Debt (Tables)

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Schedule of Debt Instruments

The following is a summary of the Company’s debt outstanding as of September 30, 2016 and December 31, 2015:

	September 30, 2016			December 31, 2015
Convertible Notes Payable	$	3,200,000		$	3,200,000
Fixed-Rate Mortgage Loans		14,465,303			14,461,421
Variable-Rate Mortgage Loans		6,279,936			8,050,043
Bonds Payable		5,640,000			5,700,000
Other Debt		3,207,750			5,105,000
		32,792,989			36,516,464
Unamortized Discount and Debt Issuance Costs		(644,498	)		(700,692	)
	$	32,148,491		$	36,815,772

Schedule of Mortgage Loan Debt

Mortgage loans 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:

			Principal Outstanding at				Stated Interest
Property	Face Amount		September 30, 2016		December 31, 2015		Rate	Maturity Date
Middle Georgia Nursing Home(1)	$	4,200,000	$	3,760,857	$	3,849,678	5.50% Fixed	October 4, 2018
Goodwill Nursing Home(1) (4)		4,976,316		4,520,816		4,577,047	5.50% Fixed	March 19, 2017
Warrenton Nursing Home		2,720,000		2,490,927		2,562,765	5.00% Fixed	December 20, 2018
Edwards Redeemer Health & Rehab		2,303,815		2,182,231		2,249,772	5.50% Fixed	January 16, 2020
Southern Hills Retirement Center		1,750,000		1,510,472		1,222,159	4.75% Fixed	November 10, 2017
Providence of Sparta Nursing Home		1,725,000		1,661,930		1,686,506	Prime Plus 0.50%/6.00% Floor	September 26, 2017 (2)
Providence of Greene Point Healthcare Center		1,725,000		-		1,692,000	Prime Plus 0.50%/6.00% Floor	Repaid on June 20, 2016
Golden Years Manor Nursing Home(3)		5,000,000		4,618,006		4,671,537	Prime Plus 1.50%/5.75% Floor	August 3, 2037
			$	20,745,239	$	22,511,464

(1)	Mortgage loans are non-recourse to the Company except for the Southern Hills line of credit owed to First United Bank.
(2)	Effective September 26, 2016, the maturity date was extended from September 17, 2016 to September 26, 2017.
(3)	During the quarter ended September 30, 2016, we executed a Modification to the mortgage note pursuant to which some accrued payments were deferred and the lender agreed to permit interest only payments through March 2017. The mortgage loan collateralized by the Golden Years Manor 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 September 30, 2016, the Company was not in compliance with certain of these non-financial covenants which is considered to be a technical Event of Default as defined in the note agreement. Remedies available to the lender in the event of a continuing Event of Default, at its option, include, but are 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 not been notified by the lender regarding the exercise of any remedies available. Guarantors under the mortgage loan are Christopher Brogdon and GLN Investors, LLC, in which the Company owns a 100% membership interest.
(4)	On September 19, 2016, the maturity date of the loan related to our Goodwill Nursing Home property was extended to March 19, 2017. The terms of the renewal call for monthly interest only payments through maturity at which time all principal and unpaid interest is due. Edwards Redeemer Health & Rehab was pledged as additional collateral on the loan. At September 30, 2016, there was approximately $60,000 in accrued interest due on the loan. We are in discussions with the lender to roll this accrual into a new note which will be amortized over future payments. No binding agreement evidencing this restructure has been signed as of the date of this Report.

Schedule of Other Debt

Other debt at September 30, 2016 and December 31, 2015 includes unsecured notes payable issued to facilitate the acquisition of the nursing home properties.

			Principal Outstanding at				Stated Interest
Property	Face Amount		September 30, 2016		December 31, 2015		Rate	Maturity Date
Goodwill Nursing Home	$	2,180,000	$	1,344,000	$	1,280,000	17.0% Fixed(4)	June 30, 2017 (1)
Providence of Sparta Nursing Home		1,050,000		1,050,000		1,050,000	10.0% Fixed	August 1, 2016 (2)
Providence of Greene Point Healthcare Center		1,150,000		813,750		1,125,000	10.0% Fixed	June 30, 2017(3)
Golden Years Manor Nursing Home		1,650,000		-		1,650,000	11.0% Fixed	April 1, 2016(5)
			$	3,207,750	$	5,105,000

(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, 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. For the nine months ended September 30, 2016, premium of $64,000 has been recognized into earnings. The tenant, New Beginnings, of the Goodwill nursing facility filed for bankruptcy in January 2016. The facility is currently vacant and not generating any revenue and is unable to pay interest on the subordinated debt. The Company has been accruing the unpaid interest but is in default under the note.

(2)

The subordinated note on Sparta matured on August 1, 2016. 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 negotiating with these investors to purchase their residual equity interests in exchange for shares of common stock. There can be no assurance that these negotiations will be successful.

(3)	The subordinated note on Greene Point matured on October 1, 2015. Investors in the Greene Point note were entitled to an additional 5% equity in Wash/Greene, LLC, the entity that owns the facility, every six months if the note is not paid when due. Effective December 31, 2015, all of the holders of the Wash/Greene 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, Wash/Greene LLC agreed to pay the investors a one-time premium equal to 5% of the principal amount of each individual note (approximately $56,000) as such time as the note is repaid. For the nine months ended September 30, 2016, premium of $56,250 has been recognized into earnings. On June 20, 2016, the Greene Pointe facility was sold for cash proceeds of $3.8 million. On the closing date, the Company paid off the mortgage loan related to this property. Subordinated notes in the amount of $813,750 remain outstanding as of September 30, 2016. Subsequent to September 30, 2016, these subordinated notes were paid in full.
(4)	As of September 30, 2016, the income from the Goodwill facility was insufficient to cover debt service for the subordinated debt for the facility. The debt is accruing interest at the default rate but not currently being paid. We are in discussions with the lender to restructure the accrued interest into a new note to be amortized through future payments.
(5)	Effective September 23, 2016, the Company exchanged 1,350,000 shares of common stock, at $0.36 per share, for an unsecured note payable with a principal balance of $1,550,000 and unpaid interest of $99,458. The transaction was accounted for as a debt extinguishment with a gain on extinguishment of debt in the amount of $1,163,458 recorded in the consolidated statement of operations for the three months ended September 30, 2016. During the three month period ended September 30, 2016, principal in the amount of $100,000 was forgiven resulting in a loss on forgiveness of debt which has been recognized in the consolidated statements of operations.

Schedule of Future Maturities of Notes Payable

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

2016	$	12,192,756
2017		12,476,358
2018		6,103,051
2019		82,265
2020		1,938,559
2021 and Thereafter		-
	$	32,792,989