Georgia
|
6519
|
81-5166048
|
||
(State or other jurisdiction of
incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification Number) |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated
filer
|
☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☐ |
Exchange Act Rule
13e-4(i)
(Cross-Border Issuer Tender Offer)
|
☐ | |||
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)
|
☐ |
Security
|
CUSIP
|
Symbol
|
Shares
Outstanding |
Exchange Consideration
|
||||
10.875% Series A Cumulative Redeemable Preferred Shares | 75903M200 |
RHE-PA
|
2,811,535 | One share of Series B Preferred Stock per share of Series A Preferred Stock |
1. |
to have the holders of our Series A Preferred Stock approve a proposal to amend our Amended and Restated Articles of Incorporation (as currently in effect, the “
Charter
”) to (i) reduce the liquidation preference of the Series A Preferred Stock to $5.00 per share, (ii) eliminate accumulated and unpaid dividends on the Series A Preferred Stock, (iii) eliminate future dividends on the Series A Preferred Stock, (iv) eliminate penalty events and the right of holders of Series A Preferred Stock to elect directors upon the occurrence of a penalty event, (v) reduce the redemption price of the Series A Preferred Stock in the event of an optional redemption to $5.00 per share, (vi) reduce the redemption price of the Series A Preferred Stock in the event of a “change of control” to $5.00 per share and (vii) change the voting rights of holders of Series A Preferred Stock when voting as a single class with any other class or series of stock to one vote per $5.00 liquidation preference, on the terms of the form of proposed amendments set forth as
Annex B
to the accompanying proxy statement/prospectus (the “
Preferred Series A Charter Amendment Proposal
”; such amendments to the Charter being referred to herein as the “
Series A Charter Amendments
”);
|
2. |
to have the holders of our Series A Preferred Stock approve a proposal to (i) amend the Charter to increase the authorized number of shares of preferred stock to 6,000,000 shares, on the terms of the form of proposed amendments set forth as Annex C-1 to the accompanying proxy statement/prospectus, and (ii) approve the authorization, creation and designation by the Board of Directors of the Company (the “
Board of Directors
” or the “
Board
”) pursuant to Section 14-2-602 of the Official Code of Georgia Annotated, from the authorized but undesignated shares of preferred stock, of the Series B Preferred Stock having the rights, preferences and privileges substantially as set forth in the form of amendment to the Charter in
Annex C
-2 to the accompanying proxy statement/prospectus and as described under “Description of Capital Stock—Series B Preferred Stock,” which, if so approved by the holders of the Series A Preferred Stock as part of this proposal, will rank senior to the Series A Preferred Stock, and be “Senior Shares” to the Series A Preferred Stock, pursuant to and as contemplated by Section 3.7(e) of the Charter (the “
Series B Preferred Stock Proposal
”; such amendments to the Charter being referred to herein as the “
Series B Charter Amendments
”);
|
3. |
to have the holders of our Common Stock approve a proposal to (i) amend the Charter for the Series A Charter Amendments, on the terms of the form of proposed amendments set forth as
Annex B
to the accompanying proxy statement/prospectus, and (ii) amend to the Charter to increase the authorized number of shares of the Company to 61,000,000 shares, consisting of 55,000,000 shares of common stock and 6,000,000 shares of preferred stock, on the terms of the form of proposed amendments set forth as
Annex C-1
to the accompanying proxy statement/prospectus (the “
Common Charter Amendment Proposal
” and, together with the Preferred Series A Charter Amendment Proposal and the Series B Preferred Stock Proposal, the “
Required Proposals
”); and
|
4. |
to have the holders of our Series A Preferred Stock and Common Stock, voting together as a single class, approve the adjournment of the Special Meeting, if necessary or appropriate, for the purpose of soliciting additional votes for the approval of the Required Proposals (the “
Adjournment Proposal
” and, together with the Required Proposals, the “
Proposals
”).
|
Sincerely, |
|
Brent Morrison |
Chief Executive Officer and President |
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• |
failure to consummate the Exchange Offer or any other liability management transactions we may pursue;
|
• |
failure to obtain shareholder approval for the Required Proposals;
|
• |
the increased risks associated with our portfolio stabilization measures;
|
• |
the duration and impact of the
COVID-19
pandemic;
|
• |
our ability to raise capital through equity and debt financings, and the cost of such capital;
|
• |
our ability to meet the continued listing requirements of the NYSE American and to maintain the listing of our securities thereon;
|
• |
our dependence on the operating success of our tenants and their ability to meet their obligations to us;
|
• |
the effect of increasing healthcare regulation and enforcement on our tenants, and the dependence of our tenants on reimbursement from governmental and other third-party payors;
|
• |
the effect of our tenants’ potential financial or legal difficulties;
|
• |
the ability and willingness of our tenants to renew their leases with us upon expiration, and our ability to reposition our properties on the same or better terms in the event of nonrenewal or if we otherwise need to replace an existing tenant;
|
• |
the impact of liabilities associated with our legacy business of owning and operating healthcare properties, including pending and potential professional and general liability claims;
|
• |
the availability of, and our ability to identify, suitable acquisition opportunities, and our ability to complete such acquisitions and lease the respective properties on favorable terms; and
|
• |
other risks inherent in the real estate business, including uninsured or underinsured losses affecting our properties, the possibility of environmental compliance costs and liabilities, and the illiquidity of real estate investments.
|
Q:
|
WHY IS THE COMPANY OFFERING TO EXCHANGE THE SERIES A PREFERRED STOCK AND REQUESTING APPROVAL OF THE SERIES A CHARTER AMENDMENTS AND THE SERIES B CHARTER AMENDMENTS?
|
A. |
The Exchange Offer is part of our recapitalization to improve our capital structure, enhance the value of our Common Stock and return value to holders of our new Series B Preferred Stock. The Series A Preferred Stock was issued with an annual dividend rate of 10.875% and since October 1, 2018 has had an annual dividend rate of 12.875%. We have not paid dividends on the Series A Preferred Stock since the fourth quarter of 2017, and we do not expect to pay or be able to pay accumulated and unpaid dividends or any other dividends on the Series A Preferred Stock for the foreseeable future. In order to remain competitive and grow our business, it is vital that we significantly reduce the Company’s weighted average cost of capital and enhance the value of the Common Stock. We believe the Exchange Offer, the issuance of the Series B Preferred Stock, the Series A Charter Amendments and the Series B Charter Amendments will have the following benefits to the Company:
|
• |
Reduce the Liquidation Preference of the Preferred Stock.
final shares
”) of the Series B Preferred Stock outstanding, the liquidation preference will be reduced to $5.00 per share. This immediate reduction in liquidation preference will create value for holders of Common Stock, reduce our cost of capital and add flexibility to our capital structure.
|
• |
Raise Equity Capital for Acquisition Opportunities
COVID-19
pandemic, which has led to reduced occupancy levels, lower profits and lower valuations at many senior housing facilities. The Company’s operating expenses are relatively fixed as it would not need to add staff to handle the leasing of more facilities, with the result that we believe the Company should be able to achieve accretive acquisitions if it can get access to equity capital at a reasonable price.
|
• |
Provide Capital to Underserved Operators.
mid-size
acquisition transactions with a focus on individual facilities with existing operators, as well as small groups of facilities and larger portfolios. In addition to pursuing acquisitions using
triple-net
lease structures, we may pursue other forms of investment, including partnering with investors, mortgage loans and joint ventures.
|
• |
Reduce the Burden of Accumulated and Unpaid Dividends on Series A Preferred Stock and Defer Dividend Accumulation.
two-thirds
of the shares of Series A Preferred Stock are exchanged) or eliminated if all of the shares of Series A Preferred Stock are exchanged. The aggregate liquidation preference for the Series B Preferred Stock will initially be $18.7 million, if
two-thirds
of the shares of Series A Preferred Stock are exchanged, and $28.1 million, if all of the Series A Preferred Stock is exchanged. The Series B Preferred Stock pays no dividends until , 2026 (except for the payment of a penalty dividend in shares of Common Stock, if applicable, as described under “Description of Capital Stock—Series B Preferred Stock—Milestone Redemption”). We expect to use a combination of cash on hand, cash from operations, new equity capital and debt to repurchase or redeem a significant portion of the Series B Preferred Stock prior to December 31, 2025. We believe that the Exchange Offer is less expensive than any restructuring alternative the Company might seek if the Exchange Offer is not completed and allows the Company’s equity holders to retain and potentially accrue value.
|
• |
Preserve Cash for Strategic Initiatives.
|
• |
Enable Us to Repurchase, Redeem or Otherwise Acquire the Company’s Preferred Stock on a Reasonable Timeframe.
|
such holders, the penalty dividend, payable in shares of Common Stock, described under “Description of Capital Stock—Series B Preferred Stock—Milestone Redemption.” Redemptions, repurchases or acquisitions meeting these milestones give the Company time to redeem, repurchase or otherwise acquire the Series B Preferred Stock and return value to holders of Series B Preferred Stock in an orderly manner using, in part, the Company’s own internally generated cash flows.
|
Q:
|
WHAT ARE THE CONSEQUENCES TO THE COMPANY IF THE EXCHANGE OFFER IS NOT CONSUMMATED AND THE PROPOSED AMENDMENTS ARE NOT ADOPTED?
|
A. |
If the Preferred Series A Charter Amendment Proposal and the Common Charter Amendment Proposal are not approved or if the other conditions to the Exchange Offer are not satisfied or waived, or if holders of our Series A Preferred Stock or Common Stock, as applicable, do not vote in favor of the Required Proposals at the Special Meeting and we are not able to complete the Exchange Offer, we will continue to be limited in our ability to raise new equity capital. If we are unable to raise new equity capital, we will be limited to only internally generated free cash flow, which could dramatically reduce our ability to grow and exposes us to significant operating and financial risk. If we are not able to complete the Exchange Offer or implement the Series A Charter Amendments and Series B Charter Amendments and thereby improve our capital structure, we will consider other restructuring alternatives that might be available to us at that time. Those alternatives may include, but are not limited to, (i) the sale of profitable assets, (ii) other forms of recapitalization, which could include (a) a distribution or
spin-off
of profitable assets, (b) alternative offers to exchange our Series A Preferred Stock, (c) the incurrence of additional debt and (d) obtaining additional equity capital on terms that may be onerous or highly dilutive, (iv) joint ventures or (v) seeking relief through the commencement of a Chapter 11 proceeding or otherwise under the U.S. Bankruptcy Code, including (a) pursuing a plan of reorganization that we would seek to confirm (or “
cram down
”) despite any class of creditors who reject or are deemed to have rejected such plan, (b) seeking bankruptcy court approval for the sale of some, most or all of our assets pursuant to section 363(b) of the U.S. Bankruptcy Code and subsequent liquidation of the remaining assets in the bankruptcy case or (c) seeking another form of bankruptcy relief, all of which would involve uncertainties, potential delays and litigation risks.
|
Q:
|
WHY IS THE COMPANY CALLING A SPECIAL MEETING OF THE HOLDERS OF OUR SERIES A PREFERRED STOCK AND COMMON STOCK?
|
A. |
As conditions to the Exchange Offer, we are separately requesting that (i) holders of our Series A Preferred Stock vote to approve the amendment of our Charter to modify the terms of the Series A Preferred Stock, on the terms of the form of proposed Series A Charter Amendments set forth as
Annex B
to this proxy statement/prospectus, in the Preferred Series A Charter Amendment Proposal, (ii) holders of our Series A Preferred Stock vote to approve (a) the amendment of our Charter to increase the authorized number of shares of preferred stock to 6,000,000 shares, on the terms of the form of proposed amendments set forth as Annex C-1 to this proxy statement/prospectus, and (b) the authorization, creation and designation by the Board pursuant to Section 14-2-602 of the Official Code of Georgia Annotated, from the authorized but undesignated shares of preferred stock, of the Series B Preferred Stock having the rights, preferences and privileges substantially as set forth in the form of amendment to our Charter in Annex C-2 to this proxy
|
statement/prospectus and as described under “Description of Capital Stock—Series B Preferred Stock,” in the Series B Preferred Stock Proposal and (iii) holders of our Common Stock vote to approve (a) the amendment of our Charter to modify the terms of the Series A Preferred Stock, on the terms of the form of proposed Series A Charter Amendments set forth as
Annex B
to this proxy statement/prospectus, and (b) the amendment of our Charter to increase the authorized number of shares of the Company to 61,000,000 shares, consisting of 55,000,000 shares of common stock and 6,000,000 shares of preferred stock, on the terms of the form of proposed amendments set forth as Annex C-1 to this proxy statement/prospectus, in the Common Charter Amendment Proposal. The approval of the Required Proposals by the requisite votes of the shareholders is a condition to the closing of the Exchange Offer. The affirmative vote of the holders of at least 66 2/3% of all shares of Series A Preferred Stock that are outstanding as of the Record Date will be required to approve the Preferred Series A Charter Amendment Proposal and the Series B Preferred Stock Proposal. The affirmative vote of the majority of votes entitled to be cast by the holders of the outstanding Common Stock as of the Record Date will be required to approve the Common Charter Amendment Proposal. In addition, holders of our Series A Preferred Stock and holders of our Common Stock will be asked to vote together as a single class to approve the adjournment of the Special Meeting to solicit additional proxies if there are not sufficient votes cast at the Special Meeting to approve the Required Proposals. The affirmative vote of a majority of the voting shares represented at the Special Meeting, whether in person or by proxy, voting together as a single class, will be required to approve the Adjournment Proposal.
|
(1) |
reduce the liquidation preference of the Series A Preferred Stock to $5.00 per share;
|
(2) |
eliminate accumulated and unpaid dividends on the Series A Preferred Stock;
|
(3) |
eliminate future dividends on the Series A Preferred Stock;
|
(4) |
eliminate penalty events and the right of holders of Series A Preferred Stock to elect directors upon the occurrence of a penalty event;
|
(5) |
reduce the redemption price of the Series A Preferred Stock in the event of an optional redemption to $5.00 per share;
|
(6) |
reduce the redemption price of the Series A Preferred Stock in the event of a “change of control” to $5.00 per share; and
|
(7) |
change the voting rights of holders of Series A Preferred Stock when voting as a single class with any other class or series of stock to one vote per $5.00 liquidation preference.
|
Q.
|
WHICH PROPOSALS WILL I BE ENTITLED TO VOTE ON AS A HOLDER OF SERIES A PREFERRED STOCK?
|
A: |
As a holder of Series A Preferred Stock, you will be entitled to vote on the Preferred Series A Charter Amendment Proposal, the Series B Preferred Stock Proposal and the Adjournment Proposal at the Special Meeting.
|
Q:
|
WHICH PROPOSALS WILL I BE ENTITLED TO VOTE ON AS A HOLDER OF COMMON STOCK?
|
A: |
As a holder of Common Stock, you will be entitled to vote on the Common Charter Amendment Proposal and the Adjournment Proposal at the Special Meeting.
|
Q:
|
WHY DOES THIS PROXY STATEMENT/PROSPECTUS INCLUDE DETAILED INFORMATION ABOUT THE EXCHANGE OFFER WHEN HOLDERS OF COMMON STOCK CANNOT PARTICIPATE IN ANY OF THESE TRANSACTIONS?
|
A. |
If you are a holder of Common Stock, you will not be able to participate in the Exchange Offer except to the extent that you also hold Series A Preferred Stock. We are required to obtain the affirmative vote of the majority of votes entitled to be cast by the holders of the outstanding Common Stock as of the Record Date for the Common Charter Amendment Proposal in connection with the Exchange Offer. The approval of the Common Charter Amendment Proposal creates risks for holders of Common Stock. Please read “Risk Factors.”
|
Q:
|
WHAT IF ANY OF THE REQUIRED PROPOSALS DO NOT PASS?
|
A: |
If any of the Required Proposals do not pass, the Exchange Offer will not close, and no shares of Series B Preferred Stock will be created, designated or issued. If the Series A Charter Amendments are not approved at the Special Meeting, then the accumulated and unpaid dividends on the Series A Preferred Stock would not be eliminated and will continue as accumulated and unpaid dividends to the holders of Series A Preferred Stock. Further, dividends on such Series A Preferred Stock will continue to accumulate until declared and paid. See our answer to “Why is the Company offering to exchange the Series A Preferred Stock and requesting approval of the Series A Charter Amendments and Series B Charter Amendments?” above.
|
Q:
|
WHAT IF HOLDERS OF SERIES A PREFERRED STOCK AND COMMON STOCK DO NOT VOTE?
|
A: |
If holders of Series A Preferred Stock do not vote on the Preferred Series A Charter Amendment Proposal or Series B Preferred Stock Proposal or holders of Common Stock do not vote on the Common Charter Amendment Proposal, their
non-vote
will have the same effect as a vote against the Preferred Series A Charter Amendment Proposal, Series B Preferred Stock Proposal or Common Charter Amendment Proposal, as applicable, but their failure to vote will have no effect on the outcome of the Adjournment Proposal. The Preferred Series A Charter Amendment Proposal and the Series B Preferred Stock Proposal must be approved by the affirmative vote of at least 66 2/3% of all shares of Series A Preferred Stock that are outstanding as of the Record Date. The Common Charter Amendment Proposal must be approved by the affirmative vote of the majority of votes entitled to be cast by the holders of the outstanding Common Stock as of the Record Date. The affirmative vote of a majority of the voting shares represented at the Special Meeting, whether in person or by proxy, voting together as a single class, will be required to approve the Adjournment Proposal.
|
Q:
|
DO THE HOLDERS OF SERIES A PREFERRED STOCK HAVE ANY APPRAISAL RIGHTS IN CONNECTION WITH THE EXCHANGE OFFER?
|
A: |
No. Holders of Series A Preferred Stock will not have appraisal rights, or any contract right to petition for fair value, with respect to the Exchange Offer. We will not independently provide such a right.
|
Q:
|
HOW MANY SHARES OF SERIES A PREFERRED STOCK IS THE COMPANY OFFERING TO EXCHANGE IN THE EXCHANGE OFFER?
|
A. |
We are offering to exchange any and all shares of the Series A Preferred Stock currently outstanding tendered in the Exchange Offer for newly issued shares of Series B Preferred Stock. In exchange for each share of Series A Preferred Stock properly tendered (and not validly withdrawn) prior to the Expiration Date and accepted by us, participating holders of Series A Preferred Stock will receive one share of Series B Preferred Stock.
|
Q:
|
WHAT WILL THE HOLDER RECEIVE IN THE EXCHANGE OFFER IF THE SHARES OF SERIES A PREFERRED STOCK ARE VALIDLY TENDERED AND ACCEPTED BY US?
|
A. |
In exchange for each share of Series A Preferred Stock properly tendered (and not validly withdrawn) prior to the Expiration Date and accepted by us, participating holders of Series A Preferred Stock will receive one share of Series B Preferred Stock.
|
Q:
|
WHAT ARE THE DIFFERENCES BETWEEN THE TERMS OF THE SERIES B PREFERRED STOCK AND THE SERIES A PREFERRED STOCK?
|
A: |
A comparison of the material differences between the rights, preferences and privileges of the Series A Preferred Stock and the rights, preferences and privileges of the Series B Preferred Stock is included in “Differences in Rights of Our Series A Preferred Stock and Series B Preferred Stock.”
|
Q:
|
WILL THE SERIES B PREFERRED STOCK TO BE ISSUED IN THE EXCHANGE OFFER BE FREELY TRADABLE?
|
A. |
Yes, provided that you are not an affiliate of the Company.
|
Q:
|
HOW WILL THE EXCHANGE OFFER AFFECT THE TRADING MARKET FOR THE SHARES OF SERIES A PREFERRED STOCK THAT ARE NOT ACCEPTED FOR EXCHANGE?
|
A. |
If the number of shares of Series A Preferred Stock that remain outstanding after the Exchange Offer is significantly reduced, the trading market for the remaining shares of Series A Preferred Stock may be less liquid and more sporadic, and market prices may fluctuate significantly depending on the volume of trading of such shares. If the Exchange Offer is consummated or if the Preferred Series A Charter Amendment
|
Proposal and the Common Charter Amendment Proposal are approved, the NYSE American may delist the shares of Series A Preferred Stock that remain outstanding if it determines that the Series A Preferred Stock no longer meets its listing criteria, including number of shares outstanding, aggregate market value of Series A Preferred Stock or the terms of the Series A Preferred Stock as amended by the Series A Charter Amendments, such that continued listing is inadvisable or unwarranted. If the NYSE American delists our Series A Preferred Stock from trading on its exchange, our Series A Preferred Stock may be able to be quoted in the
over-the-counter
|
Q:
|
WHAT RIGHTS WILL HOLDERS OF SERIES A PREFERRED STOCK LOSE IF THEY TENDER THEIR SHARES OF SERIES A PREFERRED STOCK IN THE EXCHANGE OFFER?
|
A. |
If your shares of Series A Preferred Stock are properly tendered and accepted for exchange pursuant to the Exchange Offer, you will lose the rights of a holder of such shares of Series A Preferred Stock, which are described below in this proxy statement/prospectus. For example, if your shares of Series A Preferred Stock are accepted for exchange in the Exchange Offer, you will lose your right to receive quarterly dividends in respect of the shares of Series A Preferred Stock, including previously accumulated and unpaid dividends, when and as declared by our Board of Directors. As of February 1, 2022, as a result of the suspension of the dividend payment on the Series A Preferred Stock commencing with the fourth quarter 2017 dividend period, the Company has $37.7 million accumulated and unpaid dividends on its Series A Preferred Stock, or approximately $13.40 per share.
|
Q:
|
IF THE EXCHANGE OFFER IS CONSUMMATED AND HOLDERS OF SERIES A PREFERRED STOCK DO NOT PARTICIPATE, HOW WILL THEIR RIGHTS AND OBLIGATIONS UNDER THEIR REMAINING OUTSTANDING SHARES OF SERIES A PREFERRED STOCK BE AFFECTED?
|
A: |
If the Series A Charter Amendments are effected, the rights of holders of Series A Preferred Stock will be significantly reduced, including in the following ways:
|
(1) |
the stated liquidation preference per share of Series A Preferred Stock will be reduced from $25.00 to $5.00 per share;
|
(2) |
the dividends payable quarterly in cash when and as declared by the Board of Directors, and the accumulation at a rate of 12.875% per annum of the $25.00 per share liquidation preference, would be eliminated;
|
(3) |
the approximately $37.7 million in accumulated and unpaid Series A Preferred Stock dividends would be eliminated;
|
(4) |
penalty events and the right of holders of Series A Preferred Stock to elect directors to the Board of Directors upon the occurrence of a penalty event would be eliminated;
|
(5) |
the redemption price of the Series A Preferred Stock in the event of an optional redemption will be reduced to $5.00 per share;
|
(6) |
the redemption price of the Series A Preferred Stock in the event of a “change of control” will be reduced to $5.00 per share; and
|
(7) |
the voting rights of holders of Series A Preferred Stock when voting as a single class with any other class or series of stock will be changed to one vote per $5.00 liquidation preference.
|
Q:
|
WHAT DOES THE COMPANY INTEND TO DO WITH THE SHARES OF SERIES A PREFERRED STOCK THAT ARE EXCHANGED IN THE EXCHANGE OFFER?
|
A: |
Shares of Series A Preferred Stock accepted for exchange by us in the Exchange Offer will be restored to the status of authorized but unissued shares of undesignated preferred stock.
|
Q:
|
IS THE COMPANY MAKING A RECOMMENDATION REGARDING WHETHER HOLDERS OF SERIES A PREFERRED STOCK SHOULD PARTICIPATE IN THE EXCHANGE OFFER?
|
A: |
No, we are not making any recommendation regarding whether you should tender or refrain from tendering your shares of Series A Preferred Stock for exchange in the Exchange Offer. The Board of Directors has authorized and approved the Exchange Offer. None of the Board of Directors, our officers and employees, the Information Agent, the Exchange Agent, the Proxy Solicitor, or any other person is making any recommendation to any holder of Series A Preferred Stock as to whether or not you should tender shares of Series A Preferred Stock in the Exchange Offer. Accordingly, you must make your own investment decision regarding the Exchange Offer based upon your own assessment of the market value of the Series A Preferred Stock, the likely value of the Series B Preferred Stock you would receive in the Exchange Offer, the trading price and terms of the Series A Preferred Stock after approval of the Series A Charter Amendments, the
|
potential consequences to the Company and your investment of the failure to effect the Series A Charter Amendments or the Series B Charter Amendments and consummate the Exchange Offer, your liquidity needs, your investment objectives and any other factors you deem relevant. Before making your decision, we urge you to read this proxy statement/prospectus carefully in its entirety, including the information set forth in the section of this proxy statement/prospectus entitled “Risk Factors.” |
Q:
|
HOW DOES THE BOARD OF DIRECTORS RECOMMEND THAT HOLDERS OF SERIES A PREFERRED STOCK AND HOLDERS OF COMMON STOCK VOTE?
|
A: |
The Board of Directors recommends that the holders of Series A Preferred Stock vote “
FOR
FOR
|
Q:
|
WHAT RISKS SHOULD HOLDERS OF SERIES A PRFERRED STOCK CONSIDER IN DECIDING WHETHER OR NOT TO TENDER THEIR SHARES OF SERIES A PREFERRED STOCK AND HOLDERS OF SERIES A PREFERRED STOCK AND HOLDERS OF COMMON STOCK CONSIDER IN DECIDING WHETHER OR NOT TO VOTE TO APPROVE THE PROPOSALS?
|
A: |
Holders of Series A Preferred Stock, in deciding whether to participate in the Exchange Offer, and holders of Series A Preferred Stock and holders of Common Stock, in deciding whether to vote to approve the Proposals, should carefully consider the discussion of risks and uncertainties affecting our business, the Series A Preferred Stock and the Common Stock that are described in “Risk Factors” in this proxy statement/prospectus, our Annual Report on Form
10-K
for the fiscal year ended December 31, 2020 (the “
Annual Report
”), a copy of which is attached as
Annex
to this proxy statement/prospectus, in our Quarterly Report on Form
A-1
10-Q
for the quarterly period ended March 31, 2021 (the “
First Quarter Quarterly Report
”), a copy of which is attached as
Annex
to this proxy statement/prospectus, in our Quarterly Report on Form
A-2
10-Q
for the quarterly period ended June 30, 2021 (the “
Second Quarter Quarterly Report
”), a copy of which is attached as
Annex
to this proxy statement/prospectus, and in our Quarterly Report on Form
A-3
10-Q
for the quarterly period ended September 30, 2021 (the “
Third Quarter Quarterly Report
”), a copy of which is attached as
Annex
to this proxy statement/prospectus.
A-4
|
Q:
|
WHAT ARE THE CONDITIONS OF THE EXCHANGE OFFER?
|
A: |
The Exchange Offer is subject to several conditions, including, among other things:
|
• |
the Charter Amendment Conditions;
|
• |
the Series B Preferred Designation Condition; and
|
• |
the effectiveness of the Registration Statement of which this proxy statement/prospectus is a part.
|
Q:
|
IS THE EFFECTIVENESS OF THE SERIES A CHARTER AMENDMENTS SUBJECT TO THE COMPLETION OF THE EXCHANGE OFFER?
|
A: |
No, if the Series A Charter Amendments are approved by our shareholders, then we will implement the Series A Charter Amendments by filing with the Secretary of State of the State of Georgia articles of amendment that include the Series A Charter Amendments, regardless of whether the Exchange Offer is consummated.
|
Q:
|
WHEN DOES THE EXCHANGE OFFER EXPIRE?
|
A: |
The Exchange Offer will expire at the Expiration Date, which is 11:59 p.m., New York City time, on , 2022, unless extended or earlier terminated by us.
|
Q:
|
UNDER WHAT CIRCUMSTANCES CAN THE EXCHANGE OFFER BE EXTENDED, AMENDED OR TERMINATED?
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A: |
We reserve the right to extend the Exchange Offer for any reason at all. We also expressly reserve the right, at any time or from time to time, to amend the terms of the Exchange Offer in any respect prior to the Expiration Date. If we make a material change in the terms of the Exchange Offer or the information concerning the Exchange Offer, or waive a material condition of the Exchange Offer, we will promptly disseminate disclosure regarding the changes to the Exchange Offer as required by law. In addition, we will take steps to ensure that the Exchange Offer remains open for the minimum number of days, as required by law, following the date we disseminate disclosure regarding the changes. During any extension of the Exchange Offer, shares of Series A Preferred Stock that were previously tendered for exchange pursuant to the Exchange Offer and not validly withdrawn will remain subject to the Exchange Offer. We reserve the right, in our sole and absolute discretion, to terminate the Exchange Offer at any time prior to the Expiration Date if any condition is not met. If the Exchange Offer is terminated, no shares of Series A Preferred Stock tendered in the Exchange Offer will be accepted for exchange and any shares of Series A Preferred Stock that have been tendered for exchange will be returned to the holder promptly after the termination at our expense. For more information regarding our right to extend, amend or terminate the Exchange Offer, see “The Exchange Offer—Expiration Date; Extension; Termination; Amendment.”
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Q:
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HOW WILL HOLDERS OF SERIES A PREFERRED STOCK BE NOTIFIED IF THE EXCHANGE OFFER IS EXTENDED, AMENDED OR TERMINATED?
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A: |
We will issue a press release or otherwise publicly announce any extension, amendment or termination of the Exchange Offer. In the case of an extension, we will promptly make a public announcement by issuing a press release no later than 9:00 a.m., New York City time, on the first business day after the previously scheduled Expiration Date. For more information regarding notification of extensions, amendments or the termination of the Exchange Offer, see “The Exchange Offer—Expiration Date; Extension; Termination; Amendment.”
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Q:
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ARE THE COMPANY’S RESULTS OF OPERATIONS, FINANCIAL CONDITION AND BUSINESS PROSPECTS RELEVANT TO THE DECISION OF HOLDERS OF SERIES A PREFERRED STOCK TO TENDER THEIR SHARES OF SERIES A PREFERRED STOCK FOR EXCHANGE IN THE EXCHANGE OFFER?
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A: |
Yes. The price of our Common Stock is closely linked to our results of operations, financial condition and business prospects. For information about our results of operations and financial condition and factors affecting our business prospects, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included herein, in our Annual Report, a copy of which is attached as
Annex
to this proxy statement/prospectus, in our First Quarter Quarterly Report, a copy of which is attached as
A-1
Annex A-2
|
this proxy statement/prospectus, in our Second Quarter Quarterly Report, a copy of which is attached as
Annex
to this proxy statement/prospectus, in our Third Quarter Quarterly Report, a copy of which is attached as
A-3
Annex
to this proxy statement/prospectus, and “Risk Factors” included herein, in our Annual Report, a copy of which is attached as
A-4
Annex
to this proxy statement/prospectus.
A-1
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Q:
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WHAT IS THE ACCOUNTING TREATMENT OF THE EXCHANGE OFFER?
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A: |
For each share of Series A Preferred Stock that is exchanged in the Exchange Offer, we will eliminate from our Series A Preferred Stock equity account an amount equal to the sum of $25.00 and an offset amount for the allocation of Series A Preferred Stock issuance costs. The amount eliminated, which nets to $22.20 per share of Series A Preferred Stock, will be replaced by an equivalent amount in our Series B Preferred Stock capital account.
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Q:
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WHAT IS THE EXPECTED U.S. FEDERAL INCOME TAX TREATMENT OF THE EXCHANGE OFFER?
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A: |
The Exchange Offer is expected to constitute either a taxable sale or exchange of Series A Preferred Stock or a taxable distribution to the extent of our accumulated earnings and profits, which may depend in part upon the tendering owner’s situation. For a more fulsome discussion of the tax consequences of the Exchange Offer, please see the discussion under “Material U.S. Federal Income Tax Considerations.”
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Q:
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WHAT ARE THE EXPECTED U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNING THE SERIES B PREFERRED STOCK?
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A:
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Distributions in respect of the Series B Preferred Stock will generally be taxable as dividends to the extent of our current and accumulated earnings and profits, with any excess constituting a return of basis to the extent of a holder’s basis in such shares, and any amount in excess thereof being taxable as a capital gain. Holders of the Series B Preferred Stock will be deemed to receive distributions with respect to the scheduled increases in the liquidation preference on such shares, and, if made, the penalty dividend payable in shares of Common Stock, described under “Description of Capital Stock—Series B Preferred Stock—Milestone Redemption.” Additionally, if the initial redemption price of the Series B Preferred Stock exceeds the issue price of the Series B Preferred Stock, that excess will similarly be taxable as a series of deemed distributions. For a more fulsome discussion of the tax consequences of owning the Series B Preferred Stock, please see the discussion under “Material U.S. Federal Income Tax Considerations.”
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Q:
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WILL THE COMPANY RECEIVE ANY CASH PROCEEDS FROM THE EXCHANGE OFFER?
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A: |
No. We will not receive any cash proceeds from the Exchange Offer.
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Q:
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HOW DO HOLDERS OF SERIES A PREFERRED STOCK TENDER THEIR SHARES OF SERIES A PREFERRED STOCK FOR EXCHANGE IN THE EXCHANGE OFFER?
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A: |
If your shares of Series A Preferred Stock are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to participate in the Exchange Offer, you should contact that registered holder promptly and instruct such holder to tender your shares of Series A Preferred Stock on your behalf. If you are a participant of DTC, you may electronically transmit your acceptance through DTC’s ATOP. See “The Exchange Offer—Procedures for Tendering Shares of Series A Preferred Stock” and “The Exchange Offer—The Depository Trust Company Book-Entry Transfer Procedures.”
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Q:
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WHAT HAPPENS IF SOME OR ALL OF MY SHARES OF SERIES A PREFERRED STOCK ARE NOT ACCEPTED FOR EXCHANGE?
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A: |
If we decide not to accept your shares of Series A Preferred Stock because of an invalid tender, the occurrence of the other events set forth in this proxy statement/prospectus or otherwise, the shares not accepted by us will be returned to you, at our expense, promptly after the expiration or termination of the Exchange Offer by book-entry transfer to your account at DTC, as applicable.
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Q:
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UNTIL WHEN MAY HOLDERS OF SERIES A PREFERRED STOCK WITHDRAW SHARES OF SERIES A PREFERRED STOCK PREVIOUSLY TENDERED FOR EXCHANGE?
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A: |
If not previously returned, you may withdraw shares of Series A Preferred Stock that were previously tendered for exchange at any time prior to the expiration of the Exchange Offer. In addition, you may withdraw any shares of Series A Preferred Stock that you tender that are not accepted for exchange by us after the expiration of 40 business days from the commencement of the Exchange Offer, if such shares of Series A Preferred Stock have not been previously returned to you. For more information, see “The Exchange Offer—Withdrawal Rights.”
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Q:
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HOW DO HOLDERS OF SERIES A PREFERRED STOCK WITHDRAW SHARES OF SERIES A PREFERRED STOCK PREVIOUSLY TENDERED FOR EXCHANGE IN THE EXCHANGE OFFER?
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A: |
For a withdrawal to be effective, the Exchange Agent must receive a computer-generated notice of withdrawal, transmitted by DTC on behalf of the holder in accordance with the standard operating procedure of DTC, or a written notice of withdrawal, sent by facsimile transmission, receipt confirmed by telephone, or letter, prior to the Expiration Date. For more information regarding the procedures for withdrawing shares of Series A Preferred Stock, see “The Exchange Offer—Withdrawal Rights.”
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Q:
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WHO CAN HOLDERS OF SERIES A PREFERRED STOCK AND HOLDERS OF COMMON STOCK CONTACT TO REQUEST ANOTHER COPY OF THIS PROXY STATEMENT/PROSPECTUS OR WITH QUESTIONS ABOUT THE SPECIAL MEETING?
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A: |
You can contact the Information Agent engaged for the Exchange Offer and the Proxy Solicitor engaged for this proxy solicitation at:
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Offeror
|
Regional Health Properties, Inc. |
Series A Preferred Stock Subject to the Exchange Offer
|
All outstanding shares of our Series A Preferred Stock. |
Exchange Offer
|
We are offering to exchange, upon the terms and subject to the conditions set forth in this proxy statement/prospectus and the accompanying Letter of Transmittal, any and all shares of our Series A Preferred Stock tendered in the Exchange Offer for newly issued Series B Preferred Stock. In exchange for each share of Series A Preferred Stock properly tendered (and not validly withdrawn) prior to the Expiration Date and accepted by us, participating holders of Series A Preferred Stock will receive one share of Series B Preferred Stock. |
Special Meeting Proposals
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As conditions to the Exchange Offer, we are separately requesting that (i) holders of our Series A Preferred Stock vote to approve the amendment of our Charter to modify the terms of the Series A Preferred Stock, on the terms of the form of proposed Series A Charter Amendments set forth as
Annex B
to this proxy statement/prospectus, in the Preferred Series A Charter Amendment Proposal, (ii) holders of our Series A Preferred Stock vote to approve (a) the amendment of our Charter to increase the authorized number of shares of preferred stock to 6,000,000 shares, on the terms of the form of proposed amendments set forth as Annex C-1 to this proxy statement/prospectus, and (b) the authorization, creation and designation by the Board pursuant to Section 14-2-602 of the Official Code of Georgia Annotated, from the authorized but undesignated shares of preferred stock, of the Series B Preferred Stock having the rights, preferences and privileges substantially as set forth in the form of amendment to the Charter in Annex C-2 to this proxy statement/prospectus and as described under “Description of Capital Stock—Series B Preferred Stock,” in the Series B Preferred Stock Proposal and (iii) holders of our Common Stock vote to approve (a) the amendment of our Charter to modify the terms of the Series A Preferred Stock, on the terms of the form of proposed Series A Charter Amendments set forth as
Annex B
to this proxy statement/prospectus, and (b) the amendment of our Charter to increase the authorized number of shares of the Company to 61,000,000 shares, consisting of 55,000,000 shares of common stock and 6,000,000 shares of preferred stock, on the terms of the form of proposed amendments set forth as
Annex C-1
to this proxy statement/prospectus in the Common Charter Amendment Proposal. The approval of the Required Proposals by the requisite votes of the shareholders is a condition to the closing of the Exchange Offer. The affirmative vote of the holders of at least 66 2/3% of all shares of Series A Preferred Stock that are outstanding as of the Record Date will
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be required to approve the Preferred Series A Charter Amendment Proposal and the Series B Preferred Stock Proposal. The affirmative vote of the majority of votes entitled to be cast by the holders of the outstanding Common Stock as of the Record Date will be required to approve the Common Charter Amendment Proposal. In addition, holders of our Series A Preferred Stock and Common Stock will be asked to vote together as a single class to approve the adjournment of the Special Meeting to solicit additional proxies if there are not sufficient votes cast at the Special Meeting to approve the Required Proposals. The affirmative vote of a majority of the voting shares represented at the Special Meeting, whether in person or by proxy, voting together as a single class, will be required to approve the Adjournment Proposal.
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The following is a summary of the proposed Charter Amendments and is qualified in its entirety by reference to the Charter and the amended text of the affected provisions of the Charter reflecting the Series A Charter Amendments, set forth in
Annex B
to this proxy statement/prospectus. The Series A Charter Amendments, if approved by our shareholders, would:
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(1) |
reduce the liquidation preference of the Series A Preferred Stock to $5.00 per share;
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(2) |
eliminate accumulated and unpaid dividends on the Series A Preferred Stock;
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(3) |
eliminate future dividends on the Series A Preferred Stock;
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(4) |
eliminate penalty events and the right of holders of Series A Preferred Stock to elect directors upon the occurrence of a penalty event;
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(5) |
reduce the redemption price of the Series A Preferred Stock in the event of an optional redemption to $5.00 per share;
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(6) |
reduce the redemption price of the Series A Preferred Stock in the event of a “change of control” to $5.00 per share; and
|
(7) |
change the voting rights of holders of Series A Preferred Stock when voting as a single class with any other class or series of stock to one vote per $5.00 liquidation preference.
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In addition, if the Exchange Offer is consummated, each share of Series B Preferred Stock will be senior to each share of Series A Preferred Stock with respect to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up. |
We will not consummate this Exchange Offer unless the Required Proposals have been approved by the requisite votes. For additional information regarding the Charter Amendment Conditions and the Series B Preferred Designation Condition, see “The Exchange Offer—Conditions of the Exchange Offer.” |
Expiration Date
|
The Exchange Offer will expire at the Expiration Date, which is 11:59 p.m., New York City time, on , 2022, unless extended or earlier terminated by us. See “The Exchange Offer—Expiration Date; Extension; Termination; Amendment.” |
Withdrawal;
Non-Acceptance
|
You may withdraw shares of Series A Preferred Stock tendered in the Exchange Offer at any time prior to the expiration of the Exchange Offer. In addition, if not previously returned, you may withdraw any shares of Series A Preferred Stock tendered in the Exchange Offer that are not accepted by us for exchange after the expiration of 40 business days after the commencement of the Exchange Offer. To withdraw previously tendered shares of Series A Preferred Stock, you are required to submit a notice of withdrawal to the Exchange Agent in accordance with the procedures described herein and in the Letter of Transmittal. |
If we decide for any reason not to accept any shares of Series A Preferred Stock tendered for exchange, the shares will be returned to the tendering holder at our expense promptly after the expiration or termination of the Exchange Offer. |
Any withdrawn or unaccepted shares of Series A Preferred Stock that were tendered through ATOP will be credited to the tendering holder’s account at DTC. |
For further information regarding the withdrawal of tendered shares of Series A Preferred Stock, see “The Exchange Offer—Withdrawal Rights.” |
Settlement Date
|
We will issue Series B Preferred Stock in exchange for shares of Series A Preferred Stock that are accepted for exchange promptly after the Expiration Date. |
Exchange Consideration
|
In exchange for each share of Series A Preferred Stock properly tendered (and not validly withdrawn) by the Expiration Date and accepted by us, participating holders of Series A Preferred Stock will receive one share of Series B Preferred Stock. |
Holders that tender their shares of Series A Preferred Stock that are accepted for exchange will forfeit any claim to all accumulated and unpaid dividends on their Series A Preferred Stock, regardless of when accumulated, whether before or after the date hereof and including any interest that may accumulate through the settlement date for the Exchange Offer. |
Trading and Related Matters
|
The Series B Preferred Stock issuable pursuant to the Exchange Offer is being registered under the Securities Act and will be freely tradable, except by our affiliates. |
We intend to apply for the listing of shares of our Series B Preferred Stock on the NYSE American under the ticker symbol “ .”
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No assurance can be given that our application for this listing will be approved or that a trading market will develop.
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Differences in Rights of Our Series A Preferred Stock and Series B Preferred Stock
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The Series A Preferred Stock and Series B Preferred Stock have different rights. For more information about these differences, see “Differences in Rights of Our Series A Preferred Stock and Series B Preferred Stock.” |
Holders Eligible to Participate in the Exchange Offer
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All holders of Series A Preferred Stock are eligible to participate in the Exchange Offer. See “The Exchange Offer—Terms of the Exchange Offer.” |
Conditions of the Exchange Offer
|
The Exchange Offer is subject to the satisfaction of certain conditions, including the Charter Amendment Conditions and the Series B Preferred Designation Condition. For a complete description of the conditions of the Exchange Offer, see “The Exchange Offer—Conditions of the Exchange Offer.” |
Effectiveness of Charter Amendments
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If the Series A Charter Amendments are approved by our shareholders, then we will implement the Series A Charter Amendments by filing with the Secretary of State of the State of Georgia articles of amendment that include the Series A Charter Amendments
,
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Procedures for Tendering Shares of Series A Preferred Stock
|
If your shares of Series A Preferred Stock are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to participate in the Exchange Offer, you should contact that registered holder promptly and instruct such holder to tender your shares of Series A Preferred Stock on your behalf. If you are a DTC participant, you may electronically transmit your acceptance through DTC’s ATOP. See “The Exchange Offer—Procedures for Tendering Shares of Series A Preferred Stock” and “The Exchange Offer—The Depository Trust Company Book-Entry Transfer Procedures.” |
For further information on how to tender shares of Series A Preferred Stock, contact the Information Agent or the Exchange Agent at the telephone number set forth on the back cover of this proxy statement/prospectus or consult your broker, dealer, commercial bank, trust company or other nominee for assistance. |
Amendment and Termination
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We have the right to terminate or withdraw, in our reasonable discretion, the Exchange Offer at any time and for any reason if the conditions to the Exchange Offer are not met by the Expiration Date,
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regardless of the circumstances giving rise to such condition (other than any action or failure to act by us). We reserve the right, subject to applicable law, (i) to waive certain of the conditions of the Exchange Offer on or prior to the Expiration Date and (ii) to amend the terms of the Exchange Offer. If we make a material change in the terms of the Exchange Offer or the information concerning the Exchange Offer, or waive a material condition of the Exchange Offer, we will promptly disseminate disclosure regarding the changes to the Exchange Offer as required by law. In addition, we will take steps to ensure that the Exchange Offer remains open for the minimum number of days, as required by law, following the date we disseminate disclosure regarding the changes. The Charter Amendment Conditions, the Series B Preferred Designation Condition and the condition that the Registration Statement be declared effective may not be waived. In the event that the Exchange Offer is terminated, validly withdrawn or otherwise not consummated on or prior to the Expiration Date, no consideration will be paid or become payable to holders who have properly tendered their shares of Series A Preferred Stock pursuant to the Exchange Offer. In any such event, the shares previously tendered pursuant to the Exchange Offer will be promptly returned to the tendering holders. See “The Exchange Offer—Expiration Date; Extension; Termination; Amendment.”
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Consequences of Failure to Exchange Series A Preferred Stock
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Shares of Series A Preferred Stock not accepted for exchange in the Exchange Offer will remain outstanding after consummation of the Exchange Offer. If a sufficiently large number of shares of Series A Preferred Stock do not remain outstanding after the Exchange Offer, the trading market for the remaining shares of Series A Preferred Stock may be less liquid and more sporadic, and market prices may fluctuate significantly depending on the volume of trading of the Series A Preferred Stock. Further, if the Series A Charter Amendments are effected, the rights of holders of Series A Preferred Stock will be significantly reduced. In addition, the terms of the Series B Preferred Stock, if issued, will prevent us from repurchasing or redeeming any shares of Series A Preferred Stock, so long as there are any accumulated accrued and unpaid dividends with respect to the Series B Preferred Stock. See “The Exchange Offer—Consequences of Failure to Exchange Series A Preferred Stock in the Exchange Offer” and “Risk Factors.” |
Material U.S. Federal Income Tax Considerations of the Exchange Offer
|
See “Material U.S. Federal Income Tax Considerations.” You are urged to consult your own tax advisors for a full understanding of the tax considerations of participating in the Exchange Offer in light of your own particular circumstances. |
Brokerage Commissions
|
No brokerage commissions are payable by the holders of Series A Preferred Stock to the Exchange Agent or us. If your shares of Series A Preferred Stock are held through a broker or other nominee who tenders the shares on your behalf, your broker or nominee may charge you a commission for doing so. You should consult with your broker or nominee to determine whether any charges will apply. |
Use of Proceeds
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We will not receive any cash proceeds from the Exchange Offer. |
No Appraisal Rights in Connection with the Exchange Offer
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Holders of Series A Preferred Stock will not have appraisal rights, or any contract right to petition for fair value, with respect to the Exchange Offer. We will not independently provide such a right. |
Risk Factors
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Your decision whether to participate in the Exchange Offer and to exchange your shares of Series A Preferred Stock for the Exchange Consideration will involve risk. You should be aware of and carefully consider the risk factors set forth in “Risk Factors,” along with all of the other information provided or referred to in this proxy statement/prospectus, before deciding whether to participate in the Exchange Offer. |
Regulatory Approvals
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We are not aware of any other material regulatory approvals necessary to complete the Exchange Offer, other than effectiveness of the Registration Statement of which this proxy statement/prospectus is a part and our obligation to file a Schedule
TO/13E-3
with the SEC and to otherwise comply with applicable securities laws.
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Exchange Agent
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Continental Stock Transfer & Trust Company |
Proxy Solicitor and Information Agent
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Morrow Sodali LLC |
Further Information
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If you have questions about the terms of the Exchange Offer or the procedures for tendering shares of Series A Preferred Stock in the Exchange Offer or require assistance in tendering your shares of Series A Preferred Stock, please contact the Information Agent or the Exchange Agent. The contact information for the Information Agent and the Exchange Agent is set forth on the back cover of this proxy statement/prospectus. If you would like additional copies of this proxy statement/prospectus, our annual, quarterly and current reports and other information that we reference in this proxy statement/prospectus, please contact either the Information Agent or Exchange Agent or Investor Relations at the Company. The Company has also posted the documentation on its website at
www.regionalhealthproperties.com
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Issuer
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Regional Health Properties, Inc. |
Securities to be Issued
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12.5% Series B Cumulative Redeemable Preferred Shares. |
Dividends
|
Dividends on the Series B Preferred Stock will not be paid or accrue until , 2026. Beginning on , 2026, holders of the Series B Preferred Stock are entitled to receive, when, as and if approved by our Board of Directors, out of funds legally available for the payment of distributions and declared by us, cumulative dividends at the rate of 12.5% per annum of the liquidation preference of the Series B Preferred Stock in effect on the first calendar day of the applicable dividend period (as described under “Description of Capital Stock—Series B Preferred Stock—Dividends” and subject to the sixth paragraph under that section). Dividends will be paid in cash. Dividends on the Series B Preferred Stock accrue and accumulate on each issued and outstanding share of the Series B Preferred Stock on a daily basis from , 2026 and are payable quarterly in equal amounts in arrears on or about the dividend payment date, which is the last calendar day of each dividend period commencing on , 2026; provided that if any dividend payment date is not a business day, then the dividend which would have been payable on that dividend payment date will be paid on the next succeeding business day. |
In addition, the terms of the Series B Preferred Stock, if issued, will prevent us from repurchasing or redeeming any shares of Series A Preferred Stock, so long as there are any accumulated accrued and unpaid dividends with respect to the Series B Preferred Stock. |
Penalties as a Result of Failure to Pay Dividends
|
If, at any time, there is a dividend default (with respect to the Series B Preferred Stock, as defined under “Description of Capital Stock—Series B Preferred Stock—Failure to Make Dividend Payments”) because dividends on the outstanding Series B Preferred Stock are accrued but not paid in full for any six consecutive or
non-consecutive
dividend periods, then, commencing on the first day after the dividend payment date on which a dividend default occurs and continuing until we have paid all accumulated accrued and unpaid dividends on the shares of the Series B Preferred Stock in full in cash (or declared such dividends and a sum of cash sufficient for the payment thereof is set apart for payment), the holders of the Series B Preferred Stock will
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have the voting rights described under “Description of Capital Stock—Series B Preferred Stock—Voting Rights.” Once we have paid all accumulated accrued and unpaid dividends in full in cash (or declared such dividends and a sum of cash sufficient for the payment thereof is set apart for such payment), the foregoing provisions will not be applicable, unless we again fail to pay any dividend for any future dividend period.
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Ranking
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The Series B Preferred Stock ranks: (i) senior to our Common Stock, our Series A Preferred Stock and any other shares of stock that we may issue in the future, the terms of which specifically provide that such stock ranks junior to the Series B Preferred Stock, in each case with respect to payment of dividends and amounts upon liquidation, dissolution or winding up; (ii) equal to any shares of stock that we may issue in the future, the terms of which specifically provide that such stock ranks on parity with the Series B Preferred Stock, in each case with respect to payment of dividends and amounts upon liquidation, dissolution or winding up; (iii) junior to all other shares of stock issued by us, the terms of which specifically provide that such stock ranks senior to the Series B Preferred Stock, in each case with respect to payment of dividends and amounts upon liquidation, dissolution or winding up (any such creation would require the affirmative vote of the holders of at least
two-thirds
of the outstanding shares of Series B Preferred Stock); and (iv) junior to all our existing and future indebtedness.
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Optional Redemption
|
We, at our option, upon not less than 30 nor more than 60 days’ written notice, may redeem the Series B Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price equal to the then-applicable liquidation preference per share of Series B Preferred Stock (subject to the last paragraph under “Description of Capital Stock—Series B Preferred Stock—Redemption”), plus all accumulated accrued and unpaid dividends thereon (whether or not earned, approved or declared) to, but excluding, the date fixed for redemption, without interest. |
Cumulative Redemption
|
Under the terms of the new Series B Preferred Stock, preferred shareholders may enforce certain director nomination rights against us, as described below, if we fail to redeem, repurchase or otherwise acquire, in the aggregate, (i) 400,000 shares of Series B Preferred Stock with respect to calendar year 2022, (ii) 900,000 shares of Series B Preferred Stock with respect to calendar year 2023, (iii) 1,400,000 shares of Series B Preferred Stock with respect to calendar year 2024 and (iv) 1,900,000 shares of Series B Preferred Stock with respect to calendar year 2025 (with each such number of shares of Series B Preferred Stock being cumulative of the number of shares of Series B Preferred Stock redeemed in previous calendar years). |
If, as of any cumulative redemption measurement date, we have failed to redeem, repurchase or otherwise acquire the applicable cumulative
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redemption amount, then (i) commencing on the first day after such cumulative redemption measurement date and continuing until the date a “correction event” (with respect to the Series B Preferred Stock, as defined under “Description of Capital Stock—Series B Preferred Stock—Voting Rights”) with respect to such cumulative redemption default occurs, the holders of Series B Preferred Stock will have the director nomination rights described under “Description of Capital Stock—Series B Preferred Stock—Director Nomination Rights”; and (ii) following any cumulative redemption default that has been cured by us, if we subsequently fail to redeem, repurchase or otherwise acquire the applicable cumulative redemption amount as of the applicable cumulative redemption measurement date, such subsequent failure shall constitute a separate cumulative redemption default, and the foregoing provisions of clause (i) of this sentence shall immediately apply until such time as a correction event occurs with respect to such subsequent cumulative redemption default.
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Milestone Redemption
|
If, as of the date that is 18 months after the original date of issuance, we have failed to redeem, repurchase or otherwise acquire 1,000,000 shares of Series B Preferred Stock, then within 30 days of such date, we shall pay to the holders of Series B Preferred Stock, on a pro rata basis in proportion to the number of shares of Series B Preferred Stock held by such holders, the penalty dividend, payable in shares of Common Stock, described under “Description of Capital Stock—Series B Preferred Stock—Milestone Redemption.” |
Special Redemption Upon Change of Control
|
If a change of control of us by a person, entity or group occurs, we (or the acquiring entity) will be required to redeem the Series B Preferred Stock, in whole but not in part, within 120 days after the date on which the change of control has occurred, for cash at a redemption price equal to the then-applicable liquidation preference per share of Series B Preferred Stock (subject to the last paragraph under “Description of Capital Stock—Series B Preferred Stock—Redemption”), plus all accumulated accrued and unpaid dividends thereon (whether or not earned, approved or declared) to, but excluding, the redemption date, without interest. |
Liquidation Preference
|
The “
liquidation preference
” with respect to the Series B Preferred Stock means (i) from and including the original date of issuance to, but excluding, the date that is 18 months after the original date of issuance, $10.00 per share of Series B Preferred Stock, (ii) from and including the date that is 18 months after the original date of issuance to, but excluding, the date that is 24 months after the original date of issuance, $11.00 per share of Series B Preferred Stock, (iii) from and including the date that is 24 months after the original date of issuance to, but excluding, the date that is 36 months after the original date of issuance, $12.50 per share of Series B Preferred Stock, (iv) from and including the date that is 36 months after the original date of issuance to, but excluding, the date that is 48 months after the original date of
|
issuance, $14.50 per share of Series B Preferred Stock and (v) from and including the date that is 48 months after the original date of issuance, $25.00 per share of Series B Preferred Stock, plus, in the case of this clause (v) only, an amount in cash equal to all accumulated accrued and unpaid dividends thereon (whether or not earned or declared) to, but excluding, the date fixed for redemption of the Series B Preferred Stock or the date of final distribution to such holders, as applicable, without interest; provided, however, that the liquidation preference for the final shares will be $5.00 per final share.
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If we liquidate, dissolve or wind up our operations, then the holders of the Series B Preferred Stock have the right to receive the then-applicable liquidation preference per share of Series B Preferred Stock, before any distributions or payments are made to the holders of any Common Stock, Series A Preferred Stock or any other class or series of junior shares. The rights of the holders of the Series B Preferred Stock to receive the liquidation preference will be subject to the proportionate rights of holders of each other future series or class of parity shares and subordinate to the rights of senior shares. |
Voting Rights
|
Holders of Series B Preferred Stock generally have no voting rights, except as set forth below in this “—Voting Rights” section or under “—Director Nomination Rights” or as otherwise required by law. |
When a dividend default has occurred, then the holders of the Series B Preferred Stock (voting together as a class with all other classes or series of our stock we may issue upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series B Preferred Stock in the election of directors referred to below) will be entitled to vote for the election of two additional directors to serve on our Board of Directors until a correction event as described under “Description of Capital Stock—Series B Preferred Stock—Voting Rights” has occurred with respect to such dividend default. |
When a delisting event (with respect to the Series B Preferred Stock, as defined under “Description of Capital Stock—Series B Preferred Stock—“Failure to Maintain a Listing on a National Exchange”) has occurred, then the holders of the Series B Preferred Stock (voting together as a class with all other classes or series of our stock we may issue upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series B Preferred Stock in the election of directors referred to below) will be entitled to vote for the election of one additional director to serve on our Board of Directors until a correction event as described under “Description of Capital Stock—Series B Preferred Stock—Voting Rights” has occurred with respect to such delisting event. |
In addition, the affirmative vote of the holders of at least
two-thirds
of the outstanding shares of Series B Preferred Stock is required for us to authorize or issue any class or series of senior shares or to amend
|
any provisions of our Charter so as to materially and adversely affect any rights of the Series B Preferred Stock. See “Description of Capital Stock—Series B Preferred Stock—Voting Rights.”
|
Director Nomination Rights
|
If a cumulative redemption default has occurred and continuing until the date a correction event with respect to such cumulative redemption default occurs, we shall include in our proxy statement (including our form of proxy and ballot) for the next annual meeting of shareholders (or, if such default occurs less than 60 days before the date fixed for the next annual meeting, the second annual meeting after such occurrence), the name of any nominee for election to the Board submitted pursuant to these director nomination rights, subject to the requirements described under “Description of Capital Stock—Series B Preferred Stock—Director Nomination Rights.” |
If a correction event with respect to a cumulative redemption default has not occurred at or prior to the commencement of the applicable annual meeting, then one director shall be elected out of the preferred nominee(s) by a plurality of the votes cast by the shares of Series B Preferred Stock at the annual meeting. |
No Maturity
|
The Series B Preferred Stock has no stated maturity and is not subject to any sinking fund or mandatory redemption, except following a change of control and the cumulative redemption provisions. Shares of the Series B Preferred Stock that are not required to be redeemed will remain outstanding indefinitely unless we decide to redeem them or we are required to redeem them following a change of control or we otherwise acquire them. See “Description of Capital Stock—Series B Preferred Stock—Cumulative Redemption,” “Description of Capital Stock—Series B Preferred Stock—Redemption,” and “Description of Capital Stock—Series B Preferred Stock—Special Redemption Upon Change of Control” for additional details. |
Information Rights
|
During any period in which we are not subject to Section 13 or 15(d) of the Exchange Act and any shares of Series B Preferred Stock are outstanding, we will use our best efforts to: (i) transmit by mail (or other permissible means under the Exchange Act) to all holders of Series B Preferred Stock, as their names and addresses appear on our record books and without cost to such holders, copies of the Annual Reports on Form
10-K
and Quarterly Reports on Form
10-Q
that we would have been required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act if we were subject thereto (other than any exhibits that would have been required); and (ii) promptly, upon request, supply copies of such reports to any holders of Series B Preferred Stock. We will use our best efforts to mail (or otherwise provide) the information to the holders of the Series B Preferred Stock within 15 days after the respective dates by which a periodic report on Form
10-K
or Form
10-Q,
as the case may be, in respect of such information would have been required to be filed with the SEC, if we were subject to Section 13 or 15(d) of the Exchange Act, in each
|
case, based on the dates on which we would be required to file such periodic reports if we were a
“non-accelerated
filer” within the meaning of the Exchange Act.
|
Listing
|
We intend to apply for the listing of shares of the Series B Preferred Stock on the NYSE American under the ticker symbol “ .” |
Material U.S. Federal Income Tax Considerations
|
For a discussion of the material U.S. federal income tax consequences of acquiring, holding and disposing of Series B Preferred Stock received in the Exchange Offer, see “Material U.S. Federal Income Tax Considerations.” You should consult your own tax advisors for a full understanding of the tax considerations of owning the Series B Preferred Stock in light of your own particular circumstances. |
Book-Entry and Form
|
The Series B Preferred Stock will be issued and maintained in book-entry form registered in the name of the nominee of DTC. |
Risk Factors
|
Your decision whether to participate in the Exchange Offer and to exchange your shares of Series A Preferred Stock for the Exchange Consideration will involve risk. You should be aware of and carefully consider the risk factors set forth in “Risk Factors,” along with all of the other information provided or referred to in this proxy statement/prospectus, before deciding whether to participate in the Exchange Offer. |
(1) |
the stated liquidation preference per share of Series A Preferred Stock will be reduced from $25.00 to $5.00 per share;
|
(2) |
the dividends payable quarterly in cash when and as declared by the Board of Directors, and the accumulation at a rate of 12.875% per annum of the $25.00 per share liquidation preference, would be eliminated;
|
(3) |
the approximately $37.7 million in accumulated and unpaid Series A Preferred Stock dividends would be eliminated;
|
(4) |
penalty events and the right of holders of Series A Preferred Stock to elect directors to the Board of Directors upon the occurrence of a penalty event would be eliminated;
|
(5) |
the redemption price of the Series A Preferred Stock in the event of an optional redemption will be reduced to $5.00 per share;
|
(6) |
the redemption price of the Series A Preferred Stock in the event of a “change of control” will be reduced to $5.00 per share; and
|
(7) |
the voting rights of holders of Series A Preferred Stock when voting as a single class with any other class or series of stock will be changed to one vote per $5.00 liquidation preference.
|
• |
our ability to raise additional capital;
|
• |
our ability to capitalize on business opportunities and react to competitive pressures;
|
• |
our ability to attract and retain employees;
|
• |
our liquidity;
|
• |
how our business is viewed by investors, lenders, strategic partners or customers; and
|
• |
our enterprise value.
|
2021
|
2022
|
2023
|
2024
|
2025
|
||||||||||||||||
Balance, January 1
|
$ | 27,890 | $ | 36,887 | $ | 45,884 | $ | 54,881 | $ | 63,878 | ||||||||||
Accumulated and unpaid Series A Preferred Stock dividends
|
$ | 8,997 | $ | 8,997 | $ | 8,997 | $ | 8,997 | $ | 8,997 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance, December 31
|
$ | 36,887 | $ | 45,884 | $ | 54,881 | $ | 63,878 | $ | 72,875 | ||||||||||
|
|
|
|
|
|
|
|
|
|
• |
the magnitude of the Company’s existing accumulated and unpaid dividends on the Series A Preferred Stock; the magnitude of the Company’s future dividend entitlements on the Series A Preferred Stock; and the rate that unpaid dividends would accumulate over the coming years;
|
• |
the uncertainty of the current- and
post-COVID-19
business environment; and the lack of clarity with respect to the period of time it would likely take for the long-term care and senior living industry in general, and the Company’s operations in particular, to return to occupancy and cash flow levels sufficient to enable the Company to restore dividends on the Series A Preferred Stock;
|
• |
the market value of the Series A Preferred Stock;
|
• |
the Company’s recent and anticipated results of operations and cash flows in relation to working capital, financing, growth and distribution needs;
|
• |
the extent to which accumulated and unpaid dividends on the Series A Preferred Stock would result in an increasingly serious financial burden for the Company over time; and
|
• |
the terms of the Series B Preferred Stock.
|
• |
The overall financial condition of the Company and the impact of the Exchange Offer and the Charter Amendments, which the Company expects to increase the value to all stockholders of the Company, including those who were holders of Series A Preferred Stock at the time of the Exchange Offer, over time.
|
• |
The amount of accumulated and unpaid dividends on the Series A Preferred Stock is $37.7 million as of February 1, 2022. The unpaid dividends on the Series A Preferred Stock continue to accumulate (whether or not declared or paid) at a rate of approximately $2.249 million per quarter, which will make it increasingly unlikely that the Company will ever be able to pay such accumulated dividends or raise new equity capital. As a result of the Exchange Offer, the Company would be better positioned to raise new equity capital, which can be used to make acquisitions of additional properties and to attract and retain qualified personnel.
|
• |
Through the Exchange Offer, holders of Series A Preferred Stock have the opportunity to exchange their shares for shares of Series B Preferred Stock, which will rank senior to each share of Series A Preferred Stock with respect to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up and have an initial liquidation preference of $10.00 per share. The Series B Preferred Stock will also include, among others, the following features:
|
• |
The Company may redeem, repurchase or otherwise acquire a certain amount of shares of Series B Preferred Stock through calendar year 2025 at the then applicable liquidation preference, and if we fail to redeem, repurchase or otherwise acquire the shares according to this schedule, then the holders of the Series B Preferred Stock will have the director nomination rights described under “Description of Capital Stock—Series B Preferred Stock—Director Nomination Rights”;
|
• |
The liquidation preference with respect to the Series B Preferred Stock will initially be $10.00 per share and will increase over time to $25.00 per share upon the fourth anniversary of the original date of issuance, provided that once there are 200,000 or fewer shares of the Series B Preferred Stock outstanding, the liquidation preference will be reduced to $5.00 per share; and
|
• |
Dividends will be payable in cash and will accumulate from , 2026 at a rate of 12.5% per annum of the liquidation preference of the Series B Preferred Stock in effect on the first calendar day of the applicable dividend period (subject to the sixth paragraph under “Description of Capital Stock—Series B Preferred Stock—Dividends”).
|
• |
Under the terms of the new Series B Preferred Stock, holders of the Series B Preferred Stock may enforce certain director nomination rights against us, as described under “Description of Capital
|
Stock—Series B Preferred Stock—Director Nomination Rights,” if, by the applicable date, we have failed to redeem, repurchase or otherwise acquire, in the aggregate, (i) 400,000 shares of Series B Preferred Stock with respect to calendar year 2022, (ii) 900,000 shares of Series B Preferred Stock with respect to calendar year 2023, (iii) 1,400,000 shares of Series B Preferred Stock with respect to calendar year 2024 and (iv) 1,900,000 shares of Series B Preferred Stock with respect to calendar year 2025 (with each such number of shares of Series B Preferred Stock being cumulative of the number of shares of Series B Preferred Stock redeemed in previous calendar years). Redemptions, repurchases or other acquisitions meeting these milestones give the Company time to redeem, repurchase or otherwise acquire the Series B Preferred Stock and return value to holders of Series B Preferred Stock in an orderly manner and return value to holders of Series B Preferred Stock that uses, in part, the Company’s own internally generated cash flows.
|
• |
As of December 31, 2021, the book value per basic share of our Series A Preferred Stock was $22.20.
|
• |
The current market prices as well as the Company’s historical prices of its Common Stock and Series A Preferred Stock were important considerations for our Board.
|
• |
The holders of at least 66 2/3% of the outstanding shares of the Series A Preferred Stock must vote in favor of the Preferred Series A Charter Amendment Proposal and the Series B Preferred Stock Proposal for their shares of Series A Preferred Stock to be exchanged for Series B Preferred Stock. None of the Company, its Board of Directors, officers or employees, the Information Agent, the Exchange Agent, the Proxy Solicitor, any of the Company’s financial advisors or any other person is making any recommendation to any holder of Series A Preferred Stock as to whether or not you should tender shares of Series A Preferred Stock in the Exchange Offer. Each holder of Series A Preferred Stock must make an independent investment decision if that holder wants to participate in the Exchange Offer.
|
• |
The holders of Series A Preferred Stock will forfeit all rights to receive the accumulated and unpaid dividends on the Series A Preferred Stock, though the Board of Directors discussed that it is unlikely that these amounts will be paid regardless of whether the Company consummates the Exchange Offer.
|
• |
The Series B Preferred Stock will rank senior to our Series A Preferred Stock with respect to payment of dividends and amounts upon liquidation, dissolution or winding up.
|
• |
The terms of the Series B Preferred Stock will prevent us from repurchasing or redeeming any shares of Series A Preferred Stock, so long as there are any accumulated accrued and unpaid dividends with respect to the Series B Preferred Stock.
|
• |
The initial liquidation preference per share of the Series B Preferred Stock will be $10.00. At February 1, 2022, the liquidation preference per share of the Series A Preferred Stock was $25.00.
|
• |
The Series B Preferred Stock will not accrue dividends until , 2026.
|
• |
The Company has not received any report, opinion or appraisal from an outside party with respect to the Exchange Offer, the Series A Charter Amendments or the Series B Charter Amendments.
|
• |
Holders of Series A Preferred Stock will not have appraisal rights, or any contract right to petition for fair value, with respect to the Exchange Offer, the Series A Charter Amendments or the Series B Charter Amendments. We will not independently provide such a right.
|
• |
An unaffiliated representative was not engaged by the Board to act solely on behalf of the affiliated and unaffiliated holders of Series A Preferred Stock for purposes of negotiating the terms of the Exchange Offer, the Series A Charter Amendments or the Series B Charter Amendments.
|
• |
Reduce the Liquidation Preference of the Preferred Stock.
|
• |
Raise Equity Capital for Acquisition Opportunities
COVID-19
pandemic, which has led to reduced occupancy levels, lower profits and lower valuations at many senior housing facilities. The Company’s operating expenses are relatively fixed as it would not need to add staff to handle the leasing of more facilities, with the result that we believe the Company should be able to achieve accretive acquisitions if it can get access to equity capital at a reasonable price.
|
• |
Provide Capital to Underserved Operators.
mid-size
acquisition transactions with a focus on individual facilities with existing operators, as well as small groups of facilities and larger portfolios. In addition to pursuing acquisitions using
triple-net
lease structures, we may pursue other forms of investment, including partnering with investors, mortgage loans and joint ventures.
|
• |
Reduce the Burden of Accumulated and Unpaid Dividends on Series A Preferred Stock and Defer Dividend Accumulation.
two-thirds
of the shares of Series A Preferred Stock are exchanged) or eliminated if all of the shares of Series A Preferred Stock are exchanged. The aggregate liquidation preference for the Series B Preferred Stock will initially be $18.7 million, if
two-thirds
of the shares of Series A Preferred Stock are exchanged, and $28.1 million, if all of the Series A Preferred Stock is exchanged. The Series B Preferred Stock pays no dividends until , 2026 (except for the payment of a penalty dividend in shares of Common Stock, if applicable, as described under “Description of Capital Stock—Series B Preferred Stock—Milestone Redemption”). We expect to use a combination of cash on hand, cash from operations, new equity capital and debt to repurchase or redeem a significant portion of the Series B Preferred Stock prior to December 31, 2025. We believe that the Exchange Offer is less expensive than any restructuring alternative the Company might seek if the Exchange Offer is not completed and allows the Company’s equity holders to retain and potentially accrue value.
|
• |
Preserve Cash for Strategic Initiatives.
|
• |
Enable Us to Repurchase, Redeem or Otherwise Acquire the Company’s Preferred Stock on a Reasonable Timeframe.
|
such holders, the penalty dividend, payable in shares of Common Stock, described under “Description of Capital Stock—Series B Preferred Stock—Milestone Redemption.” Redemptions, repurchases or acquisitions meeting these milestones give the Company time to redeem, repurchase or otherwise acquire the Series B Preferred Stock and return value to holders of Series B Preferred Stock in an orderly manner using, in part, the Company’s own internally generated cash flows.
|
• |
the stated liquidation preference per share of Series A Preferred Stock will be reduced from $25.00 to $5.00 per share;
|
• |
the dividends payable quarterly in cash when and as declared by the Board of Directors, and the accumulation at a rate of 12.875% per annum of the $25.00 per share liquidation preference, would be eliminated;
|
• |
the approximately $37.7 million in accumulated and unpaid Series A Preferred Stock dividends would be eliminated;
|
• |
penalty events and the right of holders of Series A Preferred Stock to elect directors to the Board of Directors upon the occurrence of a penalty event would be eliminated;
|
• |
the redemption price of the Series A Preferred Stock in the event of an optional redemption will be reduced to $5.00 per share;
|
• |
the redemption price of the Series A Preferred Stock in the event of a “change of control” will be reduced to $5.00 per share; and
|
• |
change the voting rights of holders of Series A Preferred Stock when voting as a single class with any other class or series of stock to one vote per $5.00 liquidation preference.
|
• |
terminate the Exchange Offer and not to accept for exchange any shares of Series A Preferred Stock not previously accepted for exchange upon the occurrence of any of the events specified below under “—Conditions of the Exchange Offer” that have not been waived by us; and
|
• |
amend the terms of the Exchange Offer in any manner permitted or not prohibited by law.
|
• |
If a holder of Series A Preferred Stock desires to tender its shares of Series A Preferred Stock for exchange pursuant to the Exchange Offer, but (i) the procedure for book-entry transfer cannot be completed on a timely basis, or (ii) time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date, the holder can still tender its shares of Series A Preferred Stock if all the following conditions are met:
|
• |
the tender is made by or through a bank, broker dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program or a bank, broker, dealer, credit union, savings association or other entity that is an “eligible guarantor institution,” as that term is defined in Rule
17Ad-15
promulgated under the Exchange Act (an “
Eligible Institution
”);
|
• |
the Exchange Agent receives by hand, mail, overnight courier, facsimile or electronic mail transmission, prior to the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery in the form attached as an exhibit to the Registration Statement of which this proxy statement/prospectus is a part, with signatures guaranteed by an Eligible Institution; and
|
• |
a confirmation of a book-entry transfer into the Exchange Agent’s account at DTC of all shares of Series A Preferred Stock delivered electronically, together with a properly completed and duly executed Letter of Transmittal with any required signature guarantees (or, in the case of a book-entry transfer, an agent’s message in accordance with ATOP), and any other documents required by the Letter of Transmittal, must be received by the Exchange Agent within two days that the NYSE American is open for trading after the date the Exchange Agent receives such Notice of Guaranteed Delivery.
|
• |
specify the name of the person that tendered the shares of Series A Preferred Stock to be withdrawn;
|
• |
identify the shares of Series A Preferred Stock to be withdrawn;
|
• |
specify the number of shares of Series A Preferred Stock to be withdrawn;
|
• |
include a statement that the holder is withdrawing its election to have the shares of Series A Preferred Stock exchanged;
|
• |
be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which the shares of Series A Preferred Stock were tendered, including any required signature guarantees, or be accompanied by documents of transfer sufficient to have the transfer agent register the transfer of such shares of Series A Preferred Stock into the name of the person withdrawing the tender; and
|
• |
specify the name in which any shares of Series A Preferred Stock are to be registered, if different from that of the person that tendered the shares of Series A Preferred Stock.
|
• |
holders of at least 66 2/3% of the outstanding shares of the Series A Preferred Stock as of the Record Date have not approved each of the Preferred Series A Charter Amendment Proposal (the “
Preferred Series A Charter Amendment Condition
”), and the Series B Preferred Proposal by , 2022 (the “
Series B Preferred Designation Condition
”);
|
• |
a majority of votes entitled to be cast by the holders of the outstanding Common Stock as of the Record Date have not approved the Common Amendment Proposal by , 2022 (the “
Common Charter Amendment Condition
” and, together with the Preferred Series A Charter Amendment Condition, the “
Charter Amendment Conditions
”);
|
• |
the Registration Statement of which this proxy statement/prospectus is a part shall not have become effective in accordance with the provisions of the Securities Act, a stop order shall have been issued by the SEC or a proceeding seeking such stop order has been threatened or initiated by the SEC that remains pending;
|
• |
there shall have been instituted, threatened in writing or be pending any action or proceeding before or by any court, governmental, regulatory or administrative agency or instrumentality, or by any other person, in connection with the Exchange Offer, that is, or is reasonably likely to be, in our reasonable judgment, materially adverse to our business, operations, properties, condition, assets, liabilities or prospects, or which would or might, in our reasonable judgment, prohibit, prevent, restrict or delay consummation of the Exchange Offer or materially impair the contemplated benefits to us (as set forth under “—Reasons for the Exchange Offer”) of the Exchange Offer;
|
• |
an order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been proposed, enacted, entered, issued, promulgated, enforced or deemed applicable by any court or governmental, regulatory or administrative agency or instrumentality that, in our reasonable judgment, would or would be reasonably likely to prohibit, prevent, restrict or delay consummation of the Exchange Offer or materially impair the contemplated benefits to us of the Exchange Offer, or that is, or is reasonably likely to be, materially adverse to our business, operations, properties, condition, assets, liabilities or prospects;
|
• |
there shall have occurred or be reasonably likely to occur any material adverse change to our business, operations, properties, condition, assets, liabilities, prospects or financial affairs; or
|
• |
there shall have occurred:
|
• |
any general suspension of, or limitation on prices for, trading in securities in U.S. securities or financial markets;
|
• |
a declaration of a banking moratorium or any suspension of payments in respect to banks in the United States;
|
• |
any limitation (whether or not mandatory) by any government or governmental, regulatory or administrative authority, agency or instrumentality, domestic or foreign, or other event that, in our reasonable judgment, would or would be reasonably likely to affect the extension of credit by banks or other lending institutions; or
|
• |
a natural disaster or the commencement or material worsening of a war, armed hostilities, act of terrorism, pandemic or other international or national calamity directly or indirectly involving the United States which, in our reasonable judgment, diminishes general economic activity to a degree sufficient to materially reduce demand for our business.
|
1. |
to approve a proposal to amend our Charter to (i) reduce the liquidation preference of the Series A Preferred Stock to $5.00 per share, (ii) eliminate accumulated and unpaid dividends on the Series A Preferred Stock, (iii) eliminate future dividends on the Series A Preferred Stock, (iv) eliminate penalty events and the right of holders of Series A Preferred Stock to elect directors upon the occurrence of a penalty event, (v) reduce the redemption price of the Series A Preferred Stock in the event of an optional redemption to $5.00 per share, (vi) reduce the redemption price of the Series A Preferred Stock in the event of a “change of control” to $5.00 per share and (vii) change the voting rights of holders of Series A Preferred Stock when voting as a single class with any other class or series of stock to one vote per $5.00 liquidation preference, on the terms of the form of proposed Series A Charter Amendments set forth as
Annex B
to this proxy statement/prospectus;
|
2. |
to approve a proposal to (i) amend our Charter to increase the authorized number of shares of preferred stock to 6,000,000 shares, on the terms of the form of proposed amendments set forth as Annex C-1 to this proxy statement/prospectus, and (ii) approve the authorization, creation and designation by the Board pursuant to Section 14-2-602 of the Official Code of Georgia Annotated, from the authorized but undesignated shares of preferred stock, of the Series B Preferred Stock having the rights, preferences and privileges substantially as set forth in the form of amendment to the Charter in
Annex C
-2 to this proxy statement/prospectus and as described under “Description of Capital Stock—Series B Preferred Stock,” which, if so approved by the holders of the Series A Preferred Stock as part of this proposal, will rank senior to the Series A Preferred Stock, and be “Senior Shares” to the Series A Preferred Stock, pursuant to and as contemplated by Section 3.7(e) of the Charter; and
|
3. |
to approve (together with the holders of Common Stock) the adjournment of the Special Meeting, if necessary or appropriate, for the purpose of soliciting additional votes for the approval of the Required Proposals.
|
1. |
to approve a proposal to (i) amend our Charter to (a) reduce the liquidation preference of the Series A Preferred Stock to $5.00 per share, (b) eliminate accumulated and unpaid dividends on the Series A Preferred Stock, (c) eliminate future dividends on the Series A Preferred Stock, (d) eliminate penalty events and the right of holders of Series A Preferred Stock to elect directors upon the occurrence of a penalty event, (e) reduce the redemption price of the Series A Preferred Stock in the event of an optional redemption to $5.00 per share, (f) reduce the redemption price of the Series A Preferred Stock
|
in the event of a “change of control” to $5.00 per share and (g) change the voting rights of holders of Series A Preferred Stock when voting as a single class with any other class or series of stock to one vote per $5.00 liquidation preference, on the terms of the form of proposed amendments set forth as
Annex B
to this proxy statement/prospectus and (ii) amend our Charter to increase the authorized number of shares of the Company to 61,000,000 shares, consisting of 55,000,000 shares of common stock and 6,000,000 shares of preferred stock, on the terms of the form of proposed amendments set forth as
Annex C-1
to this proxy statement/prospectus; and
|
2. |
to approve (together with the holders of Series A Preferred Stock) the adjournment of the Special Meeting, if necessary or appropriate, for the purpose of soliciting additional votes for the approval of the Required Proposals.
|
• |
shares of Series A Preferred Stock will be voted “
FOR
|
• |
shares of Series A Preferred Stock will be voted “
FOR
|
• |
shares of Common Stock will be voted “
FOR
|
• |
shares of Series A Preferred Stock and Common Stock will be voted “
FOR
|
• |
notify our Corporate Secretary in writing before your shares of voting stock have been voted at the Special Meeting;
|
• |
sign, date and mail a new proxy card to the Proxy Solicitor; or
|
• |
attend the Special Meeting and vote your shares of voting stock in person.
|
Existing Charter Provision
|
Proposed Amendment to Charter Provision
|
|||
Liquidation Preference
|
The liquidation preference is $25.00 per share. | The liquidation preference will be $5.00 per share. | ||
Payment of Dividends
|
Dividends on the Series A Preferred Stock are payable quarterly in cash when and as declared by the Board of Directors and accumulate at a rate of 12.875% per annum of the $25.00 per share liquidation preference. | Dividends on the Series A Preferred Stock will no longer be paid. | ||
Accumulated and Unpaid Dividends | Dividends shall accrue and accumulate on each issued and outstanding share of the Series A Preferred Stock on a daily basis from the original date of issuance of such share and are payable quarterly. | All accumulated and unpaid dividends will be eliminated. | ||
Penalty Events and Election of Directors | Whenever a penalty event has occurred, the number of directors constituting the Board of Directors will be automatically increased by two and the holders of the Series A Preferred Stock (voting together as a class with all other classes or series of stock we may issue upon which | There will no longer be any penalty events and holders of Series A Preferred Stock will no longer have the right to vote for the election of two directors whenever a penalty event has occurred. |
similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series A Preferred Stock in the election of those two directors) will be entitled to vote for the election of those two additional directors. | ||||
Optional Redemption Price
|
The redemption price for an optional redemption is $25.00 per share. | The redemption price for an optional redemption will be $5.00 per share. | ||
Change of Control Redemption Price | The redemption price for a redemption upon a change of control is $25.00 per share. | The redemption price for a redemption upon a change of control will be $5.00 per share. | ||
Voting Rights
|
When shares of any class or series of stock have the right to vote with the Series A Preferred Stock as a single class on any matter, the Series A Preferred Stock and the shares of each such other class or series will have one vote for each $25.00 of liquidation preference (excluding accumulated dividends). | When shares of any class or series of stock have the right to vote with the Series A Preferred Stock as a single class on any matter, the Series A Preferred Stock and the shares of each such other class or series will have one vote for each $5.00 of liquidation preference. |
Existing Charter Provision
|
Proposed Amendment to Charter
Provision |
|||
Liquidation Preference | The liquidation preference is $25.00 per share. | The liquidation preference will be $5.00 per share. | ||
Payment of Dividends | Dividends on the Series A Preferred Stock are payable quarterly in cash when and as declared by the Board of Directors and accumulate at a rate of 12.875% per annum of the $25.00 per share liquidation preference. | Dividends on the Series A Preferred Stock will no longer be paid. | ||
Accumulated and Unpaid Dividends | Dividends shall accrue and accumulate on each issued and outstanding share of the Series A Preferred Stock on a daily basis from the original date of issuance of such share and are payable quarterly. | All accumulated and unpaid dividends will be eliminated. | ||
Penalty Events and Election of Directors | Whenever a penalty event has occurred, the number of directors constituting the Board of Directors will be automatically increased by | There will no longer be any penalty events and holders of Series A Preferred Stock will no longer have the right to vote for |
two and the holders of the Series A Preferred Stock (voting together as a class with all other classes or series of stock we may issue upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series A Preferred Stock in the election of those two directors) will be entitled to vote for the election of those two additional directors. | the election of two directors whenever a penalty event has occurred. | |||
Optional Redemption Price | The redemption price for an optional redemption is $25.00 per share. | The redemption price for an optional redemption will be $5.00 per share. | ||
Change of Control Redemption Price | The redemption price for a redemption upon a change of control is $25.00 per share. | The redemption price for a redemption upon a change of control will be $5.00 per share. | ||
Voting Rights | When shares of any class or series of stock have the right to vote with the Series A Preferred Stock as a single class on any matter, the Series A Preferred Stock and the shares of each such other class or series will have one vote for each $25.00 of liquidation preference (excluding accumulated dividends). | When shares of any class or series of stock have the right to vote with the Series A Preferred Stock as a single class on any matter, the Series A Preferred Stock and the shares of each such other class or series will have one vote for each $5.00 of liquidation preference. |
• |
on an actual basis;
|
• |
on an as adjusted basis to give effect to the Exchange Offer (assuming 66 2/3% of the outstanding shares of Series A Preferred Stock (1,874,357 shares) are each exchanged for one share of Series B Preferred Stock); and
|
• |
on an as adjusted basis to give effect to the Exchange Offer (assuming 100% of the outstanding shares of Series A Preferred Stock (2,811,535 shares) are each exchanged for one share or Series B Preferred Stock).
|
September 30, 2021
|
||||||||||||
Actual
|
As Adjusted*
|
As Adjusted**
|
||||||||||
(In thousands)
|
||||||||||||
Cash
|
$ | 6,233 | $ | 6,233 | $ | 6,233 | ||||||
Restricted cash
|
3,393 | 3,393 | 3,393 | |||||||||
|
|
|
|
|
|
|||||||
Total cash and cash equivalents
|
$ | 9,626 | $ | 9,626 | $ | 9,626 | ||||||
|
|
|
|
|
|
|||||||
Senior debt, net
|
$ | 46,357 | $ | 46,357 | $ | 46,357 | ||||||
Bonds, net
|
6,238 | 6,238 | 6,238 | |||||||||
Other debt, net
|
802 | 802 | 802 | |||||||||
|
|
|
|
|
|
|||||||
Total long-term debt
|
53,397 | 53,397 | 53,397 | |||||||||
Stockholders’ equity:
|
||||||||||||
Common stock and additional
paid-in
capital, no par value; 55,000 shares authorized; 1,775 issued and outstanding at September 30, 2021
|
62,336 | 62,336 | 62,336 | |||||||||
Series A Preferred stock, no par value; 5,000 shares authorized; 2,812 shares issued and outstanding, redemption amount $70,288 at September 30, 2021
|
62,423 | 20,808 | — | |||||||||
Series B Preferred stock, no par value
|
— | 41,615 | 62,423 | |||||||||
Accumulated deficit
|
(113,881 | ) | (113,881 | ) | (113,881 | ) | ||||||
|
|
|
|
|
|
|||||||
Total stockholders’ equity
|
10,878 | 10,878 | 10,878 | |||||||||
Total long-term debt and stockholders’ equity
|
$ | 64,275 | $ | 64,275 | $ | 64,275 | ||||||
|
|
|
|
|
|
* |
Assuming 66 2/3% of the outstanding shares of Series A Preferred Stock (1,874,357 shares) are each exchanged for one share of Series B Preferred Stock.
|
** |
Assuming 100% of the outstanding shares of Series A Preferred Stock (2,811,535 shares) are each exchanged for one share of Series B Preferred Stock.
|
2022
|
High
|
Low
|
||||||
First Quarter to February 9, 2022
|
$ | 4.550 | $ | 4.080 | ||||
2021
|
High
|
Low
|
||||||
Fourth Quarter
|
$ | 5.220 | $ | 3.860 | ||||
Third Quarter
|
6.010 | 4.880 | ||||||
Second Quarter
|
6.300 | 2.730 | ||||||
First Quarter
|
2.980 | 2.240 | ||||||
2020
|
High
|
Low
|
||||||
Fourth Quarter
|
$ | 2.4200 | $ | 1.9000 | ||||
Third Quarter
|
2.2000 | 1.7800 | ||||||
Second Quarter
|
2.2400 | 1.7500 | ||||||
First Quarter
|
4.6700 | 1.8500 | ||||||
2019
|
High
|
Low
|
||||||
Fourth Quarter
|
$ | 5.5490 | $ | 3.9600 | ||||
Third Quarter
|
6.2500 | 2.9350 | ||||||
Second Quarter
|
4.2300 | 2.7805 | ||||||
First Quarter
|
4.0000 | 2.3000 |
Name and Address of Beneficial Owner
|
Number of
Shares of
Series A
Preferred Stock
Beneficially
Owned
|
Percent of
Outstanding
Series A
Preferred Stock |
||||||
Charles L. Frischer
|
397,982 |
(1)
|
14.16 | % |
(1)
|
Information obtained from the Schedule 13D/A filed by Charles L. Frischer and the Libby Frischer Family Partnership (“
LFFP
”), an entity that Mr. Frischer is the general partner of, with the SEC on July 6, 2021. Charles L. Frischer reports having sole voting power and sole dispositive power with respect to 397,982 shares of Series A Preferred Stock. LFFP reports having sole voting power and sole dispositive power with respect to 11,000 shares of Series A Preferred Stock. The principal business address of Charles L. Frischer and LFFP is 4404 52nd Avenue NE, Seattle, WA 98105.
|
(i) |
consulting with the Chairman of the Board (or the Chief Executive Officer, if there is no Chairman of the Board) regarding the agenda for Board meetings;
|
(ii) |
scheduling and preparing agendas for meetings of
non-management
directors;
|
(iii) |
presiding over meetings of
non-management
directors and executive sessions of meetings of the Board from which employee directors are excluded;
|
(iv) |
acting as principal liaison between
non-management
directors and the Chairman of the Board (or the Chief Executive Officer, if there is no Chairman of the Board) on sensitive issues; and
|
(v) |
raising issues with management on behalf of the
non-management
directors when appropriate.
|
Name
|
Audit
Committee |
Compensation
Committee
|
Nominating
Committee |
|||
Michael J. Fox
|
✓ | ✓ | Chair | |||
Brent Morrison
|
— | — | — | |||
Kenneth W. Taylor
|
Chair | ✓ | ✓ | |||
David A. Tenwick
|
✓ | Chair | ✓ |
• |
Shareholder Action Through Written Consent
|
• |
Special Meetings
|
• |
Removal of Directors
|
• |
Authorized But Unissued Stock
|
• |
Advance Notice Requirements
|
• |
Georgia “Fair Price” Statute
|
• |
Georgia “Business Combination” Statute
|
• |
the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of our stock entitling that person to exercise more than 50% of the total voting power of all our stock entitled to vote generally in the election of our directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and
|
• |
following the closing of any acquisition described in the bullet point above, neither we nor the acquiring or surviving entity has a class of common securities (or American depositary receipts representing such securities) listed on a national exchange.
|
• |
a limited purpose trust company organized under the laws of the State of New York;
|
• |
a “banking organization” within the meaning of New York Banking Law;
|
• |
a member of the Federal Reserve System;
|
• |
a “clearing corporation” within the meaning of the Uniform Commercial Code; and
|
• |
a “Clearing Agency” registered pursuant to the provisions of Section 17A of the Exchange Act.
|
• |
the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of our stock entitling that person to exercise more than 50% of the total voting power of all our stock entitled to vote generally in the election of our directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and
|
• |
following the closing of any acquisition described in the bullet point above, neither we nor the acquiring or surviving entity has a class of common securities (or American depositary receipts representing such securities) listed on a national exchange.
|
• |
a limited purpose trust company organized under the laws of the State of New York;
|
• |
a “banking organization” within the meaning of New York Banking Law;
|
• |
a member of the Federal Reserve System;
|
• |
a “clearing corporation” within the meaning of the Uniform Commercial Code; and
|
• |
a “Clearing Agency” registered pursuant to the provisions of Section 17A of the Exchange Act.
|
• |
any person from beneficially or constructively owning shares of Common Stock of any class or series (“
Equity Shares
”) to the extent that such ownership would cause the Company to fail to qualify as a
REIT
by reason of being “closely held” under the Code (without regard to whether the ownership interest is held during the last half of a taxable year);
|
• |
any person from beneficially or constructively owning Equity Shares that would cause the Company to otherwise fail to qualify as a REIT (including beneficial or constructive ownership that would result in the Company owning (actually or constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Company from such tenant would cause the Company to fail to satisfy any of the gross income requirements of Section 856(c) of the Code);
|
• |
any person from beneficially owning Equity Shares to the extent such beneficial ownership of Equity Shares would result in the Company failing to be “domestically controlled” within the meaning of Section 897(h)(4)(B) of the Code; and
|
• |
any person from beneficially owning Equity Shares to the extent such beneficial ownership of Equity Shares would result in the Company being “predominantly held” (within the meaning of Section 856(h)(3)(D)(iii) of the Code) by “qualified trusts” (within the meaning of Section 856(h)(3)(E) of the Code).
|
Series B Preferred Stock
|
Series A Preferred Stock
(Prior to Implementation of the
Charter Amendments)
|
Series A Preferred Stock
(Following Implementation of the
Charter Amendments)
|
||
Voting Rights
|
||||
On each matter on which holders of Series B Preferred Stock are entitled to vote (as further described below), each share of Series B Preferred Stock will be entitled to one vote, except that when shares of any other class or series of our stock have the right to vote with the Series B Preferred Stock as a single class on any matter, the Series B Preferred Stock and the shares of each such other class or series will have one vote per share. Holders of Series B Preferred Stock have no voting rights except as set forth below in this “—Voting Rights” section or under “—Director Nomination Rights” or as otherwise required by law: | On each matter on which holders of Series A Preferred Stock are entitled to vote (as further described below), each share of Series A Preferred Stock will be entitled to one vote, except that when shares of any other class or series of our stock have the right to vote with the Series A Preferred Stock as a single class on any matter, the Series A Preferred Stock and the shares of each such other class or series will have one vote for each $25.00 of liquidation preference (excluding accumulated dividends). Holders of Series A Preferred Stock have no voting rights except as set forth below or as otherwise required by law: | On each matter on which holders of Series A Preferred Stock are entitled to vote (as further described below), each share of Series A Preferred Stock will be entitled to one vote, except that when shares of any other class or series of our preferred stock have the right to vote with the Series A Preferred Stock as a single class on any matter, the Series A Preferred Stock and the shares of each such other class or series will have one vote for each $5.00 of liquidation preference. Holders of Series A Preferred Stock have no voting rights except as set forth below or as otherwise required by law: | ||
• When a dividend default has occurred, subject to the provisions under “Description of Capital Stock—Series B Preferred Stock—Voting Rights,” the number of directors constituting the Board of Directors will be automatically increased by two (if not already increased by two by reason of the election of directors by the holders of any other classes or series of stock we may issue upon which similar voting rights have been conferred and are exercisable and with which the Series B Preferred Stock is entitled to vote as a class with respect to the election of such two directors), and the holders of the Series B Preferred Stock
|
• Whenever a penalty event has occurred, which is defined as either a dividend default or a delisting event, the number of directors constituting the Board of Directors will be automatically increased by two (if not already increased by two by reason of the election of directors by the holders of any other classes or series of stock we may issue upon which similar voting rights have been conferred and are exercisable and with which the Series A Preferred Stock is entitled to vote as a class with respect to the election of those two directors), and the holders of
|
Series B Preferred Stock
|
Series A Preferred Stock
(Prior to Implementation of the
Charter Amendments)
|
Series A Preferred Stock
(Following Implementation of the
Charter Amendments)
|
||
(voting together as a class with all other classes or series of stock we may issue upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series B Preferred Stock in the election of such two directors) will be entitled to vote for the election of such two additional directors at a special meeting called by us at the request of the holders of record of at least 25% of the outstanding shares of Series B Preferred Stock or by the holders of any other classes or series of stock upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series B Preferred Stock in the election of such two directors (unless the request is received less than 60 days before the date fixed for the next annual or special meeting of our shareholders, in which case such vote will be held at the earlier of the second annual or special meeting of our shareholders after such date), and at each subsequent annual meeting until a correction event has occurred with respect to such dividend default.
|
the Series A Preferred Stock (voting together as a class with all other classes or series of stock we may issue upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series A Preferred Stock in the election of those two directors) will be entitled to vote for the election of those two additional directors at a special meeting called by us at the request of the holders of record of at least 25% of the outstanding shares of Series A Preferred Stock or by the holders of any other classes or series of stock upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series A Preferred Stock in the election of those two directors (unless the request is received less than 90 days before the date fixed for the next annual or special meeting of our shareholders, in which case, such vote will be held at the earlier of the next annual or special meeting of our shareholders), and at each subsequent annual meeting until a correction event has occurred with respect to each penalty event then continuing.
|
|||
• On the date a correction event with respect to a dividend default occurs, the right of holders of the Series B Preferred Stock to elect any directors pursuant to the dividend penalty right will cease and, unless there are other classes or series of our
|
• On the date a correction event occurs, the right of holders of the Series A Preferred Stock to elect any directors will cease and, unless there are other classes or series of our stock upon which similar voting rights
|
Series B Preferred Stock
|
Series A Preferred Stock
(Prior to Implementation of the
Charter Amendments)
|
Series A Preferred Stock
(Following Implementation of the
Charter Amendments)
|
||
stock upon which similar voting rights have been conferred and are exercisable, the term of any directors elected by holders of the Series B Preferred Stock pursuant to the dividend penalty right shall immediately terminate and the number of directors constituting our Board of Directors shall be reduced accordingly. For the avoidance of doubt, in no event shall the total number of directors elected by holders of the Series B Preferred Stock (voting together as a class with all other classes or series of stock we may issue upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series B Preferred Stock in the election of such directors) pursuant to the voting rights under the dividend penalty right exceed two.
|
have been conferred and are exercisable, the term of any directors elected by holders of the Series A Preferred Stock shall immediately terminate and the number of directors constituting our Board of Directors shall be reduced accordingly.
|
|||
• When a delisting event has occurred, subject to the provisions under “Description of Capital Stock—Series B Preferred Stock—Voting Rights,” the number of directors constituting the Board of Directors will be automatically increased by one (if not already increased by one by reason of the election of directors by the holders of any other classes or series of stock we may issue upon which similar voting rights have been conferred and are exercisable and with which the Series B Preferred Stock is entitled to vote as a class with respect to the election of such director), and the holders of the Series B Preferred Stock (voting together as a class with all other classes or series of stock we
|
Series B Preferred Stock
|
Series A Preferred Stock
(Prior to Implementation of the
Charter Amendments)
|
Series A Preferred Stock
(Following Implementation of the
Charter Amendments)
|
||
may issue upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series B Preferred Stock in the election of such director) will be entitled to vote for the election of such additional director at a special meeting called by us at the request of the holders of record of at least 25% of the outstanding shares of Series B Preferred Stock or by the holders of any other classes or series of stock upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series B Preferred Stock in the election of such director (unless the request is received less than 60 days before the date fixed for the next annual or special meeting of our shareholders, in which case such vote will be held at the earlier of the second annual or special meeting of our shareholders after such date), and at each subsequent annual meeting until a correction event has occurred with respect to such delisting event.
|
||||
• On the date a correction event with respect to a delisting event occurs, the right of holders of the Series B Preferred Stock to elect any director pursuant to the delisting penalty right will cease and, unless there are other classes or series of our stock upon which similar voting rights have been conferred and are exercisable, the term of any director elected by holders of the Series B Preferred Stock pursuant to the delisting penalty right shall immediately
|
Series B Preferred Stock
|
Series A Preferred Stock
(Prior to Implementation of the
Charter Amendments)
|
Series A Preferred Stock
(Following Implementation of the
Charter Amendments)
|
||
terminate and the number of directors constituting our Board of Directors shall be reduced accordingly. For the avoidance of doubt, in no event shall the total number of directors elected by holders of the Series B Preferred Stock (voting together as a class with all other classes or series of stock we may issue upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series B Preferred Stock in the election of such directors) pursuant to the voting rights under (i) the delisting penalty right exceed one or (ii) the dividend penalty right and the delisting penalty right exceed two. If (A) a delisting event occurs while a previous dividend default remains uncured and (B) two directors are already serving on the Board pursuant to the dividend penalty right, then no additional director may be elected pursuant to the delisting penalty right. If a dividend default occurs while a previous delisting event remains uncured, then, upon the election of two directors pursuant to the dividend penalty right, the term of the director then serving on the Board pursuant to the delisting penalty right, if any, shall immediately terminate and the number of directors constituting the Board shall be reduced accordingly.
|
||||
• If, at any time when the voting rights conferred upon the Series B Preferred Stock pursuant to the dividend penalty right or the delisting penalty right are exercisable, any vacancy in the office of a
|
• If, at any time when the voting rights conferred upon the Series A Preferred Stock are exercisable, any vacancy in the office of a director elected shall occur, then such vacancy may be filled only
|
Series B Preferred Stock
|
Series A Preferred Stock
(Prior to Implementation of the
Charter Amendments)
|
Series A Preferred Stock
(Following Implementation of the
Charter Amendments)
|
||
director elected or appointed pursuant to the dividend penalty right or the delisting penalty right shall occur, then such vacancy may be filled only by the remaining such director(s) or by vote of the holders of record of the outstanding Series B Preferred Stock and any other classes or series of stock upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series B Preferred Stock in the election of directors pursuant to the dividend penalty right or the delisting penalty right. Any director elected or appointed pursuant to the dividend penalty right or the delisting penalty right may be removed only by the affirmative vote of holders of the outstanding Series B Preferred Stock and any other classes or series of stock upon which similar voting rights have been conferred and are exercisable and which classes or series of stock are entitled to vote as a class with the Series B Preferred Stock in the election of directors pursuant to the dividend penalty right or the delisting penalty right, such removal to be effected by the affirmative vote of a majority of the votes entitled to be cast by the holders of the outstanding Series B Preferred Stock and any such other classes or series of stock, and may not be removed by the holders of the Common Stock.
|
by the remaining such director or by vote of the holders of record of the outstanding Series A Preferred Stock and any other classes or series of stock upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series A Preferred Stock in the election of directors. Any director elected or appointed may be removed only by the affirmative vote of holders of the outstanding Series A Preferred Stock and any other classes or series of stock upon which similar voting rights have been conferred and are exercisable and which classes or series of stock are entitled to vote as a class with the Series A Preferred Stock in the election of directors, such removal to be effected by the affirmative vote of a majority of the votes entitled to be cast by the holders of the outstanding Series A Preferred Stock and any such other classes or series of stock, and may not be removed by the holders of the Common Stock.
|
|||
• So long as any shares of Series B Preferred Stock remain outstanding, no more than six directors not elected or appointed pursuant to the
|
Series B Preferred Stock
|
Series A Preferred Stock
(Prior to Implementation of the
Charter Amendments)
|
Series A Preferred Stock
(Following Implementation of the
Charter Amendments)
|
||
dividend penalty right, the delisting penalty right or the preceding bullet point may be elected or appointed.
|
||||
• So long as any shares of Series B Preferred Stock remain outstanding, we will not, without the affirmative vote of the holders of at least
two-thirds
of the shares of the Series B Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting together as a series and also together as a class with all other classes or series of stock that we may issue upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series B Preferred Stock): (i) authorize or create, or increase the authorized or issued amount of, any class or series of senior shares or reclassify any of our authorized stock into such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of the Charter, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Series B Preferred Stock (each, an “
event
”); provided, however, with respect to the occurrence of any event set forth in clause (ii) above, so long as the Series B Preferred Stock remains outstanding with the terms thereof materially unchanged, taking into account that, upon an occurrence of an event, we may not be the
|
• So long as any shares of Series A Preferred Stock remain outstanding, we will not, without the affirmative vote of the holders of at least two thirds of the shares of the Series A Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting together as a series and also together as a class with all other classes or series of stock that we may issue upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series A Preferred Stock): (i) authorize or create, or increase the authorized or issued amount of, any class or series of senior shares or reclassify any of our authorized stock into such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of the Charter, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Series A Preferred Stock (each, an “
event
”); provided, however, with respect to the occurrence of any event set forth in (ii) above, so long as the Series A Preferred Stock
|
• So long as any shares of Series A Preferred Stock remain outstanding, we will not, without the affirmative vote of the holders of at least two thirds of the shares of the Series A Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting together as a series and also together as a class with all other classes or series of stock that we may issue upon which similar voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series A Preferred Stock): (i) authorize or create, or increase the authorized or issued amount of, any class or series of senior shares or reclassify any of our authorized stock into such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of the Charter, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Series A Preferred Stock (each, an “
event
”); provided, however, with respect to the occurrence of any event set forth in (ii) above, so long as the Series A Preferred Stock
|
Series B Preferred Stock
|
Series A Preferred Stock
(Prior to Implementation of the
Charter Amendments)
|
Series A Preferred Stock
(Following Implementation of the
Charter Amendments)
|
||
surviving entity (whether or not such event would constitute a change of control, the occurrence of any such event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting power of holders of the Series B Preferred Stock (although we would be required to redeem the Series B Preferred Stock if such event constitutes a change of control) and, provided further, that any increase in the amount of the authorized Common Stock or other stock we may issue, including the Series B Preferred Stock, or the creation or issuance of any additional Common Stock, Series B Preferred Stock or other class or other series of stock that we may issue, or any increase in the amount of authorized shares of such class or series, in each case which are parity shares or junior shares, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers and shall not require any affirmative vote or consent of the holders of the Series B Preferred Stock. Notwithstanding the foregoing, (A) if any event set forth in clause (ii) above would adversely affect one or more but not all other classes or series of stock we may issue upon which similar voting rights have been conferred and are exercisable (including the Series B Preferred Stock for this purpose), then only such classes or series of stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a class in lieu of all other classes or series of stock;
|
remains outstanding with the terms thereof materially unchanged, taking into account that, upon an occurrence of an event, we may not be the surviving entity (whether or not such event would constitute a change of control), the occurrence of any such event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting power of holders of the Series A Preferred Stock (although we would be required to redeem the Series A Preferred Stock if such event constitutes a change of control) and, provided further, that any increase in the amount of the authorized Common Stock or other stock we may issue, including the Series A Preferred Stock, or the creation or issuance of any additional Common Stock, Series A Preferred Stock or other class or other series of stock that we may issue, or any increase in the amount of authorized shares of such class or series, in each case which are parity shares or junior shares, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers and shall not require any affirmative vote or consent of the holders of the Series A Preferred Stock.
|
remains outstanding with the terms thereof materially unchanged, taking into account that, upon an occurrence of an event, we may not be the surviving entity (whether or not such event would constitute a change of control), the occurrence of any such event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting power of holders of the Series A Preferred Stock (although we would be required to redeem the Series A Preferred Stock if such event constitutes a change of control) and, provided further, that any increase in the amount of the authorized Common Stock or other stock we may issue, including the Series A Preferred Stock, or the creation or issuance of any additional Common Stock, Series A Preferred Stock or other class or other series of stock that we may issue, or any increase in the amount of authorized shares of such class or series, in each case which are parity shares or junior shares, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers and shall not require any affirmative vote or consent of the holders of the Series A Preferred Stock.
|
Series B Preferred Stock
|
Series A Preferred Stock
(Prior to Implementation of the
Charter Amendments)
|
Series A Preferred Stock
(Following Implementation of the
Charter Amendments)
|
||
and (B) if all series of a class of preferred stock are not equally affected by the proposed event, there shall be required a two-thirds approval of the class and a two-thirds approval of each series that will have a diminished status.
|
||||
Dividend Rights
|
||||
Beginning on , 2026, dividends on the Series B Preferred Stock are payable quarterly in cash when, as and if approved by the Board of Directors and declared by us and accumulate at a rate of 12.5% per annum of the liquidation preference of the Series B Preferred Stock in effect on the first calendar day of the applicable dividend period (subject to the sixth paragraph under “Description of Capital Stock—Series B Preferred Stock—Dividends”).
If we have committed a “dividend default” by failing to pay dividends on the outstanding Series B Preferred Stock in full for any six consecutive or non-consecutive dividend periods, then commencing on the first day after the dividend payment date on which a dividend default occurs and continuing until we have paid all accumulated accrued and unpaid dividends on the shares of the Series B Preferred Stock for all dividend periods up to, and including, the dividend payment date on which the accumulated accrued and unpaid dividends are paid in full in cash (or declared such dividends and a sum of cash sufficient for the payment thereof is set apart for payment), the holders of the Series B Preferred Stock will have the voting rights described above under “—Voting Rights.” Once we have paid all accumulated accrued and unpaid dividends in full in cash (or declared
|
Dividends on the Series A Preferred Stock are payable quarterly in cash when and as declared by the Board of Directors and accumulate at a rate of 10.875% per annum of the $25.00 per share liquidation preference, equivalent to $2.7187 per annum per share.
On June 8, 2018, our Board of Directors indefinitely suspended quarterly dividend payments on our Series A Preferred Stock. As of February 1, 2022, as a result of the suspension of the dividend payment on the Series A Preferred Stock commencing with the fourth quarter 2017 dividend period, the Company has $37.7 million of accumulated and unpaid dividends on its Series A Preferred Stock. As the Company has failed to pay cash dividends on the outstanding Series A Preferred Stock in full for more than four dividend periods, a dividend default has occurred and, pursuant to the terms of the Charter, the annual dividend rate on the Series A Preferred Stock for the fifth, subsequent and future missed dividend periods has increased to 12.875%, which is equivalent to approximately $3.20 per share each year, which commenced on the first day after the missed fourth quarterly payment (October 1, 2018) and will continue until the second consecutive dividend
|
Holders of Series A Preferred Stock under the amended Charter will have no dividend rights. |
Series B Preferred Stock
|
Series A Preferred Stock
(Prior to Implementation of the
Charter Amendments)
|
Series A Preferred Stock
(Following Implementation of the
Charter Amendments)
|
||
such dividends and a sum of cash sufficient for the payment thereof is set apart for such payment), the foregoing provisions will not be applicable, unless we again fail to pay any dividend for any future dividend period. | payment date following such time as the Company has paid all accumulated and unpaid dividends on the Series A Preferred Stock in full in cash. Because the foregoing constituted a penalty event, the Board of Directors automatically increased by two and the holders of Series A Preferred Stock are entitled to vote for the Penalty Directors at a special meeting called by the Company at the request of holders of record of at least 25% of the outstanding Series A Preferred Stock until a correction event with respect to the penalty event occurs. As of the date of this proxy statement/prospectus, holders of record of at least 25% of the outstanding Series A Preferred Stock have not requested a special meeting to elect the Penalty Directors. | |||
Optional Redemption
|
||||
• We, at our option, upon not less than 30 nor more than 60 days’ written notice, may redeem the Series B Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price equal to the then-applicable Liquidation Preference per share of Series B Preferred Stock (subject to the last paragraph under “Description of Capital Stock—Series B Preferred Stock—Redemption”), plus all accumulated accrued and unpaid dividends thereon (whether or not earned, approved or declared) to, but excluding, the date fixed for redemption, without interest. If fewer than all of the outstanding shares of Series B Preferred Stock are to be redeemed, the number of shares to be redeemed will be
|
• We, at our option, upon not less than 30 nor more than 60 days’ written notice, may redeem the Series A Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends thereon (whether or not earned or declared) to, but excluding, the date fixed for redemption, without interest. If fewer than all of the outstanding Series A Preferred Stock are to be redeemed, the number of shares to be redeemed will be determined by us and such shares may be redeemed pro rata from the holders of record of such shares in proportion to the number of such shares held by such
|
• We, at our option, upon not less than 30 nor more than 60 days’ written notice, will be entitled to redeem the Series A Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $5.00 per share. If fewer than all of the outstanding Series A Preferred Stock are to be redeemed, the number of shares to be redeemed will be determined by us and such shares may be redeemed pro rata from the holders of record of such shares in proportion to the number of such shares held by such holders (with adjustments to avoid redemption of fractional shares) or by lot in an equitable manner determined by us.
|
Series B Preferred Stock
|
Series A Preferred Stock
(Prior to Implementation of the
Charter Amendments)
|
Series A Preferred Stock
(Following Implementation of the
Charter Amendments)
|
||
determined by us and such shares may be redeemed pro rata from the holders of record of such shares in proportion to the number of such shares held by such holders (with adjustments to avoid redemption of fractional shares) or by lot in an equitable manner determined by us.
|
holders (with adjustments to avoid redemption of fractional shares) or by lot in an equitable manner determined by us.
|
|||
• With respect to a redemption as described above, unless all accumulated accrued and unpaid dividends on all Series B Preferred Stock and all parity shares shall have been or contemporaneously are (i) declared and paid in cash or (ii) declared and a sum of cash sufficient for the payment thereof is set apart for payment for all past dividend periods and the then current dividend period, no Series B Preferred Stock or parity shares shall be redeemed unless all outstanding Series B Preferred Stock and parity shares are simultaneously redeemed; provided, however, that the foregoing shall not prevent the purchase or acquisition of Series B Preferred Stock or parity shares (A) pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Series B Preferred Stock and parity shares or (B) by conversion into or exchange for junior shares and parity shares.
|
• With respect to a redemption as described above, unless full cumulative dividends on all Series A Preferred Stock and all parity shares shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods and the then current dividend period: (i) no Series A Preferred Stock or parity shares shall be redeemed unless all outstanding Series A Preferred Stock and parity shares are simultaneously redeemed; provided, however, that the foregoing shall not prevent the purchase or acquisition of Series A Preferred Stock or parity shares pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Series A Preferred Stock and parity shares; and (ii) we shall not purchase or otherwise acquire directly or indirectly any Series A Preferred Stock or parity shares (except by conversion into or exchange for junior shares and parity shares).
|
|||
Special Redemption
|
||||
If a “change of control” of us by a person, entity or group occurs, we (or the acquiring entity) will be required to redeem the Series B Preferred Stock, in whole but not in part, | If a “change of control” of us by a person, entity or group occurs, we (or the acquiring entity) will be required to redeem the Series A Preferred Stock, in whole but not | If “change of control” of us by a person, entity or group occurs, we (or the acquiring entity) will be required to redeem the Series A Preferred Stock, in whole but not |
Series B Preferred Stock
|
Series A Preferred Stock
(Prior to Implementation of the
Charter Amendments)
|
Series A Preferred Stock
(Following Implementation of the
Charter Amendments)
|
||
within 120 days after the date on which the change of control has occurred, for cash at a redemption price equal to the then-applicable liquidation preference per share of Series B Preferred Stock (subject to the last paragraph under “Description of Capital Stock—Series B Preferred Stock—Redemption”), plus all accumulated accrued and unpaid dividends thereon (whether or not earned, approved or declared) to, but excluding, the redemption date, without interest. A “change of control” is deemed to occur when the following have occurred and are continuing:
• the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of our stock entitling that person to exercise more than 50% of the total voting power of all our stock entitled to vote generally in the election of our directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and
• following the closing of any acquisition described in the bullet point above, neither we nor the acquiring or surviving entity has a class of common securities (or American depositary receipts representing such securities) listed on a national exchange.
|
in part, within 120 days after the date on which the change of control has occurred, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends thereon (whether or not earned or declared) to, but excluding, the redemption date, without interest. A “change of control” is deemed to occur when the following have occurred and are continuing:
• the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of our stock entitling that person to exercise more than 50% of the total voting power of all our stock entitled to vote generally in the election of our directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and
• following the closing of any acquisition described in the bullet point above, neither we nor the acquiring or surviving entity has a class of common securities (or American depositary receipts representing such securities) listed on a national exchange.
|
in part, within 120 days after the date on which the change of control has occurred, for cash at a redemption price of $5.00 per share. A “change of control” is deemed to occur when the following have occurred and are continuing:
• the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of our stock entitling that person to exercise more than 50% of the total voting power of all our stock entitled to vote generally in the election of our directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and
• following the closing of any acquisition described in the bullet point above, neither we nor the acquiring or surviving entity has a class of common securities (or American depositary receipts representing such securities) listed on a national exchange.
|
Series B Preferred Stock
|
Series A Preferred Stock
(Prior to Implementation of the
Charter Amendments)
|
Series A Preferred Stock
(Following Implementation of the
Charter Amendments)
|
||
Milestone Redemption
|
||||
If, as of the date that is 18 months after the original date of issuance, we have failed to redeem, repurchase or otherwise acquire 1,000,000 shares of Series B Preferred Stock, then within 30 days of such date, we shall pay to the holders of Series B Preferred Stock, on a pro rata basis in proportion to the number of shares of Series B Preferred Stock held by such holders, the penalty dividend, payable in shares of Common Stock, described under “Description of Capital Stock—Series B Preferred Stock—Milestone Redemption.” | ||||
Cumulative Redemption
|
||||
If, as of any cumulative redemption measurement date, we have failed to redeem, repurchase or otherwise acquire the applicable cumulative redemption amount, then (i) commencing on the first day after such cumulative redemption measurement date and continuing until the date a correction event with respect to such cumulative redemption default occurs, the holders of Series B Preferred Stock will have the director nomination rights described below under “—Director Nomination Rights”; and (ii) following any cumulative redemption default that has been cured by us, if we subsequently fail to redeem, repurchase or otherwise acquire the applicable cumulative redemption amount as of the applicable cumulative redemption measurement date, such subsequent failure shall constitute a separate cumulative redemption default, and the foregoing provisions of clause (i) of this sentence shall immediately apply until such time as a correction event occurs with respect to such subsequent cumulative redemption default. |
Series B Preferred Stock
|
Series A Preferred Stock
(Prior to Implementation of the
Charter Amendments)
|
Series A Preferred Stock
(Following Implementation of the
Charter Amendments)
|
||
Liquidation
|
||||
Upon any voluntary or involuntary liquidation, dissolution or winding up of our affairs, then, before any distribution or payment shall be made to the holders of any Common Stock, Series A Preferred Stock or any other class or series of junior shares in the distribution of assets upon any liquidation, dissolution or winding up of us, the holders of Series B Preferred Stock are entitled to receive out of our assets legally available for distribution to shareholders, liquidating distributions in the amount of the then-applicable liquidation preference per share of Series B Preferred Stock. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series B Preferred Stock will have no right or claim to any of our remaining assets. In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, our available assets are insufficient to pay the amount of the liquidating distributions on all outstanding Series B Preferred Stock and the corresponding amounts payable on all senior shares and parity shares, then after payment of the liquidating distributions on all outstanding senior shares, the holders of the Series B Preferred Stock and all other such classes or series of parity shares will share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. For such purposes, the consolidation or merger of us with or into any other entity, or the sale, lease or conveyance of all or substantially all of our property or business, or a statutory share exchange will not be deemed to constitute a voluntary or | Upon any voluntary or involuntary liquidation, dissolution or winding up of our affairs, then, before any distribution or payment shall be made to the holders of any Common Stock or any other class or series of junior shares in the distribution of assets upon any liquidation, dissolution or winding up of us, the holders of Series A Preferred Stock are entitled to receive out of our assets legally available for distribution to shareholders, liquidating distributions in the amount of the liquidation preference, or $25.00 per share, plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to, but excluding, the date of payment. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series A Preferred Stock will have no right or claim to any of our remaining assets. In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, our available assets are insufficient to pay the amount of the liquidating distributions on all outstanding Series A Preferred Stock and the corresponding amounts payable on all senior shares and parity shares, then after payment of the liquidating distribution on all outstanding senior shares, the holders of the Series A Preferred Stock and all other such classes or series of parity shares will share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. For such purposes, the consolidation or | Upon any voluntary or involuntary liquidation, dissolution or winding up of our affairs, then, before any distribution or payment shall be made to the holders of any Common Stock or any other class or series of junior shares in the distribution of assets upon any liquidation, dissolution or winding up of us, the holders of Series A Preferred Stock are entitled to receive out of our assets legally available for distribution to shareholders, liquidating distributions in the amount of the liquidation preference, or $5.00 per share. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series A Preferred Stock will have no right or claim to any of our remaining assets. In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, our available assets are insufficient to pay the amount of the liquidating distributions on all outstanding Series A Preferred Stock and the corresponding amounts payable on all senior shares and parity shares, then after payment of the liquidating distribution on all outstanding senior shares, the holders of the Series A Preferred Stock and all other such classes or series of parity shares will share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. For such purposes, the consolidation or merger of us with or into any other entity, or the sale, lease or conveyance of all or substantially all of our property or business, or a statutory share |
Series B Preferred Stock
|
Series A Preferred Stock
(Prior to Implementation of the
Charter Amendments)
|
Series A Preferred Stock
(Following Implementation of the
Charter Amendments)
|
||
involuntary liquidation, dissolution or winding up of us. Under the Charter, we are not required to set aside funds to protect the liquidation preference of the Series B Preferred Stock. | merger of us with or into any other entity, or the sale, lease or conveyance of all or substantially all of our property or business, or a statutory share exchange will not be deemed to constitute a voluntary or involuntary liquidation, dissolution or winding up of us. Under the Charter, we are not required to set aside funds to protect the liquidation preference of the Series A Preferred Stock. | exchange will not be deemed to constitute a voluntary or involuntary liquidation, dissolution or winding up of us. Under the Charter, we are not required to set aside funds to protect the liquidation preference of the Series A Preferred Stock. | ||
Director Nomination Rights
|
||||
If a cumulative redemption default has occurred and continuing until the date a correction event with respect to such cumulative redemption default occurs, we shall include in our proxy statement (including our form of proxy and ballot) for the next annual meeting of shareholders (or, if such default occurs less than 60 days before the date fixed for the next annual meeting, the second annual meeting after such occurrence), the name of any nominee for election to the Board submitted pursuant to these director nomination rights, subject to the requirements described under “Description of Capital Stock—Series B Preferred Stock—Director Nomination Rights.”
If a correction event with respect to a cumulative redemption default has not occurred at or prior to the commencement of the applicable annual meeting, then one director shall be elected out of the preferred nominee(s) by a plurality of the votes cast by the shares of Series B Preferred Stock at the annual meeting.
|
• |
an individual who is a citizen or resident of the United States;
|
• |
a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any political subdivision thereof;
|
• |
a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person; or
|
• |
an estate the income of which is subject to U.S. federal income taxation regardless of its source.
|
• |
is “not essentially equivalent to a dividend” with respect to a U.S. holder under Section 302(b)(1) of the Code;
|
• |
is a “substantially disproportionate” redemption with respect to a U.S. holder under Section 302(b)(2) of the Code; or
|
• |
results in a “complete redemption” of a U.S. holder’s stock interest in the Company under Section 302(b)(3) of the Code.
|
• |
Immediately after the redemption, the ratio of the shareholder’s voting stock to the corporation’s total outstanding voting stock is less than 80% of that ratio immediately before the redemption. The same 80% test must also be met with regard to the corporation’s common stock, voting and nonvoting, based on the fair market value of the aggregate shares of each class of common stock.
|
• |
Immediately after the redemption, the shareholder owns less than 50%, by vote, of the corporation’s voting stock.
|
• |
any amounts that are treated pursuant to the discussion above as dividend income generally will be subject to U.S. federal income tax withholding at the rate of 30% on the gross amount of any such amount unless either:
|
• |
a lower treaty rate applies and the
non-U.S.
holder furnishes a properly completed IRS Form
W-8BEN
or
W-8BEN-E
|
• |
the
non-U.S.
holder furnishes a properly completed IRS Form
W-8ECI
to the applicable withholding agent claiming that such amount is effectively connected income.
|
• |
any amounts that are treated pursuant to the discussion above as capital gain generally will not be subject to U.S. federal income tax or withholding tax; unless,
|
(A) |
the gain is effectively connected with the
non-U.S.
holder’s conduct of a trade or business in the United States (and, if the
non-U.S.
holder is entitled to the benefits of an applicable income tax treaty with the United States with respect to that gain, that gain is attributable to a permanent establishment maintained by the
non-U.S.
holder in the United States); or
|
(B) |
the
non-U.S.
holder is an individual who is present in the United States for 183 days or more during the taxable year in which the gain is recognized and certain other conditions are met.
|
• |
is “not essentially equivalent to a dividend” with respect to a U.S. holder under Section 302(b)(1) of the Code;
|
• |
is a “substantially disproportionate” redemption with respect to a U.S. holder under Section 302(b)(2) of the Code;
|
• |
results in a “complete redemption” of a U.S. holder’s stock interest in the Company under Section 302(b)(3) of the Code; or
|
• |
is a redemption of stock held by a
non-corporate
shareholder, which results in a partial liquidation of the Company under Section 302(b)(4) of the Code.
|
• |
the gain is effectively connected with a trade or business of the
non-U.S.
holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the
non-U.S.
holder in the United States);
|
• |
the
non-U.S.
holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition, and certain other conditions are met; or
|
• |
we are or have been a USRPHC for U.S. federal income tax purposes, as such term is defined in Section 897(c) of the Code, and such
non-U.S.
holder owned directly or pursuant to attribution rules at any time during the five-year period ending on the date of disposition more than 5% of the Series B Preferred Stock. This assumes that the Series B Preferred Stock is regularly traded on an established securities market, within the meaning of Section 897(c)(3) of the Code but no assurance can be given in this regard.
|
(i) |
the name and business address of the Proponent (including each beneficial owner, if any, on whose behalf the Shareholder Proposal is being made) and all Persons (as defined in Section 2.15(a) of our Bylaws) acting in concert with the Proponent (or such beneficial owner), and the name and address of all of the foregoing as they appear on the Company’s books (if they so appear);
|
(ii) |
the class and number of shares of the Company that are owned beneficially and of record by the Proponent (including each beneficial owner, if any, on whose behalf the Shareholder Proposal is being made) and the other Persons identified in clause (i);
|
(iii) |
a description of the Shareholder Proposal containing all material information relating thereto, including the information identified in Section 2.15(a)(iv) of our Bylaws;
|
(iv) |
a description of any agreement, arrangement or understanding with respect to the Shareholder Proposal between or among the Proponent and each beneficial owner, if any, on whose behalf the Shareholder Proposal is being made, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing;
|
(v) |
a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of such written notice by, or on behalf of, the Proponent and each beneficial owner, if any, on whose behalf the Shareholder Proposal is being made, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, the Proponent or such beneficial owner, with respect to the Company’s securities;
|
(vi) |
a representation that the Proponent is a holder of record of the capital stock of the Company entitled to vote at the meeting, will so remain at the time of the meeting, and intends to appear in person or by proxy at the meeting to propose such business;
|
(vii) |
a representation whether the Proponent or any beneficial owner on whose behalf the Shareholder Proposal is being made intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to approve or adopt the Shareholder Proposal or (b) otherwise to solicit proxies from shareholders in support of such Shareholder Proposal; and
|
(viii) |
any other information relating to the Proponent and such beneficial owner, if any, required to be disclosed in a proxy statement or other filing in connection with solicitations of proxies for the Shareholder Proposal under Section 14(a) of the Exchange Act.
|
☒ |
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|
Georgia
|
81-5166048
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
|
454 Satellite Boulevard NW, Suite 100, Suwanee, GA
|
30024-7191
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
Common Stock, no par value
|
RHE
|
NYSE American
|
||
10.875% Series A Cumulative Redeemable
Preferred Stock, no par value |
RHE-PA
|
NYSE American
|
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated
filer
|
☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☐ |
Page
Number
|
||||||
Part I
|
||||||
Item 1.
|
A-1-4
|
|||||
Item 1A.
|
A-1-23
|
|||||
Item 1B.
|
A-1-38
|
|||||
Item 2.
|
A-1-39
|
|||||
Item 3.
|
A-1-41
|
|||||
Item 4.
|
A-1-41
|
|||||
Part II
|
||||||
Item 5.
|
A-1-42
|
|||||
Item 6.
|
A-1-43
|
|||||
Item 7.
|
A-1-43
|
|||||
Item 7A.
|
A-1-62
|
|||||
Item 8.
|
A-1-63
|
|||||
Item 9.
|
A-1-112
|
|||||
Item 9A.
|
A-1-112
|
|||||
Item 9B.
|
A-1-113
|
|||||
Part III
|
||||||
Item 10.
|
A-1-114
|
|||||
Item 11.
|
A-1-117
|
|||||
Item 12.
|
A-1-122
|
|||||
Item 13.
|
A-1-124
|
|||||
Item 14.
|
A-1-125
|
|||||
Part IV
|
||||||
Item 15.
|
A-1-127
|
|||||
A-1-152
|
• |
The increased risks associated with our portfolio stabilization measures;
|
• |
The duration and impact of the
COVID-19
pandemic;
|
• |
Our ability to raise capital through equity and debt financings, and the cost of such capital;
|
• |
Our ability to meet the continued listing requirements of the NYSE American LLC (the “NYSE American”) and to maintain the listing of our securities thereon;
|
• |
Our dependence on the operating success of our tenants and their ability to meet their obligations to us;
|
• |
The effect of increasing healthcare regulation and enforcement on our tenants, and the dependence of our tenants on reimbursement from governmental and other third-party payors;
|
• |
The effect of our tenants’ potential financial or legal difficulties;
|
• |
The ability and willingness of our tenants to renew their leases with us upon expiration, and our ability to reposition our properties on the same or better terms in the event of nonrenewal or if we otherwise need to replace an existing tenant;
|
• |
The impact of liabilities associated with our legacy business of owning and operating healthcare properties, including pending and potential professional and general liability claims;
|
• |
The availability of, and our ability to identify, suitable acquisition opportunities, and our ability to complete such acquisitions and lease the respective properties on favorable terms; and
|
• |
Other risks inherent in the real estate business, including uninsured or underinsured losses affecting our properties, the possibility of environmental compliance costs and liabilities, and the illiquidity of real estate investments.
|
• |
the outstanding shares of AdCare’s common stock, no par value per share (the “AdCare common stock”), converted, on a
one-for-one
|
• |
the outstanding shares of AdCare’s 10.875% Series A Cumulative Redeemable Preferred Stock (the “AdCare Series A Preferred Stock”) converted, on a
one-for-one
|
• |
the board of directors (the “AdCare Board”) and executive officers of AdCare immediately prior to the Merger became the board of directors (the “RHE Board”) and executive officers, respectively, of Regional Health immediately following the Merger;
|
• |
Regional Health assumed all of AdCare’s equity incentive compensation plans, and all rights to acquire shares of AdCare common stock under any AdCare equity incentive compensation plan converted into rights to acquire RHE common stock pursuant to the terms of the equity incentive compensation plans and other related documents, if any;
|
• |
Regional Health became the successor issuer to AdCare and succeeded to the assets and continued the business and assumed the obligations of AdCare;
|
• |
the RHE common stock and RHE Series A Preferred Stock commenced trading on the NYSE American immediately following the Merger;
|
• |
the rights of the holders of RHE common stock and RHE Series A Preferred Stock are governed by the amended and restated articles of incorporation of RHE (the “RHE Charter”) and the amended and restated bylaws of RHE (the “RHE Bylaws”). The RHE Charter is substantially equivalent to AdCare’s articles of incorporation, as amended (the “AdCare Charter”), except that the RHE Charter includes ownership and transfer restrictions related to the RHE common stock. The RHE Bylaws are substantially equivalent to the bylaws of AdCare, as amended (the “AdCare Bylaws”);
|
• |
there was no change in the assets we hold or in the business we conduct; and
|
• |
there was no fundamental change to our current operational strategy.
|
• |
“Board” or “Board of Directors” refers to the AdCare Board with respect to the period prior to the Merger and to the RHE Board with respect to the period after the Merger;
|
• |
“Company”, “we”, “our” and “us” refer to AdCare and its subsidiaries with respect to the period prior to the Merger and to Regional Health and its subsidiaries with respect to the period after the Merger;
|
• |
“common stock” refers to the AdCare common stock with respect to the period prior to the Merger and to the RHE common stock with respect to the period after the Merger;
|
• |
“Series A Preferred Stock” refers to the AdCare Series A Preferred Stock with respect to the period prior to the Merger and to the RHE Series A Preferred Stock with respect to the period after the Merger;
|
• |
“Charter” refers to the AdCare Charter with respect to the period prior to the Merger and to the RHE Charter with respect to the period after the Merger; and
|
• |
“Bylaws” refers to the AdCare Bylaws with respect to the period prior to the Merger and to the RHE Bylaws with respect to the period after the Merger.
|
Owned
|
Leased
|
Managed for
Third-Parties
|
Total
|
|||||||||||||||||||||||||||||
Facilities
|
Beds/Units
|
Facilities
|
Beds/Units
|
Facilities
|
Beds/Units
|
Facilities
|
Beds/Units
|
|||||||||||||||||||||||||
State
|
||||||||||||||||||||||||||||||||
Alabama
|
2 | 230 | — | — | — | — | 2 | 230 | ||||||||||||||||||||||||
Georgia
|
3 | 395 | 8 |
(1)
|
884 | — | — | 11 | 1,279 | |||||||||||||||||||||||
North Carolina
|
1 | 106 | — | — | — | — | 1 | 106 | ||||||||||||||||||||||||
Ohio
|
4 | 291 | 1 | 99 | 3 | 332 | 8 | 722 | ||||||||||||||||||||||||
South Carolina
|
2 | 180 | — | — | — | — | 2 | 180 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total
|
12 | 1,202 | 9 | 983 | 3 | 332 | 24 | 2,517 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Facility Type
|
||||||||||||||||||||||||||||||||
Skilled Nursing
|
10 | 1,016 | 9 | 983 | 2 | 249 | 21 | 2,248 | ||||||||||||||||||||||||
Assisted Living
|
2 | 186 | — | — | — | — | 2 | 186 | ||||||||||||||||||||||||
Independent Living
|
— | — | — | — | 1 | 83 | 1 | 83 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total
|
12 | 1,202 | 9 | 983 | 3 | 332 | 24 | 2,517 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
As of January 1, 2021, pursuant to sublease terminations for two facilities located in Georgia with affiliates of Wellington, the Company commenced operating one of the previously subleased facilities as a portfolio stabilization measure and entered into a sublease agreement for the Powder Springs Facility with an affiliate of Empire (the “Wellington Transition”). The Company has entered into the Vero Management Agreement with Vero Health under which Vero Health will provide management consulting services for the Tara Facility which the Company now operates.
|
Operator Affiliation
|
Number of
Facilities
(1)
|
Beds /
Units |
||||||
C.R. Management
|
6 | 689 | ||||||
Aspire
|
5 | 390 | ||||||
Wellington Health Services
(2)
|
2 | 342 | ||||||
Peach Health Group
|
3 | 266 | ||||||
Symmetry Healthcare
|
2 | 180 | ||||||
Beacon Health Management
|
2 | 212 | ||||||
Vero Health Management
|
1 | 106 | ||||||
|
|
|
|
|||||
Subtotal
|
21 | 2,185 | ||||||
Regional Health Managed
|
3 | 332 | ||||||
|
|
|
|
|||||
Total
|
24 | 2,517 | ||||||
|
|
|
|
(1)
|
Represents the number of facilities leased or subleased to separate tenants, of which each tenant is an affiliate of the entity named in the table above. For a more detailed discussion, see Note 6—
Leases
“Portfolio of Healthcare Investments”
|
(2)
|
As of January 1, 2021, pursuant to sublease terminations for two facilities located in Georgia with affiliates of Wellington the Company commenced operating the Tara Facility as a portfolio stabilization measure and entered into a sublease agreement for the Powder Springs Facility with an affiliate of Empire. As of January 1, 2021, the Company entered into the Vero Management Agreement with Vero Health under which Vero Health will provide management consulting services for the Tara Facility which the Company now operates.
|
Owned Leased to
Third-Parties |
Leased
Subleased to
Third-Parties
|
Leased
Operating
|
Managed for
Third-Parties
|
Total
|
||||||||||||||||||||||||||||||||||||
Facilities
|
Beds/
Units |
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units |
|||||||||||||||||||||||||||||||
State
|
||||||||||||||||||||||||||||||||||||||||
Alabama
|
2 | 230 | — | — | — | — | — | — | 2 | 230 | ||||||||||||||||||||||||||||||
Georgia
|
3 | 395 | 7 | 750 | 1 | 134 | — | — | 11 | 1,279 | ||||||||||||||||||||||||||||||
North Carolina
|
1 | 106 | — | — | — | — | — | — | 1 | 106 | ||||||||||||||||||||||||||||||
Ohio
|
4 | 291 | 1 | 99 | — | — | 3 | 332 | 8 | 722 | ||||||||||||||||||||||||||||||
South Carolina
|
2 | 180 | — | — | — | — | — | — | 2 | 180 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total
|
12 | 1,202 | 8 | 849 | 1 | 134 | 3 | 332 | 24 | 2,517 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Facility Type
|
||||||||||||||||||||||||||||||||||||||||
Skilled Nursing
|
10 | 1,016 | 8 | 849 | 1 | 134 | 2 | 249 | 21 | 2,248 | ||||||||||||||||||||||||||||||
Assisted Living
|
2 | 186 | — | — | — | — | — | — | 2 | 186 | ||||||||||||||||||||||||||||||
Independent Living
|
— | — | — | — | — | — | 1 | 83 | 1 | 83 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total
|
12 | 1,202 | 8 | 849 | 1 | 134 | 3 | 332 | 24 | 2,517 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operator Affiliation
|
Number of
Facilities
(1)
|
Beds /
Units |
||||||
C.R. Management
|
6 | 689 | ||||||
Aspire
|
5 | 390 | ||||||
Peach Health Group
|
3 | 266 | ||||||
Symmetry Healthcare
|
2 | 180 | ||||||
Beacon Health Management
|
2 | 212 | ||||||
Vero Health Management
|
1 | 106 | ||||||
Empire
|
1 | 208 | ||||||
|
|
|
|
|||||
Subtotal
|
20 | 2,051 | ||||||
Regional Health Managed
|
3 | 332 | ||||||
Regional Health Operated
(2)
|
1 | 134 | ||||||
|
|
|
|
|||||
Total
|
24 | 2,517 | ||||||
|
|
|
|
(1)
|
Represents the number of facilities leased or subleased to separate tenants, of which each tenant is an affiliate of the entity named in the table above. For a more detailed discussion, see Note 6—
Leases
“Portfolio of Healthcare Investments”
|
(2)
|
Effective January 1, 2021, Regional began operating the Tara Facility and entered into the Vero Management Agreement with Vero Health, under which Vero Health is providing management consulting services for the Tara Facility. On February 28, 2019, Vero Health and the Company entered into a lease (the “Vero Health Lease”) for the Company’s
106-bed,
skilled nursing facility located in Sylvia, North Carolina (the “Mountain Trace Facility”). The Vero Health Lease for the Mountain Trace Facility became effective on March 1, 2019, upon the termination of the prior lease with the prior tenant affiliated with Symmetry Healthcare Management, LLC (“Symmetry” or “Symmetry Healthcare”). The change in operator for the Mountain Trace Facility was subsequent to an agreement the Company reached on January 28, 2019, with Symmetry with respect to a payment plan for Symmetry’s affiliate’s rent arrears and outstanding property taxes (the “Symmetry Payment Plan”).
|
Facility Name
|
State
|
Owned /
Leased |
Transaction
Type |
Commencement
Date |
||||||||||||
2014
|
||||||||||||||||
Thomasville
|
GA | Leased | Sublease | 7/1/2014 | ||||||||||||
Lumber City
|
GA | Leased | Sublease | 11/1/2014 | ||||||||||||
Southland
|
GA | Owned | Lease | 11/1/2014 | ||||||||||||
Coosa Valley
|
AL | Owned | Lease | 12/1/2014 | ||||||||||||
2015
|
||||||||||||||||
LaGrange
|
GA | Leased | Sublease | 4/1/2015 | ||||||||||||
Sumter Valley
|
SC | Owned | Lease | 4/1/2015 | ||||||||||||
Georgetown
|
SC | Owned | Lease | 4/1/2015 | ||||||||||||
Glenvue
|
GA | Owned | Lease | 7/1/2015 | ||||||||||||
Autumn Breeze
|
GA | Owned | Lease | 9/30/2015 | ||||||||||||
2016
|
||||||||||||||||
Jeffersonville
|
GA | Leased | Sublease | 6/18/2016 | ||||||||||||
Oceanside
|
GA | Leased | Sublease | 7/13/2016 | ||||||||||||
Savannah Beach
|
GA | Leased | Sublease | 7/13/2016 | ||||||||||||
2017
|
||||||||||||||||
Meadowood
|
AL | Owned | Lease | 5/1/2017 | ||||||||||||
2018
|
||||||||||||||||
Hearth & Care of Greenfield
|
OH | Owned | Lease | 12/1/2018 | ||||||||||||
The Pavilion Care Center
|
OH | Owned | Lease | 12/1/2018 | ||||||||||||
Eaglewood ALF
|
OH | Owned | Lease | 12/1/2018 | ||||||||||||
Eaglewood Care Center
|
OH | Owned | Lease | 12/1/2018 | ||||||||||||
Covington Care Center
|
OH | Leased | Sublease | 12/1/2018 | ||||||||||||
2019
|
||||||||||||||||
Mountain Trace
|
NC | Owned | Lease | 3/1/2019 | ||||||||||||
2021
|
||||||||||||||||
Powder Springs
|
GA | Leased | Sublease | 1/1/2021 | ||||||||||||
Tara
|
GA | Leased | Operating | 1/1/2021 |
• |
Enabled by the Medicare Modernization Act (2003) and subsequent laws, Medicare and Medicaid have implemented pilot programs (officially termed demonstrations or models) to “divert” elderly from SNFs and promote “aging in place” in “the least restrictive environment.” Several states have
|
implemented Home and Community-based Medicaid waiver programs that increase the support services available to senior citizens in senior housing, lengthening the time that many seniors can live outside of a SNF. These Medicaid waiver programs are subject to
re-approval,
and pilots are time-limited. Roll-back or expiration of these programs could have an adverse effect on the senior housing market.
|
• |
Changes in certification and participation requirements of the Medicare and Medicaid programs have restricted, and are likely to continue to restrict further, eligibility for reimbursement under those programs. On October 4, 2016, CMS published a final rule that, for the first time in nearly 25 years, comprehensively updated the SNF requirements for participation under Medicare and Medicaid. Among other things, the rule implemented requirements relating to quality of care and quality of life, facility responsibilities and staffing considerations, resident assessments, and compliance and ethics programs. Failure to obtain and maintain Medicare and Medicaid certification by our tenants would result in denial of Medicare and Medicaid payments, which would likely result in a significant loss of revenue. In addition, private payors, including managed care payors, increasingly are demanding that providers accept discounted payments resulting in lost revenue for specific patients. Efforts to impose reduced payments, greater discounts, and more stringent cost controls by government and other payors are expected to continue. Any reforms that significantly limit rates of reimbursement under the Medicare and Medicaid programs could have a material adverse effect on our tenants’ profitability and cash flows which, in turn, could adversely affect their ability to satisfy their obligations to us. We are unable to predict what reform proposals or reimbursement limitations will be adopted in the future or the effect such changes will have on our tenants’ operations. No assurance can be given that such reforms will not have a material adverse effect on our tenants or on their ability to fulfill their obligations to us. As a result of the Healthcare Reform Law, and specifically Medicaid expansion and establishment of Health Insurance Exchanges providing subsidized health insurance, more Americans have health insurance. These newly insured Americans utilize services delivered by providers at medical buildings and other healthcare facilities. The Healthcare Reform Law remains controversial. The continued attempts to repeal or reverse aspects of the law could result in insured individuals losing coverage, and consequently, forgoing services offered by provider tenants in medical buildings and other healthcare facilities. See Part I, Item 1A, “Risk Factors” in this Annual Report concerning a possible repeal of Healthcare Reform Law. On June 28, 2012, the United States Supreme Court upheld the individual mandate of the Healthcare Reform Law but partially invalidated the expansion of Medicaid. The ruling on Medicaid expansion allowed states to decline to participate in the expansion—and to forego funding for the Medicaid expansion—without losing their existing Medicaid funding. Given that the federal government substantially funds the Medicaid expansion, it is still unclear how many states will ultimately pursue this option. The participation by states in the Medicaid expansion could have the dual effect of increasing our tenants’ revenues, through new patients, but could also further strain state budgets. While the federal government paid for approximately 100% of those additional costs from 2014 to 2016, the federal matching rate decreased to 90% in 2020. We cannot predict whether other current or future efforts to repeal or amend the Healthcare Reform Law will be successful. Even absent changes to the Healthcare Reform Law, the executive branch of the federal government may make significant changes to the enforcement and implementation of Healthcare Reform Law requirements. We cannot predict the impact that any such repeal or amendment of the Healthcare Reform Law or related action by the executive branch would have on our operators or tenants and their ability to meet their obligations to us. We cannot predict whether the existing Healthcare Reform Law, or future healthcare reform legislation or regulatory changes, will have a material impact on our operators’ or tenants’ property or business. If the operations, cash flows, or financial condition of our operators and tenants are materially and adversely impacted by the Healthcare Reform Law or future legislation, our revenue and operations may be adversely affected as well.
|
• |
CMS is transitioning Medicare from a traditional
fee-for-service
|
for each beneficiary for a defined period of time, based on the beneficiary’s underlying medical needs, rather than the actual services provided. The result is increasing use of management tools to oversee individual providers and coordinate their services. This puts downward pressure on the number and expense of services provided. Roughly eight-million Medicare beneficiaries now receive care via Accountable Care Organizations, and Medicare Advantage health plans now provide care for roughly seventeen-million Medicare beneficiaries. The continued trend toward capitated, value-based, and bundled payment approaches has the potential to diminish the market for certain healthcare providers. In addition, on April 1, 2014, the Protecting Access to Medicare Act of 2014 was enacted, which implements value-based purchasing for SNFs. In fiscal year 2019, 2% of SNF payments began to be withheld and 60% of the amount withheld is being redistributed to SNFs as incentive payments through value-based payments. SNFs began reporting the claims-based
30-Day
All-Cause
Readmission Measure on October 1, 2015, and began reporting a resource use measure on October 1, 2016. Both measures are publicly available.
|
• |
In October 2015, the U.S. Government Accountability Office (“GAO”) released a report recommending that CMS continue to improve data and oversight of nursing home quality measures. The GAO found that nursing home quality would be easier to determine if the quality of the underlying data was improved (i.e., by changing the way self-reported data and
non-standardized
survey methodologies were used). The GAO recommended, among other things, that CMS implement a clear plan for ongoing auditing of self-reported data and establish a process for monitoring oversight modifications to better assess their effects. HHS agreed with the GAO’s recommendations, and to the extent such recommendations are implemented, they could impact our operators and tenants.
|
• |
The majority of Medicare payments continue to be made through traditional Medicare Part A and Part B
fee-for-service
pay-for-quality
pay-for-quality
|
• |
OIG has increased focus in recent years on billing practices by SNFs. In September 2015, OIG issued a report calling for reevaluation of the Medicare payment system for SNFs. In particular, OIG found that Medicare payments for therapy greatly exceeded SNFs’ costs for therapy, and that, under the current payment system, SNFs increasingly billed for the highest level of therapy even though key beneficiary characteristics remained largely the same. OIG determined that its findings demonstrated the need for CMS to reevaluate the Medicare SNF payment system, concluding that payment reform could save Medicare billions of dollars and encourage SNFs to provide services that are better aligned with beneficiaries’ care needs. OIG formulates a formal work plan each year for nursing centers. The work plan for 2020 states that OIG’s investigative and review focus for nursing facilities will include its analysis of (1) nursing facility billing to ensure that services are not duplicative or fraudulently, excessively, or unnecessarily billed; (2) involuntary transfers or discharges of nursing facility residents; (3) services provided to Medicare and Medicaid dually-eligible nursing facility residents to ensure the level of such services is properly reported; and (4) nursing facility staffing levels to ensure they meet minimum legal requirements. If followed, these reports and recommendations may impact our tenants. We cannot predict the likelihood, scope, or outcome of any such investigations on our tenants if these recommendations are implemented.
|
• |
In 2019, CMS began including the new long-term-stay hospitalization measurement that the agency began tracking in 2018 in its quality measures for the consumer-based Nursing Home Compare website. CMS also began posting the number of hours worked by a facility’s
non-nursing
staff in July 2018. In October 2019, CMS resumed posting the average number of citations per inspection for each state and the nation as a whole, which may affect each facility’s health inspection rating on the site. We cannot predict how this data will affect our tenants’ business.
|
• |
On July 29, 2016, CMS issued its final rule laying out the performance standards relating to preventable hospital readmissions from SNFs. The final rule includes the SNF
30-day
All Cause Readmission Measure, which assesses the risk-standardized rates of
all-cause,
all conditions, unplanned inpatient readmissions for Medicare
fee-for-service
30-Day
potentially preventable readmission measure as the SNF all condition risk adjusted potentially preventable hospital readmission measure. This measure assesses the facility-level risk-standardized rate of unplanned, potentially preventable hospital readmissions for SNF patients within 30 days of discharge from a prior admission to an IPPS hospital, CAH, or psychiatric hospital. Hospital readmissions include readmissions to a short-stay acute-care hospital or CAH, with a diagnosis considered to be unplanned and potentially preventable.
|
• |
On September 16, 2016, CMS issued its final rule concerning emergency preparedness requirements for Medicare and Medicaid participating providers, including long-term care facilities and intermediate care facilities for individuals with intellectual disabilities. The rule is designed to ensure providers and suppliers have comprehensive and integrated emergency policies and procedures in place, in particular during natural and
man-made
disasters. Under the rule, facilities are required to (i) document risk assessment and emergency planning, (ii) develop and implement policies and procedures based on that risk assessment, (iii) develop and maintain an emergency preparedness communication plan in compliance with both federal and state law, and (iv) develop and maintain an emergency-preparedness training and testing program. Facilities were required to have been in compliance with these regulations by November 15, 2017. We cannot predict the impact of these regulations on our tenants.
|
• |
On February 8, 2018, President Trump signed into law the Bipartisan Budget Act of 2018 (the “BBA”) extending the reduction in Medicare provider payments, commonly called the “sequestration.” This automatic payment reduction remains at 2% and applies to all Medicare physician claims and certain other claims, including physician-administered medications, submitted after April 1, 2013. Scheduled to expire in 2025, the BBA extended the sequestration through 2027.
|
• |
CMS released its final rule outlining fiscal year 2020 Medicare payment rates and quality programs for SNFs. This final rule has been effective as of October 1, 2019. The policies in the final rule continue to shift Medicare payments from volume to value by implementing SNF Value-Based Purchasing program (“VBP”) and SNF Quality Reporting Program (“QRP”). CMS will be using the Patient-Driven Payment Model (“PDPM”), which focuses on the patient’s condition and resulting care needs rather than on the amount of care provided in order to determine Medicare payment. Based on changes contained within this final rule, CMS estimates that the fiscal year 2020 aggregate impact will be an increase of $851 million in Medicare payments to SNFs, resulting from the fiscal year 2020 SNF market basket update required by the BBA to be 2.8%. The effect of the 2020 PPS rate update on our tenants’ revenues will be dependent upon their census and the mix of patients at the various PPS and PDPM pay rates. In addition, we cannot predict how future changes may impact reimbursement rates under the SNF PPS and PDPM system.
|
• |
CMS released its final rule outlining fiscal year 2021 Medicare payment rates and quality programs for SNFs. It includes routine technical rate-setting updates to the SNF prospective payment system (PPS) payment rates and adopts the revised Office of Management and Budget (OMB) statistical area delineations. In addition, the rule applies a
5-percent
cap on wage index decreases from Fiscal Year
|
2020 to Fiscal Year 2021. The rule also finalized changes to the International Classification of Diseases, Version 10
(ICD-10)
code mappings. CMS also finalized updates to the SNF VBP Program regulation text at 42 CFR § 413.338 to reflect previously finalized policies and updated the
30-day
Phase One Review and Correction deadline for the baseline period quarterly report.
|
• |
increase our vulnerability to general adverse economic and industry conditions or a downturn in our business;
|
• |
require us to dedicate a substantial portion of cash flows from operations to interest and principal payments on outstanding debt, thereby limiting the availability of cash flow for dividends and other general corporate purposes;
|
• |
require us to maintain certain debt coverage and other financial ratios at specified levels, thereby reducing our financial flexibility;
|
• |
make it more difficult for us to satisfy our financial obligations;
|
• |
expose us to increases in interest rates for our variable rate debt;
|
• |
limit our ability to borrow additional funds on favorable terms, or at all, for working capital, debt service requirements, expansion of our business or other general corporate purposes;
|
• |
limit our ability to refinance all or a portion of our indebtedness on or before maturity on the same or more favorable terms, or at all;
|
• |
limit our flexibility in planning for, or reacting to, changes in our business and our industry;
|
• |
limit our ability to make acquisitions or take advantage of business opportunities as they arise;
|
• |
place us at a competitive disadvantage compared with our competitors that have less debt; and
|
• |
limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity.
|
• |
the extent of investor interest;
|
• |
our financial performance and that of our tenants;
|
• |
general stock and bond market conditions; and
|
• |
other factors such as governmental regulatory action.
|
• |
actual or anticipated fluctuations in our operating results;
|
• |
changes in our financial condition, performance and prospects;
|
• |
changes in general economic and market conditions and other external factors;
|
• |
the market price of securities issued by other companies in our industry;
|
• |
announcements by us or our competitors of significant acquisitions, dispositions, strategic partnerships or other transactions;
|
• |
press releases or negative publicity relating to us or our competitors or relating to trends in healthcare;
|
• |
government action or regulation, including changes in federal, state and local healthcare regulations to which our tenants are subject;
|
• |
changes in financial estimates, our ability to meet those estimates, or recommendations by securities analysts with respect to us or our competitors; and
|
• |
future sales of the common stock, our Series A Preferred Stock or another series of our preferred stock, or debt securities.
|
• |
prevailing interest rates, increases in which may have an adverse effect on the market price of the Series A Preferred Stock;
|
• |
trading prices of preferred equity securities issued by other companies in our industry; and
|
• |
the annual yield from distributions on the Series A Preferred Stock as compared to yields on other financial instruments.
|
• |
the amount of undeclared preferred stock dividends in arrears with respect to the Series A Preferred Stock, which was $27.9 million at December 31, 2020.
|
• |
the ownership and transfer restrictions contained in the Charter with respect to the common stock;
|
• |
a requirement that special meetings of shareholders be called by the Board, the Chairman, the President, or the holders of shares with voting power of at least 25%;
|
• |
advance notice requirements for shareholder proposals and nominations;
|
• |
a requirement that directors may only be removed for cause and then only by an affirmative vote of at least a majority of all votes entitled to be cast in the election of such directors;
|
• |
a prohibition of shareholder action without a meeting by less than unanimous written consent;
|
• |
availability of “blank check” preferred stock; and
|
• |
a charter “constituency” clause authorizing (but not requiring) our directors to consider, in discharging their duties as directors, the effects of the Company’s actions on other interests and persons in addition to our shareholders.
|
Facility Name
|
Beds/
Units |
Structure
|
Operator Affiliation
(a)
|
|||||||
Alabama
|
||||||||||
Coosa Valley Health Care
|
124 | Owned | C.R. Management | |||||||
Meadowood
|
106 | Owned | C.R. Management | |||||||
|
|
|||||||||
Subtotal
|
230 | |||||||||
Georgia
|
||||||||||
Autumn Breeze
|
109 | Owned | C.R. Management | |||||||
Glenvue H&R
|
160 | Owned | C.R. Management | |||||||
Jeffersonville
|
131 | Leased | Peach Health Group | |||||||
LaGrange
|
138 | Leased | C.R. Management | |||||||
Lumber City
|
86 | Leased | Beacon Health Management | |||||||
Oceanside
|
85 | Leased | Peach Health Group | |||||||
Powder Springs
(c)
|
208 | Leased |
Wellington Health Services
(b)
|
|||||||
Savannah Beach
|
50 | Leased | Peach Health Group | |||||||
Southland Healthcare
|
126 | Owned | Beacon Health Management | |||||||
Tara
(d)
|
134 | Leased |
Wellington Health Services
(b)
|
|||||||
Thomasville N&R
|
52 | Leased | C.R. Management | |||||||
|
|
|||||||||
Subtotal (11)
|
1,279 | |||||||||
North Carolina
|
||||||||||
Mountain Trace Rehab
|
106 | Owned | Vero Health Management | |||||||
|
|
|||||||||
Subtotal
|
106 | |||||||||
Ohio
|
||||||||||
Covington Care
|
99 | Leased | Aspire | |||||||
Eaglewood ALF
|
80 | Owned | Aspire | |||||||
Eaglewood Care Center
|
99 | Owned | Aspire | |||||||
H&C of Greenfield
|
62 | Owned | Aspire | |||||||
Koester Pavilion
|
150 | Managed | N/A | |||||||
Spring Meade Health Center
|
99 | Managed | N/A | |||||||
Spring Meade Residence
|
83 | Managed | N/A | |||||||
The Pavilion Care Center
|
50 | Owned | Aspire | |||||||
|
|
|||||||||
Subtotal (8)
|
722 | |||||||||
South Carolina
|
||||||||||
Georgetown Health
|
84 | Owned | Symmetry Healthcare | |||||||
Sumter Valley Nursing
|
96 | Owned | Symmetry Healthcare | |||||||
|
|
|||||||||
Subtotal
|
180 | |||||||||
|
|
|||||||||
Total—All Facilities (24)
|
2,517 | |||||||||
|
|
(a)
|
Indicates the operator with which the tenant of the facility is affiliated.
|
(b)
|
Leases with Wellington terminated effective January 1, 2021.
|
(c)
|
Facility leased to an affiliate of Empire effective January 1, 2021.
|
(d)
|
Effective January 1, 2021, Regional engaged Vero Health to operate the facility on our behalf as a portfolio stabilization measure.
|
For the Twelve Months Ended
|
||||||||||||||||
March 31,
2020
|
June 30,
2020
|
September 30,
2020
|
December 31,
2020
|
|||||||||||||
Operating Metric
(1)
|
||||||||||||||||
Occupancy (%)
(2)
|
76.3 | % | 75.1 | % | 73.2 | % | 67.3 | % |
(1)
|
Excludes three managed facilities in Ohio.
|
(2)
|
Occupancy percentages are based on licensed beds.
|
Licensed Beds
|
Annual Lease
Revenue
(1)
|
|||||||||||||||||||
Number of
Facilities
|
Amount
|
Percent (%)
|
Amount
($)
’000’s
|
Percent (%)
|
||||||||||||||||
2023
|
1 | 62 | 3.0 | % | 263 | 1.9 | % | |||||||||||||
2024
|
1 | 126 | 6.1 | % | 965 | 6.8 | % | |||||||||||||
2025
|
2 | 269 | 13.1 | % | 2,219 | 15.6 | % | |||||||||||||
2026
|
— | — | 0.0 | % | — | 0.0 | % | |||||||||||||
2027
|
7 | 750 | 36.6 | % | 5,241 | 36.9 | % | |||||||||||||
2028
|
4 | 328 | 16.0 | % | 2,352 | 16.6 | % | |||||||||||||
2029
|
1 | 106 | 5.2 | % | 538 | 3.8 | % | |||||||||||||
Thereafter
|
4 | 410 | 20.0 | % | 2,603 | 18.4 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total
|
20 | 2,051 | 100.0 | % | 14,181 | 100.0 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
(1)
|
Straight-line rent.
|
Owned
|
Leased
|
Managed for Third Parties
|
Total
|
|||||||||||||||||||||||||||||
Facilities
|
Beds/
Units |
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units |
Facilities
|
Beds/
Units |
|||||||||||||||||||||||||
State
|
||||||||||||||||||||||||||||||||
Alabama
|
2 | 230 | — | — | — | — | 2 | 230 | ||||||||||||||||||||||||
Georgia
|
3 | 395 | 8 |
(1)
|
884 | — | — | 11 | 1,279 | |||||||||||||||||||||||
North Carolina
|
1 | 106 | — | — | — | — | 1 | 106 | ||||||||||||||||||||||||
Ohio
|
4 | 291 | 1 | 99 | 3 | 332 | 8 | 722 | ||||||||||||||||||||||||
South Carolina
|
2 | 180 | — | — | — | — | 2 | 180 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total
|
12 | 1,202 | 9 | 983 | 3 | 332 | 24 | 2,517 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Facility Type
|
||||||||||||||||||||||||||||||||
Skilled Nursing
|
10 | 1,016 | 9 | 983 | 2 | 249 | 21 | 2,248 | ||||||||||||||||||||||||
Assisted Living
|
2 | 186 | — | — | — | — | 2 | 186 | ||||||||||||||||||||||||
Independent Living
|
— | — | — | — | 1 | 83 | 1 | 83 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total
|
12 | 1,202 | 9 | 983 | 3 | 332 | 24 | 2,517 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
As of January 1, 2021, pursuant to sublease terminations for two facilities located in Georgia with affiliates of Wellington the Company as a portfolio stabilization measure is now operating the Tara Facility and entered into a sublease agreement for the Powder Springs Facility with an affiliate of Empire. As of January 1, 2021, the Company entered into the Vero Management Agreement with Vero Health under which Vero Health will provide management consulting services for the Tara Facility.
|
Operator Affiliation
|
Number of
Facilities
(1)
|
Beds /
Units |
||||||
C.R. Management
|
6 | 689 | ||||||
Aspire
|
5 | 390 | ||||||
Wellington Health Services
(2)
|
2 | 342 | ||||||
Peach Health
|
3 | 266 | ||||||
Symmetry Healthcare
|
2 | 180 | ||||||
Beacon Health Management
|
2 | 212 | ||||||
Vero Health Management
(3)
|
1 | 106 | ||||||
|
|
|
|
|||||
Subtotal
|
21 | 2,185 | ||||||
Regional Health Managed
|
3 | 332 | ||||||
|
|
|
|
|||||
Total
|
24 | 2,517 | ||||||
|
|
|
|
(1)
|
Represents the number of facilities leased or subleased to separate tenants, of which each tenant is an affiliate of the entity named in the table above. For a more detailed discussion, see Note 6—
Leases
Portfolio of Healthcare Investments
|
(2)
|
Leases with Wellington were terminated effective January 1, 2021.
|
(3)
|
Effective January 1, 2021, Regional engaged Vero Health to operate the facility on our behalf as a portfolio stabilization measure.
|
Owned Leased to
Third-Parties |
Leased
Subleased to Third-Parties |
Leased
Operating |
Managed for
Third-Parties |
Total
|
||||||||||||||||||||||||||||||||||||
Facilities
|
Beds/
Units |
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units |
|||||||||||||||||||||||||||||||
State
|
||||||||||||||||||||||||||||||||||||||||
Alabama
|
2 | 230 | — | — | — | — | — | — | 2 | 230 | ||||||||||||||||||||||||||||||
Georgia
|
3 | 395 | 7 | 750 | 1 | 134 | — | — | 11 | 1,279 | ||||||||||||||||||||||||||||||
North Carolina
|
1 | 106 | — | — | — | — | — | — | 1 | 106 | ||||||||||||||||||||||||||||||
Ohio
|
4 | 291 | 1 | 99 | — | — | 3 | 332 | 8 | 722 | ||||||||||||||||||||||||||||||
South Carolina
|
2 | 180 | — | — | — | — | — | — | 2 | 180 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total
|
12 | 1,202 | 8 | 849 | 1 | 134 | 3 | 332 | 24 | 2,517 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Facility Type
|
||||||||||||||||||||||||||||||||||||||||
Skilled Nursing
|
10 | 1,016 | 8 | 849 | 1 | 134 | 2 | 249 | 21 | 2,248 | ||||||||||||||||||||||||||||||
Assisted Living
|
2 | 186 | — | — | — | — | — | — | 2 | 186 | ||||||||||||||||||||||||||||||
Independent Living
|
— | — | — | — | — | — | 1 | 83 | 1 | 83 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total
|
12 | 1,202 | 8 | 849 | 1 | 134 | 3 | 332 | 24 | 2,517 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operator Affiliation
|
Number of
Facilities
(1)
|
Beds /
Units |
||||||
C.R. Management
|
6 | 689 | ||||||
Aspire
|
5 | 390 | ||||||
Peach Health Group
|
3 | 266 | ||||||
Symmetry Healthcare
|
2 | 180 | ||||||
Beacon Health Management
|
2 | 212 | ||||||
Vero Health Management
|
1 | 106 | ||||||
Empire
|
1 | 208 | ||||||
|
|
|
|
|||||
Subtotal
|
20 | 2,051 | ||||||
Regional Health Managed
|
3 | 332 | ||||||
Regional Health Operated
(2)
|
1 | 134 | ||||||
|
|
|
|
|||||
Total
|
24 | 2,517 | ||||||
|
|
|
|
(1)
|
Represents the number of facilities leased or subleased to separate tenants, of which each tenant is an affiliate of the entity named in the table above. For a more detailed discussion, see Note 6—Leases located in Part II, Item 8, “Financial Statements and Supplementary Data” and “Portfolio of Healthcare Investments” included in Part I, Item 1, “Business”, each included in this Annual Report.
|
(2)
|
Effective January 1, 2021, Regional began operating the Tara Facility and entered into the Vero Management Agreement with Vero Health under which Vero Health provides management consulting services for the Tara Facility.
|
For the year ended
December 31, |
||||||||
(Amounts in 000’s)
|
2020
|
2019
|
||||||
Recoveries
|
$ | (63 | ) | $ | (626 | ) | ||
other expense, net
|
$ | 147 | $ | — | ||||
|
|
|
|
|||||
Net (loss) income
|
$ | (84 | ) | $ | 626 | |||
|
|
|
|
Year Ended
December 31, |
Increase (Decrease)
|
|||||||||||||||
(Amounts in 000’s)
|
2020
|
2019
|
Amount
|
Percent
|
||||||||||||
Revenues:
|
||||||||||||||||
Rental revenues
|
$ | 16,325 | $ | 19,043 | $ | (2,718 | ) | (14.3 | )% | |||||||
Management fees
|
1,001 | 995 | 6 | 0.6 | % | |||||||||||
Other revenues
|
253 | 96 | 157 | 163.5 | % | |||||||||||
|
|
|
|
|
|
|||||||||||
Total revenues
|
17,579 | 20,134 | (2,555 | ) | (12.7 | )% | ||||||||||
|
|
|
|
|
|
|||||||||||
Expenses:
|
||||||||||||||||
Facility rent expense
|
6,558 | 6,645 | (87 | ) | (1.3 | )% | ||||||||||
Cost of management fees
|
675 | 661 | 14 | 2.1 | % | |||||||||||
Depreciation and amortization
|
2,894 | 3,438 | (544 | ) | (15.8 | )% | ||||||||||
General and administrative expenses
|
3,373 | 3,192 | 181 | 5.7 | % | |||||||||||
Provision (recovery) for doubtful accounts
|
925 | (281 | ) | 1,206 | (429.2 | )% | ||||||||||
Other operating expenses
|
860 | 1,017 | (157 | ) | (15.4 | )% | ||||||||||
|
|
|
|
|
|
|||||||||||
Total expenses
|
15,285 | 14,672 | 613 | 4.2 | % | |||||||||||
|
|
|
|
|
|
|||||||||||
Income from operations
|
2,294 | 5,462 | (3,168 | ) | (58.0 | )% | ||||||||||
|
|
|
|
|
|
|||||||||||
Other expense (income):
|
||||||||||||||||
Interest expense, net
|
2,777 | 5,265 | (2,488 | ) | (47.3 | )% | ||||||||||
Loss on extinguishment of debt
|
— | 2,458 | (2,458 | ) | NM | |||||||||||
Gain on disposal of assets
|
— | (7,141 | ) | 7,141 | NM | |||||||||||
Other expense
|
121 | 6 | 115 | NM | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total other expense, net
|
2,898 | 588 | 2,310 | 392.9 | % | |||||||||||
|
|
|
|
|
|
|||||||||||
(Loss) income from continuing operations before income taxes
|
(604 | ) | 4,874 | (5,478 | ) | NM | ||||||||||
|
|
|
|
|
|
|||||||||||
(Loss) income from continuing operations
|
(604 | ) | 4,874 | (5,478 | ) | NM | ||||||||||
(Loss) income from discontinued operations, net of tax
|
(84 | ) | 626 | (710 | ) | NM | ||||||||||
|
|
|
|
|
|
|||||||||||
Net (loss) income
|
$ | (688 | ) | $ | 5,500 | $ | (6,188 | ) | NM | |||||||
|
|
|
|
|
|
Year Ended
December 31, |
||||||||
Amounts in (000’s)
|
2020
|
2019
|
||||||
Net cash provided by operating activities—continuing operations
|
$ | 2,451 | $ | 3,048 | ||||
Net cash used in operating activities—discontinued operations
|
(1,156 | ) | (652 | ) | ||||
Net cash (used in) provided by investing activities—continuing operations
|
(450 | ) | 3,821 | |||||
Net cash used in financing activities—continuing operations
|
(1,391 | ) | (4,631 | ) | ||||
Net cash used in financing activities—discontinued operations
|
— | (34 | ) | |||||
|
|
|
|
|||||
Net Change in Cash and restricted cash
|
(546 | ) | 1,552 | |||||
Cash and restricted cash at beginning of period
|
8,038 | 6,486 | ||||||
|
|
|
|
|||||
Cash and restricted cash at end of period
|
$ | 7,492 | $ | 8,038 | ||||
|
|
|
|
December 31,
|
||||||||
Amounts in (000’s)
|
2020
|
2019
|
||||||
Senior debt—guaranteed by HUD
|
$ | 31,104 | $ | 31,996 | ||||
Senior debt—guaranteed by USDA
(a)
|
13,139 | 13,298 | ||||||
Senior debt—guaranteed by SBA
(b)
|
628 | 650 | ||||||
Senior debt—bonds
|
6,500 | 6,616 | ||||||
Senior debt—other mortgage indebtedness
|
3,631 | 3,777 | ||||||
Other debt
|
822 | 539 | ||||||
|
|
|
|
|||||
Sub Total
|
55,824 | 56,876 | ||||||
Deferred financing costs
|
(1,250 | ) | (1,364 | ) | ||||
Unamortized discounts on bonds
|
(135 | ) | (149 | ) | ||||
|
|
|
|
|||||
Notes payable and other debt
|
$ | 54,439 | $ | 55,363 | ||||
|
|
|
|
(a)
|
USDA
|
(b)
|
SBA
|
Amounts in
(000’s) |
||||
2021
|
$ | 2,257 | ||
2022
|
5,222 | |||
2023
|
1,770 | |||
2024
|
1,854 | |||
2025
|
1,948 | |||
Thereafter
|
42,773 | |||
|
|
|||
Subtotal
|
55,824 | |||
Less: unamortized discounts
|
(135 | ) | ||
Less: deferred financing costs
|
(1,250 | ) | ||
|
|
|||
Total notes payable and other debt
|
$ | 54,439 | ||
|
|
(Amounts in 000’s)
|
Future rental
payments
|
Accretion of
lease liability
(1)
|
Operating
lease
obligation
|
|||||||||
2021
|
$ | 6,551 | $ | (275 | ) | $ | 6,276 | |||||
2022
|
6,691 | (771 | ) | 5,920 | ||||||||
2023
|
6,823 | (1,248 | ) | 5,575 | ||||||||
2024
|
6,958 | (1,708 | ) | 5,250 | ||||||||
2025
|
7,095 | (2,150 | ) | 4,945 | ||||||||
Thereafter
|
12,736 | (4,818 | ) | 7,918 | ||||||||
|
|
|
|
|
|
|||||||
Total
|
$ | 46,854 | $ | (10,970 | ) | $ | 35,884 | |||||
|
|
|
|
|
|
(1)
|
Weighted average discount rate 7.98%
|
(Amounts in
000’s) |
||||
2021
|
$ | 12,384 | ||
2022
|
13,519 | |||
2023
|
15,477 | |||
2024
|
15,299 | |||
2025
|
13,702 | |||
Thereafter
|
33,555 | |||
|
|
|||
Total
|
$ | 103,936 | ||
|
|
Lease Term
|
||||||||||||||
Facility Name
|
Operator Affiliation
(1)
|
Commencement
Date |
Expiration
Date |
2021 Cash
Annual Rent |
||||||||||
(Thousands)
|
||||||||||||||
Owned
|
||||||||||||||
Eaglewood ALF
|
Aspire | 12/1/2018 | 11/30/2028 | 630 | ||||||||||
Eaglewood Care Center
|
Aspire | 12/1/2018 | 11/30/2028 | 441 | ||||||||||
H&C of Greenfield
|
Aspire | 12/1/2018 | 11/30/2023 | 223 | ||||||||||
Southland Healthcare
|
Beacon Health Management | 11/1/2014 | 10/31/2024 | 990 | ||||||||||
The Pavilion Care Center
|
Aspire | 12/1/2018 | 11/30/2028 | 231 | ||||||||||
Autumn Breeze
|
C.R. Management | 9/30/2015 | 9/30/2025 | 916 | ||||||||||
Coosa Valley Health Care
|
C.R. Management | 12/1/2014 | 8/31/2030 | 1,021 | ||||||||||
Glenvue H&R
|
C.R. Management | 7/1/2015 | 6/30/2025 | 1,341 | ||||||||||
Meadowood
|
C.R. Management | 5/1/2017 | 8/31/2030 | 484 | ||||||||||
Georgetown Health
|
Symmetry Healthcare | 4/1/2015 | 3/31/2030 | 347 | ||||||||||
Mountain Trace Rehab
(2)
|
Vero Health Management | 3/1/2019 | 2/28/2029 | 502 | ||||||||||
Sumter Valley Nursing
|
Symmetry Healthcare | 4/1/2015 | 3/31/2030 | 643 | ||||||||||
|
|
|||||||||||||
Subtotal Owned
Facilities (12) |
$ | 7,769 | ||||||||||||
Leased
|
||||||||||||||
Covington Care
|
Aspire | 12/1/2018 | 11/30/2028 | $ | 528 | |||||||||
Lumber City
|
Beacon Health Management | 11/1/2014 | 8/31/2027 | 959 | ||||||||||
LaGrange
|
C.R. Management | 4/1/2015 | 8/31/2027 | 1,174 | ||||||||||
Thomasville N&R
|
C.R. Management | 7/1/2014 | 8/31/2027 | 371 | ||||||||||
Jeffersonville
|
Peach Health | 6/18/2016 | 8/31/2027 | 771 | ||||||||||
Oceanside
|
Peach Health | 7/13/2016 | 8/31/2027 | 525 | ||||||||||
Savannah Beach
|
Peach Health | 7/13/2016 | 8/31/2027 | 287 | ||||||||||
Powder Springs
(3)
|
Empire | 1/1/2021 | 8/1/2027 | — | ||||||||||
Tara
(3)
|
Regional Health Properties | — | ||||||||||||
|
|
|||||||||||||
Subtotal Leased
Facilities (9) |
$ | 4,615 | ||||||||||||
|
|
|||||||||||||
Total (21)
(4)
|
$ | 12,384 | ||||||||||||
|
|
(1)
|
Represents the number of facilities which are leased or subleased to separate tenants, which tenants are affiliates of the entity named in the table above. See “
Portfolio of Healthcare Investments”
|
(2)
|
On February 28, 2019, the lease with an affiliate of Symmetry Healthcare with an expected lease term of May 31, 2030 was mutually terminated and operations transferred to a new operator, an affiliate of Vero Health, on March 1, 2019.
|
(3)
|
Indicates facilities that were leased to affiliates of Wellington until 12:01 a.m. on January 1, 2021, see Note—18
Subsequent Events
|
(4)
|
All facilities are skilled nursing facilities except for Eaglewood ALF and Meadowood, which are assisted living facilities. All facilities, except for the Tara Facility, which has been under our operation since January 1, 2021, have renewal provisions of one term of five years except Mountain Trace, Sumter Valley,
|
Covington Care, Pavilion Care Center, Eaglewood ALF, Eaglewood SNF, Powder Springs and Georgetown, which have two renewal terms with each being five years and H&C of Greenfield, which has three renewal terms with each being five years. Other than the lease for the Powder Springs Facility, the leases also contain standard rent escalations that range from 1.0% to 3.0% annually. |
PAGE
|
||||
A-1-64 | ||||
CONSOLIDATED FINANCIAL STATEMENTS
|
||||
A-1-66 | ||||
A-1-67 | ||||
A-1-68 | ||||
A-1-69 | ||||
A-1-71 |
• |
We obtained an understanding of management’s allowance for doubtful accounts review process and the internal controls in place.
|
• |
We tested the Company’s
write-off
percentages and the data used by the Company in its assessment.
|
• |
We evaluated events subsequent to the balance sheet date to assess the reasonableness of management’s estimate.
|
December 31,
|
||||||||
2020
|
2019
|
|||||||
ASSETS
|
||||||||
Property and equipment, net
|
$ | 52,533 | $ | 54,672 | ||||
Cash
|
4,186 | 4,383 | ||||||
Restricted cash
|
3,306 | 3,655 | ||||||
Accounts receivable, net of allowance of $1,381 and $615
|
2,100 | 963 | ||||||
Prepaid expenses and other
|
328 | 249 | ||||||
Notes receivable
|
444 | 840 | ||||||
Intangible assets—bed licenses
|
2,471 | 2,471 | ||||||
Intangible assets—lease rights, net
|
158 | 462 | ||||||
Right-of-use
|
33,740 | 37,287 | ||||||
Goodwill
|
1,585 | 1,585 | ||||||
Lease deposits and other deposits
|
514 | 517 | ||||||
Straight-line rent receivable
|
6,660 | 6,674 | ||||||
|
|
|
|
|||||
Total assets
|
$ | 108,025 | $ | 113,758 | ||||
|
|
|
|
|||||
LIABILITIES AND EQUITY (DEFICIT)
|
||||||||
Senior debt, net
|
$ | 47,275 | $ | 48,415 | ||||
Bonds, net
|
6,342 | 6,409 | ||||||
Other debt, net
|
822 | 539 | ||||||
Accounts payable
|
3,008 | 3,699 | ||||||
Accrued expenses
|
2,225 | 2,613 | ||||||
Operating lease obligation
|
35,884 | 39,262 | ||||||
Other liabilities
|
1,365 | 1,078 | ||||||
|
|
|
|
|||||
Total liabilities
|
96,921 | 102,015 | ||||||
|
|
|
|
|||||
Commitments and contingencies (Note 14)
|
||||||||
Stockholders’ equity:
|
||||||||
Common stock and additional
paid-in
capital, no par value; 55,000 shares authorized; 1,688 shares issued and outstanding at December 31, 2020 and 2019
|
62,041 | 61,992 | ||||||
Preferred stock, no par value; 5,000 shares authorized; 2,812 shares issued and outstanding, redemption amount $70,288 at December 31, 2020 and 2019
|
62,423 | 62,423 | ||||||
Accumulated deficit
|
(113,360 | ) | (112,672 | ) | ||||
|
|
|
|
|||||
Total stockholders’ equity
|
11,104 | 11,743 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders’ equity
|
$ | 108,025 | $ | 113,758 | ||||
|
|
|
|
Year Ended
December 31, |
||||||||
2020
|
2019
|
|||||||
Revenues:
|
||||||||
Rental revenues
|
$ | 16,325 | $ | 19,043 | ||||
Management fees
|
1,001 | 995 | ||||||
Other revenues
|
253 | 96 | ||||||
|
|
|
|
|||||
Total revenues
|
17,579 | 20,134 | ||||||
Expenses:
|
||||||||
Facility rent expense
|
6,558 | 6,645 | ||||||
Cost of management fees
|
675 | 661 | ||||||
Depreciation and amortization
|
2,894 | 3,438 | ||||||
General and administrative expenses
|
3,373 | 3,192 | ||||||
Provision (recovery) for doubtful accounts
|
925 | (281 | ) | |||||
Other operating expenses
|
860 | 1,017 | ||||||
|
|
|
|
|||||
Total expenses
|
15,285 | 14,672 | ||||||
|
|
|
|
|||||
Income from operations
|
2,294 | 5,462 | ||||||
|
|
|
|
|||||
Other expense (income):
|
||||||||
Interest expense, net
|
2,777 | 5,265 | ||||||
Loss on extinguishment of debt
|
— | 2,458 | ||||||
Gain on disposal of assets
|
— | (7,141 | ) | |||||
Other expense
|
121 | 6 | ||||||
|
|
|
|
|||||
Total other expense (income), net
|
2,898 | 588 | ||||||
|
|
|
|
|||||
(Loss) income from continuing operations before income taxes
|
(604 | ) | 4,874 | |||||
|
|
|
|
|||||
(Loss) income from continuing operations
|
(604 | ) | 4,874 | |||||
(Loss) income from discontinued operations, net of tax
|
(84 | ) | 626 | |||||
|
|
|
|
|||||
Net (loss) income
|
(688 | ) | 5,500 | |||||
|
|
|
|
|||||
Net (Loss) income attributable to Regional Health Properties, Inc.
|
(688 | ) | 5,500 | |||||
Preferred stock dividends—undeclared
|
(8,997 | ) | (8,997 | ) | ||||
|
|
|
|
|||||
Net loss attributable to Regional Health Properties, Inc. common stockholders
|
$ | (9,685 | ) | $ | (3,497 | ) | ||
|
|
|
|
|||||
Net loss (income) per share of common stock attributable to Regional Health Properties, Inc.
|
||||||||
Basic and diluted:
|
||||||||
Continuing Operations, after current period undeclared dividend
|
$ | (5.69 | ) | $ | (2.44 | ) | ||
Discontinued Operations
|
(0.05 | ) | 0.37 | |||||
|
|
|
|
|||||
$ | (5.74 | ) | $ | (2.07 | ) | |||
|
|
|
|
|||||
Weighted average shares of common stock outstanding:
|
||||||||
Basic and diluted
|
1,688 | 1,688 |
Shares of
Common Stock
(a)
|
Shares of
Preferred
Stock
|
Common
Stock and
Additional
Paid-in
Capital
|
Preferred
Stock
|
Accumulated
Deficit
|
Total
|
|||||||||||||||||||
Balance, December 31, 2018
|
1,688 | 2,812 | $ | 61,900 | $ | 62,423 | $ | (118,172 | ) | $ | 6,151 | |||||||||||||
Stock-based compensation
|
— | — | 92 | — | — | 92 | ||||||||||||||||||
Net Income
|
— | — | — | — | 5,500 | 5,500 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance, December 31, 2019
|
1,688 | 2,812 | $ | 61,992 | $ | 62,423 | $ | (112,672 | ) | $ | 11,743 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Stock-based compensation
|
— | — | 49 | — | — | 49 | ||||||||||||||||||
Net loss
|
— | — | — | — | (688 | ) | (688 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance, December 31, 2020
|
1,688 | 2,812 | $ | 62,041 | $ | 62,423 | $ | (113,360 | ) | $ | 11,104 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Reflects our
one-for-twelve
Summary of Significant Accounting Policies
|
Year Ended
December 31, |
||||||||
2020
|
2019
|
|||||||
Cash flows from operating activities:
|
||||||||
Net (Loss) income
|
$ | (688 | ) | $ | 5,500 | |||
Loss (income) from discontinued operations, net of tax
|
84 | (626 | ) | |||||
|
|
|
|
|||||
(Loss) income from continuing operations
|
(604 | ) | 4,874 | |||||
Adjustments to reconcile net (loss) income from continuing operations to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
2,894 | 3,438 | ||||||
Stock-based compensation expense
|
49 | 92 | ||||||
Rent expense in excess of cash paid
|
168 | 308 | ||||||
Rent revenue in excess of cash received
|
(979 | ) | (1,424 | ) | ||||
Amortization of deferred financing costs, debt discounts and premiums
|
128 | 198 | ||||||
Loss on debt extinguishment
|
— | 2,458 | ||||||
Gain on disposal of assets
|
— | (7,141 | ) | |||||
Bad debt expense (recovery)
|
925 | (281 | ) | |||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(1,084 | ) | 465 | |||||
Prepaid expenses and other assets
|
660 | 400 | ||||||
Accounts payable and accrued expenses
|
13 | (339 | ) | |||||
Other liabilities
|
281 | — | ||||||
|
|
|
|
|||||
Net cash provided by operating activities—continuing operations
|
2,451 | 3,048 | ||||||
Net cash used in operating activities—discontinued operations
|
(1,156 | ) | (652 | ) | ||||
|
|
|
|
|||||
Net cash provided by operating activities
|
1,295 | 2,396 | ||||||
|
|
|
|
|||||
Cash flow from investing activities:
|
||||||||
Proceeds from disposal of lease assets, net
|
— | 1,192 | ||||||
Proceeds from the sale of property and equipment, net
|
— | 2,687 | ||||||
Purchase of property and equipment
|
(450 | ) | (58 | ) | ||||
|
|
|
|
|||||
Net cash (used in) provided by investing activities—continuing operations
|
(450 | ) | 3,821 | |||||
|
|
|
|
|||||
Net cash (used in) provided by investing activities
|
(450 | ) | 3,821 | |||||
|
|
|
|
|||||
Cash flows from financing activities:
|
||||||||
Proceeds from debt issuance
|
229 | — | ||||||
Repayment on notes payable
|
(1,504 | ) | (3,036 | ) | ||||
Repayment on bonds payable
|
(116 | ) | (344 | ) | ||||
Debt extinguishment, forbearance and issuance costs, net of refunds
|
— | (1,251 | ) | |||||
|
|
|
|
|||||
Net cash used in financing activities—continuing operations
|
(1,391 | ) | (4,631 | ) | ||||
Net cash used in financing activities—discontinued operations
|
— | (34 | ) | |||||
|
|
|
|
|||||
Net cash used in financing activities
|
(1,391 | ) | (4,665 | ) | ||||
|
|
|
|
|||||
Net change in cash and restricted cash
|
(546 | ) | 1,552 | |||||
Cash and restricted cash at beginning of period
|
8,038 | 6,486 | ||||||
|
|
|
|
|||||
Cash and restricted cash at end of period
|
$ | 7,492 | $ | 8,038 | ||||
|
|
|
|
Year Ended
December 31, |
||||||||
2020
|
2019
|
|||||||
Supplemental Disclosure of Cash Flow Information:
|
||||||||
Cash interest paid
|
$ | 2,447 | $ | 4,809 | ||||
Supplemental disclosure of
non-cash
Activities:
|
||||||||
Non-cash
payments of short-term debt
|
$ | — | $ | (24,637 | ) | |||
Non-cash
debt extinguishment, issuance costs and prepayment penalties
|
— | (1,036 | ) | |||||
Non-cash
surrender of security deposit
|
— | (140 | ) | |||||
|
|
|
|
|||||
Net payments through escrow
|
— | (25,813 | ) | |||||
Non-cash
proceeds from sale of property and equipment
|
— | 25,813 | ||||||
|
|
|
|
|||||
Net proceeds through escrow
|
$ | — | $ | — | ||||
|
|
|
|
|||||
Non-cash
settlement of Peach Line (notes receivable)
|
$ | 350 | $ | — | ||||
Capture of security deposit and other payables
|
$ | 202 | $ | — | ||||
Non-cash
proceeds from vendor-financed insurance
|
$ | 339 | $ | 250 | ||||
Non-cash
proceeds from finance lease to purchase fixed assets
|
$ | — | $ | 26 |
• |
“Board” or “Board of Directors” refers to the AdCare Board with respect to the period prior to the Merger and to the RHE Board with respect to the period after the Merger;
|
• |
“common stock” refers to the AdCare common stock with respect to the period prior to the Merger and to the RHE common stock with respect to the period after the Merger;
|
• |
“Series A Preferred Stock” refers to AdCare’s 10.875% % Series A Cumulative Redeemable Preferred Stock with respect to the period prior to the Merger and to the Regional Health’s 10.875% Series A Cumulative Redeemable Preferred Stock with respect to the period after the Merger; and
|
• |
“Charter” refers to the AdCare Charter with respect to the period prior to the Merger and to the RHE Charter with respect to the period after the Merger.
|
Year Ended December 31,
|
||||||||
(Amounts in 000’s)
|
2020
|
2019
|
||||||
Rental revenues
|
$ | 549 | $ | 480 | ||||
Other operating expenses
|
549 | 480 |
December 31,
|
||||||||
(Amounts in 000’s)
|
2020
|
2019
|
||||||
Stock options
|
13 | 15 | ||||||
Common stock warrants—employee
|
49 | 49 | ||||||
Common stock warrants—nonemployee
|
9 | 9 | ||||||
|
|
|
|
|||||
Total shares
|
71 | 73 | ||||||
|
|
|
|
December 31,
|
||||||||
Amounts in (000’s)
|
2020
|
2019
|
||||||
Cash
|
$ | 4,186 | $ | 4,383 | ||||
Restricted cash:
|
||||||||
Cash collateral
|
$ | 124 | $ | 124 | ||||
HUD and other replacement reserves
|
1,675 | 2,251 | ||||||
Escrow deposits
|
1,190 | 963 | ||||||
Restricted investments for debt obligations
|
317 | 317 | ||||||
|
|
|
|
|||||
Total restricted cash
|
3,306 | 3,655 | ||||||
|
|
|
|
|||||
Total cash and restricted cash
|
$ | 7,492 | $ | 8,038 | ||||
|
|
|
|
Estimated Useful
Lives (Years)
|
December 31,
|
|||||||||||
(Amounts in 000’s)
|
2020
|
2019
|
||||||||||
Buildings and improvements
|
5-40 | $ | 65,629 | $ | 65,533 | |||||||
Equipment and computer related
|
2-10 | 5,139 | 5,601 | |||||||||
Land
(1)
|
— | 2,776 | 2,779 | |||||||||
Construction in process
|
— | 69 | 58 | |||||||||
|
|
|
|
|||||||||
73,613 | 73,971 | |||||||||||
Less: accumulated depreciation and amortization
|
(21,080 | ) | (19,299 | ) | ||||||||
|
|
|
|
|||||||||
Property and equipment, net
|
$ | 52,533 | $ | 54,672 | ||||||||
|
|
|
|
(1)
|
Includes $0.1 million of land improvements with an average estimated useful remaining life of approximately 8 years.
|
December 31,
|
||||||||
Amounts in (000’s)
|
2020
|
2019
|
||||||
Depreciation
|
$ | 2,175 | $ | 2,458 | ||||
Amortization
|
719 | 980 | ||||||
|
|
|
|
|||||
Total depreciation and amortization
|
$ | 2,894 | $ | 3,438 | ||||
|
|
|
|
(Amounts in 000’s)
|
Bed Licenses
(1)
(included in
property and
equipment)
|
Bed Licenses—
Separable
|
Lease
Rights
|
Total
|
||||||||||||
Balances, January 1, 2019
|
||||||||||||||||
Gross
|
$ | 22,811 | $ | 2,471 | $ | 5,015 | $ | 30,297 | ||||||||
Accumulated amortization
|
(4,849 | ) | — | (4,109 | ) | (8,958 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net carrying amount
|
$ | 17,962 | $ | 2,471 | $ | 906 | $ | 21,339 | ||||||||
Acquisitions
|
||||||||||||||||
Gross
|
— | — | 43 | 43 | ||||||||||||
Assets Sold
|
||||||||||||||||
Gross
|
(8,535 | ) | — | — | (8,535 | ) | ||||||||||
Accumulated amortization
|
2,003 | — | — | 2,003 | ||||||||||||
Fully amortized asset adjustments
|
||||||||||||||||
Gross
|
— | — | (300 | ) | (300 | ) | ||||||||||
Accumulated amortization
|
— | — | 300 | 300 | ||||||||||||
Amortization expense
|
(493 | ) | — | (487 | ) | (980 | ) | |||||||||
Balances, December 31, 2019
|
||||||||||||||||
Gross
|
14,276 | 2,471 | 4,758 | 21,505 | ||||||||||||
Accumulated amortization
|
(3,339 | ) | — | (4,296 | ) | (7,635 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net carrying amount
|
10,937 | 2,471 | 462 | 13,870 | ||||||||||||
Fully amortized asset adjustments
|
||||||||||||||||
Gross
|
— | — | (4,552 | ) | (4,552 | ) | ||||||||||
Accumulated amortization
|
— | — | 4,552 | 4,552 | ||||||||||||
Amortization expense
|
(415 | ) | — | (304 | ) | (719 | ) | |||||||||
Balances, December 31, 2020
|
||||||||||||||||
Gross
|
$ | 14,276 | $ | 2,471 | $ | 206 | $ | 16,953 | ||||||||
Accumulated amortization
|
(3,754 | ) | — | (48 | ) | (3,802 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net carrying amount
|
$ | 10,522 | $ | 2,471 | $ | 158 | $ | 13,151 | ||||||||
|
|
|
|
|
|
|
|
(1)
|
Non-separable
bed licenses are included in property and equipment as is the related accumulated amortization expense (see Note 4—
Property and Equipment
|
Amounts in (000’s)
|
Bed
Licenses
|
Lease
Rights
|
||||||
2021
|
$ | 414 | 24 | |||||
2022
|
414 | 24 | ||||||
2023
|
414 | 23 | ||||||
2024
|
414 | 18 | ||||||
2025
|
414 | 18 | ||||||
Thereafter
|
8,452 | 51 | ||||||
|
|
|
|
|||||
Total
|
$ | 10,522 | $ | 158 | ||||
|
|
|
|
(Amounts in 000’s)
|
December 31,
2020
|
December 31,
2019
|
||||||
Goodwill—balances, December 31, prior year
|
$ | 1,585 | $ | 2,105 | ||||
Assets sold
|
— | (520 | ) | |||||
|
|
|
|
|||||
Net carrying amount
|
$ | 1,585 | $ | 1,585 | ||||
|
|
|
|
(Amounts in 000’s)
|
Future rental
payments
|
Accretion of
lease liability
(1)
|
Operating lease
obligation
|
|||||||||
2021
|
$ | 6,551 | $ | (275 | ) | $ | 6,276 | |||||
2022
|
6,691 | (771 | ) | 5,920 | ||||||||
2023
|
6,823 | (1,248 | ) | 5,575 | ||||||||
2024
|
6,958 | (1,708 | ) | 5,250 | ||||||||
2025
|
7,095 | (2,150 | ) | 4,945 | ||||||||
Thereafter
|
12,736 | (4,818 | ) | 7,918 | ||||||||
|
|
|
|
|
|
|||||||
Total
|
$ | 46,854 | $ | (10,970 | ) | $ | 35,884 | |||||
|
|
|
|
|
|
(1)
|
Weighted average discount rate 7.98%
|
(Amounts in
000’s) |
||||
2021
|
$ | 12,384 | ||
2022
|
13,519 | |||
2023
|
15,477 | |||
2024
|
15,299 | |||
2025
|
13,702 | |||
Thereafter
|
33,555 | |||
|
|
|||
Total
|
$ | 103,936 | ||
|
|
|
Initial Lease Term
|
2021 Cash
Annual Rent |
||||||||||||||
Facility Name
|
Operator Affiliation
(1)
|
Commencement
Date |
Expiration
Date |
|||||||||||||
(Thousands)
|
||||||||||||||||
Owned
|
||||||||||||||||
Eaglewood ALF
|
Aspire | 12/1/2018 | 11/30/2028 | $ | 630 | |||||||||||
Eaglewood Care Center
|
Aspire | 12/1/2018 | 11/30/2028 | 441 | ||||||||||||
H&C of Greenfield
|
Aspire | 12/1/2018 | 11/30/2023 | 223 | ||||||||||||
Southland Healthcare
|
Beacon Health Management | 11/1/2014 | 10/31/2024 | 990 | ||||||||||||
The Pavilion Care Center
|
Aspire | 12/1/2018 | 11/30/2028 | 231 | ||||||||||||
Autumn Breeze
|
C.R. Management | 9/30/2015 | 9/30/2025 | 916 | ||||||||||||
Coosa Valley Health Care
|
C.R. Management | 12/1/2014 | 8/31/2030 | 1,021 | ||||||||||||
Glenvue H&R
|
C.R. Management | 7/1/2015 | 6/30/2025 | 1,341 | ||||||||||||
Meadowood
|
C.R. Management | 5/1/2017 | 8/31/2030 | 484 | ||||||||||||
Georgetown Health
|
Symmetry Healthcare | 4/1/2015 | 3/31/2030 | 347 | ||||||||||||
Mountain Trace Rehab
(2)
|
Vero Health Management | 3/1/2019 | 2/28/2029 | 502 | ||||||||||||
Sumter Valley Nursing
|
Symmetry Healthcare | 4/1/2015 | 3/31/2030 | 643 | ||||||||||||
|
|
|||||||||||||||
Subtotal Owned Facilities (12)
|
$ | 7,769 | ||||||||||||||
|
|
|||||||||||||||
Leased
|
||||||||||||||||
Covington Care
|
Aspire | 12/1/2018 | 11/30/2028 | $ | 528 | |||||||||||
Lumber City
|
Beacon Health Management | 11/1/2014 | 8/31/2027 | 959 | ||||||||||||
LaGrange
|
C.R. Management | 4/1/2015 | 8/31/2027 | 1,174 | ||||||||||||
Thomasville N&R
|
C.R. Management | 7/1/2014 | 8/31/2027 | 371 | ||||||||||||
Jeffersonville
|
Peach Health | 6/18/2016 | 8/31/2027 | 771 | ||||||||||||
Oceanside
|
Peach Health | 7/13/2016 | 8/31/2027 | 525 | ||||||||||||
Savannah Beach
|
Peach Health | 7/13/2016 | 8/31/2027 | 287 | ||||||||||||
Powder Springs
(3)
|
Empire | 1/1/2021 | 8/1/2027 | — | ||||||||||||
Tara
(3)
|
Regional Health Properties | — | ||||||||||||||
|
|
|||||||||||||||
Subtotal Leased Facilities (9)
|
$ | 4,615 | ||||||||||||||
|
|
|||||||||||||||
Total (21)
|
$ | 12,384 | ||||||||||||||
|
|
(1)
|
Represents the number of facilities which are leased or subleased to separate tenants, which tenants are affiliates of the entity named in the table above.
|
(2)
|
On February 28, 2019, the lease with an affiliate of Symmetry Healthcare with an expected lease term of May 31, 2030 was mutually terminated and operations transferred to a new operator (Vero Health) on March 1, 2019
.
|
(3)
|
Indicates facilities that were leased to Wellington until 12:01 a.m. on January 1, 2021, see Note—18
Subsequent
Events
|
December 31,
|
||||||||
Amounts in (000’s)
|
2020
|
2019
|
||||||
Accrued employee benefits and payroll related
|
$ | 218 | $ | 239 | ||||
Real estate and other taxes
|
491 | 883 | ||||||
Self-insured reserve
(1)
|
183 | 453 | ||||||
Accrued interest
|
424 | 208 | ||||||
Unearned rental revenue
|
41 | 46 | ||||||
Other accrued expenses
|
868 | 784 | ||||||
|
|
|
|
|||||
Total
|
$ | 2,225 | $ | 2,613 | ||||
|
|
|
|
(1)
|
The Company self-insures against professional and general liability cases incurred prior to the Transition and uses a third party administrator and outside counsel to manage and defend the claims (see Note 14
-
Commitments and Contingencies
|
December 31,
|
||||||||
Amounts in (000’s)
|
2020
|
2019
|
||||||
Senior debt—guaranteed by HUD
|
$ | 31,104 | $ | 31,996 | ||||
Senior debt—guaranteed by USDA
(a)
|
13,139 | 13,298 | ||||||
Senior debt—guaranteed by SBA
(b)
|
628 | 650 | ||||||
Senior debt—bonds
|
6,500 | 6,616 | ||||||
Senior debt—other mortgage indebtedness
|
3,631 | 3,777 | ||||||
Other debt
|
822 | 539 | ||||||
|
|
|
|
|||||
Sub Total
|
55,824 | 56,876 | ||||||
Deferred financing costs
|
(1,250 | ) | (1,364 | ) | ||||
Unamortized discounts on bonds
|
(135 | ) | (149 | ) | ||||
|
|
|
|
|||||
Notes payable and other debt
|
$ | 54,439 | $ | 55,363 | ||||
|
|
|
|
(a)
|
U.S. Department of Agriculture (“USDA”)
|
(b)
|
U.S. Small Business Administration (“SBA”)
|
Facility
|
Lender
|
Maturity
|
Interest Rate
(a)
|
December 31,
2020
|
December 31,
2019
|
|||||||||||||||
Senior debt—guaranteed by HUD
(b)
|
||||||||||||||||||||
The Pavilion Care Center
|
Orix Real Estate Capital | 12/01/2027 | Fixed | 4.16 | % | $ | 986 | $ | 1,105 | |||||||||||
Hearth and Care of Greenfield
|
Orix Real Estate Capital | 08/01/2038 | Fixed | 4.20 | % | 1,920 | 1,992 | |||||||||||||
Woodland Manor
|
Midland State Bank | 10/01/2044 | Fixed | 3.75 | % | 4,968 | 5,094 | |||||||||||||
Glenvue
|
Midland State Bank | 10/01/2044 | Fixed | 3.75 | % | 7,712 | 7,909 | |||||||||||||
Autumn Breeze
|
KeyBank | 01/01/2045 | Fixed | 3.65 | % | 6,705 | 6,876 | |||||||||||||
Georgetown
|
Midland State Bank | 10/01/2046 | Fixed | 2.98 | % | 3,394 | 3,480 | |||||||||||||
Sumter Valley
|
Key Bank | 01/01/2047 | Fixed | 3.70 | % | 5,419 | 5,540 | |||||||||||||
|
|
|
|
|||||||||||||||||
Total
|
$ | 31,104 | $ | 31,996 | ||||||||||||||||
|
|
|
|
|||||||||||||||||
Senior debt—guaranteed by USDA
(c)
|
||||||||||||||||||||
Coosa
(d)
|
Metro City | 09/30/2035 | Prime + 1.50% | 5.50 | % | $ | 5,149 | $ | 5,212 | |||||||||||
Mountain Trace
(e)
|
Community B&T | 02/24/2037 | Prime + 1.75% | 5.75 | % | 3,972 | 4,009 | |||||||||||||
Southland
(f)
|
Cadence Bank, NA | 07/27/2036 | Prime + 1.50% | 6.00 | % | 4,018 | 4,077 | |||||||||||||
|
|
|
|
|||||||||||||||||
Total
|
$ | 13,139 | $ | 13,298 | ||||||||||||||||
|
|
|
|
|||||||||||||||||
Senior debt—guaranteed by SBA
(g)
|
||||||||||||||||||||
Southland
|
Cadence Bank, NA | 07/27/2036 | Prime + 2.25% | 5.50 | % | $ | 628 | $ | 650 | |||||||||||
|
|
|
|
|||||||||||||||||
Total
|
$ | 628 | $ | 650 | ||||||||||||||||
|
|
|
|
(a)
|
Represents interest rates as of December 31, 2020 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs which range from 0.08% to 0.53% per annum.
|
(b)
|
For the seven skilled nursing facilities, the Company has term loans insured 100% by HUD with financial institutions. The loans are secured by, among other things, an assignment of all rents paid under any existing or future leases and rental agreements with respect to the underlying facility. The loans contain customary events of default, including fraud or material misrepresentations or material omission, the commencement of a forfeiture action or proceeding, failure to make required payments, and failure to perform or comply with certain agreements. Upon the occurrence of certain events of default, the lenders may, after receiving the prior written approval of HUD, terminate the loans and all amounts under the loans will become immediately due and payable. In connection with entering into loans, the facilities entered into a healthcare regulatory agreement and a promissory note, each containing customary terms and conditions.
|
(c)
|
For the three skilled nursing facilities, the Company has term loans with financial institutions, which are insured 70% to 80% by the USDA. The loans have an annual renewal fee for the USDA guarantee of 0.25% of the guaranteed portion. The loans have prepayment penalties of 1% through 2020, capped at 1% for the remainder of the first 10 years of the term and 0% thereafter.
|
(d)
|
Pursuant to the CARES Act, the monthly principal and interest payments due May 1, 2020 through September 1, 2020 for the loan for that certain
122-bed
skilled nursing facility commonly known as Coosa, located in Glencoe, Alabama, were deferred (a part of the “USDA Payment Program”). Monthly payments commencing October 1, 2020 are being applied to current interest, then deferred interest until the deferred interest is paid in full. Upon expiration of the deferral period, the payments will be
re-amortized
over the remaining term of the loan.
|
(e)
|
Pursuant to the CARES Act, the monthly principal and interest payments due May 1, 2020 through August 1, 2020 for the Mountain Trace facility loan were deferred. Monthly payments commencing September 1, 2020 are being applied to current interest, then deferred interest until the deferred interest is paid in full, payments will be
re-amortized
over the extended term of the loan.
|
(f)
|
Pursuant to the CARES Act, the monthly principal and interest payments due May 1, 2020 through October 1, 2020 for the loan for that certain
126-bed
skilled nursing facility commonly known as Southland, located in Dublin, Georgia, were deferred as a part of the USDA Payment Program. Monthly payments will recommence November 1, 2020 and the payments will be
re-amortized
over the remaining term of the loan
|
(g)
|
For one facility, the Company has a term loan with a financial institution, which is insured 75% by the SBA. The note matures in 2036.
|
(Amounts in 000’s)
|
||||||||||||||||||||
Facility
|
Lender
|
Maturity
|
Interest Rate
(a)
|
December 31,
2020
|
December 31,
2019
|
|||||||||||||||
Senior debt—bonds
(b)
|
||||||||||||||||||||
Eaglewood Bonds Series A
(c)
|
City of Springfield, Ohio
|
05/01/2042 |
Fixed
|
7.65 | % | $ | 6,379 | $ | 6,379 | |||||||||||
Eaglewood Bonds Series B
(c)
|
City of Springfield, Ohio
|
05/01/2021 |
Fixed
|
8.50 | % | 121 | 237 | |||||||||||||
|
|
|
|
|||||||||||||||||
Total
|
$ | 6,500 | $ | 6,616 | ||||||||||||||||
|
|
|
|
(a)
|
Represents interest rates as of December 31, 2020 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs of approximately 0.15% per annum.
|
(b)
|
In April 2012, a wholly-owned subsidiary of the Company entered into a loan agreement with the City of Springfield, Ohio pursuant to which City of Springfield lent to such subsidiary the proceeds from the sale of City of Springfield’s Series 2012 Bonds. The Series 2012 Bonds consist of $6.6 million in Series 2012A First Mortgage Revenue Bonds and $0.6 million in Taxable Series 2012B First Mortgage Revenue Bonds. The bonds are secured by the Company’s assisted living facility located in Springfield, Ohio known as Eaglewood Village and guaranteed by Regional. There is an original issue discount of $0.3 million related to this loan.
|
(c)
|
On January 18, 2019, the principal on the bonds was reduced in aggregate by $0.2 million. On December 21, 2018, the Company received $243,467 in cash representing a refund of the original issuance fees of these bonds, into its restricted cash account managed by BOKF, NA, who on January 18, 2019, completed a principal distribution of such funds to notified bondholders on January 15, 2019. This
pro-rata
distribution was made pursuant to the Order Authorizing Distribution of Settlement Funds Collected in Related Actions Brought by the Securities and Exchange Commission Section 5 filed August 21, 2017 in the United States District Court District of New Jersey styled Securities and Exchange Commission, Plaintiff, v. Christopher Freeman Brogdon, Defendant, and Connie Brogdon, et al., Relief Defendants. Case
2:15-cv-08173-KM-JBC.
|
(a)
|
Represents interest rates as of December 31, 2020 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs of 0.30% per annum.
|
(Amounts in 000’s)
|
||||||||||||||||||||
Lender
|
Maturity
|
Interest Rate
|
December 31,
2020
|
December 31,
2019
|
||||||||||||||||
Other debt
|
||||||||||||||||||||
First Insurance Funding
|
03/01/2021 | Fixed | 2.38 | % | $ | 94 | $ | 27 | ||||||||||||
KeyBank
|
08/25/2021 | Fixed | 0.00 | % | 495 | 495 | ||||||||||||||
FountainHead Commercial Capital—PPP Loan
|
04/16/2022 | Fixed | 1.00 | % | 229 | — | ||||||||||||||
Marlin Covington Finance
|
3/11/2021 | Fixed | 20.17 | % | 4 | 17 | ||||||||||||||
|
|
|
|
|||||||||||||||||
Total
|
$ | 822 | $ | 539 | ||||||||||||||||
|
|
|
|
Amounts in
(000’s) |
||||
2021
|
$ | 2,257 | ||
2022
|
5,222 | |||
2023
|
1,770 | |||
2024
|
1,854 | |||
2025
|
1,948 | |||
Thereafter
|
42,773 | |||
|
|
|||
Subtotal
|
55,824 | |||
Less: unamortized discounts
|
(135 | ) | ||
Less: deferred financing costs
|
(1,250 | ) | ||
|
|
|||
Total notes and other debt
|
$ | 54,439 | ||
|
|
Facility Name
|
Licensed
Beds/Units |
Location
|
Operator Affiliation
|
Lease Term
Expiration Date |
2019
Cash Annual Rent (Amounts in 000’s) |
2019
Cash Annual Rent % of Total Expected |
||||||||||||||||
Attalla
(a)
|
182 | AL | C.R. Management | 8/31/2030 | $ | 1,175 | 6.4 | % | ||||||||||||||
College Park
(a)
|
100 | GA | C.R. Management | 3/31/2025 | 645 | 3.5 | % | |||||||||||||||
Quail Creek
(a)
|
118 | OK | Southwest LTC | 12/31/2025 | 783 | 4.3 | % | |||||||||||||||
Northwest
(b)
|
100 | OK | Southwest LTC | 12/31/2025 | 379 | 2.1 | % | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
Total
|
500 | $ | 2,982 | 16.3 | % | |||||||||||||||||
|
|
|
|
|
|
(a)
|
Disposition was completed on August 1, 2019. The Company received net proceeds of $0.4 million after repayment of the Pinecone Credit Facility, the Quail Creek Credit Facility and associated expenses related to the transactions.
|
(b)
|
Disposition was completed on August 28, 2019. The Company received net proceeds of $2.3 million.
|
Facility Name
|
Lender
|
Interest Rate
|
|
Principal
indebtedness
repaid
(Amounts in 000’s) |
Purchase
Price
(Amounts in 000’s) |
Gain/
(loss)
on Sale
(Amounts in 000’s) |
||||||||||||||||
Attalla
|
Pinecone | Fixed | 13.50 | % | $ | 9,696 | $ | 13,000 | $ | 3,739 | ||||||||||||
College Park
|
Pinecone | Fixed | 13.50 | % | 3,043 | 7,000 | 3,050 | |||||||||||||||
Quail Creek
|
Congressional Bank | LIBOR + 4.75% | 7.15 | % | 3,878 | 6,100 | 524 | |||||||||||||||
Northwest
|
Pinecone | Fixed | 13.50 | % | 3,011 | 2,400 | (862 | ) | ||||||||||||||
AdCare Property Holdings
|
Pinecone | Fixed | 13.50 | % | 5,009 | — | — | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
Total
|
$ | 24,637 | $ | 28,500 | $ | 6,451 | ||||||||||||||||
|
|
|
|
|
|
Disposed
|
Comparative
(b)
|
Actual
(a)
|
||||||||||||||
(Amounts in 000’s)
|
August 1,
2019 |
August 28,
2019 |
December 31,
2018 |
December 31,
2018 |
||||||||||||
Restricted cash, current
|
$ | 126 | $ | — | $ | 145 | $ | — | ||||||||
Accounts receivable
|
51 | — | 55 | — | ||||||||||||
Lease deposits
|
— | — | — | 375 | ||||||||||||
Straight-line rent receivable
|
932 | 125 | 1,013 | 704 | ||||||||||||
Buildings and improvements, net
|
15,551 | 2,320 | 18,081 | 352 | ||||||||||||
Equipment and computer related, net
|
272 | 187 | 495 | 97 | ||||||||||||
Land, net
|
1,160 | 181 | 1,341 | — | ||||||||||||
Intangible assets—lease rights, net
|
— | — | — | 676 | ||||||||||||
Goodwill
|
230 | 290 | 520 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Assets of disposal group
|
$ | 18,322 | $ | 3,103 | $ | 21,650 | $ | 2,204 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Accounts payable
|
$ | — | $ | — | $ | — | $ | 100 | ||||||||
Other liabilities -lease deposits
|
140 | — | 140 | 170 | ||||||||||||
Notes payable and other debt
|
24,535 | — | 24,221 | — | ||||||||||||
Deferred financing costs
|
(33 | ) | — | (58 | ) | — | ||||||||||
Other liabilities -accrued straight-line rent
|
— | — | — | 1,221 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities of disposal group
|
$ | 24,642 | $ | — | $ | 24,303 | $ | 1,491 | ||||||||
|
|
|
|
|
|
|
|
(a)
|
Actual Omega Lease Termination assets and liabilities held for sale at December 31, 2018 sold during January 2019. On December 27, 2018, the Board unanimously approved to terminate the Bonterra/Parkview Master Lease for gross proceeds of approximately $1.5 million, consisting of (i) a termination fee in the amount of $1.2 million and (ii) approximately $0.3 million to satisfy other net amounts due to the Company under the leases.
|
(b)
|
Comparative balance of assets and liabilities sold pursuant to the PSA at December 31, 2018.
|
Year Ending
December 31, |
||||||||
(Amounts in 000’s)
|
2020
|
2019
|
||||||
Recoveries
|
(63 | ) | (626 | ) | ||||
Other expense, net
|
147 | — | ||||||
|
|
|
|
|||||
Net (loss) income
|
$ | (84 | ) | $ | 626 | |||
|
|
|
|
Date paid /
Arrears date
|
Dividends Per
Share
|
Dividend
Arrears
(in 000’s)
|
||||||||||
Preferred Stock Dividends:
|
||||||||||||
12/31/2017 | 0.68 | 1,912 | ||||||||||
|
|
|
|
|||||||||
For the year ended December 31, 2017
|
$ | 1,912 | ||||||||||
|
|
|
|
|||||||||
3/31/2018 | $ | 0.68 | $ | 1,912 | ||||||||
6/30/2018 | 0.68 | 1,912 | ||||||||||
9/30/2018 | 0.68 | 1,912 | ||||||||||
12/31/2018 | 0.80 | 2,249 | ||||||||||
|
|
|
|
|||||||||
For the year ended December 31, 2018
|
$ | 2.84 | $ | 7,985 | ||||||||
|
|
|
|
|||||||||
3/31/2019 | $ | 0.80 | $ | 2,250 | ||||||||
6/30/2019 | 0.80 | 2,249 | ||||||||||
9/30/2019 | 0.80 | 2,249 | ||||||||||
12/31/2019 | 0.80 | 2,249 | ||||||||||
|
|
|
|
|||||||||
For the year ended December 31, 2019
|
$ | 3.20 | $ | 8,997 | ||||||||
|
|
|
|
|||||||||
3/31/2020 | $ | 0.80 | $ | 2,250 | ||||||||
6/30/2020 | 0.80 | 2,249 | ||||||||||
9/30/2020 | 0.80 | 2,249 | ||||||||||
12/31/2020 | 0.80 | 2,249 | ||||||||||
|
|
|
|
|||||||||
For the year ended December 31, 2020
|
$ | 3.20 | $ | 8,997 | ||||||||
|
|
|
|
|||||||||
Cumulative Total Outstanding
|
$ | 27,891 | ||||||||||
|
|
* |
The Board has suspended payment of the quarterly dividend on the Series A Preferred Stock indefinitely. Such dividend suspension does not trigger a default under the Company’s outstanding indebtedness.
|
Year Ending
December 31, |
||||||||
Amounts in (000’s)
|
2020
|
2019
|
||||||
Non-employee
compensation:
|
||||||||
Restricted stock
|
$ | 49 | $ | 92 | ||||
|
|
|
|
|||||
Total
non-employee
stock-based compensation expense
|
$ | 49 | $ | 92 | ||||
|
|
|
|
|||||
Total stock-based compensation expense
|
$ | 49 | $ | 92 | ||||
|
|
|
|
Number
of
Options
(000’s)
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contract Life
(in years)
|
Aggregate
Intrinsic
Value (000’s)
(a)
|
|||||||||||||
Outstanding and vested at December 31, 2018
|
15 | $ | 47.77 | 5.4 | $ | — | ||||||||||
|
|
|||||||||||||||
Outstanding and vested at December 31, 2019
|
15 | $ | 47.77 | 4.4 | $ | — | ||||||||||
|
|
|||||||||||||||
Expired
|
(2 | ) | $ | 49.73 | — | |||||||||||
|
|
|||||||||||||||
Outstanding and vested at December 31, 2020
|
13 | $ | 47.53 | 3.5 | $ | — | ||||||||||
|
|
(a)
|
Represents the aggregate gain on exercise for vested
in-the-money
|
Stock Options Outstanding
|
Stock Options
Exercisable
|
|||||||||||||||||||
Exercise Price
|
Number
Outstanding
(000’s)
|
Weighted
Average
Remaining
Contractual Term
(in years)
|
Weighted
Average
Exercise
Price
|
Vested and
Exercisable
(000’s)
|
Weighted
Average
Exercise
Price
|
|||||||||||||||
$15.72—$47.99
|
9 | 3.9 | $ | 46.81 | 9 | $ | 46.81 | |||||||||||||
$48.00—$51.60
|
4 | 2.8 | $ | 48.96 | 4 | $ | 48.96 | |||||||||||||
|
|
|
|
|||||||||||||||||
Total
|
13 | 3.5 | $ | 47.53 | 13 | $ | 47.53 | |||||||||||||
|
|
|
|
Number of
Warrants
(000’s)
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contract Life
(in years)
|
Aggregate
Intrinsic
Value (000’s)
(a)
|
|||||||||||||
Outstanding and vested at December 31, 2018
|
85 | $ | 45.53 | 3.7 | $ | — | ||||||||||
Expired
|
(27 | ) | $ | 31.72 | ||||||||||||
|
|
|||||||||||||||
Outstanding and vested at December 31, 2019
|
58 | $ | 52.09 | 4.0 | $ | — | ||||||||||
|
|
|||||||||||||||
Outstanding and vested at December 31, 2020
|
58 | $ | 52.09 | 3.0 | $ | — | ||||||||||
|
|
(a)
|
Represents the aggregate gain on exercise for vested
in-the-money
|
Warrants Outstanding
|
Warrants Exercisable
|
|||||||||||||||||||
Exercise Price
|
Number
Outstanding
(000’s)
|
Weighted
Average
Remaining
Contractual
Term (in years)
|
Weighted
Average
Exercise
Price
|
Vested and
Exercisable
(000’s)
|
Weighted
Average
Exercise
Price
|
|||||||||||||||
$36.00—$47.99
|
14 | 1.4 | $ | 46.71 | 14 | $ | 46.71 | |||||||||||||
$48.00—$59.99
|
42 | 3.5 | $ | 52.99 | 42 | $ | 52.99 | |||||||||||||
$60.00—$70.80
|
2 | 2.4 | $ | 70.80 | 2 | $ | 70.80 | |||||||||||||
|
|
|
|
|||||||||||||||||
Total
|
58 | 3.0 | $ | 52.09 | 58 | $ | 52.09 | |||||||||||||
|
|
|
|
Number
of
Shares (000’s)
|
Weighted
Average
Grant Date
Fair Value
|
|||||||
Unvested at December 31, 2018
|
48 | $ | 6.20 | |||||
|
|
|||||||
Vested
|
(19 | ) | $ | 8.65 | ||||
|
|
|||||||
Unvested at December 31, 2019
|
29 | $ | 4.63 | |||||
|
|
|||||||
Vested
|
(15 | ) | $ | 5.53 | ||||
|
|
|||||||
Unvested at December 31, 2020
|
14 | $ | 3.60 | |||||
|
|
• |
On January 29, 2020, the Company executed a settlement, in compromise of a complaint filed in the Circuit Court of Pulaski County, in the State of Arkansas, by a former patient at one of our facilities, against the Company on May 16, 2017. The plaintiff alleged medical negligence and injury. The settlement was paid in 2020, in exchange for dismissal of the case with prejudice, in the total amount of $40,000.
|
• |
On July 27, 2020, a wrongful death action was filed in the State Court of Chatham County, Georgia, by Jerold Kaplan against affiliates of Peach Health and the Company, on behalf of, and alleging the wrongful death of a patient at the facility known as Oceanside Health and Rehab, which is operated by an affiliate of Peach Health. The plaintiff is seeking an amount in excess of $10,000 for pain and suffering and damages and an unspecified amount of punitive damages. The Company is indemnified by affiliates of Peach Health in this action. The Company believes that this action lacks merit and the Company intends to take action most favorable to the Company. There is no guarantee that the Company will prevail in this action.
|
• |
On June 1, 2020, a wrongful death action was filed in the State Court of Chatham County, Georgia, by Sandi Postle against affiliates of Peach Health and the Company, on behalf of, and alleging the wrongful death of a patient at the facility known as Oceanside Health and Rehab operated by an affiliate of Peach Health. The plaintiff is requesting an amount in excess of $10,000 for pain and suffering and damages and an unspecified amount of punitive damages. The Company is indemnified by affiliates of Peach Health in this action. The Company believes that this action lacks merit and the Company intends to take action most favorable to the Company. There is no guarantee that the Company will prevail in this action.
|
• |
On May 21, 2020, a medical negligence action was filed in the State Court of Chatham County, Georgia, by Anthony Bowman against affiliates of Peach Health and the Company, on behalf of, and alleging wrongful death of a patient, at the facility known as Oceanside Health and Rehab operated by an affiliate of Peach Health. The plaintiff is seeking unspecified compensatory damages for the actual
|
losses and unspecified punitive damages. The Company is indemnified by affiliates of Peach Health in this action. The Company believes that this action lacks merit and the Company intends to take action most favorable to the Company. There is no guarantee that the Company will prevail in this action.
|
• |
On May 26, 2020, the United States District Court Eastern District of Arkansas Central Division the court dismissed without prejudice a complaint filed on January 30, 2020 by Robert E. Rack in the Circuit Court of Pulaski County, State of Arkansas, against Joseph and Rosie Schwartz, who controlled Skyline Healthcare LLC (“Skyline”), a subsidiary of Regional, and CIBC Bancorp USA, Inc., on behalf of a deceased patient who received care at a facility known as the Woodland Hills facility located in Arkansas after the date of the Transition and after the sale of the facility to Skyline. The complaint alleged medical injury and improper care and treatment and that the Company is complicit in the medical injury and improper care because it sold the Woodland Hills facility to Skyline. The plaintiff was seeking unspecified compensatory damages for the actual losses and unspecified punitive damages.
|
• |
On December 2, 2019, a medical negligence action was filed in the State Court of Gwinnett County, Georgia, by Edward Brown against affiliates of Beacon and the Company, on behalf of, and alleging wrongful death of a patient, at the facility known as Southland Health Care and Rehab Center operated by an affiliate of Beacon. The plaintiff is seeking compensatory damages in an amount to be decided by an impartial jury for the actual expenses, other losses, wrongful death and unnecessary suffering in excess of $10,000. The Company is indemnified by affiliates of Beacon in this action. The Company believes that this action lacks merit and the Company intends to take action most favorable to the Company. There is no guarantee that the Company will prevail in this action.
|
Year Ended
December 31, |
||||||||
(Amounts in 000’s)
|
2020
|
2019
|
||||||
Net deferred tax asset (liability):
|
||||||||
Allowance for doubtful accounts
|
$ | 301 | $ | 52 | ||||
Accrued expenses
|
684 | 661 | ||||||
Net operating loss carry forwards
|
17,927 | 17,464 | ||||||
Property, equipment & intangibles
|
(2,712 | ) | (2,403 | ) | ||||
Stock based compensation
|
210 | 211 | ||||||
Self-Insurance Reserve
|
46 | 113 | ||||||
Interest Expense—Limited under 163(j)
|
1,868 | 2,391 | ||||||
|
|
|
|
|||||
Total deferred tax assets
|
18,324 | 18,489 | ||||||
Valuation allowance
|
(18,324 | ) | (18,489 | ) | ||||
|
|
|
|
|||||
Net deferred tax liability
|
$ | — | $ | — | ||||
|
|
|
|
Year Ended
December 31, |
||||||||
2020
|
2019
|
|||||||
Federal income tax at statutory rate
|
21.0 | % | 21.0 | % | ||||
State and local taxes
|
(38.7 | )% | 1.9 | % | ||||
Nondeductible expenses
|
0.1 | % | 0.2 | % | ||||
Change in valuation allowance
|
23.9 | % | (24.2 | )% | ||||
Deferred Tax Adjustments—NOL Expirations
|
(6.3 | )% | — | |||||
Other
|
— | 1.1 | % | |||||
|
|
|
|
|||||
Effective tax rate
|
0.0 | % | 0.0 | % | ||||
|
|
|
|
Item 9.
|
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
Item 9B.
|
Other Information
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Name
|
Age
|
Position
|
||||
Brent Morrison
|
45 | Chief Executive Officer, President and Director | ||||
Benjamin A. Waites
|
59 | Chief Financial Officer and Vice President | ||||
Michael J. Fox
|
43 | Director | ||||
Kenneth W. Taylor
|
60 | Director | ||||
David A. Tenwick
|
83 | Director |
(i) |
solicit proxies or written consents of shareholders with respect to any Voting Securities, or make, or in any way participate in, any solicitation of any proxy to vote any Voting Securities (other than as conducted by us), or become a participant in any election contest with respect to us;
|
(ii) |
seek to call, or request the call of, a special meeting of shareholders or seek to make, or make, any shareholder proposal at any meeting of shareholders that has not first been approved in writing by the Board;
|
(iii) |
make any request or seek to obtain, in any fashion that would require public disclosure by us, Park City or their respective affiliates, any waiver or amendment of any provision of the Fox Agreement or take any action restricted thereby; and
|
(iv) |
except as permitted by the Fox Agreement, make or cause to be made any statement or announcement that constitutes an ad hominem attack on us or our officers or directors in any document or report filed with or furnished to the SEC or any other governmental agency or in any press release or other publicly available format.
|
Item 11.
|
Executive Compensation.
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
All Other
Compensation
($)
|
Total
($)
|
||||||||||||||||||
Brent Morrison*
|
2020 | 180,000 | — | — | 29,892 |
(1)
|
209,892 | |||||||||||||||||
Chief Executive Officer, President and Director
|
2019 | 135,000 |
(2)
|
45,000 | — | 83,415 |
(3)
|
263,415 | ||||||||||||||||
(principal executive officer)
|
||||||||||||||||||||||||
E. Clinton Cain**
|
2020 | 93,750 | — | — | 67,513 |
(4)
|
161,263 | |||||||||||||||||
Former Interim Chief Financial Officer, Former Senior Vice President and Former Chief Accounting Officer
|
2019 | 150,000 | 37,500 | — | — | 187,500 | ||||||||||||||||||
(former principal accounting officer)
|
||||||||||||||||||||||||
Benjamin A. Waites***
|
2020 | 54,665 |
(5)
|
— | — | — | 54,665 | |||||||||||||||||
Chief Financial Officer and Vice President
|
2019 | — | — | — | — | — | ||||||||||||||||||
(principal financial officer)
|
* |
Mr. Morrison, a director of the Company since October 2014, commenced serving as the Company’s Chief Executive Officer and President (and principal executive officer) on March 25, 2019 (when he became an
|
employee of the Company). Mr. Morrison previously served as the Company’s Interim Chief Executive Officer and Interim President (and principal executive officer) from October 18, 2017 until March 24, 2019 (during which time he was a
non-employee,
independent contractor to the Company).
|
** |
Mr. Cain served as the Company’s Interim Chief Financial Officer (and principal financial and accounting officer) from October 18, 2017 until August 15, 2020.
|
*** |
Mr. Waites commenced serving as the Company’s Chief Financial Officer and Vice President (and principal financial officer) on September 8, 2020.
|
(1)
|
Represents: $29,892 reimbursed for housing expenses in connection with his duties as Chief Executive Officer and President. See “Executive Compensation Arrangements”
below
|
(2)
|
Represents the amount of Mr. Morrison’s
pro-rata
annual salary of $180,000, paid to Mr. Morrison as an employee from March 25, 2019 through December 31, 2019.
|
(3)
|
Represents: (i) director compensation paid to Mr. Morrison as a
non-employee
director from January 1, 2019 through March 24, 2019 of $5,548; (ii) $32,867 reimbursed for housing expenses, commuting to and from work, and relocation expenses in connection with his duties as Interim Chief Executive Officer and Interim President from January 1, 2019 through March 24, 2019; and (iii) $45,000 paid for his services as Interim Chief Executive Officer and Interim President from January 1, 2019 through March 24, 2019. See “
Executive
Compensation Arrangements”
|
(4)
|
Represents: (i) $10,475 accrued employee vacation payout; and (ii) $57,038
non-employee
consulting fees, earned in accordance with a consulting agreement, by Mr. Cain subsequent to August 15, 2020. See “
Compensation Arrangements With Former Executive Officers below”
|
(5)
|
Represents the amount of Mr. Waites’s
pro-rata
annual salary of $175,000, paid to Mr. Waites as an employee from September 8, 2020 through December 31, 2020.
|
OPTION AWARDS*
|
STOCK AWARDS*
|
|||||||||||||||||||||||
Name and Principal Position
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options (#)—
Unexercisable
|
Option
Exercise
Price
|
Option
Expiration
Date
|
Equity
Incentive
Plan
Award:
Total
Number of
Unearned
Shares,
Units or
Other
Rights
that have
Not
Vested |
Equity
Incentive
Plan
Award:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
that have
Not
Vested |
||||||||||||||||||
Brent Morrison, Chief Executive Officer, President and Director
|
4,323 | — | $ | 46.80 | 12/17/2024 | 3,476 |
(1)
|
$ | 12,444 | |||||||||||||||
(principal executive officer)
|
||||||||||||||||||||||||
Benjamin A. Waites
‘Chief Financial Officer and Vice President |
— | — | $ | — | — | — | $ | — | ||||||||||||||||
(principal financial officer)
|
||||||||||||||||||||||||
E. Clinton Cain, Former Interim Chief Financial Officer, Former Senior Vice President and Former Chief Accounting Officer
|
— | — | $ | — | — | — | $ | — | ||||||||||||||||
(former principal financial officer and former principal accounting officer)
|
* |
Reflects our
one-for-twelve
,
Summary of Significant Accounting Policies
|
(1)
|
Restricted shares vest on the following schedule: 3,476 shares on January 1, 2021.
|
Name
|
Fees earned
or paid in
cash
$
|
Stock
awards
$
|
All other
compensation
(1)
$
|
Total
$
|
||||||||||||
Michael J. Fox
|
24,000 | — | — | 24,000 | ||||||||||||
Kenneth W. Taylor
|
24,000 | — | 1,000 | 25,000 | ||||||||||||
David A. Tenwick
|
24,000 | — | 607 | 24,607 |
(1)
|
The amounts set forth reflect amounts reimbursed for in person attendance of Board meetings and the associated other
out-of-pocket
|
As of December 31, 2020
|
||||||||||||
Number of Shares Subject to
Outstanding Options or
Warrants
(1)
|
Number of
Shares
of
Unvested
(1)
Restricted
Stock |
|||||||||||
Director
|
Exercisable
|
Unexercisable
|
||||||||||
Michael J. Fox
(2)
|
6,129 | — | 3,476 | |||||||||
Kenneth W. Taylor
(3)
|
— | — | 3,187 | |||||||||
David A. Tenwick
(4)
|
2,315 | — | 3,476 |
(1)
|
Reflects our
one-for-twelve
Summary of Significant Accounting Policies
|
(2)
|
Includes: (i) options to purchase 1,806 shares of common stock, with an expiration date of January 1, 2024, at an exercise price of $48.72 per share; (ii) options to purchase 4,323 shares of common stock, with an expiration date of December 17, 2024, at an exercise price of $46.80 per share; and (iii) 3,476 shares of restricted common stock which vested on January 1, 2021.
|
(3)
|
Represents shares of restricted common stock which vested on January 1, 2021.
|
(4)
|
Includes: (i) options to purchase 2,315 shares of common stock, with an expiration date of January 1, 2024, at an exercise price of $48.72 per share; and (ii) 3,476 shares of restricted common stock which vested on January 1, 2021.
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Name of Beneficial Owner
(1)
|
Number of
Shares of
Common
Stock
Beneficially
Owned
(a) (2)
|
Percent of
Outstanding
Common
Stock
(3)
|
||||||
5% Beneficial Owners (Excluding Directors and Named Executive Officers):
|
||||||||
Christopher Brogdon
(4)
|
85,390 |
(6)
|
5.1 | % | ||||
Connie B. Brogdon
(5)
|
85,390 |
(7)
|
5.1 | % | ||||
Directors and Named Executive Officers:
|
||||||||
Michael J. Fox
|
84,121 |
(8)
|
5.0 | % | ||||
David A. Tenwick
|
54,300 |
(9)
|
3.2 | % | ||||
Brent Morrison
|
19,816 |
(10)
|
1.2 | % | ||||
Kenneth W. Taylor
|
9,562 |
(11)
|
* | |||||
E. Clinton Cain**
|
650 |
(12)
|
* | |||||
Benjamin A. Waites
|
— | * | ||||||
|
|
|
|
|||||
All Directors and Executive Officers as a Group:
|
168,449 | 9.9 | % | |||||
|
|
|
|
(a)
|
Reflects our
one-for-twelve
|
* |
Less than one percent.
|
** |
Mr. Cain ceased serving as the Company’s Interim Chief Financial Officer (and principal financial officer) on August 15, 2020.
|
(1)
|
The address for each of our directors and executive officers is c/o Regional Health Properties, Inc., 454 Satellite Boulevard NW, Suite 100, Suwanee, Georgia 30024.
|
(2)
|
Except as otherwise specified, each individual has sole and direct beneficial voting and dispositive power with respect to shares of the common stock indicated.
|
(3)
|
Percentage is calculated based on 1,688,219 shares of common stock outstanding as of March 15, 2021.
|
(4)
|
The address for Mr. Brogdon is 88 West Paces Ferry Road N.W., Atlanta, Georgia 30305.
|
(5)
|
The address for Ms. Brogdon is 88 West Paces Ferry Road N.W., Atlanta, Georgia 30305.
|
(6)
|
Includes: (i) 20,044 shares of common stock held directly by Mr. Brogdon; and (ii) 65,346 shares of common stock held by Connie B. Brogdon (his spouse). Share information is based on a Form 4 filed with the SEC on December 17, 2014 and other information known to the Company.
|
(7)
|
Includes: (i) 20,044 shares of common stock held directly by Mr. Brogdon (her spouse); and (ii) 65,346 shares of common stock held by Ms. Brogdon. Share information is based on a Form 4 filed with the SEC on December 2, 2014 and other information known to the Company.
|
(8)
|
The information set forth in this table regarding Michael J. Fox is based on a Schedule 13 D/A filed with the SEC on April 4, 2017 and other information known to the Company. Includes: (i) 15,492 shares of common stock held directly by Mr. Fox; (ii) 62,500 shares of common stock held by affiliates of Mr. Fox; (iii) options to purchase 1,806 shares of common stock held directly by Mr. Fox at an exercise price of $48.72 per share; and (iv) options to purchase 4,323 of common stock held directly by Mr. Fox at an
|
exercise price of $46.80 per share. See Part III, Item 10, “Directors, Executive Officers and Corporate Governance—
Arrangements with Directors Regarding Election/Appointment”
|
(9)
|
Includes: (i) 51,985 shares of common stock held by Mr. Tenwick; and (ii) options to purchase 2,315 shares of common stock at an exercise price of $48.72 per share.
|
(10)
|
Includes: (i) 15,493 shares of common stock held by Mr. Morrison; and (ii) options to purchase 4,323 shares of common stock held by Mr. Morrison at an exercise price of $46.80 per share.
|
(11)
|
Includes 9,562 shares of common stock held by Mr. Taylor.
|
(12)
|
Includes 650 shares of common stock held by Mr. Cain.
|
Plan Category
|
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants
|
Weighted
-Average
Exercise
Price of
Outstanding
Options,
Warrants
|
Number of
Securities Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans
|
|||||||||
Equity compensation plans approved by security holders
|
13,406 |
(2)
|
$ | 47.53 | 250,000 |
(1)
|
||||||
Equity compensation plans not approved by security
holders
(3)
|
57,552 | $ | 52.09 | — | ||||||||
|
|
|
|
|
|
|||||||
Total
|
70,958 | $ | 51.23 | 250,000 | ||||||||
|
|
|
|
|
|
(1)
|
Represents shares available for future issuance under the 2020 Plan, which was approved by the Company’s shareholders on December 16, 2020 at the 2020 Annual Meeting of Shareholders of the Company.
|
(2)
|
Represents options issued pursuant to the Company’s 2011 Stock Incentive Plan, which was approved by our shareholders.
|
(3)
|
Represents warrants issued outside of our shareholder approved plan as described below. The warrants listed below contain certain anti-dilution adjustments and, therefore, were adjusted for stock dividends in October 2010, October 2011, and October 2012, if and as applicable. The share numbers and exercise prices below reflect all such applicable adjustments.
|
• |
On December 19, 2011, we issued to David Rubenstein, as inducement to become our Chief Operating Officer,
ten-year
warrants, which as of December 31, 2020 represent the right to purchase an aggregate 14,583 shares of common stock at exercises prices per share ranging from $47.16 to $54.96, and may be exercised for cash or on a cashless exercise basis. All such warrants are fully vested.
|
• |
On December 28, 2012, we issued to Strome Alpha Offshore, Ltd., as partial consideration for providing certain financing to the Company, a
ten-year
warrant to purchase 4,167 shares of common stock at an exercise price per share of $45.60. Such warrant is fully vested.
|
• |
On May 15, 2013, we issued to Ronald W. Fleming, as an inducement to become our then Chief Financial Officer, a
ten-year
warrant, which as of December 31, 2020, represents the right to purchase
|
1,945 shares of common stock at an exercise price of $70.80, and may be exercised for cash or on a cashless exercise basis. Such warrant is fully vested.
|
• |
On November 26, 2013, we issued to an investor relations firm, as partial consideration for providing certain investor relations services to the Company, a
ten-year
warrant to purchase 834 shares of common stock at an exercise price per share of $47.52. Such warrant is fully vested.
|
• |
On March 28, 2014, we issued to the placement agents in the Company’s offering of subordinated convertible promissory notes issued in 2014, as partial compensation for serving as placement agents in such offering, five-year warrants to purchase an aggregate of 4,078 shares of common stock at an exercise price per share of $54.00. Such warrants are fully vested.
|
• |
On October 10, 2014, we issued to William McBride III, as an inducement to become our Chief Executive Officer, a
ten-year
warrant to purchase 25,000 shares of common stock, of which 8,333 shares were forfeited on April 17, 2017 upon his separation from the Company, at an exercise price per share of $53.88. The balance of such warrant is fully vested and may be exercised for cash or on a cashless basis.
|
• |
On April 1, 2015, we issued to Allan J. Rimland, as an incentive to become our then President and Chief Financial Officer, a
ten-year
warrant to purchase 22,917 shares of common stock, of which 7,639 shares were forfeited on October 17, 2017 upon his resignation from the Company, at an exercise price per share equal to $51.00. The balance of such warrant is fully vested and may be exercised for cash or on a cashless exercise basis.
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Item 14.
|
Principal Accountant Fees and Services
|
Year Ended
December 31, |
||||||||
(Amounts in 000’s)
|
2020
|
2019
|
||||||
Audit fees (total)
(1)
|
$ | 236 | $ | 231 | ||||
Audit-related fees (total)
(2)
|
— | — | ||||||
Tax fees
|
— | — | ||||||
All other fees
|
— | — | ||||||
|
|
|
|
|||||
Cherry Bekaert Total fees
|
$ | 236 | $ | 231 | ||||
|
|
|
|
(1)
|
Audit fees include fees associated with professional services rendered for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s quarterly reports on Form
10-Q
during the twelve months ended December 31, 2020 and 2019.
|
(2)
|
Audit related fees include fees for additional services related to acquisitions, registration statements and other regulatory filings.
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
(i) |
Consolidated Balance Sheets—December 31, 2020 and 2019;
|
(ii) |
Consolidated Statements of Operations—Years ended December 31, 2020 and 2019;
|
(iii) |
Consolidated Statements of Stockholders’ Equity—Years ended December 31, 2020 and 2019;
|
(iv) |
Consolidated Statements of Cash Flows—Years ended December 31, 2020 and 2019; and
|
(v) |
Notes to Consolidated Financial Statements.
|
• |
Should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
|
• |
Have been qualified by the disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
|
• |
May apply standards of materiality in a way that is different from what may be viewed as material to you or other investors, and
|
• |
Were made only as of the date of the applicable agreement or such other date or dates may be specified in the agreement and are subject to more recent developments.
|
Exhibit
No. |
Description
|
Method of Filing
|
||
2.1 | Asset Purchase Agreement, dated March 8, 2017, by and between Meadowood Retirement Village, LLC, and Meadowood Properties, LLC, and AdCare Health Systems, Inc. |
Incorporated by reference to Exhibit 2.1 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2017
|
||
2.2 | Agreement and Plan of Merger by and between AdCare Health Systems, Inc., and Regional Health Properties, Inc., dated July 7, 2017 |
Incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form
8-K
filed on July 11, 2017
|
||
3.1 | Amended and Restated Bylaws of Regional Health Properties, Inc., effective September 21, 2017 |
Incorporated by reference to Exhibit 3.3 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
3.2 | Amended and Restated Articles of Incorporation of Regional Health Properties, Inc., effective September 21, 2017 |
Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
3.3 | Certificate of Merger, effective September 29, 2017 |
Incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
3.4 | Articles of Amendment to Amended and Restated Articles of Incorporation of Regional Health Properties, Inc., effective December 31, 2018 |
Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form
8-K12
filed on December 28, 2018
|
||
4.1 | Form of Common Stock Certificate of Regional Health Properties, Inc. |
Incorporated by reference to Exhibit 4.2 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
4.2 | Description of Regional Health Properties, Inc. Capital Stock |
Incorporated by reference to Exhibit 4.2 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2018
|
||
4.3* | 2005 Stock Option Plan of AdCare Health Systems, Inc. |
Incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form
S-8
(Registration
No. 333-131542)
filed October 27, 2011
|
||
4.4* | AdCare Health Systems, Inc. 2011 Stock Incentive Plan |
Incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form
S-8
(Registration
No. 333-131542)
filed October 27, 2011
|
||
4.5* | Regional Health Properties, Inc. 2020 Equity Incentive Plan |
Incorporated by reference to Exhibit 99.1 of the Registrant’s Current Report on Form
8-K
filed December 17, 2020
|
||
4.6* | Form of Non-Statutory Stock Option Agreement |
Incorporated by reference to Exhibit 4.4 of the Registrant’s Registration Statement on Form
S-8
(Registration
No. 333-131542)
filed October 27, 2011
|
Exhibit
No. |
Description
|
Method of Filing
|
||
4.7* | Form of Incentive Stock Option Agreement |
Incorporated by reference to Exhibit 4.5 of the Registrant’s Registration Statement on Form
S-8
(Registration
No. 333-131542)
filed October 27, 2011
|
||
4.8* | Warrant to Purchase Shares of Common Stock, dated March 31, 2011, issued by AdCare Health Systems, Inc. to Cantone Research, Inc. |
Incorporated by reference to Exhibit 4.3 to the Registrant’s Form
S-3
(File
No. 333-175541)
|
||
4.9 | Registration Rights Agreement, dated April 29, 2011, by and among AdCare Health Systems, Inc. and the investors named therein |
Incorporated by reference to Exhibit 4.5 to the Registrant’s Form
S-3
(File
No. 333-175541)
|
||
4.10 | Registration Rights Agreement, dated March 31, 2011, by and among AdCare Health Systems, Inc. and the investors named therein |
Incorporated by reference to Exhibit 10.2 to the Registrant’s Form
S-3
(File
No. 333-175541)
|
||
4.11 | Form of Registration Rights Agreement, dated as of June 28, 2012, between AdCare Health Systems, Inc. and the Buyers signatory thereto |
Incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on
Form 8-K
filed July 5, 2012
|
||
4.12 | Form of Warrant to Purchase Common Stock of the Company |
Incorporated by reference to Exhibit 4.3 to the Registrant’s Form
S-3
(File
No. 333-175541)
|
||
4.13 | Warrant to Purchase 312,500 Shares of Common Stock, dated April 1, 2012, issued by AdCare Health Systems, Inc. to Strome Alpha Offshore Ltd. |
Incorporated by reference to Exhibit 4.1 of the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2012
|
||
4.14 | Warrant to Purchase 300,000 Shares of Common Stock, dated March 30, 2012, issued by AdCare Health Systems, Inc. to Cantone Asset Management LLC |
Incorporated by reference to Exhibit 4.2 of the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2012
|
||
4.15 | Warrant to Purchase 100,000 Shares of Common Stock, dated July 2, 2012, issued by AdCare Health Systems, Inc. to Cantone Research, Inc. |
Incorporated by reference to Exhibit 4.3 of the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2012
|
||
4.16 | Warrant to Purchase 50,000 Shares of Common Stock, dated December 28, 2012, issued by AdCare Health Systems, Inc. to Strome Alpha Offshore Ltd. |
Incorporated by reference to Exhibit 4.21 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
4.17 | Warrant to Purchase 15,000 Shares of Common Stock, dated August 31, 2012, issued by AdCare Health Systems, Inc. to Hayden IR, LLC |
Incorporated by reference to Exhibit 4.22 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
4.18* | Warrant to Purchase 70,000 Shares of Common Stock, dated May 15, 2013, issued by AdCare Health Systems, Inc. to Ronald W. Fleming |
Incorporated by reference to Exhibit 4.23 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
4.19 | Warrant to Purchase 75,000 shares of Common Stock, dated October 26, 2013, issued by AdCare Health Systems, Inc. to Cantone Research, Inc. |
Incorporated by reference to Exhibit 4.2 of the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2013
|
||
4.20 | Form of Registration Rights Agreement, dated March 28, 2014, by and among AdCare Health Systems, Inc. and the investors named therein |
Incorporated by reference to Exhibit 4.23 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2013
|
Exhibit
No. |
Description
|
Method of Filing
|
||
4.21 | Form of Warrant, dated March 28, 2014, issued by AdCare Health Systems, Inc. to the placement agent and its affiliates in connection with the offering of 10% Subordinated Convertible Notes Due April 30, 2015 |
Incorporated by reference to Exhibit 4.3 of the Registrant’s Quarterly Report on Form
10-Q
for the three months ended March 31, 2014
|
||
4.22 | Form of Warrant granted to management to Purchase Shares of AdCare Health Systems, Inc. dated November 20, 2007 |
Incorporated by reference to Exhibit 10.23 of the Registrant’s annual report on form
10-KSB
as amended March 31, 2008
|
||
4.23* | Unsecured Promissory Note, pursuant to Settlement Agreement dated September 26, 2017, effective October 4, 2017 by and between Regional Health Properties Inc., and William McBride, III |
Incorporated by reference to Exhibit 4.17 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended September 14, 2017
|
||
10.1* | Employment Agreement between AdCare Health Systems, Inc. and David A. Tenwick, dated September 1, 2008 |
Incorporated by reference to Exhibit 99.1 of the Registrant’s Form
8-K
filed September 8, 2008
|
||
10.2 | Regulatory Agreement and Mortgage Note between The Pavilion Care Center, LLC and Red Mortgage Capital, Inc., in the original amount of $2,108,800 dated November 27, 2007 |
Incorporated by reference to Exhibit 10.24 of the Registrant’s annual report on form
10-KSB
as amended March 31, 2008
|
||
10.3 | Regulatory Agreement and Mortgage Note between Hearth & Care of Greenfield and Red Mortgage Capital, Inc., in the original amount of $2,524,800 dated July 29, 2008 |
Incorporated by reference to Exhibit 10.31 of the Registrant’s annual report on form
10-K
filed March 31, 2009
|
||
10.4 | Loan Agreement and Secured Promissory Note between Coosa Nursing ADK, LLC, and Metro City Bank in the original amount of $7,500,000 dated September 30, 2010 |
Incorporated by reference to Exhibits 10.1 and 10.2 of the Registrant’s Form
8-K
filed October 6, 2010
|
||
10.5 | Mt. Kenn Property Holdings, LLC Deed to Secure Debt, Assignment of Rents and Security Agreement dated April 29, 2011 |
Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form
8-K
filed May 5, 2011
|
||
10.6 | CP Property Holdings, LLC Loan Agreement dated May 27, 2011 |
Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form
8-K
filed June 6, 2011
|
||
10.7 | Form of Promissory Note, issued by Mount Trace Nursing ADK, LLC |
Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K
filed June 16, 2011
|
||
10.8 | Amendment, dated June 22, 2011, between Hearth & Home of Ohio, Inc. and Christopher F. Brogdon |
Incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form
8-K
filed June 28, 2011
|
||
10.9 | Guaranty, dated May 26, 2011, made by Christopher F. Brogdon |
Incorporated by reference to Exhibit 10.34 to the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2011
|
Exhibit
No. |
Description
|
Method of Filing
|
||
10.10 | Guaranty, dated May 26, 2011, made by Connie B. Brogdon |
Incorporated by reference to Exhibit 10.35 to the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2011
|
||
10.11 | Commercial Guaranty, dated May 25, 2011,made by Christopher F. Brogdon |
Incorporated by reference to Exhibit 10.39 to the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2011
|
||
10.12 | Commercial Guaranty, dated May 25, 2011, made by Connie B. Brogdon |
Incorporated by reference to Exhibit 10.35 to the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2011
|
||
10.13 | Loan Agreement, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the SBA Loan #47671350-10 |
Incorporated by reference to Exhibit 10.42 to the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2011
|
||
10.14 | Term Note, dated July 27, 2011, made by Erin Property Holdings, LLC in favor of Bank of Atlanta, with respect to the USDA Loan |
Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended June 30, 2011
|
||
10.15 | Note, dated July 27, 2011, made by Erin Property Holdings, LLC, in favor of Bank of Atlanta, with respect to the SBA Loan |
Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.16 | Term Loan Agreement, dated July 27, 2011, among Erin Property Holdings, LLC, Erin Nursing, LLC, AdCare Health Systems, Inc. and Bank of Atlanta, with respect to the USDA Loan |
Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.17 | Loan Agreement, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the SBA Loan |
Incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.18 | Deed to Secure Debt and Security Agreement, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the USDA Loan |
Incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.19 | Deed to Secure Debt and Security Agreement, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the SBA Loan |
Incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.20 | Assignment of Leases and Rents, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the USDA Loan |
Incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.21 | Assignment of Leases and Rents, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the SBA Loan |
Incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.22 | Indemnity Agreement, Regarding Hazardous Materials, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the USDA Loan |
Incorporated by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
Exhibit
No. |
Description
|
Method of Filing
|
||
10.23 | Indemnity Agreement, Regarding Hazardous Materials, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the USDA Loan |
Incorporated by reference to Exhibit 10.10 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.24 | Security Agreement, dated July 27, 2011, between Erin Property Holdings, LLC, Erin Nursing, LLC and Bank of Atlanta, with respect to the USDA Loan |
Incorporated by reference to Exhibit 10.11 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.25 | Security Agreement, dated July 27, 2011, between Erin Property Holdings, LLC, Erin Nursing, LLC and Bank of Atlanta, with respect to the SBA Loan |
Incorporated by reference to Exhibit 10.12 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.26 | Guaranty, dated July 27, 2011, made by Erin Nursing, LLC, with respect to the USDA Loan |
Incorporated by reference to Exhibit 10.13 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.27 | Guaranty, dated July 27, 2011, made by AdCare Health Systems, Inc., with respect to the USDA Loan |
Incorporated by reference to Exhibit 10.14 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.28 | Unconditional Guaranty Business and Industry Guarantee Loan Program, dated July 27, 2011, made by Erin Nursing, LLC, with respect to the USDA Loan |
Incorporated by reference to Exhibit 10.15 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.29 | Unconditional Guarantee Business and Industry Guarantee Loan Program, dated July 27, 2011, made by AdCare Health Systems, Inc., with respect to the USDA Loan |
Incorporated by reference to Exhibit 10.16 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.30 | Unconditional Guarantee, dated July 27, 2011, made by Erin Nursing, LLC, with respect to the SBA Loan |
Incorporated by reference to Exhibit 10.17 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.31 | Unconditional Guarantee, dated July 27, 2011, made by AdCare Health Systems, Inc., with respect to the SBA Loan |
Incorporated by reference to Exhibit 10.18 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.32 | Escrow Agreement, dated July 27, 2011, between Erin Property Holdings, LLC, Bank of Atlanta, and Bank of Atlanta as Escrow Agent, with respect to the USDA Loan and the SBA Loan |
Incorporated by reference to Exhibit 10.19 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.33 | Loan Agreement, dated July 27, 2011, between Erin Property Holdings, LLC and Bank of Atlanta, with respect to the SBA Loan #47671350-10 |
Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form
10-Q
for the Quarter ended June 30, 2011
|
||
10.34 | Loan Agreement, dated September 6, 2011, by and between CP Property Holdings, LLC; CP Nursing, LLC; and Economic Development Corporation of Fulton County |
Incorporated by reference to Exhibit 10.43 to the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2011
|
Exhibit
No. |
Description
|
Method of Filing
|
||
10.57 | Guaranty Agreement, dated as of June 1, 2010, entered into by AdCare Health Systems, Inc. to and for the benefit of Bank of Oklahoma, N.A. |
Incorporated by reference to Exhibit 10.159 to the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2011
|
||
10.60 | Loan Agreement, dated as of April 12, 2012, between the City of Springfield, Ohio and Eaglewood Property Holdings, LLC |
Incorporated by reference to Exhibit 10.18 of the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2012
|
||
10.61 | Guaranty Agreement, dated as of April 12, 2012, made and entered into by AdCare Health Systems, Inc., to and for the benefit of BOKF, NA dba Bank of Oklahoma |
Incorporated by reference to Exhibit 10.19 of the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2012
|
||
10.62 | Land Use Restriction Agreement, dated as of April 12, 2012, by and between BOKF, NA dba Bank of Oklahoma and Eaglewood Property Holdings, LLC |
Incorporated by reference to Exhibit 10.20 of the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2012
|
||
10.63 | Open-End Mortgage, Assignment of Leases and Security Agreement, dated April 12, 2012, from Eaglewood Property Holdings, LLC to BOKF, NA dba Bank of Oklahoma |
Incorporated by reference to Exhibit 10.21 of the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2012
|
||
10.64 | Form of Securities Purchase Agreement, dated as of June 28, 2012, between AdCare Health Systems, Inc. and the Buyers signatory thereto |
Incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on
Form 8-K
filed July 5, 2012
|
||
10.65 | Bond Purchase Agreement, dated April 10, 2012, among Lawson Financial Corporation, The City of Springfield, Ohio and Eaglewood Property Holdings, LLC |
Incorporated by reference to Exhibit 10.40 of the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2012
|
||
10.67 | Amendment entered into as of July 26, 2012, by and between Christopher F. Brogdon and Hearth & Home of Ohio, Inc. |
Incorporated by reference to Exhibit 10.47 of the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2012
|
||
10.68 | Sublease Agreement, dated December 1, 2012, between ADK Georgia, LLC and Jeff Co. Nursing, LLC |
Incorporated by reference to Exhibit 10.245 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
10.69 | Secured Loan Agreement, dated December 28, 2012, by and among Keybank National Association and the subsidiaries of AdCare Health Systems, Inc. named therein |
Incorporated by reference to Exhibit 10.263 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
10.70* | Consulting Agreement, dated December 31, 2012, between Christopher Brogdon and AdCare Health Systems, Inc. |
Incorporated by reference to Exhibit 10.279 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
10.71 | Guaranty Indemnification Agreement, dated December 31, 2012, between AdCare Health Systems, Inc. and Christopher Brogdon |
Incorporated by reference to Exhibit 10.280 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
10.72 | Guaranty Indemnification Agreement, dated December 31, 2012, between AdCare Health Systems, Inc. and Christopher Brogdon |
Incorporated by reference to Exhibit 10.281 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
Exhibit
No. |
Description
|
Method of Filing
|
||
10.73 | Assignment of Rents, dated December 31, 2012, made and executed between Northwest Property Holdings, LLC and First Commercial Bank |
Incorporated by reference to Exhibit 10.282 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
10.74 | Mortgage, dated December 31, 2012, made and executed between Northwest Property Holdings, LLC and First Commercial Bank |
Incorporated by reference to Exhibit 10.283 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
10.75 | Promissory Note, dated December 31, 2012, issued by Northwest Property Holdings, LLC in favor of First Commercial Bank in the amount of $1,501,500 |
Incorporated by reference to Exhibit 10.284 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
10.76 | Commercial Security Agreement, dated December 31, 2012, made and executed between Northwest Property Holdings, LLC and First Commercial Bank |
Incorporated by reference to Exhibit 10.285 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
10.77 | Commercial Security Agreement, dated December 31, 2012, made and executed between NW 61st Nursing, LLC and First Commercial Bank |
Incorporated by reference to Exhibit 10.286 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
10.78 | Commercial Guaranty, dated December 31, 2012, between AdCare Health Systems, Inc. and First Commercial Bank |
Incorporated by reference to Exhibit 10.287 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
10.79 | Commercial Guaranty, dated December 31, 2012, between Northwest Property Holdings, LLC and First Commercial Bank |
Incorporated by reference to Exhibit 10.288 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
10.80 | Sublease Agreement, effective June 30, 2013, by and between ADK Georgia, LLC and Tybee NH, LLC |
Incorporated by reference to Exhibit 10.24 of the Registrant’s Quarterly Report on
Form 10-Q
for the three months ended March 31, 2013
|
||
10.81 | Sublease Agreement, effective June 30, 2013, by and between ADK Georgia, LLC and Tybee NH, LLC |
Incorporated by reference to Exhibit 10.25 of the Registrant’s Quarterly Report on
Form 10-Q
for the three months ended March 31, 2013
|
||
10.82 | Loan and Security Agreement, dated September 27, 2013, by and between QC Property Holdings, LLC and Housing & Healthcare Funding, LLC |
Incorporated by reference to Exhibit 10.30 of the Registrant’s Quarterly Report on
Form 10-Q
for the three months ended September 30, 2013
|
||
10.83 | Promissory Note, dated September 27, 2013, issued by QC Property Holdings, LLC to Housing & Healthcare Funding, LLC in the amount of $5,000,000 |
Incorporated by reference to Exhibit 10.31 of the Registrant’s Quarterly Report on
Form 10-Q
for the three months ended September 30, 2013
|
||
10.84 | Mortgage, Security Agreement Assignment of Leases and Rents and Fixture Filing, dated September 27, 2013, by QC Property Holdings, LLC to and for the benefit of Housing & Healthcare Funding, LLC |
Incorporated by reference to Exhibit 10.32 of the Registrant’s Quarterly Report on
Form 10-Q
for the three months ended September 30, 2013
|
Exhibit
No. |
Description
|
Method of Filing
|
||
10.118 | First Amendment to Lease Agreement, dated March 20, 2015, by and between Georgetown HC&R Property Holdings, LLC and Blue Ridge in Georgetown, LLC |
Incorporated by reference to Exhibit 10.409 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2014
|
||
10.119 | Lease Agreement, dated February 27, 2015 by and between Sumter Valley Property Holdings, LLC and Blue Ridge of Sumter LLC |
Incorporated by reference to Exhibit 10.410 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2014
|
||
10.120 | First Lease Amendment to Lease Agreement, dated March 20, 2015, by and between Sumter Valley Property Holdings, LLC and Blue Ridge of Sumter, LLC |
Incorporated by reference to Exhibit 10.411 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2014
|
||
10.121 | Lease Agreement dated February 27, 2015 by and between Mountain Trace Nursing ADK, LLC and Blue Ridge on the Mountain LLC |
Incorporated by reference to Exhibit 10.412 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2014
|
||
10.122 | First Amendment to Lease Agreement, dated March 20, 2015 by and between Mountain Trace Nursing ADK,LLC and Blue Ridge on the Mountain , LLC |
Incorporated by reference to Exhibit 10.413 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2014
|
||
10.123 | Sublease Agreement, dated July 1, 2014 by and between ADK Georgia, LLC, and C.R. of Thomasville, LLC |
Incorporated by reference to Exhibit 10.414 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2014
|
||
10.124 | Lease Agreement, dated September 22, 2014 by and between Coosa Nursing ADK, LLC, and C.R. of Coosa Valley, LLC |
Incorporated by reference to Exhibit 10.415 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2014
|
||
10.125 | Lease Agreement, dated September 22, 2014 by and between Attalla Nursing ADK, LLC and C.R. of Attalla, LLC |
Incorporated by reference to Exhibit 10.416 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2014
|
||
10.126 | Sublease Agreement, dated February 18, 2015 by and between CP Nursing, LLC and C.R. of College Park, LLC |
Incorporated by reference to Exhibit 10.417 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2014
|
||
10.127 | Amended and Restated Promissory Note for exit fees (Cumberland), dated April 3, 2015, by and among AdCare Health Systems, Inc. and KeyBank National Association |
Incorporated by reference to Exhibit 10.25 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2015
|
||
10.128 | Amended and Restated Promissory Note for exit fees (Northridge), dated April 3, 2015, by and among AdCare Health Systems, Inc. and KeyBank National Association |
Incorporated by reference to Exhibit 10.26 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2015
|
||
10.129 | Amended and Restated Promissory Note for exit fees (River Valley), dated April 3, 2015, by and among AdCare Health Systems, Inc. and KeyBank National Association |
Incorporated by reference to Exhibit 10.27 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2015
|
||
10.130 | Amended and Restated Promissory Note for exit fees (Sumter Valley), dated April 3, 2015, by and among AdCare Health Systems, Inc. and KeyBank National Association |
Incorporated by reference to Exhibit 10.28 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2015
|
Exhibit
No. |
Description
|
Method of Filing
|
||
10.131 | Promissory Note for exit fees (Stone County), dated April 3, 2015, by and among AdCare Health Systems, Inc. and KeyBank National Association |
Incorporated by reference to Exhibit 10.29 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2015
|
||
10.132 | Sublease Agreement, dated April 1, 2015, by and between ADK Georgia, LLC and C.R. of Lagrange, LLC |
Incorporated by reference to Exhibit 99.10 of the Registrant’s Current Report on Form
8-K
filed on April 7, 2015
|
||
10.133 | Sublease Agreement, dated May 1, 2015 by and between NW 61st Nursing, LLC and Southwest LTC-NW OKC, LLC |
Incorporated by reference to Exhibit 10.83 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2015
|
||
10.134 | Sublease Agreement, dated May 1, 2015 by and between QC Nursing, LLC and Southwest LTC-Quail Creek, LLC |
Incorporated by reference to Exhibit 10.84 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2015
|
||
10.136 | Second Amendment to Lease Agreement, dated May 31, 2015 by and between Mountain Trace Nursing ADK,LLC and Blue Ridge on the Mountain, LLC |
Incorporated by reference to Exhibit 10.7 of the Registrant’s Current Report on Form
8-K
filed on June 5, 2015
|
||
10.137 | Sublease Agreement, dated July 1, 2015 by and between 2014 HUD Master Tenant, LLC and C.R. of Glenvue, LLC |
Incorporated by reference to Exhibit 99.2 of the Registrant’s Current Report on Form
8-K
filed on July 7, 2015
|
||
10.141 | Sublease Agreement, dated August 1, 2015, by and between AdCare Health Systems, Inc. and CC SNF, LLC. |
Incorporated by reference to Exhibit 99.2 of the Registrant’s Current Report on Form
8-K
filed on August 5, 2015
|
||
10.142 | Sublease Agreement, dated August 1, 2015, by and between Eaglewood Village, LLC and EW ALF, LLC. |
Incorporated by reference to Exhibit 99.3 of the Registrant’s Current Report on Form
8-K
filed on August 5, 2015
|
||
10.143 | Sublease Agreement, dated August 1, 2015, by and between RMC HUD Master Tenant, LLC and HC SNF, LLC. |
Incorporated by reference to Exhibit 99.4 of the Registrant’s Current Report on Form
8-K
filed on August 5, 2015
|
||
10.144 | Sublease Agreement, dated August 1, 2015, by and between RMC HUD Master Tenant, LLC and PV SNF, LLC. |
Incorporated by reference to Exhibit 99.5 of the Registrant’s Current Report on Form
8-K
filed on August 5, 2015
|
||
10.145 | Sublease Agreement, dated August 1, 2015, by and between 2014 HUD Master Tenant, LLC and EW SNF, LLC. |
Incorporated by reference to Exhibit 99.6 of the Registrant’s Current Report on Form
8-K
filed on August 5, 2015
|
||
10.146 | Lease Inducement Fee Agreement, dated August 1, 2015, by and between the AdCare Health Systems, Inc. and PWW Healthcare, LLC, PV SNF, LLC, HC SNF, LLC, EW SNF, LLC, and EW ALF, LLC. |
Incorporated by reference to Exhibit 99.7 of the Registrant’s Current Report on Form
8-K
filed on August 5, 2015
|
||
10.147 | Promissory Note, dated July 17, 2015, by and between Highlands Arkansas Holdings, LLC and AdCare Health Systems, Inc. |
Incorporated by reference to Exhibit 10.101 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended June 30, 2015
|
Exhibit
No. |
Description
|
Method of Filing
|
||
10.148 | Letter Agreement to the Equitable Adjustments, dated July 17, 2015, by and between AdCare Health Systems, Inc. and Highlands Arkansas Holdings, LLC. |
Incorporated by reference to Exhibit 10.102 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended June 30, 2015
|
||
10.149 | Promissory Note, dated August 1, 2015, by and between PWW Healthcare, LLC, PV SNF, LLC, HC SNF, LLC, CC SNF, LLC EW SNF, LLC, and EW ALF, LLC, and AdCare Health Systems, Inc. |
Incorporated by reference to Exhibit 10.103 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended June 30, 2015
|
||
10.150 | Sublease Agreement, dated July 20, 2015, by and between ADK Bonterra/Parkview, LLC and 2801 Felton Avenue, L.P., and 460 Auburn Avenue, L.P. |
Incorporated by reference to Exhibit 10.104 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended June 30, 2015
|
||
10.152 | Second Amendment to Lease, dated as of August 14, 2015, between William M. Foster and ADK Georgia, LLC |
Incorporated by reference to Exhibit 99.1 of the Registrant’s Current Report on Form
8-K
filed on August 18, 2015
|
||
10.153 | Lease Guaranty made by AdCare Health Systems, Inc. for the benefit of William M. Foster, effective August 14, 2015 |
Incorporated by reference to Exhibit 99.2 of the Registrant’s Current Report on Form
8-K
filed on August 18, 2015
|
||
10.154 | Sublease Agreement, dated October 1, 2015, by and between KB HUD Master Tenant 2014, LLC, and C.R. of Autumn Breeze, LLC |
Incorporated by reference to Exhibit 99.2 of the Registrant’s Current Report on Form
8-K
filed on October 6, 2015
|
||
10.155 | Second Amendment to Lease Agreement, dated September 14, 2015, by and between Coosa Nursing ADK, LLC and C.R. of Coosa Valley, LLC |
Incorporated by reference to Exhibit 10.124 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended September 30, 2015
|
||
10.156 | Second Amendment to Lease Agreement, dated September 14, 2015, by and between Attalla Nursing ADK, LLC and C.R. of Attalla, LLC |
Incorporated by reference to Exhibit 10.125 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended September 30, 2015
|
||
10.157 | First Amendment to Lease Agreement, dated August 14, 2015, by and between 2014 HUD Master Tenant, LLC and C.R. of Glenvue, LLC |
Incorporated by reference to Exhibit 10.126 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended September 30, 2015
|
||
10.158 | Second Amendment to Lease Agreement, dated September 24, 2015, by and between Georgetown HC&R Property Holdings, LLC and Blue Ridge in Georgetown, LLC |
Incorporated by reference to Exhibit 10.127 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended September 30, 2015
|
||
10.159 | First Amendment to Sublease Agreement, dated September 10, 2015, by and between ADK Georgia, LLC and LC SNF, LLC |
Incorporated by reference to Exhibit 10.128 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended September 30, 2015
|
||
10.160 | First Amendment to Sublease Agreement, dated September 14, 2015, by and between ADK Georgia, LLC and C.R. of LaGrange, LLC |
Incorporated by reference to Exhibit 10.129 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended September 30, 2015
|
Exhibit
No. |
Description
|
Method of Filing
|
||
10.171 | Security Agreement, dated July 6, 2016, by and among ADK Georgia, LLC, OS Tybee, LLC, SB Tybee, LLC and JV Jeffersonville, LLC |
Incorporated by reference to Exhibit 10.6 of the AdCare Health Systems, Inc. Quarterly Report on
Form 10-Q
for the three and six months ended June 30, 2016
|
||
10.172 | Promissory Note, dated September 30, 2016, issued by JS Highland Holdings LLC in favor of AdCare Health Systems, Inc. |
Incorporated by reference to Exhibit 99.1 of the AdCare Health Systems, Inc. Current Report on Form
8-K
filed on October 11, 2016
|
||
10.173 | Guaranty Agreement, dated September 30, 2016, executed by Joseph Schwartz and Roselyn Schwartz in favor of AdCare Health Systems, Inc. |
Incorporated by reference to Exhibit 99.2 of the AdCare Health Systems, Inc. Current Report on Form
8-K
filed on October 11, 2016
|
||
10.174 | Second Amendment to Second Amended and Restated Note, dated November 10, 2016, by and between Christopher F. Brogdon and AdCare Health Systems, Inc. |
Incorporated by reference to Exhibit 10.7 of the AdCare Health Systems, Inc. Quarterly Report on
Form 10-Q
for the three and nine months ended September 30, 2016
|
||
10.175 | First Amendment to Promissory Note, dated September 19, 2016, by and between QC Property Holdings, LLC, and Congressional Bank. |
Incorporated by reference to Exhibit 10.8 of the AdCare Health Systems, Inc. Quarterly Report on
Form 10-Q
for the three and nine months ended September 30, 2016
|
||
10.176 | Mortgage Refinance Agreement, insured by HUD by and between AdCare Health Systems, Inc. in favor of KeyBank National Association |
Incorporated by reference to item 1.01 of the AdCare Health Systems, Inc. Current Report on Form
8-K
filed December 19, 2016.
|
||
10.177 | Lease Agreement, dated March 22, 2017, by and between Meadowood Property Holdings, LLC and CRM of Meadowood, LLC |
Incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2017
|
||
10.178 | Amendment to Promissory Note, dated April 7, 2017, issued by OS Tybee, LLC, SB Tybee, LLC and JV Jeffersonville, LLC, in favor of AdCare Health Systems, Inc. |
Incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2017
|
||
10.179 | Loan Agreement, dated May 1, 2017, between Meadowood Property Holdings, LLC and the Exchange Bank of Alabama in the original amount of $4.1 million |
Incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2017
|
||
10.180 | Guaranty Agreement, dated April 6, 2017, executed by AdCare Health Systems, Inc., in favor of Congressional Bank, a Maryland chartered commercial bank |
Incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2017
|
||
10.182 | Amendment to Loan Agreement Issued September 27, 2013, dated August 10, 2017, by and between QC Property Holdings, LLC and the Congressional Bank, a Maryland chartered commercial bank |
Incorporated by reference to Exhibit 10.6 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended June 30, 2017
|
||
10.183 | Amendment to Loan Agreement Issued December 31, 2012, dated July 31, 2017, by and between Northwest Property Holdings, LLC and the First Commercial Bank |
Incorporated by reference to Exhibit 10.7 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended June 30, 2017
|
Exhibit
No. |
Description
|
Method of Filing
|
||
10.209 | Sublease Agreement, dated as of November 30, 2018, by and between Eaglewood Village, LLC and Springfield Clark ALF, Inc. |
Incorporated by reference to Exhibit 10.209 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2018
|
||
10.210 | Sublease Agreement, dated as of November 30, 2018, by and between 2014 HUD Master Tenant, LLC and Springfield SNF, Inc. |
Incorporated by reference to Exhibit 10.210 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2018
|
||
10.211 | Guaranty, dated as of December 1, 2018, by and between Regional Health Properties, Inc. and Miami COV SNF, Inc., Greenfield SNF, Inc., Sidney SNF, Inc., Springfield Clark ALF Inc. and Springfield SNF, Inc. |
Incorporated by reference to Exhibit 10.211 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2018
|
||
10.212 | Forbearance Agreement, dated as of January 11, 2019, by and between Covington Realty, LLC and Regional Health Properties, Inc. |
Incorporated by reference to Exhibit 10.212 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2018
|
||
10.213 | Lease Termination Agreement, dated as of January 15, 2019, by and between Bonterra/Parkview Inc. and ADK Bonterra/Parkview, LLC. |
Incorporated by reference to Exhibit 10.213 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2018
|
||
10.214 | Second Amendment to Sublease Agreement, dated as of February 15, 2019, by and between ADK Georgia, LLC. and 3460 Powder Springs Road Associates, L.P. |
Incorporated by reference to Exhibit 10.214 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2018
|
||
10.215 | Second Amendment to Sublease Agreement, dated as of February 15, 2019, by and between ADK Georgia, LLC. and 3223 Falligant Avenue Associates, L.P. |
Incorporated by reference to Exhibit 10.215 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2018
|
||
10.216 | Lease Agreement, dated as of February 28, 2019, by and between Mountain Trace Nursing ADK, LLC and Vero Health X, LLC. |
Incorporated by reference to Exhibit 10.216 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2018
|
||
10.217 | Third Amendment to Sublease Agreement, dated as of March 13, 2019, by and between ADK Georgia, LLC. and 3460 Powder Springs Road Associates, L.P. |
Incorporated by reference to Exhibit 10.217 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2018
|
||
10.218 | Third Amendment to Sublease Agreement, dated as of February 15, 2019, by and between ADK Georgia, LLC. and 3223 Falligant Avenue Associates, L.P. |
Incorporated by reference to Exhibit 10.218 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2018
|
||
10.219 | Settlement Agreement and Release, dated as of March 13, 2019, by and between Regional Health Properties, Inc. and Chapter 7 Trustee. |
Incorporated by reference to Exhibit 10.219 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2018
|
Exhibit
No. |
Description
|
Method of Filing
|
||
10.246 | Management Consulting Services Agreement, dated as of January 1, 2021 by and between Vero Health Management, LLC, and Tara Operator, LLC. |
Incorporated by reference to Exhibit 99.2 of the Registrant’s Current Report on Form
8-K
filed January 7, 2021
|
||
10.247 | Agreement Regarding Leases, dated as of On December 1, 2020, by and between Regional Health Properties, Inc., and 3223 Falligant Avenue Associates, L.P., 3460 Powder Springs Road Associates, L.P., Wellington Healthcare Services II, L.P. and Mansell Court Associates LLC | Filed herewith | ||
10.248* | Offer Letter, dated as of September 4, 2020 by and between Benjamin A. Waites and Regional Health Property, Inc. | Filed herewith | ||
21.1 | Subsidiaries of the Registrant | Filed herewith | ||
23.1 | Consent of Cherry Bekaert LLP | Filed herewith | ||
31.1 | Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act | Filed herewith | ||
31.2 | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act | Filed herewith | ||
32.1 | Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith | ||
32.2 | Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith | ||
101.INS | XBRL Instance Document | Filed herewith | ||
101.SCH | XBRL Taxonomy Extension Schema | Filed herewith | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | Filed herewith | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase | Filed herewith | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase | Filed herewith | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | Filed herewith |
* |
Identifies a management contract or compensatory plan or arrangement.
|
Regional Health Properties, Inc. | ||
by: | /s/ BRENT MORRISON | |
Brent Morrison | ||
Chief Executive Officer and President
|
||
March 29, 2021
|
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Georgia
|
81-5166048
|
|
(State or other jurisdiction of
incorporation) |
(I.R.S. Employer
Identification Number)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
Common Stock, no par value
|
RHE
|
NYSE American
|
||
10.875% Series A Cumulative Redeemable
Preferred Stock, no par value
|
RHE-PA
|
NYSE American
|
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer
|
☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☐ |
Item 1. |
Financial Statements
|
March 31,
2021
|
December 31,
2020
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Property and equipment, net
|
$ | 51,961 | $ | 52,533 | ||||
Cash
|
6,196 | 4,186 | ||||||
Restricted cash
|
2,991 | 3,306 | ||||||
Accounts receivable, net of allowance of $72 and $1,381
|
1,851 | 2,100 | ||||||
Prepaid expenses and other
|
854 | 328 | ||||||
Notes receivable
|
424 | 444 | ||||||
Intangible assets—bed licenses
|
2,471 | 2,471 | ||||||
Intangible assets—lease rights, net
|
152 | 158 | ||||||
Right-of-use
|
32,811 | 33,740 | ||||||
Goodwill
|
1,585 | 1,585 | ||||||
Lease deposits and other deposits
|
514 | 514 | ||||||
Straight-line rent receivable
|
7,158 | 6,660 | ||||||
|
|
|
|
|||||
Total assets
|
$ | 108,968 | $ | 108,025 | ||||
|
|
|
|
|||||
LIABILITIES AND EQUITY
|
||||||||
Senior debt, net
|
$ | 46,974 | $ | 47,275 | ||||
Bonds, net
|
6,354 | 6,342 | ||||||
Other debt, net
|
1,105 | 822 | ||||||
Accounts payable
|
3,815 | 3,008 | ||||||
Accrued expenses
|
3,178 | 2,225 | ||||||
Operating lease obligation
|
34,978 | 35,884 | ||||||
Other liabilities
|
1,439 | 1,365 | ||||||
|
|
|
|
|||||
Total liabilities
|
97,843 | 96,921 | ||||||
|
|
|
|
|||||
Commitments and contingencies (Note 12)
|
||||||||
Stockholders’ equity:
|
||||||||
Common stock and additional
paid-in
capital, no par value; 55,000 shares authorized; 1,688 issued and outstanding at March 31, 2021 and December 31, 2020
|
62,041 | 62,041 | ||||||
Preferred stock, no par value; 5,000 shares authorized; 2,812 shares issued and outstanding, redemption amount $70,288 at March 31, 2021 and December 31, 2020
|
62,423 | 62,423 | ||||||
Accumulated deficit
|
(113,339 | ) | (113,360 | ) | ||||
|
|
|
|
|||||
Total stockholders’ equity
|
11,125 | 11,104 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders’ equity
|
$ | 108,968 | $ | 108,025 | ||||
|
|
|
|
Three Months
Ended March 31, |
||||||||
2021
|
2020
|
|||||||
Revenues:
|
||||||||
Patient care revenues
|
$ | 2,690 | $ | — | ||||
Rental revenues
|
4,081 | 4,297 | ||||||
Management fees
|
248 | 244 | ||||||
Other revenues
|
62 | 7 | ||||||
|
|
|
|
|||||
Total revenues
|
7,081 | 4,548 | ||||||
|
|
|
|
|||||
Expenses:
|
||||||||
Patient care expense
|
2,203 | — | ||||||
Facility rent expense
|
1,640 | 1,640 | ||||||
Cost of management fees
|
165 | 151 | ||||||
Depreciation and amortization
|
650 | 776 | ||||||
General and administrative expense
|
1,036 | 877 | ||||||
Doubtful accounts expense (recovery)
|
40 | (2 | ) | |||||
Other operating expenses
|
232 | 224 | ||||||
|
|
|
|
|||||
Total expenses
|
5,966 | 3,666 | ||||||
|
|
|
|
|||||
Income from operations
|
1,115 | 882 | ||||||
|
|
|
|
|||||
Other expense :
|
||||||||
Interest expense, net
|
687 | 715 | ||||||
Other expense, net
|
394 | 144 | ||||||
|
|
|
|
|||||
Total other expense, net
|
1,081 | 859 | ||||||
|
|
|
|
|||||
Income from continuing operations before income taxes
|
34 | 23 | ||||||
|
|
|
|
|||||
Income from continuing operations
|
34 | 23 | ||||||
Loss from discontinued operations, net of tax
|
(13 | ) | (37 | ) | ||||
|
|
|
|
|||||
Net Income (loss)
|
21 | (14 | ) | |||||
Preferred stock dividends—undeclared
|
(2,249 | ) | (2,249 | ) | ||||
|
|
|
|
|||||
Net Loss attributable to Regional Health Properties, Inc. common stockholders
|
$ | (2,228 | ) | $ | (2,263 | ) | ||
|
|
|
|
|||||
Net Loss per share of common stock attributable to Regional Health Properties, Inc.
|
||||||||
Basic and diluted:
|
||||||||
Continuing operations
|
$ | (1.31 | ) | $ | (1.32 | ) | ||
Discontinued operations
|
(0.01 | ) | (0.02 | ) | ||||
|
|
|
|
|||||
$ | (1.32 | ) | $ | (1.34 | ) | |||
|
|
|
|
|||||
Weighted average shares of common stock outstanding:
|
||||||||
Basic and diluted
|
1,688 | 1,688 |
For the Three Months ended March 31, 2021
|
Shares of
Common
Stock
|
Shares of
Preferred
Stock
|
Common
Stock and
Additional
Paid-in
Capital
|
Preferred
Stock
|
Accumulated
Deficit
|
Total
|
||||||||||||||||||
Balances, December 31, 2020
|
1,688 | 2,812 | $ | 62,041 | $ | 62,423 | $ | (113,360 | ) | $ | 11,104 | |||||||||||||
Net income
|
— | — | — | — | 21 | 21 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, March 31, 2021
|
1,688 | 2,812 | $ | 62,041 | $ | 62,423 | $ | (113,339 | ) | $ | 11,125 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months ended March 31, 2020
|
Shares of
Common
Stock
|
Shares of
Preferred
Stock
|
Common
Stock and
Additional
Paid-in
Capital
|
Preferred
Stock
|
Accumulated
Deficit
|
Total
|
||||||||||||||||||
Balances, December 31, 2019
|
1,688 | 2,812 | $ | 61,992 | $ | 62,423 | $ | (112,672 | ) | $ | 11,743 | |||||||||||||
Stock-based compensation
|
— | — | 12 | — | — | 12 | ||||||||||||||||||
Net loss
|
— | — | — | — | (14 | ) | (14 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, March 31, 2020
|
1,688 | 2,812 | $ | 62,004 | $ | 62,423 | $ | (112,686 | ) | $ | 11,741 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended March 31, |
||||||||
2021
|
2020
|
|||||||
Cash flows from operating activities:
|
||||||||
Net Income (loss)
|
$ | 21 | $ | (14 | ) | |||
Loss from discontinued operations, net of tax
|
13 | 37 | ||||||
|
|
|
|
|||||
Income from continuing operations
|
34 | 23 | ||||||
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
650 | 776 | ||||||
Stock-based compensation expense
|
— | 12 | ||||||
Rent expense in excess of cash paid
|
24 | 55 | ||||||
Rent revenue in excess of cash received
|
(901 | ) | (283 | ) | ||||
Amortization of deferred financing costs, debt discounts and premiums
|
33 | 33 | ||||||
Bad debt expense (recovery)
|
40 | (2 | ) | |||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
583 | (443 | ) | |||||
Prepaid expenses and other assets
|
128 | (57 | ) | |||||
Accounts payable and accrued expenses
|
1,740 | (7 | ) | |||||
Other liabilities
|
77 | 163 | ||||||
|
|
|
|
|||||
Net cash provided by operating activities—continuing operations
|
2,408 | 270 | ||||||
Net cash used in operating activities—discontinued operations
|
(58 | ) | (405 | ) | ||||
|
|
|
|
|||||
Net cash provided by (used in) operating activities
|
2,350 | (135 | ) | |||||
|
|
|
|
|||||
Cash flows from investing activities:
|
||||||||
Purchase of property and equipment
|
(33 | ) | (157 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities—continuing operations
|
(33 | ) | (157 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities
|
(33 | ) | (157 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities:
|
||||||||
Repayment on notes payable
|
(622 | ) | (436 | ) | ||||
|
|
|
|
|||||
Net cash used in financing activities—continuing operations
|
(622 | ) | (436 | ) | ||||
|
|
|
|
|||||
Net cash used in financing activities
|
(622 | ) | (436 | ) | ||||
|
|
|
|
|||||
Net change in cash and restricted cash
|
1,695 | (728 | ) | |||||
Cash and restricted cash, beginning
|
7,492 | 8,038 | ||||||
|
|
|
|
|||||
Cash and restricted cash, ending
|
$ | 9,187 | $ | 7,310 | ||||
|
|
|
|
|||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash interest paid
|
$ | 741 | $ | 689 | ||||
Supplemental disclosure of
non-cash
activities:
|
||||||||
Vendor-financed insurance
|
$ | 636 | $ | 27 |
(Amounts in 000’s)
|
March 31,
2021
|
December 31,
2020
|
||||||
Gross receivables
|
||||||||
Real Estate Services
(a)
|
$ | 1,146 | $ | 3,481 | ||||
Healthcare Services
|
777 | — | ||||||
|
|
|
|
|||||
Sub Total
|
1,923 | 3,481 | ||||||
Allowance
|
||||||||
Real Estate Services
(a)
|
(32 | ) | (1,381 | ) | ||||
Healthcare Services
|
(40 | ) | ||||||
|
|
|
|
|||||
Sub Total
|
(72 | ) | (1,381 | ) | ||||
|
|
|
|
|||||
Accounts receivable, net of allowance
|
$ | 1,851 | $ | 2,100 | ||||
|
|
|
|
(a)
|
See Note 6—
Leases
|
(Amounts in 000’s)
|
March 31,
2021
|
December 31,
2020
|
||||||
Accounts payable
|
||||||||
Real Estate Services
|
$ | 3,399 | $ | 3,008 | ||||
Healthcare Services
|
416 | — | ||||||
|
|
|
|
|||||
Total Accounts payable
|
$ | 3,815 | $ | 3,008 | ||||
|
|
|
|
Three Months Ended
March 31, |
||||||||
(Amounts in 000’s)
|
2021
|
2020
|
||||||
Rental revenues
|
$ | 133 | $ | 126 | ||||
Other operating expenses
|
$ | 133 | $ | 126 |
March 31,
|
||||||||
(Share amounts in 000’s)
|
2021
|
2020
|
||||||
Stock options
|
13 | 15 | ||||||
Warrants—employee
|
49 | 49 | ||||||
Warrants—non employee
|
9 | 9 | ||||||
|
|
|
|
|||||
Total anti-dilutive securities
|
71 | 73 | ||||||
|
|
|
|
(Amounts in 000’s)
|
March 31,
2021
|
December 31,
2020
|
||||||
Cash
|
$ | 6,196 | $ | 4,186 | ||||
Restricted cash:
|
||||||||
Cash collateral
|
153 | 124 | ||||||
HUD and other replacement reserves
|
1,731 | 1,675 | ||||||
Escrow deposits
|
790 | 1,190 | ||||||
Restricted investments for debt obligations
|
317 | 317 | ||||||
|
|
|
|
|||||
Total restricted cash
|
2,991 | 3,306 | ||||||
|
|
|
|
|||||
Total cash and restricted cash
|
$ | 9,187 | $ | 7,492 | ||||
|
|
|
|
(Amounts in 000’s)
|
Estimated
Useful
Lives
(Years) |
March 31,
2021
|
December 31,
2020
|
|||||||||
Buildings and improvements
|
5-40
|
$ | 65,672 | $ | 65,629 | |||||||
Equipment and computer related
|
2-10
|
5,056 | 5,139 | |||||||||
Land
(1)
|
— | 2,776 | 2,776 | |||||||||
Construction in process
|
— | — | 69 | |||||||||
|
|
|
|
|||||||||
73,504 | 73,613 | |||||||||||
Less: accumulated depreciation and amortization
|
(21,543 | ) | (21,080 | ) | ||||||||
|
|
|
|
|||||||||
Property and equipment, net
|
$ | 51,961 | $ | 52,533 | ||||||||
|
|
|
|
(1)
|
Includes $0.1 million of land improvements with an average estimated useful remaining life of approximately 8 years.
|
Three Months Ended
March 31, |
||||||||
(Amounts in 000’s)
|
2021
|
2020
|
||||||
Depreciation
|
$ | 540 | $ | 550 | ||||
Amortization
|
110 | 226 | ||||||
|
|
|
|
|||||
Total depreciation and amortization expense
|
$ | 650 | $ | 776 | ||||
|
|
|
|
(Amounts in 000’s)
|
Bed licenses
(included
in property
and
equipment)
(a)
|
Bed Licenses—
Separable
(b)
|
Lease
Rights
|
Total
|
Goodwill
(b)
|
|||||||||||||||
Balances, December 31, 2020
|
||||||||||||||||||||
Gross
|
$ | 14,276 | $ | 2,471 | $ | 206 | $ | 16,953 | $ | 1,585 | ||||||||||
Accumulated amortization
|
(3,754 | ) | — | (48 | ) | (3,802 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net carrying amount
|
$ | 10,522 | $ | 2,471 | $ | 158 | $ | 13,151 | $ | 1,585 | ||||||||||
Amortization expense
|
(104 | ) | — | (6 | ) | (110 | ) | — | ||||||||||||
Balances, March 31, 2021
|
||||||||||||||||||||
Gross
|
14,276 | 2,471 | 206 | 16,953 | 1,585 | |||||||||||||||
Accumulated amortization
|
(3,858 | ) | — | (54 | ) | (3,912 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net carrying amount
|
$ | 10,418 | $ | 2,471 | $ | 152 | $ | 13,041 | $ | 1,585 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(a)
|
Non-separable
bed licenses are included in property and equipment as is the related accumulated amortization expense (see Note 4—
Property and Equipment
|
(b)
|
The Company does not amortize indefinite-lived intangibles, which consist of separable bed licenses and goodwill.
|
Three Months Ended
March 31, |
||||||||
(Amounts in 000’s)
|
2021
|
2020
|
||||||
Bed licenses
|
$ | 104 | $ | 104 | ||||
Lease rights
|
6 | 122 | ||||||
|
|
|
|
|||||
Total amortization expense
|
$ | 110 | $ | 226 | ||||
|
|
|
|
(Amounts in 000’s)
|
Bed
Licenses
|
Lease
Rights
|
||||||
2021
(a)
|
$ | 310 | $ | 18 | ||||
2022
|
414 | 24 | ||||||
2023
|
414 | 23 | ||||||
2024
|
414 | 18 | ||||||
2025
|
414 | 18 | ||||||
Thereafter
|
8,452 | 51 | ||||||
|
|
|
|
|||||
Total expected amortization expense
|
$ | 10,418 | $ | 152 | ||||
|
|
|
|
(a)
|
Estimated amortization expense for the year ending December 31, 2021, includes only amortization to be recorded after March 31, 2021.
|
(Amounts in 000’s)
|
Future
rental
payments
|
Accretion of
lease liability
(1)
|
Operating
lease
obligation
|
|||||||||
2021
(2)
|
$ | 4,981 | $ | (205 | ) | $ | 4,776 | |||||
2022
|
6,752 | (713 | ) | 6,039 | ||||||||
2023
|
6,851 | (1,164 | ) | 5,687 | ||||||||
2024
|
6,958 | (1,602 | ) | 5,356 | ||||||||
2025
|
7,095 | (2,051 | ) | 5,044 | ||||||||
Thereafter
|
12,736 | (4,660 | ) | 8,076 | ||||||||
|
|
|
|
|
|
|||||||
Total
|
$ | 45,373 | $ | (10,395 | ) | $ | 34,978 | |||||
|
|
|
|
|
|
(1)
|
Weighted average discount rate 7.98%.
|
(2)
|
Estimated minimum lease payments for the year ending December 31, 2021 include only payments to be paid after March 31, 2021.
|
(Amounts
in 000’s)
|
||||
2021
(a)
|
$ | 9,337 | ||
2022
|
13,519 | |||
2023
|
15,477 | |||
2024
|
15,299 | |||
2025
|
13,702 | |||
Thereafter
|
33,555 | |||
|
|
|||
Total
|
$ | 100,889 | ||
|
|
(a)
|
Estimated minimum lease receivables for the year ending December 31, 2021 include only payments scheduled to be received after March 31, 2021.
|
(Amounts in 000’s)
|
March 31,
2021
|
December 31,
2020
|
||||||
Accrued employee benefits and payroll-related
|
$ | 449 | $ | 218 | ||||
Real estate and other taxes
(1)
|
1,022 | 491 | ||||||
Self-insured reserve
(2)
|
183 | 183 | ||||||
Accrued interest
|
334 | 424 | ||||||
Unearned rental revenue
|
42 | 41 | ||||||
Other accrued expenses
|
1,148 | 868 | ||||||
|
|
|
|
|||||
Total accrued expenses
|
$ | 3,178 | $ | 2,225 | ||||
|
|
|
|
(1)
|
Includes approximately $0.7 million of bed taxes in arrears related to the Wellington Transition.
|
(2)
|
The Company self-insures against professional and general liability cases incurred prior to the Transition and uses a third party administrator and outside counsel to manage and defend the claims (see Note 12—
Commitments and Contingencies)
|
(Amounts in 000’s)
|
March 31,
2021
|
December 31,
2020
|
||||||
Senior debt—guaranteed by HUD
|
$ | 30,875 | $ | 31,104 | ||||
Senior debt—guaranteed by USDA
|
13,096 | 13,139 | ||||||
Senior debt—guaranteed by SBA
|
616 | 628 | ||||||
Senior debt—bonds
|
6,500 | 6,500 | ||||||
Senior debt—other mortgage indebtedness
|
3,593 | 3,631 | ||||||
Other debt
|
1,105 | 822 | ||||||
|
|
|
|
|||||
Subtotal
|
55,785 | 55,824 | ||||||
Deferred financing costs
|
(1,221 | ) | (1,250 | ) | ||||
Unamortized discount on bonds
|
(131 | ) | (135 | ) | ||||
|
|
|
|
|||||
Notes payable and other debt
|
$ | 54,433 | $ | 54,439 | ||||
|
|
|
|
(Amounts in 000’s)
|
||||||||||||||||||||||
Facility
|
Lender
|
Maturity
|
Interest Rate
(a)
|
March 31,
2021
|
December 31,
2020
|
|||||||||||||||||
Senior debt—guaranteed by HUD
(b)
|
||||||||||||||||||||||
The Pavilion Care Center
|
Orix Real Estate Capital | 12/01/2027 | Fixed | 4.16 | % | $ | 956 | $ | 986 | |||||||||||||
Hearth and Care of Greenfield
|
Orix Real Estate Capital | 08/01/2038 | Fixed | 4.20 | % | 1,902 | 1,920 | |||||||||||||||
Woodland Manor
|
Midland State Bank | 10/01/2044 | Fixed | 3.75 | % | 4,935 | 4,968 | |||||||||||||||
Glenvue
|
Midland State Bank | 10/01/2044 | Fixed | 3.75 | % | 7,662 | 7,712 | |||||||||||||||
Autumn Breeze
|
KeyBank | 01/01/2045 | Fixed | 3.65 | % | 6,660 | 6,705 | |||||||||||||||
Georgetown
|
Midland State Bank | 10/01/2046 | Fixed | 2.98 | % | 3,372 | 3,394 | |||||||||||||||
Sumter Valley
|
KeyBank | 01/01/2047 | Fixed | 3.70 | % | 5,388 | 5,419 | |||||||||||||||
|
|
|
|
|||||||||||||||||||
Total
|
$ | 30,875 | $ | 31,104 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||
Senior debt—guaranteed by USDA
(c)
|
||||||||||||||||||||||
Coosa
(d)
|
Metro City | 09/30/2035 | Prime + 1.50 | % | 5.50 | % | 5,149 | 5,149 | ||||||||||||||
Mountain Trace
(e)
|
Community B&T | 02/24/2037 | Prime + 1.75 | % | 5.75 | % | 3,954 | 3,972 | ||||||||||||||
Southland
(f)
|
Cadence Bank, NA | 07/27/2036 | Prime + 1.50 | % | 6.00 | % | 3,993 | 4,018 | ||||||||||||||
|
|
|
|
|||||||||||||||||||
Total
|
$ | 13,096 | $ | 13,139 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||
Senior debt—guaranteed by SBA
(g)
|
||||||||||||||||||||||
Southland
|
Cadence Bank, NA | 07/27/2036 | Prime + 2.25 | % | 5.50 | % | 616 | 628 | ||||||||||||||
|
|
|
|
|||||||||||||||||||
Total
|
$ | 616 | $ | 628 | ||||||||||||||||||
|
|
|
|
(a)
|
Represents cash interest rates as of March 31, 2021 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs, which range from 0.08% to 0.53% per annum.
|
(b)
|
For the seven skilled nursing facilities, the Company has term loans insured 100% by HUD with financial institutions. The loans are secured by, among other things, an assignment of all rents paid under any existing or future leases and rental agreements with respect to the underlying facility. The loans contain customary events of default, including fraud or material misrepresentations or material omission, the commencement of a forfeiture action or proceeding, failure to make required payments, and failure to perform or comply
|
with certain agreements. Upon the occurrence of certain events of default, the lenders may, after receiving the prior written approval of HUD, terminate the loans and all amounts under the loans will become immediately due and payable. In connection with entering into each loan, the Company entered into a healthcare regulatory agreement and a promissory note, each containing customary terms and conditions. Pursuant to the CARES Act, up to three months of debt service payments for six of the credit facilities can be made from our restricted cash reserves. |
(c)
|
For the three skilled nursing facilities, the Company has term loans insured 70% to 80% by the USDA with financial institutions. The loans have an annual renewal fee for the USDA guarantee of 0.25% of the guaranteed portion. The loans have prepayment penalties of 1% through 2021, capped at 1% for the remainder of the first 10 years of the term and 0% thereafter except Coosa (as defined below) which is 1% thereafter.
|
(d)
|
Pursuant to the CARES Act, the monthly principal and interest payments due May 1, 2020 through September 1, 2020 for the loan for that certain
122-bed
skilled nursing facility commonly known as Coosa, located in Glencoe, Alabama, were deferred (a part of the “USDA Payment Program”). Monthly payments which commenced on October 1, 2020 are being applied to current interest, then deferred interest until the deferred interest is paid in full. Upon expiration of the deferral period, the payments will be
re-amortized
over the remaining term of the loan.
|
(e)
|
Pursuant to the CARES Act, the monthly principal and interest payments due May 1, 2020 through August 1, 2020 for the Mountain Trace Facility loan were deferred. Monthly payments which commenced on September 1, 2020 are being applied to current interest, then deferred interest until the deferred interest is paid in full, payments will be
re-amortized
over the extended term of the loan.
|
(f)
|
Pursuant to the CARES Act, the monthly principal and interest payments due May 1, 2020 through October 1, 2020 for the loan for that certain
126-bed
skilled nursing facility commonly known as Southland, located in Dublin, Georgia, were deferred as a part of the USDA Payment Program. Monthly payments recommenced on November 1, 2020 with payments through February 2021 being applied to principal and interest. Monthly payments which commenced on March 1, 2021 are being applied to current interest, then deferred interest until the deferred interest is paid in full, payments will be
re-amortized
over the extended term of the loan.
|
(g)
|
For the one skilled nursing facility, commonly known as Southland, the Company has a term loan with a financial institution, which is 75% insured by the SBA. The SBA funded two monthly debt payments during the three months ended March 31, 2021 and six payments commencing on March 1, 2020 and ending on August 1, 2020.
|
(Amounts in 000’s)
|
||||||||||||||||||||||||
Facility
|
Lender
|
Maturity
|
Interest Rate
(a)
|
March 31,
2021
|
December 31,
2020
|
|||||||||||||||||||
Senior debt—bonds
|
||||||||||||||||||||||||
Eaglewood Bonds Series A
|
City of Springfield, Ohio | 05/01/2042 | Fixed | 7.65 | % | $ | 6,379 | $ | 6,379 | |||||||||||||||
Eaglewood Bonds Series B
|
City of Springfield, Ohio | 05/01/2021 | Fixed | 8.50 | % | 121 | 121 | |||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total
|
$ | 6,500 | $ | 6,500 | ||||||||||||||||||||
|
|
|
|
(a)
|
Represents cash interest rates as of March 31, 2021. The rates exclude amortization of deferred financing of approximately 0.15% per annum.
|
(Amounts in 000’s)
|
||||||||||||||||||||||||
Facility
|
Lender
|
Maturity
|
Interest Rate
(a)
|
March 31,
2021
|
December 31,
2020
|
|||||||||||||||||||
Senior debt—other mortgage indebtedness
|
|
|||||||||||||||||||||||
Meadowood
|
|
Exchange Bank of
Alabama |
|
05/01/2022 | Fixed | 4.50 | % | 3,593 | 3,631 | |||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total
|
$ | 3,593 | $ | 3,631 | ||||||||||||||||||||
|
|
|
|
(a)
|
Represents cash interest rates as of March 31, 2021 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs of 0.30% per annum.
|
(Amounts in 000’s)
|
||||||||||||||||||||
Lender
|
Maturity
|
Interest Rate
|
March 31,
2021
|
December 31,
2020
|
||||||||||||||||
Other debt
|
||||||||||||||||||||
First Insurance Funding
|
03/01/2021 | Fixed | 2.38 | % | $ | — | $ | 94 | ||||||||||||
Servarus Financial Inc.
(a)
|
11/1/2021 | Fixed | 5.18 | % | 381 | — | ||||||||||||||
Key Bank
|
08/25/2021 | Fixed | 0.00 | % | 495 | 495 | ||||||||||||||
FountainHead Commercial Capital—PPP Loan
|
04/16/2022 | Fixed | 1.00 | % | 229 | 229 | ||||||||||||||
Marlin Covington Finance
|
03/11/2021 | Fixed | 20.17 | % | — | 4 | ||||||||||||||
|
|
|
|
|||||||||||||||||
Total
|
$ | 1,105 | $ | 822 | ||||||||||||||||
|
|
|
|
(a)
|
Insurance financing for professional and general liability and property insurance for the Tara Facility in our Healthcare Services segment.
|
For the twelve months ended March 31,
|
(Amounts in
000’s) |
|||
2022
|
$ | 2,667 | ||
2023
|
5,211 | |||
2024
|
1,778 | |||
2025
|
1,867 | |||
2026
|
1,959 | |||
Thereafter
|
42,303 | |||
|
|
|||
Subtotal
|
$ | 55,785 | ||
Less: unamortized discounts
|
(131 | ) | ||
Less: deferred financing costs, net
|
(1,221 | ) | ||
|
|
|||
Total notes and other debt
|
$ | 54,433 | ||
|
|
Three Months Ended
March 31, |
||||||||
(Amounts in 000’s)
|
2021
|
2020
|
||||||
Cost of services
|
$ | 13 | $ | 37 | ||||
|
|
|
|
|||||
Net loss
|
$ | (13 | ) | $ | (37 | ) | ||
|
|
|
|
Three Months Ended
March 31, |
||||||||
(Amounts in 000’s)
|
2021
|
2020
|
||||||
Non-employee
compensation:
|
||||||||
Board restricted stock
|
$ | — | $ | 12 | ||||
|
|
|
|
|||||
Total stock-based compensation expense
|
$ | — | $ | 12 | ||||
|
|
|
|
Number of
Shares (000’s)
|
Weighted
Avg.
Grant Date
Fair Value
|
|||||||
Unvested, December 31, 2020
|
14 | $ | 3.60 | |||||
Vested
|
(14 | ) | $ | 3.60 | ||||
|
|
|
|
|||||
Unvested, March 31, 2021
|
— | $ | — | |||||
|
|
|
|
• |
On January 29, 2020, the Company executed a settlement, in compromise of a complaint filed in the Circuit Court of Pulaski County, in the State of Arkansas, by a former patient at one of our facilities, against the Company on May 16, 2017. The plaintiff alleged medical negligence and injury. The settlement was paid in 2020, in exchange for dismissal of the case with prejudice, in the total amount of $40,000.
|
Three Months Ended March 31,
|
||||||||||||||||
2021
|
2021
|
2021
|
2020
|
|||||||||||||
(Amounts in 000’s)
|
Real Estate
Services |
Healthcare
Services |
Total
|
Real Estate
Services |
||||||||||||
Revenues:
|
||||||||||||||||
Patient care revenues
|
$ | — | $ | 2,690 | $ | 2,690 | $ | — | ||||||||
Rental revenues
|
4,081 | — | 4,081 | 4,297 | ||||||||||||
Management fees
|
248 | — | 248 | 244 | ||||||||||||
Other revenues
|
62 | — | 62 | 7 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues
|
4,391 | 2,690 | 7,081 | 4,548 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Expenses:
|
||||||||||||||||
Patient care expense
|
— | 2,203 | 2,203 | — | ||||||||||||
Facility rent expense
|
1,342 | 298 | 1,640 | 1,640 | ||||||||||||
Cost of management fees
|
165 | — | 165 | 151 | ||||||||||||
Depreciation and amortization
|
648 | 2 | 650 | 776 | ||||||||||||
General and administrative expense
|
899 | 137 | 1,036 | 877 | ||||||||||||
Doubtful accounts expense (recovery)
|
— | 40 | 40 | (2 | ) | |||||||||||
Other operating expenses
|
232 | — | 232 | 224 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total expenses
|
3,286 | 2,680 | 5,966 | 3,666 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from operations
|
1,105 | 10 | 1,115 | 882 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other expense :
|
||||||||||||||||
Interest expense, net
|
681 | 6 | 687 | 715 | ||||||||||||
Other expense, net
|
394 | — | 394 | 144 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other expense, net
|
1,075 | 6 | 1,081 | 859 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from continuing operations before income taxes
|
30 | 4 | 34 | 23 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from continuing operations
|
30 | 4 | 34 | 23 | ||||||||||||
Loss from discontinued operations, net of tax
|
(13 | ) | — | (13 | ) | (37 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Income (loss)
|
$ | 17 | $ | 4 | $ | 21 | $ | (14 | ) | |||||||
|
|
|
|
|
|
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Owned
|
Leased
|
Leased Operating
|
Managed for Third
Parties
|
Total
|
||||||||||||||||||||||||||||||||||||
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units
|
|||||||||||||||||||||||||||||||
State
|
||||||||||||||||||||||||||||||||||||||||
Alabama
|
2 | 230 | — | — | — | — | — | — | 2 | 230 | ||||||||||||||||||||||||||||||
Georgia
|
3 | 395 | 7 | 750 | 1 | 134 | — | — | 11 | 1,279 | ||||||||||||||||||||||||||||||
North Carolina
|
1 | 106 | — | — | — | — | — | — | 1 | 106 | ||||||||||||||||||||||||||||||
Ohio
|
4 | 291 | 1 | 99 | — | — | 3 | 332 | 8 | 722 | ||||||||||||||||||||||||||||||
South Carolina
|
2 | 180 | — | — | — | — | — | — | 2 | 180 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total
|
12 | 1,202 | 8 | 849 | 1 | 134 | 3 | 332 | 24 | 2,517 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Facility Type
|
||||||||||||||||||||||||||||||||||||||||
Skilled Nursing
|
10 | 1,016 | 8 | 849 | 1 | 134 | 2 | 249 | 21 | 2,248 | ||||||||||||||||||||||||||||||
Assisted Living
|
2 | 186 | — | — | — | — | — | — | 2 | 186 | ||||||||||||||||||||||||||||||
Independent Living
|
— | — | — | — | — | — | 1 | 83 | 1 | 83 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total
|
12 | 1,202 | 8 | 849 | 1 | 134 | 3 | 332 | 24 | 2,517 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operator Affiliation
|
Number of
Facilities
(1)
|
Beds / Units
|
||||||
C.R. Management
|
6 | 689 | ||||||
Aspire
|
5 | 390 | ||||||
Peach Health Group
|
3 | 266 | ||||||
Symmetry Healthcare
|
2 | 180 | ||||||
Beacon Health Management
|
2 | 212 | ||||||
Vero Health Management
|
1 | 106 | ||||||
Empire
(2)
|
1 | 208 | ||||||
|
|
|
|
|||||
Subtotal
|
20 | 2,051 | ||||||
Regional Health Managed
|
3 | 332 | ||||||
Regional Health Operated
(3)
|
1 | 134 | ||||||
|
|
|
|
|||||
Total
|
24 | 2,517 | ||||||
|
|
|
|
(1)
|
Represents the number of facilities leased or subleased to separate tenants, of which each tenant is an affiliate of the entity named in the table above. For a more detailed discussion, see Note 6
—Leases
—Leases
Portfolio of Healthcare Investments
|
(2)
|
Effective January 1, the Company entered into the PS Sublease with an affiliate of Empire for the Powder Springs Facility. See Note 6—Leases to our consolidated financial statements in Part I, Item 1, “Financial Statements (unaudited)” in this Quarterly Report.
|
(3)
|
Effective January 1, 2021, Regional began operating the Tara Facility and entered into the Vero Management Agreement with Vero Health under which Vero Health provides management consulting services for the Tara Facility.
|
For the Twelve Months Ended
|
||||||||||||||||
Operating Metric
(1)
|
June 30,
2020
|
September 30,
2020
|
December 31,
2020
|
March 31,
2021
|
||||||||||||
Occupancy (%)
|
75.1 | % | 73.2 | % | 67.3 | % | 68.6 | % |
(3)
|
Excludes three managed facilities in Ohio.
|
|
Licensed Beds
|
Annual Lease Revenue
(1)
|
||||||||||||||||||
Number of
Facilities
|
Amount
|
Percent
(%) |
Amount
‘000’s
|
Percent
(%) |
||||||||||||||||
2023
|
1 | 62 | 3.0 | % | $ | 263 | 1.9 | % | ||||||||||||
2024
|
1 | 126 | 6.1 | % | 965 | 6.8 | % | |||||||||||||
2025
|
2 | 269 | 13.1 | % | 2,219 | 15.6 | % | |||||||||||||
2026
|
— | — | 0.0 | % | — | 0.0 | % | |||||||||||||
2027
|
7 | 750 | 36.6 | % | 5,241 | 36.9 | % | |||||||||||||
2028
|
4 | 328 | 16.0 | % | 2,352 | 16.6 | % | |||||||||||||
2029
|
1 | 106 | 5.2 | % | 538 | 3.8 | % | |||||||||||||
Thereafter
|
4 | 410 | 20.0 | % | 2,603 | 18.4 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total
|
20 | 2,051 | 100.0 | % | $ | 14,181 | 100.0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
(1)
|
Straight-line rent.
|
Three Months Ended March 31,
|
||||||||||||
(Amounts in 000’s)
|
2021
|
2020
|
Percent
Change (*)
|
|||||||||
Revenues:
|
||||||||||||
Patient care revenues
|
$ | 2,690 | $ | — | NM | |||||||
Rental revenues
|
4,081 | 4,297 | (5.0 | )% | ||||||||
Management fees
|
248 | 244 | 1.6 | % | ||||||||
Other revenues
|
62 | 7 | NM | |||||||||
|
|
|
|
|||||||||
Total revenues
|
7,081 | 4,548 | 55.7 | % | ||||||||
|
|
|
|
|||||||||
Expenses:
|
||||||||||||
Patient care expense
|
2,203 | — | NM | |||||||||
Facility rent expense
|
1,640 | 1,640 | 0.0 | % | ||||||||
Cost of management fees
|
165 | 151 | 9.3 | % | ||||||||
Depreciation and amortization
|
650 | 776 | (16.2 | )% | ||||||||
General and administrative expenses
|
1,036 | 877 | 18.1 | % | ||||||||
Doubtful accounts expense (recovery)
|
40 | (2 | ) | NM | ||||||||
Other operating expenses
|
232 | 224 | 3.6 | % | ||||||||
|
|
|
|
|||||||||
Total expenses
|
5,966 | 3,666 | 62.7 | % | ||||||||
|
|
|
|
|||||||||
Income from operations
|
1,115 | 882 | 26.4 | % | ||||||||
|
|
|
|
|||||||||
Other expense :
|
||||||||||||
Interest expense, net
|
687 | 715 | (3.9 | )% | ||||||||
Other expense, net
|
394 | 144 | 173.6 | % | ||||||||
|
|
|
|
|||||||||
Total other expense, net
|
1,081 | 859 | 25.8 | % | ||||||||
|
|
|
|
|||||||||
Income from continuing operations before income taxes
|
34 | 23 | 47.8 | % | ||||||||
|
|
|
|
|||||||||
Income from continuing operations
|
34 | 23 | 47.8 | % | ||||||||
Loss from discontinued operations, net of tax
|
(13 | ) | (37 | ) | (64.9 | )% | ||||||
|
|
|
|
|||||||||
Net Income (loss)
|
$ | 21 | $ | (14 | ) | NM | ||||||
|
|
|
|
* |
Not meaningful (“NM”).
|
* |
Not meaningful (“NM”).
|
Three Months
Ended March 31, |
||||||||
(Amounts in 000’s)
|
2021
|
2020
|
||||||
Net cash provided by operating activities—continuing operations
|
$ | 2,408 | $ | 270 | ||||
Net cash used in operating activities—discontinued operations
|
(58 | ) | (405 | ) | ||||
Net cash used in investing activities—continuing operations
|
(33 | ) | (157 | ) | ||||
Net cash used in financing activities—continuing operations
|
(622 | ) | (436 | ) | ||||
|
|
|
|
|||||
Net change in cash and restricted cash
|
1,695 | (728 | ) | |||||
Cash and restricted cash at beginning of period
|
7,492 | 8,038 | ||||||
|
|
|
|
|||||
Cash and restricted cash, ending
|
$ | 9,187 | $ | 7,310 | ||||
|
|
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Item 4.
|
Controls and Procedures.
|
Item 1.
|
Legal Proceedings.
|
Item 1A.
|
Risk Factors.
|
• |
increase our vulnerability to general adverse economic and industry conditions or a downturn in our business;
|
• |
require us to dedicate a substantial portion of cash flows from operations to interest and principal payments on outstanding debt, thereby limiting the availability of cash flow for dividends and other general corporate purposes;
|
• |
require us to maintain certain debt coverage and other financial ratios at specified levels, thereby reducing our financial flexibility;
|
• |
make it more difficult for us to satisfy our financial obligations;
|
• |
expose us to increases in interest rates for our variable rate debt;
|
• |
limit our ability to borrow additional funds on favorable terms, or at all, for working capital, debt service requirements, expansion of our business or other general corporate purposes;
|
• |
limit our ability to refinance all or a portion of our indebtedness on or before maturity on the same or more favorable terms, or at all;
|
• |
limit our flexibility in planning for, or reacting to, changes in our business and our industry;
|
• |
limit our ability to make acquisitions or take advantage of business opportunities as they arise;
|
• |
place us at a competitive disadvantage compared with our competitors that have less debt; and
|
• |
limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
Item 3.
|
Defaults upon Senior Securities.
|
Item 4.
|
Mine Safety Disclosures.
|
Item 5.
|
Other Information.
|
Item 6.
|
Exhibits.
|
• |
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
|
• |
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
|
• |
may apply standards of materiality in a way that is different from what may be viewed as material to investors; and
|
• |
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
|
Exhibit No.
|
Description
|
Method of Filing
|
||
3.1 | Amended and Restated Articles of Incorporation of Regional Health Properties, Inc., effective September 21, 2017 |
Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
3.2 | Certificate of Merger, effective September 29, 2017 |
Incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
3.3 | Articles of Amendment to Amended and Restated Articles of Incorporation of Regional Health Properties, Inc., effective December 31, 2018 |
Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form
8-K12
filed on December 28, 2018
|
||
3.4 | Amended and Restated Bylaws of Regional Health Properties, Inc., effective September 21, 2017 |
Incorporated by reference to Exhibit 3.3 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
4.1 | Form of Common Stock Certificate of Regional Health Properties, Inc. |
Incorporated by reference to Exhibit 4.2 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
4.2 | Description of Regional Health Properties, Inc. Capital Stock |
Incorporated by reference to Exhibit 4.2 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2018
|
||
4.3* | AdCare Health Systems, Inc. 2011 Stock Incentive Plan |
Incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form
S-8
(Registration
No. 333-131542)
filed October 27, 2011
|
||
4.4* | AdCare Health Systems, Inc. 2020 Stock Incentive Plan |
Incorporated by reference to Exhibit 99.1 of the Registrant’s Current Report on Form
8-K
filed December 17, 2020
|
||
4.5* |
Form of
Non-Statutory
Stock Option Agreement (2011 Equity Plan)
|
Incorporated by reference to Exhibit 4.4 of the Registrant’s Registration Statement on Form
S-8
(Registration
No. 333-131542)
filed October 27, 2011
|
||
4.6* | Form of Incentive Stock Option Agreement (2011 Equity Plan) |
Incorporated by reference to Exhibit 4.5 of the Registrant’s Registration Statement on Form
S-8
(Registration
No. 333-131542)
filed October 27, 2011
|
||
4.7* | Form of Restricted Common Stock Agreement—Non Employee Director (2020 Equity Plan) | Filed herewith | ||
4.8* | Form of Restricted Common Stock Agreement—Employee (2020 Equity Plan) | Filed herewith | ||
4.9 | Form of Warrant to Purchase Common Stock of the Company (2011 Equity Plan) |
Incorporated by reference to Exhibit 4.3 to the Registrant’s Registration Statement on Form
S-3
(File
No. 333-175541)
|
Exhibit No.
|
Description
|
Method of Filing
|
||
4.10 | Warrant to Purchase 50,000 Shares of Common Stock, dated December 28, 2012, issued by AdCare Health Systems, Inc. to Strome Alpha Offshore Ltd. |
Incorporated by reference to Exhibit 4.21 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
4.11 | Form of Warrant granted to management to Purchase Shares of AdCare Health Systems, Inc. dated November 20, 2007 |
Incorporated by reference to Exhibit 10.23.2 of the Registrant’s Annual Report on Form
10-KSB
as amended March 31, 2008
|
||
4.12 | Lease, dated as of January 1, 2021, by and between ADK Georgia, LLC and PS Operator, LLC. |
Incorporated by reference to Exhibit 10.245 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2020
|
||
4.13 | Management Consulting Services Agreement, dated as of January 1, 2021 by and between Vero Health Management, LLC, and Tara Operator, LLC. |
Incorporated by reference to Exhibit 10.246 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2020
|
||
4.14 | Agreement Regarding Leases, dated as of On December 1, 2020, by and between Regional Health Properties, Inc., and 3223 Falligant Avenue Associates, L.P., 3460 Powder Springs Road Associates, L.P., Wellington Healthcare Services II, L.P. and Mansell Court Associates LLC. |
Incorporated by reference to Exhibit 10.247 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2020
|
||
31.1 |
Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act
|
Filed herewith | ||
31.2 |
Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act
|
Filed herewith | ||
32.1 |
Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act
|
Filed herewith | ||
32.2 |
Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act
|
Filed herewith | ||
101 |
The following financial information from the Registrant’s Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020; (ii) Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (unaudited); (iii) Consolidated Statements of Stockholders’ Equity (Deficit) for the three months ended March 31, 2021 and 2020 (unaudited); (iv) Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited); and (v) the Notes to Consolidated Financial Statements (unaudited).
|
Filed herewith
|
* |
Identifies a management contract or compensatory plan or arrangement
|
REGIONAL HEALTH PROPERTIES, INC.
|
||||||
(Registrant)
|
||||||
Date: |
May 14, 2021
|
/s/ Brent Morrison
|
||||
Brent Morrison | ||||||
Chief Executive Officer and Director (Principal Executive Officer) | ||||||
Date: |
May 14, 2021
|
/s/ Benjamin A. Waites
|
||||
Benjamin A. Waites | ||||||
Chief Financial Officer and Vice President (Principal Financial and Accounting Officer) |
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Georgia
|
81-5166048
|
|
(State or other jurisdiction of
incorporation) |
(I.R.S. Employer
Identification Number)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
Common Stock, no par value
10.875% Series A Cumulative Redeemable
Preferred Stock, no par value
|
RHE
RHE-PA
|
NYSE American
NYSE American
|
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer
|
☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☐ |
Page
Number |
||||||
Part I.
|
||||||
Item 1.
|
Financial Statements (unaudited) |
A-3-3
|
||||
Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 |
A-3-3
|
|||||
A-3-4
|
||||||
A-3-5
|
||||||
Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 |
A-3-6
|
|||||
Notes to Consolidated Financial Statements |
A-3-7
|
|||||
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
A-3-33
|
||||
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk |
A-3-45
|
||||
Item 4.
|
Controls and Procedures |
A-3-45
|
||||
Part II.
|
||||||
Item 1.
|
Legal Proceedings |
A-3-46
|
||||
Item 1A.
|
Risk Factors |
A-3-46
|
||||
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds |
A-3-49
|
||||
Item 3.
|
Defaults upon Senior Securities |
A-3-49
|
||||
Item 4.
|
Mine Safety Disclosures |
A-3-50
|
||||
Item 5.
|
Other Information |
A-3-50
|
||||
Item 6.
|
Exhibits |
A-3-50
|
||||
A-3-53
|
Item 1. |
Financial Statements
|
June 30,
2021
|
December 31,
2020
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Property and equipment, net
|
$ | 51,355 | $ | 52,533 | ||||
Cash
|
5,633 | 4,186 | ||||||
Restricted cash
|
2,966 | 3,306 | ||||||
Accounts receivable, net of allowance of $109 and $1,381
|
1,593 | 2,100 | ||||||
Prepaid expenses and other
|
990 | 328 | ||||||
Notes receivable
|
404 | 444 | ||||||
Intangible assets—bed licenses
|
2,471 | 2,471 | ||||||
Intangible assets—lease rights, net
|
146 | 158 | ||||||
Right-of-use
|
31,863 | 33,740 | ||||||
Goodwill
|
1,585 | 1,585 | ||||||
Lease deposits and other deposits
|
514 | 514 | ||||||
Straight-line rent receivable
|
7,643 | 6,660 | ||||||
|
|
|
|
|||||
Total assets
|
$ | 107,163 | $ | 108,025 | ||||
|
|
|
|
|||||
LIABILITIES AND EQUITY
|
||||||||
Senior debt, net
|
$ | 46,636 | $ | 47,275 | ||||
Bonds, net
|
6,236 | 6,342 | ||||||
Other debt, net
|
1,291 | 822 | ||||||
Accounts payable
|
3,383 | 3,008 | ||||||
Accrued expenses
|
3,320 | 2,225 | ||||||
Operating lease obligation
|
34,040 | 35,884 | ||||||
Other liabilities
|
1,519 | 1,365 | ||||||
|
|
|
|
|||||
Total liabilities
|
96,425 | 96,921 | ||||||
|
|
|
|
|||||
Commitments and contingencies (Note 12)
|
||||||||
Stockholders’ equity:
|
||||||||
Common stock and additional
paid-in
capital, no par value; 55,000 shares authorized; 1,727 and 1,688 issued and outstanding at June 30, 2021 and December 31, 2020, respectively
|
62,157 | 62,041 | ||||||
Preferred stock, no par value; 5,000 shares authorized; 2,812 shares issued and outstanding, redemption amount $70,288 at June 30, 2021 and December 31, 2020
|
62,423 | 62,423 | ||||||
Accumulated deficit
|
(113,842 | ) | (113,360 | ) | ||||
Total stockholders’ equity
|
10,738 | 11,104 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders’ equity
|
$ | 107,163 | $ | 108,025 | ||||
|
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
Revenues:
|
||||||||||||||||
Patient care revenues
|
$ | 2,445 | $ | — | $ | 5,135 | $ | — | ||||||||
Rental revenues
|
3,763 | 4,293 | 7,844 | 8,590 | ||||||||||||
Management fees
|
247 | 244 | 495 | 488 | ||||||||||||
Other revenues
|
13 | 2 | 75 | 9 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues
|
6,468 | 4,539 | 13,549 | 9,087 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Expenses:
|
||||||||||||||||
Patient care expense
|
2,254 | — | 4,457 | — | ||||||||||||
Facility rent expense
|
1,639 | 1,639 | 3,279 | 3,279 | ||||||||||||
Cost of management fees
|
150 | 174 | 315 | 325 | ||||||||||||
Depreciation and amortization
|
652 | 769 | 1,302 | 1,545 | ||||||||||||
General and administrative expense
|
945 | 714 | 1,981 | 1,591 | ||||||||||||
Doubtful accounts expense (recovery)
|
37 | (135 | ) | 77 | (137 | ) | ||||||||||
Other operating expenses
|
243 | 297 | 475 | 521 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total expenses
|
5,920 | 3,458 | 11,886 | 7,124 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from operations
|
548 | 1,081 | 1,663 | 1,963 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other expense (income) :
|
||||||||||||||||
Interest expense, net
|
666 | 684 | 1,353 | 1,399 | ||||||||||||
Other expense (income), net
|
323 | (9 | ) | 717 | 135 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other expense (income), net
|
989 | 675 | 2,070 | 1,534 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
(Loss) income from continuing operations before income taxes
|
(441 | ) | 406 | (407 | ) | 429 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
(Loss) income from continuing operations
|
$ | (441 | ) | $ | 406 | $ | (407 | ) | $ | 429 | ||||||
(Loss) income from discontinued operations, net of tax
|
(62 | ) | 6 | (75 | ) | (31 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net (loss) income
|
(503 | ) | 412 | (482 | ) | 398 | ||||||||||
Preferred stock dividends—undeclared
|
(2,249 | ) | (2,249 | ) | (4,498 | ) | (4,498 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Loss attributable to Regional Health Properties, Inc. common stockholders
|
$ | (2,752 | ) | $ | (1,837 | ) | $ | (4,980 | ) | $ | (4,100 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Net (loss) income per share of common stock attributable to Regional Health Properties, Inc.
|
||||||||||||||||
Basic and diluted:
|
||||||||||||||||
Continuing operations
|
$ | (1.59 | ) | $ | (1.09 | ) | $ | (2.90 | ) | $ | (2.41 | ) | ||||
Discontinued operations
|
(0.03 | ) | 0.00 | (0.04 | ) | (0.02 | ) | |||||||||
$ | (1.62 | ) | $ | (1.09 | ) | $ | (2.94 | ) | $ | (2.43 | ) | |||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average shares of common stock outstanding:
|
||||||||||||||||
Basic and diluted
|
1,697 | 1,688 | 1,692 | 1,688 |
For the Three and Six Months ended June 30, 2021
|
Shares of
Common
Stock
|
Shares of
Preferred
Stock
|
Common
Stock and
Additional
Paid-in
Capital
|
Preferred
Stock
|
Accumulated
Deficit
|
Total
|
||||||||||||||||||
Balances, December 31, 2020
|
1,688 | 2,812 | $ | 62,041 | $ | 62,423 | $ | (113,360 | ) | $ | 11,104 | |||||||||||||
Net income
|
— | — | — | — | 21 | 21 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, March 31, 2021
|
1,688 | 2,812 | $ | 62,041 | $ | 62,423 | $ | (113,339 | ) | $ | 11,125 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Stock-based compensation
|
39 | — | 123 | — | — | 123 | ||||||||||||||||||
Exercise of restricted share awards net settlement option
|
(1 | ) | — | (7 | ) | — | — | (7 | ) | |||||||||||||||
Treasury shares, no par value
|
1 | — | — | — | — | — | ||||||||||||||||||
Net loss
|
— | — | — | — | (503 | ) | (503 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, June 30, 2021
|
1,727 | 2,812 | $ | 62,157 | $ | 62,423 | $ | (113,842 | ) | $ | 10,738 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
For the Three and Six Months ended June 30, 2020
|
Shares of
Common
Stock
|
Shares of
Preferred
Stock
|
Common
Stock and
Additional
Paid-in
Capital
|
Preferred
Stock
|
Accumulated
Deficit
|
Total
|
||||||||||||||||||
Balances, December 31, 2019
|
1,688 | 2,812 | $ | 61,992 | $ | 62,423 | $ | (112,672 | ) | $ | 11,743 | |||||||||||||
Stock-based compensation
|
— | — | 12 | — | — | 12 | ||||||||||||||||||
Net loss
|
— | — | — | — | (14 | ) | (14 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, March 31, 2020
|
1,688 | 2,812 | $ | 62,004 | $ | 62,423 | $ | (112,686 | ) | $ | 11,741 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Stock-based compensation
|
— | — | 12 | — | — | 12 | ||||||||||||||||||
Net income
|
— | — | — | — | 412 | 412 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, June 30, 2020
|
1,688 | 2,812 | $ | 62,016 | $ | 62,423 | $ | (112,274 | ) | $ | 12,165 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
||||||||
2021
|
2020
|
|||||||
Cash flows from operating activities:
|
||||||||
Net (Loss) income
|
$ | (482 | ) | $ | 398 | |||
Loss from discontinued operations, net of tax
|
75 | 31 | ||||||
|
|
|
|
|||||
(Loss) income from continuing operations
|
(407 | ) | 429 | |||||
Adjustments to reconcile net (loss) income from continuing operations to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
1,302 | 1,545 | ||||||
Stock-based compensation expense
|
123 | 24 | ||||||
Rent expense in excess of cash paid
|
34 | 109 | ||||||
Rent revenue in excess of cash received
|
(1,229 | ) | (536 | ) | ||||
Amortization of deferred financing costs, debt discounts and premiums
|
55 | 64 | ||||||
Bad debt expense (recovery)
|
77 | (137 | ) | |||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
633 | (1,078 | ) | |||||
Prepaid expenses and other assets
|
244 | 65 | ||||||
Accounts payable and accrued expenses
|
1,544 | 68 | ||||||
Other liabilities
|
155 | 267 | ||||||
|
|
|
|
|||||
Net cash provided by operating activities—continuing operations
|
2,531 | 820 | ||||||
Net cash used in operating activities—discontinued operations
|
(144 | ) | (904 | ) | ||||
|
|
|
|
|||||
Net cash provided by (used in) operating activities
|
2,387 | (84 | ) | |||||
|
|
|
|
|||||
Cash flows from investing activities:
|
||||||||
Purchase of property and equipment
|
(74 | ) | (157 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities—continuing operations
|
(74 | ) | (157 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities
|
(74 | ) | (157 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities:
|
||||||||
Proceeds from debt issuance
|
— | 229 | ||||||
Repayment on notes payable
|
(1,078 | ) | (733 | ) | ||||
Repayment on bonds payable
|
(121 | ) | (116 | ) | ||||
Repurchase of common stock
|
(7 | ) | — | |||||
|
|
|
|
|||||
Net cash used in financing activities—continuing operations
|
(1,206 | ) | (620 | ) | ||||
|
|
|
|
|||||
Net cash used in financing activities
|
(1,206 | ) | (620 | ) | ||||
|
|
|
|
|||||
Net change in cash and restricted cash
|
1,107 | (861 | ) | |||||
Cash and restricted cash, beginning
|
7,492 | 8,038 | ||||||
|
|
|
|
|||||
Cash and restricted cash, ending
|
$ | 8,599 | $ | 7,177 | ||||
|
|
|
|
|||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash interest paid
|
$ | 1,435 | $ | 1,204 | ||||
Supplemental disclosure of
non-cash
activities:
|
||||||||
Vendor-financed insurance
|
$ | 867 | $ | 339 |
(Amounts in 000’s)
|
June 30,
2021
|
December 31,
2020
|
||||||
Gross receivables
|
||||||||
Real Estate Services
(a)
|
$ | 777 | $ | 3,481 | ||||
Healthcare Services
|
925 | — | ||||||
|
|
|
|
|||||
Sub Total
|
1,702 | 3,481 | ||||||
Allowance
|
||||||||
Real Estate Services
(a)
|
(32 | ) | (1,381 | ) | ||||
Healthcare Services
|
(77 | ) | — | |||||
|
|
|
|
|||||
Sub Total
|
(109 | ) | (1,381 | ) | ||||
|
|
|
|
|||||
Accounts receivable, net of allowance
|
$ | 1,593 | $ | 2,100 | ||||
|
|
|
|
(b)
|
See Note 6—
Leases
|
(Amounts in 000’s)
|
June 30,
2021
|
December 31,
2020
|
||||||
Accounts payable
|
||||||||
Real Estate Services
|
$ | 3,078 | $ | 3,008 | ||||
Healthcare Services
|
305 | — | ||||||
|
|
|
|
|||||
Total Accounts payable
|
$ | 3,383 | $ | 3,008 | ||||
|
|
|
|
Three Months Ended June 30,
|
For the Six Months Ended June 30,
|
|||||||||||||||
(Amounts in 000’s)
|
2021
|
2020
|
2021
|
2020
|
||||||||||||
Rental revenues
|
$ | 98 | $ | 119 | $ | 231 | $ | 245 | ||||||||
Other operating expenses
|
$ | 98 | $ | 119 | $ | 231 | $ | 245 |
June 30,
|
||||||||
(Share amounts in 000’s)
|
2021
|
2020
|
||||||
Stock options
|
13 | 15 | ||||||
Warrants—employee
|
49 | 49 | ||||||
Warrants—non employee
|
9 | 9 | ||||||
Total anti-dilutive securities
|
71 | 73 | ||||||
|
|
|
|
(Amounts in 000’s)
|
June 30,
2021
|
December 31,
2020
|
||||||
Cash
|
$ | 5,633 | $ | 4,186 | ||||
Restricted cash:
|
||||||||
Cash collateral
|
62 | 124 | ||||||
HUD and other replacement reserves
|
1,827 | 1,675 | ||||||
Escrow deposits
|
760 | 1,190 | ||||||
Restricted investments for debt obligations
|
317 | 317 | ||||||
|
|
|
|
|||||
Total restricted cash
|
2,966 | 3,306 | ||||||
|
|
|
|
|||||
Total cash and restricted cash
|
$ | 8,599 | $ | 7,492 | ||||
|
|
|
|
(Amounts in 000’s)
|
Estimated
Useful
Lives
(Years) |
June 30,
2021
|
December 31,
2020
|
|||||||||
Buildings and improvements
|
5-40
|
$ | 65,687 | $ | 65,629 | |||||||
Equipment and computer related
|
2-10
|
5,047 | 5,139 | |||||||||
Land
(1)
|
— | 2,776 | 2,776 | |||||||||
Construction in process
|
— | 5 | 69 | |||||||||
|
|
|
|
|
|
|||||||
73,515 | 73,613 | |||||||||||
Less: accumulated depreciation and amortization
|
(22,160 | ) | (21,080 | ) | ||||||||
|
|
|
|
|||||||||
Property and equipment, net
|
$ | 51,355 | $ | 52,533 | ||||||||
|
|
|
|
(2)
|
Includes $0.1 million of land improvements with an average estimated useful remaining life of approximately 7.4 years.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Amounts in 000’s)
|
2021
|
2020
|
2021
|
2020
|
||||||||||||
Depreciation
|
$ | 543 | $ | 544 | $ | 1,083 | $ | 1,094 | ||||||||
Amortization
|
109 | 225 | 219 | 451 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total depreciation and amortization expense
|
$ | 652 | $ | 769 | $ | 1,302 | $ | 1,545 | ||||||||
|
|
|
|
|
|
|
|
(Amounts in 000’s)
|
Bed licenses
(included
in property
and
equipment)
(a)
|
Bed Licenses—
Separable
(b)
|
Lease
Rights
|
Total
|
Goodwill
(b)
|
|||||||||||||||
Balances, December 31, 2020
|
||||||||||||||||||||
Gross
|
$ | 14,276 | $ | 2,471 | $ | 206 | $ | 16,953 | $ | 1,585 | ||||||||||
Accumulated amortization
|
(3,754 | ) | — | (48 | ) | (3,802 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net carrying amount
|
$ | 10,522 | $ | 2,471 | $ | 158 | $ | 13,151 | $ | 1,585 | ||||||||||
Amortization expense
|
(207 | ) | — | (12 | ) | (219 | ) | — | ||||||||||||
Balances, June 30, 2021
|
||||||||||||||||||||
Gross
|
14,276 | 2,471 | 206 | 16,953 | 1,585 | |||||||||||||||
Accumulated amortization
|
(3,961 | ) | — | (60 | ) | (4,021 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net carrying amount
|
$ | 10,315 | $ | 2,471 | $ | 146 | $ | 12,932 | $ | 1,585 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(c)
|
Non-separable
bed licenses are included in property and equipment as is the related accumulated amortization expense (see Note 4—
Property and Equipment
|
(d)
|
The Company does not amortize indefinite-lived intangibles, which consist of separable bed licenses and goodwill.
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
(Amounts in 000’s)
|
2021
|
2020
|
2021
|
2020
|
||||||||||||
Bed licenses
|
$ | 103 | $ | 103 | $ | 207 | $ | 207 | ||||||||
Lease rights
|
6 | 122 | 12 | 244 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total amortization expense
|
$ | 109 | $ | 225 | $ | 219 | $ | 451 | ||||||||
|
|
|
|
|
|
|
|
(Amounts in 000’s)
|
Bed
Licenses
|
Lease
Rights
|
||||||
2021
(a)
|
$ | 207 | $ | 12 | ||||
2022
|
414 | 24 | ||||||
2023
|
414 | 23 | ||||||
2024
|
414 | 18 | ||||||
2025
|
414 | 18 | ||||||
Thereafter
|
8,452 | 51 | ||||||
|
|
|
|
|||||
Total expected amortization expense
|
$ | 10,315 | $ | 146 | ||||
|
|
|
|
(a)
|
Estimated amortization expense for the year ending December 31, 2021, includes only amortization to be recorded after June 30, 2021.
|
(Amounts in 000’s)
|
Future
rental
payments
|
Accretion of
lease liability
(1)
|
Operating
lease
obligation
|
|||||||||
2021
(2)
|
$ | 3,336 | $ | (106 | ) | $ | 3,230 | |||||
2022
|
6,752 | (591 | ) | 6,161 | ||||||||
2023
|
6,851 | (1,050 | ) | 5,801 | ||||||||
2024
|
6,958 | (1,494 | ) | 5,464 | ||||||||
2025
|
7,095 | (1,950 | ) | 5,145 | ||||||||
Thereafter
|
12,736 | (4,497 | ) | 8,239 | ||||||||
|
|
|
|
|
|
|||||||
Total
|
$ | 43,728 | $ | (9,688 | ) | $ | 34,040 | |||||
|
|
|
|
|
|
(1)
|
Weighted average discount rate 7.98%.
|
(2)
|
Estimated minimum lease payments for the year ending December 31, 2021 include only payments to be paid after June 30, 2021.
|
(Amounts
in 000’s)
|
||||
2021
(a)
|
$ | 6,276 | ||
2022
|
13,519 | |||
2023
|
15,477 | |||
2024
|
15,299 | |||
2025
|
13,702 | |||
Thereafter
|
33,555 | |||
|
|
|||
Total
|
$ | 97,828 | ||
|
|
(b)
|
Estimated minimum lease receivables for the year ending December 31, 2021 include only payments scheduled to be received after June 30, 2021.
|
(Amounts in 000’s)
|
June 30,
2021
|
December 31,
2020
|
||||||
Accrued employee benefits and payroll-related
|
$ | 541 | $ | 218 | ||||
Real estate and other taxes
(1)
|
1,257 | 491 | ||||||
Self-insured reserve
(2)
|
168 | 183 | ||||||
Accrued interest
|
284 | 424 | ||||||
Unearned rental revenue
|
42 | 41 | ||||||
Other accrued expenses
|
1,028 | 868 | ||||||
|
|
|
|
|||||
Total accrued expenses
|
$ | 3,320 | $ | 2,225 | ||||
|
|
|
|
(3)
|
Includes approximately $0.7 million of bed taxes in arrears related to the Wellington Transition and approximately $0.3 million bed tax accrual for the six months ended June 30, 2021 for the Healthcare Services segment.
|
(4)
|
The Company self-insures against professional and general liability cases incurred prior to the Transition and uses a third-party administrator and outside counsel to manage and defend the claims (see Note 12—
Commitments and Contingencies)
|
(Amounts in 000’s)
|
June 30,
2021
|
December 31,
2020
|
||||||
Senior debt—guaranteed by HUD
|
$ | 30,646 | $ | 31,104 | ||||
Senior debt—guaranteed by USDA
|
13,008 | 13,139 | ||||||
Senior debt—guaranteed by SBA
|
615 | 628 | ||||||
Senior debt—bonds
|
6,379 | 6,500 | ||||||
Senior debt—other mortgage indebtedness
|
3,555 | 3,631 | ||||||
Other debt
|
1,291 | 822 | ||||||
|
|
|
|
|||||
Subtotal
|
55,494 | 55,824 | ||||||
Deferred financing costs
|
(1,202 | ) | (1,250 | ) | ||||
Unamortized discount on bonds
|
(129 | ) | (135 | ) | ||||
|
|
|
|
|||||
Notes payable and other debt
|
$ | 54,163 | $ | 54,439 | ||||
|
|
|
|
(Amounts in 000’s)
|
||||||||||||||||||||||||
Facility
|
Lender
|
Maturity
|
Interest Rate
(a)
|
June 30,
2021
|
December 31,
2020
|
|||||||||||||||||||
Senior debt—guaranteed by HUD
(b)
|
||||||||||||||||||||||||
The Pavilion Care Center
|
|
Orix Real Estate
Capital |
|
12/01/2027 | Fixed | 4.16% | $ | 925 | $ | 986 | ||||||||||||||
Hearth and Care of Greenfield
|
|
Orix Real Estate
Capital |
|
08/01/2038 | Fixed | 4.20% | 1,883 | 1,920 | ||||||||||||||||
Woodland Manor
|
Midland State Bank | 10/01/2044 | Fixed | 3.75% | 4,902 | 4,968 | ||||||||||||||||||
Glenvue
|
Midland State Bank | 10/01/2044 | Fixed | 3.75% | 7,613 | 7,712 | ||||||||||||||||||
Autumn Breeze
|
KeyBank | 01/01/2045 | Fixed | 3.65% | 6,617 | 6,705 | ||||||||||||||||||
Georgetown
|
Midland State Bank | 10/01/2046 | Fixed | 2.98% | 3,350 | 3,394 | ||||||||||||||||||
Sumter Valley
|
KeyBank | 01/01/2047 | Fixed | 3.70% | 5,356 | 5,419 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total
|
$ | 30,646 | $ | 31,104 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Senior debt—guaranteed by USDA
(c)
|
||||||||||||||||||||||||
Coosa
(d)
|
Metro City | 09/30/2035 | Prime + 1.50% | 5.50% | 5,101 | 5,149 | ||||||||||||||||||
Mountain Trace
(e)
|
Community B&T | 12/24/2036 | Prime + 1.75% | 5.75% | 3,914 | 3,972 | ||||||||||||||||||
Southland
(f)
|
Cadence Bank, NA | 07/27/2036 | Prime + 1.50% | 6.00% | 3,993 | 4,018 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total
|
$ | 13,008 | $ | 13,139 | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Senior debt—guaranteed by SBA
(g)
|
||||||||||||||||||||||||
Southland
|
Cadence Bank, NA | 07/27/2036 | Prime + 2.25% | 5.50% | 615 | 628 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total
|
$ | 615 | $ | 628 | ||||||||||||||||||||
|
|
|
|
(a)
|
Represents cash interest rates as of June 30, 2021 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs, which range from 0.08% to 0.53% per annum.
|
(b)
|
For the seven SNFs, the Company has term loans with financial institutions that are insured 100% by HUD. The loans are secured by, among other things, an assignment of all rents paid under any existing or future leases and rental agreements with respect to the underlying facility. The loans contain customary events of default, including fraud or material misrepresentations or material omission, the commencement of a
|
forfeiture action or proceeding, failure to make required payments, and failure to perform or comply with certain agreements. Upon the occurrence of certain events of default, the lenders may, after receiving the prior written approval of HUD, terminate the loans and all amounts under the loans will become immediately due and payable. In connection with entering into each loan, the Company entered into a healthcare regulatory agreement and a promissory note, each containing customary terms and conditions. Pursuant to the CARES Act, up to three months of debt service payments for six of the credit facilities can be made from our restricted cash reserves. |
(c)
|
For the three SNFs, the Company has term loans with financial institutions that are insured 70% to 80% by the USDA. The loans have an annual renewal fee for the USDA guarantee of 0.25% of the guaranteed portion. The loans have prepayment penalties of 1% through 2021, capped at 1% for the remainder of the first 10 years of the term and 0% thereafter except Coosa (as defined below) which is 1% thereafter.
|
(d)
|
Pursuant to the CARES Act, the monthly principal and interest payments due May 1, 2020 through September 1, 2020 for the loan for that certain
124-bed
SNF commonly known as Coosa, located in Glencoe, Alabama, were deferred (a part of the “USDA Payment Program”). Monthly payments that commenced on October 1, 2020 were being applied to current interest, then deferred interest until the deferred interest is paid in full on April 1, 2021. Payments have been
re-amortized
over the remaining term of the loan.
|
(e)
|
Pursuant to the CARES Act, the monthly principal and interest payments due May 1, 2020 through August 1, 2020 for the Mountain Trace Facility loan were deferred. Monthly payments that commenced on September 1, 2020 were being applied to current interest, then deferred interest until the deferred interest was paid in full on April 1, 2021. Payments have been
re-amortized
over the extended term of the loan.
|
(f)
|
Pursuant to the CARES Act, the monthly principal and interest payments due May 1, 2020 through October 1, 2020 for the loan for that certain
126-bed
SNF commonly known as Southland, located in Dublin, Georgia, were deferred as a part of the USDA Payment Program. Monthly payments recommenced on November 1, 2020 with payments through February 2021 being applied to principal and interest. Monthly payments that commenced on March 1, 2021 are being applied to current interest, then deferred interest until the deferred interest is paid in full, payments will be
re-amortized
over the extended term of the loan.
|
(g)
|
For the one SNF, commonly known as Southland, the Company has a term loan with a financial institution, which is 75% insured by the SBA. The SBA funded two monthly debt payments during the three months ended March 31, 2021 and six payments commencing on March 1, 2020 and ending on August 1, 2020.
|
(Amounts in 000’s)
|
||||||||||||||||||||
Facility
|
Lender
|
Maturity
|
Interest Rate
(a)
|
June 30,
2021
|
December 31,
2020
|
|||||||||||||||
Senior debt—bonds
|
||||||||||||||||||||
Eaglewood Bonds Series A
|
City of Springfield, Ohio | 05/01/2042 | Fixed | 7.65% | $ | 6,379 | $ | 6,379 | ||||||||||||
Eaglewood Bonds Series B
(b)
|
City of Springfield, Ohio | 05/01/2021 | Fixed | 8.50% | — | 121 | ||||||||||||||
|
|
|
|
|||||||||||||||||
Total
|
$ | 6,379 | $ | 6,500 | ||||||||||||||||
|
|
|
|
(b)
|
Represents cash interest rates as of June 30, 2021. The rates exclude amortization of deferred financing of approximately 0.01% per annum.
|
(c)
|
On May 3, 2021, in accordance with the terms of The City of Springfield, Ohio First Mortgage Revenue Series 2012 B Bonds, the Company fully repaid approximately $0.1 million in outstanding principal and interest.
|
(Amounts in 000’s)
|
||||||||||||||||||||||
Facility
|
Lender
|
Maturity
|
Interest Rate
(a)
|
June 30,
2021
|
December 31,
2020
|
|||||||||||||||||
Senior debt—other mortgage indebtedness
|
||||||||||||||||||||||
Meadowood
|
|
Exchange Bank
of Alabama |
|
05/01/2022 | Fixed | 4.50% | 3,555 | 3,631 | ||||||||||||||
|
|
|
|
|||||||||||||||||||
Total
|
$ | 3,555 | $ | 3,631 | ||||||||||||||||||
|
|
|
|
(a)
|
Represents cash interest rates as of June 30, 2021 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs of 0.30% per annum.
|
(Amounts in 000’s)
|
||||||||||||||||||||
Lender
|
Maturity
|
Interest Rate
|
June 30,
2021
|
December 31,
2020
|
||||||||||||||||
Other debt
|
||||||||||||||||||||
First Insurance Funding
(a)
|
03/01/2022 | Fixed | 3.63% | $ | 294 | $ | 94 | |||||||||||||
Servarus Financial Inc.
(b)
|
11/01/2021 | Fixed | 5.18% | 273 | — | |||||||||||||||
Key Bank
|
08/25/2021 | Fixed | 0.00% | 495 | 495 | |||||||||||||||
FountainHead Commercial Capital—PPP Loan
(c)
|
04/16/2022 | Fixed | 1.00% | 229 | 229 | |||||||||||||||
Marlin Covington Finance
|
03/11/2021 | Fixed | 20.17% | — | 4 | |||||||||||||||
|
|
|
|
|||||||||||||||||
Total
|
$ | 1,291 | $ | 822 | ||||||||||||||||
|
|
|
|
(b)
|
Annual Insurance financing primarily for the Company’s directors and officers insurance.
|
(c)
|
Insurance financing for professional and general liability and property insurance for the Tara Facility in our Healthcare Services segment.
|
(d)
|
On August 13, 2021, we received notification that the Paycheck Protection Program Loan (“PPP Loan) was forgiven by the SBA on July 9, 2021. See Note 14—
Subsequent Events
|
For the twelve months ended June 30,
|
(Amounts in 000’s)
|
|||
2022
|
$ | 6,400 | ||
2023
|
1,726 | |||
2024
|
1,808 | |||
2025
|
1,899 | |||
2026
|
1,994 | |||
Thereafter
|
41,667 | |||
|
|
|||
Subtotal
|
$ | 55,494 | ||
Less: unamortized discounts
|
(129 | ) | ||
Less: deferred financing costs, net
|
(1,202 | ) | ||
|
|
|||
Total notes and other debt
|
$ | 54,163 | ||
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Amounts in 000’s)
|
2021
|
2020
|
2021
|
2020
|
||||||||||||
Cost of services
|
$ | 62 | $ | (6 | ) | $ | 75 | $ | 31 | |||||||
|
|
|
|
|
|
|
|
|||||||||
Net (loss) income
|
$ | (62 | ) | $ | 6 | $ | (75 | ) | $ | (31 | ) | |||||
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
(Amounts in 000’s)
|
2021
|
2020
|
2021
|
2020
|
||||||||||||
Employee compensation:
|
||||||||||||||||
Restricted stock
|
$ | 123 | $ | — | $ | 123 | $ | — | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total employee stock-based compensation expense
|
$ | 123 | $ | — | $ | 123 | $ | — | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Non-employee
compensation:
|
||||||||||||||||
Board restricted stock
|
$ | — | $ | 12 | $ | — | $ | 24 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total
non-employee
stock-based compensation expense
|
$ | — | $ | 12 | $ | — | $ | 24 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total stock-based compensation expense
|
$ | 123 | $ | 12 | $ | 123 | $ | 24 | ||||||||
|
|
|
|
|
|
|
|
Number of
Shares (000’s)
|
Weighted
Avg.
Grant Date
(per Share)
Fair Value
|
|||||||
Unvested, December 31, 2020
|
14 | $ | 3.60 | |||||
Granted
|
39 | $ | 13.26 | |||||
Vested
|
(22 | ) | $ | 7.18 | ||||
|
|
|
|
|||||
Unvested, June 30, 2021
|
31 | $ | 13.26 | |||||
|
|
|
|
• |
On January 29, 2020, the Company executed a settlement, in compromise of a complaint filed in the Circuit Court of Pulaski County, in the State of Arkansas, by a former patient at one of our facilities, against the Company on May 16, 2017. The plaintiff alleged medical negligence and injury. The settlement was paid in 2020, in exchange for dismissal of the case with prejudice, in the total amount of $40,000.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||||||||||
2021
|
2021
|
2021
|
2020
|
2021
|
2021
|
2021
|
2020
|
|||||||||||||||||||||||||
(Amounts in 000’s)
|
Real
Estate Services |
Healthcare
Services |
Total
|
Real
Estate Services |
Real
Estate Services |
Healthcare
Services |
Total
|
Real
Estate Services |
||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||||||||||
Patient care revenues
|
$ | — | $ | 2,445 | $ | 2,445 | $ | — | $ | — | $ | 5,135 | $ | 5,135 | $ | — | ||||||||||||||||
Rental revenues
|
3,763 | — | 3,763 | 4,293 | 7,844 | — | 7,844 | 8,590 | ||||||||||||||||||||||||
Management fees
|
247 | — | 247 | 244 | 495 | — | 495 | 488 | ||||||||||||||||||||||||
Other revenues
|
13 | — | 13 | 2 | 75 | — | 75 | 9 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenues
|
4,023 | 2,445 | 6,468 | 4,539 | 8,414 | 5,135 | 13,549 | 9,087 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Expenses:
|
||||||||||||||||||||||||||||||||
Patient care expense
|
— | 2,254 | 2,254 | — | — | 4,457 | 4,457 | — | ||||||||||||||||||||||||
Facility rent expense
|
1,342 | 297 | 1,639 | 1,639 | 2,684 | 595 | 3,279 | 3,279 | ||||||||||||||||||||||||
Cost of management fees
|
150 | — | 150 | 174 | 315 | — | 315 | 325 | ||||||||||||||||||||||||
Depreciation and amortization
|
649 | 3 | 652 | 769 | 1,297 | 5 | 1,302 | 1,545 | ||||||||||||||||||||||||
General and administrative expense
|
823 | 122 | 945 | 714 | 1,722 | 259 | 1,981 | 1,591 | ||||||||||||||||||||||||
Doubtful accounts expense (recovery)
|
— | 37 | 37 | (135 | ) | — | 77 | 77 | (137 | ) | ||||||||||||||||||||||
Other operating expenses
|
239 | 4 | 243 | 297 | 471 | 4 | 475 | 521 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total expenses
|
3,203 | 2,717 | 5,920 | 3,458 | 6,489 | 5,397 | 11,886 | 7,124 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Income (loss) from operations
|
820 | (272 | ) | 548 | 1,081 | 1,925 | (262 | ) | 1,663 | 1,963 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Other expense (income) :
|
||||||||||||||||||||||||||||||||
Interest expense, net
|
663 | 3 | 666 | 684 | 1,344 | 9 | 1,353 | 1,399 | ||||||||||||||||||||||||
Other expense (income), net
|
323 | — | 323 | (9 | ) | 717 | — | 717 | 135 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total other expense (income), net
|
986 | 3 | 989 | 675 | 2,061 | 9 | 2,070 | 1,534 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
(Loss) income from continuing operations before income taxes
|
(166 | ) | (275 | ) | (441 | ) | 406 | (136 | ) | (271 | ) | (407 | ) | 429 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
(Loss) income from continuing operations
|
$ | (166 | ) | $ | (275 | ) | $ | (441 | ) | $ | 406 | $ | (136 | ) | $ | (271 | ) | $ | (407 | ) | $ | 429 | ||||||||||
(Loss) income from discontinued operations, net of tax
|
(62 | ) | — | (62 | ) | 6 | (75 | ) | — | (75 | ) | (31 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net Income (loss)
|
$ | (228 | ) | $ | (275 | ) | $ | (503 | ) | $ | 412 | $ | (211 | ) | $ | (271 | ) | $ | (482 | ) | $ | 398 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Owned
|
Leased
|
Leased
Operating |
Managed for
Third
Parties
|
Total
|
||||||||||||||||||||||||||||||||||||
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units
|
|||||||||||||||||||||||||||||||
State
|
||||||||||||||||||||||||||||||||||||||||
Alabama
|
2 | 230 | — | — | — | — | — | — | 2 | 230 | ||||||||||||||||||||||||||||||
Georgia
|
3 | 395 | 7 | 750 | 1 | 134 | — | — | 11 | 1,279 | ||||||||||||||||||||||||||||||
North Carolina
|
1 | 106 | — | — | — | — | — | — | 1 | 106 | ||||||||||||||||||||||||||||||
Ohio
|
4 | 291 | 1 | 99 | — | — | 3 | 332 | 8 | 722 | ||||||||||||||||||||||||||||||
South Carolina
|
2 | 180 | — | — | — | — | — | — | 2 | 180 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total
|
12 | 1,202 | 8 | 849 | 1 | 134 | 3 | 332 | 24 | 2,517 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Facility Type
|
||||||||||||||||||||||||||||||||||||||||
Skilled Nursing
|
10 | 1,016 | 8 | 849 | 1 | 134 | 2 | 249 | 21 | 2,248 | ||||||||||||||||||||||||||||||
Assisted Living
|
2 | 186 | — | — | — | — | — | — | 2 | 186 | ||||||||||||||||||||||||||||||
Independent Living
|
— | — | — | — | — | — | 1 | 83 | 1 | 83 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total
|
12 | 1,202 | 8 | 849 | 1 | 134 | 3 | 332 | 24 | 2,517 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operator Affiliation
|
Number of
Facilities
(1)
|
Beds /Units
|
||||||
C.R. Management
|
6 | 689 | ||||||
Aspire
|
5 | 390 | ||||||
Peach Health Group
|
3 | 266 | ||||||
Symmetry Healthcare
|
2 | 180 | ||||||
Beacon Health Management
|
2 | 212 | ||||||
Vero Health Management
|
1 | 106 | ||||||
Empire
(2)
|
1 | 208 | ||||||
|
|
|
|
|||||
Subtotal
|
20 | 2,051 | ||||||
Regional Health Managed
|
3 | 332 | ||||||
Regional Health Operated
(3)
|
1 | 134 | ||||||
|
|
|
|
|||||
Total
|
24 | 2,517 | ||||||
|
|
|
|
(4)
|
Represents the number of facilities leased or subleased to separate tenants, of which each tenant is an affiliate of the entity named in the table above. For a more detailed discussion, see Note 6—Leases located in Part I, Item 1, “Financial Statements”, of this Quarterly Report; Part II, Item 8, “Financial Statements and Supplementary Data”, Note 6—Leases included in the Annual Report; and “
Portfolio of Healthcare Investments
|
(5)
|
Effective January 1, 2021, the Company entered into the PS Sublease with an affiliate of Empire for the Powder Springs Facility. See Note 6—Leases to our consolidated financial statements in Part I, Item 1, “Financial Statements (unaudited)” in this Quarterly Report.
|
(6)
|
Effective January 1, 2021, Regional began operating the Tara Facility and entered into the Vero Management Agreement with Vero Health under which Vero Health provides management consulting services for the Tara Facility.
|
For the Twelve Months Ended
|
||||||||||||||||
Operating Metric
(1)
|
September 30,
2020
|
December 31,
2020
|
March 31,
2021
|
June 30,
2021
|
||||||||||||
Occupancy (%)
|
73.2 | % | 67.3 | % | 68.6 | % | 67.7 | % |
(4)
|
Excludes three managed facilities in Ohio.
|
Licensed Beds
|
Annual Lease Revenue
(1)
|
|||||||||||||||||||
Number of
Facilities
|
Amount
|
Percent
(%) |
Amount
‘000’s
|
Percent
(%) |
||||||||||||||||
2023
|
1 | 62 | 3.0 | % | $ | 263 | 1.9 | % | ||||||||||||
2024
|
1 | 126 | 6.1 | % | 965 | 6.8 | % | |||||||||||||
2025
|
2 | 269 | 13.1 | % | 2,219 | 15.6 | % | |||||||||||||
2026
|
— | — | 0.0 | % | — | 0.0 | % | |||||||||||||
2027
|
7 | 750 | 36.6 | % | 5,241 | 36.9 | % | |||||||||||||
2028
|
4 | 328 | 16.0 | % | 2,352 | 16.6 | % | |||||||||||||
2029
|
1 | 106 | 5.2 | % | 538 | 3.8 | % | |||||||||||||
Thereafter
|
4 | 410 | 20.0 | % | 2,603 | 18.4 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total
|
20 | 2,051 | 100.0 | % | $ | 14,181 | 100.0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
(2)
|
Straight-line rent.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||
(Amounts in 000’s)
|
2021
|
2020
|
Percent
Change
(*) |
2021
|
2020
|
Percent
Change
(*) |
||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||
Patient care revenues
|
$ | 2,445 | $ | — | NM | $ | 5,135 | $ | — | NM | ||||||||||||||
Rental revenues
|
3,763 | 4,293 | (12.3 | )% | 7,844 | 8,590 | (8.7 | )% | ||||||||||||||||
Management fees
|
247 | 244 | 1.2 | % | 495 | 488 | 1.4 | % | ||||||||||||||||
Other revenues
|
13 | 2 | NM | 75 | 9 | NM | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenues
|
6,468 | 4,539 | 42.5 | % | 13,549 | 9,087 | 49.1 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Expenses:
|
||||||||||||||||||||||||
Patient care expense
|
2,254 | — | NM | 4,457 | — | NM | ||||||||||||||||||
Facility rent expense
|
1,639 | 1,639 | 0.0 | % | 3,279 | 3,279 | 0.0 | % | ||||||||||||||||
Cost of management fees
|
150 | 174 | (13.8 | )% | 315 | 325 | (3.1 | )% | ||||||||||||||||
Depreciation and amortization
|
652 | 769 | (15.2 | )% | 1,302 | 1,545 | (15.7 | )% | ||||||||||||||||
General and administrative expenses
|
945 | 714 | 32.4 | % | 1,981 | 1,591 | 24.5 | % | ||||||||||||||||
Doubtful accounts expense (recovery)
|
37 | (135 | ) | (127.4 | )% | 77 | (137 | ) | (156.2 | )% | ||||||||||||||
Other operating expenses
|
243 | 297 | (18.2 | )% | 475 | 521 | (8.8 | )% | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total expenses
|
5,920 | 3,458 | 71.2 | % | 11,886 | 7,124 | 66.8 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Income from operations
|
548 | 1,081 | (49.3 | )% | 1,663 | 1,963 | (15.3 | )% | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Other expense (income) :
|
||||||||||||||||||||||||
Interest expense, net
|
666 | 684 | (2.6 | )% | 1,353 | 1,399 | (3.3 | )% | ||||||||||||||||
Other expense (income), net
|
323 | (9 | ) | NM | 717 | 135 | NM | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total other expense (income), net
|
989 | 675 | 46.5 | % | 2,070 | 1,534 | 34.9 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
(Loss) income from continuing operations before income taxes
|
(441 | ) | 406 | (208.6 | )% | (407 | ) | 429 | (194.9 | )% | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
(Loss) income from continuing operations
|
(441 | ) | 406 | (208.6 | )% | (407 | ) | 429 | (194.9 | )% | ||||||||||||||
(Loss) income from discontinued operations, net of tax
|
(62 | ) | 6 | NM | (75 | ) | (31 | ) | 141.9 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Net (loss) income
|
$ | (503 | ) | $ | 412 | (222.1 | )% | $ | (482 | ) | $ | 398 | (221.1 | )% | ||||||||||
|
|
|
|
|
|
|
|
*
|
Not meaningful (“NM”).
|
*
|
Not meaningful (“NM”).
|
*
|
Not meaningful (“NM”).
|
Six Months Ended June 30,
|
||||||||
(Amounts in 000’s)
|
2021
|
2020
|
||||||
Net cash provided by operating activities—continuing operations
|
$ | 2,531 | $ | 820 | ||||
Net cash used in operating activities—discontinued operations
|
(144 | ) | (904 | ) | ||||
Net cash used in investing activities—continuing operations
|
(74 | ) | (157 | ) | ||||
Net cash used in financing activities—continuing operations
|
(1,206 | ) | (620 | ) | ||||
|
|
|
|
|||||
Net change in cash and restricted cash
|
1,107 | (861 | ) | |||||
Cash and restricted cash at beginning of period
|
7,492 | 8,038 | ||||||
|
|
|
|
|||||
Cash and restricted cash, ending
|
$ | 8,599 | $ | 7,177 | ||||
|
|
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Item 4.
|
Controls and Procedures.
|
Item 1.
|
Legal Proceedings.
|
Item 1A.
|
Risk Factors.
|
• |
increase our vulnerability to general adverse economic and industry conditions or a downturn in our business;
|
• |
require us to dedicate a substantial portion of cash flows from operations to interest and principal payments on outstanding debt, thereby limiting the availability of cash flow for dividends and other general corporate purposes;
|
• |
require us to maintain certain debt coverage and other financial ratios at specified levels, thereby reducing our financial flexibility;
|
• |
make it more difficult for us to satisfy our financial obligations;
|
• |
expose us to increases in interest rates for our variable rate debt;
|
• |
limit our ability to borrow additional funds on favorable terms, or at all, for working capital, debt service requirements, expansion of our business or other general corporate purposes;
|
• |
limit our ability to refinance all or a portion of our indebtedness on or before maturity on the same or more favorable terms, or at all;
|
• |
limit our flexibility in planning for, or reacting to, changes in our business and our industry;
|
• |
limit our ability to make acquisitions or take advantage of business opportunities as they arise;
|
• |
place us at a competitive disadvantage compared with our competitors that have less debt; and
|
• |
limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
Item 3.
|
Defaults upon Senior Securities.
|
Item 4.
|
Mine Safety Disclosures.
|
Item 5.
|
Other Information.
|
Item 6.
|
Exhibits.
|
• |
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
|
• |
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
|
• |
may apply standards of materiality in a way that is different from what may be viewed as material to investors; and
|
• |
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
|
Exhibit No.
|
Description
|
Method of Filing
|
||
3.1 | Amended and Restated Articles of Incorporation of Regional Health Properties, Inc., effective September 21, 2017 |
Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
3.2 | Certificate of Merger, effective September 29, 2017 |
Incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
3.3 | Articles of Amendment to Amended and Restated Articles of Incorporation of Regional Health Properties, Inc., effective December 31, 2018 |
Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form
8-K12
filed on December 28, 2018
|
||
3.4 | Amended and Restated Bylaws of Regional Health Properties, Inc., effective September 21, 2017 |
Incorporated by reference to Exhibit 3.3 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
4.1 | Form of Common Stock Certificate of Regional Health Properties, Inc. |
Incorporated by reference to Exhibit 4.2 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
4.2 | Description of Regional Health Properties, Inc. Capital Stock |
Incorporated by reference to Exhibit 4.2 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2018
|
||
4.3* | AdCare Health Systems, Inc. 2011 Stock Incentive Plan |
Incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on
Form S-8
(Registration
No. 333-131542)
filed October 27, 2011
|
||
4.4* | AdCare Health Systems, Inc. 2020 Stock Incentive Plan |
Incorporated by reference to Exhibit 99.1 of the Registrant’s Current Report on Form
8-K
filed December 17, 2020
|
||
4.5* |
Form of
Non-Statutory
Stock Option Agreement (2011 Equity Plan)
|
Incorporated by reference to Exhibit 4.4 of the Registrant’s Registration Statement on
Form S-8
(Registration
No. 333-131542)
filed October 27, 2011
|
||
4.6* | Form of Incentive Stock Option Agreement (2011 Equity Plan) |
Incorporated by reference to Exhibit 4.5 of the Registrant’s Registration Statement on
Form S-8
(Registration
No. 333-131542)
filed October 27, 2011
|
||
4.7* | Form of Restricted Common Stock Agreement —Non Employee Director (2020 Equity Plan) |
Incorporated by reference to Exhibit 4.7 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2021
|
||
4.8* | Form of Restricted Common Stock Agreement —Employee (2020 Equity Plan) |
Incorporated by reference to Exhibit 4.8 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2021
|
||
4.9 | Form of Warrant to Purchase Common Stock of the Company (2011 Equity Plan) |
Incorporated by reference to Exhibit 4.3 to the Registrant’s Registration Statement on
Form S-3
(File
No. 333-175541)
|
||
4.10 | Warrant to Purchase 50,000 Shares of Common Stock, dated December 28, 2012, issued by AdCare Health Systems, Inc. to Strome Alpha Offshore Ltd. |
Incorporated by reference to Exhibit 4.21 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
Exhibit No.
|
Description
|
Method of Filing
|
||
4.11 | Form of Warrant granted to management to Purchase Shares of AdCare Health Systems, Inc. dated November 20, 2007 |
Incorporated by reference to Exhibit 10.23.2 of the Registrant’s Annual Report on
Form 10-KSB
as amended March 31, 2008
|
||
4.12 | Lease, dated as of January 1, 2021, by and between ADK Georgia, LLC and PS Operator, LLC. |
Incorporated by reference to Exhibit 10.245 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2020
|
||
4.13 | Management Consulting Services Agreement, dated as of January 1, 2021 by and between Vero Health Management, LLC, and Tara Operator, LLC. |
Incorporated by reference to Exhibit 10.246 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2020
|
||
4.14 | Agreement Regarding Leases, dated as of On December 1, 2020, by and between Regional Health Properties, Inc., and 3223 Falligant Avenue Associates, L.P., 3460 Powder Springs Road Associates, L.P., Wellington Healthcare Services II, L.P. and Mansell Court Associates LLC. |
Incorporated by reference to Exhibit 10.247 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2020
|
||
4.15* | Employment Agreement, dated July 1, 2021, by and among Regional Health Properties, Inc. and Brent Morrison. |
Incorporated by reference to Exhibit 10.229 of the Registrant’s Amendment No. 1 to the Registration Statement on Form
S-4
filed by Regional Health Properties, Inc. on July 2, 2021 (File
No. 333-256667).
|
||
31.1 | Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act | Filed herewith | ||
31.2 | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act | Filed herewith | ||
32.1 | Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith | ||
32.2 | Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith | ||
101 |
The following financial information from the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended June 30, 2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020; (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (unaudited); (iii) Consolidated Statements of Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2021 and 2020 (unaudited); (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited); and (v) the Notes to Consolidated Financial Statements (unaudited).
|
Filed herewith |
* |
Identifies a management contract or compensatory plan or arrangement
|
REGIONAL HEALTH PROPERTIES, INC.
|
||||||
(Registrant)
|
||||||
Date: |
August 13, 2021
|
/s/ Brent Morrison
|
||||
Brent Morrison | ||||||
Chief Executive Officer and Director (Principal Executive Officer) | ||||||
Date: |
August 13, 2021
|
/s/ Benjamin A. Waites
|
||||
Benjamin A. Waites | ||||||
Chief Financial Officer and Vice President (Principal Financial and Accounting Officer) |
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Georgia
|
81-5166048
|
|
(State or other jurisdiction of
incorporation)
|
(I.R.S. Employer
Identification Number)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
Common Stock, no par value
|
RHE
|
NYSE American
|
||
10.875% Series A Cumulative Redeemable Preferred Stock, no par value
|
RHE-PA
|
NYSE American
|
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer
|
☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☐ |
Item 1. |
Financial Statements
|
September 30,
2021
|
December 31,
2020
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Property and equipment, net
|
$ | 50,755 | $ | 52,533 | ||||
Cash
|
6,233 | 4,186 | ||||||
Restricted cash
|
3,393 | 3,306 | ||||||
Accounts receivable, net of allowance of $142 and $1,381
|
1,936 | 2,100 | ||||||
Prepaid expenses and other
|
617 | 328 | ||||||
Notes receivable
|
383 | 444 | ||||||
Intangible assets—bed licenses
|
2,471 | 2,471 | ||||||
Intangible assets—lease rights, net
|
140 | 158 | ||||||
Right-of-use
|
30,896 | 33,740 | ||||||
Goodwill
|
1,585 | 1,585 | ||||||
Lease deposits and other deposits
|
514 | 514 | ||||||
Straight-line rent receivable
|
8,101 | 6,660 | ||||||
|
|
|
|
|||||
Total assets
|
$ | 107,024 | $ | 108,025 | ||||
|
|
|
|
|||||
LIABILITIES AND EQUITY
|
||||||||
Senior debt, net
|
$ | 46,357 | $ | 47,275 | ||||
Bonds, net
|
6,238 | 6,342 | ||||||
Other debt, net
|
802 | 822 | ||||||
Accounts payable
|
3,918 | 3,008 | ||||||
Accrued expenses
|
4,163 | 2,225 | ||||||
Operating lease obligation
|
33,066 | 35,884 | ||||||
Other liabilities
|
1,602 | 1,365 | ||||||
|
|
|
|
|||||
Total liabilities
|
96,146 | 96,921 | ||||||
|
|
|
|
|||||
Commitments and contingencies (Note 12)
|
||||||||
Stockholders’ equity:
|
||||||||
Common stock and additional
paid-in
capital, no par value; 55,000 shares authorized; 1,775 and 1,688 issued and outstanding at September 30, 2021 and December 31, 2020, respectively
|
62,336 | 62,041 | ||||||
Preferred stock, no par value; 5,000 shares authorized; 2,812 shares issued and outstanding, redemption amount $70,288 at September 30, 2021 and December 31, 2020
|
62,423 | 62,423 | ||||||
Accumulated deficit
|
(113,881 | ) | (113,360 | ) | ||||
|
|
|
|
|||||
Total stockholders’ equity
|
10,878 | 11,104 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders’ equity
|
$ | 107,024 | $ | 108,025 | ||||
|
|
|
|
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
Revenues:
|
||||||||||||||||
Patient care revenues
|
$ | 2,309 | $ | — | $ | 7,444 | $ | — | ||||||||
Rental revenues
|
4,136 | 4,308 | 11,980 | 12,898 | ||||||||||||
Management fees
|
248 | 244 | 743 | 732 | ||||||||||||
Other revenues
|
9 | 215 | 84 | 224 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues
|
6,702 | 4,767 | 20,251 | 13,854 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Expenses:
|
||||||||||||||||
Patient care expense
|
2,454 | — | 6,911 | — | ||||||||||||
Facility rent expense
|
1,640 | 1,640 | 4,919 | 4,919 | ||||||||||||
Cost of management fees
|
153 | 161 | 468 | 486 | ||||||||||||
Depreciation and amortization
|
651 | 694 | 1,953 | 2,239 | ||||||||||||
General and administrative expense
|
972 | 743 | 2,953 | 2,334 | ||||||||||||
Doubtful accounts expense
|
— | 790 | 77 | 653 | ||||||||||||
Other operating expenses
|
204 | 109 | 679 | 630 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total expenses
|
6,074 | 4,137 | 17,960 | 11,261 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from operations
|
628 | 630 | 2,291 | 2,593 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other expense (income) :
|
||||||||||||||||
Interest expense, net
|
669 | 692 | 2,022 | 2,091 | ||||||||||||
Gain on extinguishment of debt
|
(146 | ) | — | (146 | ) | — | ||||||||||
Other expense, net
|
122 | 9 | 839 | 144 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other expense, net
|
645 | 701 | 2,715 | 2,235 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
(Loss) income from continuing operations before income taxes
|
(17 | ) | (71 | ) | (424 | ) | 358 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
(Loss) income from continuing operations
|
$ | (17 | ) | $ | (71 | ) | $ | (424 | ) | $ | 358 | |||||
Loss from discontinued operations, net of tax
|
(22 | ) | (2 | ) | (97 | ) | (33 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net (loss) income
|
(39 | ) | (73 | ) | (521 | ) | 325 | |||||||||
Preferred stock dividends—undeclared
|
(2,250 | ) | (2,250 | ) | (6,748 | ) | (6,748 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Loss attributable to Regional Health Properties, Inc. common stockholders
|
$ | (2,289 | ) | $ | (2,323 | ) | $ | (7,269 | ) | $ | (6,423 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Net loss per share of common stock attributable to Regional Health Properties, Inc.
|
||||||||||||||||
Basic and diluted:
|
||||||||||||||||
Continuing operations
|
$ | (1.25 | ) | $ | (1.38 | ) | $ | (4.15 | ) | $ | (3.79 | ) | ||||
Discontinued operations
|
(0.02 | ) | — | (0.06 | ) | (0.02 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | (1.27 | ) | $ | (1.38 | ) | $ | (4.21 | ) | $ | (3.81 | ) | |||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average shares of common stock outstanding:
|
||||||||||||||||
Basic and diluted
|
1,775 | 1,688 | 1,728 | 1,688 |
For the Three and Nine Months ended September 30, 2021
|
Shares of
Common
Stock
|
Shares of
Preferred
Stock
|
Common
Stock and
Additional
Paid-in
Capital
|
Preferred
Stock
|
Accumulated
Deficit
|
Total
|
||||||||||||||||||
Balances, December 31, 2020
|
1,688 | 2,812 | $ | 62,041 | $ | 62,423 | $ | (113,360 | ) | $ | 11,104 | |||||||||||||
Net income
|
— | — | — | — | 21 | 21 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, March 31, 2021
|
1,688 | 2,812 | $ | 62,041 | $ | 62,423 | $ | (113,339 | ) | $ | 11,125 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Stock-based compensation
|
39 | — | 123 | — | — | 123 | ||||||||||||||||||
Exercise of restricted share awards net settlement option
|
(1 | ) | — | (7 | ) | — | — | (7 | ) | |||||||||||||||
Treasury shares, no par value
|
1 | — | — | — | — | — | ||||||||||||||||||
Net loss
|
— | — | — | — | (503 | ) | (503 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, June 30, 2021
|
1,727 | 2,812 | $ | 62,157 | $ | 62,423 | $ | (113,842 | ) | $ | 10,738 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Stock-based compensation
|
48 | — | 179 | — | — | 179 | ||||||||||||||||||
Net loss
|
— | — | — | — | (39 | ) | (39 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, September 30, 2021
|
1,775 | 2,812 | $ | 62,336 | $ | 62,423 | $ | (113,881 | ) | $ | 10,878 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
For the Three and Nine Months ended September 30, 2020
|
Shares of
Common
Stock
|
Shares of
Preferred
Stock
|
Common
Stock and
Additional
Paid-in
Capital
|
Preferred
Stock
|
Accumulated
Deficit
|
Total
|
||||||||||||||||||
Balances, December 31, 2019
|
1,688 | 2,812 | $ | 61,992 | $ | 62,423 | $ | (112,672 | ) | $ | 11,743 | |||||||||||||
Stock-based compensation
|
— | — | 12 | — | — | 12 | ||||||||||||||||||
Net loss
|
— | — | — | — | (14 | ) | (14 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, March 31, 2020
|
1,688 | 2,812 | $ | 62,004 | $ | 62,423 | $ | (112,686 | ) | $ | 11,741 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Stock-based compensation
|
— | — | 12 | — | — | 12 | ||||||||||||||||||
Net income
|
— | — | — | — | 412 | 412 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, June 30, 2020
|
1,688 | 2,812 | $ | 62,016 | $ | 62,423 | $ | (112,274 | ) | $ | 12,165 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Stock-based compensation
|
— | — | 13 | — | — | 13 | ||||||||||||||||||
Net loss
|
— | — | — | — | (73 | ) | (73 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, September 30, 2020
|
1,688 | 2,812 | $ | 62,029 | $ | 62,423 | $ | (112,347 | ) | $ | 12,105 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
||||||||
2021
|
2020
|
|||||||
Cash flows from operating activities:
|
||||||||
Net (loss) income
|
$ | (521 | ) | $ | 325 | |||
Loss from discontinued operations, net of tax
|
97 | 33 | ||||||
|
|
|
|
|||||
(Loss) income from continuing operations
|
(424 | ) | 358 | |||||
Adjustments to reconcile net loss (income) from continuing operations to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
1,953 | 2,239 | ||||||
Stock-based compensation expense
|
302 | 37 | ||||||
Rent expense in excess of cash paid
|
27 | 144 | ||||||
Rent revenue in excess of cash received
|
(2,150 | ) | (765 | ) | ||||
Amortization of deferred financing costs, debt discounts and premiums
|
77 | 96 | ||||||
Gain on debt extinguishment
|
(146 | ) | — | |||||
Bad debt expense
|
77 | 653 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
737 | (1,482 | ) | |||||
Prepaid expenses and other assets
|
636 | 564 | ||||||
Accounts payable and accrued expenses
|
2,977 | (256 | ) | |||||
Other liabilities
|
241 | 345 | ||||||
|
|
|
|
|||||
Net cash provided by operating activities—continuing operations
|
4,307 | 1,933 | ||||||
Net cash used in operating activities—discontinued operations
|
(195 | ) | (1,017 | ) | ||||
|
|
|
|
|||||
Net cash provided by operating activities
|
4,112 | 916 | ||||||
|
|
|
|
|||||
Cash flows from investing activities:
|
||||||||
Purchase of property and equipment
|
(119 | ) | (209 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities—continuing operations
|
(119 | ) | (209 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities
|
(119 | ) | (209 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities:
|
||||||||
Proceeds from debt issuance
|
— | 229 | ||||||
Repayment on notes payable
|
(1,710 | ) | (1,112 | ) | ||||
Repayment on bonds payable
|
(121 | ) | (116 | ) | ||||
Debt extinguishment and issuance costs
|
(21 | ) | — | |||||
Repurchase of common stock
|
(7 | ) | — | |||||
|
|
|
|
|||||
Net cash used in financing activities—continuing operations
|
(1,859 | ) | (999 | ) | ||||
|
|
|
|
|||||
Net cash used in financing activities
|
(1,859 | ) | (999 | ) | ||||
|
|
|
|
|||||
Net change in cash and restricted cash
|
2,134 | (292 | ) | |||||
Cash and restricted cash, beginning
|
7,492 | 8,038 | ||||||
|
|
|
|
|||||
Cash and restricted cash, ending
|
$ | 9,626 | $ | 7,746 | ||||
|
|
|
|
|||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash interest paid
|
$ | 2,154 | $ | 1,718 | ||||
Supplemental disclosure of
non-cash
activities:
|
||||||||
Non-cash
payments of long-term debt
|
$ | (5,044 | ) | $ | — | |||
Non-cash
debt issuance costs and extinguishment expenses
|
(102 | ) | — | |||||
|
|
|
|
|||||
Net payments through Lender
|
$ | (5,146 | ) | $ | — | |||
Non-cash
proceeds from financing
|
5,146 | — | ||||||
|
|
|
|
|||||
Net proceeds through Lender
|
$ | 5,146 | $ | — | ||||
|
|
|
|
|||||
Net proceeds through Lender
|
$ | — | $ | — | ||||
|
|
|
|
|||||
Non-cash
gain on PPP Loan forgiveness
|
$ | 229 | $ | — | ||||
Vendor-financed insurance
|
$ | 867 | $ | 339 | ||||
Non-cash
accruals for capex
|
$ | — | $ | (157 | ) | |||
Non-cash
settlement of Peach Line (notes receivable)
|
$ | — | $ | 350 |
(Amounts in 000’s)
|
September 30,
2021
|
December 31,
2020
|
||||||
Gross receivables
|
||||||||
Real Estate Services
(a)
|
$ | 1,118 | $ | 3,481 | ||||
Healthcare Services
|
960 | — | ||||||
|
|
|
|
|||||
Sub Total
|
2,078 | 3,481 | ||||||
Allowance
|
||||||||
Real Estate Services
(a)
|
(32 | ) | (1,381 | ) | ||||
Healthcare Services
|
(110 | ) | — | |||||
|
|
|
|
|||||
Sub Total
|
(142 | ) | (1,381 | ) | ||||
|
|
|
|
|||||
Accounts receivable, net of allowance
|
$ | 1,936 | $ | 2,100 | ||||
|
|
|
|
(c)
|
See Note 6—
Leases
|
(Amounts in 000’s)
|
September 30,
2021
|
December 31,
2020
|
||||||
Accounts payable
|
||||||||
Real Estate Services
|
$ | 3,027 | $ | 3,008 | ||||
Healthcare Services
|
891 | — | ||||||
|
|
|
|
|||||
Total Accounts payable
|
$ | 3,918 | $ | 3,008 | ||||
|
|
|
|
For the Three
Months Ended September 30, |
For the Nine
Months Ended September 30, |
|||||||||||||||
(Amounts in 000’s)
|
2021
|
2020
|
2021
|
2020
|
||||||||||||
Rental revenues
|
$ | 111 | $ | 134 | $ | 342 | $ | 379 | ||||||||
Other operating expenses
|
$ | 111 | $ | 134 | $ | 342 | $ | 379 |
September 30,
|
||||||||
(Share amounts in 000’s)
|
2021
|
2020
|
||||||
Stock options
|
13 | 13 | ||||||
Warrants—employee
|
49 | 49 | ||||||
Warrants—non employee
|
9 | 9 | ||||||
|
|
|
|
|||||
Total anti-dilutive securities
|
71 | 71 | ||||||
|
|
|
|
(Amounts in 000’s)
|
September 30,
2021
|
December 31,
2020
|
||||||
Cash
(a)
|
$ | 6,233 | $ | 4,186 | ||||
Restricted cash:
|
||||||||
Cash collateral
|
93 | 124 | ||||||
HUD and other replacement reserves
|
1,918 | 1,675 | ||||||
Escrow deposits
|
1,065 | 1,190 | ||||||
Restricted investments for debt obligations
|
317 | 317 | ||||||
|
|
|
|
|||||
Total restricted cash
|
3,393 | 3,306 | ||||||
|
|
|
|
|||||
Total cash and restricted cash
|
$ | 9,626 | $ | 7,492 | ||||
|
|
|
|
(a)
|
Includes a Medicaid overpayment of $1.0 million received on September 30, 2021, which the Company expects to repay in the near future and is recorded in “Accrued Expenses” in the Company’s consolidated balance sheets as of September 30, 2021.
|
(Amounts in 000’s)
|
Estimated
Useful Lives
(Years) |
September 30,
2021
|
December 31,
2020
|
|||||||||
Buildings and improvements
|
5-40
|
$ | 65,695 | $ | 65,629 | |||||||
Equipment and computer related
|
2-10
|
5,067 | 5,139 | |||||||||
Land
(1)
|
— | 2,776 | 2,776 | |||||||||
Construction in process
|
— | — | 69 | |||||||||
|
|
|
|
|||||||||
73,538 | 73,613 | |||||||||||
Less: accumulated depreciation and amortization
|
(22,783 | ) | (21,080 | ) | ||||||||
|
|
|
|
|||||||||
Property and equipment, net
|
$ | 50,755 | $ | 52,533 | ||||||||
|
|
|
|
(3)
|
Includes $0.1 million of land improvements with an average estimated useful remaining life of approximately 7.1 years.
|
Three Months
Ended September 30, |
Nine Months
Ended September 30, |
|||||||||||||||
(Amounts in 000’s)
|
2021
|
2020
|
2021
|
2020
|
||||||||||||
Depreciation
|
$ | 542 | $ | 537 | $ | 1,625 | $ | 1,631 | ||||||||
Amortization
|
109 | 157 | 328 | 608 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total depreciation and amortization expense
|
$ | 651 | $ | 694 | $ | 1,953 | $ | 2,239 | ||||||||
|
|
|
|
|
|
|
|
(Amounts in 000’s)
|
Bed licenses
(included
in property
and
equipment)
(a)
|
Bed
Licenses—
Separable
(b)
|
Lease
Rights
|
Total
|
Goodwill
(b)
|
|||||||||||||||
Balances, December 31, 2020
|
||||||||||||||||||||
Gross
|
$ | 14,276 | $ | 2,471 | $ | 206 | $ | 16,953 | $ | 1,585 | ||||||||||
Accumulated amortization
|
(3,754 | ) | — | (48 | ) | (3,802 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net carrying amount
|
$ | 10,522 | $ | 2,471 | $ | 158 | $ | 13,151 | $ | 1,585 | ||||||||||
Amortization expense
|
(310 | ) | — | (18 | ) | (328 | ) | — | ||||||||||||
Balances, September 30, 2021
|
||||||||||||||||||||
Gross
|
14,276 | 2,471 | 206 | 16,953 | 1,585 | |||||||||||||||
Accumulated amortization
|
(4,064 | ) | — | (66 | ) | (4,130 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net carrying amount
|
$ | 10,212 | $ | 2,471 | $ | 140 | $ | 12,823 | $ | 1,585 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(e)
|
Non-separable
bed licenses are included in property and equipment as is the related accumulated amortization expense (see Note 4—
Property and Equipment
|
(f)
|
The Company does not amortize indefinite-lived intangibles, which consist of separable bed licenses and goodwill.
|
Three Months
Ended September 30, |
Nine Months
Ended September 30, |
|||||||||||||||
(Amounts in 000’s)
|
2021
|
2020
|
2021
|
2020
|
||||||||||||
Bed licenses
|
$ | 103 | $ | 103 | $ | 310 | $ | 310 | ||||||||
Lease rights
|
6 | 54 | 18 | 298 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total amortization expense
|
$ | 109 | $ | 157 | $ | 328 | $ | 608 | ||||||||
|
|
|
|
|
|
|
|
(Amounts in 000’s)
|
Bed
Licenses
|
Lease
Rights
|
||||||
2021
(a)
|
$ | 104 | $ | 6 | ||||
2022
|
414 | 24 | ||||||
2023
|
414 | 23 | ||||||
2024
|
414 | 18 | ||||||
2025
|
414 | 18 | ||||||
Thereafter
|
8,452 | 51 | ||||||
|
|
|
|
|||||
Total expected amortization expense
|
$ | 10,212 | $ | 140 | ||||
|
|
|
|
(a)
|
Estimated amortization expense for the year ending December 31, 2021, includes only amortization to be recorded after September 30, 2021.
|
(Amounts in 000’s)
|
Future
rental
payments
|
Accretion of
lease liability
(1)
|
Operating
lease
obligation
|
|||||||||
2021
(2)
|
$ | 1,675 | $ | (37 | ) | $ | 1,638 | |||||
2022
|
6,752 | (468 | ) | 6,284 | ||||||||
2023
|
6,851 | (933 | ) | 5,918 | ||||||||
2024
|
6,958 | (1,385 | ) | 5,573 | ||||||||
2025
|
7,095 | (1,847 | ) | 5,248 | ||||||||
Thereafter
|
12,736 | (4,331 | ) | 8,405 | ||||||||
|
|
|
|
|
|
|||||||
Total
|
$ | 42,067 | $ | (9,001 | ) | $ | 33,066 | |||||
|
|
|
|
|
|
(1)
|
Weighted average discount rate 7.98%.
|
(2)
|
Estimated minimum lease payments for the year ending December 31, 2021 include only payments to be paid after September 30, 2021.
|
(Amounts
in 000’s)
|
||||
2021
(a)
|
$ | 3,189 | ||
2022
|
13,519 | |||
2023
|
15,477 | |||
2024
|
15,299 | |||
2025
|
13,702 | |||
Thereafter
|
33,555 | |||
|
|
|||
Total
|
$ | 94,741 | ||
|
|
(a)
|
Estimated minimum lease receivables for the year ending December 31, 2021 include only payments scheduled to be received after September 30, 2021.
|
(Amounts in 000’s)
|
September 30,
2021
|
December 31,
2020
|
||||||
Accrued employee benefits and payroll-related
|
$ | 438 | $ | 218 | ||||
Real estate and other taxes
(1)
|
1,175 | 491 | ||||||
Self-insured reserve
(2)
|
140 | 183 | ||||||
Accrued interest
|
222 | 424 | ||||||
Unearned rental revenue
|
42 | 41 | ||||||
Medicaid overpayment—Healthcare Services
|
1,032 | — | ||||||
Other accrued expenses
|
1,114 | 868 | ||||||
|
|
|
|
|||||
Total accrued expenses
|
$ | 4,163 | $ | 2,225 | ||||
|
|
|
|
(5)
|
Includes approximately $0.7 million of bed taxes in arrears related to the Wellington Transition and approximately $0.1 million bed tax accrual for the three months ended September 30, 2021 for the Healthcare Services segment. Additionally, approximately $0.1 million bed tax for the Healthcare Services segment is included in “Accounts payable” in the Company’s consolidated balance sheets.
|
(6)
|
The Company self-insures against professional and general liability cases incurred prior to the Transition and uses a third-party administrator and outside counsel to manage and defend the claims (see Note 12—
Commitments and Contingencies)
|
(Amounts in 000’s)
|
September 30,
2021
|
December 31,
2020
|
||||||
Senior debt—guaranteed by HUD
|
$ | 30,413 | $ | 31,104 | ||||
Senior debt—guaranteed by USDA
|
7,868 | 13,139 | ||||||
Senior debt—guaranteed by SBA
|
608 | 628 | ||||||
Senior debt—bonds
|
6,379 | 6,500 | ||||||
Senior debt—other mortgage indebtedness
|
8,650 | 3,631 | ||||||
Other debt
|
802 | 822 | ||||||
|
|
|
|
|||||
Subtotal
|
54,720 | 55,824 | ||||||
Deferred financing costs
|
(1,197 | ) | (1,250 | ) | ||||
Unamortized discount on bonds
|
(126 | ) | (135 | ) | ||||
|
|
|
|
|||||
Notes payable and other debt
|
$ | 53,397 | $ | 54,439 | ||||
|
|
|
|
(Amounts in 000’s)
|
||||||||||||||||||||||||
Facility
|
Lender
|
Maturity
|
Interest Rate
(a)
|
September 30,
2021
|
December 31,
2020
|
|||||||||||||||||||
Senior debt—guaranteed by HUD
(b)
|
||||||||||||||||||||||||
The Pavilion Care Center
|
Lument Capital | 12/01/2027 | Fixed | 4.16 | % | $ | 894 | $ | 986 | |||||||||||||||
Hearth and Care of Greenfield
|
Lument Capital | 08/01/2038 | Fixed | 4.20 | % | 1,864 | 1,920 | |||||||||||||||||
Woodland Manor
|
Midland State Bank | 10/01/2044 | Fixed | 3.75 | % | 4,869 | 4,968 | |||||||||||||||||
Glenvue
|
Midland State Bank | 10/01/2044 | Fixed | 3.75 | % | 7,560 | 7,712 | |||||||||||||||||
Autumn Breeze
|
KeyBank | 01/01/2045 | Fixed | 3.65 | % | 6,573 | 6,705 | |||||||||||||||||
Georgetown
|
Midland State Bank | 10/01/2046 | Fixed | 2.98 | % | 3,328 | 3,394 | |||||||||||||||||
Sumter Valley
|
KeyBank | 01/01/2047 | Fixed | 3.70 | % | 5,325 | 5,419 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$ | 30,413 | $ | 31,104 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior debt—guaranteed by USDA
(c)
|
||||||||||||||||||||||||
Coosa
(d)(h)
|
Metro City | 01/31/2036 |
Prime + 1.50%
|
5.50 | % | — | 5,149 | |||||||||||||||||
Mountain Trace
(e)
|
Community B&T | 12/24/2036 |
Prime + 1.75%
|
5.75 | % | 3,875 | 3,972 | |||||||||||||||||
Southland
(f)
|
Cadence Bank, NA | 07/27/2036 |
Prime + 1.50%
|
6.00 | % | 3,993 | 4,018 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$ | 7,868 | $ | 13,139 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior debt—guaranteed by SBA
(g)
|
||||||||||||||||||||||||
Southland
|
Cadence Bank, NA | 07/27/2036 |
Prime + 2.25%
|
5.50 | % | 608 | 628 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$ | 608 | $ | 628 | ||||||||||||||||||||
|
|
|
|
(a)
|
Represents cash interest rates as of September 30, 2021 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs, which range from 0.09% to 0.53% per annum.
|
(b)
|
For the seven SNFs, the Company has term loans with financial institutions that are insured 100% by HUD. The loans are secured by, among other things, an assignment of all rents paid under any existing or future leases and rental agreements with respect to the underlying facility. The loans contain customary events of default, including fraud or material misrepresentations or material omission, the commencement of a forfeiture action or proceeding, failure to make required payments, and failure to perform or comply with certain agreements. Upon the occurrence of certain events of default, the lenders may, after receiving the
|
prior written approval of HUD, terminate the loans and all amounts under the loans will become immediately due and payable. In connection with entering into each loan, the Company entered into a healthcare regulatory agreement and a promissory note, each containing customary terms and conditions. Pursuant to the CARES Act, up to three months of debt service payments for six of the credit facilities can be made from our restricted cash reserves. |
(c)
|
For the two SNFs, the Company has term loans with financial institutions that are insured 70% to 80% by the USDA. The loans have an annual renewal fee for the USDA guarantee of 0.25% of the guaranteed portion. The loans had prepayment penalties of 1%, capped at 1% for the remainder of the first 10 years of the term and 0% thereafter.
|
(d)
|
Pursuant to the CARES Act, the monthly principal and interest payments due May 1, 2020 through September 1, 2020 for the loan for the Coosa Facility, were deferred (a part of the “USDA Payment Program”). Monthly payments that commenced on October 1, 2020 were being applied to current interest, then deferred interest until the deferred interest was paid in full on April 1, 2021. Payments were
re-amortized
over the remaining term of the loan. On September 30, 2021, the Company fully refinanced the MCB Coosa Loan with the Exchange Bank of Alabama, see “Senior debt—other mortgage indebtedness” below.
|
(e)
|
Pursuant to the CARES Act, the monthly principal and interest payments due May 1, 2020 through August 1, 2020 for the Mountain Trace Facility loan were deferred. Monthly payments that commenced on September 1, 2020 were being applied to current interest, then deferred interest until the deferred interest was paid in full on April 1, 2021. Payments have been
re-amortized
over the extended term of the loan.
|
(f)
|
Pursuant to the CARES Act, the monthly principal and interest payments due May 1, 2020 through October 1, 2020 for the loan for that certain
126-bed
SNF commonly known as Southland, located in Dublin, Georgia, were deferred as a part of the USDA Payment Program. Monthly payments recommenced on November 1, 2020 with payments through February 2021 being applied to principal and interest. Monthly payments that commenced on March 1, 2021 are being applied to current interest, then deferred interest until the deferred interest is paid in full, payments will be
re-amortized
over the extended term of the loan.
|
(g)
|
For the one SNF, commonly known as Southland, the Company has a term loan with a financial institution, which is 75% insured by the SBA. The SBA funded two monthly debt payments during the three months ended March 31, 2021 and six payments commencing on March 1, 2020 and ending on August 1, 2020.
|
(h)
|
On September 30, 2021, the Company refinanced the MCB Coosa Loan secured by the Coosa Facility, see “Senior debt—other mortgage indebtdness” below.
|
(Amounts in 000’s)
|
||||||||||||||||||||||||
Facility
|
Lender
|
Maturity
|
Interest Rate
(a)
|
September 30,
2021
|
December 31,
2020
|
|||||||||||||||||||
Senior debt—bonds
|
||||||||||||||||||||||||
Eaglewood Bonds Series A
|
City of Springfield, Ohio | 05/01/2042 | Fixed | 7.65 | % | $ | 6,379 | $ | 6,379 | |||||||||||||||
Eaglewood Bonds Series B
(b)
|
City of Springfield, Ohio | 05/01/2021 | Fixed | 8.50 | % | — | 121 | |||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total
|
$ | 6,379 | $ | 6,500 | ||||||||||||||||||||
|
|
|
|
(d)
|
Represents cash interest rates as of September 30, 2021. The rates exclude amortization of deferred financing of approximately 0.01% per annum.
|
(e)
|
On May 3, 2021, in accordance with the terms of The City of Springfield, Ohio First Mortgage Revenue Series 2012 B Bonds, the Company fully repaid approximately $0.1 million in outstanding principal and interest.
|
(Amounts in 000’s)
|
||||||||||||||||||||||
Facility
|
Lender
|
Maturity
|
Interest Rate
(a)
|
September 30,
2021
|
December 31,
2020
|
|||||||||||||||||
Senior debt—other mortgage indebtedness
|
|
|||||||||||||||||||||
Meadowood
(b)
|
Exchange Bank of Alabama | 10/01/2026 | Fixed | 4.50 | % | 3,504 | 3,631 | |||||||||||||||
Coosa
(c)
|
Exchange Bank of Alabama | 10/10/2026 | Fixed | 3.95 | % | 5,146 | — | |||||||||||||||
|
|
|
|
|||||||||||||||||||
Total
|
$ | 8,650 | $ | 3,631 | ||||||||||||||||||
|
|
|
|
(a)
|
Represents cash interest rates as of September 30, 2021 as adjusted for interest rate floor limitations, if applicable. The rates exclude amortization of deferred financing costs of 0.34% per annum.
|
(b)
|
On October 1, 2021, the Exchange Bank of Alabama and the Company extended the maturity date of the Meadowood Credit Facility which is secured by the Meadowood Facility and the assets of Coosa, and which is guaranteed by Regional Health Properties, Inc., from May 1, 2022 to October 1, 2026.
|
(c)
|
On September 30, 2021, the Company refinanced the MCB Coosa Loan secured by the Coosa Facility, incurring approximately $0.1 million in new fees. The Coosa Credit Facility, guaranteed by Regional Health Properties, Inc. includes customary terms, including events of default with an associated annual 5% default interest rate, and is secured by the Coosa Facility and the assets of Meadowood. Upon the occurrence of certain events of default, the lenders may terminate the Coosa Credit Facility and the Meadowood Credit Facility and all amounts due under both credit facilities will become immediately due and payable. The Coosa Credit Facility has prepayment penalties of 5% in the 1
st
year, 4% in the 2
nd
year and 1% thereafter.
|
(Amounts in 000’s)
|
||||||||||||||||||||
Lender
|
Maturity
|
Interest Rate
|
September 30,
2021
|
December 31,
2020
|
||||||||||||||||
Other debt
|
||||||||||||||||||||
First Insurance Funding
(a)
|
03/01/2022 | Fixed | 3.63 | % | $ | 197 | $ | 94 | ||||||||||||
Servarus Financial Inc.
(b)
|
11/01/2021 | Fixed | 5.18 | % | 110 | — | ||||||||||||||
Key Bank
(c)
|
08/25/2023 | Fixed | 0.00 | % | 495 | 495 | ||||||||||||||
FountainHead Commercial Capital—PPP Loan
(d)
|
04/16/2022 | Fixed | 1.00 | % | — | 229 | ||||||||||||||
Marlin Covington Finance
|
03/11/2021 | Fixed | 20.17 | % | — | 4 | ||||||||||||||
|
|
|
|
|||||||||||||||||
Total
|
$ | 802 | $ | 822 | ||||||||||||||||
|
|
|
|
(e)
|
Annual Insurance financing primarily for the Company’s directors and officers insurance.
|
(f)
|
Insurance financing for professional and general liability and property insurance for the Tara Facility in our Healthcare Services segment.
|
(g)
|
On August 17, 2021, Key Bank and the Company extended the maturity date from August 25, 2021 to August 25, 2023.
|
(h)
|
On August 13, 2021, we received notification that the PPP Loan was forgiven by the SBA on July 9, 2021.
|
For the twelve months ended September 30,
|
(Amounts in
000’s) |
|||
2022
|
$ | 1,976 | ||
2023
|
2,333 | |||
2024
|
1,922 | |||
2025
|
2,014 | |||
2026
|
2,110 | |||
Thereafter
|
44,365 | |||
|
|
|||
Subtotal
|
$ | 54,720 | ||
Less: unamortized discounts
|
(126 | ) | ||
Less: deferred financing costs, net
|
(1,197 | ) | ||
|
|
|||
Total notes and other debt
|
$ | 53,397 | ||
|
|
Three Months
Ended September 30, |
Nine Months
Ended September 30, |
|||||||||||||||
(Amounts in 000’s)
|
2021
|
2020
|
2021
|
2020
|
||||||||||||
Cost of services
|
$ | 22 | $ | 2 | $ | 97 | $ | 33 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss
|
$ | (22 | ) | $ | (2 | ) | $ | (97 | ) | $ | (33 | ) | ||||
|
|
|
|
|
|
|
|
Three Months
Ended September 30, |
Nine Months
Ended September 30, |
|||||||||||||||
(Amounts in 000’s)
|
2021
|
2020
|
2021
|
2020
|
||||||||||||
Employee compensation:
|
||||||||||||||||
Restricted stock
|
$ | 179 | $ | — | $ | 302 | $ | — | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total employee stock-based compensation expense
|
$ | 179 | $ | — | $ | 302 | $ | — | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Non-employee
compensation:
|
||||||||||||||||
Board restricted stock
|
$ | — | $ | 13 | $ | — | $ | 37 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total
non-employee
stock-based compensation expense
|
$ | — | $ | 13 | $ | — | $ | 37 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total stock-based compensation expense
|
$ | 179 | $ | 13 | $ | 302 | $ | 37 | ||||||||
|
|
|
|
|
|
|
|
Number of
Shares (000’s)
|
Weighted Avg.
Grant Date
(per Share)
Fair Value
|
|||||||
Unvested, December 31, 2020
|
14 | $ | 3.60 | |||||
Granted
|
87 | $ | 13.01 | |||||
Vested
|
(22 | ) | $ | 7.18 | ||||
|
|
|
|
|||||
Unvested, September 30, 2021
|
79 | $ | 12.99 | |||||
|
|
|
|
• |
On January 29, 2020, the Company executed a settlement, in compromise of a complaint filed in the Circuit Court of Pulaski County, in the State of Arkansas, by a former patient at one of our facilities, against the Company on May 16, 2017. The plaintiff alleged medical negligence and injury. The settlement was paid in 2020, in exchange for dismissal of the case with prejudice, in the total amount of $40,000.
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||||||||||||||||||
2021
|
2021
|
2021
|
2020
|
2021
|
2021
|
2021
|
2020
|
|||||||||||||||||||||||||
(Amounts in 000’s)
|
Real
Estate Services |
Healthcare
Services |
Total
|
Real
Estate Services |
Real
Estate Services |
Healthcare
Services |
Total
|
Real
Estate Services |
||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||||||||||
Patient care revenues
|
$ | — | $ | 2,309 | $ | 2,309 | $ | — | $ | — | $ | 7,444 | $ | 7,444 | $ | — | ||||||||||||||||
Rental revenues
|
4,136 | — | 4,136 | 4,308 | 11,980 | — | 11,980 | 12,898 | ||||||||||||||||||||||||
Management fees
|
248 | — | 248 | 244 | 743 | — | 743 | 732 | ||||||||||||||||||||||||
Other revenues
|
9 | — | 9 | 215 | 84 | — | 84 | 224 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenues
|
4,393 | 2,309 | 6,702 | 4,767 | 12,807 | 7,444 | 20,251 | 13,854 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Expenses:
|
||||||||||||||||||||||||||||||||
Patient care expense
|
— | 2,454 | 2,454 | — | — | 6,911 | 6,911 | — | ||||||||||||||||||||||||
Facility rent expense
|
1,342 | 298 | 1,640 | 1,640 | 4,026 | 893 | 4,919 | 4,919 | ||||||||||||||||||||||||
Cost of management fees
|
153 | — | 153 | 161 | 468 | — | 468 | 486 | ||||||||||||||||||||||||
Depreciation and amortization
|
645 | 6 | 651 | 694 | 1,942 | 11 | 1,953 | 2,239 | ||||||||||||||||||||||||
General and administrative expense
|
861 | 111 | 972 | 743 | 2,583 | 370 | 2,953 | 2,334 | ||||||||||||||||||||||||
Doubtful accounts (recovery) expense
|
(111 | ) | 111 | — | 790 | (111 | ) | 188 | 77 | 653 | ||||||||||||||||||||||
Other operating expenses
|
199 | 5 | 204 | 109 | 670 | 9 | 679 | 630 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total expenses
|
3,089 | 2,985 | 6,074 | 4,137 | 9,578 | 8,382 | 17,960 | 11,261 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Income (loss) from operations
|
1,304 | (676 | ) | 628 | 630 | 3,229 | (938 | ) | 2,291 | 2,593 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||||||||||||||||||
2021
|
2021
|
2021
|
2020
|
2021
|
2021
|
2021
|
2020
|
|||||||||||||||||||||||||
(Amounts in 000’s)
|
Real
Estate Services |
Healthcare
Services |
Total
|
Real
Estate Services |
Real
Estate Services |
Healthcare
Services |
Total
|
Real
Estate Services |
||||||||||||||||||||||||
Other expense (income) :
|
||||||||||||||||||||||||||||||||
Interest expense, net
|
666 | 3 | 669 | 692 | 2,010 | 12 | 2,022 | 2,091 | ||||||||||||||||||||||||
Loss on extinguishment of debt
|
(146 | ) | — | (146 | ) | — | (146 | ) | — | (146 | ) | — | ||||||||||||||||||||
Other expense, net
|
122 | — | 122 | 9 | 839 | — | 839 | 144 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total other expense, net
|
642 | 3 | 645 | 701 | 2,703 | 12 | 2,715 | 2,235 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
(Loss) income from continuing operations before income taxes
|
662 | (679 | ) | (17 | ) | (71 | ) | 526 | (950 | ) | (424 | ) | 358 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
(Loss) income from continuing operations
|
662 | $ | (679 | ) | $ | (17 | ) | $ | (71 | ) | 526 | $ | (950 | ) | $ | (424 | ) | $ | 358 | |||||||||||||
Loss from discontinued operations, net of tax
|
(22 | ) | — | (22 | ) | (2 | ) | (97 | ) | — | (97 | ) | (33 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net loss
|
$ | 640 | $ | (679 | ) | $ | (39 | ) | $ | (73 | ) | $ | 429 | $ | (950 | ) | $ | (521 | ) | $ | 325 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Owned
|
Leased
|
Leased Operating
|
Managed for
Third
Parties
|
Total
|
||||||||||||||||||||||||||||||||||||
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units
|
Facilities
|
Beds/
Units |
|||||||||||||||||||||||||||||||
State
|
||||||||||||||||||||||||||||||||||||||||
Alabama
|
2 | 230 | — | — | — | — | — | — | 2 | 230 | ||||||||||||||||||||||||||||||
Georgia
|
3 | 395 | 7 | 750 | 1 | 134 | — | — | 11 | 1,279 | ||||||||||||||||||||||||||||||
North Carolina
|
1 | 106 | — | — | — | — | — | — | 1 | 106 | ||||||||||||||||||||||||||||||
Ohio
|
4 | 291 | 1 | 99 | — | — | 3 | 332 | 8 | 722 | ||||||||||||||||||||||||||||||
South Carolina
|
2 | 180 | — | — | — | — | — | — | 2 | 180 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total
|
12 | 1,202 | 8 | 849 | 1 | 134 | 3 | 332 | 24 | 2,517 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Facility Type
|
||||||||||||||||||||||||||||||||||||||||
Skilled Nursing
|
10 | 1,016 | 8 | 849 | 1 | 134 | 2 | 249 | 21 | 2,248 | ||||||||||||||||||||||||||||||
Assisted Living
|
2 | 186 | — | — | — | — | — | — | 2 | 186 | ||||||||||||||||||||||||||||||
Independent Living
|
— | — | — | — | — | — | 1 | 83 | 1 | 83 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total
|
12 | 1,202 | 8 | 849 | 1 | 134 | 3 | 332 | 24 | 2,517 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operator Affiliation
|
Number of
Facilities
(1)
|
Beds /Units
|
||||||
C.R. Management
|
6 | 689 | ||||||
Aspire
|
5 | 390 | ||||||
Peach Health Group
|
3 | 266 | ||||||
Symmetry Healthcare
|
2 | 180 | ||||||
Beacon Health Management
|
2 | 212 | ||||||
Vero Health Management
|
1 | 106 | ||||||
Empire
(2)
|
1 | 208 | ||||||
|
|
|
|
|||||
Subtotal
|
20 | 2,051 | ||||||
Regional Health Managed
|
3 | 332 | ||||||
Regional Health Operated
(3)
|
1 | 134 | ||||||
|
|
|
|
|||||
Total
|
24 | 2,517 | ||||||
|
|
|
|
(7)
|
Represents the number of facilities leased or subleased to separate tenants, of which each tenant is an affiliate of the entity named in the table above. For a more detailed discussion, see Note 6—Leases located in Part I, Item 1, “Financial Statements”, of this Quarterly Report; Note 6—
Leases
Portfolio of Healthcare Investments
|
(8)
|
Effective January 1, 2021, the Company entered into the PS Sublease with an affiliate of Empire for the Powder Springs Facility. See Note 6—
Leases
|
(9)
|
Effective January 1, 2021, Regional began operating the Tara Facility and entered into the Vero Management Agreement with Vero Health under which Vero Health provided management consulting services for the Tara Facility. On September 21, 2021, the Company notified Vero Health of Regional’s intention to terminate the Vero Management Agreement, effective October 1, 2021. Regional will continue to operate the Tara Facility and has entered into the Peach Management Agreement with Peach, dated as of September 22, 2021 and effective October 1, 2021, to provide management consulting services for the Tara Facility.
|
For the Twelve Months Ended
|
||||||||||||||||
Operating Metric
(1)
|
December 31,
2020
|
March 31,
2021
|
June 30,
2021
|
September 30,
2021
|
||||||||||||
Occupancy (%)
|
67.3 | % | 68.6 | % | 67.7 | % | 66.7 | % |
(5)
|
Excludes three managed facilities in Ohio.
|
Number of
Facilities
|
Licensed Beds
|
Annual Lease
Revenue
(1)
|
||||||||||||||||||
Amount
|
Percent
(%) |
Amount
‘000’s
|
Percent
(%) |
|||||||||||||||||
2023
|
1 | 62 | 3.0 | % | $ | 263 | 1.9 | % | ||||||||||||
2024
|
1 | 126 | 6.1 | % | 965 | 6.8 | % | |||||||||||||
2025
|
2 | 269 | 13.1 | % | 2,219 | 15.6 | % | |||||||||||||
2026
|
— | — | 0.0 | % | — | 0.0 | % | |||||||||||||
2027
|
7 | 750 | 36.6 | % | 5,241 | 36.9 | % | |||||||||||||
2028
|
4 | 328 | 16.0 | % | 2,352 | 16.6 | % | |||||||||||||
2029
|
1 | 106 | 5.2 | % | 538 | 3.8 | % | |||||||||||||
Thereafter
|
4 | 410 | 20.0 | % | 2,603 | 18.4 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total
|
20 | 2,051 | 100.0 | % | $ | 14,181 | 100.0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
(3)
|
Straight-line rent.
|
Three Months Ended
September 30, |
Nine Months Ended
September 30,
|
|||||||||||||||||||||||
(Amounts in 000’s)
|
2021
|
2020
|
Percent
Change (*)
|
2021
|
2020
|
Percent
Change (*)
|
||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||
Patient care revenues
|
$ | 2,309 | $ | — | NM | $ | 7,444 | $ | — | NM | ||||||||||||||
Rental revenues
|
4,136 | 4,308 | (4.0 | )% | 11,980 | 12,898 | (7.1 | )% | ||||||||||||||||
Management fees
|
248 | 244 | 1.6 | % | 743 | 732 | 1.5 | % | ||||||||||||||||
Other revenues
|
9 | 215 | (95.8 | )% | 84 | 224 | (62.5 | )% | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total revenues
|
6,702 | 4,767 | 40.6 | % | 20,251 | 13,854 | 46.2 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Expenses:
|
||||||||||||||||||||||||
Patient care expense
|
2,454 | — | NM | 6,911 | — | NM | ||||||||||||||||||
Facility rent expense
|
1,640 | 1,640 | 0.0 | % | 4,919 | 4,919 | 0.0 | % | ||||||||||||||||
Cost of management fees
|
153 | 161 | (5.0 | )% | 468 | 486 | (3.7 | )% | ||||||||||||||||
Depreciation and amortization
|
651 | 694 | (6.2 | )% | 1,953 | 2,239 | (12.8 | )% | ||||||||||||||||
General and administrative expenses
|
972 | 743 | 30.8 | % | 2,953 | 2,334 | 26.5 | % | ||||||||||||||||
Doubtful accounts expense
|
— | 790 | (100.0 | )% | 77 | 653 | (88.2 | )% | ||||||||||||||||
Other operating expenses
|
204 | 109 | 87.2 | % | 679 | 630 | 7.8 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total expenses
|
6,074 | 4,137 | 46.8 | % | 17,960 | 11,261 | 59.5 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Income from operations
|
628 | 630 | (0.3 | )% | 2,291 | 2,593 | (11.6 | )% | ||||||||||||||||
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
Nine Months Ended
September 30,
|
|||||||||||||||||||||||
(Amounts in 000’s)
|
2021
|
2020
|
Percent
Change (*)
|
2021
|
2020
|
Percent
Change (*)
|
||||||||||||||||||
Other expense (income) :
|
||||||||||||||||||||||||
Interest expense, net
|
669 | 692 | (3.3 | )% | 2,022 | 2,091 | (3.3 | )% | ||||||||||||||||
Gain on extinguishment of debt
|
(146 | ) | — | NM | (146 | ) | — | NM | ||||||||||||||||
Other expense, net
|
122 | 9 | NM | 839 | 144 | NM | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total other expense, net
|
645 | 701 | (8.0 | )% | 2,715 | 2,235 | 21.5 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
(Loss) income from continuing operations before income taxes
|
(17 | ) | (71 | ) | (76.1 | )% | (424 | ) | 358 | (218.4 | )% | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
(Loss) income from continuing operations
|
(17 | ) | (71 | ) | (76.1 | )% | (424 | ) | 358 | (218.4 | )% | |||||||||||||
Loss from discontinued operations, net of tax
|
(22 | ) | (2 | ) | NM | (97 | ) | (33 | ) | 193.9 | % | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Net loss
|
$ | (39 | ) | $ | (73 | ) | (46.6 | )% | $ | (521 | ) | $ | 325 | (260.3 | )% | |||||||||
|
|
|
|
|
|
|
|
*
|
|
Three Months Ended
September 30, |
||||||||||||
(Amounts in 000’s)
|
2021
|
2020
|
Percent
Change (*)
|
|||||||||
General and administrative expenses:
|
||||||||||||
Real Estate Services
|
$ | 861 | $ | 743 | 15.9 | % | ||||||
Healthcare Services
|
111 | — | NM | |||||||||
|
|
|
|
|||||||||
Total
|
$ | 972 | $ | 743 | 30.8 | % | ||||||
|
|
|
|
*
|
|
*
|
|
Nine Months Ended
September 30, |
||||||||
(Amounts in 000’s)
|
2021
|
2020
|
||||||
Net cash provided by operating activities—continuing operations
|
$ | 4,307 | $ | 1,933 | ||||
Net cash used in operating activities—discontinued operations
|
(195 | ) | (1,017 | ) | ||||
Net cash used in investing activities—continuing operations
|
(119 | ) | (209 | ) | ||||
Net cash used in financing activities—continuing operations
|
(1,859 | ) | (999 | ) | ||||
|
|
|
|
|||||
Net change in cash and restricted cash
|
2,134 | (292 | ) | |||||
Cash and restricted cash at beginning of period
|
7,492 | 8,038 | ||||||
|
|
|
|
|||||
Cash and restricted cash, ending
|
$ | 9,626 | $ | 7,746 | ||||
|
|
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Item 4.
|
Controls and Procedures.
|
Item 1.
|
Legal Proceedings.
|
Item 1A.
|
Risk Factors.
|
• |
increase our vulnerability to general adverse economic and industry conditions or a downturn in our business;
|
• |
require us to dedicate a substantial portion of cash flows from operations to interest and principal payments on outstanding debt, thereby limiting the availability of cash flow for dividends and other general corporate purposes;
|
• |
require us to maintain certain debt coverage and other financial ratios at specified levels, thereby reducing our financial flexibility;
|
• |
make it more difficult for us to satisfy our financial obligations;
|
• |
expose us to increases in interest rates for our variable rate debt;
|
• |
limit our ability to borrow additional funds on favorable terms, or at all, for working capital, debt service requirements, expansion of our business or other general corporate purposes;
|
• |
limit our ability to refinance all or a portion of our indebtedness on or before maturity on the same or more favorable terms, or at all;
|
• |
limit our flexibility in planning for, or reacting to, changes in our business and our industry;
|
• |
limit our ability to make acquisitions or take advantage of business opportunities as they arise;
|
• |
place us at a competitive disadvantage compared with our competitors that have less debt; and
|
• |
limit our ability to borrow additional funds, even when necessary to maintain adequate liquidity.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
Item 3.
|
Defaults upon Senior Securities.
|
Item 4.
|
Mine Safety Disclosures.
|
Item 5.
|
Other Information.
|
Item 6.
|
Exhibits.
|
• |
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
|
• |
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
|
• |
may apply standards of materiality in a way that is different from what may be viewed as material to investors; and
|
• |
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
|
Exhibit No.
|
Description
|
Method of Filing
|
||
3.1 | Amended and Restated Articles of Incorporation of Regional Health Properties, Inc., effective September 21, 2017 |
Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
3.2 | Certificate of Merger, effective September 29, 2017 |
Incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
3.3 | Articles of Amendment to Amended and Restated Articles of Incorporation of Regional Health Properties, Inc., effective December 31, 2018 |
Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form
8-K12
filed on December 28, 2018
|
||
3.4 | Amended and Restated Bylaws of Regional Health Properties, Inc., effective September 21, 2017 |
Incorporated by reference to Exhibit 3.3 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
4.1 | Form of Common Stock Certificate of Regional Health Properties, Inc. |
Incorporated by reference to Exhibit 4.2 of the Registrant’s Current Report on Form
8-K12B
filed on October 10, 2017
|
||
4.2 | Description of Regional Health Properties, Inc. Capital Stock |
Incorporated by reference to Exhibit 4.2 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2018
|
||
4.3* | AdCare Health Systems, Inc. 2011 Stock Incentive Plan |
Incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on
Form S-8
(Registration
No. 333-131542)
filed October 27, 2011
|
||
4.4* | AdCare Health Systems, Inc. 2020 Stock Incentive Plan |
Incorporated by reference to Exhibit 99.1 of the Registrant’s Current Report on Form
8-K
filed December 17, 2020
|
||
4.5* |
Form of
Non-Statutory
Stock Option Agreement (2011 Equity Plan)
|
Incorporated by reference to Exhibit 4.4 of the Registrant’s Registration Statement on
Form S-8
(Registration
No. 333-131542)
filed October 27, 2011
|
||
4.6* | Form of Incentive Stock Option Agreement (2011 Equity Plan) |
Incorporated by reference to Exhibit 4.5 of the Registrant’s Registration Statement on
Form S-8
(Registration
No. 333-131542)
filed October 27, 2011
|
||
4.7* | Form of Restricted Common Stock Agreement —Non Employee Director (2020 Equity Plan) |
Incorporated by reference to Exhibit 4.7 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2021
|
||
4.8* | Form of Restricted Common Stock Agreement —Employee (2020 Equity Plan) |
Incorporated by reference to Exhibit 4.8 of the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2021
|
||
4.9 | Form of Warrant to Purchase Common Stock of the Company (2011 Equity Plan) |
Incorporated by reference to Exhibit 4.3 to the Registrant’s Registration Statement on
Form S-3
(File
No. 333-175541)
|
Exhibit No.
|
Description
|
Method of Filing
|
||
4.10 | Warrant to Purchase 50,000 Shares of Common Stock, dated December 28, 2012, issued by AdCare Health Systems, Inc. to Strome Alpha Offshore Ltd. |
Incorporated by reference to Exhibit 4.21 of the Registrant’s Annual Report on
Form 10-K
for the year ended December 31, 2012
|
||
4.11 | Form of Warrant granted to management to Purchase Shares of AdCare Health Systems, Inc. dated November 20, 2007 |
Incorporated by reference to Exhibit 10.23.2 of the Registrant’s Annual Report on
Form 10-KSB
as amended March 31, 2008
|
||
4.12 | Lease, dated as of January 1, 2021, by and between ADK Georgia, LLC and PS Operator, LLC. |
Incorporated by reference to Exhibit 10.245 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2020
|
||
4.13 | Management Consulting Services Agreement, dated as of January 1, 2021 by and between Vero Health Management, LLC, and Tara Operator, LLC. |
Incorporated by reference to Exhibit 10.246 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2020
|
||
4.14 | Agreement Regarding Leases, dated as of On December 1, 2020, by and between Regional Health Properties, Inc., and 3223 Falligant Avenue Associates, L.P., 3460 Powder Springs Road Associates, L.P., Wellington Healthcare Services II, L.P. and Mansell Court Associates LLC. |
Incorporated by reference to Exhibit 10.247 of the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2020
|
||
4.15* | Employment Agreement, dated July 1, 2021, by and among Regional Health Properties, Inc. and Brent Morrison. |
Incorporated by reference to Exhibit 10.229 of the Registrant’s Amendment No. 1 to the Registration Statement on Form
S-4
filed by Regional Health Properties, Inc. on July 2, 2021 (File
No. 333-256667).
|
||
4.16 | Management Agreement, dated as of September 22, 2021, by and between Peach Health Group, LLC and Tara Operator, LLC. |
Incorporated by reference to Exhibit 99.1 of the Registrant’s Current Report on Form
8-K
filed on September 27, 2021
|
||
4.17 | Promissory Note, dated as of September 30, 2021, by and between Coosa Nursing, LLC and the Exchange Bank of Alabama. | Filed herewith | ||
4.18 | Extension and Modification Agreement, dated as of October 01, 2021, by and between Meadowood Holdings Property, LLC and the Exchange Bank of Alabama. | Filed herewith | ||
4.19 | Second Renewal Amended and Restated Promissory Note, dated as of August 17, 2021, by and between Regional Health Properties, Inc. and KeyBank National Association. | Filed herewith | ||
31.1 | Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act | Filed herewith | ||
31.2 | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act | Filed herewith | ||
32.1 | Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith |
Exhibit No.
|
Description
|
Method of Filing
|
||
32.2 | Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith | ||
101.INS | Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | Filed herewith | ||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | Filed herewith | ||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith | ||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith | ||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed herewith | ||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith | ||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | Filed herewith |
* |
Identifies a management contract or compensatory plan or arrangement
|
REGIONAL HEALTH PROPERTIES, INC. (Registrant)
|
||||
Date: | November 12, 2021 | /s/ Brent Morrison | ||
|
|
|||
Brent Morrison | ||||
Chief Executive Officer and Director (Principal Executive Officer) | ||||
Date: | November 12, 2021 | /s/ Benjamin A. Waites | ||
|
|
|||
Benjamin A. Waites | ||||
Chief Financial Officer and Vice President (Principal Financial and Accounting Officer) |
(a)
|
Exhibit List
|
* |
Identifies a management contract or compensatory plan or arrangement.
|
** |
Filed herewith.
|
+ |
Previously filed.
|
(a) |
The undersigned registrant hereby undertakes:
|
(1) |
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
|
(i) |
To include any prospectus required by Section 10(a)(3) of the Securities Act;
|
(ii) |
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
|
(iii) |
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
|
(2) |
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide
|
(3) |
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;
|
(4) |
That, for purposes of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness.
Provided
however
|
(5) |
That, for the purpose of determining liability of the registrants under the Securities Act to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
|
(i) |
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
|
(ii) |
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
|
(iii) |
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
|
(iv) |
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
|
(b) (1) |
The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form.
|
(2) |
The registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (a)(1) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act and is used in connection with an offering of securities subject to Rule 415, will be filed as part of an amendment to the registration statement and will not be used until such an amendment is effective, and that, for purposes of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide
|
(c) |
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by the registrant is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
|
(d) |
The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
|
(e) |
The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
|
REGIONAL HEALTH PROPERTIES, INC.
|
||
By: |
/s/ Brent Morrison
|
|
Brent Morrison | ||
Chief Executive Officer and President
|
Signature
|
Title
|
Date
|
||
/s/ Brent Morrison
Brent Morrison
|
Director, Chief Executive Officer and President
(Principal Executive Officer)
|
February 11, 2022 | ||
/s/ Benjamin A. Waites
Benjamin A. Waites
|
Chief Financial Officer and Vice President
(Principal Financial Officer and Principal Accounting Officer)
|
February 11, 2022 | ||
*
Michael J. Fox
|
Director | February 11, 2022 | ||
*
Kenneth W. Taylor
|
Director | February 11, 2022 | ||
*
David A. Tenwick
|
Director | February 11, 2022 |
*By: |
/s/ Brent Morrison
|
|
Brent Morrison,
Attorney-in-Fact
|
Exhibit 5.1
1105 W. Peachtree St. NE, Suite 1000
Atlanta, Georgia 30309-3608
Tel: 404 815-3500
www.sgrlaw.com
February 11, 2022
Regional Health Properties, Inc.
454 Satellite Boulevard NW
Suite 100
Suwanee, Georgia 30024
Ladies and Gentlemen:
We have acted as Georgia counsel to Regional Health Properties, Inc., a Georgia corporation (the Company), in connection with its Registration Statement on Form S-4 (Registration No. 333-256667), originally filed on June 1, 2021 with the U.S. Securities and Exchange Commission (the Commission) under the Securities Act of 1933, as amended (the Act), as amended by Amendment No. 1 thereto filed on July 2, 2021 and Amendment No. 2 thereto to be filed on or about the date hereof (such Registration Statement, as amended at the effective date thereof, being referred to herein as the Registration Statement), relating to the proposed issuance of up to 2,811,535 shares of the Companys 12.5% Series B Cumulative Redeemable Preferred Shares (the Series B Preferred Shares), issuable pursuant to an exchange offer (the Exchange Offer) by the Company to exchange Series B Preferred Shares for the Companys 10.875% Series A Cumulative Redeemable Preferred Shares (the Series A Preferred Shares), as described in the Registration Statement. This opinion letter is furnished to you in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Act. Unless otherwise indicated in this opinion letter, each capitalized term used herein has the meaning ascribed to it in the Registration Statement.
In connection with this opinion letter, we have examined and relied upon, among other things: (i) the Registration Statement, including the annexes thereto; (ii) the Tender Offer Statement on Schedule TO-C filed by the Company with the Commission on June 1, 2021, as amended on July 6, 2021, relating to the Exchange Offer; (iii) the Companys Amended and Restated Articles of Incorporation, as amended and as currently in effect, incorporated by reference as exhibits to the Registration Statement (the Charter); (iv) the Companys Amended and Restated Bylaws, as currently in effect, incorporated by reference as an exhibit to the Registration Statement; and (v) originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and such agreements, documents, certificates and receipts of public officials, and certificates of officers or other representatives of the Company, and such other documents, certificates and records, as we have deemed necessary or appropriate as a basis for the opinion set forth below.
In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as facsimile, electronic, certified or photostatic copies, and
Regional Health Properties, Inc.
February 11, 2022
Page 2
the authenticity of the originals of such copies. We also have assumed that: (i) the Registration Statement, and any amendments thereto (including post-effective amendments), will have become effective and such effectiveness shall not have been terminated or rescinded; (ii) the shareholders of the Company will have approved the proposals set forth in the proxy statement/prospectus included in the Registration Statement (other than the Adjournment Proposal); and (iii) Articles of Amendment to the Charter reflecting the Series B Charter Amendments, in the forms submitted for our review and attached as Annex C-1 and Annex C-2 to the proxy statement/prospectus included in the Registration Statement, will be duly executed and filed with the Secretary of State of the State of Georgia in accordance with Section 14-2-1004 of the Georgia Business Corporation Code and that the Company will have paid the fees and other charges required to be paid in connection with the filing thereof. As to any facts material to the opinion expressed herein that we did not independently establish or verify, we have relied upon statements and representations of officers and other representatives of the Company and of public officials. We have also made such investigations of law as we have deemed appropriate.
Our opinion set forth below is limited to the Georgia Business Corporation Code, as amended and as currently in effect. We express no opinion herein as to any other laws, statutes, ordinances, rules or regulations.
Based upon and subject to the foregoing, we are of the opinion that, following the acceptance of the Series A Preferred Shares for payment for the issuance of the Series B Preferred Shares in accordance with the Exchange Offer, the Series B Preferred Shares, when issued in accordance with the terms and conditions of the Exchange Offer, will be validly issued, fully paid and nonassessable.
Our conclusions are limited to the matters expressly set forth as our opinion herein, and no opinion is implied or is to be inferred beyond the matters expressly so stated. Such opinion is given as of the date hereof, and we expressly decline any undertaking to revise or update such opinion subsequent to the date hereof or to advise you of any matter arising subsequent to the date hereof that would cause us to modify, in whole or in part, such opinion.
We hereby consent to the filing of this opinion letter with the Commission as Exhibit 5.1 to the Registration Statement. We also consent to the reference to our firm under the caption Legal Matters in the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission promulgated thereunder.
Sincerely, |
/s/ Smith, Gambrell & Russell, LLP |
Exhibit 8.1
910 LOUISIANA HOUSTON, TEXAS 77002-4995
TEL +1 713.229.1234 FAX +1 713.229.1522 BakerBotts.com |
AUSTIN BRUSSELS DALLAS DUBAI HOUSTON LONDON |
MOSCOW NEW YORK PALO ALTO RIYADH SAN FRANCISCO WASHINGTON |
February 11, 2022
Regional Health Properties, Inc.
454 Satellite Boulevard NW, Suite 100
Suwanee, Georgia 30024
Ladies and Gentlemen:
We have acted as counsel for Regional Health Properties, Inc., a Georgia corporation (the Company), with respect to certain legal matters in connection with its registration statement on Form S-4 (Registration No. 333-256667) (such Registration Statement, as amended at the effective date thereof, being referred to herein as the Registration Statement), originally filed with the Securities and Exchange Commission (the Commission) on June 1, 2021 under the Securities Act of 1933, as amended, relating to the proposed issuance of up to 2,811,535 shares of the Companys 12.5% Series B Cumulative Redeemable Preferred Shares (the Series B Preferred Stock) pursuant to an offer by the Company to exchange any and all of the outstanding shares of the Companys 10.875% Series A Cumulative Redeemable Preferred Shares for newly issued shares of the Series B Preferred Stock. We prepared the discussion (the Discussion) set forth under the caption Material U.S. Federal Income Tax Considerations in the prospectus forming a part of the Registration Statement (the Prospectus).
This opinion is based on various facts and assumptions, and is conditioned upon certain representations made to us by the Company as to factual matters concerning its business, properties and governing documents as set forth in the Registration Statement, the Prospectus and the Companys responses to our examinations and inquiries.
In our capacity as counsel to the Company, we have made such legal and factual examinations and inquiries, including an examination of originals or copies certified or otherwise identified to our satisfaction of such documents, corporate records and other instruments, as we have deemed necessary or appropriate for purposes of this opinion. In our examination, we have assumed the authenticity of all documents submitted to us as originals, the genuineness of all signatures thereon, the legal capacity of natural persons executing such documents and the conformity to authentic original documents of all documents submitted to us as copies. For purposes of our opinion, we have not made an independent investigation or audit of the facts set forth in the above-referenced documents or representations. In addition, in rendering this opinion we have assumed the truth and accuracy of all representations and statements made to us which are qualified as to knowledge or belief, without regard to such qualification.
Regional Health Properties, Inc. | - 2 - | February 11, 2022 |
We hereby confirm that all statements of legal conclusions contained in the Discussion constitute the opinion of Baker Botts L.L.P. with respect to the matters set forth therein as of the date hereof, subject to the assumptions, qualifications and limitations set forth therein. This opinion is based on various statutory provisions, regulations promulgated thereunder and interpretations thereof by the Internal Revenue Service and the courts having jurisdiction over such matters, all of which are subject to change either prospectively or retroactively. Also, any variation or difference in the facts from those set forth in the representations described above, including in the Registration Statement and the Prospectus, may affect the conclusions stated herein.
No opinion is expressed as to any matter not discussed in the Discussion. We are opining herein only as to the federal income tax matters described above, and we express no opinion with respect to the applicability to, or the effect on, any transaction of other federal laws, foreign laws, the laws of any state or any other jurisdiction or as to any matters of municipal law or the laws of any other local agencies within any state.
We hereby consent to the filing of this opinion of counsel as Exhibit 8.1 to the Registration Statement. We also consent to the reference to our Firm and this opinion in the Discussion and under the heading Legal Matters in the Prospectus. In giving this consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder.
The opinion expressed herein is given as of the date hereof and we undertake no obligations to supplement this opinion if any applicable law changes after such date or if we become aware of any facts that might change the opinion expressed herein after such date or for any other reason.
Very truly yours,
/s/ Baker Botts L.L.P.
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
Regional Health Properties, Inc.
Suwanee, Georgia
We hereby consent to the use, in this Registration Statement on Form S-4/A, of our report dated March 29, 2021, with respect to the consolidated balance sheets of Regional Health Properties, Inc. (the Company) as of December 31, 2020 and 2019, and the related consolidated statements of operations, stockholders equity, and cash flows for each of the years in the two-year period ended December 31, 2020, which appears in the Companys annual report on Form 10-K for the year ended December 31, 2020, and to the reference to our firm under the heading Experts.
/s/ Cherry Bekaert LLP |
Atlanta, Georgia
February 11, 2022
Exhibit 99.1
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
10.875% Series A Cumulative Redeemable Preferred Shares
(CUSIP No. 75903M200)
of
Regional Health Properties, Inc.
for
12.5% Series B Cumulative Redeemable Preferred Shares
of
Regional Health Properties, Inc.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., NEW YORK CITY TIME, ON , 2022, UNLESS EXTENDED (SUCH DATE AND TIME FOR THE EXCHANGE OFFER, AS MAY BE EXTENDED, THE EXPIRATION DATE). TENDERED SHARES OF SERIES A PREFERRED STOCK (AS DEFINED BELOW) MAY NOT BE WITHDRAWN AFTER THE EXPIRATION DATE.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
Continental Stock Transfer & Trust Company
1 State Street 30th Floor
New York, NY 10004
Attention: Corporate Actions Department
Telephone: (917) 262-2378
THE INFORMATION AGENT FOR THE EXCHANGE OFFER IS:
Morrow Sodali LLC
333 Ludlow Street
5th Floor, South Tower
Stamford, CT 06902
Individuals may call toll-free: (800) 662-5200
Banks and Brokers may call: (203) 658-9400
Email: RHE@investor.morrowsodali.com
DELIVERY OF THIS LETTER TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. PLEASE DO NOT DELIVER THIS LETTER OR SHARES OF SERIES A PREFERRED STOCK TO ANYONE OTHER THAN THE EXCHANGE AGENT.
1
Capitalized terms used but not defined herein shall have the same meanings given to them in the Proxy Statement/Prospectus (as defined below).
The undersigned acknowledges that he or she has received the Proxy Statement/Prospectus dated , 2022 (as it may be supplemented and amended from time to time, the Proxy Statement/Prospectus), of Regional Health Properties, Inc., a Georgia corporation (the Company, our, we, and us), and this Letter of Transmittal (this Letter), which together constitute the Companys offer to exchange (the Exchange Offer) any and all outstanding shares of its 10.875% Series A Cumulative Redeemable Preferred Shares (the Series A Preferred Stock) tendered in the Exchange Offer for newly issued shares of the Companys 12.5% Series B Cumulative Redeemable Preferred Shares (the Series B Preferred Stock).
In exchange for each share of Series A Preferred Stock properly tendered (and not validly withdrawn) prior to 11:59 p.m., New York City time, on , 2022 (such time and date, as the same may be extended, the Expiration Date) and accepted by us, participating holders of Series A Preferred Stock will receive one share of Series B Preferred Stock (the Exchange Consideration).
Holders that tender their shares of Series A Preferred Stock that are accepted for exchange will forfeit any claim to all accumulated and unpaid dividends on such shares of Series A Preferred Stock, regardless of when accumulated, whether before or after the date hereof and including any interest that may accumulate through the settlement date for the Exchange Offer.
The Exchange Offer will expire at the Expiration Date, unless extended or earlier terminated by us. Tendered shares of Series A Preferred Stock may be withdrawn at any time prior to the expiration of the Exchange Offer. In addition, you may withdraw any tendered shares of Series A Preferred Stock if we have not accepted them for exchange within 40 business days from the commencement of the Exchange Offer on , 2022.
In addition to the Charter Amendment Conditions and the Series B Preferred Designation Condition (each as defined in the Proxy Statement/Prospectus), the Exchange Offer is also conditioned on, among other things, that (i) the registration statement of which the Proxy Statement/Prospectus is a part (the Registration Statement) shall have become effective in accordance with the provisions of the Securities Act of 1933, as amended (the Securities Act), no stop order shall have been issued by the Securities and Exchange Commission (SEC) and no proceeding seeking such stop order has been threatened or initiated by the SEC that remains pending; (ii) there shall have not been instituted, threatened in writing or be pending any action or proceeding before or by any court, governmental, regulatory or administrative agency or instrumentality, or by any other person, in connection with the Exchange Offer, that is, or is reasonably likely to be, in our reasonable judgment, materially adverse to our business, operations, properties, condition, assets, liabilities or prospects, or which would or might, in our reasonable judgment, prohibit, prevent, restrict or delay consummation of the Exchange Offer or materially impair the contemplated benefits to us (as set forth in the Proxy Statement/Prospectus in the section titled The Exchange OfferReasons for the Exchange Offer) of the Exchange Offer, (iii) no order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been proposed, enacted, entered, issued, promulgated, enforced or deemed applicable by any court or governmental, regulatory or administrative agency or instrumentality that, in our reasonable judgment, would or would be reasonably likely to prohibit, prevent, restrict or delay consummation of the Exchange Offer or materially impair the contemplated benefits to us of the Exchange Offer, or that is, or is reasonably likely to be, materially adverse to our business, operations, properties, condition, assets, liabilities or prospects, (iv) there shall have not occurred or be reasonably likely to occur any material adverse change to our business, operations, properties, condition, assets, liabilities or prospects and (v) there shall have not occurred (a) any general suspension of, or limitation on prices for, trading in securities in U.S. securities or financial markets, (b) a declaration of a banking moratorium or any suspension of payments in respect to banks in the United States, (c) any limitation (whether or not mandatory) by any government or governmental, regulatory or administrative authority, agency or instrumentality, domestic or foreign, or other event that, in our reasonable judgment, would or would be reasonably likely to affect the extension of credit by banks or other lending institutions or (d) a natural disaster or the commencement or
2
material worsening of a war, armed hostilities, act of terrorism, pandemic or other international or national calamity directly or indirectly involving the United States which, in our reasonable judgment, diminishes general economic activity to a degree sufficient to materially reduce demand for our business. See the section titled The Exchange OfferConditions of the Exchange Offer in the Proxy Statement/Prospectus for a complete description of the conditions of the Exchange Offer. We reserve the right to extend or terminate the Exchange Offer if any condition of the Exchange Offer is not satisfied and otherwise to amend the Exchange Offer in any respect.
This Letter is to be completed by holders of the Series A Preferred Stock (Holders) if tenders are not made in accordance with the procedures mandated by the Automated Tender Offer Program (ATOP) of The Depository Trust Company (DTC) set forth in the Proxy Statement/Prospectus in the section titled The Exchange OfferThe Depository Trust Company Book-Entry Transfer Procedures. The Company will accept shares of Series A Preferred Stock for exchange tendered pursuant to the Exchange Offer through ATOP only after the Exchange Agent identified on the first page of this Letter (the Exchange Agent) timely receives, prior to the Expiration Date, (i) a timely book-entry confirmation that such shares of Series A Preferred Stock have been transferred into the Exchange Agents account at DTC and (ii) a properly transmitted agents message. The term agents message means a message transmitted by DTC to, and received by, the Exchange Agent and forming a part of a book-entry confirmation, stating that DTC has received an express acknowledgement from the participant in DTC tendering shares of Series A Preferred Stock that such participant has received and agrees to be bound by the terms of the Exchange Offer and that the Company may enforce such agreement against the participant. Delivery of documents to DTC does not constitute delivery to the Exchange Agent.
If a Holder of Series A Preferred Stock desires to tender its shares of Series A Preferred Stock for exchange pursuant to the Exchange Offer, but (i) the procedure for book-entry transfer cannot be completed on a timely basis, or (ii) time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date, the Holder can still tender its shares of Series A Preferred Stock according to the guaranteed delivery procedures set forth in the Proxy Statement/Prospectus in the section titled The Exchange OfferGuaranteed Delivery Procedures.
The Company reserves the right, at any time, or from time to time, to extend the Exchange Offer and to amend any of the terms and conditions of the Exchange Offer at its discretion.
Please read this entire Letter and the Proxy Statement/Prospectus carefully before checking any box below. The instructions included in this Letter must be followed.
YOU MUST SIGN THIS LETTER IN THE APPROPRIATE SPACE PROVIDED BELOW, WITH SIGNATURE GUARANTEE IF REQUIRED.
The undersigned has completed the box below and signed this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer.
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List in the table provided below the shares of Series A Preferred Stock to which this Letter relates. If the space provided below is inadequate, list the information requested above on a separate signed schedule and attach that schedule to this Letter.
TENDERING HOLDERS COMPLETE THIS BOX:
DESCRIPTION OF SERIES A
PREFERRED STOCK (CUSIP NO. 75903M200) |
1 | 2 | ||||||
Name(s) and Address(es) of Registered Holder(s) |
Aggregate Number of Shares
of Series A Preferred Stock |
Number of Shares of
Series A Preferred Stock Tendered* |
||||||
|
* |
Unless otherwise indicated in this column, a Holder will be deemed to have tendered ALL of its shares of Series A Preferred Stock indicated in column 1. |
The names of the Holders should be printed exactly as they appear on the certificate(s) listing the Holder as the owner of such shares of Series A Preferred Stock in the DTC system.
IF TENDERED SHARES OF SERIES A PREFERRED STOCK ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE RELEVANT ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC, COMPLETE THE FOLLOWING:
Name of Tendering Institution |
||
Account Number |
Transaction Code Number |
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NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer (and if the Exchange Offer is extended or amended, the terms of any such extension or amendment), the undersigned hereby tenders to the Company the above described shares of Series A Preferred Stock in exchange for the Exchange Consideration. Subject to, and effective upon, the acceptance for exchange of the shares of Series A Preferred Stock tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company, all right, title and interest in and to such shares of Series A Preferred Stock as are being tendered hereby.
The undersigned understands that the undersigneds tender of shares of Series A Preferred Stock pursuant to any of the procedures described in the Proxy Statement/Prospectus and in the instructions hereto and acceptance thereof by the Company will constitute a binding agreement between the undersigned and the Company. By properly tendering any shares of Series A Preferred Stock, the undersigned understands that it will waive any right to receive accrued but unpaid dividends on such security.
The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the undersigneds true and lawful agent and attorney-in-fact with respect to such shares of Series A Preferred Stock, with full power of substitution, among other things, to cause the shares of Series A Preferred Stock to be assigned, transferred and exchanged. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the shares of Series A Preferred Stock and to acquire the Exchange Consideration issuable upon the exchange of such shares of Series A Preferred Stock and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same is accepted by the Company.
The undersigned will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the sale, assignment and transfer of the shares of Series A Preferred Stock tendered hereby. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in the Proxy Statement/Prospectus in the section titled The Exchange OfferWithdrawal Rights and Instruction 8 below.
The undersigned hereby represents and warrants that it is not prohibited from selling to or otherwise doing business with U.S. Persons and persons subject to the jurisdiction of the United States by any of the regulations of the U.S. Department of Treasury Office of Foreign Assets Control, pursuant to 31 C.F.R. Chapter V, or any legislation or executive orders relating thereto.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED TENDERING HOLDERS COMPLETE THIS BOX ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE SHARES OF SERIES A PREFERRED STOCK AS SET FORTH IN THE SECTIONS ABOVE.
Unless otherwise indicated herein in the box entitled Special Issuance Instructions or Special Delivery Instructions below, please issue and deliver the Exchange Consideration issued in exchange for the shares of Series A Preferred Stock accepted for exchange, and return any shares of Series A Preferred Stock not tendered or not accepted, in the name(s) of the undersigned (or credit such shares of Series A Preferred Stock to the undersigneds account at DTC, as applicable). If the Exchange Consideration is to be issued to a person other than the person(s) signing this Letter, or if the Exchange Consideration is to be deposited to an account different
5
from the accounts of the person(s) signing this Letter, the appropriate boxes of this Letter should be completed. If shares of Series A Preferred Stock are surrendered by Holder(s) that have completed either the box entitled Special Issuance Instructions or Special Delivery Instructions below, signature(s) on this Letter must be guaranteed (see Instruction 2). The undersigned recognizes that the Company has no obligation pursuant to the Special Issuance Instructions or Special Delivery Instructions to transfer or deliver any shares of Series A Preferred Stock from the name of the registered Holder(s) thereof if the Company does not accept for exchange any of the shares of Series A Preferred Stock so tendered for exchange.
The undersigned understands that the delivery and surrender of the shares of Series A Preferred Stock are not effective, and the risk of loss of the shares of Series A Preferred Stock does not pass to the Exchange Agent, until receipt, prior to the Expiration Date, by the Exchange Agent of (i) a timely book-entry confirmation that shares of Series A Preferred Stock have been transferred into the Exchange Agents account at DTC and (ii) a properly completed and duly executed Letter and all other required documents or a properly transmitted agents message. All questions as to the form of all documents and the validity (including the time of receipt) and acceptance of tenders and withdrawals of shares of Series A Preferred Stock will be determined by the Company, in its sole discretion, which determination shall be final and binding.
SPECIAL ISSUANCE INSTRUCTIONS (See
Instruction 3) |
SPECIAL DELIVERY INSTRUCTIONS (See
Instruction 3) |
|||||
To be completed ONLY (i) if shares of Series A Preferred Stock in an amount not tendered, or Exchange Consideration issued in exchange for shares of Series A Preferred Stock accepted for exchange, are to be issued in the name of someone other than the undersigned or (ii) if shares of Series A Preferred Stock tendered by book-entry transfer that are not exchanged are to be returned by credit to an account maintained at DTC other than to the account indicated above. | To be completed ONLY if shares of Series A Preferred Stock in an amount not tendered, or Exchange Consideration issued in exchange for shares of Series A Preferred Stock accepted for exchange, are to be delivered to someone other than the registered Holder of the shares of Series A Preferred Stock whose name(s) appear(s) above, or such registered Holder at an address other than that shown above. | |||||
Issue |
☐ Exchange Consideration to: ☐ unexchanged shares of Series A Preferred Stock to: (check as applicable) |
Deliver |
☐ Exchange Consideration to: ☐ unexchanged shares of Series A Preferred Stock to: (check as applicable) |
Name(s) |
Name(s) |
|||||||
(Please Type or Print) | (Please Type or Print) | |||||||
(Please Type or Print) | (Please Type or Print) | |||||||
Address |
Address |
|||||||
(Including Zip Code) | (Including Zip Code) | |||||||
Credit the following delivered by book-entry transfer to the DTC account set forth below. ☐ Exchange Consideration: ☐ unexchanged shares of Series A Preferred Stock: (check as applicable)
|
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. | |||||||
(DTC Account Number, if applicable) |
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PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
,2022 |
,2022 |
||
(Signature(s) of Owners(s)) (Date) |
Area Code and
Telephone Number: |
If a Holder is tendering any shares of Series A Preferred Stock, this Letter must be signed by the registered Holder(s) as the name(s) appear(s) on the certificate(s) for the shares of Series A Preferred Stock or by any person(s) authorized to become registered Holder(s) by endorsements and documents transmitted herewith. If the signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 2.
Name(s): |
(Please Type or Print) |
Capacity (full title): |
Address: |
(Including Zip Code) |
Tax Identification or Social Security Number: |
|
SIGNATURE GUARANTEE
(If required by Instruction 2) |
Signature(s) Guaranteed by an Eligible Institution: |
(Title) |
(Name and Firm) | ||
Dated: , 2022 |
|
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INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter; Guaranteed Delivery Procedures. This Letter is to be completed by Holders of Series A Preferred Stock if tenders are not made in accordance with the procedures mandated by DTCs ATOP set forth in the Proxy Statement/Prospectus in the section titled The Exchange OfferThe Depository Trust Company Book-Entry Transfer Procedures. In the case of tenders through ATOP, the Company will accept shares of Series A Preferred Stock for exchange pursuant to the Exchange Offer only after the Exchange Agent timely receives, prior to the Expiration Date, (i) a timely book-entry confirmation that such shares of Series A Preferred Stock have been transferred into the Exchange Agents account at DTC and (ii) a properly transmitted agents message.
If a Holder of Series A Preferred Stock desires to tender its shares of Series A Preferred Stock for exchange pursuant to the Exchange Offer, but (i) the procedure for book-entry transfer cannot be completed on a timely basis or (ii) time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date, the Holder can still tender its shares of Series A Preferred Stock if all the following conditions are met:
(i) |
the tender is made by or through a bank, broker dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program or a bank, broker, dealer, credit union, savings association or other entity that is an eligible guarantor institution, as that term is defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended (an Eligible Institution); |
(ii) |
the Exchange Agent receives by hand, mail, overnight courier, facsimile or electronic mail transmission, prior to the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery in the form attached as an exhibit to the Registration Statement, with signatures guaranteed by an Eligible Institution; and |
(iii) |
a confirmation of a book-entry transfer into the Exchange Agents account at DTC of all shares of Series A Preferred Stock delivered electronically, together with this properly completed and duly executed Letter with any required signature guarantees (or, in the case of a book-entry transfer, an agents message in accordance with ATOP), and any other documents required by this Letter, must be received by the Exchange Agent within two days that the NYSE American LLC is open for trading after the date the Exchange Agent receives such Notice of Guaranteed Delivery. |
THE METHOD OF DELIVERY OF THIS LETTER AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, THEN REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
The delivery of the shares of Series A Preferred Stock and all other required documents will be deemed made only when confirmed by the Exchange Agent.
See the section titled The Exchange Offer in the Proxy Statement/Prospectus.
2. Signatures on this Letter; Assignments and Endorsements; Guarantee of Signatures. If this Letter is signed by the registered Holder of the shares of Series A Preferred Stock tendered hereby, the signature must correspond exactly with the name as it appears on a security position listing the Holder as the owner of such shares of Series A Preferred Stock in the DTC system without any change whatsoever.
If any tendered shares of Series A Preferred Stock are owned of record by two or more joint owners, all of such owners must sign this Letter.
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If any tendered shares of Series A Preferred Stock are registered in different names, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations.
When this Letter is signed by the registered Holder(s) of the shares of Series A Preferred Stock specified herein and tendered hereby, no separate assignments of shares are required. If, however, the Exchange Consideration is to be issued to a person other than the registered Holder, then separate assignments of shares are required.
If this Letter or any assignments of shares are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted.
Signatures on assignments of shares required by this Instruction 2 must be guaranteed by an Eligible Institution.
Signatures on this Letter need not be guaranteed by an Eligible Institution, provided the shares of Series A Preferred Stock are tendered: (i) by a registered Holder of shares of Series A Preferred Stock (including any participant in the DTC system whose name appears on a security position listing as the Holder of such shares of Series A Preferred Stock) who has not completed the box entitled either Special Issuance Instructions or Special Delivery Instructions on this Letter; or (ii) for the account of an Eligible Institution.
3. Special Issuance and Delivery Instructions. If Exchange Consideration and/or unexchanged shares of Series A Preferred Stock are to be issued in the name of a person other than the signer of this Letter, or if Exchange Consideration and/or unexchanged shares of Series A Preferred Stock are to be sent to someone other than the signer of this Letter or to an address other than that of the signer of this Letter, the appropriate boxes on this Letter should be completed. Certificates for shares of Series A Preferred Stock not exchanged will be returned by mail or, if tendered by book-entry transfer, by crediting the account indicated by the signer maintained at DTC. If no such instructions are given, such shares of Series A Preferred Stock not exchanged will be credited to the proper account maintained at DTC. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated.
4. Transfer Taxes. The Company will pay all transfer taxes, if any, applicable to the transfer of shares of Series A Preferred Stock to it or its order pursuant to the Exchange Offer, provided that such transfer taxes will not be considered to include income taxes, franchise taxes, or any other taxes that are not occasioned solely by the transfer of the shares of Series A Preferred Stock. If, however, any shares of Series A Preferred Stock not tendered or accepted for exchange are to be delivered to, or issued in the name of, any person other than the registered Holder of such Series A Preferred Stock, any shares are to be delivered to, or issued in the name of, any person other than the registered Holder of the Series A Preferred Stock tendered hereby, or if tendered shares of Series A Preferred Stock are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the exchange of shares of Series A Preferred Stock pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered Holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering Holder.
5. Waiver of Conditions. The Company reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Proxy Statement/Prospectus; however, the Charter Amendment Conditions, the Series B Preferred Designation Condition and the condition that the Registration Statement be declared effective may not be waived.
6. No Conditional Tenders. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering Holders of Series A Preferred Stock, by execution of this Letter, shall waive any right to receive notice of the acceptance of their shares of Series A Preferred Stock for exchange.
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Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of shares of Series A Preferred Stock nor shall any of them incur any liability for failure to give any such notice.
7. Partial Tenders. If less than all the shares of Series A Preferred Stock evidenced by any certificates submitted (including via DTC) are to be tendered, fill in the number of shares of Series A Preferred Stock that are to be tendered in the box entitled Tendering Holders Complete this Box. In such case, new certificate(s) for the remainder of the shares of Series A Preferred Stock that were evidenced by your old certificate(s) will only be sent to the Holder of the shares of Series A Preferred Stock (unless the box entitled Special Delivery Instructions is checked) promptly after the expiration of the Exchange Offer. All shares of Series A Preferred Stock represented by certificates delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated.
8. Withdrawal Rights. Tenders of shares of Series A Preferred Stock may be withdrawn (i) at any time prior to the Expiration Date or (ii) if not previously returned by the Company, after 40 business days from the commencement of the Exchange Offer if the Company has not accepted the tendered shares of Series A Preferred Stock for exchange by that date. You may also validly withdraw shares of Series A Preferred Stock that you tender if the related Exchange Offer is terminated without any shares of Series A Preferred Stock being accepted or as required by applicable law. If such termination occurs, the shares of Series A Preferred Stock will be returned to the tendering Holder promptly.
For a withdrawal of a tender of shares of Series A Preferred Stock to be effective, a written notice of withdrawal, sent by facsimile transmission, receipt confirmed by telephone, or letter, or a computer-generated notice of withdrawal transmitted by DTC on behalf of the Holder in accordance with the standard operating procedure of DTC, must be received by the Exchange Agent at the address set forth above prior to the Expiration Date or after 40 business days from the commencement of the Exchange Offer if the Company has not accepted the tendered shares of Series A Preferred Stock for exchange by that date. Any such notice of withdrawal must (i) specify the name of the Holder that tendered the shares of Series A Preferred Stock to be withdrawn (or, if tendered by book-entry transfer, the name of the DTC participant holding such shares on the books of DTC), (ii) identify the shares of Series A Preferred Stock to be withdrawn, (iii) specify the number of shares of Series A Preferred Stock to be withdrawn, (iv) include a statement that the Holder is withdrawing its election to have the shares of Series A Preferred Stock exchanged, (v) be signed by the Holder in the same manner as the original signature on this Letter by which the shares of Series A Preferred Stock were tendered or as otherwise described above, including any required signature guarantees, and (vi) specify the name in which any of the shares of Series A Preferred Stock are to be registered, if different from that of the person that tendered the shares of Series A Preferred Stock (or, in the case of shares tendered by book-entry, the name and account number of the DTC participant to be credited with the withdrawn shares).
A Holder who validly withdraws previously tendered shares of Series A Preferred Stock prior to the Expiration Date and does not validly re-tender shares of Series A Preferred Stock prior to such Expiration Date will not receive the Exchange Consideration. A Holder of shares of Series A Preferred Stock who validly withdraws previously tendered shares of Series A Preferred Stock prior to the Expiration Date and validly re-tenders shares of Series A Preferred Stock prior to such Expiration Date will receive the Exchange Consideration. If the shares of Series A Preferred Stock to be withdrawn have been delivered or otherwise identified to the Exchange Agent, a signed notice of withdrawal is effective immediately upon receipt by the Exchange Agent of written or facsimile transmission of the notice of withdrawal (or receipt of a request via DTC) even if physical release is not yet effected. A withdrawal of shares of Series A Preferred Stock can only be accomplished in accordance with the foregoing procedures. The Company will have the right, which it may waive, to reject the defective withdrawal of shares of Series A Preferred Stock as invalid and ineffective. If the Company waives its rights to reject a defective withdrawal of shares of Series A Preferred Stock, subject to the other terms and conditions set forth in this Letter and in the Proxy Statement/Prospectus, the Holders Series A Preferred Stock will be withdrawn and the Holder will not be entitled to the Exchange Consideration. If the Holder withdraws its Series A Preferred Stock, the Holder will have the right to
10
re-tender them prior to the Expiration Date in accordance with the procedures described above and in the Proxy Statement/Prospectus for tendering outstanding shares of Series A Preferred Stock.
9. Irregularities. The Company will determine, in its sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of shares of Series A Preferred Stock, which determination shall be final and binding on all parties. The Company reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance of which, or exchange for which, may, in the view of counsel to the Company, be unlawful. The Company also reserves the absolute right, subject to applicable law, to waive certain of the conditions of the Exchange Offer set forth in the Proxy Statement/Prospectus in the section titled The Exchange OfferConditions of the Exchange Offer, or any conditions or irregularities in any tender of shares of Series A Preferred Stock of any particular Holder whether or not similar conditions or irregularities are waived in the case of other Holders. The Companys interpretation of the terms and conditions of the Exchange Offer (including this Letter and the instructions hereto) will be final and binding. No tender of shares of Series A Preferred Stock will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Neither the Company, any affiliates or assigns of the Company, the Exchange Agent, nor any other person shall be under any duty to give notification of any irregularities in tenders or incur any liability for failure to give such notification.
10. Requests for Assistance or Additional Copies. Questions relating to the procedure for tendering may be directed to the Information Agent or the Exchange Agent at the addresses and telephone numbers indicated above. Requests for additional copies of the Proxy Statement/Prospectus, this Letter and other related documents may be directed to the Information Agent or the Exchange Agent.
11. Tax Identification Number; Backup Withholding. Under U.S. federal income tax laws, consideration paid with respect to the Exchange Offer or the Series B Preferred Stock may be subject to backup withholding (at a rate of 24%). Generally, such payments may be subject to backup withholding if the holder fails to provide its taxpayer identification number (TIN) or certification of exempt status or has been notified by the Internal Revenue Service (the IRS) that payments to it are subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will generally be allowed as a credit against a holders U.S. federal income tax liability and may entitle a holder to a refund, provided that it furnishes the required information to the IRS on a timely basis.
To avoid backup withholding, a U.S. holder (as defined in the Proxy Statement/Prospectus) should notify the Exchange Agent of its correct TIN by completing an IRS Form W-9 and certifying on such IRS Form W-9 that the TIN provided is correct (or that the holder is awaiting a TIN). In addition, a U.S. holder is required to certify on IRS Form W-9 that the holder is not subject to backup withholding because (i) the holder is exempt from backup withholding, (ii) the holder has not been notified by the IRS that it is subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified the holder that the holder is no longer subject to backup withholding. If the U.S. holder has not been issued a TIN and has applied for one or intends to apply for one in the near future, such U.S. holder should write Applied For in the space provided for the TIN in Part I of IRS Form W-9, and sign and date the IRS Form W-9. If Applied For is written in Part I and the Exchange Agent is not provided with a TIN by the time of payment, the Exchange Agent will withhold 24% from the Exchange Consideration. If the Exchange Agent is provided with an incorrect TIN or the holder makes false statements resulting in no backup withholding, the holder may be subject to penalties imposed by the IRS.
To prevent backup withholding, a non-U.S. holder (as defined in the Proxy Statement/Prospectus) should (i) submit a properly completed IRS Form W-8 BEN, IRS Form W-8BEN-E or other applicable IRS Form W-8 to the Exchange Agent, certifying under penalties of perjury to the holders foreign status or (ii) otherwise establish an exemption. IRS Forms W-8 may be obtained on the web at www.irs.gov.
NOTE: FAILURE TO COMPLETE AND RETURN AN IRS FORM W-9 (OR, IF YOU ARE NOT A U.S. PERSON, THE APPLICABLE IRS FORM W-8) MAY RESULT IN BACKUP WITHHOLDING TAX ON CONSIDERATION PAID TO YOU PURSUANT TO THE EXCHANGE OFFER, AS WELL AS WITH RESPECT TO THE SERIES B PREFERRED STOCK.
11
Form W-9
(Rev. October 2018) Department of the Treasury Internal Revenue Service |
Request for Taxpayer Identification Number and Certification
u Go to www.irs.gov/FormW9 for instructions and the latest information. |
Give Form to the requester. Do not send to the IRS.
|
Part I |
Taxpayer Identification Number (TIN) |
|
Note: If the account is in more than one name, see the instructions for line 1. Also see What Name and Number To Give the Requester for guidelines on whose number to enter. |
Employer identification number |
|||||||||||||||||||||||||
- |
Part II | Certification |
Under penalties of perjury, I certify that:
1. | The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me); and |
2. | I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding; and |
3. | I am a U.S. citizen or other U.S. person (defined below); and |
4. | The FATCA code(s) entered on this form (if any) indicating that I am exempt from FATCA reporting is correct. |
Certification instructions. You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return. For real estate transactions, item 2 does not apply. For mortgage interest paid, acquisition or abandonment of secured property, cancellation of debt, contributions to an individual retirement arrangement (IRA), and generally, payments other than interest and dividends, you are not required to sign the certification, but you must provide your correct TIN. See the instructions for Part II, later.
Sign
Here |
Signature of
U.S. person u |
Date u |
General Instructions
Section references are to the Internal Revenue Code unless otherwise noted.
Future developments. For the latest information about developments related to Form W-9 and its instructions, such as legislation enacted after they were published, go to www.irs.gov/FormW9.
Purpose of Form
An individual or entity (Form W-9 requester) who is required to file an information return with the IRS must obtain your correct taxpayer identification number (TIN) which may be your social security number (SSN), individual taxpayer identification number (ITIN), adoption taxpayer identification number (ATIN), or employer identification number (EIN), to report on an information return the amount paid to you, or other amount reportable on an information return. Examples of information returns include, but are not limited to, the following.
Form 1099-INT (interest earned or paid)
Form 1099-DIV (dividends, including those from stocks or mutual funds)
Form 1099-MISC (various types of income, prizes, awards, or gross proceeds)
Form 1099-B (stock or mutual fund sales and certain other transactions by brokers)
Form 1099-S (proceeds from real estate transactions)
Form 1099-K (merchant card and third party network transactions)
Form 1098 (home mortgage interest), 1098-E (student loan interest), 1098-T (tuition)
Form 1099-C (canceled debt)
Form 1099-A (acquisition or abandonment of secured property)
Use Form W-9 only if you are a U.S. person (including a resident alien), to provide your correct TIN.
If you do not return Form W-9 to the requester with a TIN, you might be subject to backup withholding. See What is backup withholding, later.
Cat. No. 10231X |
Form W-9 (Rev. 10-2018) |
Form W-9 (Rev. 10-2018) |
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By signing the filled-out form, you:
1. Certify that the TIN you are giving is correct (or you are waiting for a number to be issued),
2. Certify that you are not subject to backup withholding, or
3. Claim exemption from backup withholding if you are a U.S. exempt payee. If applicable, you are also certifying that as a U.S. person, your allocable share of any partnership income from a U.S. trade or business is not subject to the withholding tax on foreign partners share of effectively connected income, and
4. Certify that FATCA code(s) entered on this form (if any) indicating that you are exempt from the FATCA reporting, is correct. See What is FATCA reporting, later, for further information.
Note: If you are a U.S. person and a requester gives you a form other than Form W-9 to request your TIN, you must use the requesters form if it is substantially similar to this Form W-9.
Definition of a U.S. person. For federal tax purposes, you are considered a U.S. person if you are:
An individual who is a U.S. citizen or U.S. resident alien;
A partnership, corporation, company, or association created or organized in the United States or under the laws of the United States;
An estate (other than a foreign estate); or
A domestic trust (as defined in Regulations section 301.7701-7).
Special rules for partnerships. Partnerships that conduct a trade or business in the United States are generally required to pay a withholding tax under section 1446 on any foreign partners share of effectively connected taxable income from such business. Further, in certain cases where a Form W-9 has not been received, the rules under section 1446 require a partnership to presume that a partner is a foreign person, and pay the section 1446 withholding tax. Therefore, if you are a U.S. person that is a partner in a partnership conducting a trade or business in the United States, provide Form W-9 to the partnership to establish your U.S. status and avoid section 1446 withholding on your share of partnership income.
In the cases below, the following person must give Form W-9 to the partnership for purposes of establishing its U.S. status and avoiding withholding on its allocable share of net income from the partnership conducting a trade or business in the United States.
In the case of a disregarded entity with a U.S. owner, the U.S. owner of the disregarded entity and not the entity;
In the case of a grantor trust with a U.S. grantor or other U.S. owner, generally, the U.S. grantor or other U.S. owner of the grantor trust and not the trust; and
In the case of a U.S. trust (other than a grantor trust), the U.S. trust (other than a grantor trust) and not the beneficiaries of the trust.
Foreign person. If you are a foreign person or the U.S. branch of a foreign bank that has elected to be treated as a U.S. person, do not use Form W-9. Instead, use the appropriate Form W-8 or Form 8233 (see Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Entities).
Nonresident alien who becomes a resident alien. Generally, only a nonresident alien individual may use the terms of a tax treaty to reduce or eliminate U.S. tax on certain types of income. However, most tax treaties contain a provision known as a saving clause. Exceptions specified in the saving clause may permit an exemption from tax to continue for certain types of income even after the payee has otherwise become a U.S. resident alien for tax purposes.
If you are a U.S. resident alien who is relying on an exception contained in the saving clause of a tax treaty to claim an exemption from U.S. tax on certain types of income, you must attach a statement to Form W-9 that specifies the following five items.
1. The treaty country. Generally, this must be the same treaty under which you claimed exemption from tax as a nonresident alien.
2. The treaty article addressing the income.
3. The article number (or location) in the tax treaty that contains the saving clause and its exceptions.
4. The type and amount of income that qualifies for the exemption from tax.
5. Sufficient facts to justify the exemption from tax under the terms of the treaty article.
Example. Article 20 of the U.S.-China income tax treaty allows an exemption from tax for scholarship income received by a Chinese student temporarily present in the United States. Under U.S. law, this student will become a resident alien for tax purposes if his or her stay in the United States exceeds 5 calendar years. However, paragraph 2 of the first Protocol to the U.S.-China treaty (dated April 30, 1984) allows the provisions of Article 20 to continue to apply even after the Chinese student becomes a resident alien of the United States. A Chinese student who qualifies for this exception (under paragraph 2 of the first protocol) and is relying on this exception to claim an exemption from tax on his or her scholarship or fellowship income would attach to Form W-9 a statement that includes the information described above to support that exemption.
If you are a nonresident alien or a foreign entity, give the requester the appropriate completed Form W-8 or Form 8233.
Backup Withholding
What is backup withholding? Persons making certain payments to you must under certain conditions withhold and pay to the IRS 24% of such payments. This is called backup withholding. Payments that may be subject to backup withholding include interest, tax-exempt interest, dividends, broker and barter exchange transactions, rents, royalties, nonemployee pay, payments made in settlement of payment card and third party network transactions, and certain payments from fishing boat operators. Real estate transactions are not subject to backup withholding.
You will not be subject to backup withholding on payments you receive if you give the requester your correct TIN, make the proper certifications, and report all your taxable interest and dividends on your tax return.
Payments you receive will be subject to backup withholding if:
1. You do not furnish your TIN to the requester,
2. You do not certify your TIN when required (see the instructions for Part II for details),
3. The IRS tells the requester that you furnished an incorrect TIN,
4. The IRS tells you that you are subject to backup withholding because you did not report all your interest and dividends on your tax return (for reportable interest and dividends only), or
5. You do not certify to the requester that you are not subject to backup withholding under 4 above (for reportable interest and dividend accounts opened after 1983 only).
Certain payees and payments are exempt from backup withholding. See Exempt payee code, later, and the separate Instructions for the Requester of Form W-9 for more information.
Also see Special rules for partnerships, earlier.
What is FATCA Reporting?
The Foreign Account Tax Compliance Act (FATCA) requires a participating foreign financial institution to report all United States account holders that are specified United States persons. Certain payees are exempt from FATCA reporting. See Exemption from FATCA reporting code, later, and the Instructions for the Requester of Form W-9 for more information.
Updating Your Information
You must provide updated information to any person to whom you claimed to be an exempt payee if you are no longer an exempt payee and anticipate receiving reportable payments in the future from this person. For example, you may need to provide updated information if you are a C corporation that elects to be an S corporation, or if you no longer are tax exempt. In addition, you must furnish a new Form W-9 if the name or TIN changes for the account; for example, if the grantor of a grantor trust dies.
Penalties
Failure to furnish TIN. If you fail to furnish your correct TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.
Civil penalty for false information with respect to withholding. If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty.
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Criminal penalty for falsifying information. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment.
Misuse of TINs. If the requester discloses or uses TINs in violation of federal law, the requester may be subject to civil and criminal penalties.
Specific Instructions
Line 1
You must enter one of the following on this line; do not leave this line blank. The name should match the name on your tax return.
If this Form W-9 is for a joint account (other than an account maintained by a foreign financial institution (FFI)), list first, and then circle, the name of the person or entity whose number you entered in Part I of Form W-9. If you are providing Form W-9 to an FFI to document a joint account, each holder of the account that is a U.S. person must provide a Form W-9.
a. Individual. Generally, enter the name shown on your tax return. If you have changed your last name without informing the Social Security Administration (SSA) of the name change, enter your first name, the last name as shown on your social security card, and your new last name.
Note: ITIN applicant: Enter your individual name as it was entered on your Form W-7 application, line 1a. This should also be the same as the name you entered on the Form 1040/1040A/1040EZ you filed with your application.
b. Sole proprietor or single-member LLC. Enter your individual name as shown on your 1040/1040A/1040EZ on line 1. You may enter your business, trade, or doing business as (DBA) name on line 2.
c. Partnership, LLC that is not a single-member LLC, C corporation, or S corporation. Enter the entitys name as shown on the entitys tax return on line 1 and any business, trade, or DBA name on line 2.
d. Other entities. Enter your name as shown on required U.S. federal tax documents on line 1. This name should match the name shown on the charter or other legal document creating the entity. You may enter any business, trade, or DBA name on line 2.
e. Disregarded entity. For U.S. federal tax purposes, an entity that is disregarded as an entity separate from its owner is treated as a disregarded entity. See Regulations section 301.7701-2(c)(2)(iii). Enter the owners name on line 1. The name of the entity entered on line 1 should never be a disregarded entity. The name on line 1 should be the name shown on the income tax return on which the income should be reported. For example, if a foreign LLC that is treated as a disregarded entity for U.S. federal tax purposes has a single owner that is a U.S. person, the U.S. owners name is required to be provided on line 1. If the direct owner of the entity is also a disregarded entity, enter the first owner that is not disregarded for federal tax purposes. Enter the disregarded entitys name on line 2, Business name/disregarded entity name. If the owner of the disregarded entity is a foreign person, the owner must complete an appropriate Form W-8 instead of a Form W-9. This is the case even if the foreign person has a U.S. TIN.
Line 2
If you have a business name, trade name, DBA name, or disregarded entity name, you may enter it on line 2.
Line 3
Check the appropriate box on line 3 for the U.S. federal tax classification of the person whose name is entered on line 1. Check only one box on line 3.
IF the entity/person on line 1 is a(n) . . . |
THEN check the box for . . . | |||
Corporation | Corporation | |||
Individual
Sole proprietorship, or
Single-member limited liability company (LLC) owned by an individual and disregarded for U.S. federal tax purposes. |
Individual/sole proprietor or single-member LLC | |||
LLC treated as a partnership for U.S. federal tax purposes,
LLC that has filed Form 8832 or 2553 to be taxed as a corporation, or
LLC that is disregarded as an entity separate from its owner but the owner is another LLC that is not disregarded for U.S. federal tax purposes. |
Limited liability company and enter the appropriate tax classification. (P= Partnership; C= C corporation; or S= S corporation) | |||
Partnership | Partnership | |||
Trust/estate | Trust/estate |
Line 4, Exemptions
If you are exempt from backup withholding and/or FATCA reporting, enter in the appropriate space on line 4 any code(s) that may apply to you.
Exempt payee code.
Generally, individuals (including sole proprietors) are not exempt from backup withholding.
Except as provided below, corporations are exempt from backup withholding for certain payments, including interest and dividends.
Corporations are not exempt from backup withholding for payments made in settlement of payment card or third party network transactions.
Corporations are not exempt from backup withholding with respect to attorneys fees or gross proceeds paid to attorneys, and corporations that provide medical or health care services are not exempt with respect to payments reportable on Form 1099-MISC.
The following codes identify payees that are exempt from backup withholding. Enter the appropriate code in the space in line 4.
1An organization exempt from tax under section 501(a), any IRA, or a custodial account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2)
2The United States or any of its agencies or instrumentalities
3A state, the District of Columbia, a U.S. commonwealth or possession, or any of their political subdivisions or instrumentalities
4A foreign government or any of its political subdivisions, agencies, or instrumentalities
5A corporation
6A dealer in securities or commodities required to register in the United States, the District of Columbia, or a U.S. commonwealth or possession
7A futures commission merchant registered with the Commodity Futures Trading Commission
8A real estate investment trust
9An entity registered at all times during the tax year under the Investment Company Act of 1940
10A common trust fund operated by a bank under section 584(a)
11A financial institution
12A middleman known in the investment community as a nominee or custodian
13A trust exempt from tax under section 664 or described in section 4947
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The following chart shows types of payments that may be exempt from backup withholding. The chart applies to the exempt payees listed above, 1 through 13.
IF the payment is for . . . |
THEN the payment is exempt
for . . . |
|
Interest and dividend payments | All exempt payees except for 7 | |
Broker transactions | Exempt payees 1 through 4 and 6 through 11 and all C corporations. S corporations must not enter an exempt payee code because they are exempt only for sales of noncovered securities acquired prior to 2012. | |
Barter exchange transactions and patronage dividends | Exempt payees 1 through 4 | |
Payments over $600 required to be reported and direct sales over $5,0001 | Generally, exempt payees 1 through 52 | |
Payments made in settlement of payment card or third party network transactions | Exempt payees 1 through 4 |
1 |
See Form 1099-MISC, Miscellaneous Income, and its instructions. |
2 |
However, the following payments made to a corporation and reportable on Form 1099-MISC are not exempt from backup withholding: medical and health care payments, attorneys fees, gross proceeds paid to an attorney reportable under section 6045(f), and payments for services paid by a federal executive agency. |
Exemption from FATCA reporting code. The following codes identify payees that are exempt from reporting under FATCA. These codes apply to persons submitting this form for accounts maintained outside of the United States by certain foreign financial institutions. Therefore, if you are only submitting this form for an account you hold in the United States, you may leave this field blank. Consult with the person requesting this form if you are uncertain if the financial institution is subject to these requirements. A requester may indicate that a code is not required by providing you with a Form W-9 with Not Applicable (or any similar indication) written or printed on the line for a FATCA exemption code.
AAn organization exempt from tax under section 501(a) or any individual retirement plan as defined in section 7701(a)(37)
BThe United States or any of its agencies or instrumentalities
CA state, the District of Columbia, a U.S. commonwealth or possession, or any of their political subdivisions or instrumentalities
DA corporation the stock of which is regularly traded on one or more established securities markets, as described in Regulations section 1.1472-1(c)(1)(i)
EA corporation that is a member of the same expanded affiliated group as a corporation described in Regulations section 1.1472-1(c)(1)(i)
FA dealer in securities, commodities, or derivative financial instruments (including notional principal contracts, futures, forwards, and options) that is registered as such under the laws of the United States or any state
GA real estate investment trust
HA regulated investment company as defined in section 851 or an entity registered at all times during the tax year under the Investment Company Act of 1940
IA common trust fund as defined in section 584(a)
JA bank as defined in section 581
KA broker
LA trust exempt from tax under section 664 or described in section 4947(a)(1)
MA tax exempt trust under a section 403(b) plan or section 457(g) plan
Note: You may wish to consult with the financial institution requesting this form to determine whether the FATCA code and/or exempt payee code should be completed.
Line 5
Enter your address (number, street, and apartment or suite number). This is where the requester of this Form W-9 will mail your information returns. If this address differs from the one the requester already has on file, write NEW at the top. If a new address is provided, there is still a chance the old address will be used until the payor changes your address in their records.
Line 6
Enter your city, state, and ZIP code.
Part I. Taxpayer Identification Number (TIN)
Enter your TIN in the appropriate box. If you are a resident alien and you do not have and are not eligible to get an SSN, your TIN is your IRS individual taxpayer identification number (ITIN). Enter it in the social security number box. If you do not have an ITIN, see How to get a TIN below.
If you are a sole proprietor and you have an EIN, you may enter either your SSN or EIN.
If you are a single-member LLC that is disregarded as an entity separate from its owner, enter the owners SSN (or EIN, if the owner has one). Do not enter the disregarded entitys EIN. If the LLC is classified as a corporation or partnership, enter the entitys EIN.
Note: See What Name and Number To Give the Requester, later, for further clarification of name and TIN combinations.
How to get a TIN. If you do not have a TIN, apply for one immediately. To apply for an SSN, get Form SS-5, Application for a Social Security Card, from your local SSA office or get this form online at www.SSA.gov. You may also get this form by calling 1-800-772-1213. Use Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN, or Form SS-4, Application for Employer Identification Number, to apply for an EIN. You can apply for an EIN online by accessing the IRS website at www.irs.gov/Businesses and clicking on Employer Identification Number (EIN) under Starting a Business. Go to www.irs.gov/Forms to view, download, or print Form W-7 and/or Form SS-4. Or, you can go to www.irs.gov/OrderForms to place an order and have Form W-7 and/or SS-4 mailed to you within 10 business days.
If you are asked to complete Form W-9 but do not have a TIN, apply for a TIN and write Applied For in the space for the TIN, sign and date the form, and give it to the requester. For interest and dividend payments, and certain payments made with respect to readily tradable instruments, generally you will have 60 days to get a TIN and give it to the requester before you are subject to backup withholding on payments. The 60-day rule does not apply to other types of payments. You will be subject to backup withholding on all such payments until you provide your TIN to the requester.
Note: Entering Applied For means that you have already applied for a TIN or that you intend to apply for one soon.
Caution: A disregarded U.S. entity that has a foreign owner must use the appropriate Form W-8.
Part II. Certification
To establish to the withholding agent that you are a U.S. person, or resident alien, sign Form W-9. You may be requested to sign by the withholding agent even if item 1, 4, or 5 below indicates otherwise.
For a joint account, only the person whose TIN is shown in Part I should sign (when required). In the case of a disregarded entity, the person identified on line 1 must sign. Exempt payees, see Exempt payee code, earlier.
Signature requirements. Complete the certification as indicated in items 1 through 5 below.
1. Interest, dividend, and barter exchange accounts opened before 1984 and broker accounts considered active during 1983. You must give your correct TIN, but you do not have to sign the certification.
2. Interest, dividend, broker, and barter exchange accounts opened after 1983 and broker accounts considered inactive during 1983. You must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to the requester, you must cross out item 2 in the certification before signing the form.
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3. Real estate transactions. You must sign the certification. You may cross out item 2 of the certification.
4. Other payments. You must give your correct TIN, but you do not have to sign the certification unless you have been notified that you have previously given an incorrect TIN. Other payments include payments made in the course of the requesters trade or business for rents, royalties, goods (other than bills for merchandise), medical and health care services (including payments to corporations), payments to a nonemployee for services, payments made in settlement of payment card and third party network transactions, payments to certain fishing boat crew members and fishermen, and gross proceeds paid to attorneys (including payments to corporations).
5. Mortgage interest paid by you, acquisition or abandonment of secured property, cancellation of debt, qualified tuition program payments (under section 529), ABLE accounts (under section 529A), IRA, Coverdell ESA, Archer MSA or HSA contributions or distributions, and pension distributions. You must give your correct TIN, but you do not have to sign the certification.
What Name and Number To Give the Requester
For this type of account: | Give name and SSN of: | |||||
1. | Individual | The individual | ||||
2. | Two or more individuals (joint account) other than an account maintained by an FFI | The actual owner of the account or, if combined funds, the first individual on the account1 | ||||
3. |
Two or more U.S. persons (joint account maintained by an FFI) |
Each holder of the account | ||||
4. | Custodialaccount of a minor (Uniform Gift to Minors Act) | The minor2 | ||||
5. | a. The usual revocable savings trust (grantor is also trustee) | The grantor-trustee1 | ||||
b. So-called trust account that is not a legal or valid trust under state law | The actual owner1 | |||||
6. | Sole proprietorship or disregarded entity owned by an individual | The owner3 | ||||
7. | Grantortrust filing under Optional Form 1099 Filing Method 1 (see Regulations section 1.671-4(b)(2)(i)(A)) | The grantor* | ||||
For this type of account: | Give name and EIN of: | |||||
8. | Disregarded entity not owned by an individual | The owner | ||||
9. | A valid trust, estate, or pension trust | Legal entity4 | ||||
10. | Corporation or LLC electing corporate status on Form 8832 or Form 2553 | The corporation | ||||
11. | Association, club, religious, charitable, educational, or other tax-exempt organization | The organization | ||||
12. | Partnership or multi-member LLC | The partnership | ||||
13. | A broker or registered nominee | The broker or nominee | ||||
14. | Account with the Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments | The public entity | ||||
15. | Grantor trust filing under the Form 1041 Filing Method or the Optional Form 1099 Filing Method 2 (see Regulations section 1.671-4(b)(2)(i)(B)) | The trust |
1 List first and circle the name of the person whose number you furnish. If only one person on a joint account has an SSN, that persons number must be furnished.
2 Circle the minors name and furnish the minors SSN.
3 You must show your individual name and you may also enter your business or DBA name on the Business name/disregarded entity name line. You may use either your SSN or EIN (if you have one), but the IRS encourages you to use your SSN.
4 List first and circle the name of the trust, estate, or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title.) Also see Special rules for partnerships, earlier.
*Note: The grantor also must provide a Form W-9 to trustee of trust.
Note: If no name is circled when more than one name is listed, the number will be considered to be that of the first name listed.
Secure Your Tax Records From Identity Theft
Identity theft occurs when someone uses your personal information such as your name, SSN, or other identifying information, without your permission, to commit fraud or other crimes. An identity thief may use your SSN to get a job or may file a tax return using your SSN to receive a refund.
To reduce your risk:
Protect your SSN,
Ensure your employer is protecting your SSN, and
Be careful when choosing a tax preparer.
If your tax records are affected by identity theft and you receive a notice from the IRS, respond right away to the name and phone number printed on the IRS notice or letter.
If your tax records are not currently affected by identity theft but you think you are at risk due to a lost or stolen purse or wallet, questionable credit card activity or credit report, contact the IRS Identity Theft Hotline at 1-800-908-4490 or submit Form 14039.
For more information, see Pub. 5027, Identity Theft Information for Taxpayers.
Victims of identity theft who are experiencing economic harm or a systemic problem, or are seeking help in resolving tax problems that have not been resolved through normal channels, may be eligible for Taxpayer Advocate Service (TAS) assistance. You can reach TAS by calling the TAS toll-free case intake line at 1-877-777-4778 or TTY/TDD 1-800-829-4059.
Protect yourself from suspicious emails or phishing schemes. Phishing is the creation and use of email and websites designed to mimic legitimate business emails and websites. The most common act is sending an email to a user falsely claiming to be an established legitimate enterprise in an attempt to scam the user into surrendering private information that will be used for identity theft.
The IRS does not initiate contacts with taxpayers via emails. Also, the IRS does not request personal detailed information through email or ask taxpayers for the PIN numbers, passwords, or similar secret access information for their credit card, bank, or other financial accounts.
If you receive an unsolicited email claiming to be from the IRS, forward this message to phishing@irs.gov. You may also report misuse of the IRS name, logo, or other IRS property to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484. You can forward suspicious emails to the Federal Trade Commission at spam@uce.gov or report them at www.ftc.gov/complaint. You can contact the FTC at www.ftc.gov/idtheft or 877-IDTHEFT (877-438-4338). If you have been the victim of identity theft, see www.IdentityTheft.gov and Pub. 5027.
Visit www.irs.gov/IdentityTheft to learn more about identity theft and how to reduce your risk.
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Privacy Act Notice
Section 6109 of the Internal Revenue Code requires you to provide your correct TIN to persons (including federal agencies) who are required to file information returns with the IRS to report interest, dividends, or certain other income paid to you; mortgage interest you paid; the acquisition or abandonment of secured property; the cancellation of debt; or contributions you made to an IRA, Archer MSA, or HSA. The person collecting this form uses the information on the form to file information returns with the IRS, reporting the above information. Routine uses of this information include giving it to the Department of Justice for civil and
criminal litigation and to cities, states, the District of Columbia, and U.S. commonwealths and possessions for use in administering their laws. The information also may be disclosed to other countries under a treaty, to federal and state agencies to enforce civil and criminal laws, or to federal law enforcement and intelligence agencies to combat terrorism. You must provide your TIN whether or not you are required to file a tax return. Under section 3406, payers must generally withhold a percentage of taxable interest, dividend, and certain other payments to a payee who does not give a TIN to the payer. Certain penalties may also apply for providing false or fraudulent information.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
Continental Stock Transfer & Trust Company
1 State Street 30th Floor
New York, NY 10004
Attention: Corporate Actions Department
Telephone: (917) 262-2378
THE INFORMATION AGENT FOR THE EXCHANGE OFFER IS:
Morrow Sodali LLC
333 Ludlow Street
5th Floor, South Tower
Stamford, CT 06902
Individuals may call toll-free: (800) 662-5200
Banks and Brokers may call: (203) 658-9400
Email: RHE@investor.morrowsodali.com
Additional copies of the Proxy Statement/Prospectus, this Letter or other Exchange Offer materials may be obtained from the Information Agent or the Exchange Agent and will be furnished at our expense. Questions and requests for assistance regarding the tender of your securities should be directed to the Information Agent or the Exchange Agent.
18
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
OF SERIES A PREFERRED STOCK OF
REGIONAL HEALTH PROPERTIES, INC.
PURSUANT TO THE PROXY STATEMENT/PROSPECTUS
DATED , 2022
This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the Exchange Offer (as defined below) if:
|
the procedure for book-entry transfer cannot be completed on a timely basis, or |
|
time will not permit all required documents, including a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile of the Letter of Transmittal) and any other required documents, to reach Continental Stock Transfer & Trust Company (the Exchange Agent) prior to the Expiration Date (as defined in the Proxy Statement/Prospectus (as defined below)). |
The Proxy Statement/Prospectus dated , 2022 (as amended or supplemented from time to time, the Proxy Statement/Prospectus) and the related Letter of Transmittal (as amended or supplemented from time to time, the Letter of Transmittal), which together set forth the offer of Regional Health Properties, Inc. (the Company) to exchange (the Exchange Offer) any and all of the outstanding shares of the Companys 10.875% Series A Cumulative Redeemable Preferred Shares (the Series A Preferred Stock) for newly issued shares of the Companys 12.5% Series B Cumulative Redeemable Preferred Shares.
The Exchange Offer relates to the Series A Preferred Stock, which trades on the NYSE American LLC (the NYSE American) under the symbol RHE-PA. Any and all outstanding shares of the Series A Preferred Stock are eligible to be tendered pursuant to the Exchange Offer.
IF NECESSARY, MAIL THIS NOTICE OF GUARANTEED DELIVERY TO:
IF DELIVERING BY MAIL, HAND OR COURIER:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
1 State Street 30th Floor
New York, NY 10004
Attention: Corporate Actions Department
Facsimile: 212-616-7610
E-mail: Reorg+RegionalHealth@continentalstock.com
CONFIRM BY TELEPHONE:
Telephone: (917) 262-2378
This Notice of Guaranteed Delivery, properly completed and duly executed, may be delivered by hand, mail, overnight courier, facsimile or email transmission to the Exchange Agent. See the information set forth in the Proxy Statement/Prospectus in the section titled The Exchange OfferGuaranteed Delivery Procedures.
1
For this notice to be validly delivered, it must be received by the Exchange Agent at the above address or by facsimile transmission before the Expiration Date. Delivery of this notice to another address or facsimile number will not constitute a valid delivery. Delivery to the Company, the information agent or the book-entry transfer facility will not be forwarded to the Exchange Agent and will not constitute a valid delivery.
Your signature on this Notice of Guaranteed Delivery must be guaranteed by an Eligible Institution, and the Eligible Institution must also execute the Guarantee of Delivery attached hereto. An Eligible Institution is a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program or a bank, broker, dealer, credit union, savings association or other entity that is an eligible guarantor institution, as that term is defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended.
In addition, if the instructions to the Letter of Transmittal require a signature on a Letter of Transmittal to be guaranteed by an Eligible Institution, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal.
By signing this Notice of Guaranteed Delivery, you exchange, upon the terms and subject to the conditions described in the Proxy Statement/Prospectus and the related Letter of Transmittal, receipt of which you hereby acknowledge, the number of shares of Series A Preferred Stock specified below pursuant to the guaranteed delivery procedures set forth in the Proxy Statement/Prospectus in the section titled The Exchange OfferGuaranteed Delivery Procedures.
DESCRIPTION OF SHARES OF SERIES A PREFERRED STOCK TENDERED
List below the shares of Series A Preferred Stock to which this Notice of Guaranteed Delivery relates.
Name(s) and Address(es) of Registered Holder(s) of
|
Number of Shares
Tendered |
|
Total: |
(1) |
Unless otherwise indicated above, it will be assumed that all shares of Series A Preferred Stock listed above are being tendered pursuant to this Notice of Guaranteed Delivery. |
2
SIGNATURES
Signatures: |
Name(s) of the Holder(s) of Series A Preferred Stock: |
||
(please type or print) |
Certificate Nos.: |
Address: |
||
(Include Zip Code) |
Daytime Area Code and Telephone Number: |
Date: |
If the shares of Series A Preferred Stock will be delivered by book-entry transfer, provide the Account Number.
Account Number(s): |
GUARANTEE OF SIGNATURES
Authorized Signature: |
Name: |
(please type or print) | ||
Title.: |
|
Address: |
Name of Firm (must be an Eligible Institution as defined in the Notice of Guaranteed Delivery):
|
||
(Include Zip Code) |
Daytime Area Code and Telephone Number: |
Date: |
3
GUARANTEE OF DELIVERY
(Not to be Used for Signature Guarantee)
The undersigned, a bank, broker dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program or a bank, broker, dealer, credit union, savings association or other entity which is an eligible guarantor institution, as that term is defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended (each of the foregoing constituting an Eligible Institution), guarantees delivery to the Exchange Agent of the shares of Series A Preferred Stock tendered, in proper form for transfer, or a confirmation that the shares of Series A Preferred Stock tendered have been delivered pursuant to the procedure for book-entry transfer described in the Proxy Statement/Prospectus into the Exchange Agents account at the book-entry transfer facility, in each case together with a properly completed and duly executed Letter(s) of Transmittal (or a facsimile(s) thereof), or an agents message (as defined in the Proxy Statement/Prospectus) in the case of a book-entry transfer, and any other required documents, all within two days that the NYSE American is open for trading after the date of receipt by the Exchange Agent of this Notice of Guaranteed Delivery.
The Eligible Institution that completes this form must communicate the guarantee to the Exchange Agent and must deliver the Letter of Transmittal to the Exchange Agent, or confirmation of receipt of the shares of Series A Preferred Stock pursuant to the procedure for book-entry transfer and an agents message, within the time set forth above. Failure to do so could result in a financial loss to such Eligible Institution.
Name of Firm: |
Authorized Signature: |
Name: |
||
(Please Print) |
Title: |
Address: |
Areas Code(s) and Telephone Number(s): |
Dated: , 2022
NOTE: DO NOT SEND CERTIFICATE(S) OR ANY OTHER REQUIRED DOCUMENTS WITH THIS FORM. CERTIFICATES, IF ANY, SHOULD BE SENT TO THE EXCHANGE AGENT WITH THE LETTER OF TRANSMITTAL (UNLESS A CONFIRMATION OF BOOK-ENTRY TRANSFER IS USED FOR SHARES OF THE SERIES A PREFERRED STOCK TENDERED THROUGH DTC).
4
Exhibit 99.3
Exhibit 99.3
YOUR VOTE IS IMPORTANT. PLEASE VOTE
TODAY.
Vote by Internet, Smartphone or Tablet - QUICK EASY IMMEDIATE - 24 Hours a Day, 7 Days a Week or by Mail
proxies Your Mobile to vote or your Internet shares vote in authorizes the same the manner named as Votes if you submitted marked, signed, electronically and returned by Mobile
your proxy or over card the. on Internet [], 2022 must . be received by 11:59 p.m., Eastern Time, INTERNET www.cstproxyvote .com
Use the Internet to
vote your proxy. Have your proxy card available when you access the above website. Follow the prompts to vote your shares. MOBILE VOTING On your Smartphone/Tablet, open the QR Reader and scan the below image. Once the voting site is
displayed, enter your Control Number from the proxy card and vote your shares.
MAIL Mark, sign and date your proxy card and return it in the postage-paid
envelope provided.
PLEASE DO NOT RETURN THE PROXY CARD IF YOU ARE VOTING ELECTRONICALLY.
FOLD HERE DO NOT SEPARATE INSERT IN ENVELOPE PROVIDED
PROXY FOR HOLDERS OF
SERIES A PREFERRED STOCK
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR PROPOSALS 1, 2 AND 3.
Please mark
your votes
like this X
1. To approve a proposal to amend the Amend- FOR AGAINST ABSTAIN ed and Restated
Articles of Incorporation (the Charter) of Regional Health Properties, Inc. (the Company) to (a) reduce the liquidation preference of the Companys 10.875% Series A Cumulative Redeemable Preferred Shares (the Series A Preferred Stock) to $5.00
per share, (b) eliminate accumulated and unpaid dividends on the Series A Preferred Stock, (c) eliminate future dividends on the Series A Preferred Stock, (d) eliminate penalty events and the right of holders of Series A Preferred Stock to elect
directors upon the occurrence of a penalty event, (e) reduce the redemption price of the Series A Preferred Stock in the event of an optional redemption to $5.00 per share, (f) reduce the redemption price of the Series A Preferred Stock in the event
of a change of control to $5.00 per share and (g) change the voting rights of holders of Series A Preferred Stock when voting as a single class with any other class or series of stock to one vote per $5.00 liquidation preference.
2. To approve a proposal to (a) amend the FOR AGAINST ABSTAIN
Charter to increase the
authorized number of shares of preferred stock of the Company to 6,000,000 shares and (b) approve the authorization, creation and designation by the Board of Directors of the Company pursuant to Section 14-2-602 of the Official Code of
Georgia Annotated, from the authorized but undesignated shares of preferred stock, of the Companys 12.5% Series B Cumulative Redeemable Preferred Shares, which, if so
approved by the holders of the Series A Preferred Stock as part of this proposal, will rank senior to the Series A Preferred Stock, and be Senior Shares to the Series A Preferred Stock, pursuant to and as contemplated by Section
3.7(e) of the Charter.
3. To approve a proposal to adjourn the spe- FOR AGAINST ABSTAIN cial
meeting of the holders of the Companys Series A Preferred Stock and common stock (the Special Meeting), if necessary or appropriate, for the purpose of soliciting additional votes for the approval of Proposals 1 and 2 if there are not
sufficient votes cast at the Special Meeting to approve Proposals 1 and 2.
CONTROL NUMBER
Print Name(s):
Signature Signature, if held jointly Date , 2022
Please date and sign in the same manner in which your shares are registered. When signing as executor, administrator, trustee, guardian or attorney, please give full title. Joint
owners should each sign. If a signer is a corporation, please sign in full corporate name by duly authorized officer.
REGIONAL HEALTH PROPERTIES, INC.
Important Notice Regarding the Internet Availability of Proxy Materials for the 2022 Special Meeting of Shareholders to be held on
[], 2022 The Proxy Statement/Prospectus and the Notice of Special Meeting are available at: https://www.cstproxy.com/regionalhealthproperties/2022
FOLD HERE
DO NOT SEPARATE INSERT IN ENVELOPE PROVIDED
PROXY FOR HOLDERS OF SERIES A PREFERRED STOCK
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS FOR THE 2022 SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON [], 2022
REGIONAL HEALTH PROPERTIES, INC.
454 Satellite Boulevard NW, Suite 100 Suwanee, Georgia 30024
The undersigned hereby constitutes and appoints Brent Morrison and Benjamin A. Waites, and each of them individually, each with full power of substitution and
resubstitution, to vote in the manner specified below the numbers of shares of 10.875% Series A Cumulative Redeemable Preferred Shares of Regional Health Properties, Inc. (the Company) which the undersigned would be entitled to vote if
personally present at the Companys 2022 Special Meeting of Shareholders to be held on , 2022, at Sonesta Gwinnett Place Atlanta, located at 1775 Pleasant Hill Road, Duluth, Georgia, at , Eastern Time (the Special Meeting), and at
any adjournments or postponements thereof, upon the proposals described in the Notice of Special Meeting of Shareholders and Proxy Statement/Prospectus, the receipt of which is acknowledged. The above-named proxies of the undersigned are further
authorized and directed to vote, in their discretion, on any adjournments or postponements of the Special Meeting and on such other matters as may properly come before the Special Meeting and any adjournments or postponements thereof. THE SHARES
REPRESENTED BY THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THEN THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3, AND IN THE DISCRETION OF THE ABOVE-NAMED
PROXIES AS TO ANY OTHER MATTERS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
(Continued, and to be marked, dated
and signed, on the other side)
Exhibit 99.4
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.Vote by Internet, Smartphone or Tablet - QUICK EASY IMMEDIATE - 24 Hours a Day, 7 Days a Week or by Mail proxies Your Mobile to vote or your Internet shares vote in authorizes the same the manner named as Votes if you submitted marked, signed, electronically and returned by Mobile your or proxy over card. the Internet on [], 2022. must be received by 11:59 p.m., Eastern Time, www.cstproxyvote.comUse the Internet to vote your proxy. Have your proxy card available when you access the above website. Follow the prompts to vote your shares. MOBILE VOTING On yor Smartphone/Tablet, open the QR Reader and scan the below image. Once the voting site is displayed, enter your Control Number from the proxy card and vote your shares. MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope provided. PLEASE DO NOT RETURN THE PROXY CARD IF YOU ARE VOTING ELECTRONICALLY. FOLD HERE DO NOT SEPARATE INSERT IN ENVELOPE PROVIDED PROXY FOR HOLDERS OF COMMON STOCK Please markTHE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR PROPOSALS 1 AND 2. 1. To approve a proposal to (i) amend the FOR AGAINST ABSTAIN 2. To approve a proposal to adjourn the spe- FOR AGAINST ABSTAIN Amended and Restated Articles of Incor- cial meeting of the holders of the Companys poration (the Charter) of Regional Health Series A Preferred Stock and common stock Properties, Inc. (the Company) to (a) (the Special Meeting), if necessary or ap-reduce the liquidation preference of the Companys 10.875% Series propriate, for the purpose of soliciting additional votes for the approv-A Cumulative Redeemable Preferred Shares (the Series A Preferred al of Proposal 1 if there are not sufficient votes cast at the Special Stock) to $5.00 per share, (b) eliminate accumulated and unpaid Meeting to approve Proposal 1. dividends on the Series A Preferred Stock, (c) eliminate future dividends on the Series A Preferred Stock, (d) eliminate penalty events and the right of holders of Series A Preferred Stock to elect directors upon the occurrence of a penalty event, (e) reduce the redemption price of the Series A Preferred Stock in the event of an optional redemption to $5.00 per share, (f) reduce the redemption price of the Series A Preferred Stock in the event of a change of control to $5.00 per share and (g) change the voting rights of holders of Series A Preferred Stock when voting as a single class with any other class or series of stock to one vote per $5.00 liquidation preference, and (ii) amend the Charter to increase the authorized number of shares of the Company to 61,000,000 shares, consisting of 55,000,000 shares of common stock and 6,000,000 shares of preferred stock.CONTROL NUMBER PrintName(s): Signature Signature, if held jointly Date , 2022 Please date and sign in the same manner in which your shares are registered. When signing as executor, administrator, trustee, guardian or attorney, please give full title. Joint owners should each sign. If a signer is a corporation, please sign in full corporate name by duly authorized officer.
Important Notice Regarding the Internet Availability of Proxy Materials for the 2022 Special Meeting of Shareholders to be held on [], 2022 The Proxy Statement/Prospectus and the Notice of Special Meeting are available at: https://www.cstproxy.com/regionalhealthproperties/2022 FOLD HERE DO NOT SEPARATE INSERT IN ENVELOPE PROVIDED PROXY FOR HOLDERS OF COMMON STOCK THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS FOR THE 2022 SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON [], 2022 REGIONAL HEALTH PROPERTIES, INC. 454 Satellite Boulevard NW, Suite 100 Suwanee, Georgia 30024 The undersigned hereby constitutes and appoints Brent Morrison and Benjamin A. Waites, and each of them individually, each with full power of substitution and resubstitution, to vote in the manner specified below the numbers of shares of common stock of Regional Health Properties, Inc. (the Company) which the undersigned would be entitled to vote if personally present at the Companys 2022 Special Meeting of Shareholders to be held on , 2022, at Sonesta Gwinnett Place Atlanta, located at 1775 Pleasant Hill Road, Duluth, Georgia, at , Eastern Time (the Special Meeting), and at any adjournments or postponements thereof, upon the proposals described in the Notice of Special Meeting of Shareholders and Proxy Statement/Prospectus, the receipt of which is acknowledged. The above-named proxies of the undersigned are further authorized and directed to vote, in their discretion, on any adjournments or postponements of the Special Meeting and on such other matters as may properly come before the Special Meeting and any adjournments or postponements thereof. THE SHARES REPRESENTED BY THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THEN THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2, AND IN THE DISCRETION OF THE ABOVE-NAMED PROXIES AS TO ANY OTHER MATTERS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.(Continued, and to be marked, dated and signed, on the other side)
Exhibit 107
Calculation of Filing Fee Tables
Form S-4
(Form Type)
Regional Health Properties, Inc.
(Exact Name of Registrant as Specified in its Charter)
Table 1: Newly Registered Securities
Security
Type |
Security Class Title |
Fee
Calculation or Carry Forward Rule |
Amount
Registered |
Proposed
Maximum Offering Price Per Unit |
Maximum
Aggregate Offering Price |
Fee Rate |
Amount of
Registration Fee(3) |
|||||||||||||||||||
Fees to Be Paid |
Equity | 12.5% Series B Cumulative Redeemable Preferred Shares, no par value | Other(1) | 2,811,535 | N/A | $ | 12,103,658.18 | 0.0000927 | $ | 1,122.01 | ||||||||||||||||
Equity | Common Stock, no par value | Other(2) | 0 | (2) | N/A | $ | 0.00 | 0.0000927 | $ | 0.00 | ||||||||||||||||
Fees Previously Paid |
Equity | Common Stock, no par value | Other(3) | 1,405,768 | N/A | $ | 14,282,597.80 | $ | 1,558.24 | (4)(5) | ||||||||||||||||
Total Offering Amounts | $ | 12,103,658.18 | $ | 1,122.01 | ||||||||||||||||||||||
Total Fees Previously Paid | $ | 2,065.88 | (4)(5) | |||||||||||||||||||||||
Total Fee Offsets | $ | 2,065.88 | (6) | |||||||||||||||||||||||
Net Fee Due | $ | 0.00 | (6) |
Table 2: Fee Offset Claims and Sources
Registrant or Filer
|
Form or
|
File Number |
Initial
|
Filing Date |
Fee Offset
|
Fee Paid with Fee
|
||||||||
Rules 457(b) and 0-11(a)(2) | ||||||||||||||
Fees Offset Claims |
S-4 | 333-256667 | June 1, 2021 | $2,065.88(5)(6) | ||||||||||
Fees Offset Sources |
Regional Health Properties, Inc. | S-4 | 333-256667 | June 1, 2021 | $2,065.88(5)(6) |
(1) |
Calculated pursuant to Rules 457(c) and 457(f)(1) under the Securities Act of 1933, as amended (the Securities Act), solely for the purpose of calculating the registration fee for this offering, based on the high and low prices of the Registrants 10.875% Series A Cumulative Redeemable Preferred Shares, no par value per share (the Series A Preferred Stock), as reported on the NYSE American LLC (the NYSE American) on February 8, 2022 ($4.31 per share), multiplied by the estimated maximum number of shares of Series A Preferred Stock (2,811,535) that may be exchanged for the Registrants 12.5% Series B Cumulative Redeemable Preferred Shares, no par value per share (the Series B Preferred Stock), being registered. |
(2) |
The Registrant registered 1,405,768 shares of its Common Stock, no par value per share (the Common Stock), pursuant to the initial filing of this Registration Statement on Form S-4 on June 1, 2021. Pursuant to the filing of this pre-effective Amendment No. 2, the Registrant hereby decreases the number of shares of Common Stock registered pursuant to this Registration Statement on Form S-4 to 0. |
(3) |
Calculated pursuant to Rules 457(c) and 457(f)(1) under the Securities Act, solely for the purpose of calculating the registration fee for this offering, based on the high and low prices of the Series A Preferred Stock as reported on the NYSE American on June 28, 2021 ($5.08 per share), multiplied by the estimated maximum number of shares of Series A Preferred Stock (2,811,535) that could have been exchanged for the Common Stock that was previously registered. |
(4) |
The Registration Fee for this Registration Statement on Form S-4 with respect to the 1,405,768 shares of Common Stock previously registered upon the initial filing of this Registration Statement on Form S-4 was recalculated pursuant to Amendment No. 1 to this Registration Statement on Form S-4 in accordance with Rules 457(c) and 457(f)(1) under the Securities Act and was lowered from $2,065.88 to $1,558.24. |
(5) |
The Registrant previously paid $2,065.88 upon the initial filing of this Registration Statement on Form S-4 on June 1, 2021. |
(6) |
Pursuant to the recalculation procedure set forth in Instruction 2.A.iv of the Instructions to the Calculation of Filing Fee Tables and Related Disclosure on Form S-4, the Registrant has recalculated the filing fee due for this Registration Statement on Form S-4 and has claimed an offset of $2,065.88 pursuant to Rule 457(b) under the Securities Act as set forth in Table 2. The $2,065.88 offset corresponds to the fee the Registrant previously paid in connection with the 1,405,768 shares of Common Stock previously registered upon the initial filing of this Registration Statement on Form S-4 on June 1, 2021. The number of shares of Common Stock registered on this Registration Statement on Form S-4 has been decreased to 0 pursuant to this Amendment No. 2. The Registrant confirms that (i) this Amendment No. 2 is a pre-effective amendment, (ii) it has increased the amount of shares of Series B Preferred Stock registered on this Registration Statement on Form S-4 pursuant to this Amendment No. 2 from 0 to 2,811,535, (iii) it has decreased the amount of shares of Common Stock registered on this Registration Statement on Form S-4 pursuant to this Amendment No. 2 from 1,405,768 to 0, and (iv) it has not relied on Rule 457(o) under the Securities Act to calculate the filing fee due for the initial filing or any prior pre-effective amendments to this Registration Statement on Form S-4. |