UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date
of earliest event reported):
(Exact name of registrant as specified in its charter}
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
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(Registrant’s telephone number including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A Subordinate Voting Shares, no par value | FFNTF | OTCQX | ||
FFNT | CSE |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 2.02. | Results of Operations and Financial Condition. |
On August 15, 2022, 4Front Ventures Corp. issued a press release announcing its financial results for the three months ended June 30, 2022, a copy of which is attached as Exhibit 99.1.
In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. | Financial Statements and Exhibits |
(d) Exhibits:
Exhibit No. | Exhibit | |
99.1 | Press Release dated August 15, 2022 | |
104 | Cover Page Interactive Data File, formatted in Inline Extensible Business Reporting Language (iXBRL) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
4FRONT | VENTURES CORP. | |||
Date: August 15, 2022 | /s/ Leonid Gontmakher | |||
Leonid Gontmakher | ||||
Chief Executive Officer |
Exhibit 99.1
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., Aug. 15, 2022 /CNW/ - 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 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.
DATE: | Monday, August 15, 2022 |
TIME: | 5:00 p.m. Eastern Time |
NORTH AMERICA TOLL-FREE DIAL-IN: |
1-888-664-6392 |
WEBCAST: | The conference call will be broadcast live and available for replay at this link. |
REPLAY: | A telephonic replay of the conference call will be available until August 29, 2022. Toll-free replay number: 1-888-390-0541 Replay entry code: 694065# |
For assistance, please contact IR@4FrontVentures.com.
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/.
Financial Statements
4FRONT VENTURES CORP.
Formerly 4Front Holdings, LLC
Consolidated Balance Sheets
As of June 30, 2022 and December 31, 2021
(Amounts expressed in thousands of U.S. dollars except for share and per share data)
June 30, 2022 | December 31, 2021 | |||
ASSETS | ||||
Current assets: | ||||
Cash | $ 6,032 | $ 22,581 | ||
Accounts receivable, net | 5,844 | 1,946 | ||
Other receivables | 33 | 289 | ||
Current portion of lease receivables | 3,405 | 3,630 | ||
Inventory | 28,837 | 20,087 | ||
Current portion of notes receivable | - | 109 | ||
Prepaid expenses | 2,974 | 2,232 | ||
Total current assets | 47,125 | 50,874 | ||
Property and equipment, net | 58,967 | 42,633 | ||
Lease receivables | 6,541 | 6,748 | ||
Intangible assets, net | 54,239 | 26,246 | ||
Goodwill | 42,037 | 23,155 | ||
Right-of-use assets | 106,406 | 100,519 | ||
Deposits | 5,142 | 5,364 | ||
TOTAL ASSETS | $ 320,457 | $ 255,539 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
LIABILITIES | ||||
Current liabilities: | ||||
Accounts payable | $ 6,391 | $ 2,131 | ||
Accrued expenses and other current liabilities | 13,031 | 9,411 | ||
Taxes payable | 29,651 | 23,968 | ||
Derivative liability | 428 | 3,502 | ||
Current portion of contract liabilities | 1,535 | - | ||
Current portion of convertible notes | - | 2,784 | ||
Current portion of lease liability | 4,121 | 3,629 | ||
Current portion of notes payable and accrued interest | 8,235 | 3,413 | ||
Total current liabilities | 63,392 | 48,838 | ||
Convertible notes | 15,205 | 14,641 | ||
Notes payable and accrued interest from related party | 49,366 | 48,266 | ||
Long term notes payable | 10,128 | 1,709 | ||
Long term accounts payable | 1,200 | 1,200 | ||
Contract liabilities | 2,000 | - | ||
Contingent consideration payable | - | 2,393 | ||
Construction finance liability | 16,000 | — | ||
Deferred tax liability | 6,884 | 7,849 | ||
Lease liability | 101,380 | 93,111 | ||
TOTAL LIABILITIES | 265,555 | 218,007 | ||
SHAREHOLDERS' EQUITY | ||||
Equity attributable to 4Front Ventures Corp. | 302,502 | 274,120 | ||
Additional paid-in capital | 53,625 | 52,197 | ||
Deficit | (301,307) | (288,857) | ||
Non-controlling interest | 82 | 72 | ||
TOTAL SHAREHOLDERS' EQUITY | 54,902 | 37,532 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 320,457 | $ 255,539 |
4FRONT VENTURES CORP.
Formerly 4Front Holdings, LLC
Consolidated Statements of Operations and Comprehensive Loss
For the Three Months Ended June 30, 2022 and June 30, 2021
(Amounts expressed in thousands of U.S. dollars except for share and per share data)
Three Months Ended June 30, | Six Months Ended June 30, | |||
2022 | 2021 | 2022 | 2021 | |
REVENUE | ||||
Revenue from sale of goods | $ 25,488 | $ 24,452 | $ 48,571 | $ 44,532 |
Real estate income | 2,951 | 2,669 | 5,916 | 5,559 |
Total revenues | 28,439 | 27,121 | 54,487 | 50,091 |
Cost of goods sold | (16,123) | (10,816) | (28,717) | (19,941) |
Gross profit | 12,316 | 16,305 | 25,770 | 30,150 |
OPERATING EXPENSES | ||||
Selling and marketing expenses | 6,327 | 6,714 | 11,493 | 11,871 |
General and administrative expenses | 6,566 | 5,083 | 14,210 | 10,248 |
Depreciation and amortization | 1,123 | 861 | 1,970 | 1,635 |
Transaction and restructuring related expenses | 2,009 | — | 2,009 | — |
Equity based compensation | 390 | 2,979 | 1,428 | 5,375 |
Total operating expenses | 16,415 | 15,637 | 31,110 | 29,129 |
(Loss) Income from operations | (4,099) | 668 | (5,340) | 1,021 |
Other income (expense) | ||||
Interest income | — | 8 | 2 | 11 |
Interest expense | (3,418) | (2,901) | (6,038) | (5,362) |
Amortization of loan discount upon conversion of debt to equity | — | — | — | (2,915) |
Change in fair value of derivative liability | 1,774 | (311) | 3,074 | (2,843) |
Change in contingent consideration payable | 2,393 | — | 2,393 | — |
Loss on lease termination | — | (331) | — | (1,210) |
Other | (154) | — | (51) | — |
Total other income (expense), net | 595 | (3,535) | (620) | (12,319) |
Net loss before income taxes | (3,504) | (2,867) | (5,960) | (11,298) |
Income tax expense | (3,042) | (3,351) | (6,480) | (6,004) |
Net loss | (6,546) | (6,218) | (12,440) | (17,302) |
Net income attributable to non-controlling interest | 5 | 5 | 10 | 10 |
Net loss attributable to shareholders | $ (6,551) | $ (6,223) | $ (12,450) | $ (17,312) |
Basic and diluted loss per share | $ (0.01) | $ (0.01) | $ (0.02) | $ (0.03) |
Weighted average number of shares outstanding, basic and diluted |
636,653,975 |
587,218,794 |
628,175,765 |
573,108,183 |
Note Regarding Non-GAAP Measures, Reconciliation, and Discussion
In this press release, 4Front refers to certain non-GAAP financial measures such as Systemwide Pro Forma Revenue and Adjusted EBITDA. These measures do not have any standardized meaning prescribed by GAAP 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 consulting contract, or effectively similar relationship (net of any consulting fee or effectively similar revenue) but does not consolidate the financial results of per U.S. GAAP ASC 810. 4Front considers this measure to be an appropriate indicator of the growth and scope of the business.
Adjusted EBITDA is defined by the Company as earnings before interest, taxes, depreciation and amortization less share-based compensation expense and one-time charges related to acquisition, financing related costs, and other non-recurring expenses. 4Front considers these measures to be an important indicator of the financial strength and performance of our business.
Systemwide Pro Forma Revenue Reconciliation for the Three Months Ended
June 30, 2022
($ in 000's)
Revenue (GAAP) | $28,439 |
Less: Real Estate Income | 2,951 |
Plus: Systemwide Revenue Adjustment | 8,605 |
Systemwide Pro Forma Revenue (non-GAAP) | $34,453 |
This news release was prepared by management of 4Front Ventures, which takes full responsibility for its contents. The Canadian Securities Exchange ("CSE") has not reviewed and does not accept responsibility for the adequacy of this news release. Neither the CSE nor its Regulation Services Provider (as that term is defined in the policies of the CSE) accepts responsibility for the adequacy or accuracy of this release.
This news release does not constitute an offer to sell or a solicitation of an offer to sell any of the securities in the United States.
Forward Looking Statements
Statements in this news release that are forward looking statements are subject to various risks and uncertainties concerning the specific factors disclosed here and elsewhere in 4Front Ventures' periodic filings with securities regulators. When used in this news release, words such as "will, could, plan, estimate, expect, intend, may, potential, believe, should," and similar expressions, are forward-looking statements.
Forward looking statements may include, without limitation, statements related to future developments and the business and operations of 4Front Ventures, statements regarding when or if transactions will close or if and when required conditions to closing are attained, the completion of construction projects, the Company's ability to increase revenue and market share, the impact of the transactions on the business of 4Front, and other statements regarding future developments of the business. Although 4Front Ventures has attempted to identify important factors that could cause actual results, performance, or achievements to differ materially from those contained in the forward looking statements, there can be other factors that cause results, performance, or achievements not to be as anticipated, estimated, or intended, including but not limited to closing conditions, regulatory and permitting approvals, changes in laws or enforcement of existing laws, limited operating history, reliance on management, requirements for additional financing, competition, limits on market growth and state adoption due to inconsistent public opinion and perception of the medical-use and adult-use marijuana industry, and political change.
There can be no assurance that such information will prove to be accurate or that management's expectations or estimates of future developments, circumstances, or results will materialize. As a result of these risks and uncertainties, the results or events predicted in these forward looking statements may differ materially from actual results or events.
Accordingly, readers should not place undue reliance on forward looking statements. The forward looking statements in this news release are made as of the date of this release. 4Front disclaims any intention or obligation to update or revise such information, except as required by applicable law, and 4Front does not assume any liability for disclosure relating to any other company mentioned herein.
SOURCE 4Front
View original content: http://www.newswire.ca/en/releases/archive/August2022/15/c6785.html
%CIK: 0001627883
For further information: 4Front Investor Contacts, Andrew Thut, Chief Investment Officer, IR@4frontventures.com, 602 633 3067; Brian Pinkston, MATTIO Communications, brian@mattio.com, 703 926 9159; 4Front Media Contacts, Ellen Mellody, MATTIO Communications, ellen@mattio.com, 570 209 2947
CO: 4Front
CNW 16:29e 15-AUG-22
Cover |
Aug. 15, 2022 |
---|---|
Cover [Abstract] | |
Document Type | 8-K |
Amendment Flag | false |
Document Period End Date | Aug. 15, 2022 |
Entity File Number | 000-56075 |
Entity Registrant Name | 4FRONT VENTURES CORP. |
Entity Central Index Key | 0001783875 |
Entity Tax Identification Number | 83-4168417 |
Entity Incorporation, State or Country Code | A1 |
Entity Address, Address Line One | 5060 N. 40th Street |
Entity Address, Address Line Two | Suite 120 |
Entity Address, City or Town | Phoenix |
Entity Address, State or Province | AZ |
Entity Address, Postal Zip Code | 85018 |
City Area Code | 602 |
Local Phone Number | 633-3067 |
Written Communications | false |
Soliciting Material | false |
Pre-commencement Tender Offer | false |
Pre-commencement Issuer Tender Offer | false |
Entity Emerging Growth Company | true |
Elected Not To Use the Extended Transition Period | false |
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