Ensysce Biosciences, Inc. 10-Q

Item 1. Financial Statements. Ensysce Biosciences, Inc. Consolidated Balance Sheets (Unaudited) June 30, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 1,043,231 $ 1,123,604 Unbilled receivable 224,223 97,561 Prepaid expenses and other current assets 1,192,283 1,067,703 Total current assets 2,459,737 2,288,868 Other assets 335,883 419,217 Total assets $ 2,795,620 $ 2,708,085 Liabilities and stockholders’ equity (deficit) Current liabilities: Accounts payable $ 481,971 $ 1,936,007 Accrued expenses and other liabilities 370,186 542,260 Notes payable and accrued interest 454,463 854,697 Total current liabilities 1,306,620 3,332,964 Long-term liabilities: Liability classified warrants 9,615 26,388 Total long-term liabilities 9,615 26,388 Total liabilities $ 1,316,235 $ 3,359,352 Commitments and contingencies (Note 6) - - Stockholders’ equity (deficit) Preferred stock, $ 0.0001 par value, 1,500,000 shares authorized, no shares issued and outstanding at June 30, 2024 (unaudited) and December 31, 2023 - - Common stock, $ 0.0001 par value, 250,000,000 shares authorized at June 30, 2024 (unaudited) and December 31, 2023; 8,151,253 and 3,146,157 shares issued at June 30, 2024 (unaudited) and December 31, 2023, respectively; 8,151,172 and 3,146,076 shares outstanding at June 30, 2024 (unaudited) and December 31, 2023, respectively 815 315 Additional paid-in capital 128,448,699 121,233,901 Accumulated deficit ( 126,641,646 ) ( 121,557,074 ) Total Ensysce Biosciences, Inc. stockholders’ equity (deficit) 1,807,868 ( 322,858 ) Noncontrolling interests in stockholders’ deficit ( 328,483 ) ( 328,409 ) Total stockholders’ equity (deficit) 1,479,385 ( 651,267 ) Total liabilities and stockholders’ equity (deficit) $ 2,795,620 $ 2,708,085 The accompanying notes are an integral part of these consolidated financial statements. 1 Ensysce Biosciences, Inc. Consolidated Statements of Operations (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Federal grants $ 181,797 $ 490,472 $ 487,519 $ 1,280,107 Operating expenses: Research and development 947,229 1,643,726 1,726,133 3,439,742 General and administrative 1,190,010 1,140,700 2,559,791 2,695,553 Total operating expenses 2,137,239 2,784,426 4,285,924 6,135,295 Loss from operations ( 1,955,442 ) ( 2,293,954 ) ( 3,798,405 ) ( 4,855,188 ) Other income (expense): Change in fair value of convertible notes - - - 146,479 Change in fair value of liability classified warrants 7,818 43,622 16,773 262,650 Interest expense, net ( 27,563 ) - ( 1,275,628 ) ( 1,497 ) Other income, net 7,394 11,030 ( 27,096 ) 16,448 Total other income (expense), net ( 12,351 ) 54,652 ( 1,285,951 ) 424,080 Net loss $ ( 1,967,793 ) $ ( 2,239,302 ) $ ( 5,084,356 ) $ ( 4,431,108 ) Net loss attributable to noncontrolling interests - ( 7,060 ) ( 74 ) ( 11,001 ) Deemed dividend related to warrants down round provision - 3,729 290 12,038 Net loss attributable to common stockholders $ ( 1,967,793 ) $ ( 2,235,971 ) $ ( 5,084,572 ) $ ( 4,432,145 ) Net loss per basic and diluted share: Net loss per share attributable to common stockholders, basic and diluted $ ( 0.22 ) $ ( 0.98 ) $ ( 0.67 ) $ ( 2.66 ) Weighted average common shares outstanding, basic and diluted 8,817,316 2,274,113 7,640,192 1,667,527 The accompanying notes are an integral part of these consolidated financial statements. 2 Ensysce Biosciences, Inc. Consolidated Statements of Changes in Stockholders’ EQUITY (Deficit) (Unaudited) Stockholders’ Equity (Deficit) Common Stock Additional Number of Shares Amount Paid-In Capital Accumulated Deficit Noncontrolling interests Total Balance on March 31, 2023 1,284,583 $ 128 $ 113,293,834 $ ( 113,127,237 ) $ ( 319,149 ) $ ( 152,424 ) Settlement of restricted stock units 312 - - - - - Public offering, net 1,084,000 109 6,360,843 - - 6,360,952 Transaction costs associated with public offering - - ( 253,836 ) - - ( 253,836 ) Issuance of common stock upon exercise of warrants 300,897 30 ( 30 ) - - - Stock-based compensation - - 77,417 - - 77,417 Deemed dividend related to warrants down round provision - - 3,729 ( 3,729 ) - - Net loss - - ( 2,232,242 ) ( 7,060 ) ( 2,239,302 ) Balance on June 30, 2023 2,669,792 $ 267 $ 119,481,957 $ ( 115,363,208 ) $ ( 326,209 ) $ 3,792,807 Balance on March 31, 2024 7,329,172 $ 733 $ 128,422,232 $ ( 124,673,853 ) $ ( 328,483 ) $ 3,420,629 Issuance of common stock upon warrant inducement 822,000 82 ( 82 ) - - - Stock-based compensation - - 26,549 - - 26,549 Net Loss - - - ( 1,967,793 ) - ( 1,967,793 ) Balance on June 30, 2024 8,151,172 $ 815 $ 128,448,699 $ ( 126,641,646 ) $ ( 328,483 ) $ 1,479,385 Balance on December 31, 2022 534,490 $ 53 $ 107,216,566 $ ( 110,931,063 ) $ ( 315,208 ) $ ( 4,029,652 ) Settlement of restricted stock units 624 - - - - - Settlement of commitment fee 44,444 4 399,996 - - 400,000 Conversion of convertible notes 408,580 41 3,056,851 - - 3,056,892 Public offerings, net 1,381,619 139 9,049,865 - - 9,050,004 Transaction costs associated with public offerings - - ( 447,879 ) - - ( 447,879 ) Issuance of common stock upon exercise of warrants 300,897 30 ( 30 ) - - - Stock-based compensation - - 194,550 - 194,550 Reverse split fractional shares ( 862 ) - - - - - Deemed dividend related to warrants down round provision - - 12,038 ( 12,038 ) - - Net loss - - - ( 4,420,107 ) ( 11,001 ) ( 4,431,108 ) Balance on June 30, 2023 2,669,792 $ 267 $ 119,481,957 $ ( 115,363,208 ) $ ( 326,209 ) $ 3,792,807 Balance on December 31, 2023 3,146,076 $ 315 $ 121,233,901 $ ( 121,557,074 ) $ ( 328,409 ) $ ( 651,267 ) Balance 3,146,076 $ 315 $ 121,233,901 $ ( 121,557,074 ) $ ( 328,409 ) $ ( 651,267 ) Settlement of restricted stock units 63 - - - - - Conversion of convertible notes 745,521 75 1,168,525 - - 1,168,600 Issuance of common stock upon exercise of warrants 1,323,904 132 2,075,087 - - 2,075,219 Issuance of common stock upon warrant inducement, net of issuance costs 2,935,608 293 4,718,002 - - 4,718,295 Transaction costs associated with warrant inducement - - ( 806,862 ) - - ( 806,862 ) Stock-based compensation - - 59,756 - - 59,756 Deemed dividend related to warrants down round provision - - 290 ( 290 ) - - Net loss - - - ( 5,084,282 ) ( 74 ) ( 5,084,356 ) Balance on June 30, 2024 8,151,172 $ 815 $ 128,448,699 $ ( 126,641,646 ) $ ( 328,483 ) $ 1,479,385 Balance 8,151,172 $ 815 $ 128,448,699 $ ( 126,641,646 ) $ ( 328,483 ) $ 1,479,385 The accompanying notes are an integral part of these consolidated financial statements. 3 Ensysce Biosciences, Inc. Consolidated Statements of Cash Flows (U naudited ) Six Months Ended June 30, 2024 2023 Cash flows from operating activities: Net loss $ ( 5,084,356 ) $ ( 4,431,108 ) Adjustments to reconcile net loss to net cash used in operating activities: Accrued interest and interest expense related to note conversions 29,113 1,497 Amortization of original issue discount and debt issuance costs 1,197,200 - Change in fair value of convertible notes - ( 146,479 ) Change in fair value of liability classified warrants ( 16,773 ) ( 262,650 ) Stock-based compensation 59,756 194,550 Lease cost - ( 90 ) Changes in operating assets and liabilities: Unbilled receivable ( 126,662 ) 169,243 Prepaid expenses and other assets 190,909 469,404 Accounts payable ( 1,795,404 ) ( 1,669,162 ) Accrued expenses and other liabilities ( 172,077 ) ( 1,040,666 ) Net cash used in operating activities ( 5,718,294 ) ( 6,715,461 ) Cash flows from financing activities: Proceeds public offering, net - 9,050,004 Proceeds from warrant exercises 2,075,219 - Proceeds from warrant inducement, net of issuance costs 4,718,295 - Transaction costs associated with public offering - ( 447,879 ) Transaction costs associated with warrant inducement ( 465,494 ) - Repayment of convertible notes ( 485,190 ) ( 1,000,208 ) Repayment of financed insurance premiums ( 204,909 ) ( 204,676 ) Net cash provided by financing activities 5,637,921 7,397,241 Increase (decrease) in cash and cash equivalents ( 80,373 ) 681,780 Cash and cash equivalents beginning of period 1,123,604 3,147,702 Cash and cash equivalents end of period $ 1,043,231 $ 3,829,482 Supplemental disclosure of non-cash investing and financing activities: Incremental fair value of February 2024 warrant inducement $ 5,167,372 $ - Conversions of convertible notes into common stock $ 1,168,600 $ 3,056,892 Transaction costs from warrant inducement $ 341,368 $ - Deemed dividend related to warrants down round provision $ 290 $ 12,038 Financed insurance premiums $ 235,155 $ 445,737 Settlement of commitment fee in shares $ - $ 400,000 The accompanying notes are an integral part of these consolidated financial statements. 4 ENSYSCE BIOSCIENCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES Ensysce Biosciences, Inc. (“Ensysce”), along with its 79.2 %-owned subsidiary, EBIR, Inc. (“EBIR”, formerly known as Covistat, Inc.) and its wholly-owned subsidiaries EBI Operating, Inc. and EBI OpCo, Inc. (collectively, the “Company”), is a clinical-stage biotech company using its proprietary technology platforms to develop safer prescription drugs. The primary focus of the Company is its program developing abuse and overdose resistant pain technology with a clinical stage program being the abuse resistant, TAAP (Trypsin Activated Abuse Protection) opioid product candidate, PF614. In addition, the Company is developing its MPAR ® (Multi-Pill Abuse Resistant) technology for overdose protection which will be applied to the PF614 program. The Company is also applying its TAAP and MPAR ® technology to a methadone prodrug for use in the treatment of Opioid Use Disorder. In 2020, the Company commenced an initiative to develop a therapeutic for the treatment of certain coronavirus infections through the formation of a separate entity, EBIR, a Delaware corporation. Pursuant to the certificate of incorporation, EBIR was authorized to issue 1,000,000 shares of common stock, $ 0.001 par value per share, and 100,000 shares of preferred stock, $ 0.001 par value per share. Ensysce is a 79.2 % 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. The Company currently operates in one business segment, which is pharmaceuticals. The Company is not organized by market and is managed and operated as one business. A single management team reports to the chief operating decision maker, the Chief Executive Officer. NOTE 2 - BASIS OF PRESENTATION The consolidated financial statements have been prepared in accordance with GAAP and pursuant to the rules and regulations of the SEC. The consolidated financial statements include the accounts of Ensysce Biosciences, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in the consolidation. In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the consolidated financial statements. Operating results for the six months ended June 30, 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. Going concern The 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. The Company has not generated any product revenue. There is no assurance that profitable operations will ever be achieved, and, if achieved, will 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. 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. 5 While the Company believes in the viability of its strategy to ultimately realize revenues and in its ability to raise additional funds, management cannot be certain that additional funding will be available on acceptable terms, or at all. The Company’s ability to continue as a going concern is dependent upon its ability to obtain adequate financing and achieve profitable operations. As a result, these plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern for a period of 12 months following the date these consolidated financial statements were issued. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of estimates and assumptions Preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and disclosed in the accompanying notes. Actual results may differ from those estimates and such differences may be material to the consolidated financial statements. The more significant estimates and assumptions by management include, but are not limited to, the expense recognition for certain accrued research and development services. Cash and cash equivalents For purposes of the consolidated balance sheets and consolidated statements of cash flows, the Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. Concentrations of credit risk and off-balance sheet risk Cash and cash equivalents are financial instruments that are potentially subject to concentrations of credit risk. The Company’s cash and cash equivalents are deposited in accounts at large financial institutions and amounts currently exceed federally insured limits. The Company has no financial instruments with off-balance sheet risk of loss. Additionally, the Company had concentration in accounts payable, as two research and development vendors made up greater than 10% individually, and 31 % and 38 % in aggregate , of the outstanding accounts payable balance as of June 30, 2024 and December 31, 2023, respectively. Property and equipment Property and equipment are fully depreciated and as such there is no depreciation expense recognized in the periods presented. Fair Value Measurement ASC 820, Fair Value Measurements , (“ASC 820”) provides guidance on the development and disclosure of fair value measurements. Pursuant to ASC 820, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace. Level 3: 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. The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them for each reporting period. This determination requires significant judgments to be made by the Company. As of June 30, 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. 6 Warrants The 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. The following tables present liabilities measured and recorded at fair value on the Company’s consolidated balance sheets as of June 30, 2024, and December 31, 2023. SCHEDULE OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE Total Level 1 Level 2 Level 3 June 30, 2024 Total Level 1 Level 2 Level 3 Liability classified warrants $ 9,615 $ - $ - $ 9,615 Total $ 9,615 $ - $ - $ 9,615 Total Level 1 Level 2 Level 3 December 31, 2023 Total Level 1 Level 2 Level 3 Liability classified warrants 26,388 - - 26,388 Total $ 26,388 $ - $ - $ 26,388 The following table summarizes the change in fair value of the Company’s Level 3 liabilities for the six months ended June 30, 2024 (no level 3 assets as of the six months ended June 30, 2024): SCHEDULE OF CHANGE IN FAIR VALUE OF COMPANY’S LEVEL 3 Liability classified warrants Fair value, December 31, 2023 $ 26,388 Change in fair value ( 16,773 ) Fair value, June 30, 2024 $ 9,615 Federal Grants In 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 ® overdose prevention technology (the “MPAR Grant”). The initial grant was extended several times and cumulative funding under this grant of approximately $ 10.7 million was completed in December 2023. 7 In 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 August 31, 2024. As of June 30, 2024, the remaining cash funding under the grant is $ 1.9 million. The Company recognizes revenue when costs related to the grants are incurred and assessed as reimbursable. The Company believes this policy is consistent with the overarching premise in Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”), applied by analogy, to ensure that it recognizes revenues to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services, even though there is no “exchange” as defined in ASC 606. The Company believes the recognition of revenue as costs are incurred and reimbursable amounts become due is analogous to the concept of transfer of control of a service over time under ASC 606. The revenue recognized under the MPAR Grant and OUD Grant was as follows: SCHEDULE OF REVENUE RECOGNITION UNDER GRANTS Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 MPAR $ - $ 437,263 $ - $ 918,542 TAAP/OUD 181,797 53,209 487,519 361,565 Total $ 181,797 $ 490,472 $ 487,519 $ 1,280,107 Amounts 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 in a timely manner, no valuation allowances are recorded. Research and development costs The Company’s research and development expenses consist primarily of third-party research and development expenses, consulting expenses, animal and clinical studies, and any allocable direct overhead, including facilities and depreciation costs, as well as salaries, payroll taxes, and employee benefits for those individuals directly involved in ongoing research and development efforts. Research and development expenses are charged to expense as incurred. Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. General and administrative expenses General and administrative expenses consist primarily of personnel costs associated with the Company’s executive, finance, human resources, compliance, and other administrative personnel, as well as accounting and legal professional services fees. Stock-based compensation The Company expenses stock-based compensation over the requisite service period based on the estimated grant-date fair value of the awards using a graded amortization approach. The Company accounts for forfeitures as they occur. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. Stock-based compensation costs are recorded in general and administrative expenses and research and development expenses in the consolidated statements of operations. From time-to-time equity classified awards may be modified. On the modification date, the Company estimates the fair value of the awards immediately before and immediately after modification. The incremental increase in fair value is recognized as expense immediately to the extent the underlying equity awards are vested and over the same remaining amortization schedule as the unvested underlying equity awards. 8 Income taxes Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense. Net loss per share The 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. Basic shares outstanding include the weighted average effect of the Company’s outstanding pre-funded warrants and abeyance shares, which require no consideration for the delivery of shares of common stock. Diluted net loss per share is calculated by adjusting basic shares outstanding for the dilutive effect of common share equivalents outstanding for the period. The following weighted average shares have been excluded from the calculations of diluted weighted average common shares outstanding because 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): SCHEDULE OF WEIGHTED AVERAGE SHARES OF ANTI-DILUTIVE SECURITIES Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Stock options 580,188 26,354 580,188 26,354 RSUs - 377 - 377 Warrants 11,005,004 3,017,026 10,373,633 1,938,542 Convertible notes 137,799 - 137,799 - Total 11,722,991 3,043,757 11,091,620 1,965,273 Recently Issued Accounting Pronouncements In 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. In 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 taxes paid. 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. 9 NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consisted of the following: SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS June 30, 2024 December 31, 2023 Prepaid research and development $ 539,208 $ 535,474 Prepaid insurance 418,215 441,871 Other prepaid expenses 170,439 72,358 Other current assets 64,421 18,000 Total prepaid expenses and other current assets $ 1,192,283 $ 1,067,703 NOTE 5 – ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities consisted of the following: SCHEDULE OF ACCRUED EXPENSES AND OTHER LIABILITIES June 30, 2024 December 31, 2023 Accrued research and development $ 208,992 $ 329,228 Professional fees 26,950 110,202 Other accrued liabilities 134,244 102,830 Total accrued expenses and other liabilities $ 370,186 $ 542,260 NOTE 6 – COMMITMENTS AND CONTINGENCIES Purchase Commitments As of June 30, 2024, the Company’s commitments included approximately $ 16 million related to the Company’s open purchase orders and contractual obligations that occurred in the ordinary course of business, including commitments with contract research organizations for multi-year pre-clinical and clinical research studies. Although open purchase orders are considered enforceable and legally binding, the terms generally allow the Company the option to cancel, reschedule, and adjust its requirements based on its business needs prior to the delivery of goods or the performance of services. Litigation As of June 30, 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, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability related to pending claims and litigation. 10 Lease The Company’s current lease agreement (as amended) has a term that extends through October 31, 2024, with no contracted option to renew. As of June 30, 2024, the future lease payments totaled $ 11,363 . The Company recognized total rent expense of $ 8,747 and $ 17,495 in the three and six months ended June 30, 2024 and $ 8,375 and $ 16,749 in the three and six-months ended June 30, 2023. Share Subscription Facility In 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. The Company has not raised any capital to date pursuant to the GEM facility. NOTE 7 – NOTES PAYABLE The following table provides a summary of the Company’s outstanding debt as of June 30, 2024: SCHEDULE OF DEBT Principal balance Accrued interest Net debt balance 2023 Notes $ 216,000 6,308 - 222,308 Financed insurance 232,155 - - 232,155 Total $ 448,155 $ 6,308 - $ 454,463 The following table provides a summary of the Company’s outstanding debt as of December 31, 2023: December 31, 2023 Principal balance Accrued interest Unamortized Debt Discount and Issuance Costs Net debt balance 2023 Notes $ 1,836,000 $ 13,078 $ ( 1,197,200 ) $ 651,878 Financed insurance 197,249 5,570 - 202,819 Total $ 2,033,249 $ 18,648 $ ( 1,197,200 ) $ 854,697 11 Interest Expense The interest expense recognized for financed insurance was $ 148 and $ 2,092 for the three and six months ended June 30, 2024 and $ 0 and $ 1,497 for the three and six months ended June 30, 2023. Interest expense recognized for the 2023 Notes was $ 27,563 and $ 1.3 million for the three and six months ended June 30, 2024, which consists of amortization of the debt discount and debt issuance costs and incurred and accrued interest. 2023 Notes On 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 (ii) additional warrants to purchase 2,511,394 shares of the common stock in the aggregate. The notes were scheduled to mature on April 25, 2024 and May 28, 2024 , respectively. The combined notes are subject to an original issue discount of 8 %, have an original 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 $ 1.5675 . Beginning ninety days following issuance of the respective notes, the Company was 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 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) was recorded as interest expense within the consolidated statements of operations. As of June 30, 2024, the original debt discount and issuance costs were fully amortized to interest expense. The warrants have an exercise price of $ 1.5675 , the same as the conversion price, and are exercisable for five years following the issuance date. The warrants were equity classified as they are indexed to the Company’s stock and only settleable in shares. The warrants 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 June 30, 2024, the discount associated with the warrants was fully amortized to interest expense. 12 During 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 June 30, 2024, the remaining amount of the 2023 Notes relates to senior secured convertible promissory notes held with a Company board member (see Note 10). Financed insurance premiums In June 2024, the Company renewed and financed its directors’ and officers’ liability insurance in the amount of $ 0.2 million. Monthly payments are scheduled from July 2024 through March 2025. NOTE 8 - STOCKHOLDERS’ EQUITY The 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 June 30, 2024, and December 31, 2023, there were no shares of preferred stock issued and outstanding. 2024 Warrant Inducement On 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. The 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. As 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. In connection with the execution of the Inducement Letter, the Company executed a waiver related to the 2023 Notes’ SPA it had entered 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 inducement. The 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). The closing of the offering occurred on February 14, 2024. 13 Abeyance Shares Related 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. During the quarter ended June 30, 2024, 822,000 shares held in abeyance were delivered to the holder and the remaining shares are held in abeyance. Accordingly, as of June 30, 2024, 666,144 shares were held in abeyance, have not been issued and are not outstanding. Warrants The following table provides a summary of outstanding warrants to purchase shares of common stock as of June 30, 2024: SCHEDULE OF OUTSTANDING WARRANT Reference Shares Underlying Outstanding Warrants Exercise Price Description Classification (a) 63,659 $ 2,400.00 - 2,760.00 LACQ warrants Equity (b) 4,608 $ 1.31 Share subscription facility Equity (c) 4,518 $ 3.64 2021 Notes Liability (d) 38,900 $ 3.64 2022 Notes Liability (e) 549,993 $ 3.64 - 16.80 Public offering Equity (f) 318,451 $ 8.58 - 12.60 Public offering Equity (g) 126,061 $ 4.86 Public offering Equity (h) 2,443,187 $ 1.57 2023 Notes Equity (i) 7,455,627 $ 1.06 - 1.64 2024 Warrants Equity 11,005,004 (a) On 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). 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 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. On 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 per share. (b) 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 facility. The warrants have a three -year life and an initial exercise price of $ 2,402.40 per share. 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 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 June 30, 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. 14 (c) On September 24, 2021 and November 5, 2021, the Company issued 1,507 and 3,011 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 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 . 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 . (d) On July 1, 2022 and August 9, 2022, the Company issued 19,450 warrants each in connection with the issuance of the 2022 Notes. 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 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 . (e) On 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 (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 . (f) 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 and expire on February 2, 2028 , and August 7, 2028. (g) On 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 . 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 June 30, 2024. (h) On 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 2024, a holder of the warrants exercised 1,323,904 warrants at an exercise price of $ 1.5675 . (i) On 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. The Series 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 . 15 The fair value of each warrant issued has been determined using the Black-Scholes option-pricing model. The material assumptions used in the Black-Scholes model in estimating the fair value of the warrants issued for the periods presented were as follows: SCHEDULE OF WARRANTS FAIR VALUE ESTIMATION ASSUMPTIONS Stock price Exercise price Expected term (years) Volatility Risk free rate (a) LACQ warrants (grant date varies) $ 3,477.60 $ 2,400.00 - $ 2,760.00 3.00 110.0 % 0.5 % (b) Share subscription facility (grant date 7/2/21) $ 3,477.60 $ 2,402.40 3.00 110.0 % 0.5 % (b) Share subscription facility (remeasurement date varies) $ 1.13 - $ 1,029.60 $ 1.06 - $ 680.23 0.38 - 2.58 91.3 % - 140.5 % 1.04 % - 5.43 % (c) Liability classified warrants (grant date 9/24/21) $ 1,077.60 $ 1,831.20 5.00 94.1 % 1.0 % (c) Liability classified warrants (grant date 11/5/21) $ 540 $ 1,831.20 5.00 94.1 % 1.0 % (c) Liability classified warrants (remeasured at 6/30/24) $ 0.50 $ 3.64 2.25 - 2.35 133.7 % - 135.4 % 4.6 % (d) Liability classified warrants (grant date 7/1/22) $ 136.80 $ 170.04 5.00 98.9 % 2.9 % (d) Liability classified warrants (grant date 8/9/22) $ 127.20 $ 170.04 5.00 102.8 % 3.0 % (d) Liability classified warrants (remeasured at 6/30/24) $ 0.50 $ 3.64 3.00 - 3.11 126.7 % - 128.6 % 4.4 % NOTE 9 - STOCK-BASED COMPENSATION In 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. The Company recognized stock-based compensation expense within general and administrative expense of $ 18,658 and $ 42,146 for the three and six months ended June 30, 2024 and $ 60,394 and $ 156,663 for the three and six months ended June 30, 2023. The Company recognized stock-based compensation expense within research and development expense of $ 7,891 and $ 17,610 for the three and six months ended June 30, 2024 and $ 17,023 and $ 37,887 for the three and six months ended June 30, 2023. Option Activity There were no stock options granted during the six months ended June 30, 2024 and June 30, 2023. The following table summarizes the Company’s stock option activity during the six months ended June 30, 2024: SCHEDULE OF STOCK OPTION ACTIVITY Weighted average Options Exercise price Remaining contractual life Intrinsic value Outstanding at December 31, 2023 581,314 $ 33.15 9.57 $ - Granted - - - - Exercised - - - - Expired / Forfeited - - - - Outstanding at June 30, 2024 581,314 33.15 9.08 - Exercisable at June 30, 2024 580,188 32.28 - - Vested and expected to vest 581,314 33.15 9.08 - 16 Option Valuation The fair value of each stock option granted has been determined using the Black-Scholes option-pricing model. The material assumptions used 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 during the six months ended June 30, 2024 and 2023): ● Expected 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. ● 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. ● Risk-free 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. Treasury 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. As of June 30, 2024, the Company had an aggregate of $ 60,092 of unrecognized share-based compensation cost, which is expected to be recognized over the weighted average period of 0.95 years. Shares Reserved for Future Issuance The following shares of common stock are reserved for future issuance: SCHEDULE OF COMMON STOCK FUTURE ISSUANCE June 30, 2024 Awards outstanding under the 2021 Omnibus Incentive Plan 581,314 Awards available for future grant under 2021 Omnibus Incentive Plan 2,112 Warrants outstanding 11,005,004 Total shares of common stock reserved for future issuance 11,588,430 NOTE 10 - RELATED PARTIES As of June 30, 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. On April 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. The Company may pay the notes in full at any time prior to the conclusion of the forbearance period. 17