4Front Ventures Reports Second Quarter 2022 Financial Results

Q2 2022 Systemwide Pro Forma Revenue of $34.5 million, an increase of 6% from Q1 2022 Q2 2022 Adjusted EBITDA of $9.2 million, an increase of 2% from Q1 2022

Conference call to be held today, August 15, 2022 at 5:00 p.m. ET

PHOENIX, Ariz., August 15, 2022 – 4Front Ventures Corp. (CSE: FFNT) (OTCQX: FFNTF) (“4Front” or the “Company”), a vertically integrated, multi-state cannabis operator and retailer, today announced its financial results for the second quarter ended June 30, 2022 (“Q2 2022”). All financial information is presented in U.S. dollars unless otherwise indicated.

Q2 2022 Highlights

• Systemwide Pro Forma Revenue of $34.5 million
• GAAP revenue increased 5% year-over-year to $28.4 million
• Adjusted EBITDA increased 22.7% year-over-year to $9.2 million

• Accretive acquisition of Island Cannabis Co. was completed in April 2022
• Expanded leadership team to include Chief Financial Officer, General Counsel, President of California Operations, and Executive Vice President; as well as two additional Board members

Systemwide Pro Forma Revenue and Adjusted EBITDA are Non-GAAP measures. See “Note Regarding Non-GAAP Measures, Reconciliation, and Discussion”.

Management Commentary

“Throughout the second quarter and now halfway through the third quarter, we are seeing an acceleration of business trends within our growth markets, particularly in Massachusetts and California,” said Leo Gontmakher, Chief Executive Officer of 4Front. “Our retail locations platform-wide maintained or gained market share, despite anticipated pricing headwinds as we continue to expand our customer base with new product innovations and quality improvements. We believe we are poised for a significant leg of growth to take place over the next 12 months as we leverage our investments in state-of-the-art automation and scaled manufacturing processes, supplemented by strategic and accretive M&A.”

“In California, we believe that our positioning and strategy is building a fly-wheel of growth as we methodically take share in the biggest cannabis market in the world,” Mr. Gontmakher continued. “In addition to a steady build in our wholesale revenue, in the second quarter we secured active partnerships with more than five leading retailers, including large, region-leading operators with numerous chain locations; a statewide delivery service; and a multi-state operator. We are now providing production and packaging of gummies, vapes, infused pre-rolls, distillate and diamonds to these customers with scale and at a price-point they would be challenged to achieve on their own. In the distressed and fragmented California market, we are seeing increased interest from companies looking to 4Front as their low-cost producer of choice. Our long-term plans are to deepen and expand these relationships to grow revenue over time and add a retail presence in the state.”

“After implementing new techniques and methodologies to our production processes in Massachusetts, we made notable improvements to the yield and quality of our flower across the country during Q2. These new processes have now been incorporated in Massachusetts and Illinois, and we are currently applying them to our facilities in Washington. As the construction of Phase 1 of our Illinois cultivation and production facility nears completion, we are looking to expand our retail footprint in the state over the coming months in preparation for that facility to commence operations in 2023.”

“We are proving ourselves as a major piece of the landscape in some of the most exciting cannabis markets in the country, and we look forward to sharing our continued success as we progress. We are excited by the momentum we have seen so far in Q3, and I am convinced that the next twelve months will demonstrate the power of our model at significant scale, paving the way for robust, sustained growth in the long term.”

Operational Highlights and Current Developments

In April 2022, the Company completed its acquisition of Island Global Holdings, Inc. dba Island Cannabis Co. (“Island”), a leading California producer of pre-rolls, flower and concentrate products. The acquisition of Island adds new high-quality products to 4Front’s growing brand portfolio, including diverse lines of pre-rolls, flower and infused products with a strong following from local California consumers. In June, Island Founder and CEO Ray Landgraf, and Island COO Brandon Mills, joined 4Front’s management team as President of California Operations, and Executive Vice President, respectively.

In Q2, 4Front secured numerous private label partnerships with leading California retailers. The Company’s robust private label pipeline in the state includes top retailers with attractive shelf-space within their footprints, as well as larger strategic partners with opportunities for material revenue growth and other synergistic alignments. The Company anticipates a steady expansion of its private label pipeline through the end of this year and into 2023 and continues to explore additional growth opportunities through accretive brand and retail expansions, with new developments expected over the coming months.

Today, the Company announces that it has signed a definitive agreement to acquire the Bloom Farms and Bloom Farms Wellness (collectively, “Bloom Farms”) brands, California cannabis and hemp brands known for bringing safe and enjoyable products to consumers. The Company believes that by integrating Bloom Farms’ suite of products onto its platform, it can achieve a reduction in manufacturing costs while simultaneously increasing sales of the successful Bloom Farms brands, which include popular varieties of concentrates, flower, hemp CBD and vape products. The Company looks forward to completing the transaction with Bloom Farms in the coming weeks, and expects to announce similar acquisitions over the next several quarters.

Phase 1 Construction of the Company’s cultivation and production facility in Matteson, Illinois is expected to remain on schedule to be delivered in Q4 of this year. As the final stages of construction of Phase 1 come to a close, nominal challenges regarding the timing of electrical supply to the facility have been identified, but the Company has contingency options in place for temporary power and scope phasing, should they be required. These challenges are not expected to influence the on-time completion of Phase 1 construction in the fourth quarter of this year, or the commencement of operations expected in 2023.

Q2 2022 Financial Overview

Systemwide Pro Forma Revenue for Q2 2022 was $34.5 million, up 6% from Q1 2022 and flat from Q2 2021. GAAP revenue for Q2 2022 was $28.4 million, up 5% from Q2 2021 and up 9% from Q1 2022. This increase is primarily due to increased revenue in the Company’s wholesale revenue as it ramps those portions of its business in California, Illinois, and Massachusetts.

Adjusted EBITDA for Q2 2022 was $9.2 million, up 23% from Q2 2021, representing an Adjusted EBITDA margin of 26.7%. Continued growth of Adjusted EBITDA and margins is expected to persist through 2023 as the Company’s operations drive increased production and higher sales volumes without material increases to overhead.

As of June 30, 2022, the Company had $6.0 million of cash and $49.5 million of related-party long-term debt not due until May 2024. As of today the Company has 636,636,686 subordinate voting shares outstanding.

Conference Call

The Company will host a conference call and webcast today, Monday, August 15, 2022, at 5:00 p.m. ET to review its operational and financial results and provide an update on current business trends.

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About 4Front Ventures Corp.

4Front Ventures Corp. (“4Front” or the “Company”) (CSE: FFNT) (OTCQX: FFNTF) is a national, vertically integrated multi-state cannabis operator who owns or manages operations and facilities in strategic medical and adult-use cannabis markets, including California, Illinois, Massachusetts, Michigan and Washington. Since its founding in 2011, 4Front has built a strong reputation for its high standards and low-cost cultivation and production methodologies earned through a track record of success in facility design, cultivation, genetics, growing processes, manufacturing, purchasing, distribution, and retail. To date, 4Front has successfully brought to market more than 20 different cannabis brands and over 1800 products, which are strategically distributed through its fully owned and operated Mission dispensaries and retail outlets in its core markets. As the Company continues to drive value for its shareholders, its team is applying its decade of expertise in the sector across the cannabis industry value chain and ecosystem. For more information, visit https://4frontventures.com/.