8-K: FOXO Technologies Secures $2.8 Million in Senior Notes for Acquisitions and Working Capital

FOXO Technologies Inc. has obtained up to $2.8 million in senior notes to fund the acquisition of Myrtle Recovery Centers, Inc. and for general working capital.

Summary

• FOXO Technologies Inc. has entered into a Securities Purchase Agreement to issue up to $2.8 million in senior notes to an institutional investor.
• The initial closing will provide $840,000 in notes and 1,108,755 shares of Class A Common Stock, representing 9.99% of outstanding shares.
• Subsequent closings are contingent on the filing of a proxy statement for the acquisition of Rennova Community Health, Inc., the closing of the acquisition, and the filing of a registration statement for resale of shares.
• The notes mature on June 14, 2025, and do not accrue interest unless an event of default occurs, at which point the interest rate is 18% per annum.
• The notes have a 12% original issue discount, meaning the principal amount is 1.12 times the subscription amount.
• The company intends to use $350,000 of the initial proceeds to pay legal and accounting fees and $400,000 to pay outstanding rent and services fees owed by Myrtle to Rennova.
• The company has stated that the combined unaudited net revenue of Myrtle Recovery Centers, Inc. and Scott County Community Hospital, Inc. was approximately $18.7 million and net income was approximately $5.2 million for the twelve months ended December 31, 2023.

Sentiment

Score: 6

Explanation: The document is moderately positive, highlighting the funding secured for acquisitions and growth, but also includes risks and negative aspects such as the high discount and default interest rate on the notes and the company's history of losses.

Positives

• The funding will support the acquisition of Myrtle Recovery Centers, Inc. and provide additional working capital.
• The company believes the acquisitions will be transformative and synergistic with their existing business.
• The company has secured funding from an institutional investor, which is seen as a validation of their business model.

Negatives

• The notes do not accrue interest unless an event of default occurs, which could be a concern for investors.
• The notes have a 12% original issue discount, which reduces the initial value of the investment.
• The company has a history of losses and may not achieve or maintain profitability in the future.

Risks

• The company may not be able to satisfy the continued listing requirements of NYSE American.
• There are risks associated with the competitive and highly regulated industries in which FOXO operates.
• The company may face challenges in implementing its business plans and forecasts.
• There is a risk that the company may not be able to obtain financing in the future.
• The company's intellectual property may not be enforceable, and there is a risk of infringement on the intellectual property rights of others.
• There is a risk of downturns and a changing regulatory landscape in the biotechnology and insurance industries.

Future Outlook

The company expects the acquisitions of Myrtle Recovery Centers, Inc. and Scott County Community Hospital, Inc. to be transformative and synergistic with their existing epigenetic and AI-based solutions. They look forward to providing further updates.

Management Comments

• Mark White, Interim CEO of FOXO, said, 'We appreciate the support of this institutional investor, which we believe is further validation of our business model.'
• Mark White also stated, 'Specifically, we intend to use the proceeds to complete the acquisition of Myrtle Recovery Centers, Inc., as well as advance our planned acquisition of Scott County Community Hospital, Inc. (d/b/a Big South Fork Medical Center).'

Industry Context

This announcement reflects a trend of biotechnology companies seeking funding through private placements to support acquisitions and growth. The focus on epigenetic and AI-based solutions aligns with the growing interest in personalized medicine and advanced healthcare technologies.

Comparison to Industry Standards

• The use of senior notes for funding acquisitions is a common practice in the biotechnology industry, particularly for companies seeking to expand their operations.
• The 12% original issue discount is relatively high, which may reflect the risk associated with the company's current financial situation and the nature of the investment.
• The 18% default interest rate is also high, indicating the risk premium associated with the investment.
• The combined revenue and net income figures for Myrtle and Big South Fork Medical Center are significant and suggest a potentially accretive acquisition for FOXO.
• Comparable companies in the biotechnology space often use a mix of debt and equity financing to fund acquisitions and growth initiatives.

Related Party Transactions

• The company will use $400,000 of the initial proceeds to pay outstanding rent and services fees owed by Myrtle to Rennova.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of new shares.
• Employees may benefit from the company's growth and expansion.
• Customers may see improved services and products as a result of the acquisitions.
• Creditors may be impacted by the company's increased debt load.

Next Steps

• The company will file a preliminary proxy statement or information statement with the SEC relating to the acquisition of Rennova Community Health, Inc.
• The company will close the acquisition of Rennova Community Health, Inc.
• The company will file a registration statement with the SEC relating to the resale of shares by the purchasers.
• The company will seek approval from NYSE American for the issuance of shares.
• The company will continue to work towards the acquisition of Scott County Community Hospital, Inc.

Key Dates

Keywords

Senior Notes, Acquisition, Working Capital, Institutional Investor, Myrtle Recovery Centers, Rennova Health, Epigenetic Technology, Class A Common Stock, Securities Purchase Agreement, NYSE American