REGIONAL HEALTH PROPERTIES, INC Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

Forward-looking statements

This Quarterly Report and certain information incorporated herein by reference
contain forward-looking statements and information within the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). This information includes
assumptions made by, and information currently available to management,
including statements regarding future economic performance and financial
condition, liquidity and capital resources, and management's plans and
objectives. In addition, certain statements included in this Quarterly Report,
in the Company's future filings with the SEC, in press releases, and in oral and
written statements made by us or with our approval, which are not statements of
historical fact, are forward-looking statements. Words such as "may," "could,"
"should," "would," "believe," "expect," "anticipate," "estimate," "intend,"
"seek," "plan," "project," "continue," "predict," "will," and other words or
expressions of similar meaning are intended by us to identify forward-looking
statements, although not all forward-looking statements contain these
identifying words. Forward-looking statements are based on the Company's current
expectations about future events or results and information that is currently
available to us, involve assumptions, risks, and uncertainties, and speak only
as of the date on which such statements are made.

All forward-looking statements are subject to the risks and uncertainties
inherent in predicting the future. The Company's actual results may differ
materially from those projected, stated or implied in these forward-looking
statements as a result of many factors, including the Company's critical
accounting policies and risks and uncertainties related to, but not limited to,
the operating results of the Company's tenants, the overall industry
environment, the Company's financial condition, and the impact of the COVID-19
pandemic on the Company's business. These and other risks and uncertainties are
described in more detail in the Annual Report and in Part II, Item 1A "Risk
Factors" of this Quarterly Report, as well as other reports that the Company
files with the SEC.

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

Insight

Regional Health Properties, Inc., a Georgia corporation is a self-managed real
estate investment company that invests primarily in real estate purposed for
long-term care and senior housing. We operate through two reportable segments:
Real Estate and Healthcare Services. Our Real Estate segment consists of real
estate investments in skilled nursing and senior housing facilities. We fund our
real estate investments primarily through: (1) operational cash flow, (2)
mortgages, and (3) sale of equity securities. Our Healthcare Services segment is
comprised of an entity set up to operate our facilities facilities as needed
under our Portfolio Stabilization measures.

While the Company is a self-managed real estate investment company, the Company,
when business conditions require, may undertake portfolio stabilization
measures, such as operating a previously leased facility. For more information
see " Recent Developments" below and Note 2 - Liquidity - Changes in Operational
Liquidity - Portfolio Stabilization Measures and Note 6 - Leases to the
Company's consolidated financial statements, which are included in Part I. Item
1 hereto.

Real Estate Portfolio

As of September 30, 2022, we had investments of approximately $73.0 million in
twelve health care real estate properties and nine leased nine properties. We
currently have eleven properties, consisting of 10 skilled nursing facilities
and one assisted facility, pursuant to triple-net leases and four facilities
subleased pursuant to triple-net leases to seven different tenants. In addition,
we operate five skilled nursing facilities and one assisted living facility via
management contracts.

Skilled nursing facilities receive payments primarily from Medicare, Medicaid, and Medicare. Medical properties are subject to state and federal regulatory oversight.

Senior Housing includes assisted living ("ALF") and memory care communities
("MC') which primarily attract private payment for services as well as Medicaid
Waiver payments from the state for residents who require assistance with
activities of daily living. Need-driven properties are subject to regulatory
oversight.

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RECENT DEVELOPMENTS

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

Date Name of facility Former operator Current operator

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

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

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

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

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

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




These properties are operated by two third-party property managers in
coordination with our internal management team in exchange for the receipt of a
management fee, and as such, we are not directly exposed to the credit risk of
the property managers in the same manner or to the same extent as we are to our
triple-net tenants. However, we rely on the property managers' personnel,
expertise, technical resources and information systems, proprietary information,
good faith and judgment to manage our facilities efficiently and effectively. We
also rely on the property managers to operate our facilities in compliance with
the terms of our management agreements and all applicable laws and regulations.
As industry conditions improve, the company may look to replace management
agreements with triple-net leases.

Wallet

The following table provides summary information on the number of facilities and licensed beds/units associated with the September 30, 2022:

                                 Owned                                Leased                                  Owned                                  Leased                             Managed For
                        Leased to Third Parties             Subleased to Third Parties               Managed by Third Parties               Managed by Third Parties                   Third Parties                         Total
                    Facilities         Beds/Units        Facilities           Beds/Units         Facilities           Beds/Units        Facilities           Beds/Units         Facilities         Beds/Units      Facilities     Beds/Units
State
Alabama                       1                  124                -                      -                1                   161                -                     -                  -                 -              2            285
Georgia                       2                  235                4                    474                1                   160                3                   358                  -                 -             10          1,227
North Carolina                1                  106                -                      -                -                     -                -                     -                  -                 -              1            106
Ohio                          4                  306                1                     99                -                     -                -                     -                  3               332              8            737
South Carolina                2                  180                -                      -                -                     -                -                     -                  -                 -              2            180
Total                        11                1,111                6                    573                1                   161                3                   358                  3               332             23          2,587
Facility Type
Skilled Nursing              10                1,016                5                    573                -                     -                3                   358                  2               249             20          2,248
Assisted Living               1                   95                -                      -                1                   161                -                     -                  -                 -              2            256
Independent Living            -                    -                -                      -                -                     -                -                     -                  1                83              1             83
Total                        11                1,111                5                    573                1                   161                3                   358                  3               332             23          2,587


(1) Thomasville the establishment is self-managed and therefore not included in the table

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————————————————– ——————————

The following table provides summary information regarding the number of
facilities and related licensed beds/units by operator affiliation as of
September 30, 2022:

Operator Affiliation                   Number of Facilities (1)      Beds / Units
C.R. Management ? ?                                            2               233
Aspire                                                         5               405
Peach Health Group³                                            3               266
Symmetry Healthcare?                                           2               180
Beacon Health Management?                                      1               126
Vero Health Management                                         1               106
Cavalier Senior Living                                         1               161
Empire²                                                        1               208
Subtotal                                                      17             1,845
Regional Health Managed                                        3               332
Regional Health Operated ³ ? ? ? ? ?                           5               518
Total                                                         24             2,587


(1)
Represents the number of facilities leased or subleased to separate tenants, of
which each tenant is an affiliate of the entity named in the table above.
(2)
Effective January 1, 2021, the Company entered into the PS Sublease with an
affiliate of Empire for the Powder Springs Facility.
(3)
Effective January 1, 2021, Regional began operating the Tara Facility and
entered into a Management Agreement with Vero Health under which Vero Health
provided management consulting services for the Tara Facility. Effective October
1, 2021, Peach Health will provide management consulting services for the Tara
Facility.
(4)
In April 2022, the Company entered into an Operations Transfer and Surrender
Agreement by and between Meadowood Operations, LLC and C.R. of Meadowood, LLC.
(5)
In May 2022, the Company entered into an Operations Transfer and Surrender
Agreement by and between LaGrange Operations, LLC and C.R. of LaGrange, LLC.
(6)
In May 2022, the Company entered into an Operations Transfer and Surrender
Agreement by and between Lumber City Operations, LLC and LC SNF, LLC.
(7)
In July 2022, the Company entered into an Operations Transfer and Surrender
Agreement by and between Thomasville Operations, LLC and C.R. of Thomasville,
LLC.
(8)
In August 2022, the Company entered into an Operations Transfer Agreement and
Surrender Agreement by and between Glenvue Operations, LLC and C.R. of Glenvue,
LLC.
(9)
In October, 2022, the parent company of Symmetry entered into an Operations
Transfer Agreement with Oak Hallow Health Management, LLC to transition the two
facilities in South Carolina.


For a more detailed discussion of the above information, see Note 6 - Leases to
the consolidated financial statements included in Part I, Item 1 herein.
Additionally, see "Portfolio of Healthcare Investments" included in Part I, Item
1 "Business" in the Annual Report.

Portfolio occupancy rate

The following table provides summary information on facility-level occupancy rates in our portfolio for the periods indicated:

                                   For the Twelve Months Ended
                     December 31,   March 31,   June 30,

Operational indicator(1) 2021 2022 2022 September 30, 2022
Occupancy (%)

           65.1%         65.1%      66.7%           67.0%


(1)

Excludes three facilities managed in Ohio.

Lease expiry

The following table provides summary information regarding our lease expirations for the years indicated as of September 30, 2022:

Annual licensed bed rental revenue¹

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                                                              Amount ($)
           Number of Facilities ²    Count      Percent         '000's         Percent (%)
2023                            1        50          2.8 %            313               2.4 %
2024                            1       126          6.9 %          1,006               7.8 %
2025                            2       269         14.8 %          2,294              17.7 %
2026                            0         -          0.0 %              -               0.0 %
2027                            5       608         33.4 %          3,408              26.4 %
2028                            4       355         19.5 %          2,933              22.7 %
2029                            1       106          5.8 %            557               4.3 %
Thereafter                      3       304         16.7 %          2,416              18.7 %
   Total                       17     1,818        100.0 %         12,926             100.0 %


(1)
Straight-line rent.
(2)
See Note 6 to the consolidated financial statements included in Part I, Item 1
herein for a discussion of lease terminations.

Operating results

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

                             Three Months Ended September 30,               

Nine month period ended September 30,

                                                          Percent                                             Percent
(Amounts in 000's)        2022              2021         Change (*)          2022              2021          Change (*)
Revenues:
Patient care
revenues               $     7,769       $    2,309            236.5 %    $    14,650       $     7,444             96.8 %
Rental revenues              3,000            4,136            (27.5 )%        10,326            11,980            (13.8 )%
Management fees                255              248              2.8 %            774               743              4.2 %
Other revenues                   6                9            (33.3 )%            20                84            (76.2 )%
Total revenues              11,030            6,702             64.6 %         25,770            20,251             27.3 %

Expenses:

Patient care expense         7,476            2,454            204.6 %         14,040             6,911            103.2 %
Facility rent
expense                      1,451            1,640            (11.5 )%         4,725             4,919             -3.9 %
Cost of management
fees                           140              153             (8.5 )%           459               468             (1.9 )%
Depreciation and
amortization                   600              651             (7.8 )%         1,819             1,953             (6.9 )%
General and
administrative
expenses                     1,378              980             40.6 %          3,432             2,975             15.4 %
Doubtful accounts
expense (recovery)           1,515               (1 )             NM            3,742                76               NM
Other operating
expenses                       441              219            101.4 %          1,409               755             86.6 %
Total expenses              13,001            6,096            113.3 %         29,626            18,057             64.1 %
(Loss) income from
operations                  (1,971 )            606               NM           (3,856 )           2,194               NM
Other (income)
expense:
Interest expense,
net                            564              669            (15.7 )%         1,855             2,022             (8.3 )%
Other (income)
expense, net                (2,164 )            122               NM           (1,088 )             839               NM
Total other (income)
expense, net                (1,600 )            645           (348.1 )%           767             2,715            (71.7 )%
Net loss               $      (371 )     $      (39 )             NM      $    (4,623 )     $      (521 )          787.3 %





* Not meaningful ("NM").

Three months completed September 30, 2022 and 2021

Patient care revenues-Patient care revenues for the Healthcare Services segment,
as a result of the Company operating the Tara, Meadowood, LaGrange, Lumber City,
Thomasville and Glenview Facilities, were $7.8 million for the three months
ended September 30, 2022, compared to $2.3 million for the same period in 2021.
The 236.5% increase is primarily due to the addition of five new facilities.

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Rental revenues-Rental revenue for our Real Estate Services segment decreased by
approximately $1.1 million to $3.0 million for the three months ended September
30, 2022, compared with $4.1 million for the same period in 2021. The 27.5%
decrease is due to less rent collected as the company is now operating five
additional facilities.

Patient care expense-Patient care expense was $7.5 million for the three months
ended September 30, 2022 compared with $2.5 million for the same period in 2021.
The current period expense increase of $5.0 million was primarily due to the
additional facilities we are operating.

Facility rent expense-Facility rent of $1.5 million for the three months ended
September 30, 2022 decreased 11% from 2021 due to the amendment to the Foster
Lease.

Depreciation and amortization-Depreciation and amortization was $0.6 million for
the three months ended September 30, 2022, compared to $0.7 million for the same
period in 2021. A greater amount of fully depreciated equipment and computer
related assets in the current year was the primary driver of the decrease.

General and administrative expenses-General and administrative expenses were at
$1.4 million for the three months ended September 30, 2022 compared with $1.0
million for the same period in 2021. The increase was primarily due to the
additional facilities we are operating.

                                             Three Months Ended September 30,
                                                                          Percent
(Amounts in 000's)                        2022             2021          Change (*)
General and administrative expenses:
Real Estate Services                   $       975       $    869               12.2 %
Healthcare Services                            403            111              263.1 %
Total                                  $     1,378       $    980               40.6 %

Bad Debt Expense – The current period expense $1.5 million is mainly due to the depreciation of the linear rent linked to the terminations of the Glenvue leases, Summer and georgetown.

Other operating expenses-Other operating expenses increased by approximately
$0.2 million, to $0.4 million for the three months ended September 30, 2022,
compared with $0.2 million for the same period in 2021. The increase was due to
professional and legal services related to operator transition transactions.

                                  Three Months Ended September 30,
                                                              Percent
(Amounts in 000's)            2022            2021           Change (*)
Other operating expenses:
Real Estate Services        $     (80 )     $     214             (137.4 )%
Healthcare Services               521               5                 NM
Total                       $     441       $     219              101.4 %


* Not meaningful ("NM")

Other expense, net-Other expense, net decreased by approximately $2.3 million,
to ($2.2) million, for the three months ended September 30, 2022. These expenses
are related to professional and legal services incurred for evaluation and
assistance with possible opportunities that improve the company's capital
structure. The expenses were offset by the $2.4 million gain recognized related
to the write-down of certain accounts payable balances for unclaimed property.

Nine month period ended September 30, 2022 and 2021

Patient care revenues-Patient care revenues for the Healthcare Services segment,
as a result of the Company operating the Tara, Meadowood, LaGrange, Lumber City,
Thomasville and Glenvue Facilities, were $14.7 million for the nine months ended
September 30, 2022, compared to $7.4 million in for the same period in 2021. The
96.8% increase is primarily due to the addition of five new facilities.

Rental revenues-Rental revenue for our Real Estate Services segment was $10.3
million for the nine months ended September 30, 2022, compared with $12.0
million for the same period in 2021. The decrease is due to less rent collected
as the company is now operating five additional facilities.

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Patient care expense-Patient care expense was $14.0 million for the nine months
ended September 30, 2022 compared with $6.9 million for the same period in 2021.
The current period expense increase was primarily due to the additional
facilities we are operating.

Rental charge for premises-Rent for the premises of $4.7 million decreased by 4% for the nine months ended September 30, 2022 compared to the same period in 2021. The decrease is due to the modification Home lease.

Depreciation and amortization-Depreciation and amortization was $1.8 million for
the nine months ended September 30, 2022, compared to $2.0 million for the same
period in 2021. A greater amount of fully depreciated equipment and computer
related assets in the current year was the primary driver of the decrease.

General and administrative expenses-General and administrative expenses were
increased 15.4% to $3.4 million for the nine months ended September 30, 2022,
compared with $3.0 million for the same period in 2021. The increase primarily
due to the additional facilities we are operating.

                                                Nine Months Ended September 30,
                                                                             Percent
(Amounts in 000's)                          2022              2021          Change (*)
General and administrative expenses:
Real Estate Services                     $     2,660       $     2,605              2.1 %
Healthcare Services                              772               370            108.6 %
Total                                    $     3,432       $     2,975             15.4 %


Doubtful accounts expense- The current period expense is due to a $3.7 million
provision for doubtful accounts recorded for non-payment of rent or from
reductions taken to gain cooperation in transitioning the facilities to a new
operator and the impairment of straight-line rent associated with the lease
terminations.

Other operating expenses - Other operating expenses increased by approximately
$0.6 million, to $1.4 million for the nine months ended September 30, 2022,
compared with $0.8 million for the same period in 2021. The increase was due to
professional and legal services related to operator transition transactions.

                                     Nine Months Ended September 30,
                                                                 Percent
(Amounts in 000's)               2022             2021          Change (*)
Other operating expenses:
Real Estate Services          $       555       $    746              (25.6 )%
Healthcare Services                   854              9                 NM
Total                         $     1,409       $    755               86.6 %


* Not meaningful ("NM")

Other expense, net-Other expense, net decreased by approximately $1.9 million,
to $1.1 million income, for the nine months ended September 30, 2022. These
expenses relate to professional and legal services incurred for evaluation and
assistance with possible opportunities that improve the Company's capital
structure. The expenses were offset by the $2.4 million gain recognized related
to the write-down of certain Accounts payable balances for unclaimed property.

Cash and capital resources

Insight

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

Management anticipates access to several sources of liquidity, including cash on
hand, cash flows from operations, and debt refinancing during the twelve months
following the date of this filing. At September 30, 2022, the Company had $2.4
million in unrestricted cash, including a Medicaid overpayment of $1.5 million
received on September 30, 2021, which the Company expects to repay in the near
future.

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During the nine months ended September 30, 2022, the Company's net cash used in
operating activities was $2.2 million primarily due to unpaid rent payments and
working capital needs for the facilities we now operate. Management anticipates
collecting a portion of the past due rent after the filing date and is currently
negotiating various methods to collect the remaining unpaid rent. Cash flow from
operations in the future will be subject to the operating performance of Peach
Health under the new management agreements as well as continued uncertainty of
the COVID-19 pandemic and its impact on the Company's business, financial
condition and results of operations.

From September 30, 2022Regional recorded a provision estimated at $0.6 million against a gross claim of $6.8 million.

During the three months ended September 30, 2022, the Company recognized
approximately $0.4 million of variable rent for the Powder Springs Facility. The
Tara Facility operations performance during the three months ended September 30,
2022 has been insufficient to cover any of the rent the Company is obligated to
pay under its lease.

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

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

Modification of the debt

In conjunction with the September 30, 2021 Coosa Facility refinance, the Company
and the Exchange Bank of Alabama executed the Meadowood Credit Facility that
extended the maturity date on $3.5 million Meadowood Credit Facility, as
amended, in current senior debt secured by the assets of Coosa and the assets of
Meadowood, other mortgage indebtedness from May 1, 2022 to October 1, 2026.
Additionally on August 17, 2021, the Company extended the maturity date on
approximately $0.5 million other debt from August 25, 2021 to August 25, 2023
(known as the "KeyBank Exit Notes"). For further information, see Note 8 - Notes
Payable and Other Debt to the consolidated financial statements included in Part
I, Item 1 herein.

The Company is current with all of its Notes payable and other debt as described
in Note 8 - Notes Payable and Other Debt. The Company has benefited from
various, now expired, stimulus measures made available to it through the CARES
Act enacted by Congress in response to the COVID-19 pandemic, which allowed for,
among other things: (i) a deferral of debt service payments on USDA loans to
maturity, (ii) an allowance for debt service payments to be made out of
replacement reserve accounts for HUD loans, and (iii) debt service payments to
be made by the SBA on all SBA loans.

In 2020, the Company began exploring alternatives to retire or refinance our
outstanding Series A Preferred Stock through privately negotiated transactions,
open market repurchases, redemptions, exchange offers, tender offers, or
otherwise. Costs associated with these efforts have been expensed as incurred in
Other expense, net and were $0.09 million and $0.2 million for the three months
ended September 30, 2022 and September 30, 2021, respectively.

In February 2022, the Company commenced an offer to exchange (the "Exchange
Offer") any and all of its outstanding 10.875% Series A Cumulative Redeemable
Preferred Shares (the "Series A Preferred Stock") for newly issued shares of the
Company's 12.5% Series B Cumulative Redeemable Preferred Shares (the "Series B
Preferred Stock"). On July 25, 2022, the company failed to receive the required
votes from the common shareholders. The company decided to terminate the
preferred exchange offer.

Suspension of Series A Preferred Share Dividends

On June 8, 2018, the Board indefinitely suspended quarterly dividend payments on
the Series A Preferred Stock. As of September 30, 2022, as a result of the
suspension of the dividend payment on the Series A Preferred Stock commencing
with the fourth quarter 2017 dividend period, the Company has $43.5 million of
undeclared preferred stock dividends in arrears. The

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

Compliance with covenants

From September 30, 2022the Company was in compliance with the various financial and administrative covenants under the Company’s outstanding credit instruments.

Assessment of the company’s ability to continue its activity

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

The Company concludes that it is probable that the Company will be able to meet its obligations arising from the date of issue of these consolidated financial statements within one year within the parameters established in the accounting guidelines.

For further information regarding the Company’s cash, see Note 2 – Cash and Note 8 – Notes payable and other debts, to the consolidated financial statements included in Part I, Item 1 herein.

Cash flow

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

                                                             Nine Months Ended September 30,
(Amounts in 000's)                                             2022         

2021

Net cash (used in) provided by operating activities ($2,171)

     $         4,112
Net cash used in investing activities                                (183 )                (119 )
Net cash used in financing activities                              (2,097 )              (1,859 )
Net change in cash and restricted cash                             (4,451 )               2,134
Cash and restricted cash at beginning of period                     9,848                 7,492
Cash and restricted cash, ending                          $         5,397   

$9,626

Nine month period ended September 30, 2022

Net cash used in operating activities-was approximately $2.2 million. The
negative cash flow from operating activities was primarily caused by nonpayment
of rent from Beacon and Symmetry and changes in working capital requirements,
mostly due to accounts receivable increase of $3.3 million, for the facilities
we operate.

Net cash used in investing activities was approximately $0.2 million. These capital expenditures were for computer hardware, software and furniture and fixtures for the Tara facility.

Net cash used in financing activities was approximately $2.1 million. The money was used to make routine payments totaling $1.2 million for our Senior debt obligations, $0.9 million for other debts.

Nine month period ended September 30, 2021

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Net cash provided by operating activities- for the nine months ended September
30, 2021 was approximately $4.1 million, primarily due to changes in working
capital, consisting of our collection of rent arrears from the Wellington Lease
Termination and losses from operations less noncash charges (primarily,
depreciation and amortization and lease revenue in excess of cash rent
received).

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

Net cash used in financing activities- was approximately $1.9 million for the
nine months ended September 30, 2021. This is the result of routine repayments
of approximately $1.7 million towards our senior debt obligations, $0.2 million
repayment of other debt as well as debt extinguishment and issuance costs.

Off-balance sheet arrangements

Guarantee

The Company subleased five facilities located in Ohio to the Aspire Sublessees,
formerly affiliated with MSTC Development Inc., pursuant to the Aspire
Subleases, whereby the Aspire Sublessees took possession of, and commenced
operating, the Aspire Facilities as subtenant. The Company agreed to indemnify
Aspire against any and all liabilities imposed on them as arising from the
former operator, capped at $8.0 million. The Company has assessed the fair value
of the indemnity agreements as not material to the financial statements at
September 30, 2022. For further information see Note 6 - Leases, to the
consolidated financial statements included in Part I, Item 1 herein and also and
Note 6 - Leases included in Part II, Item 8 of the Annual Report.

Critical accounting policies

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

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



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