Description of Business

Regional Health Properties, Inc. (the "Company") is a healthcare company that owns, operates and invests in healthcare real estate and operating businesses focused on long-term care, senior housing and pharmacy services. Historically, the Company operated primarily as a healthcare real estate platform that leased skilled nursing and senior housing facilities to third-party operators under long-term triple-net lease arrangements. Over time, and particularly following recent strategic initiatives and acquisitions, the Company has evolved toward a more integrated healthcare operating model that combines healthcare real estate ownership with the direct operation of healthcare facilities and related healthcare services.

Through its subsidiaries, the Company owns and operates skilled nursing and senior housing communities that provide a range of healthcare and residential services, including sub-acute and post-acute skilled nursing care, intermediate nursing care, rehabilitative therapy, memory care, Alzheimer’s and dementia care and senior living services. In addition to operating healthcare facilities, the Company owns healthcare real estate that is leased to third-party operators pursuant to triple-net lease arrangements.

Since August 14, 2025, as part of the merger with SunLink Health Systems, the Company also acquired a pharmacy business located in Crowley, Louisiana that provides retail pharmacy services, institutional pharmacy services and durable medical equipment. The pharmacy business expands the Company’s participation across the care continuum and provides additional operating capabilities that complement its healthcare facility operations.

The Company currently operates across six states, with the majority of its facilities located in the Southeastern United States. The Company has three reportable segments: (i) Healthcare Services, which consists of the operation of skilled nursing and senior housing communities; (ii) Pharmacy Services, which consists of retail and institutional pharmacy services and durable medical equipment; and (iii) Real Estate, which consists of the leasing and subleasing of healthcare properties to third-party tenants. These segments reflect the Company’s evolution from a healthcare landlord into a more diversified owner-operator with both real estate and operating capabilities.

As of June 30, 2026, the Company’s common stock, Series A Redeemable Preferred Stock, 12.5% Series B Cumulative Redeemable Preferred Shares, and Series D 8% Cumulative Convertible Redeemable Participating Preferred Shares were quoted on the OTCQB under the symbols “RHEP,” “RHEPA,” “RHEPB,” and “RHEPZ,” respectively.

Basis of Presentation

The accompanying condensed consolidated financial statements ("consolidated financial statements") are prepared in conformity with United States ("U.S.") generally accepted accounting principles ("GAAP") in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"). The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the 2025 audited consolidated financial statements and notes thereto, which are included in the 2025 Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") on April 2, 2026.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported results of operations during the reporting period. Significant estimates include patient care revenues, rent revenues, allowance for doubtful accounts and credit losses, contractual allowances for Medicaid, Medicare, and managed care reimbursements, deferred tax valuation allowance, valuation of goodwill and other long-lived assets, and cash flow projections. Actual results could differ materially from those estimates.

Revenue Recognition and Allowance for Credit Losses

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, and ASC Topic 842, Leases, as applicable to the nature of the underlying revenue-generating activity. Revenue is recognized in an amount that reflects the consideration the Company expects to receive in exchange for goods or services transferred to customers or, in the case of lease arrangements, in accordance with the terms of the applicable lease agreements. The Company’s revenues are derived primarily from (i) patient care and other healthcare services provided through its Healthcare Services segment, (ii) pharmacy goods and services and durable medical equipment provided through its Pharmacy Services segment, and (iii) rental income from healthcare properties leased to third-party operators through its Real Estate segment. For revenue recognized under Topic 606, the Company evaluates the collectability of receivables and records allowances for credit losses and other valuation adjustments in accordance with ASC Topic 326, Financial Instruments—Credit Losses.

Patient Care Revenue. Revenue from the Healthcare Services segment is derived from services rendered to residents and patients at the Company’s skilled nursing and senior housing communities. The Company receives payment for these services from several sources, including: (i) the federal government under the Medicare program administered by the Centers for Medicare & Medicaid Services (“CMS”), (ii) state governments under their respective Medicaid and similar programs, (iii) commercial insurers and managed care organizations, and (iv) private pay residents and other individual patients. The transaction price is based on established billing rates, reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients, and other implicit price concessions. The Company recognizes revenue in the amount it expects to be entitled to receive in exchange for the services provided, including variable consideration for estimated retroactive reimbursement adjustments, if any. Performance obligations are satisfied over time as services are rendered to residents and patients. Amounts assessed as uncollectible from residents and patients are generally recorded as implicit price concessions and reflected as a direct reduction of patient care revenue.

Pharmacy Services Revenue. Revenue from the Pharmacy Services segment is derived primarily from the sale of pharmacy products and the provision of pharmacy-related services, including retail pharmacy services, institutional pharmacy services, and durable medical equipment. Revenue is recognized when control of the promised goods or services is transferred to the customer, generally on the date the applicable goods are dispensed or delivered and services are provided. Each prescription claim or sale represents a separate performance obligation. Significant portions of Pharmacy Services revenue are reimbursed by the federal Medicare Part D program and, to a lesser extent, state Medicaid programs and other third-party insurance payors. The Company records Pharmacy Services revenue at amounts billable to patients or payors, adjusted at the time of revenue recognition for estimates of variable consideration arising from anticipated differences between billed charges and amounts expected to be reimbursed. Accordingly, Pharmacy Services revenue and related receivables are reported at the net amount the Company expects to ultimately realize from patients, governmental programs, and other third-party payors.

Rental Revenue. Revenue from the Real Estate segment is recognized in accordance with ASC Topic 842, Leases. The Company’s triple-net leases generally provide for fixed rental payments and may include periodic and determinable increases in rent. Rental revenue is recognized on a straight-line basis over the non-cancelable lease term when collectability of substantially all lease payments is probable. The recognition of rental income on a straight-line basis may result in revenues recognized in advance of contractual cash receipts, creating straight-line rent receivables that are included in other assets on the consolidated balance sheets. If collectability of lease payments is no longer considered probable, the Company ceases recognition of rental income on a straight-line basis, limits future rental revenue recognition to cash received, and writes off or reserves against any existing straight-line rent receivables or other related balances, as appropriate.

Receivables and Allowance for Credit Losses. The Company measures financial assets carried at amortized cost, including trade accounts receivable, tenant receivables, straight-line rent receivables, and certain other financing-related receivables, at the net amount expected to be collected in accordance with ASC Topics 326 and 842, accordingly.

In estimating expected credit losses, the Company evaluates relevant available information, including historical collection experience, the age of receivables, current collection trends, the financial condition and credit quality of patients, customers, tenants, and payors, the nature and level of any collateral or guarantees, and current and reasonable and supportable forecasts of future economic conditions. Expected credit losses are measured over the contractual life of the asset, adjusted for expected prepayments when appropriate.

For patient care receivables in the Healthcare Services segment, the Company considers the payer mix, the aging of receivables, historical collections, and expected reimbursements from Medicare, Medicaid, managed care, and private-pay sources. Amounts due from residents and patients that are not expected to be collected are generally treated as implicit price concessions and recorded as reductions of patient care revenue. To the extent a receivable is established and collection subsequently

becomes not probable due to a change in circumstances, the Company records an allowance for credit losses or credit loss expense, as appropriate.

For Pharmacy Services receivables, the Company evaluates concession allowances and expected credit losses based on historical collection trends, customer and payor mix, the age and nature of receivables, and current and expected future economic conditions. Pharmacy accounts receivable are presented net of estimated variable consideration and expected credit losses, such that the reported balance reflects the amount expected to be ultimately collected.

For Real Estate receivables, including straight-line rent receivables and working capital or other tenant-related receivables, the Company assesses collectability based on the tenant’s payment history, financial condition, the strength of any guarantors, the value of underlying collateral, lease-level operating performance, and broader economic conditions. If facts and circumstances indicate that amounts due may not be collectible, the Company records an allowance for credit losses or, if collectability of lease payments is no longer probable, adjusts rental revenue recognition prospectively to a cash basis.

Changes in estimates regarding variable consideration, contractual adjustments, implicit price concessions, or expected credit losses are recognized in the period in which the change in estimate becomes known.

Inventory

As of June 30, 2026 and December 31, 2025, the Company had approximately $1.5 million and $1.4 million, respectively, in inventory of the Pharmacy Services segment. Inventory consists of pharmacy supplies, which are stated at the lower of cost (standard cost method), or net realizable value. Use of this method does not result in a material difference from the methods required by GAAP.

Prepaid Expenses and Other

As of June 30, 2026 and December 31, 2025, the Company had approximately $1.5 million and $1.6 million, respectively, in prepaid expenses and other, which primarily relate to insurance for the facilities we operate, directors’ and officers’ insurance, and mortgage insurance premiums.

Notes Receivable

Notes receivable are initially recognized when amounts previously recorded as accounts receivable are converted into promissory notes that evidence an unconditional obligation to pay a specified principal amount, generally together with interest, under defined repayment terms. Promissory notes are executed as an alternative to accounts receivable to formalize payment arrangements with customers. The Company's payment terms vary based on the specific facts and circumstances of each arrangement; however, promissory notes generally have maturities ranging from one to three years.

The Company evaluates outstanding notes receivable for expected credit losses at each reporting date. In estimating expected credit losses, management considers a variety of factors, including, but not limited to, payment history and current payment status, the financial condition and ability of the customer to repay, collateral or other credit enhancements, historical loss experience, and current and expected economic conditions, as applicable.We may establish reserves, accept modified payment terms, or book direct write-offs for any estimated credit loss with generally corresponding charge to credit loss expense in our Consolidated Statements of Operations and Comprehensive Loss. Subsequent changes in our estimate of credit losses may result in a corresponding increase or decrease to the credit loss expense in our Consolidated Statements of Operations and Comprehensive Loss.

Based on its evaluation as of June 30, 2026, management concluded that no allowance for expected credit losses on notes receivable was necessary, as all outstanding balances were considered collectible. Accordingly, no allowance for credit losses has been recorded related to notes receivable. The Company will continue to monitor the collectability of these balances each reporting period and will record an allowance for expected credit losses if warranted by changes in facts and circumstances.

Assets Held for Sale and Discontinued Operations

The Company may decide to sell properties that are held for use. The Company records these properties as assets held for sale when management has committed to a plan to sell the assets, actively seeks a buyer for the assets, and the consummation of the sale is considered probable and is expected within one year. Assets classified as held for sale are reported at the lower of their carrying value or their fair value, less estimated costs to sell. When the carrying value exceeds the fair value, less estimated costs to sell, an impairment expense is recognized. The Company estimates fair value, less estimated closing costs, based on

similar real estate sales transactions. These valuation assumptions are based on the three-level valuation hierarchy for fair value measurement and represent Level 2 and 3 inputs. Level 2 inputs are quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets in markets that are not active; and inputs other than quoted prices. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. See Note 5 – Assets Held for Sale for additional details on assets held for sale as of June 30, 2026 and December 31, 2025. Any debt related to assets held for sale or sold during the period are classified as debt related to assets held for sale for the current and prior periods presented in the accompanying consolidated financial statements.

Assets held for sale are presented as discontinued operations in all periods presented if the disposition represents a strategic shift that has, or will have, a major effect on the Company's financial position or results of operations. This includes the net gain (or loss) upon disposal of property held for sale, the property's operating results, depreciation and interest expense.

Accounts Payable

Other Liabilities

As of June 30, 2026 and December 31, 2025, the Company had approximately $2.0 million and $0.9 million, respectively in short-term other liabilities, which mainly represent short-term operating lease obligations.

As of June 30, 2026 and December 31, 2025, the Company had approximately $1.5 million and $1.6 million, respectively in long-term other liabilities, consisting of security lease deposits and sublease improvement funds.

Leases and Leasehold Improvements

The Company leases certain facilities and equipment in the normal course of business. At the inception of each lease, the Company performs an evaluation to determine whether the lease should be classified as an operating lease or finance lease. As of June 30, 2026, the Company's leased facility is accounted for as an operating lease. For operating leases that contain scheduled rent increases, the Company records rent expense on a straight-line basis over the term of the lease. Leasehold improvements are amortized over the shorter of the useful life of the asset or the lease term.

The Company assesses any new contracts or modification of contracts in accordance with ASC 842, Leases, to determine the existence of a lease and its classification. We are reporting revenues and expenses for real estate taxes and insurance where the lessee has not made those payments directly to a third party in accordance with their respective leases with us.

Insurance

The Company maintains insurance for professional and general liability claims for its Healthcare Services segment and Pharmacy segments and maintains coverage amounts that are required by its mortgage lenders. The Company elects to maintain a high deductible policy for working compensation. In addition, the Company maintains certain other insurance programs, including commercial general liability, property, casualty, directors’ and officers’ liability, crime, and employment practices liability.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the respective period. Diluted earnings per share is similar to basic net loss per share except that the net loss is adjusted by the impact of the weighted-average number of shares of common stock outstanding including potentially dilutive securities (such as options, warrants and non-vested common stock) when such securities are not

anti-dilutive. Potentially dilutive securities from options, warrants and unvested restricted shares are calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all options and warrants with exercise prices exceeding the average market value are used to repurchase common stock at market value. The incremental shares remaining after the proceeds are exhausted represent the potentially dilutive effect of the securities.

For the three and six months ended June 30, 2026 and 2025, diluted net loss per share attributable to common stockholders is the same as basic net loss per share since the effect of potentially dilutive securities is anti-dilutive given the net loss position of the Company. Securities outstanding that were excluded from the computation, because they would have been anti-dilutive were as follows:

For further information regarding the Company's Equity Plans, see Note 11 - Stock Based Compensation.

New Accounting Pronouncements Issued But Not Yet Effective

In November 2024, the FASB issued ASU 2024-03, Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03), which requires disclosure of incremental income statement expense information on an annual and interim basis, primarily through enhanced disclosures of specified costs and expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact that ASU 2024-03 will have on its consolidated financial statement disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270), which aims to: (i) specify form and content choices for interim financial statements and accompanying notes; (ii) add a comprehensive list of required disclosures from numerous Codification Topics to Topic 270; and (iii) introduce a disclosure principle requiring events since the end of the previous annual reporting period to be disclosed if they materially affect the entity. ASU 2025-11 is effective for interim periods in fiscal years beginning after December 14, 2027, with early adoption permitted. The Company is currently evaluating the impact that ASU 2025-11 will have on its consolidated financial statement disclosures.

No other new accounting pronouncement issued or effective has had, or is expected to have, a material impact on the Company's financial statements.