Exhibit 99.1
Unaudited Pro Forma Condensed Consolidated Financial Statements
On December 20, 2024, Summit Healthcare REIT, Inc. ("Summit" “we” or the “Company”), through our consolidated subsidiary Summit Georgia Holdings LLC, disposed of our our eight properties located in Georgia (“GA8 Properties”). As a result of the disposal, as of December 20, 2024, the GA8 Properties will no longer be included in our consolidated financial statements.
The following unaudited pro forma condensed consolidated balance sheet as of September 30, 2024 assumes that the sale occurred on September 30, 2024. The following unaudited pro forma condensed consolidated statements of operations of the Company for the nine month period ended September 30, 2024 and for the year ended December 31, 2023 are presented as if the disposal had occurred as of January 1, 2023.
The unaudited pro forma condensed consolidated financial statements are presented based on information currently available, are intended for informational purposes only, and do not purport to represent what the Summit financial position and results of operations actually would have been had the sale occurred on the dates indicated, or to project Summit's financial performance for any future period.
The unaudited pro forma condensed consolidated financial statements and the accompanying notes should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes and “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in Summit's Form 10-Q for the period ended September 30, 2024. The unaudited pro forma condensed consolidated financial statements and the accompanying notes should also be read in conjunction with the audited consolidated financial statements and accompanying notes and “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in Summit's Form 10-K for the year ended December 31, 2023.
The Historical columns in the Unaudited Pro Forma Condensed Consolidated Balance Sheet and the Unaudited Pro Forma Consolidated Statements of Operations reflect Summit's historical financial statements for the periods presented and do not reflect any adjustments related to the disposal.
The information in the Pro forma adjustments column in the Unaudited Pro Forma Condensed Consolidated Statements of Operations for the nine months ended September 30, 2024 was derived from the unaudited information supporting the Form 10-Q for the nine months ended September 30, 2024. The information in the Pro forma adjustments column in the Unaudited Pro Forma Consolidated Statements of Operations for the year ended December 31, 2023 was derived from the audited information supporting the Form 10-K for the fiscal year ended December 31, 2023.
SUMMIT HEALTHCARE REIT, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30, 2024
| Historical | Pro forma adjustments | Pro forma | ||||||||||||||
| ASSETS | ||||||||||||||||
Cash and cash equivalents | $ | 24,198,000 | $ | - | $ | 24,198,000 | ||||||||||
| Restricted cash | 2,873,000 | - | 2,873,000 | |||||||||||||
| Real estate properties, net | 40,270,000 | - | 40,270,000 | |||||||||||||
| Tenant and other receivables, net | 1,811,000 | - | 1,811,000 | |||||||||||||
| Other assets, net | 1,160,000 | - | 1,160,000 | |||||||||||||
| Equity-method investment | 415,000 | - | 415,000 | |||||||||||||
| Contract assets associated with GA8 Properties | 130,880,000 | (130,880,000 | ) | A | - | |||||||||||
| Total assets | $ | 201,607,000 | $ | (130,880,000 | ) | $ | 70,727,000 | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| Accounts payable and accrued liabilities | $ | 4,368,000 | $ | - | $ | 4,368,000 | ||||||||||
| Accrued interest associated with GA8 Properties | 8,540,000 | (8,540,000 | ) | A | - | |||||||||||
| Security deposits | 338,000 | - | 338,000 | |||||||||||||
| Loans payable, net of debt issuance costs | 41,315,000 | 41,315,000 | ||||||||||||||
| Loans payable associated with GA8 Properties | 122,340,000 | (122,340,000 | ) | A | - | |||||||||||
| Total liabilities | 176,901,000 | (130,880,000 | ) | 46,021,000 | ||||||||||||
| Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding September 30, 2024 | - | - | - | |||||||||||||
| Common stock, $0.001 par value; 290,000,000 shares authorized; 23,027,978 shares issued and outstanding at September 30, 2024 | 23,000 | - | 23,000 | |||||||||||||
| Additional paid-in capital | 116,509,000 | - | 116,509,000 | |||||||||||||
| Accumulated deficit | (91,972,000 | ) | - | (91,972,000 | ) | |||||||||||
| Total stockholders’ equity | 24,560,000 | - | 24,560,000 | |||||||||||||
| Noncontrolling interest | 146,000 | - | 146,000 | |||||||||||||
| Total equity | 24,706,000 | 24,706,000 | ||||||||||||||
| Total liabilities and stockholders’ equity | $ | 201,607,000 | $ | (130,880,000 | ) | $ | 70,727,000 | |||||||||
See accompanying notes to the unaudited condensed consolidated pro forma financial statements.
| SUMMIT HEALTHCARE REIT, INC. AND SUBSIDIARIES | |||||||||||||
| UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | |||||||||||||
| For the Nine Months Ended September 30, 2024 | |||||||||||||
| Historical | Pro forma adjustments | Pro forma | |||||||||||
| Revenues: | |||||||||||||
| Total rental revenues | $ | 7,648,000 | $ | (2,083,000 | ) | B | $ | 5,565,000 | |||||
| Resident fees and services | 5,217,000 | - | 5,217,000 | ||||||||||
| Asset management fees | 219,000 | - | 219,000 | ||||||||||
| Total operating revenue | 13,084,000 | (2,083,000 | ) | 11,001,000 | |||||||||
| Expenses: | |||||||||||||
| Property operating costs | 1,164,000 | (75,000 | ) | B | 1,089,000 | ||||||||
| Resident costs | 4,458,000 | - | 4,458,000 | ||||||||||
| General and administrative | 3,360,000 | (4,000 | ) | B | 3,356,000 | ||||||||
| Depreciation and amortization | 2,358,000 | (929,000 | ) | B | 1,429,000 | ||||||||
| Total operating expenses | 11,340,000 | (1,008,000 | ) | 10,332,000 | |||||||||
| Gain on derecognition associated with GA8 Properties | (27,455,000) | 27,455,000 | B | - | |||||||||
| Gain on sale of real estate properties | (11,151,000) | - | (11,151,000) | ||||||||||
| Operating income | 40,350,000 | (28,530,000 | ) | B | 11,820,000 | ||||||||
| Income from equity-method investee | 1,797,000 | - | 1,797,000 | ||||||||||
| Other income | 349,000 | (31,000) | B | 318,000 | |||||||||
| Interest expense | (2,617,000 | ) | 150,000 | B | (2,467,000 | ) | |||||||
| Interest expense associated with GA8 Properties | (13,233,000) | 13,233,000 | B | - | |||||||||
| Net income | $ | 26,646,000 | (15,178,000 | ) | $ | 11,468,000 | |||||||
| Noncontrolling interests’ share in net income | (83,000) | - | (83,000) | ||||||||||
| Net income applicable to common stockholders | $ | 26,563,000 | $ | (15,178,000) | $ | 11,385,000 | |||||||
| Basic and diluted loss per common share applicable to common stockholders | $ | 1.15 | $ | 0.49 | |||||||||
| Weighted average shares used to calculate basic and diluted net loss per common share | 23,027,978 | 23,027,978 | |||||||||||
See accompanying notes to the unaudited condensed consolidated pro forma financial statements.
| SUMMIT HEALTHCARE REIT, INC. AND SUBSIDIARIES | |||||||||||||
| UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS | |||||||||||||
| For the Year Ended December 31, 2023 | |||||||||||||
| Historical | Pro forma adjustments | Pro forma | |||||||||||
| Revenues: | |||||||||||||
| Total rental revenues | $ | 18,072,000 | $ | (11,829,000 | ) | B | $ | 6,243,000 | |||||
| Resident fees and services | 6,823,000 | - | 6,823,000 | ||||||||||
| Asset management fees | 554,000 | - | 554,000 | ||||||||||
| Total operating revenue | 25,449,000 | (11,829,000 | ) | 13,620,000 | |||||||||
| Expenses: | |||||||||||||
| Property operating costs | 3,773,000 | (1,287,000 | ) | B | 2,486,000 | ||||||||
| Resident costs | 5,772,000 | - | 5,772,000 | ||||||||||
| General and administrative | 5,171,000 | (7,000 | ) | B | 5,164,000 | ||||||||
| Depreciation and amortization | 7,318,000 | (5,102,000 | ) | B | 2,216,000 | ||||||||
| Impairment of real estate properties and intangible assets | 11,387,000 | (11,387,000 | ) | B | - | ||||||||
| Total operating expenses | 33,421,000 | (17,783,000 | ) | 15,638,000 | |||||||||
| Loss on derecognition associated with GA8 Properties | - | 4,543,000 | C | 4,543,000 | |||||||||
| Operating loss | (7,972,000 | ) | 1,411,000 | B | (6,561,000 | ) | |||||||
| Loss from equity-method investee | (754,000) | - | (754,000 | ) | |||||||||
| Other income | 399,000 | (182,000) | B | 217,000 | |||||||||
| Interest expense | (4,270,000 | ) | 768,000 | B | (3,502,000 | ) | |||||||
| Interest expense associated with GA8 properties | (13,251,000 | ) | 13,251,000 | B | - | ||||||||
| Gain on consolidation of interest in unconsolidated equity-method investment | 1,066,000 | - | 1,066,000 | ||||||||||
| Net loss | (24,782,000 | ) | 15,248,000 | (9,534,000 | ) | ||||||||
| Noncontrolling interests’ share in net income | (19,000 | ) | - | (19,000 | ) | ||||||||
| Net loss applicable to common stockholders | $ | (24,801,000 | ) | $ | 15,248,000 | $ | (9,553,000 | ) | |||||
| Basic and diluted loss per common share from continuing operations applicable to common stockholders | $ | (1.08 | ) | $ | (0.41 | ) | |||||||
| Weighted average shares used to calculate basic and diluted net loss per common share | 23,027,978 | 23,027,978 | |||||||||||
See accompanying notes to the unaudited condensed consolidated pro forma financial statements.
SUMMIT HEALTHCARE REIT, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Note A:
The following assets and liabilities related to the GA8 Properties were included in the unaudited condensed consolidated balance sheet as of September 30, 2024 and are being removed in the unaudited pro forma condensed consolidated balance sheet as a result of the Sale:
| ASSETS | ||||
| Contract assets associated with GA8 Properties | $ | 130,880,000 | ||
| Total assets | 130,880,000 | |||
| LIABILITIES | ||||
| Accrued interest associated with GA8 Properties | $ | 8,540,000 | ||
| Loans payable associated with GA8 Properties | 122,340,000 | |||
| Total liabilities | $ | 130,880,000 | ||
| Net Equity | $ | - |
Note B:
The following operations for the year ended December 31, 2023 and the nine months ended September 30, 2024 related to the GA8 Properties have been removed from the Company’s historical balances for pro forma purposes:
| For the Year Ended December 31, 2023 | For the Nine Months Ended September 30, 2024 | |||||||
| Revenues: | ||||||||
| Total rental revenues | $ | 11,829,000 | $ | 2,083,000 | ||||
| 11,829,000 | 2,083,000 | |||||||
| Expenses: | ||||||||
| Property operating costs | 1,287,000 | 75,000 | ||||||
| General and administrative | 7,000 | 4,000 | ||||||
| Depreciation and amortization | 5,102,000 | 929,000 | ||||||
| Impairment of real estate properties and intangible assets | 11,387,000 | - | ||||||
| Total operating expenses | 17,783,000 | 1,008,000 | ||||||
| Gain on derecognition associated with GA8 Properties | - | (27,455,000 | ) | |||||
| Operating income | (5,954,000 | ) | 28,530,000 | |||||
| Other income | 182,000 | 31,000 | ||||||
| Interest expense | (768,000 | ) | (150,000 | ) | ||||
| Interest expense associated with GA8 properties | (13,251,000 | ) | (13,233,000 | ) | ||||
| Net (loss) income | $ | (19,791,000 | ) | $ | 15,178,000 | |||
Note C:
The following loss for the year ended December 31, 2023 has been calcuated as if the GA8 Properties were disposed of as of Janaury 1, 2023.
| Total GA8 assets as of January 1, 2023 | $ | 131,671,000 | ||
| Total GA8 liabilities as of January 1, 2023 | $ | 127,128,000 | ||
| Loss associated with the disposal of the GA8 Properties | $ | 4,543,000 |
