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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(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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Name of each exchange on which registered |
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(1) On February 4, 2025, NYSE American LLC (“NYSE American” or the “Exchange”) announced that it had determined to suspend trading of the common stock, no par value per share (the “Common Stock”), and Series A Redeemable Preferred Shares, no par value per share (the “Series A Preferred Stock” and, together with the Common Stock, the “Securities”), of Regional Health Properties, Inc., a Georgia corporation (the “Company”), on NYSE American. The Company has a right to a review of the decision of the Listings Qualifications Panel (the “Panel”) to delist the Company’s Securities by the Committee for Review of the Board of Directors of the Exchange. The filing by the Exchange of an application with the Securities and Exchange Commission to delist the Company’s Securities is pending completion of all applicable procedures, including any appeal by the Company of the Panel’s decision. The Common Stock and the Series A Preferred Stock began trading on the OTCQB on March 24, 2025 under the symbols “RHEP” and “RHEPA,” respectively.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.:
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
As of May 13, 2025 the registrant had
Regional Health Properties, Inc.
Form 10-Q
Table of Contents
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Part I. |
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Item 1. |
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4 |
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Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024 |
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4 |
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Consolidated Statements of Operations for the three months ended March 31, 2025 and 2024 |
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5 |
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6 |
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Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024 |
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9 |
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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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26 |
Item 3. |
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33 |
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Item 4. |
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33 |
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Part II. |
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Item 1. |
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33 |
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Item 1A. |
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33 |
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Item 2. |
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33 |
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Item 3. |
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34 |
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Item 4. |
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34 |
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Item 5. |
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34 |
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Item 6. |
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34 |
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36 |
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3
Part I. Financial Information
Item 1. Financial Statements
REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in 000's)
(Unaudited)
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March 31, |
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December 31, |
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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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Assets 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 EQUITY |
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Senior debt, net |
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$ |
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$ |
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Debt related to assets 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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and Contingencies (Note 12) |
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Stockholders' deficit: |
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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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( |
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( |
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Total stockholders' deficit |
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( |
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( |
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Total liabilities and stockholders' deficit |
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$ |
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$ |
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See accompanying notes to unaudited consolidated financial statements.
4
REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in 000's except per share amounts)
(Unaudited)
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Three Months Ended March 31, |
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2025 |
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2024 |
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Revenues: |
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Patient care revenues |
$ |
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$ |
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Rental revenues |
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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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Depreciation and amortization |
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General and administrative expense |
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Loss on lease termination |
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Credit loss expense |
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Gain on operations transfer |
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Total expenses |
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Loss from operations |
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Other expense: |
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Interest expense, net |
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Other expense, net |
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( |
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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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Preferred stock dividends |
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( |
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Net loss attributable to Regional Health Properties, Inc. common stockholders |
$ |
( |
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$ |
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Net loss per share of common stock attributable to Regional Health Properties, Inc. |
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Basic and Diluted |
$ |
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$ |
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Weighted average shares of common stock outstanding: |
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Basic and Diluted |
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See accompanying notes to unaudited consolidated financial statements.
5
REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Amounts in 000's)
(Unaudited)
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Outstanding |
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Shares of |
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Shares of |
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Shares of |
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Shares of Treasury Stock |
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Common |
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Preferred Stock A, |
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Preferred Stock B, |
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Accumulated |
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Total |
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Balance, December 31, 2024 |
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( |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Common stock issued in connection with Preferred Stock Series B dividends |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balances, March 31, 2025 |
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( |
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$ |
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$ |
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$ |
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$ |
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$ |
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Outstanding |
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Shares of |
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Shares of |
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Shares of |
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Shares of Treasury Stock |
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Common |
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Preferred Stock A, |
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Preferred Stock B, |
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Accumulated |
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Total |
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Balance, December 31, 2023 |
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( |
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$ |
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$ |
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$ |
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$ |
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$ |
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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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Net Loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balances, March 31, 2024 |
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( |
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$ |
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$ |
426 |
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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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Three Months Ended March 31, |
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2025 |
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2024 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
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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) in excess of cash paid |
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Rent revenue less than (in excess) of cash received |
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( |
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Amortization of deferred financing costs, debt discounts and premiums |
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Loss on lease termination |
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— |
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Gain on operations transfer |
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( |
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— |
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Credit loss expense |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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Prepaid expenses and other assets |
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Accounts payable and accrued expenses |
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Other liabilities |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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Net cash used in investing activities |
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( |
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Cash flows from financing activities: |
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Payment of senior debt |
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( |
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Payment of other debt |
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Net cash used in financing activities |
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Net change in cash and restricted cash |
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Cash and restricted cash, beginning |
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Cash and restricted cash, ending |
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$ |
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$ |
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7
REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in 000's)
(Unaudited)
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For the Three Months Ended March 31, |
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2025 |
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2024 |
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Supplemental disclosure of cash flow information: |
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Cash interest paid |
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$ |
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Vendor-financed insurance |
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— |
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Gain on operations transfer |
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— |
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Preferred stock dividends paid in common stock |
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— |
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See accompanying notes to unaudited consolidated financial statements.
8
REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2025
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Regional Health Properties, Inc.'s (the "Company" or "Regional") 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. The Company's 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 United States ("U.S.") generally accepted accounting principles ("GAAP") in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"). The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the 2024 audited consolidated financial statements and notes thereto, which are included in the 2024 Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") on March 31, 2025.
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.
Revenue Recognition and Allowances
Patient Care Revenue. ASU 2014-09, Revenue from Contracts with Customers, as codified in ASC 606 ("ASC 606"), requires a company to recognize revenue when the company transfers control of promised goods and services to a customer. Revenue is recognized in an amount that reflects the consideration to which a company expects to receive in exchange for such goods and services. Revenue from our Healthcare Services business segment is derived from services rendered to patients in the Glenvue, Meadowood and Mountain Trace 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
9
leases on a straight-line basis over the applicable lease term when collectability is probable. Recognizing rental income on a straight-line basis generally results in recognized revenues during the first half of a lease term exceeding the cash amounts contractually due from our tenants, creating a straight-line rent receivable that is included in the straight-line rent receivable on our consolidated balance sheets. In the event the Company cannot reasonably estimate the future collection of rent from one or more tenant(s) of the Company's facilities, rental income for the affected facilities is recognized only upon cash collection, and any accumulated straight-line rent receivable is expensed in the period in which the Company deems rent collection to no longer be probable. For additional information with respect to such facilities, see Note 2 – Liquidity and Note 7 – Leases.
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
The following table presents the Company's Accounts receivable, net of allowance for the periods presented:
(Amounts in 000’s) |
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March 31, |
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December 31, |
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Gross receivables |
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Real Estate Services |
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$ |
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$ |
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Healthcare Services |
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Subtotal |
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Allowance |
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Real Estate Services |
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( |
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Healthcare Services |
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( |
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( |
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Subtotal |
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( |
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( |
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Accounts receivable, net of allowance |
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$ |
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$ |
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Prepaid Expenses and Other
As of March 31, 2025 and December 31, 2024, the Company had approximately $
Notes Receivable
Notes receivable are initially recorded when accounts receivable are transferred into a promissory note and are recorded as an alternative to accounts receivable to memorialize an unqualified promise to pay a specific sum, typically with interest, in accordance with a defined payment schedule. The Company’s payment terms with customers on promissory notes can vary based on several factors and the circumstances of each promissory note, however typically promissory notes mature over a
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
10
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 – Assets Held for Sale for additional details on assets held for sale as of March 31, 2025 and December 31, 2024. Any debt related to assets held for sale or sold during the period are classified as debt related to assets held for sale for the current and prior periods presented in the accompanying consolidated financial statements.
Assets held for sale are presented as discontinued operations in all periods presented if the disposition represents a strategic shift that has, or will have, a major effect on the Company's financial position or results of operations. This includes the net gain (or loss) upon disposal of property held for sale, the property's operating results, depreciation and interest expense.
Accounts Payable
The following table presents the Company's Accounts payable for the periods presented:
(Amounts in 000’s) |
|
March 31, |
|
|
December 31, |
|
||
Accounts payable |
|
|
|
|
|
|
||
Real Estate Services |
|
$ |
|
|
$ |
|
||
Healthcare Services |
|
|
|
|
|
|
||
Total Accounts payable |
|
$ |
|
|
$ |
|
||
Other Liabilities
As of March 31, 2025 and December 31, 2024, the Company had approximately $
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 March 31, 2025, the Company's leased facility is accounted for as an operating lease. 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 assesses any new contracts or modification of contracts in accordance with ASC 842, Leases, to determine the existence of a lease and its classification. We are reporting 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 their respective leases with us.
Insurance
Professional liability insurance was provided to facilities operations up until the date of the transition. Claims which were associated with operations of the Company prior to the Transition but not reported as of the transition date were self-insured.
The Company maintains insurance for professional and general liability claims for its Healthcare Services segment, which includes any facility the Company is likely to operate, however for claims prior to January 1, 2020, the Company is self-insured against professional and general liability claims since it discontinued its healthcare operations in connection with the Transition. The Company evaluates quarterly the adequacy of its self-insurance reserve based on a number of factors, including: (i) the number of actions pending and the relief sought; (ii) analyses provided by defense counsel, medical experts or other information which comes to light during discovery; (iii) the legal fees and other expenses anticipated to be incurred in defending the actions; (iv) the status and likely success of any mediation or settlement discussions, including estimated settlement amounts and legal fees and other expenses anticipated to be incurred in such settlement, as applicable; and (v) the venues in which the actions have been filed or will be adjudicated. The Company believes that most of the professional and
11
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 8 – Accrued Expenses and Note 12 - Commitments and Contingencies.
In addition, the Company maintains certain other insurance programs, including commercial general liability, property, casualty, directors’ and officers’ liability, crime, and employment practices liability.
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.
Securities outstanding that were excluded from the computation, because they would have been anti-dilutive were as follows:
|
|
|
|
|||||
(Share amounts in 000’s) |
|
March 31, |
|
|
March 31, |
|
||
Stock options |
|
|
|
|
|
|
||
Warrants - employee |
|
|
|
|
|
|
||
Total anti-dilutive securities |
|
|
|
|
|
|
||
The weighted average contractual terms in years for these stock options as of March 31, 2025 is
Recently Adopted Accounting Pronouncements
In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements (Topic 842) amendments, which requires entities to determine whether related party arrangements between entities under common control are leases. The amendments also address the accounting treatment of leasehold improvements associated with common control leases. They require the lessee to amortize leasehold improvements over the useful life of the improvements to the common control group, regardless of the lease term, as long as the lessee controls the use of the underlying asset. If the lessee no longer controls the use of the asset, the leasehold improvements are accounted for as a transfer between entities under common control through an adjustment to equity. These improvements are also subject to impairment guidance in Topic 360, Property, Plant, and Equipment. The amendment is effective for public entities beginning after December 15, 2023. The Company adopted ASU 2023-01 effective January 1, 2024. The adoption of ASU-2023-01 did not have a material impact on the Company's consolidated financial statements.
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 adoption of ASU 2023-07 did not have a material impact on the Company's consolidated financial statements. See Note 13 – Segment Results for more information.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures,
12
which requires a public company, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-09 effective January 1, 2025. The adoption of ASU-2023-09 did not have a material impact on the Company's consolidated financial statements.
New Accounting Pronouncements Issued But Not Yet Effective
In November 2024, the FASB issued ASU 2024-03, Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03), which requires disclosure of incremental income statement expense information on an annual and interim basis, primarily through enhanced disclosures of specified costs and expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact that ASU 2024-03 will have on its consolidated financial statement disclosures.
No other new accounting pronouncement issued or effective has had, or is expected to have, a material impact on the Company's financial statements.
NOTE 2. LIQUIDITY
Overview
The Company 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 but not limited to: cash on hand, collection of patient accounts receivable and uncollected rent, debt refinancing, and debt borrowings, asset sales, and/or through the sale of additional securities during the twelve months from the date of this filing. At March 31, 2025, the Company had $
During the three months ended March 31, 2025, the Company's cash provided by operating activities was $
On January 6, 2025, the Company and SunLink Health Systems, Inc., a Georgia corporation (“SunLink”), issued a joint press release announcing the execution of an Agreement and Plan of Merger, dated as of January 3, 2025 (the “Original Merger Agreement”), by and between Regional and SunLink, pursuant to which, upon the terms and subject to the conditions set forth therein, SunLink will merge with and into Regional in exchange for the issuance of an aggregate of
On April 14, 2025, the Company and SunLink entered into an Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”) with SunLink. The Merger Agreement provides that, among other things and subject to the terms and conditions of the Merger Agreement, SunLink will be merged with and into Regional (the “Merger”), with Regional surviving the Merger. The Merger Agreement amends and restates in its entirety the previously announced Original Merger Agreement.
The Merger Agreement amends the Original Merger Agreement, among other things, to: (i) increase the number of shares of common stock,
13
share of Regional Common Stock to shares of Regional Common Stock for every three shares of Regional Series D Preferred Stock, provided that the number of shares of Regional Series D Preferred Stock required to convert into one share of Regional Common Stock would be subject to reduction (as described in the Merger Agreement); and (iv) provide that SunLink may pay one or two special dividends to its shareholders prior to the closing of the Merger, in such amounts and subject to such limitations as described in the Merger Agreement. The Merger Agreement has been approved by each company’s board of directors and completion of the transaction remains subject to the receipt of the approvals of the shareholders of both Regional and SunLink, regulatory approvals and satisfaction of customary closing conditions. See Note 14 – Subsequent Events for information on the Company's execution of the Merger Agreement.
The Company's common stock and Series A Preferred Stock ("securities") was listed for trading on the NYSE American under the symbol “RHE” and "RHE-PA," respectively, up until February 5, 2025 when it was suspended from trading as a result of not meeting certain listing requirements. Currently, the Company's common stock and Series A Preferred Stock are listed on the OTC Market under the symbol "RHEP" and "RHEPA," respectively. On the OTC Market, selling our common stock and Series A Preferred Stock could be more difficult because smaller quantities of shares would likely be bought and sold, transactions could be delayed, and any security analysts’ coverage of us may be reduced. In addition, broker-dealers have certain regulatory burdens imposed upon them, which may discourage broker-dealers from effecting transactions in such securities, further limiting the liquidity of the common stock and Series A Preferred Stock. These factors could result in lower prices and larger spreads in the bid and ask prices for our securities. Such suspension from the NYSE American and continued or further declines in our share price could also greatly impair our ability to raise additional necessary capital through equity or debt financing and could significantly increase the ownership dilution to shareholders caused by our issuing equity in financing or other transactions. Any such limitations on our ability to raise debt and equity capital could prevent us from making future investments and satisfying maturing debt commitments.
Debt
As of March 31, 2025, the Company had $
Debt Covenant Compliance
Evaluation of the Company's Ability to Continue as a Going Concern
Under the accounting guidance related to the presentation of financial statements, the Company is required to evaluate, on a quarterly basis, whether or not the Company's current financial condition, including its sources of liquidity at the date that the consolidated financial statements are issued, will enable the Company to meet its obligations as they come due arising within one year of the date of the issuance of the Company's consolidated financial statements and to make a determination as to whether or not it is probable, under the application of this accounting guidance, that the Company will be able to continue as a going concern. The Company's consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
In applying applicable accounting guidance, management considered the Company's current financial condition and liquidity sources, including current funds available, forecasted future cash flows, the Company's obligations due over the next twelve months, and the Company's recurring business operating expenses.
14
The Company concluded that it is probable that the Company will be able to meet its obligations arising within one year of the date of issuance of these consolidated financial statements within the parameters set forth in the accounting guidance.
NOTE 3. CASH AND RESTRICTED CASH
The following presents the Company's cash and restricted cash:
(Amounts in 000’s) |
|
March 31, |
|
|
December 31, |
|
||
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.
NOTE 4. PROPERTY AND EQUIPMENT
The following table sets forth the Company's property and equipment:
(Amounts in 000’s) |
|
Estimated |
|
|
March 31, |
|
|
December 31, |
|
|||
Buildings and improvements |
|
|
|
$ |
|
|
$ |
|
||||
Equipment and computer related |
|
|
|
|
|
|
|
|
||||
Land |
|
|
— |
|
|
|
|
|
|
|
||
Property and equipment |
|
|
|
|
|
|
|
|
|
|||
Less: accumulated depreciation |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Property and equipment, net |
|
|
|
|
$ |
|
|
$ |
|
|||
The following table summarizes total depreciation and amortization expense three months ended March 31, 2025 and 2024:
|
|
Three Months Ended March 31, |
|
|||||
(Amounts in 000’s) |
|
2025 |
|
|
2024 |
|
||
Depreciation |
|
$ |
|
|
$ |
|
||
Amortization |
|
|
|
|
|
|
||
Total depreciation and amortization expense |
|
$ |
|
|
$ |
|
||
15
NOTE 5. ASSETS HELD FOR SALE
The following table sets forth the Company's assets held for sale by asset description:
(Amounts in 000's) |
|
Lives (Years) |
|
March 31, |
|
|
December 31, |
|
||
Buildings and improvements |
|
|
$ |
|
|
$ |
|
|||
Equipment and computer related |
|
|
|
|
|
|
|
|||
Land |
|
— |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
||
Less: accumulated depreciation and |
|
|
|
|
( |
) |
|
|
( |
) |
Assets held for sale, net |
|
|
|
$ |
|
|
$ |
|
||
The following table sets for the Company's assets held for sale by facility:
(Amounts in 000's) |
|
|
|
March 31, |
|
|
December 31, |
|
||
Coosa |
|
|
|
$ |
|
|
$ |
|
||
Meadowood |
|
|
|
|
|
|
|
|
||
Assets 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, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gross |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Accumulated amortization |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Net carrying amount |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balances, March 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gross |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Accumulated amortization |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Net carrying amount |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
The following table summarizes amortization expense for the three months ended March 31, 2025 and 2024:
|
|
Three Months Ended March 31, |
|
|||||
(Amounts in 000’s) |
|
2025 |
|
|
2024 |
|
||
Bed licenses |
|
$ |
|
|
$ |
|
||
Lease rights |
|
|
|
|
|
|
||
Total amortization expense |
|
$ |
|
|
$ |
|
||
16
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 |
|
||
2025 |
|
$ |
|
|
$ |
|
||
2026 |
|
|
|
|
|
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
||
2029 |
|
|
|
|
|
— |
|
|
Thereafter |
|
|
|
|
|
— |
|
|
Total expected amortization expense |
|
$ |
|
|
$ |
|
||
NOTE 7. LEASES
Operating Leases
As of March 31, 2025 and December 31, 2024, the Company leases
The Company subleases certain office space located in Atlanta, Georgia, which will expire on July 31, 2025.
As of March 31, 2025, the Company is in compliance with all operating lease financial covenants.
Future Minimum Lease Payments
Future minimum lease payments for the twelve months ending December 31, for each of the next five years and thereafter is as follows:
(Amounts in 000’s) |
|
Future |
|
|
Accretion of |
|
|
Operating |
|
|||
2025 |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
2026 |
|
|
|
|
|
( |
) |
|
|
|
||
2027 |
|
|
|
|
|
( |
) |
|
|
|
||
2028 |
|
|
|
|
|
( |
) |
|
|
|
||
2029 |
|
|
|
|
|
( |
) |
|
|
|
||
Thereafter |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Facilities Lessor
On February 1, 2025, Regional and SL SNF, LLC entered into a At-Risk-Management in order to transition the Southland facility back to the Company. The Company filed the Change of Ownership ("CHOW") application with the state of Georgia on February 22, 2025. See Note 14 – Subsequent Events for information regarding the Company's CHOW application.
In March 2025, Oak Hollow Healthcare Management and the Company entered into an Operations Transfer Agreement ("OTA") to transition the two facilities leased by Oak Hollow back to the Company due to an inability to safely operate the facilities. As part of the OTA, in exchange for a release of the Personal Guaranty securing the lease obligations, the Company received the patient receivables. The result of the exchange was a $
As of March 31, 2025, seven facilities (six owned by Regional and one leased to Regional) are leased or subleased on a triple net basis, meaning that the lessee (i.e., the third-party operator of the property, or the Company with respect to the operated facilities) is obligated under the lease or sublease, as applicable, for all liabilities of the property in respect to insurance, taxes and facility maintenance, as well as the lease or sublease payments, as applicable.
17
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 in 000’s) |
|
Lease Receivables |
|
|
2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
For further details regarding the Company's leased and subleased facilities to third-party operators, including a full summary of the Company's leases to third-parties and which comprise the future minimum lease receivables of the Company, see Note 7 - Leases and Leasing Transactions in Part I, Item 1, Financial Statements and Supplementary Data, included in the Annual Report.
NOTE 8. ACCRUED EXPENSES
Accrued expenses consist of the following:
(Amounts in 000’s) |
|
March 31, |
|
|
December 31, |
|
||
Accrued employee benefits and payroll-related |
|
$ |
|
|
$ |
|
||
Real estate and other taxes (1) |
|
|
|
|
|
|
||
Accrued interest |
|
|
|
|
|
|
||
Insurance escrow |
|
|
|
|
|
|
||
Other accrued expenses (2) |
|
|
|
|
|
|
||
Total accrued expenses |
|
$ |
|
|
$ |
|
||
18
NOTE 9. NOTES PAYABLE AND OTHER DEBT
See Note 9 – 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) |
|
March 31, |
|
|
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) |
|
|
March 31, |
|
|
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 |
|
Community B&T |
|
|
+ |
|
|
% |
|
|
|
|
|
|
||||
Southland |
|
Cadence Bank, NA |
|
|
+ |
|
|
% |
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
Senior debt - guaranteed by SBA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Southland(4) |
|
Cadence Bank, NA |
|
|
+ |
|
|
% |
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
19
(Amounts in 000’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Facility |
|
Lender |
|
Maturity |
|
Interest Rate (1) |
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
|||||
Senior debt - bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Eaglewood Bonds Series A |
|
City of Springfield, Ohio |
|
|
Fixed |
|
|
% |
|
$ |
|
|
$ |
|
||||
(Amounts in 000’s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Facility |
|
Lender |
|
Maturity |
|
Interest Rate (1) |
|
|
March 31, |
|
|
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 |
|
|
March 31, |
|
|
December 31, |
|
|||||
Other debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
First Insurance Funding (1) |
|
|
Fixed |
|
|
% |
|
$ |
|
|
$ |
|
||||
Exchange Bank |
|
|
Fixed |
|
|
% |
|
|
|
|
|
|
||||
Cavalier Senior Living |
|
|
Fixed |
|
|
% |
|
|
|
|
|
|
||||
Key Bank (2) |
|
|
Fixed |
|
|
% |
|
|
|
|
|
|
||||
Marlin Capital Solutions |
|
|
Fixed |
|
|
% |
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
Debt Covenant Compliance
As of March 31, 2025, the Company had
20
As of March 31, 2025, the Company was in compliance with the various financial and administrative covenants related to all of the Company’s credit facilities.
Scheduled Maturities
The schedule below summarizes the scheduled gross maturities as of March 31, 2025 for each of the next five years and thereafter.
For the Twelve Months Ended December 31, |
|
(Amounts in 000’s) |
|
|
2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Subtotal |
|
$ |
|
|
Less: unamortized discounts |
|
|
( |
) |
Less: deferred financing costs, net |
|
|
( |
) |
Total notes and other debt |
|
$ |
|
|
NOTE 10. COMMON AND PREFERRED STOCK
Common Stock
As of March 31, 2025, the Company had
Preferred Stock
As of March 31, 2025, the Company had
Series A Preferred Stock
As of March 31, 2025, the Company had shares of Series A Preferred Stock issued and outstanding. There were
Series B Preferred Stock
On January 29, 2025, the board of directors of Regional declared a dividend to the holders of its
As of March 31, 2025, the Company had shares of Series B Preferred Stock issued and outstanding.
.
NOTE 11. STOCK BASED COMPENSATION
Stock Incentive Plans
As of March 31, 2025, the number of securities remaining available for future issuance under the Company's 2023 Omnibus Incentive Compensation Plan is
21
For the three months ended March 31, 2025 and 2024, the Company recognized stock-based compensation expense as follows:
|
|
Three Months Ended March 31, |
|
|
|||||
(Amounts in 000’s) |
|
2025 |
|
|
2024 |
|
|
||
Employee compensation: |
|
|
|
|
|
|
|
||
Stock compensation expense |
|
$ |
|
|
$ |
|
|
||
Total employee stock-based compensation expense |
|
$ |
|
|
$ |
|
|
||
Restricted Stock
The following table summarizes the Company's restricted stock activity for the three months ended March 31, 2025:
|
|
Number of |
|
|
Weighted Avg. |
|
||
Unvested, December 31, 2024 |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Unvested, March 31, 2025 |
|
|
|
|
$ |
|
||
Common Stock Options
The following summarizes the Company's employee stock option activity for the three months ended March 31, 2025:
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|
Aggregate |
|
||||
Outstanding, December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Outstanding, March 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Outstanding and Vested, March 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
No stock options were granted for three months ended March 31, 2025. All outstanding stock options are vested, and the Company has no unrecognized compensation expense related to common stock options as of March 31, 2025. The intrinsic value is based upon a stock option grant to purchase
The following summary information reflects stock options outstanding, vested, and related details as of March 31, 2025:
|
|
Stock Options Outstanding |
|
|
Stock Options Exercisable |
|
||||||||||||||
Exercise Price |
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|
Number of |
|
|
Weighted |
|
|||||
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
22
Common Stock Warrants
The following summarizes the Company's warrant activity for the three months ended March 31, 2025:
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|
Aggregate |
|
||||
Outstanding and Vested, December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|||
Granted |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Outstanding and Vested, March 31, 2025 |
|
|
|
|
$ |
|
|
|
— |
|
|
$ |
|
|||
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 March 31, 2025, all of the Company's facilities operated by Regional or leased and subleased to third-party operators are certified by CMS and are operational. See Note 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
As of March 31, 2025, the Company is a defendant in one professional and general liability action related directly to patient care that our current or prior tenants provided to their patients.
As of March 31, 2023, the Company is a defendant in one professional and general liability action commenced on behalf of one of our former patients who received care at one of our facilities. The plaintiff in this action alleges negligence due to failure to provide adequate and competent staff resulting in injuries, pain and suffering, mental anguish and malnutrition and seeks unspecified actual and compensatory damages, and unspecified punitive damages. This action is covered by insurance, except that any punitive damages awarded would be excluded from coverage.
23
Self-Insured Claims
As of March 31, 2025, the Company does not have any lawsuits pertaining to facilities it transitioned operations to other entities which are not covered by insurance.
In 2024, two lawsuits were nonsuited by the plaintiff and both were dismissed withour prejudice. The Plaintiff has until August 2025, one year from the date of the nonsuit, to re-file each matter.
NOTE 13. SEGMENT RESULTS
The (“CODM”) is the President and Chief Executive Officer. The Company represents
The Company has
The table below presents the results of operations for our reporting segments for the periods presented.
|
Three Months Ended March 31, |
|
|
Three Months Ended March 31, |
|
||||||||||||||
|
2025 |
|
2025 |
|
2025 |
|
|
2024 |
|
2024 |
|
2024 |
|
||||||
(Amounts in 000’s) |
Real Estate Services |
|
Healthcare Services |
|
Total |
|
|
Real Estate Services |
|
Healthcare Services |
|
Total |
|
||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Patient care revenues |
$ |
— |
|
$ |
|
$ |
|
|
$ |
— |
|
$ |
|
$ |
|
||||
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Patient care expense |
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||
Facility rent expense |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss on lease termination |
|
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
||
Credit loss expense |
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||
Gain on operations transfer |
|
— |
|
|
( |
) |
|
( |
) |
|
|
— |
|
|
— |
|
|
— |
|
Total expenses |
|
|
|
|
|
7,508 |
|
|
|
|
|
|
|
|
|||||
Income (loss) from operations |
|
( |
) |
|
( |
) |
|
( |
) |
|
|
|
|
( |
) |
|
( |
) |
|
The CODM does not regularly review total assets for our reportable segments as total assets are not used to assess performance or allocate resources.
24
NOTE 14. SUBSEQUENT EVENTS
The Company has evaluated all subsequent events through the date the consolidated financial statements were issued and filed with the SEC. The following is a summary of the material subsequent events.
Southland Change of Ownership. On April 1, the State of Georgia approved the Company's application to change the ownership of the Southland facility from SL SNF, LLC to Southland Operations, LLC.
Amended and Restated Merger Agreement. On April 15, 2025, the Company and SunLink jointly announced that they have entered into a Merger Agreement. The Merger Agreement provides that, among other things and subject to the terms and conditions of the Merger Agreement, SunLink will be merged with and into Regional, with Regional surviving the Merger. The Merger Agreement amends and restates in its entirety the previously announced Original Merger Agreement.
The Merger Agreement, dated as of April 14, 2025, amends the Original Merger Agreement, among other things, to: (i) increase the number of shares of common stock,
The Merger Agreement has been approved by each company’s board of directors and completion of the transaction remains subject to the receipt of the approvals of the shareholders of both Regional and SunLink, regulatory approvals and satisfaction of customary closing conditions.
For further information and a copy of the Merger Agreement, see Form 8-K filed with the SEC on April 18, 2025.
25
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.
While the Company is a self-managed real estate investment company, the Company, when business conditions require, may undertake initiatives to take back facilities in order operate the facilities ourselves or using a third manager.
Real Estate Portfolio
As of March 31, 2025, we had investments of approximately $67.2 million in eleven health care real estate facilities and one leased facility. We currently own twelve properties, consisting of nine skilled nursing facilities and two multi-service facilities (of which one multi-service campus contains two co-located properties) Six facilities are pursuant to triple-net leases and six facilities are managed by two external managers. The Company has one leased facility that is subleased pursuant to a triple-net lease.
Skilled nursing facilities. SNFs provide services that include daily nursing, therapeutic rehabilitation, social services, activities, housekeeping, nutrition, medication management and administrative services for individuals requiring certain assistance for activities in daily living. A typical skilled nursing facility includes mostly one and two bed units, each equipped with a private or shared bathroom and community dining facilities.
Multi-Service Campuses. Multi-service campuses generally include some combination of co-located skilled nursing, independent living, assisted living and/or memory care units all housed at a single location and operated as a continuum of care. We also refer to continuing care retirement communities as multi-service campuses. These facilities are often marketed as an
26
opportunity for residents to “age in place,” and tend to attract couples where the individuals may require or benefit from differing levels of care.
Portfolio
The following table provides summary information regarding the number of facilities and related licensed beds/units as of March 31, 2025:
Location |
|
Skilled |
|
Multi |
|
Total |
Alabama(a) |
|
1 |
|
1 |
|
2 |
Georgia |
|
3 |
|
- |
|
3 |
North Carolina |
|
1 |
|
- |
|
1 |
Ohio(b) |
|
2 |
|
1 |
|
3 |
South Carolina |
|
2 |
|
- |
|
2 |
|
|
9 |
|
2 |
|
11 |
|
|
|
|
|
|
|
Location |
|
Skilled |
|
Multi |
|
Total |
Alabama(a) |
|
124 |
|
90 |
|
214 |
Georgia |
|
395 |
|
- |
|
395 |
North Carolina |
|
106 |
|
- |
|
106 |
Ohio(b) |
|
100 |
|
180 |
|
280 |
South Carolina |
|
180 |
|
- |
|
180 |
|
|
905 |
|
270 |
|
1,175 |
|
|
|
|
|
|
|
Location |
|
Skilled |
|
Multi Service |
|
Total |
Alabama(a) |
|
$9,613,199 |
|
$5,215,218 |
|
$14,828,417 |
Georgia |
|
21,101,193 |
|
- |
|
21,101,193 |
North Carolina |
|
7,235,953 |
|
- |
|
7,235,953 |
Ohio(b) |
|
4,059,240 |
|
10,714,214 |
|
14,773,454 |
South Carolina |
|
9,733,024 |
|
- |
|
9,733,024 |
|
|
$51,742,609 |
|
$15,929,432 |
|
$67,672,041 |
(a) Meadowood Retirement Village offers assisted living, memory care, and independent living and is therefore considered a multi-service campus. |
(b) Eaglewood Village offers assisted living and Eaglewood Care Center offers skilled nursing. Both properties are co-located and are therefore considered a multi-service campus. |
27
The following table provides summary information regarding the number of facilities and related licensed beds/units by operator/manager affiliation as of March 31, 2025:
Operator Affiliation |
|
Number of Facilities (1) |
|
|
|
Beds / Units |
|
|||
C.R. Management |
|
|
2 |
|
|
|
|
233 |
|
|
Aspire Regional Partners |
|
|
3 |
|
|
|
|
280 |
|
|
Subtotal |
|
|
5 |
|
|
- |
|
|
513 |
|
Manager Affiliation |
|
Number of Facilities (1) |
|
|
|
Beds / Units |
|
|||
CJM Advisors |
|
|
5 |
|
|
|
|
572 |
|
|
Cavalier Senior Living |
|
|
1 |
|
|
|
|
90 |
|
|
Subtotal |
|
|
6 |
|
|
- |
|
|
662 |
|
Total |
|
|
11 |
|
|
- |
|
|
1,175 |
|
For a more discussion of the above information, see Note 7 – Leases to the consolidated financial statements included in Part I, Item 1 herein. Additionally, see "Portfolio of Healthcare Investments" included in Part I, Item 1 "Business" in the Annual Report.
Portfolio Occupancy Rates
The following table provides summary information regarding our portfolio facility-level occupancy rates for the periods shown:
|
For the Twelve Months Ended |
||||||
Operating Metric |
June 30, 2024 |
|
September 30, 2024 |
|
December 31, 2024 |
|
March 31, 2025 |
Occupancy (%) |
67.5% |
|
67.2% |
|
66.8% |
|
66.5% |
Lease Expiration
The following table provides summary information regarding our lease expirations for the years shown as of December 31,:
|
|
Licensed Beds |
|
Annual Lease Revenue |
|
||||||||
|
Number of Facilities |
Count |
|
Percent |
|
Amount ($) |
|
Percent (%) |
|
||||
2028 |
5 |
379 |
|
|
61.9 |
% |
|
2,761 |
|
|
57.1 |
% |
|
2030 |
2 |
233 |
|
|
38.1 |
% |
|
2,077 |
|
|
42.9 |
% |
|
Thereafter |
0 |
0 |
|
|
0.0 |
% |
|
- |
|
|
0.0 |
% |
|
Total |
7 |
|
612 |
|
|
100.0 |
% |
|
4,838 |
|
|
100.0 |
% |
28
Results of Operations
The following table sets forth, for the periods indicated, an unaudited statement of operations items and the amounts and percentages of change of these items. The results of operations for any particular period are not necessarily indicative of results for any future period. The following data should be read in conjunction with our consolidated financial statements and the notes thereto, which are included herein.
|
|
Three Months Ended March 31, |
|
|||||||||
(Amounts in 000’s) |
|
2025 |
|
|
2024 |
|
|
Percent |
|
|||
Revenues: |
|
|
|
|
|
|
|
|
|
|||
Patient care revenues |
|
$ |
5,642 |
|
|
$ |
2,309 |
|
|
|
144.3 |
% |
Rental revenues |
|
|
1,548 |
|
|
|
1,818 |
|
|
|
(14.9 |
)% |
Total revenues |
|
|
7,190 |
|
|
|
4,127 |
|
|
|
74.2 |
% |
Expenses: |
|
|
|
|
|
|
|
|
|
|||
Patient care expense |
|
|
4,401 |
|
|
|
2,101 |
|
|
|
109.5 |
% |
Facility rent expense |
|
|
207 |
|
|
|
149 |
|
|
|
38.9 |
% |
Depreciation and amortization |
|
|
402 |
|
|
|
511 |
|
|
|
(21.3 |
)% |
General and administrative expense |
|
|
2,231 |
|
|
|
1,632 |
|
|
|
36.7 |
% |
Loss on lease termination |
|
|
303 |
|
|
|
— |
|
|
N/M |
|
|
Credit loss expense |
|
|
70 |
|
|
|
28 |
|
|
|
150.0 |
% |
Gain on operations transfer |
|
|
(106 |
) |
|
|
— |
|
|
N/M |
|
|
Total expenses |
|
|
7,508 |
|
|
|
4,421 |
|
|
|
69.8 |
% |
Loss from operations |
|
|
(318 |
) |
|
|
(294 |
) |
|
|
8.2 |
% |
Other expense: |
|
|
|
|
|
|
|
|
|
|||
Interest expense, net |
|
|
653 |
|
|
|
674 |
|
|
|
(3.1 |
)% |
Other expense, net |
|
|
291 |
|
|
|
(6 |
) |
|
N/M |
|
|
Total other expense, net |
|
|
944 |
|
|
|
668 |
|
|
|
41.3 |
% |
Net loss |
|
$ |
(1,262 |
) |
|
$ |
(962 |
) |
|
|
31.2 |
% |
Three Months Ended March 31, 2025 and 2024
Patient care revenues—Patient care revenues for the Healthcare Services segment, as a result of the Company operating the Meadowood, Glenvue, Mountain Trace, Sumter, and Georgetown facilities, were $5.6 million for the three months ended March 31, 2025, compared to $2.3 million for the same period in 2024. The 144.3% increase is due to the transition of the Mountain Trace, Georgetown, and Sumter facilities to the Healthcare Services segment.
Rental revenues—Rental revenue for our Real Estate Services segment decreased by approximately $0.3 million to $1.5 million for the three months ended March 31, 2025, compared with $1.8 million for the same period in 2024. The 14.9% decrease is primarily due to transition of the Mountain Trace facility to our Healthcare Services segment.
Patient care expense—Patient care expense was $4.4 million for the three months ended March 31, 2025 compared with $2.1 million for the same period in 2024. The current period expense increase of $2.3 million was primarily due to the transition of the Mountain Trace, Georgetown, and Sumter facilities to the Healthcare Services segment.
Facility rent expense—Facility rent was $0.2 million for the three months ended March 31, 2025, which was the same amount for the three months ended March 31, 2024.
Depreciation and amortization—Depreciation and amortization was $0.4 million for the three months ended March 31, 2025, compared to $0.5 million for the same period in 2024. The decrease is primarily due to the reduction in depreciation from fully depreciated equipment and computer related assets in the current year and suspending depreciation expense on our assets held for sale.
General and administrative expenses—General and administrative expenses were $2.2 million for the three months ended March 31, 2025 compared with $1.6 million for the same period in 2024. The difference is due to the transition of the Mountain Trace, Georgetown, and Sumter facilities to the Healthcare Services segment.
29
|
|
Three Months Ended March 31, |
|
|||||||||
(Amounts in 000’s) |
|
2025 |
|
|
2024 |
|
|
Percent |
|
|||
General and administrative expenses: |
|
|
|
|
|
|
|
|
|
|||
Real Estate Services |
|
$ |
1,021 |
|
|
$ |
1,266 |
|
|
|
(19.4 |
)% |
Healthcare Services |
|
|
1,210 |
|
|
|
366 |
|
|
|
230.6 |
% |
Total |
|
$ |
2,231 |
|
|
$ |
1,632 |
|
|
|
36.7 |
% |
Loss on Lease Termination- Expenses related to the termination of the two leases to Oak Hollow Healthcare Management were $0.3 million for the three months ended March 31, 2025. The losses consist of the writeoff of straight-line rent.
Credit loss expenses—Credit loss expense primarily represents reserves taken against patient Accounts Receivable for the three months ended March 31, 2025 and for the same period in 2024.
Gain on exchange of assets—The gain on exchange of assets were $0.1 million for the three months ended March 31, 2025. The Company took patient Accounts Receivable in leu of the outstanding Rent Receivable owed by Oak Hollow Healthcare Management as part of the lease termination.
NON-GAAP Financial Measures
The following table summarizes the Company's non-GAAP financial measure of results based on EBITDA for the quarters ending March 31, 2025 and 2024. EBITDA attributable to the Company's financial measure represents net income (loss) before interest expense (including amortization of deferred financing costs), provision for income tax, 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, gains or losses from dispositions of real estate, real estate impairment charges, provision for loan losses, non-routine transaction costs, loss on extinguishment of debt, unrealized loss on other real estate related investments and provision for credit losses and lease restructuring, as applicable.
REGIONAL HEALTH PROPERTIES, INC. |
|
|||||||
RECONCILIATION OF NET LOSS TO NON-GAAP FINANCIAL MEASURES |
|
|||||||
(in thousands) |
|
|||||||
(Unaudited) |
|
|||||||
|
|
|
|
|
|
|
||
|
|
Three Months Ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
|
|
|
|
|
||
Net loss |
|
$ |
(1,262 |
) |
|
$ |
(962 |
) |
Depreciation and amortization |
|
|
402 |
|
|
|
511 |
|
Interest expense, net |
|
|
653 |
|
|
|
674 |
|
Amortization of employee stock compensation |
|
|
22 |
|
|
|
43 |
|
EBITDA |
|
|
(185 |
) |
|
|
266 |
|
Credit loss expense |
|
|
70 |
|
|
|
28 |
|
Merger and other one-time costs |
|
|
291 |
|
|
|
54 |
|
Loss on lease termination |
|
|
303 |
|
|
|
— |
|
Gain on operations transfer |
|
|
(106 |
) |
|
|
— |
|
Gain (loss) from write-off of liabilities and other credit balances from discontinued operations |
|
|
— |
|
|
|
12 |
|
Project costs |
|
|
— |
|
|
|
40 |
|
Tail insurance on legacy facilities |
|
|
55 |
|
|
|
127 |
|
One-time income adjustment - quality incentive program (1) |
|
|
— |
|
|
|
49 |
|
Adjusted EBITDA from operations |
|
$ |
428 |
|
|
$ |
577 |
|
(1) Amounts represent adjustments needed for historical and estimated future amounts along with reconciling for timing differences. |
|
|||||||
30
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 but not limited to: cash on hand, collection of patient and rent accounts receivable, debt refinancing, and debt borrowings, asset sales, and/or through the sale of additional securities or otherwise during the twelve months from the date of this filing. At March 31, 2025, the Company had $0.5 million in unrestricted cash and 3.6 million of net accounts receivable, mainly consisting of patient accounts receivable and rent receivables.
During the three months ended March 31, 2025, the Company's net cash provided by operating activities was $0.2 million mainly due to the timing of accounts payable and accrued expense payments. 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 and notes receivable.
As of March 31, 2025, Regional recorded an estimated allowance of $0.1 million against a gross accounts receivable of $3.8 million.
As of March 31, 2025, the Company had $49.2 million in indebtedness, net of $1.0 million deferred financing, and unamortized discounts. The Company anticipates net principal repayments of approximately $6.8 million during the next twelve-month period, approximately $2.6 million of routine debt service amortization, $0.2 million payment of bond debt, and $4.0 million of Southland's maturing debt.
Debt Covenant Compliance
As of March 31, 2025, the Company was in compliance with the various financial and administrative covenants under all the Company's outstanding credit related instruments.
Evaluation of the Company's Ability to Continue as a Going Concern
Under the accounting guidance related to the presentation of financial statements, the Company is required to evaluate, on a quarterly basis, whether or not the Company's current financial condition, including its sources of liquidity at the date that the consolidated financial statements are issued, will enable the Company to meet its obligations as they come due arising within one year of the date of the issuance of the Company's consolidated financial statements and to make a determination as to whether or not it is probable, under the application of this accounting guidance, that the Company will be able to continue as a going concern. The Company's consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In applying applicable accounting guidance, management considered the Company's current financial condition and liquidity sources, including current funds available, forecasted future cash flows, the Company's obligations due over the next twelve months, and the Company's recurring business operating expenses.
The Company concludes that it is probable that the Company will be able to meet its obligations arising within one year of the date of issuance of these consolidated financial statements within the parameters set forth in the accounting guidance.
For additional information regarding the Company's liquidity, see Note 2 – Liquidity and Note 9 – Notes Payable and other debt, to the consolidated financial statements included in Part I, Item 1 herein.
Cash Flows
The following table presents selected data from our consolidated statements of cash flows for the periods presented:
31
|
|
Three Months Ended March 31, |
|
|||||
(Amounts in 000’s) |
|
2025 |
|
|
2024 |
|
||
Net cash provided by operating activities |
|
$ |
236 |
|
|
$ |
597 |
|
Net cash used in investing activities |
|
|
(65 |
) |
|
|
(55 |
) |
Net cash used in financing activities |
|
|
(587 |
) |
|
|
(751 |
) |
Net change in cash and restricted cash |
|
|
(416 |
) |
|
|
(209 |
) |
Cash and restricted cash at beginning of period |
|
|
3,472 |
|
|
|
4,184 |
|
Cash and restricted cash, ending |
|
$ |
3,056 |
|
|
$ |
3,975 |
|
Three Months Ended March 31, 2025
Net cash provided by operating activities—was approximately $0.2 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 $65.0 thousand. This capital expenditure was primarily for leasehold improvements.
Net cash used in financing activities—was approximately $0.6 million. The cash was used to make routine payments totaling $0.4 million for our Senior debt obligations, $0.2 million for other debt.
Three Months Ended March 31, 2024
Net cash provided by operating activities—was approximately $0.6 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 $55.0 thousand. This capital expenditure was primarily for leasehold improvements.
Net cash used in financing activities—was approximately $0.8 million. The cash was used to make routine payments totaling $0.4 million for our Senior debt obligations, $0.4 million for other debt.
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 March 31, 2025. For further information see Note 6 – Leases, to the consolidated financial statements included in Part I, Item 1 herein and also and Note 7 – 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.
32
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 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, 2024 filed with the SEC on March 31, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
33
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
NYSE American Listing
On February 4, 2025, NYSE American LLC (“NYSE American” or the “Exchange”) announced that it had determined to suspend trading of the common stock, no par value per share (the “Common Stock”), and Series A Redeemable Preferred Shares, no par value per share (the “Series A Preferred Stock” and, together with the Common Stock, the “Securities”), of Regional Health Properties, Inc. on NYSE American. The Company has a right to a review of the decision of the Listings Qualifications Panel (the “Panel”) to delist the Company’s Securities by the Committee for Review of the Board of Directors of the Exchange. The filing by the Exchange of an application with the SEC to delist the Company’s Securities is pending completion of all applicable procedures, including any appeal by the Company of the Panel’s decision. The Common Stock and the Series A Preferred Stock began trading on the OTCQB on March 24, 2025 under the symbols “RHEP” and “RHEPA,” respectively.
Trading Arrangement
During the first quarter of 2025, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Exchange Act)
Item 6. Exhibits.
The agreements included as exhibits to this Quarterly Report are included to provide information regarding the terms of these agreements and are not intended to provide any other factual or disclosure information about the Company, its business or the other parties to these agreements. These agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time, and should not be relied upon by investors.
34
EXHIBIT INDEX
Exhibit No. |
Description |
Method of Filing |
3.1 |
Incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K filed on July 6, 2023 |
|
|
|
|
3.2 |
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 |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
Filed herewith |
101.SCH |
Inline XBRL Taxonomy Extension Schema |
Filed herewith |
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
* Identifies a management contract or compensatory plan or arrangement.
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
REGIONAL HEALTH PROPERTIES, INC. |
|
|
|
|
(Registrant) |
|
|
|
|
|
Date: |
|
May 15, 2025 |
|
/s/ Brent Morrison |
|
|
|
|
Brent Morrison |
|
|
|
|
Chairman, Chief Executive Officer and Director (Principal Executive Officer) |
|
|
|
|
|
Date: |
|
May 15, 2025 |
|
/s/ Paul O'Sullivan |
|
|
|
|
Paul O'Sullivan |
|
|
|
|
Senior Vice President (Principal Financial Officer) |
36