Business context and reporting period
The supplied filing is 180 Life Sciences Corp.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2021—not a filing identified in its text as Forum Markets Inc. The company is a clinical-stage biotechnology business developing candidates for chronic pain, inflammation, fibrosis and related conditions. Its platforms include anti-TNF/fibrosis, cannabidiol derivatives and alpha-7 nicotinic acetylcholine receptor programs. The filing describes a Phase 2b/3 UK trial for Dupuytren’s disease. The November 2020 business combination was accounted for as a reverse recapitalization; the 2020 comparison predates that transaction and excludes KBL.
Financial performance and position
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 | Comparable 2020 period |
|---|---|---|---|
| Revenue | No revenue | No revenue | No revenue to date |
| Operating expenses | $4.01 million | $6.96 million | $0.93 million and $2.50 million, respectively |
| Operating loss | $4.01 million | $6.96 million | $0.93 million and $2.50 million, respectively |
| Net loss | $23.46 million | $39.66 million | Net income of $0.27 million and net loss of $2.11 million, respectively |
| Operating cash used | Not separately presented for the quarter | $10.34 million | $0.60 million for six months |
| Cash | $1.84 million at June 30, 2021 | $2.11 million at December 31, 2020 |
Six-month operating expenses rose to $6.96 million from $2.50 million. The net loss was heavily affected by a $32.39 million non-cash loss from remeasurement of derivative liabilities, principally associated with warrants and driven by the rise in the company’s stock price. The six-month net loss per share was $1.33, versus $0.13 in 2020. Profit margins are not meaningful because the company had no revenue and reported operating losses.
At June 30, total assets were $56.27 million and total liabilities were $53.55 million, compared with $55.53 million and $25.25 million at December 31, 2020. Current liabilities were $49.80 million, including $43.53 million of derivative liabilities; the company reported a $45.75 million working-capital deficit and $2.72 million of stockholders’ equity. Loans payable totaled $0.50 million, and convertible notes payable totaled $0.58 million, including related-party notes. These balances exclude the substantial derivative liability classification of certain warrants.
Financing activities provided $10.13 million in cash in the first half, mainly from a February stock-and-warrant offering that generated $10.73 million net proceeds, partly offset by debt repayments. Cash declined by $0.27 million over the period. The company reported no material off-balance-sheet arrangements.
Material changes versus prior comparable periods
- Six-month net loss increased to $39.66 million from $2.11 million, primarily reflecting derivative fair-value losses; the 2020 period also included gains on extinguishment of convertible notes.
- Cash used in operations increased to $10.34 million from $0.60 million. Management cited operating losses and cash use from changes in operating assets and liabilities.
- General and administrative expense rose to $5.22 million for six months from $1.46 million, reflecting stock compensation, public-company legal and professional costs, and registration-rights damages.
- Related-party R&D expense increased to $0.99 million from $0.11 million, including consulting fees, bonuses and stock compensation.
- In February, the company raised approximately $11.7 million gross by selling 2.564 million shares with warrants for an equal number of shares. The warrants were liability-classified and remeasured at fair value.
- Common shares outstanding increased from 26.17 million at December 31, 2020 to 31.06 million at June 30, 2021; further dilution is possible from outstanding warrants, options and convertible instruments.
Outlook, risks, contingencies and unusual items
Management expects continued losses and rising R&D and general and administrative costs, and cannot predict when, if ever, the company will become profitable. It expects to need additional financing and has no credit facility or committed source of capital. Management states that these conditions raise substantial doubt about the company’s ability to continue as a going concern within one year after issuance of the financial statements.
- Clinical and regulatory risk: Candidates remain in clinical or preclinical development; trials may be delayed, unsuccessful or insufficient to support approval or commercialization. COVID-19 had delayed follow-up for the Dupuytren’s trial, which was completed, but could delay other trials.
- Financing and dilution: Failure to obtain timely financing on acceptable terms could force the company to curtail development or cease operations. Future equity or convertible financing may materially dilute shareholders.
- Derivative volatility: Changes in the share price can materially affect reported losses and liabilities through fair-value remeasurement of warrants and other derivatives; these changes are non-cash but may increase volatility in reported results.
- Litigation: Disputes include claims by Cantor Fitzgerald seeking $1.5 million plus interest and fees, litigation and counterclaims involving Tyche Capital, and potential action against former KBL executives. Outcomes are uncertain. A July 2021 Alpha Capital settlement required 150,000 shares and warrants for 25,000 shares; a $47,169 accrual was recorded at June 30 in connection with that settlement.
- Registration-rights default: The company incurred and paid $524,979 in damages after failing to file a resale registration statement by the required deadline; it reported that it was no longer in default.
- Controls: Management concluded disclosure controls were ineffective at June 30. Material weaknesses included manual financial reporting, insufficient segregation of duties and staffing, inadequate written policies, and ineffective period-end and fair-value controls. Remediation plans include additional accounting staff, outside advisory support, formal procedures and improved reporting technology.
- Other unusual items: A $300,000 related-party receivable was fully reserved as uncollectible. The company recorded a $363,523 stock-compensation timing correction in the second quarter; management concluded it was immaterial and did not require restatement.
Most important facts for investors to verify
- Confirm the issuer and filing identity: the provided metadata says FORUM MARKETS Inc., while the filing identifies 180 Life Sciences Corp. (ATNF/ATNFW).
- Review the company’s near-term cash needs, financing plans and ability to address the stated going-concern doubt, given $1.84 million cash and a $45.75 million working-capital deficit.
- Assess the warrant and derivative terms, valuation assumptions and potential share dilution; these drove most of the reported six-month loss.
- Track clinical-trial progress, particularly the Dupuytren’s program, and any associated regulatory, safety, timing or funding updates.
- Monitor the legal proceedings, the Alpha settlement and any further registration-rights or other contingent payments.
- Check whether management’s planned remediation resolves the disclosed material weaknesses and whether subsequent filings report effective controls.