Have to quit listening to Shawn Leon, the year over year numbers tell the real story. The cash burn consequences from the crazy property purchase, sale, leaseback deal of August 2023 finally showed up in the Q1 and Q2 numbers to cover what was $2.3 million in mostly defaulted debt. The Evernia treatment center is fine, they have a separate lease agreement with Ethema Health. That is the business model, the debt and liabilities to get the treatment center up and running belong to Ethema Health shareholders. They keep the treatment center balance sheet clean in secure the new debt. If things go sideways these lenders will walk away with the treatment center operations used to secure the new debt.
More consequences to come with the crazy property, purchase, sale, leaseback deal of August 2023. That base payment increases 2.75% a year on the August anniversary date and the leaseback company covered themselves against inflation by tying the payment to the annual CPI. The expensive promotion for Q2 to sell the regulation "A" offering failed. Now Shawn Leon is trying to find a way to do another property purchase, sale, lease back deal to cover the new very short term debt he took on already for 2024. There is a $600K note that matures on November 15th with some nasty default terms to include ownership of 25% of ATHI direct shares, the holding company for the treatment center. Ethema just did a ridiculous deal in Q1 with Lawrence Hawkins for $1.1 million for his 25%. Yeah, they are still trying to buy the Evernia treatment center that they financed beginning in 2020. 🙄 August 4th 2023 Lease Agreement https://www.otcmarkets.com/filing/html?id=16855888&guid=iEN-kF378EVAB3h#ex10_6_htm
Page 29 and 30 For the six months ended June 30, 2024 and June 30, 2023.
Revenues Revenues were $2,790,200 and $2,866,005 for the six months ended June 30, 2024 and 2023, respectively, a decrease of $75,805 or 2.6%...
Operating Expenses Operating expenses were $3,296,785 and $2,758,833 for the six months ended June 30, 2024 and 2023, respectively, an increase of $537,952 or 19.5%. The increase is primarily due to the following:...
Rent expense was $539,263 and $220,497 for the six months ended June 30, 2024 and 2023, respectively, an increase of $318,766 or 144.6%. The increase is primarily due to the acquisition of the Evernia property and the subsequent sale of property at an increased value with the simultaneous entry into a new 20-year lease agreement. The rental increased significantly by $203,412 over the period and the rental smoothing adjustment in terms of US GAAP over the life of the lease added an additional $115,354 to the current period charge.
Operating (loss) income The operating loss was $(506,585) and the operating income was $107,172 for the six months ended June 30, 2024 and 2023, respectively, an increase of $613,757 or 572.7%.
Page 32 Over the next twelve months we estimate that the company will require approximately $3.5 million for working capital and to repay existing short-term notes as the business continues to develop its rehab business in the US market. The Company has convertible notes, short term loans and promissory notes which will mature or have already matured during the current year and 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.
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