Moxie Cannabis & High Times Have a Lot in Common

Both have unpaid debts and haven't managed to go public as planned.

It seems High Times and the company it just bought, Moxie Holdings, have a lot in common. Both companies failed to go public as planned, and both have not paid their debts.

Moxie Misfires

Moxie Cannabis, also known as MXY Holdings, told investors back in 2019 that it was raising money and had a set deadline to go public on May 17, 2021. If the company missed that deadline, legally it was supposed to return the investor’s money.

MXY did not make the deadline and never went public. It also never repaid the money, which was a convertible bond totaling $35.6 million.

The investors filed a lawsuit (attached below) in California’s Superior Court in the County of Los Angeles on July 19, 2021, asking for the money to be returned, with interest. To complicate matters, there are two MXY companies – MXY D, an investment vehicle that lent the money to MXY H, and MXY H, the company that was actually going to go public.

MXY Holdings reached a settlement with some of its investors by giving them a pro rata portion of the company’s interest in Trulieve Cannabis Corp. and its corporate affiliates acquired as a result of the company’s sale of its minority equity interest in subsidiaries PurePenn LLC and Pioneer Leasing Co. to Trulieve in November 2020.

The company looks like it owns 6,956,998 shares of Trulieve common stock and has another 18,952,369 shares of Trulieve listed as common stock receivable. MXY said in its recent offering that it hopes to reach a similar arrangement with the other shareholders.

However, the latest on this case is that it went to arbitration after a California Court denied a request from the investors for the court to appoint a receiver for MXY. The next arbitration date is scheduled for March 1, 2023.

GGB Stiffs Moxie

One good turn deserves another. MXY was left holding the bag for a loan of $5 million to Green Growth Brands, which is now bankrupt.

It seems that, in July of 2019, Green Growth Brands (GGB) was going to buy MXY in a deal valued at $310 million, which was to be paid with GGB stock (traded under the symbol GGBXF at the time). GGB borrowed $5 million for the pending acquisition costs. The loan was scheduled to mature in July 2022 , and the transaction was scheduled to close within six months.

But the acquisition was terminated, and GGB said in January 2020 that it would pay back the loan plus a $4 million termination fee.

Unfortunately for MXY, GGB filed for bankruptcy in May 2020 before any money was paid back. A partial payment of $316,150 was received in July 2021 against the outstanding balance, with litigation proceedings ongoing.  Moxie said in a securities filing that management has not recorded a receivable for the termination costs as they are in dispute.

It’s worth mentioning that GGB’s CEO was Peter Horvath, who later served for 20 months as the High Times CEO.

Despite not managing to go public in 2021, MXY recently filed another public offering with the SEC to raise $75 million. Ostensibly, the second offering would raise the money to pay off the investors. Once again, though, MXY had a failure to launch, and the offering was pulled right as the acquisition by High Times was happening.

High Times Connections

MXY changed its mind on the offering on Oct. 26, 2022, when it decided to do the deal with HighTimes Holding Corp. MXY CEO Jordan Lams is familiar with High Times as he was listed in the 100 Most Influential List in the magazine and the company’s DART vaporizer, won first place at the 2019 High Times SoCal Cannabis Cup with its piña colada flavor.

MXY Holdings and High Times also share the same auditor of company financials, GreenGrowth CPAs. High Times’ previous independent auditor, RBSN, declined to remain on the company’s account on July 18, 2022, and will only complete the audit of the 2019 books. GreenGrowth was hired shortly thereafter.

The two companies also share the Peter Horvath connection. He left High Times in January 2021, otherwise, that certainly could have been awkward.

MXY’s lawsuit with its debt holders isn’t the only litigation it is dealing with. MXY, through its Nevada subsidiary Nevada Leasing & Consulting, entered into a credit promissory note with a cultivator using the name FSWFL. It was due in July 2021, and the parties are now disputing the payments owed. The outstanding principal and interest were roughly $3.7 million.

MXY Money

MXY reported in its pulled offering that total revenue reported for the year ended Dec. 31, 2021, was $12,634,582, compared with $30,523,994 for the year ended Dec. 31, 2020. The filing stated, “This change was primarily due to a large decrease in California bulk sales and a general decline in California wholesale revenue across the industry.”

The company also said in its offering, “Our total operating expenses for the year ended December 31, 2021, were $12,202,187 compared with $14,773,811 for the year ended December 31, 2020. This decrease is primarily due to a reduction in headcount in line with the reduction in sales and product manufacturing.  Additional decreases in G&A and Sales and Marketing were also attributed to lower sales and delivery fees.”

It’s hard to see why MXY would only take stock in this transaction, since it is bringing solid revenue to the table – except maybe to try to avoid paying back the money it owes. Lams said he was unable to speak with Green Market Report at this time.

Green Market Report also reached out to the investors suing MXY for comment, but none have responded as of yet.

The MXY securities offering documents were removed from the SEC website.

MXYcase

 

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


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