8-K: FOXO Technologies Enters into Master Software Agreement with KR8 AI Inc.

FOXO Technologies has secured a perpetual license for AI software from KR8 AI Inc. to develop health and wellness applications, involving a $2.5 million initial fee, monthly payments, and royalties.

Summary

• FOXO Technologies Inc. has entered into a Master Software and Services Agreement with KR8 AI Inc. effective January 12, 2024.
• The agreement grants FOXO a perpetual, non-transferable license to use KR8 AI's software for developing AI-driven health and wellness applications.
• The territory of the agreement is limited to the U.S., Canada, and Mexico.
• FOXO will pay KR8 AI an initial license and development fee of $2.5 million.
• There is a monthly maintenance fee of $50,000.
• FOXO will also pay a 15% royalty on subscriber revenues.
• The agreement includes minimum annual royalty payments starting at $400,000 in 2024 and increasing to $1,000,000 in 2025 and then increasing by $250,000 per year.
• If FOXO fails to meet the minimum royalty payments, the license will become non-exclusive.
• The agreement can be terminated by either party for material breach or insolvency.
• FOXO can terminate with 90 days' notice, ceasing use of the software, and KR8 AI can terminate with 30 days' notice for non-payment of the initial license fee.
• On January 19, 2024, FOXO issued 1,300,000 shares of common stock to KR8 AI as part of the agreement.

Sentiment

Score: 7

Explanation: The document outlines a significant agreement for FOXO, providing access to valuable technology. However, the financial commitments and potential risks temper the overall positive sentiment.

Positives

• FOXO gains access to a perpetual license for AI software, which can be a valuable asset for long-term growth.
• The agreement allows FOXO to develop and launch its own AI-driven health and wellness applications.
• The exclusive license in the U.S., Canada, and Mexico provides a defined market for FOXO's applications.
• The software includes a core AI engine, data integration capabilities, and user experience features.
• The agreement includes support and maintenance services from KR8 AI.

Negatives

• The initial license and development fee of $2.5 million is a significant upfront cost.
• The monthly maintenance fee of $50,000 adds to the ongoing operational expenses.
• The 15% royalty on subscriber revenues could impact profitability.
• Failure to meet minimum royalty payments will result in the license becoming non-exclusive.
• The agreement includes a clause that allows KR8 AI to terminate the agreement if FOXO fails to pay any portion of the initial license fee, maintenance fee or royalty within ten days of the due date.

Risks

• The success of FOXO's applications depends on the performance and reliability of the licensed software.
• The company must generate sufficient subscriber revenue to cover the royalty payments and other fees.
• There is a risk of the license becoming non-exclusive if minimum royalty payments are not met.
• The agreement can be terminated for material breach or insolvency, which could disrupt FOXO's operations.
• The agreement includes a clause that allows KR8 AI to terminate the agreement if FOXO fails to pay any portion of the initial license fee, maintenance fee or royalty within ten days of the due date.

Future Outlook

FOXO Technologies plans to develop, launch, and maintain license applications based on its epigenetic biomarker technology using the licensed software to enhance health, wellness, and longevity.

Management Comments

• Our Interim CEO and Interim CFO each are equity owners of the Licensor.

Industry Context

This agreement reflects a growing trend of companies leveraging AI and machine learning for personalized health and wellness solutions. The focus on epigenetic data is also a notable trend in the biotechnology sector.

Comparison to Industry Standards

• The licensing agreement structure with an upfront fee, monthly maintenance, and royalty payments is common in the software industry.
• The 15% royalty rate is within the typical range for software licensing agreements, but the minimum royalty payments are a significant commitment.
• The perpetual license is a positive for FOXO, as it provides long-term access to the software.
• Comparable companies in the health tech space often use similar licensing models, but the specific terms vary based on the technology and market.

Related Party Transactions

• Our Interim CEO and Interim CFO each are equity owners of the Licensor.

Stakeholder Impact

• Shareholders may view the agreement positively as it provides access to new technology and potential revenue streams.
• Employees will be involved in the development and launch of the new applications.
• Customers will benefit from the new AI-driven health and wellness applications.
• Suppliers may see increased demand for their products and services as FOXO expands its operations.
• Creditors will be interested in FOXO's ability to generate sufficient revenue to meet its financial obligations.

Next Steps

• FOXO will begin developing and launching its AI-driven health and wellness applications.
• FOXO will need to integrate the licensed software with its existing technology.
• FOXO will need to market and promote its applications to end users.
• FOXO will need to monitor subscriber revenues to ensure compliance with the royalty agreement.

Key Dates

Keywords

AI, software license, epigenetics, health, wellness, machine learning, royalty, application development, KR8 AI, FOXO Technologies