REGIONAL HEALTH PROPERTIES, INC

Previous wording

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.

Current wording

Regional Health Properties, Inc., a Georgia corporation, operates businesses in Real Estate, Healthcare Services and Pharmacy Services. Our Real Estate segment consists of real estate investments in skilled nursing and senior housing facilities. We fund our real estate investments primarily through: (1) operational cash flow, (2) mortgages, and (3) sale of equity securities. Our Healthcare Services segment is comprised of entities set up to operate our facilities. Our Pharmacy Services segment consists of four operational areas, retail pharmacy products and services, institutional pharmacy services, which consists of specialty and non-specialty pharmaceutical and products to institutional clients or to patients in institutional settings, non-institutional pharmacy services consisting of the provision specialty and non-specialty pharmacy and biological products to clients or patients in non-institutional settings including private residential homes and durable medical equipment, consisting primarily of the sale and rental products for institutional clients or to patients and institutional settings and patient-administered home care. While the Company is a self-managed real estate investment company, the Company, when business conditions require, may undertake initiatives to take back facilities in order operate the facilities ourselves or using a third manager.

Previous wording

Multi-Service Campuses. Multi-service campuses generally include some combination of co-located skilled nursing, independent living, assisted living and/or memory care units all housed at a single location and operated as a continuum of care. We also refer to continuing care retirement communities as multi-service campuses. These facilities are often marketed as an opportunity for residents to “age in place,” and tend to attract couples where the individuals may require or benefit from differing levels of care.

Current wording

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

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 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.

Previous wording

Patient care revenues—Patient care revenues for the Healthcare Services segment, as a result of the Company operating the Georgetown, Mountain Trace, Southland, and Sumter facilities, were $14.4 million for the six months ended June 30, 2025, compared with $4.8 million for the same period in 2024. The 198.3% increase is primarily due to the transition of the additional facilities to the Healthcare Services segment.

Current wording

Patient care revenues—Patient care revenues for the Healthcare Services segment, as a result of the Company operating the Georgetown, Glenvue, Meadowood, Mountain Trace, Southland, and Sumter facilities, were $9.8 million for the three months ended September 30, 2025, compared to $2.6 million for the same period in 2024. The 280.3% increase is primarily due to the Company taking over the operations of four previously leased facilities since October 1, 2024.

Previous wording

Rental revenues—Rental revenue for our Real Estate Services segment decrease by approximately $0.5 million to $1.3 million for the three months ended June 30, 2025, compared with $1.8 million for the same period in 2024. The 28.7% decrease is due to the transition of the Georgetown, Mountain Trace, Southland, and Sumter facilities to the Healthcare Services segment.

Current wording

Rental revenues—Rental revenue for our Real Estate Services segment decreased by approximately $0.3 million to $1.3 million for the three months ended September 30, 2025, compared with $1.6 million for the same period in 2024. The decrease in rental revenue this year results from the reduction of the four leased facilities that the Company now operates.

Previous wording

Patient care expense—Patient care expense was $7.2 million for the three months ended June 30, 2025 compared with $2.2 million for the same period in 2024. The current period expense increase of $5.0 million is primarily due to the transition of the Georgetown, Mountain Trace, Southland, and Sumter facilities to the Healthcare Services segment.

Current wording

Patient care expense—Patient care expense increased to $8.6 million for the three months ended September 30, 2025 compared to $2.2 million for the three months ended September 30, 2024. The increase results from the increase in the number of facilities operated by the Company this year.

Previous wording

Facility rent expense—Facility rent was $0.1 million for the three months ended June 30, 2025, compared with $0.1 million for the same period in 2024.

Current wording

Facility rent expense—Facility rent remained consisted totaling $0.2 million for the three months ended September 30, 2025 and 2024.

Previous wording

Credit loss expense—Credit loss expense primarily represents reserves taken against patient Accounts Receivable as well as rent receivable at the Coosa Valley facility for the three months ended June 30, 2025 and for the same period in 2024.

Current wording

Credit loss expense—Credit loss expense was $0.2 million for the three months ended September 30, 2025 compared to $0.5 million for the same period in 2024. Credit loss expense represents reserves taken against patient accounts receivable at the Glenvue facility, reserves taken against rental accounts receivable at the Southland facility and a write off of approximately $0.4 million of notes receivable at Lumber City.

Previous wording

Patient care revenues—Patient care revenues for the Healthcare Services segment, as a result of the Company operating the Georgetown, Mountain Trace, Southland, and Sumter, facilities, were $8.8 million for the three months ended June 30, 2025, compared with $2.5 million for the same period in 2024. The 247.5% increase is primarily due to the transition of the Georgetown, Mountain Trace, Southland and Sumter facilities to the Healthcare Services segment.

Current wording

Patient care revenues—Patient care revenues for the Healthcare Services segment, as a result of the Company operating the Georgetown, Glenvue, Meadowood, Mountain Trace, Southland, and Sumter facilities, totaled $24.2 million for the nine months ended September 30, 2025, compared to $7.4 million for the same period in 2024. The increase is due to the increased number of facilities operated in the current year nine months.

Previous wording

Rental revenues—Rental revenue for our Real Estate Services segment decreased by approximately $0.8 million to $2.8 million for the six months ended June 30, 2025, compared with $3.6 million for the same period in 2024. The 21.7% decrease is primarily due to transition of the Georgetown, Mountain Trace, Southland and Sumter facilities to our Healthcare Services segment.

Current wording

Rental revenues—Rental revenue for our Real Estate Services segment decreased by approximately $1.2 million to $4.1 million for the nine months ended September 30, 2025, compared with $5.3 million for the same period in 2024. The (21.4)% decrease is primarily due to the reduction in rental facilities resulting from the transition to operating facilities this year.

Previous wording

Facility rent expense—Facility rent slightly increased year over year with $0.4 million for the six months ended June 30, 2025, compared with $0.3 million for the same period in 2024.

Current wording

Facility rent expense—Facility rent expense increased to $0.6 million for the nine months ended September 30, 2025 compared to $0.4 million for the nine months ended September 30, 2024.

Previous wording

The following table summarizes the Company's non GAAP financial measure of results based on EBITDA for the three and six months ended June 30, 2025 and 2024. EBITDA attributable to the Company's financial measure represents net income (loss) before interest expense (including amortization of deferred financing costs), amortization of stock-based compensation, and depreciation and amortization. Adjusted EBITDA represents EBITDA further adjusted to eliminate the impact of certain items that the Company does not consider indicative of core operating performance, such as recovery of previously reversed rent, lease termination revenue, property operating expenses, gains or losses from dispositions of real estate, real estate impairment charges, provision for loan losses, non-routine transaction costs, loss on extinguishment of debt, unrealized loss on other real estate related investments and provision for credit losses and lease restructuring, as applicable.

Current wording

The following table summarizes the Company's non-GAAP financial measure of results based on EBITDA for the three and nine months ended September 30, 2025 and 2024. EBITDA attributable to the Company's financial measure represents net income (loss) before interest expense (including amortization of deferred financing costs), amortization of stock-based compensation, and depreciation and amortization. Adjusted EBITDA represents EBITDA further adjusted to eliminate the impact of certain items that the Company does not consider indicative of core operating performance, such as recovery of previously reversed rent, lease termination revenue, property operating expenses, gains or losses from dispositions of real estate, real estate impairment charges, provision for loan losses, non-routine transaction costs, loss on extinguishment of debt, unrealized loss on other real estate related investments and provision for credit losses and lease restructuring, as applicable.

Previous wording

Overview. The Company intends to pursue measures to grow its operations, streamline its cost infrastructure and otherwise increase liquidity, including: (i) refinancing or repaying debt to reduce interest costs and mandatory principal repayments, with such repayment to be funded through potentially expanding borrowing arrangements with certain lenders; (ii) increasing future lease revenue through acquisitions and investments in existing properties; (iii) modifying the terms of existing leases; (iv) replacing certain tenants who default on their lease payment terms;(v) reducing other and general and administrative expenses and (vi) executing the proposed merger with SunLink Health Systems, Inc. (as noted below).

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;(v) reducing other and general and administrative expenses and (vi) integrating the SunLink businesses to reduce duplicative expenses.

Previous wording

Separately, the Company experienced changes in its listing status. Until February 5, 2025, Regional’s common stock and Series A Preferred Stock were listed on the NYSE American under the ticker symbols “RHE” and “RHE-PA,” respectively. Trading was suspended on that date due to noncompliance with listing standards. On June 11, 2025, the NYSE American formally delisted both securities. They now trade on the OTC Markets under the symbols “RHEP” (common stock) and “RHEPA” (Series A Preferred Stock).

Current wording

Separately, the Company experienced changes in its listing status. Until February 5, 2025, Regional’s common stock and Series A Preferred Stock were listed on the NYSE American under the ticker symbols “RHE” and “RHE-PA,” respectively. Trading was suspended on that date due to noncompliance with listing standards. On June 11, 2025, the NYSE American formally delisted both securities. They now trade on the OTC Markets under the symbols “RHEP” (common stock) and “RHEPA”

Previous wording

During the six months ended June 30, 2025, the Company's net cash provided by operating activities was $0.8 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, 2025, the Company's net cash used by operating activities was $1.0 million primarily due to fluctuations in working capital. Management anticipates collecting a portion of the past due rent after the filing date and is currently negotiating various methods to collect the remaining unpaid rent.

Previous wording

As of June 30, 2025, the Company had $48.9 million in indebtedness, net of $1.0 million deferred financing, and unamortized discounts. The Company anticipates net principal repayments of approximately $3.3 million during the next twelve-month period, approximately $2.7 million of routine debt service amortization, $0.4 million of insurance financing amortization, and a $0.2 million payment of bond debt.

Current wording

As of September 30, 2025, the Company had $48.6 million in indebtedness, net of $0.9 million deferred financing costs and unamortized discounts. The Company anticipates net principal repayments of approximately $3.0 million during the next twelve-month period, approximately $2.2 million of routine debt service amortization, $0.6 million of insurance financing amortization, and $0.2 million payment of bond debt.

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 certain assets held for sale (See Note 5 -Assets Held for Saleto the consolidated financial statements included in Part I, Item 1 herein) to increase cash available for operations and future investments. At June 30, 2025, the Company had $0.4 million in unrestricted cash and 4.4 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, cash flows from investing and debt refinancing during the twelve months following the date of this filing.

Previous wording

As of June 30, 2025, the Company was in compliance with the various financial and administrative covenants under all the Company's outstanding credit related instruments.

Current wording

As of September 30, 2025, the Company was in compliance with the various financial and administrative covenants under the Company's outstanding credit related instruments.

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 used in operating activities—was approximately $1.0 million. The negative cash flow from operating activities was mainly due to the timing of working capital accounts.

Previous wording

Net cash used in financing activities—was approximately $1.3 million. The cash was used to make routine payments totaling

Current wording

Net cash used in financing activities—was approximately $3.8 million. Cash of $2.7 million was used to repurchase Series B Preferred shares and make routine payments totaling 1.3 million for our senior debt obligations.

Previous wording

Net cash provided by operating activities—was approximately $0.8 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 $0.7 million. The cash was used to make routine payments totaling $0.8 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, and $0.2 million for other debt.

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.