RHEP 10-Q
Regional Health Properties, Inc (RHEP)
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
(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:
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Stock, no par value |
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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 19, 2024, the registrant had
Regional Health Properties, Inc.
Form 10-Q
Table of Contents
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Page |
Part I. |
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Item 1. |
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3 |
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Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 |
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3 |
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4 |
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5 |
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Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 |
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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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Item 3. |
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37 |
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Item 4. |
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37 |
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Part II. |
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Item 1. |
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37 |
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Item 1A. |
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37 |
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Item 2. |
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38 |
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Item 3. |
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38 |
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Item 4. |
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39 |
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Item 5. |
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39 |
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Item 6. |
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39 |
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41 |
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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, 2024 |
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December 31, 2023 |
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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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Notes receivable |
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Intangible assets - bed licenses |
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Intangible assets - lease rights, net |
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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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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 and stockholders' equity (deficit) |
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$ |
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$ |
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See accompanying notes to unaudited consolidated financial statements.
3
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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2024 |
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2023 |
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2024 |
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2023 |
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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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Management fees |
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Other revenues |
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— |
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Total revenues |
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Expenses: |
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Patient care expense |
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Facility rent expense |
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Cost of management fees |
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— |
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— |
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Depreciation and amortization |
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General and administrative expense |
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Credit loss expense |
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Total expenses |
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Loss from operations |
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( |
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Other (income) expense: |
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Interest expense, net |
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Other expense (income), net |
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Total other expense, net |
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Net loss |
$ |
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$ |
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$ |
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$ |
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Preferred stock dividends - gain on extinguishment |
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— |
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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.
4
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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Total |
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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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Balances, January 1, 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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— |
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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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( |
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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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— |
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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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( |
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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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— |
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Forfeitures of stock-based awards |
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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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— |
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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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( |
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Balances, September 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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5
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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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Total |
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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, January 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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$ |
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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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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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— |
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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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( |
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Balances, March 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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$ |
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Extinguishment of Series A Preferred Stock |
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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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Exchange of Series A to Series B |
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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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— |
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Forfeitures of stock-based awards |
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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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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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( |
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Balances, June 30, 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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— |
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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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( |
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Balances, September 30, 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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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)
|
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Nine Months Ended September 30, |
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|||||
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2024 |
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2023 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
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Stock-based compensation expense |
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Rent expense less than cash paid |
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( |
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( |
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Rent revenue in excess of cash received |
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( |
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( |
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Amortization of deferred financing costs, debt discounts and premiums |
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Write off of straight-line receivable |
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— |
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Credit loss expense |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
|
|
Prepaid expenses and other assets |
|
|
|
|
|
|
||
Lease deposits and other deposits |
|
|
— |
|
|
|
( |
) |
Accounts payable and accrued expenses |
|
|
|
|
|
( |
) |
|
Other liabilities |
|
|
( |
) |
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Payment of senior debt |
|
|
( |
) |
|
|
( |
) |
Payment of other debt |
|
|
( |
) |
|
|
( |
) |
Payment of debt extinguishment and issuance costs |
|
|
( |
) |
|
|
( |
) |
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, |
|
|||||
|
2024 |
|
|
2023 |
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
||
Cash interest paid |
$ |
|
|
$ |
|
||
Supplemental disclosure of non-cash activities: |
|
|
|
|
|
||
Vendor-financed insurance |
$ |
|
|
$ |
|
||
Exchange of preferred stock Series A to Series B |
$ |
— |
|
|
$ |
|
|
Gain on extinguishment of preferred stock |
$ |
— |
|
|
$ |
|
|
Account receivable converted to note receivable |
$ |
— |
|
|
$ |
|
|
Building improvements financed with note payable |
$ |
|
|
$ |
— |
|
|
See accompanying notes to unaudited consolidated financial statements.
8
REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
September 30, 2024
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. Our business primarily consists of leasing such facilities to third-party tenants, which operate the facilities. The Company has
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 2023 audited consolidated financial statements and notes thereto, which are included in our 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on April 1, 2024 ("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.
Reclassifications
Certain reclassifications have been made to the amounts in prior periods in order to conform to the current period's presentation. A reclassification has been made to certain expenses reported on the consolidated statements of operations in the prior period in order to conform to the current period's presentation. The reclassifications had no material effect on earnings per share.
Principles of Consolidations
Variable Interest Entities
The Company has a loan receivable with Peach Health, a sublessee. Such agreement creates a variable interest in the Peach Health sublessee that may absorb some or all of the expected losses of the entity. The Company does not consolidate the operating activities of the Peach Health sublessee as the Company does not have the power to direct the activities that most significantly impact the entity's economic performance.
9
Revenue Recognition and Allowances
Patient Care Revenue. ASC Topic 606, Revenue from Contracts with Customers 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 the Meadowood and Glenvue facilities. 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 Company 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 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.
Management Fee Revenues and Other Revenues. The Company recognizes management fee revenues as services are provided in accordance with ASU 2014-09, Revenue from Contracts with Customers, as codified in ASC 606, which requires revenue to be recognized in an amount that reflects the consideration to which a company expects to receive in exchange for such goods and services. The Company had one contract to manage three facilities (the “Management Contract”) which ended on December 31, 2023. Further, the Company recognizes interest income from loans and investments, using the effective interest method when collectability is probable. The Company applies the effective interest method on a loan-by-loan basis.
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 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
As of September 30, 2024 and December 31, 2023, the Company reserved for approximately $
10
The following table presents the Company's Accounts receivable, net of allowance for the periods presented:
(Amounts in 000’s) |
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Gross receivables |
|
|
|
|
|
|
||
Real Estate Services |
|
$ |
|
|
$ |
|
||
Healthcare Services |
|
|
|
|
|
|
||
Subtotal |
|
|
|
|
|
|
||
Allowance |
|
|
|
|
|
|
||
Real Estate Services |
|
$ |
( |
) |
|
$ |
|
|
Healthcare Services |
|
|
( |
) |
|
|
( |
) |
Subtotal |
|
|
( |
) |
|
|
( |
) |
Accounts receivable, net of allowance |
|
$ |
|
|
$ |
|
||
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 5 for additional details on assets held for sale as of September 30, 2024 and December 31, 2023. 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.
In June 2024, the Company, with the support of its Board of Directors, committed to a plan of action to sell the Mt. Trace Property Holdings (Mt. Trace Property”), with a sale probable and subject to customary approvals. As a result, the Company’s management determined that the criteria under GAAP for the Mt. Trace Property to be classified as held for sale were met.
Prepaid Expenses and Other
As of September 30, 2024 and December 31, 2023, 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, 2024 |
|
|
December 31, 2023 |
|
||
Accounts payable |
|
|
|
|
|
|
||
Real Estate Services |
|
$ |
|
|
$ |
|
||
Healthcare Services |
|
|
|
|
|
|
||
Total Accounts payable |
|
$ |
|
|
$ |
|
||
Other Expense, net
The Company had retained a law firm to evaluate and assist with opportunities to improve the Company's capital structure. See Note 2 – Series A Preferred Exchange Offer.
11
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, 2024, 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.
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
We maintain general liability, professional liability, and other insurance policies in amounts and with coverage and deductibles we believe are appropriate, based on the nature and risks of our business, historical experience, availability, and industry standards, including for the operations at the Glenvue and Meadowood facilities. Our current policies provide for deductibles for each claim and contain various exclusions from coverage. The Company has self-insured against professional and general liability claims related to its healthcare operations that were discontinued during 2014 and 2015 in connection with its transition from an owner and operator of healthcare properties to a healthcare property holding and leasing company (the "Transition"). For further information, see Note 11 – Commitments and Contingencies, and Note 12 – Commitments and Contingencies, to the consolidated financial statements for the year ended December 31, 2023 for more information. 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 7 – Accrued Expenses. In addition, the Company maintains certain other insurance programs, including commercial general liability, property, casualty, directors' and officers' liability, crime, and employment practices liability.
Net 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.
12
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) |
2024 |
|
|
2023 |
|
||
Stock options |
|
|
|
|
|
||
Warrants - employee |
|
|
|
|
|
||
Warrants - non employee |
|
|
|
|
|
||
Total anti-dilutive securities |
|
|
|
|
|
||
The weighted average contractual terms in years for these securities as of September 30, 2024, with
New Accounting Pronouncements Issued But Not Yet Effective
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 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 Company is currently evaluating the impact of adopting ASU 2023-07.
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 does not expect the adoption of ASU 2023-09 to have a material impact on the Company's consolidated financial statements.
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 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; and (v) reducing other and general and administrative expenses.
Management anticipates access to several sources of liquidity, including cash on hand, cash flows from operations, and debt refinancing, during the twelve months following the date of this filing. At September 30, 2024, the Company had $
During the nine months ended September 30, 2024, the Company's cash provided by operating activities was $
Series A Preferred Stock Exchange Offer
In connection with the completion of the Exchange Offer and the implementation of the Series A Charter Amendments and the Series B Charter Amendments, the liquidation preference of the Series A Preferred Stock was reduced, accumulated and unpaid dividends on the Series A Preferred Stock were eliminated and future dividends on the Series A Preferred Stock were eliminated. As a result, $
13
information regarding the Exchange Offer, Series A Charter Amendments and Series B Charter Amendments, see Note 9 – Common and Preferred Stock.
Debt
As of September 30, 2024, 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.
At September 30, 2024, the Company had cash on hand of $
These conditions raise doubt regarding our ability to continue as a going concern as the Company will need additional debt or equity financing or a combination of both to continue its operations and meet its financial obligations for twelve months from the date these consolidated financial statements were issued if we do not obtain a forbearance agreement with the lender. We think it is likely we will reach an agreement.
We may consume available resources more rapidly than currently anticipated, resulting in the need for additional funding. We expect to incur continuing losses for the foreseeable future.
Any additional debt or equity financing that the Company obtains may substantially dilute the ownership held by our existing stockholders. The economic dilution to our shareholders will be significant if our stock price does not materially increase, or if the effective price of any sale is below the price paid by a particular investor. The Company may be unable to access further equity or debt financing when needed or obtain additional financing under acceptable terms, if at all.
We may decide to raise additional capital through a variety of sources in the short-term and in the long-term, including but not limited to:
14
If the Company is unable to raise additional capital, there is a risk that the Company could be required to discontinue or significantly reduce the scope of its operations. These consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 3. CASH AND RESTRICTED CASH
The following presents the Company's cash and restricted cash:
(Amounts in 000’s) |
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
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.
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.
15
NOTE 4. PROPERTY AND EQUIPMENT
The following table sets forth the Company's property and equipment:
(Amounts in 000’s) |
|
Estimated |
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
|||
Buildings and improvements |
|
|
|
$ |
|
|
$ |
|
||||
Equipment and computer related |
|
|
|
|
|
|
|
|
||||
Land (1) |
|
|
— |
|
|
|
|
|
|
|
||
Property and equipment |
|
|
|
|
|
|
|
|
|
|||
Less: accumulated depreciation and amortization |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Property and equipment, net |
|
|
|
|
$ |
|
|
$ |
|
|||
The following table summarizes total depreciation and amortization expense three and nine months ended September 30, 2024 and 2023:
|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|
|||||||||||
(Amounts in 000’s) |
|
2024 |
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Depreciation |
|
$ |
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amortization |
|
|
|
|
|
|
|
|
|
|
|
||||
Total depreciation and amortization expense |
|
$ |
|
$ |
|
|
$ |
|
|
$ |
|
||||
NOTE 5. ASSETS HELD FOR SALE
The following table sets forth the Company's asset held for sale:
(Amounts in 000’s) |
|
Estimated |
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Buildings and improvements |
|
|
$ |
|
|
$ |
|
|||
Less: accumulated depreciation |
|
|
|
|
( |
) |
|
|
( |
) |
Asset held for sale, net |
|
|
|
$ |
|
|
$ |
|
||
NOTE 6. INTANGIBLE ASSETS AND GOODWILL
Intangible assets and Goodwill consist of the following:
(Amounts in 000’s) |
|
Bed licenses |
|
|
Bed Licenses - |
|
|
Lease |
|
|
Total |
|
|
Goodwill (2) |
|
|||||
Balances, December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gross |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Accumulated amortization |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Net carrying amount |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Balances, September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gross |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accumulated amortization |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Net carrying amount |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
16
The following table summarizes amortization expense for the three and nine months ended September 30, 2024 and 2023:
|
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|
|||||||||||
(Amounts in 000’s) |
|
2024 |
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
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 |
|
||
2024 (3 months remaining) |
|
$ |
|
|
$ |
|
||
2025 |
|
|
|
|
|
|
||
2026 |
|
|
|
|
|
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
— |
|
|
Total expected amortization expense |
|
$ |
|
|
$ |
|
||
NOTE 7. LEASES
Facility and Office Lessee
As of September 30, 2024 and December 31, 2023, 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
The Company also leased certain office space located in Suwanee, Georgia through the termination date of June 30, 2023. Effective July 1, 2023, the Company signed a sublease for
As of September 30, 2024, 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 |
|
|||
2024 (3 months remaining) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
2025 |
|
|
|
|
|
( |
) |
|
|
|
||
2026 |
|
|
|
|
|
( |
) |
|
|
|
||
2027 |
|
|
|
|
|
( |
) |
|
|
|
||
2028 |
|
|
|
|
|
( |
) |
|
|
|
||
Thereafter |
|
|
|
|
|
( |
) |
|
|
|
||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Facilities Lessor
As of September 30, 2024, the Company was the lessor of
17
operating the property, including insurance, taxes and facility maintenance, as well as the lease or sublease payments to the Company. The weighted average remaining lease term for our
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 |
|
|
2024 (3 months remaining) |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
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 6 - Leases and Leasing Transactions in Part II, Item 8, Financial Statements and Supplementary Data, included in the Annual Report.
NOTE 8. ACCRUED EXPENSES
Accrued expenses consist of the following:
(Amounts in 000’s) |
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Accrued employee benefits and payroll-related |
$ |
|
|
$ |
|
||
Real estate and other taxes (1) |
|
|
|
|
|
||
Self-insured reserve |
|
|
|
|
|
||
Accrued interest |
|
|
|
|
|
||
Unearned rental revenue |
|
— |
|
|
|
|
|
Insurance escrow |
|
|
|
|
— |
|
|
Other accrued expenses |
|
|
|
|
|
||
Total accrued expenses |
$ |
|
|
$ |
|
||
18
NOTE 9. 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, 2024 |
|
|
December 31, |
|
||
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 |
|
$ |
|
|
$ |
|
||
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, 2024 |
|
|
December 31, |
|
|||||
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 (4) |
|
Community B&T |
|
|
Prime + |
|
|
% |
|
$ |
|
|
$ |
|
||||
Southland |
|
Cadence Bank, NA |
|
|
Prime + |
|
|
% |
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
Senior debt - guaranteed by SBA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Southland(5) |
|
Cadence Bank, NA |
|
|
Prime + |
|
|
% |
|
$ |
|
|
$ |
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
19
(Amounts in 000’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Facility |
|
Lender |
|
Maturity |
|
Interest Rate (1) |
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
|||||
Senior debt - bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Eaglewood Bonds Series A |
|
City of Springfield, Ohio |
|
|
Fixed |
|
|
% |
|
$ |
|
|
$ |
|
||||
(Amounts in 000’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Facility |
|
Lender |
|
Maturity |
|
Interest Rate (1) |
|
|
September 30, 2024 |
|
|
December 31, |
|
|||||
Senior debt - other mortgage indebtedness |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Meadowood (2) |
|
Exchange Bank of Alabama |
|
|
Fixed |
|
|
% |
|
$ |
|
|
$ |
|
||||
Coosa (3) |
|
Exchange Bank of Alabama |
|
|
Fixed |
|
|
% |
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
(Amounts in 000’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Lender |
|
Maturity |
|
Interest Rate |
|
|
September 30, 2024 |
|
|
December 31, |
|
|||||
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, 2024, the Company had
20
As of September 30, 2024, the Company was in compliance with the various financial and administrative covenants under the Company's outstanding credit related instruments with the exception of a notice of default under two USDA loans secured by the Southland and Mt. Trace Property and an SBA loan secured by Southland. On October 25, 2024, the Company received a notice of acceleration and demand for payment from the lenders of Southland stating that the covenants of the deed of trust have been violated for failure to pay principal and interest. The lender accelerated the maturity dates and is requesting for the loans to be paid in full plus unpaid interest and late fees immediately. We are working with the lender to reach a forbearance agreement and think it is likely we will reach an agreement. On November 8, 2024, Company obtained a line of credit and intends to pay all unpaid principal and interest payments to get back into compliance with the loan documents. The Company is working with the lender of the Mt. Trace Property to get back into compliance with the loan documents and received a waiver in November 2024.
Scheduled Maturities
The schedule below summarizes the scheduled gross maturities as of September 30, 2024 for each of the next five years and thereafter.
For the Twelve Months Ended December 31, |
(Amounts in 000’s) |
|
|
2024 (3 months remaining) |
$ |
|
|
2025 |
|
|
|
2026 |
|
|
|
2027 |
|
|
|
2028 |
|
|
|
Thereafter |
|
|
|
Subtotal |
$ |
|
|
Less: unamortized discounts |
|
( |
) |
Less: deferred financing costs, net |
|
( |
) |
Total notes and other debt |
$ |
|
|
NOTE 10. COMMON AND PREFERRED STOCK
On June 27, 2023, the Company convened a special meeting (the “Special Meeting”) of the holders of its
All of the proposals presented at the Special Meeting were approved by the requisite votes of the applicable shareholders of the Company, including:
21
On June 30, 2023, the Company closed the Exchange Offer. Continental Stock Transfer & Trust Company, the exchange agent in connection with the Exchange Offer, notified the Company that
On July 3, 2023, in connection with the closing of the Exchange Offer, the Company filed Amended and Restated Articles of Incorporation (the “Charter”) with the Secretary of State of the State of Georgia.
Common Stock
As of September 30, 2024, the Company had
Preferred Stock
As of September 30, 2024 , the Company had
Series A Preferred Stock
On June 27, 2023, certain Preferred Series A Charter Amendments were approved at the Special Meeting to (i) reduce the liquidation preference of the Series A Preferred Stock to $
The Company has accounted for the Series A Charter Amendments to the rights, preferences, and privileges of the Series A Preferred Stock as an extinguishment of the Series A Preferred Stock and issuance of new Series B Preferred Stock due to the significance of the modifications to the substantive contractual terms and the associated fundamental changes to the nature of the Series A Preferred Stock. Accordingly, the Company recorded an aggregate gain of $
On June 30, 2023, in connection with the closing of the Exchange Offer,
As of September 30, 2024, the Company had shares of Series A Preferred Stock issued and outstanding, and the accumulated and unpaid dividends on the Series A Preferred Stock in the amount of $
Series B Preferred Stock
The terms and provisions of the Series B Preferred Stock include, among other things: (i) no stated maturity and not being subject to any sinking fund or mandatory redemption, except following a change of control and the cumulative redemption provisions, (ii) ranks senior to our common stock, our Series A Preferred Stock and any other shares of our stock that we may
22
issue in the future, the terms of which specifically provide that such stock ranks junior to the Series B Preferred Stock, in each case with respect to payment of dividends and amounts upon the occurrence of a liquidation event, (iii) dividend rate is
As of September 30, 2024, the Company had
Series E Preferred Stock
All shares of Series E Preferred Stock were redeemed in connection with the Special Meeting. The Series E Preferred Stock designation has been eliminated from the Charter and, as of September 30, 2024, there are
NOTE 11. STOCK BASED COMPENSATION
Stock Incentive Plans
On September 21, 2023, our Board of Directors (the "Board") approved the Regional Health Properties, Inc. 2023 Omnibus Incentive Compensation Plan (the “2023 Plan”), which was approved by the Company's shareholders on November 16, 2023 at the 2023 Annual Meeting of Shareholders. The 2023 Plan is administered by the Compensation Committee of the Board of the Company. The 2023 Plan shall remain in effect, subject to the right of the Board to amend or terminate the 2023 Plan at any time, until the earlier of 11:59 p.m. (ET) on September 21, 2033, or the date all shares subject to the 2023 Plan shall have been issued and the restrictions on all restricted shares granted under the Plan shall have lapsed, according to the 2023 Plan’s provisions.
Our 2023 Plan replaced the Regional Health Properties, Inc. 2020 Equity Incentive Plan (the “2020 Plan”). Outstanding awards under the 2020 Plan will continue to be governed by the terms of the 2020 Plan until exercised, expired or otherwise terminated or canceled, but
As of September 30, 2024, the number of securities remaining available for future issuance under the 2023 Plan is
For the three and nine months ended September 30, 2024 and 2023, the Company recognized stock-based compensation expense as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(Amounts in 000’s) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Employee compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total employee stock-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of September 30, 2024, the remaining stock-based compensation expense that is expected to be recognized in future periods is $
23
Restricted Stock
The following table summarizes the Company's restricted stock activity for the nine months ended September 30, 2024:
|
|
Number of |
|
|
Weighted Avg. |
|
||
Unvested, December 31, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Unvested, September 30, 2024 |
|
|
|
|
$ |
|
||
The remaining unvested shares at September 30, 2024 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, 2024:
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|
Aggregate |
|
||||
Outstanding, December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Outstanding, September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Outstanding and Vested, September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The aggregate intrinsic value of options outstanding and vested was calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock as of September 30, 2024. The fair value of the common stock is the closing stock price of the Company's Common Stock.
The following summary information reflects stock options outstanding, vested, and related details as of September 30, 2024:
|
|
Stock Options Outstanding |
|
|
Stock Options Exercisable |
|
||||||||||||||
Exercise Price |
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|
Shares Vested, September 30, 2024 (000's) |
|
|
Weighted |
|
|||||
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
Total |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
Common Stock Warrants
The following summarizes the Company's employee and non-employee common stock warrant as of December 31, 2023 and September 30, 2024:
24
|
|
Outstanding and Exercisable |
|
|||||||||
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|||
Outstanding and Vested, December 31, 2023 |
|
|
|
$ |
|
|
|
|
||||
Outstanding and Vested, September 30, 2024 |
|
|
|
$ |
|
|
|
|
||||
The Company has
NOTE 12. 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, 2024, 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 7 - 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
On February 16, 2024, the Regional's insurance carrier was able to reach a settlement with the family of Mable Polite within policy limits.
As of September 30, 2024, the Company has been named in three lawsuits pertaining to facilities it transitioned operations to other entities as a lessor in 2015. Even though the residents were not part of our dates of service as the operator of the buildings, the lawsuits claim the Company knew the new operator had a history of providing poor patient care and therefore should not have leased or sold the premises to the new operator. We do not believe there is any basis in law or fact to hold the previous operator/ lessor liable, and as a result management has concluded that the likelihood of a material adverse result should be remote. Despite our confidence in our legal position, we have to acknowledge that jurors sometimes follow sympathy rather than the law. One of the three cases was dismissed. The plaintiff has until August of 2025 to re-file the lawsuit. Subsequent to quarter end, the two other suits were non-suited by the plaintiff and the matters were dismissed without prejudice. The plaintiff has until August 2025 to re-file the cases.
25
NOTE 13. SEGMENT RESULTS
The Company has
The Company reports segment information based on the "management approach" defined in ASC 280, Segment Reporting. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reportable segments.
The table below presents the results of operations for our reporting segments for the periods presented.
|
Three Months Ended September 30, |
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||||||||||||
|
2024 |
|
2024 |
|
2024 |
|
|
2023 |
|
2023 |
|
2023 |
|
|
2024 |
|
2024 |
|
2024 |
|
|
2023 |
|
2023 |
|
2023 |
|
||||||||||||
(Amounts in 000’s) |
Real Estate Services |
|
Healthcare Services |
|
Total |
|
|
Real Estate Services |
|
Healthcare Services |
|
Total |
|
|
Real Estate Services |
|
Healthcare Services |
|
Total |
|
|
Real Estate Services |
|
Healthcare Services |
|
Total |
|
||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Patient care revenues |
$ |
— |
|
$ |
|
$ |
|
|
$ |
— |
|
$ |
|
$ |
|
|
$ |
— |
|
$ |
|
$ |
|
|
$ |
— |
|
$ |
|
$ |
|
||||||||
Rental revenues |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
||||||||
Management fees |
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
||||
Other revenues |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Patient care expense |
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||||||
Facility rent expense |
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
||||||||
Cost of management fees |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Credit loss expense |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||||||||
Total expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income (loss) from operations |
|
( |
) |
|
( |
) |
|
( |
) |
|
|
|
|
( |
) |
|
( |
) |
|
|
|
|
( |
) |
|
( |
) |
|
|
|
|
( |
) |
|
( |
) |
|||
Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other expense (income), net |
|
|
|
|
|
|
|
|
( |
) |
|
— |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||||||
Total other expense (income), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net loss |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
Total assets for the Real Estate Services segment and Healthcare Services segment were $
26
Total assets for the Real Estate Services segment and Healthcare Services segment were $
NOTE 14. SUBSEQUENT EVENTS
As of September 30, 2024, the Company was in compliance with the various financial and administrative covenants under the Company's outstanding credit related instruments with the exception of a notice of default under two USDA loans secured by the Southland and Mt. Trace Property and an SBA loan secured by Southland. On October 25, 2024, the Company received a notice of acceleration and demand for payment from the lenders of Southland stating that the covenants of the deed of trust have been violated for failure to pay principal and interest. The lender accelerated the maturity dates and is requesting for the loans to be paid in full plus unpaid interest and late fees immediately. We are working with the lender to reach a forbearance agreement and think it is likely we will reach an agreement. The Company is working with the lender of the Mt. Trace Property to get back into compliance with the loan documents and received a waiver in November 2024.
On November 8, 2024, Company obtained a $.
On November 11, 2024, the Company executed a operations transfer agreement and a lease termination agreement with the tenant of the Mt. Trace Property effective November 15, 2024. The Company will be the new operator of the facility.
On November 11, 2024, the NYSE Regulation determined that the Company is no longer suitable for listing pursuant to Section 1009(a) of the NYSE American Company Guide as the Company was unable to demonstrate that it had regained compliance with Sections 1003(a)(i) and (ii) of the NYSE American Company Guide by the end of the maximum 18-month compliance plan period, which expired on November 10, 2024. The Company has a right to a review of staff’s determination to delist the Company’s Securities by the Listings Qualifications Panel of the Committee for Review of the Board of Directors of the Exchange. Following such appeal, a decision by the Listings Qualifications Panel will be made and announced by NYSE American regarding either proceeding with suspension and delisting or continued trading in the Company’s Securities. The Company’s request for such a review must be made by November 18, 2024. The Company intends to appeal such determination and will continue with the plan to regain compliance. The Company expects the Securities to continue to trade on NYSE American during the appeal process.
27
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, is a self-managed real estate investment company that invests primarily in real estate purposed for long-term care and senior housing. We operate through two reportable segments: Real Estate and Healthcare 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 an entity set up to operate our facilities as needed under our Portfolio Stabilization measures.
While the Company is a self-managed real estate investment company, the Company, when business conditions require, may undertake portfolio stabilization measures, such as operating a previously leased facility.
Real Estate Portfolio
As of September 30, 2024, we had investments of approximately $66.5 million in eleven health care real estate properties and one leased property. We currently own eleven properties, consisting of nine skilled nursing facilities (“SNFs”) and two multi-service facilities. Nine facilities are pursuant to triple-net leases, one is managed by an external manager, and one is managed internally by the Company. 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 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.
28
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.
Portfolio
The following table provides summary information regarding the number of facilities and related licensed beds/units as of September 30, 2024:
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) |
|
112 |
|
194 |
|
306 |
South Carolina |
|
180 |
|
- |
|
180 |
|
|
917 |
|
284 |
|
1,201 |
|
|
|
|
|
|
|
Location |
|
Skilled Nursing Investment |
|
Multi Service Investment |
|
Total Investment |
Alabama (1) |
|
$9,613,199 |
|
$4,884,514 |
|
$14,497,713 |
Georgia |
|
24,475,283 |
|
- |
|
24,475,283 |
North Carolina |
|
7,224,953 |
|
- |
|
7,224,953 |
Ohio (2) |
|
3,872,791 |
|
6,716,420 |
|
10,589,211 |
South Carolina |
|
9,733,024 |
|
- |
|
9,733,024 |
|
|
$54,919,250 |
|
$11,600,934 |
|
$66,520,184 |
(1) Meadowood Retirement Village offers assisted living, memory care, and independent living and is therefore considered a multi-service campus. |
(2) Eaglewood Village offers assisted living and Eaglewood Care Center offers skilled nursing. Both properties are co-located and are therefore considered a multi-service campus. |
The following table provides summary information regarding the number of facilities and related licensed beds/units by operator affiliation as of September 30, 2024:
Operator Affiliation |
|
Number of Facilities (1) |
|
|
Beds / Units |
|
||
C.R. Management |
|
|
2 |
|
|
|
233 |
|
Aspire Regional Partners |
|
|
3 |
|
|
|
306 |
|
Oak Hollow Health Care Management |
|
|
2 |
|
|
|
180 |
|
Beacon Health Management |
|
|
1 |
|
|
|
126 |
|
Vero Health Management |
|
|
1 |
|
|
|
106 |
|
Cavalier Senior Living |
|
|
1 |
|
|
|
90 |
|
RHP Operations |
|
|
1 |
|
|
|
160 |
|
Subtotal |
|
|
11 |
|
|
|
1,201 |
|
29
For a more detailed discussion of the above information, see Note 6 - Leases to the consolidated financial statements included in Part I, Item 1 herein. Additionally, see "Portfolio of Healthcare Investments" included in Part I, Item 1 "Business" in the Annual Report.
Portfolio Occupancy Rates
The following table provides summary information regarding our portfolio facility-level occupancy rates for the periods shown:
|
|
|
|||||||||||||
Operating Metric |
December 31, 2023 |
|
|
March 31, 2024 |
|
|
June 30, 2024 |
|
|
September 30, 2024 |
|
||||
Occupancy (%) |
|
66.3 |
% |
|
|
66.2 |
% |
|
|
66.1 |
% |
|
|
65.8 |
% |
Lease Expiration
The following table provides summary information regarding our lease expirations for the years shown as of December 31,:
|
|
|
Licensed Beds |
|
Annual Lease Revenue (2) |
|
|||||||||
|
Number of Facilities |
|
Count |
|
Percent (%) |
|
Amount ($) |
|
Percent (%) |
|
|||||
2025 |
0 |
|
|
- |
|
|
0.0 |
% |
|
- |
|
|
0.0 |
% |
|
2026 |
0 |
|
|
- |
|
|
0.0 |
% |
|
- |
|
|
0.0 |
% |
|
2027 |
0 |
|
|
- |
|
|
0.0 |
% |
|
- |
|
|
0.0 |
% |
|
2028 |
5 |
|
|
405 |
|
|
38.6 |
% |
|
2,761 |
|
|
43.0 |
% |
|
2029 |
0 |
|
|
- |
|
|
0.0 |
% |
|
- |
|
|
0.0 |
% |
|
2030 |
2 |
|
|
233 |
|
|
22.2 |
% |
|
2,077 |
|
|
32.4 |
% |
|
Thereafter |
2 |
|
|
180 |
|
|
17.1 |
% |
|
995 |
|
|
15.5 |
% |
|
Total |
|
11 |
|
|
1,050 |
|
|
100.0 |
% |
|
6,416 |
|
|
100.0 |
% |
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.
30
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
2024 |
|
|
2023 |
|
|
Percent |
|
|
2024 |
|
|
2023 |
|
|
Percent |
|
||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Patient care revenues |
$ |
2,585 |
|
|
$ |
2,136 |
|
|
|
21.0 |
% |
|
$ |
7,418 |
|
|
$ |
6,577 |
|
|
|
12.8 |
% |
Rental revenues |
|
1,640 |
|
|
|
1,739 |
|
|
|
(5.7 |
)% |
|
|
5,257 |
|
|
|
5,170 |
|
|
|
1.7 |
% |
Management fees |
|
— |
|
|
|
263 |
|
|
|
(100.0 |
)% |
|
|
— |
|
|
|
788 |
|
|
|
(100.0 |
)% |
Other revenues |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
107 |
|
|
|
(100.0 |
)% |
Total revenues |
|
4,225 |
|
|
|
4,138 |
|
|
|
2.1 |
% |
|
|
12,675 |
|
|
|
12,642 |
|
|
|
0.3 |
% |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Patient care expense |
|
2,179 |
|
|
|
2,153 |
|
|
|
1.2 |
% |
|
|
6,462 |
|
|
|
6,444 |
|
|
|
0.3 |
% |
Facility rent expense |
|
149 |
|
|
|
149 |
|
|
|
— |
|
|
|
446 |
|
|
|
446 |
|
|
|
— |
|
Cost of management fees |
|
— |
|
|
|
146 |
|
|
|
(100.0 |
)% |
|
|
— |
|
|
|
442 |
|
|
|
(100.0 |
)% |
Depreciation and amortization |
|
474 |
|
|
|
526 |
|
|
|
(9.9 |
)% |
|
|
1,499 |
|
|
|
1,738 |
|
|
|
(13.8 |
)% |
General and administrative expense |
|
1,224 |
|
|
|
1,339 |
|
|
|
(8.6 |
)% |
|
|
4,085 |
|
|
|
4,284 |
|
|
|
(4.6 |
)% |
Credit loss expense |
|
499 |
|
|
|
229 |
|
|
|
117.9 |
% |
|
|
563 |
|
|
|
269 |
|
|
|
109.3 |
% |
Total expenses |
|
4,525 |
|
|
|
4,542 |
|
|
|
(0.4 |
)% |
|
|
13,055 |
|
|
|
13,623 |
|
|
|
(4.2 |
)% |
Loss from operations |
|
(300 |
) |
|
|
(404 |
) |
|
|
(25.7 |
)% |
|
|
(380 |
) |
|
|
(981 |
) |
|
|
(61.3 |
)% |
Other (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense, net |
|
677 |
|
|
|
708 |
|
|
|
(4.4 |
)% |
|
|
2,021 |
|
|
|
2,066 |
|
|
|
(2.2 |
)% |
Other expense (income), net |
|
5 |
|
|
|
(139 |
) |
|
|
(103.6 |
)% |
|
|
249 |
|
|
|
603 |
|
|
|
(58.7 |
)% |
Total other expense, net |
|
682 |
|
|
|
569 |
|
|
|
19.9 |
% |
|
|
2,270 |
|
|
|
2,669 |
|
|
|
(14.9 |
)% |
Net loss |
$ |
(982 |
) |
|
$ |
(973 |
) |
|
|
0.9 |
% |
|
$ |
(2,650 |
) |
|
$ |
(3,650 |
) |
|
|
(27.4 |
)% |
Three Months Ended September 30, 2024 and 2023
Patient care revenues—Patient care revenues for the Healthcare Services segment, as a result of the Company operating the Meadowood and Glenvue Facilities, were $2.6 million for the three months ended September 30, 2024, compared to $2.1 million for the same period in 2023. The 21.0% increase is primarily due to an increase in the Medicaid reimbursement rate paid for the Glenvue facility and an increase in occupancy at the Glenvue facility.
Rental revenues—Rental revenue for our Real Estate Services segment decreased by approximately $0.1 million to $1.6 million for the three months ended September 30, 2024, compared with $1.7 million for the same period in 2023.
Patient care expense—Patient care expense remained consistent totaling $2.2 million for the three months ended September 30, 2024 and 2023.
Facility rent expense—Facility rent remained consisted totaling $0.1 million for the three months ended September 30, 2024 and 2023.
Depreciation and amortization—Depreciation and amortization remained consistent totaling $0.5 million for the three months ended September 30, 2024 and 2023.
General and administrative expenses—General and administrative expenses were $1.2 million for the three months ended September 30, 2024 compared with $1.3 million for the same period in 2023.
|
Three Months Ended September 30, |
|
|||||||||
(Amounts in 000’s) |
2024 |
|
|
2023 |
|
|
Percent |
|
|||
General and administrative expenses: |
|
|
|
|
|
|
|
|
|||
Real Estate Services |
$ |
897 |
|
|
$ |
1,234 |
|
|
|
(27.3 |
)% |
Healthcare Services |
|
327 |
|
|
|
95 |
|
|
|
244.2 |
% |
Total |
$ |
1,224 |
|
|
$ |
1,329 |
|
|
|
(7.9 |
)% |
Credit loss expense—Credit loss expense was $0.5 million for the three months ended September 30, 2024 compared to $0.3 million for the same period in 2023. Credit loss expense represents reserves taken against patient accounts receivable at the
31
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 (income), net—Other (income) expense decreased by $.2 thousand for the three months ending September 30, 2024 compared to the same period in 2023 due to writing off escheatment liabilities in 2023.
Nine Months Ended September 30, 2024 and 2023
Patient care revenues—Patient care revenues for the Healthcare Services segment, as a result of the Company operating the Meadowood and Glenvue Facilities, totaled $7.4 million for the nine months ended September 30, 2024, compared to $6.6 million for the same period in 2023. The 12.8% increase is primarily due to an increase in the Medicaid reimbursement rate paid for the Glenvue facility and an increase in occupancy at the Glenvue facility.
Rental revenues—Rental revenue for our Real Estate Services segment increased by approximately $.1 million to $5.3 million for the nine months ended September 30, 2024, compared with $5.2 million for the same period in 2023. The 1.7% increase is primarily due to the extension of the Greenfield lease and the increase in rent from the Southland facility.
Patient care expense—Patient care expense remained consistent totaling $6.5 million for the nine months ended September 30, 2024 and 2023.
Facility rent expense—Facility rent expense remained consistent totaling $0.4 million for the nine months ended September 30, 2024 and 2023.
Depreciation and amortization—Depreciation and amortization was $1.5 million for the nine months ended September 30, 2024, compared to $1.7 million for the same period in 2023.
General and administrative expenses—General and administrative expenses were $4.1 million for the nine months ended September 30, 2024, compared with $4.3 million for the same period in 2023. The decrease is primarily due to a reduction in corporate overhead.
|
Nine Months Ended September 30, |
|
|||||||||
(Amounts in 000’s) |
2024 |
|
|
2023 |
|
|
Percent |
|
|||
General and administrative expenses: |
|
|
|
|
|
|
|
|
|||
Real Estate Services |
$ |
3,034 |
|
|
$ |
2,970 |
|
|
|
2.2 |
% |
Healthcare Services |
|
1,051 |
|
|
|
1,314 |
|
|
|
(20.0 |
)% |
Total |
$ |
4,085 |
|
|
$ |
4,284 |
|
|
|
(4.6 |
)% |
Credit loss expense—Credit loss expense was $0.6 million for nine months ended September 30, 2024, compared to $0.3 million for the same period in 2023. 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 (income), net—Other expense, net was 0.2 million for nine months ended September 30, 2024, compared to $0.6 million for the same period in 2023. The prior year expenses were related to professional and legal services incurred for the preferred exchange and legacy facility related expenses.
NON-GAAP Financial Measures
The following table summarizes the Company's non-GAAP financial measure of results based on EBITDA for the three and six months ending September 30, 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
32
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.
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, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
$ |
(982 |
) |
|
$ |
(973 |
) |
|
$ |
(2,650 |
) |
|
$ |
(3,650 |
) |
Depreciation and amortization |
|
474 |
|
|
|
526 |
|
|
|
1,499 |
|
|
|
1,738 |
|
Interest expense, net |
|
677 |
|
|
|
708 |
|
|
|
2,021 |
|
|
|
2,066 |
|
Amortization of employee stock compensation |
|
19 |
|
|
|
85 |
|
|
|
85 |
|
|
|
321 |
|
EBITDA |
|
188 |
|
|
|
346 |
|
|
|
955 |
|
|
|
475 |
|
Credit loss expense |
|
499 |
|
|
|
229 |
|
|
|
563 |
|
|
|
269 |
|
Other expense (income), net |
|
5 |
|
|
|
(139 |
) |
|
|
249 |
|
|
|
603 |
|
Gain (loss) from write-off of liabilities and other credit balances from discontinued operations |
|
3 |
|
|
|
(200 |
) |
|
|
180 |
|
|
|
(231 |
) |
Expenses related to preferred stock recapitalization |
|
- |
|
|
|
95 |
|
|
|
- |
|
|
|
768 |
|
Other one-time costs |
|
179 |
|
|
|
6 |
|
|
|
319 |
|
|
|
270 |
|
Project costs |
|
20 |
|
|
|
70 |
|
|
|
85 |
|
|
|
237 |
|
Tail insurance on legacy facilities |
|
55 |
|
|
|
127 |
|
|
|
262 |
|
|
|
382 |
|
One-time income adjustment - quality incentive program (1) |
|
49 |
|
|
|
49 |
|
|
|
(49 |
) |
|
|
(354 |
) |
Adjusted EBITDA from operations |
$ |
998 |
|
|
$ |
583 |
|
|
$ |
2,564 |
|
|
$ |
2,419 |
|
(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; and (v) reducing other and general and administrative expenses.
Management anticipates access to several sources of liquidity, including cash on hand, cash flows from operations, and debt refinancing during the twelve months following the date of this filing. The Company has committed to a plan to sell the Mt. Trace Property to increase cash available for operations and future investments. At September 30, 2024, the Company had $0.5 million in unrestricted cash and $2.0 million of net accounts receivable, mainly consisting of patient accounts receivables and rent receivables.
During the nine months ended September 30, 2024, the Company's net cash provided by operating activities was $1.0 million primarily due timing of payments of accounts payable. 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, 2024, the Company recorded an estimated allowance of $2.2 million against a gross accounts receivable of $4.2 million.
As of September 30, 2024, the Company had $49.7 million in indebtedness, net of $1.0 million deferred financing costs and unamortized discounts. The Company anticipates net principal repayments of approximately $2.2 million during the next
33
twelve-month period, approximately $1.6 million of routine debt service amortization, $0.4 million of insurance financing amortization, and $0.2 million payment of bond debt.
Series A Preferred Stock Exchange Offer
On June 30, 2023, the Company closed the Company’s offer to exchange (the “Exchange Offer”) any and all outstanding shares of the Company’s 10.875% Series A Cumulative Redeemable Preferred Shares (the “Series A Preferred Stock”) for newly issued shares of the Company’s Series B Preferred Stock. In connection with the completion of the Exchange Offer and the implementation of the Series A Charter Amendments and the Series B Charter Amendments, the liquidation preference of the Series A Preferred Stock was reduced, accumulated and unpaid dividends on the Series A Preferred Stock were eliminated and future dividends on the Series A Preferred Stock were eliminated. As a result, $50.4 million in accumulated and unpaid dividends on the Series A Preferred Stock were eliminated and, as of September 30, 2024, there are no accumulated and unpaid dividends on the Series A Preferred Stock. For further information regarding the Exchange Offer, Series A Charter Amendments and Series B Charter Amendments, see Note 9 – Common and Preferred Stock. As of September 30, 2024, the Company has not redeemed any Series B Preferred Stock.
In early 2020, the Company began ongoing efforts to investigate alternatives to retire or refinance our outstanding Series A Preferred Stock through privately negotiated transactions, open market repurchases, redemptions, exchange offers, tender offers, or otherwise.
Costs associated with these efforts have been expensed as incurred in “Other expense, net” and there were no expenses incurred for the nine months ended September 30, 2024 and there were $0.5 million for the nine months ended nine months ended September 30, 2023.
Series A Preferred Dividend Suspension
Prior to the Exchange Offer, as discussed above, we suspended the quarterly dividend payment with respect to our Series A Preferred Stock commencing with the fourth quarter of 2017, and on June 8, 2018, the Board suspended quarterly dividend payments indefinitely with respect to the Series A Preferred Stock. The dividend suspension provided the Company with additional funds to meet its ongoing liquidity needs. As the Company had failed to pay cash dividends on the outstanding Series A Preferred Stock in full for more than four dividends periods, the annual dividend rate on the Series A Preferred Stock for the fifth and future missed dividend periods had increased to 12.875%, which was equivalent to approximately $3.20 per share each year, commencing on the first day after the missed fourth quarterly payment (October 1, 2018) and continuing until the second consecutive dividend payment date following such time as the Company had paid all accumulated and unpaid dividends on the Series A Preferred Stock in full in cash. As discussed above, in connection with the completion of the Exchange Offer, accumulated and unpaid dividends on the Series A Preferred Stock were eliminated.
Debt Covenant Compliance
As of September 30, 2024, the Company was in compliance with the various financial and administrative covenants under the Company's outstanding credit related instruments with the exception of a notice of default under two USDA loans secured by the Southland and Mt. Trace Property and an SBA loan secured by Southland. On October 25, 2024, the Company received a notice of acceleration and demand for payment from the lenders of Southland stating that the covenants of the deed of trust have been violated for failure to pay principal and interest. The lender accelerated the maturity dates and is requesting for the loans to be paid in full plus unpaid interest and late fees immediately. We are working with the lender to reach a forbearance agreement and think it is likely we will reach an agreement. On November 8, 2024, Company obtained a line of credit and intends to pay all unpaid principal and interest payments to get back into compliance with the loan documents. The Company is working with the lender of the Mt. Trace Property to get back into compliance with the loan documents and received a waiver in November 2024.
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.
34
At September 30, 2024, the Company had cash on hand of $0.5 million. At September 30, 2024, the Company had an accumulated deficit of $84.6 million. For the nine months ended September 30, 2024, the Company had a net loss of $2.7 million and had $1.0 million of net cash provided by operations for the period, respectively. The Company received a notice of default under one USDA loan secured by Southland and an SBA loan secured by Southland totaling $4.1 million. On October 25, 2024, the Company received a notice of acceleration and demand for payment from the lenders of Southland stating that the covenants of the deed of trust have been violated for failure to pay principal and interest. The lender accelerated the maturity dates and is requesting for the loans to be paid in full plus unpaid interest and late fees immediately. We are working with the lender to reach a forbearance agreement and think it is likely we will reach an agreement. On November 8, 2024, Company obtained a line of credit and intends to pay all unpaid principal and interest payments to get back into compliance with the loan documents.
These conditions raise doubt regarding our ability to continue as a going concern as the Company will need additional debt or equity financing or a combination of both to continue its operations and meet its financial obligations for twelve months from the date these consolidated financial statements were issued if we do not obtain a forbearance agreement with the lender. We think it is likely we will reach an agreement.
We may consume available resources more rapidly than currently anticipated, resulting in the need for additional funding. We expect to incur continuing losses for the foreseeable future.
Any additional debt or equity financing that the Company obtains may substantially dilute the ownership held by our existing stockholders. The economic dilution to our shareholders will be significant if our stock price does not materially increase, or if the effective price of any sale is below the price paid by a particular investor. The Company may be unable to access further equity or debt financing when needed or obtain additional financing under acceptable terms, if at all.
We may decide to raise additional capital through a variety of sources in the short-term and in the long-term, including but not limited to:
If the Company is unable to raise additional capital, there is a risk that the Company could be required to discontinue or significantly reduce the scope of its operations. These consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
For additional information regarding the Company's liquidity, see Note 2 – Liquidity and Note 9 – Senior Debt 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) |
|
2024 |
|
|
2023 |
|
||
Net cash provided by operating activities |
|
$ |
990 |
|
|
$ |
3,460 |
|
Net cash used in investing activities |
|
|
(430 |
) |
|
|
(916 |
) |
Net cash used in financing activities |
|
|
(1,242 |
) |
|
|
(1,818 |
) |
Net change in cash and restricted cash |
|
|
(682 |
) |
|
|
726 |
|
Cash and restricted cash at beginning of period |
|
|
4,184 |
|
|
|
3,909 |
|
Cash and restricted cash, ending |
|
$ |
3,502 |
|
|
$ |
4,635 |
|
35
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, $0.2 million for other debt.
Nine Months Ended September 30, 2023
Net cash provided by operating activities—was approximately $3.5 million. The positive cash flow from operating activities were largely due to collection of the ERTC, collection of patient care receivables, and rent receivables.
Net cash used in investing activities—was approximately $0.9 million. The negative cash flow was mainly from reclassified capital expenditures, new equipment, and finished capital expense projects.
Net cash used in financing activities—was approximately $1.8 million. The cash was used to make routine payments totaling $1.8 million for our debt obligations.
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, 2024. 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.
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.
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.
36
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 Senior Vice President (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 12 - 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.
There are no 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, 2023 filed with the SEC on April 1, 2024 other than as set forth below.
Healthcare reform legislation impacts cannot accurately be predicted and could adversely affect our results of operations.
37
We and the healthcare operators leasing our properties depend on the healthcare industry and are susceptible to risks associated with healthcare reform. Legislative proposals are introduced each year that would introduce major changes in the healthcare system, both nationally and at the state level. For example, we believe that efforts may be made to, among other things, transition Federal payment programs further in the direction of value based care, but we cannot predict whether or in what form any of these measures may be enacted, or what effect they would have on our business or the businesses of our tenants if enacted. Efforts may also be made to reduce the age at which individuals become eligible for Medicare, which could have an adverse impact on our tenants because Medicare sometimes reimburses long term care providers at rates lower than those paid by commercial payors. In addition, the Biden Administration announced a focus on implementing minimum staffing requirements and increased inspections as part of nursing home reforms announced in the 2022 State of the Union Address. On April 22, 2024, CMS issued a final rule regarding minimum staffing requirements and increased inspections at nursing homes in order to establish comprehensive nurse staffing requirements. The rule consists of three core staffing requirements: (1) overall minimum standard of 3.48 total nurse staff hours per resident day; (2) minimum nurse staffing standards of 0.55 hours per resident day for registered nurses and 2.45 hours of care from a certified nurse’s aid per resident per day; and (3) a requirement to have a registered nurse onsite 24 hours a day, seven days a week. The rule includes a staggered implementation approach for which CMS will publish additional details on compliance as the implementation dates approach. The rule also includes possible waivers and temporary hardship exemptions for select facilities, however no funding for the additional staff will be provided. We are currently evaluating the impact of the rule, but believe the unfunded mandate to increase staff may have a material and adverse impact on the financial condition of our tenants. We cannot predict whether any future legislation related to staffing will be adopted or, if adopted, the impact such legislation may have on our tenants or our business.
Our tenants are subject to extensive federal, state and local laws and regulations affecting the healthcare industry that include those relating to, among other things, licensure, conduct of operations, ownership of facilities, addition of facilities and equipment, allowable costs, services, prices for services, qualified beneficiaries, quality of care, patient rights and insurance, fraudulent or abusive behavior, labor and employment issues and financial and other arrangements that may be entered into by healthcare providers. See “Government Regulation” in Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 1, 2024, for more information. If our tenants or operators fail to comply with the laws, regulations and other requirements applicable to their businesses and the operation of our properties, they could become ineligible to receive reimbursement from governmental and private third-party payor programs, face bans on admissions of new patients or residents, suffer civil or criminal penalties or be required to make significant operational changes. The cost to comply with these laws, regulations and other requirements results in increased costs of doing business for our tenants and operators. If our tenants are unable to offset these increased costs, the operating results and financial condition of our tenants will be adversely impacted and they may be unable to satisfy their rent obligations to us.
We believe that additional resources may be dedicated to regulatory enforcement, which could further increase our tenants’ costs of doing business and negatively impact their ability to pay their rent obligations to us. Changes in enforcement policies by federal and state governments have also resulted in a significant increase in inspection rates, citations of regulatory deficiencies and sanctions, including terminations from Medicare and Medicaid programs, bars on Medicare and Medicaid payments for new admissions, civil monetary penalties and criminal penalties. Our tenants and operators could be forced to expend considerable resources responding to an investigation, lawsuit or other enforcement action under applicable laws or regulations. Additionally, if our tenants’ residents do not have insurance, it could adversely impact the tenants’ ability to satisfy their obligation to us.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
In connection with the completion of the Exchange Offer and the implementation of the Series A Charter Amendments and the Series B Charter Amendments, the liquidation preference of the Series A Preferred Stock was reduced, accumulated and unpaid dividends on the Series A Preferred Stock were eliminated and future dividends on the Series A Preferred Stock were eliminated. As a result, $50.4 million in accumulated and unpaid dividends on the Series A Preferred Stock were eliminated and, as of September 30, 2024, there are no accumulated and unpaid dividends on the Series A Preferred Stock. For further information regarding the Exchange Offer, Series A Charter Amendments and Series B Charter Amendments, see Note 2 – Liquidity and Note 9 – Common and Preferred Stock to the consolidated financial statements included in Part I, Item 1 herein.
38
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
NYSE American Listing
On May 10, 2023, we received a letter from the NYSE American notifying us that we were not in compliance with Section 1003(a)(ii) of the NYSE American Company Guide. As a result, we became subject to the procedures and requirements of Section 1009 of the NYSE American Company Guide. On June 9, 2023, we submitted a plan to the NYSE American advising of actions we have taken or will take to regain compliance with the continued listing standards by November 10, 2024. On June 29, 2023, we received a letter from the NYSE American notifying us that we were not in compliance with Section 1003(a)(i) of the NYSE Company Guide. On August 1, 2023, we received a letter (the “Acceptance Letter”) from the NYSE American notifying us that the compliance plan has been accepted. On November 11, 2024, the NYSE Regulation determined that the Company is no longer suitable for listing pursuant to Section 1009(a) of the NYSE American Company Guide as the Company was unable to demonstrate that it had regained compliance with Sections 1003(a)(i) and (ii) of the NYSE American Company Guide by the end of the maximum 18-month compliance plan period, which expired on November 10, 2024. The Company has a right to a review of staff’s determination to delist the Company’s Securities by the Listings Qualifications Panel of the Committee for Review of the Board of Directors of the Exchange. Following such appeal, a decision by the Listings Qualifications Panel will be made and announced by NYSE American regarding either proceeding with suspension and delisting or continued trading in the Company’s Securities. The Company’s request for such a review must be made by November 18, 2024. The Company intends to appeal such determination and will continue with the plan to regain compliance. The Company expects the Securities to continue to trade on NYSE American during the appeal process.
Regional Health’s common stock and Series A Preferred Stock will continue to be listed on the NYSE American while it attempts to regain compliance with the continued listing standard noted, subject to Regional Health’s compliance with other continued listing requirements. The common stock and Series A Preferred Stock will continue to trade under the symbols “RHE” and “RHE-PA,” respectively, but will each have an added designation of “.BC” to indicate that Regional Health is not in compliance with the NYSE American’s continued listing standards.
Trading Arrangement
During the third quarter of 2024, 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.
39
EXHIBIT INDEX
Exhibit No. |
|
Description |
|
Method of Filing |
|
|
|
|
|
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) |
|
|
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 |
|
|
|
|
|
|
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 |
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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. |
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Filed herewith |
101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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Filed herewith |
104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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Filed herewith |
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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.
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REGIONAL HEALTH PROPERTIES, INC. |
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(Registrant) |
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Date: |
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November 19, 2024 |
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/s/ Brent Morrison |
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Brent Morrison |
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Chairman, Chief Executive Officer and Director (Principal Executive Officer) |
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Date: |
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November 19, 2024 |
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/s/ Paul O'Sullivan |
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Paul O'Sullivan |
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Senior Vice President (Principal Financial Officer) |
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