SunLink(SSY) - 2025 Q2 - Quarterly Report

Financial Performance - Net revenues for the three months ended December 31, 2024, were $7,935, a decrease of 6.8% compared to $8,510 for the same period in 2023[73] - For the six months ended December 31, 2024, net revenues were $15,858, down 7.1% from $17,065 in the prior year[73] - Operating loss for the three months ended December 31, 2024, was $1,012, representing a 133.7% increase from a loss of $433 in the same period of 2023[73] - Pharmacy net revenues decreased by $623 or 7% for the three months ended December 31, 2024, compared to the same period in 2023[73] - The company reported a loss from continuing operations before income taxes of $1,070 for the three months ended December 31, 2024, compared to a loss of $404 in the prior year[73] - The company recorded a net loss of $1,343 for the three months ended December 31, 2024, compared to a net loss of $3,075 for the same period in 2023, showing an improvement in net loss year-over-year[92] Costs and Expenses - Total costs and expenses for the three months ended December 31, 2024, were $8,947, slightly up from $8,943 in 2023, while for the six months, costs rose to $18,064 from $17,948[74] - The cost of goods sold as a percentage of net revenues increased to 58.2% for the three months ended December 31, 2024, compared to 56.0% in 2023, reflecting rising operational costs[75] Asset Sales and Losses - The company recorded a loss of $962 on the sale of Trace Regional Hospital assets during the year ended June 30, 2024[68] - The company completed the sale of Trace Extended Care Facility for approximately $7,100, resulting in a gain of $5,584 for the fiscal year ended June 30, 2024[68] - The company recorded a pre-tax gain of $665 from the sale of a minority equity investment in a subsidiary during the six months ended December 31, 2024[78] - The company sold its IT subsidiary in January 2025 for $150, with an impairment loss of $100 recorded at December 31, 2024[77] Mergers and Acquisitions - The merger agreement with Regional Health Properties, Inc. involves the issuance of 1,410,000 shares of Regional common stock and preferred stock[65] - The company announced a merger agreement with Regional Health Properties, Inc., which involves the issuance of 1,410,000 shares of common stock and preferred stock, subject to shareholder and regulatory approvals[96] Liquidity and Cash Position - The liquidity position of the company was $8,020 in unrestricted cash as of December 31, 2024, which is deemed adequate to support operations for the next twelve months[94] - The company has reported no material changes in cash obligations during the six months ended December 31, 2024[97] - Cash expenditures for the next twelve months are expected to align with those for the fiscal year ended June 30, 2024, subject to potential increases in operating and administrative costs[97] - There are ongoing uncertainties related to the aftereffects of the COVID-19 pandemic and asset sales that may impact future cash expenditures[97] Legal Expenses - Legal expenses to a related law firm amounted to $116,000 and $102,000 for the three months ended December 31, 2024 and 2023, respectively[99] - Total legal expenses to the same law firm for the six months ended December 31, 2024 and 2023 were $277,000 and $289,000, respectively[99] - Outstanding legal expenses to the law firm were $116,000 and $156,000 as of December 31, 2024, and June 30, 2024, respectively[99] Future Expectations and Commitments - The Company expects its pharmacy business to purchase approximately $800 million of capitalizable DME over the next twelve months[97] - A capital commitment of $50 million is allocated for upgrading the drug compounding facility[97] - Other capital expenditures for the pharmacy business are anticipated to be lower than those in fiscal years 2024 and 2023[97] - The Company has not engaged in transactions using derivative financial instruments, indicating minimal exposure to market risk[100] - The company recognized a valuation allowance of $8,517 against deferred tax assets as of December 31, 2024, indicating a lack of expected future taxable income[82]