REGIONAL HEALTH PROPERTIES, INC [RHE] Filings

10-Q 1 rhe-20240630.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-33135

Regional Health Properties, Inc.

(Exact name of registrant as specified in its charter)

    Georgia

    81-5166048

    (State or other jurisdiction
of incorporation)

    (I.R.S. Employer
Identification Number)

1050 Crown Pointe Parkway, Suite 720, Atlanta, GA 30338

(Address of principal executive offices)

(678) 869-5116

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	RHE	NYSE American
Series A Redeemable Preferred Stock, no par value	RHE-PA	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.:


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

As of August 09, 2024 the registrant had 1,904,028 shares of common stock, no par value, outstanding.

Regional Health Properties, Inc.

Form 10-Q

Table of Contents


		Page Number
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3
	Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	3
	Consolidated Statements of Operations for the three and six and months ended June 30, 2024 and 2023	4
	Consolidated Statements of Stockholders' Equity (Deficit) for the three and six and months ended June 30, 2024 and 2023	5
	Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023	6
	Notes to Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	36
Item 6.	Exhibits	36

Signatures		38

Part I. Financial Information

Item 1. Financial Statements

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in 000's)


	June 30, 2024			December 31, 2023
	(Unaudited)
ASSETS
Property and equipment, net	$	39,866		$	40,398
Asset held for sale, net		4,851			4,939
Cash		679			953
Restricted cash		2,895			3,231
Accounts receivable, net of allowances of $2,082 and $2,040		1,817			1,403
Prepaid expenses and other		894			609
Notes receivable		1,020			1,044
Intangible assets - bed licenses		2,471			2,471
Intangible assets - lease rights, net		77			87
Right-of-use operating lease assets		2,352			2,556
Goodwill		1,585			1,585
Lease deposits and other deposits		4			4
Straight-line rent receivable		2,809			2,901
Total assets	$	61,320		$	62,181
LIABILITIES AND EQUITY (DEFICIT)
Senior debt, net	$	39,796		$	40,401
Debt related to asset held for sale, net		3,388			3,454
Bonds, net		5,848			5,991
Other debt, net		1,213			889
Accounts payable		3,615			2,493
Accrued expenses		4,323			4,060
Operating lease obligation		2,693			2,917
Other liabilities		1,861			1,791
Total liabilities		62,737			61,996

Stockholders' (deficit) equity:
Common stock and additional paid-in capital, no par value; 55,000 shares authorized; 1,915 shares issued and 1,904 shares outstanding at June 30, 2024; and 1,850 shares issued and 1,839 shares outstanding at December 31, 2023		63,125			63,059
Preferred stock, no par value; 5,000 shares authorized (including amounts authorized for Series A and Series B); shares issued and outstanding designated as follows:
Preferred stock, Series A, no par value; 560 shares authorized, issued and outstanding at June 30, 2024 and December 31, 2023, with a redemption amount $426 at June 30, 2024 and December 31, 2023		426			426
Preferred stock, Series B, no par value; 2,812 shares authorized; 2,252 shares issued and outstanding at June 30, 2024 and December 31, 2023, with a redemption amount $18,602 at June 30, 2024 and December 31, 2023		18,602			18,602
Accumulated deficit		(83,570	)		(81,902	)
Total stockholders' (deficit) equity		(1,417	)		185
Total liabilities and stockholders' equity (deficit)	$	61,320		$	62,181

See accompanying notes to unaudited consolidated financial statements.

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in 000's, except share and earnings per share amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Revenues:
Patient care revenues	$	2,525		$	2,526		$	4,834		$	4,442
Rental revenues		1,800			1,722			3,617			3,430
Management fees		—			247			—			525
Other revenues		—			103			—			107
Total revenues		4,325			4,598			8,451			8,504
Expenses:
Patient care expense		2,183			1,969			4,283			4,290
Facility rent expense		149			149			297			297
Cost of management fees		—			146			—			286
Depreciation and amortization		514			702			1,025			1,212
General and administrative expense		1,229			1,422			2,860			2,954
Credit loss expense		36			24			65			40
Total expenses		4,111			4,412			8,530			9,079
Income (loss) from operations		214			186			(79	)		(575	)
Other expense:
Interest expense, net		669			679			1,344			1,359
Other expense, net		251			192			245			742
Total other expense, net		920			871			1,589			2,101
Net loss	$	(706	)	$	(685	)	$	(1,668	)	$	(2,676	)
Preferred stock dividends-gain on extinguishment		—			43,395			—			43,395
Net income (loss) attributable to Regional Health Properties, Inc. common stockholders	$	(706	)	$	42,710		$	(1,668	)	$	40,719
Net income (loss) per share of common stock attributable to Regional Health Properties, Inc.
Basic:	$	(0.38	)	$	22.68		$	(0.91	)	$	21.74
Diluted:	$	(0.38	)	$	22.68		$	(0.91	)	$	21.73
Weighted average shares of common stock outstanding:
Basic:		1,846,885			1,883,028			1,842,957			1,872,636
Diluted:		1,846,885			1,883,253			1,842,957			1,873,489

See accompanying notes to unaudited consolidated financial statements.

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

(Amounts in 000's)

(Unaudited)


	Shares of Common Stock Outstanding		Shares of Preferred Stock A		Shares of Preferred Stock B		Shares of Treasury Stock			Common Stock and Additional Paid-in Capital		Preferred Stock A, no par value		Preferred Stock B, no par value		Accumulated Deficit			Total
Balances, January 1, 2024		1,839		560		2,252		(11	)	$	63,059	$	426	$	18,602	$	(81,902	)	$	185
Stock-based compensation		—		—		—		—			43		—		—		—			43
Net loss		—		—		—		—			—		—		—		(962	)		(962	)
Balances, March 31, 2024		1,839		560		2,252		(11	)	$	63,102	$	426	$	18,602	$	(82,864	)	$	(734	)
Stock-based compensation		—		—		—		—			23		—		—		—			23
Restricted stock issuance		65		—		—		—			—		—		—		—			—
Net loss		—		—		—		—			—		—		—		(706	)		(706	)
Balances, June 30, 2024		1,904		560		2,252		(11	)	$	63,125	$	426	$	18,602	$	(83,570	)	$	(1,417	)


	Shares of Common Stock Outstanding		Shares of Preferred Stock A			Shares of Preferred Stock B		Shares of Treasury Stock			Common Stock and Additional Paid-in Capital		Preferred Stock A, no par value			Preferred Stock B, no par value		Accumulated Deficit			Total
Balances, January 1, 2023		1,784		2,812			—		(9	)	$	62,702	$	62,423		$	—	$	(121,409	)	$	3,716
Stock-based compensation		—		—			—		—			81		—			—		—			81
Restriced stock issuance		99		—			—		—			—		—			—		—			—
Net loss		—		—			—		—			—		—			—		(1,992	)		(1,992	)
Balances, March 31, 2023		1,883		2,812			—		(9	)	$	62,783	$	62,423		$	—	$	(123,401	)	$	1,805
Extinguishment of Series A Preferred Stock		—		(2,252	)		—		—			—		(61,997	)		—		—			(61,997	)
Exchange of Series A to Series B		—		—			2,252		—			—		—			18,602		43,395			61,997
Stock-based compensation		—		—			—		—			155		—			—		—			155
Forfeitures of stock-based awards		—		—			—		(2	)		—		—			—		—			—
Net loss		—		—			—		—			—		—			—		(685	)		(685	)
Balances, June 30, 2023		1,883		560			2,252		(11	)	$	62,938	$	426		$	18,602	$	(80,691	)	$	1,275

See accompanying notes to unaudited consolidated financial statements.

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in 000's)

(Unaudited)


	Six Months Ended June 30,
	2024			2023
Cash flows from operating activities:
Net loss	$	(1,668	)	$	(2,676	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		1,025			1,212
Stock-based compensation expense		66			236
Rent expense less than cash paid		(20	)		(11	)
Rent revenue in excess of cash received		(263	)		(236	)
Amortization of deferred financing costs, debt discounts and premiums		37			37
Bad debt expense		65			40
Changes in operating assets and liabilities:
Accounts receivable		(123	)		3,512
Prepaid expenses and other assets		530			797
Accounts payable and accrued expenses		1,383			(460	)
Other liabilities		70			504
Net cash provided by operating activities		1,102			2,955
Cash flows from investing activities:
Purchase of property and equipment		(395	)		(854	)
Net cash used in investing activities		(395	)		(854	)
Cash flows from financing activities:
Payment of senior debt		(688	)		(624	)
Payment of other debt		(612	)		(504	)
Debt extinguishment and issuance costs		(17	)		(17	)
Net cash used in financing activities		(1,317	)		(1,145	)
Net change in cash and restricted cash		(610	)		956
Cash and restricted cash, beginning		4,184			3,909
Cash and restricted cash, ending	$	3,574		$	4,865

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in 000's)

(Unaudited)


	Six Months Ended June 30,
	2024		2023
Supplemental disclosure of cash flow information:
Cash interest paid	$	1,355	$	1,312
Supplemental disclosure of non-cash activities:
Vendor-financed insurance	$	712	$	962
Exchange of preferred stock Series A to Series B	$	—	$	18,602
Gain on extinguishment of preferred stock	$	—	$	43,395
Cavalier Management	$	78	$	—

See accompanying notes to unaudited consolidated financial statements.

REGIONAL HEALTH PROPERTIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2024

NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Regional Health Properties, Inc.'s (the "Company" or "Regional Health") predecessor was incorporated in Ohio on August 14, 1991, under the name Passport Retirement, Inc. In 1995, Passport Retirement, Inc. acquired substantially all of the assets and liabilities of AdCare Health Systems, Inc. and changed its name to AdCare Health Systems, Inc. ("AdCare"). AdCare completed its initial public offering in November 2006, relocated its executive offices and accounting operations to Georgia in 2012, and changed its state of incorporation from Ohio to Georgia in December 2013. Regional Health Properties, Inc. is a self-managed real estate investment company that invests primarily in real estate purposed for long-term care and senior housing. The Company's business primarily consists of leasing such facilities to third-party tenants, which operate the facilities. The Company has two primary reporting segments: (i) Real Estate, which consists of the leasing and subleasing of long-term care and senior living facilities to third-party tenants and (ii) Healthcare Services segment, which consists of the operation of the Meadowood and Glenvue facilities. Effective August 3, 2023, the Company’s 12.5% Series B Cumulative Redeemable Preferred Shares (the “Series B Preferred Stock”) is quoted on the OTC Markets Group, Inc.’s OTCQB Venture Market under the symbol “RHEPB”.

Basis of Presentation

The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and with the instructions to Form 10-Q and Rule 8-03 of Article 8 of Regulation S-X. The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the 2023 audited consolidated financial statements and notes thereto, which are included in the 2023 Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") on April 1, 2024.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

Reclassifications

Certain reclassifications have been made to the amounts reported in the prior period in order to conform to the current period's presentation. A reclassification has been made to certain expenses reported on the consolidated statements of operations in the prior period in order to conform to the current period's presentation. The reclassifications had no material effect on earnings per share.

Revenue Recognition and Allowances

Patient Care Revenue. Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers, requires a company to recognize revenue when the company transfers control of promised goods and services to a customer. Revenue is recognized in an amount that reflects the consideration to which a company expects to receive in exchange for such goods and services. Revenue from our Healthcare Services business segment is derived from services rendered to patients in the Meadowood and Glenvue facilities. The Company receives payments from the following sources for services rendered in our facilities: (i) the federal government under the Medicare program administered by the Centers for Medicare and Medicaid Services ("CMS"); (ii) state governments under their respective Medicaid and similar programs; (iii) commercial insurers; and (iv) individual patients and clients. The vast majority (greater than 90%) of the revenue the Company has recognized is from government sources. The Company determines the transaction price based on established billing rates reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients and other price concessions. Contractual adjustments and discounts are based on contractual agreements, discount policies and historical experience. These amounts are due from residents or third-party payors and include variable consideration for retroactive adjustments from estimated reimbursements, if any, under reimbursement programs. Performance obligations, such as providing room and board, wound care, intravenous drug therapy, physical therapy, and quality of life activities amongst others, are determined based on the

nature of the services provided are determined based on the nature of the services provided. Estimated uncollectible amounts due from patients are generally considered implicit price concessions that are a direct reduction to net patient care revenues.

Triple-Net Leased Properties. The Company recognizes rental revenue in accordance with ASC 842, Leases. The Company's triple-net leases provide for periodic and determinable increases in rent. The Company recognizes rental revenues under these leases on a straight-line basis over the applicable lease term when collectability is probable. Recognizing rental income on a straight-line basis generally results in recognized revenues during the first half of a lease term exceeding the cash amounts contractually due from our tenants, creating a straight-line rent receivable that is included in the straight-line rent receivable on our consolidated balance sheets. In the event the Company cannot reasonably estimate the future collection of rent from one or more tenant(s) of the Company's facilities, rental income for the affected facilities is recognized only upon cash collection, and any accumulated straight-line rent receivable is expensed in the period in which the Company deems rent collection to no longer be probable.

Management Fee Revenues and Other Revenues. The Company recognizes management fee revenues as services are provided in accordance with ASU 2014-09, Revenue from Contracts with Customers, as codified in ASC 606, which requires revenue to be recognized in an amount that reflects the consideration to which a company expects to receive in exchange for such goods and services. The Company had one contract to manage three facilities (the “Management Contract”) which ended on December 31, 2023. Further, the Company recognizes interest income from loans and investments, using the effective interest method when collectability is probable. The Company applies the effective interest method on a loan-by-loan basis.

Allowances. The Company assesses the collectability of its rent receivables, including straight-line rent receivables and working capital loans to tenants. The Company bases its assessment of the collectability of rent receivables and working capital loans to tenants on several factors, including payment history, the financial strength of the tenant and any guarantors, the value of the underlying collateral, and current economic conditions. If the Company’s evaluation of these factors indicates it is probable that the Company will be unable to receive the rent payments or payments on a working capital loan, then the Company provides a reserve against the recognized straight-line rent receivable asset or working capital loan for the portion that we estimate may not be recovered. Payments received on impaired loans are applied against the allowance. If the Company changes its assumptions or estimates regarding the collectability of future rent payments required by a lease or required from a working capital loan to a tenant, then the Company may adjust its reserve to increase or reduce the rental revenue or interest revenue from working capital loans to tenants recognized in the period the Company makes such change in its assumptions or estimates. See Note 7 – Leases. The Company has reserved for approximately 1.5% of our patient care receivables based on the historic industry standards and continues to assess the adequacy of such reserve.

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


(Amounts in 000’s)	June 30, 2024			December 31, 2023
Gross receivables
Real Estate Services	$	1,015		$	693
Healthcare Services		2,884			2,750
Subtotal		3,899			3,443
Allowance
Real Estate Services		—			—
Healthcare Services		(2,082	)		(2,040	)
Subtotal		(2,082	)		(2,040	)
Accounts receivable, net of allowance	$	1,817		$	1,403

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 5 for additional details on assets held for sale as of June 30, 2024 and December 31, 2023. 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.

In June 2024, the Company, with the support of its Board of Directors, committed to a plan of action to sell the Mt. Trace Property Holdings (Mt. 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 Mt. Trace Property to be classified as held for sale were met.

Prepaid Expenses and Other

As of June 30, 2024 and December 31, 2023, the Company had approximately $0.9 million and $0.6 million , respectively, in prepaid expenses and other; the $0.3 million increase is related to insurance for the Meadowood and Glenvue facility operations, while the other amounts are predominantly for directors' and officers' insurance, NYSE American annual fees, and mortgage insurance premiums.

Accounts Payable

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


(Amounts in 000’s)	June 30, 2024		December 31, 2023
Accounts Payable
Real Estate Services	$	1,862	$	751
Healthcare Services		1,753		1,742
Total Accounts Payable	$	3,615	$	2,493

Other Liabilities

As of June 30, 2024 and December 31, 2023, the Company had approximately $1.9 million and $1.8 million, respectively in Other liabilities, consisting of security lease deposits and sublease improvement funds.

Other Expense, net

The Company had retained a law firm to evaluate and assist with opportunities to improve the Company's capital structure. See Note 2 – Series A Preferred Exchange Offer.

Leases and Leasehold Improvements

The Company leases certain facilities and equipment in the normal course of business. At the inception of each lease, the Company performs an evaluation to determine whether the lease should be classified as an operating lease or finance lease. As of June 30, 2024, the Company's leased facility is accounted for as an operating lease. For operating leases that contain scheduled rent increases, the Company records rent expense on a straight-line basis over the term of the lease. Leasehold improvements are amortized over the shorter of the useful life of the asset or the lease term.

The Company assesses any new contracts or modification of contracts in accordance with ASC 842, Leases, to determine the existence of a lease and its classification. We are reporting revenues and expenses for real estate taxes and insurance where the lessee has not made those payments directly to a third party in accordance with their respective leases with us.

Insurance

We maintain general liability, professional liability, and other insurance policies in amounts and with coverage and deductibles we believe are appropriate, based on the nature and risks of our business, historical experience, availability, and industry standards, including for the operations at the Glenvue and Meadowood facilities. Our current policies provide for deductibles for each claim and contain various exclusions from coverage. The Company has self-insured against professional and general liability claims related to its healthcare operations that were discontinued during 2014 and 2015 in connection with its transition

from an owner and operator of healthcare properties to a healthcare property holding and leasing company (the "Transition"). For further information, see Note 12 – Commitments and Contingencies, and Note 12 – Commitments and Contingencies, to the consolidated financial statements for the year ended December 31, 2023 for more information. The Company evaluates quarterly the adequacy of its self-insurance reserve based on a number of factors, including: (i) the number of actions pending and the relief sought; (ii) analyses provided by defense counsel, medical experts or other information which comes to light during discovery; (iii) the legal fees and other expenses anticipated to be incurred in defending the actions; (iv) the status and likely success of any mediation or settlement discussions, including estimated settlement amounts and legal fees and other expenses anticipated to be incurred in such settlement, as applicable; and (v) the venues in which the actions have been filed or will be adjudicated. The Company believes that most of the professional and general liability actions are defensible and intends to defend them through final judgment unless settlement is more advantageous to the Company. Accordingly, the self-insurance reserve reflects the Company's estimate of settlement amounts for the pending actions, if applicable, and legal costs of settling or litigating the pending actions, as applicable. Because the self-insurance reserve is based on estimates, the amount of the self-insurance reserve may not be sufficient to cover the settlement amounts actually incurred in settling the pending actions, or the legal costs actually incurred in settling or litigating the pending actions. See Note 8 – Accrued Expenses. In addition, the Company maintains certain other insurance programs, including commercial general liability, property, casualty, directors' and officers' liability, crime, and employment practices liability.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the respective period. Diluted earnings per share is similar to basic net loss per share except that the net loss is adjusted by the impact of the weighted-average number of shares of common stock outstanding including potentially dilutive securities (such as options, warrants and non-vested common stock) when such securities are not anti-dilutive. Potentially dilutive securities from options, warrants and unvested restricted shares are calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all options and warrants with exercise prices exceeding the average market value are used to repurchase common stock at market value. The incremental shares remaining after the proceeds are exhausted represent the potentially dilutive effect of the securities.

Securities outstanding that were excluded from the computation, because they would have been anti-dilutive were as follows:


	June 30,
(Share amounts in 000’s)	2024		2023
Stock options		33		13
Warrants - employee		32		32
Warrants - non employee		—		1
Total anti-dilutive securities		65		46

The weighted average contractual terms in years for these securities as of June 30, 2024, with no intrinsic value, are 6.4 years for the stock options and 0.5 years for the warrants.

Recently Adopted Accounting Pronouncements

In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements (Topic 842) amendments, which requires entities to determine whether related party arrangements between entities under common control are leases. The amendments also address the accounting treatment of leasehold improvements associated with common control leases. They require the lessee to amortize leasehold improvements over the useful life of the improvements to the common control group, regardless of the lease term, as long as the lessee controls the use of the underlying asset. If the lessee no longer controls the use of the asset, the leasehold improvements are accounted for as a transfer between entities under common control through an adjustment to equity. These improvements are also subject to impairment guidance in Topic 360, Property, Plant, and Equipment. The amendment is effective for public entities beginning after December 15, 2023. The Company adopted ASU 2023-01 effective January 1, 2024. The adoption of ASU-2023-01 did not have a material impact on the Company's consolidated financial statements.

New Accounting Pronouncements Issued But Not Yet Effective

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 Company is currently evaluating the impact of adopting ASU 2023-07.

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 does not expect the adoption of ASU 2023-09 to have a material impact on the Company's consolidated financial statements.

No other new accounting pronouncement issued or effective has had, or is expected to have, a material impact on the Company's financial statements.

NOTE 2. LIQUIDITY

Overview

The Company intends to pursue measures to grow its operations, sell non-core assets, streamline its cost infrastructure and otherwise increase liquidity, including: (i) refinancing or repaying debt to reduce interest costs and mandatory principal repayments, with such repayment to be funded through potentially expanding borrowing arrangements with certain lenders; (ii) increasing future lease revenue through acquisitions and investments in existing properties; (iii) strategically dispose of facilities for operational improvements or to take advantage of high sales prices; (iv) modifying the terms of existing leases; (v) replacing certain tenants who default on their lease payment terms; and (vi) reducing other and general and administrative expenses.

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

During the six months ended June 30, 2024, the Company's cash provided by operating activities was $1.1 million primarily due to the timing of accounts payable and accrued expense payments. The Company is seeking collection of the past due rent. In addition, management is working to expedite the time it takes to collect and receive aged patient receivables. Cash flow from operations in the future will be based on the operational performance of the facilities under the company's management, Glenvue and Meadowood.

Series A Preferred Stock Exchange Offer ("Exchange Offer")

In early 2020, the Company began ongoing efforts to investigate alternatives to retire or refinance our outstanding Series A Preferred Stock through privately negotiated transactions, open market repurchases, redemptions, exchange offers, tender offers, or otherwise.

On June 30, 2023, the Company closed the Company’s offer to exchange (the “Exchange Offer”) any and all outstanding shares of the Company’s 10.875% Series A Cumulative Redeemable Preferred Shares (the “Series A Preferred Stock”) for newly issued shares of the Company’s Series B Preferred Stock. In connection with the completion of the Exchange Offer and the implementation of the Series A Charter Amendments and the Series B Charter Amendments, the liquidation preference of the Series A Preferred Stock was reduced, accumulated and unpaid dividends on the Series A Preferred Stock were eliminated and future dividends on the Series A Preferred Stock were eliminated. As a result, $50.4 million in accumulated and unpaid dividends on the Series A Preferred Stock were eliminated and, as of June 30, 2024, there are no accumulated and unpaid dividends on the Series A Preferred Stock. For further information regarding the Exchange Offer, Series A Charter Amendments and Series B Charter Amendments, see Note 10 – Common and Preferred Stock.

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

Series A Preferred Dividend Suspension

Prior to the Exchange Offer, as discussed above, we suspended the quarterly dividend payment with respect to our Series A Preferred Stock commencing with the fourth quarter of 2017, and on June 8, 2018, the Board suspended quarterly dividend payments indefinitely with respect to the Series A Preferred Stock. The dividend suspension provided the Company with additional funds to meet its ongoing liquidity needs. As the Company had failed to pay cash dividends on the outstanding Series A Preferred Stock in full for more than four dividends periods, the annual dividend rate on the Series A Preferred Stock for the fifth and future missed dividend periods had increased to 12.875%, which was equivalent to approximately $3.20 per share each year, commencing on the first day after the missed fourth quarterly payment (October 1, 2018) and continuing until the second consecutive dividend payment date following such time as the Company had paid all accumulated and unpaid dividends on the Series A Preferred Stock in full in cash. As discussed above, in connection with the completion of the Exchange Offer, accumulated and unpaid dividends on the Series A Preferred Stock were eliminated.

Debt

As of June 30, 2024, the Company had $50.2 million in indebtedness, net of $0.9 million deferred financing costs and $0.1 million in unamortized discounts. The Company anticipates net principal repayments of approximately $2.4 million during the next twelve-month period, approximately $1.6 million of routine debt service amortization, $0.6 million of insurance financing amortization, and $0.2 million payment of bond debt.

Debt Covenant Compliance

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

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

Under the accounting guidance related to the presentation of financial statements, the Company is required to evaluate, on a quarterly basis, whether or not the Company's current financial condition, including its sources of liquidity at the date that the consolidated financial statements are issued, will enable the Company to meet its obligations as they come due arising within one year of the date of the issuance of the Company's consolidated financial statements and to make a determination as to whether or not it is probable, under the application of this accounting guidance, that the Company will be able to continue as a going concern. The Company's consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

In applying applicable accounting guidance, management considered the Company's current financial condition and liquidity sources, including current funds available, forecasted future cash flows, the Company's obligations due over the next twelve months, and the Company's recurring business operating expenses.

The Company concluded that it is probable that the Company will be able to meet its obligations arising within one year of the date of issuance of these consolidated financial statements within the parameters set forth in the accounting guidance.

NOTE 3. CASH AND RESTRICTED CASH

The following presents the Company's cash and restricted cash:


(Amounts in 000’s)	June 30, 2024		December 31, 2023
Cash	$	679	$	953

Restricted cash:
Cash collateral	$	57	$	159
HUD and other replacement reserves		2,055		2,125
Escrow deposits		466		630
Restricted investments for debt obligations		317		317
Total restricted cash		2,895		3,231

Total cash and restricted cash	$	3,574	$	4,184

Cash collateral—In securing mortgage financing from certain lending institutions, the Company and certain of its wholly-owned subsidiaries are required to deposit cash to be held as collateral in accordance with the terms of such loan agreements.

HUD and other replacement reserves—The regulatory agreements entered into in connection with the financing secured through HUD require monthly escrow deposits for replacement and improvement of the HUD project assets.

Escrow deposits—In connection with financing secured through the Company's lenders, several wholly-owned subsidiaries of the Company are required to make monthly escrow deposits for taxes and insurance.

Restricted cash for debt obligations—In compliance with certain financing and insurance agreements, the Company and certain wholly-owned subsidiaries of the Company are required to deposit cash held as collateral by the lender or in escrow with certain designated financial institutions.

NOTE 4. PROPERTY AND EQUIPMENT

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


(Amounts in 000’s)	Estimated Useful Lives (Years)		June 30, 2024			December 31, 2023
Buildings and improvements	5-40		$	59,914		$	59,508
Equipment and computer related	2-10			1,124			1,187
Land (1)		—		2,774			2,774
Property and equipment				63,812			63,469
Less: accumulated depreciation				(23,946	)		(23,071	)
Property and equipment, net			$	39,866		$	40,398

(1)

Includes $0.1 million of land improvements with an average estimated useful remaining life of approximately 4.5 years as of June 30, 2024.

The following table summarizes total de

REGIONAL HEALTH PROPERTIES, INC [RHE] Filings
REGIONAL HEALTH PROPERTIES, INC [RHE-PA] Filings
REGIONAL HEALTH PROPERTIES, INC [RHEPB] Filings
10-Q	[2024-08-13]
10-Q	[2024-05-15]
10-K	[2024-04-01]
10-Q	[2023-11-14]
10-Q	[2023-08-18]
10-Q	[2023-05-15]
10-K	[2023-04-14]
10-Q	[2022-11-22]
10-Q	[2022-08-23]
10-Q	[2022-05-31]
10-K	[2022-02-22]
10-Q	[2021-11-12]
10-Q	[2021-08-13]
10-Q	[2021-05-14]
10-K	[2021-03-29]
10-Q	[2020-11-13]
10-Q	[2020-08-11]
10-Q	[2020-06-11]
10-K	[2020-03-27]
10-Q	[2019-11-12]
10-Q	[2019-08-14]
10-Q	[2019-06-18]
10-K	[2019-05-17]
10-Q	[2018-11-14]
10-Q	[2018-08-14]
10-Q	[2018-05-21]
10-K	[2018-04-16]
10-Q	[2017-11-14]
10-Q	[2017-08-14]
10-Q	[2017-05-15]
10-K	[2017-04-17]
10-Q	[2016-11-14]
10-Q	[2016-08-15]
10-Q	[2016-05-16]
10-K	[2016-03-30]
10-Q	[2015-11-16]
10-Q	[2015-08-13]
10-Q	[2015-05-14]
10-K	[2015-03-31]
10-Q	[2014-11-13]
10-Q	[2014-08-11]
10-Q	[2014-05-08]
10-K	[2014-03-31]
S-1	[2013-12-31]
10-Q	[2013-11-14]
10-Q	[2013-08-14]
S-1	[2013-07-29]
10-Q	[2013-07-26]
10-K	[2013-07-08]
10-Q	[2012-11-13]
10-Q	[2012-08-07]
10-Q	[2012-05-10]
10-K	[2012-03-19]

REGIONAL HEALTH PROPERTIES, INC [RHE] Filings

REGIONAL HEALTH PROPERTIES, INC [RHE-PA] Filings

REGIONAL HEALTH PROPERTIES, INC [RHEPB] Filings