Business Context and Reporting Period
The filing is Leisure Acquisition Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2018. The provided metadata identifies Ensysce Biosciences, Inc., but the filing itself names Leisure Acquisition Corp., a Delaware blank-check company and shell company. The company had not commenced operating activities and was seeking a target for a business combination.
The company completed its initial public offering on December 5, 2017, issuing 20,000,000 units at $10.00 per unit and placing $200.0 million in a trust account. It had until December 5, 2019 to complete a business combination.
Financial Metrics
| Metric | March 31, 2018 / Three Months Ended |
|---|---|
| Operating revenue | None; the company had not generated operating revenues. |
| Operating costs | $170,134 |
| Interest income | $691,167 |
| Net income | $406,066 |
| Adjusted net loss attributable to non-redeemable common shares | $114,769 |
| Basic and diluted net loss per share | $0.02 |
| Cash outside trust | $1,902,667 |
| Trust account assets | $200,747,032 |
| Total assets | $202,873,569 |
| Total liabilities | $7,197,431, including $7,000,000 of deferred underwriting fees |
| Cash flow from operations | $(216,827) |
| Long-term debt | None reported |
The trust account consisted of cash and U.S. Treasury securities. The company withdrew $61,420 of trust-account interest to pay franchise taxes during the quarter and withdrew an additional $116,750 in April 2018 to pay income taxes.
Material Changes Versus the Prior Comparable Period
- A three-month prior comparable income statement and cash flow period was not provided in the filing text; therefore, a clear year-over-year or sequential operating comparison cannot be made.
- Compared with December 31, 2017, cash outside the trust account declined from $2,090,074 to $1,902,667, while trust-account assets increased from $200,119,137 to $200,747,032.
- Common stock subject to possible redemption increased in carrying value from $190,270,071 to $190,676,137, while the number of redeemable shares declined from 19,015,680 to 19,010,039.
- Retained earnings improved from an accumulated deficit of $31,193 to retained earnings of $374,873, primarily reflecting the quarter’s net income and the related redemption-value adjustment.
- The underwriters’ $7.0 million deferred fee remained outstanding and is payable only upon completion of a business combination, subject to the underwriting agreement.
Outlook, Risks, Contingencies, and Unusual Items
- Management expects to continue incurring costs to identify, evaluate, and complete a business combination but does not expect operating revenue before such a transaction.
- The initial business combination must generally involve target businesses with aggregate fair market value of at least 80% of the trust-account balance, excluding specified items.
- HG Vora committed to purchase $62.5 million of private-placement units concurrently with a business combination, but its approval of the transaction is required and may be withheld for any reason.
- Funding parties committed to provide up to $1.0 million of working-capital loans if needed; these loans would be repaid upon a business combination or potentially converted into warrants.
- If no business combination is completed by December 5, 2019, the company must cease operations, redeem the public shares using the trust account, and liquidate. Warrants may expire worthless, and the per-share liquidation amount could be below the original $10.00 offering price.
- Public shareholders have redemption rights in connection with a business combination, subject to stated limitations, including a 20% redemption restriction for certain holders when a shareholder vote is sought.
- The sponsors agreed to protect the trust account from certain creditor claims, subject to significant exceptions and limitations.
- The company reported no legal proceedings, no material changes to the risk factors in its latest Form 10-K, and no off-balance-sheet arrangements.
- Management concluded that disclosure controls and procedures were effective as of March 31, 2018, with no material changes to internal control over financial reporting during the quarter.
Facts an Investor Should Verify
- Confirm the registrant identity: the filing is for Leisure Acquisition Corp., not Ensysce Biosciences, Inc.
- Verify whether a business combination was completed by the December 5, 2019 deadline and whether the company subsequently changed its name, structure, or reporting status.
- Review the composition and restrictions of the $200.7 million trust account, including deferred underwriting fees, taxes, redemption activity, and any sponsor indemnification claims.
- Assess the dilution implications of the founder shares, public and private warrants, potential working-capital loan conversions, and the $62.5 million contingent forward purchase commitment.
- Confirm the company’s redemption and liquidation terms, including the possibility that public shareholders could receive less than $10.00 per share.
- Review subsequent SEC filings for changes in target-search status, financing needs, related-party loans, and material risk factors.