Ethema Health Corp (GRST)

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Ethema Restructures Debt and Raises New Financing to Acquire Interest in New Facility

June 12, 2020 09:00 ET | Source: Ethema Health Corporation

WEST PALM BEACH, FL, June 12, 2020 (GLOBE NEWSWIRE) -- via NEWMEDIAWIRE – Ethema Health Corporation (OTCPINK: GRST) (“Ethema” “GRST” or the “Company”), a provider of healthcare services, previously announced that it was working to restructure its debt and to acquire the majority interest in a company that would give Ethema a new treatment center location in West Palm Beach. This press release will update the status of those negotiations as well as previous announcements regarding letters of intent for other acquisitions, and general corporate matters. This release will serve as a general update on these matters and more detailed information will follow in additional press releases and regulatory filings.

New Financing and Acquisition

The Company has secured term sheets from two of its existing lenders for new investments to finance the acquisition and operation of its new addiction treatment facility at 950 Evernia Street, West Palm Beach Florida. The New notes will be for a principal amount of $330,000.00 including an OID of $30,000. The net proceeds to the Company after the OID discount and legal fees will be $293,000.00. Document drafts have been submitted and the Company hopes to close on this transaction in the next week. The acquisition announced in January 2020 is scheduled to close immediately after closing the new financing. The new facility will be licensed for all levels of care. There is capacity for 60 beds on the property. The Company expects to ramp up its virtual care that it developed in 2019 as this will become an important aspect of treatment going forward. The company expects strong demand for addiction treatment services for the foreseeable future. The location and building are ideal for the operation of an addiction treatment business. The Company expects to use the latest developments and methods to make the facility a COVID-19 free zone for its clients.

Debt and Warrant Amendments

The following Lenders and Warrant holders have been renegotiating the terms of their debt and/or warrants. All of these agreements include lock-ups on the conversion to shares. Some of these agreements are finalized and some are pending completion of documentation.

Power Up Lending Group Ltd. – Paid.
Firstfire Global Opportunities Fund LLC – Amendment signed with Lock-up pending two payments of $25,000.00 each at end of June and July 2020.
Labrys Fund, LP – Amendment signed with Lock-up pending eight monthly payments of $25,000.00 each starting October 15, 2020.
Auctus Fund, LLC (“Auctus”) – Amendment is pending. The agreement is for a Lock-up with a payment plan of nine monthly payments of $25,000.00 each beginning October 1, 2020. Auctus is participating in the new financing.
Leonite Capital LLC (“Leonite”) – Term sheet signed and pending final documents. The term sheet includes the following changes:
The principal outstanding would be reduced to $1,250,000.00 and all existing defaults would be waived.
A $700,000 portion of the note would be converted to 10% redeemable preferred shares in the Company’s Canadian real estate holding subsidiary Cranberry Cove Holdings Ltd.
A $400,000 portion of the note would be converted into 6% callable Series A Preferred shares of the Company.
A $150,000 portion of the note would remain outstanding with the following changes:
All existing defaults would be waived
No conversion between month 1 and 3
Minimal leak out conversion between month 4 and 6
Six Equal Monthly payments of the balance starting in month 7

The documentation to effect the Leonite amendments are still in draft form and subject to legal review.

All existing Leonite Warrants to be exchanged with a new Leonite five year warrant granting Leonite the option to purchase equity up to 20% of the outstanding common shares at $.10 subject to adjustment. Any portion of the warrant that is exercised will reduce the remainder of the warrant remaining based on the total number of common shares outstanding at the time of the exercise. The warrant may not be exercised in the first three months of the warrant term.
Series N Convertible Notes – There are approximately $3 million of Series N convertible notes outstanding plus accrued interest. A portion of these notes have extended their term and the Company expects to renegotiate the term and/or the conversion of the notes in the near future.
Shareholders Loan – There remains in excess of $3 million dollars of shareholder loans due to be settled in the near future.

Other Acquisitions

The company entered into two LOI’s before the end of 2019 and both of those LOIs expired before the Company could raise any financing to complete those acquisitions. There is still an effort ongoing on a non-exclusive basis in both cases to participate in a financing for an acquisition for a portion of these businesses. There is no concrete development in either of these cases.

Corporate Actions:

The Audit of the Company’s annual financial statements are near completion and the filing of the 10k is expected in the next 7 to 10 days and the filing of the 10Q for the first quarter should follow shortly thereafter.

Statement from CEO:

“Despite the severe setbacks faced by the Company over the last 6 months, my wife and I remain committed to the success of the Company. We have continued to support the Company financially and believe wholeheartedly in the ability to deliver quality addiction treatment services to clients. We have personally guaranteed many of the Company obligations and fully support the Company going forward. The future for addiction treatment services is expected to be very strong due to the severe effects on many people from isolation and fear of the COVID-19 virus, not to mention the trauma of losing a loved one in these difficult circumstances. We aim to be part of the healing and recovery from these extraordinary times and wish to thank all the various lenders, shareholders, and stakeholders who have supported us in restructuring and have given us the opportunity to help as many people as we can going forward,” said Shawn Leon CEO of the Company.

Some of the actions described in this update are not yet finalized and the Company will provide an update on these items as they are consummated.

About Ethema Health Corporation

Ethema Health Corporation (OTCQB: GRST) operates in the behavioral healthcare space specifically in the treatment of substance use disorders. Ethema developed a unique style of treatment over the last ten years and has had much success with in-patient treatment for adults. Ethema will continue to develop world-class programs and techniques for North America. For more information, you can visit our website at www.ethemahealth.com.