SONIDA SENIOR LIVING INC

Previous wording

The following discussion and analysis addresses (i) the Company’s results of operations for the three and six months ended June 30, 2024 and 2023, and (ii) liquidity and capital resources of the Company.

Current wording

The following discussion and analysis addresses (i) the Company’s results of operations for the three and nine months ended September 30, 2024 and 2023, and (ii) liquidity and capital resources of the Company.

Previous wording

As of June 30, 2024, the Company operated 78 senior housing communities in 19 states with an aggregate capacity of approximately 8,700 residents, including 66 owned senior housing communities (4 through a joint venture) and 12 communities that the Company third-party manages.

Current wording

As of September 30, 2024, the Company operated 83 senior housing communities in 20 states with an aggregate capacity of approximately 9,100 residents, including 70 owned senior housing communities (four through joint venture investments in a consolidated entity and four through a joint venture investment in an unconsolidated entity) and 13 communities that the Company third-party manages.

Previous wording

The Company derives its revenue primarily by providing senior living and healthcare services to seniors. During the three months ended June 30, 2024, the Company generated resident revenue of $63.1 million compared to resident revenue of $57.0 million in the three months ended June 30, 2023, representing an increase of 10.7%. The increase in revenue was primarily due to increased occupancy and to a lesser extent, increased average rent rates, and one additional owned community that was acquired in May 2024. During the six months ended June 30, 2024, the Company generated resident revenue of $123.8 million compared to $113.6 million during the six months ended June 30, 2023, representing an increase of 9.0%. The increase in revenue was primarily due to increased occupancy and to a lesser extent, increased average rent rates and one additional owned community that was acquired in May 2024.

Current wording

The Company derives its revenue primarily by providing senior living and healthcare services to seniors. During the three months ended September 30, 2024, the Company generated resident revenue of $67.0 million compared to resident revenue of $59.1 million in the three months ended September 30, 2023, representing an increase of 13.4%. The increase in revenue was primarily due to increased occupancy, increased average rent rates, and four additional owned communities acquired in July 2024. During the nine months ended September 30, 2024, the Company generated resident revenue of $190.8 million compared to $172.7 million during the nine months ended September 30, 2023, representing an increase of 10.5%. The increase in revenue was primarily due to increased occupancy, increased average rent rates, and five additional communities that were acquired during 2024.

Previous wording

Weighted average occupancy for the three months ended June 30, 2024 and 2023 for the 61 same-store communities owned by the Company was 86.2% and 83.9%, resp ectively, reflecting continued occupancy growth. The average monthly rental rate for these communities for the three months ended June 30, 2024 was 8.4% higher as compared to the three months ended June 30, 2023.

Current wording

Weighted average occupancy for the three months ended September 30, 2024 and 2023 for the 61 same-store communities owned by the Company was 87.0% and 84.9%, respectively, reflecting continued occupancy growth. The average monthly rental rate for these communities for the three months ended September 30, 2024 was 4.5% higher as compared to the three months ended September 30, 2023.

Previous wording

Weighted average occupancy for thesix months ended June 30, 2024 and 2023 for the 61 same-store communities owned by the Company was 86.0% and 83.9%, respe ctively, reflecting continued occupancy growth. The average monthly rental rate for thesix months ended June 30, 2024 was 7.1% higher as compared to thesix months ended June 30, 2023.

Current wording

Weighted average occupancy for thenine months ended September 30, 2024 and 2023 for the 61 same-store communities owned by the Company was 86.4% and 84.2%, respectively, reflecting continued occupancy growth. The average monthly rental rate for the nine months ended September 30, 2024 was 6.2% higher as compared to thenine months ended September 30, 2023.

Previous wording

The Company has property management agreements with a third-party owner and a joint venture pursuant to which the Company manages certain communities on their behalf for a management fee based on gross revenues of the applicable communities, as well as an incentive management fee, and other customary terms and conditions. The Company managed twelve communities on behalf of the third-party owner during the six months ending June 30, 2024 and ten communities during the six months ending June 30, 2023. The Company managed four communities on behalf of a joint venture during the six months ending June 30, 2024 and none during the prior period.

Current wording

The Company has property management agreements with a third-party owner and its joint ventures pursuant to which the Company manages certain communities on their behalf for a management fee based on gross revenues of the applicable communities, as well as an incentive management fee, and other customary terms and conditions. The Company managed thirteen communities on behalf of the third-party owner during the nine months ended September 30, 2024 and as compared to ten communities during the nine months ended September 30, 2023. The Company managed four communities on behalf of an unconsolidated joint venture and four communities of a consolidated joint venture during the nine months ending September 30, 2024 and none during the prior period.

Previous wording

On February 1, 2024, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Conversant Dallas Parkway (A) LP, Conversant Dallas Parkway (B) LP and several other shareholders (together, the “Investors”), pursuant to which the Investors agreed to purchase from the Company, and the Company agreed to sell to the Investors, in a private placement transaction (the “2024 Private Placement”) pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), an aggregate of 5,026,318 shares of the Company’s common stock at a price of $9.50 per share.

Current wording

On February 1, 2024, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Conversant Dallas Parkway (A) LP, Conversant Dallas Parkway (B) LP and several other shareholders (together, the “Investors”), pursuant to which the Investors agreed to purchase from the Company, and the Company agreed to sell to the Investors, in a private placement transaction (the “2024 Private Placement”) pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, an aggregate of 5,026,318 shares of the Company’s common stock at a price of $9.50 per share.

Previous wording

The 2024 Private Placement occurred in two tranches. The first tranche occurred on February 1, 2024, at which time 3,350,878 shares of common stock were issued and sold to the Investors for a total of $31.8 million. The second tranche occurred on March 22, 2024, at which time 1,675,440 shares of common stock were issued and sold to the Investors for a total of $15.9 million. The second tranche occurred following receipt of the Stockholder Approval. The Company used a portion of the proceeds from the first tranche to fund a portion of the cash purchase price for the 2024 Loan Purchase. The Company used the remaining proceeds for ongoing working capital, continued investments in community improvements, acquisitions of new communities, broader community programming and general corporate purposes. As of June 30, 2024, the majority of our common stock is held by Conversant Dallas Parkway (A) LP, Conversant Dallas Parkway (B) LP, and Conversant Dallas Parkway (D) LP (together, “Conversant” or the “Conversant Investors”).

Current wording

The 2024 Private Placement occurred in two tranches. The first tranche occurred on February 1, 2024, at which time 3,350,878 shares of common stock were issued and sold to the Investors for a total of $31.8 million. The second tranche occurred on March 22, 2024, at which time 1,675,440 shares of common stock were issued and sold to the Investors for a total of

Previous wording

In April 2024, the Company entered into an asset purchase agreement to acquire a community located in Macedonia, Ohio for a purchase price of $10.7 million plus transaction costs of $0.4 million. In May 2024, the Company closed on the acquisition and entered into a mortgage loan totaling $9.4 million. The Company purchased a Secured Overnight Financing Rate- (“SOFR”) based interest rate cap (“IRC”) to reduce exposure to the variable interest rate fluctuations associated with the new mortgage. The total cost of the IRC was $0.2 million and has an aggregate notional amount of $9.4 million. The IRC has a 24-month term and caps SOFR at 6.00%. See “Note 6–Notes Payable” and “Note 13–Fair Value Measurements” in the Notes to Condensed Consolidated Financial Statements.

Current wording

In April 2024, the Company entered into an asset purchase agreement to acquire a community located in Macedonia, Ohio for a purchase price of $10.7 million plus transaction costs of $0.4 million. In May 2024, the Company closed on the acquisition and entered into a mortgage loan totaling $9.4 million. The Company purchased a Secured Overnight Financing Rate- (“SOFR”) based interest rate cap (“IRC”) to reduce exposure to the variable interest rate fluctuations associated with the new mortgage. The total cost of the IRC was $0.2 million and has an aggregate notional amount of $9.4 million. The IRC has a 24-month term and caps SOFR at 6.00%. See “Note 6–Debt” and “Note 13–Fair Value Measurements” in the Notes to Condensed Consolidated Financial Statements.

Previous wording

In April 2024, the Company and KZ Stone Investor LLC (“KZ Investor”) formed a new joint venture, Stone JV LLC (“Stone”) for the purpose of acquiring, owning, and operating four senior housing communities located in the Midwest. In May 2024, Stone purchased the four communities for a purchase price of $64.0 million. KZ Investor is the controlling managing member of the newly formed venture and owns 66.67% of the entity as of June 30, 2024. Sonida owns a 33.33% noncontrolling interest of the new venture as of June 30, 2024, which was acquired through cash contributions in conjunction with the closing. Sonida operates the four communities for a management fee based on gross revenues of the applicable communities, as well as an incentive management fee, and other customary terms and conditions. Sonida’s investment in the venture is accounted for under the equity method of accounting.

Current wording

In April 2024, the Company and KZ Stone Investor LLC (“KZ Investor”) formed a new joint venture, Stone JV LLC (“Stone”) for the purpose of acquiring, owning, and operating four senior housing communities located in the Midwest. In May 2024, Stone purchased the four communities for a purchase price of $64.0 million. KZ Investor is the controlling managing member of the newly formed venture and owns 66.67% of the entity as of September 30, 2024. Sonida owns a 33.33% noncontrolling interest in the new venture as of September 30, 2024, which was acquired through cash contributions in connection with the closing. Sonida operates the four communities for a management fee based on gross revenues of the applicable communities, as well as an incentive management fee based on earnings before interest, taxes, depreciation, amortization, rent, and management fees, and other customary terms and conditions.

Previous wording

The Company has evaluated its investment in the Stone joint venture under ASC 810. The Company has determined that it does not have the power to direct the activities of the VIE that most significantly impact its economic performance and is not the primary beneficiary of the VIE in accordance with ASC 810. The Company's interests in the VIE are, therefore, accounted for under the equity method of accounting. The carrying amount of the Company's investment in the unconsolidated venture and maximum exposure to loss as a result of the Company's ownership interest in the joint venture was $22.3 million, which is included in equity method investments on the accompanying condensed consolidated balance sheet as of June 30, 2024.

Current wording

The Company has evaluated its investment in the Stone joint venture under ASC 810. The Company has determined that it does not have the power to direct the activities of the VIE that most significantly impact its economic performance and is not the primary beneficiary of the VIE in accordance with ASC 810. The Company's interests in the VIE are, therefore, accounted for under the equity method of accounting. The carrying amount of the Company's investment in the unconsolidated venture and maximum exposure to loss as a result of the Company's ownership interest in the joint venture was $11.9 million, which is included in equity method investment on the accompanying condensed consolidated balance sheet as of September 30, 2024.

Previous wording

The Company evaluates the realization of its investment in unconsolidated entities accounted for using the equity method if circumstances indicate the Company's investment is other than temporarily impaired. During the three and six months ended June 30, 2024, there were no impairments.

Current wording

The Company evaluates the realization of its investment in unconsolidated entities accounted for using the equity method if circumstances indicate the Company's investment is other than temporarily impaired. During the three and nine months ended September 30, 2024, there were no impairments.

Previous wording

During 2020, the Company initiated aprocess to transfer the operations and ownership of 18 propertiesto Fannie Mae. In January 2023, the Company received notice that the foreclosure sales conducted by Fannie Mae had successfully transitioned the remaining two properties to new owners. This event relieved the Company of the existing Fannie Mae debt relating to the two properties. Accordingly, the Company recognized a total of $36.3 million for the gain on debt extinguishments for the six months ended June 30, 2023. With the transition of these two remaining properties, the 18 total Fannie Mae properties’ foreclosure was complete.

Current wording

During 2020, the Company initiated aprocess to transfer the operations and ownership of 18 propertiesto Fannie Mae. In January 2023, the Company received notice that the foreclosure sales conducted by Fannie Mae had successfully transitioned the remaining two properties to new owners. This event relieved the Company of the existing Fannie Mae debt relating to the two properties. Accordingly, the Company recognized a total of $36.3 million for the gain on debt extinguishments for the nine months ended September 30, 2023. With the transition of these two remaining properties, the 18 total Fannie Mae properties’ foreclosure was complete.

Previous wording

On February 2, 2024, the Company expanded the existing loan facility with Ally by $24.8 million (“Ally Third Amendment”) to partially fund the 2024 Loan Purchase. The Company incurred deferred loan costs of $0.5 million as part of the Ally financing that will be amortized over the loan term. As part of the Ally Third Amendment, the Company expanded its current interest rate cap to include the additional loan obligation at a cost of $0.6 million. The expanded Ally debt facility is secured by six of the Company’s senior living communities involved in the 2024 Loan Purchase.

Current wording

On February 2, 2024, the Company expanded the existing loan facility with Ally by $24.8 million (“Ally Third Amendment”) to partially fund the 2024 Loan Purchase. The Company incurred deferred loan costs of $0.5 million as part of the Ally financing that will be amortized over the loan term. As part of the Ally Third Amendment, the Company expanded its current interest rate cap to include the additional loan obligation at a cost of $0.6 million and increased the monthly interest rate cap reserve (“IRC Reserve”) held by Ally to match the notional amount required under the increased obligation. In addition, the Waiver Principal Reserve Amount (defined below) was increased by an average of approximately $36,000 per month and the Company made a one-time payment to the debt service reserve of $0.4 million. The expanded Ally debt facility is secured by six of the Company’s senior living communities involved in the 2024 Loan Purchase.

Previous wording

On May 22, 2024, the Company executed an amendment (“Ally Fourth Amendment”) to the Ally term loan agreement. Ally Bank successfully syndicated a portion of its total term loan commitment to Cross River Bank. The Ally Fourth Amendment avails the Company to a $10 million delayed draw upon the achievement of certain financial covenants. Ally Bank retained $76.2 million of the initial term loan and $6.7 million of the delayed draw for a total of $82.9 million while Cross River Bank obtained $36.7 million of the initial term loan and $3.3 million of the delayed draw loan for a total of $40 million. Following the syndication, Ally Bank and Cross River Bank owned 67.5% and 32.5% of the outstanding principal balance, respectively. As each lender loans a specific amount to the debtor and has the right to repayment from the debtor this transaction is considered a loan syndication and the guidance in ASC 470-50 should be applied to the modified loans on a creditor-by-creditor basis. As Ally Bank was the sole lender prior to the syndication, there is no change in the allocation of deferred loan costs, and they will continue to be amortized over the loan term.

Current wording

On May 22, 2024, the Company executed an amendment (“Ally Fourth Amendment”) to the Ally term loan agreement. Ally Bank successfully syndicated a portion of its total term loan commitment to Cross River Bank. Following the syndication, Ally Bank and Cross River Bank owned 67.5% and 32.5% of the outstanding principal balance, respectively. As each lender loans a specific amount to the debtor and has the right to repayment from the debtor this transaction is considered a loan syndication and the guidance in ASC 470-50 should be applied to the modified loans on a creditor-by-creditor basis. As Ally Bank was the sole lender prior to the syndication, there is no change in the allocation of deferred loan costs, and they will continue to be amortized over the loan term.

Previous wording

•During the Waiver period, Ally will collect the equivalent of the monthly Ally Term Loan principal payment (as provided for in the Ally Term Loan Agreement) of approximately $117,000 through an Ally controlled escrow

Current wording

•During the Waiver period, Ally will collect the equivalent of the monthly Ally Term Loan principal payment (as provided for in the Ally Term Loan Agreement) of approximately $117,000 through an Ally controlled escrow (“Waiver Principal Reserve Account”). Per the Fourth Ally Amendment and the expansion of our loan by $24.8 million, this escrow has increased by an average of $36,000 a month.

Previous wording

In connection with the Macedonia community acquisition in May 2024, the Company entered into a $9.4 million mortgage with a new lender. The mortgage has a 60-month term and a variable interest rate equal to 1-month term SOFR + 2.00%. The Company is not required to make scheduled principal payments for the first 36 months. The Company also entered into a SOFR-based IRC to reduce exposure to the variable interest rate fluctuations associated with the new mortgage. The total cost of the IRC was $0.2 million and has an aggregate notional amount of $9.4 million. The IRC has a 24-month term and caps SOFR at 6.00% from May 9, 2024 through May 1, 2026 with respect to such variable rate indebtedness.

Current wording

In connection with the Macedonia community acquisition in May 2024, the Company entered into a $9.4 million mortgage with a new lender. The mortgage has a 60-month term and a variable interest rate equal to 1-month term SOFR plus 2.00% margin. The Company is not required to make scheduled principal payments for the first 36 months. The Company also entered into a SOFR-based IRC to reduce exposure to the variable interest rate fluctuations associated with the new mortgage. The total cost of the IRC was $0.2 million and has an aggregate notional amount of $9.4 million. The IRC has a 24-month term and caps SOFR at 6.00% from May 9, 2024 through May 1, 2026 with respect to such variable rate indebtedness.

Previous wording

On August 5, 2024, the Company entered into loan modification agreements (“Texas Loan Modification”) with one of its lenders on two owned communities in Texas. The original loan terms included maturities of April 2025 and October 2031, as well as cross-default provisions with each other. The Texas Loan Modification includes revised loan maturities of December 2025 on both communities, with the Company’s option to make a discounted payoff (“Texas DPO”) of the outstanding loan principal on or prior to November 1, 2024. As part of the consideration, the Company is required to pay a total restructure fee of $250,000 at the time of the Texas DPO. The Texas DPO amount of $18.5 million represents a discount of 36% on the total principal outstanding of $28.7 million on these two loans (as of July 31, 2024).

Current wording

On August 5, 2024, the Company entered into loan modification agreements (“Texas Loan Modification”) with one of its lenders on two owned communities in Texas. The original loan terms included maturities of April 2025 and October 2031, as well as cross-default provisions with each other. The Texas Loan Modification includes revised loan maturities of December 2025 on both communities, with the Company’s option to make a discounted payoff (“Texas DPO”) of the outstanding loan principal on or prior to November 1, 2024. As part of the consideration, the Company was required to pay a total restructuring fee of $250,000. See “Note 15–Subsequent Events” in the Notes to Condensed Consolidated Financial Statements.

Previous wording

Resident revenue for the three months ended June 30, 2024 was $63.1 million as compared to $57.0 million for the three months ended June 30, 2023, representing an increase of $6.1 million, or 10.7%. The increase in revenue was primarily due to increased occupancy and to a lesser extent, increased average rent rates, and one additional owned community that was acquired in May 2024. For the three months ended June 30, 2023, the Company received approximately $0.4 million in various relief funds received from state departments due to financial distress impacts of COVID-19 (“State Relief Funds”). For the three months ended June 30, 2024, the Company received no State Relief Funds.

Current wording

Resident revenue for the three months ended September 30, 2024 was $67.0 million as compared to $59.1 million for the three months ended September 30, 2023, representingan increase of $7.9 million, or 13.4%. Theincrease in revenue was primarily due to increased occupancy, increased average rent rates, and five additional communities acquired during 2024. For the three months ended September 30, 2023, the Company received approximately $0.5 million in various relief funds received from state departments due to financial distress impacts of COVID-19 (“State Relief Funds”). For the three months ended September 30, 2024, the Company did not receive any State Relief Funds.

Previous wording

Managed community reimbursement revenue for the three months ended June 30, 2024 was $6.4 million as compared to $5.4 million for the three months ended June 30, 2023, representing an increase of $1.0 million or 18.5%. The increase was primarily a result of managing more communities in the three months ended June 30, 2024 compared to the prior period.

Current wording

Managed community reimbursement revenue for the three months ended September 30, 2024 was $6.6 million as compared to $5.0 million for the three months ended September 30, 2023, representing an increase of $1.6 million or 32.0%. The increase was primarily a result of managing three more communities in the three months ended September 30, 2024 compared to the prior period.

Previous wording

General and administrative expenses for the three months ended June 30, 2024 were $9.2 million as compared to $6.6 million for the three months ended June 30, 2023, representing an increase of $2.6 million. The increase was primarily a result of an increase in labor and employee related expenses of $1.0 million, a $0.6 million increase in stock-based compensation expense, a $0.3 million increase in transaction costs, and a net increase in other expenses of $0.6 million.

Current wording

General and administrative expenses for the three months ended September 30, 2024 were $11.8 million as compared to $8.6 million for the three months ended September 30, 2023, representing an increase of $3.2 million. The increase was primarily a result of an increase in labor and employee related expenses of $1.6 million due to the additional communities acquired and managed during 2024, a $0.8 million increase in stock-based compensation expense, a $0.5 million increase in transaction costs, and a net increase in other expenses of $0.3 million.

Previous wording

Managed community reimbursement expense for the three months ended June 30, 2024 was $6.4 million as compared to $5.4 million for the three months ended June 30, 2023, representing an increase of $1.0 million or 18.5%. The increase was primarily a result of managing more communities in the three months ended June 30, 2024 compared to the prior period.

Current wording

Managed community reimbursement expense for the three months ended September 30, 2024 was $6.6 million as compared to $5.0 million for the three months ended September 30, 2023, representing an increase of $1.6 million or 32.0%. The increase was primarily a result of managing more communities in the three months ended September 30, 2024 compared to the prior period.

Previous wording

Interest expense for the three months ended June 30, 2024 was $9.0 million as compared to $8.6 million for the three months ended June 30, 2023, representing an increase of $0.4 million primarily due to the change in fair value of our IRC and the ending of the Fannie Interest Abatement Period ending on May 31, 2024.

Current wording

Interest expense for the three months ended September 30, 2024 was $9.8 million as compared to $9.0 million for the three months ended September 30, 2023, representingan increase of $0.8 million primarily due to the change in fair value of our IRC and the ending of the Fannie Interest Abatement Period ending on May 31, 2024.

Previous wording

Resident revenue for thesix months ended June 30, 2024 was $123.8 million as compared to $113.6 million for thesix months ended June 30, 2023, representing an increase of $10.2 million, or 9.0%. The increase in revenue was primarily due to increased occupancyand to a lesser extent, increased average rent rates, andone additional owned community that was acquired in May 2024. For the six months ended June 30, 2023, the Company received $2.4 million in State Relief Funds. For the six months ended June 30, 2024, the Company received no State Relief Funds.

Current wording

Resident revenue for thenine months ended September 30, 2024 was $190.8 million as compared to $172.7 million for thenine months ended September 30, 2023, representing an increase of $18.1 million, or 10.5%. Theincrease in revenue was primarily due to increased occupancy, increased average rent rates, and five additional communities acquired during 2024. For the nine months ended September 30, 2023, the Company received $2.9 million in State Relief Funds. For the nine months ended September 30, 2024, the Company did not receive State Relief Funds.

Previous wording

Managed community reimbursement revenue for the six months ended June 30, 2024 was $12.5 million as compared to $10.3 million for the six months ended June 30, 2023, an increase of $2.2 million or 21.4%. The increase was primarily a result of managing more communities in the six months ended June 30, 2024 as compared to the prior period.

Current wording

Managed community reimbursement revenue for the nine months ended September 30, 2024 was $19.1 million as compared to $15.3 million for the nine months ended September 30, 2023, an increase of $3.8 million or 24.8%. The increase was primarily a result of managing more communities in the nine months ended September 30, 2024 as compared to the prior period.

Previous wording

Operating expenses for thesix months ended June 30, 2024 were$92.3 million as compared to$88.5 million for thesix months ended June 30, 2023, representing an increase of$3.8 million, or 4.3%. The increase is primarily attributable to the increase in labor over this period.

Current wording

Operating expenses for thenine months ended September 30, 2024 were$142.8 million as compared to$133.0 million for thenine months ended September 30, 2023, representingan increase of$9.8 million, or 7.4%. The increase is primarily attributable to the increase in labor of $6.9 million and an increase in other expenses of $2.9 million as a result of five new consolidated communities this period as compared to the prior period.

Previous wording

General and administrative expenses for the six months ended June 30, 2024 were $16.4 million as compared to $13.6 million for the six months ended June 30, 2023, representing an increase of$2.8 million. The increase was primarily a result of an increase in labor and employee related expenses of $1.6 million, an increase in stock-based compensation of $0.3 million, an increase in transaction costs of $0.3 million, and a net increase in other expenses of $0.6 million.

Current wording

General and administrative expenses for the nine months ended September 30, 2024 were $28.2 million as compared to $22.3 million for the nine months ended September 30, 2023, representing an increase of$5.9 million. The increase was primarily a result of an increase in labor and employee related expenses of $3.2 million, an increase in stock-based compensation of $1.1 million, an increase in transaction costs of $0.8 million, and a net increase in other expenses of $0.8 million. The main driver of the increases were the additional expenses related to five new consolidated communities this period as compared to the prior period.

Previous wording

Managed community reimbursement expense for the six months ended June 30, 2024 was $12.5 million as compared to $10.3 million for the six months ended June 30, 2023, an increase of $2.2 million or 21.4%. The increase was primarily a result of managing more communities in the six months ended June 30, 2024 as compared to the prior period.

Current wording

Managed community reimbursement expense for the nine months ended September 30, 2024 was $19.1 million as compared to $15.3 million for the nine months ended September 30, 2023, an increase of $3.8 million or 24.8%. The increase was primarily a result of managing more communities in the nine months ended September 30, 2024 as compared to the prior period.

Previous wording

Interest expense for thesix months ended June 30, 2024 was $17.6 million as compared to $17.4 million for thesix months ended June 30, 2023, representing an increase of $0.2 million primarily due to thechange in fair value of our IRC.

Current wording

Interest expense for thenine months ended September 30, 2024 was $27.4 million as compared to $26.4 million for thenine months ended September 30, 2023, representingan increase of $1.0 million primarily due to the change in fair value of our IRC.

Previous wording

Gain on extinguishment of debtfor the six months ended June 30, 2024 was $38.1 million. The gain relates to the derecognition of notes payable and liabilities as a result of the 2024 Loan Purchase from one of our lenders. Gain onextinguishment of debtfor the six months ended June 30, 2023 was$36.3 million and related to the derecognition of notes payable and liabilities as a result of the transition of legal ownership of two communities to Fannie Mae, the holder of the related non-recourse debt.

Current wording

Gain on extinguishment of debtfor the nine months ended September 30, 2024 was $38.1 million. The gain related to the derecognition of notes payable and liabilities as a result of the 2024 Loan Purchase from one of our lenders. Gain onextinguishment of debtfor the nine months ended September 30, 2023 was$36.3 million and related to the derecognition of notes payable and liabilities as a result of the transition of legal ownership of two communities to Fannie Mae, the holder of the related non-recourse debt.

Previous wording

In addition to $9.5 million of unrestricted cash as of June 30, 2024, our future liquidity will depend in part upon our operating performance, which will be affected by prevailing economic conditions, and financial, business and other factors, some of which are beyond our control. Principal sources of liquidity are expected to be cash flows from operations, proceeds from equity offerings, proceeds from debt refinancings or loan modifications, and proceeds from the sale of owned assets. During 2023, we entered into loan modifications with Fannie Mae, an amendment with Ally Bank, including a revised Limited Payment Guaranty, and an Equity Commitment with Conversant. During the first quarter of 2024, we completed the 2024 Private Placement pursuant to which we issued and sold an aggregate of 5.0 million shares of our common stock to several of our shareholders for gross cash proceeds of $47.8 million, which enabled us to purchase all of the Company’s debt then outstanding with a certain lender at a substantial discount, as well as fund future working capital and growth initiatives. Additional financing of $24.8 million for the debt purchase was provided by Ally Bank through an expansion of the Company’s existing Ally Bank term loan. On April 1, 2024, the Company entered into the At-the-Market Issuance Sales Agreement (the “ATM Sales Agreement”), whereby the Company may sell, at its option, shares of its common stock up to an aggregate offering price of $75,000,000. As of June 30, 2024, the Company has received $17.4 million net proceeds from the ATM sales. These transactions are expected to provide additional financial flexibility to us and increase our liquidity position. See “Note 6–Notes Payable,” “Note 7–Securities Financing,” and “Note 15–Subsequent Events” in the Notes to Condensed Consolidated Financial Statements.

Current wording

In addition to $24.9 million of unrestricted cash as of September 30, 2024, our future liquidity will depend in part upon our operating performance, which will be affected by prevailing economic conditions, and financial, business and other factors, some of which are beyond our control. Principal sources of liquidity are expected to be cash flows from operations, proceeds from equity offerings, proceeds from our debt and credit facility, proceeds from debt refinancings or loan modifications, and proceeds from the sale of owned assets. During 2023, we entered into loan modifications with Fannie Mae, an amendment with Ally Bank, including a revised Limited Payment Guaranty, and an Equity Commitment with Conversant. During 2024, we completed the 2024 Private Placement pursuant to which we issued and sold an aggregate of 5.0 million shares of our common stock to several of our shareholders for gross cash proceeds of $47.8 million, which enabled us to purchase all of the Company’s debt then outstanding with a certain lender at a substantial discount, as well as fund future working capital and growth initiatives. Additional financing of $24.8 million for the debt purchase was provided by Ally Bank through an expansion of the Company’s existing Ally Bank term loan. On April 1, 2024, the Company entered into the At-the-Market Issuance Sales Agreement (the “ATM Sales Agreement”), whereby the Company may sell, at its option, shares of its common stock up to an aggregate offering price of $75,000,000. As of September 30, 2024, the Company has received $18.7 million net proceeds from the ATM sales. During August 2024, the Company completed a public offering and issued 4,830,317 shares of common stock for net proceeds of $124.1 million. During August 2024, the Company entered into a Credit Facility in which borrowing availability is determined based upon the value of the senior living communities. These transactions are expected to provide additional financial flexibility to us and increase our liquidity position. See “Note 6–Debt,” “Note 7–Securities Financing,” and “Note 15–Subsequent Events” in the Notes to Condensed Consolidated Financial Statements.

Previous wording

The Company, from time to time, considers and evaluates financial and capital raising transactions related to its portfolio, including debt refinancings, purchases and sales of assets, equity offerings and other transactions. There can be no assurance that the Company will continue to generate cash flows at or above current levels, or that the Company will be able to obtain the capital necessary to meet the Company’s short- and long-term capital requirements.

Current wording

The Company, from time to time, considers and evaluates financial and capital raising transactions related to its portfolio, including debt financings and refinancings, purchases and sales of assets, equity offerings and other transactions. There can be no assurance that the Company will continue to generate cash flows at or above current levels, or that the Company will be able to obtain the capital necessary to meet the Company’s short- and long-term capital requirements.

Previous wording

Net cash used in operating activities for the six months ended June 30, 2024 was $1.6 million as compared to net cash provided by operating activities of $5.5 million for the six months ended June 30, 2023. The change of $7.2 million is primarily due to the settlement of accounts payable and accrued expenses, and to a lesser extent, timing of accounts receivable collections during the six months ended June 30, 2024. Additionally, we received grants of $2.4 million in the six months ended June 30, 2023 from state departments due to financial distress impacts of COVID-19.

Current wording

Net cash provided by operating activities for the nine months ended September 30, 2024 was $1.4 million as compared to $10.6 million for the nine months ended September 30, 2023. The change of $9.2 million is primarily due to the settlement of accounts payable and accrued expenses during the nine months ended September 30, 2024 compared to the prior year period. Additionally, we received grants of $2.9 million in the nine months ended September 30, 2023 from state departments due to financial distress impacts of COVID-19. No such grants were received during 2024.

Previous wording

Net cash used in investing activities for the six months ended June 30, 2024 was $42.7 million primarily due to the acquisition of a new community of $11.1 million and acquisition of unconsolidated entities of $22.3 million, ongoing capital improvements combined with refurbishments at the Company’s senior housing communities of $9.9 million, partially offset by $0.6 million from the proceeds from the sale of an unencumbered land parcel in January 2024. Net cash used in investing activities of $9.4 million for the six months ended June 30, 2023 isprimarily the result ofongoing capital improvements and refurbishments at the Company’s senior housing communities of $9.7 million, partially offset by $0.3 million from the proceeds from the sale of an unencumbered land parcel in March 2023.

Current wording

Net cash used in investing activities for the nine months ended September 30, 2024 was $154.1 million primarily due a payment of $102.5 million for an acquisition deposit used to fund the purchase of the Palm Communities on October 1, 2024. Other net cash used in investing activities was for the acquisition of four new communities for $22.3 million, the acquisition of four unconsolidated entities for $22.4 million, and ongoing capital improvements combined with refurbishments at the Company’s senior housing communities of $17.9 million, which was partially offset by a return on investment of $10.4 million in our unconsolidated entities. Net cash used in investing activities of $12.8 million for the nine months ended September 30, 2023 wasprimarily the result ofongoing capital improvements and refurbishments at the Company’s senior housing communities of $14.2 million, partially offset by $1.4 million from the proceeds from the sale of fixed assets.

Previous wording

Net cash provided by financing activities for the six months ended June 30, 2024 was $50.4 million primarily due to net proceeds from the issuance of common stock of $65.1 million and proceeds of $36.6 million from notes payable, partially offset by repayments of notes payable of $48.5 million and purchases of derivative assets of $1.9 million. The net cash used in financing activities for the six months ended June 30, 2023 was $6.3 million primarily due to repayments of notes payable.

Current wording

Net cash provided by financing activities for the nine months ended September 30, 2024 was $178.8 million primarily due to net proceeds from the issuance of common stock of $190.5 million, proceeds of $36.9 million from notes payable, and proceeds from noncontrolling investors of $7.7 million, partially offset by repayments of notes payable of $50.0 million and dividends paid of $1.4 million. The net cash used in financing activities for the nine months ended September 30, 2023 was $7.4 million primarily due to repayments of notes payable of $12.5 million and deferred financing costs paid of $0.8 million, partially offset by proceeds of $6.0 million from equity draws under the Equity Commitment.