UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2019

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

For the transition period from_______ to ______

Commission file number 0-15415

GLOBAL HEALTHCARE REIT, INC.

(Exact name of Registrant as specified in its Charter)

Utah		87-0340206
(State or other jurisdiction of incorporation or organization)		I.R.S. Employer
~~incorporation or organization)~~		Identification number

6800 N. 79^th79th St., Ste. 200,

Niwot, CO 80503

80503

(Address of principal executive offices)

(Zip Code)

Issuer’s telephone number: (303) 449-2100

Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller Reporting Company [X]

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company [X]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ ] No [X]

As of ~~May 20,~~November 18, 2019, the Registrant had ~~27,350,131~~27,441,040 shares of its Common Stock outstanding.

INDEX

		Page No.

	PART I — FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)	3

	Consolidated Balance Sheets as of ~~March 31,~~September 30, 2019 (Unaudited) and December 31, 2018	3

	Consolidated Statements of Operations for the Three and Nine Months Ended ~~March 31,~~September 30, 2019 and 2018 (Unaudited)	4

	Consolidated Statements of Changes in Equity for the Three and Nine Months Ended ~~March 31,~~September 30, 2019 and 2018 (Unaudited)	5

	Consolidated Statements of Cash Flows for the ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2019 and 2018 (Unaudited)	6

	Notes to Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	27

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3.	Defaults Upon Senior Securities	28

Item 4.	Removed and Reserved	28

Item 5.	Other Information	28

Item 6.	Exhibits	2928

PART 1. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

GLOBAL HEALTHCARE REIT, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	March 31, 2019			December 31, 2018			September 30, 2019			December 31, 2018
ASSETS
Property and Equipment, Net	$	36,524,474		$	35,885,145		$	36,782,009		$	35,885,145
Cash and Cash Equivalents		386,124			1,100,218			447,945			1,100,218
Restricted Cash		228,515			206,989			351,238			206,989
Accounts Receivable, Net		435,659			166,696			759,900			166,696
Investments in Debt Securities		12,134			162,106			19,861			162,106
Notes Receivable								1,000,000			106,334
Prepaid Expenses and Other		902,403			774,733			901,558			668,399
Total Assets	$	38,489,309		$	38,295,887		$	40,262,511		$	38,295,887

LIABILITIES AND EQUITY
Liabilities
Debt, Net of discount of $483,590 and $507,829, respectively	$	35,744,057		$	35,721,341
Debt – Related Parties, Net of discount of $0 and $0, respectively		875,000			875,000
Debt, Net of unamortized discount of $526,132 and $507,829, respectively							$	37,193,521		$	35,721,341
Debt – Related Parties, Net of unamortized discount of $0 and $0, respectively								875,000			875,000
Accounts Payable and Accrued Liabilities		298,886			306,437			498,490			306,437
Accounts Payable – Related Parties		93,406			118,230			48,280			118,230
Dividends Payable		7,500			7,500			7,500			7,500
Derivative Liability		2,682			2,785			-			2,785
Lease Security Deposit		280,000			280,000			250,600			280,000
Total Liabilities		37,301,531			37,311,293			38,873,391			37,311,293
Commitments and Contingencies Equity
Commitments and Contingencies
Stockholders’ Equity
Preferred Stock:
Series A - No Dividends, $2.00 Stated Value, Non-Voting; 2,000,000 Shares Authorized, 200,500 Shares Issued and Outstanding		401,000			401,000			401,000			401,000
Series D - 8% Cumulative, Convertible, $1.00 Stated Value, Non-Voting; 1,000,000 Shares Authorized, 375,000 Shares Issued and Outstanding		375,000			375,000			375,000			375,000
Common Stock - $0.05 Par Value; 50,000,000 Shares Authorized, 27,077,404 and 26,300,317 Shares Issued and Outstanding at March 31, 2019 and December 31, 2018, Respectively		1,353,870			1,340,234
Common Stock - $0.05 Par Value; 50,000,000 Shares Authorized, 27,441,040 and 26,804,677 Shares Issued and Outstanding at September 30, 2019 and December 31, 2018, Respectively								1,372,052			1,340,234
Additional Paid-In Capital		10,174,041			10,137,148			10,359,464			10,137,148
Accumulated Deficit		(10,913,810	)		(11,070,606	)		(10,912,983	)		(11,070,606	)
Total Global Healthcare REIT, Inc. Stockholders’ Equity		1,390,101			1,182,776			1,594,533			1,182,776
Noncontrolling Interests		(202,323	)		(198,182	)		(205,413	)		(198,182	)
Total Equity		1,187,778			984,594			1,389,120			984,594
Total Liabilities and Equity	$	38,489,309		$	38,295,887		$	40,262,511		$	38,295,887

See accompanying notes to unaudited consolidated financial statements.

GLOBAL HEALTHCARE REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

							Nine Months Ended						Three Months Ended
	Three Months Ended March 31,						September 30,						September 30,
	2019			2018			2019			2018			2019			2018

Revenue
Rental Revenue	$	895,288		$	812,065		$	2,789,220		$	2,599,224		$	963,645		$	885,013
Healthcare Revenue		379,791			-			2,089,386			-			1,025,458			-
Total Revenue		1,275,079			812,065			4,878,606			2,599,224			1,989,103			885,013
Expenses
General and Administrative		193,479			145,155			891,031			687,649			320,195			187,035
Property Taxes, Insurance and Other Operating		349,188			80,816			1,596,835			446,240			703,816			218,138
Acquisition Costs								6,771			-			6,771			-
Depreciation		322,925			305,410			969,834			941,569			323,983			322,986
Total Expenses		865,592			531,381			3,464,471			2,075,458			1,354,765			728,159
Income from Operations		409,487			280,684			1,414,135			523,766			634,338			156,854
Other (Income) Expense
Gain on Warrant Liability		(103	)		(40,423	)		(2,785	)		(92,586	)		(27	)		(15,974	)
Gain on Extinguishment of Debt		-			(94,925	)
Loss on Settlement of Other Liabilities		-			29,900
Loss on Extinguishment of Debt								-			57,694			-			-
Gain on Settlement of Other Liabilities								-			(98,521	)		-			354
Gain on Sale of Investments		(1,069	)		-			(1,069	)		-			-			-
Gain on Proceeds from Insurance Claim		(270,264	)		-			(324,018	)		-			(53,754	)		-
Interest Income		(5,467	)		-			(26,248	)		-			(19,245	)		-
Interest Expense		526,235			598,366			1,595,363			1,783,296			524,503			590,514
Total Other (Income) Expense		249,332			492,918			1,241,243			1,649,883			451,477			574,894
Net Income (Loss)		160,155			(212,234	)		172,892			(1,126,117	)		182,861			(418,040	)
Net Loss Attributable to Noncontrolling Interests		4,141			7,901
Net (Income) Loss Attributable to Noncontrolling Interests								7,231			17,965			1,221			(948	)
Net Income (Loss) Attributable to Global Healthcare REIT, Inc.		164,296			(204,333	)		180,123			(1,108,152	)		184,082			(418,988	)
Series D Preferred Dividends		(7,500	)		(7,500	)		(22,500	)		(22,500	)		(7,500	)		(7,500	)
Net Income (Loss) Attributable to Common Stockholders	$	156,796		$	(211,833	)	$	157,623		$	(1,130,652	)	$	176,582		$	(426,488	)
Per Share Data:
Net Income (Loss) per Share Attributable to Common Stockholders:
Basic	$	0.01		$	(0.01	)	$	0.01		$	(0.04	)	$	0.01		$	(0.02	)
Diluted	$	0.01		$	(0.01	)	$	0.01		$	(0.04	)	$	0.01		$	(0.02	)
Weighted Average Common Shares Outstanding:
Basic		26,895,586			26,662,817			27,228,919			26,900,729			27,438,076			27,078,034
Diluted		26,895,586			26,662,817			27,228,919			26,900,729			27,438,076			27,078,034

See accompanying notes to unaudited consolidated financial statements.

GLOBAL HEALTHCARE REIT, INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(UNAUDITED)

	Series A Preferred Stock				Series D Preferred Stock				Common Stock				Additional					Global Healthcare REIT, Inc.			Non-						Series A Preferred Stock				Series D Preferred Stock				Common Stock				Additional					Global Healthcare REIT, Inc.			Non-
	Number of Shares		Amount		Number of Shares		Amount		Number of Shares		Amount		Paid-In Capital		Accumulated Deficit			Stockholders’ Equity			controlling Interests			Total Equity			Number of Shares		Amount		Number of Shares		Amount		Number of Shares		Amount		Paid-In Capital		Accumulated Deficit			Stockholders’ Equity			controlling Interests			Total Equity

Balance, December 31, 2018		200,500	$	401,000		375,000	$	375,000		26,804,677	$	1,340,234	$	10,137,148	$	(11,070,606	)	$	1,182,776		$	(198,182	)	$	984,594			200,500	$	401,000		375,000	$	375,000		26,804,677	$	1,340,234	$	10,137,148	$	(11,070,606	)	$	1,182,776		$	(198,182	)	$	984,594
Share Based Compensation – Restricted Stock Awards and Stock Options		-		-		-		-		272,727		13,636		36,893		-			50,529			-			50,529			-		-		-		-		272,727		13,636		36,893		-			50,529			-			50,529
Series D Preferred Dividends		-		-		-		-		-		-		-		(7,500	)		(7,500	)		-			(7,500	)		-		-		-		-		-		-		-		(7,500	)		(7,500	)		-			(7,500	)
Net Income (Loss)		-		-		-		-		-		-		-		164,296			164,296			(4,141	)		160,155			-		-		-		-		-		-		-		164,296			164,296			(4,141	)		160,155
Balance, March 31, 2019		200,500	$	401,000		375,000	$	375,000		27,077,404	$	1,353,870	$	10,174,041	$	(10,913,810	)	$	1,390,101		$	(202,323	)	$	1,187,778			200,500	$	401,000		375,000	$	375,000		27,077,404	$	1,353,870	$	10,174,041	$	(10,913,810	)	$	1,390,101		$	(202,323	)	$	1,187,778
Share Based Compensation – Restricted Stock Awards and Stock Options																												-		-		-		-		272,727		13,637		110,813		-			124,450			-			124,450
Series D Preferred Dividends																												-		-		-		-		-		-		-		(7,500	)		(7,500	)		-			(7,500	)
Net Income (Loss)																												-		-		-		-		-		-		-		(168,255	)		(168,255	)		(1,869	)		(170,124	)
Balance, June 30, 2019																												200,500	$	401,000		375,000	$	375,000		27,350,131	$	1,367,507	$	10,284,854	$	(11,089,565	)	$	1,338,796		$	(204,192	)	$	1,134,604
Share Based Compensation – Restricted Stock Awards and Stock Options																												-		-		-		-		90,909		4,545		74,610		-			79,155			-			79,155
Series D Preferred Dividends																												-		-		-		-		-		-		-		(7,500	)		(7,500	)		-			(7,500	)
Net Income (Loss)																												-		-		-		-		-		-		-		184,082			184,082			(1,221	)		182,861
Balance, September 30, 2019																												200,500	$	401,000		375,000	$	375,000		27,441,040	$	1,372,052	$	10,359,464	$	(10,912,983	)	$	1,594,533		$	(205,413	)	$	1,389,120

	Series A Preferred Stock				Series D Preferred Stock				Common Stock				Additional					Global Healthcare REIT, Inc.			Non-						Series A Preferred Stock				Series D Preferred Stock				Common Stock				Additional					Global Healthcare REIT, Inc.			Non-
	Number of Shares		Amount		Number of Shares		Amount		Number of Shares		Amount		Paid-In Capital		Accumulated Deficit			Stockholders’ Equity			controlling Interests			Total Equity			Number of Shares		Amount		Number of Shares		Amount		Number of Shares		Amount		Paid-In Capital		Accumulated Deficit			Stockholders’ Equity			controlling Interests			Total Equity

Balance, December 31, 2017		200,500	$	401,000		375,000	$	375,000		26,300,317	$	1,315,016	$	9,422,924	$	(9,048,443	)	$	2,465,497		$	(183,339	)	$	2,282,158			200,500	$	401,000		375,000	$	375,000		26,300,317	$	1,315,016	$	9,422,924	$	(9,048,443	)	$	2,465,497		$	(183,339	)	$	2,282,158
Share Based Compensation – Restricted Stock Awards		-		-		-		-		562,500		28,125		16,875		-			45,000			-			45,000			-		-		-		-		562,500		28,125		16,875		-			45,000			-			45,000
Series D Preferred Dividends		-		-		-		-		-		-		-		(7,500	)		(7,500	)		-			(7,500	)		-		-		-		-		-		-		-		(7,500	)		(7,500	)		-			(7,500	)
Loss on Modification of Warrants Triggering Extinguishment of Debt		-		-		-		-		-		-		29,900		-			29,900						29,900			-		-		-		-		-		-		29,900		-			29,900						29,900
Net Loss		-		-		-		-		-		-		-		(204,333	)		(204,333	)		(7,901	)		(212,234	)		-		-		-		-		-		-		-		(204,333	)		(204,333	)		(7,901	)		(212,234	)
Balance, March 31, 2018		200,500	$	401,000		375,000	$	375,000		26,862,817	$	1,343,141	$	9,469,699	$	(9,260,276	)	$	2,328,564		$	(191,240	)	$	2,137,324			200,500	$	401,000		375,000	$	375,000		26,862,817	$	1,343,141	$	9,469,699	$	(9,260,276	)	$	2,328,564		$	(191,240	)	$	2,137,324
Share Based Compensation – Restricted Stock Awards																												-		-		-		-		150,000		7,500		104,700		-			112,200			-			112,200
Series D Preferred Dividends																												-		-		-		-		-		-		-	��	(7,500	)		(7,500	)		-			(7,500	)
Net Loss																												-		-		-		-		-		-		-		(484,831	)		(484,831	)		(11,012	)		(495,843	)
Balance, June 30, 2018																												200,500	$	401,000		375,000	$	375,000		27,012,817	$	1,350,641	$	9,574,399	$	(9,752,607	)	$	1,948,433		$	(202,252	)	$	1,746,181
Share Based Compensation – Restricted Stock Awards																												-		-		-		-		250,000		12,500		151,346		-			163,846			-			163,846
Series D Preferred Dividends																												-		-		-		-		-		-		-		(7,500	)		(7,500	)		-			(7,500	)
Net Loss																												-		-		-		-		-		-		-		(418,988	)		(418,988	)		948			(418,040	)
Balance, September 30, 2018																												200,500	$	401,000		375,000	$	375,000		27,262,817	$	1,363,141	$	9,725,745	$	(10,179,095	)	$	1,685,791		$	(201,304	)	$	1,484,487

See accompanying notes to unaudited consolidated financial statements.

GLOBAL HEALTHCARE REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30,
	2019			2018
Cash Flows From Operating Activities:
Net income (loss)	$	172,892		$	(1,126,117	)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
Depreciation		969,834			941,569
Amortization and Accretion		103,572			115,462
Bad Debt Expense		-			56,000
Increase in Deferred Rent Receivable		(61,949	)		(68,552	)
Stock Based Compensation		254,134			321,046
Gain on Sale of Investments		(1,069	)		-
Loss on Extinguishment of Debt		-			57,694
Gain on Settlement of Debt		-			(98,521	)
Gain on Derivative Liability		(2,785	)		(92,586	)
Changes in Operating Assets and Liabilities:
Accounts & Rents Receivable		(593,204	)		(60,713	)
Lease Security Deposit		(29,400	)		-
Prepaid Expenses		(171,210	)		(25,512	)
Accounts Payable and Accrued Liabilities		114,296			384,273
Cash Provided by Operating Activities		755,111			404,043

Cash Flows From Investing Activities:
Issuance of Note Receivable		(893,666	)		-
Purchase of Investments in Debt Securities		(7,727	)		(64,426	)
Proceeds from Sale of Investments in Debt Securities		151,041			-
Capital Expenditures on Property and Equipment Additions		(1,866,698	)		(565,036	)
Cash Used in Investing Activities		(2,617,050	)		(629,462	)

Cash Flows From Financing Activities:
Proceeds from Issuance of Debt, Outside Parties		1,800,187			493,533
Payments on Debt, Outside Parties		(414,887	)		(373,868	)
Cash Overdraft		-			6,529
Deferred Loan Costs Paid		(8,885	)		(31,875	)
Dividends Paid on Preferred Stock		(22,500	)		(22,500	)
Cash Provided by Financing Activities		1,353,915			71,819

Net Increase (Decrease) in Cash		(508,024	)		(153,600	)
Cash and Cash Equivalent and Restricted Cash at Beginning of the Year		1,307,207			972,148
Cash and Cash Equivalent and Restricted Cash at End of the Year	$	799,183		$	818,548

Supplemental Disclosure of Cash Flow Information
Cash Paid for Interest	$	1,613,109		$	1,446,855
Cash Paid for Income Taxes	$	-		$	-

Cash and Cash Equivalent	$	447,945		$	-
Restricted Cash		351,238			818,548
Total Cash and Cash Equivalent and Restricted Cash	$	799,183		$	818,548

Supplemental Schedule of Non-Cash Investing and Financing Activities
Dividends declared on Series D Preferred Stock	$	22,500		$	22,500
Accrued Interest Paid by Proceeds from Debt	$	-		$	22,800
Offers from Line of Credit to Settle Bonds Payable	$	-		$	509,479

See accompanying notes to unaudited consolidated financial statements.

GLOBAL HEALTHCARE REIT, INC.

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(UNAUDITED)~~

Three Months Ended March 31,
2019 2018
Cash Flows From Operating Activities:
Net income (loss) $ 160,155 $ (212,234 )
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
Depreciation 322,925 305,410
Amortization and Accretion 33,124 45,047
Increase in Deferred Rent Receivable (22,089 ) (23,736 )
Stock Based Compensation 50,529 45,000
Gain on Sale of Investments (1,069 ) -
Loss on Extinguishment of Debt - 29,900
Gain on Settlement of Debt - (94,925 )
Gain on Derivative Liability (103 ) (40,423 )
Changes in Operating Assets and Liabilities, Net of Assets and Liabilities Acquired:
Accounts & Rents Receivable (268,963 ) 52,796
Prepaid Expenses 38,085 (45,979 )
Accounts Payable and Accrued Liabilities (46,455 ) 147,464
Cash Provided by Operating Activities 266,139 208,320

Cash Flows From Investing Activities:
Issuance of Note Receivable (143,666 ) -
Purchase of Investments in Debt Securities - (34,576 )
Proceeds from Sale of Investments in Debt Securities 151,041 -
Capital Expenditures on Property and Equipment Additions (962,254 ) (143,445 )
Cash Used in Investing Activities (954,879 ) (178,021 )

Cash Flows From Financing Activities:
Proceeds from Issuance of Debt, Outside Parties 159,875 52,862
Payments on Debt, Outside Parties (147,318 ) (132,448 )
Deferred Loan Costs Paid (8,885 ) -
Dividends Paid on Preferred Stock (7,500 ) (7,500 )
Cash Used In Financing Activities (3,828 ) (87,086 )

Net Decrease in Cash (692,568 ) (56,787 )
Cash and Cash Equivalent and Restricted Cash at Beginning of the Year 1,307,207 972,148
Cash and Cash Equivalent and Restricted Cash at End of the Year $ 614,639 $ 915,361

Supplemental Disclosure of Cash Flow Information
Cash Paid for Interest $ 506,367 $ 453,698
Cash Paid for Income Taxes $ - $ -

Cash and Cash Equivalent $ 386,124 $ 105,486
Restricted Cash 228,515 809,875
Total Cash and Cash Equivalent and Restricted Cash $ 614,639 $ 915,361

Supplemental Schedule of Non-Cash Investing and Financing Activities
Dividends declared on Series D Preferred Stock $ 7,500 $ 7,500
Offers from Line of Credit to Settle Bonds Payable $ - $ 380,075

~~See accompanying notes to unaudited consolidated financial statements.~~

~~GLOBAL HEALTHCARE REIT, INC.~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Description of the Business

Global Healthcare REIT, Inc. (the ~~Company~~“Company” or ~~Global)~~“Global”) was organized with the intent of operating as a real estate investment trust (REIT) for the purpose of investing in real estate and other assets related to the healthcare industry. The Company’s focus has partially shifted toward owning and operating its real estate assets. Prior to the Company changing its name to Global Healthcare REIT, Inc. on September 30, 2013, the Company was known as Global Casinos, Inc. Global Casinos, Inc. operated two gaming casinos which were split-off and sold on September 30, 2013. Simultaneous with the split-off and sale of the gaming operations, the Company acquired West Paces Ferry Healthcare REIT, Inc. (WPF) in a transaction accounted for as a reverse acquisition whereby WPF was deemed to be the accounting acquirer.

The Company intends to make a REIT election under sections 856 through 859 of the Internal Revenue Code of 1986, as amended. Such election will be made by the Board of Directors at such time as the Board determines that we qualify as a REIT under applicable provisions of the Internal Revenue Code.

~~The Company~~ acquires, develops, leases, manages and disposes of healthcare real estate, and provides financing to healthcare providers. As of ~~March 31,~~September 30, 2019, the Company owned eleven healthcare properties which are primarily leased or managed by third-party operators under triple-net operating terms. However, the Company operates the facilities internally when advantageous and expedient.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and in conjunction with the rules and regulations of the Securities Exchange Commission. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary to make the consolidated financial statements not misleading have been included. Operating results for the three and nine months ended ~~March 31,~~September 30, 2019 are not necessarily indicative of the results that may be expected for the entire year. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission.

Recently Adopted Accounting Pronouncements

Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-7”), which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees. The adoption of ASU 2018-07 did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the Financial Accounting Standards Board issued ASU No. 2016-02, “Leases: Topic 842 (ASU 2016-02)”, to supersede nearly all existing lease guidance under GAAP. The guidance would require lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets. ASU 2016-02 is effective for the Company as of January 1, 2019 and adoption requires using a modified retrospective approach with the option to elect certain practical expedients. The Company has determined that it does not have any leases that fall under the guidance of ASU 2016-02 and it had no impact on its consolidated financial statements.

Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board and other entities issued new or modifications to, or interpretations of, existing accounting guidance during 2019. Management has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.

Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net loss. Reclassification adjustments are amounts reclassified to Notes Receivable that were presented in Prepaid Expenses and Other in previous period.

2. GOING CONCERN

The accompanying consolidated financial statements and notes have been prepared assuming the Company will continue as a going concern.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2019, the Company had net income of ~~$160,155~~$172,892 and reported net cash provided by operations of ~~$266,139.~~$755,111. During the years ended December 31, 2018 and December 31, 2017, the Company incurred net losses of $2,007,006 and $3,001,618, respectively, and as of ~~March 31,~~September 30, 2019 ~~has~~had an accumulated deficit of ~~$10,913,810.~~$10,912,983. These circumstances raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to generate sufficient revenues and cash flows to operate profitably and meet contractual obligations or raise additional capital through debt financing or through sales of common stock.

~~The failure~~Failure to achieve the necessary levels of profitability and cash flows or obtain additional funding would be detrimental to the Company. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

3. PROPERTY AND EQUIPMENT

The gross carrying amount and accumulated depreciation of the Company’s property and equipment as of ~~March 31,~~September 30, 2019 and December 31, 2018 are as follows:

	March 31, 2019			December 31, 2018			September 30, 2019			December 31, 2018

Land	$	1,597,500		$	1,597,500		$	1,597,500		$	1,597,500
Land Improvements		200,000			200,000			242,000			200,000
Buildings and Improvements		36,126,867			36,076,632			36,153,900			36,076,632
Furniture, Fixtures and Equipment		1,475,923			1,469,976			1,511,826			1,469,976
Construction in Progress		4,822,259			3,916,187			5,621,767			3,916,187
		44,222,549			43,260,295			45,126,993			43,260,295

Less Accumulated Depreciation		(6,138,075	)		(5,815,150	)		(6,784,984	)		(5,815,150	)
Less Impairment		(1,560,000	)		(1,560,000	)		(1,560,000	)		(1,560,000	)

	$	36,524,474		$	35,885,145		$	36,782,009		$	35,885,145

	For the Three Months Ended March 31,				For the Nine Months Ended September 30,
	2019		2018		2019		2018

Depreciation Expense	$	322,925	$	305,410	$	969,834	$	941,569
Cash Paid for Capital Expenditures	$	962,254	$	143,445	$	1,866,698	$	565,036

4. INVESTMENTS IN DEBT SECURITIES

At ~~March 31,~~September 30, 2019 and December 31, 2018, the Company held investments in marketable securities that were classified as held-to-maturity and carried at amortized costs. Held-to-maturity securities consisted of the following:

March 31, 2019 December 31, 2018

States and Municipalities $ 12,134 $ 162,106

	September 30, 2019		December 31, 2018

State and Municipal Bonds	$	19,861	$	162,106

Contractual maturity of held-to-maturity securities at ~~March 31,~~September 30, 2019 is September 1, 2043 and September 1, 2022, and total value of securities at their respective maturity dates is ~~$30,000.~~$60,000. Actual maturities may differ from contractual maturities because some borrowers have the right to call or prepay obligations with or without call or prepayment penalties. The Company received proceeds of $151,041 from the sale of debt securities and recognized a gain on sale of investments of $1,069 during the ~~three~~nine months ended ~~March 31, 2019.~~September 30, 2019 and invested $7,727 in purchase of investments in debt securities.

5.NOTES RECEIVABLE

Note ~~Receivable – Receiver for Healthcare Management of Oklahoma, LLC~~

On May 10, 2016, the Company obtained a Court Order appointing a receiver to control and operate the skilled nursing facility in Southern Hills, Tulsa. The former lease operator represented that it was unable to meet the financial commitments of the facility, including the payment of rent, payroll, and other operating requirements. The transition to the receiver was part of a turnaround effort to restore viable operations at the facility. The Court ordered the Company to provide the receiver a revolving line of credit not to exceed $250,000 of which the Company advanced $150,000 during 2016. The receiver is to repay the revolving unsecured line of credit from the operation or sale of the facility or other sources. The Company has determined the note as no longer being collectible based on the ability to repay and has recorded bad debt expense of $150,000 in the consolidated statements of operations for the year ended December 31, 2016. During November 2017, the Company made a short-term loan in the amount of $84,000 to the operator with the understanding that it would be repaid immediately; the loan was repaid during 2018.

~~Note~~ Receivable: Accounts Receivable Line ofCredit (“ARLOC”) – Infinity Health Interests, LLC

As part of the transition to a new tenant at High Street Nursing facility, the Company committed a $250,000 Accounts Receivable Line of Credit (“ARLOC”) to an affiliate of Infinity Health Interests, LLC (“Infinity”) in order to ensure that no disruptions in management of the facility occur. The ARLOC is secured by a first lien on all the receivables of the facility as well as a personal guarantee from the two principals of Infinity. The Company expects facility level operational performance to improve under Infinity’s stewardship and commitment to the surrounding community.As of ~~March 31,~~September 30, 2019 and December 31, 2018 the Company had lent $250,000 and $106,334, respectively, to Infinity under this agreement. The interest rate is 10% payable at the maturity date on August 31, 2019. The maturity date is under negotiation for further extension, currently the note is technically in default at the default interest rate of 15% annually.

Note Receivable: Commercial Promissory Note– Receivership Estate of Healthcare Management of Oklahoma, LLC

The Company purchased a $750,000 note from F&M Bank on August 6, 2019, as part of a Receivership certificate in our Southern Hills SNF, for $694,609 paid to F&M bank and $55,391 paid to the Receiver. The maturity date of the note is February 07, 2018, and carries an interest rate of 6.75% as of September 30, 2019 (prime rate +2%). The note is past its maturity date and is in default.This purchase was made to facilitate the termination of the Receivership and transfer of the HMO assets and operations, subject to the approval of the Oklahoma Department of Health, to Southern Hills Rehab Center, LLC, a wholly-owned subsidiary of the Company.

6. DEBT AND DEBT-RELATED PARTIES

The following is a summary of the Company’s debt outstanding as of ~~March 31,~~September 30, 2019 and December 31, 2018:

	March 31, 2019			December 31, 2018			September 30, 2019			December 31, 2018

Senior Secured Promissory Notes	$	1,485,000		$	1,485,000		$	1,485,000		$	1,485,000
Senior Unsecured Promissory Notes		300,000			300,000			300,000			300,000
Senior Secured Promissory Notes - Related Parties		875,000			875,000			875,000			875,000
Fixed-Rate Mortgage Loans		20,902,663			21,049,981			22,551,595			21,049,981
Variable-Rate Mortgage Loans		4,618,006			4,618,006			4,618,006			4,618,006
Line of Credit		7,385,978			7,240,183			7,229,052			7,240,183
Other Debt		1,536,000			1,536,000			1,536,000			1,536,000

		37,102,647			37,104,170			38,594,653			37,104,170

Premium, Unamortized Discount and Debt Issuance Costs		(483,590	)		(507,829	)		(526,132	)		(507,829	)

	$	36,619,057		$	36,596,341		$	38,068,521		$	36,596,341

As presented in the Consolidated Balance Sheets:

Debt, Net	$	35,744,057		$	35,721,341		$	37,193,521		$	35,721,341

Debt - Related Parties, Net		875,000			875,000			875,000			875,000

	$	36,619,057		$	36,596,341		$	38,068,521		$	36,596,341

Corporate Senior and Senior Secured Promissory Notes

From November through December 2016, the Company undertook a private offering of its 10% Senior Secured Promissory Notes. The notes are secured by all assets of the Company not serving as collateral for other notes. As of December 31, 2016, $600,000 of the notes had been issued of which $450,000 were issued to the directors of the Company or entities or persons affiliated with these directors. The notes initially bore interest at a rate of 10% payable monthly with principal and unpaid interest due at maturity, originally January 13, 2018. The notes were issued with warrants to purchase 600,000 shares of common stock at an exercise price of $0.75 per share. The warrants have a cashless exercise provision.

The notes are secured by all assets of the Company not serving as collateral for other notes. As of December 31, 2017, $500,000 in notes had their maturity date extended to December 31, 2018, and all notes’ maturity dates were extended prior to their original maturity. The maturity date of the 600,000 warrants issued along with the notes was extended to December 31, 2018 as well. The transaction was accounted for as a debt extinguishment with a loss on modification of warrant in the amount of $62,696 recorded in the consolidated statement of operations for the year ended December 31, 2017.

In 2017, an additional $600,000 in notes were sold and issued, of which $425,000 were to related parties. At December 31, 2017, there were outstanding an aggregate of $1.2 million in senior secured notes. The maturity date of all the senior secured notes was extended to December 31, 2018 prior to their original maturity ~~date, $225,000 of which occurred in 2018. During 2018, among the $225,000 senior secured notes that were extended to December 31, 2018, $125,000 were to related parties.~~date. For every $1.00 in principal amount of note, investors got one warrant exercisable for one year to purchase an additional share of common stock at an exercise price of $.75 per share. The warrants have a cashless exercise provision and were valued using the Black-Scholes pricing model. The maturity date of the 1.2 million warrants issued along with the notes was extended to December 31, ~~2018 as well, 225,000 warrants of which occurred in~~ 2018.

In October 2017, the Company sold an aggregate of $300,000 in senior unsecured notes. The notes bear interest at the rate of 10% per annum and are due in 2020. For every $1.00 in principal amount of note, investors got one warrant exercisable for one year to purchase an additional share of common stock at an exercise price of $.75 per share. The warrants have a cashless exercise provision.

In October 2018, the Company, through a registered broker-dealer acting as Placement Agent, undertook a private offering to accredited investors of Units, each Unit consisting of an 11% Senior Secured Note, due in three years, (October 31, 2021) and one Warrant for each $1.00 in principal amount of Note exercisable for three years to purchase a share of Common Stock at an exercise price of $0.50 per share.The Company and the Placement Agent completed the Offering in December 2018 having sold an aggregate of $1,160,000 in Notes and Warrants. The net proceeds to the Company were $1,092,400, after deducting Placement Agent fees of $67,600, and issued 111,000 warrants to the Placement Agent with $21,453 of the fair value of the warrants recorded as loan cost. The Offering also included the exchange of an aggregate of $1.075 million in outstanding senior secured 10% Notes and Warrants for Units in the Offering. No proceeds were realized from the exchange and no fees were paid to the Placement Agent for such exchanges. During 2018, among the $1.075 million senior secured notes that were extended to October 31, 2021 by virtue of the exchange, $875,000 were to related parties. As of ~~March 31,~~September 30, 2019 the Company had not renewed or repaid $125,000 in 10% notes with a maturity date of December 31, 2018, and those notes were technically in default.

The value of the warrants issued to the note holders was calculated using the Black-Scholes pricing model using the following significant assumptions:

	December 31, 2018

Volatility		122% - 123	%
Risk-free Interest Rate		2.76% - 2.94	%
Exercise Price	$	0.50
Fair Value of Common Stock	$	0.30 - $0.35
Expected Life		2.9 – 3.0 years

During the year ended December 31, 2017, the Company issued 900,000 warrants in connection with its note offerings with a value on the issue date estimated to be $121,435, bifurcated from the value of the note. As of December 31, 2017, the unamortized balance of discount on notes was $77,105. During the year ended December 31, 2018, the Company issued 1,160,000 warrants with a value on the issue date estimated to be $207,025 bifurcated from the value of the note and exchanged 1,075,000 existing warrants for new ones in connection with its note offerings. As a result of the modification the Company recognized a loss on extinguishment of $248,346. As of ~~March 31,~~September 30, 2019, the unamortized balance of discount on notes was ~~$196,908.~~$129,580. Amortization expense was ~~$16,261~~$54,433 and ~~$19,568~~$57,856 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, respectively.

Mortgage Loans and Lines of Credit Secured by Real Estate

Mortgage loans and other debts such as line of credit here are collateralized by all assets of each nursing home property and an assignment of its rents. Collateral for certain mortgage loans includes the personal guarantee of Christopher Brogdon. Mortgage loans for the periods presented consisted of the following:

	Face		Principal Outstanding at				Stated Interest	Maturity	Face		Principal Outstanding at				Stated Interest	Maturity
Property	Amount		March 31, 2019		December 31, 2018		Rate	Date	Amount		September 30, 2019		December 31, 2018		Rate	Date

Southern Hills Retirement Center Line of Credit⁽¹⁾⁽²⁾	$	7,229,052	$	7,105,218	$	7,119,743	5.25% Fixed	April 28, 2019	$	7,229,052	$	7,229,052	$	7,119,743	5.75% Fixed		October 28, 2019
Middle Georgia Nursing Home^(2,3)		3,570,000		3,533,486		3,561,461	5.50% Fixed	October 26, 2021
Eastman Nursing Home^(2,3)										3,570,000		3,481,745		3,561,461	5.50% Fixed		October 26, 2021
Goodwill Nursing Home⁽²⁾		5,005,000		4,355,739		4,390,082	5.50% Fixed	March 19, 2020		5,005,000		4,308,416		4,390,082	5.50% Fixed		March 19, 2020
Warrenton Nursing Home⁽⁴⁾		2,720,000		2,270,447		2,287,323	5.50% Fixed	January 20, 2020		3,768,600		3,757,190		2,287,323	3.73% Fixed		July 1, 2049
Edward Redeemer Health & Rehab		2,303,815		2,118,284		2,138,128	5.50% Fixed	January 16, 2020		2,303,815		2,081,053		2,138,128	5.50% Fixed		January 16, 2020
Glen Eagle Health & Rehab⁽⁵⁾		2,761,250		2,743,557		2,761,250	5.50% Fixed	May 25, 2021		2,761,250		3,103,926		2,761,250	5.50% Fixed		May 25, 2021
Glen Eagle Health and Rehab Line of Credit⁽²⁾⁽⁵⁾		400,000		280,760		120,440	6.50% Fixed	September 30, 2019		400,000		-		120,440	6.50% Fixed		September 30, 2019
Providence of Sparta Nursing Home⁽⁶⁾		3,039,300		2,961,250		2,975,337	3.88% Fixed	November 1, 2047		3,039,300		2,932,665		2,975,337	3.88% Fixed		November 1, 2047
Meadowview Healthcare Center⁽⁷⁾		3,000,000		2,919,900		2,936,400	6.00% Fixed	October 30, 2022		3,000,000		2,886,600		2,936,400	6.00% Fixed		October 30, 2022
GL Nursing Home⁽⁸⁾		5,000,000		4,618,006		4,618,006	Prime Plus 1.50%/ 5.75% Floor	August 3, 2037		5,000,000		4,618,006		4,618,006	Prime Plus 1.50%/ 5.75% Floor		August 3, 2037

			$	32,906,647	$	32,908,170					$	34,398,653	$	32,908,170

(1) On October 31, 2017, the Company, through its wholly-owned subsidiaries Southern Tulsa, LLC and Southern Tulsa TLC, LLC, as Co-Borrowers, consummated a new Line of Credit with Southern Bank (formerly First Commercial Bank) pursuant to a Promissory Note in the principal amount of $7,229,052 (the “Line of Credit”). Under the Line of Credit, the Company refinanced the prior mortgage on its skilled nursing facility in Tulsa for $1,546,801,funded open market and tender offer purchases of its Industrial Revenue Bonds covering the ALF and ILF as well as provided working capital for improvements to the ALF and ILF. As of December 31, 2018, a total of $7,119,743 was drawn under the Line of Credit, and as of ~~March 31,~~September 30, 2019, a total of ~~$7,105,218~~$7,229,052 was drawn under the Line of Credit.

The interest rate on the Line of Credit isincreased from 5.25%. to 5.75% effective April 28, 2019 and will remain at that rate until the Line of Credit converts to an amortizing loan. Monthly payments of interest began on November 30, 2017 and continue until the Promissory Note is paid in full on the Maturity Date. ~~On May 3, 2018 the~~The Maturity Date was been extended multiple times; initially from April 30, 2018 to October 30, 2018. The Maturity Date was further extended in three month increments to ~~February~~October 28, ~~2019 and subsequently to April 28, 2019, with the intent to convert to an amortizing loan thereafter.~~2019. The Credit Note is secured by a First Mortgage and Assignment of Rents on Real Property for Southern Hills Rehabilitation Center, a Junior Lien and Assignment of Rents on Real Property for it Southern Hills Independent Living Facility location and a Junior Lien on Real Property for its Southern Hills Assisted Living Facility location. With the retirement of the Tulsa Industrial Authority Bonds effective November 1, 2018, Southern Bank (formerly First Commercial Bank) moved into a senior position on the ALF and ILF properties.

(2) Mortgage loans are non-recourse to the Company except for (i) the senior loan held by ServisFirst Bank on Meadowview (Ohio), (ii) the ~~loan~~loans held by Colony Bank on ~~Middle Georgia~~Eastman and Glen Eagle, and (iii) the Southern Hills line of credit and Goodwill loan owed to Southern Bank (formerly First Commercial Bank).

(3) The loan at ~~Middle Georgia~~Eastman was renewed on November 26, 2018 with the maturity extended to October 26, 2021.

(4) The original loan was extended on January 19, 2019 to January 20, 2020 and the Company capitalized $8,885 in loan costs ~~paid, amortized over the term of the extension. Amortization expense related to~~paid. The loan ~~costs of this loan totaled $2,050 for the three months ended March 31,~~was subsequently refinanced in June 2019. The Company has incurred ~~$43,681~~$156,671 in unamortized loan costs to refinance this debt with another lender. The refinance was treated as debt extinguishment, with a new maturity date of July 1, 2049 and an interest rate of 3.73%. For the nine months ended September 30, 2019, amortization expense related to loan costs of the prior loan totaled $8,885 and amortization expense related to loan costs for the new loan, which began in July 2019, totaled $870.

(5) Amortization expense related to loan costs of this loan totaled ~~$219~~$656 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019. Amortizing payments began in January 2019. In June 2018 the Company converted the original note to a fixed note which qualified as debt extinguishment, unamortized debt discount on the original note was expensed as a loss on extinguishment of $27,794. In April 2018, the Company capitalized $22,800 in fees and interest and added it to principal. The Company is subject to financial covenants and customary affirmative and negative covenants, including compliance with the covenants of all other notes and bonds. As of ~~March 31,~~September 30, 2019, the Company was not in compliance with some unrelated notes and bonds, which is considered to be a technical Event of Default as defined in the note agreement, but the Company believes that it is in good standing with the Lender. In October 2018 the Lender extended the Company a line of credit with a limit of $200,365 to provide working capital to scale operations at the facility. As of December 31, 2018 the Company had drawn $120,440 on the line. The line of credit was expanded in February 2019 to $400,000 with a maturity date of September 30, 2019. ~~As of March 31,~~Prior to September 30, 2019, the Company had drawn ~~$280,760~~$400,000 on the ~~line.~~line which was subsequently merged into the amortizing note due May 21, 2021.

(6) The senior debt and subordinated debt owed in relation to Providence of Sparta was refinanced into a single senior HUD note during 2017. Amortization expense related to loan costs totaled ~~$1,246~~$3,738 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019.

(7) Amortization expense related to loan costs of this loan totaled ~~$2,326~~$6,978 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019. The Company is subject to financial covenants and customary affirmative and negative covenants, including compliance with the covenants of all other notes and bonds. As of ~~March 31,~~September 30, 2019, the Company was not in compliance with some unrelated notes and bonds, which is considered to be a technical Event of Default as defined in the note agreement, but the Company believes that it is in good standing with the Lender.

(8) Effective September 19, 2016, we executed a Modification to the mortgage note pursuant to which some accrued payments were deferred, and the lender agreed to permit interest only payments through March 2017. The mortgage loan collateralized by the GL Nursing Home is 80% guaranteed by the USDA and requires an annual renewal fee payable in the amount of 0.25% of the USDA guaranteed portion of the outstanding principal balance as of December 31 of each year. The Company is subject to financial covenants and customary affirmative and negative covenants. As of ~~March 31,~~September 30, 2019, the Company was not in compliance with certain of these financial and non-financial covenants which is considered to be a technical Event of Default as defined in the note agreement. The Company is also delinquent in installment payments due under the mortgage. Remedies available to the lender in the event of a continuing Event of Default, at its option, include, but are not necessarily limited to the following (1) lender may declare the principal and all accrued interest on the note due and payable; and (2) lender may exercise additional rights and remedies under the note agreement to include taking possession of the collateral or seeking satisfaction from the guarantors. The Company has been notified by the lender regarding the Events of Default. Guarantors under the mortgage loan include Christopher Brogdon. With our consent, Mr. Brogdon has assumed operations of the facility and is dealing with the lender. ~~The Company is in negotiations with Mr. Brogdon to sell him the facility.~~

Other mortgage loans contain non-financial covenants, including reporting obligations, with which the Company has not complied in some instances or in an untimely manner. These mortgage loans are technically in ~~default.~~default; however our relationship with these lenders is considered good.

Bonds Payable - Tulsa County Industrial Authority

On March 1, 2014, Southern Tulsa, LLC (Southern Tulsa), a subsidiary of WPF that owns the Southern Hills Retirement Center, entered into a loan agreement with the Tulsa County Industrial Authority (Authority) in the State of Oklahoma pursuant to which the Authority lent to Southern Tulsa the proceeds from the sale of the Authority’s Series 2014 Bonds. The Series 2014 Bonds consisted of $5,075,000 of principal in Series 2014A First Mortgage Revenue Bonds and $625,000 of principal in Series 2014B Taxable First Mortgage Revenue Bonds. During the year ended December 31, 2017, $127,000 of Series 2014B Taxable First Mortgage Revenue Bond were retired with $60,000 in cash payments and ~~67,000~~$67,000 in non-cash payments; $452,000 of Series 2014A First Mortgage Revenue Bonds were retired with non-cash payments. Deferred loan costs incurred of $478,950 and an original issue discount of $78,140 related to the loan are amortized to interest expense over the life of the loan. Amortization expense related to deferred loan costs and the original issue discount totaled ~~$4,704~~$14,113 and ~~$761,~~$2,283, respectively, for the ~~three~~nine months ended ~~March 31,~~September 30, 2018. The ~~loan agreement includes certain financial covenants required to be maintained by the Company, with which we~~Bonds were ~~not~~retired in ~~compliance as of March 31, 2019. There is $5,061,000~~full in ~~voluntary non-cash principal reduction payments during the year ended December 31,~~November 2018. As of ~~March 31,~~September 30, 2019 and December 31, 2018, restricted cash of ~~$1,179~~$0 and $1,179, respectively is related to these bonds.

Other Debt

Other debt due at ~~March 31,~~September 30, 2019 and December 31, 2018 includes unsecured notes payable issued to entities controlled by the Company used to facilitate the acquisition of the nursing home properties.

Face Principal Outstanding at Stated Interest Maturity
Property Amount March 31, 2019 December 31, 2018 Rate Date
Goodwill Nursing Home $ 2,180,000 $ 1,536,000 $ 1,536,000 13%⁽¹⁾ Fixed December 31, 2019

Face

Principal Outstanding at

Stated Interest

Maturity

Property

Amount

September 30, 2019

December 31, 2018

Rate

Date

Goodwill Nursing Home

2,180,000

1,536,000

13% (1) Fixed

December 31, 2019

(1) The subordinated note on Goodwill matured on July 1, 2015. Investors in the Goodwill note were entitled to an additional 5% equity in Goodwill Hunting, LLC every six months if the note is not paid when due. Effective December 31, 2015, the investors holding the subordinated debt executed an Agreement Among Lenders pursuant to which they (i) agreed to waive any and all equity ratchets and (ii) agreed to extend the maturity date of the subordinated debt to June 30, 2017. In exchange, Goodwill Hunting agreed to pay the investors an additional one-time premium equal to 5% of the principal amount of the individual note at such time as the note is repaid. Effective May 3, 2017, we entered into an Allonge and Modification Agreement with the Goodwill investors pursuant to which they agreed to (i) waive all accrued interest through December 31, 2017, (ii) reduce interest rate to 13% beginning January 1, 2018 and (iii) extend the maturity date of the notes to December 31, 2019. In exchange, the Company agreed that upon repayment of the notes, the investors would be entitled to a one-time premium payment in the amount of 15% of the principal balance of the notes.

Our corporate debt at September 30, 2019 and December 31, 2018 includes unsecured notes and notes secured by all assets of the Company not serving as collateral for other notes.

	Face		Principal Outstanding at				Stated Interest	Maturity
Series	Amount		September 30, 2019		December 31, 2018		Rate	Date

10% Senior Secured Promissory Note	$	125,000	$	125,000	$	125,000	10.0% Fixed		December 31, 2018
10% Senior Unsecured Promissory Notes		300,000		300,000		300,000	10.0% Fixed		October 31, 2020
11% Senior Secured Promissory Notes		2,235,000		2,235,000		2,235,000	11.0% Fixed		October 31, 2021

			$	2,660,000	$	2,660,000

For the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, the Company received proceeds from the issuance of debt of ~~$159,875~~$1,800,187 and ~~$52,862,~~$493,533, respectively. Cash payments on debt totaled ~~$147,318~~$414,887 and ~~$132,448~~$373,868 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, respectively. Amortization expense for deferred loan costs totaled ~~$33,124~~$103,572 and ~~$45,047~~$115,462 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, respectively.

Future maturities and principal reduction payments of all notes and bonds payable listed above for the next five years and thereafter are as follows:

Years
2019	$	19,659,755	⁽¹⁾	$	19,603,962	⁽¹⁾
2020		9,013,714			6,893,587
2021		5,626,986			5,705,128
2022		64,013			140,332
2023		66,541			145,757
2024 and after		2,671,638			6,105,887

	$	37,102,647		$	38,594,653

(1) Any note or bond that is not in compliance with all financial and non-financial covenants is considered to have an immediate maturity, including those that require compliance with covenants on any and all other notes. The notes secured by the facilities at Meadowview and Abbeville have such covenants which were in technical non-compliance at ~~March 31,~~September 30, 2019, but the Company believes that its relationships with these lenders is good.

7. STOCKHOLDERS’ EQUITY

Preferred Stock

The Company has authorized 10,000,000 shares of preferred stock. These shares may be issued in series with such rights and preferences as may be determined by the Board of Directors.

Series A Convertible Redeemable Preferred Stock

The Company’s Board of Directors has authorized 2,000,000 shares of $2.00 stated value, Series A Preferred Stock. The preferred stock has a senior liquidation preference value of $2.00 per share, has no voting or redemption rights and does not accrue dividends.

As of ~~March 31,~~September 30, 2019 and December 31, 2018, the Company has 200,500 shares of Series A Preferred stock outstanding.

Series D Convertible Preferred Stock

The Company has established a class of preferred stock designated “Series D Convertible Preferred Stock” (Series D preferred stock) and authorized an aggregate of 1,000,000 non-voting shares with a stated value of $1.00 per share. Holders of the Series D preferred stock are entitled to receive dividends at the annual rate of eight percent (8%) based on the stated value per share computed on the basis of a ~~360 day~~360-day year and twelve ~~30 day~~30-day months. Dividends are cumulative, shall be declared quarterly, and are calculated from the date of issue and payable on the fifteenth day of April, July, October and January. The dividends may be paid, at the option of the holder either in cash or by the issuance of shares of the Company’s common stock valued at the market price on the dividend record date. Shares of the Series D preferred stock are redeemable at the Company’s option. At the option of the holder, shares of the Series D preferred stock plus any declared and unpaid dividends are convertible to shares of the Company’s common stock at a conversion rate of $1.00 per share.

As of ~~March 31,~~September 30, 2019 and December 31, 2018, the Company had 375,000 shares of Series D preferred stock outstanding.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, the Company paid ~~$7,500~~$22,500 and ~~$7,500,~~$22,500, respectively, for Series D preferred stock dividends. Dividends of ~~$7,500~~$22,500 and ~~$7,500~~$22,500 were declared during the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, respectively, with dividends of $7,500 accrued and payable as of ~~March 31,~~September 30, 2019 and 2018. All quarterly dividends previously declared have been paid.

Restricted Stock Awards

The following table summarizes the restricted stock unit activity during the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018.

	March 31, 2019			March 31, 2018			September 30, 2019			September 30, 2018

Outstanding Non-Vested Restricted Stock Units, Beginning		-			-			-			-
Granted		272,727			562,500			636,363			962,500
Vested		(68,182	)		(140,625	)		(545,453	)		(821,875	)

Outstanding Non-Vested Restricted Stock Units, Ending		204,545			421,875			90,910			140,625

In connection with these director and executive restricted stock grants, the Company recognized stock-based compensation of ~~$22,500~~$180,000 and ~~$45,000~~$321,046 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, respectively.

Common Stock Warrants

As of ~~March 31,~~September 30, 2019 and December 31, 2018, the Company had ~~2,714,918~~2,598,130 and 3,142,586, respectively, of outstanding warrants to purchase common stock at a weighted average exercise price of ~~$0.57~~$0.54 and $0.60, respectively. During the ~~three month~~nine-month period ended ~~March 31,~~September 30, 2019 and 2018, an aggregate of ~~427,668~~544,456 and ~~71,250~~241,135 warrants with a weighted average exercise price of ~~$0.75~~$0.88 and ~~$0.60,~~$0.74, respectively, expired. The aggregate intrinsic value of the common stock warrants outstanding at ~~March 31,~~September 30, 2019 was $0.

Common Stock Options

As of ~~March 31,~~September 30, 2019 and December 31, 2018, the Company had 600,000 and 600,000, respectively, of outstanding options to purchase common stock at a weighted average exercise price of $0.36. During the ~~three month~~nine-month period ended ~~March 31,~~September 30, 2019 and 2018, no options expired. The aggregate intrinsic value of the common stock options outstanding at ~~March 31,~~September 30, 2019 was $0.

8. RELATED PARTIES

Clifford Neuman provides office space for the Company’s Controller at no charge. As of ~~March 31,~~September 30, 2019 and December 31, 2018, the Company owed Mr. Neuman for legal services rendered ~~$93,406~~$48,280 and $118,230, respectively.

Creative Cyberweb developed and maintains the Company’s website and is affiliated with CFO Zvi Rhine’s family. The ongoing upkeep is $450 per month.

In January 2018, the Directors modified the Directors’ Compensation Plan to provide the annual grants be subject to ratable vesting over 12 months. In March 2019, ~~The~~the Board approved an annual grant to three of its Directors without other compensation plans, restricted stock awards of 90,909 shares each, subject to vesting. In July 2019, the Board approved a pro-rated annual grant to two of its Directors without other compensation plans restricted stock awards of 90,909 shares in aggregate, subject to vesting. In connection with these director restricted stock grants, the Company recognized stock-based compensation of ~~$22,500~~$90,000 and ~~$45,000~~$135,000 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, respectively.

In May 2018, the Company approved a compensation agreement for CFO Zvi Rhine that included (i) base salary of $165,000 per year (which accrues beginning January 1, 2018 but payable only after the Company raises capital of at least $600,000), (ii) 150,000 shares of restricted stock vesting one-half each on January 1, 2019 and January 1, 2020, and (iii) options to purchase 600,000 of the Company’s common stock at an exercise price of $.36 per share, each expiring on March 31, 2023, and vesting one quarter each on April 1, 2018, April 1, 2019, October 1, 2019, and April 1, 2020. For the ~~three~~nine months ended ~~March 31,~~September 30, 2019 the Company has accrued ~~$58,750~~$183,950 in salaries and recognized ~~$22,500~~$90,000 in stock-based compensation for Directors and ~~$28,029~~$74,134 for Mr. Rhine. ~~Effective~~On April 1,15, 2019, the Company ~~and Mr. Rhine entered into~~executed an Amendment No. 1 to Employment Agreement (the “Amendment”), with an effective date of April 1, 2019, with Mr. Rhine. Pursuant to the ~~Employment Agreement. See Subsequent Events~~Amendment, the Company granted Mr. Rhine a bonus for ~~details.~~2018 services in the amount of $90,000 payable in shares of restricted common stock. The shares were valued at $0.33 per share (the closing price of the Company’s stock on April 2, 2019), resulting in 272,727 shares of Common Stock. The Amendment also defines a Bonus Plan for Mr. Rhine for future periods which provides for additional incentive compensation if certain performance milestones are achieved.

9. FACILITY LEASES

The following table summarizes our leasing arrangements related to the Company’s healthcare facilities at ~~March 31,~~September 30, 2019:

Facility	Monthly Lease Income⁽¹⁾		Lease Expiration	Renewal Option, if any	Monthly Lease Income⁽¹⁾		Lease Expiration		Renewal Option, if any
Middle Georgia	$	60,000	October 31, 2022	None
Eastman⁽²⁾					$	60,000		October 31, 2022	None
Warrenton	$	55,724	June 30, 2026	Term may be extended for one additional ten-year term.	$	55,724		June 30, 2026	Term may be extended for one additional ten-year term.
Goodwill⁽²⁾⁽³⁾	$	40,125	February 1, 2027	Term may be extended for one additional five-year term.	$	40,125		February 1, 2027	Term may be extended for one additional five-year term.
Edwards Redeemer(4)	$	48,728	October 31, 2022	Term may be extended for one additional five-year term.	$	48,728		October 31, 2022	Term may be extended for one additional five-year term.
Providence	$	42,519	June 30, 2026	Term may be extended for one additional ten-year term.	$	42,519		June 30, 2026	Term may be extended for one additional ten-year term.
Meadowview⁽³⁾⁽⁵⁾	$	-	October 31, 2023	Term may be extended for one additional five-year term.	$	-		October 31, 2023	Term may be extended for one additional five-year term.
GL Nursing⁽⁴⁾⁽⁶⁾	$	-	-	None	$	-		-	None
Glen Eagle⁽⁵⁾⁽⁷⁾	$	-	-	None	$	-		-	None
Southern Hills SNF⁽⁶⁾⁽⁸⁾	$	37,000	May 31, 2019	Term may be extended for one additional five-year term.	$	-		-	Term may be extended for two additional five-year term.
Southern Hills ALF⁽⁷⁾⁽⁹⁾		-	-	None	$	-		-	None
Southern Hills ILF⁽⁸⁾		-	-	None
Southern Hills ILF⁽¹⁰⁾					$	-		-	None

(1) Monthly lease income reflects rent income on a straight-line basis over, where applicable, the term of each lease.

(2) On October 18, 2019, the Company terminated the lease at its Eastman property and is pursuing a Receivership to assume the operations of the facility.

(3) In January 2016, the Goodwill facility was closed by Georgia regulators and all residents were removed. In a transaction related to the sale of the Greene Point facility, an affiliate of the buyer of Greene Point executed a ~~ten year~~ten-year operating lease covering Goodwill. After investing approximately $2.0 million in capital improvements in the property, the lease operator obtained all regulatory approvals and began admitting patients in December 2016. The lease became effective on February 1, 2017, and the facility began generating rental revenue thereafter.

~~(3)~~(4) Cadence informed the Company that it intended to close the Edwards Redeemer facility due to unprofitable operations. In violation of the operating lease, Cadence began moving patients from the facility and, as of October 18, 2019, all patients had been removed. In response to our Petition, on October 17, 2019, the District Court of Oklahoma County, State of Oklahoma issued a Temporary Order Appointing Receiver (the “Order”) pursuant to a Motion to Appoint Receiver filed by Edwards Redeemer Property Holdings, LLC (“Edwards Property”), a wholly-owned subsidiary of the Company, with respect as a skilled nursing facility. The Order was issued due to the violations by Cadence of the business-preservation obligations contained in the lease between Edwards Property and the Operator.The Company will allow Edwards Redeemer to remain closed for the purpose of undertaking extensive renovations to the facility. The renovations are expected to take up to 12 months.

(5) The lease was generating $33,000 in monthly gross rent; however, the operator experienced adverse results in late 2017 and throughout 2018. In April 2018 the Company recognized a bad debt expense of $56,000 related to rent receivables previously booked in 2018 at the Meadowview facility. Effective December 1, 2018, the Company completed the operations transfer to an affiliate of Infinity Health Interests, LLC (“Infinity”). The lease is structured with a lower base rent component than the prior operator but also includes occupancy-based escalators that will better align facility operations with future rental payments.

~~(4)~~(6) Effective January 1, 2016, the GL Nursing facility was leased to another operator for a period of ten years at a monthly base rent of $30,000 which was subject to increases based on census levels. Under the terms of the lease, the Company agreed to fund certain capital expenditures, which it was unable to fulfill. In July 2016, the new tenant served notice that it was terminating the lease effective August 31, 2016. The Company entered into a Lease Termination Agreement under which it paid the tenant $145,000 and is obligated to make future payments. Effective August 30, 2016, the Company entered into a new lease agreement with another nursing home operator. The lease term was to commence at the end of a straddle period. During the straddle period, the Company made working capital advances to enable the operator to cover cash flow deficits resulting from initial operations of the facility. Prior to the end of the straddle period, the lease operator informed the Company that it would vacate the facility. An entity affiliated with Mr. Brogdon, who is a guarantor of the mortgage, assumed operations of the facility in March 2018 under an OTA. We do not expect the facility to generate any future revenue for the Company.

~~(5)~~(7) The Company entered into a management agreement with Cadence Healthcare Solutions to operate Glen Eagle after expending approximately $1.0 million in capital improvements. The facility passed its licensure survey and began admitting patients in June 2018. Effective October 12, 2018, the facility gained its certification and started collecting revenues from Medicare and Medicaid in April 2019. On October 17, 2019, the Company terminated its management with Cadence Healthcare Solutions and is currently operating the building independently.

~~(6)~~(8) Lease agreement dated May 21, 2014 with lease payments commencing February 1, 2015. On May 10, 2016, the Company obtained a Court Order appointing a Receiver to control and operate the Southern Hills SNF. The former lease operator represented that it was unable to meet the financial commitments of the facility, including the payment of rent, payroll and other operating requirements. In October 2017, the Receiver engaged a new manager for the facility at the request of the Company. In May 2019 the lease expired, and in July 2019 the facility was leased to Southern Hills Rehab Center LLC, a wholly owned subsidiary of the Company, to conduct operations. Commencement of the lease is contingent upon regulatory approval of the transfer of the Certificates of Need and appropriate licenses to operate the facility, and the lease term extends five years from the contingent commencement date. The Company plans to operate this building independently.

~~(7)~~(9) The Company plans to operate the Southern Hills ALF ~~through a third-party manager~~independently once construction is complete and a state license is secured.

~~(8)~~(10) The Company ~~plans to operate~~has been operating the Southern Hills ILF ~~through a third-party manager once renovations are complete. The first residents are expected in July~~independently since October 2019.

Lessees are responsible for payment of insurance, taxes and other charges while under the lease. Should the lessees not pay all such charges as required under the leases, or if there is no tenant, the Company may become liable for such operating expenses. We have been required to cover those expenses at Glen Eagle as well as the Southern Hills ALF and ILF.

Future cash payments for rent to be received during the initial terms of the leases for the next five years and thereafter are as follows (excludes Abbeville, Edwards Redeemer, Southern Tulsa SNF and Southern Tulsa ALF and ~~Southern Tulsa~~ ILF due to ~~property~~properties being ~~non-operating,~~independently operated, and GL Nursing):

Years

2018	$	2,345,240
2019		3,126,946	$	625,725
2020		3,183,242		2,540,490
2021		3,015,544		2,585,058
2022		1,922,794		2,508,774
2023 and Thereafter		5,120,111
2023				1,922,794
2024 and Thereafter			��	5,120,111

	$	18,713,877	$	15,302,952

10. FAIR VALUE MEASUREMENTS

Financial assets and liabilities recorded at fair value in our consolidated balance sheets are categorized based upon a fair value hierarchy established by GAAP, which prioritizes the inputs used to measure fair value into the following levels:

Level 1— Quoted market prices in active markets for identical assets or liabilities at the measurement date.

Level 2— Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable and can be corroborated by observable market data.

Level 3— Inputs reflecting management’s best estimates and assumptions of what market participants would use in pricing assets or liabilities at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Our consolidated balance sheets include the following financial instruments: cash and cash equivalents, advances to related parties, notes receivable, restricted cash, accounts payable, debt and lease security deposit. We consider the carrying values of our short-term financial instruments to approximate fair value because they generally expose the Company to limited credit risk, because of the short period of time between origination of the financial assets and liabilities and their expected settlement, or because of their proximity to acquisition date fair values. The carrying value of debt approximates fair value based on borrowing rates currently available for debt of similar terms and maturities.

Upon acquisition of real estate properties, the Company determines the total purchase price of each property and allocates this price base on the fair value of the tangible assets and intangible assets, if any, acquired and any liabilities assumed based on Level 3 inputs. These Level 3 inputs can include comparable sales values, discount rates, and capitalization rate assumptions from a third party appraisal or other market sources.

Assets and liabilities measured at fair value on a recurring basis as of ~~March 31,~~September 30, 2019 and December 31, 2018 are summarized below:

			Fair Value Measurement								Fair Value Measurement
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3

Warrant Liability	$	2,682	$	-	$	-	$	2,682	$	-	$	-	$	-	$	-
Investment in Debt Securities		12,134		12,134		-		-		19,861		19,861		-		-

Fair Value at March 31, 2019	$	14,816	$	12,134	$	-	$	2,682
Fair Value at September 30, 2019									$	19,861	$	19,861	$	-	$	-

Warrant Liability	$	2,785	$	-	$	-	$	2,785	$	2,785	$	-	$	-	$	2,785
Investment in Debt Securities		162,106		162,106		-		-		162,106		162,106		-		-

Fair Value at December 31, 2018	$	164,891	$	162,106	$	-	$	2,785	$	164,891	$	162,106	$	-	$	2,785

Because these warrants have full reset adjustments tied to future issuance of equity securities by the Company, it is subject to derivative liability treatment under ASC 815-40-15.

The warrant liability is marked-to-market each reporting period with the change in fair value recorded as a gain or loss within Other (Income) Expense on the Company’s Consolidated Statement of Operations until the warrants are exercised, expire, or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument. The fair value of the warrant liability is determined each reporting period by utilizing the Black-Scholes option pricing model.

The investments in debt securities are recorded at amortized cost since they are considered held-to-maturity.

The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuation for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018:

	2019			2018			2019			2018

Beginning Balance January 1	$	2,785		$	95,371		$	2,785		$	95,371

Change in Fair Value of Warrant Liability		(103	)		(40,423	)		(2,785	)		(92,586	)

Ending Balance, March 31	$	2,682		$	54,948
Ending Balance, September 30							$	-		$	2,785

The significant assumptions used in the Black-Scholes option pricing model as of ~~March 31,~~September 30, 2019 and December 31, 2018 include the following:

	March 31, 2019			December 31, 2018			September 30, 2019			December 31, 2018

Volatility		147.43	%		63.58% - 91.93	%		-	%		63.58% - 91.93	%
Risk-free Interest Rate		2.44	%		2.36% - 2.59	%		-	%		2.36% - 2.59	%
Exercise Price	$	1.37		$	0.75 - 1.37		$	-		$	0.75 - 1.37
Fair Value of Common Stock	$	0.33		$	0.33		$	-		$	0.33
Expected Life		0.49 years			0.45 – 0.99 years			-			0.45 – 0.99 years

11. SEGMENT REPORTING

The Company had two primary reporting segments during the ~~three~~nine months ended ~~March 31,~~September 30, 2019, which include real estate services and healthcare services. The Company reports segment information based on the “management approach” defined inASC 280, Segment Reporting. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reportable segments.

Total assets for the healthcare services and real estate services segments were ~~$561,376~~$ 880,632 and ~~$37,927,933,~~$39,381,879, respectively, as of ~~March 31,~~September 30, 2019 and $145,260 and $38,150,627, respectively, as of December 31, 2018.

	Statements of Operations Items for the Three Months Ended																	Statements of Operations Items for the Nine Months Ended
	March 31, 2019								March 31, 2018									September 30, 2019								September 30, 2018
	Real Estate Services			Healthcare Services		Consolidated			Real Estate Services			Healthcare Services			Consolidated			Real Estate Services			Healthcare Services		Consolidated			Real Estate Services			Healthcare Services			Consolidated
Rental Revenue	$	895,288		$	-	$	895,288		$	812,065		$	-		$	812,065		$	2,789,220		$	-	$	2,789,220		$	2,599,224		$	-		$	2,599,224
Healthcare Revenue		-			379,791		379,791			-			-			-			-			2,089,386		2,089,386			-			-			-
Total Revenue		895,288			379,791		1,275,079			812,065			-			812,065			2,789,220			2,089,386		4,878,606			2,599,224			-			2,599,224
Expenses
General and Administrative		112,215			81,264		193,479			104,926			40,229			145,155			575,930			315,101		891,031			569,807			117,842			687,649
Property Taxes, Insurance and Other Operating		62,655			286,533		349,188			22,203			58,613			80,816			117,778			1,479,047		1,596,835			105,593			340,647			446,240
Acquisition Costs																			6,771			-		6,771			-			-			-
Depreciation		319,456			3,469		322,925			305,410			-			305,410			959,427			10,407		969,834			936,943			4,626			941,569
Total Expenses		494,326			371,266		865,592			432,539			98,842			531,381			1,659,916			1,804,555		3,464,471			1,612,343			463,115			2,075,458
Income (Loss) from Operations		400,962			8,525		409,487			379,526			(98,842	)		280,684			1,129,304			284,831		1,414,135			986,881			(463,115	)		523,766
Other (Income) Expense
Gain on Warrant Liability		(103	)		-		(103	)		(40,423	)		-			(40,423	)		(2,785	)		-		(2,785	)		(92,586	)		-			(92,586	)
Gain on Extinguishment of Debt		-			-		-			(94,925	)		-			(94,925	)
(Gain) Loss on Settlement of Other Liabilities		-			-		-			29,900			-			29,900
Loss on Extinguishment of Debt																			-			-		-			57,694			-			57,694
Gain on Settlement of Other Liabilities																			-			-		-			(98,521	)		-			(98,521	)
Gain on Sale of Investments		(1,069	)		-		(1,069	)											(1,069	)		-		(1,069	)		-			-			-
Gain from Insurance Claim		(270,264	)		-		(270,264	)											(324,018	)		-		(324,018	)		-			-			-
Interest Income		(5,467	)		-		(5,467	)		-			-			-			(26,248	)		-		(26,248	)		-			-			-
Interest Expense		526,235			-		526,235			598,366			-			598,366			1,595,363			-		1,595,363			1,783,296			-			1,783,296
Total Other (Income) Expense		249,332			-		249,332			492,918			-			492,918			1,241,243			-		1,241,243			1,649,883			-			1,649,883
Net Income (Loss)		151,630			8,525		160,155			(113,392	)		(98,842	)		(212,234	)		(111,939	)		284,831		172,892			(663,002	)		(463,115	)		(1,126,117	)
Net Loss Attributable to Noncontrolling Interests		4,141			-		4,141			7,901			-			7,901			7,231			-		7,231			17,965			-			17,965
Net Income (Loss) Attributable to Global Healthcare REIT, Inc.	$	155,771		$	8,525	$	164,296		$	(105,491	)	$	(98,842	)	$	(204,333	)	$	(104,708	)	$	284,831	$	180,123		$	(645,037	)	$	(463,115	)	$	(1,108,152	)

	Statements of Operations Items for the Three Months Ended
	September 30, 2019								September 30, 2018
	Real Estate Services			Healthcare Services		Consolidated			Real Estate Services			Healthcare Services			Consolidated
Rental Revenue	$	963,645		$	-	$	963,645		$	885,013		$	-		$	885,013
Healthcare Revenue		-			1,025,458		1,025,458			-			-			-
Total Revenue		963,645			1,025,458		1,989,103			885,013			-			885,013
Expenses
General and Administrative	��	185,263			134,932		320,195			176,036			10,999			187,035
Property Taxes, Insurance and Other Operating		29,892			673,924		703,816			48,964			169,174			218,138
Acquisition Costs		6,771			-		6,771			-			-			-
Depreciation		320,514			3,469		323,983			319,516			3,470			322,986
Total Expenses		542,440			812,325		1,354,765			544,516			183,643			728,159
Income (Loss) from Operations		421,205			213,133		634,338			340,497			(183,643	)		156,854
Other (Income) Expense
Gain on Warrant Liability		(27	)		-		(27	)		(15,974	)		-			(15,974	)
Loss on Extinguishment of Debt		-			-		-			-			-			-
Gain on Settlement of Other Liabilities		-			-		-			354			-			354
Gain from Insurance Claim		(53,754	)				(53,754	)
Interest Income		(19,245	)		-		(19,245	)		-			-			-
Interest Expense		524,503			-		524,503			590,514			-			590,514
Total Other (Income) Expense		451,477			-		451,477			574,894			-			574,894
Net Income (Loss)		(30,272	)		213,133		182,861			(234,397	)		(183,643	)		(418,040	)
Net Loss Attributable to Noncontrolling Interests		1,221			-		1,221			(948	)		-			(948	)
Net Income (Loss) Attributable to Global Healthcare REIT, Inc.	$	(29,051	)	$	213,133	$	184,082		$	(235,345	)	$	(183,643	)	$	(418,988	)

12. LEGAL PROCEEDINGS

The Company and/or its affiliated subsidiaries are involved in the following litigation:

Bailey v. GL Nursing, LLC, et. al in the Circuit Court of Lonoke County, Arkansas, 23rd Circuit,43CV-19-151.

As we simply were the owners of the property and not the operators, we believe that primary responsibility, if any, falls with the operator at the time. Under the terms of the lease, the operator has a duty to indemnify the Company, a claim which we intend to assert.

While it is too early to assess the Company’s exposure, we believe at this time that the likelihood of an adverse outcome is remote.

Southern Tulsa, LLC v. Healthcare Management of Oklahoma, LLC, District Court of Tulsa County, State of Oklahoma, Case No. CJ – 2016- 01781.

This matter was brought by us to have the appointment of a Receiver for the Southern Tulsa SNF and to recover damages from our former operator at that facility. The Court ~~has~~ ordered the appointment of a Receiver effective May 10, 2016. Other claims and matters are pending. The Company has entered into an agreement with the Receiver to assign operations and assets to a subsidiary of the Company and, once the assignments are approved by the State, discharge the Receiver.

Thomas v. Edwards Redeemer Property Holdings, LLC, et.al., District Court for Oklahoma County, Oklahoma, Case No. CJ 2016-2160.

This action arises from a personal injury claim brought by heirs of a former resident of our Edwards Redeemer facility. We are entitled to indemnification from the lease operator and should be covered under the lease operator’s general liability policy. As we are not the operators of the facility and believe we have indemnity coverage, we believe we have no exposure. The lease operator’s insurance carrier is providing a defense and ~~indemnity;~~indemnity and, as a result, we believe the likelihood of a material adverse result is remote.

Edwards Redeemer Property Holdings LLC v. Edwards Redeemer Healthcare & Rehab, LLC,District Court of Oklahoma County, State of Oklahoma, Case No. CJ-19-5883.

This action was brought by us against the former lease operator for breaching the lease agreement, removing all the patients and closing the facility. On October 17, 2019, the Court entered an Order Appointing a Receiver. Other claims are pending.

Dodge NH, LLC v. Eastman Healthcare & Rehab, LLC,Superior Court of Dodge County, State of Georgia, File No. 19V-8716.

This action was brought by us against the former lease operator for numerous violations of the operating lease, including violation of the cross-default provisions with Edwards Redeemer, which had been operated by an affiliate of the Eastman operator. We also served a Notice of Termination with respect to the operating lease. On October 18, 2019, the Court entered an Order granting to us a Temporary Restraining Order requiring the lease operator to maintain the status quo of the facility. On November 8, 2019, we filed a Motion for Appointment of Receiver, which Motion is pending.

13. OTHER INCOME

During the nine months ended September 30, 2019, the Company received proceeds from insurance claims in excess of the cost of repairs. The net gain of $324,018 has been recognized under other income as Gain on Proceeds from Insurance Claim.

14. SUBSEQUENT EVENTS

~~On April 12,~~Edwards Redeemer

Cadence informed the Company that it intended to close the Edwards Redeemer facility due to unprofitable operations. In violation of the operating lease, Cadence began moving patients from the facility and, as of October 18, 2019, all patients had been removed. In response to our Petition, on October 17, 2019, the ~~Company entered into~~District Court of Oklahoma County, State of Oklahoma issued a ~~definitive Asset Purchase Agreement~~Temporary Order Appointing Receiver (the “Order”) pursuant to ~~acquire the Higher Call Nursing Center in Quapaw, Oklahoma. The transaction is subject~~a Motion to ~~numerous conditions such as completing our due diligence, financing, completion~~Appoint Receiver filed by Edwards Redeemer Property Holdings, LLC (“Edwards Property”), a wholly-owned subsidiary of the ~~operations transfer agreement, and is not closed~~Company, with respect as a skilled nursing facility. The Order was issued due to the violations by Cadence of the ~~date~~business-preservation obligations contained in the lease between Edwards Property and the Operator.The Company will allow Edwards Redeemer to remain closed for the purpose of ~~this report.~~undertaking extensive renovations to the facility. The renovations are expected to take up to 12 months.

~~On April 15,~~Eastman

The operating leases at Edwards Redeemer and Eastman contain cross-default provisions, meaning a default by the lessee under one lease constituted a default under the other. Inasmuch as Cadence’s defaults at Edward Redeemer were incurable, on October 18, 2019 we delivered to Cadence a Notice of Termination of the lease covering Eastman. Concurrently, we applied for a Temporary Restraining Order requiring Cadence to continue to operate the facility and maintain the status quo under the provisions of the operating lease. Subsequently, the Company has filed a Motion to Appoint Receiver as under the terms of the operating lease, Cadence is required to turn over operations of Eastman to the Company, as Lessor.

Abbeville

Effective October 17, 2019, the ~~Company executed an Amendment No.~~Company’s affiliate Global Abbeville, LLC terminated the Management Agreement dated January 1, ~~to Employment Agreement (the “Amendment”), with an effective date~~2018, between Global Abbeville, LLC, a wholly-owned subsidiary of ~~April 1, 2019, with Zvi Rhine. Pursuant to the Amendment,~~ the Company ~~granted Mr. Rhine a bonus for 2018 services in~~and Cadence Healthcare Solutions, LLC. The Company plans to operate Abbeville with its existing staff at the amount of $90,000 payable in shares of restricted common stock. The shares were valued at $0.33 per share (the closing price of the Company’s stock on April 2, 2019), resulting in 272,727 shares of Common Stock. The Amendment also defines a Bonus Plan for Mr. Rhine for future periods which provides for additional incentive compensation if certain performance milestones are achieved.location.

Southern Hills

Effective October 16, 2019, the Receiver at Southern Hills terminated its Management Agreement with Cadence Healthcare Solutions, LLC dated October 1, 2017. The Company plans to operate Southern Hills with its existing staff at the location.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with our interim financial statements and notes thereto contained elsewhere in this report. This section contains forward-looking statements, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the SEC.

Our actual future results and trends may differ materially from expectations depending on a variety of factors discussed in our filings with the SEC. These factors include without limitation:

● macroeconomic conditions, such as a prolonged period of weak economic growth, and volatility in capital markets;

● changes in national and local economic conditions in the real estate and healthcare markets specifically;

● legislative and regulatory changes impacting the healthcare industry, including the implementation of the healthcare reform legislation enacted in 2010;

● the availability of debt and equity capital;

● changes in interest rates;

● competition in the real estate industry; and,

● the supply and demand for operating properties in our market areas.

Overview

Global Healthcare REIT, Inc. (“Global” or “we” or the “Company”) was organized for the purpose of investing in real estate related to the long-term care industry.

We ~~plan to elect to be treated as a real estate investment trust (REIT) in the future; however, we did not make that election for the 2019 fiscal year.~~

We acquire, develop, lease, manage and dispose of healthcare real estate, and provide financing to healthcare providers. Our portfolio will be comprised of investments in the following five healthcare segments: (i) senior housing, (ii) life science, (iii) medical office, (iv) post-acute/skilled nursing and (v) hospital. We will make investments within our healthcare segments using the following five investment products: (i) properties under lease, (ii) debt investments, (iii) developments and redevelopments, (iv) investment management and (v) the Housing and Economic Recovery Act of 2008 (“RIDEA”), which represents investments in senior housing operations utilizing the structure permitted by RIDEA.

The delivery of healthcare services requires real estate and, as a result, tenants and operators depend on real estate, in part, to maintain and grow their businesses. We believe that the healthcare real estate market provides investment opportunities due to the following:

●	Compelling demographics driving the demand for healthcare services;
●	Specialized nature of healthcare real estate investing; and
●	Ongoing consolidation of a fragmented healthcare real estate sector.

Acquisitions

We did not acquire any properties during the ~~three month~~nine-month periods ended ~~March 31,~~September 30, 2019 and 2018.

Properties

As of ~~March 31,~~September 30, 2019, we owned eleven long-term care facilities including a campus of three buildings in Tulsa, OK. The following table provides summary information regarding these facilities at ~~March 31,~~September 30, 2019:

Property Name	Location	Effective Percentage Equity Ownership			Date Acquired	Gross Square Feet		Purchase Price		Outstanding Debt at March 31, 2019		Location		Effective Percentage Equity Ownership			Date Acquired		Gross Square Feet		Purchase Price		Outstanding Debt at September 30, 2019

Middle GA Nursing Home (a/k/a Crescent Ridge)	Eastman, GA		100	%	3/15/2013		28,808	$	5,000,000	$	3,533,486
Eastman Nursing Home (a/k/a Crescent Ridge)													Eastman, GA		100	%		3/15/2013		28,808	$	5,000,000	$	3,481,745

Warrenton Health and Rehabilitation	Warrenton, GA		100	%	12/31/2013		26,894	$	3,500,000	$	2,270,447		Warrenton, GA		100	%		12/31/2013		26,894	$	3,500,000	$	3,757,190

Southern Hills Retirement Center	Tulsa, OK		100	%	2/7/2014		104,192	$	2,000,000	$	7,105,218		Tulsa, OK		100	%		2/7/2014		104,192	$	2,000,000	$	7,229,052

Goodwill Nursing Home	Macon, GA		85	%	5/19/2014		46,314	$	7,185,000	$	4,355,739		Macon, GA		85	%		5/19/2014		46,314	$	7,185,000	$	5,844,416

Edwards Redeemer Health & Rehab	Oklahoma City, OK		100	%	9/16/2014		31,939	$	3,142,233	$	2,118,284		Oklahoma City, OK		100	%		9/16/2014		31,939	$	3,142,233	$	2,081,053

Providence of Sparta Nursing Home	Sparta, GA		100	%	9/16/2014		19,441	$	2,836,930	$	2,961,250		Sparta, GA		100	%		9/16/2014		19,441	$	2,836,930	$	2,932,665

Meadowview Healthcare Center	Seville, OH		100	%	9/30/2014		27,500	$	3,000,000	$	2,919,900		Seville, OH		100	%		9/30/2014		27,500	$	3,000,000	$	2,886,600

Grand Prairie Nursing Home	Lonoke, AR		100	%	9/16/2014		40,737	$	6,742,767	$	4,618,006		Lonoke, AR		100	%		9/16/2014		40,737	$	6,742,767	$	4,618,006

Glen Eagle Healthcare & Rehab (Formerly Abbeville Health & Rehab)	Abbeville, GA		100	%	5/25/2016		29,393	$	2,100,000	$	3,024,317		Abbeville, GA		100	%		5/25/2016		29,393	$	2,100,000	$	3,103,926

Property Name 2019 Base Revenue
Per Lease Operating Lease Expiration

Middle Georgia Nursing Home (a/k/a Crescent Ridge) $ 720,000 October 31, 2022
Warrenton Health and Rehabilitation $ 642,846 June 30, 2026
Southern Hills Retirement Center $ 78,000 May 31, 2019
Goodwill Nursing Home $ 560,138 February 1, 2027
Edwards Redeemer Health & Rehab $ 574,958 October 31, 2022
Providence of Sparta Nursing Home $ 494,496 June 30, 2026
Meadowview Healthcare Center $ - November 30, 2023
GL Nursing Home $ - -
Abbeville Health & Rehab $ - -

Property Name	2019 Base Revenue Per Lease		Operating Lease Expiration

Eastman Nursing Home (a/k/a Crescent Ridge)	$	720,000		October 31, 2022
Warrenton Health and Rehabilitation	$	642,846		June 30, 2026
Southern Hills Retirement Center	$	12,000		-
Goodwill Nursing Home	$	560,138		February 1, 2027
Edwards Redeemer Health & Rehab	$	574,958		October 31, 2022
Providence of Sparta Nursing Home	$	494,496		June 30, 2026
Meadowview Healthcare Center	$	-		November 30, 2023
GL Nursing Home	$	-		-
Abbeville Health & Rehab	$	-		-

Going Concern

The accompanying consolidated financial statements and notes have been prepared assuming the Company will continue as a going concern. For the ~~three~~nine months ended ~~March 31,~~September 30, 2019, the Company had net income of ~~$160,155~~$172,892 and reported net cash provided by operations of ~~$266,139.~~$755,111. During the years ended December 31, 2018 and December 31, 2017, the Company incurred net losses of $2,007,006 and $3,001,618, respectively, and as of ~~March 31,~~September 30, 2019 has an accumulated deficit of ~~$10,913,810.~~$10,912,983. These circumstances raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to generate sufficient revenues and cash flows to operate profitably and meet contractual obligations or raise additional capital through debt financing or through sales of common stock.

Results of Operations

The following discussion of the financial condition, results of operations, cash flows, and changes in our financial position should be read in conjunction with our interim consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.

Results of Operations - ~~Three months~~Nine Months Ended ~~March 31,~~September 30, 2019 Compared to the ~~Three months~~Nine Months Ended ~~March 31,~~September 30, 2018

Rental revenues for the ~~three month~~nine-month periods ended ~~March 31,~~September 30, 2019 and 2018 totaled ~~$895,288~~$2,789,220 and ~~$812,065,~~$2,599,224, respectively, an increase of ~~$83,223.~~$189,996. The Company also had healthcare revenue of ~~$379,791~~$2,089,386 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019, compared to $0 for the ~~three~~nine months ended ~~March 31,~~September 30, 2018, related to the commencement of operations at the Glen Eagle facility in Abbeville, GA. Looking forward, we ~~expect to commence operations~~anticipate growing the revenue at the Southern Hills ILF facility in 2019 ~~which we expect to contribute more meaningfully to healthcare revenues as the year progresses, as we expect to be the operator of that facility with a manager.~~and beyond. We also expect ~~Meadowview~~ to ~~begin paying rent in 2019 with material upside if certain occupancy-based escalators are triggered.~~acquire from the Receiver the assets and operations of the Southern Hills SNF and plan to operate the SNF independently. Offsetting these increases will be the lost revenue from our Edwards facility which closed on October 2019.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2019, we recognized rental revenues on ~~seven~~eight properties, with no revenues recognized from our assisted ~~living facility and independent~~ living facility located in Tulsa, Oklahoma, the GL Nursing facility in Lonoke, AR or the Meadowview facility in Seville, OH.

General and administrative expenses were ~~$193,479~~$891,031 and ~~$145,155~~$687,649 for the ~~three month~~nine-month periods ended ~~March 31,~~September 30, 2019 and 2018, respectively, an increase of ~~$48,324.~~$203,382 largely due to increases in the size of the operation at our Abbeville facility. For the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and ~~March 31,~~September 30, 2018, respectively, general and administrative expenses included ~~$50,529~~$254,134 and ~~$45,000~~$321,046 of share based compensation related to restricted stock and common stock awards.

Property taxes, insurance, and other operating expenses totaled ~~$349,188~~$1,596,835 and ~~$80,816~~$446,240 for the ~~three month~~nine-month periods ended ~~March 31,~~September 30, 2019 and 2018, respectively. Lessees are responsible for the payment of insurance, taxes and other charges while under the lease. Should the lessee not pay all such charges, as required under the leases, we may be liable for such operating expenses. ~~We have been required~~As the operator at Glen Eagle facility in Abbeville, GA, we are responsible to cover these ~~expenses at our Abbeville facility as we fund the initial working capital needs to stabilize the operations.~~expenses. We are also responsible for property taxes and insurance related to the ALF and ILF at our Southern Hills Retirement Center.

Depreciation expense increased ~~$17,515~~$28,265 from ~~$305,410~~$941,569 for the ~~three~~nine months ended ~~March 31,~~September 30, 2018 to ~~$322,925~~$969,834 for ~~three~~nine months ended ~~March 31,~~September 30, 2019. We have not recorded depreciation expense on our assisted living facility and independent living facility located at our Southern Hills Retirement Center which will commence once renovations have been completed and the properties are placed in service.

The Company had ~~$5,467~~$26,248 interest income for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and no interest income for the ~~three~~nine months ended ~~March 31,~~September 30, 2018.

Interest expense decreased ~~$72,131~~$187,933 from ~~$598,366~~$1,783,296 for the ~~three~~nine months ended ~~March 31,~~September 30, 2018 to ~~$526,235~~$1,595,363 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019. We capitalized ~~$14,525~~$8,698 of interest during the ~~three~~nine months ended ~~March 31,~~September 30, 2019.

Liquidity and Capital Resources

Throughout its history, the Company has experienced shortages in working capital and has relied, from time to time, upon sales of debt and equity securities to meet cash demands generated by our acquisition activities.

Our liquidity is expected to increase from potential equity and debt offerings and decrease as net offering proceeds are expended in connection with our various property improvement projects. Our continuing short-term liquidity requirements consisting primarily of operating expenses and debt service requirements, excluding balloon payments at maturity, are expected to be achieved from rental revenues received and existing cash on hand. We plan to renew secured obligations that mature during 2019, as our projected cash flow from operations will be insufficient to retire the debt. Our restricted cash approximated ~~$228,515~~$351,238 as of ~~March 31,~~September 30, 2019 and is to be expended on ~~debt service,~~insurance, taxes, repairs, and capital expenditures associated with Providence of Sparta Nursing Home.

Cash provided by operating activities was ~~$266,139~~$755,111 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 compared to cash provided by operating activities of ~~$208,320~~$404,043 for the ~~three~~nine months ended ~~March 31,~~September 30, 2018. Cash flows from operations were beneficially impacted by ~~the decrease~~increased net income offset by increases in prepaid expenses and accounts receivable ~~and the increase in rental revenues received and accounts payable~~ during the first ~~three~~nine months of 2019.

Cash used in investing activities was ~~$954,879~~$2,617,050 for the ~~three-month~~nine-month period ended ~~March 31,~~September 30, 2019 compared to cash used in investing activities of ~~$178,021~~$629,462 for the ~~three month~~nine-month period ended ~~March 31,~~September 30, 2018. The increase reflects increased spending on property renovations and refurbishments.

Cash ~~used~~provided by financing activities was ~~$3,828~~$1,353,915 for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 compared to cash ~~used in~~provided by financing activities of ~~$87,086~~$71,819 for the ~~three~~nine months ended ~~March 31,~~September 30, 2018. During the first ~~three~~nine months of 2019, we ~~issued $159,875 in~~received proceeds from the issuance of debt of $1,800,187 and made payments on debt of ~~$147,318.~~$414,887. During the first ~~three~~nine months of 2018, we issued ~~$52,862~~$493,533 in debt in cash and made cash payments on debt of ~~$132,448.~~$373,868.

As of ~~March 31,~~September 30, 2019 and December 31, 2018, our debt balances consisted of the following:

	March 31, 2019			December 31, 2018			September 30, 2019			December 31, 2018

Senior Secured Promissory Notes	$	1,485,000		$	1,485,000		$	1,485,000		$	1,485,000
Senior Unsecured Promissory Notes		300,000			300,000			300,000			300,000
Senior Secured Promissory Notes - Related Parties		875,000			875,000			875,000			875,000
Fixed-Rate Mortgage Loans		20,902,663			21,049,981			22,551,595			21,049,981
Variable-Rate Mortgage Loans		4,618,006			4,618,006			4,618,006			4,618,006
Line of Credit		7,385,978			7,240,183			7,229,052			7,240,183
Other Debt		1,536,000			1,536,000			1,536,000			1,536,000

		37,102,647			37,104,170			38,594,653			37,104,170

Premium, Unamortized Discount and Debt Issuance Costs		(483,590	)		(507,829	)		(526,132	)		(507,829	)

	$	36,619,057		$	36,596,341		$	38,068,521		$	36,596,341

As presented in the Consolidated Balance Sheets:

Debt, Net	$	35,744,057		$	35,721,341		$	37,193,521		$	35,721,341

Debt - Related Parties, Net		875,000			875,000			875,000			875,000

	$	36,619,057		$	36,596,341		$	38,068,521		$	36,596,341

The weighted average interest rate and term of our fixed rate debt are ~~6.14%~~6.02% and ~~3.88~~6.60 years, respectively, as of ~~March 31,~~September 30, 2019. The weighted average interest rate and term of our variable rate debt are 7% and ~~18.36~~17.85 years, respectively, as of ~~March 31,~~September 30, 2019.

Mortgage Loans and Lines of Credit Secured by Real Estate

Mortgage loans and other debts such as lines of credit ~~here~~ are collateralized by all assets of each nursing home property and an assignment of its rents. Collateral for certain mortgage loans includes the personal guarantee of Christopher Brogdon or corporate guarantees. Mortgage loans for the periods presented consisted of the following:

	Face		Principal Outstanding at				Stated Interest	Maturity		Face		Principal Outstanding at				Stated Interest		Maturity
Property	Amount		March 31, 2019		December 31, 2018		Rate	Date		Amount		September 30, 2019		December 31, 2018		Rate		Date

Southern Hills Retirement Center Line of Credit⁽¹⁾⁽²⁾	$	7,229,052	$	7,105,218	$	7,119,743	5.25% Fixed		April 28, 2019	$	7,229,052	$	7,229,052	$	7,119,743		5.75% Fixed		October 28, 2019
Middle Georgia Nursing Home^(2,3)		3,570,000		3,533,486		3,561,461	5.50% Fixed		October 26, 2021
Eastman Nursing Home^(2,3)											3,570,000		3,481,745		3,561,461		5.50% Fixed		October 26, 2021
Goodwill Nursing Home⁽²⁾		5,005,000		4,355,739		4,390,082	5.50% Fixed		March 19, 2020		5,005,000		4,308,416		4,390,082		5.50% Fixed		March 19, 2020
Warrenton Nursing Home⁽⁴⁾		2,720,000		2,270,447		2,287,323	5.50% Fixed		January 20, 2020		3,768,600		3,757,190		2,287,323		3.73% Fixed		July 1, 2049
Edward Redeemer Health & Rehab		2,303,815		2,118,284		2,138,128	5.50% Fixed		January 16, 2020		2,303,815		2,081,053		2,138,128		5.50% Fixed		January 16, 2020
Glen Eagle Health & Rehab⁽⁵⁾		2,761,250		2,743,557		2,761,250	5.50% Fixed		May 25, 2021		2,761,250		3,103,926		2,761,250		5.50% Fixed		May 25, 2021
Glen Eagle Health and Rehab Line of Credit⁽²⁾⁽⁵⁾		400,000		280,760		120,440	6.50% Fixed		September 30, 2019		400,000		-		120,440		6.50% Fixed		September 30, 2019
Providence of Sparta Nursing Home⁽⁶⁾		3,039,300		2,961,250		2,975,337	3.88% Fixed		November 1, 2047		3,039,300		2,932,665		2,975,337		3.88% Fixed		November 1, 2047
Meadowview Healthcare Center⁽⁷⁾		3,000,000		2,919,900		2,936,400	6.00% Fixed		October 30, 2022		3,000,000		2,886,600		2,936,400		6.00% Fixed		October 30, 2022
GL Nursing Home⁽⁸⁾		5,000,000		4,618,006		4,618,006	Prime Plus 1.50%/ 5.75% Floor		August 3, 2037		5,000,000		4,618,006		4,618,006		Prime Plus 1.50%/ 5.75% Floor		August 3, 2037

			$	32,906,647	$	32,908,170						$	34,398,653	$	32,908,170

(3) The loan at ~~Middle Georgia~~Eastman was renewed on November 26, 2018 with the maturity extended to October 26, 2021.

We have ~~$8.9~~$7.2 million of debt maturing and expect principal reduction payments of approximately ~~$391,661~~$105,378 in the year ended December 31, 2019. There is also ~~$10.3~~$10.6 million in debt in technical default maturing after December 31, 2019 but shown due immediately. While we anticipate being able to refinance all the loans at reasonable market terms upon maturity, inability to do so may impact our financial position and results of operations. We expect to refinance ~~$7.4~~$7.2 million in mortgage loans maturing in 2019 as the associated properties meet loan to value requirements currently being employed in commercial lending markets. We have ~~$125,000~~$1,661,000 in note obligations maturing in 2019. ~~The following~~Following is a summary of our subordinated debt and corporate debt at ~~March 31,~~September 30, 2019 and December 31, ~~2018:~~2018.

Subordinated and Corporate Debt

Our subordinated debt at ~~March 31,~~September 30, 2019 and December 31, 2018 includes unsecured notes payable issued to entities controlled by the Company used to facilitate the acquisition of the nursing home properties.

Face

Principal Outstanding at

Stated Interest

Maturity

Face

Principal Outstanding at

Stated Interest

Maturity

Property

Amount

March 31, 2019

December 31, 2018

Rate

Date

Amount

September 30, 2019

December 31, 2018

Rate

Date

Goodwill Nursing Home

2,180,000

1,536,000

13%⁽¹⁾ Fixed

December 31, 2019

2,180,000

1,536,000

13%⁽¹⁾ Fixed

December 31, 2019

(1)

The subordinated note on Goodwill matured on July 1, 2015. Investors in the Goodwill note were entitled to an additional 5% equity in Goodwill Hunting, LLC every six months if the note is not paid when due. Effective December 31, 2015, the investors holding the subordinated debt executed an Agreement Among Lenders pursuant to which they (i) agreed to waive any and all equity ratchets and (ii) agreed to extend the maturity date of the subordinated debt to June 30, 2017. In exchange, Goodwill Hunting agreed to pay the investors an additional one-time premium equal to 5% of the principal amount of the individual note at such time as the note is repaid. Effective May 3, 2017, we entered into an Allonge and Modification Agreement with the Goodwill investors pursuant to which they agreed to (i) waive all accrued interest through December 31, 2017, (ii) reduce interest rate to 13% beginning January 1, 2018 and (iii) extend the maturity date of the notes to December 31, 2019. In exchange, the Company agreed that upon repayment of the notes, the investors would be entitled to a one-time premium payment in the amount of 15% of the principal balance of the notes.

Our corporate debt at ~~March 31,~~September 30, 2019 and December 31, 2018 includes unsecured notes and notes secured by all assets of the Company not serving as collateral for other notes.

	Face		Principal Outstanding at,				Stated Interest	Maturity		Face		Principal Outstanding at				Stated Interest		Maturity
Series	Amount		March 31, 2019		December, 31, 2018		Rate	Date		Amount		September 30, 2019		December 31, 2018		Rate		Date

10% Senior Secured Promissory Note	$	125,000	$	125,000	$	125,000	10.0% Fixed		December 31, 2018	$	125,000	$	125,000	$	125,000		10.0% Fixed		December 31, 2018
10% Senior Unsecured Promissory Notes		300,000		300,000		300,000	10.0% Fixed		October 31, 2020		300,000		300,000		300,000		10.0% Fixed		October 31, 2020
11% Senior Secured Promissory Notes		2,235,000		2,235,000		2,235,000	11.0% Fixed		October 31, 2021		2,235,000		2,235,000		2,235,000		11.0% Fixed		October 31, 2021

			$	2,660,000	$	2,660,000						$	2,660,000	$	2,660,000

Contractual Obligations

As of ~~March 31,~~September 30, 2019, we had the following contractual obligations:

Total Less Than 1 Year 1 – 3 Years 3 – 5 Years More Than 5 Years
Notes and Bonds Payable - Principal $ 37,102,647 $ 28,239,408 $ 6,076,830 $ 131,824 $ 2,654,585
Notes and Bonds Payable - Interest 3,760,500 1,228,060 919,692 211,390 1,401,358

Total Contractual Obligations $ 40,863,147 $ 29,467,468 $ 6,996,522 $ 343,214 $ 4,055,943

	Total		Less Than 1 Year		1 – 3 Years		3 – 5 Years		More Than 5 Years
Notes and Bonds Payable - Principal	$	38,594,653	$	26,134,409	$	6,173,017	$	294,343	$	5,992,884
Notes and Bonds Payable - Interest		5,366,869		976,997		965,007		477,088		2,947,777

Total Contractual Obligations	$	43,961,522	$	27,111,406	$	7,138,024	$	771,431	$	8,940,661

Revenues from operations are sufficient to meet the working capital needs of the Company for the foreseeable future. Cash on hand, combined proceeds from the issuance of our Senior Secured Promissory Notes in the aggregate amount of $1,160,000 during 2018 and revenues generated from operations are in excess of operating expenses and debt service requirements. Debt maturities are expected to be refinanced at reasonable terms upon maturity. The Company anticipates a combination of conventional mortgage loans, at market rates, issuance of revenue bonds and possibly additional equity injections to fund the acquisition cost of any additional properties. Except for renovations at Southern Hills Retirement Center, there are no material capital improvement or recurring capital expenditure commitments at the properties.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that we consider material.

Critical Accounting Policies

Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements. Certain of these accounting policies are particularly important for an understanding of the financial position and results of operations presented in the consolidated financial statements set forth elsewhere in this report. These policies require the application of judgment and assumptions by management and, as a result, are subject to a degree of uncertainty. Actual results could differ as a result of such judgment and assumptions.

Property Acquisitions

We allocate the purchase price of acquired properties to net tangible and identified intangible assets and any liabilities based on relative fair values. Fair value estimates are based on information obtained from independent appraisals, other market data, information obtained during due diligence and information related to the marketing and leasing at the specific property. Acquisition-related costs such as due diligence, legal and accounting fees are expensed as incurred and not applied in determining the purchase price or fair value of an acquired property.

Impairment of Long Lived Assets

When circumstances indicate the carrying value of property may not be recoverable, the Company reviews the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. This estimate considers factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If impairment exists, due to the inability to recover the carrying amount of the property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property. Estimated fair value is determined with the assistance from independent valuation specialists using recent sales of similar assets, market conditions and projected cash flows of properties using standard industry valuation techniques.

Recently Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board and other entities issued new or modifications to, or interpretations of, existing accounting guidance during ~~2018.~~2019. Management has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.

Subsequent Events

~~On April 12,~~Edwards Redeemer

Eastman

~~On April 15,~~Abbeville

Southern Hills

Effective October 16, 2019, the Receiver at Southern Hills terminated its Management Agreement with Cadence Healthcare Solutions, LLC dated October 1, 2017. The ~~shares were valued~~Company plans to operate Southern Hills with its existing staff at ~~$0.33 per share (the closing price of~~ the Company’s stock on April 2, 2019), resulting in 272,727 shares of Common Stock. The Amendment also provides for an incentive bonus program for future periods subject to meeting certain performance milestones.location.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives.

Our management, including our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based on this evaluation, our CEO and CFO concluded that the design and operation of our disclosure controls and procedures were not effective as of such date to provide assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management as appropriate, to allow timely decisions regarding disclosures.

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended ~~March 31,~~September 30, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1.Legal Proceedings

The Company and/or its affiliated subsidiaries are involved in the following litigation:

Bailey v. GL Nursing, LLC, et.al. in the in the Circuit Court of Lonoke County, Arkansas, 23rd Circuit, 43CV-19-151.

The Company’s ~~wholly owned~~wholly-owned subsidiary was named as a co-defendant in the action arising out of a claimed personal injury suffered by the plaintiff while a resident of the skilled nursing home owned, but not operated, by GL Nursing. As of this date, we have engaged legal counsel but ~~have~~ no further information is known regarding the merits of the claim. After initial inquiry, it does not appear that the lease operator of the facility had in effect general liability insurance covering the GL Nursing, as landlord, as required by the operating lease. As we simply were the owners of the property and not the operators, we believe that primary responsibility, if any, falls with the operator at the time. Under the terms of the lease, the operator has a duty to indemnify the Company, a claim which we intend to assert.

While it is too early to assess the Company’s exposure, we believe at this time that the likelihood of an adverse outcome is remote.

Southern Tulsa, LLC v. Healthcare Management of Oklahoma, LLC, District Court of Tulsa County, State of Oklahoma, Case No. CJ – 2016- 01781.

This matter was brought by us to have the appointment of a Receiver for the Southern Tulsa SNF and to recover damages from our former operator at that facility. The Court has ordered the appointment of a Receiver effective May 10, 2016. Other claims and matters are pending.

Thomas v. Edwards Redeemer Property Holdings, LLC, et.al., District Court for Oklahoma County, Oklahoma, Case No. CJ 2016-2160.

Edwards Redeemer Property Holdings LLC v. Edwards Redeemer Healthcare & Rehab, LLC,District Court of Oklahoma County, State of Oklahoma, Case No. CJ-19-5883.

Dodge NH, LLC v. Eastman Healthcare & Rehab, LLC,Superior Court of Dodge County, State of Georgia, File No. 19V-8716.

Item 1A.Risk Factors

None, except as previously disclosed.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None, except as previously disclosed, such as the 272,727 shares of restricted common stock granted to Mr. Zvi Rhine as a bonus for services in 2018, and effective March 1, 2019, we issued 90,909 shares of common stock to each of Baller, Desmond and Neuman under the Directors’ Compensation Plan. Also, in July 2019, we issued 37,879 and 53,030 shares of common stock to Mr. Sink and Mr. Downs, respectively, as director compensation for 2019.

Item 3. Defaults Upon Senior Securities

None, except as disclosed in this Report.

Item 4. Removed and Reserved

Item 5. Other Information

None.

Item 6. Exhibits

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002*

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002*

32.		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

101.INS		XBRL Instance Document**
101.SCH		XBRL Schema Document**
101.CAL		XBRL Calculation Linkbase Document**
101.LAB		XBRL Label Linkbase Document**
101.PRE		XBRL Presentation Linkbase Document**
101.DEF		XBRL Definition Linkbase Document**

* filed herewith

** furnished, not filed

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	GLOBAL HEALTHCARE REIT, INC.

Date: ~~May 20,~~November 18, 2019	By:	/s/ Lance Baller
		Lance Baller, Interim ~~CEO~~Chief Executive Officer (Principal Executive Officer)

Date: ~~May 20,~~November 18, 2019	By:	/s/ Zvi Rhine
		Zvi Rhine, Chief Financial Officer
		(Principal Accounting Officer)

	March 31, 2019		December 31, 2018

States and Municipalities	$	12,134	$	162,106

	Total		Less Than 1 Year		1 – 3 Years		3 – 5 Years		More Than 5 Years
Notes and Bonds Payable - Principal	$	37,102,647	$	28,239,408	$	6,076,830	$	131,824	$	2,654,585
Notes and Bonds Payable - Interest		3,760,500		1,228,060		919,692		211,390		1,401,358

Total Contractual Obligations	$	40,863,147	$	29,467,468	$	6,996,522	$	343,214	$	4,055,943