SunLink Health Systems, Inc. (NYSE American: SSY) today announced a loss from continuing operations of $652,000 (or a loss of $0.09 per fully diluted share) for its fourth fiscal quarter ended June 30, 2024 compared to a loss from continuing operations of $1,021,000 (or a loss of $0.15 per fully diluted share) for the fourth fiscal quarter ended June 30, 2023.

Earnings from discontinued operations were $4,940,000 (or earnings of $0.70 per fully diluted share) for the fourth fiscal quarter ended June 30, 2024 compared to a loss from discontinued operations of $405,000 (or a loss of $0.06 per fully diluted share) for the fourth fiscal quarter ended June 30, 2023. During the quarter ended June 30, 2024, the Company’s indirect subsidiary, Southern Health Corporation of Houston, Inc. (“Southern”) sold its Trace Extended Care & Rehab senior care facility and related real estate in Houston, Mississippi for net proceeds of $6,522,000 and recorded a gain on the sale of $5,584,000. Southern’s results are included in discontinued operations for the year ended June 30, 2024.

Primarily as a result of the sale of Trace Extended Care & Rehab, net income for the quarter ended June 30, 2024 was $4,288,000 (or $0.61 per fully diluted share) compared to a net loss of $1,426,000 (or a loss of $0.20 per fully diluted share) for the quarter ended June 30, 2023.

On January 22, 2024, Southern reached revised agreements for the sale of Trace Regional Hospital, a vacant medical office building and three (3) patient clinics in Chickasaw County Mississippi, (collectively “Trace Hospital Assets”) to Progressive Health of Houston, LLC (“Progressive”) pursuant to which (i) Southern sold certain personal and intangible property to Progressive for $500,000 under to an asset purchase agreement (“Trace Hospital Assets Sale"), (ii) entered into a six-month net lease of the real property of the hospital, medical office building and the clinics property (the "Trace Real Estate Lease") for $20,000 per month, (iii) entered into a contract to sell the Trace Hospital real estate (the "Trace Hospital Real Estate") to Progressive for $2,000,000 and (iv) engaged Progressive under a management agreement to manage the operations of Trace Hospital pending receipt of certain regulatory approvals, which was received February 29, 2024. The Company recorded a loss of $962,000 on the Trace Hospital Assets sale during the year ended June 30, 2024, which included sale expenses of $174,000. The completion of the Trace Hospital Real Estate sale has been extended by mutual agreement to October 4, 2024. As a result of the transactions ("Revised Agreement"), SunLink reported an impairment loss of $1,974,000 at December 31, 2023 to reduce the net value of the Trace Hospital Assets and Trace Hospital Real Estate to the estimated sale proceeds under the Revised Agreement. An impairment reserve of $1,695,000 remains at June 30, 2024 for the Trace Hospital Real Estate. There can be no assurance the completion of the sale of the Trace Hospital Assets Real Estate will be achieved.

Consolidated net revenues for each of the fiscal quarters ended June 30, 2024 and 2023 were $7,913,000 and $8,010,000, respectively, which consists primarily of pharmacy net revenues. Pharmacy net revenues for the quarter ended June 30, 2024 decreased $97,000, or 1%, from the same period last year as a result of lower pharmacy scripts dispensed. The quarter ended June 30, 2024 includes $34,000 of prior period sales tax credits relating to such sales tax refund claims.

SunLink reported an operating loss for the quarter ended June 30, 2024 of $675,000 compared to an operating loss for the quarter ended June 30, 2023 of $1,112,000. The decreased operating loss this year compared to last year resulted primarily from increased gross profit margin on pharmacy revenue.

SunLink reported a loss from continuing operations of $2,311,000 (or a loss of $0.33 per fully diluted share) for its twelve months ended June 30, 2024 compared to earnings from continuing operations of $198,000 (or $0.03 per fully diluted share) for the twelve months ended June 30, 2023.

Earnings from discontinued operations were $784,000 (or $0.11 per fully diluted share) for the twelve months ended June 30, 2024 compared to a loss of $1,993,000 (or a loss of $0.28 per fully diluted share) for the twelve months ended June 30, 2023, primarily due to the Trace Hospital Assets and Trace Extended Care & Rehab transactions and Trace Hospital Real Estate impairment charge described above.

SunLink reported a net loss of $1,527,000 (or a loss of $0.22 per fully diluted share) for its twelve months ended June 30, 2024 compared to a net loss of $1,795,000 (or $0.26 per fully diluted share) for the twelve months ended June 30, 2023.

Consolidated net revenues for each of the twelve months ended June 30, 2024 and 2023 were $32,440,000 and $34,280,000, respectively. Pharmacy net revenues for the twelve months ended June 30, 2023 included $2,615,000 from the reversal of reserves for certain sales taxes previously accrued. The Company determined during that quarter that, based on discussions and correspondence from taxing authorities and consultation with external legal counsel, it was more likely than not that such accrued sales taxes would not be payable. The twelve months ended June 30, 2024 includes $471,000 of prior period sales tax refunds. Excluding the effect of the sales tax refunds and reversal of sales tax accruals, net revenues decreased less than 1 % in the twelve months ended June 30, 2024 compared to the prior year.

SunLink reported an operating loss for the twelve months ended June 30, 2024 of $2,411,000 compared to operating profit for the twelve months ended June 20, 2023 of $74,000. The operating profit during the comparable twelve month period last year resulted primarily from the reversal of accrued sales tax reserves.

COVID-19 Pandemic

The Company continues to experience adverse after-effects of the COVID-19 pandemic in the quarter ended June 30, 2024 and believes such effects will likely continue to affect its assets and operations in the foreseeable future particularly from salaries and wages pressure, workforce shortages, supply chain disruption and broad inflationary pressures. Our ability to make estimates of any such continuing effects on future revenues, expenses or changes in accounting judgments that have had or are reasonably likely to have a material effect on our financial statements is very limited, depending as they do on the severity and length thereof; as well as any further government actions and/or regulatory changes intended to address such effects.

SunLink Health Systems, Inc. is the parent company of subsidiaries that own and operate a pharmacy business and an information technology business in the Southeast. For additional information on SunLink Health Systems, Inc., please visit the Company’s website.

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding the company’s business strategy. These forward-looking statements are subject to certain risks, uncertainties, and other factors, which could cause actual results, performance, and achievements to differ materially from those anticipated. Certain of those risks, uncertainties and other factors are disclosed in more detail in the company’s Annual Report on Form 10-K for the year ended June 30, 2024 and other filings with the Securities and Exchange Commission which can be located at www.sec.gov.

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