snda-20230630

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 June 30, 2023


☐			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

Sonida Senior Living, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware						75-2678809
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)


14755 Preston Road, Suite 810, Dallas, Texas						75254
(Address of principal executive offices)						(Zip code)

(972) 770-5600

(Registrant’s 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 every Interactive Data File required to be submitted 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 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

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 x

As of August 10, 2023, the Registrant had 7,777,846 shares of common stock outstanding.

Sonida Senior Living, Inc.

Form 10-Q Table of Contents

For the Period Ended June 30, 2023


			Page Number
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets — June 3 0 , 2023 (Unaudited) and December 31, 2022			4
Condensed Consolidated Statements of Operations — Three and S ix Months Ended June 3 0 , 2023 and 2022 (Unaudited)			5
Condensed Consolidated Statements of Shareholders’ Equity (Deficit)— Three and Six Months Ended June 3 0 , 2023 and 2022 (Unaudited)			6
Condensed Consolidated Statements of Cash Flows — Six Months Ended June 3 0 , 2023 and 2022 (Unaudited)			7
Notes to Condensed Consolidated Financial Statements (Unaudited)			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			34
Item 4. Controls and Procedures			34
Part II. Other Information			35
Item 1. Legal Proceedings			35
Item 1A. Risk Factors			35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 3. Defaults Upon Senior Securities			36
Item 4. Mine Safety Disclosures			36
Item 5. Other Information			36
Item 6. Exhibits			36
Signature			38

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 year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2023, as well as “Item . 1A. R isk Factors” in this Quarterly Report on Form 10-Q, 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, including the Company’s ability to complete the modifications to its loan agreements described in this Quarterly Report on Form 10-Q;

•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 Part I of this Quarterly Report on Form 10-Q;

•the departure of certain 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

Sonida Senior Living, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)


	June 30, 2023		December 31, 2022
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	7,203	$	16,913
Restricted cash	13,417		13,829
Accounts receivable, net	7,586		6,114

Prepaid expenses and other assets	5,008		4,099
Derivative assets	1,600		2,611
Total current assets	34,814		43,566
Property and equipment, net	606,069		615,754

Other assets, net	1,226		1,948
Total assets	$	642,109	$	661,268
Liabilities and Equity
Current liabilities:
Accounts payable	$	10,005	$	7,272
Accrued expenses	36,008		36,944
Current portion of notes payable, net of deferred loan costs	88,636		46,029
Deferred income	4,142		3,419
Federal and state income taxes payable	61		—
Other current liabilities	554		653



Total current liabilities	139,406		94,317
Notes payable, net of deferred loan costs and current portion	547,381		625,002
Other liabilities	77		113
Total liabilities	686,864		719,432
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 June 30, 2023 and December 31, 2022	45,978		43,550
Shareholders’ deficit:
Preferred stock, $0.01 par value:
Authorized shares - 15,000 as of June 30, 2023 and December 31, 2022; none issued or outstanding, except Series A convertible preferred stock as noted above	—		—
Common stock, $0.01 par value:
Authorized shares - 15,000 as of June 30, 2023 and December 31, 2022; 7,178 and 6,670 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	72		67
Additional paid-in capital	294,320		295,277
Retained deficit	(385,125)		(397,058)
Total shareholders’ deficit	(90,733)		(101,714)
Total liabilities, redeemable preferred stock and shareholders’ deficit	$	642,109	$	661,268

See Notes to Condensed Consolidated Financial Statements.

Sonida Senior Living, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues:
Resident revenue	$	56,960	$	51,996	$	113,566	$	102,830
Management fees	531		600		1,036		1,228
Managed community reimbursement revenue	5,363		7,041		10,325		14,063
Total revenues	62,854		59,637		124,927		118,121
Expenses:
Operating expense	44,662		41,510		88,470		83,439
General and administrative expense	6,574		9,439		13,637		17,712

Depreciation and amortization expense	9,927		9,671		19,808		19,249
Managed community reimbursement expense	5,363		7,041		10,325		14,063
Total expenses	66,526		67,661		132,240		134,463
Other income (expense):
Interest income	188		2		382		3
Interest expense	(8,558)		(7,920)		(17,425)		(15,523)


Gain (loss) on extinguishment of debt, net	—		—		36,339		(641)
Gain on sale of assets, net	—		—		251		—
Other income (expense), net	(117)		8,532		(179)		8,669
Income (loss) before provision for income taxes	(12,159)		(7,410)		12,055		(23,834)
Provision for income taxes	(53)		—		(122)		(254)
Net income (loss)	(12,212)		(7,410)		11,933		(24,088)
Dividends on Series A convertible preferred stock	—		(1,134)		—		(2,267)
Undeclared dividends on Series A convertible preferred stock	(1,230)		—		(2,428)		—
Undistributed net income allocated to participating securities	—		—		(1,419)		—
Net income (loss) attributable to common stockholders	$	(13,442)	$	(8,544)	$	8,086	$	(26,355)

Weighted average common shares outstanding — basic	6,381		6,358		6,374		6,350
Weighted average common shares outstanding — diluted	6,381		6,358		6,856		6,350

Basic net income (loss) per common share	$	(2.11)	$	(1.34)	$	1.27	$	(4.15)
Diluted net income (loss) per common share	$	(2.11)	$	(1.34)	$	1.18	$	(4.15)

See Notes to Condensed Consolidated Financial Statements.

Sonida Senior Living, Inc.

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

(in thousands)


	Common Stock			Additional Paid-In Capital		Retained Deficit
	Shares	Amount						Total
Balance as of December 31, 2021	6,634	$	66	$	295,781	$	(342,657)	$	(46,810)
Series A convertible preferred stock dividends	—	—		(1,133)		—		(1,133)
Stock-based plan activity	31	1		—		—		1
Non-cash stock-based compensation	—	—		1,827		—		1,827
Net loss	—	—		—		(16,678)		(16,678)
Balance as of March 31, 2022	6,665	$	67	$	296,475	$	(359,335)	$	(62,793)
Series A convertible preferred stock dividends	—	—		(1,134)		—		(1,134)
Stock-based plan activity	157	1		(220)		—		(219)
Non-cash stock-based compensation	—	—		2,240		—		2,240
Net loss	—	—		—		(7,410)		(7,410)
Balance as of June 30, 2022	6,822	$	68	$	297,361	$	(366,745)	$	(69,316)






	Common Stock			Additional Paid-In Capital		Retained Deficit
	Shares	Amount						Total
Balance as of December 31, 2022	6,670	$	67	$	295,277	$	(397,058)	$	(101,714)
Undeclared dividends on Series A convertible preferred stock	—	—		(1,198)		—		(1,198)
Stock-based plan activity	272	2		(17)		—		(15)
Non-cash stock-based compensation	—	—		902		—		902

Net income	—	—		—		24,145		24,145
Balance as of March 31, 2023	6,942	$	69	$	294,964	$	(372,913)	$	(77,880)
Undeclared dividends on Series A convertible preferred stock	—	—		(1,230)		—		(1,230)
Issuance of common stock, net	68	1		(1)		—		—

Stock-based plan activity	168	2		(14)		—		(12)

Non-cash stock-based compensation	—	—		601		—		601
Net loss	—	—		—		(12,212)		(12,212)
Balance as of June 30, 2023	7,178	$	72	$	294,320	$	(385,125)	$	(90,733)

See Notes to Condensed Consolidated Financial Statements.

Sonida Senior Living, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	11,933	$	(24,088)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	19,808		19,249
Amortization of deferred loan costs	788		519


Gain on sale of assets, net	(251)		—
Write-off of other assets	—		535
Unrealized loss on interest rate cap, net	1,103		45
(Gain) loss on extinguishment of debt	(36,339)		641
Provision for bad debt	334		522
Non-cash stock-based compensation expense	1,503		4,067
Other non-cash items	(1)		4
Changes in operating assets and liabilities:
Accounts receivable, net	(1,807)		(1,387)

Prepaid expenses and other assets	1,316		700
Other assets, net	294		(301)
Accounts payable and accrued expense	6,100		(2,524)

Federal and state income taxes payable	61		(421)
Deferred income	723		352

Other current liabilities	(28)		17
Net cash provided by (used in) operating activities	5,537		(2,070)
Cash flows from investing activities:
Acquisition of new communities	—		(12,342)
Capital expenditures	(9,698)		(12,149)
Proceeds from sale of assets	343		—
Net cash used in investing activities	(9,355)		(24,491)
Cash flows from financing activities:
Proceeds from notes payable	—		80,000
Repayments of notes payable	(5,893)		(94,247)

Purchase of common stock	—		(219)
Dividends paid on Series A convertible preferred stock	—		(2,985)
Purchase of interest rate cap	—		(258)
Deferred loan costs paid	(327)		(2,180)
Other financing costs	(84)		(57)
Net cash used in financing activities	(6,304)		(19,946)
Decrease in cash and cash equivalents and restricted cash	(10,122)		(46,507)
Cash, cash equivalents, and restricted cash at beginning of period	30,742		92,876
Cash, cash equivalents, and restricted cash at end of period	$	20,620	$	46,369

Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	14,459	$	14,367
Income taxes paid, net	$	76	$	672
Non-cash investing and financing activities:
Undeclared dividends on Series A convertible preferred stock	$	2,428	$	—
Non-cash additions of property and equipment	$	1,788	$	780

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. (formerly known as Capital Senior Living Corporation), a Delaware corporation (together with its subsidiaries, the “Company,” “our,” “us,” or “Sonida”), is one of the leading owner-operators of senior housing communities in the United States in terms of resident capacity. The Company owns, operates, develops, and manages senior housing communities throughout the United States. As of June 30, 2023, the Company operated 72 senior housing communities in 18 states with an aggregate capacity of approximately 8,000 residents, including 62 senior housing communities that the Company owned and 10 communities that the Company managed on behalf of third parties. As of December 31, 2022, the Company had two properties that were no longer operated and were in the process of transitioning the legal ownership back to the Federal National Mortgage Association (“Fannie Mae”). The transfer of ownership was completed during January 2023. The accompanying condensed consolidated financial statements include the financial statements of Sonida Senior Living, Inc. and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

Interim Unaudited Financial Information

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and should be read in conjunction with the condensed consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted from this Quarterly Report on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“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 management, the accompanying unaudited condensed consolidated financial statements include all adjustments, including normal recurring items, necessary to present fairly our condensed consolidated financial position as of June 30, 2023 and December 31, 2022, and our condensed consolidated results of operations and cash flows for the periods ended June 30, 2023 and 2022.

Reclassifications

Certain amounts previously reflected in the prior year condensed consolidated financial statements have been reclassified to conform to our June 30, 2023 presentation.

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. Going Concern Uncertainty and Related Strategic Cash Preservation Initiatives

Accounting Standards Codification (“ASC”) 205-40, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” requires an evaluation of whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within 12 months after the date the financial statements are issued. Initially, this evaluation does not consider the potential mitigating effect of management’s plans that have not been fully implemented. When substantial doubt exists, management evaluates the mitigating effect of its plans to determine if it is probable that (1) the plans will be effectively implemented within one year after the date the financial statements are issued, and (2) when implemented, the plans will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

In complying with the requirements under ASC 205-40 to complete an evaluation without considering mitigating factors, the Company considered several conditions or events excluding the impact of the Fannie Mae forbearance discussed below and including: (1) the current inflationary environment and the impact of elevated interest rates on the Company’s operations and financial results; (2) scheduled principal and interest payments due in the next 12 months; (3) recurring operating losses; (4) the Company’s working capital deficit; and (5) events of non-compliance with certain of our mortgage agreements, as noted in “Note 6 –Notes Payable.” The above conditions raise substantial doubt about the Company’s ability to continue as a going concern for the 12-month period following the date the June 30, 2023 financial statements are issued.

As discussed below, the Company has implemented plans that encompass short-term cash preservation initiatives to provide the Company with adequate liquidity to meet its obligations for at least the 12-month period following the date its June 30, 2023 financial statements are issued, in addition to creating sustained cash flow generation thereafter. The Company’s primary sources of near- and medium-term liquidity are expected to be (1) net cash generated from operations; (2) COVID-19 or related relief grants from various state agencies; (3) debt modifications, refinancings and extensions to the extent available on acceptable terms; and (4) equity issuances pursuant to the equity commitment agreement defined and described below.

Strategic and Cash Preservation Initiatives

The Company has taken the following actions, among others, to improve its liquidity position and to address uncertainty about its ability to continue as a going concern:

•Upon its management team transition in September 2022, the Company promptly implemented new strategic and operational plans to accelerate margin recovery, including the following:

◦Design and execution of a comprehensive resident rate review program to align revenues with the significant increase in the operating cost environment.

◦Implementation of a global purchasing organization function to leverage scaled purchasing to lower unit operating costs.

◦Use of several internally developed and external programs to provide alternative mitigants to a challenging labor environment.

•We have adopted a comprehensive cash optimization strategy aimed at improving working capital management.

•In June 2023, the Company entered into a forbearance agreement with Fannie Mae (“Fannie Forbearance” and “Fannie Forbearance Agreement”), pursuant to which, among other things, the Company and Fannie Mae are structuring a loan modification agreement with terms identical to those contained within the forbearance agreement that will significantly reduce debt service payments, improve working capital, and extend loan maturities. Concurrent with the Fannie Mae Forbearance Agreement, the Company executed a second amendment to its Refinance Facility and Second Amended and Restated Limited Payment Guaranty with Ally Bank, which, among other things, temporarily reduced the minimum liquidity covenant under such Refinance Facility for a period of 18 months, subject to certain conditions set forth therein. See “Note 6 – Notes Payable” for more information about these agreements and transactions.

•Through recently integrated systems and revised process workflows, the Company has implemented additional proactive spending reductions, including reduced discretionary spending and more stringent, return-based capital spending.

•The Company received approximately $0.4 million in various state grants during the quarter ended June 30, 2023 and approximately $2.4 million for the six months ended June 30, 2023, and has outstanding applications for additional grants not yet received.

•Under the terms of the Amended and Restated Investment Agreement, dated October 1, 2021 (the “A&R Investment Agreement”) entered into with Conversant Dallas Parkway (A) LP and Conversant Dallas Parkway (B) LP, (together “Conversant” or the “Conversant Investors”), the Company may request additional investments from the Conversant Investors in shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”) (up to an aggregate amount equal to $25.0 million) that can be used for future investment in accretive capital expenditures and acquisitions, subject to certain conditions.

•The Company entered into a $13.5 million equity commitment agreement with the Conversant Investors, at the Company’s right, but not the obligation. See “Note 7 –Se curities Fi nancing” and “Note 15 –Subsequent Events.”

While the Company’s plans are designed to provide it with adequate liquidity to meet its obligations for at least the 12-month period following the date its financial statements are issued, the remediation plan is dependent on conditions and matters that may be outside of the Company’s control, and no assurances can be given that certain options will be available on terms acceptable to the Company, or at all. Accordingly, management could not conclude that it was probable that the plans will mitigate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities in the normal course of business for the 12-month period following the date the financial statements are issued. As such, the accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.

3. Summary of Significant Accounting Policies

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 following table sets forth our cash, cash equivalents, and restricted cash (in thousands):


	June 30, 2023		December 31, 2022
Cash and cash equivalents	$	7,203	$	16,913
Restricted cash:
Property tax and insurance reserves	5,575		6,184
Lender reserves	1,806		1,500
Capital expenditures reserves	1,925		2,034
Deposits pursuant to outstanding letters of credit	4,111		4,111
Total restricted cash	13,417		13,829
Total cash, cash equivalents, and restricted cash	$	20,620	$	30,742

Long-Lived Assets

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 on long-lived assets during the six months ended June 30, 2023 and June 30, 2022.

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. See “Note 4 – Property and Equipment, net.”

Revenue Recognition

Resident revenue consists of fees for basic housing and certain support services and fees associated with additional housing and expanded support requirements such as assisted living care, memory care, and ancillary services. Basic housing and certain support services revenue is recorded when services are rendered, and amounts billed are due from residents in the period in which the rental and other services are provided. Residency 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, with resident fees billed monthly in advance. Revenue for certain ancillary services is recognized as services are provided, and includes fees for services such as medication management, daily living activities, beautician/barber, laundry, television, guest meals, pets, and parking, which are generally billed monthly in arrears. Other operating revenue consists of provider relief funds received from various states due to the financial distress impacts of COVID-19 (“Provider Relief Funds”).

The Company’s senior housing communities have residency agreements that generally require the resident to pay a community fee and other amounts prior to moving into the community, which are initially recorded by the Company as deferred revenue. The Company had contract liabilities for deferred fees paid by our residents prior to the month housing and support services were to be provided totaling approximately $4.1 million and $3.4 million, respectively, which is reported as deferred income within current liabilities of the Company’s condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022.

Revenues from the Medicaid program accounted for approximately 9.4% and 9.9% of the Company’s revenue in the three months ended June 30, 2023 and June 30, 2022, respectively. Revenues from the Medicaid program accounted for approximately 9.4% and 9.7% of the Company’s revenue in the six months ended June 30, 2023 and June 30, 2022, respectively. During the three months ended June 30, 2023 and 2022, 23 and 28, respectively, of the Company’s communities were providers of services under the Medicaid program, and during the six months ended June 30, 2023 and 2022, 24 and 28, respectively, of the Company’s communities were providers of services under the Medicaid program. Accordingly, these communities were entitled to reimbursement under the Medicaid program at established rates that were lower than private pay rates. Resident revenues for Medicaid residents were recorded at the reimbursement rates as the rates were set prospectively by the applicable state upon the filing of an annual cost report. None of the Company’s communities were providers of services under the Medicare program the three months ended June 30, 2023 and 2022.

Laws and regulations governing the Medicaid program are complex and subject to interpretation. The Company believes that it is in compliance with all applicable laws and regulations and is not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on its Condensed Consolidated Financial Statements. While no such regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties, and exclusion from the Medicaid program.

The Company has management agreements whereby it manages certain communities on behalf of third-party owners under contracts that provide for periodic 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” on the Company’s condensed consolidated statements of operations. The related costs are included in “managed community reimbursement expense” on the Company’s condensed consolidated statements of operations. See “Note 8– Revenue.”

The Company received approximately $9.1 million in the three and six months ended June 30, 2022 through grants from the Public Health and Social Services Emergency Fund’s (the “Federal Relief Fund”) Phase 4 General Distribution 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. For the three and six months ended June 30, 2023, the Company received approximately $0.4 million and $2.4 million, respectively, in various Provider Relief Funds received from state departments due to financial distress impacts of COVID-19. For the three and six months ended June 30, 2022, the Company received approximately $0.5 million and $1.2 million, respectively, in various Provider Relief Funds from state departments due to financial distress impacts of COVID-19. The Company recognizes income for government grants on a systematic and rational basis over the periods in which the Company recognizes the related expenses or loss of revenue for which the grants are intended to compensate when there is reasonable assurance that the Company will comply with the applicable terms and conditions of the grant and there is reasonable assurance that the grant will be received. The Phase 4 Federal Relief Funds received from the Federal Government were recorded in “other income (expense), net” and the state department Provider Relief Funds were recorded as “resident revenue–other operating revenue” in the Company’s condensed consolidated financial statements and notes thereto.

Credit Risk and Allowance for Doubtful Accounts

The Company’s resident accounts receivable are generally due within 30 days after the date billed. Accounts receivable are reported net of an allowance for doubtful accounts of $6.2 million and $5.9 million as of June 30, 2023 and December 31, 2022, 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.

Concentration of Credit Risk and Business Risk

Substantially all of our revenues are derived from senior living communities we own and 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), which we estimate represented approximately 23%, 18%, 20% and 11%, respectively, of our resident revenues for the three months ended June 30, 2023 and approximately 24%, 18%, 20% and 10%, respectively, of our resident revenues for the six months ended June 30, 2023.

SEC Form 10-Q filed by Sonida Senior Living Inc.