Hightimes Holdings issued a preliminary prospectus for a Reg A+ offering, with a goal of raising up to $50 million by selling shares at $11.00, with net proceeds of up to $43 million after an 8% selling agent fee and expenses of up to an additional $3 million. The company intends to raise a minimum of $5 million and needs to raise at least $17.2 million to list on the NASDAQ, where it intends to apply with the symbol “HITM”. The company will list on the OTCQX if not approved NASDAQ, but it may defer if it proceeds with a previously announced merger agreement with Origo Acquisition (NASDAQ: OACQ).
The prospectus indicates that the company has 20.45mm shares outstanding (almost 25 million on a fully-diluted basis) before the offering. The company intends to use the proceeds to “reduce our outstanding indebtedness, fund our brand development, including expansion of our Cannabis Cup events, marketing and other operating expenses, and to provide working capital to the High Times Group for acquisitions, joint ventures and other general corporate purposes…”
The company faces a near-term debt obligation that it intends to address:
In connection with our contemplated Use of Proceeds we are assuming that substantial portions of our $11.5 million of senior secured indebtedness to ExWorks Capital Fund I, L.P. (“ExWorks’) that is currently scheduled to mature on August 28, 2018 will either be refinanced by another lender or extended by ExWorks. Although we have reached an agreement in principle with ExWorks to increase our loan to $12.5 million and extend the maturity date of the revised note to ExWorks to as late as February 28, 2021, we have not entered into a final agreement with ExWorks. In the event that ExWorks does not elect to extend the maturity date of our obligations or we are unable to refinance such indebtedness, we will have to use approximately $12.7 million of the net proceeds of this Offering to retire such indebtedness. There can be no assurance that we will raise sufficient net proceeds from this Offering to retire the ExWorks indebtedness. Even if we are able to repay the ExWorks indebtedness, funds, otherwise intended to be used to fund our brand development and expansion of our business will not be available for such purposes and our ability to achieve our strategic goals will be materially and adversely affected.
If we fail to repay or refinance the ExWorks indebtedness, ExWorks will be in a position to foreclose on all of our assets, in which event, investors in this Offering could lose their entire investment. See “Risk Factors” on page __ of this Offering Circular
High Times reports four operating segments:
- festivals events and competitions, including live events and productions, including its Cannabis Cup®;
- publishing and print advertising, including the publication of our monthly High Times Magazine®
- e-Commerce; and
- licensing and branding, including co-sponsorship and strategic partnership arrangements.
As of September 30th, the company reported total assets of just $3.55 million but debt of $38.6 million and total liabilities of $46.7 million . It reported year-to-date revenue for the nine months ending September 30th of $12.46 million, with all but $448,000 generated in the United States. Sales grew only 0.5% from the same period in 2016 and resulted in an operating loss of $9.4 million.