4Front Ventures delays annual filings, can’t pay auditors

4Front Ventures (CSE: FFNT) (OTCQB: FFNTF) said Wednesday it can’t meet its April 30 regulatory deadline to file its annual financial report because it can’t pay its auditors.

The Phoenix-based company also applied for a management cease trade order that would temporarily restrict company leaders from trading its securities while it tries to fix its money problems.

The delay comes as the company works to “resolve the issue and expects to be able to file the necessary reports upon completion of securing additional financing, restructuring its liabilities and continuing discussions with one of the company’s lessors,” according to a news release. Management stated that it expects to file within 60 days of restarting its audit.

The delay follows a tough stretch for 4Front, which lost $6.4 million in the third quarter while watching its revenue slide. Third-quarter revenue dropped to $15.2 million, down from $20.1 million a year earlier and lower than the $18.7 million from the previous quarter.

The company blamed “softness in our retail channel stemming from heightened competition” in both Illinois and Massachusetts markets for the revenue dip.

Still, CEO Andrew Thut previously tried to sound positive, saying the company was making progress on scaling production in Illinois, growing wholesale in Massachusetts and seeing better results in Washington.

“Despite the uncertainties surrounding federal cannabis reform, we’re optimistic, especially given signs that we may have unexpected advocates in the incoming administration,” Thut said at the time. “We’re confident entering Q4 and are ready to return to growth and sustainable positive cash flows from operations.”

4Front also said at the time that it retained Canaccord Genuity to help with an internal reorganization, particularly regarding its financial position. The company also took out an $850,000 loan to finance ongoing operations.

The company asked for relief under Canadian National Policy 12-203, which would block management from trading company securities until it files its financials. The Ontario Securities Commission hasn’t ruled on this request yet.

If rejected, the commission might instead impose a broader order affecting all company securities.

While the filings remain outstanding, 4Front promised to provide biweekly status updates and confirmed that insiders can’t trade company stock until the annual filings are submitted.

The company has been pushing growth initiatives despite its financial crunch. During the third quarter, it continued building a massive 250,000-square-foot cultivation facility in Matteson, Illinois, planning to expand from 24,000 to 34,800 square feet of growing space. Its Massachusetts wholesale business showed some promise with a 56% increase in revenue to nearly $2 million for the quarter.

As of September 2024, 4Front had $278 million in assets, with just $1.2 million in cash, against $326.5 million in liabilities, including nearly $69 million in debt.

The company said there are no bankruptcy proceedings underway and “no material business developments” since filing its last quarterly report in December beyond what its already disclosed.