UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 001-38306

Ensysce Biosciences, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware		82-2755287
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7946 Ivanhoe Avenue, Suite 201 La Jolla, California		92037
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (858) 263-4196

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

Warrants to purchase one share of Common Stock

ENSC

ENSCW

The Nasdaq Stock Market LLC

OTC Pink Open Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of August 8, 2022, the registrant had 37,320,556 shares of common stock, $0.0001 par value per share, outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will” and “would,” or the negative of these terms or other similar expressions intended to identify statements about the future. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements include, without limitation, statements about:

	●	the risk that our lead product candidate PF614 and PF614-MPAR™ may not be successful in limiting or impeding abuse, overdose, or misuse or providing additional safety upon commercialization;

	●	reliance by us on third-party contract research organizations, or CROs, for its research and development activities and clinical trials;

	●	the need for substantial additional funding to complete the development and commercialization of our product candidates;

	●	the risk that our clinical trials may fail to replicate positive results from earlier preclinical studies or clinical trials conducted by us or third parties;

	●	the risk that the potential product candidates that we develop may not progress through clinical development or receive required regulatory approvals within expected timelines or at all;

	●	the risk that clinical trials may not confirm any safety, potency, or other product characteristics described or assumed in this Quarterly Report on Form 10-Q;

	●	the risk that we will be unable to successfully market or gain market acceptance of its product candidates;

	●	the risk that our product candidates may not be beneficial to patients or successfully commercialized;

	●	the risk that we have overestimated the size of the target market, patients’ willingness to try new therapies, and the willingness of physicians to prescribe these therapies;

	●	effects of competition;

	●	the risk that third parties on which we depend for laboratory, clinical development, manufacturing, and other critical services will fail to perform satisfactorily;

	●	the risk that our business, operations, clinical development plans and timelines, and supply chain could be adversely affected by the effects of health epidemics, including the ongoing COVID-19 pandemic;

	●	the risk that we will be unable to obtain and maintain sufficient intellectual property protection for its investigational products or will infringe the intellectual property protection of others;

	●	the loss of key members of our management team;

	●	changes in our regulatory environment;

	●	our need for additional financing to fund its operations and research and development;

	●	the ability to attract and retain key scientific, medical, commercial, or management personnel;

	●	changes in our industry;

	●	our ability to remediate any material weaknesses or maintain effective internal controls over financial reporting;

	●	the risk that our common stock will be suspended from trading on Nasdaq;

	●	the ability to meet and maintain applicable listing standards of the Nasdaq; and

	●	other factors disclosed in this Quarterly Report on Form 10-Q.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on Ensysce’s current expectations and beliefs concerning future developments and their potential effects Ensysce. There can be no assurance that future developments affecting Ensysce will be those that Ensysce has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond Ensysce’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Moreover, the occurrence of the events described in the “Risk Factors” in our Annual Report on Form 10-K may adversely affect Ensysce. Ensysce will not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

GLOSSARY

Definitions:
2021 Notes		The senior secured convertible promissory notes in the aggregate original principal amount of $15.9 million, sold in two closings on September 24, 2021 and November 5, 2021, respectively, pursuant to the Securities Purchase Agreement entered into on September 24, 2021
2022 Notes		The senior secured convertible promissory notes in the aggregate original principal amount of $8.48 million, sold in two closings on July 1, 2022, and August 9, 2022, respectively, pursuant to the Securities Purchase Agreement entered into on June 30, 2022
2021 Omnibus Incentive Plan		Ensysce Biosciences, Inc. Amended and Restated 2021 Omnibus Incentive Plan
Aggregate Limit		Up to $60 million of gross proceeds with respect to the GEM Agreement
ASC 606		Accounting Standards Codification Topic 606, Revenue from Contracts with Customers
ASC 740		Accounting Standards Codification Topic 740, Income Taxes
ASC 820		Accounting Standards Codification Topic 820, Fair Value Measurements
Board		Board of directors of Ensysce, or a committee thereof, as applicable
Business Combination		The merger of Merger Sub with and into Former Ensysce, with Former Ensysce continuing as the surviving entity and a wholly-owned subsidiary of LACQ, which changed its name to Ensysce Biosciences, Inc. following consummation of the Merger.
CMOs		Contract manufacturing organizations
Company		Ensysce Biosciences, Inc. and its consolidated subsidiaries
COVID-19		Novel coronavirus disease
Covistat		A clinical stage pharmaceutical company that is developing a compound utilized in the Company’s overdose protection program for the treatment of COVID-19 and 79.2%-owned subsidiary of the Company
CROs		Contract research organizations
Ensysce		Ensysce Biosciences, Inc.
Exchange Act		Securities Exchange Act of 1934
FDA		United States Food and Drug Administration
Former Ensysce		Ensysce Biosciences, Inc., a Delaware corporation, prior to the consummation of the merger with and into Merger Sub
GAAP		Generally Accepted Accounting Principles in the United States of America
GEM Agreement		Share Purchase Agreement between the Company, GEM Global, and GYBL, dated as of December 29, 2020, including a Registration Rights Agreement between the same parties and dated as of the same date
GEM Global		GEM Global Yield LLC SCS
GYBL		GEM Yield Bahamas Limited
IND		Investigational New Drug
IRB		Institutional Review Board
JOBS Act		Jumpstart Our Business Startups Act of 2012
LACQ		Leisure Acquisition Corp., a Delaware Corporation
Merger Agreement		Agreement and Plan of Merger, dated as of January 31, 2021, by and among LACQ, Merger Sub and Former Ensysce, providing for, among other things, and subject to the terms and conditions therein, a business combination between Former Ensysce and LACQ pursuant to the proposed merger of Merger Sub with and into Former Ensysce, with Former Ensysce surviving the transaction as a wholly-owned subsidiary of LACQ, which changed its name to Ensysce Biosciences, Inc. following consummation of the Merger
Merger Sub		EB Merger Sub, Inc., a Delaware corporation, a wholly-owned subsidiary of LACQ prior to the consummation of the Merger
MPAR		Multi-Pill Abuse Resistance
MPAR Grant		Research and development grant related to the development of its MPAR^TM overdose prevention technology awarded to the Company by NIH through NIDA in September 2018
Nasdaq		Nasdaq Stock Market LLC
NIDA		National Institute of Drug Abuse
NIH		National Institutes of Health
OUD Grant		Research and development grant related to the development of its TAAP/MPAR^TM abuse deterrent technology for Opioid Use Disorder awarded to the Company by NIH/NIDA in September 2019
SEC		U.S. Securities and Exchange Commission
Securities Act		Securities Act of 1933
SPA		Securities Purchase Agreement, dated as of September 24, 2021, by and between Ensysce and the institutional investors party thereto
TAAP		Trypsin Activated Abuse Protection

Table of Contents

		Page

	Forward-Looking Statements	i
	Glossary	ii

PART I.	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Consolidated Statements of Changes in Stockholders’ Equity (Deficit)	3
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36

PART II.	OTHER INFORMATION	37

Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	38
Item 6.	Exhibits	38
Signatures		39

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Ensysce Biosciences, Inc.

Consolidated Balance Sheets

	June 30, 2022			December 31, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	3,734,646		$	12,264,736
Unbilled receivable		276,631			441,721
Right-of-use asset		10,251			24,721
Prepaid expenses and other current assets		3,173,246			2,931,415
Total current assets		7,194,774			15,662,593
Property and equipment, net		-			-
Deferred financing costs		82,819			-
Other assets		671,423			754,756
Total assets	$	7,949,016		$	16,417,349
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	3,048,037		$	301,104
Accrued expenses and other liabilities		2,670,591			3,407,533
Lease liability		10,313			24,874
Notes payable and accrued interest ($2,519,539 and $12,358,886 at fair value at June 30, 2022 and December 31, 2021, respectively)		2,519,539			12,748,155
Total current liabilities		8,248,480			16,481,666
Long-term liabilities:
Notes payable, net of current portion		137,317			4,440,951
Other long-term liabilities		360,797			3,652,790
Total liabilities	$	8,746,594		$	24,575,407
Commitments and contingencies (Note 6)		-			-
Stockholders’ deficit
Preferred stock, $0.0001 par value, 1,500,000 shares authorized, no shares issued and outstanding at June 30, 2022 (unaudited) and December 31, 2021		-			-
Common stock, $0.0001 par value, 150,000,000 shares authorized; 35,550,034 and 24,662,904 shares issued at June 30, 2022 (unaudited) and December 31, 2021, respectively; 35,530,279 and 24,643,149 shares outstanding at June 30, 2022 (unaudited) and December 31, 2021, respectively		3,553			2,464
Additional paid-in capital		95,016,354			77,964,860
Accumulated deficit		(95,511,543	)		(85,845,567	)
Total Ensysce Biosciences, Inc. stockholders’ deficit		(491,636	)		(7,878,243	)
Noncontrolling interests in stockholders’ deficit		(305,942	)		(279,815	)
Total stockholders’ deficit		(797,578	)		(8,158,058	)
Total liabilities and stockholders’ deficit	$	7,949,016		$	16,417,349

The accompanying notes are an integral part of these consolidated financial statements.

Ensysce Biosciences, Inc.

Consolidated Statements of Operations

(Unaudited)

	2022			2021			2022			2021
	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Federal grants	$	207,471		$	444,516		$	810,569		$	695,091
Operating expenses:
Research and development		5,311,298			463,219			8,451,394			787,595
General and administrative		1,951,356			393,914			4,217,161			884,386
Total operating expenses		7,262,654			857,133			12,668,555			1,671,981

Loss from operations		(7,055,183	)		(412,617	)		(11,857,986	)		(976,890	)

Other income (expense):
Change in fair value of derivative liabilities		-			712,899			-			673,314
Change in fair value of convertible notes		(88,763	)		-			2,678,415			-
Change in fair value of liability classified warrants		148,393			-			2,942,791			-
Loss on debt conversions		(892,636	)		-			(2,595,278	)		-
Interest expense		(37,781	)		(910,327	)		(52,802	)		(1,258,161	)
Other income and expense, net		2,850			(347,566	)		10,816			(347,566	)
Total other income (expense), net		(867,937	)		(544,994	)		2,983,942			(932,413	)

Net loss	$	(7,923,120	)	$	(957,611	)	$	(8,874,044	)	$	(1,909,303	)
Net loss attributable to noncontrolling interests		(26,309	)		(22,067	)		(26,127	)		(26,028	)
Deemed dividend related to warrants down round provision		102,479			-			818,059			-
Net loss attributable to common stockholders	$	(7,999,290	)	$	(935,544	)	$	(9,665,976	)	$	(1,883,275	)
Net loss per share:
Net loss per share attributable to common stockholders, basic and diluted	$	(0.24	)	$	(0.06	)	$	(0.32	)	$	(0.12	)
Weighted average common shares outstanding, basic and diluted		33,988,783			16,053,550			30,656,712			15,943,867

The accompanying notes are an integral part of these consolidated financial statements.

Ensysce Biosciences, Inc.

Consolidated Statements of Changes in Stockholders’ EQUITY (Deficit)

(Unaudited)


	Stockholders’ Equity (Deficit)
	Common Stock				Additional
	Number of Shares		Amount		Paid-In Capital			Accumulated Deficit			Noncontrolling interests			Total
Balance on March 31, 2021		16,053,550	$	1,605	$	49,822,991		$	(56,906,447	)	$	(221,586	)	$	(7,303,437	)
Stock-based compensation		-		-		36,373			-			-			36,373
Settlement of convertible notes		1,357,968		136		5,696,567			-			-			5,696,703
Issuance of common stock for business combinations, net of transaction costs		6,844,268		684		7,694,580			-			-			7,695,264
Net loss									(935,544	)		(22,067	)		(957,611	)
Balance on June 30, 2021		24,255,786	$	2,425	$	63,250,511		$	(57,841,991	)	$	(243,653	)	$	5,167,292

Balance on March 31, 2022		29,949,032	$	2,995	$	88,900,164		$	(87,512,253	)	$	(279,633	)	$	1,111,273
Conversion of convertible notes		5,481,247		548		5,718,141			-			-			5,718,689
Stock-based compensation						295,580									295,580
Settlement of restricted stock units		100,000		10		(10	)								-
Deemed dividend related to warrants down round provision		-		-		102,479			(102,479	)					-
Net loss									(7,896,811	)		(26,309	)		(7,923,120	)
Balance on June 30, 2022		35,530,279	$	3,553	$	95,016,354		$	(95,511,543	)	$	(305,942	)	$	(797,578	)

The accompanying notes are an integral part of these consolidated financial statements.

Ensysce Biosciences, Inc.

Consolidated Statements of Changes in Stockholders’ EQUITY (Deficit)

(Unaudited)

	Stockholders’ Equity (Deficit)
	Common Stock						Additional
	Number of Shares			Amount			Paid-In Capital		Accumulated Deficit			Noncontrolling interests			Total
Balance on December 31, 2020		239,465,160		$	5,987		$	49,511,927	$	(55,958,716	)	$	(217,625	)	$	(6,658,427	)

Retroactive application of recapitalization		(223,696,435	)		(4,410	)		4,410		-			-			-
Balance on December 31, 2020, effect of reverse recapitalization		15,768,725			1,577			49,516,337		(55,958,716	)		(217,625	)		(6,658,427	)
Exercise of stock options		284,825			28			262,834		-			-			262,862
Settlement of convertible notes		1,357,968			136			5,696,567		-			-			5,696,703
Issuance of common stock for business combination, net of transaction costs		6,844,268			684			7,694,580		-			-			7,695,264
Stock-based compensation		-			-			80,193		-			-			80,193
Net loss		-			-			-		(1,883,275	)		(26,028	)		(1,909,303	)
Balance on June 30, 2021		24,255,786		$	2,425		$	63,250,511	$	(57,841,991	)	$	(243,653	)	$	5,167,292

Balance on December 31, 2021		24,643,149		$	2,464		$	77,964,860

SEC Form 10-Q filed by Ensysce Biosciences Inc.