Business context and reporting period
This filing is a Form 10-Q for the three and nine months ended September 30, 2022. Although the request identifies FORUM MARKETS Inc, the filing itself names 180 Life Sciences Corp. (NASDAQ: ATNF; warrants: ATNFW), a clinical-stage biotechnology company. It reports no revenue and develops therapeutics in fibrosis/anti-TNF, CBD-derived drugs, and α7nAChR platforms.
Financial performance and position
| Metric | Q3 2022 / Sep. 30, 2022 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None generated | None generated |
| Operating expenses | $4.06 million | Q3 2021: $4.22 million |
| Net income (loss) | $(21.49) million | Q3 2021: $18.30 million income |
| Nine-month net loss | $(16.98) million | Nine months 2021: $(21.36) million |
| Cash used in operations | Nine months: $9.20 million | Nine months 2021: $14.34 million |
| Cash | $3.59 million | December 31, 2021: $8.22 million |
| Working capital | $1.79 million | December 31, 2021: deficit of $8.50 million |
| Total assets / liabilities | $34.34 million / $8.26 million | December 31, 2021: $62.71 million / $23.39 million |
| Loans payable | $0.44 million, including related-party loans | December 31, 2021: $1.96 million, including related-party loans |
Margins are not meaningful because the company has no revenue. Q3’s $18.87 million goodwill impairment was a noncash charge. Nine-month results also include a $14.17 million noncash gain from changes in derivative-liability fair value; these valuation items materially affect reported losses and comparisons. Derivative liabilities fell to $1.05 million from $15.22 million at year-end.
Material changes versus prior periods
- Q3 swung from reported income of $18.30 million in 2021 to a loss of $21.49 million in 2022, principally reflecting the goodwill impairment and much smaller derivative fair-value gains than in the prior-year quarter.
- Nine-month operating expenses increased to $12.26 million from $11.18 million. General and administrative expense rose 19% to $10.41 million, largely due to higher legal and insurance costs; research and development expense rose to $1.69 million.
- Nine-month operating cash use improved by $5.14 million year over year, but cash still declined $4.64 million after financing and currency effects.
- The July 2022 offering raised $6.50 million gross through common stock and warrants. Common shares outstanding rose to 39.25 million from 34.04 million at year-end.
Outlook, risks, contingencies and unusual items
- Going concern: Management states substantial doubt exists about the company’s ability to continue as a going concern for one year after issuance. It needs additional financing; no committed credit facility or capital source is available. Management cites minimum monthly cash requirements of approximately $900,000 and expects further funding needs. Failure to raise capital could require curtailing development or operations.
- Clinical development: The company expects research and development and administrative costs to increase, but gives no specific revenue or profitability guidance. Development, regulatory, trial-enrollment, manufacturing and COVID-related delays remain risks. The Phase 2b Dupuytren’s Contracture trial follow-up and analysis were completed, with results published in April 2022.
- Impairment: The company recorded an $18.87 million goodwill impairment after a sharp decline in its share price and reporting-unit valuation. Further impairments are possible.
- Legal and insurance matters: The company is involved in multiple lawsuits, including disputes with former executives, Tyche Capital, the Bauer defendants, and its former D&O insurer. It recorded a $1.84 million insurance receivable, whose recovery is uncertain. The company’s claims against others and asserted defenses are also uncertain.
- Listing and dilution: Nasdaq notified the company that it did not meet the $1.00 minimum bid-price requirement; the stated initial cure deadline was March 29, 2023. A reverse split of between 1-for-4 and 1-for-20 was proposed for stockholder consideration. Outstanding options and warrants create potential dilution; the filing reports 3.26 million options and 18.37 million warrants outstanding at September 30.
- Controls: Management concluded disclosure controls were not effective. Material weaknesses in financial reporting systems and review controls over stock-based compensation and payroll classification remained unremediated.
- Subsequent events: After quarter-end, the remaining 1.085 million pre-funded warrants were exercised on November 1, 2022. The company also entered a new Oxford research agreement, committing £125,000 per quarter for one year beginning January 2023.
Most important facts for investors to verify
- Confirm the filing is for 180 Life Sciences Corp., not FORUM MARKETS Inc.
- Assess cash runway, expected financing requirements, and the terms and dilution of any future capital raises.
- Review clinical-program progress, trial costs, and whether the company can advance candidates without additional financing.
- Track Nasdaq bid-price compliance, the proposed reverse split, and total potential dilution from outstanding securities.
- Evaluate the recoverability of the $1.84 million insurance receivable and potential cash exposure from litigation and legal-fee advancements.
- Monitor remediation of the disclosed control weaknesses and the basis for future goodwill or intangible-asset valuations.