dvhh's answer contains the crucial pointer:
If you're reading only a single line, there's no reason to use a while loop at all.
Your while loop leaves $VAR1 and $VAR2 empty, because the last attempt to read from the input file invariably fails due to having reached EOF, causing the variables to be set to the empty string.
If, by contrast, you truly needed to read values from multiple lines and needed to access them after the loop, you could use a bash array:
aVar1=() aVar2=() # initialize arrays
while read var1 var2
do
   aVar1+=( "$var1")
   aVar2+=( "$var2")
done < file.txt
# ${aVar1[@]} now contains all $var1 values, 
# ${aVar2[@]} now contains all $var2 values.
Note that it's good practice not to use all-uppercase names for shell variables so as to avoid conflicts with environment variables.