8-K/A: FOXO Technologies Acquires Myrtle Recovery Centers in Share and Note Deal

FOXO Technologies Inc. has acquired Myrtle Recovery Centers from Rennova Health in exchange for shares and a note, marking a significant move in the behavioral health sector.

Summary

• FOXO Technologies Inc. acquired Myrtle Recovery Centers from Rennova Health, Inc. for $0.5 million, paid through a combination of FOXO shares and a note.
• The transaction closed on June 14, 2024, with FOXO issuing 1 million shares and a $0.3 million note to Rennova on July 17, 2024.
• Myrtle Recovery Centers operates a behavioral health facility in Oneida, Tennessee, offering both residential and outpatient services.
• Myrtle's unaudited financials for January 1 to June 13, 2024, show net revenues of $281,117 and a net loss of $767,202.
• Myrtle has a working capital deficit of $2.1 million and an accumulated deficit of $1.9 million as of June 13, 2024.
• Myrtle's operations are funded by loans from its former parent company, Rennova Health, totaling $0.5 million as of June 13, 2024, and a $1.6 million note payable to Rennova.
• The acquisition is intended to improve Myrtle's business operations, strategic focus, and access to capital.

Sentiment

Score: 4

Explanation: The document highlights significant financial challenges for Myrtle, including substantial losses and a going concern issue, which are major negatives. However, the acquisition by FOXO and the potential for future growth provide some positive aspects, resulting in a low to moderate negative sentiment.

Positives

• Myrtle has secured two full licenses from the Tennessee Department of Mental Health and Substance Abuse Services.
• Myrtle has established in-network contracts with multiple commercial payers.
• The acquisition by FOXO is expected to improve Myrtle's business operations and access to capital.
• Myrtle offers both residential and outpatient services, diversifying its revenue streams.

Negatives

• Myrtle has incurred significant net losses, with a $767,202 loss for the period January 1 to June 13, 2024.
• Myrtle has a substantial working capital deficit of $2.1 million and an accumulated deficit of $1.9 million as of June 13, 2024.
• Myrtle's cash position is critically deficient, raising concerns about its ability to continue as a going concern.
• Myrtle is reliant on loans from its former parent company, Rennova Health.

Risks

• Myrtle's ability to continue as a going concern is dependent on significantly increasing revenues and achieving profitability.
• There is no assurance that Myrtle will be able to achieve its business plan or secure additional financing.
• The financial statements do not reflect the actual expenses that would have been incurred if Myrtle had been a standalone company.
• Myrtle's operations are subject to regulatory risks and potential legal matters.

Future Outlook

Myrtle expects to transition its business from a startup phase throughout the remainder of 2024 and aims to expand its business locations and improve access to capital.

Management Comments

• Management believes the acquisition will result in improved business and operational decision-making for Myrtle.
• Management intends for the acquisition to improve Myrtle's ability to attract, retain, and incentivize employees.
• Management expects the acquisition to improve access to capital to fund Myrtle's expansion.

Industry Context

The acquisition of Myrtle by FOXO reflects a trend of consolidation and investment in the behavioral health sector, particularly in rural markets. This move allows FOXO to diversify its portfolio and enter a growing market segment.

Comparison to Industry Standards

• Myrtle's financial performance, particularly its net losses and working capital deficit, is concerning compared to established players in the behavioral health industry.
• Companies like Acadia Healthcare and Universal Health Services, which are larger and more established, typically have stronger financial metrics and more diversified revenue streams.
• Myrtle's reliance on related-party transactions and loans from its parent company is not typical of mature, standalone healthcare providers.
• The acquisition by FOXO is a strategic move to address these financial challenges and improve Myrtle's competitive position.

Related Party Transactions

• RHI charged Myrtle rent and hoteling expenses for use of its Big South Fork Medical Center campus.
• RHI charged Myrtle management fees to cover various corporate costs.
• Myrtle has loans from its former parent company, Rennova Health.
• Myrtle entered into a management agreement with RHI on June 1, 2024.
• Myrtle entered into a lease agreement with RHI on June 14, 2024.

Stakeholder Impact

• Shareholders of FOXO may see a potential increase in value if Myrtle's performance improves.
• Employees of Myrtle may benefit from improved business operations and access to capital.
• Patients of Myrtle may experience enhanced services and facilities.
• Suppliers and creditors of Myrtle may be impacted by the change in ownership and financial structure.

Next Steps

• FOXO will prepare a definitive purchase price valuation within one year of the acquisition.
• Myrtle will focus on transitioning from a startup phase and expanding its business.
• Myrtle will work to improve its financial performance and achieve profitability.

Key Dates

Keywords

acquisition, behavioral health, substance abuse treatment, healthcare, FOXO Technologies, Myrtle Recovery Centers, Rennova Health, financial statements, going concern, licenses