Item
1.01
Entry into a Material Definitive Agreement.
On
December 1, 2017, Ethema Health Corporation, a Colorado corporation (the “
Company
”) and its wholly owned subsidiaries
Ethema Clinic Muskoka Inc., an Ontario corporation and Seastone Delray Healthcare LLC, a Florida limited liability company (the
“
Subsidiaries
”) and Cranberry Cove Holdings Ltd., an Ontario corporation (“
Cranberry
”) closed
on a private offering (the “
Private Offering
”) to raise up to $1,500,000 in capital. Pursuant to the Private
Offering, the Company and the Subsidiaries jointly and severally issued one senior secured convertible promissory note (the "
Note
"),
bearing a principal amount of up to $1,650,000 in total, to Leonite Capital, LLC, a Delaware limited liability company (the “
Investor
”).
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 (the “
A&R Note
”), which note amends and restates the Note to (a) extend
the maturity date to December 1, 2018; (b) remove Cranberry as an obligor; (c) increase the interest rate by 2.00% 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 A&R Note, the parties entered into (i) a S
ecurities 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 (the “
Warrant
”); (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; and (iv) a First Amendment to the
A&R Note, effective January 2, 2018 (the “
First Amendment
” and together with the foregoing agreements the
“
Ancillary Agreements
”).
At
the execution of the Note, the Investor funded an initial tranche of $300,000. Thereafter the Investor funded a second tranche
of $156,136.20. 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.
The
A&R Note, as amended, and Warrant were offered and issued without registration under the Securities Act of 1933, as amended
(the “
Securities Act
”), in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act, as
provided in Rule 506 of Regulation D promulgated thereunder. The A&R Note, as amended, and Warrant, and the shares of common
stock issuable upon exercise and/or conversion thereof, have not been registered under the Securities Act, or any other applicable
securities laws, and unless so registered may not be offered or sold in the United States, except pursuant to an exemption from
the registration requirements of the Securities Act.