High Times Hires Third CEO In One Year

CEO Stormy Simon is out at Hightimes Holding Corp. after just four months. Former Green Growth Brands (OTC: GGBXF) Peter Horvath is in. This is the third CEO for the iconic publisher High Times in just 13 months as the company pivots away from events and news and instead heads towards the dispensary side of the industry.

“We are pleased to welcome Peter to the High Times family, and to be able to tap into his wealth of experience capitalizing on major consumer brands. There are few executives with his retail experience in the mainstream world and, up to this point, none in the cannabis world with such an accomplished background,” Hightimes Holding Corp. Executive Chairman Adam Levin said. “The team and I would like to thank Stormy for all of her hard work in getting us through this transition period, and we are excited to have her continue working with us on this mission to grow High Times into all the business areas it helped create.”

Horvath’s Track Record

The High Times press release notes that Horvath previously held leadership roles for companies such as L Brands (Victoria’s Secret, Bath & Body Works, etc. ), American Eagle Outfitters (American Eagle & Aerie), and DSW (Designer Shoe Warehouse) and that he was with DSW when it went public on the NYSE in 2005. It also mentioned that he formed Green Growth Brands and took it public on the CSE in November 2018. It even touts his launch of Seventh Sense CBD. What it doesn’t mention is that Horvath was forced to resign recently and left without his million-dollar severance package after the company burned millions of dollars on Seventh Sense. The chain was closed in March and attempted to not pay the laid-off employees their back pay until Green Market Report exposed the story. 

“High Times is a unique brand with an important and rich heritage that deserves amplification and broader reach,” stated incoming Chief Executive Officer Peter Horvath. “I think of brands like Glossier, who first earned high affinity followers through compelling and relevant content, and then demonstrated that you can also serve their followers through commerce.  So, it’s been done before, I wouldn’t suggest that it will be easy, but we have all the resources to succeed.”

Victoria’s Secret is also about to go under. The once-thriving leader in women’s lingerie miscalculated its customer base’s move away from the over-sexualization of women. As women were moving away from body shaming and embracing all shapes and sizes, Victoria’s Secret was slow to recognize the seismic shift, and competitors began to take market share. The company recently tried to sell itself to a private equity firm, but the sale has fallen through. With retail in a tailspin due to the COVID-19 lockdown, it’s future is unclear.

CEO Revolving Door

It’s highly unusual for companies planning to go public to have a revolving door of CEO’s. A potential publicly-traded company typically wants to project an image of stability in order to show shareholders that their investment is in good hands. The Horvath hire is meant to align with High Times’ recent acquisition of pending and operational licenses from  Harvest Health & Recreation (OTC:HARV). His retail background seems more suitable to chairman Adam Levine’s vision for High Times dispensaries versus the previous CEO Stormy Simon.

Simon was just hired in January with her previous experience at e-commerce brand Overstock.com as the reason she moved from her position as a board member to the role of CEO. At the time of her hire, High Times said it was creating a virtual distribution business alongside its physical businesses of dispensaries and consumption cafes. The company signaled that Simon wasn’t necessarily in charge as the recent announcement with Harvest Health did not include her whatsoever. It’s highly unusual for a company CEO to not be quoted in an acquisition press release or be included in the purchase documentation. Her absence sent red flags that something was underway. It’s unclear whether Simon remains on the board. She is currently running for state representative in Utah.

Levine stepped down from the CEO role when Kraig Fox stepped in to lead the company through its efforts to go public and shift towards a plant-touching business. Fox was hired in April 2019 and left nine months later.  Fox’s background as a Senior Managing Director of Guggenheim Partners where he focused on Guggenheim’s overall strategy in the media and entertainment spaces as well as the management of its media and entertainment investments was seen as an asset.

Fox continues to receive his director and officer insurance policy, and High Times agreed to reimburse Fox for certain previously incurred business expenses (within five days) of successful completion of sales of an additional $5 million of equity securities or $10 million of proceeds from the sale of debt securities. He is expected to be reimbursed $125,000 with respect to expenses and lease payments for which Fox provided the company with receipts.

Harvest Health Deal

High Times did acknowledge that its deal to acquire the licenses from Harvest Health was subject to certain closing conditions, including the receipt of certain regulatory and third-party consents. The parties are aiming to close the acquisitions no later than June 30, 2020, subject to the parties’ mutual agreement to extend the closing date.

There is a major problem with one of the Have A Heart dispensaries that High Times is buying from Harvest Health. One license belongs to the HAH San Francisco location in which CEO Alexis Bronson says Harvest Health had no right to sell. Bronson owns 40% of the HAH dispensary and he claims his business partners sold their shares to Interurban Capital Group (ICG) without his approval. The dispensary was then flipped to Harvest Health & Recreation, who just sold it to HHI Acquisition Corp, a subsidiary of Hightimes Holding Corp.

The High Times Purchase Agreement acknowledges the Bronson position in HAH. The document states, “Neither ICG nor Harvest holds any rights to acquire the 40% interest held by Bronson. Assignment of Contingent Assignment requires the consent of the Board of Managers of HAH 2 CA LLC.” High Times was to deliver $1 million to Harvest Health on April 27 as a deposit and then another $4 million at the closing date or within 45 days of the effective date. High Times did not respond to a request to comment on the Bronson situation. Harvest is also suing ICG which adds even more complications to this deal.

The issue with this one particular license may not hold up the whole deal and if High Times can close at least some of the operational licenses then revenue can begin flowing into the company.

Delayed Reporting

High Times announced that it will delay delivering its annual report as per the SEC’s order which allows for this due to the COVID-19 virus.