GBCS Global Healthcare Reit, Inc.

Management Discussion

• Rental revenue for the year ended December 31, 2018 totaled $3,507,366, compared to $3,129,928 for the year ended December 31, 2017, an increase of $377,438. The company also had net Healthcare revenue of $116,025 for the year end December 31, 2018, compared to $0 for the year ended December 31, 2017, related to the newly commenced operation at the Abbeville facility. Factors that contributed to the increase in rental revenue included improved performance at the Southern Hills SNF as well as base rent and occupancy-based escalators at other facilities. These factors were offset by the performance decline at Meadowview, which generated no rent since February 2018.
• Going forward, we expect to commence operations at the Southern Hills ALF and ILF facilities in 2019 which we expect to contribute more meaningfully to revenues as the year progresses. We also expect Meadowview to begin paying rent in the second quarter of 2019 with material upside if certain occupancy-based escalators are triggered.
• General and administrative expenses were $1,099,179 for the year ended December 31, 2018 compared to $1,001,202 for the year ended December 31, 2017, an increase of $97,977. The increase was due to higher salaries and wages particularly at the Glen Eagle facility. The Company stringently reviews its costs regularly but believes its cost structure has been optimized for its current portfolio. For the years ended December 31, 2018 and 2017, general and administrative expenses included $402,392 and $488,321, respectively, of stock-based compensation related to restricted stock and common stock awards granted. We recognized $56,000 of bad debt expense during 2018 related to a rent receivable which we determined to be uncollectible.