GLOBAL HEALTHCARE REIT, INC. TABLE OF CONTENTS Item No. Form 10-K Report Page Cautionary Note Regarding Forward-Looking Statements v PART I Item 1 Business 5 Item 1A Risk Factors 22 Item 1B Unresolved Staff Comments 22 Item 2 Properties 23 Item 3 Legal Proceedings 24 Item 4 Mine Safety Disclosures 24 PART II Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 25 Item 6 Selected Financial Data 26 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 26 Item 7A Quantitative And Qualitative Disclosures About Market Risk 36 Item 8 Financial Statements and Supplementary Data 36 Item 9 Changes in Disagreements With Accountants on Accounting and Financial Disclosure 36 Item 9A Controls and Procedures 36 Item 9B Other Information 38
PART III Item 10 Directors, Executive Officers and Corporate Governance 39 Item 11 Executive Compensation 45 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 47 Item 13 Certain Relationships and Related Transactions, and Director Independence 49 Item 14 Principal Accounting Fees and Services 51 PART IV Item 15 Exhibits and Financial Statement Schedules 52 Signatures 3
ITEM 2. PROPERTIES As of December 31, 2015, we owned nine senior living facilities. The following table provides summary information regarding these facilities. Property Name Location Effective Equity Date Acquired Gross Square Feet Purchase Price Debt at December 31, 2015 Middle GA Nursing Home (a/k/a Crescent Ridge) Eastman, GA 100% 3/15/2013 28,808 $ 5,000,000 $ Warrenton Health and GA 100% 26,894 $ 3,500,000 $ Southern Hills Retirement Center Tulsa, OK 100% 2/07/2014 $ 2,000,000 $ Goodwill Nursing Home Macon, GA 83.62% (2) 5/19/2014 46,314 $ 7,185,000 $ Edwards Redeemer Health & Rehab City, OK 100% 9/16/2014 31,939 $ 3,142,233 $ Providence of Sparta Nursing Home Sparta, GA 97.36% (3) 9/16/2014 19,441 $ 2,836,930 $ Providence of Greene Point Healthcare Center Union Point, GA 100%(3) 9/16/2014 26,948 $ 2,948,253 $ Healthcare Center Seville, OH 100% 9/30/2014 27,500 $ 3,000,000 $ Golden Years Manor Nursing Home Lonoke, AR 75.5% 9/16/2014 40,737 $ 6,742,767 $ 0
The weighted average interest rate and term of our fixed rate debt are 7.0% and 5.9 years, respectively, as of December 31, 2015. The weighted average interest rate and term of our variable rate debt are 5.9% and 12.9 years, respectively, as of December 31, 2015. We have $11.1 million of debt maturing during the year ending December 31, 2016. While we anticipate being able to refinance all the loans at reasonable market terms upon maturity, our inability to do so may impact our financial position and results of operations. We expect to refinance $8.0 in mortgage loans maturing in 2016 as the associated properties meet loan to value requirements currently being employed in commercial lending markets. We have $2.7 million in subordinated debt maturing in 2016. As indicated in the table below, investors in the subordinated debt may receive additional equity interests in our properties if the subordinated debt is not paid when due. See the consolidated financial statements included elsewhere in the Form 10-K for additional debt details. The following is a summary of our subordinated debt at December 31, 2015: Subordinated Debt Our subordinated debt at December 31, 2015 and 2014 includes unsecured notes payable issued to controlled entities used to facilitate the acquisition of the nursing home properties. Principal Outstanding at Stated Face December 31, Property Amount 2015 2014 Rate Date Goodwill Nursing Home 2,180,000 $ $ 13.0 %(1) Fixed June 30, 2017(2) Edwards Redeemer Health & Rehab 880,000 - 880,000 12.0% Fixed Repaid January, 2015 Providence of Sparta Nursing Home 1,050,000 1,050,000 1,050,000 10.0% Fixed August 1, 2016(3) Providence of Greene Point Center 1,150,000 1,125,000 1,150,000 10.0% Fixed June 30, 2017(4) Golden Years Manor 1,650,000 1,650,000 1,650,000 11.0% Fixed April 1, 2016(5)
GLOBAL HEALTHCARE REIT, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT) Series A Preferred Stock Series D Preferred Stock Common Stock of 31, $ $ $ $ $ $ $ $ - - - - - - - - to - - - - - - - - – - - 30 99 5, 34
The failure to achieve the necessary levels of profitability and cash flows or obtain additional funding would detrimental to the Company. The consolidated financial statements do not include any adjustments that might necessary if the Company is unable to continue as a going concern. 3. ACQUISITIONS OF CONSOLIDATED PROPERTIES The Company did not acquire any properties during the year ended December 31, 2015. Property acquisitions for the year ended December 31, 2014 are as follows: Date Acquired Property Name Location Purchase Price Debt Assumed(5) January 27, 2014 Scottsburg Healthcare Center Scottsburg, Indiana $ 112,500 (1) $ 3,480,000 February 2014 Southern Hills Retirement Center Tulsa, Oklahoma 2,000,000 - May 19, 2014 Goodwill Nursing Home Macon, Georgia 800,000 4,813,346 September 16, 2014 Edwards Redeemer Health & Rehabilitation Oklahoma City, Oklahoma 491,487 (2) 2,254,581 September 16, 2014 Providence of Sparta Nursing Home Sparta, Georgia 61,930 (3) 2,775,000 September 16, 2014 Providence of Greene Pointe Healthcare Center Union Point, Georgia 73,253 (4) 2,875,000 September 30, 2014 Meadowview Healthcare Center Seville, Ohio 3,000,000 - (1) The purchase price for this property included the issuance of 150,000 shares of the Company’s common stock valued at $112,500. (2) The purchase price for this property was paid through forgiveness of an advance owed to the Company by Christopher Brogdon. (3) The purchase price for this property included the issuance of 61,930 shares of the Company’s common stock valued at $61,930. (4) The purchase price for this property included the issuance of 73,253 shares of the Company’s common stock valued at $73,253. (5) Does not include new financing in the form of unsecured subordinated debt. F-77
Other Debt – Related Parties Other debt due at December 31, 2015 and 2014 includes unsecured notes payable issued to entities controlled by the Company used to facilitate the acquisition of the nursing home properties. Principal Outstanding at Stated Face December 31, Property Amount 2015 2014 Rate Date Goodwill Nursing Home $ $ 13.0 %(1) Fixed June 30, 2017(2) Edwards Redeemer Health & Rehab 880,000 - 880,000 12.0% Fixed Repaid on January 20, 2015 Providence of Sparta Nursing Home 1,050,000 1,050,000 10.0% Fixed August 1, 2016(3) Providence of Greene Point Center 1,125,000 1,150,000 10.0% Fixed June 30, 2017(4) Golden Years Manor Nursing Home 1,650,000 1,650,000 11.0% Fixed April 1, 2016(5) $ $ (1)The interest rate on this note increased from 12% to 13% per annum effective January 1, 2015. (2)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, all of the holders of the Goodwill subordinated note executed an Agreement Among Lenders pursuant to which they (i) waived all equity ratchets and (ii) extended the maturity date of their notes to June 30, 2017. In exchange, Goodwill Hunting LLC agreed to pay the investors a one-time premium equal to 5% of the principal amount of each individual note (approximately $64,000) as such time as the note is repaid. (3)The subordinated note on Sparta matured on August 1, 2015. Investors in the Sparta note are entitled to an additional 5% equity in Providence HR, LLC every six months if the note is not paid when due. The Company is