Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
The following discussion and analysis
of the Company’s financial condition and results of operations should be read in conjunction with our audited financial
statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data”
of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking
statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of
many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,” “Item 1A.
Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Overview
We are a blank check company incorporated
on September 11, 2017 in Delaware and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, recapitalization, reorganization or similar business combination with one or more target businesses. We intend
to effectuate our Business Combination using cash from the proceeds of our Initial Public Offering, the sale of the Private Placement
Warrants that occurred simultaneously with the completion of our Initial Public Offering, the sale of the Private Placement Units
under the Contingent Forward Purchase Contract, if any (which has been waived in connection with the Business Combination with
Ensysce), our capital stock, debt or a combination of cash, stock and debt.
We are incurring significant costs in
the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Recent Developments
On November 26, 2019, the Company
held a special meeting of stockholders at which our stockholders approved extending our Combination Period deadline from December 5,
2019 to April 5, 2020 (the “First Extension”). Our public stockholders were able to elect to redeem their shares
in connection with the First Extension for a pro rata portion of the amount then on deposit in the Trust Account ($10.00 per share,
plus any pro rata interest earned on the funds held in the Trust Account and not previously released to us to pay franchise and
income taxes). With respect to public shares not redeemed in connection with the Special Meeting, we agreed to make Contributions
of $0.03 for each public share that was not redeemed by stockholders for each of the four monthly periods covered by the extension
(commencing on December 6, 2019 through the end of the First Extension), subject to certain conditions. The number of shares
of redeemed by public stockholders in connection with the First Extension was 1,123,749 for an aggregate cash redemption
amount of $11,583,473.
On December 5, 2019, the Company
entered into the Expense Advancement Agreement with GTWY Holdings pursuant to which GTWY Holdings committed to provide $566,288
to fund Contributions to the Trust Account, representing the amount needed to fund the first monthly Contribution during the First
Extension. The Company drew down the full amount under the Expense Advancement Agreement to fund the required Contribution to
the Trust Account for the period December 6, 2019 to January 5, 2020 by issuing an unsecured promissory note to GTWY
Holdings. The note does not bear interest. If we complete our initial business combination, the amount borrowed under the Expense
Advancement Agreement would be repaid out of the proceeds of the Trust Account released to it. Otherwise, amounts borrowed under
the Expense Advancement Agreement would be repaid only out of funds held outside the Trust Account. Amounts borrowed pursuant
to the Expense Advancement Agreement were deposited to the Trust Account on December 6, 2019. The note was converted into
warrants on January 31, 2021 at a price of $1.00 per warrant and subject to the same terms and conditions as our private placement
warrants.
On January 6, 2020, the Company deposited
$566,288 to the Trust Account to fund the required Contribution to the Trust Account for the period January 6, 2020 to February 5,
2020.
On January 15, 2020, we drew down
$1,000,000 under the Expense Advancement Agreement with our sponsors and strategic investor dated December 1, 2017 to fund general
corporate purposes in exchange for issuing unsecured promissory notes. The holders had the option to convert the promissory notes
into warrants at a price of $1.00 per warrant subject to the same terms and conditions as private placement warrants. The
notes were converted into warrants on June 25, 2020. Notes issued under the Expense Advancement Agreement do not bear interest.
If we complete an initial business combination, we would repay amounts borrowed under the Expense Advancement Agreement out of
the proceeds of the Trust Account released to it; provided, however, that the sponsors and strategic investor have the option to
convert promissory notes into warrants at a price of $1.00 per warrant subject to the same terms and conditions as our private
placement warrants. Otherwise, amounts borrowed under the Expense Advancement Agreement would be repaid only out of funds held
outside the Trust Account. The expense advancement agreement was amended to increase the total amount of advances available to
us under the agreement by $125,000 on June 29, 2020 and by an additional $75,000 on October 26, 2020 and an additional $100,000
on November 30, 2020, for a total of $300,000, of which we drew down $225,000 pursuant to promissory notes issued in October and
November 2020, with a resulting balance of $225,000 under the promissory notes as of December 31, 2020. On February 23, 2021, we
entered into the Fourth Expense Advancement Amendment to the Expense Advancement Agreement to increase the total amount of advances
available to the Company under the agreement to $1,460,000. The November 2020 Promissory Notes were amended and restated on February
24, 2021 in order to reflect the incremental increase of the total amount of advances available to the Company thereunder to $460,000
from $300,000 and all of such increase was drawn on February 24, 2021.
On each of February 4, 2020 and March
4, 2020, we deposited $566,288 into the Trust Account to fund the required Contribution to the Trust Account for the remaining
monthly periods covered by the Extension.
On March 26, 2020, we held a special meeting
pursuant to which our stockholders approved extending the Combination Period from April 5, 2020 to June 30, 2020 (the “Second
Extension Date”). In connection with the approval of the extension, stockholders elected to redeem an aggregate of 16,837,678
shares of our common stock. As a result, an aggregate of $176,283,492 (or approximately $10.47 per share) was released from our
Trust Account to pay such stockholders. Of the amount paid to redeeming stockholders, $136,283,492 was paid as of March 31, 2020
and the balance of $40,000,000 was paid on April 1, 2020.
On June 26, 2020, we held a special meeting pursuant to which
our stockholders approved extending the Combination Period from June 30, 2020 to December 1, 2020 (the “Third Extension Date”).
In connection with the approval of the extension, stockholders elected to redeem an aggregate of 776,290 shares of our common stock.
As a result, an aggregate of $8,099,292 (or approximately $10.43 per share) was released from our Trust Account to pay such stockholders.
On July 16, 2020, we elected to terminate
the Agreement and Plan of Merger, dated December 27, 2019 (the “GTWY Merger Agreement”), with GTWY Holdings, and a
related subsidiary, GTWY Merger Sub Corp. Pursuant to its terms, we had the ability to terminate the GTWY Merger Agreement to the
extent the business combination had not been completed by July 15, 2020.
On November 24, 2020, our stockholders
approved extending the Combination Period from December 1, 2020 to June 30, 2021 (the “Fourth Extension Date”). In
connection with the approval of the extension, stockholders elected to redeem an aggregate of 38,015 shares of the Company’s
common stock. As a result, an aggregate of $393,380 (or approximately $10.34 per share) was released from our Trust Account to
pay such stockholders, and we have 6,224,268 shares of common stock outstanding as
of March 15, 2021.
NASDAQ Notice
On November 30, 2020, we received a notice
from the Listing Qualifications Department of The Nasdaq Stock Market LLC stating that we were not in compliance with Listing
Rule IM-5101-2 (the “Rule”), which requires that a special purpose acquisition company complete one or more business
combinations within 36 months of the effectiveness of the registration statement filed in connection with its initial public offering,
and that we were also not in compliance with Nasdaq’s minimum publicly held shares requirement under Listing Rule 5550(a)(4),
which requires a listed company’s primary equity security to maintain a minimum of 500,000 publicly held shares.
On January 27, 2021, the Panel granted
our request for continued listing of our equity securities on the Nasdaq Capital Market pursuant to an extension,
subject to certain milestones, through June 1, 2021. See “Item 1A. Risk Factors — The Nasdaq may not continue to list
our securities, which could limit investors’ ability to make transactions in our securities and subject us to additional
trading restrictions”.
Merger Agreement
On January 31, 2021, we entered into a
Merger Agreement with Ensysce and Merger Sub, relating to a proposed business combination transaction between us and Ensysce.
Pursuant to the Merger Agreement, Merger
Sub will merge with and into Ensysce, with Ensysce surviving such merger as our wholly owned subsidiary and the stockholders of
Ensysce becoming our stockholders (the “Merger”).
Ensysce’s issued and outstanding
share of common stock as of immediately prior to the closing of the Merger (including shares issuable on conversion of convertible
notes of Ensysce). will, at the closing (the “Closing”) of the transactions contemplated by the Merger Agreement (collectively,
the “Transaction”), be canceled and converted into the right to receive our common stock, calculated based on an exchange
ratio of 0.06585 (the “Exchange Ratio”).
The Transaction will be consummated subject
to the deliverables and provisions as further described in the Merger Agreement.
We are incurring significant costs in
the pursuit of its acquisition plans. We may be required to seek additional resources in the future to fund general corporate
purposes and cannot assure you that our plans to complete the Transactions will be successful.
Results of Operations
Our only activities from inception through
December 31, 2020 were organizational activities and those necessary to prepare for the Initial Public Offering, identifying a
target for our Business Combination and seeking to complete an initial business combination, including activities in connection
with the proposed acquisition of Ensysce and the announced and subsequently terminated acquisition of GTWY Holdings. We do not
expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income
in the form of interest income on marketable securities. We are incurring expenses as a result of being a public company (for
legal, financial reporting, accounting and auditing compliance), as well as for due diligence and transaction expenses in connection
with completing a Business Combination.
For year ended December 31, 2020, we had a net income of $2,404,519,
which consists interest income on marketable securities held in the Trust Account of $719,646 and the forgiveness of accounts payable
of $3,298,207, offset by operating costs of $1,368,841 and a provision for income taxes of $244,493.
For the year ended December 31, 2019,
we had net income of $365,954, which consists of interest income on marketable securities held in the Trust Account of $4,249,828
offset by operating costs of $3,328,674 and a provision for income taxes of $555,200.
Liquidity and Capital Resources
As of December 31, 2020, we had marketable
securities held in the Trust Account of $12,628,170 (including approximately $239,000 of interest income) consisting of money
market funds. Interest income on the Trust Account will be used by us to pay franchise and income taxes. Through December 31,
2020, we withdrew $2,001,144 of interest earned on the Trust Account to pay franchise and income taxes, of which $326,352 was
withdrawn during the year ended December 31, 2020.
We intend to use substantially all of
the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less deferred underwriting
commissions and interest income that is used to pay franchise and income taxes) to complete our Business Combination. To the extent
that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining
proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses,
make other acquisitions and pursue our growth strategies.
As of December 31, 2020, we had cash of
$49,202 held outside the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate
target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or
similar locations of prospective target businesses or their representatives or owners, review corporate documents and material
agreements of prospective target businesses, and structure, negotiate and complete a Business Combination, and we have also used
such funds to make Contributions to the Trust Account in connection with the First Extension (see “Recent Developments”
above).
For the year ended December 31, 2020, cash used in operating
activities was $864,439. Net income of $2,404,519 was impacted by interest earned on marketable securities held in the Trust Account
of $719,646 and the forgiveness of accounts payable in the amount of $3,298,207. Changes in operating assets and liabilities provided
$748,895 of cash from operating activities.
For the year ended December 31, 2019,
cash used in operating activities was $1,424,792. Net income of $365,954 was offset by interest earned on marketable securities
held in the Trust Account of $4,249,828 and a deferred tax benefit of $1,764. Changes in operating assets and liabilities provided
$2,460,846 of cash from operating activities.
On December 5, 2019, the Company
entered into the Expense Advancement Agreement with GTWY Holdings pursuant to which GTWY Holdings committed to provide $566,288
to fund Contributions to the Trust Account. representing the amount needed to fund the first monthly Contribution during the First
Extension. The Company drew down the full amount under the Expense Advancement Agreement to fund the required Contribution to
the Trust Account for the period December 6, 2019 to January 5, 2020 by issuing an unsecured promissory note to GTWY
Holdings (the “GTWY Promissory Note”). The GTWY Promissory Note does not bear interest. Amounts borrowed pursuant
to the Expense Advancement Agreement were deposited to the Trust Account on December 6, 2019. On January 31, 2021, we
entered into an amendment to the GTWY Promissory Note to permit conversion of all or a portion of the GTWY Promissory Note into
warrants at a price of $1.00 per warrant. In connection with such amendment, GTWY Holdings elected to convert the full principal
balance of the GTWY Promissory Note into 566,288 warrants.
On December 1, 2017, HG Vora entered into
a Contingent Forward Purchase Contract with us to purchase, in a private placement for gross proceeds of $62,500,000 to occur concurrently
with the consummation of our Business Combination, 6,250,000 Units on the same terms as the sale of Units in the Initial Public
Offering at $10.00 per unit. The funds from the sale of the Private Placement Units may be used as part of the consideration to
the sellers in the Business Combination; any excess funds from the Private Placement Units may be used for working capital in the
post-transaction company. This commitment is independent of the percentage of stockholders electing to redeem their shares and
provides us with an increased minimum funding level for the Business Combination. HG Vora’s obligation to purchase our Units
under the Contingent Forward Purchase contract is contingent upon, among other things, HG Vora approving the Business Combination,
which approval can be withheld for any reason. In connection with previously proposed business combination transaction with GTWY
Holdings, an amendment to the Contingent Forward Purchase Contract was effected on December 27, 2019 to provide that the Contingent
Forward Purchase Contract would terminate as of, and contingent upon, the closing of the transaction with GTWY Holdings such that
the strategic investor would instead purchase 3,000,000 units of GTWY Holdings’ equity securities (with each unit consisting
of one GTWY Holdings Share and one-half of one GTWY Holdings Warrant) for a purchase price of $10.00 per unit. In addition, HG
Vora waived its rights under the Contingent Forward Purchase Contract to purchase Private Placement Units in connection with the
proposed Merger with Ensysce.
In order to fund working capital
deficiencies or finance transaction costs in connection with a Business Combination, the Hydra Sponsor, an affiliate of the
Matthews Lane Sponsor and HG Vora (the “Funding Parties”) loaned an aggregate of $1,000,000 to the Company, in
accordance with unsecured promissory notes issued on January 15, 2020 to the Funding Parties, pursuant to an expense advance
agreement dated December 1, 2017 which were subsequently converted by the holders into warrants on June 25, 2020. The expense
advancement agreement was amended to increase the total amount of advances available to the Company under the agreement by
an additional $300,000 pursuant to amendments effected through November 30, 2020, of which the Company drew down an aggregate
of $225,000 through December 31, 2020. The agreement was further amended on February 23, 2021 to increase the total amount of
advances available to the Company by an additional $160,000 which was drawn down, on February 24, 2021, resulting in aggregate loans
outstanding of $460,000 at March 10, 2021. The Funding Parties may, but are not obligated to, loan the Company additional
funds from time to time or at any time, as may be required (“Working Capital Loans”). Under the expense
advancement agreement, Working Capital Loans would either be paid upon completion of a Business Combination, without
interest, or, at the holder’s discretion, could be converted into warrants at a price of $1.00 per warrant. The
warrants would be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the
Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds
held in the Trust Account would be used to repay the Working Capital Loans. As of December 31, 2020, there were $225,000
amounts outstanding under the Working Capital Loans (the $1,000,000 previously loaned by the Funding Parties having been
converted into warrants on June 25, 2020).
As of December 31, 2020, we had $49,202
in our operating bank accounts, $12,628,170 in securities held in the Trust Account to be used for a Business Combination or to
repurchase or redeem its common stock in connection therewith and working capital deficit of $127,869, which excludes $93,929
of prepaid income and franchise taxes.
We will need to raise additional capital
through loans or additional investments from our sponsors, HG Vora, stockholders, officers, directors, or third parties. Our sponsors
and HG Vora may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable
in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If
we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include,
but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead
expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all.
These conditions raise substantial doubt about our ability to continue as a going concern through June 30, 2021, the date that
we will be required to cease all operations, except for the purpose of winding up, if a Business Combination is not consummated.
These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification
of the liabilities that might be necessary should we be unable to continue as a going concern.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities,
which would be considered off-balance sheet arrangements as of December 31, 2020. We do not participate in transactions that create
relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would
have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance
sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities,
or purchased any non-financial assets.
Contractual Obligations
As of December 31, 2020, we do not have
any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement dated
December 1, 2017 to pay our Hydra sponsor a monthly fee of up to $10,000 for office space, utilities and secretarial and administrative
support provided to us until the earlier of the completion of the Business Combination and our liquidation. We began incurring
these fees on December 1, 2017. Effective September 30, 2020, Hydra Sponsor agreed to stop charging the Company the monthly administrative
fee and forgave the $71,000 outstanding balance due under the agreement.
The
underwriters are entitled to underwriting discounts and commissions of 5.5%, of which 2.0% ($4,000,000) was paid at the closing
of the Initial Public Offering, and 3.5% ($7,000,000) was deferred. The deferred discount will become payable to the underwriters
from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of
the underwriting agreement. The underwriters are not entitled to any interest accrued on the deferred discount. On November 23,
2020, the underwriters agreed to waive $250,000 of the deferred fee that is to be paid upon consummation of the Business Combination,
as a result of which $6,750,000 remained payable. On January 31, 2021, the underwriters agreed to reduce the total deferred underwriting
fee that is to be paid to such underwriters upon the consummation of our Business Combination to $2,000,000, which have the right,
under certain situations, to pay in the form of our common stock.
Critical Accounting Policies
The preparation of financial statements
and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could
materially differ from those estimates. We have identified the following critical accounting policies:
Common Stock Subject to Possible Redemption
We account for our common stock subject
to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and measured
at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within
the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified
as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain
redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly,
common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’
equity section of our balance sheets.
Net Income (Loss) Per Common Share
We apply the two-class method in calculating
earnings per share. Net income per common share, basic and diluted for redeemable common stock is calculated by dividing the interest
income earned on the Trust Account, net of applicable taxes, if any, by the weighted average number of shares of redeemable common
stock outstanding for the period. Net loss per common share, basic and diluted for non-redeemable common stock is calculated by
dividing net income less income attributable to redeemable common stock, by the weighted average number of shares of non-redeemable
common stock outstanding for the period presented.
Recent Accounting Pronouncements
Management does not believe that any other
recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial
statements.
Item 7A. Quantitative and Qualitative
Disclosures about Market Risk
Not applicable for smaller reporting companies.
Item 8. Financial Statements
and Supplementary Data
This information appears following Item 15 of this Report and
is incorporated herein by reference.
Item 9. Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
Disclosure controls and procedures are
controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management,
including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15
under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness
of the design and operation of our disclosure controls and procedures as of December 31, 2020. Based upon their evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) were effective.
Management’s Annual Report on Internal
Control over Financial Reporting
As required by SEC rules and regulations
implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate
internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes
in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness
of our internal control over financial reporting at December 31, 2020. In making these assessments, management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated
Framework (2013). Based on our assessments and those criteria, management determined that we maintained effective internal control
over financial reporting as of December 31, 2020.
This Annual Report on Form 10-K does not
include an attestation report of internal controls from our independent registered public accounting firm due to our status as
an emerging growth company under the JOBS Act.
Changes in Internal Control over Financial
Reporting
There were no changes in our internal
control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most
recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers
and Corporate Governance
Directors and Executive Officers
Our current directors and executive officers
as of the date of this Report are as follows:
Name Age * Position
A. Lorne Weil 75 Executive Chairman
Daniel B. Silvers 44 Chief Executive Officer and Director
Marc J. Falcone 47 Director
Steven M. Rittvo 72 Director
David L. Weinstein 54 Director
George Peng 50 Chief Financial Officer, Treasurer and Secretary
Eric Carrera 31 Senior Vice President — Finance and Business Development
A. Lorne Weil has served as our
Executive Chairman since our formation in September 2017 and has been a principal of Hydra Management, an investment vehicle formed
by Mr. Weil, since September 2014. Mr. Weil serves as Executive Chairman of Inspired Entertainment, Inc., a position he has held
since December 2016. Previously, Mr. Weil served as Chairman and CEO of Inspired’s predecessor, Hydra Industries Acquisition
Corp., since October 2014. Mr. Weil previously served as Chairman of the Board of Scientific Games Corporation (and its predecessor
Autotote Corporation) from October 1991 to November 2013. Mr. Weil also served as the Chief Executive Officer of Scientific Games
Corporation (and its predecessor Autotote Corporation) from 1992 to 2008 and from November 2010 to November 2013 (Mr. Weil had
retired in 2008) and as the President from August 1997 to June 2005. Under Mr. Weil’s stewardship, the company made a number
of significant acquisitions and joint ventures, including the privatization of the off-track betting operations of the State of
Connecticut, and the acquisitions of Scientific Games Holdings Corp., IGT Online Entertainment Systems, Global Draw and WMS Industries,
and the privatization of the Illinois, New Jersey and Italian lotteries. Prior to joining Scientific Games, Mr. Weil was President
of Lorne Weil, Inc., a firm he founded which provided strategic planning and corporate development services to technology-based
industries, a role he maintained from 1979 to November 1992. From 1974 to 1979, Mr. Weil was Vice President — Corporate Development
at General Instrument Corporation. From 1970 to 1974, Mr. Weil was a manager with the Boston Consulting Group. Mr. Weil received
his undergraduate degree from the University of Toronto, an M.S. degree from the London School of Economics and an M.B.A. from
Columbia University, where he served for more than 10 years on the Board of Overseers. From 2011 to 2013, Mr. Weil was a director
of Avantair Inc. In 2012, Mr. Weil was the sponsor and Chairman of the Board of Andina Acquisition Corp., a Nasdaq-listed blank
check company, and currently serves as the Non-Executive Chairman of the Board of the successor entity, Tecnoglass Inc.
We believe Mr. Weil is well-qualified to
serve as a member of our board of directors due to his extensive business experience in strategic planning and corporate development,
his experience successfully overseeing the IPO of Hydra Industries Acquisition Corp. and its subsequent merger with Inspired Gaming
Group, the IPO of Andina and its subsequent merger with Tecnoglass, the contacts he has fostered over the course of his extensive
career, as well as his vast operational experience.
Daniel B. Silvers has served as
Chief Executive Officer and a Director of the Company since our formation in September 2017. Additionally, he has served as Managing
Member of Matthews Lane Capital Partners LLC, an investment firm, since June 2015 and also has served as Executive Vice President
and Chief Strategy Officer of Inspired Entertainment, Inc., a company involved in the gaming equipment supplier industry, since
December 2016. At Inspired, Mr. Silvers is also a member of the Office of the Executive Chairman. He is the former President
of Spring Owl Asset Management LLC, an investment management firm, a position he held from March 2009 to June 2015 (including predecessor
entities). From April 2009 to October 2010, Mr. Silvers also served as President of Western Liberty Bancorp, an acquisition oriented
holding company that acquired and recapitalized a community bank in Las Vegas, Nevada. Mr. Silvers joined a predecessor of Spring
Owl from Fortress Investment Group, a leading global alternative asset manager, where he worked from 2005 to 2009. At Fortress,
Mr. Silvers’ primary focus was to originate and oversee due diligence on
and asset management for real estate and gaming investments in Fortress’ Drawbridge Special Opportunities Fund. Prior to
joining Fortress, Mr. Silvers was a senior member of the real estate, gaming and lodging investment banking group at Bear, Stearns
& Co., Inc. Mr. Silvers serves as a director of Avid Technology, Inc., a global media technology provider. Mr. Silvers previously
served on the board of directors of Forestar Group, Inc., International Game Technology, bwin.party digital entertainment plc,
Universal Health Services, Inc., PICO Holdings, Inc., Ashford Hospitality Prime, Inc. and India Hospitality Corp. Mr. Silvers holds
a B.S. in Economics, as well as an M.B.A with a concentration in Finance, from The Wharton School of the University of Pennsylvania.
We believe Mr. Silvers is well-qualified
to serve as a member of our board of directors due to his extensive experience in corporate finance, capital allocation, capital
markets and public company governance.
Marc J. Falcone has served as a
member of our board of directors since December 1, 2017. Mr. Falcone has served as the President and Chief Financial Officer of
Sightline Payments LLC, a leading digital commerce platform for the gaming industry, since February 2019. Mr. Falcone is also the
principal of MF Ventures LLC, a diversified investment platform with investments in companies involved in the hospitality, gaming
and leisure industries, including Kentucky Downs located in Franklin, Kentucky, which operates 750 historical horse racing machines.
Mr. Falcone served as Executive Vice President, Chief Financial Officer and Treasurer of Red Rock Resorts, Inc. from October 2015
until May 2017 and as Executive Vice President and Chief Financial Officer of Station Casinos LLC from June 2011 until May 2017.
Mr. Falcone served as Treasurer of Station Casinos LLC since January 2013 until May 2017. Mr. Falcone also served as Chief Financial
Officer of Fertitta Entertainment LLC from October 2010 through May 2016. From June 2008 to October 2010, Mr. Falcone worked at
Goldman Sachs & Co. where he focused on restructuring transactions in the hospitality and gaming sectors under that firm’s
Whitehall division. From May 2006 to June 2008, Mr. Falcone was a senior analyst at Magnetar Capital, LLC (an alternative asset
management firm), covering the gaming, lodging, leisure, REIT and airline industries. From May 2002 to June 2006, Mr. Falcone was
a Managing Director for Deutsche Bank Securities Inc. covering gaming, lodging and leisure companies and was recognized as one
of the industry’s top analysts. Prior to joining Deutsche Bank Securities Inc., Mr. Falcone worked for Bear, Stearns &
Co. Inc., covering the gaming, lodging and leisure industries. Mr. Falcone holds a bachelor’s degree in Real Estate Finance
and Hotel Administration from Cornell University.
We believe Mr. Falcone is well-qualified
to serve as a member of our board of directors due to his significant experience as an executive officer at a public company in
the leisure sector and investment experience with the leisure sector and leisure-related businesses.
Steven M. Rittvo has served as a
member of our board of directors since December 1, 2017. Since February 2017, Mr. Rittvo serves as Chairman and Chief Executive
Officer of Innovation Project Development, a multi-disciplinary development management services company focused on leisure- and
residential-related developments. Mr. Rittvo has been with Innovation Project Development since November 2005. In May 1993, Mr.
Rittvo co-founded The Innovation Group, Inc., a gaming, hospitality and leisure sector consulting firm headquartered in Denver
with offices in New Orleans, Atlantic City, Aspen, Minneapolis and Orlando. Mr. Rittvo served as President of Innovation Group
until February 2017. In Mr. Rittvo’s various roles with The Innovation Group, he advised and participated in gaming studies
for clients ranging from Caesars Entertainment, MGM Mirage, Pinnacle Entertainment, Mandalay Resort Group, Isle of Capri, Harrah’s
Entertainment, Trump Hotels and Casinos, as well as numerous Native American tribes and government agencies throughout the United
States and the World. Mr. Rittvo holds a bachelor’s degree in Systems Engineering and a master’s degree in Transportation
Engineering and Planning from the Polytechnic Institute of New York.
We believe Mr. Rittvo is well-qualified
to serve as a member of our board of directors due to his significant experience managing leisure-related developments and advising
owners, operators and other stakeholders in the leisure sector and leisure-related businesses.
David L. Weinstein has served as
a member of the LACQ board of directors since December 1, 2017. Mr. Weinstein is a partner at Belvedere Capital, a real estate
investment firm based in New York, and is primarily focused on Belvedere’s investment in Industry City, a six million square
foot redevelopment project in Sunset Park, Brooklyn. Mr. Weinstein serves as Chief Executive Officer of GreenAcreage Real Estate
Corp., a REIT, a position he assumed in August 2020, and also serves as a director of GreenAcreage. Mr. Weinstein was previously
a partner at Belvedere Capital from September 2008 until October 2013 and rejoined as a partner in 2016. From February 2015 until
August 2016, Mr. Weinstein was a member of the
board of directors of Forestar Group, Inc. Mr. Weinstein previously served as President and Chief Executive Officer of MPG Office
Trust, Inc., a publicly traded office REIT, from November 2010 until the sale of the Company in October 2013. He was a member of
the board of directors of MPG Office Trust, Inc. from August 2008 until October 2013. From April 2007 until August 2008, Mr. Weinstein
was a Managing Director of West bridge Investment Group/Westmont Hospitality Group, a real estate investment fund focused on hospitality.
From 1996 until January 2007, Mr. Weinstein worked at Goldman, Sachs & Co. in New York, first as a Vice President in the real
estate investment banking group (focusing on mergers, asset sales and corporate finance) and then, from 2004, as a Vice President
in the Special Situations Group (focused on real estate debt investments). Mr. Weinstein holds a Bachelor of Science degree in
Economics, magna cum laude, from The Wharton School of the University of Pennsylvania and a Juris Doctor, cum laude, from the University
of Pennsylvania Law School. He is a member of the New York State Bar Association.
We believe Mr. Weinstein is well-qualified
to serve as a member of our board of directors due to his real estate banking, investment and management experience, including
as a chief executive officer of a publicly traded real estate company, as well as his corporate governance experience through service
as a board member of a public company will be valuable to the Company’s board of directors.
George Peng has served as our Chief
Financial Officer, Treasurer and Secretary since our formation in September 2017. Additionally, Mr. Peng has been a Principal of
Hydra Management, LLC, an investment vehicle of Mr. Weil’s since July 2014 and as Vice President of Finance at Inspired
Entertainment, Inc., since January 2017. Previously, he was Chief Financial Officer of Hydra Industries Acquisition Corp., a special-purpose
acquisition corporation that acquired Inspired Entertainment, Inc., from August 2015 until January 2017. Before that, Mr. Peng
was a consultant to Scientific Games Corporation from May 2013 to April 2014, where he assisted in its integration of the acquisition
of WMS Industries. Mr. Peng was focused on the financial and operational impacts of integrating the accounting and finance functions
of both companies, including human resource allocation, budgeting, and cost reductions. Prior to consulting to Scientific Games,
Mr. Peng was a consultant primarily focused on financial planning and analysis for various industries, including retail and financial
services. Previously, he was an Associate in the Investment Banking division of Credit Suisse, focusing on private equity, high
yield, and leveraged lending products. Mr. Peng holds an A.B. in Economics from the University of Michigan, Ann Arbor, as well
as an M.B.A. with a concentration in Finance from the Anderson School at UCLA. Mr. Peng is a CFA Charter holder, which he was awarded
in 2006.
Eric Carrera has served as our Senior
Vice President of Finance and Business Development since September 2017. Additionally, Mr. Carrera has served as the Senior Associate
of Hydra Management, LLC, an investment vehicle of Mr. Weil, since June 2015 and as Manager of Finance/M&A of Inspired Entertainment,
Inc. since January 2017. Mr. Carrera was Senior Vice President at Andina Acquisition Corp. II, a special-purpose acquisition corporation,
from November 2015 to March 2018 when it successfully completed its business combination with Lazydays R.V. Center, Inc., a premier
RV dealership destination. From June 2011 to February 2015, Mr. Carrera was an international business development associate with
Scientific Games Corporation, a supplier of technology-based products, systems and services to gaming markets worldwide. From September
2011 to December 2013, Mr. Carrera acted as an advisor to Andina Acquisition Corp. and was a member of the team that successfully
completed a business transaction with Tecnoglass S.A., a Colombian manufacturer of glass and windows. Mr. Carrera received a B.S.
from Boston University School of Management and is also a CFA Charter holder.
Number and Terms of Office of Officers
and Directors
Our Board is presently comprised of five
(5) members and is divided into three separate classes of directors. One class of directors is normally elected at each annual
meeting of stockholders for a term of three (3) years. Mr. Falcone, our Class I director, was elected at our first annual meeting
of stockholders in 2018 for a three-year term expiring at our 2021 annual meeting of stockholders. Messrs. Rittvo and Weinstein,
our Class II directors, were each elected at our 2019 Special Meeting for a three-year term expiring at our 2022 annual meeting
of stockholders. Messrs. Weil and Silvers were each elected at our 2020 Special Meeting for a three-year term expiring at our 2023
annual meeting of stockholders.
Our officers are appointed by the
board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board
of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws
provide that our officers may consist of a Chairman of the Board, Chief Executive Officer, President, Chief Financial
Officer, Vice Presidents, Secretary, Treasurer and such other offices as may be determined by the board of directors.
Director Independence
Nasdaq listing standards require that a
majority of our board of directors be independent. An “independent director” is defined generally as a person other
than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion
of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying
out the responsibilities of a director. Our board of directors has determined that Messrs. Falcone, Rittvo and Weinstein are “independent
directors” as defined in the Nasdaq listing standards and applicable SEC rules.
Committees of the Board of Directors
Our Board has two standing committees:
an audit committee and a compensation committee. Our committees are comprised solely of independent directors.
Audit Committee
The members of our audit committee are
Messrs. Falcone, Rittvo and Weinstein. Mr. Falcone currently serves as Chairman of the audit committee. All members of the audit
committee qualify as independent directors under applicable rules and regulations of the SEC and Nasdaq.
Each member of the audit committee is financially
literate and our board of directors has determined that Mr. Falcone qualifies as an “audit committee financial
expert” as defined in applicable SEC rules.
We have adopted an audit committee charter,
which details the principal functions of the audit committee, including:
Compensation Committee
The members of our compensation committee
are Messrs. Falcone, Rittvo and Weinstein. Mr. Weinstein currently serves as Chairman of the compensation committee. All members
of the compensation committee qualify as independent directors under applicable rules and regulations of the SEC and Nasdaq.
We have adopted a compensation committee
charter, which details the principal functions of the compensation committee, including:
● reviewing and approving the compensation of the other executive officers;
● reviewing executive compensation policies and plans;
● administering equity-based compensation plans;
It is likely that prior to the consummation
of a Business Combination, the compensation committee will only be responsible for the review and recommendation of any compensation
arrangements to be entered into in connection with such Business Combination.
The charter also provides that the compensation
committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser
and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before
engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee
will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Director Nominations
We do not have a standing nominating committee.
In accordance with Rule 5605(e)(2) of the Nasdaq Rules, a majority of the independent directors may recommend a director nominee
for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily carry
out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee.
As there is no standing nominating committee, we do not have a nominating committee charter in place.
The board of directors will also consider
director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand
for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Our stockholders
that wish to nominate a director for election to the Board should follow the procedures set forth in our bylaws. Stockholder recommendations
should be submitted in writing to: Leisure Acquisition Corp., 250 West 57th Street, Suite 415, New York, New York 10107, Attention:
Secretary.
We have not formally established any specific,
minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating
nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge
of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our
stockholders.
Compensation Committee Interlocks and Insider
Participation
None of our officers currently serves,
or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more
officers serving on our board of directors, except that Mr. Weil, our Executive Chairman, is Executive Chairman of Inspired Entertainment,
Inc. and Mr. Silvers, our Chief Executive Officer and a member of our board of directors, is an executive officer of Inspired Entertainment,
Inc.
Code of Ethics
We have adopted a Code of Ethics applicable
to our directors, executive officers and employees that complies with the rules and regulations of the Nasdaq. The Code of Ethics
codifies the business and ethical principles that govern all aspects of our business. We have previously filed copies of our form
Code of Ethics, our form of Audit Committee Charter and our form of Compensation Committee Charter as exhibits to our registration
statement in connection with our Initial Public Offering. You may review these documents by accessing our public filings at the
SEC’s web site at www.sec.gov. Copies of our Code of Ethics and our audit committee and compensation committee charters are
available, without charge, on our website at www.leisureacq.com or upon request from us. We intend to disclose any amendments to
or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Conflicts of Interest
Each of our officers and directors presently
has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities pursuant to which
such officer or director is or will be required to present a business combination opportunity. Accordingly, if any of our officers
or directors becomes aware of a business combination opportunity that is suitable for an entity to which he or she has then-current
fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such opportunity
to such entity and not to us. We do not believe, however, that the fiduciary duties or contractual obligations of our officers
or directors will materially affect our ability to complete our Business Combination. In addition, our amended and restated certificate
of incorporation provides for the waiver of any requirement to present corporate opportunities to us to the extent it would conflict
with competing duties owed to other entities. Our amended and restated certificate of incorporation provides that we renounce our
interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person
solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually
permitted to undertake and would otherwise be reasonable for us to pursue.
In addition, our sponsors, officers, directors
and director nominees have agreed, pursuant to a written letter agreement, not to participate in the formation of, or become an
officer or director of, any other blank check company until we have entered into a definitive agreement regarding our Business
Combination or we have failed to complete our Business Combination during the Combination Period. Our management team is not currently
involved in any other blank check offering.
Potential investors should also be aware
of the following other potential conflicts of interest:
The conflicts described above may not be
resolved in our favor.
In general, officers and directors of a
corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation
if:
● the corporation could financially undertake the opportunity;
● the opportunity is within the corporation’s line of business; and
Accordingly, as a result of multiple business
affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting
the above-listed criteria to multiple entities. Furthermore, our amended and restated certificate of incorporation will provide
that the doctrine of corporate opportunity will not apply with respect to any of our officers or directors in circumstances where
the application of the doctrine would conflict with any fiduciary duties or contractual obligations they may have.
Below is a table summarizing the entities
to which our executive officers and directors currently have fiduciary duties or contractual obligations.
Individual Entity Entity’s Business Affiliation
A. Lorne Weil Hydra Management Investment Vehicle Principal
Inspired Entertainment Gaming Technology Executive Chairman
Daniel B. Silvers Matthews Lane Capital Partners Investment Vehicle Principal
Inspired Entertainment Gaming Technology Chief Strategy Officer
Avid Technology, Inc. Global Media Technology Provider Director
George Peng Hydra Management Investment Vehicle Principal
Inspired Entertainment Gaming Technology Vice President Finance
Eric Carrera Hydra Management Investment Vehicle Senior Associate
Inspired Entertainment Gaming Technology Manager, Finance & M&A
Marc J. Falcone ECL Entertainment Entertainment Principal
Sightline Payments LLC Gaming Technology Officer
MF Ventures LL Investment Vehicle Principal
Accordingly, a scenario could arise whereby
business opportunities may be provided to one of the above-listed entities by our officers or directors instead of us. For example,
if any of our officers or directors becomes aware of a business combination opportunity that is suitable for an entity to which
he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations
to present such opportunity to such entity and not to us. We do not believe, however, that the fiduciary duties or contractual
obligations of our officers or directors will materially affect our ability to complete our Business Combination. In addition,
our amended and restated certificate of incorporation provides for the waiver of any requirement to present corporate opportunities
to us to the extent it would conflict with competing duties owed to other entities. Our amended and restated certificate of incorporation
provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity
is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity
is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
We are not prohibited from pursuing a Business
Combination with a company that is affiliated with our sponsors, strategic investor, officers or directors. In the event we seek
to complete our Business Combination with such a company, we, or a committee of independent
directors, would obtain an opinion from an independent investment banking firm which is a member of FINRA, or from an independent
accounting firm, that such a Business Combination is fair to our company from a financial point of view.
In the event that we submit our Business
Combination to our public stockholders for a vote, our initial stockholders have agreed to vote any founder shares held by them
and any public shares purchased during or after the offering in favor of our Business Combination and our officers and directors
have also agreed to vote any public shares purchased during or after the offering in favor of our Business Combination.
Limitation on Liability and Indemnification
of Officers and Directors
Our amended and restated certificate of
incorporation provides that our officers and directors will be indemnified by us to the fullest extent authorized by Delaware law,
as it now exists or may in the future be amended. In addition, our amended and restated certificate of incorporation provides that
our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty
as directors, unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally