It’s been almost eleven months since Hightimes Holdings, the parent of High Times and the Cannabis Cup, announced its plans to go public on the NASDAQ by merging into Origo Acquisition Corporation, and it continues to pursue that transaction, though Origo lost its NASDAQ listing in February, as well as a Regulation A+ offering that still has not commenced. In April, we reported a substantial deterioration in the financials of the company for the year ending December 31, 2017, with 4th quarter sales declining 8.7% from the 4th quarter in 2016 and by 0.9% for all of 2017.
The company filed a post-qualification amendment to its Form 1-A with the SEC that suggests the financial condition has become even more precarious. In the first quarter of 2018, sales plunged 64.9% to just $1.481 million:
Most of the decline can be attributed to the events business, which fell almost 83%, but publishing revenue declined over 16% as well. The company indicated that its Cannabis Cup events will take place later in the year compared to the prior year, with one in Las Vegas and in Los Angeles taking place in the first quarter of 2017 and none in the first quarter of 2018. The $554K in sales were generated by smaller events, and the company expects the number of Cannabis Cups and small events to increase for the full year. It blamed the publishing decline on lower sales at the newsstands and through subscription and lower print advertising revenue, with digital partially offsetting these factors.
The company provided information about its cost of revenue, which was $503K, as well as its operating expenses, which declined substantially to $2.391 million, producing an operating loss of $1.413 million compared to an operating loss in the first quarter of 2017 of $6.54 million. Much of the year-ago operating expenses were due to a one-time non-cash charge of $6.689 million for equity compensation charges for consulting.
Looking beyond the loss from operations, interest expense increased by $676K. Factoring in this cost as well as several other non-operational items, the company reported a net loss of $12.304 million, an increase from the $7.887 loss it reported in the first quarter of 2017. The company reported equity of -$53.674 million, but it provided a pro forma balance sheet with seven adjustments, the largest of which are assumptions of debt being converted to equity, that result in a pro forma equity of $-10.695 million.
While the company pursues its Reg A+ offering, selling up to 4.545 million shares at $11.00 per share, which values the company at $225 million, it continues to attempt to merge into Origo as well, pushing the outside closing date to September 12th.
