OTC: GBCS

Healthcare
Industry

Healthcare
is the single largest industry in the U.S. based on Gross Domestic Product (“GDP”). According to the National Health Expenditures
report by the Centers for Medicare and Medicaid Services (“CMS”): (i) national health expenditures are expected to grow 1.2
percentage points faster than GDP per year over the 2016 – 2025 period; (ii) the average compounded annual growth rate for national
health expenditures, over the projection period of 2016 through 2027, is anticipated to be 5.6%; and (iii) health spending is projected
to represent 19.9% of US GDP by 2025, up from 17.8% in 2015.

Senior
citizens are the largest consumers of healthcare services. According to CMS, on a per capita basis, the 85-year and older segment of
the population spends 92% more on healthcare than the 65 to 84-year-old segment and over 329% more than the population average.

In
the future, the Company intends to continue to evaluate operations that will enhance our portfolio of healthcare centers.

4

Real
Estate Industry

The
delivery of healthcare services requires real estate and, as a result, tenants and operators depend on real estate, in part, to maintain
and grow their businesses.

At December 31, 2025 the
Company owned 12 healthcare facilities. Initially, the Company simply owned the physical property and real estate and leased or subleased
the facility to third-party operators. In 2019, the Company intentionally decided to begin moving towards operations through newly created
independent operating subsidiaries. As of December 31, 2025,
the Company, through wholly-owned subsidiaries, operates nine healthcare facilities.

In
January 2026 the Company completed the sale of two of its facilities in Georgia for a purchase price of $13.2 million. As a result, the
Company is currently operating seven healthcare facilities beginning in February 2026.

Business
Strategy

As
an organization, our primary goal is to increase shareholder value through profitable growth and provision of professional
healthcare. Our investment strategy to achieve this goal is based on four principles: (i) quality healthcare for our residents, (ii)
opportunistic investing, (iii) portfolio diversification and (iv) conservative financing.

Quality
Healthcare for our Residents

Our
healthcare operations are expected to bolster our revenue. The mix of our revenues, from leasing facilities to our owner operator
model has shifted from rents to healthcare provision as well. Our operational teams and staff at our
facilities are dedicated to maintaining the highest of standards and quality care metrics in line with, but not limited to, the CDC,
ADA, CMS, and all state and local guidelines.

Opportunistic
Investing

We
will make investment decisions in ways expected to drive profitable growth and create shareholder value. We will perform in depth
due diligence and quantitative and qualitative analyses designed to position ourselves to create and take advantage
of situations to meet our goals and investment criteria.

Portfolio
Diversification

We
believe in maintaining a portfolio of healthcare investments diversified by operational type, geography, operator, tenant, and product. Diversification reduces the likelihood that a single event might materially harm our business and allows us to take advantage
of opportunities in different markets based on individual market dynamics. While pursuing this strategy of diversification, we will monitor,
but will not limit, our investments based on the percentage of our total assets that may be invested in any one property, or geographic
location, or the number of properties which we may lease to a single operator or tenant. We may, amongst other things, structure transactions as master leases,
require operator or tenant insurance and indemnifications, obtain credit enhancements in the form of guarantees, letters of credit or
security deposits, and take other measures to mitigate risk.

Financing

We
will strive to manage our debt-to-equity levels in reasonable ways and maintain multiple sources of liquidity, access to capital markets
and secured debt lenders, relationships with current and prospective institutional joint venture partners, and our ability to appropriately
divest of assets. Our debt obligations will be primarily fixed rate with staggered maturities, which reduces the impact of rising interest
rates on our operations.

We plan to finance any potential investments based on our evaluation
of available sources of funding. For short-term purposes, we may arrange for short-term borrowings from banks or other sources or arrange
appropriately for the sale of some of our operating facilities. We may also arrange for longer-term financing through offerings of equity
and debt securities and/or, placement of mortgage debt and capital from institutional lenders and equity investors.

Competition

Investing
in real estate serving the healthcare industry is highly competitive. We will face competition from REITs, investment companies, private
equity and hedge fund investors, sovereign funds, healthcare operators, lenders, developers, and other institutional investors, some
of which/whom may have greater resources and lower costs of capital than we do. Increased competition makes it more challenging for us to identify
and successfully capitalize on opportunities that meet our objectives. Our ability to compete may also be impacted by national and local
economic trends, availability of investment alternatives, availability and cost of capital, construction and renovation costs, existing
laws and regulations, new legislation, and population trends.

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Income
from our facilities is dependent on the ability of our operations to compete with other healthcare companies on a number of
different levels, including: the quality of care provided, reputation, the physical appearance of a facility, price and range of
services offered, alternatives for healthcare delivery, the supply of competing properties, physicians, staff, referral
sources, the size and demographics of the population in surrounding areas, and the financial condition of our tenants and
operators. Private, federal, and state payment programs as well as the effect of laws and regulations may also have a significant
influence on the profitability of our facilities.

Healthcare
Operations

Post-acute/skilled
nursing. Skilled Nursing Facilities (“SNF”) offer restorative, rehabilitative and custodial nursing care for people
not requiring the more extensive and sophisticated treatment available at hospitals. Ancillary revenues and revenues from post-acute
care services are derived from providing services to residents beyond room and board and include inter-alia occupational, physical,
speech, respiratory and intravenous therapy, wound care, oncology treatment, brain injury care and orthopedic therapy as well as
sales of pharmaceutical products and other services. Certain SNFs provide some of the foregoing services on an out-patient
basis.

Post-acute/skilled
nursing services provided by our operations in these facilities will be primarily paid for either by private sources or through
the Medicare and Medicaid programs.

Independent
Living Facilities (“ILFs”). ILFs are designed to meet the needs of seniors who choose to live in an environment
surrounded by their peers with services such as housekeeping, meals and activities. These residents generally do not need assistance
with activities of daily living (“ADL”), such as bathing, eating, and dressing. However, residents may have the option
to contract for these services.

Senior
Housing. Senior housing facilities include assisted living facilities (“ALFs”), independent living facilities (“ILFs”)
and continuing care retirement communities (“CCRCs”), which cater to different segments of the elderly population based upon
their needs. Services provided by our operations in these facilities are primarily paid for by the residents directly or through
private insurance and are less reliant on government reimbursement programs such as Medicaid and Medicare. Senior housing property types
are further described below.

Assisted
Living Facilities. ALFs are licensed care facilities that provide personal care services, support, and housing for those who need
help with activities of daily living yet require limited medical care. The programs and services may include transportation, social activities,
exercise and fitness programs, beauty or barber shop access, hobby and craft activities, community excursions, meals in a dining room
setting and other activities sought by residents. These facilities are often in apartment-like buildings with private residences ranging
from single rooms to large apartments. Certain ALFs may offer higher levels of personal assistance for residents with Alzheimer’s
disease or other forms of dementia. Levels of personal assistance are based in part on local regulations.

Continuing
Care Retirement Communities (“CCRCs”). CCRCs provide housing and health-related services under long-term contracts. This
alternative is appealing to residents as it eliminates the need for relocating when health and medical needs change, thus allowing residents
to “age in place.” Some CCRCs require a substantial entry or buy-in fee and most also charge monthly maintenance fees in
exchange for a living unit, meals, and some health services. CCRCs typically require the individual to be in relatively good health and
independent upon entry.

Investments

Direct
Ownership. We plan to primarily generate revenue by purchasing properties and operating the facilities internally. Most of our
revenue will be received from government agencies, hospice companies, managed care contracts and private pay receipts that will
provide for a substantial recovery of operating expenses including but not limited to staffing, supplies, bed taxes, real estate
taxes, repairs and maintenance, utilities, and insurance. For existing properties with leases in place, our rents typically will be
received from leases under triple net leases.

Operating
Properties. We may enter contracts with healthcare operators to manage communities that are placed in a structure permitted by
the Housing and Economic Recovery Act of 2008 (commonly referred to as “RIDEA”). Additionally, as an owner operator, our
local teams work to create alignment with our internal health care providers to scale operating efficiencies, and/or ancillary
services intended to drive profitable growth.

Our
ability to grow income from our properties depends, in part, on our ability to (i) increase revenue and other earned income by increasing
occupancy levels and improving rates, (ii) manage bad debt and (iii) control operating expenses. For properties under lease, most of
our leases will include contractual annual base rent escalation clauses that are either predetermined fixed increases and/or are a function
of an inflation index.

Debt
Investments. Our mezzanine loans will typically be secured by a pledge of ownership interests of an entity or entities, which directly
or indirectly own properties, and are subordinate to more senior debt, including mortgages and more senior mezzanine loans. Such mortgages and construction financing will typically be issued by federal, state, and/or local banks and will generally be secured
by healthcare real estate.

6

Developments
and Redevelopments. We will typically commit to development projects that are at least 50% pre-leased or when we believe that
market conditions will support more speculative construction. We will work closely with our local real estate service providers,
including brokerage, property management, project management and construction management companies to assist us in evaluating
development proposals and completing developments that we choose to undertake. Our development and redevelopment investments will likely be in the life science
and medical office segments. Redevelopments are properties that require significant capital expenditures (generally more than 25% of
acquisition cost or existing basis) to achieve property stabilization or to change the primary use of the properties.

Recent
Financings

2021
Senior Secured Note Extension

On
January 17, 2020, the Board of Directors agreed to increase the total offering amount and extend the period of its 2018 Offering of 11%
Senior Secured Notes. The total amount of the Offering was increased to $2,500,000. Effective February 5, 2020, and March 3, 2020, the
Company completed the sale of $60,000 and $100,000, respectively, of Units in the Offering. The sale of $100,000 Units on March 3, 2020,
was to a related party. Effective October 31, 2020, the Company completed the exchange of $150,000 of Units in the Offering for matured
Senior Unsecured Notes. No fees or commissions were paid on the sale of the Units. The proceeds were used for general working capital.

In
July 2023, the Company renegotiated the Senior Secured Notes, originally issued in 2018. The new terms were for 11% annual interest through
December 31, 2024. The warrants issued and associated with these notes were extended through the same date.

Effective
December 31, 2024, the Company again renegotiated the Senior Secured Notes. The new terms are for 13% interest through December 31, 2025,
with certain events triggering earlier redemption. The 177,500 previously issued warrants were also extended through December 31, 2025
and the exercise price reduced to $2.25 per share.

Effective
December 31, 2025, the Company entered into a Third Amended and Restated Allonge and Modification Agreement (the “Third
Allonge”) with the holders of more than a majority in interest in the Company’s 2018 11% Senior Secured Promissory Notes
(the “Notes”). There were an aggregate of $1,775,000 in principal amount of Notes outstanding. The Maturity Date of the
Notes was extended to the earlier of (i) February 28, 2026 or (ii) the consummation by the Company of a Qualified Transaction which
would result in the Company realizing net proceeds, after deducting transaction expenses and retirement of mortgage debt, sufficient
to enable the Company to retire all outstanding Notes, principal and accrued interest. The Maturity Date could be extended under
certain circumstances. Interest on the Notes will accrue at the rate of 13% per annum until paid in full. The expiration date of the
Warrants previously granted to the Noteholders was extended to December 31, 2027. The exercise price of the Warrants will continue
to be $2.25 per share. Based on various discussions and negotiations between the Company and the Note holders, the Notes were repaid in
full in January 2026.

Lines
of Credits

On
April 12, 2024, the Company entered into a Commercial Line of Credit Agreement and Note with Southern Bank for a secured line of credit
in the principal amount limit of $750,000 at a fixed interest rate of 8.50% per annum with a Maturity Date of April 12, 2025. In August 2025, the Commercial Line of Credit was converted into a Promissory
Note and extended to December 12, 2030 with an interest rate of 7.25%. The Company repaid the balance outstanding on the Promissory Note
in January 2026.

In
November 2024, the Company entered into another Commercial Line of Credit Agreement and Note with Southern Bank for a secured line of
credit in the principal amount limit of $750,000 at a fixed interest rate of 7.75% per annum with a Maturity Date of November 14, 2025.
In November 2025 the Company and Southern Bank agreed to extend the maturity
date of the Commercial Line of Credit to December 14, 2026. The interest rate of the on the Commercial Line of Credit as of December 31,
2025 was 7.75%.

As
of December 31, 2025, the balance outstanding on the Commercial Line of Credits is $325,192 and the amount available is approximately
$425,000.

Government
Regulations, Licensing and Enforcement

Overview

Our
operations, and tenants will typically be subject to extensive and complex federal, state and local healthcare laws, rules and regulations relating
to fraud and abuse practices, government reimbursement, licensure and certificate of need and similar laws governing the operation of
healthcare facilities, and we expect that the healthcare industry, in general, will continue to face increased regulation and pressure
in the areas of fraud, waste and abuse, cost control, healthcare management and provision of services, among others. These regulations
are wide-ranging and can subject our operations to civil, criminal, and administrative sanctions. Affected operators may find it increasingly difficult to comply with this complex and evolving regulatory environment because of a relative lack
of guidance in many areas as certain of our healthcare properties will be subject to oversight from several government agencies and the
laws may vary from one jurisdiction to another. Changes in laws and regulations reimbursement enforcement activity and regulatory
non-compliance by our operations can all have a significant effect on the financial condition of the property, which in turn
may adversely impact us.

We
will seek to mitigate the risk to us resulting from the significant healthcare regulatory risks faced by our operations and tenants
by diversifying our portfolio among property types and geographical areas, diversifying our tenant and operations base to limit our
exposure to any single entity, and seeking operations that are not largely dependent on Medicaid reimbursement for their revenues.
In addition, we work to ensure in each instance that our operations have obtained all necessary licenses and permits before
beginning (and maintaining) operations and require that those operators covenant that they will comply with all applicable laws and
regulations in connection with the facility operations.

The
following is a discussion of certain laws and regulations generally applicable to our operations and tenants.

7

Fraud
and Abuse Enforcement

There
are various extremely complex federal and state laws, rules and regulations governing healthcare providers’ relationships and
arrangements and prohibiting fraudulent and abusive practices by such healthcare providers. These laws include (i) federal and state
false claims acts, which, among other things, prohibit providers from filing false claims or making false statements to receive
payment from Medicare, Medicaid and/or other federal or state healthcare programs, (ii) federal and state anti-kickback and
fee-splitting statutes, including the Medicare and Medicaid anti-kickback statute, which prohibit the payment or receipt of
remuneration to induce referrals or recommendations of healthcare items or services, (iii) federal and state physician self-referral
laws (commonly referred to as the “Stark Law”), which generally prohibit referrals by physicians to entities with which
the physician or an immediate family member has a financial relationship, (iv) the federal Civil Monetary Penalties Law, which
prohibits, among other things, the knowing presentation of a false or fraudulent claim for certain healthcare services and (v)
federal and state privacy laws, including the privacy and security rules contained in the Health Insurance Portability and
Accountability Act of 1996 (“HIPPA”), which provide for the privacy and security of personal health information.
Violations of healthcare fraud and abuse laws carry civil, criminal, and administrative sanctions, including, potentially punitive
sanctions, monetary penalties, imprisonment, denial of Medicare and Medicaid reimbursement and potential exclusion from Medicare,
Medicaid or other federal or state healthcare programs. These laws are enforced by a variety of federal, state, and local agencies
and can in some instances also be enforced by private litigants through, among other things, federal and state false claims acts,
which allow private litigants to bring qui tam or “whistleblower” actions. Many of our operations are subject to these
laws, and some of them may in the future become the subject of governmental enforcement actions if there is lack of compliance with
applicable laws.

Healthcare
Licensure and Certificate of Need

Certain
healthcare facilities in our portfolio are or will be subject to extensive federal, state, and local licensure, certification and
inspection laws and regulations. In addition, various licenses and permits are required to dispense narcotics, operate pharmacies,
handle radioactive materials, and operate certain equipment. Many states require certain healthcare providers to obtain a
certificate of need, which requires prior approval for the construction, expansion, and closure of certain healthcare facilities.
The approval process related to state certificate of need laws may impact some of our ability to expand or
operate effectively.

Americans
with Disabilities Act (the “ADA”)

Our
properties must comply with the ADA and any similar state or local laws to the extent that such properties are “public accommodations”
as defined in those statutes. The ADA may require removal of barriers to access by persons with disabilities in certain public areas
of our properties where such removal is readily achievable. To date, we have not received any notices of noncompliance with the ADA that
have caused us to incur substantial capital expenditures to address ADA concerns. Should barriers to access by persons with disabilities
be discovered at any of our properties, we may be directly or indirectly responsible for additional costs that may be required to make
facilities ADA-compliant. Noncompliance with the ADA could result in the imposition of fines or an award of damages to private litigants.
The obligation to make readily achievable accommodations pursuant to the ADA is an ongoing one, and we continue to assess our properties
and will make necessary modifications as appropriate in this respect.

Environmental
Matters

A
wide variety of federal, state, and local environmental and occupational health and safety laws, rules and regulations
affect healthcare facility operations. These complex federal and state statutes, and their enforcement, involve a myriad of laws, rules
and regulations, many of which may involve strict liability on the part of the potential offender. Some of these federal and state laws,
rules and regulations may directly impact us. Under various federal, state, and local environmental laws, ordinances, rules and regulations,
an owner of real property or a secured lender, such as us if applicable, may be liable for the costs of removal or remediation of hazardous
or toxic substances at, under or disposed of in connection with such property, as well as other potential costs relating to hazardous
or toxic substances (including government fines and damages for injuries to persons and adjacent property). The cost of any required remediation,
removal, fines or personal or property damages and the owner’s or secured lender’s liability therefore could exceed or impair
the value of the property, and/or the assets of the owner or secured lender. In addition, the presence of such substances, or the failure
to properly dispose of or remediate such substances, may adversely affect the owner’s ability to sell or rent such property or to
borrow using such property as collateral any or all of which, in turn, could reduce our revenues.

Taxation

Federal
Income Tax Considerations

The
following summary of the taxation of the Company and the material federal tax consequences to the holders of our debt and equity securities
is for general information only and is not tax advice. This summary does not address all aspects of taxation that may be relevant to
certain types of holders of stock or securities (including, but not limited to, insurance companies, tax-exempt entities, financial institutions
or broker-dealers, persons holding shares of common stock as part of a hedging, integrated conversion, or constructive sale transaction
or a straddle, traders in securities that use a mark-to-market method of accounting for their securities, investors in pass-through entities
and foreign corporations and persons who are not citizens or residents of the United States).

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This
summary does not discuss all the aspects of U.S. federal income taxation that may be relevant to you considering your particular investment
or other circumstances. In addition, this summary does not discuss any state or local income taxation or foreign income taxation or other
tax consequences. This summary is based on current U.S. federal income tax law. Subsequent developments in U.S. federal income tax law,
including changes in law or differing interpretations, which may be applied retroactively, could have a material effect on the U.S. federal
income tax consequences of purchasing, owning, and disposing of our securities as set forth in this summary. Before you purchase our
securities, you should consult your own tax advisor regarding the U.S. federal, state, local, foreign, and other tax consequences of
acquiring, owning, and selling our securities.

On
March 31, 2010, the President signed into law the Health Care and Education Reconciliation Act of 2010, which requires U.S.
stockholders who meet certain requirements and are individuals, estates, or certain trusts to pay an additional 3.8% tax on, among
other things, dividends on and capital gains from the sale or other disposition of stock for taxable years beginning after December
31, 2012. U.S. stockholders should consult with their tax advisors regarding the effect, if any, of this legislation on their
ownership and disposition of shares of our stock.

Pursuant
to the One Big Beautiful Bill Act (OBBBA) enacted in 2025, the limitation on the deductibility of business interest expense under Internal
Revenue Code Section 163(j) was modified. Specifically, the calculation of Adjusted Taxable Income (ATI) now permanently includes the
add-back of depreciation, amortization, and depletion (the ‘EBITDA’ metric). This legislative change has significantly increased
our interest expense deduction threshold, thereby reducing our disallowed interest expense and the associated carryforward balances as
of December 31, 2025.

Health
Care Regulatory Climate

Government
Regulation and Reimbursement

The
U.S. healthcare industry is heavily regulated. Our operations are subject to extensive and complex federal, state
and local healthcare laws, rules and regulations. These laws, rules and regulations are subject to frequent and substantial amendments
and changes resulting from the adoption of new legislation, rules and regulations, and administrative and judicial interpretations of
existing law. The ultimate timing or effect of these changes, which may be applied retroactively, cannot be predicted. Changes in laws,
rules and regulations impacting our operations, in addition to non-compliance by our operations, can have a significant effect on the
operations and financial condition of our operations, which in turn may adversely impact us. There is the potential that we may be subject
directly to healthcare laws, rules and regulations because of the broad nature of some of these regulations, such as the Anti-kickback
Statute and False Claims Act, among others.

Any permanent or temporary changes to regulations and reimbursement, as well as emergency legislation, including
the CARES Act enacted on March 27, 2020, [related to the coronavirus outbreak] and discussed below, continue to have a significant impact
on our operations and financial condition. The extent that the regulations’ effect on the Company’s operational and financial
performance may depend on future developments, including the sufficiency and timeliness of additional governmental relief, the duration,
spread and intensity of a defined outbreak, the impact of genetic mutations of the virus into new variants, the impact of vaccine distributions
and booster doses on our operations and their populations, the impact of vaccine mandates on staffing shortages at our operations, as
well as the difference in how any pandemic may impact SNFs in contrast
to ALFs, all of which developments and impacts are uncertain and difficult to predict. Due to these uncertainties, we are not able at
this time to estimate the effect of these factors on our business; however, the adverse impact on our business, results of operations,
financial condition and cash flows could be material.

A
significant portion of our revenue (payor mix) is derived from government-funded reimbursement programs, consisting primarily of
Medicare and Medicaid. As federal and state governments continue to focus on healthcare reform initiatives, efforts to reduce costs
by government payors will likely continue. Any limits on the scope of services reimbursed and/or reductions of reimbursement
rates could therefore have a material adverse effect on our results of operations and financial condition. Additionally, new and
evolving payor and provider programs that are tied to quality and efficiency could adversely impact our liquidity, financial
condition or results of operations, and there can be no assurance that payments under any of these government healthcare programs
are currently, or will be in the future, sufficient to fully reimburse us for our operating and capital expenses. In addition to
quality and value based reimbursement reforms, the U.S. Centers for Medicare and Medicaid Services (“CMS”) has
implemented a number of initiatives focused on the reporting of certain facility specific quality of care indicators that could
affect our operations and financial results, including publicly released quality ratings for all of the nursing homes that participate in Medicare or
Medicaid under the CMS “Five Star Quality Rating System.” Facility rankings, ranging from five stars (“much above
average”) to one star (“much below average”) are updated on a monthly basis. SNFs are required to provide
information for the CMS Nursing Home Compare website regarding staffing and quality measures. These rating changes have impacted
referrals to SNFs, and it is possible that changes to this system or other ranking systems could lead to future reimbursement
policies that reward or penalize facilities on the basis of the reported quality of care parameters.

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The
following is a discussion of certain U.S. laws and regulations generally applicable to our operations.

In
further response to the pandemic, the CARES Act authorized approximately $178 billion to be distributed through the Provider Relief Fund
to reimburse eligible healthcare providers for healthcare related expenses or lost revenues that were attributable to coronavirus. Funds
have been allocated since 2020 in targeted and general distributions, the latter over four phases. In September 2021, HHS announced the
release of $25.5 billion in phase four provider funding, including $17 billion of the $178 billion previously authorized through the
CARES Act and $8.5 billion for rural providers, including those with Medicaid and Medicare patients, through the American Rescue Plan
Act, with payments that began in December 2021. The Provider Relief Fund is administered under the broad authority and discretion of
HHS and recipients are not required to repay distributions received to the extent they are used in compliance with applicable requirements.
HHS continues to evaluate and provide allocations of, and issue regulation and guidance regarding, grants made under the CARES Act. We
do not expect our operations to receive additional funding from HHS.

The
CARES Act and related legislation also made other forms of financial assistance available to healthcare providers, which have the potential
to impact our operators to varying degrees. This assistance includes Medicare and Medicaid payment adjustments and an expansion of the
Medicare Accelerated and Advance Payment Program, which made available accelerated payments of Medicare funds in order to increase cash
flow to healthcare providers. These payments are loans that healthcare providers were scheduled to repay beginning
one year from the issuance date of each healthcare provider’s or supplier’s accelerated or advance payment, with repayment
made through automatic recoupment of 25% of Medicare payments otherwise owed to the healthcare provider or supplier for eleven months,
followed by an increase to 50% for another six months, after which any outstanding balance would be repaid subject to an interest rate
of 4%. We believe these repayments commenced for many of our healthcare providers in April 2021 and have adversely impacted operating
cash flows of these healthcare providers.

The
Budget Control Act of 2011 established a Medicare Sequestration of 2%, which is an automatic reduction of certain federal spending as
a budget enforcement tool. Originally, the sequester was supposed to be in effect from FY 2013 to FY 2021. However, most recently, the
Infrastructure Investment and Jobs Act extended the sequester through FY 2031. Additional legislation, including the CARES Act and the
Protecting Medicare and American Farmers Act, suspended the application of the sequester to Medicare from May 1, 2020 through March 31,
2022. It also limited Medicare reductions to 1% from April 1, 2022 through June 30, 2022. The full 2% Medicare sequestration went into
effect as of July 1, 2022. The sequestration is currently extended through fiscal year 2031 and gradually increases to 4% from 2030 through
2031.

Quality
of Care Initiatives and Additional Requirements In August 2021, CMS announced it was developing an emergency regulation requiring staff
vaccinations within the nation’s more than 15,000 Medicare and Medicaid-participating nursing homes, and in September 2021, CMS
further announced that the scope of the regulation would be expanded to include workers in hospitals, dialysis facilities, ambulatory
surgical settings, and home health agencies. In addition, recent updates to the Nursing Home Care website and the Five Star Quality Rating
System include revisions to the inspection process, adjustment of staffing rating thresholds, the implementation of new quality measures
and the inclusion of a staff turnover percentage (over a 12-month period). Although the American Rescue Plan Act did not allocate specific
funds directly to SNF or ALF providers, certain funds were allocated to states who that distributed a portion of these funds to SNF and
ALF providers. In addition, the American Rescue Plan Act allocated funds to quality improvement organizations to provide infection control
and vaccination uptake support to SNFs and to the CDC for staffing, training and deployment of state-based nursing home and long-term
care “strike teams” to assist facilities with known or suspected deficiencies. Additionally, the Biden Administration
announced a focus on implementing minimum staffing requirements and increased inspections as part of the nursing home reforms announced
in the 2022 State of the Union Address, and in July 2022, CMS announced it was evaluating a proposed federal staffing mandate for SNFs.
It is uncertain whether such a mandate will be implemented and, if it is, whether it will be accompanied by additional funding to offset
any increased staffing requirements for our operations; an unfunded mandate to increase staff in SNFs may have a material and adverse
impact on the financial condition of our operations.

In
March 2021, the Oversight Subcommittee of the House Ways and Means Committee held a hearing on examining the impact of private
equity in the U.S. healthcare system, including the impact on quality of care provided within the skilled nursing industry. The
Biden Administration additionally announced in March 2022 a focus on reviewing private equity investment specifically in the skilled
nursing sector. These initiatives, as well as additional calls for government review of the role of private equity in the U.S.
healthcare industry, could result in additional requirements and/or impacts on our operations.

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Reimbursement
Generally:

Medicaid. Most
of our SNF operations derive a substantial portion of their revenue from state Medicaid programs. Whether and to what extent the
level of Medicaid reimbursement covers the actual cost to care for a Medicaid eligible resident varies by state. While periodic rate
setting occurs and, in most cases, has an inflationary component, the state rate setting process has not always keep pace with
inflation or, even if it does, there is a risk that is may still not be sufficient to cover all or a substantial portion of the cost
to care for Medicaid eligible residents. Additionally, rate setting is also subject to changes based on state budgetary constraints
and political factors, both of which could result in decreased or insufficient reimbursement to the industry even in an environment
where costs are rising. Since our profit margins on Medicaid patients in our facilities are generally relatively low, more than
modest reductions in Medicaid reimbursement or an increase in the percentage of Medicaid patients has in the past, and may in the
future, adversely affect our results of operations and financial condition, which in turn could adversely impact
us.

The
CARES Act and American Rescue Plan Act contained several provisions designed to increase coverage, expand benefits, and adjust federal
financing for state Medicaid programs. While the CARES Act provided for a 6.2% FMAP add-on to the Medicaid program during the PHE, only
certain states passed any of that specifically on to SNF operators either via an enhanced rate or lump sum payments. Additionally, the
American Rescue Plan Act provided for a 10% FMAP add-on for state home and community-based service expenditures from April 1, 2021 through
March 31, 2022 in an effort to assist seniors and people with disabilities to receive services safely in the community rather than in
nursing homes and other congregate care settings. Both programs came with conditions that states had to meet to eligible for the FMAP
add-on. There may be future initiatives proposed to allocate funding available for reimbursement away from SNFs in favor of home health
agencies and community-based care.

The
risks of insufficient Medicaid reimbursement rates along with possible initiatives to push residents historically cared for in SNFs to
alternative settings may impact us more acutely in states where we have a larger presence. We continue to monitor rate adjustment activity
in other states in which we have a meaningful presence, and it is too early to assess whether rates will generally keep pace with increased
operator costs.

Medicare.
On July 29, 2022, CMS issued a final rule regarding the government fiscal year 2023 Medicare payment rates and quality payment programs
for SNFs, with aggregate Medicare Part A payments projected to increase by $904 million, or 2.7%, for fiscal year 2023 compared to fiscal
year 2022. This estimated reimbursement increase is attributable to a 3.9% market basket increase factor plus a 1.5 percentage point
market basket forecast error adjustment and less than a 0.3 percentage point productivity adjustment, as well as a $780 million decrease
in the SNF prospective payment system rates as a result of the recalibrated parity adjustment described below, which is being phased
in over two years. The annual update is reduced by two percentage points for SNFs that fail to submit required quality data to CMS under
the SNF Quality Reporting Program. CMS has indicated that these impact figures did not incorporate the SNF Value-Based Program reductions
that are estimated to be $186 million in fiscal year 2023. While Medicare reimbursement rate setting, which takes effect annually each
October, has historically included forecasted inflationary adjustments, the degree to which those forecasts accurately reflect current
inflation rates remains uncertain. Additionally, it remains uncertain whether these adjustments will ultimately be offset by non-inflationary
factors, including any adjustments related to the impact of various payment models, such as those described below.

Payments
to healthcare providers continue to be increasingly tied to quality and efficiency. The Patient Driven Payment Model
(“PDPM”), which was designed by CMS to improve the incentives to treat the needs of the whole patient, became effective
October 1, 2019. CMS has stated that it intended PDPM to be revenue-neutral to operators, with future Medicare reimbursement
reductions possible if that was not the case. In April 2022, CMS issued a proposal for comment, which included an adjustment to
obtain that revenue neutrality as early as the 2023 rate setting period. After considering the feedback received in the rulemaking
cycle, CMS finalized recalibration of the PDPM parity adjustment factor of 4.6% with a two-year phase-in period that would reduce
SNF spending by 2.3%, or approximately $780 million, in each of fiscal years 2023 and 2024. Prior to COVID-19, we believed that
certain of our operations could realize efficiencies and cost savings from increased concurrent and group therapy under PDPM and some
had reported early positive results. Given the ongoing impacts of COVID-19, many operators are and may continue to be restricted
from pursuing concurrent and group therapy and unable to realize these benefits. Additionally, our operations continue to adapt to
the reimbursement changes and other payment reforms resulting from the value-based purchasing programs applicable to SNFs under the
2014 Protecting Access to Medicare Act. These reimbursement changes have had and may, together with any further reimbursement
changes to PDPM or value-based purchasing models, in the future have an adverse effect on the operations and financial condition of
some operators and could adversely impact the ability of operators to meet their obligations to us.

On
May 27, 2020, CMS added physical therapy, occupational therapy and speech-language pathology to the list of approved telehealth Providers
for the Medicare Part B programs provided by a SNF as a part of the COVID-19 1135 waiver provisions. The COVID-19 1135 waiver provisions
also allow for the facility to bill an originating site fee to CMS for telehealth services provided to Medicare Part B beneficiary residents
of the facility when the services are provided by a physician from an alternate location, effective March 6, 2020 through May 11, 2023,
the scheduled end of the public health emergency.

Other
Regulation:

Office
of the Inspector General Activities. The Office of Inspector General (“OIG”) of HHS has provided long-standing guidance
for SNFs regarding compliance with federal fraud and abuse laws. More recently, the OIG has conducted increased oversight activities
and issued additional guidance regarding its findings related to identified problems with the quality of care and the reporting and investigation
of potential abuse or neglect at group homes, nursing homes and SNFs. The OIG has additionally reviewed the staffing levels reported
by SNFs as part of its August 2018 and February 2019 Work Plan updates and included a review of involuntary transfers and discharges
from nursing homes in the June 2019 Work Plan updates. In August 2020, the OIG released its findings regarding its review of staffing
levels in SNFs from 2018. The OIG recommended that CMS enhance efforts to ensure nursing homes meet daily staffing requirements and explore
ways to provide consumers with additional information on nursing homes’ daily staffing levels and variability. The OIG indicated
that while the review was initiated before the COVID-19 pandemic emerged, the pandemic reinforces the importance of sufficient staffing
for nursing homes, as inadequate staffing can make it more difficult for nursing homes to respond to infectious disease outbreaks like
COVID-19. It is unknown what impact, if any, enhanced scrutiny of staffing levels by OIG and CMS will have on our operations.

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Department
of Justice and Other Enforcement Actions. SNFs are under intense scrutiny for ensuring the quality of care being rendered to residents
and appropriate billing practices conducted by the facility. The Department of Justice (“DOJ”) has historically used the
False Claims Act to civilly pursue nursing homes that bill the federal government for services not rendered or care that is grossly substandard.
For example, California prosecutors announced in March 2021 an investigation into a skilled nursing provider that is affiliated with
one of our operators, alleging the chain manipulated the submission of staffing level data in order to improve its Five Star rating.
In 2020, the DOJ launched a National Nursing Home Initiative to coordinate and enhance civil and criminal enforcement actions against
nursing homes with grossly substandard deficiencies. Such enforcement activities are unpredictable and may develop over lengthy periods
of time. An adverse resolution of any of these enforcement activities or investigations incurred by our operators may involve injunctive
relief and/or substantial monetary penalties, either or both of which could have a material adverse effect on their reputation, business,
results of operations and cash flows.

Medicare
and Medicaid Program Audits. Governmental agencies and their agents, such as the Medicare Administrative Contractors, fiscal intermediaries
and carriers, as well as the OIG, CMS and state Medicaid programs, conduct audits of our operators’ billing practices from time
to time. CMS contracts with Recovery Audit Contractors on a contingency basis to conduct post-payment reviews to detect and correct improper
payments in the fee-for-service Medicare program, to managed Medicare plans and in the Medicaid program. Regional Recovery Audit Contractor
program auditors along with the OIG and DOJ are expected to continue their efforts to evaluate SNF Medicare claims for any excessive
therapy charges. CMS also employs Medicaid Integrity Contractors to perform post-payment audits of Medicaid claims and identify overpayments.
In addition, the state Medicaid agencies and other contractors have increased their review activities. To the extent any of our operators
are found out of compliance with any of these laws, regulations or programs, their financial position and results of operations can be
adversely impacted, which in turn could adversely impact us.

Fraud
and Abuse. There are various federal and state civil and criminal laws, rules and regulations governing a wide array of healthcare provider
referrals, relationships and arrangements, including laws and regulations prohibiting fraud by healthcare providers. Many of these complex
laws raise issues that have not been clearly interpreted by the relevant governmental authorities and courts.

These
laws include: (i) federal and state false claims acts, which, among other things, prohibit providers from filing false claims or making
false statements to receive payment from Medicare, Medicaid or other federal or state healthcare programs; (ii) federal and state anti-kickback
and fee-splitting statutes, including the Medicare and Medicaid Anti-kickback statute, which prohibit the payment or receipt of remuneration
to induce referrals or recommendations of healthcare items or services, such as services provided in a SNF; (iii) federal and state physician
self-referral laws (commonly referred to as the Stark Law), which generally prohibit referrals by physicians to entities for designated
health services (some of which are provided in SNFs) with which the physician or an immediate family member has a financial relationship;
(iv) the federal Civil Monetary Penalties Law, which prohibits, among other things, the knowing presentation of a false or fraudulent
claim for certain healthcare services and (v) federal and state privacy laws, including the privacy and security rules contained in the
Health Insurance Portability and Accountability Act of 1996, which provide for the privacy and security of personal health information.

Violations
of healthcare fraud and abuse laws carry civil, criminal and administrative sanctions, including punitive sanctions, monetary penalties,
imprisonment, denial of Medicare and Medicaid reimbursement and potential exclusion from Medicare, Medicaid or other federal or state
healthcare programs. Additionally, there are criminal provisions that prohibit filing false claims or making false statements to receive
payment or certification under Medicare and Medicaid, as well as failing to refund overpayments or improper payments. Violation of the
Anti-kickback statute or Stark Law may form the basis for a federal False Claims Act violation. These laws are enforced by a variety
of federal, state and local agencies and can also be enforced by private litigants through, among other things, federal and state false
claims acts, which allow private litigants to bring qui tam or whistleblower actions, which have become more frequent in recent years.

Privacy:

We
and our operators are subject to various federal, state and local laws and regulations designed to protect the confidentiality and
security of patient health information, including the federal Health Insurance Portability and Accountability Act of 1996, as
amended, the Health Information Technology for Economic and Clinical Health Act (“HITECH”), HIPAA. The HITECH Act
expanded the scope of these provisions by mandating individual notification in instances of breaches of protected health
information, providing enhanced penalties for HIPAA violations, and granting enforcement authority to states’ Attorneys
General in addition to the HHS Office for Civil Rights (“OCR”). Additionally, in a final rule issued in January 2013,
HHS modified the standard for determining whether a breach has occurred by creating a presumption that any non-permitted
acquisition, access, use or disclosure of protected health information is a breach unless the covered entity or business associate
can demonstrate through a risk assessment that there is a low probability that the information has been compromised.

Various
states have similar laws and regulations that govern the maintenance and safeguarding of patient records, charts and other information
generated in connection with the provision of professional medical services. These laws and regulations require our operators to expend
the requisite resources to secure protected health information, including the funding of costs associated with technology upgrades. Operators
found in violation of HIPAA or any other privacy law or regulation may face significant monetary penalties. In addition, compliance with
an operator’s notification requirements in the event of a breach of unsecured protected health information could cause reputational
harm to an operator’s business.

Licensing
and Certification. Our operators and facilities are subject to various federal, state and local licensing and certification laws
and regulations, including laws and regulations under Medicare and Medicaid requiring operators of SNFs and ALFs to comply with extensive
standards governing operations. Governmental agencies administering these laws and regulations regularly inspect our operators’
facilities and investigate complaints. Our operators and their managers receive notices of observed violations and deficiencies from
time to time, and sanctions have been imposed from time to time on facilities operated by them. In addition, many states require certain
healthcare providers to obtain a certificate of need, which requires prior approval for the construction, expansion or closure of certain
healthcare facilities, which has the potential to impact some of our operators’ abilities to expand or change their businesses.

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Other
Laws and Regulations. Additional federal, state and local laws, rules and regulations affect how we conduct our operations, including laws
and regulations protecting consumers against deceptive practices and otherwise generally affecting our operators’ management of
their property and equipment and the conduct of their operations (including laws and regulations involving fire, health and safety; the
Americans with Disabilities Act (the “ADA”), which imposes certain requirements to make facilities accessible to persons
with disabilities, the costs for which we may be directly or indirectly responsible; the U.S. Patient Protection and Affordable Care
Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the “Healthcare Reform
Law”), which amended requirements for staff training, discharge planning, infection prevention and control programs, and pharmacy
services, among others; staffing; quality of services, including care and food service; residents’ rights, including abuse and
neglect laws; and health standards, including those set by the federal Occupational Safety and Health Administration (in the U.S.). It
is anticipated that our operators will continue to face additional federal and state regulatory requirements related to the operation
of their facilities in response to the COVID-19 pandemic. These requirements may continue to evolve and develop over lengthy periods
of time.

General
and Professional Liability. Although arbitration agreements have generally been effective in limiting general and professional
liabilities for SNF and long-term care providers, there have been numerous lawsuits in recent years challenging the validity of
arbitration agreements in long-term care settings. On July 16, 2019, CMS issued a final rule lifting the prohibition on pre-dispute
arbitration agreements offered to residents at the time of admission provided that certain requirements are met. The rule prohibits
providers from requiring residents to sign binding arbitration agreements as a condition for receiving care and requires that the
agreements specifically grant residents the explicit right to rescind the agreement within thirty calendar days of signing. A number
of professional liability and employment related claims have been filed or are threatened to be filed against long-term care
providers related to COVID-19. While such claims may be subject to liability protection provisions within various state executive
orders or legislation and/or federal legislation, an adverse resolution of any of legal proceeding or investigations against our
operators may involve injunctive relief and/or substantial monetary penalties, either or both of which could have a material adverse
effect on our operators’ reputation, business, results of operations and cash flows.

Environmental,
Social and Governance (“ESG”)

We
reasonably prioritize environmental, social and governance initiatives that matter to our business and shareholders. Our
Nominating and Corporate Governance Committee of our Board of Directors has been charged with primary oversight of our
sustainability efforts.

As
a triple-net landlord at two of our facilities, our third-party operators maintain operational control and responsibility for our real
estate on a day-to-day basis. While our ability to mandate environmental changes to their operations is limited, our tenants are contractually
bound to preserve and maintain our properties in good working order and condition. In connection with this, they are required to meet
or exceed annual expenditure thresholds on capital improvements and enhancements of our properties, which in some cases may facilitate
improvements in the environmental performance of our properties and reduces energy usage, water usage, and direct and indirect greenhouse
gas emissions. The goal is to incentivize operators to invest in sustainable capital projects that provide a favorable return on investment
while reducing the environmental footprint of these operations. Our due diligence on real estate acquisitions generally includes environmental
assessments as part of our analysis to understand the environmental condition of the property, and to determine whether the property
meets certain environmental standards. Similarly, during the due diligence process, we seek to evaluate the risk of physical, natural
disaster or extreme weather patterns on the properties we are looking to acquire and to assess their compliance with building codes,
which often results in remediations that incorporate sustainable improvements into our properties.

We
are committed to providing a positive and engaging work environment for our employees and taking an active role in the betterment of
the communities in which our employees live and work. See also “Human Capital Management” immediately below.

Human
Capital Management

Our
business and operating success is based on the focused passion and dedication of our people. We believe our employees’
commitment to our Company provides better service to our tenants and stakeholders, supports an inclusive and collegial working
environment and generates long-term value for our shareholders and the communities which we serve. As of March 20, 2025 we had 531
employees including the executive officers listed below, none of whom is subject to a collective bargaining agreement. Due to the
size and nature of our business, our future performance depends to a significant degree upon the continued contributions of our
executive management team and other key employees. As such, the ability to attract, develop and retain qualified personnel will
continue to be important to the Company’s ongoing and long-term success.

We
are committed to providing a positive and engaging work environment for our employees and taking an active role in the betterment of
the communities in which our employees live and work. Our full-time employees are provided a competitive benefits program, the opportunity
to participate in our employee stock purchase program, bonus and incentive pay opportunities, competitive paid time-off benefits and
paid parental leave, wellness programs, continuing education and development opportunities, and periodic engagement surveys. In addition,
we believe that giving back to our community is an extension of our mission to improve the lives of our stockholders, our employees,
and their families.

EMPLOYEES

As
of December 31, 2025, the Company and its subsidiaries had 476 employees. The Company also engages the services of consultants from time
to time, some of which may be provided by affiliates of the Company at no cost.

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