ER of Texas - Chapter 11 Case Summary

Business Description

Headquartered in Little Elm, TX, ER of Texas, LLC, along with its Debtor and non-Debtor affiliates (collectively, "ER of Texas" or the "Company"), operates a network of freestanding emergency medical care facilities ("FEMCs") across the Dallas-Fort Worth metropolitan area.

• ER of Texas Emergency Room is an alliance of healthcare professionals dedicated to uncompromising service to the people of Texas and surrounding communities.
• Each facility provides 24-hour emergency care, including medical screening examinations, stabilizing treatment, diagnostic laboratory services, ultrasound services, and radiology services.

The Company delivers quality patient-centered emergency healthcare services in a safe, efficient, equitable, and fiduciary responsible manner across multiple locations, including Colleyville, Highland Village, Hillcrest/Dallas, Hurst, Little Elm, and Texoma/Sherman. Two previously operated locations in Frisco and Uptown/Dallas are now closed.

Collectively, the Debtors employ approximately 147 W-2 employees through MedOps Staffing LLC across their locations, including nursing, radiology, and patient registration staff, though only 127 are being paid this pay period.

• The Company also engages independent-contractor physicians through PERT, PLLC pursuant to written Physician Staffing Agreements dated as of November 15, 2021, providing 24/7 physician coverage to the Debtors' emergency facilities.

The Debtors are cash flow positive, with a 13-week cash flow budget reflecting projected weekly incoming cash of approximately $625,000, or approximately $89,286 per day, with projected weekly net operating income of approximately $155,165.

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Corporate History

ER of Texas, LLC was formed as a Texas limited liability company on April 28, 2020. The company is managed by managers, with member ownership reflected in the parent entity's operating agreement as Ron Walraven (33.33%), Michele Brownfield (33.33%), and Phillip Michael Hawk, Jr. (33.33%).

Organizational Structure

The Company includes ER of Texas, LLC, which serves as Manager, and numerous affiliated operating entities. Each site-level entity is manager-managed by ER of Texas, LLC, with execution in financing documents by the Manager, evidencing centralized managerial control over operating affiliates.

• ER of Texas Little Elm, LLC was formed on July 2, 2020.
• Certain Debtor entities, including ER of Texas Hurst LLC, ER of Texas Colleyville LLC, and ER of Texas Texoma LLC, were formed on July 7, 2021.
• ER of Texas Funding, LLC was formed on July 30, 2021 for the purpose of ownership and operations and funding of freestanding emergency room centers in Texas.
• MedOps Staffing LLC employs and provides administrative personnel to the operating entities.
• PERT, PLLC serves as the Debtors' physician staffing vehicle, engaging licensed physicians as independent contractors and supplying 24/7 physician coverage to the Debtors' emergency facilities.

Chapter 11 Filing

The governing bodies of each Debtor entity adopted resolutions authorizing the filing of voluntary Chapter 11 bankruptcy petitions, employment of legal and financial professionals, and related actions to facilitate reorganization and address financial liabilities.

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Operations Overview

The Debtors operate 24/7 standalone emergency rooms providing emergency medical services to patients in the Dallas-Fort Worth metropolitan area. The Company's corporate headquarters is located at 2800 Little Elm Parkway, Little Elm, TX 75068.

Facility Locations

The Debtors operate freestanding emergency room facilities at multiple locations across the Dallas-Fort Worth metropolitan area, including:

• Colleyville (5000 Hwy 121, Colleyville, TX 76034)
• Highland Village (3160 Justin Rd, Highland Village, TX 75077)
• Hillcrest/Dallas (6215 Hillcrest Ave, Dallas, TX 75205)
• Hurst (824 Airport Fwy, Hurst, TX 76054)
• Little Elm (2800 Little Elm Pkwy, Little Elm, TX 75068)
• Texoma/Sherman (115 W Travis St, Sherman, TX 75092)

Two locations are now closed: Frisco (16300 Hwy 121, Frisco, TX 75035) and Uptown/Dallas (3607 Oak Lawn Ave, Suite 100, Dallas, TX 75219).

Physician Staffing Model

PERT, PLLC engages licensed physicians as independent contractors (the "Contractor Physicians") and supplies 24/7 physician coverage to the Debtors' emergency facilities pursuant to written Physician Staffing Agreements dated as of November 15, 2021.

• Under the Physician Staffing Agreements, PERT, PLLC has the exclusive right and duty for oversight and management of physician staffing and is responsible for hiring, credentialing, scheduling, and compensating the Contractor Physicians.
• Contractor Physicians are compensated at a base hourly rate of $175 per hour for non-holiday shifts, with increased rates of $195 to $205 per hour based on patient census milestones, and $255 per hour for shifts worked on designated holidays (July 4, Thanksgiving Day, Christmas Eve, Christmas Day, New Year's Eve, and New Year's Day).
• Compensation is calculated on an hourly basis, tracked in the Debtors' scheduling and payroll systems, and remitted via ACH transfer or check.
• Historically, the Debtors have paid Contractor Physicians on a current basis typically daily, prior to or promptly following each shift worked and have endeavored to remain current on all physician compensation obligations.

Under applicable Texas law and regulatory requirements, each of the Debtors' freestanding emergency medical care facilities must have a licensed physician on site at all times in order to operate as an emergency clinic. If a Contractor Physician is not present at a facility, that facility must immediately cease operations and close its doors to patients. Moreover, any interruption in continuous physician coverage may result in the decertification of that location as a licensed freestanding emergency medical care facility under state law.

Workforce

The Debtors employ approximately 147 W-2 employees through MedOps Staffing LLC who perform essential functions related to the Debtors' emergency medical services, including nursing, radiology, and patient registration; however, only 127 are being paid this pay period. All employees are paid on a bi-weekly basis.

• These employees are critical to the Debtors' ability to continue providing emergency medical services and generating revenue during these Chapter 11 Cases.
• In the ordinary course of business, the Debtors incur and pay various obligations to or for the benefit of their employees, including wages, salaries, reimbursable expenses, and payroll-related taxes and deductions.
• The Debtors also provide benefits to employees, including health insurance, and make payments to third parties in connection therewith.

Cash Management System

The Debtors utilize a cash management system (the "Cash Management System") to collect, transfer, and disburse funds generated by their operations and to record such transactions. The Debtors' existing cash management system is comparable to the centralized cash management systems typically used by similarly sized corporate enterprises and is essential for the efficient operation of the Debtors' business.

• The Debtors' receipts are derived primarily from third-party payor remittances, including payments from commercial insurers and government healthcare programs.
• The Debtors receive payments from payors including UnitedHealthcare, Blue Cross Blue Shield of Texas, Cigna, Aetna, UMR, and various other insurance carriers and administrators.
• These remittances are deposited into the Debtors' bank accounts through electronic funds transfers, lockbox receipts, and other payment mechanisms.

The Debtors maintain their primary bank accounts at JPMorgan Chase Bank, N.A. The bank accounts include operating accounts, revenue accounts, and money market accounts used by the various Debtor entities to receive funds and make disbursements. In addition, the Debtors utilize a lockbox account for centralized receipt of high-volume insurance remittances.

• Disbursements from the Debtors' bank accounts are used to fund the Debtors' ongoing operations, including payroll, physician compensation, rent, utilities, medical supplies, insurance premiums, taxes, and other ordinary course expenses necessary for the continued operation of the Debtors' emergency medical facilities.

In the ordinary course of business, the Debtors engage in certain intercompany transactions to facilitate cash management across the enterprise. These transactions include transfers of funds between bank accounts to fund site-level operations, allocation of shared expenses among Debtor entities, centralization of receipts at the parent level followed by downstream funding to operating subsidiaries, and settlement of intercompany payables and receivables arising from ordinary course operations.

Utility Services

The Debtors rely on uninterrupted utility services, including electricity, natural gas, water and sewer, telephone and internet, solid waste removal, and site security monitoring, to provide emergency medical care, maintain patient safety, preserve accreditation and licensure, and maximize estate value.

• The Debtors receive utility services from providers including TXU Energy Retail Company LLC (electric), CoServ Electric, Atmos Energy Corporation (natural gas), various municipalities for water and sewer services, AT&T and Frontier Communications for telecommunications, Spectrum (Charter Communication) for internet, Community Waste Disposal and Republic Services for solid waste, and Alert 360 for security monitoring.
• Uninterrupted utility service is essential to patient safety, facility accreditation and licensure, and the preservation of estate value.
• The Debtors operate freestanding emergency rooms where loss of electricity, gas, water, or communications could endanger patients and staff and result in facility closure.

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Prepetition Obligations

As of the Petition Date, the Debtors' total secured and unsecured debt exceeds $17,000,000. The Debtors have a complex capital structure with significant secured and unsecured debt. Multiple lenders hold secured claims, as evidenced by numerous UCC-1 financing statements filed against the Debtors and their assets.

Senior Secured Indebtedness

• The Debtors' primary senior secured lender is Encore Bank, N.A. (the "Senior Lender"), which is party to a Loan Agreement dated November 2, 2022, as amended by a Loan Modification Agreement dated October 2024.
  • The obligations to the Senior Lender (the "Senior Indebtedness") are evidenced by, among other documents, Amended and Restated Promissory Notes in the original principal amounts of $2,250,000 and $2,000,000, and are allegedly secured by a blanket lien on substantially all of the Debtors' assets.
  • As of the Petition Date, the Debtors have outstanding debt to Encore Bank in the approximate amount of $400,000 allegedly secured by a blanket senior lien.

Subordinated Indebtedness

• The Debtors also obtained financing from Newtek Bank in the form of a term loan in the approximate amount of $15,000,000, secured by a senior position on real estate and operations of HWP ERTX Investor, LLC, the owner of the real estate at Little Elm and Highland Village and a subordinated position on the personal property assets of certain of the Debtors.
  • Newtek has contractually subordinated its security interest to Encore's security interests pursuant to the Newtek Commercial Security Agreement, dated as of March 25, 2025.

Merchant Cash Advance Obligations

Beyond the Encore Debt and Newtek Secured Claims, numerous other creditors have asserted secured claims against the Debtors and their assets. These claims, arising from various financing and merchant cash advance agreements, are evidenced by a significant number of UCC-1 financing statements filed with the Texas Secretary of State, encumbering specific assets, accounts receivable, and/or all assets of individual Debtor entities.

• Many of these agreements are styled as "Merchant Agreements" or "Future Receivables Sale Agreements" with parties such as MCA Funding Group, Forever Funding LLC, and CapitalDomain LLC.
• These arrangements are typically allegedly secured by UCC-1 financing statements granting a security interest in all or substantially all of the assets of the specific Debtor entity, with a particular focus on all present and future accounts receivable, chattel paper, and general intangibles.
• As of September 30, 2025, the Debtors have approximately $11,000,000 in outstanding MCA obligations.

Prepetition Physician Contractor Obligations

• As of the Petition Date, the Debtors estimate that the aggregate amount of current Physician Contractor Obligations outstanding for the week immediately preceding is approximately $151,286, representing amounts owed to physicians working across six active facilities: Colleyville, Highland Village, Hillcrest, Hurst, Little Elm, and Texoma.
  • This amount represents physician compensation that accrued during the period immediately preceding the Petition Date when the Debtors' bank accounts were frozen by one of the Debtors' merchant cash advance lenders, which prevented the Debtors from making payments in the ordinary course.

Critical Vendor Obligations

The Debtors, with the assistance of their management team and advisors, conducted a comprehensive review of their vendor relationships to identify those vendors providing goods and services so vital that even a brief disruption would threaten patient care, licensure, regulatory compliance, and public safety. Through this process, the Debtors identified seven Critical Vendors with aggregate prepetition balances totaling $513,455.

The Critical Vendors include:

• EPowerDoc

  The Debtors' electronic medical records ("EMR") platform provider, responsible for documentation, imaging integration, and recordkeeping essential to compliance with state and federal health information laws. Prepetition balance: $166,806.
  • Infrastructure replacement would require sixty to ninety days and would jeopardize patient safety and regulatory compliance.

• McKesson

  The Debtors' primary supplier of narcotic drugs through its licensure as a Class A pharmacy arrangement. Prepetition balance: $110,000.
  • Re-registration and onboarding with an alternative provider would prohibitively delay patient care and require DEA and state controlled substances.

• Med Partners

  The Debtors' supplier of essential medical supplies, including laboratory quality-control panels and non-narcotic drugs. Prepetition balance: $100,026.
  • No local substitute suppliers have been identified that could provide comparable products on the necessary timeline.

• PWR Technology

  The Debtors' provider of internet, telephony, VPN, and HIPAA-compliant network security services. Prepetition balance: $69,798.
  • Replacement would require thirty to forty-five days of downtime and would adversely impact multiple other vendor relationships that depend on the Debtors' network infrastructure.

• Integrated Ultrasound

  The Debtors' provider of ultrasound services, which are required under Texas state licensing requirements for freestanding emergency rooms. Prepetition balance: $59,625.
  • No replacement vendors are available locally, and the services are a licensure requirement.

• Clinic RX Partners

  The Debtors' pharmacist-of-record and Class A pharmacy oversight provider. Prepetition balance: $7,200.
  • Changes to the pharmacist-of-record require state board filings and would delay regulatory compliance.

• Oxygen Supply

  The Debtors' medical oxygen supplier. Prepetition balance: $1,200.
  • Oxygen supply is essential for emergency care and compliance with freestanding emergency department standards.

Based on vendor communications and operational assessments, these Critical Vendors will not continue delivering goods and services on commercially reasonable terms absent payment of prepetition amounts. Transitioning to alternative providers would require between thirty and ninety days, and in several cases no feasible local alternative exists, making any transition incompatible with uninterrupted emergency room operations and the Debtors' state-law obligations.

• To place the requested amounts in proper context, the total Critical Vendor prepetition exposure of $513,455 represents less than six days of projected cash receipts.
• The Critical Vendor amounts are modest relative to overall cash flow and represent essential expenditures that directly support patient care and regulatory compliance.

Debtor Assets

The Debtors' primary assets consist of accounts receivable, equipment, inventory, real property, and cash, much of which is encumbered by liens. Many of the Debtors' properties serve as collateral for the Debtors' secured obligations.

• The Debtors' primary secured lender is Encore Bank, which holds a blanket lien on substantially all of the Debtors' assets, including cash, accounts receivable, and other collateral (collectively, the "Cash Collateral").
• The Debtors' cash, including cash proceeds of accounts receivable arising from services rendered prior to the Petition Date, constitutes "cash collateral" within the meaning of section 363(a) of the Bankruptcy Code.

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Events Leading to Bankruptcy

Operational Challenges and Overleveraging

The Debtors' financial distress is a result of rapid, debt-fueled expansion, operational challenges, and significant litigation costs. While the business grew in scale, it became over-leveraged, and revenues were insufficient to service the substantial debt load incurred to fund facility acquisitions and operations.

• The Debtors' attempts to secure additional out-of-court financing to address their liquidity constraints were unsuccessful.
• Consequently, the Debtors determined that a chapter 11 filing was necessary to obtain the protection of the automatic stay, secure debtor-in-possession financing, and pursue a value-maximizing path for all stakeholders, whether through a sale or a plan of reorganization.

Immediate Liquidity Crisis

In the period immediately preceding the Petition Date, the Debtors' bank accounts were frozen by one of the Debtors' merchant cash advance lenders, which prevented the Debtors from making payments in the ordinary course, including approximately $151,286 in physician compensation owed for the week immediately preceding the filing.

Chapter 11 Filing and Go-Forward Strategy

ER of Texas, LLC filed for Chapter 11 protection on February 10, 2026 (the "Petition Date").

• The Debtors require the ability to use Cash Collateral to fund their day-to-day operations, including payroll, vendor payments, and other ordinary course expenses necessary to continue operating their freestanding emergency medical care facilities.
  • Without the ability to use Cash Collateral, the Debtors will be unable to fund their operations, pay their employees, purchase supplies and medications, or otherwise continue providing emergency medical services to patients.
• Access to the Cash Collateral is essential to the Debtors' ability to continue operating their emergency room facilities, preserve the going-concern value of their businesses, and maximize value for all stakeholders.
  • Without access to the Cash Collateral, the Debtors would be unable to pay employees, purchase medical supplies and pharmaceuticals, maintain insurance, pay utilities, and meet other operational obligations.
  • The immediate and irreparable harm that would result from a cessation of the Debtors' operations would destroy the value of the Debtors' estates and prejudice the interests of all creditors and parties in interest.
• In exchange for use of Cash Collateral, the Debtors propose to provide the Senior Lender with adequate protection of its interest in the Cash Collateral, including replacement liens on postpetition assets of the same type as the prepetition collateral, superpriority administrative expense claims to the extent of any diminution in the value of the Senior Lender's collateral, and other customary protections.

The Debtors' emergency room facilities provide critical healthcare services to patients in their communities. Disruption of these services would have severe consequences for the health and welfare of patients who depend on the Debtors' facilities for emergency medical care.

• Failure to pay prepetition employee obligations could result in immediate and irreparable harm to employee morale and, in turn, the Debtors' ability to operate their medical facilities effectively.
  • Many of the Debtors' employees depend on receiving timely payment of their wages and would suffer severe personal hardship if payment were withheld.
  • The potential departure of valuable employees would significantly impair the Debtors' ability to continue operations and maintain the quality of patient care.
• The Contractor Physicians are essential to the Debtors' continued operations.
  • If the Debtors are not authorized to pay prepetition Physician Contractor Obligations, the Debtors risk losing critical physician coverage, which would force the closure of one or more facilities, potentially trigger decertification, and severely impair the Debtors' ability to operate and generate revenue for the benefit of the estate and its creditors.
• Any interruption in the supply of essential goods and services including EMR systems, pharmaceuticals, medical supplies, network infrastructure, and oxygen would directly and immediately jeopardize patient care and could result in loss of licensure.

Without the ability to use Cash Collateral, pay employees and physicians, maintain utility services, and pay critical vendors, the Debtors' emergency room operations would cease, causing immediate and irreparable harm to patients, employees, and the communities the Debtors serve.