Organization, Description of Business, Basis of Presentation, Summary of Significant Accounting Policies, Liquidity and Going Concern

12 Months Ended

Dec. 31, 2021

Accounting Policies [Abstract]

Organization, Description of Business, Basis of Presentation, Summary of Significant Accounting Policies, Liquidity and Going Concern

1. Organization, Description of Business, Basis of Presentation, Summary of Significant Accounting Policies, Liquidity and Going Concern

Description of Business

Clearday, Inc., a Delaware corporation (the “Company”), formerly known as Superconductor Technologies Inc., was established in 1987 and closed a merger with Allied Integral United, Inc., a Delaware corporation (“AIU”), on September 9, 2021. This merger was described in the Registration Statement (“AIU Merger Registration Statement”) on Form S-4, as amended and supplemented (Registration No. 333-256138). Prior to the closing of the merger, the Company was a leading company in developing and commercializing high temperature superconductor (“HTS”) materials and related technologies. As described in the AIU Merger Registration Statement, after the merger, the Company continued the businesses of AIU and continued one of the businesses of the Company related to its Sapphire Cryocooler and its related patents and intellectual property. AIU was incorporated on December 20, 2017 and began its business on December 31, 2018 when it acquired the businesses of certain private funds that operate five (5) memory care residential facilities and other businesses (the “2018 Acquisition”), including commercial real estate and hospitality assets from related parties. The memory care business is conducted through the Memory Care America LLC subsidiary (“MCA”), which has been in the residential care business since November 2010 and has been managed by the Company’s executives for approximately 5 years. Since the 2018 Acquisition, the Company has been developing innovative care and wellness products and services focusing on the longevity market.

All of the Company’s assets that were acquired in the 2018 Acquisition and are not related to the memory care facilities or the non-acute care and wellness industry were designated as non-core businesses and held for disposition. Accordingly, such assets and liabilities are classified as held for sale in the audited consolidated balances sheets as of December 31, 2021 and December 31, 2020. Additionally, the results of operations for these non-core businesses are classified as income from discontinued operations within the audited consolidated statements of operations for the years ended December 31, 2021 and December 31, 2020.

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19, which spread throughout the U.S. and the world, as a pandemic and has had a significant impact on the global economy, resulting in rapidly changing market and economic conditions. National and local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain non-essential businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. The governmental response includes additional protocols for the health and safety of residents and staff in the Company’s facilities. The outbreak and associated restrictions on travel that have been implemented have had a material adverse impact on the Company’s business and cash flow from operations, similar to many businesses. The Company has begun, and intends to continue, to resume normal operations as soon as practicable. However, the Delta Variant of the COVID-19 has become the predominant COVID-19 strain in the United States and has put a renewed focus on prevention and has caused many governments and other authorities to re-institute preventive measures to mitigate the risk of hyperlocal outbreaks. The total impact of COVID-19 is unknown and may continue as the rates of infection, including of the Delta Variant, have increased in Texas and many other states in the U.S. As a result, management has concluded that there was a long-lived asset impairment triggering event during 2020 and 2021, which required management to perform an impairment evaluation. See Note 5 – Discontinued Operations for additional discussion and results.

As noted above in the Introductory Note, this Report is the first Annual Report on Form 10-K by the Company after the merger. Accordingly, this is the first Annual Report on Form 10-K by the Company that includes the businesses conducted by AIU prior to the merger. Additionally, this annual Report on Form 10-K by the Company uses a date for the year end that is the last day of the year or December31, 2021 which is a change of the year ended date that was previously used. The Company has assessed the change of the fiscal year ending dates and believes that the change in year ending dates by the Company has not had a material impact on the financial results for the year ended provided in this Report and improves the comparability between fiscal periods.

Merger between Allied Integral Untiled, Inc and AIU Special merger Company, Inc and Name Change

On September 9, 2021,

● The merger that was described in the AIU Merger Registration Statement was completed.

● In connection with, and prior to completion of, the Merger, the Company (1) effected a 3.773585 -for-1 share reverse stock split (the “Reverse Stock Split”) of its Common Stock resulting in a decrease of outstanding shares of common stock from 2,751,780 to approximately 729,222; and (2) changed its name to “Clearday, Inc.”

● A special distribution for the issuance and delivery of additional shares of its common stock (“True Up Shares”) to the holders of its shares of Clearday Common Stock of record as of 5:00 pm Eastern Time on September 9, 2021 was declared, which provided for the distribution of an aggregate amount of approximately 546,820 shares of such Common Stock (representing a dividend rate of approximately 0.749868); such shares were distributed on or about September 20, 2021.

Clearday, Inc.

Notes to Audited Consolidated Financial Statements

Under the terms of the merger:

● There was an increase in the number of shares of AIU common stock (2:1), 50% of the shares of AIU’s 6.75% Series A Cumulative Convertible Preferred Stock were converted into AIU common stock and then the shares of AIU common stock were exchanged for shares of Clearday, Inc. Common Stock at an exchange ratio of approximately 1.192 shares of Common Stock for each share of AIU common stock;

● Each share of AIU’s 6.75% Series A Cumulative Convertible Preferred Stock that was not converted into AIU common stock were exchanged for an equal number of a new series of preferred stock issued by Clearday, par value $0.001 per share that are designated Clearday 6.75% Series F Cumulative Convertible Preferred Stock (“Series F Preferred”), which provide substantially similar terms as the AIU Series A Preferred, except that such preferred stock will convert to that number of shares of the Clearday’s Common Stock after giving effect to the exchange ratio used in the Merger or 2.384675 shares of Common Stock issuable upon the exchange of 1 share of Series F Preferred;

● The Company assumed the obligations of the warrants issued by AIU so that such warrants now represent the right to be exercised for shares of the Clearday’s Common Stock equal to approximately 3,781,509 shares;

● Clearday assumed the obligation to issue its shares of Common Stock with respect to the (1) 10.25% Series I Cumulative Convertible Preferred Stock (AIU Alt Care Preferred”) issued by AIU Alternative Care, Inc. (“AIU Alt Care”), a subsidiary of AIU, and (2) units of limited partnership interest (“Clearday OZ LP Interests”) of Clearday Alternative Care OZ Fund LP (“Clearday OZ Fund”), a subsidiary of AIU Alt Care, which as of the effective date of the merger was equal to an aggregate amount of approximately $15,253,740 of investment and accrued dividends.

The merger was accounted for as a reverse asset acquisition in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Under this method of accounting, AIU was deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the facts that, immediately following the Merger: (i) AIU’s stockholders owned a substantial majority of the voting rights in the combined company, (ii) AIU designated a majority of the members of the initial board of directors of the combined company, and (iii) AIU’s senior management holds all key positions in the senior management of the combined company. As a result, as of the closing date of the Merger, the net assets of the Company were recorded at their acquisition-date relative fair values in the accompanying consolidated financial statements of the Company and the reported operating results prior to the Merger are those of AIU.

Liquidity and Going Concern

The Company has incurred significant cumulative consolidated operating losses and negative cash flows. As of December 31, 2021, the Company has an accumulated deficit of $(65,208,327) continued loss from operations of $(19,506,675) and negative cash flows from continued operations in the amount of $(11,832,919). These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company plans to continue to fund its losses from operations and capital funding needs through public or private equity or debt financing or other sources, including the continued sale of its non-core assets and sale or disposition of other assets. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects. The accompanying audited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result should the Company not continue as a going concern. Management does not believe they have sufficient cash for the next twelve months from the date of this report to continue as a going concern without raising additional capital.

On April 29, 2021, the Company executed a secured promissory note with Benworth Capital Partners, LLC in the amount of $4,550,000, which included the grant of a first mortgage regarding the property owned by the Company and used to conduct its operations for its Naples Memory Care facility located at 2626 Goodlette-Frank Road, Naples, Florida 34105 (the “Naples Property”). The original mortgage on this property was paid off in the amount of $2,739,195 and closing costs of $354,357 were paid. The net proceeds to the Company in this mortgage refinancing was $1,456,448. This first mortgage loan has a one-year term as compared to the prior (refinanced) mortgage which had a maturity date of 2041. This first mortgage loan provides for interest only payments at a fixed interest rate of 9.95%. The loan is guaranteed by certain officers.

Clearday, Inc.

Notes to Audited Consolidated Financial Statements

For the period ended December 31, 2021 the Company entered into certain financing transactions related to the sale or forward sale of approximately $1,623,500 of revenues from the MCA residential fees. These transactions resulted in net proceeds of approximately $1,141,600. The repayment of these financing transactions range from 210 days to one year. (See “Note 6 – Indebtedness”)

For the period ended December 31, 2021, the Company sold undivided interests, representing 67.36% of the aggregate interests, in the Naples Property for an aggregate cash amount of $3,141,000 which was received by, and is available to, Clearday. The remaining 32.64% of the undivided interests in the Naples Property are retained by the Company.