This Annual Report and the documents that are incorporated by reference in this
Annual Report contain certain forward-looking statements within the meaning of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. Forward-looking statements include all
statements that do not relate solely to historical or current facts and may be
identified by the use of words such as "may," "believe," "will," "seeks to",
"expect," "project," "estimate," "anticipate," "plan" or "continue." These
forward-looking statements are based on the current plans and expectations and
are subject to a number of risks, uncertainties and other factors which could
significantly affect current plans and expectations and our future financial
condition and results. For a listing and a discussion of such factors, which
could cause actual results, performance and achievements to differ materially
from those anticipated, see Certain Cautionary Statements-Forward Looking
Information and Item 1A.

Critical accounting estimates

The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires us to make estimates and assumptions
that affect reported amounts and related disclosures. We consider an accounting
estimate to be critical if:

• it requires the formulation of assumptions that were uncertain at the time of the

estimate has been made; and

• changes in the estimate or different estimates that could have been made

could have a material impact on our consolidated statement of earnings or

financial condition.


The table of critical accounting estimates that follows is not intended to be a
comprehensive list of all of our accounting policies that require estimates. We
believe that of our significant accounting policies, as discussed in Note 2 of
our Notes to Consolidated Financial Statements included in this Annual Report on
Form 10-K for the fiscal year ended June 30, 2021, the estimates discussed below
involve a higher degree of judgment and complexity. We believe the current
assumptions and other considerations used to estimate amounts reflected in our
consolidated financial statements are appropriate. However, if actual experience
differs from the assumptions and other considerations used in estimating amounts
reflected in our consolidated financial statements, the resulting changes could
have a material adverse effect on our consolidated results of operations and
financial condition.

                                       33

————————————————– ——————————-

The following table presents information about our critical accounting estimates, as well as the effects of hypothetical changes in the significant assumptions used to develop each estimate:



Balance Sheet or Statement of
Operations and Comprehensive
Earnings and Loss Caption/Nature of           Assumption / Approach Used
Critical Estimate Item                   (dollar amounts in thousands, except           Sensitivity Analysis
(dollar amounts in thousands, except                     per                    (dollar amounts in thousands, except
per share)                                              share)                               per share)
Receivables-net and Provision for
Concession Adjustments

Receivables-net for our Healthcare       The largest component of concessions   A significant increase in our
Services segment primarily consists of   adjustments in our patient accounts    provision for doubtful accounts (as
amounts due from third-party payors      receivable for our Healthcare          a percentage of revenues) would
and patients from providing healthcare   Services and Pharmacy segments         lower our earnings. This would
services to healthcare facility          relates to accounts for which          adversely affect our results of
patients. Receivables for our Pharmacy   patients are responsible, which we     operations, financial condition,
segment primarily consists of amounts    refer to as patient responsibility     liquidity and potentially our future
due from third-party payors;             accounts. These accounts include       access to capital.
institutions such as extended care and   both amounts payable by uninsured      If net revenues during fiscal year
rehabilitation centers, nursing homes,   patients and co-payments and           2021 were changed by 1%, our 2021
home health, hospice, hospitals;         deductibles payable by insured         after-tax income from continuing
Medicaid Part D program; and customers   patients. In general, we attempt to    operations would change by
from the sale of pharmacy services and   collect deductibles, co-payments and   approximately $407 or diluted
merchandise. Our ability to collect      self-pay accounts prior to the time    earnings per share of $0.06.
outstanding receivables is critical to   of service for non-emergency care.     This is only one example of
our results of operations and cash       If we do not collect these patient     reasonably possible sensitivity
flows. The primary uncertainty lies      responsibility accounts prior to the   scenarios. The process of
with accounts for which patients are     delivery of care, the accounts are     determining the allowance requires
responsible, which we refer to as        handled through our billing and        us to estimate uncollectible patient
patient responsibility accounts. These   collections processes.                 accounts that are highly uncertain
accounts include both amounts payable    We attempt to verify each patient's    and requires a high degree of
by uninsured patients and co-payments    insurance coverage as early as         judgment. It is impacted by, among
and deductibles payable by insured       possible before a scheduled            other things, changes in regional
patients                                 non-emergency admission or         

economic conditions, business office

                                         procedure, including with respect to   operations, payor mix and trends in
Our provision for concession             eligibility, benefits and              private and federal or state
adjustments, included in our results     authorization/pre-certification    

public health coverage. of continued activities for the required years, in order to notify the end June 30th, was as follows:

           patients of the estimated amounts
2021-$726; and                           for which they will be responsible.
2020-$784                                Our hospital does not operate an
                                         emergency room. We attempt to verify
                                         insurance coverage within a
                                         reasonable amount of time for all
                                         non-emergency urgent admissions in
                                         compliance with the Emergency
                                         Medical Treatment and Active Labor
                                         Act.
                                         In general, we utilize the following
                                         steps in collecting accounts
                                         receivable: if possible, cash
                                         collection of all or a portion of
                                         deductibles, co-payments and
                                         self-pay accounts prior to or at the
                                         time service is provided; billing
                                         and follow-up with third party
                                         payors; collection
                                         calls; utilization of collection
                                         agencies; sue to collect if the
                                         patient has the means to pay and
                                         chooses not to pay; and if
                                         collection efforts are unsuccessful,
                                         write off the accounts.




                                       34
--------------------------------------------------------------------------------


Balance Sheet or Statement of
Operations and Comprehensive
Earnings and Loss Caption/Nature of          Assumption / Approach Used
Critical Estimate Item                  (dollar amounts in thousands, except           Sensitivity Analysis
(dollar amounts in thousands, except                    per                    (dollar amounts in thousands, except
per share)                                             share)                               per share)
                                        Our policy is to write off accounts
                                        after all collection efforts have
                                        failed, which is typically no longer
                                        than 120 days after the date of
                                        discharge of the patient or service
                                        to the patient or customer. Patient
                                        responsibility accounts represent
                                        the majority of our write-offs. Our
                                        subsidiary hospital retains
                                        third-party collection agencies for
                                        billing and collection of delinquent
                                        accounts; the use of one or more
                                        collection agencies promotes
                                        competition and improved
                                        performance. Generally, we do not
                                        write off accounts prior to
                                        utilizing the services of a
                                        collection agency. Once collection
                                        efforts have proven unsuccessful, an
                                        account is written off from our
                                        patient accounting system.
                                        We monitor our revenue trends by
                                        payor classification on a
                                        quarter-by-quarter basis along with
                                        the composition of our accounts
                                        receivable agings. This review is
                                        focused primarily on trends in
                                        self-pay revenues, self-pay accounts
                                        receivable, co-payment receivables
                                        and historic payment patterns.
                                        In addition, we analyze other
                                        factors such as day's revenue in
                                        accounts receivable and we review
                                        admissions and charges by
                                        physicians, primarily focusing on
                                        recently recruited physicians.




                                       35
--------------------------------------------------------------------------------


Balance Sheet or Statement of
Operations and Comprehensive
Earnings and Loss Caption/Nature of         Assumption / Approach Used
Critical Estimate Item                    (dollar amounts in thousands,              Sensitivity Analysis
(dollar amounts in thousands, except                except per               (dollar amounts in thousands, except
per share)                                            share)                              per share)
Revenue recognition / Net Patient
Service Revenues

For our Healthcare Services segment, revenue is recognized when we recognize estimated revenue in the period of amounts owed by patients, third parties in which the services are provided. For payers, institutions and our Pharmacy segment, we recognize other income for healthcare and pharmacy products in the period in which the services and goods provided net of services are provided and at the time the goods are provided. contractual discounts under customer assumption of contract or government payment for goods. Patient debt ratio. The estimates for the contracts consist mainly of amounts due for indemnities are calculated using third-party payers and patients. computerized and manual processes The amounts we receive for treatment depend on the type of patient payers covered by the government concerned. In our hospital, the programs, such as Medicare and contractual allowances are Medicaid, and other third parties calculated by a computerized payer, such as HMOs, PPOs and other systems based on payment terms for private insurers. , are determined each payer and certain manuals under contracts or established estimates are used in the calculation of government tariffs and are generally contractual allocations based on less than our historical billing perceptions established with the payers. As a result, our gross

           that are not significant or have

income and patient receivables are not contracted with reduced net receivables to us. Any contractual adjustments under such contracts or

           regardless of type of payor or

government payment rates by means of a calculation method are revised taking into account contractual discounts. and compared to actual experience The sources of this income were the same as on a periodic basis. follows for the year ended June 30th, Debtors mainly 2021 (as a percentage of the total composed of amounts due on third-party income):

                              party payors, institutions, and
Medicare-44.7%;                         patients. Amounts we receive for
Medicaid-25.9%; and                     the treatment of patients covered
Commercial insurance and other          by HMOs, PPOs and other private
sources-12.5%.                          insurers are generally less than
                                        our established billing rates. We
                                        include contractual allowances as
                                        a reduction to revenues in our
                                        financial statements based on
                                        payor specific identification and
                                        payor specific factors for rate
                                        increases and denials.




                                       36
--------------------------------------------------------------------------------


Balance Sheet or Statement of
Operations and Comprehensive
Earnings and Loss Caption/Nature     Assumption / Approach Used
of Critical Estimate Item                (dollar amounts in                Sensitivity Analysis
(dollar amounts in thousands,           thousands, except per      (dollar amounts in thousands, except
except per share)                              share)                           per share)
                                     Governmental payors           Governmental payors

                                     The majority of services      Because the laws and regulations
                                     performed on Medicare and    

governing medicare and medicare

                                     Medicaid patients are         programs are complex and subject to
                                     reimbursed at predetermined   change, the estimates of contractual
                                     reimbursement rates.         

the discounts we record could change from

                                     The differences between the   material amounts. Adjustments
                                     established billing rates     related to final settlements for
                                     (i.e., gross charges) and     revenues retrospectively increased
                                     the predetermined             (decreased) our revenues from
                                     reimbursement rates are       continuing operations by the
                                     recorded as contractual      

following amounts for the years

                                     discounts and deducted from   ended June 30:
                                     gross charges. Under this     2021-$69 and
                                     prospective reimbursement     2020-$139.
                                     system, there is no
                                     adjustment or settlement of
                                     the difference between the
                                     actual cost to provide the
                                     service and the
                                     predetermined reimbursement
                                     rates.
                                     Discounts for
                                     retrospectively cost-based
                                     revenues are estimated
                                     based on historical and
                                     current factors and are
                                     adjusted in future periods
                                     when settlements of filed
                                     cost reports are received.
                                     Final settlements under all
                                     programs are subject to
                                     adjustment based on
                                     administrative review and
                                     audit by third party
                                     intermediaries, which can
                                     take several years to
                                     resolve completely.

                                     Commercial Insurance          Commercial Insurance

                                     For most managed care         If our overall estimated contractual
                                     plans, contractual            discount percentage on all of our
                                     allowances estimated at the  

commercial revenues in 2021 were

                                     time of service are           changed by 1%, our 2021 after-tax
                                     adjusted to actual            income from continuing operations
                                     contractual allowances as     would change by approximately $78.
                                     cash is received and claims   This is only one example of
                                     are reconciled. We evaluate  

reasonably possible sensitivity

                                     the following criteria in     

scenarios. The process of

                                     developing the estimated      

the determination of the allowance requires

                                     contractual allowance         us to estimate the amount expected
                                     percentages: historical       to be received and requires a high
                                     contractual allowance         degree of judgment. It is impacted
                                     trends based on actual        by

changes in managed care contracts

                                     claims paid by managed care   and other related factors.
                                     payors; review of             A significant increase in our
                                     contractual allowance         estimate of contractual discounts
                                     information reflecting        would

lower our income. That would do

                                     current contract terms;       

adversely affect our results

                                     consideration and analysis    

operations, financial situation,

                                     of changes in payor mix       

liquidity and future access to

                                     reimbursement levels; and     capital.
                                     other issues that may
                                     impact contractual
                                     allowances.




                                       37
--------------------------------------------------------------------------------

Balance sheet or income statement and overall assumption / approach Profits and losses Legend / nature

              Used
of Critical Estimate Item              (dollar amounts in              Sensitivity Analysis
(dollar amounts in thousands,         thousands, except per    (dollar amounts in thousands, except
except per share)                            share)                         per share)
Intangible assets and accounting
for business combinations

Our intangible assets by activity According to the segment included in our

              Financial Accounting
consolidated balance sheets as of    Standards Board
June 30 for the following years      ("FASB") Accounting
was as follows:                      Standards Codification
                                     350-10,
                                     "Intangibles-Goodwill
                                     and Other," ("ASC
                                     350-10") goodwill and
                                     intangible assets with
                                     indefinite lives are
                                     reviewed by us at least
                                     annually for
                                     impairment. For
                                     purposes of these
                                     analyses, the estimate
                                     of fair value is based
                                     on the income approach,
                                     which estimates the
                                     fair value based on
                                     future discounted cash
                                     flows. The estimate of
                                     future discounted cash
                                     flows is based on
                                     assumptions and
                                     projections that are
                                     believed to be
                                     currently reasonable
                                     and supportable. If it
                                     is determined the
                                     carrying value of
                                     goodwill or other
                                     intangible assets to be
                                     impaired, then the
                                     carrying value is
                                     reduced.
                                     The purchase price of
                                     acquisitions is
                                     allocated to the assets
                                     acquired and
                                     liabilities assumed
                                     based upon their
                                     respective fair values
                                     and are subject to
                                     change during the
                                     twelve-month period
                                     subsequent to the
                                     acquisition date. We
                                     engage independent
                                     third-party valuation
                                     firms to assist us in
                                     determining the fair
                                     values of assets
                                     acquired and
                                     liabilities assumed at
                                     the time of
                                     acquisition. Such
                                     valuations require us
                                     to make significant
                                     estimates and
                                     assumption, including
                                     projections of future
                                     events and operating
                                     performance.




                                              2021        2020
                 Pharmacy
                 Trade name                 $   1,180   $   1,180
                 Customer relationships         1,089       1,089
                 Medicare License                 623         623
                                                2,892       2,892
                 Accumulated amortization     (1,665)     (1,638)
                 Total                      $   1,227   $   1,254




                                       38
--------------------------------------------------------------------------------


Balance Sheet or Statement of
Operations and Comprehensive
Earnings and Loss Caption/Nature of
Critical Estimate Item                    Assumption / Approach Used              Sensitivity Analysis
(dollar amounts in thousands, except    (dollar amounts in thousands,     (dollar amounts in thousands, except
per share)                                    except per share)                        per share)
                                       Fair value estimates are derived
                                       from independent appraisals,
                                       established market values of
                                       comparable assets, or internal
                                       calculations of estimated future
                                       net cash flows. Our estimate of
                                       future cash flows is based on
                                       assumptions and projections we
                                       believe to be currently
                                       reasonable and supportable. Our
                                       assumptions take into account
                                       revenue and expense growth
                                       rates, patient volumes, changes
                                       in payor mix, and changes in
                                       legislation and other payor
                                       payment patterns.

Professional and general liability
claims

We are subject to potential medical    The reserve for professional and   Actuarial calculations include a
malpractice lawsuits and other         general liability claims is        large number of variables that may
claims as part of providing            based upon independent actuarial   significantly impact the estimate of
healthcare and pharmacy related        calculations, which consider       ultimate losses recorded during a
services. To mitigate a portion of     historical claims data,            reporting period. In determining
this risk, we have maintained          demographic considerations,        loss estimates, professional
insurance for individual malpractice   severity factors and other         judgment is used by each actuary by
claims exceeding a self-insured        actuarial assumptions in the       selecting factors that are
retention amount. Our self-insurance   determination of reserve           considered appropriate by the
retention amount was $1,000 on         estimates.                         actuary for our specific
individual malpractice claims for      The reserve for professional and   circumstances. Changes in
each contract year commencing          general liability claims           assumptions used by our independent
March 1, 2011 through February 29,     reflects the current estimate of   actuary with respect to demographics
2016 and was reduced to $750 from      all outstanding losses,            and geography, Industry trends,
March 1, 2016 through March 31,        including incurred but not         development patterns and judgmental
2021. A tail insurance policy has      reported losses, based upon        selection of other factors may
been purchased for claims occurring    actuarial calculations as of the   impact our recorded reserve levels
on or before March 31, 2021 which      balance sheet date. The loss       and our results of operations.
has a $750 per incident self-insured   estimates included in the          Changes in our initial estimates of
retention. For claims occurring        actuarial                          professional and general liability
after March 31, 2021, claims made      calculations may change in the     claims are non-cash charges and
insurance policies have been           future based upon updated facts    accordingly, there would be no
purchased with $1,000 on individual    and circumstances.                 material impact currently on our
malpractice claims for the contract                                       

liquidity or capital resources. starting year April 1, 2021 We are revising our reserve estimate by March 31, 2022.

                process by obtaining independent
                                       actuarial calculations
Each year, we obtain quotes from       quarterly.
various malpractice insurers with
respect to the cost of obtaining
medical malpractice insurance
coverage. We compare these quotes to
our most recent actuarially
determined estimates of losses at
various self-insured retention
levels. Accordingly, changes in
insurance costs affect the
self-insurance retention level we
choose each year. As insurance costs
increase, we may accept a higher
level of risk in self-insured
retention levels.




                                       39
--------------------------------------------------------------------------------

Balance sheet or income statement and overall assumption / approach Profits and losses Legend / nature

               Used
of Critical Estimate Item               (dollar amounts in              Sensitivity Analysis
(dollar amounts in thousands,           thousands, except       (dollar amounts in thousands, except
except per share)                           per share)                       per share)
The reserve for professional and     Our estimated reserve
general liability claims included    for
in our consolidated balance sheets   professional and general
as of June 30 was as follows:        liability claims will be
2021-$37 and                         significantly affected
2020-$123                            if current and future
The total increases (decreases)      claims differ from
for professional and general         historical trends. While
liability coverage, included in      we monitor reported
our consolidated results of          claims closely and
operations for the years ended       consider potential
June 30, was as follows:             outcomes as estimated by
2021-$211; and                       our independent
2020-$(338).                         actuaries when
                                     determining our
                                     professional and general
                                     liability reserves, the
                                     complexity of the
                                     claims, the extended
                                     period of time to settle
                                     the claims and the wide
                                     range of potential
                                     outcomes complicates the
                                     estimation process. In
                                     addition, certain
                                     states, including
                                     Georgia, have passed
                                     varying forms of tort
                                     reform which attempt to
                                     limit the number and
                                     types of claims and the
                                     amount of some medical
                                     malpractice awards. If
                                     enacted limitations
                                     remain in place or if
                                     similar laws are passed
                                     in the states where our
                                     other medical facilities
                                     are located, our loss
                                     estimates could
                                     decrease.
                                     Conversely,
                                     liberalization of the
                                     number and type of
                                     claims and damage awards
                                     permitted under any such
                                     law applicable to our
                                     operations could cause
                                     our loss estimates to
                                     increase.




                                       40
--------------------------------------------------------------------------------

Balance sheet or income statement and overall assumption / approach Profits and losses Legend / nature

              Used
of Critical Estimate Item              (dollar amounts in               Sensitivity Analysis
(dollar amounts in thousands,           thousands, except       (dollar amounts in thousands, except
except per share)                          per share)                        per share)
Accounting for income taxes

Deferred tax assets in general The first step in Our deferred tax assets was $ 6,700 to represent the elements that will lead to the determination of the

           June 30, 2021, excluding the impact of
in a tax deduction in future years   deferred tax asset        valuation allowances. At June 30, 2021,
for which we have already recorded   valuation allowance is    the Company evaluated the need for a
the tax benefit in our Statement     identifying reporting     valuation allowance against our
of Operations and Comprehensive      jurisdictions where we    deferred tax assets and determined that
Earnings and Loss. We assess the     have a history of tax     it was more likely than not that
likelihood that deferred tax         and operating losses or   none of our deferred tax assets would
assets will be recovered from        are projected to have     be realized. As a result, in
future taxable income. To the        losses in future          accordance with ASC 740, we recognized
extent we believe that recovery is   periods as a result of    a total valuation allowance of $6,700
not probable, a valuation            changes in operational    against the deferred tax asset so that
allowance is established. To the     performance. We then      the net tax deferred asset was $0 at
extent we establish a valuation      determine if a            June 30, 2021. We conducted our
allowance or increase this           valuation allowance       evaluation by considering available
allowance, we must include an        should be established     positive and negative evidence to
expense as part of the income tax    against the deferred      determine our ability to realize our
provision in our results of          tax assets for that       deferred tax assets. In our evaluation,
operations. Our net deferred tax     reporting jurisdiction.   we gave more significant weight to
asset balance (net of valuation                                evidence that was objective in nature
allowance) in our consolidated       The second step is to     as compared to subjective evidence.
balance sheets as of June 30 for     determine the amount of   Also, more significant weight was given
the following years was as           the valuation             to evidence we judged directly related
follows:                             allowance. We will        to our current financial performance as
2021-$0; and                         generally establish a     compared to less current evidence and
2020-$0.                             valuation allowance       future 

plans.

Our provisions for loss equal to the net Le IRS may propose adjustments for deferred tax assets in our

           deferred tax asset        items we have failed to identify as tax
consolidated balance sheets as of    (deferred tax assets      contingencies. If the IRS were to
June 30 for the following years      less deferred tax         propose and sustain assessments equal
were as follows:                     liabilities) related to   to 10% of our taxable income for 2020,
2021-$6,700; and                     the jurisdiction          we would incur approximately $0 of
2020-$8,389.                         identified in the first   additional tax expense for 2021 plus
In addition, significant judgment    step of the analysis.     applicable penalties and interest.
is required in determining and       In certain cases, we
assessing the impact of certain      may not reduce the
tax-related contingencies. We        valuation allowance by
establish accruals when, despite     the amount of the
our belief that our tax return       deferred tax
positions are fully supportable,     liabilities depending
it is probable that we have          on the nature and
incurred a loss related to tax       timing of future
contingencies and the loss or        taxable income
range of loss can be reasonably      attributable to
estimated.                           deferred tax
We adjust the accruals related to    liabilities.
tax contingencies as part of our
provision for income taxes in our    In assessing tax
results of operations based upon     contingencies, we
changing facts and circumstances,    identify tax issues
such as the progress of a tax        that we believe may be
audit, development of industry       challenged upon
related examination issues, as       examination by the
well as legislative, regulatory or   taxing authorities. We
judicial developments. A number of   also assess the
years may elapse before a            likelihood of
particular matter, for which we      sustaining tax benefits
have established an accrual, is      associated with tax
audited and resolved.                planning strategies and
                                     reduce tax benefits
                                     based on management's
                                     judgment regarding such
                                     likelihood. We compute
                                     the tax on each
                                     contingency. We then
                                     determine the amount of
                                     loss, or reduction in
                                     tax benefits based upon
                                     the foregoing and
                                     reflects such amount as
                                     a component of the
                                     provision for income
                                     taxes in the reporting
                                     period.
                                     During each reporting
                                     period, we assess the
                                     facts and circumstances
                                     related to recorded tax
                                     contingencies. If tax
                                     contingencies are no
                                     longer deemed probable
                                     based upon new facts
                                     and circumstances, the
                                     contingency is
                                     reflected as a
                                     reduction of the
                                     provision for income
                                     taxes in the current
                                     period.




                                       41
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Financial summary

The results from continuing operations shown in the historical summary below relate to our two business segments, Healthcare and Pharmaceuticals.



                                                            2021            

2020

Net Revenues-Healthcare Services                        $     13,613     $     16,243
Net Revenues-Pharmacy                                         27,072           31,570
Total Net Revenues                                            40,685           47,813
Costs and expenses                                           (38,816 )        (48,142 )
Operating profit (loss)                                        1,869             (329 )
Federal stimulus - Pandemic relief funds                       4,880        

54

Forgiveness of PPP loans and accrued interest                    264        

0

Interest Expense                                                 (28 )            (29 )
Loss on extinguishment of debt-net                                 0             (178 )
Gain on sale of assets                                            13        

192

Earnings (loss) from continuing operations before
income taxes                                            $      6,998     $  

(290)

Health Services segment: admissions to hospitals and long-term care and rehabilitation centers

                                                       281        

393

Hospital and Extended Care and Rehabilitation Center
Patient Days                                                  19,577           25,946




Results of Operations

Our net income comes mainly from our two business segments, health services and pharmacy. The Company’s net income by payer was as follows for the years ended June 30, 2021 and 2020:


                                                    2021         2020
              Medicare                            $ 18,194     $ 20,013
              Medicaid                              10,522       13,956
              Retail and Institutional Pharmacy      6,090        6,465
              Managed Care & Other Insurance         5,094        6,742
              Self-pay                                 510          498
              Rent                                       0           16
              Other                                    275          123
              Total Net Revenues                  $ 40,685     $ 47,813




Healthcare Services net revenues in the current year are composed of revenues
from one hospital, one extended care and rehabilitation center and a subsidiary
which provides information technology services to outside customers and SunLink
subsidiaries. Healthcare Services net revenues decreased $2,630, or 16.2% in the
year ended June 30, 2021 compared to the year ended June 30, 2020. The decrease
in net revenues for fiscal 2021 resulted from primarily from reduced patient
demand as a result of the COVID-19 pandemic. Hospital days decreased 21.9%,
extended care and rehabilitation center patient days decreased 25.0% and clinic
visits decreased 25.5% in the fiscal year ended June 30, 2021 compared to the
prior year. Settlements of prior year Medicare and Medicaid cost reports
contributed net revenues from continuing operations of $69 for the year ended
June 30, 2021 and $139 for the year ended June 30, 2020.

Pharmacy Segment net revenues for the year ended June 30, 2021 of $27,072
decreased 14.2% from the prior year. The decreased net revenues resulted from
decreased referrals from physician offices and other sources due to the COVID-19
pandemic and the related downward turn in the local economies serviced by the
segment. Total scripts filled decreased 9.6% and Durable Medical Equipment sales
orders decreased 7.9% for the year ended June 30, 2021 from the prior year.
Also, the operations of the Pharmacy segment in Lake Charles, Louisiana were
impacted by Hurricane Laura in August 2020 and by Hurricane Delta in October
2020. The local area suffered devasting winds and flooding and customer demand
decreased as a result.

                                       42
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Costs and expenses, including depreciation and amortization, were $38,816 and
$48,142 for the fiscal years ended June 30, 2021 and 2020, respectively. Costs
and expenses as a percentage of net revenues were:



                                                       2021       2020
              Cost of goods sold                        38.4 %     39.8 %
              Salaries, wages and benefits              33.9 %     40.7 %
              Supplies                                   2.4 %      2.5 %
              Purchased services                         6.1 %      6.2 %
              Other operating expenses                   9.9 %      7.3 %
              Rent and lease expense                     1.4 %      1.3 %
              Depreciation and amortization expense      3.4 %      3.0 %





Cost of goods sold as a percent of net revenues decreased 1.4% in the fiscal
year ended June 30, 2021 compared to the prior fiscal year due to decreased
sales of higher cost intravenous products. Salaries, wages and benefits expense
as a percent of net revenues decreased 6.8% this year compared to the prior
fiscal year due to the recognition of CARES Act Employer Retention Credits which
the company qualified for when the program was amended effective January 1,
2021. Other operating expenses increased 2.6% due to increased professional
liability and other insurance expenses.



Operating profit (loss)

Operating profit was $1,871 for the year ended June 30, 2021 compared to an
operating loss of $329 for the year ended June 30, 2020. The operating profit in
the year ended June 30, 2021 compared to the prior fiscal year resulted from the
recognition of CARES Act Employer Retention Credits for which the company
qualified when the program was amended effective January 1, 2021.



Other Income – Federal Stimulation – Pandemic Relief Fund

As part of CARES, two subsidiaries received total payments of $5,370 under the
Provider Relief Fund ("PRF"). These funds were allocated to Medicare facilities
and providers affected by COVID-19 based on eligible provider's net patient
revenues and are required to be used for COVID-19 related costs and to offset
the effect of COVID-19, including reduced revenues. The relief funds are
recognized as government grants. The Company recognized income when it was able
to comply with the relevant conditions of the grants. During the fiscal year
ended June 30, 2021, $4,880 of these funds were recognized as Other Income for
reimbursement of Lost Revenues and for COVID-19 related expenses compared to $54
for the fiscal year ended June 30, 2020.

Delivery of the PPP loan and accrued interest

During the quarter ended June 30, 2021, $261 of our PPP loans and related $3 of
accrued interest were forgiven by the SBA and $264 was recorded as income
relating to the PPP loan forgiveness in the quarter ended June 30, 2021. In July
and August 2021, we received notification that the remaining outstanding $2,972
of PPP loans and related $38 of accrued interest was forgiven by the SBA. During
the quarter ended September 30, 2021, we will record $3,010 of income for PPP
loan forgiveness.

Interest Expense-net

Net interest expense was $ 28 and $ 29 for the past years June 30, 2021 and 2020, respectively, and consisted mainly of accrued interest on PPP loans during the year ended June 30, 2021.

Loss on extinction of debt

During the year ended June 30, 2020, the Company repaid the outstanding balance
of the Trace RDA Loan, which was scheduled to be fully repaid in July 2027. The
pre-payment was made with cash on hand. The Company recorded a non-cash loss on
early extinguishment of debt relating to the pre-payment of $178 during the year
ended June 30, 2020.



Gain on Sale of Assets


At December 20, 2019, the Company sold a medical office building and approximately 4 acres of land to Clanton, Alabama. After the expenses, the Company received the net proceeds from the sale of $ 204, which was retained for working capital and overhead costs of the business

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purposes. The capital gain before tax on the sale of the building was $ 86 and is included in the Company’s results for the year ended June 30, 2020.

On September 9, 2019, the Company sold approximately 11.4 acres of undeveloped
land in Fulton, MO. After expenses, the Company received net proceeds from the
sale of $348, which was retained for working capital and general corporate
purposes. The pre-tax gain on the sale of property was $100 and is included in
the Company's results for the fiscal year ended June 30, 2020.

Income taxes



We recorded income tax expense of $63 ($63 state tax expense) for the year ended
June 30, 2021 compared to an income tax expense of $296 ($296 state tax expense)
for the year ended June 30, 2020.



Of the CARES Act provisions, the most material income tax considerations related
to the Company are related to the amounts for ERC and amounts received as
general and targeted PRF. Based on the latest published IRS guidance as of the
preparation of the June 30, 2021 financial statements, PRF (to the extent the
applicable terms and conditions required to retain the funds are met "Retainable
PRF") are fully includable in taxable income in the Company's tax returns in the
fiscal year received. ERC are includable in tax income in the Company's tax
returns in the fiscal year in which the payroll expenses for which the quarterly
credits offset are deductible. ERC results in qualified wages being disallowed
as a deduction for the portion of wages paid equal to the sum of the payroll tax
credit taken in the associated quarter. For amounts received and forgiven under
PPP Loans, due to the enactment of the Consolidated Appropriations Act, 2021, on
December 27, 2020, Congress specifically allows the deduction of any expenses
associated with forgiven PPP loan proceeds. It is the Company's assumption at
June 30, 2021 that all PPP Loan associated expenses will be deductible for
income tax and the book forgiveness income will not be taxable. The Company has
sufficient federal net operating losses for the period to cover the resulting
provisional June 30, 2021 taxable income, The year ended June 30, 2021 current
tax expense represents the state income tax accrued resulted from tax income
resulting from ERC accrued and associated disallowed wages and PRF received
during the period.

In accordance with the Financial Accounting Standards Board Accounting Standards
Codification ("ASC") 740, we evaluate our deferred taxes quarterly to determine
if adjustments to our valuation allowance are required based on the
consideration of available positive and negative evidence using a "more likely
than not" standard with respect to whether deferred tax assets will be realized.
Our evaluation considers, among other factors, our historical operating results,
our expectation of future results of operations, the duration of applicable
statuary carryforward periods and conditions of the healthcare industry. The
ultimate realization of our deferred tax assets depends primarily on our ability
to generate future taxable income during the periods in which the related
temporary differences in the financial basis and the tax basis of the assets
become deductible. The value of our deferred tax assets will depend on
applicable income tax rates.

At June 30, 2021, consistent with the above process, we evaluated the need for a
valuation allowance against our deferred tax assets and determined that it was
more likely than not that none of our deferred tax assets would be realized. As
a result, in accordance with ASC 740, we recognized a valuation allowance of
$6,700 against the deferred tax asset so that there is no net long-term deferred
income tax asset or liability at June 20, 2021. We conducted our evaluation by
considering available positive and negative evidence to determine our ability to
realize our deferred tax assets. In our evaluation, we gave more significant
weight to evidence that was objective in nature as compared to subjective
evidence. Also, more significant weight was given to evidence that directly
related to our current financial performance as compared to less current
evidence and future performance.

The principal negative evidence that led us to determine at June 30, 2021 that
all the deferred tax assets should have full valuation allowances was the
underlying negative business conditions for rural healthcare businesses in which
our Healthcare Services Segment businesses operate and the Federal income tax
net operating loss carry-forward of approximately $15,631.

For Federal income tax purposes, at June 30, 2021, the Company had approximately
$15,631 of estimated net operating loss carry-forwards available for use in
future years subject to the limitations of the provisions of Internal Revenue
Code Section 382. These net operating loss carryforwards expire primarily in
fiscal 2023 through fiscal 2038; however, with the enactment of the Tax Cut and
Jobs Act on December 22, 2017, federal net operating loss carryforwards
generated in taxable years beginning after December 31, 2017 now have no
expiration date. The Company's returns for the periods prior to the fiscal year
ended June 30, 2018 are no longer subject to potential federal and state income
tax examination.

Discontinued Operations

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Loss from discontinued operations net of income tax was $47 for the year ended
June 30, 2021, and loss from discontinued operations net of income taxes were
$554 for the year ended June 30, 2020. The results of all the businesses in
.discontinued operations are presented below:

Sold Hospitals - Subsidiaries of the Company have sold substantially all of the
assets of five hospitals ("Other Sold Hospitals") during the period July 2, 2012
to March 17, 2019. The income before income taxes for the fiscal year ended June
30, 2021of the Other Sold Hospitals resulted primarily from the positive effects
of prior year Medicare and Medicaid cost report settlements. The loss before
income taxes for the fiscal year ended June 30, 2020 resulted primarily from
retained professional liability claims expenses and from the negative effects of
prior year Medicare and Medicaid cost report settlements.

Life Sciences and Engineering Segment -SunLink retained a defined benefit
retirement plan which covered substantially all of the employees of this segment
when the segment was sold in fiscal 1998. Effective February 28, 1997, the plan
was amended to freeze participant benefits and close the plan to new
participants. Pension expense and related tax benefit or expense is reflected in
the results of operations for this segment for the fiscal years ended June 30,
2021 and 2020.

Discontinued operations – Summary information on the income statement


                                                          2021       2020
           Net Revenues:
           Sold Hospitals                                 $ 191     $   37
                                                          $ 191     $   37
           Earnings (Loss) before Income Taxes:
           Sold Hospitals                                 $  33     $ (418 )
           Life sciences and engineering                    (80 )     (136 )
           Earnings (loss) before income taxes              (47 )     (554 )
           Income tax expense                                 0          0
           Earnings (Loss) from discontinued operations   $ (47 )   $ (554 )




Net profit (loss) – Net profit for the year ended June 30, 2021 was $ 6,890
($ 0.99 per fully diluted share) compared to the net loss for the year ended
June 30, 2020 of $ 1,140 (a loss of $ 0.16 per fully diluted share).

Liquidity and capital resources

Overview

Our primary source of liquidity is unrestricted cash on hand, which was $9,962
at June 30, 2021. The Company and its subsidiaries currently are funding working
capital needs primarily from cash on hand. From time-to-time, nevertheless, we
may seek to obtain financing for the liquidity needs or the Company or
individual subsidiaries. The Company believes, currently, that its ability to
raise capital (debt or equity) in the public or private markets on what it
considers acceptable terms is uncertain, and due to the COVID-19 pandemic and
related factors, may be non-existent.

CARES Act Provider Relief Funds- The CARES Act was enacted by the U.S.
government on March 27, 2020. Among the relief to health care providers under
the CARES Act are grant of funds under PRF and forgivable loans under the
PPP. We have received a total of $8,304 under the CARES Act programs consisting
of $5,370 in general and targeted PRF and $3,234 of PPP loans. During the first
two calendar quarters of 2021, the Company qualified for, and we are applying
for ERC through amending our quarterly payroll tax filing for the applicable
quarters.

Subject to the effects, risks and uncertainties associated with the COVID-19
pandemic and our right to retain the CARES described above, we believe we have
adequate financing and liquidity to support our current level of operations
through the next twelve months.

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Contractual obligations, commitments and contingencies

Contractual obligations related to long-term debt, non-cancelable operating
leases and interest on outstanding debt from continuing operations at June 30,
2021 is shown in the following table. The interest on variable interest debt is
calculated at the interest rate in effect at June 30, 2021.



                                                          Interest on
                 Payments                 Long-Term        Long-Term
                 due in:                    Debt             Debt
                 1 year                  $     3,009     $          43
                 2 years                          36                 5
                 3 years                          16                 1
                 4 years                           0                 0
                 5 years                           0                 0
                 More than 5 years                 0                 0
                                         $     3,061     $          49





Long-term Debt -At June 30, 2021, we had outstanding long-term debt of $3,061,
which was composed of PPP Loans of $2,972 (which the Company has notified has
been forgiven under the terms of program) and capital lease debt of $89.

Commitments for capital expenditures - At June 30, 2021, the Company has
approximately $1,100 of commitments for future capital expenditures for our
Trace hospital under its Trace Forward Capital Plan which was announced in March
2021. This Plan expands, upgrades and improves the physical plant, patient care,
ancillary services and support areas of the Trace hospital.



Related party transactions

A director of the Company is a member of a law firm which provides services to
SunLink. The Company has expensed an aggregate of $182 and $251 to the law firm
in the fiscal years ended June 30, 2021 and 2020, respectively. Included in the
Company's consolidated balance sheets at June 30, 2020 and 2019 is $21 and $6 of
amounts payable to the law firm.

Inflation

During periods of inflation and labor shortages, employee wages increase and
suppliers pass along rising costs to us in the form of higher prices for their
supplies and services. We have not always been able to offset increases in
operating costs by increasing prices for our services and products or by
implementing cost control measures. We are unable to predict our ability to
control future cost increases or offset future cost increases by passing along
the increased cost to customers.

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