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.
