Global Medical REIT (GMRE) 10-Q 2015 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

  X. QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

OR

 . TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________.

Commission file number: 333-177592

Global Medical REIT Inc.

 (Exact name of registrant as specified in its charter)

Maryland	46-4757266
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4800 Montgomery Lane, Suite 450 Bethesda, MD	20814
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (202) 524-6851

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. X.Yes .No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 X. No.

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filter	.	Accelerated filter	.
Non-accelerated filter (Do not check if a smaller reporting company)	.	Smaller reporting company	X.

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

Class	Outstanding November 3, 2015
Common Stock, $0.001 par value per share	250,000

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
Item 1.	Financial Statements
	Balance Sheets – September 30, 2015 (unaudited) and December 31, 2014	4
	Statements of Operations (unaudited) – Three and Nine Months Ended September 30, 2015 and September 30, 2014	5
	Statements of Cash Flows (unaudited) – Nine Months Ended September 30, 2015 and September 30, 2014	6
	Notes to the Unaudited Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	21
Signatures		23

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CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements.” Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

CERTAIN TERMS USED IN THIS REPORT

When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to Global Medical REIT Inc., unless otherwise indicated.

“ZH International Holdings Limited” (formerly known as “Heng Fai Enterprises, Ltd.”) a Hong Kong company which owns or controls ZH USA, LLC, our majority shareholder.

“ZH USA, LLC” (formerly known as “HFE USA, LLC”) a Delaware limited liability company owned by ZH International Holdings Limited. ZH USA, LLC is our majority shareholder.

“Inter-American Management” refers to Inter-American Management, LLC, a Delaware limited liability company owned or controlled by an affiliate of ZH USA, LLC, our majority shareholder.

“SEC” refers to the United States Securities and Exchange Commission.

“Common stock” refers to the common shares in our capital stock.

Our financial statements are stated in United States dollars (US $) and are prepared in accordance with United States generally accepted accounting principles.

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GLOBAL MEDICAL REIT INC.

Balance Sheets

		As of
		September 30,		December 31,
		2015		2014
		(unaudited)
Assets
Investment in real estate:
Land	$	1,859,400	$	572,400
Building and improvements		34,123,034		23,801,362
		35,982,434		24,373,762
Less: accumulated depreciation		(776,071)		(329,580)
Investment in real estate, net		35,206,363		24,044,182
Cash and cash equivalents		300,579		301,402
Tenant receivables		25,058		-
Deferred rent receivable and other assets		1,226		2,793
Deferred financing costs, net		339,576		291,691
Total assets	$	35,872,802	$	24,640,068
Liabilities and Shareholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	315,816	$	338,764
Due to related parties, net		580,283		330,768
Convertible debenture, due to majority shareholder		9,991,940		5,446,102
Notes payable to majority shareholder		388,195		38,195
Notes payable related to acquisitions		23,880,796		16,760,000
Total liabilities		35,157,030		22,913,829
Shareholders' equity:
Preferred stock, $0.001 par value, 100,000,000 shares authorized; no shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively		-		-
Common stock $0.001 par value, 500,000,000 shares authorized at September 30, 2015 and December 31, 2014, respectively; 250,000 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively		250		250
Additional paid-in capital		3,011,790		3,011,790
Accumulated deficit		(2,296,268)		(1,285,801)
Total shareholders' equity		715,772		1,726,239
Total liabilities and shareholders' equity	$	35,872,802	$	24,640,068

The accompanying notes are an integral part of these unaudited financial statements.

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GLOBAL MEDICAL REIT INC.

Statements of Operations

(unaudited)

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2015		2014		2015		2014
Revenue
Rental revenue	$	482,131	$	408,932	$	1,392,669	$	522,030
Other income		4,971		70		12,471		797
Total revenue		487,102		409,002		1,405,140		522,827
Expenses
Management fees		90,000		90,000		270,000		180,000
General and administrative		377,810		51,941		518,591		506,448
Depreciation expense		153,148		138,528		446,491		177,245
Interest expense		363,937		314,139		988,825		405,145
Total expenses		984,895		594,608		2,223,907		1,268,838
Net loss	$	(497,793)	$	(185,606)	$	(818,767)	$	(746,011)
Net loss per share – Basic and Diluted	$	(1.99)	$	(1.08)	$	(3.28)	$	(7.65)
Weighted average shares outstanding – Basic and Diluted		250,000		172,500		250,000		97,509

The accompanying notes are an integral part of these unaudited financial statements.

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GLOBAL MEDICAL REIT INC.

Statements of Cash Flows

(unaudited)

		Nine Months Ended September 30,
		2015		2014
Operating activities
Net loss	$	(818,767)	$	(746,011)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		446,491		177,245
Amortization of deferred financing costs		89,850		36,077
Changes in operating assets and liabilities:
Tenant receivables		(25,058)		-
Deferred rent receivable and other assets		1,567		-
Accounts payable and accrued expenses		(44,248)		186,421
Accrued management fees due to related party		270,000		180,000
Net cash used in operating activities		(80,165)		(166,268)
Investing activities
Loans to related party		(71,683)		(42,915)
Purchase of land, buildings and improvements		(11,608,672)		(24,373,762)
Net cash used in investing activities		(11,680,355)		(24,416,677)
Financing activities
Loans from related parties		51,198		63,000
Proceeds from convertible debenture, due to majority shareholder		4,545,838		8,378,142
Proceeds from notes payable to majority shareholder		350,000		345,053
Payments on notes payable to majority shareholder		-		(306,858)
Proceeds from notes payable related to acquisitions		7,377,500		16,760,000
Principal payments on notes payable related to acquisitions		(256,704)		-
Dividends paid to common shareholders		(170,400)		(63,920)
Payment of deferred financing costs		(137,735)		(357,563)
Net cash provided by financing activities		11,759,697		24,817,854
Net (decrease) increase in cash and cash equivalents		(823)		234,909
Cash and cash equivalents—beginning of period		301,402		3,501
Cash and cash equivalents—end of period	$	300,579	$	238,410
Supplemental cash flow information:
Cash payments for interest	$	961,383	$	-
Noncash financing activity:
Notes payable to majority shareholder converted to equity	$	-	$	2,932,040

The accompanying notes are an integral part of these unaudited financial statements.

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GLOBAL MEDICAL REIT INC.

Notes to the Unaudited Financial Statements

Note 1 – Organization

Global Medical REIT Inc. (the “Company”) was incorporated in the state of Nevada on March 18, 2011 under the name Scoop Media, Inc. (“Scoop Media”), which was acquired by the Hong Kong company ZH International Holdings Limited (formerly known as Heng Fai Enterprises, Ltd.) in 2013. The Company changed to its current name effective January 6, 2014 in connection with its re-domestication into a Maryland corporation. The Company’s primary investor goal is to provide attractive risk-adjusted returns and maximize sustainable distributable cash flow. The Company’s principal investment strategy is to act on the opportunities created by the changing healthcare environment by acquiring, selectively developing and managing locally critical medical properties that are core to medical operator businesses and that meet our investment criteria. In general, the Company seeks to acquire or develop specialty medical properties in desirable markets with tenants who are expected to prosper in the changing healthcare delivery environment. The Company focuses on specialty medical properties, including medical office buildings, outpatient treatment and diagnostic facilities, physical group practice clinics, ambulatory surgery centers and specialty hospitals and treatment centers.

On June 29, 2015, Joy Town Inc., a company incorporated in the British Virgin Islands, acquired a controlling interest in Heng Fai Enterprises, Ltd.On September 7, 2015, Heng Fai Enterprises, Ltd. changed its name to ZH International Holdings Limited.

ZH International Holdings Limited, is a Hong Kong listed company engaged in real estate development, investments, management and sales, hospitality management and investments and REIT management. ZH International Holdings Limited owns ZH USA, LLC, (formerly known as HFE USA, LLC) the Company’s majority shareholder. As of September 30, 2015,ZH USA, LLC owns an aggregate of 248,825 (or 99.5%) of the Company’s outstanding common stock.

Note 2 – Summary of Significant Accounting Policies

Basis of presentation

The accompanying financial statements are unaudited and include the accounts of the Company. The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the accompanying financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s audited financial statements and notes thereto for the fiscal year ended December 31, 2014. In the opinion of management, all adjustments of a normal and recurring nature necessary for a fair presentation of the financial statements for the interim periods have been made.

Note 3 – Properties

Description of Properties

On September 25, 2015, the Company acquired a combined approximately 27,193 square foot surgery center and medical office building located in West Mifflin, Pennsylvania and the adjacent parking lot for approximately $11.35 million (approximately $11.6 million after including legal and related fees). The facilities are operated by Associates in Ophthalmology, LTD and Associates Surgery Centers, LLC, respectively, and leased back to those entities by the Company via two separate lease agreements that expire in 2030. Each lease has two successive options by the tenants to renew for five year periods. Base rent increases by 2% each lease year commencing on October 1, 2018. The property is owned fee simple. In connection with the acquisition of the facilities, the Company borrowed $7,377,500 from Capital One, National Association (“Capital One”) and funded the remainder of the purchase price with the proceeds from a convertible debenture (the “Convertible Debenture”) it issued to its majority shareholder in the total amount of $4,545,838. Refer to Note 4 – “Notes Payable Related to Acquisitions” and Note 6 – “Related Party Transactions” for details regarding the funding of this transaction.

The Company also owns an approximately 8,840 square foot medical office building known as the Orthopedic Surgery Center, located in Asheville, North Carolina that was acquired on September 19, 2014 for approximately $2.5 million and a 56-bed long term acute care hospital located at 1870 S 75^th Street, Omaha, Nebraska that was acquired on June 5, 2014 for approximately $21.9 million.

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On September 30, 2015, the Company entered into an asset purchase agreement with an unrelated party Star Medreal, LLC, a Texas limited liability company, to acquire an approximately 24,000 square foot acute hospital facility located in Plano, Texas, along with all real property and improvements thereto for approximately $17.5 million. Additionally, the Company is obligated to pay a development fee of $500,000. The property will be leased back via a triple net lease agreement that expires in 2035. The tenant has two successive options to renew the lease for five year periods. The terms of the lease also provide for an allowance for a 6,400 square foot expansion for an incremental amount up to $2.75 million to be paid by the Company. The acquisition will be funded by third party debt and convertible borrowings from the Company’s majority shareholder. The acquisition is expected to be completed by no later than December 31, 2015.

Tenant Receivables

As of September 30, 2015, the Company’s tenant receivable balance includes rent receivable from the West Mifflin facility of $13,061 that was earned since its acquisition on September 25, 2015 and rent due from the Omaha facility of $11,997 derived from a contractual rent increase that commenced in July 2015. These amounts are deemed collectible as of September 30, 2015.

Deferred Rent Receivable and Other Assets

As of September 30, 2015 this amount represents the Company’s deferred rent receivable balance derived from the straight-line revenue recognition from the West Mifflin facility, commencing with its acquisition on September 25, 2015.

Note 4 – Notes Payable Related to Acquisitions

West Mifflin Note Payable

In order to finance a portion of the purchase price for the West Mifflin facility, on September 25, 2015 the Company entered into a Term Loan and Security Agreement with Capital One (the “Lender”) to borrower $7,377,500 (the “Loan”). The Loan bears interest at 3.72% per annum and all unpaid interest and principal is due on September 25, 2020 (the “Maturity Date”). Interest is paid in arrears and interest payments begin on November 1, 2015, and on the first day of each calendar month thereafter. Principal payments begin on November 1, 2018 and on the first day of each calendar month thereafter based on an amortization schedule with the principal balance due on the Maturity Date. The Loan may not be prepaid in whole or in part prior to September 25, 2017, thereafter, the Company, at its option, may prepay the Loan at any time, in whole (but not in part) on at least thirty (30) calendar days but not more than sixty (60) calendar days advance written notice. The Loan has an early termination fee of two percent (2%) if prepaid prior to September 25, 2018.

At closing the Company paid the Lender a non-refundable commitment fee of $73,775. If any principal, interest or other sum due by the Company is not paid on the date on which it is due, the Company is obligated to pay to the Lender an amount equal to the lesser of five percent (5%) of such unpaid sum or the maximum amount permitted by applicable laws. All fees hereunder are non-refundable and deemed fully earned when due and payable.

The Term Loan and Security Agreement contains covenants that are customary for similar credit arrangements. These include covenants relating to establishment of reserves for the payment of taxes, insurance and capital replacements (under certain circumstances), maintaining a collection account, financial reporting and notification, payment of indebtedness, taxes and other obligations, and compliance with certain applicable laws. There are also financial covenants that require the Company to (i) maintain a fixed charge coverage ratio (defined as the ratio of EBITDA to fixed charges) commencing December 31, 2015 of not less than 1.00 to 1.00, (ii) not permit the ratio of EBITDA to total indebtedness as of the last day of each calendar quarter, commencing December 31, 2015 and continuing thereafter to be less than 0.09 to 1.00, and (iii) maintain operator EBITDAR as of the last day of each fiscal quarter commencing December 31, 2015 of not less than $6,000,000. The Term Loan and Security Agreement also imposes certain customary limitations and requirements on the Company with respect to, among other things, the maintenance of properties, access to real property, insurance, compliance with laws, maintenance of books and records, inspection rights, environmental matters, indemnity, healthcare operations, right of first refusal for future financing, incurrence of indebtedness and liens, the making of investments, the payment of distributions or making of other restricted payments, healthcare matters, mergers, acquisitions and dispositions of assets, and transactions with affiliates.

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The Term Loan and Security Agreement contains customary events of default, including, without limitation: non-payment of obligations under the Term Loan and Security Agreement when due; the material inaccuracy of any representations or warranties; a violation of covenants in the Term Loan and Security Agreement (subject, in the case of certain such covenants, to cure periods); a default related to other material debt or uninsured loss in excess of $100,000; certain events of bankruptcy or insolvency; judgments for the payment of money in excess of $100,000 in the aggregate that remains unpaid or unstayed and undischarged for a period of 30 days after the date on which the right to appeal has expired; and a change of control of the Company. The occurrence and continuance of an event of default could result in, among other things, amounts owing under the Term Loan and Security Agreement being accelerated, payment of the Early Termination Fee and the Term Loan and Security Agreement being terminated.

During the continuance of any default, the applicable interest rate on all obligations owing under the Term Loan and Security Agreement is the lesser of (a) the maximum rate permitted by applicable law; or (b) 3% per annum over the current interest rate otherwise applicable.

The Company incurred deferred financing costs of $137,735 related to this loan.No interest expense was incurred on the note during the three and nine months ended September 30, 2015 and 2014, respectively.

As of September 30, 2015, scheduled principal payments due in each calendar year listed below are as follows:

2015	$	-
2016		-
2017		-
2018		22,044
2019		136,007
Thereafter		7,219,449
Total Future Payments	$	7,377,500

Omaha Note Payable

In order to finance a portion of the purchase price for a 56-bed long term acute care hospital located in Omaha, Nebraska, on June 5, 2014 the Company entered into a Term Loan and Security Agreement with Capital One, National Association (the “Lender”) to borrower $15.06 million (the “Loan”). The Loan bears interest at 4.91% per annum and all unpaid interest and principal is due on June 5, 2017 (the “Maturity Date”). Interest is paid in arrears. Interest payments began on August 1, 2014 and are due on the first day of each calendar month thereafter. Principal payments began on January 1, 2015 and are due on the first day of each calendar month thereafter based on an amortization schedule with the principal balance due on the Maturity Date. For the nine months ended September 30, 2015 the Company made principal payments in the amount of $231,702.Interest expense on the Loan was $186,702 and $495,275 for the three and nine months ended September 30, 2015, respectively. Interest expense on the Loan was $191,576 and 244,980 for the three and nine months ended September 30, 2014, respectively.

 As of September 30, 2015, scheduled principal payments due in each calendar year listed below are as follows:

2015	$	79,834
2016		325,323
2017		14,423,141
Total Future Payments	$	14,828,298

Asheville Note Payable

In order to finance a portion of the purchase price of an approximately 8,840 square foot medical office building known as the Orthopedic Surgery Center, located in Asheville, North Carolina, on September 15, 2014 the Company entered into a Promissory Note with the Bank of North Carolina to borrow $1.7 million. The note bears interest on the outstanding principal balance at the simple, fixed interest rate of 4.75% per annum and all unpaid principal and interest is due on February 15, 2017. Commencing on October 15, 2014, the Company will make on the 15^th of each calendar month until and including March 15, 2015, monthly payments consisting of interest only. Thereafter, commencing on April 15, 2015, the outstanding principal and accrued interest shall be payable in monthly amortizing payments of $10,986 each on the 15^th day of each calendar month, until and including January 15, 2017. For the nine months ended September 30, 2015 the Company made principal payments in the amount of $25,002.Interest expense on the note was $20,433 and $61,101 for the three and nine months ended September 30, 2015, respectively. No interest expense was incurred on the note during the three and nine months ended September 30, 2014, respectively.

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As of September 30, 2015, scheduled principal payments due in each calendar year listed below are as follows:

2015	$	12,897
2016		52,719
2017		1,609,382
Total Future Payments	$	1,674,998

Deferred Financing Costs

The Company incurred deferred financing costs related to the notes payable obtained for acquisitions. A rollforward of the deferred financing cost balance as of September 30, 2015 is as follows:

Balance as of December 31, 2014, net	$	291,691
Deferred financing costs incurred – nine months ended September 30, 2015		137,735
Amortization expense – nine months ended September 30, 2015		(89,850)
Balance as of September 30, 2015, net	$	339,576

Amortizationexpense was $30,257 and $89,850 for the three and nine months ended September 30, 2015, respectively. Amortization expense was $28,301 and $36,077 for the three and nine months ended September 30, 2014, respectively. Amortization expense is included in the “Interest Expense” line item in the accompanying Statements of Operations.

Note 5 – Shareholders’ Equity

Preferred Stock

The Company’s charter authorizes the issuance of 100,000,000 shares of preferred stock, par value $0.001 per share. As of September 30, 2015 and December 31, 2014, no shares of preferred stock were issued and outstanding.

Common Stock

The Company has 500,000,000 of authorized shares of common stock, $0.001 par value. As of September 30, 2015 and December 31, 2014, there were 250,000 outstanding common shares.

Pursuant to a previously declared dividend approved by the Board of Directors of the Company and in compliance with applicable provisions of the Maryland General Corporation Law, the Company has paid a monthly dividend of $0.0852 per share, an aggregate of $21,300 per month, each month during the period from January 1, 2015 through September 30, 2015. The September 2015 dividend amount of $21,300 was unpaid as of September 30, 2015 and therefore was accrued and included in the line item “Accounts Payable and Accrued Expenses” in the accompanying Balance Sheet as of September 30, 2015. This dividend was paid in October 2015.

Accordingly, during the nine months ended September 30, 2015 the Company recorded total dividends to holders of its common stock of $191,700, of which $170,400 were paid as of September 30, 2015.

Note 6 – Related Party Transactions

Management Agreement

On November 10, 2014,the Company entered into a Management Agreement, with an effective date of April 1, 2014, with Inter-American Management, LLC (the “Manager”), a Delaware limited liability company and an affiliate of the Company. Under the terms of the Management Agreement, the Manager is responsible for designing and implementing our business strategy and administering our business activities and day-to-day operations. For performing these services, the Company will pay the Manager a base management fee equal to the greater of (a) 2.0% per annum of the Company’s net asset value (the value of the Company’s assets less the value of the Company’s liabilities), or (b) $30,000 per calendar month. For the three and nine months ended September 30, 2015, management fees of $90,000 and $270,000, respectively, were incurred and expensed. For the three and nine months ended September 30, 2014, management fees of $90,000 and $180,000, respectively (incurred beginning April 1, 2014), were incurred and expensed. As of September 30, 2015 and December 31, 2014, cumulative management fees of $540,000 and $270,000, respectively, were incurred and expensed by the Company, due to the Manager, and remain unpaid. The unpaid management fee balance is included in the “Due to Related Parties, Net” line item in the accompanying Balance Sheets. Additionally, during the three months ended September 30, 2015 we expensed $227,000 that was paid to the Manager related to the West Mifflin acquisition.

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Allocated General and Administrative Expenses

In the future, the Company may receive an allocation of general and administrative expenses from the Manager that are either clearly applicable to or were reasonably allocated to the operations of the properties. There were no allocated general and administrative expenses from the Manager for the three and nine months ended September 30, 2015 and September 30, 2014, respectively.

Convertible Debenture, Due to Majority Shareholder

As of September 30, 2015 and December 31, 2014, the outstanding principal balance of the Convertible Debenture was $9,991,940 and $5,446,102, respectively. During the three months ended September 30, 2015 ZH USA, LLC loaned the Company $4,545,838 to partially fund the West Mifflin transaction. Interest expense on the Convertible Debenture was $126,545 and $342,599 for the three and nine months ended September 30, 2015, respectively. Interest expense on the Convertible Debenture was $94,262 and $124,088 for the three and nine months ended September 30, 2014, respectively. As discussed in the “Notes Payable to Majority Shareholder” section below, during the nine months ended September 30, 2015, ZH USA, LLC loaned the Company a total of $350,000 in the form of notes payable in order to pay off all accrued interest and unpaid interest on the Convertible Debenture as of March 31, 2015, in the amount of approximately $341,000. Incurred and unpaid interest for the nine months ended September 30, 2015 of $235,169 is owed by the Company on the Convertible Debenture and is classified as “Accounts Payable and Accrued Expenses” on the accompanying Balance Sheets.

The Company analyzed the conversion option in the Convertible Debenture for derivative accounting treatment under ASC Topic 815, “Derivatives and Hedging,” and determined that the instrument does not qualify for derivative accounting. The Company therefore performed an analysis to determine if the conversion option was subject to a beneficial conversion feature and determined that the instrument does not have a beneficial conversion feature.

Notes Payable to Majority Shareholder

During the nine months ended September 30, 2015, ZH USA, LLC made two loans to the Company in the amounts of $250,000 and $100,000 ($350,000 total loaned) in the form of notes payable that were primarily used to pay in full all accrued and unpaid interest on the Convertible Debenture as of March 31, 2015 in the amount of approximately $341,000. As of September 30, 2015 and December 31, 2014, the notes payable to the majority shareholder balance was $388,195 and $38,195, respectively. The notes payable balance is unsecured, due on demand, and non-interest bearing.

Due to related parties, net

A detail of the due to related parties, net balance as of September 30, 2015 and December 31, 2014 is as follows:

		September 30, 2015		December 31, 2014
Due from Manager(a)	$	114,598	$	42,915
Due to Manager – management fees(b)		(540,000)		(270,000)
Due to Manager – other funds(c)		(139,881)		(103,683)
Due to affiliated REIT(c)		(15,000)		-
Due to related parties, net	$	(580,283)	$	(330,768)

(a)

Funds loaned by the Company were primarily used by the Manager for the Asheville facility acquisition and for general corporate purposes. An additional $71,683 was loaned by the Company during the nine months ended September 30, 2015.

(b)

Management fees incurred by the Company and unpaid were $270,000 during the nine months ended September 30, 2015.

(c)

Fund received by the Company were primarily used for general corporate purposes. An additional $51,198 was received by the Company during the nine months ended September 30, 2015.

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Note 7 – Rental Revenue

The aggregate annual minimum cash to be received by the Company on the noncancelable operating leases related to the Omaha, Asheville, and West Mifflin facilities in effect as of September 30, 2015, are as follows in the calendar years listed below.

2015	$	663,775
2016		2,685,284
2017		2,548,786
2018		2,561,584
2019		2,630,556
Thereafter		17,574,709
Total Future Receipts	$	28,664,694

Note 8 – Omaha Land Lease Rent Expense

The Omaha facility land lease currently expires in 2033, subject to future renewal options of up to 50 years by the Company. Under the terms of the land lease, annual rents increase 12.5% every fifth anniversary of the lease and therefore rental expense is recognized by the Company on a straight line basis. During the three and nine months ended September 30, 2015 the Company expensed a total of $46,768 and $61,738 related to this land lease, respectively, which is included in the “General and Administrative” expense line item in the accompanying Statements of Operations.The Company expensed $14,969 related to the land lease during the three and nine months ended September 30, 2014.

The aggregate minimum cash payments to be made by the Company on the non-cancelable Omaha facility related land lease in effect as of September 30, 2015, are as follows in the calendar years listed below.

2015	$	14,969
2016		59,877
2017		59,877
2018		63,619
2019		67,362
Thereafter		1,040,948
Total Future Payments	$	1,306,652

Note 9 – Commitments and Contingencies

Litigation

The Company is not presently subject to any material litigation nor, to its knowledge, is any material litigation threatened against the Company, which if determined unfavorably to the Company, would have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Environmental Matters

The Company follows a policy of monitoring its properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at its properties, the Company is not currently aware of any environmental liability with respect to its properties that would have a material effect on its financial position, results of operations, or cash flows. Additionally, the Company is not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability that management believes would require additional disclosure or the recording of a loss contingency.

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Note 10 – Subsequent Events

On October 6, 2015, the Company entered into an asset purchase agreement with an unrelated party R&K Healthcare Real Estate, L.L.C., a Texas limited liability company, to acquire an 84-bed, approximately 104,369 square foot acute care hospital facility located on 18 acres in Lancaster, Texas, along with all real property and improvements for approximately $20.5 million. The property will be leased back via a triple net lease agreement that expires in 2035. The tenant has two successive options to renew the lease for five year periods. The acquisition will be funded by third party debt and convertible borrowings from the Company’s majority shareholder. The acquisition is expected to be completed by no later than December 31, 2015.

In October 2015 the Company paid the dividend that was declared on September 17, 2015 in the amount of $0.0852 per share to the holders of the Company’s common stock of record as of the close of business on September 29, 2015. The amount of the dividend paid was $21,300.

On October 16, 2015, the Company declared a dividend of $0.0852 per share payable to the holders of its common stock of record at the close of business October 30, 2015. Dividends shall be paid no later than the 20th day of the following month subject to compliance with applicable provisions of the Maryland General Corporation Law. The aggregate amount of the dividend to be paid was $21,300.

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

The following discussion should be read in conjunction with our financial statements included herein, including the notes to those financial statements, included elsewhere in this report, and the Section entitled “Cautionary Statement on Forward-Looking Information” in this report. As discussed in more detail in the Section entitled “Cautionary Statement on Forward-Looking Information,” this discussion contains forward-looking statements which involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements.

Overview

Global Medical REIT Inc. (the “Company”) was incorporated in the state of Nevada on March 18, 2011 under the name Scoop Media, Inc. (“Scoop Media”), which was acquired by the Hong Kong company ZH International Holdings Limited (formerly known as Heng Fai Enterprises, Ltd.) in 2013.ZH International Holdings Limited is a Hong Kong listed company engaged in real estate development, investments, management and sales, hospitality management and investments and REIT management.The Company re-domiciled into a Maryland corporation effective January 6, 2014 and as discussed below its principal investment strategy is to develop and manage a portfolio of real estate assets in the healthcare industry, which includes the real estate of hospitals and medical centers.

On June 29, 2015, Joy Town Inc., a company incorporated in the British Virgin Islands, acquired a controlling interest in Heng Fai Enterprises, Ltd.On September 7, 2015, Heng Fai Enterprises, Ltd. changed its name to ZH International Holdings Limited.

ZH International Holdings Limited, is a Hong Kong listed company engaged in real estate development, investments, management and sales, hospitality management and investments and REIT management. ZH International Holdings Limited owns ZH USA, LLC, (formerly known as HFE USA, LLC) our majority shareholder. As of September 30, 2015,ZH USA, LLC owns an aggregate of 248,825 (or 99.5%) of the Company’s outstanding common stock.

Business Strategy

Our primary investor goal is to provide attractive risk-adjusted returns and maximize sustainable distributable cash flow. Our principal investment strategy is to act on the opportunities created by the changing healthcare environment by acquiring, selectively developing and managing locally critical medical properties that are core to medical operator businesses and that meet our investment criteria. In general, we seek to acquire or develop specialty medical properties in desirable markets with tenants who are expected to prosper in the changing healthcare delivery environment. We are focused on owning, operating, and developing and managing specialty medical properties located initially throughout the United States and in future internationally. Medical properties in which we seek to invest include (but are not limited to): (1) Single tenant medical practice buildings, (2) Ambulatory Surgery Centers, (3) Outpatient Treatment and Diagnostic Facilities, (4) Acute care Hospitals. General and various specialty hospitals focused on and specialized in providing care for many medical conditions and performing wide ranging procedures, such as cardiovascular and orthopedic surgery.

Our unique mission as an international medical equity real estate investment trust (“REIT” – refer to the “Qualification as a REIT” section herein for additional information) is to selectively sponsor and underwrite ownership of leading medical provider’s core real estate assets worldwide. We intend to serve only the best healthcare operators in prominent regional and community locations throughout selected emerging international markets. Initial focus for our portfolio is within the United States and Asian growth markets.

Our understanding of contemporary clinical and business models empowers our dedicated focus: to support continuous delivery of necessary quality care to widespread communities while delivering to our fund investors unparalleled portfolio asset quality and steady dividends.

Internal Growth Strategy

We seek to achieve our business objectives internally through entering into long-term leases with annual contractual rent increases and using net-lease structures.

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Financing Strategy

We plan to build our capital structure with a balanced approach that maximizes flexibility. We will seek to: (1) achieve opportunistic and reasonable debt service ratios, (2) balance debt in a fashion that enhances our ability to access capital markets, (3) establish a secured revolving credit facility to finance acquisitions in concert with other debt instruments, which depending on appropriateness and availability, include, the assumption of mortgage loans and the placement of “stand- alone” non-recourse debt secured by the property, and (4) access capital internationally so as to avoid market cycle shortages of capital and enhance acquisition expediency.

We are in discussions with underwriters in order to pursue an offering of our securities to raise the capital needed to expand our business. Although ZH USA, LLC may lend us funds or invest in our securities for our continued working capital needs and we are in discussions with underwriters regarding a possible future offering of our securities, we have not entered into any agreement with ZH USA, LLC or any third parties for any future loans or investments in our company.

Qualification as a REIT

Our business strategy is conducive to a more favorable tax structure whereby we may qualify and elect to be treated as a REIT for U.S. federal income tax purposes. We plan to elect to be taxed as REIT under U.S. federal income tax laws commencing with our contemplated taxable year ending December 31, 2015. We believe that, commencing with 2015, we will have been organized and have operated in such a manner as to qualify for taxation as a REIT under all of the federal income tax laws, and we intend to continue to operate in such a manner. We, however, cannot provide assurances that we will operate in a manner so as to qualify or remain qualified as a REIT.

In order to qualify as a REIT, a substantial percentage of the Company’s assets must be qualifying real estate assets and a substantial percentage of the Company’s income must be rental revenue from real property or interest on mortgage loans. We must elect under the U.S. Internal Revenue Code (the “Code”) to be treated as a REIT. Subject to a number of significant exceptions, a corporation that qualifies as a REIT generally is not subject to U.S. federal corporate income taxes on income and gain that it distributes to its stockholders, thereby reducing its corporate level taxes. The vast majority of U.S. REITs are incorporated or formed in Maryland and we believe that reincorporating in Maryland will put our Company in the best position to raise additional capital and grow our business.

Properties

On September 25, 2015, the Company acquired a combined approximately 27,193 square foot surgery center and medical office building located in West Mifflin, Pennsylvania and the adjacent parking lot for approximately $11.35 million (approximately $11.6 million after including legal and related fees). The facilities are operated by Associates in Ophthalmology, LTD and Associates Surgery Centers, LLC, respectively, and leased back to those entities by the Company via two separate lease agreements that expire in 2030. Each lease has two successive options by the tenants to renew for five year periods. Base rent increases by 2% each lease year commencing on October 1, 2018. The property is owned fee simple. In connection with the acquisition of the facilities, the Company borrowed $7,377,500 from Capital One, National Association (“Capital One”) and funded the remainder of the purchase price with the proceeds from a convertible debenture (the “Convertible Debenture”) it issued to its majority shareholder in the total amount of $4,545,838.

The Company also owns an approximately 8,840 square foot medical office building known as the Orthopedic Surgery Center, located in Asheville, North Carolina that was acquired on September 19, 2014 for approximately $2.5 million and a 56-bed long term acute care hospital located at 1870 S 75th Street, Omaha, Nebraska that was acquired on June 5, 2014 for approximately $21.9 million.

Management Agreement

As discussed in Note 6 – “Related Party Transactions” in the footnotes to the accompanying financial statements, on November 10, 2014,we entered into a Management Agreement, with an effective date of April 1, 2014, with Inter-American Management, LLC (the “Manager”), our affiliate.

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Competition

We compete for development and acquisition opportunities with, among others, private investors, healthcare providers, (including physicians), healthcare-related REITs, real estate partnerships, financial institutions and local developers. Many of these competitors have substantially greater financial and other resources than we have and may have better relationships with lenders and sellers. Increased competition for medical properties from competitors, including other REITs, may adversely affect our ability to acquire specialty medical properties and the price we pay for properties. Our properties face competition from other nearby facilities that provide services comparable to those offered at our facilities. Some of those facilities are owned by governmental agencies and supported by tax revenue, and others are owned by nonprofit corporations and may be supported to a large extent by endowments and charitable contributions. Those types of support are not available to our facilities. In addition, competing healthcare facilities located in the areas served by our facilities may provide health services that are not available at our facilities.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires our management to use judgment in the application of accounting policies, including making estimates and assumptions. We base estimates on the best information available to us at the time, our experience and on various other assumptions believed to be reasonable under the circumstances. These estimates affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would have been applied, resulting in a different presentation of our financial statements. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. For a more detailed discussion of our significant accounting policies, see Note 2 – “Summary of Significant Accounting Policies” in the footnotes to the accompanying financial statements. Below is a discussion of accounting policies that we consider critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Purchase of Real Estate

Transactions in which real estate assets are purchased that are not subject to an existing significant lease or are attached or related to a major healthcare provider are treated as asset acquisitions, and as such are recorded at their purchase price, including acquisition fees, which is allocated to land and building based upon their relative fair values at the date of acquisition. Investment properties that are acquired either subject to a significant existing lease or as part of a portfolio level transaction with significant leasing activity are treated as a business combination under Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations,” which requires the purchase price of acquired properties be allocated to the acquired tangible assets and liabilities, consisting of land, building, and any identified intangible assets. Acquisition fees are expensed as incurred. Fair value is determined based on ASC Topic 820, “Fair Value Measurements and Disclosures,” primarily based on unobservable data inputs. In making estimates of fair values for purposes of allocating the purchase price of individually acquired properties, the Company utilizes its own market knowledge and published market data. In this regard, the Company also utilizes information obtained from county tax assessment records to assist in the determination of the fair value of the land and building. The Company utilizes market comparable transactions such as price per square foot to assist in the determination of fair value for purposes of allocating the purchase price of properties acquired as part of portfolio level transactions. The value of acquired leases, if applicable, is estimated based upon the costs we would have incurred to lease the property under similar terms.

Impairment of Long Lived assets

The Company evaluates its real estate assets for impairment periodically or whenever events or circumstances indicate that its carrying amount may not be recoverable. If an impairment indicator exists, the Company compares the expected future undiscounted cash flows against the carrying amount of an asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, the Company records an impairment loss for the difference between the estimated fair value and the carrying amount of the asset. As of September 30, 2015 and December 31, 2014 no impairment was recorded as it was not deemed necessary.

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Revenue Recognition

The Company’s operations currently consist of rental revenue earned from three tenants under leasing arrangements which provide for minimum rent, escalations, and charges to the tenant for the real estate taxes and operating expenses. The leases have been accounted for as operating leases. For operating leases with contingent rental escalators revenue is recorded based on the contractual cash rental payments due during the period. Revenue from leases with fixed annual rental escalators (such as the West Mifflin facility) are recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. If the Company determines that collectability of rents is not reasonably assured, future revenue recognition is limited to amounts contractually owed and paid, and, when appropriate, an allowance for estimated losses is established.

The Company consistently assesses the need for an allowance for doubtful accounts, including an allowance for operating lease straight-line rent receivables, for estimated losses resulting from tenant defaults, or the inability of tenants to make contractual rent and tenant recovery payments. The Company also monitors the liquidity and creditworthiness of its tenants and operators on a continuous basis. This evaluation considers industry and economic conditions, property performance, credit enhancements and other factors. For operating lease straight-line rent amounts, the Company's assessment is based on amounts estimated to be recoverable over the term of the lease. As of September 30, 2015 and December 31, 2014 no allowance was recorded as it was not deemed necessary.

Fair Value of Financial Instruments

Fair value is a market-based measurement and should be determined based on the assumptions that market participants would use in pricing an asset or liability. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. 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 three levels are defined as follows:

• Level 1- Inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets;

• Level 2- Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and

• Level 3- Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company considers the carrying values of cash and cash equivalents, accounts and other receivables, accounts payable and accrued expenses to approximate their fair value due to the short period of time since origination or the short period of time between origination of the instruments and their expected realization. Due to the short-term nature of these instruments, Level 1 and Level 2 inputs are utilized to estimate the fair value of these financial instruments. The fair value of amounts due to or from related parties are deemed undeterminable due to their nature.

Results of Operations

Revenues

Total revenue for the three months ended September 30, 2015 was $487,102, compared with $409,002 for the same period in 2014, an increase of $78,100. The increase is primarily a result of rental revenue earned from our Asheville facility for the entire 2015 three month period as the Asheville facility was acquired on September 19, 2014 and therefore the prior three month period only included revenue from the facility for eleven days. Additionally the 2015 three month period reflects a rent increase at the Omaha facility commencing in July 2015 and six days of revenue earned from the West Mifflin facility that was acquired on September 25, 2015.

Total revenue for the nine months ended September 30, 2015 was $1,405,140, compared with $522,827 for the same period in 2014, an increase of $882,313. The increase is primarily a result of rental revenue earned from our Omaha and Asheville facilities for the entire 2015 nine month period as the Omaha facility was acquired on June 5, 2014 and the Asheville facility was acquired on September 19, 2014 and therefore the prior nine month period did not include revenue from the facilities for the entire period. Additionally, as discussed above, the 2015 nine month period reflects a rent increase at the Omaha facility commencing in July 2015 and six days of revenue earned from the West Mifflin facility that was acquired on September 25, 2015.

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Management Fees

Management fees for the three months ended September 30, 2015 and September 30, 2014 were $90,000. These amounts consist of $30,000 incurred per month under the terms of the Management Agreement we entered into effective as of April 1, 2014.

Management fees for the nine months ended September 30, 2015 were $270,000, compared with $180,000 for the same period in 2014, an increase of $90,000. The increase is a result of a full nine months of management fees incurred and payable under the terms of the Management Agreement for the 2015 nine month period compared to only six months incurred for the 2014 period (April 1, 2014 thru September 30, 2014).

General and Administrative

General and administrative expense for the three months ended September 30, 2015 were $377,810, compared with $51,941 for the same period in 2014, an increase of $325,869. The increase was primarily a result of $227,000 of one-time acquisition costs that were expensed during the 2015 three month period related to the West Mifflin facility as well as from an increase in ground rent from the straight line recognition of the expense. Additionally, the increase resulted from an increase in professional fees incurred (primarily accounting and legal) and other general office expenses during the 2015 three month period as that period included the results of the Asheville facility for the full period (acquired in September 2014). The increase was partially offset by $48,400 of a one-time acquisition cost that was expensed during the 2014 three month period related to the Asheville facility.

General and administrative expense for the nine months ended September 30, 2015 were $518,591, compared with $506,448 for the same period in 2014, an increase of $12,143. The increase was primarily a result of $227,000 of one-time acquisition costs that were expensed during the 2015 nine month period related to the West Mifflin facility as well as from an increase in ground rent from the straight line recognition of the expense. Additionally, the increase resulted from an increase in professional fees incurred (primarily accounting and legal) and other general office expenses during the 2015 nine month period as that period included the results of the Omaha and Asheville facilities for the full period (acquired in June 2014 and September 2014, respectively). The increase was partially offset by $454,866 and $48,400 of one-time acquisition costs that were expensed during the 2014 nine month period related to the Omaha and Asheville facilities, respectively.

Depreciation Expense

For the three months ended September 30, 2015 depreciation expense was $153,148 compared with $138,528 for the same period in 2014, an increase of $14,620. The increase is a result of depreciation incurred for the entire 2015 three month period related to the Asheville facility that was acquired on September 19, 2014 and therefore the prior three month period did not incur depreciation expense or the full period.

For the nine months ended September 30, 2015 depreciation expense was $446,491 compared with $177,245 for the same period in 2014, an increase of $269,246. The increase is primarily a result of depreciation incurred on our Omaha and Asheville facilities for the entire 2015 nine month period as the Omaha facility was acquired on June 5, 2014 and the Asheville facility was acquired on September 19, 2014 and therefore the prior nine month period did not incur depreciation expense for the full period.

Interest Expense

For the three months ended September 30, 2015 interest expense was $363,937 (comprised of interest expense on borrowings of $333,680 and deferred financing cost amortization of $30,257) compared with $314,139 (comprised of interest expense on borrowings of $285,838 and deferred financing cost amortization of $28,301) for the same period in 2014. The increase was primarily a result of interest incurred during the 2015 three month period on borrowings from the majority shareholder and the third party loan both used to finance the September 2014 Asheville acquisition.

For the nine months ended September 30, 2015 interest expense was $988,825 (comprised of interest expense on borrowings of $898,975 and deferred financing cost amortization of $89,850) compared with $405,145 (comprised of interest expense on borrowings of $369,068 and deferred financing cost amortization of $36,077) for the same period in 2014. The increase was primarily a result of interest incurred during the 2015 three month period from increased borrowings from the majority shareholder to finance the Omaha, Asheville, and West Mifflin acquisitions, a full nine months of interest incurred during the 2015 period on the third party loans to acquire the Omaha facility in June 2014 and the Asheville facility in September 2014, and additional amortization expense incurred during the full 2015 nine period related to deferred financing costs on the loans obtained to acquire the three facilities.

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Liquidity and Capital Resources

General

Liquidity is a measure of our ability to meet potential cash requirements, maintain our assets, fund our operations and make dividend distributions to our stockholders and other general business needs. Our liquidity, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control. Our near-term liquidity requirements consist primarily of purchasing our target assets, restoring and leasing properties and funding our operations.

Our long-term liquidity needs consist primarily of funds necessary to pay for the acquisition and maintenance of properties; non-recurring capital expenditures; interest and principal payments on our indebtedness discussed below; payment of quarterly dividends to our stockholders to the extent declared by our board of directors; and general and administrative expenses. The nature of our business, our aggressive growth plans and the requirement that we distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain, to our stockholders, may cause us to have substantial liquidity needs over the long-term. We will seek to satisfy our long-term liquidity needs through cash flow from operations, long-term secured and unsecured indebtedness, the issuance of debt and equity securities, property dispositions, and joint venture transactions. We have financed our operations and acquisitions to date through the funding by the majority shareholder and bank loans as discussed below. We expect to meet our operating liquidity requirements generally through cash on hand and cash provided by operations (as we acquire additional real estate assets). We anticipate that cash on hand, cash provided by operations, funding from financial institutions, and funding by our majority shareholder will be sufficient to meet our liquidity requirements for at least the next 12 months. Our assets are illiquid by their nature. Thus, a timely liquidation of assets might not be a viable source of short-term liquidity should a cash flow shortfall arise that causes a need for additional liquidity. It could be necessary to source liquidity from other financing alternatives should any such scenario arise.

To qualify as a REIT for federal income tax purposes, we are required to distribute annually at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our net taxable income. Subject to the requirements of the Maryland General Corporation Law we intend to pay quarterly dividends to our stockholders, if and to the extent authorized by our board of directors.

Cash Flow Information

Net cash used in operating activities for the nine months ended September 30, 2015 was $80,165, which was primarily derived from the payoff of accrued interest on the Convertible Debenture during the first quarter of 2015, partially offset by depreciation and deferred financing amortization expense and accrued management fees. We anticipate cash flows from operating activities to increase as we purchase additional properties and have a full year of operations from our recent acquisitions.

Net cash used in investing activities for the nine months ended September 30, 2015 was $11,680,355, which resulted primarily from the acquisition of the West Mifflin facility in September 2015.

Net cash provided by financing activities for the nine months ended September 30, 2015 was $11,759,697. Cash flows provided by financing activities were derived primarily from proceeds received from Capital One and our majority shareholder used to fund the West Mifflin acquisition, partially offset by cash paid for dividends, debt principal payments, and deferred financing costs.

Our continued operations and expansion are dependent upon our ability to obtain additional working capital. Historically our controlling shareholder has lent us funds that we have combined with debt financing to complete acquisitions of medical properties. We are in discussions with underwriters in order to pursue an offering of our securities to raise the capital needed to expand our business. Although ZH USA, LLC may lend us funds or invest in our securities for our continued working capital needs and we are in discussions with underwriters regarding a possible future offering of our securities, we have not entered into any agreement with ZH USA, LLC or any third parties for any future loans or investments in our company. In the event we are unable to raise capital needed for our proposed business, we will have to seek additional financing, and no assurances can be given that such financing would be available on a timely basis, on terms that are acceptable or at all. Failure to obtain additional financing could result in delay or indefinite postponement of our proposed business expansion which would materially adversely affect our results of operations and financial condition and threaten our financial viability.

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Dividends

Pursuant to a previously declared dividend approved by the Board of Directors of the Company and in compliance with applicable provisions of the Maryland General Corporation Law, the Company has paid a monthly dividend of $0.0852 per share, an aggregate of $21,300 per month, each month during the period from January 1, 2015 through September 30, 2015. The September 2015 dividend amount of $21,300 was unpaid as of September 30, 2015 and therefore was accrued and included in the line item “Accounts Payable and Accrued Expenses” in the accompanying Balance Sheet as of September 30, 2015. This dividend was paid in October 2015.

Accordingly, during the nine months ended September 30, 2015 the Company recorded total dividends to holders of its common stock of $191,700, of which $170,400 were paid as of September 30, 2015.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our future income, cash flows, and fair values relevant to financial instruments are dependent on prevailing market interest rates. Interest rates are highly sensitive to several factors, including governmental monetary policies, domestic and global economic and political conditions and other factors which are beyond our control. We may incur additional variable rate debt in the future. In addition, decreases in interest rates may lead to additional competition for the acquisition of single-family homes and other real estate due to a reduction in attractive alternative income-producing investments. Increased competition for the acquisition of single-family homes may lead to future acquisitions being more costly and result in lower yields on single-family homes we have targeted for acquisition. In such circumstances, if we are not able to offset the decrease in yields by obtaining lower interest costs on our borrowings, our results of operations will be adversely affected. Significant increases in interest rates may also have an adverse impact on our earnings if we are unable to acquire single-family homes with rental rates high enough to offset the increase in interest rates on our borrowings.

Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We may in the future use derivative financial instruments to manage, or hedge, interest rate risks related to any borrowings we may have. We expect to enter into such contracts only with major financial institutions based on their credit rating and other factors.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to management, including the principal executive and financial officer as appropriate, to allow timely decisions regarding required disclosures. Our principal executive officer and principal financial officer evaluated the effectiveness of disclosure controls and procedures as of September 30, 2015 pursuant to Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to ensure that information required to be included in our periodic SEC filings is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms.

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

Changes in Internal Control over Financial Reporting

No changes were made to our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, the Company may become involved in litigation relating to claims arising out of its operations in the normal course of business. We are not involved in any pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on the Company.

Item 1A. Risk Factors.

Not applicable to smaller reporting companies.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit No.	Description
3.1	Articles of Incorporation of Global Medical REIT Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s Report on Form 10-Q as filed with the Commission on April 22, 2014).
3.2	Articles of Conversion filed with the Secretary of State of Nevada (incorporated herein by reference to Exhibit 3.2 to the Company’s Report on Form 10-Q as filed with the Commission on April 22, 2014).
3.3	Articles of Conversion filed with the Secretary of State of Maryland (incorporated herein by reference to Exhibit 3.3 to the Company’s Report on Form 10-Q as filed with the Commission on April 22, 2014).
3.4	Bylaws of Global Medical REIT Inc. (incorporated herein by reference to Exhibit 3.4 to the Company’s Report on Form 10-Q as filed with the Commission on April 22, 2014).
3.5	Articles of Amendment to Articles of Incorporation filed with the Secretary of State of Maryland (incorporated herein by reference to Annex A to the Company’s Definitive Information Statement on Schedule 14C as filed with the Commission on October 3, 2014).
4.1	Conversion Agreement dated December 23, 2013 between Scoop Media, Inc. and Global Medical REIT Inc. (incorporated herein by reference to Exhibit 4.1 to the Company’s Report on Form 10-Q as filed with the Commission on July 21, 2014).
4.2	Debt Conversion Agreement and Convertible Debenture dated July 17, 2014 between Global Medical REIT, Inc. and Heng Fai Enterprises Limited.
10.1	Purchase Agreement between Global Medical REIT Inc. and LTAC Landlord, LLC dated April 11, 2014 (incorporated herein by reference to Exhibit 10.1 to the Company’s Report on Form 8-K as filed with the Commission on April 18, 2014).

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10.2	Term Loan and Security Agreement with Capital One, National Association, dated June 5, 2014 (incorporated herein by reference to Exhibit 10.1 to the Company’s Report on Form 8-K as filed with the Commission on June 12, 2014).
10.3+	Management Agreement between Global Medical REIT Inc. and Inter-American Management LLC dated November 10, 2014 (incorporated herein by reference to Exhibit 10.1 to the Company’s Report on Form 8-K as filed with the Commission on November 14, 2014).
10.4	Convertible Demand Promissory Note between Global Medical REIT Inc. and HFE USA, LLC dated September 10, 2014 for $860,000 (incorporated herein by reference to Exhibit 10.4 to the Company’s Transition Report on Form 10-K/T as filed with the Commission on March 20, 2014).
10.5	Convertible Demand Promissory Note between Global Medical REIT Inc. and HFE USA, LLC dated September 10, 2014 for $50,000 (incorporated herein by reference to Exhibit 10.5 to the Company’s Transition Report on Form 10-K/T as filed with the Commission on March 20, 2014).
10.6	Asset Purchase Agreement between Global Medical REIT Inc. and Associates Properties, LP dated as of July 31, 2015 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A as filed with the Commission on October 26, 2015).
10.7	Purchase Agreement between Global Medical REIT Inc. and Associates Properties II, LP dated as of July 31, 2015 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K/A as filed with the Commission on October 26, 2015).
10.8	Term Loan and Security Agreement between GMR Pittsburgh, LLC and Capital One, National Association dated as of September 25, 2015 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the Commission on October 1, 2015).
31.1*	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *	XBRL Instance Document
101.SCH *	XBRL Taxonomy Schema
101.CAL *	XBRL Taxonomy Calculation Linkbase
101.DEF *	XBRL Taxonomy Definition Linkbase
101.LAB *	XBRL Taxonomy Label Linkbase
101.PRE *	XBRL Taxonomy Presentation Linkbase

+ Management contract or compensatory plan or arrangement.

* Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		GLOBAL MEDICAL REIT INC.
Date: November 3, 2015	By:	/s/David A. Young
		David A. Young
		Chief Executive Officer (Principal Executive Officer)
Date: November 3, 2015	By:	/s/Donald McClure
		Donald McClure
		Chief Financial Officer (Principal Financial and Accounting Officer)

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