Acquisition of Houston-based FormTex Plastics

July 04, 2022

July 4, 2022 — (Vancouver, BC) good natured Products Inc. (the “Company” or “good natured®”) (TSX-V: GDNP) (OTCQX: GDNPF), a North American leader in plant-based products, today announced that, through a wholly owned subsidiary, it has closed the acquisition of all the business and operating assets of Houston-based FormTex Plastics Corporation (“FormTex”) for cash consideration of approximately USD $4.8 million (the “Acquisition”). The Acquisition will be funded in cash from the Company’s treasury. The terms of the Acquisition were first announced in the Company’s news release dated May 4, 2022.

“We are very pleased to complete this Acquisition and welcome everyone at FormTex to the good natured® family,” said Paul Antoniadis, CEO of good natured®. “The addition of FormTex expands the scope and reach of our packaging business, in-line with the strategic direction we’ve communicated, and we believe there is material upside potential for revenue and profitability through capacity expansion, supply chain improvements and cost synergies previously disclosed.”

“We believe partnering with good natured® is a win-win scenario for our valued employees and customers,” said Mark Anselmo, co-owner of FormTex. “It is a very strong strategic fit, and we see the same path to much larger and more profitable operations leveraging greater access to capital and good natured®’s internally produced extruded rollstock capacity. This in turn will enable us to have a more significant positive environmental impact by producing more sustainable packaging solutions that the market is demanding.”

Founded in 1989, FormTex produces custom plastic packaging for the medical, food, electronic, industrial, and retail end markets. FormTex is ISO 9001:2015 certified in the design and manufacture of thermoplastic molded components and operates seven different thermoforming machines in a leased 51,000 square foot facility on 1.9 acres of land in Houston, Texas.

Key Highlights of the Acquisition:

FormTex generated unaudited revenue of approximately USD $4.9 million and adjusted EBITDA1 of approximately USD $0.6 million in the calendar year ended December 2021 (or “FY2021”).
FormTex generated unaudited revenue of USD $5.1 million for the trailing twelve months ended February 28, 2022.
FormTex generated an unaudited gross margin rate of approximately 42% in FY2021.
The Acquisition includes a minimum of USD $650,000 of net working capital as part of the purchase price.
The Acquisition adds 30 business-to-business (“B2B”) accounts to the Company’s active B2B customer base.
The current management team operating FormTex will be joining the good natured®
Highly strategic and synergistic acquisition that is expected to be immediately accretive to shareholders on an adjusted EBITDA
Expected to provide cost synergies of approximately USD $0.2 to $0.3 million in the twelve months following the close of the Acquisition.

Key Strategic Highlights:

Strategic access to Texas and the Southern US. Texas is the world’s 9^th largest and the United States’ 2^nd largest economy by GDP.
good natured® is expected to supply FormTex’s extruded rollstock sheet requirements from its Ex-Tech facility, which is expected to result in material positive financial synergies.
Significant potential to increase FormTex’s current capacity utilization rate of 40% through higher production uptime and add new capacity with additional thermoforming machines in the current facility footprint, and utilization of additional warehousing space.
FormTex’s proximity to one of the 10 largest outbound shipping endpoints in North America will significantly reduce shipping costs to the Company’s customers in the southern United States.
FormTex’s location provides direct access to the 6^th largest U.S. container port, creating a highly efficient port of entry for raw materials coming from Europe and South America.
good natured® will be able to leverage Houston-based manufacturing, importing, warehousing, and logistics to service the southeastern U.S. market, which includes Florida (the 4^th largest state by GDP), Georgia (the 9^th largest state by GDP), and North Carolina (the 11^th largest state by GDP).
All FormTex customers are net new customers not currently being serviced by the Company, creating cross-selling opportunities for other good natured® products and services.

The Acquisition was an arm’s length transaction and is subject to customary post-closing adjustments.

The good natured® corporate profile can be found at: investor.goodnaturedproducts.com

About good natured Products Inc.

good natured® is passionately pursuing its goal of becoming North America’s leading earth-friendly product company by offering the broadest assortment of plant-based products made from rapidly renewable resources instead of fossil fuels. The Company is focused on making it easy and affordable for business owners and consumers to shift away from petroleum to better everyday products® that use more renewable materials, less fossil fuel, and no chemicals of concern.

good natured® offers over 400 products and services through wholesale, direct to business, and retail channels. From plant-based home organization products to certified compostable food containers, bio-based industrial supplies and medical packaging, the Company is focused on making plant-based products more readily accessible to people as a means to create meaningful environmental and social impact.

For more information: goodnaturedproducts.com

On behalf of the Company:
Paul Antoniadis – Executive Chair & CEO
Contact: 1-604-566-8466

Investor Contact:
Spencer Churchill
Investor Relations1-877-286-0617 ext. 113
invest@goodnaturedproducts.com

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibilities for the adequacy or accuracy of this release.

Non-GAAP financial measures

We have included in this press release a discussion of the FormTex’s adjusted EBITDA, a non-GAAP measure, for FY2021, to provide what management believes is a meaningful comparison of FormTex’s performance in FY2021. In this news release, adjusted EBITDA is earnings before interest and finance costs, taxes, depreciation and amortization, other non‐cash items and one‐time gains and losses. Adjusted EBITDA does not have a standardized meaning, and therefore may not be comparable to similar measures presented by other issuers. The use of the adjusted EBITDA by management allows for evaluation of FormTex’s principal business activities as certain non‐core items such as interest and finance costs, taxes, depreciation and amortization, and other non‐cash items and one‐time gains and losses are removed.

The following table, expressed in USD, provides a reconciliation of FormTex net income to adjusted EBITDA for the period ended:

Cautionary Statement Regarding Forward-Looking Information

This press release contains “forward-looking statements” within the meaning of applicable securities laws. Forward-looking statements can be identified by words such as: ”anticipate,” “intend,” “plan,” “budget,” “believe,” “project,” “estimate,” “expect,” “scheduled,” “forecast,” “strategy,” “future,” “likely,” “may,” “to be,” “could,”, “would,” “should,” “will” and similar references to future periods or the negative or comparable terminology, as well as terms usually used in the future and the conditional. Examples of forward-looking statements include, among others, statements regarding the Acquisition, and the projected impact of completion of the Acquisition on the Company’s business, financial conditions and results. All forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.

By their nature, forward-looking statements involve known and unknown risks, uncertainties, changes in circumstances and other factors that are difficult to predict and many of which are outside of the Company’s control which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on the Company’s current beliefs, expectations and assumptions regarding the future of its business, future plans and strategies, projections, anticipated events and trends, general market conditions, the economy and other future conditions. The Company’s actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause actual results and financial conditions to differ materially from those indicated in the forward-looking statements include, among others risks relating to general economic, market and business conditions and unforeseen delays in the realization of the benefits of the Acquisition described in this press release.

The Company considers its assumptions to be reasonable based on currently available information, but cautions the reader that its assumptions regarding future events, many of which are beyond the control of the Company, may ultimately prove to be incorrect since they are subject to risks and uncertainties that affect the Company and its businesses. When relying on the Company’s forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The Company has assumed that the material factors referred to above will not cause such forward-looking statements and information to differ materially from actual results or events. However, there can be no assurance that such assumptions will reflect the actual outcome of such items or factors.

Other than as required under securities laws, the Company does not undertake to update this information at any particular time.

Adjusted EBITDA is a non-GAAP measure. For more information regarding non-GAAP measures included in this news release, please refer to “Non-GAAP financial measures” below.

Texas Enters 2021 as World’s 9^th Largest Economy by GDP, Texas Economic Development Corporation, January 2021, https://businessintexas.com/news/texas-enters-2021-as-worlds-9th-largest-economy-by-gdp/