4Front - A Mass Market Platform for Consumer Cannabis Investor - - PowerPoint PPT Presentation

CSE: FFNT / OTCQX: FFNTF

4Front - A Mass Market Platform for Consumer Cannabis

Investor Presentation

Opportunity

4Front | A Mass Market Platform for ConsumerCannabis

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Information in this presentation is about 4Front (“4Front”), its principals, its business and the industry in which it is a

• participant. The information is presented for informational

purposes only and does not constitute an offering of securities

• r otherwise constitute an invitation or inducement to any

person to underwrite, subscribe for, or otherwise acquire or dispose of, securities of, in or by 4Front or any of its principals

• r affiliates. Any future offering or sale of securities by or of

4Front will be presented in, and sold pursuant to, a legally- compliant securities offering, the terms of which will be set forth in the appropriate legal documentation. This presentation contains information about 4Front and the industry in which 4Front is a participant, including financial information and information that may constitute forward- looking statements that inherently are subject to substantial risks and uncertainties because they relate to inherently unpredictable future events. Such forward-looking statements relate to: operational performance, market size, regulatory and legal environments. Words or phrases such as “anticipate,” “objective,” “may ,” “will,” “might,” “should,” “could,” “can,” “intend,” “expect,” “believe,” “estimate,” or similar expressions or variants thereof suggest future outcomes, the results of which are uncertain and are “forward-looking information” or “forward-looking statements” within the meaning of applicable securities laws. These statements Include, but are not limited to, statements made regarding future operations, financial performance, operational milestones, retail store openings, and harvest yields. Readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date

• hereof. All subsequent oral or written forward-looking

statements attributable to 4Front or any of its directors, officers

• r employees, or any persons acting on their behalf, are

expressly qualified in their entirety by the cautionary statement

• above. Neither 4Front nor any of 4Front’s representatives make

any representation or warranty, express or implied, as to the accuracy, sufficiency or completeness of the information in this presentation. Actual results could differ materially from those currently anticipated due to a number of factors and risks. Material factors such as legal or regulatory changes, failure to achieve

• perational objectives, crop disease, etc., could cause actual

results to differ materially from a conclusion, forecast or projection in the forward-looking statements. Particularly, actual revenue, Systemwide Pro Forma Revenue, and/or Adjusted EBITDA, may materially differ from the Company's targets or projections. Other than as required pursuant to applicable law, 4Front does not intend to, and does not have any obligation to, update the information contained in the presentation, including, without limitation, any financial information or information constituting forward-looking statements. This presentation also contains certain personal opinions of the principals of 4Front regarding the industry in which 4Front is a participant, including, without limitation, personal opinions regarding the future development and other characteristics of the industry. These opinions are solely the personal opinions of the principals of 4Front and are based on the personal knowledge, experience and expectations of those principals. Neither 4Front nor any of its principals has confirmed the reasonableness or reliability of these opinions or the premises upon which these personal opinions have been formed. Although these personal opinions may be useful for purposes of gaining a general understanding of the industry in which 4Front is a participant, these opinions should not be viewed as replacements for the viewer’s own assessment of the industry based on the viewer’s own diligence, knowledge and understanding. This presentation is for informational purposes and does not constitute an offer or a solicitation of an offer to purchase the securities referred to herein. The shares of 4Front have not been and will not be registered under the United States Securities Act of 1933, as amended.

Disclaimer

Opportunity

4Front | A Mass Market Platform for ConsumerCannabis

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In this presentation, 4Front refers to certain non-IFRS financial measures such as Systemwide Pro Forma Revenue and Adjusted EBITDA. These measures do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. 4Front defines Systemwide Pro Forma Revenue as total revenue plus revenue from entities with which the Company has a management contract but does not consolidate the financial results of per IFRS 10 – Consolidated Financial Statements (net

• f any management fees), plus revenue from pending and

closed acquisitions as if such acquisitions had occurred on January 1, 2019, plus revenue from certain entities to which the Company provides services, sells non-cannabis input materials, and leases operating facilities, and which the Company has an

• ption to purchase should applicable state law change (net of

any revenues generated by leasing such facilities, selling such input materials, and provision of services, etc.). 4Front considers this measure to be an important indicator of the growth and scope of the business. Adjusted EBITDA is defined by 4Front as earnings before interest, taxes, depreciation and amortization less share-based compensation expense and one-time charges related to acquisition and financing related costs. Similarly, 4Front considers this measure to be an important indicator of the financial strength and performance of our business. Certain information within this presentation regarding the financial and operational performance of companies which are not subsidiaries and/or do not have a management contract with 4Front has been provided voluntarily by such companies. 4Front is relying upon the accuracy of such information and makes no assurances regarding the accuracy of any such information. Certain of the information contained in this presentation concerning economic trends and performance and market and industry data is based upon or derived from information provided by third party consultants, other companies which the Company leases property to, and other industry or government

• sources. 4Front cannot guarantee the accuracy of such

information nor has it independently verified the assumptions upon which projections of future trends and performance are

• based. This information and data is subject to change and

cannot always be verified with complete certainty due to limits

• n the availability and reliability of raw data, the voluntary

nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey of market or industry data. As a result, the information and data set forth in this presentation, and estimates and beliefs based on such information and data, may not be reliable. The Tumwater facility is operated by Northwest Cannabis Solutions (“NWCS”) and the Elma facility by 7Point Holdings (“7P”). Washington state law currently forbids the out-of-state

• wnership of cannabis licenses. Brightleaf leases the facilities to

NWCS and 7P, and additionally licenses its brand names and intellectual property, sells non-cannabis inputs to, and provides growing consulting services. For more information, please refer to Cannex Capital Holdings, Inc., Listing Statement, available at www.thecse.com, and Cannex’s Audited Annual Financial Statements for the Year Ended December 31, 2018, available at www.sedar.com. NWCS and 7P have provided certain data which Is used In this presentation Including, but not limited to, harvest size and yield, and revenue Information. The Company Is using this Information with the consent of NWCS and 7P, but cannot guarantee the accuracy of such Information.

Disclaimer contd.

Opportunity

4Front | A Mass Market Platform for ConsumerCannabis

Evolved to obtaining and operating its

• wn cannabis assets

Completed merger with Cannex, bringing battle-tested production capabilities to the company

Welcome to the new 4Front

Founded as a consulting company to assist clients in obtaining cannabis licenses, utilizing standard operating procedures from the famed Harborside dispensary

Retail Wellness Cultivation & Production

2011 2015

July

2019

4Front at a Glance

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Opportunity

4Front | A Mass Market Platform for ConsumerCannabis

• We believe that execution with a focus on low-cost production and supply chain

management should result in the creation of significant shareholder value.

• We are taking battle-tested operations – proven low cost, quality production of mass

market cannabis products – and replicating them across a portfolio of licenses in nascent and adult use-leaning states.

• We believe our knowledgeable team, experience with scale and efficiency, and

demonstrated success in highly competitive markets make us uniquely positioned to deliver on our thesis.

Our Strategy is Simple

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4Front's Thesis

Opportunity

4Front | A Mass Market Platform for ConsumerCannabis

Retail

Operate strategically across 4 states

Infrastructure

Efficient build outs of high- yield cultivation and production facilities

Regulatory

Proven track record of winning licenses in competitive markets

Production

>20 Brands with >300 SKUs currently sold in >60% of Washington cannabis retailers, and beginning to hit the shelves in Massachusetts

Mission Driven

Long history of credible leadership in the fight to legalize cannabis

Cultivation

Validated yields of over 400 grams/ sq.ft. at scale 6

The New 4Front: Prepared for Mass Market Leadership

Opportunity

4Front | A Mass Market Platform for ConsumerCannabis

Leadership:

Prioritize smart stewardship of capital and value creation for shareholders

Battle-Tested:

Ability to produce high-quality, low-cost cannabis products at scale

Magnet for Talent:

Mission-driven culture matters

Strategic Asset Base:

Adult-use leaning asset base withlimited competition

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Four Pillars of 4Front

Operations Matter Brightleaf

4Front | A Mass Market Platform for ConsumerCannabis

Tumwater production facility, Washington Elma cultivation facility, Washington

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Production: Efficient Operations at Scale

Operations Matter Brightleaf

4Front | A Mass Market Platform for ConsumerCannabis

The Brightleaf team has been reducing the costs of cannabis production for years. When Washington’s wholesale price for cannabis plummeted roughly 70% to a low of $520/lb. in 2017, high-cost producers began shuttering

• perations.

But the Brightleaf facilities were still profitable even at those prices. 4Front is now taking those battle-tested, low-cost production capabilities and introducing them to nascent markets.

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Production: Efficient Operations at Scale

Operations Matter Brightleaf

4Front | A Mass Market Platform for ConsumerCannabis

Facilities produce quality (high terpene count, >20% average THC potency) at low cost (<$0.75 per gram)1 The 2018 Elma facility (v2.0) was 37% cheaper to build per foot, but has realized 28% better yields to date Cost per Gram Significantly Lower than Major Canadian LPs2

The Flagship Facilities in Washington, v1.0 and v2.0 - Yield & Production1

Production/kg Yield g/sq. ft.

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Production: Efficient Operations at Scale

Operations Matter Brightleaf

4Front | A Mass Market Platform for ConsumerCannabis

“ ... we would highlight Northwest Cannabis Solutions, which is in the top 10 for flower, capsules, pre-rolls, and vapor pens.”

– Vivien Azer, Cowen Equity Research 11

Production: Diverse and Consistent Mix of Mass Market Brands

Operations Matter Brightleaf

4Front | A Mass Market Platform for ConsumerCannabis

Strong Brands Across All Product Types

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Operations Matter Brightleaf

4Front | A Mass Market Platform for ConsumerCannabis

Materializing in Massachusetts

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August 2019 September 2019 October 2019

Cannex operations team becomes the Brightleaf division of 4Front and assumes control over all cultivation and production

• perations at 4Front’s

Worcester facility. Marmas and Pebbles, two of Washington’s most beloved edibles brands, are introduced to the Massachusetts market. First harvest from 4Front’s Worcester facility, yielding ≈ 270-300 grams/sq. ft.

• n an annualized

basis.

December 2019

Premium Brightleaf flower strains introduced to the Massachusetts market - Funky Monkey Cannabis

• Co. and Legends

brands.

February 2020

Premium Brightleaf infused flower products introduced to the Massachusetts market - Terp Stix Infused Joints

Operations Matter Mission

4Front | A Mass Market Platform for ConsumerCannabis

Mission: Mission-Driven Retail

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Mission retail was created to provide cannabis consumers of all types access to quality, low-cost products in a warm, welcoming environment.

• Key retail assets in Massachusetts and Illinois to support major Brightleaf cultivation

and manufacturing projects

• Will expand retail in core markets to deepen foothold and provide additional distribution

for our products

Operations Matter Pure Ratios

4Front | A Mass Market Platform for ConsumerCannabis Chad Conner, co-founder and CEO of Pure Ratios, is a recognized expert and practitioner of holistic medicine and the use of cannabis and alternative approaches to wellness. He's also a professor and clinical supervisor at the Pacific College of Oriental Medicine, a leading educational institution devoted to furthering holistic medicine.

Founded in 2015, Pure Ratios focuses on holistic wellness products that marry cannabinoids with traditional Eastern medicine ingredients, as well as hemp-derived CBD products that are sold nationwide.

• Focused suite of wellness products, starting with the popular 96-

hour transdermal patch which effectively delivers a steady dose of CBD and/or THC, moving to salves and roll-ons as complementary form factors, and now launching tablets of cannabinoids mixed with precise formulations of adaptogenic mushrooms.

• Recently re-introduced to California adult-use cannabis market by

partnering with Caliva, a major cannabis distributor in the state.

Pure Ratios' award-winning transdermal patch is a customer favorite Best Patch Around - "I have tried numerous patches, some

almost twice the Pure Ratios price, but this one is a home run for the quality and the value. Most other patches are 8-12 hours." – Sharon L. 15

Pure Ratios: Cannabinoids for Wellness

Operations Matter

4Front | A Mass Market Platform for ConsumerCannabis

National Presence – Going Deep Not Wide

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Michigan

Adult use

State Population: 9.9 million

Illinois

Adult use

State Population: 12.8 million

Massachusetts

Adult use

State Population: 6.8 million

California

Adult use

State Population: 39.5 million

Washington

Adult use

State Population: 7.6 million

Operations Matter

4Front | A Mass Market Platform for ConsumerCannabis

Committed, Experienced and Aligned Management

Nicolle Dorsey - CFO

Prior to joining 4Front, Nicolle served as Principal Accounting Officer and Controller at RGS Energy, a publicly traded solar energy company. Her accounting background includes serving as both assistant controller and senior corporate accountant for several public and private companies in various utility and energy industries. Ms. Dorsey has extensive knowledge of technical accounting, financial forecasting, financial analysis, and business operations.

Kris Krane - President, 4Front & Mission

Prior to co-founding 4Front Advisors with Josh Rosen in 2011, Kris served as director of client services for CannBe, a pioneer in developing best practices within the medical cannabis industry. Kris has dedicated his career to reforming the nation’smisguided drug policies, having served as associate director of NORML from 2000 to 2005 and executive director of Students for Sensible Drug Policy from 2006 to 2009.

Andrew Thut - CIO, 4Front

Andrew was an early investor in 4Front, joining the company full time in 2014. He brings to the team a wealth offinancial- management experience and business acumen having previously served as managing director of the BlackRock Small Cap Growth Fund at BlackRock Advisors LLC. During his 11- year involvement, the $2 billion fund ranked in the top five percent of all domestic small cap growth funds.

Leo Gontmakher - CEO

Leo co-founded Northwest Cannabis Solutions, which under his leadership grew to be one of the largest and most successful producers of cannabis products in Washington state. He also served as Chief Operating Officer at Cannex, which merged with 4Front in July 2019.

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Operations Matter

4Front | A Mass Market Platform for ConsumerCannabis

Josh Rosen – Executive Chairman

Josh spent 13 years as an equity analyst and portfolio manager in the financial services industry, during which time he became

• ne of the youngest vice presidents in Credit Suisse’s history.Josh

moved into private equity in 2008 because he wanted to have a more meaningful impact on companies. Josh co-founded 4Front Advisors with Kris Krane in 2011.

Kathi Lentzsch - Director

Kathi is the current CEO and president of Bartell Drugs, one

• f the oldest and largest independent pharmacy chains in the
• country. Kathi has more than three decades of experience inretail
• perations and management as well as previously serving as CEO
• f Elephant Pharmacy, a new pharmacy concept that offered

health-conscious consumers a health and wellness-minded product selection.

Eric Rey –Director

Eric is a director and consultant to Arcadia Biosciences, Inc. where he previously served as President and CEO. Mr. Rey has managed agricultural research, product developmentand commercial programs for more than 21 years. Prior to Arcadia he was a partner at the Rockridge Group, a consulting firm focused

• n agricultural biotechnology, and was formerly Vice President of

Operations for Calgene Oils, a Division of the Monsanto Company.

Betty Aldworth - Director

Betty is executive director of Students for Sensible Drug Policy, the largest single-issue student advocacy organization in the

• world. She previously served as deputy director of the National

Cannabis Industry Association and worked as a consultanthelping cannabis-related businesses and nonprofit organizations. She was also a spokesperson and advocacy director for Colorado’s successful 2012 Campaign to Regulate Marijuana LikeAlcohol.

David Daily - Director

David is the CEO of Gravitron, LLC which he founded in 2004. Its original invention was the first all-glass gravity bong, the Gravitron, which was an instant success and has become a cult

• classic. Since the Gravitron, Mr. Daily has designed or led the

Grav design team to bring over 500 unique top-line products to the cannabis market. In 2018, Grav was named in the 50 best companies to work for in cannabis by MG magazine.

Strong Independent Board Members

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Operations Matter

4Front | A Mass Market Platform for ConsumerCannabis

Cannabis 1.0 We believe how cannabis companies are valued will evolve from a focus on assets to how well they’re able to execute on their strategy and effectively

• perate those assets.

Cannabis 2.0 Cannabis 3.0

• “Funded capacity”
• Management resumes
• License portfolio
• Total Addressable Market
• Operating metrics
• Execution
• Scalable capabilities

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The Evolution of Cannabis in the Capital Markets: Identifying the Winners

Conclusion

While competitors sought to plant flags in as many jurisdictions as possible to chase “total addressable market,” we focused on prudent but aggressive growth, acquired battle-tested

• perational skills in Cannex, and continued to focus on the key markets that we believe will lead

to outsized future revenue and profit. Cannabis is a game of Risk, not Monopoly – and that’s how we play.

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Others Zigged While We Zagged

Conclusion

Andrew Thut

Chief Investment Officer, 4Front 617.413.0069

andrew.thut@4frontventures.com

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Contact

Leo Gontmakher

Chief Executive Officer

425.633.0799 leo@4frontventures.com www.4frontventures.com

Appendices

4Front | A Mass Market Platform for ConsumerCannabis

Opportunity

Capitalization Table

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4Front Shares I/O Cash (CAD) Price Shares As-Converted Shares Subordinate Voting Common 225,878,132 225,878,132 Proportionate Subordinate Voting Common 3,804,591 304,367,280 Multiple Voting Shares 1,276,208 1,276,208 Total As-Converted Subordinate Voting Shares (Basic Shares Outstanding) 230,958,931 531,521,620 Dilutive Securities

GGP Convertible Debt @ USD 0.83* $ 1.16 41,512,197 Subordinate Convertible Note @ USD 0.25 $ 0.35 23,306,697 Options @ USD 0.08 $ 635,504 $ 0.10 6,355,040 Options @ CAD 0.80 $ 6,577,984 $ 0.80 8,222,480 Options @ CAD 1.00 $19,600,000 $ 1.00 19,600,000 Options @ CAD 1.50 $6,075,000 $ 1.50 4,050,000 Compensation Warrants @ CAD 0.70 $2,389,391 $ 0.70 3,413,416 GGP Financing Warrants @ USD 0.67 $2,106,311 $ 0.94 2,230,080 GGP Financing Warrants @ USD 1.00 $9,240,000 $ 1.32 7,000,000 GGP Financing Warrants @ USD 1.33 $7,894,737 $ 1.75 4,511,278 GGP Financing Warrants @ USD 1.99 $5,266,331 $ 2.62 2,010,050

Total C$ 59,149,754 122,211,238 Total As-Converted Shares Outstanding Plus Total Dilutive Securities 653,732,858

Fully Diluted Shares Outstanding (Treasury Method) 560,124,184

*Includes principal and accrued interest through 5/31/2019

4Front | A Mass Market Platform for ConsumerCannabis

Opportunity

Adult Use/Recreational Medical CBDOnly No Legal Cannabis

The U.S. Cannabis market is growing

• rapidly. The majority of states already

have some form of legal cannabis.

The U.S.cannabis market is expected to be US$75 Billion by 20301

US Cannabis Market

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4Front | A Mass Market Platform for ConsumerCannabis

Opportunity

Wine & Spirits

$100B+

20% Penetration

Beer

$100B+

25% Penetration

Cannabis

$75B+

14% Penetration

Coffee

$50B+

50% Penetration

(cannabis). Penetration defined as percentage of adults consuming respective product in the past year.

US Market Potential

1

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4Front | A Mass Market Platform for ConsumerCannabis

Opportunity

US Support for Legalization

• f Americans

Support legalizing Medical Marijuana 3

94% 64%

• f Americans

Support fully legalizing Marijuana 4

• f Americans

Live in a state where Marijuana is legal in some form 1

60%

• f Americans

Live in a state where Marijuana is legal for adult use 2

20%

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4Front | A Mass Market Platform for ConsumerCannabis

Opportunity

"The global legal cannabis market is projected to be worth up to US$103.9 billion by 2024."

– The Global Cannabis Report,Nov 2019, Prohibition Partners. Medical &Recreational Medical UnitedStates

The Global Cannabis Landscape

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