High Times Holding Corp (fka HTHC)

[JohnCM]

NEWS OUT!!

High Times Plans Flagship Retail Stores, Clearing Way to Sell Cannabis through Dispensaries

IPO-Edge.com
By John Jannarone
IPO-Edge.comJanuary 16, 2020

Deals Signed with Holders of Dispensary Licenses in Los Angeles and Las Vegas

High Times announced it will open two flagship retail stores offering cannabis under dispensary licenses, giving the strongest brand in the marijuana industry a new engine of growth as it prepares for a public listing.

Formally known as Hightimes Holding Corp., the owner of the eponymous magazine and operator of Cannabis Cup events has signed binding letters of intent with holders of dispensary licenses in high-traffic locations in Las Vegas and Los Angeles. The new locations will provide a cross-marketing opportunity, both with the High Times and Cannabis Cup brands. The stores will sell logo memorabilia, licensed products, and a variety of cannabis products, including local strains that have won Cannabis Cup awards.

“These Cannabis Cup winners are heroes,” High Times CEO Stormy Simon told IPO Edge in an interview. “We will allow them to be recognized with a dedicated space in our new stores.”

The decision to enter the dispensary business comes as many small operators have struggled to keep up with larger players such as MedMed Enterprises Inc., Harvest Health & Recreation, Inc., Medicine Man Technologies, Inc., and Terra Tech Corp. By purchasing or partnering with mom-and-pop dispensaries, High Times can elevate businesses to a higher competitive plane using its brand power and industry expertise.

In an interview with IPO Edge, High Times Executive Chairman Adam Levin said that the company is focused on Ebitda-positive stores. The new locations may be acquired through a combination of both cash and shares of High Times, which remain available to all investors through a portal here.

“Having the second mover advantage in this industry, combined with the present downturn in the cannabis capital markets, provides unique timing for High Times to help non-branded stores to differentiate themselves from the industry’s larger multi-state operators,” Mr. Levin said.

High Times plans to continue looking for more dispensaries to purchase. Those may include locations in states where cannabis is recreationally legal such as California and Nevada as well as states such as Florida and New York where it is prescribed for medicinal purposes.

“Even medicinal states can make sense for us,” Ms. Simon said. “High Times was publishing medicinal articles back in the 70s and 80s so the brand is well known in that community.”

In conjunction with the dispensary news, High Times also announced the appointment of Paul Henderson, former CEO of Grupo Flor, as the organization’s President. Mr. Henderson successfully built Salinas, CA-based East of Eden, one of the top-selling Cannabis stores in the state. Prior to running Grupo Flor, Mr. Henderson ran business units at The Goldman Sachs Group, Inc. General Electric Company’s GE Capital, and Apple Inc.

Until now, High Times had focused mainly on being a media company. Like many other companies in the industry, High Times avoided “touching the plant” to ensure it could comply with all regulators and comply with listing rules on certain stock exchanges. Companies that do handle cannabis directly tend to list on Canadian exchanges or trade over the counter in the U.S., indicating that may be where High Times shares trade first.

The company has sold shares to roughly 27,000 investors in an offering of up to $50 million which remains open until March 31. Some of the shares sold have generated cash that won’t appear on the company’s balance sheet until the stock begins to trade.

In addition to the share offering, High Times converted $28.6 million of debt to equity. That transaction dramatically reduced the company’s leverage and gave it scope to acquire some complimentary businesses. For instance, High Times bought Spain’s Spannabis conference last year for $7 million.

With a new CEO, High Times looks to open dispensaries

JANUARY 16, 2020 by Kayleigh Barber

High Times’ new CEO, Stormy Simon, wants to expand her business beyond its 46-year-old magazine into weed dispensaries.

While Simon, who previously served as president of Overstock.com, would not disclose an official timeline for opening retail venues, she said the company has already purchased retail dispensary licenses. The first two retail venues will be in Las Vegas and Los Angeles, according to a company press release, although Simon said she plans to set up additional stores in markets where High Times has previously held its Cannabis Cup events. These markets include Colorado, Michigan and Washington state, as well as Amsterdam.

“The past three years in cannabis has been like 90 years in any other industry,” Simon said. “In each of these markets, we’ve held Cannabis Cups,” she noted, adding,”And we have award-winning cannabis that can be featured and promoted and displayed on our stores.”

Programmatic advertising has historically been a difficult area for cannabis publishers to capitalize on. And because of this, High Times has put an emphasis on consumer revenue and sponsorship-driven events, as well as direct-to-consumer commerce businesses. Simon said the next step for a publication that connects consumers with cannabis is creating retail locations.

As of Dec. 31, 2018, the last time Hightimes Holding reported revenue amid hopes of launching an IPO, it had earned most of its revenue (almost 70%) from events, including a competition series, the Cannabis Cup; a music festival, the Bright Side Festival; and the BizBash party, held at the cannabis expo MJBizCon. The company’s events business generated ticket sales as well as sponsorship revenue. Advertising and publishing represented 29% of its revenue, with direct sales advertising accounting for most of that revenue stream, though the company also sells some programmatic advertising. And the remaining 2% came from merchandise, commerce and licensing deals. In 2018, the company’s total revenue was $14.8 million.

While Simon declined to provide the company’s 2019 revenue figures, she said she expected retail and commerce to be big areas of potential growth in 2020. Simon did say that merchandise sales increased in 2019 over the previous year but declined to be more specific.

Simon said that parent company Hightimes Holding is still pursuing an IPO — for this year. Hightimes Holdings has raised $20 million from 20,000 investors. She is confident the company can reach $50 million, Simon said, adding that one of the “the best ways to raise capital in the cannabis business” is to give consumers the opportunity to own a piece of the industry and the community.

Direct investment is important for a company seeking to expand into operating a dispensary business because banks won’t finance loans for cannabis businesses, said attorney Michael D. Cutler of EvansCutler Attorneys, which specializes in cannabis licensing in Massachusetts.

“You need to have a pretty good war chest going into it before getting out on the other side,” said Cutler, explaining that most banks are federally chartered and marijuana use is still illegal, according to federal law.

From securing a location to preparing to open this type of business, the state licensing process can take as long as a year, Cutler said. The cost of renting a venue, making the venue operational, applying for the license and hiring legal representation could run upward of $2 million, though the fees vary from state to state.

In California, for instance, the license fees are based on an applicant’s estimated gross revenue during the 12-month license period, according to the state’s website. Cova Software, a cannabis business software provider, estimated that the up-front investment for opening a California dispensary would be $80,000 to $250,000 a year, with variations in real estate and the scaled licensing fees playing a factor. The costs in Michigan would be much less, $47,000 to $136,000.

The New York Post reported in December that Hightimes Holding was saddled with $105.2 million in debt, following its acquisitions of Dope, Culture and Green Rush Daily.

Update: This story has been updated to include the locations of the first two retail venues, Las Vegas and Los Angeles, which were announced on Thursday.