- Q3 2022 Revenue Increases 31% Year-over-Year to $9.6 Million -
Greenwood Village, Colorado, Jan. 09, 2023 (GLOBE NEWSWIRE) -- Selectis Health, Inc. (OTC: GBCS) ("Selectis" or the "Company") is reporting financial and operating results for the third quarter ended September 30, 2022.
Third Quarter 2022 Summary (vs. Year-Ago Quarter) 1
- Revenue increased 31% to $9.6 million compared to $7.3 million.
- Net loss was $1.0 million or $(0.33) per share compared to a net loss of $0.06 million or $(0.02) per share.
"During the third quarter, we continued to advance our strategic initiatives and meaningfully increase our portfolio-wide patient census," said Lance Baller, Chairman and CEO of Selectis. "We generated revenue growth of 31% year-over-year, even as we navigated the effects of seasonality and select COVID-19 impacts. Though these effects served as headwinds on our bottom-line performance, we have made additional progress with internal hiring and training to further enhance our operational efficiency and optimize our progress. Our business transformation strategy has allowed us to build a strong foundation from which to support our momentum in the year ahead.
"The Healthcare sector is in constant change, and our business is adapting at a rapid rate. Through 2022 and into 2023, we have focused on cost reductions to align more with the pre-COVID environment. We have completed bids and entered into contracts with group purchasing organizations (GPOs) that leverage our size in negotiations and maximize buying power to reduce expenses organization-wide. In working with these GPOs, we will still be utilizing many of the same vendors, but at reduced rates. We will also be utilizing an enterprise purchasing software system to control and have greater planning and insight into our overall spend. This agreement will reduce costs over the coming year, and we seek to drive additional operational and cost efficiencies through 2023."
Recent Operational Highlights
- Corporate Updates
- Continued to roll out corporate training program, with the goal of implementing additional facility-level training in 2023.
- Appointed David Furstenberg to board of directors, effective July 1, 2022. Furstenberg qualifies as the audit committee's financial expert within the meaning of Item 407(d)(5) of Regulation S-K.
- Engaged Marcum LLP as the Company's new auditor, effective October 4, 2022.
- Appointed Andrew Sink to board of directors following the resignation of Clifford Neuman as director and secretary, effective October 19, 2022. Selectis's CFO, Christine Lucus, was appointed as the Company's new secretary on October 31, 2022.
- Began implementing a GPO program subsequent to the third quarter. This program is expected to generate organization-wide annual cost savings of 4%.
- Facility-Level Updates
- Strengthened senior strategic leadership teams with additional hires at two of the Georgia facilities.
- Drove census improvements at all owned facilities, with most facilities largely remaining at near maximum available capacity.
- Improved census at Southern Hills independent living facility to a baseline of around 70 patients, with the goal of reaching maximum capacity of 90 patients by the end of the first quarter of 2023.
- Increased census at Park Place facility to nearly 50 residents.
Randy Barker, President and COO of Selectis, commented:
"We continued to improve patient census and support our corporate and facility-level staff. Our census growth came despite the onset of COVID-related impacts at six of our facilities during the third quarter. At each of these facilities, we worked quickly to protect our patients and staff members, and our ongoing work to strengthen our internal teams has allowed us to recover more swiftly from these impacts. While the COVID impacts resulted in increased spending on third-party staffing agencies relative to the second quarter, we maintained our strong focus on supporting our personnel. We made additional senior strategic leadership hires at our Warrenton and Glen Eagle facilities, and the initial roll-out of our corporate-level leadership training has helped streamline our organization-wide communication.
"Subsequent to the quarter, we have worked to further enhance our operational infrastructure. In October, we appointed Marcum LLP as our independent registered public accounting firm, and we also appointed Andy Sink as an independent board director following Cliff Neuman's resignation as director and secretary in order to have proper board committee ratios of independent directors. Most recently, we have entered the early stages of implementing a GPO program, which enables access to discounted agreements with leading vendors and offers a new software system to improve our oversight across all facilities. We believe the GPO will optimize our cost savings and organizational efficiency, and we expect it to drive annual estimated cost savings of approximately 4% once fully implemented.
"As we enter 2023, we aim to continue increasing our patient census, optimize Medicare and Medicaid patient mix, and work to eliminate agency spending costs to further improve our progress towards profitability. We will work to maintain the census growth trends we have generated throughout the year, as well as expand our facility-level capacity, hiring, and training to further support this growth. On the corporate level, we continue to target listing on a major national exchange to improve our visibility and create additional shareholder value. I am proud of our ongoing strategic progress and commitment to top-quality patient care."
Third Quarter 2022 Financial Results
Revenue in the third quarter of 2022 increased 31% to $9.6 million compared to $7.3 million in the year-ago quarter. The increase was primarily driven by a continued focus on healthcare operations, as well as assuming operations at additional facilities relative to the prior year quarter. This was partially offset by seasonality and COVID-19 impacts.
General and administrative expenses in the third quarter of 2022 were $2.0 million, or 20.6% as a percentage of revenue, compared to $1.7 million, or 23.5% as a percentage of revenue, in the year-ago quarter. The increased expenses were largely driven by assuming operations at a higher number of the Company's owned facilities relative to the prior year period, while the improvement in the general and administrative expense ratio was driven by the aforementioned year-over-year revenue growth during the quarter.
Net loss in the third quarter of 2022 was $1.0 million or $(0.33) per share compared to a net loss of $0.06 million or $(0.02) per share in the year-ago quarter. The decrease was primarily driven by the aforementioned impacts of seasonality and COVID-19 during the quarter, partially offset by decreased interest expense due to the mortgages the Company successfully refinanced over the past year.
Cash and investments were $2.8 million at September 30, 2022 compared to $4.8 million at December 31, 2021. The decrease was primarily attributable to lower working capital as a result of property improvement projects and certain debt service requirements.
Operating cash flow for the nine months ended September 30, 2022 improved to $(0.7) million compared to $(1.6) million in the comparable year-ago period. The increase was mainly driven by the Company's improved operational performance through the first nine months of 2022, partially offset by increased expenses associated with assuming operations at a higher number of owned facilities.
Revisions to Previously Issued Financial Statements
During the preparation of the financial statements for the nine months ending September 30, 2022, the Company became aware of misstatements in the financial statements of $191,589 and $469,302 of healthcare revenue and accounts receivable reported during the three- and six-month period ended March 31, 2022 and June 30, 2022, respectively. The Company determined that cash payments received from a Medicare B bad debt reimbursement program were recorded directly to revenue, rather than a reduction to the account receivable account to which the receivables were recorded, causing both revenue and receivables to be overstated at each reporting period.
In the consolidated financial statements for the six months ending June 30, 2022, the Company identified an error related to the accounting guidance for intercompany revenues and expenses. For the six months ending June 30, 2022, the Company recorded $869,249 of intercompany revenues to healthcare revenue and $869,249 of intercompany expenses in general and administrative expenses.
The Company assessed the materiality of this error on prior period financial statements in accordance with the SEC Staff Accounting Bulletin Number 99, Materiality, and ASC 250-10, Accounting Changes and Error Corrections. The error did not have any material effect on the Company's previously reported Condensed Consolidated Statements of Cash Flows and Condensed Consolidated Statements of Shareholder's Deficit for the quarters ended March 31, 2022 and June 30, 2022. The Company determined that this error was not material to the financial statements for the six months ended June 30, 2022. The Company decided to correct these immaterial errors as a revision to previously issued financial statements and has revised the June 30, 2022 financial statements accordingly.
For a summary of these revisions on the affected financial statement line items, please refer to pages 9-10 of the Company's Form 10-Q for the three and nine months ended September 30, 2022.
New Transfer Agent Engaged
Effective January 6, 2023, the Company completed the transition from AST Equiniti to Broadridge Corporate Issuer Solutions, Inc. ("Broadridge") as the Company's transfer agent. The Company believes that this new relationship will show substantial improvement in the quality and timeliness of transactional services for its shareholders.
Baller concluded: "We have used Broadridge in the past for our annual proxy services and have been impressed with their professionalism. We look forward to continuing our work with Broadridge and are confident that our shareholders will see substantial improvement going forward."
About Selectis Health
Selectis Health owns and/or operates healthcare facilities in Arkansas, Georgia, Ohio, and Oklahoma, providing a wide array of living services, speech, occupational, physical therapies, social services, and other rehabilitation and healthcare services. Selectis focuses on building strategic relationships with local communities in which its partnership can improve the quality of care for facility residents. With its focused growth strategy, Selectis intends to deepen its American Southcentral and Southeastern market presence to better serve the aging population along a full continuum of care.
For more information, please visit www.selectis.com.
Forward Looking Statements
This press release contains statements that plan for or anticipate the future. In this press release, forward-looking statements are generally identified by the words "anticipate," "plan," "believe," "expect," "estimate," and the like. These forward-looking statements include, but are not limited to, statements regarding the following:
| * | strategic business relationships; | |
| * | statements about our future business plans and strategies; | |
| * | anticipated operating results and sources of future revenue; | |
| * | our organization's growth; | |
| * | adequacy of our financial resources; | |
| * | development of markets; | |
| * | competitive pressures; | |
| * | changing economic conditions; and, | |
| * | expectations regarding competition from other companies. | |
| * | the duration and scope of the COVID-19 pandemic | |
| * | the impact of the COVID-19 pandemic on occupancy rates and on the operations of the Company's facilities. | |
| * | Actions governments take in response to the COVID-19 pandemic, including the introduction of public health measures and other regulations affecting our properties and our operations. | |
| * | The effects of health and safety measures adopted by us in response to the COVID-19 pandemic. | |
| * | Increased operational costs because of health and safety measures related to COVID-19. | |
| * | Disruptions to our property acquisition and disposition activities due to economic uncertainty caused by COVID-19. | |
| * | General economic uncertainty in key markets as a result of the COVID-19 pandemic and a worsening of global economic conditions or low levels of economic growth. |
Although we believe that any forward-looking statements, we make in this press release are reasonable, because forward-looking statements involve future risks and uncertainties, there are factors that could cause actual results to differ materially from those expressed or implied. For example, a few of the uncertainties that could affect the accuracy of forward-looking statements, besides the specific factors identified above in the Risk Factors section of this press release, include:
| * | changes in general economic and business conditions affecting the healthcare industry; | |
| * | developments that make our facilities less competitive; | |
| * | changes in our business strategies; | |
| * | the level of demand for our facilities; and | |
| * | regulatory changes affecting the healthcare industry and third-party payor practices. |
Investor Relations Contact
Scott Liolios or Jackie Keshner
Gateway Group, Inc.
(949) 574-3860
selectis@gatewayir.com
SELECTIS HEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2022 | December 31, 2021 | |||||||
| Unaudited | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 1,928,472 | $ | 3,939,445 | ||||
| Accounts Receivable, Net of allowance | 3,064,919 | 3,506,719 | ||||||
| Prepaid Expenses and Other | 462,868 | 498,015 | ||||||
| Investments in Debt Securities | 24,387 | 24,387 | ||||||
| Total Current Assets | 5,480,646 | 7,968,566 | ||||||
| Long Term Assets | ||||||||
| Restricted Cash | 831,687 | 853,656 | ||||||
| Property and Equipment, Net | 36,006,716 | 37,024,592 | ||||||
| Goodwill | 1,076,908 | 1,076,908 | ||||||
| Total Assets | $ | 43,395,957 | $ | 46,923,722 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Liabilities | ||||||||
| Accounts Payable and Accrued Liabilities | $ | 2,478,953 | $ | 4,363,917 | ||||
| Accounts Payable - Related Parties | - | 21,571 | ||||||
| Dividends Payable | 7,500 | 7,500 | ||||||
| Short term debt - Related Parties, Net of discount of $0 and $3,234, respectively | 150,000 | 150,000 | ||||||
| Current Maturities of Long Term Debt, Net of Discount of $1,184 and $1,714, respectively | 2,049,750 | 6,312,562 | ||||||
| Other Current Liability | - | 931,446 | ||||||
| Total Current Liabilities | 4,686,203 | 11,786,996 | ||||||
| Debt- Related Parties | 750,000 | 750,000 | ||||||
| Debt, Net of discount of $933,737 and $452,593, respectively | 34,528,330 | 31,054,962 | ||||||
| Lease Security Deposit | 253,899 | 229,582 | ||||||
| Total Liabilities | $ | 40,218,432 | $ | 43,821,540 | ||||
| Commitments and Contingencies | ||||||||
| Equity | ||||||||
| Preferred Stock: | ||||||||
| Series A - No Dividends, $2.00 Stated Value, Non-Voting; 2,000,000 Shares Authorized, 200,500 Shares Issued and Outstanding | 401,000 | 401,000 | ||||||
| Series D - 8% Cumulative, Convertible, $10.00 Stated Value, Non-Voting; 1,000,000 Shares Authorized, 375,000 Shares Issued and Outstanding | 375,000 | 375,000 | ||||||
| Common Stock - $0.05 Par Value; 800,000,000 Shares Authorized, 3,054,588 and 2,998,362 Shares Issued and Outstanding at September 31, 2022 and December 31, 2021, respectively | 152,728 | 150,168 | ||||||
| Additional Paid-In Capital | 13,793,300 | 13,494,394 | ||||||
| Accumulated Deficit | (11,544,503 | ) | (11,318,380 | ) | ||||
| Total Selectis Health, Inc. Stockholders' Equity | 3,177,525 | 3,102,182 | ||||||
| Total Liabilities and Equity | $ | 43,395,957 | $ | 46,923,722 | ||||
SELECTIS HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Nine Months Ended | Three Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | ||||||||||||||||
| Rental Revenue | $ | 469,938 | $ | 933,360 | $ | 158,875 | $ | 155,071 | ||||||||
| Healthcare Revenue | 26,438,806 | 17,431,882 | 9,135,306 | 6,939,841 | ||||||||||||
| Healthcare Grant Revenue | 2,891,463 | 504,550 | 287,804 | - | ||||||||||||
| Management Fee Revenue | - | 224,143 | 224,143 | |||||||||||||
| Total Revenue | 29,800,207 | 19,093,935 | 9,581,985 | 7,319,055 | ||||||||||||
| Expenses | ||||||||||||||||
| Property Taxes, Insurance and Other Operating | 21,192,559 | 12,613,896 | 7,227,718 | 4,413,930 | ||||||||||||
| General and Administrative | 5,329,475 | 4,732,115 | 1,970,890 | 1,721,292 | ||||||||||||
| Provision for Bad Debts | 783,524 | 28,275 | 252,050 | 12,142 | ||||||||||||
| Depreciation | 1,348,645 | 1,286,279 | 453,608 | 435,013 | ||||||||||||
| Total Expenses | 28,654,203 | 18,660,565 | 9,904,266 | 6,582,377 | ||||||||||||
| Income (Loss) from Operations | 1,146,004 | 433,370 | (322,281 | ) | 736,678 | |||||||||||
| Other (Income) Expense | ||||||||||||||||
| Loss (Gain) on Extinguishment of Debt | 46,466 | - | - | - | ||||||||||||
| Interest Expense, net | 1,438,629 | 1,680,540 | 722,226 | 486,816 | ||||||||||||
| Gain on Forgiveness of PPP Loan | - | (675,598 | ) | - | - | |||||||||||
| Other Income | (135,468 | ) | (548,933 | ) | (53,582 | ) | (51,856 | ) | ||||||||
| Lease Termination Expense | - | 450,427 | - | 354,710 | ||||||||||||
| Total Other Expense | 1,349,627 | 906,436 | 668,644 | 789,670 | ||||||||||||
| Net Loss | (203,623 | ) | (473,066 | ) | (990,925 | ) | (52,992 | ) | ||||||||
| Net Loss Attributable to Noncontrolling Interests | - | (10,650 | ) | - | - | |||||||||||
| Net Loss Attributable to Selectis Health, Inc. | (203,623 | ) | (483,716 | ) | (990,925 | ) | (52,992 | ) | ||||||||
| Series D Preferred Dividends | (22,500 | ) | (22,500 | ) | (7,500 | ) | (7,500 | ) | ||||||||
| Net Loss Attributable to Common Stockholders | $ | (226,123 | ) | $ | (506,216 | ) | $ | (998,425 | ) | $ | (60,492 | ) | ||||
| Per Share Data: | ||||||||||||||||
| Net Loss per Share Attributable to Common Stockholders: | ||||||||||||||||
| Basic | $ | (0.07 | ) | $ | (0.18 | ) | $ | (0.33 | ) | $ | (0.02 | ) | ||||
| Diluted | $ | (0.07 | ) | $ | (0.18 | ) | $ | (0.33 | ) | $ | (0.02 | ) | ||||
| Weighted Average Common Shares Outstanding: | ||||||||||||||||
| Basic | 3,053,970 | 2,741,186 | 3,054,588 | 2,824,560 | ||||||||||||
| Diluted | 3,053,970 | 2,741,186 | 3,054,588 | 2,824,560 | ||||||||||||
1 Select financial results for the three and nine months ended September 30, 2022 reflect the impacts of revisions the Company has made to its previously issued financial statements. For further detail on these revisions, please refer to the "Revisions to Previously Issued Financial Statements" section of this press release and pages 9-10 of the Company's Form 10-Q for the three and nine months ended September 30, 2022.
