Industry Overview - The current moment presents a significant opportunity for marijuana stock investors, as legal cannabis remains a volatile sector with multi-state operators (MSOs) and ancillary companies leading the market [1][2] - Despite a decline in the sector's overall value, certain companies continue to achieve gains, indicating ongoing progress within the industry [1] Investment Potential - Long-term investing in cannabis stocks is seen as a speculative opportunity, with the potential for better reform and market conditions over time [2] - Historical trends suggest that positive news regarding cannabis reform has previously led to improved trading conditions for investors [2] Canadian Marijuana Stocks - Canadian marijuana stocks are highlighted as potential investments, particularly during a period when the majority of the sector is undervalued [3] - Investors are encouraged to conduct thorough research and develop a strategic plan to capitalize on potential recoveries in the market [3] Company Highlights - **SNDL Inc.**: Engages in the production, distribution, and sale of cannabis products for the adult-use market in Canada, with Q2 2025 earnings set to be reported on July 31 [4][6] - **Aurora Cannabis Inc.**: Involved in the production and sale of cannabis products, recently announced a charitable initiative donating 5% of net profits from specific products to veteran organizations, with a cap of C$200,000 [9][10] - **Village Farms International, Inc.**: Known for its innovative packaging approach through its subsidiary Pure Sunfarms, which aims to enhance consumer experience in cannabis shopping [11][12]

Core Insights - Pure Sunfarms Corp. is the first licensed cannabis producer in Canada to introduce windowed packaging for its dried flower products, allowing consumers to see the product before purchase [1][2][3] - This packaging innovation is a response to recent regulatory changes from Health Canada, which now permits transparent containers and cut-out windows for dried flower packaging [2] - The new packaging aims to enhance consumer experience by allowing them to assess quality based on visual characteristics rather than solely on THC content [2][3] Company Overview - Pure Sunfarms is a leading cannabis producer in Canada, operating one of the largest cannabis facilities globally, with a focus on high-quality B.C. grown cannabis [4][7] - The company is recognized as a top-selling brand of recreational dried flower in Canada and produces popular cultivars like Pink Kush [5] - Pure Sunfarms is a wholly owned subsidiary of Village Farms International, Inc., which has extensive experience in Controlled Environment Agriculture and is expanding into high-growth cannabinoid opportunities [6][8] Market Position - Pure Sunfarms operates a greenhouse production facility of 2.2 million square feet and is noted as the lowest-cost producer in Canada [7] - The company has plans for future expansion with an additional 2.6 million square feet of greenhouse capacity [7] - Pure Sunfarms also exports medical cannabis to international markets and is involved in the commercialization of cannabis products through its subsidiary Rose LifeScience [8]

Core Insights - Pure Sunfarms Corp. has published significant research on THC potency variability in cannabis, emphasizing the need for improved labeling practices in the industry [1][3][4] Group 1: Research Findings - The study conducted by Village Farms Canadian Cannabis Research analyzed dried cannabis flower from commercial-scale production, revealing substantial THC level variations within individual plants and across different strains [2] - The research indicates that cannabis, being an agricultural product, exhibits natural variability influenced by environmental factors, challenging the notion of a fixed THC percentage as a quality measure [3] Group 2: Industry Implications - Current Canadian regulations require a single THC percentage on cannabis packaging, which the study suggests misrepresents the actual cannabinoid content experienced by consumers [3] - The findings provide a basis for evidence-based policy discussions and potential regulatory changes in the cannabis industry [3] Group 3: Company Overview - Pure Sunfarms is a leading cannabis producer in Canada, operating one of the largest cannabis facilities globally, with a focus on high-quality B.C. grown cannabis [5][8] - The company is recognized for its popular cultivars, including Pink Kush, and maintains EU GMP certification for international medicinal market exports [6][8] Group 4: Future Growth and Expansion - Village Farms, the parent company of Pure Sunfarms, is expanding its cannabis operations internationally, targeting markets with significant growth potential and exporting medical cannabis to countries like Germany and Australia [9] - The company also plans to enter the U.S. THC market, leveraging its greenhouse assets in Texas for future expansion [10]

Industry Overview - The cannabis industry is experiencing a turbulent period characterized by intense pullbacks and ongoing federal uncertainty, but solid long-term trends may drive major returns for patient investors [1] - Ancillary industries such as cannabis real estate, biotech, and consumer wellness are expected to benefit from the broader ecosystem expansion, making marijuana stock investing appealing as it offers exposure to an emerging, recession-resistant industry with high growth potential [2] Investment Opportunities - Multistate operators (MSOs), cannabis ETFs, REITs, and ancillary marijuana companies are positioned to see significant upside despite the volatility expected in 2025 [3] - The long-term investment case for marijuana stocks remains strong, and investors are encouraged to plan and strategize while weighing risks and rewards [3] Company Highlights - **Village Farms International, Inc. (NASDAQ: VFF)**: Recently regained compliance with Nasdaq's minimum closing bid price requirement of US$1.00 per share [6] - **SNDL Inc. (NASDAQ: SNDL)**: Reported Q1 2025 earnings with net revenue of US$204.914 million, a 3.6% increase from 2024, and gross profit of US$56.641 million, a 12.4% increase [11] - **High Tide Inc. (NASDAQ: HITI)**: Expanded its retail presence with the opening of two new Canna Cabana locations, bringing its total to 202 locations across Canada [13]

Core Viewpoint - Village Farms International has regained compliance with Nasdaq's minimum closing bid price requirement, indicating a positive development for the company's stock listing status [1] Company Overview - Village Farms is a large-scale, vertically-integrated supplier of high-value, plant-based Consumer Packaged Goods, leveraging decades of experience in Controlled Environment Agriculture [2] - The company has established itself as a leading fresh produce supplier in the US and Canada, now focusing on high-growth cannabinoid opportunities internationally [2] Cannabis Operations - In Canada, Pure Sunfarms, a wholly owned subsidiary, is one of the largest cannabis operations globally, with 2.2 million square feet of greenhouse production and recognized as a low-cost producer [3] - Village Farms owns an additional 2.6 million square feet of greenhouse capacity in Canada for future expansion and holds an 80% stake in Rose LifeScience, a leader in cannabis product commercialization [3] International Expansion - The company is targeting legal cannabis opportunities internationally, exporting medical cannabis from its EU GMP certified facility in Canada to markets such as Germany, the UK, Israel, Australia, and New Zealand [4] - In Europe, Leli Holland, a wholly-owned subsidiary, holds one of ten licenses to grow and distribute recreational cannabis within the Dutch Coffee Shop Experiment [4] US Market Strategy - In the US, Balanced Health Botanicals, a wholly owned subsidiary, is a leading CBD and hemp-derived brand, with plans to enter the US THC market leveraging its Texas-based greenhouse assets [5] - The company has 2.2 million square feet of existing greenhouse capacity and 950 acres of owned, unoccupied land for future expansion in the US [5] Clean Energy Initiatives - Village Farms Clean Energy, in partnership with Terreva Renewables, generates renewable natural gas from landfill gas, significantly reducing greenhouse gas emissions in Vancouver [6] - This initiative is equivalent to removing over 100,000 vehicles from the road or powering 51,300 homes for a year [6] Joint Ventures - The company holds a 37.9% equity interest in Vanguard Food LP, a joint venture aimed at creating a premier branded CPG foods company through mergers and acquisitions [7] - Vanguard Food LP plans to acquire additional produce assets and operations with the support of private investment partners [7]

Core Insights - The transaction has established Vanguard Food LP as a new leader in the North American produce industry, backed by private investment firms [1][2] - The joint venture aims to leverage its expertise in cultivation, sales, and distribution to create a premier branded CPG foods company focused on healthy lifestyles and sustainable practices [2][4] Company Overview - Vanguard Food LP is a joint venture between Kennedy Lewis Investment Management, Sweat Equities, and Village Farms International, operating 80 acres of advanced greenhouse facilities in Texas and sourcing from an additional 385 acres [4] - The company plans to pursue a roll-up strategy to acquire other produce assets and expand its product offerings through mergers and acquisitions [2][4] Strategic Vision - The leadership of Vanguard believes there is a significant opportunity to meet the growing consumer demand for healthier food alternatives, positioning the company for future growth [3] - The partnership is expected to enhance resources for innovation and value creation for customers, marking a new era for Village Farms' legacy produce business [3][4] Investment Management Background - Kennedy Lewis Investment Management manages over $28 billion across various private funds and investment vehicles, indicating strong financial backing for Vanguard [5] - Sweat Equities focuses on health and wellness investments, with approximately $100 million in invested capital across multiple funds, emphasizing its commitment to the food and beverage sector [6][7]

Core Viewpoint - Village Farms International has successfully closed a transaction to privatize the majority of its fresh produce business, positioning itself as a leader in the global cannabis industry with a net cash position and significant greenhouse assets [1][2]. Company Overview - Village Farms is a large-scale, vertically-integrated supplier of high-value, plant-based Consumer Packaged Goods, leveraging decades of experience in Controlled Environment Agriculture [3]. - The company has transitioned from being a leading fresh produce supplier to focusing on high-growth cannabinoid opportunities internationally [3]. Cannabis Operations - In Canada, Pure Sunfarms, a wholly-owned subsidiary, is one of the largest cannabis operations globally, with 2.2 million square feet of greenhouse production and recognized as a low-cost producer [4]. - The company has an additional 2.6 million square feet of greenhouse capacity in Canada for future expansion and holds an 80% stake in Rose LifeScience, a leader in cannabis product commercialization [4]. International Expansion - Village Farms is targeting emerging legal cannabis markets with significant growth potential, exporting medical cannabis to countries such as Germany, the UK, Israel, Australia, and New Zealand [5]. - The company is expanding its export business and investing in international production assets, including a license to grow and distribute recreational cannabis in the Netherlands [5]. U.S. Market Strategy - Village Farms plans to enter the U.S. THC market through various strategies, utilizing its Texas-based greenhouse assets, which include 2.2 million square feet of existing capacity and 950 acres of unoccupied land for future expansion [6]. Renewable Energy Initiative - Village Farms Clean Energy, in partnership with Terreva Renewables, generates renewable natural gas from landfill gas, significantly reducing greenhouse gas emissions in Vancouver [7]. Joint Venture and Future Plans - The company holds a 37.9% equity stake in Vanguard Food LP, which aims to create a premier branded CPG foods company through acquisitions and expansion of its product offerings [8].

Industry Overview - The U.S. cannabis industry is projected to reach approximately $45 billion by 2025 and over $75 billion by 2030, driven by federal reform discussions and expanding legalization [1][2] - Canadian cannabis companies are strategically positioning themselves for growth in the U.S. market through acquisitions and partnerships [1][2] Company Highlights Tilray Brands Inc. - Tilray operates in Canada, Europe, and the U.S., focusing on wellness and beverage sectors, distributing THC-infused beverages in over 10 U.S. states [3][5] - In Q3 fiscal 2025, Tilray reported revenue of $185.8 million, with a gross profit of $52 million, marking a 5% increase in gross margin to 28% [7][8] - Despite a net loss of $793.5 million primarily due to non-cash impairment charges, Tilray reduced its overall debt by $76 million, indicating a commitment to financial sustainability [8] Canopy Growth Corporation - Canopy Growth, a prominent cannabis producer in Canada, has shifted its U.S. strategy through Canopy USA, allowing it to engage with American operators while adhering to federal laws [9][11] - The company reported Q3 fiscal 2025 revenue of $74.8 million, a 5% decline year-over-year, but an 8% increase when excluding divested businesses [12][13] - Canopy's medical cannabis business in Canada remains strong, and the company prepaid a $100 million loan to improve cash flow and reduce interest costs [13] Village Farms International Inc. - Village Farms transitioned from greenhouse vegetable growing to cannabis production through its Pure Sunfarms subsidiary, focusing on wellness-based expansion in the U.S. [14][16] - In Q1 2025, Village Farms reported consolidated revenue of $77.1 million, slightly down from $78.1 million the previous year, but its Canadian cannabis segment achieved a net income of $3 million, a 258% increase [17][18] - The company plans to privatize part of its produce business to concentrate resources on its cannabis operations, which is expected to unlock more value [18] Investment Outlook - Canadian cannabis companies like Tilray, Canopy, and Village Farms are actively restructuring operations and improving balance sheets to capture growth in the U.S. market [19][20] - Each company has shown improvements in key financial metrics, with Tilray leading in beverages, Canopy leveraging brand strength, and Village Farms excelling in operational efficiency [20]

Financial Performance - Village Farms reported Q1 2025 consolidated sales of $77.1 million, a slight decrease from $78.1 million in Q1 2024[10]. - The company experienced a consolidated net loss of $6.7 million, or $0.06 per share, compared to a net loss of $2.9 million, or $0.03 per share in the prior year[10]. - Adjusted EBITDA for Q1 2025 was $0.1 million, down from $3.6 million in Q1 2024, indicating a significant decline in operational profitability[10]. - Sales for the three months ended March 31, 2025, were $77,074, a decrease of 1.3% from $78,077 in the same period of 2024[21]. - Gross profit for Q1 2025 was $11,340, down 27.0% from $15,513 in Q1 2024[21]. - Net loss attributable to Village Farms International Inc. shareholders increased to $6,703 in Q1 2025 from $2,852 in Q1 2024, representing a 134.5% increase[21]. - Adjusted EBITDA for Q1 2025 was $81, a significant decline from $3,591 in Q1 2024[21]. - Basic loss per share for Q1 2025 was $(0.06), compared to $(0.03) in Q1 2024[21]. - Total current assets decreased to $104,874,000 as of March 31, 2025, from $116,019,000 at December 31, 2024, a decline of 9.6%[45]. - Total liabilities decreased to $119,151,000 as of March 31, 2025, from $125,348,000 at December 31, 2024, a reduction of 4.5%[45]. - Cash and cash equivalents at the end of Q1 2025 were $15,125,000, down 38.5% from $24,631,000 at the end of Q4 2024[48]. - Net cash used in operating activities for Q1 2025 was $6,376,000, compared to a minimal usage of $50,000 in Q1 2024[48]. - Cash flows used in investing activities totaled $2,839,000 in Q1 2025, an increase from $1,876,000 in Q1 2024[48]. - Comprehensive loss attributable to Village Farms International, Inc. shareholders was $5,811,000 in Q1 2025, compared to $6,815,000 in Q1 2024, indicating a slight improvement[46]. Cannabis Operations - Canadian Cannabis net income increased 258% year-over-year to $3.0 million, with adjusted EBITDA rising 64% to $6.7 million[5][18]. - International medical export cannabis sales surged 285% year-over-year, contributing to gross margin expansion in Canadian Cannabis to 36%[5][10]. - Village Farms commenced cannabis sales in the Netherlands, marking its entry into the European recreational market, with sales beginning in late February 2025[5][10]. - The company plans to complete its Phase II facility in Groningen by Q1 2026, which is expected to quintuple annual production capacity[4][10]. - Retail branded sales in Canadian Cannabis decreased by 20%, while non-branded sales increased by 3% in Canadian dollars[10][19]. - The company maintained a top three market share position in Canada despite a reduction in lower-margin branded sales[5][16]. - Sales breakdown for Q1 2025 included $37,421 from VF Fresh, $34,837 from Canadian Cannabis, and $3,904 from U.S. Cannabis[23]. - The company is expanding its international presence by exporting medical cannabis to markets including Germany, the UK, Israel, Australia, and New Zealand[34]. - Village Farms plans to enter the U.S. THC market leveraging its 5.5 million square feet of greenhouse capacity in West Texas[35]. - Village Farms is one of the leading CBD and hemp-derived brands in the U.S. through its subsidiary Balanced Health Botanicals[35]. Strategic Initiatives - The company expects to receive $40 million in cash proceeds and a 37.9% equity ownership interest in Vanguard Food LP from the privatization of certain Fresh Produce segment assets[3][4]. - The partnership with Terreva Renewables is expected to reduce greenhouse gas emissions by 475,000 metric tons of CO2 annually[36]. - The company is focusing on high-growth cannabinoid opportunities internationally, with strategic investments in international assets[34]. - The proposed spin-out of produce assets into a new joint venture is part of the company's future growth strategy[38]. - Village Farms has 2.6 million square feet of additional greenhouse capacity available in Canada for future expansion[33]. Management Outlook - Management cautioned that the results for the three months ended March 31, 2025, may not be indicative of future performance[22]. - For the three months ended March 31, 2024, the total net loss was $2,852,000, with a significant loss from U.S. Cannabis operations amounting to $711,000[27]. - Adjusted EBITDA for the total company was $3,591,000, with the Canadian Cannabis segment contributing $4,073,000[27].

[PART I - FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) The company's Q1 2025 results show decreased assets, a wider net loss of $6.7 million, and a post-quarter privatization of its Fresh Produce segment Condensed Consolidated Statements of Financial Position (Assets) (In thousands USD) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total current assets** | $104,874 | $116,019 | | **Total non-current assets** | $272,230 | $273,287 | | **Total assets** | **$377,104** | **$389,306** | Condensed Consolidated Statements of Financial Position (Liabilities and Equity) (In thousands USD) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total current liabilities** | $54,561 | $62,219 | | **Total non-current liabilities** | $64,590 | $63,129 | | **Total liabilities** | **$119,151** | **$125,348** | | **Total shareholders' equity** | **$248,337** | **$254,005** | Condensed Consolidated Statements of Operations | (In thousands USD, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Sales** | $77,074 | $78,077 | | **Gross profit** | $11,340 | $15,513 | | **Loss before taxes** | $(6,132) | $(2,359) | | **Net loss attributable to VFF shareholders** | **$(6,703)** | **$(2,852)** | | **Basic and Diluted loss per share** | **$(0.06)** | **$(0.03)** | Condensed Consolidated Statements of Cash Flows | (In thousands USD) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Net cash used in operating activities** | $(6,376) | $(50) | | **Net cash used in investing activities** | $(2,839) | $(1,876) | | **Net cash used in financing activities** | $(384) | $(1,442) | | **Net decrease in cash** | $(9,506) | $(3,606) | | **Cash, end of period** | $15,125 | $31,685 | - The company operates through subsidiaries including Village Farms Fresh (produce), Pure Sunfarms (Canadian cannabis), Balanced Health (U.S. CBD), VF Clean Energy, and Leli Holland (Netherlands cannabis)[23](index=23&type=chunk)[30](index=30&type=chunk) - The company received a Nasdaq notification for not meeting the minimum bid price requirement and has until **October 13, 2025**, to regain compliance[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - Subsequent to quarter end, the company announced the privatization of certain Fresh Produce assets for **$40 million in cash** and a **37.9% equity interest** in a new joint venture, Vanguard[91](index=91&type=chunk) - Subsequent to quarter end, the company entered into new and amended credit facilities with more favorable covenants for its FCC Term Loan and Pure Sunfarms operations[88](index=88&type=chunk)[89](index=89&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q1 2025 saw a 1% sales decrease and a 27% gross profit drop, driven by Produce segment losses but offset by strong Cannabis segment performance [Executive Overview and Recent Developments](index=27&type=section&id=Executive%20Overview%20and%20Recent%20Developments) The company is focusing on its global cannabis operations, highlighted by strong international sales growth and the privatization of its Produce segment - The company's vision is to be an international leader in plant-based consumer products, leveraging its experience in fresh produce for cannabis markets[94](index=94&type=chunk) - Canadian Cannabis segment maintained a **top-three market share** in Canada and returned to its targeted gross margin range of **30-40%**[112](index=112&type=chunk) - International medical cannabis sales **increased 285% year-over-year** in Q1, with distribution expanded to New Zealand[117](index=117&type=chunk) - Netherlands Cannabis (Leli Holland) commenced sales to Dutch coffeeshops in February 2025 and broke ground on a Phase II facility to quintuple production capacity[104](index=104&type=chunk)[114](index=114&type=chunk) - Subsequent to quarter end, the company announced a transaction to privatize its Produce segment operations for **$40 million** and a **37.9% equity interest** in a new joint venture, Vanguard Food LP[114](index=114&type=chunk) [Consolidated Results of Operations](index=32&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated Q1 2025 sales decreased 1% to $77.1 million, with a 27% drop in gross profit leading to a wider net loss of $6.7 million Consolidated Financial Performance (Q1 2025 vs Q1 2024) | (In thousands USD) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Sales** | $77,074 | $78,077 | | **Gross profit** | $11,340 | $15,513 | | **Loss before taxes** | $(6,132) | $(2,359) | | **Net loss attributable to VFF** | $(6,703) | $(2,852) | | **Adjusted EBITDA** | $81 | $3,591 | - The **1% decrease in sales** was primarily due to lower Canadian and U.S. Cannabis sales, partially offset by a slight increase in VF Fresh sales[124](index=124&type=chunk) - The **27% decrease in gross profit** was mainly caused by a **$7.6 million decline** in VF Fresh gross profit, which was partially offset by a $3.0 million increase in Canadian Cannabis gross profit[126](index=126&type=chunk) - Selling, general and administrative (SG&A) expenses increased by 2% to $16.8 million, representing 22% of sales[127](index=127&type=chunk) [Segmented Results of Operations](index=35&type=section&id=Segmented%20Results%20of%20Operations) Performance varied widely by segment, with strong profitability in Canadian Cannabis contrasting sharply with a significant loss in the Produce segment Segment Operating (Loss) Income (Q1 2025 vs Q1 2024) | (In thousands USD) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Produce (VF Fresh)** | $(7,157) | $617 | | **Cannabis - Canada** | $3,713 | $1,804 | | **Cannabis - U.S.** | $58 | $(711) | | **Clean Energy** | $325 | $(20) | | **Cannabis - Netherlands** | $(238) | $(363) | Segment Sales (Q1 2025 vs Q1 2024) | (In thousands USD) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Produce (VF Fresh)** | $37,421 | $36,094 | | **Cannabis - Canada** | $34,837 | $37,446 | | **Cannabis - U.S.** | $3,904 | $4,537 | | **Clean Energy** | $426 | $0 | | **Cannabis - Netherlands** | $486 | $0 | [Canadian Cannabis Segment](index=35&type=section&id=Canadian%20Cannabis%20Segment) Despite a 7% sales decrease, the segment's gross margin improved to 36%, driving a significant increase in net income to $3.0 million - Net sales **decreased by 7% to $34.8 million**, impacted by a $2.3 million unfavorable currency fluctuation and a planned reduction in value-branded product sales[137](index=137&type=chunk)[138](index=138&type=chunk) - **Gross margin improved to 36%** from 25% YoY, due to a better sales mix with higher volumes of international and non-brand flower, and lower sales of value brands[144](index=144&type=chunk) - **International sales grew 259%**, driven by strong export volumes to Germany[138](index=138&type=chunk) - **Adjusted EBITDA increased 64% to $6.7 million** from $4.1 million in Q1 2024, reflecting the improved margins[147](index=147&type=chunk) [U.S. Cannabis Segment](index=39&type=section&id=U.S.%20Cannabis%20Segment) The segment achieved profitability with a net income of $58k despite a 14% sales decrease, driven by significant cost reductions - Net sales **decreased 14% to $3.9 million** due to new state restrictions on CBD sales and competition from unregulated hemp products[149](index=149&type=chunk) - The segment achieved **net income of $58k**, compared to a net loss of ($711k) in Q1 2024[153](index=153&type=chunk) - The improved profitability was driven by a **26% decrease in SG&A expenses** due to more efficient marketing and contract renegotiations[152](index=152&type=chunk) - **Adjusted EBITDA improved to $114k** from a loss of ($615k) in the prior-year quarter[154](index=154&type=chunk) [Netherlands Cannabis Segment](index=39&type=section&id=Netherlands%20Cannabis%20Segment) The newly operational segment recorded $486k in sales with a 41% gross margin, resulting in a net loss of $242k for its inaugural quarter - The segment commenced sales in Q1 2025 and was not operational in Q1 2024[155](index=155&type=chunk) Q1 2025 Financial Results | Metric | Amount (in thousands USD) | | :--- | :--- | | **Net Sales** | $486 | | **Cost of Sales** | $285 | | **Gross Profit** | $201 | | **Gross Margin** | 41% | | **Net Loss** | $(242) | | **Adjusted EBITDA** | $77 | [Produce Segment - VF FRESH](index=41&type=section&id=Produce%20Segment%20-%20VF%20FRESH) The segment's sales rose 4% but a 27% surge in costs led to a gross loss of $4.3 million and a net loss of $7.8 million - Sales **increased 4% to $37.4 million**, driven by a 39% increase in volume from supply partners, but partially offset by lower average selling prices for tomatoes (-15%) and peppers (-34%)[163](index=163&type=chunk)[164](index=164&type=chunk) - **Cost of sales increased 27% to $41.7 million**, primarily due to a negative crop impact from dust storms at company-owned greenhouses and higher costs from supply partners[165](index=165&type=chunk) - The segment recorded a **gross loss of ($4.3 million)** and a **net loss of ($7.8 million)**, a significant decline from a gross profit of $3.3 million and net income of $0.1 million in Q1 2024[166](index=166&type=chunk)[168](index=168&type=chunk) - **Adjusted EBITDA was negative ($5.1 million)** compared to a positive $2.0 million in the prior-year quarter[169](index=169&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity with $15.1 million in cash and has subsequently amended credit facilities for more favorable terms - At March 31, 2025, **cash and cash equivalents were $15.1 million** and **working capital was $50.3 million**[170](index=170&type=chunk) - The company was not in compliance with certain financial covenants at Dec 31, 2024, but received waivers and subsequently amended covenants to be more favorable in April 2025[171](index=171&type=chunk)[175](index=175&type=chunk) - On April 17, 2025, Pure Sunfarms replaced its existing loans with a new **C$37.4 million secured credit facility**, including a C$27.4 million term loan and a C$10.0 million revolving facility, maturing in February 2028[183](index=183&type=chunk)[184](index=184&type=chunk) Summary of Cash Flows (Three Months Ended March 31) | (in Thousands USD) | 2025 | 2024 | | :--- | :--- | :--- | | **Cash used in Operating activities** | $(6,376) | $(50) | | **Cash used in Investing activities** | $(2,839) | $(1,876) | | **Cash used in Financing activities** | $(384) | $(1,442) | [Non-GAAP Measures](index=47&type=section&id=Non-GAAP%20Measures) Consolidated Adjusted EBITDA fell to $81k from $3.6 million, as a large loss in the Produce segment offset strong Cannabis segment earnings - Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, and amortization (EBITDA), further adjusted for items like foreign currency exchange effects and share-based compensation[193](index=193&type=chunk) Reconciliation of Net Loss to Adjusted EBITDA (Consolidated) | (in thousands USD) | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Net loss** | $(6,703) | $(2,852) | | Amortization and depreciation | 4,973 | 4,558 | | Foreign currency exchange (gain) loss | (18) | 775 | | Interest expense, net | 631 | 711 | | Provision for income taxes | 983 | 320 | | Share-based compensation | 145 | 405 | | Other adjustments | 70 | (326) | | **Adjusted EBITDA** | **$81** | **$3,591** | Adjusted EBITDA by Segment (Q1 2025) | (in thousands USD) | Adjusted EBITDA | | :--- | :--- | | **Produce (VF Fresh)** | $(5,122) | | **Cannabis - Canada** | $6,698 | | **Cannabis - U.S.** | $114 | | **Clean Energy** | $325 | | **Cannabis - Netherlands** | $77 | | **Corporate** | $(2,011) | | **Total** | **$81** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rate fluctuations on its $44.2 million of variable-rate debt and CAD/USD foreign exchange volatility - The company is exposed to interest rate risk on its variable-rate debt, which totaled approximately **$44.2 million** as of March 31, 2025[205](index=205&type=chunk)[206](index=206&type=chunk) - The company is exposed to foreign exchange risk due to its Canadian operations, where a **$0.10 increase in the Canadian dollar** exchange rate would result in a net foreign exchange gain of approximately **$4.4 million**[208](index=208&type=chunk) [Item 4. Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2025, having remediated previously identified material weaknesses - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were **effective as of March 31, 2025**[211](index=211&type=chunk) - The company has **remediated the previously identified material weaknesses** related to IT general controls (user access, change management) and manual journal entry controls at its Produce segment[213](index=213&type=chunk)[214](index=214&type=chunk) - Remediation actions included enhancing IT risk assessments, limiting privileged user access, and implementing stricter review and approval controls for manual journal entries[214](index=214&type=chunk)[216](index=216&type=chunk) [PART II - OTHER INFORMATION](index=53&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) The company is engaged in ordinary course legal proceedings, none of which are considered material to its business - The Company is engaged in ordinary course legal proceedings, none of which are considered material to the business[217](index=217&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) Key risks include potential Nasdaq delisting due to low stock price and the uncertainty of realizing benefits from the Produce segment privatization - The company's common shares may be **delisted from Nasdaq** if it does not regain compliance with the minimum bid price requirement of US$1.00 by the extended deadline of **October 13, 2025**[219](index=219&type=chunk)[220](index=220&type=chunk) - Delisting from Nasdaq would likely decrease liquidity, increase stock price volatility, and adversely affect the ability to raise capital[221](index=221&type=chunk) - The company may fail to realize the expected benefits of privatizing its Fresh Produce segment, as it will have only a minority interest and limited control over the new joint venture[222](index=222&type=chunk) [Item 2. Unregistered Sale of Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sale%20of%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any of its common shares during the three months ended March 31, 2025 - The Company did not repurchase any of its Common Shares during the three months ended March 31, 2025[223](index=223&type=chunk) [Item 3. Defaults Upon Senior Securities](index=53&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable [Item 4. Mine Safety Disclosures](index=53&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable [Item 5. Other Information](index=55&type=section&id=Item%205.%20Other%20Information) During the quarter ended March 31, 2025, no director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[226](index=226&type=chunk) [Item 6. Exhibits](index=56&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including amended credit agreements, officer certifications, and XBRL data files - Exhibits filed include an Amended and Restated Credit Agreement with Farm Credit Canada, a new Credit Agreement for Pure Sunfarms, and certifications by the Principal Executive and Financial Officers[227](index=227&type=chunk)