Atlas Engineered Products Enters Into Definitive Agreement to Acquire South Central Building Systems and Closes Second Tranche of Private Financing

December 06, 2018

Nanaimo, British Columbia. ATLAS ENGINEERED PRODUCTS LTD. (“Atlas” or the “Company”) (TSX-V: AEP, OTC Markets: APEUF) a leading supplier of trusses, engineered wood products and building components, is pleased to announce that it has entered into a definitive agreement to purchase all of the issued and outstanding shares of South Central Building Systems Ltd. (“South Central”) of Carman, Manitoba and that it has closed Tranche 2 of its private placement financing.

South Central Building Systems

To acquire South Central, Atlas has agreed to pay an aggregate purchase price of $3,400,000, consisting of $2,500,000 payable on closing in the form of cash and assumption of debt, 1,000,000 common shares of Atlas valued at an agreed upon price of $0.40 per share, and $500,000 payable in five equal monthly installments (the “Installment Payments”), with the first Installment Payment due in the third month following closing. South Central’s shareholders may elect to receive the Installment Payments in Atlas common shares at a price of $0.40 per share, provided that, at the time the election is made, it is made with respect to his or her pro rata share of the full remaining balance of the Installment Payments still payable.

The purchase price for South Central is based on it having working capital of $400,000 at closing, and is subject to adjustment post-closing based on the actual working capital amount. Mr. Bill Woods, CFO for Atlas said, “South Central has a solid track record of aggressive double-digit revenue growths over the last number of years, and most recently in fiscal 2018 revenues grew 35% over 2017 to $3.5 million, delivering an impressive 23% EBITDA margin. The business is nimble, generates good cash flows, and quite frankly impressive controls.”

“This is a SMART acquisition for Atlas”, commented CEO & President, Dirk Maritz. “With the acquisitions we’ve completed to date, Atlas is on track to deliver close to $50 million top-line revenues this year – only one year into its consolidation strategy. With our focus on efficiencies, productivity, economies-of-scale and buying power optimization we are confident we can deliver on our profitability targets as well. This deal fits squarely within our acquisition strategy and will bring an energetic, highperformance team to Atlas, best-in-class, efficient automation, capacity to significantly increase output, a loyal and growing customer base and EBITDA margins to be proud of. South Central is based in the middle of over 25+ growing communities in Southern Manitoba, can easily reach nearby Winnipeg, and huge potential into the northern parts of Minnesota and Dakota. Strategically, we have clearly defined our desired footprint locations, growth potential, revenue, profitability, quality of assets and people expectations – South Central, has checked every box, and we are excited to now be in the Prairies. The Atlas growth story continues.”

Closing of the South Central acquisition remains subject to customary closing conditions, financing, TSX Venture Exchange approval and satisfactory completion of Atlas’ due diligence investigations. Please follow the attached link to view Mr. Dirk Maritz’s and Mr. Lindsey Boeve’s

Interview with Proactive Investors:

Closing of Private Placement Financing

Atlas also announces that it has closed the second tranche of its non-brokered private placement financing (the “Offering”), issuing a total of 832,500 units (each a “Unit”) for aggregate gross proceeds of $333,000. The closing of this tranche of the Offering brings the total amount sold under the Offering to 10,330,000 Units for total aggregate gross proceeds of $4,132,000. The Offering is now closed.

Each Unit under the Offering consists of one Atlas common share and one-half of one warrant (each a “Warrant”). Each whole Warrant entitles the holder thereof to purchase one additional Atlas common share at a price of $0.60 per share for a period of two years from the date of issuance. Atlas has the right to accelerate the expiry date of the Warrants if its common shares trade at a volume weighted average price greater than $0.80 per share for 20 consecutive trading days. If exercised, the expiry date of the Warrants will be accelerated to the date that is 30 days after Atlas issues a news release announcing the exercise of the acceleration right.

Directors and officers purchased 345,000 Units under the Offering. The sale of securities to Atlas’ directors and officers is exempt from the formal valuation and minority approval requirements of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions as the fair market value of the securities purchased in the Offering by Atlas’ directors and officers is less than 25% of Atlas’ market capitalization. A material change report was not filed in respect of the participation by Atlas’ directors and officers as, in the opinion of management, such participation does not constitute a “material change” as defined in National

Instrument 51-102 – Continuous Disclosure Obligations.

The securities issued in the second tranche under the Offering are subject to a four month and one day hold period expiring on April 4, 2019. The securities issued under the Offering have not been registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws. Accordingly, any securities issued under the Offering to United States purchasers may not be offered or sold within the United States except in compliance with the registration requirements of the U.S. Securities Act and any applicable state securities laws, or pursuant to exemptions therefrom. Atlas does not intend to file a registration statement in the United States with respect to the securities issued in the Offering. This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities to, or for the account or benefit of, persons in the United States. Proceeds of the private placement were used to acquire Tandelle Specialty Inc. and Pacer Building Components Inc. of Ilderton, Ontario, completed in November, with the balance planned for use in financing future acquisitions and for general working capital purposes.

About Atlas Engineered Products Ltd.

Atlas Engineered Products is a newly listed growth company, that continues to acquire and operate profitable, well-established manufacturing and distribution facilities across Canada’s truss and engineered products industry. Atlas Engineered Products is meeting the needs of residential and commercial construction clients, by currently operating in British Columbia, Manitoba and Ontario. Atlas Engineered Products has a well-defined and disciplined acquisition and operating strategy enabling us to scale aggressively, giving us a unique opportunity to consolidate a fragmented industry of independent operators.

For further information please contact:

Atlas Engineered Products Ltd. Atlas Engineered Products Ltd
Dirk Maritz, CEO and President Bill Woods, CFO
Phone: 1-250-754-1400
Email: [email protected]
Unit 102, 6551 Aulds Road Nanaimo, BC V9S 5X9

For investor relations please contact:

Rob Gamley

Phone: 1-604-689-7422
Email: [email protected]
Contact Financial Corp.
810 – 609 Granville St.
Vancouver, BC V7Y 1G5

Forward Looking Information

Information set forth in this news release contains forward-looking statements. These statements reflect management’s current estimates, beliefs, intentions and expectations; they are not guarantees of future performance. The Company cautions that all forward looking statements are inherently uncertain and that actual performance may be affected by a number of material factors, many of which are beyond the Company’s control. Such factors include, among other things: risks and uncertainties relating to the Company including those to be described in the Annual Information Form filed by the Company on June 1, 2018 and the Management’s Discussion and Analysis (“MD&A”) for the Company’s fiscal quarter ended August 31, 2018 filed by the Company on October 17, 2018, both on Accordingly, actual and future events, conditions and results may differ materially from the estimates, beliefs, intentions and expectations expressed or implied in the forward looking information. Except as required under applicable securities legislation, the Company undertakes no obligation to publicly update or revise forward-looking information. Closing of the acquisition of South Central Building Systems Ltd. remains subject to a number of conditions, including, but not limited to, financing, satisfactory completion of the Company’s due diligence investigations and TSX Venture.

Exchange approval.

Non-IFRS Financial Measures and Management Prepared Financial Information Readers are cautioned that the financial results of South Central for the 2017 and 2018 fiscal years were prepared by management, and have not been audited or reviewed by an independent auditor. EBITDA, adjusted EBITA and EBITDA margent are measures not recognized under IFRS. However, Atlas’ management believes that most shareholders, creditors, other stakeholders and investment analysts prefer to have these measures included as reported measures of operating performance, a proxy for cash flow, and to facilitate valuation analysis. EBITDA is defined as earnings before interest income, interest expense, taxes, depreciation and amortization. Adjusted EBITDA is calculated as net income less total interest expense, income taxes, depreciation and amortization and non-cash charges for share based compensation. EBITDA margin is EBITDA as a percentage of total revenue. Management believes EBITDA, adjusted EBITDA and EBITDA margin are useful measures that facilitate period to-period operating comparisons. EBITDA, adjusted EBITDA and EBITDA margin do not have standardized meanings prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Readers are cautioned that EBITDA, adjusted EBITDA and EBITDA margin are not alternatives to measures determined in accordance with IFRS and should not, on their own, be construed as indicators of performance, cash flow or profitability.