Ensysce Biosciences(ENSC) - 2025 Q2 - Quarterly Report

General Information Form 10-Q Filing Details Ensysce Biosciences, Inc.'s Form 10-Q for Q2 2025 details its status as a Nasdaq-listed non-accelerated filer and smaller reporting company - The report is a Quarterly Report on Form 10-Q for the period ended June 30, 2025[2] - Ensysce Biosciences, Inc. is incorporated in Delaware and its common stock trades on The Nasdaq Stock Market under the symbol ENSC[3][4] - The registrant is classified as a non-accelerated filer and a smaller reporting company[4] Common Stock Outstanding | As of Date | Shares Outstanding | | :--------- | :----------------- | | August 12, 2025 | 2,968,444 shares | FORWARD-LOOKING STATEMENTS Nature of Forward-Looking Statements Forward-looking statements, identifiable by specific terms, are based on current expectations but involve substantial risks and uncertainties, meaning actual results may differ materially - Forward-looking statements are identified by terms such as 'anticipate,' 'believe,' 'continue,' 'could,' 'estimate,' 'expect,' 'intend,' 'may,' 'might,' 'objective,' 'ongoing,' 'plan,' 'potential,' 'predict,' 'project,' 'should,' 'will' and 'would,' or their negatives[6] - These statements are based on current expectations and projections about future events and financial trends, but involve substantial risks and uncertainties[6][8] Key Risks and Uncertainties Forward-looking statements are subject to risks including financing, product candidate failure, CRO reliance, IP, and regulatory approvals, which could materially affect actual results - Estimates regarding expenses, revenue, capital requirements, and timing/availability of additional financing may not match actual amounts[7][9] - Ability to continue as a going concern for the next twelve months is uncertain[7][9] - Risk that lead product candidates (PF614 and PF614-MPAR) may not successfully limit abuse, overdose, or misuse, or provide additional safety upon commercialization[7][9] - Reliance on third-party contract research organizations (CROs) for R&D and clinical trials[7][9] - Need for substantial additional funding to complete product candidate development and commercialization[7][9] - Clinical trials may fail to replicate positive results from earlier studies[7][9] - Product candidates may not progress through clinical development or receive required regulatory approvals within expected timelines or at all[7][9] - Inability to successfully market or gain market acceptance of product candidates[7][9] - Risk of overestimating target market size, patient willingness to try new therapies, and physician willingness to prescribe[7][9] - Inability to obtain and maintain sufficient intellectual property protection or risk of infringing others' IP[7][9] - Loss of key management team members[7][9] - Changes in regulatory environment or industry[7][9] - Ability to remediate material weaknesses or maintain effective internal controls over financial reporting[7][9] - Risk of common stock delisting from Nasdaq or inability to maintain compliance with listing standards[7][9] - The company will not update or revise any forward-looking statements unless required by applicable securities laws[8] GLOSSARY Key Definitions This section defines key terms and acronyms used in the report, covering financial instruments, company entities, regulatory bodies, and proprietary technologies - The glossary defines various financial instruments and transactions, such as the 2021, 2022, and 2023 Notes, and different warrant inducements and offerings (e.g., 2024 February Warrant Inducement, 2025 April Warrant Inducement)[11] - Key company-specific terms include 'Company' (Ensysce Biosciences, Inc. and subsidiaries), 'EBIR' (79.2%-owned subsidiary developing overdose protection), 'TAAP' (Trypsin Activated Abuse Protection), and 'MPAR' (Multi-Pill Abuse Resistance)[11][12] - Regulatory and market terms defined include FDA, GAAP, Nasdaq, NIDA, NIH, and SEC[12] PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Ensysce Biosciences, Inc.'s unaudited consolidated financial statements, including balance sheets, statements of operations, equity changes, and cash flows, with explanatory notes Consolidated Balance Sheets The consolidated balance sheets show a slight decrease in total assets and an increase in total liabilities from December 31, 2024, to June 30, 2025 Consolidated Balance Sheet Highlights | Item | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------------- | :-------------------------- | :------------------ | | Cash and cash equivalents | $2,211,575 | $3,502,077 | | Unbilled receivable | $1,204,979 | $124,115 | | Total current assets | $5,281,595 | $5,344,682 | | Total assets | $5,574,455 | $5,597,232 | | Total current liabilities | $2,513,010 | $2,207,197 | | Total liabilities | $2,514,043 | $2,217,293 | | Total stockholders' equity | $3,060,412 | $3,379,939 | - Cash and cash equivalents decreased by approximately $1.29 million from December 31, 2024, to June 30, 2025[17] - Unbilled receivable increased significantly from $124,115 to $1,204,979[17] - Accrued expenses and other liabilities increased from $548,458 to $1,045,657[17] Consolidated Statements of Operations The company reported a net loss for both periods, with increased federal grants offset by higher R&D expenses, and improved net loss per share due to more shares outstanding Consolidated Statements of Operations Highlights | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Federal grants | $1,371,438 | $181,797 | $2,691,210 | $487,519 | | Research and development expenses | $1,923,430 | $947,229 | $3,808,957 | $1,726,133 | | General and administrative expenses | $1,198,523 | $1,190,010 | $2,600,279 | $2,559,791 | | Net loss | $(1,733,517) | $(1,967,793) | $(3,679,090) | $(5,084,356) | | Net loss per basic and diluted share | $(0.79) | $(3.35) | $(2.04) | $(9.98) | | Weighted average common shares outstanding | 2,202,299 | 587,822 | 1,803,393 | 509,347 | - Federal grants revenue increased by $1.19 million (YoY) for the three months ended June 30, 2025, and by $2.20 million (YoY) for the six months ended June 30, 2025[20] - Research and development expenses increased by $0.98 million (YoY) for the three months ended June 30, 2025, and by $2.08 million (YoY) for the six months ended June 30, 2025[20] - Net loss per basic and diluted share improved from $(3.35) to $(0.79) for the three months ended June 30, 2025, and from $(9.98) to $(2.04) for the six months ended June 30, 2025, primarily due to a significant increase in weighted average common shares outstanding[20] Consolidated Statements of Changes in Stockholders' Equity The statements reflect a decrease in total stockholders' equity, with increases in common stock and additional paid-in capital from financing activities, offset by a growing accumulated deficit - Total stockholders' equity decreased from $3,379,939 at December 31, 2024, to $3,060,412 at June 30, 2025[17] - Additional paid-in capital increased from $133,252,585 to $136,612,043, driven by warrant exercises, warrant inducements, and a public offering[17][23] - The accumulated deficit increased from $(129,544,299) to $(133,223,223) due to the net loss incurred during the period[17][23] Consolidated Statements of Cash Flows Operating cash flow remained negative but improved year-over-year, while financing activities provided less cash in 2025 compared to 2024 Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Item | 2025 | 2024 | | :---------------------------------- | :----------- | :----------- | | Net cash used in operating activities | $(4,414,280) | $(5,718,294) | | Net cash provided by financing activities | $3,123,778 | $5,637,921 | | Net decrease in cash and cash equivalents | $(1,290,502) | $(80,373) | | Cash and cash equivalents end of period | $2,211,575 | $1,043,231 | - Net cash used in operating activities decreased by $1.3 million (YoY) for the six months ended June 30, 2025, primarily due to greater grant funding and reduced cash outlays for accounts payable[25][164] - Net cash provided by financing activities decreased by $2.5 million (YoY) for the six months ended June 30, 2025, mainly from warrant inducements and public offerings[25][165] Notes to Consolidated Financial Statements (Unaudited) These notes explain the company's business, accounting policies, financial instruments, and significant transactions, including its clinical-stage status, going concern uncertainty, and equity financing NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES Ensysce is a clinical-stage biotech developing safer prescription drugs using TAAP and MPAR technologies, with a subsidiary focused on overdose protection and COVID-19 treatment - Ensysce Biosciences, Inc. is a clinical-stage biotech company developing safer prescription drugs using proprietary TAAP (Trypsin Activated Abuse Protection) and MPAR (Multi-Pill Abuse Resistance) technology platforms[28] - The primary focus is on abuse and overdose resistant pain technology, with PF614 as a clinical-stage opioid product candidate and MPAR applied to the PF614 program and a methadone prodrug for Opioid Use Disorder[28] - EBIR, Inc., a 79.2%-owned subsidiary, is developing a compound for overdose protection and COVID-19 treatment, with noncontrolling interests held by key personnel and an unrelated party[28][29] NOTE 2 - BASIS OF PRESENTATION The financial statements are GAAP and SEC compliant, reflect a December 2024 reverse stock split, and highlight going concern uncertainty due to lack of product revenue and need for financing - Consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules, including Ensysce Biosciences, Inc. and its subsidiaries[30] - A 1-for-15 reverse stock split was completed in December 2024, with all share and per share amounts retrospectively restated[31] - The company has not generated product revenue and requires significant additional financing, raising substantial doubt about its ability to continue as a going concern for the next 12 months[33][34] NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the company's accounting policies, including single segment reporting, Level 3 fair value measurements for liability classified warrants, federal grant revenue recognition, and expensing of R&D and G&A costs - The company operates and manages its business as one reportable and operating segment[39] - Liability classified warrants are measured at fair value using a Black-Scholes model and classified as Level 3 inputs[44][46] Fair Value of Liability Classified Warrants (Level 3) | Date | Fair Value | | :-------------------- | :----------- | | June 30, 2025 | $1,033 | | December 31, 2024 | $10,096 | - Revenue from federal grants (MPAR and OUD) is recognized as costs are incurred and assessed as reimbursable[50] Federal Grant Revenue | Grant Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | MPAR | $1,371,438 | $- | $2,691,210 | $- | | TAAP/OUD | $- | $181,797 | $- | $487,519 | | Total | $1,371,438 | $181,797 | $2,691,210 | $487,519 | - Research and development expenses and general and administrative expenses are charged to expense as incurred[52][53] - The company maintains a full valuation allowance against all deferred tax assets due to uncertainty of realization[146] NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets increased slightly from December 31, 2024, to June 30, 2025, primarily due to higher prepaid insurance and other current assets Prepaid Expenses and Other Current Assets | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Prepaid research and development | $1,060,659 | $1,342,461 | | Prepaid insurance | $403,087 | $315,306 | | Other prepaid expenses | $160,265 | $42,723 | | Other current assets | $241,030 | $18,000 | | Total | $1,865,041 | $1,718,490 | - Total prepaid expenses and other current assets increased by $146,551 from December 31, 2024, to June 30, 2025[64] NOTE 5 – OTHER ASSETS Other assets increased significantly, primarily due to a substantial rise in deposits, partially offset by a decrease in long-term prepaid insurance Other Assets | Item | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Prepaid insurance | $166,667 | $250,000 | | Deposits | $126,193 | $2,550 | | Total | $292,860 | $252,550 | - Total other assets increased by $40,310 from December 31, 2024, to June 30, 2025[65] - Deposits increased from $2,550 to $126,193[65] NOTE 6 – ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities nearly doubled from December 31, 2024, to June 30, 2025, driven by increased accrued R&D costs and new consultant compensation accruals Accrued Expenses and Other Liabilities | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Accrued research and development | $640,603 | $324,521 | | Accrued consultant compensation | $180,000 | $- | | Accrued professional fees | $57,562 | $88,995 | | Other accrued liabilities | $167,492 | $134,942 | | Total | $1,045,657 | $548,458 | - Total accrued expenses and other liabilities increased by $497,199 from December 31, 2024, to June 30, 2025[66] - Accrued research and development increased by $316,082, and $180,000 was accrued for consultant compensation[66] NOTE 7 - COMMITMENTS AND CONTINGENCIES The company has $8.3 million in R&D purchase commitments, settled a consultant dispute with common shares and accruals, and has a product development agreement involving milestone-based stock issuance - As of June 30, 2025, the company had estimated purchase commitments of $8.3 million related to open purchase orders and contractual obligations, primarily with contract research organizations for multi-year pre-clinical and clinical research studies[67] - In April 2025, the company settled a dispute with a former independent contractor by issuing 20,000 shares of common stock and accruing a total settlement value of $0.2 million[69] - A product development and supply agreement with Galephar Pharmaceutical Research, Inc. involves issuing 13,801 restricted shares of common stock upon specific operational and regulatory milestones, with one-third vesting immediately[70][71] - The Galephar agreement also includes milestone-based payments to be settled in common stock, for which the company recognized $140,000 in R&D expense for the six months ended June 30, 2025[72] NOTE 8 - NOTES PAYABLE Notes payable primarily consist of 2023 Notes and financed insurance premiums, with significantly reduced interest expense in 2025 as debt discount amortization concluded Outstanding Debt Summary | Item | June 30, 2025 (Net Debt) | December 31, 2024 (Net Debt) | | :------------------ | :----------------------- | :--------------------------- | | 2023 Notes | $236,475 | $230,368 | | Financed insurance | $188,046 | $71,292 | | Total | $424,521 | $301,660 | Interest Expense | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Financed insurance | $0 | $148 | $909 | $2,092 | | 2023 Notes | $3,160 | $27,563 | $6,107 | $1,300,000 | - The original debt discount and issuance costs for the 2023 Notes were fully amortized to interest expense by December 31, 2024[77][78] - The remaining 2023 Notes are senior secured convertible promissory notes held by a company board member, subject to a forbearance agreement expiring April 25, 2026[79][104] NOTE 9 - STOCKHOLDERS' EQUITY This note details the company's equity structure and recent financing activities, including several warrant inducements and registered direct offerings that increased common stock and additional paid-in capital - The company's Certificate of Incorporation authorizes 250,000,000 shares of common stock and 1,500,000 shares of preferred stock, with no preferred stock outstanding[81] - In April 2025, the company completed a warrant inducement, generating approximately $2.2 million in gross proceeds by incentivizing the exercise of 630,376 existing warrants and issuing 1,260,752 new unregistered Common Warrants[82][83][120] - In March 2025, a registered direct offering and concurrent private placement generated approximately $1.1 million in gross proceeds from the sale of common stock and pre-funded warrants, and issued 630,376 new unregistered Series A-5 and Series A-6 warrants[85][86][122][123] - In August 2024, a registered direct offering and warrant inducement generated approximately $1.7 million from common stock/pre-funded warrants and $3.4 million from warrant exercises, and issued 1,863,706 new unregistered warrants[87][125][126][127] - In February 2024, a warrant inducement generated approximately $4.7 million in gross proceeds by incentivizing the exercise of 240,120 existing warrants and issuing 480,240 new unregistered Series A and Series B Warrants[90][129] Summary of Outstanding Warrants (June 30, 2025) | Reference | Shares Underlying Outstanding Warrants | Exercise Price | Classification | | :-------- | :----------------------------------- | :------------- | :------------- | | April 2025 Warrants | 1,282,320 | $1.90 - $4.05 | Equity | | March 2025 Warrants | 22,063 | $4.3625 | Equity | | August 2024 Warrants | 1,864,545 | $7.05 - $8.8125 | Equity | | February 2024 Warrants | 16,811 | $24.56 | Equity | | 2023 Notes Warrants | 162,881 | $7.05 - $23.51 | Equity | | Other Warrants | 73,474 | $54.56 - $41,400 | Equity & Liability | | Total | 3,422,094 | | | NOTE 10 - STOCK-BASED COMPENSATION Stock-based compensation expense increased in 2025, with 64,000 stock options granted to employees and board members at a weighted-average fair value of $2.63 Stock-Based Compensation Expense | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative | $62,137 | $18,658 | $73,133 | $42,146 | | Research and development | $150,222 | $7,891 | $201,569 | $17,610 | - During the six months ended June 30, 2025, the company granted 64,000 stock options to employees and board members, with exercise prices ranging from $2.00 to $3.12 per share[99] - The weighted-average grant date fair value of options granted during the six months ended June 30, 2025, was $2.63[102] - As of June 30, 2025, there was $89,539 of unrecognized share-based compensation cost, expected to be recognized over a weighted average period of 0.79 years[102] Shares Reserved for Future Issuance (June 30, 2025) | Item | Shares | | :------------------------------------------ | :------- | | Awards outstanding under the Plan | 102,785 | | Awards available for future grant under the Plan | 14,385 | | Warrants outstanding | 3,422,094 | | Shares for consultant compensation agreement outside the Plan | 13,801 | | Total shares of common stock reserved for future issuance | 3,553,065 | NOTE 11 - RELATED PARTIES As of June 30, 2025, the company had a $0.2 million senior secured convertible promissory note plus accrued interest and 29,547 warrants outstanding to a board member, subject to a forbearance agreement expiring April 25, 2026 - As of June 30, 2025, the company held a $0.2 million senior secured convertible promissory note plus accrued interest and 29,547 warrants (exercisable at $23.51 per share) issued to a board member[104] - A forbearance agreement with the board member regarding these notes will expire on April 25, 2026[104] NOTE 12 - SUBSEQUENT EVENTS Subsequent to June 30, 2025, the company issued 575,188 shares of common stock for $1.1 million in cash proceeds from the exercise of certain April 2025 warrants - Since June 30, 2025, the company issued 575,188 shares of common stock for cash proceeds of $1.1 million upon exercise of certain April 2025 warrants[105] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting its clinical-stage status, operating losses, and dependence on future financing Overview Ensysce is a clinical-stage pharmaceutical company developing abuse and overdose resistant pain relief solutions, facing significant operating losses and requiring substantial additional funding to continue as a going concern - Ensysce is a clinical-stage pharmaceutical company focused on developing innovative solutions for severe pain relief, reducing opioid misuse, abuse, and overdose[108] - Lead product candidate PF614 (extended release TAAP prodrug of oxycodone) is in Phase 3 clinical development, PF614-MPAR is in Phase 1b, and nafamostat has completed Phase 1[108][110] - The company has incurred significant operating losses since inception, has no products approved for sale, and has not generated revenue from product sales[109][111] - Substantial additional funding is required to support continuing operations and growth strategy, with current cash sufficient only into the third quarter of 2025, raising substantial doubt about the company's ability to continue as a going concern[113][116] 2025 April Warrant Inducement In April 2025, the company generated $2.2 million in gross proceeds by incentivizing warrant exercises and issuing new unregistered Common Warrants, incurring $0.3 million in costs and issuing placement agent warrants - In April 2025, the company entered into an Inducement Letter for the exercise of 630,376 outstanding warrants[118] - Gross proceeds from the exercise of warrants and payment for new Common Warrants totaled approximately $2.2 million[120] - The company issued 1,260,752 new unregistered Common Warrants with an exercise price of $1.90 per share, expiring in 18 months and 5 years[120] - Transaction costs included approximately $0.3 million in legal fees and other closing costs, and the issuance of 44,126 unregistered placement agent warrants[121] 2025 Registered Direct Offering and 2025 March Warrant Offering In March 2025, the company raised $1.1 million in gross proceeds from a registered direct offering and private placement, issuing new unregistered warrants and paying placement agent fees - In March 2025, the company issued 239,594 shares of common stock and pre-funded warrants for 75,594 shares, generating approximately $1.1 million in gross proceeds[122] - Concurrently, 630,376 unregistered Series A-5 and Series A-6 warrants were issued, with an exercise price of $3.24 per share[123] - The company paid a cash fee of $77,000 and $65,950 for expenses to the placement agent, and issued 22,063 placement agent warrants[124] 2024 Registered Direct Offering and 2024 August Warrant Inducement In August 2024, the company raised $1.7 million from a direct offering and $3.4 million from warrant exercises, issuing new unregistered warrants and paying placement agent fees - In August 2024, the company issued 166,054 shares of common stock and pre-funded warrants for 70,827 shares, generating approximately $1.7 million in gross proceeds[125] - An inducement agreement led to the exercise of 480,234 outstanding warrants at a reduced exercise price of $7.05 per share, generating approximately $3.4 million in gross proceeds[126] - The company issued 1,863,706 new unregistered warrants with an exercise price of $7.05 per share[127] - Placement agent fees included a $354,000 cash fee, $100,950 for expenses, and the issuance of 50,200 placement agent warrants[128] 2024 February Warrant Inducement In February 2024, the company generated $4.7 million in gross proceeds by incentivizing warrant exercises and issuing new unregistered warrants, also repaying $0.5 million in notes with a premium - In February 2024, the company induced the exercise of 240,120 existing warrants at a reduced exercise price of $19.65 per share, generating approximately $4.7 million in gross proceeds[129] - New unregistered Series A and Series B Warrants were issued to purchase up to 480,240 shares of Common Stock, both with an exercise price of $15.90 per share[129] - A waiver related to the 2023 Notes' SPA required repayment of $0.5 million of investor-held notes with a $0.5 million premium[130] - Transaction costs included approximately $0.3 million in legal fees and other closing costs, and the issuance of 16,811 unregistered placement agent warrants[131] Components of Our Operating Results This section details the company's revenue, primarily from federal grants, and operating expenses, particularly R&D, which are significant and expected to increase Revenue The company generates limited revenue primarily from federal grants, with no product sales expected in the near future, and grant funds recognized as costs are incurred - The company has generated limited revenue since inception and does not expect product sales revenue in the near future[132] - Revenue is primarily derived from federal grants, specifically MPAR and OUD grants from the NIH through NIDA[133] - Grant revenue is recognized when costs related to the grants are incurred and assessed as reimbursable[133] Operating Expenses Operating expenses, comprising R&D and G&A costs, are expensed as incurred and are expected to increase as product candidates advance and public company operations expand Research and Development Expenses R&D expenses, including third-party costs for studies and manufacturing, are expensed as incurred and are expected to remain elevated as product candidates advance through clinical development, contingent on financing - Research and development expenses consist primarily of third-party costs (CROs, CMOs, consultants), preclinical and clinical studies, and employee-related expenses[134][137] - R&D costs are expensed as incurred and are not tracked on a program-by-program basis[134][135] - R&D expenses are expected to remain elevated as the company continues existing and initiates new clinical trials for PF614, PF614-MPAR, and nafamostat, and conducts other preclinical and clinical development, contingent on obtaining financing[136] General and Administrative Expenses G&A expenses, including personnel and professional fees, are expensed as incurred and are anticipated to increase with headcount and public company operational requirements, particularly for pre-commercialization activities - General and administrative expenses primarily consist of employee-related expenses (salaries, benefits, stock-based compensation) for executive, finance, HR, and administrative functions[140] - These expenses also include professional fees for legal, patent, consulting, investor relations, accounting, and audit services[140] - G&A expenses are anticipated to increase in the future due to increased headcount, significant accounting, audit, legal, regulatory, compliance, and investor relations costs, and preparation for commercial operations[141] Other Income (Expense) Other income (expense) includes changes in fair value of liability classified warrants, interest expense, and provision for income taxes, with a full valuation allowance maintained against deferred tax assets Change in fair value of liability classified warrants Changes in the fair value of liability classified warrants are recognized through earnings each reporting period, estimated using a Black-Scholes option pricing model - Changes in the fair value of liability classified warrants are recognized through earnings for each reporting period[143] - The fair value of these warrants is estimated using a Black-Scholes option pricing model[143] Interest Expense Interest expense includes interest accrued on financed directors' and officers' insurance and interest from the 2023 Notes, which also reflected amortization of debt discount and issuance costs - Interest expense consists of interest accrued on financed directors' and officers' insurance and interest from the 2023 Notes[144] - The 2023 Notes interest expense included amortization of the debt discount from original issuance and warrant issuances, and associated debt issuance costs[144] Provision for Income Taxes The company accounts for income taxes using the asset and liability method but has not recorded significant income tax expense due to net losses, maintaining a full valuation allowance against deferred tax assets - The company accounts for income taxes using the asset and liability method[146] - No significant income tax expense or benefits have been recorded, and a full valuation allowance is maintained against all deferred tax assets[145][146] - The company is evaluating the impact of ASU No. 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' effective for annual periods beginning after December 15, 2024[61] Results of Operations This section compares the company's financial performance for the three and six months ended June 30, 2025, versus 2024, highlighting increased federal grant revenue and R&D expenses, leading to a reduced net loss Comparison of the Three Months Ended June 30, 2025 and 2024 For Q2 2025, federal grants revenue increased by $1.2 million, R&D expenses rose by $1.0 million, G&A remained stable, and net loss decreased by $234,276 Results of Operations (Three Months Ended June 30) | Item | 2025 | 2024 | Change | | :------------------------------------------ | :----------- | :----------- | :----------- | | Federal grants | $1,371,438 | $181,797 | $1,189,641 | | Research and development | $1,923,430 | $947,229 | $976,201 | | General and administrative | $1,198,523 | $1,190,010 | $8,513 | | Loss from operations | $(1,750,515) | $(1,955,442) | $204,927 | | Net loss | $(1,733,517) | $(1,967,793) | $234,276 | - Federal grants revenue increased by $1.2 million, primarily due to increased activities under the MPAR grant in 2025[150] - Research and development expenses increased by $1.0 million, driven by higher clinical and pre-clinical activity for PF614-MPAR[151] - General and administrative expenses remained consistent at $1.2 million[152] Comparison of the six months ended June 30, 2025 and 2024 For the six months ended June 30, 2025, federal grant funding increased by $2.2 million, R&D expenses rose by $2.1 million, G&A remained stable, and net loss decreased by $1.4 million Results of Operations (Six Months Ended June 30) | Item | 2025 | 2024 | Change | | :------------------------------------------ | :----------- | :----------- | :----------- | | Federal grants | $2,691,210 | $487,519 | $2,203,691 | | Research and development | $3,808,957 | $1,726,133 | $2,082,824 | | General and administrative | $2,600,279 | $2,559,791 | $40,488 | | Loss from operations | $(3,718,026) | $(3,798,405) | $80,379 | | Net loss | $(3,679,090) | $(5,084,356) | $1,405,266 | - Federal grant funding increased by $2.2 million, attributed to a new MPAR grant that began in September 2024[155] - Research and development expenses increased by $2.1 million, driven by increased clinical and pre-clinical programs for PF614 and PF614-MPAR[155] - General and administrative expenses remained stable at $2.6 million for both periods[156] Liquidity and Capital Resources The company had $2.2 million in cash as of June 30, 2025, faces significant operating losses, and requires additional capital to continue as a going concern, with $9.4 million in MPAR grant funding remaining - As of June 30, 2025, the company had $2.2 million in cash and cash equivalents[159] - The company has incurred significant operating losses and negative cash flows, and current cash is sufficient only into the fourth quarter of 2025, raising substantial doubt about its ability to continue as a going concern[159][162] - Future operations will require additional capital, expected to be funded through public or private equity offerings, debt financings, or collaboration agreements[160] - Remaining funding under the MPAR federal research grant totaled $9.4 million at June 30, 2025, expected to be utilized by May 31, 2027[161] Cash Flows (Six Months Ended June 30) | Item | 2025 | 2024 | | :---------------------------------- | :----------- | :----------- | | Net cash used in operating activities | $(4,414,280) | $(5,718,294) | | Net cash provided by financing activities | $3,123,778 | $5,637,921 | | Net decrease in cash and cash equivalents | $(1,290,502) | $(80,373) | - Net cash used in operating activities decreased by $1.3 million (YoY) in 2025, while net cash provided by financing activities decreased by $2.5 million (YoY)[164][165] - Commitments as of June 30, 2025, included an estimated $8.3 million related to open purchase orders and contractual obligations, primarily for multi-year pre-clinical and clinical research studies[168] Critical Accounting Policies and Significant Judgments and Estimates Financial statement preparation requires significant estimates and judgments, particularly for accrued R&D expenses, based on service progress from third parties, with potential for adjustments - Preparation of consolidated financial statements requires significant estimates and judgments, especially for accrued research and development expenses[171][173] - Estimates for R&D expenses are based on reviewing open contracts, communicating with personnel, and assessing the progress of services from CROs and other third parties[173] - Variations in the actual timing or level of effort for services compared to estimates could lead to adjustments in accruals or prepaid expenses[173] Off-Balance Sheet Arrangements The company reported no off-balance sheet arrangements during the periods presented or currently - The company does not have any off-balance sheet arrangements[176] Recently Issued Accounting Pronouncements The company is evaluating the impact of recently issued accounting pronouncements, including ASU No. 2023-09, ASU 2024-03, and ASU 2024-04, on its consolidated financial statements - The company is evaluating the impact of ASU No. 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' effective for annual periods beginning after December 15, 2024[61] - The company is evaluating the impact of ASU 2024-03, 'Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures,' effective for annual periods beginning after December 15, 2026[62] - The company is evaluating the impact of ASU 2024-04, 'Debt – Debt with Conversion and other Options,' effective for all entities after December 15, 2025[63] Smaller Reporting Company Status The company qualifies as a 'smaller reporting company,' allowing reduced disclosure obligations, a status that will change if its public float or annual revenues exceed specified thresholds - The company is a 'smaller reporting company,' which allows for reduced disclosure obligations, including providing only two years of audited financial statements[178] - This status will be maintained until the market value of common stock held by non-affiliates exceeds $250 million or annual revenues exceed $100 million and market value exceeds $700 million[178] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks primarily related to interest rates and inflation, though neither is expected to have a material impact on its financial position or operations Interest Rate Risk The company's cash and cash equivalents are held in cash and a short-term money market fund, so interest rate changes are not expected to materially impact its financial position or results of operations - Cash and cash equivalents consist of cash and a money market fund account[180] - Due to the short-term nature of the money market fund, changes in market interest rates are not expected to have a material impact on financial position or results of operations[180] Inflation Risk The company does not believe that inflation and changing prices have had a significant impact on its results of operations for any periods presented - The company does not believe that inflation and changing prices had a significant impact on its results of operations for any periods presented[181] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[182] - No changes in internal control over financial reporting occurred during the fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[183] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company may face various disputes, but as of June 30, 2025, no pending legal proceedings are expected to materially adversely affect its financial condition or operations - The company may become involved in disputes and litigation related to intellectual property, licensing, contract law, and employee relations[184] - As of June 30, 2025, and December 31, 2024, there were no pending legal proceedings against the company expected to have a material adverse effect on cash flows, financial condition, or results of operations[68][184] Item 1A. Risk Factors This section refers to the detailed discussion of risk factors in the company's 2024 Annual Report on Form 10-K, which could materially affect its financial condition and results of operations - A detailed discussion of risk factors is included in Part I, Item 1A. Risk Factors of the company's 2024 Annual Report on Form 10-K[185] - These risks and uncertainties have the potential to materially affect the company's financial condition and results of operations[185] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Information on unregistered equity sales in April 2025 was previously disclosed, and 20,000 common shares were issued to a former contractor to resolve a dispute, exempt from registration - Information concerning the sale of unregistered securities in April 2025 was disclosed in a Current Report on Form 8-K filed on April 24, 2025[186] - On April 7, 2025, the company issued 20,000 shares of common stock to a former independent contractor as compensation to resolve a dispute, exempt from registration under Section 4(a)(2) of the Securities Act[187] Item 3. Defaults Upon Senior Securities This item is not applicable to the company - This item is not applicable[188] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[189] Item 5. Other Information No other information is reported under this item - No other information is reported under this item[190] Item 6. Exhibits This section lists the exhibits filed as part of the report, including certifications from the Principal Executive Officer and Principal Financial Officer, and Inline XBRL documents - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act of 2002[191] - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) and the Cover Page Interactive Data File are also filed[191] Signatures The report is duly signed on behalf of Ensysce Biosciences, Inc. by David Humphrey, Chief Financial Officer, Secretary, and Treasurer, on August 13, 2025 - The report is signed by David Humphrey, Chief Financial Officer, Secretary and Treasurer of Ensysce Biosciences, Inc.[195] - The signing date is August 13, 2025[195]