What changed in this filing

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Item 1. Financial Statements

2024-05-13 compared with 2023-11-09 · 390 added, 560 removed, 324 unchanged (75% of the section changed)

2 unchanged sentences

Balance Sheets

March 31, 2024

December 31, 2023

Current assets:

Cash and cash

Cash and cash equivalents

Unbilled receivable

Right-of-use asset

expenses and other current assets

Prepaid expenses and other current assets

Total current assets

Liabilities and stockholders’

Liabilities and stockholders’ equity (deficit)

Current liabilities:

Accounts payable

Accrued expenses and other

Lease liability

payable and accrued interest

Accrued expenses and other liabilities

Notes payable and accrued interest

Total current liabilities

Long-term liabilities:

Notes payable, net of current

classified warrants

Liability classified warrants

Total long-term liabilities

Total liabilities

Commitments and contingencies (Note 6)

Stockholders’ equity

Preferred stock, $ 0.0001 par value, 1,500,000

shares authorized, no shares issued and outstanding at September 30, 2023 and December 31, 2022

Common stock, $ 0.0001 par value, 250,000,000

shares authorized at September 30, 2023 and December 31, 2022;

2,864,085 and 534,571 shares issued at September 30, 2023 and December

31, 2022, respectively;

2,864,004 and 534,490 shares outstanding at September 30, 2023 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 March 31, 2024 (unaudited) and December 31, 2023

Common stock, $ 0.0001 par value, 250,000,000 shares authorized at March 31, 2024 (unaudited) and December 31, 2023;

7,329,253 and 3,146,157 shares issued at March 31, 2024 (unaudited) and December 31, 2023, respectively;

7,329,172 and 3,146,076 shares outstanding at March 31, 2024 (unaudited) and December 31, 2023, respectively

Additional paid-in capital

Accumulated deficit

( 124,673,853 )

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Total Ensysce Biosciences, Inc.

stockholders’

equity (deficit)

( 3,714,444 )

Noncontrolling

interests in stockholders’ equity (deficit)

stockholders’ equity (deficit)

( 4,029,652 )

liabilities and stockholders’ equity (deficit)

Noncontrolling interests in stockholders’ deficit

Total stockholders’ equity (deficit)

Total liabilities and stockholders’ equity (deficit)

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

1 unchanged sentence

Statements of Operations

Months Ended September 30,

Three Months Ended March 31,

Federal grants

1 unchanged sentence

Research and development

and administrative

operating expenses

General and administrative

Total operating expenses

Loss from operations

1 unchanged sentence

( 2,561,235 )

( 7,562,502 )

( 18,021,309 )

Other income (expense):

Issuance costs for convertible

( 1,118,721 )

Loss on issuance of convertible

( 3,609,944 )

Change in fair value of

convertible notes

Issuance of liability classified

( 3,737,371 )

Change in fair value of

liability classified warrants

Loss on debt conversions

( 1,404,877 )

( 4,000,155 )

Change in fair value of convertible notes

Change in fair value of liability classified warrants

Interest expense, net

other income (expense), net

( 1,248,065 )

$ ( 2,690,806 )

$ ( 9,855,565 )

$ ( 7,121,914 )

Other income and expense, net

Total other income, net

( 1,273,599 )

Net loss attributable to

noncontrolling interests

dividend related to warrants down round provision

loss attributable to common stockholders

$ ( 3,116,563 )

$ ( 2,191,806 )

Net loss attributable to noncontrolling interests

Deemed dividend related to warrants down round provision

Net loss attributable to common stockholders

$ ( 3,116,779 )

$ ( 2,196,174 )

Net loss per basic and diluted

Net loss per share attributable

to common stockholders, basic and diluted

Weighted average common shares outstanding,

basic and diluted

Net loss per basic and diluted share:

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

Weighted average common shares outstanding, basic and diluted

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

1 unchanged sentence

Statements of Changes in Stockholders’ EQUITY (Deficit)

Stockholders’

Equity (Deficit)

Paid-In Capital

Noncontrolling

Balance on June 30, 2022

$ ( 95,511,543 )

$ ( 305,942 )

$ ( 797,578 )

Conversion of convertible notes

Stock-based compensation

Settlement of restricted stock units

Deemed dividend related to warrants down round

( 9,834,073 )

( 9,855,565 )

Balance on September

$ ( 105,409,155 )

$ ( 327,434 )

Stockholders’ Equity (Deficit)

Noncontrolling

Balance on December 31, 2022

$ 107,216,566

Balance on June 30, 2023

$ ( 110,931,063 )

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Settlement of restricted stock units

Issuance of common stock upon exercise of warrants

Stock-based compensation

( 2,689,571 )

( 2,690,806 )

Balance on September

$ 119,537,611

$ ( 118,052,779 )

$ ( 327,444 )

Balance on December 31, 2021

$ ( 85,845,567 )

$ ( 279,815 )

$ ( 8,158,058 )

Consultant Compensation

Conversion of convertible notes

Settlement of restricted stock units

Settlement of commitment fee

Public offering, net

Transaction costs associated with public offering

Stock-based compensation

Reverse split fractional shares

Deemed dividend related to warrants down round provision

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( 2,191,806 )

Balance on September 30, 2022

Balance on March 31, 2023

$ 113,293,834

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$ ( 319,149 )

$ ( 152,424 )

Balance on December 31, 2023

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Settlement of restricted stock units

Settlement of commitment fee

Conversion of convertible notes

Public offerings, net

Transaction costs associated with public offerings

Issuance of common stock upon exercise of warrants

Issuance of common stock upon warrant inducement, net of issuance costs

Transaction costs associated with warrant inducement

Stock-based compensation

Reverse split fractional shares

Deemed dividend related to warrants down round

Deemed dividend related to warrants down round provision

( 3,116,489 )

( 3,116,563 )

Balance on September

Balance on March 31, 2024

$ 128,422,232

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(U naudited )

Months Ended September 30,

Cash flows from operating

$ ( 7,121,914 )

$ ( 18,729,609 )

Adjustments to reconcile net loss to net cash

used in operating activities:

Gain on sale of asset

Accrued interest

Change in fair value of

liability classified warrants

Three Months Ended March 31,

Cash flows from operating activities:

$ ( 3,116,563 )

Loss on issuance of convertible

Change in fair value of

convertible notes

$ ( 2,191,806 )

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

Accrued interest and interest expense related to note conversions

Amortization of original issue discount and debt issuance costs

Change in fair value of convertible notes

Change in fair value of liability classified warrants

Stock-based compensation

Issuance of liability classified

Issuance costs paid to

close convertible notes

Loss on debt conversions

Changes in operating assets

and liabilities:

Changes in operating assets and liabilities:

Unbilled receivable

Prepaid expenses and other

Prepaid expenses and other assets

Accounts payable

( 1,295,655 )

expenses and other liabilities

( 1,345,624 )

cash used in operating activities

( 8,978,107 )

( 14,591,819 )

Cash flows from investing

from sale of asset

Net cash provided by

investing activities

Cash flows from financing

Proceeds public offerings,

Proceeds from issuance

of convertible notes, net

Transaction costs associated

with public offerings

Repayments of convertible

Accrued expenses and other liabilities

Net cash used in operating activities

( 3,408,403 )

of financed insurance premiums

cash provided by financing activities

Decrease in cash and cash

( 3,606,919 )

Cash flows from financing activities:

Proceeds public offering, net

Proceeds from warrant exercises

Proceeds from warrant inducement, net of issuance costs

Transaction costs associated with public offering

Transaction costs associated with warrant inducement

Repayment of convertible notes

Repayment of financed insurance premiums

Net cash provided by financing activities

Increase (decrease) in cash and cash equivalents

( 1,731,937 )

and cash equivalents beginning of period

and cash equivalents end of period

Cash and cash equivalents beginning of period

Cash and cash equivalents end of period

Supplemental cash flow information:

Income tax payments

Supplemental disclosure

of non-cash investing and financing activities:

Stock-based compensation

Conversions of convertible

notes into common stock

Payable to related parties

Proceeds from financed

insurance premiums, net

Settlement of commitment

fee in shares

Deemed dividend related

to warrants down round provision

Supplemental disclosure of non-cash investing and financing activities:

Incremental fair value of February 2024 warrant inducement

Conversions of convertible notes into common stock

Transaction costs from warrant inducement

Deemed dividend related to warrants down round provision

Cash true-up liability

Settlement of commitment fee in shares

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

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

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

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

The Company is also applying its TAAP

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Ensysce is a 79.2 %

stockholder in EBIR, with 19.8 % and 1.0 % of the shares held by certain key personnel of the Company and an unrelated party, respectively.

stockholder in EBIR, with 9.9 % and 10.9 % of the shares held by a certain key person of the Company and two unrelated parties, respectively.

The non-Ensysce owned shares and the activity are reflected on the financial statements as Noncontrolling interests.

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transactions have been eliminated in the consolidation.

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 nine months ended September 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 30, 2023.

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

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 $ 118.0 million at September 30, 2023.

There is no assurance

that profitable operations will ever be achieved, and, if achieved, could be sustained on a continuing basis.

Product development activities,

clinical and pre-clinical testing, and commercialization of the Company’s product candidates are necessary to develop the Company’s

products and will require significant additional financing.

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, 2024, are not necessarily indicative of the results that may be expected

for the year ending December 31, 2024.

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, 2023, which may be found in the Company’s Form 10-K filed with the SEC on March 15, 2024.

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.

There is no assurance that profitable operations will ever be achieved, and, if achieved,

would be sustained on a continuing basis.

Product development activities, clinical and pre-clinical testing, and commercialization of

the Company’s product candidates are necessary to develop the Company’s products and will require significant additional

There can be no assurance the Company will be able to obtain such funds.

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

December 2020, the Company executed the GEM Agreement.

Under the agreement, the investor agreed to provide the Company with a share subscription

facility of up to $ 60.0 million for a 36-month term following the public listing of the Company’s common stock.

The Company controls

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

The investor will pay, in cash,

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

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

preceding the draw down date.

On June 30, 2021, the Company consummated the Business Combination, resulting in the Company’s shares

becoming publicly listed on Nasdaq on July 2, 2021.

Concurrent with the public listing of the Company’s shares, the Company issued

to the investor 4,608 warrants with a three-year term to purchase common stock of Ensysce at an exercise price of $ 2,402.40 per share

The Company was required to pay a commitment fee to the investor of $ 1.2 million with $ 0.8 million due on the first anniversary

of the public listing date and $ 0.4 million due on the 18-month anniversary of the public listing date.

The first $ 0.8 million of the

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.

These matters, among others, raise substantial doubt

about the Company’s ability to continue as a going concern.

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

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the date these consolidated financial statements were issued.

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

as a going concern.

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

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The more significant estimates and assumptions

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

allowance of deferred tax assets resulting from net operating losses, and the fair value of warrants and options to purchase the Company’s

common stock and convertible notes payable.

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

and cash equivalents

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The Company has no financial instruments with off-balance sheet risk of loss.

Additionally, the Company had concentration in accounts

payable, as one to two research and development vendors made up greater than 10% individually, and 17 % and 38 % in aggregate , of the outstanding

accounts payable balance as of March 31, 2024 and December 31, 2023, respectively.

and equipment

and equipment include office and laboratory equipment that is recorded at cost and depreciated using the straight-line method over the

estimated useful lives of five to six years .

Property and equipment are fully depreciated as such there is no depreciation recognized

in the three and nine months ended September 30, 2023.

Depreciation expense is classified in general and administrative expense in the

accompanying consolidated statements of operations.

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.

As of September 30, 2023 and December 31, 2022, the Company

did not have any bifurcated embedded derivatives in the Company’s consolidated balance sheets.

and equipment are fully depreciated as such there is no depreciation expense recognized in the periods presented.

Value Measurement

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

of September 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.

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

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.

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.

of March 31, 2024, and December 31, 2023, 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.

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

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 September

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

31, 2024, and December 31, 2023.

OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

value of convertible note

classified warrants

Fair value of convertible note

Liability classified

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

March 31, 2024

Liability classified warrants

December 31, 2023

Liability classified warrants

following table summarizes the change in fair value of the Company’s Level 3 liabilities for the quarter ended March 31, 2024 (no

level 3 assets as of quarter-end March 31, 2024):

OF CHANGE IN FAIR VALUE OF COMPANY’S LEVEL 3

Liability classified warrants

Fair value, December 31, 2023

( 3,056,892 )

Cash payments

Cash true-up liability

Change in fair value

Fair value, September 30, 2023

Fair value, March 31, 2024

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

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(the “MPAR Grant”).

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

and $ 2.2 million in years 1 and 2, respectively) of which the Company must contribute $ 1.1 million in the first year of the grant.

August 2019, the grant was amended such that the approved budget for the two-year period decreased to approximately $ 5.1 million ($ 2.1

million and $ 3.0 million in years 1 and 2, respectively).

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

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

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

additional $ 2.8 million of funding in year 4 under the MPAR Grant from July 1, 2022 through June 30, 2023, subsequently extended through

December 31, 2023.

This brings total funding under this grant to approximately $ 10.7 million.

The initial grant was extended several times and cumulative funding under this grant of approximately

$ 10.7 million was completed in December 2023.

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.

The total approved budget was approximately $ 5.4 million

and the current grant period ends in August of 2024.

As of March 31, 2024, the remaining funding under the grant is $ 1.9 million.

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

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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:

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

OF REVENUE RECOGNIZATION UNDER GRANTS

Months Ended September 30,

Three Months Ended March 31,

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 sheets.

As all amounts are expected to be remitted in a timely

manner, no valuation allowances are recorded.

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

As all amounts are expected to be remitted in a timely manner,

no valuation allowances are recorded.

and development costs

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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.

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.

Diluted net loss per share is calculated by adjusting basic shares

outstanding for the dilutive effect of common share equivalents outstanding for the period.

For purposes of the diluted net loss per

share calculation, stock options, RSUs, warrants and convertible notes are considered to be common share equivalents but are excluded

from the calculation of diluted net loss per common share if their effect would be anti-dilutive.

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

they would have been anti-dilutive:

they would have been anti-dilutive (the Company has utilized the principal balance outstanding and the end of period conversion price

for the Convertible Notes for the purposes of the weighted average share calculation below):

OF WEIGHTED AVERAGE SHARES OF ANTI-DILUTIVE SECURITIES

Ended September 30,

Three Months Ended March 31,

Stock options

Convertible notes

Anti-dilutive weighted

average shares

Issued Accounting Pronouncements

August 2020, the FASB issued ASU No.

2020-06, Debt – Debt with Conversion and Other Options (Topic 470) to address issues identified

as a result of the complexity with applying GAAP for certain financial instruments with characteristics of liabilities and equity.

FASB decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock, resulting in

fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP.

Certain types of

convertible instruments will continue to be subject to separation models:

(a) those with embedded conversion features that are not clearly

and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from

derivative accounting and (b) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in

For convertible instruments, the contracts primarily affected are those with beneficial conversions or cash conversion features

as the accounting models for those specific features have been removed.

For contracts in an entity’s own equity, the contracts

primarily affected are freestanding instruments and embedded features that are accounted for as derivatives due to a failure to meet

the settlement conditions of the derivatives scope exceptions.

The FASB simplified the settlement assessment by removing the requirements

to (a) consider whether the contract would be settled in registered shares, (b) to consider whether collateral is required to be posted,

and (c) assess shareholder rights.

The FASB also decided to enhance information transparency by making targeted improvements to the disclosures

for convertible instruments and earnings-per-share guidance.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2023

and early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.

Entities must adopt the guidance

as of the beginning of its annual fiscal year and a modified retrospective or fully retrospective transition approach is permitted.

Company adopted the standard with an effective date of January 1, 2023 and the adoption did not have a significant impact on the consolidated

financial statements.

November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”,

which sets forth improvements to the current segment disclosure requirements in accordance with Topic 280 “Segment Reporting,”

including clarifying that entities with a single reportable segment are subject to both new and existing segment reporting requirements.

ASU 2023-07 will be effective retrospectively for fiscal years beginning after December 15, 2023, and interim periods beginning after

December 15, 2024.

Adoption of this ASU is currently being evaluated by the Company.

December 2023, the FASB issued ASU No.

2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” ASU 2023-09

requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income

ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

expenses and other current assets consisted of the following:

OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

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Other current assets

Total prepaid expenses

and other current assets

Total prepaid expenses and other current assets

5 – ACCRUED EXPENSES AND OTHER LIABILITIES

expenses and other liabilities consisted of the following:

OF ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued research and development

Share subscription facility commitment fees

Professional fees

Other accrued liabilities

Total accrued expenses

and other liabilities

Total accrued expenses and other liabilities

6 – COMMITMENTS AND CONTINGENCIES

of September 30, 2023, the Company’s commitments included an estimated $ 17.8 million related to the Company’s open purchase

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

of March 31, 2024, the Company’s commitments included an estimated $ 17.6 million related to the Company’s open purchase orders

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

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

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to the delivery of goods or the performance of services.

of September 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.

From time to time, the Company could become involved

in disputes and various litigation matters that arise in the normal course of business.

These may include disputes and lawsuits related

to intellectual property, licensing, contract law and employee relations matters.

Periodically, the Company reviews the status of significant

matters, if any exist, and assesses its potential financial exposure.

If the potential loss from any claim or legal claim is considered

probable and the amount can be estimated, the Company accrues a liability for the estimated loss.

of March 31, 2024, and December 31, 2023, 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.

From time to time, the Company could become involved in disputes

and various litigation matters that arise in the normal course of business.

These may include disputes and lawsuits related to intellectual

property, licensing, contract law and employee relations matters.

Periodically, the Company reviews the status of significant matters,

if any exist, and assesses its potential financial exposure.

If the potential loss from any claim or legal claim is considered probable

and the amount can be estimated, the Company accrues a liability for the estimated loss.

Legal proceedings are subject to uncertainties,

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As additional information becomes available, the Company reassesses the potential liability related to pending claims and litigation.

Company’s current lease agreement (as amended) has a term that extends through October 31, 2024 with no option to renew.

September 30, 2023, the future lease payments totaled $ 2,732 .

The Company recognized total rent expense of $ 8,375 and $ 25,124 in the

three and nine months ended September 30, 2023 and $ 7,939 and $ 23,606 in the three and nine months ended September 30, 2022.

Company’s current lease agreement (as amended) has a term that extends through October 31, 2024, with no contracted option to renew.

As of March 31, 2024, the future lease payments totaled $ 22,727 .

The Company recognized total rent expense of $ 8,747 in the three months

ended March 31, 2024 and $ 8,375 in the three months ended March 31, 2023.

Subscription Facility

December 2020, the Company executed the GEM Agreement, under which an investor agreed to provide the Company with a share subscription

facility of up to $ 60.0 million for a 36-month term following the public listing of the Company’s common stock.

The Company controls

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

The investor will pay, in cash,

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

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

preceding the draw down date.

Concurrent with the public listing of the Company’s shares on July 2, 2021, the Company issued to

the investor 4,608 warrants with a three -year term to purchase common stock of Ensysce at an exercise price of $ 2,402.40 per share, subsequently

reduced to $ 1.06 at February 12, 2024 (Note 8).

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

has not raised any capital to date pursuant to the GEM facility.

7 – NOTES PAYABLE

Company’s outstanding notes payable balance was $ 350,932 as of September 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 March 31, 2024.

Principal balance

Accrued interest

Unamortized Debt Discount & Issuance Costs

Net debt balance

Financed insurance

following table provides a summary of the Company’s outstanding debt as of December 31, 2023:

value adjustment

Principal balance

Accrued interest

Unamortized Debt Discount & Issuance Costs

Net debt balance

$ ( 1,197,200 )

Financed insurance

interest expense recognized for financed insurance was $ 7,649 and $ 9,146 for the three and nine months ended September 30, 2023 and $ 4,859

and $ 6,864 for the three and nine months ended September 30, 2022.

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

The agreement provides

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

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.

The total initial fair value of the debt at issuance

was $ 15.9 million.

The Company recorded total issuance costs of $ 1.9 million representing investment banking and legal fees of $ 1.0 million

and original issue discounts of $ 0.9 million.

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 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 September 30, 2023.

$ ( 1,197,200 )

interest expense recognized for financed insurance was $ 1,944 and $ 1,497 for the three months ended March 31, 2024 and 2023, respectively.

Interest expense recognized for the 2023 Notes was $ 1.2 million for the three months ended March 31, 2024, which consists of amortization

of the debt discount and debt issuance costs and incurred and accrued interest.

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 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.

Additionally, the Company recorded issuance costs of $ 1.1 million

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 .

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

rights to its patents and licenses.

The Company is restricted from issuing certain additional debt or equity without the prior written

consent of the holders for certain specified periods set forth in the 2022 Notes.

If, at any time while the 2022 Notes are outstanding,

the Company carries out one or more capital raises in excess of $ 5.0 million, the holder has the right to require the Company to use

up to 20 % of the gross proceeds of such transaction to redeem all or a portion of the convertible notes for an amount in cash equal to

the cash Mandatory Redemption Amount (i.e., 108% of outstanding principal and unpaid interest).

The Company triggered this provision

in connection with the public offering of securities in December of 2022, the resulting principal payments and interest were reflected

as a reduction to the outstanding balance of the 2022 Notes.

The 8 % premium was paid in cash and was reflected as interest expense within

the consolidated statement of operations.

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

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

The interest may be settled in cash or shares

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

The outstanding

principal and interest balances were satisfied in March 2023.

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.

connection with the 2022 Notes, the Company also issued warrants to purchase 38,900 shares of the Company’s common stock.

have an adjusted exercise price of $ 3.64 and are exercisable for five years following issuance of the 2022 Notes.

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

outstanding 2022 Notes from $ 24.07 to $ 9.01 for the period from January 12, 2023 until May 12, 2023.

Cash true-up payments totaling $ 0.6

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.

Conversions of the 2022 Notes in

the quarter ended March 31, 2023, totaled $ 3.1 million and resulted in the issuance of 408,582 shares of common stock at a weighted-average

exercise price of $ 7.48 per share.

The outstanding principal and interest balances of the 2022 Notes were satisfied in March 2023.

true-up payments totaling $ 0.6 million for conversions below the adjusted price were paid in May 2023.

October 23, 2023, the Company entered into a Securities Purchase Agreement (“SPA”) for an aggregate financing of $ 1.8 million

with investors, including $ 0.2 million with a board member.

At the first closing under the SPA, which occurred on October 25, 2023, the

Company issued to the investors (i) senior secured convertible promissory notes in the aggregate principal amount of $ 612,000 for an

aggregate purchase price of $ 566,667 and (ii) warrants to purchase 1,255,697 shares of the Company’s common stock, par value $ 0.0001

per share in the aggregate.

At the second closing under the SPA, which occurred on November 29, 2023, the Company issued to the investors

referenced above, (i) additional notes in the aggregate principal amount of $ 1,224,000 for an aggregate purchase price of $ 1,133,333

and (i) additional warrants to purchase 2,511,394 shares of the common stock in the aggregate.

The notes mature on April 25, 2024 and

May 28, 2024 respectively.

combined notes are subject to an original issue discount of 8 %, have a term of six months from their respective date of issuance and

accrue interest at the rate of 6.0 % per annum.

The notes are convertible into common stock, at a per share conversion price equal to

Beginning ninety days following issuance of the respective notes, the Company is obligated to redeem monthly one third of the

original principal amount under the applicable note, plus accrued but unpaid interest, liquidated damages and any other amounts then

owing to the holder of such note.

The Company is required to pay the redemption amount in cash with a premium of 10 % or, at the election

of the purchaser at any time, some or all of the principal amount and interest may be paid by conversion of shares under the note into

common stock based on a conversion price equal to $ 1.5675 .

The Company determined the 2023 Notes are to be accounted for as conventional

convertible debt as they provide for the holder an option to convert the outstanding balances into a fixed number of shares (or an equivalent

amount of cash at the discretion of the Company) and the option to convert meets the definition of an exception from derivative accounting.

As a result, the Company has reflected the outstanding principal amount, the remaining unamortized discount (both original issue discount

and the relative fair value discount associated with the warrants discussed below) and the remaining debt issuance costs as a net amount

on the face of the balance sheet.

The amortization of the original debt discount (approximately $ 0.1 million) and issuance costs (approximately

$ 0.3 million) will be recorded as interest expense within the consolidated statements of operations.

As of March 31, 2024, approximately

$ 0.4 million of the original debt discount and issuance costs was amortized to interest expense.

warrants have an exercise price of $ 1.5675 , the same as the conversion price, and are exercisable for five years following the issuance

The warrants were equity classified as they are indexed to the Company’s stock and only settleable in shares.

were initially measured at fair value using a Black-Scholes valuation model and were allocated along with the 2023 Notes using the relative

fair value method.

The initial fair value of $ 1.1 million allocated to the warrants was considered a debt discount and will be amortized

to interest expense over the remaining term of the notes.

As of March 31, 2024, approximately $ 0.8 million of the discount associated

with the warrants was amortized to interest expense.

the quarter ended March 31, 2024, the Company converted 745,521 shares of common stock with a conversion value of $ 1.2 million related

to the 2023 Notes.

In addition, in connection with the SPA, the Company incurred a $ 1.0 million waiver fee in connection to the 2024

Warrant Inducement (see note 8) to pay down $ 0.5 million of 2023 Notes and $ 0.5 million in transaction costs recorded as such in the

consolidated statement of stockholders’ equity.

As of March 31, 2024, the remaining amount of the 2023 Notes, net of unamortized

debt and issuance costs outstanding, relates to senior secured convertible promissory notes held with a Company board member (see Note

insurance premiums

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

Monthly payments commenced 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.

incurred $ 7,649 and $ 9,146 of interest expense for the three and nine months ended September 30, 2023.

Monthly payments commenced in July 2023 and the final installment was paid on April 2, 2024.

The Company incurred $ 1,944 and $ 1,497 ,

of interest expense associated with the financed insurance premiums for the periods ended March 31, 2024 and 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 September 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 million.

The closing occurred on February 6, 2023.

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 million.

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.

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

Company’s current Certificate of Incorporation authorizes 250,000,000 shares of common stock and 1,500,000 shares of preferred

stock, both with par value equal to $ 0.0001 .

As of March 31, 2024, and December 31, 2023, there were no shares of preferred stock issued

and outstanding.

Warrant Inducement

February 12, 2024, the Company executed an Inducement Letter with certain holders of existing warrants to purchase up to an aggregate

of 3,601,752 shares of the Company’s common stock issued to the holders in connection with the 2023 May Offering.

Pursuant to the

Inducement Letter, the holders agreed to exercise for cash their existing warrants to purchase an aggregate of 3,601,752 shares of Common

Stock at a reduced exercise price of $ 1.31 per share in consideration of the Company’s agreement to issue new unregistered Series

A Warrants (the “Series A Warrants”) to purchase up to 3,601,752 shares of Common Stock and new unregistered Series B Warrants

(the “Series B Warrants”) to purchase up to 3,601,752 shares of Common Stock (collectively, the “New Warrant Shares”).

The Series A Warrants have an exercise price of $ 1.06 per share and have a term equal to eighteen months from the date of issuance.

Series B Warrants have an exercise price of $ 1.06 per share and will expire on May 12, 2028 .

The gross proceeds to the Company from the

exercise of the warrants were approximately $ 4.7 million, prior to deducting placement agent fees and estimated offering expenses.

the existing warrants and the new warrants were equity classified before and after the exchange, and as the exchange is directly attributable

to an equity offering, the Company recognized the effect of the modification of approximately $ 5.2 million as an equity issuance cost.

connection with the execution of the Inducement Letter, the Company executed a waiver related to the 2023 Notes’s SPA it had entered

into as of October 23, 2023.

The SPA contained restrictions on the Company’s ability to undertake certain transactions, which included

the execution of the Inducement Letter.

The Waiver permitted the Company to execute the Inducement Letter but required repayment of the

certain investor held notes issued under the SPA with a premium following closing of the transaction contemplated thereby.

Refer to Note

7 for the details of the waiver fee and the application of the amounts to the outstanding notes and as a transaction cost of the warrant

Company utilized an exclusive placement agent for the 2024 Warrant Inducement and incurred approximately $ 0.3 million in legal fees and

other closing costs.

Additionally, the Company issued to the placement agent as compensation unregistered warrants to purchase up to

252,123 shares of Common Stock, equal to 7.0% of the aggregate number of shares of Common Stock (or warrants) placed in the transaction .

The placement agent warrants expire on May 12, 2028 , and have an exercise price of $ 1.6375 per share of Common Stock (equal to 125% of

the reduced exercise price per Existing Warrant).

closing of the offering occurred on February 14, 2024.

to the 2024 Warrant Inducement, a holder left 1,488,144 shares in abeyance at the Company’s transfer agent to be delivered

to the holder at their request.

On April 8, 2024, 256,000 shares held in abeyance were delivered to the holder and the remaining shares

are held in abeyance.

Accordingly, as of March 31, 2024, 1,488,144 shares were held in abeyance, have not been issued and are not outstanding.

March 31, 2024, outstanding warrants to purchase shares of common stock are as follows:

OF OUTSTANDING WARRANT

Exercise Price

Classification

$ 2,400.00 - 2,760.00

LACQ warrants

Share subscription facility

Public offering

$ 3.64 - 16.80

Public offering

$ 8.58 - 12.60

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 and August 2023, 7,782

and 7,310 warrants, respectively, were cancelled).

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.

total of 41,666 of the outstanding warrants are public warrants which trade on the OTC Pink

Open Market under the ticker symbol ENSCW.

$ 1.06 - 1.64

2024 Warrants

June 30, 2021, as a result of the Closing of the Business Combination, the Company assumed a total of 78,751 warrants previously

issued by LACQ (subsequently in December 2022 and August 2023, 7,782 and 7,310 warrants, respectively, were cancelled).

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 ENSCW.

The remaining 21,993 warrants are private warrants

with restrictions on transfer and which have the right to a cashless exercise at the option

of the holder.

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 to $ 2,400.00 .

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.

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 facility.

The warrants have a three -year life and an initial exercise price of $ 2,402.40 per share.

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.

to common stock issued at prices 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 September 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.

price of $ 2,402.40 per share to the current exercise price at March 31, 2024 of $ 1.06 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 1,507 and 3,011 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

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

and November 4, 2026 , respectively.

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 .

1 unchanged sentence

reduce their exercise price to $ 3.64 .

July 1, 2022 and August 9, 2022, the Company issued 19,450 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 2022 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 549,993 equity classified warrants in connection with a public offering.

The warrants were immediately

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 .

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 conversion price) 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.

5 unchanged sentences

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, 344,804 were exercised between the closing date and September

As of September 30, 2023, 222,072 pre-funded warrants remain outstanding.

The pre-funded warrants are immediately exercisable

with an exercise price of $ 0.0001 .

In connection to the Inducement Letter entered into February 12, 2024, certain existing

warrant holders agreed to exercise 3,601,752 series A-1 and A-2 warrants at a reduced exercise price of $ 1.31 .

The placement agent

warrants remain outstanding as of March 31, 2024.

October 25, 2023 and November 28, 2023, the Company issued warrants to purchase 1,255,697 shares and 2,511,394 shares, respectively.

The warrants were immediately exercisable with an exercise price of $ 1.5675 and expire on October 25, 2028 and November 28, 2028 ,

respectively.

In January of 2024 a holder of the warrants exercised 1,323,904 warrants at an exercise price of $ 1.5675 .

February 12, 2024, the Company issued 7,455,627 equity classified warrants (Series A Warrants, Series B Warrants and placement agent

warrants) in connection with the Inducement Letter for the 2024 warrant inducement and related warrant restructuring.

A and Series B Warrants were immediately exercisable with an exercise price of $ 1.06 and expire on August 14, 2025 and May 12, 2028 ,

respectively.

The placement agent warrants were immediately exercisable with an exercise price of $ 1.6375 and expire on May 12, 2028 .

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

2 unchanged sentences

OF WARRANTS FAIR VALUE ESTIMATION ASSUMPTIONS

Expected term (years)

(a) LACQ warrants

(grant date varies)

(b) Share subscription facility

(grant date 7/2/21)

(b) Share subscription facility

(remeasurement date varies)

Expected term

(a) LACQ warrants (grant date varies)

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

(b) Share subscription facility (remeasurement date varies)

$ 1.13 - $ 1,029.60

(grant date 9/24/21)

(grant date 11/5/21)

(remeasured at 9/30/23)

(d) Liability classified warrants

(grant date 7/1/22)

(d) Liability classified warrants

(grant date 8/9/22)

(d) Liability classified warrants

(remeasured at 9/30/23)

91.3 % - 140.5 %

1.04 % - 5.43 %

132.7 % - 135.2 %

(d) Liability classified warrants (grant date 7/1/22)

(d) Liability classified warrants (grant date 8/9/22)

(d) Liability classified warrants (remeasured at 3/31/24)

120.7 % - 122.1 %

9 - STOCK-BASED COMPENSATION

connection with the Business Combination, the Company assumed the 2021 Omnibus Incentive Plan (the “2021 Omnibus Plan”),

which was approved by LACQ’s board and subsequently LACQ’s stockholders at a special stockholder meeting on June 28, 2021.

The 2021 Omnibus Plan provides for the conversion with existing terms of the 18,432 options outstanding under Former Ensysce stock plans

and reserves for issuance an additional 4,166 shares for future awards under the 2021 Omnibus Plan.

No further awards may be made under

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 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 $ 41,336 and $ 198,000 for the three and

nine months ended September 30, 2023 and $ 128,357 and $ 731,126 for the three and nine months ended September 30, 2022.

The Company recognized

stock-based compensation expense within research and development of $ 14,338 and $ 52,224 for the three and nine months ended September

30, 2023 and $ 28,791 and $ 124,034 for the three and nine months ended September 30, 2022.

were no stock options granted during the nine months ended September 30, 2023.

During the nine months ended September 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

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

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

connection with the Business Combination, the Company assumed the 2021 Omnibus Incentive Plan.

In February 2023, the Company’s

Board approved an annual increase of 26,725 shares and in August 2023, the Company’s stockholders approved a proposal for an increase

of 585,796 shares available for future grant under the 2021 Omnibus Plan.

Company recognized within general and administrative expense stock-based compensation expense of $ 23,488 and $ 96,270 for the three months

ended March 31, 2024 and 2023, respectively.

During the three months ended March 31, 2024 and 2023, the Company recognized stock-based

compensation expense of $ 9,719 and $ 20,863 , respectively, within research and development expense.

were no stock options granted during the three months ended March 31, 2024 and March 31, 2023.

following table summarizes the Company’s stock option activity during the three months ended March 31, 2024:

SCHEDULE OF STOCK OPTION ACTIVITY

contractual life

Weighted average

Exercise price

Remaining contractual life

Intrinsic value

Outstanding at December 31, 2023

Expired / Forfeited

Outstanding at September 30, 2023

Exercisable at September 30, 2023

Outstanding at March 31, 2024

Exercisable at March 31, 2024

Vested and expected to vest

2 unchanged sentences

in the Black-Scholes model in estimating the fair value of the options granted for the periods presented were as follows (there were

no grants issued in 2023):

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

Nine Months Ended

September 30, 2022

Exercise price

$ 103.20 - 1,507.20

Expected stock price volatility

76.61 - 95.87 %

Expected term (years)

Risk-free interest rate

1.52 % - 3.14 %

Expected dividend yield

no grants issued in during the three months ended March 31, 2024 and 2023):

stock-price volatility.

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

weighted-average grant date fair value of options granted during the nine months ended September 30, 2022 was $ 19.24 .

of September 30, 2023, the Company had an aggregate of $ 163,754 of unrecognized share-based compensation cost, which is expected to be

recognized over the weighted average period of 1.32 years.

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

SCHEDULE OF RESTRICTED STOCK UNITS

Restricted Stock

Weighted average fair

Outstanding at December 31, 2022

Outstanding at September 30, 2023

were no restricted stock units granted or forfeited during the nine months ended September 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

of March 31, 2024, the Company had an aggregate of $ 86,641 of unrecognized share-based compensation cost, which is expected to be recognized

over the weighted average period of 1.08 years.

were no restricted stock units granted or outstanding during the three months ended March 31, 2024.

The estimated fair value of each

of the Company’s restricted stock unit awards granted in 2023 was determined on the date of grant based on the closing price of

the Company’s common stock on the previous trading date.

The restricted stock unit awards granted in 2023 were immediately vested

and there were no other valuation inputs used for the estimated fair value.

Reserved for Future Issuance

1 unchanged sentence

SCHEDULE OF COMMON STOCK FUTURE ISSUANCE

September 30, 2023

March 31, 2024

Awards outstanding under the 2021 Omnibus Incentive Plan

2 unchanged sentences

Total shares of common stock reserved for future issuance

10 – SUBSEQUENT EVENTS

October 23, 2023, the Company entered into a Securities Purchase Agreement (the “SPA”) for an aggregate financing of $ 1.7

million with investors.

At the first closing under the SPA, which is expected to occur on or before November 9, 2023, the Company will

issue to the investors (i) senior secured convertible promissory notes in the aggregate principal amount of $ 612,000 for an aggregate

purchase price of $ 566,667 and (ii) warrants to purchase 1,255,697 shares of the Company’s common stock, par value $ 0.0001 per

share in the aggregate.

At the second closing under the SPA, which will occur upon certain conditions being satisfied, the Company will

issue to the investors referenced above, (i) additional notes in the aggregate principal amount of $ 1,224,000 for an aggregate purchase

price of $ 1,133,333 and (i) additional warrants to purchase 2,511,394 shares of the common stock in the aggregate.

In connection with

the financing, the Company issued a $ 0.2 million senior secured convertible promissory note to a board member.

combined notes are subject to an original issue discount of 8 %, have a term of six months from their respective date of issuance and

accrue interest at the rate of 6.0 % per annum.

The notes are convertible into common stock, at a per share conversion price equal to

Beginning ninety days following issuance of the respective notes, the Company is obligated to redeem monthly one third of the

original principal amount under the applicable note, plus accrued but unpaid interest, liquidated damages and any other amounts then

owing to the holder of such note.

The Company is required to pay the redemption amount in cash with a premium of 10 % or, at the election

of the purchaser at any time, some or all of the principal amount and interest may be paid by conversion of shares under the note into

common stock based on a conversion price equal to $ 1.5675 .

warrants will have an exercise price of $ 1.5675 , the same as the conversion price, and are exercisable for five years following issuance,

issuance to occur on each of the first and second closing dates under the SPA.

Incentive Plan

October 19, 2023, the Company registered 26,725 additional common shares connection with Section 4.1(a)(i) of the 2021 Incentive Plan

and 585,796 additional common shares in connection with an amendment of the 2021 Incentive Plan, which was approved by shareholders on

August 24, 2023.

In October 2023, the Company granted awards for 615,000 common shares under the 2021 Incentive Plan.

10 - RELATED PARTIES

of March 31, 2024, the Company held a $ 0.2 million senior secured convertible promissory note plus accrued interest and 0.4 million warrants

exercisable for common stock at $ 1.5675 per share issued from a board member in connection to the issuance of the 2023 Notes.

25, 2024, the Company and the board member entered into a forbearance agreement that will expire on April 25, 2025 .

Upon termination

of the forbearance period, the Company will owe the remaining outstanding principal balance together with unpaid interest.

may pay the notes in full at any time prior to the conclusion of the forbearance period.

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