UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 001-39783
FOXO TECHNOLOGIES INC.
(Exact name of registrant as specified in its
charter)
| Delaware | | 85-1050265 |
(State or other jurisdiction of
incorporation or organization) | | (I.R.S. Employer
Identification No.) |
729 N. Washington Ave., Suite 600 Minneapolis, MN | | 55401 |
| (Address of principal executive offices) | | (Zip Code) |
(612) 562-9447
(Registrant’s telephone number, including
area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class: | | Trading Symbol(s) | | Name of Each Exchange on Which Registered: |
| Class A Common Stock, par value $0.0001 | | FOXO | | NYSE American |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☐ No ☒
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☐ No ☒
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer, “smaller reporting company” and “emerging
growth company” in Rule 12b-2.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☒ | | |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of January 19, 2024, there were 8,946,032
shares of Class A common stock, par value $0.0001 per share (the “Class A Common Stock”) of the registrant issued and outstanding.
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-Q/A (the “Amendment”)
amends the Quarterly Report on Form 10-Q of FOXO Technologies Inc. (the “Company”) for the three and nine months ended September
30, 2023 filed with the Securities and Exchange Commission on January 19, 2024 (the “Original 10-Q”). On May 30, 2024, after
review and consideration of the errors described below, the Board of Directors, after consultation with Kreit & Chiu CPA LLP, the
Company’s independent registered public accounting firm, concluded that the Company’s financial statements for the three
and nine months ended September 30, 2023 (the “September 30, 2023 Financial Statements”) could no longer be relied upon as
being in compliance with generally accepted accounting principles. Accordingly, the Company is restating the September 30, 2023 Financial
Statements.
Subsequent to filing the Original 10-Q, the
Company determined that the down round provisions of common stock warrants that the Company assumed in a business combination that closed
on September 22, 2022 (the “Assumed Warrants”) had been triggered on September 19, 2023. The triggering event occurred as
a result of the issuance of rights to receive shares (the “Rights”) under the terms of a Shares for Services Agreement (the
“SSA Agreement”) dated September 19, 2023. The SSA Agreement was filed as Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed with the Commission on September 19, 2023. Under Section 3(b)(i) of the Form of Assumed Warrants, the Rights constituted
a dilutive issuance and, as such, required the company to reduce the per share exercise price of the outstanding Assumed Warrants and
proportionally increase the number of Assumed Warrants outstanding.
In accordance with Accounting Standard Update
(“ASU”) 2017-11, “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and
Hedging (Topic 815),” as amended, when determining whether certain financial instruments should be classified as liabilities or
equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to
an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result,
a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability
at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments
require entities that present earnings (loss) per share (EPS) in accordance with Topic 260 to recognize the effect of the down round
feature when it is triggered. That effect is treated as a deemed dividend and as a reduction of income (or an increase in the net loss)
available to common stockholders in basic and diluted EPS.
In May 2021, the Financial Accounting Standards
Board (the “FASB”) issued ASU 2021-04, “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments
(Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own
Equity (Subtopic 815-40), Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written
Call Options.” The FASB issued this update to clarify and reduce diversity in an issuer’s accounting for modifications or
exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification
or exchange. The guidance clarifies whether an issuer should account for a modification or an exchange of a freestanding equity-classified
written call option that remains equity classified after modification or exchange as (1) an adjustment to equity (that is, deemed dividends)
and, if so, the related earnings per share (EPS) effects, if any, or (2) an expense and, if so, the manner and pattern of recognition.
The deemed dividend represents the increase in the fair value of the derivative as a result of the modification.
During the six months ended June 30, 2023,
the Company recorded a deemed dividend of $2.5 million in connection with an Exchange Offer, which is more fully discussed in Note 7
to the accompanying unaudited condensed consolidated financial statements. However, the Company did not record the deemed dividend resulting
from the trigger of the down round provisions of the Assumed Warrants in the Original 10-Q. Therefore, the deemed dividend was understated
in the three and nine months ended September 30, 2023 by approximately $0.9 million. The Company is required to report any increase in
the fair value of the Assumed Warrants resulting from a trigger of the down round provisions as a deemed dividend in its financial statements
with a corresponding increase in the net loss available to common shareholders.
The error discussed above also resulted in
an understatement of the reported number of Assumed Warrants outstanding at September 30, 2023 from a reported 25,868 Assumed Warrants
outstanding to a corrected 2,007,848 Assumed Warrants outstanding and an overstatement of the exercise price of the Assumed Warrants
from a reported $62.10 per share to a corrected exercise price of $0.80 per share. Accordingly, we are restating our previously filed
financial statements to correct these errors. The correction of these errors did not impact assets, liabilities, total stockholders’
deficit, total cash flows, net loss or comprehensive loss.
The effect of the restatement on each of our
financial statements as of September 30, 2023 and for the three and nine months ended September 30, 2023 is as follows (dollars in thousands,
except per share amounts):
Unaudited Condensed Consolidated Balance
Sheets Data
| | |
As Previously
Reported
September 30,
2023 | | |
Correction | | |
As Restated
September 30,
2023 | |
| Stockholders’ deficit | |
| | |
| | |
| |
| Preferred stock, $0.0001 par value, 10,000,000 shares
authorized, none shares issued and outstanding | |
$ | - | | |
$ | - | | |
$ | - | |
| Common stock, $0.0001 par value, 500,000,000
shares authorized, 5,916,852 shares issued and outstanding | |
$ | 6 | | |
$ | - | | |
$ | 6 | |
| Additional paid-in-capital | |
$ | 161,180 | | |
$ | 912 | | |
$ | 162,092 | |
| Accumulated deficit | |
$ | (172,289 | ) | |
$ | (912 | ) | |
$ | (173,201 | ) |
| Total stockholders’ deficit | |
$ | (11,103 | ) | |
$ | - | | |
$ | (11,103 | ) |
Unaudited
Condensed Consolidated Statements of Operations Data
| | |
For
the
Three Months
Ended
September 30,
2023
As Previously
Reported | | |
Correction | | |
For
the
Three Months
Ended
September 30,
2023
As Restated | |
| | |
| | |
| | |
| |
| Net loss | |
$ | (3,660 | ) | |
$ | - | | |
$ | (3,660 | ) |
| Deemed dividends | |
$ | - | | |
$ | (912 | ) | |
$ | (912 | ) |
| Net loss to common stockholders | |
$ | (3,660 | ) | |
$ | (912 | ) | |
$ | (4,572 | ) |
| Net loss per share, basic and diluted | |
$ | (0.75 | ) | |
$ | (0.19 | ) | |
$ | (0.94 | ) |
Unaudited Condensed Consolidated Statements
of Operations Data
| | |
For
the
Nine Months
Ended
September 30,
2023
As Previously
Reported | | |
Correction | | |
For
the
Nine Months
Ended
September 30,
2023
As Restated | |
| | |
| | |
| | |
| |
| Net
loss | |
$ | (22,592 | ) | |
| - | | |
$ | (22,592 | ) |
| Deemed
dividends | |
$ | (2,466 | ) | |
| (912 | ) | |
$ | (3,378 | ) |
| Net
loss to common stockholders | |
$ | (25,058 | ) | |
| (912 | ) | |
$ | (25,970 | ) |
| Net
loss per share, basic and diluted | |
$ | (7.48 | ) | |
| (0.27 | ) | |
$ | (7.75 | ) |
Unaudited Condensed Consolidated Statement
of Changes in Stockholders’ Deficit Data
| | |
For
the
Three Months Ended September 30, 2023
As Previously
Reported | | |
Correction | | |
For
the Three Months Ended September
30, 2023
As Restated | |
| Additional paid-in-capital at September 30, 2023 | |
$ | 161,180 | | |
$ | 912 | | |
$ | 162,092 | |
| Accumulated deficit at September 30, 2023 | |
$ | (172,289 | ) | |
$ | (912 | ) | |
$ | (173,201 | ) |
| | |
For
the Nine Months Ended September 30, 2023
As Previously Reported | | |
Correction | | |
For
the Nine Months Ended September
30, 2023
As Restated | |
| Additional paid-in-capital at September 30, 2023 | |
$ | 161,180 | | |
$ | 912 | | |
$ | 162,092 | |
| Accumulated deficit at September 30, 2023 | |
$ | (172,289 | ) | |
$ | (912 | ) | |
$ | (173,201 | ) |
Unaudited Condensed Consolidated Statements
of Cash Flows Supplemental Data
| | |
For
the Nine Months Ended September
30, 2023
As Previously Reported | | |
Correction | | |
For
the Nine Months Ended September
30, 2023
As Restated | |
| NONCASH INVESTING AND FINANCING ACTIVITIES: | |
| | |
| | |
| |
| Deemed dividends from Exchange Offer and down
round provisions of Assumed Warrants | |
$ | 2,466 | | |
$ | 912 | | |
$ | 3,378 | |
As a result of the correction of the
errors, changes have been made to Part I, Item 1 (Financial Statements), Item 2 (Management’s Discussion and Analysis of
Financial Condition and Results of Operations) and Part II, Item 1A (Risk Factors). As required by Rule 12b-15 under the Securities
Exchange Act of 1934, as amended, the Company’s Interim Chief Executive Officer and Interim Chief Financial Officer are
providing currently dated certifications, set forth in Exhibits 31.1, 31.2 and 32.1 to this Amendment. Thus, the Company hereby
amends Part 1, Items 1 and 2 and Part II, Item 1A of the Original Filing and adds such currently dated certificates and updated XBRL
as Exhibits.
Except as disclosed above, the Amendment does not modify or update
the disclosures presented in, or exhibits to, the Original 10-Q.
FOXO
TECHNOLOGIES INC.
FORM 10-Q/A FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 2023
TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
AND OTHER INFORMATION
CONTAINED IN THIS REPORT
This Quarterly Report on Form 10-Q/A, or
this Report, and the documents incorporated herein by reference contain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), which include, without limitation, Statements regarding estimates and forecasts of financial
and performance metrics, projections of market opportunity and market share, potential benefits and the commercial attractiveness to
its customers of our products and services, the potential success of our marketing and expansion strategies, realization of the potential
benefits of the Business Combination (including with respect to stockholder value and other aspects of our business identified in this
Report), as well as other reports that we file from time to time with the Securities and Exchange Commission. Any statements about our
business, financial results, financial condition and operations contained in this Report that are not statements of historical fact may
be deemed to be forward-looking statements. These forward-looking statements represent our intentions, plans, expectations, assumptions
and beliefs about future events and are subject to risks, uncertainties and other factors including, without limitation, the direct and
indirect effects of coronavirus disease 2019, or COVID-19, and related issues that may arise therefrom.
Without limiting the foregoing, the words
“believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,”
or similar expressions are intended to identify forward-looking statements. We undertake no obligation to update publicly any forward-looking
statements for any reason, except as required by law, even as new information becomes available or other events occur in the future.
Our actual results could differ materially from those expressed or implied by these forward-looking statements as a result of various
factors, including the risk factors described in Part I., Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2022, which was filed with the U.S. Securities and Exchange Commission (the “SEC”) on
March 31, 2023, and elsewhere in this Report such as, but not limited to:
| ● | we
have a history of losses and may not achieve or maintain profitability in the future; |
| ● | our
independent registered public accounting firm has included an explanatory paragraph relating
to our ability to continue as a going concern, which could limit our ability to raise additional
capital; |
| ● | we
will require additional capital to commercialize our product and service offerings and grow
our business, which may not be available on terms acceptable to us or at all; |
| ● | the
loss of the services of our current executives or other key employees, or failure to attract
additional key employees; |
| ● | the
strength of our brands and our ability to develop, maintain and enhance our brands and our
ability to develop and expand our customer base; |
| ● | access
to the substantial resources to continue the development of new products and services; |
| ● | our
ability to commercialize our technology enabled products and services with a high level of
service at a competitive price, achieve sufficient sales volumes to realize economies of
scale and create innovative new products and services to offer to our customers; |
| ● | our
ability to effectively and in a cost-feasible manner acquire, maintain and engage with our
targeted customers; |
| ● | the
impact on our business of security incidents or real or perceived errors, failures or bugs
in our systems and/or websites |
| ● | the
impact of changes in the general economic conditions; |
| ● | our
success and ability to establish and grow our epigenetic testing service and the development
of epigenetic biomarkers; |
| ● | our
ability to apply the relatively new field of epigenetics to the industries in which we seek
to operate; |
| ● | our
ability to validate and improve the results of our 2019 Pilot Study; |
| ● | the
impact of competition in the personal health and wellness testing market; |
| ● | our
ability to procure materials and services from third-party suppliers for our epigenetic testing
services; |
| ● | our
ability to maintain compliance now or in the future to laws and regulations relating to laboratory
testing, our consumer engagement services and our use of epigenetic biomarkers; |
| ● | our
ability to maintain focus on our main business line initiatives, while providing ancillary
product and service offerings that support our baseline technology; |
| ● | our
ability to satisfy the regulatory conditions that our business operates in; |
| ● | the
ability to contract or maintain relationships related to selling life insurance products
underwritten and issued by third-party carriers; |
| ● | competition
in the industries in which we operate or seek to operate; |
| ● | the
dependence on search engines, social media platforms, content-based online advertising and
other online sources to attract customers to our website; |
| ● | our
ability to comply with customer privacy and data privacy and security laws and regulations; |
| ● | our
ability to prevent or address the misappropriation of our data; |
| ● | our
ability to comply with current and changes to regulations in the jurisdiction in which we
operate; |
| ● | the
impact of new legislation or legal requirements affecting how we communicate with our customers; |
| ● | our
ability to obtain sufficiently broad protection of our intellectual property throughout the
world; |
| ● | the
impact of changes in trademark or patent law in the United States and other jurisdictions; |
| ● | the
impact of claims that our employees, consultants or independent contractors have wrongfully
used or disclosed confidential information of third parties or that our employees have wrongfully
used or disclosed alleged trade secret of their former employers; |
| ● | lawsuits
and other claims by third parties or investigations by various regulatory agencies that we
may be subjected to and are required to report to, including but not limited to, the SEC; |
| ● | our
ability to successfully register and enforce our trademarks; |
| ● | the
impact of claims challenging the inventorship of our patents and other intellectual property; |
| ● | the
adequacy of our patent terms to protect our competitive position; and |
| ● | the
risks to our proprietary software and source code from our use of open source software. |
Unless expressly indicated or the context requires
otherwise, the terms “FOXO,” the “Company,” “we,” “us” or “our” in this Report
refer to FOXO Technologies Inc., a Delaware corporation, and, where appropriate, its subsidiaries.
PART I - FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
FOXO
technologies inc. and subsidiaries
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Dollars in thousands, except per share data)
(Unaudited)
| | |
September 30, | | |
December 31, | |
| | |
2023 | | |
2022 | |
| | |
| | |
| |
| Assets | |
| | |
| |
| Current assets | |
| | |
| |
| Cash and cash equivalents | |
$ | 42 | | |
$ | 5,515 | |
| Supplies | |
| 1,131 | | |
| 1,313 | |
| Prepaid expenses | |
| 1,306 | | |
| 2,686 | |
| Prepaid consulting fees | |
| - | | |
| 2,676 | |
| Other current assets | |
| 106 | | |
| 114 | |
| Total current assets | |
| 2,585 | | |
| 12,304 | |
| Intangible assets | |
| 428 | | |
| 2,043 | |
| Reinsurance recoverables | |
| - | | |
| 18,573 | |
| Cloud computing arrangements | |
| - | | |
| 2,225 | |
| Other assets | |
| 118 | | |
| 263 | |
| Total assets | |
$ | 3,131 | | |
$ | 35,408 | |
| | |
| | | |
| | |
| Liabilities and Stockholders’ (Deficit) Equity | |
| | | |
| | |
| Current liabilities | |
| | | |
| | |
| Accounts payable | |
$ | 4,816 | | |
$ | 3,466 | |
| Related party payables | |
| 747 | | |
| 500 | |
| Senior PIK Notes | |
| 4,006 | | |
| 1,409 | |
| Accrued severance | |
| 1,528 | | |
| 1,045 | |
| Accrued settlement | |
| 2,300 | | |
| - | |
| Accrued and other liabilities | |
| 119 | | |
| 493 | |
| Total current liabilities | |
| 13,516 | | |
| 6,913 | |
| Warrant liability | |
| 67 | | |
| 311 | |
| Senior PIK Notes | |
| - | | |
| 1,730 | |
| Policy reserves | |
| - | | |
| 18,573 | |
| Other liabilities | |
| 651 | | |
| 1,173 | |
| Total liabilities | |
| 14,234 | | |
| 28,700 | |
| Commitments and contingencies (Note 12) | |
| | | |
| | |
| Stockholders’ (deficit) equity | |
| | | |
| | |
Preferred stock, $0.0001 par value; 10,000,000 shares authorized, none issued or outstanding as of September 30, 2023 and December 31, 2022 | |
| - | | |
| - | |
| Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 5,916,852 and 2,966,967 issued, and 5,916,852 and 2,752,890 outstanding as of September 30, 2023 and December 31, 2022, respectively | |
| 6 | | |
| 3 | |
| Treasury stock, at cost, 0 and 214,077 as of September 30, 2023 and December 31, 2022, respectively | |
| - | | |
| - | |
| Additional paid-in capital | |
| 162,092 | | |
| 153,936 | |
| Accumulated deficit | |
| (173,201 | ) | |
| (147,231 | ) |
| Total stockholders’ (deficit) equity | |
| (11,103 | ) | |
| 6,708 | |
| Total liabilities and stockholders’ (deficit) equity | |
$ | 3,131 | | |
$ | 35,408 | |
See accompanying Notes to Unaudited Condensed
Consolidated Financial Statements
Foxo
Technologies INc. and subsidiaries
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
| | |
Three Months Ended
September
30, | | |
Nine Months Ended
September
30, | |
| | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| Total revenue | |
$ | 10 | | |
$ | 14 | | |
$ | 35 | | |
$ | 93 | |
| Cost of sales | |
| 70 | | |
| - | | |
| 70 | | |
| - | |
| Gross profit | |
| (60 | ) | |
| 14 | | |
| (35 | ) | |
| 93 | |
| Operating expenses: | |
| | | |
| | | |
| | | |
| | |
| Research and development | |
| 283 | | |
| 558 | | |
| 925 | | |
| 2,160 | |
| Management contingent share plan expense (forfeitures) | |
| (1,553 | ) | |
| - | | |
| (141 | ) | |
| - | |
| Impairment of intangible assets and cloud computing
arrangements | |
| - | | |
| - | | |
| 2,633 | | |
| - | |
| Selling, general and administrative | |
| 4,717 | | |
| 8,269 | | |
| 15,052 | | |
| 17,239 | |
| Total operating expenses | |
| 3,447 | | |
| 8,827 | | |
| 18,469 | | |
| 19,399 | |
| Loss from operations | |
| (3,507 | ) | |
| (8,813 | ) | |
| (18,504 | ) | |
| (19,306 | ) |
| Non-cash change in fair value of convertible debentures | |
| - | | |
| (3,697 | ) | |
| - | | |
| (28,180 | ) |
| Change in fair value of warrant liability | |
| 36 | | |
| 1,349 | | |
| 244 | | |
| 1,349 | |
| Change in fair value of forward purchase put derivative | |
| - | | |
| (1,284 | ) | |
| | | |
| (1,284 | ) |
| Change in fair value of forward purchase collateral
derivative | |
| - | | |
| (27,378 | ) | |
| | | |
| (27,378 | ) |
| Loss from PIK Note Amendment and 2022 Debenture Release | |
| | | |
| - | | |
| (3,521 | ) | |
| - | |
| Interest expense | |
| (148 | ) | |
| (424 | ) | |
| (865 | ) | |
| (1,250 | ) |
| Other income (expense) | |
| (41 | ) | |
| (779 | ) | |
| 54 | | |
| (883 | ) |
| Total non-operating expense | |
| (153 | ) | |
| (32,213 | ) | |
| (4,088 | ) | |
| (57,626 | ) |
| Loss before income taxes | |
| (3,660 | ) | |
| (41,026 | ) | |
| (22,592 | ) | |
| (76,932 | ) |
| Provision for income taxes | |
| - | | |
| - | | |
| - | | |
| | |
| Net loss | |
$ | (3,660 | ) | |
$ | (41,026 | ) | |
$ | (22,592 | ) | |
$ | (76,932 | ) |
Deemed
dividends related to the Exchange Offer and trigger of down round provisions of Assumed Warrants | |
| (912 | ) | |
| - | | |
| (3,378 | ) | |
| - | |
| Net loss to common stockholders | |
$ | (4,572 | ) | |
$ | (41,026 | ) | |
$ | (25,970 | ) | |
$ | (76,932 | ) |
| | |
| | | |
| | | |
| | | |
| | |
Net loss per share of Class A common stock, basic and diluted | |
$ | (0.94 | ) | |
$ | (67.04 | ) | |
$ | (7.75 | ) | |
$ | (128.65 | ) |
See accompanying Notes to Unaudited Condensed
Consolidated Financial Statements
FOXO TECHNOLOGIES INC.
and subsidiaries
CONDENSED CONSOLIDATED STATEMENTS
OF STOCKHOLDERS’ (DEFICIT) EQUITY
(Dollars in thousands)
(Unaudited)
| | |
FOXO
Technologies Operating Company | | |
FOXO
Technologies Inc. | | |
| | |
| | |
| |
| | |
Series
A
Preferred Stock | | |
Common
Stock (Class A) | | |
Common
Stock (Class B) | | |
Common
Stock (Class A) | | |
Treasury
Stock | | |
Additional
Paid- | | |
Accumulated | | |
| |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
in-Capital | | |
Deficit | | |
Total | |
| Three
Months Ended September 30, 2022 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Balance,
June 30, 2022 | |
| 800,000 | | |
$ | 21,854 | | |
| 154,516 | | |
$ | - | | |
| 200,000 | | |
$ | - | | |
| - | | |
$ | - | | |
| - | | |
$ | 12,026 | | |
$ | (87,882 | ) | |
$ | (54,002 | ) |
| Activity
prior to the business combination: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net
loss to common stockholders | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (9,531 | ) | |
| (9,531 | ) |
| Equity-based
compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 211 | | |
| - | | |
| 211 | |
| Effects
of the business combination: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Conversion
of Series A Preferred Stock | |
| (800,000 | ) | |
| (21,854 | ) | |
| 800,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 21,854 | | |
| - | | |
| - | |
| Conversion
of Bridge Loans | |
| - | | |
| - | | |
| 1,517,273 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 88,975 | | |
| - | | |
| 88,975 | |
| Conversion
of Class B Common Stock | |
| - | | |
| - | | |
| 200,000 | | |
| - | | |
| (200,000 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Conversion
of existing Class A Common Stock | |
| - | | |
| - | | |
| (2,671,789 | ) | |
| - | | |
| - | | |
| - | | |
| 1,551,871 | | |
| 1 | | |
| - | | |
| - | | |
| - | | |
| 1 | |
| Reverse
recapitalization | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 814,365 | | |
| 1 | | |
| - | | |
| 19,677 | | |
| - | | |
| 19,678 | |
| Activity
after the business combination: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net
loss to common stockholders | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (31,495 | ) | |
| (31,495 | ) |
| Equity-based
compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 917,500 | | |
| 1 | | |
| - | | |
| 329 | | |
| - | | |
| 330 | |
| Cantor
Commitment Fee | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 19,048 | | |
| - | | |
| - | | |
| 1,600 | | |
| - | | |
| 1,600 | |
| Balance,
September 30, 2022 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 3,302,784 | | |
$ | 3 | | |
| - | | |
$ | 144,672 | | |
$ | (128,908 | ) | |
$ | 15,767 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Nine
Months Ended September 30, 2022 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance,
December 31, 2021 | |
| 800,000 | | |
$ | 21,854 | | |
| 3,021 | | |
$ | - | | |
| 200,000 | | |
$ | - | | |
| - | | |
$ | - | | |
| - | | |
$ | 4,902 | | |
$ | (51,976 | ) | |
$ | (25,220 | ) |
| Activity
prior to the business combination: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net
loss to common stockholders | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (45,437 | ) | |
| (45,437 | ) |
| Lease
contributions | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 225 | | |
| - | | |
| 225 | |
| Equity-based
compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 717 | | |
| - | | |
| 717 | |
| Warrant
repurchase | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (507 | ) | |
| - | | |
| (507 | ) |
| Issuance
of shares for exercised stock options | |
| - | | |
| - | | |
| 1,495 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Issuance
of shares for consulting agreement | |
| - | | |
| - | | |
| 150,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 211 | | |
| - | | |
| 211 | |
| Effects
of the business combination: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Conversion
of Series A Preferred Stock | |
| (800,000 | ) | |
| (21,854 | ) | |
| 800,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 21,854 | | |
| - | | |
| - | |
| Conversion
of Bridge Loans | |
| - | | |
| - | | |
| 1,517,273 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 88,975 | | |
| - | | |
| 88,975 | |
| Conversion
of Class B Common Stock | |
| - | | |
| - | | |
| 200,000 | | |
| - | | |
| (200,000 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Conversion
of existing Class A Common Stock | |
| - | | |
| - | | |
| (2,671,789 | ) | |
| - | | |
| - | | |
| - | | |
| 1,551,871 | | |
| 1 | | |
| - | | |
| - | | |
| - | | |
| 1 | |
| Reverse
recapitalization | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 814,365 | | |
| 1 | | |
| - | | |
| 19,677 | | |
| - | | |
| 19,678 | |
| Activity
after the business combination: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net
loss to common stockholders | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (31,495 | ) | |
| (31,495 | |
| Equity-based
compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 917,500 | | |
| 1 | | |
| - | | |
| 329 | | |
| - | | |
| 330 | |
| Cantor
Commitment Fee | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 19,048 | | |
| - | | |
| - | | |
| 1,600 | | |
| - | | |
| 1,600 | |
| Balance,
September 30, 2022 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 3,302,784 | | |
$ | 3 | | |
| - | | |
$ | 144,672 | | |
$ | (128,908 | ) | |
$ | 15,767 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Three
Months Ended September 30, 2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance,
June 30, 2023 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| - | | |
| - | | |
| 4,648,096 | | |
$ | 5 | | |
| - | | |
$ | 161,594 | | |
$ | (168,629 | ) | |
$ | (7,030 | ) |
| Net
loss to common stockholders | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,572 | ) | |
| (4,572 | ) |
| Stock-based
compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (329,032 | ) | |
| - | | |
| - | | |
| (1,447 | ) | |
| - | | |
| (1,447 | ) |
| Private
placements net of issuance costs | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 929,376 | | |
| 1 | | |
| - | | |
| 443 | | |
| - | | |
| 444 | |
| Issuance
of shares to Joseph Gunner | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 276,875 | | |
| | | |
| | | |
| 221 | | |
| | | |
| 221 | |
| Issuance
of shares to MSK | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 292,867 | | |
| | | |
| | | |
| 234 | | |
| - | | |
| 234 | |
| Deemed
dividend related to down round provisions of Assumed Warrants | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| | | |
| 912 | | |
| - | | |
| 912 | |
| Issuance
of shares to employees | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 98,670 | | |
| - | | |
| - | | |
| 135 | | |
| - | | |
| 135 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance,
September 30, 2023 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 5,916,852 | | |
$ | 6 | | |
| - | | |
$ | 162,092 | | |
$ | (173,201 | ) | |
$ | (11,103 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Nine
Months Ended September 30, 2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance,
December 31, 2022 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 2,966,967 | | |
$ | 3 | | |
| (214,077 | ) | |
| 153,936 | | |
| (147,231 | ) | |
| 6,708 | |
| Net
loss to common stockholders | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (25,970 | ) | |
| (25,970 | ) |
| Stock-based
compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (365,132 | ) | |
| - | | |
| - | | |
| 226 | | |
| - | | |
| 226 | |
| 2022
Debenture Release | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 703,500 | | |
| 1 | | |
| - | | |
| 2,180 | | |
| - | | |
| 2,181 | |
| PIK
Note Amendment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 432,188 | | |
| - | | |
| - | | |
| 1,339 | | |
| - | | |
| 1,339 | |
| Exchange
Offer | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 795,618 | | |
| 1 | | |
| - | | |
| 2,466 | | |
| - | | |
| 2,467 | |
| Deemed dividends from trigger of down round provisions
of Assumed Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
912 |
|
|
|
- |
|
|
|
912 |
|
| Private
placements net of issuance costs | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 929,376 | | |
| 1 | | |
| - | | |
| 443 | | |
| - | | |
| 443 | |
| Issuance
of shares to employees | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 98,670 | | |
| - | | |
| - | | |
| 135 | | |
| - | | |
| 135 | |
| Issuance
of shares to MSK | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 292,867 | | |
| - | | |
| - | | |
| 234 | | |
| - | | |
| 234 | |
| Issuance
of shares to Joseph Gunner | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 276,875 | | |
| - | | |
| - | | |
| 221 | | |
| - | | |
| 221 | |
| Treasury
stock | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (214,077 | ) | |
| - | | |
| 214,077 | | |
| - | | |
| - | | |
| - | |
| Balance,
September 30, 2023 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 5,916,852 | | |
$ | 5 | | |
| - | | |
$ | 162,092 | | |
$ | (173,201 | ) | |
$ | (11,103 | ) |
See accompanying Notes to Unaudited Condensed
Consolidated Financial Statements
FOXO
TECHNOLOGIES INC. and subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
| | |
Nine Months Ended
September 30, | |
| | |
2023 | | |
2022 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | |
| |
| Net loss | |
$ | (22,592 | ) | |
$ | (76,932 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 1,251 | | |
| 159 | |
| Loss from PIK Note Amendment and 2022 Debenture Release | |
| 3,521 | | |
| - | |
| Equity-based compensation | |
| 361 | | |
| 1,002 | |
| Cantor Commitment Fee | |
| - | | |
| 1,600 | |
| Amortization of consulting fees paid in common stock | |
| 2,221 | | |
| 2,954 | |
| Impairment of intangible assets and cloud computing arrangements | |
| 2,633 | | |
| - | |
| Change in fair value of convertible debentures | |
| - | | |
| 28,180 | |
| Change in fair value of forward purchase agreement collateral derivative | |
| - | | |
| 27,378 | |
| Change in fair value of warrants | |
| (244 | ) | |
| (1,349 | ) |
| Change in fair value of forward purchase agreement put derivative | |
| - | | |
| 1,284 | |
| Conversion of accrued interest | |
| - | | |
| 593 | |
| PIK interest | |
| 419 | | |
| - | |
| Amortization of debt issuance costs | |
| 448 | | |
| - | |
| Contributions in the form of rent payments | |
| - | | |
| 225 | |
| Recognition of prepaid offering costs upon election of fair value option | |
| - | | |
| 107 | |
| Other | |
| 100 | | |
| - | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Supplies | |
| 182 | | |
| (1,762 | ) |
| Prepaid expenses and consulting fees | |
| 1,835 | | |
| (1,002 | ) |
| Other current assets | |
| 3 | | |
| - | |
| Cloud computing arrangements | |
| - | | |
| (1,941 | ) |
| Reinsurance recoverables | |
| 18,573 | | |
| 709 | |
| Accounts payable | |
| 1,806 | | |
| (489 | ) |
| Accrued and other liabilities | |
| 1,891 | | |
| 761 | |
| Policy reserves | |
| (18,573 | ) | |
| (709 | ) |
| Net cash used in operating activities | |
| (6,165 | ) | |
| (19,232 | ) |
| CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
| Purchase of property and equipment | |
| - | | |
| (108 | ) |
| Development of internal use software | |
| - | | |
| (1,622 | ) |
| Net cash used in investing activities | |
| - | | |
| (1,730 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
| Proceeds from issuance of convertible debentures | |
| - | | |
| 28,000 | |
| Warrant repurchase | |
| - | | |
| (507 | ) |
| Senior PIK Notes proceeds | |
| - | | |
| 3,458 | |
| Reverse recapitalization proceeds | |
| - | | |
| 23,226 | |
| Forward purchase agreement escrow | |
| - | | |
| (29,135 | ) |
| Forward purchase agreement proceeds | |
| - | | |
| 484 | |
| Forward purchase agreement collateral release to Meteora | |
| - | | |
| 733 | |
| Private placements | |
| 744 | | |
| - | |
| Related party promissory note | |
| 247 | | |
| (1,160 | ) |
| Deferred offering costs | |
| (299 | ) | |
| (539 | ) |
| Net cash provided by financing activities | |
| 692 | | |
| 24,560 | |
| Net change in cash and cash equivalents | |
| (5,473 | ) | |
| 3,598 | |
| Cash and cash equivalents at beginning of period | |
| 5,515 | | |
| 6,856 | |
| Cash and cash equivalents at end of period | |
$ | 42 | | |
$ | 10,454 | |
| | |
| | | |
| | |
| NONCASH INVESTING AND FINANCING ACTIVITIES: | |
| | | |
| | |
| 2022 Debenture Release | |
$ | 2,181 | | |
$ | - | |
| PIK Note Amendment | |
$ | 1,339 | | |
$ | - | |
Deemed dividends from Exchange
Offer and trigger of down round provisions of Assumed Warrants |
|
$ |
3,378 |
|
|
$ |
- |
|
| Conversion of debt | |
$ | - | | |
$ | 88,382 | |
| Conversion of preferred stock | |
$ | - | | |
$ | 21,854 | |
| Accrued internal use software | |
$ | - | | |
$ | 239 | |
See accompanying Notes to Unaudited Condensed
Consolidated Financial Statements
Foxo
technologies inc. and subsidiaries
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
Note
1 DESCRIPTION OF BUSINESS
FOXO Technologies Inc. (“FOXO” or
the “Company”), formerly known as Delwinds Insurance Acquisition Corp. (“Delwinds”), a Delaware corporation,
was originally formed in April 2020 as a publicly traded special purpose company for the purpose of effecting a merger, capital stock
exchange, asset acquisition, reorganization, or similar business combination involving one or more businesses. FOXO is a leader in commercializing
epigenetic biomarker technology to support groundbreaking scientific research and disruptive next-generation business initiatives. The
Company applies automated machine learning and artificial intelligence technologies to discover epigenetic biomarkers of human health,
wellness and aging. On October 29th, 2023 the Company entered into a Letter Agreement with KR8 AI Inc. to develop a Direct
to Consumer app (iOS and Android) combining its AI Machine Learning technology to provide a commercial application of Foxo’s epigenetic
biomarker technology as a subscription consumer engagement platform. The Letter Agreement limits the distribution of any such apps to
consumers in North America. The Letter Agreement provides that KR8 will grant the Company a non-provisional exclusive License with a
perpetual term upon the parties’ signing of a definitive license agreement.
The Company manages and reports results of operations
for the Company’s epigenetic biomarker technology business operations.
The Business Combination
On February 24, 2022, Delwinds entered into a
definitive Agreement and Plan of Merger, dated as of February 24, 2022, as amended on April 26, 2022, July 6, 2022 and August 12, 2022
(the “Merger Agreement”), with FOXO Technologies Inc., now known as FOXO Technologies Operating Company (“FOXO Technologies
Operating Company” or “Legacy FOXO”), DWIN Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of
Delwinds (“Merger Sub”), and DIAC Sponsor LLC (the “Sponsor”), in its capacity as the representative of the stockholders
of Delwinds from and after the closing (the “Closing”) of the transactions contemplated by the Merger Agreement (collectively,
the “Business Combination”).
The Business Combination was approved by Delwinds’
stockholders on September 14, 2022 and closed on September 15, 2022 (the “Closing Date”) whereby Merger Sub merged into FOXO
Technologies Operating Company, with FOXO Technologies Operating Company surviving the merger as a wholly owned subsidiary of the Company
(the “Combined Company”), and with FOXO Technologies Operating Company security holders becoming security holders of the
Combined Company. Immediately upon the Closing, the name of Delwinds was changed to FOXO Technologies Inc.
Following the Closing, FOXO is a holding company
whose wholly-owned subsidiary, FOXO Technologies Operating Company, conducts all of the core business operations. FOXO Technologies Operating
Company maintains its two wholly-owned subsidiaries, FOXO Labs Inc. and FOXO Life, LLC. FOXO Labs maintains a wholly-owned subsidiary,
Scientific Testing Partners, LLC, while FOXO Life Insurance Company was a wholly-owned subsidiary of FOXO Life, LLC. See Note 10 for
more information on FOXO Life Insurance Company. References to “FOXO” and the “Company” in these condensed consolidated
financial statements refer to FOXO Technologies Operating Company and its wholly-owned subsidiaries prior to the Closing and FOXO Technologies
Inc. following the Closing.
Note
2 GOING CONCERN UNCERTAINTY AND MANAGEMENT’S PLAN
The Company’s
history of losses requires management to critically assess its ability to continue operating as a going concern. For the three and nine
months ended September 30, 2023, the Company incurred net losses of $3,660 and $22,592 respectively. As of September 30, 2023, the Company
had an accumulated deficit of $173,201. Cash used in operating activities for the nine months ended September 30, 2023 was $6,165. As
of September 30, 2023, the Company had $42 of available cash and cash equivalents.
Foxo
technologies inc. and subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except per share data)
The Company’s
ability to continue as a going concern is dependent on generating revenue, raising additional equity or debt capital, reducing losses
and improving future cash flows. The Company will continue ongoing capital raise initiatives and has demonstrated previous success in
raising capital to support its operations. For instance, in the first and second quarters of 2022, the Company issued convertible debentures
for $28,000 that subsequently converted to equity. The Company also completed its transaction with Delwinds that was initially intended
to provide up to $300,000 of capital to the Company. An equity line of credit agreement, a backstop agreement, and forward purchase agreement
were also part of the Business Combination and were intended to provide capital. Ultimately, the series of transactions associated with
the Business Combination did not result in any net proceeds for the Company. Additionally, we are unlikely to receive proceeds from the
exercise of outstanding warrants as a result of the difference between our current trading price of the Company’s Class A Common
Stock and the exercise price of the various warrants.
During the first quarter
of 2023, the Company completed the sale of FOXO Life Insurance Company in order to gain access to the cash held as statutory capital
and surplus at FOXO Life Insurance Company. See Note 10 for more information. The Company used the cash previously held at FOXO Life
Insurance Company to fund its operation as it continues to (i) pursue additional avenues to capitalize the Company and (ii) commercialize
its products to generate revenue. See Notes 5 and 7 for additional information on the Exchange Offer and PIK Note Offer to Amend that
were structured to allow the Company to more easily raise capital. See Note 13 for information on the 2023 Private Placement.
On June 12, 2023, the
Company received an official notice of noncompliance (the “NYSE American Notice”) from NYSE Regulation (“NYSE”)
stating that the Company is below compliance with Section 1003(a)(i) in the NYSE American Company Guide since the Company reported stockholders’
deficit of $(30) at March 31, 2023, and losses from continuing operations and/or net losses in its two most recent fiscal years ended
December 31, 2022. As required by the NYSE American Notice, on July 12, 2023, the Company submitted a compliance plan (the “Plan”)
to NYSE advising of actions it has taken or will take to regain compliance with the NYSE American continued listing standards by December
12, 2024, and if NYSE accepts the Plan, the Company has an eighteen (18) month period to comply with the Plan. Should the Plan not be
accepted or the Company be unable to comply with the Plan, then it may make it more difficult for the Company to raise capital.
However, the Company
can provide no assurance that these actions will be successful or that additional sources of financing will be available on favorable
terms, if at all. As such, until additional equity or debt capital is secured and the Company begins generating sufficient revenue, there
is substantial doubt about the Company’s ability to continue as a going concern for the one-year period following the issuance
of these condensed consolidated financial statements. In the event that the Company is unable to secure additional financing by mid-January
2024, it may be unable to fund its operations and will be required to evaluate further alternatives, which could include further curtailing
or suspending its operations, selling the Company, dissolving and liquidating its assets or seeking protection under the bankruptcy laws.
A determination to take any of these actions could occur at a time that is earlier than when the Company would otherwise exhaust its
cash resources.
As previously disclosed, on September 20,
2022, the Company issued to certain investors 15% Senior Promissory Notes (the “PIK Notes”) in an aggregate principal amount
of $3,458, each with a maturity date of April 1, 2024 (the “Maturity Date”). Pursuant to the terms of the PIK Notes, commencing
on November 1, 2023, and on each one month anniversary thereof, the Company is required to pay the holders of the PIK Notes an equal
amount until their outstanding principal balance has been paid in full on the Maturity Date, or, if earlier, upon acceleration or prepayment
of the PIK Notes in accordance with their terms. The Company failed to make the payments due on November 1, 2023, which constitutes an
event of default under the PIK Notes.
As a result of this event of default, the interest
rate of the PIK Notes increased from 15% per annum (compounded quarterly on each December 20, March 20, June 20 and September 20) to
22% per annum (compounded annually and computed on the basis of a 360-day year). In addition, the holders of the PIK Notes may, among
other remedies, accelerate the Maturity Date and declare all indebtedness under the PIK Notes due and payable at 130% of the outstanding
principal balance.
In October 2023, the
Company announced that the Company is in discussions with the holders of the PIK Notes with respect to certain amendments to the PIK
Notes to cure the event of default; however, there has been no agreement that the PIK Note holders will agree to amend the PIK Notes.
Foxo
technologies inc. and subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except per share data)
Note
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Certain
information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed
or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting, and thus the accompanying unaudited condensed
consolidated financial statements do not include all information and footnotes necessary for a complete presentation of financial position,
results of operations or cash flows. The unaudited condensed consolidated financial statements should be read in conjunction with the
audited consolidated financial statements as of and for the year ended December 31, 2022 and the notes thereto. The consolidated balance
sheet data as of December 31, 2022 was derived from the audited consolidated financial statements as of that date but does not include
all disclosures required by U.S. GAAP. In the opinion of management, the accompanying unaudited condensed consolidated financial statements
include all adjustments of a normal or recurring nature, which are necessary for a fair presentation of financial position, operating
results and cash flows for the periods presented. Operating results for the three and nine months ended September 30, 2023 are not necessarily
indicative of the results that may be expected for the year ending December 31, 2023.
The unaudited condensed consolidated financial
statements include the accounts of FOXO and its wholly-owned subsidiaries. All intercompany balances and transactions are eliminated in
consolidation.
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act of 1933, as modified by the Jumpstart Our Business Startups Act of 2012, and it thus
may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not
emerging growth companies.
The preparation of the unaudited condensed consolidated
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities. For further information regarding the Company’s basis
of presentation and use of estimates, refer to the audited consolidated financial statements as of and for the year ended December 31,
2022. The policies and estimates described in that report are used for preparing the Company’s quarterly unaudited condensed consolidated
financial statements.
Note
4 INTANGIBLE ASSETS AND CLOUD COMPUTING ARRANGEMENTS
The components of intangible assets and cloud computing arrangements
as of September 30, 2023 and December 31, 2022 were as follows:
| | |
September 30,
2023 | | |
December 31,
2022 | |
| Methylation pipeline | |
$ | 592 | | |
$ | 592 | |
| Underwriting API | |
| 840 | | |
| 840 | |
| Longevity API | |
| 717 | | |
| 717 | |
| Less: accumulated amortization and impairment | |
| (1,721 | ) | |
| (106 | ) |
| Intangible assets | |
$ | 428 | | |
$ | 2,043 | |
| | |
September 30,
2023 | | |
December 31,
2022 | |
| Digital insurance platform | |
$ | 2,966 | | |
$ | 2,966 | |
| Less: accumulated amortization and impairment | |
| (2,966 | ) | |
| (741 | ) |
| Cloud computing arrangements | |
$ | - | | |
$ | 2,225 | |
Amortization of the Company’s intangible
assets and cloud computing arrangements is recorded on a straight-line basis within selling, general and administrative expenses. The
Company recognized amortization expense of $49 and $1,208 for the three and nine months ended September 30, 2023 and did not have any
amortization expense for the three and nine months ended September 30, 2022.
Foxo
technologies inc. and subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except per share data)
In April of 2023 and as part of the Company’s
planning, the Company finalized its objectives and key results (“OKRs”) for the second quarter of 2023. As part of the OKR
process the Company’s goals to support the digital insurance platform indicated that the manner in which the digital insurance platform
is used and corresponding cash flows would no longer support the asset. Accordingly, the Company recognized a $1,425 impairment loss in
April of 2023 representing the remaining unamortized balance of the digital insurance platform at the date of impairment.
In June of 2023, the Company determined that both
the underwriting API and longevity API were fully impaired as it no longer forecasted positive cash flows from the longevity report or
underwriting report. For the longevity report, the Company sells the product at cost. For the underwriting report, the Company no longer
expects sales during the amortization period. Accordingly, the Company has determined the assets are not recoverable and the cash flows
no longer support the assets. The Company recognized impairment charges of $630 and $578 for the underwriting API and longevity API, respectively.
The Company recognized an impairment loss of $0 and $2,633 for the three and nine months ended September 30, 2023, respectively.
Note
5 DEBT
On September 20, 2022, the Company entered into
separate Securities Purchase Agreements with accredited investors pursuant to which the Company issued its 15% Senior Promissory Notes
(the “Senior PIK Notes”) in the aggregate principal amount of $3,458. The Company received net proceeds of $2,918, after deducting
fees and expenses of $540.
The Senior PIK Notes bear interest at 15% per
annum, paid in arrears quarterly by payment in kind through the issuance of additional Senior PIK Notes (“PIK Interest”).
The Senior PIK Notes mature on April 1, 2024 (the “Maturity Date”). Commencing on November 1, 2023, the Company is required
to pay the holders of the Senior PIK Notes and on each one month anniversary thereof an equal amount until the outstanding principal balance
has been paid in full on the Maturity Date. If the Senior PIK Notes are prepaid in the first year, the Company is required to pay the
holders the outstanding principal balance, excluding any increases as a result of PIK Interest, multiplied by 1.15.
The Company had agreed to not obtain additional
equity or debt financing, without the consent of a majority of the holders of the Senior PIK Notes, other than if a financing pays amounts
owed on the Senior PIK Notes, with the exception of certain exempt issuances. The Company shall not incur other indebtedness, except for
certain exempt indebtedness, until such time the Senior PIK Notes are repaid in full; however, the Senior PIK Notes are unsecured.
PIK Note Amendment
On May 26, 2023, the
Company consummated two issuer tender offers: (i) the Exchange Offer (as described below in Note 7) and (ii) the Offer to Amend 15% Senior
Promissory Notes and Consent Solicitation, commenced on April 27, 2023 (the “PIK Note Offer to Amend”), pursuant to which
the Company offered all holders of Senior PIK Notes 0.125 shares of Class A Common Stock for every $1.00 of the Original Principal Amount
(as defined in the Senior PIK Notes) of such holder’s Senior PIK Notes, in exchange for the consent by such holder of Senior PIK
Notes to amendments to the Senior Promissory Note Purchase Agreement, dated September 20, 2022, between the Company and each purchaser
of Senior PIK Notes (the “PIK Note Purchase Agreement”).
Pursuant to the PIK Note
Offer to Amend, the Company solicited approval from holders of Senior PIK Notes to amend the PIK Note Purchase Agreement to permit the
following issuances by the Company of Class A Common Stock and Common Stock Equivalents (as defined in the PIK Note Purchase Agreement),
without prepaying the PIK Notes: (i) the issuance of shares of Class A Common Stock in connection with the PIK Offer Note Offer to Amend,
(ii) the issuance of shares of Class A Common Stock in connection with the Exchange Offer (as defined in Note 7), (iii) the issuance of
shares of Class A Common Stock or Common Stock Equivalents (as defined in the PIK Note Purchase Agreement) in connection with the 2022
Bridge Debenture Release (as defined in Note 7), (iv) the issuance of shares of Class A Common Stock or Common Stock Equivalents (as defined
in the PIK Note Purchase Agreement) in (a) a private placement of the Company’s equity, equity-linked or debt securities resulting
in gross proceeds to the Company no greater than $5 million (a “Private Placement”) and/or (b) a registered offering of the
Company’s equity, equity-linked or debt securities resulting in gross proceeds to the Company no greater than $20 million (a “Public
Financing”); provided that (A) the proceeds of a Private Placement resulting in gross proceeds to the Company of at least $2 million
are used by the Company to prepay not less than 25% of the Outstanding Principal Balance (as defined in the Senior PIK Notes) as of the
date of prepayment on a pro rata basis upon the closing of such Private Placement, and (B) the proceeds of a Public Financing resulting
in gross proceeds to the Company of at least $10 million are used by the Company to prepay all of the Outstanding Principal Balance as
of the date of prepayment upon the closing of such Public Financing, and (v) the issuance of shares of Class A Common Stock or Common
Stock Equivalents (as defined in the PIK Note Purchase Agreement) as Private Placement Additional Consideration (as defined below) (collectively,
the “PIK Note Amendment”).
The Company received
consents from all Senior PIK Note holders and all required approvals, including stockholder approval, and issued on a pro rata basis to
the holders of the Senior PIK Notes 432,188 shares of Class A Common Stock in consideration for the PIK Note Amendment.
The Company accounted for the PIK Note Amendment
as an extinguishment as the consideration of $1,339 paid to Senior PIK Note holders in the form of Class A Common Stock caused the cash
flows after the PIK Note Amendment to change by more than 10%. Due to the short-term nature of the Senior PIK Notes, the Company determined
the reacquisition price of debt was equal to the principal amount at the time of the amendment. The Company recognized $1,596 of expense
related to the PIK Note Amendment consisting of $256 of unamortized debt issuance costs and $1,339 for the issuance of Class A Common
Stock
Foxo
technologies inc. and subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except per share data)
The Company will continue to pay PIK Interest
until maturity or repayment.
As per the Current Report on Form 8-K filed November 2, 2023, Pursuant
to the terms of the PIK Notes, commencing on November 1, 2023, and on each one month anniversary thereof, the Company is required to pay
the holders of the PIK Notes an equal amount until their outstanding principal balance has been paid in full on the Maturity Date, or,
if earlier, upon acceleration or prepayment of the PIK Notes in accordance with their terms. The Company failed to make the payments due
on November 1, 2023, which constitutes an event of default under the PIK Notes.
As a result of this event of default, the interest rate of the PIK
Notes increased from 15% per annum (compounded quarterly on each December 20, March 20, June 20 and September 20) to 22% per annum (compounded
annually and computed on the basis of a 360-day year). In addition, the holders of the PIK Notes may, among other remedies, accelerate
the Maturity Date and declare all indebtedness under the PIK Notes due and payable at 130% of the outstanding principal balance.
Given the Company’s current cash constraints, the Company is
currently in discussions with the holders of the PIK Notes with respect to certain amendments to the PIK Notes to cure the event of default;
however, there can be no assurance that the PIK Note holders will agree to amend the PIK Notes.
As of September 30, 2023, the Company has recorded
$4,006 balance as current liabilities based on the monthly installments payment schedule. For the three and nine months ended September
30, 2023 the Company recognized $145 and $420, respectively of contractual interest expense on the Senior PIK Notes; and $0 and $448,
respectively related to the amortization of debt issuance costs on the Senior PIK Notes. The amortization of debt issuance costs includes
$256 of unamortized debt issuance costs at the time of the PIK Note Amendment. Additionally, the Company recognized $593 and $1,627 of
contractual interest expense related to the 12.5% Original Issue Discount Convertible Debentures issued in 2021 by Legacy FOXO (the “2021
Bridge Debentures”) for the three and nine months ended September 30, 2022 of which $181 and $508, respectively is for related party
holders.
Note
6 RELATED PARTY TRANSACTIONS
Office Space
The Company subleased its office space from an
investor through May of 2022. The investor paid all lease costs, including common area maintenance and other property management fees,
on the Company’s behalf. These payments were treated as additional capital contributions.
2021 Bridge Debentures
Prior to the conversion of the 2021 Bridge Debentures
to shares of FOXO Technologies Operating Company Class A Common Stock and subsequent exchange for Class A Common Stock of the Company
at Closing of the Business Combination, certain related parties invested in the 2021 Bridge Debentures.
Sponsor Loan
In order to finance transaction costs in connection
with the business Combination, the Sponsor or an affiliate of the Sponsor loaned Delwinds funds for working capital. As of September 30,
2023, $500 was remaining due to the Sponsor and is shown as a related party payable in the consolidated balance sheet.
Foxo
technologies inc. and subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except per share data)
Demand Promissory Note
On September 19, 2023, the Company obtained a
$247 loan from Andrew J. Poole, a former director of the Company (the “Loan”), to be used to pay for directors’ and
officers’ insurance through November 2023. The Company issued to Mr. Poole a demand promissory note for $247 evidencing the Loan
(the “Note”). The Note does not bear interest. The Note is due on demand, and in the absence of any demand, the Note will
be due one year from the issuance date. The Note may be prepaid, in whole or in part, without penalty at any time.
Consulting Agreement
In April 2022, the Company executed a consulting
agreement (the “Consulting Agreement”) with an individual (the “Consultant”) considered to be a related party
of the Company as a result of his investment in the 2021 Bridge Debentures. The agreement, which expired in April 2023, had a minimum
term of twelve months, over which the Consultant is to provide services that include, but are not limited to, advisory services relating
to the implementation and completion of the Business Combination. Following the execution of the agreement, as compensation for such services
to be rendered as well as related expenses over the term of the contract, the Consultant was paid a cash fee of $1,425. The Consulting
Agreement also calls for the payment of an equity fee as compensation for such services. The Company issued 150,000 shares of Legacy FOXO
Class A Common Stock to the Consultant during the second quarter of 2022 to satisfy the equity fee that converted into 87,126 shares of
Class A Common Stock. The Company has determined that all compensation costs related to the Consulting Agreement, including both cash
fees and the equity fee, represent remuneration for services to be rendered evenly over the contract term. Thus, all such costs were initially
recorded at fair value as prepaid consulting fees in the consolidated balance sheet and are being recognized as selling, general and administrative
expenses in the condensed consolidated statement of operations on a straight-line basis over the term of the contract. For the three and
nine months ended September 30, 2023, $0 and $2,676, respectively, in expenses were recognized related to the Consulting Agreement. For
both the three and nine months ended September 30, 2022 the Company recognized $2,081 and $3,568, respectively, in expenses for the Consulting
Agreement.
Contractor Agreement
In October 2021, FOXO entered into a Contractor
Agreement with Dr. Murdoc Khaleghi, one of its former directors, under which Dr. Khaleghi served as FOXO’s Chief Medical Officer.
The Company paid Dr. Khaleghi $0 in 2023 and $27 and $81 for the three and nine months ended September 30, 2022, respectively.
Board and Executive Departures:
In addition to Dr. Khaleghi who resigned in 2022,
the following Board members resigned in 2023;
Mr. Tyler Danielson resigned as Interim Chief
Executive Officer on September 14, 2023
Mr.
Robert Potashnick resigned as Chief Financial Officer effective September 13, 2023
Andrew Poole resigned as director on November
21, 2023
Board Appointment:
Mark White was appointed on September 19, 2023
as Interim Chief Executive Officer and Director.
Executive Appointment:
Martin Ward was appointed on September 19, 2023
as Interim Chief Financial Officer
Foxo
technologies inc. and subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except per share data)
Note 7 STOCKHOLDERS’
(DEFICIT) EQUITY
In connection with the Business Combination, the
Company adopted the second amended and restated certificate of incorporation (the “Amended and Restated Company Charter”)
to, among other things, increase the total number of authorized shares of all capital stock, par value $0.0001 per share, to 510,000,000
shares, consisting of (i) 500,000,000 shares of Class A Common Stock and (ii) 10,000,000 shares of preferred stock.
Preferred Stock
The Amended and Restated Company Charter authorizes
the Company to issue 10,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined
from time to time by the Company’s board of directors. As of September 30, 2023, there were no shares of preferred stock issued
or outstanding.
Warrants
Public Warrants and Private Placement Warrants
The Company issued 1,006,250 common stock warrants
in connection with Delwinds’ initial public offering (the “IPO”) (the “Public Warrants”). Simultaneously
with the closing of the IPO, Delwinds consummated the private placement of 31,623 common stock warrants (the “Private Placement
Warrants”).
Public Warrants may only be exercised for a whole
number of shares. Each Public Warrant entitles the holder to purchase one share of Class A Common Stock at a price of $115.00 per share,
subject to adjustment. The Public Warrants became exercisable 30 days after the completion of a Business Combination. The Public Warrants
will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company may redeem the Public Warrants:
| ● | in
whole and not in part; |
| ● | at
a price of $0.10 per warrant; |
| ● | upon
not less than 30 days’ prior written notice of redemption given after the warrants become exercisable; and |
| ● | if,
and only if, the reported last sale price of the Company’s Class A Common Stock equals or exceeds $180.00 per share for any 20
trading days within a 30-trading day period commencing once the warrants become exercisable and ending three business days before the
Company sends the notice of redemption to the warrant holders. |
If and when the warrants become redeemable by
the Company, the Company may not exercise its redemption right if the issuance of shares of common stock upon exercise of the warrants
is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect such registration
or qualification.
If the Company calls the Public Warrants for redemption,
management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis”.
The exercise price and number of shares of Class A Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances
including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not
be adjusted for issuance of Class A Common Stock at a price below its exercise price. Additionally, in no event will the Company be required
to net cash settle the warrants.
Foxo
technologies inc. and subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except per share data)
The Private Placement Warrants are identical to
the Public Warrants, except that the Private Placement Warrants and the Class A Common Stock issuable upon the exercise of the Private
Placement Warrants were not transferable, assignable or salable until 30 days after the Business Combination was completed, subject to
certain limited exceptions. Additionally, the Private Placement Warrants are exercisable on a cashless basis and are non-redeemable so
long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone
other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and
exercisable by such holders on the same basis as the Public Warrants.
Assumed Warrants
At
Closing of the Business Combination, the Company assumed common stock warrants to purchase FOXO Class A Common Stock (“Assumed
Warrants”) and exchanged such Assumed Warrants for common stock warrants to purchase 190,619 shares of the Company’s Class
A Common Stock. Each Assumed Warrant entitled the holder to purchase one share of Class A Common Stock at a price of $62.10 per share,
subject to adjustment. The Assumed Warrants are exercisable over a three-year period from the date of issuance. The terms of the Assumed
Warrants include down round provisions that should the Company issue common stock for a consideration of less than $62.10 per share then
the exercise price shall be lowered to the new consideration amount on a per share basis with a simultaneous and corresponding increase
to the number of warrants. A triggering event occurred as a result of the issuance of a rights to receive shares (the “Rights”)
under the terms of a Shares for Services Agreement dated September 19, 2023. Therefore, as of September 30, 2023, 2,007,848 Assumed Warrants
were outstanding with an exercise price of $0.80 per share. The incremental value of the modification to the Assumed Warrants as a result
of the trigger of the down round provisions of $912, was recorded as a deemed dividend in the three and nine months ended September 30,
2023. The incremental fair value of the Assumed Warrants as a result of the trigger of the down round provisions was measured
using the Black Scholes valuation model with the following assumptions: risk free rate of 5.16 %, volatility of 99.62%, term of .43 years
and expected dividend yield of $0.
Also, during the nine months ended September
30, 2023, the Company recorded a deemed dividend of $2,466 as a result of the Exchange Offer discussed below.
Exchange Offer
On May 26, 2023, the Company consummated its tender
offer commenced on April 27, 2023, to all 190,619 holders of Assumed Warrants to receive 48.3 shares of the Company’s Class A Common
Stock in exchange for each Assumed Warrant tendered (the “Exchange Offer”). The consideration was accounted for as a deemed
dividend to the warrant holders, is calculated based on the fair value of common stock at consummation of the offering and reflected in
net loss to common stockholders.
As part of the Exchange Offer, the Company also
solicited consents from holders of the Assumed Warrants to amend and restate in its entirety the Securities Purchase Agreement, dated
as of January 25, 2021 (the “Original Securities Purchase Agreement”), by and between Legacy FOXO (and assumed by the Company
in connection with the Business Combination) and each purchaser of 2021 Bridge Debentures and warrants to purchase shares of FOXO Class
A Common Stock, as amended (together with the 2021 Bridge Debentures, the “Original Securities”) identified on the signature
pages thereto, which governs all of the Assumed Warrants and the Original Securities (together with the Assumed Warrants, the “Securities”),
pursuant to the terms of an Amended and Restated Securities Purchase Agreement, to provide that the issuance of shares of Class A Common
Stock and certain issuances of Common Stock Equivalents (as defined in the Original Securities Purchase Agreement) in connection with
the Exchange Offer, the PIK Note Amendment, the 2022 Bridge Debenture Release (as defined below), and a Private Placement and a Public
Financing, as well as any previous issuance of Class A Common Stock or Common Stock Equivalents (as defined in the Original Securities
Purchase Agreement), do not trigger, and cannot be deemed to have triggered, any anti-dilution adjustments in the Securities.
Pursuant to the Exchange Offer, an aggregate of 164,751 Assumed Warrants were tendered and an aggregate of 795,618 shares of Class A Common Stock were issued to the holders of Assumed Warrants resulting in a deemed dividend of $2,466. After the Exchange Offer, 25,868 Assumed Warrants remained outstanding. At the same time 432,188 shares of Class A Common Stock were issued as part of the PIK Note Amendment as discussed in Note 5.
2022 Bridge Debenture Release
The Company entered into two separate general
release agreements in June of 2023 (the “General Release Agreements” and such transaction, the “2022 Bridge Debenture
Release”). The General Release Agreements are with former registered holders (the “Investors”) of 10% Original Issue
Discount Convertible Debentures issued in 2022 by Legacy FOXO (the “2022 Bridge Debentures”).
Foxo
technologies inc. and subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except per share data)
Pursuant to their respective General Release Agreement,
each Investor released, waived and discharged the Company from any and all claims that such Investor had, have or may have against the
Company from the beginning of time through the effective date of their respective General Release Agreement (the “Release”).
As consideration for the Release and each Investor’s other obligations, covenants, agreements, representations and warranties set
forth in their respective General Release Agreement, the Company issued to each Investor 0.067 shares of Class A Common Stock for every
$1.00 of Subscription Amount (as defined in the securities purchase agreements governing the 2022 Bridge Debentures) of 2022 Bridge Debentures
purchased by such Investor. Pursuant to the General Release Agreements, the Company issued an aggregate of 703,500 shares of Class A Common
Stock.
The Company issued shares to the Investors in
exchange for the release and recognized expense of $2,181 based on the shares issued and corresponding fair value of common stock at the
time of issuance.
Private Placement
From
July 14, 2023 through July 20, 2023 (each such date, a “First Tranche Closing Date”), the Company entered into three separate
Stock Purchase Agreements (the SPAs), which have substantially similar terms, with three accredited investors (the “Buyers”),
pursuant to which the Company agreed to issue and sell to the Buyers, in a private placement (the “2023 Private Placement”),
in two separate tranches each, an aggregate of up to 562,500 shares of the Company’s Class A Common Stock at a price of $0.80 per
share, for aggregate gross proceeds of $450. The net proceeds from the 2023 Private Placement, after deducting placement agent fees and
other offering expenses, was approximately $260. Pursuant to the terms of the SPAs, the Buyers initially purchased an aggregate of 281,250
shares of Class A Common Stock on the applicable First Tranche Closing Dates, and purchased an aggregate of 281,250 additional shares
of Class A Common Stock on August 4, 2023, following the effectiveness of the First Resale Registration Statement.
On August 23, 2023, the
Company entered into three additional Stock Purchase Agreements (the “Second Round SPAs”) and Registration Rights Agreements
(the “Second Round RRAs”), with the Buyers, pursuant to which the Company issued and sold to the Buyers, in the second round
of the 2023 Private Placement (the “2023 PIPE Second Round”), in two separate tranches each, an aggregate of 366,876 shares
of Class A Common Stock at the Per Share Price for aggregate gross proceeds of $293.5 and aggregate net proceeds of approximately $217,
after deducting placement agent fees and other offering expenses. Pursuant to the terms of the Second Round SPAs, the Buyers initially
purchased an aggregate of 183,438 shares of Class A Common Stock on August 23, 2023, and purchased an aggregate of 183,438 additional
shares of Class A Common Stock on September 7, 2023, following the effectiveness of the Second Resale Registration Statement.
Treasury Stock
The Company cancelled the outstanding treasury
stock on April 14, 2023.
Note 8 NET LOSS
PER SHARE
The Business Combination was accounted for as
a reverse recapitalization by which FOXO Technologies Operating Company issued equity for the net assets of Delwinds accompanied by a
recapitalization. Earnings per share has been recast for all historical periods to reflect the Company’s capital structure for all
comparative periods.
The Company excluded the effect of the 69,668
Management Contingent Shares outstanding and not vested as of September 30, 2023 from the computation of basic net loss per share for
the three and nine months ended September 30, 2023, as the conditions to trigger the vesting of the Management Contingent Shares had not
been satisfied as of September 30, 2023. Shares issued to the Company’s former CEO pursuant to the Management Contingent Share Plan
which are under review to determine if such shares should be forfeited in accordance with such plan are included in net loss per share.
See Note 12 for additional information.
The Company excluded the effect of the Public
Warrants, the Private Placement Warrants, the Assumed Options, and Assumed Warrants from the computation of diluted net loss per share
for the three and nine months ended September 30, 2023 as their inclusion would have been anti-dilutive because the Company was in a loss
position for such periods. The Assumed Options, the Assumed Warrants, and Bridge Debentures were excluded from the three and nine months
ended September 30, 2022 as their inclusion would have been anti-dilutive because the Company was in a loss position for such periods.
The following table sets forth the calculation
of basic and diluted earnings per share for the periods indicated based on the weighted average number of shares outstanding during the
respective periods:
| | |
Three Months Ended
September
30, | | |
Nine Months Ended
September
30, | |
| | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| Net loss - basic and diluted | |
$ | (3,660 | ) | |
$ | (41,026 | ) | |
$ | (22,592 | ) | |
$ | (76,932 | ) |
| Deemed dividend related to the Exchange Offer and down
round provisions of Assumed Warrants | |
| (912 | ) | |
| - | | |
| (3,378 | ) | |
| - | |
Net loss to common stockholders - basic and diluted | |
$ | (4,572 | ) | |
$ | (41,026 | ) | |
$ | (25,970 | ) | |
$ | (76,932 | ) |
Basic and diluted weighted average number of Class A Common Stock | |
| 4,878 | | |
| 612 | | |
| 3,350 | | |
| 598 | |
Basic and diluted net loss per share available to Class A Common Stock | |
$ | (0.94 | ) | |
$ | (67.04 | ) | |
$ | (7.75 | ) | |
$ | (128.65 | ) |
Foxo
technologies inc. and subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except per share data)
The following Class A common stock equivalents
have been excluded from the computation of diluted net loss per common share as the effect would be antidilutive and reduce the net loss
per common stock (shares in actuals):
| | |
As of September 30, | |
| | |
2023 | | |
2022 | |
| Public and private warrants | |
| 1,037,873 | | |
| 1,037,873 | |
| Assumed warrants | |
| 2,007,848 | | |
| 190,619 | |
| Assumed options | |
| 215,094 | | |
| 296,579 | |
| Total antidilutive shares | |
| 3,260,815 | | |
| 1,525,071 | |
Note 9 FAIR VALUE
MEASUREMENTS
The following table presents information about
the Company’s assets and liabilities that are measured on a recurring basis as of September 30, 2023 and December 31, 2022 and indicates
the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
| | |
Fair Value Measurements Using Inputs Considered as: | |
| September 30, 2023 | |
Fair Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| Liabilities: | |
| | |
| | |
| | |
| |
| Warrant liability | |
$ | 67 | | |
$ | 65 | | |
$ | 2 | | |
$ | - | |
| Total liabilities | |
$ | 67 | | |
$ | 65 | | |
$ | 2 | | |
$ | - | |
| | |
Fair Value Measurements Using Inputs Considered as: | |
| December 31, 2022 | |
Fair Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| Liabilities: | |
| | |
| | |
| | |
| |
| Warrant liability | |
$ | 311 | | |
$ | 302 | | |
$ | 9 | | |
$ | - | |
| Total liabilities | |
$ | 311 | | |
$ | 302 | | |
$ | 9 | | |
$ | - | |
Warrant Liability
The Public Warrants and Private Placement Warrants
are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liability on the Company’s balance
sheet. The warrant liability is measured at fair value on a recurring basis, with any changes, if applicable, in the fair value presented
as change in fair value of warrant liability in the Company’s statement of operations. The measurement of the Public Warrants is
classified as Level 1 due to the use of an observable market quote in an active market under ticker FOXOW:OTCPK. As the transfer of the
Private Placement Warrants to anyone outside of a small group of individuals who are permitted transferees would result in the Private
Placement Warrants having substantially the same terms as the Public Warrants, the Company determined the fair value of each Private Placement
Warrant is equivalent to that of each Public Warrant, with an insignificant adjustment for short-term marketability restrictions. As such,
the Private Placement Warrants are classified as Level 2.
Bridge Debentures
The Company elected the fair value option on both
the 2021 and 2022 Bridge Debentures that converted to shares of FOXO Class A Common Stock as part of the Business Combination. Changes
in the Company’s prior fair value measurements are recorded as non-cash change in fair value of convertible debentures in the condensed
consolidated statements of operations.
Foxo
technologies inc. and subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in thousands, except per share data)
Note
10 FOXO LIFE INSURANCE COMPANY
On February 3, 2023,
the Company consummated the previously announced sale of FOXO Life Insurance Company to Security National Life Insurance Company (the
“Buyer”). At closing, all of the FOXO Life Insurance Company’s shares were cancelled and retired and ceased to exist
in exchange for the assignment to the Company of FOXO Life Insurance Company’s statutory capital and surplus amount of $5,002, as
of the closing date, minus $200 (the “Merger Consideration”). Pursuant to the transaction, at the closing, the Company paid
the Buyer’s third-party out-of-pocket costs and expenses of $51 resulting in a total loss of $251 that was recognized within selling,
general and administrative expense on the condensed consolidated statements of operations and in the FOXO Life segment. After the Merger
Consideration and Buyer’s third party expenses, the transaction resulted in the Company gaining access to $4,751 that was previously
held as statutory capital and surplus pursuant to the Arkansas Insurance Code.
Note
11 BUSINESS SEGMENT
The Company manages and classifies its business
into two reportable business segments:
| |
● |
FOXO Labs is commercializing proprietary epigenetic biomarker technology to be used for underwriting risk classification in the global life insurance industry. The Company’s innovative biomarker technology enables the adoption of new saliva-based health and wellness biomarker solutions for underwriting and risk assessment. The Company’s research demonstrates that epigenetic biomarkers, collected from sal |