What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-08-11 · 295 added, 250 removed, 408 unchanged (57% of the section changed)

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is a clinical stage pharmaceutical company seeking to develop innovative solutions for severe pain relief while reducing

the fear of and the potential for addiction, opioid misuse, abuse and overdose.

We have also incorporated a 79.2%-owned subsidiary, Covistat,

the fear of and the potential for opioid misuse, abuse and overdose.

We have a 79.2%-owned subsidiary, EBIR,

a clinical stage pharmaceutical company that is developing a compound utilized in Ensysce’s overdose protection program for the

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have incurred significant operating losses since inception.

As of June 30, 2022, we had an accumulated deficit of $95.5 million.

to continue to incur net losses for the foreseeable future, and we expect our clinical development expenses, and general and administrative

expenses to continue to increase.

We expect that our expenses and capital requirements will increase substantially in connection with

our ongoing development activities, particularly if and as we:

preclinical studies and continue existing and initiate new clinical trials for PF614, PF614-MPAR™ and nafamostat, our lead

product candidates being tested for chronic pain and infectious disease;

the development of our product candidate pipeline of other product candidates, including through business development efforts to

invest in or in-license other technologies or product candidates;

expand and protect our intellectual property portfolio;

additional clinical, quality control, medical, scientific and other technical personnel to support our clinical operations;

regulatory approvals for any product candidates that successfully complete clinical trials;

any pre-commercialization activities to establish sales, marketing and distribution capabilities for any product candidates for which

we may receive regulatory approval;

our infrastructure and facilities to accommodate our growing employee base;

operational, financial and management information systems and personnel, including personnel to support our research and development

programs, any future commercialization efforts and our transition to operating as a public company.

As of September 30, 2022, we had an accumulated deficit of $105.4 million.

We expect to continue to incur net losses for the foreseeable future, and we expect our clinical development expenses, and general and

administrative expenses to continue to increase.

We expect that our expenses and capital requirements will increase substantially in

connection with our ongoing development activities, particularly if and as we:

continue preclinical studies

and continue existing and initiate new clinical trials for PF614, PF614-MPAR™ and nafamostat, our lead product candidates being

tested for chronic pain and infectious disease;

advance the development

of our product candidate pipeline of other product candidates, including through business development efforts to invest in or in-license

other technologies or product candidates;

maintain, expand and protect

our intellectual property portfolio;

hire additional clinical,

quality control, medical, scientific and other technical personnel to support our clinical operations;

seek regulatory approvals

for any product candidates that successfully complete clinical trials;

undertake any pre-commercialization

activities to establish sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory

expand our infrastructure

and facilities to accommodate our growing employee base;

add operational, financial

and management information systems and personnel, including personnel to support our research and development programs, any future

commercialization efforts and our transition to operating as a public company.

expect to incur additional costs associated with operating as a public company, including significant legal, accounting, insurance, investor

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continue our operations at planned levels and be forced to reduce or terminate our operations.

pandemic Business Update

In March 2020, the World Health Organization declared COVID-19 a global

To date, our financial condition and operations have not been significantly impacted by the ongoing COVID-19 pandemic.

we 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.

are continuing to evaluate the impact of the ongoing COVID-19 pandemic on our business and continue to take proactive measures to protect

the health and safety of our employees, as well as to maintain business continuity.

We believe that the current measures we have implemented

with respect to the ongoing COVID-19 pandemic are appropriate, reflecting both regulatory and public health guidance, to maintain business

We will continue to closely monitor and seek to comply with guidance from governmental authorities and adjust our activities

as appropriate.

Combination Transaction

January 31, 2021, LACQ executed a definitive merger agreement among it, Merger Sub and Former Ensysce, providing for, among other things,

and subject to terms and conditions therein, the business combination between LACQ and Former Ensysce pursuant to the merger of Merger

Sub with and into Former Ensysce, with Former Ensysce continuing as the surviving entity and as a wholly-owned subsidiary of LACQ (the

“Business Combination”).

and subject to terms and conditions therein, the Business Combination.

On June 30, 2021, the Business Combination was consummated.

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common stock of the combined company.

Former Ensysce’s existing equity incentive plans were terminated;

awards issued under the

existing equity incentive plans were exchanged for awards issued under the Company’s 2021 Omnibus Incentive Plan, a new equity

incentive plan that we and the stockholders adopted in connection with the Business Combination.

Former Ensysce’s existing equity incentive plans were terminated, with awards issued under the

existing equity incentive plans exchanged for awards issued under the Company’s 2021 Omnibus Incentive Plan.

We received net proceeds of approximately

$7.8 million at the closing of the Business Combination and we continue to operate under our management team, led by our Chief Executive

Officer Lynn Kirkpatrick.

$7.8 million at the closing of the Business Combination.

We continue to operate under our management team, led by our Chief Executive

Lynn Kirkpatrick.

On July 2, 2021, the combined company’s common stock began trading on Nasdaq under the ticker symbol

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We expense research and development costs as incurred, which include:

incurred to conduct the necessary preclinical studies and clinical trials required to obtain regulatory approval;

incurred under agreements with contract research organizations (“ CROs ”) that are primarily engaged in the oversight

and conduct of our drug discovery efforts and preclinical studies, clinical trials and contract manufacturing organizations (“ CMOs ”)

expenses incurred to conduct

the necessary preclinical studies and clinical trials required to obtain regulatory approval;

expenses incurred under

agreements with contract research organizations (“ CROs ”) that are primarily engaged in the oversight and conduct

of our drug discovery efforts and preclinical studies, clinical trials and contract manufacturing organizations (“ CMOs ”)

that are primarily engaged to provide preclinical and clinical drug substance and product for our research and development programs;

costs related to acquiring and manufacturing materials in connection with our drug discovery efforts and preclinical studies and

clinical trial materials, including manufacturing validation batches, as well as investigative sites and consultants that conduct

our clinical trials, preclinical studies and other scientific development services;

made in cash or equity securities under third-party licensing, acquisition and option agreements;

employee-related

expenses, including salaries and benefits, travel and stock-based compensation expense for employees engaged in research and development

related to compliance with regulatory requirements;

facilities-related costs, depreciation and other expenses, which include rent and utilities.

other costs related to

acquiring and manufacturing materials in connection with our drug discovery efforts and preclinical studies and clinical trial materials,

including manufacturing validation batches, as well as investigative sites and consultants that conduct our clinical trials, preclinical

studies and other scientific development services;

payments made in cash or

equity securities under third-party licensing, acquisition and option agreements;

employee-related expenses,

including salaries and benefits, travel and stock-based compensation expense for employees engaged in research and development functions;

costs related to compliance

with regulatory requirements;

allocated facilities-related

costs, depreciation and other expenses, which include rent and utilities.

recognize external development costs as incurred.

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do not track our research and development expenses on a program-by-program basis.

Our direct external research and development

expenses consist primarily of external costs, such as fees paid to outside consultants, CROs, CMOs and research laboratories in

connection with our preclinical development, process development, manufacturing and clinical development activities.

allocate employee costs, costs associated with our discovery efforts, laboratory supplies, and facilities, including depreciation or

other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not

separately classified.

We use internal resources primarily to conduct our research and development as well as for managing our

preclinical development, process development, manufacturing and clinical development activities.

These employees work across

multiple programs and, therefore, we do not track our costs by program and cannot state precisely the total costs incurred for each

of our clinical and preclinical programs on a project-by-project basis.

Our direct external research and development expenses

consist primarily of external costs, such as fees paid to outside consultants, CROs, CMOs and research laboratories in connection with

our preclinical development, process development, manufacturing and clinical development activities.

We do not allocate employee costs,

costs associated with our discovery efforts, laboratory supplies, and facilities, including depreciation or other indirect costs, to

specific programs because these costs are deployed across multiple programs and, as such, are not separately classified.

We use internal

resources primarily to conduct our research and development as well as for managing our preclinical development, process development,

manufacturing and clinical development activities.

These employees work across multiple programs and, therefore, we do not track our

costs by program and cannot state precisely the total costs incurred for each of our clinical and preclinical programs on a project-by-project

and development activities are central to our business model.

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to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of the following:

scope, progress, outcome and costs of our preclinical development activities, clinical trials and other research and development

an appropriate safety and efficacy profile with investigational new drug (“ IND ”) enabling studies;

patient enrollment in and the initiation and completion of clinical trials;

timing, receipt and terms of any marketing approvals from applicable regulatory authorities including the FDA and non-U.S.

extent of any required post-marketing approval commitments to applicable regulatory authorities;

clinical and commercial manufacturing capabilities or making arrangements with third-party manufacturers in order to ensure that

we or our third-party manufacturers are able to make product successfully;

and timely delivery of clinical-grade and commercial-grade drug formulations that can be used in our clinical trials and for commercial

the scope, progress, outcome

and costs of our preclinical development activities, clinical trials and other research and development activities;

establishing an appropriate

safety and efficacy profile with investigational new drug (“ IND ”) enabling studies;

successful patient enrollment

in and the initiation and completion of clinical trials;

the timing, receipt and

terms of any marketing approvals from applicable regulatory authorities including the FDA and non-U.S.

the extent of any required

post-marketing approval commitments to applicable regulatory authorities;

establishing clinical and

commercial manufacturing capabilities or making arrangements with third-party manufacturers in order to ensure that we or our third-party

manufacturers are able to make product successfully;

development and timely

delivery of clinical-grade and commercial-grade drug formulations that can be used in our clinical trials and for commercial launch;

maintaining, defending and enforcing patent claims and other intellectual property rights;

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administrative costs as incurred.

We anticipate that our general and administrative

expenses, excluding non-cash expenses to recognize the fair value of warrants, will increase in the future as we increase our headcount

to support the continued development of our product candidates.

We also anticipate that we will continue to incur significant accounting,

audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses as a public

Additionally, if and when we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in

payroll and other employee-related expenses as a result of our preparation for commercial operations, especially as it relates to the

sales and marketing of that product candidate.

anticipate that our general and administrative expenses, excluding non-cash expenses to recognize the fair value of warrants, will increase

in the future as we increase our headcount to support the continued development of our product candidates.

We also anticipate that we

will continue to incur significant accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well

as investor and public relations expenses as a public company.

Additionally, if and when we believe a regulatory approval of a product

candidate appears likely, we anticipate an increase in payroll and other employee-related expenses as a result of our preparation for

commercial operations, especially as it relates to the sales and marketing of that product candidate.

income (expense)

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in fair value of convertible notes

elected the fair value option to account for the 2021 Notes as we believe the fair value option provides users of the financial statements

with greater ability to estimate the outcome of future events as facts and circumstances change, particularly with respect to changes

in the fair value of the common stock underlying the conversion option.

We use a discounted cash flow model and a Monte Carlo analysis

to estimate the fair value of the notes, both of which rely on unobservable Level 3 inputs.

Changes in the fair value of the notes are

recognized through earnings for each reporting period.

elected the fair value option to account for the 2021 Notes and 2022 Notes as we believe the fair value option provides users of the

financial statements with greater ability to estimate the outcome of future events as facts and circumstances change, particularly with

respect to changes in the fair value of the common stock underlying the conversion option.

We use a discounted cash flow model and a

Monte Carlo analysis to estimate the fair value of the notes, both of which rely on unobservable Level 3 inputs.

Changes in the fair

value of the notes are recognized through earnings for each reporting period.

in fair value of liability classified warrants

warrants issued with the 2021 Notes are liability classified due to certain cash settlement features.

We use a Black-Scholes option pricing

model to estimate the fair value of the warrants.

Changes in the fair value of the warrants are recognized through earnings for each

reporting period.

warrants issued with the 2021 Notes and 2022 Notes are liability classified due to certain cash settlement features.

We use a Black-Scholes

option pricing model to estimate the fair value of the warrants.

Changes in the fair value of the warrants are recognized through earnings

for each reporting period.

on debt conversions

conversions on the 2021 Notes occur, we calculate the difference between the conversion price and the average of the high and low stock

price on the date of conversion.

The resulting difference is either a loss if the conversion price was below the average of the high

and low stock price on the date of conversion or a gain if the conversion price was above the average of the high and low stock price

on the date of conversion.

conversions on the 2021 Notes and 2022 Notes occur, we calculate the difference between the conversion price and the average of the high

and low stock price on the date of conversion.

The resulting difference is either a loss if the conversion price was below the average

of the high and low stock price on the date of conversion or a gain if the conversion price was above the average of the high and low

stock price on the date of conversion.

expense consists of interest accrued on our financed directors and officers insurance as well as imputed interest on the commitment fees

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available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

As of June 30, 2022,

we continue to maintain a full valuation allowance against all of our deferred tax assets based on our evaluation of all available evidence.

As of September 30,

2022, we continue to maintain a full valuation allowance against all of our deferred tax assets based on our evaluation of all available

file income tax returns in the United States federal tax jurisdiction and state jurisdictions and may become subject to income tax audit

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of Operations

of the three months ended June 30, 2022 and 2021:

Three Months Ended June 30,

of the three months ended September 30, 2022 and 2021:

Three Months Ended September 30,

Federal grants

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General and administrative

(14,686,396 )

Total operating expenses

(11,644,935 )

Loss from operations

(16,886,795 )

Other income (expense):

Change in fair value of derivative liabilities

Issuance costs for convertible notes

Loss on issuance of convertible notes

Change in fair value of convertible notes

Issuance of liability classified warrants

Change in fair value of liability classified warrants

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grant funding

Funding from federal grants for the three months ended

June 30, 2022 and 2021 totaled $0.2 million and $0.4 million, respectively, representing a decrease of $0.2 million.

Differences are due

to the timing of research activities eligible for funding as well as the grant period.

We expect funding from federal grants to generally

increase in the future due to the timing of preclinical and clinical development activities under the grants.

from federal grants for the three months ended September 30, 2022 and 2021 totaled $0.3 million and $1.2 million, respectively, representing

a decrease of $0.9 million.

Differences are due to the timing of research activities eligible for funding as well as the grant period.

We expect funding from federal grants to generally increase in the future due to the timing of preclinical and clinical development activities

under the grants.

and development expenses

Research and development expenses for the three months

ended June 30, 2022 and 2021 were $5.3 million and $0.5 million, respectively, representing an increase of $4.8 million.

was primarily the result of increased external research and development costs related to clinical and pre-clinical programs for PF-614

and PF614-MPAR™.

and development expenses for the three months ended September 30, 2022 and 2021 were $4.8 million and $1.7 million, respectively, representing

an increase of $3.0 million.

The increase was primarily the result of increased external research and development costs related to clinical

and pre-clinical programs for PF614 and PF614-MPAR™.

We do not currently track expenses on a program-by-program basis.

We expect future research and development expenses

to approximate current levels.

General and administrative expenses

General and administrative expenses for the three

months ended June 30, 2022 and 2021 were $2.0 million and $0.4 million, respectively, representing an increase of $1.6 million.

was primarily a result of increased expenses related to operating as a public company, including legal and accounting fees and director

and officer insurance expenses.

We expect future general and administrative expenses to approximate current levels.

future research and development expenses to approximate current levels.

and administrative expenses

and administrative expenses for the three months ended September 30, 2022 and 2021 were $1.7 million and $16.4 million,

respectively, representing an decrease of $14.7 million.

The decrease was primarily a result of non-cash expenses incurred in the

comparable prior period in connection with the valuation of issued warrants.

We expect future general and administrative expenses to

approximate current levels.

income and expense

in the fair value of derivative liabilities during the three months ended June 30, 2021 resulted from the decreased likelihood of realization

of the embedded derivative instrument in convertible notes payable, resulting in a gain of $0.7 million during the three months ended

June 30, 2021.

All outstanding liabilities were settled in connection with the conversion of outstanding note payables on June 30, 2021.

in fair value of convertible notes and liability classified warrants for the 2022 period relate to the 2021 Notes.

Loss on debt conversions

is driven by the difference between the conversion price of the 2021 Notes and the average of the high and low stock price on the date

of conversion.

There was no corresponding activity in the 2021 period.

expense decreased $0.9 million in the 2022 period due to the conversion of outstanding convertible notes on June 30, 2021 and because

interest expense associated with the 2021 Notes is reflected in the fair value adjustments instead of separately presented as interest

of the six months ended June 30, 2022 and 2021

following table summarizes our results of operations for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

costs for convertible notes increased due to both tranches of the 2022 Notes being issued during the period while only one tranche

of the 2021 Notes was issued during the similar prior period.

The loss on issuance of the convertible notes was due to the current

share price at issuance (of the 2022 Notes) exceeding the conversion price.

Changes in fair value of convertible notes and liability

classified warrants for the 2022 period relate to both the 2021 Notes and 2022 Notes compared to only changes related to the 2021

Notes in the prior period.

Loss on debt conversions is driven by the difference between the conversion price of the 2021 Notes and

2022 Notes and the average of the high and low stock price on the date of conversion.

There was no corresponding activity in the

of the nine months ended September 30, 2022 and 2021

following table summarizes our results of operations for the nine months ended September 30, 2022 and 2021:

Nine Months Ended September 30,

Federal grants

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General and administrative

(11,540,080 )

Total operating expenses

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Other income (expense):

Issuance costs for convertible note

Change in fair value of derivative liabilities

Loss on issuance of convertible notes

Change in fair value of convertible notes

Issuance of liability classified warrants

Change in fair value of liability classified warrants

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Interest expense

Loss on extinguishment of debt

Other income and expense, net

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$ (19,108,777 )

$ (6,964,741 )

Net loss attributable to noncontrolling interests

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$ (19,046,801 )

$ (7,782,701 )

grant funding

Funding from federal grants for the months ended June

30, 2022 and 2021 totaled $0.8 million and $0.7 million, respectively, representing an increase of $0.1 million.

Differences are due to

the timing of research activities eligible for funding as well as the grant period.

We expect funding from federal grants to generally

increase in the future due to the timing of preclinical and clinical development activities under the grants.

Research and development expenses

Research and development expenses for the six months

ended June 30, 2022 and 2021 were $8.4 million and $0.8 million, respectively, representing an increase of $7.6 million.

was primarily the result of increased external research and development costs related to clinical programs for PF-614 and preclinical

programs for PF614-MPAR™.

from federal grants for the nine months ended September 30, 2022 and 2021 totaled $1.1 million and $1.9 million, respectively, representing

an decrease of $0.8 million.

Differences are due to the timing of research activities eligible for funding as well as the grant period.

We expect funding from federal grants to generally increase in the future due to the timing of preclinical and clinical development activities

under the grants.

and development expenses

and development expenses for the nine months ended September 30, 2022 and 2021 were $13.4 million and $2.5 million, respectively, representing

an increase of $10.9 million.

The increase was primarily the result of increased external research and development costs related to clinical

programs for PF614 and preclinical programs for PF614-MPAR™.

We do not currently track expenses on a program-by-program basis.

We expect future research and development

expenses to approximate current levels.

General and administrative expenses

General and administrative expenses for the six months

ended June 30, 2022 and 2021 were $4.2 million and $0.9 million, respectively, representing an increase of $3.3 million.

was primarily a result of increased expenses related to operating as a public company, including legal and accounting fees and director

and officer insurance expenses.

We expect future general and administrative expenses to approximate current levels.

Other income and expense

Changes in the fair value of derivative liabilities

during the six months ended June 30, 2021 resulted from the decreased likelihood of realization of the embedded derivative instrument

in convertible notes payable, resulting in a gain of $0.7 million during the six months ended June 30, 2021.

All outstanding liabilities

were settled in connection with the conversion of outstanding note payables on June 30, 2021.

in fair value of convertible notes and liability classified warrants for the 2022 period relate to the 2021 Notes.

Loss on debt conversions

is driven by the difference between the conversion price of the 2021 Notes and the average of the high and low stock price on the date

of conversion.

We expect future research and development expenses to approximate current levels.

and administrative expenses

and administrative expenses for the nine months ended September 30, 2022 and 2021 were $5.7 million and $17.3 million, respectively,

representing a decrease of $11.5 million.

The decrease was primarily a result of non-cash expenses incurred in the comparable prior

period in connection with the valuation of issued warrants.

We expect future general and administrative expenses to approximate current

income and expense

in the fair value of derivative liabilities during the nine months ended September 30, 2021 resulted from the decreased likelihood of

realization of the embedded derivative instrument in convertible notes payable, resulting in a gain of $0.7 million during the nine months

ended September 30, 2021.

All outstanding liabilities were settled in connection with the conversion of outstanding note payables on

June 30, 2021.

costs for convertible notes increased due to both tranches of the 2022 Notes being issued during the period while only one tranche of

the 2021 Notes was issued during the similar prior period.

The loss on issuance of the convertible notes was due to the current share price at issuance (of the 2022 Notes)

exceeding the conversion price.

Changes in fair value of convertible notes and liability classified warrants

for the 2022 period relate to both the 2021 Notes and 2022 Notes compared to only changes related to the 2021 Notes in the prior period.

Loss on debt conversions is driven by the difference between the conversion price of the 2021 Notes and 2022 Notes and the average of

the high and low stock price on the date of conversion.

There was no corresponding activity in the 2021 period.

expense decreased $1.2 million in the 2022 period due to the conversion of outstanding convertible notes on June 30, 2021 and because

interest expense associated with the 2021 Notes is reflected in the fair value adjustments instead of separately presented as interest

and capital resources

of liquidity and capital

of June 30, 2022, we had $3.7 million of cash and cash equivalents.

Since inception, we have generated limited revenues and have incurred

significant operating losses and negative cash flows from our operations, and we anticipate that we will continue to incur losses for

at least the foreseeable future.

of September 30, 2022, we had $4.5 million of cash and cash equivalents.

Since inception, we have generated limited revenues and have

incurred significant operating losses and negative cash flows from our operations, and we anticipate that we will continue to incur losses

for at least the foreseeable future.

We have not yet commercialized any of our product candidates and we do not expect to generate revenue

from sales of any product candidates for several years, if at all.

As of June 30, 2022, we had an accumulated deficit of $95.5 million.

We have funded our operations to date primarily with

proceeds from the sale of common equity, funding under federal research grants and borrowings under promissory notes.

To fund future operations,

we will likely need to raise additional capital.

The amount and timing of future funding requirements will depend on many factors, including

the timing and results of our ongoing research and development efforts and related general and administrative support.

We anticipate that

we will continue to fund our operations through public or private equity or debt financings or other sources which may include potential

collaboration agreements.

We cannot make assurances that anticipated additional financing will be available to us on favorable terms,

As of September 30, 2022, we had an accumulated deficit of $105.4

have funded our operations to date primarily with proceeds from the sale of common equity, funding under federal research grants and

borrowings under promissory notes.

To fund future operations, we will likely need to raise additional capital.

The amount and timing

of future funding requirements will depend on many factors, including the timing and results of our ongoing research and development

efforts and related general and administrative support.

We anticipate that we will continue to fund our operations through public or

private equity or debt financings or other sources which may include potential collaboration agreements.

We cannot make assurances that

anticipated additional financing will be available to us on favorable terms, if at all.

remaining funding under two approved federal research grants totals $5.8 million, covering the period through August 31, 2023.

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of the average daily trading volume for the 30 trading days immediately preceding the date we deliver the draw down notice.

to utilize this share subscription facility is restricted while the 2021 Notes are outstanding.

to utilize this share subscription facility is restricted while the 2021 Notes or 2022 Notes are outstanding.

the public listing of the Company’s shares following the closing of the Merger, GEM Global became entitled to a commitment fee

in the form of cash or freely tradeable shares of our common stock in an amount equal to 2% of the Aggregate Limit or $1.2 million to

be paid in two tranches.

The commitment fee for the first tranche, which is equal to 67% of the commitment fee, or $800,000, was paid

through issuance of 921,235 shares of common stock in July 2022.

The commitment fee for the second tranche, which is equal to the remaining

33% of the commitment fee, or $400,000, becomes payable in January 2023.

in the form of cash or freely tradeable shares of our common stock in an amount equal to 2% of the Aggregate Limit or $1.2 million

to be paid in two tranches.

The commitment fee for the first tranche, which is equal to 67% of the commitment fee, or $800,000, was

discharged with 46,062 shares of common stock transferred from related parties in July 2022.

The commitment fee for the second

tranche, which is equal to the remaining 33% of the commitment fee, or $400,000, becomes payable in January 2023.

Additionally,

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bid price for such common stock on the first day of trading on Nasdaq.

The strike price was reduced to $0.46 per share at June 30, 2022

The strike price was reduced to $4.04 per share at September 30,

2022 because of a pricing adjustment per the GEM Agreement.

The warrant can be exercised on a cashless basis in part or in whole at any time

during the term.

Any failure by us to timely transfer the shares under the warrant pursuant to GEM Global’s exercise will entitle

GEM Global to compensation in addition to other remedies.

The number of shares underlying the warrant as well as the strike price is

subject to adjustments for recapitalizations, reorganizations, change of control, stock split, stock dividend, reverse stock splits,

The warrant can be exercised on a cashless basis in part or in whole at any

time during the term.

Any failure by us to timely transfer the shares under the warrant pursuant to GEM Global’s exercise will

entitle GEM Global to compensation in addition to other remedies.

The number of shares underlying the warrant as well as the strike price

is subject to adjustments for recapitalizations, reorganizations, change of control, stock split, stock dividend, reverse stock splits,

and issuances of additional common shares at a price per share less than the exercise price.

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for legal or other costs or expenses reasonably incurred in investigating, preparing, or defending against any such loss.

September 24, 2021, we entered the SPA for an aggregate financing of $15.0 million with institutional investors.

September 24, 2021, we entered into a Securities Purchase Agreement for an aggregate financing of $15.0 million with institutional investors.

The Company issued to

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(ii) warrants to purchase 54,174 shares of the Company’s common stock in the aggregate at an exercise price of $152.60 per share.

June 30, 2022, we entered a second SPA for an aggregate financing of $8.0 million with institutional investors.

The Company issued

to the investors (i) 2022 Notes in the aggregate principal amount of $8.48 million for an aggregate purchase price of $8.0 million

and (ii) warrants to purchase 9,335,780 shares of the Company’s common stock in the aggregate at an exercise price of $0.7085

The first funding of $4.0 million occurred on July 1, 2022 and the second funding of $4.0 million occurred on August 9, 2022.

June 30, 2022, we entered into a Securities Purchase Agreement for an aggregate financing of $8.0 million with institutional investors.

issued to the investors (i) 2022 Notes in the aggregate principal amount of $8.48 million for an aggregate purchase price of $8.0

million and (ii) warrants to purchase 466,789 shares of the Company’s common stock in the aggregate at an exercise price of

$14.17 per share.

The first funding of $4.0 million occurred on July 1, 2022 and the second funding of $4.0 million occurred on

August 9, 2022.

following table summarizes our cash flows for each of the periods presented:

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities

$ (14,591,819 )

$ (4,474,364 )

Net cash provided by investing activities

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

$ (7,761,655 )

the six months ended June 30, 2022 and 2021, we used cash in operating activities of $7.9 million and $0.6 million, respectively.

increase primarily resulted from the clinical advancement of our product candidates, the timing of vendor invoicing and payments, and

increased costs related to operating as a public company.

the six months ended June 30, 2022, net cash provided by investing activities was $4,500 from the sale of certain property and equipment.

the six months ended June 30, 2022, net cash used in financing activities was $0.7 million, primarily consisting of repayment of financed

insurance premiums and cash redemption payment of convertible notes.

During the six months ended June 30, 2021, net cash provided by

financing activities was $8.5 million, primarily consisting of proceeds from issuance of common stock related to the Business Combination.

the nine months ended September 30, 2022 and 2021, we used cash in operating activities of $14.6 million and $4.5 million, respectively.

The increase primarily resulted from the clinical advancement of our product candidates, the timing of vendor invoicing and payments,

and increased costs related to operating as a public company.

the nine months ended September 30, 2022, net cash provided by investing activities was $4,500 from the sale of certain property and

the nine months ended September 30, 2022, net cash provided by financing activities was $6.8 million, primarily consisting of proceeds

from the issuance of the 2022 Notes, net repayment of financed insurance premiums and cash payment of convertible notes.

During the nine

months ended September 30, 2021, net cash provided by financing activities was $11.1 million, primarily consisting of proceeds from Business

Combination and convertible note financing.

primary use of cash is to fund operating expenses, primarily related to our research and development activities.

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will depend largely on our ability to:

preclinical development of our early-stage programs and clinical trials of our product candidates;

or have manufactured on our behalf, preclinical and clinical drug material and develop processes for late state and commercial manufacturing;

regulatory approvals for any product candidates that successfully complete clinical trials;

a sales, marketing, medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain

marketing approval and intend to commercialize on our own;

additional clinical, quality control and scientific personnel;

our operational, financial and management systems and increase personnel, including personnel to support our clinical development,

manufacturing and commercialization efforts and our operations as a public company;

maintain, expand and protect our intellectual property portfolio;

the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights,

including enforcing and defending intellectual property related claims;

the costs of operating as a public company.

have generated limited revenues and have incurred significant operating losses since our inception and, as of June 30, 2022, had an accumulated

deficit of $95.5 million.

We expect to continue to incur significant and increasing expenses and operating losses for the foreseeable

advance preclinical development

of our early-stage programs and clinical trials of our product candidates;

manufacture, or have manufactured

on our behalf, preclinical and clinical drug material and develop processes for late state and commercial manufacturing;

seek regulatory approvals

for any product candidates that successfully complete clinical trials;

establish a sales, marketing,

medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval

and intend to commercialize on our own;

hire additional clinical,

quality control and scientific personnel;

expand our operational,

financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and

commercialization efforts and our operations as a public company;

obtain, maintain, expand

and protect our intellectual property portfolio;

manage the costs of preparing,

filing and prosecuting patent applications, maintaining and protecting our intellectual property rights, including enforcing and

defending intellectual property related claims;

manage the costs of operating

as a public company.

have generated limited revenues and have incurred significant operating losses since our inception.

As of September 30, 2022, had

an accumulated deficit of $105.4 million.

We expect to continue to incur significant and increasing expenses and operating losses for

the foreseeable future.

the completion of the Business Combination and public listing of our common stock on Nasdaq, we had access to up to $60.0 million from

a share subscription facility entered into in December 2020.

a share subscription facility under the GEM agreement.

The 2021 Notes and 2022 Notes limit our ability to execute certain debt

and equity financings, including its existing $60.0 million share subscription facility, while the 2021 Notes and 2022 Notes are outstanding.

and equity financings, including under the GEM Agreement, while the 2021 Notes or 2022 Notes are outstanding.

Without the availability of proceeds through the share subscription facility, existing cash resources are not sufficient to allow us

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increase significantly as a result of many factors, including:

scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical and clinical

costs, timing and outcome of regulatory review of our product candidates;

costs, timing and ability to manufacture our product candidates to supply our clinical and preclinical development efforts and our

clinical trials;

costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product

candidates for which we receive marketing approval;

costs of manufacturing commercial-grade product and necessary inventory to support commercial launch;

ability to receive additional non-dilutive funding, including grants from organizations and foundations;

revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval;

costs of preparing, filing and prosecuting patent applications, obtaining, maintaining, expanding and enforcing our intellectual

property rights and defending intellectual property-related claims;

ability to establish and maintain collaborations on favorable terms, if at all;

extent to which we acquire or in-license other product candidates and technologies.

the scope, progress, results

and costs of researching and developing our product candidates, and conducting preclinical and clinical trials;

the costs, timing and outcome

of regulatory review of our product candidates;

the costs, timing and ability

to manufacture our product candidates to supply our clinical and preclinical development efforts and our clinical trials;

the costs of future activities,

including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which

we receive marketing approval;

the costs of manufacturing

commercial-grade product and necessary inventory to support commercial launch;

the ability to receive

additional non-dilutive funding, including grants from organizations and foundations;

the revenue, if any, received

from commercial sale of our products, should any of our product candidates receive marketing approval;

the costs of preparing,

filing and prosecuting patent applications, obtaining, maintaining, expanding and enforcing our intellectual property rights and

defending intellectual property-related claims;

our ability to establish

and maintain collaborations on favorable terms, if at all;

the extent to which we

acquire or in-license other product candidates and technologies.

accounting policies and significant judgments and estimates

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Examples of estimated accrued research and development expenses include fees paid to:

including research laboratories, in connection with preclinical development activities;

and investigative sites in connection with preclinical studies and clinical trials;

in connection with drug substance and drug product formulation of preclinical studies and clinical trial materials.

vendors, including research

laboratories, in connection with preclinical development activities;

CROs and investigative

sites in connection with preclinical studies and clinical trials;

CMOs in connection with

drug substance and drug product formulation of preclinical studies and clinical trial materials.

base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant

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value of liabilities

elected the fair value option to account for the convertible notes as we believe the fair value option provides users of the financial

statements with greater ability to estimate the outcome of future events as facts and circumstances change, particularly with respect

to changes in the fair value of the common stock underlying the conversion option.

We use a Monte Carlo simulation model to estimate

the fair value of the 2021 Notes, which relies on unobservable Level 3 inputs.

Changes in the fair value of the notes are recognized

through earnings for each reporting period.

elected the fair value option to account for the 2021 Notes as we believe the fair value option provides users of the

financial statements with greater ability to estimate the outcome of future events as facts and circumstances change, particularly

with respect to changes in the fair value of the common stock underlying the conversion option.

The Company determined that the 2022 Notes should be recorded at estimated

fair value on its issuance date and adjusted to its estimated fair value as of each reporting date.

We use a Monte Carlo simulation

model to estimate the fair value of the 2021 Notes and 2022 Notes, which relies on unobservable Level 3 inputs.

Changes in the fair value of the

notes are recognized through earnings for each reporting period.

We issued warrants in connection with the issuance

of both the 2021 and 2022 Notes.

The warrants were liability classified due to certain cash settlement features.

The Company uses a Black-Scholes

model to estimate the fair value of the warrants.

Changes in the fair value of the warrants are recognized through earnings for each reporting

sheet arrangements

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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 2. Management’s Discussion and Analysis