Embattled company Oliver's Real Food (ASX: OLI) will seek to raise up to $5 million to stay in business, within weeks of a suspension from trading on the ASX as the market regulator felt its finances were not up to scratch.
The health food outfit, which last year reached a master franchise deal for branded concessions across EG Group's service stations, saw its revenues tumble in the December half although it reduced its loss thanks to support from JobKeeper.
Just last week its founder and then chairman Jason Gunn resigned along with his wife and former director Amanda Gunn. A renewed board backed by Gelba Pty Ltd and the Gregg family is now having its own crack at turning Oliver's around.
In what appears to be the renewed board's first major step to execute their vision, Oliver's has announced plans to raise between $3.5 million and $5 million funds at $0.03 per share, representing more than a 50 per cent discount to the last trades in February.
For the time being, this slashes an already dwindled stake for the Gunns down to $1.18 million.
Oliver's says it already has binding commitments for a $2.5 million placement to fund working capital and the expected investment required to take advantage of opportunities as Australia emerges from a period of reduced business activity due to COVID-induced travel restrictions.
The placement will comprise a two-tranche issue with the first being worth $1.2 million, while the second $1.3 million tranche will need shareholder approval as it exeeds the company's existing placement capacity and the recipients are Gelba and another company associate Twenty Second Sepeld Pty Ltd.
Shareholders will be able to vote on the second tranche of the placement at an extraordinary general meeting to be held in May 2021
"In addition to the Placement, investors will be invited to participate in a Share Purchase Plan (SPP) for up to $30,000 per investor, at a price that will be determined by the Board and announced, either prior to or at the time the EGM notice is issued to shareholders," the company said.
"The SPP will be capped at $1.5 million, and investors may be subject to scale backs."
The reason Oliver's was suspended stemmed from a critical report from auditor Bishop Collins which noted the company was "critically dependent upon achieving a number of assumptions to continue as a going concern".
One of these assumptions was its ability to pay back a $5 million loan to PURE Asset Management, which has reached a deal with Oliver's to reduce its current cash covenants by $1 million, and will also be participating in the placement with around $600,000 in support.
The company claims the trading suspension came about as the group was finalising the arrangements announced today.
"The Board had been working with management on a series of measures to improve performance and raise capital for some weeks prior to the ASX action," Oliver's said.
"The Board continues to discuss with the ASX their concerns and hopes that this announcement will give them and all our stakeholders greater confidence in OLI's capacity to continue as a going concern."Never miss a news update, subscribe here. Follow us on LinkedIn, Instagram and Twitter.
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