180 Life Sciences Corp., formerly known as KBL Merger Corp. IV, has made a bold move to pivot its business strategy towards the thriving iGaming industry. Historically, the company has been focused on the development of therapeutics for unmet medical needs in chronic pain, inflammation, fibrosis, and other inflammatory diseases. However, the recent acquisition of a robust blockchain-based gaming technology platform has prompted the company to strategically reposition itself to capitalize on the rapidly growing global online gaming market.
Company Background
The company's journey began in 2016 when it was formed as a blank check company, with the goal of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination. In 2019, 180 Life Corp., a wholly-owned subsidiary of the company, was incorporated in Delaware, marking the start of the company's focus on the development of various pharmaceutical product candidates.
Over the years, 180 Life Sciences has built a diverse pipeline of three product development platforms: fibrosis and anti-tumor necrosis factor (TNF) drugs, which are derivatives of cannabidiol (CBD) or cannabigerol (CBG) analogues, selective cannabinoid agonists (SCAs), and alpha 7 nicotinic acetylcholine receptor (α7nAChR). However, due to resource constraints, the company has significantly slowed down its research and development activities in the SCA and anti-TNF platforms, while suspending further development of the α7nAChR program.
Financials and Liquidity
As of September 30, 2024, 180 Life Sciences had an accumulated deficit of $129.24 million and a working capital deficit of $5.16 million, with a net loss of $1.89 million and cash used in operating activities of $529.91K for the nine months ended September 30, 2024. These financial challenges have prompted the company to explore strategic alternatives, including the acquisition of the blockchain-based gaming technology platform, to maximize value for its shareholders.
The company's financial difficulties were not new, as it had faced early challenges in developing its biotechnology products and platforms. In 2022, the company reported significant operating losses and impairment charges related to its research and development activities, which led to liquidity issues as it struggled to raise sufficient capital to fund its operations. Despite these setbacks, the company continued to pursue its biotechnology business while exploring new opportunities for growth and value creation.
For the most recent quarter (Q3 2024), the company reported no revenue, a net loss of $836,720, and negative operating cash flow (OCF) and free cash flow (FCF) of $223,659. The company's debt-to-equity ratio stands at 0.1267, with cash reserves of $194,920 as of the latest reporting period. The current ratio and quick ratio are both 0.19, indicating potential liquidity challenges.
The company does not disclose performance by geographic markets, likely due to being a small-cap company that only sells in the US. Additionally, 180 Life Sciences does not have any available credit lines disclosed in its financial reports.
Legal Issues and Management Changes
In September 2021, 180 Life Sciences initiated legal action against its former CEO, Dr. Marlene Krauss, and two of her affiliated companies. The lawsuit alleges that Dr. Krauss engaged in unauthorized monetary transfers, non-disclosure of financial liabilities, issuing shares without authorization, and improperly allowing stockholder redemptions. This litigation is ongoing and represents a significant challenge for the company's management and governance.
In a separate but related matter, Dr. Krauss filed a lawsuit against the company in August 2021, claiming that 180 Life Sciences is obligated to advance her expenses for defending against an SEC investigation and other lawsuits. This litigation is also ongoing and adds to the company's legal complexities.
These legal issues highlight the turbulent period the company has faced in recent years and underscore the importance of its strategic pivot towards the iGaming sector as a potential path to financial stability and growth.
Strategic Pivot to iGaming
On September 29, 2024, 180 Life Sciences entered into an Asset Purchase Agreement with Elray Resources, Inc., whereby the company acquired certain source code and intellectual property relating to an online blockchain casino, known as the "Gaming Technology Platform." This acquisition marks a significant shift in the company's business strategy, as it now plans to strategically enter the online gaming industry, leveraging the newly acquired technological capabilities.
The Gaming Technology Platform includes advanced components designed to support online casinos using blockchain technology, such as a robust infrastructure for casino game programming, a seamless cryptocurrency and FIAT currency exchange system, a sophisticated API for reliable payment gateways, a secure player account management system, and a customer relationship management system to foster player loyalty and enhance lifetime value.
Management believes that the combination of the Gaming Technology Platform and the strength of 180 Life Sciences' Nasdaq listing make the company an attractive consolidation vehicle for the iGaming industry. As such, the company plans to work to identify potential acquisitions, although no specific targets exist at present.
iGaming Market Overview
The global iGaming market has experienced remarkable growth in recent years, driven by technological advancements, increased internet penetration, and evolving consumer preferences. According to a report by Statista, the global online gaming sector is estimated to reach $97 billion in 2024 and is projected to grow to nearly $133 billion by 2029. The cryptocurrency-based iGaming sector is growing even faster, with SOFTSWISS estimating growth of over 20% between 2022 and 2023 for crypto-based bets.
Geographically, Europe leads the iGaming market, accounting for over 45% of the global market share in 2022, thanks to well-established regulatory frameworks in key countries such as the UK, Malta, and Sweden. In North America, the U.S. market has seen exponential growth following the 2018 U.S. Supreme Court case that struck down the federal ban on sports betting, leading to an expansion in both online casino and sports betting offerings across multiple states. The U.S. iGaming market is projected to reach $39.8 billion by 2029, growing at a compound annual growth rate (CAGR) of 9.8%, compared to projected revenue of $25 billion in 2024.
Future Plans and Challenges
180 Life Sciences' immediate focus is on launching B2C online casino operations in high-growth international markets, leveraging the innovative blockchain technology of the Gaming Technology Platform to enhance transparency, operational efficiency, and the overall user experience. The company plans to pursue licensing in well-known and high-governance gaming jurisdictions, while evaluating a variety of games from third-party suppliers to populate the planned front-end customer interface.
Management estimates that the initial cost to fully commercialize the Gaming Technology Platform, with a license in one key jurisdiction, ten games, and an adequate marketing and administrative budget, ranges from $3 million to more than $5 million. The company currently has limited cash on hand and expects to raise additional funding through debt or equity financing to support the development and operation of this new business venture.
Despite the company's pivot towards the iGaming sector, it continues to maintain its existing biotechnology assets, including the fibrosis and anti-TNF drug platforms. However, due to resource constraints, the company has slowed down research and development activities significantly in these areas, while suspending further development of the α7nAChR program.
The company expects to require significant additional capital to fund the commercialization of its newly acquired iGaming assets, continue research and development, and cover other operating costs until it can generate sufficient revenues from its planned products and operations. The current cash balance is only expected to be sufficient to fund planned business operations until approximately December 2025, highlighting the urgent need for additional financing.
Conclusion
In conclusion, 180 Life Sciences' decision to acquire the blockchain-based Gaming Technology Platform and pivot towards the booming iGaming industry represents a bold and strategic move to capitalize on the rapidly growing global online gaming market. While the company's historical focus has been on the development of novel therapeutics, the potential opportunities in the iGaming sector have prompted a significant shift in the company's business strategy.
The company faces significant financial and operational challenges, including ongoing legal issues, limited cash reserves, and the need for substantial capital to fund its new iGaming initiatives. However, if successful, this pivot could potentially provide a path to financial stability and growth that has eluded the company in its biotechnology ventures.
Investors and stakeholders will closely watch how 180 Life Sciences navigates this transition and its ability to successfully execute on its iGaming initiatives, while also managing the continued development of its existing biotechnology assets. The coming months will be critical as the company seeks to secure necessary funding, obtain gaming licenses, and launch its online casino operations in a highly competitive and rapidly evolving market.