Real Good Food Company, Inc. (NASDAQ:RGF), a Delaware-incorporated food and kindred products manufacturer, has announced significant corporate governance changes, including the issuance of preferred stock and amendments to its Certificate of Incorporation. The changes were filed with the Securities and Exchange Commission (SEC) on Monday, reflecting actions taken on November 12, 2024.
The company disclosed the creation and issuance of a new series of preferred stock, known as Series A Preferred Stock, as part of an agreement with Emblem Investments Fund I, LP.
The transaction involves 6,876,814 shares, equating to 19.99% of the voting interests in the company as of the date of the original agreement, September 20, 2024.
The issuance is part of a broader set of transactions that include a $60 million term loan from Emblem and the issuance of Class C Units in Real Good Foods, LLC, a subsidiary of the company.
The Series A Preferred Stock carries no dividend rights and has been given a liquidation preference over the common stock. Holders of the Series A Preferred Stock will not receive dividends, whether in cash or property, but will have one vote per share on matters submitted to a vote of common stockholders. The preferred stock is also senior to both classes of common stock in terms of liquidation preference.
Furthermore, the company's Certificate of Incorporation was amended and restated to accommodate the issuance of the preferred stock. These changes are detailed in the Certificate of Designation of Series A Preferred Stock and the Amended and Restated Certificate of Incorporation, both of which were filed as exhibits to the SEC report.
The agreement with Emblem also stipulates that upon approval by the company's stockholders, the Series A Preferred Stock will be canceled and replaced with Class B Common Stock, ensuring that Emblem will own 19.99% of the fully diluted voting non-economic interests in the company immediately after the issuance.
The SEC filing underscores Real Good Food Company's strategic financial maneuvers as it navigates its capital structure and governance. The company's actions reflect a significant modification to the rights of security holders and an adjustment to the company's corporate governance framework.
This report is based on a press release statement and provides a summary of the key events without speculation or subjective assessment. The information is intended to offer investors a clear understanding of the recent corporate changes at Real Good Food Company, Inc.
In other recent news, Real Good Food Company has announced a restatement of its financial statements for 2022 and the quarterly periods of 2023 due to errors in revenue recognition. This decision, made by the company's audit committee and board of directors, was disclosed in an 8-K filing with the Securities and Exchange Commission (SEC).
The restatement pertains to the incorrect accounting treatment of a specific sales agreement, leading to adjustments in the reported revenues, costs of sales, and accounts receivable for the mentioned periods.
In other developments, Real Good Food is also facing potential delisting from the Nasdaq Global Market due to non-compliance with the exchange's listing rules. The company has requested a hearing with an independent Hearings Panel to seek an extension to regain compliance.
On a positive note, the company has increased its borrowing capacity by amending its credit agreement with PMC Financial Services Group, raising the revolving credit facility from $42 million to $46 million. This move provides the company with increased financial flexibility.
Furthermore, the company has expanded its distribution in 4,000 Walmart (NYSE:WMT) stores nationwide with the introduction of its new Seasoned Chicken Breast Chunks, part of a broader strategy to grow its Frozen Proteins portfolio. Despite these challenges, Real Good Food continues to focus on its operational and strategic initiatives.
InvestingPro Insights
Real Good Food Company's recent corporate governance changes and financial maneuvers come at a time when the company faces significant market challenges. According to InvestingPro data, RGF's stock has experienced a substantial decline, with a 1-year price total return of -86.65% as of the latest available data. This downward trend is further emphasized by the stock's current price being only 12.45% of its 52-week high.
InvestingPro Tips highlight that RGF suffers from weak gross profit margins and is not expected to be profitable this year. These factors may have contributed to the company's decision to issue preferred stock and secure a $60 million term loan, as outlined in the article. The company's operating income margin stands at -25.27% for the last twelve months, underscoring the financial pressures it faces.
Given the context of RGF's recent corporate actions, investors might find value in exploring the additional 11 InvestingPro Tips available for a more comprehensive analysis of the company's financial health and market position.
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