Indebtedness

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Indebtedness

6. Indebtedness

As of June 30, 2022 and December 31, 2021, the current portion of long-term debt within the Company’s unaudited condensed financial statements for our core MCA and Corporate facilities is $9,293,965 and $3,941,782 respectively.

As of June 30, 2022 and December 31, 2021 the long term debt less the current portion of the company debt is $396,790 and $5,572,427. This debt is expected to be repaid primarily with the proceeds from the sales of these assets. See Note 2 – Summary of Significant Accounting Policies for more information about the Company’s assets held for sale.

Interest and Future Maturities

The Company has recorded interest expense in the accompanying unaudited condensed consolidated financial statements of $395,045 and $896,643 for the three and six months ended June 30, 2022 respectively compared to $194,618 and $273,399 respectively for the three and six months ended June 30,2021. The Company had $85,753 and $170,980 loss respectively, for discontinued operations respectively for the three and six months ended June 30, 2022 and $632,243 income and $944,255 for discontinued operations for the same periods in 2021.

The change in the interest expense reflects primarily the impact of the factoring loans we have taken out which carry a higher interest rate.

As of June 30,			Continuing Core				Discontinued Non-Core				Total
2022			8,123,233				-				8,123,233
2023			4,550,000				805,000				5,355,000
2024			-				-				0
2025			566,208				421,470				987,678
Thereafter			494,900				218,617				713,517
Total obligations		$	13,734,341			$	1,445,087			$	15,179,428

Clearday, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The following table summarizes the maturity of the Company’s long-term debt and notes payable as of June 30, 2022:

	Maturity Date	Interest  Rate			June 30, 2022		December 31, 2021
Memory Care (Core) Facilities:
Naples Equity Loan	May 2023		9.95	%		4,550,000		4,550,000
Libertas Financing Agreement	May 2022		0.00	%		-		283,685
New Braunfels Samson Funding 1	April 2022		0.00	%		-		80,467
New Braunfels Samson Group 2	April 2022		0.00	%		-		80,467
Naples Operating LG Funding	April 2022		0.00	%		-		92,519
Naples LLC CFG Merchant Solutions	September 2022		0.00	%		-		134,239
MCA Invesque Loan	January 2024		8.50	%		-		57,452
New Braunfels Business Loan	March 2022		6.25	%		10,994		64,072
Gearhart Loan	December 2022		7.00	%		193,578		213,578
Five C’s Loan	December 2022		9.85	%		325,000		325,000
Jefferson	May 2023		12.00	%		168,000		-
GS Capital	May 2023		12.00	%		115,800		-
Firstfire	May 2023		12.00	%		172,200		-
SBA PPP Loans	February 2022		1.00	%		1,518,682		2,510,998
Buda 2K Hospitality LLC	October 2022		15.00	%		-		100,000
Equity Secure Fund I, LLC	June 2022		11.50	%		1,000,000		1,000,000
New Braunfels Samson Funding 1	April 2023		0.00	%		-		-
New Braunfels Samson Group 2	April 2023		0.00	%		-		-
Naples LLC CFG Merchant Solutions	January 2023		0.00	%		-		-
Bank Direct Payable	Dec 2022		3.13	%		521,013		-
Naples Operating PIRS Capital	March 2023		0.00	%		416,000		-
Little Rock Libertas	February 2023		0.00	%		408,205		-
PIRS Capital Financing Agreement	March 2023		0.00	%		206,545		-
New Braunfels Samson Funding 1	February 2023		0.00	%		118,286		-
New Braunfels Samson Group 2	February 2023		0.00	%		216,857		-
Little Rock Samson Funding #3	May 2023		0.00	%		112,005		-
Naples Samson #1	May 2023		0.00	%		112,417		-
Sixth Street	April 2023		12.00	%		154,980		-
Westover Samson #1	April 2023		0.00	%		173,259		-
Naples LG Funding #2	April 2023		0.00	%		211,210		-
New Braunfels Samson #1	April 2023		0.00	%		36,591		-
Little Rock Premium Funding	April 2023		0.00	%		258,750		-
Notional amount of debt						11,000,372		9,492,477
Less: current maturities						10,014,800		4,910,863
					$	985,572	$	4,581,614

Non-core businesses classified as liabilities held for sale:

Real Estate:
Artesia Note (6)	June 2033	Variable		$	218,617	$	225,436
Tamir Note	March 2022	12.00	%		-		300,000
Leander Note	April 2022	12.75	%		-		700,000
Leander Stearns National Association	February 2023	10.375	%		805,000		-
Notional amount of debt					1,023,617		1,225,436
Less: current maturities					805,000		1,000,000
				$	218,617	$	225,436
Core Businesses (Continuing Operations) Notes Payable
Cibolo Creek Partners promissory note	December 2025	0.09	%	$	66,208	$	66,208
EIDL SBA Treas 310	December 2051	3.75	%		494,900		494,900
AGP Contract	October 2022	2.00	%		2,367,476		2,522,922
Round Rock Development Partners Note	December 2025	0.09	%		500,000		500,000
Notional amount of debt					3,428,584		3,584,030
Other Current Liabilities
Related Party Payable - Guarantee Fees					668,023		283,023
				$	668,023	$	283,023

Non-Core Businesses (Discontinued Continuing Operations) Notes Payable
Cibolo Creek Partners promissory note	December 2025	0.09	%	$	421,470	$	421,470
Notional amount of debt					421,470		421,470

* On July 7, 2022, this note was modified to reduce the principal to $550,000 and extend the maturity to March 31, 2023.

On the accompanying unaudited condensed consolidated balance sheet for core business operations includes $694,615 and $0 of unamortized debt discounts as of June 30, 2022 and 2021, respectively.

Clearday, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Memory Care (Core) Facilities:

Naples Equity Loan

On April 29, 2021, the Company executed a secured promissory note with Benworth Capital Partners, LLC in the amount of $4,550,000. The original Naples mortgage was paid off in the amount of $2,739,195 and there were closing costs of $354,357 which netted the Company proceeds in the amount of $1,456,448. This secured promissory note is a two-year loan with interest only payments at a fixed interest rate of 9.95%. This loan is guaranteed by certain officers of the Company and is secured by the Memory Care facility located at 2626 Goodlette-Frank Road, Naples, Florida 34105.

PPP Loans

In May 2020, the Company was granted four separate loans under the Paycheck Protection Program (the “PPP Loans”) administered by the United States Small Business Administration (“SBA”) established under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which has enabled the Company to retain the Company’s employees during the period of disruption created by the Coronavirus pandemic. STI was granted one loan in March 2021. The PPP Loans, which are evidenced by Notes issued by the Company (the “Note”), mature in May 2022 and bear interest at a fixed rate of 1.0% per annum, accruing from May 2020 (“Loan Date”) and payable monthly. The Note is unsecured and guaranteed by the SBA. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. The Note provides for customary defaults, including failure to make payment when due or to fulfill the Company’s obligations under the notes or related documents, reorganizations, mergers, Consolidations or other changes to the Company’s business structure, and certain defaults on other indebtedness, bankruptcy events, adverse changes in financial condition or civil or criminal actions. The PPP Loans may be accelerated upon the occurrence of a default. We expect that our remaining PPP loans (including STI) will be forgiven in the upcoming months.

Clearday, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

AGP Promissory Note

The Company entered into an unsecured promissory note with A.G.P./Alliance Global Partners (“AGP”) which was the financial adviser to AIU in connection with the merger. The $2,419,420, principal balance amount due of this note represents the unpaid fee amount then owed to AGP for its services. Interest under this note accrues at 2% per annum. The Company was obligated to make monthly payments of $30,000 and pay 50% of net proceeds (which shall be deemed gross proceeds minus direct selling costs, expenses and commissions) received, directly or indirectly, by the Company and/or its subsidiaries from the issuance of any equity or equity-linked financing (including convertible debt), less any selling commissions. Accrued and unpaid obligations of this note were due on September 10, 2022. On July 7, 2022, the Company and AGP modified the obligations under this note in consideration of a payment of $175,000. The modified note reduced the principal balance to $550,000, as of such date, provides for interest to continue to accrue at 2% per annum, extended the maturity from September 10, 2022 to March 31, 2023 and provides that the note represents all of the obligations of the Company to AGP. The Company may continue to prepay this note at any time without penalty or fee and will continue to pay 25% of net proceeds (which shall be deemed gross proceeds minus direct selling costs, expenses and commissions) received, directly or indirectly, by the Company and/or its subsidiaries from the issuance of any equity or equity-linked financing (including convertible debt), less any selling commissions.

New Braunfels Business Loan

On December 23, 2015, the Company executed a business loan agreement with ServisFirst Bank for $600,000. In October 2019, the loan was extended and now matures in March 2022. The loan has a fixed interest rate of 6.25%. The note is guaranteed by certain officers and directors of the Company and is collateralized by furniture, fixtures and equipment at MCA New Braunfels.

Gearhart Loan

On April 1, 2012, the Company executed a promissory note with Betty Gearhart for $200,000 (the “Gearhart Note”). Interest accrues at a fixed rate of 7.0% and is payable quarterly in January, April, July and October. In April 2015, the Company executed the First Amended and Restated Promissory Note in the principal amount of $238,578, which extended the maturity date until April 2017. The note is collateralized by the debtor granting a security interest to Betty Gearhart including all assets of MCA, LLC as well as any proceeds (including insurance proceeds) of any and all of the foregoing collateral. The maturity date of the loan was further extended in April 2017, April 2018 and April 2020. The Second Amendment to the Amended and Restated Promissory Note (the “Second Amendment”) was executed on March 5, 2020 in the principal amount of $218,578 and has a maturity date of April 1, 2021. The scheduled maturity date of this note has been further extended to December 31, 2022.

Five C’s, LLC Loan

As of April 1, 2019, the Five C’s LLC entered into an agreement issuing capital stock that reduced obligations under an existing promissory note to $325,000 that was payable one year after the initial loan was funded, with a right of AIU to extend the maturity date for an additional six-month period. As of December 31, 2020, this note was in default. Subsequently, in February 2021, an extension agreement was entered which set an interest rate of 9.85% per annum and rescheduled the maturity date to December 31, 2022. This note can be extended by the parties for successive six-month periods unless the noteholder provides a notice to the borrower that the term shall not be extended on or prior to the date that is 30 days prior than the expiration of the note.

Equity Secured Fund I, LLC

On March 26, 2021, the Company executed a promissory note for $1,000,000 with Equity Secured Fund I, LLC. The loan matures on April 26, 2022 and was subject to one (1) twelve (12)-month extension option. The Company and this lender continue to extend the maturity on a month to month basis. The interest rate of the loan is 11.50% and is guaranteed by certain officers and is collateralized the building located at 8800 Village Drive in San Antonio, Texas. Total proceeds received by the Company was $803,963 after adjusting the interest for the period amounting to approximately $115,000, which is classified as prepaid interest in the unaudited condensed unaudited condensed consolidated balance sheet; $44,891 and $5,575 that was paid for prepaid property tax and prepaid insurance respectively (both of which) are included in “net deferred finance cost” and $31,000 in closing costs.

Clearday, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Firstfire

On April 5, 2022, Clearday, Inc. (the “Company”), entered into a Securities Purchase Agreement (the “Note Purchase Agreement”) to issue an unsecured promissory note (the “Note”) to an institutional lender. We used the proceeds of this financing to fund our operations. The Note provides for the net funding to Clearday of $150,000 after payment of specified expenses of $3,750 and provides for an original issue discount of $18,450, resulting in a principal obligation of $172,200 and a one-time interest charge of 12% on such principal amount.

The Note provides for a one year maturity. Monthly payments on the Note of $19,286.40 will be made by Clearday with the first payment being on May 20, 2022, which payments are subject to a 10 day grace period. The Note is unsecured. The Note provides specified events of default (an “Event of Default”) including failure to timely pay the monetary obligations under the Note and such breach continues for a period of ten (10) days after written notice from the Noteholder’ a breach of covenants under the Note or the Purchase Agreement that continues for a period of twenty (20) days after written notice by the Noteholder; breach of any representation and warranty in the Note or Purchase Agreement; commencement of bankruptcy or similar proceedings; failure to maintain the listing of Clearday’s common stock on at least one of the Over-the-Counter markets such as the OTCQB; the failure of Clearday to comply with the reporting requirements of the Securities Exchange Act; Clearday’s liquidation, or a financial statement restatement by Clearday. This lender has waived the default under this Note caused by this Report not being filed when due.

Jefferson Street

On May 16, 2022, we entered into a Securities Purchase Agreement (the “Jefferson Purchase Agreement”) to issue an unsecured promissory note (the “Jefferson Note”) to an institutional lender. This Jefferson Note provides for the proceeds to us of $150,000 and provides for an original issue discount of $18,000 or 12%, resulting in a principal obligation of $168,000. We paid $15,000 in placement fees in connection with the sale of the Jefferson Note. After payment of such fees and closing cost, the sale of the Jefferson Note resulted in $135,000 in net proceeds to the us. The interest on this Jefferson Note is 12% per annum or $20,160. The Jefferson Note provides for a one year maturity. Monthly payments on the Jefferson Note of $18,816 will be made by Clearday with the first payment being on July 16, 2022, which payments are subject to a 10 day grace period, or shorter if the payment date is not a business day. The Jefferson Note is unsecured. The Jefferson Note provides specified events of default (a “Jefferson Event of Default”) including failure to timely pay the monetary obligations under the Jefferson Note and such breach continues for a period of ten (10) days after written notice from the Jefferson Noteholder’ a breach of covenants under the Jefferson Note or the Jefferson Purchase Agreement that continues for a period of twenty (20) days after written notice by the Jefferson Noteholder; breach of any representation and warranty in the Jefferson Note or Jefferson Purchase Agreement; commencement of bankruptcy or similar proceedings; failure to maintain the listing of Clearday’s common stock on at least one of the Over-the-Counter markets such as the OTCQX; the failure of Clearday to comply with the reporting requirements of the Securities Exchange Act; Clearday’s liquidation, or a financial statement restatement by Clearday. Upon any Jefferson Event of Default, the obligations under the Note will accrue interest at an annual rate of 22% and, if such Jefferson Event of Default is continuing at any time that is 180 days after the date of the Note, provide the Noteholder the right and option to convert the obligations under the Note to shares of Clearday’s common stock. The price for any such conversion is equal to 75% (or a 25% discount) of the average of the five (5) lowest per share daily volume-weighted average price of Clearday’s common stock over the ten (10) consecutive trading days that are not subject to specified market disruptions immediately preceding the date of the conversion. The conversion right of the holder of the Jefferson Note is subject to a customary limitation on beneficial ownership of 4.99% of Clearday’s common stock. Each of the Jefferson Note and the Jefferson Purchase Agreement has other customary covenants and provisions, including representations and warranties, payment of brokers, and indemnification, that Clearday will not sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business without the consent of the holder of the Jefferson Note and Clearday will maintain a reserve of authorized and unissued shares of common stock sufficient for full conversion of the obligations under the Jefferson Note. This lender has waived the default under this Note caused by this Report not being filed when due.

Clearday, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

GS Capital

On May 20, 2022, we entered into a Securities Purchase Agreement (the “GS Purchase Agreement”) to issue an unsecured promissory note (the “GS Note”) to an institutional lender. This GS Note provides for the proceeds to us of $103,500 and provides for an original issue discount of $12,300 or 12%, resulting in a principal obligation of $115,800. We paid $10,000 in placement fees in connection with the sale of the GS Note and certain other expenses of the lender. After payment of such fees and closing cost, the sale of the GS Note resulted in $90,000 in net proceeds to the us. The interest on this GS Note is 12% per annum or $20,160. The GS Note provides for a one year maturity. Ten monthly payments on the GS Note of $12,969.60 will be made by Clearday with the first payment being on the date that is 60 days after the issue date of the GS Note, which payments are subject to a 10 calendar day grace period, or shorter if the payment date is not a business day. The GS Note is unsecured. The GS Note provides specified events of default (a “GS Event of Default”) including failure to timely pay the monetary obligations under the GS Note, a breach of covenants under the GS Note or the GS Purchase Agreement; breach of any representation and warranty in the GS Note or GS Purchase Agreement; commencement of bankruptcy or similar proceedings; failure to maintain the listing of Clearday’s common stock on at least one of the Over-the-Counter markets such as the OTCQX; the failure of Clearday to comply with the reporting requirements of the Securities Exchange Act; Clearday’s liquidation, a financial statement restatement by Clearday, an judgment against Clearday that is not previously disclosed in our filings with the SEC that is for more than $150,000 and remains unvacated, unbonded or unstayed for 20 days, unless otherwise permitted by the holder of the GS Note, or cross defaults under any promissory note or similar instrument with initial principal obligations of $150,000 or more. Upon any GS Event of Default, the obligations under the GS Note will accrue interest at an annual rate of 22% and, if such GS Event of Default is continuing for 10 calendar days (but 30 calendar days if the Event of Default occurred in the first 150 days after the date of the GS Note), then from and after the date that is 180 days after the date of the holder of the GS Note may convert the obligations under the GS Note to shares of Clearday’s common stock. The price for any such conversion is equal to 75% (or a 25% discount) of the average of the five (5) lowest per share daily volume-weighted average price of Clearday’s common stock over the ten (10) consecutive trading days that are not subject to specified market disruptions immediately preceding the date of the conversion. The conversion right of the holder of the GS Note is subject to a customary limitation on beneficial ownership of 4.99% of Clearday’s common stock. Each of the GS Note and the GS Purchase Agreement has other customary covenants and provisions, including representations and warranties, payment of brokers, and indemnification, that Clearday will not sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business without the consent of the GS Noteholder and Clearday will maintain a reserve of authorized and unissued shares of common stock sufficient for full conversion of the obligations under the GS Note. The GS Note includes a most favored nations clause providing that the conversion price and interest rate of the GS Note will be adjusted on a ratchet basis if Clearday offers more favorable terms in any other unsecured borrowing that is $250,000 or less or that has a maturity date of one year or less such as conversion price, interest rate (whether through a straight discount or in combination with an original issue discount) or other more favorable term as to conversion price or interest rate to another party. This lender has waived the default under this Note caused by this Report not being filed when due.

Sixth Street

The Note provides for the net funding to Clearday of $150,000 after payment of specified expenses of $3,750 and provides for an original issue discount of $18,450, resulting in a principal obligation of $172,200 and a one-time interest charge of 12% on such principal amount. We paid $15,000 in placement fees in connection with the sale of the Note. The Note is not registered and was sold as a private placement exempt from the registration requirements of the Securities Act of 1933, as amended, under Section 4(a)(2) thereof.

The Note provides for a one year maturity. Monthly payments on the Note of $19,286.40 will be made by Clearday with the first payment being on July 26, 2022, which payments are subject to a 10 day grace period. The Note is unsecured. The Note provides specified events of default (an “Event of Default”) including failure to timely pay the monetary obligations under the Note and such breach continues for a period of ten (10) days after written notice from the Noteholder’ a breach of covenants under the Note or the Note Purchase Agreement that continues for a period of twenty (20) days after written notice by the Noteholder; breach of any representation and warranty in the Note or Note Purchase Agreement; commencement of bankruptcy or similar proceedings; failure to maintain the listing of Clearday’s common stock on at least one of the Over-the-Counter markets such as the OTCQB; the failure of Clearday to comply with the reporting requirements of the Securities Exchange Act; Clearday’s liquidation, or a financial statement restatement by Clearday.

Upon any Event of Default, the obligations under the Note will accrue interest at an annual rate of 22% and, if such Event of Default is continuing at any time that is 180 days after the date of the Note, provide the Noteholder the right and option to convert the obligations under the Note to shares of Clearday’s common stock. The price for any such conversion is equal to 75% (or a 25% discount) of the average of the five (5) lowest per share daily volume-weighted average price of Clearday’s common stock over the ten (10) consecutive trading days that are not subject to specified market disruptions immediately preceding the date of the conversion. The conversion right of the Noteholder is subject to a customary limitation on beneficial ownership of 4.99% of Clearday’s common stock. This lender has waived the default under this Note caused by this Report not being filed when due.

Debt Related to Assets Held for Sale

Clearday, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Artesia Note

On April 1, 2013, the Company executed a promissory note with FirstCapital Bank of Texas, N.A. for a principal amount of $314,500 (“Artesia Note”). the Company executed an amendment to the Artesia Note on July 23, 2018 (“Amended Artesia Note”). The Amended Artesia Note had a principal balance of $266,048 upon execution. The original maturity date of the note was March 1, 2018, which was extended to June 23, 2033 in the Amended Artesia Note. The note requires equal monthly principal and interest payments through maturity and has no prepayment penalties. The note has a variable interest rate equal to the greater of 6.0% or the Prime rate plus 1.0%. The note is collateralized by a security interest in the property and other assets within the property and is guaranteed by certain officers and directors of the Company. As of June 30, 2022, the interest rate for this loan is 6% (the greater of 6% or the Prime rate of 3.25% plus 1.0%).

Leander Note

On October 5, 2018, the Company executed a loan agreement with Equity Security Investments for a principal amount of $700,000 (“Leander Note”) to refinance existing financing for the property. The note had an original maturity date of October 5, 2019 and was collateralized by a security interest in the property and other assets within the property and is guaranteed by certain officers and directors of the Company. The Company exercised an extension option which extended the maturity of the note to October 5, 2020. The note required interest only monthly payments with the full principal balance becoming due upon the maturity date. The note has a fixed interest rate of 12.75%. As of October 12, 2020, the maturity of the note was extended to April 5, 2021 and was refinanced on February 10, 2022 when the Company executed a $805,000 one-year loan on the Leander note that extends the new maturity date to February 10, 2023. The note has a fixed interest rate of 10.75%, which also includes a $56,000 interest reserve for one year in the withholdings. The loan is expected to be paid off at the time of the sale of this property.

Notes Payable

The Company has notes payable to Cibolo Creek Partners, LLC, its affiliate Round Rock Development Partners, LP. These notes have a maturity date of December 31, 2025, and there is no interest accruing on any of these notes. Each of these lenders was a related party when the obligations were incurred. For more information, see Note 9 - Related Party Transactions.