| Item 1.01 |
Entry into a Material Definitive Agreement. |
Clearday, Inc. (“Clearday” or the
“Company”) entered into certain financing agreements to refinance certain of its existing indebtedness at its residential
facility operating facilities on more favorable terms to repay outstanding debt and provide working capital for Clearday’s innovative
care businesses. Clearday is negotiating the refinancing of some of its other debt including its mortgage on its Naples, Florida residential
care facility.
The innovate care businesses include the development
and deployment of robots in our residential care facilities as part of our Clearday Direct program. The Mitra robot and robotic applications
are developed through our previously reported joint venture with Invento Research Inc. The Mitra robot has several use cases or applications
that enable superior care to older Americans in their home environment and in our residential care facilities. We intend to provide the
Mitra robot, through Clearday Direct, to residents at our residential care facilities, and charge additional amounts for such services,
that may also include rooms that have innovative therapies such as Clearday Restore and premium furnishings. A digital stream of an example
of a resident’s experience with the Mitra robot is available at our website at https://myclearday.com/robotics/. Clearday intends
to continue its deployment of the Mitra robot with additional use cases or applications in its residential care facilities and to third
parties.
MCA
Naples, LLC and MCA Naples Operating Company, LLC as an additional party (“MCA”), each a subsidiary of Clearday, Inc., entered
into a financing agreement (“Purchase Agreement”) on February 28, 2022 with CFG Marchant Solutions, LLC (“Financing
Party 1”), to refinance its existing debt with the Financing Party 1 and obtain additional financing on more favorable
terms. The financing under the Purchase Agreement funded on February 28, 2022 and provided aggregate gross proceeds of approximately
$450,000, of which approximately $73,130 was used to repay existing indebtedness and approximately $9,000 paid transaction related fees.
The debt that was refinanced had an original balance of $385,000 and a balance of $275,000 as of September 30, 2021, as previously reported
on the Company’s quarterly report as of such date. The refinanced debt terms provide better weekly repayment amounts, 2.22% of
the total debt balance compared with 3.12%, and a better advanced amount of 77% of the total debt balance compared with 71%.
Under
the Purchase Agreement with the Financing Party 1 MCA sold to Financing Party 1 a specified percentage of its future receipts
(as defined by the Purchase Agreement), which includes the future resident revenues in the Naples, Florida residential care facility
owned by MCA, equal to $585,000 for $450,000 (or an advance rate of 77%), less origination and other fees of approximately $9,000.
MCA agrees to repay this amount in 45 equal weekly installments, subject to the right of the Financing Party 1 to change the daily
amount to more closely reflect the actual future receipts of MCA. The Financing Party 1 has specified customary collection procedures
for the collection and remittance of the weekly payable amount including direct payments from a specified authorized bank account. The
Purchase Agreement provides that the sale of the future receipts shall be construed and treated for all purposes as a true and complete
sale and includes customary provisions granting a security interest under the Uniform Commercial Code in accounts and the proceeds. The
Purchase Agreement also provides customary provisions including representations, warranties and covenants, indemnification, arbitration
and the exercise of remedies upon a breach or default; and provides the Financing Party 1 with a Right of First Refusal for a
two year term to purchase any additional future receipts of MCA or its affiliates that guaranteed the obligations under the Purchase
Agreement.
The
obligations of MCA under the Purchase Agreement are irrevocably, absolutely, and unconditionally guaranteed by certain affiliates of
MCA as additional parties to the Purchase Agreement: Memory Care American, LLC, MCA Management Company, Inc., MCA Naples Operating Company,
LLC and MCA Naples Holdings, LLC; and by a Personal Guaranty of Performance by an officer of Clearday, which provides customary provisions,
including representations, warranties and covenants.
The
foregoing descriptions of Purchase Agreement and the related Personal Guaranty of Performance are not complete and are qualified in their
entirety by reference to the full text of such agreements, which are filed as Exhibit 10.1 and 10.2 to this Current Report on Form 8-K,
each of which is incorporated herein by reference.
Memory
Care At Good Shepherd, LLC (“MCGS”), a Clearday subsidiary, entered into an Agreement of Sale of Future Receivables (“Sale
Agreement”) on March 4, 2022 with Libertas Funding LLC (Financing Party 2”) to refinance its existing debt with Financing
Party 2 and obtain additional financing on more favorable terms. The financing under the Sale Agreement funded on March 4, 2022 and provided
aggregate gross proceeds of approximately $450,000, of which approximately $152,078 was used to repay existing indebtedness and approximately
$9,000 paid transaction related fees. The debt that was refinanced had an original balance of $737,000 and a balance of $488,408 as of
September 30, 2021, as previously reported on the Company’s quarterly report as of such date. The refinanced debt terms provide
a better discount factor of 1.31 compared with 1.34 , which is a better advanced amount of 76.3% of the total debt balance compared with
74.6%.
Under
the Sale Agreement with the Financing Party 2 MCGS sold to Financing Party 2 a specified percentage of its future receipts (as defined
by the Sale Agreement), which includes the future resident revenues in the Little Rock, Arkansas residential care facility owned by MCGS,
equal to $589,500 for $450,000 (or an advance rate of 76.3%), less origination and other fees of approximately $9,000. MCGS agrees to
repay this amount in approximately 50 equal weekly installments. The Financing Party 2 has specified customary collection procedures
for the collection and remittance of the weekly payable amount including direct payments from a specified authorized bank account. The
Sale Agreement provides that the sale of the future receipts shall be construed and treated for all purposes as a true and complete sale
and includes customary provisions granting a security interest under the Uniform Commercial Code in accounts and the proceeds. The Sale
Agreement also provides customary provisions including representations, warranties and covenants, indemnification, arbitration and the
exercise of remedies upon a breach or default.
MCGS
has the right to repay the obligations under the Sale Agreement during the initial 5 months that the obligations are outstanding, with
a discount to the total financing amount based on the month of the repayment, beginning at 9.16%, and decreasing by 1.53% per month .
The
obligations of MCGS under the Sale Agreement are irrevocably, absolutely, and unconditionally guaranteed by the CEO of Clearday. The
provisions for such guaranty include customary provisions, including representations, warranties and covenants.
The
foregoing descriptions of Sale Agreement and the related guaranty are not complete and are qualified in their entirety by reference to
the full text of such agreement, which is filed as Exhibit 10.3 to this Current Report on Form 8-K, each of which is incorporated herein
by reference.
Forward
Looking Statements
This
communication contains forward-looking statements (including within the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, and Section 27A of the Securities Act of 1933, as amended) concerning the Company. These statements may discuss goals, intentions
and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs
of the management of the Company, as well as assumptions made by, and information currently available to, management. Forward-looking
statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions, and include
words such as “may,” “will,” “should,” “would,” “expect,” “anticipate,”
“plan,” “likely,” “believe,” “estimate,” “project,” “intend,”
and other similar expressions. Statements that are not historical facts are forward-looking statements. Forward-looking statements are
based on current beliefs and assumptions that are subject to risks and uncertainties and are not guarantees of future performance. Actual
results could differ materially from those contained in any forward-looking statement as a result of various factors, including, without
limitation: the risks regarding the Company and its business, generally; risks related to the Company’s ability to correctly estimate
and manage its operating expenses and develop its innovate non-acute care businesses and the acceptance of its proposed products and
services, including with respect to future financial and operating results; the ability of the Company to protect its intellectual property
rights; competitive responses to the Company’s businesses including its innovative non-acute care business; unexpected costs, charges
or expenses; regulatory requirements or developments; changes in capital resource requirements; and legislative, regulatory, political
and economic developments. The foregoing review of important factors that could cause actual events to differ from expectations should
not be construed as exhaustive and should be read in conjunction with statements that are included herein and elsewhere, including the
risk factors included in the Company’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed with the SEC and the registration statement regarding the Company’s previously announced merger, that was filed
and declared effective. The Company can give no assurance that the actual results will not be materially different than those based on
the forward looking statements. Except as required by applicable law, the Company undertakes no obligation to revise or update any forward-looking
statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
