Ensysce Biosciences(US:ENSC)2020-03-10 20:21Merger and Acquisition Strategy - The company entered into a Merger Agreement with GTWY Holdings, which is the parent of Gateway Casinos & Entertainment Limited, one of Canada's largest gaming companies, involving a proposed business combination[21]. - The company intends to focus on the location-based leisure sector for potential acquisitions, leveraging the management team's expertise[41]. - The acquisition strategy includes identifying and building a company in the leisure sector, with plans for additional mergers and acquisitions post-Business Combination[42]. - The company plans to utilize its management team's networks to identify acquisition opportunities and conduct thorough due diligence on prospective target businesses[43][44]. - The Business Combination must involve target businesses with an aggregate fair market value of at least 80% of the assets held in the Trust Account[51]. - The company may structure the Business Combination to acquire less than 100% of the target business, provided it maintains a controlling interest of 50% or more of the voting securities[52]. - The company anticipates that target business candidates will be sourced from various unaffiliated entities, including investment banking firms and private equity groups[66]. - The company may continue to seek a Business Combination with a different target if the initial proposed Business Combination is not completed[111]. - The company is considering a Business Combination with an operating company in the leisure sector but is not limited to any specific industry[216]. - The company will not pursue a Business Combination with another blank check company or a business directly competitive with Inspired due to non-competition agreements[217]. Financial Overview - The Initial Public Offering (IPO) generated total gross proceeds of $200 million from the sale of 20 million units at $10.00 per unit, with an additional $6.825 million raised from a private placement of warrants[25]. - As of the IPO closing date, $200 million was deposited into a Trust Account, invested in U.S. government treasury bills or money market funds[26]. - The company has approximately $188,312,000 available for a Business Combination as of December 31, 2019, after accounting for $7,000,000 in deferred underwriting fees[59]. - A strategic investor has entered into a Contingent Forward Purchase Contract for gross proceeds of approximately $62,500,000, involving the purchase of 6,250,000 units at $10.00 per unit[60]. - The initial amount held in the Trust Account was $10.00 per public share, expected to increase with accrued interest[93]. - The company has $1,061,151 of proceeds held outside the Trust Account as of December 31, 2019, which may be used for costs associated with dissolution[115]. - The company has received working capital loans of $1,000,000 in January 2020[188]. - The company must maintain a minimum stockholders' equity of $2,500,000 to continue listing on Nasdaq[175]. Business Combination Process - The company has until April 5, 2020, to complete a Business Combination, with the possibility of extending this deadline upon stockholder approval[27]. - Stockholder approval is required if shares issued equal or exceed 20% of the outstanding common stock[84]. - The company may conduct redemptions without stockholder votes under SEC tender offer rules[80]. - Redemptions will be conducted for at least 20 business days if following tender offer rules[97]. - The company will not complete the Business Combination if public stockholders tender more shares than offered[97]. - The company anticipates that the per-share redemption price will be based on the aggregate amount in the Trust Account divided by outstanding public shares[93]. - If stockholder approval is required, redemptions will be conducted in conjunction with a proxy solicitation[98]. - The company may seek to recruit additional managers post-Business Combination[79]. - The management team intends to devote necessary time to the Business Combination process, although no specific hours are mandated[53]. - The company may seek to raise additional funds through private offerings of debt or equity securities in connection with the Business Combination[64]. Risks and Challenges - The company has not engaged in any operations or generated revenue to date, classifying it as a "shell company" under the Securities Exchange Act of 1934[40]. - The lack of business diversification may expose the company to significant risks in a single industry[76]. - The company may face intense competition from other entities in identifying and acquiring target businesses, which could limit its ability to acquire larger targets[133]. - Risks associated with combining with financially unstable businesses may adversely impact the company[218]. - Stockholders may experience a reduction in the value of their shares post-Business Combination, with limited remedies available[218]. - If the Business Combination is not completed, public stockholders who elected to redeem their shares will not be entitled to redeem for the pro rata share of the Trust Account[110]. - If too many public stockholders exercise their redemption rights, the company may not meet closing conditions for a Business Combination[155]. - The ability of public stockholders to redeem shares may make the company's financial condition unattractive to potential Business Combination targets[154]. - If the funds outside the Trust Account are insufficient, the company may need to borrow funds or liquidate[188]. - If the Business Combination is not completed, public stockholders may receive less than $10.35 per share upon liquidation[188]. Compliance and Regulatory Issues - The company is classified as an "emerging growth company" and will remain so until it meets certain revenue or market value thresholds[58]. - The company is exempt from certain SEC rules protecting stockholders in blank check companies due to having net tangible assets exceeding $5,000,000[179]. - If the company is deemed an investment company, it may face burdensome compliance requirements that could hinder its ability to complete a Business Combination[202]. - The Trust Account is intended to hold funds pending the completion of a Business Combination or the return of funds to public stockholders[206]. - The company does not plan to comply with certain procedures under Delaware law, which may increase stockholder liability[209]. - If bankruptcy occurs, the Trust Account proceeds may be subject to claims from third parties, potentially affecting stockholder distributions[128]. - The company has not secured third-party financing for the Business Combination, and there is no assurance that such financing will be available[59]. - The company has the ability to register a significant number of securities, which may adversely affect the market price of its common stock[215]. - The grant of registration rights to initial stockholders may complicate the completion of a Business Combination and affect the market price of common stock[214].