutive securities – share-based employee options and awards		—			—			—
Weighted average number of common shares – diluted		108,728			89,127			82,161
Anti-dilutive options and awards (1)		6,947			4,089			3,822
Net loss per ordinary share:
Basic	$	(0.29	)	$	(1.13	)	$	(0.11	)
Diluted	$	(0.29	)	$	(1.13	)	$	(0.11	)

(1)Options to purchase shares of common stock and unvested RSUs are not included in the calculation of net (loss) income per share because the effect would have been anti-dilutive.

16. SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

On January 30, 2023, the Company closed a public offering (the "Offering") of 18,350,000 Common Shares at a price of US$1.35 per share together with accompanying warrants to purchase up to 18,350,000 Common Shares, which have an exercise price of US$ 1.65 per share (the "Warrants"). The gross proceeds from the Offering were approximately US$25 million before deducting placement agent fees and other offering expenses payable by the Company. The proceeds from the Offering are being used for general working capital. The accompanying Warrants have an exercise price of US$1.65 and became exercisable beginning six months from issuance and will expire five years from the date of initial exercisability.

On August 9, 2022, Village Farms entered into a Controlled Equity Offering Sales Agreement ("Sales Agreement") pursuant to which the Company may offer and sell Common Shares having an aggregate offering price up to $50 million from time to time to or through Cantor Fitzgerald & Co. and A.G.P./Alliance Global Partners. Under the Sales Agreement, the Company may offer and sell Common Shares through Cantor Fitzgerald & Co. and A.G.P./Alliance Global Partners by any method deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act of 1933, as amended, including sales made directly

34

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

on The Nasdaq Capital Market. As of December 31, 2022, the Company had issued and sold 3,175,000 Common Shares under the Sales Agreement, resulting in net proceeds of $6,692 after deducting commissions and offering expenses.

The Company’s Share-Based Compensation Plan (the “Plan”) dated January 1, 2010, was most recently approved by Shareholders on June 10, 2021. The Plan provides that the number of Common Shares reserved for issuance upon the exercise or redemption of awards granted under the Plan is a rolling maximum of ten percent (10%) of the outstanding Common Shares at any point in time. Approximately 4,078 shares remain available for issuance as of December 31, 2023.

Stock options have been granted with an exercise price equal to the fair market value of the common stock on the date of grants and have a ten-year contractual term. The stock options vest ratably over a 3- year period. Compensation expense is recognized on a straight-line basis.

The fair market value of stock options is estimated using the Black-Scholes-Merton valuation model and the Company uses the following methods to determine its underlying assumptions: expected volatilities are based on the historical volatilities of the weekly closing price of the Company’s common stock; the expected term of options granted is based historical exercises and forfeitures; the risk-free interest rate is based on Canadian Treasury bonds issued with similar life terms to the expected life of the grant; and the expected dividend yield is based on the current annual dividend amount divided by the stock price on the date of grant. Forfeitures are recorded when incurred.

The following key assumptions were used in the valuation model to value stock option grants for each respective period:

	2023	2022	2021
Expected volatility	85.7% - 87.8%	84.0% - 89.9%	68.3% - 75.7%
Dividend	$nil	$nil	$nil
Risk-free interest rate	2.76% - 4.15%	1.41% - 3.28%	1.07% - 1.54%
Expected life	6.5 years	6.5 years	4.5 years - 6.9 years
Fair value	$0.44 - $0.82	$0.93 - $4.33	$4.29 - $7.31

Stock option transactions under the Company’s plan for the years ended December 31, 2023, 2022 and 2021 are summarized as follows:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2021		3,067,322		$	5.42		6.82	$	15,735
Granted during 2021		792,236		$	8.47		9.78	$	57
Exercised during 2021		(177,000	)	$	1.07		1.14	$	1,813
Forfeited/expired during 2021		(60,000	)	$	10.70
Outstanding at December 31, 2021		3,622,558		$	6.20		7.89	$	6,530
Exercisable at December 31, 2021		2,042,663		$	4.80		5.14	$	6,001
Granted during 2022		725,360		$	2.74		9.70	$	16
Exercised during 2022		(180,000	)	$	1.30		0.51	$	772
Forfeited during 2022		(78,500	)	$	8.45
Outstanding at December 31, 2022		4,089,418		$	5.76		6.77	$	152
Exercisable at December 31, 2022		2,549,401		$	5.88		5.46	$	133
Granted during 2023		3,492,991		$	0.94		9.34	$	130
Exercised during 2023		(100,000	)	$	0.83			$	71
Forfeited during 2023		(535,833	)	$	4.04
Outstanding at December 31, 2023		6,946,576		$	3.50		7.54	$	83
Exercisable at December 31, 2023		3,081,262		$	6.07		5.44	$	1

The weighted-average grant-date fair value of options granted during the years 2023, 2022 and 2021 was $0.71, $3.31 and $6.00, respectively. The total intrinsic value of options exercised during the years ended December 31, 2023, 2022 and 2021, was $71, $772 and $2,273, respectively.

35

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

A summary of the status of the Company’s non-vested stock options, and the changes during the year ended December 31, 2023 is presented below:

	Number of Options			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Non-vested at January 1, 2023		1,540,017		$	3.72
Granted		3,492,991		$	0.71
Vested		(739,361	)	$	3.89
Forfeited		(428,333	)	$	2.76
Non-vested at December 31, 2023		3,865,314		$	1.07	$	82

As of December 31, 2023, there was approximately $1,833 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the stock option plan; that cost is expected to be recognized over a period of three years.

The Company has also issued performance-based restricted share units to Village Farms employees involved with future developments of the Company. Once a performance target is met and the share units are deemed earned and vested, compensation expense is recognized, based on the fair value of the share units on the grant date.

Performance-based restricted share unit activity for the years ended December 31, 2023, 2022 and 2021 is as follows:

	Number of Performance-based Restricted Share Units			Weighted Average Grant Date Fair Value
Outstanding at January 1, 2021		869,000		$	5.89
Granted		158,000		$	7.72
Issued		(487,000	)	$	5.70
Forfeited/expired		(310,000	)	$	6.66
Outstanding at December 31, 2021		230,000		$	6.83
Exercisable at December 31, 2021		200,000		$	6.49
Granted		—			—
Exercised		(200,000	)	$	6.41
Forfeited		—			—
Outstanding at December 31, 2022		30,000		$	8.31
Exercisable at December 31, 2022		30,000		$	8.31
Granted		—			—
Issued		(10,000	)	$	8.31
Forfeited/expired		(20,000	)	$	8.31
Outstanding at December 31, 2023		—		$	-
Exercisable at December 31, 2023		—		$	-

36

VILLAGE FARMS INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

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

Total share-based compensation for the years ended December 31, 2023, 2022 and 2021 of $3,111, $3,987 and $7,533, respectively, was recorded in selling, general and administrative expenses and the corresponding amount credited to additional paid in capital.

17. CHANGES IN NON-CASH WORKING CAPITAL ITEMS

	For the Years Ended December 31,
	2023			2022			2021
Trade receivables	$	(2,525	)	$	3,310		$	(9,914	)
Inventories		(5,282	)		(14,583	)		(16,761	)
Lease liabilities		(1,893	)		—			—
Due from joint ventures		—			—			4
Other receivables		9			(4	)		(399	)
Prepaid expenses and deposits		(1,151	)		3,815			(3,201	)
Trade payables		(3,546	)		6,697			6,327
Accrued liabilities		5,665			7,805			(10,389	)
Other assets, net of other liabilities		6,635			(9,286	)		(12,816	)
	$	(2,088	)	$	(2,246	)	$	(47,149	)

37