180 Life Sciences Corp. (NASDAQ: ATNF) — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022; filed August 9, 2022. The supplied filing is for 180 Life Sciences Corp., not FORUM MARKETS Inc. The company is a clinical-stage biotechnology business developing therapies for chronic pain, inflammation, fibrosis and related conditions. It reports no revenue to date.
Financial performance and position
| Metric | Q2 2022 / June 30, 2022 | Prior comparable period / Dec. 31, 2021 |
|---|---|---|
| Revenue | None | None |
| Operating expenses | $4.52 million for Q2; $8.20 million for six months | $4.01 million for Q2 2021; $6.96 million for six months |
| Operating loss | $4.52 million for Q2; $8.20 million for six months | $4.01 million for Q2 2021; $6.96 million for six months |
| Net income (loss) | $2.94 million for Q2; $4.50 million for six months | $(23.46) million for Q2 2021; $(39.66) million for six months |
| Cash and cash equivalents | $1.63 million | $8.22 million |
| Working capital | Deficit of $2.32 million | Deficit of $8.50 million |
| Total liabilities | $10.57 million | $23.39 million |
| Stockholders’ equity | $42.79 million | $39.32 million |
Six-month operating cash use was $5.60 million, compared with $10.34 million in 2021. Financing activities used $1.01 million, mainly for loan repayments; cash fell by $6.60 million over the period. The filing reports no product margins. Loans payable, including related-party and noncurrent amounts, totaled approximately $0.93 million; derivative liabilities were $2.50 million at June 30.
Net income was not generated from product sales or operating profitability: it primarily reflects a $12.72 million six-month noncash gain from the decrease in fair value of derivative liabilities. The comparable 2021 period recorded a $32.39 million loss from that remeasurement. Q2 2022’s derivative-liability gain was $7.49 million, versus a $19.16 million loss in Q2 2021.
Changes and notable items
- Six-month operating expenses rose 18% year over year to $8.20 million. General and administrative expense increased 34% to $6.99 million, with higher legal and professional, insurance, patent and personnel costs cited; research and development expense increased to $1.11 million.
- Cash declined substantially from year-end, although the working-capital deficit narrowed, partly alongside the reduction in derivative liabilities and other balance-sheet movements.
- Goodwill, intangible assets and in-process research and development totaled about $48.7 million, approximately 91% of total assets, making impairment judgments significant.
- Common shares outstanding were 34.14 million at June 30, versus 34.04 million at year-end. The filing reports 37.70 million shares issued and outstanding as of August 9.
Outlook, risks and contingencies
- Going concern: Management states that substantial doubt exists about the company’s ability to continue as a going concern. The company has no revenue, an accumulated deficit of $64.18 million, and depends on additional financing. Management cited a minimum monthly cash requirement of approximately $900,000 and said failure to obtain timely financing could force cuts to development activities or cessation of operations.
- Subsequent financing: A July 2022 offering closed July 20 and generated approximately $6.5 million gross proceeds through common shares and warrants. The financing provides additional liquidity but includes substantial potential dilution. The company also entered a three-year Oxford University trial-support agreement requiring staged payments.
- Clinical development: The Phase 2b Dupuytren’s Contracture trial follow-up and statistical analysis were completed; top-line results were announced in December 2021 and published in April 2022. The company expects research and development spending to increase as programs advance. Clinical, regulatory, manufacturing, funding and commercialization outcomes remain uncertain.
- Legal matters: Multiple proceedings are ongoing, including disputes involving former executives, Tyche Capital and the Bauer defendants. The company seeks recovery in certain cases but gives no assurance of success. AmTrust disputes insurance coverage; the company recorded a $1.52 million insurance claims receivable and cautions that recovery is uncertain.
- Controls: Management concluded disclosure controls were ineffective at June 30. Material weaknesses include a lack of a fully integrated financial consolidation/reporting system and ineffective review controls concerning stock-based compensation and payroll classification. Remediation work is planned, but completion is not assured.
- Other risks include potential Nasdaq listing noncompliance, impairment of substantial intangible assets, possible dilution from future fundraising, COVID-related trial delays, macroeconomic and currency exposures, and litigation outcomes. The filing provides no financial guidance or specific revenue forecast.
Investor verification priorities
- Confirm post-offering cash, net proceeds after fees, and the expected duration of liquidity relative to the stated monthly cash requirement.
- Review the July offering’s share and warrant terms, potential dilution, exercise conditions and resulting ownership effects.
- Track clinical milestones, trial funding and timelines, particularly the Oxford feasibility trial and the company’s pipeline plans.
- Assess whether the $1.52 million insurance receivable is collectible and monitor developments in the material legal proceedings.
- Follow remediation of the disclosed control weaknesses and verify the reliability of future financial reporting.
- Evaluate impairment risk for goodwill, intangible assets and in-process research and development, which comprise most reported assets.