REGIONAL HEALTH PROPERTIES INC

Previous wording

While the Company is a self-managed real estate investment company, the Company, when business conditions require, may undertake portfolio stabilization measures, such as operating a previously leased facility. For more information see " Recent Developments" below.

Current wording

While the Company is a self-managed real estate investment company, the Company, when business conditions require, may undertake portfolio stabilization measures, such as operating a previously leased facility.

Previous wording

As of June 30, 2024, we had investments of approximately $67.5 million in eleven health care real estate properties and one leased property. We currently own eleven properties, consisting of nine skilled nursing facilities and two multi-service facilities. Nine facilities are pursuant to triple-net leases, one is managed by an external manager, and one is managed internally by the Company. The Company has one leased facility that is subleased pursuant to a triple-net lease.

Current wording

As of September 30, 2024, we had investments of approximately $66.5 million in eleven health care real estate properties and one leased property. We currently own eleven properties, consisting of nine skilled nursing facilities (“SNFs”) and two multi-service facilities. Nine facilities are pursuant to triple-net leases, one is managed by an external manager, and one is managed internally by the Company. The Company has one leased facility that is subleased pursuant to a triple-net lease.

Previous wording

For a more discussion of the above information, see Note 7 -Leasesto 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.

Current wording

For a more detailed discussion of the above information, see Note 6 -Leasesto 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.

Previous wording

Patient care revenues—Patient care revenues for the Healthcare Services segment, as a result of the Company operating the Meadowood and the Glenvue Facilities, were $4.8 million for the six months ended June 30, 2024, compared with $4.4 million for the same period in 2023. The 8.8% increase is primarily due to the change in the Medicaid reimbursement rate paid for the Glenvue facility.

Current wording

Patient care revenues—Patient care revenues for the Healthcare Services segment, as a result of the Company operating the Meadowood and Glenvue Facilities, were $2.6 million for the three months ended September 30, 2024, compared to $2.1 million for the same period in 2023. The 21.0% increase is primarily due to an increase in the Medicaid reimbursement rate paid for the Glenvue facility and an increase in occupancy at the Glenvue facility.

Previous wording

Rental revenues—Rental revenue for our Real Estate Services segment increased by approximately $0.1 million to $1.8 million for the three months ended June 30, 2024, compared with $1.7 million for the same period in 2023. The 4.5% increase is primarily due to the extension of the Greenfield lease and the increase in rent from the Springfield ALF facility.

Current wording

Rental revenues—Rental revenue for our Real Estate Services segment decreased by approximately $0.1 million to $1.6 million for the three months ended September 30, 2024, compared with $1.7 million for the same period in 2023.

Previous wording

Patient care expense—Patient care expense was $2.2 million for the three months ended June 30, 2024 compared with $2.0 million for the same period in 2023. The current period expense increase of $0.2 million was primarily due to increased staffing costs at the Meadowood and Glenvue facilities.

Current wording

Patient care expense—Patient care expense remained consistent totaling $2.2 million for the three months ended September 30, 2024 and 2023.

Previous wording

Facility rent expense—Facility rent was $0.1 million for the three months ended June 30, 2024, compared with $0.1 million for the same period in 2023.

Current wording

Facility rent expense—Facility rent remained consisted totaling $0.1 million for the three months ended September 30, 2024 and 2023.

Previous wording

General and administrative expenses—General and administrative expenses were $1.2 million for the three months ended June 30, 2024, compared with $1.4 million for the same period in 2023. The difference is primarily from reduced corporate salaries resulting from fewer corporate employees and lower legal fees.

Current wording

General and administrative expenses—General and administrative expenses were $1.2 million for the three months ended September 30, 2024 compared with $1.3 million for the same period in 2023.

Previous wording

Credit loss expense—Credit loss expense primarily represents reserves taken against patient Accounts Receivable at the Glenvue facility for the three months ended June 30, 2024 and for the same period in 2023.

Current wording

Credit loss expense—Credit loss expense was $0.5 million for the three months ended September 30, 2024 compared to $0.3 million for the same period in 2023. Credit loss expense represents reserves taken against patient accounts receivable at the

Previous wording

Patient care revenues—Patient care revenues for the Healthcare Services segment, as a result of the Company operating the Meadowood and the Glenvue Facilities, were $2.5 million for the three months ended June 30, 2024, compared with $2.5 million for the same period in 2023.

Current wording

Patient care revenues—Patient care revenues for the Healthcare Services segment, as a result of the Company operating the Meadowood and Glenvue Facilities, totaled $7.4 million for the nine months ended September 30, 2024, compared to $6.6 million for the same period in 2023. The 12.8% increase is primarily due to an increase in the Medicaid reimbursement rate paid for the Glenvue facility and an increase in occupancy at the Glenvue facility.

Previous wording

Rental revenues—Rental revenue for our Real Estate Services segment increased by approximately $0.2 million to $3.6 million for the six months ended June 30, 2024, compared with $3.4 million for the same period in 2023. The 5.5% increase is primarily due to the extension of the Greenfield lease and the increase in rent from the Southland facility.

Current wording

Rental revenues—Rental revenue for our Real Estate Services segment increased by approximately $.1 million to $5.3 million for the nine months ended September 30, 2024, compared with $5.2 million for the same period in 2023. The 1.7% increase is primarily due to the extension of the Greenfield lease and the increase in rent from the Southland facility.

Previous wording

Depreciation and amortization—Depreciation and amortization was $0.5 million for the three months ended June 30, 2024, compared with $0.7 million for the same period in 2023.

Current wording

Depreciation and amortization—Depreciation and amortization was $1.5 million for the nine months ended September 30, 2024, compared to $1.7 million for the same period in 2023.

Previous wording

General and administrative expenses—General and administrative expenses were $2.9 million for the six months ended June 30, 2024, compared with $3.0 million for the same period in 2023. The difference is primarily from the 2023 allocation of costs from general and administrative expense to cost of management fees and a reduction of corporate overhead.

Current wording

General and administrative expenses—General and administrative expenses were $4.1 million for the nine months ended September 30, 2024, compared with $4.3 million for the same period in 2023. The decrease is primarily due to a reduction in corporate overhead.

Previous wording

Credit loss expense—Credit loss expense primarily represents reserves taken against patient Accounts Receivable at the Glenvue facility for the six months ended June 30, 2024 and for the same period in 2023.

Current wording

Credit loss expense—Credit loss expense was $0.6 million for nine months ended September 30, 2024, compared to $0.3 million for the same period in 2023. Credit loss expense represents reserves taken against patient accounts receivable at the Glenvue facility, reserves taken against rental accounts receivable at the Southland facility and a write off of approximately $0.4 million of notes receivable at Lumber City.

Previous wording

Other expense, net—Other expense, net decreased by approximately $0.5 million to $0.2 million for the six months ended June 30, 2024, compared with $0.7 million for the same period in 2023 . The prior year expenses were related to professional and legal services incurred for the preferred exchange and legacy facility related expenses.

Current wording

Other expense (income), net—Other expense, net was 0.2 million for nine months ended September 30, 2024, compared to $0.6 million for the same period in 2023. The prior year expenses were related to professional and legal services incurred for the preferred exchange and legacy facility related expenses.

Previous wording

The following table summarizes the Company's non GAAP financial measure of results based on EBITDA for the the three and six months ending June 30, 2024. EBITDA attributable to the Company's financial measure represents net income (loss) before interest expense (including amortization of deferred financing costs), amortization of stock-based compensation, and depreciation and amortization. Adjusted EBITDA represents EBITDA further adjusted to eliminate the impact of certain items that the Company does not consider indicative of core operating performance, such as recovery of previously reversed rent, lease termination revenue, property operating expenses, gains or losses from dispositions of real estate, real estate impairment 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.

Current wording

The following table summarizes the Company's non-GAAP financial measure of results based on EBITDA for the three and six months ending September 30, 2024. EBITDA attributable to the Company's financial measure represents net income (loss) before interest expense (including amortization of deferred financing costs), amortization of stock-based compensation, and depreciation and amortization. Adjusted EBITDA represents EBITDA further adjusted to eliminate the impact of certain items that the Company does not consider indicative of core operating performance, such as recovery of previously reversed rent, lease termination revenue, property operating expenses, gains or losses from dispositions of real estate, real estate impairment 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.

Previous wording

The Company intends to pursue measures to grow its operations, sell non-core assets, 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) strategically dispose of facilities for operational improvements or to take advantage of high sales prices; (iv) modifying the terms of existing leases; (v) replacing certain tenants who default on their lease payment terms; and (vi) reducing other and general and administrative expenses.

Current wording

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.

Previous wording

Management anticipates access to several sources of liquidity, including cash on hand, cash flows from operations, cash flows from investing and debt refinancing during the twelve months following the date of this filing. The Company has committed to a plan to sell the Mt. Trace Property to increase cash available for operations and future investments. At June 30, 2024, the Company had $0.7 million in unrestricted cash and 1.8 million of net accounts receivable, mainly consisting of patient accounts receivable and rent receivables.

Current wording

Management anticipates access to several sources of liquidity, including cash on hand, cash flows from operations, and debt refinancing during the twelve months following the date of this filing. The Company has committed to a plan to sell the Mt. Trace Property to increase cash available for operations and future investments. At September 30, 2024, the Company had $0.5 million in unrestricted cash and $2.0 million of net accounts receivable, mainly consisting of patient accounts receivables and rent receivables.

Previous wording

During the six months ended June 30, 2024, the Company's net cash provided by operating activities was $1.1 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.

Current wording

During the nine months ended September 30, 2024, the Company's net cash provided by operating activities was $1.0 million primarily due timing of payments of accounts payable. Management anticipates collecting a portion of the past due rent after the filing date and is currently negotiating various methods to collect the remaining unpaid rent.

Previous wording

As of June 30, 2024, Regional recorded an estimated allowance of $2.1 million against a gross accounts receivable of $3.9 million.

Current wording

As of September 30, 2024, the Company recorded an estimated allowance of $2.2 million against a gross accounts receivable of $4.2 million.

Previous wording

As of June 30, 2024, the Company had $50.2 million in indebtedness, net of $1.0 million deferred financing, and unamortized discounts. The Company anticipates net principal repayments of approximately $2.4 million during the next twelve-month period, approximately $1.6 million of routine debt service amortization, $0.6 million of insurance financing amortization, and a $0.2 million payment of bond debt.

Current wording

As of September 30, 2024, the Company had $49.7 million in indebtedness, net of $1.0 million deferred financing costs and unamortized discounts. The Company anticipates net principal repayments of approximately $2.2 million during the next twelve-month period, approximately $1.6 million of routine debt service amortization, $0.4 million of insurance financing amortization, and $0.2 million payment of bond debt.

Previous wording

Costs associated with these efforts have been expensed as incurred in “Other expense, net” and there were no expenses incurred for the six months ended June 30, 2024 and there were $0.5 million for the six months ended June 30, 2023.

Current wording

Costs associated with these efforts have been expensed as incurred in “Other expense, net” and there were no expenses incurred for the nine months ended September 30, 2024 and there were $0.5 million for the nine months ended nine months ended September 30, 2023.

Previous wording

As of June 30, 2024, the Company was in compliance with the various financial and administrative covenants under the Company's outstanding credit related instruments with the exception of a noticed default under one USDA loan. The Company is working with the USDA lender to get back into compliance with the loan documents.

Current wording

As of September 30, 2024, the Company was in compliance with the various financial and administrative covenants under the Company's outstanding credit related instruments with the exception of a notice of default under two USDA loans secured by the Southland and Mt. Trace Property and an SBA loan secured by Southland. On October 25, 2024, the Company received a notice of acceleration and demand for payment from the lenders of Southland stating that the covenants of the deed of trust have been violated for failure to pay principal and interest. The lender accelerated the maturity dates and is requesting for the loans to be paid in full plus unpaid interest and late fees immediately. We are working with the lender to reach a forbearance agreement and think it is likely we will reach an agreement. On November 8, 2024, Company obtained a line of credit and intends to pay all unpaid principal and interest payments to get back into compliance with the loan documents. The Company is working with the lender of the Mt. Trace Property to get back into compliance with the loan documents and received a waiver in November 2024.

Previous wording

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.

Current wording

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.

Previous wording

Net cash provided by operating activities—was approximately $1.1 million. The positive cash flow from operating activities was mainly due to the timing of working capital accounts.

Current wording

Net cash provided by operating activities—was approximately $1.0 million. The positive cash flow from operating activities was mainly due to the timing of working capital accounts.

Previous wording

Net cash used in financing activities—was approximately $1.3 million. The cash was used to make routine payments totaling $0.7 million for our senior debt obligations, $0.6 million for other debt.

Current wording

Net cash used in financing activities—was approximately $1.2 million. The cash was used to make routine payments totaling 1.0 million for our senior debt obligations, $0.2 million for other debt.

Previous wording

Net cash provided by operating activities—was approximately $3.0 million. The positive cash flow from operating activities were largely due to collection of the ERTC, collection of patient care receivables, and rent receivables.

Current wording

Net cash provided by operating activities—was approximately $3.5 million. The positive cash flow from operating activities were largely due to collection of the ERTC, collection of patient care receivables, and rent receivables.

Previous wording

Net cash used in financing activities—was approximately $1.1 million. The cash was used to make routine payments totaling $1.1 million for our senior debt obligations.

Current wording

Net cash used in financing activities—was approximately $1.8 million. The cash was used to make routine payments totaling $1.8 million for our debt obligations.

Previous wording

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 credit losses, 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.

Current wording

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.