UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 FORM 10-K

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

For the fiscal year ended:December 31, 20152019

or

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

For the transition period from _________to ___________

Commission file number:000-15078

GreeneStone HealthcareEthema Health Corporation

(Exact name of registrant as specified in its charter)

Colorado 84-1227328

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

5734 Yonge Street, Suite 3001590 S. Congress Avenue

North York, Ontario, Canada M2M 4E7West Palm Beach, Florida 33406

(Address of principal executive offices)

(416) 222-5501(561) 290-0239

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act:

Securities registered under Section 12(g) of the Act:

Common Stock, $0.01 par value per share

(Title of class)

Indicate by check mark if the registrant is a well knownwell-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  [ ]☐  No  [X] ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  [ ]☐  No  [X]☒ 

Indicate by check mark whether the registrant:issuer: (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 lastpast 90 days. Yes[X]☒  Yes  No  [ ]☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,website, if any, every Interactive Data Fileinteractive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§(section 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’sissuer’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K10-K/A or any amendment to this Form 10-K. [ ]10-K/A. ☒

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

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

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

The aggregate market value of the voting and nonvotingregistrant’s common equitystock held by non-affiliates of the registrant onas of June 30, 2015,28, 2019, based on a closing share price of $0.03$0.07 was approximately $1,226,511. $4,898,198.

As of April 10, 2015,June 30, 2020, the registrant had 47,738,8551,841,090,247 shares of its common stock, par value $0.01 per share, outstanding.

COVID-19 EXPLANATORY NOTE

The Company has been unable to meet the extended deadline to file its Annual Report on Form 10-K as allowed by the Order of the Securities and Exchange Commission (the “SEC”), dated March 25, 2020, pursuant to Section 36 of the Securities Exchange Act of 1934 modifying exemptions from the reporting and proxy delivery requirements for public companies (Release No. 34-22465). Due to the lockdowns imposed by local US State Government, the Company has not had access to consulting and other administrative staff and accordingly was unable to compile and review information necessary to complete our filing within the extended time period allowed by the SEC, without unreasonable effort or expense due to circumstances related to the COVID-19 pandemic.

GREENESTONE HEALTHCARE

ETHEMA HEALTH CORPORATION

YEAR ENDED DECEMBER 31, 20152019

TABLE OF CONTENTS

PART I

Item 1. Business.

Company History

GreeneStone HealthcareEthema Health Corporation (the “Company” or “Ethema”), a Colorado corporation was incorporated under the laws of the State of Colorado on April 1, 1993, (“Greenestone” or the “Company”), and is the surviving company of a merger, effective February 1, 1995, between the Company and Nova Natural Resources Corporation, a Delaware corporation (“Nova Delaware”). The merger was effectuated solely for the purpose of changing the Company’s domicile from Delaware to Colorado. At all times prior to 2001, the Company was engaged in the oil and gas exploration business. Nova Delaware was the successor entity to Nova Petroleum Corporation, a Delaware corporation, and Power Resources Corporation, a Delaware corporation, which merged in 1986 (“the 1986 Merger”). Prior to the 1986 Merger, Nova Petroleum Corporation and Power Resources Corporation had operated since 1979 and 1972, respectively. In 2001, the Company entered into the electronics business and this business was active in 2001 and 2002, as part of the Torita Group. After 2002, the Company continued with various stages of development in this business until 2010.

Recent Developments

On December 29, 2015 the Company entered into a nonbinding Letter of Intent (the “LOI”) with Aurora Recovery Centre LP (“ALP” for the purchase of certain assets of ALP. This LOI has expired and the proposed transaction will not proceed.

In February 2015, the Company finalized the terms for the acquisition of the property currently leased by the Company. The property, which is the location of GreeneStone's Muskoka addiction treatment center, encompasses approximately 48,000 square feet of buildings on 43 acres and is adjacent to Lake Muskoka in Ontario. The property has11separate buildings, including five detox suites, 29 residential suites, staff cottages with 13 individual bedrooms, a self-contained fitness center, kitchen and dining facilities, and several meeting and therapy rooms. Additional facilities include an indoor and outdoor pool, a tennis court, a volleyball court, a running track and nature trails. As of the date of this annual report, the Company is addressing certain due diligence items which are being resolved and once the requisite funds have been raised the transaction will be consummated.

The purchase price for the property consists of the following; i) CAD$5,500,000 which will be funded by a mortgage bond over the property; and ii) the issue of 50,000,000 common shares in the Company, at the market price of the shares on the date of closing.

Change in Operations

On April 1, 2010, the Company pursuant to Board of Directors resolution, changed its principal operations from development stage electronics to healthcare services. On March 29, 2010, the Company entered into a one year consulting agreement with GreenestoneGreeneStone Clinic Inc., a Canadian corporation (“Greenestone Clinic”), whereby Greenestone Clinic provided consulting services for the Company’s development and operation of medical clinics in the province of Ontario, Canada. Specifically, Greenestone Clinic provided medical and business expertise in the initial startup of private clinics and technical assistance to ensure that the clinics were in compliance with governmental policy and procedure requirements as well as any operational requirements. At the time of entering into this consulting agreement, Greenestone Clinic operated a clinic at the Muskoka property now housing its addiction treatment clinic and provided endoscopy services that the Company had planned to offer in its first Ontario medical clinic.

OnMay15,2010,theCompany secured a subleaseofspace (whichwaspreviouslytheRothbart PainClinic) ofapproximately 8,000 sq. ft. tobeused astheCompany’sexecutiveoffices and to run anendoscopy clinic,whichwas subsequently sold.services. The Company started offering medical services in June2010,offering various medical services,includingendoscopy,cardiologyandexecutivemedicals, which services were subsequently sold as part of the sale of our subsidiary, 1816191 Ontario (“1816191”) duringDecember2014.

InMarch2011,GreenestoneClinic,aformerCompanyconsultant, gave upthepremises in Bala,Ontario,previously leasedbyGreenestoneClinicand operated as a private medicalresortand alsoallowed theCompany todobusinessusingthe“GreeneStone” name. The Company,through itswholly ownedsubsidiary GreeneStoneClinicMuskokaInc. (“GreeneStoneMuskoka”)enteredintoa leasewith the owneroftheMuskokapremisesonApril1, 2011.The Companyoffersonlymentalhealthandaddictiontreatment services atthis location whichoperates as an in-patientaddictiontreatmentcenter.sold.

On December 17, 2014,May 15, 2010, the Company completedsecured a sublease of space (which was previously the saleRothbart Pain Clinic) of all ofapproximately 8,000 sq. ft. to be used as the outstanding shares of its subsidiary, 1816191, for the sum of CAD$1,282,002, comprised of the agreed purchase price of CAD$1,250,000Company’s executive offices and the acquisition of net assets at closing of CAD$32,002.to run an endoscopy clinic. The saleEndoscopy clinic was made pursuant to a Share Purchase Agreement, dated October 6, 2014, by and between the Company and Jaintheelal Parekh Medicine Professional Corporation (“Jaintheelal”).subsequently sold. The Company, and Jaintheelal entered into a revised Share Purchase Agreement on December 16, 2014.

JaintheelalisownedbyDr.Jay Parekh,theCompany’sformerMedical director in chargeofEndoscopy. The sale priceof CAD$1,282,002included theassumptionby Jaintheelal of debtinthesame amount asthesale price,whichdebt wasowedby1816191totheCompany intheamountof CAD$895,496and toJaintheelal ofCAD$386,542. Atclosing, Jaintheelaloffsettheassumeddebttotheregistrantof CAD$895,496 by US$277,500 throughthecancellation of2,408,268 sharesoftheCompany’s commonstock,for a net amountduetotheCompanyof US$493,807.The remainderoftheassumeddebtowedby1816191totheCompanywas originallyduetotheCompanyonJune30,2015,which duedate was extendedto December31,2015,thisloanhasnotbeenextendedbeyond thisdateasofthedatehereof, is intheformofan interest bearingnote withacouponof 5%per annum.

The Company’s principaloperationsarenow theprovisionofaddictiontreatment services.

Corporate Structure

The Company currently has one, its wholly owned operating subsidiary GreeneStone Muskoka.

Clinic Muskoka Inc. (“GreeneStone Muskoka Treatment Center

On February 1, 2011,Dr.Paul Garfunkel was retained on a six-month consulting contract to advise the Company on its plan to go into the addiction treatment business.Dr.Garfunkel formed a Clinical Advisory Group (“CAG”Muskoka”) including himself,Dr.Clive Chamberlain,Dr.Greg Donahue and Janice Harris R.N. The CAG created the mission and protocols for the addiction treatment business and was tasked to hire a leader for the addiction treatmentbusiness.

On April 1, 2011, the Company through GreeneStone Muskoka,, also entered into a lease (the “Bala Lease”) with Cranberry Cove Holdings Ltd. (“Cranberry”), the owner of the Bala, Ontario property (the “Bala Property”) in order to operate aMuskoka premises on April 1, 2011 and provided mental health and addiction treatment services and operated an in-patient addiction treatment center at this location.

During December 2016, the property. Company obtained a license to operate and provide addiction treatment healthcare services in Florida, USA. The company commenced operations under this license with effect from January 2017.

On April 1, 2011February 14, 2017, the Company completed a series of transactions (referred to collectively as the “Restructuring Transactions”), including a Share Purchase Agreement (the “Purchase Date”“SPA”) whereby the Company acquired 100% of the stock of Cranberry Cove Holdings Ltd. (“CCH”), which held the real estate on which the Company’s GreeneStone Muskoka operated, an asset purchase agreement (the “APA”) and lease (the “Lease”) whereby the Company sold certain of the GreeneStone Muskoka business assets and leased the real estate to the buyer, and a real estate purchase agreement and asset purchase agreement whereby the Company purchased the real estate and business assets of Seastone Delray (the “Florida Purchase”).

The Share Purchase Agreement

Under the SPA, the Company acquired 100% of the stock of CCH from Leon Developments Ltd. (“Leon Developments”), a company wholly owned by Shawn E. Leon, who is the President, CEO, and CFO of the Company (“Mr. Leon”). CCH owns the real estate on which GreeneStone Muskoka is located. The total consideration paid by the Company was CDN$3,517,062, including the assumption of certain liabilities of CCH, which was funded by the assignment to Leon Developments of certain indebtedness owing to the Company in the amount of CDN$659,918, and the issuance of 60,000,000 shares of the Company’s common stock to Leon Developments, valued at US$0.0364 per share.

The Asset Purchase Agreement and Lease

Under the APA, the assets of GreeneStone Muskoka were sold by the Company, through its subsidiary, GreeneStone Muskoka, to Canadian Addiction Residential Treatment LP (the “Purchaser”), for a total consideration of CDN$10,000,000, plus an additional performance payment of up to CDN$3,000,000 to be received in 2019 if certain clinic performance metrics are met. The Purchaser completed the sale with cash proceeds to the Company of CDN$10,000,000, of which CDN$1,500,000 was held in escrow for up to two years to cover indemnities given by the Company. The proceeds of the GreeneStone Muskoka asset sale were used to pay down certain tax debts and operational costs of the Company and to fund the Florida Purchase, mentioned below.

Through the APA, substantially all of the assets of Greenestone Clinic thatGreeneStone Muskoka were previously usedsold, leaving Ethema with only the underlying clinic real estate, which the Company, through its newly acquired subsidiary, CCH concurrently leased to the Purchaser. The Lease is a triple net lease and provides for a five (5) year primary term with three (3) five-year renewal options, annual base rent for the operationfirst year at CDN$420,000 with annual increases, an option to tenant to purchase the leased premises and certain first refusal rights.

The Florida Purchases and Business

Immediately after closing on the sale of the executive medical center located atassets of the Bala Property.Canadian Rehab Clinic, the Company closed on the acquisition of the business and real estate assets of Seastone Delray pursuant to certain real estate and asset purchase agreements. This gave GreeneStone Muskokabusiness is operated through its wholly owned subsidiary, Addiction Recovery Institute of America, LLC (“ARIA”) (formerly Seastone Delray Healthcare, LLC). The purchase price for the ARIA assets was US$6,070,000 financed with a turnkey opportunity to start up its addiction treatment business (the “GreeneStone Muskoka TreatmentCenter”).purchase money mortgage of US$3,000,000, and US$3,070,000 in cash.

On April 1, 2011,Dr.Susan K. Blank4, 2017 the Company changed its Corporate name from Greenestone Healthcare Corporation to Ethema Health Corporation.

On November 2, 2017, the Company entered into an Agreement to purchase from AREP 5400 East Avenue LLC certain buildings in West Palm Beach, Florida, totaling approximately 80,000 square feet, on which the Company planned to operate a substance abuse treatment center. The purchase price of the Property was hired$20,530,000. The Company made a series of nonrefundable down payments totaling $2,940,546 in 2017 and 2018. The Company could not get the necessary financing to close on the deal.

On May 23, 2018, the Company converted the agreement to purchase AREP 5400 East Avenue LLC. (“the landlord”) into a lease agreement with a purchase option of $17,250,000, increasing August 31, 2018 by $750,000 per month until the purchase option is exercised. The premises is located at 5400, 5402 and 5410 East Avenue, West Palm Beach, Florida (the “Property”). The lease was for an initial 10 years and provided for two additional 10 year extensions.

The Company was previously under agreement to purchase the property from the landlord. The property is presently used as a one-year contractrehabilitation treatment center. The current tenant at the property, Alternatives in Treatment, LLC, a Florida limited liability company, consented to run the GreeneStone Muskoka Treatment Center.Dr.Blank workedLease and concurrent with the CAGexecution of the Lease entered into a Sublease Agreement with the Company.

In June 2018, the Company moved its operations out of the Delray Beach properties and into the leased property at 5400 East Avenue in West Palm Beach.

On August 3, 2018, the Company changed the name of its subsidiary Seastone Delray Healthcare, LLC to refineAddiction Recovery Institute of America, LLC (“ARIA”).

The Company received a license to operate in-patient detoxification and residential treatment services in September 2018.

In June of 2019, the missionCompany and protocolsthe landlord wished to proceed with marketing the property for sale and agreed to convert the GreeneStone Muskoka Treatment Center and workedlong term lease into a month to month lease for a reduced amount of space on the policiesproperty and procedures for the operationAlternatives in Treatment became a direct tenant of the treatmentcenter.Landlord in the remainder of the space.

The Company once again had an opportunity to purchase the property in October of 2019 but could not arrange for sufficient financing to complete the purchase and the Landlord subsequently entered into a conditional agreement with another purchaser.

On December 20, 2019, the Company entered into an agreement with the landlord to terminate the lease agreement on January 31, 2020. The Company plans to open a new facility at another location nearby which was subsequently delayed by the Corona Virus pandemic.

Corporate Structure

The Company consists of the following entities:

Ethema is the publicly traded investment holding company.

In August 2011,

Muskoka previously owned and operated the GreeneStone Muskoka Treatment Center began providing addiction treatment servicescenter in Canada which was sold to Canadian Addiction Residential Treatment LP (“CART”). Muskoka has certain receivables collectible from CART and took its first paying clients. The GreeneStone Muskoka Treatment Center offers clientscertain remaining liabilities.

This company was acquired from Leon Developments and owns and leases the property on which CART operates an addiction treatment center.

ARIA operated a 45day program that costs between CAD$27,000 and CAD$37,000 per treatment period. Treatment is individualized, providing the first two weekscenter in Delray Beach, Florida out of treatment, with an assessment thereafter and often, a recommendation to extend treatment.premises which it had acquired in February 2017. The treatment offered is concurrent, with addictioncenter was relocated and co-occurring mental health disorders treated atwas operated out of leased premises in West Palm Beach Florida.

DARE was formed in 2016 to acquire the same time. Thepremises in which ARIA operated its Delray treatment center, the premises were acquired directly into ARIA. DARE has a 36 bed capacity and can easily be expanded beyond that capacity. Treatment consists of group and individual therapy, as well as recreation therapy. Clients are taught about nutrition and are provided with nutritious food while intreatment.remained dormant since inception.

In November of 2011, the CAG was disbanded after achieving its goals. In March 2012, Dr. Blank and two contract therapists, all of whom were from the United States, were replaced by a more permanent team of Canadian doctors and therapists.

Employees

As of December 31, 2015, GreeneStone Healthcare2019, Ethema Health Corporation had no employees and its subsidiary GreeneStone Clinic Muskoka had approximately 322 employees.

Marketing

The addiction treatment business in the USA operates as a private payan insured healthcare service. The customers get no government or OHIP subsidy to attend our treatment facility. The decision to attend the treatment center is made by each individual, making it important to market our services to the individual. There are a large number of mental health professionals that refer to the treatment center and we ensure that we maintain contact with and market to these professionals. Our marketing efforts are long term processes of establishing relationships with relevant professionals and our treatment staff. We use industry specific conferences and functions to network with these professionals.

Approximately 70% of our clients are sourced via the Internet. This is the single biggest focus for our marketing team, Search Engine Optimization (SEO) is very important and the Company aggressively seeks the maximum cost/benefit relationships with specialist firms in this field. We believe our marketing efforts are successful and effective.

Competition

The private pay addiction treatment business is not well established in Canada and there are only a few competitors that provide these services. Two of the biggest providers are also government hospital licensed facilities, that do both OHIP insured services and privately paid services. Most hospitals have a mental health unit that can handle detoxification, but do not provide addiction treatment programs. There is only one large competitor with a similar offering to GreeneStone Muskoka, located on the west coast of Canada. There are hundredsa significant amount of private paidtreatment facilities in the United States, and they collectively, represent a major competitorwe compete with these clinics for those with the ability to pay for addictionpatients who are typically covered by insured healthcare services. Addiction service facilities in the United States that offer the same level of treatment offered by our Company are generally 50% to 100% more expensive than we are. We believe that travel to the United States by potential customers with potential travel restrictions as well as the higher cost eliminates many U.S. facilities as competition.

Environmental Regulations

The Company is not currently subject to any pending administrative or judicial enforcement proceedings arising under environmental laws or regulations. Environmental laws and regulations may be adopted in the future which may have an impact upon the Company’s operations.

Item 1A. Risk Factors.

Not applicable because we are a smaller reporting company.

Item 1B. Unresolved Staff Comments

none.None. 

Item 2. Properties.

GreenestoneEthema Executive Offices and Endoscopy Unit

The Company’s executive offices are located at 5734 Yonge Street, Suite 300, Toronto, Ontario, Canada M2M 4E7, consisting of approximately 8,000 sq. ft. and takes up the entire third floor of the building (the “Yonge Street Facility”). 1590 S. Congress Avenue, West Palm Beach, Florida, 33406..

West Palm Beach Treatment Operations

The Company treatment operations were based in our leased premises at 5400 East Avenue, West Palm Beach, Florida, USA.

This facility was leased by 1816191 and the primary activityoperated until January 30, 2020, we have subsequently ceased operations at this facility was endoscopy procedures. The Company entered into a sublease for office space at these premises from 1816191 on a month to month basis.and are currently exploring new treatment facility options.

Greenestone Muskoka Treatment Facility

The BalaGreenestone Muskoka Treatment Facility is located in Bala, Ontario at 3571 Highway 169. The property is 43 acres in size and contains approximately 48,000 square feet of buildings. The property is owned by Ethema’s wholly owned Canadian subsidiary CCH and has been leased from Cranberry Coveto the new owner of the Muskoka Clinic for a term of five years, which commencedends on April 1, 2014 and hasFebruary 28, 2022. The Lease gives the tenant an option to extend for anthree additional three years. Further, the Company hasfive (5) year terms, an option to purchase the property at any time duringfor a purchase price of $7,000,000 in the first thirty six (36) months of the term and thereafter at a purchase price increased by $1,500,000 for each successive year up to a maximum of the lease for $10.0 million dollars$10,000,000, and a right of first refusal in the event of a sale to a third party.

Delray Beach Real Estate

The Company purchased the properties at 801 and 810 Andrews Avenue in Delray Beach in February 2017. The 801 Andrews Avenue property was a 10 unit residential complex used to house clients of the Company treatment programs and the 810 Andrews Avenue property was where the treatment was performed and also acted as the Company head office.

The Company ceased operations in its Delray Beach properties in June 2018 and relocated its treatment facility to the newly leased premises in West Palm Beach.

The Company entered into short term month to month leases on both properties while they were being held for resale. On April 2, 2019, the Company disposed of the real property at 801 Andrews Avenue, Delray Beach for gross proceeds of $3,500,000, retaining the property at 810 Andrews Avenue Delray Beach, Florida, which property, was transferred on October 10, 2019, in terms of a deed of transfer, to Leonite Capital, LLC, for net proceeds of $1,398,510, which proceeds were offset against the convertible loan owing to Leonite. Subsequent to year end, in terms of the Deed of transfer an additional $36,470 of expenses were incurred relating to the disposal of the property, these expenses were added to the Leonite convertible loan balance outstanding.

West Palm Beach Property

On November 2, 2017, the Company entered into an Agreement to purchase from AREP 5400 East Avenue LLC certain buildings in West Palm Beach, Florida, totaling approximately 80,000 square feet, on which the present tenant operates a substance abuse treatment center. The purchase price of the Property was $20,530,000. The Company made a series of nonrefundable down payments totaling $2,940,546 and $1,825,000 as of December 31, 2018 and 2017, respectively. The Company failed to close on the property purchase agreement.

On May 23, 2018, the Company converted the agreement to purchase AREP 5400 East Avenue LLC. (“the landlord”) into a lease agreement with a purchase option of $17,250,000, increasing August 31, 2018 by $750,000 per month until the purchase option is exercised. The premises is located at 5400, 5402 and 5410 East Avenue, West Palm Beach, Florida (the “Property”). The lease was for an initial 10 years and provided for two additional 10 year extensions.

On December 20, 2019, the Company entered into an agreement with the landlord to terminate the lease agreement on January 31, 2020.

On February 1, 2019 ARIA entered into a lease for an industrial storage space at 5401 East Avenue in West Palm Beach for a period of five years. ARIA abandoned this property in March 2020.

Item 3. Legal Proceedings.

In March 2020 a former employee filed a suit against the Company for unpaid wages amounting to $5,700. The suit was settled out of court for gross wages of $7,500 and legal fees of an additional $3,500.

WeA suit, claiming past due rent was filed against the Company in March 2020 for rent of a storage warehouse, the warehouse was abandoned during March 2020. The rental expense was accrued in our records as of December 31, 2019.

Other than disclosed above, we are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 4. Mine Safety Disclosures.Disclosures.

None.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

(a)Market Information

The Company’s common stock is quoted on the Over-the-counter Bulletin BoardMarket (the “OTCBB”“OTCQB”) under the symbol “GRST”. The Company was sponsored by the market maker Wilson Davis & Co. from Salt Lake City, Utah, which filed a Form 15c2-11 application with the Financial Industry Regulatory Authority (“FINRA”) for the Company in 2011. This application was approved by FINRA in February 2012, and Wilson Davis & Co. first quoted the stock in March 2012.

From March 2012 to January 2020, our common stock has been traded on the OTCQB markets under the symbol “GRST”, in January 2020, the stock was downgraded to the OTC Pink Sheets market.

The following table sets forth the rangelast reported sale price of high and low bid quotations for our common stock for each of the periods indicated as reported by the OTCBB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Quotations on the OTCBB reflect bid and ask quotations, may reflect inter-dealer prices, without retail markup, markdown or commission and may not represent actual transactions.OTC Pink on June 30, 2020, was $0.0014 per share. As of June 30, 2020, there were approximately 155 holders of record of our common stock. 

(b)Holders

The number of record holders of the Company’s common stock as of April 10, 2015, was approximately 149.Dividend Policy

(c)Dividends

We have nevernot paid any cash dividends on our common shares,stock to date, and we do not anticipate that we will pay anyhave no intention of paying cash dividends with respect to those securities in the foreseeable future. Our current business planWhether we declare and pay dividends is determined by our Board of Directors at their discretion, subject to retaincertain limitations imposed under Nevada corporate law. The timing, amount and form of dividends, if any, future earnings to finance the expansion developmentwill depend on, among other things, our results of operations, financial condition, cash requirements and other factors deemed relevant by our business.Board of Directors.

(d)Securities Authorized for Issuance Under Equity Compensation PlansPlan Information

As of December 31, 2015, there were 10,000,000 common securities authorizedSee Item 11 - Executive Compensation for issuance under the Company’s 2013 Stock Option Plan (which was previously approved by securityholders). 

equity compensation plan information.

Recent Sales of Unregistered Securities

In the securities transactions describedOther than as set forth below shares were issued pursuant to the exemptions from the registration requirements ofor as previously disclosed in our filings with the Securities Act of 1933, as amended, afforded the Company under Section 4(a)(2) promulgated thereunder due to the fact that the issuanceand Exchange Commission, we did not involve a public offering because of the insubstantial number of persons involved in each offering, the size of the offering, manner of the offering and number of shares offered. Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(a) (2) of the Securities Act for these transactions.

The following is a summary of thesell any equity securities transactions during the year ended December 31, 2015:2019 in transactions that were not registered under the Securities Act.

On January 15, 2015Between September 11, 2019 and December 30, 2019 in terms of conversion notices received from First Fire Global Opportunities Fund, the Company issued 300,00011,887,445 shares of the Company’s common stock to JMJ pursuant to the conversion of a convertible note totaling US$8,117 at a conversion pricepar value of US$0.027$0.01 per share.share to settle $43,092 of convertible debt.

On March 31, 2015, the Company cancelled 2,909 shares of the Company’s common stock pursuant to a convertible note conversion to recognize the effect of the currency exchange difference in the note conversion.

On March 31, 2015, the Company issued 250,000 shares of the Company’s common stock and 106,000 of the Company’s Series B Preferred stock to Castelli as compensation for services rendered totaling$56,096.

On April 30, 2015, the Company issued 1,060,000 shares of the Company’ common stock to Castelli upon conversion of the 106,000 Series B Preferred stock, mentioned above, at a conversion ratio of10:1.

Penny Stock

The U.S. Securities and Exchange Commission (the “SEC”) has adopted rules that regulate broker-dealerbroker dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer,broker dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws;laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;price; (d) contains a toll-free telephone number for inquiries on disciplinary actions;actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks;stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

The broker-dealerbroker dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock;stock; (b) the compensation of the broker-dealerbroker dealer and its salesperson in the transaction;transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock;stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealerbroker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.

These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.

Item 6. Selected Financial Data.

Not applicable as we are a smaller reporting company.

Special Note Regarding Forward-Looking Statements

Many of the matters discussed within this Annual Report on Form 10-K (“Annual Report”) contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) on our current expectations and projections about future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements. Such risks and uncertainties include the risks noted under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but are also contained elsewhere. We do not undertake any obligation to update any forward looking statements. Unless the context requires otherwise, references to “we,” “us,” “our,” and “Ethema,” refer to Ethema Health Corporation and its subsidiaries.

Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We do not undertake any obligation to update any forward-looking statements.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This annual report on Form 10-K and other reports filed by Greenestone Healthcare Corp. (“we,” “us,” “our,” or the “Company”) from time to time with the SEC contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our consolidated financial statements would be affected to the extent there are material differences between these estimates. This discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and accompanying notes to the consolidated financial statements for the year ended December 31, 2015.2019.

PlanResults of Operationoperations for the year ended December 31, 2019 and the year ended December 31, 2018.

During the next twelve months, the Company plans to continue and expand its operations as a provider of addiction and after-care treatment services. The Company plans to focus on the growth of its addiction and aftercare treatment units while simultaneously reducing costs in current operations.Revenue

The Company finalized the terms for the acquisition of the property currently leased by the Company. The property, which is the location of GreeneStone's Muskoka addiction treatment center, encompasses approximately 48,000 square feet of buildings on 43 acresRevenue was $359,947 and is adjacent to Lake Muskoka in Ontario. The Company expects this deal to close by the second quarter of the 2016 financial year, once the appropriate funding has been raised.

The Company plans to expand its addiction treatment business with acquisitions. In 2014, the Company entered into a non-binding letter of intent with Venture Academy to acquire teen addition treatment centers in Ontario and British Columbia. The Company will need to raise additional capital for this acquisition, which would require the sale of its equity and/or debt securities and securing bank financing.

Results of Operations

For the Fiscal Year Ended December 31, 2015, Compared to the Fiscal Year Ended December 31, 2014

Revenue

We had revenues totaling $3,138,878 and $3,416,342$432,515 for the years ended December 31, 20152019 and 2014,2018, respectively, a decrease of $277,464$72,568 or 8.1%16.8%. We operate in Canada

Revenue from patient treatment was $28,363 and our functional currency is the Canadian Dollar. Our revenue, in Canadian Dollars increased from CAD$3,963,274 to CAD$4,003,090$101,514 for the years ended December 31, 20142019 and 2015,2018, respectively, an increasea decrease of $39,816$73,151 or 1.0%72.0%. The decrease is primarily due to the bad debt provision of $214,837 offset by an increase in revenue in US$ terms is attributableof $141,686 due to the relative strengthreconciliation of the US$ against the CAD$outstanding bills from healthcare companies by a third party collections agent, resulting in increased billings collectible during the current year, the average exchange rate between the CAD$ and the US$ has weekend from $0.9051 in the prior year to $0.7833 in the current year, a decrease in the average exchange rate of 15.5%. The Company believes that revenue will grow over the next year.

Operating Expenses

Operating expenses totaled $3,409,450Revenue from rental income was $331,584 and $4,757,851$331,001 for the years ended December 31, 20152019 and 2014,2018, respectively, a decreasean increase of $1,348,401$583 or 28.3%0.2%. The decrease in operating expenses in US$ terms is attributable to the relative strength of the US$ against the CAD$ during the current year, the average exchange rate between the CAD$ and the US$ has weekend from $0.9051 in the prior year to $0.7833 in the current year, a decrease in the average exchange rate of 15.5%. The decline in the currency exchange rate accounts for approximately $530,156 of the differential. The non-currency decrease is primarily attributed to a reduction in labor of $903,217 due to a reduction in labor overhead costs and the cessation of aftercare services and a non-currency decrease in rental expense ofapproximately $91,765 due to a re-negotiation of our rental arrangement at our executive offices.

Operating lossExpenses

The operating loss totaled $270,572Operating expenses was $4,559,682 and $1,341,509$3,316,832 for the years ended December 31, 20152019 and 2014,2018, respectively, a decreasean increase of $1,070,937, primarily due to the decline$1,242,850 or 37.5%. The increase in operating expenses explainedabove.is attributable to:

Other expenseOperating loss

Other expense of $457,913 consists primarily of the provision of $446,476 raised against the receivable on the sale of the Endoscopy clinic. This receivableThe operating loss was fully provided for as there were no payments received in accordance with the agreement or any payments received as of the date hereof.

Interest expense

Interest expense totaled $192,104$4,199,735 and $310,583$2,884,317 for the years ended December 31, 20152019 and 2014,2018, respectively, an increase of $1,315,418 or 45.6%. The increase is attributable to the decreased revenues and the movements in operating expenses discussed above.

Other income

Other income was $6,600 and $6,009 for the years ended December 31, 2019 and 2018, respectively, an increase of $591 or 9.8%. This amount is immaterial.

Other expense

Other expense of $0 and $8,000 for the years ended December 31, 2019 and 2018, a decrease of $8,000 or 100%. This amount is immaterial.

Loss on sale of assets

The loss on sale of assets was $1,019,812 for the year ended December 31, 2019. The loss represents loss on the disposal of the Delray Beach properties during 2019.

Penalty on convertible notes

The penalty on convertible notes was $569,628 for the year ended December 31, 2019. The penalty arose on notes which were in default in 2019, penalties were either levied or provided for in terms of the agreements entered into with the lenders.

Loss on debt conversion

Loss on debt conversion was $203,981 for the year ended December 31, 2019. The loss on debt conversion arose during the current year as certain convertible debt was converted into equity at prices below market prices in terms of the agreements entered into with lenders during the current and prior periods.

Deposit forfeited

On December 20, 2019, the Company entered into an agreement to terminate the lease agreement on January 30, 2020. The deposit forfeited was $1,665,078 for the year ended December 31, 2019. The deposit forfeited represents deposits initially paid for the acquisition of the West Palm Beach treatment facility located at 5400, 5402 and 5410 East Avenue West Palm Beach. We were unable to consummate the purchase transaction and entered into a lease agreement with the landlord, the deposit initially paid was offset against outstanding rental. The excess was recorded as a forfeiture.

Interest income

Interest income of $17,226 and $5,334 for the years ended December 31, 2019 and 2018, respectively, an increase of $11,892 or 222.9%. The interest income in the current year was earned on the escrow balance due from the sale of Greenstone Muskoka in 2017.

Interest expense

Interest expense of $1,079,038 and $696,944 for the years ended December 31, 2019 and 2018, respectively, an increase of $382,094 or 54.8% was primarily due to the increase in convertible note funding during the current year of a net $1,704,431 primarily for working capital purposes. 

Debt discount

Debt discount was $3,338,760 and $4,504,007 for the years ended December 31, 2019 and 2018, respectively, a decrease of $118,479$1,165,247 or 38.1%25.9%. The decline consistscharge during the current period represents the amortization of an approximate declinethe value of $29,871the warrants issued over the terms of the convertible loan agreements entered into during 2019 and 2018 and the amortization of the fair value of the beneficial conversion feature of the convertible notes issued to note holders during 2017 through 2019 period. The fair value of the warrants and the beneficial conversion features are amortized over a six to twelve month period, the term of the underlying convertible securities. The decrease is due to the deteriorationlower value of convertible notes issued during the current year.

Derivative liability movement

The derivative liability movement during the current year represents the mark to market movements of variably priced convertible notes and warrants issued during the current and prior years. These securities are marked to market on a quarterly basis and the resultant gain or loss is recorded as a derivative liability movement in the exchange rateconsolidated statements of operations and a reduction in the interest bearing convertible notes which were carried in the prior year, offset by an increase in interest expense attributable to interest on payroll and Harmonized SalesTax(“HST”), and accruals for income taxpenalties.comprehensive loss.

Foreign exchange movements

Foreign exchange movements of $184,586, represent$(311,606) and $428,053 for the years ended December 31, 2019 and 2018, represents the realized exchange lossgains and (losses) on monetary assets and liabilities settled during the current year as well as mark to market adjustments on monetary assets and liabilities reflected on the balance sheet and denominated in Canadian Dollars.

Taxation

A taxation expenseTaxation of $50,000 was provided for in the current year as an estimate of potential US taxes to be paid for failure to file required US tax returns in time.

Net loss from discontinued operations

During the prior year, the Company disposed of its Endoscopy Clinic to a related party. The net loss from discontinued operations amounted to $248,181.

Net Loss

Net loss totaled $1,155,176$0 and $1,900,273$102,232 for the years ended December 31, 20152019 and 2014,2018, respectively, a decrease of $745,097,100%. Taxation expense is the estimated foreign tax liability on our Canadian operations during the prior year.

Net loss

Net loss of $(14,962,841) and $(8,178,643) for the years ended December 31, 2019 and 2018, respectively, an increase of $6,784,198 or 83.0%, is primarily due to the decreaseincrease in operating expenses in the current year, the loss on the sale of assets, the Endoscopy unit inloss on debt conversions, the prior yearpenalty on convertible notes and the decline in interest expense, discussed above.deposit forfeited, offset by the increased credit on the derivative liability movement during the current year.

Contingency related to outstanding payroll tax liabilities:liabilities

The Company was delinquent in filing previous payroll tax returns resulting in taxes, interest and penalties payable at December 31, 2015 and 2014. As of December 31, 2015 and 2014 as part of Taxes Payable, the Company has payroll tax liabilities of approximately $2,429,032 and $2,065,000, respectivelyalso not filed certain foreign assets forms due to various taxing authorities on the consolidated balance sheets. If the Company does not satisfy these liabilities, the taxing authorities may place liens on its bank accounts which would have a negative impact on its ability to operate. Further, the actual liability may be higher due to interest orUS Federal Government. A provision of $250,000 was made for any potential penalties assesseddue. This issue is being addressed by the taxing authorities.our tax advisors.

Liquidity and Capital Resources

The following table summarizes working capital atCash used in operating activities of $2,895,538 and $1,463,544 for the years ended December 31, 2015, compared2019 and 2018, respectively increased by $1,431,994 or 97.8%. The increase is primarily due to the following:

Cash generated by investing activities during the year ended December 31, 2014.2019 was $4,556,698 and cash used in investing activities for the year ended December 31, 2018 was $1,432,110 an increase of $5,988,808 or 418.2%. We realized net proceeds on the disposal of the Delray Beach properties of $4,756,360 during the current year, during the prior year we paid deposits on the West Palm Beach properties of $1,111,993 and improved the West Palm Beach properties by $320,117.

Cash used by financing activities for the year ended December 31, 2019 was $1,951,034 and generated by financing activities for the year ended December 31, 2018 was $3,360,764, a decrease of $5,311,798 or 158.1%. We repaid the mortgage outstanding on the Delray properties of $3,067,073 out of the proceeds of the property disposal and repaid $2,504,695 to debt investors during the current year, in the prior year we raised $4,035,000 from debt investors.

Over the next twelve months we estimate that the company will require $3.5millionapproximately $7.5 million in funding to cover therepay its obligations, if these obligations are not converted to equity and for funding working capital deficit and properly market and promoteas we continue to seek opportunities for addiction treatment in the company. The company will have to raise equity or secure debt.US markets. There is no assurance that the Company will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on the Company’s financial condition. In the opinion of management, the Company’s liquidity risk is assessed as high and remains unchanged from the prior year.high.

Item 8. Financial Statements and Supplementary Data.

GREENESTONE HEALTHCAREETHEMA HEALTH CORPORATION

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US$ unless otherwise indicated)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
StockholdersofGreeneStone HealthcareCorporation Ethema Health Corporation

Opinion on the Consolidated Financial Statements

Wehave auditedtheaccompanying consolidated balancesheetsofGreeneStone Healthcare Ethema Health Corporation (“(the “Company”) at December 31, 2019 and December 31, 2018, and the Company”) as ofDecember31, 2015and2014andtherelatedconsolidatedstatementsof operationsandothercomprehensive loss, changes in stockholders’ deficit, and cash flows fortheyearsendedDecember31, 20152019 and2014.These consolidated financial statementsare 2018, and theresponsibilityoftheCompany’s management.Ourresponsibility is related notes (collectively referred to express anopinionontheseas the consolidatedfinancial statements basedonouraudit.

Weconducted our auditin accordancewith thestandardsofthePublic Company Accounting Oversight Board (United States)statements). Those standards requirethatweplanand performthe audittoobtain reasonable assurance about whether thefinancial statementsarefreeofmaterial misstatement. The Company isnotrequired tohave,norwereweengagedtoperform, anauditof itsinternal controloverfinancial reporting.Our audit includedconsiderationofinternal controloverfinancial reporting as a basis fordesigningauditproceduresthatareappropriate inthecircumstances,but notforthepurposeofexpressing anopinionontheeffectivenessoftheCompany’s internal control over financial reporting. Accordingly, weexpressnosuchopinion.An auditalsoincludesexamining, ona test basis,evidence supportingtheamounts and disclosures inthefinancial statements, assessingthe accountingprinciplesused and significant estimates madebymanagement, aswellasevaluating theoverall financial statement presentation.Webelieve thatour auditprovidesa reasonable basis forouropinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of GreeneStone Healthcare Corporation as ofthe Company at December 31, 20152019 and 20142018, and the results of its operations and its cash flows for the years ended December 31, 20152019 and 20142018, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discusseddescribed in Note 3 to the consolidated financial statements, the Company has sustained net losseshad accumulated deficit of approximately $45.5 million and has anegative working capital and stockholder’s deficit. These conditions raiseof approximately $18.3 million at December 31, 2019, which raises substantial doubt about the Company’sits ability to continue as a going concern. Management’s plans in regardsregard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

Basis for Opinion

/s/RBSM LLP

New York, NY

April 14, 2016These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

The accompanying notes are an integral partOur audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

GREENESTONE HEALTHCARE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS

ETHEMA HEALTH CORPORATION

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of the consolidated financial statements 

ETHEMA HEALTH CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS 

AND COMPREHENSIVE LOSS

The accompanying notes are an integral part of the consolidated financial statements

ETHEMA HEALTH CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

The accompanying notes are an integral part of the consolidated financial statement

ETHEMA HEALTH CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS 

The accompanying notes are an integral part of the consolidated financial statements

GREENESTONE HEALTHCARE

ETHEMA HEALTH CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.Nature of Business

GreeneStone HealthcareEthema Health Corporation (the “Company”) was incorporated under the laws of the state of Colorado, USA, on April 1, 1993. Effective April 4, 2017, the Company changed its name to Ethema Health Corporation and prior to that, on May 2012, the Company had changed its corporate name to GreeneStone Healthcare Corporation from Nova Natural Resources Corporation. As atof December 31, 2015 and 2014,2017, the Company ownsowned 100% of the outstanding shares of GreenestoneGreeneStone Clinic Muskoka Inc., which was incorporated in 2010 under the laws of the Province of Ontario, Canada. GreenestoneCanada; Cranberry Cove Holdings Ltd., incorporated on January 9, 2004 under the laws of the Province of Ontario, Canada; Addiction Recovery Institute of America (“ARIA”) (formerly Seastone Delray Healthcare, LLC), incorporated on May 17, 2016 under the laws of Florida, USA; and Delray Andrews RE, LLC, incorporated on May 17, 2016 under the laws of Florida, USA.

During December 2016, the Company obtained a license to operate and provide addiction treatment healthcare services in Florida, USA. The company commenced operations under this license with effect from January 2017.

On February 14, 2017, the Company completed a series of transactions (referred to collectively as the “Restructuring Transactions”), including a Share Purchase Agreement (the “SPA”) whereby the Company acquired 100% of the stock of CCH, which holds the real estate on which the Company previously operated a rehabilitation clinic (“the Canadian Rehab Clinic”). The Company entered into an Asset Purchase Agreement (the “APA”) and lease (the “Lease”) whereby the Company sold all of the Canadian Rehab Clinic business assets and leased the real estate to the buyer. Simultaneously with this transaction, the Company entered into a Real Estate Purchase agreement and Asset Purchase Agreement whereby the Company purchased the real estate and business assets of Seastone Delray (the “Florida Purchase”).

The Share Purchase Agreement

Under the SPA, the Company acquired 100% of the stock of CCH from Leon Developments Ltd. (“Leon Developments”), a company wholly owned by Shawn E. Leon, who is the President, CEO, and CFO of the Company (“Mr. Leon”). CCH owns the real estate on which the Canadian Rehab Clinic is located. The total consideration paid by the Company was CDN$3,517,062, including the assumption of certain liabilities of CCH, which was funded by the assignment to Leon Developments of certain indebtedness owing to the Company in the amount of CDN$659,918, and the issuance of 60,000,000 shares of the Company’s common stock to Leon Developments, valued at US$0.0364 per share.

The Asset Purchase Agreement and Lease

Under the APA, the assets of the Canadian Rehab Clinic were sold by the Company, through its subsidiary, GreeneStone Clinic Muskoka Inc. provides medical services(“Muskoka”), to various patientsCanadian Addiction Residential Treatment LP (the “Purchaser”), for a total consideration of CDN$10,000,000, plus an additional payment of up to CDN$3,000,000 as a performance payment to be received in a2019 if certain clinic locatedperformance metrics are met. The Purchaser completed the sale with cash proceeds to the Company of CDN$10,000,000, of which CDN$1,500,000 was to remain in escrow for up to two years to cover indemnities given by the regional municipalityCompany. The proceeds of Muskoka.the Muskoka clinic asset sale were used to pay down certain tax debts and operational costs of the Company and to fund the Florida Purchase, mentioned below.

2.SummaryThrough the APA, substantially all of Significant Accounting Policiesthe assets of the Canadian Rehab Clinic were sold, leaving Ethema with only the underlying clinic real estate, which the Company, through its newly acquired subsidiary, CCH, concurrently leased to the Purchaser. The Lease is a triple net lease and provides for a five (5) year primary term with three (3) five-year renewal options, annual base rent for the first year at CDN$420,000 with annual increases, an option to tenant to purchase the leased premises and certain first refusal rights.

a)The Florida Purchase

Immediately after closing on the sale of the assets of the Canadian Rehab Clinic, the Company closed on the acquisition of the real estate assets of Seastone Delray pursuant to certain real estate and asset purchase agreements The purchase price for the Seastone assets was US$6,070,000 financed with a purchase money mortgage of US$3,000,000, and US$3,070,000 in cash.

On May 23, 2018, the Company converted a purchase agreement with AREP 5400 East Avenue LLC to a ten year lease agreement for a substance abuse treatment center in properties located at 5400, 5402 and 5410 East Avenue, west Palm Beach, Florida. The Company was also granted an option to purchase the property at a price of $17,250,000, increasing by $750,000 per month.

The Company ceased operations in its Delray Beach properties and relocated its treatment facility to the newly leased premises in West Palm Beach.

On April 2, 2019, the Company disposed of the real property located at 801 Andrews Avenue, Delray Beach for gross proceeds of $3,500,000, retaining the property at 810 Andrews Avenue Delray Beach, Florida.

On October 10, 2019, the Company transferred the real Property located at 810 Andrews Avenue, Delray Beach, Florida to Leonite Capital, LLC, for net proceeds of $1,398,510, which proceeds were offset against the convertible loan owing to Leonite.

ETHEMA HEALTH CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Financial Reporting

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Revenues and expenses are reported on the accrual basis, which means that income is recognized as it is earned and expenses are recognized as they are incurred.America (“US GAAP”).

Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company'sCompany’s system of internal accounting control is designed to assure, among other items, that i) recorded transactions are valid; ii) valid transactions are recorded; and iii) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.

b)Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of AmericaUS 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

c)Principals of consolidation and foreign currency translation

The accompanying consolidated financial statements include the accounts of the Company and all of its subsidiary.subsidiaries. All inter-companyintercompany transactions and balances have been eliminated on consolidation.

TheCertain of the Company’s subsidiary’ssubsidiaries functional currency is the Canadian dollar, while the Company’s reporting currency is the U.S. dollar. All transactions initiated in Canadian dollars are translated into US dollars in accordance with ASC 830, “Foreign Currency Translation"Translation” as follows:

Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ deficit as a component of accumulated other comprehensive income or loss. Therefore, translation adjustments are not included in determining net income (loss) but reported as other comprehensive income (loss).

GREENESTONE HEALTHCARE CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

2.Summary of Significant Accounting Policies(continued)

c)Principals of consolidation and foreign currency translation (continued)

For foreign currency transactions, the Company translates these amounts to the Company’s functional currency at the exchange rate effective on the invoice date. If the exchange rate changes between the time of purchase and the time actual payment is made, a foreign exchange transaction gain or loss results which is included in determining net income for the period.

The relevant translation rates are as follows: For the year ended December 31, 20152019 a closing rate of CDN$1.0000 equals US$0.7699 and an average exchange rate of CDN$1.0000 equals US$0.7536. For the year ended December 31, 2018 a closing rate of CAD$1.0000 equals US$0.722500.7330 and an average exchange rate of CAD$1.0000 equals US$0.7833 for the year ended December 31, 2015.0.7574. 

ETHEMA HEALTH CORPORATION

d)Revenue Recognition

The Company recognizes revenue from the rendering of services when they are earned; specifically, when all of the following conditions are met:

In particular, the Company recognizes:

Deferred revenue represents monies deposited by the patients for future services to be provided by the Company. Such monies will be recognized into revenue as the patient progresses through their treatment term.

e)Non-monetary transactions

The Company’s policy is to measure an asset exchanged or transferred in a non-monetary transaction at the more reliable measurement of the fair value of the asset given up and the fair value of the asset received, unless:

GREENESTONE HEALTHCARE CORPORATION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

ASC 606 requires companies to exercise more judgment and recognize revenue using a five-step process.

2.SummaryAs a result of Significant Accounting Policies(continued)certain changes required by ASC 606, the majority of the Company’s provision for doubtful accounts are recorded as a direct reduction to revenue instead of being presented as a separate line item on the consolidated statements of operations and comprehensive loss. The adoption of ASC 606 has no impact on the Company’s accounts receivable as it was historically recorded net of allowance for doubtful accounts and contractual adjustments, and the Company has eliminated the presentation of allowance for doubtful accounts on the consolidated balance sheets. As a result, upon the Company’s adoption of ASC 606 the majority of what was previously classified as the provision for bad debts in the statement of operations is now reflected as implicit price concessions (as defined in ASC 606) and therefore is included as a reduction to net operating revenues in 2019.

f)Cash and cash equivalents

As our performance obligations relate to contracts with a duration of one year or less, the Company elected the optional exemption in ASC 606-10-50-14(a). Therefore, the Company is not required to disclose the transaction price for the remaining performance obligations at the end of the reporting period or when the Company expects to recognize the revenue. The Company has minimal unsatisfied performance obligations at the end of the reporting period as our patients typically are under no obligation to remain admitted in our facilities.

The Company's policyCompany receives payments from the following sources for services rendered in our U.S. Facility: (i) commercial insurers; and (ii) individual patients and clients. As the period between the time of service and time of payment is typically one year or less, the Company elected the practical expedient under ASC 606-10-32-18 and did not adjust for the effects of a significant financing component.

The Company derives a significant portion of its revenue from other payors that receive discounts from established billing rates. The various managed care contracts under which these discounts must be calculated are complex, subject to disclose bank balancesinterpretation and adjustment, and may include multiple reimbursement mechanisms for different types of services provided in the Company’s inpatient facilities and cost settlement provisions. Management estimates the transaction price on a payor-specific basis given its interpretation of the applicable regulations or contract terms. The services authorized and provided and related reimbursement are often subject to interpretation that could result in payments that differ from the Company’s estimates. Additionally, updated regulations and contract renegotiations occur frequently, necessitating regular review and assessment of the estimation process by management.

Settlements with third-party payors are estimated and recorded in the period in which the related services are rendered and are adjusted in future periods as final settlements are determined. In the opinion of management, adequate provision has been made for any adjustments and final settlements. However, there can be no assurance that any such adjustments and final settlements will not have a material effect on the Company’s financial condition or results of operations. The Company’s receivables were $105,842 and $202,654 for the years ended December 31, 2019 and 2018, respectively. Management believes that these receivables are properly stated and are not likely to be settled for a significantly different amount. The net adjustments to estimated settlements resulted in a decrease in revenues of $414,603 and $262,353 for the years ended December 31, 2019 and 2018, respectively.

The Company’s revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company derives its revenues from the sale of its services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its revenue transactions:

ETHEMA HEALTH CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For purposes of the statements of cash including bank overdrafts with balances that fluctuate frequently from being positive to overdrawn and term depositsflows, the Company considers all highly liquid instruments purchased with a maturity period of three months or less fromand money market accounts to be cash equivalents. The Company maintains cash and cash equivalents with several financial institution in the date of acquisition.USA and Canada.

The Company has $72,250 (CAD$100,000)primarily places cash balances in restricted cash heldthe USA with high-credit quality financial institutions located in the United States which are insured by their bankthe Federal Deposit Insurance Corporation up to cover againsta limit of $250,000 per institution, in Canada which are insured by the possibilityCanadian Deposit Insurance Corporation up to a limit of credit card charge backs, for services not performed.CDN$100,000 per institution.

g)

Accounts receivable primarily consists of amounts due from third-party payors (non-governmental) and private pay patients and is recorded net of allowances for doubtful accounts and contractual discounts. The Company’s ability to collect outstanding receivables is critical to its results of operations and cash flows. Accordingly, accounts receivable reported in the Company’s consolidated financial statements is recorded at the net amount expected to be received. The Company’s primary collection risks are (i) the risk of overestimating net revenues at the time of billing that may result in the Company receiving less than the recorded receivable, (ii) the risk of non-payment as a result of commercial insurance companies denying claims, (iii) the risk that patients will fail to remit insurance payments to the Company when the commercial insurance company pays out-of-network claims directly to the patient, (iv) resource and capacity constraints that may prevent the Company from handling the volume of billing and collection issues in a timely manner, (v) the risk that patients do not pay the Company for their self-pay balances (including co-pays, deductibles and any portion of the claim not covered by insurance) and (vi) the risk of non-payment from uninsured patients.

The Company provides anderives the majority of its revenues from commercial payors at out-of-network rates. Management estimates the allowance for contractual and other discounts based on its historical collection experience. The services authorized and provided and related reimbursement are often subject to interpretation and negotiation that could result in payments that differ from the Company’s estimates. The Company’s allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company's estimate is based on historical collection experience, but management also takes into consideration the age of accounts, creditworthiness and a review ofcurrent economic trends when evaluating the current status of trade accounts receivable. It is reasonably possible that the Company’s estimateadequacy of the allowance for doubtful accounts will change. At December 31, 2015 and December 31, 2014,accounts. An account is written off only after the Company has a $0 and $27,294 allowance for doubtful accounts, respectively.pursued collection efforts or otherwise determines an account to be uncollectible. Uncollectible balances are written-off against the allowance. Recoveries of previously written-off balances are credited to income when the recoveries are made.

h)Financial instruments

The Company initially measures its financial assets and liabilities at fair value, except for certain non-arm'snon-arm’s length transactions. The Company subsequently measures all its financial assets and financial liabilities at amortized cost.

Financial assets measured at amortized cost include cash and accounts receivable.

Financial liabilities measured at amortized cost include bank indebtedness, accounts payable and accrued liabilities, harmonized sales tax payable, withholding taxes payable, convertible notes payable, loanloans payable and related party notes.

Financial assets measured at cost are tested for impairment when there are indicators of impairment. The amount of the write-down is recognized in net income. The previously recognized impairment loss may be reversed to the extent of the improvement, directly or by adjusting the allowance account, provided it is no greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously. The amount of the reversal is recognized in net income. The Company recognizes its transaction costs in net income in the period incurred. However, financial instruments that will not be subsequently measured at fair value are adjusted by the transaction costs that are directly attributable to their origination, issuance or assumption.

ETHEMA HEALTH CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS