Overview

The Company is a self-managed real estate investment company that invests primarily in real estate purposed for long-term care and senior living. Our business primarily consists of leasing and subleasing healthcare facilities to third-party tenants. As of December 31, 2019, the Company owned, leased, or managed for third parties 24 facilities primarily in the Southeast.



The operators of the Company's facilities provide a range of health care and
related services to patients and residents, including skilled nursing and
assisted living services, social services, various therapy services, and other
rehabilitative and healthcare services for both long-term and short-stay
patients and residents.

The following table provides summary information regarding the number of facilities and related licensed beds/units as of December 31, 2019:





                                                   Owned                            Leased                       Managed for Third Parties                        Total
                                        Facilities       Beds/Units       Facilities       Beds/Units       Facilities              Beds/Units         Facilities       Beds/Units
State
Alabama                                           2              230                -                -                -                         -                2              230
Georgia                                           3              395                8              884                -                         -               11            1,279
North Carolina                                    1              106                -                -                -                         -                1              106
Ohio                                              4              291                1               99                3                       332                8              722
South Carolina                                    2              180                -                -                -                         -                2              180
Total                                            12            1,202                9              983                3                       332               24            2,517
Facility Type
Skilled Nursing                                  10            1,016                9              983                2                       249               21            2,248
Assisted Living                                   2              186                -                -                -                         -                2              186
Independent Living                                -                -                -                -                1                        83                1               83
Total                                            12            1,202                9              983                3                       332               24            2,517






The following table provides summary information regarding the number of
facilities and licensed beds/units by operator affiliation as of December 31,
2019:

                                           Number of
           Operator Affiliation          Facilities (1)      Beds / Units
           C.R. Management                             6               689
           Aspire                                      5               390
           Wellington Health Services                  2               342
           Peach Health                                3               266
           Symmetry Healthcare                         2               180
           Beacon Health Management                    2               212
           Vero Health                                 1               106
           Subtotal                                   21             2,185
           Regional Health Managed                     3               332
           Total                                      24             2,517




    (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. For a more detailed discussion, see Note 7 - Leases located


        in Part II, Item 8, "Financial Statements and Supplementary Data" and
        "Portfolio of Healthcare Investments" included in Part I, Item 1,
        "Business", each included in this Annual Report.




Current Significant Events: The Company is closely monitoring and regularly
communicating with all of the operators and management teams of its facilities
regarding the COVID-19 pandemic. Our tenants may be materially and adversely
affected by this pandemic. Such an outbreak or other adverse public health
developments could

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materially disrupt our tenants' businesses and operations. Such events could
cause issues such as temporary closures of nursing facilities, staff shortages
and supply chain disruptions which could affect our tenants' ability to make
rental payments pursuant to our leases and hence that could have a materially
adverse effect the Company's liquidity and capital resources.

As of March 23, 2020, two facilities the Company manages in Miami County, Ohio,
have reported "presumptive positive" cases of COVID-19. The Centers for Disease
Control & Prevention ("CDC") will provide final confirmation of the cases. The
Company is engaging in aggressive mitigation efforts in accordance with CDC and
Ohio Department of Health guidelines to protect the health and safety of
residents while respecting their rights. Employees at both locations are taking
several precautions as they care for residents, including, among other things,
monitoring themselves for symptoms upon leaving and returning home, and upon
arriving at and leaving the skilled nursing facility. They are also wearing
masks and other personal protective equipment while caring for residents.
Additionally as of March 23, 2020, none of our other operators have reported any
occurrences of COVID-19 in any of the buildings they are managing. Our operators
have also reported to us that they currently have adequate supply levels,
including appropriate quantities of Personal Protective Equipment (PPE) for
staff. Additionally as of the date of filing the Company has received no
additional information.

The COVID-19 pandemic is rapidly evolving. The information in this Annual Report
is based on data currently available to us and will likely change as the
pandemic progresses. As COVID-19 continues to spread throughout areas in which
we operate, we believe the outbreak has the potential to have a material
negative impact on our operating results and financial condition. The extent of
the impact of COVID-19 on our operational and financial performance will depend
on certain developments, including the duration and spread of the outbreak,
impact on our operators, employees and vendors, and impact on the facilities we
manage, all of which are uncertain and cannot be predicted. Given these
uncertainties, we cannot reasonably estimate the related impact to our business,
operating results and financial condition.

Resolved Significant Events: Prior to August 1, 2019, the continuation of our
business was dependent upon our ability: (i) to comply with the terms and
conditions under the Pinecone Credit Facility and the second new amended and
restated forbearance agreement, dated March 29, 2019, between the Company and
certain of its subsidiaries and Pinecone (the "Second A&R Forbearance
Agreement") as amended on June 13, 2019; and (ii) to refinance or obtain further
debt maturity extensions on the Quail Creek Credit Facility, neither of which
was entirely within the Company's control. These factors had created substantial
doubt about the Company's ability to continue as a going concern. The Company
repaid the Pinecone Credit Facility and Quail Creek Credit Facility on August 1,
2019.

On September 30, 2019, the Company fully extinguished all obligations under the
Pinecone Credit Facility when the Company and Pinecone entered into a waiver and
release agreement and the Company paid approximately $0.4 million to Pinecone to
fully extinguish the surviving obligations and provisions (the "Surviving
Obligations") of the Pinecone Credit Facility, which included (i) a right of
first refusal to provide first mortgage financing for any acquisition of a
healthcare facility by the Company for a period of three months following the
above repayment, and (ii) an exclusive option to refinance the Company's
existing first mortgage loan (the "Pinecone Financing Option"), with a balance
of $5.3 million at June 30, 2019, on the Company's 124-licensed bed skilled
nursing facility located in Alabama known as Coosa Valley Health Care, in each
case subject to the terms and conditions of the Pinecone Credit Facility.

Acquisitions and Dispositions



Pursuant to the PSA, between certain subsidiaries of the Company and MED, the
Company completed the Asset Sale. Under the PSA, the Company sold: (i) on August
28, 2019, the Northwest Facility; and (ii) on August 1, 2019, the Attalla
Facility, the College Park Facility, and the Quail Creek Facility.

In connection with the Asset Sale: (i) MED paid to the Company a cash purchase
price for the PSA Facilities equal to $28.5 million in the aggregate; (ii) the
Company incurred approximately $0.4 million in sales commission expenses and
$0.1 million for a building improvement credit; and (iii) the Company
transferred approximately $0.1 million in lease security deposits to MED.

On August 1, 2019, the Company used a portion of the proceeds from the Asset
Sale to repay approximately $21.3 million to Pinecone to extinguish all
indebtedness owed under the Pinecone Credit Facility, by the Company with an
original aggregate principal amount of $16.25 million which refinanced existing
mortgage debt, and to repay

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approximately $3.8 million to Congressional Bank to extinguish all indebtedness owed by the Company under the Quail Creek Credit Facility.



Effective January 15, 2019, the Company's leases of the Omega Facilities, which
leases were due to expire August 2025 and which Omega Facilities the Company
subleased to third party subtenants, was terminated by mutual consent of the
Company and the lessor(s) and sublessee(s) of the Omega Facilities. In
connection with the Omega Lease Termination, the Company transferred
approximately $0.4 million of its integral physical fixed assets at the Omega
Facilities to the lessor and on January 28, 2019 received from the lessor gross
proceeds of approximately $1.5 million, consisting of (i) a termination fee in
the amount of $1.2 million and (ii) approximately $0.3 million to satisfy other
net amounts due to the Company under the leases.

The Company made no acquisitions or dispositions during the year ended December 31, 2018.

For further information, see Note 1 - Summary of Significant Accounting Policies, Note 9 - Notes Payable and Other Debt and Note 10 - Acquisitions and Dispositions, to our audited consolidated financial statements in Part II, Item 8., "Financial Statements and Supplementary Data" in this Annual Report.

Divestitures



For information regarding the Company's divestitures, please refer to Note 11 -
Discontinued Operations, to our audited consolidated financial statements in
Part II, Item 8., "Financial Statements and Supplementary Data" in this Annual
Report.

The following table summarizes the activity of discontinued operations for the years ended December 31, 2019 and 2018:





                                       For the year ended December 31,
            (Amounts in 000's)            2019                   2018
            Recoveries              $           (626 )       $         (83 )
            Interest expense, net   $              -         $           9
            Net income              $            626         $          74




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Critical Accounting Policies



We prepare our consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"). The
preparation of these consolidated 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. We believe that the
following represents our critical accounting policies.

Revenue Recognition and Allowances

Triple-Net Leased Properties. The Company's triple-net leases provide for
periodic and determinable increases in rent. We recognize rental revenues under
these leases on a straight-line basis over the applicable lease term when
collectability is probable. Recognizing rental income on a straight-line basis
generally results in recognized revenues during the first half of a lease term
exceeding the cash amounts contractually due from our tenants, creating a
straight-line rent receivable that is included in straight-line rent receivable
on our consolidated balance sheets. In the event the Company cannot reasonably
estimate the future collection of rent from one or more tenant(s) of the
Company's facilities, rental income for the affected facilities will be
recognized only upon cash collection, and any accumulated straight-line rent
receivable will be reversed in the period in which the Company deems rent
collection no longer probable. Rental revenues for five facilities located in
Ohio (until operator transition on December 1, 2018) and one facility in North
Carolina are recorded on a cash basis. See Note 7 - Leases to our audited
consolidated financial statements in Part II, Item 8., "Financial Statements and
Supplementary Data" in this Annual Report)

Revenue from Contracts with Customers and Other Revenue. The Company recognizes
management fee revenues received as services are provided. The Company has one
Management Contract, with payment for each month of service received in full on
a monthly basis. The maximum penalty for service contract nonperformance under
the Management Contract is $50,000 per year, payable after the end of the year.
Further, the Company recognizes interest income from loans and investments,
using the effective interest method when collectability is probable. The Company
applies the effective interest method on a loan-by-loan basis.

Allowances. The Company assesses the collectability of our rent receivables,
including straight-line rent receivables. The Company bases its assessment of
the collectability of rent receivables and working capital loans to tenants on
several factors, including payment history, the financial strength of the tenant
and any guarantors, the value of the underlying collateral, and current economic
conditions. If the Company's evaluation of these factors indicates it is
probable that the Company will be unable to receive the rent payments or
payments on a working capital loan, the Company provides a reserve against the
recognized straight-line rent receivable asset or working capital loan for the
portion that we estimate may not be recovered. If the Company changes its
assumptions or estimates regarding the collectability of future rent payments
required by a lease or required from a working capital loan to a tenant, the
Company may adjust its reserve to increase or reduce the rental revenue or
interest revenue from working capital loans to tenants recognized in the period
the Company makes such change in its assumptions or estimates.

As of December 31, 2019 and December 31, 2018, the Company reserved for approximately $0.6 million and $1.4 million, respectively, of uncollected receivables. Accounts receivable, net totaled $1.0 million at December 31, 2019 compared with $1.0 million at December 31, 2018.



Leasing. On January 1, 2019, the Company adopted Accounting Standards Update
("ASU") ASU 2016-02, Leases, as codified in Accounting Standards Codification
("ASC") 842, using the non-comparative transition option pursuant to ASU
2018-11. Therefore the Company has not restated comparative period financial
information for the effects of ASC 842, nor made the new required lease
disclosures for comparative periods beginning before January 1, 2019. The
Company recognized both right of use assets and lease liabilities for leases in
which we lease land, real property or other equipment, electing the practical
expedient to maintain the prior operating lease classification. Effective
January 1, 2019, the Company assesses any new contracts or modification of
contracts in accordance with ASC 842 to determine the existence of a lease and
its classification. We are reporting revenues and expenses for real estate taxes
and insurance, prospectively where the lessee has not made those payments
directly to a third party in

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accordance with their respective leases with us. Additionally, we now expense
certain leasing costs, other than leasing commissions, as they are incurred.
Current GAAP provides for the deferral and amortization of such costs over the
applicable lease term. Adoption of ASU 2016-02 has not had a material effect on
the Company's consolidated financial statements, other than the initial balance
sheet impact of recognizing the right-of-use assets and the right-of-use lease
liabilities. Upon adoption, we recognized operating lease assets of $39.8
million on our consolidated balance sheet for the period ended March 31, 2019,
which represents the present value of minimum lease payments associated with
such leases. Also upon adoption, we recognized operating lease liabilities of
$41.5 million on our consolidated balance sheet for the period ended March 31,
2019. The present value of minimum lease payments was calculated on each lease
using a discount rate that approximated our incremental borrowing rate and the
current lease term and upon adoption we utilized a discount rate of 7.98% for
the Company's leases. See Note 1 - Summary of Significant Accounting Policies
and Note 7 - Leases to our audited consolidated financial statements in Part II,
Item 8., "Financial Statements and Supplementary Data" in this Annual Report)

Asset Impairment



We review the carrying value of long-lived assets that are held and used in our
operations for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
these assets is determined based upon expected undiscounted future net cash
flows from the operations to which the assets relate, utilizing management's
best estimate, assumptions, and projections at the time. If the carrying value
is determined to be unrecoverable from future operating cash flows, the asset is
deemed impaired and an impairment loss would be recognized to the extent the
carrying value exceeded the estimated fair value of the asset. We estimate the
fair value of assets based on the estimated future discounted cash flows of the
asset. Management has evaluated its long-lived assets and identified no material
asset impairment during the years ended December 31, 2019 and 2018.

We test indefinite-lived intangible assets for impairment on an annual basis or
more frequently if events or changes in circumstances indicate that the carrying
amount of the intangible asset may not be recoverable.

Goodwill represents the excess of the purchase price over the fair value of
identifiable net assets acquired in business combinations. Goodwill is subject
to annual testing for impairment. In addition, goodwill is tested for impairment
if events occur or circumstances change that would reduce the fair value of a
facility below its carrying amount. We perform annual testing for impairment
during the fourth quarter of each year (see Note 6 - Intangible Assets and
Goodwill to our audited consolidated financial statements in Part II, Item 8.,
"Financial Statements and Supplementary Data" in this Annual Report).



Extinguishment of Debt



The Company recognizes extinguishment of debt when the criteria for a troubled
debt restructure are not met and the change in the debt terms is considered
substantial. The Company calculates the difference between the reacquisition
price of the debt and the net carrying amount of the extinguished debt
(including deferred finance fees) and recognizes a gain or loss on the
consolidated statement of operations in the period of extinguishment.

Self-Insurance Reserve



The Company has self-insured against professional and general liability claims
since it discontinued its healthcare operations in connection with the
Transition. The Company evaluates quarterly the adequacy of its self-insurance
reserve based on a number of factors, including: (i) the number of actions
pending and the relief sought; (ii) analyses provided by defense counsel,
medical experts or other information which comes to light during discovery;
(iii) the legal fees and other expenses anticipated to be incurred in defending
the actions; (iv) the status and likely success of any mediation or settlement
discussions, including estimated settlement amounts and legal fees and other
expenses anticipated to be incurred in such settlement, as applicable; and (v)
the venues in which the actions have been filed or will be adjudicated. The
Company believes that most of the professional and general liability actions are
defensible and intends to defend them through final judgment unless settlement
is more advantageous to the Company. Accordingly, the self-insurance reserve
reflects the Company's estimate of settlement amounts for the pending actions,
if applicable, and legal costs of settling or litigating the pending actions, as
applicable. Because the self-insurance reserve is based on estimates, the amount
of the self-insurance reserve may not be sufficient to cover the settlement
amounts actually incurred in settling the pending actions, or the legal costs
actually incurred in settling or litigating the pending actions.

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Stock-Based Compensation

The Company follows the provisions of ASC Topic 718 "Compensation - Stock Compensation", which requires the use of the fair-value based method to determine compensation for all arrangements under which employees, non-employees, and others receive shares of stock or equity instruments (options, warrants or restricted shares). All awards are amortized on a straight-line basis over their vesting terms.

Income Taxes



As required by ASC Topic 740, "Income Taxes", we established deferred tax assets
and liabilities for temporary differences between the financial reporting basis
and the tax basis of our assets and liabilities at tax rates in effect when such
temporary differences are expected to reverse. When necessary, we record a
valuation allowance to reduce our net deferred tax assets to the amount that is
more likely than not to be realized. At December 31, 2019, the Company has a
valuation allowance of approximately $18.5 million. In future periods, we will
continue to assess the need for and adequacy of the remaining valuation
allowance. ASC 740 provides information and procedures for financial statement
recognition and measurement of tax positions taken, or expected to be taken, in
tax returns.

Among other changes, the Tax Reform Act reduced the US federal corporate tax
rate from 35% to 21% beginning in 2018. As a result of the Tax Reform Act, net
operating loss ("NOL") carry forwards generated in tax years 2018 and forward
have an indefinite life. For this reason, the Company has taken the position
that the deferred tax liability related to the indefinite lived intangibles can
be used to support an equal amount of the deferred tax asset related to the 2018
NOL carry forward generated. This resulted in the Company recognizing an income
tax benefit of approximately $0.04 million for the year ended December 31, 2018,
related to the use of our naked credit as a source of income to release a
portion of our valuation allowance.

In determining the need for a valuation allowance, the annual income tax rate,
or the need for and magnitude of liabilities for uncertain tax positions, we
make certain estimates and assumptions. These estimates and assumptions are
based on, among other things, knowledge of operations, markets, historical
trends and likely future changes and, when appropriate, the opinions of advisors
with knowledge and expertise in certain fields. Due to certain risks associated
with our estimates and assumptions, actual results could differ.

In general, the Company's tax returns filed for the 2016 through 2019 tax years
are still subject to potential examination by taxing authorities. We are not
currently under examination by any other major income tax jurisdiction.

Further information required by this Item is provided in Note 1 - Summary of
Significant Accounting Policies to our audited consolidated financial statements
included in Part II, Item 8., "Financial Statements and Supplementary Data" in
this Annual Report.

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Results of Operations

Years Ended December 31, 2019 and 2018



The following table sets forth, for the periods indicated, statement of
operations items and the amount and percentage 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 audited consolidated financial statements and the notes
thereto, which are included in Part II, Item 8., "Financial Statements and
Supplementary Data" in this Annual Report.



                                             Year Ended December 31,           Increase (Decrease)
(Amounts in 000's)                             2019             2018          Amount         Percent
Revenues:
Rental revenues                            $     19,043       $  20,902     $    (1,859 )        (8.9 )%
Management fees                                     995             949              46           4.8 %
Other revenues                                       96             195             (99 )       (50.8 )%
Total revenues                                   20,134          22,046          (1,912 )        (8.7 )%
Expenses:
Facility rent expense                             6,645           8,683          (2,038 )       (23.5 )%
Cost of management fees                             661             638              23           3.6 %
Depreciation and amortization                     3,438           4,634          (1,196 )       (25.8 )%
General and administrative expenses               3,192           3,692            (500 )       (13.5 )%
(Recovery) provision for doubtful
accounts                                           (281 )         4,132          (4,413 )      (106.8 )%
Other operating expenses                          1,017           1,059             (42 )        (4.0 )%
Total expenses                                   14,672          22,838          (8,166 )       (35.8 )%
Income (loss) from operations                     5,462            (792 )         6,254        (789.6 )%
Other expense (income):
Interest expense, net                             5,265           5,929            (664 )       (11.2 )%
Loss on extinguishment of debt                    2,458           5,234          (2,776 )       (53.0 )%
Gain on disposal of assets                       (7,141 )             -          (7,141 )          NM
Other expense                                         6              52             (46 )       (88.5 )%
Total other expense, net                            588          11,215         (10,627 )       (94.8 )%
Income (loss) from continuing operations
before
  income taxes                                    4,874         (12,007 )        16,881            NM
Income tax benefit                                    -             (38 )            38        (100.0 )%
Income (loss) from continuing operations          4,874         (11,969 )        16,843            NM
Income from discontinued operations, net
of tax                                              626              74             552         745.9 %
Net Income (loss)                          $      5,500       $ (11,895 )   $    17,395            NM

Year Ended December 31, 2019 Compared with Year Ended December 31, 2018:



Rental Revenues-Total rental revenue decreased by $1.9 million, or 8.9%, to
$19.0 million for the year ended December 31, 2019, compared with $20.9 million
for the year ended December 31, 2018. The decrease reflects approximately $2.2
million related to the Omega Lease Termination, $1.3 million related to the sale
of the PSA Facilities, approximately $0.6 million due to an amendment to the
subleases for two facilities located in Georgia subleased to affiliates of
Wellington Health Services and $0.2 million rent concession provided to
affiliates of Healthcare Management, LLC ("Symmetry" or "Symmetry Healthcare")
off-set by approximately $1.9 million rent received in the current year by
affiliates of Aspire for the five facilities located in Ohio (the "Ohio Beacon
Facilities") previously operated by and leased to affiliates (the "Ohio Beacon
Affiliates") of Beacon Health Management, LLC ("Beacon"), who stopped paying
rent for those facilities and the recognition of $0.5 million of property tax
income as a result of the Company's adoption on ASC 842. The Company recognizes
all rental revenues on a straight line rent accrual basis, except with respect
to the Ohio Beacon Affiliates in the prior year and the Company's 106-bed,
skilled nursing facility located in Sylvia, North Carolina known as the Mountain
Trace Facility, while operated by an affiliate of Symmetry for January and
February 2019 and the PSA Facilities sold during the third quarter of 2019, for
which rental revenue was recognized based on cash received. For further
information see Note 7 - Leases, to our audited consolidated financial
statements in Part II, Item 8., "Financial Statements and Supplementary Data" in
this Annual Report.

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Other Revenues-Other revenues decreased by $0.1 million, or 50.8%, to $0.1
million for the twelve months ended December 31, 2019, compared with $0.2
million for the year ended December 31, 2018 due to recognizing $0.1 million
less in interest revenue on a line of credit extended to affiliates of Peach
Health Group, LLC ("Peach Health").

Facility Rent Expense-Facility rent decreased by approximately $2.1 million, or
23.5%, to $6.6 million for the twelve months ended December 31, 2019, compared
with $8.7 million for the year ended December 31, 2018. The net decrease is due
to the Omega Lease Termination and an agreement with Covington Realty, LLC
("Covington"), whereby Covington among other items reduced our base rent for a
period of time. See Note 7 - Leases, to our audited consolidated financial
statements in Part II, Item 8., "Financial Statements and Supplementary Data" of
this Annual Report.

Depreciation and Amortization-Depreciation and amortization decreased by
approximately $1.2 million or 25.8%, to $3.4 million for the year ended
December 31, 2019, compared with $4.6 million for the year ended December 31,
2018. The decrease is primarily due to the reduction in depreciation from fully
depreciated equipment and computer related assets in the current year and the
cessation of depreciation and amortization on assets sold in August 2019. See
Note 10 - Acquisitions and Dispositions, to our audited consolidated financial
statements in Part II, Item 8., "Financial Statements and Supplementary Data" of
this Annual Report

General and Administrative-General and administrative costs decreased by $0.5
million or 13.5%, to $3.2 million for the year ended December 31, 2019, compared
with $3.7 million for the year ended December 31, 2018. The decrease is due to
approximately $0.6 million lower business consulting and legal expenses incurred
in relation to the various Pinecone Credit Facility forbearance agreements, a
continued decrease in auditing, accounting and other expenses of approximately
$0.1 million off-set by a non-recurring increase in employee related expenses of
approximately $0.2 million.

Provision for doubtful accounts-Provision for doubtful accounts expense
decreased by approximately $4.4 million, to a benefit of $0.3 million, for the
twelve months ended December 31, 2019, compared with $4.1 million for the year
ended December 31, 2018. The current year recovery is related to the collection
of the Ohio Beacon Affiliates lease termination payment plan, while the prior
year expense is due to the Ohio Beacon Affiliates notifying the Company of their
plan to cease operating our properties on June 30, 2018 and, the Company
recording allowances for balances owed by the Ohio Beacon Affiliates and
affiliates of Symmetry, and the associated write-off of the straight-line rent
receivable. During the three months ended September 30, 2019, the Company
released all of the remaining provision for the Ohio Beacon Affiliates' payment
plan due to their timely monthly payments, which was off-set by providing for
all but approximately $0.1 million of the outstanding balances due from
affiliates of Symmetry pursuant to non-payment of an agreement payment plan
reached on September 20, 2018, where they withheld rent over a deferred
maintenance dispute. In 2018, the Company had also recorded an allowance of
approximately $2.0 million on a $3.0 million note issued to Skyline Healthcare
LLC ("Skyline") in relation to their purchase of nine former facilities of the
Company located in Arkansas, due to Skyline's bankruptcy.

Interest Expense, net-Interest expense, net decreased by approximately $0.6
million or 11.2%, to $5.3 million for the year ended December 31, 2019, compared
with $5.9 million for the year ended December 31, 2018. The decrease is due to
the August 1, 2019, repayment of all amounts due under the Pinecone Credit
Facility and the Quail Creek Credit Facility. See Note 9 - Notes Payable and
Other Debt, to our audited consolidated financial statements in Part II,
Item 8., "Financial Statements and Supplementary Data." of this Annual Report



Loss on Debt Extinguishment-Loss on extinguishment of debt decreased by
approximately $2.7 million to $2.5 million for the year ended December 31, 2019,
compared with approximately $5.2 million for the year ended December 31, 2018.
The current period expense is due to the Second A&R Forbearance Agreement, the
repayment of all amounts due under the Pinecone Credit Facility and related
expenses amounting to approximately $2.1 million and $0.4 million in settlement
of the Surviving Obligations, while the prior period expense is due to
approximately $3.6 million due to the substantial change in debt terms pursuant
to a forbearance agreement dated September 6, 2018, known as the New Forbearance
Agreement with Pinecone, and pre-payment penalties of $0.2 million and $0.2
million in expensed deferred financing fees from the repayment of debt in
connection with the Pinecone Credit Facility., see Note 9 - Notes Payable and
Other Debt to our audited consolidated financial statements in Part II, Item 8.,
"Financial Statements and Supplementary Data." of this Annual Report.



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Gain on disposal of Assets- Gain on disposal of assets of $7.1 million for the
twelve months ended December 31, 2019, is comprised of $6.4 million due to the
sale of four of the Company's facilities in the current quarter and $0.7 million
from the Omega Lease Termination in the first quarter of 2019.

Income from Discontinued Operations- Income from discontinued operations
increased by approximately $0.5 million, or 745.9%, to a benefit of $0.6 million
for the twelve months ended December 31, 2019, compared with a benefit of $0.1
million for the same period in 2018. The increase is due to net favorable
adjustments to bad debt expense and lower professional and general legal
expenses as the Company nears completion of its legacy professional and general
liability claims and Transition vendor settlements and approximately a $0.1
million workers compensation insurance prior year's premium and deposit refund.

Liquidity and Capital Resources



The Company is undertaking measures to grow its operations, streamline its cost
infrastructure and otherwise increase liquidity by: (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 or raising capital through the issuance of securities after
restructuring of the Company's capital structure; (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
from the date of this filing. At December 31, 2019, the Company had $4.4 million
in unrestricted cash. During the twelve months ended December 31, 2019, the
Company generated positive cash flow from continuing operations of $3.0 million
and anticipates continued positive cash flow from operations in the future.

On June 8, 2018, the Board indefinitely suspended quarterly dividend payments
with respect to the Series A Preferred Stock. As of December 31, 2019, 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 $18.9
million of undeclared preferred stock dividends in arrears. The Board plans to
revisit the dividend payment policy with respect to the Series A Preferred Stock
on an ongoing basis. The Board believes that the dividend suspension will
provide the Company with additional funds to meet 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 consecutive dividends periods, the
annual dividend rate on the Series A Preferred Stock for the fifth and future
missed dividend period has increased to 12.875%, which is equivalent to $3.22
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. If and when the Company resumes payment of the dividend on the Series A
Preferred Stock, the Company expects that it will satisfy the dividend
requirements (including accrued dividends), if and when declared, from
internally generated cash flows or raising capital through the issuance of
securities after restructuring of the Company's capital structure. See Note 12 -
Common and Preferred Stock to our audited consolidated financial statements
included in Part II, Item 8., "Financial Statements and Supplementary Data" in
this Annual Report.

Debt

As of December 31, 2019, the Company had $55.4 million in indebtedness. The
Company anticipates net principal repayments of approximately $1.7 million
during the next twelve-month period which include $1.5 million of routine debt
service amortization, approximately $0.1 million payments on other non-routine
debt and a $0.1 million payment of bond debt.

On August 1, 2019, the Company used a portion of the proceeds from the Asset Sale to repay approximately $21.3 million to Pinecone to extinguish all indebtedness owed by the Company the Pinecone Credit Facility, and to repay approximately $3.8 the Quail Creek Credit Facility.

On September 30, 2019, the Company and Pinecone entered into a waiver and release agreement, and the Company paid approximately $0.4 million to Pinecone to fully extinguish the Surviving Obligations under the Pinecone Credit Facility.


                                       54

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The continuation of our business was dependent upon our ability: (i) to comply
with the terms and conditions under the Pinecone Credit Facility and the Second
A&R Forbearance Agreement as amended on June 13, 2019; and (ii) to refinance or
obtain further debt maturity extensions on the Quail Creek Credit Facility,
neither of which was entirely within the Company's control. These factors had
created substantial doubt about the Company's ability to continue as a going
concern. However, the going concern issue was resolved when Company repaid the
Pinecone Credit Facility and Quail Creek Credit Facility on August 1, 2019. See
Note - 9 Notes Payable and Other Debt and Note - 10 Acquisitions and
Dispositions to our audited consolidated financial statements included in
Part II, Item 8., "Financial Statements and Supplementary Data" in this Annual
Report.

Changes in Operational Liquidity



During the year ended December 31, 2018, eight of the Company's facilities were
in arrears' on their rent payments. Combined cash rental payments for all eight
facilities totaled $0.4 million per month, or approximately 21% of our
anticipated total monthly rental receipts. Five of these facilities were the
Ohio Beacon Facilities and were leased to the Ohio Beacon Affiliates. The Ohio
Beacon Affiliates who were ten months in arrears on rental payments, surrendered
possession of the Ohio Beacon Facilities upon the mutual lease termination on
December 1, 2018. Pursuant to the mutual lease termination, the Ohio Beacon
Affiliates agreed to pay a $0.675 million termination fee, payable in 18 monthly
installments of $37,500 commencing January 3, 2019 in full satisfaction of a
$0.5 million lease inducement and approximately $2.5 million in rent arrears and
approximately $0.6 million of other receivables. Of the remaining three
facilities who were in arrears on their rental payments and which were leased to
affiliates of Symmetry Healthcare, one such facility is located in North
Carolina (which the Company transitioned to a new operator on March 1, 2019) and
two such facilities are located in South Carolina. For additional information
with respect to such facilities, see Note 7 - Leases to our audited consolidated
financial statements included in Part II, Item 8., "Financial Statements and
Supplementary Data" in this Annual Report).

On September 20, 2018, the Company reached an agreement with Symmetry
Healthcare, pursuant to which Symmetry Healthcare agreed to a payment plan for
rent arrears and the Company agreed to an aggregate reduction of approximately
$0.6 million in annualized rent with respect to the three facilities leased to
the Symmetry Tenants and waived approximately $0.2 million in rent that was in
arrears with respect to such facilities, upon which the Symmetry Tenants
recommenced monthly rent payments with respect to such facilities of $0.1
million in the aggregate, starting with the September 1, 2018 amounts due.

On November 30, 2018, the Company subleased the Ohio Beacon Facilities to
affiliates (collectively, "Aspire Sublessees") of Aspire, management formerly
affiliated with MSTC Development Inc., pursuant to separate sublease agreements
(under Aspire's operation, the "Aspire Subleases"), providing that Aspire
Sublessees would take possession of and operate the Ohio Beacon Facilities
(under Aspire's operation, the "Aspire Facilities") as subtenant, effective
December 1, 2018. Annual anticipated minimum cash rent for the next twelve
months is approximately $1.8 million with provision for approximately $0.7
million additional cash rent based on each facility's prior month occupancy. For
additional information with respect to such facilities, see Note 7 - Leases to
our audited consolidated financial statements included in Part II, Item 8.,
"Financial Statements and Supplementary Data" in this Annual Report.

On January 15, 2019, but effective February 1, 2019, the Company agreed to a 10%
reduction in base rent, or in aggregate approximately an average $31,000 per
month cash rent reduction for the year ended December 31, 2019, and $48,000 per
month decrease in straight-line revenue, respectively, for two of the Company's
eight facilities located in Georgia, which are subleased to affiliates of
Wellington Health Services (the "Wellington Sublessees") under agreements dated
January 31, 2015, as subsequently amended (the "Wellington Subleases"). The
Wellington Sublessees are due to expire August 31, 2027, and relate to the
Company's 134-bed skilled nursing facility located in Thunderbolt, Georgia and
an 208-bed skilled nursing facility located in Powder Springs, Georgia combined.
Additionally, the Company modified the annual rent escalator to 1% per year from
the prior scheduled increase from 1% to 2% previously due to commence on the 1st
day of the sixth lease year. See Note - 19 Subsequent Events to our audited
consolidated financial statements included in Part II, Item 8., "Financial
Statements and Supplementary Data" in this Annual Report.


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





                                                             Year Ended December 31,
Amounts in (000's)                                          2019                2018

Net cash provided by operating activities-continuing operations

$       3,048

$ 3,079 Net cash used in operating activities-discontinued operations

                                                       (652 )            (1,731 )
Net cash provided by (used in) investing
activities-continuing operations                                3,821                (338 )
Net cash (used in) provided by financing
activities-continuing operations                               (4,631 )

356

Net cash used in financing activities-discontinued operations

                                                        (34 )              (239 )
Net Change in Cash and restricted cash                          1,552

1,127


Cash and restricted cash at beginning of period                 6,486

5,359


Cash and restricted cash at end of period               $       8,038       $       6,486




Year Ended December 31, 2019

Net cash provided by operating activities-continuing operations for the year
ended December 31, 2019, was approximately $3.0 million, consisting primarily of
our income from operations less changes in working capital, and noncash charges
(primarily gain on disposal of assets, depreciation and amortization, loss on
debt extinguishment, and lease revenue in excess of cash received). The slight
decrease primarily reflects lower rent receipts offset by a decrease in interest
payments, legal and consulting expenses related to the Pinecone Credit Facility
and increase in bad debt collections.

Net cash used in operating activities-discontinued operations for the year months ended December 31, 2019 was approximately $0.7 million, excluding non-cash proceeds and payments. This amount was to fund legal and associated settlement costs related to our legacy professional and general liability claims.



Net cash provided by investing activities-continuing operations for the year
ended December 31, 2019, was approximately $3.8 million. This is the result of
the receipt of $2.7 million net proceeds (excluding non-cash proceeds and
payments) from the sale of the PSA Facilities in the current quarter and the
$1.2 million Omega Lease Termination fee offset by $0.1 million capital
expenditures on building improvements.

Net cash used in financing activities-continuing operations was for the year
ended December 31, 2019, was approximately $4.6 million. Excluding non-cash
proceeds and payments, this was the result of routine repayments of
approximately $3.0 million of other existing debt obligations, $0.3 million
repayment of bonds principal and approximately $1.3 million in relation to
expenses and fees related to Pinecone forbearance agreements, repayment of the
Pinecone Credit Facility and settlement of the Surviving Obligations.

Net cash used in financing activities-discontinued operations for the year ended December 31, 2019 was for Medicaid and vendor note payments.

Year Ended December 31, 2018



Net cash provided by operating activities-continuing operations for the year
ended December 31, 2018, was approximately $3.1 million consisting primarily of
our income from continuing operations less changes in working capital, and other
noncash charges (primarily loss on debt extinguishment, depreciation and
amortization, and bad debt expense less lease revenue in excess of cash
received) all primarily the result of routine operating activity.

Net cash used in operating activities-discontinued operations for the year months ended December 31, 2018 was approximately $1.7 million, excluding non-cash proceeds and payments. This amount was to fund legal and associated settlement costs related to our legacy professional and general liability claims.


                                       56

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Net cash used in investing activities-continuing operations for the year ended
December 31, 2018, was approximately $0.3 million. This is the result of capital
expenditures on building improvements for three of the Company's properties.

Net cash provided by financing activities-continuing operations was for the year
ended December 31, 2018, was approximately $0.4 million, excluding non-cash
proceeds and payments. This is the result of $2.4 million new financing from
Pinecone and approximately $0.2 million refund of bond debt issuance fees,
offset by routine repayments of approximately $2.2 million of other existing
debt obligations and $0.1 million of Pinecone debt issuance expense.

Net cash used in financing activities-discontinued operations for the year ended December 31, 2018 was approximately $0.2 million payments for Medicaid and vendor notes.

Notes Payable and Other Debt

Notes payable and other debt consists of the following:





                                                         December 31,
           Amounts in (000's)                          2019         2018
           Senior debt-guaranteed by HUD             $ 31,996     $ 32,857
           Senior debt-guaranteed by USDA (a)          13,298       13,727
           Senior debt-guaranteed by SBA (b)              650          668
           Senior debt-bonds                            6,616        6,960
           Senior debt-other mortgage indebtedness      3,777       28,139
           Other debt                                     539          664
           Sub Total                                   56,876       83,015
           Deferred financing costs                    (1,364 )     (1,535 )
           Unamortized discounts on bonds                (149 )       (167 )
           Notes payable and other debt              $ 55,363     $ 81,313

(a) U.S. Department of Agriculture ("USDA")

(b) U.S. Small Business Administration ("SBA")




For a detailed description of each of the Company's debt financings, see Note 9
- Notes Payable and Other Debt to our audited consolidated financial statements
in Part II, Item 8., "Financial Statements and Supplementary Data" in this
Annual Report.

Scheduled Maturities

The schedule below summarizes the scheduled gross maturities as of December 31, 2019 for each of the next five years and thereafter.





                                                  Amounts in (000's)
            2020                                 $              1,701
            2021                                                2,242
            2022                                                5,145
            2023                                                1,752
            2024                                                1,839
            Thereafter                                         44,197
            Subtotal                                           56,876
            Less: unamortized discounts                          (149 )
            Less: deferred financing costs                     (1,364 )
            Total notes payable and other debt   $             55,363




                                       57


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Debt Covenant Compliance



As of December 31, 2019, the Company had approximately 17 credit related
instruments outstanding that include various financial and administrative
covenant requirements. Covenant requirements include, but are not limited to,
fixed charge coverage ratios, debt service coverage ratios, minimum earnings
before interest, taxes, depreciation, and amortization or earnings before
interest, taxes, depreciation, amortization, and restructuring or rent costs,
and current ratios. Certain financial covenant requirements are based on
consolidated financial measurements whereas others are based on measurements at
the subsidiary level (i.e., facility, multiple facilities or a combination of
subsidiaries). The subsidiary level requirements are as follows: (i) financial
covenants measured against subsidiaries of the Company; and (ii) financial
covenants measured against third-party operator performance. Some covenants are
based on annual financial metric measurements whereas others are based on
monthly and quarterly financial metric measurements (the "Financial Covenants").
The Company routinely tracks and monitors its compliance with its covenant
requirements.

Included in several of the Company's loan agreements are administrative
covenants requiring that a set of audited financial statements be provided to
the guarantor within 90 days of the end of each fiscal year (the "Administrative
Covenants").

For the year ended December 31, 2019 the Company was in compliance with all such Financial Covenants and Administrative Covenants.

Evaluation of the Company's Ability to Continue as a Going Concern





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 entity's current financial condition, including its sources of
liquidity at the date that the consolidated financial statements are issued,
will enable the entity to meet its obligations arising within one year of the
date of the issuance of the Company's consolidated financial statements as they
come due and to make a determination as to whether or not it is probable, under
the application of this accounting guidance, that the entity 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 as well as the Company's recurring business operating
expenses.



The Company is able to conclude that it is probable that the Company will be
able to meet its obligations arising within one year of the date of issuance of
these consolidated financial statements within the parameters set forth in the
accounting guidance.

See Note 9 - Notes Payable and Other Debt to our audited consolidated financial
statements included in Part II, Item 8., "Financial Statements and Supplementary
Data" in this Annual Report.

Receivables

Our operations could be adversely affected if we experience significant delays
in receipt of rental income from our operators. Our future liquidity will
continue to be dependent upon the relative amounts of current assets
(principally cash and accounts receivable) and current liabilities (principally
accounts payable and accrued expenses). In that regard, accounts receivable can
have a significant impact on our liquidity.

Accounts receivable totaled $1.0 million at December 31, 2019 compared with $1.0 million at December 31, 2018.



The allowance for bad debt was $0.6 million and $1.4 million at December 31,
2019 and 2018, respectively. We continually evaluate the adequacy of our bad
debt reserves based on aging of older balances, payment terms and historical
collection trends.

                                       58


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Off-Balance Sheet Arrangements

Guarantee

On June 18, 2016, the Company entered into a master sublease agreement, as amended on March 30, 2018, with affiliates (collectively, "Peach Health Sublessee") of Peach Health Group, LLC, providing that Peach Health Sublessee would take possession of and operate facilities located in Georgia.



On April 6, 2017, the Company guaranteed Peach Health Sublessee's $2.5 million
revolving working capital loan from a third-party lender (the "Peach Working
Capital Facility"), subsequently capped at $1.75 million which matures April 5,
2020. Borrowings under the Peach Working Capital Facility are based on a
percentage of a borrowing base of eligible accounts receivable. Eligible
accounts, net of an allowance for amounts outstanding after 120 days, excluding
applicable credits and further reduced for a liquidity factor specific to the
payor type, comprise Medicare, Medicaid and commercial accounts only and exclude
co-insurance and self-pay. The Peach Working Capital Facility is subject to
certain burn-off provisions (i.e., the Company's obligations under such guaranty
cease after the later of 18 months or achievement of a certain financial ratio's
by Peach Health Sublessee). The Company has assessed the fair value of the
guarantee as not material to the financial statements at December 31, 2019.

On November 30, 2018, the Company subleased the Ohio Beacon Facilities to
affiliates Aspire Sublessees of Aspire, pursuant to the Aspire Subleases,
whereby the Aspire Sublessees took possession of, and commenced operating, the
Ohio Beacon Facilities (under Aspire's operation, the Aspire Facilities) as
subtenant. The Aspire Subleases became effective on December 1, 2018 and are
structured as triple net leases. The Aspire Facilities are comprised of: (i) a
94-bed skilled nursing facility located in Covington, Ohio (the "Covington
Facility"); (ii) an 80-bed assisted living facility located in Springfield, Ohio
(the "Eaglewood ALF Facility"); (iii) a 99-bed skilled nursing facility located
in Springfield, Ohio (the "Eaglewood Care Center Facility"); (iv) a 50-bed
skilled nursing facility located in Greenfield, Ohio (the "H&C of Greenfield
Facility"); and (v) a 50-bed skilled nursing facility located in Sidney, Ohio
(the "Pavilion Care Facility"). Pursuant to the Aspire Subleases, 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 December 31, 2019.

Operating Leases



As of December 31, 2019, the Company leased a total of nine skilled nursing
facilities under non-cancelable leases, most of which have rent escalation
clauses and provisions for payments of real estate taxes, insurance and
maintenance costs; each of the skilled nursing facilities that are leased by the
Company are subleased to and operated by third-party operators. The Company also
leases certain office space located in Atlanta and Suwanee, Georgia.

Future minimum lease payments for each of the next five years ending December 31
are as follows:



                         Future rental          Accretion of           Operating lease
   (Amounts in 000's)      payments          lease liability (1)         obligation
   2020                 $         6,390     $                (268 )   $           6,122
   2021                           6,551                      (755 )               5,796
   2022                           6,691                    (1,223 )               5,468
   2023                           6,823                    (1,674 )               5,149
   2024                           6,958                    (2,109 )               4,849
   Thereafter                    19,832                    (7,954 )              11,878
   Total                $        53,245     $             (13,983 )   $          39,262

(1) Weighted average discount rate 7.98%






For a further description of the Company's operating leases, see Note 7 - Leases
to our audited consolidated financial statements in Part II, Item 8., "Financial
Statements and Supplementary Data" in this Annual Report.



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Leased and Subleased Facilities to Third-Party Operators





As of December 31, 2019, 21 facilities (12 owned by us and nine leased to us)
are leased or subleased on a triple net basis, meaning that the lessee (i.e.,
the third-party operator of the property) is obligated under the lease or
sublease, as applicable, for all liabilities of the property in respect to
insurance, taxes and facility maintenance, as well as the lease or sublease
payments, as applicable.





Future minimum lease receivables for each of the next five years ending December
31 are as follows:



                                      (Amounts in 000's)
                        2020         $             15,716
                        2021                       16,100
                        2022                       17,272
                        2023                       17,587
                        2024                       17,447
                        Thereafter                 53,311
                        Total        $            137,433




The following is a summary of the Company's leases and subleases to
third-parties which comprise the future minimum lease receivables of the
Company. Each lease contains specific rent escalation amounts ranging from 1.0%
to 3.0% annually. Further, each lease has one or more renewal options. For those
facilities subleased by the Company, the renewal option in the sublease
agreement is dependent on the Company's renewal of its lease agreement.



                                                                     Lease Term
                                                              Commencement   Expiration     2020 Cash
Facility Name                     Operator Affiliation (1)        Date          Date       Annual Rent
                                                                                           (Thousands)
Owned
Eaglewood ALF                    Aspire                       12/1/2018      11/30/2028              630
Eaglewood Care Center            Aspire                       12/1/2018      11/30/2028              408
H&C of Greenfield                Aspire                       12/1/2018      11/30/2023              213
Southland Healthcare             Beacon Health Management     11/1/2014      10/31/2024              970
The Pavilion Care Center         Aspire                       12/1/2018      11/30/2028              222
Autumn Breeze                    C.R. Management              9/30/2015      9/30/2025               894
Coosa Valley Health Care         C.R. Management              12/1/2014      8/31/2030               995
Glenvue H&R                      C.R. Management              7/1/2015       6/30/2025             1,302
Meadowood                        C.R. Management              5/1/2017       8/31/2030               474
Georgetown Health                Symmetry Healthcare          4/1/2015       3/31/2030               329
Mountain Trace Rehab             Vero Health Management       3/1/2019       2/28/2029               490
Sumter Valley Nursing            Symmetry Healthcare          4/1/2015       3/31/2030               632
Subtotal Owned Facilities (12)                                                            $        7,559
Leased
Covington Care                   Aspire                       12/1/2018      11/30/2028   $          503
Lumber City                      Beacon Health Management     11/1/2014      8/31/2027               936
LaGrange                         C.R. Management              4/1/2015       8/31/2027             1,140
Thomasville N&R                  C.R. Management              7/1/2014       8/31/2027               362
Jeffersonville                   Peach Health                 6/18/2016      8/31/2027               748
Oceanside                        Peach Health                 7/13/2016      8/31/2027               510
Savannah Beach                   Peach Health                 7/13/2016      8/31/2027               279
Powder Springs                   Wellington Health Services   4/1/2015       8/31/2027             1,981
Tara                             Wellington Health Services   4/1/2015       8/31/2027             1,698
Subtotal Leased Facilities (9)                                                            $        8,157
Total (21)                                                                                $       15,716




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(1) Represents the number of facilities which are leased or subleased to

separate tenants, which tenants are affiliates of the entity named in the

table above. See "Portfolio of Healthcare Investments" in Part I, Item 1,

"Business" in this Annual Report.




All facilities are skilled nursing facilities except for Eaglewood ALF and the
Meadowood Facility which are assisted living facilities. All facilities have
renewal provisions of one term of five years, except facilities (Mountain Trace,
Sumter Valley, Covington Care, Pavilion Care Center, Eaglewood ALF, Eaglewood
SNF and Georgetown) which have two renewal terms with each being five years and
H&C of Greenfield which has three renewal terms with each being five years. The
leases also contain standard rent escalations that range from 1.0% to 3.0%
annually.

On April 24, 2018, the Ohio Beacon Affiliates informed the Company in writing
that they would no longer be operating five (four owned and one leased by the
Company) of the Ohio Beacon Facilities and that they would surrender operation
of such facilities to the Company on June 30, 2018. On November 30, 2018, the
Ohio Beacon Affiliates, who were ten months in arrears on rental payments,
surrendered possession of the Ohio Beacon Facilities and the lease was
terminated by mutual consent. Pursuant to such termination, the Ohio Beacon
Affiliates agreed to pay a $0.675 million termination fee, payable in 18 monthly
installments of $37,500 commencing January 3, 2019 in full satisfaction of their
remaining $0.5 million lease inducement due to the Company and approximately
$2.5 million in rent arrears and approximately $0.6 million of other
receivables, such as property taxes and capital expenditures, which discharges
each tenant from any and all claims upon completion of the payment plan. The
Company intends to enforce its rights under the termination agreement. As of the
date of filing this Annual Report, 14 such payments have been received, and
there is no assurance that the Company will be able to obtain payment of all the
outstanding unpaid termination fee from the Ohio Beacon Affiliates. The Company
completed negotiations with Aspire, who received HUD approval for such
facilities and took possession of Ohio Beacon Facilities on December 1, 2018.

On November 30, 2018 the Company subleased the Ohio Beacon Facilities to
affiliates of Aspire pursuant to the Aspire Subleases, providing that Aspire
Sublessees would take possession of and operate the Aspire Facilities as
subtenant. The Aspire Subleases became effective on December 1, 2018 and are
structured as triple net leases. The Aspire Facilities are comprised of: (i) the
Covington Facility; (ii) the Eaglewood ALF Facility; (iii) the Eaglewood Care
Center Facility; (iv) the H&C of Greenfield Facility; and (v) the Pavilion Care
Facility. Under the Aspire Subleases, a default related to an individual
facility may cause a default under all the Aspire Subleases. All Aspire
Subleases are for an initial term of ten years, with renewal options, except
with respect to term for the H&C of Greenfield Facility, which has an initial
five year term, and set annual rent increases generally commencing in the third
lease year; from month seven of the Aspire Subleases monthly rent amounts may
increase based on each facility's prior month occupancy, with minimum annual
rent escalations of at least 1% generally commencing in the third lease year.
Minimum rent receivable for the Covington Facility, the Eaglewood ALF Facility,
the Eaglewood Care Center Facility, the H&C of Greenfield Facility and the
Pavilion Care Facility for the year ended December 31, 2019 is $0.4 million,
$0.5 million, $0.4 million, $0.2 million and $0.2 million per annum,
respectively. Additionally, 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 December 31, 2019.

For a detailed description of each of the Company's leases, see Note 7 - Leases
to our audited consolidated financial statements included in Part II, Item 8.,
"Financial Statements and Supplementary Data" in this Annual Report.

Professional and General Liability



As of the date of filing this Annual Report, the Company is a defendant in a
total of nine professional and general liability actions, primarily commenced on
behalf of one former patient and eight of our current or prior tenant's former
patients. These actions generally seek unspecified compensatory and punitive
damages for former patients who were allegedly injured or died while patients of
our facilities due to professional negligence or understaffing. One such action,
on behalf of the Company's former patient, is covered by insurance, except that
any award of punitive damages would be excluded from such coverage, and nine of
such actions relate to events which occurred after the Company transitioned the
operations of the facilities in question to a third-party operator and which are
subject to such operators' indemnification obligations in favor of the Company.

The Company has self-insured against professional and general liability actions since it discontinued its healthcare operations in connection with the Transition. The Company established a self-insurance reserve for these


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professional and general liability claims, included within "Accrued expenses" in
the Company's audited consolidated balance sheets of $0.5 million and $1.4
million at December 31, 2019, and December 31, 2018, respectively. Additionally
as of December 31, 2019 and December 31, 2018, approximately $0.3 million and
$0.6 million was reserved for settlement amounts in "Accounts payable" in the
Company's audited consolidated balance sheets.

Accordingly, the self-insurance reserve accrual primarily reflects the Company's
estimate of settlement amounts for the pending actions, as appropriate and legal
costs of settling or litigating the pending actions, as applicable. These
amounts are expected to be paid over time as the legal proceedings progress. The
duration of such legal proceedings could be greater than one year subsequent to
the year ended December 31, 2019; however management cannot reliably estimate
the exact timing of payments.

See Note 15 - Commitments and Contingencies and Note 19 - Subsequent Events to our audited consolidated financial statements included in Part II, Item 8., "Financial Statements and Supplementary Data" in this Annual Report.

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