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good natured Products Inc. Announces the Closing of its Acquisition of Integrated Packaging Films

December 22, 2020 — (Vancouver, BC) good natured Products Inc. (the “Company” or “good natured®”) (TSX-V: GDNP), today announced that it has closed the strategic acquisition of, through a wholly owned subsidiary, IPF Holdings Inc. dba Integrated Packaging Films (“IPF”), for $16.7 million (the “Acquisition”). All dollar figures in this release are in Canadian dollars unless noted otherwise.

The terms of the Acquisition were first announced on December 1, 2020, and the purchase price was paid through a combination of the previously announced $12.5 million in cash, the issuance of $833,467 in common shares of the Company (“Common Shares”) at a deemed price of $0.47 per Common Share, and the issuance of a $3.3 million vendor take-back note, subject to customary working capital and closing adjustments.

“We’re very pleased to announce the completion of this Acquisition and welcome everyone at IPF to the good natured® family,” said Paul Antoniadis, CEO of good natured®. “This transaction marks another significant milestone in the Company’s growth trajectory and contributes approximately $17.0 million in annual sales. This Acquisition diversifies and strengthens our industrial business group with the addition of nearly 100 customers, as well as entry into the medical and electronic industrial rollstock segment.”

Paul added: “I would like to express my appreciation to all team members and parties involved in contributing to the IPF closing. The Acquisition of IPF, in conjunction with the recent acquisition of Shepherd Thermoforming and Packaging in May 2020, represents our team’s ability to deliver on our acquisition strategy that underpins our organic growth business model.”

Founded in 1997 by the Mechar family, IPF is located in Ayr, Ontario and is a manufacturer of high quality, rigid plastic sheets used to create a variety of products, including thermoformed packaging. IPF’s customers serve a diverse set of end markets, including electronics, retail, industrial, food and medical packaging. IPF currently serves nearly 100 customers from a dedicated 32,000 square foot leased facility on 2.9 acres of land. Customers are primarily located in the northeast and midwest United States and Eastern Canada.

Key Highlights of the Acquisition:

  • IPF generated trailing twelve-month (“TTM”) revenue ending September 2020 of approximately $17.0 million
  • Adds just under 100 business-to-business customers, growing the Company’s business to business segment to a total of approximately 500 customers
  • IPF’s geographic sales mix is approximately 65% US and 35% Canadian
  • Adds between $10 and $12 million (unaudited) of total assets to the Company’s balance sheet
  • TTM EBITDA of approximately $3.7 million
  • Highly strategic and synergistic acquisition that is expected to be immediately accretive to shareholders on an adjusted EBITDA basis
  • Expected to provide synergies of approximately $1.0 to $2.0 million in EBITDA in 2021
  • Enables further vertical integration at the Company’s thermoforming facility where finished packaging gross margins are expected to increase by 30% to 35% by incorporating roll stock extruded at the IPF facility
  • All pre-existing indebtedness of IPF will be paid out as a deduction of purchase price proceeds
  • $1.25 million in target net working capital required at closing
  • good natured® will begin recognizing revenue from IPF commencing December 1, 2020

Key Strategic Highlights:

  • Adds the medical and electronic market segments to current industrial business group
  • Establishes a full integrated custom packaging supply chain to service eastern Canada and the northeastern United States
  • Complements and builds on the Company’s existing outsourced supply chain partnerships
  • Grows customer count to approximately 500 recurring business-to-business customers, further opening up cross-selling opportunities
  • Strengthens industrial business group innovation and new product development pipeline
  • IPF’s facility includes 22 million pounds of production capacity on an annual basis, which is being upgraded to a total annual production capacity of 25 million pounds with an anticipated completion date of Q1 2021. The IPF facility is currently operating at approximately 75% capacity

Financing Details:

The Company secured the following financing, which has enabled it to complete the Acquisition and will fund related integration costs:

  • $7.6 million reducing term loan with the Royal Bank of Canada with 6-year amortization at market rates
  • US$2.5 million draw down of the BDC Capital Corp. (“BDC”) acquisition line under the terms and conditions of the Company’s existing BDC credit facility, as originally announced in June 2019
  • $3.3 million 3-year vendor take-back note at annual interest of 3.75%, the principal of which is repayable as to 1/3 on the second anniversary of closing, with the balance paid on the third anniversary of the closing of the Acquisition
  • $833,467 in Common Shares priced at $0.47 per Common Share issued to one of the sellers of IPF for an aggregate of 1,773,334 Common Shares, which are subject to a 12-month contractual hold period which exceeds the requirement of a four-month hold period under securities laws
  • $4.0 million in gross proceeds from a bought deal private placement financing of Common Shares at a price of $0.47 per Common Share, which closed on December 17, 2020, as was announced on such date

In addition, the Royal Bank of Canada has made available to IPF a $3.0 million revolving operating line of credit, plus a $400,000 revolving capital term loan, and a $400,000 revolving lease line. These credit facilities will be dedicated to the IPF operations and secured by its assets. The line of credit will be used to fund ongoing growth of IPF through the procurement of raw materials, inventory, and operating requirements.

The Company’s material financing agreements with BDC and the Royal Bank of Canada are available on SEDAR.

Debt for Shares:

Following the closing of the Offering, the Company plans to issue 62,500 Common Shares at a deemed price of $0.80 per Common Share to settle $50,000 of corporate debt owed to an arm’s length creditor of a subsidiary of the Company (the “Share Settlement”). The Share Settlement remains subject to TSX-V approval and is expected to occur upon receipt of such approval. The Shares to be issued pursuant to the Share Settlement will be subject to a four-month hold period.

Grant of Stock Options:

The Company concurrently announces, pursuant to the Company’s Omnibus Equity Incentive Compensation Plan, that it has granted stock options (the “Options”) to certain employees and consultants of IPF in connection with such persons entering into employment agreements upon the closing of the Acquisition, which are exercisable for up to an aggregate of 200,000 Common Shares of the Company. The Options are exercisable at $0.92 per Common Share.

This news release does not constitute an offer to sell or a solicitation of an offer to sell any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933 (the “US Securities Act”) or any states securities laws and may not be offered or sold within the United states or to US Persons (as defined in Regulation S under the US Securities Act) unless registered under the US Securities Act and applicable state securities laws or an exemption from such registration is available.

The Acquisition was an arm’s length transaction. The share purchase agreement in connection with the Acquisition has been previously filed on the Company’s profile at

The good natured® corporate profile can be found on our ESG investment website.

About good natured Products Inc.
good natured® is producing and distributing one of North America’s widest assortments of better everyday products® made with 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.

With a growing assortment of over 385 products and services, good natured® creates eco-friendly home and business products, food packaging, restaurant/take-out containers, medical and industrial supplies designed to do good for the planet, good for human health and good for business by driving incremental sales, minimizing waste and reducing environmental impact, all bundled up in a fresh and approachable brand.

For more information, see our investor site.

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

Investor Contact:
Spencer Churchill
Investor Relations
1-877-286-0617 ext. 113

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 certain non-GAAP measures that are used to evaluate the performance of IPF, including adjusted EBITDA. As non-GAAP measures generally do not have a standardized meaning, they may not be comparable to similar measures presented by other issuers. Adjusted EBITDA does not have a generally accepted industry definition.

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, the projected impact of completion of the Acquisition on the Company’s business, financial conditions and results, and the use of funds for integration costs.

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.

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.

Forward-looking statements contained in this news release are based on the Company’s current estimates, expectations and projections regarding, among other things, sales volume and pricing which it believes are reasonable as of the current date. The reader should not place undue importance on forward-looking statements and should not rely upon these statements as of any other date. All forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.

TTM EBITDA is a non-GAAP financial measure and does not have any standardized meaning prescribed by IFRS-IASB. See ‘Non-GAAP financial measures’ in this news release.