Business Context and Reporting Period
This Form 10-Q was filed by Leisure Acquisition Corp., not Ensysce Biosciences, Inc.; investors should verify the issuer identity. The filing covers the three and nine months ended September 30, 2020, and was signed November 9, 2020.
Leisure Acquisition Corp. was a shell blank-check company formed to complete a business combination. It had not commenced operating activities, generated no revenue, and had not completed a transaction. Its proposed merger with GTWY Holdings Limited was terminated on July 16, 2020.
Key Financial Metrics
| Metric | Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | Comparable Period |
|---|---|---|---|
| Operating costs | $287,254 | $1,274,109 | $584,418 and $1,399,530, respectively |
| Interest income | $1,840 | $719,353 | $1,107,955 and $3,497,481, respectively |
| Forgiveness of debt | — | $3,298,207 | — |
| Net income | $218,823 | $2,479,203 | $489,723 and $1,684,538, respectively |
| Basic and diluted earnings per share | $0.03 | $0.39 | $(0.08) and $(0.18), respectively |
| Net cash used in operating activities | $468,847 for the nine months | $999,036 for the comparable nine months |
There was no operating revenue, so revenue growth and operating margins are not meaningful. Nine-month net income was driven primarily by a non-cash $3.3 million debt forgiveness and trust-account interest, rather than operating performance.
At September 30, 2020, total assets were $13.29 million, including $13.19 million in the Trust Account and $53,492 of operating cash. Total liabilities were $8.02 million, including a $566,268 promissory note and a $7.0 million deferred underwriting fee payable. Stockholders’ equity was $5.00 million, and common stock subject to possible redemption was $270,999.
Material Changes Versus Prior Comparable Period
- Nine-month net income increased to $2.48 million from $1.68 million, primarily because of the $3.30 million forgiveness of previously recorded professional fees.
- Interest income declined to $719,353 from $3.50 million as the Trust Account balance fell substantially following shareholder redemptions and lower investment yields.
- Operating costs declined to $1.27 million from $1.40 million for the nine-month period and to $287,254 from $584,418 for the quarter.
- The Trust Account declined from $195.31 million at December 31, 2019 to $13.19 million at September 30, 2020, largely due to redemptions totaling approximately $196.0 million during the extension process.
- Public shares subject to possible redemption declined from 17.50 million at year-end 2019 to 26,189 at September 30, 2020.
- A $1.0 million related-party promissory note issued in January 2020 was converted into warrants on June 25, 2020. No working-capital loan balance remained outstanding at September 30, 2020.
Guidance, Outlook, Risks, and Unusual Items
- The company had until December 1, 2020 to complete a business combination unless shareholders approved an extension. A November 24, 2020 meeting was scheduled to seek an extension to June 30, 2021.
- If the extension was not approved and a business combination was not completed by December 1, 2020, the company would cease operations, redeem public shares, and liquidate.
- Management reported a working-capital deficit of $224,608, excluding $125,677 of income taxes payable expected to be paid from Trust Account interest. Management stated that additional financing would be needed and disclosed substantial doubt about the company’s ability to continue as a going concern through December 1, 2020.
- In October 2020, the company drew $75,000 under an amended expense advancement agreement; up to $200,000 was available after the amendment.
- COVID-19 could delay target identification, negotiations, financing, and transaction completion. Nasdaq listing compliance and potential delisting were also identified as risks.
- The $3.30 million debt forgiveness and the termination of the GTWY transaction were unusual items affecting the period’s results.
- The $7.0 million deferred underwriting fee was payable only upon completion of a business combination, subject to the underwriting agreement.
- The filing reports no legal proceedings, no off-balance-sheet financing arrangements, and effective disclosure controls as of September 30, 2020.
Most Important Facts to Verify
- Confirm whether this filing belongs to Leisure Acquisition Corp. or whether the requested company metadata incorrectly identifies Ensysce Biosciences, Inc.
- Verify the outcome of the November 24, 2020 extension meeting and whether the company completed a business combination or liquidated after the reporting date.
- Reconcile Trust Account redemptions, the remaining $13.19 million balance, and the number of public shares still subject to redemption.
- Assess the going-concern warning, available sponsor financing, and the company’s ability to fund operations outside the Trust Account.
- Separate recurring operating performance from the $3.30 million non-cash debt-forgiveness gain and trust-account interest income.
- Review the $7.0 million deferred underwriting fee, the $566,268 promissory note, and the October 2020 $75,000 working-capital borrowing.