Exhibit 99.7

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

Introduction

 

The unaudited pro forma condensed combined balance sheet as of June 30, 2020 and the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2020 and for the year ended December 31, 2019, combine the unaudited pro forma condensed combined financial statements of 180 with the financial statements of KBL to give effect to the business combination. Additionally, the financial statements of 180 (where 180 refers to the post-combination results of 180 Life Sciences Corp. f/k/a CannBioRx Life Sciences Corp.), CBR Pharma, 180 LP and CannBioRx (where CannBioRx refers to the pre-combination results of 180 Life Sciences Corp. f/k/a CannBioRx Life Sciences Corp.) were combined to give effect to the Reorganization. The Reorganization and business combination are reflected as if they had occurred on January 1, 2019 with respect to the unaudited pro forma condensed combined statements of operations and on June 30, 2020 with respect to the unaudited pro forma condensed combined balance sheet.

 

Accounting for the Merger

 

The financial statements of KBL, 180, CBR Pharma, 180 LP, CannBioRx and Katexco were prepared in accordance with GAAP. In the Reorganization between 180 (the legal acquiree) and the 180 Subsidiaries (Katexco, CBR Pharma and 180 LP) which was consummated on July 16, 2019, it was determined that Katexco was the accounting acquirer and the remaining companies were the accounting acquirees. In the business combination between KBL and the newly combined 180, the business combination was accounted for as a reverse recapitalization of 180.

 

The unaudited pro forma condensed combined financial information should be read in conjunction with the financial statements of each of KBL, 180 and the 180 Subsidiaries as well as the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of KBL” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of 180” herein and the other information contained in or incorporated by reference into this proxy statement/prospectus.

 

The unaudited pro forma condensed combined financial information includes reclassifications to conform the 180 Subsidiaries’ historical accounting presentation to 180’s accounting presentation.

 

The unaudited pro forma adjustments give effect to events that are directly attributable to the transactions and are based on available data and certain assumptions that management believes are factually supportable. In addition, with respect to the unaudited condensed combined statements of operations, the unaudited pro forma adjustments are expected to have a continuing impact on the combined results.

 

The unaudited pro forma condensed combined financial information is presented for informational purposes only and to aid you in your analysis of the financial aspects of the transactions. The unaudited pro forma condensed combined financial information described above has been derived from the historical financial statements of 180, KBL and the 180 Subsidiaries and the related notes included elsewhere in this proxy statement/prospectus. The unaudited pro forma condensed combined financial information is based on 180’s accounting policies. Further review may identify additional differences between the accounting policies of 180, KBL and the 180 Subsidiaries. The unaudited pro forma adjustments and the pro forma condensed combined financial information do not reflect the impact of synergies or post-transaction management actions and are not necessarily indicative of the financial position or results of operations that may have actually occurred had the transactions taken place on the dates noted, or of 180’s future financial position or operating results.

 

Pursuant to KBL’s Charter, public stockholders are being offered the opportunity to redeem, upon the Closing, shares of KBL Common Stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit in the Trust Account. For illustrative purposes, based on the fair value of marketable securities held in the Trust Account as of June 30, 2020 of approximately $11.3 million, the estimated per share redemption price would have been approximately $10.41. Subsequent to June 30, 2020, stockholders holding 106,186 public shares exercised their right to redeem such public shares into a pro rata portion of the Trust Account. As a result, an aggregate of approximately $1,160,695 was removed from the Trust Account to pay such holders. The below pro forma financial statement give effect to this transaction.

 

The unaudited pro forma condensed combined financial statements present two redemption scenarios as follows:

 

Assuming No Redemption:    This scenario assumes that 106,186 shares of KBL Common Stock are redeemed, which are the shares that were redeemed subsequent to June 30, 2020. This scenario also assumes the sale of 778,359 shares of KBL Common Stock pursuant to a Guarantee and Commitment Agreement whereby Tyche will purchase enough KBL Common Stock to ensure the combined entity has $5,000,001 in net tangible assets.

 

Assuming Maximum Redemption:    This scenario assumes that the remaining 940,416 shares of redeemable KBL Common Stock are redeemed. This scenario also assumes the sale of an additional 978,973 shares of KBL Common Stock pursuant to a Guarantee and Commitment Agreement whereby Tyche will purchase enough KBL Common Stock to ensure the combined entity has $5,000,001 in net tangible assets.

 

 

 

180 LIFE SCIENCES CORP.
BUSINESS COMBINATION
Unaudited Pro Forma Condensed Combined Balance Sheet
June 30, 2020

 

   180   KBL   Pro Forma
Adjustments
      Intercompany
Eliminations
   Pro Forma
Combined
(No
Redemption)
   Maximum
Redemption
Adjustments
   Pro Forma
Combined
(Maximum
Redemption)
 
   Note A   Note B   Note C       Note D   Note E   Note F     
Assets                                       
Current Assets:                                       
Cash  $70,127   $257,601   $20,561,942   (a), (c), (e), (f)   $   $20,889,670   $   $20,889,670 
Restricted cash       787,865                787,865        787,865 
Due from related parties   321,904                    321,904        321,904 
Prepaid income taxes       21,806                21,806        21,806 
Prepaid expenses and other current assets   160,511    118,645                279,156        279,156 
Total Current Assets   552,542    1,185,917    20,561,942            22,300,401        22,300,401 
Cash and marketable securities held in Trust Account       11,276,350    (11,276,350 ) (c)                 
Other assets       163,797                163,797        163,797 
Property and equipment, net   44,077                    44,077        44,077 
Intangible assets, net   1,973,859                    1,973,859        1,973,859 
In-process research and development   12,462,429                    12,462,429        12,462,429 
Goodwill   35,339,135                    35,339,135        35,339,135 
Total Assets  $50,372,042   $12,626,064   $9,285,592       $   $72,283,698   $   $72,283,698 
                                        
Liabilities and Stockholders’ Equity                                       
Current Liabilities:                                       
Accounts payable and accrued expenses  $7,063,216   $339,497   $196,998   (d), (e)   $   $7,599,711   $   $7,599,711 
Accounts payable and accrued expenses – related party   386,244        (3,064 ) (e)        383,180        383,180 
Convertible promissory note – related party       337,301    (337,301 ) (e)                 
Advances due – 180       1,379,815            (1,379,815)            
Due to related parties, net   25,187    795,003                820,190        820,190 
Loans payable   145,054                    145,054        145,054 
Loans payable – related
parties
   440,756                    440,756        440,756 
Convertible notes payable, net of discount       431,745                431,745        431,745 
Derivative liability       214,188                214,188        214,188 
Total Current Liabilities   8,060,457    3,497,549    (143,367 )      (1,379,815)   10,034,824        10,034,824 
Loans payable – non current portion   246,914                    246,914        246,914 
Convertible notes payable – non current portion   2,035,164        (1,702,664 ) (e)        332,500        332,500 
Convertible notes payable – related parties – non current portion   523,609        (253,609 ) (e)        270,000        270,000 
Deferred tax liability   3,624,036                    3,624,036        3,624,036 
Total Liabilities   14,490,180    3,497,549    (2,099,640 )      (1,379,815)   14,508,274        14,508,274 

 

2

 

 

180 LIFE SCIENCES CORP.
BUSINESS COMBINATION
Unaudited Pro Forma Condensed Combined Balance Sheet — (continued)
June 30, 2020

 

   180   KBL   Pro Forma
Adjustments
      Intercompany
Eliminations
   Pro Forma
Combined
(No
Redemption)
   Maximum
Redemption
Adjustments
   Pro Forma
Combined
(Maximum
Redemption)
 
   Note A   Note B   Note C      Note D   Note E   Note F     
Commitments and Contingencies                                      
Preferred stock, subject to redemption           3,000,000  (f)        3,000,000        3,000,000 
Common stock       4,128,507    (4,128,507) (c)                 
                                       
Stockholders’ Equity:                                      
Preferred stock                               
Common stock   8    508    2,067  (a), (d), (b), (c), (e)        2,583    4    2,587 
Additional-paid in capital   76,293,471    6,458,398    13,875,274  (a), (d), (b), (c), (e)        96,627,143    (4)   94,627,139 
Accumulated other comprehensive income   (824,158)                  (824,158)       (824,158)
Retained earnings/accumulated deficit   (39,587,459)   (1,458,898)   (1,363,602) (d)    1,379,815    (41,030,144)       (41,030,144)
Total Stockholders’ Equity   35,881,862    5,000,008    12,513,739       1,379,815    54,775,424        54,775,424 
Total Liabilities and Stockholders’ Equity  $50,372,042   $12,626,064   $9,285,592      $   $72,283,698   $   $72,283,698 

 

See notes to the unaudited pro forma condensed combined financial information.

 

3

 

 

180 LIFE SCIENCES CORP.
BUSINESS COMBINATION
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Six Months Ended June 30, 2020

 

   180   KBL   Pro Forma
Adjustments
      Pro Forma
Combined
(No
Redemption)
   Maximum
Redemption
Adjustments
   Pro Forma
Combined
(Maximum
Redemption)
 
   Note A   Note B   Note C           Note D      
Operating Expenses:                                 
Research and development  $704,800   $   $      $704,800   $   $704,800 
General and administrative – related parties   96,402               96,402        96,402 
General and administrative   1,699,859    635,631    (768,145) (a)    1,567,345        1,567,345 
Total Operating
Expenses
   2,501,061    635,631    (768,145)      2,368,547        2,368,547 
Loss From Operations   (2,501,061)   (635,631)   768,145       (2,368,547)       (2,368,547)
                                  
Other Income (Expense):                                 
Other income – related parties   240,000               240,000        240,000 
Other income   12,605               12,605        12,605 
Interest income       38,438    (38,438) (b)             
Interest expense   (325,414)   (270,257)   245,098  (b)    (350,573)       (350,573)
Interest expense – related party   (41,670)       18,365  (b)    (23,305)       (23,305)
Loss on issuance of convertible promissory note       (1,657,522)   1,657,522  (e)             
Gain on extinguishment,
net
   491,624        (491,624) (e)             
Total Other Income (Expense)   377,145    (1,889,341)   1,390,923       (121,273)       (121,273)
(Loss) Income Before Provision for Income Taxes   (2,123,916)   (2,524,972)   2,159,068       (2,489,820)       (2,489,820)
Income tax benefit (provision)   10,038    (3,827)   3,827  (c)    10,038        10,038 
Net Loss  $(2,113,878)  $(2,528,799)  $2,162,895      $(2,479,782)  $   $(2,479,782)
                                  
Loss per share:                                 
Basic  $(25.07)  $(0.57)          $(0.10)       $(0.10)
Diluted  $(25.07)  $(0.57)          $(0.10)       $(0.10)
                                  
Number of common shares outstanding                                 
Basic   84,326    4,468,714    19,515,831  (d)    23,984,545    38,557    24,023,103 
Diluted   84,326    4,468,714    19,515,831  (d)    23,984,545    38,557    24,023,103 

 

See notes to the unaudited pro forma condensed combined financial information.

 

4

 

 

180 LIFE SCIENCES CORP.
BUSINESS COMBINATION
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2019

 

   180   KBL   Pro Forma
Adjustments
      Pro Forma
Combined (No
Redemption)
   Maximum
Redemption
Adjustments
   Pro Forma
Combined
(Maximum
Redemption)
 
   Note A   Note B   Note C          Note D     
Operating Expenses:                                 
Research and development  $2,794,716   $   $      $2,794,716   $   $2,794,716 
Rental income – related parties   (170,872)              (170,872)       (170,872)
General and administrative   7,976,030    1,208,943    (672,304) (a)    8,512,669        8,512,669 
Modification of stock
award – related parties
   12,959,360               12,959,360        12,959,360 
General and
administrative – related parties
   473,425               473,425        473,425 
Total Operating
Expenses
   24,032,659    1,208,943    (672,304)      24,569,298        24,569,298 
Loss From Operations   (24,032,659)   (1,208,943)   672,304       (24,569,298)       (24,569,298)
                                  
Other Income (Expense):                                 
Gain on sale of property and equipment   1,714               1,714        1,714 
Other income, net   407,651               407,651        407,651 
Other income – related parties   552,329               552,329        552,329 
Interest income   4,039    1,374,898    (1,374,898) (b)    4,039        4,039 
Interest income – related parties   2,170               2,170        2,170 
Interest expense   (160,185)       123,112  (b)    (37,073)       (37,073)
Interest expense – related parties   (30,563)       9,604  (b)    (20,959)       (20,959)
Loss on extinguishment on convertible notes payable   (703,188)              (703,188)       (703,188)
Change in fair value of accrued issuable equity   (327,879)              (327,879)       (327,879)
Change in fair value of accrued issuable equity – related parties   (3,893,086)              (3,893,086)       (3,893,086)
Total Other Income (Expense)   (4,146,998)   1,374,898    (1,242,182)      (4,014,282)       (4,014,282)
Income (Loss) Before Provision for Income Taxes   (28,179,657)   165,955    (569,878)      (28,583,580)       (28,583,580)
Income tax benefit (provision)   20,076    (257,255)   257,255  (c)    20,076        20,076 
Net Income (Loss)  $(28,159,581)  $(91,300)  $(312,623)     $(28,563,504)  $   $(28,563,504)
                                  
Loss per share:                                 
Basic  $(281.60)  $(0.02)          $(1.22)       $(1.21)
Diluted  $(281.60)  $(0.02)          $(1.22)       $(1.21)
                                  
Number of common shares outstanding                                 
Basic   100,000    4,223,791    19,175,515  (d)    23,499,306    38,557    23,537,864 
Diluted   100,000    4,223,791    19,175,515  (d)    23,499,306    38,557    23,537,864 

 

See notes to the unaudited pro forma condensed combined financial information.

 

5

 

 

Basis of Presentation

 

The unaudited pro forma condensed combined financial information set forth herein is based upon the unaudited pro forma condensed combined financial statements of 180 and the financial statements of KBL. The unaudited pro forma condensed combined financial information is presented as if the business combination had been completed on January 1, 2019 with respect to the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2020 and for the year ended December 31, 2019 and on June 30, 2020 in respect of the unaudited pro forma condensed combined balance sheet.

 

The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the combined financial position or results of operations had the business combination occurred as of the date indicated, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that the combined company will experience after the completion of the business combination.

 

We have accounted for the business combination in these unaudited pro forma condensed combined financial statements as a reverse recapitalization, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”). In accordance with ASC 805, this is a capital transaction of 180 (the legal acquiree) and is the equivalent to the issuance of shares by 180 for the net monetary assets of KBL, accompanied by a recapitalization.

 

Pro forma adjustments reflected in the unaudited pro forma condensed combined balance sheet are based on items that are factually supportable and directly attributable to the business combination. Pro forma adjustments reflected in the pro forma condensed combined statements of income are based on items that are factually supportable, directly attributable to the business combination and are expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial information does not reflect the cost of any integration activities or benefits from the business combination, including potential synergies that may be generated in future periods.

 

Pro Forma Adjustments

 

The following pro forma adjustments give effect to the business combination.

 

Unaudited Pro Forma Condensed Combined Balance Sheet — As of June 30, 2020

 

    Note A   Derived from the unaudited pro forma condensed combined balance sheet of 180 as of June 30, 2020 included elsewhere in this proxy statement/prospectus.
         
    Note B   Derived from the unaudited condensed balance sheet of KBL as of June 30, 2020 included elsewhere in this proxy statement/prospectus.

 

Pro Forma Adjustments:

 

    Note C   (a)   To record the sale of 778,359 shares (increase in par value of $78) of KBL Common Stock at an assumed price of $10.00 per share for aggregate proceeds of $7,783,588 pursuant to a Guarantee and Commitment Agreement whereby Tyche will purchase sufficient shares of KBL Common Stock to ensure the combined entity has $5,000,001 in net tangible assets (see table further below).
             
        (b)   To give effect to the reverse recapitalization whereby KBL will issue 17,500,000 shares (adds par value of $1,750) of KBL Common Stock to the shareholders of 180 and the elimination of 85,050 shares (decrease in par value of $8) of 180 common stock.

 

6

 

 

        (c)   To give effect to (a) the reclassification from temporary equity to permanent equity of the remaining 290,595 shares (increase in par value of $29), assuming no redemption of those shares; (b) the issuance of 1,200,250 shares (increase in par value of $120) pursuant to certain KBL shareholder rights; (c) to give effect to the redemption of 106,186 shares at approximately $10.93 per share (decrease in par value of $11) for an aggregate cash pay out of $1,160,695 on July 9, 2020, and (d) to reclassify the $11,276,350 in the Trust Account to unrestricted cash.
             
        (d)   To give effect to an additional $197,500 of 180 merger expenses to be incurred subsequent to June 30, 2020 with an offset to accounts payable. Also, to eliminate KBL’s $1,458,898 accumulated deficit. Additionally, to give effect for the issuance of an additional 500,000 shares of KBL Common Stock (increase in par value of $50) to Tyche pursuant to a certain agreement upon close of the business combination.
             
        (e)   To give effect to the conversion of $1,702,664 of convertible notes and $502 of accrued interest into 419,625 shares of KBL common stock (adds par value of $42). To give effect to the conversion of $253,609 of convertible notes — related parties and $3,064 of accrued interest — related parties into 63,269 shares of KBL common stock (adds par value of $6). Furthermore, to repay $337,301 of related party convertible promissory notes upon closing of the business combination.
             
        (f)  

On June 26, 2020, the Company entered into a Securities Purchase Agreement (the “SPA”) dated June 12, 2020, whereby upon the second closing pursuant to the SPA, upon the registration statement becoming effective, as well as certain other conditions being satisfied, the Company shall have the right to have a certain investor purchase all of the authorized Series A Convertible Preferred Stock (1,000,000 shares) of the Company for an aggregate purchase price of $3,000,000.

 

The Preferred Stock shall be convertible into common stock at a conversion price of $5.28 per share at the election of the holder at any time following issuance, subject to adjustment.

 

At any time following the three month anniversary of the Business Combination, the holder of the Preferred Stock has the right to force the Company to redeem all or any portion of the Preferred Stock then owned by the holder in cash. The Series A Convertible Preferred Stock redemption features require bifurcation, however the value is indeterminable as of the date of this filing as certain of the key terms will become known at issuance. As a result, the Company did not recognize a separated component at its fair value related to the redemption features in these pro forma financial statements.

             
    Note D       To reverse $1,379,815 of bad debt allowance on 180’s books and then to eliminate the intercompany loans between 180 and KBL.
             
    Note E       The below table illustrates the allocation of ownership interests in the combined entity.

 

June 30, 2020  Number of
Shares
 
KBL outstanding shares   5,077,321 
Outstanding shares true-up   4,245 
KBL shares outstanding subject to potential redemption   396,781 
Shares issuable to 180 shareholders(1)   17,500,000 
Conversion of rights into shares of KBL   1,200,250 
Automatic conversion of debt   482,894 
Shares redeemed on July 9, 2020   (106,186)
Tyche backstop shares   778,359 
Additional Tyche shares   500,000 
    25,833,664 

 

 
(1)Certain Canadian shareholders have the ability to elect to receive Exchangeable Shares held in the form of preferred stock in 180. For pro forma purposes the Company has assumed all Exchangeable Shares have been converted into KBL Common Stock.

 

7

 

 

    Note F   To give effect to the redemption of 940,416 shares at $10.41 (subtracts $94 of par value) of common stock with an aggregate cash payment of $9,789,730 and an additional issuance of 978,973 IPO shares (adds par value of $98) of common stock at $10.00 share for aggregate gross proceeds of $9,789,730 pursuant to a Guarantee and Commitment Agreement whereby Tyche will purchase enough shares of KBL Common Stock to ensure the combined entity has $5,000,001 in net tangible assets (see table below).

 

   June 30, 2020 
   No
Redemption
   Maximum
Redemption
 
Total Assets  $72,283,698   $72,283,698 
Total Liabilities(1)   17,508,274    17,508,274 
Net Assets   54,775,424    54,775,424 
Less: Goodwill   (35,339,135)   (35,339,135)
Less: In-process research and development   (12,462,429)   (12,462,429)
Less: Other intangible assets   (1,973,859)   (1,973,859)
Tangible net assets  $5,000,001   $5,000,001 

 

 
(1)Includes preferred stock subject to redemption.

 

Unaudited Pro Forma Condensed Combined Statement of Operations For The Six Months Ended June 30, 2020

 

    Note A   Derived from the unaudited pro forma condensed combined statement of operations of 180 for the six months ended June 30, 2020 included elsewhere in this proxy statement/prospectus.
         
    Note B   Derived from the unaudited condensed statement of operations of KBL for the six months ended June 30, 2020 included elsewhere in this proxy statement/prospectus.

 

Pro Forma Adjustments:

 

    Note C   a)   To give effect to a new employment agreement whereby a new executive will receive aggregate cash compensation of $125,000 (which represents the six month effect of base year cash compensation of $250,000). Furthermore, to eliminate $893,145 of non-recurring merger related expenses.
             
        b)   To eliminate interest income derived from KBL’s investment account as the cash within the investment account would have likely been reclassified to a non-interest bearing account upon the Closing. To eliminate aggregate interest expense of $245,098 related to notes payable that will be converted upon close of the business combination. To eliminate aggregate interest expense — related party of $18,365 related to notes payable that will be converted upon close of the business combination.
             
        c)   To eliminate the KBL income tax provision as the combined entity is expected to incur a loss during the period.
             
        d)   The below table illustrates the adjustment to the weighted average shares outstanding used in the earnings per share calculations for the 17,500,000 shares of KBL Common Stock issued as consideration to the 180 stockholders, less the 1,050,000 holdback shares (6% of the 17,500,000 shares issuable to the 180 stockholders, which will be held in escrow for 12 months in order to satisfy any potential indemnification claims of KBL, plus 482,894 shares issuable upon the automatic conversion of certain convertible debt, plus the 290,595 remaining redeemable shares of KBL Common Stock reclassified from temporary equity to permanent equity, the 1,200,250 shares of KBL Common Stock issued as a result of conversion of rights, the issuance of 778,359 Tyche backstop shares, the issuance of an additional 500,000 shares pursuant to a certain agreement, less the 84,326 shares outstanding of 180 common stock. The diluted loss per share data is calculated based on net loss divided by the weighted average shares outstanding.

 

8

 

 

June 30, 2020  Weighted
Average
Number of
Shares
 
Share consideration for transaction   17,500,000 
Outstanding shares true-up   4,245 
Holdback shares   (1,050,000)
Automatic conversion of debt   482,894 
Shares redeemed on July 9, 2020   (106,186)
Reclassification from temporary equity to permanent equity   290,595 
Conversion of rights into shares of KBL   1,200,250 
Tyche backstop shares   778,359 
Additional Tyche shares   500,000 
Elimination of 180’s weighted average equity   (84,326)
Total adjustment   19,515,831 

 

        e)   To remove the effect of the loss on issuance of the convertible promissory note as well as the gain on extinguishment.
             
    Note D   To reduce weighted average shares outstanding by 940,416 shares of KBL Common Stock assuming all remaining IPO shares are redeemed. Additionally, to increase weighted average shares outstanding by 978,973 shares of KBL Common Stock issued pursuant to the Guarantee and Commitment Agreement.

 

Unaudited Pro Forma Condensed Combined Statement of Operations For The Year Ended December 31, 2019

 

    Note A   Derived from the unaudited pro forma condensed combined statement of operations of 180 for the year ended December 31, 2019 included elsewhere in this proxy statement/prospectus.
         
    Note B   Derived from the audited statement of operations of KBL for the year ended December 31, 2019 included elsewhere in this proxy statement/prospectus.

 

Pro Forma Adjustments:

 

    Note C   a)   To give effect to a new employment agreement whereby a new executive will receive aggregate cash compensation of $250,000. Furthermore, to eliminate $922,304 of non-recurring merger related expenses.
             
        b)   To eliminate interest income derived from KBL’s investment account as the cash within the investment account would have likely been reclassified to a non-interest bearing account upon the Closing. To eliminate aggregate interest expense of $132,716 related to notes payable that will be converted upon close of the business combination.
             
        c)   To eliminate the KBL income tax provision as the combined entity is expected to incur a loss during the period.
             
        d)   The below table illustrates the adjustment to the 17,500,000 weighted average shares outstanding used in the earnings per share calculations for the additional shares of KBL Common Stock issued as consideration to the 180 stockholders, less the 1,050,000 holdback shares (6% of the 17,500,000 shares issuable to the 180 stockholders, which will be held in escrow for 12 months in order to satisfy any potential indemnification claims of KBL), plus 482,894 shares issuable upon the automatic conversion of certain convertible debt, less the 173,851 shares of KBL Common Stock redeemed during 2020, the 1,200,250 shares of KBL Common Stock issued as a result of conversion of rights, the issuance of 778,389 Tyche backstop shares, the issuance of 500,000 additional Tyche shares, less the outstanding 180 common stock. The diluted loss per share data is calculated based on net loss divided by the weighted average shares outstanding

 

9

 

 

December 31, 2019  Weighted
Average
Number of
Shares
 
Share consideration for transaction   17,500,000 
Outstanding shares true-up   4,245 
Holdback shares   (1,050,000)
Automatic conversion of debt   482,894 
Reclassification from temporary equity to permanent equity   33,618 
Shares redeemed during 2020   (173,851)
Tyche backstop shares   778,359 
Additional Tyche shares   500,000 
Conversion of rights into shares of KBL   1,200,250 
Elimination of CannBioRx’s historical equity   (100,000)
Total adjustment   19,175,515 

 

    Note D   To reduce weighted average shares outstanding by 940,416 shares of KBL Common Stock assuming all remaining IPO shares are redeemed. Additionally, to increase weighted average shares outstanding by 978,973 shares of KBL Common Stock issued pursuant to the Guarantee and Commitment Agreement.

 

10

 

 

180 LIFE SCIENCES CORP.
REORGANIZATION
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2019

 

   180   CBR Pharma   180 LP   CannBioRx   Pro Forma
Adjustments
      Intercompany
Eliminations
   Pro Forma
Combined
 
   Note A   Note B   Note C   Note D   Note E      Note F      
Operating Expenses:                                      
Research and development  $1,887,402   $623,578   $283,736   $   $      $   $2,794,716 
Rental income – related parties   (25,946)   (186,688)                  41,762    (170,872)
General and administrative   5,701,705    2,284,027    882,848    1,730,334    (1,267,662) (a), (c)    (1,355,222)   7,976,030 
Modification of stock award – related parties   12,959,360                           12,959,360 
General and administrative – related parties   340,765    132,660                       473,425 
Total Operating Expenses   20,863,286    2,853,577    1,166,584    1,730,334    (1,267,662)      (1,313,460)   24,032,659 
Loss From Operations   (20,863,286)   (2,853,577)   (1,166,584)   (1,730,334)   1,267,662       1,313,460    (24,032,659)
                                       
Other Income (Expense):                                      
Gain on sale of property and equipment   1,714                           1,714 
Other income, net           407,651                   407,651 
Other income – related parties   552,329                           552,329 
Interest income   3,727    2,193                   (1,881)   4,039 
Interest income – related parties       2,170                       2,170 
Interest expense – related parties   (23,074)       (7,489)                  (30,563)
Interest expense   (162,066)                      1,881    (160,185)
Loss on extinguishment on convertible notes payable   (703,188)                          (703,188)
Change in fair value of accrued issuable equity   (327,879)                          (327,879)
Change in fair value of accrued issuable equity – related parties   (3,881,819)   (11,267)                      (3,893,086)
Total Other Income (Expense)   (4,540,256)   (6,904)   400,162                   (4,146,998)
(Loss) Income Before Provision for Income Taxes   (25,403,542)   (2,860,481)   (766,422)   (1,730,334)   1,267,662       1,313,460    (28,179,657)
Provision for income taxes   9,496                10,580  (c)        20,076 
Net Loss  $(25,394,046)  $(2,860,481)  $(766,422)  $(1,730,334)  $1,278,242      $1,313,460   $(28,159,581)
                                       
Earnings per share:                                      
Basic  $(405.52)                              $(281.60)
Diluted  $(405.52)                              $(281.60)
                                       
Number of common shares outstanding                                      
Basic   62,621                   37,379  (b)         100,000 
Diluted   62,621                   37,379  (b)         100,000 

 

See notes to the unaudited pro forma condensed combined financial information.

 

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Basis of Presentation

 

The unaudited pro forma condensed combined financial information set forth herein is based upon the financial statements of 180 (inclusive of Katexco, the accounting acquirer, plus the historical pre-Reorganization financial statements of CannBioRx, CBR Pharma and 180 LP (collectively the accounting acquirees). The unaudited pro forma condensed combined financial information is presented as if the Reorganization had been completed on January 1, 2019 with respect to the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019. No 2020 pro forma condensed combined Reorganization financial statements are presented because the June 30, 2020 financial statements of 180, included elsewhere in this proxy statement/prospectus, represent the June 30, 2020 consolidated balance sheet of 180 and the 180 Subsidiaries following the July 16, 2019 Reorganization.

 

The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the combined results of operations had the Reorganization occurred as of the date indicated, nor is it meant to be indicative of any anticipated combined future results of operations that the combined company will experience after the completion of the Reorganization.

 

We have accounted for the Reorganization using the acquisition method of accounting, in accordance with ASC 805. In accordance with ASC 805, we used our best estimates and assumptions to assign fair values to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. Goodwill as of the acquisition date was measured as the excess of the purchase consideration over the fair value of the net tangible and identifiable intangible assets acquired.

 

Pro forma adjustments reflected in the pro forma condensed combined statements of income are based on items that are factually supportable, are directly attributable to the Reorganization, and are expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial information does not reflect the cost of any integration activities or benefits from the Reorganization, including potential synergies that may be generated in future periods.

 

Pro Forma Adjustments

 

The following pro forma adjustments give effect to the Reorganization.

 

Unaudited Pro Forma Condensed Combined Statement of Operations For The Year Ended December 31, 2019

 

    Note A   Derived from the unaudited consolidated statement of operations of 180 for the year ended December 31, 2019 included elsewhere in this proxy statement/prospectus.
         
    Note B   Derived from the unaudited statement of operations of CBR Pharma for the six months ended June 30, 2019 included elsewhere in this proxy statement/prospectus, as adjusted for the results from July 1, 2019 to July 16, 2019.

 

   Six Months
Ended
June 30,
2019
   Period From
July 1, 2019
through
July 16,
2019
   Period From
January 1, 2019
through
July 16,
2019
 
   CBR Pharma   CBR Pharma   CBR Pharma 
Operating expenses (income):            
Research and development  $578,216   $45,362   $623,578 
General and administrative   2,100,806    183,221    2,284,027 
Rental income – related parties   (182,616)   (4,072)   (186,688)
General and administrative – related parties   121,734    10,926    132,660 
Loss from operations   (2,618,140)   (235,437)   (2,853,577)
Interest income   2,186    6    2,193 
Interest income – related parties   2,170        2,170 
Change in fair value of accrued issuable equity – related party   (11,249)   (18)   (11,267)
Net loss  $(2,625,033)  $(235,449)  $(2,860,481)

 

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    Note C   Derived from the unaudited statement of operations of 180 LP for the six months ended June 30, 2019 included elsewhere in this proxy statement/prospectus, as adjusted for the results from July 1, 2019 to July 16, 2019.

 

   Six Months
Ended
June 30,
2019
   Period From
July 1, 2019
through
July 16,
2019
   Period From
January 1, 2019
through
July 16,
2019
 
   180 LP   180 LP   180 LP 
Operating expenses:            
Research and development  $246,260   $37,476   $283,736 
General and administrative   824,265    58,583    882,848 
Loss from operations   (1,070,525)   (96,059)   (1,166,584)
Other income – related party   340,968    66,683    407,651 
Interest expense – related parties   (6,882)   (607)   (7,489)
Net loss  $(736,439)  $(29,983)  $(766,422)

 

    Note D   Derived from the unaudited statement of operations of CannBioRx for the six months ended June 30, 2019.

 

   Six Months
Ended
June 30,
2019
   Period From
July 1, 2019
through
July 16,
2019
   Period From
January 1, 2019
through
July 16,
2019
 
   CBR-LS   CBR-LS   CBR-LS 
Operating expenses:            
General and administrative  $1,050,000   $680,334   $1,730,334 
Loss from operations   (1,050,000)   (680,334)   (1,730,334)
Net loss  $(1,050,000)  $(680,334)  $(1,730,334)

 

Pro Forma Adjustments:

 

    Note E   a)   To eliminate $1,327,998 merger expenses.
             
        b)   To adjust the weighted average shares for the full year effect of the shares issued in the Reorganization, as if the Reorganization occurred on January 1, 2019. The weighted average shares outstanding used in the pro forma combined loss per share calculations reflect 68,571 shares of 180 common stock issued as consideration to the former stockholders of the accounting acquirees and 31,429 shares of 180 common stock issued to the former Katexco stockholders. The diluted loss per share data is calculated based on net loss divided by the weighted average dilutive shares outstanding.
             
        c)   To give effect to incremental amortization expense of $60,336 related to the technology licenses and a corresponding income tax benefit.
             
    Note F   To eliminate intercompany activity between 180, CBR Pharma, 180 LP and CannBioRx.

 

 

13