[10-Q] REGIONAL HEALTH PROPERTIES, INC Quarterly Earnings Report
Regional Health Properties reported Q3 2025 results reflecting its SunLink merger and expanded operations. Revenue rose to $15,138 from $4,225 a year ago, driven by patient care of $9,831, rental revenue of $1,303, and pharmacy revenue of $4,004. Net income was $3,382 versus a loss of $(982) in Q3 2024, aided by a $5,311 gain on bargain purchase.
Total assets were $72,150 and total liabilities $68,997, with stockholders’ deficit improving to $(1,538). Cash was $994 and accounts receivable $7,715. Net cash from operations for the nine months was $(994), investing provided $5,332 (including $5,975 cash acquired), and financing used $(3,818). Debt, net, was $48,578, and the company was in covenant compliance.
The SunLink merger closed on August 14, 2025, issuing 1,595,400 common shares and 1,408,121 Series D preferred shares. The Coosa and Meadowood facilities were classified as held for sale; the Coosa sale closed on November 6, 2025. The common and Series A preferred now trade on OTCQB as RHEP and RHEPA. Shares outstanding were 3,934,677 as of November 13, 2025.
- None.
- None.
Insights
Merger drove scale and a one-time gain; core cash flow mixed.
Regional Health posted Q3 revenue of
Liquidity shows
The company recorded total assets of
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
Commission File Number
Regional Health Properties, Inc.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation) |
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(I.R.S. Employer Identification Number) |
(Address of principal executive offices)
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(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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N/A (1) |
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Stock, no par value |
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N/A (1) |
(1) On June 11, 2025, NYSE American LLC (“NYSE American”) filed a Form 25 with the U.S. Securities and Exchange Commission to delist Regional Health Properties, Inc.’s (“Regional”) common stock, no par value (the “Common Stock”), and Regional’s Series A Redeemable Preferred Shares, no par value (the “Series A Preferred Stock”), from NYSE American. The Common Stock and the Series A Preferred Stock trade on the OTCQB under the symbols “RHEP” and “RHEPA,” respectively.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.:
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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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. Yes ☐ No ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
As of November 13, 2025, the registrant had
Regional Health Properties, Inc.
Form 10-Q
Table of Contents
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Page |
Part I. |
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FINANCIAL INFORMATION |
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Item 1. |
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Financial Statements (unaudited) |
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3 |
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Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 |
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3 |
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Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024 |
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Consolidated Statements of Stockholders' (Deficit) Equity for the three and nine months ended September 30, 2025 and 2024 |
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Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 |
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Notes to Unaudited Consolidated Financial Statements |
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Item 2. |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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32 |
Item 3. |
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Quantitative and Qualitative Disclosures About Market Risk |
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42 |
Item 4. |
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Controls and Procedures |
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42 |
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Part II. |
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OTHER INFORMATION |
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Item 1. |
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Legal Proceedings |
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Item 1A. |
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Risk Factors |
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42 |
Item 2. |
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Unregistered Sales of Equity Securities and Use of Proceeds |
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44 |
Item 3. |
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Defaults upon Senior Securities |
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44 |
Item 4. |
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Mine Safety Disclosures |
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44 |
Item 5. |
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Other Information |
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45 |
Item 6. |
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Exhibits |
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45 |
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Signatures |
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2
Part I. Financial Information
Item 1. Financial Statements
REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in 000's)
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September 30, 2025 |
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December 31, 2024 |
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(Unaudited) |
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ASSETS |
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Property and equipment, net |
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$ |
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$ |
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Asset held for sale, net |
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Cash |
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Restricted cash |
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Accounts receivable, net of allowances of $ |
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Prepaid expenses and other |
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Inventory |
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— |
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Notes receivable |
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Intangible assets |
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Right-of-use operating lease assets |
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Goodwill |
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Straight-line rent receivable |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY |
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Senior debt, net |
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$ |
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$ |
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Debt related to asset held for sale, net |
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Bonds, net |
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Other debt, net |
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Accounts payable |
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Accrued expenses |
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Operating lease obligation |
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Other liabilities |
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Total liabilities |
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Preferred stock, Series D, |
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— |
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Stockholders' (deficit) equity: |
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Common stock and additional paid-in capital, |
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Preferred stock, |
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Preferred stock, Series A, |
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Preferred stock, Series B, |
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Accumulated deficit |
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Total stockholders' (deficit) equity |
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Total liabilities, mezzanine equity, and stockholders' (deficit) equity |
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$ |
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$ |
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3
See accompanying notes to unaudited consolidated financial statements.
4
REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in 000's, except per share data)
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2025 |
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2024 |
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2025 |
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2024 |
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Revenues: |
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Patient care revenues |
$ |
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$ |
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$ |
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$ |
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Rental revenues |
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Pharmacy revenues |
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— |
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— |
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Total revenues |
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Costs and expenses |
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Cost of goods sold |
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— |
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— |
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Patient care expense |
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Facility rent expense |
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Depreciation and amortization |
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General and administrative expense |
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Loss on lease termination |
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— |
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— |
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— |
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Credit loss expense |
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Gain on operations transfer |
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— |
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— |
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— |
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Total costs and expenses |
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Loss from operations |
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Other (income) expense: |
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Interest expense, net |
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Gain on bargain purchase |
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— |
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— |
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Other expense, net |
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Total other expense, net |
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Net Income (Loss) |
$ |
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$ |
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$ |
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$ |
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Preferred stock dividends |
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— |
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— |
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( |
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— |
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Deemed contribution related to Preferred Series B purchases |
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— |
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— |
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Net profit (loss) attributable to Regional Health Properties, Inc. common stockholders |
$ |
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$ |
( |
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$ |
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$ |
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Net profit (loss) per share of common stock attributable to Regional Health Properties, Inc. |
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Basic: |
$ |
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$ |
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$ |
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$ |
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Diluted: |
$ |
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$ |
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$ |
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$ |
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Weighted average shares of common stock outstanding: |
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Basic: |
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Diluted: |
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See accompanying notes to unaudited consolidated financial statements.
5
REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Amounts in 000's)
(Unaudited)
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Shares of |
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Shares of |
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Shares of |
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Shares of Treasury Stock |
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Common stock and additional paid-in capital |
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Preferred Stock A, |
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Preferred Stock B, |
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Accumulated |
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Total |
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Balance, December 31, 2024 |
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( |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Common stock issued in connection with Preferred Stock Series B dividends |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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Balances, March 31, 2025 |
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( |
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( |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Restricted stock issuance |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balances, June 30, 2025 |
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( |
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( |
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( |
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Stock-based compensation, net of forfeitures |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Restricted stock issuance |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Repurchase of Preferred B Shares |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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( |
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Acquisition of SunLink (shares issued, effective date Aug 14 2025) |
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— |
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— |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Balances, September 30, 2025 |
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( |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Shares of |
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Shares of |
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Shares of |
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Shares of Treasury Stock |
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Common stock and additional paid-in capital |
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Preferred Stock A, |
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Preferred Stock B, |
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Accumulated |
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Total |
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Balance, December 31, 2023 |
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( |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balances, March 31, 2024 |
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( |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Restricted stock issuance |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balances, June 30, 2024 |
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( |
) |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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Stock-based compensation, net of forfeitures |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Restricted stock issuance |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Forfeitures of stock-based awards |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balances, September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||||||
See accompanying notes to unaudited consolidated financial statements.
6
REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in 000's)
(Unaudited)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Gain on bargain purchase |
|
|
( |
) |
|
|
- |
|
Stock-based compensation expense |
|
|
|
|
|
|
||
Rent expense less than cash paid |
|
|
( |
) |
|
|
( |
) |
Rent revenue in excess of cash received |
|
|
( |
) |
|
|
( |
) |
Loss on lease termination |
|
|
|
|
|
- |
|
|
Amortization of deferred financing costs, debt discounts and premiums |
|
|
|
|
|
|
||
Gain on operations transfer |
|
|
( |
) |
|
|
- |
|
Write off of straight-line receivable |
|
|
— |
|
|
|
|
|
Credit loss expense |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other assets |
|
|
( |
) |
|
|
|
|
Accounts payable and accrued expenses |
|
|
|
|
|
|
||
Change in Inventory |
|
|
( |
) |
|
|
- |
|
Other liabilities |
|
|
|
|
|
( |
) |
|
Net cash provided by (used in) operating activities |
|
|
( |
) |
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
||
Cash acquired from merger |
|
|
|
|
|
— |
|
|
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) investing activities |
|
|
|
|
|
( |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
||
Payment of senior debt |
|
|
( |
) |
|
|
( |
) |
Payment of other debt |
|
|
( |
) |
|
|
( |
) |
Repurchase of Preferred B Shares |
|
|
( |
) |
|
|
- |
|
Proceeds from the exercise of stock options |
|
|
|
|
|
- |
|
|
Payment of debt extinguishment and issuance costs |
|
|
— |
|
|
|
( |
) |
Proceeds from other debt |
|
|
|
|
|
- |
|
|
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Net change in cash and restricted cash |
|
|
|
|
|
( |
) |
|
Cash and restricted cash, beginning |
|
|
|
|
|
|
||
Cash and restricted cash, ending |
|
$ |
|
|
$ |
|
||
7
REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in 000's)
(Unaudited)
|
Nine Months Ended September 30, |
|
|||||
|
2025 |
|
|
2024 |
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
||
Cash interest paid |
$ |
|
|
$ |
|
||
Supplemental disclosure of non-cash activities: |
|
|
|
|
|
||
Vendor-financed insurance |
|
|
|
|
|
||
Preferred stock dividends paid in common stock |
|
|
|
|
- |
|
|
Cavalier management |
|
- |
|
|
|
|
|
Issuance of Series D Preferred Shares |
|
|
|
|
- |
|
|
Common shares issued for merger |
|
|
|
|
- |
|
|
See accompanying notes to unaudited consolidated financial statements.
8
REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
September 30, 2025
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Regional Health Properties, Inc.'s (the "Company" or "Regional Health") predecessor was incorporated in Ohio on August 14, 1991, under the name Passport Retirement, Inc. In 1995, Passport Retirement, Inc. acquired substantially all of the assets and liabilities of AdCare Health Systems, Inc. and changed its name to AdCare Health Systems, Inc. ("AdCare"). AdCare completed its initial public offering in November 2006, relocated its executive offices and accounting operations to Georgia in 2012, and changed its state of incorporation from Ohio to Georgia in December 2013. Regional Health Properties, Inc. is a self-managed real estate investment company that invests primarily in real estate purposed for long-term care and senior housing and
As announced on August 14, 2025, the Company completed its previously announced merger with SunLink Health Systems, Inc. (“SunLink”), a Georgia corporation, pursuant to that certain Amended and Restated Agreement and Plan of Merger, dated as of April 14, 2025, by and between the Company and SunLink (the “Original Merger Agreement”), as amended by that certain Amendment to Amended and Restated Agreement and Plan of Merger, dated as of June 22, 2025, by and between the Company and SunLink (the “Merger Agreement Amendment”) (the Original Merger Agreement, as amended by the Merger Agreement Amendment, the “Merger Agreement”). Pursuant to the Merger Agreement, on the Closing Date, SunLink merged with and into the Company, with the Company continuing as the surviving corporation (the “merger”). See Note 3 - Business Combination.
Basis of Presentation
The accompanying consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles ("GAAP") in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"). The accompanying consolidated financial statements are unaudited and should be read in conjunction with the 2024 audited consolidated financial statements and notes thereto, which are included in our 2024 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") on March 31, 2025 ("Annual Report").
In the opinion of management, the unaudited consolidated financial statements for the interim periods presented include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's financial position and the results of its operations and cash flows for such periods presented. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.
9
Reclassifications
Certain prior period amounts have been reclassified to conform with the current period presentation format. These reclassifications had no effect on previously reported results of operations, total assets, total liabilities, or stockholders’ deficit.
Principles of Consolidations
Revenue Recognition and Allowances
Patient Care Revenue. ASU 2014-09, Revenue from Contracts with Customers, as codified in ASC 606 ("ASC 606"), requires a company to recognize revenue when the company transfers control of promised goods and services to a customer. Revenue is recognized in an amount that reflects the consideration to which a company expects to receive in exchange for such goods and services. Revenue from our Healthcare Services business segment is derived from services rendered to patients in six facilities we operate. The Company receives payments from the following sources for services rendered in our facilities: (i) the federal government under the Medicare program administered by the U.S. Department of Health and Human Services Centers for Medicare and Medicaid Services ("CMS"); (ii) state governments under their respective Medicaid and similar programs; (iii) commercial insurers; and (iv) individual patients and clients. The vast majority of the revenue the Health Services segment recognizes is from government sources. The Company determines the transaction price based on established billing rates reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients and other price concessions. Contractual adjustments and discounts are based on contractual agreements, discount policies and historical experience. The Company recognizes revenue at the amount that reflects the consideration the Company expects to receive in exchange for the services provided. These amounts are due from residents or third-party payors and include variable consideration for retroactive adjustments from estimated reimbursements, if any, under reimbursement programs. Performance obligations are determined based on the nature of the services provided. Revenue is recognized as performance obligations are
satisfied. Estimated uncollectible amounts due from patients are generally considered implicit price concessions that are a direct reduction to net operating revenues.
Triple-Net Leased Properties. The Company recognizes rental revenue of the Rental Estate Services segment in accordance with ASC 842, Leases. The Company's triple-net leases provide for periodic and determinable increases in rent. The Company recognizes rental revenues under these leases on a straight-line basis over the applicable lease term when collectability is probable. Recognizing rental income on a straight-line basis generally results in recognized revenues during the first half of a lease term exceeding the cash amounts contractually due from our tenants, creating a straight-line rent receivable that is included in the straight-line rent receivable on our consolidated balance sheets. In the event the Company cannot reasonably estimate the future collection of rent from one or more tenant(s) of the Company's facilities, rental income for the affected facilities is recognized only upon cash collection, and any accumulated straight-line rent receivable is expensed in the period in which the Company deems rent collection to no longer be probable. For additional information with respect to such facilities, see Note 2 – Liquidity and Note 8 – Leases.
Pharmacy Services Revenue. The Company recognizes revenue of the Pharmacy Services segment from providing pharmacy goods and services to patients and is recognized on the date the goods and services are provided to at amounts billable to individual patients, adjusted for estimates for variable consideration. Revenue is recognized when control of the promised goods or services are transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Each prescription claim represents a separate performance obligation of the Company, separate and distinct from other prescription claims under customer arrangements. Significant portions of the revenue from sales of pharmaceutical and medical products are reimbursed by the federal Medicare Part D program and, to a lesser extent, state Medicaid programs. The Company monitors its revenues and receivables from these reimbursement sources, as well as other third-party insurance payors, and reduces revenue at the revenue recognition date, to properly account for the variable consideration due to anticipated differences between billed and reimbursed amounts. Accordingly, the total net revenues and receivables reported in the Company’s consolidated financial statements of the Pharmacy Services Segment are recorded at the amount expected to be ultimately received from these payors.
Allowances. The Company assesses the collectability of its rent receivables, including straight-line rent receivables and working capital loans to tenants. The Company bases its assessment of the collectability of rent receivables and working capital loans to tenants on several factors, including payment history, the financial strength of the tenant and any guarantors, the value of the underlying collateral, and current economic conditions. If the Company’s evaluation of these factors indicates it is probable that the Company will be unable to receive the rent payments or payments on a working capital loan, then the
10
Company provides a reserve against the recognized straight-line rent receivable asset or working capital loan for the portion that we estimate may not be recovered. Payments received on impaired loans are applied against the allowance. If the Company changes its assumptions or estimates regarding the collectability of future rent payments required by a lease or required from a working capital loan to a tenant, then the Company may adjust its reserve to increase or reduce the rental revenue or interest revenue from working capital loans to tenants recognized in the period the Company makes such change in its assumptions or estimates. See Note 7 – Leases. The Company has reserved for approximately
Activity in the allowance for credit losses in the Real Estate segment for the nine months ended September 30, 2025 and September 30, 2024 included the following:
(Amounts in 000’s) |
|
Nine Months Ended September 30, 2025 |
|
|
December 31, 2024 balance |
|
$ |
|
|
Credit loss expense |
|
|
|
|
Write offs |
|
|
( |
) |
September 30, 2025 balance |
|
|
|
|
Activity in the allowance for credit losses in the Healthcare segment for the nine months ended September 30, 2025 and September 30, 2024 included the following:
(Amounts in 000’s) |
|
Nine Months Ended September 30, 2025 |
|
|
December 31, 2024 balance |
|
$ |
|
|
Credit loss expense |
|
|
|
|
Write offs |
|
|
( |
) |
September 30, 2025 balance |
|
|
|
|
Activity in the allowance for credit losses in the Pharmacy segment for the nine months ended September 30, 2025 included the following:
(Amounts in 000’s) |
|
Nine Months Ended September 30, 2025 |
|
|
Balance acquired at acquisition |
|
$ |
|
|
Credit loss expense |
|
|
|
|
Write offs |
|
|
( |
) |
September 30, 2025 balance |
|
|
|
|
As of September 30, 2025 and December 31, 2024, the Company reserved for approximately $
The following table presents the Company's Accounts receivable, net of allowance for the periods presented:
(Amounts in 000’s) |
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Gross receivables |
|
|
|
|
|
|
||
Real Estate Services |
|
$ |
|
|
$ |
|
||
Healthcare Services |
|
|
|
|
|
|
||
Pharmacy Services |
|
|
|
|
|
- |
|
|
Subtotal |
|
|
|
|
|
|
||
Allowance |
|
|
|
|
|
|
||
Real Estate Services |
|
$ |
( |
) |
|
$ |
( |
) |
Healthcare Services |
|
|
( |
) |
|
|
( |
) |
Pharmacy Services |
|
|
( |
) |
|
|
— |
|
Subtotal |
|
|
( |
) |
|
|
( |
) |
Accounts receivable, net of allowance |
|
$ |
|
|
$ |
|
||
11
Assets Held for Sale and Discontinued Operations
The Company may decide to sell properties that are held for use. The Company records these properties as assets held for sale when management has committed to a plan to sell the assets, actively seeks a buyer for the assets, and the consummation of the sale is considered probable and is expected within one year. Assets classified as held for sale are reported at the lower of their carrying value or their fair value, less estimated costs to sell. When the carrying value exceeds the fair value, less estimated costs to sell, an impairment expense is recognized. The Company estimates fair value, less estimated closing costs, based on similar real estate sales transactions. These valuation assumptions are based on the three-level valuation hierarchy for fair value measurement and represent Level 2 and 3 inputs. Level 2 inputs are quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets in markets that are not active; and inputs other than quoted prices. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. See Note 6 - Assets Held for Sale for additional details on assets held for sale as of September 30, 2025 and December 31, 2024. Any debt related to assets held for sale or sold during the period are classified as debt related to assets held for sale for the current and prior periods presented in the accompanying consolidated financial statements.
Assets held for sale are presented as discontinued operations in all periods presented if the disposition represents a strategic shift that has, or will have, a major effect on the Company's financial position or results of operations. This includes the net gain (or loss) upon disposal of property held for sale, the property's operating results, depreciation and interest expense.
Prepaid Expenses and Other
As of September 30, 2025 and December 31, 2024, the Company had approximately $
Inventory
As of September 30, 2025, the Company had approximately $
Accounts Payable
The following table presents the Company's Accounts payable for the periods presented:
(Amounts in 000’s) |
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Accounts payable |
|
|
|
|
|
|
||
Real Estate Services |
|
$ |
|
|
$ |
|
||
Healthcare Services |
|
|
|
|
|
|
||
Pharmacy Services |
|
|
|
|
|
— |
|
|
Total Accounts payable |
|
$ |
|
|
$ |
|
||
The attribution of the $
Leases and Leasehold Improvements
The Company leases certain facilities and equipment in the normal course of business. At the inception of each lease, the Company performs an evaluation to determine whether the lease should be classified as an operating lease or finance lease. As of September 30, 2025, all of the Company's leased facilities are accounted for as operating leases. For operating leases that contain scheduled rent increases, the Company records rent expense on a straight-line basis over the term of the lease. Leasehold improvements are amortized over the shorter of the useful life of the asset or the lease term.
The Company recognizes both right of use assets and lease liabilities for leases in which we lease land, real property, or other equipment. We assess any new contracts or modification of contracts in accordance with ASC 842, Leases to determine the existence of a lease and its classification.
12
We report revenues and expenses for real estate taxes and insurance where the lessee has not made those payments directly to a third-party in accordance with its respective leases with us. Additionally, we expense certain leasing costs, other than leasing commissions, as they are incurred. The present value of minimum lease payments was calculated on each lease, using a discount rate that approximated our incremental borrowing rate and the current lease term. See Note 6– Leases for more information on the Company's operating leases.
Insurance
The Company maintains insurance for professional and general liability claims for its Healthcare Services segment, which includes any facility the Company is likely to operate. However, for claims prior to January 1, 2020, the Company is self-insured against professional and general liability claims since it discontinued its healthcare operations in connection with the Transition. The Company evaluates quarterly the adequacy of its self-insurance reserve based on a number of factors, including: (i) the number of actions pending and the relief sought; (ii) analyses provided by defense counsel, medical experts or other information which comes to light during discovery; (iii) the legal fees and other expenses anticipated to be incurred in defending the actions; (iv) the status and likely success of any mediation or settlement discussions, including estimated settlement amounts and legal fees and other expenses anticipated to be incurred in such settlement, as applicable; and (v) the venues in which the actions have been filed or will be adjudicated. The Company believes that most of the professional and
general liability actions are defensible and intends to defend them through final judgment unless settlement is more advantageous to the Company. Accordingly, the self-insurance reserve reflects the Company’s estimate of settlement amounts for the pending actions, if applicable, and legal costs of settling or litigating the pending actions, as applicable. Because the self-insurance reserve is based on estimates, the amount of the self-insurance reserve may not be sufficient to cover the settlement amounts actually incurred in settling the pending actions, or the legal costs actually incurred in settling or litigating the pending actions. See Note 9 – Accrued Expenses and Note 13 - Commitments and Contingencies.
In addition, the Company maintains certain other insurance programs, including commercial general liability, property, casualty, directors’ and officers’ liability, crime, and employment practices liability.
Other Expense, net
For the three and nine months ended September 30, 2025 other expenses represents costs incurred in connection with the Merger. See Note 3 – Business Combination.
Net Income (Loss) Per Share
Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the respective period. Diluted earnings per share is similar to basic net loss per share except that the net loss is adjusted by the impact of the weighted-average number of shares of common stock outstanding including potentially dilutive securities (such as options, warrants and non-vested common stock) when such securities are not anti-dilutive. Potentially dilutive securities from options, warrants and unvested restricted shares are calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all options and warrants with exercise prices exceeding the average market value are used to repurchase common stock at market value. The incremental shares remaining after the proceeds are exhausted represent the potentially dilutive effect of the securities.
Securities outstanding that were excluded from the computation, because they would have been anti-dilutive were as follows:
|
September 30, |
|
|||||
(Share amounts in 000’s) |
2025 |
|
|
2024 |
|
||
Stock options |
|
|
|
|
|
||
Warrants - employee |
|
|
|
|
|
||
Total anti-dilutive securities |
|
|
|
|
|
||
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public company to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. A public company with a single reportable segment is required to apply the
13
disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The adoption of ASU 2023-07 did not have a material impact on the Company's consolidated financial statements. See Note 13 – Segment Results for more information.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures,
which requires a public company, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-09 effective January 1, 2025. The adoption of ASU-2023-09 did not have a material impact on the Company's consolidated financial statements.
New Accounting Pronouncements Issued But Not Yet Effective
In November 2024, the FASB issued ASU 2024-03, Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03), which requires disclosure of incremental income statement expense information on an annual and interim basis, primarily through enhanced disclosures of specified costs and expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact that ASU 2024-03 will have on its consolidated financial statement disclosures.
No other new accounting pronouncement issued or effective has had, or is expected to have, a material impact on the Company's financial statements.
NOTE 2. LIQUIDITY
Overview
The Company continues to take strategic steps to strengthen its liquidity position and support long-term growth. These initiatives include refinancing or repaying existing debt to reduce interest expense and mandatory principal payments—potentially through expanded borrowing arrangements—alongside efforts to increase lease revenue through acquisitions and reinvestments in existing properties. The Company is also working to restructure lease terms with certain tenants, replace non-performing tenants, reduce general and administrative expenses, and completed its merger with SunLink which provided $
Separately, the Company experienced changes in its listing status. Until February 5, 2025, Regional’s common stock and Series A Preferred Stock were listed on the NYSE American under the ticker symbols “RHE” and “RHE-PA,” respectively. Trading was suspended on that date due to noncompliance with listing standards. On June 11, 2025, the NYSE American formally delisted both securities. They now trade on the OTC Markets under the symbols “RHEP” (common stock) and “RHEPA” (Series A Preferred Stock).
Trading on the OTC Markets presents challenges, including reduced liquidity, wider bid-ask spreads, and limited analyst coverage. In addition, broker-dealers face greater regulatory burdens, which may further discourage trading activity. These limitations could depress trading prices and negatively impact the Company’s ability to raise capital through equity or debt offerings. Such constraints may impair the Company’s ability to invest in future growth or refinance upcoming debt maturities.
During the nine months ended September 30, 2025, the Company used $
As of September 30, 2025, the Company held approximately $
Debt
14
As of September 30, 2025, the Company had $
Debt Covenant Compliance
Evaluation of the Company's Ability to Continue as a Going Concern
Under the accounting guidance related to the presentation of financial statements, the Company is required to evaluate, on a quarterly basis, whether or not the Company's current financial condition, including its sources of liquidity at the date that the consolidated financial statements are issued, will enable the Company to meet its obligations as they come due arising within one year of the date of the issuance of the Company's consolidated financial statements and to make a determination as to whether or not it is probable, under the application of this accounting guidance, that the Company will be able to continue as a going concern. The Company's consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
In applying applicable accounting guidance, management considered the Company's current financial condition and liquidity sources, including current funds available, forecasted future cash flows, the Company's obligations due over the next twelve months, and the Company's recurring business operating expenses.
NOTE 3. BUSINESS COMBINATION
(Amounts in 000s)
Overview
Effective August 14, 2025, the Company closed on the merger with SunLink; whereas, SunLink merged with and into the Company, and the Company continuing as the surviving corporation. The primary reason for the combination was the combination of the Company and SunLink would result in the potential for a material and immediate and long-term upside to both company's current shareholders' valuation. The two companies had complimentary business lines and long-term experience of senior management provided a complimentary merger resulting in multiple business synergies.
On August 5, 2025, the Company filed Articles of Amendment (the “Articles of Amendment”) to its Amended and Restated Articles of Incorporation with the Secretary of State of the State of Georgia to establish its Series D
Pursuant to the Merger Agreement, at the effective time of the merger (the “Effective Time”), each five shares of common stock,
Accounting for the Merger
The merger is accounted for as a business combination pursuant to Accounting Standards Codification Topic 805, (“ASC 805”), where the Company, the legal acquiree, is determined to be the accounting acquirer of SunLink. After the closing of the merger transaction, SunLink ceased to exist.
The assets and liabilities of SunLink on the closing date were consolidated into the Company at their respective fair values, and the shortfall of the purchase price consideration over the fair value of SunLink’s net assets was recognized as a gain on bargain purchase. Fair value is defined in Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (“ASC 820”) as “the price that would be received to sell an asset or paid to transfer a liability in an orderly
15
transaction between market participants at the measurement date. The Company’s preliminary purchase price allocation was based on an evaluation of the appropriate fair values and represents management’s best estimate based on available data. Any changes within the measurement period resulting from facts and circumstances that existed as of the acquisition date may result in retrospective adjustments to the provisional amounts recorded at the acquisition date. The Company employed a third-party valuation firm to assist in determining the purchase price allocation of assets and liabilities acquired from SunLink.
A combination of the income, cost, and market approaches were used to determine the value of property and equipment, trademarks and trade name, client relationships, and Medicare license, as applicable. The income approach determines the fair value for an asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a rate of return that reflects the relative risk of achieving the cash flow and the time value of money. Projected cash flows for each asset considered multiple factors, including current Fair Measurements and Disclosure. The cost approach utilizes assumptions for the cost to replace, timing, and resources required, as well as profit margin and opportunity costs. The market approach seeks to determine the current value of an asset by reference to recent comparable transactions involving the sale of similar assets. Adjustments may need to be made to those recorded transactions in order to account for any significant differences between the assets being valued. As of September 30, 2025, the calculation and allocation of the purchase price to tangible and intangible assets and liabilities is preliminary, as the Company is still in the process of accumulating all of the required information to finalize the opening balance sheet and calculations of intangible assets.
Purchase Price Allocation
The unaudited consolidated financial information reflects a gain on bargain purchase because the estimated fair value of the identifiable net assets acquired exceeds the estimated purchase price consideration.
At the merger,
Total consideration transferred to SunLink holders $
A bargain purchase of $
Regional common stock issued to SunLink shareholders |
|
|
|
Regional Series D preferred stock issued to SunLink shareholders |
|
|
|
Fair value of consideration transferred |
|
|
|
Property and equipment, net |
|
|
|
Cash |
|
|
|
Receivables, net |
|
|
|
Prepaids and other assets |
|
|
|
Inventory |
|
|
|
Intangible assets |
|
|
|
ROU operating lease assets |
|
|
|
Estimated fair value of total assets acquired |
|
|
|
Accounts Payable |
|
|
|
Operating lease obligation |
|
|
|
Accrued expenses and other liabilities |
|
|
|
Fair value of total |
|
|
|
Fair value of net assets acquired |
|
|
|
Gain on bargain purchase |
|
( |
) |
Acquisition-related costs (included in other expense in Regional's Consolidated Statements of Operations) were $
16
The amounts of SunLink’s revenues and net income (loss) included in Regional Health’s Consolidated Statements of Operations for the three months ended September 30, 2025, and the revenue and net income (loss) of the combined entity had the acquisition date been January 1, 2024 are:
|
Revenues |
|
Net Income (Loss) |
|
||
Actual from August 15, 2025 to September 30, 2025 |
$ |
|
$ |
( |
) |
|
|
|
|
|
|
||
(1) Supplemental pro forma from January 1, 2025 to September 30, 2025 |
$ |
|
$ |
( |
) |
|
|
|
|
|
|
||
(1) Supplemental pro forma from July 1, 2025 to September 30, 2025 |
$ |
|
$ |
( |
) |
|
|
|
|
|
|
||
Supplemental pro forma from January 1, 2024 to September 30, 2024 |
$ |
|
$ |
( |
) |
|
|
|
|
|
|
||
Supplemental pro forma from July 1, 2024 to September 30, 2024 |
$ |
|
$ |
( |
) |
|
(1) The unaudited pro forma net income for the three and nine months ended September 30, 2025 excludes a nonrecurring pro forma adjustment directly attributable to the SunLink merger, consisting of a bargain purchase gain of $
Defined Benefit Pension Plan
SunLink retained a defined benefit retirement plan which covered substantially all the employees of a business when the business was sold in 1998. Effective February 28, 1997, the plan was amended to freeze participant benefits and closed the plan to new participants. Pension expense and related tax benefit or expense is reflected in the Consolidated Statements of Operations.
The components of pension expense for the post-merger three and nine months ended September 30, 2025, respectively, were as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|
||||
|
|
|
|
||||
|
2025 |
|
|
2025 |
|
||
Interest Costs |
|
|
|
|
|
||
Expected Return on Assets |
|
( |
) |
|
|
( |
) |
Net pension (income) expense |
|
( |
) |
|
|
( |
) |
NOTE 4. CASH AND RESTRICTED CASH
The following presents the Company's cash and restricted cash:
(Amounts in 000’s) |
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Cash |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Restricted cash: |
|
|
|
|
|
|
||
Cash collateral |
|
$ |
|
|
$ |
|
||
HUD and other replacement reserves |
|
|
|
|
|
|
||
Escrow deposits |
|
|
|
|
|
|
||
Restricted investments for debt obligations |
|
|
|
|
|
|
||
Total restricted cash |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Total cash and restricted cash |
|
$ |
|
|
$ |
|
||
Cash collateral—In securing mortgage financing from certain lending institutions, the Company and certain of its wholly-owned subsidiaries are required to deposit cash to be held as collateral in accordance with the terms of such loan agreements.
17
HUD and other replacement reserves—The regulatory agreements entered into in connection with the financing secured through HUD require monthly escrow deposits for replacement and improvement of the HUD project assets.
Escrow deposits—In connection with financing secured through the Company's lenders, several wholly-owned subsidiaries of the Company are required to make monthly escrow deposits for taxes and insurance.
Restricted cash for debt obligations—In compliance with certain financing and insurance agreements, the Company and certain wholly-owned subsidiaries of the Company are required to deposit cash held as collateral by the lender or in escrow with certain designated financial institutions.
NOTE 5. PROPERTY AND EQUIPMENT
The following table sets forth the Company's property and equipment:
(Amounts in 000’s) |
|
Estimated |
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
|||
Buildings and improvements |
|
|
|
$ |
|
|
$ |
|
||||
Equipment and computer related |
|
|
|
|
|
|
|
|
||||
Land |
|
|
— |
|
|
|
|
|
|
|
||
Property and equipment |
|
|
|
|
|
|
|
|
|
|||
Less: accumulated depreciation |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Property and equipment, net |
|
|
|
|
$ |
|
|
$ |
|
|||
The following table summarizes total depreciation and amortization expense three and nine months ended September 30, 2025 and 2024:
|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|
|||||||||||
(Amounts in 000’s) |
|
2025 |
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Depreciation |
|
$ |
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amortization |
|
|
|
|
|
|
|
|
|
|
|
||||
Total depreciation and amortization expense |
|
$ |
|
$ |
|
|
$ |
|
|
$ |
|
||||
NOTE 6. ASSETS HELD FOR SALE
Assets held for sale represent our Coosa and Meadowood facilities.
(Amounts in 000’s) |
|
Estimated |
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Buildings and improvements |
|
|
$ |
|
|
$ |
|
|||
Equipment and computer related |
|
|
|
|
|
|
|
|||
Land |
|
— |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
|
|
( |
) |
|
|
( |
) |
Asset held for sale, net |
|
|
|
$ |
|
|
$ |
|
||
On July 30, 2025, the Company, Coosa Nursing ADK LLC, a wholly-owned subsidiary of the Company (“Coosa”), and Coosa Valley SNF Realty LLC (the “Purchaser”) entered into a binding asset purchase agreement (the “APA”), whereby Coosa would sell Coosa Valley Health and Rehab (the “Coosa Facility”) to the Purchaser, subject to a 45-day due diligence window in favor of the Purchaser. Under the terms contemplated by the APA, the Purchaser would acquire the Coosa Facility for a
18
NOTE 7. INTANGIBLE ASSETS AND GOODWILL
Intangible assets and Goodwill consist of the following:
(Amounts in 000’s) |
|
Bed licenses |
|
|
Bed Licenses - |
|
|
Lease |
|
|
|
Pharmacy Intangibles |
|
|
Total Intangible Assets |
|
|
Goodwill (2) |
|
||||||
Balances, December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Gross |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|||||
Accumulated amortization |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Net carrying amount |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|||||
Balances, September 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Gross |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Accumulated amortization |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Net carrying amount |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
The following table summarizes amortization expense for the three and nine months ended September 30, 2025 and 2024:
|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|
|||||||||||
(Amounts in 000’s) |
|
2025 |
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Bed licenses |
|
$ |
|
$ |
|
|
$ |
|
|
$ |
|
||||
Lease rights |
|
|
|
|
|
|
|
|
|
|
|
||||
Total amortization expense |
|
$ |
|
$ |
|
|
$ |
|
|
$ |
|
||||
Expected amortization expense for the years ending December 31, for all definite-lived intangibles, for each of the next five years and thereafter is as follows:
(Amounts in 000’s) |
|
Bed |
|
|
Lease |
|
|
Pharmacy Customer List |
|
|
Pharmacy Medicare License |
|
||||
2025 (3 months remaining) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
2027 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
2028 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
2029 |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|||
Thereafter |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Total expected amortization expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
NOTE 8. LEASES
Facility and Office Lessee
As of September 30, 2025 and December 31, 2024, the Company leases one Skilled Nursing Facility ("SNF") in Covington, Ohio under a non-cancelable lease, which has rent escalation clauses and provisions for payments of real estate taxes, insurance, and maintenance costs. The remaining lease term for the Covington facility is approximately
19
Effective July 1, 2023, the Company signed a sublease for
As of September 30, 2025, the Company is in compliance with all operating lease financial covenants.
Future Minimum Lease Payments
Future minimum lease payments for the twelve months ending December 31, for each of the next five years and thereafter is as follows:
(Amounts in 000’s) |
|
Future |
|
|
Accretion of |
|
|
Operating |
|
|||
2025 (3 months remaining) |
|
$ |
|
|
$ |
( |
) |
|
|
|
||
2026 |
|
|
|
|
|
( |
) |
|
|
|
||
2027 |
|
|
|
|
|
( |
) |
|
|
|
||
2028 |
|
|
|
|
|
( |
) |
|
|
|
||
2029 |
|
|
|
|
|
( |
) |
|
|
|
||
Thereafter |
|
|
|
|
|
( |
) |
|
|
|
||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Facilities Lessor
As of September 30, 2025, the Company was the lessor of
Future Minimum Lease Receivables
Future minimum lease receivables for the twelve months ending December 31, for each of the next five years and thereafter is as follows:
|
|
(Amounts |
|
|
2025 (3 months remaining) |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
For further details regarding the Company's leased and subleased facilities to third-party operators, including a full summary of the Company's leases to third-parties and which comprise the future minimum lease receivables of the Company, see Note 7 - Leases and Leasing Transactions in Part II, Item 8, Financial Statements and Supplementary Data, included in the Annual Report.
20
NOTE 9. ACCRUED EXPENSES
Accrued expenses consist of the following:
(Amounts in 000’s) |
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Accrued employee benefits and payroll-related |
$ |
|
|
$ |
|
||
Real estate and other taxes (1) |
|
|
|
|
|
||
Self-insured reserve |
|
( |
) |
|
|
|
|
Accrued interest |
|
|
|
|
|
||
Insurance escrow |
|
|
|
|
|
||
Pharmacy |
|
|
|
|
- |
|
|
Minimum pension liability |
|
|
|
|
- |
|
|
Deferred taxes |
|
|
|
|
- |
|
|
Other accrued expenses |
|
|
|
|
|
||
Total accrued expenses |
$ |
|
|
$ |
|
||
NOTE 10. NOTES PAYABLE AND OTHER DEBT
See Note 8 – Notes Payable and Other Debt in Part II, Item 8, Financial Statements and Supplementary Data, included in the Annual Report for a detailed description of all the Company's debt facilities.
Notes payable and other debt consists of the following:
(Amounts in 000’s) |
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Senior debt—guaranteed by HUD |
|
$ |
|
|
$ |
|
||
Senior debt—guaranteed by USDA (1) |
|
|
|
|
|
|
||
Senior debt—guaranteed by SBA(2) |
|
|
|
|
|
|
||
Senior debt—bonds |
|
|
|
|
|
|
||
Senior debt—other mortgage indebtedness |
|
|
|
|
|
|
||
Other debt |
|
|
|
|
|
|
||
Subtotal |
|
|
|
|
|
|
||
Deferred financing costs |
|
|
( |
) |
|
|
( |
) |
Unamortized discount on bonds |
|
|
( |
) |
|
|
( |
) |
Notes payable and other debt |
|
$ |
|
|
$ |
|
||
21
The following is a detailed listing of the debt facilities that comprise each of the above categories:
(Amounts in 000’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Facility |
|
Lender |
|
Maturity |
|
Interest Rate (1) |
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
|||||
Senior debt - guaranteed by HUD (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
The Pavilion Care Center |
|
Newpoint Capital |
|
|
Fixed |
|
|
% |
|
$ |
|
|
$ |
|
||||
Hearth and Care of Greenfield |
|
Newpoint Capital |
|
|
Fixed |
|
|
% |
|
|
|
|
|
|
||||
Woodland Manor |
|
Newpoint Capital |
|
|
Fixed |
|
|
% |
|
|
|
|
|
|
||||
Glenvue |
|
Newpoint Capital |
|
|
Fixed |
|
|
% |
|
|
|
|
|
|
||||
Autumn Breeze |
|
KeyBank |
|
|
Fixed |
|
|
% |
|
|
|
|
|
|
||||
Georgetown |
|
Newpoint Capital |
|
|
Fixed |
|
|
% |
|
|
|
|
|
|
||||
Sumter Valley |
|
KeyBank |
|
|
Fixed |
|
|
% |
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
Senior debt - guaranteed by USDA (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Mountain Trace |
|
Community B&T |
|
|
Prime + |
|
|
% |
|
$ |
|
|
$ |
|
||||
Southland |
|
Cadence Bank, NA |
|
|
Prime + |
|
|
% |
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
Senior debt - guaranteed by SBA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Southland(4) |
|
Cadence Bank, NA |
|
|
Prime + |
|
|
% |
|
$ |
|
|
$ |
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
(Amounts in 000’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Facility |
|
Lender |
|
Maturity |
|
Interest Rate (1) |
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
|||||
Senior debt - bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Eaglewood Bonds Series A |
|
City of Springfield, Ohio |
|
|
Fixed |
|
|
% |
|
$ |
|
|
$ |
|
||||
(Amounts in 000’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Facility |
|
Lender |
|
Maturity |
|
Interest Rate (1) |
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
|||||
Senior debt - other mortgage indebtedness |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Meadowood (2) |
|
Exchange Bank of Alabama |
|
|
Fixed |
|
|
% |
|
$ |
|
|
$ |
|
||||
Coosa (3) |
|
Exchange Bank of Alabama |
|
|
Fixed |
|
|
% |
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
22
(Amounts in 000’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Lender |
|
Maturity |
|
Interest Rate |
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
|||||
Other debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
First Insurance Funding (1) |
|
|
Fixed |
|
|
% |
|
$ |
|
|
$ |
|
||||
Key Bank (2) |
|
|
Fixed |
|
|
% |
|
|
|
|
|
|
||||
Marlin Capital Solutions |
|
|
Fixed |
|
|
% |
|
|
|
|
|
|
||||
Cavalier Management |
|
|
Fixed |
|
|
% |
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
Debt Covenant Compliance
As of September 30, 2025, the Company had
As of September 30, 2025, the Company was in compliance with the various financial and administrative covenants under all the Company's outstanding credit related instruments.
Scheduled Maturities
The schedule below summarizes the scheduled gross maturities as of September 30, 2025 for each of the next five years and thereafter.
For the Twelve Months Ended December 31, |
(Amounts in 000’s) |
|
|
2025 (3 months remaining) |
$ |
|
|
2025 |
|
|
|
2026 |
|
|
|
2027 |
|
|
|
2028 |
|
|
|
Thereafter |
|
|
|
Subtotal |
$ |
|
|
Less: unamortized discounts |
|
( |
) |
Less: deferred financing costs, net |
|
( |
) |
Total notes and other debt |
$ |
|
|
23
NOTE 11. COMMON AND PREFERRED STOCK
On August 4, 2025, the Company reconvened its special meeting (the “Special Meeting”) of the holders of its common stock (the “Common Stock”), which Special Meeting was originally convened on July 29, 2025 and adjourned to August 4, 2025. The Special Meeting was called to consider the proposals set forth in the Company’s joint proxy statement/prospectus filed with the SEC on June 25, 2025 (as supplemented or amended, the “Joint Proxy Statement/Prospectus”) in connection with the proposed merger of SunLink, with and into the Company, with the Company surviving the merger as the surviving corporation.
Both of the required proposals in connection with the merger presented at the Special Meeting were approved by the requisite votes of the common stock shareholders of the Company as follows:
On August 5, 2025, the Company filed Articles of Amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of the State of Georgia to establish its Series D
On August 14, 2025, the Company issued
See Note 3 - Business Combination for more information on the merger.
Common Stock
As of September 30, 2025, the Company had
Preferred Stock
As of September 30, 2025, the Company had
Series A Preferred Stock
As of September 30, 2025, the Company had
Series B Preferred Stock
On January 29, 2025, the board of directors of the Company declared a dividend to the holders of its
On September 17, 2025, the Company completed the repurchase of
24
As of September 30, 2025, the Company had
Series D Preferred Stock
Subject to the terms and conditions of the proposed The Company’s articles of amendment, beginning on July 1, 2027, holders of the Company’s Series D Preferred Stock receive, when, as, and if approved by the Company’s Board out of funds of the Company legally available for the payment of distributions and declared by the Company, cumulative preferential dividends at a rate per annum equal to the dividend rate (as defined below) of the liquidation preference (as defined below) of the Series D Preferred Stock in effect on the first calendar day of the applicable Dividend Period (as defined in the articles of amendment). The “dividend rate” shall mean (as a percentage of liquidation preference)
Except as otherwise required by the proposed Company’s articles of amendment or law, the Company’s Series D Preferred Stock will not have voting rights. However, as long as any shares of the Company’s Series D Preferred Stock are outstanding, the Company will not, without the affirmative vote of the holders of at least (A) two-thirds of the Company’s Series D Preferred Stock outstanding at the time, if there are more than
The Company’s articles of amendment further provide that, so long as at least
The Company’s articles of amendment further provide that, so long as at least
The Company’s articles of amendment further provide that, so long as at least
25
Company shall not otherwise take action, to provide for (i) the accrual or payment of dividends on the Company’s Series A Preferred Stock, (ii) an increase of the liquidation preference of the Company’s Series A Preferred Stock, (iii) a right of conversion of the Company’s Series A Preferred Stock into the Company’s common stock or (iv) the exchange by the Company of the Company’s Series A Preferred Stock for the Company’s common stock. The Company’s articles of amendment further provide that, so long as at least
The Company’s Series D Preferred Stock is convertible into shares of the Company’s common stock at the conversion ratio at the option of a holder of Company’s Series D Preferred Stock and mandatorily upon the following events: (i) there shall be
If a National Market Listing (as defined in the Company’s articles of amendment) of the Company’s common stock is not achieved by the Company on or before the last day of: (i) the sixth whole calendar month immediately after the merger (the “First Milestone Date”), or (ii) the twelfth whole calendar month immediately after the merger (the “Second Milestone Date”), or (iii) the eighteenth whole calendar month immediately after the merger (the “Third Milestone Date”) or (iv) the twenty-fourth whole calendar month immediately after the merger (the “Fourth Milestone Date”), then on the First Milestone Date the conversion ratio shall automatically be reduced, and on each succeeding Milestone Date automatically further reduced, by one-half of a share of Company’s Series D Preferred Stock in the number of shares of Company’s Series D Preferred Stock required for conversion into a share of the Company’s common stock. Each such reduction on any such Milestone Date once occurring shall not lapse or be subject to any correction event (as defined in the Company’s articles of amendment). “Milestone Date” shall mean, as applicable, the First Milestone Date, the Second Milestone Date, the Third Milestone Date or the Fourth Milestone Date.
For a further summary description of the material terms of the Company’s Series D preferred stock, see “Description of Company’s Series D preferred stock.” in the Registration Statement, Amendment No. 3 filed on Form S-4/A with the SEC on June 24, 2025.
As of September 30, 2025, the Company had
NOTE 12. STOCK BASED COMPENSATION
Stock Incentive Plans
As of September 30, 2025, the number of securities remaining available for future issuance under the Company's 2023 Omnibus Incentive Plan ("2023 Equity Plan") was
26
For the three and nine months ended September 30, 2025 and 2024, the Company recognized stock-based compensation expense as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(Amounts in 000’s) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Employee compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total employee stock-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of September 30, 2025, the remaining stock-based compensation expense that is expected to be recognized in future periods is approximately $
Restricted Stock
The following table summarizes the Company's restricted stock activity for the nine months ended September 30, 2025:
|
|
Number of |
|
|
Weighted Avg. |
|
||
Unvested, December 31, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Unvested, September 30, 2025 |
|
|
|
|
$ |
|
||
On June 20, 2025, a Restricted Stock Award ("RSA") with respect to
On August 14, 2025, a RSA with respect to
The unvested shares at September 30, 2025 will vest over the next
Common Stock Options
The following summarizes the Company's employee and non-employee stock option activity for the nine months ended September 30, 2025:
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|
Aggregate |
|
||||
Outstanding, December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercised |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Outstanding, September 30, 2025 |
|
|
|
|
$ |
|
|
|
— |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
No stock options were granted for the nine months ended September 30, 2025. All vested stock options were exercised during the nine months ended September 30, 2025; thus, there are no outstanding stock options as of September 30, 2025.
27
Common Stock Warrants
The following summarizes the Company's employee and non-employee common stock warrant nine months ended September 30, 2025:
|
|
Outstanding and Exercisable |
|
|||||||||
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|||
Outstanding, December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|||
Expired |
|
|
( |
) |
|
$ |
|
|
|
|
||
Outstanding, September 30, 2025 |
|
|
|
|
$ |
|
|
|
— |
|
||
NOTE 13. COMMITMENTS AND CONTINGENCIES
Regulatory Matters
Laws and regulations governing federal Medicare and state Medicaid programs are complex and subject to interpretation. Compliance with such laws and regulations can be subject to future governmental review and interpretation as well as significant regulatory action including fines, penalties, and exclusion from certain governmental programs. As of September 30, 2025, all of the Company's facilities operated by Regional or leased and subleased to third-party operators are certified by CMS and are operational. See Note 8 - Leases.
Legal Matters
The Company is a party to various legal actions and administrative proceedings and is subject to various claims arising in the ordinary course of business, including claims that the services the Company provided during the time it operated SNFs resulted in injury or death to the patients of the Company's facilities and claims related to professional and general negligence, employment, staffing requirements and commercial matters. Although the Company intends to vigorously defend itself in these matters, there is no assurance that the outcomes of these matters will not have a material adverse effect on the Company's business, results of operations and financial condition.
The Company previously operated, and the Company and its tenants now operate, in an industry that is highly regulated. As such, in the ordinary course of business, the Company and its tenants are continuously subject to state and federal regulatory scrutiny, supervision and control. Such regulatory scrutiny often includes inquiries, investigations, examinations, audits, site visits and surveys, some of which are non-routine. In addition, the Company believes that there has been, and will continue to be, an increase in governmental investigations of long-term care providers, particularly in the area of Medicare and Medicaid false claims, as well as an increase in enforcement actions resulting from these investigations. Adverse determinations in legal proceedings or governmental investigations against or involving the Company or its tenants, whether currently asserted or arising in the future, could have a material adverse effect on the Company's business, results of operations and financial condition.
Professional and General Liability Claims
As of September 30, 2025, the Company is a defendant in one professional and general liability action related directly to patient care that our current or prior tenants provided to their patients.
As of September 30, 2025, the Company is a defendant in one professional and general liability action commenced on behalf of one of our former patients who received care at one of our facilities. The plaintiff in this action alleges negligence due to failure to provide adequate and competent staff resulting in injuries, pain and suffering, mental anguish and malnutrition and seeks unspecified actual and compensatory damages, and unspecified punitive damages. This action is covered by insurance, except that any punitive damages awarded would be excluded from coverage.
28
See Note 15 – Subsequent Events for more information on litigation proceedings.
NOTE 14. SEGMENT RESULTS
The chief operating decision maker (“CODM”) is the President and Chief Executive Officer. The Company represents
The Company has
The table below presents the results of operations for our reporting segments for the periods presented.
29
|
Three Months Ended September 30, |
|
|
|
Three Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
|||||||||||||||||||||||||||||||||||||||||||
|
2025 |
|
2025 |
|
2025 |
|
2025 |
|
|
|
2024 |
|
2024 |
|
2024 |
|
2024 |
|
|
|
|
2,025 |
|
|
2,025 |
|
|
2,025 |
|
2025 |
|
|
|
2024 |
|
2024 |
|
2024 |
|
2024 |
|
||||||||||||||||
(Amounts in 000’s) |
Real Estate Services |
|
Healthcare Services |
|
Pharmacy Services |
|
Total |
|
|
|
Real Estate Services |
|
Healthcare Services |
|
Pharmacy Services |
|
Total |
|
|
|
Real Estate Services |
|
Healthcare Services |
|
Pharmacy Services |
|
Total |
|
|
|
Real Estate Services |
|
Healthcare Services |
|
Pharmacy Services |
|
Total |
|
|||||||||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Patient care revenues |
$ |
— |
|
$ |
|
$ |
— |
|
$ |
|
|
|
$ |
— |
|
$ |
|
$ |
— |
|
$ |
|
|
|
|
- |
|
|
|
|
- |
|
$ |
|
|
|
$ |
— |
|
$ |
|
$ |
— |
|
$ |
|
|||||||||||
Rental revenues |
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|||||||||||
Pharmacy revenues |
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|||||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Cost of goods sold |
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|||||||
Patient care expense |
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|||||||||||||
Facility rent expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|||||||||||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||||||||||||||||
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||||||||||||||||
Loss on lease termination |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|||||
Credit loss expense |
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
||||||||||||||
Gain on operations transfer |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|||
Total costs and expenses |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
||||||||||||||
30
Income (loss) from operations |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
|
— |
|
|
|
|
( |
) |
|
— |
|
|
( |
) |
|
Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Interest expense, net |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||||||||||||||
Loss on disposal of assets |
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
|
|
|
|
|
|
|
— |
|
|
— |
|
|||||
Other expense (income), net |
|
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||||||||||||
Total other expense (income), net |
|
|
|
( |
) |
|
( |
) |
|
( |
) |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
( |
) |
|
( |
) |
|
( |
) |
|
|
|
|
|
|
|
— |
|
|
|
|||||||||||
Net loss |
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
|
|
|
$ |
( |
) |
$ |
( |
) |
$ |
— |
|
$ |
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
$ |
|
|
|
$ |
( |
) |
$ |
( |
) |
$ |
— |
|
$ |
( |
) |
|||||||
The CODM does not regularly review total assets for our reportable segments as total assets are not used to assess performance or allocate resources.
NOTE 15. SUBSEQUENT EVENTS
31
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
This Quarterly Report and certain information incorporated herein by reference contain forward-looking statements and information within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This information includes assumptions made by, and information currently available to management, including statements regarding future economic performance and financial condition, liquidity and capital resources, and management's plans and objectives. In addition, certain statements included in this Quarterly Report, in the Company's future filings with the SEC, in press releases, and in oral and written statements made by us or with our approval, which are not statements of historical fact, are forward-looking statements. Words such as "may," "could," "should," "would," "believe," "expect," "anticipate," "estimate," "intend," "seek," "plan," "project," "continue," "predict," "will," and other words or expressions of similar meaning are intended by us to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are based on the Company's current expectations about future events or results and information that is currently available to us, involve assumptions, risks, and uncertainties, and speak only as of the date on which such statements are made.
All forward-looking statements are subject to the risks and uncertainties inherent in predicting the future. The Company's actual results may differ materially from those projected, stated or implied in these forward-looking statements as a result of many factors, including the Company's critical accounting policies and risks and uncertainties related to, but not limited to, the operating results of the Company's tenants, the overall industry environment, the Company's financial condition, and the impact of the COVID-19 pandemic on the Company's business. These and other risks and uncertainties are described in more detail in the Annual Report and in Part II, Item 1A "Risk Factors" of this Quarterly Report, as well as other reports that the Company files with the SEC.
Forward-looking statements speak only as of the date they are made and should not be relied upon as representing the Company's views as of any subsequent date. The Company undertakes no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by applicable laws, and you are urged to review and consider disclosures that the Company makes in this Quarterly Report and other reports that the Company files with the SEC that discuss factors germane to the Company's business.
Overview
Regional Health Properties, Inc., a Georgia corporation, operates businesses in Real Estate, Healthcare Services and Pharmacy Services. Our Real Estate segment consists of real estate investments in skilled nursing and senior housing facilities. We fund our real estate investments primarily through: (1) operational cash flow, (2) mortgages, and (3) sale of equity securities. Our Healthcare Services segment is comprised of entities set up to operate our facilities. Our Pharmacy Services segment consists of four operational areas, retail pharmacy products and services, institutional pharmacy services, which consists of specialty and non-specialty pharmaceutical and products to institutional clients or to patients in institutional settings, non-institutional pharmacy services consisting of the provision specialty and non-specialty pharmacy and biological products to clients or patients in non-institutional settings including private residential homes and durable medical equipment, consisting primarily of the sale and rental products for institutional clients or to patients and institutional settings and patient-administered home care. While the Company is a self-managed real estate investment company, the Company, when business conditions require, may undertake initiatives to take back facilities in order operate the facilities ourselves or using a third manager.
Real Estate Portfolio
As of September 30, 2025, we had investments of approximately $67.9 million in eleven health care real estate properties and one leased property. We currently own eleven properties, consisting of nine skilled nursing facilities and two multi-service facilities (of which one multi-service campus contains two co-located properties). Seven facilities are pursuant to triple-net leases and six facilities are managed by two external managers. The Company has one leased facility that is subleased pursuant to a triple-net lease.
Skilled nursing facilities. SNFs provide services that include daily nursing, therapeutic rehabilitation, social services, activities, housekeeping, nutrition, medication management and administrative services for individuals requiring certain assistance for
32
activities in daily living. A typical skilled nursing facility includes mostly one and two bed units, each equipped with a private or shared bathroom and community dining facilities.
Multi-Service Campuses. Multi-service campuses generally include some combination of co-located skilled nursing, independent living, assisted living and/or memory care units all housed at a single location and operated as a continuum of care. We also refer to continuing care retirement communities as multi-service campuses. These facilities are often marketed as an
opportunity for residents to “age in place,” and tend to attract couples where the individuals may require or benefit from differing levels of care.
Portfolio
The following table provides summary information regarding the number of facilities and related licensed beds/units as of September 30, 2025:
Location |
|
Skilled Nursing Facilities |
|
Multi Service Properties |
|
Total Properties |
Alabama (1) |
|
1 |
|
1 |
|
2 |
Georgia |
|
3 |
|
- |
|
3 |
North Carolina |
|
1 |
|
- |
|
1 |
Ohio (2) |
|
2 |
|
1 |
|
3 |
South Carolina |
|
2 |
|
- |
|
2 |
|
|
9 |
|
2 |
|
11 |
|
|
|
|
|
|
|
Location |
|
Skilled Nursing Beds/Units |
|
Multi Service Beds/Units |
|
Total Beds/Units |
Alabama (1) |
|
124 |
|
90 |
|
214 |
Georgia |
|
395 |
|
- |
|
395 |
North Carolina |
|
106 |
|
- |
|
106 |
Ohio (2) |
|
100 |
|
180 |
|
280 |
South Carolina |
|
180 |
|
- |
|
180 |
|
|
905 |
|
270 |
|
1,175 |
|
|
|
|
|
|
|
Location |
|
Skilled Nursing Investment |
|
Multi Service Investment |
|
Total Investment |
Alabama (1) |
|
$9,613,199 |
|
$5,224,561 |
|
$14,837,760 |
Georgia |
|
21,269,575 |
|
- |
|
21,269,575 |
North Carolina |
|
7,224,953 |
|
- |
|
7,224,953 |
Ohio (2) |
|
4,059,240 |
|
10,714,214 |
|
14,773,454 |
South Carolina |
|
9,830,884 |
|
- |
|
9,830,884 |
|
|
$51,997,850 |
|
$15,938,776 |
|
$67,936,626 |
(1) Meadowood Retirement Village offers assisted living, memory care, and independent living and is therefore considered a multi-service campus. |
(2) Eaglewood Village offers assisted living and Eaglewood Care Center offers skilled nursing. Both properties are co-located and are therefore considered a multi-service campus. |
The following table provides summary information regarding the number of facilities and related licensed beds/units by operator affiliation as of September 30, 2025:
Operator Affiliation |
|
Number of Facilities (1) |
|
|
Beds / Units |
|
||
C.R. Management |
|
|
2 |
|
|
|
233 |
|
Aspire Regional Partners |
|
|
3 |
|
|
|
280 |
|
Subtotal |
|
|
5 |
|
|
|
513 |
|
Manager Affiliation |
|
Number of Facilities |
|
|
Beds / Units |
|
||
Cavalier Senior Living |
|
|
1 |
|
|
|
90 |
|
CJM Advisors |
|
|
5 |
|
|
|
572 |
|
Subtotal |
|
|
6 |
|
|
|
662 |
|
Total |
|
|
11 |
|
|
|
1,175 |
|
33
For a more detailed discussion of the above information, see Note 7 - Leases to the consolidated financial statements included in Part I, Item 1 herein. Additionally, see "Portfolio of Healthcare Investments" included in Part I, Item 1 "Business" in the Annual Report.
Portfolio Occupancy Rates
The following table provides summary information regarding our portfolio facility-level occupancy rates for the periods shown:
|
|
|
|||||||||||||
Operating Metric (1) |
December 31, 2024 |
|
|
March 31, 2025 |
|
|
June 30, 2025 |
|
|
September 30, 2025 |
|
||||
Occupancy (%) |
|
68.1 |
% |
|
|
67.7 |
% |
|
|
67.1 |
% |
|
|
67.3 |
% |
Lease Expiration
The following table provides summary information regarding our lease expirations for the years shown as of December 31,:
|
|
|
Licensed Beds |
|
Annual Lease Revenue (2) |
|
|||||||||
|
Number of Facilities |
|
Count |
|
Percent (%) |
|
Amount ($) |
|
Percent (%) |
|
|||||
2025 |
1 |
|
|
124 |
|
|
19.4 |
% |
|
1,071 |
|
|
22.1 |
% |
|
2026 |
0 |
|
|
- |
|
|
0.0 |
% |
|
- |
|
|
0.0 |
% |
|
2027 |
0 |
|
|
- |
|
|
0.0 |
% |
|
- |
|
|
0.0 |
% |
|
2028 |
5 |
|
|
405 |
|
|
63.5 |
% |
|
2,761 |
|
|
57.1 |
% |
|
2029 |
0 |
|
|
- |
|
|
0.0 |
% |
|
- |
|
|
0.0 |
% |
|
2030 |
1 |
|
|
109 |
|
|
17.1 |
% |
|
1,006 |
|
|
20.8 |
% |
|
2031 |
0 |
|
|
- |
|
|
0.0 |
% |
|
- |
|
|
0.0 |
% |
|
Thereafter |
0 |
|
|
- |
|
|
0.0 |
% |
|
- |
|
|
0.0 |
% |
|
Total |
|
7 |
|
|
638 |
|
|
100.0 |
% |
|
4,838 |
|
|
100.0 |
% |
34
Pharmacy Services
The pharmacy business is composed of four operational areas conducted in three locations in southwest Louisiana:
Retail pharmacy products and services, consisting of retail pharmacy sales.
Institutional pharmacy services consisting of the provision of specialty and non-specialty pharmaceutical and biological products to institutional clients or to patients in institutional settings, such as extended care and rehabilitation centers, nursing homes, assisted living facilities, behavioral and specialty hospitals, hospice, and correctional facilities.
Non-institutional pharmacy services consisting of the provision of specialty and non-specialty pharmaceutical and biological products to clients or patients in non-institutional settings including private residential homes.
Durable medical equipment products and services (“DME”), consisting primarily of the sale and rental of products for institutional clients or to patients in institutional settings and patient-administered home care.
Results of Operations
The following table sets forth, for the periods indicated, an unaudited statement of operations items and the amounts and percentages of change of these items. The results of operations for any particular period are not necessarily indicative of results for any future period. The following data should be read in conjunction with our consolidated financial statements and the notes thereto, which are included herein.
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
2025 |
|
|
2024 |
|
|
Percent |
|
|
2025 |
|
|
2024 |
|
|
Percent |
|
||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Patient care revenues |
$ |
9,831 |
|
|
$ |
2,585 |
|
|
|
280.3 |
% |
|
$ |
24,247 |
|
|
$ |
7,418 |
|
|
|
226.9 |
% |
Rental revenues |
|
1,303 |
|
|
|
1,640 |
|
|
|
(20.5 |
)% |
|
|
4,134 |
|
|
|
5,257 |
|
|
|
(21.4 |
)% |
Pharmacy revenues |
|
4,004 |
|
|
|
— |
|
|
n/m |
|
|
|
4,004 |
|
|
|
— |
|
|
n/m |
|
||
Total revenues |
|
15,138 |
|
|
|
4,225 |
|
|
|
258.3 |
% |
|
|
32,385 |
|
|
|
12,675 |
|
|
|
155.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cost of goods sold |
|
2,470 |
|
|
|
— |
|
|
n/m |
|
|
|
2,470 |
|
|
|
— |
|
|
n/m |
|
||
Patient care expense |
|
8,639 |
|
|
|
2,179 |
|
|
|
296.5 |
% |
|
|
20,224 |
|
|
|
6,462 |
|
|
|
213.0 |
% |
Facility rent expense |
|
197 |
|
|
|
149 |
|
|
|
32.2 |
% |
|
|
552 |
|
|
|
446 |
|
|
|
23.8 |
% |
Depreciation and amortization |
|
547 |
|
|
|
474 |
|
|
|
15.4 |
% |
|
|
1,351 |
|
|
|
1,499 |
|
|
|
(9.9 |
)% |
General and administrative expense |
|
3,713 |
|
|
|
1,224 |
|
|
|
203.3 |
% |
|
|
8,375 |
|
|
|
4,085 |
|
|
|
105.0 |
% |
Loss on lease termination |
|
— |
|
|
|
— |
|
|
n/m |
|
|
|
303 |
|
|
|
— |
|
|
n/m |
|
||
Credit loss expense |
|
166 |
|
|
|
499 |
|
|
|
(66.7 |
)% |
|
|
636 |
|
|
|
563 |
|
|
|
13.0 |
% |
Gain on operations transfer |
|
— |
|
|
|
— |
|
|
n/m |
|
|
|
(106 |
) |
|
|
— |
|
|
n/m |
|
||
Total costs and expenses |
|
15,732 |
|
|
|
4,525 |
|
|
|
247.7 |
% |
|
|
33,805 |
|
|
|
13,055 |
|
|
|
158.9 |
% |
Loss from operations |
|
(594 |
) |
|
|
(300 |
) |
|
|
98.0 |
% |
|
|
(1,420 |
) |
|
|
(380 |
) |
|
|
273.7 |
% |
Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense, net |
|
751 |
|
|
|
677 |
|
|
|
10.9 |
% |
|
|
2,019 |
|
|
|
2,021 |
|
|
n/m |
|
|
Gain on bargain purchase |
|
(5,311 |
) |
|
|
— |
|
|
n/m |
|
|
|
(5,311 |
) |
|
|
— |
|
|
n/m |
|
||
Other expense, net |
|
584 |
|
|
|
5 |
|
|
|
11580.0 |
% |
|
|
1,201 |
|
|
|
249 |
|
|
|
382.3 |
% |
Total other expense, net |
|
(3,976 |
) |
|
|
682 |
|
|
|
(683.0 |
)% |
|
|
(2,091 |
) |
|
|
2,270 |
|
|
|
(192.1 |
)% |
Net Income (Loss) |
$ |
3,382 |
|
|
$ |
(982 |
) |
|
|
(444.4 |
)% |
|
$ |
671 |
|
|
$ |
(2,650 |
) |
|
|
(125.3 |
)% |
Three Months Ended September 30, 2025 and 2024
Patient care revenues—Patient care revenues for the Healthcare Services segment, as a result of the Company operating the Georgetown, Glenvue, Meadowood, Mountain Trace, Southland, and Sumter facilities, were $9.8 million for the three months ended September 30, 2025, compared to $2.6 million for the same period in 2024. The 280.3% increase is primarily due to the Company taking over the operations of four previously leased facilities since October 1, 2024.
35
Rental revenues—Rental revenue for our Real Estate Services segment decreased by approximately $0.3 million to $1.3 million for the three months ended September 30, 2025, compared with $1.6 million for the same period in 2024. The decrease in rental revenue this year results from the reduction of the four leased facilities that the Company now operates.
Pharmacy revenues —Pharmacy revenues of $4.0 million for the three months ended September 30, 2025 is the revenue generated during the post SunLink merger period.
Costs of goods sold — Costs of goods sold is the cost of Pharmacy products sold or rented during the post SunLink merger period.
Patient care expense—Patient care expense increased to $8.6 million for the three months ended September 30, 2025 compared to $2.2 million for the three months ended September 30, 2024. The increase results from the increase in the number of facilities operated by the Company this year.
Facility rent expense—Facility rent remained consisted totaling $0.2 million for the three months ended September 30, 2025 and 2024.
Depreciation and amortization—Depreciation and amortization remained consistent totaling $0.5 million for the three months ended September 30, 2025 and 2024.
General and administrative expenses—General and administrative expenses were $3.7 million for the three months ended September 30, 2025 compared with $1.2 million for the same period in 2024. The increased expense this year resulted from the increased cost of the four facilities being operated this year that were rented last year.
|
Three Months Ended September 30, |
|
|||||||||
(Amounts in 000’s) |
2025 |
|
|
2024 |
|
|
Percent |
|
|||
General and administrative expenses: |
|
|
|
|
|
|
|
|
|||
Real Estate Services |
$ |
1,094 |
|
|
$ |
897 |
|
|
|
22.0 |
% |
Healthcare Services |
|
1,674 |
|
|
|
327 |
|
|
|
411.9 |
% |
Pharmacy Services |
|
945 |
|
|
|
— |
|
|
n/m |
|
|
Total |
$ |
3,713 |
|
|
$ |
1,224 |
|
|
|
203.3 |
% |
Credit loss expense—Credit loss expense was $0.2 million for the three months ended September 30, 2025 compared to $0.5 million for the same period in 2024. Credit loss expense represents reserves taken against patient accounts receivable at the Glenvue facility, reserves taken against rental accounts receivable at the Southland facility and a write off of approximately $0.4 million of notes receivable at Lumber City.
Other expense—Other expense of $0.6 million for the three months ending September 30, 2025 was legal and other expenses incurred for the SunLink merger.
Gain on bargain purchase - The gain on bargain purchase of $5.3 million for the three months ended September 30, 2025 resulted from the SunLink merger completed on August 14, 2025.
Nine Months Ended September 30, 2025 and 2024
Patient care revenues—Patient care revenues for the Healthcare Services segment, as a result of the Company operating the Georgetown, Glenvue, Meadowood, Mountain Trace, Southland, and Sumter facilities, totaled $24.2 million for the nine months ended September 30, 2025, compared to $7.4 million for the same period in 2024. The increase is due to the increased number of facilities operated in the current year nine months.
Rental revenues—Rental revenue for our Real Estate Services segment decreased by approximately $1.2 million to $4.1 million for the nine months ended September 30, 2025, compared with $5.3 million for the same period in 2024. The (21.4)% decrease is primarily due to the reduction in rental facilities resulting from the transition to operating facilities this year.
Pharmacy revenues —Pharmacy revenues of $4.0 million for the nine months ended September 30, 2025 is the revenue generated during the post SunLink merger period.
36
Costs of goods sold — Costs of goods sold is the cost of Pharmacy products sold or rented during the post SunLink merger period.
Patient care expense—Patient care expense was $20.2 million for the nine months ended September 30, 2025 compared to $6.5 million for the nine months ended September 30. 2024. The increase this year resulted from the increased number of facilities operated this year
Facility rent expense—Facility rent expense increased to $0.6 million for the nine months ended September 30, 2025 compared to $0.4 million for the nine months ended September 30, 2024.
Depreciation and amortization—Depreciation and amortization was $1.4 million for the nine months ended September 30, 2025, compared to $1.5 million for the same period in 2024.
General and administrative expenses—General and administrative expenses were $8.4 million for the nine months ended September 30, 2025, compared with $4.1 million for the same period in 2024. The increased expense this year resulted from the increased cost of the four facilities being operated this year that were rented last year.
|
Nine Months Ended September 30, |
|
|||||||||
(Amounts in 000’s) |
2025 |
|
|
2024 |
|
|
Percent |
|
|||
General and administrative expenses: |
|
|
|
|
|
|
|
|
|||
Real Estate Services |
$ |
2,844 |
|
|
$ |
3,034 |
|
|
|
(6.3 |
)% |
Healthcare Services |
|
4,586 |
|
|
|
1,051 |
|
|
|
336.3 |
% |
Pharmacy Services |
|
945 |
|
|
|
— |
|
|
n/m |
|
|
Total |
$ |
8,375 |
|
|
$ |
4,085 |
|
|
|
105.0 |
% |
Credit loss expense—Credit loss expense was $0.6 million for nine months ended September 30, 2025, compared to $0.6 million for the same period in 2024. Credit loss expense represents reserves taken against patient accounts receivable at the Glenvue facility, reserves taken against rental accounts receivable at the Southland facility and a write off of approximately $0.4 million of notes receivable at Lumber City.
Other expense, net—Other expense, net was 1.2 million for nine months ended September 30, 2025, compared to $0.2 million for the same period in 2024. The expenses were predominantly legal and other expenses incurred for the SunLink merger.
Gain on bargain purchase - The gain on bargain purchase of $5.3 million for the nine months ended September 30, 2025 resulted from the SunLink merger completed on August 14, 2025.
NON-GAAP Financial Measures
The following table summarizes the Company's non-GAAP financial measure of results based on EBITDA for the three and nine months ended September 30, 2025 and 2024. EBITDA attributable to the Company's financial measure represents net income (loss) before interest expense (including amortization of deferred financing costs), amortization of stock-based compensation, and depreciation and amortization. Adjusted EBITDA represents EBITDA further adjusted to eliminate the impact of certain items that the Company does not consider indicative of core operating performance, such as recovery of previously reversed rent, lease termination revenue, property operating expenses, gains or losses from dispositions of real estate, real estate impairment charges, provision for loan losses, non-routine transaction costs, loss on extinguishment of debt, unrealized loss on other real estate related investments and provision for credit losses and lease restructuring, as applicable.
37
REGIONAL HEALTH PROPERTIES, INC. |
|
||||||||||||||
RECONCILIATION OF NET LOSS TO NON-GAAP FINANCIAL MEASURES |
|
||||||||||||||
(in thousands) |
|
||||||||||||||
(Unaudited) |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
$ |
3,382 |
|
|
$ |
(982 |
) |
|
$ |
671 |
|
|
$ |
(2,650 |
) |
Depreciation and amortization |
|
547 |
|
|
|
474 |
|
|
|
1,351 |
|
|
|
1,499 |
|
Interest expense, net |
|
751 |
|
|
|
677 |
|
|
|
2,019 |
|
|
|
2,021 |
|
Amortization of employee stock compensation |
|
124 |
|
|
|
19 |
|
|
|
171 |
|
|
|
85 |
|
EBITDA |
|
4,804 |
|
|
|
188 |
|
|
|
4,212 |
|
|
|
955 |
|
Credit loss expense |
|
166 |
|
|
|
499 |
|
|
|
636 |
|
|
|
563 |
|
Other expense (income), net |
|
584 |
|
|
|
5 |
|
|
|
1,201 |
|
|
|
249 |
|
Gain (loss) from write-off of liabilities and other credit balances from discontinued operations |
|
- |
|
|
|
3 |
|
|
|
- |
|
|
|
180 |
|
Gain from bargain purchase |
|
(5,311 |
) |
|
|
- |
|
|
|
(5,311 |
) |
|
|
- |
|
Expenses related to preferred stock recapitalization |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other one-time costs |
|
170 |
|
|
|
179 |
|
|
|
366 |
|
|
|
319 |
|
Project costs |
|
- |
|
|
|
20 |
|
|
|
- |
|
|
|
85 |
|
Tail insurance on legacy facilities |
|
- |
|
|
|
55 |
|
|
|
74 |
|
|
|
262 |
|
One-time income adjustment - quality incentive program (1) |
|
- |
|
|
|
49 |
|
|
|
(196 |
) |
|
|
(49 |
) |
Adjusted EBITDA from operations |
$ |
413 |
|
|
$ |
998 |
|
|
$ |
982 |
|
|
$ |
2,564 |
|
(1) Amounts represent adjustments needed for historical and estimated future amounts along with reconciling for timing differences. |
|
||||||||||||||
Liquidity and Capital Resources
Overview
The Company intends to pursue measures to grow its operations, streamline its cost infrastructure and otherwise increase liquidity, including: (i) refinancing or repaying debt to reduce interest costs and mandatory principal repayments, with such repayment to be funded through potentially expanding borrowing arrangements with certain lenders; (ii) increasing future lease revenue through acquisitions and investments in existing properties; (iii) modifying the terms of existing leases; (iv) replacing certain tenants who default on their lease payment terms;(v) reducing other and general and administrative expenses and (vi) integrating the SunLink businesses to reduce duplicative expenses.
On July 30, 2025, the Company, Coosa, and the Purchaser entered into a binding asset purchase agreement, or APA, whereby Coosa would sell the Coosa Facility to the Purchaser, subject to a 45-day due diligence window in favor of the Purchaser. Under the terms contemplated by the APA, the Purchaser would acquire the Coosa Facility for a purchase price of $10.6 million. The sale of the Coosa Facility was completed on November 6, 2025.For further information see Note 6 - Assets Held for Sale and Note 15 - Subsequent Events to the consolidated financial statements included in Part I, Item 1 herein.
Effective August 14, 2025, the Company closed on the merger with SunLink; whereas, SunLink merged with and into the Company, and the Company continuing as the surviving corporation. The Company issued 1,592,438 shares of the Company's common stock and 1,405,609 shares of the Company's Series D preferred stock as the purchase price consideration for the merger. Unrestricted cash acquired from SunLink was $6.0 million. For further information see Note 3 - Business Combination.to the consolidated financial statements included in Part I, Item 1 herein.
Separately, the Company experienced changes in its listing status. Until February 5, 2025, Regional’s common stock and Series A Preferred Stock were listed on the NYSE American under the ticker symbols “RHE” and “RHE-PA,” respectively. Trading was suspended on that date due to noncompliance with listing standards. On June 11, 2025, the NYSE American formally delisted both securities. They now trade on the OTC Markets under the symbols “RHEP” (common stock) and “RHEPA”
38
(Series A Preferred Stock).
Trading on the OTC Markets presents challenges, including reduced liquidity, wider bid-ask spreads, and limited analyst coverage. In addition, broker-dealers face greater regulatory burdens, which may further discourage trading activity. These limitations could depress trading prices and negatively impact the Company’s ability to raise capital through equity or debt offerings. Such constraints may impair the Company’s ability to invest in future growth or refinance upcoming debt maturities.
During the nine months ended September 30, 2025, the Company's net cash used by operating activities was $1.0 million primarily due to fluctuations in working capital. Management anticipates collecting a portion of the past due rent after the filing date and is currently negotiating various methods to collect the remaining unpaid rent.
As of September 30, 2025, the Company had $1.0 million in unrestricted cash and $7.7 million of net accounts receivable, mainly consisting of patient and rent receivables. Net accounts receivable consist of gross accounts receivable of $8.6 million offset by a recorded estimated allowance of $0.9 million
As of September 30, 2025, the Company had $48.6 million in indebtedness, net of $0.9 million deferred financing costs and unamortized discounts. The Company anticipates net principal repayments of approximately $3.0 million during the next twelve-month period, approximately $2.2 million of routine debt service amortization, $0.6 million of insurance financing amortization, and $0.2 million payment of bond debt.
Management anticipates access to several sources of liquidity, including cash on hand, cash flows from operations, cash flows from investing and debt refinancing during the twelve months following the date of this filing.
Debt Covenant Compliance
As of September 30, 2025, the Company was in compliance with the various financial and administrative covenants under the Company's outstanding credit related instruments.
Evaluation of the Company's Ability to Continue as a Going Concern
Under the accounting guidance related to the presentation of financial statements, the Company is required to evaluate, on a quarterly basis, whether or not the Company's current financial condition, including its sources of liquidity at the date that the consolidated financial statements are issued, will enable the Company to meet its obligations as they come due arising within one year of the date of the issuance of the Company's consolidated financial statements and to make a determination as to whether or not it is probable, under the application of this accounting guidance, that the Company will be able to continue as a going concern. The Company's consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In applying applicable accounting guidance, management considered the Company's current financial condition and liquidity sources, including current funds available, forecasted future cash flows, the Company's obligations due over the next twelve months, and the Company's recurring business operating expenses.
The Company concludes that it is probable that the Company will be able to meet its obligations arising within one year of the date of issuance of these consolidated financial statements within the parameters set forth in the accounting guidance.
For additional information regarding the Company's liquidity, see Note 2 – Liquidity and Note 10 – Notes Payable and Other Debt, to the consolidated financial statements included in Part I, Item 1 herein.
Cash Flows
The following table presents selected data from our consolidated statements of cash flows for the periods presented:
|
|
Nine Months Ended September 30, |
|
|||||
(Amounts in 000’s) |
|
2025 |
|
|
2024 |
|
||
Net cash (used in) provided by operating activities |
|
$ |
(994 |
) |
|
$ |
990 |
|
Net cash (used in) provided by investing activities |
|
|
5,332 |
|
|
|
(430 |
) |
Net cash (used in) financing activities |
|
|
(3,818 |
) |
|
|
(1,242 |
) |
Net change in cash and restricted cash |
|
|
520 |
|
|
|
(682 |
) |
Cash and restricted cash at beginning of period |
|
|
3,472 |
|
|
|
4,184 |
|
Cash and restricted cash, ending |
|
$ |
3,992 |
|
|
$ |
3,502 |
|
39
Nine Months Ended September 30, 2025
Net cash used in operating activities—was approximately $1.0 million. The negative cash flow from operating activities was mainly due to the timing of working capital accounts.
Net cash provided by investing activities—was approximately $5.3 million. This includes $6.0 million of cash acquired in the SunLink merger.
Net cash used in financing activities—was approximately $3.8 million. Cash of $2.7 million was used to repurchase Series B Preferred shares and make routine payments totaling 1.3 million for our senior debt obligations.
Nine Months Ended September 30, 2024
Net cash provided by operating activities—was approximately $1.0 million. The positive cash flow from operating activities was mainly due to the timing of working capital accounts.
Net cash used in investing activities—was approximately $0.4 million. This capital expenditure was primarily for leasehold improvements.
Net cash used in financing activities—was approximately $1.2 million. The cash was used to make routine payments totaling 1.0 million for our senior debt obligations, and $0.2 million for other debt.
Subsequent Events
On November 6, 2025, the Company's wholly=owned subsidiary Coosa Nursing ADK LLC sold its Coosa Valley Health and Rehab (“the Coosa facility”) to an unaffiliated company for cash of $10.6 million. A gain on the sale of the property of approximately $3.7 million is expected to be reported in Regional’s results for the quarter ended December 31, 2025. Debt of approximately $4.9 million was repaid at closing. Cash of approximately $4.7 million was received at closing, after payments of $0.6 million of transaction expenses and $ $0.4 million deposited to escrow accounts for future tax payment related to the sold assets. The cash received at closing will be used by Regional for general corporate and other purposes.
Off-Balance Sheet Arrangements
Guarantee
The Company subleased five facilities located in Ohio to the Aspire Sublessees, formerly affiliated with MSTC Development Inc., pursuant to the Aspire Subleases, whereby the Aspire Sublessees took possession of, and commenced operating, the Aspire Facilities as subtenant. The Company agreed to indemnify Aspire against any and all liabilities imposed on them as arising from the former operator, capped at $8.0 million. The Company has assessed the fair value of the indemnity agreements as not material to the financial statements at September 30, 2025. For further information see Note 6 – Leases, to the consolidated financial statements included in Part I, Item 1 herein and also and Note 6 – Leases included in Part II, Item 8 of the Annual Report.
Effective on August 14, 2025, the Company assumed by operation of law all of the prior debts, liabilities, obligations and duties of SunLink, and such debts, liabilities, obligations and duties may be enforced against the Company to the same extent as if the Company had itself incurred or contracted all such debts, liabilities, obligations and duties. For further information see Note 3 - Business Combination to the consolidated financial statements included in Part I, Item 1 herein.
Critical Accounting Policies
We prepare our financial statements in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Article 8 of Regulation S-X. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses. On an ongoing basis, we review our judgments and estimates, including, but not limited to, those related to doubtful accounts, income taxes, stock compensation, intangible assets and loss contingencies. We base our estimates on historical experience, business knowledge and on various other assumptions that we believe to be reasonable under the circumstances at the time. Actual results may vary from our estimates. These estimates are evaluated by management and revised as circumstances change.
40
For a discussion of our critical accounting policies, see Note 1 – Organization and Significant Accounting Policies to the consolidated financial statements included in Part I, Item 1 herein.
41
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Disclosure in response to Item 3 of Form 10-Q is not required to be provided by smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our management, with the participation of our Chief Executive Officer and Senior Vice President, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report (the "Evaluation Date"). Based on such evaluation, our management has concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
There has been no change in the Company's internal controls over financial reporting that occurred during the period covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings.
The Company is a defendant in various legal actions and administrative proceedings arising in the ordinary course of business, including claims that the services the Company provided during the time it operated skilled nursing facilities resulted in injury or death to patients. Although the Company settles cases from time to time when settlement can be achieved on a reasonable basis, the Company vigorously defends any matter in which it believes the claims lack merit and the Company has a reasonable chance to prevail at trial or in arbitration. Litigation is inherently unpredictable. There is no assurance that the outcomes of these matters will not have a material adverse effect on the Company's financial condition. Although arising in the ordinary course of the Company's business, certain of these matters are described in Note 13 - Commitments and Contingencies.
Item 1A. Risk Factors.
For a detailed description of certain risk factors that could affect our business, operations and financial condition, see Part I, Item 1A., Risk Factors, included in the Annual Report, as supplemented and modified by the risk factors set forth below in this Item 1A. The risk factors described in the Annual Report and this Quarterly Report (collectively, the “Risk Factors”) do not describe all risks applicable to our business, and we intend it only as a summary of certain material factors. The Risk Factors should be considered in connection with evaluating the forward-looking statements contained in this Quarterly Report because the Risk Factors could cause the actual results and conditions to differ materially from those projected in forward-looking statements. If any of the risks actually occur, our business, financial condition, or results of operations could be negatively affected. In that case, the trading price of the common stock, no par value per share (the "common stock"), the Series A Redeemable Preferred Shares, no par value per share (the "Series A Preferred Stock"), and the 12.5% Series B Cumulative Redeemable Preferred Shares, no par value per share (the "Series B Preferred Stock"), could decline.
The merger with SunLink added the Pharmacy Services segment and risk factors related to the Pharmacy Services segment is stated as follows:
Risks Relating to our Pharmacy Operations
The operations of our Pharmacy business may be adversely affected by changes in government reimbursement regulations and
42
payment levels.
The operations of our Pharmacy business has historically derived approximately 65% respectively, of its net revenues from government payors, principally Medicare and Medicaid.
There is no assurance that the reimbursement methodology used by Medicare will not be extended to the provision of all specialty pharmaceuticals or to the specialty pharmaceuticals most often sold by the Pharmacy operations or that the Pharmacy operations will continue to be able to operate our Pharmacy Services segment profitably at either existing or at lower reimbursement rates. Likewise, we cannot assure you that the Part B CAP program will not be extended to rural or exurban areas in general or to the areas in which the Pharmacy segment operates, or may seek to operate, in particular or the Pharmacy business would be able to meet the qualifications to become a Part B CAP vendor either now or at any time in the future.
The operations of our Pharmacy business could be harmed by further changes in government purchasing methodologies and reimbursement rates for Medicare or Medicaid.
In addition to the impact of Medicare Prescription Drug Improvement and Modernization Act (“MMA”), in order to deal with budget shortfalls, some states are attempting to create state administered prescription drug discount plans, to limit the number of prescriptions per person that are covered, to raise Medicaid co-pays and deductibles, and are proposing more restrictive formularies and reductions in pharmacy reimbursement rates. Any reductions in amounts reimbursable by other government programs for pharmacy services or changes in regulations governing such reimbursements could materially and adversely affect our Pharmacy business, financial condition, and results of operations.
Louisiana, where our Pharmacy business operates, has implemented a managed Medicaid program which is administered by outside contractors. These managed Medicaid programs are designed to reduce the State’s administrative costs and the cost of the products and services provided to beneficiaries.
The Durable Medical Equipment(“DME”) service line of the Pharmacy business may be adversely affected by further changes in government reimbursement regulations and payment levels, especially if the DME service line becomes subject to additional competitive bidding procedures.
The Pharmacy business is currently subject to the expanded provisions of the Medicare competitive bidding program which have had a negative impact on the prices we receive for DME. The current provisions could be expanded or changed in the future. Any additional changes in government reimbursement or payment amounts could have a further adverse effect on our consolidated results of operations.
The operations of our Pharmacy business depend on a continuous supply of key products. Any shortages of key products could adversely affect the business of the Pharmacy operations.Many of the products distributed by the operations of our Pharmacy business are manufactured with ingredients that are susceptible to supply shortages. In addition, the manufacturers of these products may not have adequate manufacturing capability to meet rising demand. If any products distributed by the Pharmacy business are in short supply for extended periods of time, this could result in a material adverse effect on our business and results of operations.
The operations of our Pharmacy business are highly dependent on our relationship with and the stability of one key supplier, and the loss of such key supplier could adversely affect the business of the Pharmacy business.Any termination of, or adverse change in, our relationships with our key supplier, or the loss of supply of one of our key products for any other reason, could have a material adverse effect on the business of the Pharmacy operations and our consolidated results of operations. The largest supplier for the Pharmacy business has historically accounted for approximately 75% of the segment’s cost of goods sold In addition, the Pharmacy business has few long-term contracts with its suppliers. Arrangements with most of its suppliers may be canceled by either party, without cause and on minimal notice; and many of these arrangements are not governed by written agreements.
The loss of one or more of larger institutional pharmacy customers could hurt our business by reducing the revenues and profitability of the operations of our Pharmacy business.As is customary in the institutional pharmacy industry, the institutional pharmacy service line of our Pharmacy business has customer contracts, but generally not long-term contracts, with its institutional pharmacy customers. Loss of existing contracts or significant declines in the level of purchases by one or more of the larger institutional pharmacy customers could have a material adverse effect on the business of the Pharmacy operations and our consolidated results of operations.
The failure of the Pharmacy business to maintain eligibility as a Medicare and Medicaid supplier could materially adversely affect its competitive position. Likewise, its failure to maintain and expand relationships with private payors, who can
43
effectively determine the pharmacy source for their members, could materially adversely affect its competitive position.
Changes in average wholesale prices (“AWP”) could reduce our pricing and margins.
Many government payors, including Medicare and Medicaid, have paid, or continue to pay, the operations of our Pharmacy business directly or indirectly at a rate based upon a drug’s AWP less a percentage factor. The Pharmacy business also has contracted with some private payors to sell drugs at AWP or at AWP less a percentage factor. For most drugs, AWP is compiled and published by several private companies, including First DataBank, Inc. Several states have filed lawsuits against pharmaceutical manufacturers for allegedly inflating reported AWP for prescription drugs. In addition, class action lawsuits have been brought by consumers against pharmaceutical manufacturers alleging overstatement of AWP. We are not responsible for such calculations, reports or payments; however, there can be no assurance that the ability of our Pharmacy business to negotiate discounts from drug manufacturers will not be materially adversely affected by such investigations or lawsuits.
The federal government also has entered into settlement agreements with several drug manufacturers relating to the calculation and reporting of AWP pursuant to which the drug manufacturers, among other things, have agreed to report new pricing information, the “average sales price”, to government healthcare programs. The average sales price is calculated differently than AWP and may be expected to have the effect of indirectly reducing reimbursement.
The Pharmacy business faces numerous competitors and potential competitors in the market in which our Pharmacy business operates, many of whom are significantly larger and who have significantly greater financial resources.
Large national companies operate in the existing market in which our Pharmacy business operates. We cannot assure you that one or more of such companies or other healthcare companies will not seek to compete or intensify their level of competition in the areas in which we conduct or may seek to conduct one or more of the components of the operations of our Pharmacy business.
The operations of our Pharmacy business may be adversely affected by industry trends in managed care contracting and consolidation. growing number of health plans are contracting with a single provider of Pharmacy services. Likewise, manufacturers may not be eager to contract with regional providers of Pharmacy services. If the Pharmacy business is unable to obtain managed care contracts in the areas in which we provide Pharmacy services or are unable to obtain pharmacy products at reasonable costs or at all, the business operations of our Pharmacy business could be adversely affected.
The Pharmacy business market may grow slower than expected, which could adversely affect our revenues.We cannot predict the rate of actual future growth in product availability and spending, the extent to which patient demand or spending for specialty drug services in rural or exurban areas will match national averages or whether government payors will provide reimbursement for new products under Medicare or Medicaid on a timely basis, at what rates, or at all. Adverse developments in any of these areas could have an adverse impact on the business operations of our Pharmacy business.
The profitability of our Pharmacy business can be adversely affected by a decrease in the introduction of new brand name and generic prescription drugs.Sales and profit margins of the Pharmacy business are materially affected by the introduction of new brand name and generic drugs. New brand name drugs can result in increased drug utilization and associated sales revenues, while the introduction of lower priced generic alternatives typically result in relatively lower sales revenues, but higher gross profit margins. Accordingly, a decrease in the number of significant new brand name drugs or generics successfully introduced could adversely affect our business and results of operations.
There are no other material changes to the risk factors set forth in Part I, Item 1A, in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 31, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
44
Item 5. Other Information.
NYSE American Listing
The Company's common stock and Series A Preferred Stock ("securities") was listed for trading on the NYSE American under the symbol “RHE” and "RHE-PA," respectively, up until February 5, 2025 when it was suspended from trading as a result of not meeting certain listing requirements. And on June 11, 2025, the Company was notified that the Company's common stock and Series A Preferred Stock were delisted from the NYSE American Exchange. Currently, the Company's common stock and Series A Preferred Stock are listed on the OTC Market under the symbol "RHEP" and "RHEPA," respectively.
Trading Arrangement
During the third quarter of 2025, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Exchange Act)
Item 6. Exhibits.
The agreements included as exhibits to this Quarterly Report are included to provide information regarding the terms of these agreements and are not intended to provide any other factual or disclosure information about the Company, its business or the other parties to these agreements. These agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time, and should not be relied upon by investors.
45
EXHIBIT INDEX
Exhibit No. |
|
Description |
|
Method of Filing |
|
|
|
|
|
2.1
|
|
Agreement and Plan of Merger by and between Regional Health Properties, Inc. and SunLink Health Systems Inc., dated as of January 3, 2025 |
|
Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed on January 10, 2025
|
|
|
|
|
|
2.2
|
|
Amended and Restated Agreement and Plan of Merger by and between Regional Health Properties, Inc. and SunLink Health Systems Inc., dated as of April 14, 2025
|
|
Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed on April 18, 2025
|
|
|
|
|
|
2.3 |
|
Amendment to Amended and Restated Agreement and Plan of Merger by and between Regional Health Properties, Inc. and SunLink Health Systems, Inc., dated as of June 22, 2025 |
|
Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed on June 23, 2025 |
|
|
|
|
|
2.4
|
|
Asset Purchase Agreement by and between Regional Health Properties, Inc., Coosa Nursing ADK LLC, and Coosa Valley SNF Realty LLC, effective July 30, 2025
|
|
Incorporated by reference to Exhibit 2.3 of the Registrant's Quarterly Report of Form 10-Q filed on August 14, 2025 |
|
|
|
|
|
3.1 |
|
Amended and Restated Articles of Incorporation of Regional Health Properties, Inc., effective July 3, 2023 |
|
Incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K filed on July 6, 2023 |
|
|
|
|
|
3.24 |
|
Amended and Restated Bylaws of Regional Health Properties, Inc., effective September 21, 2017 |
|
Incorporated by reference to Exhibit 3.3 of the Registrant's Current Report on Form 8-K12B filed on October 10, 2017 |
|
|
|
|
|
3.2(a) |
|
Amendment No. 1 to Amended and Restated Bylaws of Regional Health Properties, Inc., effective June 27, 2023 |
|
Incorporated by reference to Exhibit 3.6 of the Registrant’s Post-Effective Amendment No. 1 to Registration Statement on Form S-4 (Reg. No. 333-269750) filed on June 28, 2023 |
|
|
|
|
|
3.2(b)
|
|
Articles of Amendment to Amendment and Restated Articles of Incorporation of Regional Health Properties, Inc., effective August 5, 2025
|
|
Incorporated by reference to Exhibit 3.1 of Registrant's Current Report of Form 8-K filed on August 5, 2025
|
|
|
|
|
|
10.1 |
|
Amended and Restated Employment Agreement by and between Regional Health Properties, Inc. and Brent S. Morrison, dated as of August 14, 2025 |
|
Incorporated by reference to Exhibit 10.1 of Registrant's Current Report of Form 8-K filed on August 14, 2025
|
|
|
|
|
|
10.2 |
|
Employment Agreement by and between Regional Health Properties, Inc. and Robert M. Thornton, Jr., dated as of August 14, 2025
|
|
Incorporated by reference to Exhibit 10.2 of Registrant's Current Report of Form 8-K filed on August 14, 2025
|
|
|
|
|
|
10.3 |
|
Award Agreement by and between Regional Health Properties, Inc. and Robert M. Thornton, Jr., dated as of August 14, 2025
|
|
Incorporated by reference to Exhibit 10.3 of Registrant's Current Report of Form 8-K filed on August 14, 2025
|
46
|
|
|
|
|
31.1 |
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act |
|
Filed herewith |
|
|
|
|
|
31.2 |
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act |
|
Filed herewith |
|
|
|
|
|
32.1 |
|
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act |
|
Filed herewith |
|
|
|
|
|
32.2 |
|
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act |
|
Filed herewith |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
|
Filed herewith |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
Filed herewith |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
Filed herewith |
47
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
REGIONAL HEALTH PROPERTIES, INC. |
|
|
|
|
(Registrant) |
|
|
|
|
|
Date: |
|
November 14, 2025 |
|
/s/ Brent S. Morrison |
|
|
|
|
Brent S. Morrison |
|
|
|
|
Chairman, Chief Executive Officer and Director (principal executive officer) |
|
|
|
|
|
Date: |
|
November 14, 2025 |
|
/s/ Mark J. Stockslager |
|
|
|
|
Mark J. Stockslager |
|
|
|
|
Chief Financial Officer (principal financial officer) |
48
