☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR ~~15(D)~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

For the ~~Transition Period~~transition period from ~~_______________~~___________ to ~~_______________~~___________

(Exact ~~name~~Name of ~~registrant~~Registrant as ~~specified~~Specified in its ~~charter)~~Charter)

~~(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)~~

~~810 Andrews Avenue, Delray Beach, Florida 33483 (Address of principal executive offices~~Former Name, Former Address and ~~zip code)~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by ~~section~~Section 13 or 15(d) of the Securities Exchange Act of 1934 during the ~~past~~preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ~~[X]~~☒ No ~~[ ]~~☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation STS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such ~~files.~~files). Yes ~~[X]~~☒ No ~~[ ]~~☐

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

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[ ]~~Yes ☐ No ~~[X]~~☒

AsSecurities registered pursuant to Section 12(b) of ~~November 20, 2017, there were 121,339,230~~the Act:

Indicate the number of shares outstanding of each of the ~~registrant’s~~issuer’s classes of common ~~stock.~~stock, as of the latest practicable date:

Number of shares of common stock outstanding as of November 18, 2019 was 147,383,897

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In particular, statements contained in this Quarterly Report on Form 10-Q, including but not limited to, statements regarding the sufficiency of our cash, our ability to finance our operations and business initiatives and obtain funding for such activities; our future results of operations and financial position, business strategy and plan prospects, or costs and objectives of management for future acquisitions, are forward looking statements. These forward-looking statements relate to our future plans, objectives, expectations and intentions and may be identified by words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “intends,” ~~’‘targets,~~“targets,” “projects,” “contemplates,” ~~’‘believes,~~“believes,” “seeks,” “goals,” “estimates,” ~~’‘predicts,~~“predicts,” ~~’‘potential”~~“potential” and “continue” or similar words. Readers are cautioned that these forward-looking statements are based on our current beliefs, expectations and assumptions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified below, under Part II, Item 1A. “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, and those identified under Part I, Item 1A of our Annual Report on Form ~~10-K~~10-K/A for the year ended December 31, ~~2016~~2018 filed with the SEC on April ~~17, 2017.~~22, 2019. Therefore, actual results may differ materially and adversely from those expressed, projected or implied in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.

Throughout this Quarterly Report on Form 10-Q, “Ethema,” the “Company,” “we,” “us” and “our” refer to Ethema ~~Healthcare~~Health Corporation.

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

ETHEMA HEALTH CORPORATION

~~(formerly Greenstone Healthcare Corporation)~~
UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

Three months ended September 30, 2017 Three Months ended September 30, 2016 Nine months ended September 30, 2017 Nine Months ended September 30, 2016

Revenues $ 648,298 $ —   $ 1,373,028 $ —

Operating expenses
General and administrative 170,491 55,124 578,931 165,319
Professional fees 53,830 47,135 453,034 122,180
Salaries and wages 200,863 89,934 583,559 110,934
Depreciation and amortization 131,784 —   314,190 —
Total operating expenses 556,968 192,193 1,929,714 398,433

Operating income (loss) 91,330 (192,193 ) (556,686 ) (398,433 )

Other Income (expense)
Other income 67,596 60,000 635,904 72,507
Other expense —   (12,250 ) (392,538 ) (12,250 )
Interest income —   —   32,074 —
Interest expense (86,371 ) (8,598 ) (242,992 ) (15,701 )
Debt discount (13,052 ) (39,988 ) (442,377 ) (73,250 )
Derivative liability movement (19,329 ) —   75,203 —
Foreign exchange movements 53,294 11,099 (111,052 ) 13,833
Net income (loss) before taxation from continuing operations 93,468 (181,930 ) (1,002,464 ) (413,294 )
Taxation —   —   —   —
Net income (loss) from continuing operations 93,468 (181,930 ) (1,002,464 ) (413,294 )

Gain on disposal of business —   —   7,494,828 —
Operating (loss) income from discontinued operations, net of tax (218,253 ) 318,901 (300,439 ) 762,680
Net (loss) income from discontinued operations, net of tax (218,253 ) 318,901 7,194,389 762,680
Net (loss) income (124,785 ) 136,971 6,191,925 349,386
Accumulated other comprehensive income (loss)
Foreign currency translation adjustment 277,923 24,805 241,231 (190,471 )

Total comprehensive income $ 153,138 $ 161,776 $ 6,433,156 $ 158,915

Basic loss per common share from continuing operations $ —   $ —   $ (0.01 ) $ (0.01 )
Basic income per share from discontinued operations $ —   $ —   $ 0.07 $ 0.02
Basic income per common share $ —   $ —   $ 0.06 $ 0.01
Diluted loss per common share from continuing operations $ —   $ —   $ (0.01 ) $ (0.01 )
Diluted income per share from discontinued operations $ —   $ —   $ 0.06 $ 0.02
Diluted income per common share $ —   $ —   $ 0.05 $ 0.01
Weighted average common shares outstanding - Basic 119,407,668 48,738,855 102,455,451 48,158,563
Weighted average common shares outstanding - Diluted 119,407,668 49,005,555 117,312,150 48,425,263

	Three months ended September 30, 2019			Three months ended September 30, 2018			Nine months ended September 30, 2019			Nine months ended September 30, 2018

Revenues	$	148,042		$	270,370		$	328,244		$	450,366

Operating expenses
General and administrative		216,004			234,991			1,123,207			600,639
Rental expense		432,617			469,741			1,212,042			626,321
Management fees		—			46,350			—			138,448
Professional fees		92,407			114,760			510,608			297,858
Salaries and wages		370,341			263,901			1,103,054			657,337
Depreciation		47,104			67,929			179,399			204,384
Total operating expenses		1,158,473			1,197,672			4,128,310			2,524,987

Operating loss		(1,010,431	)		(927,302	)		(3,800,066	)		(2,074,621	)

Other Income (expense)
Other income		6,600			6,009			6,600			6,009
Other expense		(11,729	)		—			(11,729	)		—
Interest income		51			5,334			15,313			5,334
Loss on disposal of property		—			—			(692,488	)		—
Bonus shares issued to investors		—			—			(143,500	)		—
Interest expense		(299,022	)		(225,205	)		(841,160	)		(572,243	)
Debt discount		(974,084	)		(1,195,638	)		(2,564,338	)		(3,288,472	)
Derivative liability movement		1,875,402			37,951			3,130,273			(771,000	)
Foreign exchange movements		59,983			(95,292	)		(211,967	)		153,232
Net loss before taxation		(353,230	)		(2,394,143	)		(5,113,062	)		(6,541,761	)
Taxation		—			—			—			—
Net loss		(353,230	)		(2,394,143	)		(5,113,062	)		(6,541,761	)
Accumulated other comprehensive loss
Foreign currency translation adjustment		(21,394	)		33,954			(60,720	)		(61,691	)

Total comprehensive loss	$	(374,624	)	$	(2,360,189	)	$	(5,173,782	)	$	(6,603,452	)

Basic and diluted loss per common share	$	—		$	(0.02	)	$	(0.04	)	$	(0.05	)
Weighted average common shares outstanding – Basic and diluted		143,636,081			124,089,230			133,121,771			123,852,105

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

ETHEMA HEALTH CORPORATION

~~(formerly Greenstone Healthcare Corporation)~~

UNAUDITED CONDENSED ~~CONSOLDATED STATEMENTS~~CONSOLIDATED STATEMENT OF ~~STOCKHOLDERS EQUITY (DEFICIT)~~STOCKHOLDERS’ DEFICIT

Common Additional
Shares Amount Paid in Capital Comprehensive Income Accumulated Deficit Total

Balance at January 1, 2017 48,738,855 $ 487,389 $ 16,509,906 $ 807,563 $ (20,981,914 ) $ (3,177,056 )

Shares issued to acquire subsidiary 60,000,000 600,000 1,584,000 —   —   2,184,000
Conversion of debt to equity 12,500,375 125,004 250,007 375,011
Fair value of warrants issued —   —   71,000 —   —   71,000
Shares issued for services 100,000 1,000 3,000 —   —   4,000
Foreign currency translation —   —   —   241,231 —   241,231
Net income —   —   —   —   6,191,925 6,191,925
Balance as of September 30, 2017 121,339,230 $ 1,213,393 $ 18,417,913 $ 1,048,794 $ (14,789,989 ) $ 5,890,111

	Preferred Series B				Common				Additional
	Shares		Amount		Shares		Amount		Paid in Capital		Comprehensive Income			Accumulated Deficit			Total

Balance as of December 31, 2018		—	$	—		124,300,341	$	1,243,004	$	20,939,676	$	630,411		$	(30,529,044	)	$	(7,715,953	)

Fair value of warrants issued		—		—		—		—		874,566		—			—			874,566
Shares issued for commitment fees		—		—		71,111		711		4,267		—			—			4,978
Foreign currency translation		—		—		—		—		—		43,097			—			43,097
Net loss		—		—		—		—		—		—			(3,088,680	)		(3,088,680	)
Balance as of March 31, 2019		—		—		124,371,452		1,243,715		21,818,509		673,508			(33,617,724	)		(9,881,992	)

Fair value of warrants issued		—		—		—		—		332,209		—			—			332,209
Share based compensation		—		—		5,300,000		53,000		318,000		—			—			371,000
Conversion of convertible notes		—		—		11,875,000		118,750		831,250		—			—			950,000
Bonus shares issued to investors		—		—		2,050,000		20,500		123,000								143,500
Foreign currency translation		—		—		—		—		—		39,017			—			39,017
Net loss		—		—		—		—		—		—			(1,671,152	)		(1,671,152	)
Balance as of June 30, 2019		—		—		143,596,452		1,435,965		23,422,968		712,525			(35,288,876	)		(9,717,418	)
Fair value of warrants issued		—		—		—		—		113,722		—			—			113,722
Conversion of convertible notes		—		—		260,416		2,605		15,624		—			—			18,229
Foreign currency translation		—		—		—		—		—		(21,394	)		—			(21,394	)
Net loss		—		—		—		—		—		—			(353,230	)		(353,230	)
Balance as of September 30, 2019		—	$	—		143,856,868	$	1,438,570	$	23,552,314	$	691,131		$	(35,642,106	)	$	(9,960,091	)

	Preferred Series B				Common				Additional
	Shares		Amount		Shares		Amount		Paid in Capital			Comprehensive Income			Accumulated Deficit			Total

Balance as of December 31, 2017		—	$	—		123,239,230	$	1,232,393	$	18,545,913		$	796,453		$	(22,350,401	)	$	(1,775,642	)

Shares issued for commitment fees		—		—		165,000		1,650		9,900			—			—			11,550
Foreign currency translation		—		—		—		—		—			(53,186	)		—			(53,186	)
Net loss		—		—		—		—		—			—			(1,216,155	)		(1,216,155	)
Balance as of March 31, 2018		—		—		123,404,230		1,234,043		18,555,813			743,267			(23,566,556	)		(3,033,433	)

Shares issued for commitment fees		—		—		605,000		6,050		41,100			—			—			47,150
Fair value of series N warrants issued		—		—		—		—		1,202,747			—			—			1,202,747
Foreign currency translation		—		—		—		—		—			(42,459	)		—			(42,459	)
Net loss		—		—		—		—		—			—			(2,931,463	)		(2,931,463	)
Balance as of June 30, 2018		—		—		124,009,230		1,240,093		19,799,660			700,808			(26,498,019	)		(4,757,458	)
Shares issued for commitment fees		—		—		80,000		800		(800	)		—			—			—
Fair value of series N warrants issued		—		—		—		—		284,982			—			—			284,982
Foreign currency translation		—		—		—		—		—			33,954			—			33,954
Net loss		—		—		—		—		—			—			(2,394,143	)		(2,394,143	)
Balance as of September 30, 2018		—	$	—		124,089,230	$	1,240,893	$	20,083,842		$	734,762		$	(28,892,162	)	$	(6,832,665	)

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

~~ETHEMA HEALTH CORPORATION~~

~~(formerly Greenstone Healthcare Corporation)~~

~~UNAUDITED CONDENSED CONSOLDATED STATEMENTS OF CASH FLOWS~~

Nine months ended September 30, 2017 Nine months ended September 30, 2016
Operating activities
Net income $ 6,191,925 $ 349,386
Net income from discontinued operations $ (7,194,389 ) $ (762,680 )
Net loss from continuing operations $ (1,002,464 ) $ (413,294 )
Adjustment to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation 314,190 —
Non cash compensation expense on acquisition of subsidiary 373,274 —
Loss on mortgage sold 19,265 —
Non cash compensation for services 4,000 50,000
Other foreign exchange movements 63,962 6,951
Amortization of debt discount 442,377 73,250
Derivative liability movements (75,203 ) —
Provision against receivable on sale of subsidiary (446,476 ) —
Non cash earnout accrual (162,536 ) —
Changes in operating assets and liabilities
Accounts receivable (833,374 ) —
Prepaid expenses (12,013 ) (118,140 )
Accounts payable and accrued liabilities (162,834 ) (254,195 )
Taxes payable (2,393,899 ) 240,440
Net cash used in operating activities - continuing operations (3,871,731 ) (414,988 )
Net cash (used in) provided by operating activities - discontinued operations (117,221 ) 738,967
(3,988,952 ) 323,979
Investing activities
Investments in Seastone (2,960,000 ) —
Proceeds from restricted cash 74,480 —
Purchase of fixed assets (8,878 ) —
Net cash used in investing activities - continuing operations (2,894,398 ) —
Net cash provided by (used in) investing activities - discontinued operations 6,285,852 (11,836 )
3,391,454 (11,836 )

Financing activities
Decrease in bank overdraft (56,105 ) (8,657 )
Repayment of loan payable —   (4,406 )
Proceeds from short-term notes —   283,386
Repayment of short-term note —   (107,639 )
Proceeds from mortgage sold 111,554 —
Proceeds from mortgage 4,367,000 —
Repayment of mortgage (3,482,144 ) —
Proceeds from convertible notes 294,500 —
Repayment of convertible notes (274,958 ) —
Proceeds from related party notes (595,736 ) (253,389 )
Net cash provided by (used in) financing activities 364,111 (90,705 )

Effect of exchange rate on cash 241,231 (190,471 )

Net change in cash 7,844 30,967
Beginning cash balance 4,779 174
Ending cash balance $ 12,623 $ 31,141

ETHEMA HEALTH CORPORATION

~~(formerly Greenstone Healthcare Corporation)~~

UNAUDITED CONDENSED ~~CONSOLDATED STATEMENTS~~CONSOLIDATED STATEMENT OF CASH FLOWS

					Nine months ended September 30, 2019			Nine months ended September 30, 2018
Operating activities
Net loss					$	(5,113,062	)	$	(6,541,761	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation						179,399			204,384
Non-cash interest accrual on escrow deposit						(15,280	)		—
Loss on disposal of property						692,488			—
Loss on debt conversion						11,729			—
Bonus shares issued to investors						143,500			—
Non-cash compensation for services						375,978			58,700
Amortization of debt discount						2,564,338			3,288,472
Derivative liability movements						(3,130,273	)		771,000
Movement on receivables reserve						—			(753,159	)
Non-cash deferral of operating lease liability expense						259,299			—
Changes in operating assets and liabilities
Accounts receivable						38,517			869,559
Prepaid expenses and other current assets						(53,017	)		30,707
Accrued purchase consideration						322,217			517,239
Accounts payable and accrued liabilities						1,202,253			398,633
Taxes payable						—			(9,917	)
Net cash used in operating activities						(2,521,914	)		(1,166,143	)

Investing activities
Proceeds on disposal of property, net of closing costs of $183,344						3,318,141			—
Deposits paid						—			(1,132,509	)
Deposit refunded						15,592			—
Purchase of fixed assets						(22,868	)		(41,610	)
Net cash provided by (used in) investing activities						3,310,865			(1,174,119	)

Financing activities
Proceeds from bank overdraft						28,062			—
Repayment of bank overdraft						—			(28,781	)
Repayment of mortgage loans						(3,026,653	)		(90,373	)
Proceeds from convertible notes						2,912,355			3,130,000
Repayment of convertible notes						(1,123,666	)		(586,000	)
Proceeds from promissory notes						153,541			—
Repayment of promissory notes						(7,552	)		—
Proceeds from related party notes						85,484			55,033
Net cash (used by) provided by financing activities						(978,429	)		2,479,879

Effect of exchange rate on cash						165,552			(59,238	)

Net change in cash						(23,926	)		80,379
Beginning cash balance						24,674			339
Ending cash balance					$	748		$	80,718

Supplemental cash flow information
Cash paid for interest	$	253,256	$	9,632	$	683,487		$	308,077
Cash paid for income taxes	$	—	$	—	$	—		$	—

Non cash investing and financing activities
Common shares issued to acquire subsidiary	$	2,184,000	$	—
Conversion of debt to equity	$	375,011	$	—
Fair value of warrants issued	$	71,000	$	—	$	1,320,497		$	1,487,729
Assumption of mortgage liabilities on acquisition of subsidiary	$	3,145,549	$	—

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

ETHEMA HEALTH CORPORATION

~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

~~1. Nature of Business~~

1.	Nature of business

Ethema 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 name to GreeneStone Healthcare Corporation from Nova Natural Resources Corporation. As of ~~September 30,~~December 31, 2017, the Company owned 100% of the outstanding shares of GreeneStone Clinic Muskoka Inc., incorporated in 2010 under the laws of the Province of Ontario, Canada; Cranberry Cove Holdings Ltd., incorporated on January 9, 2004 under the laws of the Province of Ontario, ~~Canada. and~~Canada; Addiction Recovery Institute of America (“ARIA”) (formerly Seastone Delray Healthcare, ~~LLC,~~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 ~~Cranberry Cove Holdings Ltd.,~~CCH, which holds the real estate on which the ~~Company’s Rehabilitation Clinic~~Company previously operated a rehabilitation clinic (“the Canadian Rehab Clinic”) ~~operates,~~. The Company entered into an ~~asset purchase agreement~~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, and~~buyer. Simultaneously with this transaction, the Company entered into a ~~real estate purchase~~Real Estate Purchase agreement and ~~asset purchase agreement~~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 ~~Cranberry Cove Holdings Ltd. (“CCH”)~~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. (“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 as a performance payment 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 ~~will~~was to remain in escrow for up to two years to cover indemnities given by the Company. The proceeds of 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.

Through the APA, substantially all of the 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.

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 ~~business and~~ real estate assets of Seastone Delray pursuant to certain real estate and asset purchase agreements ~~This business is operated through its wholly owned subsidiary Seastone.~~ 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.

ETHEMA HEALTH CORPORATION

~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

1.2.

~~Nature~~Summary of ~~Business (continued)~~significant accounting policies

Basis of presentation

The ~~accompanying~~(a) unaudited condensed consolidated balance sheets as of September 30, 2019, which have been derived from the unaudited condensed consolidated financial statements, and as of December 31, 2018, which have been derived from audited consolidated financial statements, and (b) the unaudited condensed consolidated statements of operations and cash flows of the Company, have been prepared in accordance with accounting principles generally accepted in the United States ~~of America~~(“GAAP”) for interim ~~consolidated~~ financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation ~~SX.~~S-X. Accordingly, ~~these unaudited condensed consolidated financial statements~~they do not include all of the information and ~~disclosures~~footnotes required by ~~accounting principles generally accepted in the United States of America~~GAAP for complete financial statements.

~~All~~ In the opinion of management, all adjustments (consisting of normal recurring ~~adjustments)~~accruals) considered necessary for a fair presentation have been ~~included in these unaudited condensed consolidated financial statements.~~included. Operating results for the ~~three and~~ nine ~~month period presented~~months ended September 30, 2019 are not necessarily indicative of ~~the~~ results that may be expected for ~~any other interim period or for~~ the ~~full year. The balance sheet at~~year ending December 31, ~~2016 has been derived from audited consolidated financial statements. The~~2019. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and ~~footnotes~~notes thereto included in the Company’s Form 10-K/A for the year ended December 31, ~~2016.~~2018, filed with the Securities and Exchange Commission (“SEC”) on April 22, 2019.

All amounts referred to in the notes to the unaudited condensed consolidated financial statements are in United States Dollars ($) unless stated otherwise.

~~Summary of Significant Accounting Policies~~

Use of Estimates

The preparation of ~~unaudited condensed consolidated~~ financial statements in conformity with ~~accounting principles generally accepted in the United States of America~~US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

~~Principals~~Principles of consolidation and foreign currency translation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and all of its ~~subsidiary.~~subsidiaries. All intercompany transactions and balances have been eliminated on consolidation.

~~The Company previously owned an operational subsidiary whose~~Certain of the Company’s subsidiaries functional currency ~~was~~is the Canadian dollar, while the Company’s reporting currency is the U.S. ~~dollar. The Company recently acquired a property-owning subsidiary, CCH, whose functional currency is the Canadian~~ dollar. All transactions initiated in Canadian dollars are translated into US dollars in accordance with ASC 830, “Foreign Currency Translation” as follows:

●

Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date.

●

Equity at historical rates.

●

Revenue and expense items and cash flows at the average rate of exchange prevailing during the period.

Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ ~~equity~~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).

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 nine months ended September 30, ~~2017;~~2019, a closing rate of ~~CAD$1.0000~~CDN$1.00 equals US$~~0.8013~~0.7551 and an average exchange rate of CDN$1.00 equals US$0.7523. For the nine months ended September 30, 2018, a closing rate of CAD$1.00 equals US$0.7725 and an average exchange rate of CAD$1.0000 equals US$~~0.7984.~~0.7651.

ETHEMA HEALTH CORPORATION

~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

2.	Summary of significant accounting policies (continued)

Revenue Recognition

ASU 2014-09 requires companies to exercise more judgment and recognize revenue using a five-step process. The Company adopted ASU 2014-09 using the modified retrospective method for all contracts effective January 1, 2018. Modified retrospective adoption requires entities to apply the standard retrospectively to the most current period presented in the financial statements, requiring the cumulative effect of the retrospective application as an adjustment to the opening balance of retained earnings at the date of initial application. Prior periods have not been adjusted. No cumulative effect adjustment in retained earnings was recorded as the adoption of ASU 2014-09 did not significantly impact the Company’s reported historical revenue.

As a result of certain changes required by ASU 2014-09, 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 condensed consolidated statements of operations. The adoption of ASU 2014-09 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 condensed consolidated balance sheets.

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 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 interpretation and adjustment, and may include multiple reimbursement mechanisms for different types of services provided in the Company’s in-patient facilities and cost settlement provisions. Management estimates the transaction price on a pay or 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 under cost reimbursement agreements 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 accounts receivables were $164,148 and $202,654 for the nine months ended September 30, 2019 and year ended December 31, 2018, respectively, and were included in other current assets in the consolidated balance sheets. 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 accounts receivable settlements resulted in a decrease in revenues of $0 and $262,353 for the nine months ended September 30, 2019 and the year ended December 31, 2018, respectively.

ETHEMA HEALTH CORPORATION

~~2. Summary of Significant Accounting Policies (continued)~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Cash and cash equivalents~~Summary of significant accounting policies (continued)

The Company's policy is to disclose bank balances under cash, including bank overdrafts with balances that fluctuate frequently from being positive to overdrawn and term deposits with a maturity period of three months or less from the date of acquisition.

d)c)

Revenue Recognition (continued)

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, as defined below. 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:

	i.	identify the contract with a customer;
	ii.	identify the performance obligations in the contract;
	iii.	determine the transaction price;
	iv.	allocate the transaction price to performance obligations in the contract; and
	v.	recognize revenue as the performance obligation is satisfied.

The Company has two operating segments from which it derives revenues ~~i) rental income from leasing of a rehabilitation facility to third parties and ii) in-patient revenues for rehabilitation services provided to customers. Revenue~~which is recognized ~~as follows:~~on the basis described below.

Rental Income

In terms of the lease agreement, on a monthly basis as long as the facility is utilized by the tenant

ii.

In-patient revenue

The ~~customers~~patients have been treated and provided with services by the Company; there is clear evidence that an arrangement exists; the amount of revenue and related costs can be measured reliably; and it is probable that the economic benefits associated with the transaction will flow to the Company.

Non-monetary transactions

~~In particular,~~

The Company’s policy is to measure an asset exchanged or transferred in a non-monetary transaction at the ~~Company recognizes fees for inpatient addiction treatments proportionately over the term~~more reliable measurement of the ~~patient’s treatment.~~

~~Deferred revenue represents monies deposited by~~fair value of the ~~patients for future services to be provided by~~asset given up and the ~~Company. Such monies will be recognized into revenue as~~fair value of the ~~patient progresses through their treatment term.~~asset received, unless:

e)●

~~Recent accounting pronouncements~~The transaction lacks commercial substance;

●

The transaction is a transfer between entities under common control;

●

The transaction is an exchange of a product or property held for sale in the ordinary course of business for a product or property to be sold in the same line of business to facilitate sales to customers other than the parties to the exchange;

●

Neither the fair value of the asset received nor the fair value of the asset given up is reliably measurable; or

●

The transaction is a non-monetary, non-reciprocal transfer to owners that represents a spinoff or other form of restructuring or liquidation.

Cash and cash equivalents

~~In July 2017,~~The Company’s policy is to disclose bank balances under cash, including bank overdrafts with balances that fluctuate frequently from being positive to overdrawn and term deposits with a maturity period of three months or less from the ~~FASB issued Accounting Standards Update No. (“ASU’’) 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480)~~date of acquisition. The Company had no cash equivalents at September 30, 2019 and ~~Derivatives and Hedging (Topic 815). The amendments in this Update provide guidance about:~~December 31, 2018.

ETHEMA HEALTH CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Accounting for certain financial instruments with down round features~~Summary of significant accounting policies (continued)

2.f)

~~Replacement~~Accounts receivable

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 unaudited condensed 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.

Allowance for Doubtful Accounts, Contractual and Other Discounts

The Company derives 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 is based on historical experience, but management also takes into consideration the age of accounts, creditworthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. An account is written off only after the Company has 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. The allowance for doubtful accounts was $363,068 as at September 30, 2019 and December 31, 2018.

Financial instruments

The Company initially measures its financial assets and liabilities at fair value, except for certain non-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, loans 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 UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2.	Summary of significant accounting policies (continued)

Financial instruments (continued)

FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

The Company measures its convertible debt and derivative liabilities associated therewith at fair value. These liabilities are revalued periodically and the resultant gain or loss is realized through the Statement of Operations.

Property, plant and equipment

Fixed assets are recorded at cost. Depreciation is calculated on the straight line basis over the estimated life of the asset:

- Buildings	25 years
- Leasehold improvements	over the term of the ~~indefinite deferral for mandatorily redeemable financial instruments of certain non-public entities and certain non-controlling interests~~lease

Leases

Leases are classified as either capital or operating leases. Leases that transfer substantially all of the benefits and inherent risks of ownership of property to the Company are accounted for as capital leases. At the time a capital lease is entered into, an asset is recorded together with its related long-term obligation to reflect the acquisition and financing. Equipment recorded under capital leases is amortized on the same basis as described above. Payments under operating leases with lease durations less than twelve months are expensed as incurred.

Income taxes

The ~~amendments~~Company accounts for income taxes under the provisions of ASC Topic 740, “Income Taxes”. Under ASC Topic 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income taxes are provided using the liability method. Under this method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The tax basis of an asset or liability is the amount attributed to that asset or liability for tax purposes. The effect on deferred taxes of a change in ~~Part I~~tax rates is recognized in income in the period of change. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all of, the deferred tax assets will not be realized.

ASC Topic 740 contains a two-step approach to recognizing and measuring uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company recognizes interest and penalties accrued on unrecognized tax benefits within general and administrative expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction in general and administrative expenses in the period that such determination is made.

The tax returns for fiscal 2001, through 2017 are subject to audit or review by the US tax authorities, whereas fiscal 2010 through 2017 are subject to audit or review by the Canadian tax authority.

ETHEMA HEALTH CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2.	Summary of significant accounting policies (continued)

Net income (loss) per Share

Basic net income (loss) per share is computed on the basis of the weighted average number of common stock outstanding during the period.

Diluted net income (loss) per share is computed on the basis of the weighted average number of common stock and common stock equivalents outstanding. Dilutive securities having an anti-dilutive effect on diluted net income (loss) per share are excluded from the calculation.

Dilution is computed by applying the treasury stock method for options and warrants. Under this ~~Update change~~method, “in-the money” options and warrants are assumed to be exercised at the ~~classification analysis~~beginning of ~~certain equity-linked financial instruments~~the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Dilution is computed by applying the if-converted method for convertible preferred stocks. Under this method, convertible preferred stock is assumed to be converted at the beginning of the period (or at the time of issuance, if later), and preferred dividends (if any) will be added back to determine income applicable to common stock. The shares issuable upon conversion will be added to weighted average number of common stock outstanding. Conversion will be assumed only if it reduces earnings per share (or increases loss per share).

Stock based compensation

Stock based compensation cost is measured at the grant date, based on the estimated fair value of the award and is recognized as expense over the employee’s requisite service period or vesting period on a straight-line basis. Share-based compensation expense recognized in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2019 and 2018 is based on awards ultimately expected to vest and has been reduced for estimated forfeitures. This estimate will be revised in subsequent periods if actual forfeitures differ from those estimates. We have minimal awards with performance conditions and no awards dependent on market conditions.

Derivatives

The Company evaluates embedded ~~features) with down round features. When determining~~conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether ~~certain financial instruments~~the embedded conversion feature should be ~~classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether~~bifurcated from the host instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would beand accounted for as a derivative ~~liability~~ at fair value with changes in fair value recorded in earnings. The Company uses a Black Scholes Option Pricing model to estimate the fair value of convertible debt conversion features at the end of each applicable reporting period. Changes in the fair value of these derivatives during each reporting period are included in the statements of operations. Inputs into the Black Scholes Option Pricing model require estimates, including such items as ~~a result~~estimated volatility of the ~~existence~~Company’s stock, risk free interest rate and the estimated life of ~~a down round feature. For freestanding equity classified~~the financial instruments being fair valued.

If the ~~amendments~~conversion feature does not require ~~entities that present earnings per share (EPS) in accordance with Topic 260 to recognize~~derivative treatment under ASC 815, the ~~effect of the down round feature when it~~instrument is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopicevaluated under ASC 470-20 ~~Debt—Debt~~“Debt with Conversion and Other ~~Options), including related EPS guidance (in Topic 260).~~Options” for consideration of any beneficial conversion feature.

The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.

ETHEMA HEALTH CORPORATION

~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

~~2. Summary of Significant Accounting Policies (continued)~~

2.	e)Summary of significant accounting policies (continued)

Recent accounting pronouncements ~~(continued)~~

Adoption of Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”), No. 2016-02, Leases (Topic 842) (ASC 842)

The amendments in ~~Part I~~this update establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition of ~~this Update are~~a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than twelve months. The new standard is effective for fiscal years and interim periods ~~within those fiscal years,~~ beginning after December 15, ~~2018. Early~~2018, with early adoption permitted. A modified retrospective transition approach is ~~permitted~~required for ~~all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of~~leases existing at, or entered into after, the beginning of the ~~fiscal year~~earliest comparative period presented in the financial statements, including a number of optional practical expedients that ~~includes that interim period. The amendments in Part 1 of this Update should be applied in either of~~entities may elect to apply. In July 2018, the ~~following ways: 1. Retrospectively~~FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, an update which provides another transition method, the prospective transition method, which allows entities to ~~outstanding financial instruments with a down round feature by means of~~initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the ~~statement~~opening balance of financial position as of the beginning of the first fiscal year and interim period(s) in which the pending content that links to this paragraph is effective 2. Retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10.

~~The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect.~~

~~The Company is currently evaluating the impact this ASU will have on its consolidated financial statements.~~

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging, an amendment to Topic 815. The amendments in this Update better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To meet that objective, the amendments expand and refine hedge accounting for both nonfinancial and financial risk components 2 and align the recognition and presentation of the effects of the hedging instrument and the hedged itemretained earnings in the financial statements. The amendments in this Update require an entity to present the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported.

~~The amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early application is permitted in any interim~~ period after issuance of the Update. All transition requirements and elections should be applied to hedging relationships existing (that is, hedging relationships in which the hedging instrument has not expired, been sold, terminated, or exercised or the entity has not removed the designation of the hedging relationship) on the date of adoption. The effect of adoption should be reflected as of the beginning of the fiscal year of adoption. The Company ~~is currently evaluating~~adopted the new standard on January 1, 2019 using the prospective transition method.

The Company has identified all leases and reviewed the leases to determine the impact ~~this ASU will have~~of ASC 842 on its unaudited condensed consolidated financial statements. The Company has elected to apply the practical expedient to certain classes of leases, whereby the separation of components of leases into lease and non-lease components is not required and all of the practical expedients to all leases, which include not reassessing (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases, and (3) initial direct costs for any existing leases. The adoption of the new standard resulted in the recording of a right-of-use asset and a lease liability on the unaudited condensed consolidated balance sheet on January 1, 2019 of $15,986,074. The adoption of ASU 2016-02, as amended, has had no impact on the unaudited condensed consolidated statements of operations or unaudited condensed consolidated statements of cash flows.

~~In September 2017, the~~

Recent accounting pronouncements

The FASB issued ~~ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842). The amendments in this ASU deals with~~several updated during the ~~transition and effective dates~~period, none of ~~implementing~~these standards are either applicable to ASU 2014-09, Revenue from contracts with customers, ASU 2016-08, Revenue from contracts with customers, principal versus agent considerations, ASU 2016-10, revenues from contacts with customers; identifying performance obligations and licensing, ASU 2016-12, revenues from contacts with customers, narrow scope improvements and practical expedients, 2016-20, technical corrections and improvements and ASU 2017-05, other income, gains and losses from the ~~derecognition of non-financial assets.~~

~~The transition provisions~~Company or require adoption of Topic 606 for annual reporting periods commencing after December 15, 2017 and the adoption of Topic 842 for annual reporting periods beginning after December 15, 2018 for public business entities, if the requirements of a public business entity as defined in ASU 2017-122 are not met, may adopt Topic 606 for annual reporting periods commencing after December 15, 2018 and for Topic 842 for annual reporting periods commencing after December 15, 2019. Early adoption is permitted of both Topics. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements.

~~Any new accounting standards, not disclosed above, that have been issued or proposed by FASB that do not require adoption until~~at a future date and are not expected to have a material impact on the unaudited condensed consolidated financial statements upon adoption.

10p)

~~ETHEMA HEALTH CORPORATION~~

~~(formerly Greenstone Healthcare Corporation)~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~

~~2. Summary of Significant Accounting Policies (continued)~~

Financial instruments Risks

The Company is exposed to various risks through its financial instruments. The following analysis provides a measure of the Company’s risk exposure and concentrations at the balance sheet date, September 30, ~~2017~~2019 and December 31, ~~2016.~~2018.

Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Financial instruments that subject the Company to credit risk consist primarily of accounts receivable.

Credit risk associated with accounts receivable of ~~Seastone of Delray~~ARIA is mitigated as only a percentage of the revenue billed to health insurance companies is recognized as income until such time as the actual funds are collected. The revenue is concentrated amongst several health insurance companies located in the US.

In the opinion of management, credit risk with respect to accounts receivable is assessed as low.

ETHEMA HEALTH CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~ii.~~

~~Liquidity risk~~Summary of significant accounting policies (continued)

Financial instruments Risks (continued)

ii.

Liquidity risk

Liquidity risk is the risk the Company will not be able to meet its financial obligations as they fall due. The Company is exposed to liquidity risk through its working capital deficiency of ~~$1,877,040~~$13,826,678 accumulated deficit ~~$(14,789,989). As disclosed in note 6, the~~of $35,642,106. The Company will be dependent upon the raising of additional capital in order to implement its business plan. 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, liquidity risk is assessed as high, material and remains unchanged from the prior year.

iii.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises of three types of risk: interest rate risk, currency risk, and other price risk. The Company is exposed to interest rate risk and currency risk.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to minimal interest rate risk ~~on its bank indebtedness~~ as there is ~~a balance owing of $11~~minimal overdraft indebtedness as of September 30, ~~2017. This liability is based on floating rates of interest that have been stable during the current reporting period.~~2019. In the opinion of management, interest rate risk is assessed as low, not material and remains unchanged from the prior year.

Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is subject to currency risk as it has subsidiaries that operate in Canada and are subject to fluctuations in the Canadian dollar. A substantial portion of the Company’s financial assets and liabilities are denominated in Canadian dollars. Based on the net exposures at September 30, ~~2017,~~2019, a 5% depreciation or appreciation of the Canadian dollar against the U.S. dollar would result in an approximate ~~$13,217~~$9,400 increase or decrease in the Company’s after tax net income from operations. The Company has not entered into any hedging agreements to ~~mediate~~mitigate this risk. In the opinion of management, currency risk is assessed as low, material and remains unchanged from the prior year.

~~ETHEMA HEALTH CORPORATION~~

~~(formerly Greenstone Healthcare Corporation)~~c.

~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~

~~2. Summary of Significant Accounting Policies (continued)~~

~~Financial instruments (continued)~~

~~iii.~~

~~Market risk (continued)~~

Other price risk

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. In the opinion of management, the Company is not exposed to this risk and remains unchanged from the prior year.

~~Derivative instrument liability~~

The Company accounts for derivative instruments in accordance with ASC815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedging relationships and the types of relationships designated are based on the exposures hedged. At September 30, 2017, the Company had a derivative liability amounting to $148,297.

h)q)

~~Convertible Instruments~~Reclassification of Prior Year Presentation

~~The Company evaluates and accounts~~Certain prior year amounts have been reclassified for conversion options embedded in its convertible instruments in accordance with professional standards for “Accounting for Derivative Instruments and Hedging Activities.” Professional standards generally provide three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrumentconsistency with the ~~same terms as~~current year presentation. These reclassifications had no effect on the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaningreported results of Conventional Convertible Debt Instrument.” The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying Common Stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying Common Stock at the commitment date of the note transaction and the effective conversion price embedded in the note.operations.

ETHEMA HEALTH CORPORATION

~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

~~Disposal of Business~~

On February 14, 2017, in terms of the details outlined in note 1 above, the Company disposed of the business and certain assets of its Canadian Rehab Clinic for gross proceeds of CDN$10,000,000, a total of CDN$1,500,000 of the gross proceeds is being held in escrow for up to two years, in addition there is an earnout payment of up to CDN$3,000,000 to be received in 2019, if certain clinic performance metrics are met, see note 8 below.

The proceeds realized from the sale of the Canadian Rehab Clinic were used to settle outstanding tax liabilities, refer note 11 below, and to acquire the business of Seastone of Delray, refer note 5 below.

~~The proceeds realized on disposal have been allocated as follows:~~

			~~Amount~~

~~Proceeds on disposal~~			~~$ 7,644,000~~

~~Assets sold:~~
~~Accounts receivable~~			~~113,896~~
~~Plant and equipment~~			~~109,075~~
			~~222,971~~
~~Liabilities assumed by purchaser~~
~~Deferred revenue~~			~~(73,799)~~

~~Net assets and liabilities sold~~			~~149,172~~

~~Net profit realized on disposal~~			~~$ 7,494,828~~

~~Acquisition of subsidiary~~

On February 14, 2017, the Company acquired 100% of the equity of CCH, from Leon Developments, a company wholly owned by our CEO. 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 (US$504,442) on the disposal of a subsidiary, 1816191 Ontario, which principal amount had previously been fully provided for during 2015; and the issuance of 60,000,000 shares of the Company’s common stock at US$0.0364 per share for proceeds of $2,184,000.

On June 1, 2017, the Company had the property owned by CCH appraised by an independent valuer, the appraisal obtained was for CDN$10,000,000, which resulted an increase in the value of the assets acquired by $1,146,000 and a corresponding reduction in the excess purchased consideration allocated to the shareholder.

~~ETHEMA HEALTH CORPORATION~~

~~(formerly Greenstone Healthcare Corporation)~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~

~~Acquisition of subsidiary (continued)~~

~~The allocation of the purchase price is as follows:~~

			~~Amount~~
~~Purchase price paid:~~
~~Common shares issued to Seller~~			~~$ 2,184,000~~
~~Receivable assumed by the Seller~~			~~504,442~~
			~~2,688,442~~
~~Allocated as follows:~~

~~Assets acquired:~~
~~Property~~			~~7,644,000~~
~~Receivable from Ethema Health Corporation~~			~~299,743~~
			~~7,943,743~~
~~Liabilities assumed:~~
~~Accounts payable and other accruals~~			~~158,093~~
~~Related party payable to Leon Developments~~			~~2,057,392~~
~~Mortgage liability owing to Ethema Health Corporation~~			~~267,550~~
~~Mortgage liability~~			~~3,145,550~~
			~~5,628,575~~

~~Net assets acquired~~			~~2,315,168~~

~~Excess purchase consideration allocated to shareholders compensation~~			~~$ 373,274~~

~~Acquisition of the business of Seastone of Delray~~

~~The Company, utilized a portion of the proceeds realized on the sale of the Canadian Rehab Clinic to acquire certain assets of Seastone of Delray.~~

The Company obtained its own license to run a rehabilitation Clinic in Florida in December 2016 and began operations, through its wholly owned subsidiary, Seastone of Delray, LLC, effective January 2017.

~~ETHEMA HEALTH CORPORATION~~

~~(formerly Greenstone Healthcare Corporation)~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~

~~Acquisition of the business of Seastone of Delray (continued)~~

~~The assets acquired were as follows:~~

			~~Amount~~

~~Purchase price paid:~~
~~Cash paid to seller~~			~~$ 2,960,000~~
~~Deposits previously paid to seller~~			~~110,000~~
~~Mortgage liability funds~~			~~3,000,000~~
			~~6,070,000~~
~~Assets acquired:~~
~~Property~~			~~4,410,000~~
~~Furniture and fixtures~~			~~80,000~~
~~Intangibles - to be classified~~			~~1,438,525~~
~~Receivables~~			~~141,475~~
			~~$ 6,070,000~~

Going concern

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with US GAAP applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations in the normal course of business. As ofat September 30, ~~2017,~~2019 the Company has a working capital deficiency of ~~$1,877,040~~$13,826,678 and accumulated deficit of ~~$(14,789,989).~~$35,642,106. Management believes that current available resources will not be sufficient to fund the Company’s planned expenditures over the next 12 months. Accordingly, the Company will be dependent upon the raising of additional capital through placement of common shares, and/or debt financing in order to implement its business plan, and or generating sufficient revenue in excess of costs. If the Company raises additional capital through the issuance of equity securities or securities convertible into equity, stockholders will experience dilution, and such securities may have rights, preferences or privileges senior to those of the holders of common stock or convertible senior notes. If the Company raises additional funds by issuing debt, the Company may be subject to limitations on its operations, through debt covenants or other restrictions. If the Company obtains additional funds through arrangements with collaborators or strategic partners, the Company may be required to relinquish its rights to certain geographical areas, or techniques that it might otherwise seek to retain. 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. These factors create substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments relating to the ~~amounts and classifications~~recoverability or classification of recorded assets and liabilities or other adjustments that ~~might~~may be necessary should the Company not be ~~unable to continue operations.~~

~~The ability of the Company~~able to continue as a going concern is dependent on the Company generating cash from the sale of its common stock or obtaining debt financing and attaining future profitable operations. Management's plans include selling its equity securities and obtaining debt financing to fund its capital requirement and ongoing operations; however, there can be no assurance the Company will be successful in these efforts.

~~7. Discontinued Operations~~

On February 14, 2017, the Company completed a series of transactions, including an APA whereby the Company sold certain of the Canadian Rehab Clinic assets. The assets disposed of business represented substantially all of the operating assets of the Canadian Rehab Clinic and has been disclosed as a discontinued operation for comparative purposes as of December 31, 2016 and for the three and nine month period ended September 30, 2017 and 2016. Refer note 2 above.

~~ETHEMA HEALTH CORPORATION~~

~~(formerly Greenstone Healthcare Corporation)~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~concern.

7.4.

~~Discontinued Operations (continued)~~

~~The assets and liabilities of discontinued operations as of December 31, 2016 is as follows:~~

							~~December 31, 2016~~
~~Current assets~~
~~Accounts receivable, net~~							~~$ 123,358~~
Prepaid expenses and other current assets							~~11,253~~
~~Total current assets~~							~~134,611~~
~~Non-current assets~~
~~Plant and equipment, net~~							~~129,127~~
~~Deposits~~							-
~~Total assets~~							~~263,738~~

~~Current liabilities~~
~~Deferred revenues~~							~~80,519~~

~~Discontinued operation~~							~~183,219~~

~~The Statement of operations for discontinued operations is as follows:~~Prepaid expenses and other current assets includes the following:

On February 25, 2019, the Company entered into a Letter of Intent whereby it would purchase a 33.33% interest in Local Link Wellness, LLC (“LLW”) for gross proceeds of $400,000. LLW proposes to provide a comprehensive addiction treatment program to large employee groups. The company has advanced LLW a total of $120,000 as at September 30, 2019. These funds were advanced as short-term promissory notes that are immediately due and payable and are classified as other current assets on our condensed consolidated balance sheet.

Three months ended September 30, 2017 Three months ended September 30, 2016 Nine months ended September 30, 2017 Nine months ended September 30, 2016

Revenues $                  -    $      1,076,303 $         232,040 $      2,923,524

Operating expenses
Depreciation and amortization                      -                  16,586                 4,196               47,332
General and administrative                    353             197,854             119,058             547,477
Professional fees                      -                          -                  32,818                       -
Rent                      -                104,881               47,493             284,993
Salaries and wages                      -                366,986             201,723          1,178,968
Total operating expenses                    353             686,307             405,288          2,058,770

Operating (loss) income                  (353)             389,996           (173,248)             864,754

Other (Expense) Income
Other income                      -                          -                          -                  21,042
Other expense                      -                (28,298)                       -                (28,298)
Interest expense               (1,904)             (40,031)               (2,898)           (116,774)
Foreign exchange movements           (215,996)               (2,766)           (124,293)               21,956
Net (loss) income before taxation           (218,253)             318,901           (300,439)             762,680
Taxation                      -                          -                          -                          -
Net (loss) income from discontinued operations $       (218,253) $         318,901 $       (300,439) $         762,680

Gain on disposal of business                      -                          -             7,494,828                       -

$       (218,253) $         318,901 $      7,194,389 $         762,680
5. Assets held for resale
On April 2, 2019, the Company entered into a Commercial Contract whereby the real property at 801 Andrews Avenue, Delray Beach, Florida, consisting of land and condominiums thereon, was sold to JAGGM, LLC for $3,500,000. This transaction closed on April 26, 2019.
The loss realized on the disposal was calculated as follows:
Amount

Proceeds received $ 3,500,485
Less: closing costs (182,344 )
Net proceeds received 3,318,141

Assets sold:
Land 1,877,618
Buildings thereon 2,060,219
Furniture and fixtures 72,792
4,010,629

Loss on disposal $ 692,488

16
15

ETHEMA HEALTH CORPORATION
~~(formerly Greenstone Healthcare Corporation)~~
NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

6. 8. ~~Due from sale of subsidiary~~Deposit on real estate
~~A net amount of CDN$617,960 was due to~~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 ~~sale~~present tenant operates a substance abuse treatment center. The purchase price of the ~~Endoscopy Clinic~~Property is $20,530,000. The Company made a series of nonrefundable down payments totaling $2,924,955 as of September 30, 2019 and $2,940,546 as of December 31, ~~2016. This amount was past due~~2018. 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 by $750,000 per month, commencing on August 31, 2018, until the purchase option is exercised. The premises is located at 5400, 5402 and ~~had fully provided~~5410 East Avenue, West Palm Beach, Florida (the “Property”). The lease is for ~~as of December 31, 2016.~~an initial 10 years and provides for two additional 10 year extensions.

~~On February 14, 2017,~~The Company was previously under agreement to purchase the ~~Company acquired CCH~~property from ~~Leon Developments~~the landlord. The property is presently used as a rehabilitation treatment center. The current tenant at the property, Alternatives in Treatment, LLC, a Florida limited liability company, consented to the Lease and ~~settled a portion~~concurrent with the execution of the ~~purchase consideration by assigning~~Lease entered into a Sublease Agreement with the ~~proceeds due~~Company. The Company intends to make investments and enter into joint venture arrangements with established addiction recovery businesses based in the ~~Company on the sale~~US and leverage of ~~the Endoscopy Clinic~~these investments and arrangements to Leon Developments. The note together with accrued interest thereon of CDN$41,959 amounted to CDN$659,919 (US$504,442). The provision raised against the note was reversed and the unrecorded interest thereon was recognized during the current period.bring patient into its leased facility.
7. Due on sale of business

On February 14, 2017, the Company sold its Canadian Rehab Clinic for gross proceeds of CDN$10,000,000, of which CDN$1,500,000 ~~(US$1,155,900) has~~had been retained in an escrow account for a period of up to two years in order to guarantee the warranties provided by the Company in terms of the APA. In addition, the Company may earn up to an additional CDN$3,000,000 as a performance payment based on the attainment of certain clinic performance metrics. The Company estimates that the earnout will approximate $663,000 and is accruing this additional amount over a period of twenty-three and a half months. The accrual is recorded as other income, asAs of September 30, ~~2017,~~2019, CDN$1,055,042 of the ~~company~~escrow had been refunded to the Company and CDN$365,268 had been used to affect building improvements to the premises owned by CCH, for a total reduction of CDN$1,420,310. The remaining escrow balance was CDN$100,000 consisting of principal of CDN$76,690 and accrued ~~$169,593 (at closing exchange rates) as additional income.~~interest thereon of CDN$20,310.

8. 9. Property, plant and equipment
Property, plant and equipment consists of the following:

September 30, 2017 December 31, 2016
Cost Amortization and Impairment Net book value Net book value

Property $ 12,432,237 $ (307,253 ) $ 12,124,984 $ —
Furniture and fixtures 80,000 (15,000 ) 65,000 —

$ 12,512,237 $ (322,253 ) $ 12,189,984 $ —
September 30,
2019 December 31, 2018
Cost Accumulated Depreciation Net book value Net book value

Land $ 1,038,661 $ —   $ 1,038,661 $ 2,911,530
Property 4,023,914 (444,961 ) 3,578,953 5,750,045
Leasehold improvements 271,074 (21,783 ) 249,291 251,774
Furniture and fixtures —   —   —   35,000
$ 5,333,649 $ (466,744 ) $ 4,866,905 $ 8,948,349
Depreciation expense for the three months ended September 30, ~~2017~~2019 and ~~2016~~2018 was ~~$131,784~~$47,104 and ~~$0,~~$67,929, respectively, and for the nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 was ~~$314,190~~$179,399 and ~~$0,~~$204,384, respectively.

9. ~~10.~~ ~~Intangibles~~Leases
~~In terms~~Adoption of ASC Topic 842, Leases
On January 1, 2019, the Company adopted Topic 842 using the modified retrospective method applied to leases that were in place as of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 840. The Company's leases consists of operating leases that relate to real estate rental agreements. All of the ~~acquisition of Seastone of Delray, the Company paid an amount of $1,438,525 (Note 1 above) in excess of the fair market~~ value of the ~~assets acquired. This amount will be allocated~~Company's lease portfolio relates to ~~different classes of intangible assets when an independent valuation of the intangibles is performed.~~a real estate lease agreement that was entered into in May 2018.

ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9. ~~11.~~ ~~Taxes Payable~~Leases (continued)
Practical Expedients and Elections
The Company ~~settled~~elected the ~~tax liabilities owing~~package of practical expedients permitted under the transition guidance, which allowed us to carryforward our historical lease classification, our assessment on whether a contract is or contains a lease, and our initial direct costs for any leases that exist prior to adoption of the new standard. We also elected the short-term lease recognition exemption for all leases that qualify.
Discount Rate applied to property operating lease
To determine the present value of minimum future lease payments for operating leases at January 1, 2019, the Company was required to estimate a rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the Canadian Revenue Authorities out of the proceeds of the disposal of the Canadian Rehab Clinic on February 14, 2017. The Company paid CDN$2,929,886 to settle outstanding payroll liabilities, CDN$441,598 to settle outstanding GST/HST liabilities andlease payments in a ~~further CDN$ 57,621 to settle other Canadian tax liabilities.~~similar economic environment (the "incremental borrowing rate" or "IBR").

The ~~remaining~~Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. For the reference rate, the Company used the average of (i) the risk free interest rate adjusted for a premium for Company and liquidity risk; (ii) the weighted average mortgage interest rate currently availed to the Company; and (iii) the fifteen year mortgage interest rate. The weighted average rate the Company determined was 4.76% as an appropriate incremental borrowing rate to apply to its real-estate operating lease.
Right of use assets
Right of use assets are included in the unaudited condensed consolidated Balance Sheet are as follows:
September 30,
2019

Non-current assets
Right of use assets, operating leases, net of amortization $ 15,200,632
Total operating lease cost
Individual components of the total lease cost incurred by the Company is as follows:
Nine months
ended
September 30,
2019

Operating lease expense $ 1,602,936

Minimum rental payments under operating leases are recognized on a straight-line basis over the term of the lease.
Maturity of operating leases
The amount of future minimum lease payments under operating leases are as follows:
Amount

Remainder of 2019 $ 458,965
2020 1,882,422
2021 1,962,242
2022 2,042,062
2023 and thereafter 12,436,420
Total undiscounted minimum future lease payments 18,782,111
Deferred rental liability on straight line amortization 259,299
Imputed interest (3,581,480 )
Total operating lease liability $ 15,459,930

Disclosed as:
Current portion $ 889,385
Non-current portion 14,570,545
$ 15,459,930
17
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10. Taxes payable
The taxes payable consist of:

● A payroll tax liability of ~~$154,795~~$137,876 (CDN$~~193,184)~~182,589) in Greenestone Muskoka which has not been settled as yet.
● The Company has assets and operates businesses in Canada and is required to disclose these operations to the US taxation authorities, the requisite disclosure has not been made. Management has reserved the maximum penalty due to the IRS in terms of non-disclosure. This ~~noncompliance~~non-compliance with US disclosure requirements is currently being addressed. An amount of $250,000 has been accrued for any potential exposure the Company may have.
17● Estimated income taxes payable in certain of the Canadian operations.

~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~
~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~
September 30,
2019 December 31,
2018

Payroll taxes $ 137,876 $ 133,843
HST/GST payable 15,184 33,757
US penalties due 250,000 250,000
Income tax payable 368,572 357,792

$ 771,632 $ 775,392

~~12.~~11. ~~Short-term~~ Convertible ~~Notes~~notes

The ~~short-term~~ convertible notes consist of the following:
Interest rate Maturity date Principal Outstanding Accrued interest Unamortized Discount September 30, 2017 December 31, 2016

Labrys Fund, LP 8.0% August 2, 2017 $                -    $               -    $               -    $                   -    $                -

Power Up Lending Group LTD. 12.0% March 20, 2018 $       113,500 $         3,844 $      (70,834) $           46,510 $                -

Series L Convertible notes 0.0% June 30, 2017 to July 17, 2017                    -                      -                      -                          -             250,258
$    113,500 $  3,844 $    (70,834) $         46,510 $    250,258
Disclosed as follows:
Short-term portion $           46,510 $      250,258
Long-term portion                       -                       -
$         46,510 $    250,258

Interest
rate
Maturity date Principal Interest Debt Discount
September 30,
2019

December 31,
2018

Leonite Capital LLC 11.0 % December 31,
2019 $ 2,212,731 $ 66,265 $ —   $ 2,278,996 $ 2,494,180
1.0 % September 10, 2019 60,000 58 —   60,058 —

Power Up Lending Group Ltd 9.0 % May 15,2019 —   —   —   —   94,595
9.0 % September 10, 2019 —   —   —   —   44,484
9.0 % November 15, 2019 18,000 6,239 (3,260 ) 20,979 —
9.0 % April 30, 2020 53,000 1,098 (38,010 ) 16,088 —
9.0 % April 30, 2020 83,000 1,576 (60,962 ) 23,614 —

First Fire Global Opportunities Fund 12.0 % December 9, 2019 193,500 5,709 (45,991 ) 153,218 —

Actus Fund, LLC 10.0 % May 7, 2020 225,000 3,375 (180,657 ) 47,718 —

Labrys Fund, LP 12.0 % January 8, 2020 282,000 7,788 (153,261 ) 136,527 —

Series N convertible notes 6.0 % May 17, 2019 to September 16, 2020 3,229,000 182,230 (717,718 ) 2,693,512 1,770,214

$ 5,430,710 $ 4,403,473

18
~~Labrys Fund, LP~~ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
11. Convertible notes (continued)
Leonite Capital, LLC
On ~~February~~December 1, 2017, the Company closed on a private offering to raise US $1,500,000 in capital. The Company issued one senior secured convertible promissory note with a principal amount of $1,650,000 to Leonite Capital, LLC (“Leonite”). The note is convertible into shares of common stock at a conversion price of $0.06 per share, subject to anti-dilution and price protection. The Note bears interest at the rate of 8.5% per annum. The Note’s amended maturity date was December 1, 2018. During the term of the Note the Company and the Subsidiaries was obligated to make monthly payment of accrued and unpaid interest. The Note contains Company and Subsidiary representations and warranties, covenants, events of default, and registration rights. The Company paid a commitment fee of $132,000 settled through the issue of 1,650,000 shares of common stock and paid $20,000 towards the lenders legal fees. In conjunction with this note, the Company issued a five year warrant to purchase 27,500,000 shares of common stock at an exercise price or $0.10 per share, subject to antidilution and price protection.
The Note provided that the parties use reasonable best efforts to close on the remaining $1,200,000 of availability under the Note by January 1, 2018. As a condition to the closing of the Balance Tranche, the parties must finalize and enter into additional agreements related to the Private Offering, including, but not limited to, (i) a Securities Purchase Agreement; (ii) a Warrant Agreement under which the Investor will have the right to purchase up to 27,500,000 shares of the Company’ common stock for $0.10 per share, subject to adjustment, for a period of five years; (iii) a Securities Pledge Agreement under which the Company and the Subsidiaries will grant the lender a blanket lien on their assets, and the Company will pledge its equity ownership in the Subsidiaries. Upon the closing of the Balance Tranche the maturity date of the Note was to become December 1, 2018.
On December 29, 2017, effective as of December 1, 2017, the Company and the Subsidiaries entered into an Amended and Restated Senior Secured Convertible Promissory Note, which note amended and restated the Note to (a) extend the maturity date to December 1, 2018; (b) remove CCH, as an obligor; (c) increase the interest rate by 2.00% per annum, to 8.5% per annum; and (d) issue an additional 250,000 shares of the Company’s common stock to the Investor. In connection with the execution of the amendment, the parties entered into (i) a Securities Purchase Agreement; (ii) a Warrant Agreement under which the Investor will have the right to purchase up to 27,500,000 shares of the Company’ common stock for $0.10 per share, subject to adjustment, for a period of five years; (iii) a Security and Pledge Agreement and a General Security Agreement under which the Company and the Subsidiaries will grant the Investor a blanket lien on their assets, and the Company will pledge its equity ownership in the Subsidiaries; effective January 2, ~~2017,~~2018.
At the execution of the Note, the Investor funded an initial tranche of $300,000. Thereafter the Investor funded a second tranche of $156,136. Upon the execution of the A&R Note the Investor funded a third tranche of $100,000. Upon the execution of the First Amendment the Investor funded a final tranche of $850,000, with the remaining $93,764 of availability under the A&R Note, as amended, serving as a holdback pursuant to the terms of the First Amendment.
On March 12, 2018, the Company entered into a Securities Purchase Agreement ~~with LABRYS FUND LP, in terms of the agreement~~pursuant to which the Company ~~borrowed $110,000~~issued a Convertible Promissory Note in ~~terms~~the aggregate principal amount of $330,000, including an ~~unsecured convertible promissory~~Original Issue Discount of $30,000, for net proceeds of $300,000. The note ~~with~~had a maturity date of ~~August 2, 2017.~~March 19, 2018. The outstanding principal amount of the note was convertible at any time and from time to time at the election of the purchaser following the issue date into shares of the Company’s common stock at a conversion price equal to $0.06 per share subject to anti-dilution and price protection. The Company paid a commitment fee of $19,800 settled through the issue of 330,000 shares of common stock. This note was repaid on the maturity date for gross proceeds of $330,000.
On March 29, 2018, the Company, entered into a Securities Purchase Agreement pursuant to which the Company issued a Convertible Promissory Note in the aggregate principal amount of $165,000, including an Original Issue Discount of $15,000, for net proceeds of $150,000. The note had a maturity date of December 1, 2018 and bears interest at a rate of 8%8.5% per annum. The outstanding principal amount of the note is ~~only~~ convertible ~~upon a repayment default,~~at any time and from time to time at the ~~lower of 60%~~election of the ~~lowest traded price over~~purchaser following the ~~preceding 30 day trading period prior to the issuance of this note or 60%~~issue date into shares of the ~~lowest traded~~Company’s commonstock at a conversion price ~~30 days prior~~equal to ~~the conversion date.~~$0.06 per share subject to anti-dilution and price protection. The Company ~~issued 1,200,000 common shares to the note holder as~~paid a commitment fee ~~which returnable~~of $11,550 settled through the issue of 165,000 shares ~~will be returned~~of common stock. In conjunction with this note the Company issued a five year warrant to ~~the company if fully repaid prior~~purchase 5,500,000 shares of common stock at an exercise price of $0.10 per share, subject to ~~August 2, 2017.~~anti-dilution and price protection.

~~On May 26, 2017, the Company repaid the note for gross proceeds of $112,744, including interest thereon of $2,744. The 1,200,000 commitment fee shares were returned to the Company.~~19
18

ETHEMA HEALTH CORPORATION
~~(formerly Greenstone Healthcare Corporation)~~
NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

~~12.~~11. ~~Short-term~~ Convertible ~~Notes~~~~(Continued)~~notes (continued)
Leonite Capital, LLC (continued)
On April 17, 2018, the Company, entered into a Securities Purchase Agreement pursuant to which the Company issued a Convertible Promissory Note in the aggregate principal amount of $605,000, including an Original Issue Discount of $55,000, for net proceeds of $550,000. The note had a maturity date of December 1, 2018 and bears interest at 8.5% per annum. The outstanding principal amount of the note is convertible at any time and from time to time at the election of the purchaser following the issue date into shares of the Company’s common stock at a conversion price equal to $0.06 per share subject to price protection and anti-dilution protection. The Company paid a commitment fee of $42,350 settled through the issue of 10,083,333 shares of common stock. In conjunction with this note the Company issued a five year warrant to purchase 10,083,333 shares of common stock at an exercise price of $0.10 per share, subject to anti-dilution and price protection.
On November 5, 2018, the Company, entered into a Securities Purchase Agreement pursuant to which the Company issued a Convertible Promissory Note in the aggregate principal amount of $111,111, including an Original Issue Discount of $11,111, for net proceeds of $100,000. The note had a maturity date of November 30, 2018 and bore interest at 1.0% per annum. The outstanding principal amount of the note was convertible at any time and from time to time at the election of the purchaser following the issue date into shares of the Company’s common stock at a conversion price equal to $0.06 per share subject to price protection and anti-dilution protection. The Company paid a commitment fee of $8,889 settled through the issue of 111,111 shares of common stock. In conjunction with this note the Company issued a five year warrant to purchase 1,400,000 shares of common stock at an exercise price of $0.10 per share, subject to anti-dilution and price protection. This note was repaid on the maturity date for gross proceeds of $111,184.
On January 17, 2019, the Company, entered into a Securities Purchase Agreement pursuant to which the Company issued a Convertible Promissory Note in the aggregate principal amount of $71,111, including an Original Issue Discount of $7,111, for net proceeds of $64,000. The note had a maturity date of July 25, 2019 and bears interest at 11.0% per annum. The outstanding principal amount of the note was convertible at any time and from time to time at the election of the purchaser following the issue date into shares of the Company’s common stock at a conversion price equal to $0.06 per share subject to price protection and anti-dilution protection. The Company paid a commitment fee of $4,978 settled through the issue of 71,111 shares of common stock. In conjunction with this note the Company issued a five year warrant to purchase 1,185,183 shares of common stock at an exercise price of $0.10 per share, subject to anti-dilution and price protection.
Effective March 19, 2019, the Company entered into a note extension agreement with Leonite, whereby the convertible notes outstanding to Leonite, amounting to $2,420,000, for consideration of $75,000 added to the principal outstanding on the note on January 1, 2019, a further $75,000 added to the principal outstanding on the note on February 1, 2019 and a further $100,000 added to the principal of the note on March 15, 2019, the maturity date of all of the convertible notes above were extended to December 31, 2019 and has subsequently been partially settled by the transfer of the property located at 810 Andrews Avenue, Delray Beach, Florida, valued at $1,500,000.
On August 26, 2019, the Company, entered into a Securities Purchase Agreement pursuant to which the Company issued a Convertible Promissory Note in the aggregate principal amount of $60,000, including an Original Issue Discount of $10,000, for net proceeds of $47,000. The note had a maturity date of September 10, 2019 and bears interest at 1.0% per annum. The outstanding principal amount of the note is convertible at any time and from time to time at the election of the purchaser following the issue date into shares of the Company’s common stock at a conversion price equal to $0.06 per share subject to price protection and anti-dilution protection. In conjunction with this note the Company issued a five year warrant to purchase 1,000,000 shares of common stock at an exercise price of $0.10 per share, subject to anti-dilution and price protection.

Power Up Lending Group LTD
On ~~June 19, 2017,~~July 31, 2018, the Company, entered into a Securities Purchase Agreement with Power Up, ~~Lending Group Ltd.,~~ pursuant to which the Company issued to the Purchaser a Convertible Promissory Note in the aggregate principal amount of ~~$113,500.~~$153,000. The Note ~~has~~had a maturity date of ~~March 20, 2018~~May 15, 2019 and bears interest at the ~~at the~~ rate of ~~eight~~nine percent per annum from the date on which the Note iswas issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company ~~shall have~~has the right to prepay the Note in terms of agreement.
The outstanding principal amount of the Note is convertible at any time and from time to time at the election of the Purchaser during the period beginning on the date that is 180 days following the issue date into shares of the Company’s common stock at a conversion price equal to 61% of the lowest closing bid price of the Company’s common stock for the ten trading days prior to conversion. On January 28, 2019, the Company repaid the Power Up convertible note entered into on July 31, 2018 of $153,000 together with interest and early settlement penalty thereon for a payout of $207,679.
20
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
11. Convertible notes (continued)
Power Up Lending Group LTD (continued)
On September 10, 2018, the Company, entered into a Securities Purchase Agreement with Power Up, pursuant to which the Company issued to the Purchaser a Convertible Promissory Note in the aggregate principal amount of $133,000. The Note had a maturity date of September 10, 2019 and bears interest at the rate of nine percent per annum from the date on which the Note was issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company had the right to prepay the Note in terms of agreement. The outstanding principal amount of the Note is convertible at any time and from time to time at the election of the Purchaser during the period beginning on the date that is 180 days following the issue date into shares of the Company’s common stock at a conversion price equal to 61% of the ~~average~~ lowest closing bid ~~prices~~price of the Company’s common stock for the ten trading days prior to conversion. ~~The balance~~On March 11, 2019, the Company repaid the Power Up convertible note entered into on September 10, 2018, of ~~the Note plus accrued~~$133,000 together with interest ~~at September 30, 2017 was $46,510, net~~and early settlement penalty thereon for gross proceeds of ~~unamortized discount of $70,834.~~$180,062.

~~Series L convertible notes~~
~~The~~On January 9, 2019, the Company, entered into ~~Series L Convertible~~a Securities Purchase ~~Agreements~~Agreement with ~~8 individuals on December 30, 2016. In terms of these agreements,~~Power Up, pursuant to which the Company ~~borrowed an~~issued a Convertible Promissory Note in the aggregate principal amount of ~~$468,969~~$53,000 for net proceeds of $50,000 after expenses. The Note had a maturity date of October 30, 2019 and bears interest at the rate of nine percent per annum from the date on which the Note was issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company has the right to prepay the Note in terms of agreement. The outstanding principal amount of the Note was convertible at any time and from time to time at the election of Power Up during the period beginning on the date that is 180 days following the issue date into shares of the Company’s common stock at a conversion price equal to 61% of the lowest closing bid price of the Company’s common stock for the ten trading days prior to conversion. On July 8, 2019, the Company repaid the convertible note of $53,000 together with interest thereon and early settlement penalty for gross proceeds of $72,000.
On January 28, 2019, the Company, entered into a Securities Purchase Agreement with Power Up, pursuant to which the Company issued a Convertible Promissory Note in the aggregate principal amount of $138,000 for net proceeds of $135,000 after expenses. The Note had a maturity date of November 15, 2019 and bears interest at the rate of nine percent per annum from the date on which the Note was issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company has the right to prepay the Note in terms of agreement. The outstanding principal amount of the Note was convertible at any time and from time to time at the election of Power Up during the period beginning on the date that is 180 days following the issue date into shares of the Company’s common stock at a conversion price equal to 61% of the lowest closing bid price of the Company’s common stock for the ten trading days prior to conversion. On July 16, 2019, the Company repaid the convertible note of $138,000 together with interest thereon and early settlement penalty for gross proceeds of $186,743.
On March 6, 2019, the Company, entered into a Securities Purchase Agreement with Power Up, pursuant to which the Company issued a Convertible Promissory Note in the aggregate principal amount of $128,000. The Note has a maturity date of January 30, 2020 and bears interest at the rate of nine percent per annum from the date on which the Note was issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company has the right to prepay the Note in terms of agreement. The outstanding principal amount of the Note is convertible at any time and from time to time at the election of Power Up during the period beginning on the date that is 180 days following the issue date into shares of the Company’s common stock at a conversion price equal to 61% of the lowest closing bid price of the Company’s common stock for the ten trading days prior to conversion. On September 18, 2019, the Company repaid $110,000 of the principal outstanding on the note.
On July 8, 2019, the Company, entered into a Securities Purchase Agreement with Power Up, pursuant to which the Company issued a Convertible Promissory Note in the aggregate principal amount of $53,000. The Note has a maturity date of April 30, 2020 and bears interest at the rate of nine percent per annum from the date on which the Note was issued until the same becomes due and payable, whether at maturity or upon acceleration or byprepayment or otherwise. The Company has the right to prepay the Note in terms of agreement. The outstanding principal amount of the Note is convertible at any time and from time to time at the election of Power Up during the period beginning on the date that is 180 days following the issue date into shares of the Company’s common stock at a conversion price equal to 61% of the lowest closing bid price of the Company’s common stock for the ten trading days prior to conversion.
21
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
11. Convertible notes (continued)
Power Up Lending Group LTD (continued)
On July 15 2019, the Company, entered into a Securities Purchase Agreement with Power Up, pursuant to which the Company issued a Convertible Promissory Note in the aggregate principal amount of $83,000. The Note has a maturity date of April 30, 2020 and bears interest at the rate of nine percent per annum from the date on which the Note was issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company has the right to prepay the Note in terms of agreement. The outstanding principal amount of the Note is convertible at any time and from time to time at the election of Power Up during the period beginning on the date that is 180 days following the issue date into shares of the Company’s common stock at a conversion price equal to 61% of the lowest closing bid price of the Company’s common stock for the ten trading days prior to conversion.
First Fire Global Opportunities Fund
On March 5, 2019, the Company entered into a Securities Purchase Agreement pursuant to which the Company issued a Convertible Promissory Note in the aggregate principal amount of $200,000, for net proceeds of $192,000 after the payment of legal fees and origination fees amounting to $8,000. The note has a maturity date of December 9, 2019. The outstanding principal amount of the note is convertible at any time and from time to time at the election of the purchaser. 180 days after the issued date into shares of the Company’s common stock at the lower of $0.08 per share or 65% of the lowest trade price during the ten consecutive trading days immediately prior to conversion. The note has certain buyback terms if the Company consummates a registered or unregistered primary offering of securities for capital raising purposes, or an option to convert at a 20% discount to the offering price to investors.
On September 11, 2019, in terms of a ~~senior ranking convertible promissory note~~conversion notice received, the Company issued 260,416 shares of Common stock in settlement of $6,500 of principal outstanding.
Actus Fund, LLC
On August 7 2019, the Company, entered into a Securities Purchase Agreement with Actus Fund, LLC, pursuant to which the Company issued a Convertible Promissory Note in the aggregate principal amount of $225,000. The Note has a maturity date ~~six months~~of May 7, 2020 and bears interest at the rate of ten percent per annum from the date on which the Note was issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company has the right to prepay the Note in terms of agreement. The outstanding principal amount of the Note is convertible at any time and from time to time at the election of Actus Fund, LLC during the period beginning on the date that is 180 days following the issue date into shares of the Company’s common stock at a conversion price equal to 60% of the lowest closing bid price of the Company’s common stock for the thirty trading days prior to conversion.
Labrys Fund, LP
On July 8, 2019, 2019, the Company, entered into a Securities Purchase Agreement with Labrys Fund, LP, pursuant to which the Company issued a Convertible Promissory Note in the aggregate principal amount of $282,000 for net proceeds of $253,800 after an original issue discount of $28,200. The Note has a maturity date of January 8, 2020 and ~~bearing~~bears interest at 0%the rate of twelve percent per ~~annum.~~annum from the date on which the Note was issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The ~~notes are~~Company has the right to prepay the Note in terms of agreement. The outstanding principal amount of the Note is convertible at any time and from time to time at the ~~option~~election of Labrys during the period beginning on the date that is 180 days following the issue date into shares of the ~~holder into~~Company's common stock at a conversion price equal to 60% of the lowest closing bid price of the Company's common stock for the thirty trading days prior to conversion. The Company was also required to issue 2,764,706 shares of common stock, which shares will be returned to the Company if the note is repaid prior to the expiry of 180 days from the date of issuance.
In connection with the issuance of the convertible promissory note to Labrys Fund LP, the Company issued 2,700,000 returnable shares. These shares are returnable if the note is paid prior to maturity date on January 8, 2020. Should the convertible note be in default the shares will be retained by Labrys Fund, LP. The Company intends repaying the note prior to maturity, therefore the returnable shares are not recorded as issued until the note is in default.
22
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
11. Convertible notes (continued)
Series N convertible notes
During the period from May 17, 2018 to December 4, 2018, The Company closed several tranches of a private offering in which it raised $2,505,000 in principal from 12 accredited investors through the issuance to the investors of the Company’s Series N convertible notes, in the total original principal amount of $2,505,000, which Notes are convertible into the Company’s common stock at a conversion price of ~~$0.03~~$0.08 per share together with three year warrants to purchase up to a total of 31,312,500 shares of the Company’s common stock at an exercise price of $0.12 per share. Both the conversion price under the Notes and the exercise price under the warrants are subject to ~~certain recapitalization adjustments. On~~standard price and anti-dilution adjustment mechanisms. The notes mature between May 16, 2019 to December ~~30, 2016, it was determined that the beneficial conversion feature related to the discounted note and warrant issuances amounting to $218,711 would be amortized over the life of the loans.~~3, 2019.

~~During~~Between January ~~2017,~~28, 2019 and September 17, 2019, the Company ~~borrowed a further aggregate~~closed several tranches of Series N Convertible notes in which it raised $1,643,894 in principal from accredited investors through the issuance to the investors of the Company’s Series N convertible notes, in the total original principal amount of ~~$71,000 in terms of three senior ranking convertible promissory notes with a maturity date six months from the issue date and bearing interest at 0% per annum. The notes~~$1,643,894, which Notes are convertible atinto the ~~option of the holder into shares of~~Company’s common stock ~~of the Company~~ at a conversion price of ~~$0.03~~$0.08 per share together with three year warrants to purchase up to a total of 20,925,000 shares of the Company’s common stock at an exercise price of $0.12 per share. Both the conversion price under the Notes and the exercise price under the warrants are subject to ~~certain recapitalization adjustments. In January 2017, it was determined that~~standard adjustment mechanisms. The notes mature one year from the ~~beneficial conversion feature related to the discounted note and warrant issuances amounting to $71,000 would be amortized over the life~~date of ~~the loans.~~issuance.

On May ~~4, 2017,~~15, 2019, one investor converted the ~~Company repaid $20,000 of the principal outstanding to one investor. During July and August 2017, the Company repaid a further $144,958 of the principal outstanding to five investors.~~
~~During July 2017, five investors converted an~~ aggregate principal amount of ~~$375,011~~$950,000 of Series N convertible notes into ~~12,500,375~~11,875,000 shares of common stock at a conversion price of ~~$0.03~~$0.08 per share.

~~The amortization charge of the debt discount for the three months and nine months ended September 30, 2017 was $5,917 and$289,711, respectively.~~
In terms of the Series L Convertible notes issued above, during January 2017, the Company granted three-year warrants to the Series L Convertible noteholders, exercisable for 2,366,667 shares of common stock at an exercise price of $0.03, subject to certain recapitalization adjustments, per share, expiring between January 16 and January 17, 2020. (Refer note 16 (b) below).
12. 19
~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~Mortgage loans
~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~
~~13.~~ ~~Derivative liability~~

The short-term convertible notes issued to Labrys Fund LP and Power Up Lending Group, LTD, disclosed in note 12 above, have variable priced conversion rights with no fixed floor price and will reprice dependent on the share price performance over varying periods of time. This gives rise to a derivative financial liability, which was initially valued at inception of the convertible notes at~~$223,500, the maximum amount permissible, using a Black-Scholes valuation model.~~
The Labrys Fund note was repaid in May 2017; therefore, the derivative liability was no longer required, the total derivative liability relating to this note of $183,048 was released to the statement of operations. The value of the Power Up convertible note was re-assessed as of September 30, 2017 and a further charge of $19,329 was made to the statement of operations. The value of the derivative liability will be re assessed at each financial reporting period, with any movement thereon recorded in the statement of operations in the period in which it is incurred.
~~The following assumptions were used in the Black-Scholes valuation model:~~
~~Nine months ended September 30, 2017~~
~~Calculated stock price~~ ~~$0.03 to $0.06~~
~~Risk free interest rate~~ ~~0.64% to 1.31%~~
~~Expected life of convertible notes~~ ~~3 to 9 months~~
~~expected volatility of underlying stock~~ ~~134.9% to 198.48%~~
~~Expected dividend rate~~ 0%
~~The movement in derivative liability is as follows:~~
~~Nine months ended September 30, 2017~~
~~Opening balance~~ ~~$                     -~~
~~Derivative liability arising from convertible notes~~             ~~223,500~~
~~Fair value adjustment to derivative liability~~                ~~(75,203)~~
~~$           148,297~~
20
~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~
~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~
~~14.~~ ~~Related Party Transactions~~
~~Greenstone Clinic Inc.~~
~~As of September 30, 2017 and December 31, 2016, the Company had a payable of $0 and $79,592, respectively. Greenstone Clinic Inc., is controlled by one of the Company’s directors. The balance~~Mortgage loans payable is ~~noninterest bearing, not secured and has no specific repayment terms.~~
~~1816191 Ontario~~
As of September 30, 2017, and December 31, 2016, the Company had a payable of $16,855 and $70,763, respectively, to 1816191 Ontario, the Endoscopy Clinic, which was sold at the end of the prior year. The payable is noninterest bearing, and has no specific repayment terms.
~~Shawn E. Leon~~
As of September 30, 2017, and December 31, 2016 the Company had a receivable of $15,756 and a payable of $8,492, respectively to Shawn E. Leon, a director and CEO of the Company. The balances receivable and payable are noninterest bearing and have no fixed repayment terms.
Mr. Leon was paid management fees of $193,156 during the nine months ended September 30, 2017. In addition to this the Company recorded a once off compensation expense in other expenses, relating to the excess of the fair value of the assets acquired in Cranberry Cove Holdings, Ltd. Mr. Leon is the owner of Leon Developments, the counterparty in the acquisition of the Cranberry Cove subsidiary referred to in note 1 and 3 above.
~~Leon Developments, Ltd.~~
The Company acquired CCH from Leon Developments, Ltd., on February 14, 2017, refer note 1 and 3 above. CCH owns the facility utilized by the Canadian Rehab Clinic which was sold to a third party on February 14, 2017. CCH owed CDN $2,692,512 to Leon Developments. The amount owing to Leon Developments Ltd., as of September 30, 2017 was $1,740,018.
~~Cranberry Cove Holdings Ltd.~~
The Company acquired CCH on February 14, 2017. CCH owns the real estate previously utilized by the Canadian Rehab Clinic and now utilized by the purchaser of the business. As of December 31, 2016, the Company had a receivable of $84,867 from CCH.
Prior to the acquisition of CCH, the Company paid rental expense to CCH of $47,493 for the period ended September 30, 2017 and $100,203 and $271,364 for the three and nine months ended September 30, 2017, respectively.
~~15.~~ ~~Loans payable~~
On February 14, 2017, the Company acquired 100% of the equity of CCH, from Leon Developments. The subsidiary has certain mortgage indebtedness amounting to CDN$4,115,057 (US$3,145,549) at the date of acquisition, which was assumed by the Company.
On February 14, 2017, the Company acquired certain assets of Seastone of Delray, including fixed property. A portion of the purchase consideration was funded by a purchase money mortgage secured over the properties acquired, amounting to $3,000,000.
21
~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~
~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~
~~15.~~ ~~Loans payable (continued)~~
~~The loans payable is~~disclosed as follows:

Interest
rate Maturity date Principal
Outstanding Accrued
interest September 30,
2019 December 31,
2018

Cranberry Cove Holdings, Ltd.
Pace Mortgage 4.2 % July 19, 2022 $ 3,938,887 $ 4,986 $ 3,943,873 $ 3,924,836
ARIA
Mortgage 5.0 % February 13, 2020 - - - 2,954,786
$ 3,938,887 $ 4,986 $ 3,943,873 $ 6,879,622
Disclosed as follows:
Short-term portion $ 110,569 $ 172,276
Long-term portion 3,833,304 6,707,346
$ 3,943,873 $ 6,879,622
Interest rate Maturity date Principal Outstanding Accrued interest September 30, 2017 December 31, 2016

Cranberry Cove Holdings
First Mortgage 8.0% August 14, 2017 $                -    $                   -    $                   -    $                   -
Second Mortgage 12.0% November 4, 2018                    -                          -                          -                          -
Pace Mortgage 4.2% July 19,2022        4,391,140                 5,558          4,396,698                       -
Seastone of Delray
Mortgage 5.0% February 13, 2020        2,982,280 $           12,426          2,994,706                       -
$ 7,373,420 $          17,984 $   7,391,404 $                  -
Disclosed as follows:
Short-term portion $         158,534 $                   -
Long-term portion          7,232,870                       -
$   7,391,404 $                  -
The aggregate amount outstanding at September 30, 2019 is payable as follows:

Amount

2017 $           38,438
2018             134,673
2019             140,707
2020          3,032,025
2021             116,262
Thereafter          3,929,299
Total $   7,391,404
~~Cranberry Cove Holdings~~
Amount
Within one year $ 110,569
One to two years 110,064
Two to three years 3,723,240
Total $ 3,943,873

~~First Mortgage~~
The first mortgage with an aggregate principal amount outstanding of CDN$3,500,000, including late charges, interest and penalties of CDN$165,057 for a gross aggregate amount outstanding of CDN$3,663,380, over the Cranberry Cove Holdings, ~~properties is secured by the property located at 3571 Muskoka Road, #169, Bala, described as PT LT 15 CON F Medora PT1 35R5958, PT 2 &3 35R11290, Muskoka Lakes. The~~Ltd – Pace mortgage bears interest at the rate of 8% per annum on the aggregate principal outstanding of $3,500,000 and matures on August 14, 2017, with monthly interest payments of $23,118 (CDN 30,000). During March 2017, the Company made a principal payment of CDN$100,000 on the first mortgage.
~~This mortgage was repaid in full on July 21, 2017 out of the proceeds derived from a new mortgage agreement entered into on July 19, 2017, see below.~~
~~Second Mortgage~~
The second mortgage had an initial principal amount outstanding of CDN$350,000, on May 23, 2017, the Company sold CDN$175,000 of the mortgage it owned to the second mortgage holder for gross proceeds of CDN$150,000, the balance outstanding on the second mortgage is now CDN$525,000, the mortgage is secured by the Cranberry Cove Holdings properties located at 3571 Muskoka Road, #169, Bala, described as PT LT 15 CON F Medora PT1 35R5958, PT 2 &3 35R11290, Muskoka Lakes. The mortgage bears interest at the rate of 12% per annum on the aggregate principal outstanding of CDN$525,000, and matures on November 4, 2018, with monthly interest payments of CDN$3,500.
~~This mortgage was repaid in full on July 21, 2017 out of the proceeds derived from a new mortgage agreement entered into on July 19, 2017, see below.~~
22
~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~
~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~

~~15.~~ ~~Loans payable (continued)~~
~~Pace Mortgage~~
On July 19, 2017, ~~Cranberry Cove Holdings, LTD. (“CCH”),~~CCH, a wholly owned subsidiary, closed on a loan agreement in the principal amount of CDN$5,500,000. The loan is secured by a first mortgage on the premises owned by CCH located at 3571 Muskoka Road 169, Bala, Ontario (the “Property”). The ~~Loan~~loan bears interest at the fixed rate of 4.2% with a 5-year primary term and a 25-year amortization. The Company has guaranteed the ~~Loan~~loan and the Company’s chief executive officer and controlling shareholder also has personally guaranteed the Loan. CCH and the Company have granted the Lender a general security interest in its assets to secure repayment of the Loan. The loan is amortized with monthly installments of CDN $29,531.
~~Seastone of Delray~~
23
ETHEMA HEALTH CORPORATION

~~The~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
12. Mortgage loans payable (continued)
ARIA
On February 13, 2017, the Company, through its subsidiary, ARIA, entered into a Mortgage and Security Agreement ~~with Seastone~~to purchase the properties located at 801 and 810 Andrews Avenue, Delray ~~Healthcare, LLC on February 13, 2017~~Beach, Florida, for ~~the~~an aggregate principal sum of $3,000,000, bearing interest at the rate of 5% per annum, maturing on February 13, 2020, with monthly ~~repayments~~installments of ~~interest and principal of~~ $15,000. ~~The proceeds of the mortgage of $3,000,000 was used to fund the acquisition of the Seastone Delray properties, described as follows:~~

~~Parcel 1, Moore’s Landing according~~On April 2, 2019, the Company entered into a Commercial Contract whereby the real property at 801 Andrews Avenue, Delray Beach, Florida, consisting of land and condominiums thereon, was sold to JAGGM, LLC for $3,500,000. This transaction closed during April 2019 and the ~~Plat thereof, as recorded in Plat Book 42, page 72, Public Records~~principal mortgage liability of ~~Palm Beach County, Florida~~
Unit numbers 1 to 10, inclusive of Seastone Condominium Apartments, a Condominium, according to The Declaration of Condominium recorded on O.RT. Book 3313, Page 122 and all exhibits thereof, Public Records of Palm Beach County, Florida.$2,942,526, including interest thereon was settled.

~~16.~~ ~~Stockholders’ equity (deficit)~~
a)13. ~~Common shares~~Third party loan

On ~~February 2, 2017,~~April 12, 2019, Eileen Greene, a related party assigned CDN1,000,000 of the amount owed by the Company ~~issued 1,200,000 common shares~~to her to a ~~convertible note holder in terms of a returnable commitment fee.~~third party. The ~~shares are returnable to~~loan bears interest at 12% per annum which the Company ~~if the convertible note is repaid prior~~agreed to maturity, failing which the commitment fee will be earned. These shares were not accounted for as issued as the probability of the commitment fee being assessed was not probable or certain. The convertible loan was repaid and the 1,200,000 common shares were returned to the Company, refer note 12 above.
On February 14, 2017, in terms of the acquisition of 100% of the capital stock of Cranberry Cove Holdings Ltd. (“CCH”) from Leon Developments, the Company funded a portion of the acquisition by the issuance of 60,000,000 shares of the Company’s common stock at a market value of US$0.0364 per share, totaling $2,184,000, refer note 1 and 3 above.
~~On May 30, 2017, the Company issued 100,000 common shares to a vendor in lieu of services rendered at a market value of US$0.04 per share.~~
During July 2017, five Series L Convertible note holders exercised their conversion rights and converted an aggregate principal amount of $375,011 into 12,500,375 shares of common stock at a conversion price or $0.03 per share.
23
~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~
~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~pay.

~~16.~~14. ~~Stockholders’ equity (deficit) (continued)~~
b) ~~Warrants~~Derivative liabilities

~~In terms of~~The short-term convertible notes, together with certain warrants issued to Leonite and the ~~short-term Series L Convertible~~short term convertible notes ~~entered into with 3 parties, as~~ disclosed in note 1211 above and note 16 below, have variable priced conversion rights with no fixed floor price and will reprice dependent on the ~~Company awarded three year warrants exercisable~~share price performance over ~~2,366,666 shares~~varying periods of ~~common stock,~~time. This gives rise to a derivative financial liability, which was initially valued at ~~an exercise price~~inception of ~~$0.03 per share.~~the convertible notes at $1,959,959 using a Black-Scholes valuation model.

The ~~fair value~~derivative liability is marked-to-market on a quarterly basis. As of ~~Warrants awarded during the nine months ended~~ September 30, ~~2017 were~~2019, the derivative liability was valued at ~~$94,620 using the Black Scholes pricing model utilizing the following weighted average assumptions:~~$2,673,079.

The following assumptions were used in the Black-Scholes valuation model:
Nine months ended
September 30, ~~2017~~
2019

Calculated stock price $0.05 to $0.09 ~~$0.04~~
Risk free interest rate 1.43% to 2.56% ~~1.48%~~
Expected life of convertible notes and warrants ~~(years)~~ 3 to 60 months ~~3 years~~
expected volatility of underlying stock 102.3% to 206.8% ~~398%~~
Expected dividend rate 0 0%%

The ~~movements~~movement in ~~warrants~~derivative liability is ~~summarized~~ as follows:

No. of shares Exercise price per share Weighted average exercise price

Outstanding January 1, 2016          6,300,000 $ 0.0033 to $0.03 $                 0.14
Granted        19,337,409                     0.03                 0.0300
Forfeited/cancelled        (6,000,000)                     0.15                 0.1500
Exercised                       -                            -                            -
Outstanding December 31, 2016        19,637,409 $ 0.0033 to $0.03                 0.0300
Granted          2,366,666                     0.03                 0.0300
Forfeited/cancelled                       -                            -                            -
Exercised                       -                            -                            -
Outstanding September 30, 2017        22,004,075 $ 0.033 to $0.03 $                 0.0300
September 30,
2019 December 31,
2018

Opening balance (January 1) $ 4,618,080 $ 2,859,832
Derivative liability on issued convertible notes and variable priced warrants 1,185,272 1,335,709
Fair value adjustments to derivative liability (3,130,273 ) 422,539

Closing balance $ 2,673,079 $ 4,618,080

24
24

ETHEMA HEALTH CORPORATION
~~(formerly Greenstone Healthcare Corporation)~~
NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

15. Related party transactions
Shawn E. Leon
As of September 30, 2019 and December 31, 2018 the Company had a receivable of $34,761 and $32,650, respectively from Shawn E. Leon. Mr. Leon is a director and CEO of the Company. The balances receivable is non-interest bearing and has no fixed repayment terms.
Mr. Leon was paid management fees of $0 and $138,448 for the nine months ended September 30, 2019 and 2018 respectively.
Leon Developments, Ltd.
As of September 30, 2019 and December 31, 2018, the Company owed Leon Developments, Ltd., $1,634,159 and $1,581,499, respectively. The balance owing to Leon Developments, Ltd. Is non-interest bearing and has no fixed terms of repayment.
Eileen Greene
As of September 30, 2019 and December 31, 2018, the Company owed Eileen Greene, the spouse of Mr. Leon, $373,249 and $1,034,114, respectively. The amount owing to Ms. Greene is non-interest bearing and has no fixed repayment terms.
During the current period, Eileen Greene assigned CDN$1,000,000 of the amount owing to her to a shareholder. The amount owing to the shareholder bears interest at 12% per annum, which the Company has agreed to pay.
All related party transactions occur in the normal course of operations and in terms of agreements entered into between the parties.
16. ~~Stockholders’ equity (deficit)~~Stockholders' deficit
a) Common shares
Authorized, issued and outstanding
On September 20, 2019, in terms of a shareholders resolution and Article of Amendment filed with the Nevada Secretary of State, the Company increased its authorized common share capital to 900,000,000 shares with a par value of $0.01 per share.
The Company has authorized 900,000,000 shares with a par value of $0.01 per share. The company has issued and outstanding 143,856,868 and 124,300,341 as of September 30, 2019 and December 31, 2018, respectively.
On January 17, 2019, the Company issued 71,111 shares of common stock to Leonite in connection with the closing of a financing of a Senior Secured Convertible Note. The shares were valued at $4,978 on the issue date and recorded as a debt discount.
On May 15, 2019, a Series N convertible note holder converted an aggregate principal amount of $950,000 of principal debt into 11,875,000 at a conversion price of $0.08 per share.
During June 2019, the Company issued a total of 5,300,000 shares of common stock to certain consultants, directors and employees for services rendered during the course of the current fiscal year. These shares of common stock were valued at $371,000 at the date of grant.
During June 2019, the Company issued a total of 2,050,000 shares of common stock to certain investors as bonus shares. These shares were valued at $0.07 per share on the date of issuance.
On July 15, 2019, the Company issued 2,700,000 returnable shares to Labrys Fund, LP in connection with a convertible note issued on July 8, 2019. These shares are only earned upon an event of a repayment default. The Company intends repaying the note prior to maturity, therefore the shares are not recorded as issued for financial statement purposes.
On September 11, 2019, in terms of a conversion notice received from First Fire Global Opportunities Fund, the company issued 260,416 shares of common stock to settle $6,500 of convertible debt.
25
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
16. Stockholders' deficit (continued)

b) ~~Warrants (continued)~~Preferred shares
Authorized, issued and outstanding
The Company has authorized 13,000,000 preferred shares with a par value of $0.01 per share, designated as 3,000,000 series A convertible preferred shares and 10,000,000 series B convertible preferred shares. The Company has no preferred shares issued and outstanding.
c) Warrants
In terms of the convertible note agreements entered into with Leonite disclosed in note 11 above, the Company granted warrants exercisable over a total of 2,185,183 shares of common stock at an initial exercise price of $0.10 per share, which was recorded as a debt discount.
In terms of the Series N Convertible debt issued to various accredited investors, disclosed in note 11 above, the Company granted warrants exercisable over a total of 20,925,000 shares of common stock at an initial exercise price of $0.12 per share, which was recorded as a debt discount.
The warrants were valued using a Black Scholes pricing model and the relative fair value method, on the date of grant at $1,363,869 using the following weighted average assumptions:
Nine months ended
September 30,
2019
Calculated stock price $0.05 to $0.09
Risk free interest rate 1.43% to 2.58%
Expected life of warrants 36 to 60 months
expected volatility of underlying stock 164.5% to 186.7%
Expected dividend rate 0 %
The volatility of the common stock is estimated using historical data of the Company’s common stock. The risk-free interest rate used in the Black Scholes pricing model is determined by reference to historical U.S. Treasury constant maturity rates with maturities approximate to the life of the warrants granted. An expected dividend yield of zero is used in the valuation model, because the Company does not expect to pay any cash dividends in the foreseeable future. As of September 30, 2019, the Company does not anticipate any awards will be forfeited in the valuation of the warrants.
A summary of all of the Company’s warrant activity during the period January 1, 2018 to September 30, 2019 is as follows:
No. of shares Exercise price per
share Weighted average exercise price

Outstanding January 1, 2018 49,504,075 $0.0033 to $.0.10 $ 0.0690
Granted 48,295,833 $0.10 to $0.12 0.1130
Forfeited/cancelled — — —
Exercised — — —
Outstanding December 31, 2018 97,799,908 $0.03 to $0.12 $ 0.0910
Granted 23,110,183 $0.10 to $0.12 0.1177
Forfeited/cancelled (300,000 ) $0.0033 (0.0033 )
Exercised — — —
Outstanding September 30, 2019 120,610,091 $0.03 to $0.12 $ 0.0960

The following table summarizes information about warrants outstanding at September 30, ~~2017:~~2019:

Warrants outstanding Warrants exercisable Warrants outstanding Warrants exercisable
Exercise price No. of shares Weighted average remaining years Weighted average exercise price No. of shares Weighted average exercise price

No. of shares

Weighted average
remaining years

Weighted average
exercise price

No. of shares

Weighted average
exercise price

$0.0033             300,000 *               300,000
$0.03        21,704,075                   2.44          21,704,075 21,704,075 0.47 21,704,075
$0.09 1,000,000 4.91 1,000,000
$0.10 45,668,516 3.35 45,668,516
$0.12 52,237,500 2.09 52,237,500

       22,004,075                   2.44 $               0.03          22,004,075 $                 0.03 120,610,091 2.32 $ 0.0960 120,610,091 $ 0.0960

*       In terms of an agreement entered into with an investor relations company, 300,000 warrants were to be issued as part of the Investor Relations Agreement. These warrants have not been issued as yet, therefore the warrant terms are uncertain.
All of the warrants outstanding as of September 30, ~~2017~~2019 and December 31, 2018 are vested. The warrants outstanding as of September 30, ~~2017~~2019 have an intrinsic value of ~~$668,123.~~$434,082.
26
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

16. c)Stockholders' deficit (continued)
d) Stock options

Our board of directors adopted the ~~GreeneStone~~Greenestone Healthcare Corporation 2013 Stock Option Plan (the “Plan”) to promote our ~~long- term~~long-term growth and profitability by (i) providing our key directors, officers and employees with incentives to improve stockholder value and contribute to our growth and financial success and (ii) enable us to attract, retain and reward the best available persons for positions of substantial responsibility. A total of 10,000,000 shares of our common stock have been reserved for issuance upon exercise of options granted pursuant to the Plan. The Plan allows us to grant options to our employees, officers and directors and those of our subsidiaries; provided that only our employees and those of our subsidiaries may receive incentive stock options under the Plan. We have granted a total of 480,000 options as of September 30, ~~2017~~2019 under the Plan.
No options were issued, exercised or cancelled ~~for~~during the ~~period under review.~~nine months ended September 30, 2019 and the year ended December 31, 2018, respectively.

The following table summarizes information about options outstanding as of September 30, ~~2017.~~2019:
Options outstanding Options exercisable

Exercise price
No. of shares
Weighted average
remaining years

Weighted average
exercise price
No. of shares
Weighted average
exercise price

$0.12 480,000 0.08 480,000

480,000 0.08 $ 0.12 480,000 $ 0.12

The Company issued Stock options to a former officer vesting over a 24-month period commencing on November 1, 2014 expiring on October 31, 2019, a formal option agreement has not been issued as yet, as such the terms of these options are uncertain.
Options outstanding Options exercisable
Exercise price No. of shares Weighted average remaining years Weighted average exercise price No. of shares Weighted average exercise price

$0.12             480,000                   2.08             480,000

            480,000                   2.08 $               0.12             480,000 $                0.12

As of September 30, ~~2017,~~2019 there was no unrecognized compensation costs related to these options and the ~~intrinsic~~fair value of the options isas of September 30, 2019 was $0.
25
~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~
~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~

17. ~~17.~~ Segment information

~~Due to the recent acquisition of the Cranberry Cove subsidiary on February 14, 2017, the~~The Company has two reportable operating ~~segments;~~segments:

a. Rental income from the property owned by ~~Cranberry Cove~~CCH subsidiary located at 3571 Muskoka Road, #169, Bala, on which the operations of the Canadian Rehab Clinic were located prior to disposal on February 14, 2017 and subsequently leased to the purchasers of the business of the Canadian Rehab Clinic, for a period of 5 years renewable for a further three five-year periods and with an option to acquire the property at a fixed price.

b. Rehabilitation Services provided to customers, ~~during the nine months ended September 30, 2017,~~ these services were provided to customers at ~~our~~the Company’s ARIA and Seastone of Delray business acquired on February 14, 2017. The Rehabilitation services provided by our Canadian Rehab Center for the nine months ended September 30, 2017 and 2016 are reported under discontinued operations and have not been reported as part of the Segment Information.operations.

~~The segment operating results of the reportable segments are disclosed as follows:~~
Three months ended September 30, 2017
Rental Operations In-Patient services Total

Revenue $              83,837 $            564,461 $         648,298
Operating expenditure                158,808                398,160              556,968

Operating (loss) income              (74,971)              166,301                91,330

Other (expense) income
Other income                         -                     67,596                67,596
Interest expense                (38,714)                (47,657) (86,371)
Amortization of debt discount                         -                   (13,052)              (13,052)
Loss on change in fair value of derivative liability                         -                   (19,329)              (19,329)
Foreign exchange movements                         (18,320)                    71,614                53,294
Net loss before taxation from continuing operations              (132,005)              225,473           93,468
Taxation                         -                            -                            -
Net loss from continuing operations $        (132,005) $      225,473 $        93,468

26
27

ETHEMA HEALTH CORPORATION
~~(formerly Greenstone Healthcare Corporation)~~
NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

17. Segment information (continued)

The segment operating results of the reportable segments are disclosed as follows:
Nine months ended September 30, 2017 Three months ended September 30, 2019
Rental Operations In-Patient services Total Rental Operations In-Patient services Total

Revenue $            203,962 $         1,169,066 $      1,373,028 $ 83,542 $ 64,500 $ 148,042
Operating expenditure                294,673             1,635,041          1,929,714
Operating expenses 32,125 1,126,348 1,158,473

Operating loss              (90,711)            (465,975)            (556,686)
Operating income (loss) 51,417 (1,061,848 ) (1,010,431 )

Other (expense) income
Other income                         -                   635,904              635,904 —   6,600 6,600
Other expense              (373,274)              (19,264)            (392,538) —   (11,729 ) (11,729 )
Interest income                         -                     32,074                32,074 —   51 51
Interest expense              (136,902)                (106,090)            (242,992) (83,840 ) (215,182 ) (299,022 )
Amortization of debt discount                         -                 (442,377)            (442,377) —   (974,084 ) (974,084 )
Loss on change in fair value of derivative liability                         -                     75,203                75,203 —   1,875,402 1,875,402
Foreign exchange movements                        (18,320)                (92,732)              (111,052) 19,828 40,155 59,983
Net loss before taxation from continuing operations              (619,207)              (383,257)         (1,002,464)
Net loss before taxation (12,595 ) (340,635 ) (353,230 )
Taxation                         -                            -                            -    —   —   —
Net loss from continuing operations $        (619,207) $        (383,257) $    (1,002,464)
Net loss from operations $ (12,595 ) $ (340,635 ) $ (353,230 )
Three months ended September 30, 2018
Rental Operations In-Patient services Total

Revenue $ 83,031 $ 187,339 $ 270,370
Operating expenditure 45,102 1,152,570 1,197,672

Operating income (loss) 37,929 (965,231 ) (927,302 )

Other (expense) income
Other income —   6,009 6,009
Interest income —   5,334 5,334
Interest expense (42,845 ) (182,360 ) (225,205 )
Amortization of debt discount —   (1,195,638 ) (1,195,638 )
Derivative liability movements —   37,951 37,951
Foreign exchange movements (15,244 ) (80,048 ) (95,292 )
Net loss before taxation (20,160 ) (2,373,983 ) (2,394,143 )
Taxation —   —   —
Net loss from operations $ (20,160 ) $ (2,373,983 ) $ (2,394,143 )

28
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
17. Segment information (continued)
The segment operating results of the reportable segments are disclosed as follows:
Nine months ended September 30, 2019
Rental Operations In-Patient services Total

Revenue $ 248,019 $ 80,225 $ 328,244
Operating expenses 106,393 4,021,917 4,128,310

Operating income (loss) 141,626 (3,941,692 ) (3,800,066 )

Other (expense) income
Other income —   6,600 6,600
Other expense —   (11,729 ) (11,729 )
Interest income —   15,313 15,313
Loss on disposal of property —   (692,488 ) (692,488 )
Bonus shares issued to investors —   (143,500 ) (143,500 )
Interest expense (165,614 ) (675,546 ) (841,160 )
Amortization of debt discount —   (2,564,338 ) (2,564,338 )
Loss on change in fair value of derivative liability —   3,130,273 3,130,273
Foreign exchange movements (25,752 ) (186,215 ) (211,967 )
Net loss before taxation (49,740 ) (5,063,322 ) (5,113,062 )
Taxation —   —   —
Net loss from operations $ (49,740 ) $ (5,063,322 ) $ (5,113,062 )
Nine months ended September 30, 2018
Rental Operations In-Patient services Total

Revenue $ 250,174 $ 200,192 $ 450,366
Operating expenditure 121,606 2,403,381 2,524,987

Operating income (loss) 128,568 (2,203,189 ) (2,074,621 )

Other (expense) income
Other income —   6,009 6,009
Interest income —   5,334 5,334
Interest expense (135,740 ) (436,503 ) (572,243 )
Amortization of debt discount —   (3,288,472 ) (3,288,472 )
Derivative liability movement —   (771,000 ) (771,000 )
Foreign exchange movements 32,311 120,921 153,232
Net income (loss) before taxation 25,139 (6,566,900 ) (6,541,761 )
Taxation —   —   —
Net income (loss) from operations $ 25,139 $ (6,566,900 ) $ (6,541,761 )
29
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
17. Segment information (continued)
The segment operating results of the reportable segments are disclosed as follows:
The operating assets and liabilities of the reportable segments are as follows:

Rental Operations In-Patient services Total

Purchase of fixed assets $ —   $ 8,878 $ 8,878
Assets
Current assets 6,391 1,011,561 1,017,952
Non-current assets 7,825,234 7,174,787 15,000,021
Liabilities
Current liabilities (2,333,270 ) (561,722 ) (2,894,992 )
Non-current liabilities (4,311,464 ) (2,921,406 ) (7,232,870 )
Intercompany balances (1,813,184 ) 1,813,184 —
Net (liability) asset  position $ (626,293 ) $ 6,516,404 $ 5,890,111
27
~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~
~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~
September 30, 2019
Rental Operations In-Patient services Total

Purchase of fixed assets —   22,868 22,868
Assets
Current assets 3,480 397,068 400,548
Non-current assets 2,852,070 20,215,934 23,068,004
Liabilities
Current liabilities (1,306,190 ) (12,921,036 ) (14,227,226 )
Non-current liabilities (4,741,441 ) (14,459,976 ) (19,201,417 )
Intercompany balances 765,246 (765,246 ) —
Net liability position (2,426,835 ) (7,533,256 ) (9,960,091 )

18. Net loss ~~(income)~~ per common share

For the three ~~months ended September 30, 2017, 480,000 options to purchase shares of common stock; 22,004,075 warrants to purchase shares of common stock~~ and convertible notes convertible into 3,721,311 shares of common stock at the Company’s share price on September 30, 2017, were excluded from the calculation of earnings per share as the result would have been anti-dilutive.
~~For the three months ended September 30, 2016 the computation of basic and diluted earnings per share is as follows:~~

Amount Number of shares Per share amount

Basic earnings per share
Net loss per share from continuing operations $       (181,930)        48,738,855 $                -
Net income per share from discontinued operations             318,901        48,738,855 $                -

Basic income per share             136,971        48,738,855                    -

Effect of dilutive securities

Warrants                       -                266,700
Options                       -                          -

Diluted earnings per share
Net loss per share from continuing operations           (181,930)        49,005,555                    -
Net income per share from discontinued operations             318,901        49,005,555                    -

$         136,971        49,005,555 $                -
~~For the~~ nine months ended September 30, ~~2017~~2019 and 2018, the following options, warrants and convertible notes were excluded from the computation of ~~basic and~~ diluted ~~earnings~~net loss per share is as ~~follows:~~the results would have been anti-dilutive.
Amount Number of shares Per share amount

Basic earnings per share
Net loss per share from continuing operations $    (1,002,464)      102,455,451 $           (0.01)
Net income per share from discontinued operations          7,194,389      102,455,451 $            0.07

Basic income per share          6,191,925      102,455,451                0.06

Effect of dilutive securities

Warrants                       -           14,856,699
Options                       -                          -

Diluted earnings per share
Net loss per share from continuing operations        (1,002,464)      117,312,150               (0.01)
Net income per share from discontinued operations          7,194,389      117,312,150                0.06

$      6,191,925      117,312,150 $            0.05
28
~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~
~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~
September 30,
2019 September 30,
2018

Stock options 480,000 480,000
Warrants 120,610,091 86,337,408
Convertible notes 94,933,731 68,861,363

216,023,822 155,678,771

~~18.~~ ~~Net loss (income) per common share~~
~~For the nine months ended September 30, 2016 the computation of basic and diluted earnings per share is as follows:~~
Amount Number of shares Per share amount

Basic earnings per share
Net loss per share from continuing operations $       (413,294)        48,158,563 $                -
Net income per share from discontinued operations             762,680        48,158,563 $                -

Basic income per share             349,386        48,158,563                    -

Effect of dilutive securities

Warrants                       -                266,700
Options                       -                          -

Diluted earnings per share
Net loss per share from continuing operations           (413,294)        48,425,263                    -
Net income per share from discontinued operations             762,680        48,425,263                    -

$         349,386        48,425,263 $                -
19. ~~Commitments~~Commitment and contingencies

a.a) Contingency related to outstanding penalties
The Company has provided for potential US penalties of $250,000 due to ~~noncompliance~~non-compliance with the filing of certain required returns. The actual liability may be higher due to interest and penalties assessed by these taxing authorities.

b.b) ~~Other~~Option to purchase lease property
On May 23, 2018, the Company entered into a Lease Agreement pursuant to which it leased from the AREP 5400 East Avenue LLP (the “Landlord”), the premises located at 5400, 5402, and 5410 East Avenue, West Palm Beach, Florida (the “Property”). The Lease has an initial term of 10 years and provides for 2 additional 10 year extensions. The Company has the option to purchase the property initially for $17,250,000, which amount has increased to $27,750,000 as of October 31, 2019, plus any landlord funded improvements. The option to purchase increases by $750,000 per calendar month. The initial base rental is $146,337 per month, plus any taxes imposed on the premises or the base rental. The Company intends to make investments and enter into joint venture arrangements with established addiction recovery businesses based in the US and leverage of these investments and arrangements to bring patient into its leased facility.
30
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
19. Commitment and contingencies
c) Future minimum operating lease payments
In terms of the lease agreement mentioned above the Company is obligated to make the following minimum undiscounted lease payments:
Amount

Remainder of 2019 $ 458,965
2020 1,882,422
2021 1,962,242
2022 2,042,062
2023 and thereafter 12,436,420
$ 18,782,111
d) Mortgage payments
The Company is obligated to make the following mortgage loans payments:
Amount
Within one year $ 110,569
One to two years 110,064
Two to three years 3,723,240
Total $ 3,943,873
e) Other
The Company has principal and interest payment commitments under the Convertible notes disclosed under Note 11 above. Conversion of these notes are at the option of the investor, if not converted these notes may need to be repaid.
From time to time, the Company and its subsidiaries enter into legal disputes in the ordinary course of business. The Company believes there are no material legal or administrative matters pending that are likely to have, individually or in the aggregate, a material adverse effect on its business or results of operations.

20. ~~20.~~ ~~Income taxes~~Subsequent events

~~The~~Convertible notes
On October 10, 2019, in terms of a conversion notice received from First Fire Global Opportunities Fund, the Company ~~is not current~~issued 366,666 shares of Common stock in ~~its tax filings as~~settlement of ~~September 30, 2017.~~$6,500 of principal outstanding on the $200,000 convertible note issued on March 5, 2019.
On November 4, 2019, in terms of a conversion notice received from First Fire Global Opportunities Fund, the Company issued 460,363 shares of Common stock in settlement of $7,000 of principal outstanding on the $200,000 convertible note issued on March 5, 2019.

The Company has ~~accrued $250,000 for not filing certain required returns in the United States.~~
~~The Company is also currently evaluating potential tax liabilities due to the gain on disposal of our Canadian Rehab Clinic.~~
~~The total tax liabilities, including penalties and interest could be significant and adversely impact stockholder value.~~
29
~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~
~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~
~~21.~~ ~~Subsequent events~~
~~On August 3, 2017, the Company entered into~~reached an agreement with Leonite Capital, LLC whereby it has agreed to ~~acquire a property at 45 West 17th Street, Riviera Beach, Florida, including the completion~~transfer ownership of the ~~construction of a 20 bed in-patient detoxification facility~~land and ~~the licensing approvals to operate a detoxification facility for a total purchase consideration of $3,000,000, of which $1,000,000~~buildings at 810 Andrews Avenue, Delray Beach, valued at $1,500,000, in partial settlement of the ~~financing is to be provided by the seller, bearing interest at 7% per annum for a 22-month period.~~amount owed. This agreement ~~is subject~~has not closed as yet. Leonite has agreed to ~~a successful closing on or before November 17, 2017, after which~~further negotiate to extend the maturity date ~~it may be cancelled by either party.~~
~~This agreement was subsequently cancelled and all deposits paid were returned.~~
~~On October 31, 2017 and November 6, 2017, Eileen Greene, the spouse~~ of the ~~CEO, advanced the company CDN $575,000 and CDN $327,000, respectively. The terms of the advance are undecided~~remaining balance outstanding to ~~date. The proceeds of these advances were used to make the initial down payments, as discussed below.~~December 31, 2019.

On November ~~6, 2017,~~15, 2019, the Company entered into a ~~Securities Purchase Agreement~~non-binding letter of intent with ~~Power Up Lending Group Ltd., pursuant to which~~an addiction treatment center based in Fort Lauderdale Florida, whereby the Company ~~issued~~would invest up to ~~the Purchaser a Convertible Promissory Note~~$18,000,000 in the aggregate principal amount of $103,000. The Note has a maturity date of August 15, 2018 and bears interest at the at the rate of twelve percent per annum from the date on which the Note is issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Note in terms of agreement at a prepayment penalty ranging from 112% to 130% of the balance outstanding. The outstanding principal amount of the Note is convertible at any time and from time to time at the election of the Purchaser during the period beginning on the date that is 180 days following the issue date into shares of the Company's common stock at a conversion price equal to 61% of the lowest closing bid price of the Company's common stock for the ten trading days prior to conversion. The proceeds of this note was also used to fund the initial down payment, as discussed below.
On November 2, 2017, the Company entered into an agreement to purchase certain buildings in West Palm Beach, Florida, totalling approximately 80,000 square feet on which the current tenant operates a substance abuseaddiction treatment center for a ~~consideration~~50% equity stake in the business. The initial investment of ~~$20,080,000. The Company is obligated to make certain non-refundable down payments~~$12,000,000 for 40% of ~~$2,210,000. The closing of this transaction~~the equity is expected to take place ~~on February 28, 2018 or at~~in 3 equal tranches of $4,000,000 each and an ~~earlier date agreed~~additional optional investment of $6,000,000 for an additional 10% to bybe exercised within a year. The parties will determine the ~~parties.~~future use of the West Palm Beach facility under potential joint venture arrangements with the addiction treatment center.

Other than disclosed above, the Company has evaluated subsequent events through the date of the unaudited condensed consolidated financial statements were available to be issued and has concluded that no such events or transactions took place that would require disclosure herein.
30

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

The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our consolidated financial statements and the notes presented herein and the consolidated financial statements and the other information set forth in our Annual Report on Form 10- KK/A for the year ended December 31, ~~2016~~2018 filed with the Securities and Exchange Commission on April ~~17, 2017.~~22, 2019. In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the Securities and Exchange Commission.
Our 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 financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our 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 financial statements and accompanying notes to the financial statements for the year ended December 31, ~~2016.~~2018.

Plan of Operation

During the next twelve months, the Company plans to continue and expand its operations as a provider of addiction and aftercare treatment ~~services through marketing efforts undertaken to expand its patient base in Florida.~~services. The Company ~~plans~~has recently entered into a Letter of Intent to ~~focus on~~invest in a larger treatment provider and as this plan materializes, the ~~growth~~Company will work closely with this provider to determine how best to leverage its marketing spend and to which segments of ~~its addiction and aftercare treatment units~~the market to target. Our plan would be to complement each other in the marketplace by ~~seeking out potential acquisitions.~~having a wider variety of services available by specializing in different locations. It is not yet determined if any changes will be made to the management structure of our facility in West Palm Beach.

Results of Operations
For the three months ended September 30, ~~2017~~2019 and ~~the three month months ended~~ September 30, ~~2016~~2018.
~~Revenue~~Revenues
Revenues ~~was $648,298~~were $148,042 and $0$270,370 for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, ~~an increase~~a decrease of $648,298. The Company disposed of its Canadian Rehab Clinic on February 14, 2017 and simultaneously acquired the operations of Seastone of Delray. Revenue includes rental income of $83,837 earned by our recently acquired Cranberry Cove subsidiary. The revenues earned for patient treatments from the Canadian Rehab Clinic have been reclassified to discontinued operations. There is no meaningful comparative data to compare our revenues.$122,328 or 45.2%.

~~Operating Expenses~~
~~Operating expenses~~Revenue from patient treatment was ~~$556,968~~$64,500 and ~~$192,193~~$187,339 for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, ana decrease of $122,839 or 65.6%. We have not been able to attract sufficient patient numbers into our US facilities to generate sufficient revenues to cover operating costs, temporarily reducing our patient intake while we explore joint venture arrangements and investments in established addiction recovery operations within the US. We expect, that if we are successful in our efforts we will increase of~~$364,775, or 189.8%. The operations of the Canadian Rehab Clinic been reclassified to discontinued operations as the business unit was sold effective February 14, 2017.~~our patient numbers and revenues.

~~The operating expenses incurred during the prior three month period are minimal~~Revenue from rental income was $83,542 and ~~consisted primarily of payroll costs of $89,934, management fees of $45,742 and professional fees of $47,135.~~
31
~~The operating expenses in the current period include the following:~~
● ~~General and administrative expenses of $170,491, primarily operating costs incurred by our recently acquired Seastone of Delray business, including management fees of $42,705.~~
● ~~Professional fees of $53,830, primarily legal fees related to corporate activity and the recent corporate restructure~~
● ~~Salaries and wages of $200,863, primarily related to the Seastone acquisition~~
● ~~Depreciation of $131,784, related to the assets of our recently acquired subsidiary Cranberry Cove Holdings and of the acquisition of the Seastone business on February 14, 2017.~~
~~Operating income (loss)~~
~~Operating income (loss) amounted to $91,330 and $(192,193)~~$83,031 for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, an ~~improvement~~increase of ~~$283,523~~$511 or ~~147.5%, primarily~~0.6%. The increase is due to ~~our Seastone operations which has been profitable during~~foreign currency movements between the ~~current quarter, offset by corporate operating expenses.~~two periods.
Operating Expenses

~~Other income~~
~~Other income was $67,596~~Operating expenses were $1,158,473 and ~~$60,000~~$1,197,672 for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, ~~an increase~~a decrease of ~~$7,596~~$39,201 or ~~12.7%~~3.3%. ~~Other income in~~The decrease is primarily due to the current period represents expected additional earnout payments on the disposal of the Canadian Rehab Clinic in February 2017. Other income in the prior period, consisted of the sale of mineral rights owned by the holding company prior to its transformation to a rehabilitation enter.following:

● Management fees was $0 and $46,350 for the three months ended September 30, 2019 and 2018, respectively, a decrease of $46,350 or 100%. Management has not charged fees during the current year to preserve operating cash flow.

~~Other~~
● Salaries of $370,341 and $263,901 for the three months ended September 30, 2019 and 2018, an increase of $106,440 or 40.3% primarily due to additional staff required to operate the significantly larger West Palm Beach facility, which was not in full operation during the prior period.
● All other expense categories were reduced in an effort to preserve cash and curtail operating expenses whilst the Company seeks new business lines.
● Depreciation was $47,104 and $67,929 for the three months ended September 30, 2019 and 2018, respectively, a decrease of $20,825 or 30.7%, the decrease is attributable to the disposal of the condominiums in Delray Beach during the prior quarter.
~~Other expense~~Operating loss
The operating loss was $0$1,010,431 and ~~$12,250~~$927,302 for the three months ended September 30, ~~2017,~~2019 and 2018, respectively, an increase of $83,129 or 9.0%. The increase is attributable to the lower revenues offset by a ~~decrease of $12,250 or 100.0%.~~reduction in operating expenses, as discussed above.
Interest expense

Interest expense
~~Interest expense~~ was ~~$86,371~~$299,022 and ~~$8,598~~$225,205 for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, an increase of ~~$77,773, the increase is~~$73,817 or 32.8% was primarily due to ~~interest due on~~ the ~~new mortgage loans which replaced~~increase in convertible note funding during the ~~mortgage loans assumed by the Company when it acquired Cranberry Cove Holdings, Ltd and on the purchase money mortgage loan entered into to acquire the properties associated with Seastone of Delray.~~current period. The funding was used for general working capital purposes.

Debt ~~Discount~~discount
Debt discount was ~~$13,052~~$974,084 and ~~$39,988~~$1,195,638 for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, a decrease of ~~$26,936~~$221,554 or ~~67.4% and~~18.5%. The charge during the current period represents the amortization of the value of the warrants issued inover the terms of the convertible loan agreements entered into during ~~December 2016~~the current period and ~~January 2017~~during 2018 and the amortization of the fair value of the beneficial conversion feature of the convertible notes issued to note holders during ~~June 2017,~~ the current period and 2018. The fair value of the warrants and the beneficial conversion ~~feature~~features are amortized over a six to ~~nine~~twelve month period, the term of the underlying convertible securities.

Derivative liability movement
~~Derivative~~
The derivative liability movement of $1,875,402 (gain) and $37,951(gain) represents the mark to market movements of variably priced convertible notes and warrants issued during the current and prior comparative period. 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 unaudited condensed consolidated statement of operations.
Foreign exchange movements
Foreign exchange movements was ~~$19,329~~$59,983 and $0$(95,292) for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, ~~an increase of~~$19,329 or 100%. This movement represents the mark to market of the derivative liabilities arising on the beneficial conversion feature of the variable priced notes issued to note holders in June 2017.
32
~~Foreign exchange movements~~
~~Foreign exchange movements were $53,294 and $11,099 for the three months ended September 30, 2017 and 2016, respectively, and represents~~representing the realized exchange gains and (losses) on monetary assets and liabilities settled during ~~each period~~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. The average exchange rate utilized during the current year of $0.7523 weakened by 2.6% from $0.7725 in the prior period.

Net loss

Net ~~(loss) income from discontinued operations~~
~~The net (loss) income from discontinued operations was $(218,253)~~loss of $(353,230) and ~~$318,901,~~$(2,394,143) for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, ~~an increase in loss~~a decrease of ~~$537,154,~~$2,040,913 or ~~168.4%. The current period loss~~85.2%, is ~~made up~~ primarily ~~of foreign exchange loss of $215,996~~ due to the ~~mark to market of assets denominated in Canadian Dollars in our discontinued Canadian operation. professional fees, penalties and a foreign currency loss realized on the remaining assets~~movement in the ~~discontinued operation. The discontinued operation has significant receivables from the Group and from the disposal of the rehab clinic, the Canadian Dollar has strengthened against the US Dollar~~derivative liability during the current period ~~giving rise to the foreign currency loss.~~
~~The prior income from discontinued operations represents the trading operations of the Canadian Rehab clinic.~~
as discussed above.

~~Net (loss) income~~
Net (loss) income was $(124,785) and $136,971 for the three months ended September 30, 2017 and 2016, respectively, a decrease of $261,756 or 191.1% primarily due to the foreign currency loss on the mark to market of Canadian assets reported under discontinued operations.
For the nine months ended September 30, ~~2017~~2019 and September 30, 2018.
Revenues were $328,244 and $450,366 for the nine months ended September 30, ~~2016.~~2019 and 2018, respectively, a decrease of $122,122 or 27.1%.
Revenue from patient treatment was $80,225 and $200,192 for the nine months ended September 30, 2019 and 2018, respectively, a decrease of $119,967 or 59.9%. We have not been able to attract sufficient patient numbers into our US facilities to generate sufficient revenues to cover operating costs, temporarily reducing our patient intake while we explore joint venture arrangements and investments in established addiction recovery operations within the US. We expect, that if we are successful in our efforts we will increase our patient numbers and revenues.
Revenue from rental income was $248,019 and $250,174 for the nine months ended September 30, 2019 and 2018, respectively, a decrease of $2,155 or 0.9%. The decrease is due to foreign currency movements between the two periods.
~~Revenue~~
~~Revenues~~Operating Expenses
Operating expenses were $4,128,310 and $2,524,987 for the nine months ended September 30, 2019 and 2018, respectively, an increase of $1,603,323 or 63.5%. The increase is primarily due to the following:
● General and administrative expenses of $1,123,207 and $600,639 for the nine months ended September 30, 2019 and 2018, respectively, an increase of $522,568 or 87.0%, primarily due to an increase in property taxes of $441,711 and directors fees of $70,000 paid by the issuance of stock during the current period, the balance is made up of general movements in individually immaterial expenses associated with running a much larger facility in West Palm Beach.
● Rent expense was $1,212,042 and $626,321 for the nine months ended September 30, 2019 and 2018, an increase of $585,721 or 93.5%. This was due to the Company converting the option to purchase the property located at 5400 East Avenue, West Palm Beach, Florida, in which the treatment center is located into an operating lease during May 2018. The Company has an option to acquire the property.
● Management fees of $0 and $138,448 for the nine months ended September 30, 2019 and 2018, respectively, decreased by $138,448 or 100%, our CEO did not charge any fees during the current period to facilitate cash flow.
● Professional fees of $510,608 and $297,858 for the nine months ended September 30, 2019 and 2018, respectively, increased by $212,750 or 71.4%, the increase is due to consulting fees paid to two individuals who assisted with business development during the relocation of operations to the USA from Canada.
● Salaries and wages of $1,103,054 and $657,337 for the nine months ended September 30, 2019 and 2018, respectively, increased by $445,717 or 67.8%, primarily due to additional staff required to operate the significantly larger West Palm Beach facility, which was not in full operation during the prior period.
● Depreciation was $179,399 and $204,384 for the nine months ended September 30, 2019 and 2018, respectively, a decrease of $24,985 or 12.2%, the decrease is attributable to the disposal of the condominiums in Delray Beach during the current quarter.
Operating loss
The operating loss was ~~$1,373,028~~$3,800,066 and $2,074,621 for the nine months ended September 30, 2019 and 2018, respectively, an increase of $1,725,445 or 83.2%. The increase is attributable to the operating expenses discussed above and the reduction in patient revenues.

Loss on disposal of property
The loss on disposal of property of $692,488 and $0 for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, an increase of ~~$1,373,028. The Company disposed~~100% was due to the sale of ~~its Canadian Rehab Clinic~~the condominiums in Delray Beach, the proceeds were used to settle the mortgage owing on ~~February 14, 2017 and simultaneously acquired~~ the operations of Seastone of Delray. Revenue includes rental income of $203,962 earned by our recently acquired Cranberry Cove subsidiary. The revenues earned for patient treatments from the Canadian Rehab Clinic have been reclassified to discontinued operations. There is no meaningful comparative data to compare our revenues.
~~Operating Expenses~~properties.
Bonus shares issued to investors
~~Operating expenses was $1,929,714~~The bonus shares to investors of $143,500 and ~~$398,433~~$0 for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, ~~an increase of$1,531,281 or 384.3%~~increased by 100%. ~~The operations of the Canadian Rehab Clinic been reclassified~~Bonus shares were issued to ~~discontinued operations as the business unit was sold effective February 14, 2017.~~
~~The operating expenses incurred~~certain investors during the ~~prior nine month~~current period ~~consisted primarily of Investor relations fees of $57,100, management fees of $92,319, professional fees of $122,180 and payroll costs of $110,934.~~
33
~~The operating expenses~~to facilitate additional investment in the ~~current nine month period include the following:~~
● General and administrative expenses of $578,931, primarily management fees of $241,923 charged by our CEO and operating costs incurred by our recently acquired Seastone of Delray business, which are individually insignificant to discuss separately;
● ~~Professional fees of $453,034, primarily legal fees related to the recent corporate restructure;~~
● ~~Salaries and wages of $583,559, primarily related to the payroll costs in our recently acquired Seastone operation.~~
● ~~Depreciation of $314,190 for the assets of our recently acquired subsidiary Cranberry Cove Holdings and of the acquisition of the Seastone business on February 14, 2017.~~
~~Operating loss~~Company.

~~Operating loss amounted to $(556,686)~~Interest expense
Interest expense of $841,160 and ~~$(398,433)~~$572,243 for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, an increase of ~~$(158,253)~~$268,917 or ~~39.7%,~~47.0% was primarily due to the ~~additional professional fees incurred on the corporate restructure, management fees paid and depreciation expense~~increase in convertible note funding during the current period ~~offset by the revenues earned from our Seastone operation~~ of ~~$1,373,028.~~a net $1,788,689. The funding was used for general working capital purposes.

~~Other income~~Debt discount
~~Other income~~
Debt discount was ~~$635,904~~$2,564,338 and ~~$72,507~~$3,288,472 for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, ~~an increase~~a decrease of $563,397. Other income in the current period consists of the reversal of a provision raised against a receivable on the disposal of the Endoscopy Clinic in prior years amounting to $472,368, the receivable was assigned to Leon Developments as part of the purchase consideration paid on the acquisition of Cranberry Cove and an accrual of $162,536 relating to expected proceeds on the earnout provision of the Canadian Rehab Clinic disposal.
~~Other expense~~
Other expense was $392,538 and $12,250 for the nine months ended September 30, 2017 and 2016, respectively, an increase of $380,288. Other expense consists of; i) $373,274 of the excess of the purchase price paid over the fair market value of the assets of Cranberry Cove Holdings Ltd. This expenditure is classified as once-off compensation expense to our CEO who owns 100% of Leon Developments, the counterparty to the purchase of the Cranberry Cove Subsidiary; and ii) $19,265 representing the loss realized on disposing of a portion of the mortgage owned by the Company in CCH, at a discount to face value.
~~Interest income~~
Interest income of $32,074 consists primarily of interest earned on the receivable from the sale of our Endoscopy Clinic in prior years. The interest due on this receivable was reversed in prior periods due to uncertainty as to the collectability of this amount. The receivable was assigned to Leon Developments as part of the purchase consideration for Cranberry Cove Holdings Ltd.
34
~~Interest expense~~
Interest expense was $242,992 and $15,701 for the nine months ended September 30, 2017 and 2016, respectively, an increase of $227,291, the increase is primarily due to interest due on the mortgage loans assumed by the Company when it acquired Cranberry Cove Holdings, Ltd and on the purchase money mortgage loan entered into to acquire the properties associated with Seastone of Delray.
~~Debt Discount~~
~~Debt discount was $442,377 and $73,250 for the nine months ended September 30, 2017 and 2016, respectively, an increase of $368,827.~~$724,134 or 22.0%. The charge during the current period represents the amortization of the value of the warrants issued inover the terms of the convertible loan agreements entered into during ~~December 2016~~the current period and ~~January 2017~~during 2018 and the amortization of the fair value of the beneficial conversion feature of the convertible notes issued to note holders during ~~February 2017~~the current period and ~~June 2017, the~~2018. The fair value of the warrants and the beneficial conversion ~~feature~~features are amortized over a six to ~~nine~~twelve month period, the term of the underlying convertible securities.
Derivative liability movement
The ~~$73,250, incurred~~derivative liability movement of $3,130,273 (Gain) and (771,000) (Loss) represents the mark to market movements of variably priced convertible notes and warrants issued during the current and prior comparative period. 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 ~~prior period represents the amortization~~unaudited condensed consolidated statement of ~~the value of warrant and original issue discount attached to a short-term loan.~~operations.

~~Derivative liability movement~~Foreign exchange movements
~~Derivative liability movement was $75,203~~
Foreign exchange movements of $(211,967) and $0$153,232 for the nine months ended September 30, ~~2017~~2019 and 2016, respectively, an increase of $75,203 or 100%. This movement represents the mark to market of the derivative liabilities arising on the beneficial conversion feature of the variable priced notes issued to note holders in June 2017. The February note was prepaid in May 2017 and an additional note was issued in June 2017.
~~Foreign exchange movements~~
~~Foreign exchange movements were $(111,052) and $13,833 for the nine months ended September 30, 2017 and 2016,~~2018, respectively, represents the realized exchange ~~losses~~gains and ~~gains, respectively,~~(losses) on monetary assets and liabilities settled during ~~each period~~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. The average exchange rate utilized during the current year of $0.7523 weakened by 2.6% from $0.7725 in the prior period.
Net loss

Net ~~income from discontinued operations~~
~~The net income from discontinued operations was $7,194,389~~loss of $(5,113,062) and ~~$762,680,~~$(6,541,761) for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, ~~an increase~~a decrease of ~~$6,431,708.~~
~~The current period income~~$1,428,699 or 21.8%, is ~~primarily made up as follows:~~
● ~~Operating loss of $300,439, the operations were disposed of on February 14, 2017, and the loss includes expenditure incurred to dispose of the operation.~~
● Profit on sale of the business of the Canadian Rehab Clinic of $7,494,828 represents the excess of the proceeds received over the assets disposed of as reflected in note 1 and 3 to the unaudited condensed consolidated financial statements.
35
The prior period income primarily represents the operating income of the discontinued Canadian Rehab Clinic of $912,086, other income of $21,042 on insurance proceeds received for fire damage, interest expense of $116,774, primarily related to outstanding tax liabilities which have now been settled, depreciation of 47,332 and net foreign exchange gains of $21,956.
~~Net income~~
~~Net income was $6,191,925 and $349,386 for the nine months ended September 30, 2017 and 2016, respectively, an increase of $5,842,539,~~ primarily due to the ~~profit~~increase in operating expenses in the current period, the loss realized on the sale of the ~~Canadian Rehab clinic of $7,494,828, the reversal of the provision raised against the loan on sale of the Endoscopy clinic of $472,368,~~property, offset by the ~~compensation charge~~swing in derivative liability movements of ~~$373,274 relating~~$3,901,273 during the comparative period.
35
Contingency related to outstanding payroll tax liabilities
The Company also has not filed certain foreign assets forms due to the ~~acquisition~~US Federal Government. A provision of ~~Cranberry Cove, and the amortization of $442,377 of debt discount during the current period.~~
$250,000 was made for any potential penalties due.

Liquidity and Capital Resources
~~The following table summarizes working capital as~~
Cash used in operating activities of $2,521,914 and $1,166,143 for the nine months ended September 30, ~~2017~~2019 and ~~December 31, 2016.~~2018, respectively increased by $1,355,771 or 116.3%. The increase is primarily due to the following:

Current Assets $ 1,017,952 $ 275,575 $ 742,377
Current Liabilities (2,894,992 ) (3,637,111 ) 742,119
Working capital Deficit $ (1,877,040 ) $ (3,361,536 ) $ 1,484,496
· the decrease in net loss of $1,428,699, discussed under operations above.
·
the movement in non-cash items decreased by $(3,241,378), primarily made up of;
· The increase in derivative liability movement of $(3,901,273) and;
· The increase in the movement of debt discount amortization of $724,134, offset by;
· The deferred rental liability movement of $259,299 and;
· The movement in on cash compensation for services rendered of $317,278.
· The net movement in working capital items of $(296,250).

~~The Company realized~~Cash provided by investing activities of $3,310,865 and utilized by investing activities of $1,174,119 for the nine months ended September 30, 2019 and 2018, respectively, an increase of $4,484,984. We sold the Delray condominiums in the current period realizing proceeds of ~~CDN$8,500,000 (US$6,479,400) from~~$3,318,141 and in the ~~disposal~~prior period we paid deposits on real estate of ~~its Canadian Rehab Clinic in February 2017. These proceeds were~~$1,132,509, whilst attempting to close the purchase of 5400 East Avenue, West Palm Beach, Florida.
Cash used ~~to settle outstanding tax liabilities~~by financing activities was $978,429 and generated by financing activities was $2,479,879 for the nine months ended September 30, 2019, a decrease of ~~CDN$3,429,105 (US$2,621,208) and to purchase~~$3,458,308. We repaid the ~~propertyand assets~~mortgage bond associated with the ~~Seastone of Delray operations on February 14, 2017 amounting to US$2,960,000, the remaining funds were used for working capital purposes~~condominiums we sold and ~~to fund the restructuring transactions.~~
~~The Company borrowed an additional $294,500 in terms of~~raised a net $1,788,689 from convertible ~~short-term~~ notes, ~~during the period January to September 2017, of which $130,000 was paid~~promissory notes and related parties during the current period. ~~A further $111,554 was realized on the sale of portion of the mortgage owned by the Holding Company on the Cranberry Cove properties. The Company~~We raised a ~~new mortgage on~~net $2,544,000 in the ~~Cranberry Cover properties of CDN $5,500,000 ($4,367,000), the proceeds which were used to repay the existing first and second mortgage of $3,327,144, the redemption of $144,958 of the~~prior period from convertible notes and ~~the balance for~~related parties to fund working capital ~~purposes. We~~purposes
Over the next twelve months we estimate that the ~~Company~~company will require ~~an additional $1,000,000 for~~approximately $2.5 million in working capital ~~purposes. The Company will also need~~as it continues to ~~raise additional funding to meet the minimum deposit requirements and to acquire certain buildings in~~develop its West Palm Beach ~~Florida, disclosed under~~facility and it is also exploring several other treatment center options and sources of patients throughout the ~~subsequent events note in the notes~~country. The company may have to ~~the unaudited condensed consolidated financial statements above.~~raise equity or secure debt. 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.~~medium.

We have assigned the ownership of our property at 810 Andrews Avenue, Delray Beach, Florida, valued at $1,500,000 to a convertible note holder as partial settlement of the amount owing and intend raising funds from certain investors to settle the remaining balance and other convertible notes as they fall due, we may not be successful in our fund raising attempts.
Recently Issued Accounting Pronouncements

The recent Accounting Pronouncements are fully disclosed in note 2 to our unaudited condensed consolidated financial statements.

Management does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have an effect on the accompanying unaudited condensed consolidated financial statements.

36
Off balance sheet arrangements

We do not maintain off-balance sheet arrangements nor do we participate in non-exchange traded contracts requiring fair value accounting treatment.

Inflation

The effect of inflation on our revenue and operating results was not significant.

Climate Change
We believe that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.
36

Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.

Item 4. Controls and Procedures.
Disclosure Controls and Procedures
The Company has adopted and maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission. The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. As required under Exchange Act Rule 13a-15, the Company’s management, including the Principal Executive Officer and the Principal Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that due to a lack of segregation of duties the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Subject to receipt of additional financing or revenue generated from operations, the Company intends to retain additional individuals to remedy the ineffective controls.

Changes in Internal Control
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our fiscal quarter ended September 30, ~~2017~~2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
37

PART II

Item 1. Legal Proceedings.

WeA former employee has filed suit against the Company asserting wrongful dismissal, claiming damages between CDN$43,500 and CDN$50,000 this matter was settled for CDN$14,070, including applicable legal fees, the settlement remains unpaid as the plaintiff has not signed the minutes of settlement.
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 1A. Risk Factors.

Not applicable because we are a smaller reporting company.

Item 2. Unregistered sales of equity securities and use of proceeds

~~In the securities transactions described below,~~No shares were issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as amended, afforded the Company under Section 4(a)(2) promulgated thereunder due to the fact that the issuance 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 Company issued 1,200,000 returnable shares to a note holder as a commitment fee should the note not be repaid prior to maturity. These shares are not recorded as issued until such time as the commitment fee is probable or likely to occur. The note was repaid on May 26, 2017 and the shares were returned to the Company.
~~On February 14, 2017, the Company issued 60,000,000 shares to Leon Developments as purchase consideration for the acquisition of its wholly owned subsidiary Cranberry Cove Holdings Ltd.~~
~~On May 30, 2017, the Company issued 100,000 common shares to a vendor for services rendered.~~
~~During July 2017, the Company issued 12,500,375 shares of common stock on the conversion of $375,011 of convertible debt.~~

Item 3. Defaults upon senior securities
None.

Item 4. Mine Safety Disclosures.
None.

Item 5. Other Information.

Not applicable.
38
Item 6. Exhibits

Exhibit No.
Description

31.1 Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002 *
32.1 Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002*

101.INS XBRL Instance *

101.SCH XBRL Taxonomy Extension Schema * 101.CAL XBRL Taxonomy Extension Calculation * 101.DEF Taxonomy Extension Definition * 101.LAB Taxonomy Extension Labels *
~~101.~~ PRE Taxonomy Extension Presentation *
101. PRE Taxonomy Extension Presentation *

* filed herewith

39
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ETHEMA HEALTH CORPORATION

Date: November ~~20, 2017~~19, 2019
By:/s/ Shawn E. Leon
Name: Shawn E. Leon
Title: Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name Position Date

/s/Shawn E. Leon Chief Executive Officer (Principal Executive Officer),
November ~~20, 2017~~
19, 2019
Shawn Leon Chief Financial Officer (Principal Financial Officer), President and Director
/s/ John O’Bireck Director November ~~20, 2017~~19, 2019
John O’Bireck

/s/ Gerald T. Miller Director November ~~20, 2017~~19, 2019
Gerald T. Miller
40

Colorado		84-1227328
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer Identification No.)

810 Andrews Avenue Delray Beach, Florida		33483
Address of Principal Executive Offices		Zip Code

Large accelerated filer ~~[ ]~~☐	Accelerated filer	~~[ ]~~ ☐
Non-accelerated filer ~~[ ](Do not check if a smaller reporting company)~~☒	Smaller reporting company	~~[X]~~ ☒
	Emerging growth company	~~[X]~~ ☒

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common shares		GRST		Nasdaq

	~~ETHEMA HEALTH CORPORATION~~	Page
~~(formerly Greenstone Healthcare Corporation)~~ ~~NINE MONTHS ENDED SEPTEMBER 30, 2017~~ ~~TABLE OF CONTENTS~~	~~Page~~
PART I.	I - FINANCIAL INFORMATION
Item 1.l.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of September 30, 2019 (Unaudited) and December 31, 2018	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018	2
	Unaudited Condensed Consolidated Statements of Stockholder's Deficit for the three months ended March 31, June 30, and September 30, 2019 and 2018	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018	5
	Notes to the Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3132
Item 3.	Quantitative and Qualitative ~~Disclosure about~~Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

	PART ~~II.~~	II - OTHER INFORMATION
Item 11.	Legal Proceedings	38
Item 1A.	Risk ~~factors~~Factors	38
Item 22.	Unregistered ~~sale~~Sales of ~~equity securities~~Equity Securities and ~~use~~Use of ~~proceeds~~Proceeds	38
Item 33.	Defaults ~~upon senior securities~~Upon Senior Securities	38
Item 44.	Mine Safety Disclosures	38
Item 55.	Other Information	38
Item 66.	Exhibits	3938
SIGNATURES		4039

	~~Page~~
~~Condensed Consolidated Balance Sheets as of September 30, 2017 (unaudited) and December 31, 2016~~		2
~~Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017~~
~~and 2016.~~		3
~~Unaudited Condensed Consolidated Statements of changes in Stockholders Deficit.~~		4
~~Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016~~		5
~~Notes to the unaudited Condensed Consolidated Financial Statements~~		7

	September 30, 2017		December 31, 2016
	(Unaudited)
ASSETS

Current assets
Cash	$	12,623	$	4,779
Accounts receivable		974,849		—
Prepaid expenses		14,724		2,710
Discontinued operations		—		183,219
Related party Receivables		15,756		84,867
Total current assets		1,017,952		275,575
Non-current assets
Investment		—		110,000
Due on sale of subsidiary		1,371,512		—
Property, plant and equipment		12,189,984		—
Intangibles		1,438,525		—
Cash - Restricted		—		74,480
Total non-current assets		15,000,021		184,480
Total assets	$	16,017,973	$	460,055

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities
Bank overdraft	$	11	$	56,116
Accounts payable and accrued liabilities		379,972		374,317
Taxes payable		404,795		2,798,824
Convertible loans		46,510		250,258
Loans payable		158,534		—
Derivative liability		148,297		—
Related party payables		1,756,873		157,596
Total current liabilities		2,894,992		3,637,111
Non-current liabilities
Loan payable		7,232,870		—
Total liabilities		10,127,862		3,637,111

Stockholders' equity (deficit)
Preferred stock - Series A; $0.01 par value, 3,000,000 authorized, nil outstanding as of September 30, 2017 and December 31, 2016.		—			—
Preferred Stock - Series B; $0.01 par value, 10,000,000 authorized, nil outstanding as of September 30, 2017 and December 31, 2016.		—			—
Common stock; $0.01 par value, 500,000,000 shares authorized; 121,339,230 and 48,738,855 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively.		1,213,393			487,389
Additional paid-in capital		18,417,913			16,509,906
Accumulated other comprehensive income		1,048,794			807,563
Accumulated deficit		(14,789,989	)		(20,981,914	)
Total stockholders' equity (deficit)		5,890,111			(3,177,056	)
Total liabilities and stockholders' equity (deficit)	$	16,017,973		$	460,055

	September 30, 2019			December 31, 2018
	(unaudited)
ASSETS

Current assets
Cash	$	748		$	24,674
Accounts receivable, net		164,148			202,654
Prepaid expenses and other current assets		200,891			147,870
Related party receivables		34,761			32,650
Total current assets		400,548			407,848
Non-current assets
Deposit on real estate		2,924,955			2,940,546
Due on sale of business		75,512			372,366
Property, plant and equipment		4,866,905			8,948,349
Right of use assets		15,200,632			—
Total non-current assets		23,068,004			12,261,261
Total assets	$	23,468,552		$	12,669,109

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities
Bank overdraft	$	28,062		$	—
Accounts payable and accrued liabilities		2,160,888			1,092,882
Taxes payable		771,632			775,392
Convertible notes		5,430,710			4,403,473
Promissory notes		155,493			—
Mortgage loans, current portion		110,569			172,276
Operating lease liability, current portion		889,385			—
Derivative liability		2,673,079			4,618,080
Related party payables		2,007,408			2,615,613
Total current liabilities		14,227,226			13,677,716
Non-current liabilities
Third party loan		797,568			—
Mortgage loans, net of current portion		3,833,304			6,707,346
Operating lease liability, net of current portion		14,570,545			—
Total non-current liabilities		19,201,417			6,707,346
Total liabilities		33,428,643			20,385,062

Stockholders’ deficit
Preferred stock - Series A; $0.01 par value, 3,000,000 authorized, nil outstanding as of September 30, 2019 and December 31, 2018.		—			—
Preferred Stock - Series B; $0.01 par value, 10,000,000 authorized, nil outstanding as of September 30, 2019 and December 31, 2018.		—			—
Common stock; $0.01 par value, 900,000,000 shares authorized; 143,856,868 and 124,300,341 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively.		1,438,570			1,243,004
Additional paid-in capital		23,552,314			20,939,676
Accumulated other comprehensive income		691,131			630,411
Accumulated deficit		(35,642,106	)		(30,529,044	)
Total stockholders’ deficit		(9,960,091	)		(7,715,953	)
Total liabilities and stockholders’ deficit	$	23,468,552		$	12,669,109

	Three months ended September 30, 2017			Three Months ended September 30, 2016			Nine months ended September 30, 2017			Nine Months ended September 30, 2016

Revenues	$	648,298		$	—		$	1,373,028		$	—

Operating expenses
General and administrative		170,491			55,124			578,931			165,319
Professional fees		53,830			47,135			453,034			122,180
Salaries and wages		200,863			89,934			583,559			110,934
Depreciation and amortization		131,784			—			314,190			—
Total operating expenses		556,968			192,193			1,929,714			398,433

Operating income (loss)		91,330			(192,193	)		(556,686	)		(398,433	)

Other Income (expense)
Other income		67,596			60,000			635,904			72,507
Other expense		—			(12,250	)		(392,538	)		(12,250	)
Interest income		—			—			32,074			—
Interest expense		(86,371	)		(8,598	)		(242,992	)		(15,701	)
Debt discount		(13,052	)		(39,988	)		(442,377	)		(73,250	)
Derivative liability movement		(19,329	)		—			75,203			—
Foreign exchange movements		53,294			11,099			(111,052	)		13,833
Net income (loss) before taxation from continuing operations		93,468			(181,930	)		(1,002,464	)		(413,294	)
Taxation		—			—			—			—
Net income (loss) from continuing operations		93,468			(181,930	)		(1,002,464	)		(413,294	)

Gain on disposal of business		—			—			7,494,828			—
Operating (loss) income from discontinued operations, net of tax		(218,253	)		318,901			(300,439	)		762,680
Net (loss) income from discontinued operations, net of tax		(218,253	)		318,901			7,194,389			762,680
Net (loss) income		(124,785	)		136,971			6,191,925			349,386
Accumulated other comprehensive income (loss)
Foreign currency translation adjustment		277,923			24,805			241,231			(190,471	)

Total comprehensive income	$	153,138		$	161,776		$	6,433,156		$	158,915


Basic loss per common share from continuing operations	$	—	$	—	$	(0.01	)	$	(0.01	)
Basic income per share from discontinued operations	$	—	$	—	$	0.07		$	0.02
Basic income per common share	$	—	$	—	$	0.06		$	0.01
Diluted loss per common share from continuing operations	$	—	$	—	$	(0.01	)	$	(0.01	)
Diluted income per share from discontinued operations	$	—	$	—	$	0.06		$	0.02
Diluted income per common share	$	—	$	—	$	0.05		$	0.01
Weighted average common shares outstanding - Basic		119,407,668		48,738,855		102,455,451			48,158,563
Weighted average common shares outstanding - Diluted		119,407,668		49,005,555		117,312,150			48,425,263

	Amount

Proceeds received	$	3,500,485
Less: closing costs		(182,344	)
Net proceeds received		3,318,141

Assets sold:
Land		1,877,618
Buildings thereon		2,060,219
Furniture and fixtures		72,792
		4,010,629

Loss on disposal	$	692,488

	September 30, 2017							December 31, 2016
	Cost		Amortization and Impairment			Net book value		Net book value

Property	$	12,432,237	$	(307,253	)	$	12,124,984	$	—
Furniture and fixtures		80,000		(15,000	)		65,000		—

	$	12,512,237	$	(322,253	)	$	12,189,984	$	—

	September 30, 2019

Non-current assets
Right of use assets, operating leases, net of amortization	$	15,200,632

	Nine months ended September 30, 2019

Operating lease expense	$	1,602,936

	Amount

Remainder of 2019	$	458,965
2020		1,882,422
2021		1,962,242
2022		2,042,062
2023 and thereafter		12,436,420
Total undiscounted minimum future lease payments		18,782,111
Deferred rental liability on straight line amortization		259,299
Imputed interest		(3,581,480	)
Total operating lease liability	$	15,459,930

Disclosed as:
Current portion	$	889,385
Non-current portion		14,570,545
	$	15,459,930

	September 30, 2019		December 31, 2018

Payroll taxes	$	137,876	$	133,843
HST/GST payable		15,184		33,757
US penalties due		250,000		250,000
Income tax payable		368,572		357,792

	$	771,632	$	775,392

	Interest rate	Maturity date	Principal Outstanding	Accrued interest	Unamortized Discount	September 30, 2017	December 31, 2016

Labrys Fund, LP	8.0%	August 2, 2017	$ -	$ -	$ -	$ -	$ -

Power Up Lending Group LTD.	12.0%	March 20, 2018	$ 113,500	$ 3,844	$ (70,834)	$ 46,510	$ -

Series L Convertible notes	0.0%	June 30, 2017 to July 17, 2017	-	-	-	-	250,258
			$ 113,500	$ 3,844	$ (70,834)	$ 46,510	$ 250,258
Disclosed as follows:
Short-term portion						$ 46,510	$ 250,258
Long-term portion						-	-
						$ 46,510	$ 250,258

	Interest rate			Maturity date	Principal		Interest		Debt Discount			September 30, 2019		December 31, 2018

Leonite Capital LLC		11.0	%	December 31, 2019	$	2,212,731	$	66,265	$	—		$	2,278,996	$	2,494,180
		1.0	%	September 10, 2019		60,000		58		—			60,058		—

Power Up Lending Group Ltd		9.0	%	May 15,2019		—		—		—			—		94,595
		9.0	%	September 10, 2019		—		—		—			—		44,484
		9.0	%	November 15, 2019		18,000		6,239		(3,260	)		20,979		—
		9.0	%	April 30, 2020		53,000		1,098		(38,010	)		16,088		—
		9.0	%	April 30, 2020		83,000		1,576		(60,962	)		23,614		—

First Fire Global Opportunities Fund		12.0	%	December 9, 2019		193,500		5,709		(45,991	)		153,218		—

Actus Fund, LLC		10.0	%	May 7, 2020		225,000		3,375		(180,657	)		47,718		—

Labrys Fund, LP		12.0	%	January 8, 2020		282,000		7,788		(153,261	)		136,527		—

Series N convertible notes		6.0	%	May 17, 2019 to September 16, 2020		3,229,000		182,230		(717,718	)		2,693,512		1,770,214

												$	5,430,710	$	4,403,473

			~~Nine months ended September 30, 2017~~

~~Calculated stock price~~			~~$0.03 to $0.06~~
~~Risk free interest rate~~			~~0.64% to 1.31%~~
~~Expected life of convertible notes~~			~~3 to 9 months~~
~~expected volatility of underlying stock~~			~~134.9% to 198.48%~~
~~Expected dividend rate~~			0%

			~~Nine months ended September 30, 2017~~

~~Opening balance~~			~~$ -~~
~~Derivative liability arising from convertible notes~~			~~223,500~~
~~Fair value adjustment to derivative liability~~			~~(75,203)~~
			~~$ 148,297~~

	Interest rate			Maturity date	Principal Outstanding		Accrued interest		September 30, 2019		December 31, 2018

Cranberry Cove Holdings, Ltd.
Pace Mortgage		4.2	%	July 19, 2022	$	3,938,887	$	4,986	$	3,943,873	$	3,924,836
ARIA
Mortgage		5.0	%	February 13, 2020		-		-		-		2,954,786
					$	3,938,887	$	4,986	$	3,943,873	$	6,879,622
Disclosed as follows:
Short-term portion									$	110,569	$	172,276
Long-term portion										3,833,304		6,707,346
									$	3,943,873	$	6,879,622

											Amount

2017											$ 38,438
2018											134,673
2019											140,707
2020											3,032,025
2021											116,262
Thereafter											3,929,299
Total											$ 7,391,404

	Amount
Within one year	$	110,569
One to two years		110,064
Two to three years		3,723,240
Total	$	3,943,873

			Nine months ended September 30, ~~2017~~ 2019

Calculated stock price	$0.05 to $0.09	~~$0.04~~
Risk free interest rate	1.43% to 2.56%	~~1.48%~~
Expected life of convertible notes and warrants ~~(years)~~	3 to 60 months	~~3 years~~
expected volatility of underlying stock	102.3% to 206.8%	~~398%~~
Expected dividend rate	0	0%%

	No. of shares	Exercise price per share	Weighted average exercise price

Outstanding January 1, 2016	6,300,000	$ 0.0033 to $0.03	$ 0.14
Granted	19,337,409	0.03	0.0300
Forfeited/cancelled	(6,000,000)	0.15	0.1500
Exercised	-	-	-
Outstanding December 31, 2016	19,637,409	$ 0.0033 to $0.03	0.0300
Granted	2,366,666	0.03	0.0300
Forfeited/cancelled	-	-	-
Exercised	-	-	-
Outstanding September 30, 2017	22,004,075	$ 0.033 to $0.03	$ 0.0300

	September 30, 2019			December 31, 2018

Opening balance (January 1)	$	4,618,080		$	2,859,832
Derivative liability on issued convertible notes and variable priced warrants		1,185,272			1,335,709
Fair value adjustments to derivative liability		(3,130,273	)		422,539

Closing balance	$	2,673,079		$	4,618,080

	No. of shares			Exercise price per share		Weighted average exercise price

Outstanding January 1, 2018		49,504,075			$0.0033 to $.0.10	$	0.0690
Granted		48,295,833			$0.10 to $0.12		0.1130
Forfeited/cancelled		—			—		—
Exercised		—			—		—
Outstanding December 31, 2018		97,799,908			$0.03 to $0.12	$	0.0910
Granted		23,110,183			$0.10 to $0.12		0.1177
Forfeited/cancelled		(300,000	)		$0.0033		(0.0033	)
Exercised		—			—		—
Outstanding September 30, 2019		120,610,091			$0.03 to $0.12	$	0.0960

	Warrants outstanding			Warrants exercisable		Warrants outstanding						Warrants exercisable
Exercise price	No. of shares	Weighted average remaining years	Weighted average exercise price	No. of shares	Weighted average exercise price	No. of shares		Weighted average remaining years		Weighted average exercise price		No. of shares		Weighted average exercise price

$0.0033	300,000	*		300,000
$0.03	21,704,075	2.44		21,704,075			21,704,075		0.47				21,704,075
$0.09							1,000,000		4.91				1,000,000
$0.10							45,668,516		3.35				45,668,516
$0.12							52,237,500		2.09				52,237,500

	22,004,075	2.44	$ 0.03	22,004,075	$ 0.03		120,610,091		2.32	$	0.0960		120,610,091	$	0.0960

	Options outstanding						Options exercisable
Exercise price	No. of shares		Weighted average remaining years		Weighted average exercise price		No. of shares		Weighted average exercise price

$0.12		480,000		0.08				480,000

		480,000		0.08	$	0.12		480,000	$	0.12

	Three months ended September 30, 2017
	Rental Operations	In-Patient services	Total

Revenue	$ 83,837	$ 564,461	$ 648,298
Operating expenditure	158,808	398,160	556,968

Operating (loss) income	(74,971)	166,301	91,330

Other (expense) income
Other income	-	67,596	67,596
Interest expense	(38,714)	(47,657)	(86,371)
Amortization of debt discount	-	(13,052)	(13,052)
Loss on change in fair value of derivative liability	-	(19,329)	(19,329)
Foreign exchange movements	(18,320)	71,614	53,294
Net loss before taxation from continuing operations	(132,005)	225,473	93,468
Taxation	-	-	-
Net loss from continuing operations	$ (132,005)	$ 225,473	$ 93,468

	Nine months ended September 30, 2017			Three months ended September 30, 2019
	Rental Operations	In-Patient services	Total	Rental Operations			In-Patient services			Total

Revenue	$ 203,962	$ 1,169,066	$ 1,373,028	$	83,542		$	64,500		$	148,042
Operating expenditure	294,673	1,635,041	1,929,714
Operating expenses					32,125			1,126,348			1,158,473

Operating loss	(90,711)	(465,975)	(556,686)
Operating income (loss)					51,417			(1,061,848	)		(1,010,431	)

Other (expense) income
Other income	-	635,904	635,904		—			6,600			6,600
Other expense	(373,274)	(19,264)	(392,538)		—			(11,729	)		(11,729	)
Interest income	-	32,074	32,074		—			51			51
Interest expense	(136,902)	(106,090)	(242,992)		(83,840	)		(215,182	)		(299,022	)
Amortization of debt discount	-	(442,377)	(442,377)		—			(974,084	)		(974,084	)
Loss on change in fair value of derivative liability	-	75,203	75,203		—			1,875,402			1,875,402
Foreign exchange movements	(18,320)	(92,732)	(111,052)		19,828			40,155			59,983
Net loss before taxation from continuing operations	(619,207)	(383,257)	(1,002,464)
Net loss before taxation					(12,595	)		(340,635	)		(353,230	)
Taxation	-	-	-		—			—			—
Net loss from continuing operations	$ (619,207)	$ (383,257)	$ (1,002,464)
Net loss from operations				$	(12,595	)	$	(340,635	)	$	(353,230	)

	Three months ended September 30, 2018
	Rental Operations			In-Patient services			Total

Revenue	$	83,031		$	187,339		$	270,370
Operating expenditure		45,102			1,152,570			1,197,672

Operating income (loss)		37,929			(965,231	)		(927,302	)

Other (expense) income
Other income		—			6,009			6,009
Interest income		—			5,334			5,334
Interest expense		(42,845	)		(182,360	)		(225,205	)
Amortization of debt discount		—			(1,195,638	)		(1,195,638	)
Derivative liability movements		—			37,951			37,951
Foreign exchange movements		(15,244	)		(80,048	)		(95,292	)
Net loss before taxation		(20,160	)		(2,373,983	)		(2,394,143	)
Taxation		—			—			—
Net loss from operations	$	(20,160	)	$	(2,373,983	)	$	(2,394,143	)

	Nine months ended September 30, 2019
	Rental Operations			In-Patient services			Total

Revenue	$	248,019		$	80,225		$	328,244
Operating expenses		106,393			4,021,917			4,128,310

Operating income (loss)		141,626			(3,941,692	)		(3,800,066	)

Other (expense) income
Other income		—			6,600			6,600
Other expense		—			(11,729	)		(11,729	)
Interest income		—			15,313			15,313
Loss on disposal of property		—			(692,488	)		(692,488	)
Bonus shares issued to investors		—			(143,500	)		(143,500	)
Interest expense		(165,614	)		(675,546	)		(841,160	)
Amortization of debt discount		—			(2,564,338	)		(2,564,338	)
Loss on change in fair value of derivative liability		—			3,130,273			3,130,273
Foreign exchange movements		(25,752	)		(186,215	)		(211,967	)
Net loss before taxation		(49,740	)		(5,063,322	)		(5,113,062	)
Taxation		—			—			—
Net loss from operations	$	(49,740	)	$	(5,063,322	)	$	(5,113,062	)

	Nine months ended September 30, 2018
	Rental Operations			In-Patient services			Total

Revenue	$	250,174		$	200,192		$	450,366
Operating expenditure		121,606			2,403,381			2,524,987

Operating income (loss)		128,568			(2,203,189	)		(2,074,621	)

Other (expense) income
Other income		—			6,009			6,009
Interest income		—			5,334			5,334
Interest expense		(135,740	)		(436,503	)		(572,243	)
Amortization of debt discount		—			(3,288,472	)		(3,288,472	)
Derivative liability movement		—			(771,000	)		(771,000	)
Foreign exchange movements		32,311			120,921			153,232
Net income (loss) before taxation		25,139			(6,566,900	)		(6,541,761	)
Taxation		—			—			—
Net income (loss) from operations	$	25,139		$	(6,566,900	)	$	(6,541,761	)

	September 30, 2019
	Rental Operations			In-Patient services			Total

Purchase of fixed assets		—			22,868			22,868
Assets
Current assets		3,480			397,068			400,548
Non-current assets		2,852,070			20,215,934			23,068,004
Liabilities
Current liabilities		(1,306,190	)		(12,921,036	)		(14,227,226	)
Non-current liabilities		(4,741,441	)		(14,459,976	)		(19,201,417	)
Intercompany balances		765,246			(765,246	)		—
Net liability position		(2,426,835	)		(7,533,256	)		(9,960,091	)