REGIONAL HEALTH PROPERTIES, INC

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Regional Health Properties, Inc. is a healthcare company that owns, operates and invests in healthcare real estate and operating businesses focused on long-term care, senior housing and pharmacy services. Historically, the Company operated primarily as a healthcare real estate platform that leased skilled nursing and senior housing facilities to third-party operators under long-term triple-net lease arrangements. Over time, and particularly following recent strategic initiatives and acquisitions, the Company has evolved toward a more integrated healthcare operating model that combines healthcare real estate ownership with the direct operation of healthcare facilities and related healthcare services.

Through its subsidiaries, the Company owns and operates skilled nursing and senior housing communities that provide a range of healthcare and residential services, including sub-acute and post-acute skilled nursing care, intermediate nursing care, rehabilitative therapy, memory care, Alzheimer’s and dementia care and senior living services. In addition to operating healthcare facilities, the Company owns healthcare real estate that is leased to third-party operators pursuant to triple-net lease arrangements.

As part of the SunLink merger described below, the Company also acquired a pharmacy business located in Crowley, Louisiana that provides retail pharmacy services, institutional pharmacy services and durable medical equipment. The pharmacy business expands the Company’s participation across the care continuum and provides additional operating capabilities that complement its healthcare facility operations.

The Company currently operates acrosssix states, with the majority of its facilities located in the Southeastern United States. The Company hasthree reportable segments: (i) Healthcare Services, which consists of the operation of skilled nursing and senior housing communities; (ii) Pharmacy Services, which consists of retail and institutional pharmacy services and durable medical equipment; and (iii) Real Estate, which consists of the leasing and subleasing of healthcare properties to third-party tenants. These segments reflect the Company’s evolution from a healthcare landlord into a more diversified owner-operator with both real estate and operating capabilities.

On August 14, 2025, the Company completed its previously announced merger with SunLink Health Systems, Inc. (“SunLink”), pursuant to which SunLink merged with and into the Company, with the Company continuing as the surviving corporation (the “Merger”). See Note 3 – Business Combination.

As of December 31, 2025, the Company’s common stock and Series A Redeemable Preferred Stock trade on the OTCQB under the symbols “RHEP” and “RHEPA,” respectively. In addition, the Company’s 12.5% Series B Cumulative Redeemable Preferred Shares and Series D 8% Cumulative Convertible Redeemable Participating Preferred Shares are quoted on the OTCQB under the symbols “RHEPB” and “RHEPZ,” respectively.

Basis of Presentation

The accompanying consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported results of operations during the reporting period. Significant estimates include patient care revenues, rent revenues, allowance for doubtful accounts and credit losses, contractual allowances for Medicaid, Medicare, and managed care reimbursements, deferred tax valuation allowance, valuation of goodwill and other long-lived assets, and cash flow projections. Actual results could differ materially from those estimates.

Advertising Expense

The Company expenses advertising and promotional costs related to its retail pharmacy, institutional pharmacy, and durable medical equipment operations as incurred. Such costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Reclassifications

Certain prior period amounts have been reclassified to conform with the current period presentation format. These reclassifications had no effect on previously reported results of operations, total assets, total liabilities, or stockholders’ deficit.

Principles of Consolidation

The consolidated financial statements include the Company’s majority owned and controlled subsidiaries. All intercompany transactions and balances have been eliminated through consolidation.

Arrangements with other business enterprises are evaluated, and those in which Regional Health is determined to have controlling financial interest are consolidated. Guidance is provided by FASB ASC Topic 810-10, Consolidation—Overall, which includes consolidation of business enterprises to which the usual condition of consolidation (ownership of a majority voting interest) does not apply. This guidance includes controlling financial interests that may be achieved through arrangements that do not involve voting interests. In absence of clear control through voting interests, a company’s exposure (variable interest) to the economic risks and potential rewards from the variable interest entity’s (“VIE”) assets and activities are the best evidence of control. If an enterprise holds the power to direct and right to receive benefits or absorb the losses of an entity, it would be considered the primary beneficiary. The primary beneficiary is required to consolidate the assets, liabilities and results of operations of the VIE in its financial statements.

The Company has evaluated and concluded that as of December 31, 2025 and December 31, 2024, the Company has no relationship with a VIE in which it is the primary beneficiary required to consolidate the entity.

Cash and Restricted Cash

Certain cash and amounts are restricted for specific purposes such as (i) mortgage escrow requirements; (ii) reserves for capital expenditures on United States Housing and Urban Development (“HUD”) insured facilities; and (iii) collateral for other debt obligations.

Revenue Recognition and Allowance for Credit Losses

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, and ASC Topic 842, Leases, as applicable to the nature of the underlying revenue-generating activity. Revenue is recognized in an amount that reflects the consideration the Company expects to receive in exchange for goods or services transferred to customers or, in the case of lease arrangements, in accordance with the terms of the applicable lease agreements. The Company’s revenues are derived primarily from (i) patient care and other healthcare services provided through its Healthcare Services segment, (ii) pharmacy goods and services and durable medical equipment provided through its Pharmacy Services segment, and (iii) rental income from healthcare properties leased to third-party operators through its Real Estate segment. The Company evaluates the collectability of receivables and records allowances for credit losses and other valuation adjustments in accordance with ASC Topic 326, Financial Instruments—Credit Losses.

Patient Care Revenue. Revenue from the Healthcare Services segment is derived from services rendered to residents and patients at the Company’s skilled nursing and senior housing communities. The Company receives payment for these services from several sources, including: (i) the federal government under the Medicare program administered by the Centers for Medicare & Medicaid Services (“CMS”), (ii) state governments under their respective Medicaid and similar programs, (iii) commercial insurers and managed care organizations, and (iv) private pay residents and other individual patients. The transaction price is based on established billing rates, reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients, and other implicit price concessions. The Company recognizes revenue in the amount it expects to be entitled to receive in exchange for the services provided, including variable consideration for estimated retroactive reimbursement adjustments, if any. Performance obligations are satisfied over time as services are rendered to residents and patients. Amounts assessed as uncollectible from residents and patients are generally recorded as implicit price concessions and reflected as a direct reduction of patient care revenue.

Pharmacy Services Revenue. Revenue from the Pharmacy Services segment is derived primarily from the sale of pharmacy products and the provision of pharmacy-related services, including retail pharmacy services, institutional pharmacy services, and durable medical equipment. Revenue is recognized when control of the promised goods or services is transferred to the customer, generally on the date the applicable goods are dispensed or delivered and services are provided. Each prescription claim or sale represents a separate performance obligation. Significant portions of Pharmacy Services revenue are reimbursed by the federal Medicare Part D program and, to a lesser extent, state Medicaid programs and other third-party insurance payors. The Company records Pharmacy Services revenue at amounts billable to patients or payors, adjusted at the time of revenue recognition for estimates of variable consideration arising from anticipated differences between billed charges and amounts expected to be reimbursed. Accordingly, Pharmacy Services revenue and related receivables are reported at the net amount the Company expects to ultimately realize from patients, governmental programs, and other third-party payors.

Rental Revenue. Revenue from the Real Estate segment is recognized in accordance with ASC Topic 842, Leases. The Company’s triple-net leases generally provide for fixed rental payments and may include periodic and determinable increases in rent. Rental revenue is recognized on a straight-line basis over the non-cancelable lease term when collectability of substantially all lease payments is probable. The recognition of rental income on a straight-line basis may result in revenues recognized in advance of contractual cash receipts, creating straight-line rent receivables that are included in other assets on the consolidated balance sheets. If collectability of lease payments is no longer considered probable, the Company ceases recognition of rental income on a straight-line basis, limits future rental revenue recognition to cash received, and writes off or reserves against any existing straight-line rent receivables or other related balances, as appropriate.

Receivables and Allowance for Credit Losses. The Company measures financial assets carried at amortized cost, including trade accounts receivable, tenant receivables, straight-line rent receivables, and certain other financing-related receivables, at the net amount expected to be collected in accordance with ASC Topics 326 and 842, accordingly.

In estimating expected credit losses, the Company evaluates relevant available information, including historical collection experience, the age of receivables, current collection trends, the financial condition and credit quality of patients, customers, tenants, and payors, the nature and level of any collateral or guarantees, and current and reasonable and supportable forecasts of future economic conditions. Expected credit losses are measured over the contractual life of the asset, adjusted for expected prepayments when appropriate.

For patient care receivables in the Healthcare Services segment, the Company considers the payer mix, the aging of receivables, historical collections, and expected reimbursements from Medicare, Medicaid, managed care, and private-pay sources. Amounts due from residents and patients that are not expected to be collected are generally treated as implicit price concessions and recorded as reductions of patient care revenue. To the extent a receivable is established and collection subsequently becomes not probable due to a change in circumstances, the Company records an allowance for credit losses or bad debt expense, as appropriate.

For Pharmacy Services receivables, the Company evaluates concession allowances and expected credit losses based on historical collection trends, customer and payor mix, the age and nature of receivables, and current and expected future economic conditions. Pharmacy accounts receivable are presented net of estimated variable consideration and expected credit losses, such that the reported balance reflects the amount expected to be ultimately collected.

For Real Estate receivables, including straight-line rent receivables and working capital or other tenant-related receivables, the Company assesses collectability based on the tenant’s payment history, financial condition, the strength of any guarantors, the value of underlying collateral, lease-level operating performance, and broader economic conditions. If facts and circumstances indicate that amounts due may not be collectible, the Company records an allowance for credit losses or, if collectability of lease payments is no longer probable, adjusts rental revenue recognition prospectively to a cash basis.

Changes in estimates regarding variable consideration, contractual adjustments, implicit price concessions, or expected credit losses are recognized in the period in which the change in estimate becomes known.

Activity in the allowance for credit losses in the Real Estate segment for the years ended December 31, 2025 and December 31, 2024 included the following:

Activity in the allowance for credit losses in the Healthcare segment for the years ended December 31, 2025 and December 31, 2024 included the following:

Activity in the allowance for credit losses in the Pharmacy segment for the year ended December 31, 2025 included the following:

As of December 31, 2025 and December 31, 2024, the Company reserved for approximately $0.8 million and $0.1 million, respectively, of uncollected receivables. Accounts receivable, net totaled $8.0 million at December 31, 2025, $3.4 million at December 31, 2024, and$1.4 million at December 31, 2023.

The following table presents the Company's Accounts receivable, net of allowance for the periods presented:

Concentrations of Credit Risk

Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of cash, restricted cash, accounts receivable and straight-line rent receivables. Cash and restricted cash are held with various financial institutions. From time to time, these balances exceed the federally insured limits. These balances are maintained with high quality financial institutions which management believes limits the risk.

Accounts receivable are recorded at net realizable value. The Company performs ongoing evaluations of its tenants and significant third-party payors with which it contracts, and generally does not require collateral. The Company maintains an allowance for doubtful accounts and credit losses which management believes is sufficient to cover potential losses. Delinquent accounts receivable are charged against the allowance for doubtful accounts and credit losses once collection has been determined to be unlikely. Accounts receivable are considered past due and placed on delinquent status based upon contractual terms as well as how frequently payments are received, on an individual account basis.

Prepaid Expenses and Other

As of December 31, 2025 and December 31, 2024, the Company had$1.6 million and$0.6 million, respectively, in prepaid expenses and other, which primarily relate to insurance for the facilities we operate, directors’ and officers’ insurance, and mortgage insurance premiums.

Inventory

As of December 31, 2025, the Company had$1.4 million in inventory of the Pharmacy Services segment. Inventory consists of pharmacy supplies, which are stated at the lower of cost (standard cost method), or net realizable value. Use of this method does not result in a material difference from the methods required by GAAP.

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 1 to 3 year period. Similar to accounts receivable, each reporting period the Company evaluates the collectability of outstanding notes receivable balances. We evaluate the collectability of our notes receivable based on a combination of credit quality indicators, including, but not limited to payment status, financial strength of the customer, and historical write-offs. We may establish reserves, accept modified payment terms, or book direct write offs for any estimated credit loss with generally a corresponding charge to credit loss expense in our

Consolidated Statement of Operations. Subsequent changes in our estimate of credit losses may result in a corresponding increase or decrease to the credit loss expense in our Consolidated Statement of Operations.

Beacon Health Management. Under the Operations Transfer Agreement for Lumber City, Beacon Health and the Company entered into a promissory note in the amount of $0.5 million. Under the terms of this promissory note, thebalance was to be paid over 24 months in the amount of $24,000 per month, and the principal balance to accrue interest at the rate of 8% annually. In September 2024, the Company wrote off $0.4 million of the promissory note as a credit loss expense. For the year ended December 31, 2025, no payments were received against the promissory note. As of December 31, 2025 and December 31, 2024, the principal note receivable balance remaining was $0.2 million and $0.2 million, respectfully.

In August 2023, the Company and its former tenant, SL SNF, LLC, entered into a lease amendment (the “Amendment”) regarding the Southland facility. The amendment reduces the monthly rent to $43,000 effective April 1, 2023 and includes a $0.3 million promissory note (the “Promissory Note”). The lease termination date under the amendment is October 31, 2024. Under the terms of the Promissory Note, the principal sum plus all accrued interest, accruing on the unpaid principal balance at a rate of 8% per annum, is due and payable on December 1, 2024, with minimum monthly payments of principal and interest of $18,353 per month beginning on July 1, 2023. For the year ended December 31, 2025, no payments were received against the Promissory Note. As of December 31, 2025 and December 31, 2024, the principal note receivable balance remaining was $0.2 million and $0.2 million, respectfully.

Coosa Valley. In November 2025, C.R. of Coosa Valley, LLC ("Coosa Valley") executed a secured promissory note (the "Secured Promissory Note") payable to the Company with a principal amount of $275 thousand, interest rate at 6% per annum and a monthly payment of $10,000. The principal and accrued interest shall be due and payable by November 30, 2027. As of December 31, 2025, the Secured Promissory Note balance remaining was $0.3 million .

Property and Equipment

Property and equipment are stated at cost. Expenditures for major improvements are capitalized. Depreciation commences when the assets are placed in service. Maintenance and repairs which do not improve or extend the life of the respective assets are charged to expense as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is recorded. Depreciation is recorded on a straight-line basis over the estimated useful lives of the respective assets. Property and equipment also includes bed license intangibles for states other than Ohio (where the building and bed license are deemed complimentary assets) and are amortized over the life of the building.

The Company reviews property and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable. The circumstances and events regarding the possible presence of impairment, are based on inputs such as, market conditions, operator performance, and legal matters. If there is an indication of possible impairment, we conduct areview that is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and estimated hold period. This estimate considers factors such as expected future operating income, market and other applicable trends including the terminal value of the property. If impairment exists, due to the inability to recover the carrying amount of the property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property.

Assets Held for Sale and Discontinued Operations

The Company may decide to sell properties that are held for use. The Company records these properties as assets held for sale when management has committed to a plan to sell the assets, actively seeks a buyer for the assets, and the consummation of the sale is considered probable and is expected within one year. Assets classified as held for sale are reported at the lower of their carrying value or their fair value, less estimated costs to sell. When the carrying value exceeds the fair value, less estimated costs to sell, an impairment expense is recognized. The Company estimates fair value, less estimated closing costs, based on similar real estate sales transactions. These valuation assumptions are based on the three-level valuation hierarchy for fair value measurement and represent Level 2 and 3 inputs. Level 2 inputs are quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets in markets that are not active; and inputs other than quoted prices. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. See Note 6 –Assets Held for Sale for additional details on assets held for sale as of December 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.

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 financing lease. As of December 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.

The following table summarizes real estate tax recognized on our consolidated statement of operations and comprehensive earnings in “General and administrative expense”for the years ended December 31, 2025 and 2024:

Accounts Payable

The following table presents the Company's accounts payable for the periods presented:

Other Liabilities - long term

As of December 31, 2025 and December 31, 2024, the Company had $1.6 million and $1.7 million, respectively, in Other long-term liabilities; which mainly represent lease deposits held and lease payables.

Intangible Assets and Goodwill

Intangible assets consist of finite lived and indefinite lived intangibles. The Company’s finite lived intangibles include lease rights and certain certificate of need (“CON”) and bed licenses that are not separable from the associated buildings. Finite lived intangibles are amortized over their estimated useful lives. For the Company’s lease related intangibles, the estimated remaining useful life is based on the terms of the underlying facility leases averaging approximately seven years. For the Company’s CON/bed licenses that are not separable from the buildings, the estimated useful life is based on the building life when acquired with a remaining average estimated useful life of approximately 24 years.

The Company evaluates the recoverability of the finite lived intangibles whenever an impairment indicator is present. The circumstances and events regarding the possible presence of an impairment indicator are based on inputs such as market conditions, operator performance, and legal matters. If there is an indication of possible impairment, we conduct a review that is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and estimated hold period. This estimate considers factors such as expected future operating income, market and other applicable trends including the terminal value of the property. If impairment exists, due to the inability to recover the carrying amount of the CON, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the CON.

The Company's indefinite-lived intangibles consist primarily of values assigned to CON/bed licenses that are separable from the buildings, as well as a trade name of $0.7 million acquired in connection with the merger with SunLink Health Systems, Inc. and attributable to the Carmichaels Cashway Pharmacy specialty pharmacy operations. The Company also acquired finite-lived intangibles in connection with the SunLink merger, including customer relationships of $1.0 million and Medicare licenses of $0.5 million, both of which are amortized over their respective useful lives. The Company does not amortize goodwill or indefinite-lived intangibles. The Company's goodwill is related to certain property acquisitions but is evaluated for impairment on the operator level. On an annual basis, the Company evaluates the recoverability of all indefinite-lived intangibles, including the pharmacy trade name, and goodwill by performing an impairment test. The Company performs its annual test for impairment during the fourth quarter of each year or more frequently if events and circumstances indicate that goodwill or any indefinite-lived intangible might be impaired. For the years ended December 31, 2025 and December 31, 2024, the test results indicated no impairment necessary.

Extinguishment of Debt

The Company recognizes extinguishment of debt when the criteria for a troubled debt restructuring are not met and the change in the debt terms is considered substantial. The Company calculates the difference between the reacquisition price of the debt and the net carrying amount of the extinguished debt (including deferred finance fees) and recognizes a gain or loss on the consolidated statement of operations in the period of extinguishment.

Earnings Per Share

Basic earnings per share is computed by dividing net income or 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 earnings per share except that the net income or 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:

Other expense, net

For the years ended December 31, 2025 and 2024 these costs represent transaction costs, see Note 3 -Business Combinationfor more information.

Deferred Financing Costs

The Company records deferred financing costs associated with debt obligations as direct reduction from the carrying amount of the debt liability. Costs are amortized over the term of the related debt using the straight-line method and are reflected as interest expense. The straight-line method yields results substantially similar to those that would be produced under the effective interest rate method.

Income Taxes and Uncertain Tax Positions

Deferred tax assets or liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that included the enactment date. Deferred tax assets are also recognized for the future tax benefits from net operating loss and other carry forwards. Valuation allowances are recorded for deferred tax assets when the recoverability of such assets is not deemed more likely than not.

On December 22, 2017, tax legislation commonly known as The Tax Cuts and Jobs Act (the “Tax Reform Act”) was enacted. Among other changes the Tax Reform Act reduced the US federal corporate tax rate from 35% to 21% beginning in 2018.

As a result of the Tax Reform Act, net operating loss (“NOL”) carry forwards generated in tax years 2018 and forward have an indefinite life. For this reason, the Company has taken the position that the deferred tax liability related to the indefinite lived intangibles can be used to support an equal amount of the deferred tax asset related to the 2018 NOL carry forward generated.

Judgment is required in evaluating uncertain tax positions. The Company determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold it is measured to determine the amount of benefit to recognize in the financial statements. The Company classifies unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as liabilities in the consolidated balance sheets. As of December 31, 2025 and 2024, the Company has a full valuation allowance on all deferred tax balances.

The Company is subject to income taxes in the U.S. and numerous state and local jurisdictions. In general, the Company’s tax returns filed for the 2020 through 2024 tax years are still subject to potential examination by taxing authorities. To the Company’s knowledge, the Company is not currently under examination by any major income tax jurisdiction.

Stock Based Compensation

The Company follows the provisions of ASC Topic 718, Compensation - Stock Compensation, which requires the use of the fair-value based method to determine compensation for all arrangements under which employees, non-employees, and others receive shares of stock or equity instruments (options, warrants or restricted shares). All awards are amortized on a straight-line basis over their vesting terms. Stock-based compensation is measured at the grant date for all stock-based awards based upon the fair value of the awards and forfeitures are recognized as they occur.

Fair Value Measurements and Financial Instruments

Accounting guidance establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The categorization of a measurement within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

Level 1— Quoted market prices in active markets for identical assets or liabilities

Level 2— Other observable market-based inputs or unobservable inputs that are corroborated by market data

Level 3— Significant unobservable inputs

The respective carrying value of certain financial instruments of the Company approximates their fair value. These instruments include cash, restricted cash, accounts receivable, notes receivable, and accounts payable. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values, they are receivable or payable on demand, or the interest rates earned and/or paid approximate current market rates.

Insurance

The Company maintains insurance for professional and general liability claims for its Healthcare Services segment and Pharmacy segments and maintains coverage amounts that are required by its mortgage lenders. The Company elects to maintain a high deductible policy for working compensation. In addition, the Company maintains certain other insurance programs, including commercial general liability, property, casualty, directors’ and officers’ liability, crime, and employment practices liability.

Recently Adopted Accounting Pronouncements

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 11 –Segment Results for more information.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires a public company, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company 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.

Recent Accounting Pronouncements

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.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270), which aims to: (i) specify form and content choices for interim financial statements and accompanying notes; (ii) add a comprehensive list of required disclosures from numerous Codification Topics to Topic 270; and (iii) introduce a disclosure principle requiring events since the end of the previous annual reporting period to be disclosed if they materially effect the entity. ASU 2025-11 is effective for interim periods in fiscal years beginning after December 14, 2027, with early adoption permitted. The Company is currently evaluating the impact that ASU 2025-11 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

The Company’s liquidity profile is influenced by the operating performance and working capital needs of its Healthcare Services and Pharmacy Services segments, as well as rent collections, tenant performance and refinancing activity within its Real Estate segment. During 2025, the expansion of operated facilities increased the Company’s use of working capital, particularly accounts receivable, payroll-related expenditures and other operating costs, while the Real Estate segment continued to provide rental income and asset sale proceeds. As of December 31, 2025, the Company held approximately $3.0 million in unrestricted cash and $8.0 million in net accounts receivable, primarily comprised of Healthcare Services and Pharmacy Services patient accounts receivable. In addition, on August 14, 2025, the Company completed its merger with SunLink, which provided approximately $6.0 million of acquired unrestricted cash. See Note 3 – Business Combination.

The Company also experienced changes in its listing status during 2025. Until February 5, 2025, the Company’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 OTCQB under the symbols “RHEP” and “RHEPA,” respectively. Trading on the OTC Markets presents challenges, including reduced liquidity, wider bid-ask spreads, limited analyst coverage and greater regulatory burdens on broker-dealers, which may further discourage trading activity. These limitations could depress trading prices and negatively impact the Company’s ability to raise capital through equity or debt offerings.

Short-term Liquidity

Management expects that the Company’s short-term liquidity requirements over the twelve months following the issuance of these consolidated financial statements will be funded primarily through collections of patient and rent accounts receivable, refinancing activity, including refinancing related to the Southland facility, additional debt borrowings and proceeds from the sale of assets classified as held for sale. Regional has committed to a plan to sell an additional asset classified as held for sale to generate additional liquidity in support of operations and potential investment opportunities. See Note 6 – Assets Held for Sale.

During the year ended December 31, 2025, the Company used $2.3 million of cash in operating activities, largely due to working capital needs and timing differences in accounts payable and accrued expense payments. Management continues to focus on collections of aged patient receivables and on stabilizing the operating performance of the Company’s Healthcare Services and Pharmacy Services segments. The Company’s short-term liquidity continues to be affected by the transition of certain facilities from leased to operated status, which has increased working capital requirements, including payroll, supplies and patient receivables.

The Company’s future short-term liquidity will also depend on the financial performance of the Company’s leased facilities and the facilities managed by CJM Advisors, including Georgetown, Glenvue, Mountain Trace, Southland and Sumter, as well as the performance of the Pharmacy Services business. In addition, the Real Estate segment consists of leases toone operator. Aspire Regional Partners, through a group of affiliated tenants, leases five facilities. The Company therefore depends on tenants affiliated with Aspire for all of its rent revenues, and there can be no assurance that such tenants will have sufficient assets, income or access to financing to enable them to make rental payments or otherwise satisfy their lease obligations.

Long-term Liquidity

Management expects that the Company’s long-term liquidity needs will be funded primarily from cash generated in the ordinary course of business and, as needed, from the sale of securities. The Company’s ability to generate cash from operations on a long-term basis will depend on the operating performance of its Healthcare Services, Pharmacy Services and Real Estate segments, including occupancy, reimbursement levels, labor costs, pharmacy reimbursement collections, rent collections and overall operating margins.

The Company’s ability to raise capital through the sale of securities will depend on market conditions, investor interest, the trading price and liquidity of its securities and its overall financial performance. Because the Company’s securities trade on the OTCQB rather than a national securities exchange, access to equity capital may be more limited than that of issuers listed on a national securities exchange. Accordingly, there can be no assurance that long-term liquidity from the sale of securities will be available on acceptable terms, if at all.

Debt

On October 25, 2024, the Company received a notice of acceleration and demand for payment from the lender of the Southland facility stating that covenants under the deed of trust had been violated for failure to pay principal and interest. The lender accelerated the maturity dates and demanded immediate payment in full of the loans, together with unpaid interest and late fees.

On November 8, 2024, the Company obtained a $0.5 million line of credit with Exchange Bank. The line of credit accrues interest at 7.75% per annum, with interest-only payments payable monthly. As of December 31, 2025, the amount borrowed under the line of credit was paid back due to the sale of Coosa Valley.

On November 22, 2024, the Company and Erin Property Holdings, LLC entered into two Forbearance Agreements with Cadence Bank, N.A. relating to certain defaults under the loan agreements in the principal amounts of $5.0 million due July 27, 2036 and $0.8 million due July 27, 2036. Pursuant to the Forbearance Agreements, the borrower agreed to make specified payments toward the outstanding notes and related fees, and the lender agreed, subject to the terms and conditions of the agreements, to forbear from exercising its rights and remedies during the forbearance period.

On February 27, 2025, the Company entered into a second amendment to the Forbearance Agreements extending the expiration date to February 1, 2027. During the forbearance period, the Company and the borrower are required to continue making monthly principal and interest payments in accordance with the terms of the notes, with interest continuing to accrue. The remaining balances of the USDA Note and SBA Note, together with all principal, interest, late charges and statutory attorneys’ fees, will be due at the end of the forbearance period.

For the years ended December 31, 2025 and 2024, the Company didnot refinance any other debt and did not modify any debt. As of December 31, 2025, the Company had $43.2 million in indebtedness, net of $0.9 million of deferred financing costs and unamortized discounts. The Company anticipates net principal repayments of approximately $8.4 million during the next twelve-month period, including approximately $1.4 million of routine debt service amortization, approximately $3.9 million of Southland debt classified as current due to the lender’s forbearance, $3.0 million related to the maturity of the Meadowood mortgage and approximately $0.2 million of bond debt. For further information, see Note 10 – Notes Payable and Other Debt.

Debt Covenant Compliance

As of December 31, 2025, the Company was in compliance with the financial and administrative covenants related to its outstanding credit facilities, except with respect to the Southland-related USDA and SBA notes that are subject to the forbearance arrangements described above. Management continues to monitor compliance closely and evaluate refinancing and other liquidity alternatives.

Operational Liquidity

For the years ended December 31, 2025 and 2024, the Healthcare Services segment generated operating profit of $0.9 million and an operating loss of $0.7 million, respectively. In addition, gross accounts receivable for the segment increased to $5.0 million in 2025 from $1.9 million in 2024, reflecting the expansion of operated facilities. As described in more detail in Note 8 – Leases, the Company terminated a master lease and, as of December 31, 2025 and 2024, operated three andtwo facilities, respectively.

Evaluation of the Company’s Ability to Continue as a Going Concern

Under applicable accounting guidance, the Company is required to evaluate, on a quarterly basis, whether its current financial condition, including its sources of liquidity as of the date the consolidated financial statements are issued, will enable it to meet its obligations as they come due within one year after the date the consolidated financial statements are issued. The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

In performing this evaluation, management considered the Company’s current financial condition and liquidity sources, including unrestricted cash, forecasted future cash flows, anticipated collections of receivables, expected refinancing activity, expected debt borrowings, anticipated proceeds from assets held for sale and the Company’s obligations due within the next twelve months, together with recurring operating expenses. Based on this evaluation, management concluded that it is probable that the Company will be able to meet its obligations arising within one year after the date these consolidated financial statements are issued.

NOTE 3. BUSINESS COMBINATION

Effective August 14, 2025, the Company closed on the merger with SunLink; whereas, SunLink merged with and into the Company, and the Company continuing as the surviving corporation. The primary reason for the combination was the combination of the Company and SunLink would result in the potential for a material and immediate and long-term upside to both company's current shareholders' valuation. The two companies had complimentary business lines and long-term experience of senior management provided a complimentary merger resulting in multiple business synergies.

On August 5, 2025, the Company filed Articles of Amendment (the “Articles of Amendment”) to its Amended and Restated Articles of Incorporation with the Secretary of State of the State of Georgia to establish its Series D Preferred Stock.

Pursuant to the Merger Agreement, at the effective time of the merger (the “Effective Time”), each five shares of common stock, no par value per share, of SunLink (“SunLink common stock”) issued and outstanding immediately prior to the Effective Time (other than excluded shares (as defined in the Merger Agreement)) were converted into the right to receive (i)1.1330 validly issued, fully paid and nonassessable shares of the Company's common stock, and (ii) one validly issued, fully paid and nonassessable share of Series D Preferred Stock, no par value per share. Holders of SunLink common stock will receive cash (without interest) in lieu of fractional shares of the Company's common stock or Series D preferred stock in accordance with the terms of the Merger Agreement. The total aggregate consideration paid in the merger was 1,595,400 shares of the Company's common stock and 1,405,609 shares of Regional Series D preferred stock.

Accounting for the Merger

The merger is accounted for as a business combination pursuant to Accounting Standards Codification Topic 805, (“ASC 805”), where the Company, the legal acquiree, is determined to be the accounting acquirer of SunLink. After the closing of the merger transaction, SunLink ceased to exist.

The assets and liabilities of SunLink on the closing date were consolidated into the Company at their respective fair values, and the shortfall of the purchase price consideration over the fair value of SunLink’s net assets was recognized as a gain on bargain purchase. Fair value is defined in Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (“ASC 820”) as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company’s preliminary purchase price allocation was based on an evaluation of the appropriate fair values and represents management’s best estimate based on available data. Any changes within the measurement period resulting from facts and circumstances that existed as of the acquisition date may result in retrospective adjustments to the provisional amounts recorded at the acquisition date. The Company employed a third-party valuation firm to assist in determining the purchase price allocation of assets and liabilities acquired from SunLink.

A combination of the income, cost, and market approaches were used to determine the value of property and equipment, trademarks and trade name, client relationships, and Medicare license, as applicable. The income approach determines the fair value for an asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a rate of return that reflects the relative risk of achieving the cash flow and the time value of money. Projected cash flows for each asset considered multiple factors, including current Fair Measurements and Disclosure. The cost approach utilizes assumptions for the cost to replace, timing, and resources required, as well as profit margin and opportunity costs. The market approach seeks to determine the current value of an asset by reference to recent comparable transactions involving the sale of similar assets. Adjustments may need to be made to those recorded transactions in order to account for any significant differences between the assets being valued. As of December 31, 2025, the calculation and allocation of the purchase price to tangible and intangible assets and liabilities is preliminary, as the Company is still in the process of accumulating all of the required information to finalize the opening balance sheet and calculations of intangible assets.

Purchase Price Allocation

The consolidated financial information reflects a gain on bargain purchase because the estimated fair value of the identifiable net assets acquired exceeds the estimated purchase price consideration.

At the Merger,1,595,400 Shares of Regional Health common stock and 1,405,609 Regional Series D preferred stock were issued. The Regional Health common stock at the merger was valued at the closing trading on the closing date. The new Regional Health Series D preferred stock was valued by an independent valuation firm. The total value of the Regional equity exchanged for the SunLink shares, was as follows:

A bargain purchase of $5,775 thousand was recognized for the merger because the fair value of identifiable net assets exceeded the purchase price consideration. A summary of the fair value consideration transferred for the Merger and the preliminary allocation to the fair value of the assets and liabilities of SunLink follows:

Acquisition-related costs (included in other expense in Regional's consolidated statement of operations and comprehensive earnings) were $1.3 million and $0.5 million for the years ended December 31, 2025 and 2024, respectively.

The amounts of SunLink’s revenues and net income (loss) included in Regional Health’s consolidated statement of operations and comprehensive earnings for the year ended December 31, 2025, and the revenue and net income (loss) of the combined entity had the acquisition date been January 1, 2024 are:

(1) The unaudited pro forma net income for the year ended December 31, 2025 excludes a nonrecurring pro forma adjustment directly attributable to the SunLink merger, consisting of a bargain purchase gain of$5,775 thousand.

Defined Benefit Pension Plan

SunLink retained a defined benefit retirement plan which covered substantially all the employees of a business when the business was sold in 1998. Effective February 28, 1997, the plan was amended to freeze participant benefits and closed the plan to new participants. Pension expense and related tax benefit or expense is reflected in the consolidated statement of operations and comprehensive earnings. See Note 13 -Employee Benefits for more information.

NOTE 4. CASH, RESTRICTED CASH, AND INVESTMENTS

The following presents the Company’s 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 5. PROPERTY AND EQUIPMENT

The following table sets forth the Company’s property and equipment:

During the years ended December 31, 2025 and December 31, 2024, the Company recordedno impairments in property and equipment.

The following table summarizes total depreciation and amortization for the years ended December 31, 2025 and 2024:

NOTE 6. ASSETS HELD FOR SALE

In June 2024, the Company, with the support of its Board of Directors, committed to a plan of action to sell the Mountain Trace Property Holdings ("Mountain Trace Property”), with a sale probable and subject to customary approvals. As a result, the Company’s management determined that the criteria under GAAP for the Mountain Trace Property to be classified as held for sale were met.

In November 2024, the Company decided to end the sales process and executed an operations transfer agreement and a lease termination agreement (the "Mountain Trace Property Agreement") with the tenant of the Mt. Trace Property effective November 15, 2024. The Company will be the new operator of the facility. As a result of this Mountain Trace Property Agreement, the Company declassified the Mountain Trace Property as held for sale. In December 2024, the Company listed with a brokerage firm to sell the Coosa and Meadowood properties, with a sale probable and subject to customary approvals.

In November 2025, the Company's wholly-owned subsidiary Coosa Nursing ADK, LLC sold its Coosa Valley Health and Rehab (“the Coosa Valley facility”) to an unaffiliated company for cash of$10.6 million.The Company reported a gain on the sale of the property of $2.7 million, which is reported on the consolidated statements of income for the year ending December 31, 2025. In addition, the debt associated with the Coosa Valley facility of $4.9 million was repaid at closing. Cash of $4.7 million was received at closing, after payments of $0.6 million of transaction expenses and $0.4 million deposited to escrow accounts for future tax payment related to the Coosa Valley facility sold assets. The cash received at closing will be used by the Company for general corporate and other purposes.

The following table sets forth the Company's assets held for sale by asset description:

The following table sets for the Company's assets held for sale by facility:

NOTE 7. INTANGIBLE ASSETS AND GOODWILL

Intangible assets consist of the following:

(1)

Non-separable bed licenses are included in property and equipment as is the related accumulated amortization expense (see Note 5 –Property and Equipment).

(2)

The Company does not amortize indefinite-lived intangibles, which consist of separable bed licenses, trade name, and goodwill.

Expected amortization expense for the year ended December 31, for all definite-lived intangibles, for each of the next five years and thereafter is as follows:

NOTE 8. LEASES

Operating Leases

As of December 31, 2025 and December 31, 2024, the Company leasesone Skilled Nursing Facility ("SNF") in Covington, Ohio under a non-cancelable lease, which has rent escalation clauses and provisions for payments of real estate taxes, insurance, and maintenance costs. The remaining lease term for the Covington facility is approximately 2.9 years as of December 31, 2025. The Company subleases the Covington facility to a third party.

Effective July 1, 2023, the Company signed a sublease for 2,000 sq ft of office space in Atlanta, Georgia. The sublease expired on July 31, 2025. On July 30, 2025, the Company entered into atwo year lease with the landlord which the lease commenced August 1, 2025 and will expire on July 31, 2027.

The Pharmacy Segment business assets at the Merger included $593 thousand of Right of Use assets, consisting primarily of four non-cancellable property leases with expiration dates ranging from May 2026 to December 2030 and office equipment leases. As of December 31, 2025, the Company's total Right of Use asset balance was $2.9 million and is a part of the Company's Other assets balance of $3.8 million. As of December 31, 2024, the Company's total Right of Use asset balance was $2.2 million and is a part of the Company's Other assets balance of $4.7 million.

As of December 31, 2025 and December 31, 2024, the Company is in compliance with all operating lease financial covenants.

Future Minimum Lease Payments

Future minimum lease payments for each of the next five years ended December 31, and thereafter are as follows:

Weighted average discount rate is 7.98%

Weighted average life of lease is 3.7 years

Lessor

Facilities Leased or Subleased by the Company

As of December 31, 2025 and December 31, 2024, the Company leased or subleased 6 facilities to two third-party operator on a triple net basis. The lease for Autumn Breeze with C.R. Management was terminated effective February 1, 2026 as per Note 17. The weighted average remaining lease term for the five remaining facilities is 2.9 years.

Below is a description of the leases with the Company as lessor as of December 31, 2025.

Aspire. On November 30, 2018, the Company subleased five facilities located in Ohio to affiliates (collectively, “Aspire Sublessees”) of Aspire Regional Partners, Inc. (“Aspire”). The Aspire Subleases became effective on December 1, 2018 and are structured as triple net leases. The Aspire Facilities are comprised of 5 facilities: (i) a 94-bed SNF located in Covington, Ohio (the “Covington Facility”); (ii) an 80-bed assisted living facility located in Springfield, Ohio (the “Eaglewood ALF Facility”); (iii) a 99-bed SNF located in Springfield, Ohio (the “Eaglewood Care Center Facility”); (iv) a 50-bed SNF located in Greenfield, Ohio (the “H&C of Greenfield Facility”); and (v) a 50-bed SNF located in Sidney, Ohio (the “Pavilion Care Facility”). Under the Aspire Subleases, a default related to an individual facility may cause a default under all the Aspire Subleases. Each sublease has an initial term of 10 years, with renewal options, except for the H&C of Greenfield Facility, which has an initial five year term, and set annual rent increases generally commencing in the third lease year. From month seven of the Aspire Subleases, monthly rent amounts may increase based on each facility’s prior month occupancy, with minimum annual rent escalations of at least 1% generally commencing in the third lease year. Minimum rent receivable for the Covington Facility, the Eaglewood ALF Facility, the Eaglewood Care Center Facility, the H&C of Greenfield Facility and the Pavilion Care Facility for the year ended December 31, 2019 (the first lease year) was $0.4 million, $0.5 million, $0.4 million, $0.2 million and $0.2 million per annum, respectively. For the year ended December 31, 2020, minimum rent receivable increased for the Covington and the Eaglewood ALF Facility to $0.5 million and $0.6 million per annum, respectively. The set annual rent increases, mentioned above, commenced on December 1, 2021.

Vero Health ("Vero"). On February 28, 2019, the Company entered into a lease agreement (the “Vero Health Lease”) with Vero Health, providing that Vero Health would take possession of and operate the Mountain Trace Facility located in North Carolina. The Vero Health Lease became effective, upon the termination of the prior Mountain Trace Tenant mutual lease termination on March 1, 2019. The Vero Health Lease is for an initial term of 10 years, with renewal options, is structured as a triple net lease and rent for the Mountain Trace Facility is approximately $0.5 million per year, with an annual 2.5 % rent escalation clause. The Company elected to terminate the lease agreement on November 15, 2024 after Vero determined it could no longer operate the facility and maintain substantial compliance with state regulations. Vero and the Company agreed to termination the lease in November 2024.

Oak Hollow Healthcare Management ("Oak Hollow"). On November 1, 2022, the Company entered intotwo lease agreements ("the Oak Hollow Lease") with Oak Hollow Healthcare Management, providing that Oak Hollow would take possession of and operate the Georgetown and Sumter Facilities located in South Carolina. The Oak Hollow Lease became effective, upon the termination of the prior Georgetown and Sumter Tenant mutual lease termination on November 1, 2022. The Oak Hollow Leases are for an initial term of 10 years, with renewal options, is structured as a triple net leases and rent for the Georgetown and Sumter Facilities are approximately $0.3 and $.4 million per year, respectfully. Both leases have annual 2.5 % rent escalation clauses. Oak Hollow and the Company agreed to termination both leases in March 2025.

C.R. Management. The Company has leasedone facility to affiliates of C.R. Management (“CRM”), pursuant to a long-term, triple net operating lease. Currently, CRM leases one skilled nursing facilities, Autumn Breeze, from the Company. See Subsequent Events - Note 17

Future Minimum Lease Receivables

Future minimum lease receivables for each of the next five years ended December 31, and thereafter are as follows:

The following table summarizes the Company’s leases to third-parties as of December 31, 2025. Each lease is structured as “triple-net” and contains specific rent escalation amounts ranging from 1.0% to 2.5% annually. Further, each lease has one or more renewal options. For those facilities subleased by the Company, the renewal option in the sublease agreement is dependent on the Company’s renewal of the prime lease agreement.

(1)

Represents the number of facilities which are leased or subleased to separate tenants, which tenants are affiliates of the entity named in the table above.

(2)

Aspire Regional Partners represents 100% of Real Estate 2025 cash rent.

NOTE 9. ACCRUED EXPENSES

Accrued expenses consist of the following:

(1)

Includes approximately $3.7 million and $3.5 million of bed tax accruals for the Healthcare Services segment as of December 31, 2025 and 2024, respectively.

(2)

Includes approximately $765 k of accrued payroll and $218 k of other accrued expense.

NOTE 10. NOTES PAYABLE AND OTHER DEBT

Notes payable and other debt consists of the following:

(1)

U.S. Department of Agriculture (“USDA”)

(2)

U.S. Small Business Administration (“SBA”)

The following is a detailed listing of the debt facilities that comprise each of the above categories:

(1)

Represents interest rates as of December 31, 2025 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs which are approximately 0.16% per annum.

(2)

For theseven SNF’s, the Company has term loans insured 100% by HUD with financial institutions. The loans are secured by, among other things, an assignment of all rents paid under any existing or future leases and rental agreements with respect to the underlying facility. The loans contain customary events of default, including fraud or material misrepresentations or material omission, the commencement of a forfeiture action or proceeding, failure to make required payments, and failure to perform or comply with certain agreements. Upon the occurrence of certain events of default, the lenders may, after receiving the prior written approval of HUD, terminate the loans and all amounts under the loans will become immediately due and payable. In connection with entering into loans, the facilities entered into a healthcare regulatory agreement and a promissory note, each containing customary terms and conditions.

(3)

For thetwo SNF’s, the Company has term loans with financial institutions, which are insured 70% to 80% by the USDA. The loans have an annual renewal fee for the USDA guarantee of 0.25% of the guaranteed portion. The loans have prepayment penalties of 1% through 2020, capped at 1% for the remainder of the first 10 years of the term and 0% thereafter. On February 27, 2026, the Company entered into a second amendment of the Forbearance Agreement. The new expiration date is February 1, 2027.

(4)

Forone SNF, commonly known as Southland, the Company has a term loan with a financial institution, which is insured 75% by the SBA. On February 27, 2026, the Company entered into a second amendment of the Forbearance Agreement. The new expiration date is February 1, 2027.

(1)

Represents interest rates as of December 31, 2025 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs of approximately 0.10% per annum.

(1)

Represents interest rates as of December 31, 2025 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs of 0.34%per annum.

(2)

The Meadowood Credit Facility is secured by the Meadowood Facility and the assets of Coosa, which is guaranteed by Regional Health Properties, Inc.

(3)

The Coosa Credit Facility, guaranteed by Regional Health Properties, Inc., includes customary terms, including events of default with an associated annual 5% default interest rate, and is secured by the Coosa Facility and the assets of Meadowood. Upon the occurrence of certain events of default, the lenders may terminate the Coosa Credit Facility and the Meadowood Credit Facility, and all amounts due under both credit facilities will become immediately due and payable. The Coosa Credit Facility has prepayment penalties of 5% in the 1 st year,4% in the 2 nd year and 1% thereafter.

(1)

Annual Insurance financing primarily for the Company’s directors’ and officers’ insurance.

(2)

On December 30, 2025, Key Bank and the Company extended the maturity date from August 25,2025 to August 25, 2030.

Debt Covenant Compliance

As of December 31, 2025, the Company had approximately 20 credit related instruments outstanding that include various financial and administrative covenant requirements. Covenant requirements include, but are not limited to, fixed charge coverage ratios, debt service coverage ratios, minimum earnings before interest, taxes, depreciation, and amortization or earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs, and current ratios. Certain financial covenant requirements are based on consolidated financial measurements whereas others are based on measurements at the subsidiary level (i.e., facility, multiple facilities or a combination of subsidiaries). The subsidiary level requirements are as follows: (i) financial covenants measured against subsidiaries of the Company; and (ii) financial covenants measured against third-party operator performance. Some covenants are based on annual financial metric measurements whereas others are based on monthly and quarterly financial metric measurements. The Company routinely tracks and monitors its compliance with its covenant requirements.

At December 31, 2025, the Company was in compliance with the various financial and administrative covenants related to all of the Company’s credit facilities.

Scheduled Minimum Debt Principal payments and Maturity payments

The schedule below summarizes the scheduled gross minimum principal payments and maturity payments as of December 31, 2025 for each of the next five years and thereafter.

NOTE 11. SEGMENT RESULTS

Thechief operating decision maker (“CODM”) is the President and Chief Executive Officer. The Company represents three reportable segments, based on how its CODM evaluates the business and allocates resources. The CODM assesses performance for the Company and decides how to allocate resources based on each segments Income (Loss) From Operations ("Operating Income"). The CODM uses Operating Income to evaluate the performance of each segment in deciding whether to reinvest profits into the segment. The CODM evaluates performance based on Operating Income, as noted in the table below. The Company reports segment information based on the "significant expense principle” defined in ASC 280, Segment Reporting along with other segment items, which is the difference between segment revenue and less segment expenses disclosed under the significant expense principle for each reported measure of segment profit or loss. The Company hasthree primary reporting segments:(i)Real Estate Services, which consists of the leasing and subleasing of long-term care and senior living facilities to third-party tenants, (ii) Healthcare Services, which consists of the operation of the Glenvue, Meadowood, Georgetown, Sumter, Southland, and Mountain Trace facilities and (iii) Pharmacy Service Segment, which 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.

The table below presents the results of operations for our reporting segments for the periods presented.

The CODM does not regularly review total assets for our reportable segments as total assets are not used to assess performance or allocate resources.

NOTE 12. COMMON AND PREFERRED STOCK

On August 14, 2025, the Company issued 1,592,438 shares of the Company's common stock and 1,405,609 shares of the Company's Series D preferred stock as the purchase price consideration for the merger.

See Note 3 -Business Combinationfor more information on the merger.

Common Stock

As of December 31, 2025, the Company had 55,000,000 shares of Common Stock authorized and 3,945,557 shares issued and 3,934,677 shares outstanding. There wereno dividends declared or paid on the common stock during the years ended December 31, 2025 and 2024.

Preferred Stock

As of December 31, 2025, the Company had 5,000,000 shares of Preferred Stock authorized and 3,706,405 shares issued and outstanding.

Series A Preferred Stock

Under certain Preferred Series A Charter Amendments to the rights, preferences, and privileges of the Series A Preferred Stock, approved in June 2023, the following modifications were approved to: (i) reduce the liquidation preference of the Series A Preferred Stock to $5.00 per share, (ii) eliminate accumulated and unpaid dividends on the Series A Preferred Stock, (iii) eliminate future dividends on the Series A Preferred Stock, (iv) eliminate penalty events and the right of holders of Series A Preferred Stock to elect directors upon the occurrence of a penalty event, (v) reduce the redemption price of the Series A Preferred Stock in the event of an optional redemption to $5.00 per share, (vi) reduce the redemption price of the Series A Preferred Stock in the event of a “change of control” to $5.00 per share and (vii) change the voting rights of holders of Series A Preferred Stock when voting as a single class with any other class or series of stock to one vote per $5.00 liquidation preference. The fair value of the Series A Preferred Stock was $0.76 per share based on a probability-weighted average of the expected return method.

As of December 31, 2025, the Company had 559,263 shares of Series A Preferred Stock issued and outstanding. No dividends were declared or paid on the Series A Preferred Stock for the years ended December 31, 2025 and 2024.

Series B Preferred Stock

The terms and provisions of the Series B Preferred Stock include, among other things: (i) no stated maturity and not being subject to any sinking fund or mandatory redemption, except following a change of control and the cumulative redemption provisions, (ii) ranks senior to our common stock, our Series A Preferred Stock and any other shares of our stock that we may issue in the future, the terms of which specifically provide that such stock ranks junior to the Series B Preferred Stock, in each case with respect to payment of dividends and amounts upon the occurrence of a liquidation event, (iii) dividend rate is 12.5% per annum of the liquidation preference of the Series B Preferred Stock in effect on the first calendar day of the applicable dividend period, (iv) initial dividend period will commence July 1, 2027, (v) liquidation preference is initially be $10.00 per share and will increase over time, pursuant to the terms set forth in the Charter, to $25.00 per share upon the fourth anniversary date of the original issuance date, provided that once there are 200,000 or fewer shares of the Series B Preferred Stock outstanding, the liquidation preference will be reduced to $5.00 per share; and (vi) the Company must redeem, repurchase or otherwise acquire certain amount of shares of Series B Preferred Stock through the fourth anniversary of the original date of issuance as provided in the Charter. The fair value of the Series B Preferred Stock was $8.26 per share based on a probability-weighted average of the expected return method.

On January 29, 2025, the board of directors of the Company declared a dividend to the holders of its Series B Preferred Stock, on a pro rata basis in proportion to the number of shares of Series B Preferred Stock held by such holders of 250,000 shares of the Company’s common stock, rounded down to the nearest whole share of Common Stock. The dividend was paid on February 19, 2025 to holders of record of the Series B Preferred Stock as of the close of business on February 10, 2025 and 249,990 shares of the Company's common stock were issued. The Company is required to pay the dividend of Common Stock to such holders of Series B Preferred Stock pursuant to the terms of Regional’s Amended and Restated Articles of Incorporation, which governs the terms of the Series B Preferred Stock.

On September 17, 2025, the Company completed the repurchase of 366,359 shares of its Series B Preferred Stock through three privately negotiated transactions.

On November 25, 2025, the Board of Directors authorized and approved the purchase of up to an aggregate of 500,000 shares of Series B Preferred Stock (“Stock Repurchase Plan”). The Special Committee of the Company’s Board of Directors is authorized to oversee the timing, nature, amount and conduct of the Stock Repurchase Plan. Under the program, the Company may purchase shares of the Company’s Series B Preferred Stock from time to time through open-market and privately negotiated transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. Repurchases of Series B will be made in accordance with Rule 10b-18 of the Securities Exchange Act of 1934 at prices depending on prevailing market conditions. The program does not obligate the Company to repurchase any shares of its Preferred Series B stock during any period. The repurchase will be funded by cash on hand from time to time. The repurchase program is expected to continue indefinitely until the maximum number of shares of stock has been repurchased or until the repurchase program is earlier modified, suspended or terminated by the Board of Directors. As of December 31, 2025,144,470 shares of our Series B Preferred Stock have been purchased under the Stock Repurchase Plan.

All the Series B Preferred Stock shares repurchased during the fiscal year 2025 were retired and restored to the status of authorized but unissued shares of undesignated Preferred Stock.

As of December 31, 2025, the Company had 1,741,173 shares of Series B Preferred Stock issued and outstanding. Except for the dividends declared on January 29, 2025, no other dividends were declared or paid on the Series B Preferred Stock for the years ended December 31, 2025 and 2024.

Series D Preferred Stock

Subject to the terms and conditions of the the Company’s articles of amendment effective August 4, 2025, beginning on July 1, 2027, holders of the Company’s Series D Preferred Stock receive, when, as, and if approved by the Company’s Board out of funds of the Company legally available for the payment of distributions and declared by the Company, cumulative preferential dividends at a rate per annum equal to the dividend rate (as defined below) of the liquidation preference (as defined below) of the Series D Preferred Stock in effect on the first calendar day of the applicable Dividend Period (as defined in the articles of amendment). The “dividend rate” shall mean (as a percentage of liquidation preference)8% per annum, subject to adjustment as provided in the Company’s articles of amendment. The “liquidation preference” shall mean, with respect to the Company’s Series D preferred stock, $12.50 per share of the Company’s Series D preferred stock, subject to adjustment as provided in the Company’s articles of amendment.

Except as otherwise required by the Company’s articles of amendment or law, the Company’s Series D Preferred Stock will not have voting rights. However, as long as any shares of the Company’s Series D Preferred Stock are outstanding, the Company will not, without the affirmative vote of the holders of at least (A) two-thirds of the Company’s Series D Preferred Stock outstanding at the time, if there are more than 200,000 shares of the Company’s Series D Preferred Stock outstanding at the time, or (B) a majority of the Company’s Series D Preferred Stock outstanding at the time, if there are 200,000 or fewer shares of the Company’s Series D Preferred Stock outstanding at the time, (i) authorize or create, or increase the authorized or issued amount of, any class or series of Senior Shares (as defined in the Company’s articles of amendment) or reclassify any of the authorized stock of the Company into such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of the Company’s articles of incorporation, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Company’s Series D preferred stock.

The Company’s articles of amendment further provide that, so long as at least 200,000 sharesof Company’s Series D

Preferred Stock remain outstanding, the holders of Company’s Series D Preferred Stock voting as a separate class at a meeting of such shareholders duly called for that purpose shall be entitled to elect two members of the Company’s board of directors (each, a “Company’s Series D Preferred Stock director”).

The Company’s articles of amendment further provide that, so long as at least 200,000 shares of Company’s Series D Preferred Stock remain outstanding, the Company will not, without the affirmative vote of (i) a majority of the Company’s Board and (ii) both the Company’s Series D Preferred Stock directors, affect any of the following actions by the Company, whether by amendment, merger, consolidation, operation of law or otherwise: (i) enter into any transaction or agreement that would result in any sale, merger, recapitalization or liquidation event if the transaction would result in (A) the issuance or assumption of any Senior Shares or (B) the holders of Company’s Series D Preferred Stock receiving less than the greater of: (i) the liquidation preference (including accumulated accrued and unpaid dividends) and (ii) an amount equal to the product of (A) the average closing price of the Company’s common stock on (x) the National Securities Exchange (as defined in the Company’s articles of amendment) on which the Company’s common stock is then-listed and traded for the 60 trading days (as defined in the Company’s articles of amendment) immediately preceding the record date, or (y) the OTC on which the Company’s common stock is then-traded for 90 days immediately preceding the record date if the Company’s common stock is not then listed or traded on a National Securities Exchange by (B) the number of shares of the Company’s common stock into which the Company’s Series D Preferred Stock are then-convertible; or (ii) declare or pay any dividend on any class of equity securities of the Company other than the Company’s Series B Preferred Stock and Company’s Series D Preferred Stock unless all dividends applicable to both the Company’s Series B Preferred Stock and Company’s Series D Preferred Stock have been declared and paid to date.

The Company’s articles of amendment further provide that, so long as at least 200,000 shares of Company’s Series D Preferred Stock remain outstanding, no new Senior Shares or new Parity Shares (as defined in the Company’s articles of amendment) shall be issued and, other than the Company’s Series B Preferred Stock and the Company’s Series A Preferred Stock, be permitted to be outstanding. The Company’s articles of amendment further provide that, so long as at least 200,000 shares of Company’s Series D Preferred Stock remain outstanding, the Company’s Series A Preferred Stock shall not be amended, and Company shall not otherwise take action, to provide for (i) the accrual or payment of dividends on the Company’s Series A Preferred Stock, (ii) an increase of the liquidation preference of the Company’s Series A Preferred Stock, (iii) a right of conversion of the Company’s Series A Preferred Stock into the Company’s common stock or (iv) the exchange by the Company of the Company’s Series A Preferred Stock for the Company’s common stock. The Company’s articles of amendment further provide that, so long as at least 200,000 shares of Company’s Series D Preferred Stock remain outstanding, no Junior Shares (as defined in the Company’s articles of amendment) shall be issued or permitted to be outstanding by the Company which are convertible into the Company’s common stock with an effective (x) conversion price less than $20.00 per share of the Company’s common stock or (y) any conversion ratio more favorable to such Junior Shares than the substantial equivalent of the then-applicable conversion ratio (as defined below) for the Company’s Series D preferred stock. The Company’s Series D Preferred Stock is redeemable at the option of the Company, upon a change of control (as defined in the Company’s articles of amendment) and mandatorily on or before December 31, 2029, in each case subject to the terms and conditions of the Company’s articles of amendment.

The Company’s Series D Preferred Stock is convertible into shares of the Company’s common stock at the conversion ratio at the option of a holder of Company’s Series D Preferred Stock and mandatorily upon the following events: (i) there shall be 200,000 or fewer shares of Company’s Series B Preferred Stock outstanding; and (ii) the average closing price of the Company’s common stock on a National Securities Exchange is at least $20.00, as adjusted pursuant to the Company’s articles of amendment, over any 30 trading days following the date on which there are 200,000 or fewer shares of Company’s Series B Preferred Stock outstanding. The “conversion ratio” means 1.1330 shares of the Company’s common stock for every three shares of Company’s Series D preferred stock, subject to adjustment as provided in the Company’s articles of amendment. The Company’s Series D Preferred Stock shall not be entitled to the benefits of any retirement or sinking fund. The Company’s Series D Preferred Stock shall rank junior to the Company’s Series B Preferred Stock and on parity with the Company’s Series A Preferred Stock.

If a National Market Listing (as defined in the Company’s articles of amendment) of the Company’s common stock is not achieved by the Company on or before the last day of: (i) the sixth whole calendar month immediately after the merger (the “First Milestone Date”), or (ii) the twelfth whole calendar month immediately after the merger (the “Second Milestone Date”), or (iii) the eighteenth whole calendar month immediately after the merger (the “Third Milestone Date”) or (iv) the twenty-fourth whole calendar month immediately after the merger (the “Fourth Milestone

Date”), then on the First Milestone Date the conversion ratio shall automatically be reduced, and on each succeeding Milestone Date automatically further reduced, by one-half of a share of Company’s Series D Preferred Stock in the number of shares of Company’s Series D Preferred Stock required for conversion into a share of the Company’s common stock. Each such reduction on any such Milestone Date once occurring shall not lapse or be subject to any correction event (as defined in the Company’s articles of amendment). “Milestone Date” shall mean, as applicable, the First Milestone Date, the Second Milestone Date, the Third Milestone Date or the Fourth Milestone Date.

For a further summary description of the material terms of the Company’s Series D preferred stock, see “Description of Company’s Series D preferred stock.” in the Registration Statement, Amendment No. 3 filed on Form S-4/A with the SEC on June 24, 2025.

As of December 31, 2025, the Company had 1,405,609 shares of Series D Preferred Stock issued and outstanding. No dividends were declared or paid on the Series D Preferred Stock for the year ended December 31, 2025.

13. EMPLOYEE BENEFITS

Defined Contribution Plan —SunLink had a defined contribution plan pursuant to IRS Section 401(k) covered substantially all employees. This plan was assumed by the Company in the Merger, and it is being amended to include all the Company’s employees. The Company matches a specified percentage of the employee’s contribution as determined periodically by its management. No match was provided for the year ended December 31, 2025. Plan expense for the defined contribution plan was $0 for the year ended December 31, 2025.

Defined Benefit Plans —Prior to 1997, SunLink maintained a defined benefit retirement plan covering substantially all of its domestic employees. Effective February 28, 1997, SunLink amended its domestic retirement plan to freeze participant benefits and closed the plan to new participants. Benefits under the frozen plan are based on years of service and level of earnings. The plan was assumed by the Company in the Merger. The Company funds the frozen plan, which is noncontributory, at a rate that meets or exceeds the minimum amounts required by the Employee Retirement Income Security Act of 1974. No defined benefit plan is currently maintained for employees of the Company.

At December 31, 2025, the plan’s assets were invested 11% in cash and short-term investments,85% in equity investments and 14% in fixed income investments. The plan’s current investment policy of primarily investing in cash and short-term investments is based on the possible need for immediate liquidity as benefits are paid and participants withdraw from the plan. The expected return on investment of 6.4% is based upon the plan’s historical return on assets. The plan expects to pay $75 thousand, $31 thousand, $34 thousand, $37 thousand, and $40 thousand in pension benefits in the years ending December 31, 2026 through 2030, respectively. The plan expects to pay $239 thousand in pension benefits for the years December 31, 2031through 2036 in the aggregate. This assumes the plan participants elect to take monthly pension benefits as opposed to a lump sum payout when they reach age 65. The Company madeno contributions to the plan during the year ended December 31, 2025, and plans to makeno contribution to the plan for the year ended December 31, 2026. The fair value of the plan assets at December 31, 2025, were $863 thousand, of which $736 thousand is classified as a Level 2 investment within the valuation hierarchy and $121 thousand is classified as a Level 3 within the valuation hierarchy.

The components of net pension expense for the year ended December 31, 2025 was as follows:

Summary information for the plans (comprised solely of one domestic plan) is as follows for the fiscal year ended December 31, 2025:

NOTE 14. STOCK BASED COMPENSATION

Stock Incentive Plans

On September 21, 2023 (the “Effective Date”), our Board of Directors (the "Board") approved the Regional Health Properties, Inc. 2023 Omnibus Incentive Compensation Plan (the “2023 Plan”), which was approved by the Company's shareholders on November 16, 2023 at the 2023 Annual Meeting of Shareholders. The 2023 Plan authorizes the Compensation Committee of the Board of the Company to grant awards to non-employee directors, employees (including executive officers) and consultants. Under the terms of the 2023 Plan, the maximum number of shares of common stock reserved for delivery in settlement of awards shall be an aggregate of 225,000 shares of our common stock and grants are subject to certain limitations. The 2023 Plan permits the grant of any or all of the following types of awards to grantees: (i) stock options, including non-qualified options and incentive stock options; (ii) stock appreciation rights; (iii) restricted shares; (iv) performance units; (v) performance shares; (vi) deferred stock; (vii) restricted stock units; (viii) dividend equivalents; and (vii) other stock-based awards.

The 2023 Plan shall remain in effect, subject to the right of the Board to amend or terminate the 2023 Plan at any time, until the earlier of 11:59 p.m. (ET) on September 21, 2033, or the date all shares subject to the 2023 Plan shall have been issued and the restrictions on all restricted shares granted under the Plan shall have lapsed, according to the 2023 Plan’s provisions.

Our 2023 Plan replaced the Regional Health Properties, Inc. 2020 Equity Incentive Plan (the “2020 Plan”). Outstanding awards under the 2020 Plan will continue to be governed by the terms of the 2020 Plan until exercised, expired or otherwise terminated or canceled, butno further equity awards will be granted under the 2020 Plan.

As of December 31, 2025, the number of securities remaining available for future issuance under our 2023 Plan is 76,000.

See Note 17 -Subsequent Eventsfor additional information on our 2023 Plan..

The following table summarizes employee stock-based compensation for the years ended December 31, 2025 and 2024:

As of December 31, 2025, the remaining stock-based compensation expense that is expected to be recognized in future periods is $0.3 million, which the Company expects to recognize over an estimated weighted average period of 1.5 years.

Common Stock Options

The following summarizes the Company’s employee and non-employee stock option activity for the years ended December 31, 2025 and 2024:

For the year ended December 31, 2025, no stock options were granted. All vested stock options were exercised during twelve months ended December 31, 2025; thus, there areno outstanding stock options as of December 31, 2025.

For the year ended December 31, 2024, a stock option to purchase 24,000 shares of common stock was granted under our 2023 Plan to an employee with an exercise price of $2.03. The weighted average fair value of the option granted was $1.77 and was estimated using the Black-Scholes option-pricing model with the following assumptions: (i) expected term of 5.27 years, (ii) risk free interest rate of 3.81%, (iii) dividend yield of 0.0%, and (iv) expected volatility of 127.14%.

The Company hasno unrecognized compensation expense related to common stock stock options as of December 31, 2025.

Common Stock Warrants

The Company grants stock warrants to officers, directors, employees and certain consultants to the Company from time to time as determined by the Board and, when appropriate, the Compensation Committee of the Board. The Board administers the granting of warrants, determines the persons to whom awards will be made, the amount of the awards, and the other terms and conditions of the awards.

The following summarizes the Company’s employee and non-employee common stock warrant activity for the years ended December 31, 2025 and 2024:

No warrants were granted during the years ended December 31, 2025 and 2024. The Company hasno unrecognized compensation expense related to common stock warrants as of December 31, 2025.

Restricted Stock

The following summarizes the Company’s restricted stock activity for the years ended December 31, 2025 and 2024:

On June 20, 2025, a Restricted Stock Award ("RSA") with respect to 65,000 shares of common stock was granted under the 2023 Equity Plan, which will vest in two equal annual installments on June 20, 2026 and June 20, 2027.

On August 14, 2025, a RSA with respect to 100,000 shares of common stock was granted as an inducement grant ("inducement grant") to a new officer of the Company. As such, the inducement grant was issued outside the Company's 2023 Equity Plan. Under the terms of the inducement grant award, the RSA will vest in three substantially equal installments on August 14, 2025, August 14, 2026 and August 14, 2027.

The remaining compensation expense on the unvested restricted stock as of December 31, 2025 that is expected to be recognized in future periods is $0.3 million, which the Company expects to recognize over an estimated weighted average period of 1.5 years.

NOTE 15. 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 may be subject to future governmental review, audit, investigation and interpretation, as well as significant regulatory action, including fines, penalties and exclusion from certain governmental programs.

As of December 31, 2025, the Company’s facilities that are operated by the Company, leased or subleased to third-party operators, or otherwise managed by third parties were certified by the Centers for Medicare & Medicaid Services (“CMS”) and were operational. Because the Company operates through Healthcare Services, Pharmacy Services and Real Estate segments, regulatory exposure may arise directly from the Company’s operated businesses, indirectly through tenant and operator performance at leased facilities, or from legacy matters relating to prior periods of direct operations. Based on information currently available, the Company believes that it is in compliance in all material respects with applicable laws and regulations relating to its current operations, although there can be no assurance that governmental agencies will not reach different conclusions in the future.

Legal Matters

The Company is party to various legal actions and administrative proceedings and is subject to various claims arising in the ordinary course of business, including claims relating to prior direct facility operations, current operated facilities, employment matters, staffing requirements, commercial disputes and other business matters. The Company believes that many of these matters are defensible and intends to defend them vigorously unless settlement is determined to be in the best interests of the Company. However, there can be no assurance that the resolution of any such matters will not have a material adverse effect on the Company’s business, results of operations or financial condition.

In addition, the Company’s tenants and operators conduct business in a highly regulated industry and are subject to continuing state and federal scrutiny, supervision and control. Such scrutiny may include inquiries, investigations, examinations, audits, site visits and surveys, some of which are non-routine. The Company believes that governmental investigations and enforcement activity involving long-term care providers have increased, particularly in areas involving Medicare and Medicaid reimbursement, false claims, staffing requirements and quality-of-care matters. Adverse determinations in legal proceedings or governmental investigations involving the Company, its prior operations, or its tenants and operators could have a material adverse effect on the Company’s business, results of operations and financial condition.

Professional and General Liability Claims Covered by Insurance

As of December 31, 2025, the Company was a defendant in two professional and general liability action arising from care provided to a former patients at the Company’s facilities. The plaintiff alleges negligence, including alleged failures to provide adequate and competent staffing, and seeks unspecified actual, compensatory and punitive damages for alleged injuries, pain and suffering, mental anguish and malnutrition. The Company believes this matter is covered by insurance, except that any punitive damages that may be awarded would be excluded from coverage.

NOTE 16. INCOME TAXES

At December 31, 2025 and 2024, the tax effect of significant temporary differences representing deferred tax assets and liabilities are as follows:

At December 31, 2025 the total tax expense is as follows:

The items accounting for the differences between income taxes computed at the federal statutory rate and the provision for income taxes are as follows:

As of December 31, 2025, the Company had consolidated federal NOL carry forwards of $98.1 million. As a result of the Tax Reform Act, approximately $28.7 million of NOL’s generated in 2018 and after do not expire and are currently offset by a full valuation allowance. The NOLs generated before December 31, 2018, which amount to $63.4 million begin to expire in 2025 through 2037 and currently are offset by a full valuation allowance. As of December 31, 2025, the Company had consolidated state NOL carry forwards of $52.0 million. These NOLs begin to expire in 2025 through 2037 and currently are offset by a full valuation allowance.

Given the Company’s historical net operating losses, a full valuation allowance has been established on the Company’s net deferred tax assets. The Company has generated additional deferred tax liabilities related to its tax amortization of certain acquired indefinite lived intangible assets because these assets are not amortized for book purposes. The tax amortization in current and future years gives rise to a deferred tax liability which will only reverse at the time of ultimate sale or book impairment. As a result of the Tax Reform Act, NOL carry forwards generated in tax years 2018 and forward have an indefinite life. For this reason, the Company has taken the position that the deferred tax liability related to the indefinite lived intangibles can be used to support an equal amount of the deferred tax asset related to the NOL carry forwards generated in tax years 2018 and forward.

The Company files federal, state and local income tax returns in the U.S. The Company is generally no longer subject to income tax examinations for years prior to fiscal 2019.

NOTE 17. 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.

On January 5, 2026, the Company's shareholders approved the Regional Health Properties, Inc. Amended and Restated 2023 Omnibus Incentive Compensation Plan (the “A&R Plan”), which was approved by our Board unanimously, subject to approval of the A&R Plan by our shareholders, on November 25, 2025. The A&R Plan (i) increased the number shares of our common stock authorized for issuance under the A&R Plan by 550,000 shares, which increased the total number of authorized shares available for issuance under the 2023 Plan from 225,000 to 775,000 and (ii) increased the number of share of our common stock that may be issued pursuant to incentive stock options under the A&R Plan from 225,000 to 775,000.

As of January 14th, 2026, the Company has repurchased an additional 30,232 shares of its Series B Preferred Stock for a cost of $184,677.

On February 1, 2026, we terminated the lease with C-Ross for the Autumn Breeze facility. We have subsequently entered into a management agreement with CJM Advisors to provide day-to-day management services.

On February 27, 2026, the Company entered into a second amendment of the Forbearance Agreement. The new expiration date is February 1, 2027.