What changed in this filing

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Item 1. Financial Statements

2022-08-11 compared with 2022-05-12 · 454 added, 295 removed, 563 unchanged (57% of the section changed)

2 unchanged sentences

Balance Sheets

March 31, 2022

June 30, 2022

Current assets:

5 unchanged sentences

Property and equipment, net

Deferred financing costs

Liabilities and stockholders’ equity (deficit)

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Lease liability

Notes payable and accrued interest ($ 6,073,057 and $ 12,358,886 at fair value at March 31, 2022 and December 31, 2021, respectively)

Notes payable and accrued interest ($ 2,519,539 and $ 12,358,886 at fair value at June 30, 2022 and December 31, 2021, respectively)

Total current liabilities

Long-term liabilities:

Notes payable, net of current portion (at fair value)

Notes payable, net of current portion

Other long-term liabilities

Total long-term liabilities

Total liabilities

Commitments and contingencies (Note 6)

Stockholders’ equity (deficit)

Preferred stock, $ 0.0001 par value, 1,500,000 shares authorized, no shares issued and outstanding at March 31, 2022 (unaudited) and December 31, 2021

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;

29,968,787 and 24,662,904 shares issued at March 31, 2022 (unaudited) and December 31, 2021, respectively;

29,949,032 and 24,643,149 shares outstanding at March 31, 2022 (unaudited) and December 31, 2021, respectively

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

Additional paid-in capital

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Total Ensysce Biosciences, Inc.

stockholders’ equity (deficit)

stockholders’ deficit

( 7,878,243 )

Noncontrolling interests in stockholders’ equity (deficit)

Total stockholders’ equity (deficit)

Noncontrolling interests in stockholders’ deficit

Total stockholders’ deficit

( 8,158,058 )

Total liabilities and stockholders’ equity (deficit)

Total liabilities and stockholders’ deficit

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

1 unchanged sentence

Statements of Operations

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Federal grants

5 unchanged sentences

( 7,055,183 )

( 11,857,986 )

Other income (expense):

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Interest expense

( 1,258,161 )

Other income and expense, net

Total other income (expense), net

Net income (loss)

$ ( 7,923,120 )

$ ( 957,611 )

Net income (loss) attributable to noncontrolling interests

$ ( 8,874,044 )

$ ( 1,909,303 )

Net loss attributable to noncontrolling interests

Deemed dividend related to warrants down round provision

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$ ( 935,544 )

$ ( 9,665,976 )

$ ( 1,883,275 )

Net loss per share:

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Stockholders’ Equity (Deficit)

Number of Shares

Paid-In Capital

Accumulated Deficit

Noncontrolling

Balance on March 31, 2021

$ ( 56,906,447 )

$ ( 221,586 )

$ ( 7,303,437 )

Stock-based compensation

Settlement of convertible notes

Issuance of common stock for business combinations, net of transaction costs

Balance on June 30, 2021

$ ( 57,841,991 )

$ ( 243,653 )

Balance on March 31, 2022

$ ( 87,512,253 )

$ ( 279,633 )

Conversion of convertible notes

Stock-based compensation

Settlement of restricted stock units

Deemed dividend related to warrants down round provision

( 7,896,811 )

( 7,923,120 )

Balance on June 30, 2022

$ ( 95,511,543 )

$ ( 305,942 )

$ ( 797,578 )

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

Biosciences, Inc.

Statements of Changes in Stockholders’ EQUITY (Deficit)

Stockholders’ Equity (Deficit)

Noncontrolling

Balance on December 31, 2020

4 unchanged sentences

( 223,696,435 )

Balance on December 31, 2020, after effect of reverse recapitalization

Balance on December 31, 2020, effect of reverse recapitalization

( 55,958,716 )

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Exercise of stock options

Settlement of convertible notes

Issuance of common stock for business combination, net of transaction costs

Stock-based compensation

Balance on March 31, 2021

( 1,883,275 )

( 1,909,303 )

Balance on June 30, 2021

$ ( 57,841,991 )

$ ( 243,653 )

Balance on December 31, 2021

2 unchanged sentences

$ ( 8,158,058 )

Beginning balance

$ ( 85,845,567 )

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Deemed dividend related to warrants down round provision

Balance on March 31, 2022

( 8,847,917 )

( 8,874,044 )

Balance on June 30, 2022

$ ( 95,511,543 )

$ ( 305,942 )

$ ( 797,578 )

Ending balance

$ ( 95,511,543 )

$ ( 305,942 )

$ ( 797,578 )

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

1 unchanged sentence

Statements of Cash Flows

Months Ended March 31,

flows from operating activities:

(U naudited )

Six Months Ended June 30,

Cash flows from operating activities:

$ ( 8,874,044 )

$ ( 1,909,303 )

to reconcile net loss to net cash used in operating activities:

on sale of asset

of discounts on promissory notes

in fair value of embedded derivative

in fair value of liability classified warrants

Adjustments to reconcile net loss to net cash used in operating activities:

Gain on sale of asset

Accrued interest

Accretion of discounts on promissory notes

Change in fair value of embedded derivative

Change in fair value of liability classified warrants

( 2,942,791 )

in fair value of convertible notes

Change in fair value of convertible notes

( 2,678,415 )

on debt conversions

in operating assets and liabilities:

expenses and other assets

expenses and other liabilities

cash used in operating activities

Stock-based compensation

Loss on debt conversions

Changes in operating assets and liabilities:

Unbilled receivable

Prepaid expenses and other assets

Accounts payable

Accrued expenses and other liabilities

Net cash used in operating activities

( 7,877,508 )

flows from investing activities:

from sale of asset

cash provided by investing activities

flows from financing activities:

from issuance of promissory notes

from issuance of promissory notes to related parties

from exercise of stock options

of financed insurance premiums

cash (used in) provided by financing activities

(decrease) in cash and cash equivalents

Cash flows from investing activities:

Proceeds from sale of asset

Net cash provided by investing activities

Cash flows from financing activities:

Proceeds from issuance of promissory notes

Proceeds from issuance of promissory notes to related parties

Proceeds from exercise of stock options

Repayments of convertible notes

Proceeds from issuance of common stock for business combination

Repayment of financed insurance premiums

Net cash (used in) provided by financing activities

Increase (decrease) in cash and cash equivalents

( 8,530,090 )

and cash equivalents beginning of period

and cash equivalents end of period

cash flow information:

disclosure of non-cash investing and financing activities:

value of embedded derivative at issuance

transaction costs in accounts payable

transaction costs in accrued expenses and other liabilities

Cash and cash equivalents beginning of period

Cash and cash equivalents end of period

Supplemental cash flow information:

Income tax payments

Supplemental disclosure of non-cash investing and financing activities:

Transaction costs for business combination included in accounts payable offset

against additional paid-in capital

Deferred transaction costs for convertible notes

Stock-based compensation

of convertible notes into common stock

dividend related to warrants down round provision

Conversions of convertible notes into common stock

Net assets acquired in business combination

Deemed dividend related to warrants down round provision

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

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(collectively, the “Company”), is a clinical-stage biotech company using its two novel

proprietary technology platforms to develop what the Company believe to be safer prescription drugs.

The primary focus of the Company

is developing abuse and overdose resistant pain drugs, with a clinical stage program for the abuse resistant, TAAP (Trypsin Activated

Abuse Protection) opioid product candidate, PF614.

In addition, the Company is developing its MPAR TM (Multi-Pill Abuse Resistant)

technology for overdose protection which will be applied to the PF614 program.

In 2019, the Company commenced discovery work applying

its TAAP and MPAR TM technology to a methadone prodrug for use in the treatment of Opioid Use Disorder (OUD).

proprietary technology platforms to develop safer prescription drugs.

The primary focus of the Company is developing abuse and overdose

resistant pain drugs, with a clinical stage program for the abuse resistant, TAAP (Trypsin Activated Abuse Protection) opioid product

candidate, PF614.

In addition, the Company is developing its MPAR TM (Multi-Pill Abuse Resistance) technology for overdose

protection which will be applied to the PF614 program.

The Company has also commenced development work applying its TAAP and MPAR TM

technology to a methadone prodrug for use in the treatment of Opioid Use Disorder (OUD).

January 31, 2021, Leisure Acquisition Corp., a Delaware corporation (“LACQ”), entered into an Agreement and Plan of Merger

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party, respectively.

March 2020, the World Health Organization declared the outbreak of a respiratory disease caused by a new coronavirus as a “pandemic”.

First identified in late 2019 and known now as COVID-19, the outbreak has impacted millions of individuals worldwide.

In response, many

countries have implemented measures to combat the outbreak which have impacted global business operations.

The Company’s operations

have not been significantly impacted;

however, the Company continues to monitor the situation.

No impairments were recorded as of the

balance sheet date as no triggering events or changes in circumstances had occurred as of year-end;

however, due to significant uncertainty

surrounding the situation, management’s judgment regarding this could change in the future.

In addition, while the Company’s

results of operations, cash flows and financial condition could be negatively impacted, the extent of the impact cannot be reasonably

estimated at this time.

Covistat’s emphasis is now on developing one or more compounds utilized in Ensysce’s overdose protection

program for the treatment of respiratory diseases.

To date, the Company’s financial condition and

operations have not been significantly impacted by the ongoing COVID-19 pandemic.

However, the Company cannot at this time predict the

specific extent, duration, or full impact that the ongoing COVID-19 pandemic will have on our financial condition and operations, including

ongoing and planned clinical trials and other operations required to support those clinical trials and research and development activities

to advance our pipeline.

No impairments were recorded as of the balance sheet date as no triggering events or changes in circumstances;

however, due to significant uncertainty surrounding the situation, management’s judgment regarding this could change in the future.

In addition, while the Company’s results of operations, cash flows and financial condition could be negatively impacted, the extent

of the impact cannot be reasonably estimated at this time.

Company currently operates in one business segment, which is pharmaceuticals.

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the opinion of management, all adjustments considered necessary for a fair presentation have been included in the consolidated financial

Operating results for the three months ended March 31, 2022, are not necessarily indicative of the results that may be expected

for the year ending December 31, 2022.

The interim unaudited consolidated financial statements have been prepared under the presumption

that users of the interim financial information have either read or have access to the audited consolidated financial statements for

the fiscal year ended December 31, 2021, which may be found in the Company’s Form 10-K filed with the SEC on March 31, 2022.

Operating results for the three and six months ended June 30, 2022, are not necessarily indicative of the results that may

be expected for the year ending December 31, 2022.

The interim unaudited consolidated financial statements have been prepared under the

presumption that users of the interim financial information have either read or have access to the audited consolidated financial statements

for the fiscal year ended December 31, 2021, which may be found in the Company’s Form 10-K filed with the SEC on March 31, 2022.

Business Combination was accounted for as a reverse recapitalization in accordance with U.S.

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among other things, the realization of assets and satisfaction of liabilities in the normal course of business.

Company has not generated any product revenue and had an accumulated deficit of $ 87.5

million at March 31, 2022.

Company has not generated any product revenue and had an accumulated deficit of $ 95.5 million at June 30, 2022.

There is no assurance

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These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

December 2020, the Company executed a share subscription facility with an investment group.

Under the agreement, the investor agreed

to provide the Company with a share subscription facility of up to $ 60.0 million for a 36-month term following the public listing of

the Company’s common stock.

The Company will control the timing and maximum amount of drawdown under this facility and has no minimum

drawdown obligation.

The investor will pay, in cash, a per-share amount equal to 90% of the average daily closing price of the Company’s

stock during the 30 consecutive trading days prior to the issuance of a draw notice, which shall not exceed 400% of the average trading

volume for the 30 trading days immediately preceding the draw down date.

On June 30, 2021, the Company consummated the Business Combination

with LACQ, resulting in the Company’s shares becoming publicly listed on Nasdaq on July 2, 2021.

Concurrent with the public listing

of the Company’s shares, the Company issued to the investor 1,106,108 warrants with a five-year term to purchase common stock of

Ensysce at an exercise price of $ 10.01 per share (Note 8).

The Company must pay a commitment fee to the investor of $ 1.2 million with

$ 800,000 due on the first anniversary of the public listing date and $ 400,000 due on the 18-month anniversary of the public listing date.

The commitment fee can be paid from the proceeds of a draw against the facility or in freely tradable common stock of the Company.

September 2021, the Company entered into a $ 15.9 million convertible note financing agreement with institutional investors (the “2021

Notes”) (See Note 7 for additional information).

The agreement limits the Company’s ability to execute certain debt and equity

financings, including its existing $60.0 million share subscription facility, while the convertible notes are outstanding.

availability of proceeds through the share subscription facility, existing cash resources are not sufficient to fund current planned

While the Company believes in the viability of its strategy to ultimately realize revenues and in its ability to raise additional

funds, management cannot be certain that additional funding will be available on acceptable terms, or at all.

The Company’s ability

to continue as a going concern is dependent upon its ability to obtain adequate financing and achieve profitable operations.

these plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern for a period of 12 months

following the date these consolidated financial statements were issued.

December 2020, the Company executed a share subscription facility with an investment group (the “GEM agreement”).

Under the agreement, the investor

agreed to provide the Company with a share subscription facility of up to $ 60.0

million for a 36-month term following the public listing of the Company’s common stock.

The Company will control the timing

and maximum amount of drawdown under this facility and has no minimum drawdown obligation.

The investor will pay, in cash, a

per-share amount equal to 90% of the average daily closing price of the Company’s stock during the 30 consecutive trading days

prior to the issuance of a draw notice, which shall not exceed 400% of the average trading volume for the 30 trading days

immediately preceding the draw down date.

On June 30, 2021, the Company consummated the Business Combination with LACQ, resulting in

the Company’s shares becoming publicly listed on Nasdaq on July 2, 2021.

Concurrent with the public listing of the

Company’s shares, the Company issued to the investor 1,106,108

warrants with a five-year term to purchase common stock of Ensysce at an exercise price of $ 10.01

per share (Note 8).

The Company must pay a commitment fee to the investor of $ 1.2

million with $ 800,000

due on the first anniversary of the public listing date and $ 400,000

due on the 18-month anniversary of the public listing date.

The commitment fee can be paid from the proceeds of a draw against the

facility or in freely tradable common stock of the Company (Note 11).

September 2021, the Company entered into a $ 15.9 million

convertible note financing agreement with institutional investors (the “2021 Notes”) (See Note 7 for additional

information).

In July and August 2022, the Company received funding under a $ 8.48 million

convertible note financing agreement with the same institutional investors (the “2022 Notes”) (See Note 11 for

additional information).

The agreements limit the Company’s ability to execute certain debt and equity financings, including

its existing $ 60.0 million

share subscription facility, while the convertible notes are outstanding.

Without the availability of proceeds through the share

subscription facility, existing cash resources are not sufficient to fund current planned operations.

While the Company believes in

the viability of its strategy to ultimately realize revenues and in its ability to raise additional funds, management cannot be

certain that additional funding will be available on acceptable terms, or at all.

The Company’s ability to continue as a going

concern is dependent upon its ability to obtain adequate financing and achieve profitable operations.

As a result, these plans do

not alleviate substantial doubt about the Company’s ability to continue as a going concern for a period of 12 months following

the date these consolidated financial statements were issued.

consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as

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by management include, but are not limited to, the expense recognition for certain research and development services, the valuation allowance

of deferred tax assets resulting from net operating losses, the valuation of common stock, warrants, options to purchase the Company’s

common stock, and the notes payable.

of deferred tax assets resulting from net operating losses, warrants, options to purchase the Company’s common stock, and the notes

and Cash Equivalents

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estimated useful lives of five to six years.

No depreciation expense was recognized for the three months ended March 31, 2022.

expense of $ 51 was recognized for the three months ended March 31, 2021.

Depreciation expense is classified in general and administrative

expense in the accompanying consolidated statements of operations.

No depreciation expense was recognized for the three and six months ended June 30, 2022.

Depreciation expense of $ 50 and $ 101 was recognized for the three and six months ended June 30, 2021.

Depreciation expense is classified

in general and administrative expense in the accompanying consolidated statements of operations.

and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets

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There were no such losses for

the three months ended March 31, 2022 and 2021.

the three and six months ended June 30, 2022 and 2021.

Financial Instruments

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820, Fair Value Measurements , (“ASC 820”) provides guidance on the development and disclosure of fair value measurements.

Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset

Pursuant to ASC 820, fair value is defined as an exit price, representing the amount that would be received to sell an asset

or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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This determination requires significant judgments to be made by the Company.

of March 31, 2022 and December 31, 2021, the recorded values of cash and cash equivalents, prepaid expenses, accounts payable, and accrued

of June 30, 2022 and December 31, 2021, the recorded values of cash and cash equivalents, prepaid expenses, accounts payable, and accrued

expenses and other liabilities approximate their fair values due to the short-term nature of these items.

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following tables present assets and liabilities measured and recorded at fair value on the Company’s consolidated balance sheet

as of March 31, 2022 and December 31, 2021.

as of June 30, 2022 and December 31, 2021.

OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

June 30, 2022

Fair value of convertible note

Liability classified warrants

December 31, 2021

Fair value of convertible note

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OF CHANGE IN FAIR VALUE OF COMPANY’S LEVEL 3

classified warrants

Convertible note

Liability classified

Fair value, December 31, 2021

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( 2,942,791 )

Fair value, March 31, 2022

September 2018, the National Institutes of Health (“NIH”) through the National Institute on Drug Abuse awarded the Company

a research and development grant related to the development of its MPAR TM overdose prevention technology (the “MPAR

The total approved budget for the initial two-year period was approximately $ 5.4 million ($ 3.2 million and $ 2.2 million

in years 1 and 2 respectively) of which the Company must contribute $ 1.1 million in the first year of the grant.

In August 2019, the

grant was amended such that the approved budget for the two-year period decreased to approximately $ 5.1 million ($ 2.1 million and $ 3.0

Fair value, June 30, 2022

September 2018, the National Institutes of Health (“NIH”) through the National Institute on Drug Abuse awarded the

Company a research and development grant related to the development of its MPAR TM overdose prevention technology (the

“MPAR Grant”).

The total approved budget for the initial two-year period was approximately $ 5.4

million ($ 3.2

million and $ 2.2

million in years 1 and 2 respectively) of which the Company must contribute $ 1.1

million in the first year of the grant.

In August 2019, the grant was amended such that the approved budget for the two-year period

decreased to approximately $ 5.1

million ($ 2.1

million and $ 3.0

million in years 1 and 2, respectively).

In June 2021, the Company received a Notice of Award for an additional $ 2.8 million of funding

in year 3 under the MPAR Grant beginning July 1, 2021.

September 2019, the NIH/National Institute on Drug Abuse awarded the Company a second research and development grant related to the development

In June 2021, the Company received a Notice of Award for an additional $ 2.8

million of funding in year 3 under the MPAR Grant beginning July 1, 2021.

In June 2022, the Company received a Notice of Award for

an additional $ 2.8

million of funding in year 4 under the MPAR Grant from July 1, 2022 through June 30, 2023.

This brings total funding under this

grant to approximately $ 10.7

September 2019, the NIH/National Institute on Drug Abuse awarded the Company a research and development grant related to the development

of its TAAP/MPAR TM abuse deterrent technology for Opioid Use Disorder (“OUD”) (the “OUD Grant”).

total approved budget for the two-year period was approximately $ 5.4 million.

total approved budget was approximately $ 5.4 million and the current grant period ends in August 2023.

Company recognizes revenue when costs related to the grants are incurred.

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OF REVENUE RECOGNIZATION UNDER GRANTS

Months Ended March 31,

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Three Months Ended

Six months ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

requested or eligible to be requested through the NIH payment management system, but for which cash has not been received, are presented

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allowances are recorded.

Correction of an Error

In August 2022, the

Company concluded that due to an error in the measurement of the unbilled receivable and the associated grant revenue as of December

31, 2021, and March 31, 2022, the June 30, 2022, balance sheet would be adjusted.

The change resulted in a decrease in the balance

of the unbilled receivable of $ 214,308

and a corresponding increase in general and administrative expense presented in the consolidated statement of operations.

Company, in consultation with the Audit Committee of the Board of Directors, evaluated the effect of these adjustments on the Company’s

consolidated financial statements under ASC 250, Accounting Changes and Error Corrections and Staff Accounting Bulletin No.

108, Considering

the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements and determined it was not

necessary to recall its previously issued consolidated financial statements as the errors did not materially misstate any previously

issued consolidated financial statements and the correction of the error in the current fiscal year is also not material.

looked at both quantitative and qualitative characteristics of the required corrections in making the determination.

and Development Costs

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of management’s judgment.

For the three months ended March 31, 2022 and 2021, stock-based compensation costs are recorded in general

and administrative expenses and research and development expenses in the consolidated statements of operations.

time-to-time equity classified awards may be modified.

On the modification date, the Company estimates the fair value of the awards immediately

before and immediately after modification.

The incremental increase in fair value is recognized as expense immediately to the extent

the underlying equity awards are vested and on a straight-line basis over the same remaining amortization schedule as the unvested underlying

equity awards.

For the three and six months ended June 30, 2022 and 2021, stock-based compensation costs are recorded

in general and administrative expenses and research and development expenses in the consolidated statements of operations.

From time to time equity classified awards may be

On the modification date, the Company estimates the fair value of the awards immediately before and immediately after modification.

The incremental increase in fair value is recognized as expense immediately to the extent the underlying equity awards are vested and

over the same remaining amortization schedule as the unvested underlying equity awards.

taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an

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numerators and denominators of the basic and diluted earnings per share calculations follows:

SCHEDULE OF EARNINGS PER SHARE RECONCILIATION

Months Ended March 31,

Net income (loss) attributable to common stockholders

OF EARNINGS PER SHARE RECONCILIATION

Three Months Ended June 30,

Six Months Ended June 30,

Net loss attributable to common stockholders

$ ( 7,999,290 )

$ ( 935,544 )

Weighted average shares outstanding, basic

Weighted average dilutive stock options

Weighted average shares outstanding, diluted

Net income (loss) per share attributable to common

stockholders, basic and diluted

$ ( 9,665,976 )

$ ( 1,883,275 )

Weighted average shares outstanding, basic and diluted

Net loss per share attributable to common stockholders, basic and diluted

following weighted average shares have been excluded from the calculations of diluted weighted average common shares outstanding because

they would have been anti-dilutive:

SCHEDULE OF WEIGHTED AVERAGE SHARES OF ANTI-DILUTIVE SECURITIES

Months Ended March 31,

OF WEIGHTED AVERAGE SHARES OF ANTI-DILUTIVE SECURITIES

Three Months Ended June 30,

Six Months Ended June 30,

Stock options

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after December 31, 2021 and interim periods within that year.

On January 1, 2022, the Company adopted ASU 2019-12 and did not have a

significant impact on the consolidated financial statements.

On January 1, 2022, the Company adopted ASU 2019-12 and the adoption did

not have a significant impact on the consolidated financial statements.

August 2020, the FASB issued ASU No.

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Company is evaluating the impact of ASU 2020-06 on the consolidated financial statements.

In May 2021, the FASB issued

2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options

(A Consensus of the FASB Emerging Issues Task Force (the “EITF”)) – to clarify and reduce diversity in an issuer’s

accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity

classified after modification or exchange.

The guidance in the ASU requires the issuer to treat a modification of an equity-classified

warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant.

guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of

the original warrant and issuance of a new warrant.

Under the amendments, an issuer should measure the effect of a modification as the

difference between the fair value of the modified warrant and the fair value of that warrant immediately before modification.

concluded that the recognition of the modification depends on the nature of the transaction in which a warrant is modified.

more than one element in a transaction (for example, if the modification involves both a debt modification and an equity issuance), then

the guidance requires the issuer to allocate the effect of the option modification to each element.

On January 1, 2022, the Company adopted ASU 2021-04 and the adoption did not have a significant impact on the consolidated

financial statements.

4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

expenses and other current assets consisted of the following:

SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid insurance

OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid research and development

Prepaid insurance

Other prepaid expenses

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Accrued research and development

Professional fees

Bonus accrual

Professional fees

Accrued scientific advisory board fees

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6 – COMMITMENTS AND CONTINGENCIES

of March 31, 2022, the Company’s commitments included an estimated $ 15.8

million related to the Company’s open

purchase orders and contractual obligations that occurred in the ordinary course of business, including commitments with contract research

organizations for multi-year pre-clinical and clinical research studies.

Although open purchase orders are considered enforceable and

legally binding, the terms generally allow the Company the option to cancel, reschedule, and adjust its requirements based on its business

needs prior to the delivery of goods or the performance of services.

of March 31, 2022 and December 31, 2021, there were no pending legal proceedings against the Company that are expected to have a material

of June 30, 2022, the Company’s commitments included an estimated $ 18.6 million related to the Company’s open purchase orders

and contractual obligations that occurred in the ordinary course of business, including commitments with contract research organizations

for multi-year pre-clinical and clinical research studies.

Although open purchase orders are considered enforceable and legally binding,

the terms generally allow the Company the option to cancel, reschedule, and adjust its requirements based on its business needs prior

to the delivery of goods or the performance of services.

of June 30, 2022 and December 31, 2021, there were no pending legal proceedings against the Company that are expected to have a material

adverse effect on cash flows, financial condition or results of operations.

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the lease under ASC 842 and the Company remeasured the lease liability as of the amendment date.

of March 31, 2022, the future lease payments totaled $ 17,716 .

Company recognized total rent expense of $ 7,834 and $ 12,379 in the three months ended March 31, 2022, and 2021, respectively.

of June 30, 2022, the future lease payments totaled $ 10,506 .

Company recognized total rent expense of $ 7,834 and $ 15,667 in the three and six months ended June 30, 2022, and $ 7,062 and $ 14,123 in

the three and six months ended June 30, 2021.

Subject to Shareholder Approval

July 2021, the Company engaged two consultants to perform certain public and investor relations services in consideration for warrants

to purchase 500,000

shares of common stock with a five-year term

and an exercise price of $ 6.28

shares of common stock each, and 200,000

restricted stock units each.

The restricted stock

year , with 50 % based on continued service and

contingent upon certain market

These equity awards were contingent upon shareholder approval of an amended and restated 2021 Omnibus Plan at a special shareholder

meeting in January 2022, whereby the warrants were replaced by non-qualified stock options with similar terms.

As the original terms

of the awards did not satisfy the grant date criteria for an equity award, as of December 31, 2021, the Company recorded a liability

to reflect the estimated value of services received

during the period.

On February 14, 2022, the equity awards were granted, and the Company reclassified the outstanding liability to stockholders’

During the three months ended March 31, 2022 the Company reclassified the existing balance of the liability to equity and

recorded an additional $ 87,208

of consultant compensation to general

and administrative expense as a result of the vesting schedule of the restricted stock units.

July 2021, the Company engaged two consultants to perform certain public and investor relations services in consideration for

warrants to purchase 500,000 shares of common stock with a five-year term and an exercise price of $ 6.28 each, 50,000 shares of

common stock each, and 200,000 restricted stock units each.

The restricted stock units vest over one year with 50 % of the vesting

contingent upon certain market conditions.

These equity awards were contingent upon shareholder approval of an amended and restated

2021 Omnibus Plan at a special shareholder meeting in January 2022, whereby the warrants were replaced by non-qualified stock

options with similar terms.

As the original terms of the awards did not satisfy the grant date criteria for an equity award, as of

December 31, 2021, the Company recorded a liability $ 1,342,479 to reflect the estimated value of services received during the

On February 14, 2022, the equity awards were granted, and the Company reclassified the outstanding liability to

stockholders’ equity.

During the six months ended June 30, 2022, the Company recorded an additional $ 125,222 ($ 38,014 related to the three-month period ended June 30, 2022) of

consultant compensation to general and administrative expense as a result of the vesting schedule of the restricted stock

7 – NOTES PAYABLE

following table provides a summary of the Company’s outstanding debt as of March 31, 2022:

following table provides a summary of the Company’s outstanding debt as of June 30, 2022:

SCHEDULE OF DEBT

value adjustment

2021 convertible notes

$ ( 29,202 ) -

following table provides a summary of the Company’s outstanding debt as of December 31, 2021:

value Adjustment

debt discount

Finance Insurance

1 unchanged sentence

SCHEDULE OF INTEREST EXPENSE DEBT

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Three months ended

Six months ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Stated interest accrual

11 unchanged sentences

2021 Notes mature on June 23, 2023 for the First Closing, and August 4, 2023 for the Second Closing.

The 2021 Notes bear interest at

a rate of 5 % per annum, in addition to an original issue discount of 6 % .

The interest may be settled in cash or shares at the option

of the Company and is payable together with monthly redemptions of the outstanding principal amount of the debt.

The notes bear interest at a rate

of 5 % per annum, in addition to an original issue discount of 6 %.

The interest may be settled in cash or shares at the option of the

Company and is payable together with monthly redemptions of the outstanding principal amount of the debt.

Company elected to apply the fair value option to the measurement of the 2021 Notes.

The total initial fair value of the debt at issuance

The Company recorded total issuance

costs of $ 1.9

million representing investment banking and legal

fees of $ 1.0

million and original issue discounts of $ 0.9

After multiple conversions since issuance,

the Company remeasured the fair value as of March 31, 2022 and recognized a gain of $ 2.8

million as the fair value of the 2021 Notes had

decreased to $ 7.7

million due to a decrease in the value of the

conversion option resulting from a decrease in the price of the Company’s common stock.

The March 31, 2022 fair value measurement

includes the assumption of accrued interest and interest expense (at the stated rate plus an 8 %

cash settlement premium) and thus a separate

amount is not reflected on the consolidated statements of operations.

If presented separately, the total amount of interest expense (after

consideration of the conversions) at March 31, 2022 would be $ 123,220 .

The total initial fair value of the debt at

issuance was $ 15.9

The Company recorded total issuance costs of $ 1.9

million representing investment banking and legal fees of $ 1.0 million

and original issue discounts of $ 0.9

After multiple conversions since issuance, the Company remeasured the fair value as of June 30, 2022 and recognized a loss

due to changes in effective interest rates for the three-month period then ended and a gain of $ 2,678,415

for the six-month period ended June 30, 2022 primarily to reductions in the Company’s stock price.

The June 30, 2022 fair

value measurement includes the assumption of accrued interest and interest expense (at the stated rate plus an 8 %

cash settlement premium) and thus a separate amount is not reflected on the consolidated statements of operations.

separately, the amount of interest expense after consideration of the conversions would be $ 71,637

and $ 194,856

for the three- and six-month periods ended June 30, 2022, respectively.

2021 Notes may be converted into the Company’s common stock at the option of the holder in whole or in part at the conversion price

7 unchanged sentences

the 2021 Notes.

January 1, 2022 for the First Closing, and February 1, 2022 for the Second Closing, and the first of each subsequent month, terminating

upon the full redemption of the 2021 Notes (each a “Monthly Redemption Date”), the Company shall redeem the Monthly Redemption

Amount (defined below), payable in cash or shares.

The number of shares to be settled shall be based on a conversion price equal to the

lesser of (a) $5.87 and (b) 92 % of the average of the three lowest volume-weighted average prices (“VWAP”) during the 10

consecutive trading days prior to the applicable Monthly Redemption Date.

The Company may not pay the Monthly Redemption Amount in shares

unless the applicable conversion price is greater than or equal to $ 0.78 and the Company has been in compliance with customary requirements

under the agreement, unless waived in writing by the holder .

January 1, 2022 for the First Closing, and February 1, 2022 for the Second Closing, and the first of each subsequent month,

terminating upon the full redemption of the 2021 Notes (each a “Monthly Redemption Date”), the Company shall redeem the

Monthly Redemption Amount (defined below), payable in cash or shares.

number of shares to be settled shall be based on a conversion price equal to the lesser of (a) $ 5.87

of the average of the three lowest volume-weighted average prices (“VWAP”) during the 10 consecutive trading days prior

to the applicable Monthly Redemption Date.

The Company may not pay the Monthly Redemption Amount in shares unless the applicable

conversion price is greater than or equal to $ 0.78

and the Company has been in compliance with customary requirements under the agreement, unless waived in writing by the

If the applicable conversion price is less than $ 0.78 at

the time of the Monthly Redemption Date the Company will be required to fund the difference in cash.

During the period ended June

30, 2022, the Company paid $ 265,812

to fund such differences in cash (reducing the outstanding principal balance of the 2021 Notes).

Monthly Redemption Amount is defined as 1/18 th of the original principal amount, plus accrued but unpaid interest, plus any

6 unchanged sentences

notes for an amount in cash equal to the cash Mandatory Redemption Amount (i.e., 108% of outstanding principal and unpaid interest).

following table provides a summary of the Company’s 2021 Notes conversions during the three months period ending March 31,

SCHEDULE OF CONVERSIONS DEBT

following table provides a summary of the Company’s 2021 note conversions during the six-month period ending June 30, 2022:

OF CONVERSION DEBT

January 3, 2022

1 unchanged sentence

March 1, 2022

the three months ending March 31, 2022, the company recognized $ 1.7

million of loss on debt conversions related

April 1, 2022

the three and six months ended June 30, 2022, the company recognized $ 0.9 million and $ 2.6 million of loss on debt conversions related

to the monthly conversions, resulting from the difference between the conversion price and the average of the high and low stock price

on the date of conversion.

Such expense is reported under other income (expense), net in the consolidated statements of operations.

Such loss is reported under other income (expense), net in the consolidated statements of operations.

insurance premiums

the year ended December 31, 2021, the Company financed its director and officer liability insurance in the amount of $ 867,300 ,

of which the note was paid in full as of March 31, 2022.

The Company expensed $ 2,004 of interest for the three months ended March 31,

year ended December 31, 2021, the Company financed its directors’ and officers’ liability insurance in the amount of $ 867,300 ,

of which the note was paid in full as of June 30, 2022.

The Company expensed $ 0 and $ 2,004 of interest for the three and six months ended

June 30, 2022, respectively.

8 - STOCKHOLDERS’ EQUITY

1 unchanged sentence

150,000,000 shares of common stock and 1,500,000 shares of preferred stock, both with par value equal to $ 0.0001 .

As of March 31, 2022

As of June 30, 2022

and December 31, 2021, there were no shares of preferred stock issued and outstanding.

6 unchanged sentences

shares of common stock were issued in settlement of deferred underwriting costs.

March 31, 2022, outstanding warrants to purchase shares of common stock are as follows:

June 30, 2022, outstanding warrants to purchase shares of common stock are as follows:

SCHEDULE OF OUTSTANDING WARRANT

Underlying Outstanding Warrants

Shares Underlying Outstanding Warrants

Exercise Price

Classification

12 unchanged sentences

are private warrants with restrictions on transfer and which have the right to a cashless exercise at the option of the holder.

August 3, 2021, the Company entered into an agreement with an existing warrant holder to reduce the exercise price of 500,000

warrants issued on June 30, 2021 from $ 11.50

August 3, 2021, the Company entered into an agreement with an existing warrant holder to reduce the exercise price of 500,000 warrants

issued on June 30, 2021 from $ 11.50 to $ 10.00 , resulting in an incremental increase in their fair value of $ 56,591 , recognized in

general and administrative expense.

July 2, 2021, upon public listing of the Company’s shares, the Company issued 1,106,108 warrants to purchase common stock pursuant

4 unchanged sentences

and administrative expense due to the uncertainty of future issuance of shares under the share subscription facility.

December 28, 2021, January 3, 2022, February 1, 2022 and March 1, 2022 the exercise price of the warrants adjusted to $ 4.50 per share,

$ 2.83 per share, $ 1.58 per share, and $ 0.96 per share, respectively, as required by a down round adjustment feature of the warrant,

due to common stock issued at a price below the then current exercise price.

The difference in fair value of the existing warrant

prior to the adjustment and the value of the warrant after (utilizing a “Black-Scholes model”) is reflected on the consolidated

statement of operations as a “deemed dividend.”

December 28, 2021, January 3, 2022, February 1, 2022, March 1, 2022, May 1, 2022, and June 1, 2022 the exercise price of the warrants

adjusted to $ 4.50 per share, $ 2.83 per share, $ 1.58 per share, $ 0.96 per share, $ 0.94 per share, and $ 0.46 per share, respectively,

as required by a down round adjustment feature of the warrant, due to common stock issued at a price below the then current exercise

The difference in fair value of the existing warrant prior to the adjustment and the value of the warrant after (utilizing

a “Black-Scholes model”) is reflected on the consolidated statement of operations as a “deemed dividend.”

September 24, 2021, the Company issued 361,158 warrants in connection with the issuance of the convertible notes.

10 unchanged sentences

SCHEDULE OF WARRANTS FAIR VALUE ESTIMATION ASSUMPTIONS

warrants (grant date varies)

subscription facility (grant date 7/2/2021)

subscription facility (remeasurement date varies)

(a) LACQ warrants (grant date varies)

(b) Share subscription facility (grant date 7/2/21)

(b) Share subscription facility (remeasurement date varies)

$ 0.57 - 4.29

Exercise price

$ 10.00 - 11.50

$ 0.46 - 2.83

Expected term (years)

108.17 %- 117.22 %

Risk free rate

classified warrants (grant date 9/24/2021)

classified warrants (remeasured at 3/31/22)

(d) Liability

classified warrants (grant date 11/5/2021)

(d) Liability

classified warrants (remeasured at 3/31/22)

1.04 %- 2.93 %

(d) Liability classified warrants (grant date 11/5/2021)

(d) Liability classified warrants (remeasured at 6/30/22)

Exercise price

15 unchanged sentences

which was approved by LACQ’s board and subsequently LACQ’s stockholders at a special stockholder meeting on June 28,

The 2021 Omnibus Plan provides for the conversion with existing terms of the 4,444,068 options outstanding under Former Ensysce stock

plans and reserves for issuance an additional 1,000,000 shares for future awards under the 2021 Omnibus Plan.

On January 26 2022, the

2021 Omnibus Plan was amended and restated to include an additional 3,000,000 shares available for future grant.

No further awards may

be made under the Former Ensysce stock plans.

The Company recognized within general and administrative

expense stock-based compensation expense of $ 373,944 and $ 43,820 for the three months ended March 31, 2022 and 2021, respectively.

the three months ended March 31, 2022 and 2021, the Company recognized stock-based compensation expense of $ 28,490 and $ 0 , respectively,

within research and development expense.

The stock-based compensation expense consisted of expense associated with stock options, restricted

stock units and other compensation shares issued to non-employee consultants.

the three months ended March 31, 2022, the Company granted stock options to purchase an aggregate of 1,986,000

shares of common stock to employees, consultants

and members of the Board.

The options vest over periods between 0

years and have an exercise price of between $ 1.08

There were no stock option grants

following table summarizes the Company’s stock option activity during the three months ended March 31, 2022:

The 2021 Omnibus Plan provides for the conversion with existing terms of the 4,444,068

options outstanding under Former Ensysce stock plans and reserves for issuance an additional 1,000,000

shares for future awards under the 2021 Omnibus Plan.

On January 26, 2022, the 2021 Omnibus Plan was amended and restated to include

an additional 3,000,000

shares available for future grant and to provide for future annual increases.

No further awards may be made under the Former Ensysce stock plans.

Company recognized within general and administrative expense stock-based compensation expense of $ 228,823 and $ 602,767 for the three

and six months ended June 30, 2022, and $ 36,373 and $ 80,193 for the three and six months ended June 30, 2021.

During the three and six

months ended June 30, 2022, the Company recognized stock-based compensation expense of $ 66,756 and $ 95,246 within research and development.

During the three and six months ended June 30, 2021, there was no stock-based compensation allocated to research and development.

the six months ended June 30, 2022, the Company granted stock options to purchase an aggregate of 2,291,000 shares of common stock to

employees, consultants and members of the board of directors.

The options vest over periods between 0 and 4 years and have an exercise

price of between $ 0.43 and $ 6.28 per share.

There were no stock option grants in 2021.

following table summarizes the Company’s stock option activity during the six months ended June 30, 2022:

SCHEDULE OF STOCK OPTION ACTIVITY

1 unchanged sentence

Exercise price

Remaining contractual

Remaining contractual life

Intrinsic value

1 unchanged sentence

Expired / Forfeited

Outstanding at March 31, 2022

Exercisable at March 31, 2022

Outstanding at June 30, 2022

Exercisable at June 30, 2022

Vested and expected to vest

4 unchanged sentences

SCHEDULE OF SHARE-BASED PAYMENT AWARD, STOCK OPTIONS, VALUATION ASSUMPTIONS

Three Months Ended

March 31, 2022

Six Months Ended

June 30, 2022

$ 0.43 - $ 1.70

Exercise price

1 unchanged sentence

Expected stock price volatility

76.61 - 95.87 %

Expected term (years)

Risk-free interest rate

1.52 % - 3.14 %

Expected dividend yield

18 unchanged sentences

to pay any dividends on the Company’s common stock.

weighted-average grant date fair value of options granted during the three months ended March 31, 2022 was $ 1.01 .

weighted-average grant date fair value of options granted during the six months ended June 30, 2022 was $ 0.96 .

There were no options

granted during the three months ended March 31, 2021.

of March 31, 2022, the Company had an aggregate of $ 924,175

of unrecognized share-based compensation

cost, which is expected to be recognized over the weighted average period of 1.6

the three months ended March 31, 2022, the Company granted 927,358

restricted stock unit (“RSU”) awards

(weighted-average fair value per share of $ 1.04 ), issued 547,358

shares of common stock for vested RSU awards

(weighted average fair value per share of $ 1.23 ) and cancelled 50,000

granted during the six months ended June 30, 2021.

of June 30, 2022, the Company had an aggregate of $ 819,956 of unrecognized share-based compensation cost, which is expected to be recognized

over the weighted average period of 1.7 years.

the six months ended June 30, 2022, the Company granted 927,358

restricted stock unit (“RSU”) awards (weighted average fair value of $1.04), issued 647,358

shares of common stock for vested RSU awards (weighted average fair value of $ 1.29 )

and cancelled 150,000

The remaining 130,000

awards (weighted average fair value per share of $ 0.88 ) outstanding are subject to time-based and market vesting conditions and

are scheduled to vest by December 2023.

The estimated fair value of each of the Company’s RSU awards was determined on the

date of grant based on the closing price of the Company’s common stock on the previous trading date.

awards (weighted average fair value of $ 0.99 )

outstanding are subject to time-based and market vesting conditions and are scheduled to vest by December 2023.

The estimated fair

value of each of the Company’s was determined on the date of grant based on the closing price of the Company’s common

stock on the previous trading date.

Reserved for Future Issuance

1 unchanged sentence

SCHEDULE OF COMMON STOCK FUTURE ISSUANCE

March 31, 2022

June 30, 2022

Awards outstanding under the 2021 Omnibus Incentive Plan

3 unchanged sentences

10 - RELATED PARTIES

Company paid cash compensation during the three months ended March 31, 2021 of $ 33,146 to the Chief Executive Officer through a separate

operating company with which the Chief Executive Officer is affiliated.

There were no such payments in the three months ended March 31,

Company paid cash compensation during the three and six months ended June 30, 2021 of $ 10,752 and $ 40,314 , respectively, to the Chief

Executive Officer through a separate operating company with which the Chief Executive Officer is affiliated.

There were no such payments

in the three and six months ended June 30, 2022.

11 - SUBSEQUENT EVENTS

the second quarter of 2022, in connection with the monthly redemption schedule (described in Note 7), the Company issued 4,511,920

shares of common stock as a result of monthly

conversions of $ 4.3

the third quarter of 2022, the Company issued 2,797,621

shares of common stock as a result of conversions of $ 1.1

million of the 2021 Notes.

July 2022, the Company settled $ 0.8 million

of the share subscription facility commitment fees (described in Note 2) through payment of 921,935 shares of common stock in

accordance with the GEM agreement.

July 2022, the Company financed its directors’ and officers’ liability insurance in the amount of $ 0.4 million to satisfy

the outstanding liability recorded in accounts payable as of June 30, 2022.

June 30, 2022, the Company entered into an $ 8.0

million convertible financing agreement with institutional investors.

The agreement provides for two closings, each for notes

payable of $ 4.24 million

(resulting in gross cash proceeds of $ 4.0

Funds were received for the first closing on July 1, 2022 and for the second closing on August 9,

2022 Notes are convertible into Common Stock, at a per share conversion price equal to $ 0.5450 , a 10 % premium to the average price of

the Common Stock for the three trading days prior to the first closing.

Under the Notes, commencing on September 29, 2022 and continuing

monthly on the first day of each month beginning November 2, 2022, the Company is obligated to redeem one fifteenth (1/15 th )

of the original principal amount under the applicable Note, plus accrued but unpaid interest.

The Company may elect to pay all or part

of the redemption amount in cash with a premium of eight percent or in conversion shares of Common Stock based on a conversion price

equal to the lesser of (i) the conversion price and (ii) 92% of the average of the three lowest VWAPs (as defined) during the ten consecutive

trading days ending on the trading day that is immediately prior to the applicable redemption date, but in no event may the Company pay

the redemption amount in conversion shares of Common Stock unless the conversion price is at least equal to $0.1003 and certain equity

conditions are satisfied .

connection with each of the first and second closings of the 2022 Notes the Company also issued warrants to purchase 4,667,890 shares

of the Company’s common stock.

The warrants have an exercise price of $ 0.7085 , a 30 % premium to the conversion price and are exercisable

for five years following issuance of the 2022 Notes.

The issuance of these warrants will require the Company to reduce the conversion

price of the 2021 Notes and the exercise price of the outstanding warrants associated with the 2021 Notes to $ 0.78 .

The proceeds of the 2022 Notes will be used for working

capital purposes subject to certain customary restrictions are secured by the Company’s rights to its patents and licenses.

Company is restricted from issuing certain additional debt or equity without the prior written consent of the holders for certain specified

periods set forth in the 2022 Notes.

2022 Notes mature on December 29, 2023 and February 7, 2024 , for the first and second closings, respectively.

The notes bear interest

at a rate of 6 % per annum, in addition to an original issue discount of 6 %.

The interest may be settled in cash or shares at the option

of the Company and is payable together with monthly redemptions of the outstanding principal amount of the debt.

the second closing of the 2022 Notes, the parties agreed to modify the conversion price of the remaining 2021 Notes from $ 0.78 to $ 0.35

until October 1, 2022, with any remaining balance payable in cash on October 10, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements