ACQUISITION AND STOCK EXCHANGE AGREEMENTS

6 Months Ended

Jun. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

ACQUISITION AND STOCK EXCHANGE AGREEMENTS

Note 5 ACQUISITION AND STOCK EXCHANGE AGREEMENTS

On June 10, 2024, the Company entered into two stock exchange agreements, each with Rennova Health, Inc., a Delaware corporation, (“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 $500, 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. As of June 30, 2024, the Company recorded a non-interest bearing note payable due on demand to RHI in the amount of $265 and it recorded the remaining purchase price of $235 payable in 1,023,629 shares of its Class A Common Stock issuable to RHI as additional paid-in-capital. The number of shares of the Company’s Class A Common Stock issuable to RHI was determined by dividing $235 by the volume weighted average price of the Company’s Common Stock on the day prior to closing, which was $0.23 per share. The Company issued the shares to RHI on July 17, 2024. The purchase price payable for the equity interest in Myrtle will be subject to certain post-closing adjustments, as provided in the Myrtle Agreement.

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.

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 RHI’s Big South Fork Medical Center 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 supplements 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 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.

The preliminary fair value of the purchase consideration payable to RHI under the terms of the Myrtle Agreement was allocated to the net tangible and intangible assets acquired. The Company accounted for the acquisition as a business combination 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 date, at their respective fair values and consolidated with those of the Company.

The Company will undertake a valuation study to determine the fair value of the assets acquired. The preliminary estimated fair value of the assets acquired, and net of the liabilities assumed is approximately $500. The excess of the purchase price over the aggregate fair value of the tangible assets acquired and liabilities transferred is currently estimated to be $2,369 and has been treated as goodwill. In addition, during the measurement period or until a valuation study is complete, the provisional amounts used for the purchase price allocation are subject to adjustments for a period not to exceed one year from the acquisition date. As a result, upon completion of a valuation study, the amount of goodwill presented below may be increased or decreased. The preliminary purchase price allocation was based, in part, on discussions with RHI.

Management Agreement

On June 1, 2024, Myrtle and RHI entered into a management agreement wherein RHI agreed to provide management and consulting services to Myrtle for a management fee of $15 per month. The agreement can be terminated by either party at any time without cause on 30 days written notice to the other party.

Lease Agreement

Myrtle entered into a formal lease agreement with RHI under which Myrtle agreed to lease facilities at RHI’s Big South Fork Medical Center campus beginning on June 14, 2024 for a term of one year with annual options to renew for up to five additional years with an initial monthly base rental amount of $35 and annual rent increases equal to the greater of 3% and the consumer price index. The lease has been accounted for as a right-of-use asset and obligation as more fully discussed in Note 11.

FOXO acquired Myrtle as a synergistic opportunity to expand its operations into the healthcare sector and as a compliment to its epigenetic biomarkers of human health, wellness and aging.

The following table shows the preliminary allocation of the purchase price of Myrtle to the acquired identifiable assets acquired, and liabilities transferred on June 14, 2024:

Total purchase price	$	500
Tangible and Intangible assets acquired, and liabilities assumed at estimated fair value:
Cash	$	6
Accounts receivable, net		284
Property and equipment, net		221
Right-of-use lease asset		1,463
Accounts payable		(708	)
Accrued expenses		(99	)
Right-of-use lease liability		(1,463	)
Note payable to RHI		(1,611	)
Noncontrolling interest		38
Assets acquired, net of liabilities transferred	$	(1,869	)
Goodwill	$	2,369

The total cost relating to the acquisition was approximately $505. This includes the $500 consideration to RHI and legal costs of approximately $5, which were expensed as of June 30, 2024.

The following presents the unaudited pro-forma combined results of operations of the Company and Myrtle as if the acquisition had occurred on January 1, 2023.

	Three-Months Ended						Six-Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Net Revenue	$	137		$	12		$	316		$	25
Net loss		(2,394	)		(11,361	)		(4,441	)		(19,077	)
Deemed dividend from trigger of down round provision feature		(310	)		(2,466	)		(966	)		(2,466	)
Net loss to common stockholders	$	(2,704	)	$	(13,827	)	$	(5,407	)	$	(21,543	)
Net loss per share:
Basic and diluted net loss to common stockholders	$	(0.24	)	$	(3.59	)	$	(0.51	)	$	(5.99	)
Weighted average number of common shares outstanding during the period:
Basic and diluted		11,365			3,851			10,653			3,598

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 acquisition been completed as of January 1, 2023 or to project potential operating results as of any future date or for any future periods.

Second Stock Exchange Agreement with RHI

In the second agreement with RHI (the “RCHI Agreement”), dated June 10, 2024, the Company agreed to issue 20,000 shares of its to be designated Series A Cumulative Convertible Redeemable Preferred Stock (the “Preferred Stock”) to RHI in exchange for all of the outstanding shares of RHI’s subsidiary, Rennova Community Health, Inc. (“RCHI”). RCHI owns all of the outstanding shares of Scott County Community Hospital, Inc. (operating as Big South Fork Medical Center), RHI’s critical access care hospital in Oneida, Tennessee. Each share of the Company’s Preferred Stock will have a stated value of $1. The number of shares of the Company’s Preferred Stock issuable to RHI upon the closing of the RCHI Agreement is subject to adjustment as provided in the RCHI Agreement.

The closing of the RCHI Agreement is subject to a number of conditions, including the approval of the shareholders of each of the Company and RHI.