Lucy Scientific Debt Climbs in Fiscal Year Report

Lucy Scientific Debt Climbs in Fiscal Year Report

Lucy Scientific Discovery Inc. (NASDAQ: LSDI) reported its full-year results for the period ended June 2023, in which the psychedelic start-up piled onto its mounting deficit despite new M&A developments.

According to regulatory filings with the U.S. Securities and Exchange Commission, Lucy posted net product sales of $7,048 for the fiscal year, compared with no reported sales the previous year. The company linked the rise to the introduction of microdose mushroom capsules on their online platform.

However, the company also reported a net loss of $8.98 million for the year, with an accumulated deficit of $44 million. The company holds cash assets totaling $1.67 million.

Lucy attributed much of the loss to $5.8 million in selling, general and administrative expenses. It noted that the company’s transition to a public company required added expenses related to regulatory compliance with SEC rules, legal fees, audit costs, and other associated professional services.

Included in the reported net loss were non-cash items totaling $4.58 million. A portion of this, $951,088, was associated with the issuance of common shares for various purposes, such as consulting services and community donations.

Lucy has experienced operating losses and negative cash flows since its establishment. To finance its operations, the company has relied heavily on equity sales, issuance of promissory notes, both convertible and non-convertible, and proceeds from its IPO.

Gross proceeds from the IPO amounted to $7.5 million, with Lucy netting $5.8 million after accounting for underwriting discounts, commissions, and related expenses.

Most of the company’s cash reserves have been channeled into operating expenses, which are primarily allocated to general, administrative, selling expenses, and, when liquidity allows, research and development activities.

Lucy had an eventful past year, which included its all-stock acquisition of Blue Sky Wellness and its proposed purchase of High Times Holding Corp.’s intellectual property rights.

The deal with High Times – which spawned red flags and arrived right before federal regulators accused its CEO, Adam Levin, of securities fraud – didn’t come so much as a surprise, as Lucy has close ties with High Times, tethered by a web of familial connections.

A looming deadline to repay a $28 million debt likely also drove the timing of the deal. High Times was given a due date of Sept. 30 to pay the debt to a receiver for the lender, ExWorks.

Lucy’s former CEO Chris McElvany said in an interview during its public launch that the company wants to start mass manufacturing psychedelic drugs such as MDMA “that most likely will be available through prescription or as prescription medication later this year or earlier next year.”

“We aim to be the first and largest manufacturer to fill that gap,” he said. McElvany in July was replaced by Richard Nanula.

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