RIGHT-OF-USE LEASE ASSETS AND OBLIGATIONS

3 Months Ended

Mar. 31, 2026

Right-of-use Lease Assets And Obligations

RIGHT-OF-USE LEASE ASSETS AND OBLIGATIONS

Note 11 RIGHT-OF-USE LEASE ASSETS AND OBLIGATIONS

Lease Agreements Between Myrtle and RHI and SCCH and RHI

Myrtle entered into a lease agreement with a subsidiary of RHI under which Myrtle agreed to lease facilities at BSF’s campus beginning June 14, 2024. The lease is for a term of one year with five annual options to renew for an additional year with an initial monthly base rental amount of $35,000 and annual rent increases equal to the greater of 3% and the consumer price index. As of June 14, 2025, the Company renewed the lease for an additional year and, accordingly, the monthly base rental amount has been increased to $36,050.

On June 1, 2024, SCCH entered into a “triple net” lease agreement with a subsidiary of RHI under which SCCH agreed to lease the BSF hospital facilities. The lease is for a term of one year with five annual options to renew for an additional year with an initial monthly base rental amount of $65,000 and annual rent increases equal to the greater of 3% and the consumer price index. As of June 1, 2025, the Company renewed the lease for an additional year and, accordingly, the monthly base rental amount has been increased to $66,950.

The Company has waived payment defaults on these facility leases through June 30, 2026.

Other Lease

Also, included in the table below is a motor vehicle leased by Vector.

For operating leases with terms greater than 12 months, including annual options that are expected to be renewed, the Company records the related right-of-use assets and right-of-use obligations at the present value of lease payments over the terms.

The Company uses an estimated borrowing interest rate at lease commencement as its interest rate, as its operating leases do not provide a readily determinable implicit interest rate.

The following table presents the Company’s lease-related assets and obligations at March 31, 2026 and December 31, 2025:

	Balance Sheet Classification	March 31, 2026			December 31, 2025

Assets:

Operating leases	Right-of-use assets	$	3,422,734		$	3,548,623

Liabilities:
Current:
Operating leases	Right-of-use lease obligations	$	534,660		$	499,351
Noncurrent:
Operating leases	Right-of-use lease obligations, noncurrent		3,027,977			3,174,549

Total right-of-use lease obligations		$	3,562,637		$	3,673,900

Weighted average remaining term of operating leases, including option periods expected to renew			4.25 years			4.50 years

Discount rate			22.0	%		22.0	%

The following table presents certain information related to lease expense for the right-of-use operating leases for the three months ended March 31, 2026 and 2025:

	2026		2025
	Three Months Ended
	March 31,
	2026		2025

Right-of-use operating leases amortization (1)	$	125,889	$	102,934
Right-of-use operating leases interest expense (1)	$	199,868	$	-
Right-of-use operating leases interest expense (2)	$	-	$	220,486
Right-of-use operating leases expense	$	-	$	220,486

(1)	Expense is included in selling, general and administrative expenses in the consolidated statement of operations.

(2)	Expense is included in interest expense in the consolidated statements of operations.

The following table presents supplemental cash flow information for the three months ended March 31, 2026 and 2025:

		2026				2025
Operating cash flows for right-of-use operating leases		$	274,066			$	368,555

Aggregate future minimum lease payments under right-of-use operating leases are as follows:

	Right-of-Use Operating Leases
Twelve months ending:
March 31, 2027	$	1,270,699
March 31, 2028		1,305,528
March 31, 2029		1,343,556
March 31, 2030		1,383,865
March 31, 2031		231,854
Thereafter		-
Total		5,535,502

Less interest		(1,972,865	)
Present value of minimum lease payments		3,562,637

Less current portion of right-of-use lease obligations		(534,660	)
Right-of-use lease obligations, net of current portion	$	3,027,977