SEC Form 10-Q Summary
Filing identity: The supplied filing is for Leisure Acquisition Corp., not Ensysce Biosciences, Inc. It covers the unaudited quarter and six months ended June 30, 2019, filed August 7, 2019. Leisure Acquisition was a blank-check company seeking a business combination and was classified as a shell company.
Business Context and Reporting Period
The company had no operating business or revenue through June 30, 2019. Its activities consisted of formation, the December 2017 initial public offering, private warrant issuance, and the search for a target business combination. The company expected to cease operations and liquidate if it did not complete a business combination by December 5, 2019.
Financial Position and Performance
| Metric | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 |
|---|---|---|
| Revenue | No operating revenue | No operating revenue |
| Operating costs | $625,938 | $815,112 |
| Interest income | $1,209,556 | $2,389,526 |
| Net income | $418,902 | $1,194,815 |
| Adjusted net loss attributable to non-redeemable shares | $521,222 | $610,066 |
| Basic and diluted loss per share | $0.09 | $0.10 |
Net income was generated primarily by interest earned on the Trust Account and unrealized gains on its marketable securities, rather than by operations. Operating and net profit margins are not meaningful because the company had no operating revenue.
- Cash outside the Trust Account: $1,402,157 at June 30, 2019, down from $1,658,398 at December 31, 2018.
- Trust Account: $204,888,032, substantially invested in U.S. Treasury bills.
- Total assets: $206,357,272.
- Common stock subject to possible redemption: $193,586,919, representing 18,899,782 shares.
- Total stockholders’ equity: $5,000,001.
- Debt: No long-term debt, capital leases, or operating leases were reported. A $7.0 million deferred underwriting fee was payable only upon completion of a business combination.
- Liquidity: Management believed available cash would fund operations through the earlier of a business combination or December 5, 2019.
The balance sheet text reports total current liabilities of $327,388, although the listed current-liability components appear inconsistent with that total. The filing text does not provide a clear corrected value.
Cash Flow and Material Changes
| Cash Flow Metric | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 |
|---|---|---|
| Net cash used in operating activities | $726,805 | $668,968 |
| Net cash provided by investing activities | $479,204 | $333,254 |
| Net cash used in financing activities | $8,640 | $32,000 |
| Net change in cash | $(256,241) | $(367,714) |
- Six-month net income increased to $1.19 million from $821,176, primarily because of higher Trust Account interest income.
- Six-month operating costs increased to $815,112 from $481,672.
- Six-month cash used in operating activities increased to $726,805 from $668,968.
- Trust Account interest of $479,204 was withdrawn during the first six months to pay franchise and income taxes; cumulative withdrawals through June 30, 2019 were $1,317,791.
- Shares subject to possible redemption declined to 18,899,782 from 18,960,928, while non-redeemable shares increased to 6,100,218 from 6,039,072.
Outlook, Risks, Contingencies, and Unusual Items
- The company did not provide operating revenue or earnings guidance because it had not completed a business combination.
- HG Vora had conditionally committed to purchase $62.5 million of private placement units at the closing of a business combination. The commitment required HG Vora to approve the transaction and could be withheld for any reason.
- Sponsors and HG Vora had committed an aggregate of up to $1.0 million in potential working-capital loans. Up to $1.0 million could be converted into warrants at the lenders’ option.
- The company faced the risk that it would be unable to identify or complete a business combination, in which case it would liquidate and distribute the Trust Account subject to applicable obligations and redemption rights.
- A business combination could require additional equity or debt financing and could materially dilute existing shareholders, increase leverage, or impose repayment and covenant risks.
- The company had a $7.0 million deferred underwriting fee payable from the Trust Account only if a business combination closed.
- The company reported no legal proceedings, no material changes to previously disclosed risk factors, and no subsequent events requiring adjustment or disclosure.
- Management concluded that disclosure controls and procedures were effective and reported no material change in internal control over financial reporting.
Investor Verification Items
- Confirm the issuer identity: the filing is for Leisure Acquisition Corp., not Ensysce Biosciences, Inc.
- Verify the apparent current-liability total discrepancy in the condensed balance sheet.
- Review the December 5, 2019 business-combination deadline, liquidation mechanics, and redemption rights.
- Assess whether the contingent $62.5 million HG Vora financing commitment was ultimately approved and funded.
- Review the treatment and payment of the $7.0 million deferred underwriting fee.
- Distinguish Trust Account interest-driven net income from operating performance, since the company had no operating revenue.