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 September 30, 2022, the Company had $2.4 million in unrestricted cash. Unrestricted cash includes a Medicaid overpayment of $1.5 million received on September 30, 2021 that the Company expects to repay in the near future. The overpayment is recorded in Accrued Expenses in the Company's consolidated balance sheets as of September 30, 2022 and December 31, 2021.

During the nine months ended September 30, 2022, the Company's cash used in operating activities was $2.2 million primarily due to unpaid rent payments and working capital needs to transition operations of the Glenvue, Thomasville, LaGrange, Lumber City and Meadowood facilities. The Company is seeking collection of the past due rent. In addition, management is

working to expedite the time it takes to collect and receive aged receivables. Cash flow from operations in the future, will be based on the operational performance of the facilities under Peach Health's management, as well as continued uncertainty of the COVID-19 pandemic and its impact on the Company's business, financial condition and results of operations.

In 2020, the Company began exploring alternatives to retire or refinance our outstanding Series A Preferred Stock through privately negotiated transactions, open market repurchases, redemptions, exchange offers, tender offers, or otherwise. In February 2022, the Company commenced an offer to exchange (the "Exchange Offer") any and all of its outstanding 10.875% Series A Cumulative Redeemable Preferred Shares (the "Series A Preferred Stock") for newly issued shares of the Company's 12.5% Series B Cumulative Redeemable Preferred Shares (the "Series B Preferred Stock"). When the Company did not obtain the shareholder approval required in connection with the Exchange Offer, the Company terminated the Exchange Offer.

On June 8, 2018, the board of directors of Regional (the "Board") indefinitely suspended quarterly dividend payments on the 10.875% Series A Preferred Stock. As of September 30, 2022, as a result of the suspension of the dividend payment on the Series A Preferred Stock commencing with the fourth quarter 2017 dividend period, the Company has $43.5 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 (i.e. October 1, 2018) and continuing until the second consecutive dividend payment date following such time as the Company has fully paid all accumulated and unpaid dividends on the Series A Preferred Stock in cash.

As of September 30, 2022, the Company had $52.6 million in indebtedness, net of $1.2 million deferred financing costs and unamortized discounts. The Company anticipates net principal repayments of approximately $2.9 million during the next twelve-month period, approximately $1.7 million of routine debt service amortization, $1.1 million of current maturities of other debt (including $0.6 million related to insurance financing), and a $0.1 million payment of bond debt.

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. Consequently the Company recorded a net gain of approximately $0.2 million on forgiveness of debt during the year ended December 31, 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"). In conjunction with this Coosa Credit Facility refinance, the Company and the Exchange Bank of Alabama signed an agreement (the "Meadowood Credit Facility"), on October 1, 2021 that extended the maturity date on the $3.5 million Meadowood Credit 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.

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 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.

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 (the "KeyBank Exit Notes"). For further information, see Note 8 – Notes Payable and Other Debt.

At September 30, 2022, the Company was in compliance with the various financial and administrative covenants related to all of the Company's credit facilities.

COVID-19. Many of our operators have reported incurring significant cost increases as a result of the COVID-19 pandemic. 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 readmittances from SNFs. The COVID-19 pandemic may also lead to temporary closures of nursing facilities operated by our tenants, impairing our tenants’ ability to make their rental payments to us pursuant to their respective lease agreements.

Portfolio Stabilization Measures. In the past. our operators did not provide lease guarantees from affiliated entities. Given this, certain operators have terminated their leases in light of operational difficulties caused by the COVID-19 pandemic. While the Company is a self-managed real estate investment company that invests in real estate, when business conditions require, the Company undertakes portfolio stabilization measures. The table below summarizes the lease terminations since the onset of the COVID-19 pandemic and the Company’s resulting portfolio stabilization measures:


Date	Facility Name	Former Operator	Current Operator

January 2021	Powder Springs	Wellington Healthcare Services	Released to Empire Care Centers

January 2021	Tara	Wellington Healthcare Services	Regional Health (managed by Peach Health)

April 2022	Meadowood	C.R. Management	Regional Health (managed by Cavalier Senior Living Operations)

May 2022	LaGrange	C.R. Management	Regional Health (managed by Peach Health)

May 2022	Lumber City	Beacon Health Management	Regional Health (managed by Peach Health)

July 2022 August 2022	Thomasville Glenvue	C.R. Management C.R. Management	Regional Health (application pending) Regional Health (managed by Peach Health)

For more information, see Note 1 – Organization and Significant Accounting Policies, Note 6 – Leases and Note 12 – Segment Results.

Capital Requirements. Until the Company releases the facilities referenced above, the operation of these facilities will require additional working capital, which is partially offset by cash flow received from the operation of these facilities. Since January, 2021, the company Accounts Receivable and Accounts Payable for the Healthcare Services segment have grown to $4.3 million and $1.6 million, respectfully.

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

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

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