180 Life Sciences Corp. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Comparison of Restated Financial Statements to Financial Statements as Previously Reported

Comparison of Restated Financial Statements to Financial Statements as Previously Reported

9 Months Ended

Sep. 30, 2020

Accounting Changes and Error Corrections [Abstract]

COMPARISON OF RESTATED FINANCIAL STATEMENTS TO FINANCIAL STATEMENTS AS PREVIOUSLY REPORTED

14. COMPARISON OF RESTATED FINANCIAL STATEMENTS TO FINANCIAL STATEMENTS AS PREVIOUSLY REPORTED

In these restated financial statements and footnotes, we have added disclosure in Note 11 for previously undisclosed contingent liabilities. The following tables compare the Company's previously issued Balance Sheet, Statement of Operations, and Statement of Cash Flows as of September 30, 2020 and for the three months and nine months then ended to the corresponding restated financial statements for that period end. The adjustments that relate to the restated financial statements are:

	●	the recording of a liability for the $244,444 cash fee and the $172,248 issuance date value of the warrants due to A.G.P. related to the placement of the Dominion, Kingsbrook and Alpha Capital Anstalt convertible promissory notes and the related debt discount recorded against those convertible promissory notes; plus an additional $47,023 of related debt discount amortization; and also the related $35,149 increase in the fair value of the warrant liability as of September 30, 2020;

●

the recording of a $309,211 reduction of the beneficial conversion features associated with the convertible promissory notes and the related reduction of the debt discount;

●

the recording of a liability for the $1,454,239 of contingent legal fees that became due prior to the issuance of the September 30, 2020 financial statements during the three months ended September 30, 2020;

	●	the recording of a liability for $42,640 for valuation work that was performed during the three months ended September 30, 2020 but was unrecorded;

	●	the recording of a $124,154 reduction in the advances due to 180 as a result of a mis-posting of the transactions during the nine months ended September 30, 2020;

●

the recording of a liability for the $500,000 cash fee due to the former Chief Executive Officer in connection with the Resignation Agreement and the reapplication of a $200,000 subsequent payment to the former Chief Executive Officer against this liability, as intended, as opposed to a reduction of the March Promissory Note during the nine months ended September 30, 2020;

●

the recording of stock-based compensation during the three and nine months ended September 30, 2020 of $0 and $2,625,000, respectively, with the issuance date value of the 500,000 shares of common stock that the Company is obligated to replace with the Escrow Agent after the Escrow Agent became obligated to return 500,000 Founder Shares to the Sponsor, both as a result of the Resignation Agreement; and

●

the recording of the transfer of $2,021,705 of common stock subject to redemption (temporary equity) to common stock (permanent equity), due to the negative impact of the above adjustments on permanent equity.

The effects of the restatement on the line items within the Company's unaudited Condensed Consolidated Balance Sheet as of September 30, 2020 are as follows:

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2020
	As Originally Reported			Adjustments			As Restated

Assets
Current assets:
Cash	$	473,851		$	-		$	473,851
Restricted cash		179,014			-			179,014
Prepaid income taxes		25,633			-			25,633
Prepaid expenses		42,665			-			42,665
Total current assets		721,163			-			721,163

Marketable securities held in Trust Account		10,303,227			-			10,303,227
Total Assets	$	11,024,390		$	-		$	11,024,390

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$	358,268		$	2,041,323		$	2,399,591
Accrued issuable equity		-			207,397			207,397
March promissory note – related party		87,301			200,000			287,301
Loans payable		-			10,000			10,000
Due to related party		795,003						795,003
Advances due - 180		667,315			(124,154	)		543,161
Convertible promissory notes, net of debt discount		1,838,118			(60,458	)		1,777,660
Derivative liability		256,670			-			256,670
Total Liabilities		4,002,675			2,274,108			6,276,783

Commitments and Contingencies

Common stock subject to possible redemption		2,021,705			(2,021,705	)		-

Stockholders' Equity:
Preferred stock		-			-			-
Common stock		528			19			547
Additional paid-in capital		8,342,826			4,337,475			12,680,301
(Accumulated deficit)/Retained earnings		(3,343,344	)		(4,589,897	)		(7,933,241	)
Total Stockholders' Equity		5,000,010			(252,403	)		4,747,607
Total Liabilities and Stockholders' Equity	$	11,024,390		$	-		$	11,024,390

The effects of the restatement on the line items within the Company's unaudited Consolidated Statement of Operations for the three and nine months ended September 30, 2020 are as follows:

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Three Months Ended September 30, 2020									For the Nine Months Ended September 30, 2020
	As Originally Reported			Adjustments			As Restated			As Originally Reported			Adjustments			As Restated

General and administrative expenses	$	403,397		$	1,382,725		$	1,786,122		$	1,039,028		$	4,507,725		$	5,546,753
Loss from operations		403,397			1,382,725			1,786,122			1,039,028			4,507,725			5,546,753

Other (expense) income:
Interest expense		(1,504,319	)		(47,023	)		(1,551,342	)		(1,774,576	)		(47,023	)		(1,821,599	)
Loss on issuance of convertible promissory note		-			-			-			(1,657,522	)		-			(1,657,522	)
Interest income		266			-			266			38,704			-			38,704
Change in fair value of derivative liability and accrued issuable equity		19,177			(35,149	)		(15,972	)		19,177			(35,149	)		(15,972	)
Other (expense) income, net		(1,484,876	)		(82,172	)		(1,567,048	)		(3,374,217	)		(82,172	)		(3,456,389	)

(Loss) income before income taxes		(1,888,273	)		(1,464,897	)		(3,353,170	)		(4,413,245	)		(4,589,897	)		(9,003,142	)
Benefit (provision) for income taxes		3,827			-			3,827			-			-			-
Net (loss) income	$	(1,884,446	)	$	(1,464,897	)	$	(3,349,343	)	$	(4,413,245	)	$	(4,589,897	)	$	(9,003,142	)

Weighted average shares outstanding
Basic		5,177,321			61,901			5,239,222			4,706,640			20,784			4,727,424
Diluted		5,177,321			61,901			5,239,222			4,706,640			20,784			4,727,424

Net income (loss) per common share
Basic	$	(0.36	)	$	(0.28	)	$	(0.64	)	$	(0.94	)	$	(0.96	)	$	(1.90	)
Diluted	$	(0.36	)	$	(0.28	)	$	(0.64	)	$	(0.94	)	$	(0.96	)	$	(1.90	)

The effects of the restatement on the line items within the Company's unaudited Consolidated Statement of Cash Flows for the nine months ended September 30, 2020 are as follows:

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Nine Months Ended September 30, 2020
	As Originally Reported			Adjustments			As Restated

Cash Flows from Operating Activities:
Net (loss) income	$	(4,413,245	)	$	(4,589,897	)	$	(9,003,142	)
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Interest income earned on investments held in Trust Account		(38,704	)		-			(38,704	)
Stock-based compensation		-			2,625,000			2,625,000
Amortization on debt discount		1,658,866			47,023			1,705,889
Loss on issuance of convertible promissory notes		1,657,522			-			1,657,522
Change in fair value of the derivative liability and accrued issuable equity		(19,177	)		35,149			15,972
Changes in operating assets and liabilities:
Prepaid expenses		9,125			-			9,125
Accounts payable and accrued expenses		89,845			1,796,879			1,886,724
Net cash and restricted cash used in operating activities		(1,055,768	)		(85,846	)		(1,141,614	)

Cash Flows from Investing Activities:
Cash withdrawn from Trust Account for redemptions		1,889,579			-			1,889,579
Investment of cash in Trust Account		(276,448	)		-			(276,448	)
Net cash and restricted cash provided by investing activities		1,613,131			-			1,613,131

Cash Flows from Financing Activities:
Advances from 180		9,990			(9,990	)		-
Proceeds from loans payable		-			10,000			10,000
Repayment of advances from 180		(1,042,500	)		(114,164	)		(1,156,664	)
Proceeds from convertible promissory note – related party		33,877			-			33,877
Repayment of convertible promissory note – related party		(312,922	)		200,000			(112,922	)
Proceeds from convertible promissory notes		2,750,000			-			2,750,000
Redemptions of common stock		(1,889,579	)		-			(1,889,579	)
Net cash and restricted cash used in financing activities		(451,134	)		85,846			(365,288	)

Net Change in Cash and Restricted Cash		106,229			-			106,229
Cash and Restricted Cash – Beginning of period		546,636			-			546,636
Cash and Restricted Cash – Ending of period	$	652,865		$	-		$	652,865

Supplementary cash flow information:

Non-cash investing and financing activities:
Change in value of common stock subject to possible redemption	$	3,564,178		$	(2,021,705	)	$	1,542,473
Waiver of deferred underwriting fee	$	4,025,000		$	-		$	4,025,000
Initial classification of derivative liability in connection with issuance of convertible promissory note	$	275,847		$	-		$	275,847
Original issue discount in connection with issuance of convertible promissory note	$	305,556		$	-		$	305,556
Accrual of debt issue costs	$	-		$	416,692		$	416,692
Issuance of commitment shares and leak out shares in connection with convertible promissory notes	$	3,952,423		$	107,481		$	4,059,904