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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~June~~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 2526,~~985~~173,~~132~~811 shares of our common stock outstanding as of the close of business on ~~August~~December 3015, 2023.

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 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.

~~June~~September 30, 2023

FORM 10-Q

Table of Contents

		Page	~~Page~~
PART I	Financial Information
Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets – June 30, 2023 and December 31, 2022 (Unaudited)		1
	Condensed Consolidated Balance Sheets – September 30, 2023, and December 31, 2022 (Unaudited)	1
	Condensed Consolidated Statements of Operations – For The Six months Ended June 30, 2023 and 2022 (Unaudited)		2
	Condensed Consolidated Statements of Operations – For the Three and Nine Months Ended September 30, 2023, and 2022 (Unaudited)	2
	Condensed Consolidated Statements of Mezzanine Equity, Convertible Preferred Stock and Stockholder’s Deficit – Six Months Ended June 30, 2023 and 2022 (Unaudited)		3
	Condensed Consolidated Statements of Mezzanine Equity, Convertible Preferred Stock and Stockholder’s Deficit – Nine Months Ended September 30, 2023, and 2022 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows – For The Six months Ended June 30, 2023 and 2022 (Unaudited)		5
	Condensed Consolidated Statements of Cash Flows – For the Nine Months Ended September 30, 2023, and 2022 (Unaudited)	5
	Notes to Unaudited Condensed Consolidated Financial Statements		6
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28	27
Item 3	Quantitative and Qualitative Disclosures About Market Risk	33	30
Item 4	Evaluation of Disclosure Controls and Procedures.	33	30
PART II	Other Information
Item 1.	Legal Proceedings	34	30
Item 1A.	Risk Factors	34	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34	31
Item 3.	Defaults Upon Senior Securities	34	31
Item 4.	Mine Safety Disclosures	34	31
Item 5.	Other Information	34	31
Item 6.	Exhibits	34	31

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

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

(Unaudited)

	June 30, 2023			December 31, 2022
	September 30, 2023			December 31, 2022
ASSETS
Current assets:
Cash	$	899,~~093~~810		$	195,638
Restricted cash		~~10,000~~-			10,000
Accounts receivable, net		~~381,883~~-			47,705
Prepaid expenses		~~142~~377,~~042~~709			213,289
Total current assets		~~542~~477,~~018~~519			466,632
Non-current assets
Operating lease right-of-use assets		-			22,792,752
Real estate property and equipment, net		6,~~127~~086,~~735~~243			6,522,979
Intangible assets, net		3,~~312~~362,~~000~~375			3,680,000
Other long-term assets		264,258			288,155
Other non-current assets		278,902			288,155
Total assets	$	10,~~246~~205,~~011~~039		$	33,750,518
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	3,~~641~~449,~~431~~094		$	6,324,002
Accrued expenses		6,~~260~~136,~~831~~875			8,415,609
Derivative liabilities		5,~~675~~281,~~083~~612			2,320,547
Accrued interest		1,~~275~~769,~~823~~075			294,370
Related Party Payables		750,432			672,597
Related party payables		2,025,354			672,597
Deferred revenue		-			901,235
Current portion long-term debt		1719,~~007~~879,~~210~~095			16,347,290
Current portion of operating lease liabilities		-			2,907,605
Other current liabilities		1,~~086~~091,~~013~~009			1,140,106
Total current liabilities		3539,~~696~~632,~~823~~114			39,323,361
Long-term liabilities:
Operating lease liabilities, net of current portion		-			24,415,791
Long-term debt, less current portion, net		54,~~620~~544,~~489~~126			1,392,940
Total liabilities		4144,~~317~~176,~~313~~240			65,132,092
Mezzanine equity
Series F 6.75% Convertible Preferred Stock, $.001 par value, 5,000,000 share authorized, 4,369,529 and 4,797,052 issued and outstanding on June 30, 2023 and December 31, 2022, respectively. Liquidation value $99,125,693 and $96,296,493 on June 30, 2023 and December 31, 2022, respectively.		18,623,139			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)		-
Preferred Stock, $0.001 par value, 10,000,000 shares authorized		-			-
Stockholders’ Deficit:
Series A Convertible Preferred Stock, $0.001 par value, 2,000,000 shares authorized, 328,925 shares issued and outstanding, as of both June 30, 2023 and December 31, 2022. Liquidation value of $329 as of both June 30, 2023 and December 31, 2022		329			329
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 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, 25,977,628 and 20,805,448 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		25,978			20,805
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		22,~~985~~549,~~945~~271			16,098,182
Accumulated deficit		(8386,~~755~~222,~~699~~414	)		(79,671,065	)
Clearday, Inc. stockholders’ deficit		(6063,~~743~~646,~~447~~659	)		(63,551,749	)
Non-controlling interest in subsidiaries		1110,~~049~~568,~~006~~921			11,722,096
Clearday Inc. stockholder’s total deficit		(4953,~~694~~077,~~441~~738	)		(51,829,653	)
TOTAL LIABLITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT	$	10,~~246~~205,~~011~~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 ~~Six~~Nine Months Ended ~~June~~September 30, 2023, and 2022

(Unaudited)

	2023			2022			2023			2022
	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
REVENUES
Resident fee revenue, net	$	~~436~~618,~~684~~317		$	32,~~068~~946,~~470~~690		$	3,~~332~~950,~~010~~327		$	69,~~193~~139,~~231~~921
Adult day care		~~159~~190,~~766~~789			6466,~~724~~803			~~248~~439,~~807~~596			~~148~~215,~~620~~423
Commercial property rental revenue		22,~~581~~802			243,~~358~~809			4467,~~718~~520			347,~~919~~728
Total revenues		~~619~~831,~~031~~908			3,~~135~~057,~~552~~302			34,~~625~~457,~~535~~443			69,~~345~~403,~~770~~072
OPERATING EXPENSES
Wages & general operating expenses		~~851~~500,~~499~~264			4,~~437~~271,~~616~~412			45,~~697~~198,~~974~~238			913,~~071~~343,~~672~~084
Selling, general and administrative expenses		~~944~~565,~~385~~766			~~992~~1,~~433~~569,129			12,~~877~~088,~~016~~601			23,~~385~~016,~~803~~870
Depreciation and amortization expense		229,247			185,044			526,073			372,259
Pre-merger related expenses		703,125			-			703,125			-
Total operating expenses		2,025,131			5,615,093			7,101,063			11,829,734
Insurance expense		291,782			108,687			486,313			1,046,749
Operating loss		(1,406,100	)		(2,479,541	)		(3,475,528	)		(5,483,964	)
Bad debt expense		325,787			-			485,437			-
Depreciation and amortization expense		228,988			178,654			755,061			550,913
Total operating expenses		2,615,712			6,127,883			9,716,775			17,957,616
Operating loss		(1,783,804	)		(3,070,581	)		(5,259,332	)		(8,554,544	)
Other (income) expenses
Interest expense		1,~~719~~485,~~216~~132			~~395~~1,~~045~~030,979			23,~~434~~919,~~049~~180			~~896~~1,~~643~~927,622
PPP loan forgiveness		-			~~(349,500~~-	)		-			(992,316	)
Derivative financing costs		-			-			2,567,460			-
Fair value of derivative		(1,~~082~~029,~~946~~338	)		-			(~~482~~1,~~286~~511,624	)		-
Extinguishment of debt		-			-			653,814			-
Loss (gain) on extinguishment of debt		-			(1,642,476	)		653,814			(1,642,476	)
(Gain)/loss on disposal of asset		(5,925	)		-			100,542			-
Loss on disposal of assets		-			-			100,542			-
Loss on impairment								318,936
Loss on impairment of debt		723,324						1,042,260
(Gain)/loss on termination of lease		193,758			-			(4,336,886	)		-
Gain on termination of lease		-			-			(4,336,886	)		-
Other (income)/expenses		~~(198~~120,~~429~~443	)		(~~279~~1,~~011~~782,887	)		~~299~~420,~~695~~138			(~~422~~2,~~900~~205,787	)
Total other (income)/expenses, net		21,~~791~~299,~~566~~561			(~~233~~2,~~466~~394,384	)		12,~~555~~854,~~324~~884			(~~518~~2,~~573~~912,957	)
Net loss from continuing operations		(43,~~197~~083,~~666~~363	)		(2676,~~246,075~~197	)		(58,~~030~~114,~~852~~216	)		(45,~~965~~641,~~391~~588	)
Loss from discontinued operations, net of tax		-			~~(85~~582,~~753~~503	)		-			~~(170~~411,~~980~~523	)
Net loss		(43,~~197~~083,~~666~~363	)		(293,~~331,828~~694	)		(58,~~030~~114,~~852~~216	)		(5,~~136~~230,~~371~~065	)
Net loss attributable to non-controlling interest		(395,263	)		(74,147	)		(946,218	)		(218,412	)
Preferred stock dividend		(1,653,009	)		(1,666,980	)		(4,996,780	)		(4,941,921	)
Preferred stock dividend		(1,644,987	)		(1,655,926	)		(3,343,771	)		(3,274,941	)
Net loss attributable to common shareholders		(4,736,372	)		(1,760,672	)		(13,110,996	)		(10,171,985	)
Net loss attributable to Clearday, Inc. common stockholders	$	(6,237,916	)	$	(4,061,901	)	$	(9,320,841	)	$	(8,629,724	)
Net loss attributable to non-controlling interest		(616,649	)		(132,482	)		(1,562,867	)		(350,894	)
Basic and diluted loss per share attributable to Clearday, Inc.
Net loss attributable to Clearday, Inc. shareholders	$	(4,119,723	)	$	(1,893,156	)	$	(11,548,129	)	$	(10,522,880	)
Net loss from continued operations		(0.16	)		(0.13	)		(0.20	)		(0.30	)
Basic and diluted loss per share attributable to Clearday, Inc. shareholders
Net loss from discontinued operations		0.00			0.00			0.00			(0.01	)
Net loss from continued operations		(0.16	)		(0.04	)		(0.46	)		(0.33	)
Net loss		(0.16	)		(0.13	)		(0.20	)		(0.31	)
Net loss from discontinued operations		0.00			0.03			0.00			0.02
Weighted average common shares basic and diluted outstanding		25,468,230			17,775,792			24,721,121			16,408,710
Net loss		(0.16	)		(0.01	)		(0.46	)		(0.31	)
Weighted average common shares basic and diluted outstanding		26,097,002			18,168,228			25,162,174			16,993,322

See accompanying notes to the unaudited condensed consolidated financial statements.

Clearday, Inc.

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

~~Six~~ Nine Months Ended ~~June~~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				3,274,941		-		-						(3,274,941	)					(3,274,941	)					(3,274,941	)
PIK dividend accruals on convertible Series F Preferred stock		-		4,941,921		-		-		-				(4,941,921	)		-			(4,941,921	)		-			(4,941,921	)
Series F Preferred F Stock converted to common Stock						-		-		2,861,334		2,859		(2,853	)		-			6						6
Series F Preferred stock converted to common stock		-		-		-		-		2,861,334		2,859		(2,853	)		(669,904	)		(669,898	)		-			(669,898	)
Accrued of series I convertible Preferred Stock in subsidiary						-		-															273,128			273,128
Accrual of Series I Convertible Preferred stock in subsidiary		-		-		-		-		-		-		-			-			-			136,564			136,564
Series I adjustment						-		-									(669,904	)		(669,904	)					(669,904	)
Series I Convertible Preferred stock adjustment						-		-															273,128			273,128
Shares issued for Loan						-		-																		-
Stock compensation for services		-		-		-		-		280,000		280		398,920			-			399,200			-			399,200
Dissolution of Longhorn Hospitality														(3,871,239	)		3,871,239			-						-
Stock issued for loan										558,150		558		447,243						447,801						447,801
Net loss						-		-				-		-			(5,136,371	)		(5,136,371	)		(218,412	)		(5,354,783	)
Dissolution of Longhorn Hospitality		-		-		-		-		-		-		(3,871,239	)		3,871,239			-			-			-
Balance at June 30, 2022		4,797,052		20,132,208		328,925		329		17,775,792		17,774		9,920,448			(67,143,363	)		(57,204,812	)		11,385,411			(45,819,401	)
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.

	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					3,343,771											(3,343,771	)					(3,343,771	)					(3,343,771	)
PIK dividend accruals on Series F Preferred stock		-			4,996,780			-		-		-		-		(4,996,780	)		-			(4,996,780	)		-			(4,996,780	)
Series F Preferred F Stock converted to common Stock		(427,523	)		(5,168,712	)				-		616,253		616		5,168,096			-			5,168,712						5,168,712
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
Accrued of series I convertible Preferred Stock in subsidiary																									273,128			273,128
Accrual of Series I Convertible Preferred stock in subsidiary		-			-			-		-		-		-		-			-			-			409,692			409,692
Debt discount from derivative settlements		-			-			-		-		-		-		~~881~~927,~~127~~991			-			~~881~~927,~~127~~991			-			~~881~~927,~~127~~991
Stock Compensation for services												254,609		256		214,131						214,387						214,387
Stock compensation for services		-			-			-		-		292,829		294		214,130			-			214,424			-			214,424
Shares issued for Loan												83,160		83		70,602						70,685						70,685
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		-			-			-		-		-		-		-			(46,~~084~~551,~~634~~349	)		(46,~~084~~551,~~634~~349	)		(~~946~~1,~~218~~562,867	)		(58,~~030~~114,~~852~~216	)
Balance at June 30, 2023		4,369,529			18,623,139			328,925		329		25,977,628		25,978		22,985,945			(83,755,699	)		(60,743,447	)		11,049,006			(49,694,441	)
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,~~369~~311,~~529~~048			1819,~~623~~106,~~139~~537			328,925		329		2526,~~977~~155,~~628~~305		2526,~~978~~155		22,~~985~~549,~~945~~271			(8386,~~755~~222,~~699~~414	)		(6063,~~743~~646,~~447~~659	)		1110,~~049~~568,~~006~~921			(4953,~~694~~077,~~441~~738	)

See accompanying notes to the unaudited condensed consolidated financial statements.

Clearday, Inc.

Condensed Consolidated Statements Of Cash Flows

For The ~~Six~~Nine Months Ended ~~June~~September 30, 2023, and 2022

(Unaudited)

	June 30, 2023			June 30, 2022
	September 30, 2023			September 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(58,~~030~~114,~~852~~216	)	$	(5,~~136~~230,~~371~~065	)
Loss from discontinued operations, net of tax		-			(~~170~~411,~~980~~523	)
Loss from continued operations		(58,~~030~~114,~~852~~216	)		(45,~~965~~641,~~391~~588	)
Adjustments required to reconcile net loss to cash flows used in operating activities
Depreciation and amortization		~~526~~755,~~073~~061			~~372~~550,~~259~~913
Amortization of right of use assets		-			920,473
Shares issued for loan commitment		70,685			-
Shares issued for services		214,~~388~~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		~~273~~409,~~128~~692			-
Change in fair value of the derivatives		(482,286	)		-
Change in fair value of derivatives		(1,511,624	)		-
Amortization of debt discount related to derivatives		1,~~236~~973,~~995~~718			-
Amortization of debt issuance costs		~~115~~170,~~883~~919			~~433~~966,~~001~~052
Loss on extinguishment of debt		653,814			-(1,642,476	)
Loss on sale of fixed assets		100,542			-
Loss on impairment of debt – SPAC partner		1,042,260			-
Bad debt expense		159,650			-
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		(~~493~~437,~~828~~731	)		(6724,~~736~~054	)
Other current assets		~~23,897~~-			-
Prepaid expenses		71(164,~~247~~420	)		~~(243~~2,~~270~~666,713	)
Accounts payable		~~565~~373,~~411~~074			1,~~427~~420,~~151~~895
Accrued liabilities		12,~~845~~214,~~221~~518			(1,~~195~~524,~~821~~391	)
Other current liabilities		-			259,929
Deferred revenue		(901,235	)		-
Related party payables		771,~~835~~352,757			-
Other non-current assets		-9,253			680,335
Other liabilities		(54,093	)		(172,501	)
Other current liabilities		(49,097	)		552,845
Change in operating lease liability		-			(~~462~~383,~~233~~689	)
Net cash used in operating activities		(23,~~796~~121,~~951~~596	)		(12,~~874~~263,~~407~~858	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		136,630			-
Proceeds from sale of property and equipment		133,133			-
Payments for property and equipment		-			(28,310	)
Purchase of intangibles		(234,375	)
Net cash provided by (used in) investing activities of the continuing operations		136,630			(28,310	)
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 and notes payable		(903,429	)		(2,255,374	)
Payment of long-term debt		(1,136,280	)		(2,551,046	)
Borrowings on debt		3,376,205			3,394,568
Proceeds from borrowings on debt		4,253,290			3,878,139
Net cash provided by in financing activities		23,~~472~~117,~~776~~010			1,~~139~~327,~~194~~093
Change in cash and restricted cash from continuing operations		(~~187~~105,~~545~~828	)		(~~763~~965,~~523~~075	)
Change in cash and restricted cash from discontinued operations		-			~~(201,552~~-	)
Cash and restricted cash at beginning of the period		205,638			-975,075
Cash and restricted cash at end of period	$	1899,~~093~~810		$	~~(965~~10,~~075~~000	)
Reconciliation of cash and restricted cash consist of the following:
End of period
Cash and cash equivalents		899,~~093~~810			-
Restricted cash		~~10,000~~-			10,000
Total cash and restricted cash	$	1899,~~093~~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	$	~~215~~292,~~602~~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		56,~~168~~338,~~712~~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
Settlements on derivative liability		881,127			-
Debt discount on derivative liabilities		2,833,222		$	-
PIK dividends for Series F Preferred Stock		3,343,771			-
Settlements on derivative liabilities		927,993			-
Debt discount on derivative liability	$	2,150,489		$	-

See accompanying notes to the unaudited condensed consolidated financial statements.

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~~ was established in 1987 and closed a merger (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~~Tech ~~platform~~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-~~tech~~Tech ~~platform~~Platform. ~~During~~As of the second quarter of 2023, the Company ~~operated~~owns and operates one residential care facility and one adult daycare facility, and ~~marketed~~ 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 ~~June~~September 30, 2023, we have an accumulated deficit of $8386,~~755~~222,~~699~~414. During the ~~period~~nine months ended ~~June~~September 30, 2023, we had a net loss from operations of $58,~~030~~114,~~852~~ 216 and net cash used in operating activities of $23,~~796~~121,~~951~~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 capital that may be available in connection with the 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 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”). 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.

The certificate of incorporation of AIU Alt Care authorizes 1,500,000 shares of preferred stock designated as its Series I 10.25% cumulative convertible preferred stock, par value $0.01 per share (the “Alt Care Preferred Stock”) of which 700,000 is designated Alt Care Preferred Stock; and 1,500,000 of common stock. Each share of the Alt Care Preferred Stock has a stated value equal to the $10.00 Alt Care Preferred Stock original issue price.

AIU Alt Care formed AIU Impact Management, LLC, which is the sole general partner and manager of Clearday OZ Fund. Clearday OZ Fund allocates 99% of income gains and losses to the limited partners and 1% to its general partner (AIU Impact Management, LLC).

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 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~~Tech Platform and ~~personal~~Personal ~~care~~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.

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~~. Maintenance and repairs are charged to operations as incurred. Depreciation is ~~and amortization are~~ 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 years)
Buildings and building improvements		39
Leasehold improvements		15
Furniture and fixtures and equipment		7
Computer equipment and software		5

Intangible Assets, Net

Software Capitalization

~~With~~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 stage, both internal expenses and those paid to third parties are capitalized and amortized per FASB Topic ~~ASC350~~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~~ assets is reduced to fair value.

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.

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~~ 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~~ 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. 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 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.

	For the three-month period ended June 30,
	For the three-month period ended September 30,
	2023		%			2022		%
Revenue from contracts with customers:
Resident rent - over time	$	~~436~~618,~~684~~317		7074	%	$	32,~~068~~946,~~470~~690		9897	%
Day care – point in time		~~159~~190,~~766~~789		2623	%		6466,~~724~~803		2	%
Amenities and conveniences - point in time		22,~~581~~802		43	%		243,~~358~~809		01	%
Total revenue from contracts with customers	$	~~619~~831,~~031~~908		100	%	$	3,~~135~~057,~~552~~302		100	%

	For the six month periods ended June 30,
	For the nine-month periods ended September 30,
	2023		%			2022		%
Revenue from contracts with customers:
Resident rent - over time	$	3,~~332~~950,~~010~~327		9289	%		69,~~193~~139,~~231~~921		9897	%
Day care		248,807		7	%		148,620		2	%
Day care – point in time		439,596		10	%		215,423		2	%
Amenities and conveniences - point in time		4467,~~718~~520		1	%		347,~~919~~728		01	%
Total revenue from contracts with customers	$	34,~~625~~457,~~535~~443		100	%	$	69,~~345~~403,~~770~~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 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.

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~~ 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~~ 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~~ 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 ~~June~~September 30, ~~2023~~ 2023, and December 31, 2022:

June 30, 2023
September 30, 2023
	Level 1	~~Level 1~~	Level 2	~~Level 2~~	Level 3	~~Level 3~~	Total	~~Total~~
Derivative liability		-		-		5,675,083		5,675,083
Derivative liabilities		-		-		5,281,612		5,281,612

December 31, 2022
	Level 1	~~Level 1~~	Level 2	~~Level 2~~	Level 3	~~Level 3~~	Total	~~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 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 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 ~~June~~September 30, 2023, the Company estimated the fair value of the conversion feature derivatives embedded in ~~the~~its ~~notes~~debt ~~payable~~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 $0.8078; risk-free interest rates ranging from 4.1360% to 5.4755%; expected volatility of the Company’s common ~~stock~~ stock ranging from ~~135~~136% to ~~310~~187%; estimated exercise prices ranging from $0.35 to $0.75; and terms from one to sixty months.

At December 31, 2022, the Company estimated the fair value of the conversion feature derivatives embedded in ~~the~~debt ~~notes~~instruments ~~payable~~ 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 $0.43; and terms from three to sixty months.

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:

Balance - December 31, 2022	$	2,320,547
Additions		45,~~717~~400,~~949~~682
Settlements		(~~881~~927,~~127~~993	)
Change in fair value		(~~482~~1,~~286~~511,624	)
Balance - June 30, 2023	$	5,675,083
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~~ 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 ~~six~~nine months ended ~~June~~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 ~~six~~nine months ended ~~June~~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~~ 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 Right of Use (“ROU”) assets were written off effective March 31, 2023, when the Company disposed of the three leased ~~properties~~ 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~~ 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.

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.

~~Company~~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~~ 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 (loss) attributable to 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 establishes accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the ~~amount~~ amount of the loss can be reasonably estimated. Also, the defense and resolution of these claims, lawsuits, and regulatory and other ~~government~~ 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 ~~Issued~~Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 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”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equityNone. 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 beginning after December 15, 2023. The Company is currently evaluating the impact that ASU 2020-06 may have on its condensed consolidated financial statements and related disclosures.

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) 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), 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. ASU 2020-06 is effective for the Company beginning 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.

CLEARDAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 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 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:

	June 30, 2023			December 31, 2022
	September 30, 2023			December 31, 2022
Land	$	2,081,~~879~~878		$	2,231,879
Building and building improvements		4,975,244			4,975,243
Leasehold Improvements		710,317			846,754
Computers		57,166			332,809
Furniture, fixtures, and equipment		7275,~~213~~710			1,379,219
Other Equipment		74,935			518,145
Construction in progress		138,187			138,187
Total		8,~~109~~113,~~941~~437			10,422,236
Less accumulated depreciation		(1,982,206	)		(3,899,257	)
Real estate, property and equipment, gross		8,113,437			10,422,236
Real estate, property and equipment, net	$	6,127,735		$	6,522,979
Less accumulated depreciation		(2,027,194	)		(3,899,257	)
Real estate, property and equipment, net	$	6,086,243		$	6,522,979

The Company recorded depreciation expenses relating to real estate, property, and equipment in the amount of $~~526~~203,~~073~~061 and $~~372~~550,~~259~~ 913 for the nine-months ~~periods~~ ended ~~June~~September 30, 2023, and September 2022, respectively.

4. Intangible Assets, Net

Software Capitalization.

AtThe net carrying amount of our internally ~~June~~developed ~~30,~~software ~~2023~~related ~~and~~to ~~June~~our ~~30,~~Longevity ~~2022,~~Tech Platform totaled $3,~~312~~362,~~000~~375 at September 30, 2023, and $3,680,000 at December 30, 2022. We added $234,375 of ~~respectively~~development ~~were~~costs in the ~~balances~~three ~~that~~months ended September 30, 2023, for ongoing platform enhancements are expected to 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 over its estimated life. Currently, $3,128,000 is being amortized based on the estimated useful life of five years. The Company began this amortization starting January 1, 2023.

Developed intangible assets subject to amortization are as follows:

		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Remaining Useful Life (Years)
	September 30, 2023
		June 30, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Remaining Useful Life (Years)
		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
Developed technology		3,680,000	$	368,000	$	3,312,000		4.50
Technology for future deployment		234,375		-		234,375
Total Intangible assets	$	3,914,375	$	552,000	$	3,362,375

The Company recorded amortization expense related to its intangible assets in the amounts of $~~368~~552,000 and $0 for the ~~periods~~nine months ended ~~June~~ September 30, 2023, and ~~June~~September 30, 2022, respectively.

Expected future amortization expense for intangible assets as of ~~June~~September 30, 2023, is as follows:

Fiscal Years
2023 (remaining)	$	~~368~~184,000
2024		736,000
2025		736,000
2026		736,000
2027		736,000
Thereafter		-
Total	$	3,~~312~~128,000

CLEARDAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted-Average Remaining Useful Life (Years)
	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 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 removed ~~right~~the ofrelated ~~use liabilities~~ROU assets and ~~right~~ROU ofliabilities ~~use assets related to these Community Leases,~~ as of ~~December~~March 31, ~~2022~~2023. ~~and~~Additionally, the ~~write-off or elimination of the~~ related net leasehold improvements and personal property in these 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 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 (the “~~Viveon Merger”) with Viveon ~~Health Acquisition Corp.~~, a ~~Delaware corporation (“Viveon”), 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, which under the terms of the ~~First~~amendment ~~Amendment~~ to the Lease Transition Agreement, ishas ~~September~~been 30extended 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 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 extension fee payable under the LTA First Amendment.

CLEARDAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In connection with the Lease 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 ~~provided 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 entered into new agreements with the residents at the Communities, effective the Commencement Date and were responsible for any operating losses of the facilities from and after March 31, 2023. The Current Operators have provided notice to each of the residents at the Communities that their agreements with the Current Operators have been terminated, effective on the Commencement Date. 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. The New Communities Operators have employed, or offered employment to, all of our employees at these communities and will fund and be responsible for any operating cash losses for the Communities.

6. Indebtedness

AsAt ofSeptember ~~June~~ 30, 2023, the Company had total outstanding debt in the amount of $24,423,221, net of debt discount and derivatives, of which $19,879,095 was, current. At December 31, 2022, the ~~current~~Company ~~portion~~had oftotal ~~long-term~~outstanding debt ~~within~~in the ~~Company’s~~amount ~~condensed~~of ~~consolidated financial statements was~~ $17,~~007~~740,~~210~~230, net of debt discount and derivatives, of which $16,347,290 was current. During the nine months ended September 30, 2023, and 2022, we incurred interest expenses totaling $3,919,180 and $1,927,622, respectively.

~~During the six months ended June 30, 2023 and 2022, we incurred interest expense totaling $1,197,054 and $896,643, respectively.~~14

CLEARDAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes ~~the~~future ~~Company’s~~payments ~~debt~~required asto ofbe ~~June~~made ~~30,~~on ~~2023~~the ~~and~~Company’s ~~December 31, 2022:~~debt.

Schedule of Long Term Debt

As of June 30,	Total
At September 30,	Total
2023		15,615,892
2024		16,059,812
2024		2,333,909
2025		5,471,130
2025		4,956,948
2026		4,049,224
2026		1,518,682
2027		-
Thereafter		-
2028		-
Total obligations	$	24,425,431
Thereafter		494,900
Total obligations	$	26,075,066

~~Indebtedness~~The offollowing ~~Facilities~~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 at September 30, 2023, and December 31, 2022:

Indebtedness of Facilities and Properties

Schedule of Maturity Debt

	Maturity Date	Interest Rate			~~June~~September 30, 2023		December 31, 2022
Naples Equity Loan ^	May 2023		9.95	%	$	4,550,000	$	4,550,000
Gearhart Loan ^	December 2022		7.00	%		193,578		193,578
SBA PPP Loans #	February 2022		1.00	%		1,518,682		1,518,682
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
1800 Diagonal Lending	~~October~~February 2024		12.00	%		4594,~~303~~016		116,760
1800 Diagonal Lending	February 2024		12.00	%		134,723		-
Equity Secure Fund I, LLC*	March 2024		18.00	%		1,097,610		1,000,000
Invesque, Inc.	July 2025		10.00	%		3,977,470
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
Little Rock Libertas	February 2023	0.00	%		326,330		326,330
PIRS Capital Financing Agreement	March 2023	0.00	%		144,659		144,659
Naples Samson #1	May 2023	0.00	%		76,916		76,916
Naples LG Funding #2	April 2023	0.00	%		171,170		171,170
Little Rock Premium Funding	April 2023	0.00	%		211,313		211,313
Little Rock KIT Funding	December 2022	0.00	%		89,400		89,400
Little Rock Samson Funding #4	February 2023	0.00	%		170,501		170,501
Naples Operating SWIFT	December 2022	0.00	%		111,750		111,750
New Braunfels Samson Cloud Fund	February 2023	0.00	%		308,035		308,035
New Braunfels Samson Group	February 2023	0.00	%		375,804		375,804
Westover Hills One River	December 2022	0.00	%		128,298		128,301
Westover Hills FOX Capitol	March 2023	0.00	%		109,384		109,384
Westover Hills Arsenal	October 2023	0.00	%		95,882		95,882
Westover Samson Funding	March 2023	0.00	%		267,754		267,754
Subtotal merchant cash advance loans					2,925,196		2,925,199
Notional amount of debt					14,~~442,~~562,922		10,434,193
Less: current maturities					14,~~442,~~562,922		10,434,193
				$	-	$	-

1615

CLEARDAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Indebtedness Allocated to real estate

Real Estate:
Artesia Note	~~June~~September 2033	Variable		$	-	$	211,721
Carpenter Enterprises	Demand Note	Variable			~~237~~178,~~180~~346		300,000
Leander Stearns National Association	February 2023	10.38	%		805,000		805,000
Notional amount of debt					1983,~~042,180~~346		1,316,721
Less: current maturities					~~805~~983,~~000~~346		805,000
				$	~~237,180~~-	$	511,721

Other (Corporate) Indebtedness

AGP Contract ^	March 2023	5.00	%	$	550,000		$	550,000
AGP Contract and Note^***	March 2023	5.00	%	$	550,000		$	550,000
Cibolo Creek Partners	December 2025	0.09	%		~~388~~358,~~276~~008			421,470
Cibolo Creek Partners promissory note	December 2025	0.09	%		9150,~~208~~215			96,208
EIDL SBA Treas 310	December 2051	3.75	%		494,900			494,900
Firstfire	May 2023	12.00	%		~~(1,378~~-	)		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	%		~~500~~557,~~000~~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			-
Mast Hill LP (January 2023) @	January 2024	12.00	%		756,000			-
Bridge Financings		8.00			685,000			-
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					57,~~799~~387,~~689~~798			3,852,587
Less: current maturities					15,~~942~~984,~~422~~672			2,340,009
				$	31,~~857~~403,~~267~~126		$	1,512,578
TIC Purchase Agreements	No Specified Date	8.00	%	$	3,141,000		$	3,141,000
		Total			2426,~~425~~075,~~431~~066			18,744,501
Less Debt Discount & Derivatives		~~Less Debt Discount & Derivatives~~			(1,~~797~~651,~~732~~845	)		(1,004,271	)
		Total		$	2224,~~627~~423,~~699~~221		$	17,740,230

^	Obligation is in default. ~~Interest~~The interest rate set forth is the stated ~~rated~~rate of interest. The actual rate of 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 7 — 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 collection of default interest and other amounts, and in the case of Mast Hill to exercise the Lender Remedy Warrants described in Note 10 — Deficit. ~~Jefferson Street Capital LLC has granted a forbearance to October 31, 2023.~~ Mast Hill LP ~~has~~ granted a forbearance dated October 4, 2023 until the earlier of (i) the closing of the ~~merger~~Viveon (“Merger”) ~~with Viveon Health Acquisition Corp under the merger agreement dated as of April 5, 2023, as amended,~~ (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 ~~the~~ 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”). ~~There~~Jefferson Street Capital LLC granted a forbearance to October 31, 2023, but as of the date of this 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 ~~the~~we ~~Company~~ will be able to extend any the forbearances with any of these lenders on acceptable terms or at all or that ~~Clearday~~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 ~~have~~were ~~been~~ modified asin ofthe ~~June~~third 5,quarter of 2023.
**	Obligation amended and is in default as of the date of this Report as described 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.

1716

CLEARDAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Equity Secure Fund I, LLC Modification

As of ~~June~~September 5, 2023, AIU 8800 Village Drive, LLC, the 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 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 ~~received certain advances that are payable on demand and on October 6, 2023,~~ issued Senior Convertible Notes (“Bridge Notes”) asduring ~~payment of such advances with interest accruing under Bridge Note as of the date of each such advance~~2023. The Company is continuing such ~~offering~~ 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 Event of Default as defined in the Bridge Note. The Bridge Notes will be payable on ~~June~~ September 30, 2024 (the “Bridge Note Maturity Date”). The Bridge Notes will provide for conversion into shares of our common stock based on a contingency. ~~In the~~If ~~event that~~ the ~~merger agreement dated as of April 5, 2023, as amended, (the “~~Viveon Merger ~~Agreement”) with Viveon Health Acquisition Corp., a Delaware corporation (“Viveon”) providing for the proposed merger (“Viveon Merger”)~~ is terminated, then the conversion price for our shares of common stock will be the lower of $0.82 per share and a price per share equal to a 25% discount to the 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 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 any stock split, reverse stock split, merger, consolidation, combination or similar transactions, and such shares of our common stock will be exchanged for shares of Viveon common stock 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 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 Form 10-Q for the quarter ending June 30, 2023, that was filed on October 17, 2023.

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 $300,000 to $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 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 (“AGP Second Amended Note”), effective December 31, 2023, that amends Clearday’s obligations under the Promissory Note and Amendment (the “AGP First Amended Note”) dated July 6, 2022 of the initial principal amount of $550,000. The AGP First Amended Note amended the obligations under the Promissory Note 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 $578,795.89 which equals the principal amount of the AGP First Amended Note of $550,000 plus accrued and unpaid interest, extended the maturity date to the 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.

7. Commitments and Contingencies

Contingencies

Simpsonville litigation

~~The~~Simpsonville Action 1 - The tenant, MCA Simpsonville Operating Company LLC, ~~referred to as~~ (“Tenant”), of the MCA community ~~that is~~ located in Simpsonville, South Carolina, ~~referred~~ ~~to as~~ (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”), and its affiliates (– the Embree Group of Companies: ~~Embree Construction Group, Inc., Embree Asset Group, Inc., and Embree Capital Markets Group, Inc., referred to~~ collectively as (“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~~The ~~Person, et. al., Cause No. 19-0651-C368 in the 368th Judicial District Court of Williamson County, Texas. After the~~ trial court issued a judgment onin ~~damages~~this inlitigation ~~the~~and ~~amount~~assessed damages of $2,801,365. ~~and~~The ~~appeals~~judgement ofwas ~~this~~appealed ~~judgment~~but ~~this~~subsequently ~~action was~~ settled on August 5, 2022, asin ~~reflected~~favor byof anthe ~~Agreed~~plaintiff ~~Final~~with ~~Judgment~~a ~~for~~final anjudgment ~~aggregate amount~~ of $3,012,011, including costs and expenses ~~in favor of the plaintiff~~, of which $2,763,936 ~~was~~ was settled by the release of a cash bond that Tenant previously deposited with the Court. ~~and~~The ~~the~~ remaining amount of $248,075 was 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 and permitted the ~~lease~~Landlord ofto sell the Simpsonville Facility asto ~~contemplated~~a bythird party ~~such~~thereby ~~agreement~~limiting tothe ~~transfer~~future ofobligations ~~certain~~under ~~operations,~~the ~~including~~ lease. ~~obligations~~At September 30, ~~which~~ ~~permitted~~2023, the ~~Landlord~~total tooutstanding ~~sell~~amount ~~the~~owed for Simpsonville ~~Facility~~Action to1 ais ~~third~~$313,298 ~~party~~ and is ~~thereby~~recorded ~~limit~~in Accrued Expenses on the ~~future~~Company’s ~~obligations~~condensed ~~under~~consolidated ~~the~~balance ~~lease~~sheet.

The Landlord filed a second action on April 9, 2021 (Simpsonville Action 2), for claims similar to Simpsonville Action 1 including relief for payment of rent past due 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 judgment in this matter in favor of the Landlord on April 14, 2023. 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 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.” 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.”17

~~Under the structure used for the lease and operations of the Simpsonville Facility~~CLEARDAY, ~~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~~INC. Neither Tenant or 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 to negotiate a settlement of the summary judgement. There can be no assurance that any such settlement discussions will be held or that there will be any settlement of these actions on terms that are acceptable or at all.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Simpsonville Action 2 - The Landlord filed a second action on April 9, 2021 (“Simpsonville Action 2”), for claims similar to Simpsonville Action 1 including relief for payment of past due rent and reimbursement of taxes from October 2020 to the time of the trial in this action. The court granted a final judgment in this matter in favor of the Landlord on April 14, 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.” 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, Tenant is the direct obligor under the lease and another subsidiary of Clearday, Trident, is a guarantor of the lease obligations. Neither Tenant nor 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 attempted to negotiate a settlement of the summary judgement; however, such 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 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~~ 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 ~~June~~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~~273,~~000~~322. The Company has accrued this amount in its financial statements as of September ~~June~~ 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 ~~accrued~~recorded the amount of the underpayment inof ~~its~~approximately ~~financial~~$1,241,180 ~~statements~~and $527,000, as of ~~June~~September 30, 2023, and December 31, 2022, ofrespectively including ~~approximately~~any $1taxes,~~197~~ penalties,~~672~~ and ~~$527,000,~~interest ~~respectively,~~in ~~which~~“Accrued ~~amount~~expenses” ~~does~~its ~~not~~condensed ~~include~~consolidated ~~any~~balance ~~taxes, penalties, and interest~~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~~ 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~~418,~~000~~ 098 in such payroll 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. There is no assurance that any such tax credits will be received.

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~~ 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 $2,925,196, as summarized in Note 6 — 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~~403,~~640~~863, plus other costs, fees and certain other 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 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 such judgement was not appealed by us, and this judgement was entered in the 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 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 (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 anthe ~~officer~~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, Florida (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 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, ~~2023We~~2023. ~~believe~~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 ~~fair~~property. ~~value~~We ofand 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 mortgaged property has a fair value that is is significantly greater than the amount of the mortgage obligations and ~~intends~~we intend to negotiate a forbearance or other modification of ~~the~~ 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~~The ~~Stearns~~Company ~~National~~has ~~Association,~~been ~~the~~threatened ~~mortgage~~with ~~lender~~litigation ~~for~~by the ~~property~~law ~~(“Leander~~firm ~~Property”)~~Rigrodsky ~~owned by Leander Associates~~Law, ~~Ltd~~ P.,A. ~~(“Leander”),~~alleging aunjust ~~Texas~~enrichment ~~limited~~in ~~partnership~~connection ~~that~~with ~~is a consolidated subsidiary of Clearday, Inc., has commenced~~stockholder litigation ~~regarding~~commenced ~~the~~by ~~nonpayment~~such offirm arelated ~~mortgage~~to ~~loan~~the ~~obligations~~AIU ofMerger ~~approximately~~and ~~$875,000~~claiming ~~seeking repayment~~damages of ~~the mortgage loan of~~ $~~805~~200,000 ~~that was due February 10, 2023, and additional amounts, including interest and late fees~~. ~~Leander~~This ~~and~~law ~~the~~firm ~~mortgage~~alleges ~~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~~complaint ~~monthly~~filed ~~installment~~caused ~~payments~~material tosupplemental 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 Notedisclosures. The ~~mortgage~~Company 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 inassessing ~~excess~~these ofallegations ~~the amounts owed to the mortgage lender~~ and ~~the~~expects ~~other financing by us owed~~ to ~~KOBO~~respond ~~LP with respect to the Leander Property~~appropriately. 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.

CLEARDAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In addition, from time to time, the Company becomes involved in litigation matters in the ordinary course of its business. Such litigations include annonpayment ~~action that alleges negligence and other claims regarding the death~~ of aaccounts ~~resident in a memory care facility~~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 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.

CLEARDAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8. Earnings Per Share

Basic net income (loss) per common share is calculated by dividing the net income (loss) attributable to 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~~Clearday ~~stockholders~~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.

~~The~~Following ~~following~~is ~~tables set forth~~ the ~~potentially~~Company’s ~~dilutive~~earnings ~~shares~~per ~~that~~share ~~were~~calculation ~~anti-dilutive~~included in ~~their respective periods as~~ the ~~Company~~condensed ~~had~~consolidated ~~net losses~~statements ~~for~~of ~~the periods ended June 30~~operation, ~~2023 and 2022, respectively.~~

	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 September 30, 2023, and 2022, respectively.

	2023	~~2023~~	2022	~~2022~~
		For the Six Months Ended
	For the Nine Months Ended
Dilution shares calculation	~~June~~September 30,
	2023	~~2023~~	2022	~~2022~~
Series A Convertible Preferred Stock		328,925		328,925
Series F 6.75% Convertible Preferred Stock		4,~~538~~311,~~616~~048		4,797,052
Series I 10.25% Convertible Preferred Stock		1,365,640		320,657
Limited Partnership Units		99,038		99,038
Warrants		73,~~618~~902,~~820~~081		4,036,320
Bridge Notes		835,366		-
Total participating securities		1410,~~786~~842,~~405~~098		9,581,992

CLEARDAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9. Related Party Transactions

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 1% 2% 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. 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 the amount of $~~336~~344,~~538~~ 969 including principal and; interest (ii) past due rent for ~~our~~ robots of approximately $~~127~~162,~~933 including~~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; (3) B.J. Parrish, our Chief Operating Officer $4469,~~722~~ 532 in loan guaranty fees.; (4) Steve ~~Parsons~~Persons, our shareholder $2463,~~198~~ 193 in loan guaranty fees.; (5) Christen ~~Hemmings~~Hemmens, our isV.P ~~owed~~and Director of Education approximately $~~130~~120,~~000~~ 300 in unsecured short term non-interest-bearing debt and ~~additional amounts~~ $14,000 for loan guaranty fees. (6) Kelly Rio, a shareholder and former employee $16,000 for a loan that she made to the Company

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 specified by such lender. In December 2018, AIU acquired businesses affiliated with Cibolo Creek. As of ~~June~~September 30, 2023, AIU Sixth Street, Cibolo Creek and Round Rock were owed $~~479~~0,~~484~~ $408,223 and $500,000 respectively, by the Company. As of December 31, 2022, AIU, ~~Inc.~~Sixth Street, Cibolo Creek and Round Rock were owed $8949,~~381~~493, $517,678 and $500,000 respectively, by the Company. These amounts are included in Note 6 – Indebtedness.

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 Levychin is a partner of this firm and member of our audit committee. We had accounts payable in 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 nine months ended September 30, 2023, and paid this firm approximately $37,500 during 2022.

Thinktiv

Clearday has engaged Thinktiv, Inc. to provide services under the terms of a previously reported Services Agreement dated as of March 6, 2019, by and 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 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 Company, for ~~the~~ land of 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 ~~the basis of~~ a 360-day year, less $19,075. Stockdale is required to pay Mr. Walesa the approximate sum of $1,590 ~~per~~ 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 the Stockdale’s repurchase right terminates, on ~~June~~September 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.

Viveon Merger

We have agreed to invest approximately 48% of the net proceeds from advances orof the issuance of our Bridge Notes with Viveon. As of ~~June~~ September 30, 2023, we have invested ~~approximately~~ $~~319~~1,~~000~~ 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 ~~approximately~~ $~~558~~732,~~700~~ 762 as of ~~August~~December 118, 2023, for a total investment of ~~approximately~~ $~~877~~1,~~600~~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 anreserve ~~allowance~~against ~~for doubtful accounts in~~ 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 that will be issued in the Merger to increase the valuation of Clearday to $500 million based on, among other factors, the demonstrated benefits of Clearday’s ~~longevity~~Longevity ~~care~~Tech ~~platform~~Platform.

10. Equity (Deficit)

~~The~~Accumulated ~~certificate of incorporation of Clearday, Inc. provides for 80,000,000 authorized shares of Common Stock and 10,000,000 authorized shares of preferred stock, each par value $0.001 per share.~~Deficit

~~Liquidation~~As ~~Preference~~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. For the year ended December 31, 2022, we had a net loss from operations of $14,462,738.

InPreferred 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.Stock

21The Company has 10,000,000 authorized shares of Preferred Stock at a par value of $0.001.

The Company has 2,000,000 authorized shares of Series A Convertible Preferred Stock at a par value of $.001, of which 328,925 shares were issued and outstanding 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,

Common Stock

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 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.

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.

~~Holders~~Voting Rights - Each holder of common stock ~~have~~is noentitled ~~preemptive,~~to ~~conversion~~one orvote ~~subscription~~for ~~rights,~~each ~~and~~share ~~there~~on isall nomatters ~~redemption~~submitted orto ~~sinking~~a ~~fund~~vote ~~provisions~~of ~~applicable~~the stockholders, toincluding the ~~common~~election ~~stock~~of directors. The ~~rights,~~Company’s ~~preferences~~amended and ~~privileges~~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 ~~common~~most ~~stock~~of ~~are~~the ~~subject~~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 ~~adversely affected~~removed only for cause by, the ~~rights~~affirmative vote of the holders of ~~shares~~at least 75% of ~~any~~the ~~series~~consolidated ofvoting ~~preferred~~power ~~stock,~~of ~~which~~all the Company’s ~~may~~stockholders entitled ~~designate~~to ~~and~~vote ~~issue~~on in the ~~future~~election of directors, voting together as a single class.

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.

~~Preferred~~Restricted Stock - During the third quarter of 2023, we did not issue any shares of our common stock to consultants.

~~The~~Registered ~~Company~~Shares ~~has~~- ~~5,000,000~~During ~~shares~~the ofthird ~~Series~~quarter ~~F 6.75% cumulative convertible common stock, $0.001 par value, authorized with 4,369,529 and 4,797,052 issued and outstanding as~~ of ~~June 30,~~ 2023, ~~and~~we ~~December~~issued ~~31,~~approximately ~~2022~~139,457 ~~respectively.~~shares ~~The Series F Preferred Stock has a stated value~~ of ~~$20.00 per~~common ~~share~~stock isupon ~~exchangeable at~~ the ~~option~~conversion of ~~the~~our ~~holder into approximately 2.38 shares of the Company’s Common Stock, subject to~~Series ~~adjustment~~F ~~for~~Preferred ~~specified fundamental transactions such as~~ stock ~~splits, reverse stock splits and stock combinations~~. ~~See~~Such ~~Note~~shares 11were ~~— Mezzanine~~registered ~~Equity,~~under ~~for~~our ~~accounting~~prior ~~treatment~~registration ~~of the Series F Preferred Stock~~statement.

~~The~~Stock ~~Company’s~~Options ~~Series~~- AOn ~~Preferred~~September ~~Stock~~30, ~~has~~2023, awe ~~$.001~~continued ~~par~~to ~~value,~~have ~~2,000,000~~the ~~shares~~two ~~authorized~~active equity award option plans, the 2003 Equity Incentive Plan and the ~~328~~2013 Equity Incentive Plan (collectively,~~925~~ ~~shares~~the ~~issued~~“Stock ~~and~~Option ~~outstanding~~Plan”). Although we can only grant new options under the as2013 ofEquity ~~June~~Incentive 30Plan. Under our Stock Option Plan, ~~2023~~stock ~~and~~awards ~~December~~were 31made to our former directors, ~~2022.~~key ~~Except~~employees, ~~for~~consultants, and anon-employee ~~preference~~directors onand ~~liquidation~~consisted of ~~$0.01~~stock ~~per~~options, ~~share~~restricted stock awards, ~~each~~performance ~~share~~awards, ofand ~~Series~~performance Ashare ~~Preferred~~awards. Stock isoptions were granted at prices no less than the ~~economic~~market ~~equivalent~~value ofon ~~ten~~the ~~twelfths~~date of agrant. ~~share~~There ofwere ~~common~~no stock ~~into~~options ~~which~~that itwere isexercisable on ~~convertible.~~September ~~Except~~30, as2023, ~~required~~and bythere ~~law,~~ were no stock options exercised during the ~~Series~~nine Aand ~~Preferred~~twelve ~~Stock~~months ~~will~~ended ~~not~~September ~~have~~30, ~~any~~2023, ~~voting~~or ~~rights~~December 31, 2022.

~~Dividends~~Stock ~~and~~Compensation ~~Distributions~~- At September 30, 2023, there was no unamortized stock compensation.

~~For the six-month periods ended June 30, 2023, and 2022, the Company accrued dividends for the 6.75% Series F preferred stock in the amount of $3,343,771 and $1,655,926 respectively.~~ 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. (“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 ~~June~~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
	Common Shares
	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
Warrants related to October 2019 financing		100,719		100,719	$	5.39	October 10, 2024
Warrants related to October 2019 financing		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:

	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 ~~June~~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 $5.00 per 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.

2324

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~~:

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
	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*
Related to the September 30, 2022, Financing (Mast Hill LP)		472,500		0-	$	0.5075	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*

* 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

During the period ended ~~June~~September 30, 2023, the Company calculated the fair value of the warrants ~~granted~~outstanding based on assumptions used in ~~the~~ the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock on the date of of issuance ranging from $0.75 to $0.85; risk-free interest rates ranging from 3.53% to .474.06%; volatility ranging from 183% to ~~184~~187% based on the historical volatility of the Company’s common stock; exercise prices ranging from $0.50 to $0.75; and terms of sixty months.

~~Stock Options~~25

On June 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 option exercises during the six and twelve months ended June 30, 2023 or December 31, 2022. There were no stock options that were exercisable on June 30, 2023.

CLEARDAY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock

During the second quarter of 2023, we issued approximately 208,430 shares of our common stock to consultants, including a former employee.

Registered Shares

During the second quarter of 2023, we issued approximately 616,253 shares of common stock upon the conversion of our Series F Preferred stock. Such shares were registered under our prior registration statement.

As of June 30, 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 ~~six~~nine months ended ~~June~~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 ~~June~~September 30, 2023, and 2022, there was no amount invested in Clearday OZ 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~~common ~~Stock~~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 ~~June~~September 30, 2023, and 2022 the loss for AIU Alt Care is ~~$38,394~~as and Clearday Oz Fund loss is $917,382. Based on 99% ownership interest, AIU Alt Care and Clearday OZ fund incurred a loss attributable to the NCI in the amount of $38,010 and $908,208, respectively in the period ended June 30, 2023 and incurred gains of $1,663 and losses of $218,412, respectively, for the period ended June 30, 2022.follows:

	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~~At ~~the~~September ~~period ended June~~ 30, 2023, no89,700 ~~additional~~ shares of AIU Alt Care Preferred Stock orwere outstanding and 244,473 units of Clearday OZ LP Interests were ~~issued~~ outstanding. AtFor ~~June~~ the nine months ended September 30, 2023, ~~89,700~~no additional shares of AIU Alt Care Preferred Stock ~~were~~or ~~outstanding and 244,473 units of~~ Clearday OZ LP Interests were ~~outstanding~~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.

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 $409,692 for the ~~six~~nine-month period ended ~~June~~September 30, 2023.

2526

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.

11. Mezzanine Equity

The Company has 105,000,000 ~~shares of preferred stock~~ authorized, ~~par value $0.001 per share, including 5,000,000 designated as Series F Preferred Stock and 4,369,529~~ shares ~~outstanding as~~ of ~~June 30, 2023. Pursuant to the Certificate of Designations of~~ Series F ~~Preferred~~6.75% ~~Stock, upon~~Convertible 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 Preferred Stock ~~that~~at a ~~transaction~~par isvalue ~~not a Deemed Liquidation Event, the holders~~ of ~~then~~$0.001 ~~outstanding~~per Series F 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 andshare, ~~plus any accumulated and unpaid dividends. As the payment~~ of ~~this~~which ~~Preference Amount is not solely within the control of the Company~~4, ~~the Series F Preferred Stock does not qualify as permanent~~311,048 ~~equity~~ and ~~has~~4,797,052 ~~been~~shares ~~classified~~were asissued ~~mezzanine equity. The Series F Preferred Stock is not redeemable,~~ and itoutstanding ~~was not probable that there would be a Liquidation Event~~ as of ~~June~~September 30, 2023~~. Therefore~~, ~~the~~and ~~Company~~December is31, ~~not currently required to accrete the Series F Preferred Stock to the aggregate liquidation value~~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 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 equity. The Series F Convertible Preferred Stock is not redeemable, and it was not probable that there would be a Liquidation Event as of 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.

12. Subsequent Events

We evaluated subsequent events and transactions occurring after ~~June~~September 30, 2023, through the date of this 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~~Leander ~~Merger~~Property Sale

~~Amendment~~Stearns toBank National Association (the ~~Viveon~~“Mortgage ~~Merger~~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.

~~On August 28, 2023, Viveon, its subsidiary VHAC2 Merger Sub, Inc., a Delaware~~Extinguishment 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~~Indebtedness 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~~Merchant onadvance ~~August 29, 2023, as Exhibit 2.1, the terms of which are incorporated by reference herein.~~loans

~~Modification~~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.

A subsidiary of the Company, Leander Associates Ltd., modified the terms of its mortgage loan as described in Note 7 — Commitments and Contingencies.

Bridge Financings

We incurred additional financings of a gross amount of approximately $1.7 million as advances and the issuances of the Bridge Notes described in Note 6 — Indebtedness, of which we shared approximately $768,000 with Viveon as described in Note 9 — Related Party Transactions.

Additional Financings

WeBridge Financings ~~received~~- ~~approximately~~Through ~~$58~~December 8,~~000~~ ~~as an advance from KOBO~~2023, ~~L.P.~~we ~~(“Kobo”) and~~incurred ~~are~~additional ~~negotiating~~financings anof ~~amendment~~a togross ~~the~~amount ~~Property~~of ~~Sale Proceeds Advance to reflect this advance and waive the prior payment defaults by~~$1,575,000 ~~Leander.~~as Weadvances ~~expect~~from ~~that this amendment will provide that~~ the ~~sole~~issuances ~~owner~~ of ~~Leander~~the ~~will~~Bridge ~~provide~~Notes ~~grant a security interest~~ described in ~~Leander~~Note ~~and, if~~6 ~~Kobo~~— ~~is required to enforce its remedies for any additional default~~Indebtedness, ~~that the net proceeds~~ of ~~any~~which ~~sale~~we ofshared ~~the Leander Property above~~$732,762 ~~the~~with Viveon ~~mortgage~~pursuant ~~obligation~~to ~~and~~ the ~~amounts~~arrangement ~~owed~~described toin ~~Kobo~~Note ~~will~~9 be— ~~shared:~~Related ~~80%~~Party toTransactions ~~Kobo~~– ~~and~~Viveon ~~20% to us~~Merger.

26Modification of Indebtedness

The Company modified the indebtedness owed to Invesque and to AGP as summarized in Note 6 - Indebtedness.

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

The following discussion should be read in conjunction with the 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~~ 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~~longevity-tech platform for the estimated 170 million Americans turning 50 by 2030. Our ~~Longevity~~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.

WeDuring ~~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 of the~~ first ~~quarter~~nine ofmonths ~~2023 and the beginning~~ of ~~the second quarter 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~~ that has its shares of common stock listed on the ~~NYSE~~New ~~American~~York ~~exchange;~~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 ~~(“MCA~~in ~~Facility Leases”) of~~ these three facilities ~~(“MCA 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 MCA Facility Leases ~~will~~has ~~significantly~~improved ~~change~~ our financial operations and cash flows ~~for a period following March 31~~, ~~2023,~~ primarily by reducing our operating losses and debt that wewas ~~were~~ required to ~~incur to~~ fund such losses.

Seasonality

Residential care facilities are seasonal in nature. Generally, the Naples residential care 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~~longevity-tech platform businesses to have such seasonality.

Results of Operations

~~Our~~Prior ~~operating~~to ~~revenues~~exiting ~~prior~~three toof our four MCA Facilities on March 31, 2023, our operating revenues were predominately from our MCA Facilities and adult day care center. ~~and~~After ~~four~~March ~~residential~~31, ~~memory~~2023, our operating revenues were primarily from our Naples residential care ~~facilities,~~community ~~three~~(“Naples ofCommunity”) ~~which~~and weour ~~exited~~San asAntonio ofAdult ~~such~~Daycare ~~dat~~center. ~~MCA~~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. ~~Our~~Revenues ~~revenues~~ from our adult day care service ~~includes~~include private pay ~~reimbursements~~customers, but primarily include payments made to ~~veterans~~us ~~under~~through aan adult day program sponsored by the United States Department of Veterans Affairs (VA) on behalf of veterans who qualify.

Our operating expenses are primarily the expenses of our MCA facilities as well as the expenses that we incur in our other businesses, including adult day care and our Longevity-tech platform. Expenses incurred by MCA 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 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 the MCA businesses.

Operating Summary for the Three-Months Ending June 30, 2023 and 2022

We reduced our net operating loss by approximately 42% or approximately $1.0 million during the quarter ending June 30, 2023, compared to the quarter ending June 30, 2022, primarily by reducing our total operating expenses by approximately 63% or approximately $3.6 million offset by a decrease in total revenues by approximately 80% or approximately $2.5 million.

SG&A Expenses were primarily insurance, interest expense, bank fees, equity-based compensation and audit and other professional fees and decreased by 2% or approximately less than $0.02 million, primarily due to a decrease of our property and casualty insurance resulting from the termination of the Community Leases.

Revenues. Revenues decreased by approximately 80% or $2.5 million to approximately $0.62 million during the quarter ending June 30, 2023, from approximately $3.1 million during the quarter ending June 30, 2022, primarily due to lower revenues reflecting 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. We have been able to significantly increase the daily rate during the second quarter of 2023 charged at our adult day care community due in large part to the deployment of our Longevity-tech platform and accepting clients that require a greater attention and care. In the third quarter of 2023, we have 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 Expense. Operating expenses decreased by approximately 63% or approximately $3.5 million to approximately $2.1 million during the quarter ending June 30, 2023 (a greater decrease than our decrease in revenues during this period) from approximately $5.6 million during the quarter ending June 30, 2022, primarily due to: (1) lower wages and general operating expenses of approximately 15% or approximately $3.7 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, and (2) lower selling, general and administrative expenses, including healthcare insurance expense, of approximately 36.8% or approximately 0.5 million resulting primarily from changes in personnel reflecting our pivot to a longevity technology company and reduced professional and consulting fees

Research & Development. We did not have any research and development expenses during the quarter ending June 30, 2023 or June 30, 2022.

Interest. Our interest expense increased by approximately 335% or approximately $1.3 million to $1.7 million during the quarter ending June 30, 2023 from $0.4 million during the quarter ending June 30, 2022. The increase of interest expense resulted primarily because of additional debt incurred during the period, including the note payable to Invesque, Inc. arising from the termination of the Community Leases and higher interest rates charged, including default interest rates and other fees and expenses arising from defaults, primarily the Benworth Action and, to a smaller extent, 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 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. There was not any impairment taken during the second quarter of 2023 as compared to the second quarter of 2022.

Other income increased during the second quarter ending June 30, 2023, to approximately $0.2 million from approximately $0.3 million or approximately 29% primarily due from the fair value of derivatives. In addition to our operating expenses incurred by us for the operation of the three properties under the Community Leases, we recognized approximately $0.19 million under the Lease Transition Agreements related to expenses incurred by these properties during April, 2023, which will be a nonrecurring expense.

Operating Summary for the Six-Months Ending June 30, 2023 and 2022

We reduced our net operating loss by approximately 38% or approximately $2.1 million during the six months ending June 30, 2023, compared to the same period ending June 30, 2022, primarily by reducing our total operating expenses by approximately 40% or approximately $4.7 million offset by a decrease in total revenues by approximately 43% or approximately $2.7 million.

Revenues. Revenues decreased by approximately 43% or $2.7 million to approximately $3.6 million during the six months ending June 30, 2023, from approximately $6.3 million during the same period ending June 30, 2022, primarily due to lower revenues reflecting 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 six-month period compared to the three month period ending June 30, 2023 primarily because we operated the Community Leases for half of this six month period. We have been able to significantly increase the daily rate during the second quarter of 2023 charged at our adult day care community due in large part to the deployment of our Longevity-tech platform and accepting clients that require a greater attention and care. In the third quarter of 2023, we have 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 Expense. Operating expenses decreased by approximately 40% or approximately $4.7 million to approximately $7.0 million during the six months ending June 30, 2023 from approximately $11.8 million during the same period ending June 30, 2022, primarily due to (1) lower wages and general operating expenses of approximately 26% or approximately $0.629 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, and (2) lower selling, general and administrative expenses, including healthcare insurance expense, of approximately 29% or approximately 0.7 million resulting primarily from changes in personnel reflecting our pivot to a longevity technology company and reduced professional and consulting fees.

Research & Development. We did not record any research and development expenses during the six-month ending June 30, 2023 or the six months ending June 30, 2022.

Interest. Our interest expense increased by approximately 171% or approximately $1.5 to $2.4 million during the six months ending June 30, 2023, from $0.896 million during the same ending June 30, 2022. Our interest expense during the six months ending June, 30, 2023 was primarily debt incurred during the later part of this period including the note payable to Invesque incurred on March 31, 2023 and higher interest rates charged, including default interest rates and other fees and expenses arising from defaults, primarily the Benworth Action and, to a smaller extent, 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 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. There was not any impairment taken during the six months period of 2023 as compared to the same period of 2022.

Other Income or Loss. Other income increased during the second quarter ending June 30, 2023, to approximately $1.5 million from approximately ($0.5) million or approximately 400% primarily due to the interest expense and derivative financing costs. In addition to our operating expenses incurred by us for the operation of the three properties under the Community Leases, we recognized approximately $0.19 million under the Lease Transition Agreements related to expenses incurred by these properties during April 2023, which will be a nonrecurring expense.

Our operating expenses are primarily the expenses of our Naples Community, adult day care and our Longevity-Tech Platform. Expenses incurred by our Naples Community are primarily wages and benefits, wage-related expenses; operating expenses, including utilities, housekeeping, dietary, maintenance, regulatory requirements, insurance and administrative costs and salaries; lease expenses which ended 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 other communities we held prior to March 31, 2023.

Operating Summary for the Three-Months Ended September 30, 2023, and 2022

Revenues. Revenues decreased by approximately 73% or $2.2 million to approximately $0.8 million during the quarter ended September 30, 2023, from approximately $3.1 million during the quarter ended September 30, 2022, primarily due to lower revenues reflecting 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 of approximately 186% or approximately $0.1 million to approximately $0.2 million, offset to a smaller extent, decreased commercial property rental income during this period due to 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 and accepting clients that require greater attention and care. In the third quarter of 2023, we 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 Expense. Operating expenses decreased by approximately 57% or approximately $3.5 million to approximately $2.6 million during the quarter ended September 30, 2023 due to (1) lower wages and general operating expenses of approximately 88% or approximately $3.8 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, and (2) lower selling, general and administrative expense of approximately 47% or approximately $0.7 million resulting primarily from changes in personnel reflecting our pivot to a longevity technology company and reduced professional and consulting 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.

Operating loss. We reduced our net operating loss by approximately 42% or approximately $1.3 million during the quarter ended September 30, 2023, compared to the quarter ended September 30, 2022, primarily by reducing our total operating expenses offset by a decrease in total revenues, discussed above.

Other (income) Expenses. 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 44% or approximately $0.5 million to approximately $1.5 million during the quarter ended September 30, 2023, from $1.0 million during the quarter ended September 30, 2022. The increase in interest expense resulted from higher interest rates charged, including default interest rates and other fees and expenses arising from defaults, primarily the Bentworth Action and, to a smaller extent, 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 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.

Fair value of derivatives. 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 gains or losses from derivative liabilities in the third quarter of September 2022.

Gain on debt extinguishment. We did not extinguish any debt in the third quarter of ended September 2023. However, during the 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.

Operating loss. We reduced our net operating loss by approximately 39% or approximately $3.3 million during the 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, and higher interest rates charged, including default interest rates and other fees and expenses arising from defaults, primarily the Benworth Action and, to a smaller extent, 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 does not include any accrual for unpaid interest under the MCA Agreements, each of 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.

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 ~~the ERTC program~~ and therefore expect additional cash payments under the 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 ~~second quarter~~nine ofmonths ended September 30, 2023, compared to approximately $1 million of PPP Loan Forgiveness received in the nine months ended September 30, 2022.

Contractual Obligations and Commitments

See the “Commitment and Contingencies” section within Note 7 — 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~~agreement ~~provided~~required ~~for~~us ~~our obligation~~ to pay ~~approximately~~an approximate total of $3.5 million ~~with~~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 ~~are~~were required to pay the remaining $250,000 on September 30, 2023,. ~~subject~~The toLease ~~additional~~Transition ~~extensions.~~Agreement ~~The~~has ~~foregoing~~been ~~description~~amended ofas ~~terms~~described ~~and~~in ~~conditions~~Note of6 ~~the~~- ~~amendment~~Indebtedness. toOur ~~the~~obligations ~~Lease~~under ~~Transition~~this ~~Agreement~~agreement are ~~not~~in ~~complete~~default ~~and~~as ~~qualified~~of inJanuary ~~their~~2, ~~entirety~~2024. We expect to ~~the~~continue ~~provisions~~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 ~~which~~or isextension ~~provided~~of asterms ~~Exhibit~~that ~~10.2~~are ofacceptable ~~this~~or ~~Report~~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 7 — Commitments and Contingencies to the financial statements – Commitments and Contingencies.

Off-Balance Sheet Arrangements

None.

Liquidity and 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.

~~Restricted~~We had no restricted cash asat ofSeptember ~~June~~ 30, 2023,. ~~and~~Restricted cash at December 31, 2022, ~~includes~~included cash that Clearday deposited as security for obligations arising from ~~property~~ property taxes, property insurance and replacement reserve Clearday is required to establish escrows as required by Clearday’s ~~mortgages~~ mortgages and certain resident security deposits.

We have continued to sustain significant operating losses and have used cash raised byfrom ~~the~~ issuing of securities and ~~the issuance of~~ debt, including convertible debt, to fund such losses. We expect to continue to incur losses until we ~~are~~can ~~able to~~ realize revenues from our ~~Longevity~~ 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, ~~Agreements~~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 ~~may~~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~~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~~ 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.

As noted 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 with these lenders a deferment of payment obligations 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, however, 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.31

WeAs ~~have~~discussed ~~undertaken~~in ~~certain~~Note ~~actions~~6 in— ~~our~~Indebtedness, ~~Naples~~we ~~residential~~have ~~care~~loans ~~community~~ and ~~our~~other ~~San~~indebtedness ~~Antonio~~that ~~adult~~are ~~daycare~~in ~~community~~default. ~~including~~The ~~increasing rates~~lenders ~~that~~may weexercise ~~expect~~remedies including ~~will~~the ~~lower~~sale ~~our~~of ~~operating~~assets ~~working~~in ~~capital~~a ~~deficit~~foreclosure process. We ~~increased~~expect ~~our~~to ~~resident~~negotiate ~~fees~~a indeferment ~~the~~of ~~Naples~~payment ~~community~~obligations inwith ~~July and~~these ~~expect~~lenders toand a ~~continue~~payment toplan ~~increase~~that ~~the~~may ~~rates~~be funded, in ~~large~~ part, ~~because~~by of the ~~incorporation~~sale of our securities, including the ~~Longevity-tech~~Bridge ~~platform~~Financings. WeThere ~~have~~can ~~been able~~be tono ~~raise~~assurance that ~~our~~we ~~daily~~will ~~rates~~be atable ~~our~~to ~~adult~~defer ~~daycare~~such ~~center~~payment ~~and~~obligations ~~are~~on ~~planning~~acceptable toterms, ~~open~~or ~~additional~~at ~~adult~~all, ~~daycare~~or ~~centers~~ that we ~~believe~~ will raise sufficient additional funds ~~generate~~on ~~net~~acceptable ~~operating~~terms, ~~income~~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 ~~incur~~lower ~~ongoing~~our ~~recurring~~operating ~~expenses~~working ~~associated~~capital ~~with~~deficit. ~~professional~~We increased our resident fees ~~for~~in ~~accounting,~~the ~~legal,~~Naples community in July and ~~other~~expect ~~expenses~~to ~~for~~continue ~~annual~~to ~~reports, quarterly~~increase ~~reports~~the rates, ~~proxy~~in ~~statements~~large part, because of the ~~Viveon~~incorporation ~~Merger~~of ~~and~~the ~~other~~Longevity-Tech ~~filings~~Platform. ~~under~~We ~~the~~are ~~Exchange~~planning ~~Act.~~to ~~These~~open ~~obligations~~additional adult daycare centers that we believe will ~~reduce~~generate net operating income, however, our ability ~~and~~ ~~resources~~to open such additional centers will depend on our ability to ~~fund~~raise ~~other~~additional financings. ~~aspects~~There can be no assurance that any such additional financing will be available on acceptable terms or at all. Additionally, executive management of our ~~business~~Naples residential care community have tendered their resignation during December 2023. We ~~hope~~expect to beincur additional ~~able~~costs to ~~use~~recruit ~~our~~a ~~status~~new asexecutive ateam ~~public~~and ~~company~~expect to ~~increase~~incur ~~our~~a ~~ability to~~period ~~use~~of ~~non-cash~~lower ~~means~~resident ofoccupancy ~~settling~~until ~~obligations~~the ~~and~~new ~~compensate~~management ~~certain~~team is ~~independent~~onboard ~~contractors~~and ~~who~~effective, ~~provide~~which ~~professional~~will ~~services~~likely toincrease ~~us, although~~our ~~there~~operating ~~can~~loss beat nothis ~~assurances~~community ~~that~~during wethe ~~will~~later bepart ~~successful~~of inthe ~~any~~fourth quarter of ~~those~~2023 ~~efforts~~and during the first quarter of 2024.

We ~~continue~~will toincur ~~take~~ongoing ~~actions~~and torecurring ~~close~~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 ~~expect~~other ~~that~~filings ~~Viveon~~under the Exchange Act. These obligations will reduce our ability and resources to fund other aspects of our business. We hope to be inable to use our status as a ~~position~~public company to ~~make~~increase ~~the~~our ~~requisite~~ability ~~registration~~to ~~statement~~use non-cash means of settling obligations and ~~proxy~~compensate ~~filings~~certain ~~for~~independent ~~the~~contractors ~~merger~~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 ~~six~~nine-months ~~ending~~ended ~~June~~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 ~~six~~nine-months ~~ending~~ended ~~June~~September 30, 2023, ~~and 2022,~~ our investing activities were related to our investment in Viveon which enabled Viveon to to pay certain operating and merger related expenses and costs.

Cash Flows from Financing Activities

During the ~~six~~nine-months ~~ending~~ended ~~June~~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 ~~six~~nine-months ~~ending June~~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 $34.13 million ~~and issued our common stock for the payment of compensation for consulting services~~, we repaid outstanding indebtedness in the aggregate amount of approximately $01.91 million. ~~During~~Net ~~the~~cash ~~six-months~~provided ~~ending June 30, 2022,~~by wefinancing ~~raised~~activities ~~proceeds~~was ~~from the issuance of debt in the aggregate amount of approximately~~ $43.~~207~~1 million, ~~primarily~~for ~~from~~ the ~~issuance~~nine ofmonths ~~$465,000 of~~ended ~~debt~~September ~~to institutional lenders~~30, $22022,~~425,105~~ ~~financing~~which ~~insurance~~consisted ~~premiums,~~primarily ~~$805,000 refinancing~~ of ~~certain~~net ofproceeds received ~~our~~from ~~properties~~Invesque, ~~through mortgage~~Bridge ~~refinancing~~financings, and ~~$521,013~~the ~~through~~loans ~~Merchant~~from ~~Cash~~other ~~Advance~~corporate ~~Loans~~ and weinstitutional ~~repaid~~lenders ~~outstanding~~offset ~~indebtedness~~by inpayments ~~the aggregate amount~~ of ~~approximately $1~~indebtedness.~~0 million.~~

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~~Note ~~Discussion and Analysis of Financial Condition, Results of Operations~~ 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 ending ~~June~~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 ~~consolidated~~ condensed consolidated financial statements included in this Report.

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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, 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, 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~~which the Company believes is adequate to protect ~~the~~us ~~Company~~ from material damages and losses resulting from the consequences of losses caused by climate change. However, we ~~the Company~~ 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. 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 ~~ending~~ended ~~June~~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~~ remediated or mitigated certain internal control weaknesses such as segregation of duties.

PART II Other information

Item 1. Legal Proceedings

Information on material developments in our legal proceedings is included in Note 7 — Commitments and Contingencies to our 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.

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:

1. On April 3, 2023, 25,097 shares to Dickson Co for accounting services that were provided by such person prior to 2022. 2. On May 8, 2023, 133,333 shares to Outside The Box Capital Inc for marketing services to be provided by such person. 3. On May 24, 2023, 50,000 shares to Kelly Rios, a former employee, as a bonus for additional post separate services provided by such individual. 4. We issued approximately $1.26 million of Bridge Notes onfrom ~~September~~October 295, 2023, through December 8, 2023, which may be converted into approximately 12,~~463~~640,~~415~~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 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~~ 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~~196, as summarized in Part I, Item 1 Note 6 — 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 6 — 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
2.1		First Amendment to Merger Agreement, dated as of August 28, 2023, by and among Viveon Health Acquisition Corp., Clearday, Inc., VHAC2 Merger Sub, Inc., Viveon Health LLC and Clearday SR LLC.
10.1		Form of Senior Convertible Notes issued by Clearday, Inc.
10.2		First Amendment To Lease Transition Agreement entered into on September 8, 2023, effective as of July 31, 2023, by and between (1) the following entities referred to as “Landlord”: (i) MHI-MC San Antonio, LP, a Delaware limited partnership, (ii) MC New Braunfels, LP, a Delaware limited partnership, and (iii) MHI Little Rock, LP, a Delaware limited partnership; and (2) the following entities referred to as “MCA”: (i) MCA Mainstreet Tenant, LLC, a Tennessee limited liability company, (ii) MCA Westover Hills Operating Company, LLC, a Tennessee limited liability company, (iii) MCA New Braunfels Operating Company, LLC, a Tennessee limited liability company; (iv) and Memory Care at Good Shepherd, LLC, an Arkansas limited liability company.
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.

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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 16, 2023	/s/ BJ Parrish
Dated: January 12, 2024	/s/ BJ Parrish
	BJ Parrish
	Acting Chief Financial Officer
	/s/ James T. Walesa
	James T. Walesa
	President and Chief Executive Officer

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Filing Compare · Clearday, Inc.