UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM ~~10-Q/A~~10-Q

~~(Amendment No. 1)~~

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number 0-21074

CLEARDAY, INC.

(Exact name of registrant as specified in its charter)

Delaware

77-0158076

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

8800 Village Drive, Suite 106, San Antonio, Texas 78217

(Address of principal executive offices & zip code)

(210) 451-0839

(Registrant’s telephone number including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ or No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001		CLRD		OTCQX

We had ~~25,997,628~~26,173,811 shares of our common stock outstanding as of the close of business on ~~July 14,~~December 15, 2023.

~~Clearday, Inc.~~

~~Explanatory Note~~

Clearday, Inc. (the “Company”) is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, which was originally filed with the Securities and Exchange Commission (“SEC”) on July 17, 2023 (the “Original Filing”), to amend the Company’s unaudited condensed consolidated financial statements as of March 31, 2023 and make certain other amendments. The Company has previously filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (the “June 10Q”). The amendments provided in this filing have been incorporated in the June 10Q and the Company does not expect to make any amendments to the June 10Q.

~~Part I, Item 1 Condensed Consolidated Financial Statements has been amended to reflect the following amendments:~~

Item As Amended Original Filing Difference
● Changes to the Condensed Consolidated Balance Sheet:

ASSETS
Non-Current assets
^[1] Real estate property and equipment, net 6,321,749 6,227,965 93,784
^[1] Total assets 10,346,008 10,252,224 93,784

LIABILITIES, MEZZANINE EQUITY AND DEFICIT
Current liabilities:
^[2] Accrued expenses 5,989,892 5,966,110 23,782
^[3] Accrued interest 895,013 471,684 423,329
^[2] Related party payables
738,725

708,366

30,359

^[2][3] Total current liabilities
32,828,102
32,350,632 477,470
^[2][3] Total liabilities 37,452,825 36,975,355 477,470

Deficit
^[4] Additional paid-in-capital 19,132,830 19,193,946 (61,116 )
^[5] Accumulated deficit (79,606,718 ) (79,011,020 ) (595,698 )
^[6] Clearday, Inc. Stockholders’ deficit: (60,448,365 ) (59,791,551 ) (656,814 )
^[7] Non-controlling interest in subsidiaries
11,307,705

11,034,577

273,128

Total deficit
(49,140,660
)
(48,756,974
)
(383,686
)
TOTAL LIABLITIES, MEZZANINE EQUITY AND DEFICIT 10,346,008 10,252,224 93,784

● Changes to the Condensed Consolidated Statements of Operations
Operating Expenses
^[8] Wages & general operating expenses 3,846,475 3,815,150 31,325

^[9] Selling, general and administrative expenses 904,989 880,485 24,504
^[10] Depreciation and amortization expense 296,826 324,044 (27,218 )
^[11] Total operating expenses 5,048,290 5,019,679 28,611
^[11] Operating Loss (2,041,786 ) (2,013,175 ) (28,611 )
Other (income) expenses
^[12] Interest Expense 714,833 549,033 165,800
^[13] Loss (gain) on the sale of fixed assets 106,467 192,407 (85,940 )
^[14] Other (income)/expenses 498,124 10,897 487,227
^[15] Total other (income)/expenses (1,555,178 ) (2,122,265 ) 567,087
^[16] Net income (loss) from continuing operations (486,608 ) 109,090 (595,698 )
^[16] Net loss attributable to Clearday, Inc. common stockholders (2,736,347 ) (2,140,649 ) (595,698 )

Basic and diluted loss per share attributable to Clearday, Inc.
^[17] Weighted average common shares basic and diluted outstanding 23,910,818 24,187,743 (276,925 )

● Changes to the Condensed Consolidated Statements of Mezzanine Equity, Convertible Preferred Stock and Stockholders’ Deficit
^[18] Accrual of Series I Convertible Preferred Stock in subsidiary
136,564

(136,564
) 273,128
^[19] Stock compensation for services (common stock par value amount) 75 - 75
^[19] Stock compensation for services (common stock additional paid in capital amount) (61,191 ) - (61,191 )
^[18] Non-Controlling Interest
11,307,705

11,034,577

273,128

Total Deficit
49,140,660

48,756,974

383,686

● Changes to the Condensed Consolidated Statements Of Cash Flows
CASH FLOWS FROM OPERATING ACTIVITIES
^[20] Net income (loss) (486,608 ) 109,090 (595,698 )
^[20] Loss from continued operations (486,608 ) 109,090 (595,698 )
^[2] Adjustments required to reconcile net income (loss) to cash flows used in operating activities
^[21] Depreciation and amortization 296,826 324,044 (27,218 )
^[22] Shares issued for services (61,116 ) - (61,116 )
^[23] Loss (gain) on the sale of fixed assets 106,467 192,407 (85,940 )
^[18] Series I preferred stock accumulated dividend
136,564

(136,564
)
273,128

^[24] Accrued liabilities 1,193,473 746,362 447,111
^[9] Related party payables
66,128

35,769

30,359

^[25] Net cash used in activities of continuing operations (1,066,342 ) (1,046,967 ) (19,375 )
^[25] Net cash used in operating activities (1,066,342 ) (1,046,967 ) (19,375 )

CASH FLOWS FROM FINANCING ACTIVITIES
^[26] Proceeds from long-term debt 1,619,316 1,534,560 84,756
^[26] Net cash provided by in financing activities 970,195 885,439 84,756
^[27] Change in cash and restricted cash from discontinued operations - 195,638 (195,638 )
^[27] Cash and restricted cash at beginning of the year 205,638 10,000 195,638
CASH FLOWS FROM INVESTING ACTIVITIES
^[28] Payments for property and equipment (18,063 ) (37,437 ) 19,374
^[28] Net cash provided by (used in) investing activities of the continuing operations (18,063 ) (37,437 ) 19,374

~~Explanation of the amendments or revisions:~~

¹	~~To correct the overstatement of depreciation expense on buildings and leasehold improvements, net of additional depreciation expense described in note 10, below.~~

²	To correct the understatement of accrued expenses, including an amount for consulting fees that were paid by the issuance of common stock and to correct the accrued amount payable to related persons as of March 31, 2023.

³	To correct the understatement of default interest for the Naples Equity Loan, including amounts accrued for prior periods that, as reported in the Original Filing, was in default and subject to additional amounts for fees, charges and interest.

⁴	~~To correct the overstatement of the additional paid in capital that was reported in the Original Filing.~~

⁵	~~To reflect the aggregate adjustments to Net income (loss) from continuing operations described below in note 16.~~

⁶	~~To reflect the aggregate changes to the Additional paid-in-capital and the Accumulated deficit described in notes 4 and 5.~~

⁷	~~To correct the accrual of Series I Convertible Preferred Stock in subsidiary that was reported in error in the Original Filing.~~

⁸	To correct the accrual for additional amounts including interest related to employment related taxes such as required withholdings for federal income tax and employee and employer contributions for FICA (Social Security and Medicare) taxes.

⁹	To correct the accrual for expenses related to consulting services of approximately (19,228), certain expenses related to the Simpsonville Facility of approximately 13,373, and rent by the Company of robots from a related party of $30,359.

¹⁰	~~To correct the depreciation and amortization expense amount for the six month period.~~

¹¹	~~To correct each balance, which is the aggregate of the adjustments described in notes 8, 9, and 10.~~

¹²	~~To correct the amount of the additional interest related to the Naples Equity Loan at the default interest rate for the three months ending March 31, 2023.~~

¹³	~~To correct the amount related to the loss on disposition of assets in the Community Leases that were terminated under the Lease Termination Agreement.~~

¹⁴

To correct the accrual for the (i) Simpsonville Action 2 in the amount of $210,324 to reflect the summary judgment in this matter in favor of the Landlord on April 14, 2023 that was not appealed by the defendants and the judgment to enforce the summary judgment that was entered on September 14, 2023, each as described in Note 8 Commitments and Contingencies to the condensed consolidated financial statements; and (ii) prior accrual of interest, fees and costs related to the Naples Equity Loan of $257,592; and (iii) other adjustments including increase of other income related to the disposition of certain assets, net of depreciation.

¹⁵	~~To correct this balance, which is the aggregate of the adjustments described in notes 12, 13, and 14.~~

¹⁶	~~To correct this balance, which reflects the adjustments described in notes 11 and 15.~~

¹⁷	~~To correct the amount of the weighted average common shares basic and diluted outstanding that was incorrectly stated in the Original Filing.~~

¹⁸	~~To correct the computation of the non-controlling interest in the subsidiaries that was not correctly reported in the Original Filing, which is the same adjustment described in note 7.~~

¹⁹	~~To correct the amount of stock compensation for services that was not correctly stated in the Original Filing. This amendment is also to Stock Compensation for services – Total Deficit.~~

²⁰	~~To correct this amount to reflect the aggregate adjustments to the net income described in note 16.~~

²¹	~~To correct this amount to reflect the aggregate adjustments to depreciation and amortization expense described in note 10.~~

²²	~~To correct this amount to reflect the aggregate adjustments related to issuance of common stock for consulting services described in note 19.~~

²³	~~To correct this amount to reflect the aggregate adjustment related to the loss on the disposition of assets described in note 13.~~

²⁴	~~To correct this amount to reflect the aggregate adjustment related to the increase of certain liabilities described in notes 2 and 3.~~

²⁵	~~To correct this amount to reflect the aggregate adjustments to this financial statement described in notes 20-24, inclusive.~~

²⁶	~~To correct the amount of the net cash provided by in financing activities that was reported in error in the Original Filing.~~

²⁷	~~To correct these amounts to reflect the proper classification in these balances that were incorrectly classified in discontinued operations in the Original Filing.~~

²⁸	~~To reflect the correct amount of purchases (net) of property, plant and equipment for the period.~~

~~This Amendment No. 1 also~~

●	~~Revised the footnotes to the Company’s condensed consolidated financial statements provided in this Report,~~
●	Revised the Condensed Consolidated Statements of Mezzanine Equity, Convertible Preferred Stock and Stockholders’ Deficit – Three Months Ended March 31, 2023 (Unaudited) to make conforming changes to the amendments described above,
●	Revised the Condensed Consolidated Statements Of Cash Flows to add to the supplemental disclosures of non-cash investing and financing activities for the following: settlements on derivative liability; Converted Preferred Shares Series F to Common Shares; PIK dividends for Series F preferred shares; Discount on derivative liability; Termination of leases; Accounts payable exchanged for common shares; and Notes payable used to pay rent expense,
●	Supplemented such footnotes to include the amortization expense related to intangible assets for the three months ending March 31, 2023 in Note 4 — and corrected a reference to the amortization expense and carrying value for Developed technology as of December 31, 2022,
●	~~Corrected the referenced interest rate for certain indebtedness in Note 7 — Indebtedness, Intangible Assets, Net,~~
●	~~Revised the disclosures to Note 8 — Commitments and Contingencies to include events to the date of the filing of this Amendment No. 1,~~
●	~~Revised the disclosure regarding derivative calculation in Note 11 — Deficit,~~
●	~~Revised the disclosure regarding the sale of a property (the Stockdale Financing) and deleted the error that references such transaction as an off balance sheet financing,~~
●	~~Revised the subsequent events to include the additional subsequent events to the date of the filing of this Amendment No. 1, and~~
●	~~Revised Part I, Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations to reflect the amendments described above.~~

In addition, the Company’s Principal Executive and Principal Financial Officer has provided new certifications dated as of the date of this filing in connection with this Form 10-Q/A (Exhibits 31.1, 31.2, 32.1 and 32.2).

The Company has considered the materiality of the amendments set forth in this Amendment No. 1 to assess whether the errors in the Original Filing were material to a reasonable investor’s perspective based on the total mix of information that has been provided to investors in the Company’s filings with the SEC, and considered relevant facts and circumstances including both quantitative and qualitative factors, including without limitation that the Company continued to incur a significant net loss from continuing operations and that the Company’s revised net ~~cash used in activities of continuing operations~~ was not materially different from the amount in the Original Filing. The Company notes that there is no executive compensation that would be subject to any clawback of executive compensation if the financial statements included in the Original Filing were restated.

Except as described above, no changes have been made to the Original Filing, and this Amendment No. 1 does not modify, amend or update in any way the financial or other information contained in the Original Filing.

No other material changes have been made to the Original Report. Except as may otherwise be stated, this Form 10-Q/A continues to speak as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or upda~~te any related disclosures made in the Form 10-Q.~~

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995 for these forward-looking statements. Our forward-looking statements relate to future events or our future performance and include, but are not limited to, statements concerning our business strategy, future commercial revenues, market growth, capital requirements, new product introductions, expansion plans and the adequacy of our funding. Other statements contained in this Report that are not historical facts are also forward-looking statements. We have tried, wherever possible, to identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and other comparable terminology.

We caution investors that any forward-looking statements presented in this Report, or that we may make orally or in writing from time to time, are based on the beliefs of, assumptions made by, and information currently available to, us. Such statements are based on assumptions and the actual outcome will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences may be material. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on known results and trends at the time they are made, to anticipate future results or trends.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include the following:

	●	Our limited cash and a history of losses;

	●	Our ability to finance our innovative care products and services, including our Longevity-tech platform and products and services that are in development;

	●	The impact of any financing activity on the level of our stock price;

	●	The impact of any default by us of certain indebtedness and the exercise by the lenders of their respective remedies including the right to convert stock and exercise warrants at a price that is a discount to our trading price;

	●	The additional dilutive impact of any issuances of securities to raise capital, including any capital in anticipation and in advance of the previously reported merger (the “Viveon Merger”) of us with Viveon Health Acquisition Corp.;

	●	The timing and amount of financing acquired in connection with the Viveon Merger;

	●	The cost and uncertainty from compliance with environmental regulations and the regulations related to operating our memory care ~~facilities~~facility and adult day care ~~centers;~~center;

	●	The effect of pandemics and other public health related issues on our businesses, including actions or additional regulations by State and Federal governments;

	●	Local, regional, national and international economic conditions and events, and the impact they may have on us and our customers;

	●	The impact of inflation to our businesses, including increases in our labor costs and other costs we pay for goods and services;

	●	The impact of a shortage of workers in our industries and our ability to maintain costs while properly staffing our facilities;

	●	The availability of state funds through civil money penalty grant programs;

	●	Increases in tort and insurance liability costs;

	●	Delays or nonpayment to us, including payments related to government or agency reimbursements;

	●	Our ability to pay our liabilities, including tax ~~obligations;~~obligations and the exercise of remedies by holders of our indebtedness; and

	●	Circumstances that adversely affect the ability of older adults or their families to pay for our services, such as economic downturns, weakening investment returns, higher levels of unemployment among our residents or potential residents’ family members, lower levels of consumer confidence, stock market volatility and/or changes in demographics.

For further discussion of these and other factors see “Risk Factors” in our Annual Report on Form 10-K, as amended and supplemented.

This Report and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date of this Report.

Clearday, Inc.

~~March 31,~~September 30, 2023

FORM 10-Q

Table of Contents

		Page
PART I	Financial Information
Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets – ~~March 31,~~September 30, 2023, and December 31, 2022 (Unaudited)	1
	Condensed Consolidated Statements of Operations – For ~~The~~the Three and Nine Months Ended ~~March 31,~~September 30, 2023, and 2022 (Unaudited)	2
	Condensed Consolidated Statements of Mezzanine Equity, Convertible Preferred Stock and ~~Stockholders’~~Stockholder’s Deficit – ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2023, and 2022 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows – For ~~The Three~~the Nine Months Ended ~~March 31,~~September 30, 2023, and 2022 (Unaudited)	5
	Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3228
Item 3	Quantitative and Qualitative Disclosures About Market Risk	3533
Item 4	Evaluation of Disclosure Controls and Procedures.	3533
PART II	Other Information
Item 1.	Legal Proceedings	3534
Item 1A.	Risk Factors	3534
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3634
Item 3.	Defaults Upon Senior Securities	3634
Item 4.	Mine Safety Disclosures	3634
Item 5.	Other Information	3634
Item 6.	Exhibits	3634

References in this Report to ~~the~~ “Clearday”, the “Company”, “we”, “us” include Clearday, Inc. and its consolidated subsidiaries, unless otherwise expressly stated or the context indicates otherwise.

The mark “Clearday” is protected under applicable intellectual property laws. Solely for convenience, trademarks of Clearday referred to in this Report may appear without the ^TM symbol, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and related intellectual property rights.

Clearday, Inc.

Condensed Consolidated Balance Sheets

~~March 31,~~September 30, 2023, and December 31, 2022

(Unaudited)

	March 31, 2023			December 31, 2022			September 30, 2023			December 31, 2022
ASSETS
Current assets:
Cash	$	81,429		$	195,638		$	99,810		$	195,638
Restricted cash		10,000			10,000			-			10,000
Accounts receivable, net		58,447			47,705			-			47,705
Prepaid expenses		113,666			213,289			377,709			213,289
Other current assets		466			-
Total current assets		264,008			466,632			477,519			466,632

Non-current assets
Operating lease right-of-use assets		-			22,792,752			-			22,792,752
Real estate property and equipment, net		6,321,749			6,522,979			6,086,243			6,522,979
Intangible assets, net		3,496,000			3,680,000			3,362,375			3,680,000
Other long-term assets		264,251			288,155
Other non-current assets								278,902			288,155
Total assets	$	10,346,008		$	33,750,518		$	10,205,039		$	33,750,518

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	3,599,141		$	6,324,002		$	3,449,094		$	6,324,002
Accrued expenses		5,989,892			8,415,609			6,136,875			8,415,609
Derivative liabilities		3,748,918			2,320,547			5,281,612			2,320,547
Accrued interest		895,013			294,370			1,769,075			294,370
Related party payables		738,725			672,597			2,025,354			672,597
Deferred revenue		13,466			901,235			-			901,235
Current portion long-term debt		16,746,935			16,347,290			19,879,095			16,347,290
Operating lease liabilities		-			2,907,605
Current portion of operating lease liabilities								-			2,907,605
Other current liabilities		1,096,012			1,140,106			1,091,009			1,140,106
Total current liabilities		32,828,102			39,323,361			39,632,114			39,323,361

Long-term liabilities:
Operating lease liabilities		-			24,415,791
Operating lease liabilities, net of current portion								-			24,415,791
Long-term debt, less current portion, net		4,624,723			1,392,940			4,544,126			1,392,940
Total liabilities		37,452,825			65,132,092			44,176,240			65,132,092

Mezzanine equity
Series F 6.75% Convertible Preferred Stock, $.001 par value, 5,000,000 share authorized, 4,791,401 and 4,797,052 issued and outstanding on March 31, 2023 and December 31, 2022, respectively. Liquidation value $102,380,677 and $101,162,577 on March 31, 2023 and December 31, 2022, respectively.		22,033,843			20,448,079
Series F 6.75% Convertible Preferred Stock, $.001 par value, 5,000,000 share authorized, 4,311,048 and 4,797,052 issued and outstanding on September 30, 2023, and December 31, 2022, respectively. Liquidation value $99,609,085 and $101,162,577 on September 30, 2023, and December 31, 2022, respectively.								19,106,537			20,448,079

Deficit:
Commitments and contingencies (Note 7)								-

Stockholders’ Deficit:
Preferred Stock, $0.001 par value, 10,000,000 shares authorized
Series A Convertible Preferred Stock, $0.001 par value, 2,000,000 shares authorized, 328,925 and 328,925 shares issued and outstanding, as of March 31, 2023 and December 31, 2022, respectively. Liquidation value of $329 and $329 on March 31, 2023 and December 31, 2022, respectively		329			329
Common Stock, $0.001 par value, 25,194,402 and 20,805,448 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		25,194			20,805

Series A Convertible Preferred Stock, $0.001 par value, 2,000,000 shares authorized, 328,925 shares issued and outstanding, as of both September 30, 2023, and December 31, 2022. Liquidation value of $329 as of both September 30, 2023, and December 31, 2022								329			329
Preferred Stock value								329			329
Common Stock, $0.001 par value, 80,000,000 shares authorized, 26,155,305 and 20,805,448 shares issued and outstanding at September 30, 2023, and December 31, 2022, respectively								26,155			20,805
Additional paid-in-capital		19,132,830			16,098,182			22,549,271			16,098,182
Accumulated deficit		(79,606,718	)		(79,671,065	)		(86,222,414	)		(79,671,065	)
Clearday, Inc. Stockholders’ deficit:		(60,448,365	)		(63,551,749	)
Clearday, Inc. stockholders’ deficit								(63,646,659	)		(63,551,749	)
Non-controlling interest in subsidiaries		11,307,705			11,722,096			10,568,921			11,722,096
Total deficit	$	(49,140,660	)	$	(51,829,653	)
Clearday Inc. stockholder’s total deficit								(53,077,738	)		(51,829,653	)
TOTAL LIABLITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT	$	10,346,008		$	33,750,518		$	10,205,039		$	33,750,518

See accompanying notes to the unaudited condensed consolidated financial statements.

Clearday, Inc.

Condensed Consolidated Statements Of Operations

For The Three and Nine Months Ended ~~March 31,~~September 30, 2023, and 2022

(Unaudited)

~~(Unaudited)~~

	2022			2022			2023			2022			2023			2022
	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022			2023			2022
REVENUES
Resident fee revenue, net	$	2,895,326		$	3,124,761		$	618,317		$	2,946,690		$	3,950,327		$	9,139,921
Adult day care		89,041			83,896			190,789			66,803			439,596			215,423
Commercial property rental revenue		22,137			1,561			22,802			43,809			67,520			47,728
Total revenues		3,006,504			3,210,218			831,908			3,057,302			4,457,443			9,403,072

OPERATING EXPENSES
Wages & general operating expenses		3,846,475			4,634,056			500,264			4,271,412			5,198,238			13,343,084
Selling, general and administrative expenses		904,989			1,393,370			565,766			1,569,129			2,088,601			3,016,870
Pre-merger related expenses								703,125			-			703,125			-
Insurance expense								291,782			108,687			486,313			1,046,749
Bad debt expense								325,787			-			485,437			-
Depreciation and amortization expense		296,826			187,215			228,988			178,654			755,061			550,913
Total operating expenses		5,048,290			6,214,641			2,615,712			6,127,883			9,716,775			17,957,616

Operating loss		(2,041,786	)		(3,004,423	)		(1,783,804	)		(3,070,581	)		(5,259,332	)		(8,554,544	)

Other (income) expenses
Interest expense		714,833			501,598			1,485,132			1,030,979			3,919,180			1,927,622
PPP loan forgiveness		-			(642,816	)		-			-			-			(992,316	)
Derivative financing costs		2,567,460			-			-			-			2,567,460			-
Changes in fair value of derivative		(1,565,232	)		-
Fair value of derivative								(1,029,338	)		-			(1,511,624	)		-
Loss (gain) on extinguishment of debt								-			(1,642,476	)		653,814			(1,642,476	)
Loss on disposal of assets		106,467			-			-			-			100,542			-
Loss on impairment of debt								723,324						1,042,260
Gain on termination of lease		(4,530,644	)		-			-			-			(4,336,886	)		-
Extinguishment of debt		653,814			-
Other income		498,124			(143,889	)
Total other income		(1,555,178	)		(285,107	)
Other (income)/expenses								120,443			(1,782,887	)		420,138			(2,205,787	)
Total other (income)/expenses, net								1,299,561			(2,394,384	)		2,854,884			(2,912,957	)

Net loss from continuing operations		(486,608	)		(2,719,316	)		(3,083,363	)		(676,197	)		(8,114,216	)		(5,641,588	)
Loss from discontinued operations, net of tax		-			(85,227	)		-			582,503			-			411,523
Net loss		(486,608	)		(2,804,543	)		(3,083,363	)		(93,694	)		(8,114,216	)		(5,230,065	)
Preferred stock dividend								(1,653,009	)		(1,666,980	)		(4,996,780	)		(4,941,921	)
Net loss attributable to common shareholders								(4,736,372	)		(1,760,672	)		(13,110,996	)		(10,171,985	)
Net loss attributable to non-controlling interest		(550,955	)		(144,265	)		(616,649	)		(132,482	)		(1,562,867	)		(350,894	)
Preferred stock dividend		(1,698,784	)		(1,619,015	)
Net loss attributable to Clearday, Inc. common stockholders	$	(2,736,347	)	$	(4,567,823	)
Net loss attributable to Clearday, Inc. shareholders							$	(4,119,723	)	$	(1,893,156	)	$	(11,548,129	)	$	(10,522,880	)

Basic and diluted loss per share attributable to Clearday, Inc.
Basic and diluted loss per share attributable to Clearday, Inc. shareholders
Net loss from continued operations		(0.11	)		(0.29	)		(0.16	)		(0.04	)		(0.46	)		(0.33	)
Net loss from discontinued operations		0.00			(0.01	)		0.00			0.03			0.00			0.02
Net loss		(0.11	)		(0.30	)		(0.16	)		(0.01	)		(0.46	)		(0.31	)
Weighted average common shares basic and diluted outstanding		23,910,818			15,010,907			26,097,002			18,168,228			25,162,174			16,993,322

See accompanying notes to the unaudited condensed consolidated financial statements.

Clearday, Inc.

~~Condensed~~ Consolidated Statements of Mezzanine Equity, Convertible Preferred Stock and Stockholders’ Deficit

~~Three~~Nine Months Ended ~~March 31, 2023 and 2022~~

~~(Unaudited)~~

September 30,

Shares Amount Shares Amount Shares Amount Capital Deficit Deficit Interest Deficit
Mezzanine Equity Series F Preferred Stock Preferred Stock Series A Common Stock Additional Paid- in Accumulated Clearday, Inc. Stockholders’ Non-Controlling Total
Shares Amount Shares Amount Shares Amount Capital Deficit Deficit Interest Deficit
Balance at December 31, 2021 4,797,052 $ 16,857,267 328,925 $ 329 14,914,458 $ 14,915 $ 17,069,481 $ (65,208,327 ) $ (48,123,602 ) $ 11,330,695 $ (36,792,907 )
PIK dividends accruals on Convertible Preferred Stock F - 1,619,015 - - - - (1,619,015 ) - (1,619,015 ) - (1,619,015 )
Series F Incentive Common Stock - - - - 2,861,334 2,859 (2,853 ) - 6 - 6
Series F shares converted to common stock
Series F shares converted to common stock, shares
Accrual of Series I Convertible Preferred Stock in subsidiary - - - - - - - - - 136,564 136,564
Series I adjustment - - - - - - - (669,904 ) (669,904 ) - (669,904 )
Debt discount from derivative settlements
Stock issued for extinguishment of liabilities
Stock issued for extinguishment of liabilities, shares
Stock Compensation for services - - - - - - - - - - -
Stock Compensation for services, shares
Shares issued for Loan - - - - - - - - - - -
Shares issued for Loan, shares
Dissolution of Longhorn Hospitality - - - - - - (3,871,239 ) 3,871,239 - - -
Redemption of series F shares - - - - - - - - - - -
Officer Compensation and debt conversion - - - - - - - - - - -
Net loss - - - - - - - (2,804,543 ) (2,804,543 ) (144,265 ) (2,948,808 )
Balance at March 31, 2022 4,797,052 $ 18,476,282 328,925 $ 329 17,775,792 $ 17,774 $ 11,576,374 $ (64,811,535 ) $ (53,217,058 ) $ 11,322,994 $ (41,894,064 )
Shares Amount Shares Amount Shares Amount Capital Deficit Deficit Interest Deficit
Mezzanine Equity Series F Preferred Stock Preferred Stock Series A Common Stock Additional Paid- in Accumulated Clearday, Inc. Stockholders’ Non-Controlling Total
Shares Amount Shares Amount Shares Amount Capital Deficit Deficit Interest Deficit
Balance at December 31, 2021       4,797,052 $ 16,857,267 328,925 $ 329 14,914,458 $ 14,915 $ 17,069,481 $ (65,208,327 ) $         (48,123,602 ) $ 11,330,695 ($ 36,792,907 )
PIK dividend accruals on convertible Series F Preferred stock - 4,941,921 - - - (4,941,921 ) - (4,941,921 ) - (4,941,921 )
Series F Preferred stock converted to common stock
-

-
- - 2,861,334 2,859 (2,853 ) (669,904 ) (669,898 ) - (669,898 )
Accrual of Series I Convertible Preferred stock in subsidiary - - - - - - - - - 136,564 136,564
Series I Convertible Preferred stock adjustment - - 273,128 273,128
Stock compensation for services - - - - 280,000 280 398,920 - 399,200 - 399,200
Stock issued for loan 558,150 558 447,243 447,801 447,801
Dissolution of Longhorn Hospitality - - - - - - (3,871,239 ) 3,871,239 - - -
Net loss - - - - (5,230,064 ) (5,230,064 ) (350,894 ) (5,580,958 )
Balance at September 30, 2022 4,797,052 21,799,188 328,925 329 18,613,942 18,612 9,099,631 (67,237,056 ) (58,118,484 ) 11,389,493 (46,728,991 )
See accompanying notes to the unaudited condensed consolidated financial statements.
Shares Amount Shares Amount Shares Amount Capital Deficit Deficit Interest Deficit
Mezzanine Equity Series F Preferred Stock Preferred Stock Series A Common Stock Additional Paid- in Accumulated Clearday, Inc. Stockholders’ Non-Controlling Total
Shares Amount Shares Amount Shares Amount Capital Deficit Deficit Interest Deficit
Balance at December 31, 2022 4,797,052 $ 20,448,079 328,925 $ 329 20,805,448 $ 20,805 $ 16,098,182 $ (79,671,065 ) $ (63,551,749 ) $ 11,722,096 $ (51,829,653 )
Balance 4,797,052 $ 20,448,079 328,925 $ 329 20,805,448 $ 20,805 $ 16,098,182 $ (79,671,065 ) $ (63,551,749 ) $ 11,722,096 $ (51,829,653 )
PIK dividends accruals on Convertible Preferred Stock F - 1,698,784 - - - - (1,698,784 ) - (1,698,784 ) - (1,698,784 )
Series F shares converted to common stock (5,651 ) (113,020 ) - - 13,449 13 113,007 - 113,020 - 113,020
Accrued of series I Convertible Preferred Stock in subsidiary - - - - - - - - - 136,564 136,564
Debt discount from derivative settlements - - - - - - 713,435 - 713,435 - 713,435
Stock Compensation for services - - - - 74,187 75 (61,191 ) - (61,116 ) - (61,116 )
Shares issued for Loan - - - - 83,160 83 70,603 - 70,686 - 70,686
Stock issued for extinguishment of liabilities - - - - 4,218,158 4,218 3,897,578 - 3,901,796 - 3,901,796
Net loss - - - - - - - 64,347 64,347 (550,955 ) (486,608 )
Balance at March 31, 2023 4,791,401 $ 22,033,843 328,925 $ 329 25,194,402 $ 25,194 $ 19,132,830 $ (79,606,718 ) $ (60,448,365 ) $ 11,307,705 $ (49,140,660 )
Balance 4,791,401 22,033,843 328,925 329 25,194,402 25,194 19,132,830 (79,606,718 ) (60,448,365 ) 11,307,705 (49,140,660 )
3
Mezzanine Equity Series F Preferred Stock Preferred Stock Series A Common Stock Additional Paid- in Accumulated Clearday, Inc. Stockholders’ Non-Controlling Total
Shares Amount Shares Amount Shares Amount Capital Deficit Deficit Interest Deficit
Balance at December 31, 2022          4,797,052 $ 20,448,079 328,925 $ 329 20,805,448 $ 20,805 $ 16,098,182 $ (79,671,065 ) $ (63,551,749 ) $ 11,722,096 $ (51,829,653 )
Balance          4,797,052 $ 20,448,079 328,925 $ 329 20,805,448 $ 20,805 $ 16,098,182 $ (79,671,065 ) $ (63,551,749 ) $ 11,722,096 $ (51,829,653 )
PIK dividend accruals on Series F Preferred stock - 4,996,780 - - - - (4,996,780 ) - (4,996,780 ) - (4,996,780 )
Series F Preferred stock converted to common Stock (486,004 ) (6,338,323 ) - - 755,710 755 6,337,568 - 6,338,323 - 6,338,323
Accrual of Series I Convertible Preferred stock in subsidiary - - - - - - - - - 409,692 409,692
Debt discount from derivative settlements - - - - - - 927,991 - 927,991 - 927,991
Stock compensation for services - - - - 292,829 294 214,130 - 214,424 - 214,424
Stock issued for loan - - - - 83,160 83 70,602 - 70,685 - 70,685
Stock issued for extinguishment of debt - - - - 4,218,158 4,218 3,897,578 - 3,901,796 - 3,901,796
Net loss - - - - - - - (6,551,349 ) (6,551,349 ) (1,562,867 ) (8,114,216 )
Balance at September 30, 2023 4,311,048 19,106,537 328,925 329 26,155,305 26,155 22,549,271 (86,222,414 ) (63,646,659 ) 10,568,921 (53,077,738 )
Balance 4,311,048 19,106,537 328,925 329 26,155,305 26,155 22,549,271 (86,222,414 ) (63,646,659 ) 10,568,921 (53,077,738 )

See accompanying notes to the unaudited condensed consolidated financial statements.

4

Clearday, Inc.
Condensed Consolidated Statements Of Cash Flows
For The ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2023, and 2022
(Unaudited)
September 30, 2023 September 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (8,114,216 ) $ (5,230,065 )
Loss from discontinued operations, net of tax - (411,523 )
Loss from continued operations (8,114,216 ) (5,641,588 )
Adjustments required to reconcile net loss to cash flows used in operating activities
Depreciation and amortization 755,061 550,913
Shares issued for loan commitment 70,685 -
Shares issued for services 214,424 846,974
Financing costs from derivative liabilities 2,567,460 -
Gain on termination of lease (4,336,886 ) -
Series I preferred stock accumulated dividend 409,692 -
Change in fair value of derivatives (1,511,624 ) -
Amortization of debt discount related to derivatives 1,973,718 -
Amortization of debt issuance costs 170,919 966,052
Loss on extinguishment of debt 653,814 (1,642,476 )
Loss on impairment of debt – SPAC partner 1,042,260 -
Loss on disposal of assets 100,542 -
Bad debt expense 485,437 -
Gain on PPP loan forgiveness - (992,316 )
Changes in operating assets and liabilities
Accounts receivable (437,731 ) (24,054 )
Other current assets
-
-
Prepaid expenses (164,420 ) 2,666,713
Accounts payable 373,074 1,420,895
Accrued liabilities 2,214,518 (1,524,391 )
Other current liabilities
-
259,929
Deferred revenue (901,235 ) -
Related party payables 1,352,757 -
Other non-current assets 9,253 680,335
Other current liabilities (49,097 ) 552,845
Change in operating lease liability - (383,689 )
Net cash used in operating activities (3,121,596 ) (2,263,858 )
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment 133,133 -
Purchase of intangibles (234,375 )
Purchase of property and equipment - (28,310 )
Net cash used in investing activities of the continuing operations (101,242 ) (28,310 )
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term debt (1,136,280 ) (2,551,046 )
Proceeds from borrowings on debt 4,253,290 3,878,139
Net cash provided by in financing activities 3,117,010 1,327,093
Change in cash and restricted cash from continuing operations (105,828 ) (965,075 )
Change in cash and restricted cash from discontinued operations - -
Cash and restricted cash at beginning of the period 205,638 975,075
Cash and restricted cash at end of period $ 99,810 $ 10,000

Reconciliation of cash and restricted cash consist of the following:
End of period
Cash and cash equivalents 99,810 -
Restricted cash - 10,000
Total cash and restricted cash $ 99,810 $ 10,000
Beginning of period
Cash and cash equivalents 195,638 965,075
Restricted cash 10,000 10,000
Total cash and restricted cash $ 205,638 $ 975,075

Supplemental disclosures of cash flow information
Cash paid for interest $ 292,784 $ -
Cash paid for income taxes - -

Supplemental disclosures of non-cash investing and financing activities:
Early lease termination fee $ 27,323,396 $ -
Series F incentive shares converted to common stock 6,338,323
PIK dividends for Series F Preferred Stock 4,996,780 4,941,921
Indebtedness used to pay off rent expense 3,212,305
Accounts payable exchanged for common shares 3,247,982
Debt discount on derivative liabilities 2,833,222 $ -
Settlements on derivative liabilities 927,993 -

2023 2022

Three Months Ended March 31,

2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (486,608 ) $ (2,804,543 )
Loss from discontinued operations, net of tax - (85,227 )
Loss from continued operations (486,608 ) (2,719,316 )
Adjustments required to reconcile net loss to cash flows used in operating activities
Depreciation and amortization 296,826 187,215
Amortization of right of use assets - 459,750
Shares issued for loan commitment 70,686 -
Shares issued for services (61,116 ) -
Financing costs from derivative liabilities 2,567,460 -
Gain on termination of leases (4,530,644 ) -
Series I preferred stock accumulated dividend 136,564 -
Loss on the sale of fixed assets 106,467 -
Bad debt expense
179,854
-
Change in fair value of the derivatives (1,565,232 ) -
Amortization of debt issuance costs 241,504 501,970
Amortization of discount on derivatives
540,760
-
Loss on extinguishment of debt
653,814
-
Gain on PPP loan forgiveness - (642,816 )

Changes in operating assets and liabilities
Accounts receivable (190,596 ) 6,145
Other current assets 23,438 -
Prepaid expenses 99,623 (433,839 )
Accounts payable 523,121 902,548
Accrued expenses - (181,935 )
Accrued liabilities 1,193,472 -
Deferred revenue (887,769 ) -
Related party payable 66,128 -
Other current liabilities (44,094 ) 113,000
Change in operating lease liability - (227,777 )
Net cash used in operating activities of continuing operations (1,066,342 ) (2,035,055 )
Net cash used in activities of discontinued operations - (45,421 )
Net cash used in operating activities (1,066,342 ) (2,080,476 )

CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property and equipment (18,063 ) (13,348 )
Net cash used in investing activities of continuing operations (18,063 ) (13,348 )

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of debt - (977,263 )
Proceeds from long-term debt 1,619,316 -
Payment of long-term debt (649,121 ) -
Payments on lease obligations - 12,929,498
Borrowings on debt, net - 2,130,268
Net cash provided by financing activities 970,195 14,082,503

Change in cash and restricted cash from continuing operations (114,209 ) (895,398 )
Change in cash and restricted cash from discontinued operations - 56,159
Cash and restricted cash at beginning of the year 205,638 975,075
Cash and restricted cash at end of year $ 91,429 $ 135,836

Reconciliation of cash and restricted cash consist of the following:
End of period
Cash and cash equivalents 81,429 125,836
Restricted cash 10,000 10,000
Total cash and restricted cash $ 91,429 $ 135,836
Beginning of period
Cash and cash equivalents 195,638 965,075
Restricted cash 10,000 10,000
Total cash and restricted cash $ 205,638 $ 975,075

Supplemental disclosures of cash flow information
Cash paid for interest $ 649,121 $ -
Cahs paid for income taxes - -

Supplemental disclosures of non-cash investing and financing activities:
Settlements on derivative liability 713,435 -
PIK dividends for Series F preferred stock 1,698,784 -
Converted Preferred Shares Series F to Common Shares
113,020
-
Discount on derivative liability
1,139,578
-
Termination of leases
27,323,396
-
Accounts payable exchanged for common shares
3,247,982
-
Notes payable used to pay rent expense
3,018,547
-
See accompanying notes to the unaudited condensed consolidated financial statements.
5

CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Going Concern

Organization, Description of Business

Clearday, Inc., a Delaware corporation (the “Company”), formerly known as Superconductor Technologies Inc. (“STI”), was established in 1987 and closed a merger ~~(“AIU~~(the “AIU Merger”) with Allied Integral United, Inc., a Delaware corporation (“AIU”), on September 9, 2021. The Company continued the businesses of AIU and continued one of the businesses of STI. AIU was incorporated on December 20, 2017, and began its business on December 31, 2018, when it acquired memory care residential facilities and other businesses (the “2018 Acquisition”) that was conducted since November 2010. Since the 2018 Acquisition, the Company has been developing innovative care and wellness products and services focusing on the longevity market, including its ~~Longevity-tech platform.~~Longevity-Tech Platform. In the first quarter of 2023, the Company disposed of three of its four full time memory care communities to focus on its digital care services, including robotics and its ~~Longevity~~Longevity-Tech Platform. As of the second quarter of 2023, the Company owns and operates one residential care ~~platform.~~facility and one adult daycare facility, and its focus is marketing its digital care services to third parties.

Proposed merger with Viveon Health Acquisition Corp
The Company, Viveon Health Acquisition Corp. (“Viveon” or “Parent”), a Delaware corporation, VHAC2 Merger Sub, Inc. (“Merger Sub”), a Delaware corporation, and Viveon Health LLC, (“SPAC Representative”), a Delaware limited liability Company, entered into a merger agreement dated April 5, 2023 (the “Viveon Merger Agreement”)
Amendment to the Viveon Merger Agreement - On August 28, 2023, the parties above amended and modified the Viveon Merger Agreement (the “First Amendment”) to, among other things, (i) increase the merger consideration from $250,000,000 to $550,000,000 (plus the aggregate exercise price for all Clearday options and warrants), payable in shares of common stock of Viveon, (ii) provide that holders of all of the Company’s common and preferred stock as of the effective time of the Viveon Merger be entitled to receive a pro rata portion of the additional five million shares of Viveon common stock, in the aggregate (the “Earnout Shares”), if at any time during the period beginning on the date of the closing of the Viveon Merger (the “Closing Date”) and ending on the fifth anniversary of the Closing Date (the “Earnout Eligibility Period”), the Adjusted Net Income (as defined in the Viveon Merger Agreement) for any 12 month period is a positive number or there is a change of control of Viveon during the Earnout Eligibility Period. The foregoing description of the First Amendment is not complete and is subject to and qualified in its entirety by reference to the First Amendment which is included in the Company’s Current Report on Form 8-K filed on August 29, 2023, as Exhibit 2.1, the terms of which are incorporated by reference herein.
As of the Amendment Effective Date, the Viveon Merger has not been completed nor has it been terminated. Furthermore, Clearday and Viveon have not filed Form S-4 with the Securities and Exchange Commission (“SEC”) and thus the merger is not yet pending government review and/or other necessary approvals.
Going Concern

As of ~~March 31,~~September 30, 2023, we have an accumulated deficit of $~~79,606,718~~86,222,414. During the ~~period~~nine months ended ~~March 31,~~September 30, 2023, we had a net loss from operations of $~~486,608~~8,114,216 and net cash used in operating activities of $~~1,066,342~~3,121,596. During the year ended December 31, 2022, we had a net loss from operations of $14,462,738 and cash used in operating activities of $3,978,027. 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 ~~to a limited extent,~~capital that may be available in connection with the ~~continued sale of its non-core assets and sale or disposition of other assets.~~Viveon Merger. 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 prospects. The accompanying condensed 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.

2. Summary of Significant Accounting Policies

The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the interim reporting rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments (unless otherwise indicated), necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company, including its wholly owned ~~subsidiaries. In 2019,~~subsidiaries and AIU Alternative Care, Inc., a Delaware corporation (“AIU Alt Care”) and Clearday Alternative Care Oz Fund, L.P, a Delaware limited partnership (“Clearday OZ Fund”)~~, were formed.~~. The Company owns all of the voting interests of AIU Alt Care and the sole general partner of Clearday OZ Fund, and less than 1% of the preferred economic interests in such companies.

~~In November 2019,~~The certificate of incorporation of AIU Alt Care ~~filed a certificate~~authorizes 1,500,000 shares of ~~designation that authorized~~ preferred stock designated as ~~the~~its Series I 10.25% cumulative convertible preferred stock, par value $0.01 per share (the “Alt Care Preferred Stock”)~~. The certificate of incorporation of AIU Alt Care authorizes~~ ~~1,500,000~~ ~~shares of preferred stock~~ of which 700,000 is designated Alt Care Preferred Stock; and 1,500,000 of common stock. Each share of ~~The~~the Alt Care Preferred Stock has a stated value equal to the $10.00 Alt Care Preferred Stock original issue price. ~~For the year ended on December 31, 2021, $897,000~~ ~~was invested in AIU Alt Care in exchange for~~ ~~89,700~~ ~~shares of Alt Care Preferred Stock.~~

~~In October 2019,~~ AIU Alt Care formed AIU Impact Management, LLC, ~~and Clearday OZ Fund were formed. AIU Impact Management, LLC manages Clearday OZ Fund as its~~which is the sole general partner ~~owns~~ 1%and manager of Clearday OZ Fund. Clearday OZ Fund ~~and~~ allocates 99% of income gains and losses ~~accordingly~~ to the limited ~~partners.~~partners and 1% to its general partner (AIU Impact Management, LLC).

6
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Each of the Alt Care Preferred Stock and the limited partnership interests in Clearday OZ Fund (“Clearday OZ LP Interests”) may be exchanged by the holder of such securities into shares of Clearday common stock. The exchange rate for each of the Alt Care Preferred Stock and the Clearday OZ LP Interests are equal to (i) the aggregate investment amount for such security plus accrued and unpaid dividends at 10.25% per annum, (ii) divided by 80% of the 20 consecutive day volume weighted closing price of the Common Stock of Clearday preceding the conversion date.

The Company reports its non-controlling interest in subsidiaries as a separate component of equity in the condensed consolidated balance sheets and reports both net loss attributable to the non-controlling interest and net loss attributable to the Company’s common stockholders on the face of the condensed consolidated statement of operations.

Basis of Presentation

The Company’s condensed consolidated financial statements have been prepared in conformity with GAAP. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Classification of Convertible Preferred Stock

The Company applied ASC 480, “Distinguishing Liabilities from Equity”, and revised the condensed consolidated ~~financial statement~~ presentation of its convertible preferred stock whose redemption is outside the control of the issuer. Registrants having such securities outstanding are required to present separately, in balance sheets, amounts applicable to the following three general classes of securities: (i) preferred stocks subject to mandatory redemption requirements or whose redemption is outside the control of the issuer; (ii) preferred stocks which are not redeemable or are redeemable solely at the option of the issuer; and (iii) common stocks. In addition, the rules require disclosure of redemption terms, five-year maturity data, and changes in redeemable preferred stock.

Reclassification
Certain comparative amounts have been reclassified to conform to the financial statement presentation adopted for the current year. These reclassifications have no effect on previously reported net loss, total assets, total liabilities or total stockholders’ deficit.
Use of Estimates

The Company’s condensed consolidated financial statement preparation requires that management make estimates and assumptions which affect the reporting of assets and liabilities and the related disclosure of contingent assets and liabilities in order to report these condensed consolidated financial statements in conformity with GAAP. Actual results could differ from those estimates.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker, the Chief Executive Officer, in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business as two operating segments, the ~~Longevity-tech~~Longevity-Tech Platform and ~~personal care.~~Personal Care.

Cash, and Restricted Cash

Cash, consisting of short-term, highly liquid investments and money market funds with original maturities of three months or less at the date of purchase, are carried at cost plus accrued interest, which approximates market value.

Restricted cash includes cash that the Company deposited as security for obligations arising from property taxes, property insurance and replacement reserve the Company is required to establish escrows as required by its mortgages and certain resident security deposits.

Accounts Receivable

The Company records accounts receivable at their estimated net realizable value. Additionally, the Company estimates allowances for uncollectible amounts based upon factors which include, but are not limited to, historical payment trends, write-off experience, and the age of the receivable as well as a review of specific accounts, the terms of the agreements, the residents, the payers’ financial capacity to pay and other factors which may include likelihood and cost of litigation.

7
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Real Estate Property and Equipment, Net

Property and equipment are stated at cost less accumulated ~~depreciation and amortization.~~depreciation. Maintenance and repairs are charged to operations as incurred. Depreciation ~~and amortization are~~is based on the straight-line method over the estimated useful lives of the related assets. When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the accounts, and any resulting gain or loss is reflected in operations in the period realized.

Depreciation is computed on the straight-line method with useful lives as follows:
Schedule of Estimated Useful Lives
Asset Class
Estimated
Useful Life ~~(in~~

(in years)

Buildings and building improvements 39
Leasehold improvements 15
~~Equipment~~Furniture and fixtures and equipment 7
Computer equipment and software 5
~~Furniture and fixtures~~ 7

Intangible Assets, Net

Software Capitalization
~~Software Capitalization~~.
Intangible assets are stated at cost less accumulated amortization. Amortization is based on the straight-line method over the estimated useful lives of the related assets. With regards to developing software, any application costs incurred during the development ~~state,~~stage, both internal expenses and those paid to third parties are capitalized and amortized per FASB Topic ~~ASC350-40~~ASC 350-40 (“Internal-Use Software Accounting & Capitalization”) based on the estimated useful life of five years. Once the software has been developed, the costs to maintain and train others for its use will be expensed. With regards to developing software, any application costs incurred during the development state, both internal expenses and those paid to third parties are capitalized and amortized based on the estimated useful life of ~~five years~~.

Impairment Assessment

The Company evaluates intangible assets and other long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. This includes but is not limited to significant adverse changes in business climate, market conditions or other events that indicate an assets’ carrying amount may not be recoverable. ~~Recoverability~~The recoverability of these assets is measured by comparing the carrying amount of each asset to the future cash flows the asset is expected to generate. If the cash flows used in the test for recoverability are less than the carrying amount of these assets, the carrying amount of such assets is reduced to fair value.
The Company evaluates and tests the recoverability of its goodwill for impairment at least annually during its fourth quarter of each fiscal year or more often if and when circumstances indicate that goodwill may not be recoverable.

Revenue Recognition

The Company recognizes revenue from contracts with customers in accordance with ASC Topic 606, “Revenue from Contracts with Customers”, or ASC Topic 606, using the practical expedient in paragraph 606-10-10-4 that allows for the use of a portfolio approach, because we have determined that the effect of applying the guidance to our portfolios of contracts within the scope of ASC Topic 606 on our condensed consolidated financial statements would not differ materially from applying the guidance to each individual contract within the respective portfolio or our performance obligations within such portfolio. The five-step model defined by ASC Topic 606 requires the Company to: (i) identify its contracts with customers, (ii) identify its performance obligations under those contracts, (iii) determine the transaction prices of those contracts, (iv) allocate the transaction prices to its performance obligations in those contracts and (v) recognize revenue when each performance obligation under those contracts is satisfied. Revenue is recognized when promised goods or services are transferred to the customer in an amount that reflects the consideration expected in exchange for those goods or services.

8
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A substantial portion of the Company’s revenue from its independent living and assisted living communities relates to contracts with residents for services that are generally covered under ASC Topic 606. The Company’s contracts with residents and other customers that are within the scope of ASC Topic 606 are generally short-term in nature. The Company has determined that services performed under those contracts are considered one performance obligation in accordance with ASC Topic 606 as such services are regarded as a series of distinct events with the same timing and pattern of transfer to the resident or customer. Revenue is recognized for those contracts when the Company’s performance obligation is satisfied by transferring control of the service provided to the resident or customer, which is generally when the services are provided over time.

Resident fees at our residential communities consist of regular monthly charges for basic housing and support services and fees for additional requested services, such as assisted living services, personalized health services and ancillary services. Fees are specified in our agreements with residents, which are generally short term (30 days to one year), with regular monthly charges billed in advance. Funds received from residents in advance of services provided are not material to our condensed consolidated financial statements. ~~Some of our~~Our senior living communities require payment of an upfront entrance fee in advance of a resident moving into the community; substantially all these community fees are non-refundable and are initially recorded as deferred revenue ~~and included in accrued expenses and other current liabilities~~ in our condensed consolidated balance sheets. These deferred amounts are then amortized on a straight-line basis into revenue over the term of the resident’s agreement. When the resident no longer resides within our community, the remaining deferred non-refundable fees are recognized in revenue. Revenue recorded and deferred in connection with community fees is not material to our condensed consolidated financial statements. Revenue for basic housing and support services and additional requested services is recognized in accordance with ASC Topic 606 and measured based on the consideration specified in the resident agreement and is recorded when the services are provided.

Resident Care Contracts

Resident fees at the Company’s senior living communities may consist of regular monthly charges for basic housing and support services and fees for additional requested services and ancillary services. Fees are specified in the Company’s agreements with residents, which are generally short term (30 days to one year), with regular monthly charges billed on the first of the month. Funds received from residents in advance of services are not material to the Company’s condensed consolidated financial statements.

Below is a table that shows the breakdown by percentage of revenues related to contracts with residents versus resident fees for support or ancillary services.
Schedule of Revenue from Contract with Customers
For the periods ended March 31, For the three-month period ended September 30,
2023 % 2022 % 2023 % 2022 %
Revenue from contracts with customers:
Resident rent - over time $ 2,895,326 96 % $ 3,124,761 97 % $ 618,317 74 % $ 2,946,690 97 %
Day care 89,041 3 % 83,896 3 %
Day care – point in time 190,789 23 % 66,803 2 %
Amenities and conveniences - point in time 22,137 1 % 1,561 0 % 22,802 3 % 43,809 1 %
Total revenue from contracts with customers $ 3,006,504 100 % $ 3,210,218 100 % $ 831,908 100 % $ 3,057,302 100 %
For the nine-month periods ended September 30,
2023 % 2022 %
Revenue from contracts with customers:
Resident rent - over time $ 3,950,327 89 % 9,139,921 97 %
Day care – point in time 439,596 10 % 215,423 2 %
Amenities and conveniences - point in time 67,520 1 % 47,728 1 %
Total revenue from contracts with customers $ 4,457,443 100 % $ 9,403,072 100 %

Financial Instruments

In accordance with the reporting requirements of the FASB ASC Topic 825, “Financial Instruments”, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this standard and includes this additional information in the notes to the ~~condensed~~ consolidated financial statements when the fair value is different than the carrying value of those financial instruments. The Company does not have assets or liabilities measured at fair value on a recurring basis except its derivative ~~liability.~~liabilities.

9
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at the balance sheet dates, nor gains or losses reported in the statements of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held during the periods presented, except as disclosed.
Fair Value Measurement

ASC Topic 820, “Fair Value Measurements”, provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows:

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices such as equities listed on the New York Stock Exchange.

Level 2 - Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.

Level 3 - Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation such as complex and subjective models and forecasts used to determine the fair value.

The following tables present the Company’s assets and liabilities that were measured and recognized at fair value as of ~~March 31,~~September 30, 2023, and December 31, 2022:
Schedule of Assets and Liabilities Measured at Fair Value
March 31, 2023
Level 1 Level 2 Level 3 Total
Derivative liability - - $ 3,748,918 $ 3,748,918
September 30, 2023
Level 1 Level 2 Level 3 Total
Derivative liabilities - - 5,281,612 5,281,612

December 31, 2022 December 31, 2022 December 31, 2022
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Derivative liability - - $ 2,320,547 $ 2,320,547
Derivative liabilities - - 2,320,547 2,320,547

Under the Company’s contract ordering policy, the Company first considers common shares issued and outstanding as well as reserved but unissued equity awards, such as under an equity award program. All remaining equity linked instruments such as, but not limited to, options, warrants, ~~and~~ debt and equity with conversion features are evaluated based on the date of issuance. If the number of shares which may be issued under the Company’s agreements exceed the authorized number of shares or are unable to be determined, equity linked instruments from that date forward are considered to be derivative liabilities until such time as the number of shares which may be issued under the Company’s agreements no longer exceed the authorized number of shares and are able to be determined.

The Company has outstanding note agreements containing provisions meeting the definition of a derivative ~~liability~~liabilities which therefore require bifurcation. Further, pursuant to the Company’s contract ordering policy, any issuance of equity linked instruments ~~subsequent to~~after the initial triggering agreement will result in derivative liabilities.

At ~~March 31,~~September 30, 2023, the Company estimated the fair value of the conversion feature derivatives embedded in ~~the notes payable~~its debt instruments and warrants based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock of $~~0.51~~0.78; risk-free interest rates ranging from ~~3.60~~4.60% to ~~4.94~~5.55%; expected volatility of the Company’s common stock ranging from ~~182~~136% to ~~421~~187%; estimated exercise prices ranging from $0.35 to $~~0.43~~0.75; and terms from one to sixty ~~months.~~months.

At December 31, 2022, the Company estimated the fair value of the conversion feature derivatives embedded in ~~the notes payable~~debt instruments and warrants based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock of $0.56; risk-free interest rates ranging from 3.99% to 4.76%; expected volatility of the Company’s common stock ranging from 183% to 572%; estimated exercise prices ranging from $0.35 to $~~0.75~~0.43; and terms from three to sixty ~~months.~~months.

10
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the changes in the Company’s Level 3 derivative ~~liability~~liabilities at fair value is as follows:
Summary of Activity of Level 3 Liabilities

Balance - December 31, 2022 $ 2,320,547 $ 2,320,547
Additions 3,707,038 5,400,682
Settlements (713,435 ) (927,993 )
Change in fair value (1,565,232 ) (1,511,624 )
Balance - March 31, 2023 $ 3,748,918
Balance - September 30, 2023 $ 5,281,612

Convertible Instruments

The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC Topic 815, “Derivatives and Hedging Activities”.

Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: ~~The~~When necessary the Company records ~~when necessary,~~ discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the ~~note~~debt transaction and the effective conversion price embedded in the ~~note.~~debt instrument. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

Research and Development Costs

Research and development costs are charged to expense as incurred and are included in operating expenses. There were no research and development costs incurred in the three or nine months ended ~~March 31,~~September 30, 2023, or 2022.

Advertising Costs

The costs of advertising are expensed as incurred. Advertising expenses are included in the Company’s operating expenses. There were no advertising expenses in the three or nine months ended ~~March 31,~~September 30, 2023, or 2022.

Lease Accounting

The Company follows ASC Topic 842, “Leases”. The Company has elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. All ~~ROU~~Right of Use (“ROU”) assets were written off effective March 31, 2023, when the Company disposed of the three leased properties described in Note 5 — Leases.

Income Taxes

The Company’s income tax expense includes U.S. income taxes. Certain items of income and expense are not reported in tax returns and financial statements in the same year. The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences to be included in the Company’s condensed consolidated financial statements. Under this method, deferred tax assets and liabilities are determined based on ~~the basis of~~ the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse, while the effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

11
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company can recognize a tax benefit only if it is “more likely than not” that a particular tax position will be sustained upon examination or audit. To the extent the “more likely than not” standard has been satisfied, the benefit associated with a tax position is measured as the largest amount that has a greater than 50% likelihood of being realized.

Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income, and, to the extent, the Company believes that the Company is more likely than not that all or a portion of deferred tax assets will not be realized, the Company establishes a valuation allowance to reduce the deferred tax assets to the appropriate valuation.

The Company includes the related tax expense or tax benefit within the tax provision in the condensed consolidated statement of operations in that period. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. In the future, if the Company determines that it would be able to realize its deferred tax assets in excess of their net recorded amount, the Company will make an adjustment to the deferred tax asset valuation allowance and record an income tax benefit within the tax provision in the condensed consolidated statement of operations in that period.

The Company pays franchise taxes in certain states in which it has operations. The Company has included franchise taxes in general and administrative and operating expenses in its condensed consolidated statements of operations.

Earnings Per Share

FASB ASC Topic 260, “Earnings Per Share”, requires a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share (EPS) computations.

Basic earnings (loss) per share are computed by dividing income ~~available~~(loss) attributable to ~~common stockholders~~Clearday shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

Commitments and Contingencies

The Company has been, is currently, and expects in the future to be involved in claims, lawsuits, and regulatory and other government audits, investigations and proceedings arising in the ordinary course of the Company’s business, some of which may involve material amounts. The Company ~~establish~~establishes accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Also, the defense and resolution of these claims, lawsuits, and regulatory and other government audits, investigations and proceedings may require the Company to incur significant expense. The Company accounts for claims and litigation losses in accordance with ASC Topic 450, “Contingencies”. Under ASC Topic 450, loss contingency provisions are recorded for probable and estimable losses at the Company’s best estimate of a loss or, when a best estimate cannot be made, at the Company’s estimate of the minimum loss. These estimates are often developed prior to knowing the amount of the ultimate loss, require the application of considerable judgment and are refined as additional information becomes known. Accordingly, the Company is often initially unable to develop a best estimate of loss and therefore the estimated minimum loss amount, which could be zero, is recorded; then, as information becomes known, the minimum loss amount is updated, as appropriate. Occasionally, a minimum or best estimate amount may be increased or decreased when events result in a changed expectation.

Recently Adopted Accounting Pronouncements
None.
Recently Issued Accounting Pronouncements applicable to the Company but not yet adopted.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic ~~470- 20)~~470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ~~(“ASU 2020-06”)~~(ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (a) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (b) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (c) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share for convertible instruments by using the “if-converted” method. In addition, entities must presume share settlement for purposes of calculating diluted earnings per share when an instrument may be settled in cash or shares. ~~For smaller reporting companies,~~ ASU 2020-06 is effective for ~~fiscal years~~the Company beginning ~~after December 15, 2023.~~January 1, 2024. The Company is currently evaluating the impact that ASU 2020-06 may have on its condensed consolidated financial statements and related disclosures.

12
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2023, there were several new accounting pronouncements issued by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s condensed consolidated financial statements.

3. Real Estate, Property and Equipment

The Company’s real estate, property and equipment consisted of the following at the respective balance sheet dates:
Schedule of Real Estate, Property and Equipment
March 31,
2023 December 31,
2022 September 30, 2023 December 31, 2022

Land $ 2,231,879 $ 2,231,879 $ 2,081,878 $ 2,231,879
Building and building improvements 4,975,243 4,975,243 4,975,244 4,975,243
Leasehold Improvements 710,317 846,754 710,317 846,754
Computers 57,192 332,809 57,166 332,809
Furniture, fixtures, and equipment 72,213 1,379,219 75,710 1,379,219
Other Equipment 74,937 518,145 74,935 518,145
Work in progress 138,187 138,187
Construction in progress 138,187 138,187
Total 8,259,968 10,422,236 8,113,437 10,422,236
Real estate, property and equipment, gross 8,113,437 10,422,236
Less accumulated depreciation (1,938,219 ) (3,899,257 ) (2,027,194 ) (3,899,257 )
Real estate, property and equipment, net $ 6,321,749 $ 6,522,979 $ 6,086,243 $ 6,522,979

The Company recorded depreciation ~~and amortization~~ expenses relating to real estate, property, and equipment in the amount of $~~112,826~~203,061 and $~~501,797~~ 550,913for the ~~periods~~nine-months ended ~~March 31,~~September 30, 2023, and ~~December 31,~~September 2022, respectively.

4. Intangible Assets, Net
Software Capitalization.
~~With regards~~The net carrying amount of our internally developed software related to ~~developing software, any application~~our Longevity Tech Platform totaled $3,362,375 at September 30, 2023, and $3,680,000 at December 30, 2022. We added $234,375 of development costs ~~incurred during~~in the ~~development state, both internal expenses and those paid~~three months ended September 30, 2023, for ongoing platform enhancements are expected to ~~third parties are capitalized~~add to the platform’s overall functionality. We expect to continue to incur additional costs of this nature for at least to the end of 2023. At which time it will be put into service and amortized ~~per FASB Topic ASC350-40 (“Internal-Use Software Accounting & Capitalization”). Once the software has been developed, the costs to maintain and train others for~~over its ~~use will be expensed. At March 31, 2023 and March 31, 2022,~~estimated life. Currently, $~~3,496,000~~3,128,000 ~~and $2,240,000, respectively were the balances that will be~~is being amortized based on the estimated useful life of five years. The Company began this amortization starting January 1, 2023.
~~Acquired~~Developed intangible assets subject to amortization are as follows:

Schedule of Expected Future Amortization Expense for Intangible Assets

March 31, 2023

Gross Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

Weighted-Average
Remaining Useful
Life (Years)

Developed technology $ 3,680,000 $ 184,000 $ 3,496,000 4.75
~~Expected future amortization expense for intangible assets as of March 31, 2023 is as follows:~~
September 30, 2023

Gross Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

Weighted-Average
Remaining Useful
Life (Years)

Developed technology $ 3,680,000 $ 552,000 $ 3,128,000 4.25
Technology for future deployment 234,375 - 234,375
Total Intangible assets $ 3,914,375 $ 552,000 $ 3,362,375
~~Schedule of Future Amortization Expense for Intangible Assets~~

Fiscal Years
2023 (remaining) $ 552,000
2024 736,000
2025 736,000
2026 736,000
2027 736,000
Thereafter -
Total $ 3,496,000

December 31, 2022

Gross Carrying
Amount

Accumulated
Amortization
Net Carrying
Amount
Weighted-Average
Remaining Useful
Life (Years)

Developed technology $ 2,240,000 $ - $ 2,240,000 5.75
The Company recorded amortization expense related to its intangible assets in the amounts of $~~184,000~~552,000 and $0 for the ~~periods~~nine months ended ~~March 31,~~September 30, 2023, and ~~March 31,~~September 30, 2022, respectively.

Expected future amortization expense for intangible assets as of September 30, 2023, is as follows:
Schedule of Future Amortization Expense for Intangible Assets
Fiscal Years
2023 (remaining) $ 184,000
2024 736,000
2025 736,000
2026 736,000
2027 736,000
Thereafter -
Total $ 3,128,000
13
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
Gross Carrying Amount
Accumulated
Amortization
Net Carrying Amount
Weighted-Average
Remaining Useful
Life (Years)

Developed technology $ 3,680,000 $ - $ 3,680,000 5.00
5. Leases

Lease Terminations

On March 31, 2023, the Company entered into agreements (collectively, the “Lease ~~Termination~~Transition Agreement”) to terminate the leases (“Community Leases”) for three of its four residential care facilities, which account for all of Clearday’s leased residential care facilities. The Community Leases related to residential communities (the “Communities”) located in Westover, Texas, New Braunfels, Texas and Little Rock, Arkansas. Terminating the Community Leases ~~will remove Right of Use~~removed the related ROU assets and ROU liabilities ~~and right of use assets related to these Community Leases,~~ as of ~~December~~March 31, ~~2022 and the write-off or elimination of~~2023. Additionally, the related net leasehold improvements and personal property in these ~~Communities. As of March 31, 2023, we had~~Communities were written off. We currently have no material economic rights or obligations under the Community Leases other than for payment obligations under the Lease ~~Termination~~Transition Agreements. ~~The tenants of the Community Leases and the guarantors, including Clearday, Inc., entered a Lease Transition Agreement with the Lessor of the properties dated March 31, 2023.~~ The Lease Transition Agreement provided, among other matters, that the aggregate liability of the Clearday subsidiaries that are tenants under the Community Leases are reduced to amount (the “Repayment Amount”) that is equal to the sum of: (1) past due rent payments under the Community Leases of $1,284,770 (“Past Due Community Lease Amounts”), (2) a fixed amount arising from the termination of the Community Leases of $1,710,777 (“Rent Differential Amount”), (3) the amount of additional advances (“Critical Expenses Advances”) by ~~Landlord~~landlord to pay critical expenses plus the premium for tail insurance policy in favor of the ~~Landlord~~landlord (the obligation for such premiums are limited $275,000), (4) plus an additional amount that is equal to the greater of $25,000 or 5% of such Critical Expenses Advances. The Critical Expense Advances and additional amount were determined in the second quarter of 2023. The Repayment Amount is due and payable over a period maturing on July 31, 2025, as follows: (1) on closing date of the ~~previously announced~~ proposed ~~merger~~Viveon Merger with Viveon, ~~Health Acquisition Corp. (the “Viveon Merger”),~~ a payment equal to 10% of the new money that is raised in connection with the Viveon Merger (subject to a minimum payment of $300,000 and a maximum payment of $500,000); provided that if the Viveon Merger ~~does~~did not close by July 31, 2023, then a payment of $300,000 ~~will~~(the “Down Payment”) was scheduled to be paid on July 31, 2023, or such other date agreed by Landlord and ~~Clearday;~~Clearday, which under the terms of the amendment to the Lease Transition Agreement, has been extended to December 31, 2023 subject to certain additional extensions. (2) $400,000 payable quarterly commencing on December 31, 2023, and (3) beginning with the calendar quarter ending December 31, 2023, 10% of the Excess Cash Flow, generally based on earnings before interest, taxes, depreciation, and amortization of Clearday. The current guarantors of the Community Leases (a subsidiary of Clearday, Inc. and two individuals) continued to guaranty the obligations, as modified by the Lease Transition Agreement, and provided a security ~~interests~~interest on the collateral specified in such guarantees. The Lease Transition Agreement was amended by the First Amendment (“LTA First Amendment”) entered into on September 8, 2023, effective July 31, 2023, and the Second Amendment (“LTA Second Amendment”) entered into on December 20, 2023, effective December 15, 2023. The LTA Second Amendment (1) extended the due date for the Down Payment to December 31, 2023 and (2) increased the Down Payment amount by an extension fee of $50,000
, which amount is in addition to the $15,000
13
~~CLEARDAY, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ extension fee payable under the LTA First Amendment.

In connection with the Lease ~~Termination~~Transition Agreements, the tenants under the Community Leases and the Clearday, Inc. subsidiaries that operated the Communities signed a promissory note for the Repayment Amount and the Past Due Community Lease Amounts and Clearday, Inc. agreed to be an additional guarantor of the obligations of the Community Leases, as modified and limited by the Community Lease Transition Agreement, which is less than approximately $4,000,000 under the terms of a Guaranty (the “Guaranty”). Clearday also agreed to cooperate with Landlord to facility the termination of the Community Leases the sale of the furniture and fixtures at the Communities to the New Operator so that New Operator may enter into a lease or purchase of the Communities and operate the memory care businesses in the Communities or other businesses at the Communities that they choose to conduct.

In connection with the proposed termination of the Community Leases, the subsidiaries that operate the Communities (the “Current Operators”) and subsidiaries of the New Operator (“New Communities Operators”) entered into the previously reported Operations Transfer Agreement dated as of April 1, 2023, (the “OTA”). The OTA provides that the New Communities Operators will purchase the personal property and other assets of the Current Operators used at the Communities to enable the New Communities Operators to conduct their business at the Communities under new leases or other arrangements with the Landlord. Such purchase and sale will close on the date that the New Communities Operators receive the licenses, authorizations and approvals from the applicable Texas and Arkansas governmental agencies to conduct a licensed residential memory care business at the Communities and they enter into new leases with the Landlord (the “Commencement Date”). The New Communities Operators will enter into new agreements with the residents at the Communities, effective the Commencement Date, which agreements, according to statements by the New Communities Operators, will be at the same price as the rates charged by Current Operators. The Current Operators have provided a notice to each of the residents at the Communities that their current agreement will terminate, effective the Commencement Date. In connection with the OTA, the Current Operators and the New Communities Operators entered into Interim Management and Security Agreements or an Interim Consulting and Security Agreement, as applicable, dated as of April 1, 2023 (the “Interim Agreements”). The Interim Agreements provide that the New Communities Operators will assist with operating the Communities as an independent contractor, pending their receipt of government authorizations and approvals necessary to operate memory care residential care businesses at the Communities. The New Communities Operators are not affiliated with the Company or its officers or directors. The OTA and Interim Agreements provide for the asset purchase and sale of the memory care businesses at the Communities, and the transfer of certain agreements and the assumption of certain specified liabilities. The Current Operators, each of which is a subsidiary of Clearday, Inc., remain obligated for liabilities that are not assumed by the New Operators. ~~Under the Interim Agreements, the~~The New Communities Operators ~~is an independent contractor that has~~have employed, or offered employment to, all of ~~the~~our employees ~~of the Current Operators~~ at ~~the Communities~~these communities and will fund and be responsible for any operating cash losses for the Communities.

6. ~~Discontinued Operations~~
~~The following statement is the condensed consolidated statement of operations for the Company’s discontinued operations for the period ended March 31, 2022:~~
~~Schedule of Discontinued Operations for Consolidated Statement of Operations~~

REVENUES
Commercial property rental revenue $ 14,239
Total revenues, net 14,239

Costs and expenses
Operating expenses -
General and administrative expenses 36,636
Total operating expenses $ 36,636

Loss from operations (22,307 )

Other/(income) expenses
Interest expense 44,151
Gain on disposal of assets -
Equity income from investees, net of applicable taxes -
Impairment expense (recovery) -
Other (income) expenses 18,768
Total (income)/expense 62,920

Net loss $ (85,227 )
7. Indebtedness

AsAt September 30, 2023, the Company had total outstanding debt in the amount of ~~March 31, 2023~~$24,423,221, net of debt discount and derivatives, of which $19,879,095 was, current. At December 31, 2022 the ~~current portion~~Company had total outstanding debt in the amount of ~~long-term~~$17,740,230, net of debt ~~within the Company’s financial statements was $16,746,935~~discount and derivatives, of which $16,347,290~~, respectively.~~
was current. During the ~~periods~~nine months ended ~~March 31,~~September 30, 2023, and 2022, we incurred interest expenses totaling $~~714,833~~3,919,180 and $~~501,598~~1,927,622, respectively.

14
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes future payments required to be made on the Company’s debt.
Schedule of Long Term Debt
At September 30, Total
2024 16,059,812
2025 5,471,130
2026
4,049,224
2027 -
2028 -
Thereafter 494,900
Total obligations $ 26,075,066
The following tables summarizes the Company’s debt.
Schedule of Debt
At September 30, Total
Facility Indebtedness 11,637,726
Merchant Cash Advance Loans 2,925,196
Indebtedness Allocated to Real Estate 983,346
Other Corporate Indebtedness 7,387,798
TIC Purchase Agreements 3,141,000
Total Obligations 26,075,066
Debt Discount & Derivatives (1,651,845 )
Total obligations, net $ 24,423,221
The following table provides details of the Company’s debt ~~as of March 31,~~at September 30, 2023, and December 31, 2022:

~~Schedule of Long Term Debt~~
As of March 31, Total
2022 6,839,277
2023 9,635,591
2024 1,494,886
2025 4,461,182
Thereafter 494,900
Total obligations $ 22,925,835
Indebtedness of Facilities and Properties
Schedule of Maturity Debt
Maturity Date Interest Rate March 31,
2023
December 31,
2022
Maturity Date Interest Rate September 30, 2023 December 31, 2022
Naples Equity Loan ^ May 2023 9.95 % $ 4,550,000 $ 4,550,000 May 2023 9.95 % $ 4,550,000 $ 4,550,000
Gearhart Loan ^ December 2022 7.00 % 193,578 193,578 December 2022 7.00 % 193,578 193,578
SBA PPP Loans # February 2022 1.00 % 1,518,682 1,518,682 February 2022 1.00 % 1,518,682 1,518,682
Bank Direct Payable ^ December 2022 3.13 % 31,569 80,381
IPFS D&O Insurance August 2024 8.80 % 118,277 -
Bank Direct Payable December 2022 3.13 % - 80,381
Bank Direct Payable November 2023 6.99 % 104,947 -
AIU Sixth Street February 2023 12.00 % - 49,593 February 2023 12.00 % - 49,593
1800 Diagonal Lending
October 2024 12.00 % 93,408 116,760 February 2024 12.00 % 94,016 116,760
1800 Diagonal Lending
February 2024 12.00 % 173,594 -
Equity Secure Fund I, LLC* June 2022 11.50 % 1,000,000 1,000,000 March 2024 18.00 % 1,097,610 1,000,000
Invesque
July 2025
10.00 %
3,458,504
-
Invesque, Inc. ** July 2025 10.00 % 3,960,616 -
Merchant Cash Advance Loans (^^)
Naples Operating PIRS Capital March 2023 0.00 % $ 338,000 $ 338,000 March 2023 0.00 % $ 338,000 $ 338,000
Little Rock Libertas February 2023 0.00 % 326,330 326,330 February 2023 0.00 % 326,330 326,330
PIRS Capital Financing Agreement March 2023 0.00 % 144,659 144,659 March 2023 0.00 % 144,659 144,659
Naples Samson #1 May 2023 0.00 % 76,916 76,916 May 2023 0.00 % 76,916 76,916
Naples LG Funding #2 April 2023 0.00 % 171,170 171,170 April 2023 0.00 % 171,170 171,170
Little Rock Premium Funding April 2023 0.00 % 211,313 211,313 April 2023 0.00 % 211,313 211,313
Little Rock KIT Funding December 2022 0.00 % 89,400 89,400 December 2022 0.00 % 89,400 89,400
Little Rock Samson Funding #4 February 2023 0.00 % 170,501 170,501 February 2023 0.00 % 170,501 170,501
Naples Operating SWIFT December 2022 0.00 % 111,750 111,750 December 2022 0.00 % 111,750 111,750
New Braunfels Samson Cloud Fund February 2023 0.00 % 308,035 308,035 February 2023 0.00 % 308,035 308,035
New Braunfels Samson Group February 2023 0.00 % 375,804 375,804 February 2023 0.00 % 375,804 375,804
Westover Hills One River December 2022 0.00 % 128,298 128,301 December 2022 0.00 % 128,298 128,301
Westover Hills FOX Capitol March 2023 0.00 % 109,384 109,384 March 2023 0.00 % 109,384 109,384
Westover Hills Arsenal October 2023 0.00 % 95,882 95,882 October 2023 0.00 % 95,882 95,882
Westover Samson Funding March 2023 0.00 % 267,754 267,754 March 2023 0.00 % 267,754 267,754
Subtotal merchant cash advance loans 2,925,196 2,925,199

Notional amount of debt     13,944,531 10,434,193     14,562,922 10,434,193
Less: current maturities     13,944,531 10,434,193     14,562,922 10,434,193
    $ - $ -     $ - $ -

15
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Indebtedness Allocated to ~~Assets Held For Sale~~real estate
Real Estate:                
Artesia Note June 2033 Variable $ - $ 211,721 September 2033 Variable $ - $ 211,721
Carpenter Enterprises Demand Note Variable 300,000 300,000 Demand Note Variable 178,346 300,000
Leander Stearns National Association ^ February 2023 10.38 % 805,000 805,000
Leander Stearns National Association February 2023 10.38 % 805,000 805,000
Notional amount of debt     1,105,000 1,316,721     983,346 1,316,721
Less: current maturities     805,000 805,000     983,346 805,000
    $ 300,000 $ 511,721     $ - $ 511,721

Other (Corporate) Indebtedness
 
AGP Contract ^ March 2023 5.00 % $ 550,000 $ 550,000
Cibolo Creek Partners December 2025 0.09 % 411,470 $ 421,470
Cibolo Creek Partners promissory note December 2025 0.09 % 91,208 96,208
EIDL SBA Treas 310 December 2051 3.75 % 494,900 494,900
Firstfire May 2023 12.00 % 37,195 95,054
Five C’s Loan ^ December 2022 9.85 % 325,000 325,000
GS Capital May 2023 12.00 % 12,048 50,955
Jefferson Street Capital LLC @ May 2023 12.00 % 33,600 84,000
KOBO, L.P. ^ October 2023 Floating % 500,000 500,000
Mast Hill LP @ May 2023 12.00 % 300,000 420,000
Mast Hill LP @ July 2023 12.00 % 252,000 315,000
Round Rock Development Partners Note December 2025 0.09 % 500,000 500,000
Jefferson Street Capital LLC (February 2023)
February 2024
12.00 % 192,883 -
Mast Hill LP (January 2023)
January 2024
12.00 % 756,000 -
Convertible Notes Issued by AIU Alternative Care, Inc.
January 2024
12.00 % 279,000 -

Notional amount of debt     4,735,304 3,852,587
Less: current maturities 2,009,843 2,340,009
$ 2,725,461 $ 1,512,578

TIC Purchase Agreements No Specified Date 8.00 % $ 3,141,000 $ 3,141,000

Total 22,925,835 18,744,501
Less Debt Discount & Derivatives (1,554,177 ) (1,004,271 )
Total $ 21,371,658 $ 17,740,230
AGP Contract and Note^*** March 2023 5.00 % $ 550,000 $ 550,000
Cibolo Creek Partners December 2025 0.09 % 358,008 421,470
Cibolo Creek Partners promissory note December 2025 0.09 % 50,215 96,208
EIDL SBA Treas 310 December 2051 3.75 % 494,900 494,900
Firstfire May 2023 12.00 % - 95,054
Five C’s Loan ^ December 2022 9.85 % 325,000 325,000
GS Capital May 2023 12.00 % - 50,955
Jefferson Street Capital LLC @ May 2023 12.00 % 16,800 84,000
KOBO, L.P. October 2023 Floating % 557,992 500,000
Mast Hill LP @ May 2023 12.00 % 300,000 420,000
Mast Hill LP @ July 2023 12.00 % 252,000 315,000
Round Rock Development Partners Note December 2025 0.09 % 500,000 500,000
Jefferson Street Capital LLC (February 2023) February 2024 12.00 % 192,883 -
Mast Hill LP (January 2023) @ January 2024 12.00 % 756,000 -
Bridge Financings (convertible to common stock September 2024 8.00 % 2,235,000 -
Rom Papadopolous January 2024 50,000
Convertible Notes Issued by AIU Alternative Care, Inc. January 2024 12.00 % 749,000 -

Notional amount of debt     7,387,798 3,852,587
Less: current maturities 5,984,672 2,340,009
$ 1,403,126 $ 1,512,578

TIC Purchase Agreements No Specified Date 8.00 % $ 3,141,000 $ 3,141,000

Total 26,075,066 18,744,501
Less Debt Discount & Derivatives (1,651,845 ) (1,004,271 )
Total $ 24,423,221 $ 17,740,230

^ Obligation is in default. The interest rate ~~noted above~~set forth is the stated rate of ~~interest and does not reflect the default~~interest. The actual rate of ~~interest.~~interest has increased under the terms of the obligation.
^^ We have ceased payment of these obligations. Obligations are subject to litigation for nonpayment, as previously reported. See Note 87 — Commitments and Contingencies.
# SBA PPP obligations are past due and in the Company is continuing the process to have these obligations forgiven.
@
Obligation is in payment default. ~~Each~~Neither lender has ~~not~~ exercised any of their remedies. Each lender has the right to exercise remedies including the conversion of the promissory note into shares of our common stock and ~~the Company continues to negotiate with each lender a payment schedule. The interest rate noted above is the stated rate~~collection of default interest and ~~does not reflect~~other amounts, and in the ~~default rate~~case of ~~interest. Subsequently, each lender has provided~~Mast Hill to exercise the Lender Remedy Warrants described in Note 10 — Deficit.
Mast Hill LP granted a forbearance dated October 4, 2023 until the earlier of ~~their remedies which was in effect~~(i) the closing of the Viveon Merger (ii) to January 2, 2024 (90 days from the date of the forbearance), (iii) the date that Clearday, Inc. or any of its subsidiaries makes an assignment for the benefit of creditors, or applies for or consents to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed. or (iv) the date that bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against Clearday, Inc. or any of its subsidiaries (the earlier of the aforementioned (i), (ii), (iii) or (iv) shall be referred to herein as the “Waiver Expiration Date”).
Jefferson Street Capital LLC granted a forbearance to October 31, 2023, but as of the date of this ~~Report.~~Report has not exercised additional legal measures towards enforcement of payment of the debt. The Company is working on a longer-term solution. However, there can be no assurance that we will be able to extend any the forbearances with any of these lenders on acceptable terms or at all or that we will be able to comply with the terms of the forbearance provided by Mast Hill LP which includes that Clearday provide net proceeds from additional financings by Clearday under the terms of the promissory notes with such lender, unless such payment is excused by such lender.
* Obligations were modified in the third quarter of 2023.
** ~~Obligations have been modified~~Obligation amended and is in default as of the date of this Report as described ~~in Note 13 Subsequent Events.~~below.
*** Obligation amended effective December 31, 2023 to, among other matters, waive the default by extending the maturity date to September 2024 and increase the principal amount to $578,795.89 which is the principal plus the accrued and unpaid interest.

16
~~CLEARDAY, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~Mast Hill Financing – January 2023~~
~~On January 13, 2023, the Company incurred a loan in the principal amount of $756,000, by issuing a promissory note (“MH Loan 1 Note”) that included original issue discount of $75,600. The Company paid $68,040~~ ~~in placement fees and $12,000~~ ~~of legal fees and expenses of the lender. The net proceeds of this loan were used to repay the obligations of a mortgage on a land asset held by a subsidiary (“Artesia”) of approximately $213,000~~ ~~and the remaining amount was used for general working purposes. The obligations under this loan incur interest equal to~~ 12~~% per annum, subject to increase to the lesser of~~ 16~~% per annum or the maximum amount permitted by law upon an Event of Default as defined by MH Loan 1 Note. The loan is due and payable on~~ ~~January 26, 2024. Interest and principal are payable from and after April 12, 2023, subject to a five business day grace period, in equal monthly payments of $75,600~~ ~~plus accrued and unpaid interest, subject to the Company’s right to extend any or each of the first three such payments for 30 days upon payment of a fee equal to~~ 10~~% of the amount due on such payment date. The loan may be prepaid upon notice of seven trading days without payment or penalties or fees other than a $750~~ ~~administrative fee. The Company paid the lender a commitment fee of~~ ~~83,160~~ ~~shares of its common stock (“MH Loan 1 Commitment Shares”) and issued two warrants to the lender. One warrant (the “MH Loan Note Warrant”) may be exercised for~~ ~~1,134,000~~ ~~shares of the Company’s common stock from and after an Event of Default, as defined under MH Loan 1 Note, at a price per share of $0.75. The other warrant (the “MH Loan 1 Other Warrant”) may be exercised for~~ ~~851,000~~ ~~shares of the Company’s common stock at a price per share of $0.75~~. Each of the MH Loan 1 Note Warrant and the MH Loan 1 Other Warrant provide for customary “cashless” exercise of such warrant and adjustments to the exercise price and shares underlying each warrant, including adjustment in the event of an issuance of common stock or deemed issuance of common stock at a price that is lower than then exercise price on a “full rachet” basis. Artesia absolutely and unconditionally guaranteed to the lender the full amount of the loan under the terms and conditions of that certain guaranty (the “Guaranty”). Such Guarantee is secured by all assets of Artesia and the proceeds therefrom, including the land asset located at 6465 7 Rivers Highway, Artesia, NM. Artesia has agreed to record a mortgage with respect to such property in form mutually determined by Lender and Artesia. The lender has certain remedies, including the right to convert the unpaid amount of the loan, from and after an Event of Default, at a price per share equal to $~~0.50~~. The exercise price of each warrant and the conversion price of MH Loan 1 Note are subject to adjustment in the event the Company issues shares of common stock or equivalents at a price per share that is lower than then exercise or conversion price. The Company reserved shares of its common stock for issuance upon conversion of MH Loan 1 Note or the warrants and has agreed to register the shares of common stock for resale under the Securities Act of 1933, as amended. The Company granted the lender with a right of first refusal with respect to any bona fide offer of any financing , subject to exceptions for certain specified transactions: (1) a bona fide offer of capital or financing from a nationally recognized broker dealer that is retained by Borrower and acceptable to the Holder, which acceptance will not be unreasonably delayed, withheld or conditioned (“Investment Banker”), or any person or party that is introduced to the Company by the Investment Banker in its capacity as a placement agent, (ii) a bona fide offer of capital or financing from a person or party if such capital or financing is used by the Company for the acquisition or refinance of real property so long as (a) any security interest granted to such person or party is solely limited to the real property being acquired or refinanced and (b) such person or party shall have no rights at any time in such transaction or any related transaction to acquire Common Stock or Common Stock Equivalents of the Company (each a “Real Property Transaction”), as well as (iii) a bona fide offer of specified capital or financing through certain financing transactions. MH Loan 1 Note is subject to repayment from the use of proceeds of certain transactions. If, prior to the full repayment or satisfaction of the MH Loan 1 Note’s obligations, the Company receives cash proceeds of more than $2,000,000.00 (the “Minimum Threshold”) in the aggregate, from the sale of assets or issuance of the Company’s securities, including pursuant to an Equity Line of Credit (as defined in MH Loan 1 Note), then the Lender may require us to apply up to 50% of such proceeds after the Minimum Threshold to repay all or any portion of the outstanding obligation under the Note; provided that such repayment obligation is not applicable to Real Property Transactions, the sale of assets to customers of the Company in the ordinary course of business, the sale of interests in real estate, or any Small Business Administration Economic Injury Disaster Loan. Additionally, the Company provided the lender with rights to receive terms provided under any other financing transaction that are more favorable than under MH Loan 1 Note, other than Real Property Transactions and certain other transactions.
~~1800 Diagonal Lending – February 2023~~
~~On February 10, 2023, the Company issued an unsecured promissory note (the “1800 Note”) to an institutional lender in the aggregate amount of $194,360, including original issue discount of $20,824. The Company used the proceeds of this financing to fund the Company’s operations and repay approximately $19,280~~ ~~of existing indebtedness to this lender that was incurred April 5, 2022. The 1800 Note provides for the net funding to Clearday of $150,000~~ ~~after payment of specified expenses of $4,250~~ ~~and provides for an original issue discount of $19,286, resulting in a principal obligation of $194,360~~ ~~and a one-time interest charge of~~ 12~~% on such principal amount.~~
~~The 1800 Note provides for a one-year maturity. Monthly payments on the 1800 Note of approximately $21,768~~ will be made by Clearday with the first payment being on March 30, 2023, which payments are subject to a 10-day grace period. The 1800 Note provides specified events of default (an “Event of Default”) including failure to timely pay the monetary obligations under the 1800 Note and such breach continues for a period of ten (10) days after written notice from the 1800 Noteholder’ a breach of covenants under the 1800 Note or the Purchase Agreement that continues for a period of twenty (20) days after written notice by the 1800 Noteholder; breach of any representation and warranty in the 1800 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 OTCQX or 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.
17
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Equity Secure Fund I, LLC Modification
~~Upon any Event~~
As of ~~Default,~~September 5, 2023, AIU 8800 Village Drive, LLC, the ~~obligations~~subsidiary of Clearday, Inc. that owns the property in San Antonio, Texas used for our headquarters and production facilities, extended, modified and rearranged the mortgage financing of such property, to extend the maturity to March 26, 2024, obtain additional financing for the payment of taxes and certain other amounts, increase the interest rate to 18% per annum, provide a right, if there are no uncured defaults under such mortgage financing, to extend the ~~1800~~maturity of the mortgage financing for an additional twelve months for payment of a fee equal to 1% of the original ($1 million) principal amount of the mortgage note and reduce the interest rate to 16.75% during such extension period.
Bridge Financings.
The Company has issued Senior Convertible Notes (“Bridge Notes”) during 2023. The Company is continuing such offerings of Bridge Notes of an amount of up to $16,000,000, or such other amount as determined by the Company, to accredited investors in an offering that is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). Each Bridge Note will accrue interest at 8% per annum, increased by 4% per annum during an ~~annual rate of 22% and, if such~~ Event of Default ~~is continuing at any time that is 180 days after~~as defined in the ~~date of the 1800~~Bridge Note. The Bridge Notes will be payable on September 30, 2024 (the “Bridge Note Maturity Date”). The Bridge Notes will provide ~~the 1800 Noteholder the right and option to convert the obligations under the 1800 Note to~~for conversion into shares of ~~Clearday’s~~our common ~~stock. The~~stock based on a contingency. If the Viveon Merger is terminated, then the conversion 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 1800 Noteholder is subject to a customary limitation on beneficial ownership of 4.99% of Clearday’s common stock.
~~Jefferson Street – February 2023~~
On February 17, 2023, the Company issued an unsecured promissory note (the “Jefferson Street Note”) to an institutional lender. the Company used the net proceeds of this financing to fund the Company’s operations.
On February 17, 2023, the Company entered into a Securities Purchase Agreement with an institutional lender (the “Lender”) to issue an unsecured promissory note (the “Jefferson Street Note”) to the Lender. This Jefferson Street Note provides for the proceeds to us of approximately $~~135,000~~ ~~and provides for an original issue discount of $22,217~~ or 12~~%, resulting in a principal obligation of $172,217. The Company paid $15,000~~ ~~in placement fees in connection with the issuance and sale of the securities to the Lender. The Jefferson Street Note provides~~ ~~a one-time interest charge of~~ 12~~% on such principal amount or $20,666~~ ~~and~~ a ~~one-year maturity. Monthly payments on the Jefferson Street Note of the accrued, unpaid interest and outstanding principal, subject to adjustment,~~ ~~shall be paid in ten (10) payments~~ ~~each in the amount of $19,288.30~~ ~~(a total payback to the Holder of $192,883). The first such payment is due April 16, 2023, with nine (9) subsequent payments each month thereafter, which payments are subject to a 10 day grace period, or shorter if the payment date is not a business day.~~
The Jefferson Street Note provides specified events of default (a “Event of Default”) including failure to timely pay the monetary obligations under the Jefferson Street Note and such breach continues for a period of ten (10) days after written notice from the Jefferson Street Noteholder’ a breach of covenants under the Jefferson Street Note or the Securities Purchase Agreement that continues for a period of twenty (20) days after written notice by the Jefferson Street Noteholder; breach of any representation and warranty in the Jefferson Street Note or Securities 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 Event of Default, the obligations under the Jefferson Street 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 Jefferson Street Note, provide the Jefferson Street Noteholder the right and option to convert the obligations under the Jefferson Street 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 Street Note is subject to a customary limitation on beneficial ownership of 4.99% of Clearday’s common stock. Each of the Jefferson Street Note and the Securities 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 Street Note and Clearday will maintain a reserve of authorized and unissuedour shares of common stock ~~sufficient for full conversion~~will be the lower of ~~the obligations under the Jefferson Street Note.~~
~~As additional consideration, the Company issued to the Lender~~$0.82 per share and a ~~Common Stock Purchase Jefferson Street Warrant (“Jefferson Street Warrant”) to purchase~~ ~~225,000~~ ~~shares of the Company’s Common Stock at an exercise~~ price per share ~~of $0.75. The Jefferson Street Warrant expires five years from March 16, 2023. The Jefferson Street Warrant provides for customary “cashless” exercise of such Jefferson Street Warrant and adjustments~~equal to a 25% discount to the ~~exercise~~volume weighted average price per share for our common stock for the ten (10) trading days preceding such termination date. If the Viveon Merger Agreement is not terminated, then at the closing of the Viveon Merger, the principal and ~~shares underlying each warrant, including~~accrued interest of the Bridge Notes will be converted at a price per share equal to $0.82 subject to ratable adjustment in the event of ~~an issuance~~any stock split, reverse stock split, merger, consolidation, combination or similar transactions, and such shares of our common stock ~~or deemed issuance~~will be exchanged for shares of Viveon common stock ~~at a price~~under the terms of the Viveon Merger Agreement. The Bridge Notes have certain restrictions including the incurrence of additional related party transactions, restricted payments, maintenance of insurance and not change in our business and that the net proceeds of such financings would be used for the repayment of existing indebtedness and general corporate and working capital purposes of us and Viveon in anticipation of the Viveon Merger. We have agreed to share the net cash proceeds raised in any financing with Viveon as described in Note 9 — Related Party Transactions. The foregoing description of the form of the Bridge Notes is ~~lower than then exercise price~~qualified in their entirety by reference to the full text of the Bridge Note, which is incorporated by reference into this report as Exhibit 10.1 to our Quarterly Report on ~~a “full rachet” basis.~~
18
~~CLEARDAY, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~Convertible Notes Issued by AIU Alternative Care, Inc.~~Form 10-Q for the quarter ending June 30, 2023, that was filed on October 17, 2023.

~~From February 17,~~Invesque Obligations Amendment
Clearday and certain of its subsidiaries entered into the LTA Second Amendment effective December 15, 2023. Among other matters, the LTA Second Amendment deferred the due date for the initial Down Payment to December 31, 2023, and increased such amount payable from $300,000to ~~April 10, 2023, a subsidiary~~$350,000. The LTA Second Amendment provided customary representations and warranties of the parties thereto, reaffirmed the obligations under the Lease Transition Agreement, as amended, and the related guarantees and provided a waiver of defenses by Clearday and the guarantors party thereto. The obligations are in default as of January 2, 2024. The obligations provide a late charge (“Late Charge”) equal to 10% of the amount of any unpaid payment after the fifth day following the due date therefor to defray part of the increased cost of collecting late payments and the opportunity costs incurred by Landlord because of the unavailability of the funds. Additionally, the Landlord has customary rights upon the default under the Transition Agreement, the Guaranteed Note and the Guaranty. The Company ~~AIU Alternative Care, Inc.~~expects to negotiate an additional deferral or amendment of the payment date of the Down Payment. There can be no assurance that any such additional deferral or amendment will be consummated on acceptable terms or at all.
AGP Contract and Note Amendment
Clearday entered into a Promissory Note and Second Amendment (“~~AIU Alt Care”~~AGP Second Amended Note”), issued convertible unsecured promissory notes (each, a “Convertible Note” and collectively, the “Convertible Notes”) to lenders in a private placement of such securities, including related persons. The aggregate gross proceeds of such Convertible Notes to Marcheffective December 31, 2023, ~~are approximately~~ ~~279,000~~that amends Clearday’s obligations under the Promissory Note and ~~to April 10, 2023 is approximately $549,000. Each Convertible Note provides for interest at the rate a~~ 12~~% per annum (~~1~~% per month) that accrues and is payable at the maturity~~Amendment (the “AGP First Amended Note”) dated July 6, 2022 of the ~~loan or upon prepayment or conversion, if earlier.~~initial principal amount of $550,000. The ~~lender~~AGP First Amended Note amended the obligations under ~~each Convertible~~the Promissory Note ~~was also~~dated September 10, 2021, issued with respect to obligations under the Advisory Agreement dated July 25, 2019 by and between Clearday Operations, Inc. and AIU, as amended. Effective December 31, 2023, the AGP Second Amended Note confirms obligations to $10578,795.89~~% of~~ which equals the principal amount inof the ~~Company’s common stock at the per share price~~AGP First Amended Note of $~~0.75~~550,000. The loan under each Convertible Note is due January 31, 2024. The principal and the accrued and unpaid interests of each loan may be converted into the Company’s shares of common stock by such lender at the per share price of $~~0.75~~, subject to appropriate adjustments for any stock splits, reverse stock splits mergers, consolidations or similar transactions (the “Loan Conversion Price”). The Company also has the right to convert the principal and the plus accrued and unpaid interest, onextended the ~~loan at~~maturity date to the ~~Loan Conversion Price upon certain events:~~earlier of (i) September 30, 2024 or (ii) the closing date of the Viveon Merger under the Viveon Merger Agreement or the date of an event of default, and (iii) deleted the obligation of Clearday to prepay the obligations by amounts of capital raised by equity or equity linked securities.
● ~~The issuance by AIU Alt Care or the Company or any of its other subsidiaries of any equity securities in one or more offerings with aggregate gross proceeds of at least $~~5 ~~million;~~
● ~~The issuance by the Company or any of its other subsidiaries of convertible debt securities that were issued with gross proceeds in an aggregate amount of at least $~~5 ~~million;~~
● The listing by the Company or its common stock to the New York Stock Exchange, the NYSE American or any tier of the NASDAQ market in connection with an offering of securities by the Company or any of its subsidiaries in connection with any merger, consolidation or similar transaction with another person in which the Company is the surviving entity; or
● The exchange of the shares of the Company’s common stock for the common stock or other security that is listed on the New York Stock Exchange, the NYSE American or any tier of the NASDAQ market in connection with any merger, consolidation or similar transaction with another person in which Clearday is not the surviving entity or in which Clearday becomes a subsidiary of such other person, including without limitation, any special purpose acquisition corporation.
8.7. Commitments and Contingencies

Contingencies

Simpsonville litigation
Simpsonville Action 1 -The tenant, MCA Simpsonville Operating Company LLC, ~~referred to as Tenant,~~(“Tenant”), of the MCA community ~~that is~~ located in Simpsonville, South Carolina, ~~referred to as the Simpsonville Facility,~~(the “Simpsonville Facility”), and other affiliates of the Company have a dispute with the landlord of the Simpsonville Facility MC-Simpsonville, SC-UT, LLC, ~~referred to as the Landlord,~~(the “Landlord”), and its affiliates ~~(Embree~~– the Embree Group of ~~Companies: Embree Construction Group, Inc., Embree Asset Group, Inc., and Embree Capital Markets Group, Inc., referred to~~Companies collectively ~~as Embree)~~(“Embree”) under the terms of the lease. After non-payment, the Landlord instituted litigation (“Simpsonville Action 1”) ~~that is captioned and numbered MC-Simpsonville, SC-UT, LLC v. Steve Person, et. al., Cause No. 19-0651-C368 in the 368th Judicial District Court of Williamson County, Texas. After the~~. The trial court issued a judgment onin this litigation and assessed damages ~~in the amount~~ of $2,801,365 ~~and appeals of this judgment this action~~. The judgement was appealed but subsequently settled on August 5, 2022, ~~as reflected by an Agreed Final Judgment for an aggregate amount~~in favor of the plaintiff with a final judgment of $3,012,011, including costs and expenses, ~~in favor of the plaintiff,~~ of which $2,763,936was settled by the release of a cash bond that Tenant previously deposited with the ~~Court and the~~Court. The remaining amount of $248,075was to be paid within ~~six~~nine months after the entry of the judgment. The Company has not paid this amount. In connection with the settlement of Simpsonville Action 1 ~~Tenant entered into~~ an agreement allowed Tenant to transfer certain operations, including lease obligations, of the Simpsonville Facility that Tenant and Landlord terminated ~~the lease of the Simpsonville Facility as contemplated by such agreement to transfer of certain operations, including lease obligations, which~~and permitted the Landlord to sell the Simpsonville Facility to a third party ~~and~~ thereby ~~limit~~limiting the future obligations under the lease. At September 30, 2023, the total outstanding amount owed for Simpsonville Action 1 is $313,298 and is recorded in Accrued Expenses on the Company’s condensed consolidated balance sheet.
17
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Simpsonville Action 2 - The Landlord filed a second action on April 9, 2021 ~~(Simpsonville~~(“Simpsonville Action 2)2”), for claims similar to Simpsonville Action 1 including relief for payment of ~~rent~~ past due rent and reimbursement of taxes from October 2020 to the time of the trial in this action. This action captioned and numbered MC-Simpsonville, SC-UT, LLC v. Steve Person, James Walesa and Trident Healthcare Properties I, LP (“Trident”), Cause No. 21-0513-C425 in the 425th Judicial District Court of Williamson County, Texas. The court granted ~~summary~~a final judgment in this matter in favor of the Landlord on April 14, ~~2023.~~2023, and assessed damages of $2,673,373. On September 14, 2023, the court entered an order (the “Judgment Enforcement Order”) requiring the turnover of non-exempt assets of the defendants Steve Person and James Walesa, Clearday’s CEO and the assets of Trident Healthcare Properties I, LP and the appointment of a receiver to enforce the summary judgement. The Judgment Enforcement Order provides, in part, that “Nothing in this Order is intended to delay, hinder or disrupt the closing of the ~~[Viveon] merger.~~Viveon Merger.” The Judgment Enforcement Order also provides certain restrictions regarding the sale or transfer of the Clearday securities owned by Steve Person or James Walesa, providing in part that “Any liquidation of the Clearday shares by Receiver requires approval of this Court, after notice and hearing, or written agreement of the parties. Nothing herein, however, prevents the transfer of the shares under the expected merger so long as Defendant and the receivership estate retain their rights in such shares. No party, including Defendants, shall encumber the shares except as specifically provided herein.”
Under the structure used for the lease and operations of the Simpsonville Facility, ~~a subsidiary of Clearday, Inc.,~~ Tenant is the direct obligor under the lease and another subsidiary of Clearday, Trident, is a guarantor of the lease obligations. Neither Tenant ornor Trident have any material assets. We are assessing the exposure of these matters to Clearday, Inc. under these actions, including any liability under indemnification agreements with the individual guarantors. We ~~expect to offer~~attempted to negotiate a settlement of the summary ~~judgement. There can be no assurance that any~~judgement; however, such ~~settlement discussions will be held or that there will be any settlement of these actions~~negotiations were not successful. At September 30, 2023, the total outstanding amount owed for Simpsonville Action 2 including post judgement interest is $2,769,303 and is recorded in Accrued Expenses on ~~terms that are acceptable or at all.~~the Company’s condensed consolidated balance sheet.
Employment related taxes

Certain subsidiaries of the Company that operate hotel assets did not pay employment related taxes such as required withholdings for Texas State unemployment taxes and federal income tax and employee and employer contributions for FICA (Social Security and Medicare) taxes, and federal unemployment tax for certain periods from December 31, 2018, to December 31, 2021. These subsidiaries have since made the appropriate filings with the Internal Revenue Service and the Company has accrued the full estimated amount of the underpaid taxes as well as the estimated penalties and interest. As of ~~December 31, 2022,~~September 30, 2023, the amount of the estimated taxes, penalties, and interest, assuming that there is no waiver or mitigation of the penalties, is $~~311,000~~273,322. The Company has accrued this amount in its financial statements as of ~~March 31,~~September 30, 2023. The amount that was accrued in the condensed consolidated financial statements as of December 31, 2022, was $261,000.
Certain subsidiaries of the Company that operate its residential care communities have not paid employment related taxes such as required withholdings for federal income tax and employee and employer contributions for FICA (Social Security and Medicare) taxes, and federal and state unemployment tax from and after the payroll periods that ended September 16, 2022, to the date of this Report. These subsidiaries have since made the appropriate filings with the Internal Revenue Service and the Company has recorded the amount of the underpayment of approximately $1,241,180 and $527,000, as of September 30, 2023, and December 31, 2022, respectively including any taxes, penalties, and interest in “Accrued expenses” its condensed consolidated balance sheets. In connection with these matters, on August 3, 2023, the Internal Revenue Service issued a tax lien against MCA Management Company, Inc., a dormant and inactive subsidiary of Clearday, Inc. that does not have any assets. The Internal Revenue Service has indicated that it will commence enforcement action regarding this obligation.
Payroll related taxes

In the fourth quarter of 2021, certain subsidiaries of the Company did not remit payroll taxes related to the Earned Retentions Tax Credit (“ERTC”). The ERTC program permitted an offset for such obligations and was terminated during the fourth quarter with an effective termination date of September 30, 2021. As a result, the Company has ~~accrued~~recorded $~~1,097,000~~1,418,098 in such payroll ~~taxes.~~taxes in “Accrued expenses” its condensed consolidated balance sheet as of September 30, 2023. These subsidiaries have applied for certain tax credits, including ERTC and Families First Coronavirus Response Act. The Company expects to use such credits that will be applied to reduce these payroll tax liabilities.
~~Certain subsidiaries of the Company~~ There is no assurance that ~~operate its residential care communities have not paid employment related taxes~~any such ~~as required withholdings for federal income~~ tax and employee and employer contributions for FICA (Social Security and Medicare) taxes, and federal and state unemployment tax from and after the payroll period that ended September 16, 2022. These subsidiaries have since made the appropriate filings with the Internal Revenue Service and the Company has accrued the amount of the underpayment in its financial statements as of March 31, 2023 and December 31, 2022, of approximately $~~978,000~~ ~~and $527,000, respectively, which amount does not include any taxes, penalties, and interest.~~credits will be received.

1918
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Merchant advance loans

Certain subsidiaries of the Company that operate residential care facilities (“MCA Borrowers”) incurred certain financings through merchant credit advances. Such financings were provided by creditors under agreements (“MCA Agreements”) that describe the transaction as the sale of future receivables by the applicable MCA Borrower. The aggregate accrued amount of these financings is approximately $~~2,925,195~~2,925,196, as summarized in Note 76 — Indebtedness. Eight of these financing parties have commenced actions alleging, among other matters, a breach of the MCA Agreement for non-payment and a breach of the guaranty by the applicable guarantors. These actions demand monetary damages that, in the aggregate, are approximately $~~1,531,640~~1,403,863, plus other costs, fees and certain other ~~amounts.~~amounts after taking into the effect of the action that has been discontinued without prejudice.

These actions are:

1. Premium Merchant Funding 18, LLC v Memory Care at Good Shepherd LLC and James Walesa (a guarantor), filed in state court in Kings County, New York on August 19, 2022 (summary judgement in this matter was entered in favor of the plaintiff and ~~the Company has entered a notice to appeal)~~such judgement was not appealed by us);
2. Libertas Funding LLC v. Memory Care at Good Shepherd, LLC, et. al. including James Walesa (a guarantor), filed in state court in Monroe County, New York on August 24, 2022 (summary judgement in this matter was entered in favor of the Company’s subsidiary and ~~may be~~such judgement was not appealed by us, and this judgement was entered in the ~~plaintiff)~~State of Texas);
3. Cloudfund LLC v MCA New Braunfels Operating Company LLC et. al. including James Walesa (a guarantor), filed in state court in Nassau County, New York on August 29, 2022;
4. Cloudfund LLC v MCA Naples Operating Company, LLC and James Walesa (a guarantor), filed in state court in Nassau County, New York on August 30, 2022 (summary judgement in this matter was entered in favor of the plaintiff and ~~the Company has have entered a notice to appeal)~~such judgement was not appealed);
5. Swift Funding Source Inc. v MCA Naples Operating Company LLC et. al. including Christin Hemmens (a guarantor), filed in state court in Ontario County, New York on August 31, 2022;
6. ~~Pirs~~PIRS Capital, LLC v MCA Westover Hills Operating Company, LLC et. al. including James Walesa (a guarantor), filed in state court in New York County, New York on September 8, ~~2022;~~2022 (this action was discontinued without prejudice on October 25, 2023);
7. Prosperum Capital Partners, LLC dba Arsenal Funding v MCA Westover Hills Operating Company LLC et. al. including James Walesa (a guarantor), filed in state court in Kings County, New York on September 28, 2022;
8. Fox Capital Group, Inc. v MCA Westover Hills Operating Company LLC et. al. including James Walesa (a guarantor), filed in state court in Bexar County, Texas on October 25, 2022.

James Walesa is the Company’s Chief Executive Officer, ~~and/or~~ Christin Hemmens is ~~an officer~~the Company’s VP of ~~Clearday.~~Education. Other than as set forth above, each of these actions are in the pleading or discovery stage of litigation.

Naples Equity Loan: The mortgage lender for the Naples, Florida facility commenced an action for nonpayment of the mortgage note. The action is captioned A.AD.A, INC.; Anga Properties, LLC; Arce Holdings, LLC; Benfam Holdings LLC; Carolina Resources, LLC; Emilio Diaz SD Investment Account, LLC; Michael B. and Irma B. Goldstein; David J. Gonzalez; Hersab Holdings, LLC; Indocan Investment USA Corporation; Armando Navarro; Robbia Properties LLC; Shochat Holdings I LLC; and Wekwit, Inc. (collectively referred to as the Naples Lender) vs. MCA Naples, LLC (“MCA Naples”), Case No. 11-2023-CA-000243-0001- flied in the Circuit Court in and for Collier County, Floridanote (the “Benworth Action”). This litigation arises from the nonpayment under the mortgage and promissory note. The Benworth Action demands payment of the principal amount of the promissory note of ~~$4,550,000~~$4,550,000 together with default interest, late charges, costs advanced, insurance advances, attorney’s fees and costs and seeks the Final Judgment of Foreclosure and such further relief as the court deems just and proper. The Benworth Action also seeks the amount from James Walesa, the Company’s Chief Executive Officer, under the personal irrevocable and unconditional guaranty, in favor of Benworth Capital Partners, LLC, of the obligations of MCA Naples under the mortgage and promissory note. A clerk’s default was entered against MCA Naples on May 15, 2023, and against Mr. Walesa on May 31, 2023. On July 5, 2023, MCA Naples filed a motion to set aside the default and the defaults were set aside. MCA Naples, LLC filed its Answer and Defenses. A Motion to ~~Dismiss~~dismiss the ~~Complaint~~complaint was filed on behalf of Mr. Walesa and iswas set for a hearing on November 6, 2023. Plaintiffs filed a Motion for Summary Judgment which was denied on October 3, 2023. The mortgage lender amended their complaints on November 9, 2023, to, among other matters, include MCA Naples Operating Company, LLC, the operator of our Naples community, as a party that has an interest in the property. We and Mr. Walesa provided an answer to the amended complaint on November 28, 2023. A hearing for the summary judgment on the amended complaint has been scheduled for January 2024. We believe that ~~the fair value of~~ the mortgaged property has a fair value that is significantly greater than the amount of the mortgage obligations and ~~intends~~we intend to negotiate a forbearance or other modification of the mortgage, or refinance the mortgage obligations, or assist in a sale and modification of the mortgage note. There can be no assurance ~~however,~~ that any such transaction will be consummated on acceptable terms or at all.
Leander Stearns National Association, the mortgage lender for the property (“Leander Property”) owned by Leander Associates, Ltd., (“Leander”), a Texas limited partnership that is a consolidated subsidiary of Clearday, Inc., has commenced litigation regarding the nonpayment of a mortgage loan obligations of approximately $875,000 seeking repayment of the mortgage loan of $805,000 that was due February 10, 2023 and additional amounts, including interest and late fees. Leander and the mortgage lender entered into a Forbearance Agreement as of May 22, 2023 and the first amendment thereto dated September 8, 2023, that, among other matters, provided a forbearance period and extended the maturity of the mortgage loan to October 21, 2023, and requires certain payments to the mortgage lender, including monthly installment payments to the mortgage lender of all accrued, unpaid interest starting on September 15, 2023 and continuing on the same day of each month thereafter until the New Maturity Date (as defined below) with interest calculated on the unpaid principal balance as set forth in the Note. The mortgage loan under the forbearance agreement, as amended, provides that the mortgage lender deferred certain past-due interest to the extended maturity date of October 21, 2023. Leander has entered into a purchase and sale agreement for the Leander Property for a value that is in excess of the amounts owed to the mortgage lender and the other financing by us owed to KOBO LP with respect to the Leander Property. We believe that the net proceeds to Leander from the sale of the Leander Property will not be material after giving effect to the payments to the mortgage lender, and existing financing of net proceeds to KOBO LP and other financings of such proceeds, and transaction brokerage fees and other costs.

The Company has been threatened with litigation by the law firm Rigrodsky Law, P.A. alleging unjust enrichment in connection with stockholder litigation commenced by such firm related to the AIU Merger and claiming damages of $200,000. This law firm alleges that the complaint ~~that was~~ filed caused material supplemental disclosures. The Company is assessing these allegations and expects to respond appropriately.

2019
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Certain subsidiaries of the Company that operate hotel assets have not paid employment related taxes such as required withholdings for Texas State unemployment taxes and federal income tax and employee and employer contributions for FICA (Social Security and Medicare) taxes, and federal unemployment tax for the period from December 31, 2018, to December 31, 2019. These subsidiaries have since made the appropriate filings with the Internal Revenue Service and the Company has accrued the full estimated amount of the underpaid taxes as well as the estimated penalties and interest. As of March 31, 2023, the amount of the estimated taxes, penalties, and interest, assuming that there is no waiver or mitigation of the penalties, is $~~467,451~~ ~~The Company has accrued this amount in its condensed consolidated financial statements, which amount does not include credits that the Company expects this subsidiary to receive.~~

In addition, from time to time, the Company becomes involved in litigation matters in the ordinary course of its business. Such litigations include ~~an action that alleges negligence and other claims regarding the death~~nonpayment of ~~a resident in a memory care facility.~~accounts payable. Although the Company is unable to predict with certainty the eventual outcome of any litigation, the Company does not believe any of its currently pending litigation is likely to have a material adverse effect on its business.

Indemnification Agreements

Certain lease and other obligations of the Company are guaranteed in whole or in part by James Walesa and/or BJ Parrish and ~~others.~~others who are related parties. The Company has agreed to indemnify and hold each such individual harmless for all liabilities and payments on account of any such guaranty. The lease obligations of the Company for ~~its lease obligations for~~ four of its five MCA facilities, including the lease of the MCA community ~~that is in Simpsonville, South Carolina, referred to as~~for the Simpsonville ~~facility.~~Facility. This is the facility that is the subject of litigation and judgement against certain of the Company’s subsidiaries. We have been fully indemnified by James Walesa for all obligations that the Company may incur with respect to an adverse judgement against the Company, including any post-judgement interest. Such indemnification by James Walesa is under an agreement dated as of July 30, 2020. Under such agreement, James Walesa ~~receives~~is to receive a fee equal to 2% of the total amount payable by AIU or any of its subsidiaries which is payable in units of shares of the AIU Alt Care Preferred and Clearday Warrants at $10.00 per unit, which is the same as the cash payment for such units by third parties in the offering of such units by AIU Alt Care. If Mr. Walesa is required to make any payments under this indemnification, the Company will issue shares of AIU Alt Care Preferred and Clearday Warrants, at $10.00 per unit, for the amount of such payment.

Subsequently, an amendment to the indemnification agreement above was signed on January 19, 2021, in which additional securities were pledged on behalf of James Walesa for all obligations that Company may incur with respect to an adverse judgement and/or any post-judgement interest. In the event that Mr. Walesa is required to make any payments under this amended indemnification agreement, then Company will issue shares of AIU Care, AIU Warrants and AIU Common Stock at $10.00 per unit as well as Series A Preferred at $20.00 per unit, for the amount of such payment.

2120
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9.8. Earnings Per Share

Basic net income (loss) per common share is calculated by dividing the net income (loss) attributable to ~~common stockholders~~Clearday shareholders by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to ~~common stockholders~~Clearday shareholders by the weighted average number of common shares and potentially dilutive securities outstanding for the period. For the Company’s diluted earnings per share calculation, the Company uses the “if-converted” method for preferred stock and convertible debt and the “treasury stock” method for Warrants and Options.

Following is the Company’s earnings per share calculation included in the condensed consolidated statements of operation,
Schedule of Condensed Consolidated Statements of Operation
Nine Months Three Months
9/30/2023

Basic and diluted loss per share attributable to Clearday, Inc.
Net Income (loss) (8,114,216 ) (3,083,363 )
Preferred stock dividends (4,996,780 ) (1,653,009 )
Net (loss) attributable to common shareholders (13,110,996 ) (4,736,372 )
Net (loss) attributable to non-controlling interest (1,562,867 ) (616,649 )
Net loss available to Clearday shareholders (11,548,129 ) (4,119,723 )
Earnings ( loss) per share attributable to Clearday, Inc.
Basic (0.46 ) (0.16 )
Diluted
Weighted average common shares outstanding
Basic 25,162,174 26,097,002
Diluted 25,162,174 26,097,002
The following tables set forth the potentially dilutive shares that were anti-dilutive in their respective periods as the Company had net losses for the periods ended ~~March 31,~~September 30, 2023, and 2022, respectively.

Schedule of Anti-Dilutive Shares Compensation of Earnings (Loss) Per Share
2023 2022
For the Three Months Ended
Dilution shares calculation March 31,
2023 2022
Series A Convertible Preferred Stock 328,925 328,925
Series F 6.75% Convertible Preferred Stock 4,791,401 4,797,052
Series I 10.25% Convertible Preferred Stock 682,820 320,657
Limited Partnership Units 99,038 99,038
Warrants 7,618,820 4,038,801
Total participating securities 13,521,004 9,586,495
2023 2022
For the Nine Months Ended
Dilution shares calculation September 30,
2023 2022
Series A Convertible Preferred Stock 328,925 328,925
Series F 6.75% Convertible Preferred Stock 4,311,048 4,797,052
Series I 10.25% Convertible Preferred Stock 1,365,640 320,657
Limited Partnership Units 99,038 99,038
Warrants 3,902,081 4,036,320
Bridge Notes 835,366 -
Total participating securities 10,842,098 9,581,992

21
~~10.~~
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Related Party Transactions

~~Debt.~~Debt and Guarantees

The Company’s indebtedness includes amounts loaned to us by executive management. In addition, the Company incurs debt that is personally guaranteed by certain executives, officers and directors for which they receive a guarantee fee. There is a guarantee fee agreement in place that details the amount of the fee as well as payment terms. The amount of the fee is capped at 2% of the amount of the outstanding note regardless of how many guarantors there are ~~some loans~~on the loan unless otherwise determined by the Company’s Board of Directors. The fee is paid 1% at the time of executing the agreement and 1% when the loan is paid off.
We owe (1) Richard Morris, our General Counsel, (i) for a loan in ~~which executive management has loaned money~~the amount of $344,969 including principal and; interest (ii) past due rent for robots of approximately $162,155 including interest; (2) James Walesa, our Chief Executive Officer, approximately $143,141 in loan guaranty fees, and approximately $47,065 for advances he made to the ~~Company. In addition, there are loans~~Company; (3) B.J. Parrish, our Chief Operating Officer $69,532 in loan guaranty fees; (4) Steve Persons, our shareholder $63,193 in loan guaranty fees; (5) Christen Hemmens, our V.P and Director of Education approximately $120,300 in unsecured short term non-interest-bearing debt and $14,000 for loan guaranty fees. (6) Kelly Rio, a shareholder and former employee $16,000 for a loan that she made byto the Company ~~itself in which certain executives personally guarantee the debt.~~

Cibolo Creek Partners, LLC (“Cibolo Creek”) and its affiliate Round Rock Development Partners, LP (“RRDP”) prior to December 31, 2018, made loans to us under revolving credit notes that bear interest at the then applicable federal rate and are payable on demand or other date ~~that was~~ specified by such lender. In December 2018, AIU acquired businesses affiliated with Cibolo Creek. As of ~~December 31, 2022,~~September 30, 2023, AIU ~~Inc.,~~Sixth Street, Cibolo Creek and Round Rock were owed $~~66,208~~0, $~~411,470~~408,223 and $500,000 respectively, by the Company. As of December 31, 2022, AIU Sixth Street, Cibolo Creek and Round Rock were owed $49,493, $517,678 and $500,000 respectively, by the Company. These amounts are included in Note 6 – Indebtedness.

~~We owe (1)~~During the first two quarters of 2023 we used the services of Galleros Robinson, LLP, a CPA and advisory firm, for certain accounting services. Richard ~~Morris, our General Counsel, $330,175~~ ~~for loans and rent of approximately~~ ~~94,650~~ ~~for rental payments regarding our robots and certain other advances and reimbursements and (2) James Walesa, our Chief Executive Officer, approximately $44,165~~ ~~in loan guaranty fees. Christin Hemmens, another related party is owed approximately $130,000~~ ~~in unsecured short term non-interest bearing debt, and (3) BJ Parrish approximately $44,000~~ ~~in loan guaranty fees.~~
~~Guarantees~~
~~From time-to-time certain officers and directors will personally guarantee a loan. There~~Levychin is a ~~guaranteed fee agreement~~partner of this firm and member of our audit committee. We had accounts payable in ~~place that details~~ the amount of $27,500 and $10,500 at September 30, 2023 and December 31, 2022. respectively. We made no payments to this firm during the ~~fee as well as payment terms for certain executives in the Company. The amount of the fee is capped at~~ 1~~% of the amount of the outstanding note regardless of how many guarantors there are on the loan unless otherwise determined by the Company’s Board of Directors.~~
~~11.~~ ~~Deficit~~
~~The certificate of incorporation of Clearday, Inc. provides for~~ ~~80,000,000~~ ~~authorized shares of Common Stock~~nine months ended September 30, 2023, and ~~10,000,000~~ ~~authorized shares of preferred stock, each par value $0.001~~ ~~per share.~~
~~On January 27, 2023, the Company issued~~ ~~4,218,158~~ ~~shares of the Company’s Common Stock in consideration of~~paid this firm approximately $~~3,248,000~~37,500 ~~of accrued amounts payable to Thinktiv, Inc. and for continued services technology and advisory services~~ during ~~the first quarter as from time to time mutually agreed.~~
~~Liquidation Preference~~
In the event of the Company’s liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all the Company’s debts and other liabilities and the satisfaction of any liquidation preferences that may be granted to the holders of any then outstanding shares of preferred stock.
22
~~CLEARDAY, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~2022.

~~Rights and Preferences~~Thinktiv

~~Holders~~Clearday has engaged Thinktiv, Inc. to provide services under the terms of ~~common stock have no preemptive, conversion or subscription rights,~~a previously reported Services Agreement dated as of March 6, 2019, by and ~~there is no redemption or sinking fund provisions applicable~~between Thinktiv, Inc. and Clearday Operations, Inc. During the third quarter of 2023 we incurred approximately $937,500 of fees to this related party and expect to incur the ~~common stock. The rights, preferences and privileges~~same amount in the fourth quarter of 2023. Approximately 25% of these fees are accrued as intangibles as described in Note 4.
Stockdale Financing.
On May 22, 2023, Stockdale Associates, Ltd. (“Stockdale”), a wholly owned subsidiary of Clearday, Inc. entered into a sales transaction with James Walesa, the Chief Executive Officer of the ~~holders~~Company, for land of ~~common stock are subject~~approximately 1.5 acres owned by Stockdale located in the city of Stockdale, Texas (the “Stockdale Property”). The aggregate purchase price for the Stockdale Property was approximately $155,925. Mr. Walesa used the Stockdale Property to obtain mortgage financing from a third party (the “Stockdale Mortgage Loan”). Stockdale may repurchase the Stockdale Property at any time upon payment to Mr. Walesa of $175,000, plus interest on such an amount at a rate of 10.9% annually based on a 360-day year, less $19,075. Stockdale is required to pay Mr. Walesa the approximate sum of $1,590 per month commencing July 1, 2024, and ~~may be adversely affected by,~~pay all other amounts required under the ~~rights~~Stockdale Mortgage Loan and all amounts including property taxes, required for the ownership of the ~~holders~~property. The Stockdale Mortgage Loan matures, and the Stockdale’s repurchase right terminates, on September 1, 2028. A $5,925 gain on the sale of ~~shares~~the Stockdale property was recognized and included in Gain/loss on disposal of ~~any series of preferred stock, which the Company may designate and issue in the future.~~assets on our condensed consolidated financial statements.

~~Voting Rights~~Viveon Merger

We have agreed to invest approximately ~~Each holder~~48% of the net proceeds from advances of the issuance of our Bridge Notes with Viveon. As of September 30, 2023, we have invested $1,042,260 of such net proceeds in Viveon under the terms of a promissory note issued by Viveon (the “Viveon Note”). We have subsequently invested $732,762 as of December 8, 2023, for a total investment of $1,775,023. We made this investment in Viveon to pay a portion of Viveon’s working capital expenses incurred in anticipation of the Viveon Merger. Because the indebtedness under this Viveon Note will be eliminated in the Viveon Merger or likely uncollectible in the event the Viveon Merger is not closed because we do not have the right to any of Viveon’s assets in their trust account, which is their only asset, we have recorded reserve against the full amount of such investment. We have also amended the terms of the Viveon Merger Agreement to, among other matters, increase the number of shares of Viveon common stock ~~is entitled~~that will be issued in the Merger to ~~one vote for each share~~increase the valuation of Clearday to $500 million based on, ~~all matters submitted to a vote~~among other factors, the demonstrated benefits of ~~the stockholders, including the election of directors~~. The Company’s amended and restated certificate of incorporation and amended and restated bylaws do not provide for cumulative voting rights. Because of this absence of cumulative voting, the holders of most of the shares of common stock entitled to vote in any election of directors can elect all the directors standing for election, if they should so choose. In addition, the Company’s amended and restated certificate of incorporation also provides that the Company’s directors may be removed only for cause by the affirmative vote of the holders of at least 75% of the consolidated voting power of all the Company’s stockholders entitled to vote on the election of directors, voting together as a single class.Clearday’s Longevity Tech Platform.

Subject to supermajority votes for some matters, matters shall be decided by the affirmative vote of the Company’s stockholders having a majority in voting power of the votes cast by the stockholders present or represented and voting on such matter, provided that the holders of the Company’s common stock are not allowed to vote on any amendment to the Company’s certificate of incorporation that relates solely to the terms of one or more series of preferred stock if the holders of such affected series are entitled, either separately or together with the holders or one or more such series, to approve such amendment. The affirmative vote of the holders of at least 75% of the votes that all of the Company’s stockholders would be entitled to cast in any annual election of directors and, in some cases, the affirmative vote of a majority of minority stockholders entitled to vote in any annual election of directors are required to amend or repeal the Company’s bylaws, amend or repeal certain provisions of the Company’s certificate of incorporation, approve certain transactions with certain affiliates, or approve the sale or liquidation of the Company.10. The vote of most minority stockholders applies when an individual or entity and its affiliates or associates together own more than 50% of the voting power of the Company’s then outstanding capital stockEquity (Deficit).

Accumulated Deficit
As of September 30, 2023, we have an accumulated deficit of $86,222,414. During the period ended September 30, 2023, we had a net loss from operations of $8,114,216. Forthe year ended December 31, 2022, we had a net loss from operations of $14,462,738.
Preferred Stock

The Company has ~~5,000,000~~10,000,000 authorized shares of ~~Series F~~ ~~6.75% cumulative convertible common stock, $0.001~~ ~~par value, authorized with~~ ~~4,791,401~~ ~~and~~ ~~4,797,052~~ ~~issued and outstanding as of March 31, 2023 and December 31, 2022, respectively. The Series F~~ Preferred Stock ~~has~~at a ~~stated~~par value of $~~20.00~~0.001 ~~per share is exchangeable at the option of the holder into approximately~~ ~~2.38~~ shares of the Company’s Common Stock, subject to adjustment for specified fundamental transactions such as stock splits, reverse stock splits and stock combinations. See Note 12 – Mezzanine Equity – Mezzanine, for accounting treatment of the Series F Preferred Stock..

The ~~Company’s~~Company has 2,000,000 authorized shares of Series A Convertible Preferred Stock ~~has~~at a $~~.001~~ par value of $~~2,000,000~~.001 ~~shares authorized, and~~, of which 328,925 shares were issued and outstanding ~~as of March 31,~~at September 30, 2023, and December 31, 2022. Except for a preference on liquidation of $0.01 per share, each share of Series A Preferred Stock is the economic equivalent of ten twelfths of a share of common stock into which it is convertible. Except as required by law, the Series A Preferred Stock will not have any voting rights. The liquidation value of the Series A Convertible Preferred Stock is $329 at September 30, 2023, and December 31, 2022,

~~Dividends and Distributions~~Common Stock

~~For the periods ended March 31,~~The Company has 80,000,000 authorized shares of Common Stock with a par value of $0.001 per share. At September 30, 2023 and December 31, 2022 there were 26,155,305 and 20,805,448 shares issued and outstanding, respectively.
Liquidation Preference - In the ~~Company accrued dividends for~~event of the ~~6.75% Series F preferred~~Company’s liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the ~~amount~~net assets legally available for distribution to stockholders after the payment of $~~1,698,784~~all the Company’s debts and $~~1,619,015~~ ~~respectively.~~other liabilities and the satisfaction of any liquidation preferences that may be granted to the holders of any then outstanding shares of preferred stock.

2322
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Rights and Preferences - Holders of common stock have no preemptive, conversion or subscription rights, and there is no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock, which the Company may designate and issue in the future.
Voting Rights - Each holder of common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. The Company’s amended and restated certificate of incorporation and amended and restated bylaws do not provide for cumulative voting rights. Because of this absence of cumulative voting, the holders of most of the shares of common stock entitled to vote in any election of directors can elect all the directors standing for election, if they should so choose. In addition, the Company’s amended and restated certificate of incorporation also provides that the Company’s directors may be removed only for cause by the affirmative vote of the holders of at least 75% of the consolidated voting power of all the Company’s stockholders entitled to vote on the election of directors, voting together as a single class.
Subject to supermajority votes for some matters, matters shall be decided by the affirmative vote of the Company’s stockholders having a majority in voting power of the votes cast by the stockholders present or represented and voting on such matter, provided that the holders of the Company’s common stock are not allowed to vote on any amendment to the Company’s certificate of incorporation that relates solely to the terms of one or more series of preferred stock if the holders of such affected series are entitled, either separately or together with the holders or one or more such series, to approve such amendment. The affirmative vote of the holders of at least 75% of the votes that all of the Company’s stockholders would be entitled to cast in any annual election of directors and, in some cases, the affirmative vote of a majority of minority stockholders entitled to vote in any annual election of directors are required to amend or repeal the Company’s bylaws, amend or repeal certain provisions of the Company’s certificate of incorporation, approve certain transactions with certain affiliates, or approve the sale or liquidation of the Company. The vote of most minority stockholders applies when an individual or entity and its affiliates or associates together own more than 50% of the voting power of the Company’s then outstanding capital stock.

Restricted Stock - During the third quarter of 2023, we did not issue any shares of our common stock to consultants.
Registered Shares - During the third quarter of 2023, we issued approximately 139,457 shares of common stock upon the conversion of our Series F Preferred stock. Such shares were registered under our prior registration statement.
Stock Options - On September 30, 2023, we continued to have the two active equity award option plans, the 2003 Equity Incentive Plan and the 2013 Equity Incentive Plan (collectively, the “Stock Option Plan”). Although we can only grant new options under the 2013 Equity Incentive Plan. Under our Stock Option Plan, stock awards were made to our former directors, key employees, consultants, and non-employee directors and consisted of stock options, restricted stock awards, performance awards, and performance share awards. Stock options were granted at prices no less than the market value on the date of grant. There were no stock options that were exercisable on September 30, 2023, and there were no stock options exercised during the nine and twelve months ended September 30, 2023, or December 31, 2022.
Stock Compensation - At September 30, 2023, there was no unamortized stock compensation.
23
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Warrants

The Company has three separate types of warrants that are outstanding:

● warrants that were granted and outstanding by Superconductor Technologies Inc. (“STI”) prior to the September 9, 2021, effective date of the previously disclosed merger ~~(the “AIU Merger”)~~ with Allied Integral United, ~~Inc.~~Inc (“AIU” the “AIU Merger”).;
● warrants assumed by the Company that were granted by AIU prior to the effective date of the AIU Merger; and
● ~~warrant~~warrants that were issued by the Company after the AIU Merger.
The following is a summary of such outstanding warrants at ~~March 31~~September 30 2023:

Warrants (“STI Warrants”) issued by STI prior to September 9, 2021, the effective date of the AIU Merger.
Summary of Outstanding Warrants
Total Currently Exercisable
Exercise Price
per Share
Expiration Date Total Currently Exercisable
Exercise Price
per Share
Expiration Date
Common Shares Common Shares
Total Currently Exercisable
Exercise Price
per Share
Expiration Date Total Currently Exercisable
Exercise Price
per Share
Expiration Date

Warrants related to March 2018 financing 7,331 7,331 $ 245.84 September 9, 2023
Warrants related to July 2018 financing 119,241 119,241 $ 75.48 July 25, 2023
Warrants related to July 2018 financing 7,154 7,154 $ 94.35 July 25, 2023
Warrants related to May 2019 financing 5,518 5,518 $ 26.96 May 23, 2024 5,518 5,518 $ 26.96 May 23, 2024
Warrants related to October 2019 financing 100,719 100,719 $ 5.39 October 10, 2024 100,719 100,719 $ 5.39 October 10, 2024
Warrants related to October 2019 financing 14,336 14,336 $ 6.74 October 8, 2024 14,336 14,336 $ 6.74 October 8, 2024

Warrants that were issued by Clearday Operations, Inc. prior to the effective date of the AIU ~~Merger~~:Merger:

Common Shares
Total Currently Exercisable
Exercise Price
per Share
Expiration Date

Warrants issued in connection with financings * 3,281,508 3,281,508 $ 5.00 November 15, 2029
Warrants issued to a consultant ^ 500,000 500,000 $ 11.00 August 10, 2026

* Two of our subsidiaries have preferred securities that are classified under GAAP as Non-Controlling Interest: (1) the preferred stock designated as the Series I 10.25% cumulative convertible preferred stock, par value $0.01 per share of AIU Alt Care (the “Alt Care Preferred Stock”); and (2) the preferred limited partnership interests of Clearday OZ Fund (the “Clearday OZ LP Interests”).. As of ~~March 31,~~September 30, 2023, there are 1,376,118 warrants that were issued by Clearday to investors in the Alt Care Preferred Stock and the Clearday OZ LP Interests that may be exercised for an aggregate of 3,281,508 shares of the Company’s Common Stock. The exercise price per share for each is $5.00per share, subject to adjustment for specified fundamental transactions such as stock splits, reverse stock splits and stock combinations.

^ The Company also has a warrant issued to a consultant representing 500,000 shares of the Company’s Common Stock at an exercise price of $11.00 per share, which may be paid by customary cashless exercise. Such warrant is subject to adjustment for specified fundamental transactions such as stock splits, reverse stock splits and stock combinations.

24
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Warrants issued by Clearday, Inc. to Lenders after the effective date of the AIU ~~Merger~~ ~~to Lenders:~~Merger:

Each of the following warrants (“Lender Remedy Warrants”) were issued in connection with a financing arrangement and provides that the warrant may only be issued upon an event of default under the related promissory note.

Common Shares Common Shares
Outstanding Exercisable Exercise Price Maturity Date Outstanding Exercisable Exercise Price Maturity Date
Related to the January 12, 2023, Financing (Mast Hill LP) 1,134,000 0 $ 0.75 5 years after Trigger Date* 1,134,000 - $ 0.75 5 years after Trigger Date*
Related to the September 30, 2022, Financing (Mast Hill LP) 472,500 0 $ 0.50 5 years after Trigger Date* 472,500 - $ 0.75 5 years after Trigger Date*
Related to the July 1, 2022, Financing (Mast Hill LP) 900,000 0 $ 0.50 5 years after Trigger Date* 900,000 - $ 0.50 5 years after Trigger Date*

* Trigger Date is defined as the date of an Event of Default under the promissory note ~~that is~~ related to the financing in which this warrant was issued, which default has not been waived.

The additional warrants were also issued to lenders:

Common Shares

Related to the February 17, 2023, Financing (Jefferson Street Capital LLC) 225,000 225,000 $ 0.75 March 16, 2028
Related to the January 12, 2023, Financing (Mast Hill LP) 851,000 851,000 $ 0.75 February 14, 2028

Derivative Calculation

~~At March 31,~~During the period ended September 30, 2023, the Company ~~estimated~~calculated the fair value of the ~~conversion feature derivatives embedded in the notes payable and~~ warrants outstanding based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock on the date of issuance ranging from $~~0.51~~0.75 to $0.85; risk-free interest rates ranging from ~~3.60%~~3.53% to .~~4.94%~~474.06%; ~~expected~~volatility ranging from 183% to 187% based on the historical volatility of the Company’s common ~~stock ranging from~~ ~~182%~~ to ~~421%; estimated~~stock; exercise prices ranging from $~~0.35~~ 0.50to $~~0.43~~0.75; and terms ~~from one to~~of sixty months.
~~Stock Options~~
On March 31, 2023, we continued to have the two active equity award option plans, the 2003 Equity Incentive Plan and the 2013 Equity Incentive Plan (collectively, the “Stock Option Plan”). Although we can only grant new options under the 2013 Equity Incentive Plan. Under our Stock Option Plan, stock awards were made to our former directors, key employees, consultants, and non-employee directors and consisted of stock options, restricted stock awards, performance awards, and performance share awards. Stock options were granted at prices no less than the market value on the date of grant. There were no stock option exercises during the three and twelve months ended March 31, 2023 or December 31, 2022. There were no stock options that were exercisable on March 31, 2023.

25
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~Restricted Stock~~
~~During the first quarter of 2023, we issued approximately~~ ~~4,326,415~~ ~~shares of our common stock to consultants, including an exchange of~~ ~~4,218,158~~ ~~shares for $3,248,000~~ ~~of accrued expenses, as previously reported, and reflected an adjustment (decrease) of stock issuance to consultants in the amount~~ ~~25,097~~.
~~Registered Shares~~
~~During the first quarter of 2023, we issued approximately~~ ~~48,802~~ ~~shares of common stock upon the conversion of our Series F Preferred stock. Such shares were registered under our prior registration statement.~~
~~As of March 31, 2023, there was no unamortized stock compensation.~~
Non-Controlling Interest

In November 2019, a certificate of incorporation was entered into by AIU Alt Care for Series I 10.25% cumulative convertible preferred stock, par value $0.01 per share that authorizes the issuance of 1,500,000 shares of preferred stock and 1,500,000 of common stock and designated 700,000 as Series I Preferred Stock. Each share of Series I Preferred Stock has a stated value equal to the Series I Preferred Stock original issue price. For the ~~three~~nine months ended ~~March 31,~~September 30, 2023, and 2022, there was no amount invested in AIU Alt Care.

In October 2019, AIU Alt Care formed AIU Impact Management, LLC and they formed Clearday OZ Fund, which is managed by AIU Impact Management, LLC, as the general partner. For the three months ended ~~March 31,~~September 30, 2023, and 2022, $there was 0no ~~and $~~0 ~~was~~amount invested in Clearday OZ ~~Fund, respectively.~~Fund.

The exchange rate for each of the Alt Care Preferred Stock and the limited partnership units in Clearday OZ Fund to Clearday, Inc. ~~Common Stock~~common stock is equal to (i) the aggregate investment amount for such security plus accrued dividends at 10.25% per annum, (ii) divided by 80% of the 20 consecutive day volume weighted closing price of the Common Stock of Clearday preceding the conversion date. Prior to the merger, these securities were exchangeable to shares of AIU common stock at a rate of 1 share for every $10.00 of aggregate amount of the investment plus such accrued dividends.

Non-Controlling Interest Loss Allocation

The Company applied ASC 810-10 guidance to correctly allocate the percentage of loss attributable to the NCI of each company. For the period ended ~~March 31,~~September 30, 2023, and 2022 the loss for AIU Alt Care is $as follows:
~~16,190~~ ~~and Clearday Oz Fund loss is $540,330. Based on~~ 99~~% ownership interest, AIU Alt Care and Clearday OZ fund incurred a loss attributable to the NCI in the amount~~Schedule of $~~16,028~~ ~~and $534,927, respectively in the period ended March 31, 2023 and incurred gains of $3,252~~ ~~and losses of $145,772, respectively, for the period ended March 31, 2022.~~Loss Attributable To Non-Controlling Interest Loss Allocation
Net Loss Net Loss
Attributable to NCI
Nine months ended September 30, Nine months ended September 30,
2023 2022 2023 2022
AIU Alt Care (114,080 ) - (112,940 ) -
Clearday OZ Fund (1,464,573 ) (354,438 ) (1,449,927 ) (350,894 )
Total (1,578,653 ) (354,438 ) (1,562,867 ) (350,894 )

Cumulative Convertible Preferred Stock and Limited Partnership Interests in Subsidiaries (NCI)

~~For the period ended March 31, 2023 no additional shares of AIU Alt Care Preferred Stock or Clearday OZ LP Interests were issued.~~ At ~~March 31,~~September 30, 2023, 89,700 shares of AIU Alt Care Preferred Stock were outstanding and 244,473 units of Clearday OZ LP Interests were outstanding. For the nine months ended September 30, 2023, no additional shares of AIU Alt Care Preferred Stock or Clearday OZ LP Interests were issued.

The terms and conditions of the Alt Care Preferred Stock and the Clearday OZ LP Interests allow the investors in such interests to exchange such securities into the Company’s common stock at the conversion price equal to 80% of the 20 consecutive day volume weighted closing price of the Common Stock of Clearday preceding the conversion date. ~~At March 31, 2023, AIU Alt Care and Clearday OZ Fund had outstanding~~ ~~2,010,150~~ ~~warrants.~~
~~Each warrant has a term of~~ ~~ten years~~ ~~and provides for the purchase of~~ 1 ~~share of the Company’s common stock at a cash exercise price equal to $5.00~~ per share. The number of shares of the Company’s common stock and the warrant exercise price will be subject to adjustment for stock dividends, stock splits, combinations or other similar recapitalizations.

Dividends on the Alt Care Preferred Stock and preferred distributions on the units of limited partnership interests in Clearday OZ Fund are at each calendar quarterly month end at the applicable dividend rate (10.25%) on the original issue price of the Alt Care Preferred Stock or the units limited partnership interests. Dividends will either (a) be payable in cash, if and to the extent declared by the board of directors or the general partner, or (b) by issuing Dividend Shares equal to the aggregate accrued dividend divided by the Series I Original Issue Price. Dividends, if noticed to the Holder, will be payable after the Dividend Payment Date. Accrued dividends totaled $~~682,820~~409,692 for the nine-month period ended ~~March 31,~~September 30, 2023.

26
CLEARDAY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Each of the Company, AIU Alt Care and Clearday OZ Fund shall redeem the Alt Care Preferred Stock or the units of limited partnership interests on the 10 Year Redemption Date that is ten years after the final closing of the offering. The securities provide for a redemption in cash or shares of common stock at the option of Clearday, Inc., in an amount equal to the unreturned investment in the Alt Care Preferred Stock or units of limited partnership interests. Upon consummation of certain equity offerings prior to May 1, 2022, AIU Alt Care may, at its option, redeem all or a part of the Alt Care Preferred Stock for the liquidation preference plus a make-whole premium. In addition, upon the occurrence of, among other things (i) any change of control, (ii) a liquidation, dissolution, or winding up, (iii) certain insolvency events, or (iv) certain asset sales, each holder may require the Company to redeem for cash all such holder’s then outstanding shares of Alt Care Preferred Stock.

The Certificate of Designation also sets forth certain limitations on the Company’s ability to declare or make certain dividends and distributions and engage in certain reorganizations. The limited partnership agreement has similar provisions.

Subject to certain exceptions, the holders of Alt Care Preferred Stock and the units of limited partnership interests have no voting power and no right to vote on any matter at any time, either as a separate series or class or together with any other series or class of shares of capital stock or partnership interests, and are not be entitled to call a meeting of such holders for any purpose, nor are they entitled to participate in any meeting of the holders of the Company’s common stock or participate in the management of Clearday OZ Fund by its general partner.

~~12.~~11. Mezzanine Equity

The Company has ~~10,000,000~~5,000,000 authorized shares of ~~preferred stock authorized,~~Series F 6.75% Convertible Preferred Stock at a par value of $0.001 per share, ~~including~~of which ~~5,000,000~~4,311,048 ~~designated as Series F Preferred Stock~~ and ~~4,791,401~~4,797,052 shares were issued and outstanding as of ~~March~~September 30, 2023, and December 31, ~~2023.~~ 2022.
Pursuant to the Certificate of Designations of Series F Convertible Preferred Stock, upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation (“Liquidation Event”), including any Deemed Liquidation Event, as defined in the Certificate of Designations and unless otherwise determined by the majority of the holders of the Series F Convertible Preferred Stock that a transaction is not a Deemed Liquidation Event, the holders of then outstanding Series F Convertible Preferred Stock shall be entitled to be paid a liquidation preference (“Preference Amount”) out of the assets of the Company available for distribution to its stockholders equal to the original issue price ~~and,~~ plus any accumulated and unpaid dividends. As the payment of this Preference Amount is not solely within the control of the Company, the Series F Convertible Preferred Stock does not qualify as permanent equity and has been classified as mezzanine ~~or temporary~~ equity. The Series F Convertible Preferred Stock is not redeemable, and it was not probable that there would be a Liquidation Event as of ~~March 31,~~September 30, 2023. Therefore, the Company is not currently required to accrete the Series F Convertible Preferred Stock to the aggregate liquidation value.

Dividends and Distributions
For the nine-months ended September 30, 2023, and 2022, the Company accrued dividends for the 6.75% Series F Convertible Preferred Stock in the amount of $4,996,780 and $4,941,921 respectively.
~~13.~~12. Subsequent Events

We evaluated subsequent events and transactions occurring after ~~March 31,~~September 30, 2023, through the date of this ~~Report.~~Report to determine if there were any such events or transactions requiring adjustment to or disclosure in the accompanying condensed consolidated financial statements, noting none other than the following.

~~Viveon Merger~~Leander Property Sale
Stearns Bank National Association (the “Mortgage Lender”), for the property (“Leander Property”) owned by Leander Associates, Ltd., (“Leander”), a Texas limited partnership that is a consolidated subsidiary of Clearday, Inc., has commenced litigation regarding the nonpayment of a mortgage loan obligations of approximately $875,000 seeking repayment of the mortgage loan of $805,000 due February 10, 2023, and additional amounts including interest and late fees. Leander and the mortgage lender entered into a Forbearance Agreement as of May 22, 2023, and the first amendment thereto dated September 8, 2023, that, among other matters, provided a forbearance period and extended the maturity of the mortgage loan to October 21, 2023, and requires certain payments to the mortgage lender, including monthly installment payments to the mortgage lender of all accrued, unpaid interest starting on September 15, 2023, and continuing on the same day of each month thereafter until the New Maturity Date (as defined below) with interest calculated on the unpaid principal balance as set forth in the note. The mortgage loan under the forbearance agreement, as amended, provides that the mortgage lender deferred certain past-due interest to the extended maturity date of October 21, 2023. The Leander Property was sold on October 17, 2023, at a contract sales price of $1,750,000 which is more than the amounts owed to the Mortgage Lender and the other financing we owed to KOBO LP with respect to the Leander Property. The net proceeds to Clearday from the sale of the Leander Property were approximately $5,836 after giving effect to the payments to the Mortgage Lender, existing financing to KOBO LP and other financings of such proceeds, transaction brokerage fees and other costs of approximately $155,418. From the sale of the Leander Property the Mortgage Lender was paid $880,626 including penalties and interest. KOBO LP was paid $708,120 for amounts owed to them including expense reimbursement.
Extinguishment of Indebtedness - Merchant advance loans
PIRS Capital, LLC, a financing party, commenced legal actions (PIRS Capital LLC v MCA Westover Hills Operating Company, LLC et. al. including James Walesa (a guarantor), filed in state court in New York County, New York on September 8, 2022) alleging, among other matters, a breach of the MCA Agreement for non-payment and a breach of the guaranty by the applicable guarantors. However, this action was discontinued without prejudice on October 25, 2023. PIRS Capital, LLC has dismissed its lawsuit and the related indebtedness in the amount of $144,659 listed as a Merchant Cash Advance Loan in Note 6 — Indebtedness has been extinguished.
Additional Financings

~~Merger Agreement~~Bridge Financings - Through December 8, 2023, we incurred additional financings of a gross amount of $1,575,000as advances from the issuances of the Bridge Notes described in Note 6 — Indebtedness, of which we shared $732,762 with Viveon pursuant to the arrangement described in Note 9 — Related Party Transactions – Viveon Merger.

~~On April 5, 2023,~~Modification of Indebtedness
The Company modified the ~~Company entered into a Merger Agreement (the “Merger Agreement”), by~~indebtedness owed to Invesque and among the Company, Viveon Health Acquisition Corp., a Delaware corporation (“Viveon” or “Viveon Health”), VHAC2 Merger Sub, Inc., a Delaware corporation (“Merger Sub”), Viveon Health LLC, a Delaware limited liability Company,to AGP as summarized in the capacity as the representative from and after the Effective Time (as defined in the Merger Agreement) for the stockholders of Viveon (other than the Company Stockholders (as defined in the Merger Agreement)) as of immediately prior to the Effective Time (and their successors and assigns) in accordance with the terms and conditions of the Merger Agreement, and the Company SR LLC, a Delaware limited liability company, in the capacity as the representative from and after the Effective Time for the holders of Company Preferred Stock (as defined in the Merger Agreement) as of immediately prior to the Effective Time (and their successors and assigns) in accordance with the terms and conditions of the Merger Agreement. Pursuant to the terms of the Merger Agreement, a business combination between Viveon and the Company will be effected through the Viveon Merger of Merger Sub with and into the Company, with the Company surviving the Viveon Merger as a wholly owned subsidiary of Viveon and Viveon will change its name to “Clearday Holdings, Inc.” (the “Merger”). The board of directors of the Company has (i) approved and declared advisable the Merger Agreement, the Merger and the other transactions contemplated thereby and (ii) resolved to recommend approval of the Merger Agreement, the Merger and related transactions by the stockholders of the Company. Capitalized terms used herein but not defined shall have the meanings ascribed thereto in the Merger Agreement, which is attached hereto as Exhibit 2.1.Note 6 - Indebtedness.
27
~~CLEARDAY, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~Merger Consideration~~
The total consideration to be paid at Closing (the “Merger Consideration”) by Viveon to the Company security holders (and holders who have the right to acquire the Company capital stock) will be an amount equal to $~~250~~ ~~Million (plus the aggregate exercise price for all the Company options and warrants). The Merger Consideration will be payable in shares of common stock, par value $0.0001~~ ~~per share, of Viveon (“Viveon Common Stock”) valued at $~~10 ~~per share.~~
~~In addition, the holders of Company Preferred Stock will have the contingent right to earn up to~~ ~~5,000,000~~ shares of Viveon Common Stock, in the aggregate (the “Earnout Shares”), if at any time during the period beginning on the date of the Closing (the “Closing Date”) and ending on the fifth anniversary of the Closing Date (the “Earnout Eligibility Period”), the Adjusted Net Income for any Earnout Period is a positive number for the first time during the Earnout Eligibility Period (the “Earnout Milestone”).
If, following the Closing Date and prior to end of the Earnout Eligibility Period, there is a Change of Control, then, immediately prior to such Change of Control, all the Earnout Shares not yet earned shall be earned by the Company Earnout Holders and shall be released from escrow and delivered to the Company Earnout Holders, and the Company Earnout Holders shall be eligible to participate in such Change of Control transaction with respect to such Earnout Shares.
The Earnout Shares will be placed in escrow and will not be released from escrow until they are earned as a result of the occurrence of the Earnout Milestone or a Change of Control, if applicable. The Earnout Shares that are not earned on or before the expiration of the Earnout Eligibility Period shall be automatically forfeited and cancelled.
Cancellation of Securities. Each share of the Company capital stock, if any, that is owned by Viveon, Merger Sub, the Company, or any of their subsidiaries (as treasury stock or otherwise) immediately prior to the effective time of the Merger (the “Effective Time”), will automatically be cancelled and retired without any conversion or consideration.
~~Preferred Stock. At the Effective Time, each issued and outstanding share of the Company’s Series F Cumulative Convertible Preferred Stock, par value $0.001~~ per share (the “Company Series F Preferred Stock”) (other than any such shares of the Company capital stock cancelled as described above and any dissenting shares), will be converted into the right to receive: (A) one (1) share of Parent New Series F Preferred Stock plus (B) a number of Earnout Shares in accordance with, and subject to the contingencies, set forth in the Merger Agreement.
~~Each issued and outstanding share of the Company’s Series A Convertible Preferred Stock, par value $0.001~~ per share (“Series A Preferred Stock”) (other than any such shares of the Company capital stock cancelled as described above and any dissenting shares), will be converted into the right to receive: (A) one (1) share of Parent New Series A Preferred Stock plus (B) a number of Earnout Shares in accordance with, and subject to the contingencies, set forth in the Merger Agreement.
~~Common Stock. At the Effective Time, each issued and outstanding share of the Company’s common stock, par value $0.001~~ per share (the “Company Common Stock”) (other than any such shares of the Company capital stock cancelled as described above and any dissenting shares) will be converted into the right to receive a number of shares of Viveon Common Stock equal to the Conversion Ratio. The “Conversion Ratio” as defined in the Merger Agreement means an amount equal to (a)~~(i) the sum of $250~~ Million, plus the aggregate exercise or conversion price of outstanding the Company’s stock options and warrants (excluding unvested options and options or warrants with an exercise or conversion price of $5.00 or more), divided by (ii) the number of fully diluted the Company capital stock (including Company Preferred Stock, warrants, stock options, convertible notes, and any other convertible securities) (excluding unvested options and options or warrants with an exercise or conversion price of $5.00 or more and assuming a conversion price of the Company subsidiary securities as provided in the Merger Agreement); divided by (b) $~~10.00~~.
Stock Options. At the Effective Time, each outstanding option to purchase shares of the Company Common Stock will be converted into an option to purchase, subject to substantially the same terms and conditions as were applicable under such options prior to the Effective Time, shares of Viveon Common Stock equal to the number of shares subject to such option prior to the Effective Time multiplied by the Conversion Ratio, at an exercise price per share of Viveon Common Stock equal to the exercise price per share of the Company Common Stock subject to such option divided by the Conversion Ratio.
28
~~CLEARDAY, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
Warrants. Contingent on and effective as of immediately prior to the Effective Time, each outstanding warrant to purchase shares of the Company Preferred Stock or the Company Common Stock will be treated in accordance with the terms thereof.
Convertible Notes. Contingent on and effective as of immediately prior to the Effective Time, the Company’s convertible notes outstanding as of immediately prior to the Effective Time, will be treated in accordance with the terms of the relevant agreements governing such convertible notes.
Subsidiary Capital Stock. At and as of the Effective Time, the Alt Care Preferred Stock and the Clearday OZ LP Interests (collectively, the “Subsidiary Capital Stock”) will remain in full force and effect with the right to acquire the Viveon Common Stock with such adjustments noted in the terms of such Subsidiary Capital Stock.
~~Representations and Warranties~~
The Merger Agreement contains customary representations and warranties of the parties thereto with respect to, among other things, (a) corporate existence and power, (b) authorization to enter into the Merger Agreement and related transactions; subsidiaries, (c) governmental authorization, (d) non-contravention, (e) capitalization, (f) corporate records, (g) consents, (h) financial statements, (i) internal accounting controls, (j) absence of certain changes, (k) properties; title to assets, (l) litigation, (m) material contracts, (n) licenses and permits, (o) compliance with laws, (p) intellectual property, (q) privacy and data security, (r) employee matters and benefits, (s) tax matters, (t) real property, (u) environmental laws, (v) finders’ fees, (w) directors and officers, (x) anti-money laundering laws, (y) insurance, (z) related party transactions, and (aa) certain representations related to securities law and activity. Viveon has additional representations and warranties, including (a) issuance of shares, (b) trust fund, (c) listing, (d) board approval, (e) SEC documents and financial statements, (f) certain business practices, (g) expenses, indebtedness and other liabilities and (h) brokers and other advisors.
~~Covenants~~
The Merger Agreement includes customary covenants of the parties with respect to operation of their respective businesses prior to consummation of the Merger and efforts to satisfy conditions to consummation of the Merger. The Merger Agreement also contains additional covenants of the parties, including, among others, access to information, cooperation in the preparation of the Registration Statement and Proxy Statement (as each such terms are defined in the Merger Agreement) required to be filed in connection with the Merger and to obtain all requisite approvals of each party’s respective stockholders. Viveon and the Company have each also agreed to include in the Proxy Statement the recommendation of its respective board that its stockholders approve all of the proposals to be presented at its respective special meeting. In addition, each of Viveon and the Company have agreed to use commercially reasonable efforts to solicit and finalize definitive documentation for a committed equity in an aggregate amount that, together with the funds in the Trust Account after giving effect to potential redemptions from Viveon’s public stockholders, together with financing programs available to the Company after the Closing, will provide to the Company working capital to meet its short term commercial development goals.
Viveon has also agreed to prepare a proxy statement to seek the approval of its stockholders (the “Extension Proposal”) to amend its organizational documents to extend the period of time Viveon is afforded under its organizational documents and IPO prospectus to consummate an initial business combination for an additional three months, from June 30,2023 to September 30, 2023 (or such earlier date as Viveon and the Company may agree in writing).
~~Each party’s representations, warranties and pre-Closing covenants will not survive Closing and no party has any post-Closing indemnification obligations.~~
Viveon Equity Incentive Plan, Viveon has agreed to approve and adopt an equity incentive plan (the “Incentive Plan”) to be effective as of the Closing and in a form mutually acceptable to Viveon and the Company, subject to approval of the Incentive Plan by the Viveon stockholders. The Incentive Plan will provide for an initial aggregate share reserve equal to 8% of the number of shares of Viveon Common Stock issued and outstanding at the Closing and an “evergreen” provision that is mutually agreeable to Viveon and the Company will provide for an automatic increase on the first day of each fiscal year in the number of shares available for issuance under the Incentive Plan as mutually determined by Viveon and the Company.
~~Non-Solicitation Restrictions~~
Each of Viveon and the Company has agreed that from the date of the Merger Agreement to the Effective Time or, if earlier, the valid termination of the Merger Agreement in accordance with its terms, it will not initiate any negotiations with any party relating to an Alternative Transaction (as such term is defined in the Merger Agreement) or enter into any agreement relating to such a proposal, other than as expressly excluded from the definition of an Alternative Transaction. Each of Viveon and the Company has also agreed to be responsible for any acts or omissions of any of its respective representatives that, if they were the acts or omissions of Viveon and the Company, as applicable, would be deemed a breach of the party’s obligations with respect to these non-solicitation restrictions.
29
~~CLEARDAY, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~Conditions to Closing~~
The consummation of the Merger is conditioned upon, among other things, (i) the absence of any applicable law or order restraining, prohibiting or imposing any condition on the consummation of the Merger and related transactions, (ii) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) receipt of any consent, approval or authorization required by any Authority (as defined in the Merger Agreement), (iv) Viveon having net tangible assets of at least $~~5,000,001~~ (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act), unless Viveon’s amended and restated certificate of incorporation shall have been amended to remove such requirement prior to or concurrently with the Closing, (v) approval by the Company’s stockholders of the Merger and related transactions, (vi) approval by Viveon’s stockholders of the Merger and related transactions, (vii) the conditional approval for listing by NYSE American (or an alternate exchange) of the shares of Viveon Common Stock to be issued in connection with the transactions contemplated by the Merger Agreement and satisfaction of initial and continued listing requirements, and (viii) the Registration Statement becoming effective in accordance with the provisions of the Securities Act of 1933, as amended (“Securities Act”).
Solely with respect to Viveon and Merger Sub, the consummation of the Merger is conditioned upon, among other things, (i) the Company having duly performed or complied with all of its obligations under the Merger Agreement in all material respects, (ii) the representations and warranties of the Company, other than certain fundamental representations as defined in the Merger Agreement, being true and correct in all respects unless failure would not have or reasonably be expected to have a Material Adverse Effect (as defined in the Merger Agreement) on the Company or any of its subsidiaries, (iii) certain fundamental representations, as defined in the Merger Agreement, being true and correct in all respects, other than de minimis inaccuracies, (iv) no event having occurred that would result in a Material Adverse Effect on the Company or any of its subsidiaries, (v) the Company and its securityholders having executed and delivered to Viveon each Additional Agreement (as defined in the Merger Agreement) to which they each are a party and (vi) the Company delivering certain certificates to Viveon.
Solely with respect to the Company, the consummation of the Merger is conditioned upon, among other things, (i) Viveon and Merger Sub having duly performed or complied with all of their respective obligations under the Merger Agreement in all material respects, (ii) the representations and warranties of Viveon and Merger Sub, other than certain fundamental representations as defined in the Merger Agreement, being true and correct in all respects unless failure to be true and correct would not have or reasonably be expected to have a Material Adverse Effect on Viveon or Merger Sub and their ability to consummate the Merger and related transactions, (iii) certain fundamental representations, as defined in the Merger Agreement, being true and correct in all respects, other than de minimis inaccuracies, (iv) no event having occurred that would result in a Material Adverse Effect on Viveon or Merger Sub, (v) the Amended Parent Charter (as defined in the Merger Agreement) being filed with, and declared effective by, the Delaware Secretary of State, (vi) Viveon delivering certain certificates to the Company, (vii) the size and composition of the post-Closing board of directors of Viveon having been appointed as set forth in the Merger Agreement and (viii) Viveon, Viveon Health LLC (“Sponsor”) and other stockholders, as applicable, having executed and delivered to the Company each Additional Agreement to which they each are a party.
~~Termination~~
~~The Merger Agreement may be terminated at any time prior to the Effective Time as follows:~~
(i) by either Viveon or the Company, if (A) the Merger and related transactions are not consummated on or before the latest of (1) June 30, 2023, (2) if the Extension Proposal is approved, September 30, 2023 and (3) if one or more extensions to a date following September 30, 2023 are obtained at the election of Viveon, with Viveon stockholder vote, in accordance with the Viveon’s amended and restated certificate of incorporation, the last date for Viveon to consummate a business combination pursuant to such extensions; and (B) the material breach or violation of any representation, warranty, covenant or obligation under the Merger Agreement by the party seeking to terminate the Merger Agreement was not the cause of, or resulted in, the failure of the Closing to occur on or before the Outside Closing Date, without liability to the other party;
(ii) by either Viveon or the Company, if any Authority has issued any final decree, order, judgment, award, injunction, rule or consent or enacted any law, having the effect of permanently enjoining or prohibiting the consummation of the Merger, provided that, the party seeking to terminate cannot have breached its obligations under the Merger Agreement and such breach was a substantial cause of, or substantially resulted in, such action by the Authority; and
~~(iii) by mutual written consent of Viveon and the Company duly authorized by each of their respective boards of directors.~~
30
~~CLEARDAY, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~Certain Related Agreements~~
Parent Support Agreements. Concurrently with the execution of the Merger Agreement, Viveon, the Company and the Sponsor and the officers and directors of Viveon entered into a support agreement (the “Parent Support Agreement”) pursuant to which the Sponsor and the officers and directors of Viveon have agreed to vote all shares of Viveon common stock beneficially owned by them, including any additional shares of Viveon they acquire ownership of or the power to vote: (i) in favor of the Merger and related transactions, (ii) against any action reasonably be expected to impede, delay, or materially and adversely affect the Merger and related transactions, and (iii) in favor of an extension of the period of time Viveon is afforded to consummate an initial business combination.
Company Support Agreements. Concurrently with the execution of the Merger Agreement, Viveon, the Company and certain stockholders of the Company entered into a support agreement (the “Company Support Agreement”), pursuant to which such the Company stockholders have agreed to vote all common and preferred stock of the Company beneficially owned by them, including any additional shares of the Company they acquire ownership of or the power to vote, in favor of the Merger and related transactions and against any action reasonably be expected to impede, delay, or materially and adversely affect the Merger and related transactions.
Lock-Up Agreements. In connection with the Closing, certain the Company stockholders will each agree, subject to certain customary exceptions, not to (i) offer, sell contract to sell, pledge or otherwise dispose of, directly or indirectly, any Lockup Shares, (ii) enter into a transaction that would have the same effect, (iii) enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the Lock-Up Shares or otherwise, (iv) engage in any short sales or other arrangement with respect to the Lock-Up Shares or (v) publicly announce any intention to effect any transaction specified in clause (i), (ii) or (iii) until the date that is six months after the Closing Date (the “Lock-Up Period”). The term “Lockup Shares” mean the Merger Consideration Shares and the Earnout Shares, if any, whether or not earned prior to the end of the Lock-up Period, together with any other shares of Viveon Common Stock, and including any securities convertible into, or exchangeable for, or representing the rights to receive Viveon Common Stock, if any, acquired during the Lock-up Period. If the closing price of Viveon Common Stock equals or exceeds $~~12.50~~ ~~per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period following the Closing Date,~~ 50~~% of the Lock-up Shares will be released from the lock-up. The existing escrow provisions of Viveon Common Stock held by certain stockholders will remain in effect.~~
Amended and Restated Registration Rights Agreement. At the Closing, Viveon will enter into an amended and restated registration rights agreement (the “Amended and Restated Registration Rights Agreement”) with certain existing stockholders of Viveon and the Company with respect to their shares of Viveon Common Stock acquired before or pursuant to the Merger, and including the shares issuable on conversion of the warrants issued to the Sponsor in connection with Viveon’s initial public offering and any shares issuable on conversion of loans or other convertible securities. The agreement amends and restates the registration rights agreement Viveon entered into on December 22, 2020 in connection with its initial public offering. Subject to the Lock-Up Agreements described above, the holders of a majority of the shares held by the existing Viveon stockholders, and the holders of a majority of the shares held by the Company stockholders will each be entitled to make one demand that the Company register such securities for resale under the Securities Act, or two demands each if Viveon is eligible to use Form S-3 or a similar short-form registration statement. In addition, the holders will have certain “piggy-back” registration rights that require Viveon to include such securities in registration statements that Viveon otherwise files. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering Viveon’s securities. Viveon will bear the expenses incurred in connection with the filing of any such registration statements.
The foregoing descriptions of agreements and the transactions and documents contemplated thereby are not complete and are subject to and qualified in their entirety by reference to the Merger Agreement, form of Parent Support Agreement, form of Company Support Agreement, form of Lock-Up Agreement, and form of Amended and Restated Registration Rights Agreement.
~~Amendment to the Viveon Merger Agreement~~
On August 28, 2023, Viveon, its subsidiary VHAC2 Merger Sub, Inc., a Delaware corporation (“Merger Sub”), the Company, Viveon Health LLC, a Delaware limited liability company (“SPAC Representative”), and Clearday SR LLC, a Delaware limited liability company (“Company Representative”) entered into the First Amendment to Viveon Merger Agreement (the “First Amendment”) that amended and modified the Viveon Merger Agreement to, among other things, (i) increase the merger consideration from $~~250,000,000~~ ~~to $500,000,000~~ (plus the aggregate exercise price for all Clearday options and warrants), payable in shares of common stock of Viveon, (ii) provide that holders of all of the Company’s common and preferred stock as of the effective time of the Viveon Merger will be entitled to receive a pro rata portion of the additional 5 million shares of Viveon common stock, in the aggregate (the “Earnout Shares”), if at any time during the period beginning on the date of the closing of the Viveon Merger (the “Closing Date”) and ending on the fifth anniversary of the Closing Date (the “Earnout Eligibility Period”), the Adjusted Net Income (as defined in the Viveon Merger Agreement) for any 12 month period is a positive number or there is a change of control of Viveon during the Earnout Eligibility Period. The foregoing description of the First Amendment is not complete and is subject to and qualified in its entirety by reference to the First Amendment which is filed with the Company’s Current Report on Form 8-K filed on August 29, 2023 as Exhibit 2.1, the terms of which are incorporated by reference herein.
~~Stockdale Financing~~
On May 22, 2023, Stockdale Associates, Ltd. (“Stockdale”), a wholly owned subsidiary of Clearday, Inc. entered into a sales transaction with James Walesa, the Chief Executive Officer of the Company, for the land of approximately ~~1.5~~ ~~acres owned by Stockdale s located in the city of Stockdale, Texas (the “Stockdale Property”). The aggregate purchase price for the Stockdale Property was approximately $155,925~~. Mr. Walesa used the Stockdale Property to obtain mortgage financing from a third party (the “Stockdale Mortgage Loan”) . Stockdale may repurchase the Stockdale Property at any time upon payment to Mr. Walesa of $~~175,000, plus interest on such an amount at a rate of~~ ~~10.9% annually based on a 360-day year, less $19,075. Stockdale is required to pay Mr. Walesa the approximate sum of $1,590~~ per month commencing July 1, 2024, and pay all other amounts required under the Stockdale Mortgage Loan and all amounts including property taxes, required for the ownership of the property. . The Stockdale Mortgage Loan matures, and Stockdale’s repurchase right terminates, on June 1, 2028. A $~~5,925~~ ~~gain on the sale of the Stockdale property was recognized and included in Gain/loss on disposal of assets on our condensed consolidated financial statements.~~
~~Modification of Indebtedness~~
~~A subsidiary of the Company, Leander Associates Ltd., modified the terms of its mortgage loan as described in Note 8, Commitments and Contingencies.~~
~~Additional Note Issuances~~
~~As noted in Note 7 Indebtedness, AIU Alt Care continued to issue its Convertible Notes after March 31, 2023 to April 10, 2023.~~
31

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the ~~condensed~~ consolidated financial statements and related notes included elsewhere in this Report. Some of the information contained in this discussion and analysis, including information with respect TO Clearday, its plans, and strategy for its business and related financing, includes forward-looking statements that involve risks and uncertainties.

Overview

We provide technologies and innovative care solutions to address the global aging crises. We have used our extensive experience in senior care, including owning and operating high-performing residential care facilities in the most challenging senior care venues (Memory and Alzheimer’s treatment), to develop our purpose-built ~~Longevity-tech~~longevity-tech platform for the estimated 170 million Americans turning 50 by 2030. Our ~~Longevity-tech~~longevity-tech platform intentionally moves our focus from a facility-driven real estate business to a healthcare technologies business that is designed to capture the massive unmet senior care need. We believe that the currently available longevity-tech solutions do not address this significant market and that we are able to modernize the nearly 54,000 U.S. daily care, skilled nursing, and long-term care facilities.

We have recently shifted our business strategy to move from a facility-driven real estate business to a health technology company in order to capture the massive unmet need caused by today’s disconnected longevity-tech market. At the end ofDuring the first ~~quarter of 2023 and the beginning of the second quarter~~nine months of 2023, we:

● entered into a merger agreement ~~(“Viveon Merger Agreement”)~~ with Viveon Health Acquisition Corp., a Delaware corporation (“Viveon” “Viveon Merger Agreement”), that is a special purpose acquisition corporation ~~or SPAC and~~(“SPAC”) that has its shares of common stock listed on the ~~NYSE American exchange;~~New York Stock Exchange (“NYSE”), and amended the Viveon Merger Agreement that increased our valuation for the Viveon Merger;
● exited from three of our four residential care facilities and ~~limit~~limited our financial investment in the capital-intensive residential memory care businesses by terminating our leases ~~(“MC Facility Leases”) of~~in these three facilities ~~(“MC Facilities”)~~ that were operated through our Memory Care America LLC subsidiary (“MCA”, “MCA Facilities”. “MCA Facility Leases”) ~~subsidiary.~~; and
● Worked to expand our Adult Day Care business.
The termination of the MCMCA Facility Leases ~~will significantly change~~has improved our financial operations and cash flows, ~~for a period following March 31, 2023,~~ primarily by reducing our operating losses and debt that ~~we were~~was required ~~to incur~~ to fund such losses.
Seasonality

Residential care facilities are seasonal in nature. Generally, the Naples residential care ~~facilities suffer~~facility suffers revenue losses in summer months as some families of residents temporarily move to Northern areas and bring their resident family members with them; and during the winter months as there is often an increase in the loss of residents during these periods primarily because of flu and other health issues during such periods. We do not expect our ~~Longevity-tech~~longevity-tech platform businesses to have such seasonality.

Results of Operations

~~Our~~Prior to exiting three of our four MCA Facilities on March 31, 2023, our operating revenues ~~during the first quarter of 2023~~ were predominately from our ~~four residential memory care facilities, three of which we exited as of March 31, 2023,~~MCA Facilities and ~~our~~ adult day care center. ~~MCA~~After March 31, 2023, our operating revenues were primarily from our Naples residential care community (“Naples Community”) and our San Antonio Adult Daycare center. Our Naples Community earns revenue from its communities primarily by providing services to individual residents for a specified monthly fee, which fee includes all services such as room, meals, ~~and~~ programs, respite care, and to a lesser extent, certain community fees for a resident to move into a facility. All of ~~MCA’s~~the revenues from our Naples Community are “private pay” which are charged directly to the resident and paid by such individual’s family or administrator. Residents may terminate services upon advance notice of a specified period. A portion of our revenues were from our adult day care business. Our adult day care service earns revenues primarily by providing services to individual clients for weekday sessions, which includes activities. ~~A part of~~Revenues from our ~~revenues includes reimbursements~~adult day care service include private pay customers, but primarily include payments made to ~~veterans under a~~us through an adult day program sponsored by the United States Department of Veterans Affairs (VA). on behalf of veterans who qualify.

3228

Our operating expenses are primarily the expenses of our ~~MCA facilities as well as the expenses that we incur in our other businesses, including~~Naples Community, adult day care and our ~~Longevity-tech platform.~~Longevity-Tech Platform. Expenses incurred by ~~MCA~~our Naples Community are primarily wages and benefits, ~~including wages and~~ wage-related expenses; operating expenses, including utilities, housekeeping, dietary, maintenance, regulatory requirements, insurance and administrative costs and salaries; lease expenses which ended ~~as of~~effective March 31, 2023; other general and administrative expenses; depreciation and amortization expense on buildings and furniture and equipment; and interest expenses for loans and other financings related to our Naples residential care community and the ~~MCA businesses.~~other communities we held prior to March 31, 2023.

~~SG&A Expenses~~ ~~were primarily insurance, interest expense, bank fees, equity-based compensation~~Operating Summary for the Three-Months Ended September 30, 2023, and ~~audit and other professional fees.~~2022

~~We reduced our operating loss~~Revenues. Revenues decreased by approximately ~~32.0%~~73% or $2.2 million to approximately ~~$0.96~~$0.8 million during the quarter ~~ending March 31,~~ended September 30, 2023, ~~compared to the quarter ending March 31, 2022, primarily by reducing our total operating expenses by~~from approximately ~~18.8% or approximately $1.2 million offset by a smaller decrease in total revenues by approximately 6.3% or approximately $0.2 million.~~
~~Revenues~~~~. Revenues decreased by approximately 6.3% or $0.2 million to approximately $3.0~~$3.1 million during the quarter ~~ending March 31, 2023 from approximately $3.2 million during the quarter ending March 31,~~ended September 30, 2022, primarily due to ~~decreased~~lower revenues ~~of approximately $0.2 million or approximately 7.3% related to our MCA facilities due to lower residents fees primarily from a promotions~~reflecting the Community Leases that ~~were offered during this period,~~we terminated effective March 31, 2023, offset by ~~additional~~an increase of revenues during such period from our adult day care ~~and,~~center of approximately 186% or approximately $0.1 million to approximately $0.2 million, offset to a smaller extent, ~~increased~~decreased commercial property rental income during this ~~period. We have been able~~period due to ~~increase~~the sale or other disposition of commercial properties. During the second quarter of 2023, we significantly increased the daily rate charged at our adult day care community due in large part to the deployment of our ~~Longevity-tech platform. We have also~~longevity-tech platform and accepting clients that require greater attention and care. In the third quarter of 2023, we deployed our ~~Longevity-tech~~longevity-tech platform at our ~~remaining~~Naples memory care community and ~~expect to continue~~began to increase rates at that ~~community.~~
community which we expect will enable better operating results in future periods.
Operating Expense. Operating expenses decreased by approximately ~~18.8%~~57% or approximately ~~$1.2~~$3.5 million to approximately ~~$5.0~~$2.6 million during the quarter ~~ending March 31,~~ended September 30, 2023 ~~from approximately $6.2 million during the quarter ending March 31, 2022, primarily~~ due to (1) lower wages and general operating expenses of approximately ~~17.0%~~88% or approximately ~~$0.8~~$3.8 million resulting primarily from lower ~~resident care~~employee wages and related expenses related to the reduction of resident care staff at the terminated Community Leases, offset in part by increased wages and related expenses due to an increase in executives and staff developing and marketing our ~~Longevity-tech platform,~~Longevity-Tech Platform, and (2) lower selling, general and administrative ~~expenses~~expense of approximately ~~35.1%~~47% or approximately ~~$0.5~~$0.7 million resulting primarily from changes in personnel reflecting ~~out~~our pivot to a longevity technology company and reduced ~~professionally~~professional and consulting ~~fees.~~fees and (3) approximately $0.3 million decrease of accrued expenses due to an adjustment related to certain contingencies. These decreases were offset by (1) a $0.7 million increase in expenses incurred by us for corporate strategy and strategic marketing including corporate narrative and brand development as well as the review of strategic partner opportunities as described in Note 9 to the financial statements included in this Report; (2) a $0.2 million or 169% increase in insurance expense; 3) a $0.3 million increase in bad debt expense related to the full reserve of a receivable recorded for reimbursement of expenses whose collectability is uncertain.

~~Research & Development.~~ Operating loss.We ~~did not incur any research and development expenses~~reduced our net operating loss by approximately 42% or approximately $1.3 million during the quarter ~~ending March 31,~~ended September 30, 2023, ~~or March 31, 2022.~~compared to the quarter ended September 30, 2022, primarily by reducing our total operating expenses offset by a decrease in total revenues, discussed above.

~~Interest.~~ Other (income) Expenses.~~Our~~Other income decreased (other expense increased) during the third quarter of 2023, to approximately $1.3 million of other expenses from approximately $2.4 million of other income. This is an approximate $3.7 million or 154% increase in other expenses (decrease in other income). This change is primarily related to a 44% increase in interest expense because we incurred a higher interest rate for defaulting on our indebtedness, a $0.7 million increase in loss on debt impairment for the reserve of the Viveon Note, a $1.6 million decrease in gain on extinguishment of debt as no gain was recognized in the third quarter of 2023, and a $1.9 million increase in other expense (decrease in other income). These items are further discussed below.
Interest expense. Interest expenses increased by approximately ~~42.5%~~44% or approximately ~~$0.2~~$0.5 million to ~~$0.7~~approximately $1.5 million during the quarter ~~ending March 31,~~ended September 30, 2023, from ~~$0.5~~$1.0 million during the quarter ~~ending March 31,~~ended September 30, 2022. ~~Our interest expense during the first quarters of 2023 and 2022 was primarily allocated to the operations of our residential care facilities.~~ The increase in MCA allocated interest is primarily due to our high interest loans financings that were incurred to fund operating expenses and the development costs for our innovative products and services in advance of amounts received from the Internal Revenue Service under the employee retention tax credit (“ERTC”) program which was delayed. The interest expense ~~that was not allocated~~resulted from higher interest rates charged, including default interest rates and other fees and expenses arising from defaults, primarily the Bentworth Action and, to ~~MCA~~a smaller extent, the mortgage loan on the Leander Property and a greater interest rate related ~~primarily~~ to the mortgage on our headquarters ~~building and other real estate assets.~~property. The amount of interest expense does not include any accrual of interest for unpaid interest under the MCA Agreements, each of which are not being paid by us. See Item 3 Legal Proceedings.

~~Impairment.~~Fair value of derivatives. ~~There was~~In the third quarter of 2023 we recognized an approximate $1.0 million gain arising from the fair value of derivate liabilities. We expect our gains or losses arising from derivative liabilities to increase or decrease as we continue to raise capital through issuing additional Bridge Notes. We did not recognize any ~~impairment taken~~gains or losses from derivative liabilities in the third quarter of September 2022.
29
Gain on debt extinguishment. We did not extinguish any debt in the third quarter of ended September 2023. However, during the ~~first~~three months ended September 2022 we recognized a gain of approximately $1.6 million after we extinguished some of our debt.
Loss on impairment of debt. During the three months ended September 2023, we recognized an approximate $0.7 million loss on impairment of debt arising from our fundings to Viveon through the Bridge Notes described in Part I, Item 1, Note 9- Related Party Transactions. We did not impair any debt in the third quarter of September 2022.
Other (income) Expenses. Other income decreased (other expenses increased) by approximately $1.9 million or 107% in the third quarter of 2023 compared to the third quarter in 2022 to $0.1 million of other expenses in 2023 from of $1.8 million of other income in 2022. These changes were due to various miscellaneous entries made to adjust and correct accounting balances.
Operating Summary for the Nine Months Ending September 30, 2023, and 2022
Revenues. Revenues decreased by approximately 53% or $4.9 million to approximately $4.5 million during the nine months ended September 30, 2023, from approximately $9.4 million during the same period ending September 30, 2022, primarily due to lower revenues from the Community Leases that we terminated effective March 31, 2023, offset by an increase of revenues during such period from our adult day care center and, to a smaller extent, increased commercial property rental income during this period. The decrease was less of a percentage during the nine-month period compared to the three-month period ended September 30, 2023, primarily because we operated the Community Leases for one third of this nine-month period. During the second quarter of 2023 we significantly increased the daily rate charged at our adult day care community due in large part to the deployment of our longevity-tech platform and accepting clients that require greater attention and care. In the beginning in the second and continuing in to the third quarter of 2023, we also deployed our longevity-tech platform at our Naples memory care community and began to increase rates at that community which we expect will enable better operating results in future periods.
Operating Expenses. Operating expenses decreased by approximately 46% or approximately $8.2 million to approximately $10.0 million during the nine months ended September 30, 2023, from approximately $18 million during the same period ended September 30, 2022, primarily due to (1) lower wages and general operating expenses of approximately 61% or approximately $8.1 million resulting primarily from lower employee wages and related expenses related to the reduction of resident care staff at the terminated Community Leases offset in part by increased wages and related expenses due to an increase in executives and staff developing and marketing our Longevity-Tech Platform; (2) lower selling, general and administrative expenses of $0.7 million or 22%; (3) lower healthcare insurance expense of approximately 54% or approximately $0.6 million resulting primarily from changes in personnel reflecting our pivot to a longevity technology company and reduced professional and consulting fees and (4) approximately $0.3 million decrease of accrued expenses due to an adjustment related to certain contingencies. These decreases were offset by (1) a $0.7 million increase in expenses incurred by us for corporate strategy and strategic marketing including corporate narrative and brand development as well as the review of strategic partner opportunities as described in Note 9 to the financial statements included in this Report; (2) a $0.5 million increase in bad debt expense primarily related to the full reserve of a receivable recorded for reimbursement of expenses whose collectability is uncertain; and (3) a $0.2 million or 37% increase in depreciation and amortization expenses primarily due to amortization being recorded for part of our Longevity Tech Platform being placed into service at the beginning of 2023.

~~Other income~~Operating loss ~~increased significantly~~. We reduced our net operating loss by approximately 39% or approximately $3.3 million during the ~~first quarter~~nine months ended September 30, 2023, compared to the same period ended September 30, 2022, primarily by reducing our total operating expenses offset by a decrease in total revenues of discussed above.
Other (income) Expenses.Other income decreased (other expenses increased) during the nine months ended September 30, 2023, to approximately $2.9 million of other expenses from approximately $2.9 million of other income or approximately 198% This $5.8 million decrease in other income (or increase in other expenses) is due to the explanations below.
Interest expense. Interest expenses increased to $3.9 million during the nine months ended September 30, 2023, from $1.9 million during the same period ended September 30, 2022, or approximately $2.0 million or 103%. Interest expense during the nine months ended September 30, 2023, was primarily related to debt incurred, including the note payable to Invesque on March 31, 2023, ~~to approximately $1.6 million~~and higher interest rates charged, including default interest rates and other fees and expenses arising from ~~approximately $0.3 million or approximately 445.5%~~defaults, primarily ~~due from~~ the ~~approximate $4.5 million gain on the termination of three of our residential care communities offset in large part by derivative financing costs of approximately $2.6 million~~Benworth Action and, to a smaller extent, ~~from other~~the mortgage loan on the Leander Property and a greater interest rate related to the mortgage on our headquarters property. The amount of interest expense ~~and~~does not include any accrual for unpaid interest under the ~~gain on the disposal~~MCA Agreements, each of ~~assets.~~which are not being paid by us. See Item 3 Legal Proceedings.

PPP loan forgiveness. We recognized income or a gain of approximately $1.0 million when our PPP loan was forgiven during the nine months ended September 30, 2022. There was no such amount recognized in the nine months ended September 30, 2023, thus contributing to the period over period decline in other income.
3330
Derivative financing costs. Derivative financing costs including the fair value of derivatives of approximately $1.1 million, net expense contributed to the increase in other expenses. These same expenses were not recognized in 2022,
(Gain) loss on debt extinguishment. For the nine months ended September 30, 2023, we recognized a loss on extinguishment of debt of approximately $0.7 million compared to us recognizing a gain on debt extinguishment of $1.6 million. This contributed approximately $2.3 million or 140% to the increase in other expenses or decline in other income.
Loss on impairment of debt. During the nine months ended September 30, 2023, we recognized $1.0 million of expenses related to the impairment of debt arising from our fundings to Viveon through the Bridge Notes described in Part I, Item 1, Note 9 - Related Party Transactions. No such impairment was applicable in the nine months ended September 30, 2022. This contributed to the increase in other expenses or decline in other income.
Gain on Termination of lease. During the nine months ended September 30, 2023, we recognized a $4.3 million gain related to the termination of lease obligations related to our Community Leases that were terminated in March of 2023. This entire amount was an increase in other income and offset the overall increase in other expenses or decline in other income for the 2023 versus 2022 nine-month comparison.
Other (income) Expenses. Other income decreased (other expenses increased) during the nine months ended September 30, 2023, to approximately $0.4 million of other expenses from approximately $2.2 million of other income or approximately 119%. This $2.6 million decrease in other income (or increase in other expenses) is due to various miscellaneous entries made to adjust and correct accounting balances.
Government Programs

We participated in ~~ERTC program~~ and therefore expect additional cash payments under the ~~ERTC.~~Employee Retention Tax Credit (“ERTC”) program. We have applied for payments under the Families First Coronavirus Response Act (the “FFCRA”), as amended by the COVID-related Tax Relief Act of 2020 and expect to utilize the federal tax credits available under the federal Work Opportunity Tax Credit (WOTC). The amount of savings under WOTC is subject to the hiring of workers from certain disadvantaged targeted categories and is generally calculated as a percentage of wages over a twelve-month period up to worker maximum by targeted category. We did not have any PPP Loan Forgiveness ~~during~~in the ~~first quarter~~nine months ended September 30, 2023, compared to approximately $1 million of ~~2023.~~PPP Loan Forgiveness received in the nine months ended September 30, 2022.

Contractual Obligations and Commitments

See the “Commitment and Contingencies” section within Note 87 — Commitments and Contingencies of the condensed consolidated financial statements within this Report, which information is incorporated herein by reference.

We entered into the Lease Transition Agreement to terminate the Community Leases as described in Note 5 — Leases. We amended this agreement on September 8, 2023, effective July 31, 2023. This agreement required us to pay an approximate total of $3.5 million of which $300,000 was payable on July 31, 2023. We paid $50,000 of this amount on July 31, 2023, and under the amendment were required to pay the remaining $250,000 on September 30, 2023. The Lease Transition Agreement has been amended as described in Note 6 - Indebtedness. Our obligations under this agreement are in default as of January 2, 2024. We expect to continue to negotiate a further extension of the payment dates for such obligations. There can be no assurance that any such negotiations will conclude with an amendment or extension of terms that are acceptable or at all.
Legal Proceedings

Clearday is subject to legal proceedings. The disclosures in this part of Management’s Discussion and Analysis of Financial Condition and Results of Operations are provided under Item 1 Note 87 — Commitments and Contingencies to the financial statements – Commitments and Contingencies.

Off-Balance Sheet Arrangements

None.

~~Cash~~Liquidity and ~~Restricted Cash~~Capital Resources

Cash, consisting of short-term, highly liquid investments and money market funds with original maturities of nine months or less at the date of purchase, are carried at cost plus accrued interest, which approximates market.

We had no restricted cash at September 30, 2023. Restricted cash ~~as of March 31, 2023 and~~at December 31, 2022, ~~includes~~included cash that Clearday deposited as security for obligations arising from property taxes, property insurance and replacement reserve Clearday is required to establish escrows as required by Clearday’s mortgages and certain resident security deposits.
We have continued to sustain significant operating losses and have used cash raised from issuing securities and debt, including convertible debt, to fund such losses. We expect to continue to incur losses until we can realize revenues from our longevity-tech platform. However, we expect to have lower operating losses going forward primarily because of the termination of the Community Leases under the Lease Transition Agreement, offset in part by our incurrence of expenses incurred by us for corporate strategy and strategic marketing including corporate narrative and brand development as well as the review of strategic partner opportunities as described in Note 9 to the financial statements included in this Report.
Our existing liquidity will likely not be sufficient to fund our operations, including payroll, anticipated capital expenditures, working capital, and other financing requirements for the foreseeable future. We may require more financing than anticipated, especially if our planned sales or revenues of our longevity-tech platform are delayed or the closing of the Viveon Merger is further delayed.
We expect our operating working capital needs to be less after the termination of the Community Leases under the Lease Transition Agreement as we will not incur the cash losses incurred in operating these communities, offset in part because of the amounts payable under the Lease Transition Agreement which is funded through a note that we issued to the landlord. The annualized operating loss for the three-month period ended September 30, 2023, was approximately $4.4 million compared to the annual operating loss for 2022 of $11.9 million, an improvement of approximately 63%. Our annualized revenues for the three-month period ended September 30, 2023, was approximately $3.3 million compared to the annual revenues for 2022 of approximately $12.5 million, a decrease of approximately $9.2 million or approximately 73%. The Lease Transition Agreement has been amended as described in Note 6 - Indebtedness. Our obligations under this agreement are in default as of January 2, 2024. We expect to continue to negotiate a further extension of the payment dates for such obligations. There can be no assurance that any such negotiations will conclude with an amendment or extension of terms that are acceptable or at all.
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As discussed in Note 6 — Indebtedness, we have loans and other indebtedness that are in default. The lenders may exercise remedies including the sale of assets in a foreclosure process. We expect to negotiate a deferment of payment obligations with these lenders and a payment plan that may be funded, in part, by the sale of our securities, including the Bridge Financings. There can be no assurance that we will be able to defer such payment obligations on acceptable terms, or at all, or that we will raise sufficient additional funds on acceptable terms, or at all.
We have undertaken certain actions in our Naples residential care community and our San Antonio adult daycare community including increasing rates and expect that will lower our operating working capital deficit. We increased our resident fees in the Naples community in July and expect to continue to increase the rates, in large part, because of the incorporation of the Longevity-Tech Platform. We are planning to open additional adult daycare centers that we believe will generate net operating income, however, our ability to open such additional centers will depend on our ability to raise additional financings. There can be no assurance that any such additional financing will be available on acceptable terms or at all. Additionally, executive management of our Naples residential care community have tendered their resignation during December 2023. We expect to incur additional costs to recruit a new executive team and expect to incur a period of lower resident occupancy until the new management team is onboard and effective, which will likely increase our operating loss at this community during the later part of the fourth quarter of 2023 and during the first quarter of 2024.
We will incur ongoing and recurring expenses associated with professional fees for accounting, audit, legal, and other expenses in connection with filing our annual and quarterly reports on forms 10-K and 10-Q with the Securities and Exchange Commission (“SEC), proxy statements, the Viveon Merger and other filings under the Exchange Act. These obligations will reduce our ability and resources to fund other aspects of our business. We hope to be able to use our status as a public company to increase our ability to use non-cash means of settling obligations and compensate certain independent contractors who provide professional services to us, although there can be no assurances that we will be successful in any of those efforts.
We continue to take actions to close the Viveon Merger and expect that Viveon will be in a position to make the requisite registration statement and proxy filings for the Viveon Merger.
We also have incurred certain bridge financings that are due and payable in January, 2024. We do not expect to have sufficient funds to repay these obligations which will incur additional interest of 2% per month and expect to enter to negotiate with the holders of these obligations an amendment or waiver to extend the maturity date. There can be no assurance that any such negotiations will conclude with an amendment or extension of terms that are acceptable or at all.
Cash Flows from Operating Activities
During the nine-months ended September 30, 2023, and 2022, our operating activities primarily consisted of revenue from our residential and adult daycare communities and payments or accruals for employees and other operating expenses and payment of some of our liabilities.
Cash Flows from Investing Activities
During the nine-months ended September 30, 2023, our investing activities were related to our investment in Viveon which enabled Viveon to pay certain operating and merger related expenses and costs.
Cash Flows from Financing Activities
During the nine-months ended September 30, 2023, and 2022, our financing activities consisted of transactions in which we raised proceeds through the issuance of debt or equity securities. During the nine-months ended September 30, 2023, we raised proceeds primarily from the issuance of debt to institutional lenders and the advances or subscriptions for Bridge Financings in the aggregate amount of $4.3 million, we repaid outstanding indebtedness in the aggregate amount of approximately $1.1 million. Net cash provided by financing activities was $3.1 million for the nine months ended September 30, 2022, which consisted primarily of net proceeds received from Invesque, Bridge financings, and the loans from other corporate and institutional lenders offset by payments of indebtedness.

Critical Accounting Policies and Significant Judgments and Estimates

The preparation of the condensed consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

For a description of the accounting policies that, in management’s opinion, involve the most significant application of judgment or involve complex estimation and which could, if a different judgment or ~~estimates~~estimate were made, materially affect our reported financial position, results of operations, or cash flows, see ~~“Management’s Discussion and Analysis of Financial Condition, Results of Operations –~~Note 2– Critical Accounting Policies and Estimates” ~~and~~in the notes to our condensed consolidated financial statements included in this ~~quarterly analysis.~~Report.

During the three months ~~ended March 31,~~ending September 30, 2023, there were no significant changes in our accounting policies and estimates other than the newly adopted accounting standards that are disclosed in Note 2 — Summary of Significant Accounting Policies to our condensed consolidated financial statements included in this Report.

3432

Impact of Climate Change

Concerns about climate change have resulted in various treaties, laws and regulations that are intended to limit carbon emissions and address other environmental concerns. These and other laws may cause energy or other costs at The Company’s communities to increase. In the ~~long-term,~~long term, the Company believes any such increased costs will be passed through and paid by the Company’s residents and other customers in higher charges for ~~The~~the Company’s services. However, in the ~~short-term,~~short term, these increased costs, if material in amount, could materially and adversely affect the Company’s financial condition and results of operations.

Some observers believe severe weather in different parts of the world over the last few years is evidence of global climate change. Severe weather has had and may continue to have an adverse effect on certain senior living communities ~~The~~the Company operates. Flooding caused by rising sea levels and severe weather events, including hurricanes, tornadoes and widespread fires may have an adverse effect on the senior living communities the Company operates. The Company mitigates these risks by procuring insurance ~~coverage. The~~coverage which the Company believes is adequate to protect ~~the Company~~us from material damages and losses resulting from the consequences of losses caused by climate change. However, ~~the Company~~we cannot be sure that ~~its~~our mitigation efforts will be sufficient or that future storms, rising sea levels or other changes that may occur due to future climate change could not have a material adverse effect on the Company’s financial results. The Company’s properties have not experienced any material damage due to significant storms such as unusual freezes in Texas or Florida hurricanes. However, we have experienced increased property insurance rates after certain severe weather events and such increases may continue. Additionally, changes in the severity and frequency of adverse weather arising from climate change may impact our ability to deliver services at our Adult Daycare center due to closings which would reduce our revenues and increase costs during periods of severe weather events due to inability of staff to report to work and other factors.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this section.

Item 4. Evaluation of Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of our Chief Executive Officer and acting Chief Financial Officer (our principal executive officer and principal financial officer, respectively), has evaluated its disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Report. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired controls objectives. Any “material weaknesses” in the Company’s internal controls may arise because of the internal control environment of the Company. Based upon that evaluation, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures were ineffective. Specifically, the company does not have adequate segregation of duties that adequately restrict user and privileged access to certain financial applications, programs, and data to appropriate company personnel; do not adequately limit access to electronic payment systems for authorized expenditures; and have inadequate cyber controls regarding the protection of our data and restricting data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately. Management has identified these weaknesses and have adopted a program to remediate such weaknesses.

Remediation Plan. The Company has instituted efforts to remediate these concerns and enhance ~~The~~the Company’s internal control environment to remediate these issues by the end of the ~~year or.~~year. However, any failure to maintain effective controls could result in significant deficiencies or material weaknesses and cause the Company to fail to meet the Company’s periodic reporting obligations or result in material misstatements in the Company’s financial statements. The Company may also be required to incur costs to improve its internal control system and hire additional personnel. This could negatively impact the Company’s results of operations.

Changes in Internal Control over Financial Reporting

There have ~~not~~ been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended ~~March 31,~~September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except as noted below. We increased the number of our financial and accounting staff and remediated or mitigated certain internal control weaknesses such as segregation of duties.

33
PART II Other information
Item 1. Legal Proceedings

Information on material developments in our legal proceedings is included in Note 87 — Commitments and Contingencies to our ~~condensed~~ consolidated financial statements included in Part I, Item 1 of this Report.

ITEM 1A. Risk Factors

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this section.

35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In addition to the issuance of securities described by the Company in a Current Report on Form 8-K, the Company has issued the following shares of our common ~~stock as of the date of the Original Filing:~~stock:

1. ~~On January 3,~~We issued approximately $1.6 million of Bridge Notes from October 5, 2023, ~~and May~~through December 8, 2023, ~~25,097~~which may be converted into approximately 2,640,014 shares of our common stock, assuming the conversion price of $0.82 per share of common stock, which is subject to adjustment in the event that the Viveon Merger Agreement is terminated or ~~an aggregate of 50,194 shares to Dickson Co for accounting services that were provided by such person.~~
2. ~~On May 8, 2023, 133,333 shares to Outside The Box Capital Inc for marketing services to be provided by such person.~~expires.

Each such issuance was exempt from the registration requirements of the Securities Act of 1933, as amended, under Section 4(a)(2) thereof, as each transaction was a privately negotiated transaction that did not involve any public offering. There was no underwriter or placement agent in any such transaction. There was no cash consideration for any such transaction. The Company received or will receive services from each such purchaser of the shares of common stock.

Item 3. Defaults Upon Senior Securities

Certain subsidiaries of the Company that operate residential care facilities (“MCA Borrowers”) incurred certain financings through merchant credit advances. Such financings were provided by creditors under agreements (“MCA Agreements”) that describe the transaction as the sale of future receivables by the applicable MCA Borrower. The aggregate accrued amount of these financings is approximately ~~$2,925,195,~~$2,925,196, as summarized in Part I, Item 1 Note 76 — Indebtedness. During the first quarter of 2023, the Company assessed its rights under the terms of these MCA Agreements and determined that it had rights and defenses to the continued payments to the creditors. The Company has not made payments on account of these MCA Agreements and, accordingly, these MCA Agreements are considered in default by the creditors. The inclusion of the disclosures in this Item 3 is not an admission that the MCA Borrowers are in default of its obligations under the MCA Agreements.

Defaults of indebtedness are noted in Item 1, Note 76 — Indebtedness which information is incorporated herein by reference.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit
No.
Description
31.1⁽¹⁾ Certification of the Chief Executive Officer pursuant to Exchange Act Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2⁽¹⁾ Certification of the Chief Financial Officer pursuant to Exchange Act Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1⁽¹⁾ Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2⁽¹⁾ Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS⁽²⁾ Inline XBRL Instance Document

101.SCH⁽²⁾ Inline XBRL Taxonomy Extension Schema Document

101.CAL⁽²⁾ Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF⁽²⁾ Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB⁽²⁾ Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE⁽²⁾ Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

⁽¹⁾ Filed herewith.
⁽²⁾ Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise are not subject to liability under those sections.

3634
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized.

CLEARDAY, INC.

Dated: ~~October 31, 2023~~January 12, 2024 /s/ BJ Parrish
BJ Parrish
Acting Chief Financial Officer

/s/ James T. Walesa
James T. Walesa
President and Chief Executive Officer

3735

	*Item*	As Amended			Original Filing			Difference
●	Changes to the Condensed Consolidated Balance Sheet:

	ASSETS
	Non-Current assets
^[1]	Real estate property and equipment, net		6,321,749			6,227,965			93,784
^[1]	Total assets		10,346,008			10,252,224			93,784

	LIABILITIES, MEZZANINE EQUITY AND DEFICIT
	Current liabilities:
^[2]	Accrued expenses		5,989,892			5,966,110			23,782
^[3]	Accrued interest		895,013			471,684			423,329
^[2]	Related party payables		738,725			708,366			30,359
^[2][3]	Total current liabilities		32,828,102			32,350,632			477,470
^[2][3]	Total liabilities		37,452,825			36,975,355			477,470

	Deficit
^[4]	Additional paid-in-capital		19,132,830			19,193,946			(61,116	)
^[5]	Accumulated deficit		(79,606,718	)		(79,011,020	)		(595,698	)
^[6]	Clearday, Inc. Stockholders’ deficit:		(60,448,365	)		(59,791,551	)		(656,814	)
^[7]	Non-controlling interest in subsidiaries		11,307,705			11,034,577			273,128
	Total deficit		(49,140,660	)		(48,756,974	)		(383,686	)
	TOTAL LIABLITIES, MEZZANINE EQUITY AND DEFICIT		10,346,008			10,252,224			93,784

●	Changes to the Condensed Consolidated Statements of Operations
	Operating Expenses
^[8]	Wages & general operating expenses		3,846,475			3,815,150			31,325
^[9]	Selling, general and administrative expenses		904,989			880,485			24,504
^[10]	Depreciation and amortization expense		296,826			324,044			(27,218	)
^[11]	Total operating expenses		5,048,290			5,019,679			28,611
^[11]	Operating Loss		(2,041,786	)		(2,013,175	)		(28,611	)
	Other (income) expenses
^[12]	Interest Expense		714,833			549,033			165,800
^[13]	Loss (gain) on the sale of fixed assets		106,467			192,407			(85,940	)
^[14]	Other (income)/expenses		498,124			10,897			487,227
^[15]	Total other (income)/expenses		(1,555,178	)		(2,122,265	)		567,087
^[16]	Net income (loss) from continuing operations		(486,608	)		109,090			(595,698	)
^[16]	Net loss attributable to Clearday, Inc. common stockholders		(2,736,347	)		(2,140,649	)		(595,698	)

	Basic and diluted loss per share attributable to Clearday, Inc.
^[17]	Weighted average common shares basic and diluted outstanding		23,910,818			24,187,743			(276,925	)

●	Changes to the Condensed Consolidated Statements of Mezzanine Equity, Convertible Preferred Stock and Stockholders’ Deficit
^[18]	Accrual of Series I Convertible Preferred Stock in subsidiary		136,564			(136,564	)		273,128
^[19]	Stock compensation for services (common stock par value amount)		75			-			75
^[19]	Stock compensation for services (common stock additional paid in capital amount)		(61,191	)		-			(61,191	)
^[18]	Non-Controlling Interest		11,307,705			11,034,577			273,128
	Total Deficit		49,140,660			48,756,974			383,686

●	Changes to the Condensed Consolidated Statements Of Cash Flows
	CASH FLOWS FROM OPERATING ACTIVITIES
^[20]	Net income (loss)		(486,608	)		109,090			(595,698	)
^[20]	Loss from continued operations		(486,608	)		109,090			(595,698	)
^[2]	Adjustments required to reconcile net income (loss) to cash flows used in operating activities
^[21]	Depreciation and amortization		296,826			324,044			(27,218	)
^[22]	Shares issued for services		(61,116	)		-			(61,116	)
^[23]	Loss (gain) on the sale of fixed assets		106,467			192,407			(85,940	)
^[18]	Series I preferred stock accumulated dividend		136,564			(136,564	)		273,128
^[24]	Accrued liabilities		1,193,473			746,362			447,111
^[9]	Related party payables		66,128			35,769			30,359
^[25]	Net cash used in activities of continuing operations		(1,066,342	)		(1,046,967	)		(19,375	)
^[25]	Net cash used in operating activities		(1,066,342	)		(1,046,967	)		(19,375	)

	CASH FLOWS FROM FINANCING ACTIVITIES
^[26]	Proceeds from long-term debt		1,619,316			1,534,560			84,756
^[26]	Net cash provided by in financing activities		970,195			885,439			84,756
^[27]	Change in cash and restricted cash from discontinued operations		-			195,638			(195,638	)
^[27]	Cash and restricted cash at beginning of the year		205,638			10,000			195,638
	CASH FLOWS FROM INVESTING ACTIVITIES
^[28]	Payments for property and equipment		(18,063	)		(37,437	)		19,374
^[28]	Net cash provided by (used in) investing activities of the continuing operations		(18,063	)		(37,437	)		19,374

	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Deficit			Interest			Deficit
	Mezzanine Equity Series F Preferred Stock				Preferred Stock Series A				Common Stock				Additional Paid- in			Accumulated			Clearday, Inc. Stockholders’			Non-Controlling			Total
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Deficit			Interest			Deficit
Balance at December 31, 2021		4,797,052	$	16,857,267		328,925	$	329		14,914,458	$	14,915	$	17,069,481		$	(65,208,327	)	$	(48,123,602	)	$	11,330,695		$	(36,792,907	)
PIK dividends accruals on Convertible Preferred Stock F		-		1,619,015		-		-		-		-		(1,619,015	)		-			(1,619,015	)		-			(1,619,015	)
Series F Incentive Common Stock		-		-		-		-		2,861,334		2,859		(2,853	)		-			6			-			6
Series F shares converted to common stock
Series F shares converted to common stock, shares
Accrual of Series I Convertible Preferred Stock in subsidiary		-		-		-		-		-		-		-			-			-			136,564			136,564
Series I adjustment		-		-		-		-		-		-		-			(669,904	)		(669,904	)		-			(669,904	)
Debt discount from derivative settlements
Stock issued for extinguishment of liabilities
Stock issued for extinguishment of liabilities, shares
Stock Compensation for services		-		-		-		-		-		-		-			-			-			-			-
Stock Compensation for services, shares
Shares issued for Loan		-		-		-		-		-		-		-			-			-			-			-
Shares issued for Loan, shares
Dissolution of Longhorn Hospitality		-		-		-		-		-		-		(3,871,239	)		3,871,239			-			-			-
Redemption of series F shares		-		-		-		-		-		-		-			-			-			-			-
Officer Compensation and debt conversion		-		-		-		-		-		-		-			-			-			-			-
Net loss		-		-		-		-		-		-		-			(2,804,543	)		(2,804,543	)		(144,265	)		(2,948,808	)
Balance at March 31, 2022		4,797,052	$	18,476,282		328,925	$	329		17,775,792	$	17,774	$	11,576,374		$	(64,811,535	)	$	(53,217,058	)	$	11,322,994		$	(41,894,064	)

	September 30, 2023			September 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(8,114,216	)	$	(5,230,065	)
Loss from discontinued operations, net of tax		-			(411,523	)
Loss from continued operations		(8,114,216	)		(5,641,588	)
Adjustments required to reconcile net loss to cash flows used in operating activities
Depreciation and amortization		755,061			550,913
Shares issued for loan commitment		70,685			-
Shares issued for services		214,424			846,974
Financing costs from derivative liabilities		2,567,460			-
Gain on termination of lease		(4,336,886	)		-
Series I preferred stock accumulated dividend		409,692			-
Change in fair value of derivatives		(1,511,624	)		-
Amortization of debt discount related to derivatives		1,973,718			-
Amortization of debt issuance costs		170,919			966,052
Loss on extinguishment of debt		653,814			(1,642,476	)
Loss on impairment of debt – SPAC partner		1,042,260			-
Loss on disposal of assets		100,542			-
Bad debt expense		485,437			-
Gain on PPP loan forgiveness		-			(992,316	)
Changes in operating assets and liabilities
Accounts receivable		(437,731	)		(24,054	)
Other current assets		-			-
Prepaid expenses		(164,420	)		2,666,713
Accounts payable		373,074			1,420,895
Accrued liabilities		2,214,518			(1,524,391	)
Other current liabilities		-			259,929
Deferred revenue		(901,235	)		-
Related party payables		1,352,757			-
Other non-current assets		9,253			680,335
Other current liabilities		(49,097	)		552,845
Change in operating lease liability		-			(383,689	)
Net cash used in operating activities		(3,121,596	)		(2,263,858	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment		133,133			-
Purchase of intangibles		(234,375	)
Purchase of property and equipment		-			(28,310	)
Net cash used in investing activities of the continuing operations		(101,242	)		(28,310	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term debt		(1,136,280	)		(2,551,046	)
Proceeds from borrowings on debt		4,253,290			3,878,139
Net cash provided by in financing activities		3,117,010			1,327,093
Change in cash and restricted cash from continuing operations		(105,828	)		(965,075	)
Change in cash and restricted cash from discontinued operations		-			-
Cash and restricted cash at beginning of the period		205,638			975,075
Cash and restricted cash at end of period	$	99,810		$	10,000

Reconciliation of cash and restricted cash consist of the following:
End of period
Cash and cash equivalents		99,810			-
Restricted cash		-			10,000
Total cash and restricted cash	$	99,810		$	10,000
Beginning of period
Cash and cash equivalents		195,638			965,075
Restricted cash		10,000			10,000
Total cash and restricted cash	$	205,638		$	975,075

Supplemental disclosures of cash flow information
Cash paid for interest	$	292,784		$	-
Cash paid for income taxes		-			-

Supplemental disclosures of non-cash investing and financing activities:
Early lease termination fee	$	27,323,396		$	-
Series F incentive shares converted to common stock		6,338,323
PIK dividends for Series F Preferred Stock		4,996,780			4,941,921
Indebtedness used to pay off rent expense		3,212,305
Accounts payable exchanged for common shares		3,247,982
Debt discount on derivative liabilities		2,833,222		$	-
Settlements on derivative liabilities		927,993			-

Asset Class	Estimated Useful Life ~~(in~~ (in years)
Buildings and building improvements		39
Leasehold improvements		15
~~Equipment~~Furniture and fixtures and equipment		7
Computer equipment and software		5
~~Furniture and fixtures~~		7

	For the periods ended March 31,										For the three-month period ended September 30,
	2023		%			2022		%			2023		%			2022		%
Revenue from contracts with customers:
Resident rent - over time	$	2,895,326		96	%	$	3,124,761		97	%	$	618,317		74	%	$	2,946,690		97	%
Day care		89,041		3	%		83,896		3	%
Day care – point in time												190,789		23	%		66,803		2	%
Amenities and conveniences - point in time		22,137		1	%		1,561		0	%		22,802		3	%		43,809		1	%
Total revenue from contracts with customers	$	3,006,504		100	%	$	3,210,218		100	%	$	831,908		100	%	$	3,057,302		100	%

	For the nine-month periods ended September 30,
	2023		%			2022		%
Revenue from contracts with customers:
Resident rent - over time	$	3,950,327		89	%		9,139,921		97	%
Day care – point in time		439,596		10	%		215,423		2	%
Amenities and conveniences - point in time		67,520		1	%		47,728		1	%
Total revenue from contracts with customers	$	4,457,443		100	%	$	9,403,072		100	%

March 31, 2023
	Level 1		Level 2		Level 3		Total
Derivative liability		-		-	$	3,748,918	$	3,748,918


Balance - December 31, 2022	$	2,320,547		$	2,320,547
Additions		3,707,038			5,400,682
Settlements		(713,435	)		(927,993	)
Change in fair value		(1,565,232	)		(1,511,624	)
Balance - March 31, 2023	$	3,748,918
Balance - September 30, 2023				$	5,281,612


	March 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Remaining Useful Life (Years)
Developed technology	$	3,680,000	$	184,000	$	3,496,000		4.75

	September 30, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Remaining Useful Life (Years)
Developed technology	$	3,680,000	$	552,000	$	3,128,000		4.25
Technology for future deployment		234,375		-		234,375
Total Intangible assets	$	3,914,375	$	552,000	$	3,362,375


Fiscal Years
2023 (remaining)	$	552,000
2024		736,000
2025		736,000
2026		736,000
2027		736,000
Thereafter		-
Total	$	3,496,000


REVENUES
Commercial property rental revenue	$	14,239
Total revenues, net		14,239

Costs and expenses
Operating expenses		-
General and administrative expenses		36,636
Total operating expenses	$	36,636

Loss from operations		(22,307	)

Other/(income) expenses
Interest expense		44,151
Gain on disposal of assets		-
Equity income from investees, net of applicable taxes		-
Impairment expense (recovery)		-
Other (income) expenses		18,768
Total (income)/expense		62,920

Net loss	$	(85,227	)

At September 30,	Total
2024		16,059,812
2025		5,471,130
2026		4,049,224
2027		-
2028		-
Thereafter		494,900
Total obligations	$	26,075,066

At September 30,	Total
Facility Indebtedness		11,637,726
Merchant Cash Advance Loans		2,925,196
Indebtedness Allocated to Real Estate		983,346
Other Corporate Indebtedness		7,387,798
TIC Purchase Agreements		3,141,000
Total Obligations		26,075,066
Debt Discount & Derivatives		(1,651,845	)
Total obligations, net	$	24,423,221

As of March 31,	Total
2022		6,839,277
2023		9,635,591
2024		1,494,886
2025		4,461,182
Thereafter		494,900
Total obligations	$	22,925,835

	Maturity Date	Interest Rate			March 31, 2023		December 31, 2022		Maturity Date	Interest Rate			September 30, 2023		December 31, 2022
Naples Equity Loan ^	May 2023		9.95	%	$	4,550,000	$	4,550,000	May 2023		9.95	%	$	4,550,000	$	4,550,000
Gearhart Loan ^	December 2022		7.00	%		193,578		193,578	December 2022		7.00	%		193,578		193,578
SBA PPP Loans #	February 2022		1.00	%		1,518,682		1,518,682	February 2022		1.00	%		1,518,682		1,518,682
Bank Direct Payable ^	December 2022		3.13	%		31,569		80,381
IPFS D&O Insurance									August 2024		8.80	%		118,277		-
Bank Direct Payable									December 2022		3.13	%		-		80,381
Bank Direct Payable									November 2023		6.99	%		104,947		-
AIU Sixth Street	February 2023		12.00	%		-		49,593	February 2023		12.00	%		-		49,593
1800 Diagonal Lending	October 2024		12.00	%		93,408		116,760	February 2024		12.00	%		94,016		116,760
1800 Diagonal Lending	February 2024		12.00	%		173,594		-
Equity Secure Fund I, LLC*	June 2022		11.50	%		1,000,000		1,000,000	March 2024		18.00	%		1,097,610		1,000,000
Invesque	July 2025		10.00	%		3,458,504		-
Invesque, Inc. **									July 2025		10.00	%		3,960,616		-

Naples Operating PIRS Capital	March 2023	0.00	%	$	338,000	$	338,000	March 2023	0.00	%	$	338,000	$	338,000
Little Rock Libertas	February 2023	0.00	%		326,330		326,330	February 2023	0.00	%		326,330		326,330
PIRS Capital Financing Agreement	March 2023	0.00	%		144,659		144,659	March 2023	0.00	%		144,659		144,659
Naples Samson #1	May 2023	0.00	%		76,916		76,916	May 2023	0.00	%		76,916		76,916
Naples LG Funding #2	April 2023	0.00	%		171,170		171,170	April 2023	0.00	%		171,170		171,170
Little Rock Premium Funding	April 2023	0.00	%		211,313		211,313	April 2023	0.00	%		211,313		211,313
Little Rock KIT Funding	December 2022	0.00	%		89,400		89,400	December 2022	0.00	%		89,400		89,400
Little Rock Samson Funding #4	February 2023	0.00	%		170,501		170,501	February 2023	0.00	%		170,501		170,501
Naples Operating SWIFT	December 2022	0.00	%		111,750		111,750	December 2022	0.00	%		111,750		111,750
New Braunfels Samson Cloud Fund	February 2023	0.00	%		308,035		308,035	February 2023	0.00	%		308,035		308,035
New Braunfels Samson Group	February 2023	0.00	%		375,804		375,804	February 2023	0.00	%		375,804		375,804
Westover Hills One River	December 2022	0.00	%		128,298		128,301	December 2022	0.00	%		128,298		128,301
Westover Hills FOX Capitol	March 2023	0.00	%		109,384		109,384	March 2023	0.00	%		109,384		109,384
Westover Hills Arsenal	October 2023	0.00	%		95,882		95,882	October 2023	0.00	%		95,882		95,882
Westover Samson Funding	March 2023	0.00	%		267,754		267,754	March 2023	0.00	%		267,754		267,754
Subtotal merchant cash advance loans												2,925,196		2,925,199

Notional amount of debt					13,944,531		10,434,193					14,562,922		10,434,193
Less: current maturities					13,944,531		10,434,193					14,562,922		10,434,193
				$	-	$	-				$	-	$	-

Real Estate:
Artesia Note	June 2033	Variable		$	-	$	211,721	September 2033	Variable		$	-	$	211,721
Carpenter Enterprises	Demand Note	Variable			300,000		300,000	Demand Note	Variable			178,346		300,000
Leander Stearns National Association ^	February 2023	10.38	%		805,000		805,000
Leander Stearns National Association								February 2023	10.38	%		805,000		805,000
Notional amount of debt					1,105,000		1,316,721					983,346		1,316,721
Less: current maturities					805,000		805,000					983,346		805,000
				$	300,000	$	511,721				$	-	$	511,721


AGP Contract ^	March 2023	5.00	%	$	550,000		$	550,000
Cibolo Creek Partners	December 2025	0.09	%		411,470		$	421,470
Cibolo Creek Partners promissory note	December 2025	0.09	%		91,208			96,208
EIDL SBA Treas 310	December 2051	3.75	%		494,900			494,900
Firstfire	May 2023	12.00	%		37,195			95,054
Five C’s Loan ^	December 2022	9.85	%		325,000			325,000
GS Capital	May 2023	12.00	%		12,048			50,955
Jefferson Street Capital LLC @	May 2023	12.00	%		33,600			84,000
KOBO, L.P. ^	October 2023	Floating	%		500,000			500,000
Mast Hill LP @	May 2023	12.00	%		300,000			420,000
Mast Hill LP @	July 2023	12.00	%		252,000			315,000
Round Rock Development Partners Note	December 2025	0.09	%		500,000			500,000
Jefferson Street Capital LLC (February 2023)	February 2024	12.00	%		192,883			-
Mast Hill LP (January 2023)	January 2024	12.00	%		756,000			-
Convertible Notes Issued by AIU Alternative Care, Inc.	January 2024	12.00	%		279,000			-

Notional amount of debt					4,735,304			3,852,587
Less: current maturities					2,009,843			2,340,009
				$	2,725,461		$	1,512,578

TIC Purchase Agreements	No Specified Date	8.00	%	$	3,141,000		$	3,141,000

		Total			22,925,835			18,744,501
		Less Debt Discount & Derivatives			(1,554,177	)		(1,004,271	)
		Total		$	21,371,658		$	17,740,230

AGP Contract and Note^***	March 2023	5.00	%	$	550,000		$	550,000
Cibolo Creek Partners	December 2025	0.09	%		358,008			421,470
Cibolo Creek Partners promissory note	December 2025	0.09	%		50,215			96,208
EIDL SBA Treas 310	December 2051	3.75	%		494,900			494,900
Firstfire	May 2023	12.00	%		-			95,054
Five C’s Loan ^	December 2022	9.85	%		325,000			325,000
GS Capital	May 2023	12.00	%		-			50,955
Jefferson Street Capital LLC @	May 2023	12.00	%		16,800			84,000
KOBO, L.P.	October 2023	Floating	%		557,992			500,000
Mast Hill LP @	May 2023	12.00	%		300,000			420,000
Mast Hill LP @	July 2023	12.00	%		252,000			315,000
Round Rock Development Partners Note	December 2025	0.09	%		500,000			500,000
Jefferson Street Capital LLC (February 2023)	February 2024	12.00	%		192,883			-
Mast Hill LP (January 2023) @	January 2024	12.00	%		756,000			-
Bridge Financings (convertible to common stock	September 2024	8.00	%		2,235,000			-
Rom Papadopolous	January 2024				50,000
Convertible Notes Issued by AIU Alternative Care, Inc.	January 2024	12.00	%		749,000			-

Notional amount of debt					7,387,798			3,852,587
Less: current maturities					5,984,672			2,340,009
				$	1,403,126		$	1,512,578

TIC Purchase Agreements	No Specified Date	8.00	%	$	3,141,000		$	3,141,000

		Total			26,075,066			18,744,501
Less Debt Discount & Derivatives					(1,651,845	)		(1,004,271	)
		Total		$	24,423,221		$	17,740,230

^	Obligation is in default. The interest rate ~~noted above~~set forth is the stated rate of ~~interest and does not reflect the default~~interest. The actual rate of ~~interest.~~interest has increased under the terms of the obligation.
^^	We have ceased payment of these obligations. Obligations are subject to litigation for nonpayment, as previously reported. See Note 87 — Commitments and Contingencies.
#	SBA PPP obligations are past due and in the Company is continuing the process to have these obligations forgiven.
@	Obligation is in payment default. ~~Each~~Neither lender has ~~not~~ exercised any of their remedies. Each lender has the right to exercise remedies including the conversion of the promissory note into shares of our common stock and ~~the Company continues to negotiate with each lender a payment schedule. The interest rate noted above is the stated rate~~collection of default interest and ~~does not reflect~~other amounts, and in the ~~default rate~~case of ~~interest. Subsequently, each lender has provided~~Mast Hill to exercise the Lender Remedy Warrants described in Note 10 — Deficit. Mast Hill LP granted a forbearance dated October 4, 2023 until the earlier of ~~their remedies which was in effect~~(i) the closing of the Viveon Merger (ii) to January 2, 2024 (90 days from the date of the forbearance), (iii) the date that Clearday, Inc. or any of its subsidiaries makes an assignment for the benefit of creditors, or applies for or consents to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed. or (iv) the date that bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against Clearday, Inc. or any of its subsidiaries (the earlier of the aforementioned (i), (ii), (iii) or (iv) shall be referred to herein as the “Waiver Expiration Date”). Jefferson Street Capital LLC granted a forbearance to October 31, 2023, but as of the date of this ~~Report.~~Report has not exercised additional legal measures towards enforcement of payment of the debt. The Company is working on a longer-term solution. However, there can be no assurance that we will be able to extend any the forbearances with any of these lenders on acceptable terms or at all or that we will be able to comply with the terms of the forbearance provided by Mast Hill LP which includes that Clearday provide net proceeds from additional financings by Clearday under the terms of the promissory notes with such lender, unless such payment is excused by such lender.
*	Obligations were modified in the third quarter of 2023.
**	~~Obligations have been modified~~Obligation amended and is in default as of the date of this Report as described ~~in Note 13 Subsequent Events.~~below.
***	Obligation amended effective December 31, 2023 to, among other matters, waive the default by extending the maturity date to September 2024 and increase the principal amount to $578,795.89 which is the principal plus the accrued and unpaid interest.

	●	~~The issuance by AIU Alt Care or the Company or any of its other subsidiaries of any equity securities in one or more offerings with aggregate gross proceeds of at least $~~5 ~~million;~~
	●	~~The issuance by the Company or any of its other subsidiaries of convertible debt securities that were issued with gross proceeds in an aggregate amount of at least $~~5 ~~million;~~
	●	The listing by the Company or its common stock to the New York Stock Exchange, the NYSE American or any tier of the NASDAQ market in connection with an offering of securities by the Company or any of its subsidiaries in connection with any merger, consolidation or similar transaction with another person in which the Company is the surviving entity; or
	●	The exchange of the shares of the Company’s common stock for the common stock or other security that is listed on the New York Stock Exchange, the NYSE American or any tier of the NASDAQ market in connection with any merger, consolidation or similar transaction with another person in which Clearday is not the surviving entity or in which Clearday becomes a subsidiary of such other person, including without limitation, any special purpose acquisition corporation.

	1.	Premium Merchant Funding 18, LLC v Memory Care at Good Shepherd LLC and James Walesa (a guarantor), filed in state court in Kings County, New York on August 19, 2022 (summary judgement in this matter was entered in favor of the plaintiff and ~~the Company has entered a notice to appeal)~~such judgement was not appealed by us);
	2.	Libertas Funding LLC v. Memory Care at Good Shepherd, LLC, et. al. including James Walesa (a guarantor), filed in state court in Monroe County, New York on August 24, 2022 (summary judgement in this matter was entered in favor of the Company’s subsidiary and ~~may be~~such judgement was not appealed by us, and this judgement was entered in the ~~plaintiff)~~State of Texas);
	3.	Cloudfund LLC v MCA New Braunfels Operating Company LLC et. al. including James Walesa (a guarantor), filed in state court in Nassau County, New York on August 29, 2022;
	4.	Cloudfund LLC v MCA Naples Operating Company, LLC and James Walesa (a guarantor), filed in state court in Nassau County, New York on August 30, 2022 (summary judgement in this matter was entered in favor of the plaintiff and ~~the Company has have entered a notice to appeal)~~such judgement was not appealed);
	5.	Swift Funding Source Inc. v MCA Naples Operating Company LLC et. al. including Christin Hemmens (a guarantor), filed in state court in Ontario County, New York on August 31, 2022;
	6.	~~Pirs~~PIRS Capital, LLC v MCA Westover Hills Operating Company, LLC et. al. including James Walesa (a guarantor), filed in state court in New York County, New York on September 8, ~~2022;~~2022 (this action was discontinued without prejudice on October 25, 2023);
	7.	Prosperum Capital Partners, LLC dba Arsenal Funding v MCA Westover Hills Operating Company LLC et. al. including James Walesa (a guarantor), filed in state court in Kings County, New York on September 28, 2022;
	8.	Fox Capital Group, Inc. v MCA Westover Hills Operating Company LLC et. al. including James Walesa (a guarantor), filed in state court in Bexar County, Texas on October 25, 2022.

	Nine Months			Three Months
	9/30/2023

Basic and diluted loss per share attributable to Clearday, Inc.
Net Income (loss)		(8,114,216	)		(3,083,363	)
Preferred stock dividends		(4,996,780	)		(1,653,009	)
Net (loss) attributable to common shareholders		(13,110,996	)		(4,736,372	)
Net (loss) attributable to non-controlling interest		(1,562,867	)		(616,649	)
Net loss available to Clearday shareholders		(11,548,129	)		(4,119,723	)
Earnings ( loss) per share attributable to Clearday, Inc.
Basic		(0.46	)		(0.16	)
Diluted
Weighted average common shares outstanding
Basic		25,162,174			26,097,002
Diluted		25,162,174			26,097,002

	2023		2022
	For the Three Months Ended
Dilution shares calculation	March 31,
	2023		2022
Series A Convertible Preferred Stock		328,925		328,925
Series F 6.75% Convertible Preferred Stock		4,791,401		4,797,052
Series I 10.25% Convertible Preferred Stock		682,820		320,657
Limited Partnership Units		99,038		99,038
Warrants		7,618,820		4,038,801
Total participating securities		13,521,004		9,586,495

	2023		2022
	For the Nine Months Ended
Dilution shares calculation	September 30,
	2023		2022
Series A Convertible Preferred Stock		328,925		328,925
Series F 6.75% Convertible Preferred Stock		4,311,048		4,797,052
Series I 10.25% Convertible Preferred Stock		1,365,640		320,657
Limited Partnership Units		99,038		99,038
Warrants		3,902,081		4,036,320
Bridge Notes		835,366		-
Total participating securities		10,842,098		9,581,992

	●	warrants that were granted and outstanding by Superconductor Technologies Inc. (“STI”) prior to the September 9, 2021, effective date of the previously disclosed merger ~~(the “AIU Merger”)~~ with Allied Integral United, ~~Inc.~~Inc (“AIU” the “AIU Merger”).;
	●	warrants assumed by the Company that were granted by AIU prior to the effective date of the AIU Merger; and
	●	~~warrant~~warrants that were issued by the Company after the AIU Merger.

	Total		Currently Exercisable		Exercise Price per Share		Expiration Date	Total		Currently Exercisable		Exercise Price per Share		Expiration Date
	Common Shares							Common Shares
	Total		Currently Exercisable		Exercise Price per Share		Expiration Date	Total		Currently Exercisable		Exercise Price per Share		Expiration Date

Warrants related to March 2018 financing		7,331		7,331	$	245.84	September 9, 2023
Warrants related to July 2018 financing		119,241		119,241	$	75.48	July 25, 2023
Warrants related to July 2018 financing		7,154		7,154	$	94.35	July 25, 2023
Warrants related to May 2019 financing		5,518		5,518	$	26.96	May 23, 2024		5,518		5,518	$	26.96	May 23, 2024
Warrants related to October 2019 financing		100,719		100,719	$	5.39	October 10, 2024		100,719		100,719	$	5.39	October 10, 2024
Warrants related to October 2019 financing		14,336		14,336	$	6.74	October 8, 2024		14,336		14,336	$	6.74	October 8, 2024

	*	Two of our subsidiaries have preferred securities that are classified under GAAP as Non-Controlling Interest: (1) the preferred stock designated as the Series I 10.25% cumulative convertible preferred stock, par value $0.01 per share of AIU Alt Care (the “Alt Care Preferred Stock”); and (2) the preferred limited partnership interests of Clearday OZ Fund (the “Clearday OZ LP Interests”).. As of ~~March 31,~~September 30, 2023, there are 1,376,118 warrants that were issued by Clearday to investors in the Alt Care Preferred Stock and the Clearday OZ LP Interests that may be exercised for an aggregate of 3,281,508 shares of the Company’s Common Stock. The exercise price per share for each is $5.00per share, subject to adjustment for specified fundamental transactions such as stock splits, reverse stock splits and stock combinations.

	^	The Company also has a warrant issued to a consultant representing 500,000 shares of the Company’s Common Stock at an exercise price of $11.00 per share, which may be paid by customary cashless exercise. Such warrant is subject to adjustment for specified fundamental transactions such as stock splits, reverse stock splits and stock combinations.

	Common Shares							Common Shares
	Outstanding		Exercisable		Exercise Price		Maturity Date	Outstanding		Exercisable		Exercise Price		Maturity Date
Related to the January 12, 2023, Financing (Mast Hill LP)		1,134,000		0	$	0.75	5 years after Trigger Date*		1,134,000		-	$	0.75	5 years after Trigger Date*
Related to the September 30, 2022, Financing (Mast Hill LP)		472,500		0	$	0.50	5 years after Trigger Date*		472,500		-	$	0.75	5 years after Trigger Date*
Related to the July 1, 2022, Financing (Mast Hill LP)		900,000		0	$	0.50	5 years after Trigger Date*		900,000		-	$	0.50	5 years after Trigger Date*