Financial Difficulties and Liabilities - Over the past three years, four operators have faced financial or legal difficulties, resulting in non-payment of rent or bankruptcy, which could impact rental revenue significantly [118] - The company is currently a defendant in 10 professional and general liability actions, with claims seeking unspecified compensatory and punitive damages for alleged negligence or understaffing [137] - The self-insurance reserve for professional and general liability claims was $0.1 million as of December 31, 2022, and $0.2 million as of December 31, 2021, indicating potential exposure to significant liabilities [139] - The company maintains insurance for its Healthcare Services segment, but for claims prior to January 1, 2020, it is self-insured, which may lead to substantial liabilities if claims exceed reserves [139] - Changes in reimbursement rates from governmental and private payors could adversely affect the financial condition of tenants, impacting their ability to meet lease obligations [134] - The healthcare industry faces pressure from government and private payors to control costs, which may lead to reduced reimbursement rates for services provided by tenants [131] - The company may incur substantial additional expenses related to licensing and repositioning properties if tenants default or do not renew leases [123] - The COVID-19 pandemic has exacerbated financial difficulties for certain lessees, potentially leading to further rent deferrals or lease modifications unfavorable to the company [118] Financial Performance and Liquidity - The company has approximately $52.2 million in indebtedness as of December 31, 2022, with net principal repayments of approximately $1.8 million anticipated in the next twelve months [153] - The company reported a net loss of $6.9 million for the year ended December 31, 2022, and had $0.8 million in cash at that date [156] - Accumulated accrued and unpaid dividends on the Series A Preferred Stock amounted to $45.9 million as of December 31, 2022 [163] - The company is undertaking measures to increase liquidity, including refinancing debt, increasing lease revenue through acquisitions, and reducing general and administrative expenses [158] - The company relies on external sources of capital, and its ability to raise funds is influenced by market conditions and the performance of its capital stock [160] - The company’s real estate investments are relatively illiquid, limiting its ability to respond promptly to economic changes [152] Regulatory and Compliance Risks - The company faces risks associated with healthcare reform legislation that could adversely affect its operations and those of its tenants [143] - The company’s tenants are subject to extensive regulations, and non-compliance could impact their ability to make lease payments [146] - The company maintains various security controls, but there is a risk of data security incidents that could adversely affect its operations [147] - The company’s ability to incur additional debt is subject to compliance with financial covenants, and breaches could materially affect its operations [164] Dividend and Stock Issues - The company has $45.9 million of undeclared preferred stock dividends in arrears as of December 31, 2022 [173] - The quarterly dividend payment for the Series A Preferred Stock has been suspended indefinitely since the fourth quarter of 2017 [177] - The annual dividend rate on the Series A Preferred Stock will increase from 10.875% to 12.875% if the stock is not listed on a national exchange for 180 consecutive days [186] - The company is currently unable to pay dividends on its stock, including common and Series A Preferred Stock [176] - The ability of the company's subsidiaries to pay dividends is dependent on their earnings and may be restricted by agreements governing their indebtedness [174] Market and Management Risks - The market price of the common stock and Series A Preferred Stock has fluctuated significantly due to various factors, including economic conditions and investor interest [168] - The company may face challenges in securing indebtedness or refinancing existing indebtedness due to economic conditions and credit market turbulence [166] - The ownership and transfer restrictions in the company's Charter may prevent or restrict the acquisition or transfer of shares of common stock [178] - The company is subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act, which may strain its resources [187] - The loss of key management personnel could adversely affect the company's ability to manage its business and achieve its objectives [189] - Directors and officers own a significant number of shares, allowing them to influence major corporate actions such as mergers and reorganizations [191] - Control by directors may deter hostile takeovers and limit other shareholders' ability to approve transactions [191] - Smaller reporting companies are not required to disclose quantitative and qualitative market risk information [317]
Regional Health Properties(RHE) - 2022 Q4 - Annual Report