(Former name, former address and former fiscal year, if changed since last report).

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files. Yes ☒ No ☐ Not Applicable ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer”, “small reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

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

As of May 6, ~~2021, 81,191,191~~2022, 88,561,929 common shares ~~of common stock~~ were issued and outstanding.

As used in this Quarterly Report on Form 10-Q, the terms “Village Farms,” “Village Farms International,” the “Company,” “we,” “us,” “our” and similar references refer to Village Farms International, Inc. and our consolidated subsidiaries, and the term “Common Shares” refers to our common shares, no par value. Our financial information is presented in U.S. dollars and all references in this Quarterly Report on Form 10-Q to “$” means U.S. dollars and all references to “C$” means Canadian dollars.

This Quarterly Report on Form 10-Q the following trademarks, trade names and service marks of ours: Village Farms®, Delectable TOV®, From Our House To Your Home®, Mini Sensations®, Sinfully Sweet Campari®, Heavenly Villagio Marzano®, BC Grown Logo®, Texas Grown Logo®, Good for the Earth ®, Village Farms Greenhouse Grown ®, Village Fields®, Pure SunfarmsTM, Pure Sunfarms BC GrownTM, Farm to FlowerTM, No Sun No FlowerTM, Plants and People FirstTM, Pure ProvisionsTM, Rise with the SunTM, The BakeryTM, Purple Sun GodTM, and Pure Sun CBDTM. This report also contains trademarks, trade names and service marks that are owned by other persons or entities.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is subject to the safe harbor created by those sections. This Quarterly Report on Form 10-Q also contains “forward-looking information” within the meaning of applicable Canadian securities law. We refer to such forward-looking statements and forward-looking information collectively as “forward-looking statements”. Forward-looking statements may relate to the Company’s future outlook or financial position and anticipated events or results and may include statements regarding the financial position, business strategy, budgets, expansion plans, litigation, projected production, projected costs, capital expenditures, financial results, taxes, plans and objectives of or involving the Company. Particularly, statements regarding future results, performance, achievements, prospects or opportunities for the Company, the greenhouse vegetable industry or the cannabis industry are forward-looking statements. In some cases, forward-looking information can be identified by such terms as “outlook”, “may”, “might”, “will”, “could”, “should”, “would”, “occur”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “try”, “estimate”, “predict”, “potential”, “continue”, “likely”, “schedule”, “objectives”, or the negative or grammatical variation thereof or other similar expressions concerning matters that are not historical facts. The forward-looking statements in this Quarterly Report on Form 10-Q are subject to risks that may include, but are not limited to: our limited operating history, including that of Rose LifeScience Inc. (“Rose”), Balanced Health Botanicals, LLC (“Balanced Health”), Pure Sunfarms, Inc. and our operations of growing hemp in the United States; the legal status of Pure Sunfarms, Rose and Balanced Health cannabis business; risks relating to the integration of Balanced Health and Rose into our cannabis business; risks relating to obtaining additional financing, including our dependence upon credit facilities; potential difficulties in achieving and/or maintaining profitability; variability of product pricing; risks inherent in the cannabis, hemp, CBD, cannabinoids, and agricultural businesses; market position, ability to leverage current business relationships for future business involving hemp and cannabinoids, the ability of Pure Sunfarms and Rose to cultivate and distribute cannabis in Canada; existing and new governmental regulations, including risks related to regulatory compliance and licenses (e.g., Pure Sunfarms ability to obtain licenses for its Delta 2 greenhouse facility as well as additional licenses under the Canadian act respecting cannabis to amend to the Controlled Drugs and Substances Act, the Criminal Code and other Acts, S.C. 2018, c. 16 (Canada) for its Delta 3 greenhouse facility), and changes in our regulatory requirements; risks relating to conversion of our greenhouses to cannabis production for Pure Sunfarms; risks related to rules and regulations at the U.S. federal (Food and Drug Administration and United States Department of Agriculture), state and municipal levels with respect to produce and hemp; retail consolidation, technological advances and other forms of competition; transportation disruptions; product liability and other potential litigation; retention of key executives; labor issues; uninsured and underinsured losses; vulnerability to rising energy costs; environmental, health and safety risks, foreign exchange exposure, risks associated with cross-border trade; difficulties in managing our growth; restrictive covenants under our credit facilities; natural catastrophes; the ongoing and developing COVID-19 pandemic; and tax risks.

The Company has based these forward-looking statements on factors and assumptions about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. Although the forward-looking statements contained in this Quarterly Report on Form 10-Q are based upon assumptions that management believes are reasonable based on information currently available to management, there can be no assurance that actual results will be consistent with these forward-looking statements. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond the Company’s control, that may cause the Company’s or the industry’s actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the factors contained in the Company’s filings with securities regulators, including this Quarterly Report on Form 10-Q. In particular, we caution you that our forward-looking statements are subject to the

ongoing and developing circumstances related to the COVID-19 pandemic, which may have a material adverse effect on our business, operations and future financial results.

When relying on forward-looking statements to make decisions, the Company cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future results, performance, achievements, prospects and opportunities. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events or information as of the date on which the statements are made in this Quarterly Report on Form 10-Q. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

	March 31, 2021		December 31, 2020		March 31, 2022		December 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	131,696	$	21,640	$	34,623	$	53,417
Restricted cash		4,091		4,039		6,810		5,250
Trade receivables		33,470		23,222		35,857		34,360
Inventories		46,851		46,599		79,611		68,677
Note receivable - joint venture						3,207		—
Other receivables		181		145		582		616
Income tax receivable		18		18		3,631		2,430
Prepaid expenses and deposits		7,806		6,145		10,662		10,209
Total current assets		224,113		101,808		174,983		174,959
Non-current assets
Property, plant and equipment		192,583		187,020		220,616		215,704
Note receivable - joint venture						—		3,256
Investment in minority interests		1,726		1,226		2,109		2,109
Note receivable - joint venture		3,423		3,545
Goodwill		24,314		24,027		119,597		117,533
Intangibles		17,317		17,311		26,512		26,394
Deferred tax asset		13,711		13,312		18,682		16,766
Operating right-of-use assets		3,549		3,797
Finance right-of-use assets		—		35
Right-of-use assets						7,195		7,609
Other assets		1,830		1,950		6,088		2,581
Total assets	$	482,566	$	354,031	$	575,782	$	566,911
LIABILITIES
Current liabilities
Line of credit	$	—	$	2,000	$	9,880	$	7,760
Trade payables		20,785		15,064		23,998		22,597
Current maturities of long-term debt		10,434		10,166		10,585		11,416
Note payable		—		15,314
Accrued sales taxes						9,235		3,899
Accrued loyalty program						1,728		2,098
Accrued liabilities		21,077		22,438		15,659		14,168
Operating lease liabilities - current		1,137		1,107
Finance lease liabilities - current		21		27
Income tax payable		2,827		4,523
Lease liabilities - current						872		962
Other current liabilities		2,409		1,641		1,549		1,413
Total current liabilities		58,690		72,280		73,506		64,313
Non-current liabilities
Long-term debt		55,869		53,913		49,749		50,419
Deferred tax liability		16,793		18,059		21,257		18,657
Operating lease liabilities - non-current		2,554		2,855
Finance lease liabilities - non-current		4		8
Lease liabilities - non-current						6,366		6,711
Other liabilities		1,769		1,633		2,076		1,973
Total liabilities		135,679		148,748		152,954		142,073
Commitments and contingencies (note 17)
Commitments and contingencies
MEZZANINE EQUITY
Redeemable non-controlling interest						16,271		16,433
SHAREHOLDERS’ EQUITY
Common stock, no par value per share - unlimited shares authorized; 81,191,191 shares issued and outstanding at March 31, 2021 and 66,911,811 shares issued and outstanding at December 31, 2020.		301,092		145,668
Common stock, no par value per share - unlimited shares authorized; 88,561,929 shares issued and outstanding at March 31, 2022 and 88,233,929 shares issued and outstanding at December 31, 2021.						365,737		365,561
Additional paid in capital		9,353		17,502		10,333		9,369
Accumulated other comprehensive income		7,966		6,255		10,225		6,696
Retained earnings		28,476		35,858		20,262		26,779
Total shareholders’ equity		346,887		205,283		406,557		408,405
Total liabilities and shareholders’ equity	$	482,566	$	354,031
Total liabilities, mezzanine equity and shareholders’ equity					$	575,782	$	566,911

The accompanying notes are an integral part of these Condensed Consolidated Interim Statements of Financial Position.

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

Three Months Ended March 31,

2021

2020

Sales

$
52,396

$
32,112

Cost of sales

(50,089
)

(31,347
)
Gross margin

2,307

765

Selling, general and administrative expenses

(8,092
)

(3,921
)
Share-based compensation

(1,998
)

(529
)
Interest expense

(741
)

(537
)
Interest income

3

383

Foreign exchange loss

(504
)

(926
)
Gain on settlement agreement

—

4,681

Other (expense) income

(69
)

39

Loss on disposal of assets

—

(6
)
Loss before taxes and earnings of unconsolidated entities

(9,094
)

(51
)
Recovery of income taxes

1,839

1,012

(Loss) income from consolidated entities after income taxes

(7,255
)

961

Equity (losses) earnings from unconsolidated entities

(127
)

3,229

Net (loss) income

$
(7,382
)

$
4,190

Basic (loss) income per share

$
(0.10
)

$
0.08

Diluted (loss) income per share

$
(0.10
)

$
0.08

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

Basic

76,022

52,933

Diluted

76,022

54,175

Net (loss) income

$
(7,382
)

$
4,190

Other comprehensive (loss) income:

Foreign currency translation adjustment

1,711

(127
)
Comprehensive (loss) income

$
(5,671
)

$
4,063

	Three Months Ended March 31,
	2022			2021
Sales	$	70,156		$	52,396
Cost of sales		(60,252	)		(50,089	)
Gross margin		9,904			2,307
Selling, general and administrative expenses		(16,971	)		(8,092	)
Share-based compensation		(964	)		(1,998	)
Interest expense		(683	)		(741	)
Interest income		110			3
Foreign exchange gain (loss)		319			(504	)
Other expense		(8	)		(69	)
Loss before taxes and loss from equity method investments		(8,293	)		(9,094	)
Recovery of income taxes		1,666			1,839
Loss from equity method investments		(52	)		(127	)
Loss including non-controlling interests		(6,679	)		(7,382	)
Less: net loss attributable to non-controlling interests, net of tax		162			—
Net loss attributable to Village Farms International, Inc.	$	(6,517	)	$	(7,382	)
Basic loss per share attributable to Village Farms International, Inc. shareholders	$	(0.07	)	$	(0.10	)
Diluted loss per share attributable to Village Farms International, Inc. shareholder	$	(0.07	)	$	(0.10	)
Weighted average number of common shares used in the computation of net loss per share (in thousands):
Basic		88,376			76,002
Diluted		88,376			76,002
Loss including non-controlling interests	$	(6,679	)	$	(7,382	)
Less: net loss attributable to non-controlling interests, net of tax		162			—
Net loss attributable to Village Farms International, Inc.		(6,517	)		(7,382	)
Other comprehensive loss:
Foreign currency translation adjustment		461			1,711
Comprehensive loss attributable to Village Farms International, Inc. shareholders	$	(6,056	)	$	(5,671	)

The accompanying notes are an integral part of these Condensed Consolidated Interim Statements of ~~Income (Loss)~~Loss and Comprehensive ~~Income (Loss).~~Loss.

Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity and Mezzanine Equity

	Three Months Ended March 31, 2021															Three Months Ended March 31, 2022
	Number of Common Shares (in thousands)		Common Stock		Additional Paid in Capital			Accumulated Other Comprehensive (Loss) Income		Retained Earnings			Total Shareholders’ Equity			Number of Common Shares (in thousands)		Common Stock		Additional Paid in Capital		Accumulated Other Comprehensive (Loss) Income		Retained Earnings			Total Shareholders’ Equity			Mezzanine Equity
Balance at January 1, 2021		66,912	$	145,668	$	17,502		$	6,255	$	35,858		$	205,283
Shares issued in public offering, net of issuance costs		10,887		127,489		—			—		—			127,489
Shares issued on exercise of warrants		3,045		27,743		(10,080	)		—		—			17,663
Balance at January 1, 2022																	88,234	$	365,561	$	9,369	$	6,696	$	26,779		$	408,405		$	16,433
Shares issued on exercise of stock options		104		192		(67	)		—		—			125			328		176		—		—		—			176			—
Share-based compensation		243		—		1,998			—		—			1,998			—		—		964		—		—			964			—
Cumulative translation adjustment		—		—		—			1,711		—			1,711			—		—		—		3,529		—			3,529			—
Net loss		—		—		—			—		(7,382	)		(7,382	)		—		—		—		—		(6,517	)		(6,517	)		(162	)
Balance at March 31, 2021		81,191	$	301,092	$	9,353		$	7,966	$	28,476		$	346,887
Balance at March 31, 2022																	88,562	$	365,737	$	10,333	$	10,225	$	20,262		$	406,557		$	16,271

	Three Months Ended March 31, 2020														Three Months Ended March 31, 2021
	Number of Common Shares (in thousands)		Common Stock		Additional Paid in Capital		Accumulated Other Comprehensive Loss			Retained Earnings		Total Shareholders’ Equity			Number of Common Shares (in thousands)		Common Stock		Additional paid in capital			Accumulated Other Comprehensive Loss		Retained Earnings			Total Shareholders’ Equity			Mezzanine Equity
Balance at January 1, 2020		52,657	$	98,333	$	4,351	$	(475	)	$	24,250	$	126,459
Balance at January 1, 2021																66,912	$	145,668	$	17,502		$	6,255	$	35,858		$	205,283			—
Shares issued in public offering, net of issuance costs		3,594		7,323		—		—			—		7,323			10,887		127,489		—			—		—			127,489			—
Shares issued on exercise of warrant																3,045		27,743		(10,080	)		—		—			17,663			—
Shares issued on exercise of stock options																104		192		(67	)		—		—			125			—
Share-based compensation		—		—		529		—			—		529			243		—		1,998			—		—			1,998			—
Cumulative translation adjustment		—		—		—		(127	)		—		(127	)		—		—		—			1,711		—			1,711			—
Net income		—		—		—		—			4,190		4,190
Balance at March 31, 2020		56,251	$	105,656	$	4,880	$	(602	)	$	28,440	$	138,374
Net loss																—		—		—			—		(7,382	)		(7,382	)		—
Balance at March 31, 2021																81,191	$	301,092	$	9,353		$	7,966	$	28,476		$	346,887		$	—

The accompanying notes are an integral part of these Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity and Mezzanine Equity.

	Three Months Ended March 31,						Three Months Ended March 31,
	2021			2020			2022			2021
Cash flows used in operating activities:
Net (loss) income	$	(7,382	)	$	4,190
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Net loss							$	(6,517	)	$	(7,382	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,225			1,530			3,128			3,225
Amortization of deferred charges		78			19			66			78
Share of loss (income) from joint ventures		127			(3,229	)
Share of loss from joint ventures								52			127
Interest expense		741			537			683			741
Interest income		(3	)		(383	)		(110	)		(3	)
Interest paid on long-term debt		(851	)		(538	)		(747	)		(851	)
Gain on settlement agreement		—			(4,681	)
Loss on disposal of assets		—			6
Unrealized foreign exchange gain/loss								113			—
Non-cash lease expense		(128	)		(271	)		(116	)		(128	)
Interest paid on finance lease		—			(1	)
Share-based compensation		1,998			529			964			1,998
Deferred income taxes		(2,538	)		(468	)		(2,062	)		(2,538	)
Changes in non-cash working capital items		(9,703	)		2,225			(5,091	)		(9,703	)
Net cash used in operating activities		(14,436	)		(535	)		(9,637	)		(14,436	)
Cash flows used in investing activities:
Purchases of property, plant and equipment		(4,706	)		(259	)		(5,263	)		(4,706	)
Note receivable								(3,442	)		—
Advances to joint ventures		(5	)		—			—			(5	)
Investment in joint ventures		—			(6,063	)
Investment in minority interests		(500	)		—			—			(500	)
Net cash used in investing activities		(5,211	)		(6,322	)		(8,705	)		(5,211	)
Cash flows provided by financing activities:
Proceeds from borrowings		4,176			2,000			2,120			4,176
Repayments on borrowings		(4,223	)		(875	)		(983	)		(4,223	)
Proceeds from issuance of common stock and warrants		135,000			7,957			—			135,000
Issuance costs		(7,511	)		(633	)		—			(7,511	)
Proceeds from exercise of stock options		125			—			176			125
Proceeds from exercise of warrants		17,663			—			—			17,663
Payments on capital lease obligations		(155	)		(21	)		(301	)		(155	)
Payment of note payable related to acquisition		(15,498	)		—			—			(15,498	)
Net cash provided by financing activities		129,577			8,428			1,012			129,577
Effect of exchange rate changes on cash and cash equivalents		178			(2	)		96			178
Net increase in cash and cash equivalents		110,108			1,569
Net (decrease) increase in cash and cash equivalents								(17,234	)		110,108
Cash and cash equivalents, beginning of period		25,679			11,989			58,667			25,679
Cash and cash equivalents, end of period	$	135,787		$	13,558		$	41,433		$	135,787

The accompanying notes are an integral part of these Condensed Consolidated Interim Statements of Cash Flows.

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

Village Farms International, Inc. (“VFF”) and together with its subsidiaries (the “Company”, “we”, “us”, or “our”) is incorporated under the Canada Business Corporation Act. VFF’s principal operating subsidiaries as of March 31, ~~2021~~2022 are Village Farms Canada Limited Partnership, ~~(“VFCLP”),~~ Village Farms, L.P. ~~(“VFLP”)~~, ~~VF Clean Energy, Inc. (“VFCE”), and~~ Pure Sunfarms Corp. (“Pure Sunfarms” ~~or “PSF”~~), and Balanced Health Botanicals, LLC (“Balanced Health”). VFF also owns a 70% interest in Rose LifeScience Inc. (“Rose”).

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”), which is recorded as an equity investment (note 9).~~

The Company’s shares are listed on ~~both~~ the ~~Toronto Stock Exchange and~~ Nasdaq Capital Market (“Nasdaq”)~~, in each case,~~ under the symbol “VFF”.

~~The Company~~Village Farms owns and operates sophisticated, highly intensive agricultural greenhouse facilities in British Columbia and Texas, where it produces, markets and sells premium-quality tomatoes, bell peppers, and cucumbers. ~~The Company, through~~Its wholly owned subsidiary, Pure Sunfarms, is a vertically integrated licensed producer and supplier of cannabis products to be sold to other licensed providers and provincial governments across Canada and internationally. Through its 70% ownership of Rose, the Company has a substantial presence in the Province of Quebec as a cannabis supplier, producer and commercialization expert. The ~~Company, through its~~Company’s wholly owned subsidiary, ~~VFCE, owns~~Balance Health, develops and ~~operates a 7.0 MW power plant that generates electricity. VF Hemp cultivated one crop season of high~~sells high-quality, cannabidiol (“CBD”) ~~hemp in multiple states throughout the United States in 2017.~~based products including ingestible, edible and topical applications.

The accompanying unaudited ~~Condensed Consolidated Interim Financial Statements~~condensed consolidated interim financial statements for the three months ended March 31, ~~2021~~2022 have been prepared in accordance with accounting principles generally accepted in the United States ~~for~~(“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated balance sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the ~~instructions to~~audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2021, included in our Annual Report on Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for fair presentation have been included. Operating10-K. The results for the ~~three months ended March 31, 2021 are subject to seasonal variations and accordingly~~interim periods are not necessarily indicative of the results ~~that may be expected~~ for the ~~year ending December 31, 2021. For further information, refer~~full year.

In the opinion of management, these financial statements include all adjustments, which are of a normal recurring nature, necessary for a fair statement of the financial position, results of operations, comprehensive loss, cash flows and the change in equity for the periods presented.

There have been no changes to ~~the Consolidated Financial Statements and notes thereto included~~our significant accounting policies described in ~~our~~the Annual Report on Form 10-K for the ~~fiscal years~~year ended December 31, ~~2020~~2021 filed with the SEC on March 1, 2022 that have had a material impact on our condensed consolidated interim financial statements and ~~2019.~~related notes.

The condensed consolidated interim financial statements reflect the accounts of the Company and its majority-owned and controlled subsidiaries. All intercompany accounts and transactions between our consolidated operations have been eliminated.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying GAAP to debt instruments, derivatives, and other contracts that reference LIBOR or other reference rates expected to be discontinued as a result of reference rate reform. This guidance is optional and may be elected through December 31, 2022 using a prospective application on all eligible contract modifications. The Company has a line of credit that incorporates LIBOR as a referenced interest rate. It is difficult to predict what effect, if any, the phase-out of LIBOR and the use of alternative benchmarks may have on the Company’s business or on the overall financial markets. The Company has not adopted any of the optional expedients or exceptions through March 31, ~~2021~~2022 but will continue to evaluate the possible adoption of any such expedients or exceptions.

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

Classification	March 31, 2021		December 31, 2020		March 31, 2022		December 31, 2021
Cannabis:
Available for sale - flower and trim	$	13,785	$	12,720
Distilled oil		14,288		13,511
Capitalized production costs		1,108		3,438
Other		2,436		2,552
Raw materials					$	1,789	$	2,071
Work-in-progress						8,854		5,056
Finished goods						40,336		32,161
Packaging						7,091		5,877
Produce and Energy:
Crop inventory		14,454		13,441		18,688		19,475
Purchased produce inventory		650		810		818		2,485
Spare parts inventory		130		127
Spare parts inventory and packaging						2,035		1,552
Inventory	$	46,851	$	46,599	$	79,611	$	68,677

Classification	March 31, 2021			December 31, 2020			March 31, 2022			December 31, 2021
Land	$	10,534		$	10,447		$	14,262		$	14,095
Leasehold and land improvements		4,158			4,154			5,231			5,224
Buildings		143,163			142,060			186,239			184,444
Machinery and equipment		70,080			69,390			81,036			79,070
Construction in progress		59,773			52,960			43,442			39,206
Less: Accumulated depreciation		(95,125	)		(91,991	)		(109,594	)		(106,335	)
Property, plant and equipment, net	$	192,583		$	187,020		$	220,616		$	215,704

The following table presents the changes in the carrying value of goodwill by reportable segment for the ~~following as of:~~three months ended March 31, 2022:

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

The expected future amortization expense for definite-lived intangible assets as of March 31, ~~2021~~2022 was as follows:

Fiscal period
Remainder of 2021	$	590
2022		786
Remainder of 2022			$	861
2023		780		919
2024		780		786
2025		688		692
2026				596
Thereafter		9,960		9,505
Intangibles, net	$	13,584	$	13,359

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 leases production-related equipment at its greenhouses in Texas and British Columbia. The Company also leases an office building located in Lake Mary, Florida for its corporate ~~headquarters.~~ headquarters, and office and manufacturing space in Denver, Colorado for Balanced Health’s headquarters and operations. Rose owns land and leases a building for its headquarters and operations in Montreal, Quebec.

	Three months ended March 31,				Three months ended March 31,
	2021		2020		2022		2021
Operating cash flows from operating leases	$	128	$	271	$	116	$	128
Operating cash flows from finance leases	$	-	$	1
Finance cash flows from finance leases	$	155	$	21	$	301	$	155

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

On November 2, 2020, Village Farms consummated a definitive purchase and sale agreement with Emerald Health Therapeutics Inc. (“Emerald”), acquiring 36,958,500 common shares in the capital of Pure Sunfarms owned by Emerald, and increasing Village Farms’ ownership of Pure Sunfarms to 100%. The shares were acquired for a total purchase price of C$79.9 million (US$60.0 million), satisfied through an initial C$60.0 million (US$45.0 million) cash payment and a C$19.9 million (US$15.0 million) secured promissory note that was payable to Emerald, which promissory note was repaid in full on February 8, 2021.

~~The acquisition was a business combination and has been accounted for in accordance with the measurement and recognition provisions of Accounting Standards Codification (“ASC”) Topic 805,~~ ~~Business Combinations~~ ~~(ASC Topic 850”~~). ASC Topic 805 requires that the purchase consideration be allocated to the assets acquired and liabilities assumed in a business combination based upon their estimated fair values at the date of acquisition. The purchase price has been allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The Company used information available to make fair value determinations and engaged independent valuation specialists to assist in the fair value determination of acquired intangible assets. The estimated fair value of licenses was determined using a multi-period excess earnings method. This earnings-based method considers the 85 net present value of the licenses’ cash flows discounted at an asset specific discount rate. The net present value attributable to the licenses deducts the contributory asset charges used in connection with the licenses. The estimated fair value of the brand was determined using the relief-from-royalty method. This method assumes that the brand has value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires the Company to estimate the future revenues for the related brand, the appropriate royalty rate, and an asset specific discount rate. This measure of fair value requires considerable judgment about the value a market participant would be willing to pay to achieve the benefits associated with the brand. Acquired property, plant and equipment and software was valued using the replacement cost method, which requires the Company to estimate the costs to construct an asset of equivalent utility at prices available at the time of the valuation analysis, with adjustments in value for physical deterioration and functional and economic obsolescence. Upon the acquisition of Pure Sunfarms, the Company identified goodwill of C$30,618 (US$24,314). This goodwill was calculated as the difference between the fair value of the consideration issued for the acquisition of Pure Sunfarms and the fair value of all assets and liabilities acquired. The goodwill is attributable to the acquired workforce and potential for growth through the conversion of the Delta 1 greenhouse facility and future accretive acquisitions. The Company is required to record a deferred tax liability for the difference between the assigned values and the tax bases of assets acquired and liabilities assumed. None of the goodwill is deductible for tax purposes. As a result of the acquisition, the Company also recognized a gain of $23.6 million due to the revaluation of its previously held investment in Pure Sunfarms to its fair value at the acquisition date. The initial accounting for the business combination was considered complete for the year ended December 31, 2020.

The following table shows the allocation of the purchase price to assets acquired and liabilities assumed, based on estimates of fair value, including a summary of the identifiable classes of consideration transferred, and amounts by category of assets acquired and liabilities assumed at the acquisition date:

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

~~Prior to its acquisition on November 2, 2020, the Company accounted for its investment in Pure Sunfarms, in accordance with ASC Topic 323,~~ ~~Equity Method and Joint Ventures~~ (“ASC Topic 323”), using the equity method. The Company determined that Pure Sunfarms was a variable interest entity (“VIE”), however the Company did not consolidate Pure Sunfarms because the Company was not the primary beneficiary. Although the Company was able to exercise significant influence over the operating and financial policies of Pure Sunfarms through its then 58.7% majority interest, the Company shared joint control of the board of directors and therefore was not the primary beneficiary. For the three months ended March 31, 2020, the Company’s equity earnings from Pure Sunfarms were $3,531.

On March 2, 2020, pursuant to the Settlement Agreement, Emerald transferred to the Company 2.5% of additional equity in Pure Sunfarms. The Company determined the fair value of the equity received from Emerald to be C$6.5 million (US$4.7 million). The Company recorded this amount as a gain and included it as a gain on settlement agreement on the Condensed Consolidated Statement of Income (Loss) and Comprehensive Income (Loss) for the three months ended March 31, 2020.

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

For the three months ended March 31, 2021 and 2020, the Company’s equity losses from VF Hemp were ($127) and ($302), respectively. The Company’s maximum exposure to loss as a result of its involvement with VF Hemp is directly related to the recovery of the $3,423 loan outstanding to VF Hemp.

On November 15, 2021, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”), with Rose and other parties, including the shareholders of Rose (collectively, the “Rose Sellers”), for the acquisition of a 70% interest in Rose pursuant to the terms of the Purchase Agreement (the “Acquisition”), for a total purchase price (the “Purchase Price”) of C$46.7 million, comprised of a cash purchase price of C$19.9 million and a total of 2,411,280 Common Shares of Village Farms (“Village Farms Shares”), subject to customary purchase price adjustments. The Village Farms Shares issued under the Purchase Agreement are subject to lock-up agreements, and subject to compliance with applicable securities laws, 33% of these shares will be released from lock-up restrictions four (4) months following the Closing Date, another 33% of these shares will be released from lock-up restrictions eight (8) months after the Closing Date and the remaining shares will be released from lock-up restrictions one (1) year after the Closing Date.

Under the terms of the Purchase Agreement, the Company filed a prospectus supplement under our existing shelf registration statement on March 15, 2022 to register for resale all of the Village Farms Shares issued to the Rose Sellers on the Closing Date.

NaN of the co-founders of Rose (the “Management Shareholders”), who were among the Rose Sellers of Rose in the Acquisition, have remained in their current roles with Rose post-Acquisition and have retained a non-voting 30% interest in Rose (the “Retained Interest”). In conjunction with the Acquisition, Village Farms and the Management Shareholders have entered into a unanimous shareholders agreement (the “USA”) providing Village Farms with a call option to acquire the Retained Interest between December 31, 2024 and March 31, 2025 or upon the occurrence of certain liquidity events with respect to Village Farms (the “Call Option”). As part of the Call Option, Village Farms can also acquire 34% of the Retained Interest between December 31, 2022 and March 31, 2023. A put right has also been granted to the Management Shareholders to require Village Farms to complete the acquisition of the Retained Interest upon their death or disability or the occurrence of certain liquidity events with respect to Village Farms (the “Put Option”, and together with the Call Option, the “Put/Call Option”). The price for the Put/Call Option was set at a multiple solely based on Rose’s adjusted EBITDA performance of the

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

applicable prior calendar year. If exercised upon a liquidity event, the Option Price is subject to a minimum amount which varies depending on the year on which it is exercised.

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

Based upon preliminary estimates, the Company identified goodwill of $34,548 and a redeemable NCI classified as temporary mezzanine equity of $16,479. The goodwill has been allocated to the Canadian Cannabis reporting segment. The Company expects to recognize intangible assets but is still in the process of identifying and valuing them as well as the fair value of the Put Option identified and classified as redeemable non-controlling interest. The Company expects the accounting for the business combination to be complete by June 30, 2022.

March 31, 2021

December 31, 2020

Current assets

Inventory

$
4,035

$
4,035

Other current assets

182

302

Non-current assets

885

937

Current liabilities

(1,479
)

(1,472
)
Non-current liabilities

(13,702
)

(13,697
)
Net assets

$
(10,079
)

$
(9,895
)
Reconciliation of net assets:

Accumulated retained earnings

$
(9,895
)

$
(3,791
)
Net loss

(194
)

(6,114
)
Contributions from joint venture partners

10

10

Net assets

$
(10,079
)

$
(9,895
)

Consideration paid	Shares		Share Price		Amount
Cash					$	15,859
Village Farms common shares issued		2,411,280	$	9.04		21,798
Working capital adjustment						1,055
Total fair value of consideration					$	38,712

In February 2021, the Company exercised a portion of its option to make an additional equity investment in Australia-based Altum International Pty Ltd (“Altum”). The Company exercised 204,000 options at $2.45 per option increasing its ownership to just under 10.0%.

During the year ended December 31, 2021, the Company exercised its option and purchased additional shares of Altum, bringing the Company’s total investment in Altum to 11.9%.

In September 2021, the Company entered into an option agreement whereby the Company received the irrevocable right to acquire an 80% ownership interest (the “Option Agreement”) in Netherlands-based Leli Holland B.V. (“Leli”) upon payment of EUR50,000 (the “Option”). The ~~carrying value~~Option Agreement allows the Company to acquire 80% of Leli’s shares for EUR3,950,000, of which EUR950,000 is due and payable to Leli’s shareholders upon the exercise of the ~~assets~~Option and ~~securities pledged as collateral for~~ the ~~FCC Loan as~~remainder due in three equal installments subject to the achievement of ~~March 31, 2021 and December 31, 2020 was $207,762 and $86,664, respectively.~~

certain project development milestones. The ~~carrying value~~option is exercisable at the sole discretion of the ~~assets pledged as collateral~~Company for ~~the Operating Loan as~~a period of ~~March 31, 2021 and December 31, 2020 was $25,033 and $23,443, respectively.~~5 years.

~~The Company, excluding Pure Sunfarms’ borrowings, was in compliance with all of its credit facility covenants as of March 31, 2021.~~

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

On March ~~15, 2021, Pure Sunfarms entered into~~18, 2022, the ~~Third Amended~~Company loaned EUR 2.6 million (US$2.7 million) to L.L. Lichtendahl Beheer B.V, a private company that holds a 50% interest in Leli. The loan bears interest at a rate of 4% per annum. The outstanding loan and ~~Restated Credit Agreement (the “Third Amended~~accrued interest are to be repaid within 14 days upon written request by the Company.

The net assets of VF Hemp were ($10,400) and Restated PSF Credit Agreement) with Farm Credit Canada and two Canadian chartered banks, which extended the maturity date of each of the PSF Revolving Line of Credit, PSF Non-Revolving Facility and the PSF Term Loan through February 7, 2024, included an unlimited guarantee from Village Farms and changed certain financial covenants. The Third Amended and Restated PSF Credit Agreement amends and updates the previous three loan facilities. The PSF Revolving Line of Credit had 0 balance($10,369) as of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The net loss for three months ended March 31, 2022 and 2021 was $162 and $127, respectively.

The Company’s line of credit (excluding Pure Sunfarms) had $2,000 drawn on the facility as of March 31, 2022, while there was 0 amount drawn as of December 31, 2021.

The carrying value of the assets and securities pledged as collateral for the FCC Loan as of March 31, 2022 and December 31, 2021 was $192,344 and $233,187, respectively.

The carrying value of the assets pledged as collateral for the Operating Loan as of March 31, 2022 and December 31, 2021 was $33,840 and $34,741, respectively.

On March 2, 2022, the Company repaid the outstanding balance on the VFCE Term Loan and related advance balance on term loan.

The Pure Sunfarms ~~is required to comply with financial covenants, measured quarterly.~~line of credit had $7,880 and $7,760 outstanding as of March 31, 2022 and December 31, 2021, respectively. As of March 31, 2022 and December 31, 2021, Pure Sunfarms ~~was in compliance with~~had an outstanding letter of credit issued to BC Hydro against the ~~financial covenants.~~ revolving line of credit of $4,039.

The weighted average interest rate on short-term borrowings as of March 31, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~4.95%~~5.05% and ~~5.11%~~5.15%, respectively.

Accrued interest payable on the ~~Credit Facilities~~credit facilities and loans as of March 31, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~$177~~$234 and ~~$189,~~$304, respectively, and these amounts are included in accrued liabilities in the ~~interim~~ statements of financial position. The Company is required to comply with financial covenants, measured either quarterly or annually depending on the covenant. As of March 31, 2022 the Company was in compliance with the financial covenants.

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

The aggregate annual maturities of long-term debt for the remainder of ~~2021~~2022 and thereafter are as follows:

Remainder of 2021	$	5,311
2022		8,001
Remainder of 2022			$	6,226
2023		7,618		7,454
2024		26,286		26,446
2025		22,300		22,327
2026				700
Thereafter		3,524		2,879
Total	$	73,040	$	66,032

The Company’s financial instruments include cash and cash equivalents, trade receivables, note receivables, minority investments, trade payables, accrued liabilities, lease liabilities, note payables and debt. The carrying value of cash and cash equivalents, trade receivables, notes receivable, trade payables, and accrued liabilities approximate their fair values due to the short-term maturity of these financial instruments. The carrying value of lease liabilities, notes payable, and debt approximate their fair values due to insignificant changes in credit risk. For its minority investments, the Company has elected the practicability election to fair value measurement, under which the investment is measured at cost, less impairment, plus or minus observable price changes of an identical or similar investment.

On February 10, 2022, the Company entered into an AUD 1 million (US$719) convertible promissory note with Altum (the “Note”). Interest will accrue at a rate of 12% per annum, calculated monthly. Unless earlier repaid, or converted into ordinary shares of Altum, the principal and accrued interest of the Note will be due and payable on August 10, 2023. As of March 31, 2022, the balance of the Note including accrued interest was $727.

On March 25, 2019, the Company entered into a Grid Loan Agreement (the “Grid Loan”) with VF Hemp. The Grid Loan ~~has a~~had an original maturity date of March 25, ~~2022 and bears simple interest at the rate of 8% per annum, calculated monthly.~~2022. The maturity date has been extended to June 30, 2022. As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, the Grid Loan balance was ~~$3,423~~$3,207 and ~~$3,545,~~$3,256, respectively.

One of the Company’s employees is related to a member of the Company’s executive management team and received approximately ~~$37~~$24 and ~~$28~~$37 in salary and benefits during the three months ~~ended~~ending March 31, 2022 and 2021, ~~and 2020,~~ respectively.

During 2020, the Company had advanced $249 to an employee in connection with a relocation at the request of the Company. During the three months ended March 31, 2021, the employee repaid $124 of the outstanding loan balance. The remaining balance will be forgiven following one year of service with the Company.

A provision for income taxes 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 three months ended March 31, 2022 and 2021 was 26% ~~compared to 24% for the three months ended March 31, 2020.~~.

The recovery of income taxes was ~~$1,839~~$1,666 for the three months ended March 31, ~~2021~~2022 compared to ~~$1,012~~$1,839 for the three months ended March 31, ~~2020.~~ 2021.

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

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~~

As of March 31, 2022 the ~~Company operates in 3 segments. The~~ Company’s ~~three~~4 reportable segments include Cannabis, Produce and Energy. The Cannabis segment produces and supplies cannabis products to be sold to other licensed providers and provincial governments across Canada and internationally. The Produce business produces, markets, and sells premium quality tomatoes, bell peppers and cucumbers. are as follows:

The Company’s primary operations are in the United States and Canada. Segment information is summarized below:

	Three months ended March 31,						Three months ended March 31,
	2021			2020			2022			2021
Sales
Produce	$	34,867		$	31,962		$	41,349		$	34,867
Cannabis		17,460			—
Cannabis - Canada								21,769			17,460
Cannabis - United States								7,043			—
Energy		69			150			(5	)		69
	$	52,396		$	32,112		$	70,156		$	52,396
Gross margin
Produce	$	717		$	943		$	(4,290	)	$	717
Cannabis		2,212			—
Cannabis - Canada								9,510			2,212
Cannabis - United States								4,712			—
Energy		(622	)		(178	)		(28	)		(622	)
	$	2,307		$	765		$	9,904		$	2,307

Basic and diluted net ~~income (loss)~~loss per ordinary share is calculated as follows:

	Three months ended March 31,					Three months ended March 31,
	2021			2020		2022			2021
Numerator:
Net (loss) income	$	(7,382	)	$	4,190
Net loss						$	(6,517	)	$	(7,382	)
Denominator:
Weighted average number of common shares - basic		76,022			52,933		88,376			76,002
Effect of dilutive securities- share-based employee options and awards		—			1,242		—			—
Weighted average number of common shares - diluted		76,022			54,175		88,376			76,002
Antidilutive options and awards		300			510		3,622			300
Net (loss) income per ordinary share:
Net loss per ordinary share:
Basic	$	(0.10	)	$	0.08	$	(0.07	)	$	(0.10	)
Diluted	$	(0.10	)	$	0.08	$	(0.07	)	$	(0.10	)

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

On January 20, 2021, the Company closed a registered direct offering with certain institutional investors for the purchase and sale of an aggregate of 10,887,097 common shares at a purchase price of $12.40~~per common share for gross proceeds of approximately $135 millionbefore placement agent fees and other offering expenses.~~

On September 10, 2020, the Company sold 9,396,226 units through a registered direct offering. Each unit that was sold consisted of one common share of the Company and one-half (0.5) of a warrant to purchase a common share of the Company at a price of $5.80. On March 10, 2021, the warrants became exercisable and will expire on September 10, 2025. As of March 31, 2021, 3,045,283 of the warrants have been exercised.

Share-based compensation expense for the three months ended March 31, 2022 and 2021 was $964 and ~~2020 was~~ $1,998, ~~and $529,~~ respectively.

Stock option activity for the three months ended March 31, ~~2021 is~~2022 was as follows:

Number of
Options

Weighted
Average
Exercise Price

Weighted
Average
Remaining
Contractual
Term (years)

Aggregate
Intrinsic
Value

Outstanding at January 1, 2021

3,067,322

C$

6.91

6.82

$
20,051

Exercised

(104,000
)

C$

1.40

0.00

$
—

Outstanding at March 31, 2021

2,963,322

C$

7.10

6.72

$
28,661

Exercisable at March 31, 2021

1,717,501

C$

5.45

4.90

$
19,490

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2022		3,622,558		$	7.30		7.89	$	6,551
Granted		189,500		$	5.40		9.84
Exercised		(170,000	)	$	1.28		1.26
Fortified		(20,000	)	$	8.31		9.64
Outstanding at March 31, 2022		3,622,058		$	6.81		7.04	$	5,309
Exercisable at March 31, 2022		1,967,662		$

Performance-based shares activity for the three months ended March 31, ~~2021~~2022 was as follows:

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 can be reasonably estimated. 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 the operations.

~~As of March 31, 2021, Pure Sunfarms had a commitment of $1,000 in the event of a service agreement break up.~~

On May 7, 2021, the Company entered into an Amended and Restated Credit Agreement with Bank of Montreal, which among other things, reduces the revolving commitment to a maximum of $10,000 less letters of credit, and extends the terms of the agreement to May 7, 2024.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated interim financial statements and related notes included in Item 1 of Part I of this Quarterly Report and the Management’s Discussion and Analysis of Financial Condition and Results of Operations and consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. This discussion and analysis contain forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on ~~a number of~~ assumptions and estimates that are inherently subject to significant risks and uncertainties, and our actual results could differ materially from the results anticipated by our forward-looking statements, particularly in light of the ongoing and developing COVID-19 pandemic. ~~In particular, we~~We encourage you to review the risks and uncertainties described in “Risk Factors” in Part I, Item 1A in the Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021 and in Part II, Item 1A of this Quarterly Report. These risks and uncertainties could cause actual results to differ materially from those projected or implied by our forward-looking statements contained in this report. These forward-looking statements are made as of the date of this management’s discussion and analysis, and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by law. ~~See “Forward-Looking Statements”.~~

Village Farms International, Inc. (“VFF”), ~~the parent company,~~ together with its subsidiaries, ~~(collectively,~~ the “Company”, “Village Farms”, “we”, “us”, or “our”) is a corporation existing under the Canada Business Corporations Act. The Company’s principal operating subsidiaries are one of the largest and longest-operating vertically integrated greenhouse growers in North America and the only publicly traded greenhouse produce company in Canada. Following our acquisition of the remaining 41.3% interest in British Columbia-basedVillage Farms Canada LP, Village Farms LP, VF Clean Energy, Inc. (“VFCE”), Pure Sunfarms ~~Corp.~~Corp (“Pure Sunfarms” or “PSF”) ~~that was completed~~, Balanced Health Botanicals, LLC (“Balanced Health” or “BHB”) and Rose LifeScience Inc. “(Rose LifeScience” or “Rose”). Village Farms acquired 70% ownership of privately-held, Quebec-based Rose LifeScience on November ~~2, 2020 (the “Pure~~15, 2021 and acquired 100% interest in privately held Colorado-based Balanced Health on August 16, 2021.

The Company’s overall strategy is to be recognized as an international leader in consumer products from plants, whereby we produce and market value-added products that are consistently preferred by consumers. To do so, we leverage decades of cultivation expertise, investment, and experience in fresh produce (primarily tomatoes) across other plant-based opportunities. In Canada, we converted two produce facilities to grow cannabis for the Canadian adult use market. Our focus for our Canadian cannabis segment is to produce the highest quality cannabis products at an “everyday premium price”. This market position, together with our cultivation expertise, has enabled us to evolve into one of the few consistently profitable Canadian licensed producers (“LPs”) under our Pure Sunfarms ~~Acquisition”~~subsidiary.

Additionally, through organic growth, acquisitions and/or exports, we plan to participate in other international markets where cannabis attains legal status. In March 2022, Pure Sunfarms received European Union Good Manufacturing Practice (“EU GMP”) certification for its 1.1 million square foot Delta 3 cannabis facility located in Delta, British Columbia (“B.C.”) which permits Pure Sunfarms to export EU GMP-certified medical cannabis to importers and distributors in international markets that require EU GMP certification. We expect international expansion should enhance our profitability while expanding our brand and experience into emerging new legal cannabis markets.

Within the U.S., we ~~now~~acquired Balanced Health, an industry-leading cannabinoid business which extends our portfolio into cannabidiol (“CBD”) consumer products. We also operate a large, well-established produce business under the Village Farms Fresh (“VF Fresh”) brand which sells into food and mass retail stores. We own and operate produce cultivation assets in both B.C. and Texas and source produce from our growing partners, predominantly in Mexico. Our intention is to use our assets, expertise and experience (across cannabis, CBD and produce) to participate in the U.S. cannabis market when legally permitted to do so.

Village Farms’ Canadian cannabis segment includes Pure Sunfarms and Rose LifeScience.

Pure Sunfarms is one of the single largest cannabis growing operations in the world, one of the lowest-cost greenhouse producers and one of the best-selling flower brands in Canada. Pure Sunfarms leverages our 30 years of experience as a vertically integrated greenhouse grower for the rapidly developing cannabis opportunity in ~~Canada. Pure Sunfarms is currently one of the largest producers of cannabis in~~ Canada with commercial distribution in ~~five~~six Canadian provinces: Alberta, British Columbia, Ontario, ~~Alberta, Saskatchewan,~~Manitoba, Quebec and ~~Manitoba.~~Saskatchewan. Our long-term objective for Pure Sunfarms is to be the leading ~~low cost, high quality~~low-cost, high-quality cannabis producer in Canada.

~~In our greenhouse operations, we produce~~Village Farms acquired 70% ownership of privately-held Rose LifeScience on November 15, 2021. Rose is a leading third-party cannabis products commercialization expert in the Province of Quebec, acting as the exclusive, direct-to-retail sales, marketing and ~~distribute fresh, premium-quality produce with consistency 365 days a year from more than eight million square feet~~distribution entity for some of ~~Controlled Environment Agriculture (“CEA”) greenhouses~~the best-known brands in ~~British Columbia (“B.C.”) and Texas,~~Canada as well as ~~from~~Quebec-based micro and craft growers. With decades of regulated-market experience, Rose partners with cannabis companies to assist in commercializing their products, distributing the products throughout Quebec and ensuring a strong presence in the marketplace.

On August 16, 2021, the Company acquired 100% interest in privately held Colorado-based Balanced Health. Balanced Health is one of the leading cannabinoid brands and e-commerce platforms in the United States. BHB develops and sells high-quality CBD-based health and wellness products, distributing their diverse portfolio of consumer products through retail storefronts and its top-ranked e-commerce platform, CBDistillery^TM.

The Company entered the U.S. hemp business in the spring of 2019 after the passing of the 2018 Farm Bill. We established a joint venture with a 65% interest in VF Hemp for multi-state outdoor hemp cultivation and cannabidiol extraction. Currently, VF Hemp is not cultivating hemp as we await FDA clarity on the use of CBD.

Through our ~~partner greenhouses~~Village Farms Fresh brand, we are growers, marketers and distributors of premium-quality, greenhouse-grown tomatoes in North America. These premium products are grown in sophisticated, highly intensive agricultural greenhouse facilities located in B.C.~~, Ontario,~~ and ~~Mexico.~~Texas. The Company also markets and distributes premium tomatoes, peppers and cucumbers produced under exclusive arrangements with other greenhouse producers located primarily in Mexico, B.C. and Ontario. The Company primarily markets and distributes under its Village Farms® brand name to retail supermarkets and dedicated fresh food distribution companies throughout the United States and Canada.

Through our subsidiary VF Clean Energy, Inc. ~~(“VFCE”)~~, ~~owns~~we owned and ~~operates~~operated a ~~7.0-megawatt~~ power plant from landfill gas that ~~generates~~generated electricity and ~~provides~~provided thermal heat, in colder months, to one of the Company’s adjacent ~~B.C.~~British Columbia greenhouse facilities and ~~sells~~sold electricity to the British Columbia Hydro and Power ~~Authority (“BC Hydro”).~~Authority. On November 10, 2020 we announced that we will be transitioning this operation to a ~~renewable natural gas facility~~Renewable Natural Gas (“~~Delta RNG Project”~~RNG”) operation in conjunction with Mas Energy, LLC, ~~(“Mas Energy”)~~ which ~~is expected to~~we believe will enhance our financial return as well as provide food-grade ~~CO2, which~~CO² that can be used in both our cannabis and produce growing operations in Delta, B.C.

~~The Company entered~~ As of April 30, 2022, VFCE has shut down its power plant in preparation for the ~~U.S. hemp business in the spring of 2019 after the passing of the 2018 Farm Bill. We established a joint venture, Village Fields Hemp USA, LLC (“VFH”), for multi-state outdoor hemp cultivation~~transition to RNG operations. For additional detail, see “Recent Developments and ~~cannabidiol (“CBD”) extraction, and initiated plans to pursue controlled environment hemp production at our Texas greenhouse operations.~~

Internationally, we evaluate, and target select, nascent, legal cannabis and CBD opportunities with significant long-term potential, with an initial focus on the Asia-Pacific region through our investment in Australia-based Altum International Pty Ltd (“Altum”).

~~On January 20, 2021,~~Updates - Village Farms completed a registered direct offering with certain institutional investors for the purchase and sale of an aggregate 10,887,097 Common Shares at a purchase price of $12.40 (approximately C$15.70) per Common Share for gross proceeds of approximately $135 million (approximately C$171 million) before placement fees and other offering expenses payable by Village Farms.Clean Energy Update” below.

~~Update Relating~~Our Response to the ~~Outbreak of the~~Ongoing Coronavirus Pandemic

In March 2020, the World Health Organization declared the outbreak of the COVID-19 virus a global pandemic. This outbreak continues to cause major disruptions to businesses and markets worldwide as the virus continues to spread. ~~A number of~~Several countries as well as certain states and cities within the United States and Canada have enacted temporary closures of businesses, issued quarantine or shelter-in-place orders and taken other restrictive ~~measures in~~measures. In response to ~~COVID-19. To date,~~the COVID-19 pandemic, the Company implemented safety protocols and procedures to protect its employees, its subcontractors, and its customers. These protocols take into consideration guidance from state and local government agencies as well as the Centers for Disease Control and Prevention and other public health authorities.

As of May 9, 2022, all of ~~our~~the Company’s operations are operating normally, however, the extent to which COVID-19 and the related global economic crisis affect ~~our~~the Company’s business, results of operations and

financial condition, will depend on future developments that are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and any recovery period, future actions taken by governmental authorities, central banks and other third parties (including new financial regulation and other regulatory reform) in response to the pandemic, and the effects on our produce, clients, vendors and employees. ~~We continue~~Village Farms continues to service ~~our~~its customers amid uncertainty and disruption linked to COVID-19 and ~~we are~~is actively managing ~~our~~its business to respond to the impact.

On February 5, 2021, Village Farms repaid in full the Promissory Note of C$19,900 plus accrued interest of C$622 to Emerald Health Therapeutics, Inc. (”Emerald”), that was issued in conjunction with the Purchase Agreement on September 8, 2020. The Company no longer owes any amounts to Emerald with respect to the Pure Sunfarms TransactionInflation and the ~~previously pledged 9,239,625 Common Shares of Pure Sunfarms have~~Russia/Ukraine Conflict

Our business has been ~~released~~affected, and we expect will continue to ~~the Company by the collateral agent.~~

~~Village Farms was added to the S&P/TSX Composite Index (Consumer Staples sector) prior to trading on March 22, 2021. The S&P/TSX Composite Index is the headline index~~be affected for the ~~Canadian equity market~~foreseeable future, by rising inflation and issupply chain issues arising from COVID-19, and indirectly, the ~~broadest index~~Russia/Ukraine conflict may impact the price of oil and natural gas which may negatively affect our operating results. Inflation has affected and continues to affect, amongst other items, supply chain and labor costs as well as purchasing decisions of consumers which may impact demand for our products. See Part II, Item 1A, “Risk Factors”, in ~~the S&P/TSX family. We believe that inclusion in the S&P/TSX Composite Index can potentially broaden participation in the Company's investor base by enabling investments from index funds~~this Quarterly Report.

InCanadian cannabis recent developments and updates include the first quarter of 2021, warrants issued as part of the September 2020 registered direct offering were exercised, resulting in proceeds to the Company of $17,663 and the issuance of 3,045,283 additional Common Shares. There are 1,652,830 remaining warrants from the September 2020 registered direct offering as of the date of this filing.

On May 7, 2021, Village Farms amended the Operating Loan terms to extend the credit agreement with an amended line of credit of C$10,000 and maturity date of May 7, 2024. See “Liquidity and Capital Resources – Operating Loan”.

~~During the first quarter of 2021, Pure Sunfarms continued seeking opportunities to increase its production, sales, brand awareness and global footprint. A few notable accomplishments include:~~following:

~~In November 2020, VFCE entered into~~The Delta RNG Project consists of a partnership with Mas Energy to convert the current landfill gas to electricity business into a state-of-the-art landfill gas to high-demand renewable natural gas ~~facility.~~facility, which was entered into in November 2020 by VFCE. Mas Energy will design, build, finance, own and operate the Delta RNG Project. VFCE renewed and extended the existing contract with the City of Vancouver to capture the landfill gas at its Delta, B.C. ~~site.~~site securing future resources for the Delta RNG Project. The 20-year extension, with aan option for an additional five-year ~~option,~~extension period, commences upon the start-up of the commercial operations of the Delta RNG Project. ~~We anticipate that~~

The project is designed to generate renewable natural gas and CO² from the ~~conversion~~methane gas created at the nearby landfill. Village Farms plans to utilize the ~~Delta RNG Project will begin mid-2021 with commercial operations to commence in mid-2022. We expect the project to capture the CO2~~CO² from the renewable natural gas production process ~~and make it available to Village Farms~~ for ~~producing crops~~use in ~~its~~our three Delta, B.C. vegetable and cannabis ~~greenhouses. The reduction in~~greenhouse facilities, thereby reducing natural gas requirements ~~is expected to decrease~~and decreasing the total carbon footprint of Village Farms. Mas Energy intends to sell the renewable natural gas and VFCE will receive a portion of the revenues in the form of a royalty. When announced in November 2020, we anticipated attaining all regulatory approvals in the first half of 2021 with an expected operational start up as early as the first half of 2022. However, COVID-19 adversely impacted the bureaucratic approval processes in Canada surrounding permitting and zoning requirements necessary to break ground on the Delta RNG Project. We attained the majority of regulatory approvals in the first quarter of 2022, and we now have an expected operational start up in mid-2023. In addition, the Company has paid off all VFCE loans and entered into a financial arrangement with Mas Energy, in which Mas Energy advanced $445 against future natural gas royalties anticipated after operations commence in mid-2023.

On ~~February 8,~~September 28, 2021, Village Farms ~~exercised~~entered into an option agreement whereby the Company received the irrevocable right to ~~increase its equity investment~~acquire at least an 80% ownership interest (the “Option Agreement”) in ~~Altum from 6.6% to just under 10%~~Netherlands-based Leli Holland B.V. (“Leli”) upon payment of EUR50,000 (the “Option”). ~~On May 5, 2021,~~The Option Agreement allows Village Farms to acquire 80% of Leli’s shares for EUR3,950,000, of which EUR950,000 is due and payable to Leli’s shareholders upon the exercise of the Option and the remainder due in three equal installments subject to the achievement of certain project development milestones. The Option is exercisable at the sole discretion of Village Farms during the Option exercise period ending September 30, 2026. As of the date of this filing of this Quarterly Report, we have not exercised the Option.

Leli is one of ten applicants selected to receive a license (subject to customary government approval) to legally cultivate and distribute cannabis to retailers when the Dutch government implements its ~~remaining option~~Experiment to ~~increase its equity investment in Altum to just under 12%~~Investigate Closed Cannabis Supply Chains (“Dutch Supply Chain Experiment”). The ~~investment~~Dutch Supply Chain Experiment is specified by the Dutch government to be approximately 65,000 kilograms of dried flower annually from the ten approved producers during the first year. Leli and Village Farms plan to construct two indoor CEA production facilities, leveraging Leli’s track record managing complex regulatory and approval procedures in ~~Altum, one~~the Netherlands at both the federal and local levels and Village Farms’ three-plus decades as a vertically integrated CEA grower, as well as its extensive experience in cultivation, product development and commercialization in the Canadian legal recreational cannabis market. If the Option is exercised, the Company will be the majority owner of ~~Asia-Pacific’s leading CBD platforms, represents~~Leli. Village Farms will then become responsible for the development of the project and product commercialization throughout the fully vertically integrated business model.

On March 18, 2022, the Company loaned $2,715 (EUR 2.6 million) to L.L. Lichtendahl Beheer B.V, a ~~capital efficient means~~private company that holds a 50% interest in Leli. The outstanding loan and accrued interest are to ~~participate in opportunities in this region.~~be repaid within fourteen days upon written request by the Company.

Our consolidated results of operations (prior to net income) for the three months ended March 31, ~~2021~~2022 and ~~2020~~March 31, 2021 presented below reflect the operations of our consolidated ~~wholly owned~~wholly-owned subsidiaries, which does not include our VFH joint venture. The income (loss) from the equity ~~in earnings from VFH~~method investments is reflected in our net income for the three months ended March 31, ~~2021~~2022 and ~~2020 presented below. Due to the acquisition of our joint venture, Pure Sunfarms, on November 2, 2020, the equity earnings from Pure Sunfarms are reflected in our net~~

~~income for March 31, 2020. However, for the three months ended~~ March 31, 2021 ~~the~~presented below. Balanced Health was acquired on August 16, 2021 and their results ~~of Pure Sunfarms~~ are presented in the operations of our consolidated ~~wholly owned subsidiaries. For information regarding~~wholly-owned subsidiaries for the three months ended March 31, 2022. The Company acquired 70% of Rose LifeScience on November 15, 2021 and their results are presented in the operations of ~~operations from~~ our ~~joint ventures, see “Reconciliation~~consolidated wholly-owned subsidiaries and the minority interest is presented in Net Income (Loss) Attributable to Non-controlling Interests, Net of ~~Generally Accepted Accounting Practices (“GAAP”) Results to Proportionate Results” below.~~Tax for the three months ended March 31, 2022.

(In thousands of U.S. dollars, except per share amounts, and unless otherwise noted)

	For the three months ended March 31,						For the three months ended March 31,
	2021⁽¹⁾			2020⁽¹⁾			2022 ⁽¹⁾			2021⁽¹⁾
Sales	$	52,396		$	32,112		$	70,156		$	52,396
Cost of sales		(50,089	)		(31,347	)		(60,252	)		(50,089	)
Gross margin		2,307			765			9,904			2,307
Selling, general and administrative expenses		(8,092	)		(3,921	)		(16,971	)		(8,092	)
Share-based compensation		(1,998	)		(529	)		(964	)		(1,998	)
Interest expense		(741	)		(537	)		(683	)		(741	)
Interest income		3			383			110			3
Foreign exchange loss		(504	)		(926	)
Gain on settlement agreement		—			4,681
Other (expense) income		(69	)		39
Loss on disposal of assets		—			(6	)
Foreign exchange gain (loss)								319			(504	)
Other expense, net								(8	)		(69	)
Recovery of income taxes		1,839			1,012			1,666			1,839
(Loss) income from consolidated entities after income taxes		(7,255	)		961
Equity (losses) earnings of unconsolidated entities		(127	)		3,229
Net (loss) income	$	(7,382	)	$	4,190
Loss from consolidated entities								(6,627	)		(7,255	)
Less: net loss attributable to non-controlling interests, net of tax								162			—
Loss from equity method investments								(52	)		(127	)
Net loss attributable to Village Farms International Inc.							$	(6,517	)	$	(7,382	)
Adjusted EBITDA ⁽²⁾	$	404		$	1,096		$	(6,111	)	$	404
(Loss) earnings per share - basic	$	(0.10	)	$	0.08
(Loss) earnings per share – diluted	$	(0.10	)	$	0.08
Basic loss per share							$	(0.07	)	$	(0.10	)
Diluted loss per share							$	(0.07	)	$	(0.10	)

We caution that our results of operations for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 may not be indicative of our future performance, particularly in light of the ongoing COVID-19 pandemic. We are currently unable to assess the ultimate impact of the COVID-19 pandemic on our business and our results of operations for future periods.

The following segmented financial information includes the financial results of our cannabis segment (Pure Sunfarms), before any allocation to Village Farms, which were not consolidated in our financial results for the three months ended March 31, 2020 and consolidated in our financial results for the three months ended March 31, 2021.

A discussion of our consolidated results for the three months ended March 31, ~~2021~~2022 and ~~2020~~March 31, 2021 is included below. The consolidated results include all ~~three~~four of our operating segments, ~~which include produce,~~VF Fresh (produce), Canadian cannabis, U.S. cannabis and clean energy, along with all public company expenses. ~~Pure Sunfarms was~~Village Farms acquired 100% of Balanced Health on August 16, 2021 and their operating results are consolidated in ~~its entirety~~our Consolidated Statements of Loss for January 1, 2022 through March 31, 2022. The Company acquired 70% of Rose LifeScience on November ~~2, 2020;~~15, 2021 and their operating results are consolidated in our Consolidated Statements of Loss and the minority interest is presented in Net Loss Attributable to Non-controlling Interests, Net of Tax for January 1, 2022 through March 31, 2022. For a discussion of our segmented results, please see “Segmented Results of Operations” below.

Sales for the three months ended March 31, 2021, the operating results of Pure Sunfarms are consolidated in our Consolidated Statements of Income (Loss), and for the three months ended March 31, 2020, Pure Sunfarms’ results are included in equity earnings from unconsolidated entities in our Consolidated Statements of Income (Loss).

~~We also present a discussion of the operating results of Pure Sunfarms, before any allocation~~2022 were $70,156 as compared to ~~Village Farms, which were not consolidated in our financial results for the three months ended March 31, 2020 but were consolidated in our results~~$52,396 for the three months ended March 31, 2021. ~~As a result of the Pure Sunfarms Acquisition, Pure Sunfarms recognized an~~The increase in ~~the fair value~~sales of ~~its inventory on-hand on the acquisition date, resulting~~$17,760 or 34% was attributable to revenue growth in ~~a $2,925 charge to cost of~~our key operating segments: VF Fresh, Canadian cannabis and U.S. cannabis. VF Fresh’s sales ~~in the first quarter of 2021~~increased $6,566, Canadian cannabis increased $4,309 and ~~a $3,295~~

charge to cost of sales in the fourth quarter of 2020 from the revaluation of its inventory to fair value. This is a non-cash accounting charge to cost of sales and should be adjusted for when analyzing the actual operational results of Pure Sunfarms.

~~Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020~~

~~Sales~~U.S. cannabis increased $7,043 for the three months ended March 31, ~~2021 were $52,396~~2022 as compared to ~~$32,112 for~~ the three months ended March 31, ~~2020.~~2021. The ~~increase in sales was primarily due~~acquisitions of Balanced Health and Rose contributed $7,043 and $3,608, respectively, to the ~~inclusion~~quarter-over-quarter revenue growth while the remaining $7,109 was derived from organic growth of VF Fresh and Pure Sunfarms’ Q1 2021 revenues of $17,460 and an increase in produce supply partner sales of $4,139, partially offset by a decrease in our own produce sales of ($1,234) and VFCE power sales of ($81). The produce supply partner sales increase was due to higher volumes of pounds sold of tomatoes, peppers, cucumbers and mini-cucumbers. The decrease in our own produce sales was due to a (24%) decrease in the average selling price of tomatoes in the three months ended March 31, 2021 versus March 31, 2020, partially offset by a 14% increase in our own production volume. The price decrease is the result of a market supply overage caused by lower retailer demand along with an increase in Canadian tomato production from new acreage under light in 2021. The tomato produce industry is currently experiencing one of the lowest pricing environments for tomatoes-on-the-vine and beefsteak varieties in the past ten years.Sunfarms.

Cost of sales for the three months ended March 31, ~~2021~~2022 were ~~$50,089~~$60,252 as compared to ~~$31,347~~$50,089 for the three months ended March 31, ~~2020.~~2021. The increase in cost of sales of ($10,163) or (20%) was primarily ~~due to the addition of Pure Sunfarms’ Q1 2021~~derived from an increase in VF Fresh cost of sales of ~~$15,248,~~($11,454) and an increase in ~~produce supply partner costs~~U.S. cannabis cost of ~~$3,282 and higher clean energy costs~~sales of ~~$356,~~($2,331), partially offset by a decrease in ~~our own production~~Canadian cannabis cost of sales of ~~($144). The Q1 2021 cost of sales~~$2,989 for ~~Pure Sunfarms includes a $2,925 charge from~~ the ~~revaluation of its inventory~~three months ended March 31, 2022 as compared to ~~fair value at acquisition date. The increase in produce supply partner cost of sales was driven by higher volumes of pounds sold and~~ the increase in clean energy costs were driven by higher depreciation charges. The decrease in our own production costs was driven by lower cost per pound production at two of our Texas facilities and better utilization of our transportation and handling cost, primarily due to greenhouse management efficiency efforts.three months ended March 31, 2021.

Gross margin for the three months ended March 31, ~~2021~~2022 increased ~~$1,542~~$7,597 to $9,904, for a 14% gross margin, in comparison to $2,307, for a 4% ~~gross margin (including the $2,925 charge from the revaluation of Pure Sunfarms’ inventory to fair value at acquisition date), in comparison to $765, for a 2%~~ gross margin, for the three months ended March 31, ~~2020. Gross margin for the three months ended March 31, 2021 increased $4,467 to $5,232, for a 10%~~2021. Statutory gross margin ~~(excluding the $2,925 charge from the revaluation of Pure Sunfarms’ inventory~~by segment for Q1 2022 was (10%) for VF Fresh, 44% for Canadian cannabis and 67% for U.S. cannabis as compared to fair value at acquisition date). Gross margin (excluding the revaluation charge) increased due to the inclusion of Pure Sunfarms’ Q1 2021 gross margin of $5,137, partially offset by a lower produce gross margin of ($226)2% for VF Fresh and ~~a lower clean energy gross margin of ($444). The decreased produce gross margin was primarily due to lower prices~~13% for ~~tomatoes~~Canadian cannabis in Q1 2021 and the lower gross margin for clean energy was driven by higher depreciation charges as the depreciable life of VFCE assets have been accelerated due to the upcoming transition of operations to the Delta RNG Project expected in mid-2021.2021.

Selling, general and administrative expenses for the three months ended March 31, ~~2021~~2022 increased ~~$4,171~~$8,879 to $16,971 or 24% of sales compared to $8,092 ~~compared to $3,921~~or 15% of sales for the three months ended March 31, ~~2020.~~2021. The increase in selling, general and administrative expenses was primarily due to the acquisition of Balanced Health and Rose LifeScience and inclusion of ~~Pure Sunfarms’~~their expenses in the three months ended March 31, 2022. In addition, corporate expenses increased $1,027 due to Q1 2022 costs associated with the start-up of ~~$3,966~~Leli and our development team, and an increase in ~~corporate expenses, primarily related~~audit, regulatory and compliance fees in the three months ended March 31, 2022 as compared to ~~public company costs such as investor relations, legal and regulatory fees, listing fees for~~ the ~~TSX, January 2021 equity raise and incremental costs of U.S. reporting compliance.~~three months ended March 31, 2021.

Share-based compensation expenses for the three months ended March 31, ~~2021~~2022 were ~~$1,998~~$964 as compared to ~~$529~~$1,998 for the three months ended March 31, ~~2020.~~2021. The ~~increase~~decrease in share-based compensation was primarily due to the vesting of performance share grants for ~~Pure Sunfarms’~~Canadian cannabis management ~~of $1,094~~and corporate management in Q1 2021 ~~versus nil in Q1 2020, along~~associated with attained milestones and conditions met associated with the ~~cost of issuing stock options in December 2020.~~

On March 2, 2020, pursuant to the settlement agreement between the Company, Pure Sunfarms and Emerald (“Settlement Agreement”), Emerald transferred to the Company 2.5% of additional equity in Pure Sunfarms. The Company determined the fair valueCompany’s acquisition of the equity received from Emerald to be $4,681 (C$6,500). The Company recorded this amount as a gain on non-monetary exchange on the Consolidated Statement of Income (Loss) and Comprehensive Income (Loss) for the three months ended March 31, 2020.

Income taxes for the three months ended March 31, 2021 was a recovery of $1,839 compared to a recovery of $1,012 for the three months ended March 31, 2020. For the three months ended March 31, 2021 and 2020, our effective tax rate, including both current and deferred income taxes, was 19.9% and 31.8%, respectively. The equity losses for our unconsolidated entity, VFH, is reported post-tax and therefore does not affect our tax calculation. Our share of income for Pure Sunfarms was presented in equity earnings from unconsolidated entities for the three months ended March 31, 2020. Village Farms began fully consolidating operating resultsremaining 41.3% of Pure Sunfarms on November 2, ~~2020; Pure Sunfarms’ operating results are fully consolidated for the three months ended March 31, 2021.~~2020.

~~Our share of earnings from our joint ventures for the three months ended March 31, 2021 was ($127) compared~~Net Loss Attributable to ~~$3,229 for the three months ended March 31, 2020. Our share of income from Pure Sunfarms was presented in equity earnings from unconsolidated entities for the three months ended March 31, 2020.~~ Village Farms began fully consolidating operating results of Pure Sunfarms on November 2, 2020 and its results are presented in the Company’s consolidated operating results for the three months ended March 31, 2021. For information regarding the results of operations from our joint ventures, see “Reconciliation of U.S. GAAP Results to Proportionate Results” below.

Net loss for the three months ended March 31, ~~2021~~2022 was ($~~7,382)~~6,517) as compared to a net ~~income~~loss of ~~$4,190~~($7,382) for the three months ended March 31, ~~2020.~~2021. The ~~decrease~~improvement in net ~~income is primarily~~loss was due to ~~a lower gross margin from Pure Sunfarms (which includes the $2,925 charge~~positive net income contribution from the ~~revaluation of its inventory to fair value at acquisition date)~~Canadian cannabis and ~~higher company-wide selling, general and administrative expense and share-based compensation~~U.S. cannabis segments in 2022, offset by an increase in net loss from VF Fresh for the three months ended March 31, ~~2021~~2022 as compared to the three months ended March 31, ~~2020, which also included a gain from the Settlement Agreement of $4,681 in March 2020.~~2021.

Adjusted EBITDA for the three months ended March 31, ~~2021~~2022 was ~~$404~~($6,111) compared to ~~$1,096~~$404 for the three months ended March 31, ~~2020.~~2021. The decrease in adjusted EBITDA was primarily due to lower operating results of ~~both Pure Sunfarms and the produce business.~~VF Fresh. See the reconciliation of Adjusted EBITDA to net income in “Non-GAAP Measures—Reconciliation of Net Earnings to Adjusted EBITDA”.

(In thousands of U.S. dollars, except per share amounts, and unless otherwise noted)

	For the Three Months Ended March 31, 2022
	VF Fresh (Produce)			Cannabis - Canada ⁽¹⁾			Cannabis - U.S. ⁽¹⁾			Clean Energy			Corporate			Total
Sales	$	41,349		$	21,769		$	7,043		$	(5	)	$	—		$	70,156
Cost of sales		(45,520	)		(12,259	)		(2,331	)		(142	)		—			(60,252	)
Selling, general and administrative expenses		(3,140	)		(6,933	)		(4,296	)		(32	)		(2,570	)		(16,971	)
Share-based compensation		—			(367	)		(95	)		—			(502	)		(964	)
Other (expense) income, net		(30	)		(746	)		—			(6	)		520			(262	)
Recovery of (provision for) income taxes		1,715			(639	)		—			—			590			1,666
(Loss) income from consolidated entities		(5,626	)		825			321			(185	)		(1,962	)		(6,627	)
Less: net loss attributable to non-controlling interests, net of tax		—			162			—			—			—			162
(Loss) from equity method investments		—			—			(52	)		—			—			(52	)
Net (loss) income		(5,626	)		987			269			(185	)		(1,962	)		(6,517	)
Adjusted EBITDA⁽²⁾	$	(6,201	)	$	2,104		$	580		$	(59	)	$	(2,535	)	$	(6,111	)
Basic loss (income) per share	$	(0.06	)	$	0.01		$	0.00		$	(0.00	)	$	(0.02	)	$	(0.07	)
Diluted loss (income) per share	$	(0.06	)	$	0.01		$	0.00		$	(0.00	)	$	(0.02	)	$	(0.07	)

	For the Three Months Ended March 31, 2021
	VF Fresh (Produce)			Cannabis - Canada ⁽¹⁾			Cannabis - U.S. ⁽¹⁾			Clean Energy			Corporate			Total
Sales	$	34,867		$	17,460		$	—		$	69		$	—		$	52,396
Cost of sales		(34,150	)		(15,248	)		—			(691	)		—			(50,089	)
Selling, general and administrative expenses		(2,551	)		(3,966	)		—			(32	)		(1,543	)		(8,092	)
Share-based compensation		—			(1,094	)		—			—			(904	)		(1,998	)
Other expense, net		(256	)		(630	)		—			(12	)		(413	)		(1,311	)
Recovery of income taxes		505			644			—			—			690			1,839
Loss from consolidated entities		(1,585	)		(2,834	)		—			(666	)		(2,170	)		(7,255	)
Less: net (income) loss attributable to non-controlling interests, net of tax		—			—			—			—			—			—
Loss from equity method investments		—			—			(127	)		—			—			(127	)
Net loss		(1,585	)		(2,834	)		(127	)		(666	)		(2,170	)		(7,382	)
Adjusted EBITDA⁽²⁾	$	(492	)	$	2,534		$	(79	)	$	(16	)	$	(1,543	)	$	404
Basic loss per share	$	(0.02	)	$	(0.04	)	$	(0.00	)	$	(0.01	)	$	(0.03	)	$	(0.10	)
Diluted loss per share	$	(0.02	)	$	(0.04	)	$	(0.00	)	$	(0.01	)	$	(0.03	)	$	(0.10	)

~~Pure Sunfarms’~~The produce segment, VF Fresh, currently consists of Village Farms LP and Village Farms Canada LP. VF Fresh’s comparative analysis are based on the consolidated results of ~~Pure Sunfarms~~Village Farms LP and Village Farms Canada LP for the three months ended March 31, ~~2021, December 31, 2020,~~2022 and 2021.

Three Months Ended March 31, ~~2020, not accounting~~2022 Compared to Three Months Ended March 31, 2021

VF Fresh sales for three months ended March 31, 2022 were $41,349 as compared to $34,867 for the three months ended March 31, 2021. The increase in sales of $6,482 or 19% was due to increases in our own produce revenues of $3,472 and our grower partner revenues of $3,010. The increase in our own produce revenues was primarily due to an increase in tomato volume of 19% while the selling price of our own tomatoes was relatively flat due to a change in sales mix to a greater percentage ~~owned~~of higher priced specialty tomatoes. The increase in grower partner revenues was primarily due to higher volumes of pounds sold of tomatoes, peppers, cucumbers and mini-cucumbers, partially offset by ~~Village Farms. As a result~~decreases in tomato prices of (2%), pepper prices of (25%), cucumber prices of (7%) and mini-cucumber prices of (29%) in Q1 2022 as compared to Q1 2021.

VF Fresh cost of sales for three months ended March 31, 2022 were $45,520 as compared to $34,150 for the ~~Pure Sunfarms Acquisition, Pure Sunfarms recognized~~three months ended March 31, 2021. Cost of sales increased ($11,370) or (33%) due to increases in our own produce cost of sales of ($7,054) and our grower partner cost of sales of ($4,316). The increase in our own produce cost of sales was driven by the 19% increase in tomato volume at our Texas greenhouses as well as an increase in the ~~fair value~~sales mix for specialty tomatoes which require higher costs for cultivation and packaging. The increase in volume and an incremental increase in freight costs of ~~its inventory on-hand on the acquisition date, resulting~~approximately ($1,803) drove higher transportation and handling costs of produce in ~~a $2,925 charge~~Q1 2022 as compared to Q1 2021. In addition, in Q1 2022, we incurred an incremental catch up to our cost of sales of $1,779 on our Texas crop cycle that began in summer/fall 2021 and ends in late Q2 2022 due to an expected lower total crop volume and higher cost of production for the growing cycle due to ongoing disease pressure and supply chain cost increases, effectively increasing our production price per pound for our Texas tomato crop. The increase in grower partner cost of sales was driven by an increase in purchased production from our grower partners as well as fixed contract pricing on some of our grower partner tomato varieties. Our facility management has implemented changes to increase crop yield and reduce cost per pound, however our efforts could not mitigate the increases in supply chain costs and incremental freight experienced in Q1 2022.

The gross margin for VF Fresh was ($4,171) for three months ended March 31, 2022 as compared to $717 for the three months ended March 31, 2021. Gross margin in the first quarter of ~~2021 and a $3,295 charge to~~2022 has been greatly affected by the higher cost of sales, which was attributable to additional freight per pound, a revised production forecast and higher cultivation costs in our Texas facilities and lower grower partner gross margin of ($1,306). The higher freight per pound was mostly due to increases in fuel prices and trucker shortages which could not be passed on to our customers.

VF Fresh selling, general and administrative expenses for three months ended March 31, 2022 were $3,140 or 8% of sales as compared to $2,551 or 7% of sales for the ~~fourth~~three months ended March 31, 2021. The quarter-over-quarter increase in selling, general and administrative expenses was primarily due to legal fees.

VF Fresh’s net loss for three months ended March 31, 2022 was ($5,626) as compared to ($1,585) for the three months ended March 31, 2021. The increase in net loss for the first quarter of ~~2020 from~~2022 as compared to the ~~revaluation~~first quarter of ~~its inventory~~2021 was primarily due to ~~fair value. This~~the lower gross margin and higher selling, general and administrative expenses incurred in 2022.

The Adjusted EBITDA for VF Fresh was ($6,201) for three months ended March 31, 2022 as compared to ($492) for the three months ended March 31, 2021. The lower Adjusted EBITDA was due to a decrease in operating margin of ($5,477) for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

The Canadian cannabis segment currently consists of Pure Sunfarms and Rose LifeScience. The comparative analysis for Canadian cannabis is ~~a non-cash accounting charge to cost of sales and should be adjusted for when analyzing~~based on the ~~actual operational~~consolidated results of Pure ~~Sunfarms. See “Reconciliation of U.S. GAAP Results to Proportionate Results”~~Sunfarms and Rose LifeScience for ~~a presentation~~the three months ended March 31, 2022 and the results of Pure ~~Sunfarms’ proportionate~~Sunfarms for March 31, 2021. The Company acquired 70% of Rose LifeScience on November 15, 2021 and as such the operating results of Rose LifeScience from January 1, 2022 to March 31, 2022 are consolidated in our results for the three months ended March 31, ~~2021 and~~2022 with the minority interest presented in Net Income (Loss) Attributable to Non-controlling Interests, Net of Tax.

2022 Compared to Three Months Ended March 31, 2021 ~~Compared to Three Months Ended December 31, 2020~~

~~Pure Sunfarms’~~Canadian cannabis net sales for the three months ended March 31, ~~2021~~2022 were ~~$17,460~~$21,769 as compared to ~~$17,303~~$17,460 for the three months ended ~~December~~March 31, ~~2020.~~2021. The ~~sequential~~period-over-period net sales increase of $4,309 or 25% includes $3,609 in Q1 2022 net sales from Rose. The increase between comparable quarters was ~~comprised~~driven by a 79% increase in non-branded sales and an 8% increase in branded sales. The 79% increase in non-branded sales was due primarily to the continued development and strengthening of ~~a 20%~~relationships with other key LPs that are purchasing high potency, high-quality flower and trim made available as Pure Sunfarms expanded its cultivation footprint. The 8% increase in branded sales was attained through the addition of Rose branded sales in Q122, partially offset by a ~~(49%~~(10%) ~~decrease~~decline in ~~non-branded sales.~~Pure Sunfarms branded sales driven by selective price decreases on slower moving flower and cannabis derivative products. For the three months ended March 31, ~~2021, 71%~~2022, 67% of revenue was generated from branded flower, ~~and 13%~~inclusive of pre-rolls, 8% of revenue from ~~tinctures~~cannabis derivative products and ~~Cannabis 2.0 products (branded cannabis oil, edibles and vapes)~~25% from non-branded sales as compared to ~~56%~~71% of revenue from branded flower, inclusive of pre-rolls, 13% from cannabis derivative products and ~~12% of revenue~~16% from ~~tinctures and Cannabis 2.0 products~~non-branded sales for ~~the three months ended December 31, 2020. For~~ the three months ended March 31, 2021, non-branded sales represented 16% of revenues compared to 32% for the three months ended December 31, 2020.The decrease in non-branded sales between comparable periods was driven primarily by an oversaturated wholesale market combined with the impact of several provincial boards initiating stock keeping unit (“SKU”) rationalization and management of their March 31, 2021 fiscal year-end inventory levels, which decreased demand from other licensed producers (“LP”) in the wholesale market.2021.

~~Pure Sunfarms’~~Canadian cannabis cost of sales for the three months ended March 31, ~~2021 was $15,248~~2022 were $12,259 as compared to ~~$13,918~~$15,248 for the three months ended ~~December~~March 31, ~~2020.~~2021. The period-over-period net cost of sales decrease of $2,989 or 20% includes $2,388 in Q1 ~~2021 and Q420~~2022 cost of sales from Rose. In addition, the Q2 2022 cost of sales for Pure Sunfarms includes a ~~$2,925~~positive adjustment of $2,050 and ~~$3,295~~the Q1 2021 cost of sales for Pure Sunfarms includes a ($2,778) charge ~~respectively,~~ from the revaluation of its inventory to fair value at acquisition ~~date.~~date of November 2, 2020. The ~~increase in~~ cost of sales decrease is partly attributable to ongoing improvements in yields, potency and growing practices as well as a higher proportion of non-branded sales between comparable periods, ~~was driven by the higher volume of branded sales which~~as non-branded products require ~~incremental costs for~~lower manufacturing, packaging and ~~distribution.~~distribution costs.

Gross margin for the three months ended March 31, ~~2021 decreased ($1,173)~~2022 increased $7,298 to ~~$2,212, for~~$9,510, or a ~~13%~~44% gross margin, in comparison to ~~$3,385, for~~$2,212, or a ~~20%~~13% gross margin, for the three months ended ~~December~~March 31, ~~2020.~~2021. Gross margin for the three months ended March 31, ~~2021 decreased ($1,542)~~2022 increased $2,470 to ~~$5,137, for~~$7,460, or a 34% gross margin (excluding the purchase price inventory positive adjustment of $2,050) in comparison to $4,990, or a 29% gross margin (excluding the purchase price inventory adjustment charge of ~~$2,925), in comparison to $6,679, for a 39% gross margin (excluding the purchase price inventory adjustment of $3,295)~~$2,778), for the three months ended ~~December~~March 31, ~~2020.~~2021. The ~~decrease~~increase in gross margin between comparable periods was primarily due to the ~~increase~~production of high-quality, high-potency flower from a larger cultivation footprint which is a key factor in decreasing cost of sales ~~associated with~~as a percentage of revenue and offset the ~~higher volume of branded sales~~price compression experienced across various provincial markets in ~~2021 that require incremental costs for manufacturing, packaging and distribution.~~Q1 2022.

~~Pure Sunfarms’~~Canadian cannabis selling, general and administrative expenses for the three months ended March 31, ~~2021 were $3,966~~2022 increased $2,967 to $6,933 or 32% of sales compared to ~~$4,476 for the three months ended December 31, 2020. The decrease in selling, general and administrative expenses~~$3,966 or 23% of sales for the three months ended March 31, ~~2021~~2021. The increase in ~~comparison to the three months ended December 31, 2020~~selling, general and administrative expenses in Q2 2022 was ~~primarily~~ due to a ~~reduction~~40% rise in Pure Sunfarms’ expenses and the inclusion of Rose expenses of $1,364. The quarter-over-quarter increase was mostly due to planned incremental investment in sales support and marketing ~~spend and lower professional fees, such as legal and consulting services, partially offset by~~campaigns for the higher volume of sales in 2022 along with additional headcount, IT services, regulatory and compliance fees to support the growth of ~~Pure Sunfarms.~~the Canadian cannabis segment.

~~Share-based~~Canadian cannabis share-based compensation expenses for the three months ended March 31, ~~2021~~2022 were ~~$1,094~~$367 as compared to $61 for the three months ended December 31, 2020. The increase in share-based compensation is due to the vesting of performance share grants for Pure Sunfarms’ management as well as the incremental cost of issuing stock options in December 2020.

~~Pure Sunfarms’ net loss~~$1,094 for the three months ended March 31, ~~2021 was ($2,834) as compared to ($1,720) for the three months ended December 31, 2020.~~2021. The Q1 2021 and Q420 net loss for Pure Sunfarms includes a $2,925 and $3,295 charge, respectively, from the revaluation of its inventory to fair value at acquisition date. The higher net loss between periods was driven by a lower gross margin, largely attributable to a lower average selling price for non-branded sales and increased share-based compensation, partially offset by lower selling, general and administrative expenses.

Adjusted EBITDA for the three months ended March 31, 2021 and December 31, 2020 was $2,534 and $2,279, respectively. The increase in Adjusted EBITDA was driven by higher net sales and lower selling, general and administrative expenses in the three months ended March 31, 2021 as compared to the three months ended December 31, 2020. The three months ended December 31, 2020 also included a $757 write-off of a note receivable from Emerald as part of the Pure Sunfarms acquisition.

~~Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020~~

Pure Sunfarms’ net sales for the three months ended March 31, 2021 were $17,460 as compared to $13,137 for the three months ended March 31, 2020. The period-over-period net sales increase was comprised of a 117% increase in branded sales, partially offset by a (62%) decrease in non-branded sales. For the three months ended March 31, 2021, 71% of revenue was generated from branded flower and 13% of revenue from tinctures and Cannabis 2.0 products as compared to 47% of revenue from branded flower for the three months ended March 31, 2020. Pure Sunfarms had not begun selling Cannabis 2.0 products in the three months ended March 31, 2020. For the three months ended March 31, 2021, non-branded sales represented 16% of revenues compared to 53% for the three months ended March 31, 2020. The decrease in non-branded sales between periods was driven primarily by an oversaturated wholesale market combined with the impact of several provincial boards initiating SKU rationalization and management of their March 31, 2021 fiscal year-end inventory levels, which decreased demand for many LPs in the wholesale market.

Pure Sunfarms’ cost of sales for the three months ended March 31, 2021 were $15,248 as compared to $6,258 for the three months ended March 31, 2020. The Q1 2021 cost of sales for Pure Sunfarms includes a $2,925 charge from the revaluation of its inventory to fair value at acquisition date. The increase in cost of sales between periods was driven by the higher volume of branded sales which require incremental costs for manufacturing, packaging and distribution.

Gross margin for the three months ended March 31, 2021 decreased ($4,667) to $2,212, for a 13% gross margin (including the purchase price inventory adjustment of $2,925), in comparison to $6,879, for a 52% gross margin, for the three months ended March 31, 2020. Gross margin for the three months ended March 31, 2021 decreased ($1,742) to $5,137, for a 29% gross margin (excluding the purchase price inventory adjustment of $2,925). The decrease in gross margin between comparable periods was primarily due to price compression in the wholesale market over the past 12 months combined with the increase in cost of sales associated with a higher volume of branded sales which require incremental costs for manufacturing, packaging and distribution.

Selling, general and administrative expenses for the three months ended March 31, 2021 increased $1,532, or (63%), to $3,966 compared to $2,434 for the three months ended March 31, 2020. The increase in selling, general and administrative expenses was due to incremental sales support and marketing for the higher volume of branded sales in 2021 along with additional headcount to support the growth of Pure Sunfarms.

~~Share-based compensation expenses for the three months ended March 31, 2021 were $1,094 as compared to nil for the three months ended March 31, 2020. The increase~~ in share-based compensation was primarily due to the vesting of performance share grants for Pure Sunfarms’ management associated with attained milestones and ~~Pure Sunfarms’ management not being part~~conditions met associated with the Company’s acquisition of the ~~Company until November 2020.~~

Pure Sunfarms ~~recognized income of $4,348 in the first quarter of 2020 as an outcome of the March~~on November 2, 2020 Settlement Agreement between Pure Sunfarms, Emerald and the Company. This gain is Pure Sunfarm’s forgiveness of the shareholder loan and accrued interest owed by Emerald offset by the extinguishment of the supply agreement and any amounts receivable under it, which included a C$8,100 receivable from Emerald for sales made in 2019.2020.

~~Pure Sunfarms’~~Canadian cannabis net ~~loss~~income for the three months ended March 31, ~~2021~~2022 was ~~($2,834)~~$987 as compared to net ~~income~~loss of ~~$6,165~~($2,834) for the three months ended March 31, ~~2020.~~2021. The ~~Q1 2021 net loss for Pure Sunfarms includes a $2,925 charge from the revaluation of its inventory to fair value at acquisition date. The decrease~~increase in net income between periods was primarily due to ~~lower~~a higher gross margin which was impacted by the positive purchase price inventory adjustment and lower share-based compensation expense, partially offset by higher selling, general and administrative ~~expenses and share-based compensation expense in 2021, while 2020 also included the gain on the settlement of net liabilities of $4,348.~~expenses.

Adjusted EBITDA for the three months ended March 31, ~~2021~~2022 and March 31, ~~2020~~2021 was ~~$2,534~~$2,104 and ~~$4,868,~~$2,534, respectively. The lower Adjusted EBITDA between periods was primarily due to ~~lower non-branded sales~~higher selling, general and ~~lower gross margin~~administrative expenses along with the effect of the purchase price inventory adjustments on the calculation of Adjusted EBITDA. See the reconciliation of Adjusted EBITDA to net income in ~~Q1 2021 as compared~~“Non-GAAP Measures—Reconciliation of Net Earnings to ~~Q1 2020.~~Adjusted EBITDA”.

The U.S. cannabis segment currently consists of Balanced Health and VF Hemp. For the three months ended March 31, ~~2020,~~2022, U.S. cannabis financial results are based on the ~~average selling price~~consolidated results of Balanced Health from the closing date of the acquisition of August 16, 2021. VF Hemp is a joint venture and its results are included in “(Losses) Income from Equity Method Investments” for ~~non-branded sales was higher than~~ the three months ended March 31, ~~2020~~2022.

U.S. cannabis sales for the period of January 1, 2022 to March 31, 2022 were $7,043. Over 99% of sales were generated in the United States and gross sales were composed of 73% from e-commerce sales, 16% from retail sales, 5% from shipping income and 1% from bulk sales. In addition, sales included a 5% loyalty program impact as loyalty program customers generate loyalty points that may be used when purchasing Balanced Health products.

U.S. cannabis cost of sales for the ~~wholesale market faced oversaturation in 2021.~~period of January 1, 2022 to March 31, 2022 were $2,331. Cost of sales can be primarily attributed directly to e-commerce, retail and bulk cost of sales with all other costs of sales categorized within other manufacturing costs including expenses such as warehouse expenses, freight and shipping supplies.

U.S. cannabis gross margin for the period of January 1, 2022 to March 31, 2022 was $4,712 or 67%.

U.S. cannabis selling general and administrative expenses for the period of January 1, 2022 to March 31, 2022 was $4,296 or 61% of sales. As the U.S. cannabis business derives a substantial number of sales through its online technology platforms, the primary expense categories within selling, general and administrative include sales and marketing, merchant fees, e-commerce support, IT services, research and development and customer service.

U.S. cannabis net income for the period of January 1, 2022 to March 31, 2022 was $269 due primarily to the gross margin of 67%.

U.S. cannabis adjusted EBITDA for the period of January 1, 2022 to March 31, 2022 was $580 and was due primarily to operating profit for the period.

AtAs at March 31, 2022, we had $41,433 in cash (includes $6,810 in restricted cash) and $101,477 of working capital, and as at December 31, 2021, we had ~~$131,696~~$58,667 in cash (includes $5,250 in restricted cash) and ~~$165,423 of working capital, and at December 31, 2020, we had $21,640 in cash and $29,528~~$110,646 of working capital. We ~~expect~~believe that cash generated from our operating activities, Credit Facilities and Pure Sunfarms Loans will provide sufficient liquidity to ~~utilize cash-on-hand and provide or obtain adequate financing to maintain and improve~~meet our ~~property, plant and equipment, to fund~~ working capital ~~produce~~ needs, repayments of long-term debt, future contractual obligations and ~~invest in Pure Sunfarms~~planned capital expenditures for the next ~~twelve months from cash flows from operations, and, as needed, from~~12 months. An additional ~~borrowings under the Credit Facilities (as defined below) or~~potential source of liquidity is access to capital markets for additional equity or debt financing. We intend to use our cash on hand for daily funding requirements.

(in thousands of U.S. dollars unless otherwise noted)	Maximum		Outstanding March 31, 2021		Maximum		Outstanding March 31, 2022
Operating Loan⁽¹⁾	C$	13,000	$	—	C$	10,000	$	2,000
Term Loan	$	28,198	$	28,198
FCC Term Loan					$	26,230	$	26,230
Pure Sunfarms Loans	C$	46,990	C$	46,990	C$	46,415	C$	46,415
VFCE Loan	C$	995	C$	995

The Company’s borrowings under the FCC Term Loan, the Operating Loan and the VFCE Borrowings (as defined below) (collectively the “Credit Facilities”)~~, excluding Pure Sunfarms borrowings,~~ are subject to certain positive and negative covenants, including debt ratios, and the Company is required to maintain certain minimum working capital. As of March 31, ~~2021,~~2022, the Company was in compliance with all of its covenants under its Credit Facilities.On December 31, 2021 we were not in compliance with one financial covenant under our FCC Term Loan. Subsequent to December 31, 2021, we received a waiver from Farm Credit Canada (“FCC”) in connection with the

annual testing on December 31, 2021 for the one financial covenant. FCC measures our financial covenants once a year on the last calendar day of the year and our next annual testing date will be on December 31, 2022. We can provide no assurance that we will be in compliance or receive a waiver for any non-compliance as of the next annual testing date.

Accrued interest payable on the Credit Facilities and Pure Sunfarms Loans as of March 31, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~$177~~$234 and ~~$189,~~$304, respectively, and these amounts are included in accrued liabilities in the ~~interim statements~~Consolidated Statements of ~~financial position.~~Financial Position.

The Company has a term loan financing agreement with ~~the~~ Farm Credit Canada, ~~(“FCC”),~~ a Canadian creditor ~~(“FCC~~(the “FCC Term Loan”). The non-revolving variable rate term loan has a maturity date of April 1, 2025 and a balance of ~~$28,198~~$26,230 on March 31, ~~2021~~2022 and ~~$28,690 as of~~$26,723 on December 31, ~~2020.~~2021. The outstanding balance is repayable by way of monthly installments of principal and interest, with the balance and any accrued interest to be paid in full on April 1, 2025. Effective August 1, 2020, monthly principal payments were reduced to $164 from $257. As of March 31, ~~2021 and December 31, 2020,~~2022, borrowings under the FCC Term Loan agreement were subject to an interest rate of ~~3.766% and 3.79%~~3.77% per ~~annum, respectively.~~annum.

As collateral for the FCC Term Loan, the Company has provided promissory notes, a first mortgage on the VFF-owned Delta 1 and Texas greenhouse ~~properties (excluding the Delta 2 and Delta 3 greenhouse facilities),~~facilities, and general security agreements over its assets. In addition, the Company has provided full recourse guarantees and has granted security interests in respect of the FCC Term Loan. The carrying value of the assets and securities pledged as collateral as of March 31, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~$207,762~~$192,344 and ~~$86,664,~~$233,187, respectively.

The Company has a revolving line of credit agreement with a Canadian chartered bank ~~(“Operating~~(the “Operating Loan”). The ~~revolving~~ Operating Loan has a line of credit of up to C$10,000, as amended on May 7, 2021, less outstanding letters of credit totaling ~~US$150~~$150 and C$38 and includes variable interest rates with a maturity date of May 7, 2024. The Operating Loan is subject to margin requirements stipulated by the ~~bank. As~~lender. The Operating Loan had a balance of $2,000 on March 31, ~~2021,~~2022 and there was no amount drawn on this loan ~~and as of~~on December 31, ~~2020, the amount drawn on this facility was US$2,000.~~2021.

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 March 31, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~$25,033~~$33,840 and ~~$23,443,~~$34,741, respectively.

VFCE ~~has~~had a loan agreement with a Canadian chartered bank that includes a non-revolving fixed rate loan ~~(“VFCE~~(the “VFCE Loan”) of C$~~3.0 million~~3,000 with a maturity date of June 2023 and a fixed interest rate of 4.98% per annum. The Company paid off the outstanding balance of the VFCE Loan in the first quarter of 2022. As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, the balance of the VFCE Loan was ~~US$730~~nil and ~~US$797,~~C$624, respectively. The loan agreement also includes an uncommitted, non-revolving credit facility for up to C$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 C$700 to support financing of certain capital expenditures (“VFCE Credit Facility”). The Company received an initial advance of C$250 in October 2017. Each advance is to be repaid on a five-year, straight-line amortization of principal, repaid in monthly installments of principal plus interest at an interest rate of C$ prime rate plus 200 basis points. As of March 31, 2021 and December 31, 2020, the outstanding borrowings under the VFCE Credit Facility were US$60 and US$69, respectively (such borrowings, together with the VFCE Loan, the ”VFCE Borrowings”).

On March 15, 2021, Pure Sunfarms entered into the Third Amended and Restated Credit Agreement (the “Third Amended and Restated PSF Credit ~~Agreement)~~Agreement”) with ~~Farm Credit Canada (“FCC”)~~FCC and two Canadian chartered banks, which extended the maturity date of each of the PSF Revolving Line of Credit, PSF Non-Revolving Facility and the PSF Term Loan (each as defined below) through February 7, 2024 and included ~~an unlimited~~a guarantee ~~from~~by Village ~~Farms and changed certain financial covenants.~~Farms. The Third Amended and Restated PSF Credit Agreement ~~amends~~amended and ~~updates~~updated the previous three loan facilities.

The first loan facility under the Third Amended and Restated PSF Credit Agreement is a revolving line of credit (the “PSF Revolving Line of Credit”) with two separate C$7,500 commitments from each of the Canadian chartered banks. Each lender established a revolving line of credit severally and not jointly whereby Pure Sunfarms may receive advances in equal proportionate amounts from each lender. The advances shall be used for working capital purposes, general corporate purposes and capital expenditures, of which capital expenditures may not exceed C$7,500 in aggregate use of the outstanding advances. Interest is payable at the Canadian prime rate plus an applicable margin per annum, payable monthly. The PSF Revolving Line of Credit had noan outstanding balance of C$9,855 as of March 31, ~~2021~~2022 and December 31, ~~2020.~~2021. Pure Sunfarms had an outstanding letter of credit issued to BC Hydro against the revolving line of credit of C$5,145 at March 31, 2022 and December 31, 2021.

The second loan facility under the Third Amended and Restated PSF Credit Agreement is a credit ~~agreement~~facility with a Canadian chartered bank, as agent and lead lender, and FCC, as lender, in respect of a C$17,000 secured non-revolver term loan (the “PSF Non-Revolving Facility). The PSF Non-Revolving Facility, which matures on February 7, 2024, is secured by the Delta 2 and Delta 3 greenhouse facilities and contains customary financial and restrictive covenants. The purpose of the PSF Non-Revolving Facility is to refinance our Delta 3 greenhouse and provide funds to upgrade and retrofit the ~~D2 Property.~~Delta 2 facility. The outstanding amount on the PSF Non-Revolving Facility was ~~US$13,177~~C$14,595 on March 31, ~~2021~~2022 and ~~US$13,385~~C$15,076 on December 31, ~~2020.~~2021.

The third loan facility under the Third Amended and Restated PSF Credit Agreement is a C$~~25 million~~25,000 term loan (the “PSF Term Loan”) at the Canadian prime interest rate plus an applicable margin, repayable in quarterly payments equal to 2.50% of the outstanding principal amount starting June 30, 2021 and maturing February 7, 2024. Advances under the PSF Term Loan ~~shall~~are required to be used to finance the upgrade and retrofit of the Delta 2 greenhouse to render it suitable for cannabis cultivation as well as any funds necessary for capital expenditures on the ~~D3 Property’s~~Delta 3 processing facility. The outstanding amount on the PSF Term Loan was ~~US$19,713~~C$21,965 on March 31, ~~2021~~2022 and ~~US$16,535~~C$22,614 on December 31, ~~2020.~~2021.

On December 20, 2020, Pure Sunfarms entered into a C$6,250 non-revolving demand loan at the Canadian prime interest rate plus 3.75% per annum with a Canadian chartered bank with the financial support of the Business Development Bank of Canada (the “BDC Facility”). The BDC Facility, provided as part of COVID-19 government relief, requires interest only payments monthly for the first twelve months and matures on December 31, 2031. Commencing on December 31, 2021, Pure Sunfarms will repay the outstanding principal amount in equal monthly installments. The outstanding amount on the BDC Facility was ~~US$4,989~~C$6,094 on March 31, ~~2021~~2022 and ~~US$4,905~~C$6,282 on December 31, ~~2020.~~2021.

Pure Sunfarms is required to comply with financial covenants under the Third Amended and Restated PSF Credit Agreement, which are measured quarterly. As of March 31, ~~2021,~~2022, Pure Sunfarms was in compliance with ~~the~~these financial covenants.

The Company had a note payable due to Emerald of C$19,900, ~~(US$15,314),~~ plus accrued interest ~~included in the statements as of December 31, 2020~~ that the Company originally issued to Emerald as partial consideration for the November 2, 2020 acquisition of Pure Sunfarms. The note and accrued interest were repaid to Emerald in full on February 5,8, 2021.

The Company closed equity offerings on March 24, 2020, September 10, 2020, and January 20, 2021. The March 24, 2020 public offering raised gross proceeds of C$11,500 through the issuance of 3,593,750 Common Shares at a price of C$3.20 per Common Share. The September 10, 2020 offering raised gross proceeds of US$49,800 through the issuance of 9,396,226 Units with each Unit consisting of one Common Share at a price of US$5.30 per share and one-half of a Warrant at an exercise price of US$5.80, and onOn January 20, 2021, Village Farms completed a registered direct offering for the purchase and sale of an aggregate of 10,887,097 Common Shares at a purchase price of ~~US$12.40~~$12.40 per Common Share for gross proceeds of approximately ~~US$135 million.~~$135,000.

	For the three months ended March 31,						For the three months ended March 31,
(in Thousands)	2021			2020			2022			2021
Cash beginning of period	$	25,679		$	11,989		$	58,667		$	25,679
Net cash flow provided by/(used in):
Operating activities		(14,436	)		(535	)		(9,637	)		(14,436	)
Investing activities		(5,211	)		(6,322	)		(8,705	)		(5,211	)
Financing activities		129,577			8,428			1,012			129,577
Net cash increase (decrease) for the period		109,930			1,571
Net cash (decrease) increase for the period								(17,330	)		109,930
Effect of exchange rate changes on cash		178			(2	)		96			178
Cash, end of the period	$	135,787		$	13,558		$	41,433		$	135,787

For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, cash flows used in operating activities ~~before~~were ($9,637) and ($14,436), respectively. The operating activities for the three months ended March 31, 2022 consisted of ($5,091) in changes in non-cash working capital ~~totaled~~items and ($4,546) in changes before non-cash working capital items, while operating activities for 2021 consisted of ($9,703) in changes in non-cash working capital items and ($4,733) ~~and ($2,760), respectively.~~in changes before non-cash working capital items. The ~~decline~~decrease in ~~cash flows from operating activities between periods~~changes before non-cash working capital items for Q1 2022 as compared to Q1 2021 was primarily due to ~~lower operating results~~an improvement in our net loss of ~~both Pure Sunfarms and~~$865 from quarter-over-quarter improvement from our Canadian cannabis operations, as well as the ~~produce business in Q1 2021.~~addition of U.S. cannabis, partially offset by higher losses from VF Fresh.

For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, cash flows used in investing activities were ($~~5,211)~~8,705) and ($~~6,322)~~5,211), respectively. Q1 2022 investing activities consisted of a ($2,715) loan to L.L. Lichtendahl Beheer B.V., a private company that holds a 50% interest in Leli, a promissory note to Altum of ($727) and ($5,263) of capital expenditure expenses, of which ($4,344) was for Pure Sunfarms Delta 2 packhouse conversion and Delta 3 improvement projects and ($883) for our produce operations. Q1 2021 investing activities primarily ~~consist~~consisted of a ($500) investment in Altum and ($4,706) of capital expenditure expenses, of which ($3,789) was primarily for the Pure Sunfarms Delta 2 greenhouse transition to cannabis and ($916) for our produce operations. ~~Q1 2020 investing activities consist primarily of ($6,063) of additional investment in Pure Sunfarms and ($259) of capital expenditures for our produce operations.~~

For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, cash flows provided by financing activities were $1,012 and $129,577, respectively. For the three months ended March 31, 2022, cash flows provided by financing activities primarily consisted of $2,000 for proceeds from the Operating Loan, $176 in proceeds from the exercise of Common Shares, ($983) in repayments on borrowings and ~~$8,428, respectively.~~($301) for payments on lease obligations. For the three months ended March 31, 2021, cash flows provided by financing activities primarily consisted of $127,489 of net proceeds from the issuance of Common Shares, $17,663 in proceeds from the exercise of warrants from the September 2020 registered direct offering and the ($15,498) payment of the Emerald Promissory Note. For the three months ended March 31, 2020, cash flows provided by financing activities primarily consisted of the $7,324 generated from the issuance of Common Shares, net of issuance costs, and $1,125 of proceeds from borrowings net of repayments.

~~Information regarding~~We expect to meet our contractual obligations asand commitments through the use of ~~March 31, 2021 is set forth~~our working capital. We currently do not have any material obligations identified in the ~~table below:~~

Financial liabilities

Total

1 year

2-3 years

4-5 years

More than 5 years

Long-term debt

$
73,040

$
5,575

$
38,502

$
24,352

$
4,611

Line of credit

—

—

—

—

—

Trade payables

20,785

20,785

—

—

—

Accrued liabilities

21,077

21,077

—

—

—

Lease liabilities

3,716

1,158

1,969

463

126

Other liabilities

23,798

—

23,798

—

—

Total

$
142,416

$
48,595

$
64,269

$
24,815

$
4,737

Asnear future, however, as noted in “Recent Developments and Updates – International Update”, we entered into an option agreement to receive the irrevocable right to acquire 80% ownership of ~~March 31, 2021, Pure Sunfarms had~~Leli. This potential investment is being evaluated by the Company and may require a ~~service agreement with an unrelated party. In~~material contractual obligation in the event ~~Pure Sunfarms terminates~~that we exercise the ~~agreement, Pure Sunfarms would be required~~Option.

In addition, we currently have material long-term debt and lines of credit that we rely on to ~~pay~~meet financing needs of the ~~counterparty a C$1.0 million termination fee. This is considered a commitment.~~Company. The long-term debt and lines of credit have interest rate terms whereas the possibility of rising interest rates may impact the cost of capital for the Company. See “Item 7A – Qualitative and Quantitative Disclosures About Market Risk – Interest Rate Risk” below for additional information.

References in this MD&A to “Adjusted EBITDA” are to earnings (including the equity earnings of ~~Pure Sunfarms and~~the joint venture, VFH) before interest, taxes, depreciation, and amortization (“EBITDA”), as further adjusted to exclude foreign currency exchange gains and losses on translation of long-term debt, unrealized gains on the changes in the value of derivative instruments, share-based compensation, gains and losses on asset sales and the other adjustments set forth in the table below. Adjusted EBITDA is a ~~cash flow~~ measure of operating performance that is not recognized under GAAP and does not have a standardized meaning prescribed by GAAP. Therefore, Adjusted EBITDA may not be comparable to similar measures presented by other issuers. Investors are cautioned that Adjusted EBITDA should not be construed as an alternative to net income or loss determined in accordance with GAAP as an indicator of our ~~performance or to cash flows from operating, investing, and financing activities as measures of liquidity and cash flows.~~performance. Management believes that Adjusted EBITDA is an important measure in evaluating the historical performance of the ~~Company.~~Company because it excludes non-recurring and other items that do not reflect our business performance.

We also present Adjusted EBITDA, earnings per share and diluted earnings per share on a proportionate segment basis. Each of the components of Adjusted EBITDA, on a proportionate segment basis (which include our proportionate share of the Pure Sunfarms and VFH operations), are presented in the table Reconciliation of GAAP to Proportionate Results below. We believe that the ability of investors to assess our overall performance may be improved by the disclosure of proportionate segment Adjusted EBITDA, earnings per share and diluted earnings per share, given that our joint ventures represent a significant percentage of our net income.

The following table reflects a reconciliation of net income to Adjusted EBITDA, as presented by the Company:

	For the three months ended March 31,						For the three months ended March 31,
(in thousands of U.S. dollars)	2021 ⁽¹⁾			2020 ⁽¹⁾			2022 ⁽¹⁾			2021 ⁽¹⁾
Net (loss) income	$	(7,382	)	$	4,190
Net loss							$	(6,517	)	$	(7,382	)
Add:
Amortization		3,412			1,530			2,702			3,412
Foreign currency exchange loss		504			926
Foreign currency exchange (gain) loss								(319	)		504
Interest expense, net		738			154	��		573			738
Recovery of income taxes		(1,839	)		(1,012	)		(1,666	)		(1,839	)
Share-based compensation		1,998			529			964			1,998
Interest expense for JVs		14			293			13			14
Amortization for JVs		34			301			94			34
Foreign currency exchange loss for JVs		—			102			29			—
Provision for income taxes for JVs		—			1,269
Purchase price adjustment ⁽²⁾		2,925			—			(2,050	)		2,925
Gain on settlement agreement ⁽³⁾		—			(4,681	)
Gain on settlement of net liabilities from JV		—			(2,496	)
Gain on disposal of assets		—			(9	)
Adjusted EBITDA ⁽⁴⁾	$	404		$	1,096
Adjusted EBITDA for JVs ^{(See table below)}	$	(79	)	$	2,683
Amortization of deferred charges								66			—
Adjusted EBITDA ⁽³⁾							$	(6,111	)	$	404
Adjusted EBITDA for JVs ⁽⁴⁾							$	(25	)	$	(79	)
Adjusted EBITDA excluding JVs	$	483		$	(1,587	)	$	(6,086	)	$	483

The following tables are a reconciliation of the GAAP results to the proportionate results (which include our proportionate share of Pure Sunfarms and VF Hemp operations). The tables reflect the full statements of income for Pure Sunfarms (Cannabis) and VFH (Hemp) multiplied by the ownership percentage of the Company (versus presenting the results of these joint ventures in Equity Earnings from Unconsolidated Entities):

For the Three months ended March 31, 2021

Produce

Cannabis ⁽¹⁾

Hemp⁽¹⁾

Total

Sales

$
34,936

$
17,460

$
—

$
52,396

Cost of sales

(34,841
)

(15,248
)

(48
)

(50,137
)
Selling, general and administrative expenses

(4,126
)

(3,966
)

(65
)

(8,157
)
Share-based compensation

(904
)

(1,094
)

—

(1,998
)
Other expense, net

(681
)

(630
)

(14
)

(1,325
)
Recovery of income taxes

1,195

644

—

1,839

Net loss

$
(4,421
)

$
(2,834
)

$
(127
)

(7,382
)
Adjusted EBITDA⁽²⁾

$
(2,051
)

$
2,534

$
(79
)

$
404

Losses per share – basic

$
(0.06
)

$
(0.04
)

$
(0.00
)

$
(0.10
)
Losses per share – diluted

$
(0.06
)

$
(0.04
)

$
(0.00
)

$
(0.10
)

For the three months ended March 31, 2020

Produce

Cannabis⁽¹⁾

Hemp ⁽¹⁾

Total

Sales

$
32,112

$
7,442

$
98

$
39,652

Cost of sales

(31,347
)

(3,557
)

(120
)

(35,024
)
Selling, general and administrative expenses

(3,921
)

(1,348
)

(117
)

(5,386
)
Share-based compensation

(529
)

—

—

(529
)
Gain on settlement agreement

4,681

—

—

4,681

Gain on settlement of net liabilities

—

2,496

—

2,496

(Loss) gain on disposal of assets

(6
)

5

10

9

Other expense, net

(1,041
)

(238
)

(173
)

(1,452
)
Recovery of (provision for) income taxes

1,012

(1,269
)

—

(257
)
Net income (loss)

$
961

$
3,531

$
(302
)

$
4,190

Adjusted EBITDA ⁽²⁾

$
(1,587
)

$
2,778

$
(95
)

$
1,096

Earnings (losses) per share – basic

$
0.02

$
0.07

$
(0.01
)

$
0.08

Earnings (losses) per share – diluted

$
0.02

$
0.07

$
(0.01
)

$
0.08

The adjusted results are not generally accepted measures of financial performance under GAAP. Our method of calculating these financial performance measures may differ from other companies and accordingly, they may not be comparable to measures used by other companies.

Our discussion and analysis of our financial condition and results of operations are based upon our Unaudited Condensed Consolidated Interim Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses and related disclosure of contingent assets and liabilities.

We believe that the estimates, assumptions and judgments involved in the accounting policies described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our most recent Annual Report on Form 10-K for the year ended December 31, 2021 have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Actual results could differ from the estimates we use in applying our critical accounting policies. We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its long-term debt, for which the interest rates charged fluctuate based on the 90-day LIBOR rate. The Company has a line of credit that incorporates LIBOR as a referenced interest rate. It is difficult to predict what effect, if any, the phase-out of LIBOR and the use of alternative benchmarks may have on the Company’s business or on the overall financial markets. If interest rates had been 50fifty basis points higher, ~~(lower),~~ the net income ~~for~~during the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 would have been ~~higher (lower)~~lower by ~~$81~~$76 and ~~$40,~~$81, respectively. This represents ~~$81~~$76 and ~~$40~~$81 in increased ~~(decreased)~~ interest expense for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively.

While we cannot predict our ability to refinance existing debt or the significance of the impact that interest rate movements will have on our existing debt, management evaluates our financial position on an ongoing basis.

As of March 31, ~~2021,~~2022 and ~~2020,~~2021, the Canadian/U.S. foreign exchange rate was C$1.00 = US$~~0.7941~~0.7995 and C$1.00 = US$~~0.7056,~~0.7941, respectively. Assuming that all other variables remain constant, an increase of $0.10 in the Canadian dollar would have the following impact on the ending balances of certain statements of financial position items at March 31, ~~2021~~2022 and ~~March 31, 2020~~2021 with the net foreign exchange gain or loss directly impacting net income (loss).

	March 31, 2021			March 31, 2020			March 31, 2022			March 31, 2021
Financial assets
Cash and cash equivalents	$	1,365		$	1,179		$	763		$	1,365
Trade receivables		3,180			181			3,348			3,180
JV notes receivable		—			1,451
Inventories		3,998			—			7,108			3,998
Prepaid and deposits		764			—			217			764
Financial liabilities
Trade payables and accrued liabilities		(4,312	)		(266	)		(4,306	)		(4,312	)
Loan payable		(4,798	)		(142	)		(1,059	)		(4,798	)
Deferred tax liability		(2,209	)		—			(2,753	)		(2,209	)
Net foreign exchange gain (loss)	$	(2,012	)	$	2,403		$	3,318		$	(2,012	)

Our exposure to foreign exchange risk and the impact of foreign exchange rates are monitored by the Company’s management but generally the Company tries to match its sales (trade receivables) and vendor payments (trade payables) such that the net impact is not material.

Other than the interest rate risk and foreign exchange risk discussed above, there have been no material changes to our market risks from those disclosed in Part II, Item 7A of our Annual Report on Form 10-K.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified by the U.S. Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Principal Financial and Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.

~~The Company’s~~As required by Rule 13a-15(b) under the Exchange Act, our management, including our Chief Executive Officer and ~~Principal~~Chief Financial ~~and Accounting~~ Officer, evaluated the effectiveness of ~~the design and operation of the Company’s “disclosure~~our disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report. Based upon that evaluation, the Chief Executive Officer and the Principal Financial and Accounting Officer concluded that,procedures as of the end of the period covered by this Quarterly Report ~~the Company’s~~on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2022, our disclosure controls and procedures are ~~effective.~~not effective at a reasonable assurance level due to the material weakness described in Management’s Report on Internal Control over Financial Reporting in our Annual Report on Form 10-K for the year ended December 31, 2021.

As of December 31, 2021, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control –Integrated Framework (2013). Based on this assessment, our management concluded that, as of December 31, 2021, our internal control over financial reporting was not effective based on those criteria because a material weakness in internal control over financial reporting existed as of that date, as described below.

The Company did not operate effective controls over the calculation of one of its debt covenants. The Company’s controls related to the review of debt covenant calculations failed to identify a violation of a debt covenant as at December 31, 2021 in a timely manner. The lender subsequently waived the debt covenant prior to filing and therefore there was no impact on the Company’s December 31, 2021 financial statements.

In the first quarter of 2022, the Company implemented remediation measures improving the review of the calculation of its debt covenants by applying additional independent review of the calculations. In addition, the Company is working with its lender group to modify and synchronize its loan covenants such that definitions of loan covenants are aligned going forward to avoid conflicting covenants between the Company and one of its subsidiaries. The Company will continue to review, optimize and enhance its financial reporting controls and procedures to ensure the remediation measures are effective and controls are operating effectively. The Company expects implementation of its remediation plan by the end of the second quarter of 2022.

The Company’s management, including the Chief Executive Officer and Principal Financial and Accounting Officer, has reviewed the Company’s internal control over financial reporting. There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the ~~Company’s~~Exchange Act), other than to address the material weakness described in management's report on internal control over financial reporting, during ~~the~~our fiscal quarter ended ~~March~~December 31, 2021 that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

From time to time the Company is engaged in legal proceedings in the ordinary course of business. We do not believe any current legal proceedings are material to our business.

Our business, operations, and financial condition are subject to various risks and uncertainties. The risk factors described in Part I, Item 1A, “Risk Factors” contained in our Annual Report on Form 10K for the year ended December 31, ~~2020,~~2021, as filed with the SEC on March ~~15, 2021~~1, 2022 and amended on March ~~18, 2021,~~14, 2022, should be carefully considered, together with the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q and in our other filings filed with the SEC in connection with evaluating us, our business, and the forward-looking statements contained in this Quarterly Report on Form 10-Q. During the quarter ended March 31, ~~2021,~~2022, there have been no material changes from the risk factors previously disclosed under Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K, for the year ended December 31, ~~2020.~~2021, except as described below.

For the year ended March 2022, the US Bureau of Labor and Statistics reported that inflation increased 8.5 percent as against prices from March 2021. This represents the largest 12-month advance since 1981. Rising inflation affects our cultivation costs, distribution costs and operating expenses. We believe that volatile prices for commodities have impacted our operating results. We maintain strategies to mitigate the impact of higher raw material, energy and commodity costs, which include cost reduction, sourcing, passing along certain cost increases to customers and other actions, which may help to offset a portion of the adverse impact.

The effect of sanctions and an escalation of the conflict in Ukraine may further disrupt supply chains and adversely impact our business.

As a result of the current conflict between Russia and Ukraine and related geopolitical tensions, there have been, and may continue to be, significant adverse impacts on fuel, transportation costs and natural resources. Additionally, the governments of the United States, the European Union, Canada and other jurisdictions have announced the imposition of sanctions on certain industry sectors and parties in Russia as well as enhanced export controls on certain products and industries. These and any additional sanctions and export controls, as well as any counter responses by the governments of Russia, could adversely affect, the global supply chain, and the availability and prices of raw materials, energy prices, as well as the global financial markets and financial services industry.

The Company did not repurchase any of its Common Shares during the three months ended March 31, 2022. On May 21, 2021, the Company announced that the TSX accepted a notice filed by the Company of its intention to make a Normal Course Issuer Bid (“NCIB”). The NCIB notice provides that Village Farms may, during the period commencing May 26, 2021 and terminating May 25, 2022, purchase up to 4,062,309 of its Common Shares by way of a NCIB over the facilities of The Nasdaq Stock Market LLC and/or through alternative trading systems in Canada and the United States. Daily purchases are limited to 233,243 Common Shares, other than block purchase exceptions. Shareholders may obtain a copy of the NCIB notice, without charge, by contacting Village Farms.

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

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Shares, without par value		VFF		The Nasdaq Stock Market LLC

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Interim Financial Statements (Unaudited)
	Condensed Consolidated Interim Statements of Financial Position		23
	Condensed Consolidated Interim Statements of ~~Income (Loss)~~Loss and Comprehensive ~~Income (Loss)~~Loss		34
	Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity and Mezzanine Equity		45
	Condensed Consolidated Interim Statements of Cash Flows		56
	Notes to Condensed Consolidated Interim Financial Statements		67
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		3129
Item 4.	Controls and Procedures		3129

PART II - OTHER INFORMATION			3331
Item 1.	Legal Proceedings		3331
Item 1A.	Risk Factors		3331
Item 6.	Exhibits		3332

	Signatures		3433

Classification	March 31, 2021			December 31, 2020
Licenses	$	13,023		$	12,870
Branding		3,733			3,688
Computer Software		956			945
Less: Accumulated amortization		(395	)		(192	)
Intangibles, net	$	17,317		$	17,311

	Cannabis - Canada		Cannabis - United States		Total
Balance as of December 31, 2021	$	57,525	$	60,008	$	117,533
Foreign currency translation adjustment		2,064		-		2,064
Balance as of March 31, 2022	$	59,589	$	60,008	$	119,597

	~~March 31, 2021~~
~~Weighted average remaining lease term:~~
~~Operating leases~~		~~4.1~~
~~Finance leases~~		~~1.1~~
~~Weighted average discount rate:~~
~~Operating leases~~		~~5.73~~	%
~~Finance leases~~		~~6.25~~	%

	Operating leases			Finance leases
Remainder of 2021	$	980		$	18
2022		1,090			9
2023		870			—
2024		512			—
2025		258
Thereafter		433			—
Undiscounted lease cash flow commitments		4,143			27
Reconciling impact from discounting		(452	)		(2	)
Lease liabilities on consolidated statement of financial position as of March 31, 2021	$	3,691		$	25

	November 2, 2020
ASSETS
Cash and cash equivalents	$	10,860
Trade receivables, net		10,553
Inventories		32,393
Prepaid expenses and deposits		3,572
Property, plant and equipment		122,831
Goodwill		23,095
Intangibles		16,670
Total assets		219,974
LIABILITIES
Trade payables		3,849
Accrued liabilities		13,062
Income taxes payable		2,173
Current maturities of long-term debt		2,306
Deferred revenue		77
Long-term debt		23,903
Deferred tax liabilities		16,424
Total liabilities		61,794
Net assets acquired	$	158,180

	Three months ended			Three months ended
	March 31, 2021			March 31, 2020
Sales	$	17,459		$	13,137
Cost of sales*		(12,322	)		(6,258	)
Gross Margin		5,137			6,879
Selling, general and administrative expenses		(5,119	)		(2,434	)
Income from operations		18			4,445
Interest expense		(372	)		(217	)
Foreign exchange loss		(149	)		(179	)
Other income, net**		(50	)		4,332
Income before taxes		(553	)		8,381
Recovery of (provision for) income taxes		149			(2,216	)
Net income	$	(404	)	$	6,165

~~Balance, January 1, 2020~~	$	—2022
~~Share of net loss~~Weighted average remaining lease term:		~~(3,975~~	)
~~Losses applied against joint venture note receivable~~Operating leases		~~3,975~~6.3
~~Balance, December 31, 2020~~	$	—
~~Balance, January 1, 2021~~	$	—
~~Share of net loss~~Finance leases		~~(127~~0.3	)
~~Losses applied against joint venture note receivable~~Weighted average discount rate:		~~127~~
~~Balance, March 31, 2021~~Operating leases	$	—8.55	%
Finance leases		6.25	%

	Operating leases
Remainder of 2022	$	1,560
2023		1,900
2024		1,386
2025		1,145
2026		1,166
Thereafter		3,183
Undiscounted lease cash flow commitments		10,340
Reconciling impact from discounting		(3,102	)
Lease liabilities on consolidated statement of financial position as of March 31, 2022	$	7,238

10	~~DEBT~~	November 15, 2021
ASSETS
Cash and cash equivalents		$		1,118
Trade and other receivables, net				1,595
Inventories				3,586
Prepaid expenses and deposits			498
Property, plant and equipment				16,423
Goodwill				34,548
Total assets				57,768
LIABILITIES
Trade payables				774
Accrued liabilities				1,803
Total liabilities				2,577
Mezzanine equity				16,479
Total liabilities and mezzanine equity				19,056
Net assets acquired		$		38,712

	March 31, 2021			December 31, 2020
Term Loan - ("FCC Loan") - repayable by monthly principle of payments of $164 and accrued interest at a rate of 3.766%; matures April 1, 2025	$	28,198		$	28,690
Term Loan - VFCE: CA$3.0M - non-revolving fixed rate loan with fixed interest rate of 4.98%; matures June 2023		730			797
Advance on term loan - VFCE: CA$250 - repayable in monthly installments of principle plus interest rate of CA$ prime rate plus 200 basis points		60			69
Term Loan - Pure Sunfarms - CA$19.0M - Canadian prime interest rate plus an applicable margin, repayable in quarterly payments equal to 2.50% of the outstanding principal amount, interest rate of 4.2%; matures February, 2024		13,177			13,385
Term loan - Pure Sunfarms - CA$25.0 - Canadian prime interest rate plus an applicable margin, repayable in quarterly payments equal to 2.50% of the outstanding principal amount starting June 30, 2021, interest rate of 4.2%; matures February 2024		19,713			16,535
BDC Facility - Pure Sunfarms - non-revolving demand loan at prime interest plus 3.75%, matures December 31, 2031		4,989			4,905
Unamortized deferred financing fees		(564	)		(302	)
Total	$	66,303		$	64,079


Segment		Description
Produce		The Produce segment produces, markets, and sells premium quality tomatoes, bell peppers and cucumbers.
Cannabis – Canada		The Cannabis-Canada segment produces and supplies cannabis products to be sold to other licensed providers and provincial governments across Canada and internationally.
Cannabis – United States		The Cannabis – United States segment develops and sells high-quality, CBD-based health and wellness products including ingestible, edible and topical applications.
Energy		The Energy business produces power that it sells per a long-term contract to its one customer.

	Number of Performance-based Restricted Share Units			Weighted Average Grant Date Fair Value
Outstanding at January 1, 2021		869,000		C$	7.51
Received		(243,000	)	C$	6.53
Outstanding at March 31, 2021		626,000		C$	7.89
Exercisable at March 31, 2021		5,000		C$	5.79


	Three months ended March 31, 2021	Three months ended March 31, 2020
Sales:
Produce	$ 34,867	$ 31,962
Cannabis	17,460	13,137
Clean Energy	69	150
	$ 52,396	$ 45,249
Cost of Sales:
Produce	($ 34,066)	($ 30,928)
Cannabis⁽¹⁾	(15,248)	(6,258)
Clean Energy	(775)	(419)
	($ 50,089)	($ 37,605)
Selling, general and administrative expenses:
Produce	($ 2,551)	($ 2,535)
Cannabis	(3,966)	(2,434)
Clean Energy	(32)	(45)
Corporate	(1,543)	(1,341)
	($ 8,092)	($ 6,355)
Share-based compensation:
Produce	$ -	$ -
Cannabis	(1,094)	-
Clean Energy	-	-
Corporate	(904)	(529)
	($ 1,998)	($ 529)
Operating profit/(loss):
Produce	($ 1,750)	($ 1,501)
Cannabis⁽¹⁾	(2,848)	4,445
Clean Energy	(738)	(314)
Corporate	(2,447)	(1,870)
	($ 7,783)	$ 760

Financial liabilities	Total		1 year		2-3 years		4-5 years		More than 5 years
Long-term debt	$	73,040	$	5,575	$	38,502	$	24,352	$	4,611
Line of credit		—		—		—		—		—
Trade payables		20,785		20,785		—		—		—
Accrued liabilities		21,077		21,077		—		—		—
Lease liabilities		3,716		1,158		1,969		463		126
Other liabilities		23,798		—		23,798		—		—
Total	$	142,416	$	48,595	$	64,269	$	24,815	$	4,737

Breakout of JV Adjusted EBITDA	For the three months ended March 31,
(in thousands of U.S. dollars)	2021			2020
Pure Sunfarms Adjusted EBITDA	$	—		$	2,778
VFH Adjusted EBITDA		(79	)		(95	)
Total JV Adjusted EBITDA	$	(79	)	$	2,683

	For the Three months ended March 31, 2021
	Produce			Cannabis ⁽¹⁾			Hemp⁽¹⁾			Total
Sales	$	34,936		$	17,460		$	—		$	52,396
Cost of sales		(34,841	)		(15,248	)		(48	)		(50,137	)
Selling, general and administrative expenses		(4,126	)		(3,966	)		(65	)		(8,157	)
Share-based compensation		(904	)		(1,094	)		—			(1,998	)
Other expense, net		(681	)		(630	)		(14	)		(1,325	)
Recovery of income taxes		1,195			644			—			1,839
Net loss	$	(4,421	)	$	(2,834	)	$	(127	)		(7,382	)
Adjusted EBITDA⁽²⁾	$	(2,051	)	$	2,534		$	(79	)	$	404
Losses per share – basic	$	(0.06	)	$	(0.04	)	$	(0.00	)	$	(0.10	)
Losses per share – diluted	$	(0.06	)	$	(0.04	)	$	(0.00	)	$	(0.10	)

Exhibit Number		Description of Document

10.1		~~Amended and Restated Credit~~Employment Agreement, dated as of May 1, 2021, by and between ~~Village Farms Canada Limited Partnership~~Orville Bovenschen and Village Farms L.P.~~, and Bank of Montreal, dated May 7, 2021~~.

31.1		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

104		The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101

	VILLAGE FARMS INTERNATIONAL, INC.

	By:	/s/ Stephen C. Ruffini
		Name:	Stephen C. Ruffini

		Title:	Executive Vice President and Chief Financial Officer

		(Authorized Signatory and Principal Financial and Accounting Officer)
Date: May 10, ~~2021~~2022

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company