Debra Borchardt
Origo Acquisition Corp. (OACQ) filed to change its name to High Times Media on December 29, 2017, and convert from a Cayman Islands company to a Nevada corporation and change its symbol. Origo merged with High Times Holding Corp., the publisher of High Times Magazine in July of 2017. Following the merger, the company has applied to be listed on the Nasdaq exchange under the symbol HITM.
Its been months since the two companies announced a merger, but it has yet to close. The most recent filing said that the companies had until March 12, 2018, to complete the deal.
High Times Revenue Falls
Net revenue for the nine months ending September 30, 2017 increased slightly to $12.4 million from last year’s $12.3 million for the same time period. Gross profits fell to $3.7 million from last year’s $4.6 million for those same nine months. The net losses shot up to $15.9 million from the previous year’s net loss of $2.7 million.
While the company is best known for its magazine High Times, it makes the bulk of its money from the events called the Cannabis Cups. The company believes that by standardizing event costs profits will improve. It is estimating that net revenues will increase 37.9% in 2017 to $20.14 million and another 131% in 2018 to $46.58 million. The number of Cannabis Cups will increase from 10 in 2017 to 15 in 2018 and 18 in 2019. The revenues for just the events alone increased 10% from $8.7 million for the nine months ending September 2016 to $9.6 million for the same nine months in 2017. Events though can only be held in certain geographic locations.
Business at the magazines has been tough, The filing stated, ” For the years ended December 31, 2016, 2015 its print and digital advertising revenues declined 6.4% and 30.6 %, respectively, as compared to the preceding year despite it having maintained or gained market share in advertising revenues in each of 2016, 2015, and its circulation revenues (subscription and newsstand) declined 23.8%, 34.4% respectively, as compared to the preceding year.”
Nasdaq Keeps Trying To Delist The Company
Nasdaq attempted to delist Origo in February of 2017 for not meeting the listing requirements of 300 shareholders. Origo submitted a plan to accomplish this in April of 2017 and Nasdaq granted an extension. In October 2017, Nasdaq agreed to allow Origo to continue listing the shares on Nasdaq through February 2018 in order to complete the merger. Then last month, Nasdaq said that Origo’s failure to hold an annual meeting for the fiscal year ending November 30, 2016, served as an additional reason to delist the shares. Once again, Origo responded and for now, Nasdaq has agreed to let the shares remain at least until the February date or upon review following the merger, whichever comes first.
According to the filing, Origo said, “It is likely that Nasdaq will require Origo to file a new initial listing application and meet its initial listing requirements as opposed to its more lenient continued listing requirements. Origo cannot assure you that it will be able to meet those initial listing requirements at that time.” If High Times isn’t allowed to list at the Nasdaq, it hurts the liquidity of the shares and bumps the stock to the OTC Marketplace and it joins the other marijuana penny stocks.
The Future For High Times
Following the close of the merger, Edward J. Fred and Jose Aldeanueva will resign as Chief Executive Officer and Chief Financial Officer, respectively, and Adam E. Levin will be designated as Chief Executive Officer and David Newberg will be designated as Chief Financial Officer. It is also contemplated that David Peck will be appointed as Senior Vice President of Publishing.
The company is facing a $6 million employee lawsuit alleging that THC Group broke an employment agreement and the company is countersuing. In addition to that, the filing stated, “High Times Group is currently generating operating losses and requires the continued infusion of new capital to continue and grow business operations. The net operating loss for the current fiscal year is due to a number of non-recurring non-cash expenses (consulting primarily equity compensation charges) which, if eliminated, would result in High Times Group being close to a net cash flow break-even.”
The company also said that it has to prepay for Cannabis Cup events months in advance and in order to pay a former THC shareholder $2.7 million (who holds $30 million in purchase notes), it had to increase its senior credit facilities to $11.5 million. The company must make $17.6 million in payments in 2018 for various obligations.
The company signed an agreement with Creative Artists Associates and Emerald Branding to develop new opportunities. High Times is considering licensing clothes, papers, vaporizers, shoes, and media properties like movies and television shows.
High Times History
THC Group was founded in 1974 and publishes the monthly magazine and produces events like the Cannabis Cup. High Times Holdings was created in December of 2016 to acquire Trans-High Corporation and its subsidiaries called the THC Group in a deal valued at $70 million. The High Times Group entered into an agreement with Green Rush Daily in August 2017 and the company also owns the domain 420.com.
