S-1/A: Lucy Scientific Discovery Inc. Files Amendment No. 1 to Form S-1 for Resale of Common Shares

Lucy Scientific Discovery Inc. has filed an amendment to its Form S-1 registration statement for the resale of up to 7,361,688 common shares by selling stockholders.

Summary

• Lucy Scientific Discovery Inc. has filed Amendment No. 1 to its Form S-1 registration statement with the SEC on February 5, 2024.
• The registration statement pertains to the offer and resale of up to 7,361,688 common shares by selling stockholders.
• These shares include 4,497,363 shares issuable upon conversion of senior secured convertible promissory notes, 1,500,000 shares issuable upon exercise of warrants at $0.25 per share, and 1,364,325 shares issuable upon the effectiveness of the registration statement.
• The company will not receive proceeds from the sale of shares by the selling stockholders, but may receive approximately $375,000 if all warrants are exercised for cash.
• The selling stockholders will bear the selling expenses, while the company will cover the registration expenses.
• The common shares are quoted on The Nasdaq Capital Market under the symbol LSDI, with the last reported sale price on February 2, 2024, at $0.2385 per share.
• Investing in the company's securities involves a high degree of risk, as detailed in the Risk Factors section of the prospectus.
• The company is an emerging growth company and a smaller reporting company, which allows for reduced reporting requirements.
• The company has a history of operating losses and may require additional funding to finance its operations.
• The company's independent auditors have raised concerns about its ability to continue as a going concern.
• The company is pursuing acquisitions of Bluesky Biologicals Inc. and the intellectual property of Hightimes, which are subject to Nasdaq approval.
• The company has entered into a strategic investment agreement with Hightimes, receiving advertising credits in exchange for common shares.
• The company has launched new product lines, Mindful by Lucy and Twilight by Lucy, in the psychoactive alternatives market.
• Christopher McElvany resigned as President and CEO, and Richard Nanula was appointed as the new CEO.
• The company received a deficiency letter from Nasdaq for not meeting the minimum bid price requirement and has until March 19, 2024, to regain compliance.
• The company surrendered its Dealer Licence in November 2023 to better manage costs.

Sentiment

Score: 4

Explanation: The document presents a mixed sentiment. While there are positive aspects such as potential revenue from warrant exercises and strategic acquisitions, the concerns about the company's ability to continue as a going concern and the Nasdaq deficiency letter weigh heavily on the overall outlook.

Positives

• The company may receive $375,000 if all warrants are exercised for cash, which will be used for working capital and general corporate purposes.
• The company is pursuing acquisitions of Bluesky Biologicals Inc. and the intellectual property of Hightimes, which could lead to significant growth.
• The company has launched new product lines, Mindful by Lucy and Twilight by Lucy, in the psychoactive alternatives market, which Forbes predicts will double to over $5 billion in gross sales by 2025.
• The company entered into a strategic investment agreement with Hightimes, receiving $833,333 of annual advertising and marketing credits for five consecutive years.

Negatives

• The company will not receive any proceeds from the sale of common shares by the selling stockholders.
• The company's independent auditors have raised concerns about its ability to continue as a going concern.
• The company has a history of operating losses and may require additional funding to finance its operations.
• The company received a deficiency letter from Nasdaq for not meeting the minimum bid price requirement and has until March 19, 2024, to regain compliance.
• The company surrendered its Dealer Licence in November 2023 to better manage costs.

Risks

• Investing in the company's securities involves a high degree of risk, as detailed in the Risk Factors section of the prospectus.
• The company's independent auditors have raised concerns about its ability to continue as a going concern.
• The company may not be able to maintain compliance with Nasdaq's listing standards, which could lead to delisting.
• The company's growth depends on completing the acquisitions of Bluesky and the intellectual property of Hightimes, which are subject to Nasdaq approval.
• Future capital raises may dilute existing stockholders' ownership.
• The company may experience extreme stock price volatility unrelated to its actual or expected operating performance, financial condition or prospects.

Future Outlook

The company expects to realize significant growth in its business if it is able to complete the acquisition of Bluesky and acquisition of the intellectual property of Hightimes. The company intends to monitor the psychedelic marketplace and revisit the Dealer License when the regulatory landscape provides for a clearer path to meaningful revenues.

Management Comments

• Mr. Nanula is a highly experienced business advisor and senior executive with more than 35 years of experience in corporate finance and strategy including tenure with the Walt Disney Company (Disney), Starwood Hotels and Resorts, Amgen, and Colony Capital.

Industry Context

The company is operating in the emerging market for psychoactive alternatives, which Forbes predicts will double to over $5 billion in gross sales by 2025.

Comparison to Industry Standards

• The document does not contain specific comparisons to industry standards.
• The document does not contain specific comparisons to comparible companies.
• The document does not contain specific comparisons to comparible projects.
• The document does not contain specific comparisons to comparible results.

Management Changes

Related Party Transactions

• Paul Abramowitz, one of the company's directors, is a shareholder of Hightimes and is the stepfather of the person who was Executive Chairman of Hightimes through September 2023.
• Mr. Abramowitz's biological son is a beneficial owner of Roma Ventures, LLC, an entity that owned approximately 8.53% of the company's issued and outstanding Common Shares upon the entrance into the transaction.
• Benjamin Windle is the investment manager of Roma Ventures and Whistling Pines LLC, one of the Selling Stockholders.
• Mr. Abramowitz's biological son is a beneficial owner of Whistling Pines LLC.

Stakeholder Impact

• Shareholders face a high degree of risk due to the company's financial condition and the speculative nature of the industry.
• Employees may be affected by potential workforce reductions if the company is unable to secure additional funding.
• Customers may benefit from new product lines and potential acquisitions, but also face uncertainty due to the company's financial situation.
• Suppliers and creditors face increased risk due to the company's financial condition and potential inability to meet its obligations.

Next Steps

• The company will continue to monitor the closing bid price of its Common Shares and seek to regain compliance with all applicable Nasdaq requirements within the allotted compliance period.
• The company is pursuing acquisitions of Bluesky Biologicals Inc. and the intellectual property of Hightimes, which are subject to Nasdaq approval.
• The company intends to monitor the psychedelic marketplace and revisit the Dealer License when the regulatory landscape provides for a clearer path to meaningful revenues.

Key Dates

Keywords

common shares, selling stockholders, registration statement, Lucy Scientific Discovery, warrants, convertible notes, Nasdaq, Bluesky, Hightimes, acquisitions