The Very Good Food Company Inc (NASDAQ: VGFC) stock price rallied 42.1% despite news that an existing creditor had called in a loan claiming that the plant-based food company had defaulted on the loan.
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According to the report by just Food, Wagner Capital, a Toronto-based creditor, had called in a CAD8.1 million (US$6 million) loan, including principal and interest, in addition to the accrued interest and “recovery costs”.
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The move comes after talks with private equity firm Reef Capital to secure funding worth CAD2.1 million fell through, leaving the company exposed and unable to repay its debts. The Very Good Food company had warned investors that it needed additional capital to remain operational.
After sounding the alarm about its finances in November, the Very Good Food Company initiated talks with Reef Capital to secure the much-needed additional funding to continue operating. However, the talks did not result in the signing of a deal.
Wagner Capital said that certain events of default had occurred, including that VGFC had breached a cash-reserve requirement and exceeded a so-called ‘borrowing base’. The lender had reserved the right to appoint a receiver within a ten-day window starting on January 6, 2023.
The Very Good Food Company has been struggling, having received a non-compliance notice from the Nasdaq after it failed to hold its annual general meeting 12 months from the end of its 2021 fiscal year on December 31, 2021.
The company also has a delisting notice from the Nasdaq after its stock price had a closing bid price of $0.10 or less for at least ten consecutive trading days. The company requested a hearing and got a grace period conditional on getting shareholder approval for a reverse stock split by February 27, 2023.
The Very Good Food Company also revealed that two directors, Justin Steinbach and Dela Salem, had resigned from its board, leaving Parimal Rana, its CEO, as the only director. The firm is currently looking for new directors.
The road ahead for the VGFC is rocky, and it is unclear whether the company shall survive.
*This is not investment advice.
The Very Good Food (VGFC) stock price.
The Very Good Food (VGFC) stock price rallied 42.14% to trade at $0.0968, from Wednesday’s closing price of $0.0681.
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