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 June 30, ~~2020~~2021

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

For the transition period from _______ to ______

Commission file number 0-15415

SELECTIS HEALTH, INC. f/k/a 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

Identification number

~~6800 N. 79th St.~~8480 E Orchard Rd, ~~Ste. 200,~~Ste 4900,

~~Niwot,~~ Greenwood Village, CO

~~80503~~80111

(Address of principal executive offices)

(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class		Trading Symbol (s)		Name of each exchange on which registered
N/A		N/A		N/A

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 ~~November 18, 2020,~~August 16, 2021, the Registrant had ~~26,866,379~~ 28,480,132 shares of its Common Stock outstanding.

~~INDEX~~

INDEX

		Page No.
	PART I — FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)	3

	Consolidated Balance Sheets as of June 30, ~~2020~~2021 (Unaudited) and December 31, ~~2019~~2020	3

	Consolidated Statements of Operations for the ~~Three~~Six and ~~Six~~Three Months Ended June 30, 2021, and 2020 ~~and 2019~~ (Unaudited)	4

	Consolidated Statements of Changes in Equity for the ~~Three~~Six and ~~Six~~Three Months Ended June 30, 2021, and June 30, 2020 ~~and 2019~~ (Unaudited)	5

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021, and 2020 ~~and 2019~~ (Unaudited)	6

	Notes to Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2219

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3224

Item 4.	Controls and Procedures	3224

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	3324

Item 2.	COVID-19 Pandemic	26

Item 1A.	Risk Factors	3432

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3533

Item 3.	Defaults Upon Senior Securities	3533

Item 4.	Removed and ~~Reserved~~reserved	3533

Item 5.	Other Information	3533

Item 6.	Exhibits	3533

PART 1. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

SELECTIS HEALTH, INC. f/k/a GLOBAL HEALTHCARE REIT, INC.

CONSOLIDATED BALANCE SHEETS

	June 30, 2020			December 31, 2019			June 30, 2021			December 31, 2020
	(Unaudited)						(Unaudited)
ASSETS
Property and Equipment, Net	$	37,140,599		$	36,394,587
Current Assets
Cash and Cash Equivalents		2,844,515			641,215		$	3,255,478		$	3,567,437
Restricted Cash		424,636			351,298			430,505			410,866
Accounts Receivable, Net		1,562,911			1,188,100			3,234,343			1,931,569
Prepaid Expenses and Other								734,028			682,949
Investments in Debt Securities		24,387			24,387			24,387			24,387
Intangible Assets		-			15,258
Total Current Assets								7,678,741			6,617,208

Long Term Assets
Property and Equipment, Net								37,782,709			38,238,367
Goodwill		379,479			379,479			1,076,908			1,076,908
Prepaid Expenses and Other		674,404			883,839
Total Assets	$	43,050,931		$	39,878,163		$	46,538,358		$	45,932,483

LIABILITIES AND EQUITY
Liabilities
Debt, Net of discount of $450,111 and $493,353, respectively	$	39,113,315		$	36,954,184
Debt – Related Parties, Net of discount of $5,192 and $0, respectively		1,119,808			1,025,000
Current Liabilities
Accounts Payable and Accrued Liabilities		1,011,543			1,241,573			3,964,902			3,196,178
Accounts Payable – Related Parties		-			32,156			81,576			9,900
Dividends Payable		7,500			7,500			-			7,500
Current Maturities of Long Term Debt, Net of Discount of $26,002 and $1,714, respectively								7,197,174			19,299,156
Debt – Related Parties, Net of discount of $13,153 and $3,234, respectively								1,121,766			1,121,766
Total Current Liabilities								12,365,418			23,634,500

Debt, Net of discount of $347,081 and $450,879, respectively								31,180,075			18,830,444
Lease Security Deposit		252,600			251,100			253,100			251,600
Total Liabilities		41,504,766			39,511,513			43,798,593			42,716,544
Commitments and Contingencies
Equity
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
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
Common Stock - $0.05 Par Value; 50,000,000 Shares Authorized, 27,414,525 and 27,441,040 Shares Issued and Outstanding at June 30, 2020 and December 31, 2019, respectively		1,370,726			1,372,052
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
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
Preferred Stock Value
Common Stock - $0.05 Par Value; 50,000,000 Shares Authorized, 26,924,949 and 26,866,379 Shares Issued and Outstanding at June 30, 2021 and December 31, 2020, respectively								1,346,248			1,343,319
Additional Paid-In Capital		10,397,755			10,385,417			10,099,641			10,331,065
Accumulated Deficit		(10,792,565	)		(11,962,220	)		(9,482,124	)		(9,036,400	)
Total Global Healthcare REIT, Inc. Stockholders’ Equity		1,751,916			571,249
Total Selectis Health, Inc. Stockholders’ Equity								2,739,765			3,413,984
Noncontrolling Interests		(205,751	)		(204,599	)		-			(198,045	)
Total Equity		1,546,165			366,650			2,739,765			3,215,939
Total Liabilities and Equity	$	43,050,931		$	39,878,163		$	46,538,358		$	45,932,483

See accompanying notes to unaudited consolidated financial statements.

SELECTIS HEALTH, INC. f/k/a GLOBAL HEALTHCARE REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

~~(UNAUDITED)~~(Unaudited)


	Six Months Ended						Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						June 30,						June 30,
	2020			2019			2020			2019			2021			2020			2021			2020

Revenue
Rental Revenue	$	1,144,605		$	1,825,575		$	623,593		$	930,287		$	778,289		$	1,144,605		$	387,903		$	623,593
Healthcare Revenue		7,837,461			1,063,928			4,506,872			684,137			10,996,591			7,837,461			5,624,134			4,506,872
Total Revenue		8,982,066			2,889,503			5,130,465			1,614,424			11,774,880			8,982,066			6,012,037			5,130,465
Expenses
Property Taxes, Insurance and Other Operating														8,199,966			4,985,975			4,655,236			2,654,231
General and Administrative		715,770			570,836			372,707			377,357			3,010,823			715,770			912,496			372,707
Property Taxes, Insurance and Other Operating		4,985,975			893,019			2,654,231			543,831
Provision for Bad Debts		263,890			-			57,282			-			16,133			263,890			(8,001	)		57,282
Acquisition Costs		28,654			-			13,763			-			-			28,654			-			13,763
Depreciation		768,103			645,851			380,885			322,926
Depreciation and Amortization														851,266			768,103			450,243			380,885
Total Expenses		6,762,392			2,109,706			3,478,868			1,244,114			12,078,188			6,762,392			6,009,974			3,478,868
Income from Operations		2,219,674			779,797			1,651,597			370,310
Income (Loss) from Operations														(303,308	)		2,219,674			2,063			1,651,597
Other Income (Expense)
Gain on Extinguishment of Debt														-			(80,400	)		-			(80,400	)
Interest Expense														1,193,724			1,116,571			650,181			611,301
Gain on Forgiveness of PPP Loan														(675,598	)		-			-			-
Other (Income) Expense														(401,360	)		-			30,662			-
Gain on Warrant Liability		-			(2,758	)		-			(2,655	)
Gain on Extinguishment of Debt		(80,400	)		-			(80,400	)		-
Gain on Sale of Investments		-			(1,069	)		-			-
Gain on Proceeds from Insurance Claim		-			(270,264	)		-			-
Interest Income		-			(7,003	)		-			(1,536	)
Interest Expense		1,116,571			1,070,860			611,301			544,625
Total Other (Income) Expense		1,036,171			789,766			530,901			540,434			116,766			1,036,171			680,843			530,901
Net Income (Loss)		1,183,503			(9,969	)		1,120,696			(170,124	)		(420,074	)		1,183,503			(678,780	)		1,120,696
Net Loss Attributable to Noncontrolling Interests		1,152			6,010			2,859			1,869
Net Income (Loss) Attributable to Global Healthcare REIT, Inc.		1,184,655			(3,959	)		1,123,555			(168,255	)
Net (Income) Loss Attributable to Noncontrolling Interests														(10,650	)		1,152			-			2,859
Net Income (Loss) Attributable to Selectis Health, Inc.														(430,724	)		1,184,655			(678,780	)		1,123,555
Series D Preferred Dividends		(15,000	)		(15,000	)		(7,500	)		(7,500	)		(15,000	)		(15,000	)		(7,500	)		(7,500	)
Net Income (Loss) Attributable to Common Stockholders	$	1,169,655		$	(18,959	)	$	1,116,055		$	(175,755	)	$	(445,724	)	$	1,169,655		$	(686,280	)	$	1,116,055
Per Share Data:
Net Income (Loss) per Share Attributable to Common Stockholders:
Basic	$	0.04		$	(0.00	)	$	0.04		$	(0.01	)	$	(0.02	)	$	0.04		$	(0.03	)	$	0.04
Diluted	$	0.04		$	(0.00	)	$	0.04		$	(0.01	)	$	(0.02	)	$	0.04		$	(0.03	)	$	0.04
Weighted Average Common Shares Outstanding:
Basic		27,427,928			27,122,607			27,414,816			27,347,134			26,879,180			27,427,928			26,891,841			27,414,816
Diluted		27,810,428			27,122,607			27,797,316			27,347,134			26,879,180			27,810,428			26,891,841			27,797,316

See accompanying notes to unaudited consolidated financial statements.

SELECTIS HEALTH, INC. f/k/a GLOBAL HEALTHCARE REIT, INC.

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

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

Balance, December 31, 2019 200,500 $ 401,000 375,000 $ 375,000 27,441,040 $ 1,372,052 $ 10,385,417 $ (11,962,220 ) $ 571,249 $ (204,599 ) $ 366,650
Relative Fair Value of Warrants Issued with Senior Secured Notes - - - - - - 19,762 - 19,762 - 19,762
Series D Preferred Dividends - - - - - - - (7,500 ) (7,500 ) - (7,500 )
Net Income - - - - - - - 61,100 61,100 1,707 62,807
Balance, March 31, 2020 200,500 $ 401,000 375,000 $ 375,000 27,441,040 $ 1,372,052 $ 10,405,179 $ (11,908,620 ) $ 644,611 $ (202,892 ) $ 441,719
Share Based Compensation – Restricted Stock Awards (Forfeitures) - - - - (26,515 ) (1,326 ) (7,424 ) - (8,750 ) - (8,750 )
Series D Preferred Dividends - - - - - - - (7,500 ) (7,500 ) - (7,500 )
Net Income (Loss) - - - - - - - 1,123,555 1,123,555 (2,859 ) 1,120,696
Balance, June 30, 2020 200,500 $ 401,000 375,000 $ 375,000 27,414,525 $ 1,370,726 $ 10,397,755 $ (10,792,565 ) $ 1,751,916 $ (205,751 ) $ 1,546,165


	Series A Preferred Stock				Series D Preferred Stock				Common Stock				Additional						Selectis Health, 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

Balance, December 31, 2020		200,500		401,000		375,000		375,000		26,866,379		1,343,319		10,331,065			(9,036,400	)		3,413,984			(198,045	)		3,215,939
Relative Fair Value of Warrants Issued with Senior Secured Notes
Share Based Compensation - Restricted Stock Awards (Forfeitures)
Share Based Compensation - Restricted Stock Awards (Forfeitures), shares
Series D Preferred Dividends		-		-		-		-		-		-		-			(7,500	)		(7,500	)		-			(7,500	)
Share Based Compensation - Restricted Stock Awards
Share Based Compensation - Restricted Stock Awards, shares
Cashless Excerise of Warrants
Cashless Excerise of Warrants, shares
Purchase of Non-controlling Interest
Net Income		-		-		-		-		-		-		-			248,056			248,056			10,650			258,706
Balance, March 31, 2021		200,500		401,000		375,000		375,000		26,866,379		1,343,319.00		10,331,065			(8,795,844	)		3,654,540			(187,395	)		3,467,145
Series D Preferred Dividends		-		-		-		-		-		-		-			(7,500	)		(7,500	)		-			(7,500	)
Share Based Compensation – Restricted Stock Awards										30,000		1,500		17,400						18,900						18,900
Cashless Exercise of Warrants										28,570		1,429		(1,429	)											-
Purchase of Non-controlling Interest														(247,395	)					(247,395	)		187,395			(60,000	)
Net Loss		-		-		-		-		-		-					(678,780	)		(678,780	)		-			(678,780	)
Balance, June 30, 2021		200,500		401,000		375,000		375,000		26,924,949		1,346,248		10,099,641			(9,482,124	)		2,739,765			-			2,739,765

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

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
Share Based Compensation – Restricted Stock Awards and Stock Options - - - - 272,727 13,636 36,893 - 50,529 - 50,529
Series D Preferred Dividends - - - - - - - (7,500 ) (7,500 ) - (7,500 )
Net Income (Loss) - - - - - - - 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
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 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

	Series A Preferred Stock				Series D Preferred Stock				Common Stock						Additional						Selectis Health, 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

Balance, December 31, 2019		200,500		401,000		375,000		375,000		27,441,040			1,372,052			10,385,417			(11,962,220	)		571,249			(204,599	)		366,650
Relative Fair Value of Warrants Issued with Senior Secured Notes		-		-		-		-		-			-			19,762			-			19,762			-			19,762
Series D Preferred Dividends		-		-		-		-		-			-			-			(7,500	)		(7,500	)		-			(7,500	)
Net Income		-		-		-		-		-			-			-			61,100			61,100			1,707			62,807
Balance, March 31, 2020		200,500		401,000		375,000		375,000		27,441,040			1,372,052			10,405,179			(11,908,620	)		644,611			(202,892	)		441,719
Share Based Compensation - Restricted Stock Awards (Forfeitures)		-		-		-		-		(26,515	)		(1,326	)		(7,424	)		-			(8,750	)		-			(8,750	)
Series D Preferred Dividends		-		-		-		-		-			-			-			(7,500	)		(7,500	)		-			(7,500	)
Net Income (Loss)		-		-		-		-		-			-			-			1,123,555			1,123,555			(2,859	)		1,120,696
Balance, June 30, 2020		200,500		401,000		375,000		375,000		27,414,525			1,370,726			10,397,755			(10,792,565	)		1,751,916			(205,751	)		1,546,165

See accompanying notes to unaudited consolidated financial statements.

SELECTIS HEALTH, INC. f/k/a GLOBAL HEALTHCARE REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

~~(UNAUDITED)~~(Unaudited)

Six Months Ended June 30,
2020 2019
Cash Flows From Operating Activities:
Net income (loss) $ 1,183,503 $ (9,969 )
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
Depreciation 768,103 645,851
Amortization of Deferred Loan Costs and Debt Discount 90,907 71,231
Provision for Bad Debt 263,890 -
Stock Based Compensation (Forfeitures) (8,750 ) 174,979
Gain on Sale of Investments - (1,069 )
Gain on Extinguishment of Debt (80,400 ) -
Gain on Derivative Liability - (2,758 )
Changes in Operating Assets and Liabilities, Net of Assets and Liabilities Acquired:
Accounts and Rents Receivable (638,701 ) (358,523 )
Prepaid Expenses and Other Assets 115,786 (121,818 )
Deferred Rent Receivables (23,851 ) (42,019 )
Accounts Payable and Accrued Liabilities (262,051 ) 74,934
Lease Security Deposits 1,500 (30,000 )
Cash Provided by Operating Activities 1,409,936 400,839
Cash Flows From Investing Activities:
Issuance of Note Receivable - (143,666 )
Purchase of Investments in Debt Securities - (910 )
Proceeds from Sale of Investment in Debt Securities - 151,041
Net Cash Paid in Higher Call Asset Acquisition (1,045,767 ) -
Capital Expenditures on Property and Equipment Additions (185,590 ) (1,464,562 )
Cash Used in Investing Activities (1,231,357 ) (1,458,097 )
Cash Flows From Financing Activities:
Proceeds from Issuance of Debt, Related Party 100,000 -
Proceeds from Issuance of Debt, Non-Related Party 2,721,890 1,676,354
Payments on Debt, Non-Related Party (675,736 ) (273,550 )
Deferred Loan Costs Paid (33,095 ) (8,885 )
Dividends Paid on Preferred Stock (15,000 ) (15,000 )
Cash Provided by Financing Activities 2,098,059 1,378,919
Net Increase in Cash 2,276,638 321,661
Cash and Cash Equivalents and Restricted Cash at Beginning of the Period 992,513 1,307,207
Cash and Cash Equivalents and Restricted Cash at End of the Period $ 3,269,151 $ 1,628,868
Supplemental Disclosure of Cash Flow Information
Cash Paid for Interest $ 1,025,664 $ 1,094,089
Cash Paid for Income Taxes $ - $ -
Cash and Cash Equivalents $ 2,844,515 $ 1,314,364
Restricted Cash 424,636 314,504
Total Cash and Cash Equivalents and Restricted Cash $ 3,269,151 $ 1,628,868
Supplemental Schedule of Non-Cash Investing and Financing Activities
Dividends declared on Series D Preferred Stock $ 15,000 $ 15,000
Non-cash owner financing for fixed assets purchase 150,000 -
Prepaid deposit exchanged for fixed asset acquisition 117,500 -
Relative Fair Value of Warrants Issued with Senior Secured Notes 19,762 -
Interest on debt capitalized into principal
135

	2021			2020
	Six Months Ended June 30,
	2021			2020
Cash Flows From Operating Activities:
Net Income (Loss)	$	(420,074	)	$	1,183,503
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities:
Gain on forgiveness of PPP Loan		(675,598	)		-
Other Income from Partial Settlement of Debt		(481,954	)		-
Depreciation and Amortization		851,266			768,103
Amortization of Deferred Loan Costs and Debt Discount		69,591			90,907
Provision for Bad Debts		16,133			263,890
Stock Based Compensation (Forfeitures)		18,900			(8,750	)
Gain on Extinguishment of Debt		-			(80,400	)
Changes in Operating Assets and Liabilities, Net of Assets and Liabilities Acquired:
Accounts and Rents Receivable		(1,318,907	)		(638,701	)
Prepaid Expenses and Other Assets		456,354			115,786
Deferred Rent Receivable		-			(23,851	)
Accounts Payable and Accrued Liabilities		840,400			(262,051	)
Lease Security Deposits		1,500			1,500
Cash Provided (Used in) Operating Activities		(642,389	)		1,409,936

Cash Flows From Investing Activities:
Net Cash Paid in Higher Call Asset Acquisition		-			(1,045,767	)
Capital Expenditures for Property and Equipment		(395,608	)		(185,590	)
Cash Used in Investing Activities		(395,608	)		(1,231,357	)

Cash Flows From Financing Activities:
Proceeds from Issuance of Debt, Related Party		-			100,000
Proceeds from Issuance of Debt, Non-Related Party		1,423,417			2,721,890
Payments on Debt, Non-Related Party		(595,240	)		(675,736	)
Deferred Loan Costs Paid		-			(33,095	)
Purchase of Non-Controlling Interest		(60,000	)		-
Dividends Paid on Preferred Stock		(22,500	)		(15,000	)
Cash Provided by Financing Activities		745,677			2,098,059

Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash		(292,320	)		2,276,638
Cash and Cash Equivalents and Restricted Cash at Beginning of the Period		3,978,303			992,513
Cash and Cash Equivalents and Restricted Cash at End of the Period	$	3,685,983		$	3,269,151

Supplemental Disclosure of Cash Flow Information
Cash Paid for Interest		1,193,724			1,025,664
Cash Paid for Income Taxes		-			-
Cash and Cash Equivalents		3,255,478			2,844,515
Restricted Cash		430,505			424,636
Total Cash and Cash Equivalents and Restricted Cash		3,685,983			3,269,151

Supplemental Schedule of Non-Cash Investing and Financing Activities
Dividends Declared on Series D Preferred Stock	$	15,000		$	15,000
Issuance of common stock for cashless exercise of warrants		1,429			-
Financing of Insurance Premiums		507,433			-
Non-cash owner financing for fixed assets purchase		-			150,000
Prepaid deposit exchanged for fixed asset acquisition		-			117,500
Relative Fair Value of Warrants Issued with Senior Secured Notes		-			19,762
Interest on debt capitalized into principal		-			135

See accompanying notes to unaudited consolidated financial statements.

SELECTIS HEALTH, INC. f/k/a GLOBAL HEALTHCARE REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Description of the Business

Selectis Health, Inc. f/k/a, Global Healthcare REIT, Inc. (“~~we”, “our”,~~Selectis” or “we” or the “Company” ~~or “Global”~~) ~~was organized with~~owns and operates, through wholly-owned subsidiaries Assisted Living Facilities, Independent Living Facilities, and Skilled Nursing Facilities across the ~~intent~~South and Southeastern portions of ~~operating as a real estate investment trust (REIT) for~~ the ~~purpose of investing in real estate and other assets related to~~US. In 2019 the ~~healthcare industry. The Company’s focus has partially~~Company shifted from leasing ~~nursing home assets~~long-term care facilities to third-party, independent operators toward owning and operating its real estate assets itself. As a result, the Company no longer intends to elect to qualify as a REIT, and is currently considering changing its name and other charter provisions to better reflect its current businesstowards an owner operator model.

Prior to the Company changing its name to Selectis Health, Inc., the Company was known as Global Healthcare REIT, Inc. onfrom September 30, 2013, to May 2021. Prior to this, 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”). WPF was ~~deemed to be~~merged into the ~~accounting acquirer.~~Company in 2019.

~~The Company acquires, develops, leases, manages~~We acquire, develop, lease, manage, and ~~disposes~~dispose of healthcare real estate, ~~and provides~~provide financing to healthcare ~~providers. As~~providers, and provide healthcare operations through our wholly-owned subsidiaries. Our portfolio is comprised of investments in the following three healthcare segments: (i) senior housing (including independent and assisted living), (ii) post-acute/skilled nursing, and (iii) bonds securing senior housing communities. We will make investments within our healthcare segments using the following six investment products: (i) direct ownership of properties, (ii) debt investments, (iii) developments and redevelopments, (iv) investment management, (v) the Housing and Economic Recovery Act of 2008 (“RIDEA”), which represents investments in senior housing operations utilizing the structure permitted by RIDEA and (xi) owning healthcare operations.

Management’s Liquidity Plans

On August 27, 2014, FASB issued ASU 2014-05, Disclosure of Uncertainties about an Entity’s ability to Continue as a Going Concern, which requires management to assess a company’s ability to continue as a going concern within one year from financial statement issuance and to provide related footnote disclosures in certain circumstances.

For the six months ended June 30, ~~2020,~~2021, the Company ~~owned~~had negative operating cash flows of $0.6 million and a net working capital deficit of $4.7million. However, management believes that the Company’s ability to meet its obligations for the next twelve ~~healthcare~~months from the date these financial statements were issued has been alleviated due to, but not limited to:

	1.	Projected cash flows from operations resulting from continued improvement of the Company’s operating performance. During the six months ended June 30, 2021, the Company reported a net loss of $445,724. In March of 2021, the Company opened Park Place and in 2021 is planning to acquire, or open one to three additional facilities. Based on management’s projections we expect to generate positive cash flows for the next twelve months.

	2.	Future refinancing of existing debt. As of June 30, 2021, the Company has a net working capital deficit of approximately $4.7 million. At the time of this filing, management has refinanced all five of the Company’s mortgages that mature in 2021. We are continuing to work with HUD to refinance additional properties to longer-term paper which will provide more certainty for future loan payments.

The focus on opportunities within our current portfolio and future properties ~~which are either leased or managed~~to acquire and operate, the settlement, refinance, and continued service of debt obligations, the potential funds generated from stock sales and other initiatives contributing to additional working capital should alleviate any substantial doubt about the Company’s ability to continue as a going concern as defined by ~~third-party operators under triple-net operating terms or operated directly by~~ASU 2014-05. However, we cannot predict, with certainty, the ~~Company. The Company operates~~outcome of our actions to generate liquidity and the ~~facilities internally when advantageous and expedient.~~failure to do so could negatively impact our future operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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~~ six months ended June 30, ~~2020~~2021, 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, ~~2019~~2020, filed with the Securities and Exchange Commission.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board and other entities issued new or modifications to, or interpretations of, existing accounting guidance during ~~2020.~~2021. 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.

~~2. GOING CONCERN~~

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

For the six months ended June 30, 2020, the Company had net income of $1,183,503 and reported net cash provided by operations of $1,409,936. However, the Company has incurred net losses in each of the previous five fiscal years and, as of June 30, 2020, had an accumulated deficit of $10,792,565. 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.

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. ASSET ACQUISITION – HIGHER CALL NURSING CENTER~~

Effective March 2, 2020, the Company, through its newly formed wholly-owned subsidiary, Global Quapaw, LLC (“Quapaw”), completed the acquisition of an 86-licensed bed, long-term care facility known as Higher Call Nursing Center (“Higher Call”) located in Quapaw, Oklahoma for the purchase price of $1.3 million. Quapaw has entered into an operating lease agreement with Global Higher Call Nursing, LLC, a wholly owned subsidiary of the Company, as lessee, to be the operator of the facility. The acquisition represents the consummation of an Asset Purchase Agreement dated October 21, 2019 between Higher Call Nursing Center, Inc., as Seller, and Quapaw, as Buyer. The purchase was accounted for as an asset acquisition in accordance with ASC 805. Accordingly, on the acquisition date, the Company recorded property and equipment in the amount of $1.3 million in connection with the asset acquisition which consists of the purchase consideration of $1.3 million and acquisition costs of $13,267. In connection with the acquisition, the Company paid net cash of $1,045,767, relinquished a prepaid cash deposit of $117,500, and agreed to non-cash owner financing debt of $150,000.

~~4. PROPERTY AND EQUIPMENT~~

~~The gross carrying amount and accumulated depreciation of the Company’s property and equipment as of June 30, 2020 and December 31, 2019 are as follows:~~

June 30, 2020 December 31, 2019

Land $ 1,676,692 $ 1,597,500
Land Improvements 242,000 242,000
Buildings and Improvements 39,710,962 38,362,127
Furniture, Fixtures and Equipment 1,778,755 1,707,925
Construction in Progress 3,185,068 3,185,068
46,593,477 45,094,620

Less Accumulated Depreciation (7,892,878 ) (7,140,033 )
Less Impairment (1,560,000 ) (1,560,000 )

$ 37,140,599 $ 36,394,587

For the Six Months Ended June 30,
2020 2019

Depreciation Expense $ 752,845 $ 645,851
Cash Paid for Capital Expenditures $ 185,590 $ 1,464,562

~~5. INVESTMENTS IN DEBT SECURITIES~~

On June 30, 2020 and December 31, 2019, the Company held investments in debt securities that were classified as held-to-maturity and carried at amortized costs. Held-to-maturity securities consisted of the following:

June 30, 2020 December 31, 2019

States and Municipalities $ 24,387 $ 24,387

Contractual maturity of held-to-maturity securities at June 30, 2020 is $24,387, all due in one year or less, and total value of securities at their respective maturity dates is $24,387. 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.

~~6. INTANGIBLE ASSETS~~

As part of the acquisition of the operations at Southern Hills Rehab Center, LLC (“SHR”), the Company recognized certain intangible assets related to the potential net income from the existing patients in the facility. The Company estimated the value of these contracts to be $42,185 based on historical net revenues and census information provided by the seller. The asset was depreciated on a straight-line basis over 47 days, starting from December 1, 2019. Accordingly, the Company recognized depreciation expense of $15,258 during the six months ended June 30, 2020. The intangible asset was fully depreciated as of June 30, 2020.

~~7. GOODWILL~~

The Company recorded Goodwill because of the acquisition of the operations at SHR in December 2019. Goodwill is tested for impairment at a reporting unit level on an annual basis or when an event occurs, or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. During the six months ended June 30, 2020, the Company recorded no impairment of Goodwill.

~~8. DEBT AND DEBT - RELATED PARTIES~~

~~The following is a summary of the Company’s debt outstanding as of June 30, 2020 and December 31, 2019:~~

June 30, 2020 December 31, 2019

Senior Secured Promissory Notes $ 1,545,000 $ 1,485,000
Senior Unsecured Promissory Notes 300,000 300,000
Senior Secured Promissory Notes - Related Parties 975,000 875,000
Fixed-Rate Mortgage Loans 29,399,050 22,427,949
Variable-Rate Mortgage Loans 5,663,646 4,618,006
Line of Credit, Senior Secured
-
7,230,582
Other Debt, Subordinated Secured 1,045,561 1,386,000
Other Debt, Subordinated Secured - Related Parties 150,000 150,000
Paycheck Protection Program Loans 1,610,169 -
40,688,426 38,472,537
Unamortized Discount and Debt Issuance Costs (455,303 ) (493,353 )

$ 40,233,123 $ 37,979,184
As presented in the Consolidated Balance Sheets:

Debt, Net $ 39,113,315 $ 36,954,184

Debt - Related Parties, Net 1,119,808 1,025,000
$ 40,233,123 $ 37,979,184

~~Corporate Senior and Senior Secured Promissory Notes~~

In 2017, $600,000 in notes were sold and issued, of which $425,000 were to related parties. On 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. 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 $0.75 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, 225,000 warrants of which occurred in 2018. As of December 31, 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. Effective January 28, 2020, the Company exchanged $100,000 in outstanding senior secured 10% Notes and Warrants that had matured on December 31, 2018 for 11% Senior Secured Promissory Notes and issued 100,000 cashless exercise warrants for purchase of company stock at $0.50, expiring October 31, 2021. As of June 30, 2020, the Company had not renewed or repaid $25,000 in 10% notes with a maturity date of December 31, 2018, and those notes were technically in default.

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 October 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 $0.75 per share. The warrants have a cashless exercise provision. All notes remain outstanding as of June 30, 2020. Effective October 31, 2020, the Company exchanged $150,000 in outstanding Senior Unsecured 10% Notes and Warrants that had matured on October 31, 2020 for 11% Senior Secured Promissory Notes and issued 150,000 cashless exercise warrants for purchase of the Company’s common stock at $0.50 per share, expiring October 31, 2021. The Company also repaid the remaining $150,000 of 10% Senior Unsecured Notes.

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.

On January 17, 2020, the Board of Directors agreed to increase the total offering amount and extend the period of its 2018 Offering of 11% Senior Secured Notes. The total amount of the Offering has been increased to $2,500,000 and the offering period will continue until terminated by the Board of Directors. Effective February 5, 2020 and March 3, 2020, the Company completed the sale of $60,000 and $100,000, respectively, of Units in the Offering. The sale of $100,000 Units on March 3, 2020 was to a related party. Effective October 31, 2020 the Company completed the exchange of $150,000 of Units in the Offering for matured Senior Unsecure notes. No fees or commissions were paid on the sale of the Units. The proceeds will be used for general working capital.

~~The value of the warrants issued to the note holders during the six months ended June 30, 2020 was calculated using the Black-Scholes pricing model using the following significant assumptions:~~

Volatility 115.2% - 117.3 %
Risk-free Interest Rate 0.71% - 1.45 %
Exercise Price $ 0.50
Fair Value of Common Stock $ 0.20 - $0.24
Expected Life 1.7 – 1.8 years

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 warrants in connection with its note offerings. During the six months ended June 30, 2020, the Company issued 160,000 warrants, 100,000 of which to related parties, with a value on the issue date estimated to be $11,616 bifurcated from the value of the note and exchanged 100,000 existing warrants for new warrants with a value on the issue date estimated to be $8,146 in connection with its note offerings. For all notes issued with warrants, the relative fair value of the warrants issued were recorded as debt discounts. As of June 30, 2020, the unamortized balance of discount on notes was $90,302. Amortization expense was $40,696 and $36,089 for the six months ended June 30, 2020 and 2019, 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 Maturity
Property Amount June 30, 2020 December 31, 2019 Interest Rate Date

Southern Hills Retirement Center ⁽¹⁾⁽²⁾ $ 7,227,074 $ 7,227,074 $ 7,230,582 4.75% Fixed June 18, 2023
Eastman Nursing Home ⁽¹⁾⁽³⁾ 3,570,000 3,394,866 3,451,593 5.50% Fixed October 26, 2021
Goodwill Nursing Home ⁽¹⁾⁽⁴⁾ 4,268,878 4,242,171 4,286,237 4.75% Fixed April 12, 2025
Warrenton Nursing Home ⁽⁵⁾ 3,768,600 3,704,959 3,739,942 3.73% Fixed July 1, 2049
Edward Redeemer Health & Rehab⁽⁶⁾ 2,065,804 2,065,773 2,074,958 4.75% Fixed June 29, 2021
Glen Eagle Health and Rehab⁽⁷⁾ 3,119,214 3,036,436 3,083,006 5.50% Fixed May 25, 2021
Providence of Sparta Nursing Home ⁽⁸⁾ 3,039,300 2,893,371 2,923,013 3.50% Fixed November 1, 2047
Meadowview Healthcare Center ⁽⁹⁾ 3,000,000 2,834,400 2,869,200 6.00% Fixed October 30, 2022
GL Nursing Home⁽¹⁰⁾ 5,000,000 4,618,006 4,618,006 Prime Plus 1.50%/ 5.75% Floor August 3, 2037
Higher Call Nursing Center ⁽¹¹⁾ 1,051,721 1,045,640 - Prime Plus 2.00% March 3, 2040

$ 35,062,696 $ 34,276,537

	~~(1)~~	Mortgage loans are non-recourse to the Company except for (i) the senior loan held by ServisFirst Bank on Meadowview (Ohio), (ii) the loans held by Colony Bank on Eastman and Glen Eagle, and (iii) the Southern Hills line of credit and Goodwill loan owed to Southern Bank (formerly First Commercial Bank).
	~~(2)~~	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 June 30, 2020, a total of $7,227,074 was drawn under the Line of Credit, and as of December 31, 2019, a total of $7,230,582 was drawn under the Line of Credit. Modifications to the loan in June 2020 effectively convert it from a line of credit to a term loan.

		The interest rate on the Line of Credit increased from 5.25% to 5.75% effective April 28, 2019 and subsequently was reduced to 4.75% as part of a new three-year loan renewal. Monthly payments of interest began on November 30, 2017 and continue until the Promissory Note is paid in full on the Maturity Date. The Maturity Date was been extended multiple times in three month increments initially from April 30, 2018 to May 5, 2020, and subsequently to June 18, 2023 with a principal amount of $7,227,074. During the six months ended June 30, 2020, the Company capitalized $33,095 in loan costs paid. 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 its 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.

	~~(3)~~	The loan at Eastman was renewed on November 26, 2018 with the maturity date extended to October 26, 2021. For the six months ended June 30, 2020, amortization expense related to loan costs totaled $643.
	~~(4)~~	The maturity date for the loan at Goodwill Nursing was extended to April 12, 2025 in June 2020. The face value of the note was adjusted to the principal outstanding at the time of $4,268,878, and the interest rate was decreased to 4.75%, from 5.50%. The modification of the loan was substantial and resulted in an extinguishment of the original loan.
	~~(5)~~	The original maturity date for the loan was extended on January 19, 2019 to January 20, 2020 and the Company capitalized $8,885 in loan costs paid. The loan was refinanced in June 2019. The Company has incurred $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 six months ended June 30, 2020, amortization expense related to loan costs totaled $2,611.
	~~(6)~~	The maturity date for the loan at Edwards Redeemer was extended to June 29, 2021 in June 2020. The face value of the note was adjusted to the principal outstanding at the time of the modification, $2,065,804, and the interest rate was decreased from 5.50% to 4.75%.
	~~(7)~~	Amortization expense related to loan costs of this loan totaled $437 for the six months ended June 30, 2020. 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 June 30, 2020, 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. The line of credit was expanded in February 2019 to $400,000 with a maturity date of September 30, 2019. Prior to September 30, 2019, the Company had drawn $400,000 on the line which was subsequently merged into the amortizing note due May 25, 2021.
	~~(8)~~	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 $2,492 for the six months ended June 30, 2020. The interest rate was reduced from 3.88% to 3.50% as part of a refinance completed in April 2020.
	~~(9)~~	Amortization expense related to loan costs of this loan totaled $4,652 for the six months ended June 30, 2020. 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 June 30, 2020, 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.
	~~(10)~~	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 June 30, 2020, the Company was not in compliance with certain of these financial and non-financial covenants which is 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 making payment of interest on the loan. The Company is not obligated to repay the interest.
	~~(11)~~	In connection with the acquisition of Higher Call, the Company entered into a senior loan agreement with Security Bank in the principal amount of $1,051,721. This loan accrues interest at the rate of 6.5% per annum and is payable in monthly installments of $7,907. The loan is secured by a senior Mortgage, Security Agreement and Assignment of Rents covering the Higher Call facility and a UCC Security Interest covering the personal property and other non-real estate assets. The Company is subject to financial covenants and customary affirmative and negative covenants. As of June 30, 2020, the Company was in compliance with these covenants.

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; however, our relationship with these lenders is considered good.

~~Other Debt~~

~~Other debt due at June 30, 2020 and December 31, 2019 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 June 30, 2020 December 31, 2019 Rate Date
Goodwill Nursing Home ⁽¹⁾ $ 2,180,000 $ 1,053,600 $ 1,536,000 13% ⁽¹⁾ Fixed December 31, 2019
Higher Call Nursing Center ⁽²⁾ 150,000 141,961 - 8% Fixed April 1, 2024

$ 1,195,561 $ 1,536,000

	~~(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. The Corporate entity, Global Healthcare REIT Inc. owns $800,000 of its own subsidiary’s notes, Goodwill Hunting, LLC, but this amount is excluded from the above table and eliminated in consolidation on the balance sheet. On June 30, 2020, the Company purchased from four former investors in GWH Investors, LLC their notes in favor of Goodwill Hunting, LLC in the aggregate amount of $482,400 for $402,000 cash and recognized a gain of $80,400, and subsequently in October purchased from two more investors an aggregate amount of $108,000 for $90,000 of cash and will recognize a gain of $18,000. The Company has not repaid or renewed the note as of June 30, 2020 and it is technically in default.
	~~(2)~~	In connection with the acquisition of Higher Call, the Company executed a promissory note in favor of the Seller, Higher Call Nursing Center, Inc., in the principal amount of $150,000 which accrues interest at the rate of 8% per annum and is payable in equal monthly installments, principal and interest. This note is secured by a corporate guaranty of Global.

~~Our corporate debt at June 30, 2020 and December 31, 2019 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
Series Amount June 30, 2020 December 31, 2019 Rate Maturity Date

10% Senior Secured Promissory Note $ 25,000 $ 25,000 $ 25,000 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 1,520,000 1,520,000 1,460,000 11.0% Fixed October 31, 2021
11% Senior Secured Promissory Notes – Related Party 975,000 975,000 875,000 11.0% Fixed October 31, 2021

$ 2,820,000 $ 2,660,000

Effective January 28, 2020, the Company exchanged $100,000 in outstanding senior secured 10% Notes that had matured December 31, 2018 for an 11% Senior Secured Note with a maturity date of October 31, 2021 and issued 100,000 cashless exercise warrants for purchase of company stock at $0.50, expiring October 31, 2021.

~~Paycheck Protection Program Loans and Other Debt~~

On April 20, 2020, the Company through its subsidiaries received a loan of $574,975 pursuant to the Paycheck Protection Program (the “PPP Loan”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 20, 2022 (the “Maturity Date”), accrues interest at 1% per annum and may be prepaid in whole or in part without penalty. No interest payments are due within the initial six months of the PPP Loan. The interest accrued during the initial six-month period is due and payable, together with the principal, on the Maturity Date. The Company used all proceeds from the PPP Loan to retain employees, maintain payroll and make lease and utility payments to support business continuity throughout the COVID-19 pandemic, which amounts are eligible for forgiveness, subject to the provisions of the CARES Act.

On May 4, 2020, the Company through its subsidiaries received loans of $324,442 and $710,752 pursuant to the Paycheck Protection Program (the “PPP Loans”) of the CARES Act. Both PPP Loans mature on May 4, 2022 (the “Maturity Date”), accrue interest at 1% per annum and may be prepaid in whole or in part without penalty. No interest payments are due within the initial six months of the PPP Loans. The interest accrued during the initial six-month period is due and payable, together with the principal, on the Maturity Date. The Company used all proceeds from the PPP Loans to retain employees, maintain payroll and make lease and utility payments to support business continuity throughout the COVID-19 pandemic, which amounts are eligible for forgiveness, subject to the provisions of the CARES Act.

For the six months ended June 30, 2020 and 2019, the Company received proceeds from the issuance of debt of $2,821,890 and $1,676,354, respectively. Proceeds from the issuance of debt in the six months ended June 30, 2020 includes $100,000 from related parties. Cash payments on debt totaled $675,736 and $273,550 for the six months ended June 30, 2020 and 2019, respectively. Amortization expense for deferred loan costs and debt discounts totaled $90,907 and $71,231 for the six months ended June 30, 2020 and 2019, 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
2020 $ 12,135,289 ⁽¹⁾
2021 8,182,778
2022 1,960,552
2023 7,595,127
2024 352,829
2025 and after 10,461,851

$ 40,688,426

~~(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 GL Nursing Home, Meadowview and Abbeville have such covenants which were in technical non-compliance at June 30, 2020, but the Company believes that its relationships with these lenders is good.

~~9. 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 June 30, 2020 and December 31, 2019, 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 year and twelve 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 June 30, 2020, and December 31, 2019, the Company had 375,000 shares of Series D preferred stock outstanding.~~

During the six months ended June 30, 2020 and 2019, the Company paid $15,000 and $15,000, respectively, for Series D preferred stock dividends. Dividends of $15,000 and $15,000 were declared during the six months ended June 30, 2020 and 2019, respectively, with dividends of $7,500 accrued and payable as of June 30, 2020 and 2019. All quarterly dividends previously declared have been paid.

~~Restricted Stock Awards~~

~~The following table summarizes the restricted stock unit activity during the six months ended June 30, 2020 and 2019.~~

June 30, 2020 June 30, 2019

Outstanding Non-Vested Restricted Stock Units, Beginning 75,000 -
Granted - 545,454
Vested (75,000 ) (409,091 )

Outstanding Non-Vested Restricted Stock Units, Ending - 136,363

In connection with these director and executive restricted stock grants, the Company recognized stock-based compensation of $135,000 for the six months ended June 30, 2019. No stock-based compensation was recognized for restricted stock grants for the six months ended June 30, 2020, but a reversal of stock-based compensation of $8,750 due to forfeitures of restricted stock awards granted in the prior year was recognized.

~~Common Stock Warrants~~

As of June 30, 2020 and December 31, 2019, the Company had 2,858,130 and 2,598,130, respectively, of outstanding warrants to purchase common stock at a weighted average exercise price of $0.53 and $0.54, respectively, and weighted average remaining term of 1.33 years and 2.10 years, respectively. During the six months ended June 30, 2020, an aggregate of 260,000 warrants with a weighted average exercise price of $0.50 were issued in connection with a private offering of the Company’s 11% Senior Secured Notes. During the six-month period ended June 30, 2019, an aggregate of 427,668 warrants with a weighted average exercise price of $0.75 expired. The aggregate intrinsic value of the common stock warrants outstanding at June 30, 2020 was $0.

~~Common Stock Options~~

As of June 30, 2020, and December 31, 2019, 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 and a weighted average remaining term of 2.75 and 3.00 years, respectively. During the six-month period ended June 30, 2020 and 2019, no options expired. The aggregate intrinsic value of the common stock options outstanding at June 30, 2020 was $0.

Earnings per Share

Basic earnings per share are based on the weighted-average number of shares of common stock outstanding. FASB ASC Topic 260, “Earnings per Share”, requires the Company to include additional shares in the computation of earnings per share, assuming dilution.

Diluted earnings per share are based on the assumption that all dilutive options and warrants were converted or exercised by applying the treasury stock method and that all convertible preferred stock were converted into common shares by applying the if-converted method. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period or at the time of issuance, if later, and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, the preferred dividends applicable to convertible preferred stock are added back to the numerator. The convertible preferred stock is assumed to have been converted at the beginning of the period or at time of issuance, if later, and the resulting common shares are included in the denominator.

We calculate basic earnings per share by dividing net income attributable to common stockholders (the “numerator”) by the weighted average number of common shares outstanding (the “denominator”) during the reporting period. Diluted earnings per share is calculated similarly but reflects the potential impact of outstanding options, warrants and other commitments to issue common stock, including shares issuable upon the conversion of convertible preferred stock outstanding, except where the impact would be anti-dilutive.

The following table sets forth the computation of basic and diluted earnings per share:

Six Months Ended Three Months Ended
June 30, June 30,
2020 2019 2020 2019
Numerator for basic earnings per share:
Net Income (Loss) Attributable to Global Healthcare REIT, Inc. $ 1,184,655 $ (3,959 ) $ 1,123,555 $ (168,255 )
Series D Preferred Dividends (15,000 ) (15,000 ) (7,500 ) (7,500 )
Net Income (Loss) Attributable to Common Stockholders - Basic $ 1,169,655 $ (18,959 ) $ 1,116,055 $ (175,755 )

Numerator for diluted earnings per share:
Net Income (Loss) Attributable to Common Stockholders $ 1,169,655 $ (18,959 ) $ 1,116,055 $ (175,755 )
Series D Preferred Dividends 15,000 - 7,500 -
Net Income (Loss) Attributable to Common Stockholders - Diluted $ 1,184,655 $ (18,959 ) $ 1,123,555 $ (175,755 )

Denominator for basic earnings per share:
Weighted Average Common Shares Outstanding 27,427,928 27,122,607 27,414,816 27,347,134

Denominator for diluted earnings per share:
Weighted Average Common Shares Outstanding – Basic 27,427,928 27,122,607 27,414,816 27,347,134
Effect of dilutive securities:
Conversion of Series D Convertible Preferred Stock 382,500 - 382,500 -
Weighted Average Common Shares Outstanding - Diluted 27,810,428 27,122,607 27,797,316 27,347,134

Net Income (Loss) per Share Attributable to Common Stockholders:
Basic $ 0.04 $ (0.00 ) $ 0.04 $ (0.01 )
Diluted $ 0.04 $ (0.00 ) $ 0.04 $ (0.01 )

Options to purchase 600,000 shares of common stock were outstanding during each of the three and six months ended June 30, 2020 but were not included in the computation of diluted earnings per share because they are anti-dilutive due to the options’ exercise price being greater than the average market price of the common shares. Warrants to purchase 2,858,130 shares of common stock were outstanding during each of the three and six months ended June 30, 2020 but were not included in the computation of diluted earnings per share because they are anti-dilutive due to the warrants’ exercise price being greater than the average market price of the common shares.SCHEDULE OF BASIC AND DILUTED EARNING PER SHARE


	Six Months Ended						Three Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Numerator for basic earnings per share:
Net Income (Loss) Attributable to Global Healthcare REIT, Inc.	$	(430,724	)	$	1,184,655		$	(678,780	)	$	1,123,555
Series D Preferred Dividends		(15,000	)		(15,000	)		(7,500	)		(7,500	)
Net Income (Loss) Attributable to Common Stockholders - Basic	$	(445,724	)	$	1,169,655		$	(686,280	)	$	1,116,055

Denominator for basic earnings per share:
Weighted Average Common Shares Outstanding		26,879,180			27,427,928			26,891,841			27,414,816

Denominator for diluted earnings per share:
Weighted Average Common Shares Outstanding - Basic		26,879,180			27,427,928			26,891,841			27,414,816
Conversion of Series D Convertible Preferred Stock		-			382,500			-			382,500
Weighted Average Common Shares Outstanding - Diluted		26,879,180			27,810,428			26,891,841			27,797,316

Net Income (Loss) per Share Attributable to Common Stockholders:
Basic	$	(0.02	)	$	0.04		$	(0.03	)	$	0.04
Diluted	$	(0.02	)	$	0.04		$	(0.03	)	$	0.04

~~10. RELATED PARTIES~~

Clifford Neuman provides office space for the Company’s Controller at no charge. As of June 30, 2020, and December 31, 2019, the Company owed Mr. Neuman for legal services rendered $0 and $32,156, respectively.

~~Creative Cyberweb developed and maintains the Company’s website and is affiliated with former 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 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 $45,000 for the six months ended June 30, 2019. No stock-based compensation was recognized in connection with director restricted stock grants for the six months ended June 30, 2020, but a reversal of stock-based compensation of $8,750 due to forfeitures of the restricted stock awards granted in prior year was recognized.

~~In the first quarter of 2020, the Board revised the Director Compensation Plan to provide that non-employee directors are entitled to a directors’ fee equal to $7,500 per quarter, payable in cash.~~

159

Fair Value Measurements

~~11. FACILITY LEASES~~

~~The following table summarizes our leasing arrangements related to the Company’s healthcare facilities at June 30, 2020:~~

Facility Monthly Lease Income ⁽¹⁾ Lease Expiration Renewal Option if any
Eastman ⁽²⁾ $ - - None
Warrenton $ 55,724 June 30, 2026 Term may be extended for one
additional ten-year term.
Goodwill ⁽³⁾ $ 48,125 February 1, 2027 Term may be extended for one
additional five-year term.
Edwards Redeemer ⁽⁴⁾ $ None
Providence $ 42,519 June 30, 2026 Term may be extended for one
additional ten-year term.
Meadowview ⁽⁵⁾ $ - None
GL Nursing ⁽⁶⁾ $ - - None
Glen Eagle ⁽⁷⁾ $ - - None
Southern Hills SNF ⁽⁸⁾ $ - - Term may be extended for two
additional five-year term.
Southern Hills ALF ⁽⁹⁾ $ - - None
Southern Hills ILF ⁽¹⁰⁾ $ - - None
Higher Call $ - - 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. A Receivership was appointed to assume the operations of the facility. The receivership was discharged on July 1, 2020 and the Company is currently operating the building independently.

(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 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.

(4) Cadence, our former lease operator, 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~~utilizes the methods of fair value measurement as described in ASC 820 to ~~remain closed for~~value its financial assets and liabilities. As defined in ASC 820, fair value is based on the ~~purpose of undertaking extensive renovations~~price that would be received to ~~the facility. We are planning~~sell an asset or paid to ~~reopen the facility~~transfer a liability in ~~the first quarter of 2021 to be operated by our newly formed wholly-owned subsidiary Tiaps Rehab Center, LLC.~~

(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 2018an orderly transaction between market participants at the ~~Meadowview facility. Effective December 1, 2018, the Company completed the operations transfer~~measurement date. In order to an affiliate of Infinity Health Interests, LLC (“Infinity”). The lease was structured with a lower base rent component than the prior operator but included occupancy-based escalators that were intended to better align facility operations with future rental payments. The Company did not receive any cash rent for the facilityincrease consistency and has not recorded any rental revenues or receivables for this facility since the inception of the lease. On August 7, 2020, the facility was served with a Notice of Immediate Imposition of Remedies from the Centers for Medicare and Medicaid Services (“CMS”), as well as a Notice of Imposition of Remedies by the Ohio Department of Health (“ODH”) ordering the facility to relocate all residents no later than August 9, 2020. The actions of the CMS and ODH were the result of ongoing operating deficiencies which the operator failed to cure. All residents of the Meadowview facility were relocated by the August 9, 2020 deadline, and as a result the facility has been closed. The Company has applied with the ODH for a new nursing home license which is pending. In September 2020, the ODH served notice that it intended to commence proceedings to revoke the nursing license on the facility. The Company has not determined what future courses of action may be required or appropriate.

(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 facilitycomparability in ~~March 2018 under an OTA. We do not expect the facility to generate any future revenue for the Company.~~

(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.

(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. The approval of the transfer of the Certificates of Need and appropriate licenses to operate the facility was granted on December 1, 2019. The Company is currently operating the building independently.

~~(9) The Company plans to operate the Southern Hills ALF independently once COVID-19 is brought under control.~~

(10) The Company has been operating the Southern Hills Independent Living Facility (ILF) directly since September 2019. The facility does not provide healthcare services. It consists of private one- and two-bedroom units leased separately to individual tenants. The rollout of the ILF has been slowed due to COVID-19.

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 SNF, ALF and ILF, Meadowview, Higher Call, and Edwards properties.

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 ILF, and Higher Call due to properties being independently operated, and GL Nursing):

Years
2020 $ 873,048
2021 1,764,942
2022 1,796,400
2023 1,828,480
2024 1,860,867
2025 and Thereafter 3,223,628

$ 11,347,365

~~12. FAIR VALUE MEASUREMENTS~~

~~Financial assets and liabilities recorded at~~ fair value ~~in our consolidated balance sheets are categorized based upon~~measurements, ASC 820 establishes a fair value hierarchy ~~established by GAAP, which~~that prioritizes ~~the~~observable and unobservable inputs used to measure fair value into ~~the following levels:~~three broad levels, which are described below:

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

Level 2—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—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.

The Company has no financial assets or financial liabilities that are required to be measured at fair value on a recurring basis as of June 30, 2021.

Our consolidated balance sheets include the following financial instruments: cash and cash equivalents, accounts ~~receivable, 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~~based 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~~rates from a ~~third party~~third-party appraisal or other market sources.

3. PROPERTY AND EQUIPMENT, NET

The ~~table presented below~~gross carrying amount and accumulated depreciation of the Company’s property and equipment as of June 30, 2021, and December 31, 2020, are as follows:

SCHEDULE OF PROPERTY PLANT AND EQUIPMENT

	June 30, 2021			December 31, 2020

Land	$	1,778,250		$	1,778,250
Land Improvements		287,054			242,000
Buildings and Improvements		40,897,582			40,612,330
Furniture, Fixtures and Equipment		2,188,720			2,123,418
Construction in Progress		3,728,431			3,728,431
Property and Equipment, Gross		48,880,037			48,484,429

Less Accumulated Depreciation		(9,537,328	)		(8,686,062	)
Less Impairment		(1,560,000	)		(1,560,000	)

Property and Equipment, Net	$	37,782,709		$	38,238,367


	For the Six Months Ended June 30,
	2021		2020

Depreciation Expense (excluding Intangible Assets)	$	851,266	$	752,845

Cash Paid for Capital Expenditures	$	395,608	$	185,590

4. INVESTMENTS IN DEBT SECURITIES

At June 30, 2021 and December 31, 2020, the Company held investments in debt securities that were classified as held-to-maturity and carried at amortized costs. Held-to-maturity securities consisted of the following:

SCHEDULE OF INVESTMENTS IN MARKETABLE SECURITIES

	June 30, 2021		December 31, 2020

States and Municipalities	$	24,387	$	24,387

Contractual maturity of held-to-maturity securities at June 30, 2021, is $24,387, all due in one year or less, and total value of securities at their respective maturity dates is $24,387. 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.

5. DEBT AND DEBT - RELATED PARTIES

The following is a summary of ~~changes in~~ the ~~fair~~Company’s debt outstanding as of June 30, 2021, and December 31, 2020:

SCHEDULE OF DEBT INSTRUMENTS

	June 30, 2021			December 31, 2020

Senior Secured Promissory Notes	$	1,670,000		$	1,695,000
Senior Secured Promissory Notes - Related Parties		975,000			975,000
Fixed-Rate Mortgage Loans		30,775,123			30,370,220
Variable-Rate Mortgage Loans		5,154,902			5,650,579
Other Debt, Current Note Payables		311,073			-
Other Debt, Subordinated Secured		741,000			741,000
Other Debt, Subordinated Secured - Related Parties		150,000			150,000
Other Debt, Subordinated Secured - Seller Financing		108,153			125,394
Debt and Debt - Related Parties, gross		39,885,251			39,707,193
Unamortized Discount and Debt Issuance Costs		(386,236	)		(455,827	)

Debt and Debt - Related Parties, net	$	39,499,015		$	39,251,366
As presented in the Consolidated Balance Sheets:

Current Maturities of Long Term Debt, Net	$	7,197,174		$	19,299,156
Debt, Net		31,180,075			18,830,444
Debt - Related Parties, Net		1,121,766			1,121,766

The weighted average interest rate and term of our fixed rate debt are 4.67% and 7.30 years, respectively, as of June 30, 2021. The weighted average interest rate and term of our variable rate debt are 5.90% and 16.62 years, respectively, as of June 30, 2021.

Corporate Senior and Senior Secured Promissory Notes

As of June 30, 2021, and December 31, 2020, the senior secured notes are subject to annual interest ranging from 10% to 11% and mature on October 31, 2021.

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, formerly but no longer a related party, or corporate guarantees. Mortgage loans for the periods presented consisted of the following:

SCHEDULE OF MORTGAGE LOAN DEBT

					Total Principal Outstanding as of
State	Number of Properties		Total Face Amount		June 30, 2021		December 31, 2020
Arkansas⁽¹⁾		1	$	5,000,000	$	4,136,052	$	4,618,006
Georgia⁽²⁾		5	$	17,765,992	$	16,914,048	$	17,029,094
Ohio		1	$	3,000,000	$	2,748,393	$	2,798,000
Oklahoma⁽³⁾		6	$	12,378,599	$	12,131,532	$	11,575,699
		13	$	38,144,591	$	35,930,025	$	36,020,799

(1)	The mortgage loan collateralized by this property 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.Guarantors under the mortgage loan include Christopher Brogdon. Mr. Brogdon has assumed operations of the facility and is making payments of principal and interest on the loan on our behalf in lieu of paying rent on the facility to us. During the six months ended June 30, 2021, the Company recognized other income of $481,954 for repayments on the loan.
(2)	The Company has refinanced two of its mortgages that would have matured in June and October of 2021 amounting to $2,961,167 and $3,289,595, to extend their maturity dates to May 2024 for both.
(3)	The Company refinanced all three mortgages in July 2021, that would have matured in June and July of 2021 amounting to $2,065,969 and $750,000, $500,000, to extend their maturity dates to September 2021 for all three.

Subordinated, Corporate and Other Debt

Other debt due at June 30, 2021 and December 31, 2020 includes unsecured notes payable issued to entities controlled by the Company used to facilitate the acquisition of the nursing home properties.

SCHEDULE OF OTHER DEBT

			Principal Outstanding at
Property	Face Amount		June 30, 2021		December 31, 2020		Stated Interest Rate	Maturity Date
Goodwill Nursing Home	$	2,030,000	$	741,000	$	741,000	13% Fixed	December 31, 2019
Goodwill Nursing Home – Related Party	$	150,000		150,000		150,000	13% Fixed	December 31, 2019
Higher Call Nursing Center		150,000		108,153		125,394	8% Fixed	April 1, 2024

			$	999,153	$	1,016,394

Our corporate debt at June 30, 2021, and December 31, 2020 includes unsecured notes and notes secured by all assets of the Company not serving as collateral for other notes.

SCHEDULE OF UNSECURED NOTES AND NOTES SECURED BY ALL ASSETS

			Principal Outstanding at
Series	Face Amount		June 30, 2021		December 31, 2020		Stated Interest Rate	Maturity Date
10% Senior Secured Promissory Note	$	25,000	$	25,000	$	25,000	10.0% Fixed	December 31, 2018
11% Senior Secured Promissory Notes		1,670,000		1,645,000		1,670,000	11.0% Fixed	October 31, 2021
11% Senior Secured Promissory Notes – Related Party		975,000		975,000		975,000	11.0% Fixed	October 31, 2021

			$	2,645,000	$	2,670,000

On June 16, 2021, the Company through its subsidiaries received confirmation that the loan of $675,598 pursuant to the Paycheck Protection Program (the “PPP Loan”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was forgiven by the SBA.

As of June 30, 2021 current maturities and principal reduction payments of all note payables listed above for the next five years and thereafter are as follows:

SCHEDULE OF FUTURE MATURITIES OF NOTES PAYABLE

Twelve months Ending June 30,
2022	$	8,358,095
2023		10,552,981
2024		6,256,031
2025		4,903,762
2026		523,385
2027 and after		9,050,997
Total	$	39,885,251

6. STOCKHOLDERS’ EQUITY

Preferred Stock

During the six months ended June 30, 2021, the Company paid $22,500 for Series D preferred stock dividends. Dividends of $15,000 were declared during the six months ended June 30, 2021. All quarterly dividends previously declared have been paid.

Common Stock

For the six months ended June 30, 2021, the Company issued 30,000 shares of restricted stock award and recognized stock-based compensation of $18,900. The Company did not pay dividends on common stock.

Non-Controlling Interest

In May 2021, the company purchased remaining non-controlling interest for $60,000.

Common Stock Warrants

As of June 30, 2021, and December 31, 2020, the Company had 2,756,000 and 2,756,000, respectively, of outstanding warrants to purchase common stock at a weighted average exercise price of $0.50 and $0.50, respectively, and weighted average remaining term of 0.42 years and 0.93 years, respectively. The aggregate intrinsic value of common stock warrants outstanding as of June 30, 2021, and December 31, 2020 was $292,160 and $82,680, respectively. During the ~~Company’s Level 3 valuation~~six months ended June 30, 2021, 100,000 warrants were exercised in a cashless transaction in exchange for 28,570 shares of common stock. Activity for the six months ended June 30, 2021, related to common stock warrants is as follows:

SCHEDULE OF COMMON STOCK WARRANTS ACTIVITY

	June 30, 2021
	Number of Warrants		Weighted Average Exercise Price

Beginning Balance		2,756,000	$	0.50
Issued		-		-
Cancelled		-		-
Exercised		100,000		0.50
Expired		-		-

Ending Balance		2,656,000	$	0.50

Common Stock Options

As of June 30, 2021, the Company had 600,000 outstanding options to purchase common stock with a weighted average exercise price of $0.36, a weighted average remaining term of 1.75 years and an intrinsic value of $150,000.

7. RELATED PARTIES

Clifford Neuman, a member of the Company’s Board of Directors, provided legal services to the Company. As of June 30, 2021, and December 31, 2020, the Company owed Mr. Neuman for legal services rendered $81,576 and ~~2019:~~$9,900, respectively.

8. FACILITY LEASES

The following table summarizes our leasing arrangements related to the Company’s healthcare facilities at June 30, 2021:

SCHEDULE OF LEASING ARRANGEMENTS

Facility	Monthly Lease Income ⁽¹⁾		Lease Expiration	Renewal Option if any
Warrenton⁽²⁾	$	54,101	-	None
Goodwill ⁽³⁾	$	48,125	February 1, 2027	Term may be extended for one additional five-year term.
Providence⁽⁴⁾	$	41,616	-	None

(1)	Monthly lease income reflects rent income on a straight-line basis over, where applicable, the term of each lease.
(2)	The Company served Notice of Termination to operator in January 2021. As per the Order issued by the Federal Bankruptcy Court, the current operator is to continue to make rental payments. See footnote 10.
(3)	The lease became effective on February 1, 2017, and the facility began generating rental revenue thereafter.
(4)	The Company served Notice of Termination to operator in January 2021. As per the Order issued by the Federal Bankruptcy Court, the current operator is to continue to make rental payments. See footnote 10.

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:

SCHEDULE OF FUTURE CASH PAYMENTS FOR RENT RECEIVED DURING INITIAL TERM OF LEASE

Years

Remaining 6 months of 2021	$	309,708
2022		626,808
2023		635,026
2024		643,401
2025		651,954
2026 and Thereafter		715,781

Total	$	3,582,678

2020 2019

Beginning Balance January 1 $ - $ 2,785

Change in Fair Value of Warrant Liability - (2,758 )

Ending Balance, June 30 $ - $ 27

~~13.~~

9. SEGMENT REPORTING

The Company had ~~two~~2 primary reporting segments during the six months ended June 30, ~~2020,~~2021, which include real estate services and healthcare services. The Company reports segment information based on the “management approach” defined in ASC 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.

Schedule of Reporting Segments

	Statements of Operations Items for the Six Months Ended
	June 30, 2021									June 30, 2020
	Real Estate Services			Healthcare Services			Consolidated			Real Estate Services			Healthcare Services		Consolidated
Rental Revenue	$	778,289		$	-			778,289		$	1,144,605		$	-	$	1,144,605
Healthcare Revenue		-			10,996,591			10,996,591			-			7,837,461		7,837,461
Total Revenue		778,289			10,996,591			11,774,880			1,144,605			7,837,461		8,982,066
Expenses
Property Taxes, Insurance and Other Operating		827,130			7,372,836			8,199,966			296,149			419,621		715,770
General and Administrative		1,960,122			1,050,701			3,010,823			299,379			4,686,596		4,985,975
Provision for Bad Debts		16,133			-			16,133			-			263,890		263,890
Acquisition Costs		-			-			-			28,654			-		28,654
Depreciation and Amortization		732,745			118,521			851,266			670,767			97,336		768,103
Total Expenses		3,536,130			8,542,058			12,078,188			1,294,949			5,467,443		6,762,392
Income (Loss) from Operations		(2,757,841	)		2,454,533			(303,308	)		(150,344	)		2,370,018		2,219,674
Other (Income) Expense
Interest Expense		1,187,872			5,852			1,193,724			1,010,360			106,211		1,116,571
Gain on Forgiveness of PPP Loan		-			(675,598	)		(675,598	)		-			-		-
Other (Income)		(401,360	)		-			(401,360	)		(80,400	)		-		(80,400	)
Total Other (Income) Expense		786,512			(669,746	)		116,766			929,960			106,211		1,036,171
Net Income (Loss)		(3,544,353	)		3,124,279			(420,074	)		(1,080,304	)		2,263,807		1,183,503
Net (Income) Loss Attributable to Noncontrolling Interests		(10,650	)		-			(10,650	)		1,152			-		1,152
Net Income (Loss) Attributable to Selectis Health, Inc.	$	(3,555,003	)	$	3,124,279		$	(430,724	)	$	(1,079,152	)	$	2,263,807	$	1,184,655

	Statements of Operations Items for the Three Months Ended
	June 30, 2021								June 30, 2020
	Real Estate Services			Healthcare Services		Consolidated			Real Estate Services			Healthcare Services		Consolidated
Rental Revenue	$	387,903		$	-		387,903		$	623,593		$	-	$	623,593
Healthcare Revenue		-			5,624,134		5,624,134			-			4,506,872		4,506,872
Total Revenue		387,903			5,624,134		6,012,037			623,593			4,506,872		5,130,465
Expenses
Property Taxes, Insurance and Other Operating		465,524			4,189,712		4,655,236			153,539			2,500,692		2,654,231
General and Administrative		456,591			455,905		912,496			147,579			225,128		372,707
Provision for Bad Debts		(8,001	)		-		(8,001	)		-			57,282		57,282
Acquisition Costs		-			-		-			13,763			-		13,763
Depreciation and Amortization		379,434			70,809		450,243			335,408			45,477		380,885
Total Expenses		1,293,548			4,716,426		6,009,974			650,289			2,828,579		3,478,868
Income (Loss) from Operations		(905,645	)		907,708		2,063			(26,696	)		1,678,293		1,651,597
Other (Income) Expense
Interest Expense		644,329			5,852		650,181			532,597			78,704		611,301
Other (Income) Expense		30,662			-		30,662			(80,400	)		-		(80,400	)
Total Other (Income) Expense		674,991			5,852		680,843			452,197			78,704		530,901
Net Income (Loss)		(1,580,636	)		901,856		(678,780	)		(478,893	)		1,599,589		1,120,696
Net (Income) Loss Attributable to Noncontrolling Interests		-			-		-			2,859			-		2,859
Net Income (Loss) Attributable to Selectis Health, Inc.	$	(1,580,636	)	$	901,856	$	(678,780	)	$	(476,034	)	$	1,599,589	$	1,123,555

Total assets for the healthcare services and real estate services segments were $8,191,160 and $34,859,771, respectively, as of June 30, 2020 and $4,654,845 and $35,223,318, respectively, as of December 31, 2019.

Statements of Operations Items for the Six Months Ended
June 30, 2020 June 30, 2019
Real Estate
Services Healthcare Services Consolidated Real Estate
Services Healthcare Services Consolidated
Rental Revenue $ 1,144,605 $ - $ 1,144,605 $ 1,825,575 $ - $ 1,825,575
Healthcare Revenue - 7,837,461 7,837,461 - 1,063,928 1,063,928
Total Revenue 1,144,605 7,837,461 8,982,066 1,825,575 1,063,928 2,889,503
Expenses
General and Administrative 296,149 419,621 715,770 390,097 180,739 570,836
Property Taxes, Insurance and Other Operating 299,379 4,686,596 4,985,975 86,065 806,954 893,019
Provision for Bad Debts - 263,890 263,890 - - -
Acquisition Costs 28,654 - 28,654 - - -
Depreciation 670,767 97,336 768,103 582,723 63,128 645,851
Total Expenses 1,294,949 5,467,443 6,762,392 1,058,885 1,050,821 2,109,706
Income (Loss) from Operations (150,344 ) 2,370,018 2,219,674 766,690 13,107 779,797
Other (Income) Expense
Gain on Warrant Liability - - - (2,758 ) - (2,758 )
Gain on Extinguishment of Debt (80,400 ) - (80,400 )
-

-

-

Gain on Sale of Investments - - - (1,069 ) - (1,069 )
Gain on Proceeds from Insurance Claim - - - (270,264 ) - (270,264 )
Interest Income - - - (7,003 ) - (7,003 )
Interest Expense 1,010,360 106,211 1,116,571 989,042 81,818 1,070,860
Total Other (Income) Expense 929,960 106,211 1,036,171 707,948 81,818 789,766
Net Income (Loss) (1,080,304 ) 2,263,807 1,183,503 58,742 (68,711 ) (9,969 )
Net Loss Attributable to Noncontrolling Interests 1,152 - 1,152 6,010 - 6,010
Net Income (Loss) Attributable to Global Healthcare REIT, Inc. $ (1,079,152 ) $ 2,263,807 $ 1,184,655 $ 64,752 $ (68,711 ) $ (3,959 )

1816

Statements of Operations Items for the Three Months Ended
June 30, 2020 June 30, 2019
Real Estate
Services Healthcare Services Consolidated Real Estate
Services Healthcare Services Consolidated
Rental Revenue $ 623,593 $ - $ 623,593 $ 930,287 $ - $ 930,287
Healthcare Revenue - 4,506,872 4,506,872 - 684,137 684,137
Total Revenue 623,593 4,506,872 5,130,465 930,287 684,137 1,614,424
Expenses
General and Administrative 147,579 225,128 372,707 278,327 99,030 377,357
Property Taxes, Insurance and Other Operating 153,539 2,500,692 2,654,231 25,241 518,590 543,831
Provision for Bad Debts - 57,282 57,282 - - -
Acquisition Costs 13,763 - 13,763 - - -

Depreciation 335,408 45,477 380,885 291,362 31,564 322,926
Total Expenses 650,289 2,828,579 3,478,868 594,930 649,184 1,244,114
Income (Loss) from Operations (26,696 ) 1,678,293 1,651,597 335,357 34,953 370,310
Other (Income) Expense
Gain on Warrant Liability - - - (2,655 ) - (2,655 )
Gain on Extinguishment of Debt (80,400 ) - (80,400 ) -
-

-

Interest Income - - - (1,536 ) - (1,536 )
Interest Expense 532,597 78,704 611,301 505,093 39,532 544,625
Total Other (Income) Expense 452,197 78,704 530,901 500,902 39,532 540,434
Net Income (Loss) (478,893 ) 1,599,589 1,120,696 (165,545 ) (4,579 ) (170,124 )
Net Loss Attributable to Noncontrolling Interests 2,859 - 2,859 1,869 - 1,869
Net Income (Loss) Attributable to Global Healthcare REIT, Inc. $ (476,034 ) $ 1,599,589 $ 1,123,555 $ (163,676 ) $ (4,579 ) $ (168,255 )

~~14.~~

10. LEGAL PROCEEDINGS

The Company and/or its affiliated subsidiaries are or were 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.

In April 2019, the Company’s 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 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.

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, filed in April 2016. 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 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 against~~We have entered into a Settlement Agreement and Release with the ~~former operator are pending.~~Receiver and an Operations Transfer Agreement pursuant to which our newly formed subsidiary will acquire the assets and operations of the facility. In March 2021, the Court approved the Settlement Agreement and Operations Transfer Agreement, the skilled nursing license was assigned to the Company’s wholly-owned subsidiary Park Place Health, LLC and the Company reopened the facility under the name Park Place Health. This matter is considered resolved.

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 21, 2019, the prior Temporary Restraining Order was superseded by an Order Appointing Receiver requested by the Company’s subsidiary Dodge NH, LLC. Under the Order, a Receiver designated by us and approved by the Court will oversee the operations at the facility. This Order will mitigate any potential disruption to the facility’s ongoing operations in light of the various disputes between the Company and the former operator, Eastman Healthcare & Rehab LLC, an affiliate of Cadence Healthcare Solutions, LLC. On January 15, 2020, the Receiver filed a Motion for the Court to authorize the Receiver to negotiate an Operations Transfer Agreement with the Company, which Motion was granted. On July ~~2nd,~~2, 2020, the court approved the Operations Transfer Agreement (“OTA”) from the receiver to Global Eastman, LLC, newly formed subsidiary of the Company. Nearly simultaneously Global Eastman, LLC secured an operating license from the state with an effective date of July 1, 2020. Pursuant to the terms of the OTA, Global Eastman has assumed all ~~receivables and selected critical liabilities~~operations associated with the prior ~~operator.~~operator, and the matter is essentially resolved in all material respects.

Village of Seville v. High Street Nursing, LLC, Wadsworth Municipal Court, State of Ohio, Case No 20-CRB-58.

This is an action filed March 2020 for sanctions against our subsidiary arising from a claimed nuisance activity (assaults on patients) at the skilled nursing facility. As we lease the facility to an operator, we have retained an attorney and entered a plea of Not Guilty. We are the landlord and do not believe we have any liability in this matter. The action was subsequently dismissed without prejudice.

Cadence Healthcare Solutions, LLC.

We received a demand letter in February 2020 from an attorney representing Cadence Healthcare Solutions, LLC (“Cadence”) claiming unpaid management fees incurred at our Glen Eagle Healthcare facility in Abbeville, Georgia. Cadence is the same manager that is involved in the matters related to Edwards Redeemer in Oklahoma City and Eastman in Eastman, Georgia, as Cadence was the manager in all three facilities until it was terminated in Q4 2019. We believe we have significant defenses and offsets to this claim and intend to defend vigorously. We believe the likelihood of a material adverse outcome is ~~extremely~~ remote.

Oliphant v. Global Eastman, LLC, et.al., State Court of Cobb County, State of Georgia, Civil Action No. 20-A-3983

This is a personal injury lawsuit against various defendants arising out of the death of a patient of the Eastman Healthcare & Rehab Center (the “Facility”). At all relevant times, the Facility was owned by the ~~Company~~Company’s wholly owned subsidiary Dodge NH, LLC and leased to Eastman Health & Rehab LLC, an affiliate of Cadence Healthcare, as lease operator. Neither the Company nor any affiliate of the Company had any involvement in patient care at the time of the incident ~~complained of.~~for which complaint was made. The Company relies upon well-settled Georgia law that a landlord has no liability for patient care. The landlord is Dodge NH, LLC. Global Eastman, LLC was not formed as a legal entity during the period of the incident and did not assume the past liabilities as part of the OTA with the receivership of Eastman Healthcare & Rehab LLC which was effective July 1, 2020. Global Eastman LLC was formed on November 21, 2019. Plaintiff has dismissed these claims with prejudice, and the Company has filed a Motion to be awarded attorneys fees and costs.

In the matter of Austin.

On December 23, 2020, we received written notice from an attorney of the intent to assert an action for damages against Dodge NH, LLC, which is our subsidiary that owns the nursing facility in Eastman Georgia. The action arises from the shooting death outside of the facility of a woman that worked for our cleaning contractor that cleaned the nursing home. The woman was shot by her former boyfriend who then committed suicide. The incident occurred in December 2019 when the facility was operated by a third-party operator who was in receivership. We ~~strongly deny~~do not believe there is any ~~liability~~basis in law or fact to hold the owner of the real estate liable, and ~~intend to vigorously defend. We believe~~as a result management has concluded that the likelihood of a material adverse ~~outcome~~result is ~~extremely~~ remote.

~~15. SUBSEQUENT EVENTS~~

In re: Providence HR, LLC v. CRM of Warrenton, LLC, United States Bankruptcy Court, Middle District of Georgia, Macon Division, Case No. 21-50201

~~On July 2, 2020,~~

In re: ALT/WARR, LLC v. CRM of Sparta, LLC, United States Bankruptcy Court, Middle District of Georgia, Macon Division, Case No. 21-50200

These are companion cases arising out of the ~~court approved~~Company’s election to terminate the operating leases on the Company’s two facilities in Warrenton and Sparta, Georgia. The Company served a Notice of Termination on each facility and in response the lease operators filed voluntary petitions under Chapter 11 of the US Bankruptcy Code. The Company filed Motions for Relief from Stay which was heard by the Court on March 22, 2021. By Order of the Court, the hearing was continued to May 25, 2021. The Court entered an interim Order requiring the lease operators to comply with their leases, including payment of rent, pending the next hearing. In June 2021, the Court entered an Order approving a Lease Termination Agreement, Operations Transfer Agreement ~~(“OTA”) from~~and Interim Management Agreement which had been negotiated by the ~~receiver~~Company and the two operating tenants, CRM of Warrenton, LLC and CRM of Sparta, LLC. The Lease Termination Agreement and Operations Transfer Agreement will become effective upon the granting of a new License by the State of Georgia for the Warrenton and Sparta facilities to Global Eastman, LLC, newly formed subsidiary of the Company. The OTA was made effective July 1, 2020, as that was the effective date of the nearly simultaneous issuance of operating license from the state. Pursuant to the terms of the OTA, Global Eastman assumed all receivables and only selected critical ongoing liabilities associated with the prior operator. All other liabilities remain with the prior operator in the former entity.

~~Effective July 23, 2020, Global Fairland Property, LLC (“Fairland Property”), a~~two newly formed wholly-owned ~~subsidiary~~subsidiaries of the Company: Selectis Sparta, LLC and Selectis Warrenton, LLC. Pending the granting of the new Licenses, the Company ~~signed~~is managing the operations of the facilities under the Interim Management Agreement using the licenses of CRM of Warrenton, LLC and CRM of Sparta, LLC.

11. SUBSEQUENT EVENTS

On July 9, 2021, the Company completed a ~~definitive Asset Purchase Agreement (the “Agreement’) pursuant to which Fairland Property intends to purchase~~$750,000 private offering through a ~~skilled nursing facility located in Fairland, Oklahoma consisting~~FINRA member placement agent. The offering consisted of ~~29 licensed beds and commonly known as “Family Care Center~~an aggregate of ~~Fairland” (the “Facility”). The purchase~~1.5 million shares of Common Stock at a private offering price of $0.50 per share. The offering was undertaken without registration under the ~~Facility will be $796,500. The purchase and sale~~Securities Act of 1933 as amended (the “Act”) in reliance upon the ~~Facility is subject to numerous conditions, including satisfactory due diligence, financing, and other conditions customary~~exemption contained in ~~transactions~~Rule 506(b) of ~~this nature. There can be no assurance that~~Regulation D under the ~~transaction will be consummated.~~Act.

2018

Effective July 31, 2020 the Company received a line of credit of $500,000 and a construction loan of $750,000 to be used for renovation and capital investment in its Edwards facility from Southern Bank. Both loans carry an interest rate of 4.75% on principal balance and mature July 30, 2021.

On August 7, 2020, the Meadowview skilled-nursing facility owned by the Company was served with a Notice of Immediate Imposition of Remedies from the Centers for Medicare and Medicaid Services (“CMS”), as well as a Notice of Imposition of Remedies by the Ohio Department of Health (“ODH”) ordering the facility to relocate all residents no later than August 9, 2020. The actions of the CMS and ODH were the result of ongoing operating deficiencies which the operator failed to cure. All residents of the Meadowview facility were relocated by the August 9, 2020 deadline and, as a result, the facility has been closed. The Company has applied with the ODH for a new nursing home license which is pending. In September 2020, the ODH served notice that it intended to commence proceedings to revoke the license on the facility. The Company has not determined what other future courses of action may be required or appropriate.

On August 18, 2020, the Company’s Board of Directors approved the repurchase for redemption of 443,431 shares of common stock for $75,385 or $0.17 per share in a privately negotiated transaction. The redemption has been completed and the shares of common stock were cancelled.

On September 29, 2020, the Company’s President and Chief Financial Officer and a member of the Board of Directors resigned from all positions with the Company. The resignations were prompted by regulatory issues not involving the Company or its subsidiaries.

On October 30, 2020, the Company purchased from two former investors in GWH Investors, LLC their notes in favor of Goodwill Hunting, LLC in the aggregate amount of $108,000 for $90,000 of cash and will recognize a gain of $18,000.

Effective October 31, 2020, the Company exchanged $150,000 in outstanding Senior Unsecured 10% Notes and Warrants that had matured on October 31, 2020 for 11% Senior Secured Promissory Notes and issued 150,000 cashless exercise warrants for purchase of company stock at $0.50, expiring October 31, 2021. The Company also repaid the remaining $150,000 of 10% Senior Unsecured Notes.

On November 13, 2020, the Company’s Board of Directors approved the repurchase for redemption of 104,715 shares of common stock for $26,718 or $0.25 per share in a privately negotiated transaction. The redemption has been completed and the shares of common stock were cancelled.

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 because 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, ~~2019~~2020, 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:

●	strategic business relationships;

●	statements about our future business plans and strategies;

●	anticipated operating results and sources of future revenue;

●	our organization’s growth;

●	adequacy of our financial resources;

●	development of markets;

●	competitive pressures;

●	changing economic conditions;

●	expectations regarding competition from other companies

●	the duration and scope of the COVID-19 pandemic

●	the impact of the COVID-19 pandemic on occupancy rates and on the operations of the Company’s facilities and its operators/tenants.

●	Actions governments take in response to the COVID-19 pandemic, including the introduction of public health measures and other regulations affecting our properties and our operations and the operations of our operators/tenants.

●	The effects of health and safety measures adopted by us and our operators/tenants in response to the COVID-19 pandemic.

●	Increased operational costs because of health and safety measures related to COVID-19.

●	The impact of the COVID-19 pandemic on the business and financial conditions of our operators/tenants and their ability to pay rent.

●	Disruptions to our property acquisition and disposition activities due to economic uncertainty caused by COVID-19.

●	General economic uncertainty in key markets as a result of the COVID-19 pandemic and a worsening of global economic conditions or low levels of economic growth.

~~● 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.~~

~~COVID-19 Pandemic~~

In December 2019, a novel strain of coronavirus (“COVID-19”) emerged in China. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The outbreak has now spread to the United States and infections have been reported globally.

Starting in March, the COVID-19 pandemic, and measures to prevent its spread began to affect us in a number of ways. In our operating portfolio, occupancy trended lower in the second half of the month as government policies and implementation of infection control best practices began to materially limit or close communities to new resident move-ins. In addition, starting in mid-March, operating costs began to rise materially, including for services, labor and personal protective equipment and other supplies, as our operators took appropriate actions to protect residents and caregivers. These trends accelerated in April and May, and are expected to continue through at least June 2021, impacting revenues and net operating income.

Our triple-net tenants experienced similar trends, which has put them under increased operational and financial pressure. Without financial support or other government assistance, certain of our triple-net tenants will likely experience worsening financial conditions through the second quarter of 2021, which would pressure their rent coverage ratios and may affect their ability to pay us contractual rent in full on a timely basis.

As of the date of this Report, four of our facilities have reported “presumptive positive” cases of COVID-19 involving both employees and residents. The Centers for Disease Control & Prevention (“CDC”) will provide final confirmation of the cases. The Company is engaging in aggressive mitigation efforts in accordance with CDC and state Department of Health guidelines to protect the health and safety of residents while respecting their rights. Employees at all of our facilities are taking several precautions as they care for residents, including, among other things, monitoring themselves for symptoms upon leaving and returning home, and upon arriving at and leaving the skilled nursing facility. They are also wearing masks and other personal protective equipment while caring for residents. Additionally, as of the date of this Report, none of our third party operators have reported any occurrences of COVID-19 in any of the buildings they are managing. Our operators have also reported to us that they currently have adequate supply levels, including appropriate quantities of Personal Protective Equipment (PPE) for staff. Additionally, as of the date of filing the Company has received no additional information.

2219

The federal government, as well as state and local governments, have implemented or announced programs to provide financial and other support to businesses affected by the COVID-19 pandemic, some of which benefit or could benefit our company, tenants, operators, borrowers and managers. While these government assistance programs are not expected to fully offset the negative financial impact of the pandemic, and there can be no assurance that these programs will continue or the extent to which they will be expanded, we are monitoring them closely and have been in active dialogue with our tenants, operators, borrowers and managers regarding ways in which these programs could benefit them or us.

In April and May, we applied for and were approved for an aggregate of $1,610,169 in PPP loans issued by the SBA. As a result of newly adopted amendments to the PPP program, 60% of the PPP loan amount must be expended on payroll in the 24 week-period following the loan date. We believe that most if not all the PPP loans will be eligible to be forgiven under the PPP guidelines. Any portion that is not forgiven must be repaid over two years.

The COVID-19 pandemic is rapidly evolving. The information in this Report is based on data currently available to us and will likely change as the pandemic progresses. As COVID-19 continues to spread throughout areas in which we operate, we believe the outbreak has the potential to have a material negative impact on our operating results and financial condition. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our operators, employees and vendors, and impact on the facilities we manage, all of which are uncertain and cannot be predicted. Given these uncertainties, we cannot reasonably estimate the related impact to our business, operating results and financial condition.

We expect the trends highlighted above with respect to the impact of the COVID-19 pandemic to continue and, in some cases, accelerate. The extent of the COVID-19 pandemic’s continued effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, the pace at which jurisdictions across the country re-open and restrictions begin to lift, the availability of government financial support to our business, tenants and operators and whether a resurgence of the outbreak occurs. Due to these uncertainties, we are not able at this time to estimate the ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition, and cash flows but it could be material.

~~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 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~~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 ~~healthcare services;~~
●	~~Specialized nature of healthcare real estate investing; and~~
●	~~Ongoing consolidation of a fragmented healthcare real estate sector.~~operating properties in our market areas.

~~Health Care Regulatory Climate~~Properties

The Centers for Medicare & Medicaid Services (“CMS”) annually updates Medicare skilled nursing facility prospective payment system rates and other policies. On July 30, 2019, CMS issued its final fiscal year 2020 Medicare skilled nursing facility update. Under the final rule, CMS projects aggregate payments to skilled nursing facilities will increase by $851 million, or 2.4%, for fiscal year 2020 compared with fiscal year 2019. The final rule also addresses implementation of the new Patient-Driven Payment Model case mix classification system that became effective on October 1, 2019, changes to the group therapy definition in the skilled nursing facility setting, and various skilled nursing facility Value-Based Purchasing and quality reporting program policies. On April 10, 2020, CMS issued a proposed rule to update skilled nursing facility rates and policies for fiscal year 2021, which starts October 1, 2020. CMS estimates that payments to skilled nursing facilities would increase by $784 million, or 2.3%, for fiscal year 2021 compared to fiscal year 2020. CMS also proposes to revise the geographic wage index and apply a cap on wage index decreases used in setting skilled nursing facility rates. The proposal would also make changes to the patient classifications under the Patient Driven Payment Model and certain minor policy changes to the Value-Based Purchasing program. Those rules were finalized in October 2020.

Since the announcement of the COVID-19 pandemic and beginning as of March 13, 2020, CMS has issued numerous temporary regulatory waivers and new rules to assist health care providers, including skilled nursing facilities, respond to the COVID-19 pandemic. These include, waiving the skilled nursing facility’s 3-day qualifying inpatient hospital stay requirement, flexibility in calculating a new Medicare benefit period, waiving timing for completing functional assessments, waiving requirements for health care professional licensure, survey and certification, provider enrollment, and reimbursement for services performed by telehealth, among many others. CMS also announced a temporary expansion of its Accelerated and Advance Payment Program to allow skilled nursing facilities and certain other Medicare providers to request accelerated or advance payments in an amount up to 100% of the Medicare Part A payments they received from October–December 2019; this expansion was suspended April 26, 2020 in light of other CARES Act funding relief. In addition, CMS has also enhanced requirements for nursing facilities to report COVID-19 infections to local, state and federal authorities.

On March 26, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), sweeping legislation intended to bolster the nation’s response to the COVID-19 pandemic. In addition to offering economic relief to individuals and impacted businesses, the law expands coverage of COVID-19 testing and preventative services, addresses health care workforce needs, eases restrictions on telehealth services during the crisis, and increases Medicare regulatory flexibility, among many other provisions. Notably, the CARES Act temporarily suspends the 2% across-the-board “sequestration” reduction during the period May 1, 2020 through December 31, 2020, and extends the current Medicare sequester requirement through fiscal year 2030. In addition, the law provides $100 billion in grants to eligible health care providers for health care related expenses or lost revenues that are attributable to COVID-19. On April 10, 2020, CMS announced the distribution of $30 billion in funds to Medicare providers based upon their 2019 Medicare fee for service revenues. Eligible providers must agree to certain terms and conditions in receiving these grants. In addition, the Department of Health and Human Services (“HHS”) has authorized $20 billion of additional funding for providers that have already received funds from the initial distribution of $30 billion. Unlike the first round of funds, which came automatically, providers have to apply for these additional funds and submit the required supporting documentation, using the online portal provided by HHS. Providers must attest to and agree to specific terms and conditions for the use of such funds. HHS will make the additional distributions with the goal of allocating the whole $50 billion proportionally across all providers based on those providers’ proportional share of 2018 net Medicare fee-for-service revenue. CMS is expected to distribute additional funding to Medicaid and potentially other providers, but the details are not yet known.

On July 18, 2019, CMS published a final rule that eliminates the prohibition on pre-dispute binding arbitration agreements between long-term care facilities and their residents. The rule also strengthens the transparency of arbitration agreements and makes other changes to arbitration requirements for long-term care facilities. There can be no assurance that these rules or future regulations modifying Medicare skilled nursing facility payment rates or other requirements for Medicare and/or Medicaid participation will not have an adverse effect on the financial condition of our borrowers and lessees which could, in turn, adversely impact the timing or level of their payments to us.

Congress periodically considers legislation revising Medicare and Medicaid policies, including legislation that could have the impact of reducing Medicare reimbursement for skilled nursing facilities and other Medicare providers, limiting state Medicaid funding allotments, encouraging home and community-based long-term care services as an alternative to institutional settings, or otherwise reforming payment policy for post-acute care services. Congress continues to consider further legislative action in response to the COVID-19 pandemic. There can be no assurances that enacted or future legislation will not have an adverse impact on the financial condition of our lessees and borrowers, which subsequently could materially adversely impact our company.

Additional reforms affecting the payment for and availability of health care services have been proposed at the federal and state level and adopted by certain states. Increasingly, state Medicaid programs are providing coverage through managed care programs under contracts with private health plans, which is intended to decrease state Medicaid costs. State Medicaid budgets may experience shortfalls due to increased costs in addressing the COVID-19 pandemic. Congress and state legislatures can be expected to continue to review and assess alternative health care delivery systems and payment methodologies. Changes in the law, new interpretations of existing laws, or changes in payment methodologies may have a dramatic effect on the definition of permissible or impermissible activities, the relative costs associated with doing business and the amount of reimbursement by the government and other third-party payors.

~~Acquisitions~~

Effective March 2, 2020, the Company, through its wholly-owned subsidiary, Global Quapaw, LLC (“Quapaw”), completed the acquisition of an 86-licensed bed, long-term care facility known as Higher Call Nursing Center (“Higher Call”) located in Quapaw, Oklahoma for the purchase price of $1,300,000. Quapaw has entered into an Operating Lease Agreement with Global Higher Call Nursing, LLC, a wholly owned subsidiary of the Company, as lessee, to be the Operator of the facility. The acquisition represents the consummation of an Asset Purchase Agreement dated October 21, 2019 between Higher Call Nursing Center, Inc., as Seller, and Quapaw, as Buyer.

~~In connection with the acquisition of Higher Call, the Company entered two credit facilities, summarized as follows:~~

The Company entered into a senior loan agreement with Security Bank in the principal amount of $1.1 million (the “Senior Loan”). The Senior Loan accrues interest at the rate of 6.5% per annum and is payable in monthly installments of $7,907. The Senior Loan matures in 2040. The Senior Loan is secured by a senior Mortgage, Security Agreement and Assignment of Rents (“Mortgage”) covering the Higher Call facility and a UCC Security Interest covering the personal property and other non-real estate assets.

The Company also executed a promissory note in favor of the Seller, Higher Call Nursing Center, Inc., in the principal amount of $150,000 (the “Seller Note”). The Seller Note accrues interest at the rate of 8% per annum and is payable in equal monthly installments, principal and interest, and matures in April 2024. The Seller Note is secured by a Corporate Guaranty of Global.

~~Properties~~

As of June 30, ~~2020,~~2021, we owned ~~twelve~~thirteen (13) long-term care facilities including a campus of three buildings in Tulsa, OK. The following table provides summary information regarding these facilities at June 30, ~~2020:~~2021:

Property Name Location Effective
Percentage
Equity
Ownership Date
Acquired Gross
Square Feet Purchase
Price Outstanding
Debt at
June 30, 2020

Eastman Nursing Home (a/k/a Middle Georgia)⁽¹⁾ Eastman, GA 100 % 3/15/2013 28,808 $ 5,000,000 $ 3,969,841

Warrenton Health and Rehabilitation Warrenton, GA 100 % 12/31/2013 26,894 $ 3,500,000 $ 3,704,959

Southern Hills Retirement Center Tulsa, OK 100 % 2/7/2014 104,192 $ 2,000,000 $ 7,227,074

Goodwill Nursing Home (a/k/a Archway)⁽¹⁾ Macon, GA 85 % 5/19/2014 46,314 $ 7,185,000 $ 5,295,771

Edwards Redeemer Health & Rehab (a/k/a Tiaps) Oklahoma City, OK 100 % 9/16/2014 31,939 $ 3,142,233 $ 2,065,773

Providence of Sparta Nursing Home Sparta, GA 100 % 9/16/2014 19,441 $ 2,836,930 $ 2,893,371

Meadowview Healthcare Center Seville, OH 100 % 9/30/2014 27,500 $ 3,000,000 $ 2,834,400

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

Glen Eagle Healthcare & Rehab Abbeville, GA 100 % 5/25/2016 29,393 $ 2,100,000 $ 3,036,436

Higher Call Nursing Center⁽¹⁾ Quapaw, OK 100 % 3/2/2020 20,694 $ 1,300,000 $ 1,187,601

							Total Square Feet				# of Beds
State	Properties		Operations		Leased Operations		Operating Square Feet		Leased Square Feet		Operating Beds		Leased Beds		Average Occupancy
Arkansas		1		-		1		-		40,737		-		141		74	%
Georgia		5		2		1		31,747		92,649		211		181		80	%
Ohio		1		-		1		-		27,500		-		100		-
Oklahoma		6		6		-		162,976		-		417		-		52	%
Total		13		8		3		194,723		160,886		628		422

~~(1)~~

Outstanding Debt includes senior and subordinated debt, but excludes intercompany subordinated debt owed to wholly owned affiliates of the Company that are eliminated in consolidation of financial statements.

Property Name 2020 Base Revenue
Per Lease Operating Lease Expiration

Eastman Nursing Home (a/k/a Middle Georgia) $ 720,000 October 31, 2022
Warrenton Health and Rehabilitation $ 642,846 June 30, 2026
Southern Hills Retirement Center $ 12,000 -
Goodwill Nursing Home (a/k/a Archway) $ 560,138 February 1, 2027
Edwards Redeemer Health & Rehab (a/k/a Tiaps) $ 574,958 October 31, 2022
Providence of Sparta Nursing Home $ 494,496 June 30, 2026
Meadowview Healthcare Center $ - November 30, 2023
Grand Prairie Nursing Home $ - -
Glen Eagle Healthcare & Rehab $ - -
Higher Call Nursing Center $ -

~~Going Concern~~

The accompanying consolidated financial statements and notes have been prepared assuming the Company will continue as a going concern. For the six months ended June 30, 2020, the Company had net income of $1,183,503 and reported net cash provided by operations of $1,409,936. However, the Company has incurred net losses in each of the previous five fiscal years and, as of June 30, 2020, had an accumulated deficit of $10,792,565. 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 -– Six Months Ended June 30, ~~2020~~2021, Compared to the Six Months Ended June 30, ~~2019~~2020

Rental revenues for the ~~six-month periods~~six months ended June 30, 2021, and 2020 totaled $778,289 and ~~2019 totaled $1,144,605 and $1,825,575, respectively, a decrease of $680,970.~~$1,144,605. The Company also had healthcare revenue of $10,996,591 for the six months ended June 30, 2021, compared to $7,837,461 for the six months ended June 30, ~~2020, compared~~2020. Due to ~~$1,063,928~~our concerted effort to focus on healthcare operations, our healthcare revenues are increasing. As we assume operations and purchase more facilities, we anticipate this trend to continue. As a result of this, our rental income will likely continue to decrease.

In accordance with GAAP, the Company has been recognizing rental revenues on a straight-line basis. As such the Company carries a receivable on the Balance Sheet to account for the difference between cash receipts and the straight-line revenue over the life of the lease. Due to the resolution of Providence HR, LLC v. CRM of Warrenton, LLC, United States Bankruptcy Court, Middle District of Georgia, Macon Division, Case No. 21-50201 and ALT/WARR, LLC v. CRM of Sparta, LLC, by order of the United States Bankruptcy Court, Middle District of Georgia, Macon Division, Case No. 21-50200 on June 21, 2021, the Company will be expensing the remaining balance of this lease asset once the Lease Termination is effective. The Company anticipates this will occur in the second half of the 2021 calendar year. Management has already written down this asset by $95,717 for rents not received in June 2021. The remaining amount is $258,943 and expect this amount to be written down once the Lease Termination is effective. As long as the Lease remains in effect, we are entitled to continuing rent payments, although there can be no assurance that rent will be paid. If the rent is paid, we will record those, upon receipt, as Other Income.

General and administrative expenses were $3,010,823 and $715,770 for the six months ended June 30, ~~2019. Factors that contributed~~2021 and 2020. To support the healthcare operations management has increased our corporate support to continue to aid the ~~decrease~~facilities in rental revenue included the appointment of a receivership at Eastman as well as the closure of Edwards Redeemer. Also, the Southern Tulsa facility is operated directly by the Company as of December 1, 2019, increasing Healthcare revenues but decreasing rental revenues. The acquisition of the Higher Call Nursing Center also increased healthcare revenues. Looking forward, we anticipate growing the rental revenue at the Southern Hills ILF facility in 2020 and beyond, but the shift toward healthcare revenue will continue as we operate more facilities directly.delivering world class care.

General and administrative expenses were $715,770 and $570,836 for the six-month periods ended June 30, 2020 and 2019, respectively, an increase of $144,934 primarily due to additional expenses with the Southern Tulsa facility being operated directly by the Company as of December 1, 2019 and Higher Call Nursing Center as of March 1, 2020. The Company stringently reviews its costs regularly but believes its cost structure has been optimized for its current portfolio. For the six months ended June 30, 2020 and June 30, 2019, respectively, general and administrative expenses included $0 and $174,979 of share-based compensation related to restricted stock and common stock awards, and for the six months ended June 30, 2020 the company reversed expenses of $8,750 related to the forfeiture of restricted stock awards in the prior year.

Property taxes, insurance, and other operating expenses totaled ~~$4,985,975~~$8,199,966 and ~~$893,019~~$4,985,975 for the ~~six-month periods~~six months ended ~~June 30,~~June30, 2021 and 2020, respectively. Our expenses have increased as a result of owning and ~~2019, respectively. Lessees are responsible for~~operating more facilities compared to the ~~payment of insurance, taxes, and other charges while under~~same time in the lease. Should the lessee not pay all such charges, as required under the leases, we may be liable for such operating expenses. We are also responsible for all working capital related to our Glen Eagle as well as the Southern Hills SNF, ALF and ILF, Meadowview, Higher Call, and Edwards properties.prior year.

Expenses related to the provision for bad debt was $0$16,133 for the six months ended June 30, ~~2019~~2021, and $263,890 for the six months ended June 30, ~~2020, an increase of $263,890. The Company’s greatly increased Healthcare Services operations require more complicated billing~~2020. This decrease is related to a bad-debt policy change, specific to healthcare.

Depreciation and ~~less certain collection, and the Company anticipates and preemptively records bad debt expense as a proportion of revenues.~~

~~Depreciation~~amortization expense increased ~~$122,252~~$83,163 from ~~$645,851~~$768,103 for the six months ended June 30, ~~2019~~2020, to ~~$768,103~~$851,266 for the six months ended June 30, ~~2020.~~2021. This increase is related to an increase in our plant, property, and equipment, compared to the same period last year.

The Company had no$1,193,724 of interest expense for the six months ended June 30, 2021, and $1,116,571 interest expense for the six months ended June 30, 2020. This increase is related to an increase in notes on new properties compared to the same period last year.

The Company had $401,360 of other income for the six months ended June 30, ~~2020~~2021, and ~~$7,003 interest income for the six months ended June 30, 2019.~~

~~Interest expense increased $45,711 from $1,070,860 for the six months ended June 30, 2019 to $1,116,571~~$0 for the six months ended June 30, 2020. Management is recording the principal reduction payments made by the operator for the Arkansas facility. We ~~capitalized $135 of interest during~~will continue to record this as the ~~six months ended June 30, 2020.~~operator continues to satisfy the debt.

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.

At June 30, 2021, the Company had cash and cash equivalents of $3,255,478 and restricted cash of $430,505. Our restricted cash is to be spent on insurance, taxes, repairs, and capital expenditures associated with Providence of Sparta Nursing Home or Warrenton Health and Rehab. 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 healthcare operations, rental revenues received, and existing cash on hand. We ~~plan to renew secured obligations~~have successfully refinanced all five mortgage that mature ~~during 2020, as our projected cash flow from operations will be insufficient to retire~~in the ~~debt. Our restricted cash approximated $425,000 as of~~2021 fiscal year.

Cash used in operating activities was $642,389 for the six months ended June 30, ~~2020 and is~~2021, compared to ~~be expended on insurance, taxes, repairs, and capital expenditures associated with Providence of Sparta Nursing Home.~~

~~Cash~~cash provided by operating activities ~~was~~of $1,409,936 for the six months ended June 30, ~~2020 compared to cash provided~~2020. Healthcare revenue was adversely affected by ~~operating~~COVID-19 which increased costs and decreased our census.

Cash used in investing activities ~~of $400,839~~was $395,608 for the six months ended June 30, 2019. Cash flows from operations were beneficially impacted by increased net income offset primarily by an increase in accounts receivable and a decrease in accounts payable and accrued liabilities during the first six months of 2020.

~~Cash used in investing activities was $1,231,357 for the six-month period ended June 30, 2020~~2021, compared to cash used in investing activities of ~~$1,458,097~~$1,231,357 for the ~~six-month period~~six months ended June 30, ~~2019. The decrease reflects less spending on property renovations and refurbishments offset by net cash paid~~2020. This amount includes the $60,000 to purchase the remaining non-controlling interest in ~~the acquisition of Higher Call assets.~~our Goodwill property.

Cash provided by financing activities was $745,677 for the six months ended June 30, 2021 compared to cash provided by financing activities of $2,098,059 for the six months ended June 30, ~~2020 compared to cash provided by financing activities of $1,378,919 for~~2020. This resulted from proceeds from a PPP loan during the six months ended June 30, ~~2019. During~~2021.

In accordance with ASU 2014-15 management believes the ~~first six months~~Company has sufficient liquidity and capital resources to maintain ongoing operations. This is, in part due to all of ~~2020, we received proceeds from~~these positive changes to cash flows, positive year-end earnings, refinancing debt to more favorable terms, the ~~issuance~~forgiveness of ~~debt~~our CARES Act loans, and the optimization of ~~$2,821,890 and made payments on debt~~our operations in many of ~~$675,736. During the first six months of 2019, we issued $1,676,354 in debt in cash and made cash payments on debt of $273,550.~~our current facilities.

~~As of June 30, 2020, and December 31, 2019, our debt balances consisted of the following:~~

June 30, 2020 December 31, 2019

Senior Secured Promissory Notes $ 1,545,000 $ 1,485,000
Senior Unsecured Promissory Notes 300,000 300,000
Senior Secured Promissory Notes - Related Parties 975,000 875,000
Fixed-Rate Mortgage Loans 29,399,050 22,427,949
Variable-Rate Mortgage Loans 5,663,646 4,618,006
Line of Credit, Senior Secured - 7,230,582
Other Debt, Subordinated Secured 1,045,561 1,386,000
Other Debt, Subordinated Secured - Related Parties 150,000 150,000
Paycheck Protection Program Loans 1,610,169 -

40,688,426 38,472,537

Unamortized Discount and Debt Issuance Costs (455,303 ) (493,353 )

$ 40,233,123 $ 37,979,184

As presented in the Consolidated Balance Sheets:

Debt, Net $ 39,113,315 $ 36,954,184

Debt - Related Parties, Net 1,119,808 1,025,000

$ 40,233,123 $ 37,979,184

2721

The weighted average interest rate and term of our fixed rate debt are 5.38% and 7.16 years, respectively, as of June 30, 2020. The weighted average interest rate and term of our variable rate debt are 5.89% and 17.58 years, respectively, as of June 30, 2020.

~~Mortgage Loans and Lines of Credit Secured by Real Estate~~

Mortgage loans and other debts such as lines of credit 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:

	~~(1)~~	Mortgage loans are non-recourse to the Company except for (i) the senior loan held by ServisFirst Bank on Meadowview (Ohio), (ii) the loans held by Colony Bank on Eastman and Glen Eagle, and (iii) the Southern Hills line of credit and Goodwill loan owed to Southern Bank (formerly First Commercial Bank).
	~~(2)~~	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 June 30, 2020, a total of $7,227,074 was drawn under the Line of Credit, and as of December 31, 2019, a total of $7,230,582 was drawn under the Line of Credit. Modifications to the loan in June 2020 effectively convert it from a line of credit to a term loan and is treated as debt extinguishment. The interest rate on the Line of Credit increased from 5.25% to 5.75% effective April 28, 2019 and subsequently was reduced to 4.75% as part of a new three-year loan renewal. Monthly payments of interest began on November 30, 2017 and continue until the Promissory Note is paid in full on the Maturity Date. The Maturity Date was been extended multiple times in three month increments initially from April 30, 2018 to May 5, 2020, and subsequently to June 18, 2023 with a principal amount of $7,227,074. During the six months ended June 30, 2020, the Company capitalized $33,095 in loan costs paid. 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 its 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.

	~~(3)~~	The loan at Eastman was renewed on November 26, 2018 with the maturity date extended to October 26, 2021. For the six months ended June 30, 2020, amortization expense related to loan costs totaled $643.
	~~(4)~~	The maturity date for the loan at Goodwill Nursing was extended to April 12, 2025 in June 2020. The face value of the note was adjusted to the principal outstanding at the time of $4,268,878, and the interest rate was decreased to 4.75%, from 5.50%. The modification of the loan was substantial and resulted in an extinguishment of the original loan.
	~~(5)~~	The original maturity date for the loan was extended on January 19, 2019 to January 20, 2020 and the Company capitalized $8,885 in loan costs paid. The loan was refinanced in June 2019. The Company has incurred $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 six months ended June 30, 2020, amortization expense related to loan costs totaled $2,611.

	~~(6)~~	The maturity date for the loan at Edwards Redeemer was extended to June 29, 2021 in June 2020. The face value of the note was adjusted to the principal outstanding at the time of the modification, $2,065,804, and the interest rate was decreased from 5.50% to 4.75%.
	~~(7)~~	Amortization expense related to loan costs of this loan totaled $437 for the six months ended June 30, 2020. 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 June 30, 2020, 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. The line of credit was expanded in February 2019 to $400,000 with a maturity date of September 30, 2019. Prior to September 30, 2019, the Company had drawn $400,000 on the line which was subsequently merged into the amortizing note due May 25, 2021.
	~~(8)~~	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 $2,492 for the six months ended June 30, 2020. The interest rate was reduced from 3.88% to 3.50% as part of a refinance completed in April 2020.
	~~(9)~~	Amortization expense related to loan costs of this loan totaled $4,652 for the six months ended June 30, 2020. 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 June 30, 2020, 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.
	~~(10)~~	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 June 30, 2020, 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 making payment of interest on the loan. The Company is not obligated to repay the interest.
	~~(11)~~	In connection with the acquisition of Higher Call, the Company entered into a senior loan agreement with Security Bank in the principal amount of $1,051,721. This loan accrues interest at the rate of 6.5% per annum and is payable in monthly installments of $7,907. The loan is secured by a senior Mortgage, Security Agreement and Assignment of Rents covering the Higher Call facility and a UCC Security Interest covering the personal property and other non-real estate assets. The Company is subject to financial covenants and customary affirmative and negative covenants. As of June 30, 2020, the Company was in compliance with these covenants.

We have $3.4 million of debt maturing and expect principal reduction payments of approximately $528,000 in the next twelve months. There is also $10.5 million in debt in technical default maturing after June 30, 2021 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 $1.2 million in loans maturing in 2020 as the associated properties meet loan to value requirements currently being employed in commercial lending markets, and have already refinanced or repaid $300,000 in loans matured or maturing in 2020. We have $325,000 in note obligations maturing in 2020. Following is a summary of our subordinated debt and corporate debt as of June 30, 2020 and December 31, 2019.

~~Other~~ ~~Debt~~

Our subordinated debt at June 30, 2020 and December 31, 2019 includes unsecured notes payable issued to entities controlled by the Company used to facilitate the acquisition of the nursing home properties.

~~(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. On June 30, 2020, the Company purchased from four former investors in GWH Investors, LLC their notes in favor of Goodwill Hunting, LLC in the aggregate amount of $482,400 for $402,000 cash and recognized a gain of $80,400, and subsequently in October purchased from two more investors an aggregate amount of $108,000 for $90,000 of cash and will recognize a gain of $18,000 The Company has not repaid or renewed the note as of June 30, 2020 and it is technically in default.

~~(2)~~

In connection with the acquisition of Higher Call, the Company executed a promissory note in favor of the Seller, Higher Call Nursing Center, Inc., in the principal amount of $150,000 which accrues interest at the rate of 8% per annum and is payable in equal monthly installments, principal and interest. This note is secured by a corporate guaranty of Global.

~~Our corporate debt at June 30, 2020 and December 31, 2019 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
Series Amount
June 30, 2020

December 31, 2019
Rate Maturity Date

10% Senior Secured Promissory Note $ 25,000 $ 25,000 $ 25,000 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 1,520,000 1,520,000 1,460,000 11.0% Fixed October 31, 2021
11% Senior Secured Promissory Notes – Related Party 975,000 975,000 875,000 11.0% Fixed October 31, 2021

$ 2,820,000 $ 2,660,000

~~Paycheck Protection Program Loans~~

On May 4, 2020, the Company through its subsidiaries received loans of $324,442 and $710,752 pursuant to the Paycheck Protection Program (the “PPP Loans”) of the CARES Act. Both PPP Loans mature on May 4, 2022 (the “Maturity Date”), accrue interest at 1% per annum and may be prepaid in whole or in part without penalty. No interest payments are due within the initial six months of the PPP Loans. The interest accrued during the initial six-month period is due and payable, together with the principal, on the Maturity Date. The Company used all proceeds from the PPP Loan to retain employees, maintain payroll and make lease and utility payments to support business continuity throughout the COVID-19 pandemic, which amounts are eligible for forgiveness, subject to the provisions of the CARES Act.

~~Contractual Obligations~~

~~As of June 30, 2020, we had the following contractual obligations:~~

Total Contractual Terms
Less Than
1 Year
1 – 3 Years 3 – 5 Years
More Than
5 Years

Notes Payable - Principal $ 40,688,426 $ 14,380,281 $ 15,307,172 $ 4,202,025 $ 6,798,948
Notes Payable - Interest 7,239,368 1,489,315 1,861,203 897,581 2,991,269

Total Contractual Obligations $ 47,927,794 $ 15,869,596 $ 17,168,375 $ 5,099,606 $ 9,790,217

Revenues from operations are sufficient to meet the working capital needs of the Company for the foreseeable future. Cash on hand 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 Grand Prairie and 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.

Goodwill

Goodwill represents the excess of the cost of an acquired business over the amounts assigned to its net assets. Goodwill is not amortized but is tested for impairment at a reporting unit level on an annual basis or when an event occurs, or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Events or changes in circumstances that may trigger interim impairment reviews include significant changes in business climate, operating results, planned investments in the reporting unit, or an expectation that the carrying amount may not be recoverable, among other factors.

The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company determines it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, an impairment test is unnecessary. If an impairment test is necessary, the Company will estimate the fair value of its related reporting units. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is determined to be impaired, and the Company will proceed with recording an impairment charge equal to the excess of the carrying value over the related fair value.

Revenue Recognition

The Company’s leases may be subject to annual escalations of the minimum monthly rent required under each lease. The accompanying consolidated financial statements reflect rental income on a straight-line basis over the term of each lease. Cumulative adjustments associated with the straight-line rent requirement are reflected in Prepaid Expenses and Other in the consolidated balance sheets and totaled $493,662 and $0 as of June 30, 2021, and 2020, respectively.

Rent receivables and unbilled deferred rent receivables are carried net of an allowance for uncollectible amounts. An allowance is maintained for estimated losses resulting from the inability of certain tenants to meet the contractual obligations under their lease agreements. The Company also maintains an allowance for deferred rent lease receivables arising from the straight-line recognition of rents. Such allowances are charged to net against rental incomes.

When the lessee is the owner of any improvements, any lessee improvement allowance that is funded by the Company is treated as a lease incentive and amortized as a reduction of revenue over the lease term. As of June 30, 2021, and 2020, there were no deferred lease incentives recorded.

For our healthcare operations, we recognize revenue in accordance with ASC 606 whereby we apply the following steps:

31	a.	Step 1: Identify the contract(s) with a customer
	b.	Step 2: Identify the performance obligations in the contract
	c.	Step 3: Determine the transaction price
	d.	Step 4: Allocate the transaction price to the performance obligations in the contract
	e.	Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

In accordance with ASC 606, estimated uncollectable amounts due from patients are generally considered implicit price concessions that are a direct reduction to net operating revenues.

Recently Adopted Accounting Pronouncements

None.

Recently Issued Accounting Pronouncements

~~Subsequent Events~~

On July 2, 2020, the court approved the Operations Transfer Agreement (“OTA”) from the receiver to Global Eastman, LLC, newly formed subsidiary of the Company. The OTA was made effective July 1, 2020, as that was the effective date of the nearly simultaneous issuance of operating license from the state. Pursuant to the terms of the OTA, Global Eastman assumed all receivables and only selected critical ongoing liabilities associated with the prior operator. All other liabilities remain with the prior operator in the former entity.

Effective July 23, 2020, Global Fairland Property, LLC (“Fairland Property”), a newly formed wholly-owned subsidiary of the Company, signed a definitive Asset Purchase Agreement (the “Agreement’) pursuant to which Fairland Property intends to purchase a skilled nursing facility located in Fairland, Oklahoma consisting of 29 licensed beds and commonly known as “Family Care Center of Fairland” (the “Facility”). The purchase price of the Facility will be $796,500. The purchase and sale of the Facility is subject to numerous conditions, including satisfactory due diligence, financing, and other conditions customary in transactions of this nature. There can be no assurance that the transaction will be consummated.

On August 7, 2020, the Meadowview skilled-nursing facility owned by the Company was served with a Notice of Immediate Imposition of Remedies from the Centers for Medicare and Medicaid Services (“CMS”), as well as a Notice of Imposition of Remedies by the Ohio Department of Health (“ODH”) ordering the facility to relocate all residents no later than August 9, 2020. The actions of the CMS and ODH were the result of ongoing operating deficiencies which the operator failed to cure. All residents of the Meadowview facility were relocated by the August 9, 2020 deadline and, as a result, the facility has been closed. The Company has submitted an application with the ODH for a new nursing home license which is pending. In September 2020, the ODH issued notice that intends to commence proceedings to revoke the license on the facility. The Company has not determined what other future courses of action may be required or appropriate.

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, ~~the same individual as of filing,~~ 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. The Controller and CFO both have direct contact with all levels of review. The Company plans to implement multi-level review in 2021, and management intends to work internally and with various third-parties to ensure we have the proper controls in place going forward.

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 June 30, ~~2020,~~2021, 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 or were 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.

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.

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.

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 21, 2019, the prior Temporary Restraining Order was superseded by an Order Appointing Receiver requested by the Company’s subsidiary Dodge NH, LLC. Under the Order, a Receiver designated by us and approved by the Court will oversee the operations at the facility. This Order will mitigate any potential disruption to the facility’s ongoing operations ~~considering~~in light of the various disputes between the Company and the former operator, Eastman Healthcare & Rehab LLC, an affiliate of Cadence Healthcare Solutions, LLC. On January 15, 2020, the Receiver filed a Motion for the Court to authorize the Receiver to negotiate an Operations Transfer Agreement with the Company, which Motion was granted. On July ~~2nd,~~2, 2020, the court approved the Operations Transfer Agreement (“OTA”) from the receiver to Global Eastman, LLC, newly formed subsidiary of the Company. ~~On the same date,~~Nearly simultaneously Global Eastman, LLC secured an operating license from the ~~state.~~state with an effective date of July 1, 2020. Pursuant to the terms of the OTA, Global Eastman ~~will assume~~has assumed all ~~receivables and selected critical liabilities~~operations associated with the prior ~~operator.~~operator, and the matter is essentially resolved in all material respects.

Village of Seville v. High Street Nursing, LLC, Wadsworth Municipal Court, State of Ohio, Case No 20-CRB-58.

Cadence Healthcare Solutions, LLC.

Oliphant v. Global Eastman, LLC, et.al., State Court of Cobb County, State of Georgia, Civil Action No. 20-A-3983

This is a personal injury lawsuit against various defendants arising out of the death of a patient of the Eastman Healthcare & Rehab Center (the “Facility”). At all relevant times, the Facility was owned by the ~~Company~~Company’s wholly owned subsidiary Dodge NH, LLC and leased to Eastman Health & Rehab LLC, an affiliate of Cadence Healthcare, as lease operator. Neither the Company nor any affiliate of the Company had any involvement in patient care at the time of the incident ~~complained of.~~for which complaint was made. The Company relies upon well-settled Georgia law that a landlord has no liability for patient care. The landlord is Dodge NH, LLC. Global Eastman, LLC was not formed as a legal entity during the period of the incident and did not assume the past liabilities as part of the OTA with the receivership of Eastman Healthcare & Rehab LLC which was effective July 1, 2020. Global Eastman LLC was formed on November 21, 2019. We strongly deny any liability and intend to vigorously defend. We believe that the likelihood of a material adverse outcome is ~~extremely~~ remote.

In the matter of Austin.

On December 23, 2020, we received written notice from an attorney of the intent to assert an action for damages against Dodge NH, LLC, which is our subsidiary that owns the nursing facility in Eastman Georgia. The action arises from the shooting death outside of the facility of a woman that worked for our cleaning contractor that cleaned the nursing home. The woman was shot by her former boyfriend who then committed suicide. The incident occurred in December 2019 when the facility was operated by a third-party operator who was in receivership. We do not believe there is any basis in law or fact to hold the owner of the real estate liable, and as a result management has concluded that the likelihood of a material adverse result is remote.

In re: Providence HR, LLC v. CRM of Warrenton, LLC, United States Bankruptcy Court, Middle District of Georgia, Macon Division, Case No. 21-50201

In re: ALT/WARR, LLC v. CRM of Sparta, LLC, United States Bankruptcy Court, Middle District of Georgia, Macon Division, Case No. 21-50200

These are companion cases arising out of the Company’s election to terminate the operating leases on the Company’s two facilities in Warrenton and Sparta, Georgia. The Company served a Notice of Termination on each facility and in response the lease operators filed voluntary petitions under Chapter 11 of the US Bankruptcy Code. The Company filed Motions for Relief from Stay which was heard by the Court on March 22, 2021. By Order of the Court, the hearing was continued to May 25, 2021. The Court entered an interim Order requiring the lease operators to comply with their leases, including payment of rent, pending the next hearing. In June 2021, the Court entered an Order approving a Lease Termination Agreement, Operations Transfer Agreement and Interim Management Agreement which had been negotiated by the Company and the two operating tenants, CRM of Warrenton, LLC and CRM of Sparta, LLC. The Lease Termination Agreement and Operations Transfer Agreement will become effective upon the granting of a new License by the State of Georgia for the Warrenton and Sparta facilities to two newly formed wholly-owned subsidiaries of the Company: Selectis Sparta, LLC and Selectis Warrenton, LLC. Pending the granting of the new Licenses, the Company is managing the operations of the facilities under the Interim Management Agreement using the licenses of CRM of Warrenton, LLC and CRM of Sparta, LLC.

Item 2. COVID-19 Pandemic

Starting in March 2020, the COVID-19 pandemic, and measures to prevent its spread began to affect us in a number of ways. In our operating portfolio, occupancy trended lower in the second half of the month as government policies and implementation of infection control best practices began to materially limit or close communities to new resident move-ins. In addition, starting in mid-March, operating costs began to rise materially, including for services, labor and personal protective equipment and other supplies, as our operators took appropriate actions to protect residents and caregivers. These trends accelerated in April and May, and are expected to continue through at least June 2021, impacting revenues and net operating income.

The Centers for Disease Control & Prevention (“CDC”) will provide final confirmation of the cases. The Company is engaging in aggressive mitigation efforts in accordance with CDC and state Department of Health guidelines to protect the health and safety of residents while respecting their rights. Employees at all of our facilities are taking several precautions as they care for residents, including, among other things, monitoring themselves for symptoms upon leaving and returning home, and upon arriving at and leaving the skilled nursing facility. They are also wearing masks and other personal protective equipment while caring for residents. Additionally, as of the date of this Report, none of our third-party operators have reported any occurrences of COVID-19 in any of the buildings they are managing. Our operators have also reported to us that they currently have adequate supply levels, including appropriate quantities of Personal Protective Equipment (PPE) for staff. Additionally, as of the date of filing, the Company has received no additional information.

The federal government, as well as state and local governments, have implemented or announced programs to provide financial and other support to businesses affected by the COVID-19 pandemic, some of which benefit or could benefit our company, tenants, operators, borrowers, and managers. While these government assistance programs are not expected to fully offset the negative financial impact of the pandemic, and there can be no assurance that these programs will continue or the extent to which they will be expanded, we are monitoring them closely and have been in active dialogue with our tenants, operators, borrowers, and managers regarding ways in which these programs could benefit them or us.

We expect the trends highlighted above with respect to the impact of the COVID-19 pandemic to continue and, in some cases, accelerate. The extent of the COVID-19 pandemic’s continued effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, the pace at which jurisdictions across the country re-open and restrictions begin to lift, the availability of government financial support to our business, tenants, and operators and whether a resurgence of the outbreak occurs. Due to these uncertainties, we are not able at this time to estimate the ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition, and cash flows but it could be material.

Health Care Regulatory Climate

Since the announcement of the COVID-19 pandemic and beginning as of March 13, 2020, CMS has issued numerous temporary regulatory waivers and new rules to assist health care providers, including skilled nursing facilities, respond to the COVID-19 pandemic. These include, waiving the skilled nursing facility’s 3-day qualifying inpatient hospital stay requirement, flexibility in calculating a new Medicare benefit period, waiving timing for completing functional assessments, waiving requirements for health care professional licensure, survey and certification, provider enrollment, and reimbursement for services performed by telehealth, among many others. CMS also announced a temporary expansion of its Accelerated and Advance Payment Program to allow skilled nursing facilities and certain other Medicare providers to request accelerated or advance payments in an amount up to 100% of the Medicare Part A payments they received from October–December 2019; this expansion was suspended April 26, 2020, in light of other CARES Act funding relief. In addition, CMS has also enhanced requirements for nursing facilities to report COVID-19 infections to local, state, and federal authorities.

On March 26, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), sweeping legislation intended to bolster the nation’s response to the COVID-19 pandemic. In addition to offering economic relief to individuals and impacted businesses, the law expands coverage of COVID-19 testing and preventative services, addresses health care workforce needs, eases restrictions on telehealth services during the crisis, and increases Medicare regulatory flexibility, among many other provisions. Notably, the CARES Act temporarily suspends the 2% across-the-board “sequestration” reduction during the period May 1, 2020, through December 31, 2020, and extends the current Medicare sequester requirement through fiscal year 2030. In addition, the law provides $100 billion in grants to eligible health care providers for health care related expenses or lost revenues that are attributable to COVID-19. On April 10, 2020, CMS announced the distribution of $30 billion in funds to Medicare providers based upon their 2019 Medicare fee for service revenues. Eligible providers must agree to certain terms and conditions in receiving these grants. In addition, the Department of Health and Human Services (“HHS”) has authorized $20 billion of additional funding for providers that have already received funds from the initial distribution of $30 billion. Unlike the first round of funds, which came automatically, providers have to apply for these additional funds and submit the required supporting documentation, using the online portal provided by HHS. Providers must attest to and agree to specific terms and conditions for the use of such funds. HHS will make the additional distributions with the goal of allocating the whole $50 billion proportionally across all providers based on those providers’ proportional share of 2018 net Medicare fee-for-service revenue. CMS is expected to distribute additional funding to Medicaid and potentially other providers, but the details are not yet known.

On December 27, 2020, President Trump signed the Consolidated Appropriations Act, 2021 which provides approximately $900 billion in COVID-19 relief aid. The Act includes an expansion of the PPP program, as well as many other provisions that may have a direct or indirect impact on health care providers like our company.

Additional reforms affecting the payment for, and availability of health care services have been proposed at the federal and state level and adopted by certain states. Increasingly, state Medicaid programs are providing coverage through managed care programs under contracts with private health plans, which is intended to decrease state Medicaid costs. State Medicaid budgets may experience shortfalls due to increased costs in addressing the COVID-19 pandemic. Congress and state legislatures can be expected to continue to review and assess alternative health care delivery systems and payment methodologies. Changes in the law, new interpretations of existing laws, or changes in payment methodologies may have a dramatic effect on the definition of permissible or impermissible activities, the relative costs associated with doing business and the amount of reimbursement by the government and other third-party payors.

Recent Developments Related to COVID-19

In addition to experiencing outbreaks of positive cases and deaths of residents and employees during the pandemic, we and our operators have been required to, and continue to, adapt their operations rapidly throughout the pandemic to manage the spread of the COVID-19 virus as well as the implementation of new treatments and vaccines, and to implement new requirements relating to infection control, personal protective equipment (“PPE”), quality of care, visitation protocols, staffing levels, and reporting, among other regulations, throughout the pandemic. Many of our controlled and third-party operators have reported incurring significant cost increases as a result of the COVID-19 pandemic, with dramatic increases for facilities with positive cases. We believe these increases primarily stem from elevated labor costs, including increased use of overtime and bonus pay, as well as a significant increase in both the cost and usage of PPE, testing equipment and processes and supplies, as well as implementation of new infection control protocols and vaccination programs. In addition, we are experiencing declines, in some cases that are material, in occupancy levels as a result of the pandemic, which declines on average appear to be stabilizing. We believe these declines may be in part due to COVID-19 related fatalities at the facilities, the delay of SNF placement and/or utilization of alternative care settings for those with lower level of care needs, the suspension and/or postponement of elective hospital procedures, fewer discharges from hospitals to SNFs and higher hospital readmittances from SNFs.

While substantial government support, primarily through the federal CARES Act in the U.S. and distribution of PPE, vaccines and testing equipment by federal and state governments, has been allocated to SNFs and to a lesser extent to ALFs, further government support will likely be needed to continue to offset these impacts. It is unclear whether and to what extent such government support will continue to be sufficient and timely to offset these impacts. In particular, it remains unclear as to whether unallocated funds under the Provider Relief Fund will be distributed to our operators in any meaningful way, whether additional funds will be added to the Provider Relief Fund or otherwise allocated to health care operators or our operators, or whether additional Medicaid funds under the recently enacted American Rescue Plan Act of 2021 (the “American Rescue Plan Act”) in the U.S. will ultimately support reimbursement to our operators. Further, to the extent the cost and occupancy impacts on our operators continue or accelerate and are not offset by continued government relief that is sufficient and timely, we anticipate that the operating results of certain of our operators would be materially and adversely affected, some may be unwilling or unable to pay their contractual obligations to us in full or on a timely basis and we may be unable to restructure such obligations on terms as favorable to us as those currently in place.

There are a number of uncertainties we face as we consider the potential impact of COVID-19 on our business, including how long census disruption and elevated COVID-19 costs will last, the impact of vaccination programs and participation levels in those programs in reducing the spread of COVID-19 in our facilities, and the extent to which funding support from the federal government and the states will continue to offset these incremental costs as well as lost revenues. Notwithstanding vaccination programs, we expect that heightened clinical protocols for infection control within facilities will continue for some period; however, we do not know if future reimbursement rates or equipment provided by governmental agencies will be sufficient to cover the increased costs of enhanced infection control and monitoring.

While we continue to believe that longer term demographics will drive increasing demand for needs-based skilled nursing care, we expect the uncertainties to our business described above to persist at least for the near term until we can gain more information as to the level of costs our operators will continue to experience and for how long, and the level of additional governmental support that will be available to them, the potential support our operators may request from us and the future demand for needs-based skilled nursing care and senior living facilities. We continue to monitor the impact of occupancy declines at many of our operators, and it remains uncertain whether and when demand and occupancy levels will return to pre-COVID-19 levels.

Government Regulation and Reimbursement

The healthcare industry is heavily regulated. Our operators, which are primarily based in the U.S., are subject to extensive and complex federal, state and local healthcare laws and regulations. These laws and regulations are subject to frequent and substantial changes resulting from the adoption of new legislation, rules and regulations, and administrative and judicial interpretations of existing law. The ultimate timing or effect of these changes, which may be applied retroactively, cannot be predicted. Changes in laws and regulations impacting our operators, in addition to regulatory non-compliance by our operators, can have a significant effect on the operations and financial condition of our operators, which in turn may adversely impact us. There is the potential that we may be subject directly to healthcare laws and regulations because of the broad nature of some of these regulations, such as the Anti-kickback Statute and False Claims Act, among others.

The U.S. Department of Health and Human Services (“HHS”) declared a public health emergency on January 31, 2020, following the World Health Organization’s decision to declare COVID-19 a public health emergency of international concern. This declaration, which has been extended through July 20, 2021, allows HHS to provide temporary regulatory waivers and new reimbursement rules designed to equip providers with flexibility to respond to the COVID-19 pandemic by suspending various Medicare patient coverage criteria and documentation and care requirements, including, for example, suspension of the three-day prior hospital stay coverage requirement and expanding the list of approved services which may be provided via telehealth. These regulatory actions could contribute to a change in census volumes and skilled nursing mix that may not otherwise have occurred. It remains uncertain when federal and state regulators will resume enforcement of those regulations which are waived or otherwise not being enforced during the public health emergency due to the exercise of enforcement discretion.

These temporary changes to regulations and reimbursement, as well as emergency legislation, including the CARES Act enacted on March 27, 2020, and discussed below, continue to have a significant impact on the operations and financial condition of our operators. The extent of the COVID-19 pandemic’s effect on the Company’s and our operators’ operational and financial performance will depend on future developments, including the sufficiency and timeliness of additional governmental relief, the duration, spread and intensity of the outbreak, the impact of new vaccine distributions on our operators and their populations, as well as the difference in how the pandemic may impact SNFs in contrast to ALFs, all of which developments and impacts are uncertain and difficult to predict. Due to these uncertainties, we are not able at this time to estimate the effect of these factors on our business; however, the adverse impact on our business, results of operations, financial condition and cash flows could be material.

A significant portion of our operators’ revenue is derived from government-funded reimbursement programs, consisting primarily of Medicare and Medicaid. As federal and state governments continue to focus on healthcare reform initiatives, efforts to reduce costs by government payors will likely continue. Significant limits on the scope of services reimbursed and/or reductions of reimbursement rates could therefore have a material adverse effect on our results of operations and financial condition. Additionally, new and evolving payor and provider programs that are tied to quality and efficiency could adversely impact our tenants’ and operators’ liquidity, financial condition or results of operations, and there can be no assurance that payments under any of these government health care programs are currently, or will be in the future, sufficient to fully reimburse the property operators for their operating and capital expenses.

The following is a discussion of recent developments regarding certain U.S. laws and regulations generally applicable to our operators, and in certain cases, to us, and their impact.

Reimbursement Changes Related to COVID-19:

U.S. Federal Stimulus Funds, through the CARES Act and Provider Relief Fund, appropriating $178 Billion to Health Care Providers. In response to the pandemic, Congress enacted a series of economic stimulus and relief measures throughout 2020. On March 18, 2020, the Families First Coronavirus Response Act was enacted in the U.S., providing a temporary 6.2% increase to each qualifying state and territory’s Medicaid Federal Medical Assistance Percentage (“FMAP”) effective January 1, 2020. The temporary FMAP increase will extend through the last day of the calendar quarter in which the public health emergency terminates. States will make individual determinations about how this additional Medicaid reimbursement will be applied to SNFs, if at all.

In a further response to the pandemic, the CARES Act authorized approximately $178 Billion to be distributed through the Public Health and Social Services Emergency Fund (“Provider Relief Fund”) to reimburse eligible healthcare providers for health care related expenses or lost revenues that are attributable to coronavirus. The Provider Relief Fund is administered under the broad authority and discretion of HHS and recipients are not required to repay distributions received to the extent they are used in compliance with applicable requirements.

HHS began distributing Provider Relief Fund grants in April 2020 and has made grants available to various provider groups in three general phases. In May 2020, HHS announced that approximately $9.5 Billion in targeted distributions would be made available to eligible skilled nursing facilities, approximately $2.5 Billion of which were composed of performance-based incentive payments tied to a facility’s infection rate. Approximately $8.5 billion in additional funds were added to the Provider Relief Fund through the American Rescue Plan Act enacted on March 11, 2021; however, these funds are limited to rural providers and suppliers.

As of March 15, 2021, based on data published by HHS, it appears that less than $29 billion of the Provider Relief Fund remains unallocated. HHS continues to evaluate and provide allocations of, and issue regulations and guidance regarding, grants made under the CARES Act and related legislation. There are substantial uncertainties regarding the extent to which our operators will receive funds which have not been allocated, whether additional funds will be allocated to the Provider Relief Fund, health care providers or senior care providers and whether additional payments will be distributed to providers, the financial impact of receiving any of these funds on their operations or financial condition, and whether operators will be able to meet the compliance requirements associated with the funds. HHS continues to evaluate and provide allocations of, and issue regulation and guidance regarding, grants made under the CARES Act.

The CARES Act and related legislation also made other forms of financial assistance available to healthcare providers, which have the potential to impact our operators to varying degrees. This assistance includes Medicare and Medicaid payment adjustments and an expansion of the Medicare Accelerated and Advance Payment Program, which made available accelerated payments of Medicare funds in order to increase cash flow to providers. These payments are loans that providers must repay. Additionally, CMS suspended Medicare sequestration payment adjustments, which would have otherwise reduced payments to Medicare providers by 2%, from May 1, 2020, through December 31, 2021, but also extended sequestration through 2030. While not limited to healthcare providers, the CARES Act additionally provided payroll tax relief for employers, allowing them to defer payment of employer Social Security taxes that are otherwise owed for wage payments made after March 27, 2020, through December 31, 2020 to December 31, 2021 with respect to 50% of the payroll taxes owed, with the remaining 50% deferred until December 31, 2022.

Quality of Care Initiatives and Additional Requirements Related to COVID-19:

In addition to COVID-19 reimbursement changes, several regulatory initiatives announced in 2020 and the first quarter of 2021 focused on addressing quality of care in long-term care facilities, including those related to COVID-19 testing and infection control protocols, vaccine protocols, staffing levels, reporting requirements, and visitation policies, as well as increased inspection of nursing homes. For example, recent updates to the Nursing Home Care website and the Five Star Quality Rating System include revisions to the inspection process, adjustment of staffing rating thresholds and the implementation of new quality measures. Although the American Rescue Plan Act did not allocate specific funds to SNF or assisted living facility providers, approximately $200 million was allocated to quality improvement organizations to provide infection control and vaccination uptake support to SNFs.

On June 16, 2020, the U.S. House of Representatives Select Subcommittee on the Coronavirus Crisis announced the launch of an investigation into the COVID-19 response of nursing homes and the use of federal funds by nursing homes during the pandemic. The Select Subcommittee continued to be active throughout the remainder of 2020 and the first quarter of 2021. In March 2021, the Oversight Subcommittee of the House Ways and Means Committee held a hearing on examining the impact of private equity in the U.S. health care system, including the impact on quality of care provided within the skilled nursing industry. These hearings could result in legislation imposing additional requirements on our operators.

Reimbursement Generally:

Medicaid. The American Rescue Plan Act contains several provisions designed to increase coverage, expand benefits, and adjust federal financing for state Medicaid programs. For example, the American Rescue Plan Act increases the FMAP by 10 percentage points for state home and community-based services expenditures beginning April 1, 2021, through March 30, 2022 in an effort to assist seniors and people with disabilities to receive services safely in the community rather than in nursing homes and other congregate care settings. As a condition for receiving the FMAP increase, states must enhance, expand, or strengthen their Medicaid home and community-based services program during this period. These potential enhancements to Medicaid reimbursement funding may be offset in certain states by state budgetary concerns, the ability of the state to allocate matching funds and to comply with the new requirements, the potential for increased enrollment in Medicaid due to unemployment and declines in family incomes resulting from the COVID-19 pandemic, and the potential allocation of state Medicaid funds available for reimbursement away from SNFs in favor of home and community-based programs. These challenges may particularly impact us in states where we have a larger presence, including Florida and Texas. In Texas in particular, several of our operators have historically experienced lower operating margins on their SNFs, as compared to other states, as a result of lower Medicaid reimbursement rates and higher labor costs. Since our operators’ profit margins on Medicaid patients are generally relatively low, more than modest reductions in Medicaid reimbursement or an increase in the percentage of Medicaid patients has in the past and may in the future adversely affect our operators’ results of operations and financial condition, which in turn could adversely impact us.

Medicare. Payments to providers continue to be increasingly tied to quality and efficiency. The Patient Driven Payment Model (“PDPM”), which was designed by CMS to improve the incentives to treat the needs of the whole patient, became effective October 1, 2019. Prior to COVID-19, we believed that certain of our operators could realize efficiencies and cost savings from increased concurrent and group therapy under PDPM and some had reported early positive results. Given the ongoing impacts of COVID-19, many operators are and may continue to be restricted from pursuing concurrent and group therapy and unable to realize these benefits. Additionally, our operators continue to adapt to the reimbursement changes and other payment reforms resulting from the value-based purchasing programs applicable to SNFs under the 2014 Protecting Access to Medicare Act, which became effective on October 1, 2018. These reimbursement changes have had and may, together with any further reimbursement changes to PDPM, in the future have an adverse effect on the operations and financial condition of some operators and could adversely impact the ability of operators to meet their obligations to us.

Department of Justice and Other Enforcement Actions:

SNFs are under intense scrutiny for ensuring the quality of care being rendered to residents and appropriate billing practices conducted by the facility. The Department of Justice (“DOJ”) has historically used the False Claims Act to civilly pursue nursing homes that bill the federal government for services not rendered or care that is grossly substandard. In 2020, the DOJ launched a National Nursing Home Initiative to coordinate and enhance civil and criminal enforcement actions against nursing homes with grossly substandard deficiencies. Such enforcement activities are unpredictable and may develop over lengthy periods of time. An adverse resolution of any of these enforcement activities or investigations incurred by our operators may involve injunctive relief and/or substantial monetary penalties, either or both of which could have a material adverse effect on their reputation, business, results of operations and cash flows.

Item 1A. Risk Factors

COVID

The COVID-19 pandemic has subjected our business, operations, and financial condition to a number of risks including the risks described in greater detail in the Management’s Discussion and Analysis section of this Report, including, but not limited to, those discussed below:

●	Risks Related to Revenue: Our revenues and our operators’ revenues are dependent, in part, on occupancy. In addition to the impact of increases in mortality rates on occupancy of our operating facilities, the ongoing COVID-19 pandemic has prevented prospective occupants and their families from visiting our facilities and limited the ability of new occupants to move into our facilities due to heightened move-in criteria and screening. Although the ongoing impact of the pandemic on occupancy remain uncertain, occupancy of our operating and triple-net properties could further decrease. Such a decrease could affect the net operating income of our operating properties and the ability of our triple-net operators to make contractual payments to us.

●	Risks Related to Operator and Tenant Financial Condition: In addition to the risk of decreased revenue from tenant and operator payments, the impact of the COVID-19 pandemic creates a heightened risk of tenant and operator, bankruptcy or insolvency due to factors such as decreased occupancy, medical practice disruptions resulting from stay-at-home orders, increased health and safety and labor expenses or litigation resulting from developments related to the COVID-19 pandemic. Although our operating lease agreements provide us with the right to evict a tenant, demand immediate payment of rent and exercise other remedies, the bankruptcy and insolvency laws afford certain rights to a party that has filed for bankruptcy or reorganization. A tenant, operator, in bankruptcy or subject to insolvency proceedings may be able to limit or delay our ability to collect unpaid rent in the case of a lease. In addition, if a lease is rejected in a tenant bankruptcy, our claim against the tenant may be limited by applicable provisions of the bankruptcy law. We may be required to fund certain expenses (e.g., real estate taxes and maintenance) to preserve the value of an investment property, avoid the imposition of liens on a property and/or transition a property to a new tenant. In some past instances, we have terminated our lease with a tenant and relet the property to another tenant; however, our ability to do so may be severely limited under current conditions due to the industry and macroeconomic effects of the COVID-19 pandemic. If we cannot transition a leased property to a new tenant because of the COVID-19 pandemic or for other reasons, we may take possession of that property, which may expose us to certain successor liabilities. Publicity about the operator’s financial condition and insolvency proceedings, particularly considering ongoing publicity related to the COVID-19 pandemic, may also negatively impact their and our reputations, decreasing customer demand and revenues. Should such events occur, our revenue and operating cash flow may be adversely affected.

●	Risks Related to Operations: Across all of our properties, we and our operators have incurred increased operational costs as a result of the introduction of public health measures and other regulations affecting our properties and our operations, as well additional health and safety measures adopted by us and our operators related to the COVID-19 pandemic, including increases in labor and property cleaning expenses and expenditures related to our efforts to procure PPE and supplies on behalf of our operators. Such operational costs may increase in the future based on the duration and severity of the pandemic or the introduction of additional public health regulations. Operators and tenants are also subject to risks arising from the unique pressures on seniors housing and medical practice employees during the COVID-19 pandemic. As a result of difficult conditions and stresses related to the COVID-19 pandemic, employee morale and productivity may suffer and additional pay, such as hazard pay, may not be sufficient to retain key operator and tenant employees. In addition, our operations or those of our operators or tenants may be adversely impacted if a significant number of our employees or those of our operators or tenants’ contract COVID-19. Although we continue to undertake extensive efforts to ensure the safety of our properties, employees and residents and to provide operator support in this regard, the impact of the COVID-19 pandemic on our facilities could result in additional operational costs and reputational and litigation risk to us and our operators. As a result of the COVID-19 pandemic, operator and tenant cost of insurance is expected to increase and such insurance may not cover certain claims related to COVID-19. Our exposure to COVID-19 related litigation risk may be increased if the operators or tenants of the relevant facilities are subject to bankruptcy or insolvency. In addition, we are facing increased operational challenges and costs resulting from logistical challenges such as supply chain interruptions, business closures and restrictions on the movement of people.

●	Risks Related to Property Acquisitions and Dispositions: As a result of uncertainty regarding the length and severity of the COVID-19 pandemic and the impact of the pandemic on our business and related industries, our investments in and acquisitions of senior housing and health care properties, as well as our ability to transition or sell properties with profitable results, may be limited. We have a significant development portfolio and have not ~~experience~~experienced significant delays or disruptions but may in the future. Such disruptions to acquisition, disposition and development activity may negatively impact our long-term competitive position.

●	Risks Related to Liquidity: The COVID-19 pandemic and related public health measures implemented by governments worldwide has had severe global macroeconomic impacts and has resulted in significant financial market volatility. An extended period of volatility or a downturn in the financial markets could result in increased cost of capital. If our access to capital is restricted or our borrowing costs increase as a result of developments in financial markets relating to the pandemic, our operations and financial condition could be adversely impacted. In addition, a prolonged period of decreased revenue and limited acquisition and disposition activity operations could adversely affect our financial condition and long-term growth prospects and there can also be no assurance that we will not face credit rating downgrades. Future downgrades could adversely affect our cost of capital, liquidity, competitive position and access to capital markets.

The events and consequences discussed in these risk factors could, in circumstances we may not be able to accurately predict, recognize or control, have a material adverse effect on our business, growth, reputation, prospects, financial condition, operating results, cash flows, liquidity, ability to pay dividends and stock price. As the COVID-19 pandemic continues to adversely affect our operating and financial results, it may also have the effect of heightening many of the other risks described in this Report.

SEC ADMINISTRATIVE ORDER

On September 25, 2020, the SEC issued an Administrative Order against Sabra Capital Partners, LLC and Zvi Rhine requiring that those respondents cease and desist from further violations of certain federal securities laws. The full text of that Order is a matter of public record and can be found at the SEC’s website: ~~www.sec.gov~~.www.sec.gov. Following the entry of that Order, on September 29, 2020, Mr. Rhine voluntarily resigned all positions with the Company, including as a Director, President and CFO of the Company. ~~The Company intends to engage a new CFO and is actively recruiting.~~ Effective October 1, 2020, the Company entered into a consulting agreement with Mr. ~~Rhine which is terminable by either party on 30 days’ notice after December 31, 2020.~~Rhine. In mid-December 2020, the Company advised Mr. Rhine ~~will~~that it would not be ~~paid~~renewing his consulting agreement beyond the termination date. The Company has discovered several matters involving a ~~fee of $15,000 per month. The agreement contains customary covenants concerning corporate opportunity and non-compete.~~financial benefit undertaken by Mr. Rhine ~~will provide consulting services related to~~that had previously been unknown by the ~~Company’s operations, but under no circumstances will those services include or relate to, directly or indirectly,~~other members of the ~~Company’s financial management~~Board and ~~reporting. Nevertheless, it~~were unauthorized by the Company. The Company is ~~likely that~~doing a thorough investigation into Mr. Rhine’s ~~resignation may have~~actions both as a ~~disruptive effect on~~former employee and subsequently as a consultant to determine the ~~Company’s near-term operations.~~full and exact nature and extent of any unauthorized conduct.

The Company has hired a new CFO effective November 30, 2020.

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

None, except as previously disclosed.

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

3131.1		Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002*

3231.2		Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002*

32.1		Certification of Chief Executive Officer ~~and~~Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

32.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

~~101.INS~~
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

3533

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.

	SELECTIS HEALTH, INC. f/k/a GLOBAL HEALTHCARE REIT, INC.

Date: ~~November 18, 2020~~August 16, 2021	By:	/s/ Lance Baller
		Lance Baller, Chief Executive Officer (Principal Executive Officer) ~~and~~

Date: August 16, 2021	By:	/s/ Brandon Thall
		Brandon Thall, Chief Financial Officer ~~(Principal~~ (Principal Accounting Officer)

3634

Volatility		115.2% - 117.3	%
Risk-free Interest Rate		0.71% - 1.45	%
Exercise Price	$	0.50
Fair Value of Common Stock	$	0.20 - $0.24
Expected Life		1.7 – 1.8 years

	Face		Principal Outstanding at				Stated	Maturity
Property	Amount		June 30, 2020		December 31, 2019		Interest Rate	Date

Southern Hills Retirement Center ⁽¹⁾⁽²⁾	$	7,227,074	$	7,227,074	$	7,230,582	4.75% Fixed	June 18, 2023
Eastman Nursing Home ⁽¹⁾⁽³⁾		3,570,000		3,394,866		3,451,593	5.50% Fixed	October 26, 2021
Goodwill Nursing Home ⁽¹⁾⁽⁴⁾		4,268,878		4,242,171		4,286,237	4.75% Fixed	April 12, 2025
Warrenton Nursing Home ⁽⁵⁾		3,768,600		3,704,959		3,739,942	3.73% Fixed	July 1, 2049
Edward Redeemer Health & Rehab⁽⁶⁾		2,065,804		2,065,773		2,074,958	4.75% Fixed	June 29, 2021
Glen Eagle Health and Rehab⁽⁷⁾		3,119,214		3,036,436		3,083,006	5.50% Fixed	May 25, 2021
Providence of Sparta Nursing Home ⁽⁸⁾		3,039,300		2,893,371		2,923,013	3.50% Fixed	November 1, 2047
Meadowview Healthcare Center ⁽⁹⁾		3,000,000		2,834,400		2,869,200	6.00% Fixed	October 30, 2022
GL Nursing Home⁽¹⁰⁾		5,000,000		4,618,006		4,618,006	Prime Plus 1.50%/ 5.75% Floor	August 3, 2037
Higher Call Nursing Center ⁽¹¹⁾		1,051,721		1,045,640		-	Prime Plus 2.00%	March 3, 2040

			$	35,062,696	$	34,276,537

	Face		Principal Outstanding at				Stated Interest	Maturity
Property	Amount		June 30, 2020		December 31, 2019		Rate	Date
Goodwill Nursing Home ⁽¹⁾	$	2,180,000	$	1,053,600	$	1,536,000	13% ⁽¹⁾ Fixed		December 31, 2019
Higher Call Nursing Center ⁽²⁾		150,000		141,961		-	8% Fixed		April 1, 2024

			$	1,195,561	$	1,536,000

Years
2020	$	12,135,289	⁽¹⁾
2021		8,182,778
2022		1,960,552
2023		7,595,127
2024		352,829
2025 and after		10,461,851

	$	40,688,426

	June 30, 2020			June 30, 2019

Outstanding Non-Vested Restricted Stock Units, Beginning		75,000			-
Granted		-			545,454
Vested		(75,000	)		(409,091	)

Outstanding Non-Vested Restricted Stock Units, Ending		-			136,363

Years
2020	$	873,048
2021		1,764,942
2022		1,796,400
2023		1,828,480
2024		1,860,867
2025 and Thereafter		3,223,628

	$	11,347,365

	2020		2019

Beginning Balance January 1	$	-	$	2,785

Change in Fair Value of Warrant Liability		-		(2,758	)

Ending Balance, June 30	$	-	$	27

Property Name	Location	Effective Percentage Equity Ownership			Date Acquired	Gross Square Feet		Purchase Price		Outstanding Debt at June 30, 2020

Eastman Nursing Home (a/k/a Middle Georgia)⁽¹⁾	Eastman, GA		100	%	3/15/2013		28,808	$	5,000,000	$	3,969,841

Warrenton Health and Rehabilitation	Warrenton, GA		100	%	12/31/2013		26,894	$	3,500,000	$	3,704,959

Southern Hills Retirement Center	Tulsa, OK		100	%	2/7/2014		104,192	$	2,000,000	$	7,227,074

Goodwill Nursing Home (a/k/a Archway)⁽¹⁾	Macon, GA		85	%	5/19/2014		46,314	$	7,185,000	$	5,295,771

Edwards Redeemer Health & Rehab (a/k/a Tiaps)	Oklahoma City, OK		100	%	9/16/2014		31,939	$	3,142,233	$	2,065,773

Providence of Sparta Nursing Home	Sparta, GA		100	%	9/16/2014		19,441	$	2,836,930	$	2,893,371

Meadowview Healthcare Center	Seville, OH		100	%	9/30/2014		27,500	$	3,000,000	$	2,834,400

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

Glen Eagle Healthcare & Rehab	Abbeville, GA		100	%	5/25/2016		29,393	$	2,100,000	$	3,036,436

Higher Call Nursing Center⁽¹⁾	Quapaw, OK		100	%	3/2/2020		20,694	$	1,300,000	$	1,187,601

Property Name	2020 Base Revenue Per Lease		Operating Lease Expiration

Eastman Nursing Home (a/k/a Middle Georgia)	$	720,000		October 31, 2022
Warrenton Health and Rehabilitation	$	642,846		June 30, 2026
Southern Hills Retirement Center	$	12,000		-
Goodwill Nursing Home (a/k/a Archway)	$	560,138		February 1, 2027
Edwards Redeemer Health & Rehab (a/k/a Tiaps)	$	574,958		October 31, 2022
Providence of Sparta Nursing Home	$	494,496		June 30, 2026
Meadowview Healthcare Center	$	-		November 30, 2023
Grand Prairie Nursing Home	$	-		-
Glen Eagle Healthcare & Rehab	$	-		-
Higher Call Nursing Center	$	-

	Total Contractual Terms		Less Than 1 Year		1 – 3 Years		3 – 5 Years		More Than 5 Years
Notes Payable - Principal	$	40,688,426	$	14,380,281	$	15,307,172	$	4,202,025	$	6,798,948
Notes Payable - Interest		7,239,368		1,489,315		1,861,203		897,581		2,991,269

Total Contractual Obligations	$	47,927,794	$	15,869,596	$	17,168,375	$	5,099,606	$	9,790,217