RHE Regional Health Properties, Inc - 10-K

Item 1A. Risk Factors

Investing in our securities involves risks. The following factors, among others, could materially adversely affect our business, financial condition, results of operations and cash flows. These risks should be considered together with the other information contained in this Annual Report.

Risks Related to Our Business

Our revenues depend on reimbursement from Medicare, Medicaid and other third-party payors; therefore, changes in reimbursement policies or payment methodologies could adversely affect our business.

A substantial portion of the revenues generated by our Healthcare Services segment, our Pharmacy Services segment and our tenants is derived from payments from government healthcare programs such as Medicare and Medicaid. These programs are subject to frequent statutory, regulatory and administrative changes, including rate reductions, changes in payment methodologies, increased utilization review, retroactive adjustments and limitations on covered services. The healthcare industry is also increasingly shifting toward value-based purchasing and other reimbursement models that link payments to quality metrics, patient outcomes and efficiency of care. If reimbursement rates decline, if new reimbursement methodologies are unfavorable, or if we, our operators or our pharmacy business fail to satisfy program requirements, our revenues, operating margins and financial condition could be materially adversely affected.

Changes in patient acuity, payor mix, bundled payments and consolidated billing arrangements could reduce our revenues and margins.

Our operating results are affected not only by reimbursement rates, but also by changes in patient acuity, length of stay, payor mix and the structure of reimbursement programs. A shift toward lower-margin residents, increased Medicare Advantage penetration, lower Medicaid reimbursement, shorter stays or increased use of bundled payment, consolidated billing or other cost-containment arrangements could reduce revenues and profitability. In addition, if reimbursement models do not adequately compensate us or our operators for the clinical needs of residents, pharmacy costs, therapy costs or other services furnished, our margins could be adversely affected.

Transition to direct operation of certain facilities may not be successful and exposes us to additional operating, regulatory and staffing risks.

We are shifting from primarily leasing facilities to operating certain facilities directly. Operating skilled nursing and related healthcare facilities requires capabilities that differ from our historical landlord model, including recruiting and retaining clinical staff amid labor shortages and elevated wage and agency costs; establishing and maintaining operating systems, billing and compliance processes and internal controls; obtaining and maintaining required state licenses and Medicare/Medicaid certifications; and, at some locations, managing third‑party managers. Newly operated facilities may require working capital and ramp‑up time and may not achieve expected volumes, payor mix or quality metrics. If we do not execute this transition effectively, we could face higher costs, operating losses, regulatory sanctions, impairment charges and liquidity pressure, and our business, financial condition and results of operations could be materially adversely affected.

For independent living, memory care and assisted living segments, revenue is also dependent on private pay sources such that events which adversely affect the ability of seniors to afford our resident offerings such as declines in the economy, housing market, consumer confidence, or the equity markets, increased inflation, and unemployment among resident family members, could cause our revenues and business to decline.

Costs to seniors associated with independent living, assisted living, and memory care communities are not generally reimbursable under government reimbursement programs such as Medicare and Medicaid. Economic decline or uncertainty, increased inflation, downturns in the housing market, higher levels of unemployment among resident family members, lower levels of consumer confidence, stock market volatility, and changes in demographics could adversely affect the ability of seniors to afford to live in our facilities. If we are unable to retain and attract seniors with sufficient income, assets, or other resources required to pay for independent living, assisted living, and memory care services and other service offerings, our occupancy, revenues, results of operations, and cash flow could decline.

Our tenants’ ability to pay rent depends on their financial performance, and tenant financial distress could materially adversely affect us.

A significant portion of our revenues is derived from lease payments from tenants who operate healthcare facilities on our properties. The ability of our tenants to satisfy their obligations depends on their operating performance, which is affected by factors including reimbursement levels, labor costs, regulatory compliance, occupancy and local market conditions. If one or more tenants were to experience financial distress, default on lease payments, seek bankruptcy protection or fail to renew leases, our rental income could decline. In addition, replacing a tenant may involve delays due to licensing, change-of-ownership approvals and other regulatory processes. Healthcare facilities are specialized assets, and identifying replacement operators may be difficult or time-consuming.

Competition and changing healthcare delivery models could reduce demand for our services.

The long-term care and healthcare services industries are highly competitive. We and our tenants compete with numerous providers of healthcare services, including skilled nursing facilities, home health providers, assisted living facilities, memory care providers, continuing care retirement communities and community-based care programs. Competition is based on factors such as quality of care, reputation, location, physician relationships, price and the range of services offered. In addition, healthcare delivery models continue to evolve, with increased emphasis on home-based care, outpatient treatment and alternatives to institutional long-term care, which may reduce demand for some of our services.

Labor shortages and staffing mandates could increase operating costs and adversely affect operations.

The healthcare industry is experiencing ongoing shortages of qualified nurses, caregivers, therapists, pharmacists and other healthcare professionals. Recruiting and retaining qualified personnel has become increasingly difficult and costly. Labor costs have increased due to wage inflation, competition for qualified staff, reliance on temporary staffing agencies and regulatory staffing requirements. Federal and state governments have implemented or proposed minimum staffing mandates for skilled nursing facilities. Complying with these requirements may significantly increase labor costs and could reduce profitability if reimbursement rates do not increase sufficiently to offset these expenses. Failure to maintain adequate staffing levels could also negatively affect quality ratings, regulatory compliance and facility operations.

State direct-spending requirements, supplemental Medicaid payment changes and other Medicaid funding restrictions could adversely affect our results.

Certain states have adopted, and other states may adopt, requirements that skilled nursing facilities spend specified portions of their revenue, including Medicaid-derived revenue, on direct patient care, staffing or other designated cost categories. These requirements may reduce operating flexibility, create compliance burdens and expose operators to penalties, recoupments, admission restrictions or other sanctions if they are not satisfied. In addition, some states have provided supplemental Medicaid payments or other support intended to offset labor inflation or workforce shortages. If such payments are reduced, delayed or eliminated, and base reimbursement rates do not increase sufficiently, our operators’ financial performance and our results could be adversely affected.

Increased survey enforcement, public quality ratings and staffing-related disclosure requirements could adversely affect our facilities and operators.

Federal and state agencies have increased scrutiny of skilled nursing facilities, including through enhanced survey enforcement, payroll-based staffing data review, infection-control oversight, public reporting of quality measures and staffing levels, and the CMS Five-Star Quality Rating System. Deficiency citations, lower public ratings, staffing-related findings or alleged failures to meet regulatory requirements may result in civil monetary penalties, denial of payment for new admissions, directed plans of correction, reputational harm, reduced referrals and lower occupancy. These developments could adversely affect the financial performance of our operated facilities and the ability of our tenants to satisfy their obligations to us.

Union activity, labor organizing efforts and other labor-related disputes could increase our costs and disrupt operations.

We and our operators compete for qualified nurses, therapists, administrators, pharmacists, pharmacy technicians and other personnel in a challenging labor market. Union activity, organizing campaigns, collective bargaining, strikes, work stoppages or other labor-related disputes could increase wages and benefits, reduce operational flexibility, disrupt staffing and adversely affect patient care and financial performance. Labor-related disputes may also lead to reputational harm, regulatory scrutiny or difficulty recruiting and retaining employees.

Public health crises and infectious disease outbreaks could disrupt operations and reduce occupancy.

Healthcare facilities are particularly vulnerable to public health crises such as epidemics, pandemics and severe seasonal illnesses. Such events may lead to reduced occupancy, increased operating costs, staffing shortages, employee burnout, litigation, regulatory enforcement and disruptions in referral patterns. Future public health crises could materially disrupt our operations and the operations of our tenants.

Economic downturns could negatively impact tenant performance and access to capital.

Periods of economic instability, inflation, rising interest rates or credit market disruption could adversely affect the healthcare industry and the real estate markets in which we operate. Economic downturns may reduce the financial stability of our tenants and limit their ability to pay rent. In addition, economic conditions may restrict our access to capital markets or increase borrowing costs, which could impair our ability to refinance debt or fund acquisitions.

Natural disasters and other catastrophic events could damage our properties and disrupt operations.

Our facilities may be affected by hurricanes, floods, fires, earthquakes, severe weather events, acts of terrorism and other catastrophic events. Such events may damage or destroy facilities, disrupt operations, require evacuation of residents, increase insurance costs and reduce occupancy. Insurance coverage may not fully cover losses or may not be available on acceptable terms.

Our geographic concentration exposes us to regional economic and regulatory risks.

Our properties are located in a limited number of states, with a significant concentration in the Southeast and certain markets in the Midwest. Regional economic conditions, demographic changes, reimbursement policies and regulatory developments affecting these areas could have a disproportionate impact on our operations.

Changes in reimbursement policies and purchasing programs could adversely affect our Pharmacy Services segment.

Our Pharmacy Services segment derives a substantial portion of its revenues from Medicare, Medicaid and other government healthcare programs. Changes in reimbursement methodologies, competitive bidding programs, average sales price methodologies, purchasing programs or other pricing benchmarks could reduce reimbursement levels. States and managed care organizations may also adopt restrictive formularies, reimbursement limitations or other cost-containment measures that reduce pharmacy reimbursement rates.

Our Pharmacy Services segment is subject to risks relating to long-term care pharmacy network participation, Part D requirements and third-party payor contracts.

Our institutional pharmacy business depends in part on participation in third-party payor networks and compliance with requirements applicable to long-term care pharmacies, including Medicare Part D and other government and commercial program requirements. If we are unable to maintain or renew contracts with pharmacy benefit managers, Part D plans, managed care organizations or other payors on acceptable terms, or if reimbursement is not adequate to cover the specialized services required of long-term care pharmacies, our pharmacy revenues and margins could be adversely affected. Changes in formulary design, network participation criteria, pricing benchmarks, utilization management requirements or other contract terms could also reduce reimbursement and profitability.

The Pharmacy Services business depends on key suppliers and customers.

Our Pharmacy Services segment relies heavily on certain suppliers for pharmaceutical products and on a limited number of important customer relationships. The loss of a key supplier, drug shortages, supply-chain disruptions or the loss of one or more significant customers could adversely affect pharmacy operations and financial performance.

The Pharmacy Services industry is highly competitive.

The pharmacy services market includes large national providers and integrated pharmacy platforms with substantially greater financial and operational resources than we possess. Increased competition, consolidation in managed care contracting, pressure from pharmacy benefit managers, changes in reimbursement and reduced growth in pharmaceutical demand could adversely affect our pharmacy operations.

Dispensing errors, failures in medication management or other pharmacy service issues could result in liability, reputational harm and loss of business.

Our pharmacy operations involve dispensing, packaging, delivering and managing of medications for elderly and medically complex patients, including residents of skilled nursing and assisted living facilities. Errors in dispensing, labeling, delivery, drug-interaction review, medication administration support or other pharmacy services could contribute to adverse drug events, hospitalizations, regulatory investigations, professional liability claims, loss of customers and reputational harm. Because long-term care residents often take multiple medications and have complex clinical needs, failures in pharmacy coordination or service quality could have a material adverse effect on our Pharmacy Services segment.

The healthcare industry is highly regulated, and regulatory changes or enforcement actions could adversely affect our tenants and operations.

Healthcare operators are subject to extensive federal, state and local regulations governing licensure, facility operations, reimbursement practices, patient care standards, fraud and abuse laws and financial relationships with providers. Failure to comply with these laws could result in fines, sanctions, loss of licensure, exclusion from government programs, facility closure, repayment obligations or other liabilities. Changes in healthcare laws, regulations or enforcement priorities could materially affect our business and the businesses of our operators.

Cybersecurity incidents or data breaches could disrupt operations and expose us to liability.

We rely on information technology systems and third-party service providers to manage business operations and sensitive information. Cybersecurity incidents, ransomware attacks, phishing events or other system disruptions could result in operational interruptions, unauthorized disclosure of confidential information, regulatory investigations, litigation and reputational harm. Healthcare organizations are frequent targets of cyberattacks, and our security measures may not prevent all incidents.

Environmental liabilities could arise from ownership of real estate.

As an owner of real property, we may be subject to environmental laws that impose liability for the presence or disposal of hazardous substances on our properties, regardless of fault. Environmental remediation costs or liabilities could exceed the value of the affected property, and tenant indemnities may not be enforceable or sufficient.

Risks Relating to Our Industry or Structure

Our substantial indebtedness could adversely affect our financial flexibility.

Our indebtedness could increase vulnerability to economic downturns, require significant cash flow to service debt, limit our ability to obtain additional financing and restrict operational flexibility due to financial covenants. Failure to comply with debt covenants could result in defaults and acceleration of outstanding debt.

We rely on external sources of capital and may be unable to obtain financing on favorable terms.

Our ability to grow our business and refinance existing debt depends on access to capital markets and other sources of financing. Market conditions, investor sentiment and our financial performance may affect our ability to obtain financing. If capital is unavailable or expensive, we may be unable to fund acquisitions, refinance maturing debt or pursue strategic opportunities.

Rising interest rates could increase borrowing costs.

Increases in interest rates could raise the cost of our existing variable-rate debt and future borrowings. Higher borrowing costs could reduce profitability, constrain capital deployment and limit acquisition opportunities.

Future transactions could result in dilution to existing shareholders.

We may pursue equity offerings, joint ventures, mergers or other strategic transactions in order to raise capital or pursue strategic opportunities. These transactions could result in significant dilution to existing shareholders.

We may fail to realize the anticipated benefits of the SunLink merger.

The anticipated strategic and financial benefits of the merger with SunLink may not be realized as expected or may take longer than anticipated. Integration challenges, unexpected liabilities or operational disruptions could reduce the expected benefits of the transaction.

Integration risks and loss of key employees could affect the combined company.

Successfully integrating operations, systems, personnel and business processes following the merger may be complex and costly. The loss of key employees or operational disruptions could negatively impact the combined company’s performance and delay realization of expected synergies.

Risks Relating to Public Company Compliance

The costs of being publicly owned may strain our resources and impact our business, financial condition, results of operations and prospects.

As a public company, we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls for financial reporting. We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting.

These requirements may place a strain on our systems and resources and have required us, and may in the future require us, to hire additional accounting and financial resources with appropriate public company experience and technical accounting knowledge. In addition, failure to maintain such internal controls could result in us being unable to provide timely and reliable financial information which could potentially subject us to sanctions or investigations by the SEC or other regulatory authorities or cause us to be late in the filing of required reports or financial results. Any of the foregoing events could have a materially adverse effect on our business, financial condition, results of operations and prospects.

Risks Related to Our Securities and Organizational Documents

The market price of our securities may be volatile.

The trading price of our securities may fluctuate due to changes in financial performance, general market conditions, industry trends, analyst recommendations and investor sentiment. Stock market volatility may cause significant price fluctuations independent of our operating performance.

Our securities trade on the OTCQB market, which provides limited liquidity.

Our common stock and preferred stock trade on the OTCQB market. Trading on the OTCQB generally results in reduced liquidity, wider bid-ask spreads, lower analyst coverage and fewer institutional investors than trading on a national securities exchange. Limited trading liquidity may adversely affect the market prices of our securities and our ability to raise capital.

The rights of holders of our preferred stock are senior to those of our common shareholders, and the rights among our series of preferred stock are not identical.

Our capital structure includes multiple series of preferred stock with differing rights, preferences and priorities. The rights of holders of our preferred stock may rank senior to the rights of holders of our common stock with respect to dividends, distributions and liquidation proceeds. In addition, the rights of one series of preferred stock may rank senior to, junior to or on parity with another series of preferred stock. As a result, holders of our common stock may not be entitled to receive dividends or liquidation proceeds unless and until the dividend and liquidation preferences of the applicable preferred stock have been satisfied. These preferences may reduce the value of our common stock and may adversely affect the rights of common shareholders in the event of a liquidation, sale of the Company or other corporate transaction.

We are a holding company and depend on dividends and other distributions from our subsidiaries to meet our obligations.

We are a holding company and conduct substantially all of our operations through our subsidiaries. Accordingly, our ability to meet our financial obligations, including debt service, operating expenses and any future dividends or other distributions to shareholders, depends on the receipt of dividends, distributions and other payments from our subsidiaries. The ability of our subsidiaries to make such payments may be restricted by applicable law, contractual obligations, debt covenants, regulatory requirements or the financial condition and operating performance of those subsidiaries. If our subsidiaries are unable to make distributions to us, our liquidity and financial flexibility could be materially adversely affected.

Ownership and transfer restrictions contained in our Charter may restrict acquisitions or transfers of our stock.

Our Charter contains ownership and transfer restrictions that may discourage, delay or prevent a person from acquiring or transferring shares of our stock. These restrictions may limit the ability of shareholders to transfer shares freely, may deter a change in control transaction and may reduce the liquidity or market value of our securities. These provisions may also prevent shareholders from receiving a premium for their shares that might otherwise be offered in connection with a proposed acquisition of the Company.

Provisions of Georgia law and our organizational documents may delay or prevent a change in control that shareholders may consider favorable.

Certain provisions of Georgia law, as well as provisions in our Charter and Bylaws, may have the effect of discouraging, delaying or preventing a change in control or changes in our management, even if some or all of our shareholders believe such a transaction or change would be in their best interests. These provisions may include restrictions on share ownership and transfer, advance notice requirements, provisions relating to the calling of shareholder meetings, and other governance provisions that could make it more difficult for a third party to acquire control of us or for shareholders to effect changes in our Board of Directors or management. These provisions could discourage takeover attempts, reduce the market price of our securities or prevent shareholders from realizing a premium over the market price of their shares.

Transactions we may pursue in the future, including transactions intended to strengthen our capital structure or improve market listing eligibility, may dilute existing shareholders.

We may in the future pursue equity issuances, convertible securities offerings, preferred stock issuances, exchanges, restructurings or other strategic or financing transactions in order to raise capital, repay indebtedness, support operations, pursue acquisitions or improve our capital markets position. Any such transaction could dilute the ownership interests or voting power of existing shareholders, reduce earnings per share or otherwise adversely affect the rights of existing holders of our common stock or preferred stock. If we issue securities with rights, preferences or privileges senior to those of our existing securities, the value of our outstanding securities could be adversely affected.

Shareholders may experience dilution or reduced voting influence as a result of past or future merger and financing transactions.

Past and future merger, acquisition, financing or restructuring transactions may reduce the ownership percentage, economic interest or voting influence of existing shareholders. Shareholders may not realize benefits from such transactions that are commensurate with any dilution they experience. In addition, the market may react negatively to such transactions, which could adversely affect the price of our securities.

General Risk Factors

If we lose key management personnel, we may not be able to successfully manage our business or achieve our objectives, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

We are dependent on our management team, and our future success depends largely upon the management experience, skill, and contacts of our management and the loss of any of our key management team could harm our business. If we lose the services of any or all of our management team, we may not be able to replace them with similarly qualified personnel, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our directors and officers substantially control all major decisions.

Our directors and officers beneficially own a significant number of shares of our outstanding common stock. Therefore, our directors and officers will be able to influence major corporate actions required to be voted on by shareholders, such as the election of directors, the amendment of our charter documents and the approval of significant corporate transactions such as mergers, reorganizations, sales of substantially all of our assets and liquidation. Furthermore, our directors will be able to make decisions affecting our capital structure, including decisions to issue additional capital stock, implement stock repurchase programs and incur indebtedness. This control may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other shareholders to approve transactions that they may deem to be in their best interests.

Item 1B. Unresol ved Staff Comments

Disclosure pursuant to Item 1B of Form 10-K is not required to be provided by smaller reporting companies.

Item 1C. Cybersecurity

Risk Management and Strategy

We have developed and implemented cybersecurity risk management processes intended to protect the confidentiality, integrity and availability of our critical systems and information.

While everyone at the Company plays a part in managing cybersecurity risks, primary cybersecurity oversight responsibility is shared by the Board, the audit committee of the Board of Directors (“Audit Committee”) and senior management. Our cybersecurity risk management program is integrated into our overall enterprise risk management program.

Our cybersecurity risk management program includes:

physical, technological and administrative controls intended to support our cybersecurity and data governance framework, including controls designed to protect the confidentiality, integrity and availability of our key information systems and tenant, employee and other third-party information stored on those systems, such as access controls, encryption, data handling requirements and other

cybersecurity safeguards, and internal policies that govern our cybersecurity risk management and data protection practices;

a defined procedure for timely incident detection, containment, response and remediation, including a written security incident response plan that includes procedures for responding to cybersecurity incidents;

cybersecurity risk assessment processes designed to help identify material cybersecurity risks to our critical systems, information, products, services and broader enterprise Information Technology (“IT”) environment;

a security team responsible for managing our cybersecurity risk assessment processes and security controls;

the use of external consultants or other third-party experts and service providers, where considered appropriate, to assess, test or otherwise assist with aspects of our cybersecurity controls;

annual cybersecurity and privacy training of employees, including incident response personnel and senior management, and specialized training for certain teams depending on their role and/or access to certain types of information; and

a third-party risk management process that includes internal vetting of certain third-party vendors and service providers with whom we may share data.

Additionally, we engage third-party providers to augment our cybersecurity capabilities. These partnerships entail ongoing assistance for threat monitoring and mitigation, as well as targeted support for specialized security expertise.

As of December 31, 2025 , we have not identified risks from known cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us,

including our business strategy, results of operations or financial condition. For an examination of cybersecurity threats that could potentially have a material impact on us, please refer to Part I, Item 1A., “Risk Factors” –“ Cybersecurity incidents or data breaches could disrupt operations and expose us to liability ” in this Annual Report.”

Governance

With oversight from the Board, the Audit Committee is primarily responsible for assisting the Board in fulfilling its ultimate oversight responsibilities relating to risk assessment and management, including relating to cybersecurity and other information technology risks. The Audit Committee oversees management’s implementation of our cybersecurity risk management program, including processes and policies for determining risk tolerance, and reviews management’s strategies for adequately mitigating and managing identified risks, including risks relating to cybersecurity threats.

Our management team is responsible for assessing and managing our material risks from cybersecurity threats and for our overall cybersecurity risk management program on a day-to-day basis, and supervises both our internal cybersecurity personnel and the relationship with our retained external cybersecurity consultants. Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, including briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The purpose of this Management’s Discussion and Analysis of Financial Condition and Results of Operations is to provide investors with management’s perspective on the Company’s financial condition, results of operations, liquidity and capital resources, including known trends, demands and uncertainties that management believes are reasonably likely to affect future performance.

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 owner-operator model that combines healthcare real estate ownership with the direct operation of healthcare facilities and related healthcare services. As of December 31, 2025, the Company had investments of approximately $59.9 million in healthcare real estate and operated or leased a portfolio consisting primarily of skilled nursing facilities and senior housing communities located in five states. In addition, following the SunLink merger completed on August 14, 2025, the Company operates a pharmacy business located in Louisiana.

The Company operates through three reportable segments: Healthcare Services, Pharmacy Services and Real Estate. The Healthcare Services segment includes the direct operation of 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. The Pharmacy Services segment includes retail pharmacy products and services, institutional pharmacy services and durable medical equipment. The Real Estate segment consists of investments in skilled nursing and senior housing properties that are leased or subleased to third-party operators under triple-net lease arrangements. These segments reflect the Company’s evolution from a healthcare landlord into a more diversified healthcare company with both real estate and operating capabilities.

The comparability of the Company’s 2025 and 2024 results is significantly affected by our changes in business mix during 2025. First, the SunLink merger added the Pharmacy Services segment beginning on August 14, 2025. Second, several facilities that were leased, subleased or managed in 2024 transitioned to operated status during 2025 and are now included in the Healthcare Services segment. As a result, year-over-year comparisons reflect not only changes in operating performance, but also a meaningful change in segment composition, including increased patient care revenues and patient care expenses in Healthcare Services, the addition of pharmacy revenues and cost of goods sold in Pharmacy Services, and lower rental revenues in Real Estate as certain properties are no longer operated under lease structures.

The Company funds its business and its three reportable segments primarily through operating cash flow, collections of patient, pharmacy and rent receivables, mortgage and other debt financing, asset sales and, when available, proceeds from the sale of securities.

Executive Summary

During 2025, the Company’s operating results were materially influenced by the integration of the SunLink merger, labor cost inflation, the addition of the Pharmacy Services segment and the transition of certain facilities from leased or managed status to operated status. These developments increased consolidated revenues, but also increased operating expenses and working capital requirements.

Management evaluates performance using both consolidated results and the performance of the Company’s three reportable segments. In 2025, Healthcare Services became a larger contributor to consolidated revenues as Georgetown, Southland and Sumter properties transitioned from leased or managed assets into operated facilities. The Real Estate segment continued to contribute recurring rental revenues, although those revenues declined year over year due to the transition of Mountain Trace and other facilities away from lease structures. Beginning in

mid-August 2025, the Pharmacy Services segment contributed script volume, pharmacy revenues and related cost of goods sold following the SunLink merger.

Management’s primary operational areas of focus are occupancy and census growth within Healthcare Services, script count and reimbursement collections within Pharmacy Services, and rent collections, tenant credit quality and portfolio optimization within Real Estate. The Company also continues to focus on labor management, cash collections, refinancing activity and the integration of the businesses acquired in the SunLink merger.

Key Segment Operating Metrics

Management evaluates the performance of the Company’s business using selected operating and financial metrics that management believes are most relevant to each of the Company’s three reportable segments.

Healthcare Services

The most important operating metrics for the Healthcare Services segment are occupancy/census, payor mix, labor costs, and accounts receivable collections. Management believes these measures are the primary drivers of patient care revenue, operating margins and cash flow for the facilities the Company operates directly.

Occupancy and census are key indicators of demand and facility utilization. Management also monitors payor mix, including the relative percentage of Medicare, Medicaid, managed care and private-pay residents, because reimbursement rates and margins vary significantly by payor source. In addition, labor costs, including wage rates, agency staffing usage and employee benefit costs, are critical measures of operating performance given the labor-intensive nature of skilled nursing and senior housing operations. Management also closely monitors patient accounts receivable and collection trends, as increases in patient receivables can materially affect the segment’s working capital and liquidity.

Pharmacy Services

The most important operating metrics for the Pharmacy Services segment are script count, reimbursement collections, gross margin, and customer retention. Management believes these measures are the best indicators of the scale, profitability and cash-generation profile of the pharmacy business.

Script count is a key measure of pharmacy volume and operating activity. Management also monitors reimbursement collections and the timing of payment from government and commercial payors, because reimbursement levels and collection timing directly affect revenue realization and working capital. Gross margin is an important measure of the relationship between pharmacy revenues and the cost of pharmaceutical products sold or medicila equipment rented. Customer retention is also a significant operating measure because the stability of institutional and retail customer relationships affects recurring revenue and the long-term growth of the segment.

Real Estate

The most important operating metrics for the Real Estate segment are rent collections, tenant credit quality, lease performance, and portfolio optimization opportunities. Management believes these measures are the most relevant indicators of the segment’s recurring cash flow and asset value. Rent collections are a primary measure of current segment performance because rental income remains the principal source of revenue within the Real Estate segment. Management also monitors tenant credit quality and the financial performance of operators, as tenant distress or weak facility performance can affect rent collections, lease renewals and the recoverability of receivables. In addition, management evaluates lease restructurings, lease terminations and transition opportunities to determine whether a property is best held as a leased asset, transferred to another operator, or operated directly within the Healthcare Services segment. These evaluations are an important part of the Company’s broader portfolio optimization and owner-operator strategy.

Industry Trends

The Company’s operations and those of its tenants continue to be affected by economic and market conditions,

including labor shortages, inflation, supply chain disruptions, interest rate levels and reimbursement pressures. These factors have increased operating costs, particularly labor costs, and in certain cases have affected occupancy, cash collections and the availability of capital.

The Company also continues to operate in an environment in which healthcare labor availability, reimbursement trends and the performance of individual operators can influence whether an asset is best held as a leased property in the Real Estate segment or operated directly through the Healthcare Services segment. Management’s strategic response has included transitioning certain defaulted or underperforming leased facilities back to operated status where the Company believes direct oversight may improve operating performance and value creation. This strategy is consistent with the Company’s broader transition toward a more integrated owner-operator model.

Recent Activities

Effective August 14, 2025, the Company completed its merger with SunLink Health Systems, Inc., with the Company continuing as the surviving corporation. Management believes the merger expanded the Company’s operating platform, adding pharmacy operations and creating opportunities for operational and corporate synergies.

On November 10, 2025, the Company sold the Coosa Valley facility for cash consideration of $10.6 million and recognized a gain on sale of approximately $3.8 million. In addition, during 2025, the Company terminated or transitioned several leases in an effort to maximize the value of owned properties, including Georgetown, Sumter, Southland and Mountain Trace, and in certain cases moved those facilities into the Healthcare Services segment.

Segment Reporting

Management believes the most meaningful way to understand 2025 results is by reference to the Company’s three reportable segments together with the consolidated statement of operations. Healthcare Services results reflect the direct operation of facilities, including the impact of taking back operations at certain properties during 2025. Pharmacy Services results reflect the partial-year contribution from the pharmacy business acquired in the SunLink merger. Real Estate results reflect rental income, credit loss expense and lease-related activity associated with facilities that remained leased or subleased to third-party operators.

At the consolidated level, patient care revenues, pharmacy revenues and patient care expense increased significantly in 2025 due primarily to the expanded Healthcare Services segment and the addition of Pharmacy Services, while rental revenues declined as certain facilities were transitioned out of the Real Estate segment and into operated status. Accordingly, line-item changes in the consolidated statement of operations should be evaluated in light of these changes in segment composition.

Years Ended December 31, 2025 and 2024

The following table sets forth, for the periods indicated, statement of operations items and the amount and percentage of change of these items. The results of operations for any particular period are not necessarily indicative of results for any future period. The following data should be read in conjunction with our audited consolidated financial statements and the notes thereto, in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Year Ended December 31,

Increase (Decrease)

(Amounts in 000's)

Amount

Percent

Revenues:

Patient care revenues

Rental revenues

Pharmacy revenues

Other revenues

Total revenues

Costs and expenses

Cost of goods sold

Patient care expense

Facility rent expense

Depreciation and amortization

General and administrative expense

Loss on lease termination

Credit loss expense

Gain on operations transfer

Total costs and expenses

Gain on asset sale

Income from operations

Other (income) expense:

Interest expense, net

Gain on bargain purchase

Other expense, net

Total other (income) expense, net

Net income (loss)

Year Ended December 31, 2025, Compared with Year Ended December 31, 2024 :

Patient care revenues Patient care revenues in our Healthcare Services segment, increased by approximately $24.8 million, or 219.8%, to $36.1 million for the year ended December 31, 2025 from approximately $11.3 million for the year ended December 31, 2024. This increase was driven by the Healthcare Services segment and reflects improved patient reimbursement rates and facility census, as well as the transition of Georgetown, Southland and Sumter into operated facilities during 2025.

Rental revenues. Total rental revenue in our Real Estate segment decreased by approximately $1.6 million, or 22.9%, to $5.4 million for the year ended December 31, 2025, compared with $7.0 million for the year ended December 31, 2024. This decrease reflects the transition of Mountain Trace and certain other properties from leased status to operated status, which reduced rental income but increased Healthcare Services patient care revenues and related expenses. See Note 8 – Leases.

Pharmacy revenues. Pharmacy revenues of $11.7 million were for the year ended December 31, 2025 reflect the partial-year contribution of the Pharmacy Services segment following the SunLink merger. Because the Pharmacy Services segment was added in August 2025, there was no comparable pharmacy revenue in 2024.

Cost of goods sold—C ost of goods sold of $7.0 million for the year ended December 31, 2025 relates to the Pharmacy Services segment and reflects the cost of pharmacy products sold or rented during the post-merger period and relates to the Pharmacy Services segment.

Patient care expense— Patient care expense increased by approximately $21.3 million, or 226.0%, to $30.8 million for the year ended December 31, 2025, compared with $9.4 million for the year ended December 31, 2024. This increase was driven primarily by the Healthcare Services segment and reflects the transition of Georgetown, Southland and Sumter into operated facilities, together with increased staff wages and other labor-related operating costs.

Facility rent expense —Facility rent expense increased by $0.2 million, or 31.3%, to $0.8 million for the year ended December 31, 2025, compared with $0.6 million for the year ended December 31, 2024. The increase was driven primarily by additional leased locations and related occupancy costs associated with the Pharmacy Services segment following the SunLink merger.

Depreciation and amortization —Depreciation and amortization remained substantially unchanged at $2.1 million for the years ended December 31, 2025 and December 31, 2024.

General and administrative. General and administrative expense increased by $6.6 million, or 122.7%, to $12.0 million for the year ended December 31, 2025, compared with $5.4 million for the year ended December 31, 2024. The increase reflects the larger scale of the Company following the SunLink merger, the costs of supporting additional operated facilities within the Healthcare Services segment, and the addition of corporate and operating expenses associated with the Pharmacy Services segment.

Credit loss expense— Credit loss expense increased by approximately $0.1 million, or 19.0%, to approximately $0.8 million, for the year ended December 31, 2025, compared with $0.7 million for the year ended December 31, 2024. This increase reflects higher receivable balances associated with the growth of the Healthcare Services segment, together with tenant-related receivable exposure within the Real Estate segment.

Loss on lease termination. The loss on lease termination of $0.9 million for the year ended December 31, 2025 reflects lease-related restructuring activity within the Real Estate segment, including the write-off of straight-line rent associated with terminated lease arrangements.

Gain on asset sale. The gain on asset sale of $2.7 million for the year ended December 31, 2025 reflects the sale of the Coosa Valley facility in November 2025.

Interest expense, net —Interest expense, net decreased by approximately $0.0 million, or 1.4%, to $2.7 million for the year ended December 31, 2025, compared with $2.7 million for the year ended December 31, 2024. The decrease was due primarily to changes in variable-rate debt, including the Mountain Trace and Southland mortgages. See Note 10 – Notes Payable and Other Debt.

Gain on bargain purchase. The gain on bargain purchase of $5.8 million for the year ended December 31, 2025 resulted from the SunLink merger completed on August 14, 2025. See Note 3 – Business Combination .

Other expense, net. Other expense, net was $1.4 million for the year ended December 31, 2025, compared to $0.7 million for the year ended December 31, 2024. The increase was due primarily to legal, advisory and other transaction-related expenses associated with the SunLink merger and the integration of the acquired businesses.

Non-GAAP Financial Measures

The following table summarizes the Company's non-GAAP financial measure of results based on EBITDA for the years ending December 31, 2025 and 2024. EBITDA represents net income (loss) before interest expense, provision for income taxes, and depreciation and amortization. Adjusted EBITDA represents EBITDA further adjusted to exclude certain items that management does not consider indicative of core operating performance, including stock-based compensation, credit loss expense, loss on lease termination, gain on asset sale, gain on bargain purchase,

merger-related costs and certain other non-recurring items. These non-GAAP financial measures are not intended to replace financial performance measures determined in accordance with U.S. GAAP, such as net income (loss). Rather, we present EBITDA and Adjusted EBITDA as supplemental measures of our performance.

Year Ended December 31,

(Amounts in 000’s)

Net income (loss)

Depreciation and amortization

Interest expense, net

Amortization of employee stock compensation

Provision for income tax

EBITDA

Credit loss expense

Loss on lease termination

Gain (loss) from write-off of liabilities and other credit balances from discontinued operations

Gain on asset sale

Gain on bargain purchase

Gain on operations transfer

Merger costs

Other one-time costs

Project costs

Tail insurance on legacy facilities

Adjusted EBITDA from operations

Liquidity and Capital Resources

The Company’s liquidity profile is determined by the operating performance and working capital needs of the Healthcare Services and Pharmacy Services segments, as well as rent collections, tenant performance and refinancing activity within the 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.

The Company’s primary sources of cash include revenues from its healthcare operations, pharmacy operations, rental income, collections of patient, pharmacy and rent receivables, refinancing transactions, debt borrowings and proceeds from asset sales. The Company’s primary uses of cash include salaries, wages and other operating costs of its Healthcare Services and Pharmacy Services segments, facility and rent expenses, debt service, capital expenditures and other working capital needs. Management monitors cash collections, facility-level operating performance, pharmacy reimbursement collections, tenant rent collections, refinancing activity, access to debt markets and access to equity capital as key liquidity drivers. Trading on the OTCQB may limit the Company’s ability to raise equity capital, which could affect future refinancing efforts, growth initiatives and overall financial flexibility.

Short-term Liquidity

Management expects the Company’s short-term liquidity requirements over the twelve months following the filing of this Annual Report 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. 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.

Receivables

As of December 31, 2025, we had approximately $8.8 million in gross patient receivables. Our liquidity could be adversely affected if we were to experience significant delays in the receipt of patient care revenues, pharmacy reimbursements or rental income from our operators. Our future liquidity will continue to depend in part on the relative amounts of current assets, principally cash and accounts receivable, and current liabilities, principally accounts payable and accrued expenses. Accordingly, the timing of accounts receivable collections remains an important component of our liquidity management.

Long-term Liquidity

Management expects the Company’s long-term liquidity needs will be funded primarily from cash generated in the ordinary course of business in conjuction with the sale of securities. The Company’s ability to generate long-term liquidity from operations 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.

Contractual Obligations

The Company’s principal contractual obligations consist of scheduled principal and interest payments on indebtedness, lease obligations and other commitments arising in the ordinary course of business. The Company expects to satisfy these obligations through cash generated in the ordinary course of business and, as needed, through refinancing transactions, asset sales and the sale of securities. The Company’s ability to satisfy these obligations will depend on the future operating performance of its Healthcare Services, Pharmacy Services and Real Estate segments, as well as its ability to access financing and capital markets on acceptable terms.

The following tables provide a summary of our scheduled minimum debt principal payments and maturity payments as of December 31, 2025:

Amounts in (000's)

Thereafter

Subtotal

Less: Deferred financing costs

Less: Unamortized discounts on bonds

Total notes payable and other debt

As of December 31, 2025, the Company was in compliance with the financial and administrative covenants under its outstanding credit instruments, except with respect to the notice of default under one USDA loan and one SBA loan, both secured by the Southland facility.

In addition to debt obligations, we have lease-related commitments, routine purchase obligations and other operating commitments associated with our Healthcare Services and Pharmacy Services segments. We may also have contingent obligations, including indemnification obligations and obligations arising from legal or regulatory matters, which are discussed elsewhere in this Annual Report. Management monitors these obligations together with expected operating cash flows and available liquidity resources in evaluating the Company’s near-term and long-term liquidity position.

Leased and Subleased Facilities to Third-Party Operators

As of December 31, 2025, five facilities (four owned by us and one leased to us) are leased or subleased on a triple net basis, meaning that the lessee (i.e., the third-party operator of the property, or the Company with respect to the operated facilities) is obligated under the lease or sublease, as applicable, for all liabilities of the property with respect to insurance, taxes and facility maintenance, as well as the lease or sublease payments, as applicable.

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

(Amounts in 000's)

Total

Cash Flows

During 2025, cash used in operating activities was approximately $2.3 million compared with cash provided by operating activities of approximately $1.9 million in 2024. The year-over-year change primarily reflects higher working capital needs associated with the operation of additional facilities in the Healthcare Services segment, the timing of collections of patient and pharmacy receivables, and the broader operating platform following the SunLink merger. Cash provided by investing activities was approximately $15.1 million in 2025, driven primarily by cash acquired in the SunLink merger and proceeds from the sale of the Coosa Valley facility. Cash used in financing activities was approximately $10.3 million in 2025, driven primarily by mortgage repayments and other debt.

The following table presents selected data from our consolidated statement of cash flows for the periods presented:

Twelve Months Ended December 31,

(Amounts in 000’s)

Net cash (used in) provided by operating activities

Net cash provided by (used in) investing activities

Net cash used in financing activities

Net change in cash and restricted cash

Cash and restricted cash at beginning of year

Cash and restricted cash, ending

Year Ended December 31, 2025

Net cash used in operating activities for the year ended December 31, 2025 was approximately $2.2 million. This use of cash was driven primarily by changes in working capital accounts, reflecting the Company’s transition to operating additional facilities during the year, including increased patient receivables, payroll-related expenditures and other operating costs associated with the Healthcare Services segment, together with the addition of working capital needs from the Pharmacy Services segment following the SunLink merger.

Net cash provided by investing activities for the year ended December 31, 2025, was approximately $15.1 million. This source of cash was driven primarily by approximately $6.0 million of cash acquired in the SunLink merger and proceeds from the sale of the Coosa Valley facility.

Net cash used in financing activities for the year ended December 31, 2025 was approximately $10.3 million. This use of cash consisted of debt repayment associated with the Coosa facility facility, routine repayments totaling $1.8 million on our senior debt obligations and other debt payments of approximately $1.1, partially offset by approximately $1.3 million of proceeds from other debt borrowings

Year Ended December 31, 2024

Net cash provided by operating activities for the year ended December 31, 2024 was approximately $1.9 million. This source of cash consisted primarily of non-cash expenses and changes in working capital accounts totaling approximately $5.1 million, partially offset by the Company’s net loss of approximately $3.2 million.

Net cash used in investing activities for the year ended December 31, 2024 was approximately $0.5 million. These expenditures related primarily to capital spending for equipment purchases and completed capital improvement projects.

Net cash used in financing activities for the year ended December 31, 2024 was approximately $2.2 million. This use of cash consisted primarily of routine repayments of approximately $1.4 million on senior debt obligations and other debt payments of approximately $1.2 million, partially offset by approximately $0.4 million in proceeds from other debt borrowings.

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 entity’s current financial condition, including its sources of liquidity as of the date our consolidated financial statements are issued, will enable the entity to meet its obligations as they come due 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 Regional Health 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, our obligations due over the next twelve months as well as our recurring business operating expenses. We were able to conclude that it is probable that the Company will be able to meet its obligations arising within one year of the date of issuance of its consolidated financial statements within the parameters set forth in the accounting guidance.

Off-Balance Sheet Arrangements

Guarantee

On November 30, 2018, the Company subleased five of the Company’s facilities located in Ohio (the “Aspire Facilities”) to affiliates of Aspire, pursuant to those subleases (the “Aspire Subleases”), whereby the Aspire affiliates took possession of, and commenced operating, the Aspire Facilities as subtenant. The Aspire Subleases became effective on December 1, 2018 and are structured as triple net leases. The Aspire Facilities are comprised of: (i) a 94-bed skilled nursing facility 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 skilled nursing facility located in Springfield, Ohio (the “Eaglewood Care Center Facility”); (iv) a 50-bed skilled nursing facility located in Greenfield, Ohio (the “H&C of Greenfield Facility”); and (v) a 50-bed skilled nursing facility located in Sidney, Ohio (the “Pavilion Care Facility”). Pursuant to the Aspire Subleases, the Company agreed to indemnify Aspire against any and all liabilities imposed on them as arising from the former operator, capped at $8.0 million. The Company has assessed the fair value of the indemnity agreements as not material to the consolidated financial statements at December 31, 2025.

Professional and General Liability

As of December 31, 2025, the Company or one of its subsidiaries is a defendant in two professional and general liability action arising from care provided to a former patient at one of its 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, although any punitive damages that may be awarded would not be covered. The Company intends to defend this matter vigorously. For additional information regarding this and other legal matters, see Note 15 – Commitments and Contingencies to our audited consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.

Critical Accounting Policies

Preparing our consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Management bases these estimates and assumptions on historical experience, current facts and circumstances, and various other factors that it believes to be reasonable under the circumstances. Actual results may differ materially from those estimates and assumptions.

We consider an accounting policy to be critical if it requires management to make assumptions that were uncertain at the time the estimate was made and if changes in those assumptions could have a material effect on our financial condition, results of operations or cash flows. Our most critical accounting policies relate to revenue recognition, allowances for credit losses, goodwill and long-lived asset impairment, lease accounting, business combinations and the valuation of contingent liabilities. For a more complete discussion of our significant accounting policies, see Note 1 to our audited consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.

Revenue Recognition and Allowances

Patient Care Revenue. The Company recognizes patient care revenue in accordance with ASC 606, Revenue from Contracts with Customers . Revenue from the Company’s Healthcare Services segment is derived from services rendered to patients at the facilities it operates. The Company receives payments for these services from several sources, including (i) the federal government under the Medicare program administered by the Centers for Medicare & Medicaid Services, (ii) state governments under their respective Medicaid and similar programs, (iii) commercial insurers, and (iv) patients and other private payors. A substantial portion of patient care revenue is derived from government reimbursement programs.

The Company determines transaction price based on established billing rates, reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients and other implicit price concessions. Contractual adjustments and discounts are based on contractual agreements, Company policies and historical experience. Patient care revenue is recognized as performance obligations that are satisfied over time as services are rendered. The amounts ultimately collected may differ from established billing rates as a result of variable consideration, including changes in reimbursement, settlements, audit adjustments and other retroactive adjustments under governmental or other reimbursement programs. The Company records revenue in the amount it expects to be entitled to receive in exchange for the services provided. Estimated uncollectible amounts due from patients are generally considered implicit price concessions and are recorded as a direct reduction of patient care revenue.

Rental Revenue from Triple-Net Leased Properties . The Company recognizes rental revenue in accordance with ASC 842, Leases . Rental revenue from the Real Estate segment is generated from healthcare properties leased to third-party operators under triple-net lease arrangements. These leases generally provide for fixed minimum rent and may include periodic contractual rent increases. Rental revenue is recognized on a straight-line basis over the noncancelable lease term, including stated rent escalations, when collectability is probable.

Recognition of rental income on a straight-line basis may result in recognized revenue that differs from cash collected

during a given period, and such differences are recorded as straight-line rent receivables on the consolidated balance sheets. If collectability of substantially all lease payments is no longer probable, the Company ceases recognizing rental income on a straight-line basis and thereafter recognizes rental income only as cash is collected. In such circumstances, any previously recognized straight-line rent receivable is evaluated for collectability and written off, in whole or in part, if appropriate. See Note 2 – Liquidity and Note 8 – Leases.

Pharmacy Services Revenue. The Company recognizes revenue from its Pharmacy Services segment in accordance with ASC 606. Pharmacy revenue is derived from the dispensing of pharmaceutical products, the provision of related pharmacy services and the sale or rental of durable medical equipment. Revenue is recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. In general, each prescription claim or product sale represents a separate performance obligation.

A substantial portion of pharmacy revenue is reimbursed by Medicare Part D, state Medicaid programs and other third-party payors. The Company records pharmacy revenue net of estimated variable consideration, including differences between amounts billed and amounts expected to be reimbursed by governmental and commercial payors. Estimates of variable consideration are based on contractual terms, reimbursement experience and other relevant factors. Accordingly, pharmacy revenues and related receivables are recorded at the amount the Company expects to ultimately collect.

Allowances and Collectability. The Company assesses collectability of its receivables based on the nature of the receivable and the relevant facts and circumstances. For rent receivables, including straight-line rent receivables, and for working capital loans to tenants, the Company evaluates collectability based on several factors, including payment history, the financial condition of the tenant and any guarantors, the value of underlying collateral, and current economic and industry conditions. If the Company determines that collection of amounts due is not probable, it records an allowance or otherwise adjusts the carrying value of the related receivable or loan. Payments received on impaired loans are applied against the related allowance. Changes in the Company’s assumptions or estimates regarding collectability are recognized in the period in which those changes occur. See Note 8 – Leases.

For patient care and pharmacy receivables, the Company evaluates expected credit losses based on historical collection experience, the age of receivables, payor mix, current economic conditions and other relevant factors. As of December 31, 2025 and 2024, the Company recorded reserves of approximately $0.8 million and $0.1 million, respectively, for uncollectible receivables. Accounts receivable, net, totaled $8.0 million at December 31, 2025, compared with $3.4 million at December 31, 2024.

Business Combinations. We account for acquired businesses using the acquisition method of accounting, which requires significant estimates and assumptions in determining the fair value of assets acquired and liabilities assumed as of the acquisition date. These estimates may include the valuation of real estate, intangible assets, assumed debt, working capital balances and contingent liabilities. The results of operations of acquired businesses are included in our consolidated financial statements from the date of acquisition. Changes in estimates or additional information obtained during the measurement period may result in adjustments to the preliminary purchase price allocation.

Advertising Costs. 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.

Leasing Costs. The Company evaluates new contracts and contract modifications in accordance with ASC 842 to determine whether an arrangement contains a lease and, if so, the appropriate lease classification. In certain cases, the Company reports revenues and expenses for real estate taxes and insurance when the lessee has not paid those amounts directly to a third party, as required under the applicable lease. The Company expenses leasing costs, other than leasing commissions and other costs that qualify for capitalization under applicable accounting guidance, as incurred. See Note 1 – Summary of Significant Accounting Policies and Note 8 – Leases to the audited consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report.

Asset Impairment

We review the carrying value of long-lived assets that are held and used in our operations for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of these assets is determined based upon expected undiscounted future net cash flows from the operations to which the assets relate, utilizing management’s best estimate, assumptions, and projections at the time. If the carrying value is determined to be unrecoverable from future operating cash flows, the asset is deemed impaired and an impairment loss would be recognized to the extent the carrying value exceeded the estimated fair value of the asset. We estimate the fair value of assets based on the estimated future discounted cash flows of the asset. Management has evaluated its long-lived assets and identified no material asset impairment during the years ended December 31, 2025 and 2024.

We test indefinite-lived intangible assets for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable.

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. Goodwill is subject to annual testing for impairment. In addition, goodwill is tested for impairment if events occur or circumstances change that would reduce the fair value of a facility below its carrying amount. We perform annual testing for impairment during the fourth quarter of each year (see Note 7 - Intangible Assets and Goodwill to our audited consolidated financial statements in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report).

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.

Income Taxes

As required by ASC Topic 740, “ Income Taxes”, we established deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities at tax rates in effect when such temporary differences are expected to reverse. When necessary, we record a valuation allowance to reduce our net deferred tax assets to the amount that is more likely than not to be realized. At December 31, 2025, the Company has a valuation allowance of approximately $21.7 million. In future periods, we will continue to assess the need for and adequacy of the remaining valuation allowance. ASC 740 provides information and procedures for financial statement recognition and measurement of tax positions taken, or expected to be taken, in tax returns.

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.

In determining the need for a valuation allowance, the annual income tax rate, or the need for and magnitude of liabilities for uncertain tax positions, we make certain estimates and assumptions. These estimates and assumptions are based on, among other things, knowledge of operations, markets, historical trends and likely future changes and, when appropriate, the opinions of advisors with knowledge and expertise in certain fields. Due to certain risks associated with our estimates and assumptions, actual results could differ. 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, 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.

Further information required by this Item is provided in Note 1 - Summary of Significant Accounting Policies to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in this Annual Report.

Item 7A. QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISK

Disclosure pursuant to Item 7A. of Form 10-K is not required to be reported by smaller reporting companies.