Business Context and Reporting Period
This Form 10-Q covers the quarter and six months ended June 30, 2018, and was filed August 1, 2018. The filing identifies the registrant as Leisure Acquisition Corp., not Ensysce Biosciences, Inc. Leisure was a Delaware blank check company formed in September 2017 to pursue a business combination and had not identified an operating target as of the reporting date. It was classified as a shell company.
Financial Position and Performance
- Cash outside trust: $1.7 million at June 30, 2018, down from $2.1 million at December 31, 2017.
- Trust account: $201.3 million, consisting substantially of U.S. Treasury bills, compared with $200.1 million at year-end.
- Total assets: $203.2 million; total liabilities: $7.1 million, including a $7.0 million deferred underwriting fee payable upon completion of a business combination.
- Redeemable common stock: 18,989,851 shares classified as temporary equity at a redemption value of $191.1 million.
- Three-month results: operating costs were $311,538; interest income was $855,071; net income was $415,110. After allocating trust-account income to redeemable shares, adjusted net loss attributable to non-redeemable common stock was $326,432, or $0.05 per share.
- Six-month results: operating costs were $481,672; interest income was $1.5 million; net income was $821,176. Adjusted net loss attributable to non-redeemable common stock was $574,871, or $0.10 per share.
- Cash flow: $669,000 used in operating activities, $333,254 provided by investing activities from trust-account withdrawals, and $32,000 used for offering costs. Net cash decreased by $367,714.
- Liquidity: management stated that it did not expect to need additional funds for planned expenditures, but acknowledged that additional financing might be required to complete a business combination or fund significant share redemptions.
Changes Versus the Prior Comparable Period
The filing presents balance-sheet comparisons with December 31, 2017 but does not provide prior-year quarterly or six-month operating results in the supplied text. Cash outside the trust account declined by approximately $367,714, while trust-account securities increased by approximately $1.2 million from accrued interest, partially offset by withdrawals. Retained earnings increased from an accumulated deficit of $31,193 to $789,983, reflecting six-month net income. The number of non-redeemable shares declined from 6,734,320 to 6,010,149.
Outlook, Risks, Contingencies, and Unusual Items
- The company expected no operating revenue before completing a business combination and expected to incur continuing legal, accounting, due-diligence, and public-company compliance costs.
- HG Vora had committed to a contingent purchase of $62.5 million of private-placement units concurrent with a business combination. The commitment was subject to HG Vora approving the transaction and could be withheld for any reason.
- Sponsors and affiliates had committed up to $1.0 million through unsecured working-capital advances if funds outside the trust account became insufficient. Up to $1.0 million of such advances could be convertible into warrants.
- The deferred $7.0 million underwriting fee would be payable from the trust account only if a business combination closed.
- If a business combination could not be completed, the company could be required to cease operations and liquidate the trust account. Trust-account proceeds could not be used to repay certain working-capital advances if no transaction closed.
- Issuing equity or debt to complete a transaction could dilute existing holders, subordinate common stock, increase leverage, restrict future financing, or adversely affect market prices.
- No legal proceedings, material subsequent events, or material changes to previously disclosed risk factors were reported. Management concluded that disclosure controls were effective and that there were no material changes in internal control over financial reporting.
Investor Verification Points
- Verify the issuer identity: the supplied filing is for Leisure Acquisition Corp., whereas the request names Ensysce Biosciences, Inc.
- Confirm the status, deadline, and terms of any proposed business combination, including shareholder redemption rights and liquidation provisions.
- Reconcile the $201.3 million trust balance with the $191.1 million redemption liability and the $7.0 million deferred underwriting obligation.
- Assess whether the contingent $62.5 million HG Vora financing remained available and whether its approval condition was satisfied.
- Monitor cash outside the trust account, ongoing administrative costs, working-capital advances, and the company’s ability to fund operations through a transaction or liquidation.