Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This Quarterly Report and certain information incorporated herein by reference contain forward-looking statements and information within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This information includes assumptions made by, and information currently available to management, including statements regarding future economic performance and financial condition, liquidity and capital resources, and management's plans and objectives. In addition, certain statements included in this Quarterly Report, in the Company's future filings with the SEC, in press releases, and in oral and written statements made by us or with our approval, which are not statements of historical fact, are forward-looking statements.

Words such as "may," "could," "should," "would," "believe," "expect," "anticipate," "estimate," "intend," "seek," "plan," "project," "continue," "predict," "will," and other words or expressions of similar meaning are intended by us to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are based on the Company's current expectations about future events or results and information that is currently available to us, involve assumptions, risks, and uncertainties, and speak only as of the date on which such statements are made.

All forward-looking statements are subject to the risks and uncertainties inherent in predicting the future. The Company's actual results may differ materially from those projected, stated or implied in these forward-looking statements as a result of many factors, including the Company's critical accounting policies and risks and uncertainties related to, but not limited to, the operating results of the Company's tenants, the overall industry environment, and the Company's financial condition. These and other risks and uncertainties are described in more detail in the Annual Report and in Part II, Item 1A "Risk Factors" of this Quarterly Report, as well as other reports that the Company files with the SEC.

Forward-looking statements speak only as of the date they are made and should not be relied upon as representing the Company's views as of any subsequent date. The Company undertakes no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by applicable laws, and you are urged to review and consider disclosures that the Company makes in this Quarterly Report and other reports that the Company files with the SEC that discuss factors germane to the Company's business.

Overview

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

As of September 30, 2026 the Company had investments of approximately $60.6 million in healthcare real estate, operated or leased a portfolio consisting primarily of skilled nursing facilities and senior housing communities located in five states, and operates a pharmacy business located in Louisiana, which was acquired following the SunLink merger completed on August 14, 2025.

The Company operates through four reportable segments: Corporate, Healthcare Services, Pharmacy Services and Real Estate Services. The Healthcare Services segment includes the direct operation of skilled nursing and senior housing communities that provide a range of healthcare and residential services, including sub-acute and post-acute skilled nursing care, intermediate nursing care, rehabilitative therapy, memory care, Alzheimer's and dementia care, and senior living services. The Pharmacy Services segment includes retail pharmacy products and services, institutional pharmacy services and durable medical equipment. The Real Estate Services segment consists of investments in skilled nursing and senior housing properties that are leased or subleased to third-party operators under triple-net lease arrangements. These segments reflect the Company's evolution from a healthcare landlord into a more diversified healthcare company with both real estate and operating capabilities.

The comparability of the Company's results for the three months ended September 30, 2026 and 2025 is affected by the SunLink merger, which added the Pharmacy Services segment beginning on August 14, 2025. In addition, one facility that was included in the Real Estate Services segment in 2025 transitioned to the Healthcare Services segment on February 1, 2026. As a

result, year-over-year comparisons reflect not only changes in operating performance, but also a meaningful change in segment composition. These changes resulted in increased patient care revenues and patient care expenses in Healthcare Services, the addition of pharmacy revenues and related cost of goods sold in Pharmacy Services, and lower rental revenues in Real Estate because one property is no longer operated under a lease structure. Accordingly, the Company's consolidated and segment results for the three and nine months ended September 30, 2026 are not directly comparable to the prior-year period.

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

Key Segment Operating Metrics

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

Healthcare Services

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

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

Pharmacy Services

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

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

Real Estate Services

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

Corporate

The most significant operating metric for the Corporate segment is general and administrative expenses, which primarily consist of corporate personnel costs, professional fees, insurance, information technology, and other administrative expenses. Management believes these costs are key indicators of corporate overhead and the Company's ability to efficiently support its operating segments.

Management monitors general and administrative expenses to evaluate spending trends, identify opportunities for cost efficiencies, and assess the overall level of corporate overhead relative to the Company's consolidated operations. Particular emphasis is placed on personnel costs, legal and accounting fees, insurance expenses, and other recurring corporate expenditures. Management also evaluates fluctuations in these expenses, including nonrecurring costs associated with acquisitions, financing activities, and other corporate initiatives, to assess their impact on the Company's consolidated operating results.

Recent Activities

Entry into Forbearance Agreements

On February 27, 2026, the Company and Erin Property Holdings, LLC (the "Borrower") entered into two Forbearance Agreements with effective dates of February 1, 2026 (the "Forbearance Agreements") with Cadence Bank, N.A. (the "Lender") relating to certain defaults by the Company and the Borrower under the loan agreements in the principal amount of $5,000,000 due on July 27, 2036 (the "USDA Note") and the principal amount of $800,000 due on July 27, 2036 (the "SBA Note" and, together with the USDA Note, the "Notes") that were issued by the Borrower to the Company to reflect payment obligations pursuant to the Security Agreement, dated as of July 27, 2011 (the "Security Agreement"), between the Borrower and the Lender.

Pursuant to the Forbearance Agreements, (a) the Borrower agreed to make payments of $21,047.76 as a one-time forbearance payment and $6,764.21 for the 2026 USDA annual renewal fee toward the SBA Note no later than February 27, 2026, and (b) the Company and the Lender agreed, subject to the terms and conditions set forth in the Forbearance Agreements, to forbear from exercising its rights and remedies on account of the failure by the Company and the Borrower to pay the amounts due under the USDA Note and SBA Note by the expiration of the period ("Forbearance Period") of February 1, 2027.

During the Forbearance Period, the Company and the Borrower shall make monthly payments of principal and interest in accordance with the terms of the USDA Note and the SBA Note with interest continuing to accrue in accordance with the terms of the Notes which amounts shall remain the obligation of the Company and the Borrower.

The remaining balances of the USDA Note and the SBA Note will be due at the end of the Forbearance Period and include all principal, interest, late charges and statutory attorney's fees.

Segment Reporting

Management believes the most meaningful way to understand 2026 results is by reference to the Company's four reportable segments together with the consolidated statement of operations and comprehensive earnings. Healthcare Services results reflect the direct operation of facilities, including the impact of taking back operations at certain properties during 2026. Pharmacy Services results reflect the contribution from the pharmacy business acquired in the SunLink merger. Real Estate results reflect rental income, credit loss expense and lease-related activity associated with facilities that remained leased or subleased to third-party operators. Corporate results primarily reflect general and administrative expenses, including corporate personnel costs, professional fees, insurance, information technology, and other administrative costs incurred to support the Company's consolidated operations.

At the consolidated level, patient care revenues, pharmacy revenues and patient care expense increased significantly in 2026 due primarily to the expanded Healthcare Services segment and the addition of Pharmacy Services, while rental revenues declined as certain facilities were transitioned out of the Real Estate Services segment and into operated status. Accordingly, line-item changes in the consolidated statement of operations and comprehensive loss should be evaluated in light of these changes in segment composition.

Real Estate Portfolio

As of September 30, 2026, we had investments of approximately $60.6 million in a portfolio of twelve healthcare facilities, consisting of eleven owned properties and one leased facility. Our owned properties consisted of nine skilled nursing facilities and two senior housing communities. Of the twelve facilities, five were leased or subleased to third-party operators under triple-net lease arrangements, and seven were managed on the Company's behalf by two external managers. The Company's leased facility is subleased to a third-party operator under a triple-net lease arrangement.

Skilled nursing facilities. SNFs provide services that include daily nursing, therapeutic rehabilitation, social services, activities, housekeeping, nutrition, medication management and administrative services for individuals requiring certain assistance for

activities in daily living. A typical skilled nursing facility includes mostly one and two bed units, each equipped with a private or shared bathroom and community dining facilities.

Independent Living Communities

Independent living communities are age-restricted residential communities designed for seniors who are able to live independently but prefer the security, convenience and social setting of community living. These communities typically offer lifestyle services and limited support services for residents who do not require a high level of daily care.

Assisted Living Facilities

Assisted living facilities provide assistance with activities of daily living while allowing residents to maintain a degree of independence. Services commonly include meals, housekeeping, medication reminders, personal care support and other services that help residents live in a supportive residential setting.

Memory Care Communities

Memory care communities provide specialized care for individuals suffering from Alzheimer's disease and other forms of dementia. These communities typically operate in a more secure setting and offer staff, programming and care plans specifically designed to address cognitive impairment and memory loss.

Portfolio

The following table provides summary information regarding the number of facilities and related licensed beds/units as of September 30, 2026:

The following table provides summary information regarding the number of facilities and related licensed beds/units by operator/manager affiliation as of September 30, 2026:

For a more discussion of the above information, see Note 8 - Leases to the consolidated financial statements included in Part I, Item 1 herein. Additionally, see "Portfolio of Healthcare Investments" included in Part I, Item 1 "Business" in the Annual Report.

Portfolio Occupancy Rates

The following table provides summary information regarding our portfolio facility-level occupancy rates for the periods shown:

Lease Expiration

The following table provides summary information regarding our lease expirations for the years shown as of December 31,:

Results of Operations

The following table sets forth, for the periods indicated, an unaudited statement of operations and comprehensive loss items and the amounts and percentages of change of these items. The results of operations for any particular period are not necessarily indicative of results for any future period. The following data should be read in conjunction with our consolidated financial statements and the notes thereto, which are included herein.

For the three and nine months ended September 30, 2026, total revenues increased to $25.0 million and $70.6 million, respectively, from $15.1 million and $32.4 million for the same prior-year periods, primarily due to the addition of Pharmacy Services revenues following the SunLink merger and increased Healthcare Services revenues from facilities transitioned to operated status. Total expenses also increased as the Company incurred the related cost of goods sold, patient care expenses and general and administrative expenses associated with the expanded operating platform. Net loss for the three and nine months ended September 30, 2026 was $0.9 million and $2.9 million, respectively, from the net income of $3.4 million and $0.7 million for the same prior-year periods, primarily from the gain on bargain purchase from the SunLink merger recorded on August 14, 2025.

Three Months Ended September 30, 2026 and 2025

Patient care revenues-Patient care revenues were $14.7 million for the three months ended September 30, 2026, compared to $9.8 million for the same period in 2025. The 49.7% increase is due to the transition of the Autumn Breeze, Georgetown, and Sumter facilities to the Healthcare Services segment and to a lesser extent an increase in census at our Glenvue facility.

Rental revenues-Rental revenue decreased by approximately $0.5 million to $0.8 million for the three months ended September 30, 2026, compared with $1.3 million for the same period in 2025. The 38.8% decrease is primarily due to transition of the Autumn Breeze, Georgetown and Sumter facilities to our Healthcare Services segment.

Pharmacy revenue- Pharmacy revenues were $9.5 million for the three months ended September 30, 2026, compared to $4.0 million for the same period in 2025. These revenues reflect the Pharmacy Services segment added in connection with the SunLink merger. For the three months ended September 30, 2025, the Pharmacy Revenue only represents revenue earned after the merger with SunLink on August 14, 2025.

Cost of goods sold-Cost of goods sold was $5.8 million for the three months ended September 30, 2026, compared to $2.5 million for the same period in 2025. These costs reflect the cost of pharmacy products sold or rented by the Pharmacy Services segment. For the three months ended September 30, 2025, the cost of goods sold only represents the associated costs on revenue earned after the merger with SunLink on August 14, 2025.

Patient care expense-Patient care expense was $11.0 million for the three months ended September 30, 2026 compared with $8.6 million for the same period in 2025. The current period expense increase of $2.4 million was primarily due to the transition of the Autumn Breeze, Georgetown, and Sumter facilities to the Healthcare Services segment and to a lesser extent an increase in census at our Glenvue facility.

Facility rent expense-Facility rent was $0.2 million for the three months ended September 30, 2026, which was generally consistent for the three months ended September 30, 2025.

Depreciation and amortization-Depreciation and amortization was $0.8 million for the three months ended September 30, 2026, compared to $0.5 million for the same period in 2025. The 43.5% increase was primarily due to depreciation on assets acquired in the SunLink acquisition.

General and administrative expenses-General and administrative expenses were $6.6 million for the three months ended September 30, 2026 compared with $3.7 million for the same period in 2025. The 76.9% increase was primarily due to the transition of the Autumn Breeze, Georgetown, Southland and Sumter facilities to the Healthcare Services segment and the addition of operations acquired in the SunLink merger.

Loss on Lease Termination-There were no expenses related to lease terminations for the three months ended September 30, 2026 and for the same period in 2025.

Credit loss expenses-Credit loss expense was $0.2 million for the three months ended September 30, 2026 and $0.2 million for the same period in 2025. The loss primarily represents reserves taken against patient accounts receivable in the period.

Impairment loss on assets held for sale -During the three months ended September 30, 2026, the Company recognized a noncash impairment loss of approximately $0.5 million related to the Meadowood property, compared to no impairment loss in the prior-year period. The impairment was based on estimated fair value less costs to sell of approximately $3.8 million, as further discussed in Note 6 - Assets Held for Sale.

Loss (gain) on bargain purchase-During the three months ended September 30, 2026, the Company recognized a purchase price adjustment of $78 thousand associated with the SunLink merger. The gain on bargain purchase of $5.3 million for the three months ended September 30, 2025 resulted from the SunLink merger completed on August 14, 2025.

Nine Months Ended September 30, 2026 and 2025

Patient care revenues-Patient care revenues were $41.4 million for the nine months ended September 30, 2026, compared to $24.2 million for the same period in 2025. The 70.9% increase is due to the transition of the Autumn Breeze, Georgetown, and Sumter facilities to the Healthcare Services segment and to a lesser extent an increase in census at our Glenvue facility.

Rental revenues-Rental revenue decreased by $1.7 million to $2.5 million for the nine months ended September 30, 2026, compared with $4.1 million for the same period in 2025. The 40.5% decrease is primarily due to transition of the Autumn Breeze, Georgetown and Sumter facilities to our Healthcare Services segment.

Pharmacy revenue- Pharmacy revenues were $26.7 million for the nine months ended September 30, 2026, compared to $4.0 million for the same period in 2025. These revenues reflect the Pharmacy Services segment added in connection with the SunLink merger. For the nine months ended September 30, 2025, the Pharmacy Revenue only represents revenue earned after the merger with SunLink on August 14, 2025.

Cost of goods sold-Cost of goods sold was $16.4 million for the nine months ended September 30, 2026, compared to $2.5 million for the same period in 2025. These costs reflect the cost of pharmacy products sold or rented by the Pharmacy Services segment. For the nine months ended September 30, 2025, the cost of goods sold only represents the associated costs on revenue earned after the merger with SunLink on August 14, 2025.

Patient care expense-Patient care expense was $31.4 million for the nine months ended September 30, 2026 compared with $20.2 million for the same period in 2025. The current period expense increase of $11.2 million was primarily due to the transition of the Autumn Breeze, Georgetown, and Sumter facilities to the Healthcare Services segment and to a lesser extent an increase in census at our Glenvue facility.

Facility rent expense-Facility rent was $0.7 million for the nine months ended September 30, 2026, which was slightly higher when compared to the nine months ended September 30, 2025, primarily due to the leases acquired in the SunLink merger.

Depreciation and amortization-Depreciation and amortization was $2.3 million for the nine months ended September 30, 2026, compared to $1.4 million for the same period in 2025. The 67.6% increase was primarily due to depreciation on assets acquired in the SunLink acquisition.

General and administrative expenses-General and administrative expenses were $19.8 million for the nine months ended September 30, 2026, compared with $8.4 million for the same period in 2025. The 136.2% increase was primarily due to the transition of the Autumn Breeze, Georgetown, Southland and Sumter facilities to the Healthcare Services segment and the addition of operations acquired in the SunLink merger.

Loss on Lease Termination-There were no material expenses related to lease terminations for the nine months ended September 30, 2026, compared to $0.3 million for the same period in 2025, which related to the termination of the two leases to Oak Hollow Healthcare Management, and the losses consist of the write-offs of straight-line rent.

Credit loss expenses-Credit loss expense was $0.6 million for the nine months ended September 30, 2026, compared to $0.6 million for the same period in 2025. The loss primarily represents reserves taken against patient accounts receivable in the period.

Impairment loss on assets held for sale -During the nine months ended September 30, 2026, the Company recognized a noncash impairment loss of approximately $0.5 million related to Meadowood, compared to no impairment loss in the prior-year period. See Note 6 - Assets Held for Sale for additional information.

Gain on operations transfer-There was no gain on operations transfer for the nine months ended September 30, 2026, compared to $0.1 million for the same period in 2025. In March 2025, the Company took patient accounts receivable in lieu of the outstanding Rent Receivable owed by Oak Hollow Healthcare Management as part of the lease termination.

Loss (gain) on bargain purchase-During the nine months ended September 30, 2026, the Company recognized a purchase price adjustment of $78 thousand associated with the SunLink merger. The gain on bargain purchase of $5.3 million for the nine months ended September 30, 2025 resulted from the SunLink merger completed on August 14, 2025.

NON-GAAP Financial Measures

The following table summarizes the Company's non-GAAP financial measure of results based on EBITDA for the quarters ending September 30, 2026 and 2025. EBITDA attributable to the Company's financial measure represents net income (loss) before interest expense (including amortization of deferred financing costs), provision for income tax, and depreciation and amortization. Adjusted EBITDA represents EBITDA further adjusted to eliminate the impact of certain items that the Company does not consider indicative of core operating performance, such as recovery of previously reversed rent, amortization of stock-based compensation, lease termination revenue, gains or losses from dispositions of real estate, real estate impairment charges, provision for loan losses, non-routine transaction costs, loss on extinguishment of debt, unrealized loss on other real estate related investments and provision for credit losses and lease restructuring, as applicable.

Liquidity and Capital Resources

Overview

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

The Company's primary sources of cash include revenues from its healthcare operations, pharmacy operations, rental income,

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

Short-term Liquidity

Management expects the Company's short-term liquidity requirements over the twelve months following the filing of this Quarterly Report to be funded primarily through collections of patient accounts receivable, rent receivable and other receivables, mortgage refinancing activity, including the potential refinancing of the Southland facility, additional debt borrowings and proceeds from the sale of assets classified as held for sale. The Company's short-term liquidity continues to be affected by the transition of the Autumn Breeze facility from leased to operated status, which has increased working capital requirements, including payroll, supplies, patient care costs and patient accounts receivable.

The Company continues to evaluate financing and liquidity alternatives. The Company remains in discussions with potential lenders regarding the refinancing of the Southland facility. In addition, the Company has received a non-binding term sheet for the refinancing of several mortgage loans, which, if completed, could provide additional liquidity for working capital and general corporate purposes. The proposed refinancing remains subject to lender due diligence, credit approval, definitive documentation, third-party reports and other customary closing conditions, and there can be no assurance that any such refinancing will be completed on the terms contemplated, within the expected timeframe, or at all.

The Company continues to evaluate opportunities to monetize non-core assets as part of its capital allocation strategy. The Meadowood facility remained classified as held for sale as of September 30, 2026. During the quarter ended March 31, 2026, the Company engaged a new broker to expand its marketing efforts and facilitate negotiations with prospective purchasers.

On October 27, 2026, the Company received a nonbinding letter of intent from a prospective purchaser proposing to acquire the Meadowood property and related operating business for approximately $4.0 million. The Company anticipates completing the sale before December 31, 2026, subject to execution of a definitive purchase agreement, due diligence, financing, and customary closing conditions.

In connection with its assessment of the assets held for sale, the Company recognized a noncash impairment loss of approximately $0.5 million during the three months ended September 30, 2026, resulting in a carrying value of approximately $3.8 million. See Note 6 - Assets Held for Sale for additional information.

The timing of the sale and amount of net proceeds remain subject to completion of the transaction and repayment of related indebtedness. There can be no assurance that the sale will be completed on the anticipated terms or within the expected timeframe.

During the nine months ended September 30, 2026, the Company generated $2.5 million of cash in operating activities. Operating cash flows were primarily affected by working capital investments associated with the assumption of operations at Autumn Breeze, which was partially offset by non-cash adjustments. Management continues to focus on collections of patient accounts receivable, past due rent and notes receivable. The Company anticipates collecting a portion of past due rent subsequent to quarter end and is negotiating various methods to collect the remaining unpaid rent and notes receivable. However, the timing and amount of collections remain subject to tenant and patient payor performance, reimbursement timing, collection efforts and other factors outside the Company's control.

At September 30, 2026, the Company had $1.7 million in unrestricted cash and $10.6 million of net accounts receivable, mainly consisting of patient accounts receivables.

As of September 30, 2026, the Company had $42.2 million in indebtedness, net of $0.8 million of deferred financing costs, and unamortized discounts. The Company anticipates net principal repayments of approximately $7.9 million during the next twelve-month period, consisting of approximately $4.0 million of routine debt service amortization, $0.2 million of bond debt payments, and $3.7 million of Southland's maturing debt.

Long-term Liquidity

Management expects the Company's long-term liquidity needs will be funded primarily from cash generated in the ordinary course of business in conjunction with the sale of securities. The Company's ability to generate long-term liquidity from operations will depend on the operating performance of its Healthcare Services, Pharmacy Services and Real Estate segments, including occupancy, reimbursement levels, labor costs, pharmacy reimbursement collections, rent collections and overall operating margins. The Company's ability to raise capital through the sale of securities will depend on market conditions, investor interest, the trading price and liquidity of its securities and its overall financial performance. Because the Company's securities trade on the OTCQB rather than a national securities exchange, access to equity capital may be more limited than that of issuers listed on a national securities exchange.

Debt Covenant Compliance

As of September 30, 2026, the Company was in compliance with the various financial and administrative covenants under all the Company's outstanding credit related instruments, except with respect to the Southland-related USDA and SBA notes that are subject to the forbearance arrangements.

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

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

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

For additional information regarding the Company's liquidity, see Note 2 - Liquidity and Note 10 - Notes Payable and other debt, to the consolidated financial statements included in Part I, Item 1 herein.

Cash Flows

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

Nine Months Ended September 30, 2026

Net cash provided by (used in) operating activities-was approximately $2.5 million. The positive cash flow from operating activities were primarily affected by working capital investments associated with the assumption of operations at Autumn Breeze and non-cash adjustments.

Net cash (used in) provided by investing activities -was approximately $1.6 million. This capital expenditure was primarily for leasehold improvements.

Net cash used in financing activities-was approximately $2.1 million. The cash was used to make routine payments totaling $1.3 million for our Senior debt obligations, and $0.7 million for other debt, and cash used for the repurchase of our Series B Preferred Stock was $0.3 million, offset by debt proceeds of $0.3 million.

Nine Months Ended September 30, 2025

Net cash provided by (used in) operating activities-was approximately $1.0 million. The negative cash flow from operating activities was mainly due to the timing of working capital accounts.

Net cash (used in) provided by investing activities-was approximately $5.3 million. This includes $6.0 million of cash acquired in the SunLink merger.

Net cash used in financing activities-was approximately $3.8 million. Cash of $2.7 million was used to repurchase Series B Preferred shares and make routine payments totaling $1.3 million for our senior debt obligations.

Off-Balance Sheet Arrangements

Guarantee

The Company subleased five facilities located in Ohio to the Aspire Sublessees, formerly affiliated with MSTC Development Inc., pursuant to the Aspire Subleases, whereby the Aspire Sublessees took possession of, and commenced operating, the Aspire Facilities as subtenant. The Company agreed to indemnify Aspire against any and all liabilities imposed on them as arising from the former operator, capped at $8.0 million. The Company has assessed the fair value of the indemnity agreements as not material to the financial statements at September 30, 2026. For further information see Note 8 - Leases, to the consolidated financial statements included in Part I, Item 1 herein and also Note 8 - Leases included in Part II, Item 8 of the Annual Report.

Critical Accounting Policies

We prepare our financial statements in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Article 8 of Regulation S-X. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses. On an ongoing basis, we review our judgments and estimates, including, but not limited to, those related to doubtful accounts, income taxes, stock compensation, intangible assets and loss contingencies. We base our estimates on historical experience, business knowledge and on various other assumptions that we believe to be reasonable under the circumstances at the time. Actual results may vary from our estimates. These estimates are evaluated by management and revised as circumstances change.

For a discussion of our critical accounting policies, see Note 1 - Organization and Significant Accounting Policies to the consolidated financial statements included in Part I, Item 1 herein and also Note 1 - Summary of Significant Accounting Policies included in Part II, Item 8 of the Annual Report.