Ensysce Biosciences(ENSC) - 2022 Q2 - Quarterly Report

Financial Performance - Ensysce Biosciences, Inc. has an accumulated deficit of $95.5 million as of June 30, 2022, and expects to continue incurring net losses in the foreseeable future [144]. - The company has not generated any revenue from product sales since its inception and does not expect to do so in the near future [153]. - Net loss for Q2 2022 was $7.9 million, compared to a net loss of $1.0 million in Q2 2021, an increase of $6.9 million [177]. - Net loss for the six months ended June 30, 2022, was $8.9 million, compared to a net loss of $1.9 million in the same period of 2021, an increase of $6.9 million [185]. - The company has incurred significant operating losses, with an accumulated deficit of $95.5 million as of June 30, 2022 [213]. Expenses - Ensysce anticipates significant increases in clinical development expenses and general and administrative expenses as it continues its development activities [144]. - Research and development expenses for Q2 2022 were $5.3 million, an increase of $4.8 million from $0.5 million in Q2 2021 [180]. - General and administrative expenses for Q2 2022 were $2.0 million, up $1.6 million from $0.4 million in Q2 2021 [181]. - Total operating expenses for Q2 2022 reached $7.3 million, compared to $0.9 million in Q2 2021, an increase of $6.4 million [177]. - Research and development expenses for the six months ended June 30, 2022, were $8.4 million, up $7.6 million from $0.8 million in the same period of 2021 [187]. - General and administrative expenses for the six months ended June 30, 2022, were $4.2 million, an increase of $3.3 million from $0.9 million in the same period of 2021 [188]. - Cash used in operating activities for the six months ended June 30, 2022, was $7.9 million, a significant increase from $0.6 million in the same period in 2021 [207]. Funding and Capital - The company received approximately $7.8 million in net proceeds from the business combination that occurred on June 30, 2021 [152]. - Ensysce is actively seeking additional funding through private and public equity offerings, debt financings, or collaborations to support its growth strategy [147]. - The company has funded operations primarily through common equity sales, federal research grants, and promissory notes, indicating a need for additional capital in the future [193]. - Current remaining funding under two federal research grants totals $6.3 million, which is available until August 31, 2023 [195]. - The GEM Agreement allows the company to draw down up to $60.0 million from GEM Global, subject to certain conditions [198]. - The company has entered into multiple financing agreements, including a $15.0 million SPA and an $8.0 million SPA with institutional investors [204][205]. - The company has limited cash resources to fund operations for the next 12 months, raising concerns about its ability to continue as a going concern [214]. Clinical Development - The lead product candidate, PF614, is currently in Phase 1b clinical development, while PF614-MPAR™ is in Phase 1 and nafamostat is moving towards Phase 2 clinical development [143]. - Ensysce has not yet completed any pivotal clinical trials or obtained regulatory approvals for its product candidates [143]. - The company expects substantial increases in expenses related to ongoing research and development activities, particularly for clinical trials [212]. Grants and Funding Sources - The company has been awarded federal grants from the NIH for the development of its MPAR overdose prevention technology and TAAP/MPAR abuse deterrent technology [154]. - Federal grant funding for Q2 2022 was $0.2 million, down from $0.4 million in Q2 2021, a decrease of $0.2 million [178]. - Federal grant funding for the six months ended June 30, 2022, was $0.8 million, an increase of $0.1 million from $0.7 million in the same period of 2021 [186]. Company Classification and Reporting - The company qualifies as an "emerging growth company" under the JOBS Act, allowing it to take advantage of certain reporting exemptions [228]. - The company is classified as a "smaller reporting company," which allows for reduced disclosure obligations until specific market value or revenue thresholds are met [229]. Stock-Based Compensation - The company measures stock-based compensation based on fair value at the grant date and recognizes the expense over the vesting period [222]. - The fair value of stock options is estimated using the Black-Scholes model, considering stock volatility, expected term, risk-free interest rate, and dividend yield [224]. - The company elected the fair value option for convertible notes, using a Monte Carlo simulation model for valuation, with changes recognized through earnings [225]. Miscellaneous - The ongoing COVID-19 pandemic has not significantly impacted the company's financial condition or operations to date [149]. - There are no off-balance sheet arrangements currently or during the presented periods [226]. - Cash and cash equivalents as of June 30, 2022, included cash and a money market fund, with minimal impact expected from sudden interest rate changes [230]. - Inflation and changing prices are not believed to have significantly impacted the company's results of operations for the periods presented [231].