4Front Ventures Cuts Workforce; Names Leo Gontmakher As CEO
4Front Ventures Corp. said Monday that it has reduced its workforce and divested non-core assets as part of its efforts to achieve positive cash flow in the second half of 2020.
In addition, the cannabis company’s board of directors has appointed Leo Gontmakher, previously its chief operating officer, to the position of chief executive officer.
Former CEO Josh Rosen will transition to Executive Chairman of the board of directors. Nicolle Dorsey, former executive vice president of finance, will become the company’s chief financial officer, replacing former CFO Brad Kotansky.
Gontmakher co-founded Northwest Cannabis Solutions, which is now one of the largest producers of cannabis products in Washington State. He also served as Chief Operating Officer at Cannex, which merged with 4Front in July 2019.
4Front Ventures said that over the past four months, it has reduced its corporate headcount by nearly 40 percent and also reduced headcount related to overhead in the Mission stores by 45 percent.
The company expects these reductions to result in savings of between $7 million and $8 million annually, without impacting its ability to meet previously stated financial goals.
4Front also said it is delaying projects that require significant capital expenditures with uncertain near-term benefits. This includes delaying the launch of its manufacturing facility in Commerce, California due to the challenging conditions that impacted the California adult-use market roll-out prior to the COVID-19 pandemic.
The company has sold its subsidiary, PHX Interactive LLC, which managed the Mission North Mountain dispensary in Phoenix, Arizona, for $6 million in cash.
4Front Ventures noted that the net effect of non-core asset sales and cost cutting measures has resulted in a significant reduction in new capital required to achieve positive cash flow in the second half of 2020. The company estimates it needs an incremental $5 million to reach this goal.
The company is finalizing a private placement to raise at least $5 million, consisting mostly of insiders and existing shareholders.
Looking ahead, 4Front Ventures said that due to the ongoing uncertainty in the market as well as the economy on account of Covid-19, it is suspending further formal financial guidance at this time. The company plans to provide reinstated guidance for both 2020 and 2021 when there is more visibility into the operating environment.
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