180 Life Sciences Corp. — Q1 2021 Form 10-Q
Registrant note: The supplied filing is for 180 Life Sciences Corp. (ticker ATNF), not Forum Markets Inc. It covers the quarter ended March 31, 2021; the report was signed July 16, 2021. Financial figures are unaudited and in U.S. dollars.
Business context and reporting period
180 Life Sciences is a clinical-stage biotechnology company developing therapies in fibrosis, inflammation, chronic pain and related areas. Its programs include anti-TNF/fibrosis, cannabinoid-derived drugs and alpha-7 nicotinic receptor therapies. The company reported no revenue. The November 2020 business combination was accounted for as a reverse recapitalization: Q1 2021 includes the post-closing combined company, while Q1 2020 reflects 180 and its operating subsidiaries but not KBL, limiting comparability.
Financial results and liquidity
| Metric | Q1 2021 / March 31, 2021 | Q1 2020 / December 31, 2020 |
|---|---|---|
| Revenue | None | None reported |
| Operating expenses | $2.95 million | $1.57 million |
| Operating loss | $2.95 million | $1.57 million |
| Net loss | $16.20 million | $2.38 million |
| Basic and diluted loss per share | $0.58 | $0.14 |
| Cash and cash equivalents | $6.05 million | $2.11 million |
| Working capital | Deficit of $25.32 million | Deficit of $17.41 million |
| Net cash used in operating activities | $6.33 million | $0.41 million |
| Net cash provided by financing activities | $10.36 million | $0.33 million |
| Total assets / total liabilities | $60.11 million / $37.40 million | $55.53 million / $25.25 million |
Gross margin and other revenue-based margins are not meaningful because the company had no revenue. Cash flow from operations worsened year over year. The company had approximately $714,000 of loans payable, $316,000 of convertible notes payable and $270,000 of related-party convertible notes at quarter-end; it also reported $24.38 million of current derivative liabilities. Total stockholders’ equity was $22.71 million, down from $30.29 million at year-end.
Material changes and unusual items
- Net loss increased substantially, driven mainly by a $13.23 million noncash loss from revaluing derivative liabilities, including warrants and convertible-note features. The liability balance rose from $4.44 million at year-end to $24.38 million.
- Operating expenses increased 88% to $2.95 million. General and administrative expense rose to $2.54 million, including increased public-company costs and stock-based compensation. Reported research and development expense fell, partly due to research tax credits and the temporary halt of certain discovery services; related-party R&D expense increased.
- The February private offering issued 2.564 million shares and warrants for another 2.564 million shares. Gross proceeds were approximately $11.7 million; the cash-flow statement reports $10.73 million net proceeds, while MD&A describes net proceeds as approximately $10.8 million.
- Convertible debt was converted into common stock, and common shares outstanding rose to 30.52 million from 26.17 million at December 31, 2020. The Q1 weighted-average share count was 27.95 million versus 16.84 million a year earlier.
Outlook, risks and contingencies
Management expects research and development and general and administrative expenses to increase as clinical programs advance. The company anticipates continued losses and cash outflows and expects to seek additional capital through equity, debt, collaborations, licenses or similar arrangements. It has no credit facility or committed funding source. Management stated that these conditions raise substantial doubt about the company’s ability to continue as a going concern within one year after the financial statements were issued; financing may not be available on acceptable terms, and operations could be curtailed or discontinued.
- Clinical and pandemic risks: Product candidates may not succeed, obtain approval or become commercially viable. COVID-19 had delayed follow-up for the Dupuytren’s trial, which was completed, but could delay other trials and restrict capital access.
- Registration-rights default: The company missed the April 24, 2021 deadline to file a resale registration statement for the private-offering securities. It reported damages of $174,993 per month, subject to a $583,310 maximum, until filing.
- Litigation: Cantor Fitzgerald sought $1.5 million plus interest and fees in a dispute over a transaction fee and settlement agreement. Tyche Capital filed counterclaims and allegations involving company management. The company disputed the claims and said outcomes were uncertain. No loss-contingency liability was recorded at March 31, 2021.
- Controls: Management concluded disclosure controls were ineffective at March 31, citing continuing material weaknesses in financial systems, segregation of duties, written accounting procedures and fair-value reporting controls. Remediation plans included hiring accounting staff and engaging an adviser.
- Related-party arrangements: The filing describes director/officer loans, accrued related-party fees, consulting compensation and executive employment agreements. These arrangements merit review alongside governance and dilution risks.
No specific revenue, earnings or cash-flow guidance was provided. Management’s outlook was qualitative and subject to substantial financing, clinical-development and regulatory uncertainty.
Investor verification priorities
- Confirm the registrant identity and ticker: the filing is for 180 Life Sciences Corp. (ATNF), despite the request metadata naming Forum Markets Inc.
- Check subsequent financing, cash runway, operating burn and the status of the going-concern uncertainty.
- Verify whether the overdue resale registration statement was filed and whether monthly damages accrued or were paid.
- Review warrant and convertible-security terms, fair-value assumptions, potential dilution and the reconciliation of offering net proceeds.
- Track clinical-trial milestones and assess the Cantor and Tyche litigation, including any developments after the reporting date.
- Monitor remediation of the disclosed material weaknesses and any later changes in financial reporting controls.