4Front Ventures Transforms Balance Sheet; Names New CEO

PHOENIX, Jan. 8, 2024 – PRESS RELEASE – 4Front Ventures Corp., a vertically integrated, multistate cannabis operator and retailer, announced that the company has entered into a conditional amendment to the loan and security agreement with its senior secured lender, LI Lending LLC under which the lender will convert approximately 44% ($USD 23,000,000) of the principal amount of its debt into class A subordinate voting shares (SVS) of the company.

The conversion price of $CAD 0.125 ($USD 0.094) per SVS was negotiated with the lenders and reserved with the Canadian Securities Exchange (CSE) at the closing price on Dec. 22, 2023. Under the terms of the amendment, the company will also provide 15% warrant coverage with an exercise price of $CAD 0.144 (USD$ 0.108), being a premium of 15% from the issue price of the SVS, each exercisable into one SVS for a term of three years.

The terms for the remaining loan balance of $USD 28,700,000 will be unamended, and the interest rate will remain at 12%. The amendment is subject to requisite third-party concessions and approvals, including regulatory approval from the CSE.

In addition, the company announced that its board of directors appointed Andrew Thut as CEO, effective Jan. 8, 2024. Thut succeeds Leo Gontmakher, who has served as CEO since May 30, 2020. Gontmakher will remain on the board as a director and serve as a consultant to the company.

"Today marks a significant milestone for 4Front as we announce the culmination of several strategic actions aimed at strengthening our balance sheet and materially accelerating our path to positive cashflow generation through the reduction of senior secured debt and the associated debt service payments," Thut said. "This transaction is more than just financial; it's a material strategic arrangement designed to facilitate sustainable and profitable growth and position the company well for the eventuality of cannabis rescheduling, federal banking reform, and improved access to capital.

"Our latest actions demonstrate a commitment to transforming our balance sheet, safeguarding the financial health of the company, and focusing on long-term growth, where we are still bullish on our ability to double the revenue of our company over the next 12-18 months in Illinois alone. Moreover, this strategic move significantly reduces our annual expenses by approximately $3 million, opening new avenues for investment and growth. LI Lending's continued, unwavering support and belief in the equity value and future upside of 4Front will allow us to realize our strategic growth plans and accelerate value creation for our shareholders.

"Further, I would like to take this opportunity to thank Leo for his leadership of 4Front. I am honored to have the opportunity to step into his shoes at such an important inflection point for the company. As we undertake an operational and strategic review of the business, I look forward to working alongside Leo and the entire 4Front team and our board to drive growth, operational excellence, and value for all stakeholders."

Gontmakher said: "I am grateful to have served as CEO of 4Front and have had the pleasure of working with Andrew for the past five years. During this time, Andrew has always distinguished himself with exemplary performance in various roles, including his former role as the Chief Investment Officer. Andrew has always provided strong leadership and has helped lay the foundation for the next phase of 4Front's growth. As demonstrated clearly by the conversion of this debt to equity, I and the investors of LI Lending are fully committed to the success of 4Front."

Board chair Robert Hunt said: "On behalf of the entire 4Front board, we thank Leo for his service as CEO to the company and are delighted to have Andrew assume this role after more than a decade of service to the company. The board has complete confidence that Andrew is the right person to lead the business forward. His proven leadership and commitment to the company will enable him to guide 4Front through its next chapter and help drive long-term value for our shareholders."

Gontmakher and Roman Tkachenko, directors of the company, each own 14.28% of the lender.