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US: 4Front sells retail licenses

4Front has entered into a definitive agreement to sell its stake in retail licenses in Pennsylvania and Maryland, netting in excess of $18 million U.S. in cash. Earlier this year the company, with growing facilities in Washington, announced their restructuring plans. "We expect these transactions will fulfill our stated objectives of being fully-funded and achieving cash flow positivity in the second half of 2020", they say. 

Non-core License Sales
4Front announces the sale of our non-core retail licenses netting in excess of $18 million U.S. and a private placement of convertible debentures of $4 million U.S. "The transaction marks a significant milestone in our goal of streamlining its cost-structure, allowing the company to focus on optimizing vertical operations in core markets such as Massachusetts, Illinois, Michigan and California", they say.

Private Placement
4Front has commitments to raise $4 million U.S. in a private placement of convertible debt led by Navy Capital. The financing was contingent on entering into the asset divestiture agreements described above. These conditions have now been satisfied. The placement is scheduled to close on or about May 4, 2020.

"This is a watershed moment for our company. We believe these non-core divestitures, combined with our private debt placement, put the Company in the enviable position of not needing additional capital to become cash flow positive", says Leo Gontmakher, CEO of 4Front. "Our commitment to a lean corporate structure and focused execution allows us to achieve self-sufficient operations while minimizing dilution to our shareholders.The momentum in our business is strong and we can now turn our complete attention to maximizing growth in our core geographies and expanding our vertical operations to take meaningful market share in nascent adult-use markets." 

Chetan Gulati of Navy Capital, said, “We are impressed with 4Front’s focus on long-term, sustainable growth and its ability to operate an efficient and lean business during these uncertain times. We believe their low-cost, high-yield cultivation and production facilities in Washington, Massachusetts and Illinois are replicable across multiple geographies and well-suited to driving growth at scale in a production-led industry. We are delighted to support the Company in its next phase of growth.”

Strong Business Momentum
"Our affiliated cultivation and production facilities in Washington state have achieved a dominant position in one of the most competitive cannabis markets in the country", Leo Gontmakher continues. "Producing over 25 different products and 300 SKUs, our focus on quality, low-cost production at scale has driven high single digit market share in the Washington wholesale market. Our strategy going forward is to proliferate these product brands and low-cost production methodologies across its license portfolio and eventually beyond."

Progress on this strategy is already underway in Massachusetts as they have imported its Washington-grown expertise and achieved cultivation yields of over 400 grams per square foot and introduced its branded products to the market. "We expect to accelerate further product roll-out and expand production capacity in anticipation of greater penetration in Massachusetts. We also have near-term plans to double production capacity in Illinois before the end of the year and roll-out our brands to patients and consumers in the state, which remains a primary focus area."

For more information:
4 Front Ventures 

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