Lucy Scientific Offering Could Further Dilute Shares

The company has been trading at 20 cents per share.

Lucy Scientific Discovery Inc. (NASDAQ: LSDI) filed a registration offering for securities that could further dilute the company’s shareholders. The filing was made on Jan. 12, despite Nasdaq warning the company that it needed to get its share price higher to not be delisted.

Shares were down 11% in early trading to 20 cents a share, likely based on the dilution fears.

As of Sept. 30, 2023, Lucy had an accumulated deficit of $46.4 million.

“Because we do not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about our ability to continue as a going concern,” the company wrote in the filing. “We will continue to be dependent upon equity and debt financings or collaborations or other forms of capital at least until we are able to generate positive cash flows from product sales, if ever.”

Lucy went on to assure shareholders that it has 180 days to get the price higher. If it is not in compliance when that initial period comes to an end on March 19, the company could be granted another 180 days from the exchange.

Payments Due

In December 2023, Lucy reported that it had entered into a securities purchase agreement with three accredited investors who “may”  lend up to a total of $1.8 million to the company. The company received a total of $850,000, before expenses, at the closing of the first tranche of the financing.

Lucy also sold the investors roughly $2 million in convertible notes.  The company said is required to make interest payments in a total amount of approximately $8,000 per month to the investors, starting in January, until the principal amount is due in December 2024.

In addition to that payout, Lucy owes Wesana money related to the acquisition that closed in  July 2023. The offering stated that:

  • $25,991.33 was due on or before Oct. 1, 2023.
  • $25,991.33 due on or before Jan. 1.
  • $25,991.33 due on or before April 1.

As of Sept. 30, 2023, Lucy had cash and cash equivalents of roughly $200,000.

The company’s revenues come from legal mushroom supplements produced by Lucy, but the company had no sales in the last reported quarter. It said it changed payment processors, and sales were to begin again in October 2023.

The offering noted that in November 2023 and January 2024, Lucy surrendered its Cannabis Standard Processing License and the Dealer Licence, respectively, to better manage its costs. The company was referring to its origins as Hollyweed North Cannabis, which ultimately received a Health Canada license. According to Cannabiz Media, this license was inactive.

The filing also stated that if Lucy was delisted, it would be considered a penny stock. However, since the stock is trading at 20 cents, it is already a penny stock.

The offering does not mention that while Lucy is trying to buy High Times’ intellectual property, High Times Chairman Adam Levin was accused of stock fraud by the SEC. Green Market Report previously wrote about the familial connection between Lucy Scientific and High Times.

The offering did say that Levin was chairman of High Times through September 2023, which seemed to imply he may no longer hold that role.

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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