4Front Ventures Corp. Initiates Comprehensive Financial and Leadership Revamp

LOS ANGELES- In a pivotal development, 4Front Ventures Corp., a multi-state cannabis operator, has embarked on a transformative journey, reshaping its financial landscape and ushering in a new era of leadership. This strategic shift is marked by a significant agreement with LI Lending, LLC, the company’s primary financier, to convert a major portion of its debt into equity, coupled with a key leadership transition.

The agreement is poised to convert approximately 44% of the company’s debt, which amounts to $23 million USD, into class A subordinate voting shares (SVS). This debt-to-equity conversion, priced at $0.125 CAD per SVS ($0.094 USD), reflects negotiations with the Canadian Securities Exchange (CSE) and is based on the closing price as of December 22, 2023. Additionally, the agreement includes a 15% warrant coverage, with warrants exercisable at $0.144 CAD per SVS ($0.108 USD), representing a 15% premium over the issue price, and valid for a period of three years. The remaining loan balance of $28.7 million USD will retain its 12% interest rate. The execution of this amendment is subject to obtaining necessary third-party consents and regulatory approvals, including from the CSE.

Simultaneously, 4Front Ventures announced a leadership shift, appointing Andrew Thut as the new Chief Executive Officer, effective January 8, 2024. Thut succeeds Leo Gontmakher, who has led the company since May 30, 2020. Gontmakher will continue to contribute as a board director and consultant.

Thut, in his inaugural address, highlighted the strategic significance of this financial restructuring. He underscored it as a critical step in strengthening the company’s balance sheet and accelerating its path to generating positive cash flow. Thut pointed out the reduction in senior secured debt and the resulting decrease in debt service payments as central to this strategy. He expressed optimism for the company’s growth prospects, especially in Illinois, projecting a potential revenue doubling in the next 12 to 18 months. Thut also noted that this strategic shift is expected to trim annual expenses by about $3 million, thereby enabling further investment and growth. He acknowledged LI Lending’s continued support and confidence in the company’s equity value and potential.

Thut also recognized Gontmakher’s leadership and contributions, expressing his honor in assuming the role at a crucial time for the company. He emphasized the importance of operational and strategic reviews moving forward and his enthusiasm for collaborating with Gontmakher and the team to drive growth and value.

Gontmakher, in his farewell remarks, reflected on his tenure, commending Thut’s abilities and leadership. He expressed confidence in Thut’s capability to guide the company into its next growth phase and pointed to the debt-to-equity conversion as a testament to investor confidence in 4Front’s future.

This strategic overhaul by 4Front Ventures represents a determined effort to recalibrate its financial structure and leadership, positioning the company for sustained growth and profitability in the rapidly evolving cannabis industry.