GBCS 10-Q
Selectis Health, Inc. (GBCS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from _______ to ______
Commission
file number
(Exact name of Registrant as specified in its Charter)
| (State or other jurisdiction of | I.R.S. Employer | |
| incorporation or organization) | Identification number |
| (Address of principal executive offices) | (Zip Code) |
Issuer’s
telephone number: (
Check
whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 12 months (or
for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer ☐ | Accelerated filer ☐ | Smaller
Reporting Company |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging
growth company
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
As of August 21, 2026, the Registrant had shares of its Common Stock outstanding.
INDEX
| 2 |
PART 1. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
SELECTIS HEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2026 | December 31, 2025 | |||||||
| (Unaudited) | (As Revised) | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Other receivable | ||||||||
| Prepaid expenses and other assets | ||||||||
| Escrow receivable | ||||||||
| Assets held for sale | ||||||||
| Total current assets | ||||||||
| Long Term Assets: | ||||||||
| Restricted cash | ||||||||
| Escrow receivable | ||||||||
| Property and equipment, net | ||||||||
| Goodwill | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Liabilities: | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Dividends payable | ||||||||
| Short term debt | ||||||||
| Current portion of long-term debt, net of discount of $ | ||||||||
| Lines of credit | ||||||||
| Liabilities held for sale, net of discount of $ | ||||||||
| Other current liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Long-term debt, net of discount of $ | ||||||||
| Lease security deposit | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity (Deficit): | ||||||||
| Preferred Series D - | ||||||||
| Common Stock - $ par value; shares authorized, shares issued and outstanding at June 30, 2026 and December 31, 2025 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ||||||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 3 |
SELECTIS HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue | ||||||||||||||||
| Healthcare revenue | $ | $ | $ | $ | ||||||||||||
| Management fee revenue | ||||||||||||||||
| Total Revenue | ||||||||||||||||
| Expenses | ||||||||||||||||
| Property taxes, insurance and other operating | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Provision for credit losses | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Total Expenses | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income from employee retention credits | ||||||||||||||||
| Gain on sale of an asset | ||||||||||||||||
| Other income | ||||||||||||||||
| Total other income (expense) | ( | ) | ||||||||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes | ||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||||||
| Series D preferred dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) attributable to common stockholders | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Per Share Data: | ||||||||||||||||
| Net income (loss) per share attributable to common stockholders: Basic | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net income (loss) per share attributable to common stockholders: Diluted | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted Average Common Shares Outstanding: Basic | ||||||||||||||||
| Weighted Average Common Shares Outstanding: Diluted | ||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 4 |
SELECTIS HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
For the Three Months Ended June 30, 2026
Series D Preferred Stock | Common Stock | Additional | Selectis Health, Inc. Stockholders’ | |||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | Paid-In Capital | Accumulated Deficit | Equity (Deficit) | ||||||||||||||||||||||
| Balance, March 31, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Series D Preferred Dividends | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
For the Three Months Ended June 30, 2025
Series D Preferred Stock | Common Stock | Additional | Selectis Health, Inc. Stockholders’ | |||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | Paid-In Capital | Accumulated Deficit |
Deficit | ||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Series D Preferred Dividends | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
For the Six Months Ended June 30, 2026
Series D Preferred Stock | Common Stock | Additional | Selectis Health, Inc. Stockholders’ | |||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | Paid-In Capital | Accumulated Deficit | Equity (Deficit) | ||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Series D Preferred Dividends | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Repurchase of preferred stock | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
For the Six Months Ended June 30, 2025
Series D Preferred Stock | Common Stock | Additional | Selectis Health, Inc. | |||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | Paid-In Capital | Accumulated Deficit | Stockholders’ Deficit | ||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Series D Preferred Dividends | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 5 |
SELECTIS HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of deferred loan costs and debt discount | ||||||||
| Provision for credit losses | ||||||||
| Gain on sale of an asset | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts and rents receivable | ( | ) | ||||||
| Prepaid expenses and other assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Lease security deposits | ||||||||
| Other current liabilities | ( | ) | ||||||
| Cash (used in) provided by operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Proceeds from sale of assets held for sale, net | ||||||||
| Cash paid for property and equipment | ( | ) | ( | ) | ||||
| Cash provided by (used in) investing activities | ( | ) | ||||||
| Cash Flows from financing activities: | ||||||||
| Proceeds from debt, non-related party | ||||||||
| Payments on debt, related party | ( | ) | ||||||
| Payments on debt, non-related party | ( | ) | ( | ) | ||||
| Proceeds from line of credit | ||||||||
| Payment on line of credit | ( | ) | ( | ) | ||||
| Repurchase of preferred stock | ( | ) | ||||||
| Cash used in financing activities | ( | ) | ( | ) | ||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | ( | ) | ||||||
| Cash, cash equivalents and restricted cash at beginning of the period | ||||||||
| Cash, cash equivalents and restricted cash at end of the period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | $ | $ | ||||||
| Total Cash, Cash Equivalents and Restricted Cash | $ | $ | ||||||
| Supplemental Schedule of Non-Cash Investing and Financing Activities | ||||||||
| Dividends declared on Series D Preferred Stock | $ | $ | ||||||
| Assumption of debt related party from a non-related party | $ | $ | ||||||
| Payoff of mortgages funded at closing | $ | $ | ||||||
| Escrow receivable funded at closing | $ | $ | ||||||
| Closing costs, prepayment penalties and other adjustments funded at closing | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 6 |
SELECTIS HEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of the Business
Selectis Health, Inc (“Selectis” or “we” or the “Company”) owns and operates, through wholly-owned subsidiaries Assisted Living Facilities, Independent Living Facilities, and Skilled Nursing Facilities across the Midwest, South and Southeastern portions of the US.
The Company acquires, develops, lease and manages healthcare real estate and provides healthcare operations through our wholly-owned subsidiaries. Our portfolio is comprised of investments in the following healthcare operations: (i) senior housing (including independent and assisted living) and (ii) post-acute/skilled nursing. We will make investments within our healthcare operations using the following six investment products: (i) direct ownership of properties, (ii) debt investments, (iii) developments and redevelopments, (iv) investment management, (v) the Housing and Economic Recovery Act of 2008 (“RIDEA”), which represents investments in senior housing operations utilizing the structure permitted by RIDEA and (vi) owning healthcare operations.
Liquidity and Going Concern
The accompanying unaudited Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP applicable to a going concern. This presentation contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described below.
For
the six months ended June 30, 2026, the Company had net income of $
| ● | Increasing revenue by increasing occupancy in the facilities and increasing Medicaid reimbursement rates; | |
| ● | Sale of certain facilities; | |
| ● | Controlling operating expenses; and | |
| ● | Seeking additional capital through the issuance of debt or equity securities, or the sale of assets. |
The focus on opportunities within the Company’s current portfolio and future properties to acquire and operate, the settlement, refinance, and continued service of debt obligations, the potential funds generated from stock sales and other initiatives contributing to additional working capital should alleviate any substantial doubt about the Company’s ability to continue as a going concern. However, the Company cannot predict, with certainty, the outcome of these actions to generate liquidity and the failure to do so could negatively impact the Company’s future operations.
| 7 |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and in conjunction with the rules and regulations of the Securities Exchange Commission. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary to make the consolidated financial statements not misleading have been included. Operating results for the three and six months ended June 30, 2026, are not necessarily indicative of the results that may be expected for the entire year. The year-end condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. In accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC), the Company has omitted certain footnote disclosures that would substantially duplicate the disclosures contained in its annual audited Consolidated Financial Statements. Therefore, the unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Basic earnings (loss) per share are based on the weighted-average number of shares of common stock outstanding. FASB ASC Topic 260, “Earnings per Share”, requires the Company to include additional shares in the computation of earnings per share, assuming dilution.
Diluted earnings per share are based on the assumption that all dilutive options and warrants were converted or exercised by applying the treasury stock method and that all convertible preferred stock were converted into common shares by applying the if-converted method. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period or at the time of issuance, if later, and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, the preferred dividends applicable to convertible preferred stock are added back to the numerator. The convertible preferred stock is assumed to have been converted at the beginning of the period or at time of issuance, if later, and the resulting common shares are included in the denominator.
We calculate basic earnings (loss) per share by dividing net income (loss) attributable to common stockholders (the “numerator”) by the weighted average number of common shares outstanding (the “denominator”) during the reporting period. Diluted earnings per share is calculated similarly but reflects the potential impact of outstanding options, warrants and other commitments to issue common stock, including shares issuable upon the conversion of convertible preferred stock outstanding, except where the impact would be anti-dilutive.
| 8 |
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Numerator for basic earnings per share: | ||||||||||||||||
| Net Income (Loss) Attributable to Selectis Health, Inc. | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Series D Preferred Dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Income (Loss) Attributable to Common Stockholders – Basic | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Denominator for basic earnings per share: | ||||||||||||||||
| Weighted Average Common Shares Outstanding - Basic | ||||||||||||||||
| Weighted Average Common Shares Outstanding - Diluted | ||||||||||||||||
| Net Income (Loss) per Share Attributable to Common Stockholders: | ||||||||||||||||
| Basic | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Diluted | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
Segment Reporting
The Company operates through a single operating and reportable segment focused on the business of operating assisted living facilities, independent living facilities, and skilled nursing facilities across the South and Southeastern portions of the US. The Company manages all business activities on a consolidated basis. The Company’s chief operating decision maker (CODM) is the Chief Executive Officer.
The CODM evaluates the performance of the operating segment and allocates resources based on net loss that also is reported on the condensed consolidated statements of operations and comprehensive loss as net loss. The measure of the operating segment assets is reported on the condensed consolidated balance sheet as total assets.
The CODM uses net income (loss) to monitor budget versus actual results and to analyze cash flows in assessing performance of the segment and allocating resources. The significant expense categories regularly provided to the CODM include property taxes, insurance and other operating expenses and general and administrative expenses. These expense categories are reported as separate line items in our condensed consolidated statements of operations and comprehensive loss. All our revenue is attributable to the United States and to our single operating segment.
Recently issued Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in ASU 2024-03 require a public business entity to disclose specific information about certain costs and expenses in the notes to its financial statements for interim and annual reporting periods. The objective of the disclosure requirements is to provide disaggregated information about a public business entity’s expenses to help investors (i) better understand the entity’s performance, (ii) better assess the entity’s prospects for future cash flows, and (iii) compare an entity’s performance over time and with that of other entities. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of the adoption of ASU 2024-03.
The FASB and other entities issued new or modifications to, or interpretations of, existing accounting guidance during 2026. Management has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.
| 9 |
3. REVISION OF PREVIOUSLY ISSUED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Revision of Previously Issued Financial Statements
In
connection with the preparation of our condensed consolidated financial statements for the three and six months ended June 30,
2026, the Company’s management identified immaterial errors within our previously issued audited consolidated financial
statements as of and for the year ended December 31, 2025 and the unaudited condensed consolidated financial statements as of and
for the three months ended March 31, 2026. The immaterial errors resulted in: (i) an $
The Company evaluated the materiality of the errors and concluded the errors were not material to the year ended December 31, 2025 and the three months ended March 31, 2026. Financial information as of December 31, 2025 and for the year ended December 31, 2025 and as of and for the three months ended March 31, 2026 has been revised in this report to correct the errors. The revisions did not impact previously reported revenue, net income (loss), earnings per share, cash flows, or total assets. The following table presents a reconciliation of our unaudited condensed consolidated financial information as originally reported to the revised amounts as of December 31, 2025 and for the year ended December 31, 2025 and as of and for the three months ended March 31, 2026:
Consolidated Balance Sheet
| As of December 31, 2025 | ||||||||||||
| As Previously Reported | Adjustment | As Revised | ||||||||||
| Other current liabilities | $ | $ | $ | |||||||||
| Total Liabilities | ||||||||||||
| Series A Preferred Stock | ( | ) | ||||||||||
| Total Equity (Deficit) | ( | ) | ( | ) | ( | ) | ||||||
Condensed Consolidated Balance Sheet
| As of March 31, 2026 | ||||||||||||
| As Previously Reported | Adjustment | As Revised | ||||||||||
| Other current liabilities | $ | $ | $ | |||||||||
| Total Liabilities | ||||||||||||
| Series A Preferred Stock | ( | ) | ||||||||||
| Total Equity (Deficit) | ( | ) | ( | ) | ||||||||
4. PROPERTY AND EQUIPMENT, NET
The gross carrying amount and accumulated depreciation of the Company’s property and equipment as of June 30, 2026 and December 31, 2025, are as follows:
| June 30, 2026 | December 31, 2025 | |||||||
| Land | $ | $ | ||||||
| Land Improvements | ||||||||
| Buildings and Improvements | ||||||||
| Furniture, Fixtures and Equipment | ||||||||
| Less: Accumulated Depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
As
of June 30, 2026 and December 31, 2025, $
| For the Three Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Depreciation Expense | $ | $ | ||||||
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Depreciation Expense | $ | $ | ||||||
5. DEBT AND DEBT - RELATED PARTIES
The following is a summary of the Company’s debt outstanding as of June 30, 2026 and December 31, 2025:
| June 30, 2026 | December 31, 2025 | |||||||
| Senior Secured Promissory Notes | $ | $ | ||||||
| Senior Secured Promissory Notes - Related Parties | ||||||||
| Fixed-Rate Mortgage Loans | ||||||||
| Variable-Rate Mortgage Loans | ||||||||
| Line of Credit | ||||||||
| Unamortized Discount and Debt Issuance Costs | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| As presented in the Consolidated Balance Sheets: | ||||||||
| Current Maturities of Long-Term Debt, Net | $ | $ | ||||||
| Current Maturities of Long-Term Debt, Net classified within liabilities held for sale (1) | ||||||||
| Short Term Debt – Related Parties, Net | ||||||||
| Line of Credit - Current | ||||||||
| Long-Term Debt | ||||||||
| $ | $ | |||||||
| (1) |
The
weighted average interest rate and term of our fixed rate debt are
The
weighted average interest rate and term of our fixed rate debt are
| 10 |
Corporate Senior and Senior Secured Promissory Notes
Senior Secured Notes
In
2017, $
In
October 2017, the Company sold an aggregate of $
In
October 2018, the Company, through a registered broker-dealer acting as Placement Agent, undertook a private offering to accredited investors
of Units, each Unit consisting of an
On
January 17, 2020, the Board of Directors agreed to increase the total offering amount and extend the period of its 2018 Offering of
These
notes were extended to
Effective
June 27, 2023, pursuant to an Allonge and Modification Agreement a Majority in Interest of the senior secured note holders agreed to
extend the maturity date of the notes to
Effective
December 31, 2024, pursuant to the Second Amended and Restated Allonge and Modification Agreement a Majority in Interest of the senior
secured note holders agreed to extend the maturity date of the notes to
Effective
December 31, 2025, pursuant to the Third Amended and Restated Allonge and Modification Agreement a Majority in Interest of the senior
secured note holders agreed to extend the maturity date of the notes to
The Company evaluated the Amendment Agreement and the amendment was not required to be accounted for as a Troubled Debt Restructuring under ASC 470-60 as no concession was granted to the Company. The Company then evaluated the Second Amended and Restated Allonge and Modification Agreement was not required to be accounted for as an extinguishment under ASC 470-50, Debt – Modifications and Extinguishment. The Company recorded the debt as a modification. As a result of the new warrants, the Company recorded the incremental increase in fair value as a debt discount which is being amortized over the extended life of the notes of twelve months.
During
the six months ended June 30, 2026 the Company paid off $
| 11 |
Mortgage Loans and Lines of Credit Secured by Real Estate
Mortgage loans and other debts such as line of credit here are collateralized by all assets of each nursing home property and an assignment of its rents. Collateral for certain mortgage loans includes the personal guarantee of Christopher Brogdon, formerly but no longer a related party, or corporate guarantees. Mortgage loans for the periods presented consisted of the following:
| Number of | Total Face | Total Principal Outstanding as of | ||||||||||||||
| State |
Properties |
Amount | June 30, 2026 | December 31, 2025 | ||||||||||||
| Arkansas(1) | $ | $ | $ | |||||||||||||
| Georgia(2) | $ | $ | $ | |||||||||||||
| Ohio(3) | $ | $ | $ | |||||||||||||
| Oklahoma(4) | $ | $ | $ | |||||||||||||
| $ | $ | $ | ||||||||||||||
| (1) | |
| (2) | |
| (3) | |
| (4) |
Corporate and Other Debt
The Company’s corporate debt as of June 30, 2026 and December 31, 2025 includes unsecured notes and notes secured by all assets of the Company not serving as collateral for other notes.
Total Principal Outstanding as of | Stated | |||||||||||||||
| Series | Face Amount | June 30, 2026 | December 31, 2025 | Interest Rate | Maturity Date | |||||||||||
| Senior Secured Promissory Notes | $ | $ | $ | |||||||||||||
| Promissory Note – Southern Bank | ||||||||||||||||
| Senior Secured Promissory Notes – Related Party | ||||||||||||||||
| $ | $ | $ | ||||||||||||||
| 12 |
Lines of Credits
On
April 12, 2024, the Company entered into a Commercial Line of Credit Agreement and Note with Southern Bank for a secured line of credit
in the principal amount limit of $
In
November 2024, the Company entered into another Commercial Line of Credit Agreement and Note with Southern Bank for a secured line of
credit in the principal amount limit of $
As
of June 30, 2026 and December 31, 2025, the balance outstanding on the Commercial Line of Credits is $
Amortization of Debt Discount
Amortization
expense for debt issuance costs and debt discounts totaled $
Future maturities and principal payments of all notes payable listed above for the next five years and thereafter are as follows:
| Year Ending December 31 | ||||
| 2026 (remaining six months) | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total (without debt discount) | $ | |||
6. STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock
The Company has authorized shares of preferred stock. These shares may be issued in series with such rights and preferences as may be determined by the board of directors.
| 13 |
Series D Convertible Preferred Stock
The
Company has established a class of preferred stock designated Series D Convertible Preferred Stock (“Series D preferred stock”)
and authorized an aggregate of non-voting shares with a stated value of $ per share. Holders of the Series D preferred
stock are entitled to receive dividends at the annual rate of
As
of June 30, 2026 and December 31, 2025, the Company had and shares of Series D Preferred Stock outstanding. During the
six months ended June 30, 2026 the Company repurchased shares of preferred stock for $
For
the three months ended June 30, 2026, and 2025, the Company declared $
Common Stock
The Company’s Board of Directors has authorized shares of $ par value, Class A Common Stock and shares of $ par value, Class B Common Stock. As of June 30, 2026 and December 31, 2025, the Company has shares of common stock outstanding.
Common Stock Warrants
As
of June 30, 2026 and December 31, 2025, the Company had
Activity for the three months ended June 30, 2026, related to common stock warrants is as follows:
| June 30, 2026 | ||||||||
| Number of | Weighted Average | |||||||
| Warrants | Exercise Price | |||||||
| January 1, 2026 Balance | $ | |||||||
| Exercised | ||||||||
| Expired | ||||||||
| June 30, 2026 Balance | $ | |||||||
7. GOODWILL
Goodwill is tested for impairment at a reporting unit level on an annual basis or when an event occurs, or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. During the six months ended June 30, 2026 and 2025, the Company recorded impairment of Goodwill.
| 14 |
Following is a summary of goodwill as of June 30, 2026 and December 31, 2025:
| Balance, December 31, 2025 | $ | |||
| Additions | ||||
| Dispositions | ( | ) | ||
| Balance, June 30, 2026 | $ |
8. SALE OF ASSETS
May 2026 Sale of Assets
On
March 5, 2026, the Company entered into a letter of intent to sell certain wholly-owned subsidiaries Global Abbeville Property, LLC and
Dodge NH, LLC, each a Georgia limited liability company (each a “Seller”) to execute and deliver a definitive Purchase and
Sale Agreement (“March 2026 PSA”) with two newly formed entities: Abbeville Crossing Propco of Journey LLC and Eastman Trails
Propco of Journey LLC, each a Georgia limited liability company (each a “Purchaser”); pursuant to which each Seller agreed
to sell substantially all of the real and personal property owned by each, namely the skilled nursing facilities for $
During
the six months ended June 30, 2026, the Company reclassified $
On
May 1, 2026 the Company sold the two Georgia facilities for gross proceeds of $
A summary of the sale is as follows:
| Description | Amount | |||
| Cash | $ | |||
| Escrow Receivable | ||||
| Notes Payable | ||||
| G&A Closing Costs | ||||
| Sale Total | $ | |||
As part of the sale of the properties, the Company recorded a gain on the sale of the properties. A summary of the gain is as follows:
| Description | Amount | |||
| Cash | $ | |||
| Escrow Receivable | ||||
| Notes Payable | ||||
| Closing expenses and adjustments | ||||
| Land & Buildings | ( | ) | ||
| Goodwill | ( | ) | ||
| Total Gain on Sale | $ | |||
9. SALE OF ATL/WARR AND PROVIDENCE HR
January 2026 Sale of Assets
On
December 5, 2025, the Company entered into a letter of intent to sell certain wholly-owned subsidiaries (collectively the “Sellers”)
of the “Company ATL/WARR, LLC and PROVIDENCE HR, LLC, each a Georgia limited liability company, consummated a definitive Purchase
and Sale Agreement (“ January 2026 PSA”) with GA SNF SPARTA GA LLC and GA SNF WARRENTON GA LLC, both limited liability companies
in exchange for $
During
the fourth quarter of 2025, the Company reclassified $
In
January 2026 the Company sold the two Georgia facilities for gross proceeds of $
| 15 |
A summary of the sale is as follows:
| Description | Amount | |||
| Cash | $ | |||
| Escrow Receivable | ||||
| Notes Payable | ||||
| G&A Closing Costs | ||||
| Sale Total | $ | |||
As part of the sale of the properties, the Company recorded a gain on the sale of the properties. A summary of the gain is as follows:
| Description | Amount | |||
| Cash | $ | |||
| Escrow Receivable | ||||
| Notes Payable | ||||
| Closing expenses and adjustments | ||||
| Land & Buildings | ( | ) | ||
| Total Gain on Sale | $ | |||
The following table sets forth the assets held for sale at December 31, 2025 relating to the sale of the two Georgia facilities which closed in January 2026:
| December 31, 2025 | ||||
| Property and equipment, net | $ | |||
| Debt attributed to assets held for sale | $ | ( | ) | |
| Accounts payable attributed to assets held for sale | $ | ( | ) | |
10. INCOME TAXES
The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual tax rate changes, the Company makes a cumulative adjustment in that quarter. The Company’s quarterly tax provision, and its quarterly estimate of its annual effective tax rate, are subject to significant volatility due to several factors, including the Company’s ability to accurately predict its pre-tax income and loss in multiple jurisdictions.
The Company’s effective tax rate was an expense of
Income
tax expense was $
11. LEGAL PROCEEDINGS
The Company and/or its affiliated subsidiaries provide patient care at or through their facilities. As such, the Company and its affiliated subsidiaries are subject from time to time to claims of negligence resulting in injury or death to residents. The Company maintains comprehensive general liability insurance and professional liability insurance in sufficient amounts to cover most material exposure resulting from these claims. The cost of defense is generally covered by these liability policies subject to reasonable reserves and deductibles. Nevertheless the Company does have exposure to these claims which in some cases can be material. There can be no assurance that the Company’s portfolio of insurance products will be adequate to cover all potential exposure or prevent material adverse financial losses.
12. COMMITMENTS AND CONTINGENCIES
General and Professional Liability Insurance and Lawsuits
The senior care industry has experienced significant increases in both the number of personal injury/wrongful death claims and in the severity of awards based upon alleged negligence by skilled nursing facilities and their employees in providing care to residents. The Company has been, and continues to be, subject to claims and legal actions that arise in the ordinary course of business, including potential claims related to patient care and treatment. The defense of these lawsuits may result in significant legal costs, regardless of the outcome, and can result in large settlement amounts or damage awards. The Company purchases insurance through third party providers that provides coverage for these claims.
There is certain additional litigation incidental to our business, none of which, based upon information available to date, would be material to our financial position, results of operations, or cash flows. In addition, the long–term care industry is continuously subject to scrutiny by governmental regulators, which could result in litigation or claims related to regulatory compliance matters.
Governmental Regulations
Laws and regulations governing the Medicare, Medicaid and other federal healthcare programs are complex and subject to interpretation. Management believes that it is following all applicable laws and regulations in all material respects. However, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties, and exclusions from the Medicare, Medicaid and other federal healthcare programs.
13. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the condensed consolidated balance sheet date up to the date that the unaudited condensed consolidated financial statements were issued. Based upon review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed consolidated financial statements, except as noted below:
Merger Agreement
On June 22, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Black Pearl Equities II, LLC, a New York limited liability company (“Purchaser”), and Tortuga Acquisition Sub, Inc., a Utah corporation and a wholly owned subsidiary of Purchaser (“Merger Sub”), pursuant to which, among other things, Purchaser has agreed to cause Merger Sub to make a cash tender offer (the “Offer”) to purchase any and all of the outstanding shares of the Company’s common stock, par value $ per share (the “Shares”), at a purchase price of $ per Share in cash (the “Offer Price”). Black Pearl Equities, LLC, a New York limited liability company, is the sole member of Purchaser (“Parent”).
Merger Sub’s obligation
to accept for payment and pay for Shares pursuant to the Offer is subject to various conditions, including (a) a nonwaivable condition
(the “Minimum Tender Condition”) that there be validly tendered and not withdrawn prior to the expiration of the Offer
that number of Shares that, when added to the Shares, if any, already owned by Parent and its subsidiaries, would represent at least seventy
percent (70%) of all then outstanding Shares, (b) Shares held by stockholders that have properly exercised appraisal rights under Utah
law shall not have exceeded fifteen percent (15%) of the Shares outstanding immediately prior to the Acceptance Time (as defined in the
Merger Agreement), (c) the Company shall have demonstrated to the reasonable satisfaction of Purchaser that the aggregate unrestricted
cash held by the Company and its subsidiaries is at least $
The Merger Agreement further provides that upon the terms and subject to the conditions set forth therein, following completion of the Offer, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and as a wholly owned subsidiary of Purchaser (the “Merger”). Pursuant to the terms of the Merger Agreement, the Company has granted to Merger Sub an irrevocable option (the “Top-Up Option”) to purchase up to that number of newly-issued Shares that, when added to the number of Shares held by Purchaser and its affiliates, would constitute one Share more than ninety percent (90%) of the total outstanding Shares. Accordingly, the Merger will be governed by Section 16-10a-1104 of the Utah Revised Business Corporation Act (the “Utah Code”), with no vote of the Company’s stockholders required to consummate the Merger. In the Merger, each outstanding Share (other than Shares held by the Company or any of its subsidiaries, Purchaser or Merger Sub or held by stockholders who are entitled to demand, and who properly demand, appraisal rights under Utah law), will be converted into the right to receive cash in an amount equal to the Offer Price, without interest.
The board of directors of the Company (the “Company Board”) has unanimously (a) determined and declared that the Merger Agreement and the transactions contemplated by the Merger Agreement (including the Offer and the Merger) are, on the terms and subject to the conditions set forth in the Merger Agreement, advisable and in the best interests of and are fair to the Company and its stockholders, (b) approved, adopted and authorized in all respects the Merger Agreement and the transactions contemplated by the Merger Agreement (including the Offer and the Merger), (c) recommended that the stockholders of the Company accept the Offer and tender their Shares pursuant to the Offer, and (d) resolved that the Merger shall be effected under Section 16-10a-1104 of the Utah Code and that the Merger shall be consummated as soon as practicable following the acceptance of Shares for payment pursuant to the Offer.
The Merger Agreement includes customary representations,
warranties and covenants of the Company, Purchaser and Merger Sub, including, among other things, a covenant of the Company not to solicit
alternative transactions or to provide information or enter into discussions in connection with alternative transactions, subject to
certain exceptions to allow the Company Board to exercise its fiduciary duties. The Merger Agreement may be terminated under certain
circumstances, including in connection with superior proposals as set forth therein. If the Company terminates the Merger Agreement to
enter into an agreement for a superior proposal and in other specified circumstances, the Company would be required to pay Purchaser
a $
Preferred Stock
Subsequent to June 30, 2026, the Company discovered that there had been a technical defect under Utah state law in connection with its issuance of shares of Series A Convertible Preferred Stock which occurred many years ago. The effect of that defect has rendered that preferred stock issuance invalid. The Board has determined that the impact of that invalidation on the Company’s financial statements, in the aggregate, was not material.
Effective August 10, 2026, the Company redeemed all remaining outstanding shares of Series D Convertible Preferred stock at a redemption price equal to their Stated Value plus accrued and unpaid dividends.
| 16 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is Management’s Discussion and Analysis of Financial Condition and Results of Operations and should be read in conjunction with the interim financial statements and notes thereto contained in this report. This section contains forward-looking statements, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based. These forward-looking statements generally are identified by the words “believes,” “projects,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise. All forward-looking statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC.
Actual future results and trends may differ materially from expectations depending on a variety of factors discussed in our filings with the SEC. These factors include without limitation:
| * | strategic business relationships; | |
| * | statements about our future business plans and strategies; | |
| * | anticipated operating results and sources of future revenue; | |
| * | our organization’s growth; | |
| * | adequacy of our financial resources; | |
| * | development of markets; | |
| * | competitive pressures; | |
| * | changing economic conditions; and | |
| * | expectations regarding competition from other companies. |
Although we believe that any forward-looking statements, we make in this Quarterly Report are reasonable, because forward-looking statements involve future risks and uncertainties, there are factors that could cause actual results to differ materially from those expressed or implied. For example, a few of the uncertainties that could affect the accuracy of forward-looking statements, besides the specific factors identified above in the Risk Factors section of this Quarterly Report, include:
| * | changes in general economic and business conditions affecting the healthcare industry; | |
| * | developments that make our facilities less competitive; | |
| * | changes in our business strategies; | |
| * | the level of demand for our facilities; and | |
| * | regulatory changes affecting the healthcare industry and third-party payor practices. |
Properties
As of June 30, 2026, we owned eight (8) long-term care facilities including a campus of three buildings in Tulsa, OK. The following table provides summary information regarding these facilities at June 30, 2026:
| Total Square Feet | # of Beds | |||||||||||||||||||||||||||
| State | Properties | Operations | Leased Operations | Operating Square Feet | Leased Square Feet | Operating Beds | Leased Beds | |||||||||||||||||||||
| Arkansas | 1 | - | 1 | - | 40,737 | - | 141 | |||||||||||||||||||||
| Ohio | 1 | - | - | 27,500 | - | 99 | - | |||||||||||||||||||||
| Oklahoma | 6 | 5 | - | 162,976 | - | 412 | - | |||||||||||||||||||||
| Total | 8 | 5 | 1 | 190,476 | 40,737 | 511 | 141 | |||||||||||||||||||||
Effective December 5, 2025, the Company executed two Purchase and Sale Agreements, and corresponding Operations Transfer Agreements, pursuant to which the Company agreed to sell to an unrelated third party, two (2) of the Company’s skilled nursing facilities in the State of Georgia: Warrenton and Sparta. The completion of the sale of the PSA’s resulted in the Company having two (2) remaining facilities in the State of Georgia. The Company closed on this transaction in January 2026.
Effective March 5, 2026, the Company executed two Purchase and Sale Agreements, and corresponding Operations Transfer Agreements, pursuant to which the Company agreed to sell to an unrelated third party, the Company’s remaining two (2) skilled nursing facilities in the State of Georgia: Glen Eagle and Eastman. This transaction closed in May 2026, therefore the Company would no longer owns any healthcare facilities in the State of Georgia.
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RESULTS OF OPERATIONS
The following discussion of the financial condition, results of operations, cash flows, and changes in our financial position should be read in conjunction with our interim consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.
Three Months Ended June 30, 2026, Compared to the Three Months Ended June 30, 2025
Three Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Revenue | ||||||||
| Healthcare revenue | $ | 4,618,665 | $ | 10,441,244 | ||||
| Management fee revenue | 108,334 | - | ||||||
| Total Revenue | 4,726,999 | 10,441,244 | ||||||
| Expenses | ||||||||
| Property taxes, insurance and other operating | 4,132,334 | 8,156,177 | ||||||
| General and administrative | 2,103,004 | 2,236,266 | ||||||
| Provision for credit losses | 363,538 | 136,348 | ||||||
| Depreciation | 229,471 | 362,742 | ||||||
| Total Expenses | 6,828,347 | 10,891,533 | ||||||
| Loss from Operations | (2,101,348 | ) | (450,289 | ) | ||||
| Other income (expense) | ||||||||
| Interest expense, net | (212,611 | ) | (225,991 | ) | ||||
| Income from employee retention credits | - | 326,500 | ||||||
| Gain on sale of assets | 10,150,510 | - | ||||||
| Other income | 758,230 | 41,753 | ||||||
| Total other (income) expense | 10,696,129 | 142,262 | ||||||
| Income (loss) before income taxes | 8,594,781 | (308,027 | ) | |||||
| Provision for income taxes | 471,423 | - | ||||||
| Net income (loss) | $ | 8,123,358 | $ | (308,027 | ) | |||
Revenues
Healthcare Revenue
Healthcare revenue for the three months ended June 30, 2026 was $4,618,665, compared to $10,441,244 for the three months ended June 30, 2025, a decrease of $5,822,579 or 56%. Healthcare revenues decreased due to the sale of four of our Georgia facilities in January and May 2026.
Management Fee Revenue
Management fee revenue for the three months ended June 30, 2026 was $108,334 compared to $0 for the three months ended June 30, 2025, an increase of $108,334 or 100%. Management fee revenues increased due to the start of a management fee arrangement in November 2025.
| 18 |
Operating Expenses
Property Taxes, Insurance, and Other Operating
Property taxes, insurance, and other operating expenses was $4,132,334 for the three months ended June 30, 2026, compared to $8,156,177 for the three months ended June 30, 2025, a decrease of $4,023,843 or 49%. This decrease can be attributed to lower operating cost due to the sale of our four Georgia facilities.
General and Administrative
General and administrative expenses was $2,103,004 for the three months ended June 30, 2026, compared to $2,236,266 for the three months ended June 30, 2025, a decrease of $133,262 or 6%. The decrease can be attributed to a decrease in salary and benefits expense.
Provision for Credit Losses
Provision for credit losses was $363,538 for the three months ended June 30, 2026, compared to $136,348 for the three months ended June 30, 2025, an increase of $227,190 or 167%. The change can be attributed to the write off receivables primarily due to the sale of four of our facilities.
Depreciation
Depreciation expense was $229,471 for the three months ended June 30, 2026, compared to $362,742 for the three months ended June 30, 2025, a decrease of $133,271 or 37%. This decrease is related to an increase in fully depreciated assets along with assets sold in 2026 attributed to our four Georgia facilities as compared to the same period in the prior year.
Other Income (Expense)
Interest Expense, Net
Interest expense, net was $212,611 for the three months ended June 30, 2026, compared to $225,991 for the three months ended June 30, 2025, a decrease of $13,380 or 6%. The decrease was due the payoff of debt as a result of the sale of our four Georgia facilities during 2026.
Income from Employee Retention Credit
Income from Employee Retention Credit was $0 for the three months ended June 30, 2026, compared to $326,500 for the three months ended June 30, 2025, a decrease of $326,500 or 100%. The decrease was due to the Company collecting previous claims made to obtain the credit.
Gain on Sale of Asset
Gain on sale of asset was income of $10,150,510 for the three months ended June 30, 2026, compared to $0 for the three months ended June 30, 2025. The increase was the result of the gain recognized due to the completion of the sale of our two Georgia facilities.
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Other Income
Other income was $758,230 for the three months ended June 30, 2026, compared to $41,753 for the three months ended June 30, 2025, an increase of $716,477 or 1,716%. The increase was primarily attributable to state credits recognized by the Company from the states of Georgia and Oklahoma.
Provision for income taxes
Income tax expense was $471,423 for the three months ended June 30, 2026, compared to $0 for the three months ended June 30, 2025. Income tax expense was the result of the gain recognized due to the completion of the sale of our two Georgia facilities and the reversal of our valuation allowance.
Six Months Ended June 30, 2026, Compared to the Six Months Ended June 30, 2025
Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Revenue | ||||||||
| Healthcare revenue | $ | 11,799,826 | $ | 20,928,183 | ||||
| Management fee revenue | 215,775 | - | ||||||
| Total Revenue | 12,015,601 | 20,928,183 | ||||||
| Expenses | ||||||||
| Property taxes, insurance and other operating | 10,200,377 | 16,237,146 | ||||||
| General and administrative | 4,232,488 | 4,601,354 | ||||||
| Provision for credit losses | 383,895 | 235,956 | ||||||
| Depreciation | 562,682 | 725,762 | ||||||
| Total Expenses | 15,379,442 | 21,800,218 | ||||||
| Loss from Operations | (3,363,841 | ) | (872,035 | ) | ||||
| Other income (expense) | ||||||||
| Interest expense, net | (1,136,395 | ) | (768,658 | ) | ||||
| Income from employee retention credits | - | 326,500 | ||||||
| Gain on sale of assets | 19,046,819 | - | ||||||
| Other income | 984,315 | 350,197 | ||||||
| Total other (income) expense | 18,894,739 | (91,961 | ) | |||||
| Income (loss) before income taxes | 15,530,898 | (963,996 | ) | |||||
| Provision for income taxes | 881,158 | - | ||||||
| Net income (loss) | $ | 14,649,740 | $ | (963,996 | ) | |||
Revenues
Healthcare Revenue
Healthcare revenue for the six months ended June 30, 2026 was $11,799,826, compared to $20,928,183 for the six months ended June 30, 2025, a decrease of $9,128,357 or 44%. Healthcare revenues decreased due to the sale of four of our Georgia facilities during 2026.
Management Fee Revenue
Management fee revenue for the six months ended June 30, 2026 was $215,775 compared to $0 for the six months ended June 30, 2025, an increase of $215,775 or 100%. Management fee revenues increased due to the start of a management fee arrangement in November 2025.
| 20 |
Operating Expenses
Property Taxes, Insurance, and Other Operating
Property taxes, insurance, and other operating expenses was $10,200,377 for the six months ended June 30, 2026, compared to $16,237,146 for the six months ended June 30, 2025, a decrease of $6,036,769 or 37%. This decrease can be attributed to lower operating cost due to the sale of our four Georgia facilities.
General and Administrative
General and administrative expenses was $4,232,488 for the six months ended June 30, 2026, compared to $4,601,354 for the six months ended June 30, 2025, a decrease of $368,866 or 8%. The decrease can be attributed to a decrease in salary and benefits expense.
Provision for Credit Losses
Provision for credit losses was $383,895 for the six months ended June 30, 2026, compared to $235,956 for the six months ended June 30, 2025, an increase of $147,939 or 63%. The change can be attributed to write offs on receivables attributed to the sale of our four Georgia facilities.
Depreciation
Depreciation expense was $562,682 for the six months ended June 30, 2026, compared to $725,762 for the six months ended June 30, 2025, a decrease of $163,080 or 22%. This decrease is related to an increase in fully depreciated assets along with assets sold at our four Georgia facilities as compared to the same period in the prior year.
Other Income (Expense)
Interest Expense, Net
Interest expense, net was $1,136,395 for the six months ended June 30, 2026, compared to $768,658 for the six months ended June 30, 2025, an increase of $367,737 or 48%. The increase was due to a prepayment premium and fees associated with mortgage payoffs being recorded within interest expense as well as higher interest rates were used in 2026.
Income from Employee Retention Credit
Income from Employee Retention Credit was $0 for the six months ended June 30, 2026, compared to $326,500 for the six months ended June 30, 2025, a decrease of $326,500 or 100%. The decrease was due to the Company collecting previous claims made to obtain the credit.
Gain on Sale of Asset
Gain on sale of asset was income of $19,046,819 for the six months ended June 30, 2026, compared to $0 for the six months ended June 30, 2025. The increase was the result of the gain recognized due to the completion of the sale of our four Georgia facilities.
Other Income
Other income was $984,315 for the six months ended June 30, 2026, compared to $350,197 for the six months ended June 30, 2025, an increase of $634,118 or 181%. The increase was primarily attributable to state credits recognized by the Company from the states of Georgia and Oklahoma.
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Provision for income taxes
Income tax expense was $881,158 for the six months ended June 30, 2026, compared to $0 for the six months ended June 30, 2025. Income tax expense was the result of the gain recognized due to the completion of the sale of our four Georgia facilities and the reversal of our valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
Current Financial Condition
Throughout its history, the Company has experienced shortages in working capital and has relied, from time to time, upon sales of debt and equity securities to meet cash demands generated by our acquisition activities.
At June 30, 2026, the Company had cash of $7.7 million and restricted cash of $0.2 million. Our restricted cash is to be expended on repairs and capital expenditures associated with Warrenton Health and Rehab facilities and decreased from December 31, 2025 as a result of the sale of four of our Georgia facilities. Our liquidity is expected to increase from potential equity and debt offerings and decrease as net offering proceeds are expended in connection with our various property improvement projects. Our continuing short-term liquidity requirements consisting primarily of operating expenses and debt service requirements, excluding balloon payments at maturity, are expected to be achieved from healthcare operations, rental revenues received, and existing cash on hand.
As reflected in our condensed consolidated financial statements included elsewhere in this Quarterly Report, we have a history of losses and incurred a net loss of $1.0 million for the year ended December 31, 2025 and had a working capital of $0.2 million as of June 30, 2026. These factors, among others, raise substantial doubt about our ability to continue as a going concern within one year from the date that the financial statements are issued. Our consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to execute our strategy and on our ability to raise additional funds through the sale of equity and/or debt securities via public and/or private offerings. There can be no assurance that management’s attempts at any or all of these endeavors will be successful.
Our long-term ability to continue as a going concern is dependent upon our ability to increase revenue, reduce costs, achieve a satisfactory level of profitable operations, and obtain additional sources of suitable and adequate financing. Our ability to continue as a going concern is also dependent its ability to further develop and execute on our business plan (including possible asset sales). We may also have to reduce certain overhead costs through the reduction of salaries and other means and settle liabilities through negotiation. There can be no assurance that management’s attempts at any or all of these endeavors will be successful.
Sources of Liquidity
The Company’s current sources of liquidity include the sale of its properties. During the six months ended June 30, 2026 the Company received gross proceeds of $13.2 million as a result of the sale of two of our Georgia Facilities. In addition, on May 1, 2026, the Company received gross proceeds of $15.7 million as a result of the sale of an additional two of our Georgia Facilities.
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As of June 30, 2026 and December 31, 2025, our debt balances consisted of the following:
| June 30, 2026 | December 31, 2025 | |||||||
| Senior Secured Promissory Notes | $ | 431,772 | $ | 1,591,238 | ||||
| Senior Secured Promissory Notes - Related Parties | - | 775,000 | ||||||
| Fixed-Rate Mortgage Loans | 12,406,293 | 24,258,870 | ||||||
| Variable-Rate Mortgage Loans | 4,361,750 | 4,485,462 | ||||||
| Line of Credit | - | 325,192 | ||||||
| 17,199,815 | 31,435,762 | |||||||
| Unamortized Discount and Debt Issuance Costs | (200,733 | ) | (435,200 | ) | ||||
| $ | 16,999,082 | $ | 31,000,562 | |||||
| As presented in the Consolidated Balance Sheets: | ||||||||
| Current Maturities of Long-Term Debt, Net | $ | 5,386,507 | $ | 10,938,102 | ||||
| Current Maturities of Long-Term Debt, Net classified within liabilities held for sale (1) | - | 5,554,463 | ||||||
| Short Term Debt – Related Parties, Net | - | 775,000 | ||||||
| Line of Credit - Current | - | 325,192 | ||||||
| Long-Term Debt | 11,612,575 | 13,407,805 | ||||||
| $ | 16,999,082 | $ | 31,000,562 | |||||
| (1) | $0 and $5,554,463 is classified within Liabilities held for sale within the consolidated balance sheets as of June 30, 2026 and December 31, 2025, respectively, which is the short-term classified debt attributable to our two Georgia facilities sold in January 2026 (See Note 9). |
The weighted average interest rate and term of our fixed rate debt are 4.16% and 17.82 years, respectively, as of June 30, 2026. The weighted average interest rate and term of our variable rate debt are 8.35% and 11.64 years, respectively, as of June 30, 2026.
The weighted average interest rate and term of our fixed rate debt are 6.21% and 13.76 years, respectively, as of December 31, 2025. The weighted average interest rate and term of our variable rate debt are 8.35% and 12.12 years, respectively, as of December 31, 2025.
Sources and Uses of Cash
The following table provides information regarding our cash flows for the six months ended June 30, 2026 and 2025:
| Six months ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net cash (used in) provided by operating activities | $ | (4,325,406 | ) | $ | 958,032 | |||
| Net cash provided by (used in) investing activities | 13,722,245 | (382,755 | ) | |||||
| Net cash used in financing activities | (3,315,980 | ) | (635,320 | ) | ||||
| Net change in cash and cash equivalents and restricted cash | $ | 6,080,859 | $ | (60,043 | ) | |||
Cash Flows (Used In) Provided By Operating Activities
Cash flows used in operating activities was $4,325,406 for the six months ended June 30, 2026, compared to cash provided $958,032 for the six months ended June 30, 2025. The decrease primarily resulted from our change in net income of $15,613,736 which was offset by changes in non-cash adjustments of $18,835,861 which was primarily attributed to the change in gain on sale of asset of $19,046,819 compared to the prior year. In addition, the Company noted a change in working capital accounts of $2,061,313 which was primarily attributed to a change in accounts payable of $2,483,132 compared to the prior year.
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Cash Flows Provided By (Used In) Investing Activities
Cash provided by investing activities was $13,722,245 for the six months ended June 30, 2026, compared to cash used of $382,755 for the six months ended June 30, 2025. Cash provided by investing activities can be attributed to the proceeds received from the sale of our four Georgia facilities. The cash used in investing activities during the six months ended June 30, 2025 was attributed to purchases of property and equipment.
Cash Flows Used In Financing Activities
Cash used in financing activities was $3,315,980 for the six months ended June 30, 2026, compared to $635,320 for the six months ended June 30, 2025. The increase in cash used in finance activities can be attributed to repayments made on our line of credit, mortgages and senior secured notes.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements. Estimates and assumptions are continually evaluated and are based on historical experience and management’s assessment of current events and other facts and circumstances that are considered to be relevant. Actual results could differ from these estimates.
Our critical accounting estimates reflecting management’s estimates and judgments are described in our Annual Report on Form 10-K for the year ended December 31, 2025. We have reviewed recently issued accounting pronouncements and are evaluating the potential impact, if any, on our condensed consolidated financial statements. Accordingly, there have been no material changes to critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.
Recently Issued Accounting Pronouncements
The FASB and other entities issued new or modifications to, or interpretations of, existing accounting guidance during 2026. Management has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives.
Our management, including our Interim CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based on this evaluation, our Interim CEO and CFO concluded that the design and operation of our disclosure controls and procedures were not effective as of such date to provide assurance that information required to be disclosed by us in the reports that we file or submit under 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 management as appropriate, to allow timely decisions regarding disclosures.
Material Weaknesses in Internal Control over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
During the preparation of our Form 10-K for the year ended December 31, 2025 , management identified a material weakness in internal control over financial reporting, specifically as it relates to the lack of a formal review process that includes multiple levels of review as well as timely review of accounts and reconciliations leading to material post-closing adjustments. This material weakness was not remediated as of June 30, 2026 and could have resulted in a material misstatement to our interim condensed consolidated financial statements that would not be prevented or detected on a timely basis.
During the preparation of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, management identified a technical defect under Utah state law related to the historical issuance of the Company’s Series A Convertible Preferred Stock. As a result, management determined that $401,000 previously classified within equity should be reported as a liability. This matter indicates a control deficiency related to the timely identification and evaluation of legal matters affecting the accounting classification and presentation of financing instruments. Management identified a material weakness in internal control over financial reporting relating complex equity transactions. This material weakness was not remediated as of June 30, 2026 and could have resulted in a material misstatement to our interim condensed consolidated financial statements that would not be prevented or detected on a timely basis.
In light of the material weakness described above, we performed additional analysis deemed necessary to ensure that our unaudited interim financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the periods presented. The Company plans to implement multi-level review in 2026, and management intends to work internally and with various third-parties to ensure we have the proper controls in place going forward.
There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended June 30, 2026, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of prior, current, and pending litigation of material significance to the Company, please see Note 11, Legal Proceedings, of this Form 10–Q.
Item 1A. Risk Factors
Not required for small reporting companies
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
| 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002* | |
| 31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002* | |
| 32.1 | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* | |
| 32.2 | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* | |
| 101.INS | Inline XBRL Instance Document** | |
| 101.SCH | Inline XBRL Schema Document** | |
| 101.CAL | Inline XBRL Calculation Linkbase Document** | |
| 101.LAB | Inline XBRL Label Linkbase Document** | |
| 101.PRE | Inline XBRL Presentation Linkbase Document** | |
| 101.DEF | Inline XBRL Definition Linkbase Document** | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* filed herewith
** furnished, not filed
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SELECTIS HEALTH, INC | ||
| Date: August 24, 2026 | By: | /s/ Krystal Eckhart |
| Krystal Eckhart, Interim Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: August 24, 2026 | By: | /s/ Krystal Eckhart |
| Krystal Eckhart, Interim Chief Financial Officer | ||
| (Principal Financial Officer) | ||
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