UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from _______ to ______
Commission
file number
(Exact name of Registrant as specified in its Charter)
| (State or other jurisdiction of | I.R.S. Employer | |
| incorporation or organization) | Identification number | |
| (Address of principal executive offices) | (Zip Code) |
Issuer’s
telephone number: (
Check
whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 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 ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer ☐ | Accelerated filer ☐ | Smaller Reporting Company |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging
growth company
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
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
As of November 10, 2023, the Registrant had shares of its Common Stock outstanding.
INDEX
| 2 |
PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
SELECTIS HEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2023 | December 31, 2022 | |||||||
| Unaudited | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and Cash Equivalents | $ | $ | ||||||
| Accounts Receivable, Net | ||||||||
| Prepaid Expenses and Other | ||||||||
| Employee Retention Credits Receivable | ||||||||
| Total Current Assets | ||||||||
| Long Term Assets | ||||||||
| Restricted Cash | ||||||||
| Property and Equipment, Net | ||||||||
| Goodwill | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Liabilities | ||||||||
| Accounts Payable and Accrued Liabilities | $ | $ | ||||||
| Dividends Payable | ||||||||
| Short-Term Debt – Related Parties | ||||||||
| Current Maturities of Long-Term Debt, Net of Discount of $ | ||||||||
| Total Current Liabilities | ||||||||
| Debt- Related Parties, Net of discount $ | ||||||||
| Debt, Net of discount of $ | ||||||||
| Lease Security Deposit | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Equity | ||||||||
| Preferred Stock: | ||||||||
| Series A – | ||||||||
| Series D – | ||||||||
| Common Stock - $ Par Value; Shares Authorized, and Shares Issued and Outstanding at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Additional Paid-In Capital | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total Equity | ||||||||
| Total Liabilities and Equity | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 3 |
SELECTIS HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Nine Months Ended | Three Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | ||||||||||||||||
| Rental Revenue | $ | $ | $ | $ | ||||||||||||
| Healthcare Revenue | ||||||||||||||||
| Healthcare Grant Revenue | ||||||||||||||||
| Total Revenue | ||||||||||||||||
| Expenses | ||||||||||||||||
| Property Taxes, Insurance and Other Operating | ||||||||||||||||
| General and Administrative | ||||||||||||||||
| Provision for Bad Debts | ||||||||||||||||
| Depreciation and Amortization | ||||||||||||||||
| Total Expenses | ||||||||||||||||
| (Loss) Income from Operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Other (Income) Expense | ||||||||||||||||
| Loss on Extinguishment of Debt | ||||||||||||||||
| Interest Expense, net | ||||||||||||||||
| Income from Employee Retention Credits | ( | ) | ( | ) | ||||||||||||
| Other Income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Other (Income) Expense | ( | ) | ( | ) | ||||||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Series D Preferred Dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss Attributable to Common Stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Per Share Data: | ||||||||||||||||
| Net Loss per Share Attributable to Common Stockholders: | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted Average Common Shares Outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 4 |
SELECTIS HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
| Series A Preferred Stock | Series D Preferred Stock | Common Stock | Selectis | |||||||||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Health, Inc. Stockholders’ Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Series D Preferred Dividends | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net Income | - | - | - | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Series D Preferred Dividends | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Net Loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Series D Preferred Dividends | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Issuance of Warrants | - | - | - | |||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Series A Preferred Stock | Series D Preferred Stock | Common Stock | Selectis | |||||||||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | Additional Paid-In | Accumulated Deficit | Health, Inc. Stockholders’ Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Series D Preferred Dividends | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Common shares issued for debt | - | - | ||||||||||||||||||||||||||||||||||
| Loss on Forgiveness of Debt | - | - | - | |||||||||||||||||||||||||||||||||
| Net Income | - | - | - | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Series D Preferred Dividends | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net Income | - | - | - | |||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Series D Preferred Dividends | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 5 |
SELECTIS HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities: | ||||||||
| Other Income from Partial Settlement of Debt | ( | ) | ||||||
| Other Income from Adjustment of Debt | ( | ) | ||||||
| Depreciation and Amortization | ||||||||
| Amortization of Deferred Loan Costs and Debt Discount | ||||||||
| Provision for Bad Debt | ||||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts and Rents Receivable | ( | ) | ( | ) | ||||
| Prepaid Expenses and Other Assets | ||||||||
| Employee Retention Credit Receivables- | ( | ) | ||||||
| Accounts Payable and Accrued Liabilities | ( | ) | ||||||
| Lease Security Deposits | ||||||||
| Cash Provided by (Used in) Operating Activities | ( | ) | ||||||
| Cash Flows From Investing Activities: | ||||||||
| Capital Expenditures for Property and Equipment | ( | ) | ( | ) | ||||
| Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Proceeds from Issuance of Debt, Non-Related Party | ||||||||
| Payments on Debt, Non-Related Party | ( | ) | ( | ) | ||||
| Dividends Paid on Preferred Stock | ( | ) | ( | ) | ||||
| Debt Discount - Warrants | ||||||||
| Cash Used in Financing Activities | ( | ) | ( | ) | ||||
| Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | ( | ) | ||||||
| Cash and Cash Equivalents and Restricted Cash at Beginning of the Period | ||||||||
| Cash and Cash Equivalents and Restricted Cash at End of the Period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||
| Cash Paid for Interest | $ | $ | ||||||
| Cash and Cash Equivalents | $ | $ | ||||||
| Restricted Cash | $ | $ | ||||||
| Total Cash and Cash Equivalents and Restricted Cash | $ | $ | ||||||
| Supplemental Schedule of Non-Cash Investing and Financing Activities | ||||||||
| Dividends Declared on Series D Preferred Stock | $ | $ | ||||||
| Non-Cash Financing of Insurance Premiums | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 6 |
SELECTIS HEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of the Business
Selectis Health, Inc (“Selectis” or “we” or the “Company”) owns and operates, through wholly-owned subsidiaries Assisted Living Facilities, Independent Living Facilities, and Skilled Nursing Facilities across the South and Southeastern portions of the US. In 2019, the Company shifted from leasing long-term care facilities to third-party, independent operators towards an owner operator model.
Prior to the Company changing its name to Selectis Health, Inc., the Company was known as Global Healthcare REIT, Inc. from September 30, 2013, to May 2021. Prior to this, the Company was known as Global Casinos, Inc. Global Casinos, Inc. operated two gaming casinos which were split-off and sold on September 30, 2013. Simultaneous with the split-off and sale of the gaming operations, the Company acquired West Paces Ferry Healthcare REIT, Inc. (“WPF”). WPF was merged into the Company in 2019.
In September 2021, the Company rebranded to Selectis Health, Inc., from Global Healthcare REIT, Inc. to better align with the current and future business model, which is to own and operate its facilities.
The Company acquires, develops, leases and manages healthcare real estate, provide financing to healthcare providers, and provide healthcare operations through our wholly-owned subsidiaries. Our portfolio is comprised of investments in the following healthcare segments: (i) senior housing (including independent and assisted living) and (ii) post-acute/skilled nursing. We will make investments within our healthcare segments using the following six investment products: (i) direct ownership of properties, (ii) debt investments, (iii) developments and redevelopments, (iv) investment management, (v) the Housing and Economic Recovery Act of 2008 (“RIDEA”), which represents investments in senior housing operations utilizing the structure permitted by RIDEA and (xi) owning healthcare operations.
Management’s Liquidity Plans and Going Concern
On August 27, 2014, FASB issued ASU 2014-05, Disclosure of Uncertainties about an Entity’s ability to Continue as a Going Concern, which requires management to assess a company’s ability to continue as a going concern within one year from financial statement issuance and to provide related footnote disclosures in certain circumstances. In accordance with ASU 2014-05, management’s analysis can only include the potential mitigating impact of management’s plans that have not been fully implemented as of the issuance date if (a) it is probable that management’s plans will be effectively implemented on a timely basis, and (b) it is probable that the plans, when implemented, will alleviate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.
The accompanying unaudited Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP applicable to a going concern. This presentation contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described below.
For
the nine months ended September 30, 2023, the Company had operating cash flows of $
| ● | Increasing revenue by increasing occupancy in the facilities and increasing Medicaid reimbursement rates; | |
| ● | Controlling operating expenses; and | |
| ● | Seeking additional capital through the issuance of debt or equity securities, or the sale of assets. |
The focus on opportunities within our current portfolio and future properties to acquire and operate, the settlement, refinance, and continued service of debt obligations, the potential funds generated from stock sales and other initiatives contributing to additional working capital should alleviate any substantial doubt about the Company’s ability to continue as a going concern as defined by ASU 2014-05. However, we cannot predict, with certainty, the outcome of our actions to generate liquidity and the failure to do so could negatively impact our future operations.
| 7 |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and in conjunction with the rules and regulations of the Securities Exchange Commission. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary to make the consolidated financial statements not misleading have been included. Operating results for the nine months ended September 30, 2023, are not necessarily indicative of the results that may be expected for the entire year. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Recently Issued Accounting Pronouncements
In September 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instrument (“ASU 2016-13”). ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 was effective for the Company beginning January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on the Company’s financial position, results of operations and cash flows.
The FASB and other entities issued new or modifications to, or interpretations of, existing accounting guidance during 2023. Management has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.
| 8 |
Basic earnings per share are based on the weighted-average number of shares of common stock outstanding. FASB ASC Topic 260, “Earnings per Share”, requires the Company to include additional shares in the computation of earnings per share, assuming dilution.
Diluted earnings per share are based on the assumption that all dilutive options and warrants were converted or exercised by applying the treasury stock method and that all convertible preferred stock were converted into common shares by applying the if-converted method. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period or at the time of issuance, if later, and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, the preferred dividends applicable to convertible preferred stock are added back to the numerator. The convertible preferred stock is assumed to have been converted at the beginning of the period or at time of issuance, if later, and the resulting common shares are included in the denominator.
We calculate basic earnings per share by dividing net income attributable to common stockholders (the “numerator”) by the weighted average number of common shares outstanding (the “denominator”) during the reporting period. Diluted earnings per share is calculated similarly but reflects the potential impact of outstanding options, warrants and other commitments to issue common stock, including shares issuable upon the conversion of convertible preferred stock outstanding, except where the impact would be anti-dilutive.
| Nine Months Ended | Three Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Numerator for basic earnings per share: | ||||||||||||||||
| Net Loss Attributable to Selectis Health, Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Series D Preferred Dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss Attributable to Common Stockholders - Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Numerator for diluted earnings per share: | ||||||||||||||||
| Net Loss Attributable to Common Stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Series D Preferred Dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss Attributable to Common Stockholders - Diluted | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Denominator for basic earnings per share: | ||||||||||||||||
| Weighted Average Common Shares Outstanding | ||||||||||||||||
| Denominator for diluted earnings per share: | ||||||||||||||||
| Weighted Average Common Shares Outstanding - Basic | ||||||||||||||||
| Effect of dilutive securities: | ||||||||||||||||
| Warrants | ||||||||||||||||
| Weighted Average Common Shares Outstanding - Diluted | ||||||||||||||||
| Net Loss per Share Attributable to Common Stockholders: | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Warrants
to purchase
| 9 |
Fair Value Measurements
The Company utilizes the methods of fair value measurement as described in ASC 820 to value its financial assets and liabilities. As defined in ASC 820, fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:
Level 1 – Quoted market prices in active markets for identical assets or liabilities at the measurement date.
Level 2 – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable and can be corroborated by observable market data.
Level 3 – Inputs reflecting management’s best estimates and assumptions of what market participants would use in pricing assets or liabilities at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The Company has no financial assets or financial liabilities that are required to be measured at fair value on a recurring basis as of September 30, 2023.
The carrying values of cash and cash equivalents, accounts payable, accrued liabilities and other short-term debt, approximate their fair value because of the short-term nature of these financial instruments. The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates.
Upon acquisition of real estate properties, the Company determines the total purchase price of each property and allocates this price based on the fair value of the tangible assets and intangible assets, if any, acquired and any liabilities assumed based on Level 3 inputs. These Level 3 inputs can include comparable sales values, discount rates, and capitalization rates from a third-party appraisal or other market sources.
| 10 |
3. OTHER CURRENT ASSETS
The
CARES Act provides an employee retention credit (“CARES Employee Retention Credit”), which is a refundable tax credit
against certain employment taxes of up to $
4. PROPERTY AND EQUIPMENT, NET
The gross carrying amount and accumulated depreciation of the Company’s property and equipment as of September 30, 2023, and December 31, 2022, are as follows:
| September 30, 2023 | December 31, 2022 | |||||||
| Land | $ | $ | ||||||
| Land Improvements | ||||||||
| Buildings and Improvements | ||||||||
| Furniture, Fixtures and Equipment | ||||||||
| Less Accumulated Depreciation | ( | ) | ( | ) | ||||
| Less Impairment | ( | ) | ( | ) | ||||
| $ | $ | |||||||
For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Depreciation Expense (excluding Intangible Assets) | $ | $ | ||||||
| 11 |
5. DEBT AND DEBT - RELATED PARTIES
The following is a summary of the Company’s debt outstanding as of September 30, 2023, and December 31, 2022:
| September 30, 2023 | December 31, 2022 | |||||||
| Senior Secured Promissory Notes | $ | $ | ||||||
| Senior Secured Promissory Notes - Related Parties | ||||||||
| Fixed-Rate Mortgage Loans | ||||||||
| Variable-Rate Mortgage Loans | ||||||||
| Other Debt, Subordinated Secured | ||||||||
| Other Debt, Subordinated Secured - Related Parties | ||||||||
| Other Debt, Subordinated Secured - Seller Financing | ||||||||
| Financed Insurance Premiums | ||||||||
| Debt and Debt – Related Parties, Gross | ||||||||
| Unamortized Discount and Debt Issuance Costs | ( | ) | ( | ) | ||||
| Debt and Debt – Related Parties, Net of Discount | $ | $ | ||||||
| As presented in the Consolidated Balance Sheets: | ||||||||
| Current Maturities of Long-Term Debt, Net | $ | $ | ||||||
| Short-Term Debt – Related Parties, Net | ||||||||
| Long-Term Debt, Net | ||||||||
| Long-Term Debt – Related Parties, Net | ||||||||
The
weighted average interest rate and term of our fixed rate debt are
Corporate Senior and Senior Secured Promissory Notes
The
senior secured notes were subject to annual interest rate of
Effective
June 27, 2023, pursuant to an Allonge and Modification Agreement a Majority in Interest of the senior secured note holders agreed to
extend the maturity date of the notes to
On
March 29, 2023, the Company entered into a short-term subordinated secured promissory note of $
| 12 |
Mortgage Loans and Lines of Credit Secured by Real Estate
Mortgage loans and other debts such as line of credit here are collateralized by all assets of each nursing home property and an assignment of its rents. Collateral for certain mortgage loans includes the personal guarantee of Christopher Brogdon, formerly but no longer a related party, or corporate guarantees. Mortgage loans for the periods presented consisted of the following:
| Number of | Total Face | Total Principal Outstanding as of | ||||||||||||||
| State | Properties | Amount | September 30, 2023 | December 31, 2022 | ||||||||||||
| Arkansas(1) | $ | $ | $ | |||||||||||||
| Georgia | $ | $ | $ | |||||||||||||
| Ohio | $ | $ | $ | |||||||||||||
| Oklahoma | $ | $ | $ | |||||||||||||
| $ | $ | $ | ||||||||||||||
| (1) |
Subordinated, Corporate and Other Debt
Other debt due at September 30, 2023 and December 31, 2022 includes unsecured notes payable issued to entities controlled by the Company used to facilitate the acquisition of the nursing home properties.
| Total Principal Outstanding as of | ||||||||||||||||
| Property | Face Amount | September 30, 2023 | December 31, 2022 | Stated Interest Rate | Maturity Date | |||||||||||
| Goodwill Nursing Home | $ | $ | $ | |||||||||||||
| Goodwill Nursing Home – Related Party | ||||||||||||||||
| Higher Call Nursing Center (1) | ||||||||||||||||
| $ | $ | $ | ||||||||||||||
| (1) |
| 13 |
The Company’s corporate debt as of September 30, 2023, and December 31, 2022 includes unsecured notes and notes secured by all assets of the Company not serving as collateral for other notes.
| Total Principal Outstanding as of | ||||||||||||||||
| Series | Face Amount | September 30, 2023 | December 31, 2022 | Stated Interest Rate | Maturity Date | |||||||||||
| 11% Senior Secured Promissory Notes | $ | $ | $ | |||||||||||||
| 11% Senior Secured Promissory Notes – Related Party | $ | |||||||||||||||
| $ | $ | $ | ||||||||||||||
6. STOCKHOLDERS’ EQUITY
Preferred Stock
During
the three and nine months ended September 30, 2023, the Company paid $
Common Stock
For the nine months ended September 30, 2023, the Company did not issue nor did it pay dividends on common stock.
| 14 |
Common Stock Warrants
As
of September 30, 2023, and December 31, 2022, the Company had
Number of Warrants | Weighted Average Exercise Price | |||||||
| Beginning Balance at January 1, 2023 | $ | |||||||
| Issued | ||||||||
| Expired | ( | ) | ||||||
| Ending Balance at September 30, 2023 | $ | | ||||||
On
July 1, 2023, the Company issued
7. FACILITY LEASES
The following table summarizes our leasing arrangements related to the Company’s healthcare facilities at September 30, 2023:
| Monthly Lease | ||||||||
| Facility | Income (1) | Lease Expiration | Renewal Option if any | |||||
| Goodwill Hunting LLC(1) | $ | |||||||
| (1) |
Cumulative
adjustments associated with the straight-line rent requirement are reflected in Prepaid Expenses and Other in the consolidated balance
sheets and totaled $
Future cash payments for rent to be received during the initial terms of the leases for the next five years and thereafter are as follows:
| As of September 30, | ||||
| 2023 (remaining) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total | $ | |||
| 15 |
8. COMMITMENTS AND CONTINGENCIES
General and Professional Liability Insurance and Lawsuits
The senior care industry has experienced significant increases in both the number of personal injury/wrongful death claims and in the severity of awards based upon alleged negligence by skilled nursing facilities and their employees in providing care to residents. The Company has been, and continues to be, subject to claims and legal actions that arise in the ordinary course of business, including potential claims related to patient care and treatment. The defense of these lawsuits may result in significant legal costs, regardless of the outcome, and can result in large settlement amounts or damage awards. The Company purchases insurance through third party providers that provides coverage for these claims.
There is certain additional litigation incidental to our business, none of which, based upon information available to date, would be material to our financial position, results of operations, or cash flows. In addition, the long–term care industry is continuously subject to scrutiny by governmental regulators, which could result in litigation or claims related to regulatory compliance matters.
Governmental Regulations
Laws and regulations governing the Medicare, Medicaid and other federal healthcare programs are complex and subject to interpretation. Management believes that it is following all applicable laws and regulations in all material respects. However, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties, and exclusions from the Medicare, Medicaid, and other federal healthcare programs.
9. RELATED PARTY TRANSACTIONS
The
Company has outstanding senior secured notes and subordinated secured debt with shareholders, members of the board of directors, and
affiliates of both. As of September 30, 2023 and December 31, 2022, there was outstanding related party debt of $
10. SUBSEQUENT EVENTS
The Company has evaluated all events or transactions that occurred after September 30, 2023 up through November 13, 2023, which is the date that the financial statements were available to be issued. There were no subsequent events which required adjustment or disclosure in the financial statements except the event described below.
| 16 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is Management’s Discussion and Analysis of Financial Condition and Results of Operations and should be read in conjunction with the interim financial statements and notes thereto contained in this report. This section contains forward-looking statements, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based. These forward-looking statements generally are identified by the words “believes,” “projects,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise. All forward-looking statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC.
Actual future results and trends may differ materially from expectations depending on a variety of factors discussed in our filings with the SEC. These factors include without limitation:
| ● | strategic business relationships; |
| ● | statements about our future business plans and strategies; |
| ● | anticipated operating results and sources of future revenue; |
| ● | organization’s growth; |
| ● | adequacy of our financial resources; |
| ● | development of markets; |
| ● | competitive pressures; |
| ● | changing economic conditions; |
| ● | expectations regarding competition from other companies; |
| ● | the duration and scope of the COVID-19 pandemic; |
| ● | the impact of the COVID-19 pandemic on occupancy rates and on the operations of the Company’s facilities and its operators/tenants; |
| ● | actions governments take in response to the COVID-19 pandemic, including the introduction of public health measures and other regulations affecting our properties and our operations and the operations of our operators/tenants; |
| ● | the effects of health and safety measures adopted by us and our operators/tenants in response to the COVID-19 pandemic; |
| ● | increased operational costs because of health and safety measures related to COVID-19; |
| ● | the impact of the COVID-19 pandemic on the business and financial conditions of our operators/tenants and their ability to pay rent; |
| ● | disruptions to our property acquisition and disposition activities due to economic uncertainty caused by COVID-19; and |
| ● | general economic uncertainty in key markets as a result of the COVID-19 pandemic and a worsening of global economic conditions or low levels of economic growth. |
| 17 |
Properties
As of September 30, 2023, we owned thirteen (13) long-term care facilities including a campus of three buildings in Tulsa, OK. The following table provides summary information regarding these facilities at September 30, 2023:
| Total Square Feet | # of Beds | |||||||||||||||||||||||||||
| Operating | Leased | |||||||||||||||||||||||||||
| Leased | Square | Square | Operating | Leased | ||||||||||||||||||||||||
| State | Properties | Operations | Operations | Feet | Feet | Beds | Beds | |||||||||||||||||||||
| Arkansas | 1 | - | 1 | - | 40,737 | - | 141 | |||||||||||||||||||||
| Georgia | 5 | 4 | 1 | 78,197 | 46,199 | 454 | 100 | |||||||||||||||||||||
| Ohio | 1 | 1 | - | 27,500 | - | 99 | - | |||||||||||||||||||||
| Oklahoma | 6 | 6 | - | 162,976 | - | 351 | - | |||||||||||||||||||||
| Total | 13 | 11 | 2 | 268,673 | 86,936 | 904 | 241 | |||||||||||||||||||||
Results of Operations
The following discussion of the financial condition, results of operations, cash flows, and changes in our financial position should be read in conjunction with our interim consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.
Nine Months Ended September 30, 2023, Compared to the Nine Months Ended September 30, 2022
Rental revenues for the nine months ended September 30, 2023 and 2022 totaled $475,643 and $469,938, respectively. The Company also had healthcare revenues of $25,493,545 for the nine months ended September 30, 2023, compared to $26,438,806 for the nine months ended September 30, 2022. Healthcare revenues decreased due to a decrease in occupancy. Our healthcare revenues will likely decrease as compared to 2022, due to a decrease in occupancy and a change in patient mix. Healthcare grant revenues for the nine months ended September 30, 2023 and 2022 totaled $1,610,753 and $2,891,463, respectively. The decrease in healthcare grant revenues is primarily due to a one-time $973,093 quality metric achievement grant during the nine months ended September 30, 2022. Also, the healthcare grant revenues received from the State of Oklahoma ceased in May 2023.
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General and administrative expenses were $7,510,881 and $5,329,475 for the nine months ended September 30, 2023 and 2022. The increase is primarily attributed to the contingent fees incurred for the receipt of CARES Employee Retention Credits and an increase in specialized professional services..
Property taxes, insurance, and other operating expenses totaled $23,633,389 and $21,192,559 for the nine months ended September 30, 2023 and 2022, respectively. This increase is attributed to an increase in operational headcount resulting in higher operational wages.
Expenses related to the provision for bad debt were $1,167,332 for the nine months ended September 30, 2023, and $783,524 for the nine months ended September 30, 2022. This increase is due to changes in the bad debt policy which has increased the provision for bad debt expense.
Depreciation and amortization expense totaled $1,235,446 and $1,348,645 for the nine months ended September 30, 2023, and 2022, respectively. This decrease is related to an increase in fully depreciated assets as compared to the same period in the prior year.
The Company had $1,493,923 of interest expense for the nine months ended September 30, 2023, and $1,438,629 interest expense for the nine months ended September 30, 2022.
The Company had income of $6,866,759 from employee retention credits for the nine months ended September 30, 2023, and $0 for the nine months ended September 30, 2022.
The Company had $256,347 of other income for the nine months ended September 30, 2023, and $135,468 for the nine months ended September 30, 2022. Management is recording the principal reduction payments made by the operator for the Arkansas facility as other income. We will continue to record this as the operator continues to satisfy the debt.
Three Months Ended September 30, 2023, Compared to the Three Months Ended September 30, 2022
Rental revenues for the three months ended September 30, 2023, and 2022 totaled $158,927 and $158,875, respectively. The Company also had healthcare revenue of $8,886,529 for the three months ended September 30, 2023, compared to $9,135,306 for the three months ended September 30, 2022. Healthcare revenues decreased due to a decrease in occupancy. Our healthcare revenues will likely decrease as compared to 2022, due to a decrease in occupancy and a change in patient mix. Healthcare grant revenues for the three months ended September 30, 2023 and 2022 totaled $0 and $287,804, respectively. The decrease in healthcare grant revenues is primarily due to grant revenue from the State of Oklahoma ceased in May 2023.
General and administrative expenses were $3,133,797 and $1,970,890 for the three months ended September 30, 2023 and 2022. The increase is primarily attributed to the contingent fees incurred for the receipt of CARES Employee Retention Credits and an increase in specialized professional services.
Property taxes, insurance, and other operating expenses totaled $7,698,266 and $7,227,718 for the three months ended September 30, 2023 and 2022, respectively. This increase is attributed to an increase in operational headcount resulting in higher operational wages.
Expenses related to the provision for bad debt were $269,197 for the three months ended September 30, 2023, and $252,050 for the three months ended September 30, 2022. This increase is due to changes in the bad debt policy which has increased the provision for bad debt expense.
| 19 |
Depreciation and amortization expense totaled $357,868 and $453,608 for the three months ended September 30, 2023, and 2022, respectively. This decrease is related to an increase in fully depreciated assets as compared to the same period in the prior year.
The Company had $408,211 of interest expense for the three months ended September 30, 2023, and $722,226 interest expense for the three months ended September 30, 2022. This decrease is related to refinancing mortgages during the year ended December 31, 2022.
The Company had $43,325 of other income for the three months ended September 30, 2023, and $53,582 of other income for the three months ended September 30, 2022. Management is recording the principal reduction payments made by the operator for the Arkansas facility as other income. We will continue to record this as the operator continues to satisfy the debt.
Liquidity and Capital Resources
Throughout its history, the Company has experienced shortages in working capital and has relied, from time to time, upon sales of debt and equity securities to meet cash demands.
At September 30, 2023, the Company had cash of $1,971,732 and restricted cash of $1,099,647. Our restricted cash is to be spent on insurance, taxes, repairs, and capital expenditures associated with Providence of Sparta Nursing Home, Warrenton Health and Rehab, or Southern Hills Rehab. Our continuing short-term liquidity requirements consisting primarily of operating expenses and debt service requirements, excluding balloon payments at maturity, are expected to be achieved from healthcare operations, rental revenues received, Employee Retention Credits received, and existing cash on hand.
Cash provided by operating activities was $2,390,891 for the nine months ended September 30, 2023, compared to cash used in operating activities of $650,648 for the nine months ended September 30, 2022.
Cash used in investing activities was $27,891 for the nine months ended September 30, 2023, compared to $330,769 for the nine months ended September 30, 2022.
Cash used in financing activities was $1,708,222, for the nine months ended September 30, 2023, compared to $1,051,525 for the nine months ended September 30, 2022.
In accordance with ASU 2014-15, the accompanying unaudited Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP applicable to a going concern. This presentation contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described below.
For the nine months ended September 30, 2023, the Company had operating cash flows of $2,390,891 and negative net working capital of $8.8 million. As a result of our losses and our projected cash needs, substantial doubt exists about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is contingent upon successful execution of management’s plan over the next twelve months to improve the Company’s liquidity and profitability, which includes, without limitation:
| ● | Increasing revenue by increasing occupancy in the facilities and increasing Medicaid reimbursement rates; | |
| ● | Controlling operating expenses; and | |
| ● | Seeking additional capital through the issuance of debt or equity securities, or the sale of assets. |
The focus on opportunities within our current portfolio and future properties to acquire and operate, the settlement, refinance, and continued service of debt obligations, the potential funds generated from stock sales and other initiatives contributing to additional working capital should alleviate any substantial doubt about the Company’s ability to continue as a going concern as defined by ASU 2014-05. However, we cannot predict, with certainty, the outcome of our actions to generate liquidity and the failure to do so could negatively impact our future operations.
The CARES Act provides an employee retention credit (“CARES Employee Retention Credit”), which is a refundable tax credit against certain employment taxes of up to $5,000 per employee for eligible employers. The tax credit is equal to 50% of qualified wages paid to employees during a quarter, capped at $10,000 of qualified wages per employee through December 31, 2020. Additional relief provisions were passed by the United States government, which extend and slightly expand the qualified wage caps on these credits through December 31, 2021. Based on these additional provisions, the tax credit is now equal to 70% of qualified wages paid to employees during a quarter, and the limit on qualified wages per employee has been increased to $10,000 of qualified wages per quarter. The Company qualified for the tax credit under the CARES Act for qualified wages for the years ended December 31, 2020 and 2021. In February 2023, the Company submitted filings for CARES Employee Retention Credits totaling $6,350,533 that are reported in the accompanying condensed consolidated balance sheet as of September 30, 2023 and in the accompanying statement of operations for the nine months ended September 30, 2023.
| 20 |
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that we consider material.
Critical Accounting Policies
Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements. Certain of these accounting policies are particularly important for an understanding of the financial position and results of operations presented in the consolidated financial statements set forth elsewhere in this report. These policies require the application of judgment and assumptions by management and, as a result, are subject to a degree of uncertainty. Actual results could differ as a result of such judgment and assumptions.
Impairment of Long-Lived Assets
When circumstances indicate the carrying value of property may not be recoverable, the Company reviews the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. This estimate considers factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition, and other factors. If impairment exists, due to the inability to recover the carrying amount of the property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property. Estimated fair value is determined with the assistance from independent valuation specialists using recent sales of similar assets, market conditions and projected cash flows of properties using standard industry valuation techniques.
Goodwill
Goodwill represents the excess of the cost of an acquired business over the amounts assigned to its net assets. Goodwill is not amortized but is tested for impairment at a reporting unit level on an annual basis or when an event occurs, or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Events or changes in circumstances that may trigger interim impairment reviews include significant changes in business climate, operating results, planned investments in the reporting unit, or an expectation that the carrying amount may not be recoverable, among other factors.
| 21 |
The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company determines it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, an impairment test is unnecessary. If an impairment test is necessary, the Company will estimate the fair value of its related reporting units. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is determined to be impaired, and the Company will proceed with recording an impairment charge equal to the excess of the carrying value over the related fair value.
Revenue Recognition
The Company’s leases may be subject to annual escalations of the minimum monthly rent required under each lease. The accompanying consolidated financial statements reflect rental income on a straight-line basis over the term of each lease.
Rent receivables and unbilled deferred rent receivables are carried net of an allowance for uncollectible amounts. An allowance is maintained for estimated losses resulting from the inability of certain tenants to meet the contractual obligations under their lease agreements. The Company also maintains an allowance for deferred rent lease receivables arising from the straight-line recognition of rents. Such allowances are charged to net against rental incomes.
When the lessee is the owner of any improvements, any lessee improvement allowance that is funded by the Company is treated as a lease incentive and amortized as a reduction of revenue over the lease term. As of September 30, 2023, and 2022, there were no deferred lease incentives recorded.
For our healthcare operations, we recognize revenue in accordance with ASC 606 whereby we apply the following steps:
| a. | Step 1: Identify the contract(s) with a customer | |
| b. | Step 2: Identify the performance obligations in the contract | |
| c. | Step 3: Determine the transaction price | |
| d. | Step 4: Allocate the transaction price to the performance obligations in the contract | |
| e. | Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation |
In accordance with ASC 606, estimated uncollectable amounts due from patients are generally considered implicit price concessions that are a direct reduction to net operating revenues.
Recently Adopted Accounting Pronouncements
In September 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instrument (“ASU 2016-13”). ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 was effective for the Company beginning January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on the Company’s financial position, results of operations and cash flows.
Recently Issued Accounting Pronouncements
The FASB and other entities issued new or modifications to, or interpretations of, existing accounting guidance during 2023. Management has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.
| 22 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives.
Our management, including our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based on this evaluation, our CEO and CFO concluded that the design and operation of our disclosure controls and procedures were not effective as of such date to provide assurance that information required to be disclosed by us in the reports that we file or submit under 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 management as appropriate, to allow timely decisions regarding disclosures.
Management noted the following deficiencies that we believe to be material weaknesses:
| ● | Inadequate design of information technology (IT) general and application controls resulting from inappropriate access given to certain individuals within finance, including the CFO and Controller; | |
| ● | Lack of segregation of duties in certain accounting and financial reporting processes including the initiation, processing, recording and approval of disbursements; and | |
| ● | Lack of a formal review process that includes multiple levels of review as well as timely review of accounts and reconciliations leading to material post-closing adjustments. |
In light of the material weaknesses described above, we performed additional analysis deemed necessary to ensure that our unaudited interim financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the periods presented. The Company plans to implement multi-level review in 2023, and management intends to work internally and with various third-parties to ensure we have the proper controls in place going forward.
There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of prior, current, and pending litigation of material significance to the Company, please see Note 8, Commitments and Contingencies, of this Form 10–Q.
Item 1A. Risk Factors
The COVID-19 pandemic has subjected our business, operations, and financial condition to several risks, including, but not limited to, those discussed below:
| ● | Risks Related to Revenue: The revenues from our operations and from our tenants are dependent on occupancy. All facilities must maintain a minimum viable resident count to ensure costs do not exceed revenues. In addition to the impact of increases in mortality rates on occupancy of our operating facilities, the ongoing COVID-19 pandemic has prevented prospective occupants and their families from visiting our facilities and limited the ability of new occupants to move into our facilities due to heightened move-in criteria and screening. Although the ongoing impact of the pandemic on occupancy remain uncertain, occupancy of our operating and triple-net properties could further decrease. Such a decrease could affect the net operating income of our operating properties and the ability of our triple-net operators to make contractual payments to us. |
| 23 |
| ● | Risks Related to Operator and Tenant Financial Condition: In addition to the risk of decreased revenue from tenant and operator payments, the impact of the COVID-19 pandemic creates a heightened risk of tenant and operator, bankruptcy, or insolvency due to factors such as decreased occupancy, medical practice disruptions resulting from stay-at-home orders, increased health and safety and labor expenses or litigation resulting from developments related to the COVID-19 pandemic. Although our operating lease agreements provide us with the right to evict a tenant, demand immediate payment of rent and exercise other remedies, the bankruptcy and insolvency laws afford certain rights to a party that has filed for bankruptcy or reorganization. A tenant, operator, in bankruptcy or subject to insolvency proceedings may be able to limit or delay our ability to collect unpaid rent in the case of a lease. In addition, if a lease is rejected in a tenant bankruptcy, our claim against the tenant may be limited by applicable provisions of the bankruptcy law. We may be required to fund certain expenses (e.g., real estate taxes and maintenance) to preserve the value of an investment property, avoid the imposition of liens on a property and/or transition a property to a new tenant. In some past instances, we have terminated our lease with a tenant and relet the property to another tenant; however, our ability to do so may be severely limited under current conditions due to the industry and macroeconomic effects of the COVID-19 pandemic. If we cannot transition a leased property to a new tenant because of the COVID-19 pandemic or for other reasons, we may take possession of that property, which may expose us to certain successor liabilities. Publicity about the operator’s financial condition and insolvency proceedings, particularly considering ongoing publicity related to the COVID-19 pandemic, may also negatively impact their and our reputations, decreasing customer demand and revenues. Should such events occur, our revenue and operating cash flow may be adversely affected. |
| ● | Risks Related to Operations: Across all of our properties, our operations and our tenants have incurred increased operational costs as a result of the introduction of public health measures and other regulations affecting our properties and our operations, as well additional health and safety measures adopted by us related to the COVID-19 pandemic, including increases in labor and property cleaning expenses and expenditures related to our efforts to procure PPE and supplies. Such operational costs may increase in the future based on the duration and severity of the pandemic or the introduction of additional public health regulations. Operators and tenants are also subject to risks arising from the unique pressures on seniors housing and medical practice employees during the COVID-19 pandemic. As a result of difficult conditions and stresses related to the COVID-19 pandemic, employee morale and productivity may suffer and additional pay, such as hazard pay, may not be sufficient to retain key operator and tenant employees. In addition, our operations may be adversely impacted if a significant number of our employees’ contract COVID-19. Although we continue to undertake extensive efforts to ensure the safety of our properties, employees, and residents and to provide operator support in this regard, the impact of the COVID-19 pandemic on our facilities could result in additional operational costs and reputational and litigation risk to us. As a result of the COVID- 19 pandemic, operator and tenant cost of insurance is expected to increase and such insurance may not cover certain claims related to COVID-19. Our exposure to COVID-19 related litigation risk may be increased if the operators or tenants of the relevant facilities are subject to bankruptcy or insolvency. In addition, we are facing increased operational challenges and costs resulting from logistical challenges such as supply chain interruptions, business closures and restrictions on the movement of people. |
| ● | Risks Related to Property Acquisitions and Dispositions: As a result of uncertainty regarding the length and severity of the COVID-19 pandemic and the impact of the pandemic on our business and related industries, our investments in and acquisitions of senior housing and health care properties, as well as our ability to transition or sell properties with profitable results, may be limited. We have a significant development portfolio and have not experienced significant delays or disruptions but may in the future. Such disruptions to acquisition, disposition and development activity may negatively impact our long-term competitive position. |
| ● | Risks Related to Liquidity: The COVID-19 pandemic and related public health measures implemented by governments worldwide, as well as current hostilities in the Middle East, have had severe global macroeconomic impacts and has resulted in significant financial market volatility. An extended period of volatility or a downturn in the financial markets could result in increased cost of capital. If our access to capital is restricted or our borrowing costs increase as a result of developments in financial markets relating to macroeconomic conditions, our operations and financial condition could be adversely impacted. In addition, a prolonged period of decreased revenue and limited acquisition and disposition activity operations could adversely affect our financial condition and long-term growth prospects and there can also be no assurance that we will not face credit rating downgrades. Future downgrades could adversely affect our cost of capital, liquidity, competitive position, and access to capital markets. |
| ● | Going Concern: For reasons more fully stated in this Report, our financial statements have been qualified due to the risk that we may not be able to continue as a going concern. Managements’ plans to improve our results of operations and liquidity may not be successful. |
The events and consequences discussed in these risk factors could, in circumstances we may not be able to accurately predict, recognize or control, have a material adverse effect on our business, growth, reputation, prospects, financial condition, operating results, cash flows, liquidity, ability to pay dividends and stock price. As the COVID-19 pandemic continues to adversely affect our operating and financial results, it may also have the effect of heightening many of the other risks described in this Report.
| 24 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
| 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002* |
| 31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002* |
| 32.1 | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
| 32.2 | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
| 101.INS | Inline XBRL Instance Document** |
| 101.SCH | Inline XBRL Schema Document** |
| 101.CAL | Inline XBRL Calculation Linkbase Document** |
| 101.LAB | Inline XBRL Label Linkbase Document** |
| 101.PRE | Inline XBRL Presentation Linkbase Document** |
| 101.DEF | Inline XBRL Definition Linkbase Document** |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* filed herewith
** furnished, not filed
| 25 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SELECTIS HEALTH, INC. f/k/a GLOBAL HEALTHCARE REIT, INC. | ||
| Date: November 13, 2023 | By: | /s/ Adam Desmond |
| Adam Desmond, Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 13, 2023 | By: | /s/ Adam Desmond |
| Adam Desmond, Chief Executive Officer | ||
| (Principal Accounting Officer) | ||
| 26 |
Exhibit 31.1
CERTIFICATION
I, Adam Desmond, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Selectis Health, Inc. | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 13, 2023 | /s/ Adam Desmond |
Adam Desmond, Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Adam Desmond, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Selectis Health, Inc/ f/k/a Global Healthcare REIT, Inc. | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 13, 2023 | /s/ Adam Desmond |
Adam Desmond, Chief Executive Officer (Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Selectis Health, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Adam Desmond, Chief Executive Officer (Principal Executive Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. Date: November 13, 2023 |
| /s/ Adam Desmond | |
| Adam Desmond, Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 32.2
Selectis Health, Inc.
Certification Pursuant to
18 U.S.C. Section 1350
(as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act Of 2002)
In connection with the Annual Report of Selectis Health, Inc. (the “Company”) on Form 10-Q for the quarter period ended September 30, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, Adam Desmond, Chief Executive Officer (Principal Accounting Officer) of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 13, 2023 |
| /s/ Adam Desmond | |
| Adam Desmond | |
Chief Executive Officer (Principal Accounting Officer) |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Revenue | ||||
| Total Revenue | $ 9,045,456 | $ 9,581,985 | $ 27,579,941 | $ 29,800,207 |
| Expenses | ||||
| Property Taxes, Insurance and Other Operating | 7,698,266 | 7,227,718 | 23,633,389 | 21,192,559 |
| General and Administrative | 3,133,797 | 1,970,890 | 7,510,881 | 5,329,475 |
| Provision for Bad Debts | 269,197 | 252,050 | 1,167,332 | 783,524 |
| Depreciation and Amortization | 357,868 | 453,608 | 1,235,446 | 1,348,645 |
| Total Expenses | 11,459,128 | 9,904,266 | 33,547,048 | 28,654,203 |
| (Loss) Income from Operations | (2,413,672) | (322,281) | (5,967,107) | 1,146,004 |
| Other (Income) Expense | ||||
| Loss on Extinguishment of Debt | 46,466 | |||
| Interest Expense, net | 408,211 | 722,226 | 1,493,923 | 1,438,629 |
| Income from Employee Retention Credits | (516,226) | (6,866,759) | ||
| Other Income | (43,325) | (53,582) | (256,347) | (135,468) |
| Total Other (Income) Expense | (151,340) | 668,644 | (5,629,183) | 1,349,627 |
| Net Loss | (2,262,332) | (990,925) | (337,924) | (203,623) |
| Series D Preferred Dividends | (7,500) | (7,500) | (22,500) | (22,500) |
| Net Loss Attributable to Common Stockholders | $ (2,269,832) | $ (998,425) | $ (360,424) | $ (226,123) |
| Net Loss per Share Attributable to Common Stockholders: | ||||
| Basic | $ (0.74) | $ (0.33) | $ (0.12) | $ (0.07) |
| Diluted | $ (0.74) | $ (0.33) | $ (0.12) | $ (0.07) |
| Weighted Average Common Shares Outstanding: | ||||
| Basic | 3,054,587 | 3,054,587 | 3,054,587 | 3,053,970 |
| Diluted | 3,054,587 | 3,054,587 | 3,054,587 | 3,053,970 |
| Rental [Member] | ||||
| Revenue | ||||
| Total Revenue | $ 158,927 | $ 158,875 | $ 475,643 | $ 469,938 |
| Health Care [Member] | ||||
| Revenue | ||||
| Total Revenue | 8,886,529 | 9,135,306 | 25,493,545 | 26,438,806 |
| Healthcare Grant Revenue [Member] | ||||
| Revenue | ||||
| Total Revenue | $ 287,804 | $ 1,610,753 | $ 2,891,463 | |
Condensed Consolidated Statements of Changes in Equity (Unaudited) - USD ($) |
Preferred Stock [Member]
Series A Preferred Stock [Member]
|
Preferred Stock [Member]
Series D Preferred Stock [Member]
|
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
Total |
|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2021 | $ 401,000 | $ 375,000 | $ 150,168 | $ 13,494,394 | $ (11,318,380) | $ 3,102,182 |
| Balance, shares at Dec. 31, 2021 | 200,500 | 375,000 | 2,998,361 | |||
| Series D Preferred Dividends | (7,500) | (7,500) | ||||
| Net Income Loss | 37,090 | 37,090 | ||||
| Common shares issued for debt | $ 2,560 | 252,440 | 255,000 | |||
| Common shares issued for debt, shares | 56,226 | |||||
| Loss on Forgiveness of Debt | 46,466 | 46,466 | ||||
| Balance at Mar. 31, 2022 | $ 401,000 | $ 375,000 | $ 152,728 | 13,793,300 | (11,288,790) | 3,433,238 |
| Balance, shares at Mar. 31, 2022 | 200,500 | 375,000 | 3,054,587 | |||
| Balance at Dec. 31, 2021 | $ 401,000 | $ 375,000 | $ 150,168 | 13,494,394 | (11,318,380) | 3,102,182 |
| Balance, shares at Dec. 31, 2021 | 200,500 | 375,000 | 2,998,361 | |||
| Net Income Loss | (203,623) | |||||
| Balance at Sep. 30, 2022 | $ 401,000 | $ 375,000 | $ 152,728 | 13,793,300 | (11,544,503) | 3,177,525 |
| Balance, shares at Sep. 30, 2022 | 200,500 | 375,000 | 3,054,587 | |||
| Balance at Mar. 31, 2022 | $ 401,000 | $ 375,000 | $ 152,728 | 13,793,300 | (11,288,790) | 3,433,238 |
| Balance, shares at Mar. 31, 2022 | 200,500 | 375,000 | 3,054,587 | |||
| Series D Preferred Dividends | (7,500) | (7,500) | ||||
| Net Income Loss | 750,212 | 750,212 | ||||
| Balance at Jun. 30, 2022 | $ 401,000 | $ 375,000 | $ 152,728 | 13,793,300 | (10,546,078) | 4,175,950 |
| Balance, shares at Jun. 30, 2022 | 200,500 | 375,000 | 3,054,587 | |||
| Series D Preferred Dividends | (7,500) | (7,500) | ||||
| Net Income Loss | (990,925) | (990,925) | ||||
| Balance at Sep. 30, 2022 | $ 401,000 | $ 375,000 | $ 152,728 | 13,793,300 | (11,544,503) | 3,177,525 |
| Balance, shares at Sep. 30, 2022 | 200,500 | 375,000 | 3,054,587 | |||
| Balance at Dec. 31, 2022 | $ 401,000 | $ 375,000 | $ 152,728 | 13,768,300 | (13,744,193) | 952,835 |
| Balance, shares at Dec. 31, 2022 | 200,500 | 375,000 | 3,054,587 | |||
| Series D Preferred Dividends | (7,500) | (7,500) | ||||
| Net Income Loss | 4,025,176 | 4,025,176 | ||||
| Balance at Mar. 31, 2023 | $ 401,000 | $ 375,000 | $ 152,728 | 13,768,300 | (9,726,517) | 4,970,511 |
| Balance, shares at Mar. 31, 2023 | 200,500 | 375,000 | 3,054,587 | |||
| Balance at Dec. 31, 2022 | $ 401,000 | $ 375,000 | $ 152,728 | 13,768,300 | (13,744,193) | 952,835 |
| Balance, shares at Dec. 31, 2022 | 200,500 | 375,000 | 3,054,587 | |||
| Net Income Loss | (337,924) | |||||
| Balance at Sep. 30, 2023 | $ 401,000 | $ 375,000 | $ 152,728 | 13,852,652 | (14,104,617) | 676,763 |
| Balance, shares at Sep. 30, 2023 | 200,500 | 375,000 | 3,054,587 | |||
| Balance at Mar. 31, 2023 | $ 401,000 | $ 375,000 | $ 152,728 | 13,768,300 | (9,726,517) | 4,970,511 |
| Balance, shares at Mar. 31, 2023 | 200,500 | 375,000 | 3,054,587 | |||
| Series D Preferred Dividends | (7,500) | (7,500) | ||||
| Net Income Loss | (2,100,768) | (2,100,768) | ||||
| Balance at Jun. 30, 2023 | $ 401,000 | $ 375,000 | $ 152,728 | 13,768,300 | (11,834,785) | 2,862,243 |
| Balance, shares at Jun. 30, 2023 | 200,500 | 375,000 | 3,054,587 | |||
| Series D Preferred Dividends | (7,500) | (7,500) | ||||
| Net Income Loss | (2,262,332) | (2,262,332) | ||||
| Issuance of Warrants | 84,352 | 84,352 | ||||
| Balance at Sep. 30, 2023 | $ 401,000 | $ 375,000 | $ 152,728 | $ 13,852,652 | $ (14,104,617) | $ 676,763 |
| Balance, shares at Sep. 30, 2023 | 200,500 | 375,000 | 3,054,587 |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||
| ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of the Business
Selectis Health, Inc (“Selectis” or “we” or the “Company”) owns and operates, through wholly-owned subsidiaries Assisted Living Facilities, Independent Living Facilities, and Skilled Nursing Facilities across the South and Southeastern portions of the US. In 2019, the Company shifted from leasing long-term care facilities to third-party, independent operators towards an owner operator model.
Prior to the Company changing its name to Selectis Health, Inc., the Company was known as Global Healthcare REIT, Inc. from September 30, 2013, to May 2021. Prior to this, the Company was known as Global Casinos, Inc. Global Casinos, Inc. operated two gaming casinos which were split-off and sold on September 30, 2013. Simultaneous with the split-off and sale of the gaming operations, the Company acquired West Paces Ferry Healthcare REIT, Inc. (“WPF”). WPF was merged into the Company in 2019.
In September 2021, the Company rebranded to Selectis Health, Inc., from Global Healthcare REIT, Inc. to better align with the current and future business model, which is to own and operate its facilities.
The Company acquires, develops, leases and manages healthcare real estate, provide financing to healthcare providers, and provide healthcare operations through our wholly-owned subsidiaries. Our portfolio is comprised of investments in the following healthcare segments: (i) senior housing (including independent and assisted living) and (ii) post-acute/skilled nursing. We will make investments within our healthcare segments using the following six investment products: (i) direct ownership of properties, (ii) debt investments, (iii) developments and redevelopments, (iv) investment management, (v) the Housing and Economic Recovery Act of 2008 (“RIDEA”), which represents investments in senior housing operations utilizing the structure permitted by RIDEA and (xi) owning healthcare operations.
Management’s Liquidity Plans and Going Concern
On August 27, 2014, FASB issued ASU 2014-05, Disclosure of Uncertainties about an Entity’s ability to Continue as a Going Concern, which requires management to assess a company’s ability to continue as a going concern within one year from financial statement issuance and to provide related footnote disclosures in certain circumstances. In accordance with ASU 2014-05, management’s analysis can only include the potential mitigating impact of management’s plans that have not been fully implemented as of the issuance date if (a) it is probable that management’s plans will be effectively implemented on a timely basis, and (b) it is probable that the plans, when implemented, will alleviate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.
The accompanying unaudited Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP applicable to a going concern. This presentation contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described below.
For the nine months ended September 30, 2023, the Company had operating cash flows of $2,390,891 and negative net working capital of $8.8 million. As a result of our losses and our projected cash needs, substantial doubt exists about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is contingent upon successful execution of management’s plan over the next twelve months to improve the Company’s liquidity and profitability, which includes, without limitation:
The focus on opportunities within our current portfolio and future properties to acquire and operate, the settlement, refinance, and continued service of debt obligations, the potential funds generated from stock sales and other initiatives contributing to additional working capital should alleviate any substantial doubt about the Company’s ability to continue as a going concern as defined by ASU 2014-05. However, we cannot predict, with certainty, the outcome of our actions to generate liquidity and the failure to do so could negatively impact our future operations.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and in conjunction with the rules and regulations of the Securities Exchange Commission. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary to make the consolidated financial statements not misleading have been included. Operating results for the nine months ended September 30, 2023, are not necessarily indicative of the results that may be expected for the entire year. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Recently Issued Accounting Pronouncements
In September 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instrument (“ASU 2016-13”). ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 was effective for the Company beginning January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on the Company’s financial position, results of operations and cash flows.
The FASB and other entities issued new or modifications to, or interpretations of, existing accounting guidance during 2023. Management has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.
Basic earnings per share are based on the weighted-average number of shares of common stock outstanding. FASB ASC Topic 260, “Earnings per Share”, requires the Company to include additional shares in the computation of earnings per share, assuming dilution.
Diluted earnings per share are based on the assumption that all dilutive options and warrants were converted or exercised by applying the treasury stock method and that all convertible preferred stock were converted into common shares by applying the if-converted method. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period or at the time of issuance, if later, and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, the preferred dividends applicable to convertible preferred stock are added back to the numerator. The convertible preferred stock is assumed to have been converted at the beginning of the period or at time of issuance, if later, and the resulting common shares are included in the denominator.
We calculate basic earnings per share by dividing net income attributable to common stockholders (the “numerator”) by the weighted average number of common shares outstanding (the “denominator”) during the reporting period. Diluted earnings per share is calculated similarly but reflects the potential impact of outstanding options, warrants and other commitments to issue common stock, including shares issuable upon the conversion of convertible preferred stock outstanding, except where the impact would be anti-dilutive.
Warrants to purchase 206,000 shares of common stock were outstanding during the three and nine months ended September 30, 2022, but were not included in the computation of diluted loss per share given that the Company is in a net loss position. Warrants to purchase 172,500 shares of common stock were issued on July 1, 2023, and were outstanding during the three and nine months ended September 30, 2023. The warrants were not included in the computation of diluted loss per share given that the Company is in a net loss position.
Fair Value Measurements
The Company utilizes the methods of fair value measurement as described in ASC 820 to value its financial assets and liabilities. As defined in ASC 820, fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:
Level 1 – Quoted market prices in active markets for identical assets or liabilities at the measurement date.
Level 2 – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable and can be corroborated by observable market data.
Level 3 – Inputs reflecting management’s best estimates and assumptions of what market participants would use in pricing assets or liabilities at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The Company has no financial assets or financial liabilities that are required to be measured at fair value on a recurring basis as of September 30, 2023.
The carrying values of cash and cash equivalents, accounts payable, accrued liabilities and other short-term debt, approximate their fair value because of the short-term nature of these financial instruments. The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates.
Upon acquisition of real estate properties, the Company determines the total purchase price of each property and allocates this price based on the fair value of the tangible assets and intangible assets, if any, acquired and any liabilities assumed based on Level 3 inputs. These Level 3 inputs can include comparable sales values, discount rates, and capitalization rates from a third-party appraisal or other market sources.
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OTHER CURRENT ASSETS |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
| OTHER CURRENT ASSETS | 3. OTHER CURRENT ASSETS
The CARES Act provides an employee retention credit (“CARES Employee Retention Credit”), which is a refundable tax credit against certain employment taxes of up to $5,000 per employee for eligible employers. The tax credit is equal to 50% of qualified wages paid to employees during a quarter, capped at $10,000 of qualified wages per employee through December 31, 2020. Additional relief provisions were passed by the United States government, which extend and slightly expand the qualified wage caps on these credits through December 31, 2021. Based on these additional provisions, the tax credit is now equal to 70% of qualified wages paid to employees during a quarter, and the limit on qualified wages per employee has been increased to $10,000 of qualified wages per quarter. The Company qualified for the tax credit under the CARES Act for qualified wages for the years ended December 31, 2020 and 2021. In February 2023, the Company submitted filings for CARES Employee Retention Credits totaling $6,350,533 that are reported in the accompanying statement of operations for the nine months ended September 30, 2023. The Company also received $516,226 in interest that is reported in the accompanying statement of operations for the three and nine months ended September 30, 2023. The Company has received $5,092,553 in CARES Employee Retention Credits as of September 30, 2023, leaving a remaining receivable balance of $1,257,980 that is reported in the accompanying condensed consolidated balance sheet as of September 30, 2023.
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PROPERTY AND EQUIPMENT, NET |
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| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT, NET | 4. PROPERTY AND EQUIPMENT, NET
The gross carrying amount and accumulated depreciation of the Company’s property and equipment as of September 30, 2023, and December 31, 2022, are as follows:
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DEBT AND DEBT - RELATED PARTIES |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEBT AND DEBT - RELATED PARTIES | 5. DEBT AND DEBT - RELATED PARTIES
The following is a summary of the Company’s debt outstanding as of September 30, 2023, and December 31, 2022:
The weighted average interest rate and term of our fixed rate debt are 3.83% and 12.39 years, respectively, as of September 30, 2023. The weighted average interest rate and term of our variable rate debt are 5.90% and 14.37 years, respectively, as of September 30, 2023.
Corporate Senior and Senior Secured Promissory Notes
The senior secured notes were subject to annual interest rate of 10% with an original maturity date of October 31, 2021. These notes were extended to June 30, 2023, and as consideration the Company modified the outstanding warrants to extend the life an additional 1.67 years. As a result of the warrant modification, the Company recorded the incremental increase in fair value of $844,425 as a debt discount which was amortized over the life of the notes.
Effective June 27, 2023, pursuant to an Allonge and Modification Agreement a Majority in Interest of the senior secured note holders agreed to extend the maturity date of the notes to December 31, 2024, relying upon an Agreement Among Lenders to which all noteholders are a party. As consideration effective July 1, 2023, the annual interest rate increased to 11% and the Company issued a new warrant for every $10 in principal totaling 172,500 of new warrants with an exercise price of $5 and an expiration date of December 31, 2024. As a result of the new warrants, the Company recorded the incremental increase in fair value of $84,352 as a debt discount which is being amortized over the life of the notes.
On March 29, 2023, the Company entered into a short-term subordinated secured promissory note of $501,006. This note accrued interest at 6.75% and originally matured on July 5, 2023. The Company extended this note to September 5, 2023, accruing interest at 7.5%. This note and all accrued interest was repaid on September 5, 2023.
Mortgage Loans and Lines of Credit Secured by Real Estate
Mortgage loans and other debts such as line of credit here are collateralized by all assets of each nursing home property and an assignment of its rents. Collateral for certain mortgage loans includes the personal guarantee of Christopher Brogdon, formerly but no longer a related party, or corporate guarantees. Mortgage loans for the periods presented consisted of the following:
Subordinated, Corporate and Other Debt
Other debt due at September 30, 2023 and December 31, 2022 includes unsecured notes payable issued to entities controlled by the Company used to facilitate the acquisition of the nursing home properties.
The Company’s corporate debt as of September 30, 2023, and December 31, 2022 includes unsecured notes and notes secured by all assets of the Company not serving as collateral for other notes.
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STOCKHOLDERS’ EQUITY |
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCKHOLDERS’ EQUITY | 6. STOCKHOLDERS’ EQUITY
Preferred Stock
During the three and nine months ended September 30, 2023, the Company paid $0 for Series D preferred stock dividends. Dividends of $7,500 and $22,500 were declared during the three and nine months ended September 30, 2023, respectively.
Common Stock
For the nine months ended September 30, 2023, the Company did not issue nor did it pay dividends on common stock.
Common Stock Warrants
As of September 30, 2023, and December 31, 2022, the Company had 172,500 and 206,000, respectively, of outstanding warrants to purchase common stock at a weighted average exercise price of $5.00 and a weighted average remaining term of years and years, respectively. The aggregate intrinsic value of common stock warrants outstanding as of September 30, 2023, and December 31, 2022 was $ and $, respectively. Activity for the nine months ended September 30, 2023, related to common stock warrants is as follows:
On July 1, 2023, the Company issued 172,500 of new warrants with an exercise price of $5 and an expiration date of December 31, 2024.
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FACILITY LEASES |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FACILITY LEASES | 7. FACILITY LEASES
The following table summarizes our leasing arrangements related to the Company’s healthcare facilities at September 30, 2023:
Cumulative adjustments associated with the straight-line rent requirement are reflected in Prepaid Expenses and Other in the consolidated balance sheets and totaled $146,740 and $117,716 as of September 30, 2023 and 2022, respectively.
Future cash payments for rent to be received during the initial terms of the leases for the next five years and thereafter are as follows:
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COMMITMENTS AND CONTINGENCIES |
9 Months Ended |
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Sep. 30, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | 8. COMMITMENTS AND CONTINGENCIES
General and Professional Liability Insurance and Lawsuits
The senior care industry has experienced significant increases in both the number of personal injury/wrongful death claims and in the severity of awards based upon alleged negligence by skilled nursing facilities and their employees in providing care to residents. The Company has been, and continues to be, subject to claims and legal actions that arise in the ordinary course of business, including potential claims related to patient care and treatment. The defense of these lawsuits may result in significant legal costs, regardless of the outcome, and can result in large settlement amounts or damage awards. The Company purchases insurance through third party providers that provides coverage for these claims.
There is certain additional litigation incidental to our business, none of which, based upon information available to date, would be material to our financial position, results of operations, or cash flows. In addition, the long–term care industry is continuously subject to scrutiny by governmental regulators, which could result in litigation or claims related to regulatory compliance matters.
Governmental Regulations
Laws and regulations governing the Medicare, Medicaid and other federal healthcare programs are complex and subject to interpretation. Management believes that it is following all applicable laws and regulations in all material respects. However, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties, and exclusions from the Medicare, Medicaid, and other federal healthcare programs.
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RELATED PARTY TRANSACTIONS |
9 Months Ended |
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Sep. 30, 2023 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY TRANSACTIONS | 9. RELATED PARTY TRANSACTIONS
The Company has outstanding senior secured notes and subordinated secured debt with shareholders, members of the board of directors, and affiliates of both. As of September 30, 2023 and December 31, 2022, there was outstanding related party debt of $750,000 in senior secured notes and $150,000 in subordinated secured debt. Interest is due and paid before the first day of the month. For the three and nine months ended September 30, 2022, related party interest expense incurred was $23,625 and $75,750, respectively. For the three and nine months ended September 30, 2023, related party interest expense incurred was $25,500 and $81,375, respectively. There were no other amounts due to or from related parties as of September 30, 2023 and December 31, 2022.
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SUBSEQUENT EVENTS |
9 Months Ended |
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Sep. 30, 2023 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | 10. SUBSEQUENT EVENTS
The Company has evaluated all events or transactions that occurred after September 30, 2023 up through November 13, 2023, which is the date that the financial statements were available to be issued. There were no subsequent events which required adjustment or disclosure in the financial statements except the event described below. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation
The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and in conjunction with the rules and regulations of the Securities Exchange Commission. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary to make the consolidated financial statements not misleading have been included. Operating results for the nine months ended September 30, 2023, are not necessarily indicative of the results that may be expected for the entire year. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission.
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| Principles of Consolidation | Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
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| Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements
In September 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instrument (“ASU 2016-13”). ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 was effective for the Company beginning January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on the Company’s financial position, results of operations and cash flows.
The FASB and other entities issued new or modifications to, or interpretations of, existing accounting guidance during 2023. Management has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.
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| Earnings per Share |
Basic earnings per share are based on the weighted-average number of shares of common stock outstanding. FASB ASC Topic 260, “Earnings per Share”, requires the Company to include additional shares in the computation of earnings per share, assuming dilution.
Diluted earnings per share are based on the assumption that all dilutive options and warrants were converted or exercised by applying the treasury stock method and that all convertible preferred stock were converted into common shares by applying the if-converted method. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period or at the time of issuance, if later, and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, the preferred dividends applicable to convertible preferred stock are added back to the numerator. The convertible preferred stock is assumed to have been converted at the beginning of the period or at time of issuance, if later, and the resulting common shares are included in the denominator.
We calculate basic earnings per share by dividing net income attributable to common stockholders (the “numerator”) by the weighted average number of common shares outstanding (the “denominator”) during the reporting period. Diluted earnings per share is calculated similarly but reflects the potential impact of outstanding options, warrants and other commitments to issue common stock, including shares issuable upon the conversion of convertible preferred stock outstanding, except where the impact would be anti-dilutive.
Warrants to purchase 206,000 shares of common stock were outstanding during the three and nine months ended September 30, 2022, but were not included in the computation of diluted loss per share given that the Company is in a net loss position. Warrants to purchase 172,500 shares of common stock were issued on July 1, 2023, and were outstanding during the three and nine months ended September 30, 2023. The warrants were not included in the computation of diluted loss per share given that the Company is in a net loss position.
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| Fair Value Measurements | Fair Value Measurements
The Company utilizes the methods of fair value measurement as described in ASC 820 to value its financial assets and liabilities. As defined in ASC 820, fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:
Level 1 – Quoted market prices in active markets for identical assets or liabilities at the measurement date.
Level 2 – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable and can be corroborated by observable market data.
Level 3 – Inputs reflecting management’s best estimates and assumptions of what market participants would use in pricing assets or liabilities at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The Company has no financial assets or financial liabilities that are required to be measured at fair value on a recurring basis as of September 30, 2023.
The carrying values of cash and cash equivalents, accounts payable, accrued liabilities and other short-term debt, approximate their fair value because of the short-term nature of these financial instruments. The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates.
Upon acquisition of real estate properties, the Company determines the total purchase price of each property and allocates this price based on the fair value of the tangible assets and intangible assets, if any, acquired and any liabilities assumed based on Level 3 inputs. These Level 3 inputs can include comparable sales values, discount rates, and capitalization rates from a third-party appraisal or other market sources. |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF BASIC AND DILUTED EARNING PER SHARE |
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PROPERTY AND EQUIPMENT, NET (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF PROPERTY PLANT AND EQUIPMENT | The gross carrying amount and accumulated depreciation of the Company’s property and equipment as of September 30, 2023, and December 31, 2022, are as follows:
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DEBT AND DEBT - RELATED PARTIES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF DEBT AND DEBT - RELATED PARTIES | The following is a summary of the Company’s debt outstanding as of September 30, 2023, and December 31, 2022:
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| SCHEDULE OF MORTGAGE LOAN DEBT |
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| SCHEDULE OF OTHER DEBT |
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| SCHEDULE OF UNSECURED NOTES AND NOTES SECURED BY ALL ASSETS | The Company’s corporate debt as of September 30, 2023, and December 31, 2022 includes unsecured notes and notes secured by all assets of the Company not serving as collateral for other notes.
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STOCKHOLDERS’ EQUITY (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF COMMON STOCK WARRANTS ACTIVITY |
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FACILITY LEASES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||
| SCHEDULE OF LEASING ARRANGEMENTS | The following table summarizes our leasing arrangements related to the Company’s healthcare facilities at September 30, 2023:
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| SCHEDULE OF FUTURE CASH PAYMENTS FOR RENT RECEIVED DURING INITIAL TERM OF LEASE | Future cash payments for rent to be received during the initial terms of the leases for the next five years and thereafter are as follows:
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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Cash used in operating activities | $ 2,390,891 | $ (650,648) |
| Working capital deficit | $ 8,800,000 | |
SCHEDULE OF BASIC AND DILUTED EARNING PER SHARE (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Sep. 30, 2022 |
Jun. 30, 2022 |
Mar. 31, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Numerator for basic earnings per share: | ||||||||
| Net Loss Attributable to Selectis Health, Inc. | $ (2,262,332) | $ (2,100,768) | $ 4,025,176 | $ (990,925) | $ 750,212 | $ 37,090 | $ (337,924) | $ (203,623) |
| Series D Preferred Dividends | (7,500) | (7,500) | (22,500) | (22,500) | ||||
| Net Loss Attributable to Common Stockholders | (2,269,832) | (998,425) | (360,424) | (226,123) | ||||
| Numerator for diluted earnings per share: | ||||||||
| Net Loss Attributable to Common Stockholders | (2,262,332) | (990,925) | (337,924) | (203,623) | ||||
| Series D Preferred Dividends | (7,500) | (7,500) | (22,500) | (22,500) | ||||
| Net Loss Attributable to Common Stockholders - Diluted | $ (2,269,832) | $ (998,425) | $ (360,424) | $ (226,123) | ||||
| Denominator for basic earnings per share: | ||||||||
| Weighted Average Common Shares Outstanding | 3,054,587 | 3,054,587 | 3,054,587 | 3,053,970 | ||||
| Denominator for diluted earnings per share: | ||||||||
| Weighted Average Common Shares Outstanding - Basic | 3,054,587 | 3,054,587 | 3,054,587 | 3,053,970 | ||||
| Effect of dilutive securities: | ||||||||
| Warrants | ||||||||
| Weighted Average Common Shares Outstanding - Diluted | 3,054,587 | 3,054,587 | 3,054,587 | 3,053,970 | ||||
| Net Loss per Share Attributable to Common Stockholders: | ||||||||
| Basic | $ (0.74) | $ (0.33) | $ (0.12) | $ (0.07) | ||||
| Diluted | $ (0.74) | $ (0.33) | $ (0.12) | $ (0.07) | ||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - shares |
Sep. 30, 2023 |
Dec. 31, 2022 |
Sep. 30, 2022 |
|---|---|---|---|
| Warrant [Member] | |||
| Warrants to purchase common stock | 172,500 | 206,000 | 206,000 |
OTHER CURRENT ASSETS (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2020 |
Feb. 28, 2023 |
Dec. 31, 2022 |
|
| Employee retention credits receivable | $ 1,257,980 | $ 1,257,980 | $ 6,350,533 | ||||
| Income from employee retention credits | 516,226 | 6,866,759 | |||||
| Employee retention credits | $ 5,092,553 | $ 5,092,553 | |||||
| CARES Act [Member] | |||||||
| Percentage of employee tax credit | 70.00% | 50.00% | |||||
| Wages paid | $ 10,000 | $ 10,000 | |||||
| Maximum [Member] | CARES Act [Member] | |||||||
| Employment tax | $ 5,000 | ||||||
SCHEDULE OF PROPERTY PLANT AND EQUIPMENT (Details) - USD ($) |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Property, Plant and Equipment [Line Items] | |||
| Property and Equipment, gross | $ 49,254,255 | $ 49,226,364 | |
| Less Accumulated Depreciation | (13,447,697) | (12,212,251) | |
| Less Impairment | (1,560,000) | (1,560,000) | |
| Property and Equipment, net | 34,246,558 | 35,454,113 | |
| Depreciation Expense (excluding Intangible Assets) | 1,235,446 | $ 1,348,645 | |
| Land [Member] | |||
| Property, Plant and Equipment [Line Items] | |||
| Property and Equipment, gross | 1,778,250 | 1,778,250 | |
| Land Improvements [Member] | |||
| Property, Plant and Equipment [Line Items] | |||
| Property and Equipment, gross | 329,055 | 329,055 | |
| Building Improvements [Member] | |||
| Property, Plant and Equipment [Line Items] | |||
| Property and Equipment, gross | 44,659,921 | 44,659,921 | |
| Furniture and Fixtures [Member] | |||
| Property, Plant and Equipment [Line Items] | |||
| Property and Equipment, gross | $ 2,487,029 | $ 2,459,138 | |
SCHEDULE OF MORTGAGE LOAN DEBT (Details) - Mortgage Loans [Member] |
Sep. 30, 2023
USD ($)
Integer
|
Dec. 31, 2022
USD ($)
|
||
|---|---|---|---|---|
| Short-Term Debt [Line Items] | ||||
| Number of Properties | Integer | 13 | |||
| Total Face Amount | $ 38,947,317 | |||
| Total Principal Outstanding | $ 34,554,062 | $ 35,448,139 | ||
| ARKANSAS | ||||
| Short-Term Debt [Line Items] | ||||
| Number of Properties | Integer | [1] | 1 | ||
| Total Face Amount | [1] | $ 5,000,000 | ||
| Total Principal Outstanding | [1] | $ 3,783,009 | 3,910,767 | |
| GEORGIA | ||||
| Short-Term Debt [Line Items] | ||||
| Number of Properties | Integer | 5 | |||
| Total Face Amount | $ 17,765,992 | |||
| Total Principal Outstanding | $ 15,599,345 | 16,019,874 | ||
| OHIO | ||||
| Short-Term Debt [Line Items] | ||||
| Number of Properties | Integer | 1 | |||
| Total Face Amount | $ 3,000,000 | |||
| Total Principal Outstanding | $ 2,583,400 | 2,649,400 | ||
| OKLAHOMA | ||||
| Short-Term Debt [Line Items] | ||||
| Number of Properties | Integer | 6 | |||
| Total Face Amount | $ 13,181,325 | |||
| Total Principal Outstanding | $ 12,588,308 | $ 12,868,098 | ||
| ||||
SCHEDULE OF MORTGAGE LOAN DEBT (Details) (Parenthetical) - Mortgage Loans [Member] - ARKANSAS |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
USD ($)
| |
| Short-Term Debt [Line Items] | |
| USDA guaranteed rate | 80.00% |
| Annual renewal fee payable | 0.25% |
| Repayment of loan | $ 114,255 |
SCHEDULE OF OTHER DEBT (Details) - Other Debt [Member] - USD ($) |
9 Months Ended | |||
|---|---|---|---|---|
Sep. 30, 2023 |
Dec. 31, 2022 |
|||
| Short-Term Debt [Line Items] | ||||
| Face Amount | $ 2,330,000 | |||
| Total, Principal Outstanding | 916,644 | $ 947,051 | ||
| Goodwill Nursing Home [Member] | ||||
| Short-Term Debt [Line Items] | ||||
| Face Amount | 2,030,000 | |||
| Total, Principal Outstanding | $ 741,000 | 741,000 | ||
| Stated Interest Rate | 13% Fixed | |||
| Maturity Date | Apr. 01, 2024 | |||
| Goodwill Nursing Home - Related Party [Member] | ||||
| Short-Term Debt [Line Items] | ||||
| Face Amount | $ 150,000 | |||
| Total, Principal Outstanding | $ 150,000 | 150,000 | ||
| Stated Interest Rate | 13% Fixed | |||
| Maturity Date | Nov. 30, 2025 | |||
| Higher Call Nursing Center [Member] | ||||
| Short-Term Debt [Line Items] | ||||
| Face Amount | [1] | $ 150,000 | ||
| Total, Principal Outstanding | [1] | $ 25,644 | $ 56,051 | |
| Stated Interest Rate | [1] | 8% Fixed | ||
| Maturity Date | [1] | Apr. 01, 2024 | ||
| ||||
SCHEDULE OF OTHER DEBT (Details) (Parenthetical) - Higher Call Nursing Center [Member] |
Sep. 30, 2023
USD ($)
|
|---|---|
| Debt Instrument, Face Amount | $ 150,000 |
| Debt Instrument, Interest Rate, Stated Percentage | 8.00% |
SCHEDULE OF UNSECURED NOTES AND NOTES SECURED BY ALL ASSETS (Details) - Unsecured Notes [Member] - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Dec. 31, 2022 |
|
| Short-Term Debt [Line Items] | ||
| Face Amount | $ 2,005,000 | |
| Total Principal Outstanding | 1,725,000 | $ 1,775,000 |
| 11% Senior Secured Promissory Note [Member] | ||
| Short-Term Debt [Line Items] | ||
| Face Amount | 1,255,000 | |
| Total Principal Outstanding | $ 975,000 | 1,025,000 |
| Stated Interest Rate | 11% Fixed | |
| Maturity Date | Dec. 31, 2024 | |
| 11% Senior Secured Promissory Note [Member] | Related Party [Member] | ||
| Short-Term Debt [Line Items] | ||
| Face Amount | $ 750,000 | |
| Total Principal Outstanding | $ 750,000 | $ 750,000 |
| Stated Interest Rate | 11% Fixed | |
| Maturity Date | Dec. 31, 2024 |
SCHEDULE OF COMMON STOCK WARRANTS ACTIVITY (Details) - Warrant [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
$ / shares
shares
| |
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |
| Number of Warrants, Beginning Balance | shares | 206,000 |
| Weighted Average Exercise Price, Beginning Balance | $ / shares | $ 5 |
| Number of Warrants, Issued | shares | 172,500 |
| Weighted Average Exercise Price, Issued | $ / shares | $ 5 |
| Number of Warrants, Expired | shares | (206,000) |
| Weighted Average Exercise Price, Expired | $ / shares | $ 5 |
| Number of Warrants, Ending Balance | shares | 172,500 |
| Weighted Average Exercise Price, Ending Balance | $ / shares | $ 5 |
STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
Jul. 01, 2023 |
|
| Class of Stock [Line Items] | |||||
| Preferred stock, dividend paid | $ 6,900 | $ 22,500 | |||
| Warrant [Member] | |||||
| Class of Stock [Line Items] | |||||
| Warrants to purchase common stock | 172,500 | 172,500 | 206,000 | 206,000 | |
| Exercise price of warrant | $ 5.00 | $ 5.00 | $ 5.00 | $ 5 | |
| Common stock warrants term | 1 year 3 months 29 days | 11 months 4 days | |||
| Aggregate intrinsic value of common stock warrants outstanding | $ 53,475 | $ 53,475 | $ 0 | ||
| Warrants issued | 172,500 | ||||
| Expiration date | Dec. 31, 2024 | ||||
| Dividend Declared [Member] | |||||
| Class of Stock [Line Items] | |||||
| Dividend, preferred stock | 7,500 | 22,500 | |||
| Series D Preferred Stock [Member] | |||||
| Class of Stock [Line Items] | |||||
| Preferred stock, dividend paid | $ 0 | $ 0 | |||
SCHEDULE OF LEASING ARRANGEMENTS (Details) - Goodwill Hunting LLC [Member] |
9 Months Ended | |||
|---|---|---|---|---|
|
Sep. 30, 2023
USD ($)
| ||||
| Defined Benefit Plan Disclosure [Line Items] | ||||
| Monthly lease income | $ 52,976 | [1] | ||
| Lease expiration date | Feb. 01, 2027 | |||
| Lease renewal option | Term may be extended for one additional five-year term. | |||
| ||||
SCHEDULE OF FUTURE CASH PAYMENTS FOR RENT RECEIVED DURING INITIAL TERM OF LEASE (Details) |
Sep. 30, 2023
USD ($)
|
|---|---|
| Leases [Abstract] | |
| 2023 (remaining) | $ 158,928 |
| 2024 | 643,401 |
| 2025 | 651,954 |
| 2026 | 660,665 |
| 2027 | 55,116 |
| Total | $ 2,170,064 |
FACILITY LEASES (Details Narrative) - USD ($) |
Sep. 30, 2023 |
Sep. 30, 2022 |
|---|---|---|
| Leases [Abstract] | ||
| Prepaid expense and other | $ 146,740 | $ 117,716 |
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Related Party Transaction [Line Items] | |||||
| Subordinated secured debt | $ 37,492,320 | $ 37,492,320 | $ 38,405,315 | ||
| Interest expense related party | 408,211 | $ 722,226 | 1,493,923 | $ 1,438,629 | |
| Related Party [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Interest expense related party | 25,500 | $ 23,625 | 81,375 | $ 75,750 | |
| Senior Secured Promissory Notes Related Parties [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Subordinated secured debt | 750,000 | 750,000 | 750,000 | ||
| Other Debt, Subordinated Secured - Related Parties [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Subordinated secured debt | $ 150,000 | $ 150,000 | $ 150,000 | ||