What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-11 compared with 2023-05-15 · 342 added, 295 removed, 502 unchanged (56% of the section changed)

2 unchanged sentences

Balance Sheets

March 31, 2023

June 30, 2023

December 31, 2022

10 unchanged sentences

Lease liability

Notes payable and accrued interest ($ 0 and $ 4,063,431 at fair value at March 31, 2023 and December 31, 2022, respectively)

Notes payable and accrued interest

Total current liabilities

Long-term liabilities:

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

Notes payable, net of current portion

Liability classified warrants

2 unchanged sentences

Commitments and contingencies (Note 6)

Stockholders’ deficit

Preferred stock, $ 0.0001 par value, 1,500,000 shares authorized, no shares issued and outstanding at March 31, 2023 (unaudited) and December 31, 2022

Common stock, $ 0.0001 par value, 250,000,000 shares authorized at March 31, 2023 (unaudited) and December 31, 2022;

1,284,664 and 534,571 shares issued at March 31, 2023 (unaudited) and December 31, 2022, respectively;

1,284,583 and 534,490 shares outstanding at March 31, 2023 (unaudited) and December 31, 2022, respectively

Stockholders’ equity deficit

Preferred stock, $ 0.0001 par value, 1,500,000 shares authorized, no shares issued and outstanding at June 30, 2023 and December 31, 2022

Common stock, $ 0.0001 par value, 250,000,000 shares authorized at June 30, 2023 and December 31, 2022;

2,669,873 and 534,571 shares issued at June 30, 2023 and December 31, 2022, respectively;

2,669,792 and 534,490 shares outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

5 unchanged sentences

( 3,714,444 )

Noncontrolling interests in stockholders’ deficit

Total stockholders’ deficit

Noncontrolling interests in stockholders’ equity (deficit)

Total stockholders’ equity (deficit)

( 4,029,652 )

Total liabilities and stockholders’ deficit

Total liabilities and stockholders’ equity (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

6 unchanged sentences

( 7,055,183 )

( 4,855,188 )

( 11,857,986 )

Other income (expense):

4 unchanged sentences

Interest expense, net

Other income and expense, net

Total other income, net

Other income, net

Total other income (expense), net

$ ( 2,239,302 )

$ ( 7,923,120 )

$ ( 4,431,108 )

$ ( 8,874,044 )

Net loss attributable to noncontrolling interests

3 unchanged sentences

$ ( 7,999,290 )

$ ( 4,432,145 )

$ ( 9,665,976 )

Net loss per basic and diluted share:

4 unchanged sentences

Statements of Changes in Stockholders’ EQUITY (Deficit)

Number of Shares

Noncontrolling

Stockholders’ Equity (Deficit)

Number of Shares

Noncontrolling

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 )

Balance on March 31, 2023

$ 113,293,834

$ ( 113,127,237 )

$ ( 319,149 )

$ ( 152,424 )

Settlement of restricted stock units

Public offering, net

Transaction costs associated with public offering

Issuance of common stock upon exercise of warrants

Stock-based compensation

Deemed dividend related to warrants down round provision

( 2,232,242 )

( 2,239,302 )

Balance on June 30, 2023

$ 119,481,957

$ ( 115,363,208 )

$ ( 326,209 )

Balance on December 31, 2021

7 unchanged sentences

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 )

Balance on December 31, 2022

8 unchanged sentences

Settlement of restricted stock units

Conversion of convertible notes

Settlement of commitment fee

Public offering, net

Transaction costs associated with public offering

Conversion of convertible notes

Public offerings, net

Transaction costs associated with public offerings

Issuance of common stock upon exercise of warrants

Stock-based compensation

3 unchanged sentences

( 4,431,108 )

Balance on March 31, 2023

$ 113,293,834

$ ( 113,127,237 )

Balance on June 30, 2023

$ 119,481,957

8 unchanged sentences

(U naudited )

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

16 unchanged sentences

Accrued expenses and other liabilities

( 1,040,666 )

Net cash used in operating activities

5 unchanged sentences

Cash flows from financing activities:

Proceeds public offering, net

Transaction costs associated with public offering

Proceeds from public offerings, net of placement fees and costs

Transaction costs associated with public offerings

Repayment of convertible notes

( 1,000,208 )

Repayment of financed insurance premiums

Net cash provided by (used in) financing activities

Decrease in cash and cash equivalents

( 1,731,937 )

Increase (decrease) in cash and cash equivalents

( 8,530,090 )

4 unchanged sentences

Supplemental disclosure of non-cash investing and financing activities:

Deferred transaction costs for convertible notes

Stock-based compensation

Conversions of convertible notes into common stock

Cash true-up liability

Financed insurance premiums

Settlement of commitment fee in shares

14 unchanged sentences

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 addition, the Company is developing its MPAR ® (Multi-Pill

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

The Company is also applying its TAAP

and MPAR TM technology to a methadone prodrug for use in the treatment of Opioid Use Disorder.

and MPAR ® technology to a methadone prodrug for use in the treatment of Opioid Use Disorder.

2020, the Company commenced an initiative to develop a therapeutic for the treatment of certain coronavirus infections through the formation

15 unchanged sentences

transactions have been eliminated in the consolidation.

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, 2023, are not necessarily indicative of the results that may be expected

for the year ending December 31, 2023.

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, 2022, which may be found in the Company’s Form 10-K filed with the SEC on March 30, 2023.

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

financial statements.

Operating results for the three and six months ended June 30, 2023, are not necessarily indicative of the results

that may be expected for the year ending December 31, 2023.

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, 2022, which may be found in the Company’s Form 10-K filed with the SEC on March

March 2023, the Company completed a 1-for-12 reverse split of its outstanding common stock.

All references in these consolidated financial

statements to shares and per share amounts in all periods have been retroactively restated to reflect the split.

The number of authorized

shares and the par value of the shares did not change as a result of the reverse stock split.

accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates,

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 $ 113.1 million at March 31, 2023.

All references in these unaudited consolidated

financial statements to shares and per share amounts in all periods have been retroactively restated to reflect the split.

of authorized shares and the par value of the shares did not change as a result of the reverse stock split.

accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which

contemplates, 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 $ 115.4 million at June 30, 2023.

There is no assurance

21 unchanged sentences

The first $ 0.8 million of the

commitment fee was paid in July 2022 in common stock of the Company (Note 10) and the remaining $ 0.4 million was paid in January 2023

in common stock of the Company.

commitment fee was paid in July 2022 in common stock of the Company and the remaining $ 0.4 million was paid in January 2023 in common

stock of the Company.

Usage of the GEM facility is limited by other agreements of the Company.

The Company has not raised any

capital to date pursuant to the GEM facility and may not raise any capital pursuant to it prior to its expiration.

The Company has not raised any capital

to date pursuant to the GEM facility and may not raise any capital pursuant to it prior to its expiration.

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

5 unchanged sentences

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

a going concern.

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

as a going concern.

3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

24 unchanged sentences

of operations.

There was no depreciation expense recognized during the three and six month periods ended June 30, 2023.

financial instruments

Company does not use derivative instruments to hedge exposures to interest rate, market, or foreign currency risks.

The Company evaluates

all of its financial instruments, including notes payable, to determine whether such instruments are derivatives or contain features

that qualify as embedded derivatives.

Embedded derivatives must be separately measured from the host contract if all the requirements

for bifurcation are met.

The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of

the host contract and the features of the derivatives.

Bifurcated embedded derivatives are recognized at fair value, with changes in

fair value recognized in the consolidated statement of operations each period.

Bifurcated embedded derivatives are classified with the

related host contract in the Company’s consolidated balance sheet.

evaluates all of its financial instruments, including notes payable, to determine whether such instruments are derivatives or

contain features that qualify as embedded derivatives.

Embedded derivatives must be separately measured from the host contract if

all the requirements for bifurcation are met.

The assessment of the conditions surrounding the bifurcation of embedded derivatives

depends on the nature of the host contract and the features of the derivatives.

Bifurcated embedded derivatives are recognized at

fair value, with changes in fair value recognized in the consolidated statement of operations each period.

As of June 30, 2023 and

December 31, 2022, the Company did not have any bifurcated embedded derivatives in the

Company’s consolidated balance sheets.

Value Measurement

5 unchanged sentences

accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:

Quoted prices in active markets for identical assets

or liabilities.

Inputs other than Level

1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Unobservable inputs which

are supported by little, or no market activity and values determined using pricing models, discounted cash flow methodologies, or

similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

prices in active markets for identical assets or liabilities.

other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

inputs which are supported by little, or no market activity and values determined using pricing models, discounted cash flow methodologies,

or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at

1 unchanged sentence

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

of March 31, 2023 and December 31, 2022, the recorded values of cash and cash equivalents, prepaid expenses, accounts payable, and accrued

of June 30, 2023 and December 31, 2022, 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.

2021 the Company issued convertible notes and elected the fair value option to account for the convertible notes as it believes 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 and redemption feature.

The fair value estimate of the 2021 Notes was based on a discounted cash flow model and a Monte Carlo simulation, which represent Level

3 measurements.

Significant assumptions include the discount rate used in the discounted cash flow model and the expected premium for

conversion used in the Monte Carlo simulation.

Changes in the fair value of the notes are recognized in other income (expense) for each

reporting period.

2021, the Company issued convertible notes and elected the fair value option to account for the convertible notes as it believes 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 and

redemption feature.

The fair value estimate of the 2021 Notes was based on a discounted cash flow model and a Monte Carlo simulation,

which represent Level 3 measurements.

Significant assumptions include the discount rate used in the discounted cash flow model and the

expected premium for conversion used in the Monte Carlo simulation.

Changes in the fair value of the notes are recognized in other income

(expense) for each reporting period.

Refer to Note 7 for details of the terms and conditions of the 2021 Notes.

July 2022 the Company issued convertible notes and the 2022 Notes are accounted for under ASC 480 – Distinguishing Liabilities

from Equity, due to share settlement features contained within the notes.

As a result, the 2022 Notes are recorded as liabilities

at fair value at the balance sheet date with changes in the fair value of the notes recognized in other income (expense) for each reporting

The fair value estimate of the 2022 Notes was based on a discounted cash flow model and a Monte Carlo simulation, which represent

Level 3 measurements.

Significant assumptions include the discount rate used in the discounted cash flow model and the expected premium

for conversion used in the Monte Carlo simulation.

July 2022 the Company issued convertible notes accounted for under ASC 480 – Distinguishing Liabilities from Equity, due

to share settlement features contained within the notes.

As a result, the 2022 Notes are recorded as liabilities at fair value at the

balance sheet date with changes in the fair value of the notes recognized in other income (expense) for each reporting period.

value estimate of the 2022 Notes was based on a discounted cash flow model and a Monte Carlo simulation, which represent Level 3 measurements.

Significant assumptions include the discount rate used in the discounted cash flow model and the expected premium for conversion used

in the Monte Carlo simulation.

Refer to Note 7 for details of the terms and conditions of the 2022 Notes.

2021 the Company issued liability classified warrants in connection with the issuance of the 2021 Notes.

In 2022 the Company issued liability

classified warrants in connection with the issuance of the 2022 Notes.

The warrants were liability classified due to certain cash settlement

features and included in “Other long-term liabilities” on the consolidated balance sheets.

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 in other income (expense)

for each reporting period.

Company issued liability-classified warrants in connection with the issuance of the 2021 and 2022 Notes.

The warrants were liability-classified

due to certain cash settlement features and are included in “Other long-term liabilities” on the consolidated balance sheets.

The Company uses a Black Scholes model to estimate the fair value of the warrants at each balance sheet date.

Changes in the fair value

of the warrants are recognized in other income (expense) for each reporting period.

Refer to Note 8 for details of the warrants.

following tables present liabilities measured and recorded at fair value on the Company’s consolidated balance sheets as of March

following tables present liabilities measured and recorded at fair value on the Company’s consolidated balance sheets as of June

30, 2023, and December 31, 2022.

OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

March 31, 2023

June 30, 2023

Fair value of convertible note

Liability classified warrants

2 unchanged sentences

Liability classified warrants

following table summarizes the change in fair value of the Company’s Level 3 assets and liabilities for the quarter ended March

following table summarizes the change in fair value of the Company’s Level 3 assets and liabilities for the six months ended June

OF CHANGE IN FAIR VALUE OF COMPANY’S LEVEL 3

Convertible note

Liability classified

Liability classified warrants

Fair value, December 31, 2022

4 unchanged sentences

Change in fair value

Fair value, March 31, 2023

Fair value, June 30, 2023

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

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

awarded the Company a research and development grant related to the development of its MPAR ® overdose prevention technology

(the “MPAR Grant”).

9 unchanged sentences

under this grant to approximately $ 10.7 million.

September 2019, the NIH/NIDA awarded the Company a second research and development grant related to the development of its TAAP/MPAR TM

September 2019, the NIH/NIDA awarded the Company a second research and development grant related to the development of its TAAP/MPAR ®

abuse deterrent technology for Opioid Use Disorder (the “OUD Grant”).

The total approved budget was approximately $ 5.4

million, and the current grant period ends in August of 2024.

Company recognizes revenue when costs related to the grants are incurred and assessed as reimbursable.

6 unchanged sentences

and reimbursable amounts become due is analogous to the concept of transfer of control of a service over time under ASC 606.

revenue recognized under the MPAR Grant and OUD Grant was as follows:

revenue recognized under the MPAR Grant and OUD Grant:

OF REVENUE RECOGNIZATION UNDER GRANTS

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

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

as an unbilled receivable on the Company’s consolidated balance sheet.

As all amounts are expected to be remitted timely, no valuation

allowances are recorded.

as an unbilled receivable on the Company’s consolidated balance sheets.

As all amounts are expected to be remitted in a timely

manner, no valuation allowances are recorded.

and development costs

16 unchanged sentences

of management’s judgment.

For the three months ended March 31, 2023, stock-based compensation costs are recorded in general and

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

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.

20 unchanged sentences

penalties accrued related to unrecognized tax benefits as income tax expense.

basic earnings per share is calculated by dividing the Company’s net income or loss attributable to common stockholders by the

weighted average number of common shares outstanding during the period.

The diluted earnings per share is calculated by dividing the

Company’s net earnings attributable to common stockholders by the diluted weighted average number of common shares outstanding

during the period, determined using the treasury stock method and the average stock price during the period.

loss per share

basic net loss per share is calculated by dividing the Company’s net loss attributable to common stockholders by the weighted average

number of common shares outstanding during the period.

Basic shares outstanding include the weighted average effect of the Company’s

outstanding pre-funded warrants, the exercise of which requires little or no consideration for the delivery of shares of common stock.

The diluted net loss per share is calculated by dividing the Company’s net loss attributable to common stockholders by the diluted

weighted average number of common shares outstanding during the period, determined using the treasury stock method and the average stock

price during the period.

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

1 unchanged sentence

OF WEIGHTED AVERAGE SHARES OF ANTI-DILUTIVE SECURITIES

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Stock options

30 unchanged sentences

SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

March 31, 2023

December 31, 2022

Prepaid research and development

4 unchanged sentences

SCHEDULE OF ACCRUED EXPENSES AND OTHER LIABILITIES

March 31, 2023

December 31, 2022

Accrued research and development

4 unchanged sentences

6 – COMMITMENTS AND CONTINGENCIES

of March 31, 2023, the Company’s commitments included an estimated $ 20.4 million related to the Company’s open purchase orders

of June 30, 2023, the Company’s commitments included an estimated $ 18.5 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

3 unchanged sentences

to the delivery of goods or the performance of services.

of March 31, 2023 and December 31, 2022, there were no pending legal proceedings against the Company that are expected to have a material

of June 30, 2023 and December 31, 2022, 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.

12 unchanged sentences

Company’s current lease agreement (as amended) has a term that extends through October 31, 2023 with no option to renew.

March 31, 2023, the future lease payments totaled $ 19,120 .

The Company recognized total rent expense of $ 8,375 in the three months ended

March 31, 2023 and $ 7,834 in the three months ended March 31, 2022.

June 30, 2023, the future lease payments totaled $ 10,926 .

The Company recognized total rent expense of $ 8,375 and $ 16,749 in the three

and six months ended June 30, 2023 and $ 7,834 and $ 15,667 in the three and six months ended June 30, 2022.

7 – NOTES PAYABLE

Company’s outstanding debt balance was zero as of March 31, 2023.

Company’s outstanding notes payable balance was $ 445,738 as of June 30, 2023 consisting solely of the principal balance on the

Company’s financing of their current Directors’ and Officers’ insurance premiums.

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

5 unchanged sentences

Financed insurance

interest expense recognized for financed insurance was as follows:

SCHEDULE OF INTEREST EXPENSE DEBT

Three months ended March 31,

Stated interest accrual

interest expense recognized for financed insurance was $ 0 and $ 1,497 for the three and six month periods ended June 30, 2023 and $ 0

and $ 2,004 for the three and six month periods ended June 30, 2022.

September 24, 2021, the Company entered into an agreement with institutional investors to issue the 2021 Notes.

1 unchanged sentence

for two closings:

the first closing for $ 5.3 million (resulting in net proceeds of $ 4.6 million) which closed on September 24, 2021 (the

“First Closing”).

the first closing for $ 5.3 million (resulting in net proceeds of $ 4.6 million) which closed on September 24, 2021.

The second closing for $ 10.6 million (resulting in net proceeds of $ 9.4 million) which closed on November 5, 2021.

5, 2021 (the “Second Closing”).

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

The interest could be settled in

cash or shares at the option of the Company and was payable together with monthly redemptions of the outstanding principal amount of

2021 Notes included a stated rate of interest of 5 % per annum, in addition to an original issue discount of 6 %.

The interest could be

settled in cash or shares at the option of the Company and was 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.

4 unchanged sentences

The 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

2021 Notes were settled on October 11, 2022 and were not outstanding during the quarter ending March 31, 2023.

(at the stated rate plus an 8 % cash settlement premium) and thus the related interest expense is not presented as a separate amount on

the consolidated statements of operations.

2021 Notes were settled on October 11, 2022 and were not outstanding during the quarter ended June 30, 2023.

June 30, 2022, the Company entered into an $ 8.0 million convertible financing agreement with institutional investors.

The agreement provided

for two closings, each for notes payable of $ 4.24 million (resulting in gross cash proceeds of $ 4.0 million).

Funds were received for

the first closing on July 1, 2022 and for the second closing on August 9, 2022.

the issuance date, the Company assessed the probability of the potential settlement scenarios under the terms of the 2022 Notes and determined

that the predominant settlement feature of the 2022 Notes was the redemption feature into shares of the Company’s common stock

issuable at the lower of the conversion price or 92 % of the average of the three lowest VWAPs in the 10 trading days immediately preceding

the redemption date.

As the predominant settlement feature of the 2022 Notes is to settle a fixed monetary amount into a variable number

of shares, the 2022 Notes fell within the scope of ASC 480.

Accordingly, 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 with the change in estimated

fair value recorded as a component other income (expense) in the Company’s consolidated statements of operations.

Company recorded the 2022 Notes at an initial fair value of $ 12.09 million which included a loss upon issuance of $ 3.6 million due to

for two closings, each for notes payable of $ 4.24 million (resulting in gross cash proceeds of $ 4.0 million per closing).

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

the issuance date, the Company assessed the probability of the potential settlement scenarios under the terms of the 2022 Notes and

determined that the predominant settlement feature of the 2022 Notes was the redemption feature into shares of the Company’s

common stock issuable at the lower of the conversion price or 92 %

of the average of the three lowest VWAPs in the 10 trading days immediately preceding the redemption date.

As the predominant

settlement feature of the 2022 Notes is to settle a fixed monetary amount into a variable number of shares, the 2022 Notes fell

within the scope of ASC 480.

Accordingly, the Company determined that the 2022 Notes should be recorded at fair value on its

issuance date and remeasured as of each reporting date with the change in fair value recorded as a component of other income

(expense) in the Company’s consolidated statements of operations.

Company initially recorded the 2022 Notes at a fair value of $ 12.09 million which included a loss upon issuance of $ 3.6 million due to

the current share price at issuance exceeding the conversion price.

1 unchanged sentence

representing a 6 % original issue discount of $ 0.5 million and $ 0.6 million of legal and investment banking fees, which were immediately

connection with each of the first and second closings of the 2022 Notes the Company also issued warrants to purchase 38,894 shares of

the Company’s common stock.

The warrants had an original exercise price of $ 170.04 and are exercisable for five years following

issuance of the 2022 Notes.

The issuance of these warrants required 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 $ 187.20 .

connection with each of the first and second closings of the 2022 Notes, the Company also issued warrants to purchase 38,894

shares of the Company’s common stock.

The warrants had an original exercise price of $ 170.04

and are exercisable for five

years following issuance of the 2022 Notes.

The issuance of these warrants required 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 $ 187.20 .

In connection with 2023 May Offering, and in exchange for $ 0.125

per outstanding warrant, the exercise prices of the 2022 Notes warrants and 2021 Notes warrants were reduced to $ 3.64

proceeds of the 2022 Notes were used for working capital purposes subject to certain customary restrictions are secured by the Company’s

17 unchanged sentences

principal and interest balances were satisfied in March 2023.

following table provides a summary of the Company’s 2022 Notes conversions during the quarter ended March 31, 2023:

SCHEDULE OF CONVERSION DEBT

Weighted Average

Conversion Price

Conversion Value

During the quarter ended March 31, 2023

January 2023, the Company entered into a letter agreement to reduce the conversion price for the remaining balance of the Company’s

1 unchanged sentence

Cash true-up payments totaling $ 0.6

million for conversions below the adjusted price are due to be paid within 120 days from January 12, 2023 in accordance with the Letter

Such payments due are recorded as Accrued Expenses and Other Liabilities (Note 5).

million for conversions below the adjusted price were due to be paid within 120 days from January 12, 2023 in accordance with the Letter

On May 12, 2023, the Company paid $ 0.6 million of cash true-up payments to the holders of the 2022 Notes.

insurance premiums

the year ended December 31, 2022, the Company financed its directors’ and officers’ liability insurance in the amount of

$ 399,949 , the liability was paid in full by March 31, 2023.

The Company paid a total of $ 9,402 in interest from inception through March

2023 when the note will be paid in full.

The Company expensed $ 1,497 of interest for the three months ended March 31, 2023.

June 2023, the Company renewed and financed its directors’ and officers’ liability insurance in the amount of $ 0.4 million.

Monthly payments commence in July 2023 and are scheduled through March 2024.

During the year ended December 31, 2022, the Company financed

its directors’ and officers’ liability insurance in the amount of $ 0.4 million and the liability was paid in full by March

The Company paid a total of $ 9,402 in interest from inception through March 2023 when the note was paid in full.

expensed $ 1,497 of interest for the six months ended June 30, 2023.

The Company incurred no interest expense during the three months

ended June 30, 2023.

8 - STOCKHOLDERS’ EQUITY

June 2021, the Company amended and restated its Certificate of Incorporation to authorize

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

In September 2022,

the Company amended and restated its Certificate of Incorporation to authorize shares up to a total of 250,000,000 shares of common stock.

As of March 31, 2023 and December 31, 2022, there were no shares of preferred stock issued and outstanding.

January 31, 2023, the Board of Directors declared a dividend of 0.001 of a share of Series A Preferred Stock, par value $ 0.0001 per share,

for each outstanding share of the Company’s common stock to stockholders of record on February 13, 2023.

Each full share of the

Series A Preferred Stock entitled holders to 1,000,000 votes per share with respect to the reverse stock split proposal and the adjournment

proposal at the Company’s special meeting of stockholders on March 23, 2023.

The Series A Preferred Stock had no dividend rights

and was fully redeemed following the effectiveness of a reverse stock split on March 31, 2023.

March 31, 2023, outstanding warrants to purchase shares of common stock are as follows:

June 2021, the Company amended and restated its Certificate of Incorporation to authorize 150,000,000 shares of common stock and 1,500,000

shares of preferred stock, both with par value equal to $ 0.0001 .

In September 2022, the Company amended and restated its Certificate

of Incorporation to authorize shares up to a total of 250,000,000 shares of common stock.

As of June 30, 2023 and December 31, 2022,

there were no shares of preferred stock issued and outstanding.

February Offering

February 2, 2023, the Company agreed to issue and sell in a registered direct offering an aggregate of 297,619

shares of common stock of the Company, par value $ 0.0001

per share, at an offering price of $ 10.08

per share, for gross proceeds of approximately $ 3.0

million before the deduction of placement agent fees and related costs of $ 0.3

The closing occurred on February 6, 2023.

The warrants issued in connection with the 2023 February Offering are described

further below.

May 12, 2023, the Company completed a public offering of an aggregate of 1,800,876

shares of its common stock at par value $ 0.0001

per share (including pre-funded warrants in lieu thereof) at a combined offering price of $ 3.887

per share, gross proceeds from this offering were approximately $ 7.0

million before the deduction of placement agent fees and related costs of $ 0.7

The warrants issued in connection with the 2023 May Offering are described further below.

connection with the offering, the Company also agreed to amend certain existing warrants to purchase up to an aggregate of 210,085 shares

of the Company’s common stock that were previously issued in September 2021 through December 2022 to purchasers in the offering

at exercise prices ranging from $ 16.80 to $ 187.20 per share, such that effective upon the closing of the offering, the amended warrants

had a reduced exercise price of $ 3.64 per share at an additional offering price of $ 0.125 per amended warrant.

June 30, 2023, outstanding warrants to purchase shares of common stock are as follows:

SCHEDULE OF OUTSTANDING WARRANT

Exercise Price

Shares Underlying Outstanding Warrants

Classification

2 unchanged sentences

Share subscription facility

$ 3.64 - 16.80

Public offering

$ 8.58 – 12.60

Public offering

June 30, 2021, as a result of the Closing, the Company assumed a total of 78,751 warrants previously issued by LACQ (subsequently

$ 3.64 - 4.86

Public offering

June 30, 2021, as a result of the Business Combination, the Company assumed a total of 78,751 warrants previously issued by LACQ (subsequently

in December 2022, 7,782 warrants were cancelled).

The warrants provide holders the right to purchase common stock at a strike price

of between $ 2,400.00 and $ 2,760.00 per share and expire June 30, 2026 , five years following the completion of the Business Combination.

A total of 41,666 of the outstanding warrants are public warrants which trade on the OTC Pink Open Market under the ticker symbol

The remaining 29,303 warrants are private warrants with restrictions on transfer and which have the right to a cashless exercise

at the option of the holder.

The warrants provide holders the right to purchase common stock at a strike price between

$ 2,400.00 and $ 2,760.00 per share and expire June 30, 2026 , five years following the completion of the Business Combination.

of 41,666 of the outstanding warrants are public warrants which trade on the OTC Pink Open Market under the ticker symbol ENSCW.

The remaining 29,303 warrants 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 price of 2,083 warrants issued

on June 30, 2021 from $ 2,760.00 to $ 2,400.00 .

On July 2, 2021, upon public

listing of the Company’s shares, the Company issued 4,608 warrants to purchase common stock pursuant to the share subscription

The warrants have a three -year life.

The grant date fair value of the warrants, based on the $ 3,477.60 stock price on the

date of issuance, was $ 11.6 million, and was recognized in general and administrative expense due to the uncertainty of future issuance

of shares under the share subscription facility.

The warrants have been

subject to multiple exercise price reductions 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 (primarily the result of the conversions of the 2021 Notes and the 2022 Notes).

The adjustments have progressed from the original exercise price of $ 2,402.40 per share to the current exercise price at March 31,

2023 of $ 8.58 per share.

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.

On September 24, 2021 and

November 5, 2021, the Company issued 1,504 and 3,008 warrants in connection with the issuance of the 2021 Notes.

The warrants were

immediately exercisable with an exercise price of $ 1,831.20 (subject to downward revision protection in the event the Company makes

certain issuances of common stock at prices below the conversion price) and expire on September 23, 2026 .

As a result of the issuance

of the 2022 Notes in July 2022, the exercise price of these warrants was adjusted down to $ 187.20 .

On July 1, 2022 and August

9, 2022, the Company issued 19,447 warrants each in connection with the issuance of the 2022 Notes.

July 2, 2021, upon public listing of the Company’s shares, the Company issued 4,608 three-year warrants to purchase common

stock pursuant to the share subscription facility.

The grant date fair value of the warrants, based on the $ 3,477.60 stock price

on the date of issuance, was $ 11.6 million, and was recognized in general and administrative expense due to the uncertainty of future

issuance of shares under the share subscription facility.

warrants have been subject to multiple exercise price reductions 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 adjustments have progressed from the original exercise

price of $ 2,402.40 per share to the current exercise price at June 30, 2023 of $ 3.64 per share.

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 and November 5, 2021, the Company issued 1,504 and 3,008 warrants in connection with the issuance of the 2021

The warrants were immediately exercisable with an exercise price of $ 1,831.20 (subject to downward revision protection in

the event the Company makes certain issuances of common stock at prices below the exercise price) and expire on September 23, 2026 .

As a result of the issuance of the 2022 Notes in July 2022, the exercise price of these warrants was adjusted down to $ 187.20 .

May 12, 2023, in exchange for $ 0.125 per outstanding warrant, the Company amended the warrants to reduce their exercise price to

July 1, 2022 and August 9, 2022, the Company issued 19,447 warrants each in connection with the issuance of the 2022 Notes.

were immediately exercisable with an exercise price of $ 170.04 (subject to downward revision protection in the event the Company

makes certain issuance of common stock at prices below the conversion price) and expire on June 29, 2027 and August 8, 2027 , respectively.

As a result of the issuance of shares and warrants in connection with the December public offering, the exercise price of these warrants

was adjusted down to $ 24.07 .

On May 12, 2023, in exchange for $ 0.125 per outstanding warrant, the Company amended the warrants to

reduce their exercise price to $ 3.64 .

December 9, 2022, the Company issued 549,987 equity classified warrants in connection with a public offering.

The warrants were immediately

exercisable with an exercise price of $ 170.04 (subject to downward revision protection in the event the Company makes certain issuance

of common stock at prices below the conversion price) and expire on June 29, 2027 and August 8, 2027 , respectively.

As a result of

the issuance of shares and warrants in connection with the December public offering, the exercise price of these warrants was adjusted

down to $ 24.07 .

On December 9, 2022, the

Company issued 549,987 equity classified warrants in connection with a public offering.

The warrants were immediately exercisable

with an exercise price of $ 16.80 (subject to downward revision protection in the event the Company makes certain issuance of common

stock at prices below the exercise price) and expire on December 9, 2027 .

On February 6, 2023, the

Company issued 318,451 equity classified warrants in connection with a public offering.

The warrants were immediately exercisable

with an exercise price of $ 8.58 - $ 12.60 (subject to downward revision protection in the event the Company makes certain issuance

of common stock at prices below the exercise price) and expire on February 2, 2028 , and August 7, 2028 .

exercisable with an exercise price of $ 16.80 and expire on December 9, 2027 .

On May 12, 2023, in exchange for $ 0.125 per applicable

warrant, the Company amended 166,667 of these warrants to reduce their exercise price to $ 3.64 .

February 6, 2023, the Company issued 318,451 equity classified warrants in connection with

a public offering.

The warrants were immediately exercisable with an exercise price of $ 8.58

- $ 12.60 and expire on February 2, 2028 , and August 7, 2028 .

May 12, 2023, the Company issued 3,727,813 equity classified warrants (series A-1, A-2 and

placement agent warrants) in connection with a public offering.

The warrants were immediately

exercisable with an exercise price of $ 3.64 - $ 4.86 and expire on November 12, 2024 , May

10, 2028 , and May 12, 2028 .

May 12, 2023 the Company also issued 1,451,876 pre-funded warrants in connection with a public offering, 885,000 pre-funded warrants

were exercised in connection with the closing of the public offering, 300,902 were exercised between the closing date and June 30,

As of June 30, 2023, 415,974 pre-funded warrants remain outstanding.

The pre-funded warrants are immediately exercisable with

an exercise price of $ 0.0001 .

fair value of each warrant issued has been determined using the Black-Scholes option-pricing model.

11 unchanged sentences

3.9 %- 4.12 %

92.6 % - 125.3 %

1.0 % - 4.9 %

5 unchanged sentences

(d) Liability classified warrants (remeasured at 6/30/23)

103.5 - 104.4 %

9 - STOCK-BASED COMPENSATION

5 unchanged sentences

the Former Ensysce stock plans.

January 2022, the 2021 Omnibus Plan was amended and restated to include an additional 12,500 shares available for future grant and to

provide for future annual increases.

In February 2023, the Company’s Board approved an annual increase of 26,725 shares available

for future grant.

Company recognized within general and administrative expense stock-based compensation expense of $ 96,270 and $ 373,944 for the three months

ended March 31, 2023 and 2022, respectively.

During the three months ended March 31, 2023 and 2022, the Company recognized stock-based

compensation expense of $ 20,863 and $ 28,490 , respectively, within research and development expense.

were no stock options granted during the three months ended March 31, 2023.

During the three months ended March 31, 2022, the Company

granted stock options to purchase an aggregate of 8,275 shares of common stock to employees, consultants and members of the Board.

options vest over periods between zero and four years and have an exercise price of between $ 259.20 and $ 1,507.20 per share.

following table summarizes the Company’s stock option activity during the three months ended March 31, 2023:

January 2022, the 2021 Omnibus Plan was amended and restated to include an additional 12,500

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

In February 2023, the Company’s Board of

Directors approved an annual increase of 26,725

shares available for future grant.

Company recognized within general and administrative expense stock-based compensation expense of $ 60,394 and $ 156,663 for the three and

six months ended June 30, 2023 and $ 228,823 and $ 602,767 for the three and six months ended June 30, 2022.

The Company recognized stock-based

compensation expense within research and development of $ 17,023 and $ 37,887 for the three and six months ended June 30, 2023 and $ 66,756

and $ 95,246 for the three and six months ended June 30, 2022.

were no stock options granted during the six months ended June 30, 2023.

During the six months ended June 30, 2022, the Company granted

stock options to purchase an aggregate of 9,545 shares of common stock to employees, consultants, and members of the board of directors.

The options vest over periods between zero and four years and have an exercise price of between $ 103.20 and $ 1,507.20 per share.

following table summarizes the Company’s stock option activity during the six months ended June 30, 2023:

SCHEDULE OF STOCK OPTION ACTIVITY

Weighted average

contractual life

Exercise price

Remaining contractual life

Intrinsic value

1 unchanged sentence

Expired / Forfeited

Outstanding at March 31, 2023

Exercisable at March 31, 2023

Outstanding at June 30, 2023

Exercisable at June 30, 2023

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

Exercise price

6 unchanged sentences

Expected dividend yield

Expected stock-price

The expected volatility is derived from the historical volatilities of publicly traded companies within the Company’s

industry that the Company considers to be comparable to the Company’s business over a period approximately equal to the expected

Expected term.

expected term represents the period that the stock-based awards are expected to be outstanding.

The Company’s historical share

option exercise experience does not provide a reasonable basis upon which to estimate an expected term due to a lack of sufficient

Therefore, the Company estimates the expected term for employees by using the simplified method provided by the Securities

and Exchange Commission.

The simplified method calculates the expected term as the average of the time-to-vesting and the contractual

life of the options.

Risk-free interest rate.

stock-price volatility.

The expected volatility is derived from the historical volatilities of publicly traded companies within

the Company’s industry that the Company considers to be comparable to the Company’s business over a period approximately

equal to the expected term.

The expected term represents the period that the stock-based awards are expected to be outstanding.

The Company’s

historical share option exercise experience does not provide a reasonable basis upon which to estimate an expected term due to a

lack of sufficient data.

Therefore, the Company estimates the expected term for employees by using the simplified method provided

by the Securities and Exchange Commission.

The simplified method calculates the expected term as the average of the time-to-vesting

and the contractual life of the options.

interest rate.

The risk-free interest rate is based on the U.S.

Treasury yield in effect at the time of grant for zero coupon U.S.

notes with maturities approximately equal to the expected term.

Expected dividend yield.

The expected dividend is assumed to be zero as the Company has never paid dividends and has no current plans 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 30, 2022 was $ 1.01 .

of March 31, 2023, the Company had an aggregate of $ 296,845 of unrecognized share-based compensation cost, which is expected to be recognized

Treasury yield in effect at the time of grant for zero coupon

Treasury notes with maturities approximately equal to the expected term.

dividend yield.

The expected dividend is assumed to be zero as the Company has never paid dividends and has no current plans

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

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

of June 30, 2023, the Company had an aggregate of $ 219,428 of unrecognized share-based compensation cost, which is expected to be recognized

over the weighted average period of 1.42 years.

following table summarizes the Company’s restricted stock units activity during the three months ended March 31, 2023:

following table summarizes the Company’s restricted stock units activity during the six months ended June 30, 2023:

SCHEDULE OF RESTRICTED STOCK UNITS

Weighted average

Restricted Stock Units

Weighted average fair value

Outstanding at December 31, 2022

Outstanding at March 31, 2023

were no restricted stock units granted or forfeited during the three months ended March 31, 2023.

The remaining awards outstanding

are subject to time-based 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.

Outstanding at June 30, 2023

were no restricted stock units granted or forfeited during the six months ended June 30, 2023.

The remaining awards outstanding are subject

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

The estimated fair value of each of the restricted stock

units 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, 2023

June 30, 2023

Awards outstanding under the 2021 Omnibus Incentive Plan

2 unchanged sentences

Total shares of common stock reserved for future issuance

10 - RELATED PARTIES

December 9, 2022, the Company completed a public offering for the sale of 241,666 shares of common stock at $ 16.80 per share and issued

550,000 warrants with an exercise price of $ 16.80 per share that expire five years following the date of issuance.

A Board member purchased

29,761 shares of common stock and was issued 59,523 warrants exercisable for common stock in the public offering.

July 2022, the Chief Executive Officer and a Board member transferred 3,838 shares of registered common stock to GYBL to settle $ 0.8

million of Company obligations related to the GEM Agreement (Note 2).

In October 2022, 3,838 shares of unregistered and restricted common

stock were subsequently issued by the Company to the related parties as reimbursement and recognized under the consolidated statement

of changes in stockholders’ deficit.

NOTE 11 – SUBSEQUENT EVENTS

On May 12, 2023, the Company

completed a public offering of an aggregate of 1,800,876 shares of its common stock (or pre-funded warrants in lieu thereof), Series A-1

warrants to purchase up to 1,800,876 shares of common stock and Series A-2 warrants to purchase 1,800,876 shares of common stock, at a

combined public offering price of $3.887 per share (or pre-funded warrant in lieu thereof) and accompanying warrants.

The Series A-1 warrants

have an exercise price of $ 3.637 per share and expire five years from the date of issuance, and the Series A-2 warrants have an exercise

price of $ 3.637 per share and expire eighteen months from the date of issuance.

The Company received gross proceeds of approximately $ 7.0

million before the deduction of placement agent fees and offering expenses.

May 12, 2023, the Company paid $ 0.6 million of cash true-up payments to holders of the 2022 Notes (Note 7).

10 – SUBSEQUENT EVENTS

Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that there have been

no events that have occurred that would require adjustments to our disclosures in the unaudited consolidated financial statements.

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