Business Context and Reporting Period
This Form 8-K, filed on February 2, 2021, reports events occurring on January 31, 2021, involving Leisure Acquisition Corp. (LACQ) and Ensysce Biosciences, Inc. (Ensysce). LACQ, a special purpose acquisition company (SPAC), entered into a definitive Merger Agreement to acquire Ensysce, a clinical-stage drug company developing tamper-proof prescription medicines to prevent drug abuse and overdoses. The transaction is expected to close in the second quarter of 2021, subject to shareholder approval and other conditions.
Key Financial Metrics and Transaction Terms
The filing details the financial structure of the proposed merger rather than historical operating results for the period.
- Exchange Ratio: Ensysce shareholders will receive 0.06585 shares of LACQ Common Stock for each share of Ensysce Common Stock held.
- Minimum Cash Requirement: LACQ must have at least $5,000,000 in cash remaining after redemptions and transaction expenses to consummate the deal.
- Net Tangible Assets: LACQ cannot close the transaction if it has less than $5,000,001 in net tangible assets post-closing.
- Termination Fee: LACQ is obligated to pay Ensysce a one-time fee of $5,250,000 if the deal is terminated due to a superior proposal or a change in board recommendation.
- Deferred Underwriting Fee: Reduced to $2,000,000, payable upon consummation of the business combination.
- Warrant Surrender: MLCP GLL Funding LLC and Hydra LAC, LLC agreed to surrender 250,000 LACQ warrants each prior to closing.
- Debt Conversion: A promissory note of $566,287.53 held by GTWY Holdings was converted into 566,288 LACQ warrants at $1.00 per warrant.
Note: The filing does not provide specific revenue, profit, cash flow, or margin figures for Ensysce or LACQ for the reporting period.
Material Changes and Agreements
The primary material change is the entry into the Merger Agreement, which will result in Ensysce becoming a wholly-owned subsidiary of LACQ. Key changes include:
- Capital Structure Conversion: Ensysce common stock, warrants, and options will convert into LACQ securities based on the exchange ratio.
- Convertible Notes: Outstanding Ensysce convertible notes will be converted to Ensysce common stock immediately prior to the merger effective time, allowing holders to participate in the exchange ratio.
- Warrant and Fee Adjustments: Specific agreements were executed to reduce the deferred underwriting fee and surrender existing warrants to facilitate the transaction.
Guidance, Outlook, Risks, and Contingencies
Outlook and Timeline: The transaction is expected to close in Q2 2021. An "Outside Date" of June 30, 2021, is set, after which either party may terminate the agreement if the transaction is not consummated.
Conditions to Closing:
- Approval by stockholders of both LACQ and Ensysce.
- No material adverse effect on either company.
- Delivery of lock-up agreements by Ensysce directors and officers.
- Regulatory clearance (no waiting periods currently expected).
Risks and Contingencies:
- Regulatory and Clinical Risk: Ensysce's product candidates may not progress through clinical development or receive FDA approval.
- Market Risk: Potential failure to gain market acceptance or commercialize products successfully.
- Transaction Risk: Failure to obtain shareholder approval, inability to meet the $5 million cash threshold due to redemptions, or failure to maintain Nasdaq listing.
- Operational Risk: Dependence on third parties for manufacturing and clinical services, and potential impacts from the COVID-19 pandemic.
Investor Verification Checklist
- Verify the final exchange ratio and the resulting pro forma share count for Ensysce shareholders.
- Confirm the amount of cash remaining in LACQ's trust account after shareholder redemptions to ensure the $5,000,000 minimum is met.
- Review the upcoming Form S-4 and proxy statement for detailed financial data on Ensysce and the combined entity.
- Monitor the status of Ensysce's clinical trials and regulatory filings for its drug candidates.
- Check for any updates regarding the $5,250,000 termination fee conditions or potential superior proposals.