Enhanced Investments - Financial Portal

Published: 2020-04-01

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, 2019 and 2018, and the related consolidated statements of income (loss) and comprehensive income (loss), changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, 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, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 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 audit 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.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, Canada April 1, 2020
We have served as the Company’s auditor since 2006.
	F-1

Village Farms International, Inc.
	Consolidated Statements of Financial Position
(In thousands of United States dollars)
		December 31, 2019	December 31, 2018
				ASSETS
				Current assets
					Cash and cash equivalents	$				11,989	$		11,920
					Trade receivables, less allowance for doubtful accounts of $5 and $50, respectively	8,997	11,292
					Inventories (note 2)	15,918	24,956
					Amounts due from joint venture (note 12)	15,418	10,873
					Other receivables	342	332
					Income tax receivable	713	—
					Prepaid expenses and deposits	1,259	889
				Total current assets		54,636	60,262
				Non-current assets
					Property, plant and equipment (note 4)	63,158	72,188
					Operating right-of-use assets (note 8)	3,485	—
					Finance right-of-use assets (note 8)	97	176
					Investment in joint ventures (note 5)	41,334	6,341
					Note receivable - joint ventures (note 12)	10,865	—
					Deferred tax asset	7,999	274
					Other assets	1,834	2,207
				Total assets	$				183,408	$		141,448
				LIABILITIES
				Current liabilities
					Line of credit	$				2,000	$		2,000
					Trade payables	12,653	14,601
					Current maturities of long-term debt (note 6)	3,423	3,414
					Operating lease liabilities - current (note 8)	875	—
					Finance lease liabilities - current (note 8)	61	78
					Accrued liabilities (note 7)	3,017	3,509
				Total current liabilities		22,029	23,602
				Non-current liabilities
					Long-term debt (note 6)	28,966	32,261
					Deferred tax liability (note 13)	1,873	—
					Operating lease liabilities - long term (note 8)	2,690	—
					Finance lease liabilities - long term (note 8)	34	102
					Other liabilities	1,357	1,050
				Total liabilities		56,949	57,015
				Commitments and contingencies (note 9)
				SHAREHOLDERS’ EQUITY
					Common stock, no par value per share - unlimited shares authorized; 52,656,669 shares
					issued and outstanding at December 31, 2019 and 47,642,672 shares issued and outstanding at December 31, 2018
						98,333	60,872
					Additional paid in capital	4,351	2,198
					Accumulated other comprehensive loss	(475)	(562)
					Retained earnings	24,250	21,925
				Total shareholders’ equity		126,459	84,433
				Total liabilities and shareholders’ equity	$				183,408	$		141,448
								The accompanying notes are an integral part of these consolidated financial statements.
									F-2

Village Farms International, Inc.
	Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
		For the Years Ended December 31, 2019, 2018 and 2017
		(In thousands of United States dollars, except per share data)
			2019	2018	2017
						Sales (note 14)	$	144,568	$	150,000	$	158,406
						Cost of sales	(151,913) (140,683) (144,433)
						Gross margin (note 14)	(7,345) 9,317		13,973
						Selling, general and administrative expenses	(16,762)	(14,108)	(14,875)
						Stock compensation	(4,714) (1,454) (1,519)
						Interest expense	(2,614) (2,794) (2,695)
						Interest income	1,036	311	—
						Foreign exchange gain (loss)	433	(1,047) 26
						Other income	268	131			46
						Gain on disposal of assets (note 5)	13,564	—			(8)
						Loss on write-off of investment (note 5)	(1,184)	—	—
						(Loss) before taxes and earnings of unconsolidated entities	(17,318) (9,644) (5,052)
						Recovery of (provision for) income taxes (note 13)	5,866	2,300	763
						Loss from consolidated entities after income taxes	(11,452)	(7,344)	(4,289)
						Equity earnings from unconsolidated entities (note 5)	13,777	(171)	(468)
						Net income (loss)	$	2,325	$	(7,515)	$	(4,757)
						Basic income(loss) per share (note 15)	$	0.05	$	(0.17)	$	(0.12)
						Diluted income (loss) per share (note 15)	$	0.05	$	(0.17)	$	(0.12)
						Weighted average number of common shares used in the computation of net income (loss) per
						share:
								Basic	49,418,228	44,356,699	39,143,912
								Diluted	51,178,981	44,356,699	39,143,912
						Net income (loss)	$	2,325	$	(7,515) $	(4,757)
						Other comprehensive income (loss):
						Foreign currency translation adjustment			87	(171)	150
						Comprehensive income (loss)	$	2,412	$	(7,686)	$	(4,607)
	The accompanying notes are an integral part of these consolidated financial statements.
										F-3

Village Farms International, Inc.
	Consolidated Statements of Changes in Shareholders’ Equity
	For the Years Ended December 31, 2019, 2018 and 2017
	(In thousands of United States dollars, except for shares outstanding)
		Number of			Accumulated Other		Total
		Common	Common	Additional Paid	Comprehensive	RetainedEarnings	Shareholders’
		Shares	Stock	In Capital	(Loss) Income		Equity
								Balance at January 1, 2017	38,882,945	$24,954	$			1,392	$					(541) $34,197	$	60,002
								Shares issued pursuant to public offering, net of issuance
								costs	2,500,000	9,769				—	—	—	9,769
								Shares issued on exercise of stock options (note 16)	91,667	59				—	—	—	59
								Issuance of warrants for common shares			—	—				148	—	—	148
								Share-based compensation (note 16)	768,000	1,333				186	—	—	1,519
								Cumulative translation adjustment			—	—				—	150	—	150
								Net loss			—	—				—	—	(4,757)	(4,757)
								Balance at December 31, 2017	42,242,612	$36,115	$			1,726	$					(391) $29,440	$	66,890
								Shares issued pursuant to public offerings, net of issuance
								costs	3,097,200	15,737				—	—	—	15,737
								Shares issued pursuant to private placement of common
								shares, net of issuance costs	1,886,793	7,755				—	—	—	7,755
								Shares issued on exercise of stock options (note 16)	365,733	434				(151)	—	—	283
								Share-based compensation (note 16)	50,334	831				623	—	—	1,454
								Cumulative translation adjustment			—	—				—	(171)	—	(171)
								Net loss			—	—				—	—	(7,515)	(7,515)
								Balance at December 31, 2018	$47,642,672	$60,872	$			2,198	$					(562) $21,925	$	84,433
								Shares issued pursuant to public offering, net of issuance
								costs	4,059,000	34,225					—	—	34,225
								Shares issued on exercise of stock options (note 16)	212,332	324				(116)	—	—	208
								Share-based compensation (note 16)	442,665	2,298				2,417	—	—	4,715
								Warrants	300,000	614				(148) —		—							466
								Cumulative translation adjustment			—	—				—	87	—	87
								Net loss			—	—				—	—	2,325	2,325
								Balance at December 31, 2019	52,656,669	$98,333	$			4,351	$					(475) $24,250	$ 126,459
													The accompanying notes are an integral part of these consolidated financial statements.
											F-4

Village Farms International, Inc.
Consolidated Statements of Cash Flows
	For the Years Ended December 31, 2019, 2018 and 2017
(In thousands of United States dollars)
		2019	2018	2017
					Cash flows from operating activities:
					Net income (loss)	$ 2,325	$ (7,515) $ (4,757)
					Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
					Depreciation and amortization	7,366	7,027	7,659
					Amortization of deferred charges	76	76	—
					(Gain) loss on disposal of assets (note 5)	(13,564)	—	8
					Loss on write-off of investment in joint venture (note 5)	1,184	—	—
					Share of (income) loss from joint venture (note 8)	(13,777)	170	470
					Interest expense	2,614	2,718	2,695
					Interest income	(1,036) (311) —
					Share-based compensation	4,714	1,454	1,519
					Lease payments	(1,043)	—	—
					Deferred income taxes	(5,855) (2,730) (792)
					Interest paid on long-term debt	(2,635) (2,417) (2,614)
					Changes in non-cash working capital items (note 17)	5,244	(3,149)	(3,519)
					Net cash (used in) provided by operating activities	(14,387)	(4,677)	669
					Cash flows from investing activities:
					Purchases of property, plant and equipment	(2,287) (3,093) (1,696)
					Investment in joint venture	(96)	—	—
					Notes receivable loaned to joint ventures (note 11)	(14,507)	(10,462)	—
					Proceeds from sale of land	52	65	—
					Net cash used in investing activities	(16,838) (13,490) (1,696)
					Cash flows from financing activities:
					Proceeds from borrowings	4,000	7,000	7,306
					Repayments on borrowings	(7,423) (7,706)		(14,320)
					Proceeds from issuance of common stock, net	34,226	23,492	9,769
					Proceeds from exercise of stock options	208	283	59
					Proceeds from exercise of warrants	466	—	—
					Payments lease obligations	(90) (71) (59)
					Net cash provided by financing activities	31,387	22,998	2,755
					Effect of exchange rate changes on cash and cash equivalents	(93)	(2)	(10)
					Increase in cash and cash equivalents	69	4,829	1,718
					Cash and cash equivalents, beginning of year	11,920	7,091	5,373
					Cash and cash equivalents, end of year	$ 11,989	$ 11,920	$ 7,091
					Supplemental cash flow information:
					Income taxes paid (recovered)	$	904	$	290	$	(25)
					Supplemental disclosure of non-cash information:
					Purchases of capital expenditures by financing capital lease	$	—	$	—	$	190
					Issuance of warrants	$	—	$	—	$	148
							The accompanying notes are an integral part of these consolidated financial statements.
								.
								F-5

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	NATURE OF OPERATIONS
			Village Farms International, Inc. (“VFF”) the parent company, together with its subsidiaries (collectively, the “Company”, “we”, “us”, or “our”) is incorporated under the Canada Business Corporation Act. VFF’s principal operating subsidiaries as of December 31, 2019 are Village Farms Canada Limited Partnership (“VFCLP”), Village Farms, L.P. (“VFLP”), and VF Clean Energy, Inc. (“VFCE”). The address of the registered office of VFF is 4700 80th Street, Delta, British Columbia, Canada, V4K 3N3. VFF owns a 65% equity interest in Village Fields Hemp USA LLC (“VF Hemp”), a 60% equity interest in Arkansas Valley Green and Gold Hemp (“AVGG Hemp) and a 53.5% equity interest in Pure Sunfarms Corp. (“Pure Sunfarms”), all of which are recorded as equity investees, see Investments in Joint Ventures (note 5).
			The Company’s shares are listed on the Toronto Stock Exchange under the symbol VFF and are also listed in the United States on the Nasdaq Capital Market (“Nasdaq”) under the symbol VFF.
			The Company owns and operates sophisticated, highly intensive agricultural greenhouse facilities in British Columbia and Texas, where it produces, markets and sells premium-quality tomatoes, bell peppers, and cucumbers. The Company, through its subsidiary VFCE, owns and operates a 7.0 MW power plant that generates electricity. The Company’s joint venture, Pure Sunfarms, is a licensed producer and supplier of cannabis products to be sold to other licensed providers and provincial governments across Canada. The Company’s joint ventures, VF Hemp and AVGG Hemp, are cultivators of high cannabidiol (“CBD”) hemp in multiple states in the United States.
		2	BASIS OF PRESENTATION
			Basis of Presentation
			These financial statements have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”) and the following accounting policies have been consistently applied in the preparation of the consolidated financial statements. Previously, the Company prepared its consolidated financial statements under International Financial Reporting Standards (“IFRS”) as permitted by securities regulators in Canada, as well as in the United States under the status of a Foreign Private Issuer as defined by the United States Securities and Exchange Commission (“SEC”). At the end of the second quarter of 2019, the Company determined that it no longer qualified as a Foreign Private Issuer under the SEC rules. As a result, beginning January 1, 2020 the Company is required to report with the SEC on domestic forms and comply with domestic company rules in the United States. The transition to US GAAP was made retrospectively for all periods from the Company’s inception.
			Principles of Consolidation
			Our consolidated financial statements include the accounts of our wholly owned subsidiaries. We consolidate variable interest entities (VIEs) when we have variable interests and are the primary beneficiary. We continually evaluate our involvement with VIEs to determine when these criteria are met. Material intercompany transactions and accounts have been eliminated in consolidation.
			All intercompany transactions, balances and unrealized gains and losses from intercompany transactions are eliminated on consolidation.
			Functional and Presentation Currency
			The functional currency for each entity included in these consolidated financial statements is the currency of the primary economic environment in which the entity operates. These consolidated financial statements are presented in United States dollars (“U.S. dollars”) which have been rounded to the nearest thousands, except per share amounts. Currency conversion to U.S. dollars is performed in accordance with ASC 830, Foreign Currency Matters.
		3	SIGNIFICANT ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATION UNCERTAINTY
			The significant accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
				F-6

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)

Use of Estimates

The preparation of our financial statements in accordance with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Actual results could differ from these estimates and those differences could be material.

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.

Sales, Trade Receivables and Concentrations of Credit Risk

For both 2019 and 2018, approximately 83% of the Company’s sales were in the United States. In 2019 three customers, Wal-mart, Kroger and Publix Super Markets, comprised 11.8%, 10.9% and 10.6% of sales, respectively. In 2018 two customers, Publix Super Markets and Kroger comprised 12.0% and 11.4% of sales, respectively.

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.

As of December 31, 2019, the Company’s trade receivables had one customer that represented more than 10% of the balance of trade receivables, representing 16.9% of the balance. As of December 31, 2018, the Company’s trade receivables had two customers that represented more than 10% of the balance of trade receivables, representing 13.8% and 11.5%. The Company believes that its expected credit losses are limited due to the protection afforded to the Company by the Perishable Agricultural Commodities Act (the “PACA”) for its sales in the United States, which represents the majority of the Company’s annual sales and accounts receivable at year end. The PACA protection gives a claim filed under the PACA first lien on all PACA assets (which include cash and trade receivables of the debtor).

Inventories

Inventories, consisting of crop inventory, purchased produce inventory and spare parts inventory are valued at the lower of cost or net realizable value determined using weighted average cost or first-in first out methods. Costs included in crop inventory include but are not limited to raw material packaging, direct labor, overhead, and the depreciation of growing equipment and facilities determined at normal capacity. These costs are expensed as cost of sales when the crops are harvested and delivered throughout the various crop cycles, which end at various times throughout the year. Inventories consisted of the following:

December 31, 2019

December 31, 2018

Crop inventory

15,281

24,249

Purchased produce inventory

530

643

Spare parts inventory

107

15,918

24,956

As of December 31, 2019 and 2018 crop inventory was written down by $218 and $401, respectively, to its net realizable value.

Equity Method Investments and Variable Interest Entities

The Company evaluates the method of accounting for investments in which it does not hold an equity interest of at least 50% based on the amount of control it exercises over the operations of the investee, exposure to losses in excess of its investment, the ability to significantly influence the investee and whether the Company is the primary beneficiary of the investee. Investments not qualifying for consolidation are accounted for under the equity method whereby the ongoing investment in the entity, consisting of its initial investment adjusted for distributions, gains and losses of the entity are classified as a single line in the consolidated statements of financial position and as a non-operating item in the consolidated statements of income (loss) and comprehensive income (loss).

F-7

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 Company regularly monitors and evaluates the fair value of its equity investments. If events and circumstances indicate that a decline in the fair value of these assets has occurred and is other than temporary, the Company will record a charge in earnings from joint ventures in the consolidated statements of income (loss). The Company’s investments do not have a readily determinable fair value as none of them are publicly traded. The fair values of the Company’s equity investments are determined by discounting the estimated future cash flows of each entity. These cash flow estimates include assumptions on growth rates and future currency exchange rates (Level 3). The Company did not record an impairment charge on any of its equity investments in fiscal years 2019, 2018, or 2017, except as noted in Note 4.
		Prior to the adoption of Accounting Standards Codification (“ASC”) 606 - ”Revenues from Contracts with Customers” the Company measured its nonmonetary equity contributions at the book value of the assets being contributed with no gain or loss being recognized. Following the adoption of ASC 606, the Company measures nonmonetary equity contributions at fair value, which provides for recognizing a gain or loss upon the derecognition of the nonmonetary assets.
		Property, Plant and Equipment
		Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is allocated between cost of sales and SG&A expenses depending on the type of asset and is determined using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the remaining life of the lease or useful life of the asset, whichever is shorter. Maintenance and repairs are charged to cost of sales when incurred. Significant expenditures, which extend the useful lives of assets, are capitalized. Land is not depreciated. The estimated useful lives of the class of assets for the current and comparative periods are as follows:
			Classification	Estimated Useful Lives
			Leasehold and land improvements	5-20 years
			Greenhouses and other buildings	4-30 years
			Greenhouse equipment	3-30 years
			Machinery and equipment	3-12 years
		Construction in process reflects the cost of assets under construction, which are not depreciated until placed into service.
		Revenue Recognition
		Prior to January 1, 2018, revenue from the sale of produce in the course of ordinary activities was measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue from the production and sale of power was measured at the fair value of the consideration received or receivable. Revenue was recognized when persuasive evidence existed that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration was probable, the associated costs and possible return of goods could be estimated reliably, there was no continuing management involvement with the goods, and the amount of revenue could be measured reliably. If it was probable that discounts would be granted and the amount could be measured reliably, then the discount was recognized as a reduction of revenue as the sales were recognized. The timing of the transfer of risks and rewards occurred at the time the produce had been successfully delivered, the risk of loss had passed to the customer, and collectability was reasonably assured.
		Following the adoption of ASC 606 on January 1, 2018 using the modified retrospective transition approach the Company now recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. In order to achieve this core principle, the Company applies a five-step process. The Company generates its revenue through the sale of grown produce and third party produce, with standard shipping terms and discounts, and through the production and sale of power. 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 they receive from the customer. The Company recognizes revenue when it has fulfilled a performance obligation, which is typically when the customer receives the goods and their performance obligation is complete. Revenue is measured as the amount of consideration the Company expects to receive in exchange for
					F-8

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)
		transferring product. 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. The Company maintains an allowance for doubtful accounts for the loss that would be incurred if a customer was unable to pay amounts due. The Company initially estimates the allowance required at the time of revenue recognition based on historical experience and makes changes to the allowance based on various factors, including changes in the customer’s financial condition or payment patterns.
		The Company sells electricity to British Columbia Hydro and Power Authority. Revenues are recognized as the electricity is delivered to/consumed by the customer and is based on contractual usage rates and meter readings that measure electricity consumption. The Company has elected to exclude taxes collected from its customers assessed by government authorities that are both imposed on and concurrent with a specific revenue-producing transaction from our determination of transaction price.
		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.
		Impairments of Long-Lived Assets
		Long-lived assets, including intangible assets subject to amortization, 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.
		Segment Reporting
		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”). Based on the aggregation criteria in ASC 280, Segment Reporting, the Company has identified two operating segments, the Produce Business and the Energy Business.
		Foreign Currency Translation
		Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rates in effect at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the exchange rate in effect when the fair value was determined. Foreign currency differences are generally recognized in net income. Non-monetary items that are measured based on historical cost in a foreign currency are translated to the functional currency using the exchange rate in effect at the date of the transaction giving rise to the item.
		Fair Value Measurements
		Pursuant to the provisions of Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures (ASC 820), the Company measures certain assets and liabilities at fair value or discloses the fair value of certain assets and liabilities recorded at cost in the consolidated financial statements. Fair value is calculated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). ASC 820 establishes a fair value hierarchy which requires assets and liabilities measured at fair value to be categorized into one of three levels based on the inputs used in the valuation. The Company classifies assets and liabilities in their entirety based on the lowest level of input significant to the fair value measurement.
			F-9

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 three levels are defined as follows:
		Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
		Level 2: Observable inputs, other than those included in Level 1, based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.
		Level 3: Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.
		Transfers between levels of the fair value hierarchy are deemed to have occurred at the end of the reporting period in which the event or change of circumstances caused the transfer to occur.
		Advertising
		Advertising costs are included in selling, general and administrative expenses and are expensed as incurred. These expenses totaled $83, $160 and $201 for the years ended 2019, 2018 and 2017, respectively.
		Share-Based Compensation
		The Company grants stock options and performance-based restricted stock (“RS”) to certain employees and directors.
		The Company recognizes stock-based compensation using the fair value provisions prescribed by ASC Topic 718, Compensation — Stock Compensation. Accordingly, 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.
		The RS granted 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.
		Income Taxes
		Deferred income taxes are provided to recognize temporary differences between the financial reporting basis and the income tax basis of the Company’s assets and liabilities using currently enacted tax rates and laws. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. In assessing the realizability of 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.
		The Company evaluates uncertain income tax positions in a two-step process. The first step is recognition, where the Company evaluates whether an individual tax position has a likelihood of greater than 50% of being sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation processes. For tax positions that are currently estimated to have a less than 50% likelihood of being sustained, zero tax
			F-10

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)
		benefit is recorded. For tax positions that have met the recognition threshold in the first step, the Company performs the second step of measuring the benefit to be recorded. The actual benefits ultimately realized may differ from the Company’s estimates. In future periods, changes in facts and circumstances and new information may require the Company to change the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recorded in results of operations and financial position in the period in which such changes occur.
		Basic and Diluted Income (Loss) Per Share
		Basic income per share is computed using the weighted average number of common shares outstanding during the period. The treasury stock method is used for the calculation of diluted income per share. Under this method, the weighted average number of common shares outstanding assumes that the proceeds to be received on the exercise of dilutive share options are applied to repurchase common shares at the average market price for the period. Share options are dilutive when the average market price of the common shares during the period exceeds the exercise price of the options. Options to purchase shares of common stock and RS are not included in the calculation of net income (loss) per share when the effect is anti-dilutive.
			F-11

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)
		New Accounting Pronouncements Adopted
		Prior to the adoption of ASU 2016-02, Leases, for leases where the Company assumed substantially all the risks and rewards of ownership were classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset was accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and rent expenses were recognized in the Company’s consolidated statements of (loss) income.
		In February 2016, the FASB issued ASU 2016-02, Leases, and has subsequently issued several supplemental and/or clarifying ASU’s (collectively, “Topic 842”), which requires a dual approach for lease accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases may result in the lessee recognizing a right of use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize lease expense on a straight-line basis.
		On January 1, 2019, the Company adopted Topic 842, using the modified retrospective method and did not restate prior periods. The Company elected to utilize the package of practical expedients that allows us to 1) not reassess whether any expired or existing contracts are or contain leases, 2) retain the existing classification of lease contracts as of the date of adoption, and 3) not reassess initial direct costs for any existing leases. The Company’s classes of assets include land leases, building leases and equipment leases.
		On adoption, the Company recognized lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of Topic 842. These lease liabilities were measured at the present value of the remaining lease payments, discounted using the borrowing rate of the Company. The weighted average incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 6.25%. These leases are included in right-of-use assets, short-term lease liabilities and long-term lease liabilities in the consolidated statements of financial position. Right-of-use assets are amortized on a straight-line basis over the lease term.
		For leases previously classified as finance leases the entity recognized the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application.
		Additionally, the Company has elected the short-term lease exception for all classes of assets, and does not apply the recognition requirements for leases of 12 months or less, and recognizes lease payments for short-term leases as expense either straight-line over the lease term or as incurred depending on whether the lease payments are fixed or variable. These elections are applied consistently for all leases.
			2019
				Operating lease commitments disclosed as at December 31, 2018	$5,064
				Less: short-term leases recognized on a straight-line basis as expense	(210)
			4,854
				Discounted using the lessee’s incremental borrowing rate of 6.25% at the date of
				initial application	4,269
				Add: additional leases identified on adoption of Topic 842	88
				Add: finance lease liabilities recognized as at December 31, 2018	180
				Lease liability recognized as at January 1, 2019	$4,537
	Of which are:
	Current lease liabilities		871
	Non-current lease liabilities		3,666
			$4,537
					F-12

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 recognized right-of-use assets relate to the following types of assets:
			December 31,	January 1,
			2018	2019
					Land	$			—	$	140
					Building	—	4,017
					Equipment	176	380
					Total right-of-use assets	$			176	$ 4,537
		New Accounting Pronouncements Not Yet Adopted
		In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU 2019-12 simplifies the accounting for income taxes by removing exceptions within the general principles of Topic 740 regarding the calculation of deferred tax liabilities, the incremental approach for intraperiod tax allocation, and calculating income taxes in an interim period. In addition, the ASU adds clarifications to the accounting for franchise tax (or similar tax). which is partially based on income, evaluating tax basis of goodwill recognized from a business combination, and reflecting the effect of any enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The ASU is effective for fiscal years beginning after December 15, 2020, and will be applied either retrospectively or prospectively based upon the applicable amendments. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.
		In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 removes the disclosure requirement for the amount and reasons for transfers between Level 1 and Level 2 fair value measurements as well as the process for Level 3 fair value measurements. In addition, the ASU adds the disclosure requirements for changes in unrealized gains and losses included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period as well as the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years and will be applied on a retrospective basis to all periods presented. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.
		In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses.” The standard, including subsequently issued amendments, requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and requires the modified retrospective approach. Early adoption is permitted. Based on the composition of the Company’s trade receivables and other financial assets, current market conditions, and historical credit loss activity, the adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.
							4	PROPERTY, PLANT AND EQUIPMENT
		Property, plant and equipment consist of the following:
								December 31, 2019	December 31, 2018
					Land			$	3,204			$	3,932
					Leasehold and land improvements	3,820	3,821
					Buildings				72,772	76,989
					Machinery and equipment				61,871	64,937
					Construction in progress	1,697	552
					Less: Accumulated depreciation				(80,206)	(78,043)
					Property, plant and equipment, net			$	63,158	$	72,188
										F-13

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)
		Depreciation expense on property, plant and equipment, was $7,366, $7,027 and $7,659 for the years ending December 31, 2019, 2018 and 2017, respectively. On March 31, 2019, Pure Sunfarms exercised its option to acquire the Delta 2 assets and operations (note 5).
			5	INVESTMENTS – EQUITY METHOD AND JOINT VENTURES
		Pure Sunfarms Corp.
		On June 6, 2017, the Company entered into an agreement to form Pure Sunfarms, a B.C. corporation, with Emerald Health Therapeutics Inc. (“Emerald”). The purpose of Pure Sunfarms is to produce, market and distribute cannabis in Canada. Village Farms held a 50% equity ownership interest in Pure Sunfarms in the form of common shares until November 19, 2019, at which time, upon entering the Settlement Agreement, the Company’s ownership increased to 53.5% through December 31, 2019.
		Pursuant to the terms of a Supply Agreement that Pure Sunfarms had with Emerald, Emerald had a right to purchase 40% of Pure Sunfarms cannabis production at a fixed price, subject to the terms and conditions of the Supply Agreement. To the extent that Emerald did not fulfill its purchase obligation, Pure Sunfarms was able to sell that excess production to other parties in the open market. The Supply Agreement stipulated that Emerald was required to pay Pure Sunfarms the difference between the fixed price and the selling price realized from other parties. During the quarter ended September 30, 2019, Emerald did not fulfill its purchase obligation and Pure Sunfarms sold the product on the open market to arm’s length parties at prices lower than the fixed price in the Supply Agreement. As a result, under the terms of the Supply Agreement, Pure Sunfarms invoiced Emerald for the difference which amounted to approximately CA$7.2 million. These charges were disputed by Emerald when initially invoiced.
		On March 6, 2020 the Company and Emerald closed a Settlement Agreement in order to settle all outstanding disputes with respect to their joint venture Pure Sunfarms. Under the terms of the Settlement Agreement:
				•	The 5,940,000 common shares of Pure Sunfarms that were placed in escrow pending Emerald’s CA$5,940 equity contribution to Pure Sunfarms (originally due in November 2019) were cancelled, effective as of November 19, 2019, and Village Farms and Emerald have ceased arbitration proceedings on the matter;
				•	Emerald forfeited and waived repayment by Pure Sunfarms of its outstanding CA$13.0 million shareholder loan to Pure Sunfarms (plus accrued interest of CA$1.1 million) and Emerald issued a promissory note to Pure Sunfarms in the amount of CA$952 related to certain amounts it owed Pure Sunfarms under the terms of the Supply Agreement;
				•	Pure Sunfarms released Emerald from all liabilities arising from their Supply Agreement under which Emerald had the provision to purchase 40% of Pure Sunfarms’ aggregate production in 2018 and 2019 including $7.2 million from the quarter ended September 30, 2019;
				•	On March 20, 2020, Emerald transferred 2.5% of additional equity in Pure Sunfarms to Village Farms;
				•	Pure Sunfarms and Emerald have released each other from their current supply agreement under which Emerald had the provision to purchase 25% of Pure Sunfarms’ aggregate cannabis production from the Delta facilities in 2020, 2021 and 2022; and
				•	Village Farms and Emerald have mutually released each other from all claims related to or arising from the disputes.
					F-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)
		The net impact of the Settlement Agreement on the ownership of Pure Sunfarms, is that as of December 31, 2019, Village Farms owned 53.5% of Pure Sunfarms and Emerald owned 46.5% of Pure Sunfarms. Effective on the settlement date, March 6, 2020, Village Farms owned 57.4% of Pure Sunfarms (note 18).
		In conjunction with the formation of Pure Sunfarms, Village Farms contributed the rights to lease and purchase the Delta 3 land and greenhouse facility to the joint venture. The contribution of the rights has been accounted for as a reduction of the land and greenhouse facility in exchange for the investment in Pure Sunfarms Corp. The net book value of the contributed land and greenhouse facility was $13,950. The Company recorded the investment at net book value. No gain was recognized. Prior to the adoption of ASC 606 the Company measured its nonmonetary equity contributions at the net book value of the assets being contributed with no gain or loss being recognized.
		On March 31, 2019, Pure Sunfarms exercised its option to utilize the Delta 2 assets and operations. The contribution of the assets has been accounted for as a disposal of the land, greenhouse facility and other assets in exchange for 25,000,000 common shares of Pure Sunfarms. This was a non-cash transaction, and it was estimated that the fair value of the land, building and other assets was $18.7 million (CA$25 million) at the date of contribution. The Company recognized a gain of $13.6 million on the contribution of the fixed assets. As of December 31, 2019 and 2018, the total investment in Pure Sunfarms of US$41.3 million and US$6.3 million, respectively, is recorded in the consolidated statements of financial position. Following the adoption of ASC 606, the Company measures nonmonetary equity contributions at fair value, which provides for recognizing a gain or loss upon the de-recognition of the nonmonetary assets. This is contrary to the non-monetary contribution of Delta 3 whereby a gain could not be recognized and the investment was recognized at net book value, as at the time ASC 606 was not applicable.
		The Company accounts for its investment in Pure Sunfarms, in accordance with ASC 323 – Equity Method and Joint Ventures (“ASC 323”), using the equity method. The Company has determined that Pure Sunfarms is a variable interest entity (“VIE”), however the Company does not consolidate Pure Sunfarms because the Company is not the primary beneficiary. Although the Company is able to exercise significant influence over the operating and financial policies of Pure Sunfarms through its 53.5% ownership interest and joint power arrangement with Emerald, the Company shares joint control of the Board of Directors and therefore is not the primary beneficiary. The Company’s maximum exposure to loss as a result of its involvement with Pure Sunfarms as of December 31,2019 relates primarily to the recovery of the outstanding loan to Pure Sunfarms.
		The Company applies the hypothetical liquidation at book value (“HLBV”) method to determine the ownership percentage for the Company and Emerald. When determining the ownership, the HLBV method only considers shares that have been fully paid for. Therefore, due to the monthly escrow payments being made by Emerald in accordance with the Delta 2 Option Agreement, the ownership will change each month escrow payment(s) are made.
		The Company’s share of the joint venture consists of the following: (in $000’s of USD):
	Balance, January 1, 2018		$ 6,511
	Share of loss for the year		(171)
	Balance, December 31, 2018		$ 6,341
	Balance, January 1, 2019		$ 6,341
	Investments in joint venture		18,717
	Share of net income for the year		16,276
	Balance, December 31, 2019		$41,334
		Summarized financial information of Pure Sunfarms (in $000’s of USD):
				December 31, 2019	December 31, 2018
					Current assets
	Cash and cash equivalents (including restricted cash)			$		7,356	$		1,731
	Trade receivables					8,687	962
								F-15

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)
	Inventory	21,745	5,101
	Other current assets	6,964	730
				Non-current assets	108,652	49,074
				Current liabilities
	Trade payables	(4,938)	(6,862)
	Borrowings due to joint venture partners	(26,413)	(2,244)
	Income taxes payable	(8,489)	—
	Borrowings - current	(1,423)	(19,442)
	Other current liabilities	(5,021)	(380)
				Non-current liabilities
	Borrowings – long term	(13,089)	—
	Deferred tax liability	(2,473)	—
				Net assets	$ 91,558	$ 28,670
					Summarized financial information of Pure Sunfarms (in $000’s of USD):
		December 31,
		2019	2018
				Reconciliation of net assets:Accumulated retained earnings
		$26,679	$	(734)
				Contributions from joint venture partners	63,481	31,008
				Currency translation adjustment	1,398	(1,604)
				Net assets	$91,558	$28,670
					Summarized financial information of Pure Sunfarms (in $000’s of USD):
		Year ended December 31,
		2019	2018			2017
							Revenue	$ 62,341	$ 3,691	$ —
							Cost of sales*	(15,067) (1,154) —
							Gross margin	47,274	2,537	—
							Selling, general and administrative expenses	(7,882) (2,584) (701)
							Income (loss) from operations	39,392	(47)	(701)
							Interest expense	(884) (72)		—
							Foreign exchange gain (loss)	(9)	(176)	(3)
							Write down of fixed assets	(144)	—	—
							Other income, net	26	18	—
							Income (loss) before taxes	38,381	(277)	(704)
							Provision for income taxes	(10,967)	55	192
							Net income (loss)	$ 27,414	$ (222)	$(512)
					*	Included in cost of sales for the years ended December 31, 2019, 2018 and 2017 is $2,671, $796 and $0 of depreciation expense.
					Village Fields Hemp USA LLC
					On February 27, 2019, the Company entered into a joint venture with Nature Crisp, LLC (“Nature Crisp”) to form VF Hemp for the objective of outdoor cultivation of high percentage cannabidiol (“CBD”) hemp and CBD extraction in multiple states throughout the United States. VF Hemp is 65% owned by the Company and 35% owned by Nature Crisp.
								F-16

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)
		Under the terms of the VF Hemp agreement, the Company has agreed to lend up to approximately US$15 million to VF Hemp for start-up costs and working capital.
		The Company accounts for its investment in VF Hemp, in accordance with ASC 323, using the equity method. The Company has determined that VF Hemp is a VIE, however it does not consolidate VF Hemp because the Company is not the primary beneficiary. Although the Company is able to exercise significant influence over the operating and financial policies of VF Hemp through its 65.0% ownership interest and joint power arrangement with Nature Crisp, the Company shares joint control of the Board of Directors and therefore is not the primary beneficiary. The Company’s maximum exposure to loss as a result of its involvement with VF Hemp relates directly to the recovery of the outstanding loan to VF Hemp.
		On March 25, 2019, the Company entered into a Grid Loan Agreement (the “Grid Loan”) with VF Hemp, whereby, as of December 31, 2019, the Company had advanced $13,323 in the form of a grid loan to VF Hemp. The Grid Loan has a maturity date of March 25, 2022, and bears simple interest at the rate of 8% per annum, calculated monthly (note 12).
		The Company is not legally obligated for the debts, obligations or liabilities of VF Hemp.
		The Company’s share of the joint venture consists of the following:
	Balance, beginning of the period		$	—
	Investments in joint venture			7
	Share of net loss		(2,464)
	Losses applied against joint venture note receivable		2,457
	Balance, December 31, 2019		$	—
		Summarized financial information of VF Hemp:
					December 31, 2019
	Current assets
	Cash and cash equivalents				$	510
	Inventory		9,308
	Prepaid expenses and deposits		36
	Non-current assets		1,476
	Current liabilities		(1,788)
	Borrowings due to Village Farms		(13,323)
	Net assets				$	(3,781)
					December 31, 2019
	Reconciliation of net assets:Net loss for the year ended December 31, 2019
					$	(3,791)
	Contributions from joint venture partners		10
	Net assets				$	(3,781)
			Year ended
					December 31, 2019
	Service revenue				$	106
	Cost of sales		(232)
	General and administrative expenses		(869)
	Interest expense		(440)
	Write down of inventory		(2,356)
	Net loss				$	(3,791)
						F-17

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)
		Arkansas Valley Green and Gold Hemp
		On May 21, 2019, the Company entered into a joint venture with Arkansas Valley Hemp, LLC (“AV Hemp”) for the objective of outdoor cultivation of high percentage cannabidiol (CBD) hemp and CBD extraction in Colorado. The joint venture, AVGG Hemp, was 60% owned by the Company, 35% owned by AV Hemp, and 5% owned by VF Hemp.
		Immediately following the fourth quarter harvest for AVGG Hemp, all of the hemp was destroyed by a severe windstorm. As a result of the loss, the Company wrote off its $1,184 loan to AVGG Hemp.
			6	DEBT
		The Company has a Term Loan financing agreement with a Canadian creditor (“FCC Loan”). The non-revolving variable rate term loan has a maturity date of May 1, 2021 and a balance of $31,306 as of December 31, 2019. The outstanding balance is repayable by way of monthly installments of principal and interest based on an amortization period of 15 years, with the balance and any accrued interest to be paid in full on May 1, 2021. As of December 31, 2019 and 2018, borrowings under the FCC Loan agreement were subject to an interest rate of 6.391% and 7.082%, respectively.
		The Company’s subsidiary VFCE has a loan agreement with a Canadian Chartered Bank that includes a non-revolving fixed rate loan of CA$3.0 million with a maturity date of June 2023 and fixed interest rate of 4.98%. As of December 31, 2019 and 2018, the balance was US$1,066 and US$1,279, respectively. The loan agreement also includes an uncommitted, non-revolving credit facility for up to CA$300 to cover Letters of Guarantee issued by the bank on behalf of the Company, with a maximum term of 365 days, renewable annually. The loan agreement also includes an uncommitted credit facility for up to CA$700 to support financing of certain capital expenditures. The Company received an initial advance of CA$250 in October 2017. Each advance is to be repaid on a five-year, straight-line amortization of principal, repaid in monthly installments of principal plus interest at an interest rate of CA$ prime rate plus 200 basis points. As of December 31, 2019 and 2018, the balance was US$106 and US$138, respectively.
		The weighted average interest rate on short-term borrowings as of December 31, 2019 and 2018 was 6.2% and 6.9%, respectively.
		The Company has a line of credit agreement with a Canadian Chartered Bank (“Operating Loan”). The revolving Operating Loan has a line of credit up to CA$13,000, less outstanding letters of credit totaling US$150 and CA$38, and variable interest rates with a maturity date on May 31, 2021. The Operating Loan is subject to margin requirements stipulated by the bank. As of December 31, 2019 and 2018, the amount drawn on this facility was US$2,000.
		The Company’s borrowings (“Credit Facilities”) are subject to certain positive and negative covenants and is required to maintain certain minimum working capital. The Company received a waiver for its annual Debt Service Coverage and Debt to EBITDA covenants as of December 31, 2019.
		Accrued interest payable on the credit facilities and loans as of December 31, 2019 and 2018 was $162 and $184, respectively, and these amounts are included in accrued liabilities in the statements of financial position.
		As collateral for the FCC Loan, the Company has provided promissory notes, a first mortgage on the VFF-owned greenhouse properties (excluding the Delta 3 and Delta 2 greenhouse facilities), and general security agreements over its assets. In addition, the Company has provided full recourse guarantees and has granted security therein. The carrying value of the assets and securities pledged as collateral as at December 31, 2019 and 2018 was $155,548 and $101,537, respectively.
		As collateral for the Operating Loan, the Company has provided promissory notes and a first priority security interest over its accounts receivable and inventory. In addition, the Company has granted full recourse guarantees and security therein. The carrying value of the assets pledged as collateral as at December 31, 2019 and 2018 was $24,915 and $36,248, respectively.
		The aggregate annual principal maturities of long-term debt for the next five years and thereafter are as follows:
				F-18

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)
	2020	$ 3,423
	2021	28,459
	2022	345
	2023	162
	2024	—
	Thereafter	—
		$32,389
			7	ACCRUED LIABILITIES
					December 31, 2019	December 31, 2018
						Accrued third party accounts payable	$		804	$		774
						Accrued audit and tax compliance fees	647	137
						Accrued taxes	527	106
						Accrued payroll	296	247
						Accrued utilities	261	403
						Accrued interest	162	184
						Accrued rebates	131	57
						Accrued propagation	51	550
						Other	138	1,051
					$		3,017	$			3,509
			8	LEASES
				The Company leases a parcel of land in Marfa, Texas that one of its greenhouses resides on as well as two distribution centers located in Fort Worth, Texas and Surrey, British Columbia. The Company also leases production related equipment at its greenhouses in Texas and British Columbia. In January the Company commenced leasing of an office building located in Lake Mary, Florida for its corporate headquarters.
				The components of lease related expenses are as follows:
		Year Ended
									December 31, 2019
	Operating lease expense (a)								$	2,410
	Finance lease expense:
	Amortization of right-of-use assets							80
	Interest on lease liabilities							7
	Total finance lease expense								$	87
				(a)		Includes short-term lease costs of $1,287 for the year ended December 31, 2019.
				Cash paid for amounts included in the measurement of lease liabilities:
		Year Ended
									December 31, 2019
	Operating cash flows from operating leases								$	1,043
	Operating cash flows from finance leases								$	7
	Financing cash flows from finance leases								$	83
										F-19

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)
		December 31, 2019
	Weighted average remaining lease term:
	Operating leases		4.1 years
	Finance leases		1.7 years
	Weighted average discount rate:
	Operating leases		6.25%
	Finance leases		6.25%
				Maturities of lease liabilities are as follows:
		Operating			Finance
		leases			leases
						2020	$ 1,073			$	65
						2021	1,090			30
						2022	869		9
						2023	641		—
						2024	276		—
						Thereafter	113		—
						Undiscounted lease cash flow commitments	4,062			104
	Reconciling impact from discounting	(497)			(9)
						Lease liabilities on consolidated balance sheet as of December 31, 2019	$ 3,565			$	95
				The following table presents the Company’s unadjusted lease commitments as of December 31, 2018 as a required disclosure for companies adopting the lease standard prospectively without revising comparative period information.
		Operating			Finance
		leases			leases
						2019	$ 1,253			$	78
						2020	1,039		62
						2021	1,052		30
						2022	841		10
						2023	618		—
						Thereafter	261		—
		$ 5,064			$ 180
							9	FINANCIAL INSTRUMENTS
				The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2019:
								Level 1	Level 2		Level 3		Total
				Financial assets
				Cash and cash equivalents				$11,989	—		—		$11,989
				Trade receivables	8,997	—		—				8,997
				JV notes receivable				26,283	—		—		26,283
				Right-of-use assets	3,582	—		—				3,582
				Total				$50,851	—		—		$50,851
				Financial liabilities
				Trade payables and accrued liabilities				$15,496	—		—		$15,496
				Line of credit	2,000	—		—				2,000
				Lease liabilities	3,660	—		—				3,660
				Debt	—	32,389		—				32,389
				Total				$21,156	$32,389			—		$53,545
				The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2018:
								Level 1	Level 2		Level 3		Total
				Financial assets

Cash and cash equivalents	$11,920	—	—	$11,920
Trade receivables	11,292	—	—	11,292
JV notes receivable	10,873	—	—	10,873
Right-of-use assets	176	—	—	176
Total	$34,261	—	—	$34,261
Financial liabilities
Trade payables and accrued liabilities	$18,110	—	—	$18,110
Line of credit	2,000	—	—	2,000
Lease liabilities	180	—	—	180
Debt	—	35,675	—	35,675
Total	$20,290	$35,675	—	$55,965
There were no financial instruments categorized as Level 3 at December 31, 2019 and December 31, 2018. There were no transfers of assets or liabilities between levels during the years ended December 31, 2019 and 2018, respectively.
					10	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 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.
						F-20

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)
		11	DEFINED CONTRIBUTION PLAN AND GROUP RETIREMENT SAVINGS PLAN
			The Company sponsors a defined contribution plan established pursuant to Section 401(k) of the Internal Revenue Code. Subject to certain dollar limits, employees may contribute a percentage of their salaries to the plan, and the Company will match a portion of each employee’s contribution. This plan is in effect for U.S.-based employees only. The expense pertaining to this plan was $125 for 2019, $133 for 2018 and $138 for 2017.
			The Company also sponsors a group registered retirement savings plan established pursuant to the Capital Accumulation Plan guidelines and applicable legislation. Subject to certain dollar limits, employees may contribute a percentage of their salaries to the plan, and the Company will match a portion of each employee’s contribution. This plan is in effect for Canada-based employees only. The expense pertaining to this plan was $11 for 2019, $9 for 2018 and $16 for 2017.
		12	RELATED PARTY TRANSACTIONS AND BALANCES
			On February 13, 2019, the Company announced that Pure Sunfarms had entered into a credit agreement with Bank of Montreal, as agent and lead lender, and Farm Credit Canada, as lender, in respect of a CA$20 million secured non-revolver term loan (the “Credit Facility”). The Credit Facility, which matures on February 7, 2022, is secured by the Delta 3 facility, and contains customary financial and restrictive covenants. The Company is not a party to the Credit Facility but has provided a limited guarantee in the amount of CA$10 million in connection with the Credit Facility.
			As of December 31, 2019 and 2018, the Company had amounts due from its joint venture, Pure Sunfarms, totaling $4,610 and $1,079, respectively. The December 31, 2019 amount due from joint venture primarily relates to an equity contribution of CA$5,940 (US$4,494) to Pure Sunfarms made by the Company, on November 19, 2019 when Emerald failed to make a required escrow equity payment to Pure Sunfarms on November 1, 2019. Emerald disputed the Company’s additional November equity contribution, as well as the cancellation of 5.94 million common shares of Pure Sunfarms that related to the failure to pay the CA$5,940 equity contribution. In an effort to narrow the issues in dispute and accelerate the resolution of this shareholder dispute, which occurred on March 6, 2020 with the Settlement Agreement, Village Farms unwound its November equity contribution in January with Pure Sunfarms providing Village Farms with a CA$5,940 refund. For the calendar year end December 31, 2019 this was recorded as part of the amount due from Joint Venture. The balance of the 2019 and December 31, 2018 amount due from joint venture are non-interest bearing and due on demand.
			On July 5, 2018, the Company entered into a Shareholder Loan Agreement (the “Loan Agreement”) with Pure Sunfarms, whereby, as of December 31, 2019, the Company contributed CA$13,000 (US$9,959) in the form of a demand loan to Pure Sunfarms. Effective January 1, 2019, the loan amounts bear simple interest at the rate of 6.2% per annum, calculated semi-annually. Interest will accrue and be payable upon demand being made by both Shareholders (see note 12).
			On March 25, 2019, the Company entered into a Grid Loan Agreement (the “Grid Loan”) with VF Hemp, whereby, as of December 31, 2019, the Company had contributed approximately $13,323 in the form a grid loan to VF Hemp. The Grid Loan has a maturity date of March 25, 2022, and bears simple interest at the rate of 8% per annum, calculated monthly.
			Under the terms of the AVGG Hemp Joint Venture Agreement, the Company agreed to lend approximately US$5 million to AVGG Hemp for start-up costs and working capital. The loan bore simple interest at the rate of 8% per annum, calculated monthly. As of December 31, 2019, the Company had loaned AVGG Hemp approximately $1,184. Immediately following AVGG Hemp’s fourth quarter harvest, all of the hemp was destroyed by a severe windstorm. As a result of the loss, the Company wrote off its $1,184 loan to AVGG Hemp.
			Amounts due from the joint ventures, including interest, as of December 31, 2019 and 2018 and included in the statements financial position:
				2019	2018
						Pure Sunfarms	$15,418	$10,873
						VF Hemp	10,865	—
						AVGG Hemp	—	—
						Total	$26,283	$10,873
			One of the Company’s employees is related to a member of the Company’s executive management team and received approximately $110, $115 and $101 in salary and benefits during the years ended December 31, 2019, 2018 and 2017, respectively.
			Included in other assets as of December 31, 2018 is a $64 promissory note that represents the unpaid amount the Company advanced to an employee in connection with a relocation at the request of the Company. The promissory note was paid in full June 10, 2019.
		13	INCOME TAXES
			The components of the provision for (recovery of) income tax for the years ended December 31, 2019 and 2018 are as follows:
							2019
								Current	Deferred	Total
									Federal	$ —	$(5,922)	$(5,922)
									State	8			(751) (743)

Foreign	(19) 818	799
	$ (11) $(5,855) $ 5,866
			F-21

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)
		2018
			Current	Deferred		Total
					Federal	$ —	$(1,786)		$(1,786)
					State	8	(187) (179)
					Foreign	422	(757) (335)
			$ 430	$(2,730) $(2,300)
		2017
			Current	Deferred		Total
					Federal	$ (232) $(1,044) $(1,276)
					State	24	(120) (96)
					Foreign	237	372		609
			$	29	$ ( 792)		$ (763)
						The provision for (recovery of) income taxes reflected in the consolidated statements of (loss) income for the years ended December 31, 2019, 2018 and 2017 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,
			2019	2018		2017
					(Loss) income before income taxes	$(3,541) $(9,815) $(5,520)
					Tax (recovery) calculated at domestic tax rates applicable in the respective			countries	(744) (2,061) (1,877)
					State tax adjustments	(350)	—		(36)
					Non-deductible items	1,304	394		422
					Capitalized debt amortization costs	(631)	—		—
					Share of (income) losses from joint venture	(4,367)	(75)		66
					Unrealized foreign exchange	(276)	(309)		116
					Deferred gains on non-cash contributions to joint venture	(2,407)	—		(1,114)
					Differences attributed to joint venture capital transactions	(42)	(56)		(698)
					Tax rate differences on deferred items	1,472	92		(268)
					Foreign exchange on translation	—	—		132
					Permanent and state true-up		63	(209)		—
					Statutory rate difference	—	—		2,550
					Other	112	(76) (56)
					Provision for (recovery of) income	taxes			$(5,866) $(2,300) $ (763)
						The statutory tax rate in effect in Canada for the years ended December 31, 2019, 2018 and 2017 was 27.0%, 27.0% and 26.0%, respectively, and 21.0%, 21.0% and 34.0%, respectively, in the United States.
						The blended effective tax rate for 2019 was 165.6% compared to 23.4% and 13.8% in 2018 and 2017, 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 positions
						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.
									F-22

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)
		Significant components of the Company’s net deferred income taxes at December 31, 2019 and 2018 are as follows:
			2019	2018
					Deferred tax assets:
	Other assets		$ 2,536	$ 2,239
	Long-term debt		1,040	1,289
	Tax losses: Non-capital and farm losses		11,553	5,974
	Provisions: Debt and unit issuance costs		800	372
	Tax losses: Capital losses		—	228
	Joint venture shares		1,154	—
	Joint venture property, plant and equipment: Valuation allowance		—	(478)
	Tax losses: Valuation allowance		(31) (25)
			17,052	9,599
					Deferred tax liabilities:
	Joint venture shares		(2,593)	(867)
	Property, plant and equipment		(8,333)	(8,458)
			(10,926) (9,535)
					Net tax assets	$ 6,126	$	274
		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 $30 valuation allowance on their deferred tax assets for the year ended December 31, 2019. The valuation allowance reflected on the consolidated balance sheets is approximately $504 and $607 at December 31, 2018 and 2017, respectively.
		Included in the schedule of deferred tax assets and liabilities above are US federal net operating losses carryforwards of approximately $48,285 and $24,340 at December 31, 2019 and 2018, respectively, which will begin to expire in 2031. At the state level, the Company has a combined states net operating loss carry forward of approximately $12,572 and $7,711 as of December 31, 2019 and 2018, respectively, which start to expire in 2020. The Canadian Non-Capital Losses carry forwards are $1,770 and $408 as of December 31, 2019 and 2018, respectively, which begin to expire in 2027.
		At December 31, 2019 and 2018, 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, 2019 and 2018, 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, 2019, the Company’s tax years for 2016, 2017 and 2018 are subject to examination by the tax authorities. As of December 31, 2019, the Company is no longer subject to U.S. federal, state or local examinations by tax authorities for years before 2015.
						F-23

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 three segments. The Company’s three segments include the Produce business, the Energy business and the Company’s cannabis and hemp business. The Produce business produces, markets, and sells the product group which consists of premium quality tomatoes, bell peppers and cucumbers. The Energy business produces power that it sells per a long-term contract to its one customer. For segment information regarding the Company’s cannabis and hemp business refer to Note 5 – Investments – Equity Method and Joint Ventures.
			The Company’s primary operations are in the United States and Canada. Segment information as of and for the years ended December 31, 2019, 2018 and 2017:
				2019	2018	2017
							Sales
							Produce – U.S.	$120,745	$124,699	$132,464
							Produce – Canada	22,674	23,355	24,020
							Energy – Canada	1,149	1,946	1,922
				$144,568	$150,000	$158,406
							Interest expense
							Produce – U.S.	$	36	$	37	$	31
							Produce - Canada	2,507	2,668	2,563
							Energy – Canada	71	89	101
				$	2,614	$	2,794	$	2,695
							Interest income
							Corporate	$	1,036	$	311	$	—
				$	1,036	$	311	$	—
							Depreciation
							Produce – U.S.	$	4,545	$	4,591	$	5,056
							Produce - Canada	1,917	1,564	1,807
							Energy – Canada	904	872	796
				$	7,366	$	7,027	$	7,659
							Gross margin
							Produce – U.S.	$ (14,153)	$	494	$	5,931
							Produce - Canada	7,486	8,659	7,946
							Energy – Canada	(678)	164	96
				$ (7,345) $	9,317	$ 13,973
								Total assets	2019	2018
	United States			$ 88,395	$ 79,126
	Canada								92,067	58,690
	Energy - Canada				2,946	3,632
				$183,408	$141,448
								Property, plant and equipment, net	2019	2018
	United States			$ 41,656	$ 42,886
	Canada								18,759	25,933
	Energy - Canada				2,743	3,369
				$ 63,158	$ 72,188
											F-24

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)
		15	INCOME PER SHARE
			Basic net income (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,
					2019	2018	2017
								Numerator:Net income (loss)
					$	2,325		$	(7,515)	$	(4,757)
								Denominator:Weighted average number of common shares - Basic
					49,418,228	44,356,699	39,143,912
								Effect of dilutive securities- share-based employee options and
								awards	1,760,753	—	—
								Weighted average number of common shares - Diluted	51,178,981	44,356,699	39,143,912
								Antidilutive options and awards (1)	310,000	2,174,999	1,163,648
								Net income (loss) per ordinary share:Basic
					$	0.05		$	(0.17) $	(0.12)
								Diluted	$	0.05		$	(0.17) $	(0.12)
			(1)					Options to purchase shares of common stock and unvested RSUs are not included in the calculation of net income (loss) per share because the effect would have been anti-dilutive.
			On March 24, 2020, the Company completed an underwritten public offering of 3,125,000 common shares in the capital of the Company (“Common Shares”), plus the exercise in full of the over-allotment option of 468,750 Common Shares (the “Offered Shares”) (note 18).
		16	SHARE-BASED COMPENSATION PLAN
			The Company’s Share-Based Compensation Plan (the “Plan”), dated January 1, 2010 was most recently approved by Shareholders on June 14, 2018. 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 2,074,000 shares remain available for issuance at December 31, 2019.
			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:
				2019		2018	2017
								Expected volatility	60.7% 55.5% 50.8%
								Dividend	$nil		$nil	$nil
								Risk-free interest rate	1.86%		2.30%	1.43%
								Expected life	5.7 years		5.9 years	6.0 years
								Fair value	CA$9.7259	CA$3.2541	CA$3.1869
									F-25

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)

Stock option transactions under the Company’s plan for the years ended December 31, 2019, 2018 and 2017 are summarized as follows:

Weighted

Average

AverageExercise

Remaining

Aggregate

Number of

Contractual

Intrinsic

Options

Price

Term (years)

Value

Outstanding at January 1, 2017

2,116,065

CA$1.19

6.24

Granted during 2017

320,000

CA$4.04

9.71

Exercised during 2017

(91,667)

CA$0.90

4.09

Forfeited/expired during 2017

(6,666)

CA$1.48

Outstanding at December 31, 2017

2,337,732

CA$1.59

5.89

$14,125

Exercisable at December 31, 2017

1,752,739

CA$1.20

4.86

$11,295

Granted during 2018

203,000

CA$5.79

9.44

Exercised during 2018

(365,733)

CA$0.98

2.68

Forfeited during 2018

(10,000)

CA$1.48

Outstanding at December 31, 2018

2,164,999

CA$2.10

5.69

$ 5,553

Exercisable at December 31, 2018

1,648,670

CA$1.43

4.74

$ 5,012

Granted

510,000

CA$16.32

9.19

Exercised

(212,332) CA$1.29

4.85

Forfeited

(10,001) CA$2.20

Outstanding at December 31, 2019

2,452,666

CA$5.12

5.60

$11,435

Exercisable at December 31, 2019

1,707,337

CA$1.78

4.18

$10,736

The weighted-average grant-date fair value of options granted during the years 2019, 2018 and 2017 was $9.58, $3.22 and $2.09, respectively. The total intrinsic value of options exercised during the years ended December 31, 2019, 2018 and 2017, was $1,999, $2,162 and $219, respectively.

A summary of the status of the Company’s non-vested stock options, and the changes during the year ended December 31, 2019, is presented below:

Weighted

Average Grant

Number of

Date Fair

Aggregate

Options

Value

Intrinsic Value

Non-vested at January 1, 2019

516,329

CA$2.27

Granted

510,000

CA$9.58

Vested

(270,999) CA$1.89

Forfeited

(10,001) CA$1.06

Non-vested at December 31, 2019

745,329

CA$7.43

$ CA$699

As of December 31, 2019, there was $855 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 8.98 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.

F-26

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)
		Performance-based restricted share unit activity for the years ended December 31, 2019, 2018 and 2017 is as follows:
			Number of
			Performance-based	Weighted Average
			Restricted Share	Grant Date Fair
			Units	Value
					Outstanding at January 1, 2017	—
	Issued		885,000				CA$2.20
	Issued		21,000				CA$6.00
	Exercised		(768,000) CA$2.20
	Forfeited/expired		(10,000) CA$2.20
					Outstanding at December 31, 2017	128,000				CA$2.82
					Earned but unissued at December 31, 2017	—	—
	Issued		979,000				CA$5.79
	Exercised		(50,334) CA$3.06
	Forfeited					—	—
					Outstanding at December 31, 2018	1,056,666				CA$5.56
					Earned but unissued at December 31, 2018	175,333				CA$5.08
	Issued		355,000	CA$14.94
	Exercised		(442,666) CA$7.82
	Forfeited/expired		(230,000) CA$12.90
					Outstanding at December 31, 2019	739,000				CA$6.58
					Earned but unissued at December 31, 2019	30,000	CA$12.87
		A summary of the status of the Company’s non-vested performance-based restricted share units, and the changes during the year ended December 31, 2019, is presented below:
			Number of
			Performance-based	Weighted Average
			Restricted Share	Grant Date Fair
			Units	Value
					Non-vested at January 1, 2019	881,333				CA$5.63
	Granted		355,000	CA$14.94
	Vested		(297,333) CA$7.54
	Forfeited		(230,000) CA$12.90
					Non-vested at December 31, 2019	709,000	CA$10.21
		Total share-based compensation expense for the years ended December 31, 2019, 2018 and 2017 of $4,714, $1,454 and $1,519, 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,
			2019	2018			2017
					Trade receivables	$ 2,301			$	(33) $(1,059)
					Inventories	9,042	(5,435) (895)
					Due from joint ventures	(3,530)	—			—
					Other receivables	(448)	1,239			(1,062)
					Prepaid expenses and deposits	(370)	(79)			(134)
					Trade payables	(1,953)	1,649			241
					Accrued liabilities	(369)	(284)			207
					Other assets, net of other liabilities	571	(206)			(817)
			$ 5,244			$(3,149) $(3,519)
									F-27

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)
		18	SUBSEQUENT EVENTS
			On March 6, 2020 the Company and Emerald closed a settlement agreement in order to settle all outstanding disputes with respect to Pure Sunfarms (note 5).
			On March 24, 2020, the Company completed an underwritten public offering of 3,125,000 Common Shares in the capital of the Company plus the exercise in full of the over-allotment option of 468,750 Common Shares at a price of $3.20 per Offered Share for aggregate gross proceeds to the Company of $11,500,000 (the “Offering”). The Offering was conducted by Beacon Securities Limited (the “Underwriter”), as sole underwriter. (All figures are expressed in Canadian dollars.)
			The net proceeds to the Company from the Offering, after deducting the Underwriter’s fee of $0.69 million, but before deducting the expenses of the Offering, were $10.71 million.
			On March 28, 2020, Pure Sunfarms secured a CA$7,500 revolving line of credit and CA$12,500 term credit facility. The Company, along with Emerald, are guarantors of the loan and as a condition of funding, the shareholders are required to contribute CA$16,000 of additional equity, of which CA$8,000 has been contributed by the Company (note 5). The Company has committed to contributing a further CA$8,000.
				F-28