GRST Ethema Health Corporation (PK)

(1)        Reflects the proceeds to be received by the Company pursuant to the sale of Units under the subscription agreement. There is no minimum Offering amount. See “Risk Factors” at page 8.

(2)        DealMaker Securities LLC, referred to herein as the Broker, is engaged to provide administrative and compliance related services in connection with this Offering, but not for underwriting or placement agent services. Broker will receive a cash commission equal to one percent (1%) of the amount raised in the Offering. Additionally, the Broker and its affiliates will receive certain other fees. The cash commissions and certain other fees in aggregate shall not exceed a maximum compensation limit for this offering of nine percent (9%).

(3)       Does not include expenses of the Offering, including without limitation, legal, accounting, escrow agent, transfer agent, other professional, printing, advertising, travel, marketing, and other expenses of this Offering.

After the qualification by the SEC of the Offering Statement, this Offering will be conducted through our website at invest.ethemahealth.com, whereby investors will receive, review, executed, and deliver subscription agreements electronically. Payment of the purchase price will be made through a third-party processor by ACH debit transfer or wire transfer or credit card to an account designated by the Company. We estimate total maximum fees related to this Offering would be approximately $450,000 assuming a fully subscribed offering. See “Use of Proceeds” and “Plan of Distribution” for more details.

The Broker is not participating as an underwriter or placement agent in this offering and will not solicit any investments, recommend our securities, provide investment advice to any prospective investor, or distribute this Offering Circular or other offering materials to potential investors. All inquiries regarding this offering should be made directly to the Company.

GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME OR NET WORTH.  DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS.  BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(D)(2)(I)(C) OF REGULATION A.  FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE YOU TO REFER TO WWW.INVESTOR.GOV.

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.

This Offering Circular follows the disclosure format prescribed by Part II of Form 1-A.

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In this Offering Circular, the term “Ethema”, “we”, “us”, “our”, or “the company” refers to Ethema Health Corporation. and our subsidiaries on a consolidated basis.

THIS OFFERING CIRCULAR MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO OUR MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. WE DO NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

You should not place undue reliance on forward looking statements. The cautionary statements set forth in this Offering Circular, including in “Risk Factors” and elsewhere, identify important factors which you should consider in evaluating our forward-looking statements. These factors include, among other things:

STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

______

This Offering Circular contains various "forward-looking statements." You can identify forward-looking statements by the use of forward-looking terminology such as "believes," "expects," "may," "would," "could," “should," "seeks," "approximately," "intends," "plans," "projects," "estimates" or "anticipates" or the negative of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or intentions. These statements may be impacted by a number of risks and uncertainties.

Although the forward-looking statements in this Offering Circular are based on our beliefs, assumptions and expectations, taking into account all information currently available to us, we cannot guarantee future transactions, results, performance, achievements or outcomes. No assurance can be made to any investor by anyone that the expectations reflected in our forward-looking statements will be attained, or that deviations from them will not be material and adverse. We undertake no obligation, other than as may be required by law, to re-issue this Offering Circular or otherwise make public statements updating our forward-looking statements.

IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR

Please carefully read the information in this offering circular and any accompanying offering circular supplements, which we refer to collectively as the offering circular. You should rely only on the information contained in this Offering Circular. We have not authorized anyone to provide you with different information. This offering circular may only be used where it is legal to sell these securities. You should not assume that the information contained in this offering circular is accurate as of any date later than the date hereof or such other dates as are stated herein or as of the respective dates of any documents or other information incorporated herein by reference.

This offering circular is part of an offering statement that we filed with the SEC, using a continuous offering process. Periodically, as we have material developments, we will provide an offering circular supplement that may add, update or change information contained in this offering circular. Any statement that we make in this offering circular will be modified or superseded by any inconsistent statement made by us in a subsequent offering circular supplement. The offering statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this offering circular. You should read this offering circular and the related exhibits filed with the SEC and any offering circular supplement, together with additional information contained in our annual reports, semi-annual reports and other reports and information statements that we will file periodically with the SEC. See the section entitled “Additional Information” below for more details.

We, and if applicable, those selling Common Stock on our behalf in this offering, will be permitted to make a determination that the purchasers of Common Stock in this offering are “qualified purchasers” in reliance on the information and representations provided by the purchaser regarding the purchaser’s financial situation. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A (“Regulation A”) under the Securities Act of 1933, as amended (the “Securities Act”). For general information on investing, we encourage you to refer to www.investor.gov.

STATE LAW EXEMPTION AND PURCHASE RESTRICTIONS

Our Common Stock is being offered and sold only to “qualified purchaser” (as defined in Regulation A). As a Tier 2 offering pursuant to Regulation A, this offering will be exempt from state law “Blue Sky” review, subject to meeting certain state filing requirements and complying with certain anti-fraud provisions, to the extent that our Common Stock offered hereby is offered and sold only to “qualified purchasers” or at a time when our Common Stock is listed on a national securities exchange. “Qualified purchasers” include: (i) “accredited investors” under Rule 501(a) of Regulation D under the Securities Act (“Regulation D”) and (ii) all other investors so long as their investment in our Common Stock does not represent more than 10% of the greater of their annual income or net worth (for natural persons), or 10% of the greater of annual revenue or net assets at fiscal year-end (for non-natural persons).

To determine whether a potential investor is an “accredited investor” for purposes of satisfying one of the tests in the “qualified purchaser” definition, the investor must be a natural person who has:

If the investor is not a natural person, different standards apply. See Rule 501 of Regulation D for more details.

For purposes of determining whether a potential investor is a “qualified purchaser,” annual income and net worth should be calculated as provided in the “accredited investor” definition under Rule 501 of Regulation D. In particular, net worth in all cases should be calculated excluding the value of an investor’s home, home furnishings and automobiles.

SUMMARY

This summary highlights information contained elsewhere in this Offering Circular. This summary is not complete and does not contain all of the information that you should consider before deciding to invest in our Common Stock. You should read this entire Offering Circular carefully, including the risks associated with an investment in us discussed in the “Risk Factors” section of this Offering Circular, before making an investment decision. 

Summary

Ethema Health Corporation aims to develop world class centers of excellence in addiction treatment for adults. We specialize in the treatment of substance use disorders. By working with doctors and researchers, we strive to develop better assessment and treatment modalities for the industry. We operate the Addiction Recovery Institute of America, a 41-bed addiction treatment facility located in West Palm Beach, Florida. This facility is a three-story building with unfinished commercial space on the first floor and two floors of mixed commercial and residential space where clients are treated and sleep. The first-floor space is being completed at which time it will allow the center to expand to 52 beds by moving existing treatment space from the 2^nd floor to the 1^st Floor.

Through this Offering, we are looking to expand our operations through acquisition of, and partnership with, other treatment facilities. By integrating operations and reducing redundancies, we can offer an efficient and effective treatment plan to service the unique and varying needs of our patients.

The Offering

The offering is for Common Stock of Ethema Health Corporation The rights of the Common Stock are described more fully in “Securities Being Offered.”

This Offering is being made on a “best efforts” basis through the use of DealMaker Securities LLC (“Broker”) as the Broker, which will be acting as broker-dealer for the Offering. Novation Solutions, Inc. (o/a DealMaker (“DealMaker”), an affiliate of Broker, is providing the platform and related services being used to obtain subscriptions.

See “Plan of Distribution” for more information. As there is no minimum Offering, upon the approval of any subscription to this Offering Circular, the Company shall immediately deposit said proceeds, after deducting applicable Offering commissions, fees and expenses, into the bank account of the Company and may dispose of the proceeds in accordance with the Use of Proceeds.

Risks Related to Our Business and Strategy

Our ability to successfully operate our business is subject to numerous risks, including those that are generally associated with operating in the addiction treatment industry. Any of the factors set forth under “Risk Factors” below may limit our ability to successfully execute our business strategy. You should carefully consider all of the information set forth in this Offering Circular and, in particular, you should evaluate the specific factors set forth under “Risk Factors” below in deciding whether to invest in our Common Stock. Risks relating to our business and our ability to execute our business strategy include:

RISK FACTORS

The SEC requires the company to identify risks that are specific to its business and its financial condition. The company is still subject to all the same risks that all companies in its business, and all companies in the economy, are exposed to. These include risks relating to economic downturns, political and economic events and technological developments (such as hacking and the ability to prevent hacking). Additionally, early-stage companies are inherently more risky than more developed companies. You should consider general risks as well as specific risks when deciding whether to invest.

Risk Factors Related to the Company and its Business

Our financials were prepared on a “going concern” basis.

Our unaudited condensed consolidated financial statements have been prepared in accordance with US GAAP applicable to a going concern, which assumes that we will be able to meet our obligations and continue its operations in the normal course of business. As of September 30, 2021, the Company has a working capital deficiency of approximately $15,440,821 and accumulated deficit of approximately $45,978,688. Management believes that current available resources will not be sufficient to fund our planned expenditures over the next 12 months. Accordingly, we 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 generating sufficient revenue in excess of costs. If we raise 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 we raise additional funds by issuing debt, we may be subject to limitations on its operations, through debt covenants or other restrictions. If we obtain additional funds through arrangements with collaborators or strategic partners, we 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 we will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on our financial condition. These factors create substantial doubt about our ability to continue as a going concern. These unaudited 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 we not be able to continue as a going concern. 

Any valuation of the Company at this stage is difficult to assess.

We established the valuation for the Offering. Unlike actively-traded companies that are valued publicly through market-driven stock prices, the valuation of limited trading companies, especially startups, is difficult to assess and you may risk overpaying for your investment. This is especially true with companies engaging in new product offerings.

We operate in a regulatory environment that is evolving and uncertain.

The healthcare and addiction treatment market is subject to various and changing regulatory schemes both federally and at the state level. These regulatory schemes are politically influenced with changes of control of our government and the composition of our state and local governments. In 2020, the United States experienced federal elections that resulted in a change in the control of both the executive and legislative branches of the federal government and some of the state governments of states in which we may look to operate. As these changes have just occurred, it is unclear what regulatory changes, if any, will be made by the new administration running the executive branch of the federal government.

We operate in a highly regulated industry.

We are subject to extensive regulation and failure to comply with such regulation could have an adverse effect on our business. Of significant note, we are subject to numerous patient privacy laws and regulations. These include federal regulations like the Health Insurance Portability and Accountability Act (HIPAA) and 42 CFR Part 2. Among other things, these regulations govern circumstances where information about a patient can be disclosed and protects all records relating to a patient’s identity, diagnosis, prognosis or treatment in a substance abuse program related or linked to the federal government. Failure to follow these regulations can result in significant fines and other penalties that may make it impossible to operate and provide our services. In addition, some of the restrictions and rules applicable to our subsidiaries could adversely affect and limit some of our business plans.

We have an evolving business model.

Our business model is one of innovation, including continuously working to expand our patient capacity and treatment techniques; see the “The Company’s Business.” It is unclear whether our expansion plans will be successful. Further, we continuously try to adapt new methods and techniques to treat our patients, and we cannot offer any assurance that any of them will be successful. We cannot offer any assurance that any of the expansion plans or any other modifications to our footprint and treatment techniques will be successful or will not result in harm to the business. We may not be able to manage growth effectively, which could damage our reputation, limit our growth, and negatively affect our operating results.

We are reliant on one main type of service.

All of current services are variants on one type of service — providing addiction treatment for adults. Our growth and future financial performance will depend on its ability to demonstrate to prospective buyers and users the value of our services. There can be no assurance that we will be successful in this effort. Furthermore, competing alternatives may be seen to have, or may actually have, certain advantages over our services.

We depend on key personnel and face challenges recruiting needed personnel.

Our future success depends on the efforts of a small number of key personnel, including our CEO, CFO, and Chairman Shawn Leon. In addition, due to our limited financial resources and the specialized expertise required, we may not be able to recruit the individuals needed for our business needs. There can be no assurance that we will be successful in attracting and retaining the personnel we require to operate and meet the needs of our patients.

Our revenues and profits are subject to fluctuations.

It is difficult to accurately forecast our revenues and operating results, and these could fluctuate in the future due to a number of factors. These factors may include adverse changes in: number of investors and amount of investors’ dollars, the success of securities markets, general economic conditions, our ability to market our services to patients and other service providers, headcount and other operating costs, and general industry and regulatory conditions and requirements. Our operating results may fluctuate from year to year due to the factors listed above and others not listed. At times, these fluctuations may be significant and could impact our ability to operate our business. Our revenue model is new and evolving, and it cannot be certain that it will be successful. The potential profitability of its business model is unproven and there can be no assurance that we can achieve profitable operations. Our ability to generate revenues depends, among other things, on its ability to generate revenues relating to helping customers engage cleaner living in an ecological community. Accordingly, we cannot assure investors that its business model will be successful or that it can sustain revenue growth, or achieve or sustain profitability.

If we cannot raise sufficient funds, we will not succeed.

To date, we have experienced a continuing need for capital to execute our business model. We are offering securities in the amount of up to $5 million in this offering, and may close on any investments that are made. The amount we can raise in any 12-month period pursuant to Regulation A is limited to $75 million. Even if the maximum amount is raised (in this 12-month period or in subsequent periods), we are likely to need additional funds in the future in order to grow, and if we cannot raise those funds for whatever reason, including reasons relating to us or to the broader economy, we may not survive. If we manage to raise only a portion of funds sought, we will have to find other sources of funding for some of the plans outlined in “Use of Proceeds.” We do not have any alternative sources of funds committed.

There is no minimum amount set as a condition to closing this offering.

Because this is a “best effort” offering with no minimum, we will have access to any funds tendered. This might mean that any investment made could be the only investment in this offering, leaving us without adequate capital to pursue our business plan or even to cover the expenses of this offering.

Natural disasters and other events beyond our control could materially adversely affect us.

Natural disasters or other catastrophic events may cause damage or disruption to our operations, commerce and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control. Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our services to our customers and could decrease demand for our services. In the spring of 2020, large segments of the U.S. and global economies were impacted by COVID-19, a significant portion of the U.S. population are subject to “stay at home” or similar requirements. The extent of the impact of COVID-19 and any subsequent “breakouts” of COVID-19, on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our customers, impact on our customer, employee or industry events, and effect on our vendors, all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19 may impact our financial condition or results of operations is uncertain. To the extent COVID-19 continues to wreak havoc on the economy and the ability to remain open may have a significant impact on our results and operations.

We a short operating history and limited working capital.

We have a limited relevant operating history upon which investors can evaluate performance and prospects and is not certain that it will maintain sustained profitability. Our business is subject to all of the risks inherent in the establishment of a new business enterprise, including, but not limited to, limited capital, need to expand its workforce, unanticipated costs, uncertain markets, adverse changes in technology and the absence of a significant operating history. We will need to maintain significant revenues to achieve and maintain profitability and we may not be able to do so. Even if we do achieve profitability, we may not be able to sustain or increase profitability in the future. If our revenues grow more slowly than we anticipate or if its operating expenses exceed expectations, our financial performance will be adversely affected. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stages of development. We cannot assure investors that it will be successful in addressing the risks it may encounter, and its failure to do so could have a material adverse effect on its business, prospects, financial condition and results of operations. Failure to meet our objectives would have a material adverse effect on our operations. In particular, insufficient market demand would have a material adverse effect on our business, financial condition and results of operations.

Growth strategy

Our business model may require an effective execution of its growth strategy over a short period of time in order to scale operations quickly and establish market presence. Achieving our growth strategy may be critical in order for its business to achieve profitability. If we are unable to effectively implement its growth strategy ahead of its competition, our business, financial condition or results of operation could be materially and adversely affected.

Competition

Our market space is competitive. If we are unable to successfully compete with competitors (including both existing and new companies that enter this market space), our business, financial condition or results of operations could be materially and adversely affected. The market for our products and services is rapidly changing. Competitors may develop products and/or services that are better, less expensive or otherwise more attractive than those offered by us.

We may be unable to maintain its relationships.

We cannot assure investors that it will be successful in maintaining relationships with its customers and counterparties. Our inability to maintain these relationships could have a material adverse effect on its business, results of operations and financial condition.

Damage to our reputation could damage its businesses.

Maintaining a positive reputation is critical to us attracting and maintaining customers, counterparties, investors and employees. Damage to its reputation can therefore cause significant harm to our business and prospects. Harm to our reputation could arise from numerous sources, including, among others, employee misconduct, litigation or regulatory outcomes, compliance failures, unethical behavior and the activities of customers and counterparties. Further, negative publicity regarding us, whether or not true, may also result in harm to its prospects.

Market changes.

Our success may be dependent upon our ability to develop our market and change our business model as may be necessary to react to changing market conditions. Our ability to modify or change its business model to fit the needs of a changing marketplace may be critical to our success, and our inability to do so could have a material adverse effect on our business, liquidity and financial condition.

Risk Factors Related to the Offering

There is uncertainty as to the amount of time it will take for us to deliver securities to investors under this offering.

The process for issuance of Common Stock is set out in “Plan of Distribution.” There may be a delay between the time you execute your subscription agreement and tender funds and the time securities are delivered to you. Although investors who provide the information required by the subscription agreement and give accurate instructions for the payment of the subscription price typically should receive their securities promptly after a complete submission, we cannot guarantee that you will receive your securities by a specific date or within a specific timeframe.

The exclusive forum provision in the subscription agreements may have the effect of limiting an investor’s ability to bring legal action against us and could limit an investor’s ability to obtain a favorable judicial forum for disputes.

Section 6 in each of the subscription agreements for this offering includes a forum selection provision that requires any claims against us based on the subscription agreement be brought in a court of competent jurisdiction in the State of Florida. The forum selection provision will not be applicable to lawsuits arising from the federal securities laws. The provision may have the effect of limiting the ability of investors to bring a legal claim against us due to geographic limitations. There is also the possibility that the exclusive forum provision may discourage stockholder lawsuits with respect to matters arising under laws other than the federal securities laws, or limit stockholders’ ability to bring such claims in a judicial forum that they find favorable for disputes with us and our officers and directors. Alternatively, if a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

Investors in this offering may not be entitled to a jury trial with respect to claims arising under the subscription agreements, which could result in less favorable outcomes to the plaintiff(s) in any action under the agreements.

Investors in this offering will be bound by the subscription agreements, each of which includes a provision under which investors waive the right to a jury trial of any claim they may have against us arising out of or relating to the subscription agreement, including any claims made under the federal securities laws.

If we opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. We believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of Florida, which governs the subscription agreement, in a court of competent jurisdiction in the State of Florida. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the subscription agreement. You should consult legal counsel regarding the jury waiver provision before entering into the subscription agreement.

If you bring a claim against us in connection with matters arising under the subscription agreement, including claims under federal securities laws, you may not be entitled to a jury trial with respect to those claims, which may have the effect of limiting and discouraging lawsuits against us. If a lawsuit is brought against us under the subscription agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in such an action.

Nevertheless, if the jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the subscription agreement with a jury trial. No condition, stipulation, or provision of the subscription agreement serves as a waiver by any holder of common shares or by us of compliance with any provision of the federal securities laws and the rules and regulations promulgated under those laws.

In addition, when shares of our Common Stock are transferred, the transferee is required to agree to all the same conditions, obligations and restrictions applicable to those securities or to the transferor with regard to ownership of those securities, that were in effect immediately prior to the transfer of the Common Stock, including but not limited to the subscription agreement. Therefore, purchasers in secondary transactions will be subject to this provision.

Future fundraising may affect the rights of investors.

In order to expand, we are likely to raise funds again in the future, either by offerings of securities (including post-qualification amendments to this offering) or through borrowing from banks or other sources. The terms of future capital raising, such as loan agreements, may include covenants that give creditors greater rights over our financial resources.

Holders of our Preferred Stock may be entitled to potentially significant liquidation preferences over holders of our Common Stock if we are liquidated, including upon a sale of our company.

Holders of our outstanding Preferred Stock may have liquidation preferences over holders of Common Stock being offered in this offering. This liquidation preference is paid if the amount a holder of Preferred Stock would receive under the liquidation preference is greater than the amount such holder would have received if such holder’s shares of Preferred Stock had been converted to Common Stock immediately prior to the liquidation event.

Our Common Stock is thinly traded.

Our Common Stock trades on the OTC Markets. It has low daily trading volume and is thinly traded. While this may change as demand for our services and Common Stock changes, there is no guarantee that adequate demand exists. Even if we seek an up-listing on the OTC Markets or another alternative trading system or “ATS,” there may not be frequent trading and therefore a lack of liquidity for the Common Stock.

You will need to keep records of your investment for tax purposes.

As with all investments in securities, if you sell the Common Stock, you will probably need to pay tax on the long- or short-term capital gains that you realize if sold at a profit or set any loss against other income. If you do not have a regular brokerage account, or your regular broker will not hold the Common Stock for you (and many brokers refuse to hold Regulation A securities for their customers) there will be nobody keeping records for you for tax purposes and you will have to keep your own records, and calculate the gain on any sales of any securities you sell.

The price for our Common Stock may be volatile.

The market price of our Common Stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

·                     The size and volume of our trading market.

·                     Having adequate capital to fulfill any reporting obligations.

·                     Inability to successfully compete against current or future competitors

·                     Adverse regulations from regulators.

·                     Departures of key personnel.

In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our securities. As a result, you may be unable to resell your securities at a desired price.

RISKS SPECIFIC TO THE BEHAVIORAL HEALTHCARE INDUSTRY

Regulation is and licensing is very stringent.

The State regulatory body in Florida is the Department of Children and Families (DCF). Facilities must comply with rigid guidelines to obtain and continue to keep its licensing. In addition, many insurance companies will not pay a provider unless they are Joint Commission accredited. This accreditation is by a national provider of accreditation to healthcare facilities. ARIA is both DCF licensed and Joint Commission accredited. In addition, ARIA is legit script certified which allows the company to market itself through google pay per click advertising. There are stringent guidelines to become legit script certified and ARIA has its certification form Legit Script. ARIA must comply with all of the national healthcare laws and HIPPA requirements. There are national laws protecting individuals from patient brokering which ARIA must strictly comply with.

Limited Ability to Set Prices for Services Provided.

Behavioral healthcare providers depend upon reimbursement for services from insurance companies and other funders, including government funders, and have only a limited ability to set and negotiate prices for the services provided. Therefore, there is no guarantee that reimbursement for the services provided will either meet the costs of providing them or generate an operating profit. In addition, providers must negotiate reimbursement rates with each insurance company and funder, thus substantially increasing administrative costs and overhead.

Insurance Companies and Funders Determine What Providers They Choose to Contract for Services.

Even as a fully licensed behavioral healthcare provider, insurance companies and government funders are under no obligation whatsoever to choose to use ARIA– or any other provider - as a contracted service provider. Insurance Companies and Funders choose providers and may cancel contracts and service relationships at their discretion.

The Need for Highly Differentiated, Customizable Treatment is Expensive.

Providing effective behavioral healthcare requires clinical expertise to a diverse population with many different diagnoses, symptoms, needs, and wants. Effective providers need to therefore offer a broad array of customizable treatment platforms and justify their effectiveness to clients and funders alike. Customizing treatment and services is expensive, requiring providers to attract, retain, and train skilled staff who are specialized in treating many specific disorders. Therefore, more staff and more expensive staff is required to treat a diverse population, thereby increasing the cost of staffing and the cost of providing treatment.

Insurance Companies Push for Lower Levels of Care and Shorter Stays.

Because a provider recommends a particular level of care and treatment regimen does not equate to an insurance company or funder agreeing to pay for the provider’s recommendation with respect to level of care, services and treatment needed, or length of stay. For the past 25 years, managed care (insurance companies) has consistently pushed for lower levels of care with shorter stays. Insurance companies consistently report they are not dictating treatment, but rather only authorizing the reimbursement of treatment they are willing to pay for. In turn, providers must either spend more time and effort obtaining authorization for treatment, decline clients for further treatment or refer them elsewhere or provide treatment without insurance reimbursement or only partial reimbursement, all of which result in increased operating costs and/or decreased revenue and profitability.

Higher Acuity Patients Are Managed at the Outpatient Level.

As a result of insurance companies and funders pushing for lower levels of care and shorter stays (which reduce insurance companies’ reimbursement costs), providers are managing higher acuity patients at lower levels of care. Higher acuity patients require more staff and better trained staff which increase operating expenses and present additional risk management challenges to the organization. These operating realities add to administrative costs and management oversight responsibilities, and negatively impact the organization’s ability to operate at a profit.

DILUTION

Dilution means a reduction in value, control or earnings of the shares the investor owns.

Immediate dilution

An emerging growth company typically sells its shares (or grants options exercisable for its shares) to its founders and early employees at a very low cash cost because they are, in effect, putting their “sweat equity” into the company. When the company seeks cash investments from outside investors, like you, the new investors typically pay a much larger sum for their shares than the founders or earlier investors, which means that the cash value of your stake is diluted because all the shares are worth the same amount, and you paid more than earlier investors for your shares. 

The following table illustrates the per share dilution to new investors discussed above, assuming the sale of, respectively, $1,000,000.00, $2,000,000.00, $4,000,000.00, and $5,000,000.00 of the shares offered for sale in this Offering (before our estimated offering expenses of $50,000.00) and based on an offering price of $0.0012 per share($0.12 per Unit). The below table reflects the dilution based upon each share of Common Stock sold instead of Units to better reflect the impact on investors:

Future dilution

Another important way of looking at dilution is the dilution that happens due to future actions by the company. The investor’s stake in a company could be diluted due to the company issuing additional shares. In other words, when

the company issues more shares, the percentage of the company that you own will go down, even though the value of the company may go up. You will own a smaller piece of that company. This increase in number of shares outstanding could result from a stock offering (such as an initial public offering, a subsequent Regulation A offering, a venture capital round, or angel investment), employees exercising stock options, or by conversion of certain instruments (e.g., convertible bonds, preferred shares or warrants) into stock.

If the company decides to issue more shares, an investor could experience value dilution, with each share being worth less than before, and control dilution, with the total percentage an investor owns being less than before. There may also be earnings dilution, with a reduction in the amount earned per share (though this typically occurs only if the company offers dividends, and most early-stage and emerging growth companies are unlikely to offer dividends, preferring to invest any earnings into the company). 

This type of dilution might also happen upon conversion of convertible notes into shares. Typically, the terms of convertible notes issued by emerging growth companies provide that note holders may be able to convert the balance of their convertible notes into shares at a discounted price, or a premium is added to the note allowing for a higher principal balance to be converted into shares than was initially invested. Either way, the holders of the convertible notes get more shares for their money than new investors. In the event that the price drops below the offering price in this offering, the holders of the convertible notes will dilute existing equity holders, even more than the new investors do, because they get more shares for their money. Investors should pay careful attention to the total amount of the convertible notes that the company has issued (and may issue in the future), and the terms of those notes.

If you are making an investment expecting to own a certain percentage of us or expecting each share to hold a certain amount of value, it’s important to realize how the value of those shares can decrease by actions taken by us. Dilution can make drastic changes to the value of each share, ownership percentage, voting control, and earnings per share.

PLAN OF DISTRIBUTION

We seeking to raise up to $5 million in total. The company will raise the money through the sale of up to 4,166,666,660 shares of Common Stock through the sale of 416,666,666 Units with each Unit containing 100 shares of Common Stock. Under a Tier 2 offering pursuant to Regulation A, we may only offer $75,000,000 in securities during a rolling 12-month period. As of the date of this Offering Circular, we have not offered or sold any securities pursuant to Regulation A in the past twelve (12) months. From time to time, we may seek to qualify additional shares.

We are offering a maximum of 4,166,666,660 shares of Common Stock through the sale of 416,666,666 Units with each Unit containing 100 shares of Common Stock on a “best effort” basis.

DealMaker Securities LLC

 We entered into an agreement with DealMaker Securities LLC, which has been engaged to provide the administrative and compliance related functions in connection with this offering, and as broker-dealer of record, but not for underwriting or placement agent services. The term of the agreement commenced on March 8, 2023 and will terminate following completion of this Offering. However, the Broker may terminate the agreement if we default on our obligations thereunder. The Broker is not purchasing any of the Units in this Offering and is not required to sell any specific number or dollar amount of the Units. We have been advised by the Broker that it will only assist us with this Offering in jurisdictions where it is registered or licensed as a broker-dealer in compliance with applicable federal and state securities laws and the rules of self-regulatory organizations including FINRA.

Commissions and Discounts

 The Broker will receive a cash commission equal to one percent (1%) of the amount raised in the Offering. Additionally, the Broker and its affiliates will receive certain other fees described specifically in the agreement with Broker filed as an exhibit to the Offering Statement of which this Offering Circular forms a part, based on the actual number of investors accepted into the Offering and the methods of payment in connection therewith.  Total payment processing expenses incurred in connection with the Offering, which are payable to an affiliate of the Broker, are expected to be approximately six and 94/100 percent (6.94%) of the Offering proceeds.  The aggregate fees payable to the Broker and its affiliates will not exceed nine percent (9%) of the Offering, or a maximum of $450,000, in the event that the Offering is fully subscribed. 

Other Terms

DealMaker Securities, LLC, the Broker, a broker-dealer registered with the Commission and a member of FINRA, has been engaged to provide the administrative and compliance related functions in connection with this offering, and as broker-dealer of record, but not for underwriting or placement agent services:

Such services shall not include providing any investment advice or any investment recommendations to any investor.

We have agreed to pay Broker and its affiliates fees consisting of the following:

The transaction fees described above associated with General, Payment Processing and AML Searches will not exceed 347,000 (6.94 %) of the maximum fees paid to Broker.

All forms of compensation paid to Broker are subject to the provisions of the maximum fees in the Offering not exceeding $450,000 or 9% if fully subscribed.

Offering Period and Expiration Date

This Offering will start on or after the Qualification Date and will terminate at our discretion or, on the Termination Date.

Procedures for Subscribing

After the Commission has qualified the Offering Statement, the Offering will be conducted using the online subscription processing platform of Novation Solutions Inc. O/A DealMaker, an affiliate of the Broker, through the website: invest.ethemahealth.com whereby investors in the Offering will receive, review, execute, and deliver subscription agreements electronically. Payment of the purchase price for the Shares will be made through a third-party processor by ACH debit transfer or wire transfer or credit card to an account designated by us. The Broker is not participating as an underwriter or placement agent in the Offering and will not solicit any investments, recommend our securities, provide investment advice to any prospective investor, or distribute the Offering Circular or other offering materials to potential investors. All inquiries regarding the Offering should be made directly to our Company. 

 Right to Reject Subscriptions. After we receive your complete, executed subscription agreement and the funds required under the subscription agreement have been deposited to the Company’s account, we have the right to review and accept or reject your subscription in whole or in part, for any reason or for no reason. We will return all monies from rejected subscriptions immediately to you, without interest or deduction.

Acceptance of Subscriptions. Upon our acceptance of a subscription agreement, we will countersign the subscription agreement and issue the Shares subscribed at closing. Once you submit the subscription agreement and it is accepted, you may not revoke or change your subscription or request your subscription funds. All accepted subscription agreements are irrevocable.

No Escrow

The proceeds of this offering will not be placed into an escrow account. We will offer our Common Stock on a best effort’s basis. As there is no minimum offering, upon the approval of any subscription to this Offering Circular, we will immediately deposit said proceeds into the bank account of the Company and may dispose of the proceeds in accordance with the Use of Proceeds at Management’s discretion.

Investment Limitations

Generally, no sale may be made to you in this Offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth (please see below on how to calculate your net worth). Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

Because this is a Tier 2, Regulation A Offering, most investors must comply with the 10% limitation on investment in the Offering. The only investor in this Offering exempt from this limitation is an “accredited investor” as defined under Rule 501 of Regulation D under the Securities Act (an “Accredited Investor”). If you meet one of the following tests you should qualify as an Accredited Investor:

 Issuance of Shares

The information regarding the ownership of the Common Stock will be recorded with the stock transfer agent.

Jury Trial Waiver

The subscription agreement provides that subscribers waive the right to a jury trial of any claim they may have against us arising out of or relating to the subscription agreement, including any claim under federal securities laws. If we opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable given the facts and circumstances of that case in accordance with applicable case law. See “RISK FACTORS.”

Selling Shareholders

No securities are being sold for the account of shareholders; all net proceeds of this offering will go to the company.

USE OF PROCEEDS TO ISSUER

We estimate that if we sell the maximum amount under this Offering of $5 million from the sale of Common Stock through the sale of the Units, the net proceeds to us in this offering will be approximately $4,550,000, after deducting the estimated offering expenses of approximately $450,000.00 (including payment to marketing, legal and accounting professional fees and other expenses).

The table below shows the net proceeds we would receive from this offering assuming an offering size of $1 million, $2 million and $5 million, and the intended use of those proceeds. There is no guarantee that we will be successful in selling any of the shares we are offering.

Primary Care Providers (PCPs). Primary care providers know their patients well, observe changes in patient functioning, and/or may be the first to observe the onset of a disorder or worsening symptoms and impaired functioning of an already diagnosed behavioral health disorder. Research evidences that 50% of all behavioral health disorders are treated in primary care and the majority of psychotropic medications are prescribed by PCPs. Considering ARIA’s continuum of care (adolescents, adults, and older adults), ARIA’s relationships with PCPs would also include pediatricians and gerontologists.

Although primary care providers (PCPs) are treating many behavioral health disorders, this should not be interpreted that there are not unmet behavioral health needs or that individual PCPs want to treat behavioral disorders.

A PCP’s decision to treat a patient’s behavioral health problems may likely reflect a gap in available behavioral health services, a lack of knowledge on the part of the PCP of what behavioral health resources are available, a lack of expertise by the PCP in what is required to accurately assess, diagnose, and treat a patient’s behavioral health disorder, and resistance by patients to enter behavioral health services (often based in the stigma associated with behavioral health conditions).

Hospital Emergency Departments (ED) and Urgent Care Centers. Because of gaps in service and long delays in obtaining outpatient appointments, potential behavioral healthcare clients increasingly present in hospital emergency departments and urgent care centers to seek behavioral health care services, often because they do not know where else to go or little else is available. While about one fourth of hospitals have acute psychiatric inpatient services, many do not have the continuum of behavioral health services ARIA provides, especially residential services. Moreover, the majority of ED patients neither need nor want acute inpatient care, nor do they meet the criteria for it. Studies indicate as many as 50% of behavioral health clients are first diagnosed in EDs. ED staff are often desperate to find appropriate referral services, which is required as part of the patient’s discharge plan from the ED.

Inpatient Psychiatric Facilities. Although the majority of hospitals do not offer acute inpatient psychiatric care, for those who do, patients consistently require follow-up outpatient care upon discharge from the inpatient unit. Many hospitals have either no or limited outpatient behavioral health services and thus must refer to local providers. The hospital inpatient staff, and particularly psychiatric social workers, are held responsible to create a discharge plan that must include appropriate follow-up care, including residential services. Collaborative, mutually beneficial relationships between ARIA and area inpatient psychiatric units offers significant opportunities for ongoing referrals and improved client outcomes.

Private Third-Party Payers (Insurance Companies). The ARIA plan includes being a contracted in-network behavioral healthcare provider to 50% of all clients. Increasingly, insurance companies, and particularly HMOs and PPOs, refer their clients directly to contracted in-network behavioral health providers. Such referrals have an additional advantage of having a pre-approved reimbursement status for ARIA’s assessment and diagnostic services. Additionally, because the costs of providing medically managed detox, partial hospitalization, and outpatient services are dramatically less expensive than acute inpatient psychiatric care, the less restrictive and expensive continuum of care ARIA provides is cost- effective and attractive to funders.

Social Service and Community Organizations. Because people with significant behavioral health disorders are likely to have other impairments in functioning, they are more likely to be affiliated with social service providers and using social services. Therefore, the ARIA market segment strategy encompasses building collaborative relationships with key social service organizations, including:

Child Protective Services. Often, families become involved with child protective services because of a parent’s mental illness or substance abuse problem that results in poor parenting or threatens a child’s safety or care. Child protective services and their affiliated, contracted social service organizations (e.g. foster care providers) are frequently seeking behavioral health services for parents so children can either stay at home or return home.

Aging, Elder Care Services, Nursing Homes, and Retirement Communities. When older adults are having difficulties caring for themselves and remaining independent due to dementia and other related behavioral health conditions, behavioral health services are often needed. However, geriatric behavioral health resources are frequently not available. And as previously stated, due to both Florida’s high proportion of older adults and the overall trend towards and aging population, older adult healthcare needs are projected to significantly increase for the next several decades.

Welfare, Homeless, and Employment Services. Because behavioral health problems result in impaired functioning, those with these problems are less likely to be working, more likely to be poor, and more likely to need and receive social services. Social workers and case workers providing direct care to these clients often can assess and help the client get to and receive needed behavioral health services. In turn, ARIA can refer clients to social service agencies as part of their rehabilitation and recovery process.

Community Organizations. Local churches, synagogues, community centers, AA/NA groups, and advocacy organizations such as the National Alliance for the Mentally Ill (NAMI) all have significant contact with those in need of behavioral health services. All are potential referral sources.

Schools and Academic Institutions. Again, our objective is to be known to those who know and work with our clients. For adolescents and college students, schools and academic institutions often have more in-depth and frequent contact with young people than their families. Moreover, students may disclose thoughts, feelings, and behaviors to trusted school personnel that they may not disclose to parents. Therefore, these organizations, and especially professional staff such as guidance counselors, principals, and faculty may be more apt to observe a change in a student’s behavior and seek to intervene on their behalf.

Our objective is to create collaborative relationships that are beneficial to the client, the school, and in turn, ourselves. For example, it is important for students to remain current in their studies while in treatment, so our adolescent behavioral health programs provide mechanisms for students to receive homework assignments, tutoring, and opportunities to submit their school work on a timely basis.

The Criminal Justice System. In the U.S., it is estimated that between 25% - 40% of those involved with the criminal justice system have behavioral health problems. While very significant, even these statistics may be too conservative. A 2011 Legal Action Report provides evidence that 67% of incarcerated individuals have a substance abuse disorder. (Legal Action Report 2011. Legality of Denying Access to Medication Assisted Treatment In the Criminal Justice System). Increasingly, states are moving to specialized drug courts which offer opportunities for substance abuse and behavioral health treatment for young offenders and first time drug offenders in lieu of incarceration. Parole boards and probation officers are increasingly seeking behavioral health services to reduce recidivism and improve outcomes.

The state of Florida has two new programs as part of SAMHSA’s GAIN’s Center for Behavioral Health and Justice Transformation as part of its Jail Diversion and Trauma Recovery Program (with a priority for Veterans). These programs managed by Florida’s Jail Diversion and Trauma Recover Project and the Florida Department of Children and Families. (Florida Department of Children and Families (2014). Substance Abuse and Mental Health Services Plan 2014-2016).

Provide Community Referral Sources a Pleasant, Expedited, and Professional Referral Experience. Referrals we receive from other professionals, and especially our key community partners, are handled by our professional and courteous ARIA Client Engagement Team. Whether the referral source is a hospital, doctor, school, or an insurance company, the professional ARIA Client Engagement Team ensures a smooth, efficient, and pleasant referral experience.

Similar to our policy with clients who seek admission on their own behalf, our practice is to create a fast, efficient pathway to engage the client and offer treatment the same day or the next business day. Fast admissions are especially important to EDs, urgent care centers, and hospital inpatient units, because hospital and medical staff are under pressure to discharge the patient quickly and with an appropriate discharge plan.

Our marketing strategy to target and engage key community partners reflects our knowledge of the business of behavioral health, the operational realities of healthcare practice, and an insider’s knowledge of the pressures our community partners face. Our objective is to be the behavioral healthcare solution for our community partner’s with a simple, quick, and professional referral process where we can quickly accept clients and clients can quickly begin treatment. Professionals and the public at-large are all too familiar with cumbersome bureaucracies, overly-complicated processes, and unhelpful people. We have a passion for excellence in customer service and that passion is made manifest at the point of entry and throughout the ARIA experience. For this reason, we have intentionally positioned our Client Engagement Team in our Marketing Department.

Our experience in behavioral healthcare has shown that competent, responsive behavioral healthcare providers who create a quick and pleasant referral process get more referrals. Our objective is to be the go-to behavioral health provider to our referral sources and community partners. In doing so, we leverage technology to expedite referrals and offer transportation to bring the client to us.

The market segmentation analysis leverages rich data from multiple sources: business sector analytics, epidemiological studies, public health and governmental reports, and scientific, published clinical studies to clearly describe and identify the characteristics and needs of specialized target markets. For example, three recent emerging trends are burgeoning needs for behavioral health treatment for returning veterans, increased need for substance abuse treatment for older adults with prescription drug dependencies, and increased needs for mental health services for older adults.

The ARIA market segmentation analysis accomplishes two core objectives. The ARIA market segmentation analysis demonstrates both what markets and segments we identify and target, but also the process of how we determine what markets to identify and target. A critical aspect of intelligent, responsive behavioral healthcare practice is the capacity to harness and leverage scientific research and epidemiological data to identify emerging trends, act on them, and achieve growth and income objectives.

One emerging trend is an aging population with increasing behavioral healthcare needs. Although the Florida has the highest proportion of adults aged 65+ in the United States, the aging population is impacting many states.

Another factor in market segmentation analysis is to identify trends in income. The healthcare analytics firm Sg2 notes FY 2014 Medicare payment increases of 2% for inpatient admissions, 6% for psychiatrists, and 8% for clinical psychologists and social workers. (Sg2 Centers for Strategic planning and Performance Strategy (2014). Reconsidering Behavioral Health).

Not only are Medicare reimbursements rising, so are state budgets for mental health spending, including Florida’s 2015 budget.

Finally, the data on the again U.S. population evidences that the emerging trend is going to gain momentum in the near future. The ARIA market segmentation analysis provides the foundation for our marketing plan. It provides:

Emerging trends ARIA reflect gaps in the current healthcare system. These emerging trends point towards high-demand services that are scalable and demonstrate significant growth and income potential. The ARIA business model and structure is strategically designed to identify emerging trends, service gaps, and market opportunities and respond to them with high-impact, evidenced-based services which are attractive to clients and payers alike.

It is unlikely that any one behavioral healthcare provider can effectively provide treatment to every person with every type of behavioral healthcare need. Therefore, identifying what services are provided and to whom becomes an essential aspect of the ARIA business plan. The ARIA market segmentation analysis provides many valuable insights to our service delivery models and processes.

First, ARIA has identified six levels of care we will initially provide: Medically managed detox (both inpatient and outpatient), residential services, partial hospitalization programs, intensive outpatient, and outpatient services. These six levels for care coupled with targeted treatment modalities and services provide an excellent continuum where a client can begin at higher levels of care and graduate to lower levels of care as they progress and reach interim treatment goals.

For example, a client entering ARIA with cocaine and alcohol dependence would begin in our medically managed detox program, then move into our residential services where he could continue treatment in our partial hospitalization program. When those treatment goals are realized and the client continues to improve, the client remains in our residential services and again graduates to the intensive outpatient program, in clinical terms representing a less structured, lower level of care. While in our intensive outpatient program, the client has further opportunities to increase participation in wellness activities, such as physical fitness, nutrition, or education and job training opportunities.

Finally, as the client continues to achieve these treatment and wellness goals, the client may again graduate to our outpatient program, with the objective of returning to the community at-large and realizing one’s human potential. Clients are welcomed and encouraged to continue on an ongoing basis in outpatient services in a maintenance capacity, both as a prophylactic to mitigate the possibility of future setbacks and relapses and also as a positive impetus for continued personal growth and well- being.

Research on substance abuse outcomes evidence increased amount of treatment (higher levels of care such as partial hospitalization programs and intensive outpatient treatment) and greater frequency of treatment and aftercare counseling are associated with improved client outcomes (Oltmanns & Emery, 2015 citing Amato et. al, 2011; Glasner-Edwards & Rawson, 2010). In addition, positive long-term outcomes for substance abuse evidence that “improvements following treatment are usually not limited to drug use alone but extend to the person’s health as well as his or her social and occupational functioning” (Oltmanns & Emery, 2015, p. 312). This is yet another example of the science-driven ARIA Wellness Model crafted from important, recent evidenced-based research.

Because the ARIA medically managed detoxification program represents our highest level of care, providing clinically appropriate follow-up services to initial detoxification is critical. Clinical and epidemiological studies provide evidence as to what providers may encounter when providing substance abuse treatment. According to a 2011 study on gender differences in substance abuse disorders in the U.S. across the lifespan (Agrawal, Heath, & Lynskey, 2011), data reveal the following:

Additionally, further research evidences:

In addition, there are several common comorbid disorders frequently associated with substance abuse disorders. These include:

Therefore, efficacious treatment of substance disorders clearly speaks to the need for and the competencies to treat mood disorders, anxiety disorders, traumatic disorders, eating disorders in adults and adolescents, and conduct disorders in adolescents. Moreover, specific diagnoses and disorders require specific treatment modalities, ranging from behavioral treatments, to cognitive-behavioral treatments, psychopharmacological treatments, and integrative treatment approaches. These specialized treatments draw upon the training, skills, and experience of an expert clinical team able to provide specialized, targeted treatments to meet individual needs and goals.

Branding Positioning

The following diagram shows each sales and marketing subject that fits into the strategic branding process. ARIA is creating a comprehensive branding strategy plan that will position the Company’s brand as a leading authority in providing a full continuum of behavioral healthcare services.

Public Relations and Media Plan

ARIA is in the process of defining its public relations goals and objectives in alignment to our overall business, marketing and sales objectives. This well-planned public relations campaign will be designed to:

ARIA will utilize a variety of communications vehicles including:

ARIA will engage a Professional PR Firm to achieve the Company’s goals:

Competition

There are a significant number of treatment facilities in the United States, we compete with these clinics for patients who are typically covered by insured healthcare services. Given the growth of the number of individuals needing services, money and commitments flowing from governments and private insurers and services to provide treatment, there is ample opportunity, but also significant potential competition in the treatment area. Aside from specialized facilities, large hospital chains may also see the opportunity to broaden their respective offerings and enter into the addiction treatment marketplace by leveraging their networks and infrastructure.

Employees

As of June 30, 2023, Ethema had 55 full and part time employees through our ARIA subsidiary.

Litigation

The company is not involved in any litigation, and its management is not aware of any pending or threatened legal actions relating to its intellectual property, conduct of its business activities, or otherwise.

THE COMPANY’S PROPERTY

In addition to our corporate offices, there are other properties we use to offer our services to our patients.

Ethema Executive Offices

The Company’s executive offices are located at 950 Evernia Street, West Palm Beach, Florida 33401

Greenestone Muskoka Treatment Facility

The Greenestone Muskoka Treatment Facility is located in Bala, Ontario at 3571 Highway 169. The property is 43 acres in size and contains approximately 48,000 square feet of buildings. The property is owned by Ethema’s wholly owned Canadian subsidiary Cranberry Cove Holdings Ltd. (“CCH”) and has been leased to the new owner of the Muskoka Clinic for a term of five years, which ends on February 28, 2022. The Lease gives the tenant an option to extend for three additional five (5) year terms, an option to purchase the property at any time for a purchase price of $7,000,000 in the first thirty-six (36) months of the term and thereafter at a purchase price increased by $1,500,000 for each successive year up to a maximum of $10,000,000, and a right of first refusal in the event of a sale to a third party. The tenant has renewed the lease for a second term which expires on February 28, 2027 and the company has extended the renewal option by one additional 5-year term. The only different term in the renewal is that the annual increases in the lease payment are 1.75% a year.

On June 30, 2023, the Company entered into an exchange agreement with Leonite Capital, LLC, whereby it exchanged the 400,000 Series B shares with a value of $400,000 plus accrued dividends thereon of $61,184, owned by Leonite Capital LLC, for its entire shareholding in its, Greenestone Muskoka Treatment Facility owning subsidiary, Cranberry Cove Holdings.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and plan of operations together with our financial statements and the related notes appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this prospectus. All amounts in this report are in U.S. dollars, unless otherwise noted.

Plan of Operation

During the next twelve months, the Company plans to continue to grow the Evernia business organically or through acquisitions, should any opportunities present themselves. On August 4, 2023, we completed both the purchase of the property in which the Evernia operates for gross proceeds of $5,500,000 and the subsequent sale of the property to Pontus Net Lease Advisors, LLC for gross proceeds of $8,500,000. Net proceeds on the two transactions after the payment of convertible and short-term notes and fees and expenses related to the transactions above was $571,984. The proceeds were used to repay certain indebtedness and to provide some working capital to organically grow the operations. We are still pursuing a Regulation A financing to further reduce debt and allow us to pursue future acquisitions.

For the three months ended June 30, 2023 and 2022.

Revenues

Revenues were $1,565,959 and $1,138,032 for the three months ended June 30, 2023 and 2022, respectively, an increase of $427,927 or 37.6%. The revenue from in-patient services related to Evernia was S1,472,593 and $1,043,861 for the three months ended June 30, 2023 and 2022, respectively. The increase is attributable to the increase in the number of beds available at the facility and increasing our in-network provider status to a second insurance provider.

The revenue from rental properties was $93,368 and $94,171 for the three months ended June 30, 2023 and 2022, a decrease of $803 or 0.9%. the slight decline represents foreign currency difference. The subsidiary owning the rental property, CCH was sold on June 30, 2023.

Operating Expenses

Operating expenses were $1,533,813 and $1,086,270 for the three months ended June 30, 2023 and 2022, respectively, an increase of $447,543 or 41.2%. The increase is primarily due to the following:

Operating income

Operating income was $32,146 and $51,762 for the three months ended June 30, 2023 and 2022, respectively, a decrease of $19,616 or 37.9%. The decrease is due to the increase in operating expenses of $447,543, offset by the increase in revenue of $427,927, as discussed in detail above.

 Penalty on convertible note

The penalty on convertible notes was $34,688 and $0 for the three months ended June 30, 2023 and 2022, respectively, an increase of $34,688 or 100%. The penalty on convertible note was agreed upon with one of our lenders whose note was in default and was subsequently settled after June 30, 2023.

Extension fee on property purchase

The extension fee on the property purchase was $130,000 and $0 for the three months ended June 30, 2023 and 2022, respectively, an increase of $130,000 or 100%. The extension fee was levied by the landlord of our West Palm Beach facility to afford us additional time to structure the acquisition of the facility, which we will in turn dispose of to a third party lender.

Interest expense

Interest expense was $143,981 and $122,848 for the three months ended June 30, 2023 and 2022, respectively, an increase of $21,133 or 17.2%. The increase is primarily due to monitoring fees incurred on two short term notes and additional interest incurred on a senior secured promissory note advanced to the Company during the prior quarter.

Amortization of debt discount

Amortization of debt discount was $87,526 and $211,202 for the three months ended June 30, 2023 and 2022, respectively, a decrease of $123,676 or 58.6%. The decrease is primarily due to the full amortization of debt discount on convertible notes in the prior periods. The current period amortization is primarily the amortization of discount on receivables funding and amortization of a discount on a senior secured promissory note advanced to the Company in the prior quarter.

Derivative liability movement

The derivative liability movement was $0 and $67,039 for the three months ended June 30, 2023 and 2022, respectively. The derivative liability movement represents the mark to market movements of variably priced convertible notes and warrants issued during the prior comparative period. The decrease in the mark to market movement of $67,039, using a Black-Scholes valuation model with a calculated stock price ranging from $0.0006 to $0.0010 per share, a risk free interest rate of 1.72% to 2.99% and expected lives of convertible notes and warrants of 3 to 36 months, with an expected underlying volatility of 220.6% to 245.9%, with no dividends expected for the foreseeable future. The decrease in the derivative liability was primarily due to the conversion and repayment of several convertible notes during the past twelve months and an overall reduction in our stock price, impacting favorably on the mark-to-market adjustment.

Foreign exchange movements

Foreign exchange movements was $(87,791) and $193,368 for the three months ended June 30, 2023 and 2022, respectively, representing the realized exchange gains and (losses) on monetary assets and liabilities settled during the current year as well as mark to market adjustments on monetary assets and liabilities reflected on the balance sheet and denominated in Canadian Dollars. The Dollar weakened against the Canadian Dollar during the current period and unrealized translation adjustments of $51,708 was realized on the disposal of our property owning subsidiary Cranberry Cove Holdings.

 Net loss before taxation

Net loss before taxation was $(451,501) and $(154,914) for the three months ended June 30, 2023 and 2022, respectively, an increase of $296,587 or 191.4%. The increase is primarily due to the increase in the foreign exchange movements and by the extension fee on the property offset by the decrease in debt discount amortization, as discussed above.

Income Taxes

Income taxes credit was $219,346 and income tax charge was $(24,700) for the three months ended June 30, 2023 and 2022, an increase of $244,046 or 988.0%. The increase is due to the completion of tax returns for our operating subsidiaries during the current quarter, which resulted in the reversal of previously provided for income taxes, primarily related to accelerated depreciation allowances on property and equipment.

Net loss

Net loss was $(232,155) and $(179,614) for the six months ended June 30, 2023 and 2022, respectively, an increase of $52,541 or 29.3%, primarily due to the increase in net loss before taxation offset by the taxation credit, as discussed above.

 For the six months ended June 30, 2023 and June 30, 2022.

Revenues

Revenues were $2,866,005 and $2,161,347 for the six months ended June 30, 2023 and 2022, respectively, an increase of $704,658 or 32.6%. The revenue from in-patient services related to Evernia was S2,685,483 and 1,973,302 for the six months ended June 30, 2023 and 2022, respectively. The increase is attributable to the increase in the number of beds available at the facility and increasing our in-network provider status to a second insurance provider.

The revenue from rental properties was $180,522 and $188,045 for the six months ended June 30, 2023 and 2022, a decrease of $7,523 or 4.0%. the decrease represents foreign currency difference. The subsidiary owning the rental property, CCH was sold on June 30, 2023.

Operating Expenses

Operating expenses were $2,758,833 and $2,034,645 for the six months ended June 30, 2023 and 2022, respectively, an increase of $724,188 or 35.6%. The increase is primarily due to the following:

Operating income

The operating income was $107,172 and $126,702 for the six months ended June 30, 2023 and 2022, respectively, a decrease of $19,530 or 15.4%. The decrease is due to the increase in operating expenses of $724,188, offset by the increase in revenue of $704,658, as discussed in detail above.

Penalty on convertible note

The penalty on convertible notes was $34,688 and $0 for the six months ended June 30, 2023 and 2022, respectively, an increase of $34,688 or 100%. The penalty on convertible note was agreed upon with one of our lenders whose note was in default and was subsequently settled after June 30, 2023. 

Extension fee on property purchase

The extension fee on the property purchase was $130,000 and $0 for the six months ended June 30, 2023 and 2022, respectively, an increase of $130,000 or 100%. The extension fee was levied by the landlord of our West Palm Beach facility to afford us additional time to structure the acquisition of the facility, which we will in turn dispose of to a third party lender.

Interest expense

Interest expense was $301,077 and $203,616 for the six months ended June 30, 2022 and 2021, respectively, an increase of $97,461 or 47.9%. The increase is primarily due to monitoring fees incurred on two short term notes which are currently in default and default interest incurred on those borrowings.

Amortization of debt discount

Amortization of debt discount was $164,447 and $464,034 for the six months ended June 30, 2023 and 2022, respectively, a decrease of $299,587 or 64.6%. The decrease is primarily due to the full amortization of debt discount on convertible notes in the prior periods, these convertible notes are expected to be settled in the short term out of proceeds of the simultaneous property acquisition and disposal. The current period amortization is primarily the amortization of discount on receivables funding.

Derivative liability movement

The derivative liability movement was $0 and $130,437 for the six months ended June 30, 2023 and 2022, respectively. The derivative liability movement represents the mark to market movements of variably priced convertible notes and warrants issued during the prior comparative period. The decrease in the mark to market movement of $130,437, using a Black-Scholes valuation model with a calculated stock price ranging from $0.0006 to $0.0010 per share, a risk free interest rate of 0.52% to 2.99% and expected lives of convertible notes and warrants of 3 to 39 months, with an expected underlying volatility of 167.1% to 245.9%, with no dividends expected for the foreseeable future. The decrease in the derivative liability was primarily due to the conversion and repayment of several convertible notes during the past twelve months and an overall reduction in our stock price, impacting favorably on the mark-to-market adjustment.

Foreign exchange movements

Foreign exchange movements was $90,746 and $97,812 for the six months ended June 30, 2023 and 2022, respectively, representing the realized exchange gains and (losses) on monetary assets and liabilities settled during the current year as well as mark to market adjustments on monetary assets and liabilities reflected on the balance sheet and denominated in Canadian Dollars. The Dollar weakened against the Canadian Dollar during the current period and unrealized translation adjustments of $51,708 was realized on the disposal of our property owning subsidiary Cranberry Cove Holdings.

Net loss before taxation

Net loss before taxation was $(613,447) and $(301,636) for the six months ended June 30, 2023 and 2022, respectively, an increase of $311,811 or 103.4%. The increase is primarily due to, the increase in the foreign exchange movements and the extension fee on the property purchase, offset by the decrease in debt discount amortization and the decrease in derivative liability movements, as discussed above.

Income taxes

Income taxes was a Tax credit was $205,575 and taxation charge was $(42,963) for the six months ended June 30, 2023 and 2022, an increase in credit of $258,538 or 601.8%. The increase is due to the completion of tax returns for our operating subsidiaries during the current quarter, which resulted in the reversal of previously provided for income taxes, primarily related to accelerated depreciation allowances on property and equipment.

Net loss

Net loss was $(407,872) and $(344,599) for the six months ended June 30, 2023 and 2022, respectively, an increase of $63,273 or 18.4%. The increase is primarily due to the increase in net loss before taxation offset by the taxation credit, as discussed above.

Results of operations for the year ended December 31, 2022 and the year ended December 31, 2021.

Revenue

Revenue was $4,820,747 and $1,942,588 for the years ended December 31, 2022 and 2021, respectively, an increase of $2,878,159 or 148.2%.

Revenue from patient treatment was $4,411,546 and $1,568,071 for the years ended December 31, 2022 and 2021, respectively, an increase of $2,843,475 or 181.3%. The increase is due to the consolidation of a full years trading of Evernia, a West Palm Beach based treatment facility, in the prior year we included Evernia in our consolidated results with effect from July 1, 2021, the date of acquisition. In addition the facility was expanded during the current year, allowing for more patients to be treated simultaneously.

Revenue from rental income was $377,351 and $374,517 for the years ended December 31, 2022 and 2021, respectively, an increase of $2,834 or 0.8%, the increase is due to the increase in monthly rental income in terms of the agreement, offset by exchange rate fluctuations, the U.S. dollar strengthened against the Canadian dollar during the current period.

Operating Expenses

Operating expenses was $4,331,630 and $1,940,483 for the years ended December 31, 2022 and 2021, respectively, an increase of $2,391,147 or 123.2%. The increase in operating expenses is attributable to:

Operating profit

The operating profit was $489,117 and $2,105 for the years ended December 31, 2022 and 2021, respectively, an increase of $487,012 or 23,136.0%. The increase is due to the increase in revenues offset by the increase in expenses, primarily due to the inclusion of Evernia in our consolidated results for the full fecal year during the current year and the expansion of the facility during the current year,

Other income

Other income was $15,760 and $273,373 for the years ended December 31, 2022 and 2021, respectively. In 2021, other income includes; (i) the reversal of a $250,000 provision raised for rental expenses on a previous property leased by the Company which has, subsequently been disposed of by the Landlord, and (ii) a financial inducement granted to the Company by the Evernia landlord.

Forgiveness of government relief loan

Forgiveness of government relief loan was $104,368 and $156,782 for the years ended December 31, 2022 and 2021, respectively, a decrease of $52,414 or 33.4%. in 2021, we had met all requirements for forgiveness of one of its Covid-19 government relief loans, in 2022, we received partial forgiveness of a second Covid-19 loan as we only partially met the forgiveness requirements.

Loss on advance

Loss on advance was $0 and $120,000 for the years ended December 31, 2022 and 2021, respectively, a decrease of $120,000 or 100.0%. The company wrote off funds advanced to Local link wellness which were deemed to be uncollectible in 2021.

Fair value of warrants granted to convertible debt holders

Fair value of warrants granted to convertible debt holders was $0 and $854,140 for the years ended December 31, 2022 and 2021, a decrease of $854,140 or 100%. In 2021, we 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. We issued warrants for a total of 195,963,598 shares of common stock which was valued using a Black Scholes valuation model.

Penalty on notes and convertible notes

Penalty on notes and convertible notes was $60,075 and $9,240 for the years ended December 31, 2022 and 2021, an increase of $50,835 or 550.2%. In 2022, the penalty on notes relates to additional principle on certain short term notes which were not paid by due date. In 2021 the penalty on convertible notes relates to a fee paid for the extension of repayment dates on the Labrys note.

Interest income 

Interest income was $78 and $0 for the years ended December 31, 2022 and 2021 respectively. The interest income is immaterial.

Interest expense

Interest expense was $588,477 and $829,525 for the years ended December 31, 2022 and 2021, respectively, a decrease of $241,048 or 29.1%, primarily due to the decrease in convertible note funding during the current year.

Debt discount

Debt discount was $624,683 and $1,965,551 for the years ended December 31, 2022 and 2021, respectively, a decrease of $1,340,868 or 68.2%. The decrease is primarily due to funding arising from other sources without significant debt discount instruments such as warrants being issued to fund operations, the majority of debt discount has been fully amortized in the current and prior year.

Derivative liability movement

We adopted ASU 2020-06 during the current year, which eliminated the derivative liability as our convertible notes with down-round features no longer met the definition of a derivative instrument. The derivative liability movement during the prior year represents the mark to market movements of variably priced convertible notes and warrants issued during prior years.

Foreign exchange movements

Foreign exchange movements was $1,071,320 and $(34,301) for the years ended December 31, 2022 and 2021, respectively and represents the realized exchange gains and (losses) on monetary assets and liabilities settled during the current year as well as mark to market adjustments on monetary assets and liabilities reflected on the balance sheet and denominated in Canadian Dollars. During the current period we disposed of Greenstone Muskoka resulting in the unrealized translation difference becoming a realized gain.

Net income (loss) before taxation

Net income before tax was $407,408 and net loss before taxation was $(1,854,306) for the years ended December 31, 2022 and 2021, respectively, an increase of $$2,261,714 or 122.0%. The increase is primarily due to the acquisition of the Evernia treatment center and the expansion of the facility during the current period.

Taxation

Taxation charge was $112,220 and taxation credit was $280,903 for the years ended December 31, 2022 and 2021, respectively an increase of $393,123 or 139.9%. The 2022 charge relates to the profitable Evernia operations, while the tax credit in the prior year arose due to the reversal of prior years’ accrual for $250,000 in penalty tax for non-disclosure of foreign entities in the US tax return, a deferred tax movement of $37,588 on the amortization of licenses which arose on the acquisition of ATHI and Evernia, and a small tax provision on profits realized on the ATHI and Evernia results.

Net income (loss)

Net income was $295,188 and net loss was $(1,573,403) for the years ended December 31, 2022 and 2021, respectively, an increase of $1,868,591 or 118.8%. The increase is due to the reasons discussed above.

Commitments and contingencies

The company has commitments under operating and finance leases as follows:

The amount of future minimum lease payments under finance leases as of June 30, 2023 is as follows:

The amount of future minimum lease payments under operating leases are as follows:

The company also has commitments under convertible loans and short term loans. If the convertible loans, as disclosed in note 11, above are not converted they will need to be repaid,.

Liquidity and Capital Resources

We have prepared our unaudited condensed consolidated financial statements in accordance with US GAAP applicable to a going concern, which assumes that we will be able to meet our obligations and continue our operations in the normal course of business. At June 30, 2023 we had a working capital deficiency of $9.3 million, and total liabilities in excess of assets in the amount of $7.9 million . We believe that current available resources will not be sufficient to fund our planned expenditures over the next 12 months. These factors, individually and collectively indicate that a material uncertainty exists that raises substantial doubt about our ability to continue as a going concern for one year from the date of issuance of these condensed interim consolidated financial statements. 

We are dependent on the raising additional capital through placement of common shares, and/or debt financing in order to implement our business plan and generating sufficient revenue in excess of costs. If we raise 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 we raise additional funds by issuing debt, we may be subject to limitations on its operations, through debt covenants or other restrictions. If we obtain additional funds through arrangements with collaborators or strategic partners, we may be required to relinquish our rights to certain geographical areas, or techniques that we might otherwise seek to retain. There is no assurance that we will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on our 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 we be unable to continue as a going concern.

Cash generated from operating activities was $35,488 and $246,940 for the six months ended June 30, 2023 and 2022, respectively, a decrease of $211,452. The decrease is primarily due to the following:

Cash generated by operating activities was $1,577,079 and cash used in operating activities was $85,567 for the years ended December 31, 2022 and 2021, respectively an increase of $1,662,646 or 1,943.1%. The decrease is primarily due to the following:

 Cash used in investing activities was $58,320 and $213,726 for the six months ended June 30, 2023 and 2022, respectively. The purchase of property and equipment in both periods related to the expansion of the in-patient treatment facility.

Cash used in investing activities was $0.7 million and $0.6 million for the years ended December 31, 2022 and 2021, respectively. We invested $0.4 million in deposits to acquire the building in which Evernia conducts its operations and the purchase of plant and equipment on the expansion of the Evernia facility. In 2021, we invested $0.5 million in the Evernia treatment facility based in West Palm Beach, prior to acquisition. We also purchased property and equipment of $0.1million, primarily to support the Evernia operation during the current year.

Cash (used in) provided by financing activities was $(210,255) and $127,259 for the six months ended June 30, 2023 and 2022, respectively. In the current period the Company received proceeds from related parties of $78,246. We received receivables funding of $264,750 and repaid $448,905 for a net repayment of $184,155, we made mortgage repayments of $58,320 on the CCH property which has subsequently been sold together with the mortgage liability. In the prior period we made a net repayment to convertible promissory note holders of $118,467 and received receivables funding of $195,500 of which $15,000 was repaid, in addition we received funding from our related parties of $207,294.

Cash generated by financing activities was $0.3 million and $0.6 million for the years ended December 31, 2022 and 2021, respectively. During 2022, we raised $0.7 million in receivables funding and repaid $0.3 million. In addition we raised $0.3 million from related parties and $0.2 million from promissory notes and repaid $0.3 million. During 2021 we raised $1.2 million and repaid $0.5 million in convertible notes, primarily to fund the Evernia operations.

Over the next twelve months we estimate that the company will require approximately $0.5 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 patients throughout the country. The Company also has convertible notes, short term loans and secured promissory notes which have matured and are in default and the Company may have to raise equity or secure debt. There is no assurance that the Company will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on the Company’s financial condition. In the opinion of management, the Company’s liquidity risk is assessed as high due to this uncertainty.

We have prepared our unaudited condensed consolidated financial statements in accordance with US GAAP applicable to a going concern, which assumes that we will be able to meet our obligations and continue our operations in the normal course of business. At June 30, 2023 we had a working capital deficiency of $9.3 million, and total liabilities in excess of assets in the amount of $7.9 million . We believe that current available resources will not be sufficient to fund our planned expenditures over the next 12 months. These factors, individually and collectively indicate that a material uncertainty exists that raises substantial doubt about our ability to continue as a going concern for one year from the date of issuance of these condensed interim consolidated financial statements.  

DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

As of December 31, 2022, our directors, executive officers and significant employees were as follows:

Shawn E. Leon, Chief Executive Officer, Chief Financial Officer, President and Director

Shawn E. Leon has been an officer and director of the Company since November 2010 and served as the President of the Company’s subsidiaries at all times. In April 2011, Mr. Leon was appointed as the Company’s Chief Executive Officer. Prior to joining the Company, Mr. Leon held the role of President of Greenestone Clinic Inc., Leon Developments Ltd, 1871 at the Locks Developments Ltd. and Leon Developments Ltd. Mr. Leon graduated with Honors in Business Administration from Wilfrid Laurier University in 1982. Mr. Leon was elected to the Board because of his prior management experience.

John O’Bireck, Director

John O’Bireck of Aurora, Ontario, Canada has been a Control Systems Engineer, since graduating in 1982, and has since been involved with building engineering teams to provide solutions for industrial and transportation industry. He was a cofounder of HyDrive Technologies Ltd. a publicly listed company where he held the positions of Director, Vice-president, Chief Technology Officer and Vice President of Advanced Product Development. Mr. O’Bireck was also the co-founder, Director and President of Supernova Performance Technologies Ltd., a privately held company. In 2014 Mr. O’Bireck was elected as a Director to the Board of Sparta Capital Ltd.

Gerald T. Miller, Director

 Gerry Miller of Toronto, Ontario, Canada is the Managing Partner of the Law Firm Gardiner Miller Arnold LLP. Mr. Miller’s practice focuses on a comprehensive range of business, finance and real estate issues. In addition to managing the law firm. Mr. Miller’s runs the business law and real estate practice at Gardiner Miller Arnold LLP Law firm. He advises small to medium sized companies in manufacturing, investing and service-related industries. Mr. Miller supervises all merger and acquisition transactions and institutional finance work.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

For the fiscal year ended December 31, 2022, we compensated our directors and executive officers as follows:

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SHAREHOLDERS

The tables below show, as of December 31, 2022, the security ownership of each director and executive officer and each person who owns beneficially more than 10% of our voting securities.

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

As of December 31, 2022, amounts payable to executive officers or their affiliates for related party payables, as detailed in the below table:

Shawn E. Leon

As of December 31, 2022 the Company had a payable to Shawn Leon of $411,611. Mr. Leon is a director and CEO of the Company. The balances payable is non-interest bearing and has no fixed repayment terms.

On December 30, 2022, the Company sold its wholly owned subsidiaries, Greenestone Muskoka and ARIA, to Mr. Leon for gross proceeds of $0. The Company realized a gain on disposal of $628,567 which was recorded as a credit to Additional Paid in Capital due to the related party nature of the transaction.

Due to the current financial position of the Group, Mr. Leon forfeited the management fees due to him for the year ended December 31, 2022.

Leon Developments, Ltd.

As of December 31, 2022, the Company owed Leon Developments, Ltd., $850,607 for funds advanced to the Company.

Eileen Greene

As of December 31, 2022, the Company owed Eileen Greene, the spouse of our CEO, Shawn Leon, $1,451,610. 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.

SECURITIES BEING OFFERED

 General

We are offering Common Stock to investors in this Offering sold in Units, with each Unit consisting of 100 shares of Common Stock. The following descriptions summarize important terms of our capital stock. This summary does not purport to be complete and is qualified in its entirety by the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws, drafts of which have been filed as Exhibits to the Offering Statement of which this Offering Circular is a part. For a complete description of our capital stock, you should refer to our Amended and Restated Certificate of Incorporation and our Bylaws, as amended and restated, and applicable provisions of the Colorado Revised Statutes.

Our authorized capital stock consists of 10,000,000,000 shares of Common Stock, $0.01 par value per share, and 10,000,000 shares of Class A Preferred Stock, $1.00 par value per share, and 400,000 shares of Class B Preferred Stock.

As of September 30, 2022, our issued and outstanding shares included 3,729,053,805 shares of Common Stock respectively and 4,000,000 shares of Series A Preferred Stock and 400,000 shares of Series B Preferred Stock.

Common Stock

Dividend Rights

Holders of Common Stock are entitled to receive dividends, as may be declared from time to time by the board of directors out of legally available funds, unless a dividend is paid with respect to all outstanding shares of Preferred Stock in an amount equal or greater than the amount those holders would receive on an as-converted basis to Common Stock. We have never declared or paid cash dividends on any of our capital stock and currently do not anticipate paying any cash dividends after this offering or in the foreseeable future.

Voting Rights

Each holder of Common Stock is entitled to one vote for each share on all matters submitted to a vote of the shareholders, including the election of directors, but excluding matters that relate solely to the terms of a series of Preferred Stock.

Right to Receive Liquidation Distributions

In the event of our liquidation, dissolution, or winding up, after the payment of all of our debts and other liabilities and the satisfaction of the liquidation preferences granted to the holders of Preferred Stock, the holders of Common Stock and the holders of Preferred Stock (calculated on an as-converted to Common Stock basis) will be entitled to share ratably in the net assets legally available for distribution to shareholders.

Additional Rights and Preferences

Holders of Common Stock have no preemptive, conversion, anti-dilution or other rights, and there are no redemptive or sinking fund provisions applicable to Common Stock.

ONGOING REPORTING AND SUPPLEMENTS TO THIS OFFERING CIRCULAR

We are an Exchange Act reporting company and subject to the periodic reporting requirements therein. As such, our duty to file reports as required by Rule 257 of Regulation A will be deemed to have been met if, as of each Form 1-K and Form 1-SA due date, we have filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act (15 U.S.C. 78m or 15 U.S.C. 78o) during the 12 months preceding such due date.

We may supplement the information in this Offering Circular by filing a Supplement with the SEC.

All these filings will be available on the SEC’s EDGAR filing system. You should read all the available information before investing.

PART III—EXHIBITS

Index to Exhibits

 *Filed herewith

SIGNATURES

Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this offering statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Palm Beach, State of Florida, on April 10, 2023.

ETHEMA HEALTH CORPORATION

By: /s/ Shawn Leon________________

Name: Shawn Leon 

Title: CEO; Director

By: /s/ Gerald T. Miller________________

Name: Gerald T. Miller 

Title: Director

By: /s/ John O’Bireck__________________

Name: John O’Bireck 

Title: Director

ETHEMA HEALTH CORPORATION

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS 

(Expressed in US$ unless otherwise indicated)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Ethema Health Corporation

West Palm Beach, Florida

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Ethema Health Corporation (the Company) at December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ deficit, and cash flows for each of the years ended December 31, 2022 and 2021, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years ended December 31, 2021 and 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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

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

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

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 4 to the consolidated financial statements, the Company has accumulated deficit of approximately $43.5 million and negative working capital of approximately $12.7 million at December 31, 2022, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 4. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for Embedded Conversion Features on Convertible Notes – Refer to Notes 11 and 17 to the Financial Statements

The principal considerations for our determination that performing procedures relating to the valuation of derivatives is a critical audit matter are the significant judgment by management when developing the fair value of the derivative liabilities. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the valuation models used and related variable inputs used within those models.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing management’s process for developing the fair value estimate; evaluating the appropriateness of the valuation techniques; testing the completeness and accuracy of underlying data used in the model; and evaluating the significant assumptions used by management, including the values of expected volatility and discount rate. Evaluating management’s assumptions related to the volatility amounts and discount rates involved evaluating whether the assumptions used by management were reasonable considering the current and historical performance, the consistency with external market and industry data, and whether these assumptions were consistent with evidence obtained in other areas of the audit.

ETHEMA HEALTH CORPORATION

CONSOLIDATED BALANCE SHEETS

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

ETHEMA HEALTH CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS 

AND COMPREHENSIVE (LOSS) INCOME

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

ETHEMA HEALTH CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

DEFICIT