10-Q: Selectis Health Reports Q1 2025 Results: Revenue Up, But Losses Persist Amid Going Concern Uncertainty

Selectis Health saw a revenue increase in Q1 2025, but continues to face net losses and substantial doubt about its ability to continue as a going concern.

Summary

• Selectis Health, Inc. reported its Q1 2025 financial results, showing a net loss of $0.7 million and a working capital deficiency of $16.8 million.
• The company's total revenue increased to $10.49 million, up from $9.49 million in Q1 2024, driven by a rise in healthcare revenue.
• Despite the revenue growth, the company faces substantial doubt about its ability to continue as a going concern due to ongoing losses and cash needs.
• Management plans to improve liquidity and profitability by increasing occupancy, raising Medicaid reimbursement rates, controlling expenses, and seeking additional capital.
• The company is also pursuing the sale of four skilled nursing facilities in Georgia for an aggregate of $27.0 million, but there is no assurance the sales will be consummated.
• The company had $1,288,779 in cash and $736,919 in restricted cash as of March 31, 2025.
• The company has identified material weaknesses in its internal controls over financial reporting.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While revenue increased and losses decreased, the going concern warning and internal control weaknesses raise significant concerns. The potential sale of facilities offers some hope, but overall the outlook is uncertain.

Positives

• Healthcare revenue increased by 12% in Q1 2025 compared to Q1 2024.
• Net loss decreased from $1,034,720 in Q1 2024 to $655,969 in Q1 2025.
• The company is pursuing the sale of four skilled nursing facilities in Georgia for $27.0 million.
• Cash flow from operating activities improved significantly to $1,035,411 compared to $249,495 in the same period last year.

Negatives

• The company has a working capital deficiency of $16.8 million as of March 31, 2025.
• There is substantial doubt about the company's ability to continue as a going concern.
• The company has identified material weaknesses in its internal controls over financial reporting.
• Rental revenue decreased by 100% due to the sale of the Archway Property in June 2024.

Risks

• The company's ability to continue as a going concern is contingent upon successful execution of management's plan to improve liquidity and profitability.
• The sale of the four skilled nursing facilities in Georgia is not assured.
• The company faces risks related to potential claims of negligence resulting in injury or death to residents.
• The company is subject to complex and evolving governmental regulations related to Medicare and Medicaid programs.
• The company has identified material weaknesses in its internal controls over financial reporting.

Future Outlook

The company expects the PSA for the sale of four Georgia facilities to close sometime in calendar 2025. The company's liquidity is expected to increase from potential equity and debt offerings and decrease as net offering proceeds are expended in connection with property improvement projects. The company's continuing short-term liquidity requirements are expected to be achieved from healthcare operations, rental revenues received, and existing cash on hand.

Management Comments

• Management plans to improve liquidity and profitability by increasing occupancy, raising Medicaid reimbursement rates, controlling expenses, and seeking additional capital.

Industry Context

The senior care industry has experienced significant increases in both the number of personal injury/wrongful death claims and in the severity of awards based upon alleged negligence by skilled nursing facilities and their employees in providing care to residents.

Comparison to Industry Standards

• The document does not provide enough information to compare Selectis Health's performance to specific industry benchmarks or competitors.
• A thorough comparison would require data on occupancy rates, revenue per occupied bed, cost per occupied bed, and other key performance indicators for similar companies in the senior care industry.
• Without this data, it is difficult to assess whether Selectis Health's results are above, below, or in line with industry standards.

Legal Proceedings

• The Company and its affiliated subsidiaries are subject from time to time to claims of negligence resulting in injury or death to residents.
• Hines v. Global Abbeville LLC, d/b/a Glen Eagle, et al, Superior Court of Warren County, State of Georgia, Civil Action No.2023-CV-094 is a personal injury lawsuit.
• Hunter v. Global Abbeville LLC, d/b/a Glen Eagle, et al, State Court of Fulton County, State of Georgia is a wrongful death lawsuit.

Related Party Transactions

• Short-term debt to related parties was $775,000 as of March 31, 2025.
• The sale of $100,000 Units on March 3, 2020 was to a related party.

Stakeholder Impact

• The company's financial condition and potential sale of facilities could impact employees, residents, and creditors.
• The company's ability to provide quality care to residents may be affected by its financial challenges.
• The company's stakeholders are exposed to the risk of potential claims of negligence resulting in injury or death to residents.

Next Steps

• The company plans to implement multi-level review in 2025.
• Management intends to work internally and with various third-parties to ensure proper controls are in place going forward.
• The company is negotiating a refinance for two loans and have received a 120 day forbearances on both to May 31, 2025.

Key Dates

Keywords

Selectis Health, financial results, Q1 2025, healthcare, skilled nursing facilities, going concern, revenue, net loss, debt, Medicaid, Medicare, internal controls