They had a bit more than $2 million in revenue for the first 6 months of the year with operating expenses to match for this iteration of ARIA is built out. The share structure and story no longer supports debt conversions and they have over $4 million of their debt in default as of Q2.
On top of that the company doesn't really own anything. Of the original 51% purchase of ATHI shares, 48% is held in options to secure nearly $1 million in notes used for the new start-up. Once the million is paid back the option holders would still retain 50% of the original options amount of ATHI (AKA Evernia, AKA ARIA). So they need $1 million to recover some 24% ownership of ATHI. They later purchased 24% of ATHI shares so this would allow the company to claim something like 51% of the treatment center with the 3% balance of the original 51% deal.
But now they essentially have no cash flow, debt in default, the $3.7 million mortgage for the Canadian property due in July, on and on. Now the $745K June Leonite note for which that have no ability to pay is secured by all assets of Ethema Health Corporation and Addiction Recovery Institute of America, LLC. The terms of which are in the missing document referred to as the "Security and Pledge Agreement". I believe this will play out as handing over what they do own of the treatment center to Leonite who will then own around 60% of ATHI shares with their options. Leonite already holds $700K in debt against the Canadian property so with the mortgage that they likely can not refinance it is a wash. The debt payments that ATHI owes to the company already goes directly to Leonite.
It looks to me like the company is currently trying to come up with a new narrative and the two letters of intent proved to be elusive per the press release. Once they have something they likely will split this to the bone and go after new funding and try to convert some more of that debt. This current story that is done in my opinion was all about converting some of the debt and not about building shareholder value. The next story will be the same which also started with nothing but debt after they closed the last treatment center in January 2020.
On June 30, 2020, the Company entered into a loan agreement with Evernia whereby it had advanced Evernia.... $97,456 and had agreed to advance a further $294,000 in future tranches,...
...management fees paid to Ethema and Hawkins, which management fee is a maximum of $20,000 per month...
...The loan will remain in place until repaid in full. The repayment proceeds will be repaid directly to Leonite in reduction of the loan funds advanced by Leonite to the Company....
4. Acquisition of subsidiaries ...The Company agrees to advance up to $1,100,000 under the Loan Agreement for the funding of the operations of ATHI as required without any contribution required by the Seller. As at the date of acquisition, July 1, 2021, the Company had advanced Evernia $1,140,985, subsequent to July 1, 2021 to June 30, 2022, Evernia had repaid $151,260. The balance owing to the company at June 30, 2022 was $989,725.
The Asset Purchase Agreement and Lease On April 28, 2021, the Stock Purchase Agreement was amended whereby the option to purchase an additional 9% of ATHI for $50,000 was amended to purchase an additional 24%, an increase of 15% over the prior option, for 100,000,000 shares of common stock and $50,000.
...The obligations of the Borrower under this Note are secured pursuant to the terms of the security and pledge agreement (The "Security and Pledge Agreement" and collectively the Purchase Agreement, the "Related Documents"...
22. Commitments and contingencies
c. ATHI Option agreements
On July 12, 2020, the Company entered into a five year option agreement with Leonite Capital LLC (“Leonite”) and other investors (collectively the “Transferees”), the Company agreed to sell to Leonite a portion of the total outstanding shares of ATHI from the shares of ATHI held by the company. The Company provided Leonite an option to purchase 33% of ATHI from the Company for a purchase consideration of $0.0001 per share, based on the advances that Leonite made to the Company totaling $655,000. Leonite shall share in all distributions by ATHI to the Company, on an as exercised basis, equal to the advances made by Leonite to the Company, thereafter the option will be reduced to 50% of the shares exercisable under the option.
On September 14, 2020, the Company entered into a five year option agreement with Ed Blasiak (“Blasiak”) whereby the Company agreed to sell to Blasiak a portion of the total outstanding shares of ATHI. The Company provided Blasiak an option to purchase 2.5% of ATHI from the Company for a purchase consideration of $0.0001 per share, based on the advances that Blasiak made to the Company totaling $50,000. Blasiak shall share in all distributions by ATHI to the Company, on an as exercised basis, equal to the advances made by Blasiak to the Company, thereafter the option will be reduced to 50% of the shares exercisable under the option.
On October 29, 2020, the Company entered into a five year option agreement with First Fire whereby the Company agreed to sell to First Fire a portion of the total outstanding shares of ATHI. The Company provided First Fire an option to purchase 6.25% of ATHI from the Company for a purchase consideration of $0.0001 per share, based on the advances that First Fire made to the Company totaling $125,000. First Fire shall share in all distributions by ATHI to the Company, on an as exercised basis, equal to the advances made by First Fire to the Company, thereafter the option will be reduced to 50% of the shares exercisable under the option.
On October 29, 2020, the Company entered into a five year option agreement entered into with Bauman, so that the Company agreed to sell to Bauman a portion of the total outstanding shares of ATHI. The Company provided Bauman an option to purchase 6.25% of ATHI from the Company for a purchase consideration of $0.0001 per share, based on the advances that Bauman made to the Company totaling $125,000. Bauman shall share in all distributions by ATHI to the Company, on an as exercised basis, equal to the advances made by Bauman to the Company, thereafter the option will be reduced to 50% of the shares exercisable under the option.
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