Ensysce Biosciences, Inc. 10-Q

Item 1A. Risk Factors. While we attempt to identify, manage and mitigate risks and uncertainties associated with our business to the extent practical, under the circumstances, some level of risk and uncertainty will always be present. Part I, Item 1A. Risk Factors of our 2022 Annual Report on Form 10-K includes a detailed discussion of our risk factors. Those risks and uncertainties have the potential to materially affect our financial condition and results of operations. The risks set forth in the following additional risk factors have the potential to materially affect our financial condition and results of operations. We need to raise additional capital to repay Investor Notes issued under a Securities Purchase Agreement dated October 23, 2023 and support our operations. If we are unable to raise capital in subsequent offerings, the assets we pledged to secure the lending may be taken. We believe that current cash on hand is insufficient to repay the Investor Notes and to fund operations through the end of the first quarter of 2024. If we are unable to repay the Investor Notes issued under a Securities Purchase Agreement dated October 23, 2023, the lenders have various recourse against us, including the ability to take control of the collateral pledged to them, which constitutes substantially all of our tangible and intangible assets, including our intellectual property. The report of our independent registered public accounting firm on our financial statements for the years ended December 31, 2022 and 2021 contains explanatory language that substantial doubt exists about our ability to continue as a going concern. We have reduced expenses because we do not have access to sufficient cash and liquidity to finance our business operations as currently contemplated and may be compelled to reduce further general and administrative expenses and delay clinical trials until we are able to obtain sufficient financing. We may find it difficult to raise money on terms favorable to us or at all. The failure to obtain sufficient capital to support our operations would have a material adverse effect on our business, financial condition and results of operations. If sufficient financing is not received timely, we would then need to pursue a plan to license or sell assets, seek to be acquired by another entity, cease operations and/or seek bankruptcy protection. If we are unable to maintain compliance with the listing standards of Nasdaq, our common stock may become delisted, which could have a material adverse effect on our ability to raise funding, which could negatively impact our business, capital and financial condition. We were not in compliance with Nasdaq listing standards and requirements for our common stock for approximately a one-year period ending in June 2023 and had been granted an exception through June 12, 2023 to meet a number of obligations before June 12, 2023 that had been imposed by Nasdaq. By letter dated June 13, 2023, Nasdaq advised us that we had regained compliance. Nasdaq requires that our common stock have a minimum bid price of at least $1 per share (the “Minimum Bid Price”). At the end of October 2023 and the beginning of November 2023, the bid price for our common stock was below the Minimum Bid Price. There can be no assurance that we will be able to maintain compliance with all of Nasdaq’s listing requirements and standards in the future. If we do not continue to meet all of those obligations, our common stock could be delisted by Nasdaq. If delisting occurs, it could be more difficult to buy or sell our securities and to obtain accurate quotations, and the price of our common stock could suffer a material decline. In addition, a delisting would impair our ability to raise capital through the public markets, could deter broker-dealers from making a market in or otherwise seeking or generating interest in our securities and might deter certain institutions and persons from investing in our securities. Any of these could negatively impact our financial condition or our ability to operate our business and maintain adequate capital. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None. Item 3. Defaults Upon Senior Securities. Not applicable. Item 4. Mine Safety Disclosures. Not applicable.