NOTE 13 - SUBSEQUENT EVENTS

The Company has evaluated events and transactions subsequent to December 31, 2023, through the date the financial statements were issued. Except for the following, there are no subsequent events identified that would require disclosure in the financial statements.

Amendments to Compensation Agreements

On January 10, 2024, and effective on January 1, 2024, the Company entered into (a) a Fourth Amendment to Amended and Restated Employment Agreement with Dr. Woody, the CEO and Director of the Company; (b) a Fourth Amendment to Employment Agreement with Dr. Rothbard, the Chief Science Officer (CSO) of the Company; (c) a Third Amendment to Consulting Agreement with Dr. Steinman, the Executive Chairman of the Company; and (d) a Second Amendment to Consulting Agreement with Prof. Sir Feldmann, the former Executive Co-Chairman of the Company (collectively, the “Amendments”), which each amended the compensation agreements then in place with such individuals (see Note 9 – Commitments and Contingencies).

Pursuant to the Amendments, each of Dr. Woody and Dr. Rothbard, effective as of January 1, 2024, agreed to a reduction of the base salaries set forth in their respective amended employment agreements, by 50%, to $245,000 per year for Dr. Woody and to $100,000 per year for Dr. Rothbard, with the amount of such salary reductions ($20,416 per month for Dr. Woody and $8,333 per month for Dr. Rothbard), accruing monthly in arrears, to be paid upon the Company raising at least $5,000,000 in funding subsequent to the date of the Amendments (the “Funding Date”), provided that in the event the Funding Date does not occur prior to March 15, 2025, the amounts accrued will be forgiven in their entirety.

Also pursuant to the Amendments, each of Dr. Steinman and Sir Feldmann, effective as of January 1, 2024, agreed to a reduction of the base salaries set forth in their respective consulting agreements, by 100%, to $0 per year for each of Dr. Steinman and Sir Feldmann, with the amount of such salary reductions ($18,750 per month or $225,000 per year, for Dr. Steinman and £14,167 per month or £170,000 per year, for Sir Feldmann), accruing monthly in arrears, to be paid on the Funding Date, provided that in the event the Funding Date does not occur prior to March 15, 2025, the amounts accrued will be forgiven in their entirety.

Granting of Extension to Regain Nasdaq Compliance

As previously disclosed in Note 10 – Stockholders’ (Deficit) Equity, the Company received a letter from Nasdaq notifying the Company that it was not in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) (the “Rule”) requires companies listed on the Nasdaq Capital Market to maintain stockholders’ equity of at least $2,500,000. On January 11, 2024, Nasdaq advised the Company that it had determined to grant the Company an extension to regain compliance with the Rule.

The terms of the extension are as follows: on or before May 13, 2024, the Company must complete certain transactions described in greater detail in the compliance plan, contemplated to result in the Company increasing its stockholders’ equity to more than $2.5 million, and opt for one of the two alternatives to evidence compliance with the Rule. Additionally, in either case the Company is required to disclose that Nasdaq will continue to monitor the Company’s ongoing compliance with the stockholders’ equity requirement and, if at the time of its next periodic report the Company does not evidence compliance, that it may be subject to delisting. Regardless of which alternative the Company chooses, if the Company fails to evidence compliance upon filing its next periodic report with the SEC following the end of such compliance period (i.e., its Quarterly Report for the Quarter ended June 30, 2024), the Company may be subject to delisting.  

Reversal of Accrued Bonuses

For the year ended December 31, 2023, the Company had a balance of $1,053,006 in accrued bonuses due to the Board of Directors for services rendered during the fiscal years 2023 and 2022; of this amount, approximately $590,000 and $460,000 relate to services rendered during the current and prior years, respectively. On January 29, 2024, it was determined during a board meeting that the Company would not be paying these bonuses and would not be awarding any bonuses during 2024; and as a result, the Company subsequently determined that this event should be recognized in the financial statements for the year ended December 31, 2023 and recorded an entry to reverse the accrued balances. This reversal is reflected in the financial statements for the year ended December 31, 2023.

D&O Insurance Lawsuit

On February 12, 2024, the judge in the Company’s pending lawsuit in the U.S. District Court Northern District of California, San Jose Division, granted a Motion for Partial Summary Judgment against AmTrust International Underwriters DAC (“AmTrust”), which was the premerger directors’ and officers’ insurance policy underwriter for the Company and the Company’s excess insurance carrier, Freedom Specialty Insurance Company (“Freedom”), and ordered as follows:

This Order applies until the final disposition of the case, but does not constitute a final judgment, and both the Company and the two insurers retain their rights to contest all applicable issues at trial, which is scheduled for May 12, 2025.

It is unclear whether the defendants will take steps to appeal this order, the outcome of any such appeal, the timing of our receipt of any funds we may receive pursuant to the order related to reimbursement of amounts related to the Securities and Commission subpoenas, if any, or such amounts that we may ultimately receive.

A final judgment following trial could potentially confirm these obligations of the insurers or, alternatively, reverse and require the Company to repay all or certain portions of such advance payments. There is no assurance at this time as to what the final judgment may entail.

Second Amendment to the 2022 Omnibus Incentive Plan

On February 16, 2024, the Company held a special meeting of its stockholders as of December 18, 2023 and approved the adoption of the Second Amendment to the 180 Life Sciences Corp. 2022 Omnibus Incentive Plan. Such amendment increased the maximum number of shares available to be issued under the Plan from 470,000 shares to 4,249,933 shares.

Special Stockholder’s Meeting/Reverse Stock Split

On February 16, 2024, the Company held a special meeting of its stockholders as of December 18, 2023 to vote on three proposals: i) approval of an amendment to the Second Amended and Restated Certificate of Incorporation to effect a reverse stock split of the issued and outstanding shares of common stock, par value $0.0001 per share, by a ratio of between one-for-four to one-for-forty, inclusive, with the exact ratio to be set at a whole number to be determined by the board of directors, ii) approval of the adoption of the Second Amendment to the 180 Life Sciences Corp. 2022 Omnibus Incentive Plan and iii) approval of the issuance of shares of common stock, $0.0001 par value per share, in excess of 19.99% of the issued and outstanding shares of common stock, upon the exercise of pre-funded warrants to purchase up to 257,205 shares of common stock, with an exercise price of $0.0019 per share; and warrants to purchase up to 954,116 shares of common stock, with an exercise price of $3.23 per share, at a price less than the minimum price as defined by and in accordance with Nasdaq Listing Rule 5635(d). All proposals were approved.

On February 16, 2024, the Company’s board of directors approved a reverse split ratio of one-for-nineteen, with any fractional shares remaining after the reverse split to be rounded up to the nearest whole share. The Company believes the split is necessary to maintain the listing of the Company’s common stock on the Nasdaq Capital Market, and to cure the Company’s current non-compliance with Nasdaq Capital Market listing rules; the board also believes that the reverse split will also improve the marketability and liquidity of the common stock.

On February 26, 2024, the Company filed a Certificate of Amendment to our Second Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware to effect the reverse stock split. Pursuant to the Certificate of Amendment, the reverse stock split was effective on February 28, 2024 at 12:01 a.m. Eastern Time (the “Effective Time”). The shares of the Company’s common stock began trading on the Nasdaq Capital Market (“Nasdaq”) on a post-split basis on February 28, 2024, with new CUSIP number: 68236V302. No change was made to the trading symbol for the Company’s shares of common stock or public warrants, “ATNF” and “ATNFW”, respectively, in connection with the reverse stock split.

New Board Members Appointed

On February 28, 2024, the Company’s Board of Directors appointed Blair Jordan as a member of the Board, and on March 7, 2024, the Company’s Board of Directors appointed Omar Jimenez and Ryan L. Smith as members of the Board. At the same time, the Board set the number of members of the Board at five members. The Board determined that Mr. Jordan, Mr. Jimenez and Mr. Smith were each independent and not party to any material plan, contract or arrangement (whether or not written) with the Company. In connection with their appointments to the Board and on February 24, 2024, March 4, 2024 and March 5, 2024, to be effective upon their appointments to the Board, the Company entered into an agreement with Mr. Jordan, Mr. Jimenez and Mr. Smith, respectively, whereby each will be paid $40,000 per year as an annual retainer fee for serving on the Board, and $10,000 per year for serving as the Chairman of the Strategic and Alternatives Committee and $15,000 per year for serving as the Lead Director (Mr. Jordan); $10,000 per year for serving as Chairman of the Audit Committee (Mr. Jimenez); and $10,000 per year for serving as the Chairman of the Compensation Committee and the Nominating and Corporate Governance Committee (Mr. Smith). The Company agreed to make an initial fee payment of $7,500 to Mr. Jordan in connection with his appointment to the Board, and subsequent fee payments quarterly in arrears, and pro-rated for partial quarters. A total of one half of such aggregate cash compensation will be accrued until such time as the Company raises an aggregate of $1 million from any source, including but not limited to debt and/or equity raises, quasi-equity raises, receipt of insurance proceeds, litigation proceeds, and corporate transactions.

Resignation of Board Member

On March 7, 2024, Sir Marc Feldmann, Ph.D. provided notice to the Board of Directors of his resignation as a member of the Board of Directors, effective on the same date. Sir Feldmann’s resignation was not the result of any disagreement with the Company relating to the Company’s operations, policies or practices, or otherwise. Prior to his resignation, Sir Feldmann served as Co-Executive Chairman of the Company but did not serve on any committees of the Board of Directors. Sir Feldmann will continue to serve as an employee of one of the Company’s subsidiaries.

Pre-Funded Warrant Exercises

During February and March 2024, the remaining additional pre-funded warrants from the Amendment to the August 2023 Offering were exercised at a price of $0.0019 per share and, as a result, the holder was issued 257,205 shares of common stock (see Note 10 – Stockholder’s (Deficit) Equity, August 2023 Offering for further details).

Nasdaq Compliance with Listing Rule 5550(a)(2) Regained

On September 7, 2023, Nasdaq staff notified the Company that its common stock failed to maintain a minimum bid price of $1.00 over the previous 30 consecutive business days as required by the Listing Rules of The Nasdaq Stock Market. Since then, the staff has determined that for the last 10 consecutive business days, from February 28 to March 12, 2024, the closing bid price of the Company’s common stock has been at $1.00 per share or greater. Accordingly, the Company has regained compliance with Listing Rule 5550(a)(2) and this matter is now closed.

Conversion of Class K Special Voting Shares

On March 12, 2024, a holder of Class K Special Voting Shares converted such shares into 14 shares of common stock of the Company in a transaction exempt from registration pursuant to Section 3(a)(9) of the Securities Act. As a result of such conversion, there are no longer any Class K Special Voting Shares.