Good Natured Products Inc (GDNP.V) produces and distributes one of North America's widest assortments of better everyday products® made from the highest possible percentage of renewable, plant-based materials and no BPAs, phthalates or other chemicals of concern potentially harmful to human health and the environment.
GDNP.V operates in two verticals: Food Packaging and Home & Office Products with over 130 SKUs. The company reports 120+ customers across 20 states & provinces ranging from large chains to small business retailers.
Coverage was initiated on November 2018 with notes on June 2019. and April 2020. Below is an update:
News Releases
Apr. 22 - Launches Biodegradable Cups, Cutlery and Containers for Restaurant Take-Out and Delivery. Added 22 BPI-certified compostable and biodegradable cups, bowls, take out containers, plates and cutlery to its assortment.
Apr. 26 - Beacon Securities Re-iterates Targets: 0.40 cents.
Apr. 28 - Announces Year Ended December 31, 2019 Audited Financial Results.
Apr. 29 - Announces BDC Financing and Update on the Acquisition of Shepherd Thermoforming & Packaging Inc. Entered into a Letter of Offer with Business Development Bank of Canada ("BDC") to provide financing for the previously announced acquisition of Shepherd Thermoforming & Packaging Inc.
Terms of BDC financing include a drawdown of approximately $1.7M USD under the GDNP.V's existing $5M USD M&A credit facility with BDC and a $6M CAD mortgage to support the acquisition of real estate as well as, conversion of $1 M CAD of GDNP.V’s existing long term credit facility into common shares of GDNP.V at $0.15 cents (Debt for Shares Transaction), and issuance of loan bonus shares (described in more detail below). The closing of the transaction is expected to be April 30, 2020 or soon thereafter in early May 2020 with an effective date of April 30, 2020.
GDNP.V also granted share-based incentive compensation to directors and officers of the Company: (i) Up to 1.03M common shares (ii) 1.05M restricted share units (“RSUs”) vesting over a period of 3 years exercisable at $0.15 per shares.
May 13 - Announces the Closing of Its Acquisition of Shepherd Thermoforming & Packaging Inc. Closed the acquisition of Shepherd Thermoforming & Packaging Inc. and all of its real estate for CAD$9.5 million.
GDNP.V also confirms completing the conversion of $1M CAD of its existing long term credit facility with BDC by issuing 6.66M shares to BDC at $0.15, and issued 3.0M Shares to BDC at $0.15 per Share as a loan bonus.
GDNP.V also announces that it has entered into a Sixth Supplemental Loan Agreement with Comerica Bank, the current senior lender to the Company, under which Comerica Bank will make available to the Company an additional $2.8 million CAD operating line of credit with interest at Prime Rate plus 0.5%, which is available for use upon the closing of the Company's acquisition of Shepherd. The line of credit will be used to fund ongoing growth for the Company and Shepherd through procurement of raw materials, production molds and new product inventories.
May 19 - Enters Medical & Pharmaceutical Industry to Support PPE Supply Chain: Supplying the medical and pharmaceutical industry with packaging for items; i.e. COVID-19 testing kits, and personal protective equipment.
Effective May 1, 2020, the Company acquired agreements to ship 47 different products to 17 customers in this segment with anticipated annualized sales in the range of CAD$1.3 to CAD$2.3M with gross margins of 35% to 45%.
May 26 - Quarterly Revenue for the Three Months Ended March 31, 2020 and New Member of Board of Directors.
June 11 - Issues Notification to Former Solegear Bioplastics Inc. Private Company Shareholders.
June 25 - Announces AGM Results.
June 30 - Appoints Bristol Capital for Investor Relations Services: Bristol will provide investor relations services with the objective of expanding awareness of the Company among buy and sell-side investor professionals.
July 8 -Announces $3.5M Brokered Private Placement Led by Integral Wealth Securities and Canaccord Genuity.
25M units at $0.14; Warrant $0.21 cents - Half a share. The net proceeds will be used to complete the repayment of the Company's outstanding convertible debentures issued on February 28th, 2018 and for general working capital purposes.
July 16 - Launches Plant-based Flexible Packaging Products: pallet stretch wrap made from 51% plant-based film.
GDNP.V has customized and sourced plant-based machine and hand pallet stretch wrap in a range of the most popular gauges for the North American market. These products are derived from rapidly renewable sugarcane and are chemically equivalent to conventional #4 LDPE to make the transition for businesses as seamless as possible.
“With our growing list of food producers and supply chain providers as customers, pallet stretch wrap is a natural addition to our product assortment that lets them extend their environmental commitment from the products they produce, to how they’re packaged and now all the way to how they’re shipped and stored” - GDNP.V's CEO.
Aug. 27 - Announces Quarterly Results for the Three and Six Months Ended June 30, 2020.
Sep. 1 - Announces $3.1 Million First Tranche Closing of Private Placement: In the First Tranche, the Company has issued 22,290,646 units (a "Unit") at a price of $0.14 per Unit. Expects to close the remainder by September 30, 2020.
Oct. 1 - Announces Redemption of Convertible Debentures & Final Closing of Private Placement: redeemed all remaining convertible debentures due February 28, 2022. Payment of $1.21M (inclusive of interest and principal) was issued at a redemption price of $1,050 per $1,000 principal amount of the Debentures.
Also announced the final closing of its brokered private placement announced on July 8, 2020, and a non-brokered for gross proceeds of $218,510.60. Total aggregate proceeds from the first and final tranche equaled $3.33M.
Oct. 6 - to Host Investor Webcast on October 14, 2020.
Oct. 13 - Announces Preliminary Results for the Three Months Ended September 30, 2020: Reported revenue for Q3 2020 is expected to be between $4.6 million to $4.7 million, an increase of 45% to 48% compared over last year. GDNP.V plans to release full Q3 2020 results in November 2020. GDNP.V has provided preliminary financial data for Q3 2020 to update investors in light of the continued macroeconomic uncertainty related to COVID.
Oct. 20 - Team Up to Deliver Plant-based Packaging with US-based Flax4Life: Flax4Life a certified gluten-free and allergy-friendly baked goods with nationwide US distribution (i.e. Whole Foods, Kroger and Publix), has made the switch to custom-designed GDNP.V's packaging made from renewable, plant-based materials.
"The switch to eco-friendly and renewable packaging reduces thousands of pounds of petroleum plastic in the environment, is a very proud and important change for our company." - General Manager at Flax4Life.
Summary
GDNP.V has been re-rated by the market in the last seven months. Going from a low of $0.105 cents all the way up to a recent multi-year high of $0.39 cents. Currently, valuation has settled above the range of exponential moving average.
Acquisition
In late April GDNP.V disclosed that Business Development Bank of Canada (BDC) was to provide financing for the previously announced acquisition of Shepherd Thermoforming & Packaging Inc. In addition to the existing $5M USD M&A credit facility with BDC, GDNP.V was granted a draw-down of approximately $1.7M USD along with $6M CAD mortgage to support the acquisition of real estate, as well as the conversion of $1 M CAD of GDNP.V’s existing long term credit facility into common shares of GDNP.V at $0.15 cents.
The last bit is rather unusual (i.e. Debt for shares with BDC). As it is understood, its speaks volume to the confidence that was placed of GDNP.V's valuation at the time. Upon closing the transaction (May 13th), GDNP.V issued 6.66M shares at $0.15 cents to BDC as well as, 3.0M shares at $0.15 per Share as a loan bonus!
At the time, GDNP.V also disclosed entering into a sixth supplemental Loan Agreement with Comerica Bank, under which Comerica Bank will make available an additional $2.8M CAD line of credit with interest at Prime Rate plus 0.5%,
The line of credit will be used to fund ongoing growth for the Company and Shepherd through procurement of raw materials, production molds and new product inventories.
Product Development
GDNP.V has continued to innovate with the launch of two timely products: a) In April, Biodegradable Cups, Cutlery and Containers for Restaurant Take-Out and Delivery. b) in July, Plant-based Flexible Packaging Products: pallet stretch wrap made from 51% plant-based film. Both these products address shift of the food service industry due to Covid-19, as well as, the overall trend away from single use plastic toward renewable forms of packaging.
Financing
in early July, GDNP.V announce the intent to raise $3.5M at $0.14 cents (Warrant $0.21 cents). The bulk of the amount was raised by the first tranche (Sep. 1, $3.1M). On October 1, GDNP.V closed the financing totaling of $3.33M with 20% insider participation. While Good Natured Products did not exceed its financing target it did announced that it had redeemed all remaining convertible debentures due February 28, 2022. GDNP.V paid, $1.2M to settle this.
Earnings
As depicted below, GDNP.V has increased its revenue for the past three quarters. In addition, Q1 and Q2 2020 are significantly better than last year. Despite reporting improved results valuation remained relatively muted. However, recent closing of the financing, investor webcast, and the delivery of the preliminary results for Q3 2020 resolved it.
Specifically, the announcement that Q3 2020 earnings were estimated to be in the $4.6M to $4.7M range was significant! Not only does it represents the highest quarterly revenue to date, it also means that GDNP.V had already eclipsed 2019 Year end revenue in three quarters which is a definite inflection point.
In April, Beacon re-iterated its $0.40 cents price target. To date, the 52 week high is $0.39 cents! While GDNP.V is settling in the low to mid-thirties cents, upcoming consumer, industry and governmental tailwinds are very strong. Should the company continue to execute as it has to date, its expected that a new price target might be in order.
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