FOXO Technologies Inc. (NYSE: FOXO) is a biotechnology company dedicated to improving human health and longevity through the development of cutting-edge technology and product solutions. The company's innovative epigenetic technology applies artificial intelligence (AI) to DNA methylation, enabling the identification of molecular biomarkers of human health and aging.
Business Overview
FOXO operates in two reportable business segments: FOXO Labs and FOXO Life. FOXO Labs is commercializing the company's proprietary epigenetic biomarker technology, which can be used for underwriting risk classification in the global life insurance industry. The company's research demonstrates that epigenetic biomarkers, collected from saliva, provide meaningful measures of individual health and wellness for the factors used in life insurance underwriting.FOXO Life was previously focused on redefining the relationship between consumers and insurers by combining life insurance with a dynamic molecular health and wellness platform. However, due to market conditions and capitalization challenges following the Business Combination, the company decided to pause sales of new life insurance products in October 2023. The company still maintains the FOXO Life segment, but it is no longer an active business unit.
Financials
For the fiscal year ended December 31, 2023, FOXO reported annual revenue of $448,000 and a net loss of $26,451,000. The company's annual operating cash flow was -$6,645,000, and its annual free cash flow was also -$6,645,000.In the first quarter of 2024, FOXO generated total revenue of $7,000, a decrease of 46% compared to the prior-year period. The company's net loss for the quarter was $1,504,000, an improvement of 80% year-over-year. FOXO's operating cash flow for the quarter was $1,716,000, compared to -$3,360,000 in the same period of 2023.
Liquidity
As of March 31, 2024, FOXO had cash and cash equivalents of $3,000 and a working capital deficit of $16,810,000. The company has financed its operations through a combination of equity and debt, including the issuance of Senior PIK Notes in the aggregate principal amount of $3,458,000 during the third quarter of 2022.FOXO has taken various actions to bolster its cash position, including raising funds through private placements and transactions with ClearThink Capital Partners, LLC and other investors. The company has also conserved cash by issuing shares of its Class A Common Stock under license agreements, legal settlements, consulting agreements, and finder's fees related to equity and debt financing.
Recent Developments
On June 10, 2024, FOXO entered into two stock exchange agreements with Rennova Health, Inc. (RHI). The first agreement provided for RHI to exchange all of its equity interest in Myrtle Recovery Centers, Inc. for $500,000 payable in shares of FOXO's Class A Common Stock. The second agreement, the RCHI Agreement, provided for FOXO to issue 20,000 shares of its to-be-designated Series A Cumulative Convertible Redeemable Preferred Stock to RHI in exchange for all of the outstanding shares of RHI's subsidiary, Rennova Community Health, Inc. (RCHI), which owns Scott County Community Hospital, Inc. (operating as Big South Fork Medical Center).FOXO believes these transactions, if completed, will provide the company with positive operating cash flows, although there can be no assurance that the company will close the transactions or that they will generate positive cash flows.
Additionally, on June 12, 2024, FOXO entered into a Securities Purchase Agreement with an institutional investor, pursuant to which the company agreed to issue up to $2,800,000 in aggregate principal amount of Senior Notes. The company received an initial $840,000 in net proceeds from the first closing under this agreement.
Despite these recent financing activities, FOXO has stated that, based on its current operations, it does not have sufficient capital to fund its operations for at least 12 months from the date of its latest financial statements. The company expects to continue to incur operating losses until it is able to finalize the acquisition of RCHI and generate positive cash flows from the combined operations.
Risks and Challenges
FOXO faces several risks and challenges that could impact its future performance. The company has a history of losses and may not achieve or maintain profitability in the future. It also faces the potential inability to establish or maintain the relationships required to advance its goals or achieve its commercialization and development plans.Additionally, FOXO's business is subject to the highly regulated nature of the biotechnology and insurance industries, which could lead to changes in laws and regulations that adversely affect the company's operations. The enforceability of FOXO's intellectual property, including its patents, and the potential infringement on the intellectual property rights of others also pose risks.
The company's continued listing on the NYSE American exchange is also a concern, as FOXO has received notices of noncompliance with certain continued listing standards. While the company is working to regain compliance, there is no assurance that it will ultimately be successful in doing so.
Conclusion
FOXO Technologies is a biotechnology company with a unique focus on leveraging epigenetic technology to improve human health and longevity. The company's two-pronged approach, with FOXO Labs commercializing its biomarker technology and FOXO Life exploring the integration of life insurance and wellness, demonstrates its commitment to innovation in the life sciences and insurance industries.Despite the company's history of losses and recent liquidity challenges, FOXO's recent financing activities and planned acquisitions suggest that it is taking steps to strengthen its financial position and position itself for future growth. However, the company continues to face significant risks and uncertainties, and its ability to achieve profitability and maintain its listing on the NYSE American exchange remain key areas of concern for investors.