LOS ANGELES – Forty-five-year-old High Times magazine, the revered elder statesman of cannabis publications, may cease to exist within a year unless parent company Hightimes Holding Corp. finds a backer to resolve $105.2 million in debt.
Hightimes Holding’s most recent filing with the Securities and Exchange Commission paints a dismal picture of the company’s situation. For the six-month period ended June 30, 2019, the corporation showed a net operating loss of $11.9 million on revenue of $10.7 million. “Because of recurring operating losses, net operating cash flow deficits, and an accumulated deficit, there is substantial doubt about the company’s ability to continue as a going concern for one year from the issuance of the financial statements,” Hightimes warned investors.
The company’s debt load appears to be the result of aggressive expansion predicated on a planned 2018 initial public offering on the NASDAQ or OTCQX. Hightimes Holding delayed the offering, focusing instead on an interim crowdsourced IPO launched in July 2018. The effort stalled after raising $15.2 million, far short of the maximum $50 million the company projected and nowhere near the liquidity required for the stock to trade on public markets.
The crowdsourced IPO’s disappointing performance and a bleak future outlook for a more traditional IPO left Hightimes unable to fulfill financial obligations related to the June 2018 acquisition of Culture Magazine. That $4 million debt is now the subject of court action.
“On the surface, the Hightimes Holding Corp. growth-through-acquisition strategy provided several competitive advantages,” said Darren Roberts, publisher of mg Magazine. “The challenges exist in how to effectively execute the plan in a financially meaningful way without being distracted from the core business.”
Despite the crowdsourced IPO’s failure to attract significant investment and a looming Culture note payment, the company snapped up four more properties between September 21, 2018, and January 11, 2019.
In September 2018, Hightimes acquired DOPE Media, for which it still owes more than $10 million of the $11.2 million purchase price. The $10 million figure was to be delivered in Class A common stock, which Hightimes is unable to guarantee it will issue. In November 2019, Hightimes laid off most of the DOPE Magazine staff and cut publication frequency from monthly to quarterly.
In October 2018, Hightimes acquired festival producer The Chalice Companies out of foreclosure for $560,000, an amount that increased to $672,000 upon Hightimes’ default on the note. The due date was rescheduled to July 1, 2019, and it’s unclear whether the terms have been satisfied.
In December 2018, Hightimes entered an agreement to purchase BIG Publications, publisher of Buyers Industry Guide and organizer of the BIG Industry Show, for cash, Class A common stock, and a promissory note with a combined value of about $4.5 million. The deal was set to close July 31, 2019, with the note coming due December 31. Hightimes’s filing indicates the company is unsure it will be able to consummate the acquisition.
In January 2019, Hightimes agreed to acquire assets belonging to Feria Del Canamo, publisher of Cannabis Magazine and organizer of Spannabis and World Cannabis Conference. The deal gave Hightimes a European platform at a cost of about $8 million in cash, Class A common stock, and fees for the 2020 and 2021 shows. In the SEC filing, the company noted it will be unable to consummate the deal without raising additional capital or financing.
[…] roller coaster almost since the beginning of Levin’s tenure. In a 2019 SEC filing, the company warned it might have to cease operations unless it could find a backer to underwrite $105.2 million in debt accumulated during an aggressive […]