UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2017~~

2022

☐
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-13445

~~Capital~~

Sonida Senior Living, ~~Corporation~~

Inc.

(Exact Name of Registrant as Specified in its Charter)

~~Delaware~~

~~75-2678809~~

Delaware

75-2678809

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

~~14160 Dallas Parkway, Suite 300, Dallas, Texas~~	~~75254~~
16301 Quorum Drive, Suite 160A, Addison, TX		75001
(Address of ~~Principal Executive Offices)~~ principal executive offices)		(Zip ~~Code)~~ code)

(972) 770-5600

(Registrant’s ~~Telephone Number, Including Area Code)~~

~~NONE~~

~~(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)~~

telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of exchange on which registered

Common Stock, $0.01 par value per share

SNDA

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒x No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐ ~~(Do not check if a smaller reporting company)~~

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October ~~27, 2017,~~31, 2022, the Registrant had ~~30,474,463 outstanding~~6,669,949 shares of ~~its Common Stock, $0.01 par value, per share.~~

~~CAPITAL SENIOR LIVING CORPORATION~~

~~INDEX~~

common stock outstanding.

		Page Number

Sonida Senior Living, Inc.

Form 10-Q Table of Contents

For the Period Ended September 30, 2022


	Page Number
Part I. Financial Information			3
Item 1. Financial ~~Statements.~~Statements			3
Condensed Consolidated Balance Sheets — ~~September~~Sept e mber 30, ~~2017~~2022 (Unaudited) and December 31, ~~2016~~2021			3	4
Condensed Consolidated Statements of Operations ~~and Comprehensive Loss~~ — Three and Nine Months Ended ~~September~~Se ptember 30, ~~2017~~2022 and ~~2016~~2021 (Unaudited )			4	5
Condensed Consolidated Statements of Shareholders’ Equity (Deficit)— Three and N ine Months Ended September 30, 2022 and 2021 (Unaudited)	6
Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~2021 (Unaudited)			5	7
Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (Unaudited)			6	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			14	19
Item 3. Quantitative and Qualitative Disclosures About Market Risk			23
Item 4. Controls and Procedures			23
Part II. Other Information			23	25
Item 1. Legal Proceedings			23	25
Item 1A. Risk Factors			23	25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			23	25
Item 3. Defaults Upon Senior Securities			24	25
Item 4. Mine Safety Disclosures			24	25
Item 5. Other Information			24	25
Item 6. Exhibits			24	26
Signature			26
~~Certifications~~		27

Cautionary Note Regarding Forward-Looking Statements

Certain information contained in this Quarterly Report on Form 10-Q of Sonida Senior Living, Inc. (together with its consolidated subsidiaries, “Sonida,” “we,” “our,” “us,” or the “Company”) constitutes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts included in this Quarterly Report on Form 10-Q, including, without limitation, those relating to the Company’s future business prospects and strategies, financial results, working capital, liquidity, capital needs and expenditures, interest costs, insurance availability and contingent liabilities, are forward-looking statements. Forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “would,” “intend,” “could,” “believe,” “expect,” “anticipate,” “project,” “plans,” “estimate” or “continue” or the negatives thereof or other variations thereon or comparable terminology.

Forward-looking statements are subject to certain risks and uncertainties that could cause the Company’s actual results and financial condition to differ materially from those indicated in the forward-looking statements, including, among others, the risks, uncertainties and factors set forth under “Item. 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2022, and also include the following:

•the impact of COVID-19, including the actions taken to prevent or contain the spread of COVID-19, the transmission of its highly contagious variants and sub-lineages and the development and availability of vaccinations and other related treatments, or another epidemic, pandemic or other health crisis;

•the Company’s ability to generate sufficient cash flows from operations, additional proceeds from debt financings or refinancings, and proceeds from the sale of assets to satisfy its short and long-term debt obligations and to fund the Company’s capital improvement projects to expand, redevelop, and/or reposition its senior living communities;

•increases in market interest rates that increase the cost of certain of our debt obligations;

•increased competition for, or a shortage of, skilled workers, including due to the COVID-19 pandemic or general labor market conditions, along with wage pressures resulting from such increased competition, low unemployment levels, use of contract labor, minimum wage increases and/or changes in overtime laws;

•the Company’s ability to obtain additional capital on terms acceptable to it;

•the Company’s ability to extend or refinance its existing debt as such debt matures;

•the Company’s compliance with its debt agreements, including certain financial covenants, and the risk of cross-default in the event such non-compliance occurs;

•the Company’s ability to complete acquisitions and dispositions upon favorable terms or at all;

• the risk of oversupply and increased competition in the markets which the Company operates;

•the Company’s ability to improve and maintain controls over financial reporting and remediate the identified material weakness discussed in Item 4 of this Quarterly Report on Form 10-Q;

•the departure of the Company’s key officers and personnel;

•the cost and difficulty of complying with applicable licensure, legislative oversight, or regulatory changes;

•risks associated with current global economic conditions and general economic factors such as inflation, the consumer price index, commodity costs, fuel and other energy costs, competition in the labor market, costs of salaries, wages, benefits, and insurance, interest rates, and tax rates; and

•changes in accounting principles and interpretations.

We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or outcomes that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. All forward-looking statements in this Quarterly Report on Form 10-Q apply only as of the date made and are expressly qualified in their entirety by the cautionary statements included in this Quarterly Report on Form 10-Q. Except as required by applicable law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

Part I. FINANCIAL INFORMATION

Item 1. ~~FINANCIAL STATEMENTS.~~

~~CAPITAL SENIOR LIVING CORPORATION~~

~~CONSOLIDATED BALANCE SHEETS~~

Financial Statements

Sonida Senior Living, Inc.

Condensed Consolidated Balance Sheets

(~~unaudited,~~ in thousands, except per share amounts)


	September 30, 2022		December 31, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	27,046	$	78,691
Restricted cash	13,770		14,185
Accounts receivable, net	4,759		3,983

Prepaid expenses and other	4,526		9,328
Total current assets	50,101		106,187
Property and equipment, net	622,753		621,199

Other assets, net	2,460		1,166
Total assets	$	675,314	$	728,552
Liabilities and Equity
Current liabilities:
Accounts payable	$	10,571	$	9,168
Accrued expenses	36,619		37,026
Current portion of notes payable, net of deferred financing costs	46,137		69,769
Deferred income	3,576		3,162
Federal and state income taxes payable	176		599
Other current liabilities	732		758



Total current liabilities	97,811		120,482
Notes payable, net of deferred financing costs and current portion	619,798		613,342
Other liabilities	143		288
Total liabilities	717,752		734,112
Commitments and contingencies
Redeemable preferred stock:
Series A convertible preferred stock, $0.01 par value; 41 shares authorized, 41 shares issued and outstanding as of September 30, 2022 and December 31, 2021	42,384		41,250
Shareholders’ equity (deficit):
Preferred stock $0.01 par value per share; 15,000 shares authorized; none issued or outstanding, except Series A convertible preferred stock as noted above	—		—
Common stock $0.01 par value per share; 15,000 shares authorized; 6,670 and 6,634 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	67		66
Additional paid-in capital	295,595		295,781
Retained deficit	(380,484)		(342,657)
Total shareholders’ equity (deficit)	(84,822)		(46,810)
Total liabilities, redeemable preferred stock and shareholders’ equity (deficit)	$	675,314	$	728,552

See Notes to Condensed Consolidated Financial Statements.

Sonida Senior Living, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

September 30,
2017

December 31,
2016

ASSETS

Current assets:

Cash and cash equivalents

$
9,186

$
34,026

Restricted cash

13,372

13,297

Accounts receivable, net

8,680

13,675

Property tax and insurance deposits

12,912

14,665

Prepaid expenses and other

3,978

6,365

Total current assets

48,128

82,028

Property and equipment, net

1,105,270

1,032,430

Other assets, net

18,233

31,323

Total assets

$
1,171,631

$
1,145,781

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$
3,975

$
5,051

Accrued expenses

36,663

39,064

Current portion of notes payable, net of deferred loan costs

16,482

17,889

Current portion of deferred income

14,245

16,284

Current portion of capital lease and financing obligations

2,806

1,339

Federal and state income taxes payable

110

218

Customer deposits

1,428

1,545

Total current liabilities

75,709

81,390

Deferred income

10,504

12,205

Capital lease and financing obligations, net of current portion

49,857

37,439

Other long-term liabilities

15,273

15,325

Notes payable, net of deferred loan costs and current portion

935,345

882,504

Commitments and contingencies

Shareholders’ equity:

Preferred stock, $.01 par value:

Authorized shares – 15,000; no shares issued or outstanding

—

—

Common stock, $.01 par value:

Authorized shares – 65,000; issued and outstanding
shares – 30,478 and 30,012 in 2017 and 2016, respectively

310

305

Additional paid-in capital

177,610

171,599

Retained deficit

(89,547
)

(51,556
)
Treasury stock, at cost – 494 shares in 2017 and 2016

(3,430
)

(3,430
)
Total shareholders’ equity

84,943

116,918

Total liabilities and shareholders’ equity

$
1,171,631

$
1,145,781


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues:
Resident revenue	$	52,485	$	48,968	$	155,315	$	140,819
Management fees	608		1,029		1,836		2,978
Managed community reimbursement revenue	7,694		7,927		21,757		33,317
Total revenues	60,787		57,924		178,908		177,114
Expenses:
Operating expense	43,123		40,668		126,562		114,994
General and administrative expense	5,851		7,473		23,563		24,182

Depreciation and amortization expense	9,691		9,503		28,940		27,811
Managed community reimbursement expense	7,694		7,927		21,757		33,317
Total expenses	66,359		65,571		200,822		200,304
Other income (expense):
Interest income	44		—		47		5
Interest expense	(8,205)		(9,701)		(23,728)		(28,574)


Gain (loss) on extinguishment of debt	—		54,080		(641)		168,292
Loss on disposition of assets, net	—		(15)		—		(436)
Other income (expense), net	(6)		—		8,663		8,703
(Loss) income before provision for income taxes	(13,739)		36,717		(37,573)		124,800
Provision for income taxes	—		(207)		(254)		(368)
Net (loss) income	(13,739)		36,510		(37,827)		124,432
Dividends on Series A convertible preferred stock	(1,134)		—		(3,401)		—
Net (loss) income attributable to common stockholders	$	(14,873)	$	36,510	$	(41,228)	$	124,432

Weighted average common shares outstanding — basic	6,364		2,062		6,357		2,061
Weighted average common shares outstanding — diluted	6,364		2,089		6,357		2,088

Basic net (loss) income per common share	$	(2.34)	$	17.71	$	(6.49)	$	60.37
Diluted net (loss) income per common share	$	(2.34)	$	17.48	$	(6.49)	$	59.59

See ~~accompanying notes~~Notes to ~~unaudited consolidated financial statements.~~

Condensed Consolidated Financial Statements.

~~CAPITAL SENIOR LIVING CORPORATION~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS~~

~~(unaudited, in thousands, except per share data)~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Revenues:

Resident revenue

$
117,318

$
111,436

$
350,026

$
331,643

Expenses:

Operating expenses (exclusive of facility lease expense and depreciation and amortization expense shown below)

74,636

69,622

220,703

203,307

General and administrative expenses

5,361

5,749

17,678

16,969

Facility lease expense

13,943

15,500

42,498

46,150

Loss on facility lease termination

—

—

12,858

—

Stock-based compensation expense

1,962

2,479

5,833

7,482

Depreciation and amortization expense

16,903

14,400

50,862

44,103

Total expenses

112,805

107,750

350,432

318,011

Income (Loss) from operations

4,513

3,686

(406
)

13,632

Other income (expense):

Interest income

19

15

51

50

Interest expense

(12,531
)

(10,636
)

(36,940
)

(30,966
)
Loss on disposition of assets, net

(1
)

(16
)

(126
)

(53
)
Other income

1

—

6

233

Loss before provision for income taxes

(7,999
)

(6,951
)

(37,415
)

(17,104
)
Provision for income taxes

(133
)

(126
)

(394
)

(403
)
Net loss

$
(8,132
)

$
(7,077
)

$
(37,809
)

$
(17,507
)
Per share data:

Basic net loss per share

$
(0.28
)

$
(0.24
)

$
(1.28
)

$
(0.61
)
Diluted net loss per share

$
(0.28
)

$
(0.24
)

$
(1.28
)

$
(0.61
)
Weighted average shares outstanding — basic

29,512

28,959

29,427

28,879

Weighted average shares outstanding — diluted

29,512

28,959

29,427

28,879

Comprehensive loss

$
(8,132
)

$
(7,077
)

$
(37,809
)

$
(17,507
)

~~See accompanying notes to unaudited consolidated financial statements.~~

~~CAPITAL SENIOR LIVING CORPORATION~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(unaudited, in thousands)~~

Nine Months Ended
September 30,

2017

2016

Operating Activities

Net loss

$
(37,809
)

$
(17,507
)
Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

50,862

44,103

Amortization of deferred financing charges

1,216

870

Amortization of deferred lease costs and lease intangibles

647

434

Amortization of lease incentives

(950
)

(563
)
Deferred income

(899
)

15

Lease incentives

5,159

5,858

Loss on facility lease termination

12,858

—

Loss on disposition of assets, net

126

53

Provision for bad debts

1,355

1,214

Stock-based compensation expense

5,833

7,482

Changes in operating assets and liabilities:

Accounts receivable

(3,834
)

(8,883
)
Property tax and insurance deposits

1,753

1,189

Prepaid expenses and other

2,387

(2,112
)
Other assets

5,149

(462
)
Accounts payable

(1,076
)

(1,053
)
Accrued expenses

(2,400
)

(1,586
)
Other liabilities

3,649

8,652

Federal and state income taxes receivable/payable

(108
)

(97
)
Deferred resident revenue

(1,520
)

(784
)
Customer deposits

(117
)

(249
)
Net cash provided by operating activities

42,281

36,574

Investing Activities

Capital expenditures

(30,165
)

(47,311
)
Cash paid for acquisitions

(85,000
)

(109,750
)
Proceeds from disposition of assets

16

32

Net cash used in investing activities

(115,149
)

(157,029
)
Financing Activities

Proceeds from notes payable

66,584

112,492

Repayments of notes payable

(15,414
)

(12,881
)
Increase in restricted cash

(75
)

(133
)
Cash payments for capital lease and financing obligations

(2,117
)

(989
)
Cash proceeds from the issuance of common stock

—

66

Excess tax benefits on stock options exercised

—

(27
)
Purchases of treasury stock

—

(2,496
)
Deferred financing charges paid

(950
)

(1,830
)
Net cash provided by financing activities

48,028

94,202

Decrease in cash and cash equivalents

(24,840
)

(26,253
)
Cash and cash equivalents at beginning of period

34,026

56,087

Cash and cash equivalents at end of period

$
9,186

$
29,834

Supplemental Disclosures

Cash paid during the period for:

Interest

$
35,108

$
30,056

Income taxes

$
534

$
564

~~See accompanying notes to unaudited consolidated financial statements.~~

~~CAPITAL SENIOR LIVING CORPORATION~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017~~

~~1. BASIS OF PRESENTATION~~

~~Capital~~Sonida Senior Living, ~~Corporation,~~Inc.

Condensed Consolidated Statements of Shareholders’ Equity (Deficit) (Unaudited)

(in thousands)


	Common Stock			Additional Paid-In Capital		Retained Deficit
	Shares	Amount						Total
Balance at December 31, 2020	2,084	$	21	$	188,978	$	(468,264)	$	(279,265)
Restricted stock awards (cancellations), net	98	1		(1)		—		—
Non-cash stock-based compensation	—	—		166		—		166
Net income	—	—		—		38,844		38,844
Balance at March 31, 2021	2,182	$	22	$	189,143	$	(429,420)	$	(240,255)
Restricted stock awards (cancellations), net	12	—		—		—		—
Non-cash stock-based compensation	—	—		517		—		517
Net income	—	—		—		49,078		49,078
Balance at June 30, 2021	2,194	$	22	$	189,660	$	(380,342)	$	(190,660)
Restricted stock awards (cancellations), net	(1)	—		—		—		—
Non-cash stock-based compensation	—	—		586		—		586
Net income	—	—		—		36,510		36,510
Balance at September 30, 2021	2,193	$	22	$	190,246	$	(343,832)	$	(153,564)


	Common Stock			Additional Paid-In Capital		Retained Deficit
	Shares	Amount						Total
Balance at December 31, 2021	6,634	$	66	$	295,781	$	(342,657)	$	(46,810)
Restricted stock awards (cancellations), net	31	1		—		—		1
Series A convertible preferred stock dividends	—	—		(1,133)		—		(1,133)
Non-cash stock-based compensation	—	—		1,827		—		1,827
Net loss	—	—		—		(16,678)		(16,678)
Balance at March 31, 2022	6,665	$	67	$	296,475	$	(359,335)	$	(62,793)
Restricted stock awards (cancellations), net	157	1		(1)		—		—
Series A convertible preferred stock dividends	—	—		(1,134)		—		(1,134)
Purchase of common stock	—	—		(219)		—		(219)
Non-cash stock-based compensation	—	—		2,240		—		2,240
Net loss	—	—		—		(7,410)		(7,410)
Balance at June 30, 2022	6,822	$	68	$	297,361	$	(366,745)	$	(69,316)
Restricted stock awards (cancellations), net	(152)	(1)		—		—		(1)
Series A convertible preferred stock dividends	—	—		(1,134)		—		(1,134)
Purchase of common stock	—	—		(44)		—		(44)
Non-cash stock-based compensation	—	—		(588)		—		(588)
Net loss	—	—		—		(13,739)		(13,739)
Balance at September 30, 2022	6,670	$	67	$	295,595	$	(380,484)	$	(84,822)

See Notes to Condensed Consolidated Financial Statements.

Sonida Senior Living, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	(37,827)	$	124,432
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	28,940		27,811
Amortization of deferred financing costs	946		1,121

Lease expense adjustment	7		(256)
Loss on disposition of assets, net	—		436
Write-off of other assets	535		—
Unrealized gain on interest rate cap, net	(206)		—
Loss (gain) on extinguishment of debt	641		(168,292)
Provision for bad debt	908		747
Non-cash stock-based compensation expense	3,479		1,269
Changes in operating assets and liabilities:
Accounts receivable, net	(1,760)		763

Prepaid expenses and other	6,755		369
Other assets, net	(115)		(95)
Accounts payable and accrued expense	566		5,199

Federal and state income taxes payable	(423)		211
Deferred resident revenue	414		(502)

Other current liabilities	43		(375)
Net cash provided by (used in) operating activities	2,903		(7,162)
Cash flows from investing activities:
Acquisition of new communities	(12,342)		—
Capital expenditures	(18,317)		(7,096)

Net cash used in investing activities	(30,659)		(7,096)
Cash flows from financing activities:
Proceeds from notes payable	80,000		17,168
Repayments of notes payable	(98,535)		(10,513)
Cash payments for finance leases and financing obligations	(81)		(74)
Purchase of common stock	(263)		—
Dividends paid to Series A preferred stockholders	(2,987)		—
Purchase of interest rate cap	(258)		—
Deferred financing costs paid	(2,180)		—

Net cash (used in) provided by financing activities	(24,304)		6,581
Decrease in cash and cash equivalents and restricted cash	(52,060)		(7,677)
Cash, cash equivalents, and restricted cash at beginning of period	92,876		30,504
Cash, cash equivalents, and restricted cash at end of period	$	40,816	$	22,827

Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	21,536	$	23,221
Income taxes	$	672	$	309

See Notes to Condensed Consolidated Financial Statements.

Sonida Senior Living, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

Organization and Business

Sonida Senior Living, Inc., a Delaware corporation, ~~(together with its subsidiaries, the “Company”),~~ is one of the ~~largest operators~~leading owner-operators of senior housing communities in the United States in terms of resident capacity. As used herein, the “Company,” “we,” “us,” or “our” refers to Sonida Senior Living, Inc. and its subsidiaries. The Company owns, operates, develops, and manages senior housing communities ~~in geographically concentrated regions~~ throughout the United States. As of September 30, ~~2017,~~2022, the Company operated ~~129~~76 senior housing communities in 2318 states with an aggregate capacity of ~~approximately 16,500~~approximately 8,000 residents, including 8362 senior housing communities that the Company owned and ~~46 senior housing~~14 communities that the Company ~~leased. As~~managed on behalf of ~~September 30, 2017, the Company also operated one home care agency.~~third parties. The accompanying condensed consolidated financial statements include the financial statements of ~~Capital~~Sonida Senior Living, ~~Corporation~~Inc. and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

Interim Unaudited Financial Information

The accompanying ~~Consolidated Balance Sheet, as of December 31, 2016, has been derived from audited~~condensed consolidated financial statements of the Company for the year ended December 31, 2016, and the accompanying unaudited consolidated financial statements, as of and for the three and nine month periods ended September 30, 2017 and 2016, have been ~~prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in the annual financial statements~~ prepared in accordance with accounting principles generally accepted in the United States ~~have not been included pursuant to those rules~~of America (“GAAP”) and ~~regulations. For further information, refer to~~should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2021. Certain information and footnote disclosures normally included in ~~the Company’s Annual~~financial statements prepared in accordance with GAAP have been omitted from this Quarterly Report on Form ~~10-K filed with~~10-Q pursuant to the rules and regulations of the Securities and Exchange Commission ~~on March 1, 2017.~~

(“SEC”). The results for the interim periods shown in this report are not necessarily indicative of future financial results. The accompanying condensed consolidated financial statements have not been audited by our independent registered public accounting firm. In the opinion of ~~the Company,~~management, the accompanying unaudited condensed consolidated financial statements ~~contain~~include all adjustments, ~~(all of which were~~including normal recurring ~~accruals)~~items, necessary to present fairly ~~the Company’s~~our condensed consolidated financial position as of September 30, ~~2017,~~2022 and December 31, 2021, and our condensed consolidated results of operations and cash flows for the periods ended September 30, 2022 and 2021.

Reclassifications

Certain amounts previously reflected in the prior year condensed consolidated balance sheet have been reclassified to conform to our September 30, 2022 presentation. The consolidated balance sheet as of December 31, 2021 reflects reclassifying “operating lease right-of-use assets, net” to “other assets, net”, “property tax and insurance deposits” to “restricted cash” and lender reserves from “other assets, net” to “restricted cash.” “Current portion of lease liabilities” and “customer deposits” were combined into “other current liabilities.” “Lease liabilities, net of current portion” has been reclassified as “other liabilities.” The consolidated statements of operations include the consolidation of “stock-based compensation expense” within “general and administrative expenses.” These reclassifications had no effect on the previously reported total assets or total liabilities.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. These estimates include such items related to the accounting for: income taxes, including assessments of probabilities of realization of income tax benefits; impairment of long-lived assets, including applicable cash flow projections, holding periods and fair value evaluations; self-insurance liabilities and expense; stock-based compensation; and depreciation and amortization including determination of estimated useful lives. Actual results could differ from those estimates.

2. Significant Accounting Policies and Recently Issued Accounting Standards

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less at the date of acquisition to be cash equivalents. The Company has deposits in banks that exceed Federal Deposit Insurance Corporation insurance limits. Management believes that credit risk related to these deposits is minimal.

Restricted cash consists of reserve accounts for property insurance, real estate taxes, capital expenditures, and debt service required by certain loan agreements. In addition, restricted cash includes deposits required by certain counterparties as collateral pursuant to letters of credit which must remain so long as the letters of credit are outstanding, which are subject to renewal annually.

The statement of cash flows reflects cash flow changes and balances for cash, cash equivalents and restricted cash on an aggregated basis. The following table reconciles cash, cash equivalents and restricted cash as reported on the condensed consolidated balance sheets to the aggregated amounts presented on the condensed consolidated statements of cash flows (in thousands):


	September 30, 2022		December 31, 2021
Cash and cash equivalents	$	27,046	$	78,691
Restricted cash:
Property tax and insurance reserves	6,215		6,666
Lender reserve	1,500		—
Capital expenditures reserves	1,944		2,637
Deposits pursuant to outstanding letters of credit	4,111		4,882
Total restricted cash	13,770		14,185
Total cash, cash equivalents, and restricted cash	$	40,816	$	92,876

Property and Equipment

Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the assets. At each balance sheet date, the Company reviews the carrying value of its property and equipment to determine if facts and circumstances suggest that they may be impaired or that the depreciation period may need to be changed. The Company considers internal factors such as net operating losses along with external factors relating to each asset, including contract changes, local market developments, and other publicly available information to determine whether impairment indicators exist.

If an indicator of impairment is identified, recoverability of an asset group is assessed by comparing its carrying amount to the estimated future undiscounted net cash flows expected to be generated by the asset group through operation or disposition, calculated utilizing the lowest level of identifiable cash flows. If this comparison indicates that the carrying amount of an asset group is not recoverable, we estimate fair value of the asset group and record an impairment loss when the carrying amount exceeds fair value. There were no impairments of long-lived assets during the three or nine months ended September 30, 2022 or 2021.

In evaluating our long-lived assets for impairment, we undergo continuous evaluations of property level performance and real estate trends, and management makes several estimates and assumptions, including, but not limited to, the projected date of disposition, estimated sales price and future cash flows of each property during our estimated holding period. If our analysis or assumptions regarding the projected cash flows expected to result from the use and eventual disposition of our properties change, we incur additional costs and expenses during the holding period, or our expected hold periods change, we may incur future impairment losses.

Upon the acquisition of new communities accounted for as an acquisition of an asset, we recognize the assets acquired and the liabilities assumed as of the acquisition date, measured at their relative fair values once we have determined the fair value of each of these assets and liabilities. The acquisition date is the date on which we obtain control of the real estate property. The assets acquired and liabilities assumed consist of land, inclusive of associated rights, buildings, assumed debt, and identified intangible assets and liabilities.

Revenue Recognition

Resident revenue primarily consists of fees for basic housing and certain support services provided to residents which are accounted for under GAAP in accordance with lease accounting standards. The Company's residency lease agreements are generally short term in nature, with durations of one year or less, and are typically terminable by either party, under certain circumstances, upon providing 30 days’ notice, unless state law provides otherwise. Resident leases do not contain purchase options or require significant assumptions or judgments. Resident fees are billed monthly in advance. Basic housing and certain support services revenue is recorded when services are rendered and amounts are billable to residents in the period in which the rental and other services are provided. At September 30, 2022 and December 31, 2021, the Company had contract liabilities for deferred fees paid by its residents prior to the month that housing and support services were to be provided totaling approximately $2.6 million and $2.3 million, respectively, which are included in deferred income.

Revenue for certain ancillary services is recognized as services are provided to customers and includes fees for certain services, such as medication management, daily living activities, beautician/barber, laundry, television, guest meals, pets, and parking, which are generally billed monthly in arrears and are included in resident revenue.

Other operating revenue generally includes nonrecurring state grants and is included in resident revenue as earned.

The Company's senior housing communities have residency agreements that generally require the resident to pay a community fee prior to moving into the community which are initially recorded as deferred revenue and subsequently amortized evenly each month over the term of the agreement. At September 30, 2022 and December 31, 2021, the Company had contract liabilities for deferred community fees totaling approximately $0.9 million and $0.8 million, respectively, which are included in deferred income.

The Company has management agreements whereby it manages certain communities on behalf of third party owners under agreements that provide for management fee payments to the Company. The Company has determined that all community management activities are a single performance obligation, which is satisfied over time as the services are rendered. The Company’s estimate of the transaction price for management services also includes the amount of reimbursement due from the owners of the communities for services provided and related costs incurred. Such revenue is included in “managed community reimbursement revenue.” The related costs are included in “managed community reimbursement expense.” Although these costs are funded by the community owners, accounting guidance requires the Company to report these fees on a gross basis as both revenues and expenses.

In April 2022 and January 2021, the Company accepted $9.1 million and $8.7 million of cash, respectively, through grants from the Public Health and Social Services Emergency Fund’s (the “Provider Relief Fund”) Phases 4 and 3 General Distribution, respectively, which was expanded by the CARES Act to provide grants or other funding mechanisms to eligible healthcare providers for healthcare-related or lost revenues attributable to COVID-19. Both the Phase 4 and Phase 3 Provider Relief Funds were recorded as other income in the periods ended September 30, 2022 and 2021, respectively. No grants were received during the three month periods ended September 30, ~~2017~~2022 and ~~2016, and cash flows for the nine month periods ended~~ September 30, ~~2017~~2021. The CARES Act Provider Relief Funds are grants that do not have to be repaid provided we satisfy the terms and ~~2016. The results of operations for the three and nine month periods ended September 30, 2017, are not necessarily indicative~~conditions of the ~~results for the year ending December 31, 2017.~~

~~2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

~~Lease Accounting~~

The Company determines whether to account for its leases as operating, capital or financing leases depending on the underlying terms of each lease agreement. This determination of classification is complex and requires significant judgment relating to certain information including the estimated fair value and remaining economic life of the community, the Company’s cost of funds, minimum lease payments and other lease terms. As of September 30, 2017, the Company leased 46 senior housing communities, 44 of which the Company classified as operating leases and two of which the Company classified as capital lease and financing obligations. The Company incurs lease acquisition costs and amortizes these costs over the term of the respective lease agreement. Certain leases entered into by the Company qualified as sale/leaseback transactions, and as such, any related gains have been deferred and are being amortized over the respective lease term. Facility lease expense in the Company’s Consolidated Statements of Operations and Comprehensive Loss includes rent expense plus amortization expense relating to leasehold acquisition costs slightly offset by the amortization of deferred gains and lease incentives. There are various financial covenants and other restrictions in the Company’s lease agreements. The Company was in compliance with all of its lease covenants at September 30, 2017. On January 31, 2017, the Company acquired the underlying real estate associated with four of its operating leases. For additional information refer to Note 3, “Acquisitions.”

CARES Act.

Credit Risk and Allowance for Doubtful Accounts

The Company’s resident ~~receivables~~accounts receivable are generally due within 30 days ~~from~~after the date billed. Accounts receivable are reported net of an allowance for doubtful accounts of ~~$4.7~~$5.6 million and ~~$4.3~~$4.7 million at September 30, ~~2017,~~2022, and December 31, ~~2016,~~2021, respectively, and represent the Company’s estimate of the amount that ultimately will be collected. The adequacy of the Company’s allowance for doubtful accounts is reviewed on an ongoing basis, using historical payment trends, write-off experience, analyses of receivable portfolios by payor source and aging of receivables, as well as a review of specific accounts, and adjustments are made to the allowance, as necessary. Credit losses on resident receivables have historically been within management’s estimates, and management believes that the allowance for doubtful accounts adequately provides for expected losses.

~~Employee Health~~

Concentration of Credit Risk and ~~Dental Benefits, Workers’ Compensation,~~Business Risk

Substantially all of our revenues are derived from senior living communities we own and ~~Insurance Reserves~~

senior living communities that we manage. Senior living operations are particularly sensitive to adverse economic, social and competitive conditions and trends, including the effects of the COVID-19 pandemic, which has adversely affected, and may continue to adversely affect, our business, financial condition, and results of operations.

We have a concentration of owned properties operating in Texas (16), Indiana (12), Ohio (11) and Wisconsin (8).

Self-Insurance Liability Accruals

The Company offers ~~certain~~ full-time employees an option to participate in its health and dental plans. The Company is self-insured up to certain limits and is insured if claims in excess of these limits are incurred. The cost of employee health and dental benefits, net of employee contributions, is shared between the corporate office and the senior housing communities based on the respective number of plan participants. Funds collected are used to pay the actual program costs, including estimated annual claims, third-party administrative fees, network provider fees, communication costs, and other related administrative costs incurred by the plans. Claims are paid as they are submitted to the Company’s third-party administrator. The Company records a liability for outstanding claims ~~and~~as well as claims that have been incurred but not yet reported. This liability is based on the historical claim reporting lag and payment trends of health and dental insurance claims. Management believes that the liability for outstanding losses and expenses is adequate to cover the ultimate cost of losses and expenses incurred at September 30, 2017; however, actual claims and expenses may differ. Any subsequent changes in estimates are recorded in the period in which they are determined.

The Company uses a combination of insurance and self-insurance for workers’ compensation. Determining the reserve for workers’ compensation losses and costs that the Company has incurred as of the end of a reporting period involves significant ~~judgments~~judgment based on projected future events, including among other factors, potential settlements for pending claims, known incidents which may result in claims, estimates of incurred but not yet reported claims, changes in insurance premiums and/or estimated litigation ~~costs and other factors.~~costs. The Company regularly adjusts these estimates to reflect changes in the foregoing factors. However, since this reserve is based on estimates, it is possible the actual expenses incurred may differ from the amounts reserved. Any subsequent changes in estimates are recorded in the period in which they are determined.

Income Taxes

Income taxes are computed using the asset and liability method and current income taxes are recorded based on amounts refundable or payable in the current year. The effective tax rates for the three and nine ~~month periods~~months ended September 30, ~~2017~~2022 and ~~2016~~2021 differ from the statutory tax rates due to state income taxes, permanent tax differences, and changes in the deferred tax asset valuation allowance. The Company is impacted by the Texas Margin Tax (“TMT”), which effectively imposes tax on modified gross revenues for communities within the State of Texas. During each of the three and nine month periods ended September 30, 2017 and 2016, the Company consolidated 38 Texas communities, and the TMT increased the overall provision for income taxes.

Deferred income taxes are recorded based on the estimated future tax effects of loss carryforwards and temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates that are expected to apply to taxable income in the years in which ~~we expect~~the Company expects those carryforwards and temporary differences to be recovered or settled. Management regularly evaluates the future realization of deferred tax assets and provides a valuation allowance, if considered necessary, based on such evaluation. As part of the evaluation, management has evaluated taxable income in carryback years, future reversals of taxable temporary differences, feasible tax planning strategies, and future expectations of income. ~~Based upon this analysis, an adjustment~~As of December 31, 2021, the Company had a three-year cumulative net operating loss for its U.S. operations and is subject to ~~the~~annual operating loss utilization limits and accordingly, has provided a full valuation allowance ~~of $3.1 million~~on its U.S. and ~~$3.0 million was recorded during the third quarters of fiscal 2017 and 2016, respectively, to increase the~~state net deferred tax assets. The valuation allowance ~~provided to $50.0 million and $28.7 million at September 30, 2017 and 2016, respectively, and reduce~~reduces the Company’s net deferred tax assets to the amount that is ~~more~~“more likely than ~~not~~not” (i.e., a greater than 50% likelihood) to be realized. Cumulative adjustments to the valuation allowance for the first nine months of fiscal 2017 and 2016 were $19.1 million and $6.4 million, respectively. The adjustment to the valuation allowance during the first nine months of fiscal 2017 included an increase of $5.3 million for the adoption of ASU 2016-09, which was effective for the Company as of January 1, 2017, to recognize net operating loss carryforwards attributable to excess tax benefits on stock compensation that had not been previously recognized to additional paid in capital. However, in the event that wethe Company were to ultimately determine that it would be more likely than not that the Company would realize the benefit of deferred tax assets in the future in excess of their net recorded amounts, adjustments to deferred tax assets would increase net income in the period such determination was ~~made~~ .made. The benefits of the net deferred tax assets might not be realized if actual results differ from expectations.

The Company evaluates uncertain tax positions through consideration of accounting and reporting guidance on criteria, measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide ~~better~~enhanced financial statement comparability among different companies. The Company is required to recognize a tax benefit in its financial statements for an uncertain tax position only if management’s assessment is that such position is “more likely than not” ~~(i.e., a greater than 50% likelihood)~~ to be upheld on audit based ~~only~~solely on the technical merits of the tax position. The Company’s policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as income tax expense.

Redeemable Preferred Stock

The Company evaluates the classification of redeemable preferred stock based on the instrument’s specific terms and rights. Perpetual convertible preferred stock which can be converted to common stock outside of the Company’s control is ~~generally no longer subject~~classified as mezzanine equity, outside of the stockholders’ equity (deficit) section, and recorded at the maximum liquidation or conversion amount. During the year ended December 31, 2021, the Company issued 41,250 shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”). Dividends on redeemable preferred stock are recorded to ~~federal~~retained earnings or additional paid-in capital if retained earnings is an accumulated deficit. If the Board does not declare a dividend in respect of any dividend payment date, the amount of such accrued and ~~state~~unpaid dividend is added to the liquidation preference and compounds quarterly.

During the three months ended September 30, 2022, the Board did not declare a dividend, and accordingly, $1.1 million was added to the liquidation preference, effectively increasing the carrying value of the redeemable preferred stock.

Derivative Instruments

We use derivative instruments as part of our overall strategy to manage our exposure to market risks associated with the fluctuations in interest rates. We may also be required to enter into interest rate derivative instruments in compliance with debt agreements. We regularly monitor the financial stability and credit standing of the counterparties to our derivative instruments. We do not enter into derivative financial instruments for trading or speculative purposes. We record all derivatives at fair value. As of September 30, 2022, our derivative instruments consisted of an interest rate cap that was not designated as a hedge instrument. Changes in fair value of undesignated hedge instruments are recorded in current period earnings in interest expense. We did not have any derivative instruments as of December 31, 2021.

Net Income (Loss) Per Common Share

Basic income ~~tax audits for tax years prior to 2013.~~

~~Net Loss Per Share~~

~~Basic net loss~~(loss) per ~~common~~ share is computed by dividing net ~~loss~~income (loss) less distributions to participating securities using the two-class method and preferred stock dividends, including redeemable preferred stock classified as mezzanine equity, divided by the weighted average number of shares of common stock outstanding. Under the two-class method, net income is reduced by the amount of any dividends earned during the period. The remaining earnings (undistributed earnings) are allocated based on the weighted-average shares outstanding of common stock and Series A Preferred Stock (on an if-converted basis) to the extent that each preferred security may share in earnings as if all of the earnings for the period had been distributed. The total earnings allocated to common stock is then divided by the number of outstanding shares to which the earnings are allocated to determine the earnings per share. The two-class method is not applicable during periods with a net loss, as the holders of the Series A Preferred Stock have no obligation to fund losses.

Diluted net income (loss) per common share is computed under the two-class method by using the weighted-average number of shares of common stock outstanding, plus, for periods with net income attributable to common stockholders, the potential dilutive effects of instruments convertible into common stock, stock options, stock-based compensation awards and warrants. The Company analyzes the potential dilutive effect of convertible instruments under the “if-converted” method, in which it is assumed that the instruments convert into common stock at the beginning of the period or when issued, if later. The Company reports the more dilutive of the approaches (two class or “if-converted”) as its diluted net income per share during the period. ~~Potentially dilutive securities consist of unvested restricted shares and shares that could be issued under outstanding stock options. Potentially dilutive~~Dilutive securities are excluded from the ~~computation~~calculation of ~~net loss~~diluted income per ~~common~~ share if ~~their~~the effect ~~is antidilutive.~~

~~The following table sets forth the computation of basic and diluted net loss per share (in thousands, except for per share amounts):~~

would be anti-dilutive.

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Net loss

$
(8,132
)

$
(7,077
)

$
(37,809
)

$
(17,507
)
Net loss allocated to unvested restricted shares

—

—

—

—

Undistributed net loss allocated to common shares

$
(8,132
)

$
(7,077
)

$
(37,809
)

$
(17,507
)
Weighted average shares outstanding – basic

29,512

28,959

29,427

28,879

Effects of dilutive securities:

Employee equity compensation plans

—

—

—

—

Weighted average shares outstanding – diluted

29,512

28,959

29,427

28,879

Basic net loss per share – common shareholders

$
(0.28
)

$
(0.24
)

$
(1.28
)

$
(0.61
)
Diluted net loss per share – common shareholders

$
(0.28
)

$
(0.24
)

$
(1.28
)

$
(0.61
)

Awards of unvested restricted stock representing approximately 957,000 and 1,028,000 shares were outstanding for the three months ended September 30, 2017 and 2016, respectively, and awards of unvested restricted stock representing approximately 884,000 and 1,038,000 shares were outstanding for the nine months ended September 30, 2017 and 2016, respectively, and were antidilutive.

~~Treasury Stock~~

Segment Reporting

The Company ~~accounts for treasury stock under~~evaluates the ~~cost method~~performance and ~~includes treasury stock~~allocates resources of its senior living communities based on current operations and market assessments on a property-by-property basis. The Company does not have a concentration of operations geographically or by product or service as ~~a component of stockholders’ equity. All shares acquired by~~its management functions are integrated at the property level. The Company has determined that its operating units meet the criteria in ASC Topic 280, Segment Reporting, to be aggregated into one reporting segment. As such, the Company ~~have been purchased~~operates in ~~open-market transactions. There were no repurchases of the Company’s common stock during the nine month period ended September 30, 2017.~~

one segment.

Recently Issued Accounting ~~Guidance~~

Pronouncements Not Yet Adopted

In ~~January 2017,~~June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting ~~Standards~~Standard Update (“ASU”) ~~2017-01,~~ ~~Business Combinations~~2016-13, Financial Instruments – ~~Clarifying~~Credit Losses: Measurement of Credit Losses on Financial Instruments. Current GAAP requires an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. ASU 2016-13 replaces the ~~Definition~~current incurred loss methodology non-lease revenue credit losses and removes the thresholds that companies apply to measure credit losses on financial statements measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities with a methodology that reflects expected credit losses and requires consideration of a ~~Business~~.broader range of reasonable and supportable information to form credit loss estimates. For smaller reporting companies, ASU 2017-01 provides guidance in accounting for business combinations when determining if the transaction represents acquisitions or disposals of assets or of a business. Under ASU 2017-01, when determining whether an integrated set of assets and activities constitutes a business, entities must compare the fair value of gross assets acquired to the fair value of a single identifiable asset or group of similar identifiable assets. If substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in the single identifiable assets or group of similar identifiable assets, the integrated set of assets and activities is not characterized as a business. ASU 2017-01 is applied prospectively and2016-13 is effective for fiscal years and for interim periods within those fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early application is permitted. Management does not expect the adoption of ASU 2017-01 to have a material impact on the Company’s financial position, results of operations or cash flows.

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force).~~ ASU 2016-18 requires an entity to include in its cash and cash-equivalent balances in the statement of cash flows those amounts that are deemed to be restricted cash and restricted cash equivalents. ASU 2016-18 is effective for interim and annual reporting periods beginning after December 15, 2017. Management does not expect the adoption of ASU 2016-18 to have a material impact on the Company’s financial position, results of operations or cash flows.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments.~~ ASU 2016-15 amends the guidance in Accounting Standards Codification (“ASC”) 230, which often requires judgment to determine the appropriate classification of cash flows as operating, investing or financing activities and has resulted in diversity in practice in how certain cash receipts and cash payments are classified. ASU 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017 and should be applied on a retrospective basis. Management does not expect the adoption of ASU 2016-15 to have a material impact on the Company’s cash flows.

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Improvements to Employee Share-based Payment Accounting~~. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in ASU 2016-09 are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted the provisions of ASU 2016-09 on January 1, 2017, and incorporated the provisions of this update into its consolidated financial statements upon adoption. Upon adoption, the Company elected to change its accounting policy to account for forfeitures as they occur. This change was applied on a modified retrospective basis with a cumulative effect adjustment to retained earnings of $0.2 million. Additionally, the adoption of ASU 2016-09 resulted in the Company recording an adjustment of $5.3 million, which resulted in an increase to the Company’s deferred tax asset valuation allowance, to recognize net operating loss carryforwards attributable to excess tax benefits on stock compensation that had not been previously recognized to additional paid in capital. Excess tax benefits for share-based payments are now included in net operating activities rather than net financing activities within the Company’s Consolidated Statements of Cash Flows. As a result of the adoption of ASU 2016-09, these reporting changes have been applied prospectively and prior periods have not been adjusted.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~. ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 will be effective beginning in 2019. Early adoption of ASU 2016-02 as of its issuance is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting the new leases standard on the Company’s consolidated financial statements.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets. Under ASU 2014-09, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. ASU 2014-09 is effective for annual periods beginning after December 15, 2017.2022. The Company is currently evaluating the impact the adoption of ~~ASU 2014-09~~this guidance will have on ~~the Company’s~~its condensed consolidated financial statements and ~~disclosures; however, based~~disclosures.

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on ~~our initial assessment we do not believe it will have~~Financial Reporting, which provides optional guidance for a ~~significant impact~~limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on contracts, hedging relationships, and other transactions that reference the ~~Company’s financial statements.~~London Inter-Bank Offered Rate (“LIBOR”). The provisions of this standard are available for election through December 31, 2022. The Company is currently ~~planning to adopt~~evaluating its contracts and the ~~standard under~~optional expedients provided by this update.

3. Property and Equipment, net

The following is a summary of our property and equipment, net as of September 30, 2022 and December 31, 2021 (in thousands):


	Asset Lives	September 30, 2022		December 31, 2021
Land		$	47,598	$	46,069
Land improvements	5 to 20 years	19,606		19,146
Buildings and building improvements	10 to 40 years	837,331		814,035
Furniture and equipment	5 to 10 years	56,376		52,602
Automobiles	5 to 7 years	2,730		2,662
Assets under financing leases and leasehold improvements (1)		2,311		2,276
Construction in progress		1,289		392
Total property and equipment		967,241		937,182
Less accumulated depreciation and amortization		(344,488)		(315,983)
Total property and equipment, net		$	622,753	$	621,199

__________

(1) Leasehold improvements are amortized over the ~~modified retrospective adoption.~~

~~3. ACQUISITIONS~~

~~Fiscal 2017~~

~~Effective January 31, 2017 (the “Closing Date”), the Company acquired the underlying real estate through an asset acquisition associated with four~~shorter of the senior housing communities previously leased from Ventas, Inc. (“Ventas”) for an acquisition price of $85.0 million (the “Four Property Lease Transaction”). The Company obtained interest only, bridge financing from Berkadia Commercial Mortgage LLC (“Berkadia”) for $65.0 millionuseful life of the acquisition price with an initial variable interest rate of LIBOR plus 4.0% and a 36-month term, with the balance of the acquisition price paid from the Company’s existing cash resources. Additionally, the Company agreed to continue paying $2.3 million of the annual rents associated with the four communities acquired overasset or the remaining lease ~~term~~ term. Assets under financing leases and leasehold improvements include $0.5 million and $0.3 million of ~~the seven communities remaining in the Ventas Lease Portfolio. As such, the total additional~~financing lease payments to be paid over the remaining lease term were discounted back to the Closing Date utilizing a credit-adjusted risk-free rate to calculate $16.0 million for the fair value of the lease termination financing obligation. The fair value of the four communities acquired was determined to approximate $88.1 million. The fair values of the property, plant, and equipment of the acquired communities were determined utilizing a direct capitalization method considering facility net operating income and market capitalization rates. These fair value measurements were based on current market conditionsright-of-use assets as of ~~the acquisition date~~September 30, 2022 and ~~are considered Level 3 measurements (fair value measurements using significant unobservable inputs) within the fair value hierarchy of ASC 820-10,~~ ~~Fair Value Measurement~~. The range of capitalization rates utilized was 7.25% to 8.50%, depending upon the property type, geographical location, and overall quality of each respective community. The acquisition price of $85.0 million and lease termination obligation of $16.0 million resulted in total aggregate consideration byDecember 31, 2021, respectively.

On February 1, 2022, the Company for the acquisition of the four communities of $101.0 million. The Company recorded the difference between the total aggregate consideration ($101.0 million) and the estimated fair value of the four communities acquired ($88.1 million) of $12.9 million as a loss on facility lease termination during the first quarter of fiscal 2017. Additionally, the Company incurred approximately $0.4 million in transaction costs related to this acquisition which have been capitalized as a component of the cost of the assets acquired.

As a result of this acquisition, the Company recorded additions to property and equipment of approximately $88.1 million within the Company’s Consolidated Balance Sheets which will be depreciated or amortized over the estimated useful lives. The purchase accounting for the Springfield Transaction and Cincinnati Transaction, as defined below, which closed during fiscal 2016, was finalized during the first quarter of fiscal 2017 and valuation adjustments resulted in the Company reclassifying approximately $1.3 million from property and equipment to other assets to reflect the final purchase price allocation.

~~Fiscal 2016~~

Effective November 2, 2016, the Company closed the acquisition of one senior housing community located in Cincinnati, Ohio, for $29.0 million (the “Cincinnati Transaction”). The community consists of 45 independent living units and 77 assisted living units. The Company incurred approximately $0.2 million in transaction costs related to this acquisition which have been included in general and administrative expenses within the Company’s Consolidated Statements of Operations and Comprehensive Loss. The Company obtained financing from Fannie Mae for approximately $22.0 million of the acquisition price at a fixed interest rate of 4.24% with a 10-year term with the balance of the acquisition price paid from the Company’s existing cash resources.

Effective September 30, 2016, the Company closed the acquisition of one senior housing community located in Springfield, Massachusetts, for $27.0 million (the “Springfield Transaction”). The community consists of 97 independent living units and 90 assisted living units. The Company incurred approximately $0.3 million in transaction costs related to this acquisition which have been included in general and administrative expenses within the Company’s Consolidated Statements of Operations and Comprehensive Loss. The Company obtained financing from Fannie Mae for $20.3 million of the acquisition price at a fixed interest rate of 4.10% with a 10-year term with the balance of the acquisition price paid from the Company’s existing cash resources.

Effective September 27, 2016, the Company closed the acquisition of one senior housing community located in Kingwood, Texas for $18.0 million (the “Kingwood Transaction”). The community consists of 96 assisted living units. The Company incurred approximately $0.2 million in transaction costs related to this acquisition which have been included in general and administrative expenses within the Company’s Consolidated Statements of Operations and Comprehensive Loss. The Company obtained financing from Protective Life Insurance Company (“Protective Life”) for $13.0 million of the acquisition price at a fixed interest rate of 4.13% with a 15-year term with the balance of the acquisition price paid from the Company’s existing cash resources.

~~Effective February 16, 2016, the Company closed~~completed the acquisition of two senior ~~housing~~living communities located in ~~Pensacola, Florida,~~Indiana for ~~$48.0 million (the “Pensacola Transaction”).~~a combined purchase price of $12.3 million. The ~~two~~ communities consist of ~~179 assisted~~a total of 157 independent living units. The ~~Company incurred approximately $0.3 million~~acquisition price was funded with cash on hand. The acquired assets did not meet the definition of a business and, as such, the transaction was accounted for as an asset acquisition pursuant to the guidance in ~~transaction costs~~subsection 805-50 of Accounting Standards Codification ("ASC") 805, Business Combinations.

4. Accrued expenses

The following is a summary of our accrued expenses as of September 30, 2022 and December 31, 2021 (in thousands):


	September 30, 2022		December 31, 2021
Accrued payroll and employee benefits	$	14,355	$	13,592
Accrued interest (1)	8,768		7,311
Accrued taxes	7,779		7,278
Accrued professional fees	2,839		4,102
Accrued other expenses	2,878		4,743
Total accrued expenses	$	36,619	$	37,026

__________

(1) Includes accrued interest related to ~~this acquisition which have been included in general~~the remaining two Fannie Mae communities totaling $3.7 million and ~~administrative expenses within the Company’s Consolidated Statements~~$2.7 million as of ~~Operations~~September 30, 2022 and ~~Comprehensive Loss. The Company obtained financing from Protective Life for $35.0 million~~December 31, 2021, respectively. See “Transactions Involving Certain Fannie Mae Loans” disclosure below.

5. Notes Payable

Notes payable consists of the ~~acquisition price at a fixed~~following (in thousands):


	Maturity Dates	September 30, 2022		December 31, 2021
Fixed rate mortgage notes payable	2024 to 2045	$	506,137	$	561,006
Fannie Mae mortgage notes payable (1)	2022	31,991		31,991
Variable rate mortgage notes payable (2)	2026 to 2029	129,727		88,711
Notes payable - insurance	2023	1,395		3,483
Notes payable - other	2023	2,121		2,121
Total notes payable		$	671,371	$	687,312
Less: deferred financing costs, net		(5,436)		(4,201)
Total notes payable, net		$	665,935	$	683,111
Less: current portion		(46,137)		(69,769)
Total long-term notes payable, net		$	619,798	$	613,342

The following schedule summarizing our notes payable as of September 30, 2022 (in thousands):


Principal payments due in:
2022 (1)	$	35,813
2023	15,054
2024	152,155
2025	114,285
2026	155,919
Thereafter	198,145
Total notes payable, excluding deferred financing costs	$	671,371

__________

(1) See “Transactions Involving Certain Fannie Mae Loans” disclosure below.

(2) See Note 12 for interest rate cap agreements on variable rate mortgage notes payable.

As of ~~4.38%~~September 30, 2022, our fixed rate mortgage notes bear interest rates ranging from 3.6% to 6.3%. Our variable rate mortgage notes are based on either one-month LIBOR or the Secured Overnight Financing Rate (“SOFR”) plus an applicable margin. As of September 30, 2022, one-month LIBOR and one-month SOFR were 3.2% and 3.0%, respectively, and the applicable margins were 2.14% and 3.50%, respectively.

As of September 30, 2022, we had property and equipment with a ~~10-year~~net carrying value of $599.2 million that is secured by outstanding notes payable.

2022 Mortgage Refinance

~~Effective January 26, 2016,~~life of the loan. As defined and required in the Limited Payment Guaranty, the Company ~~closed~~is required to maintain certain covenants including maintaining a Tangible Net Worth of $150 million and Liquid Assets of at least $13 million which is inclusive of a $1.5 million debt service reserve provided by the ~~acquisition~~Company at the closing of ~~three senior housing~~the Refinance Facility. The debt service reserve may be released upon terms described in the “Loan Agreement” and is included in restricted cash.

The Refinance Facility also requires the financial performance of the ten communities ~~located~~to meet certain financial covenants, including a minimum debt service coverage ratio and a minimum debt yield (as defined in ~~Colby, Park Falls,~~ the Loan Agreement) with a first

measurement date as of June 30, 2022 and ~~Wisconsin Rapids, Wisconsin, for approximately $16.8 million (the “Pine Ridge Transaction”).~~ quarterly measurement dates thereafter. As of September 30, 2022, we were in compliance with the financial covenants. We can provide no assurance that any financial covenants will be met in the future.

The ~~three communities consist~~Refinancing Facility requires that the Company purchase and maintain an interest rate cap facility during the term of ~~138 assisted living units.~~ the Refinancing Facility. The Company is in process of obtaining the interest rate cap facility in compliance with the lender’s requirements.

In conjunction with the Refinancing Facility, the Company incurred ~~approximately $0.1~~costs of $2.2 million in March 2022. These costs, net of amortization of $0.3 million, are included in deferred financing costs at September 30, 2022.

The financing transaction ~~costs~~ generated a loss on refinancing of notes payable of $0.6 million which is included in loss on extinguishment of debt for the nine months ended September 30, 2022.

Transactions Involving Certain Fannie Mae Loans

The Coronavirus Aid, Relief and Economic Security (“CARES”) Act, among other things, permitted borrowers with mortgages from Government Sponsored Enterprises who experienced a financial hardship related to ~~this acquisition which have been included~~the COVID-19 pandemic to obtain forbearance of their loans for up to 90 days. During 2020, the Company entered into several loan forbearance agreements with the Federal National Mortgage Association (“Fannie Mae”). In July 2020, the Company elected not to pay $3.8 million on the loans for 18 properties as of that date as it initiated a process intended to transfer the operations and ownership of such properties to Fannie Mae. Therefore, the Company was in general and administrative expenses within the Company’s Consolidated Statements of Operations and Comprehensive Loss. The Company obtained financing from Protective Life for $11.3 million of the acquisition price at a fixed interest rate of 4.50% with a 10-year term with the balance of the acquisition price paid from the Company’s existing cash resources.

default on such loans.

As a result of the events of default and receivership order obtained by Fannie Mae, the Company discontinued recognizing revenues and expenses related to the 18 properties effective August 1, 2020, which was the date of default. In addition, the Company concluded that it was no longer entitled to receive any existing accounts receivable or revenue related to the properties, that all amounts held in escrow by Fannie Mae were forfeited, and that the Company no longer had control of the properties in accordance with GAAP. Accordingly, the Company derecognized the net carrying value of the properties and related assets from the financial statements and recorded a loss from the forbearance. The Company continues to recognize the related debt and liabilities until the debts are formally released. When these ~~acquisitions,~~debts are formally released, the net carrying value of the debts is derecognized and a gain on extinguishment of debt is recognized. During the three and nine months ended September 30, 2021, Fannie Mae completed the transition of legal ownership of five and fourteen, cumulatively, of the Company's properties, respectively, and the Company recorded ~~additions to property and equipment~~a gain on extinguishment of ~~approximately $126.0~~this debt for such periods of $54.1 million and ~~other assets~~$168.3 million, respectively.

As of ~~approximately $12.8 million, primarily consisting of in-place lease intangibles, within~~September 30, 2022, two properties remain for which the ~~Company’s Consolidated Balance Sheets which will be depreciated or amortized over the estimated useful lives.~~

~~4. DEBT TRANSACTIONS~~

~~On May~~legal ownership has not been transferred back to Fannie Mae. At both September 30, 2022 and December 31, ~~2017,~~2021, the Company ~~renewed certain insurance policies and entered into a finance agreement totaling approximately $1.6 million. The finance agreement has a fixed interest rate~~included $31.8 million in outstanding debt in current portion of ~~2.76% with the principal being repaid over an 11-month term.~~

~~On January 31, 2017, in conjunction with the Four Property Lease Transaction, the Company obtained $65.0 million~~notes payable, net of ~~mortgage debt from Berkadia. The new mortgage loan is interest-only and has a 3-year term with an initial variable interest rate of LIBOR plus 4.00%. The Company incurred approximately $0.9 million in~~ deferred financing costs ~~related to this loan, which are being amortized over 3 years.~~

~~The Company issued standby letters~~ of ~~credit, totaling approximately $3.9 million, for the benefit of Hartford Financial Services (“Hartford”) associated with the administration of workers compensation.~~

The Company issued standby letters of credit, totaling approximately $6.7 million, for the benefit of Welltower, Inc. (“Welltower”), formerly Healthcare REIT, Inc. on certain leases between Welltower and the Company.

~~The Company issued standby letters of credit, totaling approximately $2.8 million, for the benefit of HCP, Inc. (“HCP”) on certain leases between HCP and the Company.~~

~~The senior housing communities owned by the Company and encumbered by mortgage debt are provided as collateral under their respective loan agreements. At~~$0.2 million. As September 30, ~~2017~~2022 and December 31, 2016, these communities carried a total net book value of approximately $1.0 billion and $935.6 million, respectively, with total mortgage loans outstanding, excluding deferred loan costs, of approximately $960.22021, accrued interest related to the remaining two properties was $3.7 million and ~~$907.2~~$2.7 million, respectively.

~~In connection with the Company’s loan commitments described above, the Company incurred financing charges that were deferred and amortized over the terms~~ As of ~~the respective notes. At~~ September 30, ~~2017~~2022 and December 31, ~~2016,~~2021, the Company ~~had gross deferred loan costs~~did not manage these properties (or any properties) on behalf of ~~approximately $13.8 million and $12.8 million, respectively. Accumulated amortization was approximately $4.2 million and $3.0 million at September 30, 2017 and December 31, 2016, respectively. The~~Fannie Mae. Except for the non-compliance with Fannie Mae mortgages for the two remaining properties expected to transition back to Fannie Mae, as noted above, the Company was in compliance with all other aspects of its outstanding indebtedness at September 30, ~~2017, and December 31, 2016.~~

~~5. EQUITY~~

2022.

6. Redeemable Preferred Stock

In November 2021, the Company issued 41,250 shares of Series A Preferred Stock. The ~~Company~~Series A Preferred Stock is ~~authorized to issue preferred stock in series and to fix and state the voting powers and such designations, preferences and relative participating, optional or other special rights~~convertible outside of the ~~shares~~Company's control and in accordance with GAAP is classified as mezzanine equity, outside the stockholders’ equity (deficit) section, on our condensed consolidated balance sheets. The Series A Preferred Stock was initially recorded at fair value upon issuance in 2021, net of ~~each such series and~~issuance costs. The holders of Series A Preferred Stock are entitled to vote with the ~~qualifications, limitations and restrictions thereof. Such action may be taken by the Company’s board of directors without stockholder approval. The rights, preferences and privileges of~~ holders of common stock ~~are subject~~on all matters submitted to ~~the rights~~a vote of stockholders of the ~~holders of preferred stock. No preferred stock was outstanding as of September 30, 2017 and December 31, 2016.~~

~~Share Repurchases~~

On January 22, 2009, the Company’s board of directors approved a share repurchase program that authorized the Company to purchase up to $10.0 million of the Company’s common stock. Purchases may be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or block trades, or by any combination of such methods, in accordance with applicable insider trading and other securities laws and regulations. The size, scope and timing of any purchases will be based on business, market and other conditions and factors, including price, regulatory and contractual requirements or consents, and capital availability. The repurchase program does not obligate the Company to acquire any particular amount of common stock and the share repurchase authorization has no stated expiration date. Shares of stock repurchased under the program will be held as treasury shares. Pursuant to this authorization, during fiscal 2009, the Company purchased 349,800 shares at an average cost of $2.67 per share for a total cost to the Company of approximately $0.9 million. On January 14, 2016, the Company announced that its board of directors approved a continuation of the share repurchase program. Pursuant to this authorization, during the first quarter of fiscal 2016, the Company purchased 144,315 shares of its common stock at an average cost of $17.29 per share for a total cost to the Company of approximately $2.5 million. All such purchases were made in open market transactions. The Company has not purchased any additional shares of its common stock pursuant to the Company’s share repurchase program during fiscal 2017.

~~6. STOCK-BASED COMPENSATION~~

The Company recognizes compensation expense for share-based stock awards to certain employees and directors, including grants of employee stock options and awards of restricted stock, in the Company’s Consolidated Statements of Operations and Comprehensive Loss based on their fair values.

On May 8, 2007, the Company’s stockholders approved the 2007 Omnibus Stock and Incentive Plan for Capital Senior Living Corporation (as amended, the “2007 Plan”), which provides for, among other things, the grant of restricted stock awards, restricted stock units and stock options to purchase shares of the Company’s common stock. The 2007 Plan authorizes the Company to issue up to 4.6 million shares of common stock and the Company has reserved shares of common stock for future issuance pursuant to awards under the 2007 Plan. Effective May 8, 2007, the 1997 Omnibus Stock and Incentive Plan (as amended, the “1997 Plan”) was terminated and no additional shares will be granted under the 1997 Plan.

~~Stock Options~~

Although the Company has not granted stock options in recent years, the Company’s stock option program is a long-term retention program that is intended to attract, retain and provide incentives for employees, officers and directors and to more closely align stockholder interests with those of our employees and directors. The Company’s stock options generally vest over a period of one to five years and the related expense is amortized on a straight-line basis over the vesting period. No stock options were outstanding at September 30, 2017.

~~Restricted Stock~~

The Company may grant restricted stock awards and units to employees, officers, and directors in order to attract, retain, and provide incentives for such individuals and to more closely align stockholder and employee interests. For restricted stock awards and units without performance and market-based vesting conditions, the Company records compensation expense for the entire award on a straight-line basis over the requisite service period, which is generally a period of one to four years, unless the award is subject to certain accelerated vesting requirements. Restricted stock awards are considered outstanding at the time of grant since the holders thereof are entitled to dividends, upon vesting, and voting rights. For restricted stock awards with performance and market-based vesting conditions, total compensation expense is recognized over the requisite service period for each separately vesting tranche of the award as if the award is, in substance, multiple awards once the performance targetCompany. It is deemed probable that the Series A Preferred Stock could be redeemed for cash, and as such, the Series A Preferred Stock is required to be remeasured and adjusted to its maximum redemption value at the end of ~~achievement. Performance goals are evaluated periodically, and if such goals are~~each reporting period. However, to the extent that the maximum redemption value of the Series A Preferred Stock does not ~~ultimately met or it is not probable the goals will be achieved, no compensation expense is recognized and any previously recognized compensation expense is reversed for performance-based awards.~~

~~The Company recognizes compensation expense of a restricted stock award over its respective vesting or performance period based on~~exceed the fair value of the ~~award~~shares at the date of issuance, the shares are not adjusted below the fair value at the date of issuance. As of September 30, 2022 and December 31, 2021, the Series A Preferred Stock is carried at the maximum redemption value. The Series A Preferred Stock does not have a maturity date and therefore is considered as perpetual.

The Series A Preferred Stock has an 11% annual dividend calculated on the ~~grant date, net~~original investment of ~~actual forfeitures. A summary~~approximately $41.3 million accrued quarterly in arrears and compounded. Dividends are cumulative, and any declaration of dividends is at the discretion of the Company’s Board of Directors. If the Board does not declare a dividend in respect of any dividend payment date, the

amount of such accrued and unpaid dividend is added to the liquidation preference and compounds quarterly thereafter. During the three months ended September 30, 2022, the Board did not declare a dividend, and accordingly, $1.1 million was added to the liquidation preference of the Series A Preferred Stock, effectively increasing the carrying value of the Series A Preferred Stock. On June 8, 2022, the Company declared a $1.1 million cash dividend on the Series A Preferred Stock, which was paid in June 2022. On March 31, 2022, the Company declared a $1.1 million cash dividend on the Series A Preferred Stock which was included in accounts payable and accrued expense as of March 31, 2022, and paid in April 2022. There were no corresponding amounts for the three or nine months ended September 30, 2021, as there were no shares of Series A Preferred Stock outstanding during such periods.

7. Revenue

Revenue for the three and nine months ended September 30, 2022 and 2021 is comprised of the following components (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Housing and support services	$	51,703	$	48,249	$	151,854	$	138,709
Community fees	481		403		1,410		1,228
Ancillary services	301		316		838		882
Other operating revenue (1)	—		—		1,213		—
Resident revenue	52,485		48,968		155,315		140,819
Management fees	608		1,029		1,836		2,978
Managed community reimbursement revenue	7,694		7,927		21,757		33,317
Total revenues	$	60,787	$	57,924	$	178,908	$	177,114

__________

(1) Other operating revenue consists of Provider Relief Funds received from state departments due to financial distress impacts of COVID-19. The Company intends to pursue additional funding that may become available in the future, but there is no guarantee of qualifying for, or receiving, any additional relief funds in the future.

Community fees, ancillary services, management fees, and community reimbursement revenue represent revenue from contracts with customers in accordance with GAAP.

8. Stock-Based Compensation

During the three months ended September 30, 2022, the Company granted restricted stock units and restricted stock awards ~~activity~~under the Company’s 2019 Omnibus Incentive Plan. Grants of stock units and ~~related information~~awards were as follows:


(in thousands, except weighted average amount)	Restricted Stock Unit and Stock Award Grants	Weighted Average Grant Date Fair Value Per Share	Total Grant Date Fair Value
Three months ended September 30, 2022	30	20.39	$	246

The Company recognized $(0.6) million and $0.6 million in stock-based compensation expense for the ~~nine-month period~~three months ended September 30, ~~2017 is presented below:~~

Outstanding at
Beginning of Period

Granted

Vested

Cancelled

Outstanding at
End of Period

Shares

829,766

525,366

(335,690
)

(62,673
)

956,769

2022 and 2021, respectively. The ~~restricted stock outstanding at September 30, 2017 had an intrinsic value of approximately $12.0 million.~~

~~During~~negative expense for the ~~nine month period~~three months ended September 30, ~~2017,~~2022 is due to forfeiture credits as a result of executive personnel changes in September 2022. The Company recognized $3.5 million and $1.3 million in stock-based compensation expense for the Company awarded 525,366 shares of restricted common stock to certain employees and directors of the Company, of which 194,652 shares were subject to performance and market-based vesting conditions. The average market value of the common stock on the date of grant was $13.57. These awards of restricted stock vest over a one to four-year period and had an intrinsic value of approximately $7.1 million on the date of grant. Additionally, during the nine-month periodnine months ended September 30, 2017, the Company awarded 26,787 restricted stock units to certain directors of the Company with an average market value of $13.44 on the date of grant. These awards of restricted stock units vest over a one-year period2022 and ~~had an intrinsic value of approximately $0.4 million on the date of grant.~~

~~Unrecognized stock-based compensation expense is $10.6 million as~~2021, respectively.

9. Commitments and Contingencies

As of September 30, ~~2017. If all awards granted are earned, the Company expects this expense~~2022, we had contractual commitments of $7.0 million related to future renovations and technology enhancements to our communities. We expect these amounts to be ~~recognized over a one to three-year period for performance and market-based stock awards and a one to four-year period for nonperformance-based stock awards and units.~~

~~7. CONTINGENCIES~~

substantially expended during 2023.

The Company has claims incurred in the normal course of its business. Most of these claims are believed by management to be covered by insurance, subject to deductibles, normal reservations of rights by the insurance companies and possibly subject to certain exclusions in the applicable insurance policies. Whether or not covered by insurance, these claims, in the opinion of management, based on advice of legal counsel, should not have a material ~~effect~~impact on the condensed consolidated financial statements of the ~~Company if determined adversely~~Company.

10. Related Party Transactions

As of September 30, 2022, affiliates of Conversant Capital LLC owned approximately 57.9% of our outstanding shares of common stock (inclusive of common stock issuable upon conversion of outstanding Series A Preferred Stock and outstanding warrants). Series A Preferred Stock dividends recognized in additional paid-in capital were $1.1 million and $3.4 million for the three and nine months ended September 30, 2022, respectively. The $1.1 million recognized for the three months ended September 30, 2022 was not paid in cash, but was instead added to the ~~Company.~~

liquidation preference of the Series A Preferred Stock, effectively increasing the carrying value of the Series A Preferred Stock. Dividends of $3.0 million were paid on the Series A Preferred Stock during the nine months ended September 30, 2022, which included $2.3 million of dividends declared in 2022, and $0.7 million of dividends declared in 2021. There were no corresponding amounts for the three or nine months ended September 30, 2021 as there were no shares of Series A Preferred Stock outstanding during such period.

11. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company uses interest rate cap arrangements with financial institutions to manage exposure to interest rate changes for loans that utilize floating interest rates. As of September 30, 2022, we had ~~two~~an interest rate cap with an aggregate notional value of its senior housing communities located in southeast Texas impacted by Hurricane Harvey during the third quarter of fiscal 2017. Both of these communities continue to remain fully vacated and are undergoing repairs. We maintain insurance coverage on these communities which includes damage caused by flooding. The insurance claim for this incident required a deductible of $100,000$50.3 million that was ~~expensed~~entered into on March 1, 2022. The fair value of this interest rate cap as ~~a component~~ of ~~operating expenses in the Company’s Consolidated Statement of Operations and Comprehensive Loss in the third quarter of fiscal 2017. Through~~ September 30, ~~2017, we have incurred approximately $0.4~~2022 was $0.5 million ~~in clean-up~~(See Note 12, Derivatives and ~~physical repair costs~~Hedging), and ~~we expect~~was determined using significant observable inputs (Level 2), including quantitative models that utilize multiple market inputs to ~~incur additional repair costs which we believe~~value the position. The majority of market inputs are ~~probable of being recovered~~actively quoted and can be validated through ~~insurance proceeds. In addition to~~external sources, including brokers, market transactions and third-party pricing services.

Financial Instruments Not Reported at Fair Value

For those financial instruments not carried at fair value, the repairs of physical damage to the buildings, the Company’s insurance coverage includes loss of business income (“Business Interruption”). Business Interruption includes reimbursement for lost revenue as well as incremental expenses incurred as a result of the hurricane. The Company received an initial payment from our insurance underwriters of approximately $1.0 million in September of which approximately $0.7 million related to Business Interruption through September 30, 2017, which has been included as a reduction to operating expenses during the third quarter of fiscal 2017. Based upon our initial assessment of the physical damagescarrying amount and insurance coverage, the Company currently estimates insurance proceeds will be sufficient to reimburse the Company for all damages and repair costs to fully restore the communities to their condition prior to the incident.

~~8. FAIR VALUE OF FINANCIAL INSTRUMENTS~~

~~The carrying amounts and~~estimated fair values of our financial ~~instruments~~assets and liabilities were as follows at September 30, ~~2017,~~2022 and December 31, ~~2016, are as follows~~2021 (in thousands):

2017

2016

Carrying
Amount

Fair Value

Carrying
Amount

Fair Value

Cash and cash equivalents

$
9,186

$
9,186

$
34,026

$
34,026

Restricted cash

13,372

13,372

13,297

13,297

Notes payable, excluding deferred loan costs

961,404

909,106

910,234

879,448


	September 30, 2022				December 31, 2021
	Carrying Amount		Fair Value		Carrying Amount		Fair Value


Notes payable, excluding deferred financing costs	$	671,371	$	585,731	$	687,312	$	636,836

~~The following methods and assumptions were used in estimating~~

We believe the ~~Company’s fair value disclosures for financial instruments:~~

~~Cash and cash equivalents and Restricted cash:~~ ~~The~~ carrying ~~amounts reported in the Company’s Consolidated Balance Sheets for~~amount of cash and cash equivalents, ~~and~~ restricted cash, accounts receivable, and accounts payable and accrued liabilities approximate fair value ~~which represent level 1 inputs as defined in the accounting standards codification.~~

~~Notes payable:~~due to their short-term nature.

The fair value of notes payable, excluding deferred financing costs, is estimated using discounted cash flow analysis, based on current incremental borrowing rates for similar types of borrowing arrangements, which represent ~~level~~Level 2 inputs as defined in ASC 820, Fair Value Measurement.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Company may adjust the ~~accounting standards codification.~~

carrying amount of certain non-financial assets to fair value on a non-recurring basis when they are impaired. During the year ended December, 31, 2021, the Company recorded non-cash impairment charges of $6.5 million to property and equipment, net. The ~~estimated~~ fair value of ~~these~~the impaired assets was $14.0 million at December 31, 2021. The fair value of the property and equipment, net was primarily determined utilizing an income capitalization approach considering stabilized facility operating income and market capitalization rates of 8.25%. There were no impairment losses for the three and nine months ended September 30, 2022 and September 30, 2021.

12. Derivatives and Hedging

The Company uses derivatives as part of our overall strategy to manage our exposure to market risks associated with the fluctuations in interest rates. We may also be required to enter into interest rate derivative instruments in compliance with debt agreements. We do not enter into derivative financial instruments for trading or speculative purposes.

On March 1, 2022, the Company entered into an interest rate cap transaction for an aggregate notional amount of $50.3 million to reduce exposure to interest rate fluctuations associated with a portion of our variable mortgage notes payable. The interest rate cap agreement has a 24-month term and effectively caps LIBOR at 4.00% from March 1, 2022 through March 1, 2024 with respect to the portion of our floating rate indebtedness. In the event LIBOR is less than the capped rate, we will pay interest at the lower LIBOR rate. In the event LIBOR is higher than the capped rate, we will pay interest at the capped rate of 4.00%. The interest rate cap is not designated as a cash flow hedge under ASC 815-20, Derivatives - Hedging, therefore all changes in the fair value of the instrument are captured as a component of interest expense in the condensed consolidated statements of operations.

The following table presents the fair values of derivative assets and liabilities ~~could be affected by market changes and this~~in the condensed consolidated balance sheets (in thousands):


	September 30, 2022
	Derivative Asset				Derivative Liability
	Notional Amount		Fair Value		Notional Amount		Fair Value
Interest rate cap	$	50,260	$	464	$	—	$	—
Total derivative			$	464			$	—

The following table presents the effect ~~could be material.~~

of the derivative instrument on the condensed consolidated statements of operations (in thousands):



	Three months ended September 30,		Nine months ended September 30,
	2022	2021	2022	2021
Derivative not designated as hedge
Interest rate cap
Gain on derivative not designated as hedge included in interest expense	251	—	206	—

13. Subsequent Event

On August 9, 2022, the Company received a notice of intent from Welltower Victory II TRS LLC (“Welltower”) to transition management of its four properties that were under an interim management agreement. The transition was completed on October 20, 2022.

Item 2. ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~ ~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS.~~

~~Certain information contained~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help provide an understanding of our business and results of operations. This MD&A should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This report, ~~constitutes “Forward-Looking Statements” within~~including the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which can be identified by the use of forward-looking terminology such as “may,” “will,” “would,” “intend,” “could,” “believe,” “expect,” “anticipate,” “estimate” or “continue” or the negative thereof or other variations thereon or comparable terminology. The Company cautions readers thatfollowing MD&A, contains forward-looking statements ~~including, without limitation, those relating to~~regarding future events or trends that should be read in conjunction with the ~~Company’s future business prospects, revenues, working capital, liquidity, capital needs, interest costs,~~risks, uncertainties and ~~income, are subject to certain risks~~other factors described under “Cautionary Note Regarding Forward-Looking Statements” above in this Quarterly Report on Form 10-Q and ~~uncertainties that could cause actual~~“Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on April 15, 2022. Actual results tomay differ materially from those ~~indicated~~projected in ~~the forward-looking~~such statements ~~due to several important factors herein identified. These factors include the Company’s ability to find suitable acquisition properties at favorable terms, financing, licensing, business conditions,~~as a result of such risks, of downturn in economic conditions generally, satisfaction of closing conditions such as those pertaining to licensure, availability of insurance at commercially reasonable rates, and changes in accounting principles and interpretations, among others,uncertainties and other ~~risks~~factors.

Critical Accounting Policies and ~~factors identified from time~~Estimates

For a discussion of our critical accounting policies and estimates, please refer to ~~time in~~our Annual Report on Form 10-K for the ~~Company’s reports filed with the Securities and Exchange Commission (“SEC”).~~

fiscal year ended December 31, 2021. There have been no significant changes to our critical accounting policies since December 31, 2021.

Overview

The following discussion and analysis addresses (i) the Company’s results of operations for the three and nine ~~month periods~~months ended September 30, ~~2017~~2022 and ~~2016,~~2021, and (ii) liquidity and capital resources of the Company, and should be read in conjunction with the Company’s consolidated financial statements contained elsewhere in this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Company.

The Company is one of the ~~largest operators~~leading owner-operators of senior housing communities in the United States. The Company’s operating strategy is to provide value to its senior living residents by ~~providing~~offering quality senior living services at reasonable prices, while achieving and sustaining a strong, competitive position within its geographically concentrated regions, as well as continuing to enhance the performance of its operations. The Company provides senior living services to the ~~elderly,~~75+ population, including independent living, assisted living, and ~~home~~memory care services at reasonable prices. Many of the Company’s communities offer a continuum of care to meet ~~its residents’~~each resident’s needs as they change over time. This continuum of care, which integrates independent living, ~~and~~ assisted living, and ismemory care which may be bridged by home care through independent home care agencies, ~~or the Company’s home care agency,~~ sustains our residents’ autonomy and independence based on their physical and mental abilities.

As of September 30, ~~2017,~~2022, the Company operated ~~129~~76 senior housing communities in 2318 states with an aggregate capacity of approximately ~~16,500~~8,000 residents, including 8362 owned senior housing communities and 14 communities that we manage on behalf of third parties.

COVID-19 Pandemic

The COVID-19 pandemic significantly disrupted the nation’s economy, the senior living industry and the Company’s business beginning in March 2020. The COVID-19 pandemic caused a decline in the occupancy levels at the Company’s communities, which negatively impacted the Company’s revenues and operating results, that depend significantly on such occupancy levels. In an effort to protect its residents and employees and slow the spread of COVID-19 and in response to quarantines, shelter-in-place orders and other limitations imposed by federal, state and local governments, the Company ~~owned~~had previously restricted or limited access to its communities, including limitations on in-person prospective resident tours and, 46in certain cases, new resident admissions. As of March 31, 2022, all of the Company's senior ~~housing~~living communities ~~that~~were open for new resident move-ins, and the Company ~~leased.~~has continued to make progress to rebuild occupancy lost during the COVID-19 pandemic. Although vaccines are now widely available, we cannot predict the duration of the pandemic or its ongoing impact on our business. If the COVID-19 pandemic worsens, including the transmission of highly contagious variants of the COVID-19 virus, the Company may have to impose or revert to restricted or limited access to its communities.

The COVID-19 pandemic has required the Company to incur significant additional operating costs and expenses in order to implement enhanced infection control protocols and otherwise care for its residents, including increased costs and expenses relating to supplies and personal protective equipment, testing of the Company’s residents and employees, labor and specialized disinfecting and cleaning services, which has increased the costs of caring for the residents and resulted in reduced occupancy at such communities. During the three month periods ended September 30, 2022 and 2021, the Company incurred $0.1 million and $0.4 million, respectively, in direct costs related to the COVID-19 pandemic. During the nine months ended September 30, 2022 and 2021, the Company incurred $0.4 million and $1.7 million, respectively, in direct costs related to the COVID-19 pandemic.

respectively, which was expanded by the CARES Act to provide grants or other funding mechanism to eligible healthcare providers for healthcare-related or lost revenues attributable to COVID-19. Both the Phase 4 and Phase 3 Provider Relief Funds were recorded as other income in the periods ended June 30, 2022 and 2021, respectively. No grants were received during the three months ended September 30, 2022 and September 30, 2021. The CARES Act Provider Relief Funds are grants that do not have to be repaid provided we satisfy the terms and conditions of the CARES Act.

The Company elected to utilize the CARES Act payroll tax deferral program to delay payment of a portion of its payroll taxes incurred from April 2020 through December 2020. The Company repaid one-half of the deferral amount in December 2021 and the other half will become due on December 31, 2022. At September 30, 2022 and December 31, 2021, the Company had $3.7 million in deferred payroll taxes, which was included in accrued expenses.

CARES Act Provider Relief Funds are subject to the terms and conditions of the program, including stringent restrictions that funds may only be used to reimburse COVID-19 related expenses or lost revenue that are attributable to COVID-19 and have not been reimbursed from other sources or that other sources are not obligated to reimburse.While we intend to pursue additional funding that may become available, there can be no assurances that we will qualify for, or receive, any additional relief funds in the future.

Significant Financial and Operational Highlights

Operations

Weighted average occupancy for the three months ended September 30, 2022 and 2021 for the 60 communities owned by the Company during both periods was 83.7% and 81.0%, respectively, reflecting continued occupancy recovery. The average monthly rental rate for these communities for the three months ended September 30, 2022 was higher by 290 basis points when compared to the three months ended September 30, 2021.

Weighted average occupancy for the nine months ended September 30, 2022 and 2021 for the 60 communities owned by the Company during both periods was 83.1% and 78.2%, respectively, reflecting continued occupancy recovery. The average monthly rental rate for these communities for the nine months ended September 30, 2022 was higher by 340 basis points when compared to the nine months ended September 30, 2021.

During the three and nine months ended September 30, 2022, the Company continued to be impacted by the senior living industry's workforce challenges related to limited staff availability, which required the use of overtime, shift bonuses and contract labor to properly support our senior living communities and residents.

2022 Mortgage Refinance

In March 2022, the Company completed the refinancing of certain existing mortgage debt (“Refinance Facility”) for ten of its communities. The Refinance Facility includes an initial term loan of $80 million. In addition, $10 million is available as delayed loans that can be borrowed upon achieving and maintaining certain financial covenant requirements and up to an additional uncommitted $40 million may be available to fund future growth initiatives. In addition, the Company provided a limited payment guaranty (“Limited Payment Guaranty”) of 33%, that reduces to 25% and then to 10%, of the then outstanding balance of the Refinance Facility if the Company achieves certain financial covenants maintained over the life of the loan. As defined and required in the Limited Payment Guaranty, the Company is required to maintain certain covenants including maintaining Tangible Net Worth of $150 million and Liquid Assets of at least $13 million, which is inclusive of a $1.5 million debt service reserve provided by the Company at the closing of the Refinance Facility. The debt services reserve may be released upon terms described in the Loan Agreement and is included in restricted cash.

The Refinance Facility also requires the financial performance of the ten communities to meet certain financial covenants, including a minimum debt service coverage ratio and a minimum debt yield (as defined in the Loan Agreement) with a first measurement date as of June 30, 2022 and quarterly measurement dates thereafter. As of September 30, ~~2017,~~2022, the ~~Company also operated one home care agency.~~

~~Significant Financial and Operational Highlights~~

The Company primarily derives its revenue by providing senior living and healthcare services to the elderly. When comparing the third quarter of fiscal 2017 to the third quarter of fiscal 2016, the Company generated total revenue of approximately $117.3 million compared to total revenue of approximately $111.4 million, respectively, representing an increase of approximately $5.9 million, or 5.3%. The increase in revenue primarily results from a full quarter of activity for the senior housing communities acquired by the Company during fiscal 2016 which resulted in an increase in revenue of approximately $4.5 million and we experienced an increase in revenue at our same-store communities of approximately $1.4 million. The increase at our same-store communities during the third quarter of fiscal 2017 was negatively impacted by Hurricane Harvey which resulted in the evacuation of all of our residents at two of our senior housing communities located in southeast Texas. Both of these communities are undergoing repairs and continue to remain fully vacated which resulted in a decrease in our same-store revenue during the third quarter of fiscal 2017 of approximately $0.9 million.

The weighted average financial occupancy rate for our consolidated communities for the third quarters of fiscal 2017 and 2016 was 86.6% and 87.8%, respectively. Although consolidated occupancies decreased, we experienced an increase in average monthly rental rates for our consolidated communities of 3.4% when comparing the third quarter of fiscal 2017 to the third quarter of fiscal 2016. On a same-store basis, the weighted average financial occupancy rate for our consolidated communities for the third quarters of fiscal 2017 and 2016 was 86.6% and 87.8%, respectively. Although same-store occupancies decreased, we experienced an increase in average monthly rental rates of 2.7% when comparing the third quarter of fiscal 2017 to the third quarter of fiscal 2016.

The Company had two of its senior housing communities located in southeast Texas impacted by Hurricane Harvey during the third quarter of fiscal 2017. Both of these communities continue to remain fully vacated and are undergoing repairs. We maintain insurance coverage on these communities which includes damage caused by flooding. The insurance claim for this incident required a deductible of $100,000 that was expensed as a component of operating expenses in the Company’s Consolidated Statement of Operations and Comprehensive Loss in the third quarter of fiscal 2017. Through September 30, 2017, we have incurred approximately $0.4 million in clean-up and physical repair costs and we expect to incur additional repair costs which we believe are probable of being recovered through insurance proceeds. In addition to the repairs of physical damage to the buildings, the Company’s insurance coverage includes loss of business income (“Business Interruption”). Business Interruption includes reimbursement for lost revenue as well as incremental expenses incurred as a result of the hurricane. The Company received an initial payment from our insurance underwriters of approximately $1.0 million in September of which approximately $0.7 million related to Business Interruption through September 30, 2017, which has been included as a reduction to operating expenses during the third quarter of fiscal 2017. Based upon our initial assessment of the physical damages and insurance coverage, the Company currently estimates insurance proceeds will be sufficient to reimburse the Company for all damages and repair costs to fully restore the communities to their condition prior to the incident.

Effective January 31, 2017, the Company acquired the underlying real estate associated with four of the senior housing communities previously leased from Ventas, Inc. (“Ventas”) for an acquisition price of $85.0 million (the “Four Property Lease Transaction”). The Company obtained interest only, bridge financing from Berkadia for $65.0 million of the acquisition price with an initial variable interest rate of LIBOR plus 4.0% and a 36-month term, with the balance of the acquisition price paid from the Company’s existing cash resources. For additional information refer to Note 3, “Acquisitions”, within the notes to unaudited consolidated financial statements.

~~Facility Lease Transactions~~

The Company currently leases 46 senior housing communities from certain real estate investment trusts (“REITs”), 44 of which are accounted for as operating leases and two of which are accounted for as capital lease and financing obligations. The lease terms are generally for 10-15 years with renewal options for an additional 5-20 years at the Company’s option. Under these agreements, the Company is responsible for all operating costs, maintenance and repairs, insurance and property taxes. The following table summarizes each of the Company’s facility lease agreements as of September 30, 2017 (dollars in millions):

Landlord

Date of Lease

Number of
Communities

Value of
Transaction

Term

Initial
Lease Rate (1)

Lease
Acquisition and
Modification
Costs (2)

Deferred
Gains / Lease
Concessions (3)

Ventas

September 30, 2005

4

$
61.4

(4)
(Two five-year renewals)

8
%

$
7.7

$
4.2

Ventas

January 31, 2008

1

5.0

(4)
(Two five-year renewals)

7.75
%

0.2

—

Ventas

June 27, 2012

2

43.3

(4)
(Two five-year renewals)

6.75
%

0.8

—

HCP

May 1, 2006

3

54.0

(5)
(Two ten-year renewals)

8
%

0.3

12.8

HCP

May 31, 2006

6

43.0

(6)
(One ten-year renewal)

8
%

0.2

0.6

HCP

December 1, 2006

4

51.0

(5)
(Two ten-year renewals)

8
%

0.7

—

HCP

December 14, 2006

1

18.0

(5)
(Two ten-year renewals)

7.75
%

0.3

—

HCP

April 11, 2007

1

8.0

(5)
(Two ten-year renewals)

7.25
%

0.1

—

Welltower

April 16, 2010

5

48.5

15 years
(One 15-year renewal)

8.25
%

0.6

0.8

Welltower

May 1, 2010

3

36.0

15 years
(One 15-year renewal)

8.25
%

0.2

0.4

Welltower

September 10, 2010

12

104.6

15 years
(One 15-year renewal)

8.50
%

0.4

2.0

Welltower

April 8, 2011

4

141.0

15 years
(One 15-year renewal)

7.25
%

0.9

16.3

Subtotal

12.4

37.1

Accumulated amortization through September 30, 2017

(7.0
)

—

Accumulated deferred gains / lease concessions recognized through September 30, 2017

—

(23.6
)
Net lease acquisition costs / deferred gains / lease concessions as of September 30, 2017

$
5.4

$
13.5

~~(1)~~

~~Initial lease rates are measured against agreed upon fair market values and are subject to conditional lease escalation provisions as set forth in each respective lease agreement.~~

~~(2)~~

~~Lease acquisition and modification costs are being amortized over the respective lease terms.~~

~~(3)~~

Deferred gains of $34.5 million and lease concessions of $2.6 million are being recognized in the Company’s Consolidated Statements of Operations and Comprehensive Loss as a reduction in facility lease expense over the respective initial lease term. Lease concessions of $0.6 million relate to the lease transaction with HCP on May 31, 2006, and of $2.0 million relate to the lease transaction with Welltower on September 10, 2010.

~~(4)~~

Effective June 17, 2015, the Company executed amendments to the master lease agreements with Ventas to facilitate up to $24.5 million of leasehold improvements for 10 of the leased communities and extend the lease terms through September 30, 2025, with two 5-year renewal extensions available at the Company’s option. Effective June 30, 2016, the Company executed amendments to the master lease agreements with Ventas to increase the Special Projects Funds for leasehold improvements from $24.5 million to $28.5 million and extend the date for completion of the leasehold improvements to June 30, 2017. Effective June 30, 2017, the Company executed amendments to the master lease agreements with Ventas to extend the date for completion of the leasehold improvements to June 30, 2018. On January 31, 2017, the Company acquired from Ventas the underlying real estate associated with four of its operating leases. For additional information refer to Note 3, “Acquisitions”, within the notes to unaudited consolidated financial statements.

~~(5)~~

On November 11, 2013, the Company executed an amendment to the master lease agreement associated with nine of its leased communities with HCP to facilitate up to $3.3 million of leasehold improvements for one of the leased communities and extend the respective lease terms through October 31, 2020, with two 10-year renewal extensions available at the Company’s option.

~~(6)~~

~~On April 24, 2015, the Company exercised its right to extend the lease terms with HCP through April 30, 2026, with one 10-year renewal extension remaining available at the Company’s option.~~

Facility lease expense in the Company’s Consolidated Statements of Operations and Comprehensive Loss includes rent expense plus amortization expense relating to leasehold acquisition costs offset by the amortization of deferred gains and lease incentives. There are various financial covenants and other restrictions in the Company’s lease agreements. The Company was in compliance with ~~all~~such financial covenants. We can provide no assurance that financial covenants will be met in the future.

The Refinance Facility carries an initial interest rate of ~~its lease covenants at September 30, 2017~~one-month SOFR plus 3.50%, subject to a SOFR floor of 0.25% and ~~December 31, 2016.~~

~~Recent Accounting Developments~~

~~In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-01,~~ ~~Business Combinations – Clarifying the Definition~~a lower margin spread of ~~a Business. ASU 2017-01 provides guidance in accounting for business combinations when determining~~3.25% or 3.00% if the ~~transaction represents acquisitions or disposals of assets or of a business. Under ASU 2017-01, when determining whether~~Company achieves and maintains certain financial covenants. The Refinancing Facility requires that the Company purchase and maintain an ~~integrated set of assets and activities constitutes a business, entities must compare~~interest rate cap facility during the ~~fair value of gross assets acquired to the fair value of a single identifiable asset or group of similar identifiable assets. If substantially all~~term of the fair value of the gross assets acquired (or disposed of) is concentrated in the single identifiable assets or group of similar identifiable assets, the integrated set of assets and activities is not characterized as a business. ASU 2017-01 is applied prospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early application is permitted. Management does not expect the adoption of ASU 2017-01 to have a material impact on the Company’s financial position, results of operations or cash flows.

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)~~. ASU 2016-18 requires an entity to include in its cash and cash-equivalent balances in the statement of cash flows those amounts that are deemed to be restricted cash and restricted cash equivalents. ASU 2016-18 is effective for interim and annual reporting periods beginning after December 15, 2017. Management does not expect the adoption of ASU 2016-18 to have a material impact on the Company’s financial position, results of operations or cash flows.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments~~. ASU 2016-15 amends the guidance in Accounting Standards Codification (“ASC”) 230, which often requires judgment to determine the appropriate classification of cash flows as operating, investing or financing activities and has resulted in diversity in practice in how certain cash receipts and cash payments are classified. ASU 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017 and should be applied on a retrospective basis. Management does not expect the adoption of ASU 2016-15 to have a material impact on the Company’s cash flows.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~ . ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 will be effective beginning in 2019. Early adoption of ASU 2016-02 as of its issuance is permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief.Refinancing Facility. The Company is ~~currently evaluating~~in process of obtaining the ~~impact~~interest rate cap facility in compliance with the lender’s requirement.

Results of ~~adopting the new leases standard on the Company’s consolidated financial statements.~~

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~. ASU 2014-09 affects any entity that either enters into contracts with customers~~Operations

Three months ended September 30, 2022 as compared to ~~transfer goods or services or enters into contracts~~three months ended September 30, 2021

Revenues

Resident revenue for the transfer of nonfinancial assets. Under ASU 2014-09, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. ASU 2014-09 is effective for annual periods beginning after December 15, 2017. The Company is currently evaluating the impact the adoption of ASU 2014-09 will have on the Company’s consolidated financial statements and disclosures; however, based on our initial assessment we do not believe it will have a significant impact on the Company’s financial statements. The Company is currently planning to adopt the standard under the modified retrospective adoption.

~~Website~~

~~The Company’s Internet website,~~ ~~www.capitalsenior.com,~~ contains an Investor Relations section, which provides links to the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and Section 16 filings and any amendments to those reports and filings. These reports and filings are available free of charge through the Company’s Internet website as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.

~~Results of Operations~~

The following table sets forth for the periods indicated selected Consolidated Statements of Operations and Comprehensive Loss data in thousands of dollars and expressed as a percentage of total revenues.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

$

%

$

%

$

%

$

%

Revenues:

Resident revenue

$
117,318

100.0

$
111,436

100.0

$
350,026

100.0

$
331,643

100.0

Expenses:

Operating expenses (exclusive of facility lease expense and depreciation and amortization expense shown below)

74,636

63.6

69,622

62.5

220,703

63.1

203,307

61.3

General and administrative expenses

5,361

4.6

5,749

5.2

17,678

5.0

16,969

5.2

Facility lease expense

13,943

11.9

15,500

13.9

42,498

12.1

46,150

13.9

Loss on facility lease termination

—

—

—

—

12,858

3.7

—

—

Stock-based compensation expense

1,962

1.7

2,479

2.2

5,833

1.7

7,482

2.3

Depreciation and amortization expense

16,903

14.4

14,400

12.9

50,862

14.5

44,103

13.3

Total expenses

112,805

96.2

107,750

96.7

350,432

100.1

318,011

96.0

Income (Loss) from operations

4,513

3.8

3,686

3.3

(406
)

(0.1
)

13,632

4.0

Other income (expense):

Interest income

19

0.0

15

0.0

51

0.0

50

0.0

Interest expense

(12,531
)

(10.6
)

(10,636
)

(9.5
)

(36,940
)

(10.6
)

(30,966
)

(9.4
)
Loss on disposition of assets, net

(1
)

—

(16
)

(0.0
)

(126
)

(0.0
)

(53
)

(0.0
)
Other income

1

0.0

—

—

6

0.0

233

0.1

Loss before provision for income taxes

(7,999
)

(6.8
)

(6,951
)

(6.2
)

(37,415
)

(10.7
)

(17,104
)

(5.3
)
Provision for income taxes

(133
)

(0.1
)

(126
)

(0.1
)

(394
)

(0.1
)

(403
)

(0.1
)
Net loss

$
(8,132
)

(6.9
)

$
(7,077
)

(6.3
)

$
(37,809
)

(10.8
)

$
(17,507
)

(5.4
)

~~Three Months Ended~~three months ended September 30, ~~2017 Compared~~2022 was $52.5 million as compared to ~~the Three Months Ended September 30, 2016~~

~~Revenues.~~

~~Resident revenue was $117.3~~$49.0 million for the three months ended September 30, ~~2017,~~2021,an increase of $3.5 million, or 7.2%. The increase in revenue was primarily due to increased occupancy, increased average rent rates, and the acquisition of two new communities in early 2022.

Management fee revenue for the three months ended September 30, 2022 decreased by $0.4 million as compared to ~~$111.4~~the three months ended September 30, 2021, primarily as a result of managing fewer communities in 2022.

Managed community reimbursement revenue for the three months ended September 30, 2022 was $7.7 million as compared to $7.9 million for the three months ended September 30, ~~2016,~~2021, representing an increase of $5.9 million, or 5.3%. The increase in resident revenue primarily results from an increase of $4.5 million from the senior housing communities acquired by the Company during or subsequent to the third quarter of fiscal 2016 and an increase of $1.4 million due to a 2.7% increase in average monthly rental rates at the Company’s other consolidated same-store communities. The increase in resident revenue at our same-store communities was negatively impacted by Hurricane Harvey which resulted in the evacuation of all of our residents at two of our communities located in southeast Texas. Both of these communities are undergoing repairs and continue to remain fully vacated which resulted in a decrease in our same-store resident revenue of approximately $0.9 million.

~~Expenses.~~

Total expenses were $112.8 million in the third quarter of fiscal 2017 compared to $107.8 million in the third quarter of fiscal 2016, representing an increase of $5.1 million, or 4.7%. This increase is primarily the result of a $5.0 million increase in operating expenses and a $2.5 million increase in depreciation and amortization expense, partially offset by a $1.6 million decrease in facility lease expense, a $0.5 million decrease in stock-based compensation expense, and a $0.4 million decrease in general and administrative expenses.

•

The increase in operating expenses primarily results from an increase of $3.1 million from the senior housing communities acquired by the Company during or subsequent to the third quarter of fiscal 2016 and an increase of $2.6 million at the Company’s other consolidated same-store communities primarily due to increased wages and benefits to employees for annual merit increases and incremental costs, including increased contract labor costs for additional staffing required for newly licensed memory care and assisted living units, to support changes in occupancy with more of our residents at higher levels of care, slightly offset by a decrease of $0.7 million for insurance proceeds the Company received in September to cover Business Interruption through September 30, 2017, for the period the two communities located in southeast Texas were unoccupied in August and September due to Hurricane Harvey.

The increase in depreciation and amortization expense primarily results from an increase of $2.7 million from senior housing communities acquired by the Company during or subsequent to the third quarter of fiscal 2016 and an increase of $2.4 million due to an increase in depreciable assets at the Company’s other consolidated same-store communities, partially offset by a decrease in in-place lease amortization of $2.5 million from senior housing communities acquired by the Company prior to the third quarter of fiscal 2016.

~~The decrease in general and administrative expenses primarily results from~~ a decrease of $0.9 million in employee insurance benefits and claims paid which resulted in lower health insurance costs to the Company, slightly offset by an increase of $0.5 million in general operating costs primarily attributable to increases in employee wages and benefits for annual merit increases and incentive compensation and additional employees hired during or subsequent to the third quarter of fiscal 2016.

$0.2 million. The decrease ~~in facility lease expense~~was primarily results from the Four Property Lease Transaction that closed on January 31, 2017, whereby the Company acquired the underlying real estate associated with four of the senior housing communities previously leased from Ventas.

The decrease in stock-based compensation expense results from the Company granting fewer shares of restricted stock at lower grant date fair market values to certain employees of the Company subsequent to the third quarter of fiscal 2016.

~~Other income and expense.~~

~~Interest income generally reflects interest earned on the investment of cash balances and escrowed funds or interest associated with certain income tax refunds or property tax settlements.~~

Interest expense increased $1.9 million in the third quarter of fiscal 2017 when compared to the third quarter of fiscal 2016 primarily due to an increase of $0.6 million from the additional mortgage debt associated with the senior housing communities acquired by the Company during or subsequent to the third quarter of fiscal 2016 and an increase of $1.3 million at the Company’s other consolidated same-store communities due to additional mortgage debt added by the Company associated with certain refinancings and supplemental loans that occurred during or subsequent to the third quarter of fiscal 2016.

~~Provision for income taxes.~~

Provision for income taxes for the third quarter of fiscal 2017 was $0.1 million, or 1.7% of loss before income taxes, compared to a provision for income taxes of $0.1 million, or 1.8% of loss before income taxes, for the third quarter of fiscal 2016. The effective tax rates for the third quarters of fiscal 2017 and 2016 differ from the statutory tax rates due to state income taxes, permanent tax differences, and changes in the deferred tax asset valuation allowance. The Company is impacted by the Texas Margin Tax (“TMT”), which effectively imposes tax on modified gross revenues for communities within the State of Texas. During each of the third quarters of fiscal 2017 and 2016, the Company consolidated 38 Texas communities and the TMT increased the overall provision for income taxes. Management regularly evaluates the future realization of deferred tax assets and provides a valuation allowance, if considered necessary, based on such evaluation. As part of the evaluation, management has evaluated taxable income in carryback years, future reversals of taxable temporary differences, feasible tax planning strategies, and future expectations of income. Based upon this evaluation, adjustments to the deferred tax asset valuation allowance of $3.1 million and $3.0 million were recorded during the third quarters of fiscal 2017 and 2016, respectively, to reduce the Company’s net deferred tax assets to the amount that is more likely than not to be realized.

~~Net loss and comprehensive loss.~~

As a result of transitioning five Fannie Mae communities to other operators during the ~~foregoing factors, the Company reported net loss and comprehensive loss of $(8.1 million)~~three-month period ended September 30, 2021.

Expenses

Operating expenses for the three months ended September 30, ~~2017,~~2022 were $43.1 million as compared to ~~net loss and comprehensive loss of $(7.1 million)~~$40.7 million for the three months ended September 30, ~~2016.~~

2021, an increase of $2.4 million or 5.9%. The increase is primarily due to a $2.6 million increase in labor and employee-related expenses, a $0.4 million increase in utility costs, and a $0.3 million increase in food expenses, partially offset by the $1.0 million energy provider settlement from winter storm Uri expensed in Q3 2021.

~~Nine Months Ended~~General and administrative expenses for the three months ended September 30, ~~2017 Compared~~2022 were $5.9 million as compared to $7.5 million for the three months ended September 30, 2021, representing a decrease of $1.6 million. This decrease is primarily due to a $1.2 million decrease in stock-based compensation expense from prior year due to forfeiture credits in connection with executive personnel changes in September 2022, and a $0.4 million net decrease in recurring corporate expenses.

Managed community reimbursement expense for the three months ended September 30, 2022 was $7.7 million as compared to $7.9 million for the three months ended September 30, 2021, representing a decrease of $0.2 million. The decrease was primarily a result of transitioning of five Fannie Mae communities to other operators during the three-month period ended September 30, 2021.

Interest expense for the three months ended September 30, 2022 was $8.2 million as compared to $9.7 million for the three months ended September 30, 2021, representing a decrease of $1.5 million due to lower overall borrowings in 2022, partially offset by increased interest rates associated with the Company’s variable rate mortgages.

Gain on extinguishment of debt was $54.1 million for the three months ended September 30, 2021. The 2021 gain related to the derecognition of notes payable and liabilities as a result of the transition of legal ownership of five communities to Fannie Mae, the holder of the related non-recourse debt.

Results of Operations

Nine ~~Months Ended~~months ended September 30, ~~2016~~

~~Revenues.~~

2022 as compared to nine months ended September 30, 2021

Revenues

Resident revenue for the nine months ended September 30, 2022 was ~~$350.0~~$155.3 million as compared to $140.8 million for the nine months ended September 30, ~~2017,~~2021,an increase of $14.5 million, or 10.3%. The increase in revenue was primarily due to increased occupancy, increased average rent rates, and the acquisition of two new communities in early 2022.

Management fee revenue for the nine months ended September 30, 2022 decreased by $1.2 million as compared to ~~$331.6~~the nine months ended September 30, 2021, primarily as a result of managing fewer communities in 2022.

Managed community reimbursement revenue for the nine months ended September 30, 2022 was $21.8 million as compared to $33.3 million for the nine months ended September 30, 2016, representing an increase of $18.4 million, or 5.5%. The increase in resident revenue primarily results from an increase of $14.7 million from the senior housing communities acquired by the Company during or subsequent to the third quarter of fiscal 2016 and an increase of $3.7 million due to a 2.5% increase in average monthly rental rates at the Company’s other consolidated same-store communities. The increase in resident revenue at our same-store communities was negatively impacted by Hurricane Harvey which resulted in the evacuation of all of our residents at two of our communities located in southeast Texas. Both of these communities are undergoing repairs and continue to remain fully vacated which resulted in2021, a decrease ~~in our same-store resident revenue~~ of ~~approximately $0.9~~$11.5 million.

~~Expenses.~~

~~Total~~ The decrease was primarily a result of transitioning of 14 Fannie Mae communities to other operators during the nine-month period ended September 30, 2021.

Expenses

Operating expenses for the nine months ended September 30, 2022 were ~~$350.4~~$126.6 million as compared to $115.0 million for the nine months ended September 30, ~~2017,~~2021, an increase of $11.6 million or 10.1%. The increase is primarily due to a $9.2 million increase in labor and employee-related expenses including premium labor, a $1.0 million increase in food costs, and a $1.4 million increase in other operating expenses.

General and administrative expenses for the nine months ended September 30, 2022 were $23.6 million as compared to ~~$318.0~~$24.2 million for the nine months ended September 30, ~~2016, representing an increase~~2021, a decrease of ~~$32.4 million, or 10.2%.~~$0.6 million. This ~~increase~~decrease is primarily ~~the result of~~due to a $17.4 million increase in operating expenses, a $12.9 million loss on facility lease termination, a $6.8 million increase in depreciation and amortization expense, and a $0.7 million increase in general and administrative expenses, slightly offset by a $3.7$2.2 million decrease in ~~facility lease expense~~bonuses and a ~~$1.6~~$1.9 million decrease in ~~stock-based compensation expense.~~

~~The increase in operating~~payroll and employee-related expenses, primarily results from an increase of $10.8 million from the senior housing communities acquired by the Company during or subsequent to the first nine months of fiscal 2016 and an increase of $7.3 million at the Company’s other consolidated same-store communities primarily due to increased wages and benefits to employees for annual merit increases and incremental costs, including increased contract labor costs for additional staffing required for newly licensed memory care and assisted living units, to support changes in occupancy with more of our residents at higher levels of care, slightly offset by a decrease of $0.7 million for insurance proceeds the Company received in September to cover Business Interruption through September 30, 2017, for the period the two communities located in southeast Texas were unoccupied in August and September due to Hurricane Harvey.

The $12.9 million loss on facility lease termination is due to the Four Property Lease Transaction that closed on January 31, 2017, whereby the Company acquired the underlying real estate associated with four of the senior housing communities previously leased from Ventas. For additional information, refer to Note 3, “Acquisitions”, within the notes to unaudited consolidated financial statements.

The increase in depreciation and amortization expense primarily results from an increase of $6.2 million from senior housing communities acquired by the Company during or subsequent to the first nine months of fiscal 2016 and an increase of $6.7 million due to an increase in depreciable assets at the Company’s other consolidated same-store communities, partially offset by a ~~decrease in in-place lease amortization of $6.2~~$2.2 million ~~from senior housing communities acquired by the Company prior to fiscal 2016.~~

~~The~~ increase ~~in general and administrative expenses primarily results from an increase of $0.7 million in employee insurance benefits and claims paid which resulted in higher health insurance costs to the Company.~~

The decrease in facility lease expense primarily results from the Four Property Lease Transaction that closed on January 31, 2017, whereby the Company acquired the underlying real estate associated with four of the senior housing communities previously leased from Ventas.

~~The decrease~~ in stock-based compensation expense ~~results from the Company granting fewer shares of restricted stock at lower grant date fair market values to certain employees of the Company subsequent to the first nine months of fiscal 2016.~~

~~Other income~~ and ~~expense.~~

~~Interest income generally reflects interest earned on the investment of cash balances and escrowed funds or interest associated with certain income tax refunds or property tax settlements.~~

a $1.3 million increase in other expenses.

~~Interest~~Managed community reimbursement expense increased $6.0 million in the first nine months of fiscal 2017 when compared to the first nine months of fiscal 2016 primarily due to an increase of $2.0 million from the additional mortgage debt associated with the senior housing communities acquired by the Company during or subsequent to the first nine months of fiscal 2016 and an increase of $4.0 million at the Company’s other consolidated same-store communities due to additional mortgage debt added by the Company associated with certain refinancings and supplemental loans that occurred during or subsequent to the first nine months of fiscal 2016.

~~Other income in fiscal 2016 represents payments received by the Company associated with certain legal settlements.~~

~~Provision for income taxes.~~

Provision for income taxes for the first nine months of fiscal 2017 was $0.4 million, or 1.1% of loss before income taxes, compared to a provision for income taxes of $0.4 million, or 2.4% of loss before income taxes, for the first nine months of fiscal 2016. The effective tax rates for the first nine months of fiscal 2017 and 2016 differ from the statutory tax rates due to state income taxes, permanent tax differences, and changes in the deferred tax asset valuation allowance. The Company is impacted by the TMT, which effectively imposes tax on modified gross revenues for communities within the State of Texas. During each of the first nine months of fiscal 2017 and 2016, the Company consolidated 38 Texas communities and the TMT increased the overall provision for income taxes. Management regularly evaluates the future realization of deferred tax assets and provides a valuation allowance, if considered necessary, based on such evaluation. As part of the evaluation, management has evaluated taxable income in carryback years, future reversals of taxable temporary differences, feasible tax planning strategies, and future expectations of income. Based upon this evaluation, adjustments to the deferred tax asset valuation allowance of $19.1 million and $6.4 million were recorded during the first nine months of fiscal 2017 and 2016, respectively, to reduce the Company’s net deferred tax assets to the amount that is more likely than not to be realized. The adjustment to the valuation allowance during the first nine months of fiscal 2017 included an increase of $5.3 million for the adoption of ASU 2016-09, which was effective for the Company as of January 1, 2017, to recognize net operating loss carryforwards attributable to excess tax benefits on stock compensation that had not been previously recognized to additional paid in capital.

~~Net loss and comprehensive loss.~~

~~As a result of the foregoing factors, the Company reported net loss and comprehensive loss of $(37.8 million)~~ for the nine months ended September 30, ~~2017 and net loss and comprehensive loss of $(17.5 million)~~2022 was $21.8 million as compared to $33.3 million for the nine months ended September 30, ~~2016.~~

2021, a decrease of $11.5 million. The decrease was primarily a result of transitioning 14 Fannie Mae communities to other operators during the nine-month period ended September 30, 2021.

Interest expense for the nine months ended September 30, 2022 was $23.7 million as compared to $28.6 million for the nine months ended September 30, 2021, a decrease of $4.9 million, primarily due to lower overall borrowings in 2022, partially offset by increased interest rates associated with the Company’s variable rate mortgages.

Loss on extinguishment of debt for the nine months ended September 30, 2022 was $0.6 million as compared to a gain on extinguishment of debt of $168.3 million for the nine months ended September 30, 2021, a decrease of $168.9 million. The 2022 loss relates to the refinancing of debt in Q1 2022. The 2021 gain related to the derecognition of notes payable and liabilities as a result of transition of legal ownership of fourteen communities to Fannie Mae, the holder of the related non-recourse debt.

Other income for the nine months ended September 30, 2022 and for the nine months ended September 30, 2021 was $8.7 million. Both current year and prior year periods include cash received for CARES Act funding for healthcare-related expenses or lost revenues attributable to COVID-19.

Cash Flow Analysis

Nine months ended September 30, 2022 as compared to nine months ended September 30, 2021

Operating activities

Net cash provided by operating activities for the nine months ended September 30, 2022 was $2.9 million as compared to net cash used in operating activities of $7.2 million for the nine months ended September 30, 2021, an increase of $10.1 million primarily due to the timing of settlements of our receivables, current assets, and payables, as well as improved operations.

Investing activities

Net cash used in investing activities for the nine months ended September 30, 2022 was $30.7 million as compared to $7.1 million for the nine months ended September 30, 2021primarily due to increase in ongoing capital improvements and renovation projects at existing communities totaling $18.3 million, and the acquisition of two new communities in Q1 2022 for $12.3 million.

Financing activities

Net cash used in financing activities for the nine months ended September 30, 2022 was $24.3 million and primarily results from repayments of notes payable and deferred financing costs paid, net of proceeds from notes payable, of $20.7 million, related to our 2022 debt refinancing and $3.0 million of dividends paid to Series A Preferred Stockholders. The net cash provided by financing activities for the nine months ended September 30, 2021 was $6.6 million and primarily results from proceeds from notes payable, net of repayments.

Liquidity and Capital Resources

~~In addition to approximately $9.2 million~~

Short-term liquidity

Our primary source of ~~unrestricted~~short-term liquidity is our cash ~~balances on hand as~~and cash equivalents and results from operations. As of September 30, ~~2017,~~2022, we had $27.0 million of cash and cash equivalents excluding our restricted cash balance of $13.8 million. Due to the ~~Company’s~~continued effects of the COVID-19 pandemic, our operations have not yet returned to 2019, pre-pandemic levels. We currently anticipate cash flow from operations will continue to be impacted for at least the near-term. Our known liquidity requirements

primarily consist of funds necessary to pay for operating expenses related to our communities and other expenditures, including general and administrative expenses, interest and scheduled principal payments on our debt and dividends on our convertible preferred stock.

The Refinancing Facility we entered into in March 2022 contains financial covenants that were effective beginning June 30, 2022 and quarterly thereafter. As of September 30, 2022, the Company was in compliance with such covenants. There is no assurance that the Company will be able to meet any financial covenant requirements in the future. One of these financial covenants is that we are required to maintain cash and cash equivalents of no less than $13 million, inclusive of a $1.5 million lender service reserve, which is included in “restricted cash”. In connection with the Refinancing Facility, the Company is in the process of obtaining an interest rate cap to hedge against further exposure in a rising interest rate environment.

Additional short-term sources of liquidity include grants under the CARES Act. As described above, these grants are ~~expected~~available to reimburse the Company for COVID-19 related expenses. In April 2022, we received a grant of $9.1 million, where we determined we met the CARES Act requirements which allowed the Company to retain the funds and not repay the grant. There is no assurance that we will meet such requirements or qualify for, or receive, any additional CARES Act funds in the future, and we do not consider this to be ~~cash flows from operations, supplemental debt financings, additional proceeds from debt refinancings, equity issuances, and/or proceeds from~~a significant source of liquidity in the ~~sale of assets. The~~future. In addition, the Company ~~expects its available cash~~has historically received and cash flows from operations, supplemental debt financings, additional proceeds from debt refinancings, and proceeds from the sale of assets to be sufficient to fund its short-term working capital requirements. The Company’s long-term capital requirements, primarilyis eligible for ~~acquisitions and other corporate initiatives, could be dependent on its ability to access additional funds through joint ventures and the debt and/or equity markets.~~ funding in connection with various state programs.

Long-term liquidity

The Company, from time to time, considers and evaluates financial and capital raising transactions related to its portfolio, including ~~supplemental~~ debt ~~financings, debt~~financing or refinancings, ~~equity issuances,~~ purchases and sales of assets, ~~reorganizations~~ and other transactions. If capital were obtained through the issuance of Company equity, the issuance of Company securities would dilute the ownership of our existing stockholders and any newly issued securities may have rights, preferences, and/or privileges senior to those of our common stock. There can be no assurance that the Company will continue to generate cash flows at or above current levels, or that the Company will be able to obtain the capital necessary to meet the Company’s short and long-term capital requirements.

~~Changes~~

In connection with the refinancing transaction in March 2022, the Company was able to refinance certain debt due during 2022, 2023 and early 2024 with longer-term financing that matures in 2026. In addition, $10.0 million is available as delayed loans that can be borrowed upon achieving and maintaining certain financial covenant requirements and up to an additional uncommitted $40 million may be available to fund future growth initiatives. There is no assurance that we will be able to meet these financial covenant requirements.

As discussed in “Note 5. Notes Payable” of the condensed consolidated financial statements, the Company has scheduled maturities of debt coming due in the next five years and thereafter. The Company currently expects to be able to meet those maturities from cash on hand,future operations and future refinancings. The Refinance Facility matures in four years with an optional one-year extension if certain financial performance metrics and other customary conditions are maintained. There is no assurance that we will be able to meet such conditions or source refinancings at the time any of our debt matures or whether the terms of such refinancings will be comparable or satisfactory compared to our current ~~economic environment could result in decreases in the fair~~loans.

The Company has unencumbered properties with a net book value of assets, slowing of transactions, and tightening liquidity and credit markets. These impacts could make securing debt for acquisitions or refinancings for the Company, joint ventures, or buyers of the Company’s properties more difficult or on terms not acceptable to the Company. Additionally, the Company may be more susceptible to being negatively impacted by operating or performance deficits based on the exposure associated with certain lease coverage requirements.

~~In summary, the Company’s cash flows were as follows (in thousands):~~

Nine Months Ended
September 30,

2017

2016

Net cash provided by operating activities

$
42,281

$
36,574

Net cash used in investing activities

(115,149
)

(157,029
)
Net cash provided by financing activities

48,028

94,202

Net decrease in cash and cash equivalents

$
(24,840
)

$
(26,253
)

~~Operating activities.~~

~~The net cash provided by operating activities for the nine month period ended September 30, 2017, primarily results from net non-cash charges of $76.2~~$23.6 million a decrease in other assets of $5.1 million, an increase in other liabilities of $3.6 million, a decrease in prepaid expenses of $2.4 million, and a decrease in property tax and insurance deposits of $1.8 million, partially offset by net loss of $(37.8 million), an increase in accounts receivable of $3.8 million, a decrease in accrued expenses of $2.4 million, a decrease in deferred resident revenue of $1.5 million, and a decrease in accounts payable of $1.1 million. The net cash provided by operating activities for the nine months ended September 30, 2016, primarily results from net non-cash charges of $59.5 million, an increase in other liabilities of $8.7 million, and a decrease in property tax and insurance deposits of $1.2 million, partially offset by net loss of $(17.5 million), an increase in accounts receivable of $8.9 million, an increase in prepaid expenses of $2.1 million, a decrease in accrued expenses of $1.6 million, a decrease in accounts payable of $1.1 million, a decrease in deferred resident revenue of $0.8 million, and an increase in other assets of $0.5 million.

~~Investing activities.~~

The net cash used in investing activities for the nine month period ended September 30, 2017, primarily results from capital expenditures of $30.2 million associated with ongoing capital renovations and refurbishments and the acquisition of senior housing communities by the Company of $85.0 million. The net cash used in investing activities for the nine months ended September 30, 2016, primarily results from capital expenditures of $47.3 million and acquisitions of senior housing communities by the Company of $109.8 million.

~~Financing activities.~~

The net cash provided by financing activities for the nine month period ended September 30, 2017, primarily results from notes payable proceeds of $66.6 million, of which $65.0 million is related to new mortgage debt associated with the acquisition of senior housing communities by the Company and approximately $1.6 million related to insurance premium financing, partially offset by repayments of notes payable of $15.4 million, payments on capital lease and financing obligations of $2.1 million, and deferred financing charges paid of $1.0 million. The net cash provided by financing activities for the nine months ended September 30, 2016, primarily results from notes payable proceeds of $112.5 million, of which approximately $79.6 million is related to new mortgage debt associated with the acquisition of senior housing communities by the Company, approximately $28.8 million related to supplemental mortgage debt obtained on existing senior housing communities, and approximately $4.1 million related to insurance premium financing, partially offset by repayments of notes payable of $12.9 million, purchases of treasury stock of $2.5 million, deferred financing charges paid of $1.8 million, and payments on capital lease and financing obligations of $1.0 million.

~~Debt transactions.~~

On May 31, 2017, the Company renewed certain insurance policies and entered into a finance agreement totaling approximately $1.6 million. The finance agreement has a fixed interest rate of 2.76% with the principal being repaid over an 11-month term.

On January 31, 2017, in conjunction with the Four Property Lease Transaction, the Company obtained $65.0 million of mortgage debt from Berkadia Commercial Mortgage LLC (“Berkadia”). The new mortgage loan is interest-only and has a 3-year term with an initial variable interest rate of LIBOR plus 4.00%. The Company incurred approximately $0.9 million in deferred financing costs related to this loan, which are being amortized over 3 years.

The Company issued standby letters of credit, totaling approximately $3.9 million, for the benefit of Hartford Financial Services (“Hartford”) associated with the administration of workers compensation.

~~The Company issued standby letters of credit, totaling approximately $2.8 million, for the benefit of HCP, Inc. (“HCP”) on certain leases between HCP and the Company.~~

~~Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.~~

The Company’s primary market risk is exposure to changes in interest rates on debt and lease instruments. As of September 30, 2017, the Company had $961.4 million in outstanding debt comprised of various fixed and variable interest rate debt instruments of $884.8 million and $76.6 million, respectively. In addition, as of September 30, ~~2017,~~2022, which could provide a source of liquidity from new debt. In the near term, the Company ~~had $448.5 million~~intends to finance the two Indiana communities purchased in ~~future facility lease obligations with contingent rent increases on certain leases based on changes in the consumer price index or certain operational performance measures.~~

Changes in interest rates would affect the fair market values of the Company’s fixed interest rate debt instruments, but would not have an impact on the Company’s earnings or cash flows. Fluctuations in interest rates on the Company’s variable interest rate debt instruments, which are tied to LIBOR, would affect the Company’s earningsQ1 2022.

Item 3. Quantitative and cash flows but would not affect the fair market values of the variable interest rate debt. Each percentage point increase in interest rates would impact the Company’s annual interest expense by approximately $0.8 million based on the Company’s outstanding variable interest rate debt as of September 30, 2017. Increases in the consumer price index could have an effect on future facility lease expense if the leased community exceeds the contingent rent escalation thresholds set forth in each of the Company’s lease agreements.

Qualitative Disclosures About Market Risk

Not applicable.

Item 4. ~~CONTROLS AND PROCEDURES.~~

Controls and Procedures

Effectiveness of Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this ~~report.~~Quarterly Report on Form 10-Q. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to the Company’s management, including the CEO and CFO as appropriate, to allow timely decisions regarding required disclosure.

Based upon the controls ~~and~~evaluation, procedures evaluation and the material weakness described in our Annual Report on Form 10-K, which was filed with the SEC on April 15, 2022, the Company’s CEO and CFO have concluded that, as of the end of the period covered by this ~~report,~~Quarterly Report on Form 10-Q, the Company’s disclosure controls and procedures are ~~effective.~~

ineffective.

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company’s fiscal quarter ended September 30, ~~2017~~2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Remediation Plan

As disclosed in previous filings for the quarters ended June 30, 2021 and September 30, 2021, for the year ended December 31, 2021, and for the quarters ended March 31, 2022 and June 30, 2022, we identified a material weakness in our internal control over financial reporting. Due to challenges in maintaining necessary accounting staffing levels, this material weakness has not been remediated as of September 30, 2022, as disclosed above.

We have developed and initiated a plan for remediation of the material weakness, including developing and maintaining appropriate management review and process level controls. We will continue to monitor the effectiveness of our remediation measures in connection with our future assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures, and we will make any changes to the design of our plan and take such other actions that we deem appropriate given the circumstances. Based on the current remediation plan, we expect to have implemented the remediation process, including developing and maintaining appropriate management review and process level controls, by the end of the fourth quarter of 2022. Control weaknesses are not considered remediated until new internal controls have been operational for a period of time, are tested, and management concludes that these controls are operating effectively.

Part II. OTHER INFORMATION

Item 1. ~~LEGAL PROCEEDINGS.~~

Legal Proceedings

The Company has claims incurred in the normal course of its business. Most of these claims are believed by management to be covered by insurance, subject to normal reservations of rights by the insurance companies and possibly subject to certain exclusions in the applicable insurance policies. Whether or not covered by insurance, these claims, in the opinion of management, based on advice of legal counsel, should not have a material effect on the condensed consolidated financial statements of the Company if determined adversely to the Company.

Item 1A. ~~RISK FACTORS.~~

Our business involves various risks. When evaluating our business, the following information should be carefully considered in conjunction with the other information contained in our periodic filings with the SEC. Additional risks and uncertainties not known to us currently or that currently we deem to be immaterial also may impair our business operations. If we are unable to prevent events that have a negative effect from occurring, then our business may suffer. Negative events are likely to decrease our revenue, increase our costs, weaken our financial results and/or decrease our financial strength, and may cause our stock price to decline. Risk Factors.

There have been no material changes ~~in our~~to the risk factors ~~from those disclosed~~set forth in Part 1,I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2021.

Item 2. ~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.~~

Unregistered Sales of Equity Securities and Use of Proceeds

The following information is provided pursuant to Item 703 of Regulation S-K. The information set forth in the table below reflects ~~shares~~the common stock purchased by the Company ~~pursuant to its share repurchase program (as described below) as of~~for the quarter ended September 30, ~~2017.~~

2022:

Period

Total Number
of Shares
Purchased

Average
Price Paid
per Share

Total Shares Purchased
as Part of Publicly
Announced Program

Approximate Dollar Value of
Shares that May Yet Be
Purchased Under the Program

Total at June 30, 2017

494,115

$
6.94

494,115

$
6,570,222

July 1 – July 31, 2017

—

—

—

6,570,222

August 1 – August 31, 2017

—

—

—

6,570,222

September 1 – September 30, 2017

—

—

—

6,570,222

Total at September 30, 2017

494,115

$
6.94

494,115

$
6,570,222


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share	Total Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program

July 1 – July 31, 2022	—	—	—	6,570,222
August 1 – August 31, 2022	—	—	—	6,570,222
September 1 – September 30, 2022	—	—	—	6,570,222

__________

(1) Does not include shares withheld to satisfy tax liabilities due upon the vesting of restricted stock, all of which have been reported in Form 4 filings relating to the Company. The average price paid per share for such share withholding is based on the closing price per share on the vesting date of the restricted stock or, if such date is not a trading day, the trading day immediately prior to such vesting date.

On January 22, 2009, the Company’s board of directors approved a share repurchase program that authorized the Company to purchase up to $10.0 million of the Company’s common stock. On January 14, 2016, the Company announced that its board of directors approved a continuation of the share repurchase program. The repurchase program does not obligate the Company to acquire any particular amount of common stock and the share repurchase authorization has no stated expiration date. ~~On January 14, 2016, the Company announced that its board of directors approved a continuation of the share repurchase program.~~ All shares that have been acquired by the Company under this program were purchased in open-market transactions.

The Company may evaluate whether to acquire additional shares of common stock under this program at its discretion.

Item 3. ~~DEFAULTS UPON SENIOR SECURITIES.~~

Defaults upon Senior Securities

Not applicable.

Item 4. ~~MINE SAFETY DISCLOSURES.~~

Mine Safety Disclosures

Not applicable.

Item 5. ~~OTHER INFORMATION.~~

Other Information

Not applicable.

Item 6. ~~EXHIBITS.~~

Exhibits

The following documents are filed as a part of this report. Those exhibits previously filed and incorporated herein by reference are identified below. Exhibits not required for this report have been omitted.

~~Exhibit~~

~~Number~~

~~Description~~

Exhibit
Number

Description

~~3.1~~

—

3.1

Amended and Restated Certificate of Incorporation of the Registrant. (Incorporated by reference to ~~exhibit~~Exhibit 3.1 to the Registration Statement No. 333-33379 on Form S-1/A filed by the Company with the Securities and Exchange Commission on September 8, 1997.)

3.1.1

—

Amendment to Amended and Restated Certificate of Incorporation of the Registrant. (Incorporated by reference to ~~exhibit~~Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999, filed by the Company with the Securities and Exchange Commission.)

~~3.2~~

3.1.2

—

Second Amendment to Amended and Restated ~~Bylaws~~Certificate of Incorporation of the ~~Registrant.~~Registrant (Incorporated by reference to ~~exhibit~~Exhibit 3.1 ~~to the Company’s Current Report filed by the Company with the Securities and Exchange Commission on March 8, 2013.)~~

~~4.1~~

—

2007 Omnibus Stock and Incentive Plan for Capital Senior Living Corporation. (Incorporated by reference to exhibit 4.6 to the Company’s Registration Statement on Form S-8 filed by the Company with the Securities and Exchange Commission on May 31, 2007.)

~~4.2~~

—

First Amendment to 2007 Omnibus Stock and Incentive Plan for Capital Senior Living Corporation. (Incorporated by reference to exhibit 4.7 to the Company’s Registration Statement on Form S-8 filed by the Company with the Securities and Exchange Commission on May 31, 2007.)

~~4.3~~

—

~~Amended and Restated Second Amendment to 2007 Omnibus Stock and Incentive Plan for Capital Senior Living Corporation. (Incorporated by reference to exhibit 10.1~~ to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on ~~May 22, 2015.~~December 14, 2020.)

~~10.1~~

3.1.3

—

~~Employment Agreement, dated July 5, 2017, by~~Third Amendment to Amended and ~~between Capital Senior Living, Inc. and Brett D. Lee.~~Restated Certificate of Incorporation of the Registrant (Incorporated by reference to ~~exhibit 10.1~~Exhibit 3.1 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and ~~exchange~~Exchange Commission on ~~July 10, 2017.~~November 4, 2021.)

31.1*

3.1.4

—

Fourth Amendment to Amended and Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on November 10, 2021.)

3.2

Second Amended and Restated Bylaws of the Registrant. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report filed by the Company on Form 8-K with the Securities and Exchange Commission on March 8, 2013.)

3.2.1

Amendment to the Second Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on November 10, 2021.)

3.3

Certificate of Designation, Rights and Privileges of Series A Convertible Preferred Stock, par value $0.01, of the Company (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on November 4, 2021.)

10.1

Amendment to Employment Agreement, by and between Sonida Senior Living, Inc. and Brandon Ribar (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed by the Company with the Securities and Exchange Commission on August 5,2022.)

31.1*

Certification of ~~Chief~~Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)

31.2*

—

Certification of ~~Chief~~Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)

32.1*

—

Certification of ~~Lawrence A. Cohen~~Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002

32.2*

—

Certification of ~~Carey P. Hendrickson~~Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002

101.INS*

101*

—

The following materials from the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2022 formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Shareholders’ Equity (Deficit) and (v) related notes.

~~XBRL Instance Document~~

101.SCH*

104*

—

Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

~~XBRL Taxonomy Extension Schema Document~~

101.CAL*

—

~~XBRL Taxonomy Extension Calculation Linkbase Document~~

101.LAB*

—

~~XBRL Taxonomy Extension Label Linkbase Document~~

101.PRE*

—

~~XBRL Taxonomy Extension Presentation Linkbase Document~~

101.DEF*

—

~~XBRL Taxonomy Extension Definition Linkbase Document~~

*	~~Filed herewith.~~

*Filed herewith.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Sonida Senior Living, Inc

(Registrant)


~~Capital Senior Living Corporation~~ ~~(Registrant)~~ By:	/s/ BRANDON M. RIBAR
	Brandon M. Ribar
~~By:~~	President and Chief Executive Officer	~~/s/ Carey P. Hendrickson~~
	(Principal Executive Officer)	~~Carey P. Hendrickson~~
	Date: November 14, 2022	~~Senior~~


By:	/s/ KEVIN J. DETZ
	Kevin J. Detz
	Executive Vice President and Chief Financial Officer
		(Principal Financial ~~Officer and Duly Authorized~~ Officer)
		Date: November ~~2, 2017~~ 14, 2022

	September 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	9,186		$	34,026
Restricted cash		13,372			13,297
Accounts receivable, net		8,680			13,675
Property tax and insurance deposits		12,912			14,665
Prepaid expenses and other		3,978			6,365
Total current assets		48,128			82,028
Property and equipment, net		1,105,270			1,032,430
Other assets, net		18,233			31,323
Total assets	$	1,171,631		$	1,145,781
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,975		$	5,051
Accrued expenses		36,663			39,064
Current portion of notes payable, net of deferred loan costs		16,482			17,889
Current portion of deferred income		14,245			16,284
Current portion of capital lease and financing obligations		2,806			1,339
Federal and state income taxes payable		110			218
Customer deposits		1,428			1,545
Total current liabilities		75,709			81,390
Deferred income		10,504			12,205
Capital lease and financing obligations, net of current portion		49,857			37,439
Other long-term liabilities		15,273			15,325
Notes payable, net of deferred loan costs and current portion		935,345			882,504
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $.01 par value:
Authorized shares – 15,000; no shares issued or outstanding		—			—
Common stock, $.01 par value:
Authorized shares – 65,000; issued and outstanding shares – 30,478 and 30,012 in 2017 and 2016, respectively		310			305
Additional paid-in capital		177,610			171,599
Retained deficit		(89,547	)		(51,556	)
Treasury stock, at cost – 494 shares in 2017 and 2016		(3,430	)		(3,430	)
Total shareholders’ equity		84,943			116,918
Total liabilities and shareholders’ equity	$	1,171,631		$	1,145,781

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues:
Resident revenue	$	117,318		$	111,436		$	350,026		$	331,643
Expenses:
Operating expenses (exclusive of facility lease expense and depreciation and amortization expense shown below)		74,636			69,622			220,703			203,307
General and administrative expenses		5,361			5,749			17,678			16,969
Facility lease expense		13,943			15,500			42,498			46,150
Loss on facility lease termination		—			—			12,858			—
Stock-based compensation expense		1,962			2,479			5,833			7,482
Depreciation and amortization expense		16,903			14,400			50,862			44,103
Total expenses		112,805			107,750			350,432			318,011
Income (Loss) from operations		4,513			3,686			(406	)		13,632
Other income (expense):
Interest income		19			15			51			50
Interest expense		(12,531	)		(10,636	)		(36,940	)		(30,966	)
Loss on disposition of assets, net		(1	)		(16	)		(126	)		(53	)
Other income		1			—			6			233
Loss before provision for income taxes		(7,999	)		(6,951	)		(37,415	)		(17,104	)
Provision for income taxes		(133	)		(126	)		(394	)		(403	)
Net loss	$	(8,132	)	$	(7,077	)	$	(37,809	)	$	(17,507	)
Per share data:
Basic net loss per share	$	(0.28	)	$	(0.24	)	$	(1.28	)	$	(0.61	)
Diluted net loss per share	$	(0.28	)	$	(0.24	)	$	(1.28	)	$	(0.61	)
Weighted average shares outstanding — basic		29,512			28,959			29,427			28,879
Weighted average shares outstanding — diluted		29,512			28,959			29,427			28,879
Comprehensive loss	$	(8,132	)	$	(7,077	)	$	(37,809	)	$	(17,507	)

Landlord	Date of Lease	Number of Communities		Value of Transaction		Term	Initial Lease Rate (1)			Lease Acquisition and Modification Costs (2)			Deferred Gains / Lease Concessions (3)
Ventas	September 30, 2005		4	$	61.4	(4) (Two five-year renewals)		8	%	$	7.7		$	4.2
Ventas	January 31, 2008		1		5.0	(4) (Two five-year renewals)		7.75	%		0.2			—
Ventas	June 27, 2012		2		43.3	(4) (Two five-year renewals)		6.75	%		0.8			—
HCP	May 1, 2006		3		54.0	(5) (Two ten-year renewals)		8	%		0.3			12.8
HCP	May 31, 2006		6		43.0	(6) (One ten-year renewal)		8	%		0.2			0.6
HCP	December 1, 2006		4		51.0	(5) (Two ten-year renewals)		8	%		0.7			—
HCP	December 14, 2006		1		18.0	(5) (Two ten-year renewals)		7.75	%		0.3			—
HCP	April 11, 2007		1		8.0	(5) (Two ten-year renewals)		7.25	%		0.1			—
Welltower	April 16, 2010		5		48.5	15 years (One 15-year renewal)		8.25	%		0.6			0.8
Welltower	May 1, 2010		3		36.0	15 years (One 15-year renewal)		8.25	%		0.2			0.4
Welltower	September 10, 2010		12		104.6	15 years (One 15-year renewal)		8.50	%		0.4			2.0
Welltower	April 8, 2011		4		141.0	15 years (One 15-year renewal)		7.25	%		0.9			16.3
Subtotal											12.4			37.1
Accumulated amortization through September 30, 2017											(7.0	)		—
Accumulated deferred gains / lease concessions recognized through September 30, 2017											—			(23.6	)
Net lease acquisition costs / deferred gains / lease concessions as of September 30, 2017										$	5.4		$	13.5

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
Total at June 30, 2017		494,115	$	6.94		494,115	$	6,570,222
July 1 – July 31, 2017		—		—		—		6,570,222
August 1 – August 31, 2017		—		—		—		6,570,222
September 1 – September 30, 2017		—		—		—		6,570,222
Total at September 30, 2017		494,115	$	6.94		494,115	$	6,570,222