UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2025

or

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to _________

Commission file number: 000-15078

Ethema Health Corporation

(Exact name of registrant as specified in its charter)

Colorado 84-1227328

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

950 Evernia Street

West Palm Beach, Florida 33401

(Address of principal executive offices)

(416) 500 0020

(Registrant’s telephone number, including area code)

Securities registered under Section 12(g) of the Act:

Common Stock, $0.01 par value per share

(Title of class) 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☐  No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ☐  No  ☒ 

Indicate by check mark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒  Yes  No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒  No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of issuer’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D.1(b).  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐  No  ☒

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2025, based on a closing share price of $0.0004 was approximately $1,421,568.

As of June 29, 2026, the registrant had 7,726,283,805 shares of its common stock, par value $0.01 per share, outstanding.

ETHEMA HEALTH CORPORATION  

YEAR ENDED DECEMBER 31, 2025

TABLE OF CONTENTS

PART I

Special Note Regarding Forward-Looking Statements

Many of the matters discussed within this Annual Report contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) based on our current expectations and projections about future events. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements. Such risks and uncertainties include the risks noted under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but are also contained elsewhere. We do not undertake any obligation to update any forward looking statements. Unless the context requires otherwise, references to “we,” “us,” “our,” and “Ethema,” refer to Ethema Health Corporation and its subsidiaries.

Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.

Item 1. Business.

Company History

Ethema Health Corporation (the “Company” or “Ethema”), a Colorado corporation was incorporated under the laws of the State of Colorado on April 1, 1993, and is the surviving company of a merger, effective February 1, 1995, between the Company and Nova Natural Resources Corporation, a Delaware corporation (“Nova Delaware”). The merger was effectuated solely for the purpose of changing the Company’s domicile from Delaware to Colorado. At all times prior to 2001, the Company was engaged in the oil and gas exploration business. Nova Delaware was the successor entity to Nova Petroleum Corporation, a Delaware corporation, and Power Resources Corporation, a Delaware corporation, which merged in 1986 (“the 1986 Merger”). Prior to the 1986 Merger, Nova Petroleum Corporation and Power Resources Corporation had operated since 1979 and 1972, respectively. In 2001, the Company entered into the electronics business and this business was active in 2001 and 2002, as part of the Torita Group. After 2002, the Company continued with various stages of development in this business until 2010.

On April 1, 2010, the Company changed its principal operations from development stage electronics to health care services. On March 29, 2010, the Company entered into a one-year consulting agreement with Greenstone Clinic Inc., a Canadian corporation (“Greenestone Clinic”), whereby Greenestone Clinic provided consulting services for the Company’s development and operation of medical clinics in the province of Ontario, Canada. Specifically, Greenestone Clinic provided medical and business expertise in the initial startup of private clinics and technical assistance to ensure that the clinics were in compliance with governmental policy and procedure requirements as well as any operational requirements. At the time of entering into this consulting agreement, Greenestone Clinic operated a clinic at the Muskoka property housing its addiction treatment clinic and provided endoscopy services. The Company started offering medical services in June 2010, offering various medical services, including endoscopy, cardiology and executive medicals, which services were subsequently sold.

During December 2016, the Company obtained a license to operate and provide addiction treatment health care services in Florida, USA. The company commenced operations under this license with effect from January 2017.

On February 14, 2017, the Company completed a series of transactions (referred to collectively as the “Restructuring Transactions”), including a Share Purchase Agreement (the “SPA”) whereby the Company acquired 100% of the stock of Cranberry Cove Holdings Ltd. (“CCH”) from Leon Developments Ltd. (“Leon Developments”), a company wholly owned by Shawn E. Leon, who is the President, CEO, and CFO of the Company, for an assignment to Leon Developments of CDN$659,918 owing to the Company and the issuance of 60,000,000 shares of the Company’s common stock valued at $2,184,000. CCH held the real estate on which the Company’s Greenstone Muskoka operated. The Company entered into an Asset Purchase Agreement (the “APA”) whereby the assets of Greenstone Muskoka were sold by Greenstone Muskoka, to Canadian Addiction Residential Treatment LP (the “Purchaser” or “CART”), for a total consideration of CDN$10,000,000. The Company also entered into a lease agreement whereby the Company leased the real estate to CART for an initial 5-year period with three 5-year renewal options.

On February 14, 2017, immediately after closing on the sale of the assets of Greenstone Muskoka, the Company closed on the acquisition of the business and real estate assets of Seastone Delray pursuant to certain real estate and asset purchase agreements through its wholly owned subsidiary, Addiction Recovery Institute of America, LLC (“ARIA”). The purchase price for the ARIA assets was US$6,070,000.

On April 4, 2017, the Company changed its Corporate name from Greenestone Healthcare Corporation to Ethema Health Corporation.

On November 2, 2017, the Company entered into an Agreement to purchase certain buildings in West Palm Beach, Florida, totaling approximately 80,000 square feet, on which the Company planned to operate a substance abuse treatment center. The purchase price of the Property was $20,530,000. The Company made a series of nonrefundable down payments totaling $2,940,546 in 2017 and 2018. On May 23, 2018, the Company converted the agreement to purchase the buildings from the Landlord into a real property lease agreement with a purchase option. The lease was for an initial 10 years and provided for two additional 10-year extensions. In June 2018, the Company moved its ARIA operations into the West Palm Beach properties and in September 2018 received a license to operate in-patient detoxification and residential treatment services. On December 20, 2019, the Company entered into an agreement with the landlord to terminate the lease agreement on January 31, 2020.

On April 2, 2019, the Company disposed of the real estate assets in ARIA located at 801 Andrews Avenue, Delray Beach for gross proceeds of $3,500,000, and on October 10, 2019, the Company transferred the remaining real estate asset located at 810 Andrews Avenue, Delray Beach, Florida to Leonite Capital, LLC, for net proceeds of $1,398,510, which proceeds were offset against the convertible loan owing to Leonite.

On June 30, 2020, the Company entered into an agreement (“the Stock Purchase Agreement”), whereby the Company agreed to acquire 51% of American Treatment Holdings, Inc. (“ATHI”) from The Q Global Trust (“Seller”) and Lawrence B Hawkins (“Hawkins”), which owned 100% of Evernia Health Services LLC. (“Evernia”), which operates drug rehabilitation facilities. The consideration for the acquisition was a loan to be provided by the Company to Evernia in the amount of $500,000. The Company has an option to acquire an additional 24% of ATHI for 100,000,000 shares of common stock and $50,000, on the condition that a probationary license was approved by the Florida Department of Family and Child Services, which was received on June 30, 2021, upon which the Company exercised its option to acquire the additional 24% of ATHI, resulting in a 75% ownership of ATHI.

On May 15, 2024, the Company entered into a Stock Purchase Agreement whereby it acquired the remaining 25% of ATHI representing 5,000,000 shares from the minority stockholder for gross proceeds of $1,100,000.

On December 30, 2022, the company entered into two agreements whereby it sold two non-operating subsidiaries, Greenstone Muskoka and ARIA to the Company Chairman and CEO for no consideration, after Greenstone Muskoka forgave its intercompany receivable owing from the Company of $6,690,381 and the Company forgave its intercompany balance owing from ARIA of $9,605,315.

On June 30, 2023, the Company entered into an exchange agreement with Leonite Capital, LLC, whereby it exchanged 400,000 Series B shares with a value of $400,000 plus accrued dividends thereon of $61,184 for its entire shareholding in its property-owning subsidiary, CCH. The Series B shares were cancelled upon consummation of the transaction.

On October 3, 2022 the Company entered into a purchase and sale agreement with Evernia Station Limited Partnership for the purchase of 950 Evernia Street, West Palm Beach, Florida (“950”), the property in which it operates its treatment center, for gross proceeds of $5,500,000 (“Purchase Agreement”). The closing was originally scheduled for February 1, 2023, however through a series of 6 addendums to the Purchase Agreement requiring the payment of a total $180,000 in extension fees, the Closing was extended to August 3, 2023.

On May 4, 2023 the Company signed a Letter of Intent with Pontus Net Lease Advisors, LLC to sell 950 for $8,500,000 and lease the property to the Company for a term of twenty years with two ten-year extensions. On May 19, 2023, the Company signed a purchase and sale agreement with Pontus Net Lease Advisors to sell 950 for $8,500,000. On August 4, 2023, the Company completed both the purchase of 950 from Evernia Station Limited Partnership and the subsequent sale of 950 to Pontus Net Lease Advisors, LLC.

Simultaneously with the closing of the purchase and sale agreements, on August 4, 2023, the Company entered into a long-term lease for 950 with an initial term of twenty years, and two ten-year extension options. The lessor is Pontus EHC Palm Beach, LLC , a Delaware limited liability company and a portfolio company of Pontus Net Lease Advisors, LLC. The lease is absolutely net and the lease cost for the initial year is $748,000 paid monthly. The lease increases at a rate of 2.75% per year for a total term lease obligation of $19,655,717 over the initial twenty-year term. The Lease is personally guaranteed by the Company President and the guarantee may be released after 5 years based on certain financial and performance metrics being met.

On March 22, 2024, the Company executed a LOI to acquire certain assets, including furniture, equipment, inventory and supplies of Boca Cove Detox, LLC, along with the assignment of lease and sub-lease for premises located at 899 Meadow Avenue, Boca Raton, Florida. On May 1, 2024 the Company, through its subsidiary Evernia Health Center LLC, entered into a Definitive Agreement whereby the Company assumed the lease for suites 100,101, 201, 202 and 203 located at 899 Meadows Road, Boca Raton, Florida (the “Leased Premises”) and the furniture, fixtures and equipment located therein, upon the assignment of the lease from the property owner. The lease was assigned on June 10, 2024 and the Company entered into a Bill of Sale to give effect to the Definitive Agreement. The purchase price was $240,000 which was settled by a deposit of $20,000 and a cash payment of $220,000 and the payment to the Seller of $83,393 for the assumption of the security deposit held by the landlord of the Leased Premises located at 899 Meadows Road.

On October 22, 2024, ARIA Kentucky LLC (ARIA Kentucky”), a wholly owned subsidiary of the Company, Edgewater Recovery Centers, LLC (“ERC”) and John Elam (the ”Seller”), entered into an Asset Purchase Agreement (”APA”) pursuant to which ARIA Kentucky agreed to acquire and ERC agreed to sell to ARIA Kentucky on the closing date (the “Acquisition”) , the addiction treatment operations owned by ERC and located in Morehead and Paducah, Kentucky through a purchase of the assets of ERC (the “Acquired Assets”), including; all assets of ERC used in the business of ERC (except for certain specified assets), including but not limited to all current assets existing at the time of closing, all cash balances and rights to receive cash, all equipment, machinery, all warranties related to the business and acquired assets, all intangible personal property, intellectual property, all business inventories, all property leases associated with the business, all assumed contracts, all governmental authorizations; and all information and records, including patient records, as defined in the APA. Certain of the real property associated with the operations of ERC (the “Real Property”) is fully leveraged and requires credit and personal guarantees which the Company is unable to provide. The entities owning the real property were acquired in a separate transaction by BH Properties Fund LLC (“BH Properties”), a company controlled by Mr. Shawn Leon, the Company’s CEO and therefore a related party. BH Properties through its acquired subsidiaries then entered into lease agreements with ARIA Kentucky on an arms-length basis, at market related rates.

On January 9, 2025, ARIA Kentucky consummated the Acquisition of the Acquired Assets of ERC. Pursuant to the terms of the APA, at closing ARIA Kentucky paid the Seller $250,000 and assumed certain liabilities related to the Acquired Assets, including trade payables and liabilities under assumed contracts and certain specifically identified liabilities, including a settlement agreement with the United States government and the State of Kentucky and certain obligations as a borrower or guarantor related to banking obligations.

On January 9, 2025, in a separate transaction, BH Properties acquired ERC Investments, LLC (”ERCI”), New Journey LLC (“NJ”) and JDE Properties, LLC (“JDE”) which separately own certain Real Property on which ARIA Kentucky operates and which was subsequently leased to ARIA Kentucky.  

Corporate Structure

The Company consists of the following entities:

Ethema is the publicly traded investment holding company, registered in Colorado, U.S. and owns the following entities:

ATHI owns 100% of the members’ interest of Evernia Health Center LLC. Ethema acquired 75% of ATHI effective July 1, 2021. On May 15, 2024, the Company entered into a Stock Purchase Agreement whereby it acquired the remaining 25% of ATHI from the minority stockholder.

Ethema owns 100% of Evernia, who operates a treatment center in West Palm Beach Florida and is a wholly owned subsidiary of ATHI which was acquired by Ethema effective July 1, 2021. The Company has been actively involved in the operation of this treatment center since June 30, 2020.

DARE has remained dormant since inception.

Ethema owns 100% of PB Billing, which performs the function of billing and collection for Evernia and ARIA Kentucky

Ethema owns 100% of ARIA Kentucky. ARIA Kentucky acquired the business and certain assets and liabilities of Edgewater Recovery on January 9, 2025.

Employees

As of December 31, 2025, Ethema had 207 employees and 16 part-time contractors. 

Marketing

The addiction treatment business in the USA operates as an insured health care service. Our marketing efforts are long-term processes of establishing relationships with relevant professionals and our treatment staff. We use industry specific conferences and functions to network with these professionals.

Through Evernia, the Company has an in-network relationship with several health care providers and the majority of the Company’s clients are sourced from these health care providers. 

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 health care services.

Environmental Regulations

The Company is not currently subject to any pending administrative or judicial enforcement proceedings arising under environmental laws or regulations. Environmental laws and regulations may be adopted in the future which may have an impact upon the Company’s operations.

Item 1A. Risk Factors.

Not applicable because we are a smaller reporting company.

Item 1B. Unresolved Staff Comments

None. 

Item 2. Properties.

Ethema Executive Offices

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

West Palm Beach Treatment Operations

The Company, through its acquisition of ATHI, effectively acquired an initial 75% of the Evernia treatment facility located at 950 Evernia Street, West Palm Beach Florida. On May 15, 2024, the Company acquired the remaining 25% of ATHI. The Company has been actively involved in the operation of the Evernia treatment facility since June 2020.

On March 22, 2024, the Company through its subsidiary Evernia Health Center LLC, entered into a Definitive Agreement whereby the Company assumed the lease for suites 100, 101, 201, 202 and 203, located at 899 Meadows Road, Boca Raton, Florida (the “Boca Leased Premises”). The company began operating a treatment facility at the Boca Lease Premises during January 2025.

Kentucky Treatment Operations

The Company through the acquisition of the business, certain assets and liabilities of Edgewater Recovery Center, LLC, operates treatment centers in Morehead, Kentucky and Paducah, Kentucky through 11 leased properties, of which two are in Paducah and the remaining in Morehead.

Item 3. Legal Proceedings.

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 4. Mine Safety Disclosures.

None.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s common stock is quoted on the Over-the-counter Market (the “OTC PINK”) under the symbol “GRST”. The Company was sponsored by the market maker Wilson Davis & Co. from Salt Lake City, Utah, which filed a Form 15c2-11 application with the Financial Industry Regulatory Authority (“FINRA”) for the Company in 2011. This application was approved by FINRA in February 2012, and Wilson Davis & Co. first quoted the stock in March 2012.

From March 2012 to January 2020, our common stock had been traded on the OTCQB markets under the symbol “GRST”. In January 2020, the stock was downgraded to the OTC Pink Sheets market.

The last quoted stock price of our common stock on the OTC Pink on June 24, 2026 was $0.00001 per share. As of June 24, 2026, there were approximately 150 holders of record of our common stock.  

Dividend Policy

We have not paid any cash dividends on our common stock to date, and we have no intention of paying cash dividends in the foreseeable future. Whether we declare and pay dividends is determined by our Board of Directors at their discretion, subject to certain limitations imposed under Colorado corporate law. The timing, amount and form of dividends, if any, will depend on, among other things, our results of operations, financial condition, cash requirements and other factors deemed relevant by our Board of Directors.

Equity Compensation Plan Information

See Item 11 - Executive Compensation for equity compensation plan information.

Recent Sales of Unregistered Securities

Other than as set forth below or as previously disclosed in our filings with the Securities and Exchange Commission, we did not sell any equity securities during the year ended December 31, 2025 in transactions that were not registered under the Securities Act.

 
Penny Stock

The U.S. Securities and Exchange Commission (the “SEC”) has adopted rules that regulate broker dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws. (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

The broker dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.

These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.

Issuer Purchases of Equity Securities

There were no issuer purchases of equity securities during the fiscal year ended December 31, 2025.

Item 6. Reserved

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by, our audited annual financial statements and the related notes thereto, each of which appear elsewhere in this Annual Report. This discussion contains certain forward-looking statements that involve risks and uncertainties in this Annual Report. Actual results could differ materially from those projected in the forward-looking statements. The Management Discussion and Analysis of Financial Condition and Results of Operations below is based upon only the financial performance of Ethema Health Corporation.

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our consolidated financial statements would be affected to the extent there are material differences between these estimates. This discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and accompanying notes to the consolidated financial statements for the year ended December 31, 2025.

Results of operations for the year ended December 31, 2025 and the year ended December 31, 2024.

Revenue

Revenue was $18,764,817 and $6,017,204 for the years ended December 31, 2025 and 2024, respectively, an increase of $12,747,613 or 211.9%. Revenues included $10,846,266 from the acquisition of the business of ERC. Revenues from existing business was $7,918,551 and $6,017,204 for the years ended December 31, 2025 and 2024, respectively, an increase of $1,901,347 or 31.6%. The increase is primarily due to the increase in patient count at the West Palm Beach facility and the acquisition of the Boca Raton rehab and detox facility during June 2024, which commenced revenue generating operations in January 2025, after obtaining all necessary regulatory approvals.

During the last quarter of 2025, a health care provider, which is a significant customer of ours reduced its reimbursement rates on services we provide to their patients by significant amounts, this resulted in some services we provide to this customer being no longer profitable. We have reacted to these reduced rates by ceasing to offer certain services to this customer’s patients and by restructuring our operations to reduce expenses in the first and second quarters of 2026. 

Operating Expenses

Operating loss

The operating loss was $260,135 and $1,333,129 for the years ended December 31, 2025 and 2024, respectively, a decrease in loss of $1,072,994 or 80.5%. The decrease is primarily due to the increase in revenue, primarily due to the acquisition of ERC and the increased revenue in our Florida locations, offset by an increase in operating expenses, as discussed in detail above.

Other income

Other income was $66,107 and $110,000 for the years ended December 31, 2025 and 2024, respectively, a decrease of $43,893 or 39.9%. The decrease in other income was primarily related to management fees earned from Edgewater Recovery in the prior year. During the current year an employee retention credit was received from the federal government.

Other expense

Other expense was $0 and $1,160 for the years ended December 31, 2025 and 2024, respectively, a decrease of $1,160 or 100.0%.

Interest income 

Interest income was $3,884 and $2,292 for the years ended December 31, 2025 and 2024 respectively. Interest income represents interest earned on positive bank balances.

Interest expense

Interest expense was $1,388,074 and $565,343 for the years ended December 31, 2025 and 2024, respectively, an increase of $822,731 or 145.5%. Included in interest expense is interest of $486,234 related to the acquisition of the business of ERC. Interest expense on the existing business was $901,840 and $565,343 for the years ended December 31, 2025 and 2024, respectively, an increase of $336,498 or 59.5%, primarily due to default interest on letter of credit funding, additional interest on Series R promissory notes which were entered into during the period March to May 2024, and interest on promissory notes issued to acquire the assets of the Boca Raton facility and the non-controlling shareholders interest in the prior year.

Amortization of debt discount

Amortization of debt discount was $616,072 and $416,120 for the years ended December 31, 2025 and 2024, respectively, an increase of $199,952 or 48.1%. Included in amortization of debt discount is amortization of $209,212 related to funding arrangements in ARIA Kentucky. Amortization of debt discount in the existing business was $406,860 and $416,120, a decrease of $9,260 or 2.2%. The amortization of debt discount relates primarily to short-term funding arrangements. In the current period the Company increased its funding arrangements to fund working capital requirements in both the ARIA Kentucky operation and our Florida operations.

Foreign exchange movements

Foreign exchange movements were $(36,023) and $37,523 for the years ended December 31, 2025 and 2024, respectively. Foreign exchange movements represents the realized exchange gains and (losses) on monetary assets and liabilities settled during the current year as well as mark to market unrealized gains and losses on monetary assets and liabilities reflected on the balance sheet and denominated in Canadian Dollars.

Net loss before income taxes

Net loss before income taxes was $2,230,313 and $2,165,937 for the years ended December 31, 2025 and 2024, respectively, an increase in loss of $64,376 or 3.0%. The increase is primarily due to an increase in operating expenses, interest expense and amortization of debt discount, offset by the increased revenue, all discussed in detail above.

Income taxes

Income taxes was a credit of $52,644 and $0 for the years ended December 31, 2025 and 2024, respectively an increase in credit of $52,644 or 100.0%. The taxation charge represents the deferred tax movement on the value of certain identifiable intangibles acquired from Edgewater. The Company made losses during the current year, increasing its Net Operating loss for tax purposes, a full valuation allowance has been provided against deferred tax assets.

Net loss

Net loss was $2,177,669 and $2,165,937 for the years ended December 31, 2025 and 2024, respectively, an increase in loss of $11,732 or 0.5%. The increase is due to the increase in loss before income taxes, offset by the deferred tax credit relating to the acquisition of intangibles assets on the acquisition of the assets of Edgewater.

Liquidity and Capital Resources

Cash used in operating activities was $0.03 million and $0.46 million for the years ended December 31, 2025 and 2024, respectively a decrease of $0.43 million or 93.5%. The decrease is primarily due to the following: 

Cash used in investing activities was $0.25 million and $1.0 million for the years ended December 31, 2025 and 2024, respectively. In the current year, we acquired the business of ERC for gross proceeds of $0.25 million net of cash on acquisition of $0.3 million, resulting in a net cash generated on acquisition of $0.05 million, we also invested $0.28 million in property and equipment, including leasehold improvements to leased properties and purchases of fittings and fixtures to increase the capacity of our facilities. In the prior period we paid $0.63 million for the acquisition of the minority interest in ATHI, a further $0.24 million for the acquisition of the assets of Boca Cove Detox and a further $0.08 million for the assumption of the real property deposit on the Boca Cove facility.

Cash provided by financing activities was $0.08 million and $1.7 million for the years ended December 31, 2025 and 2024, respectively. During the current period, we raised $2.64 million from funding arrangements and repaid $2.56 million, a net movement of $0.08 million, we received an additional bank loan of $0.3 million and issued two promissory notes for an additional $0.3 million, additionally we repaid $0.17 million of short-term notes and $0.12 million in principal on bank loans. We repaid assumed liabilities of $0.16 million and promissory notes of $0.14 million. In the prior period the Company received $1.9 million and repaid $0.8 million of short-term notes and received $0.69 million and repaid $0.59 million from funding arrangements, we repaid $0.07 million of promissory notes, and in addition we received an advance of $0.25 million from related parties and $0.2 million from subscribers for common and preferred stock.

Over the next twelve months we estimate that the Company will require approximately $3.9 million in funding to repay its obligations other than convertible notes and promissory notes. We will need funding for working capital as we continue to seek additional opportunities for addiction treatment in the US markets. 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.

Going Concern

The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the year ended December 31, 2025, we had a negative cash flow from operating activities of $0.03 million. As of December 31, 2025, we had an accumulated deficit of $46.6 million, working capital deficiency of $13.8 million and total liabilities in excess of total assets of $9.6 million. These matters raise substantial doubt about our ability to continue as a going concern.

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 our business plan and generate 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 our 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 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.

Based on the uncertainties described above, we believe our business plan does not alleviate the existence of substantial doubt about our ability to continue as a going concern within one year from the date of the issuance of these consolidated financial statements. The accompanying 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.

Commitments and contingencies

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

The amount of future minimum lease payments under finance leases at December 31, 2025 is as follows:

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

The Company also has commitments under bank loans, assumed liabilities, promissory notes, convertible loans and short-term loans, as disclosed in the financial statements.

Critical accounting policies

Revenue recognition

We recognize revenue in terms of ASC 606 which requires us to exercise more judgment and recognize revenue using a five-step process as described under our accounting policies in note 2 to the consolidated financial statements.

We derive substantially all of our revenue from payors that receive discounts from established billing rates. The various managed care contracts under which these discounts must be calculated are complex, subject to interpretation and adjustment, and may include multiple reimbursement mechanisms for different types of services provided in the Company’s inpatient facilities and cost settlement provisions. Management estimates the transaction price on a payor-specific basis given its interpretation of the applicable regulations or contract terms. The services authorized and provided and related reimbursement are often subject to interpretation that could result in payments that differ from the Company’s estimates. Additionally, updated regulations and contract renegotiations occur frequently, necessitating regular review and assessment of the estimation process by management.

Settlements with third-party payors are estimated and recorded in the period in which the related services are rendered and are adjusted in future periods as final settlements are determined. In the opinion of management, adequate provision has been made for any adjustments and final settlements.

Allowance for credit losses

In conjunction with Revenue recognition, we recognize revenue based on historical collections received from health care providers, recognizing only a percentage of revenues actually billed. Effectively recognizing revenue net of any expected billing differentials. Based on our collection experience, the percentage of revenue recognized is adjusted on a periodic basis, thereby taking into account expected credit losses in the revenue recognition process. The revenue we recognize is already net of expected credit losses.

Leases

We account for leases in terms of ASC 842. In terms of ASC 842, the Company assesses whether any asset based leases entered into for periods longer than twelve months meet the definition of financial leases or operating leases, by evaluating the terms of the lease, including the following; the duration of the lease; the implied interest rate in the lease; the cash flows of the lease; and whether the Company intends to retain ownership of the asset at the end of the lease term.

Leases which imply that we will not acquire the asset at the end of the lease term are classified as operating leases, our right to use the asset is reflected as a non-current right of use asset with a corresponding operating lease liability raised at the date of lease inception. The right of use asset and the operating lease liability are amortized over the right of use period using the effective interest rate implied in the operating lease agreement.

Long Lived Assets

The Company evaluates the carrying value of its long-lived assets for impairment by comparing the expected undiscounted future cash flows of the assets to the net book value of the assets when events or circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. If the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value will be charged to earnings.

Fair value is based upon discounted cash flows of the assets at a rate deemed reasonable for the type of asset and prevailing market conditions, appraisals, and, if appropriate, current estimated net sales proceeds from pending offers.

Critical Accounting Estimates

Preparation of our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities. Our estimates are based on our historical experience, information received from third parties and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Significant accounting policies are fundamental to understanding our financial condition and results as they require the use of estimates and assumptions which affect the financial statements and accompanying notes. See Note 2 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report for further information.

The Critical accounting policies that involved significant estimation include the following:

Business combination

In Terms of ASC 805, the Company allocated the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed for the acquisition of Edgewater Recovery Center on January 9, 2025 for gross proceeds of $250,000 and bank loan proceeds and related party proceeds, paid directly to settle the sellers debt in connection with the acquisition of $4,250,000 and $66,741, respectively. The fair value of the intangible assets acquired was estimated at $2,996,000 and the excess of the fair value of purchase consideration over the fair values of the identified assets and liabilities, recorded as goodwill amounted to $3,427,847. 

Revenue recognition

Management constantly monitors the level of billings and collections on those billings and makes an estimation of the percentage of billings that will ultimately be recorded as revenue. The various managed care contracts under which these discounts must be calculated are complex, subject to interpretation and adjustment, and may include multiple reimbursement mechanisms for different types of services provided in the Company’s inpatient facilities and cost settlement provisions. Management estimates the transaction price on a payor-specific basis given its interpretation of the applicable regulations or contract terms. The services authorized and provided and related reimbursement are often subject to interpretation that could result in payments that differ from the Company’s estimates.

Since we already make adjustments for expected collections we are constantly taking into account any expected credit losses.

Leases

On August 4, 2023, we entered into an acquisition and immediate disposal transaction with two unrelated third parties for the building which we currently operate our West Palm Beach treatment facility.

Simultaneously with the acquisition and disposal, on August 4, 2023, we entered into a long-term lease for 950 Evernia Street, West Palm Beach, Florida with an initial term of twenty years, and two ten-year extension options. The lease is absolutely net and the lease cost for the initial year is $748,000 paid monthly. The lease increases at a rate of 2.75% per year for a total term lease obligation of $19,655,717 over the initial twenty-year term. Due to the initial lease term of twenty years, we are not certain that the extension periods will be exercised at this point in time and accordingly, these have been excluded from the present value of the minimum future lease payments.

To determine the present value of minimum future lease payments for operating leases at August 4, 2023, we were required to estimate a rate of interest that we would have to pay to borrow on a collateralized basis over a similar term in a similar economic environment (the "incremental borrowing rate" or "IBR"). We determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. For the reference rate, the Company used the Fannie Mae, in excess of $3,000,000 rate based on an 80% value to loan ratio, averaging the 15- and 30-year indicative rates, resulting in a rate of 7.70%. We determined that 7.70% per annum was an appropriate incremental borrowing rate to apply to its real estate operating lease.

The present value of the future minimum lease payments was valued at $9,333,953 on August 4, 2023.

On May 1, 2024 the Company, through its subsidiary Evernia Health Center LLC, entered into a Definitive Agreement whereby the Company would assume the lease for suites 100, 101, 201, 202 and 203 located at 899 Meadows Road, Boca Raton, Florida (the “Leased Premises”) and the furniture, fixtures and equipment located therein, upon the assignment of the lease from the property owner. The lease was assigned on June 10, 2024 and the Company entered into a Bill of Sale to give effect to the Definitive Agreement.

The assigned lease has a remaining term of 3 years, expiring on June 30, 2027, with an initial monthly lease cost of $21,843 from July 1, 2024 to December 31, 2024, escalating by 2.9% per annum, each annual period being a calendar year.

To determine the present value of minimum future lease payments for operating leases at June 10, 2024, the Company was required to estimate a rate of interest that it would have to pay to borrow on a collateralized basis over a similar term in a similar economic environment (the "incremental borrowing rate" or "IBR").

The Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. For the reference rate, the Company used the Bank rate 3/1 adjustable-rate mortgage which represents the average rate for several mortgage lenders in the market of 6.36%. The Company determined that 6.36% per annum was an appropriate incremental borrowing rate to apply to its real estate operating lease.

The present value of the future minimum lease payments was valued at $744,256 on June 10, 2024.

On January 9, 2025, the Company consummated the acquisition of the Acquired Assets of ERC. Simultaneously, with the acquisition of the assets of ERC, BH Properties, a company controlled by Mr. Shawn Leon, the Company’s CEO and a related party, acquired certain of the real property associated with the operations of ERC.

The acquired properties are fully leveraged and required personal guarantees which the Company was unable to provide. The entities owning the real property were acquired in a separate transaction by BH Properties, which then, through its acquired subsidiaries entered into lease agreements with ARIA Kentucky on an arms-length basis, at market related rates.  

The Company entered into 7 lease agreements, effective January 1, 2025, with its related party, BH Properties, all of which were for an initial period of five years with an option to extend for an additional five years, since the transaction is between related parties the option is reasonably certain to be exercised, the lease agreements all include an annual escalation of 1.5% of the base rent and the lessee is responsible for utilities, property taxes, repairs and maintenance expenditure and insurance costs.

The Company also entered into a third-party lease agreement with Trent Developments, LLC for a property located at 141, 141.5 and 143 East Main Street, Morehead Kentucky. The lease is for a period of 5 years commencing on January 1, 2025, with a base annual rental of $138,000, escalating by 1.5% on the second anniversary of the lease term and each anniversary thereafter.

In addition, the Company entered into an assignment of lease agreement with MAT Properties, LLC for a property located at 154 S Owens Road, Morehead Kentucky. The original lease was modified and the term of the lease was extended to 2 years commencing on January 1, 2025, ending on December 31, 2027. The base rental of the lease is $180,000 per annum with no escalations.

The Company, through its subsidiary ARIA Kentucky, entered into 2 lease agreements, effective July 1, 2025, with its related party, BH Properties and its subsidiary, Viking Assets, LLC. The first lease is for property situated at 417 South 4^th Street, Paducah, Kentucky, with an annual base rent of $96,000 and the second lease is for property situated at 425 South 6^th Street, Paducah Kentucky, with an annual base rent of $72,000. Each lease is for an initial period of four years and six months with an option to extend for an additional five years, since the transaction is between related parties the option is reasonably certain to be exercised. Each lease agreement includes an escalation of 1.5% of the base rent, commencing on January 1, 2026, and annually thereafter. The Company is responsible for utilities, property taxes, repairs and maintenance expenditure and insurance costs.

To determine the present value of minimum future lease payments for the operating leases entered into, the Company used the borrowing rate of 7.72% at which it had recently secured to consummate the acquisition of the assets of Edgewater Recovery and is indicative of the borrowing costs the Company would expect to incur on asset funding.

The present value of the future minimum lease payments of the properties leased from related parties was $7,622,084 on January 9, 2025 and $1,243,831 on July 1, 2025, totaling $8,865,915 and the present value of future lease payments of properties leased from third parties was $1,149,642 on January 1, 2025.

Effective October 1, 2025, the Company entered into rental abatement agreements with its related party, ERC Investments, LLC, whereby rental on the 425 Clinic Drive and the 1111 US 60 W properties was abated for the three months ended December 31, 2025 by $60,000 and $90,000, respectively. This abatement was evaluated under ASC 842 and determined to be a lease modification. The Company re-evaluated the IBR rate at the date of modification and determined that the rate was 7.8% which was used to calculate the present value of future minimum lease payments of the 425 Clinic Drive and 1111 US 60 W properties at $5,409,062, a net reduction of $165,975, on the date of modification. The modification also resulted in a decrease in the rental smoothing liability of $45,761 on the date of modification, and an increase in the smoothing expense of $147,183 over the three-month period ended December 31, 2025, a net impact of $101,422 increase in rental smoothing liability for the year ended December 31, 2025.

The details of the related party property leases are as follows:

* During 2025, a once off rental abatement of $60,000 and $90,000 was granted to ARIA Kentucky by ERC Investments on the 425 Clinic Drive property and the 1111 US60W property, respectively.

Long-lived assets

We have significant long-lived assets, including property and equipment, intangible assets, right-of-use assets and deposits. The Company evaluates the carrying value of its long-lived assets for impairment by comparing management’s estimates of undiscounted future cash flows of the assets to the net book value of the assets when events or circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. This requires significant estimation of future revenue streams, based on management’s understanding of the business which may not be accurate and may require re-estimation at a future date. If the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value will be charged to earnings.

Fair value is based upon discounted cash flows of the assets at a rate deemed by management to be reasonable for the type of asset and prevailing market conditions, appraisals, and, if appropriate, current estimated net sales proceeds from pending offers.

Item 8. Financial Statements and Supplementary Data.

ETHEMA HEALTH CORPORATION

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS 

(Expressed in US$ unless otherwise indicated)

Florida Office: 2424 N. Federal Highway Suite 257 Boca Raton, FL 33431 561.405.9440

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Ethema Health Corporation and subsidiaries

West Palm Beach, FL 33401

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Ethema Health Corporation and subsidiaries (collectively, the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations, stockholders’ deficit and cash flows for each of the two years in the period ended December 31, 2025, and the related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations, has generated negative cash flows from operating activities, and has a working capital deficiency and accumulated deficit. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management's plans to address these matters are described in Note 3. The consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.

Basis for Opinion

These 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.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or are required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill and Identifiable Intangible Assets - Acquisition of Edgewater Recovery Centers, LLC

Critical Audit Matter Description

As described in Notes 4, 8, and 9 to the consolidated financial statements, the Company completed the acquisition of the addiction treatment operations of Edgewater Recovery Centers, LLC ("ERC") on January 9, 2025, accounted for as a business combination under ASC 805. As part of the final purchase price allocation, the Company recorded goodwill of $3,427,847, customer relationships of $2,944,000, and non-compete agreements of $52,000. An assembled workforce of $1,358,000 was valued and included within goodwill. The final purchase price allocation as of December 31, 2025 reflected a net decrease to goodwill of approximately $147,000 compared to the provisional allocation; the fair values of the identified intangible assets were not affected.

We identified the accounting for the ERC acquisition as a critical audit matter because auditing management's determination of the fair value of the acquired identifiable intangible assets involved a high degree of auditor judgment and subjectivity. The valuation required management to make significant assumptions regarding future revenues, projected cash flows, customer attrition rates, and discount rates. Auditing these assumptions required specialized knowledge and significant auditor judgment in evaluating the reasonableness of management's estimates.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the accounting for the ERC acquisition included, among others:

/s/ RBSM LLP

We have served as the Company’s auditor since 2023.

Boca Raton, FL

June 30, 2026

PCAOB ID Number 587 

New York, NY Washington DC Mumbai & Pune, India Boca Raton, FL

Houston, TX San Francisco, CA Las Vegas, NV Beijing, China Athens, Greece

Member: ANTEA International with affiliated offices worldwide

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 

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

ETHEMA HEALTH CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

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

ETHEMA HEALTH CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS 

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

ETHEMA HEALTH CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS