Home » High Times To Sell $11 Shares, Address Mounting Debt Problems

High Times To Sell $11 Shares, Address Mounting Debt Problems

High Times Holding Corporation (OACQ) issued a preliminary prospectus on Thursday to raise $50 million at a price of $11 a share. The company is highly dependent on getting listed on the NASDAQ exchange in order to meet its capital raising goals. To meet the NASDAQ listing requirements,  High Times will need $17.2 million from this offering. At the minimum, the company is raising $5 million, with the ability to go to $50 million.
In addition to raising money, High Times said it would also address its debt obligations. High Times had extended a loan payment that it owed to ExWorks from August 2017 to August 2018 for a principal amount of $11.5 million. It made a down payment of $2.7 million but was staring at this huge looming payment due in months. The merger with Origo Acquisition was expected to be closed months ago and the stock would’ve been listed on NASDAQ and all would be good. Instead, the merger has dragged on for months and the clock has been ticking away. The idea is that the company will now have a new note of $12.2 million due in February 2021.
In the offering, High Times said, “We intend to complete or terminate this Offering of our Class A Common Stock prior to seeking to consummate the Origo Merger.”
The Back Story
Hightimes Holding Corp. was established in December 2016 to acquire Trans-High and the THC Group. Founded in 1974, the THC Group published the famous High Times magazine and sponsored the Cannabis Cup events. The deal was valued at $70 million. Then, Hightimes Holding entered into a merger agreement, dated August 4, 2017, as amended on September 25, 2017, with Origo Acquisition Corp., a Cayman Islands corporation whose shares are currently listed on Nasdaq under the symbol ORAC. This was the way that High Times would become a NASDAQ listed company. This deal was valued at a whopping $250 million.
The planned merger has failed to close and has a March 2018 date set for the final month to complete the deal. NASDAQ has tried to boot the group out of the exchange. First for not having over 300 shareholders and then for not holding an annual meeting in 2016. Each time, the company has filed an appeal. Even if the merger is completed, it’s no guarantee NASDAQ will keep High Times as a listed company.
The Debt Mountain
High Times owes $17.6 million in payments this year alone. $8.7 million in long-term debt obligations, $2.8 million in interest payments, $6 million in convertible note obligations and $72,000 in lease commitments.
To partially finance the High Times Group acquisition, Hightimes Holding, Trans-High and each of the other members of the High Times Group executed a loan and security agreement with ExWorks Capital Fund I, L.P. The loan is now $11.5 million. This is the debt referenced above that the company is trying to push out to a later date.
Hightimes Holding also issued $30,000,000 of purchase notes to the former stockholders of THC. If the purchase notes do not convert into Class A Common Stock, High Times will owe the former stockholders of THC quarterly installments payments of $1.5 million, plus accrued interest, with a final payment of $16.5 million due on February 28, 2020.
As of September 30th, the company reported total assets of just $3.55 million, but the debt is listed at $38.6 million and with total liabilities of $46.7 million.
How Can It Pay This Debt?
In the offering, High Times says, “During the three-year period from 2014 to 2016, the net income of THC and its subsidiaries declined from $3,421,592 in 2014 to net loss of ($2,926,000) in 2016. For the nine months ended September 30, 2017, the consolidated net loss of the Hightimes Group was ($15,955,000).”
It went on to state, “Although $6,689,000 of the net loss for the nine months ended September 30, 2017 resulted from a non-recurring non-cash stock compensation charge, and an additional $2,744,000 non-cash charge for debt discount and change in derivate value for the same period, High Times Group is anticipating a return to profitability commencing in the fiscal year 2018.”
High Times has noted that ad sales for the magazine have declined and it plans on increasing the lucrative Cannabis Cup events in order to bring in more money. Still, there are a limited number of states and countries that will allow these types of events. Multiple events in some states will end up saturating the calendar and losing the appeal of the events.
It’s A Nail Biter
High Times said, “Unless Ex Works significantly extends the maturity date of our obligations to such senior lender or we are able to refinance such indebtedness we will have to apply at least $12.7 million of net proceeds of this Offering to retire such indebtedness. As at the date of this Offering Circular, we have no binding commitments from ExWorks to extend the August 28, 2018, maturity date of the ExWorks loan or from a third party investor or lender to refinancing such ExWorks loan.”
 

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  1. AND they are being sued by their ex editor. I thing their hopes and dreams are up in smoke.
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    • Right, I’ve covered that before but didn’t get into it here.
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      • You should do a deep dive on the shady nature of the people behind this IPO…feels like they have a ponzi scheme type structure
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  2. So just to be clear, Buying tthe $11 stock from this company is a bad idea ?
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  3. Is sounds like the new young get rich by 35 yrr olds are out to grab every penny available. Party like a rockstar . So many newcomers to the scene. I miss the people that cared about enjoying the show from the game from the Bleechers . Not the private area for the entitled .
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  4. I have 100 shares and I am just waiting for them to be worth something
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