Exhibit 99.1

The Very Good Food Company Reports First Quarter 2022

Financial Results

Q1 2022 Wholesale Revenue Increased 123% Compared to Q1 2021

Cash and Liquidity Update

Operational and Corporate Strategy Update

Vancouver, British Columbia (May 16, 2022) - 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 first quarter ended March 31, 2022.

Q1 2022 Financial Highlights

 

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Revenue decreased $624,739 or 24%, to $2,018,344 in Q1 2022, compared to $2,643,083 in the same period in 2021. The decrease was driven by a decrease of $1,103,735 in eCommerce sales, offset by an increase of $427,014 in wholesale revenue.

 

•

Revenue decreased $2,280,578 or 53%, to $2,018,344 in Q1 2022, compared to $4,298,922 in Q4 2021.

 

•

Wholesale revenue increased 123% to $772,919 in Q1 2022 as compared to the same quarter last year due to an increase in the number of stores and distribution points as well as increased unit velocities on core and new items.

 

•

Wholesale revenue remained relatively unchanged, with a decrease of 1% from $781,363 in Q4 2021.

 

•

eCommerce revenue decreased 51% to $1,081,360 in Q1 2022 as compared to the same period last year due to the Company’s strategic decision to eliminate digital marketing costs to acquire new customers.

 

•

eCommerce revenue decreased 68% from $3,340,107 in Q4 2021.

 

•

General and administrative expense1 (“G&A expense”) decreased $4,993.039 or 58%, to $3,637,737 in Q1 2022, compared to $8,630,775 in Q4 2021. Excluding share-based compensation and depreciation expense, adjusted general and administrative expense decreased $135,671 (2%) to $5,605,666 in Q1 2022 compared to $5,741,337 in Q4 2021. The decrease in adjusted general and administrative expense was primarily driven by a decrease in salaries and wages.

 

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Adjusted general and administrative expense1 (“Adjusted G&A expense”) increased $3,183,410 or 131%, in Q1 2022, compared to $2,422,255 in Q1 2021. The increase was primarily driven by increased legal and professional fees of $760,245, increased insurance fees of $643,215 due to increases in director and officer insurance as a result of the Company’s Nasdaq listing, increased wages and benefits of $622,329 due to higher head count, increased recruiting fees of $164,624 attributed to growing the sales team, and increased general office expenses such as supplies and software licenses of $321,796.

 

•

Adjusted G&A expense decreased $135,671 or 2%, to $5,605,666 in Q1 2022 compared to $5,741,337 in Q4 2021. The decrease was primarily driven by a decrease in salaries and wages.

 

•

Net loss2 decreased 44% to $(8,362,309) in Q1 2022 compared to $(15,028,576) in Q1 2021.

 

1	Adjusted general and administrative expense is a Non-IFRS measure calculated as total general and administrative expense less share-based compensation and depreciation.

2	Required to discuss IFRS results before non-IFRS results

•

Net loss decreased by 37% compared to $(13,330,908) in Q4, 2021.

 

•

Adjusted EBITDA3 was a loss of $(8,462,899) in Q1 2022 compared to $(5,391,936) in Q1 2021, and $(5,014,266) in Q4 2021.

Cash and Liquidity Update

The Company has incurred losses since inception and expects to incur further losses in the development of its business. Whether the Company can generate sufficient operating cash flows to pay for its expenditures and settle its obligations as they fall due is uncertain. The Company’s ability to continue as a going concern is dependent on its ability to manage costs, raise additional equity or debt on reasonable terms and/or commence profitable operations in the future. While the Company has been successful in the past in obtaining debt and equity financings, there is no assurance that the Company will be able to do so going forward. The existence of these conditions indicates that there are material uncertainties which may cast significant doubt on the Company’s ability to continue as a going concern.

As of March 31, 2022, the Company had cash and cash equivalents of $6,382,705, a reduction of $15,592,948 from $21,975,653 as of December 31, 2021. This decrease is primarily related to the Company’s greater than expected cash burn during the quarter. The Company’s current cash balance is approximately $3.3 million to settle current accounts payable and accrued liabilities of approximately $6.7 million. Management believes that the Company will need to seek additional financing within the next 30 days in order to fulfil its outstanding obligations and fund ongoing operations and will likely need to obtain subsequent financings in future periods. In order to address its lack of necessary liquidity, the Company has reduced its cash outflow related to paying trade payables while it evaluates its financing options. The Company is evaluating other alternatives of generating cash in the short term such as disposing of non-core equipment and certain raw material inventory to extend the current cash runway. There can be no assurance that disposing of non-core equipment and certain raw material inventory will be successful. While there is no assurance on the availability of the Company’s future financings, on acceptable terms, or at all, the Company believes it is able to raise capital through financing in the near term to support its new refocused strategy.

Q1 2022 Operational and Corporate Strategy Update

During the three-month period ended March 31, 2022, VERY GOOD made the strategic shift to focus on sustainable growth and a path to profitability as opposed to solely focusing on top line growth. As part of this shift, VERY GOOD consciously decided to limit its eCommerce sales due to high digital marketing costs to acquire new customers, lowered production throughput and headcount at some locations to manage inventory levels, implemented initiatives such as pausing non-critical capital expenditures and lowering general and administrative expenses.

VERY GOOD intends to continue to focus on the wholesale and food service channels, particularly in the United States, which it views as critical to realizing its vision to scale the Company.

On May 16, 2022, the Company made a strategic decision to cease regular operations at the Victoria Facility, Fairview Facility, and Patterson Facility and consolidate operations into the Rupert Facility. The Company has also decided to close the Victoria Flagship Store in Q2 2022 and no longer plans to open the Mount Pleasant Flagship Store. The Company made these decisions in an effort to create production efficiencies and reduce overhead. The Company is evaluating a few strategies as to how it can utilize these facilities going forward.

VERY GOOD expects to further right-size its workforce across its corporate business functions as it streamlines operations. It is worth mentioning that the Company has experienced higher than normal turnover over the last quarter and there is a risk of losing some critical talent. The Company is evaluating options as to how it can improve employee retention.

“We started to see the results of our refocused strategy start to materialize in the Q1 2022 financial results: while the overall sales are down as a result of our conscious decision to decrease eCommerce sales, wholesale revenue shows strong triple digit growth,” said Matthew Hall, Interim Chief Executive Office.

“During the very short period of time that I have been with the Company, I have made great strides in identifying the problem areas and have developed a strategy to put the Company back on the right track. My strategy focuses on stabilizing, right-sizing, and optimizing the business. While it will take some time for the financial results to catch up with the progress we are making, I am confident that we will start to see great improvements in future quarters. We have a great brand, fantastic products, engaged customers, and some very dedicated and talented people. We can leverage these strengths to rebuild this Company and start executing on the promise of delivering shareholder value. I believe strongly in the plant-based food sector and the approach VERY GOOD has started with. I believe we have a good shot at being the category thought leader.”

Management Changes

On April 25, 2022, VERY GOOD announced the appointment of a new Interim Chief Executive Officer and director, Matthew Hall. Matthew was a 31-year global senior executive with Nestlé, the world’s largest food and beverage manufacturer. The Company further announced accepting the resignation of Ms. Ana Silva, both from the Board of Directors and her position as President, Interim Chief Financial Officer, and Interim Corporate secretary.

On April 14, 2022, VERY GOOD announced the appointment of three of its functional leaders to executive positions within the Company.

 

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Jordan Rogers, formerly the head of Canadian retail sales, who joined VERY GOOD as part of its acquisition of the Lloyd-James Marketing Group Inc., was appointed as the Company’s Chief Commercial Officer.

 

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Kevin Callaghan, previously head of US retail sales, was appointed as Vice President of Sales –North America.

 

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Parimal Rana, formerly Director of Food Safety & Regulatory and Interim Director of Supply Chain, assumed the role of Vice President of Operations.

 

3

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, and shares, units and warrants issued for services.

All three executives served on the Company’s newly formed executive committee (the “Executive Committee”). The Executive Committee was used temporarily by the Company to review and approve key organizational, financial, operational and strategic decisions for the Company, by drawing upon the collective knowledge, experience, business acumen and skills of the senior management team.

On April 4, 2022, VERY GOOD announced that Mitchell Scott’s employment as Chief Executive Officer had been terminated. The Company also announced that James Davison has resigned as Chief Research & Development Officer and as a member of the board of directors of the Company.

As of May 16, 2022, Ms. Dela Salem, a director of the Company, has been temporarily appointed interim Co-CEO to assist Matt Hall, interim CEO, with certain administrative aspects of the role and to assist with the Company’s management transitions, given Matthew Halls’ short tenure at the Company.

The management’s discussion and analysis for the period and the accompanying financial statements and notes will be available under the Company’s profile on SEDAR at www.sedar.com and will be furnished on a Report on Form 6-K on EDGAR at www.sec.gov.

Financial Highlights

 

		Three months ended March 31,				Three months ended December 31,				Three months ended March 31,
		2022				2021				2021
Revenue by channel
eCommerce		$	1,081,360			$	3,340,107			$	2,185,095
Wholesale			772,919				781,363				345,905
Butcher Shop, Restaurant and Other			164,065				177,452				112,083
		$	2,018,344			$	4,298,922			$	2,643,083
Net loss		$	(8,362,309	)		$	(13,330,908	)		$	(15,028,576	)
Adjusted EBITDA net loss(1)		$	(8,462,899	)		$	(5,014,266	)		$	(5,391,936	)
Loss per share – basic and diluted		$	(0.07	)		$	(0.12	)		$	(0.15	)
Weighted average number of shares outstanding – basic and diluted			118,503,242				115,381,279				97,156,969

 

(1)	See “Non-IFRS Financial Measures” starting on page 13 for more information on non-IFRS financial measures and reconciliations thereof to the nearest comparable measures under IFRS.

Condensed Interim Consolidated Statements of Net Loss and Comprehensive Loss

(Expressed in Canadian dollars, unaudited)

 

Three months ended		Notes				March 31, 2022				March 31, 2021
Revenue						$	2,018,344			$	2,643,083
Procurement expense			7, 8, 21				(2,661,683	)			(2,108,963	)
Fulfilment expense			7, 8, 21				(1,917,816	)			(1,420,827	)
General and administrative expense			7, 8, 21				(3,633,691	)			(10,522,987	)
Marketing and investor relations expense			21				(1,578,394	)			(1,746,318	)
Research and development expense			7, 8, 21				(564,518	)			(366,020	)
Pre-production expense			21				(244,450	)			(842,483	)
Operating loss							(8,582,208	)			(14,364,515	)
Finance expense			17				(1,288,864	)			(357,030	)
Other expense			18				(20,230	)			(307,031	)
Change in fair value of derivative liabilities			13				1,528,993				—
Net loss							(8,362,309	)			(15,028,576	)
Foreign currency translation gain							46,522				4,474
Total comprehensive loss						$	(8,315,787	)		$	(15,024,102	)
Loss per share - basic and diluted						$	(0.07	)		$	(0.15	)
Weighted average number of shares outstanding - basic and diluted							118,503,242				97,156,969

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in Canadian dollars, unaudited)

 

		March 31, 2022				March 31, 2021
Operating activities
Net loss for the period		$	(8,362,309	)		$	(15,028,576	)
Adjustments for items not affecting cash:
Finance expense			1,288,864				361,750
Change in fair value of derivative liabilities			(1,528,993	)			—
Depreciation			615,385				329,484
Gain on termination of lease			(987	)			(1,361	)
Loss on disposal of equipment			—				19,882
Share-based compensation (recovery)			(2,003,852	)			8,774,009
Shares, units and warrants issued for services			—				152,876
Changes in non-cash working capital items
Accounts receivable			335,247				(426,174	)
Inventory			(2,011,317	)			(366,695	)
Prepaids and deposits			1,558,936				(243,502	)
Accounts payable and accrued liabilities			(2,247,742	)			1,760,552
Deferred revenue			(23,306	)			(8,888	)
Net cash and cash equivalents used in operating activities			(12,380,074	)			(4,676,643	)
Investing activities
Cash paid for acquisitions, net of cash acquired			—				(1,240,694	)
Purchase of property and equipment			(1,460,795	)			(2,060,906	)
Security deposits paid for property and equipment			(405,290	)			(1,921,344	)
Acquisition of right-of-use assets			(308,934	)			(29,408	)
Repayment received from loans to related parties			942				—
Net cash and cash equivalents used in investing activities			(2,174,077	)			(5,252,352	)
Financing activities
Proceeds from the exercise of warrants			—				2,152,484
Proceeds from the exercise of stock options			5,000				55,875
Proceeds from loans payable			31,738				—
Repayment of loans payable and other liabilities			(364,302	)			—
Payments of lease liabilities			(649,634	)			(143,961	)
Interest paid			(119,144	)			—
Net cash and cash equivalents (used in) provided by financing activities			(1,096,342	)			2,064,398
Effects of exchange rate changes on cash and cash equivalents			57,545				992
Decrease in cash and cash equivalents			(15,592,948	)			(7,863,605	)
Cash and cash equivalents, beginning of period			21,975,653				25,084,083
Cash and cash equivalents, end of period		$	6,382,705			$	17,220,478
Cash and cash equivalents consist of:
Cash		$	6,282,705			$	16,155,478
Redeemable guaranteed investment certificate (“GIC”)			—				1,000,000
Restricted redeemable GIC			100,000				65,000
Total cash and cash equivalents		$	6,382,705			$	17,220,478
Supplemental cash flow information (Note 19)

The accompanying notes are an integral part of these condensed interim consolidated financial statements

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, 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 March 31,				Three months ended December 31,				Three months ended March 31,
		2022				2021				2021
Net loss as reported		$	(8,362,309	)		$	(13,330,908	)		$	(15,028,576	)
Adjustments:
Depreciation			615,385				480,272				329,484
Impairment of goodwill			—				3,479,535				—
Loss on disposal of equipment			—				—				19,882
Gain on termination of lease			(987	)			—				(1,361	)
Finance expense			1,288,864				1,157,411				361,750
Share-based compensation (recovery)			(2,003,852	)			3,199,424				8,774,009
Shares, units and warrants issued for services			—				—				152,876
Adjusted EBITDA		$	(8,462,899	)		$	(5,014,266	)		$	(5,391,936	)

During the three months ended March 31, 2022, the Company terminated 2 lease agreements and recognized a $987 gain on termination of lease. During the three months ended March 31, 2021, the Company terminated 1 lease agreement and recognized a $1,361 gain on termination of lease.

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 March 31,				Three months ended December 31,				Three months ended March 31,
		2022				2021				2021
General and administrative expense		$	(3,637,737	)		$	(8,630,775	)		$	(10,522,987	)
Adjustments:
Share-based compensation (recovery)			(2,057,012	)			2,808,617				8,067,970
Depreciation			89,084				80,821				32,762
Adjusted general and administrative expense		$	(5,605,666	)		$	(5,741,337	)		$	(2,422,255	)

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, 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

Matthew Hall

Interim Chief Executive Officer

For further information, please contact:

Apollo Relations

Email: invest@verygoodbutchers.com

Phone: +1 855-472-9841

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 evaluation of methods for improving employee retention and the results of such evaluation; the Company’s ability to meet its future operating expenses and finance our operational, capital expenditure and debt service requirements for approximately the next 30 days;;; the Company’s ability to secure financing sufficient to meet its obligations within the next 30 days and subsequent further financings as required; 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 financings 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. Moreover, as disclosed in Note 1 of the Company’s condensed interim consolidated financial statements, there are material uncertainties related to events and conditions that may cast significant doubt upon the Company’s ability to raise funds and continue as a going concern. 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.

Exhibit 99.2

Notice of No Auditor Review of Condensed Interim Consolidated Financial Statements

The condensed interim consolidated financial statements of The Very Good Food Company Inc. comprising the accompanying condensed interim consolidated statements of financial position as at March 31, 2022, and 2021, and the condensed interim consolidated statements of net loss and comprehensive loss, changes in equity and cash flows for the periods then ended are the responsibility of the Company’s management. These financial statements have not been reviewed on behalf of the shareholders by the independent external auditors of the Company. The condensed interim consolidated financial statements have been prepared by management and include the selection of appropriate accounting principles, judgments and estimates necessary to prepare these condensed interim consolidated financial statements in accordance with International Financial Reporting Standards.

 

1

The Very Good Food Company  |   Condensed interim consolidated financial statements

For the Three Months Ended March 31, 2022 and 2021

(Unaudited)

Condensed Interim Consolidated Statements of Financial Position

(Expressed in Canadian dollars, unaudited)

 

As at		Notes		March 31, 2022				December 31, 2021
Assets
Current assets
Cash and cash equivalents				$	6,382,705			$	21,975,653
Accounts receivable		4			1,775,699				2,101,842
Inventory		5			10,722,308				8,474,255
Prepaids and deposits		6			6,849,188				8,640,286
Loan to related party		12			409,326				410,268
Total current assets					26,139,226				41,602,304
Right-of-use assets		7			17,794,773				16,659,502
Property and equipment		8			17,512,636				15,450,608
Prepaids and deposits		6			702,142				707,110
Deferred financing costs		11			3,156,816				3,924,743
Total assets				$	65,305,593			$	78,344,267
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities		9		$	6,505,933			$	8,109,161
Deferred revenue					8,831				32,137
Current portion of lease liabilities		10			1,211,299				849,935
Current portion of loans payable and other liabilities		11			1,578,698				1,947,642
Contingent considerations		20			1,048,000				1,048,000
Derivative liabilities		13			2,413,009				3,942,002
Total current liabilities					12,765,770				15,928,877
Lease liabilities		10			17,254,061				16,764,458
Loans payable and other liabilities		11			5,424,074				5,474,605
Total liabilities					35,443,905				38,167,940
Shareholders’ equity
Share capital		14			84,753,280				84,751,366
Equity reserve					24,714,531				26,719,047
Subscription received and receivable					—				(3,750	)
Accumulated other comprehensive income (loss)					33,806				(12,716	)
Deficit					(79,639,929	)			(71,277,620	)
Total shareholders’ equity					29,861,688				40,176,327
Total liabilities and shareholders’ equity				$	65,305,593			$	78,344,267
Nature of operations and going concern uncertainty (Note 1)
Commitments (Notes 10 and 23)
Subsequent events (Note 25)

Approved and authorized for issue by Board of Directors on May 16, 2022

 

/s/ Bill Tolany						/s/ Justin Steinbach
						Director

The accompanying notes are an integral part of these condensed interim consolidated financial statements

 

2

The Very Good Food Company  |  Condensed interim consolidated financial statements

For the Three Months Ended March 31, 2022 and 2021

(Unaudited)

 

Condensed Interim Consolidated Statements of Net Loss and Comprehensive Loss

(Expressed in Canadian dollars, unaudited)

 

Three months ended		Notes		March 31, 2022				March 31, 2021
Revenue				$	2,018,344			$	2,643,083
Procurement expense		7, 8, 21			(2,661,683	)			(2,108,963	)
Fulfilment expense		7, 8, 21			(1,917,816	)			(1,420,827	)
General and administrative expense		7, 8, 21			(3,633,691	)			(10,522,987	)
Marketing and investor relations expense		21			(1,578,394	)			(1,746,318	)
Research and development expense		7, 8, 21			(564,518	)			(366,020	)
Pre-production expense		21			(244,450	)			(842,483	)
Operating loss					(8,582,208	)			(14,364,515	)
Finance expense		17			(1,288,864	)			(357,030	)
Other expense		18			(20,230	)			(307,031	)
Change in fair value of derivative liabilities		13			1,528,993				—
Net loss					(8,362,309	)			(15,028,576	)
Foreign currency translation gain					46,522				4,474
Total comprehensive loss				$	(8,315,787	)		$	(15,024,102	)
Loss per share - basic and diluted				$	(0.07	)		$	(0.15	)
Weighted average number of shares outstanding - basic and diluted					118,503,242				97,156,969

The accompanying notes are an integral part of these condensed interim consolidated financial statements

 

3

The Very Good Food Company  |  Condensed interim consolidated financial statements

For the Three Months Ended March 31, 2022 and 2021

(Unaudited)

 

Consolidated Statements of Changes in Equity

(Expressed in Canadian dollars except share amounts)

 

		Number of common shares				Share capital				Equity reserves				Subscriptions received and receivable				Accumulated other comprehensive (loss) income				Deficit				Total shareholders’ equity
Balance at January 1, 2021			96,640,432			$	39,335,150			$	5,009,980			$	8,250			$	6,660			$	(16,717,697	)		$	27,642,343
Issuance of common shares pursuant to the exercise of stock options			99,167				209,118				(159,493	)			6,250				—				—				55,875
Issuance of common shares and units pursuant to the exercise of warrants			609,050				3,859,839				(1,692,855	)			(14,500	)			—				—				2,152,484
Issuance of common shares for services			25,818				152,876				—				—				—				—				152,876
Issuance of common shares for acquisitions			202,005				1,156,437				—				—				—				—				1,156,437
Share-based compensation			—				—				8,774,009				—				—				—				8,774,009
Foreign currency translation loss			—				—				—				—				4,474				—				4,474
Net loss for the period			—				—				—				—				—				(15,028,576	)			(15,028,576	)
Balance at March 31, 2021			97,576,472			$	44,713,420			$	11,931,641			$	—			$	11,134			$	(31,746,273	)		$	24,909,922
Balance at January 1, 2022			118,498,464			$	84,751,366			$	26,719,047			$	(3,750	)		$	(12,716	)		$	(71,277,620	)		$	40,176,327
Issuance of common shares pursuant to the exercise of stock options			5,000				1,914				(664	)			3,750				—				—				5,000
Share-based compensation recovery			—				—				(2,003,852	)			—				—				—				(2,003,852	)
Foreign currency translation gain			—				—				—				—				46,522				—				46,522
Net loss for the period			—				—				—				—				—				(8,362,309	)			(8,362,309	)
Balance at March 31, 2022			118,503,464			$	84,753,280			$	24,714,531			$	—			$	33,806			$	(79,639,929	)		$	29,861,688

The accompanying notes are an integral part of these condensed interim consolidated financial statements

 

4

The Very Good Food Company  |  Condensed interim consolidated financial statements

For the Three Months Ended March 31, 2022 and 2021

(Unaudited)

 

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in Canadian dollars, unaudited)

 

		March 31, 2022				March 31, 2021
Operating activities
Net loss for the period		$	(8,362,309	)		$	(15,028,576	)
Adjustments for items not affecting cash:
Finance expense			1,288,864				361,750
Change in fair value of derivative liabilities			(1,528,993	)			—
Depreciation			615,385				329,484
Gain on termination of lease			(987	)			(1,361	)
Loss on disposal of equipment			—				19,882
Share-based compensation (recovery)			(2,003,852	)			8,774,009
Shares, units and warrants issued for services			—				152,876
Changes in non-cash working capital items
Accounts receivable			335,247				(426,174	)
Inventory			(2,011,317	)			(366,695	)
Prepaids and deposits			1,558,936				(243,502	)
Accounts payable and accrued liabilities			(2,247,742	)			1,760,552
Deferred revenue			(23,306	)			(8,888	)
Net cash and cash equivalents used in operating activities			(12,380,074	)			(4,676,643	)
Investing activities
Cash paid for acquisitions, net of cash acquired			—				(1,240,694	)
Purchase of property and equipment			(1,460,795	)			(2,060,906	)
Security deposits paid for property and equipment			(405,290	)			(1,921,344	)
Acquisition of right-of-use assets			(308,934	)			(29,408	)
Repayment received from loans to related parties			942				—
Net cash and cash equivalents used in investing activities			(2,174,077	)			(5,252,352	)
Financing activities
Proceeds from the exercise of warrants			—				2,152,484
Proceeds from the exercise of stock options			5,000				55,875
Proceeds from loans payable			31,738				—
Repayment of loans payable and other liabilities			(364,302	)			—
Payments of lease liabilities			(649,634	)			(143,961	)
Interest paid			(119,144	)			—
Net cash and cash equivalents (used in) provided by financing activities			(1,096,342	)			2,064,398
Effects of exchange rate changes on cash and cash equivalents			57,545				992
Decrease in cash and cash equivalents			(15,592,948	)			(7,863,605	)
Cash and cash equivalents, beginning of period			21,975,653				25,084,083
Cash and cash equivalents, end of period		$	6,382,705			$	17,220,478
Cash and cash equivalents consist of:
Cash		$	6,282,705			$	16,155,478
Redeemable guaranteed investment certificate (“GIC”)			—				1,000,000
Restricted redeemable GIC			100,000				65,000
Total cash and cash equivalents		$	6,382,705			$	17,220,478

Supplemental cash flow information (Note 19)

The accompanying notes are an integral part of these condensed interim consolidated financial statements

 

5

The Very Good Food Company  |  Condensed interim consolidated financial statements

For the Three Months Ended March 31, 2022 and 2021

(Unaudited)

 

1.	Nature of operations and going concern uncertainty

The Very Good Food Company Inc. (the “Company”) was incorporated on December 27, 2016, under the laws of the province of British Columbia, Canada. The Company is an emerging plant-based food technology company that designs, develops, produces, distributes, and sells a variety of plant-based meats and other food alternatives. To date, the Company has developed a core product line under The Very Good Butchers brand. The Company changed its name from The Very Good Butchers Inc. to The Very Good Food Company Inc. on October 1, 2019.

Effective June 18, 2020, the Company’s common shares commenced trading on the Canadian Securities Exchange (the “CSE”) under the symbol “VERY”. Effective July 27, 2020, the Company’s shares commenced trading on the Frankfurt Stock Exchange under the symbol “0SI”. Effective October 14, 2020, the Company’s shares commenced trading on the OTC QB Market under the symbol “VRYYF”. Effective March 17, 2021, the Company’s shares commenced trading on the TSX Venture Exchange. The Company ceased trading on the CSE on March 16, 2021. Effective October 13, 2021, the Company’s common shares commenced trading on the Nasdaq Capital Market under the symbol “VGFC”.

The Company’s registered and records office are located at 800 – 885 West Georgia Street, Vancouver, British Columbia, BC V6C 3H1.

These condensed interim consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes that the Company will be able to realize its assets and satisfy its liabilities in the normal course of business for the foreseeable future. For the three-month period ended March 31, 2022, the Company generated a net loss of $8,362,309 (2021—$15,028,576) and negative cash flows from operations of $12,380,074 (2021—$4,676,643).

The Company has incurred losses since the inception and expects to incur further losses in the development of its business. Whether and when the Company can generate sufficient operating cash flows to pay for its expenditures and settle its obligations as they fall due is uncertain. The Company’s ability to continue as a going concern is dependent on its ability to manage costs, raise additional equity or debt on reasonable terms, and/or to commence profitable operations in the future. while the Company has been successful in the past in obtaining debt and equity financings, there is no assurance that the Company will be able to do so going forward. The existence of these conditions indicate that there are material uncertainties which may cast significant doubt on the Company’s ability to continue as a going concern. Management believes that it will need to seek additional financing within the next 30 days in order to fulfil its outstanding obligations and fund ongoing operations. While there may be uncertainty on the success of the Company’s future financings, the Company believes it is able to raise capital through financing in the near term to support its new refocused strategy.

These condensed interim consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and statement of financial position classifications that would be necessary were the going concern assumption inappropriate. These adjustments could be material.

Covid-19 Estimation Uncertainty

On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) a global pandemic. This has resulted in governments worldwide, including the Canadian government, to enact emergency measures to combat the spread of the virus. These measures, which include social distancing, the implementation of travel bans, and closures of non-essential businesses, have caused material disruption to businesses globally, resulting in an economic slowdown. As at March 31, 2022, the Company has not observed any material impairments of our assets or a significant change in the fair value of assets due to the COVID-19 pandemic.

The situation is dynamic and the ultimate duration and magnitude of the impact of COVID-19 on the economy and the financial effect on our business, financial position and operating results remain unknown at this time. These impacts could include the ability of the Company to raise capital, the impairment in the value of our long-lived assets, or potential future decreases in revenue or the profitability of our ongoing and future operations. The Company is closely monitoring the impact of the pandemic on all aspects of its business.

 

6

The Very Good Food Company  |  Condensed interim consolidated financial statements

For the Three Months Ended March 31, 2022 and 2021

(Unaudited)

 

2.	Basis of presentation and measurement

Statement of compliance

These condensed interim consolidated financial statements have been prepared in conformity with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, using the same accounting policies as detailed in the Company’s annual audited consolidated financial statements for the year ended December 31, 2021. These condensed financial statements do not include all the information required for full annual financial statements in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). These condensed interim consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements.

These condensed interim consolidated financial statements of the Company were authorized for issue by the Board of Directors on May 16, 2022.

Basis of presentation

These condensed interim consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: The Very Good Butchers Inc., 1218169 B.C. Ltd., 1218158 B.C. Ltd., The Cultured Nut Inc., and Lloyd-James Marketing Group Inc., companies incorporated in the province of British Columbia, Canada, and VGFC Holdings LLC, a company incorporated in the state of Delaware, U.S.A.

The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences. Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. All inter-company balances and transactions have been eliminated on consolidation.

These condensed interim consolidated financial statements have been prepared on an accrual basis and are based on historical costs. The presentation and functional currency of the Company is the Canadian dollar. In the opinion of the Company’s management, all adjustments considered necessary for a fair presentation of the financial statements have been included.

The Company structures its condensed interim consolidated statements of net loss and comprehensive loss on a functional basis..

Critical accounting estimates and judgements

The preparation of these condensed interim consolidated financial statements in accordance with IFRS requires the Company to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities and contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period. The Company’s management reviews these judgments, estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised. Actual results may differ from these judgements, estimates and assumptions.

 

7

The Very Good Food Company  |  Condensed interim consolidated financial statements

For the Three Months Ended March 31, 2022 and 2021

(Unaudited)

 

2.	Basis of presentation and measurement (continued)

 

Information on significant areas of judgement that have the most significant effect on the amounts recognized in the condensed interim consolidated financial statements relate to the following:

The determination of the ability of the Company to continue as a going concern is a key area of judgment applied in the preparation of the condensed interim consolidated financial statements as discussed above in note 1. Amortization of right-of-use assets and property and equipment are dependent upon the estimated useful lives, which are determined through the exercise of judgment. The assessment of any indicators of impairment of these assets is dependent upon judgments that take into account factors such as economic and market conditions and the useful lives of assets.

Information on significant areas of uncertainty and critical estimates in applying accounting policies that have the most significant effect on the amounts recognized in the condensed interim consolidated financial statements relate to the following:

Share-based compensation

The Company utilizes the Black-Scholes Option Pricing Model (“Black-Scholes”) to estimate the fair value of stock options and warrants granted to directors, officers, employees and service providers and to determine the fair value of its warrant derivative liability. The use of Black-Scholes requires management to make various estimates and assumptions that impact the value assigned to the stock options including the forecast future volatility of the stock price, the risk-free interest rate, dividend yield and the expected life of the stock options. Any changes in these assumptions could have a material impact on the share-based compensation calculation value. See also note 13 and 16.

Carrying value of inventory

The Company records valuation adjustments for inventory by comparing the inventory cost to its net realizable value. The process requires the use of estimates and assumptions related to future market demand, costs and prices. Such assumptions are reviewed periodically and may have a significant impact on the valuation adjustments for inventory.

Contingent consideration

Contingent consideration arising from a business combination that is classified as a liability is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

Impairment

The Company assesses impairment of non-financial assets such as right-of-use assets, and property and equipment.

At each reporting period, the Company reviews whether there are indicators that the recoverable amount of long-lived assets may be less than their carrying amount.

 

8

The Very Good Food Company  |  Condensed interim consolidated financial statements

For the Three Months Ended March 31, 2022 and 2021

(Unaudited)

 

2.	Basis of presentation and measurement (continued)

 

Long-lived assets are reviewed for impairment by estimating the recoverable amount of each cash generating unit (“CGU”) or groups of CGUs to which the long-lived assets relate. Management estimates the recoverable amount of the CGUs based on the higher of value-in-use (“VIU”) and fair value less costs of disposal (“FVLCD”). The VIU calculations are based on the present value of expected future cash flows. When measuring expected future cash flows, management makes key assumptions about future growth of profits which relate to future events and circumstances. Estimation uncertainty relates to assumptions about future operating results and the application of an appropriate discount rate. Actual results could vary from these estimates which may cause significant adjustments to the Company’s long-lived assets in subsequent reporting periods.

Leases

The lease liability and right-of-use asset valuation is based on the present value of the lease payments over the lease term. The lease term is determined as the non-cancellable term of the lease, which may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company applies judgment in evaluating whether it is reasonably certain whether or not to exercise the option to extend or terminate the lease, and any modifications to the lease term will result in the revaluation of the lease. The present value of the lease payments is dependent on the Company’s estimate of its incremental borrowing rates.

 

3.	Future accounting pronouncements

The following IFRS standards have been recently issued by the IASB. Pronouncements that are irrelevant or not expected to have a significant impact have been excluded.

Amendments to IAS 1: Classification of Liabilities as Current or Non-Current

The amendment clarifies the requirements relating to determining if a liability should be presented as current or non-current in the statement of financial position. Under the new requirement, the assessment of whether a liability is presented as current or non-current is based on the contractual arrangements in place as at the reporting date and does not impact the amount tor timing of recognition. The amendment applies retrospectively for annual reporting periods beginning on or after January 1, 2023. The Company is currently evaluating the potential impact of this amendment on the Company’s condensed interim consolidated financial statements.

 

4.	Accounts receivable

 

		As at March 31, 2022				As at December 31, 2021
GST receivable		$	1,130,717			$	1,588,641
Trade accounts receivable			630,543				337,247
Accrued interest receivable			14,439				5,394
Other receivables			—				170,560
		$	1,775,699			$	2,101,842

Trade accounts receivable is recorded net of an allowance for doubtful accounts of $146,044 (December 31, 2021—$41,350).

 

9

The Very Good Food Company  |  Condensed interim consolidated financial statements

For the Three Months Ended March 31, 2022 and 2021

(Unaudited)

 

5.

Inventory

Inventory consisted primarily of raw materials, packaging and restaurant supplies and finished goods which were either at the retail location, warehouses, storage space or held with third party distributors.

 

		As at March 31, 2022				As at December 31, 2021
Raw materials		$	4,304,185			$	3,446,596
Packaging and restaurant supplies			1,436,451				1,282,278
Finished goods			4,981,672				3,745,381
		$	10,722,308			$	8,474,255

During the three months ended March 31, 2022, a total of $166,184 (2021—$12,649) of depreciation expense related to property and equipment and $70,552 (2021—$7,668) related to right-of-use assets used in production was added to finished goods inventory.

 

6.	Prepaids and deposits

 

		As at March 31, 2022				As at December 31, 2021
Prepaid expenses		$	4,057,424			$	5,234,416
Security deposits			2,738,569				3,345,611
Lease deposits (Notes 10 and 23)			755,337				767,369
			7,551,330				9,347,396
Less: current portion of prepaids and deposits			(6,849,188	)			(8,640,286	)
		$	702,142			$	707,110

 

7.	Right-of-use assets

 

		Right-of-use building				Right-of-use equipment				Right-of-use vehicle				Total
Cost
Balance, December 31, 2021		$	16,332,489			$	1,938,163			$	33,157			$	18,303,809
Additions			—				1,573,499				—				1,573,499
Termination of lease			—				(115,440	)			—				(115,440	)
Foreign exchange translation adjustment			(36,199	)			—				—				(36,199	)
Balance, March 31, 2022		$	16,296,290			$	3,396,222			$	33,157			$	19,725,669
Accumulated Depreciation
Balance, December 31, 2021		$	(1,471,639	)		$	(162,041	)		$	(10,627	)		$	(1,644,307	)
Depreciation			(290,267	)			(51,793	)			(2,551	)			(344,611	)
Termination of leases			—				54,306				—				54,306
Foreign exchange translation adjustment			3,716				—				—				3,716
Balance, March 31, 2022		$	(1,758,190	)		$	(159,528	)		$	(13,178	)		$	(1,930,896	)
Carrying amounts
Balance, December 31, 2021		$	14,860,850			$	1,776,122			$	22,530			$	16,659,502
Balance, March 31, 2022		$	14,538,100			$	3,236,694			$	19,979			$	17,794,773

The additions in right-of-use assets (equipment) during the three months ended March 31, 2022, are primarily related to the Rupert Facility and Patterson Facility.

 

10

The Very Good Food Company  |  Condensed interim consolidated financial statements

For the Three Months Ended March 31, 2022 and 2021

(Unaudited)

 

7.	Right-of-use assets (continued)

Depreciation of right-of-use assets included in the condensed interim consolidated financial statements is split as follows:

 

		As at March 31,
		2022				2021
Consolidated statements of financial position
Included in inventory		$	70,552			$	7,668

 

		Three month period ended March 31,
		2022				2020
Consolidated statements of net loss and comprehensive loss
Included in procurement expense		$	133,646			$	27,828
Included in fulfilment expense			61,407				14,600
Included in general and administrative expense			30,638				2,583
Included in pre-production expense			48,368				179,882
		$	274,059			$	224,893

 

8.	Property and equipment

 

		Restaurant, production, and R&D equipment				Furniture and fixtures				Computer equipment and software				Leasehold improvements				Vehicle				Total
Cost
At December 31, 2021		$	10,210,651			$	693,801			$	511,526			$	5,116,346			$	241,773			$	16,774,097
Additions			1,878,309				48,201				22,991				699,462				6,634				2,655,597
Disposals			(113,177	)			—				—				—								(113,177	)
Foreign exchange translation adjustment			(8,025	)			(335	)			(220	)			(5,915	)			(1,037	)			(15,532	)
At March 31, 2022		$	11,967,758			$	741,667			$	534,297			$	5,809,893			$	247,370			$	19,300,985
Accumulated depreciation
At December 31, 2021		$	(423,325	)		$	(84,559	)		$	(366,804	)		$	(410,156	)		$	(38,645	)		$	(1,323,489	)
Depreciation			(196,622	)			(37,421	)			(82,896	)			(180,034	)			(10,537	)			(507,510	)
Disposals			41,581				—				—				—				—				41,581
Foreign exchange translation adjustment			624				55				83				252				55				1,069
At March 31, 2022		$	(577,742	)		$	(121,925	)		$	(449,617	)		$	(589,938	)		$	(49,127	)		$	(1,788,349	)
Net book value
At December 31, 2021		$	9,787,326			$	609,242			$	144,722			$	4,706,190			$	203,128			$	15,450,608
At March 31, 2022		$	11,390,016			$	619,742			$	84,680			$	5,219,955			$	198,243			$	17,512,636

As at March 31, 2022, a total of $1,954,206 (December 31, 2021—$4,492,196) of production equipment, $86,454 (December 31, 2021—$264,060) of leasehold improvements and $nil (December 31, 2021—$78,497) of vehicle was related to property and equipment under construction, and no depreciation has been recognized. The Company will begin recognizing depreciation once the underlying assets are ready for their intended use.

 

11

The Very Good Food Company  |  Condensed interim consolidated financial statements

For the Three Months Ended March 31, 2022 and 2021

(Unaudited)

 

8.	Property and equipment (continued)

 

Depreciation of property and equipment included in the condensed interim consolidated financial statements is split as follows:

 

		As at March 31,
		2022				2021
Consolidated statements of financial position
Included in inventory		$	166,184			$	12,649

 

		Three months ended March 31,
		2022				2021
Consolidated statements of net loss and comprehensive loss
Included in procurement expense		$	247,477			$	44,312
Included in fulfilment expense			9,872				945
Included in general and administrative expense			58,446				30,179
Included in research and development expense			2,384				1,020
Included in pre-production expense			23,147				28,135
		$	341,326			$	104,591

 

9.	Accounts payables and accrued liabilities

 

		As at March 31, 2022				As at December 31, 2021
Accounts payable		$	4,769,627			$	5,077,613
Accrued liabilities			1,736,306				3,031,548
		$	6,505,933			$	8,109,161

 

12