High Times Holding Corp. filed an update with the Securities & Exchange Commission on Oct. 19 that it is in default on its loan to ExWorks for $28.8 million. In 2017, High Times Holding Corp. took out a loan to acquire Trans-High Corporation (THC), which was the original corporate name for the magazine. The filing stated, “All of our obligations to ExWorks are currently in default.”
According to the filing, ExWorks funded $7.5 million to Hightimes and the other borrowers. Under the terms of the Senior Loan Agreement, interest is payable monthly at the rate of 15% per annum, with principal installments of $100,000 per month payable. Repayment commenced in September 2017, and the entire outstanding balance of the loan was due and payable on Febr. 28, 2018.
The company said it has entered into a forbearance and settlement agreement, dated Oct. 4, 2022.
It seems High Times is working with investors to execute an agreement with ExWorks to pay the company $6 million on or before Nov. 15, 2022.
According to the filing, “The Investors must provide on or before November 15, 2022, a minimum of $2,000,000 of working capital to the Borrowers, and (c) the Borrowers must make or cause one or more third parties to make an additional payment in the amount of $8,000,000 (the “Second Payment”) that is due and payable on or before September 30, 2023. In addition, we agreed to pay $60,000 per month as interest on the Second Payment until paid.”
The form stated that ExWorks agreed to accept $14 million plus accrued interest on the Second Payment as full payment and satisfaction of all obligations owed by High Times.
Clock Ticking for Investors
The filing provides four instances under which a “Forbearance Default” can be deemed to have occurred:
- The agreement between the investors and ExWorks isn’t executed by Oct. 26, 2022, or the Initial Payment is not made by Nov. 15, 2022;
- There is a default in payment required to be made with respect to the $8,000,000 Second Payment by September 30, 2023;
- The Borrowers fail to pay the $60,000 monthly payment within five business days after the end of each month; or,
- Hightimes fails or refuses within the agreed upon grace periods following the due date to furnish ExWorks with certain monthly financial reports.
In such event, High Times consented that ExWorks may file an order with the Circuit Court of Cook County, Illinois, Chancery Division to appoint a receiver over all of the assets and properties of the Borrowers, including the securities of the Hightimes direct and indirect subsidiaries and all financial and other records.
If ExWorks gets the $14 million on or before Sept. 30, 2023, it agrees to:
- Waive payment of all fees and release all liens, pledges, security interests, and other encumbrances on all assets and securities of the Hightimes Group representing Collateral under the Loan Documents;
- Issue to Adam E. Levin and the AEL Living Trust full and complete general releases under any and all guarantees issued by such Guarantors and return to such Guarantors any and all securities pledged to ExWorks to secure such guarantees; and,
- Cancel all warrants issued by Hightimes to ExWorks and return to Hightimes all shares of common stock of Hightimes issued to ExWorks under a prior forbearance agreement dated July 12, 2021, and the agreement dated on or about August 25, 2021, or otherwise.
However, these actions are provided that ExWorks shall retain 5,000,000 shares of Hightimes Class A common stock previously issued to ExWorks and receive an additional 227,272 shares of Hightimes common stock.
Finally, High Times stated in its filing, “There can be no assurance that we will be able to make final arrangements with the Investors, that they will timely execute the Participation Agreement, that the Settlement Payments shall be timely made or that other Forbearance Defaults will not occur.”
If the Investor deal doesn’t work out, ExWorks or the receiver appointed by the court could foreclose on all of High Times’ assets and properties and sell them to a third party or assign all obligations under the Loan Documents to an unaffiliated third party in exchange for the Settlement Payments or other amounts.
This means all investors in our Class A Common Stock would likely lose their entire investment.
michael g mclaughlin
October 20, 2022 at 11:29 pm
The company like so many in the weed business—–Maybe people using too much product and not running a business. Too much debt financing.
Eduard E Mayorga
October 21, 2022 at 8:31 am
Thank you interesting and objective description of the situation
Adam B Gone
October 28, 2022 at 1:07 pm
It looks like the clock has struck midnight. It is October 28th, two days after the deadline to sign an investor and no notice. Of course what investor would put $8 million into this company. Looks like it is receivership time.
October 28, 2022 at 1:09 pm
The language is loose around the agreement deadline, but the date for the payment is pretty firm. In other words, they could potentially miss the agreement date but still get a deal signed and deliver the payment in time.
Adam B Gone
October 28, 2022 at 1:25 pm
I would say Section 3 is firm on what causes the termination. I am sure Adam is saying give me a few days as we are in the process of getting it signed to get a few more days, but for sure it will terminate for lack of any payment.
(c) Lender’s agreement to forbear pursuant to Section 3(a) of this Agreement and to defer certain principal payments, interest payments, and fee payments regarding the Loan pursuant to Section 3 of this Agreement shall automatically terminate, without notice or any other further act or instrument, upon the occurrence of any of the following (each a “Forbearance Default”):
(i) if, on or before October 26, 2022, the Lender and the Investor shall have failed to execute and deliver the Participation Agreement;
October 28, 2022 at 2:55 pm
Plus, HT is often slow to update the SEC filings when they’ve taken an action. So, they may have the agmt but not updated the SEC. I had heard they had $6 and just needed $2 more, but that was just gossip and unverified.