Despite being saddled with millions in debt and little revenue coming in, High Times Holding Company says it is buying 13 planned and operational California dispensaries from Harvest Health & Recreation Inc. (OTCQX: HRVSF) in what the company described as a “mostly stock deal” and is valued at $80 million. Hightimes said it intends to fully transform the cannabis retail stores to become High Times destinations. Hightimes Holdings plans to revamp the existing design and rebrand each dispensary to fit the High Times.

This follows High Times’ previous announcement to buy two dispensaries, one in Los Angeles and one in Las Vegas. However, neither of those announced acquisitions has closed. An unnamed source told Green Market Report that the Los Angeles dispensary was trying to get out of its non-binding letter of intent with High Times as it had made the deal with Kraig Fox, the former CEO who is no longer with the firm.

According to the statement, the Harvest Health parties are aiming to close the acquisitions no later than June 30, 2020, subject to the parties’ mutual agreement to extend the closing date. “This transaction allows Harvest to invest in one of the most iconic brands in the industry,” said Steve White, Harvest’s Chief Executive Officer. “As one of the pioneers of the regulated cannabis ecosystem, we have always admired the work of High Times and are excited to watch the High Times brand flourish, as they poise themselves to enter the cannabis distribution and retail spaces.”

Harvest Health Reshuffling

Harvest Health has been frantically reshuffling its strategy as the company called off its enormous Verano acquisition last month. That deal was originally valued at over $800 million. At the time White said, “We remain focused on the continued development of assets in our core markets including Arizona, Florida, Maryland, and Pennsylvania. Recent capital raising efforts have afforded the company sufficient resources to continue to invest in strategic projects while moving toward profitability.”

Harvest Health had started 2020 with breakup news from Falcon International. In January Harvest filed suit against Falcon International, Inc. asking to terminate the planned merger agreement and return the money Harvest paid to Falcon under the Merger Agreement. Falcon has said that Harvest owes the company $50 million in a breakup fee.

Just a few weeks ago Harvest announced that it would acquire Interurban Capital Group for approximately $85.8 million payable to acquire controlling interests in five Washington cannabis dispensaries or alternatively $12.4 million to acquire substantially all of the assets of these dispensaries. ICG’s assets include direct and indirect licenses and rights to acquire entities with licenses in California, Iowa, and Washington. In addition, ICG is a service provider to these entities.

High Times Unfinished Business

High Times has had a string of unfinished deals that were announced with great fanfare. The company was supposed to buy Spannibus and the Big Show when it was moving towards a strategy of focusing on events. Neither of those deals ever closed.

The decision to acquire the dispensaries also comes on the heels of yet another push to raise money from investors. In the throes of the COVID-19 pandemic, High Times was flooding email inboxes with almost daily requests to invest in the company. So, perhaps the company raised enough money to make this latest deal? The opportunity to invest has been extended again – this time to May 15, 2020. This latest press release also suggests interested investors call the company’s hotline. The minimum investment was bumped up from $99 to $220.

Despite Stormy Simons being the company’s newest CEO, she was not quoted in the latest announcement. Instead, it was former CEO, but now Executive Chairman Adam Levin who spoke about the acquisition. Simon decided to run for political office in Utah just as she took on the responsibility of CEO of High Times.

“We’ve long supported Harvest and the other cannabis-retail-trailblazers as they pushed forward despite changing legislation, insurmountable licensing fees, political stigma and, frankly, through a process that was designed to be difficult,” said Adam Levin, Hightimes Holding Corp.’s Executive Chairman. “We have enormous respect for the Harvest brand and look forward to ushering in the next generation of retail experience with Harvest as a significant shareholder in our company.”

This latest deal comes right after High Times said it had begun the process to acquire California-based cannabis holding company Humboldt Heritage Inc. and its subsidiaries Humboldt Sun Growers Guild and Grateful Eight LLC.

Hightimes Holding Corp. said it had inked a letter of intent to acquire Humboldt, which will give it “cannabis growing, processing and product manufacturing capabilities direct from the most coveted cannabis community in the world, Humboldt County.” The value of that was also not disclosed.

High Times Debt

High Times has total liabilities of $68 million according to the company’s latest filing. It has an accumulated deficit of $105 million. For the last six months ending in 2019, High Times brought in $10 million in revenue, but its operating expenses were $14 million. The bulk of that revenue came from events that accounted for $6.7 million. With the pandemic lockdown putting an end to events that revenue stream is all but gone for now. The company reported a net loss of $11 million for those six months.

Much of the outstanding debt is supposed to convert into shares when the company goes public. This has been a moving target for two years. The company’s own filing last suggested this would happen in January 2020, but that date came and went. “While the Company’s listing and trading has been delayed for reasons largely beyond the Company’s control, the Company expects to be trading by the end of January 2020, at which time, as stated above, a significant portion of the debt will automatically convert into shares of our Class A Common Stock.”

“As of June 30, 2019, these outstanding debt obligations totaled $49,514, of which $1,490 is now in default and due on demand. However, of the $49,514 in debt obligations, upon consummation of our trading on the OTCQX or listing on another national securities exchange, more than $33,000 of the Company’s debt will be eligible for conversion into Class A Common Stock as follows: $15,362 of the above outstanding indebtedness will automatically convert into shares of our Class A Common Stock at $11.00 per share and up to $18,000 of such outstanding indebtedness is convertible, at the option of the holder, into shares of our Class A Common Stock pursuant to their respective agreements.”

More Shares Issued

Despite pricing the shares at $11 each and currently have roughly 24 million shares outstanding, on April 3, 2020, Hightimes Holding decided to do an 11-for-1 forward split of all shares of its outstanding Class A Common Stock effective on June 1, 2020, and (b) amend and restate the Company’s certificate of incorporation, effective as of June 1, 2020, to increase the number of shares of the Company’s authorized Class A Common Stock from 100,000,000 shares to 1,000,000,000 shares of Class A Common Stock.

24 million shares priced at $11 a share places the company’s market cap at $264 million. Recall, this company last reported revenue of approximately $5 million a quarter.

Pivoting In A New Climate

Certainly, it makes sense in this COVID-19 climate to shift away from what had been a lucrative event space. The Cannabis Cup in Michigan last year by all accounts was a successful event in which thousands attended. However, it is unclear when events will be returning. The company’s other revenue stream of magazine advertising had also been lucrative, but the company has closed its Dope and Culture magazines and so that income is no more.

Dispensaries have been the winners of the pandemic crisis, so if High Times can make that jump quickly, it could save the company. The question is whether it can close these deals when the company has a history of not completing announced acquisitions.