YesCare - Chapter 11 Case Summary

Business Description

Headquartered in Naples, FL, CHS FL, LLC ("CHS FL"), along with its Debtor affiliates (collectively, the "Company"), is a provider of physical and mental health services to inmate patient populations in correctional facilities. The Company serves nearly 20,000 patients daily.

• The Company typically employs (via direct employees, independent contractors, or subcontractors) the on-site medical staff providing care to the patient population, including nurses, physicians, mid-level clinicians, behavioral health staff, and related support personnel.
• The Company also maintains a central services group that provides clinical and operational guidance, recruiting and retention of personnel, clinical IT systems, and other support services to the teams in the field.

In addition to on-site care, the Company contracts with pharmacies to fill medication prescriptions that are shipped to the facility and administered to patients via the on-site staff. The Company also maintains a network of off-site providers, including hospitals, emergency rooms, and specialty physicians, to provide care that cannot be delivered on-site.

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Corporate History

In 2022, after experiencing significant financial difficulties, certain predecessor entities to the Company executed a divisional merger under the Texas Business Organizations Code, permitting the predecessor entities to merge into new legal entities and reallocate assets and liabilities in a manner binding on creditors. Two entities emerged from the process - Tehum Care Services ("Tehum") and CHS TX, Inc. ("CHS TX"), one of the Debtors in these Chapter 11 Cases. CHS TX was subsequently acquired by YesCare Corp. ("YesCare").

Tehum Chapter 11 Proceeding

• Tehum filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas, captioned In re: Tehum Care Services, Inc., Case No. 23-90086 (CML) (the "Texas Proceeding"). Tehum was not operating at the time of filing, and the bankruptcy case largely consisted of negotiations with various creditors, including multiple mediations with two mediators over several years.
• The result was a global settlement that was approved and confirmed in the Joint Chapter 11 Plan of the Tort Claimants' Committee, Official Committee of Unsecured Creditors, and Debtor (the "Tehum Plan") on March 3, 2025.
  • The settlement terms of the Tehum Plan provided, among other things, that certain settlement parties agreed to pay $50 million in monthly installments over 30 months.
  • The Tehum Plan required at least 95% of the holders of certain alleged claims to opt in to the settlement but permitted up to 5% of holders to opt out and pursue certain claims against the various settlement parties or other entities, including YesCare and CHS TX.

Organizational Structure

The Company's corporate structure is relatively simple. YesCare is the corporate parent and 100% owner of each of the Debtors and certain non-operating affiliates. YesCare has one board member, Isaac Lefkowitz. YesCare's officers are:

• Chief Executive Officer - Jeffrey Sholey
• Chief Financial Officer - James T. Sprouse, Jr.
• Chief Legal Officer - Scott King

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Operations Overview

The Company currently has over 1,500 employees and operates approximately 19 facilities across nine states. Of those facilities, nine are located in Florida, two in Kentucky, and one each in New York, Maryland, New Jersey, New Mexico, Texas, Michigan, and Virginia.

• In the ordinary course of business, the Company enters into agreements with various (typically governmental) entities under which the Debtors provide, or arrange for, the provision of healthcare services to certain inmates or detainees of the contract counterparty.
• Once client invoices are generated, payments are remitted to a centralized operating account maintained by a non-Debtor management entity that historically administers payment processing and cash management functions for the Debtors and affiliated entities (the "Management Account").

Workforce

The Debtors do not directly employ any employees; rather, the Debtors lease their employees from a non-Debtor affiliate, CHS Employee Group, LLC. In connection with the Debtors' business operations, approximately 742 employees are employed on a full-time basis and approximately 809 are employed on a part-time basis (collectively, the "Employees"). The Employees are employed by specific business line or division for which they perform services.

• Approximately 310 Employees are paid a fixed salary, and approximately 1,246 Employees are paid on an hourly basis.
• The Debtors utilize two bi-weekly payroll cycles, with payroll funded each Thursday and employees paid each Friday, one week in arrears. Payroll and benefits are processed through UKG.
• The Debtors' Employees and workforce are critical to business operations, and replacing Employees can be difficult given the skills and experience required to provide services to patients.

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Prepetition Obligations

The Debtors' prepetition liabilities consist of secured and unsecured debt. Collectively, the Debtors have more than 3,000 creditors.

Secured Debt

• The Debtors' prepetition lender is M2 LoanCo, LLC ("M2"), an affiliate of the Debtors, pursuant to that certain Third Amended and Restated Credit Agreement (as amended from time to time).
  • As of the Petition Date, the Debtors owe approximately $21 million to M2 on account of the prepetition debt.
  • The Debtors are continuing to investigate the nature of the indebtedness to M2 and reserve all rights in that regard.

Unsecured Debt

• The Debtors have substantial unsecured debt, comprised of both trade debt and litigation exposure, the majority of which is contingent, unliquidated, and disputed.
  • As of the Petition Date, the Debtors estimate their outstanding obligations to trade vendors and litigation creditors could be as high as $400 million.

Accrued Wages

• The Debtors' average weekly gross payroll obligation on account of the Employees is approximately $2,634,858.48.
• As of the Petition Date, the Debtors will owe one group of Employees for approximately three weeks of work (April 19 through the Petition Date). The initial two-week period (April 19 through May 1) would normally have been paid on May 8, 2026.
• A second group of Employees is owed for approximately two weeks of work (April 26 through the Petition Date). This payroll is due to be funded on May 14, 2026 and paid to employees on May 15, 2026.
• The Debtors estimate that, as of the Petition Date, they owe approximately $9.7 million on account of accrued and unpaid prepetition salaries and wages. Certain Employees are owed prepetition amounts in excess of the statutory cap of $17,150, with the aggregate amount in excess of the cap totaling approximately $120,000.

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Events Leading to Bankruptcy

Litigation Burden

One of the principal factors necessitating the commencement of these Chapter 11 Cases was the extraordinary financial and operational burden imposed by extensive litigation involving the Debtors. As of the Petition Date, the Debtors were parties to over 100 pending litigation matters involving alleged commercial disputes, professional negligence claims, civil rights allegations, and personal injury actions.

• A substantial majority of these proceedings were initiated by inmates at correctional facilities located across more than 15 states, including Florida.
• The defense and administration of this volume of litigation, much of which the Debtors believe is legally and factually unsupported, has required the expenditure of substantial financial resources, management attention, insurance proceeds, and operational bandwidth, forcing the Debtors to divert critical personnel and liquidity away from their core business operations and patient-care functions.

The Jackson Verdict

The Debtors' litigation exposure was further complicated by claims asserted by certain creditors and claimants who elected to opt out of the Tehum Plan. Most significantly, in a matter pending in Michigan, plaintiff Kohchise Jackson asserted civil rights and medical malpractice claims against certain of the Debtors and, on April 2, 2026, obtained a jury verdict in excess of $307 million (the "Jackson Verdict"). Upon information and belief, the Jackson Verdict constitutes one of the largest jury verdicts ever rendered against a correctional healthcare provider.

• The Debtors strongly dispute both liability and damages associated with the Jackson Verdict, believe the verdict is contrary to the evidence presented at trial and unsupported under applicable law, and intend to vigorously pursue all available post-trial motions and appellate remedies at the appropriate time.
• Regardless of the ultimate outcome of the appellate process, the sheer magnitude of the Jackson Verdict has had an immediate and materially adverse effect on the Debtors' business operations, liquidity position, access to counterparties, and overall financial condition.

Revenue Collapse and Counterparty Fallout

In the wake of the Jackson Verdict, the Debtors experienced substantial operational disruption and increasing uncertainty among governmental agencies and other contract counterparties, which collectively constitute substantially all of the Debtors' revenue base.

• Since entry of the Jackson Verdict, several significant contracts with state and local governmental entities representing over $350 million in annual revenue have been terminated, suspended, not renewed, or otherwise canceled. This represents a loss of nearly 80% of the Debtors' annual revenue.
• The Debtors further believe they have lost additional opportunities to obtain new contracts or renew existing engagements.
• The publicity and reputational harm associated with the Jackson Verdict has adversely impacted certain of the Debtors' relationships with vendors, insurers, employees, and other stakeholders, resulting in increased operational strain and additional liquidity pressure.

Additional Tehum-Related Litigation

• On April 27, 2026, certain liquidating trusts established in connection with the Tehum Plan commenced litigation against the Debtors and other parties in a matter captioned Matt Dundon, GUC Trustee, et al. v. CHS TX, Inc., et al., Case No. 26-03138. The complaint asserts various causes of action relating to, among other things, alleged breaches of a settlement agreement entered in the Tehum Plan and claims arising from certain historical organizational restructuring transactions.
• The Debtors believe these allegations are without merit and intend to vigorously defend against the asserted claims. Nonetheless, the commencement of additional large-scale litigation further increased uncertainty surrounding the Debtors' financial condition and contributed to the need for a comprehensive restructuring process.

CRO Appointment and Chapter 11 Filing

In light of the Company's financial difficulties, it became apparent that the Debtors would require a CRO to advise them through a restructuring process and, if needed, the Chapter 11 Cases. Accordingly, on May 6, 2026, the Company resolved to retain David Goldwasser of FIA Capital Partners, LLC as CRO, given his prior experience with the Company as well as his prior experience serving as CRO in other Chapter 11 cases.

• The Debtors did not have sufficient liquidity to fund the payroll that was due May 8, 2026 and will require additional financing to make the payroll. This was one of the many reasons the Debtors filed for bankruptcy.
• The Debtors commenced these Chapter 11 Cases on May 8, 2026 in the U.S. Bankruptcy Court for the Middle District of Florida to obtain the protections and breathing spell afforded by the Bankruptcy Code while they stabilize operations and evaluate value-maximizing restructuring alternatives.
• The Debtors are actively assessing strategic options for the business, including a potential sale transaction, balance-sheet restructuring, operational rationalization, recapitalization, or other restructuring transaction involving all or substantially all of the Debtors' assets or operations.
• Through these Chapter 11 Cases, the Debtors seek to preserve going-concern value, maintain continuity of patient care and operations, protect relationships with governmental counterparties and employees, and maximize recoveries for the benefit of all stakeholders.