Genufood's Kodiak Agreement Paves The Way To Commercialization
The global enzymes market is expected to grow at a 6.8% compound
annual growth rate ("CAGR") to reach $8 billion in size by 2015,
according to the
Freedonia Group.
Genufood Energy Enzymes Corp. (OTCBB: GFOO) aims to capitalize on the
growing market for these products in the Asian-Pacific region. With
many chronic, hereditary diseases and functional imbalances caused by
deficiency of certain enzymes, the company’s products fill a key void in
the market with products that are produced from natural fruit and
vegetable extracts and available to target a wide number of conditions,
as seen in Figure 1 below.
Image: http://theotcinvestor.com/wp-content/uploads/2013/09/GFOO-IMG1-09242013.png
Figure 1 – Genufood Products Overview – Source: S-1 Filing
Kodiak Provides $3 Million in Capital
On August 27th, Genufood announced that it entered into a
$3 million common stock purchase agreement with Kodiak Capital Group
LLC, middle market private equity fund. According to its CrunchBase profile,
Kodiak was founded in 2009 and has already transacted more than $300
million in financing across a number of different industries, including
biotechnology, business services, renewable energy, medical devices, and
natural resources.
Under the terms of the agreement, Kodiak agreed to purchase up to $3
million worth of common stock at a modest 20% discount to the 5-day
volume weighted average market price, while the company filed an S-1 registration statement
to issue 3.5 million new shares. The private equity firm is effectively
agreeing to value the company at over $110 million, even after the 20%
discount, marking a strong vote of confidence in management's ability to
execute.
According to Colin Manners, Director of Kodiak, in the company's press release
announcing the $3 million financing agreement, "Oliver and his team
have built an innovative product in the nutraceutical industry. We look
forward to bringing Genufood our experience in supporting successful
Asian-Pacific entrepreneurs and are delighted to be part of the next
important stage of global expansion for their human and animal enzyme
products."
Click here to register for free email updates on GFOO's progress: http://www.tdmfinancial.com/emailassets/gfoo/gfoo_landing.php
Executing a 12-Month Business Strategy
Genufood will use the proceeds from the $3 million agreement to
successfully commence full operations over the next 12 months. While the
company has reported minimal revenues to date, key agreements are
already in place with manufacturers of its enzyme products and
sufficient cash resources are available to begin operations with an
initial focus on the Asian-Pacific region and its first retail location
in Singapore, according to its S-1 filing with the SEC.
On July 24, 2013, the company announced
that it opened its first retail store in the Suntec City Mall in
Singapore to complement its existing distribution network and create
brand awareness for its GEEC ProCellax and ProAnilax enzyme supplements
in the market. Management plans to open ten total GEEC Retail Chain
Stores in Singapore where its products have been approved for
distribution. Plans are also underway to start marketing in Taiwan and
Sri Lanka.
Over the coming months, investors can expect to begin seeing sales
from these retail locations appear in the company's financial
statements. The modest $225,556 in operating expenses and $107,686 in
revenues reported in last quarter's 10-Q filing suggests that relatively
modest retail sales would be required to bring it to a key breakeven
point, especially given its high margin products and relatively low
overhead costs (other than inventory) to date.
Potential Investment Opportunity
From an investor standpoint, Genufood has raised the capital it needs
to ramp up its commercial operations over the next 12 months, which
means there's limited additional dilution required. The $3 million
common stock commitment from Kodiak also provides investors with a
strong vote of confidence in management’s ability to execute and a
cushion for the future. And finally, the company has already begun
executing on its planned expansion and commercialization.
Investors willing to assume the risks associated with micro-cap
stocks may want to take a closer look given these developments. In
particular, investors in the nutraceutical space, including companies
like Nutracuetical International Corp. (NASDAQ: NUTR) or USANA Health
Sciences Inc. (NYSE: USNA), may have a particular interest in this
smaller firm with the potential for higher growth rates than many of its
more established blue-chip peers.
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