180 Life Sciences (ATNF) - 2024 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements The company presents unaudited Q1 2024 financials showing a $1.1 million net loss and a going concern warning Condensed Consolidated Balance Sheet Data (Unaudited) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash | $675,977 | $1,975,799 | | Total Current Assets | $1,854,948 | $3,639,906 | | Total Assets | $3,441,740 | $5,259,476 | | Total Current Liabilities | $4,080,307 | $5,062,616 | | Total Liabilities | $4,396,206 | $5,387,209 | | Total Stockholders' Deficit | ($954,466) | ($127,733) | Condensed Consolidated Statements of Operations (Unaudited) | Account | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total Operating Expenses | $2,092,468 | $4,803,845 | | Loss From Operations | ($2,092,468) | ($4,803,845) | | Other Income, Net | $1,022,724 | $41,767 | | Net Loss | ($1,069,744) | ($4,762,078) | | Basic and Diluted Net Loss per Share | ($1.68) | ($24.15) | Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | ($1,033,417) | ($3,869,891) | | Net Cash Used In Financing Activities | ($264,394) | ($469,810) | | Net Decrease In Cash | ($1,299,822) | ($4,323,926) | | Cash - End of Period | $675,977 | $2,646,184 | - The company is a clinical-stage biotech firm with R&D activities significantly slowed or suspended due to resource constraints[24] - The company is actively evaluating strategic alternatives, including potential mergers or asset sales, to maximize stockholder value[25][145] - Significant losses and a $128.4 million accumulated deficit raise substantial doubt about the company's ability to continue as a going concern[26][27] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a reduced net loss in Q1 2024 but highlights a critical financial state and exploration of strategic alternatives Going Concern and Management Liquidity Plans The company faces a going concern issue with cash expected to last only through October 2024 despite recent funding - As of March 31, 2024, the company had an accumulated deficit of $128.4 million and a working capital deficit of $2.2 million[135] - The company has a minimum monthly cash requirement of approximately $300,000 to support operations[137] - Following insurance reimbursements, the company had approximately $1.5 million in cash as of May 13, 2024, expected to fund operations through October 2024[170] Consolidated Results of Operations Net loss decreased 78% in Q1 2024, driven by lower operating expenses and a one-time income from forgiven liabilities Comparison of Operating Results (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Research & Development | $365,186 | $578,309 | -37% | | General & Administrative | $1,556,740 | $4,008,852 | -61% | | Other Income, Net | $1,022,724 | $41,767 | +2,349% | | Net Loss | ($1,069,744) | ($4,762,078) | -78% | - The decrease in G&A expenses was primarily due to reduced legal fees (~$1.3M), accounting/regulatory fees ($450k), salaries ($300k), and stock-based compensation (~$280k)[161] - The significant increase in Other Income is attributable to the forgiveness of $1,039,364 in liabilities owed to contractors for certain R&D programs[41][162] Liquidity and Capital Resources The company has severely constrained liquidity with a working capital deficit and significant future cash requirements - Cash balance decreased from $2.0 million at year-end 2023 to $676k at March 31, 2024, while the working capital deficit increased to $2.2 million[163] - Cash used in operating activities for Q1 2024 was $1.0 million, a significant reduction from $3.9 million in Q1 2023[164] - The company estimates material cash requirements of approximately $4.1 million for 2024 and $23.5 million for 2025 through 2028[167] - In November 2023, the company amended its August 2023 offering, raising an additional $0.8 million in net proceeds and modifying warrant terms[176][177] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the firm is exempt from providing market risk disclosures - As a "smaller reporting company," the Company is exempt from the requirement to provide disclosures about market risk under Item 305(e) of Regulation S-K[183] Controls and Procedures Management concluded disclosure controls were ineffective due to a material weakness in financial reporting - The principal executive and financial officers concluded that disclosure controls and procedures were not effective as of March 31, 2024[186] - A material weakness was identified from the misclassification of a forgiven liability as a reduction to R&D expense instead of an increase in Other Income[186] - Management's remediation plan includes implementing an additional layer of technical review for significant, non-routine entries[190] PART II - OTHER INFORMATION Legal Proceedings The company is involved in several legal proceedings but does not expect a material adverse financial impact - The company is party to various legal proceedings, which are described in detail in Note 8 of the financial statements[195] - Management believes the ultimate resolution of current legal proceedings will not have a material adverse effect on the company's financial position, though the outcome is uncertain[194][195] Risk Factors The company faces a significant risk of delisting from Nasdaq due to non-compliance with listing standards - The company is not in compliance with Nasdaq's minimum stockholders' equity requirement of $2.5 million[200] - On May 14, 2024, the company received a delist determination letter from Nasdaq for failing to regain compliance by the May 13, 2024 deadline[205] - The company intends to request a hearing with the Nasdaq Hearings Panel to appeal the delisting, which is expected to stay the suspension of trading[206] - The company is also non-compliant with Nasdaq's audit committee requirement of at least three independent directors[208][211] - Delisting from Nasdaq could make trading the company's securities difficult and impair the ability to raise capital[212] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or issuer repurchases occurred during the quarter - There were no unregistered sales of equity securities during the quarter ended March 31, 2024, that were not previously disclosed[213] Other Information No directors or officers adopted or terminated Rule 10b5-1 trading plans during the quarter - No directors or officers adopted or terminated a Rule 10b5-1 trading plan or other trading arrangement during the quarter ended March 31, 2024[214] Exhibits This section lists required Sarbanes-Oxley certifications and other exhibits filed with the Form 10-Q - The report includes required certifications from the Principal Executive Officer and Principal Accounting Officer under Sections 302 and 906 of the Sarbanes-Oxley Act[216][217]