In a strategic move on Friday, FOXO Technologies Inc. (NYSE American: FOXO), a commercial research services company, has reached an agreement to convert outstanding senior debt into equity. This decision comes as the company seeks to address a default on its 15% Senior Promissory Notes, which had reached a total value of $4,706,628.92 as of June 30, 2024.
The company, which is headquartered in Minneapolis, Minnesota, and specializes in commercial physical and biological research, entered into Securities Purchase Agreements on September 20, 2022, issuing Senior PIK Notes totaling $3,458,000 to accredited investors. However, due to financial constraints, FOXO Technologies was unable to rectify the default on these notes.
To resolve this issue and improve shareholder equity, the company proposed amendments to the notes and received approval from over 50.01% of the note holders. The approved Amendment No. 1 will lead to an automatic exchange of the Senior PIK Notes into shares of the newly created Series B Cumulative Convertible Redeemable Preferred Stock. This exchange is set to take effect at 5:00 pm Eastern time on the second business day following stockholder approval of the conversion in compliance with NYSE American continued listing rules.
The conversion will see the principal amount of the Senior PIK Notes, excluding accrued and unpaid interest which will be waived, exchanged for shares of Series B Preferred Stock. The exchange rate will be based on the original principal amount divided by the stated value of $1,000 per share of Series B Preferred Stock. Following the exchange, all Senior PIK Notes will be canceled and satisfied in full.
The Series B Preferred Stock will not be convertible into Class A Common Stock until one year after the date of issuance, and each share will have one vote. This move by FOXO Technologies is aimed at strengthening the company's financial position and ensuring compliance with the listing requirements of the NYSE American.
In other recent news, FOXO Technologies Inc. has made significant strides in its financial and operational activities. The company has finalized the strategic acquisition of Rennova Community Health (NYSE:CYH), Inc., a move that aligns with its growth strategy and expands its presence in the healthcare sector. The transaction involved a cash consideration and the issuance of a senior note to Rennova Health, Inc., the seller.
Concurrently, FOXO Technologies has expanded its equity financing agreement with ClearThink Capital Partners, LLC, increasing the commitment from $2 million to $5 million. This allows for the purchase of additional Class A Common Stock from FOXO. The company also terminated a second Strata Purchase Agreement with ClearThink, concluding all outstanding obligations under this agreement.
FOXO Technologies has regained compliance with the New York Stock Exchange American continued listing standards, after resolving outstanding listing fees. This development eliminates the risk of delisting that the company previously faced.
In addition, FOXO has engaged in a series of strategic agreements and modifications to its executive compensation structure, including signing a Corporate Development Advisory Agreement with C L Talent Inc., and engaging J.H. Darbie & Co., Inc. as a nonexclusive financial adviser. Lastly, the company has revised its executive compensation, replacing an interim employment agreement with a new Services Agreement with Mark White.
InvestingPro Insights
FOXO Technologies' recent decision to convert outstanding senior debt into equity comes at a critical time for the company, as revealed by InvestingPro data. With a market capitalization of just $2.25 million, FOXO is facing significant financial challenges. The company's revenue for the last twelve months as of Q2 2024 stands at a mere $0.15 million, with a staggering revenue decline of 66.08% over the same period.
Two particularly relevant InvestingPro Tips highlight the company's precarious position. Firstly, FOXO "suffers from weak gross profit margins," which is evident from the -5.16% gross profit margin reported. Secondly, the tip that "short term obligations exceed liquid assets" underscores the urgency of the debt conversion strategy to improve the company's financial health.
These insights align with FOXO's efforts to address its default on Senior Promissory Notes and improve shareholder equity. The company's negative EBITDA of -$9.33 million further emphasizes the importance of this financial restructuring.
For investors seeking a more comprehensive analysis, InvestingPro offers 9 additional tips that could provide valuable context to FOXO's current situation and future prospects.
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