Attached files

file filename
EX-99.3 - EX-99.3 - Village Farms International, Inc.d918314dex993.htm
EX-99.1 - EX-99.1 - Village Farms International, Inc.d918314dex991.htm
EX-10.1 - EX-10.1 - Village Farms International, Inc.d918314dex101.htm
8-K - FORM 8-K - Village Farms International, Inc.d918314d8k.htm

Exhibit 99.2

Village Farms International, Inc.

Condensed Consolidated Interim Statements of Financial Position

(In thousands of United States dollars)

(Unaudited)

 

     June 30, 2019     December 31, 2018  

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 11,706     $ 11,920  

Trade receivables

     13,823       11,292  

Inventories

     21,284       24,956  

Amounts due from joint ventures

     10,602       10,873  

Other receivables

     819       332  

Prepaid expenses and deposits

     1,623       889  
  

 

 

   

 

 

 

Total current assets

     59,857       60,262  
  

 

 

   

 

 

 

Non-current assets

    

Property, plant and equipment

     64,671       72,188  

Operating lease right-of-use assets

     3,914       —    

Finance lease right-of-use-assets

     136       176  

Investment in joint ventures

     35,805       6,341  

Note receivable - joint ventures

     5,608       —    

Deferred tax asset

     3,602       274  

Other assets

     1,718       2,207  
  

 

 

   

 

 

 

Total assets

   $ 175,311     $ 141,448  
  

 

 

   

 

 

 

LIABILITIES

    

Current liabilities

    

Line of credit

   $ 5,000     $ 2,000  

Trade payables

     9,389       14,601  

Current maturities of long-term debt

     3,439       3,414  

Accrued liabilities

     5,886       3,509  

Operating lease liabilities - current

     839       —    

Finance lease liabilities - current

     69       78  
  

 

 

   

 

 

 

Total current liabilities

     24,622       23,602  
  

 

 

   

 

 

 

Non-current liabilities

    

Long-term debt

     30,645       32,261  

Deferred tax liability

     4,472       —    

Operating lease liabilities - current

     3,140       —    

Finance lease liabilities - current

     66       102  

Other liabilities

     1,205       1,050  
  

 

 

   

 

 

 

Total liabilities

     64,150       57,015  
  

 

 

   

 

 

 

SHAREHOLDERS’ EQUITY

    

Common stock, no par value per share - unlimited shares authorized; 49,273,786 shares issued and outstanding at June 30, 2019 and 47,642,672 shares issued and outstanding at December 31, 2018.

     76,435       60,872  

Additional paid in capital

     3,101       2,198  

Accumulated other comprehensive loss

     (482     (562

Retained earnings

     32,107       21,925  
  

 

 

   

 

 

 

Total shareholders’ equity

     111,161       84,433  
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 175,311     $ 141,448  
  

 

 

   

 

 

 

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

 

1


Village Farms International, Inc.

Condensed Consolidated Interim Statements of Income (Loss) and Comprehensive Income (Loss)

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

(Unaudited)

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2019     2018     2019     2018  

Sales

   $ 41,329     $ 42,039     $ 73,219     $ 71,529  

Cost of sales

     (44,299     (41,150     (75,514     (67,052
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     (2,970     889       (2,295     4,477  

Selling, general and administrative expenses

     (3,949     (3,688     (8,188     (7,045

Share-based compensation

     (701     (138     (1,997     (256

Interest expense

     (669     (710     (1,363     (1,341

Interest income

     211       0       347       14  

Foreign exchange gain

     243       (21     521       (14

Other income

     282       26       152       44  

Gain on disposal of assets

     —         —         13,564       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) before taxes and earnings of unconsolidated entities

     (7,553     (3,642     741       (4,121

Recovery of (provision for) income taxes

     3,284       847       (1,152     1,022  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from consolidated entities after income taxes

     (4,269     (2,795     (411     (3,099

Equity earnings (losses) from unconsolidated entities

     7,985       (265     10,593       (563
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 3,716     $ (3,060   $ 10,182     $ (3,662
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic income(loss) per share

   $ 0.08     $ (0.07   $ 0.21     $ (0.09
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted income (loss) per share

   $ 0.07     $ (0.07   $ 0.20     $ (0.09
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of common shares used in the computation of net income (loss) per share:

        

Basic

     48,825       43,336       48,322       42,894  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     50,712       43,336       50,159       42,894  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 3,716     $ (3,060   $ 10,182     $ (3,662

Other comprehensive income (loss):

        

Foreign currency translation adjustment

     36       (34     80       (89
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   $ 3,752     $ (3,094   $ 10,262     $ (3,751
  

 

 

   

 

 

   

 

 

   

 

 

 

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

 

2


Village Farms International, Inc.

Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity

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

(Unaudited)

 

     Three Months Ended June 30, 2019  
     Number of                   Accumulated Other           Total  
     Common      Common      Additional paid     Comprehensive     Retained     Shareholders’  
     Shares      Stock      in capital     (Loss) Income     Earnings     Equity  

Balance at April 1, 2019

     47,812,003      $ 61,832      $ 2,568     $ (518   $ 28,391     $ 92,273  

Shares issued on exercise of stock options

     36,783        61        (20     —         —         41  

Share-based compensation

     125,000        —          701       —         —         701  

Shares issued on exercise of warrants

     300,000        614        (148         466  

Shares issued pursuant to public offering of common shares, net of issuance costs

     1,000,000        13,928              13,928  

Cumulative translation adjustment

     —          —          —         36       —         36  

Net income

     —          —          —         —         3,716       3,716  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2019

     49,273,786      $ 76,435      $ 3,101     $ (482   $ 32,107     $ 111,161  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended June 30, 2018  
     Number of                   Accumulated Other           Total  
     Common      Common      Additional paid     Comprehensive     Retained     Shareholders’  
     Shares      Stock      in capital     (Loss) Income     Earnings     Equity  

Balance at April 1, 2018

     42,447,613      $ 36,284      $ 1,844     $ (446   $ 28,837     $ 66,519  

Shares issued on exercise of stock options

     137,732        94        —         —         —         94  

Shares issued pursuant to private placement of common shares, net of issuance costs

     1,886,793        7,755              7,755  

Share-based compensation

     —          —          138       —         —         138  

Cumulative translation adjustment

     —          —          —         (34     —         (34

Net loss

     —          —          —         —         (3,060     (3,060
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2018

     44,472,138      $ 44,133      $ 1,982     $ (480   $ 25,777     $ 71,412  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     Six Months Ended June 30, 2019  
     Number of                   Accumulated Other           Total  
     Common      Common      Additional paid     Comprehensive     Retained     Shareholders’  
     Shares      Stock      in capital     (Loss) Income     Earnings     Equity  

Balance at January 1, 2019

     47,642,672      $ 60,872      $ 2,198     $ (562   $ 21,925     $ 84,433  

Shares issued on exercise of stock options

     52,782        113        (38     —         —         75  

Share-based compensation

     278,332        908        1,089       —         —         1,997  

Shares issued on exercise of warrants

     300,000        614        (148         466  

Shares issued pursuant to public offering of common shares, net of issuance costs

     1,000,000        13,928              13,928  

Cumulative translation adjustment

     —          —          —         80       —         80  

Net income

     —          —          —         —         10,182       10,182  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2019

     49,273,786      $ 76,435      $ 3,101     $ (482   $ 32,107     $ 111,161  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     Six Months Ended June 30, 2018  
     Number of                   Accumulated Other           Total  
     Common      Common      Additional paid     Comprehensive     Retained     Shareholders’  
     Shares      Stock      in capital     (Loss) Income     Earnings     Equity  

Balance at January 1, 2018

     42,242,612      $ 36,115      $ 1,726     $ (391   $ 29,439     $ 66,889  

Shares issued on exercise of stock options

     342,733        263        —         —         —         263  

Shares issued pursuant to private placement of common shares, net of issuance costs

     1,886,793        7,755           

Share-based compensation

     —          —          256       —         —         256  

Cumulative translation adjustment

     —          —          —         (89     —         (89

Net loss

     —          —          —         —         (3,662     (3,662
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2018

     44,472,138      $ 44,133      $ 1,982     $ (480   $ 25,777     $ 71,412  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

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

 

3


Village Farms International, Inc.

Condensed Consolidated Interim Statements of Cash Flows

(In thousands of United States dollars)

(Unaudited)

 

     Six Months Ended June 30,  
     2019     2018  

Cash flows used in operating activities

   $ 10,182     $ (3,662

Net income (loss)

    

Adjustments to reconcile net loss to net cash used in operating activities:

    

Depreciation and amortization

     3,766       3,523  

Amortization of deferred charges

     38       38  

Share of (income) loss from joint ventures

     (10,593     563  

Interest expense

     1,363       1,303  

Interest income

     (347     (14

Gain on disposal of assets

     (13,564     —    

Share-based compensation

     1,997       256  

Lease payments

     (517     —    

Deferred income taxes

     1,144       (1,261

Interest paid on long-term debt

     (1,063     (1,289

Changes in non-cash working capital items

     (1,843     (6,237
  

 

 

   

 

 

 

Net cash used in operating activities

     (9,437     (6,780
  

 

 

   

 

 

 

Cash flows used in investing activities:

    

Purchases of property, plant and equipment, net of rebate

     (730     (1,440

Note receivables to joint ventures

     (5,806     —    

Proceeds from sale of asset

     60       —    

Investment in joint ventures

     (13     —    
  

 

 

   

 

 

 

Net cash used in investing activities

     (6,489     (1,440
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from borrowings

     3,000       7,000  

Repayments on borrowings

     (1,709     (917

Proceeds from issuance of common stock pursuant to public offering, net

     13,928       7,755  

Proceeds from exercise of stock options

     75       263  

Payments on capital lease obligations

     (48     (34

Proceeds from exercise of warrants

     466       —    
  

 

 

   

 

 

 

Net cash provided by financing activities

     15,712       14,067  
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     —         (5
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (214     5,842  

Cash and cash equivalents, beginning of period

     11,920       7,091  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 11,706     $ 12,933  
  

 

 

   

 

 

 

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

 

4


VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

(Unaudited)

 

1

NATURE OF OPERATIONS

Village Farms International, Inc. (“VFF” the parent company, together with its subsidiaries, the “Company”) is incorporated under the Canada Business Corporation Act. VFF’s principal operating subsidiaries as of June 30, 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 50% equity interest in Pure Sunfarms Corp. (“Pure Sunfarms”), all of which are recorded as Investments in Joint Ventures (note 7).

The Company’s shares are listed on the Toronto Stock Exchange under the symbol VFF and are also listed in the United States on the Nasdaq Capital Market (“Nasdaq”) under the symbol VFF.

The Company owns and operates sophisticated, highly intensive agricultural greenhouse facilities in British Columbia and Texas, where it produces, markets and sells premium-quality tomatoes, bell peppers, and cucumbers. The Company, through its subsidiary VFCE, owns and operates a 7.0 MW power plant that generates electricity. The Company’s joint venture, Pure Sunfarms, is a licensed producer and supplier of cannabis products to be sold to other licensed providers and provincial governments across Canada and internationally. The Company’s joint ventures, VF Hemp and AVGG Hemp, are cultivators and extractors of high cannabidiol (“CBD”) hemp in multiple states throughout the United States.

 

2

BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements for the quarter and six months ended June 30, 2019 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. 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.

These interim consolidated financial statements do not include all information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are subject to seasonal variations and are not necessarily indicative of the results that may be expected for the year ended December 31, 2019. For further information, refer to the Consolidated Financial Statements and notes thereto included in our annual report on Form 10-K for the fiscal year ended December 31, 2019 and 2018.

Other than as described below, there were no changes to our significant accounting policies described in our annual financial statements that had a material impact on our financial statements and related notes.

 

3

NEW ACCOUNTING PRONOUNCEMENTS 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.

 

5


VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

(Unaudited)

 

On January 1, 2019, the Company adopted Topic 842, using the modified retrospective method and did not restate prior periods. 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 condensed 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 of 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 of December 31, 2018

     180  
  

 

 

 

Lease liability recognized as of January 1, 2019

   $ 4,537  

Of which are:

  

Current lease liabilities

     871  

Non-current lease liabilities

     3,666  
  

 

 

 
   $ 4,537  
  

 

 

 

The recognized right-of-use assets relate to the following types of assets:

 

     December 31, 2018      January 1, 2019  

Land

   $  —        $ 140  

Building

     —          4,017  

Equipment

     176        380  
  

 

 

    

 

 

 

Total right-of-use assets

   $ 176      $ 4,537  
  

 

 

    

 

 

 

 

4

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.

 

6


VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

(Unaudited)

 

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.

 

5

INVENTORIES

 

     June 30, 2019      December 31, 2018  

Crop inventory

   $ 20,758      $ 24,249  

Purchased produce inventory

     457        643  

Spare parts inventory

     69        64  
  

 

 

    

 

 

 
   $ 21,284      $ 24,956  
  

 

 

    

 

 

 

 

6

PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consist of the following:

 

     June 30, 2019      December 31, 2018  

Land

   $ 3,204      $ 3,932  

Leasehold and land improvements

     3,820        3,819  

Buildings

     72,457        77,003  

Machinery and equipment

     61,574        65,664  

Construction in progress

     737        552  

Less: Accumulated depreciation

     (77,121      (78,782
  

 

 

    

 

 

 

Plant, property and equipment, net

   $ 64,671      $ 72,188  
  

 

 

    

 

 

 

Depreciation expense on property, plant and equipment, was $1,560 and $3,227, respectively, for the three and six months ended June 30, 2019 and $1,722 and $3,523, respectively, for the three and six months ended June 30, 2018. On March 31, 2019, Pure Sunfarms exercised its option to acquire the Delta 2 assets and operations (note 8).

 

7


VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

(Unaudited)

 

7

LEASES

The components of lease related expenses are as follows:

 

     Three Months Ended
June 30, 2019
     Six Months Ended
June 30, 2019
 

Operating lease expense (a)

   $ 590      $ 1,174  
  

 

 

    

 

 

 

Finance lease expense:

     

Amortization of right-of-use assets

   $ 20      $ 40  

Interest on lease liabilities

     2        5  
  

 

 

    

 

 

 

Total finance lease expense

   $ 22      $ 45  
  

 

 

    

 

 

 

 

(a)

Includes short-term lease costs of $317 and $628 for the three and six months ended June 30, 2019, respectively.

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

 

     Three Months Ended
June 30, 2019
     Six Months Ended
June 30, 2019
 

Operating cash flows from operating leases

   $ 259      $ 513  

Operating cash flows from finance leases

   $ 2      $ 4  

Financing cash flows from finance leases

   $ 21      $ 48  

 

     June 30, 2019  

Weighted average remaining lease term:

  

Operating leases

     4.6  

Finance leases

     2.2  

Weighted average discount rate:

  

Operating leases

     6.25

Finance leases

     6.25

Maturities of lease liabilities are as follows:

 

     Operating
leases
     Finance
leases
 

Remainder of 2019

   $ 530        42  

2020

     1,073        65  

2021

     1,090        30  

2022

     869        9  

2023

     641        —    

Thereafter

     389        —    
  

 

 

    

 

 

 

Undiscounted lease cash flow commitments

     4,592     

Reconciling impact from discounting

     (613      (11
  

 

 

    

 

 

 

Lease liabilities as of June 30, 2019

   $ 3,979        135  
  

 

 

    

 

 

 

 

8


VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

(Unaudited)

 

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
leases
     Finance
leases
 

2019

   $ 1,253      $ 78  

2020

     1,039        62  

2021

     1,052        30  

2022

     841        10  

2023

     618        —    

Thereafter

     261        —    
  

 

 

    

 

 

 
   $ 5,064      $ 180  
  

 

 

    

 

 

 

 

8

INVESTMENT IN 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.

The Company accounts for its investment in Pure Sunfarms, in accordance with Accounting Standards Codification (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 50.0% 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 June 30, 2019 relates primarily to the recovery of the outstanding loan to Pure Sunfarms.

The Company is required to apply the hypothetical liquidation at book value (“HLBV”) method to determine its allocation of the profits and loss in Pure Sunfarms. When determining its allocation of profits and losses, 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. Effective for the quarter and six-month periods ended June 30, 2019, the Company under the hypothetical liquidation method received 62.3% and 61.7%, respectively for each period.

On July 5, 2018, the Company and Emerald Health Therapeutics Canada Inc. (a subsidiary of Emerald) (together, the “Shareholders”) entered into a Shareholder Loan Agreement (the “Loan Agreement”) with Pure Sunfarms, whereby, as of June 30, 2019, the Shareholders had each contributed $10,602 (CA$13,000) 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.

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 June 30, 2019, and December 31, 2018, the total investment in Pure Sunfarms of US$35.8 million and US$6.3 million, respectively, was 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.

 

9


VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

(Unaudited)

 

The Company’s share of the joint venture consists of the following:

 

Balance, January 1, 2018

   $ 6,511  

Share of net 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 period

     10,747  
  

 

 

 

Balance, June 30, 2019

   $ 35,805  
  

 

 

 

Summarized financial information of Pure Sunfarms:

 

     June 30, 2019      December 31, 2018  

Current assets

     

Cash and cash equivalents (including restricted cash)

   $ 14,249      $ 1,731  

Trade receivables

     11,812        962  

Inventory

     9,653        5,101  

Other current assets

     449        730  

Non-current assets

     83,230        49,074  

Current liabilities

     

Trade payables

     (1,981      (6,862

Borrowings due to joint venture partners

     (22,576      (21,686

Other current liabilities

     (8,077      (380

Non-current liabilities

     

Borrowings – long term

     (13,754      —    
  

 

 

    

 

 

 

Net assets

   $ 73,005      $ 28,670  
  

 

 

    

 

 

 

Summarized financial information of Pure Sunfarms:

 

     June 30, 2019      December 31, 2018  

Reconciliation of net assets:

     

Accumulated retained earnings

   $ 16,688      $ (734

Contributions from joint venture partners

     55,762        31,008  

Currency translation adjustment

     555        (1,604
  

 

 

    

 

 

 

Net assets

   $ 73,005      $ 28,670  
  

 

 

    

 

 

 

Summarized financial information of Pure Sunfarms:

 

     Three months ended      Six months ended  
     June 30,      June 30,  
     2019      2018      2019      2018  

Revenue

   $ 24,244      $ —        $ 35,045      $ —    
Cost of sales*      (3,956      —          (7,774      —    
  

 

 

    

 

 

    

 

 

    

 

 

 
Gross Margin      20,288        —          27,271        —    
Selling, general and administrative expenses      (1,786      (589      (2,785      (1,025
  

 

 

    

 

 

    

 

 

    

 

 

 
Income (loss) from operations      18,502        (589      24,486        (1,025
Interest expense, net      (293      1        (293      1  
Foreign exchange gain      (25      60        14        21  

Other income, net

     4        —          13        —    
  

 

 

    

 

 

    

 

 

    

 

 

 
Income (loss) before taxes      18,188        (528      24,220        (1,003
(Provision for) recovery of income taxes      (5,169      —          (6,798      —    
  

 

 

    

 

 

    

 

 

    

 

 

 
Net Income (loss)    $ 13,019      $ (528    $ 17,422      $ (1,003
  

 

 

    

 

 

    

 

 

    

 

 

 

 

*

Included in cost of sales for the three and six months ended June 30, 2019 is US$387 and USD$845, respectively, of depreciation expense. There was no depreciation included in cost of sales for the three and six months ended June 30, 2018.

 

10


VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

(Unaudited)

 

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. Under the terms of the VF Hemp Joint Venture Agreement, the Company will lend 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 because the Company is able to exercise significant influence over the operating and financial policies of VF Hemp through its 65% ownership interest and joint power arrangement with Nature Crisp.

On March 25, 2019, the Company entered into a Grid Loan Agreement (the “Grid Loan”) with VF Hemp, whereby, as of June 30, 2019, the Company had advanced $5,066 in the form of a grid loan to VF Hemp. The Grid Loan has a maturity date of March 25, 2022, and will bear simple interest at the rate of 8% per annum, calculated monthly (note 10).

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

     (133

Share of losses applied against joint venture note receivable

     126  
  

 

 

 

Balance, June 30, 2019

   $ —    
  

 

 

 

Summarized financial information of VF Hemp:

 

Current assets

  

Cash and cash equivalents

   $ 73  

Inventory

     2,486  

Prepaid expenses

     1,439  

Non-current assets

     2,805  

Current liabilities

     (1,805

Non-current liabilities

     (5,193
  

 

 

 

Net assets

   $ (195
  

 

 

 

 

Reconciliation of net assets:

  

Net loss for the six months ended June 30, 2019

   $ (205

Contributions from joint venture partners

     10  
  

 

 

 

Net assets

   $ (195
  

 

 

 

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, is 60% owned by the Company, 35% owned by AV Hemp, and 5% owned by VF Hemp.

Under the terms of the AVGG Hemp Joint Venture Agreement, the Company will lend approximately US$5 million to AVGG Hemp for start-up costs and working capital. The loans bear simple interest at the rate of 8% per annum, calculated monthly (note 10). To the extent cash is available from positive cash flow, the AVGG Hemp has agreed to repay the Company with respect to any such loans, in the range of $2 million to $5 million in the initial two years following the formation of AVGG Hemp. As of June 30, 2019, the Company had loaned AVGG Hemp approximately $542.

 

11


VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

(Unaudited)

 

The Company accounts for its investment in AVGG Hemp, in accordance with ASC 323, using the equity method because the Company is able to exercise significant influence over the operating and financial policies of AVGG Hemp through its 60% ownership interest and joint power arrangement with AV Hemp.

The Company’s share of the joint venture consists of the following:

 

Balance, beginning of the period

   $ —    

Investments in joint venture

     6  

Share of net loss

     (16

Losses applied against joint venture note receivable

     10  
  

 

 

 

Balance, June 30, 2019

   $ —    
  

 

 

 

Summarized financial information of AVGG Hemp:

 

Current assets

  

Cash and cash equivalents

   $ 10  

Inventory

     533  

Other current assets

     —    

Current liabilities

     (17

Non-current liabilities

     (560
  

 

 

 

Net assets

   $ (34
  

 

 

 

 

Reconciliation of net assets:

  

Net loss for the six months ended June 30, 2019

   $ (44

Contributions from joint venture partners

     10  
  

 

 

 

Net assets

   $ (34
  

 

 

 

Summarized joint ventures’ information:

 

     Investment in joint ventures
as of June 30, 2019
     Investment in joint ventures
as of December 31, 2018
 

Pure Sunfarms

   $ 35,805      $ 6,341  

VF Hemp

     —          —    

AVGG Hemp

     —          —    
  

 

 

    

 

 

 

Total

   $ 35,805      $ 6,341  
  

 

 

    

 

 

 

 

     Equity earnings (losses) from unconsolidated entities  
     Three months ended June 30,      Six months ended June 30,  
     2019      2018      2019      2018  

Pure Sunfarms

   $ 8,105      $ (265    $ 10,747      $ (563

VF Hemp

     (104      —          (133      —    

AVGG Hemp

     (16      —          (21      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 7,985      $ (265    $ 10,593      $ (563
  

 

 

    

 

 

    

 

 

    

 

 

 

 

9

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 $32,845 as of June 30, 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 June 30, 2019, and December 31, 2018, borrowings under the FCC Loan agreement were subject to an interest rate of 7.076% and 7.082%, respectively, which is determined based on the Company’s Debt to EBITDA ratio and the applicable LIBOR rate.

 

12


VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

(Unaudited)

 

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 June 30, 2019, and December 31, 2018, the balance was US$1,219 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 June 30, 2019, and December 31, 2018, the balance was US$127 and US$138, 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 and variable interest rates with a maturity date on May 31, 2021 and is subject to margin requirements stipulated by the bank. As of June 30, 2019, and December 31, 2018, US$5,000 and US$2,000, respectively, was drawn on this facility, which is available to a maximum of CA$13,000, less outstanding letters of credit totaling US$150 and CA$38.

The Company’s borrowings (“Credit Facilities”) are subject to certain positive and negative covenants. As of June 30, 2019 the Company was in compliance with all covenants on its Credit Facilities.

Accrued interest payable on the credit facilities and loans as of June 30, 2019 and December 31, 2018 was $177 and $184, respectively, and these amounts are included in accrued liabilities in the interim statement 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 of June 30, 2019 and December 31, 2018 was $140,204 and $105,200, 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 of June 30, 2019 and December 31, 2018 was $35,107 and $36,248, respectively.

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

 

Remainder of 2019

   $ 1,718  

2020

     3,426  

2021

     28,567  

2022

     344  

2023

     175  

Thereafter

     —    
  

 

 

 
   $ 34,230  
  

 

 

 

 

10

FINANCIAL INSTRUMENTS

 

13


VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

(Unaudited)

 

The Company records accounts receivable, accounts payable, accrued liabilities and debt at cost. The carrying values of these instruments approximate their fair value due to their short-term maturities.

 

11

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 June 30, 2019 and December 31, 2018, the Company had amounts due from its joint venture, Pure Sunfarms, totaling $168 and $1,079, respectively, primarily for consulting services and the reimbursement of expenses which occurred in the year. These amounts are non-interest bearing and due on demand. On July 5, 2018, the Shareholders entered into a Loan Agreement with Pure Sunfarms, whereby, as of June 30, 2019, the Shareholders had each contributed CA$13,000 (US$10,602) 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 is accrued and payable on demand being made by either Shareholder. Prior to January 1, 2019, the loan amount bore interest at the rate of 8.0%. These amounts are included in amounts due from joint venture in the interim statements of financial position.

On March 25, 2019, the Company entered into a Grid Loan Agreement (the “Grid Loan”) with VF Hemp, whereby, as of June 30, 2019, the Company had contributed $5,066 in the form of a grid loan to VF Hemp. The Grid Loan has a maturity date of March 25, 2022, and will bear simple interest at the rate of 8% per annum, calculated monthly.

Under the terms of the AVGG Hemp Joint Venture Agreement, the Company will lend approximately US$5 million to AVGG Hemp for start-up costs and working capital. The loans will bear simple interest at the rate of 8% per annum, calculated monthly. As of June 30, 2019, the Company had loaned AVGG Hemp approximately $542.

Amounts due from the joint ventures, including interest, as of June 30, 2019 and December 31, 2018 and included in the statements financial position:

 

     June 30, 2019      December 31, 2018  

Pure Sunfarms

   $ 10,602      $ 10,873  

VF Hemp

     5,066        —    

AVGG Hemp

     542        —    
  

 

 

    

 

 

 

Total

   $ 16,210      $ 10,873  
  

 

 

    

 

 

 

One of the Company’s employees is related to a member of the Company’s executive management team and received approximately $56 and $58 in salary and benefits during the six months ended June 30, 2019 and 2018, respectively.

Included in other assets as at 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.

 

14


VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

(Unaudited)

 

12

INCOME TAXES

Income tax expense is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual rate used for the six months ended June 30, 2019 was 24%, and 25% for the six months ended June 30, 2018.

 

13

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 segment. 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 segment refer to Note 7 – Investments – Equity Method and Joint Ventures.

The Company’s primary operations are in the United States and Canada. Segment information for the three and six months ended June 30, 2019 and 2018:

 

     Three months ended June 30,      Six months ended June 30,  
     2019      2018      2019      2018  

Sales

           

Produce – U.S.

   $ 33,661      $ 32,892      $ 61,860      $ 60,318  

Produce – Canada

     7,423        8,693        10,802        10,232  

Energy – Canada

     245        454        557        979  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 41,329      $ 42,039      $ 73,219      $ 71,529  
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest expense

           

Produce – U.S.

   $ 32      $ 9      $ 65      $ 19  

Produce – Canada

     618        678        1,261        1,275  

Energy – Canada

     19        23        37        47  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 669      $ 710      $ 1,363      $ 1,341  
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest income

           

Corporate

   $ 211      $ —        $ 347      $ 14  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 211      $ —        $ 347      $ 14  
  

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation

           

Produce – U.S.

   $ 1,005      $ 1,139      $ 2,025      $ 2,333  

Produce – Canada

     328        388        747        778  

Energy – Canada

     227        195        455        412  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,560      $ 1,722      $ 3,227      $ 3,523  
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross margin

           

Produce – U.S.

   $ (5,441    $ (2,388    $ (4,736    $ 1,254  

Produce – Canada

     2,678        3,251        2,738        3,123  

Energy – Canada

     (207      26        (297      100  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ (2,970    $ 889      $ (2,295    $ 4,477  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

15


VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

(Unaudited)

 

Total assets    June 30, 2019      December 31, 2018  

United States

   $ 86,418      $ 79,126  

Canada

     85,446        58,690  

Energy - Canada

     3,447        3,632  
  

 

 

    
   $ 175,311      $ 141,448  
  

 

 

 
Property, plant and equipment    June 30, 2019      December 31, 2018  

United States

   $ 41,585      $ 42,886  

Canada

     19,952        25,933  

Energy – Canada

     3,134        3,369  
  

 

 

    

 

 

 
   $ 64,671      $ 72,188  
  

 

 

    

 

 

 

 

14

INCOME (LOSS) PER SHARE

Basic and diluted net income per ordinary share is calculated as follows:

 

     Three months ended June 30,      Six months ended June 30,  
     2019      2018      2019      2018  

Numerator:

           
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss)

   $ 3,716      $ (3,060    $ 10,182      $ (3,662
  

 

 

    

 

 

    

 

 

    

 

 

 

Denominator:

           

Weighted average number of common shares - Basic

     48,825        43,336        48,322        42,894  

Effect of dilutive securities- share-based employee options and awards

     1,887        —          1,837        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of common shares - Diluted

     50,712        43,336        50,159        42,894  
  

 

 

    

 

 

    

 

 

    

 

 

 

Antidilutive options and awards

     2,612        2,197        310        2,197  

Net income (loss) per ordinary share:

           

Basic

   $ 0.08      $ (0.07    $ 0.21      $ (0.09
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

   $ 0.07      $ (0.07    $ 0.20      $ (0.09
  

 

 

    

 

 

    

 

 

    

 

 

 

 

15

SHARE-BASED COMPENSATION PLAN

Share-based compensation expense for the three and six months ended June 30, 2019 was $701 and $1,997, respectively. Share-based compensation expense for the three and six months ended June 30, 2018 was $138 and $256, respectively.

Stock option activity for the six months ended June 30, 2019 is as follows:

 

     Number of
Options
     Weighted
Average
Exercise Price
     Weighted
Average
Remaining
Contractual
Term (years)
     Aggregate
Intrinsic
Value
 

Outstanding at December 31, 2018

     2,164,999      CA$ 2.10        5.69      $ 5,553  

Granted

     510,000      CA$ 16.32        9.94      $ —    

Exercised

     (52,782    CA$ 1.41        6.19      $ 789  

Forfeited

     (10,001    CA$ 2.20        —        $ 128  
  

 

 

          

Outstanding at June 30, 2019

     2,612,216      CA$ 4.88        6.04      $ 27,436  
  

 

 

          

Exercisable at June 30, 2019

     1,815,218      CA$ 1.60        4.61      $ 24,321  
  

 

 

          

During the six months ended June 30, 2019, 355,000 performance-based shares were granted to employees and directors involved with future developments of the Company. Once a performance target is met and the share units are deemed earned and vested, compensation expense based on the fair value of the share units on the grant date is recorded in selling, general and administrative expenses in the interim statements of income.

 

16


VILLAGE FARMS INTERNATIONAL, INC.

Notes to Condensed Consolidated Interim Financial Statements

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

(Unaudited)

 

Performance-based share activity for the six months ended June 30, 2019 was as follows:

 

     Number of
Performance-based
Restricted Share Units
     Weighted Average
Grant Date Fair
Value
 

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

     (278,333    CA$ 5.72  

Forfeited/expired

     (5,000    CA$ 5.79  
  

 

 

    

Outstanding at June 30, 2019

     1,128,333      CA$ 9.20  
  

 

 

    

Exercisable at June 30, 2019

     94,333      CA$ 6.09  
  

 

 

    

 

16

COMMITMENT 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.

 

17