Item 1.01. Entry into a Material Definitive Agreement.
The information set forth in Item 2.01 below is incorporated by reference into
this Item 1.01.
Item 2.01. Completion of Acquisition or Disposition of Assets.
Merger Agreement
As reported on its Current Report on Form 8-K filed with the Securities and
Exchange Commission on April 6, 2022, 4Front Ventures Corp. (the "Company")
entered into an agreement and plan of merger (the "Merger Agreement") by and
among the Company, Island Merger Sub, Inc., a Delaware corporation and wholly
owned subsidiary of the Company ("Merger Sub"); Island Global Holdings, Inc., a
California corporation ("Island"); and Navy Capital SR LLC, a Delaware limited
liability company ("Navy", and together with the Company, Merger Sub, and
Island, the "Parties"). Pursuant to the terms and conditions of the Merger
Agreement, Merger Sub will be merged with and into Island, with Island surviving
the merger and continuing its corporate existence as a wholly-owned subsidiary
of the Company (the "Merger"). As reported on its Current Report on Form 8-K
filed with the Securities and Exchange Commission on April 22, 2022, the Parties
entered into the first amendment (the "Amendment") to the Merger Agreement to
replace the requirement that the Navy LOC Note Holders (as such term is defined
in the Amendment) fund a letter of credit to Island of up to $1,000,000. In lieu
of funding a line of credit, the Navy LOC Note Holders agreed to pay the full
$1,000,000 in cash to Island on or prior to the closing of the transactions
contemplated by the Merger Agreement (the "Cash Payment").
On April 13, 2022 (the "Effective Date"), the Parties consummated the Merger,
pursuant to the terms and conditions of the Merger Agreement, as amended.
However, due to administrative and technical issues at the California Office of
the Secretary of State, the Parties did not receive the certificate of merger
evidencing the closing of the Merger as of the Effective Date until April 25,
2022. At the Effective Date, pursuant to the terms and conditions of the Merger
Agreement, as amended, the Company issued to certain shareholders and
debtholders of Island an aggregate of: (i) 8,783,716 Class A Subordinated Voting
Shares of the Company (the "SVS"); (ii) 6% 54-month, subordinated promissory
notes (the "Merger Notes") in the aggregate principal amount of $6,500,000; and
(iii) warrants to purchase 2,999,975 SVS at a price of $1.00 per SVS (the
"Warrants", and together with the SVS and Merger Notes, the "Merger
Consideration").
The foregoing description is qualified in its entirety by reference to: (i) the
Merger Agreement, a complete copy of which was filed as Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities and Exchange Commission by
the Company on April 6, 2022; (ii) the Amendment to the Merger Agreement, a
complete copy of which was filed as Exhibit 10.1 to the Current Report on Form
8-K filed with the Securities and Exchange Commission by the Company on April
22, 2022; and (iii) the Form of Merger Note, a complete copy of which was filed
as Exhibit 10.2 to the Current Report on Form 8-K filed with the Securities and
Exchange Commission by the Company on April 22, 2022.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 2.01 is hereby incorporated by reference into
this Item 2.03.
Item 3.02. Unregistered Sales of Equity Securities.
The information set forth in Item 2.01 above is hereby incorporated by reference
into this Item 3.02. The certain shareholders and debtholders of Island issued
the Merger Consideration (the "Island Investors") each are an accredited
investor within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and the issuance of the Merger Consideration to the Island
Investors will be made without registration in reliance on Rule 506(b) of
Regulation D under the Securities Act, as well as corresponding provisions of
state securities laws.
This Current Report on Form 8-K does not constitute an offer to sell or the
solicitation of an offer to buy the securities discussed herein, and there shall
not be any offer, solicitation or sale of these securities in any jurisdiction
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction.
Item 7.01. Regulation FD Disclosure.
On April 26, 2022, the Company issued a press release regarding the consummation
of the Merger. A copy of the press release is attached hereto as Exhibit 99.1
and incorporated herein by reference.
The information furnished pursuant to this Item and the related exhibit shall
not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or incorporated by reference in any
filing under the Securities Act of 1933, as amended, or the Exchange Act, except
as may be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits:
Exhibit No. Exhibit
10.1 Agreement and Plan of Merger, dated as of March 30, by and among
4Front Ventures Corp., Island Merger Sub, Inc., Island Global
Holdings, Inc., and Navy Capital SR LLC., filed as Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities and Exchange
Commission by the Company on April 6, 2022 and incorporated herein by
reference.
10.2 Amendment to Agreement and Plan of Merger by and among 4Front Ventures
Corp., Island Merger Sub, Inc., Island Global Holdings, Inc., and Navy
Capital SR LLC, dated April 8, 2022, filed as Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities and Exchange
Commission by the Company on April 22, 2022 and incorporated herein by
reference.
10.3 Form of Merger Note, filed as Exhibit 10.2 to the Current Report on
Form 8-K filed with the Securities and Exchange Commission by the
Company on April 22, 2022 and incorporated herein by reference.
99.1 Press Release dated April 26, 2022 .
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