180 Life Sciences Corp

Previous wording

As of March 31, 2024, we had an accumulated deficit of $128,413,401 and a working capital deficit of $2,225,359, and for the quarter ended March 31, 2024, a net loss of $1,069,744 and cash used in operating activities of $1,033,417. The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. As we are not generating revenues, we need to raise a significant amount of capital in order to pay our debts and cover our operating costs. While the Company raised money in August 2021, July 2022, December 2022 and April 2023, August 2023 and November 2023 (see Note 2 – Going Concern and Management’s Plans), andon April 16, 2024, AmTrust paid the Company $2.27 million in reimbursement of fees which the Company had advanced to Dr. Marlene Krauss and George Hornig for indemnification as former officers and directors, of which the Company received $1.5 million after the payment of attorney’s fees. On May 9, 2024, AmTrust paid the Company $300,140 in reimbursement of fees which the Company had advanced to Dr. Marlene Krauss and George Hornig, of which the Company expects to receive $200,093 after the payment of attorney’s fees.

Current wording

As of June 30, 2024, we had an accumulated deficit of $128,401,620 and a working capital deficit of $1,668,637, and for the six months ended June 30, 2024, a net loss of $1,057,963 and cash used in operating activities of $306,247. The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. As we are not generating revenues, we need to raise a significant amount of capital in order to pay our debts and cover our operating costs. While the Company raised money in August 2021, July 2022, December 2022 and April 2023, August 2023 and November 2023 (see Note 2 – Going Concern and Management’s Plans), andon April 16, 2024, AmTrust paid the Company $2.27 million in reimbursement of fees which the Company had advanced to Dr. Marlene Krauss and George Hornig for indemnification as former officers and directors, of which the Company received $1.5 million after the payment of attorney’s fees. On May 9, 2024, AmTrust paid the Company an additional $300,140 in reimbursement of fees which the Company had advanced to Dr. Marlene Krauss and George Hornig, of which the Company received $200,093 after the payment of attorneys’ fees.

Previous wording

We currently have a minimum monthly cash requirement of approximately $300,000, which is required to support the Company’s operations. We believe that in the aggregate, we will require significant additional capital funding to support and expand the research and development and marketing of our products, fund future clinical trials, repay debt obligations, provide capital expenditures for additional equipment and development costs, payment obligations, office space and systems for managing the business, and cover other operating costs until our planned revenue streams from products are fully-implemented and begin to offset our operating costs, if ever.

Current wording

We currently have a minimum monthly cash requirement of approximately $250,000, which is required to support the Company’s operations. We believe that in the aggregate, we will require significant additional capital funding to support and expand the research and development and marketing of our products, fund future clinical trials, repay debt obligations, provide capital expenditures for additional equipment and development costs, payment obligations, office space and systems for managing the business, and cover other operating costs until our planned revenue streams from products are fully-implemented and begin to offset our operating costs, if ever.

Previous wording

This MD&A and the related financial statements for the quarters ended March 31, 2024 and 2023, primarily cover the operations of 180, which is a clinical stage biotechnology company headquartered in Palo Alto, California, focused on the development of therapeutics for unmet medical needs in chronic pain, inflammation, fibrosis and other inflammatory diseases. We have three product development platforms:

Current wording

This MD&A and the related financial statements for the three and six months ended June 30, 2024 and 2023, primarily cover the operations of 180, which is a clinical stage biotechnology company headquartered in Palo Alto, California, focused on the development of therapeutics for unmet medical needs in chronic pain, inflammation, fibrosis and other inflammatory diseases. We have three product development platforms:

Previous wording

Due to restrictions in the Company’s resources, the Company has slowed down research and development activities significantly in the SCA platform and the anti-TNF platform, and the Company has not made progress in the α7nAChR platform and has suspended further research and development activity in this program the meantime.

Current wording

Due to restrictions in the Company’s resources, the Company has slowed down research and development activities significantly in the SCA platform and the anti-TNF platform, and the Company has not made progress in the α7nAChR platform and has suspended further research and development activity in this program in the meantime.

Previous wording

Change in fair value of derivative liabilities represents the non-cash change in fair value of derivative liabilities during the reporting period. Losses resulting from changes in fair value of derivative liabilities during the three months ended March 31, 2024, were driven by increases in stock price during the periods, resulting in a higher fair value of the underlying liability.

Current wording

Change in fair value of derivative liabilities represents the non-cash change in fair value of derivative liabilities during the reporting period. Losses resulting from changes in fair value of derivative liabilities during the three and six months ended June 30, 2024, were driven by increases in stock price during the periods, resulting in a higher fair value of the underlying liability.

Previous wording

We incurred research and development expenses of $365,186 for the three months ended March 31, 2024, compared to expenses of $578,309 for the three months ended March 31, 2023, representing a decrease in expenses of $213,123 or 37%. The decrease in expense includes a) a reduction in expense of approximately $100,000 due to a change in a tax credit and b) a reduction in stock-based compensation of approximately $90,000.

Current wording

We incurred research and development expenses of $488,323 for the three months ended June 30, 2024, compared to expenses of $789,411 for the three months ended June 30, 2023, representing a decrease in expenses of $301,118 or 38%. The decrease in expense includes a) a reduction in expense of approximately $100,000 due to a change in a tax credit that occurred in the prior period and was not present in the current period and b) a reduction in stock-based compensation of approximately $79,000, and an overall decrease in research and development (R&D) program spending based on Company resource allocation.

Previous wording

We incurred research and development expenses – related parties of $170,542 for the three months ended March 31, 2024, compared to $216,684 for the three months ended March 31, 2023, representing a decrease of $46,142, or 23%. The decrease is attributable to an R&D tax credit provision adjustment.

Current wording

We incurred research and development expenses – related parties of $133,665 for the three months ended June 30, 2024, compared to $131,463 for the three months ended June 30, 2023, representing an increase of $2,202, or 2%. The increase is attributable to an R&D tax credit provision adjustment.

Previous wording

We incurred general and administrative expenses of $1,556,740 and $4,008,852 for the three months ended March 31, 2024 and 2023, respectively, representing a decrease of $2,452,112 or 61% for the 2024 period, compared to the 2023 period. The decrease resulted from reduced legal fees of approximately $1.3 million, reduced accounting and regulatory fees of approximately $450,000, reduced salaries expense of approximately $300,000 and a reduction in stock-based compensation expense of approximately $280,000.

Current wording

We incurred general and administrative expenses of $2,781,490 and $6,770,928 for the six months ended June 30, 2024 and 2023, respectively, representing a decrease of $3,995,438 or 59% for the 2024 period, compared to the 2023 period. The decrease resulted from reduced legal fees of approximately $1.1 million from lower activity related to ongoing litigation in the current period, reduced professional fees of approximately $1.3 million from lower consulting and accounting fees, reduced salaries expense of approximately $170,000 from a reduction in headcount and a reduction in stock-based compensation expense of approximately $687,000. The decline in stock-based compensation is primarily due to previous awards being fully vested in 2023 and no significant new grants within the past year.

Previous wording

We had a net loss of $1,069,744 for the three months ended March 31, 2024, compared to $4,762,078 for the three months ended March 31, 2023, representing a decrease in net loss of $3,692,334 or 78%, for the reasons discussed above.

Current wording

We had a net loss of $1,057,963 for the three months ended June 30, 2024, compared to $8,442,247 for the six months ended June 30, 2023, representing a decrease in net loss of $7,384,284 or 87%, for the reasons discussed above.

Previous wording

As of March 31, 2024 and December 31, 2023, we had cash balances of $675,977 and $1,975,799, respectively, and working capital deficits of $2,225,359 and $1,422,710, respectively, largely due to a decrease in cash related to cash used in operations.

Current wording

As of June 30, 2024 and December 31, 2023, we had cash balances of $1,146,288 and $1,975,799, respectively, and working capital deficits of $1,668,637 and $1,422,710, respectively, largely due to a decrease in cash related to cash used in operations.

Previous wording

For the three months ended March 31, 2024 and 2023, cash used in operating activities was $1,033,417 and $3,869,891, respectively. Our cash used in operations for the three months ended March 31, 2024 was primarily attributable to our net loss of $1,069,744, adjusted for non-cash expenses in the aggregate amount of $259,829, as well as $223,502 of net cash used to fund changes in the levels of operating assets and liabilities. Our cash used in operations for the three months ended March 31, 2023 was primarily attributable to our net loss of $4,762,078, adjusted for non-cash expenses in the aggregate amount of $525,870, as well as $366,317 of net cash provided to fund changes in the levels of operating assets and liabilities.

Current wording

For the six months ended June 30, 2024 and 2023, cash used in operating activities was $306,247 and $6,986,733, respectively. Our cash used in operations for the six months ended June 30, 2024 was primarily attributable to our net loss of $1,057,963, adjusted for non-cash expenses in the aggregate amount of $148,941, as well as $602,775 of net cash used to fund changes in the levels of operating assets and liabilities. Our cash used in operations for the six months ended June 30, 2023 was primarily attributable to our net loss of $8,442,247, adjusted for non-cash expenses in the aggregate amount of $1,091,313, as well as $364,200 of net cash provided by changes in the levels of operating assets and liabilities. The cash used in operating activities includes the effect of proceeds from AmTrust of $1.7 million received during the second quarter of 2024 (see Note 8 - Commitments and Contingencies—Legal Matters, to the notes to unaudited consolidated financial statements included above under Part I Financial Information—Item 1. Financial Statements).

Previous wording

For the three months ended March 31, 2024 and 2023, cash used in financing activities was $264,394 and $469,810, respectively. Cash used in financing activities during the three months ended March 31, 2024 was due to repayments of loans in the amount of $264,883, offset by proceeds of $489 from the exercise of pre-funded warrants related to the Amendment to the August 2023 Offering. Cash used in financing activities during the three months ended March 31, 2023 was due to repayments of loans in the amount of $469,810.

Current wording

For the six months ended June 30, 2024, cash used in financing activities was $529,302 and cash provided by financing activities $1,992,463 for the six months ended June 30, 2023. Cash used in financing activities during the six months ended June 30, 2024 was due to repayments of loans in the amount of $529,791, offset by proceeds of $489 from the exercise of pre-funded warrants related to the Amendment to the August 2023 Offering (defined and described below under “Prior Financial Transactions—Amendment to August 2023 Offering”). Cash provided by financing activities during the six months ended June 30, 2023 was due to net proceeds of $2,720,005 from the April 2023 Offering (defined and described below under “Prior Financial Transactions—April 2023 Offering”), partially offset by the repayment of loans in the aggregate amount of $727,542.

Previous wording

Our material cash requirements and time periods of such requirements from known contractual and other obligations include milestone and royalty payments related to license agreements with Oxford University and Yissum, payments related to the director and officer insurance, payments to consultants and payments related to outside consulting firms, such as legal counsel, auditors, accountants, etc. These cash requirements, in the aggregate, are expected to amount to approximately $4,100,000 for 2024 and $23,500,000 for the years 2025 through 2028.

Current wording

Our material cash requirements and time periods of such requirements from known contractual and other obligations include milestone and royalty payments related to license agreements with Oxford University and Yissum, payments related to the director and officer insurance, payments to consultants and payments related to outside consulting firms, such as legal counsel, auditors, accountants, etc. These cash requirements, in the aggregate, are expected to amount to approximately $1,125,000 for 2024 and $3,000,000 for 2025.

Previous wording

We have not yet achieved profitability and expect to continue to incur cash outflows from operations. It is expected that our research and development and general and administrative expenses will continue to increase and, as a result, we will eventually need to raise additional capital to fund our operations. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms. Our operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. As of March 31, 2024, the conditions outlined above indicated that there was a substantial doubt about our ability to continue as a going concern within one year after the financial statement issuance date. However, in July 2022, December 2022, April 2023, August 2023 and November 2023, the Company raised additional capital of approximately $6.0 million, $5.5 million, $2.7 million, $2.7 million and $0.8 million, respectively, on April 16, 2024, AmTrust paid the Company $2.27 million in reimbursement of fees which the Company had advanced to Dr. Marlene Krauss and George Hornig, of which the Company received $1.5 million after the payment of attorney’s fees, on May 9, 2024, AmTrust paid the Company $300,140 in reimbursement of fees which the Company had advanced to Dr. Marlene Krauss and George Hornig, of which the Company expects to receive $200,093 after the payment of attorney’s fees, and with current cash on hand of approximately $1.5 million as of May 13, 2024, the Company expects to be able to continue as a going concern through October 2024.

Current wording

We have not yet achieved profitability and expect to continue to incur cash outflows from operations. It is expected that our research and development and general and administrative expenses will continue to increase and, as a result, we will eventually need to raise additional capital to fund our operations. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms. Our operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. As of June 30, 2024, the conditions outlined above indicated that there was a substantial doubt about our ability to continue as a going concern within one year after the financial statement issuance date. However, in July 2022, December 2022, April 2023, August 2023 and November 2023, the Company raised additional capital of approximately $6.0 million, $5.5 million, $2.7 million, $2.7 million and $0.8 million, respectively. On April 16, 2024, AmTrust paid the Company $2.27 million in reimbursement of fees which the Company had advanced to Dr. Marlene Krauss and George Hornig, of which the Company received $1.5 million after the payment of attorney’s fees, on May 9, 2024. AmTrust paid the Company $300,140 in reimbursement of fees which the Company had advanced to Dr. Marlene Krauss and George Hornig, of which the Company received $200,093 after the payment of attorneys’ fees, and with current cash on hand of approximately $0.5 million as of August 5, 2024, the Company expects to be able to continue as a going concern through October 2024.