8-K: 180 Life Sciences Settles Litigation with AmTrust, Issues Stock and Cash Payment

Sentiment:

8-K Filing 9 April 2025 8:30 AM

180 Life Sciences Corp. resolves ongoing litigation with AmTrust International Underwriters DAC and AmTrust Financial Services, Inc. through a settlement involving a cash payment and issuance of common stock.

Summary

180 Life Sciences Corp. entered into a Confidential Settlement Agreement and Release with AmTrust International Underwriters DAC and AmTrust Financial Services, Inc. effective April 6, 2025.
The agreement resolves ongoing litigation and disputes related to the company's pre-merger directors and officers insurance policy.
180 Life Sciences will pay AmTrust a cash payment of $250,000 within 20 days of the effective date.
The company will also issue AmTrust Financial Services, Inc. 509,707 shares of common stock within three business days of the effective date.
The settlement shares are valued at $575,000 based on the volume-weighted average price of the company's common stock over the 30 trading days preceding the effective date.
The parties will file a joint stipulation of dismissal with prejudice of the Coverage Action within ten days after delivery of both the settlement sum and the settlement shares.
Both parties provide broad mutual releases of all claims related to the Coverage Action, SEC investigation, and related insurance matters.
180 Life Sciences will file a registration statement on Form S-1 (or Form S-3, if available) with the SEC within 45 days of the effective date to register the resale of the settlement shares.
The company will use commercially reasonable efforts to have the registration statement declared effective within 60 days following the effective date.
If the company fails to file or cause the registration statement to become effective within 105 days after the effective date, liquidated damages equal to 3.0% of the shares value will be paid for each failure and for each month such failure continues, subject to a cap of 33.0% of the shares value.

Sentiment

Score: 6

Explanation: The settlement removes uncertainty but involves cash outflow and stock dilution. The liquidated damages clause adds risk. Overall, a neutral to slightly positive development.

Positives

The settlement resolves ongoing litigation and disputes, removing uncertainty for 180 Life Sciences.
Mutual releases provide broad protection against future claims related to the Coverage Action and SEC investigation.
The agreement includes customary anti-dilution protections for the settlement shares.
The company has defined timelines for filing and effectiveness of the resale registration statement.

Negatives

The company is required to make a cash payment of $250,000.
The company is required to issue 509,707 shares of common stock, which may dilute existing shareholders.
Failure to meet registration deadlines for the resale of settlement shares results in liquidated damages.
The company is responsible for all costs associated with the resale registration statement, excluding AFSIs legal fees.

Risks

Failure to meet the deadlines for filing and effectiveness of the resale registration statement could result in significant liquidated damages.
The issuance of 509,707 shares of common stock could dilute existing shareholders.
The company's ability to file a Form S-3 registration statement is contingent on its availability.
The company is subject to potential indemnification claims if any non-party objects to the settlement terms.

Future Outlook

180 Life Sciences is obligated to file a resale registration statement and maintain its effectiveness until AmTrust no longer holds any settlement shares, with potential penalties for non-compliance.

Industry Context

Settlements of insurance disputes are common, especially involving directors and officers liability. The issuance of stock as part of a settlement is less typical but can be a way for companies to conserve cash.

Comparison to Industry Standards

The terms of the settlement, including the cash payment and stock issuance, appear to be specific to the circumstances of the litigation and the financial position of 180 Life Sciences.
Comparable companies in similar situations might negotiate different terms depending on their cash reserves, stock valuation, and the strength of their legal position.
The liquidated damages clause for registration failures is a standard protection for the recipient of unregistered shares.

Legal Proceedings

The document details the settlement of a legal dispute between 180 Life Sciences and AmTrust International Underwriters DAC and AmTrust Financial Services, Inc.

Stakeholder Impact

Shareholders may experience dilution due to the issuance of new shares.
The settlement resolves a legal uncertainty, which could be viewed positively by stakeholders.
The company's cash position will be reduced by the $250,000 payment.

Next Steps

180 Life Sciences must make the $250,000 cash payment within 20 days.
180 Life Sciences must issue 509,707 shares of common stock within three business days.
The parties must file a joint stipulation of dismissal with prejudice of the Coverage Action within ten days after delivery of both the settlement sum and the settlement shares.
180 Life Sciences must file a resale registration statement with the SEC within 45 days.
180 Life Sciences must ensure the resale registration statement becomes effective within 60 days.

Key Dates

Date	Description
2017-06-07	Policy Period of June 7, 2017 to June 7, 2018 (the Policy).
2018-06-07	Policy Period of June 7, 2017 to June 7, 2018 (the Policy).
2020-11-06	KBL Merger Corp. IV merged with 180 Life Corp.
2020-11-09	The Policy Period was subsequently extended by endorsement to expire on November 9, 2020.
2021-08-19	Dr. Marlene Krauss filed a Complaint (the Advancement Complaint) and commenced a legal action against 180 Life in the Chancery Court of Delaware
2021-09-01	180 Life filed a lawsuit against Dr. Krauss, KBL Merger Sub, and KBL Healthcare Management, Inc. in the Court of Chancery of the State of Delaware
2021-10-06	180 Life advised AmTrust that it had been served with the Counterclaim and Third-Party Complaint in the 180 Life Lawsuit, and tendered those matters to AmTrust for coverage under the Policy.
2021-12-30	AmTrust denied coverage to 180 Life for the Counterclaim and Third-Party Complaint.
2022-04-19	180 Life demanded that AmTrust provide coverage under the Policy to 180 Life for the Advancement Payments made to Mr. Hornig and Dr. Krauss in relation to the SEC Investigation (the Demand).
2022-05-04	AmTrust denied coverage to 180 Life in relation to the Demand.
2022-06-29	AmTrust filed a declaratory judgment action in the U.S. District Court for the Northern District of California, captioned AmTrust International Underwriters DAC v. 180 Life Sciences Corp., Case No. 5:22-cv-03844-BLF, which sought a declaration that no coverage is available to 180 Life under the Policy for the: (1) Counterclaim and Third-Party Complaint filed in the 180 Life Lawsuit; and (2) the Advancement Payments made to Mr. Hornig and Dr. Krauss in relation to the SEC Subpoenas (the Coverage Action).
2022-09-20	180 Life filed a Counterclaim against AmTrust in the Coverage Action, which sought coverage under the Policy for: (1) 180 Lifes Advancement Payments to Dr. Krauss and Mr. Hornig; and (2) the Defense Costs incurred by 180 Life in the defense of Dr. Krauss Counterclaim and Third-Party Complaint filed in the 180 Life Lawsuit (collectively, the 180 Life Claims).
2023-03-07	The Delaware Court in the Advancement Action granted Dr. Krausss Motion for Summary Judgment in part, and subsequently entered an Order requiring 180 Life to make certain advance payments to Dr. Krauss (the Advancement Order).
2024-02-12	The District Court in the Coverage Action ordered that AmTrust advance to 180 Life under the Policy all Defense Costs in excess of the retention threshold that 180 Life has advanced, and will advance, to Dr. Krauss and Mr. Hornig in connection with the SEC Subpoenas, subject to AmTrust being entitled to reimbursement of the amounts advanced from 180 Life if the District Court subsequently found no coverage for the Advancement Payments exists under the Policy in future proceedings.
2025-04-04	Settlement Agreement signed by 180 Life Sciences Corp.
2025-04-05	Settlement Agreement signed by AmTrust International Underwriters DAC and AmTrust Financial Services, Inc.
2025-04-06	Effective Date of the Settlement Agreement.
2025-04-26	Deadline for 180 Life Sciences to pay AmTrust the $250,000 settlement sum (20 days from the Effective Date).
2025-04-09	Deadline for 180 Life Sciences to issue 509,707 shares of common stock to AmTrust Financial Services, Inc. (three business days from the Effective Date).
2025-04-16	Deadline for filing a joint stipulated dismissal of the Coverage Action (ten days after delivery of both the settlement sum and the settlement shares).
2025-05-21	Deadline for 180 Life Sciences to file a resale registration statement with the SEC (45 days from the Effective Date).
2025-06-05	Deadline for the Resale Registration Statement to become effective (60 calendar days following the Effective Date).
2025-07-21	Deadline for the Resale Registration Statement to become effective (105 days of the Effective Date).

Keywords

settlement agreement, litigation, AmTrust, 180 Life Sciences, common stock, registration rights, SEC, insurance policy, shares, cash payment

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