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

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

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

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

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

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

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

As of ~~July~~October 31, 2021: ~~1,726,605~~1,774,605 shares of common stock, no par value, were outstanding.

	June 30, 2021			December 31, 2020				September 30, 2021			December 31, 2020
	(Unaudited)							(Unaudited)
ASSETS
Property and equipment, net	$	51,355			$	52,533		$	50,755		$	52,533
Cash		5,633				4,186			6,233			4,186
Restricted cash		2,966				3,306			3,393			3,306
Accounts receivable, net of allowance of $109 and $1,381		1,593				2,100
Accounts receivable, net of allowance of $142 and $1,381									1,936			2,100
Prepaid expenses and other		990				328			617			328
Notes receivable		404				444			383			444
Intangible assets - bed licenses		2,471				2,471			2,471			2,471
Intangible assets - lease rights, net		146				158			140			158
Right-of-use operating lease assets		31,863				33,740			30,896			33,740
Goodwill		1,585				1,585			1,585			1,585
Lease deposits and other deposits		514				514			514			514
Straight-line rent receivable		7,643				6,660			8,101			6,660
Total assets	$	107,163			$	108,025		$	107,024		$	108,025
LIABILITIES AND EQUITY
Senior debt, net	$	46,636			$	47,275		$	46,357		$	47,275
Bonds, net		6,236				6,342			6,238			6,342
Other debt, net		1,291				822			802			822
Accounts payable		3,383				3,008			3,918			3,008
Accrued expenses		3,320				2,225			4,163			2,225
Operating lease obligation		34,040				35,884			33,066			35,884
Other liabilities		1,519				1,365			1,602			1,365
Total liabilities		96,425				96,921			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; 1,727 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
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		(113,842	)			(113,360	)		(113,881	)		(113,360	)
Total stockholders’ equity		10,738				11,104			10,878			11,104
Total liabilities and stockholders’ equity	$	107,163			$	108,025		$	107,024		$	108,025

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020			2021			2020
Revenues:
Patient care revenues	$	2,445		$	0		$	5,135		$	0		$	2,309		$	0		$	7,444		$	0
Rental revenues		3,763			4,293			7,844			8,590			4,136			4,308			11,980			12,898
Management fees		247			244			495			488			248			244			743			732
Other revenues		13			2			75			9			9			215			84			224
Total revenues		6,468			4,539			13,549			9,087			6,702			4,767			20,251			13,854
Expenses:
Patient care expense		2,254			0			4,457			0			2,454			0			6,911			0
Facility rent expense		1,639			1,639			3,279			3,279			1,640			1,640			4,919			4,919
Cost of management fees		150			174			315			325			153			161			468			486
Depreciation and amortization		652			769			1,302			1,545			651			694			1,953			2,239
General and administrative expense		945			714			1,981			1,591			972			743			2,953			2,334
Doubtful accounts expense (recovery)		37			(135	)		77			(137	)
Doubtful accounts expense														0			790			77			653
Other operating expenses		243			297			475			521			204			109			679			630
Total expenses		5,920			3,458			11,886			7,124			6,074			4,137			17,960			11,261
Income from operations		548			1,081			1,663			1,963			628			630			2,291			2,593
Other expense (income) :
Interest expense, net		666			684			1,353			1,399			669			692			2,022			2,091
Other expense (income), net		323			(9	)		717			135
Total other expense (income), net		989			675			2,070			1,534
Gain on extinguishment of debt														(146	)		0			(146	)		0
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		(441	)		406			(407	)		429			(17	)		(71	)		(424	)		358
(Loss) income from continuing operations	$	(441	)	$	406		$	(407	)	$	429		$	(17	)	$	(71	)	$	(424	)	$	358
(Loss) income from discontinued operations, net of tax		(62	)		6			(75	)		(31	)
Loss from discontinued operations, net of tax														(22	)		(2	)		(97	)		(33	)
Net (loss) income		(503	)		412			(482	)		398			(39	)		(73	)		(521	)		325
Preferred stock dividends - undeclared		(2,249	)		(2,249	)		(4,498	)		(4,498	)		(2,250	)		(2,250	)		(6,748	)		(6,748	)
Net Loss attributable to Regional Health Properties, Inc. common stockholders	$	(2,752	)	$	(1,837	)	$	(4,980	)	$	(4,100	)	$	(2,289	)	$	(2,323	)	$	(7,269	)	$	(6,423	)
Net (loss) income per share of common stock attributable to Regional Health Properties, Inc.
Net loss per share of common stock attributable to Regional Health Properties, Inc.
Basic and diluted:
Continuing operations	$	(1.59	)	$	(1.09	)	$	(2.90	)	$	(2.41	)	$	(1.25	)	$	(1.38	)	$	(4.15	)	$	(3.79	)
Discontinued operations		(0.03	)		0.00			(0.04	)		(0.02	)		(0.02	)		0			(0.06	)		(0.02	)
	$	(1.62	)	$	(1.09	)	$	(2.94	)	$	(2.43	)	$	(1.27	)	$	(1.38	)	$	(4.21	)	$	(3.81	)
Weighted average shares of common stock outstanding:
Basic and diluted		1,697			1,688			1,692			1,688			1,775			1,688			1,728			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
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			1,688			2,812	$	62,041		$	62,423	$	(113,360	)	$	11,104
Net income		—			—		—			—		21			21			—			—		—			—		21			21
Balances, March 31, 2021		1,688			2,812	$	62,041		$	62,423	$	(113,339	)	$	11,125			1,688			2,812	$	62,041		$	62,423	$	(113,339	)	$	11,125
Stock-based compensation		39			—		123			—		—			123			39			—		123			—		—			123
Exercise of restricted share awards net settlement option		(1	)		—		(7	)		—		—			(7	)		(1	)		—		(7	)		—		—			(7	)
Treasury shares, no par value		1			—		—			—		—			—			1			—		—			—		—			—
Net loss		—			—		—			—		(503	)		(503	)		—			—		—			—		(503	)		(503	)
Balances, June 30, 2021		1,727			2,812	$	62,157		$	62,423	$	(113,842	)	$	10,738			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 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
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			1,688		2,812	$	61,992	$	62,423	$	(112,672	)	$	11,743
Stock-based compensation		—		—		12		—		—			12			—		—		12		—		—			12
Net loss		—		—		—		—		(14	)		(14	)		—		—		—		—		(14	)		(14	)
Balances, March 31, 2020		1,688		2,812	$	62,004	$	62,423	$	(112,686	)	$	11,741			1,688		2,812	$	62,004	$	62,423	$	(112,686	)	$	11,741
Stock-based compensation		—		—		12		—		—			12			—		—		12		—		—			12
Net income		—		—		—		—		412			412			—		—		—		—		412			412
Balances, June 30, 2020		1,688		2,812	$	62,016	$	62,423	$	(112,274	)	$	12,165			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

	Six Months Ended June 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Cash flows from operating activities:
Net (Loss) income	$	(482	)	$	398
Net (loss) income							$	(521	)	$	325
Loss from discontinued operations, net of tax		75			31			97			33
(Loss) income from continuing operations		(407	)		429			(424	)		358
Adjustments to reconcile net (loss) income from continuing operations to net cash provided by operating activities:
Adjustments to reconcile net loss (income) from continuing operations to net cash provided by operating activities:
Depreciation and amortization		1,302			1,545			1,953			2,239
Stock-based compensation expense		123			24			302			37
Rent expense in excess of cash paid		34			109			27			144
Rent revenue in excess of cash received		(1,229	)		(536	)		(2,150	)		(765	)
Amortization of deferred financing costs, debt discounts and premiums		55			64			77			96
Bad debt expense (recovery)		77			(137	)
Gain on debt extinguishment								(146	)		—
Bad debt expense								77			653
Changes in operating assets and liabilities:
Accounts receivable		633			(1,078	)		737			(1,482	)
Prepaid expenses and other assets		244			65			636			564
Accounts payable and accrued expenses		1,544			68			2,977			(256	)
Other liabilities		155			267			241			345
Net cash provided by operating activities - continuing operations		2,531			820			4,307			1,933
Net cash used in operating activities - discontinued operations		(144	)		(904	)		(195	)		(1,017	)
Net cash provided by (used in) operating activities		2,387			(84	)
Net cash provided by operating activities								4,112			916
Cash flows from investing activities:
Purchase of property and equipment		(74	)		(157	)		(119	)		(209	)
Net cash used in investing activities - continuing operations		(74	)		(157	)		(119	)		(209	)
Net cash used in investing activities		(74	)		(157	)		(119	)		(209	)
Cash flows from financing activities:
Proceeds from debt issuance		—			229			—			229
Repayment on notes payable		(1,078	)		(733	)		(1,710	)		(1,112	)
Repayment on bonds payable		(121	)		(116	)		(121	)		(116	)
Debt extinguishment and issuance costs								(21	)		—
Repurchase of common stock		(7	)		—			(7	)		—
Net cash used in financing activities - continuing operations		(1,206	)		(620	)		(1,859	)		(999	)
Net cash used in financing activities		(1,206	)		(620	)		(1,859	)		(999	)
Net change in cash and restricted cash		1,107			(861	)		2,134			(292	)
Cash and restricted cash, beginning		7,492			8,038			7,492			8,038
Cash and restricted cash, ending	$	8,599		$	7,177		$	9,626		$	7,746

	Six Months Ended June 30,				Nine Months Ended September 30,
	2021		2020		2021			2020
Supplemental disclosure of cash flow information:
Cash interest paid	$	1,435	$	1,204	$	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	$	867		$	339
Non-cash accruals for capex					$	—		$	(157	)
Non-cash settlement of Peach Line (notes receivable)					$	—		$	350

Regional Health Properties, Inc., a Georgia corporation (“Regional Health” or “Regional” and, together with its subsidiaries, the “Company” or “we”), is a self-managed real estate investment company that invests primarily in real estate purposed for long-term care and senior living. The Company’s business primarily consists of leasing and subleasing healthcare facilities to third-party tenants, which in turn operate the facilities. The operators of the Company’s facilities provide a range of healthcare services to their patients and residents, including skilled nursing and assisted living services, social services, various therapy services, and other rehabilitative and healthcare services for both long-term and short-stay patients and residents.

As of ~~June~~September 30, 2021, the Company owned, leased or managed for third parties, or operated, 24 facilities, primarily in the Southeastern United States. Of the 24 facilities, the Company: (i) leased 10 skilled nursing facilities (which the Company owns) to third-party tenants, subleased 8 skilled nursing facilities (which the Company leases) to third-party tenants, and operated, as of January 1, 2021 as a portfolio stabilization measure, 1 previously subleased skilled nursing facility (which the Company leases); (ii) leased 2 assisted living facilities (which the Company owns) to third-party tenants; and (iii) managed, on behalf of third-party owners, 2 skilled nursing facilities (“SNFs”) and 1 independent living facility. Accordingly, as of January 1, 2021, the Company has 2 primary reporting segments: (i) real estate services, which consists of the leasing and subleasing of long-term care and senior living facilities to third-party tenants, including the Company’s management of 3 facilities on behalf of third-party owners (“Real Estate Services”); and (ii) healthcare services, which consists of the operation of a skilled nursing facility (“Healthcare Services”).

Effective January 1, 2021, the Company terminated the subleases for 2 skilled nursing facilities located in Georgia (the “Wellington Lease Termination”) with affiliates of Wellington Healthcare Services II, L.P. (“Wellington”), and as a portfolio stabilization measure, the Company commenced operating 1 of the facilities, a previously subleased 134-bed skilled nursing facility located in Thunderbolt, Georgia (the “Tara Facility”) and entered into a new sublease agreement with an affiliate of Empire Care Centers, LLC (“Empire”) for the other facility, a 208-bed skilled nursing facility located in Powder Springs, Georgia (the “Powder Springs Facility”). ~~The~~On January 1, 2021, the Company ~~has~~ entered into a Management Consulting Services Agreement (the “Vero Management Agreement”) with Vero Health Management, LLC (“Vero Health”) under which Vero Health ~~provides~~provided management consulting services for the Tara Facility, which the Company now operates. 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 a Management Agreement (the “Peach Management Agreement”) with Peach Health Group, LLC (“Peach”), dated as of September 22, 2021 and effective October 1, 2021 to provide management consulting services for the Tara Facility. Affiliates of Peach also lease from Regional three facilities located in Georgia. See Note 6 – Leases, herein, and Note 6 – Leases in Part II, Item 8, “Financial Statements and Supplemental Data” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (“SEC”) on March 29, 2021 (the “Annual Report”), for a more detailed description of the Company’s leases.

The Company leases its currently-owned healthcare properties, and subleases its currently-leased healthcare properties, on a triple-net basis, meaning that the lessee (i.e., the third-party operator of the property) is obligated under the lease or sublease, as applicable, for all costs of operating the property, including insurance, taxes and facility maintenance, as well as the lease or sublease payments, as applicable. These leases are generally long-term in nature with renewal options and annual rent escalation clauses.

Regional Health is successor to, and a former wholly owned subsidiary of, AdCare Health Systems, Inc. (“AdCare”). On September 29, 2017, AdCare merged (the “Merger”) with and into Regional Health, which was formed as a subsidiary of AdCare for the purpose of the Merger, with Regional Health continuing as the surviving corporation in the Merger. For a description of the Merger, see Note 1 – Summary of Significant Accounting Policies in Part II, Item 8, “Financial Statements and Supplemental Data”~~, Note 1 – Summary of Significant Accounting Policies~~ included in the Annual Report.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of

the results of operations for the periods presented have been included. Operating results for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 are not necessarily indicative of the results that may be expected for the fiscal year. The consolidated balance sheet at December 31, 2020 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

You should read the unaudited consolidated financial statements in this Quarterly Report on Form 10-Q (this “Quarterly Report”) together with the historical audited consolidated financial statements of the Company for the year ended December 31, 2020, included in the Annual Report. See Note 1 – Summary of Significant Accounting Policies in Part II, Item 8, “Financial Statements and Supplementary Data”, ~~Note 1 –~~ ~~Summary of Significant Accounting Policies~~ included in the Annual Report, for a description of all significant accounting policies. During the three and ~~six~~nine months ended ~~June~~September 30, 2021, there were no material changes to the Company’s policies.

While the Company is a self-managed real estate investment company that invests primarily in real estate purposed for long-term care and senior living, the Company, when business conditions require, may undertake portfolio stabilization measures, such as operating a previously leased facility. On January 1, 2021, following the Wellington Lease Termination, the Company commenced operating the Tara Facility, which facility comprises approximately 5.0% of the total amount of the Company’s licensed patient beds. This portfolio stabilization measure exposes the Company directly to all the risks our tenants face as discussed in this “Risk and Uncertainties” section and “Risks Related to Our Business and Industry - Our portfolio stabilization measures expose the Company to the various risks facing our tenants” in Part I, Item 1.A, “Risk Factors.” in the Annual Report.

On March 11, 2020, the World Health Organization declared the outbreak of the respiratory illness caused by a novel strain of coronavirus, SARS-CoV-2, also known as COVID-19, a global pandemic. The COVID-19 pandemic has led governments and other authorities in the United States to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines, and shelter-in-place orders. The COVID-19 pandemic and the measures to protect its spread have adversely affected our business during the ~~six~~nine months ended ~~June~~September 30, 2021, and we expect it will continue to adversely affect our business in the quarter ending ~~September 30,~~December 31, 2021 and beyond, for a variety of reasons, including those discussed below and elsewhere in this Quarterly Report.

As of ~~August 13,~~October 29, 2021, the Company is aware that each of our facilities has previously reported one or more positive cases of COVID-19 among the residents and/or operator employee populations. Many of our operators have reported incurring significant cost increases as a result of the COVID-19 pandemic, with dramatic increases for facilities with positive cases. We believe these increases primarily stem from elevated labor costs, including increased use of overtime and bonus pay, as well as a significant increase in both the cost and usage of personal protective equipment, testing equipment, processes and supplies. In terms of occupancy levels, many of our operators have reported experiencing declines, in part due to the elimination or suspension of elective hospital procedures, fewer discharges from hospitals to ~~skilled nursing facilities (“SNFs”),~~SNFs, and higher hospital re-admittances from SNFs.

The COVID-19 pandemic may also lead to temporary closures of nursing facilities, operated by our tenants, which also may affect our tenants’ ability to make their rental payments to us pursuant to their respective lease agreements. In addition, our tenants’ operations could be further disrupted if any of their employees, or the employees of their vendors, have, or are suspected of having, COVID-19. This could cause, and in some cases has already caused, our tenants or their vendors to experience staffing shortages, and this could potentially require our tenants and their vendors to close parts of or entire facilities, distribution centers, or other buildings to disinfect any affected areas.

We could also be adversely affected if government authorities impose upon our tenants, or their vendors, certain restrictions due to the COVID-19 pandemic. These restrictions may be in the form of mandatory closures, requested voluntary closures, bans on new admissions, restricted operations, or restrictions on the importation of necessary equipment or supplies which may adversely affect our tenants’ operations and their ability to make rental payments to us moving forward. In addition, family members may elect to keep nursing facility residents at home during the COVID-19 pandemic, thus reducing our tenants’ revenue. Currently, a number of our tenants have stopped admitting new patients due to rising COVID-19 infections which has resulted in decreased revenues.

As a result of the COVID-19 pandemic, our tenants may face lawsuits for alleged negligence associated with their responses to the emergency. The costs associated with defending, settling, or paying damages from such claims could negatively impact our tenants’ operating budgets and affect their ability to meet their obligations under our leases. Further, we may be subject to increased lawsuits arising out of our alleged actions or the alleged actions of our tenants for which they have agreed to

indemnify, defend and hold us harmless. An unfavorable resolution of any such pending or future litigation could materially adversely affect us. The Company is not aware of any such lawsuits against our tenants.

If our tenants are unable to make rental payments to us pursuant to their lease obligations, whether due to the tenants’ decrease in revenues or otherwise, then, in some cases, we may be forced to either attempt to replace the tenants or restructure the tenants’ long-term rent obligations and may not be able to do so on terms that are as favorable to us as those currently in place.

While the Company has received approximately 97% of its ~~expected~~anticipated fixed monthly rental receipts from tenants for the three and ~~six~~nine months ended ~~June~~September 30, 2021, there are a number of uncertainties the Company faces as it considers the potential impact of COVID-19 on its business, including the length of census disruption, elevated COVID-19 operating costs related to personal protection equipment, cleaning supplies, virus testing and increased overtime due to staff ~~illness~~illness.

On November 5, 2021, the CMS published COVID-19 Health Care Staff Vaccination requirements that most Medicare- and Medicaid-certified providers and suppliers must meet in order to participate in the ~~extent~~Medicare and Medicaid programs. This emergency regulation was effective immediately and requires employees at Medicare and Medicaid-participating facilities and employers with more than 100 employees to ~~which~~be vaccinated. Some states have also issued their own orders to employers and healthcare providers that may or may not align with federal directives. The legality of both federal and state ~~funding support~~vaccine mandates will likely be decided by the courts. Until pending laws and regulations related to vaccine mandates are both finalized and adjudicated, our tenants will continue to manage in different ways, from mandating vaccines for all employees to waiting to see how the issue is ultimately resolved. The mandates, as presently written, may cause disruption to tenants’ operations if employees refuse vaccination and are terminated, and our tenants are not able to replace them in a timely manner or experience increased costs to do so.

To help offset these ~~incremental~~ costs as well as occupancy declines, various relief programs have been enacted by federal and state governments, which have provided, and we expect will continue to provide, some payments to our tenants, subject to the programs’ respective terms and conditions. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) established a grant program administered by the U.S. Department of Health and Human Services (“HHS”) under which grants have been made available to eligible healthcare providers for healthcare related expenses or lost revenues attributable to COVID-19 (the “Provider Relief Funds”). In early November 2021, the HHS closed the application portal for its Phase 4 allocation of approximately $17 billion of Provider Relief Funds and an allocation of approximately $8.5 billion in American Rescue Plan resources for providers serving patients living in rural areas. We expect that our ~~tenants.~~ tenants pursued additional funding from these allocations, and will pursue any future funding that may become available, though there can be no assurance that our tenants will qualify for, or receive, any Phase 4 or American Rescue Plan, or any future, funding.

To the extent government support is not sufficient or timely to offset these impacts, or to the extent these trends continue or accelerate and are not offset by additional government relief that is sufficient or timely, the operating results of our operators are likely to be adversely affected, and some may be unwilling or unable to pay their contractual obligations to us in full or on a timely basis, as has occurred with one of our prior operators.

We also do not know the number of facilities that will ultimately experience widespread, high-cost outbreaks of COVID-19. While we have requested reporting case numbers from our operators and the U.S. Department of Health and Human Services Centers for Medicare and Medicaid Services (“CMS”) has required additional reporting by operators, we may not receive accurate information on the number of cases, which could result in a delay in reporting. We expect to see continued increased clinical protocols for infection control within facilities and increased monitoring of employees, guests and other individuals entering facilities; however, we do not yet know if future reimbursement rates in combination with the various relief programs that have been made available will be sufficient to cover the increased costs of enhanced infection control and monitoring. The extent of the COVID-19 pandemic’s effect on our and our operators’ operational and financial performance will depend on future developments, including the ultimate duration, spread and intensity of the outbreak, which may depend on factors such as the development and implementation of an effective vaccine and treatments for COVID-19, government funds and other support for the senior care sector and the efficacy of other policies and measures that may mitigate the impact of the pandemic, all of which are uncertain and difficult to predict. Due to these uncertainties, we are unable at this time to estimate the effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material.

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

Patient Care Revenue. Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers requires a company to recognize revenue when the company transfers control of promised goods and services to a customer. Revenue is recognized in an amount that reflects the consideration to which a company expects to receive in exchange for such goods and services. Revenue from our new Healthcare Services business segment is derived from services rendered to patients in the Tara Facility. The Company receives payments from the following sources for services rendered in our facilities: (i) the federal government under the Medicare program administered by CMS; (ii) state governments under their respective Medicaid and similar programs; (iii) commercial insurers; and (iv) individual patients and clients. The vast majority of the revenue the Company has recognized is from government sources. The Company determines the transaction price based on established billing rates reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients and other price concessions. Contractual adjustments and discounts are based on contractual agreements, discount policies and historical experience. The Company recognizes revenue at the amount that reflects the consideration the Company expects to receive in exchange for the services provided. These amounts are due from residents or third-party payors and include variable consideration for retroactive adjustments from estimated reimbursements, if any, under reimbursement programs. Performance obligations are determined based on the nature of the services provided. Revenue is recognized as performance obligations are satisfied. Estimated uncollectable amounts due from patients are generally considered implicit price concessions that are a direct reduction to net operating revenues.

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

Management Fees, Revenue from Contracts with Customers. The Company recognizes management fee revenues as services are provided. The Company has one contract to manage three facilities (the “Management Contract”), with payment for each month of service received in full on a monthly basis. The maximum penalty for service contract nonperformance under the Management Contract is $50,000 per year, payable after the end of the year.

Other ~~revenues~~Revenues. The Company recognizes interest income from loans and investments, using the effective interest method when collectability is probable. The Company applies the effective interest method on a loan-by-loan basis.

Allowances. The Company assesses the collectability of its rent receivables, including straight-line rent receivables and working capital loans to tenants. The Company bases its assessment of the collectability of rent receivables and working capital loans to tenants on several factors, including payment history, the financial strength of the tenant and any guarantors, the value of the underlying collateral, and current economic conditions. If the Company’s evaluation of these factors indicates it is probable that the Company will be unable to receive the rent payments or payments on a working capital loan, then the Company provides a reserve against the recognized straight-line rent receivable asset or working capital loan for the portion that we estimate may not be recovered. Payments received on impaired loans are applied against the allowance. If the Company changes its assumptions or estimates regarding the collectability of future rent payments required by a lease or required from a working capital loan to a tenant, then the Company may adjust its reserve to increase or reduce the rental revenue or interest revenue from working capital loans to tenants recognized in the period the Company makes such change in its assumptions or estimates. In an effort to ensure a conservative presentation of the results of the Healthcare Services segment due to lack of history, the Company has provided an additional allowance for patient care receivables of 1.5% of patient revenues.

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

(Amounts in 000’s)	June 30, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Gross receivables
Real Estate Services (a)	$	777		$	3,481		$	1,118		$	3,481
Healthcare Services		925			—			960			—
Sub Total		1,702			3,481			2,078			3,481
Allowance
Real Estate Services (a)		(32	)		(1,381	)		(32	)		(1,381	)
Healthcare Services		(77	)		—			(110	)		—
Sub Total		(109	)		(1,381	)		(142	)		(1,381	)
Accounts receivable, net of allowance	$	1,593		$	2,100		$	1,936		$	2,100

As of ~~June~~September 30, 2021 and December 31, 2020, the Company had approximately ~~$1.0~~$0.6 million and $0.3 million, respectively, in pre-paid expenses and ~~other,~~other; the ~~$0.7~~$0.3 million increase is related to insurance for the Tara Facility operations, while the other amounts are predominantly for directors’ and officers’ insurance, NYSE American annual fees, and mortgage insurance premiums.

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

As of ~~June~~September 30, 2021 and December 31, 2020, the Company had approximately ~~$1.5~~$1.6 million and $1.4 million, in Other liabilities, consisting of security lease deposits and sublease improvement funds.

The Company has retained professional services to evaluate and assist with possible opportunities to improve the Company’s capital structure.

The Company leases certain facilities and equipment in the normal course of business. At the inception of each lease, the Company performs an evaluation to determine whether the lease should be classified as an operating lease or capital lease. As of ~~June~~September 30, 2021, all of the Company’s leased facilities are accounted for as operating leases. For operating leases that contain scheduled rent increases, the Company records rent expense on a straight-line basis over the term of the lease. Leasehold improvements are amortized over the shorter of the useful life of the asset or the lease term.

In accordance with Accounting Standards Update (“ASU”) ASU 2016-02, Leases, as codified in ASC 842, the Company recognizes both right of use assets and lease liabilities for leases in which we lease land, real property, or other equipment, having elected the practical expedient to maintain the prior operating lease classification for leases entered into prior to January 1, 2019. We assess any new contracts or modification of contracts in accordance with ASC 842 to determine the existence of a lease and its classification. We ~~are reporting~~report revenues and expenses for real estate taxes and insurance where the lessee has not made those payments directly to a third-party in accordance with their respective leases with us.

The following table summarizes real estate tax recognized on our consolidated statements of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:

	Three Months Ended June 30,				For the Six Months Ended June 30,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(Amounts in 000’s)	2021		2020		2021		2020		2021		2020		2021		2020
Rental revenues	$	98	$	119	$	231	$	245	$	111	$	134	$	342	$	379
Other operating expenses	$	98	$	119	$	231	$	245	$	111	$	134	$	342	$	379

Additionally, we expense certain leasing costs, other than leasing commissions, as they are incurred. Prior GAAP provided for the deferral and amortization of such costs over the applicable lease term. The present value of minimum lease payments was calculated on each lease, using a discount rate of 7.98% for the Company’s leases that approximated our incremental borrowing rate as of January 1, 2019, and the current lease term. See Note 6– Leases for more information on the Company’s operating leases.

We maintain general liability, professional liability, and other insurance policies in amounts and with coverage and deductibles we believe are appropriate, based on the nature and risks of our business, historical experience, availability, and industry standards, including for the operations at the Tara Facility. Our current policies provide for deductibles for each claim and contain various exclusions from coverage. The Company has self-insured against professional and general liability claims related to its healthcare operations that were discontinued during 2014 and 2015 in connection with its transition from an owner and operator of healthcare properties to a healthcare property holding and leasing company (the “Transition”). See Note 14 – Commitments and Contingencies in Part II, Item 8, “Financial Statements and Supplementary Data”, ~~Note 14~~ ~~– Commitments and Contingencies~~in the Annual Report for more information. The Company evaluates quarterly the adequacy of its self-insurance reserve based on a number of factors, including: (i) the number of actions pending and the relief sought; (ii) analyses provided by defense counsel, medical experts or other information which comes to light during discovery; (iii) the legal fees and other expenses anticipated to be incurred in defending the actions; (iv) the status and likely success of any mediation or settlement discussions, including estimated settlement amounts and legal fees and other expenses anticipated to be incurred in such settlement, as applicable; and (v) the venues in which the actions have been filed or will be adjudicated. The Company believes that most of the professional and general liability actions are defensible and intends to defend them through final judgment unless settlement is more advantageous to the Company. Accordingly, the self-insurance reserve reflects the Company’s estimate of settlement amounts for the pending actions, if applicable, and legal costs of settling or litigating the pending actions, as applicable. Because the self-insurance reserve is based on estimates, the amount of the self-insurance reserve may not be sufficient to cover the settlement amounts actually incurred in settling the pending actions, or the legal costs actually incurred in settling or litigating the pending actions. See Note 7 – Accrued Expenses. In addition, the Company maintains certain other insurance programs, including commercial general liability, property, casualty, directors’ and officers’ liability, crime, and employment practices liability.

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

warrants with exercise prices exceeding the average market value are used to repurchase common stock at market value. The incremental shares remaining after the proceeds are exhausted represent the potentially dilutive effect of the securities.

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

	June 30,				September 30,
(Share amounts in 000’s)	2021		2020		2021		2020
Stock options		13		15		13		13
Warrants - employee		49		49		49		49
Warrants - non employee		9		9		9		9
Total anti-dilutive securities		71		73		71		71

The weighted average contractual terms in years for these securities as of ~~June~~September 30, 2021, with 0 intrinsic value, are ~~3.0~~2.8 years for the stock options and ~~2.5~~2.2 years for the warrants.

In July 2021, the FASB issued ASU 2021-05—Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments, which amends the lease classification requirements for lessors. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if the lease would have been classified as a sales-type lease or a direct financing lease and the lessor would have otherwise recognized a day-one loss. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2021-05 on its consolidated financial statements.

See Part II, Item 8, “Financial Statements and Supplementary Data”, Note 1 – Summary of Significant Accounting Policies included in the Annual Report, for a description of the other accounting pronouncements the Company is currently evaluating.

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

Management anticipates access to several sources of liquidity, including cash on hand, cash flows from operations, and debt refinancing during the twelve months following the date of this filing. At ~~June~~September 30, 2021, the Company had ~~$5.6~~$6.2 million in unrestricted ~~cash.~~cash, including 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. During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company generated positive cash flow from continuing operations of ~~$2.5~~$4.3 million (including the $1.0 million Medicaid overpayment) and anticipates continued positive cash flow from operations in the future, subject to the continued uncertainty of the COVID-19 pandemic and its impact on the Company’s business, financial condition and results of operations.

On December 1, 2020, the Company entered into the Wellington Lease Termination with the following affiliates of Wellington, 3223 Falligant Avenue Associates, L.P. (“Tara Tenant”) and 3460 Powder Springs Road Associates, L.P. (“Powder Springs Tenant”, and together with Tara Tenant, the “Wellington Tenants”). The Wellington Tenants subleased 2 of the Company’s 8 Georgia facilities, leased under a prime lease, under agreements dated January 31, 2015, as subsequently amended (the “Wellington Subleases”). Per the Wellington Lease Termination, possession, custody, control and operation of the Tara Facility and Powder Springs Facility (the “Wellington Facilities”) transitioned from the Wellington Tenants to the Company (the “Wellington Transition”) at 12:01 a.m. on January 1, 2021 (the “Wellington Transition Date”), pursuant to the terms and

provisions of the Operations Transfer Agreements (the “OTAs”), which the Company and the Wellington Tenants entered into in connection with the Wellington Lease Termination and which included customary termination events.

The OTAs were subject to customary closing conditions and representations and warranties. The Wellington Transition was subject to the Georgia Department of Community Health’s (“DCH”) approval of the Change in Ownership Applications (the “Applications”), which were filed by Regional on December 2, 2020. On the Wellington Transition Date, the Wellington Tenants: (i) paid all cash on hand at the Wellington Facilities to Regional; (ii) transferred and assigned, to the Company, all accounts receivable previously due to the Wellington Tenants as of the Wellington Transition Date; and (iii) entered into commercially reasonable Deposit Account Control Agreements with Regional with respect to all of the Wellington Tenants’ bank accounts that receive accounts receivable remittances. Additionally, on the Wellington Transition Date, the Company became liable for certain expenses, including approximately $1.7 million of bed taxes in arrears. On January 1, 2019, security agreements executed between the Company and the Wellington Tenants provided for certain of the Wellington Tenants assets as collateral to the Company in the event of any default under prior agreements with the Company (the “Security Agreements”). These Security Agreements survive the Wellington Transition and will remain in full force and effect in order to assist Regional in collecting the accounts receivable.

Scheduled rent payments under the Wellington Subleases constituted approximately 23% of the Company’s anticipated annual revenue in 2020. As of December 31, 2020, Regional recorded an estimated allowance of $1.4 million against a rent receivable of $2.7 million from the Wellington Tenants. During the ~~six~~three months ended ~~June~~September 2021, the Company recorded $0.1 million in debt recovery due to collections exceeding our December 31, 2020 estimated allowance. During the nine months ended September 30, 2021, the Company collected ~~$3.2~~$3.3 million pursuant to the Wellington Lease Termination (excluding $0.2 million insurance refund) and paid $1.0 million to partially satisfy the Wellington Lease Termination obligation of approximately $1.7 million of bed taxes in arrears and $0.1 million in collection expenses. The Company provides no assurance that we will be able to collect any of the additional ~~$1.3~~$1.2 million in rent arrears in excess of the net ~~$1.4~~$1.5 million already collected.

During the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company recognized ~~$0.1~~$0.5 million and ~~$0.5~~$1.0 million, respectively, of variable rent for the Powder Springs Facility and, as of the date of filing this Quarterly Report, has collected all of such variable rent replacing approximately ~~$1.0~~$1.5 million of cash rent previously anticipated from the Wellington Tenant. The Tara Facility operations performance during the ~~six~~three and nine months ended ~~June~~September 30, 2021 has been ~~sufficient~~insufficient to cover ~~approximately 54%~~any of the rent the Company is obligated to pay under its lease. On January 1, 2021, the Company entered into the Vero Management Agreement with Vero Health under which Vero Health provided management consulting services for the Tara Facility, which the Company now operates. 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. Affiliates of Peach also lease from Regional 3 facilities located in Georgia. The fixed Management fee Regional will pay Peach is 1% less than under the Vero Management Agreement with additional percentages for meeting specified performance targets. For further information on the Peach Management Agreement see Note 6 – Leases andNote 13 – Segment Results for information on the Tara Facility ~~performance see Note 13 –~~ ~~Segment Results~~.performance.

The Company is current with all of its Notes payable and other debt as described in Note 8 – Notes Payable and Other Debt. The Company has benefited from ~~various,~~certain, now expired, stimulus measures made available to it through the ~~Coronavirus Aid, Relief, and Economic Security~~CARES Act ~~(the “CARES Act”)~~ enacted by Congress in response to the COVID-19 pandemic which allowed for, among other things: (i) a deferral of debt service payments on U.S. Department of Agriculture (“USDA”) loans to maturity; (ii) an allowance for debt service payments to be made out of replacement reserve accounts for U.S. Department of Housing and Urban Development (“HUD”) loans; and (iii) debt service payments to be made by the U.S. Small Business Administration (the “SBA”) on all SBA loans. For further information, see Note 8 – Notes Payable and Other Debt.

On June 8, 2018, the board of directors of Regional (the “Board”) indefinitely suspended quarterly dividend payments with respect to the 10.875% Series A Cumulative Redeemable Preferred Shares (the “Series A Preferred Stock”). As of ~~June~~September 30, 2021, 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 ~~$32.4~~$34.6 million of undeclared Series A Preferred Stock dividends in arrears. The Board believes that the dividend suspension will provide the Company with additional funds to meet, in part, its ongoing liquidity needs. As the Company has failed to pay cash dividends on the outstanding Series A Preferred Stock in full for more than four dividend periods, the annual dividend rate on the Series A Preferred Stock for the fifth and future missed dividend periods has increased to 12.875%, which is equivalent to $3.20 per share each year, commencing on the first day after the missed fourth quarterly payment (October 1, 2018) and continuing until the second consecutive dividend payment date following such time as the Company has paid all accumulated and unpaid dividends on the Series A Preferred Stock in full in cash.

As of ~~June~~September 30, 2021, the Company had ~~$54.2~~$53.4 million in indebtedness, net of $1.3 million deferred financing, and unamortized discounts. The Company anticipates net principal repayments of approximately ~~$6.4~~$2.0 million during the next twelve-month period, ~~including~~ approximately ~~$0.5 million other debt on August 25, 2021 (the “KeyBank Exit Notes”), $3.6 million in senior debt, other mortgage indebtedness on May 1, 2022 (the “Meadowood Credit Facility”) and $1.4~~$1.3 million of routine debt service amortization, ~~$0.8~~$0.6 million of current maturities of other debt (including ~~$0.3~~$0.1 million related to insurance financing for the Tara Facility operations), and a $0.1 million payment of bond debt.

Debt Extinguishment. On August 13, 2021, the Company received official notification from FountainHead Commercial Capital, providers of our $0.2 million Paycheck Protection Program Loan (“PPP Loan), that the full $0.2 million was forgiven by the SBA on July 9, 2021.

On September 30, 2021 the Company and the Exchange Bank of Alabama executed a $5.1 million Promissory Note with a 3.95% annual fixed interest rate and maturity date of October 10, 2026 (the “Coosa Credit Facility”). The Coosa Credit Facility, refinanced $5.1 million prime + 1.5% variable interest rate debt owed to Metro City Bank with a maturity date of January 31, 2036, (the “Coosa MCB Loan”). The Coosa Credit Facility is secured by the assets of the Company’s subsidiary Coosa Nursing ADK, LLC (“Coosa”) which owns the 124-bed skilled nursing facility located in Glencoe, Alabama (the “Coosa Facility”) and the assets of the Company’s subsidiary Meadowood Property Holdings, LLC (“Meadowood”) which owns the 106-bed assisted living facility located in Glencoe, Alabama (the “Meadowood Facility”). The Company isincurred approximately $0.1 million in ~~negotiations to extend~~new deferred financing fees and expensed approximately $0.1 million deferred financing fees associated with the Coosa MCB Loan.

Consequently the Company recorded a net gain of approximately $0.1 million on extinguishment of debt during the three months ended September 30, 2021, being $0.2 million gain on forgiveness of the PPP Loan partially offset by $0.1 million of expensed deferred financing fees associated with the extinguishment of the Coosa MCB Loan.

Debt Modification. In conjunction with the September 30, 2021, Coosa Facility refinance, the Company and the Exchange Bank of Alabama signed an agreement on October 1, 2021, (the “Meadowood Credit Facility”), that extended the maturity date ofon the ~~KeyBank Exit Notes and~~$3.5 million Meadowood Credit ~~Facility.~~Facility, as amended, in senior debt other mortgage indebtedness secured by the assets of Coosa and the assets of Meadowood, from May 1, 2022 to October 1, 2026. Additionally on August 17, 2021, the Company extended the maturity date on approximately $0.5 million other debt from August 25, 2021 to August 25, 2023 (known as the “KeyBank Exit Notes”). For further information, see Note 8 – Notes Payable and Other Debt.

As of ~~June~~September 30, 2021, the Company was in compliance with the various financial and administrative covenants under the Company’s outstanding credit-related instruments.

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.

(Amounts in 000’s)	June 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Cash(a)	$	5,633	$	4,186	$	6,233	$	4,186

Restricted cash:
Cash collateral		62		124		93		124
HUD and other replacement reserves		1,827		1,675		1,918		1,675
Escrow deposits		760		1,190		1,065		1,190
Restricted investments for debt obligations		317		317		317		317
Total restricted cash		2,966		3,306		3,393		3,306
Total cash and restricted cash	$	8,599	$	7,492	$	9,626	$	7,492

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

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

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

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

(Amounts in 000’s)	Estimated Useful Lives (Years)		June 30, 2021			December 31, 2020			Estimated Useful Lives (Years)		September 30, 2021			December 31, 2020
Buildings and improvements	5-40		$	65,687		$	65,629		5-40		$	65,695		$	65,629
Equipment and computer related	2-10			5,047			5,139		2-10			5,067			5,139
Land ⁽¹⁾		—		2,776			2,776			—		2,776			2,776
Construction in process		—		5			69			—		—			69
				73,515			73,613					73,538			73,613
Less: accumulated depreciation and amortization				(22,160	)		(21,080	)				(22,783	)		(21,080	)
Property and equipment, net			$	51,355		$	52,533				$	50,755		$	52,533

The following table summarizes total depreciation and amortization expense for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(Amounts in 000’s)	2021		2020		2021		2020		2021		2020		2021		2020
Depreciation	$	543	$	544	$	1,083	$	1,094	$	542	$	537	$	1,625	$	1,631
Amortization		109		225		219		451		109		157		328		608
Total depreciation and amortization expense	$	652	$	769	$	1,302	$	1,545	$	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)		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	$	14,276		$	2,471	$	206		$	16,953		$	1,585
Accumulated amortization		(3,754	)		—		(48	)		(3,802	)		—		(3,754	)		—		(48	)		(3,802	)		—
Net carrying amount	$	10,522		$	2,471	$	158		$	13,151		$	1,585	$	10,522		$	2,471	$	158		$	13,151		$	1,585
Amortization expense		(207	)		—		(12	)		(219	)		—		(310	)		—		(18	)		(328	)		—
Balances, June 30, 2021
Balances, September 30, 2021
Gross		14,276			2,471		206			16,953			1,585		14,276			2,471		206			16,953			1,585
Accumulated amortization		(3,961	)		—		(60	)		(4,021	)		—		(4,064	)		—		(66	)		(4,130	)		—
Net carrying amount	$	10,315		$	2,471	$	146		$	12,932		$	1,585	$	10,212		$	2,471	$	140		$	12,823		$	1,585

The following table summarizes amortization expense for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(Amounts in 000’s)	2021		2020		2021		2020		2021		2020		2021		2020
Bed licenses	$	103	$	103	$	207	$	207	$	103	$	103	$	310	$	310
Lease rights		6		122		12		244		6		54		18		298
Total amortization expense	$	109	$	225	$	219	$	451	$	109	$	157	$	328	$	608

Expected amortization expense for the year ended December 31, for all definite-lived intangibles, for each of the next five years and thereafter is as follows:

(Amounts in 000’s)	Bed Licenses		Lease Rights		Bed Licenses		Lease Rights
2021 ^(a)	$	207	$	12	$	104	$	6
2022		414		24		414		24
2023		414		23		414		23
2024		414		18		414		18
2025		414		18		414		18
Thereafter		8,452		51		8,452		51
Total expected amortization expense	$	10,315	$	146	$	10,212	$	140

Facilities Leased to the Company - The Company leases 9 SNFs from unaffiliated owners under non-cancelable leases, all of which have rent escalation clauses and provisions requiring payment of real estate taxes, insurance and maintenance costs by the lessee. Except for the Tara Facility, which the Company is operating, each of the SNFs that are leased by the Company are subleased to and operated by third-party tenants. The Company also leases certain office space located in Suwanee, Georgia. The weighted average remaining lease term for our nine leased facilities is approximately ~~6.3~~6.1 years. As of ~~June~~September 30, 2021, the Company is in compliance with all operating lease financial covenants.

Future minimum lease payments for the year ended December 31, for each of the next five years and thereafter is as follows:

(Amounts in 000’s)	Future rental payments		Accretion of lease liability ⁽¹⁾			Operating lease obligation		Future rental payments		Accretion of lease liability ⁽¹⁾			Operating lease obligation
2021 ⁽²⁾	$	3,336	$	(106	)	$	3,230	$	1,675	$	(37	)	$	1,638
2022		6,752		(591	)		6,161		6,752		(468	)		6,284
2023		6,851		(1,050	)		5,801		6,851		(933	)		5,918
2024		6,958		(1,494	)		5,464		6,958		(1,385	)		5,573
2025		7,095		(1,950	)		5,145		7,095		(1,847	)		5,248
Thereafter		12,736		(4,497	)		8,239		12,736		(4,331	)		8,405
Total	$	43,728	$	(9,688	)	$	34,040	$	42,067	$	(9,001	)	$	33,066

For further details regarding the Company’s leases from unaffiliated owners under non-cancelable leases and which comprise the future minimum lease payments of the Company, see Note 6 - Leases in Part II, Item 8, “Financial Statements and Supplementary Data”, ~~Note 6 - Leases~~ included in the Annual Report.

Facilities Leased or Subleased by the Company - As of ~~June~~September 30, 2021, the Company leased or subleased 20 facilities (12 owned by the Company and 8 leased to the Company), to third-party tenants on a triple net basis, meaning that the lessee (i.e., the third-party tenant of the property) is obligated under the lease or sublease, as applicable, for all costs of operating the property, including insurance, taxes and facility maintenance, as well as the lease or sublease payments, as applicable. The weighted average remaining lease term for our facilities is approximately ~~6.0~~5.8 years.

Empire. Following the Wellington Lease Termination, effective January 1, 2021, Regional leased the Powder Springs Facility to PS Operator LLC (“PS Operator”), an affiliate of Empire, pursuant to a sublease (the “PS Sublease”).

The PS Sublease will expire on August 1, 2027, subject to two five-year optional extensions. For the first six months, the base rent under the PS Sublease ~~will equal~~equated to the adjusted earnings before interest, tax, depreciation, amortization, and rent (“EBITDAR”) as defined in the PS Sublease, of PS Operator, to the extent derived from the Powder Springs Facility. For months seven through twenty-four, the base rent will equal 80% of the Adjusted EBITDAR (as defined in the PS Sublease); however, beginning with month thirteen, the base rent may not exceed $150,000 per month. Beginning with month twenty-five, the base rent will be $140,000 per month.

For the first three months, if Adjusted EBITDAR was less than $0, PS Operator would not have paid any base rent and the Company would have reimbursed PS Operator an amount equal to the amount by which each period’s Adjusted EBITDAR was less than $0. Beginning with the fourth month and thereafter, the PS Sublease became a “triple net” lease with PS Operator responsible for payment of all expenses in addition to rent.

During the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company recognized ~~$0.1~~$0.5 million and ~~$0.5~~$1.0 million of variable rent, respectively, for the Powder Springs Facility, and $0.1 million each month during the ~~six~~nine month period ended ~~June~~September 30, 2021, in straight-line rent.

If the monthly average adjusted cash flows of PS Operator (as described in the PS Sublease) is less than $100,000 for any consecutive three-month period after the sixth month of the PS Sublease, then Regional may terminate the PS Sublease subject to the conditions set forth in the PS Sublease. The PS Sublease also includes customary covenants, events of default and indemnification obligations.

Wellington. NaN of the Company’s 8 Georgia facilities, leased under a prime lease, were subleased to affiliates of Wellington under the Wellington Subleases. The Wellington Subleases, which were due to expire August 31, 2027, related to the Tara Facility and the Powder Springs Facility.

On December 1, 2020, the Company entered into the Wellington Lease Termination with the Wellington Tenants, Wellington, as guarantor, and Mansell Court Associates LLC (“Pledgor”). Tenants, Wellington and Pledgor, together with each of their respective affiliates, shareholders, partners, members, managers, officers, directors and employees thereof, are the “Wellington Parties”.

The Wellington Transition occurred at 12:01 a.m. on January 1, 2021, pursuant to the terms and provisions of the OTAs which the Company and the Wellington Tenants entered into in connection with the Wellington Lease Termination, which included customary termination events.

The OTAs were subject to customary closing conditions and representations and warranties. The Wellington Transition was subject to DCH approval of the Applications, which were filed by Regional on December 2, 2020. On the Wellington Transition Date, the Wellington Tenants: (i) paid all cash on hand at the Wellington Facilities to Regional; (ii) transferred and assigned to the Company all accounts receivable previously due to the Wellington Tenants as of the Wellington Transition Date; and (iii) entered into commercially reasonable Deposit Account Control Agreements with Regional with respect to all of the Wellington Tenants’ bank accounts that receive accounts receivable remittances. Additionally, on the Wellington Transition Date, the Company became liable for certain expenses including approximately $1.7 million of bed taxes in arrears. The Security Agreements survive the Wellington Transition and will remain in full force and effect in order to assist Regional in collecting the accounts receivable.

As of December 31, 2020, Regional recorded an estimated allowance of $1.4 million against a rent receivable of $2.7 million from the Wellington Tenants. During the ~~six~~three months ended ~~June~~September 2021, the Company recorded $0.1 million in debt recovery due to collections exceeding our December 31, 2020 estimated allowance. During the nine months ended September 30, 2021, the Company collected ~~$3.2~~$3.3 million pursuant to the Wellington Lease Termination (excluding a $0.2 million insurance refund) and paid $1.0 million to partially satisfy the Wellington Lease Termination obligation of approximately $1.7 million of bed taxes in arrears and approximately $0.1 million in collection expenses. The Company provides no assurance that we will be able to collect any of the additional ~~$1.3~~$1.2 million in rent arrears in excess of the net ~~$1.4~~$1.5 million already collected. Scheduled rent payments under the Wellington Subleases constituted approximately 23% of the Company’s anticipated annual revenue in 2020.

During the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company recognized ~~$0.1~~$0.5 million and ~~$0.5~~$1.0 million of variable rent for the Powder Springs Facility and, as of the date of filing this Quarterly Report, has collected all of such variable rent replacing approximately ~~$1.0~~$1.5 million of cash rent previously anticipated for the Wellington Tenant.

The Tara Facility operations performance during the ~~six~~three and nine months ended ~~June~~September 30, 2021 has been ~~sufficient~~insufficient to cover ~~approximately 54%~~any of the rent the Company is obligated to pay under its lease. On January 1, 2021, the Company entered into the Vero Management Agreement with Vero Health under which Vero Health provided management consulting services for the Tara Facility, which the Company now operates. 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. Affiliates of Peach also lease from Regional three facilities located in Georgia. Under the Peach Management Agreement, for the first six months Regional will pay Peach: (i) a monthly management fee equal to 4% of the Adjusted Net Revenues (as defined in the Peach Management Agreement) of the Tara Facility with a monthly minimum of $35,000; (ii) an incentive fee of 1% of the Adjusted Net Revenues in the event that monthly EBITDAR (as defined in the Peach Management Agreement) is above $105,000; and (iii) an incentive fee of 13% of EBITDAR in the event that monthly EBITDAR is above $125,000. For months seven through the end of the Peach Management Agreement, Regional will pay Peach: (a) a monthly management fee equal to 3% of the Adjusted Net Revenues of the Tara Facility with a monthly minimum of $30,000; (b) an incentive fee of 1% of the Adjusted Net Revenues in the event that monthly EBITDAR is above $105,000; and (c) an incentive fee of 15% of EBITDAR in the event that monthly EBITDAR is above $125,000. All incentive fees will be paid on a quarterly basis. The term of the Peach Management Agreement commences on October 1, 2021 and continues for 12 months thereafter, subject to earlier termination as provided in the Peach

Management Agreement. The Peach Management Agreement also includes customary covenants, termination provisions and indemnification obligations. For further information on the Tara Facility performance see Note 13 – Segment ~~Results.~~Results.

When the Wellington Transition occurred, all agreements executed prior to the Wellington Lease Termination with the Wellington Parties, other than the Security Agreements, terminated automatically. Additionally, the Wellington Parties and Regional agreed to a mutual release whereby each party releases, acquits, and forever discharges the other party from any and all charges, complaints, claims, liabilities, demands, costs, losses, debts, and expenses of any nature whatsoever (including attorneys’ fees and costs actually incurred), known or unknown, suspected or unsuspected, accrued or not accrued, whether in law or in equity, that existed from the beginning of time to the Wellington Transition Date.

Subject to provisions in the OTAs and the Wellington Lease Termination, Regional is not liable for any contractual obligations or liabilities of the Wellington Parties owed to third-parties arising prior to the Wellington Transition Date. Regional will pay and/or assume all vacation days, sick days and paid time off accruing on or before the Wellington Transition Date.

Regional has indemnified the Wellington Parties from liabilities arising from or relating to any unpaid nursing home provider fees relating in any way to the Tara Facility and Powder Springs Facility for the period prior to and/or after December 1, 2020.

Aspire. On November 30, 2018, the Company leased or subleased to affiliates of Aspire Regional Partners, Inc. (“Aspire”) management, formerly affiliated with MSTC Development Inc., 5 facilities located in Ohio (collectively, “Aspire Sublessees”) pursuant to separate sublease agreements (the “Aspire Subleases”), whereby the Aspire Sublessees took possession of, and commenced operating, the facilities (the “Aspire Facilities”) as tenant or subtenant. The Aspire Subleases became effective on December 1, 2018 and are structured as triple net leases. The Company agreed to indemnify Aspire against any and all liabilities imposed on them as arising from the former operator, capped at $8.0 million. The Company has assessed the fair value of the indemnity agreements as not material to the consolidated financial statements at ~~June~~September 30, 2021.

Symmetry. Affiliates (the “Symmetry Tenants”) of Healthcare Management, LLC (“Symmetry” or “Symmetry Healthcare”) leased the following facilities from the Company, pursuant to separate lease agreements which expire in 2030 (the “Symmetry Leases”): (i) the Company’s 106-bed SNF located in Sylvia, North Carolina (the “Mountain Trace Facility”); (ii) the Company’s 96-bed SNF located in Sumter, South Carolina (the “Sumter Facility”); and (iii) the Company’s 84-bed SNF located in Georgetown, South Carolina (the “Georgetown Facility”). On June 27, 2018, the Company notified Blue Ridge of Sumter, LLC, the tenant with respect to the Sumter Facility (the “Sumter Tenant”), and Blue Ridge on the Mountain, LLC, the tenant with respect to the Mountain Trace Facility (the “Mountain Trace Tenant”), that continued breach of the payment terms of the applicable Symmetry Lease would constitute an event of default. The Symmetry Tenants had alleged that the Company was in material breach of each of the Symmetry Leases with regard to deferred maintenance and were withholding rental payments on the basis of such allegations.

On January 28, 2019, the Company reached an agreement with the Symmetry Tenants with respect to the Symmetry Leases, pursuant to which the Symmetry Tenants agreed to a $0.8 million (including approximately $0.06 million finance fees) payment plan for the rent arrears (the “Symmetry Payment Plan”). On February 28, 2019, the Company and the Mountain Trace Tenant mutually terminated the lease with respect to the Mountain Trace Facility and operations at the facility were transferred to Vero Health X, LLC, an affiliate of Vero Health, and hereafter also referred to as ~~Vero Health.~~“Vero Health”. The Symmetry Tenants paid $0.1 million of the Symmetry Payment Plan during the ~~six~~nine months ended ~~June~~September 30, 2021 and ~~$0.1~~$0.3 million during the ~~six~~nine months ended ~~June~~September 30, 2020. In February 2021, the Symmetry Tenants completed the Symmetry Payment Plan, upon completion of which the Company recognized $0.05 million in “Other revenues”, having previously recognized $0.01 million prior to the year ended December 31, 2019.

Vero Health. On February 28, 2019, the Company entered into a lease agreement (the “Vero Health Lease”) with Vero Health, providing that Vero Health would take possession of and operate the Mountain Trace ~~Facility located in North Carolina.~~Facility. The Vero Health Lease became effective upon the termination of the prior Mountain Trace Tenant mutual lease ~~termination~~ on March 1, 2019.

Peach Health. In connection with a master sublease agreement that the Company entered into with affiliates of Peach ~~Health Group, LLC (“Peach Health”)~~ as of June 18, 2016 and amended on March 30, 2018, the Company extended a line of credit to Peach ~~Health~~ (the “Peach Line”), which was subordinated to a line of credit extended to Peach ~~Health~~ by a third-party lender (the “Peach Working Capital Facility”). On August 27, 2020, subsequent to Peach ~~Health~~ repaying its Peach Working Capital Facility, the Company and Peach ~~Health~~ modified the Peach Line to: (i) reduce the then $1.3 million outstanding balance under the Peach Line to approximately $0.5 million, in connection with which Peach ~~Health~~ paid to the Company $0.45 million in cash and the Company accepted $0.35 million non-cash payment in exchange for Peach Health assuming from the Company certain bed tax liabilities related to facilities their affiliates operate; (ii) extend the maturity date of the Peach Line to August 1, 2025; (iii) decrease the interest rate from 16.5% to 8% per annum; and (iv) provide that Peach ~~Health~~ will not pledge, hypothecate or grant any security interest in their collateral to any other party, other than their current arrangement with the SBA, without the Company’s prior written consent. The remaining balance under the

Peach Line shall be paid by Peach ~~Health~~ to the Company in 60 equal monthly installments. During the year ended December 31, 2019, the Company suspended revenue recognition on the Peach Line interest income due pursuant to the subordination of the Peach Line to the Peach Working Capital Facility. Upon modification to the Peach Line on August 27, 2020, the Company recommenced interest income recognition.

Notes Receivable: ~~At June~~at September 30, 2021 and December 31, 2020, approximately $~~0.4~~$0.4 million was outstanding on the Peach Line.

Future minimum lease receivables for the year ended of December 31, for each of the next five years and thereafter is as follows:

	(Amounts in 000's)		(Amounts in 000's)
2021 ^(a)	$	6,276	$	3,189
2022		13,519		13,519
2023		15,477		15,477
2024		15,299		15,299
2025		13,702		13,702
Thereafter		33,555		33,555
Total	$	97,828	$	94,741

For further details regarding the Company’s leased and subleased facilities to third-party operators, including a full summary of the Company’s leases to third-parties and which comprise the future minimum lease receivables of the Company, see Note 6 - Leases and Note 9 – Acquisitions and Dispositions in Part II, Item 8, “Financial Statements and Supplementary Data”, ~~Note 6~~ ~~- Leases~~ ~~and Note 9~~ ~~– Acquisitions and Dispositions~~included in the Annual Report.

(Amounts in 000’s)	June 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Accrued employee benefits and payroll-related	$	541	$	218	$	438	$	218
Real estate and other taxes ⁽¹⁾		1,257		491		1,175		491
Self-insured reserve ⁽²⁾		168		183		140		183
Accrued interest		284		424		222		424
Unearned rental revenue		42		41		42		41
Medicaid overpayment - Healthcare Services						1,032		—
Other accrued expenses		1,028		868		1,114		868
Total accrued expenses	$	3,320	$	2,225	$	4,163	$	2,225

See Note 8 – Notes Payable and Other Debt in Part II, Item 8, “Financial Statements and Supplementary Data”, ~~Note 8~~ ~~– Notes Payable and Other Debt~~included in the Annual Report for a detailed description of all the Company’s debt facilities.

(Amounts in 000’s)	June 30, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Senior debt—guaranteed by HUD	$	30,646		$	31,104		$	30,413		$	31,104
Senior debt—guaranteed by USDA		13,008			13,139			7,868			13,139
Senior debt—guaranteed by SBA		615			628			608			628
Senior debt—bonds		6,379			6,500			6,379			6,500
Senior debt—other mortgage indebtedness		3,555			3,631			8,650			3,631
Other debt		1,291			822			802			822
Subtotal		55,494			55,824			54,720			55,824
Deferred financing costs		(1,202	)		(1,250	)		(1,197	)		(1,250	)
Unamortized discount on bonds		(129	)		(135	)		(126	)		(135	)
Notes payable and other debt	$	54,163		$	54,439		$	53,397		$	54,439

The following is a detailed listing of the debt facilities that comprise each of the above categories:

(Amounts in 000’s)
Facility	Lender	Maturity	Interest Rate ^(a)			June 30, 2021		December 31, 2020		Lender	Maturity	Interest Rate ^(a)			September 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	Lument Capital	12/01/2027	Fixed	4.16	%	$	894	$	986
Hearth and Care of Greenfield	Orix Real Estate Capital	08/01/2038	Fixed	4.20	%		1,883		1,920	Lument Capital	08/01/2038	Fixed	4.20	%		1,864		1,920
Woodland Manor	Midland State Bank	10/01/2044	Fixed	3.75	%		4,902		4,968	Midland State Bank	10/01/2044	Fixed	3.75	%		4,869		4,968
Glenvue	Midland State Bank	10/01/2044	Fixed	3.75	%		7,613		7,712	Midland State Bank	10/01/2044	Fixed	3.75	%		7,560		7,712
Autumn Breeze	KeyBank	01/01/2045	Fixed	3.65	%		6,617		6,705	KeyBank	01/01/2045	Fixed	3.65	%		6,573		6,705
Georgetown	Midland State Bank	10/01/2046	Fixed	2.98	%		3,350		3,394	Midland State Bank	10/01/2046	Fixed	2.98	%		3,328		3,394
Sumter Valley	KeyBank	01/01/2047	Fixed	3.70	%		5,356		5,419	KeyBank	01/01/2047	Fixed	3.70	%		5,325		5,419
Total						$	30,646	$	31,104						$	30,413	$	31,104
Senior debt - guaranteed by USDA ^(c)
Coosa ^(d)(h)	Metro City	09/30/2035	Prime + 1.50%	5.50	%		5,101		5,149	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	%		3,914		3,972	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	Cadence Bank, NA	07/27/2036	Prime + 1.50%	6.00	%		3,993		4,018
Total						$	13,008	$	13,139						$	7,868	$	13,139
Senior debt - guaranteed by SBA ^(g)
Southland	Cadence Bank, NA	07/27/2036	Prime + 2.25%	5.50	%		615		628	Cadence Bank, NA	07/27/2036	Prime + 2.25%	5.50	%		608		628
Total						$	615	$	628						$	608	$	628

(Amounts in 000’s)
Facility	Lender	Maturity	Interest Rate ^(a)			June 30, 2021		December 31, 2020		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	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	City of Springfield, Ohio	05/01/2021	Fixed	8.50	%		—		121
Total						$	6,379	$	6,500						$	6,379	$	6,500

(Amounts in 000’s)																			��
Facility		Lender	Maturity	Interest Rate (a)			June 30, 2021		December 31, 2020			Lender	Maturity	Interest Rate (a)			September 30, 2021			December 31, 2020
Senior debt - other mortgage indebtedness	Senior debt - other mortgage indebtedness										Senior debt - other mortgage indebtedness
Meadowood		Exchange Bank of Alabama	05/01/2022	Fixed	4.50	%		3,555		3,631
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							$	3,555	$	3,631							$	8,650		$	3,631

(Amounts in 000’s)
Lender	Maturity	Interest Rate			June 30, 2021		December 31, 2020		Maturity	Interest Rate			September 30, 2021		December 31, 2020
Other debt
First Insurance Funding ^(a)	03/01/2022	Fixed	3.63	%	$	294	$	94	03/01/2022	Fixed	3.63	%	$	197	$	94
Servarus Financial Inc. ^(b)	11/01/2021	Fixed	5.18	%		273		—	11/01/2021	Fixed	5.18	%		110		—
Key Bank(c)	08/25/2021	Fixed	0.00	%		495		495	08/25/2023	Fixed	0.00	%		495		495
FountainHead Commercial Capital - PPP Loan ^(c)(d)	04/16/2022	Fixed	1.00	%		229		229	04/16/2022	Fixed	1.00	%		—		229
Marlin Covington Finance	03/11/2021	Fixed	20.17	%		—		4	03/11/2021	Fixed	20.17	%		—		4
Total					$	1,291	$	822					$	802	$	822

As of ~~June~~September 30, 2021, the Company had 1716 credit related instruments outstanding that include various financial and administrative covenant requirements. Covenant requirements include, but are not limited to, fixed charge coverage ratios, debt service coverage ratios, minimum earnings before interest, taxes, depreciation, and amortization or earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs, and current ratios. Certain financial covenant requirements are based on consolidated financial measurements whereas others are based on measurements at the subsidiary level (i.e., facility, multiple facilities or a combination of subsidiaries). The subsidiary level requirements are as follows: (i) financial covenants measured against subsidiaries of the Company; and (ii) financial covenants measured against third-party operator performance. Some covenants are based on annual financial metric measurements, whereas others are based on monthly and quarterly financial metric measurements. The Company routinely tracks and monitors its compliance with its covenant requirements.

As of ~~June~~September 30, 2021, the Company was in compliance with the various financial and administrative covenants under the Company’s outstanding credit related instruments.

The schedule below summarizes the scheduled gross maturities as of ~~June~~September 30, 2021 for each of the next five years and thereafter.

For the twelve months ended June 30,	(Amounts in 000’s)
For the twelve months ended September 30,				(Amounts in 000’s)
2022	$	6,400		$	1,976
2023		1,726			2,333
2024		1,808			1,922
2025		1,899			2,014
2026		1,994			2,110
Thereafter		41,667			44,365
Subtotal	$	55,494		$	54,720
Less: unamortized discounts		(129	)		(126	)
Less: deferred financing costs, net		(1,202	)		(1,197	)
Total notes and other debt	$	54,163		$	53,397

For discontinued operations, cost of services, as shown below, is primarily accruals or releases of over accruals for professional and general liability claims and bad debt expense. For a historical listing and description of the Company’s discontinued entities, see Note 10 – Discontinued Operations in Part II, Item 8, “Financial Statements and Supplementary Data”,~~Note 10~~ ~~– Discontinued Operations~~ included in the Annual Report.

The following table summarizes the activity of discontinued operations for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
(Amounts in 000’s)	2021			2020			2021			2020			2021			2020			2021			2020
Cost of services	$	62		$	(6	)	$	75		$	31		$	22		$	2		$	97		$	33
Net (loss) income	$	(62	)	$	6		$	(75	)	$	(31	)
Net loss													$	(22	)	$	(2	)	$	(97	)	$	(33	)

The Company’s major classes of discontinued operation’s assets and liabilities included within the Company’s consolidated balance sheets as of ~~June~~September 30, 2021 and December 31, 2020 are: (i) “Accounts payable” of $2.5 million and $2.6 million; and (ii) “Accrued Expenses” of $0.7 million and $0.7 million, respectively.

There were 0 dividends declared or paid on the common stock during the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

NoNaN dividends were declared or paid on the Series A Preferred Stock for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

As of ~~June~~September 30, 2021, 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 ~~$32.4~~$34.6 million of undeclared preferred stock dividends in arrears. Holders of the Series A Preferred Stock are entitled to receive, when and as declared by the Board out of funds of the Company legally available for the payment of distributions, cumulative preferential cash dividends at an annual rate equal to 10.875% of the $25.00 per share stated liquidation preference of the Series A Preferred Stock, which is equivalent to an annual rate of $2.72 per share or $1.9 million per quarter. Dividends on the Series A Preferred Stock, when and as declared by the Board, are payable quarterly in arrears, on March 31, June 30, September 30, and December 31 of each year. On June 8, 2018, the Board determined to continue suspension of the payment of the quarterly dividend on the Series A Preferred Stock indefinitely. Under the terms of the Series A Preferred Stock, dividends on the Series A Preferred Stock shall continue to accrue and accumulate regardless of whether such dividends are declared by the Board. As the Company has failed to pay cash dividends on the outstanding Series A Preferred Stock in full for 4 dividends periods: (i) the annual dividend rate on the Series A Preferred Stock has increased to 12.875%, which is equivalent to an annual rate of $3.20 or $2.2 million per quarter, commencing on the first day after the missed fourth quarterly payment (October 1, 2018) continuing until the second consecutive dividend 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; and (ii) the holders of the Series A Preferred Stock will be entitled to vote, as a single class, for the election of 2 additional directors to serve on the Board, as further described in the amended and restated articles of incorporation of the Company, otherwise referred to as the Charter.

As of ~~June~~September 30, 2021, the Company had 2,811,535 shares of the Series A Preferred Stock issued and outstanding.

The Company may, at its option, redeem the Series A Preferred Stock, in whole or in part, by paying $25.00 per share, plus any accrued and unpaid dividends to the redemption date.

For historical information regarding the Series A Preferred Stock, the Company’s former “at-the-market” offering program and prior share repurchase programs, see Note 11 – Common and Preferred Stock in Part II, Item 8, “Financial Statements and Supplementary Data”, ~~Note 11~~ ~~– Common and Preferred Stock~~included in the Annual Report.

On November 4, 2020, the Board adopted, ~~subject to shareholder approval,~~ the Regional Health Properties, Inc. 2020 Equity Incentive Plan (the “2020 Plan”). The Company’s shareholders approved the 2020 Plan on December 16, 2020 at the 2020 Annual Meeting of Shareholders of the Company. The maximum number of shares of common stock authorized for issuance under the 2020 Plan is 250,000 shares, subject to certain adjustments. NaN awards may be made under the 2020 Plan after the 10th anniversary of the date of shareholder approval of the 2020 Plan, and 0 incentive stock options may be granted after the 10th anniversary of the date of Board approval of the 2020 Plan.

The 2020 Plan replaced the AdCare Health Systems, Inc. 2011 Stock Incentive Plan, as amended (the “2011 Plan”), which was assumed by Regional Health pursuant to the Merger. The 2011 Plan was originally due to expire on March 28, 2021 and provided for a maximum of 168,950 shares of common stock to be issued. NaN additional awards may be granted under the 2011 Plan, effective upon shareholder approval of the 2020 Plan. As of ~~June~~September 30, 2021, the number of securities remaining available for future issuance under the 2020 Plan is ~~210,386.~~163,000.

The shares of common stock underlying any awards granted under the 2020 Plan or the 2011 Plan that are forfeited, canceled, or otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2020 Plan. However, shares: (i) tendered or held back upon exercise of a stock option or other award under the 2020 Plan to cover the exercise price or tax withholding; and (ii) subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right upon exercise thereof, will not be added back to the shares of common stock

available for issuance under the 2020 Plan. In addition, shares of common stock repurchased by the Company on the open market will not be added back to the shares of common stock available for issuance under the 2020 Plan.

For the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company recognized stock-based compensation expense as follows:

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(Amounts in 000’s)	2021		2020		2021		2020		2021		2020		2021		2020
Employee compensation:
Restricted stock	$	123	$	0	$	123	$	0	$	179	$	0	$	302	$	0
Total employee stock-based compensation expense	$	123	$	0	$	123	$	0	$	179	$	0	$	302	$	0
Non-employee compensation:
Board restricted stock	$	0	$	12	$	0	$	24	$	0	$	13	$	0	$	37
Total non-employee stock-based compensation expense	$	0	$	12	$	0	$	24	$	0	$	13	$	0	$	37
Total stock-based compensation expense	$	123	$	12	$	123	$	24	$	179	$	13	$	302	$	37

For the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, there were 0 issuances of common stock options or warrants.

The following table summarizes the Company’s restricted stock activity for the ~~six~~nine months ended ~~June~~September 30, 2021:

	Number of Shares (000's)			Weighted Avg. Grant Date (per Share) Fair Value		Number of Shares (000's)			Weighted Avg. Grant Date (per Share) Fair Value
Unvested, December 31, 2020		14		$	3.60		14		$	3.60
Granted		39		$	13.26		87		$	13.01
Vested		(22	)	$	7.18		(22	)	$	7.18
Unvested, June 30, 2021		31		$	13.26
Unvested, September 30, 2021							79		$	12.99

The remaining unvested shares at December 31, 2020 vested on January 1, 2021, resulting in minimal compensation expense related to the final vesting of the restricted stock awards during the three months ended March 31, 2021. For restricted stock unvested at ~~June~~September 30, 2021, ~~$0.4~~$0.8 million in compensation expense will be recognized over the next ~~2.0~~2.1 years.

Laws and regulations governing federal Medicare and state Medicaid programs are complex and subject to interpretation. Compliance with such laws and regulations can be subject to future governmental review and interpretation as well as significant regulatory action including fines, penalties, and exclusion from certain governmental programs. As of ~~June~~September 30, 2021, all of the Company’s facilities operated by Regional or leased and subleased to third-party operators and managed for third-parties are certified by CMS and are operational. See Note 6 - Leases.

The Company is a party to various legal actions and administrative proceedings and is subject to various claims arising in the ordinary course of business, including claims that the services the Company provided during the time it operated SNFs resulted in injury or death to the patients of the Company’s facilities and claims related to professional and general negligence, employment, staffing requirements and commercial matters. Although the Company intends to vigorously defend itself in these matters, there is no assurance that the outcomes of these matters will not have a material adverse effect on the Company’s business, results of operations and financial condition.

The Company previously operated, and the Company and its tenants now operate, in an industry that is highly regulated. As such, in the ordinary course of business, the Company and its tenants are continuously subject to state and federal regulatory scrutiny, supervision and control. Such regulatory scrutiny often includes inquiries, investigations, examinations, audits, site visits and surveys, some of which are non-routine. In addition, the Company believes that there has been, and will continue to be, an increase in governmental investigations of long-term care providers, particularly in the area of Medicare and Medicaid false claims, as well as an increase in enforcement actions resulting from these investigations. Adverse determinations in legal proceedings or governmental investigations against or involving the Company or its tenants, whether currently asserted or arising in the future, could have a material adverse effect on the Company’s business, results of operations and financial condition.

As of ~~June~~September 30, 2021, the Company is a defendant in one professional and general liability action commenced on behalf of one of our former patients who received care at one of our facilities prior to the Transition. The plaintiff in this action alleges negligence due to failure to provide adequate and competent staff resulting in injuries, pain and suffering, mental anguish and malnutrition and seeks unspecified actual and compensatory damages, and unspecified punitive damages. This action is covered by insurance, except that any punitive damages awarded would be excluded from coverage.

During the three and ~~six~~nine months ended ~~June~~September 30, 2021, 0 professional and general liability actions related to the Company’s former patients prior to the Transition were filed against the Company.

During the three months ended March 31, 2020, the Company settled 1 professional and general liability action, as outlined below.

Claims on behalf of the Company’s Prior or Current Tenant’s Former Patients after the Transition

As of ~~June~~September 30, 2021, the Company is a defendant in an aggregate of 1312 additional professional and general liability actions. These 1312 additional professional and general liability actions, which set forth claims relating to time periods after the Transition, were commenced on behalf of former patients of our current or prior tenants. These actions generally seek unspecified compensatory and punitive damages for former patients who were allegedly injured or died due to professional negligence or understaffing at the applicable facility operated by our tenants. These actions on behalf of former patients of our current or prior tenants all relate to events which occurred after the Company transitioned the operations of the facilities in question to a third-party operator (and of which 4 such actions relate to events which occurred after the Company sold such facilities) and are subject to such operators’ indemnification obligations in favor of the Company. There is no assurance that our tenants will have sufficient assets, income, access to financing and insurance coverage to enable them to satisfy their respective indemnification obligations.

During the three months ended June 30, 2021, 1 professional and general liability action, related to the Company’s current or former tenant’s former patients was filed against the Company. The Company was subsequently dismissed with prejudice from this action on July 6, 2021.

During the three months ended March 31, 2021, 0 professional and general liability actions related to the Company’s current or former tenant’s former patients were filed against the Company.

During the three months ended September 30, 2020, 1 professional and general liability actions related to the Company’s current or former tenant’s former patients were filed against the Company.

During the three months ended June 30, 2020, 2 professional and general liability actions related to the Company’s current or former tenant’s former patients were filed against the Company.

During the three months ended March 31, 2020, 1 professional and general liability action related to the Company’s current or former tenant’s former patients was filed against the Company.

During the three months ended June 30, 2020, 1 professional and general liability action was dismissed without prejudice.

As of ~~June~~September 30, 2020, the Company was a defendant in an aggregate of 1112 professional and general liability actions, primarily commenced on behalf of 1 of our former patients and 1011 of our current or prior tenant’s former patients.

The Company established a self-insurance reserve for its professional and general liability claims, included within “Accrued expenses” on the Company’s consolidated balance sheets of ~~$0.2~~$0.1 million and $0.2 million as of ~~June~~September 30, 2021 and December 31, 2020, respectively. Additionally, as of ~~June~~September 30, 2021 and December 31, 2020, $0.1 million and $0.1 million, respectively, was reserved for settlement amounts in “Accounts payable” on the Company’s consolidated balance sheets. For additional information regarding the Company’s self-insurance reserve, see Note 14 – Commitments and Contingencies in Part II, Item 8, “Financial Statements and Supplementary Data”, ~~Note 14~~ ~~– Commitments and Contingencies~~included in the Annual Report.

Ohio Attorney General Action. On January 15, 2020, the Ohio Attorney General (the “OAG”) voluntarily dismissed with prejudice all claims pending against the Company, certain subsidiaries of the Company, and certain other parties, in ~~the~~an action they filed on October 27, 2016, in the Court of Common Pleas, Franklin County, Ohio. The dismissed lawsuit alleged that defendants, including the Company, submitted improper Medicaid claims for independent laboratory services for glucose blood tests and capillary blood draws and further alleged that defendants (i) engaged in deception, (ii) willfully received Medicaid payments to which they were not entitled or in a greater amount than that to which they were entitled, and (iii) obtained payments under the Medicaid program to which they were not entitled pursuant to their provider agreements and applicable Medicaid rules and regulations. The OAG sought, among other things, triple the amount of damages proven at trial (plus interest) and not less than $5,000 and not more than $10,000 for each deceptive claim or falsification. As previously disclosed, the Company had received a letter from the OAG in February 2014 offering to settle its claims against the defendants for improper Medicaid claims related to glucose blood tests and capillary blood draws for a payment of approximately $1.0 million, which offer the Company declined. The January 15, 2020 dismissal of the case with prejudice renders all claims against the Company moot.

Effective January 1, 2021, pursuant to the Wellington Lease Termination, as a portfolio stabilization measure the Company commenced operating the previously subleased Tara Facility. Accordingly, the Company now has 2 primary reporting segments: (i) Real Estate Services, which consists of the leasing and subleasing of long-term care and senior living facilities to third-party tenants, including the Company’s management of three facilities on behalf of third-party owners; and (ii) Healthcare Services, which consists of the operation of the Tara Facility.

The Company reports segment information based on the “management approach” defined in ASC 280, Segment Reporting. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reportable segments.

The table below presents the results of operations for our reporting segments for the periods presented.

	Three Months Ended June 30,												Six Months Ended June 30,												Three Months Ended September 30,												Nine Months Ended September 30,
	2021			2021			2021			2020			2021			2021			2021			2020			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			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		$	—		$	—		$	2,309		$	2,309		$	—		$	—		$	7,444		$	7,444		$	—
Rental revenues		3,763			—			3,763			4,293			7,844			—			7,844			8,590			4,136			—			4,136			4,308			11,980			—			11,980			12,898
Management fees		247			—			247			244			495			—			495			488			248			—			248			244			743			—			743			732
Other revenues		13			—			13			2			75			—			75			9			9			—			9			215			84			—			84			224
Total revenues		4,023			2,445			6,468			4,539			8,414			5,135			13,549			9,087			4,393			2,309			6,702			4,767			12,807			7,444			20,251			13,854
Expenses:
Patient care expense		—			2,254			2,254			—			—			4,457			4,457			—			—			2,454			2,454			—			—			6,911			6,911			—
Facility rent expense		1,342			297			1,639			1,639			2,684			595			3,279			3,279			1,342			298			1,640			1,640			4,026			893			4,919			4,919
Cost of management fees		150			—			150			174			315			—			315			325			153			—			153			161			468			—			468			486
Depreciation and amortization		649			3			652			769			1,297			5			1,302			1,545			645			6			651			694			1,942			11			1,953			2,239
General and administrative expense		823			122			945			714			1,722			259			1,981			1,591			861			111			972			743			2,583			370			2,953			2,334
Doubtful accounts expense (recovery)		—			37			37			(135	)		—			77			77			(137	)
Doubtful accounts (recovery) expense																										(111	)		111			—			790			(111	)		188			77			653
Other operating expenses		239			4			243			297			471			4			475			521			199			5			204			109			670			9			679			630
Total expenses		3,203			2,717			5,920			3,458			6,489			5,397			11,886			7,124			3,089			2,985			6,074			4,137			9,578			8,382			17,960			11,261
Income (loss) from operations		820			(272	)		548			1,081			1,925			(262	)		1,663			1,963			1,304			(676	)		628			630			3,229			(938	)		2,291			2,593
Other expense (income) :
Interest expense, net		663			3			666			684			1,344			9			1,353			1,399			666			3			669			692			2,010			12			2,022			2,091
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 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		(166	)		(275	)		(441	)		406			(136	)		(271	)		(407	)		429			662			(679	)		(17	)		(71	)		526			(950	)		(424	)		358
(Loss) income from continuing operations	$	(166	)	$	(275	)	$	(441	)	$	406		$	(136	)	$	(271	)	$	(407	)	$	429			662		$	(679	)	$	(17	)	$	(71	)		526		$	(950	)	$	(424	)	$	358
(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
Loss from discontinued operations, net of tax																										(22	)		—			(22	)		(2	)		(97	)		—			(97	)		(33	)
Net loss																									$	640		$	(679	)	$	(39	)	$	(73	)	$	429		$	(950	)	$	(521	)	$	325

Total assets for the Real Estate Services segment and Healthcare Services segment were ~~$105.7~~$104.6 million and ~~$1.5~~$2.4 million (including $1.0 million Medicaid overpayment and is recorded in “Cash” in the Company’s consolidated balance sheets as of September 30, 2021), respectively, as of ~~June~~September 30, 2021.

The Company has evaluated all subsequent events through the date the consolidated financial statements were issued and filed with the SEC.

Extension and Modification Agreement by and between Meadowood and the Exchange Bank of Alabama

On ~~August 13,~~October 1, 2021, the Exchange Bank of Alabama and the Company ~~received official notification~~extended the maturity date of the Meadowood Credit Facility (with a principal balance of $3.5 million) which is secured by the Meadowood Facility and the assets of Coosa, and which is guaranteed by Regional Health Properties, Inc., from ~~FountainHead Commercial Capital, providers~~May 1, 2022 to October 1, 2026. See Note – 2 Liquidity and Note 8 – Notes Payable and Other Debt for further information.

Claim on behalf of ~~our $0.2 million PPP loan~~the Company’s Prior Tenant’s Former Patient after the Transition

On October 4, 2021, a medical negligence and wrongful death action was filed in the State Court of Gwinnett County, Georgia, by Bonnie L. Aquilino, Traci R. Randall, and Judy W. Sturgess against Wellington, other legal entities unaffiliated with the Company, the Company, and the Company’s Chief Executive Officer, on behalf of, and alleging the wrongful death and medical negligence of, a patient at the facility known as Thunderbolt Transitional Care and Rehabilitation. During the patient’s dates of service, the facility was subleased to Wellington (a third-party operator) by the Company and such facility was operated by Wellington. The plaintiff is seeking an amount in excess of $10,000 for professional malpractice and an unspecified amount for the full value of the life of the patient and other compensatory damages to be determined by jury trial. The Company is indemnified by Wellington 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 ~~full $0.2 million~~Company will prevail in this action.

On October 7, 2021, a violation of Fair Labor Standards action was ~~forgiven~~filed in the District Court for the Southern District of Ohio, Western Division at Dayton, by Colleen Long against the Company and UVMC Nursing Care Inc. dba Koester Pavilion (the “Defendants”) on behalf of herself and all current and former non-exempt employees employed from approximately September 30, 2018 onwards (hereinafter the “Putative Class Members”) at a facility managed by the ~~SBA on July 9, 2021.~~Company alleging Defendants have failed to pay all overtime wages due. The plaintiff is seeking an order certifying the Putative Class Members as an Ohio Class and designation of the plaintiff as representative for the Ohio Class. Additionally, the plaintiff is seeking, for Putative Class Members, back pay equal to the amount of all unpaid overtime pay for three years preceding October 7, 2021 plus an additional equal amount in liquidation damages, punitive damages of not less than $150.00 for each day the violation continued, an award of 6% of the total unpaid wages or $200.00 for each instance of failure to pay wages owed within thirty days, whichever is greater, attorney’s fees and costs, and any other relief the plaintiff is entitled to. The Company intends to take action most favorable to the Company. There is no guarantee that the Company will prevail in this action.

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, the Company’s financial condition, and the impact of the COVID-19 pandemic on the Company’s business. These and other risks and uncertainties are described in more detail in the Annual Report and in Part II, Item 1A 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.

Regional Health, through its subsidiaries, is a self-managed real estate investment company that invests primarily in real estate purposed for long-term care and senior living. Our business primarily consists of leasing and subleasing healthcare facilities to third-party tenants. As of ~~June~~September 30, 2021, the Company owned, leased or managed for third parties, or operated, 24 facilities, primarily in the Southeastern United States. Of the 24 facilities, the Company: (i) leased 10 skilled nursing facilities (which the Company owns) to third-party tenants, subleased eight skilled nursing facilities (which the Company leases) to third-party tenants, and operated, as of January 1, 2021 as a portfolio stabilization measure, one previously subleased skilled nursing facility (which the Company leases); (ii) leased two assisted living facilities (which the Company owns) to third-party tenants; and (iii) managed, on behalf of third-party owners, two skilled nursing facilities and one independent living facility. Accordingly, as of January 1, 2021, the Company has two primary reporting segments, Real Estate Services and Healthcare Services.

Effective January 1, 2021, pursuant to the Wellington Lease Termination for two ~~skilled nursing facilities (“SNFs”)~~SNFs located in Georgia with affiliates of Wellington, the Company, as a portfolio stabilization measure, commenced operating the previously subleased Tara Facility and entered into a new sublease agreement with an affiliate of Empire for the Powder Springs Facility. The Company ~~has~~had entered into the Vero Management Agreement with Vero Health under which Vero Health ~~provides~~provided management consulting services for the Tara Facility, which the Company now operates. 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. Affiliates of Peach also lease from Regional three facilities located in Georgia. The fixed Management fee Regional will pay Peach is 1% less than under the Vero Management Agreement, with additional percentages for meeting specified performance targets. See Note 6 – Leases ~~herein,~~located in Part I, Item 1, “Financial Statements”, of this Quarterly Report, and Note 6 – Leases in Part II, Item 8, “Financial Statements and Supplemental Data” in the Company’s Annual Report, for a more detailed description of the Company’s leases.

The operators of the Company’s facilities provide a range of health care and related services to patients and residents, including skilled nursing and assisted living services, social services, various therapy services, and other rehabilitative and healthcare services for both long-term and short-stay patients and residents.

commenced operating the Tara Facility, which facility comprises approximately 5.0% of the total amount of the Company’s licensed patient beds. This portfolio stabilization measure exposes the Company directly to all the risks our tenants face as discussed in this “Risk and Uncertainties” section.

On March 11, 2020, the World Health Organization declared the outbreak of the respiratory illness caused by a novel strain of coronavirus, SARS-CoV-2, also known as COVID-19, a global pandemic. The COVID-19 pandemic has led governments and other authorities in the United States to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders. The COVID-19 pandemic and the measures to protect its spread have adversely affected our business during the ~~six~~nine months ended ~~June~~September 30, 2021, and we expect it will continue to adversely affect our business in the quarter ending ~~September 30,~~December 31, 2021 and beyond, for a variety of reasons, including those discussed below and elsewhere in this Quarterly Report.

As of ~~August 13,~~October 29, 2021, the Company is aware that each of our facilities has reported one or more positive cases of COVID-19 among the residents and/or operator employee populations. Many of our operators have reported incurring significant cost increases as a result of the COVID-19 pandemic, with dramatic increases for facilities with positive cases. We believe these increases primarily stem from elevated labor costs, including increased use of overtime and bonus pay, as well as a significant increase in both the cost and usage of personal protective equipment, testing equipment, processes and supplies. In terms of occupancy levels, many of our operators have reported experiencing declines, in part due to the elimination or suspension of elective hospital procedures, fewer discharges from hospitals to SNFs, and higher hospital re-admittances from SNFs.

employers with more than 100 employees to ~~which~~be vaccinated. Some states have also issued their own orders to employers and healthcare providers that may or may not align with federal directives. The legality of both federal and state ~~funding support~~vaccine mandates will likely be decided by the courts. Until pending laws and regulations related to vaccine mandates are both finalized and adjudicated, our tenants will continue to manage in different ways, from mandating vaccines for all employees to waiting to see how the issue is ultimately resolved. The mandates, as presently written, may cause disruption to tenants’ operations if employees refuse vaccination and are terminated, and our tenants are not able to replace them in a timely manner or experience increased costs to do so.

To help offset these ~~incremental~~ costs ~~for~~as well as occupancy declines, various relief programs have been enacted by federal and state governments, which have provided, and we expect will continue to provide, some payments to our ~~tenants. To the extent government support is not sufficient or timely to offset these impacts, or~~tenants, subject to the ~~extent~~programs’ respective terms and conditions. The CARES Act established a grant program administered by the HHS under which Provider Relief Funds have been made available. In early November 2021, the HHS closed the application portal for its Phase 4 allocation of approximately $17 billion of Provider Relief Funds and an allocation of approximately $8.5 billion in American Rescue Plan resources for providers serving patients living in rural areas. We expect that our tenants pursued additional funding from these ~~trends continue~~allocations, and will pursue any future funding that may become available, though there can be no assurance that our tenants will qualify for, or ~~accelerate and are not offset by additional government relief that is sufficient~~receive, any Phase 4 or ~~timely, the operating results of our operators are likely to be adversely affected, and some may be unwilling~~American Rescue Plan, or ~~unable to pay their contractual obligations to us in full or on a timely basis, as has occurred with one of our prior operators.~~any future, funding.

We also do not know the number of facilities that will ultimately experience widespread, high-cost outbreaks of COVID-19. While we have requested reporting case numbers from our operators and CMS has required additional reporting by operators, we may not receive accurate information on the number of cases, which could result in a delay in reporting. We expect to see continued increased clinical protocols for infection control within facilities and increased monitoring of employees, guests and

other individuals entering facilities; however, we do not yet know if future reimbursement rates in combination with the various relief programs that have been made available will be sufficient to cover the increased costs of enhanced infection control and monitoring. The extent of the COVID-19 pandemic’s effect on our and our operators’ operational and financial performance will depend on future developments, including the ultimate duration, spread and intensity of the outbreak, which may depend on factors such as the development and implementation of an effective vaccine and treatments for COVID-19, government funds and other support for the senior care sector and the efficacy of other policies and measures that may mitigate the impact of the pandemic, all of which are uncertain and difficult to predict. Due to these uncertainties, we are unable at this time to estimate the effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material.

The following table provides summary information regarding the number of facilities and related licensed beds/units as of ~~June~~September 30, 2021:

	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

The following table provides summary information regarding the number of facilities and related licensed beds/units by operator affiliation as of ~~June~~September 30 2021:

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

For the Twelve Months Ended

Operating Metric ⁽¹⁾

September 30,

2020

December 31,

2020

March 31,

2021

June 30,

2021

December 31,

2020

March 31,

2021

June 30,

2021

September 30,

2021

Occupancy (%)

73.2

67.3

68.6

67.7

67.3

68.6

67.7

66.7

The following table provides summary information regarding our lease expirations for the years shown as of ~~June~~September 30, 2021:

There were no acquisitions or divestitures during the three and ~~six~~nine months ended ~~June~~September 30, 2021 or ~~June~~September 30, 2020.

For historical information regarding the Company’s acquisitions and divestitures, see ~~Part II, Item 8, “Financial Statements and Supplementary Data”~~, Note 9 – Acquisitions and Dispositions and Note 10 – Discontinued Operations Part II, Item 8, “Financial Statements and Supplementary Data”, included in the Annual Report.

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 Company's Notes to our consolidated financial statements located in Part I, Item 1, “Financial Statements (unaudited)”, of this Quarterly Report.

The following table sets forth, for the periods indicated, an unaudited statement of operations 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.

	Three Months Ended June 30,									Six Months Ended June 30,									Three Months Ended September 30,									Nine Months Ended September 30,
(Amounts in 000’s)	2021			2020			Percent Change (*)			2021			2020			Percent Change (*)			2021			2020			Percent Change (*)			2021			2020			Percent Change (*)
Revenues:
Patient care revenues	$	2,445		$	—		NM			$	5,135		$	—		NM			$	2,309		$	—		NM			$	7,444		$	—		NM
Rental revenues		3,763			4,293			(12.3	)%		7,844			8,590			(8.7	)%		4,136			4,308			(4.0	)%		11,980			12,898			(7.1	)%
Management fees		247			244			1.2	%		495			488			1.4	%		248			244			1.6	%		743			732			1.5	%
Other revenues		13			2		NM				75			9		NM				9			215			(95.8	)%		84			224			(62.5	)%
Total revenues		6,468			4,539			42.5	%		13,549			9,087			49.1	%		6,702			4,767			40.6	%		20,251			13,854			46.2	%
Expenses:
Patient care expense		2,254			—		NM				4,457			—		NM				2,454			—		NM				6,911			—		NM
Facility rent expense		1,639			1,639			0.0	%		3,279			3,279			0.0	%		1,640			1,640			0.0	%		4,919			4,919			0.0	%
Cost of management fees		150			174			(13.8	)%		315			325			(3.1	)%		153			161			(5.0	)%		468			486			(3.7	)%
Depreciation and amortization		652			769			(15.2	)%		1,302			1,545			(15.7	)%		651			694			(6.2	)%		1,953			2,239			(12.8	)%
General and administrative expenses		945			714			32.4	%		1,981			1,591			24.5	%		972			743			30.8	%		2,953			2,334			26.5	%
Doubtful accounts expense (recovery)		37			(135	)		(127.4	)%		77			(137	)		(156.2	)%
Doubtful accounts expense																				—			790			(100.0	)%		77			653			(88.2	)%
Other operating expenses		243			297			(18.2	)%		475			521			(8.8	)%		204			109			87.2	%		679			630			7.8	%
Total expenses		5,920			3,458			71.2	%		11,886			7,124			66.8	%		6,074			4,137			46.8	%		17,960			11,261			59.5	%
Income from operations		548			1,081			(49.3	)%		1,663			1,963			(15.3	)%		628			630			(0.3	)%		2,291			2,593			(11.6	)%
Other expense (income) :
Interest expense, net		666			684			(2.6	)%		1,353			1,399			(3.3	)%		669			692			(3.3	)%		2,022			2,091			(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	%
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		(441	)		406			(208.6	)%		(407	)		429			(194.9	)%		(17	)		(71	)		(76.1	)%		(424	)		358			(218.4	)%
(Loss) income from continuing operations		(441	)		406			(208.6	)%		(407	)		429			(194.9	)%		(17	)		(71	)		(76.1	)%		(424	)		358			(218.4	)%
(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	)%
Loss from discontinued operations, net of tax																				(22	)		(2	)	NM				(97	)		(33	)		193.9	%
Net loss																			$	(39	)	$	(73	)		(46.6	)%	$	(521	)	$	325			(260.3	)%

Patient care revenues—Patient care revenues for our new Healthcare Services segment, as a result of the Company operating the Tara Facility, were ~~$2.4~~$2.3 million for the three months ended ~~June~~September 30, 2021, which due to lower occupancy in the current year, is approximately ~~14.2%~~21.5% less than the prior year financials we received from the prior Wellington affiliated operator.

Rental revenues—Rental revenue for our Real Estate Services segment decreased by approximately ~~$0.5~~$0.2 million, or ~~12.3%~~4.0%, to ~~$3.8~~$4.1 million for the three months ended ~~June~~September 30, 2021, compared with $4.3 million for the same period in 2020. The decrease reflects an approximately $0.9 million decrease in straight-line rent due to the Wellington Lease Termination, approximately $0.5 million and $0.4 million recognized for the three months ended ~~June~~September 30, 2020 for the Powder Springs Facility and the Tara Facility, respectively, partially ~~off-set~~offset by ~~$0.3~~approximately $0.2 million straight-line rent and ~~$0.1~~approximately $0.5 million variable rent recognized from the Powder Springs Facility under a new sublease with an affiliate of Empire in the current period. For further information see Note 6 – Leases to our consolidated financial statements in Part I, Item 1, “Financial Statements (unaudited)” in this Quarterly Report.

Other revenues—Other revenues for our Real Estate Services segment decreased by approximately $0.2 million for the three months ended September 30, 2021, compared to the same period in 2020. This decrease is due to the previously deferred interest earned on the Peach Line pursuant to the Peach Line modification in the prior year quarter and the Peach Health Sublessees repaying its third-party Peach Working Capital Facility, to which the Peach Line was subordinated

Patient care expense—Patient care expense was ~~$2.3~~$2.5 million for the three months ended ~~June~~September 30, 2021. The current ~~year~~period expense, which required an increased utilization of agency staffing, is due to the costs of operating the Tara Facility in our new Healthcare Services reporting segment.

~~Depreciation and amortization~~—Depreciation and amortization for our Real Estate Services segment decreased by approximately $0.1 million, or 15.2%, to $0.7 million for the three months ended June 30, 2021, compared with $0.8 million for the same period in 2020. This decrease is mainly due to the full depreciation of certain building improvements and equipment and computer related assets.

	Three Months Ended June 30,							Three Months Ended September 30,
(Amounts in 000’s)	2021		2020		Percent Change (*)			2021		2020		Percent Change (*)
General and administrative expenses:
Real Estate Services	$	823	$	714		15.3	%	$	861	$	743		15.9	%
Healthcare Services		122		—	NM				111		—	NM
Total	$	945	$	714		32.4	%	$	972	$	743		30.8	%

General and administrative expenses— General and administrative expenses increased by approximately ~~$0.2~~$0.3 million, or 30.8%, to ~~$0.9~~$1.0 million for the three months ended ~~June~~September 30, 2021, compared with $0.7 million for the same period in 2020. The increase is driven by ~~$0.1~~$0.2 million of non-cash stock compensation for the issuance of restricted share awards for employees and executive officers and $0.1 million incurred per the Vero Management Agreement, in our Healthcare Services segment, which provides remuneration to Vero of 5.0% of our Patient care revenues (net of contractual allowances) to provide management consulting services for the Tara Facility.

Doubtful accounts expense ~~(recovery)~~—The current ~~year~~period expense is adue to approximately $0.1 million provision for doubtful accounts in our Healthcare Services segment ~~and the~~partially offset by approximately $0.1 million of Wellington rent receivable cash collections in excess of our prior year provision for non-payment of rent in our Real Estate Services segment. The prior period ~~gain~~expense is related to the ~~collection~~provision for non-payment of ~~amounts owed~~rent by Wellington.

Other operating expenses — Other operating expenses increased by approximately $0.1 million or 87.2%, to $0.2 million for the three months ended September 30, 2021, compared with $0.1 million for the same period in 2020. The increase is due to the ~~Company under tenant payment plans previously not considered collectible.~~reversal of a provision for bed taxes related to the Peach Line modification in the prior year quarter.

Gain on extinguishment of debt— Gain on extinguishment of debt is due to the PPP Loan debt forgiveness of $0.2 million partially offset by $0.1 million of deferred financing fees from the extinguishment of the Coosa MCB Loan.

Other expense (income), net— Other expense (income), net increased by approximately ~~$0.3~~$0.1 million, to ~~$0.3~~$0.1 million, for the three months ended ~~June~~September 30, 2021. These expenses are related to professional and legal services to evaluate and assist with possible opportunities to improve the Company’s capital structure.

Patient care revenues—Patient care revenues for our new Healthcare Services segment, as a result of the Company operating the Tara Facility, were ~~$5.1~~$7.4 million for the ~~six~~nine months ended ~~June~~September 30, 2021, which due to lower occupancy in the current year, is approximately ~~11.8%~~15.1% less than the prior year financials we received from the prior Wellington affiliated operator.

Rental revenues—Rental revenue for our Real Estate Services segment, decreased by approximately ~~$0.7~~$0.9 million, or ~~8.7%~~7.1%, to ~~$7.8~~$12.0 million for the ~~six~~nine months ended ~~June~~September 30, 2021, compared with ~~$8.6~~$12.9 million for the same period in 2020. The decrease reflects approximately ~~$1.8~~$2.8 million decrease in straight-line rent due to the Wellington Lease Termination, ~~$1.0~~ $1.5

million and ~~$0.8~~$1.3 million recognized for the ~~six~~nine months ended ~~June~~September 30, 2020 for the Powder Springs Facility and the Tara Facility respectively, partially ~~off-set~~offset by ~~$0.6~~$0.9 million straight-line rent and ~~$0.5~~approximately $1.0 million variable rent recognized from the Powder Springs Facility under a new sublease with an affiliate of Empire in the current period. For further information see Note 6 – Leases to our consolidated financial statements in Part I, Item 1, “Financial Statements (unaudited)” in this Quarterly Report.

Other revenues—Other revenue for our Real Estate Services segment ~~increased~~decreased by approximately $0.1 million, for the ~~six~~nine months ended ~~June~~September 30, 2021, compared to the same period in 2020. This ~~increase~~decrease is due to recognition of the Symmetry Payment Plan fees and interest earned on the Peach Line, which had previously been deferred due to the Peach Line’s subordination to the Peach Health Sublessees third-party Peach Working Capital Facility until its repayment in the prior year.

Patient care expense—Patient care expense was ~~$4.5~~$6.9 million for the ~~six~~nine months ended ~~June~~September 30, 2021. The current year expense is due to the costs of operating the Tara Facility in our new Healthcare Services reporting segment.

Depreciation and amortization—Depreciation and amortization for our Real Estate Services segment decreased by approximately $0.2 million, or ~~15.7%~~12.8%, to ~~$1.3~~$2.0 million for the ~~six~~nine months ended ~~June~~September 30, 2021, compared with ~~$1.5~~$2.2 million for the same period in 2020. This decrease is mainly due to the full depreciation of certain building improvements and equipment and computer related assets.

General and administrative expenses— General and administrative expenses increased by approximately ~~$0.4~~$0.7 million, or ~~24.5%~~26.5%, to ~~$2.0~~$3.0 million for the ~~six~~nine months ended ~~June~~September 30, 2021, compared with ~~$1.6~~$2.3 million for the same period in 2020. The increase is driven by ~~$0.1~~$0.3 million of non-cash stock compensation for the issuance of restricted share awards for ~~employee’s~~employees and approximately ~~$0.3~~$0.4 million incurred per the Vero Management Agreement, in our Healthcare Services segment, which provides remuneration to Vero of 5.0% of our Patient care revenues (net of contractual allowances) to provide management consulting services for the Tara Facility.

Doubtful accounts expense ~~(recovery)~~—The current ~~year~~period expense is due to a $0.2 million provision for doubtful accounts in our Healthcare Services segment ~~and the~~partially offset by approximately $0.1 million of Wellington rent receivable cash collections in excess of our prior year provision for non-payment of rent in our Real Estate Services segment. The prior period ~~gain~~expense is related to a $0.9 million provision of outstanding rent arrears from Wellington, offset by $0.2 million related to the collection of amounts owed to the Company under tenant payment plans previously not considered collectible.

Other operating expenses — Other operating expenses increased by approximately $0.1 million or 7.8%, to $0.7 million for the nine months ended September 30, 2021, compared with $0.6 million for the same period in 2020. The increase is due to the reversal of a provision for bed taxes related to the Peach Line modification in the prior year quarter.

Other expense, net— Other expense, net increased by approximately ~~$0.6~~$0.7 million, to ~~$0.7~~$0.8 million, for the ~~six~~nine months ended ~~June~~September 30, 2021, compared with $0.1 million for the same period in 2020. These expenses in both years are related to professional and legal services to evaluate and assist with possible opportunities to improve the Company’s capital structure.

For further information on the Tara Facility performance, see Note 13 – Segment Results to the Company’s consolidated financial statements located in Part I, Item 1, Notes to Consolidated Financial Statements”, of this Quarterly Report.

repayment to be funded through potentially expanding borrowing arrangements with certain lenders; (ii) increasing future lease revenue through acquisitions and investments in existing properties; (iii) modifying the terms of existing leases; (iv) replacing certain tenants who default on their lease payment terms; and (v) reducing other and general and administrative expenses.

Management anticipates access to several sources of liquidity, including cash on hand, cash flows from operations, and debt refinancing during the twelve months following the date of this filing. At ~~June~~September 30, 2021, the Company had ~~$5.6~~$6.2 million in unrestricted ~~cash.~~cash, including 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. During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company generated positive cash flow from continuing operations of ~~$2.5~~$4.3 million and anticipates continued positive cash flow from operations in the future, subject to the continued uncertainty of the COVID-19 pandemic and its impact on the Company’s business, financial condition and results of operations.

As of December 31, 2020, Regional recorded an estimated allowance of $1.4 million against a rent receivable of $2.7 million from the Wellington Tenants. During the ~~six~~three months ended ~~June~~September 2021, the Company recorded $0.1 million in debt recovery due to collections exceeding our December 31, 2020 estimated allowance. During the nine months ended September 30, 2021, the Company collected ~~$3.2~~$3.3 million pursuant to the Wellington Lease Termination (excluding $0.2 million insurance refund) and paid $1.0 million to partially satisfy the Wellington Lease Termination obligation of approximately of $1.7 million of bed taxes in arrears and $0.1 million in collection expenses. The Company provides no assurance that we will be able to collect any of the additional ~~$1.3~~$1.2 million in rent arrears in excess of the net ~~$1.4~~$1.5 million already collected.

During the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company recognized ~~$0.1~~approximately $0.5 million and ~~0.5~~$1.0 million respectively, of variable rent for the Powder Springs Facility and, as of the date of filing this Quarterly Report, has collected all of such variable rent replacing approximately ~~$1.0~~$1.5 million of cash rent previously anticipated from the Wellington Tenant. The Tara Facility operations performance during the ~~six~~three and nine months ended ~~June~~September 30, 2021 has been ~~sufficient~~insufficient to cover ~~approximately 54%~~any of the rent the Company is obligated to pay under its lease. On January 1, 2021, the Company had entered into the Vero Management Agreement with Vero Health under which Vero Health provided management consulting services for the Tara Facility, which the Company now operates. 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. Affiliates of Peach also lease from Regional three facilities located in Georgia. The fixed Management fee Regional will pay Peach is 1% less than under the Vero Management Agreement with additional percentages for meeting specified performance targets. For further information on the ~~Tara Facility performance~~Peach Management Agreement see Note 8 – Leases and Note 13 – Segment Results to the Company’s consolidated financial statements located in Part I, Item 1, Notes to Consolidated Financial Statements”, of this Quarterly Report.

period, ~~including~~ approximately ~~$0.5 million other debt on August 25, 2021 (the “KeyBank Exit Notes”), $3.6 million in senior debt, other mortgage indebtedness on May 1, 2022 (the “Meadowood Credit Facility”) and $1.4~~$1.3 million of routine debt service amortization, ~~$0.8~~$0.6 million of current maturities of other debt (including ~~$0.3~~$0.1 million related to insurance financing for the Tara Facility operations), and a $0.1 million payment of bond debt.

On September 30, 2021, the Company and the Exchange Bank of Alabama executed a $5.1 million Promissory Note with a 3.95% annual fixed interest rate and maturity date of October 10, 2026. The Coosa Credit Facility refinanced $5.1 million prime + 1.5% variable interest rate debt owed to Metro City Bank with a maturity date of January 31, 2036. The Coosa Credit Facility is secured by the assets of Coosa, which includes the Coosa Facility and the assets of Meadowood which includes the Meadowood Facility. The Company isincurred approximately $0.1 million in ~~negotiations to extend~~new deferred financing fees and expensed approximately $0.1 million deferred financing fees associated with the Coosa MCB Loan.

Debt Modification. In conjunction with the September 30, 2021 Coosa Facility refinance, the Company and the Exchange Bank of Alabama executed the Meadowood Credit Facility that extended the maturity date on $3.5 million Meadowood Credit

Facility, as amended, in current senior debt secured by the assets of Coosa and the assets of Meadowood, other mortgage indebtedness from May 1, 2022 to October 1, 2026. Additionally on August 17, 2021, the Company extended the maturity date on approximately $0.5 million other debt from August 25, 2021 to August 25, 2023 (known as the “KeyBank Exit Notes”).

Company recorded a net gain of approximately $0.1 million on extinguishment of debt during the three months ended September 30, 2021, being $0.2 million gain on forgiveness of the ~~KeyBank Exit~~ PPP Loan partially offset by $0.1 million of expensed deferred financing fees associated with the extinguishment of the Coosa MCB Loan.

For further information, see Note 8 – Notes Payable and ~~Meadowood Credit Facility.~~Other Debt to the Company’s consolidated financial statements located in Part I, Item 1, Notes to Consolidated Financial Statements”, of this Quarterly Report.

The Company is current with all of its Notes payable and other debt as described in Note 8 – Notes Payable and Other Debt, to the Company’s Notes to our consolidated financial statements located in Part I, Item 1, “Financial Statements (unaudited)”, of this Quarterly Report. The Company has benefited from various, now expired, stimulus measures made available to it through the CARES Act enacted by Congress in response to the COVID-19 pandemic, which allowed for, among other things: (i) a deferral of debt service payments on USDA loans to maturity, (ii) an allowance for debt service payments to be made out of replacement reserve accounts for HUD loans, and (iii) debt service payments to be made by the SBA on all SBA loans.

In early 2020, the Company began on-going efforts to investigate alternatives to retire or refinance our outstanding debt of Series A Preferred Stock through privately negotiated transactions, open market repurchases, redemptions, exchange offers, tender offers, or otherwise. Costs associated with these efforts have been expensed as incurred in “Other expense, net” and were ~~$0.7~~$0.9 million and ~~$0.1~~$0.2 million for the ~~six~~nine months ended ~~June~~September 30, 2021 and ~~June~~September 30, 2020, respectively.

As of ~~June~~September 30, 2021, the Company was in compliance with the various financial and administrative covenants under the Company’s outstanding credit related instruments.

On June 8, 2018, the Board indefinitely suspended quarterly dividend payments with respect to the Series A Preferred Stock. As of ~~June~~September 30, 2021, 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 ~~$32.4~~$34.6 million of undeclared preferred stock dividends in arrears. The Board believes that the dividend suspension will provide the Company with additional funds to meet, in part, its ongoing liquidity needs. As the Company has failed to pay cash dividends on the outstanding Series A Preferred Stock in full for more than four dividend periods, the annual dividend rate on the Series A Preferred Stock for the fifth and future missed dividend periods has increased to 12.875%, which is equivalent to $3.20 per share each year, commencing on the first day after the missed fourth quarterly payment (October 1, 2018) and continuing until the second consecutive dividend payment date following such time as the Company has paid all accumulated and unpaid dividends on the Series A Preferred Stock in full in cash.

For additional information regarding the Company’s liquidity, see Note 2 – Liquidity and Note 8 – Notes Payable and other debt, to the Company’s consolidated financial statements located in Part I, Item 1, Notes to Consolidated Financial Statements”, of this Quarterly Report.

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

	Six Months Ended June 30,						Nine Months Ended September 30,
(Amounts in 000’s)	2021			2020			2021			2020
Net cash provided by operating activities - continuing operations	$	2,531		$	820		$	4,307		$	1,933
Net cash used in operating activities - discontinued operations		(144	)		(904	)		(195	)		(1,017	)
Net cash used in investing activities - continuing operations		(74	)		(157	)		(119	)		(209	)
Net cash used in financing activities - continuing operations		(1,206	)		(620	)		(1,859	)		(999	)
Net change in cash and restricted cash		1,107			(861	)		2,134			(292	)
Cash and restricted cash at beginning of period		7,492			8,038			7,492			8,038
Cash and restricted cash, ending	$	8,599		$	7,177		$	9,626		$	7,746

Net cash provided by operating activities—continuing operations for the ~~six~~nine months ended ~~June~~September 30, 2021 was approximately ~~$2.5~~$4.3 million, primarily due to changes in working capital, consisting of our collection of rent arrears from the Wellington Lease Termination and income from operations less noncash charges (primarily, depreciation and amortization and lease revenue in excess of cash rent received). The ~~$1.7~~$2.4 million increase compared to the same period in the prior year ~~primarily~~includes $1.0 million Medicaid overpayment that the Company expects to repay shortly and reflects the collection of ~~$3.2~~$3.3 million from the Wellington Lease Termination ~~off-set~~(excluding $0.2 million insurance refund), offset by payment of $1.0 million of bed tax in arrears for the Powder Springs Facility, $0.1 million of other collection expenses, approximately ~~$0.2~~$0.4 million additional interest payments as result of the CARES ACT interest deferrals and additional net operating outflows of ~~$0.2~~$0.6 million.

Net cash used in operating activities—discontinued operations for the ~~six~~nine months ended ~~June~~September 30, 2021 was approximately ~~$0.1~~$0.2 million, excluding non-cash proceeds and payments. This amount was to fund legal and associated settlement costs related to our legacy professional and general liability claims and expenses related to and payment of legacy accounts payable.

Net cash used in investing activities—continuing operations for the ~~six~~nine months ended ~~June~~September 30, 2021 was approximately $0.1 million. This capital expenditure was for computer hardware, software and furniture and fixtures for the Tara Facility.

Net cash used in financing activities—continuing operations was approximately ~~$1.2~~$1.9 million for the ~~six~~nine months ended ~~June~~September 30, 2021. This is the result of routine repayments ~~of approximately $0.7~~totaling $1.0 million towards our senior debt obligations, $0.1 million repayment of the City of Springfield, Ohio First Mortgage Revenue Series 2012 B Bonds, and ~~$0.4~~approximately $0.8 million toward our current insurance funding of other debt for the Tara Facility and our directors and officers insurance.

Net cash provided by operating activities—continuing operations for the ~~six~~nine months ended ~~June~~September 30, 2020 was approximately ~~$0.8~~$1.9 million, consisting primarily of our income from operations less changes in working capital, and noncash charges (primarily, depreciation and amortization, and lease revenue in excess of cash ~~received)~~rent). The Company received approximately a $0.4 million principal payment from Peach upon modification of the Peach Line, $0.5 million from rent arrears payment plans, and $0.2 million PPP loan proceeds, in addition to net operating inflows of approximately $0.8 million.

Net cash used in operating activities—discontinued operations for the ~~six~~nine months ended ~~June~~September 30, 2020 was approximately ~~$0.9~~$1.0 million, excluding non-cash proceeds and payments. This amount was to fund legal and associated settlement costs related to our legacy professional and general liability claims and payment of legacy accounts payable.

Net cash used in investing activities—continuing operations for the ~~six~~nine months ended ~~June~~September 30, 2020 was approximately $0.2 million. This capital expenditure was for a new sprinkler system at one of our ~~subleased~~leased properties.

Net cash used in financing activities—continuing operations was approximately ~~$0.6~~$1.0 million for the ~~six~~nine months ended ~~June~~September 30, 2020. This is the result of routine repayments oftotaling approximately ~~$0.8~~$1.2 million towards our debt obligations, partially ~~off-set~~offset by receipt of $0.2 million proceeds from the PPP Loan.

For information regarding the Company’s debt financings, see Note 8 – Notes Payable and Other Debt, to the Company’s Notes to our consolidated financial statements located in Part I, Item 1, “Financial Statements (unaudited)”, of this Quarterly Report and Note 8 – Notes Payable and Other Debt to our audited consolidated financial statements included in Part II, Item 8., “Financial Statements and Supplementary Data” in the Annual Report.

Our operations could be adversely affected if we experience further significant delays in receipt of rental income from our tenants.

As of ~~June~~September 30, 2021 and December 31, 2020, the Company reserved for approximately $0.1 million and $1.4 million, respectively, of uncollected receivables. Accounts receivable, net, totaled ~~$1.6~~$1.9 million at ~~June~~September 30, 2021 and $2.1 million at December 31, 2020. For information regarding the Company’s Receivables, see Note 1 – Organization and Significant Accounting Policies, to the Company’s Notes to our consolidated financial statements located in Part I, Item 1, “Financial Statements (unaudited)”, of this Quarterly ~~Report~~

For information regarding the Company’s operating leases, see Note 6 – Leases, to the Company’s Notes to consolidated financial statements located in Part I, Item 1, “Financial Statements (unaudited)”, of this Quarterly Report, and Note 6 – Leases located in Part II, Item 8, “Financial Statements and Supplementary Data”, included in the Annual Report.

On November 30, 2018, 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 Aspire Subleases became effective on December 1, 2018 and are structured as triple net leases. 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 ~~June~~September 30, 2021.

For further information see Note 6 – Leases, to the Company’s Notes to consolidated financial statements located in Part I, Item 1, “Financial Statements (unaudited)”, of this Quarterly Report, and Note 6 – Leases located in Part II, Item 8, “Financial Statements and Supplementary Data”, included in the Annual Report.

Disclosure in response to Item 3. of Form 10-Q is not required to be provided by smaller reporting companies.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report (the “Evaluation Date”). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective.

There has been no change in the Company’s internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company is a defendant in various legal actions and administrative proceedings arising in the ordinary course of business, including claims that the services the Company provided during the time it operated skilled nursing facilities resulted in injury or death to patients. Although the Company settles cases from time to time when settlement can be achieved on a reasonable basis, the Company vigorously defends any matter in which it believes the claims lack merit and the Company has a reasonable chance to prevail at trial or in arbitration. Litigation is inherently unpredictable. There is no assurance that the outcomes of these matters will not have a material adverse effect on the Company’s financial condition. Although arising in the ordinary course of the Company's business, certain of these matters are described in “Note 12 - Commitments and Contingencies – Professional and General Liability Claims” of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report, which Note – 12 is incorporated herein by this reference.

The Company believes that most of the professional and general liability actions are defensible and intends to defend them through final judgment unless settlement is more advantageous to the Company. See “Risks Related to Our Business - If we are unable to resolve our professional and general liability claims on terms acceptable to us, then it could have a material adverse effect on our business, financial condition and results of operation” in Part I, Item 1A, “Risk Factors.” in the Annual Report.

As of the date of filing of this Quarterly Report, the Company is a defendant in one professional and general liability action commenced on behalf of one of our former patients who received care at one of our facilities prior to the Transition. The plaintiff in this action alleges negligence due to failure to provide adequate and competent staff resulting in injuries, pain and suffering, mental anguish and malnutrition and seeks unspecified actual and compensatory damages, and unspecified punitive damages. This action is covered by insurance, except that any punitive damages awarded would be excluded from coverage.

Additionally, the Company is a defendant in one fair labor standards action. On October 7, 2021, a violation of Fair Labor Standards action was filed in the District Court for the Southern District of Ohio Western Division at Dayton, by Colleen Long against the Company and UVMC Nursing Care Inc. dba Koester Pavilion (the “Defendants”), on behalf of herself and all current and former non-exempt employees employed from approximately September 30, 2018 onwards (hereinafter the “Putative Class Members”), at a facility managed by the Company, alleging Defendants have failed to pay all overtime wages due. The plaintiff is seeking an order certifying the Putative Class Members as an Ohio Class and designation of the plaintiff as representative for the Ohio Class. Additionally, the plaintiff is seeking, for Putative Class Members, back pay equal to the amount of all unpaid overtime pay for three years preceding October 7, 2021 plus an additional equal amount in liquidation damages, punitive damages of not less than $150.00 for each day the violation continued, an award of 6% of the total unpaid wages or $200.00 for each instance of failure to pay wages owed within thirty days, whichever is greater, attorney’s fees and costs, and any other relief the plaintiff is entitled to. The Company intends to take action most favorable to the Company. There is no guarantee that the Company will prevail in this action.

As of the date of filing of this Quarterly Report, the Company is a defendant in an aggregate of 1213 additional professional and general liability ~~actions.~~actions, including the action detailed below. These 1213 additional professional and general liability actions set forth claims relating to time periods after the Transition, were commenced on behalf of former patients of our current or prior tenants. These actions generally seek unspecified compensatory and punitive damages for former patients who were allegedly injured or died due to professional negligence or understaffing at the applicable facility operated by our tenants. These actions on behalf of former patients of our current or prior tenants all relate to events which occurred after the Company transitioned the operations of the facilities in question to a third-party operator (and of which four such actions relate to events which occurred after the Company sold such facilities) and are subject to such operators’ indemnification obligations in favor of the Company. There is no assurance that our tenants will have sufficient assets, income, and access to financing and insurance coverage to enable them to satisfy their respective indemnification obligations.

On October 4, 2021, a medical negligence and wrongful death action was filed in the State Court of Gwinnett County, Georgia, by Bonnie L. Aquilino, Traci R. Randall, and Judy W. Sturgess against Wellington, other legal entities unaffiliated with the Company, the Company, and the Company’s Chief Executive Officer, on behalf of, and alleging the wrongful death and medical negligence of, a patient at the facility known as Thunderbolt Transitional Care and Rehabilitation. During the patient’s dates of service, the facility was subleased to Wellington (a third-party operator) by the Company, and such facility was operated by Wellington. The plaintiff is seeking an amount in excess of $10,000 for professional malpractice and an unspecified amount for the full value of the life of the patient and other compensatory damages to be determined by jury trial. The Company is indemnified by Wellington 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.

December 31, 2020, respectively. Additionally as of ~~June~~September 30, 2021 and December 31, 2020, $0.1 million and $0.1 million, respectively, was reserved for settlement amounts in “Accounts payable” on the Company’s consolidated balance sheets. For additional information regarding the Company’s self-insurance reserve, see Note 14 – Commitments and Contingencies in Part II, Item 8, “Financial Statements and Supplementary Data”, ~~Note 14~~ ~~– Commitments and Contingencies~~included in the Annual Report.

For a detailed description of certain risk factors that could affect our business, operations and financial condition, see Part I, Item 1A., Risk Factors, included in the Annual Report, as supplemented and modified by the risk factors set forth below in this Item 1A. The risk factors described in the Annual Report and this Quarterly Report (collectively, the “Risk Factors”) do not describe all risks applicable to our business, and we intend it only as a summary of certain material factors. The Risk Factors should be considered in connection with evaluating the forward-looking statements contained in this Quarterly Report because the Risk Factors could cause the actual results and conditions to differ materially from those projected in forward-looking statements. If any of the risks actually occur, our business, financial condition, or results of operations could be negatively affected. In that case, the trading price of the common stock and Series A Preferred Stock could decline.

While the Company is a self-managed real estate investment company that invests primarily in real estate purposed for long-term care and senior living, the Company, when business conditions require, may undertake portfolio stabilization measures, such as operating a previously leased facility. On January 1, 2021, following the Wellington Transition, the Company commenced operating the Tara Facility, which facility comprises approximately 5.0% of the total amount of the Company’s licensed patient beds. This portfolio stabilization measure exposes the Company directly to all the risks our tenants face as discussed in this “Risk Factors” section.

The COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our business, results of operations, cash flows, and financial condition.

On March 11, 2020, the World Health Organization declared the outbreak of the respiratory illness caused by a novel strain of coronavirus, SARS-CoV-2, also known as COVID-19, a global pandemic. The COVID-19 pandemic has led governments and other authorities in the United States to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders. The COVID-19 pandemic and the measures to protect its spread have adversely affected our business induring the ~~six~~nine months ended ~~June~~September 30, 2021, and we expect it will continue to adversely affect our business in the quarter ending ~~September 30,~~December 31, 2021 and beyond, for a variety of reasons, including those discussed below and elsewhere in this Quarterly Report.

Our tenants’ operations have been, and we expect will continue to be, materially and adversely affected by the COVID-19 pandemic due to, among other things, decreased occupancy and increased operating costs (including costs due to the implementation of additional safety protocols and procedures, purchases of personal protective equipment, increased staffing to allow facilities to adhere to social distancing and infection control protocols, and premium pay and incentive pay for the staff), which may affect our tenants’ ability to make rental payments to us pursuant to their lease agreements.

If our tenants are unable to make rental payments to us pursuant to their lease obligations, whether due to the tenants’ decrease in revenues or otherwise, then, in some cases, we may be forced to either attempt to replace tenants or restructure tenants’ long-term rent obligations and may not be able to do so on terms that are as favorable to us as those currently in place.

While the Company has received approximately 97% of its anticipated monthly rental receipts from tenants for the ~~six~~nine months ended ~~June~~September 30, 2021, there are a number of uncertainties the Company faces as it considers the potential impact of COVID-19 on its business, including the length of census disruption, elevated COVID-19 operating costs related to personal protection equipment, cleaning supplies, virus testing and increased overtime due to staff ~~illness~~illness.

On November 5, 2021, the CMS published COVID-19 Health Care Staff Vaccination requirements that most Medicare- and Medicaid-certified providers and suppliers must meet in order to participate in the ~~extent~~Medicare and Medicaid programs. This emergency regulation was effective immediately and requires employees at Medicare and Medicaid-participating facilities and employers with more than 100 employees to ~~which~~be vaccinated. Some states have also issued their own orders to employers and healthcare providers that may or may not align with federal directives. The legality of both federal and state ~~funding support~~vaccine mandates will likely be decided by the courts. Until pending laws and regulations related to vaccine mandates are both finalized and adjudicated, our tenants will continue to manage in different ways — from mandating vaccines for all employees to waiting to see how the issue is ultimately resolved. The mandates, as presently written, may cause disruption to tenants’ operations if employees refuse vaccination and are terminated, and our tenants are not able to replace them in a timely manner or experience increased costs to do so.

We also do not know the number of facilities that will ultimately experience widespread, high-cost outbreaks of COVID-19. While we have requested reporting from operators of their numbers of cases and ~~the U.S. Department of Health~~HHS and CMS has required additional reporting by operators, we may not receive accurate information on the number of cases, which could result in a delay in reporting. We expect to see continued increased clinical protocols for infection control within facilities and increased monitoring of employees, guests and other individuals entering facilities; however, we do not yet know if future reimbursement rates in combination with the various relief programs that have been made available will be sufficient to cover the increased costs of enhanced infection control and monitoring. The extent of the COVID-19 pandemic’s effect on our and our operators’ operational and financial performance will depend on future developments, including the ultimate duration, spread and intensity of the outbreak, which may depend on factors such as the development and implementation of an effective vaccine and treatments for COVID-19, government funds and other support

for the senior care sector, and the efficacy of other policies and measures that may mitigate the impact of the pandemic, all of which are uncertain and difficult to predict. Due to these uncertainties, we are ~~not able~~unable at this time to estimate the effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition, and cash flows could be material.

We have substantial indebtedness, which may have a material adverse effect on our business and financial condition.

As of ~~June~~September 30, 2021, we had approximately ~~$54.2~~$53.4 million, net of $1.3 million deferred financing and unamortized discounts, in indebtedness. We may also obtain additional short-term and long-term debt to meet future capital needs, subject to certain restrictions under our existing indebtedness, which would increase our total debt. Our substantial amount of debt could have negative consequences to our business. For example, it could:

In addition, our ability to borrow funds in the future will depend in part on the satisfaction of the covenants in our debt agreements. If we are unable to satisfy the financial covenants contained in those agreements, or are unable to generate cash sufficient to make required debt payments, the lenders and other parties to those arrangements could accelerate the maturity of some or all of our outstanding indebtedness.

We depend on affiliates of C.R Management and Aspire for a significant portion of our revenues and any inability or unwillingness by such entities to satisfy their obligations to us could have a material adverse effect on us.

As of the date of filing this Quarterly Report, our 20 properties (excluding the one facility operated by us and three facilities that are managed by us) are operated by a total of 20 separate tenants, with each of our tenants being affiliated with one of seven local or regionally-focused operators. We refer to our tenants who are affiliated with the same operator as a group of affiliated tenants. Each of our operators operate (through a group of affiliated tenants) between one and six of our facilities, with our most material operators, C.R Management and Aspire, each operating (through a group of affiliated tenants) six and five facilities, respectively. We therefore depend on tenants who are affiliated with C.R Management and Aspire for a significant portion of our revenues. We give no assurance that the tenants affiliated with C.R Management and Aspire will have sufficient assets, income and access to financing to enable them to make rental payments to us or to otherwise satisfy their obligations under the applicable leases and subleases, and any inability or unwillingness by such tenants to do so could have a material adverse effect on us.

The Board suspended dividend payments with respect to the Series A Preferred Stock, commencing with the fourth quarter of 2017, and determined to continue such suspension indefinitely in June 2018. No dividends were declared or paid with respect to the Series A Preferred Stock for such dividend periods. As a result of such suspension, the Company has ~~$32.4~~$34.6 million of undeclared preferred stock dividends in arrears, whose annual dividend rate has increased to 12.875% commencing with the fourth quarter of 2018, with respect to the Series A Preferred Stock as of the date of filing of this Quarterly Report. See Note 10 – Common and Preferred Stock, “Preferred Stock Offerings and Dividends”, to the Company’s Notes to our consolidated financial statements located in Part I, Item 1, “Financial Statements (unaudited)”, of this Quarterly Report.

~~None.~~On September 30, 2021 the Company and the Exchange Bank of Alabama executed a $5.1 million Promissory Note with a 3.95% annual fixed interest rate and maturity date of October 10, 2026 (the “Coosa Credit Facility”). The Coosa Credit Facility, refinanced $5.1 million prime + 1.5% variable interest rate debt owed to Metro City Bank with a maturity date of January 31, 2036, (the “Coosa MCB Loan”). The Coosa Credit Facility, guaranteed by Regional Health Properties, Inc., is secured by the assets of Coosa, including the Coosa Facility and the assets of Meadowood, including the Meadowood Facility. The Company incurred approximately $0.1 million in new deferred financing fees and expensed approximately $0.1 million deferred financing fees associated with the Coosa MCB Loan. The Coosa Credit Facility includes customary terms, including events of default with an associated annual 5% default interest rate. 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.

In conjunction with the September 30, 2021, Coosa Facility refinance, the Company and the Exchange Bank of Alabama signed an agreement dated October 1, 2021, that extended the maturity date on the $3.5 million Meadowood Credit Facility as amended, recorded in “senior debt other mortgage indebtedness” and which is secured by the Meadowood Facility, from May 1, 2022 to October 1, 2026. Additionally, the Meadowood Credit Facility as amended, is guaranteed by Regional Health Properties, Inc. and the assets of Coosa.

The above summary of the is qualified in its entirety by reference to the full text of the Coosa Credit Facility and the Meadowood Credit Facility, which is filed as Exhibit 4.17 and 4.18 respectively, to this Quarterly Report. For further information, see Note 8 – Notes Payable and Other Debt to the Company’s consolidated financial statements located in Part I, Item 1, Notes to Consolidated Financial Statements”, of this Quarterly Report.

The agreements included as exhibits to this Quarterly Report are included to provide information regarding the terms of these agreements and are not intended to provide any other factual or disclosure information about the Company, its business or the other parties to these agreements. These agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time, and should not be relied upon by investors.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.

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

		Page Number
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3
	Consolidated Balance Sheets as of ~~June~~September 30, 2021 and December 31, 2020	3
	Consolidated Statements of Operations for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020	4
	Consolidated Statements of Stockholders' Equity for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020	5
	Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020	6
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3033
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3945
Item 4.	Controls and Procedures	3945

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4046
Item 1A.	Risk Factors	4047
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4350
Item 3.	Defaults upon Senior Securities	4350
Item 4.	Mine Safety Disclosures	4350
Item 5.	Other Information	4350
Item 6.	Exhibits	4351

Signatures		4654

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

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

Exhibit No.	Description	Method of Filing

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

32.2	Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act	Filed herewith

~~101~~101.INS	~~The following financial information from~~Inline XBRL Instance Document – the ~~Registrant’s Quarterly Report on Form 10-Q for~~instance document does not appear in the ~~quarter ended June 30, 2021, formatted in~~Interactive Data File because 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~~tags are embedded within the ~~three and six months ended June 30, 2021 and 2020 (unaudited); (iii) Consolidated Statements of Stockholders’ Equity (Deficit) for~~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 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).Inline XBRL document)	Filed herewith

		REGIONAL HEALTH PROPERTIES, INC.
		(Registrant)

Date:	~~August 13,~~November 12, 2021	/s/ Brent Morrison
		Brent Morrison
		Chief Executive Officer and Director (Principal Executive Officer)

Date:	~~August 13,~~November 12, 2021	/s/ Benjamin A. Waites
		Benjamin A. Waites
		Chief Financial Officer and Vice President (Principal Financial and Accounting Officer)

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

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

			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	%