The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Ethema Health Corporation (the “Company”)
was incorporated under the laws of the state of Colorado, USA, on April 1, 1993. Effective April 4, 2017, the Company changed
its name to Ethema Health Corporation and prior to that, on May 2012, the Company had changed its name to GreeneStone Healthcare
Corporation from Nova Natural Resources Corporation. As of March 31, 2017, the Company owned 100% of the outstanding shares of
GreeneStone Clinic Muskoka Inc., incorporated in 2010 under the laws of the Province of Ontario, Canada; Cranberry Cove Holdings
Ltd., incorporated on January 9, 2004 under the laws of the Province of Ontario, Canada. and Seastone Delray Healthcare, LLC,
incorporated on May 17, 2016 under the laws of Florida, USA; and Delray Andrews RE, LLC, incorporated on May 17, 2016 under
the laws of Florida, USA.
During December 2016, the Company obtained a license to
operate and provide addiction treatment healthcare services in Florida, USA. The company commenced operations under this license
with effect from January 2017.
On February 14, 2017, the Company completed a series of
transactions (referred to collectively as the “Restructuring Transactions”), including a Share Purchase Agreement
(the “SPA”) whereby the Company acquired 100% of the stock of Cranberry Cove Holdings Ltd., which holds the real estate
on which the Company’s Rehabilitation Clinic (“the Canadian Rehab Clinic”) operates, an asset purchase agreement
(the “APA”) and lease (the “Lease”) whereby the Company sold all of the Canadian Rehab Clinic business
assets and leased the real estate to the buyer, and a real estate purchase agreement and asset purchase agreement whereby the
Company purchased the real estate and business assets of Seastone Delray (the “Florida Purchase”).
The Share Purchase Agreement
Under the SPA, the Company acquired 100% of the stock
of Cranberry Cove Holdings Ltd. (“CCH”) from Leon Developments Ltd. (“Leon Developments”), a company wholly
owned by Shawn E. Leon, who is the President, CEO, and CFO of the Company (“Mr. Leon”). CCH owns the real estate on
which the Canadian Rehab Clinic is located. The total consideration paid by the Company was CDN$3,517,062, including the assumption
of certain liabilities of CCH, which was funded by the assignment to Leon Developments of certain indebtedness owing to the Company
in the amount of CDN$659,918, and the issuance of 60,000,000 shares of the Company’s common stock to Leon Developments,
valued at US$0.0364 per share.
The Asset Purchase Agreement and Lease
Under the APA, the assets of the Canadian Rehab Clinic
were sold by the Company, through its subsidiary, GreeneStone Clinic Muskoka Inc. (“Muskoka”), to Canadian Addiction
Residential Treatment LP (the “Purchaser”), for a total consideration of CDN$10,000,000, plus an additional performance
payment of up to CDN$3,000,000 as a performance payment to be received in 2019 if certain clinic performance metrics are met.
The Purchaser completed the sale with cash proceeds to the Company of CDN$10,000,000, of which CDN$1,500,000 will remain in escrow
for up to two years to cover indemnities given by the Company. The proceeds of the Muskoka clinic asset sale were used to pay
down certain tax debts and operational costs of the Company and to fund the Florida Purchase, mentioned below.
Through the APA, substantially all of the assets of the
Canadian Rehab Clinic were sold, leaving Ethema with only the underlying clinic real estate, which the Company, through its newly
acquired subsidiary, CCH concurrently leased to the Purchaser. The Lease is a triple net lease and provides for a five (5) year
primary term with three (3) five year renewal options, annual base rent for the first year at CDN$420,000 with annual increases,
an option to tenant to purchase the leased premises and certain first refusal rights.
The Florida Purchase
Immediately after closing on the sale of the assets of
the Canadian Rehab Clinic, the Company closed on the acquisition of the business and real estate assets of Seastone Delray pursuant
to certain real estate and asset purchase agreements This business will be 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.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America for
interim consolidated financial information and Rule 8-03 of Regulation SX. Accordingly, these unaudited condensed consolidated
financial statements do not include all the information and disclosures required by accounting principles generally accepted in
the United States of America for complete financial statements.
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
1.
|
Nature
of Business (continued)
|
All adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included in these unaudited condensed consolidated financial statements.
Operating results for the three month period presented are not necessarily indicative of the results that may be expected for
any other interim period or for the full year. The balance sheet at December 31, 2016 has been derived from audited consolidated
financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated
financial statements and footnotes thereto for the year ended December 31, 2016.
|
|
2.
|
Summary
of Significant Accounting Policies
|
The preparation of unaudited condensed consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
|
|
b)
|
Principals
of consolidation and foreign currency translation
|
The accompanying unaudited condensed consolidated financial
statements include the accounts of the Company, its subsidiary. All intercompany transactions and balances have been eliminated
on consolidation.
The Company previously owned an operational subsidiary
whose functional currency was the Canadian dollar, while the Company’s reporting currency is the U.S. dollar. The Company
recently acquired a property owning subsidiary, CCH, whose functional currency is the Canadian dollar. All transactions initiated
in Canadian dollars are translated into US dollars in accordance with ASC 830, “Foreign Currency Translation” as follows:
|
|
•
|
Monetary
assets and liabilities at the rate of exchange in effect at the balance sheet date.
|
|
|
•
|
Equity
at historical rates.
|
|
|
•
|
Revenue
and expense items 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’ deficit as a component of accumulated other
comprehensive income or loss. Therefore, translation adjustments are not included in determining net income (loss) but reported
as other comprehensive income (loss).
For foreign currency transactions, the Company translates
these amounts to the Company’s functional currency at the exchange rate effective on the invoice date. If the exchange rate
changes between the time of purchase and the time actual payment is made, a foreign exchange transaction gain or loss results
which is included in determining net income for the period.
The relevant translation rates are as follows: For the
three months ended March 31, 2017; a closing rate of CAD$1.0000 equals US$0.7513 and an average exchange rate of CAD$1.0000
equals US$0.7555.
|
|
c)
|
Cash
and cash equivalents
|
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.
The Company has $75,131 (CAD$100,000) in restricted cash
held by their bank to cover against the possibility of credit card charge backs, for services not performed. The Company is working
on releasing these funds as it no longer operates the Canadian Rehab Clinic, which was sold on February 14, 2017.
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
2.
|
Summary
of Significant Accounting Policies (continued)
|
The Company has two operating segments
from which it derives revenues, i) rental income from leasing of a rehabilitation facility to third parties and ii) in-patient
revenues for rehabilitation services provided to customers. Reveue is recognized as follows:
|
|
·
|
in terms of the lease agreement entered into, on a monthly basis as long as the facility is utilized by the tenant
|
|
|
·
|
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;
|
|
|
|
|
|
|
·
|
it is probable that
the
economic benefits associated
with the
transaction
will
flow to
the
Company.
|
the
customers
have
been treated and provided
with
services
by the
Company;
the
amount
of
revenue and related costs can
be
In particular, the Company recognizes:
|
|
·
|
fees for
inpatient addiction
treatments proportionately
over the
term
of the
patient’s treatment.
|
|
|
e)
|
Recent
accounting pronouncements
|
In January 2017, the FASB issued Accounting Standards
Update No. (“ASU”) 2017-02, an amendment to Topic 805, Business Combinations. The amendments in this Update clarify
the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should
be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this Update affect all reporting entities
that must determine whether they have acquired or sold a business. The amendments in this Update provide a more robust framework
to use in determining when a set of assets and activities is a business. The amendments in this Update apply to annual periods
beginning after December 15, 2017. The amendments in this Update should be applied prospectively on or after the effective date.
No disclosures are required at transition. The Company does not expect this guidance to have a material impact on its financial
statements.
In January 2017, the FASB issued ASU 2017-04, an amendment
to Topic 350, Intangibles – Goodwill and Other, an entity no longer will determine goodwill impairment by calculating the
implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that
reporting unit had been acquired in a business combination. Because these amendments eliminate Step 3 2 from the goodwill impairment
test, they should reduce the cost and complexity of evaluating goodwill for impairment. An entity should apply the amendments
in this Update on a prospective basis. The amendments in this Update are effective for Goodwill impairment tests in fiscal years
beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing
dates after January 1, 2017. We are currently evaluating the effect ASU 2017-04 will have on our consolidated financial statements.
In February 2017, the FASB issued ASU 2017-05, an amendment
to Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets The amendments in this Update
are required for public business entities and other entities that have goodwill reported in their financial statements, under
the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair
value of a reporting unit with its carrying amount. The amendments in this Update modify the concept of impairment from the condition
that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying
amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied
fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting
unit had been acquired in a business combination. An entity should apply the amendments in this Update on a prospective basis.
The amendments in this Update are effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for
interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the
effect ASU 2017-05 will have on our consolidated financial statements.
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
2.
|
Summary
of Significant Accounting Policies (continued)
|
|
|
e)
|
Recent
accounting pronouncements (continued)
|
In March 2017, the FASB issued ASU 2017-07, Compensation
Retirement Benefits (Topic 715). This Update is being issued primarily to improve the presentation of net periodic pension cost
and net periodic postretirement benefit cost. This Update also includes amendments to the Overview and Background Sections of
the FASB Accounting Standards Codification. Under generally accepted accounting principles (GAAP), defined benefit pension cost
and postretirement benefit cost (net benefit cost) comprise several components that reflect different aspects of an employer’s
financial arrangements as well as the cost of benefits provided to employees. Those components are aggregated for reporting in
the financial statements. The amendments in this Update apply to all employers, including not-for-profit entities, that offer
to their employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for
under Topic 715. 2. The amendments in this Update require that an employer disaggregate the service cost component from the other
components of net benefit cost. The amendments also provide explicit guidance on how to present the service cost component and
the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost
to be eligible for capitalization. The amendments in this Update are effective for public business entities for annual periods
beginning after December 15, 2017, including interim periods within those 3 annual periods. For other entities, the amendments
in this Update are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning
after December 15, 2019. Early adoption is permitted as of the beginning of an annual period for which financial statements have
not been issued or made available for issuance. The amendments in this Update should be applied retrospectively for the presentation
of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost
in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component
of net periodic pension cost and net periodic postretirement benefit in assets. We are currently evaluating the effect ASU 2017-07
will have on our consolidated financial statements.
In March 2017, the FASB issued ASU 2017-08, Receivables—Nonrefundable
Fees and Other Costs (Subtopic 310-20) Premium Amortization of Purchased Callable Debt Securities. The amendments in this Update
affect all entities that hold investments in callable debt securities that have an amortized cost basis in excess of the amount
that is repayable by the issuer at the earliest call date (that is, at a premium). The amendments in this Update shorten the amortization
period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized
to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount
continues to be amortized to maturity. Under current GAAP, premiums and discounts on callable debt securities generally are amortized
to the maturity date. The amendments in this Update more closely align the amortization period of premiums and discounts to expectations
incorporated in market pricing on the underlying securities. As a result, the amendments more closely align interest income recorded
on bonds held at a premium or a discount with the economics of the underlying instrument. For public business entities, the amendments
in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.
For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within
fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. If an entity
early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that
includes that interim period. An entity should apply the amendments in this Update on a modified retrospective basis through a
cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the
period of adoption, an entity should provide disclosures about a change in accounting principle. We are currently evaluating the
effect ASU 2017-08 will have on our consolidated financial statements.
Any new accounting standards, not disclosed above, that
have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact
on the financial statements upon adoption.
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
2.
|
Summary
of Significant Accounting Policies (continued)
|
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, March 31, 2017 and December 31, 2016.
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.
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 $6,154,467
and
accumulated deficit
of $15,520,315. As
disclosed in
note
6, the
Company
will be dependent
upon
the
raising
of additional
capital
in order to implement its business
plan.
There is
no
assurance that
the
Company
will be
successful
with
future financing ventures, and
the inability
to secure such financing may
have
a material adverse
effect
on the
Company’s financial
condition.
In
the
opinion
of
management,
liquidity
risk is
assessed as
high,
material and remains
unchanged
from
the
prior
year.
Market risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises of three types
of risk: interest rate risk, currency risk, and other price risk. The Company is exposed to interest rate risk and currency risk.
Interest rate risk 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 $47,212 as of March 31, 2017. This liability
is based on floating rates of interest that have been stable during the current reporting period. In the opinion of management,
interest rate risk is assessed as low, not material and remains unchanged from the prior year.
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 its subsidiaries 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 March 31,
2017, a 5% depreciation or appreciation of the Canadian dollar against the U.S. dollar would result in an approximate $19,500
increase or decrease in the Company’s after tax net income from operations. The Company has not entered into any hedging
agreements to mediate this risk. In the opinion of management, currency risk is assessed as low, material and remains unchanged
from the prior year.
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
2.
|
Summary
of Significant Accounting Policies
|
|
|
f)
|
Financial
instruments (continued)
|
|
|
iii.
|
Market
risk (continued)
|
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.
|
|
g)
|
Derivative
instrument liability
|
The Company accounts for derivative instruments in accordance
with ASC815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including
certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives
on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the
derivative instruments depends on whether the derivatives qualify as hedging relationships and the types of relationships designated
are based on the exposures hedged. At March 31, 2017 the Company had a derivative liability amounting to $183,048.
|
|
h)
|
Convertible
Instruments
|
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 provides 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.
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
On February 14, 2017, in terms of the details outlined
in note 1 above, the Company disposed of the business and certain assets of its Canadian Rehab Clinic for gross proceeds of CDN$10,000,000.,
a total of CDN$1,500,000 of the gross proceeds is being held in escrow for up to two years, in addition there is an earnout payment
of up to CDN$3,000,000 to be received in 2019, if certain clinic performance metrics are met, see note 8 below.
The proceeds realized from the sale of the Canadian Rehab
Clinic were used to settle outstanding tax liabilities, refer note 11 below, and to acquire the business of Seastone of Delray,
refer note 5 below.
The proceeds realized on disposal have been allocated
as follows:
|
|
|
Amount
|
|
|
|
|
|
Proceeds on
disposal
|
|
$
|
7,644,000
|
|
|
|
|
|
|
|
|
Assets sold:
|
|
|
|
|
|
Accounts receivable
|
|
|
113,896
|
|
|
Plant and equipment
|
|
|
109,075
|
|
|
|
|
|
222,971
|
|
|
Liabilities assumed by purchaser
|
|
|
|
|
|
Deferred revenue
|
|
|
(73,799
|
)
|
|
|
|
|
|
|
|
Net assets and liabilities
sold
|
|
|
149,172
|
|
|
|
|
|
|
|
|
Net profit realized on
disposal
|
|
$
|
7,494,828
|
|
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
4.
|
Acquisition
of subsidiary
|
On
February
14,
2017,
the
Company acquired
100%
of the equity of
CCH,
from
Leon Developments, a company
wholly
owned
by
our
CEO. The
total
consideration paid
by the
Company was
CDN$3,517,062,
including
the
assumption
of
certain
liabilities of
CCH,
which
was
funded
by the
assignment to Leon
Developments
of
certain
indebtedness
owing
to
the
Company in
the
amount
of
CDN$659,918
(US$504,442)
on the
disposal
of
a subsidiary,
1816191
Ontario,
which
principal amount had previously been fully provided for during
2015;
and
the
issuance
of 60,000,000
shares
of
the
Company’s common stock at US$0.0364 per share for proceeds
of $2,184,000.
The allocation of the purchase price is as follows:
|
|
|
Amount
|
|
|
|
|
|
Purchase price paid:
|
|
|
|
|
|
Common shares issued to Seller
|
|
$
|
2,184,000
|
|
|
Receivable assumed by the Seller
|
|
|
504,442
|
|
|
|
|
|
2,688,442
|
|
|
Allocated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Assets acquired:
|
|
|
|
|
|
Property
|
|
|
6,497,400
|
|
|
Receivable from Ethema Health Corporation
|
|
|
299,743
|
|
|
|
|
|
6,797,143
|
|
|
Liabilities assumed:
|
|
|
|
|
|
Accounts payable and other accruals
|
|
|
158,093
|
|
|
Related party payable to Leon Developments
|
|
|
2,057,392
|
|
|
Mortgage liability owing to Ethema Health Corporation
|
|
|
267,540
|
|
|
Mortgage liability
|
|
|
3,145,549
|
|
|
|
|
|
5,628,575
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
1,168,568
|
|
|
|
|
|
|
|
|
Excess purchase consideration allocated
to shareholders compensation
|
|
$
|
1,519,874
|
|
|
|
5.
|
Acquisition
of the business of Seastone of Delray
|
The Company, utilized a portion of the proceeds realized
on the sale of the Canadian Rehab Clinic to acquire certain assets of Seastone of Delray.
The Company obtained its own license to run a rehabilitation
Clinic in Florida in December 2016 and began operations, through its wholly owned subsidiary, Seastone of Delray, LLC, effective
January 2017.
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
5.
|
Acquisition
of the business of Seastone of Delray (continued)
|
The assets acquired were as follows:
|
|
|
Amount
|
|
|
|
|
|
Purchase price paid:
|
|
|
|
|
|
Cash paid to seller
|
|
$
|
2,960,000
|
|
|
Deposits previously paid to seller
|
|
|
110,000
|
|
|
Mortgage liability funds
|
|
|
3,000,000
|
|
|
|
|
|
6,070,000
|
|
|
Assets acquired:
|
|
|
|
|
|
Property
|
|
|
4,410,000
|
|
|
Furniture and fixtures
|
|
|
80,000
|
|
|
Intangibles - to be classified
|
|
|
1,438,525
|
|
|
Receivables
|
|
|
141,475
|
|
|
|
|
$
|
6,070,000
|
|
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 March 31, 2017, the Company has
a working capital deficiency of $6,154,467 and accumulated deficit of $15,520,315. 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's plans include selling its equity securities and obtaining debt financing to fund its capital
requirement and ongoing operations; however, there can be no assurance the Company will be successful in these efforts.
|
|
7.
|
Discontinued
Operations
|
On February 14, 2017, the Company completed a series of
transactions, including an APA whereby the Company sold certain of the Canadian Rehab Clinic assets. The assets disposed of business
represented substantially all of the operating assets of the Canadian Rehab Clinic and has been disclosed as a discontinued operation
for comparative purposes as of December 31, 2016 and for the three month period ended March 31, 2017 and 2016. Refer note 3 above.
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
7.
|
Discontinued
Operations
|
The assets and liabilities of discontinued operations
as of December 31, 2016, respectively is as follows:
|
|
|
December
31, 2016
|
|
Current assets
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
123,358
|
|
|
Prepaid expenses and other current assets
|
|
|
11,253
|
|
|
Total current assets
|
|
|
134,611
|
|
|
Non-current assets
|
|
|
|
|
|
Plant and equipment, net
|
|
|
129,127
|
|
|
Deposits
|
|
|
—
|
|
|
Total
assets
|
|
|
263,738
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Deferred revenues
|
|
|
80,519
|
|
|
|
|
|
|
|
|
Discontinued operation
|
|
$
|
183,219
|
|
The statement of operations for the discontinued operations
is as follows:
|
|
|
Three
months ended March 31, 2017
|
|
Three
months ended March 31, 2016
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
232,152
|
|
|
$
|
822,837
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
4,196
|
|
|
|
15,333
|
|
|
General
and administrative
|
|
|
86,080
|
|
|
|
181,519
|
|
|
Professional
fees
|
|
|
648
|
|
|
|
48,765
|
|
|
Rent
|
|
|
44,518
|
|
|
|
6,144
|
|
|
Salaries
and wages
|
|
|
233,636
|
|
|
|
388,517
|
|
|
Total operating
expenses
|
|
|
369,078
|
|
|
|
640,278
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss)
income
|
|
|
(136,926
|
)
|
|
|
182,559
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(788
|
)
|
|
|
(38,196
|
)
|
|
Foreign
exchange movements
|
|
|
196,706
|
|
|
|
33,155
|
|
|
Net income before
taxation
|
|
|
58,992
|
|
|
|
177,518
|
|
|
Taxation
|
|
|
—
|
|
|
|
—
|
|
|
Net income from
discontinued operations
|
|
$
|
58,992
|
|
|
$
|
177,518
|
|
The profit on sale of business of $7,494,828 is disclosed in note 3 above.
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
8.
|
Due
from sale of subsidiary
|
A net amount of CDN$617,960 was due to the Company on
the sale of the Endoscopy Clinic as of December 31, 2016. This amount was past due and had fully provided for as of December 31,
2016.
On
February
14,
2017,
the
Company acquired CCH
from
Leon
Developments
and settled a portion
of the
purchase consideration
by
assigning
the
proceeds
due
to
the
Company
on the
sale
of the Endoscopy Clinic
to Leon Developments. The
note
together
with
accrued interest thereon
of
CDN$41,959
amounted to CDN
$659,919 (US$504,442).
The provision raised against
the
note
was reversed and
the
unrecorded
interest thereon was recognized during
the
current quarter.
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$1,126,950) has been retained in an escrow account for
a period of up to two years in order to guarantee the warranties provided by the Company in terms of the APA. In addition, the
Company may earn up to an additional CDN$3,000,000 as a performance payment based on the attainment of certain clinic performance
metrics. The Company estimates that the earnout will approximate $663,000 and is accruing this additional amount over a period
of twenty three and a half months. The accrual is recorded as other income, as of March 31, 2017, the company had accrued $42,329
as additional income.
|
|
9.
|
Property,
plant and equipment
|
Plant and equipment consists of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
2017
|
|
December
31, 2016
|
|
|
|
Cost
|
|
Amortization
and Impairment
|
|
Net
book value
|
|
Net
book value
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
$
|
10,805,005
|
|
|
$
|
(53,888
|
)
|
|
$
|
10,751,117
|
|
|
$
|
—
|
|
|
Furniture and fixtures
|
|
|
80,000
|
|
|
|
(3,000
|
)
|
|
|
77,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,885,005
|
|
|
|
(56,888
|
)
|
|
$
|
10,828,117
|
|
|
$
|
—
|
|
Depreciation expense for the three months ended March
31, 2017 and 2016 was $57,065 and $0, respectively.
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 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 and 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.
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
12.
|
Short-term
Convertible Notes
|
The short-term convertible notes consist of the following:
|
|
Interest
rate
|
|
Maturity date
|
|
Principal
Outstanding
|
|
Accrued
interest
|
|
Unamortized
Discount
|
|
March
31, 2017
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labrys Fund, LP
|
8.0%
|
|
August 2, 2017
|
|
$ 110,000
|
|
$ 1,374
|
|
$ (75,359)
|
|
$ 36,015
|
|
$ -
|
|
Series L Convertible notes
|
0.0%
|
|
June 30, 2017 to July 17, 2017
|
|
539,969
|
|
-
|
|
(170,486)
|
|
369,483
|
|
250,258
|
|
|
|
|
|
|
$ 649,969
|
|
$ 1,374
|
|
$
(245,845)
|
|
$ 405,498
|
|
$ 250,258
|
|
Disclosed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term portion
|
|
|
|
|
|
|
|
|
|
|
$ 405,498
|
|
$ 250,258
|
|
Long-term portion
|
|
|
|
|
|
|
|
|
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 405,498
|
|
$ 250,258
|
Labrys Fund, LP
On
February
2,
2017,
The Company entered
into
a Securities Purchase Agreement
with
LABRYS FUND
LP,
in terms
of the
agreement
the
Company
borrowed
$110,000
in terms
of
an unsecured
convertible promissory
note
with
a maturity
date
of August 2,
2017.
The
note
bears interest at a rate
of 8%
per annum. The
note
is
only
convertible
upon
a repayment
default, at
the lower of
60%
of
the
lowest traded price
over the
preceding
30
day trading period prior to
the
issuance
of
this
note
or
60%
of the
lowest traded price
30 days
prior
to
the
conversion date. The Company issued
1,200,000
common shares to
the
note holder
as
a commitment
fee
which
returnable shares
will be
returned to
the
company if fully
repaid prior to
August 2,
2017.
Series L convertible notes
The Company entered
into
Series L Convertible Securities Purchase Agreements
with
8
individuals
on
December
30,
2016.
In
terms
of
these agreements,
the
Company borrowed an aggregate principal amount
of
$468,969
in terms
of
a senior ranking convertible promissory
note
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. 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. The amortization charge of the debt discount for the three months ended March 31, 2017 was $109,355.
During January
2017,
the
Company borrowed a further aggregate principal amount
of
$71,000
in terms
of
three senior ranking convertible promissory
notes
with
a maturity date six months
from
the
issue date and bearing interest at
0%
per annum. The
notes
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 $104,793 would be amortized over the life of the loans. The amortization charge of the debt discount for the three
months ended March 31, 2017 was $43,664.
In terms of the Series L Convertible notes issued above,
during January 2017, the Company granted three year warrants to the Series L Convertible noteholders, exercisable for 2,366,667
shares of common stock at an exercise price of $0.03, subject to certain recapitalization adjustments, per share, expiring between
January 16 and January 17, 2020. (Refer note 16 (b) below).
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The short-term convertible
note
issued to Labrys Fund
LP,
disclosed in
note
12 above, have
variable priced conversion rights
with
no
fixed floor price and
will
reprice
dependent
on the
share price performance
over
varying periods
of
time. This
gives
rise to a derivative financial liability,
which
was
initially valued
at
inception of the
convertible
note
at
$110,000,
the
maximum amount permissible, using a BlackScholes
valuation
model. The
value
of this
derivative financial
liability
was
reassessed
at March
31, 2017
and
$73,048
was
charged to
the
statement
of
operations
and comprehensive loss. The
value of the
derivative
liability
will be
re
assessed at each financial reporting period,
with
any movement thereon recorded in
the
statement
of
operations in
the
period in
which
it
is incurred. The amortization charge of debt discount for the three months ended March 31, 2017 was $34,641.
The following assumptions were used in the Black-Scholes
valuation model:
|
|
|
Three
months ended March 31, 2017
|
|
|
|
|
|
Calculated stock price
|
|
|
$0.03
to $0.06
|
|
|
Risk free interest rate
|
|
|
0.64% to 0.91%
|
|
|
Expected life of convertible notes
|
|
|
3 to 6 months
|
|
|
expected volatility of underlying stock
|
|
|
134.9% to 180.5%
|
|
|
Expected dividend rate
|
|
|
0
|
%
|
The movement in derivative liability is as follows:
|
|
|
Three
months ended March 31, 2017
|
|
|
|
|
|
Derivative liability arising from convertible notes
|
|
$
|
110,000
|
|
|
Fair value adjustment to derivative liability
|
|
|
73,048
|
|
|
|
|
$
|
183,048
|
|
|
|
14.
|
Related
Party Transactions
|
Greenstone Clinic Inc.
As of March 31, 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 March 31, 2017 and December 31, 2016, the Company
had a payable of $13,574 and $70,763, respectively, to 1816191 Ontario, the Endoscopy Clinic, which was sold at the end of the
prior year. The receivable and payable is noninterest bearing, and has no specific repayment terms.
Shawn E. Leon
As of March 31, 2017 and December 31, 2016 the Company
had a receivable of $24,480 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 $100,000 during the
three months ended March 31, 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 4 above.
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
14.
|
Related
Party Transactions (continued)
|
Leon Developments, Ltd.
The Company acquired CCH from Leon Developments, Ltd.,
on February 14, 2017, refer note 1 and 4 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, this amount has remained unchanged since acquisition.
The amount owing is valued at $2,022,173 as of March 31, 2017.
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 CDN$58,925 and CDN$102,045 for the three months ended March 31, 2017 and 2016, 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.
The loans payable is as follows:
|
|
Interest
rate
|
|
Maturity date
|
|
Principal
Outstanding
|
|
Accrued
interest
|
|
March
31, 2017
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cranberry Cove Holdings
|
|
|
|
|
|
|
|
|
|
|
|
|
First Mortgage
|
8.0%
|
|
August 14, 2017
|
|
$ 2,753,611
|
|
$ 13,911
|
|
$ 2,767,522
|
|
$ -
|
|
Second Mortgage
|
12.0%
|
|
November 4, 2017
|
|
262,960
|
|
-
|
|
262,960
|
|
-
|
|
Seastone of Delray
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
|
5.0%
|
|
February 13, 2020
|
|
2,997,500
|
|
12,490
|
|
3,009,990
|
|
-
|
|
|
|
|
|
|
$
6,014,071
|
|
$ 26,401
|
|
$ 6,040,472
|
|
$ -
|
|
Disclosed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term portion
|
|
|
|
|
|
|
|
|
$ 3,042,972
|
|
$ -
|
|
Long-term portion
|
|
|
|
|
|
|
|
|
2,997,500
|
|
-
|
|
|
|
|
|
|
|
|
|
|
$ 6,040,472
|
|
$ -
|
The future aggregate principal outstanding will be repaid
as follows:
|
|
|
Amount
|
|
|
|
|
|
|
2017
|
|
|
$
|
3,016,571
|
|
|
|
2018
|
|
|
|
—
|
|
|
|
2019
|
|
|
|
—
|
|
|
|
2020
|
|
|
|
2,997,500
|
|
|
|
Total
|
|
|
$
|
6,014,071
|
|
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
15.
|
Loans
payable (continued)
|
Cranberry Cove Holdings
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$3,665,057, 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 $23,333.
During March 2017, the Company made a principal payment
of CDN$100,000 on the first mortgage.
The second mortgage with an aggregate principal amount
outstanding of CDN$350,000, 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 12% per annum on the aggregate principal outstanding of $350,000, and matures on November 4, 2018, with monthly interest
payments of $3,500.
Seastone of Delray
The Company entered into a Mortgage and Security Agreement
with Seastone Delray Healthcare, LLC on February 13, 2017for the aggregate principal sum of $3,000,000, bearing interest at the
rate of 5% per annum, maturing on February 13, 2020, with monthly interest payments of $12,500. 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.
|
|
16.
|
Stockholders’
equity (deficit)
|
On February 2, 2017, the Company issued 1,200,000 common
shares to a convertible note holder in terms of a returnable commitment fee. The shares are returnable to the Company if the convertible
note is repaid prior to maturity, failing which the commitment fee will be earned. These shares are not accounted for as issued
until such time as the probability of the commitment fee is assessed as probable or certain, refer note 12 above.
On February 14, 2017, in terms of the acquisition of 100%
of the capital stock of Cranberry Cove Holdings Ltd. (“CCH”) from Leon Developments, the Company funded a portion
of the acquisition by the issuance of 60,000,000 shares of the Company’s common stock at a market value of US$0.0364 per
share, totaling $2,184,000, refer note 1 and 4 above.
In terms of the short-term Series L Convertible notes
entered into with 3 parties, as disclosed in note 12 above, the Company awarded three year warrants exercisable over 2,366,666
shares of common stock, at an exercise price of $0.03 per share.
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
16.
|
Stockholders’
equity (deficit)
|
The fair value of Warrants awarded during the three months
ended March 31, 2017 were valued at $94,620 using the Black Scholes pricing model utilizing the following weighted average assumptions:
|
|
|
Three
months
ended
March
31, 2017
|
|
|
|
|
|
Calculated stock price
|
|
$
|
0.04
|
|
|
Risk free interest rate
|
|
|
1.48
|
%
|
|
Expected life of warrants (years)
|
|
|
3 years
|
|
|
expected volatility of underlying stock
|
|
|
398
|
%
|
|
Expected dividend rate
|
|
|
0
|
%
|
The movement in warrants outstanding is summarized below:
|
|
|
|
|
|
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 January 1, 2017
|
|
|
|
|
19,637,409
|
|
$0.0033 to $0.03
|
|
0.0030
|
|
Granted
|
|
|
|
|
2,366,666
|
|
0.03
|
|
0.0300
|
|
Forfeited/cancelled
|
|
|
|
|
-
|
|
-
|
|
-
|
|
Exercised
|
|
|
|
|
-
|
|
-
|
|
-
|
|
Outstanding March 31, 2017
|
|
|
|
|
22,004,075
|
|
$0.0033
to $0.03
|
|
$0.0300
|
The following table summarizes information about warrants
outstanding at March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
2.94
|
|
|
|
21,704,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,004,075
|
|
2.94
|
|
$ 0.03
|
|
22,004,075
|
|
$ 0.03
|
* 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 March 31, 2017 are
vested. The warrants outstanding as of March 31, 2017 have an intrinsic value of $8,001.
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
16.
|
Stockholders’
equity (deficit)
|
Our board of directors adopted the GreeneStone Healthcare
Corporation 2013 Stock Option Plan (the “Plan”) to promote our long-term growth and profitability by (i) providing
our key directors, officers and employees with incentives to improve stockholder value and contribute to our growth and financial
success and (ii) enable us to attract, retain and reward the best available persons for positions of substantial responsibility.
A total of 10,000,000 shares of our common stock have been reserved for issuance upon exercise of options granted pursuant to
the Plan. The Plan allows us to grant options to our employees, officers and directors and those of our subsidiaries; provided
that only our employees and those of our subsidiaries may receive incentive stock options under the Plan. We have granted a total
of 480,000 options as of March 31, 2017 under the Plan.
No options were issued, exercised or cancelled for the
period under review.
The following table summarizes information about options
outstanding as of March 31, 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
|
|
2.59
|
|
|
|
480,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
480,000
|
|
2.59
|
|
$ 0.12
|
|
480,000
|
|
$ 0.12
|
As of March 31, 2017, there was no unrecognized compensation
costs related to these options and the intrinsic value of the options is $0.
ETHEMA
HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Due to the recent acquisition of
the Cranberry Cove subsidiary on February 14, 2017, the Company has two reportable operating segments;
|
|
i.
|
Rental income from the property owned by Cranberry Cove subsidiary
located at
3571
Muskoka
Road,
#169,
Bala, on which the operations of the Canadian Rehab Clinic were located prior to disposal on February 14, 2017 and subsequently
leased to the purchasers of the business of the Canadian Rehab Clinic, for a period of 5 years renewable for a further three five
year periods and with an option to acquire the property at a fixed price.
|
|
|
ii.
|
Rehabilitation Services provided to customers, during the three months
ended March 31, 2016, these services were provided to customers at our Canadian Rehab Clinic and for the three months ended March
31, 2017, these services are now provided through our Seastone of Delray business acquired on February 14, 2017. The Rehabilitation
services for the three months ended March 31, 2016 are reported under discontinued operations and have not been reported as part
of the Segment Information.
|
The segment operating results of the reportable segments
are disclosed as follows:
|
|
|
Rental Operations
|
|
In-Patient services
|
|
Total
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
42,037
|
|
|
$
|
280,473
|
|
|
$
|
322,510
|
|
|
Operating expenditure
|
|
|
29,548
|
|
|
|
920,099
|
|
|
|
949,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
12,489
|
|
|
|
(639,626
|
)
|
|
|
(627,137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
—
|
|
|
|
504,348
|
|
|
|
504,348
|
|
|
Other expense
|
|
|
(1,519,874
|
)
|
|
|
|
|
|
|
(1,519,874
|
)
|
|
Interest income
|
|
|
—
|
|
|
|
32,074
|
|
|
|
32,074
|
|
|
Interest expense
|
|
|
(36,653
|
)
|
|
|
(26,364
|
)
|
|
|
(63,017
|
)
|
|
Amortization of debt discount
|
|
|
—
|
|
|
|
(187,659
|
)
|
|
|
(187,659
|
)
|
|
Loss on change in fair value of derivative liability
|
|
|
—
|
|
|
|
(73,048
|
)
|
|
|
(73,048
|
)
|
|
Foreign exchange movements
|
|
|
—
|
|
|
|
(157,908
|
)
|
|
|
(157,908
|
)
|
|
Net loss before taxation from continuing operations
|
|
|
(1,544,038
|
)
|
|
|
(548,183
|
)
|
|
|
(2,092,221
|
)
|
|
Taxation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Net loss from continuing operations
|
|
$
|
(1,544,038
|
)
|
|
$
|
(548,183
|
)
|
|
$
|
(2,092,221
|
)
|
ETHEMA HEALTH CORPORATION
(formerly known as GreeneStone
Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The operating assets and liabilities of the reportable
segments are as follows:
|
|
|
Rental Operations
|
|
In-Patient services
|
|
Total
|
|
|
|
|
|
|
|
|
|
Purchase of fixed assets
|
|
|
—
|
|
|
|
8,878
|
|
|
|
8,878
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
7,769
|
|
|
|
403,341
|
|
|
|
411,110
|
|
|
Non-current assets
|
|
|
2,887,063
|
|
|
|
10,647,294
|
|
|
|
13,534,357
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
(5,175,717
|
)
|
|
|
(1,389,860
|
)
|
|
|
(6,565,577
|
)
|
|
Non-current liabilities
|
|
|
—
|
|
|
|
(2,997,500
|
)
|
|
|
(2,997,500
|
)
|
|
Intercompany balances
|
|
|
(88,544
|
)
|
|
|
88,544
|
|
|
|
—
|
|
|
Net (liability) asset position
|
|
|
(2,369,429
|
)
|
|
|
6,751,819
|
|
|
|
4,382,390
|
|
|
|
18.
|
Net
income (loss) per common share
|
For the three months ended March 31, 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
|
|
$
|
(2,092,221
|
)
|
|
|
78,738,855
|
|
|
$
|
(0.03
|
)
|
|
Net income per share from discontinued operations
|
|
|
7,553,820
|
|
|
|
78,738,855
|
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share
|
|
|
5,461,599
|
|
|
|
78,738,855
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
—
|
|
|
|
266,700
|
|
|
|
|
|
|
Options
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share from continuing operations
|
|
|
(2,092,221
|
)
|
|
|
79,005,555
|
|
|
|
(0.03
|
)
|
|
Net income per share from discontinued operations
|
|
|
7,553,820
|
|
|
|
79,005,555
|
|
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,461,599
|
|
|
|
79,005,555
|
|
|
$
|
0.07
|
|
For the three months ended March 31, 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
|
|
$
|
(33,988
|
)
|
|
|
47,738,855
|
|
|
$
|
(0.00
|
)
|
|
Net income per share from discontinued operations
|
|
|
177,518
|
|
|
|
47,738,855
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share
|
|
|
143,530
|
|
|
|
47,738,855
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
—
|
|
|
|
266,700
|
|
|
|
|
|
|
Options
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share from continuing operations
|
|
|
(33,988
|
)
|
|
|
48,005,555
|
|
|
|
(0.00
|
)
|
|
Net income per share from discontinued operations
|
|
|
177,518
|
|
|
|
48,005,555
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
143,530
|
|
|
|
48,005,555
|
|
|
$
|
0.00
|
|
ETHEMA
HEALTH CORPORATION
(formerly
known as GreeneStone Healthcare Corporation)
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
19.
|
Commitments and contingencies
|
|
|
a.
|
Contingency
related to outstanding penalties
|
The Company has provided for potential US penalties of
$250,000 due to noncompliance with the filing of certain required returns. The actual liability may be higher due to interest
and penalties assessed by these taxing authorities.
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.
The Company is not current in its tax filings as of March
31, 2017.
On April 20, 2017, the Company received an advance of
CDN$400,000 from a related party. The advance is short term in nature, is non-interest bearing and has no fixed terms of repayment.
The funds are designated for general working capital purposes.
Other than disclosed above, the Company has evaluated
subsequent events through the date of the unaudited condensed consolidated financial statements were available to be issued and
has concluded that no such events or transactions took place that would require disclosure herein.