10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number 000-56075

4Front Ventures Corp.

(Exact name of registrant as specified in its charter)

British Columbia	83-4168417
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

5060 N. 40th Street

Suite 120

Phoenix, Arizona 85018

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (602) 633-3067

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 10, 2022, the registrant had 640,386,686 Class A subordinate voting shares outstanding. 

4Front Ventures Corp.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Changes in Stockholders' Equity	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38
Signatures		39

i

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

4FRONT VENTURES CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

As of September 30, 2022 and December 31, 2021

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

	September 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash	$	5,286	$	22,581
Accounts receivable, net	8,722		1,946
Other receivables	20		289
Current portion of lease receivables	3,765		3,630
Inventory	30,936		20,087
Current portion of notes receivable	—		109
Prepaid expenses and other assets	2,392		2,232
Total current assets	51,121		50,874
Property, plant, and equipment, net	58,697		42,633
Lease receivables	5,942		6,748
Intangible assets, net	54,452		26,246
Goodwill	41,393		23,155
Right-of-use assets	103,229		100,519
Deposits	5,165		5,364
TOTAL ASSETS	$	319,999	$	255,539
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accounts payable	$	11,303	$	2,131
Accrued expenses and other current liabilities	11,620		9,411
Taxes payable	32,805		23,968
Derivative liability	8		3,502
Current portion of contract liabilities	653		—
Current portion of convertible notes	—		2,784
Current portion of lease liability	3,428		3,629
Current portion of notes payable and accrued interest	9,299		3,413
Total current liabilities	69,116		48,838
Convertible notes	15,513		14,641
Notes payable and accrued interest from related party	49,422		48,266
Long term notes payable	10,279		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	100,322		93,111
TOTAL LIABILITIES	270,736		218,007
SHAREHOLDERS' EQUITY
Equity attributable to 4Front Ventures Corp.	304,602		274,120
Additional paid-in capital	54,487		52,197
Deficit	(309,913)		(288,857)
Non-controlling interest	87		72
TOTAL SHAREHOLDERS' EQUITY	49,263		37,532
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	319,999	$	255,539

See accompanying notes to condensed consolidated financial statements.

1

4FRONT VENTURES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

For the Three and Nine Months Ended September 30, 2022 and 2021

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
REVENUE
Revenue from sale of goods	$	29,067	$	23,126	$	77,638	$	67,658
Real estate income	3,407		2,815		9,323		8,374
Total revenues	32,474		25,941		86,961		76,032
Cost of goods sold	(17,427)		(10,269)		(46,144)		(30,210)
Gross profit	15,047		15,672		40,817		45,822
OPERATING EXPENSES
Selling and marketing expenses	5,462		5,992		16,955		17,863
General and administrative expenses	7,126		7,170		21,336		17,418
Depreciation and amortization	1,020		831		2,990		2,466
Transaction and restructuring related expenses	60		—		2,069		—
Equity based compensation	862		2,603		2,290		7,978
Total operating expenses	14,530		16,596		45,640		45,725
Income (loss) from operations	517		(924)		(4,823)		97
Other income (expense)
Interest income	6		2		8		13
Interest expense	(4,157)		(2,532)		(10,195)		(7,894)
Amortization of loan discount upon conversion of debt to equity	—		—		—		(2,915)
Change in fair value of derivative liability	420		3,345		3,494		502
Gain on contingent consideration payable	—		—		2,393		—
Loss on litigation settlement	(250)		—		(250)		—
Loss on lease termination	—		—		—		(1,210)
Other	(1,815)		56		(1,866)		56
Total other income (expense), net	(5,796)		871		(6,416)		(11,448)
Net loss before income taxes	(5,279)		(53)		(11,239)		(11,351)
Income tax expense	(3,322)		(4,541)		(9,802)		(10,545)
Net loss	(8,601)		(4,594)		(21,041)		(21,896)
Net income attributable to non-controlling interest	5		5		15		15
Net loss attributable to shareholders	$	(8,606)	$	(4,599)	$	(21,056)	$	(21,911)
Basic and diluted loss per share	$	(0.01)	$	(0.01)	$	(0.03)	$	(0.04)
Weighted average number of shares outstanding, basic and diluted	639,624,851		592,631,092		632,048,250		590,084,188

See accompanying notes to condensed consolidated interim financial statements.

2

4FRONT VENTURES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)

For the Nine Months Ended September 30, 2022 and 2021

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

	Share Capital
	Shares	Amount		Additional Paid-In Capital		Deficit		Total 4Front Ventures Corp. Shareholders' Equity		Non-Controlling Interest		Total Shareholders' Equity
Balance, December 31, 2021	594,181,604	$	274,120	$	52,197	$	(288,857)	$	37,460	$	72	$	37,532
Shares issued for NECC pursuant to acquisition	28,571,428	18,200		—		—		18,200		—		18,200
Share-based compensation	—	—		1,038		—		1,038		—		1,038
Conversion of notes to equity	6,235,512	3,122		—		—		3,122		—		3,122
Shares issued with exercise of warrants	88,659	50		—		—		50		—		50
Net loss	—	—		—		(5,899)		(5,899)		5		(5,894)
Balance, March 31, 2022	629,077,203	295,492		53,235		(294,756)		53,971		77		54,048
Shares issued for Island pursuant to acquisition	8,783,716	6,245		—		—		6,245		—		6,245
Warrants issued for Island pursuant to acquisition	—	732		—		—		732		—		732
Share-based compensation	—	—		390		—		390		—		390
Shares issued with exercise of stock options	51,975	33		—		—		33		—		33
Net loss	—	—		—		(6,551)		(6,551)		5		(6,546)
Balance, June 30, 2022	637,912,894	302,502		53,625		(301,307)		54,820		82		54,902
Shares issued for Bloom pursuant to acquisition	3,750,000	2,100		—		—		2,100		—		2,100
Share-based compensation	—	—		862		—		862		—		862
Shares issued with exercise of stock options				—		—		—		—		—
Net loss	—	—		—		(8,606)		(8,606)		5		(8,601)
Balance, September 30, 2022	641,662,894	$	304,602	$	54,487	$	(309,913)	$	49,176	$	87	$	49,263

See accompanying notes to condensed consolidated interim financial statements.

3

4FRONT VENTURES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)

For the Nine Months Ended September 30, 2022 and 2021

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

	Share Capital
	Shares	Amount		Additional Paid-In Capital		Deficit		Total 4Front Ventures Corp. Shareholders' Equity		Non-Controlling Interest		Total Shareholders' Equity
Balance, December 31, 2020	538,851,252	$	250,583	$	42,116	$	(250,548)	$	42,151	$	52	$	42,203
Shares issued for Pure Ratios earnout	473,491	161		—		—		161		—		161
Share-based compensation	—	—		2,396		—		2,396		—		2,396
Conversion of notes to equity	24,366,003	6,253		—		—		6,253		—		6,253
Shares issued with exercise of stock options	1,358,116	871		—		—		871		—		871
Shares issued with exercise of warrants	2,422,363	1,563		—		—		1,563		—		1,563
Return of treasury shares	(8,320)	—		—		—		—		—		—
Net loss	—	—		—		(11,089)		(11,089)		5		(11,084)
Balance, March 31, 2021	567,462,905	259,431		44,512		(261,637)		42,306		57		42,363
Shares issued for Om of Medicine earnout	535,018	722		—		—		722		—		722
Share-based compensation	—	—		2,979		—		2,979		—		2,979
Conversion of notes to equity	24,676,794	11,466		—		—		11,466		—		11,466
Shares issued with exercise of stock options	652,940	443		—		—		443		—		443
Shares issued with exercise of warrants	570,864	1,813		—		—		1,813		—		1,813
Net loss	—	—		—		(6,223)		(6,223)		5		(6,218)
Balance, June 30, 2021	593,898,521	273,875		47,491		(267,860)		53,506		62		53,568
Share-based compensation	—	—		2,603		—		2,603		—		2,603
Shares issued with exercise of stock options	21,927	2		—		—		2		—		2
Net loss	—	—		—		(4,599)		(4,599)		5		(4,594)
Balance, September 30, 2021	593,920,448	$	273,877	$	50,094	$	(272,459)	$	51,512	$	67	$	51,579

See accompanying notes to condensed consolidated interim financial statements.

4

4FRONT VENTURES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

For the Nine Months Ended September 30, 2022 and 2021

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(21,041)	$	(21,896)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Depreciation and amortization	6,844		3,668
Equity based compensation	2,290		7,978
Change in fair value of derivative liability	(3,494)		(502)
Gain on contingent consideration	(2,393)		—
Accretion of lease liability	735		726
Accretion of lease receivable	671		487
Write-off of fixed asset from terminated lease	—		1,210
Accretion of construction financing liability	1,143		—
Accretion of contingent consideration	—		228
Accretion of convertible debenture and interest	872		4,121
Accrued interest on notes payable	6,483		4,783
Deferred taxes	(965)		632
Changes in operating assets and liabilities	6,876		2,533
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	(1,979)		3,968
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired (Note 5)	(24,547)		—
Proceeds on note receivable	109		183
Sale of dispensaries and interests in cannabis licenses	—		1,093
Purchases of property and equipment	(2,535)		(14,021)
NET CASH USED IN INVESTING ACTIVITIES	(26,973)		(12,745)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of contingent consideration	(412)		(1,204)
Proceeds from issuance of construction financing liability	16,000		—
Payment on construction financing liability	(1,143)		—
Issuance of notes payable	3,000		—
Proceeds from the exercise of warrants	50		1,664
Proceeds from the exercise of stock options	33		1,315
Payments of notes payable	(5,871)		(3,453)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	11,657		(1,678)
NET DECREASE IN CASH	(17,295)		(10,455)
CASH, BEGINNING OF PERIOD	22,581		18,932
CASH, END OF PERIOD	$	5,286	$	8,477

See accompanying notes to condensed consolidated interim financial statements.

5

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

Note 1: BASIS OF PRESENTATION

4Front Ventures Corp. (“4Front” or the “Company”) exists pursuant to the provisions of the British Columbia Corporations Act. The Company operates the business through two segments, THC Cannabis and CBD Wellness. The Company's THC Cannabis segment consists of six dispensaries and nine production and cultivation facilities across Illinois, Michigan, Massachusetts, and California. Also, as part of its THC Cannabis segment, the Company leases real estate and sells equipment, supplies and intellectual property to cannabis producers in the state of Washington. The Company’s CBD Wellness segment sells non-THC hemp derived products across the United States.

The unaudited condensed consolidated interim financial statements include the accounts of 4Front and all entities in which the Company either has a controlling voting interest or is the primary beneficiary of a variable interest entity in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The Company has prepared these statements pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC) and U.S. GAAP. Certain information related to the organization, significant accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed, or omitted.

In the opinion of management, the financial statements include all adjustments necessary for the fair presentation of the results of the interim periods presented. All adjustments are of a normal recurring nature, except as otherwise noted below. Operating results for interim periods are not necessarily indicative of results you can expect for a full year. These financials should be read in conjunction with our audited consolidated financial statements and notes thereto appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Management's Estimates and Assumptions

The preparation of the Company’s financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses. We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary. Actual results may differ from these estimates. The most critical and subjective areas are discussed in detail in the notes in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. There have been no changes to the Company's accounting policies since the Annual Report with one notable addition documented below.

Contract Assets and Liabilities

A contract liability is recorded on the consolidated balance sheet for consideration transferred prior to goods transfer. Amounts expected to be recognized as revenue within the twelve months following the balance sheet date are classified as current portion of contract liabilities in the accompanying condensed balance sheets with the remaining balance classified as long term. When the Company has an unconditional right to payment, a receivable is recorded on the consolidated balance sheet as current portion of contract assets for contract assets due within twelve months or contract assets in long term assets for amounts due after twelve months. The accompanying condensed balance sheets reflect a contract liability for the amount of revenue to be recognized in the future as and when the Company satisfies its remaining performance obligations. As of September 30, 2022, the Company has recognized $2.7 million of contract liabilities of which $0.7 million are recorded as current liabilities and $2 million are recorded as long term liabilities.

6

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

New Accounting Pronouncements

Accounting Standard Updates Issued but Not Yet Adopted

In June 2022, the FASB issued ASU 2022-03, "Fair Value Measurements - Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 820)". ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. It also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted and the amendments in the ASU should be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. The Company is currently assessing the impact of adopting ASU 2022-03 on the consolidated financial statements.

Note 2: INVENTORY

The Company’s inventories include the following as of September 30, 2022 and December 31, 2021:

	September 30, 2022		December 31, 2021
Raw materials - unharvested cannabis	$	4,584	$	2,164
Raw materials - harvested and purchased cannabis	12,425		3,045
Packaging and other non-finished goods	3,547		1,734
Work in process - manufactured and purchased extracts	2,124		4,771
Finished goods	8,256		8,373
Total	$	30,936	$	20,087

Note 3: PROPERTY, PLANT, AND EQUIPMENT

Property, plant and equipment and related depreciation are summarized in the table below:

	September 30, 2022		December 31, 2021
Land	$	775	$	—
Buildings & improvements	14,253		1,483
Construction in process	328		63
Furniture, equipment & other	19,422		13,425
Leasehold improvements	36,623		35,538
Total	$	71,401	$	50,509
Less: accumulated depreciation	(12,704)		(7,876)
Total property, plant, and equipment, net	$	58,697	$	42,633

Approximately $33 million of property and equipment is secured by LI Lending as collateral on the LI Lending note (Note 7). There were no significant contractual commitments for future capital expenditures as of September 30, 2022 and December 31, 2021.

Depreciation expense for the nine months ended September 30, 2022 and 2021 was $4.8 million and $1.8 million, respectively, of which $3.9 million and $1.2 million, respectively, is included in cost of goods sold. Depreciation expense for the three months ended September 30, 2022 and 2021 was $1.4 million and $0.7 million, respectively, of which $1.2 million and $0.5 million, respectively, is included in cost of goods sold.

7

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

Note 4: INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

Intangible assets and related amortization are summarized in the table below:

	Licenses		Customer Relationships		Non-Competition Agreements		Know-How		Tradenames and Trademarks		Total
Balance, December 31, 2021	$	20,146	$	1,088	$	—	$	5,012	$	—	$	26,246
Acquisitions (Note 5)	26,700		—		—		—		3,522		30,222
Amortization expense	—		(437)		—		(1,455)		(124)		(2,016)
Balance, September 30, 2022	$	46,846	$	651	$	—	$	3,557	$	3,398	$	54,452

Goodwill

Balance, December 31, 2021	$	23,155
Acquisitions (Note 5)	18,238
Balance, September 30, 2022	$	41,393

Impairment of Intangible Assets and Goodwill

The goodwill is related to the THC Cannabis segment, and there has been no accumulated impairment within this segment. The CBD Wellness segment has an accumulated impairment charge of $13.4 million, which represents the entire balance and occurred during the year-ended December 31, 2020. As of September 30, 2022 and December 31, 2021 all goodwill and intangibles are attributable to the THC Cannabis segment.

Goodwill and infinite lived assets are assessed on an annual basis for impairment, or more frequently, if circumstances indicate an impairment to the carrying value may have occurred. As of September 30, 2022, the Company believes that the carrying amounts of the long-lived assets, including finite-lived intangible assets (licenses), are recoverable and there were no events or circumstances that indicated impairment. However, if adverse events were to occur or circumstances were to change indicating that the carrying amount of such assets may not be fully recoverable, the assets would be reviewed for impairment.

8

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

Note 5: ACQUISITIONS AND BUSINESS COMBINATIONS

New England Cannabis Company (NECC) Merger Agreement

On January 28, 2022, the Company completed an acquisition for 100% of NECC for cash consideration of $9 million and 28.6 million of Class A Subordinate Voting shares of the Company (the “SVS”). The acquisition increased the Company's presence in Massachusetts and the northeastern United States and provides additional opportunities for expansion in the Northeast.

In connection with the consummation of the NECC Merger on January 28, 2022, Mission Partners RE, LLC, a Delaware limited liability company wholly owned by the Company completed its acquisition of 100% of the issued and outstanding membership interests of 29 Everett Street LLC, a Massachusetts limited liability company (the “Everett LLC”) for cash consideration of $16 million and a promissory note of $2 million. The Everett LLC entity was solely comprised of property plant and equipment that was leased to and used by NECC at the time of the transaction and consolidated into NECC operations post acquisition. The Merger and Purchase Agreement were recorded as one transaction (collectively, referred to as the "NECC Acquisitions"), as the entities were commonly owned by the same individual and the purchase of Everett LLC was contingent on the Merger with NECC.

The preliminary purchase price allocation for the NECC acquisition is reflected in the table below and remains

subject to revisions as additional information is obtained about the facts and circumstances that existed at the valuation date. The preliminary allocation of purchase price, including the value of certain tangible and intangible assets acquired and liabilities assumed is based on the best estimates of management and is subject to revision based on the final valuations. We do not expect goodwill and intangible assets will be deductible for tax purposes.

The following tables present the preliminary purchase price allocation for the NECC Merger:

Cash consideration	$	25,000
Note to seller	2,000
Equity consideration - common stock	18,200
Total Purchase Price	$	45,200

9

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

Description	Fair value
Assets acquired:
Cash	$	2
Inventory	213
Prepaid assets	2
Property, plant, and equipment	16,000
Intangible asset - licenses	18,000
Total assets acquired	$	34,217
Liabilities assumed:
Accounts payable	800
Total liabilities assumed	$	800
Estimated fair value of net assets acquired	$	33,417
Estimated Goodwill	$	11,783

As part of the NECC Merger, the Company incurred $0.7 million in transaction and restructuring costs, which were included in transaction and restructuring related expenses and expensed as incurred.

Island Merger Agreement

On April 25, 2022, the Company completed a merger acquisition for 100% of Island Global Holdings for non-cash consideration as follows: (i) 8,783,716 Class A Subordinated Voting Shares of the Company (the “SVS”); (ii) 6% 54-month, subordinated promissory notes (the “Island Merger Notes”) in the aggregate principal amount of $10.0 million; and (iii) warrants to purchase 2,999,975 SVS at a price of $1.00 per SVS. This acquisition enhanced the Company's growing brand portfolio, including diverse lines of pre-rolls, flower and infused products.

The preliminary purchase price allocation for the Island acquisition is reflected in the table below and remains subject to revisions as additional information is obtained about the facts and circumstances that existed at the valuation date. The preliminary allocation of purchase price, including the value of certain tangible and intangible assets acquired and liabilities assumed, is based on the best estimates of management and subject to revision based on the final valuations. We do not expect goodwill and intangible assets will be deductible for tax purposes.

The following tables present the preliminary purchase price allocation for the Island Merger:

Note to seller	$	10,000
Equity consideration - common stock	6,245
Equity consideration - warrants	732
Total Purchase Price	$	16,977

10

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

Description	Fair value
Assets acquired:
Cash	$	458
Accounts receivable	511
Inventory	3,072
Prepaid expenses and other current assets	424
Property and equipment, net	2,214
Operating lease - right of use asset	10,227
Intangible assets	11,300
Total assets acquired	$	28,206
Liabilities assumed:
Accounts payable	$	1,356
Accrued expenses and other liabilities	2,566
Contract liabilities	3,535
Lease liabilities	10,227
Total liabilities assumed	17,684
Estimated fair value of net assets acquired	$	10,522
Estimated Goodwill	$	6,455

The intangible assets acquired by the Company consist of cannabis licenses, trade names and trademarks for operations. Utilizing like licenses as a benchmark, the Company determined that the licenses acquired are indefinite lived assets and the trade names and trademarks have a life of ten years.

As part of the Island Merger, the Company incurred $1.3 million in restructuring and transaction costs, which were included in transaction and restructuring related expenses and expensed as incurred.

Bloom Farms

On August 19, 2022, the Company completed an asset acquisition to acquire certain assets of Bloom Farms for stock consideration of 3,750,000 class A subordinate voting shares valued at $2.1 million. In addition to the contracted purchase price, the Company incurred $0.06 million in transactional costs that were capitalized as part of the asset acquisition. This transaction increased the Company's brand portfolio in the California market.

Share Consideration	$	2,100
Transaction Costs	6
Total Purchase Price	$	2,106

In addition to the consideration transferred, there is an earn-out consideration based on the actual revenue in excess of $2.1 million generated from the brands within California during the first 12 months after the closing. This earn-out consideration cannot exceed $5 million. As of the transaction date, it is not probable this consideration will become payable and no liability has been recognized. If the contingency becomes payable, the Company will recognize the amount in the measurement of the cost of the acquired assets.

11

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

The allocation of the asset acquisition cost is detailed below:

Description	Fair Value
Assets acquired:
Accounts receivable	$	508
Inventory	534
Equipment	142
Intangible assets - tradenames	922
Total assets acquired	$	2,106

Unaudited Pro Forma Results

The following unaudited pro forma financial information presents the results of operations of the Company, NECC, and Island for the nine months ended September 30, 2022 and 2021, as if the acquisitions had occurred as of January 1, 2021. The pro forma information does not necessarily reflect the results of operations that would have occurred had the entities been a single company during those periods.

The unaudited pro forma financial information for the Company including NECC and Island is as follows:

	For the For the Three Months Ended September 30,
	2022				2021
	Reported		Proforma		Reported		Proforma
Revenues	$	32,474	$	32,474	$	25,941	$	28,238
(Loss) income from operations	517		517		(924)		(2,603)
Net loss	$	(8,601)	$	(8,601)	$	(4,594)	$	(8,103)
Basic and diluted earning (loss) per share	$	(0.01)	$	(0.01)	$	(0.01)	$	(0.01)

	For the For the Nine Months Ended September 30,
	2022				2021
	Reported		Proforma		Reported		Proforma
Revenues	$	86,961	$	88,689	$	76,032	$	81,524
(Loss) income from operations	(4,823)		(5,875)		97		(5,093)
Net loss	$	(21,041)	$	(27,235)	$	(21,896)	$	(28,916)
Basic and diluted earning (loss) per share	$	(0.03)	$	(0.04)	$	(0.04)	$	(0.05)

Acquisition Related Results

For the NECC and Island acquisitions, the Company's consolidated results of operations included acquisition related revenue of $2.5 million and $3.5 million and net income of $1.8 million and net loss $0.1 million for the three and nine months ended September 30, 2022, respectively.

12

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

Note 6: LEASES

The Company as a Lessor:

The Company leases a building in Elma, Washington that is subleased by the Company to a third party. This sublease is classified as a finance lease with a long term lease receivable balance of $5.9 million and $6.7 million and a short term lease receivable balance of $3.8 million and $3.6 million as of September 30, 2022 and December 31, 2021, respectively. This lease generated $0.6 million and $0.7 million in real estate income for the three months ended September 30, 2022 and 2021, respectively. This lease generated $2.0 million and $2.1 million in real estate income for the nine months ended September 30, 2022 and 2021, respectively.

The Company owned buildings in Olympia, Washington that were leased to a third party. This lease was classified as a finance lease. On December 17, 2020, the Company sold the Olympia building and other assets as part of a sale and leaseback transaction and this lease was cancelled. The Company applied ASC 842 to a new sublease to the same third party and classified the new sublease as an operating lease. The lease receivable was sold to the purchaser of the assets as part of the sale and leaseback transaction. This lease generated $2.3 million and $2.1 million in real estate income for the three months ended September 30, 2022 and 2021, respectively. This lease generated $6.8 million and $6.3 million in real estate income for the nine months ended September 30, 2022 and 2021, respectively.

The following table summarizes changes in the Company’s lease receivables:

	September 30, 2022		December 31, 2021
Balance, beginning of the year	$	10,378	$	11,045
Interest	2,029		2,783
Lease payments received	(2,700)		(3,450)
Balance, end of the period	9,707		$	10,378
Less current portion	(3,765)		(3,630)
Long-term lease receivables	$	5,942	$	6,748

In addition to these agreements, the Company recorded additional real estate income of $0.5 million on various subleases for the nine months ending September 30, 2022.

13

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

Note 7: NOTES PAYABLE AND CONVERTIBLE NOTES

The Company’s notes payable and convertible notes are as follows:

	LI Lending, LLC		May 2020 Convertible Notes		May 2020 Convertible Notes (Swap)		October 2021 Convertible Note		Other Loans		Total
Balance, December 31, 2020	$	45,362	$	2,855	$	11,867	$	—	$	6,931	$	67,015
Loans advanced, net	—		—		—		14,376		930		15,306
Loan payments	(4,671)		—		—		—		(1,079)		(5,750)
Converted to equity	—		(5,852)		(11,867)		—		—		(17,719)
Accrued interest	7,575		2,997		—		265		1,124		11,961
Balance, December 31, 2021	$	48,266	$	—	$	—	$	14,641	$	7,906	$	70,813
Loans advanced, net	—		—		—		—		15,000		15,000
Loan payments	(4,689)		—		—		—		(1,182)		(5,871)
Converted to equity	—		—		—		—		(2,784)		(2,784)
Accrued interest	5,845		—		—		872		638		7,355
Balance, September 30, 2022	$	49,422	$	—	$	—	$	15,513	$	19,578	$	84,513
Less current portion	—		—		—		—		(9,299)		(9,299)
Long-term portion	$	49,422	$	—	$	—	$	15,513	$	10,279	$	75,214

Convertible Notes

On May 14, 2020, the Company issued $5.8 million in convertible notes to existing investors in the Company. The notes pay interest of 5% per annum and have a maturity date of February 28, 2022. The notes can be converted into SVS of the Company for $0.25 per share at any time at the option of the holder. The Company was permitted to require mandatory conversion at any time that the Company’s stock price remains above $0.50 for 45 consecutive days. In 2021, the Company enacted the mandatory conversion feature and converted the May 2020 Convertible Note balance to subordinate voting shares.

As part of issuing the convertible notes, the investors were given the right to exchange stock in the Company into separate convertible notes (swap notes). In total 29,448,468 shares with a value of $13.7 million were exchanged for $13.7 million in convertible notes. These notes were effective May 28, 2020, have a maturity date of May 28, 2025, and can be converted into Class A Subordinate Voting Shares of the Company for $0.46 per share at any time at the option of the holder. The notes pay no interest if the Company’s annual revenue is greater than $15 million, and 3% annually otherwise. The Company can require mandatory conversion at any time that the Company’s stock price remains above $0.92 for 45 consecutive days. In 2021, the Company exercised the mandatory conversion feature and converted the May 2020 Convertible Note (Swap) balance to subordinate voting shares.

On October 6, 2021, the Company entered into a convertible promissory note purchase agreement for $15 million, less issuance costs of $0.6 million, resulting in net proceeds of $14.4 million. The notes pay interest of 6% per annum and have a maturity date of October 6, 2024. The notes can be converted into SVS of the Company for $1.03 per share at any time at the option of the holder. As of September 30, 2022, no payments have been made for this loan.

LI Lending LLC

On May 10, 2019, the Company entered into a loan agreement with LI Lending LLC, a related party, for $50 million. LI Lending LLC is related because an officer of the Company is a part-owner of LI Lending LLC. As of September 30, 2022, the Company had drawn $45 million on the loan in two amounts, an initial $35 million and a final $10 million, both bearing a 10.25% and 12.25% interest rate, respectively. The outstanding balance as of September 30, 2022 is $49.7 million, less debt discount of $0.3 million, for a net balance of $49.4 million. See Note 11 for further discussion of this related party transaction.

In April 2020, the loan was amended. In exchange for consent to allow the sale of the Pennsylvania and Maryland assets and the release of related collateral, the Company agreed to make prepayments of principal to LI Lending LLC in the amount of $0.3 million per month for an eight-month period beginning on May 1, 2020. The $2 million prepayment was applied to the initial $35 million amount, decreasing the balance to $33 million. Additionally, the Company agreed to pay an increased interest rate of 12.25% on the final $10 million of the loan until such time as this amount has been paid down, with the initial $33 million amount continuing to be subject to the original 10.25% interest rate.

In December 2020, the loan was amended to allow for the release of collateral for the failed sale leaseback transaction described in Note 7 below, which was entered into with Innovative Industrial Properties, Inc. (“IIPR”). The amendment increased both interest rates by 2.5% on the loan amounts but allowed the payments resulting from the incremental interest to be deferred until January 1, 2022. The Company elected to defer payment, and the additional 2.5% interest is accrued each month and added to the balance of the loan. The Company was required to make interest-only payments monthly of 10.25% on the initial $33 million and 12.25% on the final $10 million of the loan until January 1, 2022 when the interest rates of 12.75% for the initial $33 million and 14.75% for the final $10 million took effect for the remaining term.

The loan matures on May 10, 2024. An exit fee of 20% of the principal balance will be due as principal is repaid. Accrued interest expense of $5.8 million includes a loan discount accretion expense of $0.2 million for the nine months ended September 30, 2022. Accrued interest expense of $2.5 million includes a loan discount accretion expense of $0.04 million for the three months ended September 30, 2022. On January 1, 2022, the Company began making the required principal payments in addition to the interest payments for this loan. As of September 30, 2022, the Company has made $4.7 million in payments on this loan.

Other

Outstanding as of September 30, 2022 were other payables totaling $19.6 million which include notes issued as part of the acquisitions of Healthy Pharms, NECC, Island, and Arkansas entities as follows:

Subsidiary	Terms	September 30, 2022		December 31, 2021
Healthy Pharms Inc.	Unsecured convertible note, due November 18, 2021 at 12% per annum	$	—	$	2,784
Healthy Pharms Inc.	Unsecured promissory note at $0.50 per share due December 18, 2022 at 10% per annum (1)	3,463		3,213
Island Global Holdings, Inc.	Promissory note due October 25, 2026 at 6% per annum	10,279		—
NECC	Promissory note due November 15, 2022 at 10% per annum (2)	1,005		—
Island Global Holdings, Inc.	Promissory note due February 28, 2023 at 1.5% per month (3)	3,057		—
Arkansas Entities	Unsecured Promissory note due December 1,2022, monthly interest payments at 14% per annum	1,730		1,709
Equipment Loans	Secured by equipment, monthly payments beginning in 2021 at 15% per annum	44		49
Other	Various	—		151
Total Notes Payable and Convertible Notes		$	19,578	$	7,906

14

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

(1) In November 2021, the unsecured promissory note was modified to be due and payable in full on or before December 18, 2022. The Company concluded the extension resulted in a debt modification under ASC 470.

(2) On July 28, 2022, the parties amended the promissory note to provide for payment of half the principal on the initial maturity date, and the remaining principal and all accrued interest on November 15, 2022. Interest will continue at annual rate of ten percent (10%).

(3) On August 30, 2022, the Company entered into a Promissory Note Purchase Agreement with HI 4Front, LCC and Navy Capital Green Fund, LP. Under the agreement, the Company sold promissory notes totaling $3 million with a six-month maturity bearing 1.5% monthly interest for three months and 2% monthly interest for three months. The notes were unsecured, but would become secured if not repaid within three months.

Construction Finance Liability

On January 28, 2022, a wholly owned subsidiary of the Company acquired property at 29 Everett in conjunction with the NECC Merger (see Note 5 for further details on the transaction). Concurrently, effective January 28, 2022, the Company sold a portion of the property it had acquired in the acquisition for $16 million. In connection with the sale of the property at 29 Everett, the Company agreed to lease the location back for cultivation, effective on January 28, 2022 with available repurchase options. This transaction did not meet the requirements of a sale leaseback transaction and as such was accounted for as a failed sale leaseback. On January 28, 2022, the Company recorded a construction finance liability for the proceeds received from the sale to recognize a liability resulting from the failed sale-leaseback transaction.

The initial term of the agreement is 20 years, with two options to extend the term for five years each. The initial monthly rent payment is equal to $0.1 million for the first year of the agreement, with 3% annual increases over the life of the agreement. As of September 30, 2022, the total finance liability associated with this transaction is $16.0 million. The total interest expense incurred during the three and nine months ending September 30, 2022 was $0.4 million and $1.1 million .

15

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

Note 8 : SHARE CAPITAL AND EQUITY

The Company has authorized an unlimited number of Class A Subordinate Voting Shares (“SVS”) and Class C Multiple Voting Shares (“MVS”), all with no par value.

All share classes are included within share capital in the consolidated statements of shareholders’ equity on an as- converted basis. Each share class is entitled to notice of and to attend any meeting of the shareholders, except a meeting of which only holders of another particular class of shares will have the right to vote. All share classes are entitled to receive dividends, as and when declared by the Company, on an as-converted basis, and no dividends will be declared by the Company on any individual class unless the Company simultaneously declares or pays dividends on all share classes. No subdivision or consolidation of any share class shall be made without simultaneously subdividing or consolidating all share classes in the same manner.

Voting shares activity for the periods presented is summarized as follows:

	Class A Subordinate Voting Shares	Class C Multiple Voting Shares	Total
Balance, December 31, 2021	592,905,396	1,276,208	594,181,604
Share capital issuances	47,481,290	—	47,481,290
Balance, September 30, 2022	640,386,686	1,276,208	641,662,894

Class A Subordinate Voting Shares

Holders of Class A Subordinate Voting Shares are entitled to one vote in respect of each SVS.

Class C Multiple Voting Shares

Holders of Class C Multiple Voting Shares are entitled to 800 votes in respect of each MVS. One MVS can convert to one SVS but are not convertible until the later of the date that (i) the aggregate number of PVS and MVS held by the Initial Holders (being the MVS holders on their initial issuance) are reduced to a number which is less than 50% of the aggregate number of PVS and MVS held by the Initial Holders on the date of completion of the Business Combination with Cannex, and (ii) 3 years following the date of the business combination with Cannex.

Series	Shares outstanding as of September 30, 2022	As converted to SVS Shares
Class A - Subordinate Voting Shares	640,386,686	640,386,686
Class C - Multiple Voting Shares	1,276,208	1,276,208
	641,662,894	641,662,894

On November 23, 2020, the Company closed a brokered private placement and issued 24,644,500 Units at a price of C$0.70 per Unit. Each Unit is comprised of one subordinate voting share of the Company and one-half of a subordinate voting share purchase warrant. Each whole warrant entitles the holder to purchase one subordinate voting share for a period of two years from the date of issuance at an exercise price of C$0.90 per subordinate voting share. Net proceeds from this transaction were $11.6 million net of share issuance costs of $0.7 million.

These warrants meet the criteria in ASC 480, and are therefore classified as derivative liabilities at fair value with changes being reported through the statement of operations. All other warrants detailed in Note 9 did not meet the criteria in ASC480 for liability classification and are classified within equity.

16

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

	9/30/2022	12/31/2021
Share Price	C$0.43	C$1.27
Exercise Price	C$0.90	C$0.90
Expected Life	0.2 years	0.9 years
Annualized Volatility	0.8294	0.4623
Dividend yield	0	0
Discount Rate	0.0378	0.0039
C$ Exchange Rate	1.37	1.27

The decrease in the value of the derivative liability is reflected in the statement of operations as a $3.5 million and $0.5 million gain on the change in fair value of the derivative liability for the nine months ending September 30, 2022 and 2021. Refer to Note 13 for additional discussion of derivative fair value.

Note 9: WARRANTS

As of September 30, 2022, there were share purchase warrants outstanding to purchase up to 29,103,553 SVS shares:

Series	Number of warrants	Weight-average exercise price
Balance, December 31, 2021	26,192,237	$	0.75
Issued	2,999,975	1.00
Exercised	(88,659)	0.56
Balance, September 30, 2022	29,103,553	$	0.75

As of September 30, 2022, the Company has the following warrants outstanding:

Warrants Outstanding	Exercise Price		Expiration Date
10,403,150	C$ 0.90 *		November 23, 2022
209,426	C$ 0.70 *		November 23, 2022
12,135,922	$ 0.82*		December 17, 2022
2,230,080	$ 0.67*		January 29, 2023
2,999,975	$	1.00	April 13, 2024
625,000	C$ 0.80 *		October 6, 2024
500,000	C$ 0.80 *		October 6, 2025
29,103,553

*Represents warrants that are exercisable as of September 30, 2022.

17

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

Note 10: SHARE-BASED COMPENSATION

The Company adopted two equity incentive plans where the Company may grant Class A stock options. Under the terms of the plans, the maximum number of stock options which may be granted are a total of 10% of the number of shares outstanding assuming conversion of all shares to SVS. The exercise price for stock options issued under the plans will be set by the compensation committee of the board of directors but will not be less than 100% of the fair market value of the Company’s shares on the grant date. Stock options have a maximum term of 10 years from the date of grant. Stock options vest at the discretion of the Board.

As of September 30, 2022, the Company had the 47,549,343 options exercisable and 57,051,012 options outstanding, with exercise prices ranging from C$0.10 to C$1.63. Stock option activity is summarized as follows:

	Number of Options	Weighted Average Price CAD$	Weighted Average Years
Balance December 31, 2021	54,282,752	0.94	2.97
Granted	7,460,000	0.82	3.38
Exercised	(51,975)	0.80	0
Forfeited/ Expired	(4,639,765)	1.01	0
Balance September 30, 2022	57,051,012	0.89	2.36

During the nine months ended September 30, 2022 and 2021, the Company recognized share-based compensation of $2.3 million and $8.0 million. During the three months ended September 30, 2022 and 2021, the Company recognized share-based compensation of $0.9 million and $2.6 million, respectively.

In determining the amount of equity-based compensation during the year, the Company used the Black-Scholes option pricing model to establish the fair value of options granted during the year with the following key assumptions:

	2022		2021
Risk-Free Interest Rate	3.62	%	0.87% to 0.92%
Expected Life	3.5 years		5.00 years
Expected Annualized Volatility	89.83	%	86.20% to 93.53%
Forfeiture rate	—	%	—	%
Expected Dividend Yield	—	%	—	%

18

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

Note 11: RELATED PARTIES

Related party transactions

LI Lending LLC

Linchpin Investors LLC (“Linchpin”), a subsidiary of the Company, and LI Lending LLC (“LI Lending”) entered into a Construction Loan Agreement dated May 10, 2019, as amended, whereby Linchpin received an up-to $45.0 million loan from LI Lending of which $48.3 million was outstanding as of December 31, 2021. Mr. Gontmakher, the CEO of the Company, and Roman Tkachenko, a director of the Company, each hold a 14.28% ownership interest in LI Lending. The loan matures in May 2024. Upon maturity, an exit fee of $9 million is payable, for a total payable at maturity of $54 million. $49.7 million of the loan advanced includes the notes payable and accrued interest less debt discount of $0.3 million that was outstanding as of September 30, 2022. Of the $49.4 million outstanding at September 30, 2022, $5.8 million represents interest accrued through September 30, 2022. See Note 7 for details on the outstanding note payable.

Pure Ratios

Leonid Gontmakher, Chief Executive Officer of the Company, holds an interest in an entity related to iWolf Management, LLC, an online marketing company serving the online CBD market which provided online marketing services during 2020 and 2019 for the Company’s Pure Ratios division. Pure Ratios paid $0.3 million for the three and nine months ended September 30, 2021 to this vendor for management fees, pass through marketing costs and customer service. Pure Ratios did not make any such payments during the nine months ended September 30, 2022.

Note 12: CONTINGENCIES

(a)    Cannabis Industry

While marijuana is legal under the laws of several U.S. states (with varying restrictions), the United States Federal Controlled Substances Act classifies all “marijuana” as a Schedule I drug, whether for medical or recreational use. Under U.S. federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of safety for the use of the drug under medical supervision. As such, there is an inherent risk related to the federal government’s position on cannabis. There is additional risk associated with the Company’s business in cannabis that third-party service providers could suspend or withdraw services and regulatory bodies could impose certain restrictions on the issuer’s ability to operate in the U.S. As of September 30, 2022, Company has not estimated a potential liability related to the possible enforcement of laws against the medical cannabis industry.

(b)    Contingent consideration payable

As part of the acquisition of Om of Medicine, LLC and Cannex’s prior acquisition of Pure Ratios, the Company is subject to contingent consideration payable to the sellers. The fair value of the contingent consideration, which is based on specific revenue levels achieved over a 2-3-year period, is as follows:

	Om of Medicine
Balance, December 31, 2021	$	2,393
Changes in fair value	(2,393)
Balance, September 30, 2022	—
Less: current portion	—
Long-term portion	$	—

19

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

The contingent consideration payable is measured at fair value based on unobservable inputs and is considered a Level 3 financial instrument. The determination of the fair value of these liabilities is primarily driven by the Company’s expectations of the respective subsidiaries achieving certain milestones. The expected milestones were assigned probabilities and the expected related cash flows were discounted to derive the fair value of the contingent consideration. The Company had an outstanding balance of contingent consideration of $2.4 million for the period ended December 31, 2021. However, the Company performed analyses and determined it does not anticipate the subsidiaries to reach the required milestone for the year ended December, 31, 2022. As a result, the Company estimated the contingent consideration to be $0 as of September 30, 2022 and recorded a gain on the fair value adjustment.

(c)    Legal Matters

From time to time, the Company may be involved in certain disputes arising in the ordinary course of business. Such disputes, taken in the aggregate, are not expected to have a material adverse effect on the Company. There are also no proceedings in which any of the Company’s directors, officers, or affiliates is an adverse party or has a material interest adverse to the Company’s interest.

On January 26, 2022, Savills, Inc. sued the Company in the U.S. District Court for the Southern District of New York. That lawsuit alleged the Company had breached an alleged agreement with Savills under which the Company was allegedly required to pay Savills a percentage of savings realized under certain incentive programs offered in some jurisdictions, which Savills would assist the Company in obtaining. Savills claimed damages of approximately $19.4 million in connection with its claim that it obtained benefits for the Company allegedly valued at over $129.0 million. The Company denied these allegations, denied the Company had obtained such benefits, disputed Savills’ characterization of the facts, and denied liability. The Company filed a counterclaim against Savills alleging breach of contract by Savills. On August 3, 2022, the parties reached a confidential settlement in principle and agreed to dismissal of all claims, which was finalized on September 12, 2022 and required the Company to pay $0.25 million in five monthly installments beginning in October 2022. In addition to this initial payment, there is a portion of the settlement that is contingent on future tax savings. As of September 30, 2022, this additional contingent amount is not reasonably estimable.

Note 13: FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

ASC 820, Fair Value Measurements, provides guidance on the development and disclosure of fair value measurements. The Company follows this authoritative guidance for fair value measurements, which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the United States of America, and expands disclosures about fair value measurements. The guidance requires fair value measurements be classified and disclosed in one of the following three categories:

Level 1	Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2	Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
Level 3	Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the periods ended September 30, 2022, and 2021, and December 31, 2021. The fair value of the Company’s cash, accounts receivable, other receivables, accounts payable and accrued expenses approximates carrying value due to their short-term nature. The Company’s notes receivable, lease receivables, contingent consideration payable, derivative liabilities, lease liabilities, convertible notes payable, construction finance liability and notes payable approximate fair value due to the instruments bearing market rates of interest or their short term nature. As the interest rates utilized to calculate these instruments approximates market

20

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

value interest rates, the carrying amounts of the instruments approximate fair value, which are primarily based on Level 1 inputs. The fair value of stock options granted were estimated based on a Black-Scholes model during the periods ended September 30, 2022 and December 31, 2021. The estimated fair value of the derivative liabilities, which represents an embedded put included in the convertible notes payable, represent Level 3 measurements.

The following table details the fair value measurements within the fair value hierarchy of the Company's financial instruments, which includes the Level 3 liabilities:

	Fair value at September 30, 2022
	Total		Level 1		Level 2		Level 3
Liabilities:
Derivative liability	$	8	$	—	$	—	$	8
Total liabilities	$	8	$	—	$	—	$	8

	Fair value at December 31, 2021
	Total		Level 1		Level 2		Level 3
Liabilities:
Derivative liability	$	3,502	$	—	$	—	$	3,502
Total liabilities	$	3,502	$	—	$	—	$	3,502

The table below provides a summary of the changes in fair value of the derivative liabilities measured on a recurring basis using significant unobservable inputs (Level 3):

	For the Nine Months Ended September 30,
Derivative liability:	2022		2021
Balance, beginning of period	$	3,502	$	5,807
(Gain) loss on fair value of derivative liability	(3,494)		(502)
Change in fair value of derivative liability upon exercise of warrants	—		(1,427)
Balance, end of period	$	8	$	3,878

There were no transfers between fair value levels for the nine months ended September 30, 2022 and the year ending December 31, 2021.

(a)    Financial Risk Management

The Company is exposed in varying degrees to a variety of financial instruments related risks. The Company's board of directors mitigate these risks by assessing, monitoring and approving the Company’s risk management processes.

(b)    Credit Risk

Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The Company’s credit risk is primarily attributable to cash, accounts receivable, lease receivables, other receivables, and notes receivable. The Company’s maximum credit risk exposure is equivalent to the carrying value of these instruments at the financial statement date. The risk to cash deposits is mitigated by holding these instruments with regulated financial institutions. Lease receivables, notes receivables and other receivables credit risk arises from the

21

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

possibility that principal and interest due may become uncollectible. The Company mitigates this risk by managing and monitoring the underlying business relationships.

The Company maintains cash with federally insured financial institutions. As of December 31, 2021, the Company exceeded federally insured limits by approximately $11 million. The Company did not exceed any federally insured limits at any of its financial institutions as of September 30, 2022. The Company has historically not experienced any losses in such accounts. As of September 30, 2022, the Company held an immaterial amount of cash in a Canadian account that is denominated in C$.

As of September 30, 2022 and December 31, 2021, the maximum credit exposure related to the carrying amounts of accounts receivable, other receivable, notes receivable and lease receivables was $18.4 million and $12.7 million, respectively.

(c)    Liquidity Risk

The Company manages liquidity risk through the management of its capital structure. The Company’s approach to managing liquidity is to raise sufficient capital to settle obligations and liabilities when due. The Company has raised capital as needed, however there is no guarantee the company will be able to continue to raise funds in the same manor it has historically.

The Company has the following obligations as of September 30, 2022, which are expected to be payable in the following respective periods:

	Less than 1 year		1 to 3 years		3 to 5 years		Greater than 5 years		Total
Accounts payable and accrued liabilities	$	22,923	$	1,200	$	—	$	—	$	24,123
Convertible notes, notes payable and accrued interest	9,299		75,214		—		—		84,513
Construction finance liability	—		16,000		—		—		16,000
Total	$	32,222	$	92,414	$	—	$	—	$	124,636

(d)    Foreign Exchange Risk

The Company is exposed to exchange rate fluctuations between United States and Canadian dollars. The Company’s share price is denominated in Canadian dollars. If the Canadian dollar declines against the United States dollar, the United States dollar amounts available to fund the Company through the exercise of stock options or warrants will be reduced. The Company also has bank accounts with balances in Canadian dollars. The value of these bank balances if converted to U.S. dollars will fluctuate. While the Company maintains a head office in Canada where it incurs expenses primarily denominated in Canadian dollars, such expenses are a small portion of overall expenses incurred by the Company. The Company does not have a practice of trading derivatives and does not engage in “natural hedging” for funds held in Canada.

22

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

Note 14: SEGMENT INFORMATION

Reportable Segments

Operating segments are components of the Company that combine similar business activities, with activities grouped to facilitate the evaluation of business units and allocation of resources by the Company’s board of directors and management. As of September 30, 2022, the Company had two reportable segments: THC Cannabis for the THC cannabis cultivation, manufacturing, and distribution and CBD Wellness which encompasses the Company's CBD sales to third party consumers.

The below table presents revenues and net (income) loss by type for the three and nine months ended September 30, 2022 and 2021, as well as assets by type as of September 30, 2022 and December 31, 2021:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net Revenues
THC Cannabis	$	32,308	$	25,529	$	86,286	$	74,073
CBD Wellness	166		412		675		1,959
Corporate	—		—		—		—
Total Net Revenues	32,474		25,941		86,961		76,032
Net (Income) Loss attributable to shareholders
THC Cannabis	(363)		949		3,739		4,790
CBD Wellness	(51)		381		(170)		1,201
Corporate	9,020		3,269		17,487		15,920
Total Net Loss	$	8,606	$	4,599	$	21,056	$	21,911

Assets	September 30, 2022		December 31, 2021
THC Cannabis	$	318,717	$	238,933
CBD Wellness	839		805
Corporate	443		15,801
Total Assets	$	319,999	$	255,539

Note 15: INCOME TAXES

The following table summarizes the Company's income tax expense:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Net loss before income taxes	$	(5,279)	$	(53)	$	(11,239)	$	(11,351)
Income tax expense	(3,322)		(4,541)		(9,802)		(10,545)

The Company has computed its provision for income taxes under the discrete method which treats the year-to-date period as if it were the annual period and determines the income tax expense or benefit on that basis. The discrete method is applied when application of the estimated annual effective tax rate is impractical because it is not possible

23

4 FRONT VENTURES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021 (unaudited)

(Amounts expressed in thousands of U.S. dollars except for share and per share data)

to reliably estimate the annual effective tax rate. The Company believes the use of this discrete method is more appropriate than the annual effective tax rate method due to the early growth stage of the business. At this time, there is a high degree of uncertainty in estimating the Company’s annual pre-tax income and significant non-deductible expenses so the Company cannot reliably estimate the annual effective tax rate.

Due to its cannabis operations, the Company is subject to the limitations of Internal Revenue Code (“IRC”) Section 280E. Under IRC Section 280E, the Company is only allowed to deduct expenses directly related to sales of its cannabis products. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E for the Company's expenses related to its plant-touching cannabis operations.

The federal statute of limitation remains open for the 2018 tax year to the present. The state income tax returns generally remain open for the 2017 tax year through the present. Net operating losses arising prior to these years are also open to examination if and when utilized.

Note 16: SUBSEQUENT EVENTS

On October 13, 2022, the Company entered into a Prepaid Forward Purchase Agreement with Frisco SPV, LLC. Under the terms of the agreement, Frisco SPV, LLC agreed to advance the Company $3.75 million in exchange for a share of the proceeds of the Company’s planned litigation against four former licensing clients. The funder’s share is equal to 1.5 multiplied by the amount of the advance, plus 35 percent of the proceeds of the litigation after deducting the funder’s multiple return, plus, beginning October 2024, 15% interest on the advance, if not repaid sooner. On October 21 and 25, 2022, Frisco SPV, LLC completed the funding as agreed. The funding is unsecured and non-recourse in the event the Company is unsuccessful in these proceedings.

On October 27, 2022, Company subsidiary IL Grown Medicine LLC entered into a First Amendment to Lease Agreement amending its lease with IIP-IL 6 LLC for the Company’s Matteson, Illinois facility by creating an option for IL Grown to increase the tenant improvement allowance for the facility by between $15.0 million and $19.9 million. On November 10, 2022, IL Grown exercised its option and entered into a Second Amendment to Lease Agreement increasing the tenant improvement allowance under the lease by $19.9 million; extending the term of the lease to 20 years after the amendment; increasing the base rent by $0.2 million per month (abated until April 1, 2023); and increasing the security deposit by $2.2 million, to be funded pro rata out of draws on the tenant improvement allowance.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Investors should read the following discussion in conjunction with the unaudited financial statements and notes thereto included under Part 1, Item 1 of this Quarterly Report on Form 10-Q. In addition, investors should refer to our audited consolidated financial statements and notes thereto and related Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Disclosure Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking information about the Company that is intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1955. Forward-looking statements are statements that are not historical facts. Words such as "guidance," "expect," "will," "may," “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “suggests,” “potential” and similar expressions are intended to identify forward-looking statements. There statements include information regarding our plans, strategies, and expectations of future financial performance and prospects. Forward-looking statements are not guarantees of performance. These statements are based upon the current beliefs and expectations of our management and are subject to significant risk and uncertainties that could cause actual results to differ materiality from those expressed in, or implied or projected by, the forward-looking information and statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot assure investors that the expectations will prove to be correct. Among the factors that could cause actual results to differ materially from the expectations are acts of war or terrorism and the impact on the social and economic conditions in the United States, the effects of the COVID pandemic, and changes in the legalization of marijuana across the United States. More information on factors that could cause actual results to differ materially from those anticipated is included from time to time in our reports filed with the Securities and Exchange Commissions, including our Annual Report on Form 10-K for the year ended December 31, 2021. New risk factors emerge over time and it is not possible to predict all such risk factors, or to assess the impact such risk factors have on the business. We undertake no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.

Overview

4Front Ventures Corp. has two primary operating segments: THC Cannabis and CBD Wellness. With regard to its THC Cannabis segment, as of September 30, 2022, the Company operates six dispensaries in Massachusetts, Illinois, and Michigan, primarily under the “MISSION” brand name and nine production and cultivation facilities in Massachusetts, Illinois and California.

The Company's six "MISSION" branded dispensaries are located in Brookline, MA, Georgetown, MA, Worcester, MA, South Shore (Chicago), IL, Calumet City, IL, and Ann Arbor, MI. The Georgetown, MA and Worcester, MA locations are co-located with the Company's cultivation facilities in those towns.

4Front operations are structured in key geographic locations across the United States to scale operations efficiently and position the company for future growth opportunities as cannabis legalization efforts continue across the U.S. and federally. Management intends to continue scaling operations in Illinois, Massachusetts, and California to increase its market share. The Company has made significant investments in manufacturing facilities in each of these locations. The Company acquired a new cultivation facility in Holliston, MA in the New England Cannabis Corporation ("NECC") acquisition (Note 5) in January 2022 which doubled the Company's cultivation footprint in the Massachusetts market. During 2022, the Company has also ramped up production at its Commerce facility which opened in January and is already selling into more than 200 retailers in the state. In additions to scaling and driving

25

operational effectiveness, the Company will also focus on developing trusted brand products to grow revenue, build customer loyalty and market share.

The Company's nine production and cultivation assets differ by state. In Massachusetts, the Company operates an indoor cultivation facility in Worcester, MA (~4k square feet of flowering canopy), an indoor cultivation and production facility in Holliston, MA (~15k square feet of flowering canopy), and an indoor cultivation and production facility in Georgetown, MA (~10k square feet of flowering canopy). In Illinois, the Company operates an indoor cultivation and production facility in Elk Grove, IL (~9k square feet of flowering canopy). Finally, in California the Company operates a production facility in Commerce, CA (~170k square feet of production and manufacturing space), a greenhouse cultivation facility in Monterrey County, CA (~80k square feet), and outdoor, hoophouse and nursery cultivation facilities in Watsonville, CA (totaling ~240k square feet).

Also, as part of its THC Cannabis segment, the Company leases real estate and sells equipment, supplies and intellectual property to cannabis producers in the state of Washington.

The Company’s CBD Wellness segment is focused upon its ownership and operation of its wholly owned subsidiary, Pure Ratios Holdings, Inc. (“Pure Ratios”), a CBD-focused wellness company in California, that sells non-THC products throughout the United States.

While marijuana is legal under the laws of several U.S. states (with varying restrictions), the United States Federal Controlled Substances Act classifies all “marijuana” as a Schedule I drug, whether for medical or recreational use. Under U.S. federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of safety for the use of the drug under medical supervision.

Recent Developments

Asset Acquisition of Bloom Farms

On August 19, 2022, the Company completed an asset acquisition of certain assets of Bloom Farms. Please see Note 5 of the financial statements for a full description of the asset acquisition transaction.

COVID-19 Pandemic

In March 2020, the World Health Organization (“WHO”) declared COVID-19 a global pandemic, and the United States declared a national emergency with respect to COVID-19. Management continues to actively monitor the developments regarding the pandemic and the impact the pandemic could have on our business, results of operations, financial condition, and most importantly the health and safety of our workforce. Given the continued volatility of the COVID-19 pandemic and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 pandemic on our results of operations, financial condition, or liquidity for 2022. Any recovery from negative impacts to our business and related economic impact due to the COVID-19 pandemic may also be slowed or reversed by a number of factors, including the current widespread resurgence in COVID-19 infections attributable to the Omicron variant, combined with the seasonal flu. As such, we are unable to reasonably estimate the duration of the pandemic or fully ascertain its long-term impact to our business.

War in Ukraine

In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these financial statements. The specific impact on our financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.

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Critical Accounting Policies and use of Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Critical accounting policies and estimates are identified and discussed in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on April 18, 2022. Although we believe our estimates and judgments are reasonable, they are based upon information available at the time the judgment or estimate is made. Actual results may differ significantly from estimates under different assumptions or conditions.

Results of Operations

Three Months Ended September 30, 2022 Compared With Three Months Ended September 30, 2021

The following table sets forth our consolidated statement of operations for the three months ended September 30, 2022 and 2021, and the change between the two years ($ in thousands):

	For the Three Months Ended September 30,				Change
	2022		2021		$		%
Revenue from Sale of Goods	$	29,067	$	23,126	$	5,941	26%
Real Estate Income	3,407		2,815		592		21%
Total Revenues	32,474		25,941		6,533		25%
Cost of Goods Sold	(17,427)		(10,269)		(7,158)		70%
Gross profit	15,047		15,672		(625)		4%
Total Operating Expense	14,530		16,596		(2,066)		(12)%
Income (Loss) from Operations	517		(924)		1,441		156%
Total Other income (expense), net	(5,796)		871		(6,667)		(765)%
Net Loss Before Income Taxes	(5,279)		(53)		(5,226)		9860%
Income Tax Expense	(3,322)		(4,541)		1,219		27%
Net Loss	$	(8,601)	$	(4,594)	$	(4,007)	87%

The Company has been focused on optimizing its operations, leveraging the assets acquired through acquisitions and realizing added synergies from expanding the size of its overall business and further vertically integrating its operations to achieve profitability.

Revenue from sale of goods for the three months ended September 30, 2022 was $29.1 million, an increase of $5.9 million or 26% compared to the three months ended September 30, 2021. In Q3 2022, wholesale and retail revenue was 26% and 66% of total revenue, respectively, as compared to 1% and 83% in the same period in 2021. Real estate income was 12% and 16% for the three months ended September 30, 2022 and 2021, respectively.

Revenue from retail sales for the three months ended September 30, 2022 was $21.5 million, which is flat as compared to the three months ended September 30, 2021. Increases in Massachusetts retail revenue were tempered by softness in retail revenues in Illinois and Michigan as compared to the three months ended September 30, 2021.

Revenue from sale of wholesale goods for the three months ended September 30, 2022 was $7.8 million, an increase of $6.0 million or 395% compared to the three months ended September 30, 2021. The increase is primarily attributable to the addition of the California wholesale business, growth in Illinois, and strong wholesale performance in Massachusetts as our brands continue to resonate with consumers outside our own dispensaries.

27

Finally, the addition of the new Holliston, Massachusetts cultivation facility added in the NECC acquisition has positioned the Company to aggressively expand further into the Massachusetts wholesale market.

Real Estate Income

Real Estate Income (Note 6) from leasing cannabis production facilities for the three months ended September 30, 2022 was $3.4 million, an increase of $0.6 million or 21% as compared to the three months ended September 30, 2021. This increase in real estate income is attribute to new subleases of building space in Illinois and California.

Gross Profit

Gross profit is calculated as revenue less cost of goods sold (“COGS”). COGS includes the direct costs attributable to the cultivation, production, manufacturing and purchase of the products sold. These costs include the direct cost of labor, seeds, growing material, raw materials and packaging, as well as other indirect costs such as utilities and supplies used in the growing process, post-harvest costs, indirect labor for individuals involved in the growing, quality control and inventory processes as well as certain costs related to its facilities.

In addition to market fluctuations, cannabis costs are affected by various state regulations that limit the sourcing and procurement of cannabis products. The change in regulatory environments may create fluctuations in gross profit over comparative periods.

Gross profit for the three months ended September 30, 2022 was $15.0 million or 46% of revenue compared to $15.7 million or 60% of revenue for the three months ended September 30, 2021. The decrease in gross profit percentage of 14% is primarily due to decreased pricing across the Company's markets. The decrease in gross profit margin has been mitigated by increases in retail sell-through of the Company owned produced products primarily in Illinois and Massachusetts. Improvements in flower yields and quality led to increases in revenue, market share, and gross margin in Massachusetts for the three months ended September 30, 2022. In late Q3 2022, the Illinois has experienced similar improvements in flower yields and quality.

Total Operating Expenses

Operating expenses consist of selling and marketing expenses, general and administrative expenses, depreciation and amortization, transaction and restructuring expenses, and equity based compensation expense. Total operating expenses for the three months ended September 30, 2022 were $14.5 million, a decrease of $2.1 million or 12%, as compared to the three months ended September 30, 2021. This decrease is primarily driven by a decrease in equity based compensation expense of $1.7 million as a result of a number of terminations of individuals who held stock options resulting in lower compensation expense.

Total Other Income (Expense), net

Other Income (Expense) consists primarily of interest income, interest expense, change in fair value of derivative liability, and loss on litigation settlement. Total Other Income (Expense) for the three months ended September 30, 2022 was ($5.8) million, as compared to $0.9 million for the three months ended September 30, 2021. This is primarily driven by a decrease in other income attributable to an increase in interest expense of $1.6 million and a decrease in the change in fair value liability of $2.9 million. The increase in interest expense is attributable to the $16 million of incremental debt added to finance the NECC acquisition (Note 5), which resulted in an increase of $0.4 million in interest expense and increased interest incurred related to the promissory notes used to finance the Island and NECC acquisitions. During the three months ended September 30, 2021, the Company recorded a $3.3 million gain on the fair value of its derivative liability.

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Nine Months Ended September 30, 2022 Compared With Nine Months Ended September 30, 2021

The following table sets forth our consolidated statement of operations for the nine months ended September 30, 2022 and 2021, and the change between the two years ($ in thousands):

	For the Nine Months Ended September 30,				Change
	2022		2021		$		%
Revenue from Sale of Goods	$	77,638	$	67,658	$	9,980	15	%
Real Estate Income	9,323		8,374		949		11	%
Total Revenues	86,961		76,032		10,929		14	%
Cost of Goods Sold	(46,144)		(30,210)		(15,934)		53	%
Gross profit	40,817		45,822		(5,005)		11	%
Total Operating Expense	45,640		45,725		(85)		—	%
Income (Loss) from Operations	(4,823)		97		(4,920)		5072	%
Total Other income (expense), net	(6,416)		(11,448)		5,032		44	%
Net Loss Before Income Taxes	(11,239)		(11,351)		112		1	%
Income Tax Expense	(9,802)		(10,545)		743		7	%
Net Loss	$	(21,041)	$	(21,896)	$	855	4	%

Revenue from sale of goods for the nine months ended September 30, 2022 was $77.6 million, an increase of $10.0 million or 15% compared to the nine months ended September 30, 2021. Wholesale revenue was 18 % and 5% for the nine months ended September 30, 2022 and 2021, respectively. Retail revenue was 71% and 84% for the nine months ended September 30, 2022 and 2021, respectively. Real estate income was 11% for the nine months ended September 30, 2022 and 2021.

Revenue from retail sales for the nine months ended September 30, 2022 was $61.8 million, an decrease of $1.8 million or 3% compared to the same period in 2021. Increases in Massachusetts retail revenue were offset by softness in retail revenues in Illinois and Michigan.

Revenue from sale of wholesale goods for the nine months ended September 30, 2022 was $15.9 million, an increase of $11.8 million or 238% compared to the same period in 2021. The increase is primarily attributable to the addition of the CA wholesale business in January 2022, coupled with Illinois and Massachusetts strong wholesale performance as our brands continue to resonate with consumers outside our own dispensaries. Finally, the addition of the new cultivation facility added in Massachusetts from the NECC acquisition has positioned the Company to aggressively expand further into the Massachusetts wholesale market.

Real Estate Income

Real Estate Income from leasing cannabis production facilities for the nine months ended September 30, 2022 was $9.3 million, an increase of $0.9 million or 11% compared to the $8.4 million recognized for the nine months ended September 30, 2021. In 2022, the increase in real estate income is attribute to new subleases of building space in Illinois and California.

Gross Profit

Gross profit for the for the nine months ended September 30, 2022 was $40.8 million or 47% of revenue compared to $45.8 million or 60% of revenue for the nine months ended September 30, 2021. The decrease in gross profit percentage of 13% is primarily due to decreased pricing across the Company's wholesale and retail markets. The

29

decrease has also been mitigated by increases in retail sell-through of the Company owned produced products primarily in Illinois and Massachusetts. Additionally, improvements in flower yields and quality led to an increases in revenue, market share and gross margin in Massachusetts for the nine months ended September 30, 2022. Late in Q3 2022, the Illinois cultivation facility experienced similar improvements in yields and quality.

Total Operating Expenses

Operating expenses consist of selling and marketing expenses, general and administrative expenses, depreciation and amortization, transaction and restructuring expenses, and equity based compensation expense. Total operating expenses for the nine months ended September 30, 2022 were flat at $45.6 million as compared to the same period in 2021.

Total Other Income (Expense), net

Other Income (Expense) consists primarily of interest income, interest expense, change in fair value of derivative liability, amortization of loan discount, and loss on litigation settlement. Total Other Income (Expense) for the nine months ended September 30, 2022 was ($6.4) million, as compared to ($11.4) million for the nine months ended September 30, 2021. As part of the 2022, contingent consideration from the OM acquisition, the Company determined it was no longer probable the milestones would be reached. This resulted in a $2.4 million gain on the contingent consideration to be recognized. During the nine months ended September 30, 2021, there was a loss on a lease termination of $1.2 million and a debt to equity conversion that resulted in a loss of $2.9 million. There were no similar losses recorded in the comparable 2022 period.

Non-GAAP Financial and Performance Measures

In addition to providing financial measurements based on GAAP, we provide additional financial metrics that are not prepared in accordance with GAAP. Management uses non-GAAP financial measure, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes and to evaluate the Company’s financial performance. Management uses the non-GAAP measurement of adjusted EBITDA, which we believe reflects our ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business, as it facilitates comparing financial results across accounting periods. We also believe that this non-GAAP financial measure enables investors to evaluate the Company’s operating results and future prospects in the same manner as management. This non-GAAP financial measures may also exclude expenses and gains that may be unusual in nature, infrequent or not reflective of the Company’s ongoing operating results. As there are no standardized methods of calculating non-GAAP measures, our methods may differ from those used by others, and accordingly, the use of these measures may not be directly comparable to similarly titled measures used by others. Accordingly, non-GAAP measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

Adjusted EBITDA

Adjusted EBITDA is a financial measure that is not calculated in accordance with U.S. GAAP. Management believes that because adjusted EBITDA excludes (a) certain non-cash expenses (such as depreciation, amortization and stock-based compensation) and (b) expenses that are not reflective of the Company’s core operating results over time (such as restructuring costs, litigation or dispute settlement charges or gains, and transaction-related costs), this measure provides investors with additional useful information to measure the Company’s financial performance, particularly with respect to changes in performance from period to period. The Company’s management uses adjusted EBITDA (a) as a measure of operating performance, (b) for planning and forecasting in future periods, and (c) in communications with the Company’s board of directors concerning the Company’s financial performance. The Company’s presentation of adjusted EBITDA is not necessarily comparable to other similarly titled captions of

30

other companies due to different methods of calculation and should not be used by investors as a substitute or alternative to net loss or any measure of financial performance calculated and presented in accordance with U.S. GAAP. Instead, management believes adjusted EBITDA should be used to supplement the Company’s financial measures derived in accordance with U.S. GAAP to provide a more complete understanding of the trends affecting the business.

Although adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, adjusted EBITDA has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for, or more meaningful than, amounts determined in accordance with U.S. GAAP. Some of the limitations to using non-GAAP measures as an analytical tool are (a) they do not reflect the Company’s interest income and expense, or the requirements necessary to service interest or principal payments on the Company’s debt, (b) they do not reflect future requirements for capital expenditures or contractual commitments, and (c) although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and non-GAAP measures do not reflect any cash requirements for such replacements.

Adjusted EBITDA is defined by the Company as earnings before interest, taxes, depreciation and amortization, accretion, share-based compensation expense, legal settlement, change in value of derivative liability, foreign exchange gain (loss), loss on lease termination, loss on litigation, other non-cash expenses, and one-time charges related to acquisition costs, financing-related costs, extraordinary pre-opening expenses and non-recurring expenses.

We consider these measures to be an important indicator of the financial strength and performance of our business. The following table reconciles adjusted EBITDA to its closest GAAP measure. For comparative purposes, certain prior year amounts have been reclassified to conform to the current year presentation.

For the nine months ended September 30, 2022 and 2021, adjusted EBITDA consisted of the following:

Nine months ended September 30,	2022		2021
Net loss (GAAP)	$	(21,041)	$	(21,896)
Interest income	(8)		(13)
Interest expense	15,072		7,894
Amortization of loan discount upon conversion of debt to equity	—		2,915
Income tax expense	9,802		10,545
Depreciation and amortization	6,844		3,668
Accretion of lease liability	11,440		—
Equity based compensation	2,290		7,978
Change in contingent consideration payable	(2,393)		—
Change in value of derivative liability	(3,494)		(502)
Acquisition, transaction, and other one-time costs	3,876		4,854
Non-cash inventory adjustment	1,600		—
Non-cash lease amortization	3,258		2,203
Loss on litigation settlement	250		—
Loss on lease termination	—		1,210
Adjusted EBITDA (Non-GAAP)	$	27,496	$	20,891

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For the three months ended September 30, 2022 and 2021, adjusted EBITDA consisted of the following:

Three months ended September 30,	2022		2021
Net loss (GAAP)	$	(8,601)	$	(4,594)
Interest income	(6)		(2)
Interest expense	5,798		2,532
Amortization of loan discount upon conversion of debt to equity	—		—
Income tax expense	3,322		4,541
Depreciation and amortization	2,155		1,502
Accretion of lease liability	4,040		—
Equity based compensation	862		2,603
Change in contingent consideration payable	—		—
Change in value of derivative liability	(420)		(3,345)
Commerce facility pre-opening expense	—		2,035
Acquisition, transaction, and other one-time costs	866		1,800
Non-cash lease amortization	1,045		438
Loss on litigation settlement	250		—
Adjusted EBITDA (Non-GAAP)	$	9,311	$	7,510

Adjusted EBITDA should not be considered in isolation from, or as a substitute for, net loss. There are a number of limitations related to the use of adjusted EBITDA as compared to net loss, the closest comparable GAAP measure. Adjusted EBITDA excludes:

•Interest income and expense

•Current income tax expense

•Depreciation and amortization expense

•Accretion expense related to a periodic update of the present value of a liability

•Equity based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy

•Legal settlements

•Non-cash change in fair value of derivative liability

•Acquisition, transaction, and other expenses (income), which vary significantly by transaction and are excluded to evaluate ongoing operating results

Liquidity and Capital Resources

As of September 30, 2022 and December 31, 2021, we had total current liabilities of $69.1 million and $48.8 million, respectively, and current assets of $51.1 million and $50.9 million, respectively, to meet our current obligations. As of September 30, 2022, we had a working deficit of $18.0 million, compared to working capital of $2.0 million, as of December 31, 2021. The decrease of $20.0 million is driven primarily by a decrease in cash and increases in accounts payable and taxes payable, partially offset by increases in accounts receivable, other receivables, and inventory, and decreases in accrued expenses and other current liabilities, derivative liability, and current portion of convertible notes.

The Company is an early-stage growth company. It is generating cash from sales and is deploying its capital reserves to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and near term. Capital reserves are being utilized for capital expenditures and improvements in existing facilities, product development and marketing, as well as customer, supplier and investor and industry relations.

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Historically, the Company has raised capital as needed however there is no guarantee the Company will be able to continue to raise funds in the same manor it has historically.

Cash Flows

Net Cash (Used in) Provided by Operations

Net cash used in operating activities was $2.0 million for the nine months ended September 30, 2022, a decrease of $5.9 million as compared to $4.0 million of net cash provided by operating activities for the nine months ended September 30, 2021. The decrease is primarily attributable to increases in working capital and the overall scaling of the Company's California operation.

Net Cash Used in Investing Activities

Net cash used in investing activities was $27.0 million for the nine months ended September 30, 2022, an increase of $14.2 million as compared to $12.7 million of cash used in investing activities for the nine months ended September 30, 2021. The increase can be attributed to the $24.5 million in cash used to complete the NECC acquisition, partially offset by a reduction in purchases of property and equipment to $2.5 million for the nine months ended September 30, 2022 as compared to $14.0 million spent on property and equipment during the nine months ended September 30, 2021.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities was $11.7 million for the nine months ended September 30, 2022, an increase of $13.3 million as compared to $1.7 million of cash used in financing activities for the nine months ended September 30, 2021. The increase is attributed to proceeds from the construction finance liability of $16.0 million associated with the NECC acquisition and a $3 million promissory note purchase during the nine months ended September 30, 2022. This was partially offset by repayments of notes payable during the nine months ended September 30, 2022 of $5.9 million and compared to $3.5 million paid in the comparable 2021 period. Refer to Note 7 for additional discussion.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to the Company, we have not identified any standards that we believe merit further discussion. We do not expect the adoption of any recently issued accounting pronouncements to have a significant impact on our financial position, results of operations, or cash flows.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.

Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard AS 2201, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

Material Weaknesses in Internal Control

The Company did not fully design and implement effective control activities based on the criteria established in the COSO framework. The Company has identified deficiencies that constitute a material weakness, either individually or in the aggregate. This material weakness is attributable to the following factors:

•We did not have sufficient accounting staff resources to timely perform closing and audit-related procedures.

•We did not have effective controls over the review procedures for balance sheet account reconciliations and manual journal entries.

•We did not have documented evidence of review procedures and did not have sufficient segregation of duties within our accounting function.

Due to the existence of the above material weakness, management, including the CEO and CFO, has concluded our internal control over financial reporting was not effective as of September 30, 2022. This material weakness creates a possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis.

Management conducted its evaluation of disclosure controls and procedures under the supervision of our CEO and CFO. Based upon, and as of the date of, this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures may not be effective as of September 30, 2022 due to the material weaknesses listed above.

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Remediation of Material Weaknesses in Internal Control over Financial Reporting

The Company continues to strengthen our internal control over financial reporting and is committed to ensuring that such controls are designed and operating effectively. The Company is implementing process and control improvements to address the above material weakness as follows:

•The Company will assess sufficient resources, both in accounting staff and related technology, needed to timely perform closing and audit-related procedures and align identified resources.

•The Company will assess controls needed to effectively review procedures for balance sheet account reconciliations and manual journal entries and implement identified controls.

•The Company will assess review procedures to have sufficient segregation of duties within our accounting function, then standardize and document such procedures for evidence of review.

The material weakness in the Company’s internal control over financial reporting will not be considered remediated until the remediated controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. The Company is working to have the material weaknesses remediated as soon as possible. However, there is no assurance that the remediation will be fully effective. As described above, the material weakness has not been fully remediated as of the filing date of this Form 10-Q. If these remediation efforts do not prove effective and control deficiencies and material weaknesses persist or occur in the future, the accuracy and timing of the Company’s financial reporting may be materially and adversely affected.

Inherent Limitations on Effectiveness of Controls

Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting

The Company has begun implementing changes to strengthen the Company's internal controls, including the hiring of a permanent CFO and Director of External Reporting, evaluating systems that could aid in improving controls, and implementing month end close procedures that include monthly flux analysis, gross margin analysis and performing balance sheet reconciliations.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings1

On January 26, 2022, Savills, Inc. sued the Company in the U.S. District Court for the Southern District of New York. That lawsuit alleged that the Company had breached an alleged agreement with Savills under which the Company was allegedly required to pay Savills a percentage of savings realized under certain incentive programs offered in some jurisdictions, which Savills would assist the Company in obtaining. Savills claimed damages of approximately $19.4 million in connection with its claim that it obtained benefits for the Company allegedly valued at over $129.0 million. The Company denied these allegations, denied the Company had obtained such benefits, disputed Savills’ characterization of the facts, and denied liability. The Company filed a counterclaim against Savills alleging breach of contract by Savills. On August 3, 2022, the parties reached a confidential settlement in principle and agreed to dismissal of all claims, which was finalized on September 12, 2022 and required the Company to pay $0.25 million in five monthly installments beginning in October 2022. In addition to this initial payment, there is a portion of the settlement that is contingent on future tax savings. As of September 30, 2022, this additional contingent amount is not reasonably estimable.

Apart from the foregoing and ongoing legal proceedings, from time to time, we may be subject to various other legal proceedings and claims that are routine and incidental to our business. Although some of the legal proceedings set forth herein may result in adverse decisions or settlements, management believes that the final disposition of such matters will not have a material adverse effect on our business, financial position, results of operations or cash flows.

Item 1A. Risk Factors

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On January 14, 2022, pursuant to a settlement agreement to settle an unsecured promissory note with an outstanding balance of $3.2 million at December 31, 2021, the Company issued 6,235,512 SVS to LJM Investment Group.

On January 28, 2022, pursuant to an agreement and plan of merger whereby New England Cannabis Corporation, Inc., a Massachusetts corporation (“NECC”) became a wholly owned subsidiary of the Company, the Company issued 28,571,428 SVS, with a deemed value of $1.05 per share, or a total estimated valuation of $9 million to Mr. Kenneth V. Stevens, the sole owner of all of the issued and outstanding capital stock of NECC.

On April 25, 2022, pursuant to an agreement and plan of merger whereby Island Global Holdings, Inc., a California corporation (“Island”) became a wholly owned subsidiary of the Company, the Company issued an aggregate of 8,783,716 SVS and warrants to purchase 2,999,975 SVS at a price of $1.00 per SVS to certain shareholders and debt holders of Island.

On August 19, 2022, the Company issued 3,750,000 SVS, was a deemed value of $0.56 per share, or a total estimated valuation of $2.1 million for the asset acquisition of certain assets of Bloom Farms.

The foregoing transactions did not involve any underwriters, any underwriting discounts or commissions, or any public offering. We believe the offers, sales, and issuances of the above securities were exempt from registration under the Exchange Act (including Regulation D promulgated thereunder) by virtue of Section 4(a)(2) of the Securities Act, because the issuance of securities to the recipients did not involve a public offering. The recipients of

1

36

the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their relationships with us or otherwise, to information about us. The issuances of these securities were made without any general solicitation or advertising.

The Company did not repurchase any shares during the reporting period.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

The Company advanced its annual shareholder meeting from December to June, and held its annual shareholder meeting on June 22, 2022.

37

Item 6. Exhibits

Exhibit Number	Exhibit Description	Form	Filing Date	Exhibit Number	Filed Herewith
31.1	Certification of the Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act				x
31.2	Certification of the Chief Financial Officer (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act				x
32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(b) Under the Securities Exchange Act of 1934 and Section 1350 of Chapter 60 of Title 18 of the United States Code *				x
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

+    Indicates management contract or compensatory plan.

*    This certification is being furnished solely to accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, and it is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

38

SIGNATURES

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 thereunto duly authorized.

	4FRONT VENTURES CORP.
Date: November 14, 2022	By:	/s/ Leo Gontmakher
		Leo Gontmakher
		Chief Executive Officer and Director
		(Principal Executive Officer)
Date: November 14, 2022	By:	/s/ Keith Adams
		Keith Adams
		Chief Financial Officer
		(Principal Financial Officer)

 

39

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Leonid Gontmakher, certify that: 

1.I have reviewed this quarterly report on Form 10-Q of 4Front Ventures Corp.; 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): 

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Date: November 14, 2022	/s/ Leonid Gontmakher
	Leonid Gontmakher, Chief Executive Officer  (principal executive officer)

EX-31.2

Exhibit 31.2

Certification of Interim Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Keith Adams, certify that: 

1.I have reviewed this quarterly report on Form 10-Q of 4Front Ventures Corp.; 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): 

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Date: November 14, 2022	/s/ Keith Adams
	Keith Adams, Chief Financial Officer  (principal financial and accounting officer)

EX-32.1

Exhibit 32.1

Certifications of Chief Executive Officer and Interim Chief Financial Officer

pursuant to

18 U.S.C. Section 1350,

as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Leonid Gontmakher, Chief Executive Officer (principal executive officer) of 4Front Ventures Corp. (the “Company”), and Keith Adams, Chief Financial Officer (principal financial and accounting officer) of the Company, each hereby certifies that, to the best of his knowledge: 

1)	The Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2022, to which this certification is attached as Exhibit 32.1 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2022 

/s/ Leonid Gontmakher 

Leonid Gontmakher  

Chief Executive Officer 

(principal executive officer)

/s/ Keith Adams

Keith Adams  

Chief Financial Officer 

(principal financial and accounting officer) 

The foregoing certifications are being furnished pursuant to 18 U.S.C. Section 1350. They are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Company, regardless of any general incorporation language in such filing. 

XML

Cover - shares	9 Months Ended
	Sep. 30, 2022	Nov. 10, 2022
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2022
Document Transition Report	false
Entity File Number	000-56075
Entity Registrant Name	4Front Ventures Corp.
Entity Incorporation, State or Country Code	A1
Entity Tax Identification Number	83-4168417
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
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		640,386,686
Entity Central Index Key	0001783875
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Amendment Flag	false
Class A Subordinate Voting Share
Document Information [Line Items]
Title of 12(b) Security	Class A Subordinate Voting Shares, no par value
Trading Symbol	FFNTF
Security Exchange Name	NONE
ADR
Document Information [Line Items]
Title of 12(b) Security	Class A Subordinate Voting Shares, no par value
Trading Symbol	FFNT
Security Exchange Name	NONE

XML

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS (unaudited) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Current assets:
Cash	$ 5,286	$ 22,581
Accounts receivable, net	8,722	1,946
Other receivables	20	289
Current portion of lease receivables	3,765	3,630
Inventory	30,936	20,087
Current portion of notes receivable	0	109
Prepaid expenses and other assets	2,392	2,232
Total current assets	51,121	50,874
Property, plant, and equipment, net	58,697	42,633
Lease receivables	5,942	6,748
Intangible assets, net	54,452	26,246
Goodwill	41,393	23,155
Right-of-use assets	103,229	100,519
Deposits	5,165	5,364
TOTAL ASSETS	319,999	255,539
Current liabilities:
Accounts payable	11,303	2,131
Accrued expenses and other current liabilities	11,620	9,411
Taxes payable	32,805	23,968
Derivative liability	8	3,502
Current portion of contract liabilities	653	0
Current portion of convertible notes	0	2,784
Current portion of lease liability	3,428	3,629
Current portion of notes payable and accrued interest	9,299	3,413
Total current liabilities	69,116	48,838
Convertible notes	15,513	14,641
Notes payable and accrued interest from related party	49,422	48,266
Long term notes payable	10,279	1,709
Long term accounts payable	1,200	1,200
Contract liabilities	2,000	0
Contingent consideration payable	0	2,393
Construction finance liability	16,000	0
Deferred tax liability	6,884	7,849
Lease liability	100,322	93,111
TOTAL LIABILITIES	270,736	218,007
SHAREHOLDERS' EQUITY
Equity attributable to 4Front Ventures Corp.	304,602	274,120
Additional paid-in capital	54,487	52,197
Deficit	(309,913)	(288,857)
Non-controlling interest	87	72
TOTAL SHAREHOLDERS' EQUITY	49,263	37,532
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 319,999	$ 255,539

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CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS (unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
REVENUE
Revenue from sale of goods	$ 29,067	$ 23,126	$ 77,638	$ 67,658
Real estate income	3,407	2,815	9,323	8,374
Total revenues	32,474	25,941	86,961	76,032
Cost of goods sold	(17,427)	(10,269)	(46,144)	(30,210)
Gross profit	15,047	15,672	40,817	45,822
OPERATING EXPENSES
Selling and marketing expenses	5,462	5,992	16,955	17,863
General and administrative expenses	7,126	7,170	21,336	17,418
Depreciation and amortization	1,020	831	2,990	2,466
Transaction and restructuring related expenses	60	0	2,069	0
Equity based compensation	862	2,603	2,290	7,978
Total operating expenses	14,530	16,596	45,640	45,725
Income (loss) from operations	517	(924)	(4,823)	97
Other income (expense)
Interest income	6	2	8	13
Interest expense	(4,157)	(2,532)	(10,195)	(7,894)
Amortization of loan discount upon conversion of debt to equity	0	0	0	(2,915)
Change in fair value of derivative liability	420	3,345	3,494	502
Gain on contingent consideration	0	0	2,393	0
Loss on litigation settlement	(250)	0	(250)	0
Loss on lease termination	0	0	0	(1,210)
Other	(1,815)	56	(1,866)	56
Total other income (expense), net	(5,796)	871	(6,416)	(11,448)
Net loss before income taxes	(5,279)	(53)	(11,239)	(11,351)
Income tax expense	(3,322)	(4,541)	(9,802)	(10,545)
Net loss	(8,601)	(4,594)	(21,041)	(21,896)
Net income attributable to non-controlling interest	5	5	15	15
Net loss attributable to shareholders	$ (8,606)	$ (4,599)	$ (21,056)	$ (21,911)
Basic loss per share (in dollar per share)	$ (0.01)	$ (0.01)	$ (0.03)	$ (0.04)
Diluted loss per share (in dollar per share)	$ (0.01)	$ (0.01)	$ (0.03)	$ (0.04)
Weighted average number of shares outstanding, basic (in shares)	639,624,851	592,631,092	632,048,250	590,084,188
Weighted average number of shares outstanding, diluted (in shares)	639,624,851	592,631,092	632,048,250	590,084,188

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CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited) - USD ($) $ in Thousands	Total	Total 4Front Ventures Corp. Shareholders' Equity	Share Capital	Additional Paid-In Capital	Deficit	Non-Controlling Interest
Beginning balance (in shares) at Dec. 31, 2020			538,851,252
Beginning Balance at Dec. 31, 2020	$ 42,203	$ 42,151	$ 250,583	$ 42,116	$ (250,548)	$ 52
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued for earnout (in shares			473,491
Shares issued for earnout	161	161	$ 161
Share-based compensation	2,396	2,396		2,396
Conversion of notes to equity (in shares)			24,366,003
Conversion of notes to equity	6,253	6,253	$ 6,253
Shares issued with exercise of warrants (in shares)			2,422,363
Shares issued with exercise of warrants	1,563	1,563	$ 1,563
Shares issued with exercise of stock options (in shares)			1,358,116
Shares issued with exercise of stock options	871	871	$ 871
Return of treasury shares (in shares)			(8,320)
Net loss	(11,084)	(11,089)			(11,089)	5
Ending balance (in shares) at Mar. 31, 2021			567,462,905
Ending Balance at Mar. 31, 2021	42,363	42,306	$ 259,431	44,512	(261,637)	57
Beginning balance (in shares) at Dec. 31, 2020			538,851,252
Beginning Balance at Dec. 31, 2020	42,203	42,151	$ 250,583	42,116	(250,548)	52
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(21,896)
Ending balance (in shares) at Sep. 30, 2021			593,920,448
Ending Balance at Sep. 30, 2021	51,579	51,512	$ 273,877	50,094	(272,459)	67
Beginning balance (in shares) at Mar. 31, 2021			567,462,905
Beginning Balance at Mar. 31, 2021	42,363	42,306	$ 259,431	44,512	(261,637)	57
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued for earnout (in shares			535,018
Shares issued for earnout	722	722	$ 722
Share-based compensation	2,979	2,979		2,979
Conversion of notes to equity (in shares)			24,676,794
Conversion of notes to equity	11,466	11,466	$ 11,466
Shares issued with exercise of warrants (in shares)			570,864
Shares issued with exercise of warrants	1,813	1,813	$ 1,813
Shares issued with exercise of stock options (in shares)			652,940
Shares issued with exercise of stock options	443	443	$ 443
Net loss	(6,218)	(6,223)			(6,223)	5
Ending balance (in shares) at Jun. 30, 2021			593,898,521
Ending Balance at Jun. 30, 2021	53,568	53,506	$ 273,875	47,491	(267,860)	62
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based compensation	2,603	2,603		2,603
Shares issued with exercise of stock options (in shares)			21,927
Shares issued with exercise of stock options	2	2	$ 2
Net loss	(4,594)	(4,599)			(4,599)	5
Ending balance (in shares) at Sep. 30, 2021			593,920,448
Ending Balance at Sep. 30, 2021	$ 51,579	51,512	$ 273,877	50,094	(272,459)	67
Beginning balance (in shares) at Dec. 31, 2021	594,181,604		594,181,604
Beginning Balance at Dec. 31, 2021	$ 37,532	37,460	$ 274,120	52,197	(288,857)	72
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued pursuant to acquisition (in shares)			28,571,428
Shares issued pursuant to acquisition	18,200	18,200	$ 18,200
Share-based compensation	1,038	1,038		1,038
Conversion of notes to equity (in shares)			6,235,512
Conversion of notes to equity	3,122	3,122	$ 3,122
Shares issued with exercise of warrants (in shares)			88,659
Shares issued with exercise of warrants	50	50	$ 50
Net loss	(5,894)	(5,899)			(5,899)	5
Ending balance (in shares) at Mar. 31, 2022			629,077,203
Ending Balance at Mar. 31, 2022	$ 54,048	53,971	$ 295,492	53,235	(294,756)	77
Beginning balance (in shares) at Dec. 31, 2021	594,181,604		594,181,604
Beginning Balance at Dec. 31, 2021	$ 37,532	37,460	$ 274,120	52,197	(288,857)	72
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	$ (21,041)
Ending balance (in shares) at Sep. 30, 2022	641,662,894		641,662,894
Ending Balance at Sep. 30, 2022	$ 49,263	49,176	$ 304,602	54,487	(309,913)	87
Beginning balance (in shares) at Mar. 31, 2022			629,077,203
Beginning Balance at Mar. 31, 2022	54,048	53,971	$ 295,492	53,235	(294,756)	77
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued pursuant to acquisition (in shares)			8,783,716
Shares issued pursuant to acquisition	6,245	6,245	$ 6,245
Warrants issued for to acquisition	732	732	$ 732
Share-based compensation	390	390		390
Shares issued with exercise of stock options (in shares)			51,975
Shares issued with exercise of stock options	33	33	$ 33
Net loss	(6,546)	(6,551)			(6,551)	5
Ending balance (in shares) at Jun. 30, 2022			637,912,894
Ending Balance at Jun. 30, 2022	54,902	54,820	$ 302,502	53,625	(301,307)	82
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares issued pursuant to acquisition (in shares)			3,750,000
Shares issued pursuant to acquisition	2,100	2,100	$ 2,100
Share-based compensation	862	862		862
Shares issued with exercise of stock options (in shares)
Shares issued with exercise of stock options	0	0
Net loss	$ (8,601)	(8,606)			(8,606)	5
Ending balance (in shares) at Sep. 30, 2022	641,662,894		641,662,894
Ending Balance at Sep. 30, 2022	$ 49,263	$ 49,176	$ 304,602	$ 54,487	$ (309,913)	$ 87

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CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (21,041)	$ (21,896)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Depreciation and amortization	6,844	3,668
Equity based compensation	2,290	7,978
Change in fair value of derivative liability	(3,494)	(502)
Gain on contingent consideration	(2,393)	0
Accretion of lease liability	735	726
Accretion of lease receivable	671	487
Write-off of fixed asset from terminated lease	0	1,210
Accretion of construction financing liability	1,143	0
Accretion of contingent consideration	0	228
Accretion of convertible debenture and interest	872	4,121
Accrued interest on notes payable	6,483	4,783
Deferred taxes	(965)	632
Changes in operating assets and liabilities	6,876	2,533
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	(1,979)	3,968
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired (Note 5)	(24,547)	0
Proceeds on note receivable	109	183
Sale of dispensaries and interests in cannabis licenses	0	1,093
Purchases of property and equipment	(2,535)	(14,021)
NET CASH USED IN INVESTING ACTIVITIES	(26,973)	(12,745)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of contingent consideration	(412)	(1,204)
Proceeds from issuance of construction financing liability	16,000	0
Payment on construction financing liability	(1,143)	0
Issuance of notes payable	3,000	0
Proceeds from the exercise of warrants	50	1,664
Proceeds from the exercise of stock options	33	1,315
Payments of notes payable	(5,871)	(3,453)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	11,657	(1,678)
NET DECREASE IN CASH	(17,295)	(10,455)
CASH, BEGINNING OF PERIOD	22,581	18,932
CASH, END OF PERIOD	$ 5,286	$ 8,477

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Basis of Presentation

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

BASIS OF PRESENTATION

4Front Ventures Corp. (“4Front” or the “Company”) exists pursuant to the provisions of the British Columbia Corporations Act. The Company operates the business through two segments, THC Cannabis and CBD Wellness. The Company's THC Cannabis segment consists of six dispensaries and nine production and cultivation facilities across Illinois, Michigan, Massachusetts, and California. Also, as part of its THC Cannabis segment, the Company leases real estate and sells equipment, supplies and intellectual property to cannabis producers in the state of Washington. The Company’s CBD Wellness segment sells non-THC hemp derived products across the United States.

The unaudited condensed consolidated interim financial statements include the accounts of 4Front and all entities in which the Company either has a controlling voting interest or is the primary beneficiary of a variable interest entity in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The Company has prepared these statements pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC) and U.S. GAAP. Certain information related to the organization, significant accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed, or omitted.

In the opinion of management, the financial statements include all adjustments necessary for the fair presentation of the results of the interim periods presented. All adjustments are of a normal recurring nature, except as otherwise noted below. Operating results for interim periods are not necessarily indicative of results you can expect for a full year. These financials should be read in conjunction with our audited consolidated financial statements and notes thereto appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Management's Estimates and Assumptions

The preparation of the Company’s financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses. We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary. Actual results may differ from these estimates. The most critical and subjective areas are discussed in detail in the notes in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. There have been no changes to the Company's accounting policies since the Annual Report with one notable addition documented below.

Contract Assets and Liabilities

A contract liability is recorded on the consolidated balance sheet for consideration transferred prior to goods transfer. Amounts expected to be recognized as revenue within the twelve months following the balance sheet date are classified as current portion of contract liabilities in the accompanying condensed balance sheets with the remaining balance classified as long term. When the Company has an unconditional right to payment, a receivable is recorded on the consolidated balance sheet as current portion of contract assets for contract assets due within twelve months or contract assets in long term assets for amounts due after twelve months. The accompanying condensed balance sheets reflect a contract liability for the amount of revenue to be recognized in the future as and when the Company satisfies its remaining performance obligations. As of September 30, 2022, the Company has recognized $2.7 million of contract liabilities of which $0.7 million are recorded as current liabilities and $2 million are recorded as long term liabilities.

New Accounting Pronouncements

Accounting Standard Updates Issued but Not Yet Adopted

In June 2022, the FASB issued ASU 2022-03, "Fair Value Measurements - Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 820)". ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. It also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted and the amendments in the ASU should be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. The Company is currently assessing the impact of adopting ASU 2022-03 on the consolidated financial statements.

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Inventory

9 Months Ended

Sep. 30, 2022

Inventory Disclosure [Abstract]

Inventory

INVENTORY

The Company’s inventories include the following as of September 30, 2022 and December 31, 2021:

	September 30, 2022		December 31, 2021
Raw materials - unharvested cannabis	$	4,584	$	2,164
Raw materials - harvested and purchased cannabis	12,425		3,045
Packaging and other non-finished goods	3,547		1,734
Work in process - manufactured and purchased extracts	2,124		4,771
Finished goods	8,256		8,373
Total	$	30,936	$	20,087

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Property Plant and Equipment

9 Months Ended

Sep. 30, 2022

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

PROPERTY, PLANT, AND EQUIPMENT

Property, plant and equipment and related depreciation are summarized in the table below:

	September 30, 2022		December 31, 2021
Land	$	775	$	—
Buildings & improvements	14,253		1,483
Construction in process	328		63
Furniture, equipment & other	19,422		13,425
Leasehold improvements	36,623		35,538
Total	$	71,401	$	50,509
Less: accumulated depreciation	(12,704)		(7,876)
Total property, plant, and equipment, net	$	58,697	$	42,633

Approximately $33 million of property and equipment is secured by LI Lending as collateral on the LI Lending note (Note 7). There were no significant contractual commitments for future capital expenditures as of September 30, 2022 and December 31, 2021.

Depreciation expense for the nine months ended September 30, 2022 and 2021 was $4.8 million and $1.8 million, respectively, of which $3.9 million and $1.2 million, respectively, is included in cost of goods sold. Depreciation expense for the three months ended September 30, 2022 and 2021 was $1.4 million and $0.7 million, respectively, of which $1.2 million and $0.5 million, respectively, is included in cost of goods sold.

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Intangible Assets and Goodwill

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

Intangible assets and related amortization are summarized in the table below:

	Licenses		Customer Relationships		Non-Competition Agreements		Know-How		Tradenames and Trademarks		Total
Balance, December 31, 2021	$	20,146	$	1,088	$	—	$	5,012	$	—	$	26,246
Acquisitions (Note 5)	26,700		—		—		—		3,522		30,222
Amortization expense	—		(437)		—		(1,455)		(124)		(2,016)
Balance, September 30, 2022	$	46,846	$	651	$	—	$	3,557	$	3,398	$	54,452

Goodwill

Balance, December 31, 2021	$	23,155
Acquisitions (Note 5)	18,238
Balance, September 30, 2022	$	41,393

Impairment of Intangible Assets and Goodwill

The goodwill is related to the THC Cannabis segment, and there has been no accumulated impairment within this segment. The CBD Wellness segment has an accumulated impairment charge of $13.4 million, which represents the entire balance and occurred during the year-ended December 31, 2020. As of September 30, 2022 and December 31, 2021 all goodwill and intangibles are attributable to the THC Cannabis segment.

Goodwill and infinite lived assets are assessed on an annual basis for impairment, or more frequently, if circumstances indicate an impairment to the carrying value may have occurred. As of September 30, 2022, the Company believes that the carrying amounts of the long-lived assets, including finite-lived intangible assets (licenses), are recoverable and there were no events or circumstances that indicated impairment. However, if adverse events were to occur or circumstances were to change indicating that the carrying amount of such assets may not be fully recoverable, the assets would be reviewed for impairment.

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Acquisitions And Business Combinations

9 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisitions and Business Combinations

ACQUISITIONS AND BUSINESS COMBINATIONS

New England Cannabis Company (NECC) Merger Agreement

On January 28, 2022, the Company completed an acquisition for 100% of NECC for cash consideration of $9 million and 28.6 million of Class A Subordinate Voting shares of the Company (the “SVS”). The acquisition increased the Company's presence in Massachusetts and the northeastern United States and provides additional opportunities for expansion in the Northeast.

In connection with the consummation of the NECC Merger on January 28, 2022, Mission Partners RE, LLC, a Delaware limited liability company wholly owned by the Company completed its acquisition of 100% of the issued and outstanding membership interests of 29 Everett Street LLC, a Massachusetts limited liability company (the “Everett LLC”) for cash consideration of $16 million and a promissory note of $2 million. The Everett LLC entity was solely comprised of property plant and equipment that was leased to and used by NECC at the time of the transaction and consolidated into NECC operations post acquisition. The Merger and Purchase Agreement were recorded as one transaction (collectively, referred to as the "NECC Acquisitions"), as the entities were commonly owned by the same individual and the purchase of Everett LLC was contingent on the Merger with NECC.

The preliminary purchase price allocation for the NECC acquisition is reflected in the table below and remains

subject to revisions as additional information is obtained about the facts and circumstances that existed at the valuation date. The preliminary allocation of purchase price, including the value of certain tangible and intangible assets acquired and liabilities assumed is based on the best estimates of management and is subject to revision based on the final valuations. We do not expect goodwill and intangible assets will be deductible for tax purposes.

The following tables present the preliminary purchase price allocation for the NECC Merger:

Cash consideration	$	25,000
Note to seller	2,000
Equity consideration - common stock	18,200
Total Purchase Price	$	45,200

Description	Fair value
Assets acquired:
Cash	$	2
Inventory	213
Prepaid assets	2
Property, plant, and equipment	16,000
Intangible asset - licenses	18,000
Total assets acquired	$	34,217
Liabilities assumed:
Accounts payable	800
Total liabilities assumed	$	800
Estimated fair value of net assets acquired	$	33,417
Estimated Goodwill	$	11,783

As part of the NECC Merger, the Company incurred $0.7 million in transaction and restructuring costs, which were included in transaction and restructuring related expenses and expensed as incurred.

Island Merger Agreement

On April 25, 2022, the Company completed a merger acquisition for 100% of Island Global Holdings for non-cash consideration as follows: (i) 8,783,716 Class A Subordinated Voting Shares of the Company (the “SVS”); (ii) 6% 54-month, subordinated promissory notes (the “Island Merger Notes”) in the aggregate principal amount of $10.0 million; and (iii) warrants to purchase 2,999,975 SVS at a price of $1.00 per SVS. This acquisition enhanced the Company's growing brand portfolio, including diverse lines of pre-rolls, flower and infused products.

The preliminary purchase price allocation for the Island acquisition is reflected in the table below and remains subject to revisions as additional information is obtained about the facts and circumstances that existed at the valuation date. The preliminary allocation of purchase price, including the value of certain tangible and intangible assets acquired and liabilities assumed, is based on the best estimates of management and subject to revision based on the final valuations. We do not expect goodwill and intangible assets will be deductible for tax purposes.

The following tables present the preliminary purchase price allocation for the Island Merger:

Note to seller	$	10,000
Equity consideration - common stock	6,245
Equity consideration - warrants	732
Total Purchase Price	$	16,977

Description	Fair value
Assets acquired:
Cash	$	458
Accounts receivable	511
Inventory	3,072
Prepaid expenses and other current assets	424
Property and equipment, net	2,214
Operating lease - right of use asset	10,227
Intangible assets	11,300
Total assets acquired	$	28,206
Liabilities assumed:
Accounts payable	$	1,356
Accrued expenses and other liabilities	2,566
Contract liabilities	3,535
Lease liabilities	10,227
Total liabilities assumed	17,684
Estimated fair value of net assets acquired	$	10,522
Estimated Goodwill	$	6,455

The intangible assets acquired by the Company consist of cannabis licenses, trade names and trademarks for operations. Utilizing like licenses as a benchmark, the Company determined that the licenses acquired are indefinite lived assets and the trade names and trademarks have a life of ten years.

As part of the Island Merger, the Company incurred $1.3 million in restructuring and transaction costs, which were included in transaction and restructuring related expenses and expensed as incurred.

Bloom Farms

On August 19, 2022, the Company completed an asset acquisition to acquire certain assets of Bloom Farms for stock consideration of 3,750,000 class A subordinate voting shares valued at $2.1 million. In addition to the contracted purchase price, the Company incurred $0.06 million in transactional costs that were capitalized as part of the asset acquisition. This transaction increased the Company's brand portfolio in the California market.

Share Consideration	$	2,100
Transaction Costs	6
Total Purchase Price	$	2,106

In addition to the consideration transferred, there is an earn-out consideration based on the actual revenue in excess of $2.1 million generated from the brands within California during the first 12 months after the closing. This earn-out consideration cannot exceed $5 million. As of the transaction date, it is not probable this consideration will become payable and no liability has been recognized. If the contingency becomes payable, the Company will recognize the amount in the measurement of the cost of the acquired assets.

The allocation of the asset acquisition cost is detailed below:

Description	Fair Value
Assets acquired:
Accounts receivable	$	508
Inventory	534
Equipment	142
Intangible assets - tradenames	922
Total assets acquired	$	2,106

Unaudited Pro Forma Results

The following unaudited pro forma financial information presents the results of operations of the Company, NECC, and Island for the nine months ended September 30, 2022 and 2021, as if the acquisitions had occurred as of January 1, 2021. The pro forma information does not necessarily reflect the results of operations that would have occurred had the entities been a single company during those periods.

The unaudited pro forma financial information for the Company including NECC and Island is as follows:

	For the For the Three Months Ended September 30,
	2022				2021
	Reported		Proforma		Reported		Proforma
Revenues	$	32,474	$	32,474	$	25,941	$	28,238
(Loss) income from operations	517		517		(924)		(2,603)
Net loss	$	(8,601)	$	(8,601)	$	(4,594)	$	(8,103)
Basic and diluted earning (loss) per share	$	(0.01)	$	(0.01)	$	(0.01)	$	(0.01)

	For the For the Nine Months Ended September 30,
	2022				2021
	Reported		Proforma		Reported		Proforma
Revenues	$	86,961	$	88,689	$	76,032	$	81,524
(Loss) income from operations	(4,823)		(5,875)		97		(5,093)
Net loss	$	(21,041)	$	(27,235)	$	(21,896)	$	(28,916)
Basic and diluted earning (loss) per share	$	(0.03)	$	(0.04)	$	(0.04)	$	(0.05)

Acquisition Related Results

For the NECC and Island acquisitions, the Company's consolidated results of operations included acquisition related revenue of $2.5 million and $3.5 million and net income of $1.8 million and net loss $0.1 million for the three and nine months ended September 30, 2022, respectively.

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Leases

9 Months Ended

Sep. 30, 2022

Leases [Abstract]

Leases

LEASES

The Company as a Lessor:

The Company leases a building in Elma, Washington that is subleased by the Company to a third party. This sublease is classified as a finance lease with a long term lease receivable balance of $5.9 million and $6.7 million and a short term lease receivable balance of $3.8 million and $3.6 million as of September 30, 2022 and December 31, 2021, respectively. This lease generated $0.6 million and $0.7 million in real estate income for the three months ended September 30, 2022 and 2021, respectively. This lease generated $2.0 million and $2.1 million in real estate income for the nine months ended September 30, 2022 and 2021, respectively.

The Company owned buildings in Olympia, Washington that were leased to a third party. This lease was classified as a finance lease. On December 17, 2020, the Company sold the Olympia building and other assets as part of a sale and leaseback transaction and this lease was cancelled. The Company applied ASC 842 to a new sublease to the same third party and classified the new sublease as an operating lease. The lease receivable was sold to the purchaser of the assets as part of the sale and leaseback transaction. This lease generated $2.3 million and $2.1 million in real estate income for the three months ended September 30, 2022 and 2021, respectively. This lease generated $6.8 million and $6.3 million in real estate income for the nine months ended September 30, 2022 and 2021, respectively.

The following table summarizes changes in the Company’s lease receivables:

	September 30, 2022		December 31, 2021
Balance, beginning of the year	$	10,378	$	11,045
Interest	2,029		2,783
Lease payments received	(2,700)		(3,450)
Balance, end of the period	9,707		$	10,378
Less current portion	(3,765)		(3,630)
Long-term lease receivables	$	5,942	$	6,748

In addition to these agreements, the Company recorded additional real estate income of $0.5 million on various subleases for the nine months ending September 30, 2022.

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Notes Payable and Convertible Notes

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Notes Payable and Convertible Notes

NOTES PAYABLE AND CONVERTIBLE NOTES

The Company’s notes payable and convertible notes are as follows:

	LI Lending, LLC		May 2020 Convertible Notes		May 2020 Convertible Notes (Swap)		October 2021 Convertible Note		Other Loans		Total
Balance, December 31, 2020	$	45,362	$	2,855	$	11,867	$	—	$	6,931	$	67,015
Loans advanced, net	—		—		—		14,376		930		15,306
Loan payments	(4,671)		—		—		—		(1,079)		(5,750)
Converted to equity	—		(5,852)		(11,867)		—		—		(17,719)
Accrued interest	7,575		2,997		—		265		1,124		11,961
Balance, December 31, 2021	$	48,266	$	—	$	—	$	14,641	$	7,906	$	70,813
Loans advanced, net	—		—		—		—		15,000		15,000
Loan payments	(4,689)		—		—		—		(1,182)		(5,871)
Converted to equity	—		—		—		—		(2,784)		(2,784)
Accrued interest	5,845		—		—		872		638		7,355
Balance, September 30, 2022	$	49,422	$	—	$	—	$	15,513	$	19,578	$	84,513
Less current portion	—		—		—		—		(9,299)		(9,299)
Long-term portion	$	49,422	$	—	$	—	$	15,513	$	10,279	$	75,214

Convertible Notes

On May 14, 2020, the Company issued $5.8 million in convertible notes to existing investors in the Company. The notes pay interest of 5% per annum and have a maturity date of February 28, 2022. The notes can be converted into SVS of the Company for $0.25 per share at any time at the option of the holder. The Company was permitted to require mandatory conversion at any time that the Company’s stock price remains above $0.50 for 45 consecutive days. In 2021, the Company enacted the mandatory conversion feature and converted the May 2020 Convertible Note balance to subordinate voting shares.

As part of issuing the convertible notes, the investors were given the right to exchange stock in the Company into separate convertible notes (swap notes). In total 29,448,468 shares with a value of $13.7 million were exchanged for $13.7 million in convertible notes. These notes were effective May 28, 2020, have a maturity date of May 28, 2025, and can be converted into Class A Subordinate Voting Shares of the Company for $0.46 per share at any time at the option of the holder. The notes pay no interest if the Company’s annual revenue is greater than $15 million, and 3% annually otherwise. The Company can require mandatory conversion at any time that the Company’s stock price remains above $0.92 for 45 consecutive days. In 2021, the Company exercised the mandatory conversion feature and converted the May 2020 Convertible Note (Swap) balance to subordinate voting shares.

On October 6, 2021, the Company entered into a convertible promissory note purchase agreement for $15 million, less issuance costs of $0.6 million, resulting in net proceeds of $14.4 million. The notes pay interest of 6% per annum and have a maturity date of October 6, 2024. The notes can be converted into SVS of the Company for $1.03 per share at any time at the option of the holder. As of September 30, 2022, no payments have been made for this loan.

LI Lending LLC

On May 10, 2019, the Company entered into a loan agreement with LI Lending LLC, a related party, for $50 million. LI Lending LLC is related because an officer of the Company is a part-owner of LI Lending LLC. As of September 30, 2022, the Company had drawn $45 million on the loan in two amounts, an initial $35 million and a final $10 million, both bearing a 10.25% and 12.25% interest rate, respectively. The outstanding balance as of September 30, 2022 is $49.7 million, less debt discount of $0.3 million, for a net balance of $49.4 million. See Note 11 for further discussion of this related party transaction.

In April 2020, the loan was amended. In exchange for consent to allow the sale of the Pennsylvania and Maryland assets and the release of related collateral, the Company agreed to make prepayments of principal to LI Lending LLC in the amount of $0.3 million per month for an eight-month period beginning on May 1, 2020. The $2 million prepayment was applied to the initial $35 million amount, decreasing the balance to $33 million. Additionally, the Company agreed to pay an increased interest rate of 12.25% on the final $10 million of the loan until such time as this amount has been paid down, with the initial $33 million amount continuing to be subject to the original 10.25% interest rate.

In December 2020, the loan was amended to allow for the release of collateral for the failed sale leaseback transaction described in Note 7 below, which was entered into with Innovative Industrial Properties, Inc. (“IIPR”). The amendment increased both interest rates by 2.5% on the loan amounts but allowed the payments resulting from the incremental interest to be deferred until January 1, 2022. The Company elected to defer payment, and the additional 2.5% interest is accrued each month and added to the balance of the loan. The Company was required to make interest-only payments monthly of 10.25% on the initial $33 million and 12.25% on the final $10 million of the loan until January 1, 2022 when the interest rates of 12.75% for the initial $33 million and 14.75% for the final $10 million took effect for the remaining term.

The loan matures on May 10, 2024. An exit fee of 20% of the principal balance will be due as principal is repaid. Accrued interest expense of $5.8 million includes a loan discount accretion expense of $0.2 million for the nine months ended September 30, 2022. Accrued interest expense of $2.5 million includes a loan discount accretion expense of $0.04 million for the three months ended September 30, 2022. On January 1, 2022, the Company began making the required principal payments in addition to the interest payments for this loan. As of September 30, 2022, the Company has made $4.7 million in payments on this loan.

Other

Outstanding as of September 30, 2022 were other payables totaling $19.6 million which include notes issued as part of the acquisitions of Healthy Pharms, NECC, Island, and Arkansas entities as follows:

Subsidiary	Terms	September 30, 2022		December 31, 2021
Healthy Pharms Inc.	Unsecured convertible note, due November 18, 2021 at 12% per annum	$	—	$	2,784
Healthy Pharms Inc.	Unsecured promissory note at $0.50 per share due December 18, 2022 at 10% per annum (1)	3,463		3,213
Island Global Holdings, Inc.	Promissory note due October 25, 2026 at 6% per annum	10,279		—
NECC	Promissory note due November 15, 2022 at 10% per annum (2)	1,005		—
Island Global Holdings, Inc.	Promissory note due February 28, 2023 at 1.5% per month (3)	3,057		—
Arkansas Entities	Unsecured Promissory note due December 1,2022, monthly interest payments at 14% per annum	1,730		1,709
Equipment Loans	Secured by equipment, monthly payments beginning in 2021 at 15% per annum	44		49
Other	Various	—		151
Total Notes Payable and Convertible Notes		$	19,578	$	7,906

(1) In November 2021, the unsecured promissory note was modified to be due and payable in full on or before December 18, 2022. The Company concluded the extension resulted in a debt modification under ASC 470.

(2) On July 28, 2022, the parties amended the promissory note to provide for payment of half the principal on the initial maturity date, and the remaining principal and all accrued interest on November 15, 2022. Interest will continue at annual rate of ten percent (10%).

(3) On August 30, 2022, the Company entered into a Promissory Note Purchase Agreement with HI 4Front, LCC and Navy Capital Green Fund, LP. Under the agreement, the Company sold promissory notes totaling $3 million with a six-month maturity bearing 1.5% monthly interest for three months and 2% monthly interest for three months. The notes were unsecured, but would become secured if not repaid within three months.

Construction Finance Liability

On January 28, 2022, a wholly owned subsidiary of the Company acquired property at 29 Everett in conjunction with the NECC Merger (see Note 5 for further details on the transaction). Concurrently, effective January 28, 2022, the Company sold a portion of the property it had acquired in the acquisition for $16 million. In connection with the sale of the property at 29 Everett, the Company agreed to lease the location back for cultivation, effective on January 28, 2022 with available repurchase options. This transaction did not meet the requirements of a sale leaseback transaction and as such was accounted for as a failed sale leaseback. On January 28, 2022, the Company recorded a construction finance liability for the proceeds received from the sale to recognize a liability resulting from the failed sale-leaseback transaction.

The initial term of the agreement is 20 years, with two options to extend the term for five years each. The initial monthly rent payment is equal to $0.1 million for the first year of the agreement, with 3% annual increases over the life of the agreement. As of September 30, 2022, the total finance liability associated with this transaction is $16.0 million. The total interest expense incurred during the three and nine months ending September 30, 2022 was $0.4 million and $1.1 million .

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Share Capital and Equity

9 Months Ended

Sep. 30, 2022

Stockholders' Equity Note [Abstract]

Share Capital and Equity

SHARE CAPITAL AND EQUITY

The Company has authorized an unlimited number of Class A Subordinate Voting Shares (“SVS”) and Class C Multiple Voting Shares (“MVS”), all with no par value.

All share classes are included within share capital in the consolidated statements of shareholders’ equity on an as- converted basis. Each share class is entitled to notice of and to attend any meeting of the shareholders, except a meeting of which only holders of another particular class of shares will have the right to vote. All share classes are entitled to receive dividends, as and when declared by the Company, on an as-converted basis, and no dividends will be declared by the Company on any individual class unless the Company simultaneously declares or pays dividends on all share classes. No subdivision or consolidation of any share class shall be made without simultaneously subdividing or consolidating all share classes in the same manner.

Voting shares activity for the periods presented is summarized as follows:

	Class A Subordinate Voting Shares	Class C Multiple Voting Shares	Total
Balance, December 31, 2021	592,905,396	1,276,208	594,181,604
Share capital issuances	47,481,290	—	47,481,290
Balance, September 30, 2022	640,386,686	1,276,208	641,662,894

Class A Subordinate Voting Shares

Holders of Class A Subordinate Voting Shares are entitled to one vote in respect of each SVS.

Class C Multiple Voting Shares

Holders of Class C Multiple Voting Shares are entitled to 800 votes in respect of each MVS. One MVS can convert to one SVS but are not convertible until the later of the date that (i) the aggregate number of PVS and MVS held by the Initial Holders (being the MVS holders on their initial issuance) are reduced to a number which is less than 50% of the aggregate number of PVS and MVS held by the Initial Holders on the date of completion of the Business Combination with Cannex, and (ii) 3 years following the date of the business combination with Cannex.

Series	Shares outstanding as of September 30, 2022	As converted to SVS Shares
Class A - Subordinate Voting Shares	640,386,686	640,386,686
Class C - Multiple Voting Shares	1,276,208	1,276,208
	641,662,894	641,662,894

On November 23, 2020, the Company closed a brokered private placement and issued 24,644,500 Units at a price of C$0.70 per Unit. Each Unit is comprised of one subordinate voting share of the Company and one-half of a subordinate voting share purchase warrant. Each whole warrant entitles the holder to purchase one subordinate voting share for a period of two years from the date of issuance at an exercise price of C$0.90 per subordinate voting share. Net proceeds from this transaction were $11.6 million net of share issuance costs of $0.7 million.

These warrants meet the criteria in ASC 480, and are therefore classified as derivative liabilities at fair value with changes being reported through the statement of operations. All other warrants detailed in Note 9 did not meet the criteria in ASC480 for liability classification and are classified within equity.

	9/30/2022	12/31/2021
Share Price	C$0.43	C$1.27
Exercise Price	C$0.90	C$0.90
Expected Life	0.2 years	0.9 years
Annualized Volatility	0.8294	0.4623
Dividend yield	0	0
Discount Rate	0.0378	0.0039
C$ Exchange Rate	1.37	1.27

The decrease in the value of the derivative liability is reflected in the statement of operations as a $3.5 million and $0.5 million gain on the change in fair value of the derivative liability for the nine months ending September 30, 2022 and 2021. Refer to Note 13 for additional discussion of derivative fair value.

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Warrants

9 Months Ended

Sep. 30, 2022

Warrants and Rights Note Disclosure [Abstract]

Warrants

WARRANTS

As of September 30, 2022, there were share purchase warrants outstanding to purchase up to 29,103,553 SVS shares:

Series	Number of warrants	Weight-average exercise price
Balance, December 31, 2021	26,192,237	$	0.75
Issued	2,999,975	1.00
Exercised	(88,659)	0.56
Balance, September 30, 2022	29,103,553	$	0.75

As of September 30, 2022, the Company has the following warrants outstanding:

Warrants Outstanding	Exercise Price		Expiration Date
10,403,150	C$ 0.90 *		November 23, 2022
209,426	C$ 0.70 *		November 23, 2022
12,135,922	$ 0.82*		December 17, 2022
2,230,080	$ 0.67*		January 29, 2023
2,999,975	$	1.00	April 13, 2024
625,000	C$ 0.80 *		October 6, 2024
500,000	C$ 0.80 *		October 6, 2025
29,103,553

*Represents warrants that are exercisable as of September 30, 2022.

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Share-Based Compensation

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Share-Based Compensation

SHARE-BASED COMPENSATION

The Company adopted two equity incentive plans where the Company may grant Class A stock options. Under the terms of the plans, the maximum number of stock options which may be granted are a total of 10% of the number of shares outstanding assuming conversion of all shares to SVS. The exercise price for stock options issued under the plans will be set by the compensation committee of the board of directors but will not be less than 100% of the fair market value of the Company’s shares on the grant date. Stock options have a maximum term of 10 years from the date of grant. Stock options vest at the discretion of the Board.

As of September 30, 2022, the Company had the 47,549,343 options exercisable and 57,051,012 options outstanding, with exercise prices ranging from C$0.10 to C$1.63. Stock option activity is summarized as follows:

	Number of Options	Weighted Average Price CAD$	Weighted Average Years
Balance December 31, 2021	54,282,752	0.94	2.97
Granted	7,460,000	0.82	3.38
Exercised	(51,975)	0.80	0
Forfeited/ Expired	(4,639,765)	1.01	0
Balance September 30, 2022	57,051,012	0.89	2.36

During the nine months ended September 30, 2022 and 2021, the Company recognized share-based compensation of $2.3 million and $8.0 million. During the three months ended September 30, 2022 and 2021, the Company recognized share-based compensation of $0.9 million and $2.6 million, respectively.

In determining the amount of equity-based compensation during the year, the Company used the Black-Scholes option pricing model to establish the fair value of options granted during the year with the following key assumptions:

	2022		2021
Risk-Free Interest Rate	3.62	%	0.87% to 0.92%
Expected Life	3.5 years		5.00 years
Expected Annualized Volatility	89.83	%	86.20% to 93.53%
Forfeiture rate	—	%	—	%
Expected Dividend Yield	—	%	—	%

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Related Parties

9 Months Ended

Sep. 30, 2022

Related Party Transactions [Abstract]

Related Parties

RELATED PARTIES

Related party transactions

LI Lending LLC

Linchpin Investors LLC (“Linchpin”), a subsidiary of the Company, and LI Lending LLC (“LI Lending”) entered into a Construction Loan Agreement dated May 10, 2019, as amended, whereby Linchpin received an up-to $45.0 million loan from LI Lending of which $48.3 million was outstanding as of December 31, 2021. Mr. Gontmakher, the CEO of the Company, and Roman Tkachenko, a director of the Company, each hold a 14.28% ownership interest in LI Lending. The loan matures in May 2024. Upon maturity, an exit fee of $9 million is payable, for a total payable at maturity of $54 million. $49.7 million of the loan advanced includes the notes payable and accrued interest less debt discount of $0.3 million that was outstanding as of September 30, 2022. Of the $49.4 million outstanding at September 30, 2022, $5.8 million represents interest accrued through September 30, 2022. See Note 7 for details on the outstanding note payable.

Pure Ratios

Leonid Gontmakher, Chief Executive Officer of the Company, holds an interest in an entity related to iWolf Management, LLC, an online marketing company serving the online CBD market which provided online marketing services during 2020 and 2019 for the Company’s Pure Ratios division. Pure Ratios paid $0.3 million for the three and nine months ended September 30, 2021 to this vendor for management fees, pass through marketing costs and customer service. Pure Ratios did not make any such payments during the nine months ended September 30, 2022.

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Contingencies

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Contingencies

CONTINGENCIES

(a)    Cannabis Industry

While marijuana is legal under the laws of several U.S. states (with varying restrictions), the United States Federal Controlled Substances Act classifies all “marijuana” as a Schedule I drug, whether for medical or recreational use. Under U.S. federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of safety for the use of the drug under medical supervision. As such, there is an inherent risk related to the federal government’s position on cannabis. There is additional risk associated with the Company’s business in cannabis that third-party service providers could suspend or withdraw services and regulatory bodies could impose certain restrictions on the issuer’s ability to operate in the U.S. As of September 30, 2022, Company has not estimated a potential liability related to the possible enforcement of laws against the medical cannabis industry.

(b)    Contingent consideration payable

As part of the acquisition of Om of Medicine, LLC and Cannex’s prior acquisition of Pure Ratios, the Company is subject to contingent consideration payable to the sellers. The fair value of the contingent consideration, which is based on specific revenue levels achieved over a 2-3-year period, is as follows:

	Om of Medicine
Balance, December 31, 2021	$	2,393
Changes in fair value	(2,393)
Balance, September 30, 2022	—
Less: current portion	—
Long-term portion	$	—

The contingent consideration payable is measured at fair value based on unobservable inputs and is considered a Level 3 financial instrument. The determination of the fair value of these liabilities is primarily driven by the Company’s expectations of the respective subsidiaries achieving certain milestones. The expected milestones were assigned probabilities and the expected related cash flows were discounted to derive the fair value of the contingent consideration. The Company had an outstanding balance of contingent consideration of $2.4 million for the period ended December 31, 2021. However, the Company performed analyses and determined it does not anticipate the subsidiaries to reach the required milestone for the year ended December, 31, 2022. As a result, the Company estimated the contingent consideration to be $0 as of September 30, 2022 and recorded a gain on the fair value adjustment.

(c)    Legal Matters

From time to time, the Company may be involved in certain disputes arising in the ordinary course of business. Such disputes, taken in the aggregate, are not expected to have a material adverse effect on the Company. There are also no proceedings in which any of the Company’s directors, officers, or affiliates is an adverse party or has a material interest adverse to the Company’s interest.

On January 26, 2022, Savills, Inc. sued the Company in the U.S. District Court for the Southern District of New York. That lawsuit alleged the Company had breached an alleged agreement with Savills under which the Company was allegedly required to pay Savills a percentage of savings realized under certain incentive programs offered in some jurisdictions, which Savills would assist the Company in obtaining. Savills claimed damages of approximately $19.4 million in connection with its claim that it obtained benefits for the Company allegedly valued at over $129.0 million. The Company denied these allegations, denied the Company had obtained such benefits, disputed Savills’ characterization of the facts, and denied liability. The Company filed a counterclaim against Savills alleging breach of contract by Savills. On August 3, 2022, the parties reached a confidential settlement in principle and agreed to dismissal of all claims, which was finalized on September 12, 2022 and required the Company to pay $0.25 million in five monthly installments beginning in October 2022. In addition to this initial payment, there is a portion of the settlement that is contingent on future tax savings. As of September 30, 2022, this additional contingent amount is not reasonably estimable.

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Financial Instruments and Financial Risk Management

9 Months Ended

Sep. 30, 2022

Investments, All Other Investments [Abstract]

Financial Instruments and Financial Risk Management

FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

ASC 820, Fair Value Measurements, provides guidance on the development and disclosure of fair value measurements. The Company follows this authoritative guidance for fair value measurements, which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the United States of America, and expands disclosures about fair value measurements. The guidance requires fair value measurements be classified and disclosed in one of the following three categories:

Level 1	Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2	Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
Level 3	Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the periods ended September 30, 2022, and 2021, and December 31, 2021. The fair value of the Company’s cash, accounts receivable, other receivables, accounts payable and accrued expenses approximates carrying value due to their short-term nature. The Company’s notes receivable, lease receivables, contingent consideration payable, derivative liabilities, lease liabilities, convertible notes payable, construction finance liability and notes payable approximate fair value due to the instruments bearing market rates of interest or their short term nature. As the interest rates utilized to calculate these instruments approximates market

value interest rates, the carrying amounts of the instruments approximate fair value, which are primarily based on Level 1 inputs. The fair value of stock options granted were estimated based on a Black-Scholes model during the periods ended September 30, 2022 and December 31, 2021. The estimated fair value of the derivative liabilities, which represents an embedded put included in the convertible notes payable, represent Level 3 measurements.

The following table details the fair value measurements within the fair value hierarchy of the Company's financial instruments, which includes the Level 3 liabilities:

	Fair value at September 30, 2022
	Total		Level 1		Level 2		Level 3
Liabilities:
Derivative liability	$	8	$	—	$	—	$	8
Total liabilities	$	8	$	—	$	—	$	8

	Fair value at December 31, 2021
	Total		Level 1		Level 2		Level 3
Liabilities:
Derivative liability	$	3,502	$	—	$	—	$	3,502
Total liabilities	$	3,502	$	—	$	—	$	3,502

The table below provides a summary of the changes in fair value of the derivative liabilities measured on a recurring basis using significant unobservable inputs (Level 3):

	For the Nine Months Ended September 30,
Derivative liability:	2022		2021
Balance, beginning of period	$	3,502	$	5,807
(Gain) loss on fair value of derivative liability	(3,494)		(502)
Change in fair value of derivative liability upon exercise of warrants	—		(1,427)
Balance, end of period	$	8	$	3,878

There were no transfers between fair value levels for the nine months ended September 30, 2022 and the year ending December 31, 2021.

(a)    Financial Risk Management

The Company is exposed in varying degrees to a variety of financial instruments related risks. The Company's board of directors mitigate these risks by assessing, monitoring and approving the Company’s risk management processes.

(b)    Credit Risk

Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The Company’s credit risk is primarily attributable to cash, accounts receivable, lease receivables, other receivables, and notes receivable. The Company’s maximum credit risk exposure is equivalent to the carrying value of these instruments at the financial statement date. The risk to cash deposits is mitigated by holding these instruments with regulated financial institutions. Lease receivables, notes receivables and other receivables credit risk arises from the

possibility that principal and interest due may become uncollectible. The Company mitigates this risk by managing and monitoring the underlying business relationships.

The Company maintains cash with federally insured financial institutions. As of December 31, 2021, the Company exceeded federally insured limits by approximately $11 million. The Company did not exceed any federally insured limits at any of its financial institutions as of September 30, 2022. The Company has historically not experienced any losses in such accounts. As of September 30, 2022, the Company held an immaterial amount of cash in a Canadian account that is denominated in C$.

As of September 30, 2022 and December 31, 2021, the maximum credit exposure related to the carrying amounts of accounts receivable, other receivable, notes receivable and lease receivables was $18.4 million and $12.7 million, respectively.

(c)    Liquidity Risk

The Company manages liquidity risk through the management of its capital structure. The Company’s approach to managing liquidity is to raise sufficient capital to settle obligations and liabilities when due. The Company has raised capital as needed, however there is no guarantee the company will be able to continue to raise funds in the same manor it has historically.

The Company has the following obligations as of September 30, 2022, which are expected to be payable in the following respective periods:

	Less than 1 year		1 to 3 years		3 to 5 years		Greater than 5 years		Total
Accounts payable and accrued liabilities	$	22,923	$	1,200	$	—	$	—	$	24,123
Convertible notes, notes payable and accrued interest	9,299		75,214		—		—		84,513
Construction finance liability	—		16,000		—		—		16,000
Total	$	32,222	$	92,414	$	—	$	—	$	124,636

(d)    Foreign Exchange Risk

The Company is exposed to exchange rate fluctuations between United States and Canadian dollars. The Company’s share price is denominated in Canadian dollars. If the Canadian dollar declines against the United States dollar, the United States dollar amounts available to fund the Company through the exercise of stock options or warrants will be reduced. The Company also has bank accounts with balances in Canadian dollars. The value of these bank balances if converted to U.S. dollars will fluctuate. While the Company maintains a head office in Canada where it incurs expenses primarily denominated in Canadian dollars, such expenses are a small portion of overall expenses incurred by the Company. The Company does not have a practice of trading derivatives and does not engage in “natural hedging” for funds held in Canada.

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Segment Information

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

Reportable Segments

Operating segments are components of the Company that combine similar business activities, with activities grouped to facilitate the evaluation of business units and allocation of resources by the Company’s board of directors and management. As of September 30, 2022, the Company had two reportable segments: THC Cannabis for the THC cannabis cultivation, manufacturing, and distribution and CBD Wellness which encompasses the Company's CBD sales to third party consumers.

The below table presents revenues and net (income) loss by type for the three and nine months ended September 30, 2022 and 2021, as well as assets by type as of September 30, 2022 and December 31, 2021:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net Revenues
THC Cannabis	$	32,308	$	25,529	$	86,286	$	74,073
CBD Wellness	166		412		675		1,959
Corporate	—		—		—		—
Total Net Revenues	32,474		25,941		86,961		76,032
Net (Income) Loss attributable to shareholders
THC Cannabis	(363)		949		3,739		4,790
CBD Wellness	(51)		381		(170)		1,201
Corporate	9,020		3,269		17,487		15,920
Total Net Loss	$	8,606	$	4,599	$	21,056	$	21,911

Assets	September 30, 2022		December 31, 2021
THC Cannabis	$	318,717	$	238,933
CBD Wellness	839		805
Corporate	443		15,801
Total Assets	$	319,999	$	255,539

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Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The following table summarizes the Company's income tax expense:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Net loss before income taxes	$	(5,279)	$	(53)	$	(11,239)	$	(11,351)
Income tax expense	(3,322)		(4,541)		(9,802)		(10,545)

The Company has computed its provision for income taxes under the discrete method which treats the year-to-date period as if it were the annual period and determines the income tax expense or benefit on that basis. The discrete method is applied when application of the estimated annual effective tax rate is impractical because it is not possible

to reliably estimate the annual effective tax rate. The Company believes the use of this discrete method is more appropriate than the annual effective tax rate method due to the early growth stage of the business. At this time, there is a high degree of uncertainty in estimating the Company’s annual pre-tax income and significant non-deductible expenses so the Company cannot reliably estimate the annual effective tax rate.

Due to its cannabis operations, the Company is subject to the limitations of Internal Revenue Code (“IRC”) Section 280E. Under IRC Section 280E, the Company is only allowed to deduct expenses directly related to sales of its cannabis products. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E for the Company's expenses related to its plant-touching cannabis operations.

The federal statute of limitation remains open for the 2018 tax year to the present. The state income tax returns generally remain open for the 2017 tax year through the present. Net operating losses arising prior to these years are also open to examination if and when utilized.

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Subsequent Events

9 Months Ended

Sep. 30, 2022

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

On October 13, 2022, the Company entered into a Prepaid Forward Purchase Agreement with Frisco SPV, LLC. Under the terms of the agreement, Frisco SPV, LLC agreed to advance the Company $3.75 million in exchange for a share of the proceeds of the Company’s planned litigation against four former licensing clients. The funder’s share is equal to 1.5 multiplied by the amount of the advance, plus 35 percent of the proceeds of the litigation after deducting the funder’s multiple return, plus, beginning October 2024, 15% interest on the advance, if not repaid sooner. On October 21 and 25, 2022, Frisco SPV, LLC completed the funding as agreed. The funding is unsecured and non-recourse in the event the Company is unsuccessful in these proceedings.

On October 27, 2022, Company subsidiary IL Grown Medicine LLC entered into a First Amendment to Lease Agreement amending its lease with IIP-IL 6 LLC for the Company’s Matteson, Illinois facility by creating an option for IL Grown to increase the tenant improvement allowance for the facility by between $15.0 million and $19.9 million. On November 10, 2022, IL Grown exercised its option and entered into a Second Amendment to Lease Agreement increasing the tenant improvement allowance under the lease by $19.9 million; extending the term of the lease to 20 years after the amendment; increasing the base rent by $0.2 million per month (abated until April 1, 2023); and increasing the security deposit by $2.2 million, to be funded pro rata out of draws on the tenant improvement allowance.

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Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

New Accounting Pronouncements

New Accounting Pronouncements

Accounting Standard Updates Issued but Not Yet Adopted

In June 2022, the FASB issued ASU 2022-03, "Fair Value Measurements - Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 820)". ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. It also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted and the amendments in the ASU should be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. The Company is currently assessing the impact of adopting ASU 2022-03 on the consolidated financial statements.

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Inventory (Tables)

9 Months Ended

Sep. 30, 2022

Inventory Disclosure [Abstract]

Summary of Inventory

The Company’s inventories include the following as of September 30, 2022 and December 31, 2021:

	September 30, 2022		December 31, 2021
Raw materials - unharvested cannabis	$	4,584	$	2,164
Raw materials - harvested and purchased cannabis	12,425		3,045
Packaging and other non-finished goods	3,547		1,734
Work in process - manufactured and purchased extracts	2,124		4,771
Finished goods	8,256		8,373
Total	$	30,936	$	20,087

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Property Plant and Equipment (Tables)

9 Months Ended

Sep. 30, 2022

Property, Plant and Equipment [Abstract]

Summary of Property and Equipment and Related Depreciation

Property, plant and equipment and related depreciation are summarized in the table below:

	September 30, 2022		December 31, 2021
Land	$	775	$	—
Buildings & improvements	14,253		1,483
Construction in process	328		63
Furniture, equipment & other	19,422		13,425
Leasehold improvements	36,623		35,538
Total	$	71,401	$	50,509
Less: accumulated depreciation	(12,704)		(7,876)
Total property, plant, and equipment, net	$	58,697	$	42,633

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Intangible Assets and Goodwill (Tables)

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Indefinite-Lived Intangible Assets

Intangible assets and related amortization are summarized in the table below:

	Licenses		Customer Relationships		Non-Competition Agreements		Know-How		Tradenames and Trademarks		Total
Balance, December 31, 2021	$	20,146	$	1,088	$	—	$	5,012	$	—	$	26,246
Acquisitions (Note 5)	26,700		—		—		—		3,522		30,222
Amortization expense	—		(437)		—		(1,455)		(124)		(2,016)
Balance, September 30, 2022	$	46,846	$	651	$	—	$	3,557	$	3,398	$	54,452

Schedule of Finite-Lived Intangible Assets

Intangible assets and related amortization are summarized in the table below:

	Licenses		Customer Relationships		Non-Competition Agreements		Know-How		Tradenames and Trademarks		Total
Balance, December 31, 2021	$	20,146	$	1,088	$	—	$	5,012	$	—	$	26,246
Acquisitions (Note 5)	26,700		—		—		—		3,522		30,222
Amortization expense	—		(437)		—		(1,455)		(124)		(2,016)
Balance, September 30, 2022	$	46,846	$	651	$	—	$	3,557	$	3,398	$	54,452

Summary of Goodwill

Goodwill

Balance, December 31, 2021	$	23,155
Acquisitions (Note 5)	18,238
Balance, September 30, 2022	$	41,393

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Acquisitions and Business Combinations (Tables)

9 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Summary of the Preliminary Purchase Price Allocation Finalized for the NECC Acquisition

The following tables present the preliminary purchase price allocation for the NECC Merger:

Cash consideration	$	25,000
Note to seller	2,000
Equity consideration - common stock	18,200
Total Purchase Price	$	45,200

Description	Fair value
Assets acquired:
Cash	$	2
Inventory	213
Prepaid assets	2
Property, plant, and equipment	16,000
Intangible asset - licenses	18,000
Total assets acquired	$	34,217
Liabilities assumed:
Accounts payable	800
Total liabilities assumed	$	800
Estimated fair value of net assets acquired	$	33,417
Estimated Goodwill	$	11,783

The following tables present the preliminary purchase price allocation for the Island Merger:

Note to seller	$	10,000
Equity consideration - common stock	6,245
Equity consideration - warrants	732
Total Purchase Price	$	16,977

Description	Fair value
Assets acquired:
Cash	$	458
Accounts receivable	511
Inventory	3,072
Prepaid expenses and other current assets	424
Property and equipment, net	2,214
Operating lease - right of use asset	10,227
Intangible assets	11,300
Total assets acquired	$	28,206
Liabilities assumed:
Accounts payable	$	1,356
Accrued expenses and other liabilities	2,566
Contract liabilities	3,535
Lease liabilities	10,227
Total liabilities assumed	17,684
Estimated fair value of net assets acquired	$	10,522
Estimated Goodwill	$	6,455

Summary of Asset Acquisition

Share Consideration	$	2,100
Transaction Costs	6
Total Purchase Price	$	2,106

The allocation of the asset acquisition cost is detailed below:

Description	Fair Value
Assets acquired:
Accounts receivable	$	508
Inventory	534
Equipment	142
Intangible assets - tradenames	922
Total assets acquired	$	2,106

Summary of Pro Forma Information

The unaudited pro forma financial information for the Company including NECC and Island is as follows:

	For the For the Three Months Ended September 30,
	2022				2021
	Reported		Proforma		Reported		Proforma
Revenues	$	32,474	$	32,474	$	25,941	$	28,238
(Loss) income from operations	517		517		(924)		(2,603)
Net loss	$	(8,601)	$	(8,601)	$	(4,594)	$	(8,103)
Basic and diluted earning (loss) per share	$	(0.01)	$	(0.01)	$	(0.01)	$	(0.01)

	For the For the Nine Months Ended September 30,
	2022				2021
	Reported		Proforma		Reported		Proforma
Revenues	$	86,961	$	88,689	$	76,032	$	81,524
(Loss) income from operations	(4,823)		(5,875)		97		(5,093)
Net loss	$	(21,041)	$	(27,235)	$	(21,896)	$	(28,916)
Basic and diluted earning (loss) per share	$	(0.03)	$	(0.04)	$	(0.04)	$	(0.05)

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Leases (Tables)

9 Months Ended

Sep. 30, 2022

Leases [Abstract]

Summary of Changes in Lease Receivables

The following table summarizes changes in the Company’s lease receivables:

	September 30, 2022		December 31, 2021
Balance, beginning of the year	$	10,378	$	11,045
Interest	2,029		2,783
Lease payments received	(2,700)		(3,450)
Balance, end of the period	9,707		$	10,378
Less current portion	(3,765)		(3,630)
Long-term lease receivables	$	5,942	$	6,748

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Notes Payable and Convertible Notes (Tables)

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Summary of Notes Payable and Convertible Notes

The Company’s notes payable and convertible notes are as follows:

	LI Lending, LLC		May 2020 Convertible Notes		May 2020 Convertible Notes (Swap)		October 2021 Convertible Note		Other Loans		Total
Balance, December 31, 2020	$	45,362	$	2,855	$	11,867	$	—	$	6,931	$	67,015
Loans advanced, net	—		—		—		14,376		930		15,306
Loan payments	(4,671)		—		—		—		(1,079)		(5,750)
Converted to equity	—		(5,852)		(11,867)		—		—		(17,719)
Accrued interest	7,575		2,997		—		265		1,124		11,961
Balance, December 31, 2021	$	48,266	$	—	$	—	$	14,641	$	7,906	$	70,813
Loans advanced, net	—		—		—		—		15,000		15,000
Loan payments	(4,689)		—		—		—		(1,182)		(5,871)
Converted to equity	—		—		—		—		(2,784)		(2,784)
Accrued interest	5,845		—		—		872		638		7,355
Balance, September 30, 2022	$	49,422	$	—	$	—	$	15,513	$	19,578	$	84,513
Less current portion	—		—		—		—		(9,299)		(9,299)
Long-term portion	$	49,422	$	—	$	—	$	15,513	$	10,279	$	75,214

Summary of Convertible Debt

Outstanding as of September 30, 2022 were other payables totaling $19.6 million which include notes issued as part of the acquisitions of Healthy Pharms, NECC, Island, and Arkansas entities as follows:

Subsidiary	Terms	September 30, 2022		December 31, 2021
Healthy Pharms Inc.	Unsecured convertible note, due November 18, 2021 at 12% per annum	$	—	$	2,784
Healthy Pharms Inc.	Unsecured promissory note at $0.50 per share due December 18, 2022 at 10% per annum (1)	3,463		3,213
Island Global Holdings, Inc.	Promissory note due October 25, 2026 at 6% per annum	10,279		—
NECC	Promissory note due November 15, 2022 at 10% per annum (2)	1,005		—
Island Global Holdings, Inc.	Promissory note due February 28, 2023 at 1.5% per month (3)	3,057		—
Arkansas Entities	Unsecured Promissory note due December 1,2022, monthly interest payments at 14% per annum	1,730		1,709
Equipment Loans	Secured by equipment, monthly payments beginning in 2021 at 15% per annum	44		49
Other	Various	—		151
Total Notes Payable and Convertible Notes		$	19,578	$	7,906

(1) In November 2021, the unsecured promissory note was modified to be due and payable in full on or before December 18, 2022. The Company concluded the extension resulted in a debt modification under ASC 470.

(2) On July 28, 2022, the parties amended the promissory note to provide for payment of half the principal on the initial maturity date, and the remaining principal and all accrued interest on November 15, 2022. Interest will continue at annual rate of ten percent (10%).

(3) On August 30, 2022, the Company entered into a Promissory Note Purchase Agreement with HI 4Front, LCC and Navy Capital Green Fund, LP. Under the agreement, the Company sold promissory notes totaling $3 million with a six-month maturity bearing 1.5% monthly interest for three months and 2% monthly interest for three months. The notes were unsecured, but would become secured if not repaid within three months.

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Share Capital and Equity (Tables)

9 Months Ended

Sep. 30, 2022

Stockholders' Equity Note [Abstract]

Summary of Voting Shares Activity

Voting shares activity for the periods presented is summarized as follows:

	Class A Subordinate Voting Shares	Class C Multiple Voting Shares	Total
Balance, December 31, 2021	592,905,396	1,276,208	594,181,604
Share capital issuances	47,481,290	—	47,481,290
Balance, September 30, 2022	640,386,686	1,276,208	641,662,894

Summary of Share Capital and Equity

Series	Shares outstanding as of September 30, 2022	As converted to SVS Shares
Class A - Subordinate Voting Shares	640,386,686	640,386,686
Class C - Multiple Voting Shares	1,276,208	1,276,208
	641,662,894	641,662,894

Summary of Measurement Input Valuation Techniques

	9/30/2022	12/31/2021
Share Price	C$0.43	C$1.27
Exercise Price	C$0.90	C$0.90
Expected Life	0.2 years	0.9 years
Annualized Volatility	0.8294	0.4623
Dividend yield	0	0
Discount Rate	0.0378	0.0039
C$ Exchange Rate	1.37	1.27

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Warrants (Tables)

9 Months Ended

Sep. 30, 2022

Warrants and Rights Note Disclosure [Abstract]

Summary of Warrants Outstanding to Purchase Shares

As of September 30, 2022, there were share purchase warrants outstanding to purchase up to 29,103,553 SVS shares:

Series	Number of warrants	Weight-average exercise price
Balance, December 31, 2021	26,192,237	$	0.75
Issued	2,999,975	1.00
Exercised	(88,659)	0.56
Balance, September 30, 2022	29,103,553	$	0.75

Summary of Warrants Outstanding And Exercisable

As of September 30, 2022, the Company has the following warrants outstanding:

Warrants Outstanding	Exercise Price		Expiration Date
10,403,150	C$ 0.90 *		November 23, 2022
209,426	C$ 0.70 *		November 23, 2022
12,135,922	$ 0.82*		December 17, 2022
2,230,080	$ 0.67*		January 29, 2023
2,999,975	$	1.00	April 13, 2024
625,000	C$ 0.80 *		October 6, 2024
500,000	C$ 0.80 *		October 6, 2025
29,103,553

*Represents warrants that are exercisable as of September 30, 2022.

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Share-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Summary of Stock Option Activity

Stock option activity is summarized as follows:

	Number of Options	Weighted Average Price CAD$	Weighted Average Years
Balance December 31, 2021	54,282,752	0.94	2.97
Granted	7,460,000	0.82	3.38
Exercised	(51,975)	0.80	0
Forfeited/ Expired	(4,639,765)	1.01	0
Balance September 30, 2022	57,051,012	0.89	2.36

Summary of Stock Options Values using Black-Scholes Model with Key Assumptions

In determining the amount of equity-based compensation during the year, the Company used the Black-Scholes option pricing model to establish the fair value of options granted during the year with the following key assumptions:

	2022		2021
Risk-Free Interest Rate	3.62	%	0.87% to 0.92%
Expected Life	3.5 years		5.00 years
Expected Annualized Volatility	89.83	%	86.20% to 93.53%
Forfeiture rate	—	%	—	%
Expected Dividend Yield	—	%	—	%

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Contingencies (Tables)

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Schedule of Fair Value of Contingent Consideration

The fair value of the contingent consideration, which is based on specific revenue levels achieved over a 2-3-year period, is as follows:

	Om of Medicine
Balance, December 31, 2021	$	2,393
Changes in fair value	(2,393)
Balance, September 30, 2022	—
Less: current portion	—
Long-term portion	$	—

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Financial Instruments and Financial Risk Management (Tables)

9 Months Ended

Sep. 30, 2022

Investments, All Other Investments [Abstract]

Schedule of Fair Value Measurements With in the Fair Value Hierarchy of The Financial Instruments

The guidance requires fair value measurements be classified and disclosed in one of the following three categories:

Level 1	Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2	Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
Level 3	Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The following table details the fair value measurements within the fair value hierarchy of the Company's financial instruments, which includes the Level 3 liabilities:

	Fair value at September 30, 2022
	Total		Level 1		Level 2		Level 3
Liabilities:
Derivative liability	$	8	$	—	$	—	$	8
Total liabilities	$	8	$	—	$	—	$	8

	Fair value at December 31, 2021
	Total		Level 1		Level 2		Level 3
Liabilities:
Derivative liability	$	3,502	$	—	$	—	$	3,502
Total liabilities	$	3,502	$	—	$	—	$	3,502

Summary of Changes in Fair Value of the Derivative Liabilities Measured on a Recurring Basis

The table below provides a summary of the changes in fair value of the derivative liabilities measured on a recurring basis using significant unobservable inputs (Level 3):

	For the Nine Months Ended September 30,
Derivative liability:	2022		2021
Balance, beginning of period	$	3,502	$	5,807
(Gain) loss on fair value of derivative liability	(3,494)		(502)
Change in fair value of derivative liability upon exercise of warrants	—		(1,427)
Balance, end of period	$	8	$	3,878

Schedule of Gross Contractual Obligations

The Company has the following obligations as of September 30, 2022, which are expected to be payable in the following respective periods:

	Less than 1 year		1 to 3 years		3 to 5 years		Greater than 5 years		Total
Accounts payable and accrued liabilities	$	22,923	$	1,200	$	—	$	—	$	24,123
Convertible notes, notes payable and accrued interest	9,299		75,214		—		—		84,513
Construction finance liability	—		16,000		—		—		16,000
Total	$	32,222	$	92,414	$	—	$	—	$	124,636

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Summary of Revenue By Type

The below table presents revenues and net (income) loss by type for the three and nine months ended September 30, 2022 and 2021, as well as assets by type as of September 30, 2022 and December 31, 2021:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net Revenues
THC Cannabis	$	32,308	$	25,529	$	86,286	$	74,073
CBD Wellness	166		412		675		1,959
Corporate	—		—		—		—
Total Net Revenues	32,474		25,941		86,961		76,032
Net (Income) Loss attributable to shareholders
THC Cannabis	(363)		949		3,739		4,790
CBD Wellness	(51)		381		(170)		1,201
Corporate	9,020		3,269		17,487		15,920
Total Net Loss	$	8,606	$	4,599	$	21,056	$	21,911

Assets	September 30, 2022		December 31, 2021
THC Cannabis	$	318,717	$	238,933
CBD Wellness	839		805
Corporate	443		15,801
Total Assets	$	319,999	$	255,539

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Income Taxes (Tables)

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Summary of Income Tax Expense and Effective Tax Rates

The following table summarizes the Company's income tax expense:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
Net loss before income taxes	$	(5,279)	$	(53)	$	(11,239)	$	(11,351)
Income tax expense	(3,322)		(4,541)		(9,802)		(10,545)

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Basis of Presentation (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($) Segment Dispensary facility	Dec. 31, 2021 USD ($)
Nature Of Operations [Line Items]
Number of operating segments | Segment	2
Number of dispensaries | Dispensary	6
Contract liabilities	$ 2,700
Current portion of contract liabilities	653	$ 0
Non-current contract liabilities	$ 2,000	$ 0
Illinois, Michigan, Massachusetts, and California
Nature Of Operations [Line Items]
Number of production facilities | facility	9

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Inventory - Summary of Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Inventory [Line Items]
Packaging and other non-finished goods	$ 3,547	$ 1,734
Work in process - manufactured and purchased extracts	2,124	4,771
Finished goods	8,256	8,373
Total	30,936	20,087
Raw materials - unharvested cannabis
Inventory [Line Items]
Raw materials	4,584	2,164
Raw materials - harvested and purchased cannabis
Inventory [Line Items]
Raw materials	$ 12,425	$ 3,045

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Property Plant and Equipment - Summary of Property and Equipment and Related Depreciation (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 71,401	$ 50,509
Less: accumulated depreciation	(12,704)	(7,876)
Total property, plant, and equipment, net	58,697	42,633
Land
Property, Plant and Equipment [Line Items]
Property and equipment, gross	775	0
Buildings & improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	14,253	1,483
Construction in process
Property, Plant and Equipment [Line Items]
Property and equipment, gross	328	63
Furniture, equipment & other
Property, Plant and Equipment [Line Items]
Property and equipment, gross	19,422	13,425
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 36,623	$ 35,538

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Property Plant and Equipment - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Property, Plant and Equipment [Line Items]
Property, plant, and equipment, net	$ 58,697,000		$ 58,697,000		$ 42,633,000
Contractual commitments for future capital expenditures	0		0		$ 0
Depreciation expense	1,400,000	$ 700,000	4,800,000	$ 1,800,000
Depreciation in COGS	1,200,000	$ 500,000	3,900,000	$ 1,200,000
Asset Pledged as Collateral
Property, Plant and Equipment [Line Items]
Property, plant, and equipment, net	$ 33,000,000		$ 33,000,000

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Intangible Assets and Goodwill - Schedule of Indefinite-Lived and Finite-Lived Intangible Assets (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)
Finite-Lived Intangible Assets [Roll Forward]
Amortization expense	$ (2,016)
Total
Balance, December 31, 2021	26,246
Acquisitions (Note 5)	30,222
Balance, September 30, 2022	54,452
Licenses
Indefinite-Lived Intangible Assets [Roll Forward]
Beginning balance	20,146
Acquisitions	26,700
Ending balance	46,846
Customer Relationships
Finite-Lived Intangible Assets [Roll Forward]
Beginning balance	1,088
Acquisitions	0
Amortization expense	(437)
Ending balance	651
Non-Competition Agreements
Finite-Lived Intangible Assets [Roll Forward]
Beginning balance	0
Acquisitions	0
Amortization expense	0
Ending balance	0
Know-How
Finite-Lived Intangible Assets [Roll Forward]
Beginning balance	5,012
Acquisitions	0
Amortization expense	(1,455)
Ending balance	3,557
Tradenames and Trademarks
Finite-Lived Intangible Assets [Roll Forward]
Beginning balance	0
Acquisitions	3,522
Amortization expense	(124)
Ending balance	$ 3,398

XML

Intangible Assets and Goodwill - Summary of Goodwill (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)
Goodwill [Roll Forward]
Beginning balance	$ 23,155
Acquisitions	18,238
Ending balance	$ 41,393

XML

Intangible Assets and Goodwill - Additional Information (Details) $ in Millions	Sep. 30, 2022 USD ($)
CBD Wellness
Disclosure Of Intangible Assets And Goodwill [Line Items]
Accumulated impairment	$ 13.4

XML

Acquisitions And Business Combinations - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands				3 Months Ended	9 Months Ended
	Aug. 19, 2022	Apr. 25, 2022	Jan. 28, 2022	Sep. 30, 2022	Sep. 30, 2022	Dec. 31, 2021
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Business combination consideration transferred liabilities incurred		$ 10,000
Warrants (in shares)				29,103,553	29,103,553	26,192,237
Bloom Farms
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Asset acquisition, consideration transferred, equity interest value	$ 2,100
Asset acquisition, consideration transferred, transaction cost	6
Asset acquisition, contingent consideration, revenue threshold amount	2,100
Bloom Farms | Maximum
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Asset acquisition, contingent consideration, liability	$ 5,000
Subordinate Voting Share | Bloom Farms
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Asset acquisition, stock consideration (in shares)	3,750,000
Asset acquisition, consideration transferred, equity interest value	$ 2,100
Asset acquisition, consideration transferred, transaction cost	$ 60
New England Cannabis Corporation
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Percentage of voting interests acquired			100.00%
Cash consideration			$ 9,000		$ 25,000
Business combination consideration transferred liabilities incurred					2,000
Transaction and restructuring costs					700
New England Cannabis Corporation | Subordinate Voting Share
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Number of shares issued as a settlement of consideration (in shares)			28,600,000
29 Everett Street LLC
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Percentage of voting interests acquired			100.00%
Cash consideration			$ 16,000
Business combination consideration transferred liabilities incurred			$ 2,000
Island Global Holdings, Inc.
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Percentage of voting interests acquired		100.00%
Business combination consideration transferred liabilities incurred		$ 10,000
Transaction and restructuring costs					$ 1,300
Interest rate, stated percentage		6.00%
Debt instrument, term		54 months
Island Global Holdings, Inc. | Trademarks and Trade Names
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Acquired indefinite-lived intangible assets, useful life					10 years
Island Global Holdings, Inc. | Subordinate Voting Share
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Warrants (in shares)		2,999,975
Warrants purchase price per share (in dollar per share)		$ 1.00
Island Global Holdings, Inc. | Subordinate Voting Share
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Number of shares issued as a settlement of consideration (in shares)		8,783,716
New England Cannabis Corporation and Island Global Holdings Inc.
Business Acquisition, Equity Interests Issued or Issuable [Line Items]
Acquisition-related revenue				$ 2,500	$ 3,500
Acquisition-related net income (loss)				$ 1,800	$ (100)

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Acquisitions and Business Combinations - Summary Of The Preliminary Purchase Price Allocation Finalized For The NECC Acquisition (Details) - USD ($) $ in Thousands			9 Months Ended
	Apr. 25, 2022	Jan. 28, 2022	Sep. 30, 2022	Dec. 31, 2021
Business Acquisition [Line Items]
Note to seller	$ 10,000
Liabilities assumed:
Estimated Goodwill			$ 41,393	$ 23,155
New England Cannabis Corporation
Business Acquisition [Line Items]
Cash consideration		$ 9,000	25,000
Note to seller			2,000
Equity consideration - common stock			18,200
Total Purchase Price			$ 45,200
Assets acquired:
Cash		2
Inventory		213
Prepaid expenses and other current assets		2
Property, plant, and equipment		16,000
Intangible assets		18,000
Total assets acquired		34,217
Liabilities assumed:
Accounts payable		800
Total liabilities assumed		800
Estimated fair value of net assets acquired		33,417
Estimated Goodwill		$ 11,783
Island Global Holdings, Inc.
Business Acquisition [Line Items]
Note to seller	10,000
Equity consideration - common stock	6,245
Equity consideration - warrants	732
Total Purchase Price	16,977
Assets acquired:
Cash	458
Accounts receivable	511
Inventory	3,072
Prepaid expenses and other current assets	424
Property, plant, and equipment	2,214
Operating lease - right of use asset	10,227
Intangible assets	11,300
Total assets acquired	28,206
Liabilities assumed:
Accounts payable	1,356
Accrued expenses and other liabilities	2,566
Contract liabilities	3,535
Lease liabilities	10,227
Total liabilities assumed	17,684
Estimated fair value of net assets acquired	10,522
Estimated Goodwill	$ 6,455

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Acquisitions and Business Combinations - Summary of Asset Acquisition (Details) - Bloom Farms $ in Thousands	Aug. 19, 2022 USD ($)
Asset Acquisition [Line Items]
Share Consideration	$ 2,100
Transaction Costs	6
Total Purchase Price	2,106
Assets acquired:
Accounts receivable	508
Inventory	534
Equipment	142
Intangible assets - tradenames	922
Total assets acquired	$ 2,106

XML

Acquisitions and Business Combinations - Summary Of Pro Forma Information (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2022	Sep. 30, 2021
Reported
Revenues	$ 32,474			$ 25,941			$ 86,961	$ 76,032
(Loss) income from operations	517			(924)			(4,823)	97
Net loss	$ (8,601)	$ (6,546)	$ (5,894)	$ (4,594)	$ (6,218)	$ (11,084)	$ (21,041)	$ (21,896)
Basic loss per share (in dollar per share)	$ (0.01)			$ (0.01)			$ (0.03)	$ (0.04)
Diluted loss per share (in dollar per share)	$ (0.01)			$ (0.01)			$ (0.03)	$ (0.04)
Proforma
Revenues	$ 32,474			$ 28,238			$ 88,689	$ 81,524
(Loss) income from operations	517			(2,603)			(5,875)	(5,093)
Net loss	$ (8,601)			$ (8,103)			$ (27,235)	$ (28,916)
Basic earning (loss) per share (in dollar per share)	$ (0.01)			$ (0.01)			$ (0.04)	$ (0.05)
Diluted earning (loss) per share (in dollar per share)	$ (0.01)			$ (0.01)			$ (0.04)	$ (0.05)

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Leases - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Leases [Line Items]
Long term lease receivable	$ 5,942		$ 5,942		$ 6,748
Current portion of lease receivables	3,765		3,765		$ 3,630
Real estate income	3,407	$ 2,815	9,323	$ 8,374
Sublease income			500
Elma, Building
Leases [Line Items]
Real estate income	600	700	2,000	2,100
Olympia Building
Leases [Line Items]
Real estate income	$ 2,300	$ 2,100	$ 6,800	$ 6,300

XML

Leases - Summary of Changes in Lease Receivables (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Sales-type and Direct Financing Leases, Lease Receivable [Roll Forward]
Balance, beginning of the year	$ 10,378	$ 11,045
Interest	2,029	2,783
Lease payments received	(2,700)	(3,450)
Balance, end of the period	9,707	10,378
Less current portion	(3,765)	(3,630)
Long-term lease receivables	$ 5,942	$ 6,748

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Notes Payable and Convertible Notes - Summary of Notes Payable and Convertible Notes (Details) - USD ($)			3 Months Ended	9 Months Ended	12 Months Ended
	Oct. 06, 2021	May 14, 2020	Sep. 30, 2022	Sep. 30, 2022	Dec. 31, 2021
Debt Instrument, Increase (Decrease) [Roll Forward]
Beginning Balance				$ 70,813,000	$ 67,015,000
Loans advanced, net				15,000,000	15,306,000
Loan payments				(5,871,000)	(5,750,000)
Converted to equity				(2,784,000)	(17,719,000)
Accrued interest				7,355,000	11,961,000
Ending Balance			$ 84,513,000	84,513,000	70,813,000
Less current portion			(9,299,000)	(9,299,000)
Long-term portion			75,214,000	75,214,000
LI Lending, LLC
Debt Instrument, Increase (Decrease) [Roll Forward]
Beginning Balance				48,266,000	45,362,000
Loans advanced, net				0	0
Loan payments				(4,689,000)	(4,671,000)
Converted to equity				0	0
Accrued interest			2,500,000	5,845,000	7,575,000
Ending Balance			49,422,000	49,422,000	48,266,000
Less current portion			0	0
Long-term portion			49,422,000	49,422,000
May 2020 Convertible Notes | Convertible Note
Debt Instrument, Increase (Decrease) [Roll Forward]
Beginning Balance				0	2,855,000
Loans advanced, net		$ 5,800,000		0	0
Loan payments				0	0
Converted to equity				0	(5,852,000)
Accrued interest				0	2,997,000
Ending Balance			0	0	0
Less current portion			0	0
Long-term portion			0	0
May 2020 Convertible Notes (Swap) | Convertible Note
Debt Instrument, Increase (Decrease) [Roll Forward]
Beginning Balance				0	11,867,000
Loans advanced, net				0	0
Loan payments				0	0
Converted to equity				0	(11,867,000)
Accrued interest				0	0
Ending Balance			0	0	0
Less current portion			0	0
Long-term portion			0	0
October 2021 Convertible Note | Convertible Note
Debt Instrument, Increase (Decrease) [Roll Forward]
Beginning Balance				14,641,000	0
Loans advanced, net	$ 14,400,000			0	14,376,000
Loan payments	$ 0			0	0
Converted to equity				0	0
Accrued interest				872,000	265,000
Ending Balance			15,513,000	15,513,000	14,641,000
Less current portion			0	0
Long-term portion			15,513,000	15,513,000
Other Loans
Debt Instrument, Increase (Decrease) [Roll Forward]
Beginning Balance				7,906,000	6,931,000
Loans advanced, net				15,000,000	930,000
Loan payments				(1,182,000)	(1,079,000)
Converted to equity				(2,784,000)	0
Accrued interest				638,000	1,124,000
Ending Balance			19,578,000	19,578,000	$ 7,906,000
Less current portion			(9,299,000)	(9,299,000)
Long-term portion			$ 10,279,000	$ 10,279,000

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Notes Payable and Convertible Notes - Convertible Notes Additional Information (Details)				9 Months Ended	12 Months Ended
	Oct. 06, 2021 USD ($) $ / shares	May 28, 2020 USD ($) d $ / shares shares	May 14, 2020 USD ($) d $ / shares	Sep. 30, 2022 USD ($)	Dec. 31, 2021 USD ($)
Debt Instrument [Line Items]
Loans advanced, net				$ 15,000,000	$ 15,306,000
Repayments of debt				5,871,000	5,750,000
May 2020 Convertible Notes | Convertible Note
Debt Instrument [Line Items]
Loans advanced, net			$ 5,800,000	0	0
Interest rate, stated percentage			5.00%
Debt instrument, convertible, conversion price (in dollars per share) | $ / shares			$ 0.25
Debt instrument, convertible, stock price trigger (in dollars per share) | $ / shares			$ 0.50
Debt instrument, convertible, threshold consecutive trading days | d			45
Repayments of debt				0	0
May 2020 Convertible Notes (Swap) | Convertible Note
Debt Instrument [Line Items]
Loans advanced, net				0	0
Interest rate, stated percentage		3.00%
Debt instrument, convertible, conversion price (in dollars per share) | $ / shares		$ 0.46
Debt instrument, convertible, stock price trigger (in dollars per share) | $ / shares		$ 0.92
Debt instrument, convertible, threshold consecutive trading days | d		45
Number of shares exchanged in debt (in shares) | shares		29,448,468
Exchanged shares value		$ 13,700,000
Issued debt in exchange of convertible equity		13,700,000
Minimum required annual revenue for interest payment		$ 15,000,000
Repayments of debt				0	0
October 2021 Convertible Note | Convertible Note
Debt Instrument [Line Items]
Loans advanced, net	$ 14,400,000			0	14,376,000
Interest rate, stated percentage	6.00%
Debt instrument, convertible, conversion price (in dollars per share) | $ / shares	$ 1.03
Debt instrument, face amount	$ 15,000,000
Payments of debt issuance costs	600,000
Repayments of debt	$ 0			$ 0	$ 0

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Notes Payable and Convertible Notes - LI Lending LLC Additional Information (Details) $ in Thousands		1 Months Ended	3 Months Ended	9 Months Ended	12 Months Ended
	Apr. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)	Sep. 30, 2022 USD ($) draw	Sep. 30, 2022 USD ($) draw	Dec. 31, 2021 USD ($)	Jan. 01, 2022	May 10, 2019 USD ($)
Debt Instrument [Line Items]
Debt, net amount		$ 67,015	$ 84,513	$ 84,513	$ 70,813
Accrued interest				7,355	11,961
Repayments of debt				5,871	5,750
LI Lending, LLC
Debt Instrument [Line Items]
Maximum borrowing capacity under credit facility							$ 50,000
Amount drawn			$ 45,000	$ 45,000
Number of draws made | draw			2	2
Long-term debt, gross			$ 49,700	$ 49,700
Debt instrument, unamortized discount			300	300
Debt, net amount		$ 45,362	49,422	$ 49,422	48,266
Periodic payment, principal	$ 300
Periodic payment, principal, payment term	8 months
Increase in interest rate		2.50%
Percentage of exit fee of the principal balance				20.00%
Interest payable			5,800	$ 5,800
Accrued interest			2,500	5,845	7,575
Loan discount accretion expense			40	200
Repayments of debt				4,689	$ 4,671
LI Lending, LLC | LI Lending Facility, Draw One
Debt Instrument [Line Items]
Amount drawn	$ 33,000		$ 35,000	$ 35,000
Interest rate			10.25%	10.25%
Debt prepayment	$ 2,000
Interest rate on initial loan amount						12.75%
LI Lending, LLC | LI Lending Facility, Draw Two
Debt Instrument [Line Items]
Amount drawn			$ 10,000	$ 10,000
Interest rate			12.25%	12.25%
Interest rate on final loan amount						14.75%

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Notes Payable and Convertible Notes - Summary of Convertible Debt (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended
	Aug. 30, 2022	Feb. 28, 2023	Nov. 30, 2022	Sep. 30, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Notes payable and convertible notes				$ 19,578	$ 7,906
Healthy Pharms Inc. | Unsecured convertible note, due November 18, 2021 at 12% per annum
Debt Instrument [Line Items]
Interest rate, stated percentage				12.00%
Notes payable and convertible notes				$ 0	2,784
Healthy Pharms Inc. | Unsecured promissory note at $0.50 per share due December 18, 2022 at 10% per annum
Debt Instrument [Line Items]
Interest rate, stated percentage				10.00%
Debt instrument, convertible, conversion price (in dollars per share)				$ 0.50
Notes payable and convertible notes				$ 3,463	3,213
Island Global Holdings, Inc. | Promissory note due October 25, 2026 at 6% per annum
Debt Instrument [Line Items]
Interest rate, stated percentage				6.00%
Notes payable and convertible notes				$ 10,279	0
Island Global Holdings, Inc. | Promissory note due February 28, 2023 at 1.5% per month
Debt Instrument [Line Items]
Interest rate, stated percentage				1.50%
Notes payable and convertible notes				$ 3,057	0
Proceeds from sale of notes receivable	$ 3,000
Debt instrument, term	6 months
Island Global Holdings, Inc. | Promissory note due February 28, 2023 at 1.5% per month | Forecast
Debt Instrument [Line Items]
Debt instrument, interest rate during period		2.00%	1.50%
NECC | Promissory note due November 15, 2022 at 10% per annum
Debt Instrument [Line Items]
Interest rate, stated percentage				10.00%
Notes payable and convertible notes				$ 1,005	0
Arkansas Entities | Unsecured Promissory note due December 1,2022, monthly interest payments at 14% per annum
Debt Instrument [Line Items]
Interest rate, stated percentage				14.00%
Notes payable and convertible notes				$ 1,730	1,709
Equipment Loans | Secured by equipment, monthly payments beginning in 2021 at 15% per annum
Debt Instrument [Line Items]
Interest rate, stated percentage				15.00%
Notes payable and convertible notes				$ 44	49
Other | Various
Debt Instrument [Line Items]
Notes payable and convertible notes				$ 0	$ 151

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Notes Payable and Convertible Notes - Construction Finance Liability (Details) $ in Millions		3 Months Ended	9 Months Ended
	Jan. 28, 2022 USD ($) extensionOption	Sep. 30, 2022 USD ($)	Sep. 30, 2022 USD ($)
Debt Disclosure [Abstract]
Proceeds from sale of property	$ 16.0
Finance liability, term of contract	20 years
Finance liability, number of extension options | extensionOption	2
Finance liability, renewal term	5 years
Finance liability, monthly payment amount	$ 0.1
Finance liability, payment amount, annual increase percentage	3.00%
Finance liability		$ 16.0	$ 16.0
Accrued interest		$ 0.4	$ 1.1

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Share Capital and Equity - Additional Information (Details) $ in Thousands		3 Months Ended		9 Months Ended
	Nov. 23, 2020 USD ($) shares	Sep. 30, 2022 USD ($) shares	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($) vote shares	Sep. 30, 2021 USD ($)	Nov. 23, 2020 $ / shares
Class Of Stock [Line Items]
Period when the convertibility of shares from one class to another become exercisable				3 years
Share capital issuances (in shares)				47,481,290
Change in fair value of derivative liability | $		$ 420	$ 3,345	$ 3,494	$ 502
Private Placement
Class Of Stock [Line Items]
Number of voting shares in each unit (in shares)		1		1
Number of warrants in each unit (in shares)		0.5		0.5
Number of securities called by each warrant (in shares)		1		1
Warrant term		2 years		2 years
Warrants purchase price per share (in dollar per share) | $ / shares						$ 0.90
Net proceeds from issuance of stock with warrants | $	$ 11,600
Payments of share issuance costs | $	$ 700
Private Placement | Share Capital with Unit Price
Class Of Stock [Line Items]
Share capital issuances (in shares)	24,644,500
Units issued, price per unit (in dollar per share) | $ / shares						$ 0.70
Class C Multiple Voting Shares
Class Of Stock [Line Items]
Number of votes each shareholder is entitled to for each share | vote				800
Percentage of shares of one class held as a percentage of shares of another class		50.00%		50.00%
Share capital issuances (in shares)				0

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Share Capital and Equity - Summary of Voting Shares Activity (Details)	9 Months Ended
	Sep. 30, 2022 shares
Class Of Stock [Line Items]
Beginning balance (in shares)	594,181,604
Share capital issuances (in shares)	47,481,290
Ending balance (in shares)	641,662,894
Class A Subordinate Voting Shares
Class Of Stock [Line Items]
Beginning balance (in shares)	592,905,396
Share capital issuances (in shares)	47,481,290
Ending balance (in shares)	640,386,686
Class C Multiple Voting Shares
Class Of Stock [Line Items]
Beginning balance (in shares)	1,276,208
Share capital issuances (in shares)	0
Ending balance (in shares)	1,276,208

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Share Capital and Equity - Summary of Share Capital and Equity (Details) - shares	Sep. 30, 2022	Dec. 31, 2021
Class Of Stock [Line Items]
Number of shares outstanding (in shares)	641,662,894	594,181,604
Class A Shares
Class Of Stock [Line Items]
Number of shares outstanding (in shares)	640,386,686
Class C Shares
Class Of Stock [Line Items]
Number of shares outstanding (in shares)	1,276,208
Class A Subordinate Voting Shares
Class Of Stock [Line Items]
Number of shares outstanding (in shares)	640,386,686	592,905,396
Class C Multiple Voting Shares
Class Of Stock [Line Items]
Number of shares outstanding (in shares)	1,276,208	1,276,208

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Share Capital and Equity - Summary of Measurement Input Valuation Techniques (Details) - Option Pricing Model	Sep. 30, 2022 $ / shares yr	Dec. 31, 2021 $ / shares yr
Share Price
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants measurement input	0.43	1.27
Exercise Price
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants measurement input	0.90	0.90
Expected Life
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants measurement input | yr	0.2	0.9
Annualized Volatility
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants measurement input	0.8294	0.4623
Dividend yield
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants measurement input	0	0
Discount Rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants measurement input	0.0378	0.0039
C$ Exchange Rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants measurement input	1.37	1.27

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Warrants - Summary of Warrants Outstanding to Purchase Shares (Details)	9 Months Ended
	Sep. 30, 2022 $ / shares shares
Number of warrants
Number of warrants, beginning balance (in shares) | shares	26,192,237
Number of warrants, issued (in shares) | shares	2,999,975
Number of warrants, exercised (in shares) | shares	(88,659)
Number of warrants, ending balance (in shares) | shares	29,103,553
Weight-average exercise price
Weighted average exercise price, Beginning balance (in dollars per share) | $ / shares	$ 0.75
Weighted average exercise price, Issued (in dollars per share) | $ / shares	1.00
Weighted average exercise price, Exercised (in dollars per share) | $ / shares	0.56
Weighted average exercise price, Ending balance (in dollars per share) | $ / shares	$ 0.75

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Warrants - Summary of Warrants Outstanding And Exercisable (Details)	Sep. 30, 2022 $ / shares shares	Sep. 30, 2022 $ / shares shares	Dec. 31, 2021 shares
Class Of Warrant Or Right [Line Items]
Warrants outstanding (in shares)	29,103,553	29,103,553	26,192,237
Exercise Price CAD 0.90
Class Of Warrant Or Right [Line Items]
Warrants outstanding (in shares)	10,403,150	10,403,150
Exercise price (in dollar per share) | $ / shares		$ 0.90
Exercise Price CAD 0.70
Class Of Warrant Or Right [Line Items]
Warrants outstanding (in shares)	209,426	209,426
Exercise price (in dollar per share) | $ / shares		$ 0.70
Exercise Price $0.82
Class Of Warrant Or Right [Line Items]
Warrants outstanding (in shares)	12,135,922	12,135,922
Exercise price (in dollar per share) | $ / shares	$ 0.82
Exercise Price $0.67
Class Of Warrant Or Right [Line Items]
Warrants outstanding (in shares)	2,230,080	2,230,080
Exercise price (in dollar per share) | $ / shares	$ 0.67
Exercise Price $1.00
Class Of Warrant Or Right [Line Items]
Warrants outstanding (in shares)	2,999,975	2,999,975
Exercise price (in dollar per share) | $ / shares	$ 1.00
Exercise Price CAD 0.80
Class Of Warrant Or Right [Line Items]
Warrants outstanding (in shares)	625,000	625,000
Exercise price (in dollar per share) | $ / shares		$ 0.80
Exercise Price CAD 0.80
Class Of Warrant Or Right [Line Items]
Warrants outstanding (in shares)	500,000	500,000
Exercise price (in dollar per share) | $ / shares		$ 0.80

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Share-Based Compensation - Additional Information (Details) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($) plan	Sep. 30, 2021 USD ($)	Sep. 30, 2022 $ / shares shares	Dec. 31, 2021 shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of equity incentive plans | plan			2
Exercisable options (in shares) | shares					47,549,343
Outstanding options (in shares) | shares					57,051,012	54,282,752
Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Strike price (in dollar per share) | $ / shares					$ 0.10
Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Strike price (in dollar per share) | $ / shares					$ 1.63
Equity Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Recognized share-based compensation expense | $	$ 0.9	$ 2.6	$ 2.3	$ 8.0
Equity Incentive Plan | Class A Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Maximum number of stock options available for grant, percentage of number of outstanding shares			10.00%
Minimum exercise price of stock options issued, percentage of fair market value of shares on grant date			100.00%
Maximum term of stock options granted			10 years

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Share-Based Compensation - Summary of Stock Option Activity (Details) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Number of Options
Number of options, beginning balance (in shares)	54,282,752
Number of options, granted (in shares)	7,460,000
Number of options, exercised (in shares)	(51,975)
Number of options, forfeited/ expired (in shares)	(4,639,765)
Number of options, ending balance (in shares)	57,051,012	54,282,752
Weighted Average Price CAD$
Weighted Average Price, Beginning Balance (in dollar per shares)	$ 0.94
Weighted Average Price, Granted (in dollar per shares)	0.82
Weighted Average Price, Exercised (in dollar per shares)	0.80
Weighted Average Price, Forfeited/ Expired (in dollar per shares)	1.01
Weighted Average Price, Ending Balance (in dollar per shares)	$ 0.89	$ 0.94
Weighted Average Years
Weighted average years	2 years 4 months 9 days	2 years 11 months 19 days
Weighted average years, granted	3 years 4 months 17 days

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Share-Based Compensation - Summary of Stock Options Values using Black-Scholes Model with Key Assumptions (Details) - Share-Based Payment Arrangement, Option	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Risk-Free Interest Rate	3.62%
Risk-Free Interest Rate, minimum		0.87%
Risk-Free Interest Rate, maximum		0.92%
Expected Life	3 years 6 months	5 years
Expected Annualized Volatility	89.83%
Expected Annualized Volatility, maximum		93.53%
Expected Annualized Volatility, minimum		86.20%
Forfeiture rate	0.00%	0.00%
Expected Dividend Yield	0.00%	0.00%

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Related Parties (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021	May 10, 2019
Entity Related To iWolf Management, LLC | Management fees, pass through marketing costs and customer service
Leadership consulting Agreement In Force And Effect For A Period
Related party transaction, amounts of transaction	$ 0.3		$ 0.3
LI Lending, LLC | Chief Executive Officer
Leadership consulting Agreement In Force And Effect For A Period
Percentage of ownership interest held		14.28%
LI Lending, LLC | Director
Leadership consulting Agreement In Force And Effect For A Period
Percentage of ownership interest held		14.28%
LI Lending, LLC
Leadership consulting Agreement In Force And Effect For A Period
Maximum borrowing capacity under credit facility					$ 50.0
Long-term line of credit				$ 48.3
Line of credit facility, exit fee		$ 9.0
Amount due at maturity		54.0
Long-term debt, gross		49.7
Debt instrument, unamortized discount		0.3
Interest payable		$ 5.8
LI Lending LLC Note, as Amended
Leadership consulting Agreement In Force And Effect For A Period
Maximum borrowing capacity under credit facility					$ 45.0

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Contingencies - Additional Information (Details)		9 Months Ended
	Jan. 26, 2022 USD ($) installment	Sep. 30, 2022 USD ($)	Dec. 31, 2021 USD ($)
Loss Contingencies [Line Items]
Outstanding balance of contingent consideration		$ 0	$ 2,400,000
Loss contingency damages sought value	$ 19,400,000
Loss contingency benefit value	129,000,000
Litigation settlement, amount	$ 250,000
Litigation settlement, number of installments | installment	5
Minimum
Loss Contingencies [Line Items]
Contingent consideration evaluation period		2 years
Maximum
Loss Contingencies [Line Items]
Contingent consideration evaluation period		3 years

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Contingencies - Summary of Fair Value of Contingent Consideration (Details) - USD ($)	9 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Loss Contingency Accrual [Roll Forward]
Balance, December 31, 2021	$ 2,400,000
Balance, September 30, 2022	0
Less: current portion	9,299,000	$ 3,413,000
Long-term portion	0	$ 2,393,000
Om of Medicine
Loss Contingency Accrual [Roll Forward]
Balance, December 31, 2021	2,393,000
Changes in fair value	(2,393,000)
Balance, September 30, 2022	0
Less: current portion	0
Long-term portion	$ 0

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Financial instruments and financial risk management - Schedule of Fair Value Measurements With in the Fair Value Hierarchy of The Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Liabilities:
Derivative liability	$ 8	$ 3,502
Total liabilities	8	3,502
Level 1
Liabilities:
Derivative liability	0	0
Total liabilities	0	0
Level 2
Liabilities:
Derivative liability	0	0
Total liabilities	0	0
Level 3
Liabilities:
Derivative liability	8	3,502
Total liabilities	$ 8	$ 3,502

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Financial Instruments and Financial Risk Management - Summary of Changes in Fair Value of the Derivative Liabilities Measured on a Recurring Basis (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance, beginning of period	$ 3,502	$ 5,807
(Gain) loss on fair value of derivative liability	(3,494)	(502)
Change in fair value of derivative liability upon exercise of warrants	0	(1,427)
Balance, end of period	$ 8	$ 3,878

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Financial Instruments and Financial Risk Management - Additional information (Details) - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Investments, All Other Investments [Abstract]
Federally insured limits exceeded amount		$ 11.0
Maximum credit exposure	$ 18.4	$ 12.7

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Financial instruments and financial risk management - Schedule of Gross Contractual Obligations (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Financial Instruments [Line Items]
Less than 1 year	$ 32,222
1 to 3 years	92,414
3 to 5 years	0
Greater than 5 years	0
Total	124,636
Accounts payable and accrued liabilities
Financial Instruments [Line Items]
Less than 1 year	22,923
1 to 3 years	1,200
3 to 5 years	0
Greater than 5 years	0
Total	24,123
Convertible notes, notes payable and accrued interest
Financial Instruments [Line Items]
Less than 1 year	9,299
1 to 3 years	75,214
3 to 5 years	0
Greater than 5 years	0
Total	84,513
Construction finance liability
Financial Instruments [Line Items]
Less than 1 year	0
1 to 3 years	16,000
3 to 5 years	0
Greater than 5 years	0
Total	$ 16,000

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Segment Information - Additional Information (Details)	9 Months Ended
	Sep. 30, 2022 Segment
Segment Reporting [Abstract]
Number of reportable segments	2

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Segment Information - Summary of Revenues By Type (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Segment Reporting Information [Line Items]
Revenues	$ 32,474	$ 25,941	$ 86,961	$ 76,032
Total Net Loss	8,606	4,599	21,056	21,911
Total Assets	319,999		319,999		$ 255,539
Corporate
Segment Reporting Information [Line Items]
Revenues	0	0	0	0
Total Net Loss	9,020	3,269	17,487	15,920
Total Assets	443		443		15,801
THC Cannabis | Operating Segments
Segment Reporting Information [Line Items]
Revenues	32,308	25,529	86,286	74,073
Total Net Loss	(363)	949	3,739	4,790
Total Assets	318,717		318,717		238,933
CBD Wellness | Operating Segments
Segment Reporting Information [Line Items]
Revenues	166	412	675	1,959
Total Net Loss	(51)	$ 381	(170)	$ 1,201
Total Assets	$ 839		$ 839		$ 805

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Income Taxes - Summary of Income Tax Expense and Effective Tax Rates (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income Tax Disclosure [Abstract]
Net loss before income taxes	$ (5,279)	$ (53)	$ (11,239)	$ (11,351)
Income tax expense	$ (3,322)	$ (4,541)	$ (9,802)	$ (10,545)

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Subsequent Events (Details) - Subsequent Event $ in Thousands	Nov. 10, 2022 USD ($)	Oct. 27, 2022 USD ($)	Oct. 13, 2022 USD ($) defendant
Subsequent Event [Line Items]
Prepaid forward purchase agreement, amount			$ 3,750
Planned litigation, number of defendants | defendant			4
Prepaid forward purchase agreement, funder's share multiplier			1.5
Percent of the proceeds of the litigation after deducting multiple return			35.00%
Stated interest rate, if not repaid before October 2024			15.00%
IL Grown Medicine, LLC
Subsequent Event [Line Items]
Tenant improvement allowance, increase	$ 19,900
Remaining lease term	20 years
Increase in base rent	$ 200
Increase in security deposit	$ 2,200
Minimum | IL Grown Medicine, LLC
Subsequent Event [Line Items]
Tenant improvement allowance, increase option		$ 15,000
Maximum | IL Grown Medicine, LLC
Subsequent Event [Line Items]
Tenant improvement allowance, increase option		$ 19,900