Ensysce Biosciences, Inc. 10-Q

Item 1. Financial Statements. LEISURE ACQUISITION CORP. CONDENSED BALANCE SHEETS September 30, December 31, 2020 2019 (unaudited) ASSETS Current Assets Cash $ 53,492 $ 1,061,151 Prepaid expenses 48,325 — Prepaid income taxes — 138,571 Total Current Assets 101,817 1,199,722 Cash and marketable securities held in Trust Account 13,187,558 195,312,177 TOTAL ASSETS $ 13,289,375 $ 196,511,899 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable and accrued expenses $ 326,425 $ 2,771,045 Income taxes payable 125,677 — Total Current Liabilities 452,102 2,771,045 Promissory note 566,268 566,268 Deferred underwriting fee payable 7,000,000 7,000,000 Total Liabilities 8,018,370 10,337,313 Commitments Common stock subject to possible redemption, 26,189 and 17,501,073 shares at redemption value at September 30, 2020 and December 31, 2019, respectively 270,999 181,174,585 Stockholders’ Equity Preferred stock, $ 0.0001 par value; 1,000,000 authorized; none issued and outstanding — — Common stock, $ 0.0001 par value; 100,000,000 shares authorized; 6,257,127 and 6,375,178 shares issued and outstanding (excluding 5,156 and 17,501,073 shares subject to possible redemption) at September 30, 2020 and December 31, 2019, respectively 624 638 Additional paid-in capital 63,385 2,542,569 Retained earnings 4,935,997 2,456,794 Total Stockholders’ Equity 5,000,006 5,000,001 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 13,289,375 $ 196,511,899 The accompanying notes are an integral part of the unaudited condensed financial statements. 1 LEISURE ACQUISITION CORP. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Operating costs $ 287,254 $ 584,418 $ 1,274,109 $ 1,399,530 Loss from operations ( 287,254 ) ( 584,418 ) ( 1,274,109 ) ( 1,399,530 ) Other income (expense): Interest income 1,840 1,107,955 719,353 3,497,481 Unrealized (loss) gain on marketable securities held in Trust Account — ( 19,496 ) — 42,475 Forgiveness of debt — — 3,298,207 — Other income, net 1,840 1,088,459 4,017,560 3,539,956 (Loss) income before provision for income taxes ( 285,414 ) 504,041 2,743,451 2,140,426 Benefit (provision) for income taxes 504,237 ( 14,318 ) ( 264,248 ) ( 455,888 ) Net income $ 218,823 $ 489,723 2,479,203 1,684,538 Weighted average shares outstanding, basic and diluted (1) 6,257,127 6,100,218 6,411,797 6,062,609 Basic and diluted net income (loss) per common share (2) $ 0.03 $ ( 0.08 ) $ 0.39 ( 0.18 ) (1) Excludes an aggregate of 26,189 and 18,860,476 shares subject to possible redemption at September 30, 2020 and 2019, respectively. (2) Net loss per common share - basic and diluted excludes income attributable to common stock subject to possible redemption of $209,175 and $965,765 for the three months ended September 30, 2020 and 2019, respectively, and $2,471,558 and $2,766,826 for the nine months ended September 30, 2020 and 2019, respectively (see Note 2). The accompanying notes are an integral part of the unaudited condensed financial statements. 2 LEISURE ACQUISITION CORP. CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 Common Stock Additional Paid in Retained Total Stockholders’ Shares Amount Capital Earnings Equity Balance – January 1, 2020 6,375,178 $ 638 $ 2,542,569 $ 2,456,794 $ 5,000,001 Change in value of common stock subject to possible redemption 229,607 22 349,835 — 349,857 Net loss — — — ( 349,854 ) ( 349,854 ) Balance – March 31, 2020 6,604,785 660 2,892,404 2,106,940 5,000,004 Change in value of common stock subject to possible redemption ( 347,658 ) ( 34 ) ( 3,610,201 ) — ( 3,610,235 ) Issuance of warrants in connection with conversion of promissory note – related parties — — 1,000,000 — 1,000,000 Net income — — — 2,610,234 2,610,234 Balance – June 30, 2020 6,257,127 $ 626 $ 282,203 $ 4,717,174 $ 5,000,003 Change in value of common stock subject to possible redemption ( 21,033 ) ( 2 ) ( 218,818 ) ( 218,820 ) Net income — — — 218,823 218,823 Balance – September 30, 2020 6,236,094 $ 624 $ 63,385 $ 4,935,997 $ 5,000,006 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 Common Stock Additional Paid in Retained Total Stockholders’ Shares Amount Capital Earnings Equity Balance – January 1, 2019 6,039,072 $ 604 $ 2,908,557 $ 2,090,840 $ 5,000,001 Change in value of common stock subject to possible redemption 8,792 1 ( 775,914 ) — ( 775,913 ) Net income — — — 775,913 775,913 Balance – March 31, 2019 6,047,864 605 2,132,643 2,866,753 5,000,001 Change in value of common stock subject to possible redemption 52,354 5 ( 418,907 ) — ( 418,902 ) Net income — — — 418,902 418,902 Balance – June 30, 2019 6,100,218 610 1,713,736 3,285,655 5,000,001 Change in value of common stock subject to possible redemption 39,306 4 ( 489,727 ) — ( 489,723 ) Net income — — — 489,723 489,723 Balance – September 30, 2019 6,139,524 $ 614 $ 1,224,009 $ 3,775,378 $ 5,000,001 The accompanying notes are an integral part of the unaudited condensed financial statements. 3 LEISURE ACQUISITION CORP. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 2020 2019 Cash Flows from Operating Activities: Net income $ 2,479,203 $ 1,684,538 Adjustments to reconcile net income to net cash used in operating activities: Interest earned on marketable securities held in Trust Account ( 719,353 ) ( 3,497,481 ) Unrealized gain on marketable securities held in Trust Account — ( 42,475 ) Forgiveness of debt ( 3,298,207 ) — Deferred tax provision — 7,156 Changes in operating assets and liabilities: Prepaid expenses ( 48,325 ) 56,569 Prepaid income taxes 138,571 96,732 Accounts payable and accrued expenses 853,587 695,925 Income taxes payable 125,677 — Net cash used in operating activities ( 468,847 ) ( 999,036 ) Cash Flows from Investing Activities: Investment of cash in Trust Account ( 1,698,862 ) — Cash withdrawn from Trust Account for redemption of common stock 184,382,784 — Cash withdrawn from Trust Account for franchise taxes and income taxes 160,050 623,204 Net cash provided by investing activities 182,843,972 623,204 Cash Flows from Financing Activities: Proceeds from convertible promissory notes – related parties 1,000,000 — Redemption of common stock ( 184,382,784 ) — Payment of offering costs — ( 8,640 ) Net cash used in financing activities ( 183,382,784 ) ( 8,640 ) Net Change in Cash ( 1,007,659 ) ( 384,472 ) Cash – Beginning 1,061,151 1,658,398 Cash – Ending $ 53,492 $ 1,273,926 Supplementary cash flow information: Cash paid for income taxes $ — $ 352,000 Non-Cash investing and financing activities: Change in value of common stock subject to possible redemption $ 3,479,198 $ 1,684,538 Issuance of warrants in connection with conversion of promissory note – related party $ 1,000,000 $ — The accompanying notes are an integral part of the unaudited condensed financial statements. 4 LEISURE ACQUISITION CORP. NOTES TO CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2020 (Unaudited) 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS Leisure Acquisition Corp. (the “Company”) is a blank check company incorporated in Delaware on September 11, 2017. The Company was formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, recapitalization, exchangeable share transaction or other similar business transaction, with one or more operating businesses or assets (a “Business Combination”). At September 30, 2020, the Company had not yet commenced operations. All activity through September 30, 2020 relates to the Company’s formation, its initial public offering (“Initial Public Offering”), which is described below, identifying a target company for a Business Combination and activities in connection with the previously proposed business combination with GTWY Holdings Limited, a Canadian corporation (“GTWY Holdings”), which was terminated on July 16, 2020. The registration statement for the Company’s Initial Public Offering was declared effective on December 1, 2017. On December 5, 2017, the Company consummated the Initial Public Offering of 20,000,000 units (“Units” and, with respect to the common stock included in the Units, the “Public Shares”), generating gross proceeds of $ 200,000,000 , which is described in Note 3. Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 6,825,000 warrants (the “Private Placement Warrants”) at a price of $ 1.00 per warrant in a private placement to Hydra LAC, LLC, an affiliate of Hydra Management, LLC (the “Hydra Sponsor”), MLCP GLL Funding LLC, an affiliate of Matthews Lane Capital Partners, LLC (the “Matthews Lane Sponsor,” and, together with the Hydra Sponsor, the “Sponsors”), HG Vora Special Opportunities Master Fund, Ltd. (“HG Vora”) and certain members of the Company’s management team, generating gross proceeds of $ 6,825,000 , which is described in Note 4. Following the closing of the Initial Public Offering on December 5, 2017, an amount of $ 200,000,000 ($ 10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement Warrants was placed in a trust account (the “Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the Trust Account, as described below. Transaction costs amounted to $ 11,548,735 , consisting of $ 4,000,000 of underwriting fees, $ 7,000,000 of deferred underwriting fees and $ 548,735 of Initial Public Offering costs. In addition, at September 30, 2020, cash of $ 53,492 was held outside of the Trust Account and is available for working capital purposes. The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80 % of the balance in the Trust Account (excluding deferred underwriting commissions and franchise and income taxes payable on the income earned on the Trust Account) at the time of the signing of an agreement to enter into a Business Combination. In addition, the Company’s Business Combination must be approved by HG Vora as a condition to the Contingent Forward Purchase Contract (as described in Note 6). The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50 % or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination. The Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro rata portion of the amount then on deposit in the Trust Account ($ 10.00 per share, plus any deposits made to the Trust Account in connection with extension payments and any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay franchise and income taxes). The per share amount to be distributed to stockholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (see Note 7). The Company will proceed with a Business Combination if the Company has net tangible assets of at least $ 5,000,001 upon consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Second Amended and Restated Certificate of Incorporation, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents with the SEC prior to completing a Business Combination. If, however, a stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or other legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsors and the Company’s other initial stockholders (collectively, the “Initial Stockholders”) have agreed to vote their Founder Shares (as defined in Note 5) and any Public Shares held by them in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. 5 LEISURE ACQUISITION CORP. NOTES TO CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2020 (Unaudited) Notwithstanding the foregoing, the Company’s Second Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to an aggregate of 20 % or more of the common stock sold in the Initial Public Offering. The Company has until December 1, 2020 to consummate a Business Combination or such later date to the extent its stockholders approve an extension (the “Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem 100% of the outstanding Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned and not previously released to pay franchise and income taxes (less up to $ 75,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements of applicable law. The underwriters have agreed to waive their rights to the deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Company’s Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution (including Trust Account assets) will be less than the $10.00 per Unit in the Initial Public Offering. On November 26, 2019, the Company held a special meeting pursuant to which the Company’s stockholders approved extending the Combination Period from December 5, 2019 to April 5, 2020 (the “Initial Extension Date”). In connection with the approval of the extension, stockholders elected to redeem an aggregate of 1,123,749 shares of the Company’s common stock. As a result, an aggregate of $ 11,583,473 (or approximately $ 10.31 per share) was released from the Company’s Trust Account to pay such stockholders The Company agreed to contribute (the “Contribution”) $ 0.03 for each share of the Company’s common stock that did not redeem in connection with the extension for each of the four monthly periods covered by the extension (commencing on December 6, 2019 through the Initial Extension Date), subject to certain conditions. On each of December 5, 2019, January 3, 2020, February 4, 2020 and March 4, 2020, the Company made a Contribution of $ 0.03 for each of the public shares outstanding, for an aggregate Contribution of $ 2,265,151 , which amounts were deposited into the Trust Account. On December 5, 2019, the Company entered into an expense advancement agreement with GTWY Holdings (the “GTWY Expense Advance Agreement”), pursuant to which GTWY Holdings committed to provide $ 566,288 to fund contributions to the Trust Account. The Company drew down the full amount under the GTWY Expense Advance Agreement to fund the required Contribution to the Trust Account for the period December 6, 2019 to January 5, 2020 by issuing an unsecured promissory note to GTWY Holdings (see Note 5). On January 15, 2020, the Company drew down $ 1,000,000 under the expense advancement agreement with the Company’s Sponsors and strategic investor dated December 1, 2017 in exchange for issuing unsecured promissory notes to fund its working capital requirements and to fund required Contributions to the Trust Account. The holders had the option to convert the promissory notes into warrants at a price of $ 1.00 per warrant subject to the same terms and conditions as private placement warrants. The notes were converted into warrants on June 25, 2020. On March 26, 2020, the Company held a special meeting pursuant to which the Company’s stockholders approved extending the Combination Period from April 5, 2020 to June 30, 2020 (the “Second Extension Date”). In connection with the approval of the extension, stockholders elected to redeem an aggregate of 16,837,678 shares of the Company’s common stock. As a result, an aggregate of $ 176,283,492 (or approximately $ 10.47 per share) was released from the Company’s Trust Account to pay such stockholders. Of the amount paid to redeeming stockholders, $ 136,283,492 was paid as of March 31, 2020 and the balance of $ 40,000,000 was paid on April 1, 2020. On June 26, 2020, the Company held a special meeting pursuant to which the Company’s stockholders approved extending the Combination Period from June 30, 2020 to December 1, 2020 (the “Third Extension Date”). In connection with the approval of the extension, stockholders elected to redeem an aggregate of 776,290 shares of the Company’s common stock. As a result, an aggregate of $ 8,099,292 (or approximately $ 10.43 per share) was released from the Company’s Trust Account to pay such stockholders. 6 LEISURE ACQUISITION CORP. NOTES TO CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2020 (Unaudited) The Initial Stockholders have agreed to (i) waive their redemption rights with respect to their Founder Shares in connection with the completion of a Business Combination, (ii) to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if the Company fails to complete a Business Combination within the Combination Period and (iii) not to propose an amendment to the Company’s Second Amended and Restated Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100 % of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their shares in conjunction with any such amendment. In order to protect the amounts held in the Trust Account, the Sponsors have agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $ 10.00 per Public Share or (ii) such lesser amount per share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsors will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsors will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account. Special Meeting to Extend Combination Period The Company has scheduled a special meeting in lieu of the 2020 annual meeting of stockholders for November 24, 2020, pursuant to which, among other matters, it will seek stockholder approval to extend the Combination Period from December 1, 2020 to June 30, 2021 (the “Extension Meeting”). The Company’s public stockholders will be able to elect to redeem their shares in connection with the Extension Meeting for a pro rata portion of the amount then on deposit in the Trust Account ($ 10.00 per share, plus any deposits made into the Trust Account for extension payments and any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay franchise and income taxes). If the Company does not obtain stockholder approval and is unable to complete a Business Combination by December 1, 2020, the Company would wind up its affairs and liquidate. Liquidity and Going Concern As of September 30, 2020, the Company had $ 53,492 in its operating bank accounts, $ 13,187,558 in securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem its common stock in connection therewith and working capital deficit of $ 224,608 , which excludes $ 125,677 of income taxes payable that will be paid from interest earned on the Trust Account. As of September 30, 2020, the Company had $ 125,000 available for drawdown under the Company’s expense advancement agreement with the Company’s Sponsors and HG Vora (see “Related Party Loans” in Note 5). The Company will need to raise additional capital through loans or additional investments from its Sponsors, HG Vora, stockholders, officers, directors, or third parties. The Company’s Sponsors and HG Vora may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through December 1, 2020, the date that the Company will be required to cease all operations, except for the purpose of winding up, if a Business Combination is not consummated. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. 7 LEISURE ACQUISITION CORP. NOTES TO CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2020 (Unaudited) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on March 10, 2020, which contains the audited financial statements and notes thereto. The financial information as of December 31, 2019 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The interim results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any future interim periods. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future events. Accordingly, the actual results could differ significantly from the Company’s estimates. Cash and Cash Equivalents The Company considers all short-term investments with an original maturity of three months or less, when purchased, to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2020 and December 31, 2019. Marketable Securities Held in Trust Account At September 30, 2020 and December 31, 2019, the assets held in the Trust Account were substantially held in a money market fund that invests primarily in U.S. Treasury Bills. Through September 30, 2020, the Company withdrew $ 1,834,842 of interest income from the Trust Account, of which $ 160,050 was withdrawn during the nine months ended September 30, 2020, to pay franchise taxes. Common Stock Subject to Possible Redemption The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets. Income Taxes The Company complies with the accounting and reporting requirements of Accounting Standards Codification (“ASC”) Topic 740 “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. 8 LEISURE ACQUISITION CORP. NOTES TO CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2020 (Unaudited) ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2020 and December 31, 2019. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The effective tax rate of 177 % and 10 % differs from the statutory tax rate of 21 % for the three and nine months ended September 30, 2020 primarily due to the reversal of previously recorded permanent differences for transactional expenses incurred in connection with the now terminated GTWY Holdings acquisition. The effective tax rate of 3 % and 21 % differs from the statutory tax rate of 21 % for the three and nine months ended September 30, 2019, respectively, due to true-up adjustments from the prior year tax returns. The Company may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. Net Loss Per Common Share Net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The Company applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption at September 30, 2020 and 2019, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase 17,825,000 shares of common stock in the calculation of diluted loss per share, since the exercise of the warrants is contingent upon the occurrence of future events. As a result, diluted loss per common share is the same as basic loss per common share for the periods. Reconciliation of Net Income (Loss) Per Common Share The Company’s net income is adjusted for the portion of income that is attributable to common stock subject to redemption, as these shares only participate in the earnings of the Trust Account and not the income or losses of the Company. Accordingly, basic and diluted income (loss) per common share is calculated as follows: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net income $ 218,823 $ 489,723 $ 2,479,203 $ 1,684,538 Less: Income attributable to common stock subject to possible redemption ( 9,648 ) ( 965,765 ) ( 7,645 ) ( 2,766,826 ) Adjusted net income (loss) 209,175 ( 476,042 ) 2,471,558 ( 1,082,288 ) Weighted average common shares outstanding, basic and diluted 6,257,127 6,100,218 6,411,797 6,062,609 Basic and diluted net income (loss) per common share $ 0.03 $ ( 0.08 ) $ 0.39 $ ( 0.18 ) Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution, which, at times may exceed the federal depository insurance coverage of $ 250,000 . The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account. Fair Value of Financial Instruments The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement” (“ASC 820”), approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature. Recent Accounting Standards Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements. 9 LEISURE ACQUISITION CORP. NOTES TO CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2020 (Unaudited) 3. INITIAL PUBLIC OFFERING Pursuant to the Initial Public Offering, the Company sold 20,000,000 Units at a purchase price of $ 10.00 per Unit. Each Unit consists of one share of common stock, and one-half of one warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of common stock at an exercise price of $ 11.50 (see Note 7). 4. PRIVATE PLACEMENT Simultaneously with the closing of the Initial Public Offering, affiliates of the Hydra Sponsor and Matthews Lane Sponsor, HG Vora and certain members of management purchased an aggregate of 6,825,000 Private Placement Warrants at $ 1.00 per Private Placement Warrant, for an aggregate purchase price of $ 6,825,000 . Each Private Placement Warrant entitles the holder to purchase one share of common stock at an exercise price of $ 11.50 . The proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds of the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. There will be no redemption rights or liquidating distributions from the Trust Account with respect to the Private Placement Warrants. The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the common stock issuable upon the exercise of the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. On June 25, 2020, the Company’s Sponsors and HG Vora converted the Promissory Notes issued to them on January 15, 2020 pursuant to a drawdown by the Company under the expense advancement agreement in the aggregate amount of $ 1,000,000 into warrants to purchase 1,000,001 shares of the Company’s common stock at an exercise price of $ 11.50 per share. 5. RELATED PARTY TRANSACTIONS Founder Shares On September 11, 2017, the Company issued an aggregate of 7,187,500 shares of common stock to the Initial Stockholders (“Founder Shares”) for an aggregate purchase price of $ 25,000 . On December 5, 2017, certain of the Initial Stockholders surrendered and returned to the Company, for nil consideration, an aggregate of 1,437,500 Founder Shares, which were cancelled, leaving an aggregate of 5,750,000 Founder Shares outstanding. The 5,750,000 Founder Shares included an aggregate of up to 750,000 shares subject to forfeiture by the Initial Stockholders to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the Initial Stockholders would own 20 % of the Company’s issued and outstanding shares after the Initial Public Offering (assuming the Initial Stockholders do not purchase any Public Shares in the Initial Public Offering). The underwriters’ election to exercise their over-allotment option expired unexercised on January 15, 2018 and, as a result, 750,000 Founder Shares were forfeited, resulting in 5,000,000 Founder Shares outstanding. The Initial Stockholders have agreed, subject to certain exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier of (i) one year after the date of the completion of a Business Combination, or (ii) the date on which the last sales price of the Company’s common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing 150 days after a Business Combination, or earlier, in each case, if subsequent to a Business Combination, the Company completes a subsequent liquidation, merger, stock exchange, or other similar transaction which results in all of the Company’s stockholders having the right to exchange their common stock for cash, securities or other property. 10 LEISURE ACQUISITION CORP. NOTES TO CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2020 (Unaudited) Administrative Services Agreement The Company entered into an agreement whereby, commencing on December 1, 2017 through the earlier of the completion of a Business Combination or the Company’s liquidation, the Company would pay Hydra Sponsor a monthly fee of up to $ 10,000 for office space, utilities and secretarial and administrative support. For the three months ended September 30, 2019, the Company incurred $ 30,000 in fees for these services. For the nine months ended September 30, 2019 the Company incurred $ 60,000 in fees for these services. Effective June 30, 2020, Hydra Sponsor agreed to stop charging the Company the monthly administrative fee and forgave the $ 71,000 outstanding balance due. Related Party Loans In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Hydra Sponsor, an affiliate of the Matthews Lane Sponsor and HG Vora (the “Funding Parties”) loaned an aggregate of $ 1,000,000 to the Company, in accordance with unsecured promissory notes issued on January 15, 2020 to the Funding Parties, pursuant to an expense advancement agreement dated December 1, 2017 which were subsequently converted by the holders into warrants on June 25, 2020. The expense advancement agreement was amended to increase the total amount of advances available to the Company under the agreement by $125,000 on June 29, 2020 and by an additional $75,000 on October 26, 2020, for a total of $200,000, of which the Company drew down $75,000 pursuant to promissory notes issued in October 2020 and $125,000 remains available for drawdown (see Note 9). The Funding Parties may, but are not obligated to, loan the Company additional funds from time to time or at any time, as may be required (“Working Capital Loans”). Under the expense advancement agreement, the Working Capital Loans would either be paid upon completion of a Business Combination, without interest, or, at the holder’s discretion could be converted into warrants at a price of $ 1.00 per warrant. The warrants would be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of September 30, 2020, there were no amounts outstanding under the Working Capital Loans (the $ 1,000,000 previously loaned by the Funding Parties having been converted into warrants on June 25, 2020). As noted above, an aggregate of $ 75,000 in Working Capital Loans became outstanding subsequent to the end of the quarter in October 2020 (see Note 9). 6. COMMITMENTS Forgiveness of Debt During the nine months ended September 30, 2020, two of the Company’s service providers forgave certain amounts due to them in connection with previously provided services. As a result, the Company recorded a forgiveness of debt in the amount of $ 3,298,207 . GTWY Holdings Promissory Note On December 5, 2019, the Company entered into the GTWY Expense Advancement Agreement, pursuant to which GTWY Holdings committed to provide $ 566,288 to fund contributions to the Trust Account. The Company drew down the full amount under the GTWY Expense Advancement Agreement to fund the required Contribution to the Trust Account for the period December 6, 2019 to January 5, 2020 by issuing an unsecured promissory note to GTWY Holdings. The note does not bear interest. If the Company completes an initial Business Combination, the Company would repay the note out of the proceeds of the Trust Account released to the Company. Otherwise, amounts borrowed under the note would be repaid only out of funds held by the Company outside the Trust Account. At September 30, 2020, there was $ 566,268 outstanding under the note. Registration Rights Pursuant to a registration rights agreement entered into on December 1, 2017, the holders of the Founder Shares, Private Placement Warrants (and their underlying securities), Private Placement Units (and their underlying securities) (as defined below) and any warrants that may be issued upon conversion of the Working Capital Loans (and their underlying securities) are entitled to registration rights. The holders of these securities are entitled to make up to two demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements. 11 LEISURE ACQUISITION CORP. NOTES TO CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2020 (Unaudited) Underwriters Agreement The underwriters of the Initial Public Offering are entitled to a deferred fee of three and one-half percent ( 3.5 %) of the gross proceeds of the Initial Public Offering, or $ 7,000,000 . Up to $0.05 per Unit (or up to $1,000,000) of the deferred fee may be paid to third parties (who are members of FINRA) that assist the Company in consummating its initial Business Combination. The election to make such payments to third parties will be solely at the discretion of the Company’s management team, and such third parties will be selected by the management team in their sole and absolute discretion. The deferred fee will be paid in cash upon the closing of a Business Combination from the amounts held in the Trust Account, subject to the terms of the underwriting agreement. Contingent Forward Purchase Contract On December 1, 2017, the strategic investor entered into a contingent forward purchase contract (the “Contingent Forward Purchase Contract”) with the Company to purchase, in a private placement for gross proceeds of $ 62,500,000 to occur concurrently with the consummation of the Business Combination, 6,250,000 Units on substantially the same terms as the sale of Units in the Initial Public Offering at $ 10.00 per Unit. In connection with previously proposed business combination transaction with GTWY Holdings, an amendment to the Contingent Forward Purchase Contract was effected on December 27, 2019 to provide that the Contingent Forward Purchase Contract would terminate as of, and contingent upon, the closing of the transaction with GTWY Holdings such that the strategic investor would instead purchase 3,000,000 units of GTWY Holdings’ equity securities (with each unit consisting of one GTWY Holdings Share and one-half of one GTWY Holdings Warrant) for a purchase price of $ 10.00 per unit. The original terms of the Contingent Forward Purchase Contract remain operative for a business combination with a target other than GTWY Holdings. Service Provider Agreement From time to time the Company has entered into and may enter into agreements with various services providers and advisors, including investment banks, to help us identify targets, negotiate terms of potential Business Combinations, consummate a Business Combination and/or provide other services. In connection with these agreements, the Company may be required to pay such service providers and advisors fees in connection with their services to the extent that certain conditions, including the closing of a potential Business Combination, are met. If a Business Combination does not occur, the Company would not expect to be required to pay these contingent fees. There can be no assurance that the Company will complete a Business Combination. 7. STOCKHOLDERS’ EQUITY Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $ 0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. As of September 30, 2020 and December 31, 2019, there were no shares of preferred stock issued or outstanding. Common Stock — The Company is authorized to issue 100,000,000 shares of common stock with a par value of $ 0.0001 per share. Holders of the Company’s common stock are entitled to one vote for each share. The underwriters’ election to exercise their over-allotment option expired unexercised on January 15, 2018 and, as a result, 750,000 Founder Shares were forfeited. At September 30, 2020 and December 31, 2019, there were 6,236,094 and 6,375,178 shares of common stock issued and outstanding, respectively, excluding 26,189 and 17,501,073 shares of common stock subject to possible redemption, respectively. Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available. The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. If any such registration statement has not been declared effective by the 60 th business day following the closing of the Business Combination, holders of the Public Warrants shall have the right, during the period beginning on the 61 st business day after the closing of the Business Combination and ending upon such registration statement being declared effective by the SEC, and during any other period when the Company shall fail to have maintained an effective registration statement covering the shares of common stock issuable upon exercise of the Public Warrants, to exercise such Public Warrants on a “cashless basis.” Notwithstanding the above, if the Company’s common stock is at the time of any exercise of a Public Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation. 12 LEISURE ACQUISITION CORP. NOTES TO CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2020 (Unaudited) The Company may redeem the Public Warrants: ● in whole and not in part; ● at a price of $ 0.01 per warrant; ● at any time during the exercise period; ● upon a minimum of 30 days’ prior written notice of redemption; ● if, and only if, the last sale price of the Company’s common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders; and ● if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless. 8. FAIR VALUE MEASUREMENTS The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities: Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2020 and December 31, 2019, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value: Description Level September 30, 2020 December 31, 2019 Assets: Cash and marketable securities held in Trust Account 1 $ 13,187,558 $ 195,312,177 9. SUBSEQUENT EVENTS The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements. On October 26, 2020, the Company entered into a second amendment to its expense advancement agreement with the Funding Parties dated December 1, 2017, as amended, to increase the total amount of advances available to the Company under the agreement by $ 75,000 such that an aggregate of $ 200,000 was available for drawdown following the amendment. The Company issued unsecured promissory notes in October 2020 pursuant to the agreement, as amended, which cover an initial aggregate drawdown amount of $ 75,000 and a maximum aggregate amount of $ 200,000 . Amounts up to the aggregate maximum amount may and are expected to be drawn down from time to time by the Company to fund its working capital requirements. 13