10-Q: FOXO Technologies Reports Second Quarter 2024 Results, Includes Acquisition of Myrtle Recovery Centers

FOXO Technologies' second quarter 2024 results show a decrease in net loss and the acquisition of Myrtle Recovery Centers, impacting both revenue and expenses.

Summary

• FOXO Technologies reported a net loss of $2.16 million for the three months ended June 30, 2024, an improvement compared to a net loss of $11.29 million for the same period in 2023.
• The company's net revenue increased to $28 thousand for the three months ended June 30, 2024, up from $12 thousand in the same period of 2023, primarily due to the acquisition of Myrtle Recovery Centers.
• Operating expenses decreased significantly to $1.62 million for the three months ended June 30, 2024, compared to $7.62 million for the same period in 2023.
• For the six months ended June 30, 2024, the net loss was $3.67 million, an improvement from the $18.93 million loss in the same period of 2023.
• The company's total assets were $6.91 million as of June 30, 2024, compared to $725 thousand as of December 31, 2023, with a significant increase in intangible assets and goodwill due to the Myrtle acquisition.
• The company's total liabilities were $23.07 million as of June 30, 2024, compared to $14.83 million as of December 31, 2023, with a significant increase in notes payable and related party payables.
• The company's stockholders deficit was $16.17 million as of June 30, 2024, compared to $14.10 million as of December 31, 2023.

Sentiment

Score: 4

Explanation: The document shows some positive developments, such as improved financial results and the acquisition of Myrtle, but the company faces significant challenges, including a going concern uncertainty, debt defaults, and NYSE noncompliance. The overall sentiment is cautiously negative.

Positives

• The company's net loss significantly decreased year-over-year, indicating improved financial performance.
• The acquisition of Myrtle Recovery Centers provides a new revenue stream and expands the company's operations into the healthcare sector.
• Operating expenses were substantially reduced, contributing to the improved financial results.
• The company has secured additional financing through promissory notes and securities purchase agreements.

Negatives

• The company has a significant working capital deficit and a total stockholders deficit.
• The company has a history of losses and is dependent on raising additional capital to continue operations.
• The company is in default under its Senior PIK Notes.
• The company received a notice of noncompliance from the NYSE due to a stockholders deficit and losses.
• The company is subject to the procedures and requirements set forth in Section 1009 of the Company Guide.
• The company is in negotiations to extend the maturity date of the May 15, 2024 promissory note and the IG Note Payable.

Risks

• The company's ability to continue as a going concern is dependent on generating revenue, raising additional capital, reducing losses, and improving cash flows.
• The company is unlikely to receive proceeds from the exercise of outstanding warrants due to the difference between the current trading price and the exercise price.
• The company is in discussions with the holders of the Senior PIK Notes to cure the event of default, but there is no assurance that an agreement will be reached.
• The company may be delisted from the NYSE if it is unable to cure the noncompliance by December 12, 2024.
• The company is subject to various legal proceedings and regulatory matters.
• The company is in default of the Settlement Agreement with Smithline and is currently in negotiations on a resolution.

Future Outlook

The company expects to continue to incur operating losses to support the growth of its business until it finalizes the acquisition of RCHI. The company expects to fund its operations through December 31, 2024, based on its current operating plan and the acquisition of RCHI.

Management Comments

• Management believes that presenting Adjusted EBITDA is more representative of our operational performance and may be more useful for investors.
• Management believes there is value in what these biomarkers will be able to provide to the world.
• Management believes they are well-positioned to help reduce barriers in advancing epigenetic research and the development of epigenetic-based products.

Industry Context

The company is operating in the emerging field of epigenetic biomarker technology, which has potential applications in life insurance underwriting and consumer health and wellness. The acquisition of Myrtle Recovery Centers expands the company's operations into the behavioral health sector, which is a growing market.

Comparison to Industry Standards

• The company's financial performance is not directly comparable to established companies in the life insurance or healthcare sectors due to its early stage of development and unique business model.
• The company's focus on epigenetic biomarkers is a novel approach, and there are limited direct competitors with similar offerings.
• The company's acquisition of Myrtle Recovery Centers is a strategic move to diversify its revenue streams and enter a more established market.
• The company's reliance on debt and equity financing is common for early-stage companies in the biotechnology and healthcare sectors.

Legal Proceedings

• The company is subject to various legal proceedings, claims, and regulatory, tax or government inquiries and investigations that arise in the ordinary course of business.
• The company is in default of the Settlement Agreement with Smithline and is currently in negotiations on a resolution.
• The company received a document request from the SEC regarding the termination of its former CEO and COO, but the SEC has concluded the investigation and does not intend to recommend an enforcement action.

Related Party Transactions

• The company has entered into a management agreement with RHI, a related party, for management and consulting services to Myrtle.
• The company has entered into a lease agreement with RHI for facilities at RHIs Big South Fork Medical Center campus.
• The company's Interim CEO and Interim CFO each are equity owners of KR8, with whom the company has a license agreement.
• The company has outstanding notes payable with related parties.

Stakeholder Impact

• Shareholders face the risk of further dilution and potential delisting from the NYSE.
• Employees may be affected by the company's financial instability and potential restructuring.
• Customers may be impacted by changes in the company's product offerings and service delivery.
• Suppliers and creditors face the risk of non-payment due to the company's financial difficulties.

Next Steps

• The company will continue to pursue additional funding through equity or debt financings.
• The company will work to close the stock exchange agreement with RHI to acquire Rennova Community Health, Inc.
• The company will continue to commercialize its products and services to generate revenue.
• The company will work to cure the default under its Senior PIK Notes.
• The company will work to regain compliance with NYSE listing standards.

Key Dates

Keywords

epigenetics, biomarkers, healthcare, Myrtle Recovery Centers, Rennova Community Health, promissory notes, stock exchange, senior notes, financial results, NYSE American