Note 18 – Subsequent Events

CarePlus Clinic Closure

On January 31, 2024, the Company closed its CarePlus Clinic (located in Williamsburg, Kentucky) due to the loss of the clinic’s clinicians and other factors.

Legal Settlements/Stipulation

As discussed in Note 14, in July 2019, CHSPSC obtained judgments against the Company of $1.3 million. On February 6, 2024, the Company and CHSPSC entered into a settlement agreement whereby the Company agreed to make periodic payments totaling $705,000 through September 2026 in full satisfaction of such judgments. The Company agreed to make an initial payment of $100,000 in February 2024 and monthly payments of $15,000 through September 2026 with additional payments of $85,000 in February 2025 and $55,000 in February 2026. To date, all required payments have not been made.

As discussed in Note 14, in March 2024, the Company entered into a Stipulation Agreement with the DOR. Under the terms of the agreement, the Company agreed to pay $645,909 in 11 monthly payments of $15,000 beginning in March 2024 with a final payment of $480,909 due on February 18, 2025. To date, all required payments have not been made.

Exercise of Series B Warrants and Extension of Series B Warrants Exercise Period

Subsequent to December 31, 2023, 2.5 billion Series B Warrants were exercised at an exercise price of $0.00009 per share. On March 20, 2024, the Company and certain institutional holders agreed that, with respect to Series B Warrants (originally issued on March 21, 2017), to acquire 101.3 billion shares of common stock, the termination date of such warrants would be extended from March 21, 2024 to December 31, 2025; provided, that (subject to the Company then having an effective registration statement covering the applicable number of shares), if Series B Warrants to acquire the following number of shares of common stock are not exercised in the respective periods below (each, an “Exercise Condition”), the termination date of all of the Series B Warrants shall instead be the date the first such Exercise Condition was not satisfied:

Schedule of Warrants

Such share numbers are subject to adjustment in the case of stock splits, combinations, dividends, reclassifications, recapitalizations or other similar events. No cashless exercise of Series B Warrants shall count toward the satisfaction of an Exercise Condition. Other than the Series B Warrants to acquire 101.3 billion shares of common stock extended pursuant to the terms of this agreement, warrants to acquire the following number of shares of common stock held by the institutional holders expired on March 21, 2024 pursuant to their terms: Series A Warrants (190 billion shares); Series B Warrants (23.8 billion shares); and Series C Warrants (190 billion shares). The Series A Warrants, Series B Warrants and Series C Warrants, referred to together as the March Warrants, are also discussed in Notes 8, 11 and 12. As of December 31, 2024, the Exercise Condition was not met and the 101.3 billion Series B Warrants expired.

Promissory Note with Institutional Investor

On October 25, 2024, the Company issued a promissory note to an institutional investor in the principal amount of $460,000. The note was issued with an original issue discount of 15%, or $60,000. Fifty percent of the principal balance of the note was due and paid on December 1, 2024. The remaining 50% of the note was due on January 1, 2025. The balance of the note and related penalties were deemed paid-in-full on January 7, 2025 by transferring 350 shares of FOXO Series A Preferred Stock to the institutional investor.

Accounts Receivable Sales Agreements

During the period January 1, 2024 to September 10, 2024, SCCH entered into four accounts receivable sales agreements whereby portions of SCCH’s accounts receivable were sold for net proceeds of $1.1 million. The agreements require periodic payments based on the SCCH’s accounts receivable collections until payments of $1.8 million are made. The Company incurred a loss on the sales of its accounts receivable during the period January 1, 2024 to September 10, 2024 of $0.7 million. A total of $0.5 million was owed under the sales agreements as of September 10, 2024. FOXO assumed this obligation pursuant to the sale of Scott County Community Hospital, Inc. on September 10, 2024, which is discussed below.

Stock Exchange Agreements

On June 10, 2024, the Company entered into two stock exchange agreements, each with FOXO Technologies, Inc. (“FOXO”).

Sale of Myrtle Under First Stock Exchange Agreement

The first agreement with FOXO, dated June 10, 2024, (the “Myrtle Agreement”), provided for the Company to exchange all of its equity interest in Myrtle for $0.5 million, payable in shares of FOXO’s Class A Common Stock (the “FOXO Common Stock”). This transaction closed on June 14, 2024. On June 25, 2024, the parties to the Myrtle Agreement entered into a Consent and Waiver (the “Consent and Waiver”), pursuant to which FOXO issued 1,023,629 shares of FOXO Common Stock to the Company on July 17, 2024 (which was the date of approval of the NYSE American, upon which the FOXO Common Stock is listed). Such shares represented $0.2 million of the purchase price. Pursuant to the Consent and Waiver, the remainder of the purchase price of $0.3 million is represented by a promissory note issued by FOXO to the Company. The promissory note is non-interest bearing, is due on demand and payable in cash or, upon receipt of required approval of the issuance under the rules of the NYSE American, in shares of FOXO Common Stock.

In addition to the $0.3 million promissory note issued to the Company by FOXO for a portion of the purchase price of Myrtle, which is discussed above, Myrtle issued a note payable to the Company dated June 13, 2024, in the original principal amount of $1.6 million, which represented the amount owed to the Company by Myrtle at the time of the sale of Myrtle to FOXO. The note is non-interest bearing, except if not paid by the maturity date of December 31, 2024, in which case the note will bear interest at 18% per annum. The Company is in discussions with FOXO about extending the maturity of such note.

Sale of Rennova Community Health, Inc. (“RCHI”) Under Second Stock Exchange Agreement

The second agreement with FOXO, also dated June 10, 2024, (the “RCHI Agreement”) provided for the Company to exchange all of the outstanding shares of its subsidiary RCHI, including RCHI’s wholly-owned subsidiary Scott County Community Hospital, Inc. (“SCCH”), for 20,000 shares of FOXO’s to be authorized Series A Cumulative Convertible Redeemable Preferred Stock (the “FOXO Series A Preferred Stock”). Closing of the RCHI Agreement was subject to a number of conditions. On September 10, 2024, the parties to the RCHI Agreement entered into an Amended and Restated Securities Exchange Agreement (the “Amendment”) which revised the consideration payable to the Company from shares of FOXO Series A Preferred Stock to $100. In addition, RCHI issued to the Company a senior secured note in the principal amount of $22.0 million (subject to adjustment) (the “RCHI Note”). The RCHI Note matured on September 10, 2026 and accrued interest on any outstanding principal amount at the rate of 8% per annum for the first six months, increasing to 12% per annum thereafter. After maturity, interest accrued at a rate of 20% per annum. The RCHI Note required principal repayments equal to 10% of the free cash flow (net cash from operations less capital expenditures) from RCHI and SCCH.

The RCHI Note was guaranteed by FOXO and SCCH, pursuant to the terms of a Guaranty Agreement (the “Guaranty”). The RCHI Note was also secured by the assets of RCHI and Scott County pursuant to a Security and Pledge Agreement (the “RCHI Pledge Agreement”) and by the “Collateral” owned by FOXO as provided in the Security and Pledge Agreement with FOXO (the “FOXO Pledge Agreement”). The Amendment also provides that the Company may at any time request that FOXO seek approval of its shareholders of the issuance of FOXO Common Stock upon conversion in full of the shares of FOXO Series A Preferred Stock issuable upon exchange of the RCHI Note. At any time after receipt of such approval, the Company shall have the option to exchange, in whole or in part, the RCHI Note for shares of FOXO Series A Preferred Stock. Upon any such exchange, the Company will receive the equivalent of $1.00 stated value of FOXO Series A Preferred Stock for each $1.00 of the aggregate of principal and accrued and unpaid interest, liquidated damages and/or redemption proceeds (or any other amounts owing under the RCHI Note) being exchanged. On December 5, 2024, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with FOXO and RCHI. Pursuant to the Exchange Agreement, $21.0 million of the principal of the RCHI Note was exchanged for 21,000 shares of FOXO Series A Preferred Stock. Upon the closing of the Exchange Agreement, RCHI executed a new senior secured promissory note payable to the Company in the principal amount of $1.0 million on the same terms of the RCHI Note (the “New Note”). The New Note matures on June 5, 2025.

In connection with the Myrtle Agreement and the RCHI Agreement and required consents for the transactions, the Company agreed to an exchange right whereby institutional investors owning the Company’s preferred stock may exchange up to $8 million of stated value of preferred stock for a like amount of the Company’s investment in FOXO’s Series A Preferred Stock. On February 3, 2025, the institutional investors exercised their exchange right in full by exchanging $8 million of stated valued of Series O Preferred Stock for $8 million of stated value of FOXO’s Series A Preferred Stock.

Unaudited Pro Forma Balance Sheet Data and Results of Operations Data of the Company Reflecting the Dispositions of Myrtle and RCHI

The following presents the unaudited pro forma balance sheet data as if the dispositions of Myrtle and RCHI had occurred on December 31, 2023. The unaudited pro forma balance sheet data are presented for information purposes only and are not intended to present the actual balance sheet that would have occurred had the dispositions been completed on December 31, 2023. The unaudited pro forma balance sheet data does not include any income tax effect that may result from the dispositions.

 Schedule of Pro-forma Balance Sheet Data

The following presents the unaudited pro forma results of operations data of the Company as if the dispositions of Myrtle and RCHI had occurred on January 1, 2022. The unaudited pro forma results of operations data are presented for information purposes only. The unaudited pro forma results of operations data are not intended to present actual results that would have occurred had the dispositions been completed as of January 1, 2022, or to project potential operating results as of any future date or for any future periods. The unaudited pro forma results of operations data do not include any gain or income tax effects that may result from the dispositions.

Schedule of Unaudited Pro forma Dispositions

Lease Agreements With Myrtle and SCCH

The buildings and campus where the Big South Fork Medical Center is located were transferred to a subsidiary of the Company during the year ended December 31, 2023. Both Myrtle and SCCH lease the facilities at the Big South Fork campus per the terms of lease agreements discussed below.

Myrtle entered into a lease agreement with the Company under which Myrtle agreed to lease facilities at Big South Fork’s campus beginning on June 14, 2024, the date that Myrtle was sold to FOXO. The lease is for a term of one year with five annual options to renew for an additional year with an initial monthly base rental amount of $35,000 and annual rent increases equal to the greater of 3% and the consumer price index.

On June 1, 2024, SCCH entered into a “triple net” lease agreement with the Company under which SCCH agreed to lease the Big South Fork’s hospital facilities. The lease is for a term of one year with five annual options to renew for an additional year with an initial monthly base rental amount of $65,000 and annual rent increases equal to the greater of 3% and the consumer price index. The lease was assumed by FOXO on September 10, 2024, the date SCCH was sold to FOXO.

Appointments to FOXO’s Management and Board of Directors

Effective on September 10, 2024, Mr. Seamus Lagan, the Company’s Chief Executive Officer and member of its board of directors, and Trevor Langley, a member of the Company’s board of directors, were appointed to the board of directors of FOXO. In addition, effective on December 5, 2024, Mr. Lagan was appointed Chief Executive Officer of FOXO.

New Corporate Office Lease Agreement

During February 2025, the Company terminated its existing corporate office lease and it leased space in a new office building for a term of three years.