UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.D. C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2017March 31, 2021

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

 

Commission File No.file number: 001-38105

 

KBL MERGER CORP. IV
(Exact name of registrant as specified in its charter)

180 LIFE SCIENCES CORP

(Exact name of registrant as specified in its charter)

 

Delaware 81-3832378

(State or other jurisdiction of


incorporation or organization)

 

(I.R.S. Employer


Identification No.)

 

527 Stanton Christiana Rd.3000 El Camino Real

Newark, DEBldg. 4, Suite 200

Palo Alto, CA 94306

 1971394306
(Address of Principal Executive Offices)principal executive offices) (Zip Code)

 

(302) 502-2727
(Registrant’s telephone number, including area code)

(650) 507-0669

(Registrant’s telephone number, including area code)

 

N/A

830 Menlo Avenue, Suite 100

Menlo Park, CA 94025

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareATNFThe NASDAQ Stock Market LLC (The NASDAQ Capital Market)
Warrants to purchase Common StockATNFWThe NASDAQ Stock Market LLC (The NASDAQ Capital Market)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,”filer”, “accelerated filer,”filer”, “smaller reporting company,”company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filerAccelerated filer
Non-accelerated filer     (Do not check if a smaller reporting company)Smaller reporting company
 Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):. Yes    No

 

As of November 9, 2017, there were 14,877,500July 16, 2021, 30,768,873 shares of the Company’s common stock, par value $0.0001 per share, were issued and outstanding.

 

 

 

 

180 LIFE SCIENCES CORP. AND SUBSIDIARIES

(FORMERLY KBL MERGER CORP. IVIV)

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Quarterly Report on Form 10-Q

TABLE OF CONTENTSINDEX

 

Cautionary Note Regarding Forward-Looking Statements Pageii
   
PART 1 – I
FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 20201
   
Item 1.Financial Statements (unaudited)1
Unaudited Condensed Balance Sheets1
CondensedConsolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2021 and 20202
   
Unaudited Condensed StatementConsolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2021 and 20203
   
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 20204
   
Notes to Unaudited Condensed Consolidated Financial Statements5
   
ItemITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations13
 
Item 3.Quantitative and Qualitative Disclosures About Market Risk15
Item 4.Controls and Procedures1519
   
PART II – OTHER INFORMATIONITEM 3. Quantitative and Qualitative Disclosures About Market Risk1628
   
Item 1.ITEM 4. Controls and ProceduresLegal Proceedings1628
   
Item 1A.PART IIRisk Factors16
   
ItemOTHER INFORMATION30
ITEM 1. Legal Proceedings.30
ITEM 1A. Risk Factors.30
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds16
Proceeds. 
Item 3.Defaults Upon Senior Securities16
Item 4.Mine Safety Disclosures16
Item 5.Other Information16
Item 6.Exhibits1730
   
SIGNATURESITEM 3. Defaults Upon Senior Securities.1831
ITEM 4. Mine Safety Disclosures.31
ITEM 5. Other Information.31
ITEM 6. Exhibits.32
Signatures34

 

i

 

 

PART 1 - FINANCIAL INFORMATIONCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Item 1.This Quarterly Report on Form 10-Q (“Report”), including this “Management’s Discussion and Analysis of Financial Statements.Condition and Results of Operations,” contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, regarding future events and the future results of the Company that are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the management of the Company. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed elsewhere in this Report, including under “Risk Factors”, and in other reports the Company files with the Securities and Exchange Commission (“SEC”), including the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on July 9, 2021 (under the heading “Risk Factors” and in other parts of that report). The Company undertakes no obligation to revise or update publicly any forward-looking statements for any reason, except as otherwise required by law.

 

The following discussion is based upon our unaudited Consolidated Financial Statements included elsewhere in this Report, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, and in other reports we file with the SEC, and in our most recent Annual Report on Form 10-K. All references to years relate to the calendar year ended December 31 of the particular year.

Summary Risk Factors

We face risks and uncertainties related to our business, many of which are beyond our control. In particular, risks associated with our business include:

We are a clinical stage biotechnology company that has no revenue to date, and we do not anticipate generating revenue for the near future;

Our need for additional financing, both near term and long term, to support our operations, our ability to raise such financing as needed, the terms of such financing, if available, potential significant dilution associated therewith, and covenants and restrictions we may need to comply with in connection with such funding;

Restrictions on our ability to issue securities, anti-dilution and most favored nation rights provided in connection therewith;

Our dependence on the success of our future product candidates, some of which may not receive regulatory approval or be successfully commercialized; problems in our manufacturing process for our new products and/or our failure to comply with manufacturing regulations, or unexpected increases in our manufacturing costs; problems with distribution of our products; and failure to adequately market our products;

Risks associated with the growth of our business, our ability to maintain such growth, difficulties in managing our growth, and executing our growth strategy;

Liability for previously restated financial statements and associated with ineffective controls and procedures;

Our dependence on our key personnel and our ability to attract and retain employees;

ii

Risks from intense competition from companies with greater resources and experience than we have;

Risks that our future product candidates, if approved, may be unable to achieve the expected market acceptance and, consequently, limit our ability to generate revenue from new products;

The fact that the majority of our license agreements provide the licensors and/or counter-parties the right to use and/or exploit such licensed intellectual property;

Preclinical studies and earlier clinical trials may not necessarily be predictive of future results and may not have favorable results; we have limited marketing experience, and our future ability to successfully commercialize any of our product candidates, even if they are approved in the future is unknown; and business interruptions could delay us in the process of developing our future product candidates and could disrupt our product sales;

Third-party payors may not provide coverage and adequate reimbursement levels for any future products;

Liability from lawsuits (including product liability lawsuits, stockholder lawsuits and regulatory matters), including judgments, damages, fines and penalties;

Security breaches, loss of data and other disruptions which could prevent us from accessing critical information or expose us to liabilities or damages;

Risks associated with clinical trials that are expensive, time-consuming, uncertain and susceptible to change, delay or termination and which are open to differing interpretations;

Our ability to comply with existing and future rules and regulations, including federal, state and foreign healthcare laws and regulations and implementation of, or changes to, such healthcare laws and regulations;

Delays in the trials, testing, application, or approval process for drug candidates and/or our ability to obtain approval for promising drug candidates, and the costs associated therewith;

Our ability to adequately protect our future product candidates or our proprietary technology in the marketplace, claims and liability from third parties regarding our alleged infringement of their intellectual property;

Differences in laws and regulations between countries and other jurisdictions;

Changes in laws or regulations, including, but not limited to tax laws and controlled substance laws, or a failure to comply with any laws and regulations;

Conflicts of interest between our officers, directors, consultants and scientists;

Penalties associated with our failure to comply with certain pre-agreed contractual obligations and restrictions;

Dilution caused by future fund raising, the conversion/exercise of outstanding convertible securities, and downward pressure on the value of our securities caused by such future issuances/sales;

Negative effects on our business from the COVID-19 pandemic and other potential future pandemics;

The extremely volatile nature of our securities and potential lack of liquidity therefore;

The fact that our Certificate of Incorporation provides for indemnification of officers and directors, limits the liability of officers and directors, allows for the authorization of preferred stock without stockholder approval, and includes certain anti-takeover provisions;

iii

Our ability to maintain the listing of our common stock and warrants on The NASDAQ Capital Market (“NASDAQ”) and the costs of compliance with SEC and NASDAQ rules and requirements;

Risks associated with our status as an emerging growth company and the provisions of the JOBS Act, which we are able to take advantage of, due to such status;

Risks associated with material weaknesses that we have identified in our disclosure controls and internal controls over financial reporting;

Failure of our information technology systems, including cybersecurity attacks or other data security incidents, that could significantly disrupt the operation of our business;

The fact that we may acquire other companies which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results and if we make any acquisitions, they may disrupt or have a negative impact on our business;

The fact that we may apply working capital and future funding to uses that ultimately do not improve our operating results or increase the value of our securities; and

Our growth depends in part on the success of our strategic relationships with third parties.

iv

180 LIFE SCIENCES CORP. AND SUBSIDIARIES

(FORMERLY KBL MERGER CORP. IVIV)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in US Dollars)

 

  September 30,
2017
  December 31, 2016 
Assets (unaudited)  (audited) 
Current asset:      
Cash $453,529  $67,250 
Prepaid expenses  32,482    
Total current assets  486,011   67,250 
         
Deferred offering costs     172,750 
Cash and marketable securities held in Trust Account  116,539,634    
Total Assets $117,025,645  $240,000 
         
Liabilities and Stockholders’ Equity        
Current liabilities:        
Accounts payable and accrued expenses $83,056  $78,105 
Income taxes payable  106,940    
Due to related party  49,041    
Note payable – related party     140,000 
Total current liabilities  239,037   218,105 
Deferred underwriting fees  4,025,000    
Total Liabilities  4,264,037   218,105 
         
Commitments        
         
Common stock subject to possible redemption, $0.0001 par value; 10,669,466 and -0- shares as of September 30, 2017 and December 31, 2016, respectively (at redemption value of approximately $10.10 per share)  107,761,607    
         
Stockholders’ Equity:        
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding as of September 30, 2017 and December 31, 2016      
Common stock, $0.0001 par value; 35,000,000 shares authorized; 4,208,034 and 2,875,000 shares issued and outstanding (excluding 10,669,466 and -0- shares subject to possible redemption) as of September 30, 2017 and December 31, 2016, respectively  421   287 
Additional paid-in capital  4,942,536   24,713 
Retained earnings (accumulated deficit)  57,044   (3,105)
Total Stockholders’ Equity  5,000,001   21,895 
Total Liabilities and Stockholders’ Equity $117,025,645  $240,000 
  March 31,  December 31, 
  2021  2020 
  (unaudited)    
Assets      
Current Assets:      
Cash $6,052,862  $2,108,544 
Due from related parties  300,000   300,000 
Prepaid expenses and other current assets  1,945,172   1,606,414 
Total Current Assets  8,298,034   4,014,958 
Intangible assets, net  2,041,999   2,047,818 
In-process research and development  12,589,191   12,569,793 
Goodwill  37,182,945   36,900,801 
Total Assets $60,112,169  $55,533,370 
         
Liabilities, Temporary Equity and Stockholders’ Equity        
Current Liabilities:        
Accounts payable $3,905,267  $8,529,259 
Accounts payable - related parties  236,534   215,495 
Accrued expenses  2,884,950   4,110,916 
Accrued expenses - related parties  512,992   454,951 
Loans payable - current portion  606,295   968,446 
Loans payable - related parties  514,140   513,082 
Convertible notes payable  316,111   1,916,195 
Convertible notes payable - related parties  270,000   270,000 
Derivative liabilities  24,375,911   4,442,970 
Total Current Liabilities  33,622,200   21,421,314 
Accrued issuable equity  -   43,095 
Loans payable - non current portion  107,964   113,763 
Deferred tax liability  3,672,710   3,668,329 
Total Liabilities  37,402,874   25,246,501 
         
Commitments and contingencies        
Series A Convertible Preferred Stock, $0.0001 par value; 1,000,000 shares designated; 0 shares issued; none available at March 31, 2021 or December 31, 2020  -   - 
         
Stockholders’ Equity:        
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; (see designations and shares authorized for Series A, Class C and Class K preferred stock)        
Class C Preferred Stock; 1 share authorized, issued and outstanding at March 31, 2021 and December 31, 2020  -   - 
Class K Preferred Stock; 1 share authorized, issued and outstanding at March 31, 2021 and December 31, 2020  -   - 
Common stock, $0.0001 par value; 100,000,000 shares authorized; 30,518,330 and 26,171,225 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively  3,052   2,617 
Additional paid-in capital  

86,436,232

   

78,005,004

 
Accumulated other comprehensive income  826,234   636,886 
Accumulated deficit  

(64,556,223

)  

(48,357,638

)
Total Stockholders’ Equity  

22,709,295

   30,286,869 
Total Liabilities and Stockholders’ Equity $60,112,169  $55,533,370 

 

The accompanying notes are an integral part of the unaudited condensedthese financial statements.


180 LIFE SCIENCES CORP. AND SUBSIDIARIES

(FORMERLY KBL MERGER CORP. IVIV)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)(Expressed in US Dollars)

(unaudited)

 

  

Three Months Ended

September 30, 2017

  

Nine Months Ended

September 30, 2017

  For the period from September 7, 2016 (inception) through September 30, 2016 
          
General and administrative expenses $140,849  $222,545  $683 
Loss from operations  (140,849)  (222,545)  (683)
             
Other income:            
Interest income  333,905   389,634    
Other income  333,905   389,634    
             
Income before provision for income taxes  193,056   167,089    
Provision from income taxes  (106,940)  (106,940)   
Net income (loss) $86,116  $60,149  $(683)
             
Weighted average shares outstanding            
Basic  4,216,561   3,195,102   2,500,000 
Diluted  14,877,500   7,600,998   2,500,000 
             
Net income (loss) per common share            
Basic $0.02  $0.02  $(0.00)
Diluted $0.01  $0.01  $(0.00)
  For the Three Months
Ended
 
  March 31, 
  2021  2020 
Operating Expenses:      
Research and development $99,899  $472,862 
Research and development - related parties  267,053   30,605 
General and administrative  2,542,231   995,328 
General and administrative - related parties  39,120   68,067 
Total Operating Expenses  2,948,303   1,566,862 
Loss From Operations  (2,948,303)  (1,566,862)
         
Other (Expense) Income:        
Gain on settlement of payables and accrued expenses  723,764   - 
Other income - related parties  -   240,000 
Interest expense  (112,933)  (152,916)
Interest expense - related parties  (13,949)  (19,848)
Loss on extinguishment of convertible notes payable, net  (9,737)  (886,736)
Change in fair value of derivative liabilities  (13,229,308)  - 
Offering costs allocated to warrant liabilities  (604,118)  - 
Change in fair value of accrued issuable equity  (9,405)  - 
Total Other Expense, Net  (13,255,686)  (819,500)
         
Loss Before Income Taxes  (16,203,989)  (2,386,362)
Income tax benefit  5,404   5,102 
Net Loss  (16,198,585)  (2,381,260)
         
Other Comprehensive Income:        
Foreign currency translation adjustments  189,348   (1,844,205)
Total Comprehensive Loss $(16,009,237) $(4,225,465)
         
Basic and Diluted Net Loss per Common Share $(0.58) $(0.14)
         
Weighted Average Number of Common Shares Outstanding:  27,953,302   16,840,668 

  

The accompanying notes are an integral part of the unaudited condensedthese financial statements.

 


180 LIFE SCIENCES CORP. AND SUBSIDIARIES

(FORMERLY KBL MERGER CORP. IVIV)

CONDENSED STATEMENTCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)(Expressed in US Dollars)

(unaudited)

 

  Common Stock  Additional Paid-in  Retained Earnings (Accumulated  

Total

Stockholders'

 
  Shares  Amount  Capital  Deficit)  Equity 
Balance – December 31, 2017  2,875,000  $287  $24,713  $(3,105) $21,895 
                     
Sale of 11,500,000 Units, net of underwriting discount and offering expenses  11,500,000   1,150   107,653,414      107,654,564 
                     
Sale of 502,500 Private Units  502,500   51   5,024,949      5,025,000 
                     
Common stock subject to redemption  (10,669,466)  (1,067)  (107,760,540)     (107,761,607)
                     
Net income           60,149   60,149 
                     
Balance – September 30, 2017  4,208,034  $421  $4,942,536  $57,044  $5,000,001 
  For The Three Months Ended March 31, 2021 
           Accumulated       
        Additional  Other     Total 
  Common Stock  Paid-in  Comprehensive  Accumulated  Stockholders’ 
  Shares  Amount  Capital  Income  Deficit  Equity 
Balance - January 1, 2021  26,171,225  $2,617  $78,005,004  $636,886  $(48,357,638) $30,286,869 
Shares issued upon conversion of KBL debt  467,123   47   1,941,078   -   -   1,941,125 
Shares issued upon conversion of 180 debt  158,383   16   432,367   -   -   432,383 
Shares issued in connection with the private offering, net of financing costs(a)  2,564,000   256   10,730,814   -   -   10,731,070 
Offering costs allocated to                        
    warrant liabilities(a)  -   -   604,118   -   -   604,118 
Warrants issued in connection with the private offering, reclassified to derivative liabilities  -   -   (7,294,836)  -   -   (7,294,836)
Shares issued upon exchange of common stock equivalents  959,809   96   (96)  -   -   - 
Stock based compensation:                        
Common stock  197,790   20   925,384   -   -   925,404 
Options  -   -   1,092,399   -   -   1,092,399 
Comprehensive loss:                        
Net loss  -   -   -   -   (16,198,585)  16,198,585)
Other comprehensive income  -   -   -   189,348   -   189,348 
Balance - March 31, 2021  30,518,330  $3,052  $86,436,232  $826,234  $(64,556,223) $22,709,295 

(a)

Consists of $11,700,000 of gross proceeds from the offering, net of placement agent fees and other cash offering costs of $968,930. Of the $968,930 offering costs, $364,812 was allocated to the common stock and $604,118 was allocated to the warrant liabilities and expensed immediately due to their liability classification (see Note 6 – Derivative Liabilities – Warrants Issued in Private Offering).

  For The Three Months Ended March 31, 2020 
           Accumulated       
        Additional  Other     Total 
  Common Stock  Paid-in  Comprehensive  Accumulated  Stockholders’ 
  Shares  Amount  Capital  Income (Loss)  Deficit  Equity 
Balance - January 1, 2020  13,846,925  $1,384  $75,890,295  $152,803  $(37,473,580) $38,570,902 
Common stock issued for cash  12,292   1   72,499   -   -   72,500 
Shares issued upon exchange of common stock equivalents  410,170   41   (41)  -   -   - 
Beneficial conversion feature on convertible debt issued          329,300   -   -   329,300 
Comprehensive loss:                        
Net loss  -   -   -   -   (2,381,260)  (2,381,260)
Other comprehensive loss  -   -   -   (1,844,205)  -   (1,844,205)
Balance - March 31, 2020  14,269,387  $1,426  $76,292,053  $(1,691,402) $(39,854,840) $34,747,237 

 

The accompanying notes are an integral part of the unaudited condensedthese financial statements.

 


180 LIFE SCIENCES CORP. AND SUBSIDIARIES

(FORMERLY KBL MERGER CORP. IVIV)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)(Expressed in US Dollars)

(unaudited)

 

  Nine Months Ended September 30, 2017  For the period from September 7, 2016 (inception) through September 30, 2016 
Cash Flows from Operating Activities:      
Net income (loss) $60,149  $(683)
Adjustments to reconcile net income (loss) to net cash used in operating activities:        
Interest earned on marketable securities held in Trust Account  (389,634)   
Changes in operating assets and liabilities:        
Prepaid expenses  (32,482)   
Accounts payable and accrued expenses  4,951   683 
Due to related party  28,000    
Income taxes payable  106,940    
Net cash used in operating activities  (222,076)   
         
Cash Flows from Investing Activities:        
Investment of cash in Trust Account  (116,150,000)   
Net cash used in investing activities  (116,150,000)   
         
Cash Flows from Financing Activities:        
Proceeds from issuance of Founders Shares     25,000 
Proceeds from sale of Units, net of underwriting discounts paid  112,125,000    
Proceeds from sale of Private Units  5,025,000    
Proceeds from advances from related party  82,599    
Repayment of advances from related party  (61,558)   
Proceeds from note payable – related party  51,521    
Repayment of note payable – related party  (191,521)   
Payment of offering costs  (272,686)   
Net cash provided by financing activities  116,758,355   25,000 
         
Net Change in Cash  386,279   25,000 
Cash – Beginning  67,250    
Cash – Ending $453,529  $25,000 
         
Non-Cash investing and financing activities:        
Deferred underwriting fees charged to additional paid in capital $4,025,000  $ 
Initial classification of common stock subject to possible redemption $107,662,332  $ 
Change in value of common stock subject to possible redemption $99,275  $ 
Offering costs charged to additional paid in capital $172,750  $ 
  For the Three Months Ended 
  March 31, 
  2021  2020 
Cash Flows From Operating Activities      
Net loss $(16,198,585) $(2,381,260)
Adjustments to reconcile net loss to net cash used in operating activities:        
Stock-based compensation        
Shares issued for services  925,404   - 
Amortization of stock options  1,092,399   - 
Depreciation and amortization  28,668   32,293 
Gain on settlement of payables and accrued expenses  (723,764)  - 
Loss on extinguishment of convertible note payable  9,737   886,736 
Gain on exchange rate transactions  -   (5,334)
Deferred tax benefit  (5,403)  (5,102)
Change in fair value of derivative liabilities  13,229,308   - 
Offering costs allocated to warrant liabilities  604,118   - 
Change in fair value of accrued issuable equity  9,405   - 
Changes in operating assets and liabilities:        
Prepaid expenses and other current assets  (342,045)  267,716 
Due from related parties  -   (240,000)
Accounts payable  (3,966,486)  302,380 
Accrued expenses  (940,301)  733,565 
Accrued issuable equity  (52,500)  - 
Total adjustments  9,868,540   1,972,254 
Net Cash Used In Operating Activities  (6,330,045)  (409,006)
         
Cash Flows From Financing Activities        
Shares issued for cash, net of issuance costs  10,731,070   - 
Repayment of loans payable  (368,532)  - 
Proceeds from sale of common stock  -   72,500 
Proceeds from loans payable  -   3,500 
Proceeds from loans payable - related parties  -   174,864 
Proceeds from convertible notes payable - related parties  -   82,500 
Cash Provided By Financing Activities  10,362,538   333,364 
         
Effect of Exchange Rate Changes on Cash  (88,175)  89,810 
         
Net Increase In Cash  3,944,318   14,168 
Cash - Beginning of Period  2,108,544   83,397 
Cash - End of Period $6,052,862  $97,565 
         
Supplemental Disclosures of Cash Flow Information:        
Cash paid during the period for interest $-  $- 
         
Non-cash investing and financing activities:        
Warrants issued in connection with the private offering $7,294,836  

$

- 
Conversion of convertible debt and accrued interest into common stock $1,340,185  $- 
Conversion of notes payable and accrued interest into common stock $432,383  $- 
Exchange of common stock equivalents for common stock $96  $- 
Accrued interest reclassified to convertible notes principal $-  $99,702 
Accrued interest reclassified to convertible notes, related party principal $-  $8,129 
Recognition of beneficial conversion feature as loss on extinguishment of convertible note principal $-  $339,200 
Redemption premium and restructuring fee recognized as an increase in convertible note principal $-  $557,444 
Proceeds from loans payable paid directly to vendors in satisfaction of accounts payable $-  $7,537 
Proceeds from loans payable - related parties paid directly to vendors in satisfaction of accounts payable $-  $9,263 
Increase in loans payable in satisfaction of certain accounts payable 

$

-  

$

3,000 
Security deposit applied to accounts payable $7,030  $- 

 

The accompanying notes are an integral part of the unaudited condensedthese financial statements.

 


KBL MERGER CORP. IV

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

(Unaudited)NOTE 1 - BUSINESS ORGANIZATION AND NATURE OF OPERATIONS

 

1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

180 Life Sciences Corp., formerly known as KBL Merger Corp. IV (the(“180LS”, or together with its subsidiaries, the “Company”) is, was a blank check company organized under the laws of the State of Delaware on September 7, 2016. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businessesbusinesses.

180 Life Corp. (“Business Combination”180”, f/k/a 180 Life Sciences Corp. and CannBioRx Life Sciences Corp.). Although is a wholly-owned subsidiary of the Company is not limited to a particular industry or geographic region for purposesand was incorporated in the State of consummating a Business Combination, the Company intends to focusDelaware on the healthcare and related wellness industry.January 28, 2019. The Company is an emerging growthlocated in the United States (“U.S.”) and is a medical pharmaceutical company focused upon unmet medical needs in the areas of inflammatory diseases, fibrosis, and as such,chronic pain by employing innovative research and, where appropriate, combination therapies, through 180’s three wholly-owned subsidiaries, 180 Therapeutics L.P. (“180 LP”), CannBioRex Pharmaceuticals Corp. (“CBR Pharma”), and Katexco Pharmaceuticals Corp. (“Katexco”). 180 LP, CBR Pharma and Katexco are together, the Company is subject to all“180 Subsidiaries.” Katexco was incorporated on March 7, 2018 under the provisions of the risks associated with early stageBritish Corporation Act of British Columbia. Additionally, 180’s wholly-owned subsidiaries Katexco Callco, ULC, Katexco Purchaseco, ULC, CannBioRex Callco, ULC, and emerging growth companies.CannBioRex Purchaseco, ULC were formed in the Canadian Province of British Columbia on May 31, 2019 to facilitate the acquisition of Katexco, CBR Pharma and 180 LP.

 

At September 30, 2017,180 LP is a clinical stage biotechnology company focused on the Company had not yet commenced operations. All activity through September 30, 2017 relates todiscovery and development of biologic therapies for the Company’s formation, its initial public offering (“Initial Public Offering”), whichtreatment of fibrosis. CBR Pharma is described below, and identifying a targetpharmaceutical research company for a Business Combination. The Company will not generate any operating revenues until after completion of its initial Business Combination, at the earliest. The Company will generate non-operating incomespecializing in the formclinical development of interest income fromsynthetic pharmaceutical grade cannabinoid compounds for the proceeds held in trust derived from the Initial Public Offeringtreatment of rheumatoid arthritis and the Private Placement (defined below). related arthritic diseases. Katexco is a medical pharmaceutical company researching and developing orally available therapies harnessing nicotinic receptors to treat inflammatory diseases.

NOTE 2 - GOING CONCERN AND MANAGEMENT’S PLANS

The Company has selected Decembernot generated any revenues and has incurred significant losses since inception. During the three months ended March 31, as its fiscal year end.

The registration statement for the Company’s Initial Public Offering was declared effective on June 1, 2017. On June 7, 2017,2021, the Company consummatedincurred a net loss of $16,198,585 and used $6,330,045 of cash in operations. As of March 31, 2021, the Initial Public OfferingCompany has an accumulated deficit of 10,000,000 units$64,556,223 and a working capital deficit of $25,324,166. The Company expects to invest a significant amount of capital to fund research and development. As a result, the Company expects that its operating expenses will increase significantly, and consequently will require significant revenues to become profitable. Even if the Company does become profitable, it may not be able to sustain or increase profitability on a quarterly or annual basis. The Company cannot predict when, if ever, it will be profitable. There can be no assurance that the intellectual property of the Company, or other technologies it may acquire, will meet applicable regulatory standards, obtain required regulatory approvals, be capable of being produced in commercial quantities at $10.00 per unit (“Units” and,reasonable costs, or be successfully marketed. The Company plans to undertake additional laboratory studies with respect to the sharesintellectual property, and there can be no assurance that the results from such studies or trials will result in a commercially viable product or will not identify unwanted side effects.

A continuation or worsening of the levels of market disruption and volatility seen in the recent past as the result of the COVID-19 pandemic could have an adverse effect on the Company’s ability to access capital, on the Company’s business, results of operations and financial condition. Management continues to monitor the developments and has taken active measures to protect the health of the Company’s common stock included inemployees, their families and the Units offered,Company’s communities. The ultimate impact will depend heavily on the “Public Shares”), generating gross proceedsduration of $100,000,000,the COVID-19 pandemic and public health responses, the efficacy of vaccines, the availability thereof, and the willingness of individuals to receive such vaccines, as well as the substance and pace of macroeconomic recovery, all of which is described in Note 3.are uncertain and difficult to predict considering the continuing evolving landscape of the COVID-19 pandemic and the public health responses to contain it.

 

Simultaneously withManagement has evaluated, and will continue to evaluate, the closingimpact of the Initial Public Offering,COVID-19 pandemic on the Company consummatedindustry and has concluded that while it is reasonably possible that the private placement (“Private Placement”)virus could have a negative effect on the Company’s financial position or results of 450,000 units (“Private Units” and, with respect toits operations, the sharesspecific impact is not readily determinable as of the Company’s common stock included indate of these condensed consolidated financial statements. To date, only the Private Units offered,follow-up time for patient data for the “Private Shares”) atPhase 2b Dupuytren’s disease clinical trial has been delayed as a priceresult of $10.00 per Private Unit in a private placement toCOVID-19, but such follow-up is now completed. The condensed consolidated financial statements do not include any adjustments that might result from the Company’s sponsor, KBL IV Sponsor LLC (the “Sponsor”), and the underwriters, generating gross proceedsoutcome of $4,500,000, which is described in Note 3.this uncertainty.

 


FollowingThese condensed consolidated financial statements have been prepared under the closing of the Initial Public Offering and the Private Placement, an amount of $101,000,000 ($10.10 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the Private Units was placed in a trust account (“Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completionassumption of a Business Combination or (ii) the distribution of the Trust Account, as described below.

On June 23, 2017, in connection with the underwriters’ election to fully exercise their over-allotment option, the Company consummated the sale of an additional 1,500,000 Units at $10.00 per Unit and the sale of an additional 52,500 Private Units at $10.00 per Private Unit, generating total gross proceeds of $15,525,000. Following the closing, an additional $15,150,000 of net proceeds ($10.10 per Unit) was placed in the Trust Account, resulting in $116,150,000 ($10.10 per Unit) held in the Trust Account.

Transaction costs amounted to $7,345,436, consisting of $2,875,000 of underwriting fees, $4,025,000 of deferred underwriting fees (see Note 6) and $445,436 of Initial Public Offering costs.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering and Private Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurancegoing concern, which assumes that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of therealize its assets heldand discharge its liabilities in the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the timenormal course of the agreementbusiness. The Company’s ability to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficientcontinue its operations is dependent upon obtaining new financing for it not to be required to register as an investment company under the Investment Company Act.

The Company will provide holders of the outstanding Public Shares (“public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account ($10.10 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously releasedongoing operations. Future financing options available to the Company for tax obligations). The per-share amount to be distributed to public stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 5). The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combinationinclude equity financings and loans and if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination.


KBL MERGER CORP. IV

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

(Unaudited)

If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its amended and restated certificate of incorporation, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents with the SEC prior to completing a Business Combination. If, however, a stockholder approval of the transactions is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination, the initial stockholder (as defined below), officers and directors have agreed to vote their Founder Shares (as defined in Note 4), Private Shares, and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the initial stockholder, officers and directors have agreed to waive their redemption rights with respect to their Founder Shares, Private Shares and Public Shares in connection with the completion of a Business Combination.

Notwithstanding the foregoing, the Company’s amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares.

The Company’s Sponsor (the “initial stockholder”), officers and directors have agreed not to propose an amendment to the Company’s amended and restated article of incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their shares of the Company’s common stock in conjunction with any such amendment.

If the Company is unable to complete a Business Combination within 18 months (or 21 months, as applicable) from the closing of the Initial Public Offering (the “Combination Period”),obtain such additional financing timely, or on favorable terms, the Company will (i) cease allmay have to curtail its development, marketing and promotional activities, which would have a material adverse effect on its business, financial condition and results of operations, except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equaland it could ultimately be forced to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payablediscontinue its operations and less up to $50,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders andliquidate. These matters raise substantial doubt about the Company’s Boardability to continue as a going concern for a reasonable period of Directors, dissolve and liquidate, subject intime, which is defined as within one year after the case of clauses (ii) and (iii) todate that the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s Rights, Warrants, Private Placement Warrants (as defined in Note 3) and the rights underlying the Private Units, which will expire worthless if the Company fails to complete its Business Combination within the Combination Period.

In connection with the redemption of 100%condensed consolidated financial statements are issued. Realization of the Company’s outstanding Public Shares for a portion ofassets may be substantially different from the funds heldcarrying amounts presented in these condensed consolidated financial statements and the Trust Account, each holder will receive a full pro rata portion of the amount then in the Trust Account, plusaccompanying condensed consolidated financial statements do not include any pro rata interest earned on the funds held in the Trust Account and not previously released toadjustments that may become necessary, should the Company for taxes payable and upbe unable to $50,000 of interest to pay dissolution expenses.continue as a going concern.

 

The initial stockholder, officers, directors and underwriters have agreed to waive their liquidation rights with respect to the Founder Shares and Private Shares if the Company fails to complete a Business Combination within the Combination Period. However, if they should acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Company’s Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.10 per share initially held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.


KBL MERGER CORP. IV

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

(Unaudited)

2.NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies as set forth in the Company’s audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2020, except as disclosed in this note.

Basis of presentationPresentation and Principles of Consolidation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)U.S. GAAP for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting.information. Accordingly, they do not include all of the information and footnotes necessarydisclosures required by U.S. GAAP for a comprehensive presentation ofannual consolidated financial position, results of operations, or cash flows.statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments consisting of a normal recurring nature, which are considered necessary for a fair presentation of the unaudited condensed consolidated financial position,statements of the Company as of March 31, 2021, and for the three months ended March 31, 2021 and 2020. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the operating results and cash flows for the periods presented. 

The accompanying unauditedfull year ending December 31, 2021 or any other period. For additional information, these condensed consolidated financial statements should be read in conjunction with the Company's final prospectus asCompany’s audited consolidated financial statements of and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SECSecurities and Exchange Commission (“SEC”) on June 2, 2017, as wellJuly 9, 2021. 

On November 6, 2020 (the “Closing Date”), the Company consummated a business combination (the “Business Combination”) pursuant to which, among other things, a subsidiary of the Company merged with and into 180, with 180 continuing as the Company’s Form 8-K, as filed with the SEC on June 26, 2017. The interim results for the threesurviving entity and nine months ended September 30, 2017 are not necessarily indicativea wholly-owned subsidiary of the resultsCompany (the “Merger”, and the Company prior to the Merger sometimes referred to herein as “KBL”). The Business Combination was accounted for as a reverse recapitalization, and 180 is deemed to be expected for the year ended December 31, 2017 or for any future interim periods.

Emerging growth company

The Company is an “emerging growth company” as defined in Section 2(a) ofaccounting acquirer. Consequently, the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosurethe historical operations that are reflected in these condensed consolidated financial statements prior to the Business Combination are those of contingent assets180 Life Corp. and liabilities atits subsidiaries. The preferred stock, common stock, additional paid in capital and earnings per share amount in these consolidated financial statements for the dateperiod prior to the Business Combination have been restated to reflect the recapitalization in accordance with the shares issued to the shareholders of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimateformer parent, 180 Life Corp. as a result of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.

Cash and cash equivalentsBusiness Combination.

 

The Company considers all short-term investmentscondensed consolidated financial statements include the historical accounts of 180 Life Corp. as accounting acquirer along with an original maturityits wholly owned subsidiaries, and, effective with the closing of three months or less when purchased to be cash equivalents. The Company did notthe Business Combination, 180LS as the accounting acquiree. All intercompany transactions and balances have any cash equivalents as of September 30, 2017 and December 31, 2016.

Cash and marketable securities heldbeen eliminated in Trust Account

At September 30, 2017, the assets held in the Trust Account were held in cash and U.S. Treasury Bills.consolidation.

 


KBL MERGER CORP. IV

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

(Unaudited)

Offering costs

Offering costs consisting of legal, accounting, underwriting fees and other costs amounting to $7,345,436 that were directly related to the Initial Public Offering were charged to stockholders’ equity upon the completion of the Initial Public Offering.

Common stock subject to possible redemptionForeign Currency Translation

 

The Company accounts for its common stock subject to possible redemption in accordance withCompany’s reporting currency is the guidance in Accounting Standards CodificationUnited States dollar. The functional currency of certain subsidiaries is the Canadian Dollar (“ASC”CAD”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock are classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at September 30, 2017, 10,669,466 shares of common stock subject to possible redemption at the redemption amount are presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.

Income taxes

The Company complies with the accounting and reporting requirements of ASC Topic 740 “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assetsBritish Pound (“GBP”). Assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts,translated based on enacted tax lawsthe exchange rates at the balance sheet date (0.7941 and rates applicable to0.7056 for the periodsCAD, 1.3766 and 1.2373 for the GBP, each as of March 31, 2021 and 2020, respectively), while expense accounts are translated at the weighted average exchange rate for the period (0.7896 and 0.7455 for the CAD and 1.3784 and 1.2805 for the GBP for each of the three months ended March 31, 2021 and 2020, respectively). Equity accounts are translated at historical exchange rates. The resulting translation adjustments are recognized in which the differences are expected to affect taxablestockholders’ equity as a component of accumulated other comprehensive income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

ASC Topic 740 prescribesComprehensive income (loss) is defined as the change in equity of an entity from all sources other than investments by owners or distributions to owners and includes foreign currency translation adjustments as described above. During the three months ended March 31, 2021 and 2020, the Company recorded other comprehensive gain (loss) of $189,348 and ($1,844,205), respectively, as a recognition thresholdresult of foreign currency translation adjustments.

Foreign currency gains and a measurement attributelosses resulting from transactions denominated in foreign currencies, including intercompany transactions, are included in results of operations. The Company recorded $11,148 and $5,334 of foreign currency transaction gains for the financial statement recognitionthree months ended March 31, 2021 and measurement2020, respectively. Such amounts have been classified within general and administrative expenses in the accompanying consolidated statements of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company’s management determined that Delaware is the Company’s only major tax jurisdiction. The Company recognizes accrued interestoperations and penalties related to unrecognized tax benefits as income tax expense. As of September 30, 2017 and December 31, 2016, there were no unrecognized tax benefits and no amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.comprehensive loss.

 

The Company may be subject to potential examination by federal or state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.Net Loss Per Common Share

 

Net income (loss) per common share

The Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” Net income (loss)Basic net loss per common share is computed by dividing net income (loss)loss attributable to common shareholders by the weighted average number of common shares outstanding forduring the period. SharesDiluted net loss per common share is computed by dividing net loss attributable to common shareholders by the weighted average number of common stock subject to possible redemption at September 30, 2017shares outstanding, plus the number of additional common shares that would have been outstanding if the common share equivalents had been issued (computed using the treasury stock or if converted method), if dilutive.

The following common share equivalents are excluded from the calculation of basic income per share for the three and nine months ended September 30, 2017 since suchweighted average common shares if redeemed, only participate inoutstanding, because their pro rata share of the Trust Account earnings. The Company has not considered the effect of (1) warrants sold in the Initial Public Offering and Private Placement to purchase 6,001,250 shares of common stock and (2) rights sold in the Initial Public Offering and Private Placement that convert into 1,200,250 shares of common stock, in the calculation of diluted income (loss) per share, since the exercise of the warrants and the conversion of the rights into shares of common stock is contingent upon the occurrence of future events.inclusion would have been anti-dilutive:

 

  March 31, 
  2021  2020 
Options  1,630,000   - 
Warrants  8,628,908   - 
Convertible debt (a)  100,361   888,187 
Total  10,359,269   888,187 

Concentration of credit risk

(a)Represents shares issuable upon conversion of debt at variable conversion prices, which were calculated using the fair value of the Company’s common stock at the respective balance sheet date.

 

Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $250,000. At September 30, 2017Warrant, Option and December 31, 2016, the Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.

8

KBL MERGER CORP. IV

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

(Unaudited)

Fair value of financial instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.

Recently issued accounting standards

Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s condensed financial statements.

3. INITIAL PUBLIC OFFERING AND PRIVATE PLACEMENT

Initial Public Offering

Pursuant to the Initial Public Offering, the Company sold 11,500,000 Units at a purchase price of $10.00 per Unit, inclusive of 1,500,000 Units sold to the underwriters on June 23, 2017 upon the underwriters’ election to fully exercise their over-allotment option, generating gross proceeds of $115,000,000. Each Unit consists of one share of the Company’s common stock, one right to receive one-tenth of one share of the Company’s common stock (“Right”), and one redeemable warrant to purchase one-half of one share of the Company’s common stock (“Warrant”). Each Warrant will entitle the holder to purchase one Common stock at an exercise price of $5.75 per half share ($11.50 per whole share), subject to adjustment. No fractional shares will be issued upon exercise of the warrants. The Warrants will become exercisable on the later of (i) 30 days after the completion of the initial Business Combination and (ii) 12 months from the closing of the Initial Public Offering, and will expire five years after the completion of the initial Business Combination or earlier upon redemption or liquidation.

The Company may redeem the Warrants, in whole and not in part, at a price of $0.01 per Warrant upon 30 days’ notice (“30-day redemption period”), only in the event that the last sale price of the common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which notice of redemption is given, provided there is an effective registration statement with respect to the shares of common stock underlying such Warrants and a current prospectus relating to those shares of common stock is available throughout the 30-day redemption period. If the Company calls the Warrants for redemption as described above, the Company’s management will have the option to require all holders that wish to exercise Warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” the management will consider, among other factors, the Company’s cash position, the number of Warrants that are outstanding and the dilutive effect on the Company’s stockholders of issuing the maximum number of shares of common stock issuable upon the exercise of the Warrants.

Each holder of a Right will receive one-tenth (1/10) of one share of common stock upon consummation of a Business Combination. No fractional shares will be issued upon exchange of the Rights. No additional consideration will be required to be paid by a holder of Rights in order to receive its additional shares upon consummation of a Business Combination as the consideration related thereto has been included in the Unit purchase price paid for by investors in the Initial Public Offering. If the Company enters into a definitive agreement for a Business Combination in which the Company will not be the surviving entity, each holder of a right will be required to affirmatively convert its rights in order to receive the 1/10 share of common stock underlying each right (without paying any additional consideration).

There will be no redemption rights or liquidating distributions with respect to the Warrants and Rights, which will expire worthless if the Company fails to complete its Business Combination within the Combination Period.

Private Placement

Concurrently with the closing of the Initial Public Offering, the Sponsor and the underwriters purchased an aggregate of 450,000 Private Units at $10.00 per Private Unit, generating gross proceeds of $4,500,000 in a Private Placement. In addition, on June 23, 2017, the Company consummated the sale of an additional 52,500 Placement Units at a price of $10.00 per Unit, which were purchased by the Sponsor and underwriters, generating gross proceeds of $525,000. Of these, 377,500 Private Units were purchased by the Sponsor and 125,000 Private Units were purchased by the underwriters. The proceeds from the Private Units were added to the net proceeds from the Initial Public Offering held in the Trust Account. The Private Units (including their component securities) will not be transferable, assignable or salable until 30 days after the completion of the initial Business Combination and the warrants included in the Private Units (the “Private Placement Warrants”) will be non-redeemable so long as they are held by the Sponsor, the underwriters or their permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor, the underwriters or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the warrants included in the Units sold in the Initial Public Offering. In addition, for as long as the Private Placement Warrants are held by the underwriters or its designees or affiliates, they may not be exercised after five years from the effective date of the registration statement related to the Initial Public Offering. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the warrants being sold as part of the Units in the Initial Public Offering and have no net cash settlement provisions.

If the Company does not complete a Business Combination within the Combination Period, the proceeds of the Private Placement will be part of the liquidating distribution to the public stockholders and the Private Units and their component securities issued to the Sponsor will expire worthless.


KBL MERGER CORP. IV

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

(Unaudited)

4. RELATED PARTY TRANSACTIONS

Founder Shares

In September 2016, the Company issued 2,875,000 shares of the Company’s common stock to the Sponsor (the “Founder Shares”) in exchange for a capital contribution of $25,000. The 2,875,000 Founder Shares included an aggregate of up to 375,000 shares subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment option was not exercised in full or in part. As a result of the underwriters’ election to exercise their over-allotment option in full on June 23, 2017, 375,000 Founder Shares were no longer subject to forfeiture.

In conjunction with their investment in the Private Units, the underwriters or their designees also purchased membership interests in the Sponsor, through which the underwriters or their designees collectively have a pecuniary interest in 230,000 Founder Shares, pursuant to a separate private placement that closed simultaneously with the closing of the Initial Public Offering and the Private Placement. The Sponsor beneficially owns the Founder Shares allocated to the underwriters or their designees and retains sole voting and dispositive power over such securities until the closing of a Business Combination, at which time the Sponsor will distribute the Founder Shares to the underwriters or their designees for no additional consideration. Upon receipt of the Founder Shares, the underwriters or their designees will no longer retain their ownership interests in the Sponsor.

The initial stockholder has agreed not to transfer, assign or sell any of the Founder Shares (except to certain permitted transferees) until the earlier to occur of (i) one year after the completion of a Business Combination, and (ii) the date following the completion of a Business Combination on which the Company completes a liquidation, merger, share exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares of the Company’s common stock for cash, securities or other property the (“Lock-Up Period”). Notwithstanding the foregoing, if the last sale price of the Company’s common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after its initial Business Combination, then the lock-up will terminate.

Related Party Advances

As of September 30, 2017, the Company’s Sponsor advanced an aggregate of $82,599 to be used for working capital purposes. The advances are non-interest bearing, unsecured and due on demand. As of September 30, 2017, the Company has repaid $61,558 of such advances. Advances amounting to $21,041 were outstanding as of September 30, 2017 and included in due to related party in the accompanying condensed balance sheet.

Note Payable – Related Party

The Sponsor loaned the Company $192,000 in the form of a promissory note to be used for the payment of costs related to the Initial Public Offering. The loan was non-interest bearing, unsecured and due on the earlier of June 30, 2017 or the closing of the Initial Public Offering. The Company repaid this loan from the proceeds of the Initial Public Offering not placed in the Trust Account on June 8, 2017.

Administrative Service FeeConvertible Instrument Valuation

 

The Company has agreed, commencing oncomputed the effective datefair value of warrants, options, convertible notes and convertible preferred stock issued using the Monte-Carlo and Black-Scholes option pricing models. The expected term used for warrants, convertible notes and convertible preferred stock are the contractual life and the expected term used for options issued is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the Initial Public Offering through the earlierexpected term of “plain vanilla” option grants. The Company is utilizing an expected volatility figure based on a review of the Company’s consummationhistorical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a Business Combination and its liquidation, to payremaining term consistent with the Sponsor a monthly feeexpected term of $10,000 for office space, utilities and secretarial and administrative support. For the three and nine months ended September 30, 2017, the Company incurred $30,000 and $40,000, respectively, of administrative service fees, of which $28,000 is payable and included in due to related party in the accompanying condensed balance sheet at September 30, 2017.instrument being valued.

 

10


KBL MERGER CORP. IV

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

(Unaudited)

Related Party Loans

In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,000,000 of such Working Capital Loans may be convertible into units of the post Business Combination entity at a price of $10.00 per unit. The units would be identical to the Private Units. There were no Working Capital Loans outstanding as of September 30, 2017.

5. COMMITMENTS AND CONTINGENCIES

Registration Rights

The holders of the Founder Shares and Private Units and warrants that maybe issued upon conversion of Working Capital Loans (and any shares of the Company’s common stock issuable upon the exercise of the Private Units and warrants that may be issued upon conversion of Working Capital Loans) are entitled to registration rights pursuant to a registration rights agreement signed on the effective date of the Initial Public Offering. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable Lock-Up Period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting AgreementSubsequent Events

 

The Company granted the underwriters a 45-day option to purchase up to 1,500,000 additional Units to cover over-allotments at the Initial Public Offering price, less the underwriting discounts and commissions. On June 23, 2017, the underwriters elected to exercise their over-allotment option to purchase 1,500,000 Units at a purchase price of $10.00 per Unit.

In connection with the closing of the Initial Public Offering and the over-allotment option, the underwriters were paid a cash underwriting discount of $2,875,000. In addition, the underwriters deferred their fee of up to $4,025,000 until the completion of the initial Business Combination (the “Deferred Fee”). The Deferred Fee will be paid in cash upon the closing of a Business Combination from the amounts held in the Trust Account, subject to the terms of the underwriting agreement.

Concurrently with the closing of the Initial Public Offering, the underwriters purchased an aggregate of 125,000 Private Units at $10.00 per Private Unit.

In conjunction with their investment in the Private Units, the underwriters or their designees also purchased membership interests in the Sponsor, through which the underwriters or their designees collectivelyhas evaluated events that have a pecuniary interest in 230,000 Founder Shares, pursuant to a separate private placement that closed simultaneously with the closing of the Initial Public Offering and the Private Placement.

6. STOCKHOLDERS’ EQUITY

Preferred Shares — The Company is authorized to issue 1,000,000 preferred shares with a par value of $0.0001 per share. At September 30, 2017 and December 31, 2016, there are no preferred shares issued or outstanding.

Common Stock — The Company is authorized to issue 35,000,000 shares of the Company’s common stock with a par value of $0.0001 per share. Holders of the Company’s shares of the Company’s common stock are entitled to one vote for each share. At September 30, 2017 and December 31, 2016, there were 4,208,034 and 2,875,000 shares of common stock issued and outstanding, respectively (excluding 10,669,466 and 0 shares of common stock subject to possible redemption, respectively).


KBL MERGER CORP. IV

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

(Unaudited)

7. TRUST ACCOUNT AND FAIR VALUE MEASUREMENTS 

The Trust Account can be invested in U.S. government securities, within the meaning set forth in the Investment Company Act, having a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act.

The Company’s amended and restated certificate of incorporation provide that, other than the withdrawal of interest to pay income taxes and up to $50,000 of interest to pay dissolution expenses if any, none of the funds held in the Trust Account will be released until the earlier of: (i) the completion of the Business Combination; (ii) the redemption of Public Shares properly tendered in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete the Business Combination within the Combination Period or (iii) the redemption of 100% of the Public Shares if the Company is unable to complete a Business Combination within the Combination Period.

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. 

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

Level 1:Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3:Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2017 and December 31, 2016, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

Description Level September 30,
2017
  December 31, 2016 
Assets:        
Cash and marketable securities held in Trust Account 1 $116,539,634  $        - 

8. SUBSEQUENT EVENTS 

The Company evaluates subsequent events and transactions that occuroccurred after the balance sheet date up to the date that thebut before these financial statements were issued. Based upon this review,that evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements.statements, except as disclosed in Note 12, Subsequent Events.

Reclassification

Certain prior year balances have been reclassified in order to conform to current year presentation. These reclassifications have no effect on previously reported results of operations or loss per share.

NOTE 4 - ACCRUED EXPENSES

Accrued expenses consist of the following as of March 31, 2021 and December 31, 2020:

  March 31,  December 31, 
  2021  2020 
Consulting fees $1,391,923  $1,718,559 
Professional fees  658,069   1,261,751 
Employee and director compensation  582,878   878,292 
Research and development fees  134,072   17,817 
Interest  104,434   184,576 
Patent costs  8,974   - 
Travel expenses  4,600   4,600 
Other  -   45,321 
  $2,884,950  $4,110,916 

As of March 31, 2021 and December 31, 2020, accrued expenses - related parties were $512,992 and $454,951, respectively. As of March 31, 2021, accrued expenses – related parties consisted primarily of professional fees and services. See Note 11 – Related Parties for details.

NOTE 5 - ACCRUED ISSUABLE EQUITY

A summary of the accrued issuable equity activity during the three months ended March 31, 2021 is presented below:

Balance at January 1, 2021 $43,095 
Reclassification to equity  (43,095)
Balance at March 31, 2021 $- 

There was no accrued issuable equity activity during the three months ended March 31, 2020.

 


NOTE 6 - DERIVATIVE LIABILITIES

The following table sets forth a summary of the changes in the fair value of Level 3 derivative liabilities that are measured at fair value on a recurring basis:

  For the Three Months Ended
March 31, 2021
 
  Warrants  Convertible Notes  Total 
Beginning balance as of January 1, 2021 $4,217,170  $225,800  $4,442,970 
Extinguishment of derivative liabilities in connection with conversion of debt  -   (591,203)  (591,203)
Warrants issued in private offering  7,294,836   -   7,294,836 
Change in fair value of derivative liabilities  12,573,904   665,404   13,229,308 
Ending balance as of March 31, 2021 $24,085,910  $290,001  $24,375,911 

The fair value of the derivative liabilities as of March 31, 2021 was estimated using the Monte-Carlo and Black Scholes option price models, with the following assumptions used:

For the
Three Months Ended
March 31,
2021
Risk-free interest rate0.00% - 0.92%
Expected term (years)0.02 – 4.90
Expected volatility85% - 192%
Expected dividends0%

Between January 15, 2021 and February 5, 2021, the fair value of derivative liabilities extinguished in connection with the conversion of debt were estimated using the Monte-Carlo and Black Scholes option price models with the following assumptions used:

January 15, 2021
to
February 5, 2021
Risk-free interest rate0.00% - 0.14%
Expected term (years)0.02 - 0.18
Expected volatility120% - 161%
Expected dividends0%

AGP Warrants

In connection with the closing of the Business Combination on November 6, 2020, the Company became obligated to assume five-year warrants for the purchase of 63,658 shares of the Company’s common stock at an exercise price of $5.28 per share (the “AGP Warrant Liability”) that had originally been issued by KBL to an investment banking firm in connection with a prior private placement.

On March 12, 2021, the Company issued a warrant to AGP (the “AGP Warrant”) to purchase up to an aggregate of 63,658 shares of the Company’s common stock at a purchase price of $5.28 per share, subject to adjustment, in full satisfaction of the AGP Warrant Liability. The purchase of shares pursuant to the AGP Warrant is limited at any given time not to exceed a beneficial ownership of 4.99% of the then total number of issued and outstanding shares of the Company’s common stock. The AGP Warrant is exercisable at any time between May 2, 2021 and May 2, 2025. The newly issued AGP Warrant did not meet the requirements for equity classification due to the existence of a tender offer provision that could potentially result in cash settlement of the AGP Warrant that did not meet the limited exception in the case of a change-in-control. Accordingly, the AGP Warrant will continue to be liability-classified. The AGP Warrant was revalued on March 31, 2021 at $403,332 which resulted in a $237,436 increase in the fair value of the derivative liabilities.

Warrants Issued in Private Offering

On February 23, 2021, the Company issued five-year warrants (the “PIPE Warrants”) to purchase 2,564,000 shares of common stock at an exercise price of $5.00 per share in connection with the private offering (see Note 10 – Stockholders’ Equity – Common Stock). The PIPE Warrants did not meet the requirements for equity classification due to the existence of a tender offer provision that could potentially result in cash settlement of the PIPE Warrants that didn’t meet the limited exception in the case of a change-in-control. Accordingly, the Company reclassified the $7,294,836 fair value of the PIPE Warrants, which was determined using the Black-Scholes option pricing model, from additional paid-in-capital to derivative liabilities. The PIPE Warrants were revalued on March 31, 2021 at $11,876,704 which resulted in a $4,581,868 change in the fair value of derivative liabilities. The following assumptions were used to value the PIPE Warrants at issuance:

February 23,
2021
Risk-free interest rate0.59%
Expected term (years)5.00
Expected volatility85.0%
Expected dividends0.0%


NOTE 7 - LOANS PAYABLE

Loans Payable

The below table summarizes the activity of loans payable during the three months ended March 31, 2021:

  Principal
Balance at
December 31,
2020
  Repayments  Effect of
Foreign
Exchange
Rates
  Principal
Balance at
March 31,
2021
 
Kingsbrook $150,000  $(150,000) $-  $- 
Paycheck Protection Program  53,051   -   -   53,051 
Bounce back loan scheme  68,245   -   582   68,827 
Other loans payable  810,913   (218,532)  -   592,381 
Total loans payable  1,082,209   (368,532)  582   714,259 
Less: loans payable - current portion  968,446   (362,151)  

-

   606,295 
Loans payable - non-current portion $113,763  $(6,381) $582  $107,964 

On March 3, 2021, the Company repaid the Kingsbrook loans payable in cash for an aggregate of $166,313, which included the principal of $150,000 and accrued interest of $16,313.

During the three months ended March 31, 2021, the Company paid an aggregate of $218,532 in partial satisfaction of other loans payable.

Loans Payable- Related Parties

The below table summarizes the activity of loans payable - related parties during the three months ended March 31, 2021:

  Principal
Balance at
December 31,
2020
  Effect of
Foreign
Exchange
Rates
  Principal
Balance at
March 31,
2021
 
Loans payable issued between            
September 18, 2019 through November 4, 2020 $513,082  $1,058  $514,140 

On February 10, 2021, the Company entered into amended loan agreements to modify the terms of certain loan agreements in the aggregate principal amount of $432,699, previously entered into with Sir Marc Feldmann and Dr. Lawrence Steinman, the Co-Executive Chairmen of the Board of Directors. The loan agreements were extended and modified to be paid back at the Company’s discretion, either by 1) repayment in cash, or 2) by converting the outstanding amounts into shares of common stock at the same price per share as the next financing transaction. Subsequently, on February 25, 2021, and effective as of the date of the original February 10, 2021 amendments, the Company determined that such amendments were entered into in error and each of Sir Feldmann and Dr. Steinman rescinded such February 10, 2021 amendments. See Note 12 – Subsequent Events.

Interest Expense on Loans Payable

For the three months ended March 31, 2021, the Company recognized interest expense and interest expense — related parties associated with the loans of $8,257 and $10,103, respectively. During the three months ended March 31, 2020, the Company recognized interest expense and interest expense — related parties associated with the loans of $14,885 and $6,638, respectively.

As of March 31, 2021, the Company had accrued interest and accrued interest — related parties associated with the loans of $16,946 and $47,694, respectively. As of December 31, 2020, the Company had accrued interest and accrued interest — related parties associated with the loans of $24,824 and $37,539, respectively. See Note 11 — Related Parties for additional details.


NOTE 8 - CONVERTIBLE NOTES PAYABLE

The below table summarizes the activity of convertible notes payable during the three months ended March 31, 2021:

  Principal Balance December 31,
2020
  Converted
to Equity
  Principal Balance March 31,
2021
 
Dominion $833,334  $(833,334) $- 
Kingsbrook  101,000   (101,000)  - 
Alpha Capital  616,111   (300,000)  316,111 
Convertible bridge notes  365,750   (365,750)  - 
Total Convertible Notes Payable $1,916,195 $(1,600,084) $316,111 

Dominion, Kingsbrook and Alpha Convertible Promissory Notes

During the three months ended March 31, 2021, certain noteholders elected to convert certain convertible notes payable with an aggregate principal balance of $1,234,334 and an aggregate accrued interest balance of $105,850 into an aggregate of 467,123 shares of the Company’s common stock at conversion prices ranging from $2.45-$3.29 per share. The shares issued upon the conversion of the convertible promissory notes had a fair value at issuance of $1,941,125. In connection with the conversion of convertible notes payable, derivative liabilities in the amount of $591,203 related to the bifurcated embedded conversion feature of such notes were extinguished. The Company recorded a loss on extinguishment of convertible notes payable of $9,737 during the three months ended March 31, 2021 as a result of the conversion of debt and the extinguishment of the related derivative liabilities.

Bridge Notes

During the three months ended March 31, 2021, certain noteholders elected to convert bridge notes with an aggregate principal balance of $365,750 and an aggregate accrued interest balance of $66,633 into an aggregate of 158,383 shares of the Company’s common stock at a conversion price of $2.73 per share.

Default on Convertible Notes

On February 3, 2021, there was an event of default in connection with the Alpha Capital convertible note (the “Alpha Capital Note”), which resulted in an increase in the settlement value of the Alpha Capital Note. The additional liability is accounted for as a bifurcated derivative. See Note 6, Derivative Liabilities, and Note 12, Subsequent Events.

Interest on Convertible Notes

During the three months ended March 31, 2021 and 2020, the Company recorded interest expense of $104,676 and $138,031, respectively, related to convertible notes payable, and recorded interest expense - related parties of $3,846 and $13,210, respectively, related to convertible notes payable - related parties.

As of March 31, 2021 and December 31, 2020, accrued interest related to convertible notes payable was $85,087 and $182,181, respectively, and accrued interest expense - related parties related to convertible notes payable - related parties was $90,845 and $124,833, which is included in accrued expenses and accrued expenses - related parties, respectively, on the accompanying condensed consolidated balance sheets.


NOTE 9 - COMMITMENTS AND CONTINGENCIES

Litigation and Other Loss Contingencies

The Company records liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company has no liabilities recorded for loss contingencies as of March 31, 2021 or December 31, 2020.

Potential Legal Matters

Action against former executives of KBL

The Company may initiate legal action against former executives of KBL for non-disclosure in the KBL original June 30, 2020 and September 30, 2020 Quarterly Reports on Form 10-Q of the matters disclosed in Note 14 (as restated) of the September 30, 2020 financial statements in the amended Quarterly Report on Form 10-Q filed on February 5, 2021. If such legal action is initiated, the Company would seek damages to cover, at a minimum, the unrecorded and contingent liability obligations and legal fees. There can be no assurance that, if such legal action is initiated, the Company will be successful in its legal actions.

Action against Tyche Capital LLC

The Company has initiated legal action against Tyche Capital LLC (“Tyche”) for breaching its obligations under a term sheet entered into between KBL, KBL IV Sponsor, LLC, 180 and Tyche on April 10, 2019 and for breaching its obligations under the Guarantee and Commitment Agreement entered into between KBL and Tyche on July 25, 2019. The Company is seeking damages to bring the net tangible asset balance of KBL as of November 6, 2020, the closing date of the Business Combination, to $5,000,001. There can be no assurance that the Company will be successful in its legal actions.

On May 17, 2021, Tyche filed a counterclaim against the Company alleging that it was the Company, rather than Tyche, that had breached the Guarantee and Commitment Agreement entered into between KBL and Tyche on July 25, 2019.  Tyche also filed a complaint against six third-party defendants, including three members of the Company’s management, Sir Marc Feldman, Dr. James Woody, and Ozan Pamir, claiming that they allegedly breached fiduciary duties to Tyche with regards to the Guarantee and Commitment Agreement.  The Company denies all of such claims, as do the three individual members of the Company’s management, and will vigorously defend against all of Tyche’s claims.

Cantor Fitzgerald & Co. Breach of Contract

On February 27, 2018, KBL entered into a service contract with Cantor Fitzgerald & Co. (“CF&CO”) whereby CF&CO would receive a transaction fee in cash arising out of any contemplated business combination by the Company. On July 25, 2019, KBL entered into the Business Combination Agreement whereby CF&CO became entitled to a transaction fee of $1,500,000 (the “Transaction Fee”). On November 6, 2020, the Company and CF&CO entered into a settlement agreement (the “Settlement Agreement”) whereby CF&CO agreed to release the Company from the obligation to pay the Transaction Fee in cash and to instead accept 150,000 fully paid shares of the Company’s common stock, but only if the Company would take all necessary action to permit the sale of the Shares by filing with the Securities and Exchange Commission (the “SEC”) a shelf registration statement within 30 days following the closing of the merger. On November 6, 2020, the Company closed the merger and in breach of the Settlement Agreement, did not file a registration statement with the SEC within 30 days of the November 6, 2020 closing, due to the need to restate the previously filed KBL financial statements.

In April 2021, Cantor Fitzgerald & Co. (“Cantor”) filed a complaint against the Company in the Supreme Court of the State of New York, County of New York (Index No. 652709/2021), alleging causes of action against the Company relating to the claimed breach of a fee agreement between the parties from February 2018 which required the Company to pay Cantor a transaction fee in cash in the event the Company completed a business transaction, as well as the alleged breach of a settlement agreement subsequently entered into with Cantor as described above. The complaint seeks $1,500,000 in damages, pre-and-post judgment interest and attorneys’ fees.

On April 4, 2021, the Company received a court summons in connection with the alleged breach of the settlement agreement pursuant to which Cantor is currently pursuing litigation. The Company plans to file a response with the court pursuant to an extension that was granted to file an answer. The Company believes it has meritorious defenses to the allegations, and the Company intends to continue to vigorously defend against the litigation. Further, the Company believes that it has counterclaims against Cantor and plans to plead such counterclaims in defense of claims raised. The outcome of the matter is currently unknown. The Company is in discussions with Cantor regarding the registration of the 150,000 shares that have been issued to Cantor and hopes to resolve this dispute by registering the shares that have been issued to Cantor, of which there is no assurance.

Convertible Promissory Note

The holder of the Alpha Convertible Note has alleged that the default event described in Note 9, Convertible Notes Payable, also applies to $300,000 of principal that was converted on February 4, 2021, which would result in an additional increase to the settlement amount of the Alpha Convertible Note. The Company is in discussions with the noteholder regarding this dispute.


Operating Leases

The Company leased office space in London, UK through an operating lease agreement, which was terminated pursuant to the terms of the lease in August 2020. Total operating lease expenses were $0 and $17,397 for each of the three months ended March 31, 2021 and 2020 and is recorded in general and administrative expenses on the condensed consolidated statements of operations.

Consulting Agreement

On February 22, 2021, the Company entered into a consultancy agreement (as amended, the “Consulting Agreement”) with a related party (the “Consultant”). The Consulting Agreement is effective December 1, 2020.

Pursuant to the Consulting Agreement, the Company agreed to pay the Consultant 15,000 British Pounds (GBP) per month (approximately $20,800) during the term of the agreement, increasing to 23,000 GBP per month (approximately $32,000) on the date (a) of publication of the data from the phase 2b clinical trial for Dupuytren’s disease (RIDD) and (b) the date that the Company has successfully raised over $15 million in capital. The Company also agreed to pay the Consultant the following bonus amounts:

The sum of £100,000 (approximately $138,000) upon submission of the Dupuytren’s disease clinical trial data for publication in a peer-reviewed journal (“Bonus 1”);

The sum of £434,673 GBP (approximately $605,000) (“Bonus 2”), which is earned and payable upon the Company raising a minimum of $15 million in additional funding, through the sale of debt or equity, after December 1, 2020 (the “Vesting Date”). Bonus 2 is payable within 30 days of the Vesting Date and shall be and shall not be accrued, due or payable prior to the Vesting Date. Bonus 2 is payable, at the election of the Consultant, at least 50% (fifty percent) in shares of the Company’s common stock, at the lower of (i) $3.00 per share, or (ii) the trading price on the date of the grant, with the remainder paid in GBP.

The sum of £5,000 (approximately $7,000) on enrollment of the first patient to the phase 2 frozen shoulder trial (“Bonus 3”); and

The sum of £5,000 (approximately $7,000) for enrollment of the first patient to the phase 2 delirium/POCD trial (“Bonus 4”).

The Consulting Agreement has an initial term of three years, and renews thereafter for additional three-year terms, until terminated as provided in the agreement. The Consulting Agreement can be terminated by either party with 12 months prior written notice (provided the Company’s right to terminate the agreement may only be exercised if the Consultant fails to perform his required duties under the Consulting Agreement), or by the Company immediately under certain conditions specified in the Consulting Agreement if (a) the Consultant fails or neglects efficiently and diligently to perform the services required thereunder or is guilty of any breach of its or his obligations under the agreement (including any consent granted under it); (b) the Consultant is guilty of any fraud or dishonesty or acts in a manner (whether in the performance of the services or otherwise) which, in the reasonable opinion of the Company, has brought or is likely to bring the Consultant, the Company or any of its affiliates into disrepute or is convicted of an arrestable offence (other than a road traffic offence for which a non-custodial penalty is imposed); or (c) the Consultant becomes bankrupt or makes any arrangement or composition with his creditors. If the Consulting Agreement is terminated by the Company for any reason other than cause, the Consultant is entitled to a lump sum payment of 12 months of his fee as at the date of termination.

Effective March 30, 2021, in satisfaction of amounts owed to the Consultant for 50% of Bonus 2, the Company issued 100,699 shares of the Company’s common stock to the Consultant. Additionally, on April 15, 2021, in satisfaction of amounts owed to the Consultant for an additional 19% of Bonus 2, the Company issued 37,715 of the Company’s common stock to the Consultant. The remainder of Bonus 2 will be due to the Consultant at such time as the Company has raised $15 million, which obligation was waived by the Company in connection with the issuance of the shares described above.

Employment Agreement of Chief Executive Officer

On February 25, 2021, the Company entered into an amended agreement with the Chief Executive Officer of the Company (the “CEO”) (the “A&R Agreement”), dated February 24, 2021, and effective November 6, 2020, which replaced the CEO’s prior agreement with the Company. Pursuant to the A&R Agreement, the CEO agreed to serve as an officer of the Company for a term of three years, which is automatically renewable thereafter for additional one-year periods, unless either party provides the other at least 90 days written notice of their intent to not renew the agreement. The CEO’s annual base salary under the agreement will initially be $450,000 per year, with automatic increases of 5% per annum.


The CEO is also eligible to receive an annual bonus, with a target bonus equal to 45% of his then-current base salary, based upon the Company’s achievement of performance and management objectives as set and approved by the Board of Directors and/or Compensation Committee in consultation with the CEO. At the CEO’s option, the annual bonus can be paid in cash or the equivalent value of the Company’s common stock or a combination. The Board of Directors, as recommended by the Compensation Committee, may also award the CEO bonuses from time to time (in stock, options, cash, or other forms of consideration) in its discretion. Under the A&R Agreement, the CEO is also eligible to participate in any stock option plans and receive other equity awards, as determined by the Board of Directors from time to time.

The A&R agreement can be terminated any time by the Company for cause (subject to the cure provisions of the agreement), or without cause (with 60 days prior written notice to the CEO), by the CEO for good reason (as described in the agreement, and subject to the cure provisions of the agreement), or by the CEO without good reason. The agreement also expires automatically at the end of the initial term or any renewal term if either party provides notice of non-renewal as discussed above.

In the event the A&R Agreement is terminated without cause by the Company, or by the CEO for good reason, the Company agreed to pay him the lesser of 18 months of salary or the remaining term of the agreement, the payment of any accrued bonus from the prior year, his pro rata portion of any current year’s bonus and health insurance premiums for the same period that he is to receive severance payments (as discussed above).

The A&R Agreement contains standard and customary invention assignment, indemnification, confidentiality and non-solicitation provisions, which remain in effect for a period of 24 months following the termination of his agreement.

Employment Agreement of Chief Financial Officer

On February 25, 2021, the Company entered into an Employment Agreement (the “CFO Agreement”) dated February 24, 2021, and effective November 6, 2020, with the Company’s Interim Chief Financial Officer. Pursuant to the agreement, the CFO agreed to serve as the Interim Chief Financial Officer (“CFO”) of the Company for an initial salary of $300,000 per year, subject to increase to a mutually determined amount upon the closing of a new financing as well as annual increases.

Under the agreement, the CFO is eligible to receive an annual bonus, in a targeted amount of 30% of his then salary, based upon the Company’s achievement of performance and management objectives as set and approved by the CEO, in consultation with the CFO. The bonus amount is subject to adjustment. The Board of Directors, as recommended by the Compensation Committee of the Company (and/or the Compensation Committee), may also award the CFO bonuses from time to time (in stock, options, cash, or other forms of consideration) in its discretion. Under the CFO Agreement, the CFO is also eligible to participate in any stock option plans and receive other equity awards, as determined by the Board of Directors from time to time. As of March 31, 2021, the Company recorded $15,750 of accrued bonus payable to the CFO.

The agreement can be terminated any time by the Company with or without cause with 60 days prior written notice and may be terminated by the CFO at any time with 60 days prior written notice. The agreement may also be terminated by the Company with six days’ notice in the event the agreement is terminated for cause under certain circumstances. Upon the termination of the CFO’s agreement by the Company without cause or by the CFO for good reason, the Company agreed to pay him three months of severance pay.

The agreement contains standard and customary invention assignment, indemnification, confidentiality and non-solicitation provisions, which remain in effect for a period of 24 months following the termination of his agreement.


NOTE 10 - STOCKHOLDERS’ EQUITY

Common Stock

Sale of Common Stock in Private Offering

On February 19, 2021, the Company entered into a Securities Purchase Agreement with certain purchasers (the “Purchasers”), pursuant to which the Company agreed to sell an aggregate of 2,564,000 shares of common stock (the “Shares”) and warrants to purchase up to an aggregate of 2,564,000 shares of common stock (the “PIPE Warrants”), at a combined purchase price of $4.55 per share and PIPE Warrant (the “Private Offering”). The Private Offering closed on February 23, 2021. Aggregate gross proceeds from the Private Offering were approximately $11.7 million. Net proceeds to the Company from the Private Offering, after deducting the placement agent fees and estimated offering expenses payable by the Company, were $10.7 million. The placement agent fees and offering expenses were accounted for as a reduction of additional paid in capital.

The PIPE Warrants have an exercise price equal to $5.00 per share, are immediately exercisable and are subject to customary anti-dilution adjustments for stock splits or dividends or other similar transactions. However, the exercise price of the PIPE Warrants will not be subject to adjustment as a result of subsequent equity issuances at effective prices lower than the then-current exercise price. The PIPE Warrants are exercisable for 5 years following the closing date. The PIPE Warrants are subject to a provision prohibiting the exercise of such Warrants to the extent that, after giving effect to such exercise, the holder of such Warrant (together with the holder’s affiliates, and any other persons acting as a group together with the holder or any of the holder’s affiliates), would beneficially own in excess of 4.99% of the Company’s outstanding common stock (which may be increased to 9.99% on a holder by holder basis, with 61 days prior written consent of the applicable holder). The PIPE Warrants were determined to be liability-classified (see Note 6 – Derivative Liabilities – Warrants Issued in Private Offering). Of the $968,930 of placement agent fees and offering expenses, $364,812 was allocated to the common stock and $604,118 was allocated to the warrant liabilities. Because the PIPE Warrants are liability classified, the $604,118 allocated to the warrants was immediately expensed.

In connection with the Private Offering, the Company also entered into a Registration Rights Agreement, dated as of February 23, 2021, with the Purchasers (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) on or prior to April 24, 2021 to register the resale of the Shares and the shares of common stock issuable upon exercise of the Warrants (the “Warrant Shares”), and to cause such registration statement to be declared effective on or prior to June 23, 2021 (or, in the event of a “full review” by the SEC, August 22, 2021). The Company is currently in default of the terms of the Registration Rights Agreement as the registration statement to register the Shares and Warrant Shares was not filed by April 24, 2021. As a result of this default, the Company is required to pay damages to the Purchasers in the aggregate amount of $174,993 each month, up to a maximum of $583,310, beginning on April 24, 2021 and until such date that the registration statement is filed with the SEC.

Common Stock Issued for Services

During the three months ended March 31, 2021, the Company issued an aggregate 197,790 of immediately vested shares of the Company’s common stock as compensation to consultants, directors, and officers, with an aggregate issuance date fair value of $925,404 which was charged immediately to the condensed consolidated statement of operations for the three months ended March 31, 2021.

Common Stock Issued Upon Exchange of Common Stock Equivalents

During the three months ended March 31, 2021, the Company issued 959,809 shares of its common stock upon the exchange of common stock equivalents.

Convertible Note Conversions

During the three months ended March 31, 2021, certain noteholders elected to convert certain convertible notes payable with an aggregate principal balance of $1,234,334 and an aggregate accrued interest balance of $105,850 into an aggregate of 467,123 shares of the Company’s common stock at conversion prices ranging from $2.45-$3.29 per share, pursuant to the terms of such notes. (See Note 8 – Convertible Notes Payable).

Bridge Note Conversions

During the three months ended March 31, 2021, certain noteholders elected to convert bridge notes with an aggregate principal balance of $365,750 and an aggregate accrued interest balance of $66,633 into an aggregate of 158,383 shares of the Company’s common stock at a conversion price of $2.73 per share, pursuant to the terms of such notes. (see Note 8 - Convertible Notes Payable).

Stock Options

On February 26, 2021, the Company issued ten-year options to purchase an aggregate of 1,580,000 shares of the Company’s common stock to two officers of the Company. The options have an exercise price of $4.43 per share and shall vest at the rate of (a) 1/5th of such Options on the date of grant; and (b) the remaining 4/5th of such options ratably on a monthly basis over the following 36 months on the last day of each calendar month; provided, however, that the equity awards will vest immediately upon executive’s death or disability. The options had a grant date fair value of $5,280,632, which will be recognized over the vesting term.


The assumptions used in the Black-Scholes valuation method were as follows:

For the
Three Months Ended
March 31,
2021
Risk free interest rate0.75%
Expected term (years)5.27 - 5.38
Expected volatility100%
Expected dividends0%

The Company recognized stock-based compensation expense related to the stock options for the three months ended March 31, 2021 and 2020 of $1,092,399 and $0, respectively, which is included within general and administrative expenses on the condensed consolidated statements of operations. As of March 31, 2021, there was $3,803,903 of unrecognized stock-based compensation expense that will be recognized over the weighted average remaining vesting period of 2.88 years.

NOTE 11 - RELATED PARTIES

Due from Related Parties

Due from related parties was $300,000 as of March 31, 2021 and December 31, 2020, and consists of a receivable due from a research and development company that has shared officers and directors.

Accounts Payable - Related Parties

Accounts payable - related parties was $236,534 as of March 31, 2021 and consists of $217,189 for professional services provided by the Company’s directors and $19,345 for accounting fees for services provided by a director and his company. Accounts payable - related parties was $215,495 as of December 31, 2020 and consists of $196,377 for professional services provided by the Company’s directors and $19,118 for accounting fees for services provided by a director and his company.

Accrued Expenses - Related Parties

Accrued expenses - related parties was $512,992 as of March 31, 2021 and consists of $138,538 of interest accrued on loans and convertible notes due to certain officers and directors of the Company and $374,454 of accrued professional fees for services provided by certain directors of the Company. Accrued expenses - related parties of $454,951 as of December 31, 2020, consists of $124,833 of interest accrued on loans and convertible notes due to certain officers and directors of the Company and $330,118 of accrued professional fees for services provided by certain directors of the Company.

Loans Payable - Related Parties

Loans payable - related parties consists of $514,140 and $513,082 as of March 31, 2021 and December 31, 2020, respectively. Please refer to Note 7 - Loan Payables for more information.

Convertible Notes Payable - Related Parties

Convertible notes payable - related parties of $270,000 and $270,000 as of March 31, 2021 and December 31, 2020, respectively, represents the principal balance of convertible notes owed to certain officers and directors of the Company.

Research and Development Expenses – Related Parties

During the three months ended March 31, 2021, the Company incurred $267,056 of research and development expenses in connection with professional fees paid to current or former officers, directors or greater than 10% investors, or affiliates thereof.

During the three months ended March 31, 2020, the Company incurred $30,605 of research and development expenses related to professional fees paid to current or former officers, directors or greater than 10% investors, or affiliates thereof.

General and Administrative Expenses - Related Parties

During the three months ended March 31, 2021, the Company incurred $39,120 of general and administrative expenses related to professional fees paid to current or former officers, directors or greater than 10% investors, or affiliates thereof.


During the three months ended March 31, 2020, the Company incurred $68,067 of general and administrative expenses related to professional fees paid to current or former officers, directors or greater than 10% investors, or affiliates thereof.

Other Income - Related Parties

During the three months ended March 31, 2021 and 2020, the Company recorded $0 and $240,000, respectively, of other income related to a one-year research and development agreement with a company who shares common officers and directors with the Company.

Interest Expense - Related Parties

During the three months ended March 31, 2021, the Company recorded $13,949 of interest expense - related parties, of which $11,526 related to interest on certain convertible notes held by officers and directors of the Company and $2,423 related to interest expense on loans from officers, directors and a greater than 10% investor of the Company.

During the three months ended March 31, 2020, the Company recorded $19,848 of interest expense - related parties, of which $13,480 related to interest on certain convertible notes held by officers and directors of the Company and $6,368 related to interest expense on loans from officers, directors and a greater than 10% investor of the Company.

NOTE 12 - SUBSEQUENT EVENTS

Common Stock Issued

During April 2021, the Company issued 37,715 shares of common stock in partial satisfaction of bonuses earned by the Consultant pursuant to the terms of the Consulting Agreement. See Note 9 – Commitments and Contingencies, Consulting Agreement.

Extension of the Loan Agreements

On April 12, 2021, the Company entered into amended loan agreements with Sir Marc Feldmann and Dr. Lawrence Steinman, the Co-Executive Chairman of the Board of Directors, which extended the date of all of their outstanding loan agreements to September 30, 2021 (see Note 7 – Loans Payable, Loans Payable – Related Parties).

Cantor Fitzgerald & Co. Litigation

On April 4, 2021, the Company received a court summons in connection with the alleged breach of a settlement agreement with Cantor Fitzgerald & Co., and Cantor Fitzgerald & Co. is currently pursuing litigation. See Note 9 – Commitments and Contingencies, Potential Legal Matters. 

EarlyBird Capital Inc. Settlement Agreement

On April 23, 2021, the Company settled the amounts due pursuant to a certain finder agreement entered into with EarlyBird Capital, Inc. (“EarlyBird”) on October 17, 2017 (the “Finder Agreement”). The Company’s Board of Directors determined it was in the best interests to settle all claims which had been made or could be made with respect to the Finder Agreement and entered into a settlement agreement (the “Settlement Agreement”). Pursuant to the Settlement Agreement, the Company paid EarlyBird a cash payment of $275,000 and issued 225,000 shares of the Company’s restricted common stock to EarlyBird.

Larsen Consulting Agreement

On April 29, 2021, the Company entered into a consulting agreement with Glenn Larsen, the former Chief Executive Officer of 180 Therapeutics LP, to act in the capacity as negotiator for the licensing of four patents. In consideration for services provided, the Company agreed to compensate Mr. Larsen with $50,000 of its restricted common stock (valued based on the closing sales price of the Company’s common stock on the date the Board of Directors approved the agreement, which shares have not been issued to date) which vests upon the Company entering into a licensing transaction with the assistance of Mr. Larsen.


Legal Action

On May 17, 2021, Tyche Capital LLC (“Tyche”) who had previously entered into a Guarantee and Commitment Agreement with the Company, filed counterclaims against the Company claiming breaches of fiduciary duties, and is seeking compensatory damages. See Note 9 – Commitments and Contingencies, Potential Legal Matters.

Application for Forgiveness of the Paycheck Protection Program Loan

On May 19, 2021, the Company applied for loan forgiveness for the amount of $51,051 in connection with amounts borrowed by Katexco under the Paycheck Protection Program. The result of the application has not yet been determined.

University of Oxford Agreement

On May 24, 2021, the Company entered into another research agreement with Oxford (the “Fifth Oxford Agreement”), pursuant to which the Company will sponsor work at the University of Oxford to conduct a multi-center, randomized, double blind, parallel group, feasibility study of anti-TNF injection for the treatment of adults with frozen shoulder during the pain-predominant phase. As consideration, the Company agreed to make the following payments to Oxford:

Amount Due
Milestone(excluding VAT)
Upon signing of the Fifth Oxford Agreement£70,546
6 months post signing of the Fifth Oxford Agreement£70,546
12 months post signing of the Fifth Oxford Agreement£70,546
24 months post signing of the Fifth Oxford Agreement£70,546


ITEMItem 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to KBL Merger Corp. IV. References to our “management” or our “management team” refer to our officers and directors, and references to the “sponsor” refer to KBL IV Sponsor LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations” regardingOperations.

General Information

This information should be read in conjunction with the Company’sinterim unaudited financial position, business strategystatements and the plansnotes thereto included in this Quarterly Report on Form 10-Q, and objectivesthe audited financial statements and notes thereto and “Part II. Other Information – Item 7. Management’s Discussion and Analysis of managementFinancial Condition and Results of Operations”, contained in our Annual Report on Form 10-K for future operations,the year ended December 31, 2020, filed with the Securities and Exchange Commission on July 9, 2021 (the “Annual Report”).

Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our unaudited consolidated financial statements included above under “Part I – Financial Information” – “Item 1. Financial Statements”.

Please see the section entitled “Glossary” in our Annual Report for a list of abbreviations and definitions used throughout this Report.

Our logo and some of our trademarks and tradenames are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek”used in this Report. This Report also includes trademarks, tradenames and variationsservice marks that are the property of others. Solely for convenience, trademarks, tradenames and similar wordsservice marks referred to in this Report may appear without the ®, ™ and expressionsSM symbols. References to our trademarks, tradenames and service marks are not intended to identifyindicate in any way that we will not assert to the fullest extent under applicable law our rights or the rights of the applicable licensors if any, nor that respective owners to other intellectual property rights will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

The market data and certain other statistical information used throughout this Report are based on independent industry publications, reports by market research firms or other independent sources that we believe to be reliable sources. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such forward-looking statements. Such forward-looking statementsinformation. We are responsible for all of the disclosures contained in this Report, and we believe these industry publications and third-party research, surveys and studies are reliable. While we are not aware of any misstatements regarding any third-party information presented in this Report, their estimates, in particular, as they relate to future events or future performance, but reflect management’s current beliefs,projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on information currently available. A number various factors, including those discussed under, and incorporated by reference in, the section entitled “Item 1A. Risk Factors” of this Report. These and other factors could cause actual events,our future performance or results to differ materially from our assumptions and estimates. Some market and other data included herein, as well as the events, performance and results discussed indata of competitors as they relate to the forward-looking statements. ForCompany, is also based on our good faith estimates.

See also “Cautionary Note Regarding Forward-Looking Statements”, above, which includes information identifying important factors that could cause actual results to differ materially from those anticipated in theon forward-looking statements, pleasewithin the meaning of the Private Securities Litigation Reform Act of 1995, used herein and other matters which are applicable to this Report, including, but not limited to this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “180 Life”, “180LS” and “180 Life Sciences Corp.” refer specifically to 180 Life Sciences Corp. and its consolidated subsidiaries. References to “KBL” refer to the Risk Factors section ofCompany prior to the Company’s final prospectusNovember 6, 2020 Business Combination.

In addition, unless the context otherwise requires and for the Initial Public Offering filedpurposes of this Report only:

CAD” refers to Canadian dollars;

Exchange Act” refers to the Securities Exchange Act of 1934, as amended;

£” or “GBP” refers to British pounds sterling;

SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and

Securities Act” refers to the Securities Act of 1933, as amended.


Where You Can Find Other Information

We file annual, quarterly, and current reports, proxy statements and other information with the SEC. The Company’s securitiesOur SEC filings can be accessed onare available to the EDGAR section ofpublic over the Internet at the SEC’s website at www.sec.gov. Exceptwww.sec.gov and are available for download, free of charge, soon after such reports are filed with or furnished to the SEC, on the “Investors”—“SEC Filings”—“All SEC Filings” page of our website at www.180lifesciences.com. Copies of documents filed by us with the SEC are also available from us without charge, upon oral or written request to our Secretary, who can be contacted at the address and telephone number set forth on the cover page of this Report. Our website address is www.180lifesciences.com/. The information on, or that may be accessed through, our website is not incorporated by reference into this Report and should not be considered a part of this Report.

Organization of MD&A

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as expressly requiredfollows:

Business Overview and Recent Events. A summary of the Company’s business and certain recent events;

Significant Financial Statement Components. A summary of the Company’s significant financial statement components;

Consolidated Results of Operations. An analysis of our financial results comparing the three months ended March 31, 2021 and 2020;

Liquidity and Capital Resources. An analysis of changes in our balance sheets and cash flows and discussion of our financial condition; and

Critical Accounting Policies. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

Business Overview and Recent Events

On November 6, 2020 (the “Closing Date”), the previously announced Business Combination was consummated following a special meeting of stockholders, where the stockholders of KBL considered and approved, among other matters, a proposal to adopt the Business Combination Agreement. Pursuant to the Business Combination Agreement, KBL Merger Sub, Inc. merged with 180 Life Corp (f/k/a 180 Life Sciences Corp.), with 180 continuing as the surviving entity and becoming a wholly-owned subsidiary of KBL. As part of the Business Combination, KBL issued 17,500,000 shares of common stock and equivalents to the stockholders of 180, in exchange for all of the outstanding capital stock of 180. The Business Combination became effective November 6, 2020 and 180 filed a Certificate of Amendment of its Certificate of Incorporation in Delaware to change its name to 180 Life Corp., and KBL changed its name to 180 Life Sciences Corp.

This MD&A and the related financial statements for the three months ended March 31, 2021 included herein includes the combined operations of KBL and 180 because the results are combined after the Closing Date.

This MD&A and the related financial statements for the three months ended March 31, 2020 includes the combined operations of 180 and its three operating entities, but does not include KBL because this period precedes the Business Combination.

Following the Closing of the Business Combination, we transitioned our operations to those of 180, which is a clinical stage pharmaceutical company headquartered in Menlo Park, California, focused on the development of therapeutics for unmet medical needs in chronic pain, inflammation, fibrosis and other inflammatory diseases, where anti-TNF therapy will provide a clear benefit to patients, by employing innovative research, and, where appropriate, combination therapy. We have three product development platforms:

fibrosis and anti-tumor necrosis factor (“TNF”);


drugs which are derivatives of cannabidiol (“CBD”); and

alpha 7 nicotinic acetylcholine receptor (“α7nAChR”).

We have several future product candidates in development, including one product candidate in a Phase 2b/3 clinical trial in the United Kingdom for Dupuytren’s disease, a condition that affects the development of fibrous connective tissue in the palm of the hand. 180 was founded by several world-leading scientists in the biotechnology and pharmaceutical sectors.

We intend to invest resources to successfully complete the clinical programs that are underway, discover new drug candidates, and develop new molecules to build our existing pipeline with the goal of addressing unmet clinical needs. The product candidates are designed via a platform comprised of defined unit operations and technologies. This work is performed in a research and development environment that evaluates and assesses variability in each step of the process in order to define the most reliable production conditions.

We may rely on third-party contract manufacturing organizations (“CMOs”) and other third parties for the manufacturing and processing of our product candidates in the future, to the extent we determine to move forward with the manufacturing of such candidates, and subject to applicable securities law,approvals. We believe the Company disclaims any intentionuse of contract manufacturing and testing for the first clinical product candidates is cost-effective and has allowed us to rapidly prepare for clinical trials in accordance with our development plans. We expect that third-party manufacturers will be capable of providing and processing sufficient quantities of these product candidates to meet anticipated clinical trial demands.

COVID-19 Pandemic

In December 2019, a novel strain of coronavirus, which causes the infectious disease known as COVID-19, was reported in Wuhan, China. The World Health Organization declared COVID-19 a “Public Health Emergency of International Concern” on January 30, 2020 and a global pandemic on March 11, 2020. The COVID-19 pandemic and the public health responses to contain it have resulted in global recessionary conditions, which did not exist at December 31, 2019. Among other effects, government-mandated closures, stay-at-home orders and other related measures have significantly impacted global economic activity and business investment in general. A continuation or obligationworsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to update or revise any forward-looking statements whetheraccess capital, and on our business, results of operations and financial condition. We have been closely monitoring the developments and have taken active measures to protect the health of our employees, their families, and our communities. The ultimate impact of the pandemic on the 2021 fiscal year and beyond will depend heavily on the duration of the COVID-19 pandemic and public health responses, including government-mandated closures, stay-at-home orders, vaccine availability and efficacy and social distancing mandates, as well as the substance and pace of macroeconomic recovery, all of which are uncertain and difficult to predict considering the rapidly evolving landscape of the pandemic and the public health responses to contain it. As of March 31, 2021, only the follow-up time for patient data for the Phase 2b Dupuytren’s disease clinical trial has been delayed as a result of new information, future events or otherwise.COVID-19, but such follow-up is now completed. However, COVID-19 may delay the initiation of certain clinical trials.

 

OverviewClose of Business Combination

 

We areAs described above, on November 6, 2020 (the “Closing Date”), the Company consummated the previously announced business combination The Business Combination was accounted for as a blank check company incorporated on September 7, 2016 in Delaware and formed for the purposereverse recapitalization of effecting a merger,180. All of 180’s capital stock exchange, asset acquisition,outstanding immediately prior to the merger was exchanged for (i) 15,736,348 shares of 180LS common stock, purchase, reorganization or similar business combination with one or more businesses. We intend(ii) 2 shares of Class C and Class K Special Voting Shares exchangeable into 1,763,652 shares of 180LS common stock which are presented as outstanding in the accompanying Statement of Changes in Stockholders’ Equity due to effectuate our Business Combination using cash from the proceeds of our Initial Public Offering and the Private Placement, our securities, debt or a combination of cash, securities and debt.

The issuance of additionalreverse recapitalization. KBL’s 6,928,645 outstanding shares of common stock are presented as being issued on the date of the Business Combination.


Financing

On February 19, 2021, the Company entered into a Securities Purchase Agreement with a number of institutional investors (the “Purchasers”) pursuant to which the Company agreed to sell to the Purchasers an aggregate of 2,564,000 shares (the “Shares”) of the Company’s common stock and warrants to purchase up to an aggregate of 2,564,000 shares of the Company’s common stock (the “SPA Warrants”), at a combined purchase price of $4.55 per Share and accompanying SPA Warrant (the “Offering”). Aggregate gross proceeds from the Offering were approximately $11.7 million, prior to deducting placement agent fees and estimated offering expenses payable by the Company. Net proceeds to the Company from the Offering, after deducting the placement agent fees and offering expenses payable by the Company, were approximately $10.8 million. The Offering closed on February 23, 2021.

Maxim Group LLC (the “Placement Agent”) acted as exclusive placement agent in connection with the Offering pursuant to an Engagement Letter between the Company and the Placement Agent dated January 26, 2021 (as amended on February 18, 2021). Pursuant to the Engagement Letter, the Placement Agent received a commission equal to seven percent (7%) of the aggregate gross proceeds of the Offering, or preferred stock:$816,634.

Conversion of Bridge Notes

On March 8, 2021, the holders of the Company’s convertible bridge notes, which were issued in December 27, 2019 and January 3, 2020 to various purchasers, converted an aggregate of $432,383, which included accrued interest of $66,633 owed under such convertible bridge notes, into an aggregate of 158,383 shares of common stock pursuant to the terms of such notes, as amended, at a conversion price of $2.73 per share.

Convertible Debt Conversions

From November 27, 2020 to February 5, 2021, the holders of the Company’s convertible promissory notes converted an aggregate of $4,782,107 owed under such convertible notes into an aggregate of 1,986,751 shares of common stock, pursuant to the terms of such notes, as amended, at conversion prices of between $2.00 and $3.29 per share.

Significant Financial Statement Components

Research and Development

To date, 180’s research and development expenses have related primarily to discovery efforts and preclinical and clinical development of its three product platforms: fibrosis and anti-TNF; drugs which are derivatives of CBD, and α7nAChR. Research and development expenses consist primarily of costs associated with those three product platforms, which include:

 

may significantly dilute the equity interest of our investors;
may subordinate the rights of holders of common stock if we issue preferred sharesexpenses incurred under agreements with rights senior to those afforded to our common stock;
could cause a change in control if a substantial number of our shares of common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any,180’s collaboration partners and could result in the resignation or removal of our present officersthird-party contract organizations, investigative clinical trial sites that conduct research and directors;
may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us;development activities on its behalf, and
may adversely affect prevailing market prices for our securities. consultants;

 

Similarly, if we issue debt securities, it could result in:

costs related to production of clinical materials, including fees paid to contract manufacturers;

 

defaultlaboratory and foreclosure on our assets if our operating revenues after our business combination are insufficientvendor expenses related to pay our debt obligations;the execution of preclinical and clinical trials;

acceleration of our obligations to repay the indebtedness even if we have made all principalemployee-related expenses, which include salaries, benefits and interest payments when due if we breach certain covenants that require thestock-based compensation; and

facilities and other expenses, which include expenses for rent and maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
our immediate payment of all principalfacilities, depreciation and accrued interest, if any, if the debt security is payable on demand;
our inability to obtain additional financing if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding;
our inability to pay dividends on our common stock;
using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, expenses, capital expenditures, acquisitionsamortization expense and other general corporate purposes;
limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and
limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.supplies.

 

We expect to continue to incur significantexpense all research and development costs in the pursuitperiods in which they are incurred. We accrue for costs incurred as services are provided by monitoring the status of each project and the invoices received from our external service providers. We adjust our accrual as actual costs become known. When contingent milestone payments are owed to third parties under research and development arrangements or license agreements, the milestone payment obligations are expensed when the milestone results are achieved.


Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that research and development expenses will increase over the next several years as clinical programs progress and as we seek to initiate clinical trials of additional product candidates. It is also expected that increased research and development expenses will be incurred as additional product candidates are selectively identified and developed. However, it is difficult to determine with certainty the duration and completion costs of current or future preclinical programs and clinical trials of product candidates.

The duration, costs and timing of clinical trials and development of product candidates will depend on a variety of factors that include, but are not limited to, the following:

per patient trial costs;

the number of patients that participate in the trials;

the number of sites included in the trials;

the countries in which the trials are conducted;

the length of time required to enroll eligible patients;

the number of doses that patients receive;

the drop-out or discontinuation rates of patients;

potential additional safety monitoring or other studies requested by regulatory agencies;

the duration of patient follow-up;

and the efficacy and safety profile of the product candidates.

In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and fund in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.

Because the product candidates are still in clinical and preclinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of product candidates or whether, or when, we may achieve profitability. Due to the early-stage nature of these programs, we do not track costs on a project-by-project basis. As these programs become more advanced, we intend to track the external and internal cost of each program.

General and Administrative

General and administrative expenses consist primarily of salaries and other staff-related costs, including stock-based compensation for shares of common stock issued to founders and personnel in executive, commercial, finance, accounting, legal, investor relations, facilities, business development and human resources functions and include vesting conditions.

Other significant general and administrative costs include costs relating to facilities and overhead costs, legal fees relating to corporate and patent matters, insurance, investor relations costs, fees for accounting and consulting services, and other general and administrative costs. General and administrative costs are expensed as incurred, and we accrue amounts for services provided by third parties related to the above expenses by monitoring the status of services provided and receiving estimates from our service providers and adjusting our accruals as actual costs become known.


It is expected that the general and administrative expenses will increase over the next several years to support our continued research and development activities, manufacturing activities, potential commercialization of our acquisition plans. We cannot assure you that our plansproduct candidates and the increased costs of operating as a public company. These increases are anticipated to raise capital orinclude increased costs related to completethe hiring of additional personnel, developing commercial infrastructure, fees to outside consultants, lawyers and accountants, and increased costs associated with being a Business Combination will be successful.public company, as well as expenses related to services associated with maintaining compliance with Nasdaq listing rules and SEC requirements, insurance and investor relations costs.

Other Income

Other income primarily represents fees earned for research and development work performed for other companies, some of which are related parties.

Interest Expense

Interest expense consists primarily of interest expense related to debt instruments.

Gain (Loss) on Extinguishment of Convertible Notes

Gain (loss) on extinguishment of convertible notes represents the shortfall (excess) of the reacquisition cost of convertible notes as compared to their carrying value.

Change in Fair Value of Derivative Liabilities

Change in fair value of derivative liabilities represents the non-cash change in fair value of derivative liabilities during the reporting period.

Offering Costs Allocated to Warrant Liabilities

Change in offering costs allocated to warrant liabilities represents placement agent fees and offering expenses which were allocated to the PIPE Warrants and expensed immediately as they are liability classified.

Change in Fair Value of Accrued Issuable Equity

Change in fair value of accrued issuable equity represents the non-cash change in fair value of accrued equity prior to its formal issuance.


CONSOLIDATED RESULTS OF OPERATIONS

Consolidated Results of Operations

 

We have neither engaged in any operations nor generated any revenuesFor the Three Months Ended March 31, 2021 Compared to date. Our only activities from September 7, 2016 (date of inception) through September 30, 2017 were organizational activities, those necessary to prepare for the Initial Public Offering, which was consummated on June 7, 2017,Three Months Ended March 31, 2020

  For the Three Months Ended 
  March 31, 
  2021  2020 
Operating Expenses:      
Research and development $99,899  $472,862 
Research and development - related parties  267,053   30,605 
General and administrative  2,542,231   995,328 
General and administrative - related parties  39,120   68,067 
Total Operating Expenses  2,948,303   1,566,862 
Loss From Operations  (2,948,303)  (1,566,862)
         
Other (Expense) Income:        
Gain on settlement of payables and accrued expenses  723,764   - 
Other income - related parties  -   240,000 
Interest expense  (112,933)  (152,916)
Interest expense - related parties  (13,949)  (19,848)
Loss on extinguishment of convertible notes payable, net  (9,737)  (886,736)
Change in fair value of derivative liabilities  (13,229,308)  - 
Offering costs allocated to warrant liabilities  (604,118)  - 
Change in fair value of accrued issuable equity  (9,405)  - 
Total Other Expense, Net  (13,255,686)  (819,500)
         
Loss Before Income Taxes  (16,203,989)  (2,386,362)
Income tax benefit  5,404   5,102 
Net Loss $(16,198,585) $(2,381,260)

Research and identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We expect to generate non-operating income in the form of interest income on cash and marketable securities held in the Trust Account. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.Development

 

ForWe incurred research and development expenses of $99,899 for the three months ended September 30, 2017, we hadMarch 31, 2021, compared to $472,862 for the three months ended March 31, 2020, representing a decrease of $372,963 or 79%. The decrease is primarily attributable to a $217,000 decrease in research and development expenses related to the temporary halting of drug discovery services in 2020 provided by Evotec International GmbH in connection with a research and development agreement until the Company raises additional capital, as well as approximately $158,000 of research tax credits earned during the first quarter of 2021.

Research and Development – Related Parties

We incurred research and development expenses – related parties of $267,053 for the three months ended March 31, 2021, compared to $30,605 for the three months ended March 31, 2020, representing an increase of $236,448 or 773%. The increase is primarily attributable to approximately $430,000 of fees and bonuses accrued in connection with a consulting agreement with a founder of 180 Therapeutics, LP that became effective on December 1, 2020 for research in connection with the Company’s product candidate for the treatment of Dupuytren’s disease, offset by approximately $190,000 of research tax credits earned during the first quarter of 2021.

General and Administrative

We incurred general and administrative expenses of $2,542,231 and $995,328 for the three months ended March 31, 2021 and 2020, respectively, representing an increase of $1,546,903 or 155%. Increases of (i) approximately $283,000 in compensation expenses and approximately $248,000 insurance expense primarily resulting from expenses incurred by the acquired entity (180LS) and (ii) approximately $1,221,000 of stock-based compensation expense were partially offset by decreases of approximately $209,000 in professional fees and consulting expenses.


General and Administrative – Related Parties

We incurred general and administrative expenses – related parties of $39,120 and $68,067 respectively for the three months ended March 31, 2021 and 2020, respectively, representing a decrease of $28,947 or 43%, resulting from an increase in related party consulting fees during the period.

Other Expenses, Net

We incurred other expenses, net income of $86,116, which consists$13,255,686 during the three months ended March 31, 2021 as compared to $819,500 for the three months ended March 31, 2020, representing an increase in other expenses of interest income on cash$12,436,186 or 1,518%. The increase was primarily attributable to the change in fair value of derivative liabilities of $13,229,308 and marketable securities heldoffering costs allocated to warrant liabilities of $604,118, partially offset by $723,764 of gains recognized related to the settlement of certain accounts payable and accrued expenses, and a decrease in the Trust Accountloss on extinguishment of $333,905, offset by operating costsconvertible notes payable of $140,849 and a provision for income taxes of $106,940.

For the nine months ended September 30, 2017, we had net income of $60,149, which consists of interest income on cash and marketable securities held in the Trust Account of $389,634, offset by operating costs of $222,545 and a provision for income taxes of $106,940.

For the period from September 7, 2016 (inception) through September 30, 2016, we had a net loss of $683, consisting of operating costs.$876,999.

 

Liquidity and Capital Resources

 

The completion of the Initial Public Offering and simultaneous Private Placement, inclusive of the underwriters’ exercise of their over-allotment option in full, generated gross proceeds to the Company of $120,025,000. Related transaction costs amounted to $7,345,436, consisting of $2,875,000 of underwriting fees, $4,025,000 of deferred underwriting commissions payable (which are held in the Trust Account) and $445,436 of Initial Public Offering costs.

Following the Initial Public Offering and the exercise of the over-allotment option, a total of $116,150,000 was placed in the Trust Account and we had $798,469 of cash held outside of the Trust Account, after payment of all costs related to the Initial Public Offering and the exercise of the over-allotment option.

As of September 30, 2017,March 31, 2021 and December 31, 2020 we had cash balances of $6,052,862 and marketable securities held in the Trust Account$2,108,544, respectively, and working capital deficits of $116,539,634, substantially all of which is invested in U.S. treasury bills with a maturity of 180 days or less. Interest income earned on the balance in the Trust Account may be available to us to pay taxes. Since inception, we have not withdrawn interest income from the Trust Account.

As of September 30, 2017, we had cash of $453,529 held outside the Trust Account, which is available for use by us to cover the costs associated with identifying a target business, negotiating a Business Combination, due diligence procedures$25,324,166 and other general corporate uses. In addition, as of September 30, 2017, we had accounts payable and accrued expenses of $83,056.$17,406,356, respectively.

 

For the ninethree months ended September 30, 2017,March 31, 2021 and 2020, cash used in operating activities amountedwas $6,330,045 and $409,006, respectively. Our cash used in operations for the three months ended March 31, 2021 was primarily attributable to $222,076, mainly resulting fromour net incomeloss of $60,149, offset by interest earned on marketable securities held$16,198,585, adjusted for non-cash expenses in the Trust Accountaggregate amount of $389,634. Changes$15,169,872 as well as $5,301,332 of net cash used to fund changes in ourthe levels of operating assets and liabilitiesliabilities. Our cash used in operations for the three months ended March 31, 2020 was primarily attributable to our net loss of $2,381,260, adjusted for non-cash expenses in the aggregate amount of $908,593, as well as $1,063,661 of net cash provided by changes in the levels of $107,409.operating assets and liabilities.

For the three months ended March 31, 2021 and 2020, cash provided by financing activities was $10,362,538 and $333,364, respectively. Cash provided by financing activities during the three months ended March 31, 2021 was due to $10,731,070 of net proceeds from our offering of common stock and warrants, partially offset by the repayment of loans in the amount of $368,532. The net cash provided by financing activities during the three months ended March 31, 2020 was comprised of $260,864 of proceeds from the issuance of debt instruments and $72,500 of proceeds from the issuance of equity instruments.

Our product candidates may never achieve commercialization and we anticipate that we will continue to incur losses for the foreseeable future. We expect that our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. As a result, until such time, if ever, as we are able to generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements, which may not be available on favorable terms, if at all. Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, license payments or milestone obligations that may arise, laboratory and related supplies, clinical costs, potential manufacturing costs, legal and other regulatory expenses and general overhead costs.

Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development activities. We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs.

 

We intendhave not yet achieved profitability and expect to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (which interest shall be net of taxes payable and excluding deferred underwriting commissions)continue to complete our initial business combination. We may withdraw interest to pay taxes and up to $50,000 for liquidation expenses, if any. To the extentincur cash outflows from operations. It is expected that our capital stock or debt is used, in whole or in part,research and development and general and administrative expenses will continue to increase and, as considerationa result, we expect to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses (as well as pay personnel and advisors to do the forgoing), structure, negotiate and complete a business combination, and to pay taxes to the extent the interest earned on the trust account is not sufficient to pay our taxes.

In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial Business Combination, we would repay such loaned amounts. In the event that our initial Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,000,000 of such loans will be convertible into units of the post-business combination entity at a price of $10.00 per unit. The units would be identical to the Private Units. No written agreements currently exist with respect to such loans.


We do not believe we will need to raise additional funds in ordercapital to meet the expenditures required for operatingfund our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. In the current economic environment, it has become especially difficult to obtain acquisition financing.operations. If we are unable to completeobtain 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 initial Business Combination because webusiness, including amounts required to fund working capital and capital expenditures. The conditions outlined above indicate that there is substantial doubt about our ability to continue as a going concern within one year after the financial statement issuance date.


Our condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the condensed consolidated financial statements do not have sufficient funds availablenecessarily purport to us, we will be forced to cease operations and liquidaterepresent realizable or settlement values. The condensed consolidated financial statements do not include any adjustment that might result from the Trust Account. In addition, following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.outcome of this uncertainty.

 

Off-balance sheet financing arrangementsRecent Funding Transactions

 

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have notFebruary 2021 Private Purchase

On February 19, 2021, we entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitmentsa Securities Purchase Agreement (the “Purchase Agreement”) with the purchasers identified on the signature pages thereto (the “Purchasers”) pursuant to which the Company agreed to sell to the Purchasers an aggregate of other entities, or purchased any non-financial assets.2,564,000 shares (the “Shares”) of common stock and warrants to purchase up to an aggregate of 2,564,000 shares of common stock (the “SPA Warrants”), at a combined purchase price of $4.55 per Share and accompanying SPA Warrant (the “Offering”). Aggregate gross proceeds from the Offering were approximately $11.7 million, prior to deducting placement agent fees and estimated offering expenses payable by the Company. Net proceeds to the Company from the Offering, after deducting the placement agent fees and estimated offering expenses payable by the Company, were approximately $10.8 million. The Offering closed on February 23, 2021.

 

Contractual obligationsThe SPA Warrants have an exercise price equal to $5.00, were immediately exercisable and are subject to customary anti-dilution adjustments for stock splits or dividends or other similar transactions. However, the exercise price of the SPA Warrants will not be subject to adjustment as a result of subsequent equity issuances at effective prices lower than the then-current exercise price. The SPA Warrants are exercisable until February 23, 2026. The SPA Warrants are subject to a provision prohibiting the exercise of such SPA Warrants to the extent that, after giving effect to such exercise, the holder of such Warrant (together with the holder’s affiliates, and any other persons acting as a group together with the holder or any of the holder’s affiliates), would beneficially own in excess of 4.99% of the outstanding common stock (which may be increased to 9.99% on a holder by holder basis, with 61 days prior written consent of the applicable holder).

 

In connection with the Offering, the Company also entered into a Registration Rights Agreement, dated as of February 23, 2021, with the Purchasers (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) on or prior to April 24, 2021 to register the resale of the Shares and the shares of common stock issuable upon exercise of the SPA Warrants (the “Warrant Shares”), and to cause such registration statement to be declared effective on or prior to June 23, 2021 (or, in the event of a “full review” by the SEC, August 22, 2021). We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreementare currently in default of the terms of the Registration Rights Agreement as we were unable to file the registration statement to register the Shares and Warrant Shares by April 24, 2021. As a result of this default, the Company is required to pay the sponsor a monthly fee of $10,000 for office space, utilities and administrative support provideddamages to the Company. We began incurring these feesPurchasers in the aggregate amount of $174,993 each month, up to a maximum of $583,310, beginning on June 7, 2017April 24, 2021 and will continue to incur these fees monthlyuntil such date that the registration statement is filed with the SEC.

The Company agreed in the Purchase Agreement that, until the earlier of (1) thirty (30) days after the completiondate on which the registration statement that is filed pursuant to the Registration Rights Agreement to register the resale by the Purchasers of the Business CombinationShares and the Warrant Shares is declared effective by the SEC (such date, the “Effective Date”) and (2) thirty (30) days after such date that the Shares may be sold without limitation pursuant to Rule 144 under the Securities Act, neither the Company nor any subsidiary thereof would (i) issue, enter into any agreement to issue or announce the Company’s liquidation.issuance or proposed issuance of any shares of common stock (or common stock equivalents) or (ii) file any registration statement or any amendment or supplement thereto, in each case other than (A) as contemplated pursuant to the Registration Rights Agreement and (B) as contemplated by that certain Registration Rights Agreement, dated June 12, 2020, by and between the Company and the parties signatory thereto.

Each of the directors and executive officers of the Company has entered into a lock-up agreement with the Company in connection with the Offering (each, a “Lock-Up Agreement”). Under the Lock-Up Agreements, from the date of the lock-up agreements until the earlier of (x) sixty (60) days after the Effective Date and (y) November 6, 2021, the directors and executive officers will not offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the director or executive officer), directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, with respect to, any shares of common stock or securities convertible, exchangeable or exercisable into, shares of common stock, subject to limited exceptions.


Maxim Group LLC (the “Placement Agent”) acted as exclusive placement agent in connection with the Offering pursuant to an Engagement Letter between the Company and the Placement Agent dated January 26, 2021 (together with the amendment letter dated February 18, 2021 (such amendment letter, the “Amendment Letter”), the “Engagement Letter”). The Engagement Letter provides, among other things, that the Placement Agent would receive a commission equal to seven percent (7%) of the aggregate gross proceeds of the Offering, which commission totaled $791,634.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on financial conditions, changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Critical Accounting Policies

See Note 3 – Summary of Significant Accounting Policies of our condensed consolidated financial statements included within this Quarterly Report for our critical accounting policies.

Recently Issued Accounting Pronouncements

See Note 3 – Summary of Significant Accounting Policies of our consolidated financial statements included within our 2020 Annual Report on Form 10-K for a summary of recently issued accounting pronouncements.

 

ITEMItem 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative and Qualitative Disclosures About Market Risk.

 

The net proceedsPursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Initial Public Offering andCompany is not required to provide the sale of the Private Units held in the Trust Account are invested in U.S. government treasury bills withinformation required by this Item as it is a maturity of 180 days or less or in money market funds meeting certain conditions under“smaller reporting company,” as defined by Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.229.10(f)(1).

 

ITEMItem 4. CONTROLS AND PROCEDURESControls and Procedures.

Evaluation of Disclosure Controls and Procedures

We have established and maintain a system of disclosure controls and procedures are controls and other procedures that are designed to ensureprovide reasonable assurance that information required to be disclosed in our reports filed with the SEC pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO)(principal executive officer) and Interim Chief Financial Officer (CFO) (principal accounting/financial officer), as appropriate, to allow timely decisions regarding required disclosures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act.

In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on their evaluation, our principal executive officer and principal financial and accounting officer concluded that, as of March 31, 2021, our disclosure controls and procedures were not effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submittedsubmit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’sSEC rules and forms. Disclosure controlsforms, and procedures include, without limitation, controls and procedures designed to ensure that such information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officerprincipal executive officer and Chief Financial Officer,principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure.disclosures as of March 31, 2021.


Management’s conclusion was based on the following material weaknesses which existed as of December 31, 2020, and continued to exist at March 31, 2021, as discussed in the Company’s Annual Report on Form 10-K:

Financial Reporting Systems: The Company did not maintain a fully integrated financial consolidation and reporting system throughout the period and as a result, extensive manual analysis, reconciliation and adjustments were required in order to produce financial statements for external reporting purposes.

Segregation of Duties: The Company does not currently have a sufficient complement of technical accounting and external reporting personnel commensurate to support standalone external financial reporting under public company or SEC requirements. Specifically, the Company did not effectively segregate certain accounting duties due to the small size of its accounting staff and maintain a sufficient number of adequately trained personnel necessary to anticipate and identify risks critical to financial reporting and the closing process. In addition, there were inadequate reviews and approvals by the Company’s personnel of certain reconciliations and other processes in day-to-day operations due to the lack of a full complement of accounting staff.

Insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of GAAP and SEC disclosure requirements.

Ineffective controls over period end financial disclosure and reporting processes, which includes the proper valuation of fair value instruments.

A material weakness is a control deficiency or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. As a company with limited accounting resources, a significant amount of management’s time and attention has been and will be diverted from our business to ensure compliance with these regulatory requirements.

 

Evaluation of Disclosure Controls and ProceduresRemediation Plan

 

As required by Rules 13a-15The Company has recently established an Audit Committee to provide oversight of remediation efforts. Management intends to take steps to develop and 15d-15 underenhance its internal controls over financial reporting, including:

hiring additional accounting personnel;

engaging an advisory firm to lead the remediation and assessment of internal controls;

developing formal policies and procedures over accounting and reporting; and

identifying additional information technology to improve financial reporting.

Our management plans to establish procedures to monitor and evaluate the Exchange Act,effectiveness of our Chief Executive Officerinternal controls over financial reporting on an ongoing basis and Chief Financial Officer carried out an evaluation of the effectivenessare committed to taking further action and implementing necessary enhancements or improvements. Management expects to complete its assessment of the design and operationoperating effectiveness of our disclosureits internal controls andover financial reporting during 2021. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures as of September 30, 2017. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.may deteriorate.

 

Changes in Internal Control Overover Financial Reporting

 

During the most recently completed fiscal quarter, thereThere has been no change in our internal control over financial reporting that occurred during the first quarter of 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II - OTHER INFORMATION

 

ITEMItem 1. LEGAL PROCEEDINGS.Legal Proceedings.

 

None.From time to time, we may be a party to litigation that arises in the ordinary course of its business. The impact and outcome of litigation, if any, is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We believe the ultimate resolution of any such current proceeding will not have a material adverse effect on our continued financial position, results of operations or cash flows.

Such current litigation or other legal proceedings are described in, and incorporated by reference in, this “Item 1. Legal Proceedings” of this Form 10-Q from, “Part I – Item 1. Financial Statements” in the Notes to Consolidated Financial Statements in “Note 9 – Commitments and Contingences”, under the heading Potential Legal Matters. The Company believes that the resolution of currently pending matters will not individually or in the aggregate have a material adverse effect on our financial condition or results of operations. However, assessment of the current litigation or other legal claims could change in light of the discovery of facts not presently known to the Company or by judges, juries or other finders of fact, which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.

Additionally, the outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected. 

 

ITEMItem 1A. RISK FACTORS.Risk Factors.

 

Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our final prospectus dated June 7, 2017 filed with the SEC. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, thereThere have been no material changes tofrom the risk factors previously disclosed in our final prospectus dated June 7, 2017Part I, Item 3 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC.Commission on July 9, 2021, under the heading “Risk Factors”, which risk factors are incorporated by reference herein, and investors should review the risks provided in the Form 10-K, prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Form 10-K for the year ended December 31, 2020, under “Risk Factors”, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.

 

ITEMItem 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Sales of Unregistered Securities

Except as set forth below, there have been no sales of unregistered securities during the quarter ended March 31, 2021 and from the period from April 1, 2021, to the filing date of this report, which have not previously been disclosed in a Current Report on Form 8-K.

In February 2021:

On February 10, 2021, the Company entered into amended loan agreements to modify the terms of certain loan agreements in the aggregate principal amount of $432,699, previously entered into with Sir Marc Feldmann and Dr. Lawrence Steinman, the Co-Executive Chairmen of the Board of Directors. The loan agreements were extended and modified to be paid back at the Company’s discretion, either by 1) repayment in cash, or 2) by converting the outstanding amounts into shares of common stock at the same price per share as the next financing transaction. Subsequently, on February 25, 2021, and effective as of the date of the original February 10, 2021 amendments, the Company determined that such amendments were entered into in error and each of Sir Feldmann and Dr. Steinman rescinded such February 10, 2021 amendments pursuant to their entry into Confirmations of Rescission acknowledgements.

In March 2021:

We issued 158,382 shares of common stock upon the conversion of $432,384 of outstanding convertible notes at a conversion price of $2.73 per share, pursuant to the terms of such notes;

14,195 restricted shares of common stock were issued to a consultant for investor relations services rendered;

We issued 1,815 shares of common stock to an external consultant for investor relations services to be rendered;

We issued 22,870 shares of common stock to external consultants of the Company for services rendered, at a price of $6.34 per share; and


We issued 2,503 shares of common stock to Donald A. McGovern, Jr., and 2,101 shares of common stock to Larry Gold, Ph.D., our directors, in consideration for services rendered to the Company as directors of the Company. 
100,699 restricted shares of common stock were issued for services rendered in connection with a Bonus to Prof. Jagdeep Nanchahal, our Chairman of our Clinical Advisory Committee.

In April 2021:

We issued 37,715 shares of common stock to Dr. Jagdeep Nanchahal, a consultant, pursuant to the terms of his consulting agreement, as partial consideration for a bonus owed to Dr. Nanchahal.

* * * * *

We claim an exemption from registration pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, for such issuances described above, since the foregoing issuances did not involve a public offering, the recipients were (a) “accredited investors”; and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Securities Act. The securities were offered without any general solicitation by us or our representatives. The securities are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

We claim an exemption from registration provided by Section 3(a)(9) of the Securities Act, for such note conversions, as the securities were exchanged by us with our existing security holders in transactions where no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

None.

 

ITEMItem 3. DEFAULTS UPON SENIOR SECURITIES.Defaults upon Senior Securities.

 

None.

 

ITEMItem 4. MINE SAFETY DISCLOSURES.Mine Safety Disclosures.

 

Not applicable.

 

ITEMItem 5. OTHER INFORMATION.Other Information.

 

None.To the extent required by Form 8-K and in an abundance of caution, the following information is being disclosed below instead of pursuant to a Current Report on Form 8-K filed with the Commission during the period pursuant to Item 1.01 and Item 1.02 of Form 8-K:

 

Item 1.01. Entry into a Material Definitive Agreement.

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On February 10, 2021, the Company entered into amended loan agreements to modify the terms of certain loan agreements in the aggregate principal amount of $432,699, previously entered into with Sir Marc Feldmann and Dr. Lawrence Steinman, the Co-Executive Chairmen of the Board of Directors. The loan agreements were extended and modified to be paid back at the Company’s discretion, either by 1) repayment in cash, or 2) by converting the outstanding amounts into shares of common stock at the same price per share as the next financing transaction. Subsequently, on February 25, 2021, and effective as of the date of the original February 10, 2021 amendments, the Company determined that such amendments were entered into in error and each of Sir Feldmann and Dr. Steinman rescinded such February 10, 2021 amendments pursuant to their entry into Confirmations of Rescission acknowledgements. On April 12, 2021, the Company entered into amended loan agreements with Sir Marc Feldmann and Dr. Lawrence Steinman, the Co-Executive Chairman of the Board of Directors, which extended the date of all of their outstanding loan agreements to September 30, 2021.

Item 1.02. Termination of Material Definitive Agreement.

To the extent required by Form 8-K, the information set forth above in Item 1.01 is incorporated into this Item 1.02 by reference.


ITEMItem 6. EXHIBITS.Exhibits.

 

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

Exhibit   

Incorporated by Reference (Unless Otherwise Indicated)

 
Number Exhibit Description Form File No. Exhibit Filing Date 
4.1 Form of Warrant (February 2021 Private Offering) 8-K 001-38105 4.1 February 24, 2021 
10.1% Securities Purchase Agreement dated as of February 19, 2021 by and between 180 Life Sciences Corp. and the purchasers identified on the signature pages thereto. 8-K 001-38105 10.1 February 24, 2021 
10.2 Engagement Letter dated January 26, 2021 between 180 Life Sciences Corp. and Maxim Group LLC. 8-K 001-38105 10.2 February 24, 2021 
10.3 Amendment to Engagement Letter between 180 Life Sciences Corp. and Maxim Group LLC dated February 18, 2021. 8-K 001-38105 10.3 February 24, 2021 
10.4 Registration Rights Agreement dated as of February 23, 2021 by and between 180 Life Sciences Corp. and the purchasers signatory thereto. 8-K 001-38105 10.4 February 24, 2021 
10.5# Form of Lock-Up Agreement (February 2021 Private Offering) 8-K 001-38105 10.5 February 24, 2021 
10.6# Consultancy Agreement dated February 22, 2021, by and between 180 Life Sciences Corp. and Prof Jagdeep Nanchahal 8-K 001-38105 10.1 March 3, 2021 
10.7# Amended and Restated Employment Agreement dated February 25, 2021, and effective November 6, 2020, by and between 180 Life Sciences Corp. and James N. Woody 8-K 001-38105 10.2 March 3, 2021 
10.8# James N. Woody - Stock Option Agreement effective February 26, 2021 (1,400,000 shares) 8-K 001-38105 10.3 March 3, 2021 
10.9# Employment Agreement dated February 24, 2021, and effective November 6, 2020, by and between 180 Life Sciences Corp. and Ozan Pamir and Amendment and Correction Thereto dated March 1, 2021 8-K 001-38105 10.4 March 3, 2021 
10.10# Ozan Pamir - Stock Option Agreement effective February 26, 2021 (180,000 shares) 8-K 001-38105 10.5 March 3, 2021 
10.11# First Amendment to Consultancy Agreement dated March 31, 2021, by and between 180 Life Sciences Corp. and Prof Jagdeep Nanchahal 8-K 001-38105 10.2 April 2, 2021 
10.12 Settlement and Mutual Release Agreement dated May 4, 2021, by and between 180 Life Sciences Corp. and EarlyBirdCapital, Inc. 8-K 001-38105 10.1 May 7, 2021 
10.13# Second Amendment to Employment Agreement dated May 27, 2021, and effective November 6, 2020, by and between 180 Life Sciences Corp., Katexco Pharmaceuticals Corp. and Ozan Pamir 8-K 001-38105 10.2 May 27, 2021 
10.14# Form of Director Nominee Offer Letter (May 2021) 8-K 001-38105 10.1 May 27, 2021 

 


No.10.15* DescriptionSir Marc Feldmann Confirmation of ExhibitRescission of Note Amendments effective February 25, 2021Filed herewith
10.16*Dr. Lawrence Steinman Confirmation of Rescission of Note Amendments effective February 25, 2021Filed herewith
31.1* Certification of the Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuantpursuant to Section 302 of the Sarbanes-Oxley Act of 2002Filed herewith
31.2*Certification of the Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Filed herewith
32.1** Certification of the Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuantpursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS* XBRL Instance Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase DocumentFurnished herewith
101.LAB*32.2** XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*Certification of the Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 XBRL Taxonomy Extension Presentation Linkbase DocumentFurnished herewith
101*Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Condensed Balance Sheets as of March 31, 2021, and December 31, 2020; (ii) Condensed Statements of Operations for the Three Months Ended March 31, 2021 and 2020; (iii) Condensed Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020; Condensed Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020; and (iv) Notes to Condensed Financial StatementsFiled herewith.

 

(1) Incorporated by reference to our Current Report on Form 8-K filed on June 7, 2017

%Certain schedules and exhibits to the Business Combination Agreement have been omitted pursuant to Item 601(a)(5) and/or (b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission upon request.

*   Filed herewith.

*Filed herewith.

** Furnished. 

**Furnished herewith.

#Management contract or compensatory plans or arrangements.

 


SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 KBL MERGER180 LIFE SCIENCES CORP. IV
  
Date: November 13, 2017July 16, 2021/s/ Marlene KraussJames N. Woody, M.D., Ph.D.
 Name:By:Marlene KraussJames N. Woody, M.D., Ph.D., Chief Executive Officer
(Principal Executive Officer)

Date: July 16, 2021/s/ Ozan Pamir
 Title:By:Ozan Pamir, Interim Chief ExecutiveFinancial Officer

(Principal Executive Officer and Principal Financial and Accounting Officer)

 

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