Lucy Scientific Discovery Inc. announced that it has entered into a securities purchase agreement with three accredited investors pursuant to which the Investors to issue 10% senior secured convertible promissory notes for the gross proceeds of of $1,800,000 on December 12, 2023. Pursuant to the Purchase Agreement, the Company sold to the Investors senior secured convertible promissory notes in an aggregate principal amount of up to $2,000,000, convertible into the Company?s common shares. The Notes carry an original issue discount of up to a total of $200,000 which is included in the up to $2,000,000 principal balance of the Note. The Purchase Agreement contains customary representations, warranties and covenants of the Company and the Investors. The First Tranche?s original issue discount, added to the principal amount owed by the Company, was a total of approximately $94,500, for a total principal balance of approximately $944,500. Pursuant to the Purchase Agreement, in connection with the payment of the First Tranche, the Investors received warrants to purchase up to an aggregate of 1,500,000. The Warrants are exercisable for Common Shares of the Company at an exercise price of $0.25. If fully exercised for cash, the Company will receive $375,000 from the exercise of the Warrants. The Warrants are exercisable until December 12, 2028. If at any time after June 12, 2024, the market price of one Common Share is greater than the Exercise Price and the Warrant Shares are not registered under an effective non-stale registration statement of the Company, the Investors may elect to receive Warrant Shares pursuant to a cashless exercise. The Exercise Price is subject to customary adjustments for distributions of assets, Common Share issuances, Common Share dividends, and anti-dilution of the Common Shares. The Notes and the Warrants were and any Common Shares issuable upon conversion of the Notes or exercise of the Warrants will be issued in transactions exempt from registration under the Securities Act of 1933, as amended (the ?Securities Act?) in reliance on Section 4(a)(2) thereof and Rule 506 of Regulation D thereunder. The Investors have represented that they are ?accredited investors,? as defined in Regulation D, and were acquiring the securities described herein for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof.

On the same date, the company announced that it has issued $850,000 in the first tranche. The notes will be matures on 12 months from the date of closing. The Notes are repayable from the date of the First Tranche, or Subsequent Tranches, if applicable, until 12 months thereafter and accrue interest at a rate of 10.0% per annum. The Company may prepay the Notes at any time prior to the Maturity Date, upon 30 days? notice to the Investors in an amount equal to 110% multiplied by the sum of the outstanding principal amount, all accrued and unpaid interest, all accrued interest through the remainder of the Note term, and (iv) any other amounts due under the Note. The Company 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. Upon the advance of the first Tranche by Holder to the Borrower, Borrower shall issue to Holder a warrant exercisable for 500,000 Common Shares. The Warrant shall have an exercise period of 60 Months, an exercise price equal to a $0.25, and (iii) provide for full ratchet anti-dilution protection provisions.