The Very Good Food Company Inc. (NASDAQ: VGFC) (TSXV: VERY.V) ("VERY GOOD" or the "Company"), a leading plant-based food technology company, today reported its financial results for the fourth quarter and year ended December 31, 2021.
"Q4 2021 was another strong quarter for VERY GOOD, with solid year-over-year growth across our eCommerce and wholesale channels," said Mitchell Scott, co-founder and CEO of VERY GOOD. "We successfully expanded our presence in the US retail market, bringing our North American store count to 1,395 by the end of 2021 and 1,651 at the end of March 2022. Our revenue in Q4 2021 was 70% higher than the previous quarter and partly supported by seasonal demand for our holiday products including the Stuffed Beast."
"VERY GOOD achieved certain of its strategic objectives for 2021 including scaling production, deepening brand awareness, expanding into U.S. wholesale, and launching innovative new products. 2021 was a year focused on investment and top-line growth, and 2022 will be more measured and focused on establishing a clear path to profitability."
As previously announced, the Company is temporarily lowering production throughput and headcount at some locations, to manage inventory levels, and implementing initiatives, such as pausing non-critical capital expenditures and lowering general & administrative spending, to manage both short and long-term liquidity, extend its cash runway and establish a path towards profitability.
Financial Highlights
As of December 31, 2021, the Company had cash and cash equivalents of $21,975,653. The Company has experienced a greater than expected cash burn in the last several months as the Company scaled its operations to meet its growth targets, which has reduced its cash position and has strained its short-term liquidity. We believe we have sufficient cash on hand and available liquidity to meet our future operating expenses and finance our operational, core capital expenditure and debt service requirements for approximately the next 3 to 5 months. The Company is currently evaluating financing options to support the business with as little dilution as possible.
_________________________ |
1 Wholesale distribution points are defined as the number of retail stores multiplied by the number of product SKUs. |
2 Required to discuss IFRS results before non-IFRS results. |
Operational Highlights
Production Update
Capital Markets Update
The management's discussion and analysis for the period and the accompanying financial statements and notes are available under the Company's profile on SEDAR at www.sedar.com and have been furnished on a Report on Form 6-K on EDGAR at www.sec.gov. VERY GOOD will also file an Annual Report on Form 20-F no later than April 30, 2022, which will incorporate by reference the Company's annual filings and will be available on EDGAR at www.sec.gov.
Q4 and Fiscal Year End 2021 Conference Call Details
VERY GOOD will host a conference call on Tuesday, April 5, 2022 at 4:30 pm Eastern Time/ 1:30 am Pacific Time to discuss the financial results and business outlook.
Participant Dial-In Numbers:
Toll-Free: 1-877-425-9470
Toll / International: 1-201-389-0878
* Participants should request The Very Good Food Company Fourth Quarter Earnings Call.
The call will be available via webcast on VERY GOOD's investor page of the Company website at www.verygoodfood.com/investors until April 30, 2022. Participants who would like to ask a question during the live Q&A must login via webcast.
Please visit the website at least 15 minutes before the call to register, download, and install any necessary audio software. A replay of the call will be available on VERY GOOD's investor page approximately two hours after the conference call has ended.
Financial Highlights
Three months ended December 31 | Year ended December 31 | |||
2021 | 2020 | 2021 | 2020 | |
Revenue by channel | ||||
eCommerce | $ 3,340,107 | $ 1,438,931 | $ 9,277,750 | $ 3,382,458 |
Wholesale | 781,363 | 255,276 | 2,429,072 | 840,490 |
Butcher Shop, Restaurant and Other | 177,452 | 142,475 | 551,961 | 413,890 |
$ 4,298,922 | $ 1,836,682 | $ 12,258,783 | $ 4,636,838 | |
Gross Profit(1) | $ 1,653,262 | $ 260,472 | $ 3,398,851 | $ 827,106 |
Gross Margin(1) | 38% | 14% | 28% | 18% |
Net Loss | $ (13,330,908) | $ (5,813,13) | $ (54,559,923) | $ (13,858,80) |
Adjusted EBITDA(1) | $ (5,014,266) | $ (3,279,266) | $ (24,253,335) | $(8,344,117) |
Loss per share – basic and diluted | $ (0.12) | $ (0.06) | $ (0.53) | $ (0.21) |
Weighted average number of shares outstanding – basic and diluted | 115,381,279 | 89,689,807 | 103,401,995 | 66,388,474 |
(1) See "Non-IFRS Financial Measures" starting on page 21 of the 2021 MD&A for more information on Non-IFRS financial measures and reconciliations thereof to the nearest comparable measures under IFRS. |
Consolidated Statements of Financial Position
(Expressed in Canadian dollars)
As at | Notes | December 31, 2021 | December 31, 2020 | |||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ 21,975,653 | $ 25,084,083 | ||||
Accounts receivable | 4 | 2,101,842 | 449,583 | |||
Inventory | 5 | 8,474,255 | 1,195,535 | |||
Prepaids and deposits | 6 | 8,640,286 | 1,887,035 | |||
Loan to related party | 14 | 410,268 | - | |||
Total current assets | 41,602,304 | 28,616,236 | ||||
Right-of-use assets | 7 | 16,659,502 | 5,046,597 | |||
Property and equipment | 8 | 15,450,608 | 740,728 | |||
Prepaids and deposits | 6 | 707,110 | 779,036 | |||
Deferred financing costs | 12 | 3,924,743 | - | |||
Total assets | $ 78,344,267 | $ 35,182,597 | ||||
Liabilities and shareholders' equity | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | 10 | $ 8,109,161 | $ 1,871,728 | |||
Deferred revenue | 32,137 | 102,239 | ||||
Current portion of lease liabilities | 11 | 849,935 | 146,935 | |||
Current portion of loans payable and other liabilities | 12 | 1,947,642 | - | |||
Contingent considerations | 9,22 | 1,048,000 | - | |||
Derivative liabilities | 15 | 3,942,002 | - | |||
Total current liabilities | 15,928,877 | 2,120,902 | ||||
Lease liabilities | 11 | 16,764,458 | 5,389,352 | |||
Loans payable and other liabilities | 12 | 5,474,605 | 30,000 | |||
Total liabilities | 38,167,940 | 7,540,254 | ||||
Shareholders' equity | ||||||
Share capital | 16 | 84,751,366 | 39,335,150 | |||
Equity reserves | 26,719,047 | 5,009,980 | ||||
Subscription received and receivable | (3,750) | 8,250 | ||||
Accumulated other comprehensive (loss) income | (12,716) | 6,660 | ||||
Deficit | (71,277,620) | (16,717,697) | ||||
Total shareholders' equity | 40,176,327 | 27,642,343 | ||||
Total liabilities and shareholders' equity | $ 78,344,267 | $ 35,182,597 | ||||
Nature of operations and going concern uncertainty (Note 1) | ||||||
Commitments (Notes 11 and 25) | ||||||
Events after the reporting period (Notes 14, 17 and 18) |
Consolidated Statements of Net Loss and Comprehensive Loss
(Expressed in Canadian dollars)
Notes | December 31, 2021 | December 31, 2020 | ||||
Revenue | $ 12,258,783 | $ 4,636,838 | ||||
Procurement expense | 7, 8, 23 | (8,859,932) | (3,809,732) | |||
Fulfilment expense | 7, 8, 23 | (10,267,444) | (1,907,621) | |||
General and administrative expense | 7, 8, 23 | (32,129,489) | (7,084,795) | |||
Marketing and investor relations expense | 23 | (11,276,537) | (3,243,210) | |||
Research and development expense | 7, 8, 23 | (1,974,530) | (477,750) | |||
Pre-production expense | 23 | (3,214,797) | - | |||
Operating loss | (55,463,946) | (11,886,270) | ||||
Finance expense | 19 | (3,024,451) | (1,842,853) | |||
Other expense | 20 | (514,638) | (129,677) | |||
Change in fair value of derivative liabilities | 15 | 7,922,647 | - | |||
Impairment of goodwill | 9 | (3,479,535) | - | |||
Net loss | (54,559,923) | (13,858,800) | ||||
Foreign currency translation (loss) income | (19,376) | 6,660 | ||||
Total comprehensive loss | $ (54,579,299) | $ (13,852,140) | ||||
Loss per share - basic and diluted | $ (0.53) | $ (0.21) | ||||
Weighted average number of shares outstanding - basic and diluted | 103,401,995 | 66,388,474 |
Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
December 31, 2021 | December 31, 2020 | |
Operating activities | ||
Net loss for the year | $ (54,559,923) | $ (13,858,800) |
Adjustments for items not affecting cash: | ||
Finance expense | 3,024,451 | 1,842,853 |
Change in fair value of derivative liabilities | (7,922,647) | - |
Depreciation | 1,938,058 | 425,276 |
(Gain) loss on termination of lease | (1,600) | 7,533 |
Lease concessions | - | (16,800) |
Loss on disposal of equipment | 32,816 | - |
Impairment of equipment | 101,077 | - |
Impairment of goodwill | 3,479,535 | - |
Share-based compensation | 21,605,880 | 2,780,488 |
Shares, units and warrants issued for services | 227,471 | 458,533 |
Changes in non-cash working capital items | ||
Accounts receivable | (1,612,791) | (376,739) |
Inventory | (6,871,350) | (1,120,057) |
Prepaids and deposits | (4,995,707) | (1,804,382) |
Accounts payable and accrued liabilities | 3,698,504 | 1,882,671 |
Deferred revenue | (70,102) | 94,663 |
Due from related parties | - | 24,280 |
Net cash and cash equivalents used in operating activities | (41,926,328) | (9,660,481) |
Investing activities | ||
Cash paid for acquisitions, net of cash acquired | (1,315,694) | - |
Purchase of property and equipment | (12,021,319) | (564,437) |
Security deposits paid for property and equipment | (2,840,116) | - |
Acquisition of right-of-use assets | (67,335) | - |
Loans to related parties | (1,250,000) | - |
Repayment received from loans to related parties | 839,732 | - |
Net cash and cash equivalents used in investing activities | (16,654,732) | (564,437) |
Financing activities | ||
Proceeds from the issuance of common shares and units for cash, net of issuance costs | 52,713,503 | 24,416,725 |
Proceeds from the exercise of warrants | 2,401,483 | 10,863,951 |
Proceeds from the exercise of stock options | 120,599 | 608,126 |
Proceeds from subscriptions received | - | 19,500 |
Proceeds from loans payable | 5,171,222 | 499,129 |
Repayment of loans payable and other liabilities | (902,863) | (490,309) |
Deferred financing costs paid | (2,262,039) | - |
Proceeds from loan payable to related parties | - | 400,000 |
Repayment of loan payable to related parties | - | (400,000) |
Payments of lease liabilities | (1,591,300) | (163,811) |
Payments of lease deposits | - | (779,036) |
Interest paid | (159,276) | (73,288) |
Net cash and cash equivalents provided by financing activities | 55,491,329 | 34,900,987 |
Effects of exchange rate changes on cash and cash equivalents | (18,699) | 2,404 |
(Decrease) increase in cash and cash equivalents | (3,108,430) | 24,678,473 |
Cash and cash equivalents, beginning of year | 25,084,083 | 405,610 |
Cash and cash equivalents, end of year | $ 21,975,653 | $ 25,084,083 |
Cash and cash equivalents consist of: | ||
Cash | $ 21,875,653 | $ 24,019,083 |
Redeemable guaranteed investment certificate ("GIC") | - | 1,000,000 |
Restricted redeemable GIC | 100,000 | 65,000 |
Total cash and cash equivalents | $ 21,975,653 | $ 25,084,083 |
Supplemental cash flow information (Note 21) |
NON-IFRS FINANCIAL MEASURES
Non-IFRS financial measures are metrics used by management that do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies.
Adjusted EBITDA
Management defines adjusted EBITDA as net loss before finance expense, tax, depreciation and amortization, share-based compensation and other non-cash items, including impairment of goodwill, loss on disposal of equipment, loss on termination of leases, finance expense and shares, units and warrants issued for services. Management believes adjusted EBITDA is a useful financial metric to assess its operating performance because it adjusts for items that either do not relate to the Company's underlying business performance or that are items that are not reasonably likely to recur.
Three months ended | Three months ended | Three months ended | Year ended | Year ended | Year ended | |
2021 | 2021 | 2020 | 2021 | 2020 | 2019 | |
Net loss as reported | $(13,330,908) | $(13,699,706) | $ (5,813,132) | $(54,559,923) | $(13,858,800) | $(2,341,544) |
Adjustments: | ||||||
Depreciation | 480,272 | 616,111 | 153,295 | 1,938,035 | 425,276 | 161,583 |
Impairment of goodwill | 3,479,535 | - | - | 3,479,535 | - | - |
Loss on disposal of equipment | - | 10,255 | - | 32,816 | - | - |
Loss on termination of lease1 | - | - | - | (1,600) | 7,533 | - |
Finance expense | 1,157,411 | 1,102,858 | 148,014 | 3,024,451 | 1,842,853 | 173,268 |
Share-based compensation | 3,199,424 | 3,796,458 | 1,951,150 | 21,605,880 | 2,780,488 | 200,933 |
Shares, units and warrants issued for services | - | - | 281,407 | 227,471 | 458,533 | 477,500 |
Adjusted EBITDA | $ (5,014,266) | $ (8,174,024) | $ (3,279,266) | $(24,253,335) | $ (8,344,117) | $ (1,328,260) |
1 On September 22, 2020, the Company terminated 17 lease agreements and purchased the related leased equipment for $79,118. The difference between the related lease liabilities and right-of-use-assets of $7,533 was recognized as a loss on termination of leases. During the years ended December 31, 2021,and 2020, the Company terminated 2 lease agreements and recognized a $1,600 gain on termination of leases. |
Gross Profit and Gross Margin
Management utilizes gross profit and gross margin to provide a representation of performance in the period, which are determined by deducting procurement expense from revenue.
Three months ended | Three months ended | Three months ended | Year ended | Year ended | Year ended | |
2021 | 2021 | 2020 | 2021 | 2020 | 2019 | |
Revenue | $ 4,298,922 | $ 2,536,097 | $ 1,836,682 | $ 12,258,783 | $ 4,636,838 | $ 999,797 |
Procurement expense | (2,645,660) | (2,059,204) | (1,576,210) | (8,859,932) | (3,809,732) | (1,169,583) |
Gross profit | $ 1,653,262 | $ 476,893 | $ 260,472 | $ 3,398,851 | 827,106 | $ (169,786) |
Gross margin | 38% | 19% | 14% | 28% | 18% | (17%) |
Adjusted General and Administrative Expense
Management defines adjusted general and administrative expense as general and administrative expense excluding non-cash items such as share-based compensation and depreciation expense. Management believes adjusted general and administrative expense provides useful information as it represents the corporate costs to operate the business excluding any non-cash items.
Three months ended | Three months ended | Three months ended | Year ended | Year ended | Year ended | |
2021 | 2021 | 2020 | 2021 | 2020 | 2019 | |
General and administrative expense | $ (8,630,775) | $ (7,089,277) | $ (3,858,273) | $ (32,129,489) | $ (7,084,795) | $ (1,622,541) |
Adjustments: | ||||||
Share-based compensation | 2,808,617 | 3,043,998 | 1,605,184 | 17,740,461 | 2,370,059 | 179,227 |
Depreciation | 80,821 | 81,755 | 98,398 | 274,776 | 230,692 | 8,707 |
Adjusted general and administrative expense | $ (5,741,337) | $ (3,963,524) | $ (2,154,691) | $ (14,114,252) | $ (4,484,044) | $ (1.434.607) |
About The Very Good Food Company Inc.
The Very Good Food Company Inc. is an emerging plant-based food technology company that produces nutritious and delicious plant-based meat and cheese products under VERY GOOD's core brands: The Very Good Butchers and The Very Good Cheese Co. www.verygoodfood.com.
OUR MISSION IS LOFTY, BADASS BUT BEAUTIFULLY SIMPLE: GET MILLIONS TO RETHINK THEIR FOOD CHOICES WHILE HELPING THEM DO THE WORLD A WORLD OF GOOD. BY OFFERING PLANT-BASED FOOD OPTIONS SO DELICIOUS AND NUTRITIOUS, WE'RE HELPING THIS KIND OF DIET BECOME THE NORM.
ON BEHALF OF THE VERY GOOD FOOD COMPANY INC
Mitchell Scott
Founder and Chief Executive Officer
Forward-Looking Statements
This news release contains "forward-looking information" within the meaning of applicable securities laws in Canada and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, including Section 21E of the Securities Exchange Act of 1934, as amended (collectively referred to as "forward-looking information"), for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes. Forward-looking information may be identified by words such as "plans", "proposed", "expects", "anticipates", "intends", "estimates", "may", "will", and similar expressions. Forward-looking information contained or referred to in this news release includes, but is not limited to, statements regarding the Company's plans to lower throughput and headcount at some locations, manage inventory levels and implement initiatives, such as temporarily pausing non-critical capital expenditures and lowering SG&A spending, to manage both short and long-term liquidity, extend its cash runway and establish a path towards profitability; the Company's ability to meet its future operating expenses and finance our operational, capital expenditure and debt service requirements for approximately the next three to five months; the Company's use of proceeds from the SEC Direct Offering; the Company's plan to file an Annual Report on Form 20-F by April 30, 2022; the Company's intended transition from a focus on top line growth to balancing top line growth and profitability; future workforce reductions; management's belief that the initiatives being implemented will allow the Company to manage both its short-term and long-term liquidity and increase its cash runway; and management's efforts to evaluate ways to support the business with as little dilution as possible. Forward-looking information is based on a number of factors and assumptions which have been used to develop such information, but which may prove to be incorrect including, but not limited to, material assumptions with respect to the Company's ability to successfully implement the cost improvement initiatives and measures and achieve their intended benefits, the Company's ability to remain listed on the Nasdaq, the availability of sufficient financing on reasonable terms or at all to fund VERY GOOD's capital and operating requirements, the Company's ability to accurately forecast customer demand for its products and manage its inventory levels, continued demand for VERY GOOD's products, continued growth of the popularity of meat alternatives and the plant-based food industry, no material deterioration in general business and economic conditions, the successful placement of VERY GOOD's products in retail stores, VERY GOOD's ability to successfully enter new markets and manage its international expansion, VERY GOOD's ability to obtain necessary production equipment and human resources as needed, VERY GOOD's relationship with its suppliers, distributors and third-party logistics providers, and management's ability to position VERY GOOD competitively. Although the Company believes that the expectations reflected in such forward-looking information are reasonable, undue reliance should not be placed on forward-looking information because VERY GOOD can give no assurance that such expectations will prove to be correct. Risks and uncertainties that could cause actual results, performance or achievements of VERY GOOD to differ materially from those expressed or implied in such forward-looking information include, among others, the impact of, uncertainties and risks associated with negative cash flow and future financing requirements to sustain and grow operations, limited history of operations and revenues and no history of earnings or dividends, competition, risks relating to the availability of raw materials, risks relating to regulation on social media, expansion of facilities, risks related to credit facilities, dependence on senior management and key personnel, availability of labour, general business risk and liability, regulation of the food industry, change in laws, regulations and guidelines, compliance with laws, risks related to third party logistics providers, unfavorable publicity or consumer perception, increased costs as a result of being a United States public company, product liability and product recalls, risks related to intellectual property, risks relating to co-manufacturing, risks related to expansion into the United States; risks related to our acquisition strategy, taxation risks, difficulties with forecasts, management of growth and litigation as well as the risks associated with the ongoing COVID-19 pandemic. For a more comprehensive discussion of the risks faced by VERY GOOD, please refer to VERY GOOD's most recent Annual Information Form filed with Canadian securities regulatory authorities at www.sedar.com and as an exhibit to the Form 6-K filed with the SEC on March 31, 2022 and available at www.sec.gov. The forward-looking information in this news release reflects the current expectations, assumptions and/or beliefs of the Company based on information currently available. Any forward-looking information speaks only as of the date of this news release. VERY GOOD undertakes no obligation to publicly update or revise any forward-looking information whether because of new information, future events or otherwise, except as otherwise required by law. The forward-looking information contained in this news release is expressly qualified by this cautionary statement.
None of the Nasdaq Stock Market LLC, TSX Venture Exchange, the SEC or any other securities regulator has either approved or disapproved the contents of this news release. None of the Nasdaq, the TSX Venture Exchange or its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange), the SEC or any other securities regulator accepts responsibility for the adequacy or accuracy of this news release.
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