Lucy Scientific’s problems continue to grow

3 weeks ago 60

Psychedelic company Lucy Scientific Discovery Inc. (NASDAQ: LSDI) is finding its problems are growing with few solutions. Last week the company notified investors that it was unable to file its financial reports on time.

The company was due to deliver its first-quarter earnings for the period ending in March by May 15, but it was unable to do so. Lucy also informed the market that it wasn’t sure when it would be able to deliver those quarterly earnings. The company’s Chief Financial Officer Brian Zasitko announced on May 3 that he had resigned with an effective date of May 17. With its CFO gone, that could be a good reason for the company not being unable to produce the financial documents or Zastiko resigned not wanting to put his name on the financials.

In addition to Zastiko resigning, board member Livio Susin resigned as well.

NASDAQ pressure

In addition to missing its date to file financials, the company is also trying to convince the NASDAQ to keep its listing. In February 2024, the NASDAQ exchange told the company that it no longer met the requirement that a listed company’s stockholders’ equity be at least $2.5 million. As reported in its Form 10-Q, the company’s stockholders’ equity as of December 31, 2023, was just $81,158. In addition, the company did not meet the alternatives of the market value of listed securities or net income from continuing operations as of the date of the letter sent by the exchange.

Lucy sent the NASDAQ a response in March, but the NASDAQ denied the company’s request to remain listed according to the company’s 8K. The exchange said it would suspend trading on May 16. However, the exchange told Lucy it could appeal that decision and the company has said it will request a hearing on the denial. That means the stock can continue trading on the NASDAQ while it appeals the decision.

According to the 8K, “At the hearing, the Company will be asked to provide a plan to regain compliance to the Panel. The Company intends to present a plan to regain compliance with the Rule and request the continued listing of its common shares on Nasdaq pending such compliance. However, there can be no assurance that the Panel will grant the Company’s request or that the Company will ultimately regain compliance with all applicable requirements for continued listing on Nasdaq.”

Stock pop

It was serendipitous when the company’s stock jumped on May 16th with 69 million shares trading versus an average volume of 1.2 million as per Yahoo Finance. The daytime high for the stock on that day was $2.12. The purchase immediately pushed the stock higher for NASDAQ listing requirements. It has since fallen and was lately selling at $1.17.

The move however prompted numerous stock jocks to include it in meme stock lists online. It even prompted some trading programs to give the company favorable ratings like Stock Invest which has a Hold/Accumulate rating.

Whoever bought the stock must be comfortable with the knowledge that the company said in its offering prospectus that it had no meaningful operations.

This also follows a 10 for 1 reverse stock split in February 2024 that the company employed in order to push its stock price higher.

Revenue path unclear

Lucy’s plan to get in NASDAQ’s good graces is unclear. The company’s planned merger with Bluesky Biologicals fell apart in March, which was supposed to be its path to profits. Before that deal, the company said in November 2023 that it surrendered its Controlled Drugs and Substances Dealer’s Licence in Canada which was effective January 2024.

In addition to those revenue ideas, the company also told investors it didn’t plan to continue pursuing the development and commercialization of TerraCube. As a result of the above, Lucy said it recorded a loss from discontinued operations for the nine months ending March 31, 2024, of $1,705,731. This could be another reason why the company is avoiding its financials being released.

Lucy had also made noise about a deal with High Times Holding company, whose assets were with a receiver who took bids on the properties. That bidding period ended on May 17. The company had said in its March 2024 stock offering in March that it was dependent upon the Bluesky and High Times deals for future revenue and with both of those options gone, it isn’t clear where any money will come from except through selling more shares and taking on more debt. Lucy noted it had an accumulated deficit of $43 million.

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