UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from __________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class: | Trading Symbol(s) | Name of Each Exchange on Which Registered: | ||
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer, “smaller reporting company” and “emerging growth company” in Rule 12b-2.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
As of May 16, 2025, there were shares of Class A common stock, par value $ per share (the “Class A Common Stock”) of the registrant issued and outstanding.
FOXO TECHNOLOGIES INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025
TABLE OF CONTENTS
| 2 |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
AND OTHER INFORMATION
CONTAINED IN THIS REPORT
This Quarterly Report on Form 10-Q, or this Report, and the documents incorporated herein by reference contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which include, without limitation, statements regarding estimates and forecasts of financial and performance metrics, projections of market opportunity and market share, potential benefits and the commercial attractiveness to its customers of our products and services, the potential success of our marketing and expansion strategies, realization of the value of other aspects of our business identified in this Report, as well as other reports that we file from time to time with the Securities and Exchange Commission. Any statements about our business, financial results, financial condition and operations contained in this Report that are not statements of historical fact may be deemed to be forward-looking statements. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors.
Without limiting the foregoing, the words “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,” or similar expressions are intended to identify forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason, except as required by law, even as new information becomes available or other events occur in the future. Our actual results could differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including the risk factors described in Part I., Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which was filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 15, 2025.
Unless expressly indicated or the context requires otherwise, the terms “FOXO,” the “Company,” “we,” “us” or “our” in this Quarterly Report refer to FOXO Technologies Inc., a Delaware corporation, and, where appropriate, its subsidiaries.
| 3 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FOXO technologies inc. and subsidiaries
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Supplies | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Right-of-use assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Notes payable | ||||||||
| Related parties’ notes payable | ||||||||
| Related parties’ payables and accrued expenses | ||||||||
| Other loans | ||||||||
| Right-of-use lease obligations | ||||||||
| Total current liabilities | ||||||||
| Warrant liabilities | ||||||||
| Right-of-use lease obligations, non-current | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 14) | ||||||||
| Stockholders’ equity | ||||||||
| Series A Preferred Stock, $ par value and $ stated value per share; shares authorized, and issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Series B Preferred Stock, $ par value and $ stated value per share; shares authorized, and issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Series C Preferred Stock, $ par value and $ stated value per share; shares authorized, and issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Series D Preferred Stock, $ par value and $ stated value per share; shares authorized, and issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Class A Common Stock, $ par value, shares authorized, and shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total FOXO stockholders’ equity | ||||||||
| Noncontrolling interest | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
| 4 |
Foxo Technologies INc. and subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net revenues | $ | $ | ||||||
| Operating expenses: | ||||||||
| Direct costs of revenue | ||||||||
| Research and development | ||||||||
| Management contingent share plan | ||||||||
| Selling, general and administrative | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Change in fair value of warrant liabilities | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Gain from extinguishment of Senior PIK Notes | ||||||||
| Other non-operating expense, net | ( | ) | ( | ) | ||||
| Total non-operating income (expense), net | ( | ) | ||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net loss, including noncontrolling interest | ( | ) | ( | ) | ||||
| Noncontrolling interest | ||||||||
| Net loss attributable to FOXO | ( | ) | ( | ) | ||||
| Deemed dividends from the issuances of preferred stock and the triggers of down round provisions and extension of Assumed Warrants | ( | ) | ( | ) | ||||
| Net loss to common stockholders | ( | ) | ( | ) | ||||
| Preferred stock dividends – undeclared | ( | ) | ||||||
| Net loss to common stockholders, net of preferred stock dividends – undeclared | $ | ( | ) | $ | ( | ) | ||
| Net loss per share of Class A Common Stock, basic and diluted | $ | ) | $ | ) | ||||
| Weighted average number of shares of Class A Common Stock, basic and diluted | ||||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
| 5 |
FOXO TECHNOLOGIES INC. and subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
| Preferred | Class A Common | Additional | Total FOXO | Total | ||||||||||||||||||||||||||||||||
| Stock | Stock | Paid- | Accumulated | Stockholders’ | Noncontrolling | Stockholders’ | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | In-Capital | Deficit | Equity | Interest | Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Net loss to common stockholders | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Noncontrolling interest | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||||||||||
| Common stock issued for conversions of Series A Preferred Stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issuances of Series B Preferred Stock in exchange for Senior PIK Notes, net of finder’s fees | - | |||||||||||||||||||||||||||||||||||
| Issuance of Series C Preferred Stock for cash investment, net of finder’s fees | - | |||||||||||||||||||||||||||||||||||
| Exchanges of Series B Preferred Stock for Series C Preferred Stock | - | |||||||||||||||||||||||||||||||||||
| Common stock issued for conversions and exchanges of notes payable | - | |||||||||||||||||||||||||||||||||||
| Common stock issued under terms of notes payable | - | |||||||||||||||||||||||||||||||||||
| Common stock issuable under terms of notes payable | - | - | ||||||||||||||||||||||||||||||||||
| Common stock issued and issuable for finder’s fees | - | |||||||||||||||||||||||||||||||||||
| Shares issued under Corporate Development and Advisory Agreement | - | ( | ) | |||||||||||||||||||||||||||||||||
| Common stock issued for legal settlement | - | |||||||||||||||||||||||||||||||||||
| Deemed dividends from issuances of preferred stock and triggers of down round provisions of Assumed Warrants | - | - | ||||||||||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Preferred Stock | Common Stock (Class A) | Additional Paid- | Accumulated | Noncontrolling | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | In-Capital | Deficit | Interest | Total | |||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Net loss to common stockholders | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Stock-based compensation | - | ( | ) | |||||||||||||||||||||||||||||
| Common Stock issued to KR8 under License Agreement | - | |||||||||||||||||||||||||||||||
| Common Stock issued under Corporate Development and Advisory Agreement | - | |||||||||||||||||||||||||||||||
| Common Stock issued to MSK under Shares for Services Agreement | - | |||||||||||||||||||||||||||||||
| Common Stock Issued to employee | - | |||||||||||||||||||||||||||||||
| Warrants issued for finder’s fee | - | - | ||||||||||||||||||||||||||||||
| Deemed dividends from trigger of down round provisions and extension of Assumed Warrants | - | - | ||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
| 6 |
FOXO TECHNOLOGIES INC. and subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss, including noncontrolling interest | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Gain from extinguishment of Senior PIK Notes | ( | ) | ||||||
| Equity-based compensation, net of forfeitures | ||||||||
| Amortization of consulting fees paid in common stock | ||||||||
| Change in fair value of warrants | ( | ) | ( | ) | ||||
| Senior PIK Notes interest | ||||||||
| Amortization of debt discounts and debt issuance costs | ||||||||
| Non-cash interest expense on right-of-use lease obligations | ||||||||
| Non-cash interest on other loans | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Supplies | ( | ) | ||||||
| Prepaid expenses | ||||||||
| Other current assets | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued and other liabilities, including related parties’ payables | ( | ) | ||||||
| Other liabilities | ||||||||
| Right-of-use lease obligations | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Net cash from investing activities | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuances of notes payable, net of issuance costs | ||||||||
| Proceeds from other loans | ||||||||
| Borrowings under note payable to RHI | ||||||||
| Payments on notes payable | ( | ) | ||||||
| Payments on other loans | ( | ) | ||||||
| Proceeds from issuance of Series C Preferred Stock, net of issuance costs | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
| 7 |
Foxo technologies inc. and subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 DESCRIPTION OF BUSINESS
FOXO Technologies Inc. (“FOXO” or the “Company”), formerly known as Delwinds Insurance Acquisition Corp. (“Delwinds”), a Delaware corporation, was originally formed in April 2020 as a publicly traded special purpose company for the purpose of effecting a merger, capital stock exchange, asset acquisition, reorganization, or similar business combination involving one or more businesses.
FOXO is commercializing epigenetic biomarker technology to support groundbreaking scientific research and disruptive next-generation business initiatives. The Company applies automated machine learning and artificial intelligence (“AI”) technologies to discover epigenetic biomarkers of human health, wellness and aging and, with the acquisitions from Rennova Health Inc. (“RHI”) of Myrtle Recovery Centers, Inc. (“Myrtle”), a Tennessee corporation, effective on June 14, 2024, and Rennova Community Health, Inc. (“RCHI”), a Florida corporation, and its wholly owned subsidiary, Scott County Community Hospital, Inc. (“SCCH”), a Tennessee corporation, on September 10, 2024, the Company offers behavioral health services, including substance use disorder treatment, and operates a critical access designated hospital in Oneida, Tennessee. The acquisitions of Myrtle and RCHI are more fully discussed in Note 5.
Segments
The Company manages and classifies its business into two reportable business segments: (i) Healthcare; and (ii) Labs and Life. Previously, Labs and Life were treated as separate segments, however, with the acquisition of Myrtle in June 2024, the Company’s operational focus shifted such that it was appropriate to combine its Labs and Life segments during the second quarter of 2024 and to operate Myrtle, RCHI and SCCH under the Company’s recently formed Healthcare segment. SCCH is doing business as Big South Fork Medical Center (“BSF”).
Note 2 GOING CONCERN AND MANAGEMENT’S PLAN
Under Accounting Standards Codification (“ASC”), Presentation of Financial Statements—Going Concern (Subtopic 205-40) (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. As required by ASC 205-40, this evaluation shall initially not take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued. Management has assessed the Company’s ability to continue as a going concern in accordance with the requirement of ASC 205-40.
The Company’s history of losses requires management
to critically assess its ability to continue operating as a going concern. For the three months ended March 31, 2025 and 2024, the Company
incurred a net loss to common stockholders of $
The Company’s ability to continue as a going concern is dependent on generating revenue, raising additional equity or debt capital, reducing losses and improving future cash flows. The Company will continue ongoing capital-raising initiatives and has demonstrated previous success in raising capital to support its operations, including equity, principally preferred stock, and debt financings.
| 8 |
See Note 9 for information on promissory notes issued and outstanding during the three months ended March 31, 2025, Note 12 for information on preferred stock and common stock issued and outstanding during the three months ended March 31, 2025 and Note 16 for financing transactions entered into subsequent to March 31, 2025.
On September 20, 2022, the Company issued to certain
investors
On October 18, 2024, the Company entered into Amendment
No. 1 to the Senior PIK Notes (the “PIK Notes Amendment No. 1”). Under the PIK Notes Amendment No.1, which was approved by
the Company’s shareholders effective January 17, 2025, on January 22, 2025, the Senior PIK Notes were automatically exchanged for
shares of the Company’s newly designated Series B Cumulative Convertible Redeemable Preferred Stock (the “Series B
Preferred Stock”) with a stated value of $ per share. The Company recorded a gain from the extinguishment from the Senior PIK
Notes of $
While the transactions discussed above have improved the Company’s capital structure, until such time as it is able to generate positive cash flows from operations, it will need to obtain external sources of financing to fund its operations. There can be no assurances that such sources of financing will be available, or if available at all, on favorable terms. As such, until additional equity or debt capital is secured and the Company begins generating sufficient revenue and operating cash flows, there is substantial doubt about the Company’s ability to continue as a going concern for the one-year period following the issuance of these unaudited condensed consolidated financial statements. If the Company is unable to fund its operations, it will be required to evaluate further alternatives, which could include further curtailing or suspending its operations, selling the Company, dissolving and liquidating its assets or seeking protection under bankruptcy laws. A determination to take any of these actions could occur at a time that is earlier than when the Company would otherwise exhaust its cash resources.
These unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Note 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, these financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read in conjunction with the consolidated financial statements as filed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. In the opinion of management, the unaudited condensed consolidated financial statements included herein contain all adjustments necessary to present fairly the Company’s consolidated financial position as of March 31, 2025, and the results of its operations and changes in stockholders’ equity (deficit) for the three months ended March 31, 2025 and 2024 and its cash flows for the three months ended March 31, 2025 and 2024. Such adjustments are of a normal recurring nature. The results of operations for the three months ended March 31, 2025 may not be indicative of results for the year ending December 31, 2025.
The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with Regulation S-X of the SEC. The unaudited condensed consolidated financial statements include the accounts of FOXO and its wholly-owned and majority-owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.
| 9 |
EMERGING GROWTH COMPANY
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933 and as modified by the Jumpstart Our Business Startups Act of 2012, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, and reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make a comparison of the Company’s consolidated financial statements with another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult because of the potential differences in accounting standards used.
COMPREHENSIVE LOSS
During the three months ended March 31, 2025 and 2024, comprehensive loss was equal to the net loss to common stockholders amounts presented in the unaudited condensed consolidated statements of operations.
RECLASSIFICATIONS
The purchase of the intangible asset under the KR8 Agreement, which is defined and discussed in Note 10, was previously reflected as a use of cash in the investing activities section of the cash flow statement with the corresponding accrued liability reflected in the operating activities section of the cash flow statement for the three months ended March 31, 2024. This amount has been reclassified to the supplemental cash flow information presented in Note 15. The following table presents the effects of the reclassification for the three months ended March 31, 2024:
| Three Months Ended | ||||||||||||
| March 31, 2024 | ||||||||||||
| As Previously Presented | Adjusted | As Revised | ||||||||||
| Net cash provided by (used in) operating activities | $ | $ | ( | ) | $ | ( | ) | |||||
| Net cash used in investing activities | ( | ) | ||||||||||
| Net change in cash | $ | ( | ) | $ | $ | ( | ) | |||||
Non-cash related party payable for purchase of intangible asset | $ | $ | $ | |||||||||
| 10 |
REVERSE STOCK SPLIT
On April 17, 2025, the Company’s board
of directors (pursuant to a previously-obtained shareholder approval) approved an amendment to its Second Amended and Restated Certificate
of Incorporation, as amended (the “Charter Amendment”), to implement a
The Reverse Stock Split was effective at 4:01 p.m., Eastern Time, on April 28, 2025. Trading reopened on April 29, 2025, which is when our Class A Common Stock began trading on a post reverse stock split basis.
All share information included in these financial statements has been reflected as if the Reverse Stock Split occurred as of the earliest period presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Management evaluates these estimates and judgments on an ongoing basis and bases its estimates on experience, current and expected future conditions, third-party evaluations, and various other assumptions that management believes are reasonable under the circumstances. Significant estimates and assumptions include the estimates of fair values of assets acquired and liabilities assumed in business combinations, contractual allowances and doubtful account reserves, long-lived assets, the valuation allowance relating to the Company’s deferred tax assets, the valuations of goodwill, intangible assets, equity and derivative instruments, deemed dividends, litigation and related reserves, among others. It is reasonably possible that actual experience could differ from the estimates and assumptions utilized and would impact future results of operations and cash flows. All revisions to accounting estimates are recognized in the period in which the estimates are revised. A description of each critical estimate is incorporated within the discussion of the related accounting policies which follow.
CASH AND CASH EQUIVALENTS
The company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value. At times, cash account balances may exceed insured limits. The Company has not experienced any losses related to such accounts and believes it is not exposed to any significant credit risk on its cash and cash equivalents.
IMPAIRMENT OF GOODWILL, INTANGIBLE ASSETS AND CLOUD COMPUTING ARRANGEMENTS
The Company reviews its goodwill and intangible assets
to determine potential impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset
group may not be fully recoverable. Recoverability is measured by comparing the carrying amount of the asset group with the future undiscounted
cash flows the assets are expected to generate. Considerable management judgment is necessary to estimate future cash flows. Accordingly,
actual results could vary significantly from such estimates. If such assets are considered impaired, an impairment loss is measured by
comparing the amount by which the carrying value exceeds the fair value of the long-lived assets. At March 31, 2025 and December 31, 2024,
the Company had intangible assets and goodwill resulting from the acquisitions of Myrtle and RCHI, which more fully discussed in Note
5.
LEASES
We account for leases in accordance with Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires leases with durations greater than 12 months to be recognized on the balance sheet. We lease facilities under operating leases with a subsidiary of RHI, a related party. For operating leases with terms greater than 12 months, we record the related right-of-use assets and right-of-use obligations at the present value of lease payments over the term. We do not separate lease and non-lease components of contracts. Our operating leases are more fully discussed in Note 11.
| 11 |
REVENUE RECOGNITION POLICY
The Company recognizes revenue in accordance with ASC, “Revenue from Contracts with Customers (Topic 606),” including subsequently issued updates. Under the accounting guidance, revenues are presented net of estimated contractual allowances and estimated implicit price concessions.
Presently, its healthcare segment consists of the operations of Myrtle from its acquisition date of June 14, 2024, and of RCHI from its acquisition date of September 10, 2024.
Myrtle’s revenues relate to contracts with patients in which its performance obligations are to provide behavioral health care services to its patients. Revenues are recorded during the period its obligations to provide health care services are satisfied. Myrtle’s performance obligations for inpatient services are generally satisfied over periods averaging approximately 7 to 28 days depending on the service line, and revenues are recognized based on charges incurred. The contractual relationships with patients, in most cases, also involve third-party payers and the transaction prices for the services provided are dependent upon the terms provided by or negotiated with the third-party payers. The payment arrangements with third-party payers for the services Myrtle provides to its patients typically specify payments at amounts less than its standard charges. Services provided to patients are generally paid at prospectively determined rates per diem.
RCHI’s revenues relate to contracts with patients of BSF in which its performance obligations are to provide health care services to the patients. Revenues are recorded during the period its obligations to provide health care services are satisfied. Its performance obligations for inpatient services are generally satisfied over periods averaging approximately three days, and revenues are recognized based on charges incurred. Its performance obligations for outpatient services, including emergency room-related services, are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services it provides to the related patients typically specify payments at amounts less than our standard charges. Medicare, because of BSF’s designation as a critical access care hospital, generally pays for inpatient and outpatient services at rates related to the hospital’s costs. Services provided to patients having Medicaid coverage are generally paid at prospectively determined rates per discharge, per identified service or per covered member. Agreements with commercial insurance carriers, managed care and preferred provider organizations generally provide for payments based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates.
Laws and regulations governing Medicare and Medicaid
programs are complex and subject to interpretation. Estimated reimbursement amounts are adjusted in subsequent periods as cost reports
are prepared and filed and as final settlements are determined (in relation to certain government programs, primarily Medicare, this is
generally referred to as the “cost report” filing and settlement process). As of March 31, 2025 and December 31, 2024, $
Management continually reviews the contractual estimation process to consider the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals. Under the revenue recognition accounting guidance, revenues are presented net of estimated contractual allowances and estimated implicit price concessions. The healthcare segment’s net revenues are based upon the estimated amounts it expects to be entitled to receive from third-party payers and patients based, in part, on Medicare and Medicaid rates as discussed above as for each of Myrtle and BSF. The healthcare segment also records estimated implicit price concessions related to uninsured accounts to record self-pay revenues at the estimated amounts it expects to collect.
The collection of outstanding receivables is the healthcare segment’s primary source of operating cash and is critical to its operating performance. The primary collection risks relate to patient accounts for which the primary insurance carrier has paid the amounts covered by the applicable agreement, but patient responsibility amounts (deductibles and copayments) remain outstanding. Implicit price concessions relate primarily to amounts due directly from patients. Accounts are written off when all reasonable internal and external collection efforts have been carried out. The estimates for implicit price concessions are based upon management’s assessment of historical write offs and expected net collections, business and economic conditions and other collection indicators.
| 12 |
The Company has recorded minor amounts of revenues from its Labs and Life segment during the three months ended March 31, 2025 and 2024. The Labs and Life segment’s revenues consist of royalties based on the Company’s epigenetic biomarker research, agents’ commissions earned on the sale, servicing and placement of life insurance policies, and epigenetic testing services sold primarily to research organizations. Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company applies judgment in determining the customer’s ability and intention to pay based on a variety of factors including the customer’s historical payment experience.
CONTRACTUAL ALLOWANCES AND DOUBTFUL ACCOUNTS POLICY
In accordance with ASC, “Revenue from Contracts with Customers (Topic 606),” including subsequently issued updates, the Company does not present “allowances for doubtful accounts” on its balance sheets, rather its accounts receivable are reported at realizable value, net of estimated contractual allowances and estimated implicit price concessions (also referred to as doubtful accounts), which are estimated and recorded in the period the related revenue is recorded. ASC, “Financial Instruments Credit Losses (Topic 326),” requires that healthcare organizations estimate credit losses on a forward-looking basis taking into account historical collection and payer reimbursement experience as an integral part of the estimation process related to contractual allowances and doubtful accounts. Receivables deemed to be uncollectible are charged against the allowance for doubtful accounts after all collection efforts have ceased or the account is settled for less than the amount originally estimated to be collected. Recoveries of receivables previously written-off are recorded as credits to the allowance for doubtful accounts. Revisions to the allowances for doubtful accounts are recorded as adjustments to revenues.
During the three months ended March 31, 2025, estimated
contractual allowances and implicit price concessions of $
EQUITY-BASED COMPENSATION
In 2022, we offered equity-based compensation to employees and non-employees in the form of stock options and restricted stock. We measure and recognize all equity-based payments to employees, service providers and board members at fair value. The cost of services received from employees and non-employees in exchange for awards of equity instruments is recognized in the consolidated statements of operations based on the estimated fair value of those awards on the grant date or reporting date, if required to be remeasured, and amortized on a straight-line basis over the requisite service period. We recognize forfeitures as incurred. We utilize a Black-Scholes valuation model to estimate the fair value of stock options and this model requires the input of assumptions, including the exercise price, volatility, expected term, discount rate, and the fair value of the underlying membership or stock on the date of grant. These inputs are provided at the grant date for an equity classified award and each measurement date for a liability classified award. Equity-based compensation awards are considered granted (i) when there is a mutual understanding of key terms, (ii) we are contingently obligated to issue the options, and (iii) the option holder begins to benefit or be adversely impacted by changes in our stock price. This primarily occurs at the time the stock option agreements are executed. The fair value of each stock option is estimated using a Black-Scholes valuation model while considering the respective rights of each type of stockholder. We did not grant stock options during the three months ended March 31, 2025 and 2024 however, we had forfeitures during the three months ended March 31, 2024. We also had forfeitures of restricted stock awards during the three months ended March 31, 2024.
| 13 |
INCOME TAXES
Deferred taxes are provided on an asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company is required to analyze its filing positions open to review and believes all significant positions have a “more-likely-than-not” likelihood of being upheld based on their technical merit and, accordingly, the Company has not identified any unrecognized tax benefits.
The Company has not provided income tax benefits for the losses that it incurred in the three months ended March 31, 2025 and 2024. The Company incurred a pre-tax loss for the year ended December 31, 2024. In addition, the Company believes that its available net operating loss carryforwards would offset future taxable income, in any, for the year ended December 31, 2025. Therefore, its effective tax rates were zero for the periods presented and it has provided a full valuation allowance for its net deferred tax assets.
Net loss per share of common stock is calculated by dividing net loss to common stockholders by the weighted average number of shares of common stock outstanding during the period. The Company follows the provisions of ASC Topic 260, Earnings Per Share for determining whether outstanding shares that are contingently returnable are included for purposes of calculating net loss to common stockholders per share and determining whether instruments granted in equity-based compensation arrangements are participating securities for purposes of calculating net loss to common stockholders per share. See Note 4, Net Loss Per Share.
BUSINESS COMBINATIONS
The Company follows the guidance in ASC 805, Business Combinations for determining the appropriate accounting treatment for business acquisitions. Under ASC 805, the assets acquired, and liabilities assumed are recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The excess of the purchase prices over the aggregate fair value of the tangible assets acquired and liabilities assumed is treated as goodwill in accordance with ASC 805. During the measurement period or until valuation studies are completed, the provisional amounts used for the purchase price allocation are subject to adjustments for a period not to exceed one year from the date of acquisition. Acquisition costs are expensed as incurred. The Company has completed the valuation studies for the purchases of Myrtle and RCHI. The accounting for the acquisitions of Myrtle and RCHI are presented in Note 5.
RECENTLY ISSUED ACCOUNTING STANDARDS
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires enhanced annual disclosures for specific categories in the rate reconciliation and income taxes paid disaggregated by federal, state and foreign taxes. ASU 2023-09 is effective for public business entities for annual periods beginning on January 1, 2025. The Company adopted ASU 2023-09 effective January 1, 2025 and will apply a retrospective approach to all prior periods presented in its annual financial statements. The Company does not expect the adoption of this new standard to have a material effect on its disclosures in its annual financial statements.
In November 2024, the FASB issued ASU 2024-04, Debt with Conversions and Other Options (Subtopic 470-20), Induced Conversions of Convertible Debt Instruments. The amendments in this ASU clarify when the settlement of a debt instrument should be accounted for as an induced conversion. Under this ASU, (a) to be accounted for as an induced conversion, an inducement offer is required to preserve the form and amount of consideration issuable upon conversion in accordance with the terms of the instrument (rather than only the equity securities issuable upon conversion), (b) whether a settlement of convertible debt is an induced conversion should be assessed as of the date the inducement offer is accepted by the holder, and (c) issuers that have exchanged or modified a convertible debt instrument within the preceding 12 months (that did not result in extinguishment accounting) should use the terms that existed 12 months before the inducement offer was accepted when determining whether induced conversion accounting should be applied. The amendments in this ASU are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in ASU 2020-06. The amendments in this ASU permit an entity to apply the new guidance on either a prospective or a retrospective basis. The Company has not yet determined the impact of the adoption of this ASU on its consolidated financial statements.
Other recent accounting standards issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
The Company excluded the effect of the and shares related to the Management Contingent Share Plan outstanding and not vested as of March 31, 2025 and 2024, respectively, from the computation of basic and diluted net loss per share for the three months ended March 31, 2025 and 2024, as the conditions to trigger the vesting of the such shares had not been satisfied as of March 31, 2025 and 2024. The Management Contingent Share Plan is more fully described in Note 14 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2024.
| 14 |
| 2025 | 2024 | |||||||
| Net loss attributable to FOXO | $ | ( | ) | $ | ( | ) | ||
| Deemed dividends from the issuances of preferred stock and the triggers of down round provisions and extension of Assumed Warrants | ( | ) | ( | ) | ||||
| Net loss to common stockholders | ( | ) | ( | ) | ||||
| Preferred stock dividends – undeclared | ( | ) | ||||||
Net loss to common stockholders, net of preferred stock dividends – undeclared | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted weighted average number of shares of Class A Common Stock | ||||||||
| Basic and diluted net loss per share available to Class A Common Stock | $ | ) | $ | ) | ||||
| March 31, 2025 | March 31, 2024 | |||||||
| Preferred stock | ||||||||
| Public and private warrants | ||||||||
| Assumed Warrants | ||||||||
| Convertible notes payable | ||||||||
| Finder’s warrants | ||||||||
| Stock options | ||||||||
| Total antidilutive shares | ||||||||
At March 31, 2025, in addition to the common stock equivalents listed in the table above, the Company has agreed to issue: (i) up to additional shares of its Class A Common Stock under the terms of a legal settlement as more fully discussed in Notes 14 and 16, (ii) an aggregate of shares of its Class A Common Stock under the terms of outstanding notes payable, which are discussed in Note 9, and (iii) shares of its Class A Common Stock for finder’s fees, which are discussed in Notes 9 and 12. See Note 16 regarding the Company’s Class A Common Stock and common stock equivalents issued and issuable subsequent to March 31, 2025.
Note 5 ACQUISITIONS AND STOCK EXCHANGE AGREEMENTS
On June 10, 2024, the Company entered into two stock exchange agreements, each with RHI.
Acquisition of Myrtle Under First Stock Exchange Agreement
The first agreement, as supplemented (the “Myrtle
Agreement”), provided for RHI to exchange all of its equity interest in Myrtle for $
| 15 |
Myrtle was formed in the second quarter of 2022 to pursue opportunities in the behavioral health sector, including substance use disorder treatment, initially in rural markets. Services are provided on either an inpatient, residential basis or an outpatient basis.
On August 10, 2023, Myrtle was granted a license by the Department of Mental Health and Substance Abuse Services of Tennessee to operate an alcohol and drug treatment facility in Oneida, Tennessee. The facility, which is located at BSF’s campus, commenced operations and began accepting patients on August 14, 2023. The facility offers alcohol and drug residential detoxification and residential rehabilitation treatment services for up to 30 patients. On November 1, 2023, Myrtle began accepting patients at its Nonresidential Office-Based Opiate Treatment Facility (“OBOT”). The OBOT is located adjacent to Myrtle’s alcohol and drug treatment facility in Oneida, Tennessee and complements the existing residential rehabilitation and detoxification services offered at Myrtle.
Myrtle has been granted two licenses from the Tennessee Department of Mental Health and Substance Abuse Services, effective August 1, 2024, for 12 months. The first license authorizes the provision of services for alcohol and drug residential detoxification treatment, as well as alcohol and drug residential rehabilitation treatment. The second license authorizes the provision of services for non-residential office-based opiate treatment.
On April 11, 2023, Myrtle sold shares of its common
stock equivalent to a
Acquisition of RCHI and Its Subsidiary SCCH Under the Second Stock Exchange Agreement with RHI, as Amended and Restated
The second agreement with RHI,
also dated June 10, 2024, (the “RCHI Agreement”) provided for the RHI to exchange all of the outstanding shares of its subsidiary
RCHI, including SCCH, for shares of the Company’s then to be authorized Series A Cumulative Convertible Redeemable Preferred Stock (“the Series
A Preferred Stock”). Closing of the RCHI Agreement was subject to a number of conditions. On September 10, 2024, the parties to
the RCHI Agreement entered into an Amended and Restated Securities Exchange Agreement (the “RCHI SEA”), which revised the
consideration payable to RHI from shares of FOXO Series A Preferred Stock to $
The RCHI Note was guaranteed by the Company and SCCH, pursuant to the terms of a Guaranty Agreement (the “Guaranty”). The RCHI Note was also secured by the assets of RCHI and Scott County pursuant to a Security and Pledge Agreement (the “RCHI Pledge Agreement”) and by the “Collateral” owned by the Company as provided in the Security and Pledge Agreement with FOXO (the “FOXO Pledge Agreement”). The Amendment also provided that RHI may at any time request that the Company seek approval of its shareholders of the issuance of its Class A Common Stock upon conversion in full of the shares of the Company’s Series A Preferred Stock issuable upon exchange of the RCHI Note. At any time after receipt of such approval, RHI had the option to exchange, in whole or in part, the RCHI Note for shares of the Company’s Series A Preferred Stock. Upon any such exchange, RHI would receive the equivalent of $ stated value of the Company’s Series A Preferred Stock for each $ of the aggregate of principal and accrued and unpaid interest, liquidated damages and/or redemption proceeds (or any other amounts owing under the RCHI Note) being exchanged.
On December 5, 2024, the Company and RCHI entered into an Exchange Agreement
(the “Exchange Agreement”) with RHI. Pursuant to the Exchange Agreement, $
| 16 |
As previously discussed in Note 1, RCHI’s wholly-owed subsidiary, SCCH, does business as BSF. BSF is a critical access hospital located in Oneida, Tennessee consisting of a 52,000-square foot hospital building and 6,300-square foot professional building on approximately 4.3 acres. BSF has 25 inpatient beds and a 24/7 emergency department and provides ancillary services, including laboratory, radiology, respiratory and pharmacy services. The hospital became operational on August 8, 2017 and it became designated as a critical access hospital (rural) in December 2021, retroactive to June 30, 2021.
Appointment of Members of the Board of Directors, Chief Executive Officer and Chairman of the Board of Directors
In connection with the acquisition of RCHI, on September 10, 2024, Mr. Seamus Lagan, a member of the board of directors and the Chief Executive Officer and Interim Chief Financial Officer of RHI, and Mr. Trevor Langley, a member of the board of directors of RHI, were appointed to the Company’s board of directors. On December 5, 2024, Mr. Lagan was appointed the Company’s Chief Executive Officer. On March 12, 2025, Mr. Langley became Chairman of the Company’s Board of Directors, replacing Brett Barnes who remains an independent member of the Board.
Lease Agreements Between Myrtle and RHI and SCCH and RHI
Myrtle entered into a lease agreement with a subsidiary
of RHI under which Myrtle agreed to lease facilities at BSF’s campus beginning June 14, 2024. The lease is for a term of
On June 1, 2024, SCCH entered into a “triple
net” lease agreement with a subsidiary of RHI under which SCCH agreed to lease the BSF hospital facilities. The lease is for a term
of one year with five annual options to renew for an additional year with an initial monthly base rental amount of $
These leases are accounted for as right-of-use assets and liabilities as more fully discussed in Note 11.
The purchase consideration payable to RHI under the terms of the Myrtle Agreement and the RCHI SEA Amendment was allocated to the net tangible and intangible assets acquired and liabilities assumed. The Company accounted for the acquisitions as business combinations under U.S. GAAP. In accordance with the acquisition method of accounting under ASC Topic 805, “Business Combinations,” (“ASC 805”), the assets acquired and liabilities assumed were recorded as of the acquisition dates, at their respective fair values and consolidated with those of the Company.
The Company has undertaken valuation studies to determine
the fair values of the assets acquired. Based on the studies that were prepared by an independent valuation firm, the assets acquired,
net of liabilities assumed, were ($
| 17 |
The following table shows the allocations of the purchase prices of Myrtle and RCHI to the identifiable assets acquired and liabilities assumed on their respective acquisition dates:
| Myrtle | RCHI | |||||||
| Total purchase price | $ | $ | ||||||
| Tangible and Intangible assets acquired, and liabilities assumed at fair value: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Supplies | ||||||||
| Prepaid expenses | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets | ||||||||
| Right-of-use lease assets | ||||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Right-of-use lease liabilities | ( | ) | ||||||
| Note payable | ( | ) | ( | ) | ||||
| Other loan | ( | ) | ||||||
| Noncontrolling interest | ||||||||
| Assets acquired, net of liabilities assumed | $ | ( | ) | $ | ( | ) | ||
| Goodwill | $ | $ | ||||||
In addition to the purchase prices listed above, the
Company incurred acquisition costs consisting of $
The following presents the unaudited pro-forma combined results of operations of the Company, Myrtle and RCHI as if the acquisitions of Myrtle and RCHI occurred on January 1, 2024.
| Three Months Ended | ||||
| March 31, | ||||
| 2024 | ||||
| Net revenues | $ | |||
| Net loss, attributable to FOXO | $ | ( | ) | |
| Deemed dividends | ( | ) | ||
| Net loss to common stockholders | ( | ) | ||
| Preferred stock dividends - undeclared | ( | ) | ||
| Net loss to common stockholders, net of preferred stock dividends - undeclared | $ | ( | ) | |
| Net loss per share: | ||||
| Basic and diluted net loss per share available to Class A Common Stock | $ | ) | ||
| Basic and diluted weighted average number of shares of Class A Common Stock | ||||
The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the acquisitions of Myrtle and RCHI been completed as of January 1, 2024 or to project potential operating results as of any future date or for any future periods.
| 18 |
Note 6 ACCOUNTS RECEIVABLE, NET
Accounts receivable at March 31, 2025 and December 31, 2024 were as follows:
March 31, 2025 | December 31, 2024 | |||||||
| Accounts receivable, gross | $ | $ | ||||||
| Less: | ||||||||
| Allowance for contractual obligations | ( | ) | ( | ) | ||||
| Allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
Note 7 INTANGIBLE ASSETS, NET AND GOODWILL
The components of intangible assets, net at March 31, 2025 and December 31, 2024 were as follows:
March 31, 2025 | December 31, 2024 | |||||||
| Tradenames | $ | $ | ||||||
| Licenses and permits | ||||||||
| Customer relationships | ||||||||
| Epigenetic APP | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
The tradenames, licenses and permits and customer relationships intangible assets resulted from the acquisitions of Myrtle and RCHI, which are more fully discussed in Note 5. The tradenames and licenses and permits assets have indefinite lives and the customer relationships is being amortized over three years.
The Company recognized
amortization expense on its intangible assets of $
Goodwill
Goodwill was $
Note 8 ACCRUED EXPENSES
At March 31, 2025 and December 31, 2024, accrued expenses consisted of the following:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Accrued payroll and related liabilities | $ | $ | ||||||
| Accrued severance | ||||||||
| Accrued interest | ||||||||
| Accrued legal expenses and settlements | ||||||||
| Medicare cost report settlement reserves | ||||||||
| Other accrued expenses | ||||||||
| Accrued expenses | $ | $ | ||||||
| 19 |
Included in accrued payroll
and related liabilities totaling $
Related parties’ payables and accrued expenses are presented in Note 10.
Note 9 DEBT
At March 31, 2025 and December 31, 2024, debt consisted of the following:
March 31, 2025 | December 31, 2024 | |||||||
| Notes payable – third parties | $ | $ | ||||||
| Notes payable – related parties | ||||||||
| Other loans | ||||||||
| Total debt | ||||||||
| Less current portion of debt | ( | ) | ( | ) | ||||
| Total debt, net of current portion | $ | $ | ||||||
Notes Payable – Third Parties
At March 31, 2025 and December 31, 2024 notes payable with third parties consisted of the following:
March 31, 2025 | December 31, 2024 | |||||||
| Senior PIK Notes in the aggregate principal amount of $ | $ | $ | ||||||
| Silverback/Western Note Payable | ||||||||
| ClearThink Notes in the aggregate principal amount of $ | ||||||||
| LGH notes payable in the aggregate principal amount of $ | ||||||||
| IG notes payable in the aggregate principal amount of $ | ||||||||
| 1800 Diagonal notes payable in the aggregate principal amount of $ | ||||||||
| Red Road note payable in the principal amount of $ | ||||||||
| Lucas Ventures notes payable in the aggregate principal amount of $ | ||||||||
| JSC notes payable in the aggregate principal amount of $ | ||||||||
| Vista Capital note payable in the principal amount of $ | ||||||||
| Total third-party notes payable | ||||||||
| Less current portion of third-party notes payable | ( | ) | ( | ) | ||||
| Total third-party notes payable, net of current portion | $ | $ | ||||||
| 20 |
15% Senior PIK Notes
On September 20, 2022, the Company entered into separate
Securities Purchase Agreements with accredited investors pursuant to which the Company issued its Senior PIK Notes in the aggregate principal
amount of $
The Senior PIK Notes bore interest at
As
noted, as of December 31, 2024, the Senior PIK Notes were in default and the Company did not have the financial ability to correct this
default. To resolve the default of the Senior PIK Notes and transition the Senior PIK Note from debt to equity, the Company asked the
Senior PIK Note holders to consider certain amendments to their Notes. On October 18, 2024, the Company received the approval of over
As a result of the automatic
exchange, during the three months ended March 31, 2025, the Company recorded a gain from extinguishment of Senior PIK Notes of $
| 21 |
Silverback/Western Note Payable
The Company assumed a promissory note payable to Western
Healthcare, LLC (the “Western Note Payable”) that was owed by SCCH at the time of the acquisition of RCHI. The acquisition
is discussed in Note 5. As of December 31, 2024, the principal balance owed was $
In February 2025, the
Western Note Payable was sold to a new holder, Silverback Capital Corporation (“Silverback”) and it was amended and
restated. Per the terms of the amendment and restatement, the principal balance of the note, which includes previously accrued
interest expense, was $
Notes Payable to ClearThink Capital Partners, LLC
During
the year ended December 31, 2024, the Company issued six promissory notes to ClearThink Capital Partners, LLC (“ClearThink”).
On January 3, 2024, the Company issued ClearThink a promissory note in the principal amount of $
On January 30, 2024, the
Company issued ClearThink a promissory note in the principal amount of up to $
On May 15, 2024, the Company
issued ClearThink a promissory note in the principal amount of $
On August 16, 2024, the Company
issued ClearThink a promissory note in the principal amount of $
On November 20, 2024 and
December 31, 2024, the Company issued ClearThink promissory notes each in the principal amount of $
During the three months ended
March 31, 2025, the Company issued two additional promissory notes to Clear Think. On January 28, 2025 and March 7, 2025, the Company
issued ClearThink promissory notes each in the principal amount of $
| 22 |
The
January 30, 2024 and August 16, 2024 notes have interest rates of
During the three months ended March 31, 2025 and 2024,
the Company received net cash proceeds from the ClearThink notes of $
Securities Purchase Agreements Dated April 28, 2024 and November 15, 2024 with LGH Investments
On April 28, 2024, the Company
entered into a Securities Purchase Agreement with LGH Investments, LLC, a Wyoming limited liability company (“LGH”), pursuant
to which the Company issued to LGH a convertible promissory note in the principal amount of $
On November 15, 2024, the
Company entered into a second Securities Purchase Agreement with LGH pursuant to which the Company issued to LGH a second convertible
promissory note in the principal amount of $
During
the three months ended March 31, 2025, the Company recorded $
| 23 |
Securities Purchase Agreements Dated April 30, 2024, December 24, 2024 and March 4, 2025 with IG Holdings, Inc.
On April 30, 2024, the Company
entered into a Securities Purchase Agreement with IG Holdings, Inc., an Arizona corporation (“IG”), pursuant to which the
Company issued IG a promissory note in the principal amount of $
On December 24, 2024, the
Company entered into a second Securities Purchase Agreement with IG pursuant to which the Company issued to IG a second convertible promissory
note in the principal amount of $
On March 4, 2025, the Company
entered into a third Securities Purchase Agreement with IG pursuant to which the Company issued to IG a third convertible promissory note
in the principal amount of $
During
the three months ended March 31, 2025, $
1800 Diagonal Lending LLC Notes Payable Dated July 22, 2024 and Security Purchase Agreements Dated November 18, 2024, January 21, 2025 and February 24, 2025
On July 22, 2024, the
Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending LLC (“1800 Diagonal”) pursuant to which
the Company issued to 1800 Diagonal a promissory note dated July 22, 2024 in the principal amount of $
| 24 |
On November 18, 2024, the
Company entered into a Securities Purchase Agreement with 1800 Diagonal pursuant to which 1800 Diagonal agreed to purchase a second promissory
note dated November 18, 2024, which is discussed below, as well as additional tranches of financings of up to $
On
November 18, 2024, the Company issued to 1800 Diagonal a promissory note in the principal amount of $
On
January 21, 2025, the Company issued to 1800 Diagonal a promissory note in the principal amount of $
On
February 24, 2025, the Company issued to 1800 Diagonal a promissory note in the principal amount of $
During the three months ended
March 31, 2025, interest expense on the 1800 Diagonal notes, including amortization of the debt discounts, totaled $
Securities Purchase Agreement with Red Road Holdings Corporation Dated October 7, 2024
On
October 7, 2024, pursuant to a Securities Purchase Agreement, the Company issued a promissory note to Red Road Holdings Corporation
(“Red Road”) in the principal amount of $
| 25 |
Securities Purchases Agreements with Lucas Ventures Dated November 18, 2024 and February 14, 2025
On November 18, 2024, the
Company entered into a Securities Purchase Agreement with Lucas Ventures LLC, (“Lucas Ventures”) pursuant to which the
Company issued to Lucas Ventures a convertible promissory note in the principal amount of $
Convertible Promissory Notes with Jefferson Street Capital LLC Under January 7, 2025 Securities Purchase Agreements
On January 7, 2025, the
Company entered into a Securities Purchase Agreement with Jefferson Street Capital LLC (“JSC”) pursuant to which the
Company agreed to issue to JSC convertible promissory notes in the principal amount of up to $
Pursuant to the Securities Purchase Agreement discussed
above, on January 7, 2025, the Company issued to JSC a convertible promissory note in the principal amount of $
Pursuant to the Securities Purchase Agreement discussed
above, on March 6, 2025, the Company issued to JSC a second convertible promissory note in the principal amount of $
| 26 |
During the three months ended March 31, 2025, $
Securities Purchase Agreement with Vista Capital Investment, LLC
On February 27, 2025, the Company
entered into a Securities Purchase Agreement with Vista Capital Investment, LLC, (“Vista Capital”) pursuant to which the
Company issued to Vista Capital a convertible promissory note in the principal amount of $
Finder’s Fee Agreement
Under the terms of a Finder’s
Fee Agreement dated October 9, 2023, the Company was obligated to pay the finder a cash fee equal to
| 27 |
Notes Payable – Related Parties
At March 31, 2025 and December 31, 2024 notes payable with related parties consisted of the following:
March 31, 2025 | December 31, 2024 | |||||||
| Poole Note, dated September 19, 2023 | $ | $ | ||||||
| Additional Poole Note | ||||||||
| Sponsor loan | ||||||||
| Note payable to RHI for the acquisition of Myrtle | ||||||||
| Note payable to RHI in connection with the acquisition of Myrtle in the original principal amount of $ | ||||||||
| New RCHI Note for the acquisition of RCHI | ||||||||
| Total related parties’ notes payable | ||||||||
| Less current portion of related parties’ notes payable | ( | ) | ( | ) | ||||
| Total related parties’ notes payable, net of current portion | $ | $ | ||||||
Poole Note
On September 19, 2023, the Company obtained a $
Additional Poole Note
On October 2, 2023, the Company obtained a $
Sponsor Loan
In order to finance transaction costs in connection with a business combination effective on September 15, 2022, a sponsor or an affiliate of the sponsor loaned Delwinds (a predecessor of the Company) funds for working capital.
Note Payable to RHI for the Acquisition of Myrtle
Pursuant to the acquisition of Myrtle as more fully
discussed in Note 5, the Company issued a non-interest bearing note payable to RHI in the amount of $
Note Payable to RHI In Connection with Myrtle Acquisition
The note payable to RHI dated
June 13, 2024, in the original principal amount of $
RCHI Note and New RCHI Note Issued In Connection with the RCHI Acquisition
In connection with the acquisition
of RCHI, which is more fully discussed in Note 5, RCHI issued the RCHI Note to RHI, the terms of which are more fully discussed in Note
5.
| 28 |
Other Loans
At March 31, 2025 and
December 31, 2024, the Company had outstanding $
Note 10 RELATED PARTY TRANSACTIONS
At March 31, 2025 and December 31, 2024, related parties’ payable and accrued expenses consisted of the following:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Accounts payable to Andrew Poole | ||||||||
| Accounts payable to InnovaQor | ||||||||
| Rent payable to a subsidiary of RHI | ||||||||
| Accounts payable to RHI | ||||||||
| Accrued interest on related parties’ notes payable (Note 9) | ||||||||
| Director fees payable | ||||||||
| Related parties’ payables and accrued expenses | $ | $ | ||||||
In addition to the transactions discussed in Notes 5, 9, 11 and 12, the Company had the following related party activity during the three months ended March 31, 2025 and 2024:
Management, License and Maintenance Fees Under the KR8 Agreement
On October 29, 2023, the Company entered into a Letter Agreement with KR8 to develop a Direct-to-Consumer APP (iOS and Android) combining its AI Machine Learning technology to provide a commercial application of FOXO’s epigenetic biomarker technology as a subscription consumer engagement platform. Effective January 12, 2024, the Letter Agreement was replaced with the Master Software and Services Agreement between the Licensor and the Company (the “KR8 Agreement”). The Company’s Director, Mark White, and Interim CFO, Martin Ward, each are equity owners of the Licensor. Under the KR8 Agreement, the Licensor granted to the Company a limited, non-sublicensable, non-transferable perpetual license to use the “Licensor Products,” which are listed in Exhibit A to the KR8 Agreement, to develop, launch and maintain license applications based upon the Company’s epigenetic biomarker technology and software to develop an AI machine learning Epigenetic APP to enhance health, wellness and longevity. The territory of the KR8 Agreement is solely within the U.S., Canada and Mexico.
Under the KR8 Agreement, the Company agreed to pay
to the Licensor an initial license and development fee of $
| 29 |
The Company could terminate the KR8 Agreement at any time upon 90 days’ notice to the Licensor provided that, as a condition to such termination, the Company immediately ceases using any Licensor Products. The Licensor could terminate the KR8 Agreement at any time upon 30 days’ notice to the Company if the Company failed to pay any portion of the “Initial License Fee,” as defined in the KR8 Agreement.
During the three months ended March 31, 2024, under
the terms of the KR8 Agreement, the Company issued shares of its Class A Common Stock to the Licensor valued at $
On December 6, 2024, the
Company entered into a termination agreement (the “KR8 Termination Agreement”) with KR8 pursuant to which shares of
the Company’s Series D Cumulative Convertible Redeemable Preferred Stock (the “Series D Preferred Stock’) with a stated
value of $
Services Agreement with Former Interim CEO
On July 25, 2024, the Company
entered into a new Services Agreement with Mr. White that superseded the interim employment agreement (the “Services Agreement”).
The initial term of the Services Agreement was until July 31, 2026. Pursuant to the Services Agreement, Mr. White was entitled to monthly
fees of $
On December 5, 2024, the Company entered into a Termination of Employment, Settlement and Mutual Release Agreement (the “White Termination Agreement”) pursuant to which the Services Agreement was terminated. The agreement provided for the following:
| ● | Payment of $ | |
| ● | Appointment of Mr. White as sole director and Chief Executive Officer of FOXO Labs; a wholly owned subsidiary of the Company and execution of an employment agreement between Mr. White and FOXO Labs providing a base salary of $ | |
| ● | The issuance to Mr. White of a promissory note by the Company in the principal amount of $ |
During
the three months ended March 31, 2025, the Company paid $
| 30 |
Other Related Party Activity
RCHI and SCCH contracted with InnovaQor, Inc. (“InnovaQor”)
to provide ongoing health information technology-related services totaling approximately $
Note 11 RIGHT-OF-USE LEASE ASSETS AND LIABILITIES
As discussed in Note 5, the Company leases facilities for its Myrtle and RCHI operations under operating leases with a subsidiary of RHI. For operating leases with terms greater than 12 months, including annual options that are expected to be renewed, the Company records the related right-of-use assets and right-of-use liabilities at the present value of lease payments over the terms.
The Company uses an estimated borrowing interest rate at lease commencement as its interest rate, as its operating leases do not provide a readily determinable implicit interest rate.
The following table presents the Company’s lease-related assets and liabilities at March 31, 2025 and December 31, 2024:
| Balance Sheet Classification |
March 31, 2025 |
December 31, 2024 | ||||||||
| Assets: | ||||||||||
| Operating leases | Right-of-use lease assets | $ | $ | |||||||
| Liabilities: | ||||||||||
| Current: | ||||||||||
| Operating leases | Right-of-use lease liabilities | $ | $ | |||||||
| Noncurrent: | ||||||||||
| Operating leases | Right-of-use lease liabilities | |||||||||
| Total right-of-use lease liabilities | $ | $ | ||||||||
| Weighted average remaining term of operating leases, including option periods expected to renew | ||||||||||
| Discount rate | % | |||||||||
The following table presents certain information related to lease expense for the right-of-use operating leases for the three months ended March 31, 2025 and 2024:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Right-of-use operating leases amortization (1) | $ | $ | ||||||
| Right-of-use operating leases interest expense (2) | $ | |||||||
| (1) | |
| (2) |
| 31 |
The following table presents supplemental cash flow information for the three months ended March 31, 2025 and 2024:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating cash flows for right-of-use operating leases | $ | $ | ||||||
Aggregate future minimum lease payments under right-of-use operating leases are as follows:
| Right-of-Use Operating Leases | ||||
| Twelve months ending: | ||||
| March 31, 2026 | $ | |||
| March 31, 2027 | ||||
| March 31, 2028 | ||||
| March 31, 2029 | ||||
| March 31, 2030 | ||||
| Thereafter | ||||
| Total | ||||
| Less interest | ( | ) | ||
| Present value of minimum lease payments | ||||
| Less current portion of right-of-use lease liabilities | ( | ) | ||
| Right-of-use lease liabilities, net of current portion | $ | |||
Note 12 STOCKHOLDERS’ EQUITY
Authorized Capital
The Company’s authorized shares of all capital stock, par value $ per share, of shares, consisting of (i) shares of preferred stock and (ii) shares of Class A Common Stock.
Preferred Stock
The Amended and Restated Certificate of Incorporation authorizes the Company to issue shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of March 31, 2025, the Company had outstanding shares of preferred stock consisting of shares of its Series A Preferred Stock, shares of its Series B Preferred Stock, shares of its Series C Cumulative Convertible Redeemable Preferred Stock (the “Series C Preferred Stock”) and shares of its Series D Preferred Stock The Company’s outstanding shares of preferred stock do not contain mandatory redemption or other features that would require them to be presented on the balance sheet outside of equity and, therefore, they qualify for equity accounting treatment. See Note 16 Subsequent Events.
Conversions of Series A Preferred Stock
No shares of Series A Preferred Stock were issued
during the three months ended March 31, 2025. During the three months ended March 31, 2025, the Company issued shares of its Class
A Common Stock to institutional investors upon conversions of shares of their Series A Preferred Stock with stated values totaling
$
During the three months ended March
31, 2025, the Company recorded $
| 32 |
Series A Preferred Stock Designation
On October 16, 2024, the Company’s board of
directors approved the designation of shares of Series A Preferred Stock. Each share of Series A Preferred Stock shall have a par
value of $ per share and a stated value equal to $ per share. Terms of the Series A Preferred Stock include: (i) dividends
at
Series B Preferred Stock
On January 22, 2025, the Company issued
shares of its Series B Preferred Stock under the automatic exchange of its Senior PIK Notes, as more fully discussed in Note 9.
The Company recorded a finder’s fee of $
Series B Preferred Stock Designation
On November 27, 2024, the Company authorized up to
shares of its Series B Preferred Stock. Each share of Series B Preferred Stock shall have a par value of $ per share and a
stated value equal to $ per share. Terms of the Series B Preferred Stock include: (i) dividends at
Series C Preferred Stock
During the three months ended March 31, 2025, the
Company issued shares of its Series C Preferred Stock to an investor for net cash proceeds of $
| 33 |
Series C Preferred Stock Designation
On November 27, 2024, the Company
authorized up to shares of its Series C Preferred Stock. Each share of Series C Preferred Stock shall have a par value of
$ per share and a stated value equal to $ per share. Terms of the Series C Preferred Stock include: (i) dividends at
Series D Preferred Stock
shares of Series D Preferred Stock were issued
or converted during the three months ended March 31, 2025 and as noted below, there are no dividends on the Series D Preferred Stock.
As of March 31, 2025, the total stated value of the Series D Preferred Stock of $
Series D Preferred Stock Designation
On December 6, 2024, the Company authorized up to
shares of its Series D Preferred Stock. Each share of Series D Preferred Stock shall have a par value of $ per share and
a stated value equal to $ per share. Terms of the Series C Preferred Stock include: (i) no dividends, (ii) no voting rights, expect
as in regards to any changes related to the Series D Preferred Stock, and (iii) conversion into shares of the Company’s Class A
Common Stock at the higher of $ per share or
Class A Common Stock
As of March 31, 2025 and December 31, 2024, there were and shares of the Company’s Class A Common Stock issued and outstanding, respectively.
Common Stock Issued to KR8 under KR8 Agreement
During the three months ended March 31, 2024, the Company issued shares of its Class A Common Stock pursuant to the KR8 Agreement, which is more fully discussed in Note 10.
October 13, 2023 Strata Purchase Agreement
On October 13, 2023, the Company entered into a Strata
Purchase Agreement (the “Strata Purchase Agreement”) with ClearThink, as supplemented by that certain Supplement to Strata
Purchase Agreement, dated as of October 13, 2023, by and between the Company and ClearThink. Pursuant to the Strata Purchase Agreement,
after the satisfaction of certain commencement conditions, including, without limitation, the effectiveness of the Registration Statement,
ClearThink has agreed to purchase from the Company, from time to time upon delivery by the Company to ClearThink of request notices, and
subject to the other terms and conditions set forth in the Strata Purchase Agreement, up to an aggregate of $
| 34 |
Common Stock Issued to MSK Under Shares for Services Agreement
On September 19, 2023, the Company entered into a Shares for Services Agreement with Mitchell Silberberg & Knupp LLP, a service provider (“MSK”). Pursuant to the Shares for Services Agreement, during the three months ended March 31, 2024, the Company issued MSK shares of its Class A Common Stock in full satisfaction of its obligation to MSK under the Shares for Services Agreement.
Common Stock Issued Under Corporate Development Advisory Agreements
On March 5, 2024, the Company
issued shares of its Class A Common Stock to Tysadco Partners valued at $
Common Stock Issued/Issuable in Connection with Notes Payable
During the three months ended
March 31, 2025, the Company issued shares of its Class A Common Stock for conversions and exchanges of $
Common Stock Issued to Smithline
During the three months ended March 31, 2025, the Company issued shares of its Class A Common Stock in connection with a legal settlement, which is more fully discussed in Note 14 under the heading, “Smithline Family Trust II vs. FOXO Technologies Inc. and Jon Sabes.”
Common Stock Issued to J.H. Darbie & Co., Inc.
During the three months ended March 31, 2025, the Company issued shares of its Class A Common Stock to J.H. Darbie & Co., Inc. (“J.H. Darbie”) for advisory services and private placement engagement as follows:
Advisory Services
On July 25, 2024, FOXO entered into the advisory agreement with J.H. Darbie pursuant to which J.H. Darbie was engaged as nonexclusive financial adviser. The term of the agreement was six months. As compensation for the services performed under the agreement, the Company issued J.H. Darbie shares of its Class A Common Stock effective January 13, 2025.
Private Placement Engagement
On July 25, 2024, FOXO engaged
J.H. Darbie, on an exclusive basis, to provide services in connection with private placements (the “Engagement”). The term
of the Engagement was 120 days, subject to early termination provisions in the Engagement. Under the Engagement, J.H. Darbie has a right
of first refusal for all financing, cash, common stock or convertible securities, debt or equity, for six months after the termination
of the Engagement. As compensation for the services performed under the Engagement, the Company issued to J. H. Darbie shares of
its Class A Common Stock effective in January 2025. As additional compensation for the services to be rendered by J.H. Darbie under the
Engagement, FOXO agreed to (i) pay a cash fee to J.H. Darbie equal to
On November 7, 2024, FOXO
and J.H. Darbie entered into an amendment to the Engagement pursuant to which the compensation for the services to be rendered by J.H.
Darbie was revised to a cash fee equal to $
| 35 |
Finder’s Fee Agreement
On October 9, 2023, the Company entered into the Finder’s
Agreement, by and between the Company and the finder. Pursuant to the Finder’s Agreement the Company agreed to pay the Finder a
cash fee equal to
Finder’s Warrants Amendment to Finder’s Agreement
Pursuant to the terms of the Finder’s Agreement,
discussed above, and in connection with a private placement of the Company’s Class A Common Stock under the Strata Purchase Agreement
during the three months ended December 31, 2023, the Company issued or was obligated to issue to the Finder
On August 22, 2024, the Company
entered into an amendment to the Finder Agreement (the “Amended Finder’s Agreement”) in which the Company agreed to
issue to the Finder shares of its Class A Common Stock for the termination of all the Finder’s common stock warrants and
outstanding cash fees owed as of that date.
Warrants
Public Warrants and Private Placement Warrants
As of March 31, 2025 and December 31, 2024, the Company
had outstanding
| 36 |
Assumed Warrants
Effective September 15, 2022, the Company consummated
a business combination. At the closing of the business combination, the Company assumed warrants, referred to as the Assumed Warrants.
The Assumed Warrants included down round provisions that should the Company issue common stock or common stock equivalents, excluding
certain exempt issuances, for consideration of less than the then exercise price per share, then the exercise price of the Assumed Warrants
shall be lowered to the new consideration amount on a per share basis with a simultaneous and corresponding increase in the number of
warrants. As a result of a triggering event in 2023, as of December 31, 2023,
On February 23, 2024,
As a result of two additional triggers of the down
round provisions during the remainder of 2024, as of December 31, 2024, the Assumed Warrants were exercisable into
During February 2025, three additional triggers of
the down round provisions of the Assumed Warrants occurred as a result of two conversions of Series A Preferred Stock into the Company’s
Class A Common Stock and the conversion prices of the Company’s preferred stock on February 23, 2025. The incremental value of the
modifications to the Assumed Warrants as a result of the triggers of the down round provisions during February 2025 resulted in deemed
dividends of $ million in the three months ended March 31, 2025. The incremental values were measured using the Black Scholes valuation
model with the following assumptions: risk free rates ranging from % to %, volatility ranging from % to , terms of
to days and expected dividend yield of $. On February 23, 2025, the
Note 13 BUSINESS SEGMENTS
The Company manages and classifies its business into
| ● | Healthcare - The Company’s healthcare segment began with the acquisition of Myrtle on June 14, 2024 and includes RCHI, which was acquired on September 10, 2024. Each of these acquisitions is more fully discussed in Note 5. Myrtle offers behavioral health services, primarily substance use disorder treatments and services that are provided on either an inpatient, residential basis or an outpatient basis. RCHI’s hospital, BSF, has 25 inpatient beds, and a 24/7 emergency department and provides ancillary services, including laboratory, radiology, respiratory and pharmacy services. BSF is designated as a Critical Access Hospital (rural) hospital. | |
| ● | Labs and Life - The Company’s Labs and Life segment is commercializing proprietary epigenetic biomarker technology. The Company’s innovative biomarker technology enables the adoption of new saliva-based health and wellness biomarker solutions. The Company’s research demonstrates that epigenetic biomarkers, collected from saliva, provide measures of individual health and wellness for the factors used in life insurance underwriting traditionally obtained through blood and urine specimens. |
The primary income measure used for assessing segment performance and making operating decisions is income (losses) before interest, income taxes, and depreciation and amortization not associated with a specific segment. The segment measure of profitability also excludes corporate and other costs, including management, IT, overhead costs and certain other non-cash charges or benefits, such as impairment and any non-cash changes in fair value.
| 37 |
With the acquisition of Myrtle on June 14, 2024, our Chief Operating Decision Maker (“CODM”) begun to consider segment assets when making decisions and allocating resources. Assets by segment as of March 31, 2025 and December 31, 2024 were as follows:
March 31, 2025 | December 31, 2024 | |||||||
| Healthcare | $ | $ | ||||||
| Labs and Life | ||||||||
| Corporate and other | ||||||||
| Total assets | $ | $ | ||||||
Summarized below is information about the Company’s operations for the three months ended March 31, 2025 and 2024 by business segment:
| Revenues | Earnings/(Losses) | |||||||||||||||
Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||||||||
| Healthcare | $ | $ | $ | ( | ) | $ | ||||||||||
| Labs and Life | ( | ) | ( | ) | ||||||||||||
| ( | ) | ( | ) | |||||||||||||
| Corporate and other (a) | ( | ) | ||||||||||||||
| Interest expense | - | - | ( | ) | ( | ) | ||||||||||
| Total | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
| (a) |
Note 14 COMMITMENTS AND CONTINGENCIES
The Company accrues costs associated with certain contingencies, including, but not limited to, settlement of legal proceedings, regulatory compliance matters and self-insurance exposures when such costs are probable and reasonably estimable. In addition, the Company records legal fees in defense of asserted litigation and regulatory matters as such legal fees are incurred. To the extent it is probable that the Company is able to recover losses and legal fees related to contingencies, it records such recoveries concurrently with the accrual of the related loss or legal fees. Significant management judgment is required to estimate the amounts of such contingent liabilities. In the Company’s determination of the probability and ability to estimate contingent liabilities, it considers the following: litigation exposure based on currently available information, consultations with external legal counsel and other pertinent facts and circumstances regarding the contingency. Liabilities established to provide for contingencies are adjusted as further information develops, circumstances change, or contingencies are resolved; and such changes are recorded in the condensed consolidated statements of operations during the period of the change and appropriately reflected in the condensed consolidated balance sheets.
Legal Proceedings
Smithline Family Trust II vs. FOXO Technologies Inc. and Jon Sabes
On November 18, 2022, Smithline filed a complaint against the Company and Jon Sabes, the Company’s former Chief Executive Officer and a former member of the Company’s board of directors, in the Supreme Court of the State of New York, County of New York.
| 38 |
On November 7, 2023, Smithline and the Company and its subsidiaries entered into the Settlement Agreement, pursuant to which the parties agreed to resolve and settle all disputes and potential claims which exist or may exist among them, including without limitation those claims asserted in the Action, as more specifically set forth in, and subject to the terms and conditions of, the Settlement Agreement. Upon the execution of the Settlement Agreement, the parties agreed to jointly dismiss the legal action without prejudice.
On May 28, 2024, the Company, entered
into an Exchange Agreement, as amended, with Smithline, terminating on February 23, 2025, pursuant to which Smithline exchanged Assumed
Warrants to purchase up to
Former CEO Severance
The Company has disclosed in previous financial filings that the Board of Directors had yet to complete its review into whether Mr. Jon Sabes, a former CEO of the Company was terminated with or without cause on November 14, 2022 and that accordingly, the Company had to make a determination on its obligations under the former CEO’s employment agreement.
The Board of Directors has now completed a review of this matter in the last quarter of 2024 and upon examination of the history and various documents and records, determined that Mr. Sabes was unequivocally terminated for cause on November 14, 2022, meaning the Company has no further obligation to Mr. Sabes.
On November 20, 2024, the Company received a letter from counsel for Mr. Jon Sabes, the former Chief Executive Officer and director, demanding payment of certain compensation and benefits. Regardless that the Company has now determined that termination of Mr. Sabes employment on November 14, 2022 was for cause and that no obligation to Mr. Sabes remains, the Company has, because of this demand, retained certain liabilities of severance pay and stock-based compensation in the financial records until the matter has been resolved in full. The Company does not believe the demand received on November 20, 2024 has any merit and will vigorously dispute any claim for payment.
Disputed Severance Policy
A proposed severance policy was drafted in early 2023
with an effective date of January 9, 2023. However, neither the Company’s board of directors nor its remuneration committee approved
the policy. If adopted the policy would have applied to all exempt level vice presidents and above employees across various departments.
It provided for a six-month salary pay out if the employee, while in good standing, was involuntarily separated from the Company. If the
policy were valid, five former employees would have met the guidelines to receive the severance aggregating approximately $
| 39 |
Illumina Judgment
On June 21, 2024, Hennepin County District Court granted
Illumina, Inc.’s Motion for Summary Judgment in the amount of $
Senior PIK Notes
In July 2024, John Nash and Mitchell
Kersch, two holders of promissory notes, which we refer to as Senior PIK Notes, filed legal actions against the Company for approximately
$
The Company is also party to various other legal proceedings, for legacy debts of the Company, claims, and regulatory, tax or government inquiries and investigations that arise in the ordinary course of business, and the Company may in the future be subject to additional legal proceedings and disputes.
Note 15 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The supplemental cash flow information for the three months ended March 31, 2025 and 2024 is as follows:
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Non-cash investing and financing activities: | ||||||||
| Related party payable for purchase of intangible asset | $ | $ | ||||||
| Class A Common Stock issued to KR8 for purchase of intangible asset under KR8 Agreement | $ | $ | ||||||
| Series B Preferred Stock issued in exchange for note payable, net of finder’s fees | $ | $ | ||||||
| Deemed dividends from issuances of preferred stock and triggers of down round provisions and extension of Assumed Warrants | $ | $ | ||||||
| Preferred stock dividends – undeclared | $ | $ | ||||||
| Warrants issuable for finder’s fees in connection with promissory notes | $ | $ | ||||||
| Class A Common Stock issued for legal settlement | $ | $ | ||||||
| Class A Common Stock issued for conversions and exchanges of notes payable | $ | $ | ||||||
| Class A Common Stock issued/issuable under the terms of notes payable | $ | $ | ||||||
| Common stock issuable to finder for finder’s fees | $ | $ | ||||||
Note 16 SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated financial statements were issued. Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the accompanying consolidated financial statements.
Smithline Share Issuances
The Company continues to issue shares
of its Class A Common Stock to Smithline under the Exchange Agreement, as amended, which is fully described in Note 14. The Company issued
shares of its Class A Common Stock to Smithline during the period April 1, 2025 to May 16, 2025, for a $
Issuances of Series A Preferred Stock to Institutional Investor
Subsequent to March 31, 2025, pursuant to Securities Purchase Agreements, the Company issued shares of its Series A Preferred Stock, which are more fully discussed in Note 12, as follows:
| ● | On April 4, 2025, the
Company issued shares of its Series A Preferred Stock to an institutional investor and received gross cash proceeds of $ | |
| ● | On April 15, 2025, the Company
issued shares of its Series A Preferred Stock to an institutional investor and received gross cash
proceeds of $ | |
| ● | On May 8, 2025, the Company issued shares of its Series A Preferred Stock to an institutional investor and received gross cash proceeds of $ | |
| ● | On May 19, 2025, the Company issued shares
of its Series A Preferred Stock to an institutional investor and received gross cash proceeds of $ |
Amended and Restated Strata Purchase Agreement
On May 15, 2025, the Company amended and restated the Strata Purchase Agreement that was previously entered into between the Company and ClearThink Capital Partners, LLC., to extend the maturity date to June 30, 2026 and improve and simplify the Purchase Price to define the price per share of Common Stock purchased shall equal 90% of the average of the two (2) lowest daily VWAP during the Valuation Period.
Amendments to Series B Preferred Stock and Series C Preferred Stock Certificates of Designation
On May 15, 2025, the Company amended the certificates of designation of its Series B and Series C preferred stock to remove an automatic conversion at 24 months after issuance to ensure the shares are treated as equity on the Company’s balance sheet.
| 40 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to the “Company,” “FOXO,” “us,” “our” or “we” refer to FOXO Technologies Inc. and its consolidated subsidiaries. The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity, capital resources and cash flows of our Company as of and for the periods presented below. You should read the following discussion of our financial condition and results of operations in conjunction with the unaudited condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC. In addition to our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below. We undertake no obligation to update publicly any forward-looking statements for any reason, except as required by law, even as new information becomes available or events occur in the future.
Formation
We were formed as a limited liability company on November 11, 2019, following our separation from GWG Holdings, Inc. We were previously named InsurTech Holdings, LLC and FOXO BioScience LLC. On November 13, 2020, FOXO Bioscience LLC completed a conversion to a C Corporation and became FOXO.
Effective September 15, 2022, we consummated our previously announced business combination pursuant to the Merger Agreement, whereby DWIN Merger Sub Inc. merged with and into Legacy FOXO, with Legacy FOXO surviving as a wholly-owned subsidiary of the Company. Upon consummation of our business combination, our name changed from Delwinds Insurance Acquisition Corp. to FOXO Technologies Inc.
Overview
We are a healthcare services and technology company operating in two reportable business segments: (i) Healthcare; and (ii) Labs and Life. These segments further operate in three synergistic divisions, a rural hospital division, a mental and behavioral health division, which together make up our Healthcare segment and an epigenetics diagnostics and interpretation division, which makes up our Labs segment. Our rural hospital division and our epigenetics diagnostics and interpretation division operate through wholly owned subsidiaries, and our behavioral health division operates through a majority-owned subsidiary.
Previously, Labs and Life were treated as separate segments; however, with the acquisition of Myrtle in June 2024, which is more fully discussed below, the Company’s operational focus shifted such that it was appropriate to combine our Labs and Life segments during the second quarter of 2024 and to operate Myrtle in the newly formed Healthcare segment. Our Healthcare segment also includes RCHI, and its wholly-owned subsidiary, SCCH which were acquired on September 10, 2024, as more fully discussed below.
| 41 |
Our Business Segments
Healthcare Segment
Myrtle offers behavioral health services, primarily substance use disorder treatments and services that are provided on either an inpatient, residential basis or an outpatient basis. RCHI’s hospital, SCCH, doing business as BSF, has 25 inpatient beds, and a 24/7 emergency department and provides ancillary services, including laboratory, radiology, respiratory and pharmacy services. BSF is designated as a Critical Access Hospital (rural) hospital.
Labs and Life Segment
Our Labs and Life segment is commercializing epigenetic biomarker technology to support groundbreaking scientific research and disruptive next-generation business initiatives. It applies automated machine learning and artificial intelligence (“AI”) technologies to discover epigenetic biomarkers of human health, wellness and aging.
Recent and Other Developments
Reverse Stock Split
On April 17, 2025, the Company’s board of directors (pursuant to a previously-obtained shareholder approval) approved an amendment to its Second Amended and Restated Certificate of Incorporation, as amended (the “Charter Amendment”), to implement a 1-for-10 reverse stock split, such that every 10 shares of Common Stock will be combined into one issued and outstanding share of Common Stock, with no change in the $0.0001 par value per share (the “Reverse Stock Split”).
The Reverse Stock Split was effective at 4:01 p.m., Eastern Time, on April 28, 2025. Trading reopened on April 29, 2025, which is when our Class A Common Stock began trading on a post reverse stock split basis. All share information included in this report has been reflected as if the Reverse Stock Split occurred as of the earliest period presented.
Stock Exchange Agreements Dated June 10, 2024
On June 10, 2024, the Company entered into two stock exchange agreements, each with RHI as follows:
Acquisition of Myrtle Under First Stock Exchange Agreement
The first agreement, as supplemented (the “Myrtle Agreement”), provided for RHI to exchange all of its equity interest in Myrtle for $0.5 million, payable in a combination of shares of the Company’s Class A Common Stock and a note payable. The closing occurred effective on June 14, 2024. The Company recorded a non-interest bearing note payable due on demand to RHI in the amount of $0.3 million and it paid the remaining purchase price of $0.2 million by issuing 102,363 shares of its Class A Common Stock to RHI on July 17, 2024. In addition to the $0.3 million promissory note issued to RHI for a portion of the purchase price of Myrtle, Myrtle issued a promissory note payable to RHI dated June 13, 2024, in the original principal amount of $1.6 million, which represented the amount owed to RHI by Myrtle at the time of the sale of Myrtle to the Company.
Myrtle was formed in the second quarter of 2022 to pursue opportunities in the behavioral health sector, including substance use disorder treatment, initially in rural markets. Services are provided on either an inpatient, residential basis or an outpatient basis.
| 42 |
On August 10, 2023, Myrtle was granted a license by the Department of Mental Health and Substance Abuse Services of Tennessee to operate an alcohol and drug treatment facility in Oneida, Tennessee. The facility, which is located at BSF’s campus, commenced operations and began accepting patients on August 14, 2023. The facility offers alcohol and drug residential detoxification and residential rehabilitation treatment services for up to 30 patients. On November 1, 2023, Myrtle began accepting patients at its Nonresidential Office-Based Opiate Treatment Facility (“OBOT”). The OBOT is located adjacent to Myrtle’s alcohol and drug treatment facility in Oneida, Tennessee and complements the existing residential rehabilitation and detoxification services offered at Myrtle.
Myrtle has been granted two licenses from the Tennessee Department of Mental Health and Substance Abuse Services, effective August 1, 2024, for 12 months. The first license authorizes the provision of services for alcohol and drug residential detoxification treatment, as well as alcohol and drug residential rehabilitation treatment. The second license authorizes the provision of services for non-residential office-based opiate treatment.
On April 11, 2023, Myrtle sold shares of its common stock equivalent to a 1.961% ownership stake in Myrtle for a de minimis value to an unaffiliated individual licensed as a physician in Tennessee. The shares have certain transfer restrictions, including the right of the subsidiary to transfer the shares to another physician licensed in Tennessee for de minimis value. The shares were sold to the individual for Tennessee healthcare regulatory reasons.
Acquisition of RCHI and Its Subsidiary SCCH Under the Second Stock Exchange Agreement with RHI, as Amended and Restated
The second agreement with RHI, also dated June 10, 2024, (the “RCHI Agreement”) provided for the RHI to exchange all of the outstanding shares of its subsidiary RCHI, including RCHI’s wholly-owned subsidiary Scott County Community Hospital, Inc. (“SCCH”), for 20,000 shares of the Company’s to be authorized Series A Cumulative Convertible Redeemable Preferred Stock (the “Series A Preferred Stock”). Closing of the RCHI Agreement was subject to a number of conditions. On September 10, 2024, the parties to the RCHI Agreement entered into an Amended and Restated Securities Exchange Agreement (the “Amendment”) which revised the consideration payable to RHI from shares of Series A Preferred Stock to $100. In addition, RCHI issued to the RHI a senior secured note in the principal amount of $22.0 million the “RCHI Note”) (subject to adjustment). The RCHI Note had a maturity date of September 10, 2026 and accrued interest on any outstanding principal amount at the rate of 8% per annum for the first six months, increasing to 12% per annum thereafter. After maturity, interest accrued at a rate of 20% per annum. The RCHI Note required principal repayments equal to 10% of the free cash flow (net cash from operations less capital expenditures) from RCHI and SCCH.
The RCHI Note was guaranteed by the Company and SCCH, pursuant to the terms of a Guaranty Agreement (the “Guaranty”). The RCHI Note was also secured by the assets of RCHI and Scott County pursuant to a Security and Pledge Agreement (the “RCHI Pledge Agreement”) and by the “Collateral” owned by the Company as provided in the Security and Pledge Agreement with FOXO (the “FOXO Pledge Agreement”). The Amendment also provided that RHI may at any time request that the Company seek approval of its shareholders of the issuance of its Class A Common Stock upon conversion in full of the shares of the Company’s Series A Preferred Stock issuable upon exchange of the RCHI Note. At any time after receipt of such approval, RHI had the option to exchange, in whole or in part, the RCHI Note for shares of the Company’s Series A Preferred Stock. Upon any such exchange, RHI would receive the equivalent of $1.00 stated value of the Company’s Series A Preferred Stock for each $1.00 of the aggregate of principal and accrued and unpaid interest, liquidated damages and/or redemption proceeds (or any other amounts owing under the RCHI Note) being exchanged. On December 5, 2024, the Company and RCHI entered into an Exchange Agreement (the “Exchange Agreement”) with RHI. Pursuant to the Exchange Agreement, $21.0 million of the principal balance of the RCHI Note was exchanged for 21,000 shares of the Company’s Series A Preferred Stock with a stated value of $21.0 million. Upon the closing of the Exchange Agreement, RCHI executed a senior secured promissory note payable to RHI (the “New RCHI Note”) in the principal amount of $1.0 million, with similar terms to the RCHI Note.
| 43 |
BSF is a critical access hospital located in Oneida, Tennessee consisting of a 52,000-square foot hospital building and 6,300-square foot professional building on approximately 4.3 acres. BSF has 25 inpatient beds and a 24/7 emergency department and provides ancillary services, including laboratory, radiology, respiratory and pharmacy services. The hospital became operational on August 8, 2017 and it became designated as a critical access hospital (rural) in December 2021, retroactive to June 30, 2021.
FOXO acquired Myrtle and RCHI as synergistic opportunities to expand its operations into the healthcare sector and as a complement to its epigenetic biomarkers of human health, wellness and aging.
Termination of Employment, Settlement and Mutual Release Agreement
On July 25, 2024, we entered into an amended Services Agreement with Mark White, our former interim chief executive officer, (the “Services Agreement”).
On December 5, 2024, we entered into a Termination of Employment, Settlement and Mutual Release Agreement (the “White Termination Agreement”) pursuant to which the Services Agreement is to be terminated.
KR8 Termination Agreement
On December 6, 2024, we entered into the Termination Agreement with KR8, pursuant to which 3,000 shares of our Series D Preferred Stock (as defined below) (the “KR8 Shares”) were issued to KR8 as full and final satisfaction of approximately $3.0 million owed to KR8 and the Master Software and Services Agreement with KR8 dated January 12, 2024, as amended (the “MSSA”), was terminated (the “KR8 Termination Agreement”). The Series D Preferred Stock have no voting rights and conversion to common stock by KR8 is subject to relevant approvals from NYSE and shareholders. The Termination Agreement closed on December 6, 2024. Effective December 6, 2024, the Company and KR8 entered into Amendment No. 1 to the KR8 Termination Agreement, which clarifies that the KR8 Termination Agreement did not terminate the MSSA but terminated the financial obligations of the Company under the MSSA.
Current Business Strategy
Myrtle Recovery Centers, Inc.
Myrtle was formed in the second quarter of 2022 to pursue opportunities in the behavioral health sector, including substance abuse treatment, initially in rural markets. Services are provided on either an inpatient, residential basis or an outpatient basis.
Myrtle was granted a license by the Department of Mental Health and Substance Abuse Services of Tennessee to operate an alcohol and drug treatment facility in Oneida, Tennessee. The facility, which is located at BSF’s campus, commenced operations and began accepting patients on August 14, 2023. The facility offers alcohol and drug residential detoxification and residential rehabilitation treatment services for up to 30 patients. On November 1, 2023, Myrtle began accepting patients at its OBOT. The OBOT is located adjacent to Myrtle’s alcohol and drug treatment facility in Oneida, Tennessee and complements the existing residential rehabilitation and detoxification services offered at Myrtle. On April 11, 2023, Myrtle sold shares of its common stock equivalent to a 1.961% ownership stake in the subsidiary for de minimis value to an unaffiliated individual licensed as a physician in Tennessee. The shares have certain transfer restrictions, including the right of the subsidiary to transfer the shares to another physician licensed in Tennessee for de minimis value. The shares were sold to the individual for Tennessee healthcare regulatory reasons
We plan to expand the Myrtle business model by acquiring additional operating facilities and by replicating the model in other rural hospital properties or suitable premises.
Rennova Community Health, Inc.
RCHI’s wholly-owned subsidiary, SCCH, is an east Tennessee based Critical Access Designated (“CAH”) 25-bed hospital licensed by the state of Tennessee, offering quality healthcare services for Oneida and the surrounding areas. SCCH is doing business as Big South Fork Medical Center (“BSF”). BSF consists of a 52,000-square foot hospital building and 6,300-square foot professional building on approximately 4.3 acres. BSF has 25 inpatient beds, and 24/7 emergency department and provides ancillary services, including laboratory, radiology, respiratory and pharmacy services. The hospital became operational on August 8, 2017 and it became designated as a Critical Access Hospital (rural) hospital in December 2021, retroactive to June 30, 2021. The hospital first opened in late 1955 and was known as Scott County Community Hospital. The hospital has been operated by RCHI since August 2017.
| 44 |
We plan to grow this division by acquisition and investment in new operations in targeted areas.
FOXO Labs
In response to changing conditions and feedback from the market, including growing demand for direct-to-consumer wellness testing and epigenetic data analysis tools, we are concentrating our efforts on: (1) our Bioinformatics Services offering, a suite of bioinformatic tools to help researchers process, analyze, and interpret epigenetic data; and (2) research and development in the fields of health and wellness testing powered by machine learning and artificial intelligence (including a potential AI platform for the delivery of health and well-being data-driven insights to individuals, healthcare professionals and third-party service providers). To further these goals, we intend to leverage the extensive epigenetic data we have generated in our clinical trials and the expertise of our team and continue building strategic alliances with new partners in academia, business, healthcare and government. We also intend to frequently evaluate and develop commercialization opportunities for our product and service offerings and our research findings.
FOXO is focused on commercializing scientific discoveries in health and longevity. A pivotal moment in the field of longevity science came with the discovery that epigenetics could be used to develop measures of health, including biological aging, according to an article published in the scientific journal, Nature, in 2014. In recent years, we and other scientists have extended these findings to assess tobacco, alcohol, blood cell composition, and other health measures based on discovered epigenetic biomarkers. To that end, FOXO is dedicated to research and development in order to provide data-driven insights based on the numerous health measures that can be determined through this unique dimension of biology and used to foster optimal health and longevity for both individuals and organizations. We believe there is value in what these biomarkers will be able to provide to the world. Current testing options can be inaccurate, and piecemeal, and often require obtaining a blood sample. Epigenetic biomarkers may pave the path for a fully comprehensive, at-home, low-cost test that could, with other existing testing, offer a much easier, more detailed sense of one’s health.
At the same time, we believe there exists a significant bottleneck in scientific research and product development using epigenetic data. Due to the complexity of the data, many scientists are unaware of how to properly process such data or take full advantage of the available tools. With our experience in bringing to market new tools (both software and hardware) and know-how (our Bioinformatics Services and analytic consulting), we believe we are well-positioned to help reduce barriers in advancing epigenetic research and the development of epigenetic-based products. Thus, we have chosen strategically to extend our expertise in epigenetic data processing and analysis to outside parties in an effort to further accelerate new discoveries. This work not only allows us to generate revenue, but also continue our work in developing improved ways in processing and analyzing this important data.
Historically, we have had two core product offerings related to the commercialization of epigenetic science: the “Underwriting Report,” and the “Longevity Report™.” The Underwriting Report, which has been under development and is currently paused until we increase our cash resources in order to continue additional research and development, is intended to allow us to leverage a single assay testing process to generate a panel of impairment scores that could be applied by life insurance underwriters to more efficiently assess clients during the underwriting process and provide a more personalized risk assessment. The Longevity Report, sales of which have also been paused as we redevelop and re-strategize around this product, was designed as a customer-facing consumer engagement product that provides actionable insights based on one’s biological age and other epigenetic measures of health and wellness. In 2023, we our Underwriting Report and Longevity Report were impaired as the projected cash flows no longer supported these intangible assets.
Management, License and Maintenance Fees Under the KR8 Agreement
On October 29, 2023, we entered into a Letter Agreement with KR8 to develop a Direct-to-Consumer APP (iOS and Android) combining its AI Machine Learning technology to provide a commercial application of our epigenetic biomarker technology as a subscription consumer engagement platform. Effective January 12, 2024, the Letter Agreement was replaced by the KR8 Agreement. Our former Interim CEO and our current Interim CFO each are equity owners of the Licensor. Under the KR8 Agreement, the Licensor granted to us a limited, non-sub licensable, non-transferable perpetual license to use the Licensor’s products to develop, launch and maintain license applications based upon our epigenetic biomarker technology and software to develop an AI machine learning epigenetic APP to enhance health, wellness and longevity. The territory of the agreement is solely within the U.S., Canada and Mexico.
| 45 |
Net Revenues
Healthcare generates revenues from hospital and ancillary services as well as substance use disorder treatments, including inpatient and outpatient services. Labs currently recognizes revenue from residual life commissions, providing epigenetic testing services and collecting a royalty from Illumina, Inc. related to the sales of the Infinium Mouse Methylation Array.
Research and Development
Labs conducts research and development, and such costs are recorded within research and development expenses on the consolidated statements of operations. Labs had operated its Bioinformatics Services as an ancillary offering, with revenue recognized as epigenetic biomarker services in our historical financial statements but now looks to it as a primary offering. Bioinformatics Services provide data processing, quality checking, and data analysis services using FOXO’s cloud-based bioinformatics pipeline, referred to as our epigenetics, longevity, or methylation pipeline in our historical financial statements. Labs accepts raw data from third party labs and converts that data into usable values for customers.
Results of Operations
Three Months Ended March 31, 2025 and 2024
| Three Months | Three Months | |||||||||||||||
| Ended | Ended | Change in | Change in | |||||||||||||
| March 31, 2025 | March 31, 2024 | $ | % | |||||||||||||
| Net revenues | $ | 3,169,920 | $ | 7,180 | $ | 3,162,740 | NM | % | ||||||||
| Operating expenses: | ||||||||||||||||
| Direct costs of revenues | 1,903,936 | - | 1,903,936 | 100.00 | % | |||||||||||
| Research and development | 30,000 | 165,360 | (135,360 | ) | -81.86 | % | ||||||||||
| Management contingent share plan | 18,878 | 32,551 | (13,673 | ) | -42.00 | % | ||||||||||
| Selling, general and administrative | 2,764,086 | 987,937 | 1,776,149 | 179.78 | % | |||||||||||
| Total operating expenses | 4,716,900 | 1,185,848 | 3,531,052 | 297.77 | % | |||||||||||
| Loss from operations | (1,546,980 | ) | (1,178,668 | ) | (368,312 | ) | 31.25 | % | ||||||||
| Change in fair value of warrant liabilities | 31,594 | 9,090 | 22,504 | 247.57 | % | |||||||||||
| Gain from extinguishment of Senior PIK Notes | 1,863,834 | - | 1,863,834 | 100.00 | % | |||||||||||
| Interest expense | (889,792 | ) | (301,912 | ) | (587,880 | ) | 194.72 | % | ||||||||
| Other non-operating expenses, net | (79,464 | ) | (32,500 | ) | (46,964 | ) | 144.50 | % | ||||||||
| Provision for income taxes | - | - | - | 0.00 | % | |||||||||||
| Net loss, including noncontrolling interest | (620,808 | ) | (1,503,990 | ) | 883,182 | -58.72 | % | |||||||||
| Noncontrolling interest | 4,350 | - | 4,350 | 100.00 | % | |||||||||||
| Net loss attributable to FOXO | (616,458 | ) | (1,503,990 | ) | 887,532 | -59.01 | % | |||||||||
| Preferred stock dividends -undeclared and deemed dividends | (487,034 | ) | (656,164 | ) | 169,130 | -25.78 | % | |||||||||
| Net loss to common stockholders | $ | (1,103,492 | ) | $ | (2,160,154 | ) | $ | 1,056,662 | -48.92 | % | ||||||
Net revenues. Net revenues were $3.2 million for the three months ended March 31, 2025, compared to $7,180 for the three months ended March 31, 2024. Myrtle, acquired on June 14, 2024 and RCHI, acquired on September 10, 2024, contributed $0.5 million and $2.7 million of the net revenues, respectively. Labs and Life’s net revenues were $8,489 and $7,180 for the three months ended March 31, 2025 and 2024, respectively.
| 46 |
Direct Costs of Revenues. Direct costs of revenues were $1.9 million for the three months ended March 31, 2025. There were no direct costs of revenues for the three months ended March 31, 2024. The direct costs of revenue for the three months ended March 31, 2025 resulted from the direct costs of Myrtle and RCHI, which were acquired on June 14, 2024 and September 10, 2024, respectively.
Research and Development. Research and development expenses were $30,000 for the three months March 31, 2025, compared to $0.2 million for the three months ended March 31, 2024. The decrease was due to research and development projects that are no longer ongoing.
Management Contingent Share Plan. Management Contingent Share Plan expense was $18,878 for the three months ended March 31, 2025 compared to an expense of $32,551 for the three months ended March 31, 2024. The expense for the three months ended March 31, 2025 resulted from the partial vesting of the 333 Management Contingent Share Plan shares that remain outstanding under the plan. These shares fully vest on September 15, 2027. During the three months ended March 31, 2024, 1,500 shares partially vested, offset by 67 shares that were forfeited under the plan.
Selling, General and Administrative. Selling, general and administrative expenses were $2.8 million for the three months ended March 31, 2025, compared to $1.0 million for the three months ended March 31, 2024. The increase of $1.8 million, or 179.78%, was primarily due to $1.6 million of selling general and administrative expenses of Myrtle, acquired on June 14, 2024, and RCHI, acquired on September 10, 2024.
Change in Fair Value of Warrant Liabilities. The fair value of the warrant liabilities decreased by $31,594 for the three months ended March 31, 2025, compared to a decrease in fair value of $9,090 for the three months ended March 31, 2024. The change was attributable to a reduction in the quoted price of the Public Warrants at March 31 2025 versus March 31, 2024. The warrants are listed on the OTC Pink Marketplace.
Gain from Extinguishment of Senior PIK Notes. During the three months ended March 31, 2025, we exchanged $5.4 million of Senior PIK Notes, which included $1.9 million of accrued interest, for $3.5 million of stated value of our Series B Preferred Stock resulting in a gain of $1.9 million.
Interest Expense. Interest expense was $0.9 million for the three months ended March 31, 2025 compared to $0.3 million for the three months ended March 31, 2024. The increase was attributable to the increase in notes payable during the three months ended March 31, 2025 compared to the 2024 period.
Other Non-Operating Expenses, Net. Other non-operating expenses, net were $0.1 million for the three months ended March 31, 2025, compared to other non-operating expenses, net of $32,500 for the three months ended March 31, 2024. The other non-operating expenses, net in the three months ended March 31, 2025 resulted primarily from $0.2 million of penalties and interest for nonpayment of payroll taxes, partially offset by hospital cafeteria income of $0.1 million. The other non-operating expenses, net in the three months ended March 31, 2024 were for other taxes.
Net Loss Attributable to FOXO. Net loss attributable to FOXO was $0.6 million for the three months ended March 31, 2025 compared to a loss of $1.5 million for the three months ended March 31, 2024. The $0.9 million improvement was primarily due to the gain from extinguishment of Senior PIK Notes of $1.9 million, partially offset by an increase in loss from operations of $0.4 million and an increase in interest expense of $0.6 million in the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Additionally, we recorded $0.5 million of undeclared and deemed dividends from the issuances of preferred stock and the triggers of the down round provisions of the Assumed Warrants in the three months ended March 31, 2025 compared to deemed dividends of $0.7 million related to the triggers of the down round provisions and extension of the Assumed Warrants during the three months ended March 31, 2024. The undeclared and deemed dividends resulted in net loss to common stockholders of $1.1 million and $2.2 million for the three months ended March 31, 2025 and 2024, respectively.
Analysis of Segment Results:
The following is an analysis of our results by reportable segment for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The primary earnings/loss measure used for assessing reportable segment performance is segment income/loss defined as earnings/loss before interest, income taxes, and depreciation and amortization not associated with a specific segment. Segment income/loss by reportable segment also excludes corporate and other costs, including management, IT, and overhead costs. For further information regarding our reportable business segments, please refer to the accompanying unaudited condensed consolidated financial statements and related notes.
| 47 |
Healthcare
Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change in $ | Change in % |
|||||||||||||
| Total revenues | $ | 3,161,431 | $ | - | $ | 3,361,431 | NM | % | ||||||||
| Operating expenses | (4,010,379 | ) | - | (4,010,379 | ) | NM | % | |||||||||
| Noncontrolling interest | 4,350 | - | 4,350 | NM | % | |||||||||||
| Segment Loss | $ | (844,598 | ) | $ | - | $ | (844,598 | ) | NM | % | ||||||
NM = Not Meaningful
Net revenues. Net revenues were $3.2 million for the three months ended March 31, 2025 and represent the net revenues of Myrtle of $0.5 million and the net revenues of RCHI of $2.7 million. Myrtle was acquired on June 14, 2024 and of RCHI was acquired on September 10, 2024. Our healthcare segment began with the acquisition of Myrtle.
Segment Loss. Segment Loss was $0.8 million for the three months ended March 31, 2025 and represents the losses of Myrtle and RCHI.
Labs and Life
Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change in $ | Change in % | |||||||||||||
| Total revenues | $ | 8,489 | $ | 7,180 | $ | 1,309 | 18.23 | % | ||||||||
| Operating expenses | (31,494 | ) | (166,630 | ) | (135,136 | ) | 81.10 | % | ||||||||
| Segment Loss | $ | (23,005 | ) | $ | (159,450 | ) | $ | (136,445 | ) | 85.57 | % | |||||
Net revenues. Net revenues were $8,489 for the three months ended March 31, 2025 compared to $7,180 for the three months ended March 31, 2024, an increase of $1,309 from royalty income.
Segment Loss. Segment loss decreased to $23,005 for the three months ended March 31, 2024 from $0.2 million for the three months ended March 31, 2024. The decrease was driven by research and development projects that are no longer ongoing.
Liquidity and Capital Resources
We had cash and cash equivalents of $16,907 and $68,268 as of March 31, 2025 and December 31, 2024, respectively. We have incurred net losses since our inception. For the three-months ended March 31, 2025 and 2024, we incurred net losses to common stockholders of $1.1 million and $2.2 million, respectively. As of March 31, 2025, we had a working capital deficit of $25.5 million. We expect to incur additional losses in future periods. Our current revenue and operating cash flow is not adequate to fund our operations in the next twelve months and requires us to fund our business through other sources until the time we achieve adequate scale. Securing additional capital is necessary to execute our business strategy.
Private Placements
During the fourth quarter of 2023, we entered into the Strata Purchase Agreement with ClearThink, as supplemented by that certain Supplement to Strata Purchase Agreement, dated as of October 13, 2023, by and between us and ClearThink. On August 13, 2024, we entered into Amendment No. 1 to the Strata Purchase Agreement pursuant to which the commitment amount was increased from $2.0 million to $5.0 million. On May 15, 2025, we amended and restated the Strata Purchase Agreement to extend the maturity date to June 30, 2026 and improve and simplify the Purchase Price to define the price per share of Common Stock purchased shall equal 90% of the average of the two (2) lowest daily VWAP during the Valuation Period.
| 48 |
Third Party Promissory Notes Payable
During the year ended December 31, 2024, we issued to third parties 17 promissory notes with principal balances totaling $5.0 million and one-time interest expense totaling $0.1 million and we received net cash proceeds from the issuances totaling $4.1 million. During the year ended December 31, 2024, we exchanged $2.2 million of the promissory notes issued in 2024 for 2,464 shares of our Series A Preferred Stock with a stated value of $1,000 per share. In addition, during the year ended December 31, 2024, $0.6 million of the principal balances of three of the promissory notes issued during 2024 and $61,745 of associated accrued interest were converted into 208,082 shares of our Class A Common Stock pursuant to the conversion terms of such notes. During the three months ended March 31, 2025, $0.7 million principal balance of the third-party notes issued in 2024, including accrued interest, were converted and exchanged into 332,431 shares of our Class A Common Stock.
During the three months ended March 31, 2025, we entered into nine third party promissory notes with principal balances totaling $1.1 million and one-time interest expense totaling $0.1 million and we received net cash of $1.0 million. In addition, in February 2025, the Western Note Payable (the “Western Note”), which we assumed when we acquired SCCH, was sold to a new holder and it was amended and restated. Per the terms of the amendment and restatement, the principal balance of the note, which included previously accrued interest expense, totaled $1.1 million, the maturity date is February 26, 2026 and the note is convertible into shares of the Company’s Class A Common Stock at a conversion price equal to 90% of the average VWAP for the five trading days prior to conversion. During the three months ended March 31, 2025, we issued 100,000 shares of our Class A Common Stock upon conversion of $0.1 million principal balance of the Western Note.
At March 31, 2025, $2.8 million of the outstanding principal balance and $0.2 million of associated one-time accrued interest of 13 third-party promissory notes were convertible into 2.5 million shares of our Class A Common Stock per the conversion terms the notes. Three other promissory notes outstanding at March 31, 2025, were convertible but only in the event of an event of default as that term is defined in the applicable agreements and three other outstanding third party promissory notes are not convertible. As of March 31, 2025, the total principal balance of third-party promissory notes payable as presented on the accompanying unaudited condensed consolidated balance sheet was $2.6 million, which was net of $0.8 million of debt discounts. In addition, $0.3 million of accrued interest was owed on these notes. Each of these notes is more fully discussed in the footnotes to the accompanying unaudited condensed consolidated financial statements.
Related Party Promissory Notes Payable
On September 10, 2024, we issued a note payable that had a maturity date of September 10, 2026 to RHI in the principal amount of $22.0 million for the purchase of RCHI. During December, 2024, we exchanged $21.0 million of the promissory note owed to RHI for 21,000 shares of our Series A Preferred Stock with a stated value of $1,000 per share and we issued to RHI a new promissory note in the principal amount of $1.0 million due on June 5, 2025.
In addition, we have outstanding a note payable to RHI in the amount of $0.3 million for the purchase of Myrtle, a note payable to RHI in the original amount of $1.6 million, which was the amount owed by Myrtle to RHI on the date that we acquired Myrtle, which balance has been reduced to $0.9 million as of March 31, 2025, and we have outstanding at March 31, 2025, three additional promissory notes payable to related parties totaling $0.8 million.
Each of these notes is more fully discussed in the footnotes to the accompanying unaudited condensed consolidated financial statements.
Preferred Stock
In addition to the issuances of shares of Series A Preferred Stock for the exchange of third party and RHI notes payable as discussed above, during the year ended December 31, 2024, we issued 120 shares of our Series C Preferred Stock with a stated value of $1,000 per share for net cash proceeds of $0.1 million and we issued 4,311.7 shares of our Series D Preferred Stock with a stated value of $1,000 per share for $4.2 million of accounts payable and accrued expenses. During December 2024, 924 shares of our Series A Preferred Stock were converted into 357,330 shares of our Class A Common Stock and during the three months ended March 31, 2025, 308 shares of our Series A Preferred Stock were converted into 146,015 shares of our Class A Common Stock.
| 49 |
On February 28, 2025, an investor purchased 60 shares of Series C Preferred Stock for net cash proceeds of $44,825 and in doing so exchanged 50 shares of Series B Preferred Stock for 75 shares of Series C Preferred Stock.
On April 12, 2025, we issued 375 shares of Series A Preferred Stock to an institutional investor in return for gross proceeds of $325,000. On April 15, 2025, we issued an additional 275 shares of Series A Preferred Stock to the institutional investor for gross proceeds of $275,000, on May 8, 2025, we issued an additional 550 shares of Series A Preferred Stock to the institutional investor for gross proceeds of $550,000 and on May 19, 2025, we issued an additional 550 shares of Series A Preferred Stock to the institutional investor for gross proceeds of $550,000.
Going Concern
Our primary uses of cash are to fund our operations as we continue to grow our business, as well as to service our debt. We finalized the acquisition of Myrtle on June 14, 2024 and the acquisition of RCHI on September 10, 2024. We are expecting the Myrtle and RCHI businesses to produce a small cash flow surplus through 2025. Capital expenditures have historically not been material to our consolidated operations, and we do not anticipate making material capital expenditures in 2025 unless we secure additional capital to expand the current operations. We expect that our liquidity requirements will continue to consist of working capital, including payments of outstanding debt and accrued liabilities and general corporate expenses associated with the growth of our business. Based on the size of our current operations, we do not have sufficient capital to fund our corporate overhead for at least 12 months from the date hereof. We expect to address our liquidity needs through the pursuit of additional funding through a combination of equity or debt financing and additional strategic acquisitions that we expect will contribute positive cash flow to enable us to fund our operations. Completing such acquisitions requires significant additional capital that has not yet been secured.
We have taken various actions to bolster our cash position, including raising funds through the private placements and the issuances of promissory notes, and conserving cash by issuing shares of our Preferred Stock and shares of our Class A Common Stock under exchange agreements, license agreements, legal settlements, consulting agreements, finder’s fees related to equity and debt financing and consulting agreements, among other transactions, as an alternative to paying in cash.
Based on our current operating plan, our cash position as of March 31, 2025, and after taking into account the actions described above, we do not expect to be able to fund our operations through 2025 without the need for additional financing or other increases in our cash and cash equivalents balance to enable us to fund our future operations.
We have based our estimates as to how long we expect we will be able to fund our operations on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect, in which case we would be required to obtain additional financing sooner than currently projected, which funding may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We may raise additional capital through equity offerings, debt financings or other capital sources. If we do raise additional capital through public or private equity offerings, or convertible debt offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely impact our existing stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take certain actions.
The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
| 50 |
The following table presents our capital resources as of March 31, 2025 and December 31, 2024:
| March 31, | December 31, | |||||||||||
| 2025 | 2024 | Change | ||||||||||
| Cash | $ | 16,907 | $ | 68,268 | $ | (51,361 | ) | |||||
| Working capital deficit | (25,462,974 | ) | (29,846,195 | ) | 4,383,223 | |||||||
| Total debt, net of discounts of $841,572 and $678,925 | 6,000,921 | 10,219,905 | (4,218,985 | ) | ||||||||
| Total stockholders’ equity | 9,652,846 | 5,271,811 | 4,381,035 | |||||||||
Cash Flows
The following table summarizes our cash flow data for the three months ended March 31, 2025 and 2024:
Cash Provided by/ (Used in) | ||||||||
| Three Months Ended March 31, | 2025 | 2024 | ||||||
| Operating Activities | $ | (1,337,591 | ) | $ | (406,302 | ) | ||
| Investing Activities | $ | - | $ | - | ||||
| Financing Activities | $ | 1,286,230 | $ | 370,720 | ||||
Operating Activities
The net cash used in operations in the three months ended March 31, 2025 was $1.3 million, or $0.9 million more than the $0.4 million of cash used in operations during the three months ended March 31, 2024. While the net loss, including noncontrolling interest, improved to $0.6 million in the three months ended March 31, 2025 compared to a net loss, including noncontrolling interest of $1.5 million for the three months ended March 31, 2024, $1.9 million of the improvement was due to the noncash gain from extinguishment of the Senior PIK Notes. Excluding the noncash gain from extinguishment of the Senior PIK Notes, the net loss, including noncontrolling interest, was $2.5 million or $1.0 million more than the comparable 2024 period resulting in more cash used in operations in the three months ended March 31, 2025.
Investing Activities
We did not have cash flows from investing activities in the three months ended March 31, 2025 and March 31, 2024.
Financing Activities
Net cash provided by financing activities for three months ended March 31, 2025 was $1.3 million compared to $0.4 million for the three months ended March 31, 2024. Net cash provided by financing activities for the three months ended March 31, 2025, included $1.0 million and $0.3 million from the issuances of third party notes payable and borrowings under a related party note payable, respectively, $0.3 million from other loans and $44,825 from the issuance of shares of preferred stock, partially offset by $0.2 million of payments on other loans and $46,322 of payments of a note payable. Net cash provided by financing activities for the three months ended March 31, 2024, included $0.4 million from promissory notes.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any non-financial assets.
Critical Accounting Policies
The preparation of the consolidated financial statements and related notes included under “Item 1. Financial Statements” and related disclosures in conformity with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires the selection of the appropriate accounting principles to be applied and the judgments and assumptions on which to base accounting estimates, which affect the reported amounts of assets and liabilities as of the date of the balance sheets, the reported amounts of revenue and expenses during the reporting periods, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances at the time such estimates are made. Actual results and outcomes may differ materially from our estimates, judgments, and assumptions. We periodically review our estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in estimates are reflected in the consolidated financial statements prospectively from the date of the change in estimate.
| 51 |
We define our critical accounting policies and estimates as those that require us to make subjective judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles. We believe the critical accounting policies used in the preparation of our financial statements which require significant estimates and judgments are as follows:
Revenue Recognition Policy
The Company recognizes revenue in accordance with ASC, “Revenue from Contracts with Customers (Topic 606),” including subsequently issued updates. Under the accounting guidance, revenues are presented net of estimated contractual allowances and estimated implicit price concessions.
Presently, its healthcare segment consists of the operations of Myrtle from its acquisition date of June 14, 2024, and of RCHI from its acquisition date of September 10, 2024.
Myrtle’s revenues relate to contracts with patients in which its performance obligations are to provide behavioral health care services to its patients. Revenues are recorded during the period its obligations to provide health care services are satisfied. Myrtle’s performance obligations for inpatient services are generally satisfied over periods averaging approximately 7 to 28 days depending on the service line, and revenues are recognized based on charges incurred. The contractual relationships with patients, in most cases, also involve third-party payers and the transaction prices for the services provided are dependent upon the terms provided by or negotiated with the third-party payers. The payment arrangements with third-party payers for the services Myrtle provides to its patients typically specify payments at amounts less than its standard charges. Services provided to patients are generally paid at prospectively determined rates per diem.
RCHI’s revenues relate to contracts with patients of BSF in which its performance obligations are to provide health care services to the patients. Revenues are recorded during the period its obligations to provide health care services are satisfied. Its performance obligations for inpatient services are generally satisfied over periods averaging approximately three days, and revenues are recognized based on charges incurred. Its performance obligations for outpatient services, including emergency room-related services, are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services it provides to the related patients typically specify payments at amounts less than our standard charges. Medicare, because of BSF’s designation as a critical access care hospital, generally pays for inpatient and outpatient services at rates related to the hospital’s costs. Services provided to patients having Medicaid coverage are generally paid at prospectively determined rates per discharge, per identified service or per covered member. Agreements with commercial insurance carriers, managed care and preferred provider organizations generally provide for payments based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates.
Management continually reviews the contractual estimation process to consider the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals. Under the revenue recognition accounting guidance, revenues are presented net of estimated contractual allowances and estimated implicit price concessions. The healthcare segment’s net revenues are based upon the estimated amounts it expects to be entitled to receive from third-party payers and patients based, in part, on Medicare and Medicaid rates as discussed above as for each of Myrtle and BSF. The healthcare segment also records estimated implicit price concessions related to uninsured accounts to record self-pay revenues at the estimated amounts it expects to collect.
| 52 |
The collection of outstanding receivables is the healthcare segment’s primary source of operating cash and is critical to its operating performance. The primary collection risks relate to patient accounts for which the primary insurance carrier has paid the amounts covered by the applicable agreement, but patient responsibility amounts (deductibles and copayments) remain outstanding. Implicit price concessions relate primarily to amounts due directly from patients. Accounts are written off when all reasonable internal and external collection efforts have been carried out. The estimates for implicit price concessions are based upon management’s assessment of historical write offs and expected net collections, business and economic conditions and other collection indicators.
Contractual Allowances and Doubtful Accounts Policy
In accordance with ASC, “Revenue from Contracts with Customers (Topic 606),” including subsequently issued updates, the Company does not present “allowances for doubtful accounts” on its balance sheets, rather its accounts receivable are reported at realizable value, net of estimated contractual allowances and estimated implicit price concessions (also referred to as doubtful accounts), which are estimated and recorded in the period the related revenue is recorded. ASC, “Financial Instruments Credit Losses (Topic 326),” requires that healthcare organizations estimate credit losses on a forward-looking basis taking into account historical collection and payer reimbursement experience as an integral part of the estimation process related to contractual allowances and doubtful accounts. Receivables deemed to be uncollectible are charged against the allowance for doubtful accounts after all collection efforts have ceased or the account is settled for less than the amount originally estimated to be collected. Recoveries of receivables previously written-off are recorded as credits to the allowance for doubtful accounts. Revisions to the allowances for doubtful accounts are recorded as adjustments to revenues.
During the three months ended March 31, 2025, estimated contractual allowances and implicit price concessions of $17.5 million have been recorded as reductions to revenues and accounts receivable balances to enable the Company to record its revenues and accounts receivable at the estimated amounts it expects to collect. As required by Topic 606, after estimated contractual allowances and implicit price concessions to the health care segment’s revenues for the three months ended March 31, 2025, the Company recorded healthcare net revenues of $3.2 million. Myrtle and SCCH were acquired on June 14, 2024 and September 10, 2024, respectively, thus no revenues were recorded related to the healthcare segment in the three months ended March 31, 2024.
The Company has recorded minor amounts of revenues from its Labs and Life segment during the three months ended March 31, 2025 and 2024. The Labs and Life segment’s revenues consist of royalties based on the Company’s epigenetic biomarker research, agents’ commissions earned on the sale, servicing and placement of life insurance policies, and epigenetic testing services sold primarily to research organizations. Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company applies judgment in determining the customer’s ability and intention to pay based on a variety of factors including the customer’s historical payment experience.
Equity-Based Compensation
In 2022, we offered equity-based compensation to employees and non-employees in the form of stock options and restricted stock. We measure and recognize all equity-based payments to employees, service providers and board members at fair value. The cost of services received from employees and non-employees in exchange for awards of equity instruments is recognized in the consolidated statements of operations based on the estimated fair value of those awards on the grant date or reporting date, if required to be remeasured, and amortized on a straight-line basis over the requisite service period. We recognize forfeitures as incurred. We utilize a Black-Scholes valuation model to estimate the fair value of stock options and this model requires the input of assumptions, including the exercise price, volatility, expected term, discount rate, and the fair value of the underlying membership or stock on the date of grant. These inputs are provided at the grant date for an equity classified award and each measurement date for a liability classified award. Equity-based compensation awards are considered granted (i) when there is a mutual understanding of key terms, (ii) we are contingently obligated to issue the options, and (iii) the option holder begins to benefit or be adversely impacted by changes in our stock price. This primarily occurs at the time the stock option agreements are executed. The fair value of each stock option is estimated using a Black-Scholes valuation model while considering the respective rights of each type of stockholder. We did not grant stock options during the three months ended March 31, 2025 and 2024 however, we had forfeitures during the three months ended March 31, 2024. We also had forfeitures of restricted stock awards during the three months ended March 31, 2024.
| 53 |
Going Concern
On a quarterly basis, we assess going concern uncertainty for our consolidated financial statements to determine if we have sufficient cash and cash equivalents on hand and working capital to operate for a period of at least one year from the date our consolidated financial statements are issued or are available to be issued (the “look-forward period”). Based on conditions that are known and reasonably knowable to us, we consider various scenarios, forecasts, projections, and estimates, and we make certain key assumptions, including the timing and nature of projected cash expenditures or programs, among other factors, and our ability to delay or curtail those expenditures or programs within the look-forward period, if necessary. Until additional equity or debt capital is secured, there is substantial doubt about the Company’s ability to continue as a going concern.
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Improvements to Income Tax Disclosures, which requires enhanced annual disclosures for specific categories in the rate reconciliation and income taxes paid disaggregated by federal, state and foreign taxes. ASU 2023-09 is effective for public business entities for annual periods beginning on January 1, 2025. We plan to adopted ASU 2023-09 effective January 1, 2025 and will apply a retrospective approach to all prior periods presented in our annual financial statements for the year ended December 31, 2025. We do not believe the adoption of this new standard will have a material effect on our disclosures.
In November 2024, the FASB issued ASU 2024-04, Debt with Conversions and Other Options (Subtopic 470-20), Induced Conversions of Convertible Debt Instruments. The amendments in this ASU clarify when the settlement of a debt instrument should be accounted for as an induced conversion. Under this ASU, (a) to be accounted for as an induced conversion, an inducement offer is required to preserve the form and amount of consideration issuable upon conversion in accordance with the terms of the instrument (rather than only the equity securities issuable upon conversion), (b) whether a settlement of convertible debt is an induced conversion should be assessed as of the date the inducement offer is accepted by the holder, and (c) issuers that have exchanged or modified a convertible debt instrument within the preceding 12 months (that did not result in extinguishment accounting) should use the terms that existed 12 months before the inducement offer was accepted when determining whether induced conversion accounting should be applied. The amendments in this ASU are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in ASU 2020-06. The amendments in this ASU permit an entity to apply the new guidance on either a prospective or a retrospective basis. The Company has not yet determined the impact of the adoption of this ASU on its consolidated financial statements.
Factors That May Adversely Affect our Results of Operations
Our results of operations may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, Medicare and Medicaid cost reimbursement, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, a resurgence of the COVID-19 pandemic and/or the emergence of new variants or new pandemics and cyber security risks. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
| 54 |
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officer and our principal financial and accounting officer (the “Certifying Officers”), or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
In our Annual Report on Form 10-K for the year ended December 31, 2024, we identified material weaknesses in our internal control over financial reporting. Insufficient staffing, accounting processes and procedures led to a lack of contemporaneous documentation supporting the accounting for certain transactions. There are risks related to the timing and accuracy of the integration of information from our various accounting systems. Based on these material weaknesses in internal control over financial reporting, management concluded the Company did not maintain effective internal control over financial reporting as of December 31, 2024. As of March 31, 2025, we concluded that these material weaknesses continued to exist.
Under the supervision and with the participation of our management, including our Certifying Officers, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective as of March 31, 2025.
Notwithstanding such material weaknesses, management believes that the unaudited condensed consolidated financial statements included in this Form 10-Q fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods and dates presented.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during the Company’s quarter ended March 31, 2025, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
| 55 |
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time-to-time, the Company may be involved in a variety of claims, lawsuits, investigations and proceedings related to contractual disputes, employment matters, regulatory and compliance matters, intellectual property rights and other litigation arising in the ordinary course of business. The Company operates in a highly regulated industry which may inherently lend itself to legal matters. Management is aware that litigation has associated costs and that results of adverse litigation verdicts could have a material effect on the Company’s financial position or results of operations. Management, in consultation with legal counsel, has addressed known assertions and predicted unasserted claims, which are presented in Note 14 to the accompanying unaudited condensed consolidated financial statements.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A of our 2024 Form 10-K, which could materially affect our business, financial condition, or future results. There have been no material changes to the risk factors previously disclosed in our 2024 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Shares Issued Under Smithline Exchange Agreement
The Company issued 119,103 shares of Class A Common Stock in January 2025, 75,350 shares of Class A Common Stock in February 2025, and 134,050 shares of Class A Common Stock in March 2025 pursuant to the Exchange Agreement dated May 28, 2024 with Smithline Family Trust II.
The securities issued above were made in reliance upon the exemption from securities registration afforded by Section 3(a)(9) of the Securities Act.
Convertible Promissory Notes and Commitment Shares
On January 21, 2025, we entered into a Securities Purchase Agreement with 1800 Diagonal, pursuant to which we issued to 1800 Diagonal a convertible promissory note in the initial principal amount of $168,728. The note has a beneficial ownership limitation of 4.99%.
On January 28, 2025, we entered into a Securities Purchase Agreement with ClearThink, pursuant to which we issued to ClearThink a convertible promissory note in the initial principal amount of $121,000 and 6,250 shares of Class A Common Stock are issuable as inducement shares to ClearThink. The note has a beneficial ownership limitation of 4.99%.
On February 24, 2025, we entered into a Securities Purchase Agreement with 1800 Diagonal, pursuant to which we issued to 1800 Diagonal a convertible promissory note in the initial principal amount of $112,746. The note has a beneficial ownership limitation of 4.99%.
On January 7, 2025, we entered into a Securities Purchase Agreement with Jefferson Street Capital LLC (“JSC”) pursuant to which we agreed to issue to JSC convertible promissory notes in the principal amount of up to $1,650,000 and up to a total number of shares of the Company’s Class A Common Stock as a commitment fee equal to 10% of the purchase price of each of the notes divided by the average VWAP of the Common Stock during the five Trading Days (as defined in the notes) prior to the issuance date of the respective notes. The per share conversion price into which principal and interest under each note is convertible into shares of the Company’s Class A Common Stock equals the higher of (i) $0.01 or (ii) the 90% of the lowest daily VWAP on any trading day during the five trading days prior to the respective conversion date. On January 7, 2025, the Company issued to JSC a convertible promissory note in the principal amount of $291,500 and 8,696 commitment shares of the Company’s Class A Common Stock were issued pursuant to this issuance. On March 6, 2025, the Company issued to JSC a convertible promissory note in the principal amount of $147,015 and 7,160 commitment shares of the Company’s Class A Common Stock were issued pursuant to this issuance.
The securities issued above were made in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D under the Securities Act, based in part on the representations of the investors. There were no sales commissions paid pursuant to these transactions.
Convertible Note Offering
On February 27, 2025, the Company’s Board of Directors approved a convertible promissory note offering of up to $1.5 million of convertible promissory notes.
Three notes were issued on February 27, March 4, and March 7, 2025, respectively, pursuant to this totalling $302,500 and 25,000 commitment shares of the Company’s Class A Common Stock are issuable pursuant to these note issuances.
The securities issued above were made in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D under the Securities Act, based in part on the representations of the investors.
| 56 |
Shares Issued Pursuant to Note Conversions
On January 2, 2025, ClearThink was issued 65,248 shares of Class A Common Stock pursuant to a note conversion.
On January 15, 2025, we issued 4,334 shares of our Class A Common Stock in exchange for the balance of our promissory note issued to LGH Investments on April 3, 2024.
In January 2025, we issued 118,650 shares of our Class A Common Stock in exchange for the balance of our promissory note issued to 1800 Diagonal on July 22, 2024.
The securities issued above were made in reliance upon the exemption from securities registration afforded by Section 3(a)(9) of the Securities Act.
Shares Issued Pursuant to Finder’s Fee Agreement
On January 13, 2025, we issued to J.H. Darbie & Co., Inc. 21,286 shares of Class A Common Stock pursuant to the Finder’s Fee Agreement and 1,587 share of Class A Common Stock were issued for services provided under a placement agreement.
The securities issued above were made in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D under the Securities Act, based in part on the representations of the investor. There were no sales commissions paid pursuant to this transaction.
Shares Issued Pursuant to Exchange Agreements
On January 3, 2024, we issued to ClearThink a promissory note in the principal amount of $75,000. On January 3, 2025, we entered into an Exchange Agreement with ClearThink pursuant to which the note was exchanged for 32,475 shares of Class A Common Stock.
On January 30, 2024, we issued to ClearThink a promissory note in the principal amount of up to $750,000 ($408,000 of which funded). On January 10, 2025, we entered into an Exchange Agreement with ClearThink pursuant to which $200,000 owing under the note was exchanged for 77,322 shares of Class A Common Stock. On January 27, 2025, we entered into an Exchange Agreement with ClearThink pursuant to which $250,000 owing under the note was exchanged for 96,652 shares of Class A Common Stock. On March 18, 2025, we entered into an Exchange Agreement with ClearThink pursuant to which the remaining $241,380 owing under the note was exchanged for 160,920 shares of Class A Common Stock.
The securities issued above were made in reliance upon the exemption from securities registration afforded by Section 3(a)(9) of the Securities Act.
Shares Issued Pursuant to Silverback Note
On August 10, 2021, SCCH and RHI issued a convertible promissory note to Western Healthcare, LLC in the principal amount of $1,583,007. On February 26, 2025, the outstanding balance of the note was assigned/sold by Western Healthcare, LLC to Silverback Capital Corporation. We have assumed all obligations and liabilities under the note by issuing the Amended and Restated Convertible Promissory Note in the principal amount of $1,080,357 issued to the Silverback (the “Silverback Note”). The Silverback Note is convertible, in whole or in part, into shares of Common Stock, at 90% (representing a discount rate of 10%) multiplied by the average VWAP of the five trading days immediately prior to the date the Conversion Notice is tendered by the holder. The Silverback Note shall bear no interest and the principal will be due and payable on February 26, 2026.
As of May 15, 2025, we had issued an aggregate of 633,160 shares of Common Stock to Silverback pursuant to conversions of the Silverback Note and a balance of $496,662.01 remains outstanding.
The securities issued above were made in reliance upon the exemption from securities registration afforded by Section 3(a)(9) of the Securities Act.
Shares Issued Pursuant to Series A Conversions
On January 2, 2025, a holder of Series A Preferred Stock was issued 104,831 shares of Class A Common Stock pursuant to the conversion of 271.1535 shares of Series A Preferred Stock.
In February 2025, a holder of Series A Preferred Stock was issued 146,015 shares of Class A Common Stock pursuant to the conversions of 308 shares of Series A Preferred Stock.
The securities issued above were made in reliance upon the exemption from securities registration afforded by Section 3(a)(9) of the Securities Act.
| 57 |
Series B Preferred Stock Issuances
On January 17, 2025, a shareholder of the Company acted by way of non-unanimous majority written consent action (in lieu of a special meeting of stockholders) to approve the automatic exchange of Senior PIK Notes. Effective as of 5:00 pm Eastern Time on January 22, 2025, the automatic exchange was completed and an aggregate of 3,457.5 shares of Series B Preferred Stock were issued to the holders of Senior PIK Notes and the Senior PIK Notes were cancelled and satisfied in full.
The securities issued above were made in reliance upon the exemption from securities registration afforded by Section 3(a)(9) of the Securities Act.
Series C Preferred Stock Issuances
On February 28, 2025 a previous holder of Senior PIK Notes purchased 60 shares of Series C Preferred Stock for $50,000 and, in doing so, exchanged 50 shares of Series B Preferred Stock for 75 shares of Series C Preferred Stock.
The securities issued above were made in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D under the Securities Act and Section and 3(a)(9) of the Securities Act, based in part on the representations of the investors.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 5. OTHER INFORMATION
Amended and Restated Strata Purchase Agreement
On May 15, 2025, we entered into the Amended and Restated Strata Purchase Agreement with ClearThink. The agreement amends and restates the Strata Purchase Agreement dated October 13, 2023, as amended, with ClearThink. Pursuant to the agreement, the definition of “Purchase Price” was amended to “the price per share of Common Stock purchased shall equal 90% of the average of the two (2) lowest daily VWAP during the Valuation Period (in each case, to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction that occurs on or after the date of this Agreement).” The definition of “Maturity Date” was also amended to June 30, 2026. A copy of the agreement is attached hereto as Exhibit 10.1.
Amended Certificate of Designation
On May 16, 2025, we filed an amendment to our Certificate of Incorporation (the “Certificate of Incorporation”), in the form of Amendments to the Certificates of Designation (the “Amended Designations”) of our previously designated “Series B Cumulative Convertible Redeemable Preferred Stock” (the “Series B Preferred Stock”) and “Series C Cumulative Convertible Redeemable Preferred Stock” (the “Series C Preferred Stock”). The Amended Designations remove Section 6(e), which was the right to an automatic conversion at the two-year anniversary from issuance, which, if retained, could mean the value issued being treated as a liability on our balance sheet. Removing this automatic conversion right means we will treat the issued shares as equity.
Copies of the Amended Designations are attached hereto as Exhibits 3.1 and 3.2.
Rule 10b5-1 Arrangements
During the quarter ended March 31, 2025, no director
or officer
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
| Exhibit No. | Description | Included | Form | Referenced Exhibit |
Filing Date | |||||
| 3.1 | Amendment to the Certificate of Designation (Series B Preferred Stock) filed with the Delaware Secretary of State on May 16, 2025 | Filed Herewith | ||||||||
3.2 |
Amendment to the Certificate of Designation (Series C Preferred Stock) filed with the Delaware Secretary of State on May 16, 2025 | Filed Herewith | ||||||||
| 10.1 | Amended and Restated Strata Purchase Agreement dated May 15, 2025 | Filed Herewith | ||||||||
| 31.1 | Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed Herewith | ||||||||
| 31.2 | Certification of the Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed Herewith | ||||||||
| 32.1# | Certification of the Company’s Principal Executive Officer and Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350. | Furnished Herewith | ||||||||
| 101.INS | Inline XBRL Instance Document. | Filed Herewith | ||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | Filed Herewith | ||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | Filed Herewith | ||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | Filed Herewith | ||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | Filed Herewith | ||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | Filed Herewith | ||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | Filed Herewith |
| # | This certification is deemed not filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act. |
| 58 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| FOXO TECHNOLOGIES INC. | ||
| Date: May 20, 2025 | /s/ Seamus Lagan | |
| Name: | Seamus Lagan | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: May 20, 2025 | /s/ Martin Ward | |
| Name: | Martin Ward | |
| Title: | Interim Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
| 59 |