Business Context and Reporting Period
This Form 8-K is filed by 180 Life Sciences Corp. (formerly KBL Merger Corp. IV) on January 28, 2021. The company consummated a business combination on November 6, 2020. This filing primarily addresses the non-reliance on previously issued financial statements for the interim period ended June 30, 2020, and reports on the conversion of convertible promissory notes into common stock between January 15 and January 21, 2021.
Key Financial Metrics and Transactions
- Debt Conversion: Holders converted $916,667 of principal and interest from convertible promissory notes into 338,393 shares of common stock. Conversion prices ranged from $2.45 to $2.86 per share.
- Remaining Debt: The outstanding balance of the convertible promissory notes is approximately $717,111.
- Financial Restatement Adjustments (June 30, 2020 Period):
- Unrecorded investment banking fees: $155,555.
- Unrecorded accrued issuable equity (warrants): $96,011.
- Debt discount and beneficial conversion feature reduction: $144,085.
- Unrecorded compensation expense (cash payment to former CEO): $500,000.
- Unrecorded compensation expense (equity issuance): $2,625,000.
- Transfer of temporary equity to permanent equity: $644,085.
Note: The filing does not provide current revenue, profit, cash flow, or margin figures for the reporting period.
Material Changes and Non-Reliance Notice
The Board of Directors concluded that consolidated financial statements for the period ended June 30, 2020 (the "Non-Reliance Period") should no longer be relied upon due to significant errors. These errors involved the failure to record specific transactions, including investment banking fees, warrant issuances, and substantial compensation obligations to the former CEO and related parties. Consequently, accrued liabilities, debt discounts, compensation expenses, and equity balances were materially understated or misclassified in the previously filed Form 10-Q.
Outlook, Risks, and Management Commentary
- Restatement Timeline: The company intends to file restated consolidated financial statements for the Non-Reliance Period and the quarter ended September 30, 2020, by February 8, 2021.
- Investor Warning: Investors are cautioned not to rely on any previously issued financial statements, press releases, or investor presentations covering the Non-Reliance Period until the restatement is filed.
- Risks: The company notes risks regarding the time and effort required to complete the restatement and the possibility of additional adjustments being required during the process.
Key Facts for Investor Verification
- Verify the filing of the restated Form 10-Q for the quarter ended June 30, 2020, by the February 8, 2021 deadline.
- Confirm the total impact of the unrecorded compensation expenses ($3.125 million total) on the company's historical financial position.
- Monitor the remaining balance of convertible debt ($717,111) and potential future conversion dilution.
- Review the updated equity structure following the transfer of $644,085 from temporary to permanent equity.