ETHEMA HEALTH CORPORATIONUNITED STATES
(formerly Greenstone Healthcare Corporation)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-Q
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:ended March 31, 2021
September 30, 2017or
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Periodtransition period from _______________ to _______________
Commission File Number: 000-15078Number 000-54748
ETHEMA HEALTH CORPORATIONCORPORATION.
(Exact nameName of registrantRegistrant as specifiedSpecified in its charter)Charter)
Colorado | 84-1227328 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer Identification No.) | |
1590 S. Congress Avenue West Palm Beach, Florida | 33406 | |
Address of Principal Executive Offices | Zip Code |
(561) 290-0239
Registrant’s Telephone Number, Including Area Code
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 officesFormer Name, Former Address and zip code)
(416) 222-5501
(Registrant’s telephone number, including area code)
Former Fiscal Year, if Changed Since Last Report
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by sectionSection 13 or 15(d) of the Securities Exchange Act of 1934 during the pastpreceding 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.
Large accelerated filer | Accelerated filer | |
Non-accelerated filer | Smaller reporting company | |
Emerging growth company |
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 121,339,230the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common shares | GRST | OTC Pink |
Indicate the number of shares outstanding of each of the registrant’sissuer’s classes of common stock.stock, as of the latest practicable date: Number of shares of common stock outstanding as of May 24, 2021 was ****.
ETHEMA HEALTH CORPORATION
NOTE REGARDING FORWARD-LOOKING STATEMENTS
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,“may,” “will,“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 “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 for the year ended December 31, 20162020 filed with the SEC on April 17, 2017.15, 2021. 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.
NOTE REGARDING COMPANY REFERENCES
Throughout this Quarterly Report on Form 10-Q, “Ethema,” the “Company,” “we,” “us” and “our” refer to Ethema HealthcareHealth Corporation.
FORM 10-Q ETHEMA HEALTH CORPORATION | |||
TABLE OF CONTENTS | |||
Page | |||
PART | I - FINANCIAL INFORMATION | ||
Item | Financial Statements | 1 | |
Condensed Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020 | 1 | ||
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2021 and 2020 | 2 | ||
Unaudited Condensed Consolidated Statements of Stockholder's Deficit for the three months ended March 31, 2021 and 2020 | 3 | ||
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 | 4 | ||
Notes to the Unaudited Condensed Consolidated Financial Statements | 5 | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||
Item 3. | Quantitative and Qualitative | ||
Item 4. | Controls and Procedures | ||
PART | II - OTHER INFORMATION | ||
Item | Legal Proceedings | ||
Item 1A. | Risk | ||
Item | Unregistered | ||
Item | Defaults | ||
Item | Mine Safety Disclosures | ||
Item | Other Information | ||
Item | Exhibits | ||
SIGNATURES |
ETHEMA HEALTH CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31, 2021 | December 31, 2020 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | 35,230 | $ | 90,500 | ||||
Accounts receivable, net | 3,113 | 3,075 | ||||||
Prepaid expenses | 1,040 | 19,190 | ||||||
Other current assets | 135,467 | 131,938 | ||||||
Other investments | 1,026,669 | 690,449 | ||||||
Total current assets | 1,201,519 | 935,152 | ||||||
Non-current assets | ||||||||
Due on sale of subsidiary | 5,157 | 5,094 | ||||||
Property and equipment | 2,885,861 | 2,882,220 | ||||||
Total non-current assets | 2,891,018 | 2,887,314 | ||||||
Total assets | $ | 4,092,537 | $ | 3,822,466 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 798,948 | $ | 833,615 | ||||
Taxes payable | 870,843 | 850,277 | ||||||
Convertible loans, net of discounts | 4,579,133 | 4,200,217 | ||||||
Short term loans | 118,382 | 115,375 | ||||||
Mortgage loans | 118,538 | 115,704 | ||||||
Government assistance loans | 156,782 | 156,782 | ||||||
Derivative liability | 4,379,372 | 4,765,387 | ||||||
Accrued dividends | 36,377 | 15,594 | ||||||
Related party payables | 2,815,450 | 2,811,849 | ||||||
Total current liabilities | 13,873,825 | 13,864,800 | ||||||
Non-current liabilities | ||||||||
Government assistance loans | 47,714 | 31,417 | ||||||
Third party loans | 731,629 | 704,271 | ||||||
Mortgage loans, net of current portion | 3,865,866 | 3,848,077 | ||||||
Total non-current liabilities | 4,645,209 | 4,583,765 | ||||||
Total liabilities | 18,519,034 | 18,448,565 | ||||||
Preferred stock - Series B; $0.0001 par value, 10,000,000 authorized, 400,000 outstanding as of March 31, 2021 and December 31, 2020, respectively. | 400,000 | 400,000 | ||||||
Stockholders’ deficit | ||||||||
Preferred stock - Series A; $0.01 par value, 10,000,000 authorized, 4,000,000 outstanding at March 31, 2021 and December 31, 2020, respectively | 40,000 | 40,000 | ||||||
Common stock - $0.01 par value, 10,000,000,000 shares authorized; 2,262,849,130 and 2,207,085,665 shares issued and outstanding as of March 31, 2021 and December 31, 2020. | 22,628,492 | 20,270,857 | ||||||
Additional paid-in capital | 24,649,099 | 23,344,885 | ||||||
Discount for shares issued below par value | (18,821,629 | ) | (17,728,779 | ) | ||||
Accumulated other comprehensive income | 836,325 | 806,719 | ||||||
Accumulated deficit | (44,858,784 | ) | (42,459,781 | ) | ||||
Total stockholders’ deficit | (15,526,497 | ) | (15,726,099 | ) | ||||
Minority shareholders interest | 700,000 | 700,000 | ||||||
Total stockholders’ deficit | (14,826,497 | ) | (15,026,099 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 4,092,537 | $ | 3,822,466 |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
1
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
PART I
Three months ended March 31, 2021 | Three months ended March 31, 2020 | |||||||
Revenues | $ | 90,793 | $ | 83,542 | ||||
Operating expenses | ||||||||
General and administrative | 5,503 | 22,536 | ||||||
Rental expense | 1,500 | 1,000 | ||||||
Professional fees | 36 | 108,021 | ||||||
Salaries and wages | 12,852 | 12,351 | ||||||
Depreciation | 32,125 | 30,241 | ||||||
Total operating expenses | 52,016 | 174,149 | ||||||
Operating income (loss) | 38,777 | (90,607 | ) | |||||
Other Income (expense) | ||||||||
Loss on conversion of convertible debentures | (1,106,648 | ) | (286,343 | ) | ||||
Penalty on convertible notes | (9,240 | ) | — | |||||
Fair value of warrants granted to convertible debt holders | (976,788 | ) | — | |||||
Exercise of warrants | (90,000 | ) | (92,952 | ) | ||||
Interest income | — | 60 | ||||||
Interest expense | (137,677 | ) | (193,922 | ) | ||||
Debt discount | (502,677 | ) | (403,677 | ) | ||||
Derivative liability movement | 495,589 | (9,754,896 | ) | |||||
Foreign exchange movements | (79,492 | ) | 484,051 | |||||
Net loss before taxation | (2,368,156 | ) | (10,338,286 | ) | ||||
Taxation | — | — | ||||||
Net loss | (2,368,156 | ) | (10,338,286 | ) | ||||
Preferred stock dividend | (30,847 | ) | — | |||||
Net loss available to ordinary shareholders | (2,399,003 | ) | (10,338,286 | ) | ||||
Accumulated other comprehensive income (loss) | ||||||||
Foreign currency translation adjustment | 29,606 | (185,813 | ) | |||||
Total comprehensive loss | $ | (2,369,397 | ) | $ | (14,865,276 | ) | ||
Basic and diluted loss per common share | $ | (0.00 | ) | $ | (0.01 | ) | ||
Weighted average common shares outstanding – Basic and diluted | 2,143,692,378 | 956,540,071 |
Item 1. Financial Statements.
INDEX
(Expressed in US Dollars unless otherwise indicated)
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
CONDENSED CONSOLDATED BALANCE SHEETS
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 |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
2
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED STATEMENTS OF OPERATIONSSTOCKHOLDERS’ DEFICIT
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 |
Series A Preferred | Common | |||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Additional Paid in Capital | Discount to par value | Comprehensive Income | Accumulated Deficit | Minority shareholders interest | Total | |||||||||||||||||||||||||||||||
Balance as of December 31, 2020 | 4,000,000 | $ | 40,000 | 2,027,085,665 | $ | 20,270,857 | $ | 23,344,885 | $ | (17,728,779 | ) | $ | 806,719 | $ | (42,459,781 | ) | $ | 700,000 | $ | (15,026,099 | ) | |||||||||||||||||||
Fair value of warrants issued to convertible debt holders | — | — | — | — | 1,207,214 | — | — | — | — | 1,207,214 | ||||||||||||||||||||||||||||||
Warrants exercised | — | — | 59,999,999 | 600,000 | — | (510,000 | ) | — | — | — | 90,000 | |||||||||||||||||||||||||||||
Conversion of convertible notes | — | — | 175,763,466 | 1,757,635 | 97,000 | (582,850 | ) | — | — | — | 1,271,785 | |||||||||||||||||||||||||||||
Foreign currency translation | — | — | — | — | — | — | 29,606 | — | — | 29,606 | ||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (2,368,156 | ) | — | (2,368,156 | ) | |||||||||||||||||||||||||||||
Dividends accrued | — | — | — | — | — | — | — | (30,847 | ) | — | (30,847 | ) | ||||||||||||||||||||||||||||
Balance as of March 31, 2021 | 4,000,000 | $ | 40,000 | 2,262,849,130 | $ | 22,628,492 | $ | 24,649,099 | $ | (18,821,629 | ) | $ | 836,325 | $ | (44,858,784 | ) | 700,000 | $ | (14,826,497 | ) |
Series A Preferred | Common | |||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Additional Paid in Capital | Discount to par value | Comprehensive Income | Accumulated Deficit | Minority shareholders interest | Total | |||||||||||||||||||||||||||||||
Balance as of December 31, 2019 | — | $ | — | 155,483,897 | $ | 1,554,838 | $ | 23,188,527 | $ | — | $ | 727,976 | $ | (45,491,885 | ) | — | $ | (20,020,544 | ) | |||||||||||||||||||||
Warrants exercised | — | — | 103,000,000 | 1,030,000 | — | (937,048 | ) | — | — | — | 92,952 | |||||||||||||||||||||||||||||
Shares issued for commitment fees | — | — | 2,700,000 | 27,000 | 138,780 | — | — | — | — | 165,780 | ||||||||||||||||||||||||||||||
Conversion of convertible notes | — | — | 1,316,679,078 | 13,166,792 | — | (12,635,787 | ) | — | — | — | 531,005 | |||||||||||||||||||||||||||||
Foreign currency translation | — | — | — | — | — | — | (185,813 | ) | — | — | (185,813 | ) | ||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (10,338,286 | ) | — | (10,338,286 | ) | ||||||||||||||||||||||||||||
Balance as of March 31, 2020 | — | $ | — | 1,577,862,975 | $ | 15,778,630 | $ | 23,327,307 | $ | 13,572,835 | $ | 542,163 | $ | 55,830,171 | — | $ | (29,754,906 | ) |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
statement
3
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
UNAUDITED CONDENSED CONSOLDATED STATEMENTSCONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)CASH FLOWS
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 | ||||||||||||
Three months ended March 31, 2021 | Three months ended March 31, 2020 | |||||||
Operating activities | ||||||||
Net loss | $ | (2,368,156 | ) | $ | (10,338,286 | ) | ||
Adjustment to reconcile net loss to net cash (used in) operating activities: | ||||||||
Depreciation | 32,125 | 30,241 | ||||||
Exercise of warrants | 90,000 | 92,952 | ||||||
Fair value of warrants granted to convertible debt holders | 976,788 | — | ||||||
Loss on conversion of convertible debentures | 1,106,648 | 286,343 | ||||||
Stock based compensation for services | — | 165,780 | ||||||
Amortization of debt discount | 502,677 | 403,677 | ||||||
Derivative liability movements | (495,589 | ) | 9,754,896 | |||||
Non-cash interest accrual on escrow deposit | — | (23 | ) | |||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable | — | 49,007 | ||||||
Prepaid expenses and other current assets | 14,638 | 3,000 | ||||||
Accounts payable and accrued liabilities | 50,330 | 75,296 | ||||||
Taxes payable | 12,983 | 10,861 | ||||||
Net cash (used in) provided by operating activities | (77,556 | ) | 533,744 | |||||
Investing activities | ||||||||
Investment in promissory note | — | (15,537 | ) | |||||
Deposits refunded | — | 5,995 | ||||||
Other investments | (336,220 | ) | — | |||||
Net cash used in investing activities | (336,220 | ) | (9,542 | ) | ||||
Financing activities | ||||||||
Decrease in bank overdraft | — | (11,079 | ) | |||||
Repayment of mortgage | (28,631 | ) | (25,855 | ) | ||||
Proceeds from convertible notes | 340,000 | — | ||||||
Repayment of convertible notes | (35,000 | ) | — | |||||
Proceeds from government assistance loans | 15,797 | — | ||||||
Repayment of related party notes | (12,985 | ) | — | |||||
Proceeds from related party notes | — | 19,362 | ||||||
Net cash provided by (used in) financing activities | 279,181 | (17,572 | ) | |||||
Effect of exchange rate on cash | 79,325 | (507,665 | ) | |||||
Net change in cash | (55,270 | ) | (1,035 | ) | ||||
Beginning cash balance | 90,500 | 2,975 | ||||||
Ending cash balance | $ | 35,230 | $ | 1,940 | ||||
Supplemental cash flow information | ||||||||
Cash paid for interest | $ | 41,344 | $ | 41,504 | ||||
Cash paid for income taxes | $ | — | $ | — | ||||
Non-cash investing and financing activities | ||||||||
Conversion of debt to equity | $ | 165,137 | $ | 531,005 | ||||
Fair value of warrants issued | $ | 230,426 | $ | — |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
4
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 OF CASH FLOWS
Supplemental cash flow information | ||||||||
Cash paid for interest | $ | 253,256 | $ | 9,632 | ||||
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 | $ | — | ||||
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 CONSOLDATEDCONSOLIDATED 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 GreeneStoneGreenstone Healthcare Corporation from Nova Natural Resources Corporation. As of September 30,December 31, 2017, the Company owned 100% of the outstanding shares of GreeneStoneGreenstone 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. andCanada; 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 ClinicCompany previously operated a rehabilitation clinic (“the Canadian Rehab Clinic”) operates,. The Company entered into an asset purchase agreementAsset 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, andbuyer. Simultaneously with this transaction, the Company entered into a real estate purchaseReal Estate Purchase agreement and asset purchase agreementAsset 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, GreeneStoneGreenstone 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 remain in escrow for up to two years to cover indemnities given by the Company.10,000,000. 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.
On April 2, 2019, the Company disposed of the real property located at 801 Andrews Avenue, Delray Beach for gross proceeds of $3,500,000.
Since June 30, 2020, the Company has been actively involved in the operation of the treatment center operated by Evernia Health Center LLC (“Evernia”) at 950 Evernia Street, West Palm Beach Florida. The Company is under contract to purchase a majority interest in this company and has been financing the startup operations of this facility. This operation will be the Company’s only treatment center operating and expects the purchase of the majority interest to close in the second quarter of 2021.
5
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED FINANCIAL STATEMENTS
Financial Reporting
The accompanying(a) unaudited condensed consolidated balance sheets as of March 31, 2021, which have been derived from the unaudited condensed consolidated financial statements, and as of December 31, 2020, 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(“US 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 statementsthey do not include all of the information and disclosuresfootnotes required by accounting principles generally accepted in the United States of AmericaUS 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 presentedmonths ended March 31, 2021 are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The balance sheet atyear ending December 31, 2016 has been derived from audited consolidated financial statements. The2021. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotesnotes thereto included in the Company’s Form 10-K for the year ended December 31, 2016.2020, filed with the Securities and Exchange Commission (“SEC”) on April 15, 2021.
All amounts referred to in the notes to the unaudited condensed consolidated financial statements are in United States Dollars ($) unless stated otherwise.
a) | Use of Estimates |
The preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of AmericaUS GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
b) | Principals 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 whoseCertain of the Company’s subsidiaries functional currency wasis 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. |
● |
● | 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’ equitydeficit 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 ninethree months ended September 30, 2017;March 31, 2021, a closing rate of CDN$1.0000 equals US$0.7952 and an average exchange rate of CDN$1.0000 equals US$0.7899. For the three months ended March 31, 2020, a closing rate of CAD$1.0000 equals US$0.80130.7049 and an average exchange rate of CAD$1.0000 equals US$0.7984.
0.7435.
6
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
2. | 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.
Revenue Recognition |
ASC 606 requires companies to exercise more judgment and recognize revenue using a five-step process.
The Company’s provision for doubtful accounts are recorded as a direct reduction to revenue instead of being presented as a separate line item on the consolidated statements of operations and comprehensive loss.
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 two operating segmentsminimal 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 which it derives revenues, i) rental income from leasingthe 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 does not adjust for the effects of a rehabilitation facilitysignificant 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 third partiesinterpretation and ii) in-patient revenuesadjustment, and may include multiple reimbursement mechanisms for rehabilitationdifferent types of services provided in the Company’s inpatient facilities and cost settlement provisions. Management estimates the transaction price on a payor-specific basis given its interpretation of the applicable regulations or contract terms. The services authorized and provided and related reimbursement are often subject to customers. Revenue isinterpretation that could result in payments that differ from the Company’s estimates. Additionally, updated regulations and contract renegotiations occur frequently, necessitating regular review and assessment of the estimation process by management.
Settlements with third-party payors are estimated and recorded in the period in which the related services are rendered and are adjusted in future periods as final settlements are determined. In the opinion of management, adequate provision has been made for any adjustments and final settlements. However, there can be no assurance that any such adjustments and final settlements will not have a material effect on the Company’s financial condition or results of operations. The Company’s receivables were $3,113 and $3,075 for the three months ended March 31, 2021 and for the year ended December 31, 2020, respectively. Management believes that these receivables are properly stated and are not likely to be settled for a significantly different amount.
The Company’s revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company derives its revenues from the sale of its services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as follows:it fulfills its obligations under each of its revenue transactions:
i. |
In terms of the lease agreement, on a monthly basis as long as the facility is utilized by the tenant
ii. |
The customers 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.
In particular, the Company recognizes fees for inpatient addiction treatments proportionately over the term of the patient’s treatment.
Deferred revenue represents monies deposited by the patients for future services to be provided by the Company. Such monies will be recognized into revenue as the patient progresses through their treatment term.
In July 2017, the FASB issued Accounting Standards Update No. (“ASU’’) 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815). The amendments in this Update provide guidance about:
The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the 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 be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it 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 Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260).
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.
allocate the transaction price to performance obligations in the contract; and |
v. | recognize revenue as the performance obligation is satisfied. |
7
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED FINANCIAL STATEMENTS
2. | Summary of significant accounting policies (continued) |
2. Summary
d) | Cash and cash equivalents |
For purposes of Significant Accounting Policies (continued)the statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents. The Company maintains cash and cash equivalents with several financial institutions in the USA and Canada.
The Company primarily places cash balances in the USA with high-credit quality financial institutions located in the United States which are insured by the Federal Deposit Insurance Corporation up to a limit of $250,000 per institution, in Canada which are insured by the Canadian Deposit Insurance Corporation up to a limit of CDN$100,000 per institution.
e) |
Accounts receivable primarily consists of amounts due from third-party payors (non-governmental) and private pay patients and is recorded net of allowances for doubtful accounts and contractual discounts. The Company’s ability to collect outstanding receivables is critical to its results of operations and cash flows. Accordingly, accounts receivable reported in the Company’s consolidated financial statements is recorded at the net amount expected to be received. The Company’s primary collection risks are (i) the risk of overestimating net revenues at the time of billing that may result in the Company receiving less than the recorded receivable, (ii) the risk of non-payment as a result of commercial insurance companies denying claims, (iii) the risk that patients will fail to remit insurance payments to the Company when the commercial insurance company pays out-of-network claims directly to the patient, (iv) resource and capacity constraints that may prevent the Company from handling the volume of billing and collection issues in a timely manner, (v) the risk that patients do not pay the Company for their self-pay balances (including co-pays, deductibles and any portion of the claim not covered by insurance) and (vi) the risk of non-payment from uninsured patients.
f) | Allowance for Doubtful Accounts, Contractual and Other Discounts |
The amendmentsCompany 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 Part Ipayments 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 this Updateaccounts, 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 effectivewritten-off against the allowance. Recoveries of previously written-off balances are credited to income when the recoveries are made.
g) | Financial instruments |
The Company initially measures its financial assets and liabilities at fair value, except for fiscal years,certain non-arm’s length transactions. The Company subsequently measures all its financial assets and interim periods within those fiscal years, beginning after December 15, 2018. Early adoptionfinancial 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 permittedrecognized 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.
8
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. | Summary of significant accounting policies (continued) |
g) | 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 and Comprehensive Loss.
h) | Property and equipment |
Property and equipment is recorded at cost. Depreciation is calculated on the straight line basis over the estimated life of the asset:
i) | Leases |
The Company accounts for leases in terms of AC 842 whereby 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. Operating leases are recognized on the balance sheet as a lease liability with a corresponding right of use asset for all entities, including adoptionleases with a term that is more than twelve months. Payments under operating leases are expensed as incurred.
j) | Income taxes |
The 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 consolidated 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 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 interim period. If an entity early adoptsaudit, including resolution of any related appeals or litigation processes. The second step is to measure the amendments in an interim period, any adjustments shouldtax 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.
9
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. | Summary of significant accounting policies (continued) |
k) | 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 method, “in-the money” options and warrants are assumed to be exercised at the beginning of the fiscal year that includes that interimperiod (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. The amendments in Part 1 ofDilution is computed by applying the if-converted method for convertible preferred stocks. Under this Update shouldmethod, convertible preferred stock is assumed to be applied in either of the following ways: 1. Retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the statement of financial position as ofconverted at the beginning of the first fiscal yearperiod (or at the time of issuance, if later), and interim period(s)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).
l) | 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 which the pending content that linksconsolidated statements of operations is based on awards ultimately expected to this paragraph is effective 2. Retrospectively to outstanding financial instrumentsvest 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 a down round feature for each prior reporting period presented in accordance with the guidanceperformance conditions and no awards dependent on accounting changes in paragraphs 250-10-45-5 through 45-10.market conditions.
The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect.
m) | Derivatives |
The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature should be bifurcated from the host instrument and accounted for as a derivative 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 estimated volatility of the Company’s stock, risk free interest rate and the estimated life of the financial instruments being fair valued.
If the conversion feature does not require derivative treatment under ASC 815, the instrument is currently evaluating the impact this ASU will have on its consolidated financial statements.evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion feature.
In August 2017, the
10
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. | Summary of significant accounting policies (continued) |
n) | Recent accounting pronouncements |
The FASB issued ASU 2017-12, Derivatives and Hedging, an amendmentseveral additional updates during the period, none of these standards are either applicable 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 item 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,Company 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 the impact this ASU will have on its consolidated financial statements.
In September 2017, 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 the transition and effective dates of implementing 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 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 untilat a future date and none are not expected to have a material impact on the consolidated financial statements upon adoption.
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, 2017March 31, 2021 and December 31, 2016.2020.
i. | 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 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.
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$12,672,306, which includes derivative liabilities of $4,379,372, and an accumulated deficit $(14,789,989). As disclosed in note 6, theof $44,858,784. The Company will beis 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 that of 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.
a. | 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 $11convertible debt, mortgage loans, short term loans, third party loans and government assistance loans as of September 30, 2017. This liability is based on floating rates of interest that have been stable during the current reporting period.March 31, 2021. In the opinion of management, interest rate risk is assessed as low, not material and remains unchanged from the prior year.moderate.
b. | 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,March 31, 2021, a 5% depreciation or appreciation of the Canadian dollar against the U.S. dollar would result in an approximate $13,217$4,526 increase or decrease in the Company’s after tax net income from operations. The Company has not entered into any hedging agreements to mediatemitigate this risk. In the opinion of management, currency risk is assessed as low, material and remains unchanged from that of the prior year.
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
c. | 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.
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.
The Company evaluates and accounts 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 instrument with the same terms as 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 Meaning 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.
11
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED FINANCIAL STATEMENTS
3. |
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:
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
The allocation of the purchase price is as follows:
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
The assets acquired were as follows:
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 of September 30, 2017,at March 31, 2021 the Company has a working capital deficiency of $1,877,040$12,672,306, including derivative liabilities of $4,379,372 and accumulated deficit of $(14,789,989).$44,858,784. 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 unaudited condensed consolidated financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations.
The ability of the Company 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'sManagement’s plans include selling its equity securities and obtaining debt financing to fund its capital requirementrequirements and ongoing operations; however, there can be no assurance the Company will be successful in these efforts.
7. Discontinued OperationsThese factors create substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments relating to the recoverability or classification of recorded assets and liabilities or other adjustments that may be necessary should the Company not be able to continue as a going concern.
4. | Other current assets |
Other current assets includes the following:
On February 14, 2017,25, 2019, the Company completedentered into a seriesLetter of transactions, including an APAIntent 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 at March 31, 2021. These funds were advanced as short-term promissory notes that are immediately due and payable and are classified as other current assets on our consolidated balance sheet.
The Company has no intention to close on the Company sold certainpurchase of LLW and is currently negotiating with the vendors to provide advertising services in lieu of the Canadian Rehab Clinic assets. The assets disposed of business represented substantially allreturn of the operating assets of$120,000 invested by 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.Company.
12
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED FINANCIAL STATEMENTS
On June 30, 2020, the Company entered into an agreement whereby the Company will acquire 51% of American Treatment Holdings, Inc. (“ATHI”) from The assetsQ Global Trust (“Seller”) and liabilitiesLawrence B Hawkins (“Hawkins”), which in turn owns 100% of discontinued operations asEvernia Health Services LLC. (“Evernia”), which operates drug rehabilitation facilities. The consideration for the acquisition is a loan to be provided by the purchaser to Evernia in the amount of December$500,000. As of March 31, 2016 is as follows:2021, the Company had advanced Evernia approximately $1,026,669 including accrued interest thereon.
The StatementCompany originally had a 180 day option, from the advancement of operationsthe first tranche to Evernia, to purchase an additional 9% of ETHI for discontinued operations is as follows:a purchase consideration of $50,000. The option has been extended and the Company had made a down payment of $10,000 towards exercising this option.
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 |
On June 30, 2020, the Company entered into an agreement whereby the Company will acquire 51% of Behavioral Health Holdings, Inc. (“BHHI”) from The Q Global Trust (“Seller”) and Lawrence B Hawkins, which in turn owns 100% of Peace of Mind Counseling Services, Inc. (“PMCS”), which operates drug rehabilitation facilities. The consideration for the acquisition is still to be determined. The Company is currently considering its options to acquire a stake in BHHI and may renegotiate the deal terms.
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS
A net amountOn July 12, 2020, the Company entered into a five year option agreement with Leonite Capital LLC (“Leonite”) and other investors (collectively the “Transferees”), the Company agreed to sell to Leonite a portion of CDN$617,960 was duethe total outstanding shares of ATHI from the shares of ATHI held by the company. The Company provided Leonite an option to purchase a 33% of ATHI from the Company for a purchase consideration of $0.0001 per share, based on the advances that Leonite made to the Company totaling $655,000. Leonite shall share in all distributions by ATHI to the Company, on an as exercised basis, equal to the saleadvances made by Leonite to the Company, thereafter the option will be reduced to 50% of the Endoscopy Clinic as of December 31, 2016. This amount was past due and had fully provided for as of December 31, 2016.shares exercisable under the option.
On FebruarySeptember 14, 2017,2020, the Company acquired CCH from Leon Developments and settledentered into a five year option agreement with Ed Blasiak (“Blasiak”) whereby the Company agreed to sell to Blasiak a portion of the total outstanding shares of ATHI. The Company provided Blasiak an option to purchase 2.5% of ATHI from the Company for a purchase consideration of $0.0001 per share, based on the advances that Blasiak made to the Company totaling $50,000. Blasiak shall share in all distributions by assigning the proceeds dueATHI to the Company, on an as exercised basis, equal to the saleadvances made by Blasiak to the Company, thereafter the option will be reduced to 50% of the Endoscopy Clinicshares exercisable under the option.
On October 29, 2020, the Company entered into a five year option agreement with First Fire whereby the Company agreed to Leon Developments.sell to First Fire a portion of the total outstanding shares of ATHI. The note togetherCompany provided First Fire an option to purchase 6.25% of ATHI from the Company for a purchase consideration of $0.0001 per share, based on the advances that First Fire made to the Company totaling $125,000. First Fire shall share in all distributions by ATHI to the Company, on an as exercised basis, equal to the advances made by First Fire to the Company, thereafter the option will be reduced to 50% of the shares exercisable under the option.
On October 29, 2020, the Company entered into a five year option agreement entered into with accrued interest thereonBauman, so that the Company agreed to sell to Bauman a portion of CDN$41,959 amountedthe total outstanding shares of ATHI. The Company provided Bauman an option to CDN$659,919 (US$504,442). The provision raised againstpurchase 6.25% of ATHI from the note was reversed andCompany for a purchase consideration of $0.0001 per share, based on the unrecorded interest thereon was recognized duringadvances that Bauman made to the current period.Company totaling $125,000. Bauman shall share in all distributions by ATHI to the Company, on an as exercised basis, equal to the advances made by Bauman to the Company, thereafter the option will be reduced to 50% of the shares exercisable under the option.
6. | 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) hashad 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,As of March 31, 2021, CDN$1,055,042 of the escrow had been refunded to the Company may earn upand CDN$461,318 had been used to an additionalaffect building improvements to the premises owned by CCH, for a total reduction of CDN$3,000,000 as a performance payment based on the attainment of certain clinic performance metrics.1,516,360. 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, as of September 30, 2017, the company had accrued $169,593 (at closing exchange rates) as additional income.remaining escrow balance was CDN$6,485 (approximately US$ 5,157).
13
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. | Property |
Property plant and equipment consists of the following:
September 30, 2017 | December 31, 2016 | March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||
Cost | Amortization and Impairment | Net book value | Net book value | Cost | Accumulated depreciation | Net book value | Net book value | |||||||||||||||||||||||||
Land | $ | 170,974 | $ | — | $ | 170,974 | $ | 168,866 | ||||||||||||||||||||||||
Property | 3,234,310 | (519,423 | ) | 2,714,887 | 2,713,354 | |||||||||||||||||||||||||||
$ | 3,405,284 | $ | (519,423 | ) | $ | 2,885,861 | $ | 2,882,220 | ||||||||||||||||||||||||
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 | $ | — |
Depreciation expense for the three months ended September 30, 2017March 31, 2021 and 20162020 was $131,784$32,125 and $0, respectively, and for the nine months ended September 30, 2017 and 2016 was $314,190 and $0,$30,241, respectively.
8. |
In terms 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 to different classes of intangible assets when an independent valuation of the intangibles is performed.
The Company settled the tax liabilities owing 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$441,598 to settle outstanding GST/HST liabilities and a further CDN$ 57,621 to settle other Canadian tax liabilities.
The remaining taxes payable consist of:
● | A payroll tax liability of |
● | A GST/HST tax payable of $87,492 (CDN$110,022). | |
● | 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 with US disclosure requirements is currently being addressed. An amount of $250,000 has been accrued for any potential exposure the Company may have. |
March 31, 2021 | December 31, 2020 | |||||||
Payroll taxes | $ | 145,200 | $ | 143,410 | ||||
HST/GST payable | 87,493 | 73,503 | ||||||
US penalties due | 250,000 | 250,000 | ||||||
Income tax payable | 388,150 | 383,364 | ||||||
$ | 870,843 | $ | 850,277 |
14
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED FINANCIAL STATEMENTS
Short-term Convertible 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 | March 31, 2021 | December 31, 2020 | ||||||||||||||||||||
Leonite Capital, LLC | 8.5 | % | — | $ | — | $ | — | $ | — | $ | — | $ | 70,583 | |||||||||||||
6.5 | % | June 12, 2021 | 677,874 | 6,763 | (340,016 | ) | 344,621 | 147,058 | ||||||||||||||||||
First Fire Global Opportunities Fund | 6.5 | % | October 29,2021 | 138,889 | 3,821 | (80,841 | ) | 61,869 | 25,297 | |||||||||||||||||
Auctus Fund, LLC | 10.0 | % | May 7, 2020 | 115,000 | — | — | 115,000 | 150,000 | ||||||||||||||||||
10.0 | % | August 13, 2021 | 95,000 | 6,139 | (35,137 | ) | 66,002 | 40,202 | ||||||||||||||||||
Labrys Fund, LP | 12.0 | % | November 30, 2021 | 275,000 | 11,053 | (183,836 | ) | 102,217 | 26,159 | |||||||||||||||||
Ed Blasiak | 6.5 | % | September 14, 2021 | 55,000 | 1,966 | (25,164 | ) | 31,802 | 17,347 | |||||||||||||||||
Joshua Bauman | 6.5 | % | September 14, 2021 | 138,889 | 4,819 | (63,817 | ) | 79,891 | 43,247 | |||||||||||||||||
Geneva Roth Remark Holdings, Inc. | 9.0 | % | August 29, 2021 | 88,000 | 2,431 | (43,711 | ) | 46,720 | 19,238 | |||||||||||||||||
9.0 | % | October 15, 2021 | 53,000 | 1,670 | (31,033 | ) | 23,637 | 6,753 | ||||||||||||||||||
9.0 | % | January 3, 2022 | 53,500 | 374 | (48,605 | ) | 5,269 | — | ||||||||||||||||||
Series N convertible notes | 6.0 | % | On Demand | 3,229,000 | 473,105 | — | 3,702,105 | 3,654,333 | ||||||||||||||||||
$ | 4,579,133 | $ | 4,200,217 |
15
Labrys Fund, LPETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. | Short-term Convertible Notes (continued) |
Leonite Capital, LLC
On FebruaryDecember 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 anti-dilution 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 29, 2018, the Company, entered into a Securities Purchase Agreement with LABRYS FUND LP, in terms of the agreementpursuant to which the Company borrowed $110,000issued a Convertible Promissory Note in termsthe aggregate principal amount of $165,000, including an unsecured convertible promissoryOriginal Issue Discount of $15,000, for net proceeds of $150,000. The note withhad a maturity date of August 2, 2017. The noteDecember 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 overpurchaser following the preceding 30 day trading period prior to the issuance of this note or 60%issue date into shares of the lowest tradedCompany’s common stock at a conversion price 30 days priorequal 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 aspaid a commitment fee which returnableof $11,550 settled through the issue of 165,000 shares will be returnedof common stock. In conjunction with this note the Company issued a five year warrant to the company if fully repaid priorpurchase 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.16
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED FINANCIAL STATEMENTS
Short-term Convertible Notes |
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 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.
On October 10, 2019, the Company transferred a warranty deed to the real property located at 810 Andrews Avenue, Delray Beach, Florida to Leonite Capital LLC, in settlement of indebtedness of $1,398,514 and additional expenses related to the disposal of the property of $36,470. These expenses of $36,470 were provided for resulting in net proceeds recognized on the transfer of the property of $1,362,044.
On July 12, 2020, the company entered into a debt extinguishment agreement with Leonite whereby the following occurred:
1. | The total amount outstanding under the note, including principal and interest was reduced to $150,000 | |
2. | $700,000 of the note was converted into Series A Redeemable Preferred shares in the Company’s subsidiary, Cranberry Cove Holdings, accruing dividends at 10% per annum. | |
3. | $400,000 of the note was converted into series B Preferred stock in the Company for a 12 month period, mandatorily redeemable by the Company accruing dividends at 6% per annum payable in cash or stock, subject to certain conditions. | |
4. | The remaining balance of $150,000 will accrue interest at 8.5% per annum and is convertible into common stock and repayable in 6 monthly installments of $25,000 commencing after December 12, 2020. | |
5. | The existing warrants were cancelled and a new five year warrant, with a cashless exercise options, exercisable for a minimum of 326,286,847 shares of common stock and a maximum of 20% of the outstanding equity of the Company at an initial exercise price of $0.10 per share subject to adjustment based on new stock issuances or the lowest volume weighted exercise price of the stock for 30 days immediately preceding the exercise was issued to Leonite. |
17
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. | Short-term Convertible Notes (continued) |
Leonite Capital, LLC (continued)
On December 28, 2020, Leonite converted $80,000 plus accrued interest of $5,949 of the Leonite loan amended on July 12, 2020, into 96,331,811 shares of common stock at a conversion price of $0.0009, thereby realizing a loss on conversion of $240,616. On January 8, 2021, Leonite converted the remaining principal amount of $70,000, plus accrued interest thereon of $137, into 78,763,466 shares of common stock at a conversion price of $0.0009 per share.
On July 12, 2020, the Company entered into a Senior Secured Convertible Note agreement with Leonite for $440,000 with an original issue discount of $40,000 for gross proceeds of $400,000, the initial tranche advanced will be for cash of $200,000 plus the OID of $20,000, the remaining advances will be at the discretion of the Leonite. The loan bears interest at 6.5% per annum and matures on June 12, 2021. The Company is required to make monthly payments of the accrued interest on the advances made. The note is convertible into common shares at the option of the holder at $0.10 per share, or 80% multiplied by the price per share paid in subsequent financings or after a six month period from the effective date at 60% of the lowest trading price during the preceding 21 consecutive trading days. The note has both conversion price protection and anti-dilution protection provisions.
On July 12, 2020, the Company entered into a five year option agreement with Leonite Capital LLC (“Leonite”) and other investors (collectively the “Transferees”), the Company agreed to sell to Leonite a portion of the total outstanding shares of ATHI from the shares of ATHI held by the company. The Company has provided Leonite an option to purchase 33% of ATHI from the Company for a purchase consideration of $0.0001 per share, based on the advances that Leonite made to the Company totaling $655,000. Leonite shall share in all distributions by ATHI to the Company, on an as exercised basis, equal to the advances made by Leonite to the Company, thereafter the option will be reduced to 50% of the shares exercisable under the option.
On January 8, 2021, in terms of a conversion notice, Leonite converted the principal sum of $70,000 and interest thereon of $137 of the Leonite loan into 78,763,466 shares of common stock at a conversion price of $0.009 per share.
In terms of clause 3.12 of the Senior secured convertible Promissory Note Agreement (“Leonite Note”) entered into with Leonite and the amendments thereto, the terms of the convertible promissory note issued to Labrys Fund LP on November 30, 2020, as described below, contained terms more favorable than those contained in the Leonite Note, resulting in an adjustment made to the Original issue discount of $4,000 and the issuance of five year warrants exercisable for 145,454,547 shares of common at an exercise price of $0.00205 per share, for all advances made to the Company by Leonite in terms of the Leonite Note, up to and including December 31, 2020.
On January 8, January 22, February 4, and February 19, 2021, Leonite advanced the company an aggregate cash amount of $290,000, including a revised original issue discount of $74,556 for an aggregate principal sum added to the Leonite Note of $364,556.
On March 3, 2021, in terms of a conversion notice, Leonite converted the principal sum of $82,681 and interest thereon of $12,319 of the Leonite Note into 97,000,000 shares of common stock at a conversion price of $0.009 per share.
18
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. | Short-term Convertible Notes (continued) |
Power Up Lending Group LTD
On June 19, 2017,July 8, 2019, 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.$53,000. The Note hashad a maturity date of March 20, 2018April 30, 2020 and bearsbore interest at the at the rate of eightnine 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 havehas 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 PurchaserPower 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 average lowest closing bid pricesprice of the Company’s common stock for the ten trading days prior to conversion. The balance of the Note plus accrued interest at September 30, 2017 was $46,510, net of unamortized discount of $70,834.
Series L convertible notes
The Company entered into Series L Convertible Securities Purchase Agreements with 8 individuals on December 30, 2016. InBetween January 10, 2020 and January 24, 2020, in terms of these agreements,conversion notices received, Power Up converted the Company borrowed an aggregate principal amount of $468,969$53,000 and interest thereon of $1,085 into 75,618,509 shares of common stock at an average conversion price of $0.000715 per share.
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.
Between January 24, 2020 and February 27, 2020, in terms of conversion notices received, Power Up converted the aggregate principal amount of $41,400 into 453,800,493 shares of common stock at an average conversion price of 0.0000912 per share.
On June 1, 2020, The Company repaid the Power Up Lending Group $41,600 in full settlement of the convertible note entered into on July 15, 2019.
19
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. | Short-term Convertible Notes (continued) |
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.
Between September 11, 2019 and December 30, 2019, in terms of a senior ranking convertible promissory note with a maturity date six months fromconversion notices received, the issue date and bearing interest at 0% per annum. The notes are convertible at the option of the holder intoCompany issued 11,887,445 shares of commonCommon stock in settlement of the Company at a conversion price$36,592 of $0.03 per share, subject to certain recapitalization adjustments. On 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.principal outstanding.
DuringBetween January 2017, the Company borrowed a further aggregate principal amount of $71,0006, 2020 and February 26, 2020, 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 are convertible at the option of the holder into shares of common stock of the Company at a conversion price of $0.03 per share, subject to certain recapitalization adjustments. In January 2017, it was determined that the beneficial conversion feature related to the discounted note and warrant issuances amounting to $71,000 would be amortized over the life of the loans.
On May 4, 2017, 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 investorsnotices received, First Fire converted an aggregate principal amount of $375,011$83,902 into 308,100,000 shares of common stock at an average conversion price of $0.000272 per share.
On June 3, 2020, the Company entered into an agreement with First Fire whereby the remaining balance of the convertible notesnote of $73,006 would be settled by two payments of $25,000 each.
Between July 2, 2020 and August 17, 2020, the Company repaid the remaining principal outstanding of $50,000 plus additional interest charges of $1,500.
On October 29, 2020, the Company entered into 12,500,375a Securities Purchase Agreement, pursuant to which the Company issued a senior secured convertible promissory note in the aggregate principal amount of $137,500, including an OID of $12,500. The note bears interest at 6.5% per annum and matures on October 29, 2021. The note is senior to any future borrowings and commencing on November 29, 2020 the Company will make monthly payments of the accrued interest under the note. The note may be prepaid at certain prepayment penalties and is convertible into shares of common stock at a conversion price at the option of $0.03the holder at $0.001 per share.share, adjusted for anti-dilution provisions; or 80% of the price per share of subsequent equity financings or; after six months 60% of the lowest trading price during the preceding six month period.
The amortization chargeOn October 29, 2020, the Company entered into a five year option agreement with First Fire whereby the Company agreed to sell to First Fire a portion of the debt discounttotal outstanding shares of ATHI. The Company provided First Fire an option to purchase 6.25% of ATHI from the Company for a purchase consideration of $0.0001 per share, based on the three months and nine months ended September 30, 2017 was $5,917 and$289,711, respectively.advances that First Fire made to the Company totaling $125,000. First Fire shall share in all distributions by ATHI to the Company, on an as exercised basis, equal to the advances made by First Fire to the Company, thereafter the option will be reduced to 50% of the shares exercisable under the option.
In terms of clause 3.12 of the Series LSenior secured convertible Promissory Note Agreement (“First Fire Note”) entered into with First Fire, the terms of the convertible promissory note issued to Labrys Fund LP on November 30, 2020, as described below, contained terms more favorable than those contained in the First Fire Note, resulting in an adjustment made to the Original issue discount of $1,389 and the issuance of five year warrants exercisable for 50,505,051shares of common at an exercise price of $0.00205 per share, for the advance made to the Company by First Fire in terms of the First Fire Note.
20
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. | Short-term Convertible Notes (continued) |
Auctus Fund, LLC
On August 7 2019, the Company, entered into a Securities Purchase Agreement with Auctus Fund, LLC, pursuant to which the Company issued a Convertible notesPromissory Note in the aggregate principal amount of $225,000. The Note had a maturity date of May 7, 2020 and bore interest at the rate of ten percent per annum from the date on which the Note was issued above,until the same became 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 Auctus 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.
On June 15, 2020, The Company entered into an amended agreement with Auctus whereby Auctus agreed to discharge the principal amount of the note by nine equal monthly installments of $25,000 commencing in October 2020. During the three months ended March 31, 2021, the Company repaid Auctus the principal sum of $35,000.
On August 13, 2020, the Company entered into a Securities Purchase Agreement with Auctus Fund LLC, pursuant to which the Company issued a convertible promissory note in the aggregate principal amount of $100,000 for net proceeds of $85,000 after certain fees and expenses of $15,000. The note has a maturity date of August 13, 2021 and bears interest at 10% per annum. The interest due on the note for the full twelve month period is due immediately upon issuance of the note, regardless of acceleration or prepayment. The principal amount of the note is payable in six monthly instalments of $16,666.66 commencing 180 days after the issuance date, the balance outstanding under the note due at maturity date. In the event a default occurs under the Note, the Note is convertible into shares of common stock at a conversion price equal to the lowest trading price over the prior 5 days prior to the date of the note or the five day volume weighted market price prior to the date of conversion. The Company is required to adhere to certain covenants including covenants concerning distributions of capital stock; restrictions on stock repurchases, additional borrowings sales of assets and loans and advances made by the Company. In conjunction with the issuance of the promissory note, the Company issued a five year warrant exercisable for 66,666,666 shares of common stock at an exercisable price of $0.0015 per share subject to anti-dilution and price protection adjustments. The Company also issued a second five year warrant exercisable for 66,666,666 shares of common stock at an exercisable price of $0.0015 per share subject to anti-dilution and price protection adjustments, which warrants will only be exercisable upon an event of default on the convertible note.
On March 9, 2021, Auctus exercised its warrant for 66,666,666 shares of common stock on a cashless exercise basis, resulting in the issue of 59,999,999 shares of common stock.
Labrys Fund, LP
On July 8, 2019, the Company, entered into a Securities Purchase Agreement with Labrys Fund, LP (“Labrys”), 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 had a maturity date of January 2017,8, 2020 and bore interest at the rate of twelve percent per annum from the date on which the Note was issued until the same became 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 was convertible at any time and from time to time at the election of Labrys 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.
In connection with the issuance of the convertible promissory note to Labrys, the Company issued 2,700,000 returnable shares. These shares were returnable if the note was paid prior to maturity date on January 8, 2020. The company had not repaid the note on the maturity date, January 8, 2020, therefore the 2,700,000 shares were expensed as an additional fee amounting to $165,780, the value of the shares on the date of grant.
21
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. | Short-term Convertible Notes (continued) |
Labrys Fund, LP (continued)
Between January 15, 2020 and February 25, 2020, in terms of conversion notices received, Labrys converted the aggregate principal sum of $8,936 and interest of $19,867 into 479,160,076 shares of common stock at an average conversion price of 0.00006 per share.
On May 15, 2020 the Company entered into an amended agreement with Labrys Fund LP whereby default interest and penalties were waived, no further conversions will be effectuated and the Company committed to make eight equal payments of $25,000 commencing on October 15, 2020, in full settlement of the balance outstanding. No event of default will occur as long as the Company makes all scheduled payments.
Between October 21, 2020 and November 30, 2020, the Company repaid principal of $37,500. The Company was unable to adhere to the amended repayment schedule and default penalty and penalty interest was reinstated.
On November 30, 2020, Labrys converted principal of $235,564 and interest thereon of $20,416 into 91,421,457 shares of common stock, realizing a gain on conversion of $4,571, thereby extinguishing the note.
On November 30, 2020, the Company, entered into a Securities Purchase Agreement with Labrys, pursuant to which the Company issued a Convertible Promissory Note in the aggregate principal amount of $275,000 for net proceeds of $239,050 after an original issue discount of $27,500 and certain legal expenses. The Note has a maturity date of November 30, 2021 and bears interest at the rate of twelve percent per annum from the date on which the Note was issued until the same became 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 Labrys 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.
In connection with the issuance of the convertible promissory note to Labrys, the Company granted three-year warrantsLabrys a five-year warrant to the Series L Convertible noteholders, exercisable for 2,366,667purchase 100,000,000 shares of common stock at an exercise price of $0.03, subject$0.00205 per share. The value of the warrant was accounted for as a debt discount.
Ed Blasiak
On September 14, 2020, the Company entered into a Securities Purchase Agreement with Ed Blasiak (“Blasiak”), pursuant to which the Company issued a senior secured convertible promissory note in the aggregate principal amount of $55,000, including an original issue discount of $5,000. The note bears interest at 6.5% per annum and matures on September 14, 2021. The note is senior to any future borrowings and commencing on October 1, 2020 the Company will make monthly payments of the accrued interest under the note. The note may be prepaid at certain recapitalization adjustments,prepayment penalties and is convertible into shares of common stock at a conversion price at the option of the holder at $0.001 per share, expiring between January 16 and January 17, 2020. (Refer note 16 (b) below).adjusted for anti-dilution provisions; or 80% of the price per share of subsequent equity financings or; after six months 60% of the lowest trading price during the preceding six month period.
On September 14, 2020, the Company entered into a five year option agreement with Ed Blasiak (“Blasiak”) whereby the Company agreed to sell to Blasiak a portion of the total outstanding shares of ATHI. The Company provided Blasiak an option to purchase 2.5% of ATHI from the Company for a purchase consideration of $0.0001 per share, based on the advances that Blasiak made to the Company totaling $50,000. Blasiak shall share in all distributions by ATHI to the Company, on an as exercised basis, equal to the advances made by Blasiak to the Company, thereafter the option will be reduced to 50% of the shares exercisable under the option.
22
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED FINANCIAL STATEMENTS
9. |
Joshua Bauman
On September 14, 2020, the Company entered into a Securities Purchase Agreement with Joshua Bauman (“Bauman”), pursuant to which the Company issued a senior secured convertible promissory note in the aggregate principal amount of $110,000, including an original issue discount of $10,000. The short-termnote bears interest at 6.5% per annum and matures on September 14, 2021. The note is senior to any future borrowings and commencing on October 1, 2020 the Company will make monthly payments of the accrued interest under the note. The note may be prepaid at certain prepayment penalties and is convertible notesinto shares of common stock at a conversion price at the option of the holder at $0.001 per share, adjusted for anti-dilution provisions; or 80% of the price per share of subsequent equity financings or; after six months 60% of the lowest trading price during the preceding six month period.
On October 29, 2020, the Company entered into a five year option agreement entered into with Bauman, so that the Company agreed to sell to Bauman a portion of the total outstanding shares of ATHI. The Company provided Bauman an option to purchase 6.25% of ATHI from the Company for a purchase consideration of $0.0001 per share, based on the advances that Bauman made to the Company totaling $125,000. Bauman shall share in all distributions by ATHI to the Company, on an as exercised basis, equal to the advances made by Bauman to the Company, thereafter the option will be reduced to 50% of the shares exercisable under the option.
In terms of clause 3.12 of the Senior secured convertible Promissory Note Agreement (“Bauman Note”) entered into with Joshua Bauman, the terms of the convertible promissory note issued to Labrys Fund LP and Power Up Lending Group, LTD, disclosedon November 30, 2020, as described above, contained terms more favorable than those contained 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 repaidBauman Note, resulting 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 wasan adjustment made to the statementOriginal issue discount of operations. The value$1,389 and the issuance of five year warrants exercisable for 50,505,051 shares of common at an exercise price of $0.00205 per share, for the advance made to the Company by Bauman in terms of the derivative liability will be re assessed at each financial reporting period, with any movement thereon recordedBauman Note.
Geneva Roth Remark Holdings, Inc
On October 29, 2020, the Company entered into a Securities Purchase Agreement pursuant to which the Company issued a Convertible Promissory Note in the statementaggregate principal amount of operations$88,000, for net proceeds of $85,000 after the payment of legal fees and origination fees amounting to $3,000. The note has a maturity date of August 29, 2021 and bears interest at the rate of 9.0% 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. 180 days after the issued date into shares of the Company’s common stock at 61% of the lowest trade price during the ten consecutive trading days immediately prior to conversion. The principal plus the accrued interest of the Note may be prepaid by the Company prior to the expiry of 180 days from issuance date at a prepayment penalty ranging from 112% to 130%.
On November 24, 2020, the Company entered into a Securities Purchase Agreement pursuant to which the Company issued a Convertible Promissory Note in the period in which itaggregate principal amount of $53,000, for net proceeds of $50,000 after the payment of legal fees and origination fees amounting to $3,000. The note has a maturity date of October 15, 2021 and bears interest at the rate of 9.0% per annum. The outstanding principal amount of the note is incurred.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 61% of the lowest trade price during the ten consecutive trading days immediately prior to conversion. The principal plus the accrued interest of the Note may be prepaid by the Company prior to the expiry of 180 days from issuance date at a prepayment penalty ranging from 112% to 130%.
The following assumptions were usedOn March 3, 2021, the Company entered into a Securities Purchase Agreement pursuant to which the Company issued a Convertible Promissory Note in the Black-Scholes valuation model:
aggregate principal amount of $53,500, for net proceeds of $50,000 after the payment of legal fees and origination fees amounting to $3,500. The movement in derivative liabilitynote has a maturity date of January 3, 2022 and bears interest at the rate of 9.0% per annum. The outstanding principal amount of the note is as follows:
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 61% of the lowest trade price during the ten consecutive trading days immediately prior to conversion. The principal plus the accrued interest of the Note may be prepaid by the Company prior to the expiry of 180 days from issuance date at a prepayment penalty ranging from 112% to 130%.
23
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS
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 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.
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.
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED FINANCIAL STATEMENTS
9. |
The loans payable is as follows:Series N convertible notes
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 | $ - |
Between January 28, 2019 and June 11, 2020, the Company closed several tranches of Series N Convertible notes in which it raised $3,229,000 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 $3,229,000, which Notes are convertible into the Company’s common stock at a conversion price of $0.08 per share together with three year warrants to purchase up to a total of 52,237,500 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 standard adjustment mechanisms. The notes mature one year from the date of issuance.
10. | Mortgage loans |
Mortgage loans is disclosed as follows:
Interest rate | Maturity date | Principal Outstanding | Accrued interest | March 31, 2021 | December 31, 2020 | |||||||||||||||||
Cranberry Cove Holdings, Ltd. | ||||||||||||||||||||||
Pace Mortgage | 4.2 | % | July 19, 2022 | $ | 3,978,909 | $ | 5,495 | $ | 3,984,404 | $ | 3,963,781 | |||||||||||
Disclosed as follows: | ||||||||||||||||||||||
Short-term portion | $ | 118,538 | $ | 115,704 | ||||||||||||||||||
Long-term portion | 3,865,866 | 3,848,077 | ||||||||||||||||||||
$ | 3,984,404 | $ | 3,963,781 |
The aggregate amount outstanding 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 the next twelve months | 118,538 | |||
Thereafter | 3,865,866 | |||
Total | $ | 3,984,404 |
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 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 MortgageLtd.
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.
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS
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”).Ontario. The Loanloan 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 Loanloan 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
The Company entered into a Mortgage and Security Agreement with Seastone Delray Healthcare, LLC on February 13, 2017 for the aggregate principal sum of $3,000,000, bearing interest at the rate of 5% per annum, maturing on February 13, 2020, with monthly repayments 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 to the Plat thereof, as recorded in Plat Book 42, page 72, Public Records 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.
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 sharesto her, to a convertible note holder in terms of a returnable commitment fee.third party. The shares are returnable toloan bears interest at 12% per annum which the Company if the convertible note is repaid prioragreed 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.pay.
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.
24
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED FINANCIAL STATEMENTS
In termsOn May 10, 2020, the Company was granted a government assistance loan in the aggregate principal amount of $156,782. The loan is forgivable if the Company demonstrates that the proceeds were used for expenses such as employee costs during the pandemic. Should the loan not be forgiven, interest is payable on the loan at the rate of 1% per annum and the principal is repayable and interest is payable over an 18 month period. No payments have been made to date and the Company expects the loan to be forgiven, therefore no interest has been accrued.
On December 1, 2020, CCH was granted a Covid-19 related government assistance loan in the aggregate principal amount of CDN$ 40,000 (Approximately $31,000). the grant is interest free and CDN$ 10,000 is forgivable if the loan is repaid in full by December 31, 2022.
On January 12, 2021, CCH received a further CDN$ 20,000 Covid-19 related government assistance loan. The loan is interest free and if repaid by December 31, 2022, CDN$ 10,000 is forgivable.
13. | Derivative liability |
The short-term Series L Convertibleconvertible notes entered into with 3 parties, asissued to convertible note holders disclosed in note 129 above, have variable priced conversion rights with no fixed floor price and will reprice dependent on the Company awarded three yearshare 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 $109,574 using a Black-Scholes valuation model, after taking into account the value of warrants exercisable over 2,366,666 shares of common stock, at an exercise price of $0.03 per share.issued to the convertible note holders.
The fair valuederivative liability is marked-to-market on a quarterly basis. As of Warrants awarded duringMarch 31, 2021, the nine months ended September 30, 2017 werederivative liability was valued at $94,620 using the Black Scholes pricing model utilizing the following weighted average assumptions:$4,379,372.
The following assumptions were used in the Black-Scholes valuation model:
March 31, 2021 | |||||||||||
Calculated stock price | $0.001 to $0.0055 | ||||||||||
Risk free interest rate | 0.03% to 0.64 | ||||||||||
Expected life of convertible notes and warrants | 3 to 60 months | ||||||||||
expected volatility of underlying stock | 157.4% to 299.1 | ||||||||||
Expected dividend rate | 0 |
The movementsmovement in warrantsderivative liability is summarized as follows:
March 31, 2021 | December 31, 2020 | |||||||
Opening balance | $ | 4,765,387 | $ | 8,694,272 | ||||
Derivative liability mark-to-market on convertible debt extinguishment | — | 126,444,276 | ||||||
Derivative liability on revised convertible notes and warrants arising from convertible debt extinguishment | — | 6,349,265 | ||||||
Derivative liability cancelled on debt extinguishment | — | (144,893,444 | ||||||
Derivative liability on issued convertible notes | 109,574 | 1,129,050 | ||||||
Fair value adjustments to derivative liability | (495,589 | ) | 7,041,968 | |||||
Closing balance | $ | 4,379,372 | $ | 4,765,387 |
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 |
25
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED FINANCIAL STATEMENTS
Shawn E. Leon
As of March 31, 2021 and December 31, 2020 the Company had a payable to Shawn Leon of $322,744. Mr. Leon is a director and CEO of the Company. The balances payable are non-interest bearing and has no fixed repayment terms.
Due to the current financial position of the Group, Mr. Leon forfeited the management fees due to him for the three months ended March 31, 2021 and for the year ended December 31, 2020.
Leon Developments, Ltd.
As of March 31, 2021 and December 31, 2020, the Company owed Leon Developments, Ltd. $946,894 and $930,307, respectively, for funds advanced to the Company.
Eileen Greene
As of March 31, 2021 and December 31, 2020, the Company owed Eileen Greene, the spouse of our CEO, Shawn Leon, $1,545,812 and $1,558,798, respectively. The amount owing to Ms. Greene is non-interest bearing and has no fixed repayment terms.
All related party transactions occur in the normal course of operations and in terms of agreements entered into between the parties.
15. | Stockholder’s deficit |
a) | Common shares |
Authorized and outstanding
The Company has authorized 10,000,000,000 shares with a par value of $0.01 per share. The company has issued and outstanding 2,262,849,130 and 2,027,085,665 shares of common stock at March 31, 2021 and December 31, 2020, respectively.
On January 8, 2021, the Company issued 78,763,466 shares of common stock to Leonite in connection with a conversion notice received, converting principal and interest of $70,137.
On March 3, 2021, the Company issued 97,000,000 shares of common stock to Leonite in connection with a conversion notice received, converting principal and interest of $95,000.
On March 9, 2021, the Company received notification of exercise of warrants for 66,666,666 shares on a cashless basis, resulting in the issuance of 59,999,999 shares of common stock valued on the date of issuance at $90,000.
b) | Series A Preferred shares |
Authorized, issued and outstanding
The Company has authorized 10,000,000 Series A preferred shares with a par value of $0.01 per share. The company has issued and outstanding 4,000,000 Series A Preferred shares at March 31, 2021 and December 31, 2020, respectively.
c) | Series B Preferred shares |
Authorized and outstanding
The Company has authorized 400,000 Series B preferred shares with a par value of $1.00 per share. The company has issued and outstanding 400,000 Series B Preferred shares at March 31, 2021 and December 31, 2020, respectively.
26
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
15. | Stockholder’s deficit (continued) |
d) | Warrants |
The Secured Promissory Note Agreements entered into with Leonite, First Fire and Bauman contain certain conversion price protection and anti-dilution protection provisions, which were triggered as a result of the terms contained in the promissory note issued to Labrys Fund LP on November 30, 2020. As a result, the Company issued five year warrants exercisable for 246,464,649 shares of common at an exercise price of $0.00205 per share, for all advances made to the Company by the lenders in terms of the secured Promissory Note Agreements.
Between January 8, 2021 and February 19, 2021, Leonite advanced the Company an additional $290,000 and in terms of clause 3.12 of the Secured Promissory Note Agreement entered into with Leonite, the Company granted Leonite five year warrants exercisable for 131,111,112 shares of common stock at an exercise price of $0.00205 per share.
On March 9, 2021, the Company received a cashless warrant exercise, exercising warrants for 66,666,666 shares for net shares of 59,999,999 shares of common stock.
A summary of all of the Company’s warrant activity during the period January 1, 2020 to March 31, 2021 is as follows:
No. of shares | Exercise price per share | Weighted average exercise price | ||||||||||
Outstanding as of January 1, 2020 | 2,566,101,248 | $0.00204 to $0.12 | $ | 0.0044700 | ||||||||
Granted | 233,333,332 | 0.0017357 | 0.0017357 | |||||||||
Adjustment due to price protection | 152,017,272,726 | 0.0000324 | 0.0000324 | |||||||||
Forfeited/cancelled | (2,366,666 | ) | 0.0300000 | 0.0300000 | ||||||||
Granted in terms of debt extinguishment | 326,286,847 | 0.000675 | 0.0006750 | |||||||||
Cancelled as part of debt extinguishment | (154,300,675,861 | ) | 0.0000324 | 0.0000324 | ||||||||
Exercised | (224,390,247 | ) | 0.0004 | 0.0004000 | ||||||||
Outstanding as of December 31, 2020 | 615,561,379 | $0.000675 to $0.12 | 0.0113796 | |||||||||
Granted | 377,575,761 | $0.0020500 | 0.0020500 | |||||||||
Forfeited/cancelled | — | — | — | |||||||||
Exercised | (66,666,666 | ) | $0.0015000 | $0.001500 | ||||||||
Outstanding as of March 31, 2021 | 926,470,474 | $0.000675 to $0.12 | $ | $0.0082883 |
The warrants were valued using a Black Scholes pricing model on the date of grant at $1,565,487 using the following weighted average assumptions:
Three months ended March 31, 2021 | ||||
Calculated stock price | $0.00205 | |||
Risk free interest rate | 0.36 to 0.59 | % | ||
Expected life of warrants | 60 months | |||
expected volatility of underlying stock | 226.2 to 231.3 | % | ||
Expected dividend rate | 0 | % |
27
ETHEMA HEALTH CORPORATION
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
15. | Stockholder’s deficit (continued) |
Warrants (continued) |
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.
The following table summarizes information about warrants outstanding at September 30, 2017:March 31, 2021:
Warrants outstanding | Warrants exercisable | ||||||||
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 | ||||||
22,004,075 | 2.44 | $ 0.03 | 22,004,075 | $ 0.03 |
Warrants outstanding | Warrants exercisable | ||||||||||||||||||||
Exercise price |
No. of shares | Weighted average remaining years | Weighted average exercise price |
No. of shares | Weighted average exercise price | ||||||||||||||||
$0.000675 | 326,286,847 | 4.28 | 326,286,847 | ||||||||||||||||||
$0.03000 | 3,703,700 | 0.04 | 3,703,700 | ||||||||||||||||||
$0.00150 | 66,666,666 | 437 | 66,666,666 | ||||||||||||||||||
$0.00205 | 477,575,761 | 4.73 | 477,575,761 | ||||||||||||||||||
$0.12 | 52,237,500 | 0.64 | 52,237,500 | ||||||||||||||||||
926,470,474 | 4.30 | $ | 0.0082883 | 926,470,474 | $ | 0.0082883 |
* 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, 2017March 31, 2021 are vested. The warrants outstanding as of September 30, 2017March 31, 2021 have an intrinsic value of $668,123.$3,227,478.
Stock options |
Our board of directors adopted the GreeneStoneGreenstone Healthcare Corporation 2013 Stock Option Plan (the “Plan”) to promote our long- termlong-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 480,000no issued options as of September 30, 2017at March 31, 2021 under the Plan.
No options were issued, exercised or cancelled for the period under review.28
The following table summarizes information about options outstanding as of September 30, 2017.
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, there was no unrecognized compensation costs related to these options and the intrinsic value of the options is $0.
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED FINANCIAL STATEMENTS
16. | Segment information |
Due to the recent acquisition of the Cranberry Cove subsidiary on February 14, 2017, theThe Company has two reportable operating segments;segments:
a. | Rental income from the property owned by |
b. | Rehabilitation Services provided to customers, |
The segment operating results of the reportable segments arefor the three months ended March 31, 2021 is disclosed as follows:
Three months ended March 31, 2021 | ||||||||||||
Rental Operations | In-Patient services | Total | ||||||||||
Revenue | $ | 90,793 | $ | — | $ | 90,793 | ||||||
Operating expenditure | (32,849 | ) | (19,167 | ) | (52,016 | ) | ||||||
Operating income (loss) | 57,944 | (19,167 | ) | 38,777 | ||||||||
Other (expense) income | ||||||||||||
Loss on debt conversion | — | (1,106,648 | ) | (1,106,648 | ) | |||||||
Penalty on convertible notes | — | (9,240 | ) | (9,240 | ) | |||||||
Fair value of warrants granted | (976,788 | ) | (976,788 | ) | ||||||||
Fair value of warrants exercised | (90,000 | ) | (90,000 | ) | ||||||||
Interest expense | (59,745 | ) | (77,932 | ) | (137,677 | ) | ||||||
Amortization of debt discount | — | (502,677 | ) | (502,677 | ) | |||||||
Change in fair value of derivative liability | — | 495,589 | 495,589 | |||||||||
Foreign exchange movements | (18,695 | ) | (60,797 | ) | (79,492 | ) | ||||||
Net loss before taxation | (20,496 | ) | (2,347,660 | ) | (2,368,156 | ) | ||||||
Taxation | — | — | — | |||||||||
Net loss | $ | (20,496 | ) | $ | (2,347,660 | ) | $ | (2,368,156 | ) |
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 |
The operating assets and liabilities of the reportable segments as of March 31, 2021 is as follows:
March 31, 2021 | ||||||||||||
Rental Operations | In-Patient services | Total | ||||||||||
Purchase of fixed assets | $ | — | $ | — | $ | — | ||||||
Assets | ||||||||||||
Current assets | 4,580 | 1,196,939 | 1,201,519 | |||||||||
Non-current assets | 2,885,861 | 5,157 | 2,891,018 | |||||||||
Liabilities | ||||||||||||
Current liabilities | (1,484,968 | ) | (12,388,857 | ) | (13,873,825 | ) | ||||||
Non-current liabilities | (4,645,209 | ) | — | (4,645,209 | ) | |||||||
Mandatory redeemable preferred shares | — | (400,000 | ) | (400,000 | ) | |||||||
Intercompany balances | 1,330,423 | (1,330,423 | ) | — | ||||||||
Net liability position | $ | (1,909,313 | ) | $ | (12,917,184 | ) | $ | (14,826,497 | ) |
29
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED FINANCIAL STATEMENTS
Segment information (continued) |
The segment operating results of the reportable segments arefor the three months ended March 31, 2020 is disclosed as follows:
Nine months ended September 30, 2017 | |||||||||||||||||
Rental Operations | In-Patient services | Total | Three months ended March 31, 2020 | ||||||||||||||
Rental Operations | In-Patient services | Total | |||||||||||||||
Revenue | $ 203,962 | $ 1,169,066 | $ 1,373,028 | $ | 83,542 | $ | - | $ | 83,542 | ||||||||
Operating expenditure | 294,673 | 1,635,041 | 1,929,714 | 30,300 | 143,849 | 174,149 | |||||||||||
Operating loss | (90,711) | (465,975) | (556,686) | ||||||||||||||
Operating income (loss) | 53,242 | (143,849 | ) | (90,607 | ) | ||||||||||||
Other (expense) income | |||||||||||||||||
Other income | - | 635,904 | 635,904 | ||||||||||||||
Other expense | (373,274) | (19,264) | (392,538) | ||||||||||||||
Loss on conversion of convertible notes | - | (286,343 | ) | (286,343 | ) | ||||||||||||
Exercise of warrants | - | (92,952 | ) | (92,952 | ) | ||||||||||||
Interest income | - | 32,074 | 32,074 | - | 60 | 60 | |||||||||||
Interest expense | (136,902) | (106,090) | (242,992) | (61,398 | ) | (132,524 | ) | (193,922 | ) | ||||||||
Amortization of debt discount | - | (442,377) | (442,377) | - | (403,677 | ) | (403,677 | ) | |||||||||
Loss on change in fair value of derivative liability | - | 75,203 | 75,203 | ||||||||||||||
Change in fair value of derivative liability | - | (9,754,896 | ) | (9,754,896 | ) | ||||||||||||
Foreign exchange movements | (18,320) | (92,732) | (111,052) | 71,619 | 412,432 | 484,051 | |||||||||||
Net loss before taxation from continuing operations | (619,207) | (383,257) | (1,002,464) | ||||||||||||||
Net income (loss) before taxation | 63,463 | (10,401,749 | ) | (10,338,286 | ) | ||||||||||||
Taxation | - | - | - | - | - | - | |||||||||||
Net loss from continuing operations | $ (619,207) | $ (383,257) | $ (1,002,464) | ||||||||||||||
Net income (loss) | $ | 63,463 | $ | (10,401,749 | ) | $ | (10,338,286 | ) |
The operating assets and liabilities of the reportable segments areas of March 31, 2020 is as follows:
March 31, 2020 | ||||||||||||
Rental Operations | In-Patient services | Total | ||||||||||
Purchase of fixed assets | — | — | — | |||||||||
Assets | ||||||||||||
Current assets | 2,883 | 208,793 | 211,676 | |||||||||
Non-current assets | 2,677,198 | — | 2,677,198 | |||||||||
Liabilities | ||||||||||||
Current liabilities | (1,149,279 | ) | (27,237,487 | ) | (28,386,766 | ) | ||||||
Non-current liabilities | (3,526,779 | ) | (730,235 | ) | (4,257,014 | ) | ||||||
Intercompany balances | (704,122 | ) | 704,122 | — | ||||||||
Net liability position | (2,700,099 | ) | (27,054,807 | ) | (29,754,906 | ) |
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 |
30
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED FINANCIAL STATEMENTS
Net |
For the three months ended September 30, 2017, 480,000March 31, 2021 and 2020, the following 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,securities were excluded from the calculationcomputation of earningsdiluted net loss per share as the resultresults 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 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 | $ (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 |
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS
Three months ended March 31, 2021 | Three months ended March 31, 2020 | |||||||
Warrants to purchase shares of common stock | 926,470,474 | 154,455,397,549 | ||||||
Convertible notes | 662,500,729 | 48,756,889,839 | ||||||
1,588,971,203 | 203,212,287,388 |
18. |
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 | $ - |
Commitments and contingencies |
a. | Contingency related to outstanding penalties |
The Company has provided for potential US penalties of $250,000 due to noncompliancenon-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. |
The company has a mortgage loans as disclosed in note 10 above. The future commitment under this loan is as follows:
Amount | ||||
Within the next twelve months | 118,538 | |||
Thereafter | 3,865,866 | |||
Total | $ | 3,984,404 |
The Company has principal and interest payment commitments under the Convertible notes disclosed under Note 9 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.
19. |
On April 30, 2021 the Company was given a conversion notice of three payments of $30,800 due on April 30, 2021 under the Labrys note entered into on November 30, 2020 in the aggregate principal amount of $275,000 and 100,000,000 restricted shares were issued. The Company is not current in its tax filings asstill has seven more payments of September 30, 2017.30,800 due under the note.
On May 10, 2021, the Company closed on a new financing with Labrys for a $550,000 convertible note including a 10% OID for net proceeds of $500,000. The Companynote bears interest at 10% per annum and has accrued $250,000a fixed conversion price of $0.005 per share subject to adjustments should other new financings be done at more favorable terms. The note is due 12 months from the issuance date. The funding included a five year warrant for not filing certain required returns in the United States.
The Company is also currently evaluating potential tax liabilities due to the gain on disposal91,666,666 shares at a conversion price of our Canadian Rehab Clinic.
The total tax liabilities, including penalties and interest could be significant and adversely impact stockholder value.
$0.006 per share.
31
ETHEMA HEALTH CORPORATION
(formerly Greenstone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED CONSOLDATEDCONSOLIDATED FINANCIAL STATEMENTS
19. | Subsequent events (continued) |
On August 3, 2017,May 10, 2021, the Company prepaid the note entered into an agreement to acquire a property at 45 West 17th Street, Riviera Beach, Florida, including the completion of the construction of a 20 bed in-patient detoxification facility and the licensing approvals to operate a detoxification facility for a total purchase consideration of $3,000,000, of which $1,000,000 of the financing is to be provided by the seller, bearing interest at 7% per annum for a 22-month period. This agreement is subject to a successful closing on or before November 17, 2017, after which 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 to date. The proceeds of these advances were used to make the initial down payments, as discussed below.
On November 6, 2017, the Company, entered into a Securities Purchase Agreement29, 2020 with Power Up Lending Group Ltd., pursuant to which the Company issued to the Purchaser a Convertible Promissory NoteFirst Fire Global Opportunities Fund, LLC in the aggregate principal amount of $103,000.$137,500. The Note hasnote was repaid in its entirety.
On May 12, warrants issued under the note in the amount 50,505,051 shares were exercised on a maturity datecashless basis, resulting in the issuance of August 15, 2018 and bears interest at42,353,038 common shares.
On April 30, 2021 the atCompany prepaid the rate of twelve percent per annum fromnote issued on October 29, 2020, to Geneva Roth Remark Holdings, Inc., in 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 outstandingaggregate 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.$88,000. The proceeds of this note was also used to fund the initial down payment, as discussed below.has been repaid in its entirety.
On November 2, 2017,May 10, 2021 the Company entered into an agreementprepaid the note issued August 13, 2020, to purchase certain buildingsAuctus Fund LLC, in Westthe aggregate principal amount of $100,000. The note has been repaid and retired.
On May 3, 2021, a Company subsidiary Addiction Recovery Institute of America LLC closed on a second PPP loan through Lendistry for net proceeds of $157,367.
The Company intends to continue its operations at a new location in west Palm Beach, Florida, totalling approximately 80,000 square feetBeach. A Letter of Intent ("LOI") was signed on whichFebruary 7, 2020, with a third party that has a property lease and a pending license at its new location. The Company originally anticipated recommencing operations in February 2020, however it has been adversely affected by the current tenant operatesCOVID-19 pandemic. The LOI requires the Company to provide a substance abuse center for a considerationworking capital loan of $20,080,000.up to $500,000, the Company has loaned $1,026,669 as of March 31, 2021. The Company is obligated to make certain non-refundable down payments of $2,210,000. The closing of this transaction is expected to take placeclose on February 28, 2018 or at an earlier date agreed to by the parties.
Other than disclosed above,acquisition during 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.second quarter.
32
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- K for the year ended December 31, 20162020 filed with the Securities and Exchange Commission on April 17, 2017.15, 2021. 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.
Plan of Operation
During the next twelve months, the Company plans to conclude the purchase of Evernia and 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. The Company plans to focus ongrow the growth of its addiction and aftercare treatment units by seeking out potential acquisitions.Evernia business.
Results of Operations
For the three months ended September 30, 2017March 31, 2021 and the three month months ended September 30, 2016March 31, 2020.
Revenues
Revenue
Revenues was $648,298were $90,793 and $0$83,542 for the three months ended September 30, 2017March 31, 2021 and 2016,2020, respectively, an increase of $648,298. The Company disposed of its Canadian Rehab Clinic on February 14, 2017$7,251 or 8.7%, this included the rental escalation as per the agreement and simultaneously acquireda deterioration in 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 fromcurrency exchange rate against the Canadian Rehab Clinic have been reclassified to discontinued operations. There is no meaningful comparative data to compare our revenues.Dollar over the prior period.
Operating Expenses
Operating expenses was $556,968were $52,016 and $192,193$174,149 for the three months ended September 30, 2017March 31, 2021 and 2016,2020, respectively, an increasea decrease of$364,775, $122,133 or 189.8%70.1%. The operations ofdecrease is primarily due to the Canadian Rehab Clinic been reclassified to discontinued operations as the business unit was sold effective February 14, 2017.
The operating expenses incurred during the prior three month period are minimal and consisted primarily of payroll costs of $89,934, management fees of $45,742 and professional fees of $47,135.
The operating expenses in the current period include the following:
General and administrative expenses was $5,503 and $22,536 for the three months ended March 31, 2021 and 2020, respectively, a decrease of |
· | Professional fees was $36 and $108,021 for the three months ended March 31, 2021 and 2020, respectively, a decrease of |
· | Salaries and wages was $12,852 and $12,351 for the three months ended March 31, 2021 and 2020, respectively, an increase of | |
· | Depreciation expense was $32,125 and $30,241 for the three months ended March 31, 2021 and 2020, an increase of $1,884 or 6.2%, the increase is related to the |
Operating Income (loss)
The operating income was $38,777 and operating loss was $90,607 for the three months ended March 31, 2021 and 2020, respectively, an improvement of $129,384 or 142.8%. The increase is due to the slight improvement in revenues and the decrease in operating expenses as discussed above.
Operating income (loss)
33
Loss on conversion of convertible debt
The loss on conversion of convertible debt was$1,106,648 and $286,343 for the three months ended March 31, 2021 and 2020, respectively, an increase of $820,305 or 286.5%. The increase in loss is attributable to the fixed conversion price on the notes converted in a market where our share price had increased substantially from the date that the fixed conversion prices were set.
Penalty on convertible notes
Operating income (loss) amounted to $91,330 and $(192,193) for the three months ended September 30, 2017 and 2016, respectively, an improvement of $283,523 or 147.5%, primarily due to our Seastone operations which has been profitable during the current quarter, offset by corporate operating expenses.
Other income
Other income was $67,596 and $60,000 for the three months ended September 30, 2017 and 2016, respectively, an increase of $7,596 or 12.7%. Other income in the current period represents expected additional earnout paymentsPenalty 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.
Other expense
Other expense was $0 and $12,250 for the three months ended September 30, 2017, a decrease of $12,250 or 100.0%.
Interest expense
Interest expense was $86,371 and $8,598 for the three months ended September 30, 2017 and 2016, respectively, an increase of $77,773, the increase is primarily due to interest due on the new mortgage loans which replaced 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 $13,052 and $39,988 for the three months ended September 30, 2017 and 2016, respectively, a decrease of $26,936 or 67.4% and represents the amortization of the value of the warrants issued in terms of the convertible loan agreements entered into during December 2016 and January 2017 and the amortization of the fair value of the beneficial conversion feature of convertible notes issued to note holders during June 2017, the fair value of the warrants and the beneficial conversion feature are amortized over a six to nine month period, the term of the underlying convertible securities.
Derivative liability movement
Derivative liability movement was $19,329$9,240 and $0 for the three months ended September 30, 2017March 31, 2021 and 2016,2020, an increase of $9,240. The penalty on convertible notes relates to a fee paid for the extension of repayment dates on the Labrys note.
Fair value of warrants granted to convertible debt holders
Fair value of warrants granted to convertible debt holders was $976,788 and $0 for the three months ended March 31, 2021 and 2020, an increase of $976,788 or 100%. The Company granted warrants to certain convertible debt holders in terms of agreements entered into with them, whereby any debt issued subsequent to their debt on more favorable terms would result in the debt holders being entitled to the same terms as issued to the subsequent debt holders. The company issued warrants for a total of 246,464,649 shares of common stock valued using a Black Scholes valuation model.
Exercise of warrants
Exercise of warrants was $90,000 and $92,952 for the three months ended March 31, 2021 and 2020, respectively, a decrease of $2,952 or 3.2%. During the current period a warrant holder exercised warrants for 66,666,666 shares of common stock resulting in the expense of $90,000 for the issue of 59,999,999 shares of common stock, on a cashless basis.
Interest expense
Interest expense was $137,677 and $193,922 for the three months ended March 31, 2021 and 2020, respectively, a decrease of $56,245 or 29.0% was primarily due to the conversion of convertible debt to equity during the current period and lower interest rates in the convertible debt outstanding during the current period.
Debt discount
Debt discount was $502,677 and $403,677 for the three months ended March 31, 2021 and 2020, respectively, an increase of$19,329 $99,000 or 100%24.5%. ThisThe increase is primarily related to the age of the convertible debt on our balance sheet which has debt discounts being amortized during the current period, in the prior period several notes had debt discount which had been fully amortized.
Derivative liability movement
The derivative liability movement was $495,589 and $(9,754,896) for the three months ended March 31, 2021 and 2020. The derivative liability movement represents the mark to market movements of variably priced convertible notes and warrants issued during the derivative liabilities arising oncurrent and prior comparative period. The mark to market movement of $495,589 during the beneficialcurrent period is due to the conversion feature of convertible debt into equity during the variable priced notes issued to note holders in June 2017.period.
Foreign exchange movements
Foreign exchange movements were $53,294was $(79,492) and $11,099$484,051 for the three months ended September 30, 2017March 31, 2021 and 2016,2020, respectively, and representsrepresenting the realized exchange gains and (losses) on monetary assets and liabilities settled during eachthe current period as well as mark to market adjustments on monetary assets and liabilities reflected on the balance sheet and denominated in Canadian Dollars.
Net (loss) income from discontinued operations
The net (loss) income from discontinued operations was $(218,253) and $318,901, for the three months ended September 30, 2017 and 2016, respectively, an increase in loss of $537,154, or 168.4%. The current period loss is made up primarily of foreignUS Dollar 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 in the discontinued operation. The discontinued operation has significant receivables from the Group and from the disposal of the rehab clinic,rate deteriorated against the Canadian Dollar has strengthened against the US Dollar during the current period, giving risecompared to the foreign currency loss.
The prior income from discontinued operations represents the trading operations of the Canadian Rehab clinic.
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 and the nine months ended September 30, 2016.
Revenue
Revenues was $1,373,028 and $0 for the nine months ended September 30, 2017 and 2016, respectively, an increase of $1,373,028. 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 $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
Operating expenses was $1,929,714 and $398,433 for the nine months ended September 30, 2017 and 2016, respectively, an increase of$1,531,281 or 384.3%. The operations of the Canadian Rehab Clinic been reclassified to discontinued operations as the business unit was sold effective February 14, 2017.
The operating expenses incurred during the prior nine month 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.
The operating expenses in the current nine month period include the following:
Operating loss
Operating loss amounted to $(556,686) and $(398,433) for the nine months ended September 30, 2017 and 2016, respectively, an increase of $(158,253) or 39.7%, primarily due to the additional professional fees incurred on the corporate restructure, management fees paid and depreciation expense during the current period, offset by the revenues earned from our Seastone operation of $1,373,028.
Other income
Other income was $635,904 and $72,507 for the nine months ended September 30, 2017 and 2016, respectively, an increase 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.
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. The charge during the current period represents the amortization of the value of the warrants issued in terms of the convertible loan agreements entered into during December 2016 and January 2017 and the amortization of the fair value of the beneficial conversion feature of convertible notes issued to note holders during February 2017 and June 2017, the fair value of the warrants and the beneficial conversion feature are amortized over a six to nine month period, the term of the underlying convertible securities. The $73,250, incurred in the prior period, representsresulting in the amortization of the value of warrant and original issue discount attached to a short-term loan.loss on foreign exchange.
Derivative liability movement
Derivative liability movement was $75,203 and $0 for the nine months ended September 30, 2017 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, respectively, represents the realized exchange losses and gains, respectively, on monetary assets and liabilities settled during each period as well as mark to market adjustments on monetary assets and reflected on the balance sheet and denominated in Canadian Dollars.
Net income from discontinued operations
The net income from discontinued operations was $7,194,389 and $762,680, for the nine months ended September 30, 2017 and 2016, respectively, an increase of $6,431,708.
The current period income is primarily made up as follows:
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 incomeloss
Net income was $6,191,925loss of $2,368,156 and $349,386$10,338,286 for the ninethree months ended September 30, 2017March 31, 2021 and 2016,2020, respectively, an increasea decrease of $5,842,539,$8,020,130 or 77.6%, primarily due to the profit realized ondecrease in operating expenses, the sale ofdecrease in 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,derivative liability movement, offset by the compensation charge of $373,274 relating toincrease in the acquisition of Cranberry Cove,loss on convertible debentures and the amortizationincrease in the fair value of $442,377 of debt discountwarrants issued to convertible note holders during the current period.
34
Contingency related to outstanding payroll tax liabilities
The Company also has not filed certain foreign assets forms due to the US Federal Government. A provision of $250,000 was made for any potential penalties due.
Liquidity and Capital Resources
Cash (used in) provided by operating activities was $(77,556) and $533,744 for the three months ended March 31, 2021 and 2020, respectively, a decrease of $611,300. The following table summarizesdecrease is primarily due to the following:
· | the decrease in net loss of $7,970,130, discussed under operations above, offset by non-cash movements of $8,521,217, primarily movements on the derivative liability and the fair value of warrants issued on convertible debt; |
· | the translation difference on foreign currency balances movement was $586,990 and includes the unrealized movements on intercompany balances which offsets the net cash generated by operating activities. |
Cash used in investing activities was $336,220 and $9,542 for the three months ended March 31, 2021 and 2020, respectively, the increase is attributable to the advances made to Evernia, which acquisition we expect to close within the second quarter.
Cash provided by financing was $279,181 and cash used in financing activities was $17,572. In the current period the Company raised convertible debt funding of $340,000 and repaid $35,000 of convertible notes and $28,631 on the mortgage loan.
Over the next twelve months we estimate that the company will require approximately $1.5 million in working capital as it continues to develop the Evernia facility and it is also exploring several other treatment center options and sources of September 30, 2017 and December 31, 2016.
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 |
patients throughout the country. The Company realized proceeds of CDN$8,500,000 (US$6,479,400) from the disposal of its Canadian Rehab Clinic in February 2017. These proceeds were used to settle outstanding tax liabilities of CDN$3,429,105 (US$2,621,208) and to purchase the propertyand assets 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 and to fund the restructuring transactions.
The Company borrowed an additional $294,500 in terms of convertible short-term notes during the period January to September 2017, of which $130,000 was paid 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 raised a new mortgage on 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 convertible notes and the balance for working capital purposes. We estimate that the Company will require an additional $1,000,000 for working capital purposes. The Company will also needcompany may have to raise additional funding to meet the minimum deposit requirements and to acquire certain buildings in West Palm Beach, Florida, disclosed under the subsequent events note in the notes to the unaudited condensed consolidated financial statements above.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.
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.
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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
35
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, 2017March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II
Item 1. Legal Proceedings.
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.
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 |
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 *
* filed herewith
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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, 2017May 24, 2021
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), |
|
Shawn Leon | Chief Financial Officer (Principal Financial Officer), President and Director | |
/s/ John O’Bireck | Director | |
John O’Bireck | ||
/s/ Gerald T. Miller | Director | |
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