☒[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

☐[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days.Yes ☒ [X] No ☐[ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporateWebsite, ifany,every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation ST (§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 ☒ [X] No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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 ☒

As of August ~~14, 2017,~~20, 2018, there were ~~108,738,855~~124,009,230 shares outstanding of the registrant’s common stock.

ETHEMA HEALTHCARE CORPORATION is filing this Amendment no. 1 on Form 10-Q/A (the “Amendment”) to amend our QUARTERLY Report on Form 10-Q for the quarter ended June 30, 2017, originally filed on August 21, 2017 (the “Form 10-Q”). The purpose of the Amendment is to fix typographical errors found in Part 1, Item 1 of the Form 10-Q. The Amendment should be read in conjunction with the original Form 10-Q filed to SEC.

This Quarterly Report on Form ~~10-Q/A~~10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In particular, statements contained in this Quarterly Report on Form ~~10-Q/A,~~10-Q, including but not limited to, statements regarding the sufficiency of our cash, our ability to finance our operations and business initiatives and obtain funding for such activities; our future results of operations and financial position, business strategy and plan prospects, or costs and objectives of management for future acquisitions, are forward looking statements. These forward-looking statements relate to our future plans, objectives, expectations and intentions and may be identified by words such as ~~“may,~~“may,” ~~“will,~~“will,” “should,” “expects,” “plans,” “anticipates,” “intends,” ’‘targets,” “projects,” “contemplates,” ’‘believes,” “seeks,” “goals,” “estimates,” ’‘predicts,” ’‘potential” and “continue” or similar words. Readers are cautioned that these forward-looking statements are based on our current beliefs, expectations and assumptions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identifiedbelow,under Part II, Item 1A. “Risk Factors” and elsewhere in this Quarterly Report on Form ~~10-Q/A,~~10-Q, and those identified under Part I, Item 1A of our Annual Report on Form ~~10-K~~10-K/A for the year ended December 31, ~~2016~~2017 filed with the SEC on April ~~17, 2017.~~18, 2018. Therefore, actual results may differ materially and adversely from those expressed, projected or implied in any forward-looking statements.Weundertake no obligation to revise or update any forward-looking statements for any reason.

Throughout this Quarterly Report on Form ~~10-Q/A,~~10-Q, “Ethema,” the “Company,” “we,” “us” and “our” refer to Ethema ~~Healthcare~~Health Corporation.

ETHEMA HEALTH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2018			December 31, 2017
	(unaudited)
ASSETS

Current assets
Cash	$	345,141		$	339
Accounts receivable		60,702			218,858
Prepaid expenses		43,905			99,342
Related party Receivables		19,265			16,080
Total current assets		469,013			334,619
Non-current assets
Deposit on real Estate		2,962,210			1,825,000
Due on sale of subsidiary		410,085			954,951
Property, plant and equipment		8,909,648			9,153,858
Total non-current assets		12,281,943			11,933,809
Total assets	$	12,750,956		$	12,268,428

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities
Bank overdraft	$	768		$	28,927
Accounts payable and accrued liabilities		331,603			372,244
Taxes payable		664,578			689,240
Convertible loans		2,225,369			160,453
Loans payable, current portion		133,617			152,402
Derivative liability		4,754,620			2,859,832
Related party payables		2,467,299			2,597,080
Total current liabilities		10,577,854			6,860,178
Non-current liabilities
Loan payable, net of current portion		6,930,560			7,183,892
Total liabilities		17,508,414			14,044,070

Stockholders' deficit
Preferred stock - Series A; $0.01 par value, 3,000,000 authorized, nil outstanding as of June 30\, 2018 and December 31, 2017.		—			—
Preferred Stock - Series B; $0.01 par value, 10,000,000 authorized, nil outstanding as of June 30, 2018 and December 31, 2017.		—			—
Common stock; $0.01 par value, 500,000,000 shares authorized; 124,009,230 and 123,239,230 shares issued and outstanding as of June 30, 2018 and December 31, 2017.		1,240,093			1,232,393
Additional paid-in capital		19,799,660			18,545,913
Accumulated other comprehensive income		700,808			796,453
Accumulated deficit		(26,498,019	)		(22,350,401	)
Total stockholders' deficit		(4,757,458	)		(1,775,642	)
Total liabilities and stockholders' deficit	$	12,750,956		$	12,268,428

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

ETHEMA HEALTH CORPORATION

~~(formerly Greenstone Healthcare Corporation)~~
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three months ended June 30, 2018			Three months ended June 30, 2017			Six months ended June 30, 2018			Six months ended June 30, 2017
					(Restated)						(Restated)
Revenues	$	66,694		$	402,220		$	179,996		$	724,730

Operating expenses
General and administrative		328,494			57,905			522,227			408,442
Management fees		45,565			—			92,098			—
Professional fees		145,088			66,403			183,098			399,204
Salaries and wages		208,280			173,451			393,436			382,695
Depreciation and amortization		68,041			73,898			136,456			107,494
Total operating expenses		795,468			371,657			1,327,315			1,297,835

Operating (loss) income		(728,774	)		30,563			(1,147,319	)		(573,105	)

Other Income (expense)
Other income		—			1,000			—			473,369
Other expense		—			(19,265	)		—			(5,093,954	)
Interest income		(49	)		—			—			32,074
Interest expense		(176,587	)		(93,603	)		(347,038	)		(156,620	)
Debt discount		(1,339,885	)		(241,666	)		(2,092,834	)		(429,325	)
Derivative liability movement		(796,795	)		167,580			(808,951	)		94,532
Foreign exchange movements		110,628			(6,438	)		248,524			(164,347	)
Net loss before taxation from continuing operations		(2,931,462	)		(161,829	)		(4,147,618	)		(5,817,376	)
Taxation		—			—			—			—
Net loss from continuing operations		(2,931,462	)		(161,829	)		(4,147,618	)		(5,817,376	)
Gain on disposal of business		—			—			—			7,494,828
Operating loss from discontinued operations, net of tax		—			(141,177	)		—			(82,185	)
Net loss from discontinued operations, net of tax		—			(141,177	)		—			7,412,643
Net (loss) income		(2,931,462	)		(303,006	)		(4,147,618	)		1,595,267
Accumulated other comprehensive (loss) income
Foreign currency translation adjustment		(53,186	)		154,255			(95,645	)		(36,692	)

Total comprehensive (loss) income	$	(2,984,648	)	$	(148,751	)	$	(4,243,263	)	$	1,558,575

Basic loss per common share from continuing operations	$	(0.02	)	$	—		$	(0.03	)	$	(0.06	)
Basic income per share from discontinued operations	$	—		$	—		$	—		$	0.08
Basic (loss) income per common share	$	0.02		$	—		$	0.03		$	0.02
Diluted loss per common share from continuing operations	$	(0.02	)	$	—		$	(0.03	)	$	(0.06	)
Diluted income per share from discontinued operations	$	—		$	—		$	—		$	0.07
Diluted (loss) income per common share	$	(0.02	)	$	—		$	(0.03	)	$	0.01
Weighted average common shares outstanding - Basic		123,976,208			108,772,921			123,571,357			93,838,855
Weighted average common shares outstanding - Diluted		123,976,208			108,772,921			123,571,357			104,974,243

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

ETHEMA HEALTH CORPORATION

UNAUDITED CONDENSED ~~CONSOLDATED BALANCE SHEETS~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT

June 30, 2017 December 31, 2016
(unaudited)
ASSETS

Current assets
Cash $ 30,683 $ 4,779
Accounts receivable 468,826 —
Prepaid expenses 9,486 2,710
Discontinued operations — 183,219
Related party Receivables 89,002 84,867
Total current assets 597,997 275,575
Non-current assets
Investment — 110,000
Due on sale of subsidiary 1,253,747 —
Property, plant and equipment 12,019,227 —
Intangibles 1,438,525 —
Cash - Restricted 23,118 74,480
Total non-current assets
14,734,617
184,480
Total assets $ 15,332,614 $ 460,055

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities
Bank overdraft $ 19,511 $ 56,116
Accounts payable and accrued liabilities 420,743 374,317
Taxes payable 397,029 2,798,824
Convertible loans 516,201 250,258
Loans payable 3,234,684 —
Derivative liability 128,968 —
Related party payables 2,229,786 157,596
Total current liabilities 6,946,922 3,637,111
Non-current liabilities
Loans payable 2,989,937 —
Total liabilities
9,936,859
3,637,111

Stockholders' equity (deficit)
Preferred stock - Series A; $0.01 par value, 3,000,000 authorized, 0 outstanding as of June 30, 2017 and December 31, 2016 — —
Preferred Stock - Series B; $0.01 par value, 10,000,000 authorized, 0 outstanding as of June 30, 2017 and December 31, 2016 — —
Common stock; $0.01 par value, 500,000,000 shares authorized; 108,838,855 and 48,738,855 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively
1,088,389
487,389
Additional paid-in capital
18,201,699
16,509,906
Accumulated other comprehensive income
770,871
807,563
Accumulated deficit
(14,665,204
) (20,981,914 )
Total stockholders' equity (deficit)
5,395,755
(3,177,056 )
Total liabilities and stockholders' equity (deficit) $ 15,332,614 $ 460,055

	Preferred Series B				Common				Additional
	Shares		Amount		Shares		Amount		Paid in Capital		Comprehensive Income			Accumulated Deficit			Total

Balance at January 1, 2018		—	$	—		123,239,230	$	1,232,393	$	18,545,913	$	796,453		$	(22,350,401	)	$	(1,775,642	)
Shares issued for commitment fee		—		—		770,000		7,700		51,000		—			—			58,700
Fair value of Series N warrants issued		—		—		—		—		1,202,747		—			—			1,202,747
Foreign currency translation		—		—		—		—		—		(95,645	)		—			(95,645	)
Net income		—		—		—		—		—		—			(4,147,618	)		(4,147,618	)
Balance as of June 30, 2018		—	$	—		124,009,230	$	1,240,093	$	19,799,660	$	700,808		$	(26,498,019	)	$	(4,757,458	)

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

ETHEMA HEALTH CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six months ended June 30, 2018			Six months ended June 30, 2017
Operating activities				(Restated)
Net (loss) income from continuing operations	$	(4,147,618	)	$	1,595,267
Net income from discontinued operations	$	—		$	(7,412,643	)
Net loss from continuing operations	$	(4,147,618	)	$	(5,817,376	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation		136,456			107,494
Non cash compensation expense on acquisition of subsidiary		—			5,074,689
Non cash compensation for services		58,700			4,000
Non cash discount on convertible notes issued		103,000			—
Other foreign exchange movements		—			(27,476	)
Amortization of debt discount		2,092,834			429,325
Derivative liability movements		808,951			(94,532	)
Movement in receivables reserve		(38,826	)		—
Provision against receivable on sale of subsidiary		—			(446,476	)
Loss on mortgage sold		—			19,265
Changes in operating assets and liabilities
Accounts receivable		196,982			(327,351	)
Prepaid expenses		51,678			(6,776	)
Accrued purchase consideration		517,239			—
Accounts payable and accrued liabilities		6,525			(55,155	)
Taxes payable		(3,896	)		(2,401,665	)
Net cash used in operating activities - continuing operations		(217,777	)		(3,542,034	)
Net cash provided by operating activities - discontinued operations		—			101,033
		(217,777	)		(3,441,001	)
Investing activities
Investments in Seastone		—			(2,960,000	)
Deposits on property		(1,133,657	)		—
Proceeds from restricted cash		—			51,362
Purchase of fixed assets		(41,610	)		(8,878	)
Net cash used in investing activities - continuing operations		(1,175,267	)		(2,917,516	)
Net cash provided by investing activities - discontinued operations		—			6,241,082
		(1,175,267	)		3,323,566

Financing activities
Decrease in bank overdraft		(28,056	)		(36,605	)
Proceeds from mortgage sold		—			111,554
Repayment of mortgage		(66,080	)		(85,613	)
Proceeds from convertible notes		2,550,000			294,500
Repayment of convertible notes		(433,000	)		(130,000	)
(Repayment) proceeds of related party notes		(31,329	)		26,195
Net cash provided by financing activities		1,991,535			180,031

Effect of exchange rate on cash		(253,690	)		(36,692	)

Net change in cash		344,802			25,904
Beginning cash balance		339			4,779
Ending cash balance	$	345,141		$	30,683

Supplemental cash flow information
Cash paid for interest	$	308,077		$	153,817
Cash paid for income taxes	$	—		$	—

Non cash investing and financing activities
Common shares issued to acquire subsidiary	$	—		$	2,184,000
Assumption of mortgage liabilities on acquisition of subsidiary	$	—		$	3,145,549

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

~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~

~~UNAUDITED CONDENSED CONSOLDATED STATEMENTS OF OPERATIONS~~

Three months ended June 30, Three Months ended June Six months ended June Six Months ended June
2017 30, 2016 30, 2017 30, 2016

Revenues $ 402,220 $ — $ 724,730 $ —

Operating expenses
General and administrative 57,905 102,970 408,442 110,197
Professional fees 66,403 53,545 399,204 75,045
Salaries and wages 173,451 15,000 382,695 21,000
Depreciation and amortization 125,340 — 182,406 —
Total operating expenses 423,099 171,515 1,372,747 206,242

Operating loss (20,879 ) (171,515 ) (648,017 ) (206,242 )

Other income (expense)
Other income 63,960 12,508 568,309 12,508
Other expense 1,127,335 — (392,539 ) —
Interest income — — 32,074 —
Interest expense (93,603 ) (7,110 ) (156,620 ) (7,103 )
Debt discount (241,666 ) (33,262 ) (429,325 ) (33,262 )
Derivative liability movement 167,580 — 94,532 —
Foreign exchange movements (6,438 ) 2,039 (164,347 ) 2,734
Net income (loss) before taxation from continuing operations 996,289 (197,340 ) (1,095,933 ) (231,365 )
Taxation — — — —
Net income (loss) from continuing operations 996,289 (197,340 ) (1,095,933 ) (231,365 )
Gain on disposal of business — — 7,494,828 —
Operating (loss) income from discontinued operations, net of tax (141,177 ) 266,260 (82,185 ) 443,779
Net (loss) income from discontinued operations (141,477 ) 266,260 7,412,643 443,779
Net income (loss) 855,112 68,920 6,316,710 212,414
Accumulated other comprehensive income (loss)
Foreign currency translation adjustment 154,255 7,789 (36,692 ) (215,276 )

Total comprehensive income (loss) $ 1,009,367 $ 76,709 $ 6,280,018 $ (2,862 )

Basic income (loss) per common share from continuing operations $ 0.01 $ — $ (0.01 ) $ —
Basic income per share from discontinued operations $ — $ — $ 0.08 $ —
Basic income per common share $ 0.01 $ — $ 0.07 $ —
Diluted income (loss) per common share from continuing operations $ 0.01 $ — $ (0.01 ) $ —
Diluted income per share from discontinued operations $ — $ — $ 0.07 $ —
Diluted income per common share $ 0.01 $ — $ 0.06 $ —
Weighted average common shares outstanding - Basic 108,772,921 47,991,602 93,838,855 47,865,229
Weighted average common shares outstanding - Diluted 119,908,308 49,192,552 104,974,243 49,066,179

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

ETHEMA HEALTH CORPORATION
~~(formerly Greenstone Healthcare Corporation)~~
~~UNAUDITED CONDENSED CONSOLDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)~~

Additional
Common Paid in Comprehensive Accumulated
Shares Amount Capital Income Deficit Total
��
Balance at January 1, 2017 48,738,855 $ 487,389 $ 16,509,906 $ 807,563 $ (20,981,914 ) $ (3,177,056 )

Shares issued to acquire subsidiary 60,000,000 600,000 1,584,000 — — 2,184,000
Shares issued for services

100,000
1,000
3,000
— — 4,000
Fair value of warrants issued — — 104,793 — — 104,793
Foreign currency translation — — —
(36,692
) — (36,692 )
Net income — — — — 6,316,710 6,316,710
Balance as of June 30, 2017 108,838,855 $ 1,088,389 $ 18,201,699 $ 770,871 $ (14,665,204 ) $ 5,395,755

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

~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~

~~UNAUDITED CONDENSED CONSOLDATED STATEMENTS OF CASH FLOWS~~

Six months ended June 30, 2017 Six months ended June 30, 2016
Operating activities
Net income $ 6,316,710 $ 212,414
Net income from discontinued operations $ (7,412,643 ) $ (443,779 )
Net loss from continuing operations $ (1,095,933 ) $ (231,365 )
Adjustment to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation 182,406 —
Non cash compensation expense on acquisition of subsidiary 373,274 —
Loss on mortgage sold 19,265
Non cash compensation for services 4,000 50,000
Other foreign exchange movements (27,476 ) 7,238
Amortization of debt discount 429,325 33,262
Derivative liability movements (94,532 ) —
Provision against receivable on sale of subsidiary (446,476 ) —
Changes in operating assets and liabilities
Accounts receivable (327,351 ) —
Prepaid expenses (6,776 ) (90,015 )
Accounts payable and accrued liabilities (150,095 ) (292,787 )
Taxes payable (2,401,665 ) 231,588
Net cash used in operating activities - continuing operations (3,542,034 ) (292,079 )
Net cash provided by operating activities - discontinued operations 101,033 423,018
(3,441,001 ) 130,939
Investing activities
Investments in Seastone (2,960,000 ) —
Proceeds from restricted cash 51,362 —
Investment in deposits — (207,158 )
Purchase of fixed assets (8,878 ) —
Net cash used in investing activities - continuing operations (2,917,516 ) (207,158 )
Net cash provided by (used in) investing activities - discontinued operations 6,241,082 (1,053 )
3,323,566 (208,211 )

Financing activities
(Decrease) Increase in bank overdraft (36,605 ) 15,834
Repayment of loan payable — (3,443 )
Proceeds from short-term notes — 283,386
Repayment of short-term note — (107,639 )
Proceeds from mortgage sold 111,554 —
Repayment of mortgage (85,613 ) —
Proceeds from convertible notes 294,500 —
Repayment of convertible notes (130,000 ) —
Proceeds from related party notes 26,195 153,273
Net cash provided by financing activities 180,031 341,411

Effect of exchange rate on cash (36,692 ) (215,276 )

Net change in cash 25,904 48,863
Beginning cash balance 4,779 174
Ending cash balance $ 30,683 $ 49,037

Supplemental cash flow information
Cash paid for interest $ 153,817 $ 7,548
Cash paid for income taxes $ — $ —

Non cash investing and financing activities
Common shares issued to acquire subsidiary $ 2,184,000 $ —
Assumption of mortgage liabilities on acquisition of subsidiary $ 3,145,549 $ —

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

~~ETHEMA HEALTH CORPORATION~~

~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business

~~Nature of Business~~

Ethema Health Corporation (the “Company”) was incorporated under the laws of the state of Colorado, USA, on April 1, 1993. Effective April 4, 2017, the Company changed its name to Ethema Health Corporation and prior to that, on May 2012, the Company had changed its name to GreeneStone Healthcare Corporation from Nova Natural Resources Corporation. As of ~~June 30,~~December 31, 2017, the Company owned 100% of the outstanding shares of GreeneStone Clinic Muskoka Inc., incorporated in 2010 under the laws of the Province of Ontario, ~~Canada;~~Canada; Cranberry Cove Holdings Ltd., incorporated on January 9, 2004 under the laws of the Province of Ontario, Canada. and Seastone Delray Healthcare, LLC, incorporated on May 17, 2016 under the laws of Florida, ~~USA;~~USA; and Delray Andrews RE, LLC, incorporated on May 17, 2016 under the laws of Florida, USA.

During December 2016, the Company obtained a license to operate and provide addiction treatment healthcare 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, which holds the real estate on which the ~~Company’s Rehabilitation Clinic~~Company previously operated a rehabilitation clinic (“the Canadian Rehab Clinic”) ~~operates,~~. The Company entered into an ~~asset purchase agreement~~Asset Purchase Agreement (the “APA”) and lease (the “Lease”) whereby the Company sold all of the Canadian Rehab Clinic business assets and leased the real estate to the ~~buyer, and~~buyer. Simultaneously with this transaction, the Company entered into a ~~real estate purchase~~Real Estate \Purchase agreement and ~~asset purchase agreement~~Asset Purchase Agreement whereby the Company purchased the real estate and business assets of Seastone Delray (the “Florida Purchase”).

The Share Purchase Agreement

Under the SPA, the Company acquired 100% of the stock of ~~Cranberry Cove Holdings Ltd. (“CCH”)~~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 (“Mr. Leon”). CCH owns the real estate on which the Canadian Rehab Clinic is located. The total consideration paid by the Company was CDN$3,517,062, including the assumption of certain liabilities of CCH, which was funded by the assignment to Leon Developments of certain indebtedness owing to the Company in the amount of CDN$659,918, and the issuance of 60,000,000 shares of the Company’s common stock to Leon Developments, valued at US$0.0364 per share.

The Asset Purchase Agreement and Lease

Under the APA, the assets of the Canadian Rehab Clinic were sold by the Company, through its subsidiary, GreeneStone Clinic Muskoka Inc. (“Muskoka”), to Canadian Addiction Residential Treatment LP (the “Purchaser”), for a total consideration of CDN$10,000,000, plus an additional performance payment of up to CDN$3,000,000 as a performance payment to be received in 2019 if certain clinic performance metrics are met. The Purchaser completed the sale with cash proceeds to the Company of CDN$10,000,000, of which CDN$1,500,000 will remain in escrow for up to two years to cover indemnities given by the Company. The proceeds of the Muskoka clinic asset sale were used to pay down certain tax debts and operational costs of the Company and to fund the Florida Purchase, mentioned below.

Through the APA, substantially all of the assets of the Canadian Rehab Clinic were sold, leaving Ethema with only the underlying clinic real estate, which the Company, through its newly acquired subsidiary, CCH concurrently leased to the Purchaser. The Lease is a triple net lease and provides for a five (5) year primary term with three (3) ~~five year~~five-year renewal options, annual base rent for the first year at CDN$420,000 with annual increases, an option to tenant to purchase the leased premises and certain first refusal rights.

The Florida Purchase

Immediately after closing on the sale of the assets of the Canadian Rehab Clinic, 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 This business is operated through its wholly owned subsidiary Seastone.~~agreements. The purchase price for the Seastone assets was US$6,070,000 financed with a purchase money mortgage of US$3,000,000, and US$3,070,000 in cash.

On November 2, 2017, the Company entered into an Agreement of Purchase and Sale (the “Agreement”) to purchase from AREP 5400 East Avenue LLC, a Delaware limited liability company (“Seller”) certain buildings in West Palm Beach, Florida, totaling approximately 80,000 square feet, on which the present tenant operates a substance abuse treatment center (the “Property”). The purchase price of the Property is $20,530,000, and the Company made nonrefundable down payments totaling $2,549,955 as of June 30, 2018.

On May 23, 2018, the Company converted the agreement to purchase AREP 5400 East Avenue LLC. ("the landlord") into a lease agreement with a purchase option of $17,250,000, increasing August 31, 2018 by $750,000 per month until the purchase option is exercised. The premises is located at 5400, 5402 and 5410 East Avenue, West Palm Beach, Florida (the "Property"). The lease is for an initial 10 years and provides for two additional 10 year extensions.

The Company was previously under agreement to purchase the Property from the Landlord. The Property is presently used as a rehabilitation treatment center. The current tenant at the property, Alternatives in Treatment, LLC, a Florida limited liability company, consented to the Lease and concurrent with the execution of the Lease entered into a Sublease Agreement with the Company.

ETHEMA HEALTH CORPORATION

~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

Nature of Business (continued)

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim consolidated financial information and Rule 8-03 of Regulation SX. Accordingly, these unaudited condensed consolidated financial statements do not include all the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements.

All adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included in these unaudited condensed consolidated financial statements. Operating results for the three and six month period presented are not necessarily indicative of the results that may be expected for any other interim period or for the fullyear.The balance sheet at December 31, ~~2016~~2017 has been derived from audited consolidated financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto for the year ended December 31, ~~2016.~~2017.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Principals of consolidation and foreign currency translation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, and its ~~subsidiary.~~wholly owned subsidiaries. All intercompany transactions and balances have been eliminated on consolidation.

The Company previously owned an operational subsidiary whose functional currency was the Canadian dollar, while the Company’s reporting currency is the U.S. dollar. The Company recently acquired a property-owning subsidiary, CCH, whose functional currency is the Canadian dollar. All transactions initiated in Canadian dollars are translated into US dollars in accordance with ASC 830, “Foreign Currency Translation” as follows:

●

Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date.

●

~~Equity~~Non monetary assets and equity at historical rates.

●

Revenue and expense items at the average rate of exchange prevailing during the period.

Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ ~~deficit~~equity as a component of accumulated other comprehensive income or loss. Therefore, translation adjustments are not included in determining net income (loss) but reported as other comprehensive income (loss).

For foreign currency transactions, the Company translates these amounts to the Company’s functional currency at the exchange rate effective on the invoice date. If the exchange rate changes between the time of purchase and the time actual payment is made, a foreign exchange transaction gain or loss results which is included in determining net income for the period.

The relevant translation rates are as follows: For the ~~six~~three months ended June 30, ~~2017;~~2018; a closing rate of CAD$1.0000 equals US$~~0.7706~~0.7594 and an average exchange rate of CAD$1.0000 equals US$~~0.7437.~~0.7715.

ETHEMA HEALTH CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (continued)

Cash and cash equivalents

The Company's policy is to disclose bank balances under cash, including bank overdrafts with balances that fluctuate frequently from being positive to overdrawn and term deposits with a maturity period of three months or less from the date of acquisition.

The Company has $23,118 (CAD$30,000) in restricted cash held by their bank to cover against the possibility of credit card charge backs, for services not performed. The Company is working on releasing these funds as it no longer operates the Canadian Rehab Clinic, which was sold on February 14, 2017.

~~ETHEMA HEALTH CORPORATION~~

~~(formerly Greenstone Healthcare Corporation)~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~

~~Summary of Significant Accounting Policies (continued)~~

Revenue Recognition

The Company has two operating segments from which it derives revenues, i) rental income from leasing of a rehabilitation facility to third parties and ii) in-patient revenues for rehabilitation services provided to customers. Revenue is recognized as follows:

Rental Income

In terms of the lease agreement, ~~entered into,~~ on a monthly basis as long as the facility is utilized by the tenant

ii.

In-patient revenue

The customers have been treated and provided with services by the ~~Company;~~Company; there is clear evidence that an arrangement ~~exists;~~exists; the amount of revenue and related costs can be measured ~~reliably;~~reliably; and it is probable that the economic benefits associated with the transaction will flow to the Company.

The Company recognizes revenue from the rendering of services when they are earned; specifically, when all of the following conditions are met:

●

the significant risks and rewards of ownership are transferred to customers and the Company retains neither continuing involvement nor effective control;

●

there is clear evidence that an arrangement exists;

●

the amount of revenue and related costs can be measured reliably; and

●

it is probable that the economic benefits associated with the transaction will flow to the Company.

In particular, the Company ~~recognizes fees for inpatient addiction treatments proportionately over the term of the patient’s treatment.~~recognizes:

●

Fees for outpatient counselling, coaching, intervention, psychological assessments and other related services when patients receive the service; and

●

Fees for inpatient addiction treatments proportionately over the term of the patient’s treatment.

Deferred revenue represents monies deposited by the patients for future services to be provided by the Company. Such monies will be recognized into revenue as the patient progresses through their treatment term.

Recent accounting pronouncements

In ~~May 2017,~~June 2018, the FASB issued ~~Accounting Standards Update No. ("ASU'') 2017-09, Compensation –~~ ASU 2018-07, Compensation—Stock Compensation ~~an amendment~~(Topic 718) Improvements to ~~Topic 718.~~ Nonemployee Share-Based Payment Accounting.

The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718.2. An entity should account for the effects of a modification unless all the following are met:

The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification.

~~The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified.~~

~~The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified.~~

The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in this Update. The amendments in this Update are effective for all entities for annual periods beginning after December 15,2017. Early adoption is permitted and should be applied prospectively to an award modified on or after the adoption date. The amendments proposed in this ASU are not expected to have a material impact on our consolidated financial statements.

~~ETHEMA HEALTH CORPORATION~~

~~(formerly Greenstone Healthcare Corporation)~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~

~~Summary of Significant Accounting Policies (continued)~~

~~Recent accounting pronouncements (continued)~~

In May 2017, the FASB issued ASU 2017-10, service concession Arrangements, an amendment to Topic 853. Topic 853 provides guidance for operating entities when they enter into a service concession arrangement with a public-sector grantor who both:

~~Controls or has the ability to modify or approve the services that the operating entity must provide with the infrastructure, to whom it must provide them, and at what price~~

~~Controls, through ownership, beneficial entitlement, or otherwise, any residual interest in the infrastructure at the end of the term of the arrangement.~~

~~In a service concession arrangement within~~expand the scope of Topic ~~853, the operating~~718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not ~~account for~~apply to share-based payments used to effectively provide (1) financing to the ~~infrastructure~~issuer or (2) awards granted in conjunction with selling goods or services to customers as ~~a lease or as property, plant, and equipment. An operating entity should refer to other Topics to account for various aspects~~part of a ~~service concession arrangement. For example, an operating entity should account~~contract accounted for ~~revenue relating to construction, upgrade, or operation services in accordance with Topic 605, Revenue Recognition, or~~under Topic 606, Revenue from Contracts with Customers.

The amendments in this Update ~~apply to the accounting by operating~~are effective for public business entities for ~~service concession arrangements~~fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For all other entities, the ~~scope~~amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic ~~853. These updates are effective when the Company adopts the updates to Topic~~ 606.

The ~~amendments proposed in~~impact of this ASU ~~are~~on the Company’s financial statements is not expected to be material.

ETHEMA HEALTH CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (continued)

Recent accounting pronouncements (continued)

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements.

The amendments in this Update provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with preparers’ requests.

The amendments in this Update provide lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met: 1. The timing and pattern of transfer of the non-lease component(s) and associated lease component are the same. 2. The lease component, if accounted for separately, would be classified as an operating lease.

The amendments in this Update related to separating components of a contract affect the amendments in Update 2016-02, which are not yet effective but can be early adopted.

The Company is currently considering the impact this ASU will have ~~an impact~~ on ~~our consolidated~~its financial statements.

Any new accounting standards, not disclosed above, that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

Financial instruments

The Company is exposed to various risks through its financial instruments. The following analysis provides a measure of the Company’s risk exposure and concentrations at the balance sheet date, June 30, ~~2017~~2018 and December 31, ~~2016.~~2017.

Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Financial instruments that subject the Company to credit risk consist primarily of accounts receivable.

Credit risk associated with accounts receivable of Seastone of Delray is mitigated as only a percentage of the revenue billed to health insurance companies is recognized as income until such time as the actual funds are collected. The revenue is concentrated amongst several health insurance companies located in the US.

In the opinion of management, credit risk with respect to accounts receivable is assessed as low.

ii.

Liquidity risk

Liquidity risk is the risk the Company will not be able to meet its financial obligations as they fall due. The Company is exposed to liquidity risk through its working capital deficiency of ~~$6,348,925~~$10,108,841 and accumulated deficit of ~~$14,665,204.~~$26,498,019. As disclosed in note 6,4, the Company will be dependent upon the raising of additional capital in order to implement its business plan. 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, liquidity risk is assessed as high, material and remains unchanged from the prior year.

ETHEMA HEALTH CORPORATION

~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (continued)

~~Summary of Significant Accounting Policies (continued)~~

Financial instruments (continued)

iii.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises of three types of risk: interest rate risk, currency risk, and other price risk. The Company is exposed to interest rate risk and currency risk.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to minimal interest rate risk on its bank indebtedness as there is a balance owing of ~~$19,511~~$768 as of June 30, ~~2017.~~2018. This liability is based on floating rates of interest that have been stable during the current reporting period. In the opinion of management, interest rate risk is assessed as low, not material and remains unchanged from the prior year.

Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is subject to currency risk as ~~its~~it has subsidiaries that operate in Canada and are subject to fluctuations in the Canadian dollar. A substantial portion of the Company’s financial assets and liabilities are denominated in Canadian dollars. Based on the net exposures at June 30, ~~2017,~~2018, a 5% depreciation or appreciation of the Canadian dollar against the U.S. dollar would result in an approximate ~~$5,900~~$5,362 increase or decrease in the Company’s after tax net income from operations. The Company has not entered into any hedging agreements to mediate this risk. In the opinion of management, currency risk is assessed as low, material and remains unchanged from the prior year.

Other price risk

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. In the opinion of management, the Company is not exposed to this risk and remains unchanged from the prior year.

Derivative instrument liability

The Company ~~accounts~~evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature should be bifurcated from the host instrument and accounted for as a derivative instruments in accordance with ASC815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value ~~regardless of hedging relationship designation. Accounting for~~with changes in fair value recorded in earnings. The Company uses a Black Scholes Option Pricing model to estimate the fair value of convertible debt conversion features at the end of each applicable reporting period. Changes in the fair value of these derivatives during each reporting period are included in the statements of operations. Inputs into the Black Scholes Option Pricing model require estimates, including such items as estimated volatility of the ~~derivative instruments depends on whether the derivatives qualify as hedging relationships~~Company’s stock, risk free interest rate and the ~~types~~estimated life of ~~relationships designated are based on~~ the ~~exposures hedged. At June 30, 2017, the Company had a derivative liability amounting to $128,968.~~financial instruments being fair valued.

If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion feature.

ETHEMA HEALTH CORPORATION

~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

2.3.

~~Summary~~Restatement of ~~Significant Accounting Policies (continued)~~

~~Convertible Instruments~~prior period results

The Company ~~evaluates and accounts~~finalized the Purchase Price allocation for conversion options embedded in its convertible instruments in accordance with professional standards for “Accounting for Derivative Instruments and Hedging Activities.” Professional standards generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the ~~economic characteristics and risks~~acquisition of the ~~embedded derivative instrument are not clearly~~assets of Seastone and ~~closely related to~~CCH during December 2017. This resulted in the ~~economic characteristics and risks~~retroactive restatement of the ~~host contract, (b)~~statement of the ~~hybrid instrument that embodies both the embedded derivative instrument~~unaudited condensed consolidated statement of operations and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaningunaudited condensed consolidated statement of Conventional Convertible Debt Instrument.” The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notescash flows for the ~~intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair~~three and six months ended June 30, 2017.

The value of the ~~underlying Common Stock at the commitment date of the note transaction~~assets acquired were adjusted in line with valuations received and the ~~effective conversion price embedded~~corresponding depreciation charge was adjusted accordingly.

This resulted in an increase in other expense of $1,146,600 and $4,701,415 for the three months and six months ended June 30, 2017, respectively, on the transfer of assets between parties under common control and a net reduction in the ~~note. Debt discounts under these arrangements are amortized over the term~~associated depreciation charge of ~~the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends~~$51,442 and $74,912 for the ~~intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying Common Stock at the commitment date of the note transaction~~three months and ~~the effective conversion price embedded in the note.~~six months ended June 30, 2017, respectively.

~~Disposal of Business~~

~~On February 14,~~A further adjustment was made to other income, which was reduced by $62,960 and $94,940, for the three months and six months ended June 30, 2017, ~~in terms~~respectively, to modify the Company’s estimate of deferred purchase price consideration due on the ~~details outlined in note 1 above, the Company disposed~~disposal of the business and certain assets of its Canadian Rehab Clinic for gross proceeds of CDN$10,000,000, a total of CDN$1,500,000 of the gross proceeds is being held in escrow for up to two years, in addition there is an earnout payment of up to CDN$3,000,000 to be received in 2019, if certain clinic performance metrics are met, see note 8 below.Muskoka.

The ~~proceeds realized from the sale~~reconciliation of the ~~Canadian Rehab Clinic were used to settle outstanding tax liabilities, refer note 11 below, and to acquire~~unaudited condensed consolidated statement of operations for the ~~business of Seastone of Delray, refer note 5 below.~~

~~The proceeds realized on disposal have been allocated~~three months ended June 30, 2017 is as follows:

ETHEMA HEALTH CORPORATION

(Formerly known as Greenestone Healthcare Corporation)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Amount

Proceeds on disposal $ 7,644,000

Assets sold:
Accounts receivable 113,896
Plant and equipment 109,075
222,971
Liabilities assumed by purchaser
Deferred revenue (73,799 )

Net assets and liabilities sold 149,172

Net profit realized on disposal $ 7,494,828

	Three months ended June 20, 2017 As previously reported			Adjustments			Three months ended June 30, 2017 As Restated

Revenues	$	402,220					$	402,220

Operating expenses
General and administrative		57,905						57,905
Professional fees		66,403						66,403
Salaries and wages		173,451						173,451
Depreciation and amortization		125,340			(51,442	)		73,898
Total operating expenses		423,099			(51,442	)		371,657

Operating (loss) gain		(20,879	)		51,442			30,563

Other Income (expense)
Other income		63,960			(62,960	)		1,000
Other expense		1,127,335			(1,146,600	)		(19,265	)
Interest expense		(93,603	)					(93,603	)
Debt discount		(241,666	)					(241,666	)
Derivative liability movement		167,580						167,580
Foreign exchange movements		(6,438	)					(6,438	)
Net loss before taxation from continuing operations		996,289			(1,158,118	)		(161,829	)
Taxation		—			—			—
Net loss from continuing operations		996,289			(1,158,118	)		(161,829	)
Net loss from discontinued operations, net of tax		(141,177	)					(141,177	)
Net income (loss)		855,112			(1,158,118	)		(303,006	)
Accumulated other comprehensive gain
Foreign currency translation adjustment		154,255						154,255

Total comprehensive income (loss)	$	1,009,367		$	(1,158,117	)	$	(148,751	)

Basic income (loss) per common share from continuing operations	$	0.01		$	(0.01	)	$	(0.00	)
Basic loss per share from discontinued operations	$	(0.00	)	$	—		$	(0.00	)
Basic income per common share	$	0.01		$	0.01		$	0.00
Diluted income per share from discontinued operations	$	(0.00	)	$	—		$	(0.00	)
Diluted income (loss) per common share	$	0.01		$	(0.01	)	$	(0.00	)
Weighted average common shares outstanding - Basic		108,772,921			108,772,921			108,772,921

ETHEMA HEALTH CORPORATION

~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

~~Acquisition of subsidiary~~

On February 14, 2017, the Company acquired 100% of the equity of CCH, from Leon Developments, a company wholly owned by our CEO. The total consideration paid by the Company was CDN$3,517,062, including the assumption of certain liabilities of CCH, which was funded by the assignment to Leon Developments of certain indebtedness owing to the Company in the amount of CDN$659,918 (US$504,442) on the disposal of a subsidiary, 1816191 Ontario, which principal amount had previously been fully provided for during 2015; and the issuance of 60,000,000 shares of the Company’s common stock at US$0.0364 per share for proceeds of $2,184,000.

During the current quarter, on June 1, 2017, the Company had the property owned by CCH appraised by an independent valuer, the appraisal obtained was for CDN$10,000,000, which resulted an increase in the value of the assets acquired by $930,600 and a corresponding reduction in the excess purchased consideration allocated to the shareholder.

~~The allocation of the purchase price is as follows:~~

Amount

Purchase price paid:
Common shares issued to Seller $ 2,184,000
Receivable assumed by the Seller 504,442
2,688,442
Allocated as follows:

Assets acquired:
Property 7,644,000
Receivable from Ethema Health Corporation 299,743
7,943,743
Liabilities assumed:
Accounts payable and other accruals 158,094
Related party payable to Leon Developments 2,057,392
Mortgage liability owing to Ethema Health Corporation 267,540
Mortgage liability 3,145,549
5,628,575

Net assets acquired 2,315,168

Excess purchase consideration allocated to shareholders compensation $ 373,274

5.3.

~~Acquisition~~Restatement of ~~the business of Seastone of Delray~~prior period results (continued)

The ~~Company, utilized a portion~~reconciliation of the ~~proceeds realized on~~unaudited condensed consolidated statement of operations for the ~~sale of the Canadian Rehab Clinic to acquire certain assets of Seastone of Delray.~~six months ended June 30, 2017 is as follows:

The Company obtained its own license to run a rehabilitation Clinic in Florida in December 2016 and began operations, through its wholly owned subsidiary, Seastone of Delray, LLC, effective January 2017.ETHEMA HEALTH CORPORATION

(Formerly known as Greenestone Healthcare Corporation)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Six months ended June 30, 2017 As previously reported			Adjustments			Six months ended June 30, 2017 As Restated

Revenues	$	724,730					$	724,730

Operating expenses
General and administrative		408,442						408,442
Professional fees		399,204						399,204
Salaries and wages		382,695						382,695
Depreciation and amortization		182,406			(74,912	)		107,494
Total operating expenses		1,372,747			(74,912	)		1,297,835

Operating loss		(648,017	)		74,912			(573,105	)

Other Income (expense)
Other income		568,309			(94,940	)		473,369
Other expense		(392,539	)		(4,701,415	)		(5,093,954	)
Interest income		32,074						32,074
Interest expense		(156,620	)					(156,620	)
Debt discount		(429,325	)					(429,325	)
Derivative liability movement		94,532						94,532
Foreign exchange movements		(164,347	)					(164,347	)
Net loss before taxation from continuing operations		(1,095,933	)		(4,721,443	)		(5,817,376	)
Taxation		—			—			—
Net loss from continuing operations		(1,095,933	)		(4,721,443	)		(5,817,376	)
Net income from discontinued operations, net of tax		7,412,643						7,412,643
Net income		6,316,710			(4,721,443	)		1,595,267
Accumulated other comprehensive gain
Foreign currency translation adjustment		(36,692	)					(36,692	)

Total comprehensive income	$	6,280,018		$	(4,721,443	)	$	1,558,575

Basic loss per common share from continuing operations	$	(0.01	)	$	(0.05	)	$	(0.06	)
Basic income per share from discontinued operations	$	0.08		$	—		$	0.08
Basic income per common share	$	0.07		$	(0.05	)	$	0.02
Diluted loss per common share from continuing operations	$	(0.01	)	$	(0.04	)	$	(0.06	)
Diluted income per share from discontinued operations	$	0.07		$	—		$	0.07
Diluted income per common share	$	0.06		$	(0.04	)	$	0.01
Weighted average common shares outstanding - Basic		93,838,855			93,838,855			93,838,855
Weighted average common shares outstanding - Diluted		104,974,243			104,974,243			104,974,243

ETHEMA HEALTH CORPORATION

~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

5.3.

~~Acquisition~~Restatement of ~~the business of Seastone of Delray~~prior period results (continued)

The ~~assets acquired were~~reconciliation of the unadjusted condensed consolidated statement of cash flows for the six months ended June 30, 2017 is as follows:

ETHEMA HEALTH CORPORATION

(Formerly known as Greenestone Healthcare Corporation)

Amount

Purchase price paid:
Cash paid to seller $ 2,960,000
Deposits previously paid to seller 110,000
Mortgage liability funds 3,000,000
6,070,000
Assets acquired:
Property 4,410,000
Furniture and fixtures 80,000
Intangibles - to be classified 1,438,525
Receivables 141,475
$ 6,070,000

	June 30, 2017 As previously reported			Adjustments			June 30, 2017 Adjusted Total
Operating activities
Net income	$	6,316,710		$	(4,721,443	)	$	1,595,267
Net income from discontinued operations		(7,412,643	)					(7,412,643	)
Net loss from continuing operations		(1,095,933	)		(4,721,443	)		(5,817,376	)
Adjustment to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation		182,406			(74,912	)		107,494
Non cash compensation expense on acquisition of subsidiary		373,274			4,701,415			5,074,689
Loss on mortgage sold		19,265						19,265
Non cash compensation for services		4,000						4,000
Other foreign exchange movements		(27,476	)					(27,476	)
Amortization of debt discount		429,325						429,325
Derivative liability movements		(94,532	)					(94,532	)
Provision against receivable on sale of subsidiary		(446,476	)					(446,476	)
Changes in operating assets and liabilities
Accounts receivable		(327,351	)					(327,351	)
Prepaid expenses		(6,776	)					(6,776	)
Accounts payable and accrued liabilities		(150,095	)		94,940			(55,155	)
Taxes payable		(2,401,665	)					(2,401,665	)
Net cash used in operating activities - continuing operations		(3,542,034	)		—			(3,542,034	)
Net cash provided by operating activities - discontinued operations		101,033						101,033
		(3,441,001	)		—			(3,441,001	)
Investing activities
Investments in Seastone		(2,960,000	)					(2,960,000	)
Proceeds from restricted cash		51,362						51,362
Purchase of fixed assets		(8,878	)					(8,878	)
Net cash used in investing activities - continuing operations		(2,917,516	)		—			(2,917,516	)
Net cash provided by investing activities - discontinued operations		6,241,082						6,241,082
		3,323,566			—			3,323,566

Financing activities
(Decrease) Increase in bank overdraft		(36,605	)					(36,605	)
Proceeds from mortgage sold		111,554						111,554
Repayment of mortgage		(85,613	)					(85,613	)
Proceeds from convertible notes		294,500						294,500
Repayment of convertible notes		(130,000	)					(130,000	)
(Repayment of) proceeds from related party notes		26,195						26,195
Net cash provided by financing activities		180,031			—			180,031

Effect of exchange rate on cash		(36,692	)					(36,692	)

Net change in cash		25,904						25,904
Beginning cash balance		4,779						4,779
Ending cash balance	$	30,683		$	—		$	30,683

ETHEMA HEALTH CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6.4.

Going ~~Concern~~concern

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with US GAAP applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations in the normal course of business. As of June 30, ~~2017,~~2018, the Company has a working capital deficiency of ~~$6,348,925~~$10,108,841 and accumulated deficit of ~~$14,665,204.~~$26,498,019. Management believes that current available resources will not be sufficient to fund the Company’s planned expenditures over the next 12 months. Accordingly, the Company 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, or generating sufficient revenue in excess of costs. If the Company raises 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 the Company raises additional funds by issuing debt, the Company may be subject to limitations on its operations, through debt covenants or other restrictions. If the Company obtains additional funds through arrangements with collaborators or strategic partners, the Company 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 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. 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 the Company be unable to continue operations.

The ability of the Company to continue as a going concern is dependent on the Company generating cash from the sale of its common stock or obtaining debt financing and attaining future profitable operations. Management's plans include selling its equity securities and obtaining debt financing to fund its capital requirement and ongoing ~~operations;~~operations; however, there can be no assurance the Company will be successful in these efforts.

~~Discontinued Operations~~

5. Discontinued Operations

On February 14, 2017, the Company completed a series of transactions, including an APA whereby the Company sold certain of the Canadian Rehab Clinic assets. The assets disposed of business represented substantially all of the operating assets of the Canadian Rehab Clinic and has been disclosed as a discontinued operation for comparative purposes as of ~~December 31, 2016 and~~June 30, 2017. And for the three and six ~~month period~~months ended June 30, 2017.

The Statement of operations for discontinued operations at June 30, 2017 ~~and 2016. Refer note 3 above.~~is as follows:

	Three months ended June 30, 2017			Six months ended June 30, 2017

Revenues	$	(112	)	$	232,040

Operating expenses
Depreciation and amortization		—			4,196
General and administrative		31,330			118,706
Professional fees		33,466			32,818
Rent		2,975			47,493
Salaries and wages		(31,913	)		201,723
Total operating expenses		35,858			404,936

Operating (loss) income		(35,970	)		(172,896	)

Other (Expense) Income
Other expense		(204	)		(993	)
Foreign exchange movements		(105,003	)		91,704
Net (loss) income before taxation		(141,177	)		(82,185	)
Taxation		—			—
Net (loss) income from discontinued operations	$	(141,177	)	$	(82,185	)

Gain on disposal of business		—			7,494,828

	$	(141,177	)	$	7,412,643

ETHEMA HEALTH CORPORATION

~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

Deposit on Real Estate

On November 2, 2017, the Company entered into an Agreement to purchase from AREP 5400 East Avenue LLC certain buildings in West Palm Beach, Florida, totaling approximately 80,000 square feet, on which the present tenant operates a substance abuse treatment center. The purchase price of the Property is $20,530,000, and made a series of nonrefundable down payments totaling $2,549,955 as of June 30, 2018.

~~Discontinued Operations (continued)~~

~~The assets and liabilities of discontinued operations as of December 31, 2016 is as follows:~~

December 31,
2016
Current assets
Accounts receivable, net $ 123,358
Prepaid expenses and other current assets 11,253
Total current assets 134,611
Non-current assets
Plant and equipment, net 129,127
Deposits —
Total assets 263,738

Current liabilities
Deferred revenues 80,519

Discontinued operation 183,219

~~The statement of operations for discontinued operations is as follows:~~

Three months Three months Six months Six months
ended June 30, ended June 30, ended June 30, ended June 30,
2017 2016 2017 2016

Revenues $ (112 ) $ 1,024,384 $ 232,040 $ 1,847,222

Operating expenses
Depreciation and amortization — 15,412 4,196 30,746
General and administrative 31,330 187,589 118,706 343,480
Professional fees 33,466 — 32,818 6,144
Rent 2,975 105,721 47,493 180,112
Salaries and wages (31,913 ) 423,464 201,723 811,981
Total operating expenses 35,858 732,186 404,936 1,372,463

Operating (loss) income (35,970 ) 292,198 (172,896 ) 474,759

Other Income
Profit on sale of business — — 7,494,828 —
Other income — 21,042 — 21,042
Interest expense (204 ) (38,547 ) (993 ) (76,743 )
Foreign exchange movements (105,003 ) (8,433 ) 91,704 24,721
Net income before taxation (141,177 ) 266,260 7,412,643 443,779
Taxation — — — —
Net income from discontinued operations $ 141,177 $ 266,260 $ 7,412,643 $ 443,779

Due from sale of subsidiary

~~A net amount of CDN$617,960 was due to the Company on the sale of the Endoscopy Clinic as of December 31, 2016. This amount was past due and had fully provided for as of December 31, 2016.~~

On February 14, 2017, the Company acquired CCH from Leon Developments and settled a portion of the purchase consideration by assigning the proceeds due to the Company on the sale of the Endoscopy Clinic to Leon Developments. The note together with accrued interest thereon of CDN$41,959 amounted to CDN$659,919 (US$504,442). The provision raised against the note was reversed and the unrecorded interest thereon was recognized during the current quarter.

~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~
~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~

8.	~~Due from sale of subsidiary (continued)~~

On February 14, 2017, the Company sold its Canadian Rehab Clinic for gross proceeds of CDN$10,000,000, of which CDN$1,500,000 (US$1,155,900) ~~has~~had been retained in an escrow account for a period of up to two years in order to guarantee the warranties provided by the Company in terms of the APA. ~~In addition,~~During the six months ended June 30, 2018, CDN960,000 of the escrow was released to the Company, ~~may earn up to~~with an additional CDN$3,000,000 as a performance payment based on the attainment of certain clinic performance metrics. The Company estimates that the earnout will approximate $663,000 and is accruing this additional amount over a period of twenty three and a half months. The accrual is recorded as other income, as of June 30, 2017, the company had accrued $97,847 (at closing exchange rates) as additional income.540,000 still outstanding.

Property, plant and equipment

Property, plant and equipment consists of the following:

	June 30, 2017							December 31, 2016		June 30, 2018							December 31, 2017
	Cost		Amortization and Impairment			Net book value		Net book value		Cost		Amortization and Impairment			Net book value		Net book value

Property	$	12,124,997	$	(176,770	)	$	11,948,227	$	—
Land										$	2,917,204	$	—		$	2,917,204	$	2,925,305
Buildings											5,928,619		(313,033	)		5,615,586		5,840,268
Furniture and fixtures		80,000		(9,000	)		71,000		—		115,750		(34,320	)		81,430		72,047
Leasehold improvements											307,319		(11,891	)		295,428		316,238
										$	9,268,892	$	(359,244	)	$	8,909,648	$	9,153,858
	$	12,204,997		(185,770	)	$	12,019,227	$	—

Depreciation expense for the three months ended June 30, 2018 and 2017 was $68,041 and ~~2016 was $125,340 and $0,~~$73,898, respectively, and depreciation expense for the six months ended June 30, 2018 and 2017 was $136,456 and ~~2016 was $182,406 and $0,~~$107,494, respectively.

~~10.~~

~~Intangibles~~

In terms of the acquisition of Seastone of Delray, the Company paid an amount of $1,438,525 (Note 1 above) in excess of the fair market value of the assets acquired. This amount will be allocated to different classes of intangible assets when an independent valuation of the intangibles is performed.

~~11.~~9.

TaxesPayable

The Company settled the tax liabilities owing to the Canadian Revenue Authorities out of the proceeds of the disposal of the Canadian Rehab Clinic on February 14, 2017. The Company paid CDN$2,929,886 to settle outstanding payroll liabilities, CDN$441,598 to settle outstanding GST/HST liabilities and a further CDN$ 57,621 to settle other Canadian tax liabilities.

~~The remaining~~ taxes payable consist of:

●

A payroll tax liability of ~~$147,027~~$144,638 (CDN$~~190,800)~~190,459) in Greenestone Muskoka which ~~has not been settled as yet.~~is being paid off in instalments.

●

The Company has assets and operates businesses in Canada and is required to disclose these operations to the US taxation authorities, the requisite disclosure has not been made. Management has reserved the maximum penalty due to the IRS in terms of non-disclosure. ~~This noncompliance~~The Company is taking steps to comply with US disclosure requirements, ~~is currently being addressed. An~~and has established a provision in the amount of ~~$250,000 has been accrued for any potential exposure the Company may have.~~$250,000.

	June 30, 2018		December 31, 2017

Payroll taxes	$	144,638	$	155,894
US penalties due		250,000		250,000
Income tax payable		269,940		283,346

	$	664,578	$	689,240

ETHEMA HEALTH CORPORATION
~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

~~12.~~10.

Short-term Convertible Notes

The short-term convertible notes consist of the following:

Interest
rate Maturity date Principal
Outstanding Accrued
interest Unamortized Discount June 30,
2017 December
31, 2016

Labrys Fund, LP 8.0 % August 2, 2017 $ — $ — $ — $ — $ —

Power Up Lending Group LTD. 12.0 % March 20, 2018 $ 113,500 $ 410 $ (108,943 ) $ 4,967 $ —

Series L Convertible notes 0.0 % June 30, 2017
to July 17, 2017 519,969 — (8,735 ) 511,234 250,258
$ 633,469 $ 410 $ (117,678 ) $ 516,201 $ 250,258
Disclosed as follows:
Short-term portion $ 516,201 $ 250,258
Long-term portion — —
$ 516,201 $ 250,258

	Interest rate	Maturity date	Principal	Interest	Debt Discount	June 30, 2018	December 31, 2017

Leonite Investments LLC	8.5%	December 1, 2018	$ 1,650,000	$ 10,174	$ (696,164)	$ 964,010	$ 138,502
	6.5%	On Demand	165,000	6,008	-	$ 171,008	-
	8.5%	On Demand	605,000	18,772	-	$ 623,772	-

Power Up Lending Group Ltd	12.0%	August 15, 2018	-	-	-	-	21,951
	12.0%	December 30, 2018	153,000	5,684	(94,591)	64,093	-

Series N Convertible notes	6.0%	November 6 to November 30, 2018	1,400,000	4,775	(1,002,289)	402,486	-

			$ 3,973,000	$ 45,413	$ (1,793,044)	$ 2,225,369	$ 160,453

Leonite Capital, LLC

On December 1, 2017, the Company closed on a private offering to raise US $1,500,000 in capital. The Company issued one senior secured convertible promissory note with a principal amount of US $1,650,000 to Leonite Capital, LLC. The Note bears interest at the rate of 6.5% per annum. The initial draw under the Note was $300,000 with a $150,000 original issue discount for a total of $450,000. The Company issued 1,650,000 shares of the Company’s common stock as a commitment fee and paid $20,000 towards the lenders legal fees. The Note’s initial maturity date is June 1, 2018. During the term of the Note the Company and the Subsidiaries will be obligated to make monthly payment of accrued and unpaid interest. The Note contains Company and Subsidiary representations and warranties, covenants, events of default, and registration rights.

~~Labrys Fund, LP~~The Note provided that the parties use reasonable best efforts to close on the remaining $1,200,000 of availability under the Note by January 1, 2018. As a condition to the closing of the Balance Tranche, the parties must finalize and enter into additional agreements related to the Private Offering, including, but not limited to, (i) a Securities Purchase Agreement; (ii) a Warrant Agreement under which the Investor will have the right to purchase up to 27,500,000 shares of the Company’ common stock for $0.10 per share, subject to adjustment, for a period of five years; (iii) a Securities Pledge Agreement under which the Company and the Subsidiaries will grant the lender a blanket lien on their assets, and the Company will pledge its equity ownership in the Subsidiaries. Upon the closing of the Balance Tranche the maturity date of the Note will become December 1, 2018.

On ~~February~~December 29, 2017, effective as of December 1, 2017, the Company and the Subsidiaries entered into an Amended and Restated Senior Secured Convertible Promissory Note, which note amends and restates the Note to (a) extend the maturity date to December 1, 2018; (b) remove CCH, as an obligor; (c) increase the interest rate by 2.00% per annum, to 8.5% per annum; and (d) issue an additional 250,000 shares of the Company’s common stock to the Investor. In connection with the execution of the amendment, the parties entered into (i) a Securities Purchase Agreement; (ii) a Warrant Agreement under which the Investor will have the right to purchase up to 27,500,000 shares of the Company’ common stock for $0.10 per share, subject to adjustment, for a period of five years; (iii) a Security and Pledge Agreement and a General Security Agreement under which the Company and the Subsidiaries will grant the Investor a blanket lien on their assets, and the Company will pledge its equity ownership in the Subsidiaries; and (iv) a First Amendment to the, effective January 2, ~~2017,~~2018.

At the execution of the Note, the Investor funded an initial tranche of $300,000. Thereafter the Investor funded a second tranche of $156,136. Upon the execution of the A&R Note the Investor funded a third tranche of $100,000. Upon the execution of the First Amendment the Investor funded a final tranche of $850,000, with the remaining $43,764 of availability under the A&R Note, as amended, serving as a holdback pursuant to the terms of the First Amendment.

Amounts under the Note are convertible, at the Investors request, into shares of the Company’s common stock at an initial price of $0.06 per share, subject to adjustment.

On March 12, 2018, the Company, entered into a Securities Purchase Agreement ~~with LABRYS FUND LP, in terms of the agreement~~pursuant to which the Company ~~borrowed $110,000~~issued a Convertible Promissory Note in ~~terms~~the aggregate principal amount of $330,000, including an ~~unsecured convertible promissory~~Original Issue Discount of $30,000, for net proceeds of $300,000. The note ~~with~~has a maturity date of ~~August 2, 2017.~~March 19, 2018. The outstanding principal amount of the note ~~bears interest~~is convertible at any time and from time to time at the election of the purchaser following the issue date into shares of the Company’s common stock at a ~~rate of 8%~~conversion price equal to $0.06 per ~~annum. The note is only convertible upon a repayment default, at the lower of 60% of the lowest traded~~share subject to price ~~over the preceding 30 day trading period prior to the issuance of~~protection and anti-dilution protection. In conjunction with this note ~~or 60% of~~ the ~~lowest traded price 30 days prior to the conversion date. The~~ Company issued ~~1,200,000~~warrants to purchase 5,500,000 shares of common ~~shares to~~stock at an exercise price of $0.10 per share.

In Conjunction with this note the ~~note holder~~Company issued 330,000 shares as a commitment fee ~~which returnable shares will be returned to the company if fully~~at a price of $0.06 per share.

The note was repaid ~~prior to August 2, 2017.~~during March 2018.

~~On May 26, 2017, the Company repaid the note for gross proceeds of $112,744, including interest thereon of $2,744. The 1,200,000 commitment fee shares were returned to the Company.~~ETHEMA HEALTH CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10.

Short-term Convertible Notes (continued)

Leonite Capital, LLC (continued)

On March 29, 2018, the Company, entered into a Securities Purchase Agreement pursuant to which the Company issued a Convertible Promissory Note in the aggregate principal amount of $165,000, including an Original Issue Discount of $15,000, for net proceeds of $150,000. The note has a maturity date of April 28, 2018. The outstanding principal amount of the note is convertible at any time and from time to time at the election of the purchaser following the issue date into shares of the Company’s common stock at a conversion price equal to $0.06 per share subject to price protection and anti-dilution protection.

In Conjunction with this note the Company paid a commitment fee of $11,550 settled through the issue of 165,000 shares at a price of $0.07 per share.

On April 17, 2018, the Company, entered into a Securities Purchase Agreement pursuant to which the Company issued a Convertible Promissory Note in the aggregate principal amount of $605,000, including an Original Issue Discount of $55,000, for net proceeds of $550,000. The note had a maturity date of May 8, 2018. The outstanding principal amount of the note is convertible at any time and from time to time at the election of the purchaser following the issue date into shares of the Company’s common stock at a conversion price equal to $0.06 per share subject to price protection and anti-dilution protection.

The Company also issued a further 605,000 shares of common stock to Leonite as a commitment fee, valued at $42,350 at grant date, and a further 10,083,333 warrants to purchase shares of common stock at an initial exercise price of $0.10 per share, subject to anti-dilution and price protection.

Power Up Lending Group LTD

On ~~June 19,~~November 6, 2017, the Company, entered into a Securities Purchase Agreement with Power Up Lending Group Ltd., pursuant to which the Company issued to the Purchaser a Convertible Promissory Note in the aggregate principal amount of ~~$113,500.~~$103,000. The Note has a maturity date of ~~March 20,~~August 15, 2018 and bears interest at the at the rate of ~~eight~~twelve percent per annum from the date on which the Note is issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Note in terms of agreement. The outstanding principal amount of the Note is convertible at any time and from time to time at the election of the Purchaser during the period beginning on the date that is 180 days following the issue date into shares of the Company’s common stock at a conversion price equal to 61% of the average lowest closing bid ~~prices~~price of the Company’s common stock for the ten trading days prior to conversion. ~~The balance of the Note plus accrued interest at June 30, 2017 was $4,967, net of unamortized discount of $108,943.~~

~~Series L convertible notes~~ On May 5, 2018, the aggregate principal outstanding of $103,000 together with interest and penalty interest thereon, was settled for gross proceeds of $141,824.

~~The~~

On March 9,2018, the Company, entered into ~~Series L Convertible~~a Securities Purchase ~~Agreements~~Agreement with ~~8 individuals on December 30, 2016. In terms of these agreements,~~Power Up Lending Group Ltd., pursuant to which the Company ~~borrowed an~~issued to the Purchaser a Convertible Promissory Note in the aggregate principal amount of ~~$468,969~~$153,000. The Note has a maturity date of December 30, 2018 and bears interest at the at the rate of twelve percent per annum from the date on which the Note is issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company has the right to prepay the Note in terms of ~~a senior ranking~~agreement. The outstanding principal amount of the Note is convertible ~~promissory note with a maturity~~at any time and from time to time at the election of the Purchaser during the period beginning on the date ~~six months from~~that is 180 days following the issue date ~~and bearing interest at 0% per annum. The notes are convertible at the option of the holder~~ into shares of the Company’s common stock at a conversion price equal to 61% of the average lowest closing bid price of the Company’s common stock for the ten trading days prior to conversion.

Series N Convertible Notes

On May 31, 2018, The Company closed a private offering (the “Private Offering”) in which it raised $1,450,000 in capital from 4 accredited investors through the issuance to the investors of the Company’s Series N Convertible Notes, in the total original principal amount of $1,400,000, which Notes are convertible into the Company’s common stock at a conversion price of ~~$0.03~~$0.08 per share ~~subject~~(the “Notes”) together with Warrants to ~~certain recapitalization adjustments. On December 30, 2016, it was determined that the beneficial conversion feature related~~purchase up to ~~the discounted note and warrant issuances amounting to $218,711 would be amortized over the life~~a total of 17,500,000 shares of the ~~loans.~~

During January 2017, the Company borrowed a further aggregate principal amount of $71,000 in terms of three senior ranking convertible promissory notes with a maturity date six months from the issue date and bearing interest at 0% per annum. The notes are convertible at the option of the holder into shares of common stock of the Company at a conversion price of $0.03 per share, subject to certain recapitalization adjustments. In January 2017, it was determined that the beneficial conversion feature related to the discounted note and warrant issuances amounting to $104,793 would be amortized over the life of the loans.

~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~
~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~

~~12.~~

~~Short-term Convertible Notes (continued)~~

~~On May 4, 2017, the Company repaid $20,000 of the principal outstanding to one investor.~~

~~The amortization charge of the debt discount for the three months and six months ended June 30, 2017 was $161,750 and $314,769, respectively.~~

~~In terms of the Series L Convertible notes issued above, during January 2017, the Company granted three year warrants to the Series L Convertible noteholders, exercisable for 2,366,667 shares of~~Company’s common stock at an exercise price of ~~$0.03,~~$0.12 per share the. Both the conversion price under the Notes and the exercise price under the Warrants are subject to ~~certain recapitalization adjustments, per share, expiring between January 16~~standard adjustment mechanisms. The Notes mature on November 30, 2018, and ~~January 17, 2020. (Refer note 16 (b) below).~~the Warrants are exercisable until May 31, 2021.

~~13.~~

~~Derivative liability~~16

The short-term convertible notes issued to Labrys Fund LP and Power Up Lending Group, LTD, disclosed in note 12 above, have variable priced conversion rights with no fixed floor price and will reprice dependent on the share price performance over varying periods of time. This gives rise to a derivative financial liability, which was initially valued at inception of the convertible notes at $223,500, the maximum amount permissible, using a Black-Scholes valuation model.ETHEMA HEALTH CORPORATION

The Labrys Fund note was repaid in May 2017; therefore, the derivative liability was no longer required, the total derivative liability relating to this note of $183,048 was released to the statement of operations. The value of the Power Up convertible note was re-assessed as of June 30, 2017 and a further charge of $15,468 was made to the statement of operations. The value of the derivative liability will be re assessed at each financial reporting period, with any movement thereon recorded in the statement of operations in the period in which it is incurred.

~~The following assumptions were used in the Black-Scholes valuation model:~~

Six months
ended
June 30, 2017

Calculated stock price $0.03 to $0.06
Risk free interest rate 0.64% to 1.24%
Expected life of convertible notes 3 to 9 months
expected volatility of underlying stock 134.9% to 180.5%

The movement in derivative liability is as follows:

Six months
ended
June 30, 2017

Opening balance $ —
Derivative liability arising from convertible notes $ 223,500
Fair value adjustment to derivative liability (94,532 )
$ 128,968

~~14.~~

~~Related Party Transactions~~

~~Greenstone Clinic Inc.~~

As of June 30, 2017, the Company had a receivable of $63,471 and as of December 31, 2016, the Company had a payable of $79,592, respectively. Greenstone Clinic Inc., is controlled by one of the Company’s directors. The balance payable is noninterest bearing, not secured and has no specific repayment terms.

~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~
NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

~~14.~~

~~Related Party Transactions (continued)~~

~~1816191 Ontario~~

As of June 30, 2017, and December 31, 2016, the Company had a payable of $16,055 and $70,763, respectively, to 1816191 Ontario, the Endoscopy Clinic, which was sold at the end of the prior year. The payable is noninterest bearing, and has no specific repayment terms.

~~Shawn E. Leon~~

As of June 30, 2017, and December 31, 2016 the Company had a receivable of $25,531 and a payable of $8,492, respectively to Shawn E. Leon, a director and CEO of the Company. The balances receivable and payable are noninterest bearing and have no fixed repayment terms.

Mr. Leon was paid management fees of $100,000 during the six months ended June 30, 2017. In addition to this the Company recorded a once off compensation expense in other expenses, relating to the excess of the fair value of the assets acquired in Cranberry Cove Holdings, Ltd. Mr. Leon is the owner of Leon Developments, the counterparty in the acquisition of the Cranberry Cove subsidiary referred to in note 1 and 4 above.

~~Leon Developments, Ltd.~~

The Company acquired CCH from Leon Developments, Ltd., on February 14, 2017, refer note 1 and 4 above. CCH owns the facility utilized by the Canadian Rehab Clinic which was sold to a third party on February 14, 2017. CCH owed CDN$2,692,512 to Leon Developments, this amount has remained unchanged since acquisition. The amount owing is valued at $2,213,731 as of June 30, 2017.

~~Cranberry Cove Holdings Ltd.~~

The Company acquired CCH on February 14, 2017. CCH owns the real estate previously utilized by the Canadian Rehab Clinic and now utilized by the purchaser of the business. As of December 31, 2016, the Company had a receivable of $84,867 from CCH.

~~Prior to the acquisition of CCH, the Company paid rental expense to CCH of CDN$58,925 and CDN$226,250 for the six months ended June 30, 2017 and 2016, respectively.~~

~~15.~~11.

Loans payable

On February 14, 2017, the Company acquired 100% of the equity of CCH, from Leon Developments. The subsidiary has certain mortgage indebtedness amounting to CDN$4,115,057 (US$3,145,549) at the date of acquisition, which was assumed by the Company.

On February 14, 2017, the Company acquired certain assets of Seastone of Delray, including fixed property. A portion of the purchase consideration was funded by a purchase money mortgage secured over the properties acquired, amounting to $3,000,000.

The loans payable is as follows:

	Interest rate		Maturity date	Principal Outstanding		Accrued interest		June 30, 2017		December 31, 2016		Interest rate	Maturity date	Principal Outstanding	Accrued interest	June 30, 2018	December 31, 2017

Cranberry Cove Holdings
First Mortgage	8.0	%	August 14, 2017	$	2,822,979	$	—	$	2,822,979	$	—
Second Mortgage	12.0	%	November 4, 2018		404,562		1,663		406,225		—
Pace Mortgage												4.2%	July 19,2022	4,087,994	5,130	4,093,124	4,349,374
Seastone of Delray
Mortgage	5.0	%	February 13, 2020		2,989,937		5,480		2,995,417		—	5.0%	February 13, 2020	2,958,725	$ 12,328	2,971,053	2,986,920
				$	6,217,478	$	7,143	$	6,224,621	$	—			$ 7,046,719	$ 17,458	$ 7,064,177	$ 7,336,294
Disclosed as follows:
Short-term portion								$	3,234,684	$	—					$ 133,617	$ 152,402
Long-term portion									2,989,937		—					6,930,560	7,183,892
								$	6,224,621	$	—					$ 7,064,177	$ 7,336,294

~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~
~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~

~~15.~~

~~Loans payable (continued)~~

The aggregate amount outstanding is payable as follows:

Amount

2017 $ 3,234,684
2018 —
2019 —
2020 2,989,937
Total $ 6,224,621

	Amount
Within 1 year	$	133,617
1 to 2 years		3,043,331
2 to 3 years		109,547
3 to 4 years		114,196
Thereafter		3,663,486
Total	$	7,064,177

~~Cranberry Cove Holdings~~Pace Mortgage

~~The first mortgage with an aggregate~~On July 19, 2017, CCH, a wholly owned subsidiary closed on a loan agreement in the principal amount ~~outstanding~~ of CDN$~~3,500,000, including late charges, interest and penalties of CDN$165,057 for a gross aggregate amount outstanding of CDN$3,663,380, over the Cranberry Cove Holdings properties~~5,500,000. The loan is secured by a first mortgage on the ~~property~~premises owned by CCH located at 3571 Muskoka Road ~~#169,~~169, Bala, ~~described as PT LT 15 CON F Medora PT1 35R5958, PT 2 &3 35R11290, Muskoka Lakes.~~Ontario (the “Property”). The ~~mortgage~~loan bears interest at the fixed rate of ~~8% per annum on~~4.2% with a 5-year primary term and a 25-year amortization. The Company has guaranteed the ~~aggregate principal outstanding~~loan and the Company’s chief executive officer and controlling shareholder also has personally guaranteed the Loan. CCH and the Company have granted the Lender a general security interest in its assets to secure repayment of ~~$3,500,000 and matures on August 14, 2017,~~the Loan. The loan is amortized with monthly ~~interest payments~~installments of ~~$23,118 (CDN 30,000).~~CDN $29,531.

~~During March 2017, the Company made a principal payment of CDN$100,000 on the first mortgage.~~

The second mortgage had an initial principal amount outstanding of CDN$350,000, on May 23, 2017, the Company sold CDN$175,000 of the mortgage it owned to the second mortgage holder for gross proceeds of CDN$150,000, the balance outstanding on the second mortgage is now CDN$525,000, the mortgage is secured by the Cranberry Cove Holdings properties located at 3571 Muskoka Road, #169, Bala, described as PT LT 15 CON F Medora PT1 35R5958, PT 2 &3 35R11290, Muskoka Lakes. The mortgage bears interest at the rate of 12% per annum on the aggregate principal outstanding of CDN$525,000, and matures on November 4, 2018, with monthly interest payments of CDN$3,500.

Seastone of Delray

The Company entered into a Mortgage and Security Agreement with Seastone Delray Healthcare, LLC on February 13, 2017 for the aggregate principal sum of $3,000,000, bearing interest at the rate of 5% per annum, maturing on February 13, 2020, with monthly repayments of interest and principal of $15,000. The proceeds of the mortgage of $3,000,000 was used to fund the acquisition of the Seastone Delray ~~properties, described as follows:~~properties.

ETHEMA HEALTH CORPORATION

~~Parcel 1, Moore’s Landing according to the Plat thereof, as recorded in Plat Book 42, page 72, Public Records of Palm Beach County, Florida~~

Unit numbers 1 to 10, inclusive of Seastone Condominium Apartments, a Condominium, according to The Declaration of Condominium recorded on O.RT. Book 3313, Page 122 and all exhibits thereof, Public Records of Palm Beach County, Florida.NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~16.~~

12.

Derivative liability

The short-term convertible notes, together with certain warrants issued to Leonite Capital LLC, and the short term convertible notes issued to Labrys Fund LP and Power Up Lending Group, LTD, disclosed in note 10 above, have variable priced conversion rights with no fixed floor price and will reprice dependent on the share price performance over varying periods of time. This gives rise to a derivative financial liability, which was initially valued at inception of the convertible notes at $1,085,837 using a Black-Scholes valuation model.

In addition, warrants exercisable over 5,500,000 shares of common stock were issued to Leonite Investments, in terms of the Securities Purchase Agreement and the Warrant Agreement entered into. Refer note 10 above.

The following assumptions were used in the Black-Scholes valuation model:

	Six months ended June 30, 2018
Calculated stock price		$0.024 to $0.10
Risk free interest rate		1.6% to 2.73%
Expected life of convertible notes		1 month to 5 years
expected volatility of underlying stock		15.4% to 495.3%
Expected dividend rate		0	%

The movement in derivative liability is as follows:

	Six months ended June 30, 2018	Year ended December 31, 2017

Opening balance	$ 2,859,832	$ -
Derivative liability arising from convertible notes	$ 1,085,837	$ 1,826,500
Fair value adjustment to derivative liability	808,951	1,033,332
Closing balance	$ 4,754,620	$ 2,859,832

13.

Related Party Transactions 1816191 Ontario

During the six months ended June 30, 2018, the Company repaid $15,921 to 1816191 Ontario, the Endoscopy clinic.

Shawn E. Leon

As of June 30, 2018, and December 31, 2017 the Company had a receivable of $19,265 and $16,080, respectively to Shawn E. Leon, a director and CEO of the Company. The balances receivable are non-interest bearing and have no fixed repayment terms.

Mr. Leon was paid management fees of $92,098 during the six months ended June 30, 2018.

Leon Developments, Ltd.

The Company acquired CCH from Leon Developments, Ltd., on February 14, 2017. CCH owns the facility utilized by the Canadian Rehab Clinic which was sold to a third party on February 14, 2017. CCH owed CDN $2,692,512 to Leon Developments. The amount owing to Leon Developments Ltd., as of June 30, 2018 was $1,542,681.

Cranberry Cove Holdings Ltd.

The Company acquired CCH on February 14, 2017. CCH owns the real estate previously utilized by the Canadian Rehab Clinic and now utilized by the purchaser of the business.

Prior to the acquisition of CCH, the Company paid rental expense to CCH of $58,925 for the period ended June 30, 2017.

ETHEMA HEALTH CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14.

Stockholders’ ~~equity (deficit)~~deficit

Common shares

On ~~February 2, 2017,~~March 29, 2018, the Company issued ~~1,200,000~~165,000 shares of common ~~shares~~stock to ~~a convertible note holder~~Leonite Capital, LLC in ~~terms~~connection with the closing of a ~~returnable commitment fee.~~financing of a Senior Secured Convertible Note. The shares ~~are returnable to the Company if the convertible note is repaid prior to maturity, failing which the commitment fee will be earned. These shares~~ were ~~not accounted for as issued as the probability of the commitment fee being assessed was not probable~~valued at $11,550, or ~~certain. The convertible loan was repaid and the 1,200,000 common shares were returned to the Company, refer note 12 above.~~$0.07 per share on March 29, 2018.

On February 14, 2017, in terms of the acquisition of 100% of the capital stock of Cranberry Cove Holdings Ltd. (“CCH”) from Leon Developments, the Company funded a portion of the acquisition by the issuance of 60,000,000 shares of the Company’s common stock at a market value of US$0.0364 per share, totaling $2,184,000, refer note 1 and 4 above.

~~On May 30, 2017,~~April 17, 2018, the Company issued ~~100,000~~605,000 shares of common stock to Leonite Capital, LLC in connection with the closing of a financing of a Senior Secured Convertible Note. The shares ~~to a vendor in lieu of services rendered~~were valued at ~~a market value of US$0.04 per share.~~ $39,450 on June 30, 2018.

~~ETHEMA HEALTH CORPORATION~~

~~(formerly Greenstone Healthcare Corporation)~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~

~~16.~~

~~Stockholders’ equity (deficit) (continued)~~

Warrants

In terms of the ~~short-term Series L Convertible notes~~convertible note agreements entered into with ~~3 parties, as~~Leonite Capital, LLC, disclosed in note 1210 above, the Company ~~awarded three year~~agreed to issue warrants exercisable over ~~2,366,666~~a total of 15,583,333 shares of common stock at an exercise price of ~~$0.03~~$0.10 per share.

In terms of the Series N Convertible debt issued to various accredited investors, disclosed in note 10 above, the Company agreed to issue warrants exercisable over a total of 17,500,000 shares of common stock at an exercise price of $0.12 per share.

The fair value of Warrants awarded and revalued during the ~~six months~~year ended June 30, ~~2017~~2018 were valued at ~~$94,620~~$799,004 using the Black Scholes pricing model utilizing the following weighted average assumptions:

Six months ended June 30, 2017
Calculated stock price $ 0.04
Risk free interest rate 1.48 %
Expected life of warrants (years) 3 years
expected volatility of underlying stock 398 %
Expected dividend rate 0 %

	Six months ended June 30, 2018

Calculated stock price		0.06 TO 0.08
Risk free interest rate		2.64 TO 2.75%
Expected life of warrants (years)		3 to 5 years
expected volatility of underlying stock		198.8 to 495.3%
Expected dividend rate		0	%

The movements in warrants is summarized as follows:

	No. of shares	Exercise price per share	Weighted average exercise price

Outstanding January 1, 2017	19,637,409	$0.0033 to $0.03	$ 0.03
Granted	29,866,666	$0.03 to $0.10	0.0945
Exercised	-	-	-
Outstanding December 31, 2017	49,504,075	$0.0033 to $0.10	0.0690
Granted	33,083,333	$0.10 to $0.12	0.11
Forfeited/cancelled	-	-	-
Exercised	-	-	-
Outstanding June 30, 2018	82,587,408	$0.0033 to $0.12	$0.0850

No. of shares Exercise price
per share Weighted
average
exercise price

Outstanding January 1, 2016 6,300,000 $0.0033 to $0.03 $ 0.14
Granted 19,337,409 0.03 0.0300
Forfeited/cancelled (6,000,000 ) 0.15 0.1500
Exercised — — —
Outstanding December 31, 2016 19,637,409 $0.0033 to $0.03 0.0300
Granted 2,366,666 0.03 0.0300
Forfeited/cancelled — — —
Exercised — — —
Outstanding June 30, 2017 22,004,075 $0.033 to $0.03 $ 0.0300

ETHEMA HEALTH CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14.

Stockholders’ deficit (continued)

Warrants (continued)

The following table summarizes information about warrants outstanding at June 30, ~~2017:~~

Warrants outstanding Warrants exercisable
Exercise price No. of shares Weighted
average
remaining
years Weighted
average
exercise price No. of shares Weighted
average
exercise price

$0.0033 300,000 * 300,000
$0.03 21,704,075 2.69 21,704,075

22,004,075 2.69 $ 0.03 22,004,075 $ 0.03

2018:

In terms of an agreement entered into with an investor relations company, 300,000 warrants were to be issued as part of the Investor Relations Agreement. These warrants have not been issued as yet, therefore the warrant terms are uncertain.

	Warrants outstanding			Warrants exercisable
Exercise price	No. of shares	Weighted average remaining years	Weighted average exercise price	No. of shares	Weighted average exercise price

$0.0033	300,000	*		300,000
$0.03	21,704,075	1.70		21,704,075
$0.10	43,083,333	4.60		43,083,333
$0.12	17,500,000	2.90		17,500,000

	82,587,408	3.45	$ 0.0850	82,587,408	$ 0.0850

* In terms of an agreement entered into with an investor relations company, 300,000 warrants were to be issued as part of the Investor Relations Agreement. These warrants have not been issued as yet, therefore the warrant terms are uncertain.

All of the warrants outstanding as of June 30, ~~2017~~2018 are vested. The warrants outstanding as of June 30, ~~2017~~2018 have an intrinsic value of ~~$668,123.~~

~~ETHEMA HEALTH CORPORATION~~

~~(formerly Greenstone Healthcare Corporation)~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~

$1,108,205.

~~16.~~c)

~~Stockholders’ equity (deficit) (continued)~~

Stock options

Our board of directors adopted the GreeneStone Healthcare Corporation 2013 Stock Option Plan (the “Plan”) to promote our long- term growth and profitability by (i) providing our key directors, officers and employees with incentives to improve stockholder value and contribute to our growth and financial success and (ii) enable us to attract, retain and reward the best available persons for positions of substantial responsibility. A total of 10,000,000 shares of our common stock have been reserved for issuance upon exercise of options granted pursuant to the Plan. The Plan allows us to grant options to our employees, officers and directors and those of our ~~subsidiaries;~~subsidiaries; provided that only our employees and those of our subsidiaries may receive incentive stock options under the Plan. We have granted a total of 480,000 options as of June 30, ~~2017~~2018 under the Plan.

No options were issued, exercised or cancelled for the period under review.

The following table summarizes information about options outstanding as of June 30, ~~2017.~~2018.

	Options outstanding						Options exercisable				Options outstanding			Options exercisable
Exercise price		No. of shares	Weighted average remaining years		Weighted average exercise price		No. of shares		Weighted average exercise price		No. of shares	Weighted average remaining years	Weighted average exercise price	No. of shares	Weighted average exercise price

$0.12		480,000		2.34				480,000			480,000	1.34		480,000

		480,000		2.34	$	0.12		480,000	$	0.12	480,000	1.34	$ 0.12	480,000	$ 0.12

As of June 30, ~~2017,~~2018, there was no unrecognized compensation costs related to these options and the intrinsic value of the options is $0.

ETHEMA HEALTH CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS

~~17.~~15.

Segment information

~~Due to the recent acquisition of the Cranberry Cove subsidiary on February 14, 2017, the~~The Company has two reportable operating segments;

i.a.

Rental income from the property owned by Cranberry Cove subsidiary located at 3571 Muskoka Road, #169, Bala, on which the operations of the Canadian Rehab Clinic were located prior to disposal on February 14, 2017 and subsequently leased to the purchasers of the business of the Canadian Rehab Clinic, for a period of 5 years renewable for a further three five-year periods and with an option to acquire the property at a fixed price.

~~ii.~~b.

Rehabilitation Services provided to customers, during the ~~six~~three months ended ~~June 30, 2017,~~March 31, 2018, these services were provided to customers at our Seastone of Delray business acquired on February 14, 2017. The Rehabilitation services provided by our Canadian Rehab Center for the ~~six~~three months ended ~~June 30,~~March 31, 2017 ~~and 2016~~ are reported under discontinued operations and have not been reported as part of the Segment Information.

The segment operating results of the reportable segments are disclosed as follows:

	Three months ended June 30, 2018
	Rental Operations			In-Patient services			Total

Revenues	$	83,031		$	(16,337	)	$	66,694
Operating expenses		45,102			750,366			795,468

Operating income (loss)		37,929			(766,703	)		(728,774	)

Other (expense) income
Interest income		—			(49	)		(49	)
Interest expense		(42,845	)		(133,742	)		(176,587	)
Amortization of debt discount		—			(1,339,885	)		(1,339,885	)
Loss on change in fair value of derivative liability		—			(796,795	)		(796,795	)
Foreign exchange movements		18,345			92,283			110,628
Net income (loss) before taxation from continuing operations		13,429			(2,944,891	)		(2,931,462	)
Taxation		—			—			—
Net income (loss) from continuing operations	$	13,429		$	(2,944,891	)	$	(2,931,462	)

	Three months ended June 30, 2017
	Rental Operations			In-Patient services			Total

Revenues	$	78,088		$	324,132		$	402,220
Operating expenses		54,875			316,782			371,657

Operating income		23,213			7,350			30,563

Other (expense) income
Other income		—			1,000			1,000
Other expense		—			(19,265	)		(19,265	)
Interest expense		(61,535	)		(32,068	)		(93,603	)
Amortization of debt discount		—			(241,666	)		(241,666	)
Loss on change in fair value of derivative liability		—			167,580			167,580
Foreign exchange movements		—			(6,438	)		(6,438	)
Net loss before taxation from continuing operations		(38,322	)		(123,507	)		(161,829	)
Taxation		—			—			—
Net loss from continuing operations	$	(38,322	)	$	(123,507	)	$	(161,829	)

ETHEMA HEALTH CORPORATION
~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED ~~CONSOLDATED~~CONSOLIDATED FINANCIAL STATEMENTS

~~17.~~15.

Segment information (continued)

The segment operating results of the reportable segments are disclosed as follows:

Three months ended June 30, 2017
Rental
Operations

In-Patient
services

Total

Revenue $ 78,088 $ 324,132 $ 402,220
Operating expenditure 106,317 316,782 423,099

Operating (loss) income (28,229 ) 7,350 (20,879 )

Other income (expense)
Other income — 63,960 63,960
Other expense 1,146,600 (19,265 ) 1,127,335
Interest income — — —
Interest expense (61,535 ) (32,068 ) (93,603 )
Amortization of debt discount — (241,666 ) (241,666 )
Derivative liability movement — 167,580 167,580
Foreign exchange movements — (6,438 ) (6,438 )
Net income (loss) before taxation 1,056,836 (60,547 ) 996,289
Taxation — — —
Net income (loss) $ 1,056,036 $ (60,547 ) $ 996,289

Six months ended June 30, 2017
Rental In-Patient
Operations services Total

Revenue $ 120,125 $ 604,605 $ 724,730
Operating expenditure 135,865 1,236,882 1,372,747

Operating loss (15,740 ) (632,277 ) (648,017 )

Other (expense) income
Other income — 568,309 568,309
Other expense (373,274 ) (19,265 ) (392,539 )
Interest income — 32,074 32,074
Interest expense (98,188 ) (58,432 ) (156,620 )
Amortization of debt discount — (429,325 ) (429,325 )
Derivative liability movement — 94,532 94,532
Foreign exchange movements — (164,347 ) (164,347 )
Net loss before taxation (487,202 ) (608,731 ) (1,095,933 )
Taxation — — —
Net loss $ (487,202 ) $ (608,731 ) $ (1,095,933 )

	Six months ended June 30, 2018
	Rental Operations			In-Patient services			Total

Revenues	$	167,143		$	12,853		$	179,996
Operating expenses		76,504			1,250,811			1,327,315

Operating income (loss)		90,639			(1,237,958	)		(1,147,319	)

Other (expense) income
Interest expense		(92,895	)		(254,143	)		(347,038	)
Amortization of debt discount		—			(2,092,834	)		(2,092,834	)
Loss on change in fair value of derivative liability		—			(808,951	)		(808,951	)
Foreign exchange movements		47,555			200,969			248,524
Net income (loss) before taxation from continuing operations		45,299			(4,192,917	)		(4,147,618	)
Taxation		—			—			—
Net income (loss) from continuing operations	$	45,299		$	(4,192,917	)	$	(4,147,618	)

	Six months ended June 30, 2017
	Rental Operations			In-Patient services			Total

Revenues	$	120,125		$	604,605		$	724,730
Operating expenses		60,953			1,236,882			1,297,835

Operating income (loss)		59,172			(632,277	)		(573,105	)

Other (expense) income
Other income		—			473,369			473,369
Other expense		(5,074,689	)		(19,265	)		(5,093,954	)
Interest income		—			32,074			32,074
Interest expense		(98,188	)		(58,432	)		(156,620	)
Amortization of debt discount		—			(429,325	)		(429,325	)
Loss on change in fair value of derivative liability		—			94,532			94,532
Foreign exchange movements		—			(164,347	)		(164,347	)
Net loss before taxation from continuing operations		(5,113,705	)		(703,671	)		(5,817,376	)
Taxation		—			—			—
Net loss from continuing operations	$	(5,113,705	)	$	(703,671	)	$	(5,817,376	)

ETHEMA HEALTH CORPORATION
~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS

~~17.~~15.

Segment information (continued)

The operating assets and liabilities of the reportable segments at June 30, 2018, are as follows:

	Rental Operations				In-Patient services			Total			Rental Operations			In-Patient services			Total

Purchase of fixed assets	$		—		$	8,878		$	8,878		$	30,860		$	10,750		$	41,610
Assets
Current assets		4,795				593,202			597,997			(11,055	)		480,068			469,013
Non-current assets		7,604,277				7,130,340			14,734,617			3,002,860			9,279,083			12,281,943
Liabilities
Current liabilities		(5,389,542		)		(1,557,380	)		(6,946,922	)		(2,177,320	)		(8,400,534	)		(10,577,854	)
Non-current liabilities		—				(2,989,937	)		(2,989,937	)		(4,016,836	)		(2,913,724)			(6,930,560	)
Intercompany balances		150,644				(150,644	)		—			(771,823	)		771,823			—
Net asset position	$	2,370,174			$	3,025,581		$	5,395,755
Net (liability) asset position											$	(3,974,174	)	$	(783,284	)	$	(4,757,458	)

~~18.~~16.

Net ~~income (loss)~~loss (income) per common share

~~For the three months ended June 30, 2017 the computation of basic and diluted earnings per share is as follows:~~

Number of Per share
Amount shares amount

Basic earnings per share
Net income per share from continuing operations $ 996,289 108,772,921 $ 0.01
Net loss per share from discontinued operations (141,177 ) 108,772,921 $ (0.00 )

Basic income per share 855,112 108,772,921 0.01

Effect of dilutive securities

Warrants 11,135,387
Options

Diluted earnings per share
Net loss per share from continuing operations 996,289 119,908,308 0.01
Net income per share from discontinued operations (141,177 ) 119,908,308 (0.00 )

Diluted income per share $ 855,112 119,908,308 $ 0.01

For the three and six months ended June 30, ~~2016~~2018, the following options, warrants and convertible notes were excluded from the computation of ~~basic and~~ diluted ~~earnings~~net loss per share is as ~~follows:~~

the results would have been anti-dilutive.

Amount Number of
shares Per share
amount

Basic earnings per share
Net loss per share from continuing operations $ (197,340 ) 47,991,602 $ —
Net income per share from discontinued operations 266,260 47,991,602 $ —

Basic income per share 68,920 47,991,602 —

Effect of dilutive securities

Warrants — 1,200,950
Options — —

Diluted earnings per share
Net loss per share from continuing operations (197,340 ) 49,192,552 —
Net income per share from discontinued operations 266,260 49,192,552 —
Diluted income per share
$ 68,920 49,192,552 $ —

	Three and six months ended June 30, 2018		Three months ended June 30, 2017

Stock options		480,000		480,000
Warrants to purchase shares of common stock		82,587,408		22,004,075
Convertible notes		43,916,472		3,101,093
		126,983,880		25,585,168

ETHEMA HEALTH CORPORATION
~~(formerly Greenstone Healthcare Corporation)~~

NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS

~~18.~~16.

Net ~~income (loss)~~loss (income) per common share (continued)

For the six months ended June 30, 2017 the computation of basic and diluted earnings per share is as follows:

									Amount			Number of shares		Per share amount
	Amount			Number of shares		Per share amount
Basic earnings per share
Net loss per share from continuing operations	$	(1,095,933	)		93,821,728	$	(0.01	)	$	(5,817,376	)		93,838,855	$	(0.06	)
Net income per share from discontinued operations		7,412,643			93,821,728	$	0.08			7,412,643			93,838,855		0.08

Basic income per share		6,316,710			93,821,728		0.07			1,595,267			93,838,855		0.02

Effect of dilutive securities

Warrants		—			11,135,387					—			11,135,388
Options		—			—
Convertible debt										—			—

Diluted earnings per share
Net loss per share from continuing operations		(1,095,933	)		104,957,115		(0.01	)		(5,817,376	)		104,974,243		(0.06	)
Net income per share from discontinued operations		7,412,643			104,957,115		0.07			7,412,643			104,974,243		0.07

Diluted income per share	$	6,316,710			104,957,115	$	0.06
									$	1,595,267			104,974,243	$	0.01

~~For the six months ended June 30, 2016 the computation of basic and diluted earnings per share is as follows:~~

Amount Number of
shares Per share
amount

Basic earnings per share
Net loss per share from continuing operations $ (231,365 ) 47,865,229 $ —
Net income per share from discontinued operations 443,779 47,865,229 $ —

Basic income per share 212,414 47,865,229 —

Effect of dilutive securities

Warrants — 1,200,950
Options — —

Diluted earnings per share
Net loss per share from continuing operations (231,365 ) 49,066,179 —
Net income per share from discontinued operations 443,779 49,066,179 —

Diluted income per share
$ 212,414 49,066,179 $ —

~~ETHEMA HEALTH CORPORATION~~
~~(formerly Greenstone Healthcare Corporation)~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS~~

~~19.~~17.

Commitments and contingencies

Contingency related to outstanding penalties

The Company has provided for potential US penalties of $250,000 due to noncompliance with the filing of certain required returns. The actual liability may be higher due to interest and penalties assessed by these taxing authorities.

~~Other~~Operating leases

The Company has assumed operating leases for certain vehicles and office equipment.

On May 23, 2018, the Company entered into a Lease Agreement pursuant to which it leased from the AREP 5400 East Avenue LLP (the “Landlord”), the premises located at 5400, 5402, and 5410 East Avenue, West Palm Beach, Florida (the “Property”). The Lease has an initial term of 10 years and provides for 2 additional 10 year extensions. The Company has the option to purchase the property for proceeds of $17,250,000 by August 31, 2018, plus any landlord funded improvements. The option to purchase increase by $750,000 per calendar month commencing on August 31, 2018. The initial base rental is $146,337 per month, plus any taxes imposed on the premises or the base rental.

The future commitment of these operating leases and the property lease are as follows:

	Amount

Within 1 year	$	881,012
1 to 2 years		1,802,872
2 - 3 years		1,882,422
3 - 4 years		1,962,242
5 years and thereafter		12,165,898
Total	$	18,694,445

ETHEMA HEALTH CORPORATION

NOTES TO THE UNAUDITED CONDENSED CONSOLDATED FINANCIAL STATEMENTS

17.

Commitments and contingencies (continued)

Mortgage bonds

The company has two mortgage loans as disclosed in note 11 above. The future commitments under these loans are as follows:

	Amount

Within 1 year	$	3,071,861
1 to 2 years		105,087
2 - 3 years		109,547
3 - 4 years		114,196
5 years and thereafter		3,663,486
Total	$	7,066,177

Other

The Company has principal and interest payment commitments under the Convertible notes disclosed under Note 10 above. Conversion of these notes are at the option of the investor, if not converted these notes may need to be repaid.

From time to time, the Company and its subsidiaries enter into legal disputes in the ordinary course of business. The Company believes there are no material legal or administrative matters pending that are likely to have, individually or in the aggregate, a material adverse effect on its business or results of operations.

~~20.~~18.

Income taxes

The Company is not current in its tax filings for tax years 2011 to 2017 as of June 30, ~~2017.~~2018.

~~21.~~19.

Subsequent events

On July ~~19, 2017, Cranberry Cove Holdings, LTD. (“CCH”)~~31, 2018, the Company, entered into a Securities Purchase Agreement with Power Up Lending Group Ltd., pursuant to which the Company issued to the Purchaser a ~~wholly owned subsidiary closed on a loan agreement~~Convertible Promissory Note in the aggregate principal amount of ~~CDN$5,500,000.~~$153,000. The ~~loan is secured by~~Note has a ~~first mortgage on the premises owned by CCH located at3571 Muskoka Road 169, Bala, Ontario (the “Property”). The Loan~~maturity date of May 15, 2019 and bears interest at the ~~fixed~~at the rate of ~~4.2% with a 5 year primary term~~nine percent per annum from the date on which the Note is issued until the same becomes due and ~~a 25 year amortization.~~payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company has ~~guaranteed~~ the ~~Loan~~right to prepay the Note in terms of agreement. The outstanding principal amount of the Note is convertible at any time and from time to time at the election of the Purchaser during the period beginning on the date that is 180 days following the issue date into shares of the Company’s ~~chief executive officer and controlling shareholder also has personally guaranteed the Loan. CCH and the Company have granted the Lender~~common stock at a ~~general security interest in its assets~~conversion price equal to ~~secure repayment~~61% of the ~~Loan.~~average lowest closing bid price of the Company’s common stock for the ten trading days prior to conversion.

~~On August 3, 2017, the Company entered into an agreement to acquire a property at 45 West 17~~^th Street, Riviera Beach, Florida, including the completion of the construction of a 20 bed in-patient detoxification facility and the licensing approvals to operate a detoxification facility for a total purchase consideration of $3,000,000, of which $1,000,000 of the financing is to be provided by the seller, bearing interest at 7% per annum for a 22 month period. This agreement is subject to a successful closing on or before November 17, 2017, after which date it may be cancelled by either party.

During August 2017, we repaid a total of $145,192 of the Series L convertible notes outstanding, the remaining note holders have an outstanding principal of $374,777 and has sent the Company notices of conversion at $0.03 per share.

Other than disclosed above, the Company has evaluated subsequent events through the date of the unaudited condensed consolidated financial statements were available to be issued and has concluded that no such events or transactions took place that would require disclosure herein.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our consolidated financial statements and the notes presented herein and the consolidated financial statements and the other information set forth in our Annual Report on Form ~~10-K~~10- K/A for the year ended December 31, ~~2016~~2017 filed with the Securities and Exchange Commission on April ~~17, 2017.~~18, 2018. In addition to historical information, the followingManagement’sDiscussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the Securities and Exchange Commission.

Our 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.Webelieve 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 financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our 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 financial statements and accompanying notes to the financial statements for the year ended December 31, ~~2016.~~2017.

Plan of Operation

During the next twelve months, the Company plans to continue and expand its operations as a provider of addiction and aftercare treatment services through marketing efforts undertaken to expand its patient base in Florida. The Company plans to focus on the growth of its addiction and aftercare treatment units by seeking out potential acquisitions.

Results of Operations

For the three months ended June 30, ~~2017~~2018 and the three months ended June 30, ~~2016.~~2017.

~~Revenue~~

Revenues was ~~$402,220~~$66,694 and $0$402,220 for the three months ended June 30, 2018 and 2017, ~~and 2016,~~ respectively, ~~an increase~~a decrease of ~~$402,220.~~$335,526 or 83.4%. The decrease is primarily due to the Company ~~disposed~~adjusting its basis of ~~its Canadian Rehab Clinic~~providing against gross revenues on ~~February 14, 2017 and simultaneously acquired~~ the ~~operations of Seastone of Delray.~~limited experience is has had with dealing with US Health care providers. Revenue includes rental income of $78,088 earned by our recently acquired Cranberry Cove subsidiary. The revenues earned for patient treatments from the Canadian Rehab Clinic have been reclassified to discontinued operations. There is no meaningful comparative data to compare our revenues.

~~Operating Expenses~~

~~Operating expenses was $423,099~~$83,031 and ~~$171,515~~$78,088 for the three months ended June 30, 2018 and 2017, ~~and 2016, respectively, an~~the increase is due to the increase in base rent charged to the tenant, in terms of the lease agreement.Due to the increase of ~~$251,584. The operations of~~ the ~~Canadian Rehab Clinic been reclassified to discontinued operations as~~revenue reserve, based on claims experience, the ~~business unit was sold effective February 14, 2017.~~

The operating expenses incurred during the prior three month period are minimal and consisted primarily of Investor relations fees of $50,000, management fees of $46,577 and professional fees of $53,545.

~~The operating expenses in the current three month period include the following:~~

●

~~General and administrative expenses of $57,905, primarily operating costs incurred by our recently acquired Seastone of Delray business.~~

●

~~Professional fees of $66,403, primarily legal fees related to the recent corporate restructure~~

●

~~Salaries and wages of $173,451, primarily related to the Seastone acquisition~~

●

~~Depreciation of $125,340, related to the assets of our recently acquired subsidiary Cranberry Cove Holdings and of the acquisition of the Seastone business on February 14, 2017.~~

~~Operating loss~~

~~Operating loss amounted to $20,879 and $171,515~~revenues for the three months ended June 30, ~~2017 and 2016, respectively, a decrease of $150,636, primarily due to our Seastone operations which has been profitable during the current quarter, offset by corporate operating expenses.~~2018 was negative.

~~Other income~~ Operating Expenses

~~Other income~~

Operating expenses was ~~$63,960~~$795,468 and ~~$12,508~~$371,657 for the three months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, an increase of ~~$51,452 or 411.4%~~$423,811or 114.0%. ~~Other income in~~The increase is primarily due to the current period represents expected additional earnout payments on the disposal of the Canadian Rehab Clinic in February 2017. Other income in the prior period, consisted of the sale of mineral rights owned by the holding company prior to its transformation to a rehabilitation enter.following:

An increase in General and administrative expenses of $270,589, which includes rental and operating expense of $172,748 relating to the property lease agreement entered into on May 23, 2018. An increase in stock based compensation of $102,150 relating to commitment fees issued to certain convertible note holders, offset by a reduction in several other immaterial expenses.

An increase in management fee expense of $45,565, in the prior year, no management fee expense was charged.

An increase in professional fees of $78,685, primarily due to the increase in legal activity related to the potential acquisition of the premises located at 5400, 5402, and 5410 East Avenue, West Palm Beach, Florida.

An increase in salaries and wages of $34,829 due the increase in headcount related to the operations located at 5400, 5402, and 5410 East Avenue, West Palm Beach, Florida.

~~Other expense~~

~~Other expense~~Operating loss

Operating loss was ~~$1,127,335~~$728,774 and $0a profit of $30,563 for the three months ended June 30, 2018 and 2017, respectively, an increase in loss of ~~$1,127,335 or 100%. Other expense represents; i) an adjustment of $1,146,600~~$759,337, primarily due to the ~~value of~~reduction in revenue based on the ~~Cranberry Cove property acquired~~provisions established against collectability and the ~~corresponding reduction in the amount of the excess purchase consideration paid~~increased operating expenses as additional compensation to our controlling shareholder, based on a property valuation dated June 2017; and ii) a loss of $19,265 realized on disposing of a portion of the mortgage owned by the Company in CCH, at a discount to face value.

discussed above.

~~Interest expense~~ Other income

~~Interest expense~~Other income was ~~$93,603~~$0 and ~~$7,110~~$1,000 for the three months ended June 30, 2018 and 2017, respectively.

Other expense

Other expense was $0 and ~~2016,~~$19,265 for the three months ended June 30, 2018 and 2017, respectively, a decrease of $19,265 or 100.0%, the charge in the prior period represented a loss on a portion of a mortgage receivable sold to a third party.

Interest expense

Interest expense was $176,587 and $93,603 for the three months ended June 30, 2018 and 2017, respectively, an increase of ~~$86,493,~~$82,984 or 88.7%, the increase is primarily due to interest due on the new mortgage loans which replaced the mortgage loans assumed by the Company when it acquired Cranberry Cove Holdings, Ltd and on the purchase money mortgage loan entered into to acquire the properties associated with Seastone of ~~Delray.~~Delray, also includes additional interest expense incurred on the convertible notes taken out during the current period.

Debt Discount

Debt discount was ~~$241,666~~$1,339,885 and ~~$33,262~~$241,666 for the three months endedJune 30, ~~2017~~2018 and ~~2016,~~2017, respectively, an increase of ~~$208,404~~$1,098,219 or ~~100%~~454.4% and represents the amortization of the value of the convertible notes and warrants issued in terms of the convertible loan agreements entered into during ~~December 2016 and January~~ 2017 and the ~~amortization~~current period, The Company raised a total of ~~the fair value~~$1,950,000 of ~~the beneficial conversion feature of~~net proceeds from convertible notes ~~issued to note holders~~ during ~~February 2017 and June 2017,~~ the ~~fair value of the warrants and the beneficial conversion feature are amortized over a six to nine month period, the term of the underlying convertible securities.~~current period.

Derivative liability movement

Derivative liability movement was ~~$167,580~~$(796,795) and $0$167,580 for the three months ended June 30, 2018 and 2017, ~~and 2016,~~ respectively, ~~an increase~~a net change of ~~$167,580 or 100%.~~$964,375. This movement represents the mark to market of the derivative liabilities arising on the beneficial conversion feature of the variable priced notes issued to note holders ~~in February 2017~~during the current period and ~~June 2017. The February note was prepaid in May 2017 and an additional note was issued in June 2017. The $33,262, incurred in~~ the prior ~~period represents the amortization of the value of warrants and original issue discount attached to a short-term loan.~~year.

Foreign exchange movements

Foreign exchange movements were ~~$(6,438)~~$110,628 and ~~$2,039~~$(6,438) for the three months ended June 30, 2018 and 2017, respectively, and ~~2016, respectively,~~ represents ~~the realized exchange~~predominantly unrealized gains and losses on intercompany liabilities and ~~gains, respectively, on monetary~~ assets ~~and liabilities settled during each period as well as mark to market adjustments on monetary assets and liabilities reflected on the balance sheet and denominated in Canadian Dollars.~~of our various subsidiaries.

Net ~~(loss)~~loss from discontinued operations

The net income from discontinued operations of $0 and $141,177, represents professional fees, foreign currency losses and penalty expenses on our discontinued operation which was disposed of on February 14, 2017.

~~The net (loss) income from discontinued operations~~

Net loss

Net loss was ~~$(141,177)~~$(2,931,462) and ~~$266,260,~~$(303,006) for the three months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, an increase of $2,628,456, primarily due to the increase in ~~loss~~operating expenses, the net movement in derivative liabilities and the amortization of $407,437, or 153.0%. The current period loss is made up of professional fees, penalties and a foreign currency loss realized on the remaining assets in the discontinued operation. The discontinued operation has significant receivables from the Group and from the disposal of the rehab clinic, the Canadian Dollar has strengthened against the US Dollardebt discount during the current period, ~~giving rise to the foreign currency loss.~~discussed above.

~~The prior income from discontinued operations represents the trading operations of the Canadian Rehab clinic.~~

~~Net income~~

Net income was $855,112 and $68,920 for the three months ended June 30, 2017 and 2016, respectively, an increase of $786,192 or 1,140.7%, primarily due to the $1,146,600 adjustment of the value of the Cranberry Cove property acquired and the corresponding reduction in the amount of the excess purchase consideration paid as additional compensation to our controlling shareholder, the mark-to- market movement in the derivative liability, offset by interest expense and debt discount incurred during the current period.

For the six months ended June 30, ~~2017~~2018 and the six months ended June 30, ~~2016.~~2017.

Revenue

Revenues was ~~$724,730~~$179,996 and $0$724,730 for the six months ended June 30, 2018 and 2017, ~~and 2016,~~ respectively, ~~an increase~~a decrease of ~~$724,730.~~$544,734 or 75.2%. The decrease is primarily due to the Company ~~disposed~~adjusting its basis of ~~its Canadian Rehab Clinic~~providing against gross revenues on ~~February 14, 2017 and simultaneously acquired~~ the ~~operations of Seastone of Delray.~~limited experience is has had with dealing with US Health care providers. Revenue includes rental income of $120,125 earned by our recently acquired Cranberry Cove subsidiary. The revenues earned for patient treatments from the Canadian Rehab Clinic have been reclassified to discontinued operations. There is no meaningful comparative data to compare our revenues.

~~Operating Expenses~~

~~Operating expenses was $1,372,747~~$167,143 and ~~$206,242~~$120,125 for the six months ended June 30, 2018 and 2017, the increase is due to the increase in base rental and ~~2016, respectively, an increase of $1,166,505. The operations of~~ the ~~Canadian Rehab Clinic been reclassified to discontinued operations as the business unit was sold effective February 14, 2017.~~

~~The operating expenses incurred during the prior six month period consisted primarily of Investor relations fees of $57,100, management fees of $46,577~~lease agreement being in operation for only four and ~~professional fees of $75,045.~~

~~The operating expenses~~a half months in the ~~current six month period include the following:~~

●

General and administrative expenses of $408,442, primarily management fees of $199,219 charged by our CEO and operating costs incurred by our recently acquired Seastone of Delray business, which are individually insignificant to discuss separately;

●

~~Professional fees of $399,204, primarily legal fees related to the recent corporate restructure;~~

●

~~Salaries and wages of $382,695, primarily related to the Seastone acquisition~~

●

~~Depreciation of $182,406 for the assets of our recently acquired subsidiary Cranberry Cove Holdings and of the acquisition of the Seastone business on February 14, 2017.~~

~~Operating loss~~previous period.

Operating ~~loss amounted to $648,017~~Expenses

Operating expenses were $1,327,315 and ~~$206,242~~$1,297,835 for the six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, an increase of ~~$441,775~~$29,480 or ~~214.2%,~~2.3%. The increase is primarily due to the ~~additional professional fees incurred on the corporate restructure, management fees paid and depreciation expense during the current period.~~following:

An increase in General and administrative expenses of $1,123,785, which includes rental and operating expense of $172,748 relating to the property lease agreement entered into on May 23, 2018, an increase in stock based compensation of $131,700 relating to commitment fees issued to certain convertible note holders in the current period, offset by a reduction in legal and professional fees of $254,116 related to the disposal of the Canadian rehab clinic in the prior period.

An increase in management fee expense of $92,098, in the prior period, no management fee expense was charged.

A decrease in professional fees of $216,106, related to the disposal of the Canadian rehab clinic in the prior period.

An increase in salaries and wages of $28,962 due the increase in headcount related to the operations located at 5400, 5402, and 5410 East Avenue, West Palm Beach, Florida.

~~Other income~~

~~Other income~~Operating loss

Operating loss was ~~$568,309~~$1,147,319 and ~~$12,508~~$573,105 for the six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, an increase in loss of ~~$555,801. Other income~~$574,214, primarily due to the reduction in ~~the current period consists of the reversal of a provision raised against a receivable~~revenue based on the ~~disposal~~provisions established against collectability of ~~the Endoscopy Clinic in prior years amounting to $472,368, the receivable was assigned to Leon Developments~~receivables as ~~part of the purchase consideration paid on the acquisition of Cranberry Cove and an accrual of $94,940 relating to expected proceeds on the earnout provision of the Canadian Rehab Clinic disposal.~~discussed above.

Other ~~expense~~ income

Other ~~expense~~income was ~~$392,539~~$0 and $0$473,369 for the six months ended June 30, 2018 and 2017, respectively. In the prior period, a provision raised against a receivable from the Endoscopy clinic was reversed upon the assignment of the receivable to Leon Developments.

Other expense

Other expense was $0 and ~~2016,~~$5,093,954 for the six months ended June 30, 2018 and 2017, respectively, ~~an increase~~a decrease of ~~$392,539~~$5,093,954 or ~~100%~~100.0%. Other expense consists ~~of; i) $373,274~~ of the excess of the purchase price paid over the ~~fair market~~carry over basis value of the assets of Cranberry Cove Holdings Ltd. This expenditure is classified as once-off compensation expense to our CEO who owns 100% of Leon Developments, the counterparty to the purchase of the Cranberry Cove ~~Subsidiary; and ii) $19,265 represents the loss realized on disposing of a portion of the mortgage owned by the Company in CCH, at a discount to face value.~~Subsidiary

Interest ~~income~~

Interest income of $32,074 consists primarily of interest earned on the receivable from the sale of our Endoscopy Clinic in prior years. The interest due on this receivable was reversed in prior periods due to uncertainty as to the collectability of this amount. The Receivable was assigned to Leon Developments as part of the purchase consideration for Cranberry Cove Holdings Ltd.

~~Interest~~ expense

Interest expense was ~~$156,620~~$347,038 and ~~$7,103~~$156,620 for the six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, an increase of ~~$149,517,~~$190,418 or 121.6%, the increase is primarily due to interest due on the new mortgage loans which replaced the mortgage loans assumed by the Company when it acquired Cranberry Cove Holdings, Ltd and on the purchase money mortgage loan entered into to acquire the properties associated with Seastone of ~~Delray.~~Delray, also includes additional interest expense incurred on the convertible notes taken out during the current period.

Debt Discount

Debt discount was ~~$429,325~~$2,092,834 and ~~$33,262~~$429,325 for thesixmonths endedJune 30, ~~2017~~2018 and ~~2016,~~2017, respectively, an increase of ~~$396,063. The charge during the current period~~$1,663,509 or 387.5% and represents the amortization of the value of the convertible notes and warrants issued in terms of the convertible loan agreements entered into during ~~December 2016 and January~~ 2017 and the ~~amortization~~current period, The Company raised a total of ~~the fair value~~$2,550,000 of ~~the beneficial conversion feature of~~net proceeds from convertible notes ~~issued to note holders~~ during ~~February 2017 and June 2017,~~ the fair value of the warrants and the beneficial conversion feature are amortized over a six to nine month period, the term of the underlying convertible securities. The $33,262, incurred in the prior period represents the amortization of the value of warrant and original issue discount attached to a short-term loan.current period.

Derivative liability movement

Derivative liability movement was ~~$94,532~~$(808,951) and $0$94,532 for the six months ended June 30, 2018 and 2017, ~~and 2016,~~ respectively, ~~an increase~~a net change of ~~$94,532 or 100%.~~$903,483. This movement represents the mark to market of the derivative liabilities arising on the beneficial conversion feature of the variable priced notes issued to note holders ~~in February 2017~~during the current period and ~~June 2017. The February note was prepaid in May 2017 and an additional note was issued in June 2017.~~the prior year.

Foreign exchange movements

Foreign exchange movements were ~~$(164,347)~~$248,524 and ~~$2,734~~$(164,347) for the six months ended June 30, 2018 and 2017, respectively, and ~~2016, respectively,~~ represents ~~the realized exchange~~predominantly unrealized gains and losses on intercompany liabilities and ~~gains, respectively, on~~ monetary assets ~~and liabilities settled during each period as well as mark to market adjustments on monetary assets and reflected on the balance sheet and denominated in Canadian Dollars.~~of our various subsidiaries.

Net ~~income~~loss from discontinued operations

The net income from discontinued operations ~~was~~of $0 and $7,412,643 ~~and $443,779,~~ for the six months ended June 30, 2018 and 2017, ~~and 2016,~~ respectively ~~an increase~~consists primarily of ~~$6,968,864.~~the $7,494,828 gain made on the sale of the Canadian Rehab Center in the prior period, offset by the net operating loss incurred in the prior period of $82,185.

~~The current period~~Net (loss) income ~~is primarily made up as follows:~~

●

~~Operating loss of $172,896, the operations were disposed of on February 14, 2017, and the loss includes expenditure incurred to dispose of the operation.~~

●

Profit on sale of the business of the Canadian Rehab Clinic of $7,494,828 represents the excess of the proceeds received over the assets disposed of as reflected in note 1 and 3 to the unaudited condensed consolidated financial statements.

●

Foreign exchange gain of $91,704 which represents the realized gains on the monetary assets and liabilities settled during each period as well as mark to market adjustments on monetary assets and liabilities reflected on the balance sheet and denominated in Canadian Dollars.

The prior period income represents the operating income of the discontinued Canadian Rehab Clinic of $474,759, other income of $21,042 on insurance proceeds received for fire damage, interest expense of $76,743, primarily related to outstanding tax liabilities which have now been settled and net foreign exchange gains of $24,721.

~~Net income~~

Net (loss) income was ~~$6,316,710~~$(4,147,618) and ~~$212,414~~a net income $1,595,267 for the six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, an increase in loss of ~~$6,104,296,~~$5,742,885, primarily due to the ~~profit~~gain realized on the ~~sale~~disposal of the Canadian Rehab ~~clinic of $7,494,828,~~Center in the prior period, offset by the ~~compensation charge of $373,274 relating~~increase in other expenses related to the ~~acquisition~~excess purchase price paid over the assets under common control of ~~Cranberry cove and~~our CEO, in the prior period, offset by the increase in the amortization of ~~$429,325 of~~ debt discount ~~during~~and derivative liability movements in the current period.

Liquidity and Capital Resources

The following table summarizes working capital as of June 30, ~~2017~~2018 and December 31, ~~2016.~~2017.

	June 30, 2017			December 31, 2016			Increase (decrease)
											June 30, 2018			December 31, 2018			Change
Current Assets	$	597,997		$	275,575		$	322,422		$	469,013		$	334,619		$	134,394
Current Liabilities		(6,946,922	)		(3,637,111	)		(3,309,811	)		(10,577,854	)		(6,860,178	)		(3,717,676	)
Working capital Deficit	$	(6,348,925	)	$	(3,361,536	)	$	(2,987,389	)	$	(10,108,841	)	$	(6,525,559		$	(3,583,282	)

The Company ~~realized proceeds~~borrowed an additional $2,550,000 and repaid $433,000 of ~~CDN$8,500,000 (US$6,479,400) from~~this during the disposal of its Canadian Rehab Clinic in February 2017. These proceeds were used to settle outstanding tax liabilities of CDN$3,429,105 (US$2,621,208) and to purchase the property and assets associated with the Seastone of Delray operations on February 14, 2017 amounting to US$2,960,000, the remaining funds were usedcurrent period, for general working capital purposes and to ~~fund~~pay deposits on real estate, the ~~restructuring transactions.~~

~~The Company borrowed an additional $294,500~~overall increase in ~~terms~~convertible loans also includes the amortization of ~~convertible short-term notes during the period January~~debt discount amounting to ~~June 2017, of which $130,000 was paid~~$2,093,000 during the current period. A further $111,554 was realized on the sale of portion of the mortgage owned by the Holding Company on the Cranberry Cove properties. The proceeds realized were used to repay $85,613 of the mortgage liability and the balance for general working capital purposes. Subsequent to June 30, 2017, the Company raised an additional CDN$5,500,000 mortgage to repay the current Cranberry Cover mortgages and to fund working capital and reduce other debt. Weestimate that the Company will require an additional ~~$1,000,000~~$3,000,000 for working capital purposes. The company may be required to raise additional 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 and remains unchanged from the prioryear.

Recently Issued Accounting Pronouncements

The recent Accounting Pronouncements are fully disclosed in note 2 to our unaudited condensed consolidated financial statements.

Management does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have an effect on the accompanying unaudited condensed consolidated financial statements.

Off balance sheet arrangements

We do not maintain off-balance sheet arrangements nor do we participate in non-exchange traded contracts requiring fair value accounting treatment.

Inflation

The effect of inflation on our revenue and operating results was not significant.

Climate Change

We believe that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

The Company has adopted and maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Quarterly Report on Form ~~10-Q/A,~~10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission. The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. As required under Exchange Act Rule 13a-15, the Company’s management, including the Principal Executive Officer and the Principal Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that due to a lack of segregation of duties the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in theSEC’srules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Subject to receipt of additional financing or revenue generated from operations, the Company intends to retain additional individuals to remedy the ineffective controls.

Changes in Internal Control

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our fiscal quarter ended June 30, ~~2017~~2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings.

WeA former employee has filed suit against the Company asserting wrongful dismissal, claiming damages between CDN$43,500 and CDN$50,000 this matter was settled for CDN$14,070, including applicable legal fees, the settlement remains unpaid as the plaintiff has not signed the minutes of settlement.

Other than disclosed above, 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~~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 1A. Risk Factors.

Not applicable because we are a smaller reporting company.

Item 2. Unregistered sales of equity securities and use of proceeds

In the securities transactions described below, shares were issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as amended, afforded the Company under Section 4(a)(2) promulgated thereunder due to the fact that the issuance did not involve a public offering because of the insubstantial number of persons involved in each offering, the size of the offering, manner of the offering and number of shares offered. Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(a) (2) of the Securities Act for these transactions.

~~The~~On March 29, 2018, the Company issued ~~1,200,000 returnable~~165,000 shares toof common stock in connection with the closing of a ~~note holder as~~financing of a ~~commitment fee should the note not be repaid prior to maturity. These shares are not recorded as issued until such time as the commitment fee is probable or likely to occur.~~Senior Secured Convertible Note. The ~~note was repaid on May 26, 2017 and the~~ shares were ~~returned to the Company.~~valued at $11,550, or $0.07 per share.

On ~~February 14, 2017,~~April 17, 2018, the Company issued ~~60,000,000~~605,000 shares ~~to Leon Developments as purchase consideration for~~of common stock in connection with the ~~acquisition~~closing of ~~its wholly owned subsidiary Cranberry Cove Holdings Ltd.~~

~~On May 30, 2017, the Company issued 100,000 common~~a financing of a Senior Secured Convertible Note. The shares ~~to a vendor for services rendered.~~were valued at $39,450.

Item 3. Defaults upon senior securities

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits

Exhibit No.

Description

	~~Exhibit No.~~	~~Description~~

	31.1	Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002 *


	32.1	Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 *

101.INS XBRL Instance *

101.SCH XBRL Taxonomy Extension Schema *

101.CAL XBRL Taxonomy Extension Calculation *

101.DEF Taxonomy Extension Definition *

101.LAB Taxonomy Extension Labels *

101.PRE Taxonomy Extension Presentation *

101.

PRE Taxonomy Extension Presentation *

* filed herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ETHEMA HEALTH CORPORATION

Date: ~~September 15, 2017~~May 20, 2018

By:/s/ Shawn E. Leon Name: Shawn E. Leon

Title: Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Position	Date

/s/Shawn E. Leon	Chief Executive Officer (Principal Executive Officer),	~~September 15, 2017~~ May 20, 2018
Shawn Leon	Chief Financial Officer (Principal Financial Officer), President and Director

/s/ John O’Bireck	Director	~~September 15, 2017~~May 20, 2018
John O’Bireck

/s/ Gerald T. Miller	Director	~~September 15, 2017~~May 20, 2018
Gerald T. Miller

Large accelerated ~~filer~~	☐filer[ ]	Accelerated filer	☐[ ]
Non-accelerated filer	☐ ~~(Do~~ [ ](Do not check if a smaller reporting company)	Smaller reporting company	☒[X]
		Emerging growth company	☒[X]

	~~Page~~	PAGE
Condensed ~~Consolidated~~consolidated Balance Sheets as of June 30, ~~2017~~2018 (unaudited) and December 31, ~~2016~~2017			1
Unaudited Condensed Consolidated Statements of Operations and Comprehensive loss for the three and six months ended June 30, ~~2017~~2018 and ~~2016.~~2017.			2
Unaudited Condensed Consolidated ~~Statements~~Statement of ~~changes~~Changes in ~~Stockholders Deficit.~~Stockholders’ Deficit for the six months ended June 30, 2018			3
Unaudited Condensed Consolidated ~~Statements~~Statement of Cash Flows for the six months ended June 30, ~~2017~~2018 and ~~2016~~2017.			4
Notes to the unaudited Condensed Consolidated Financial Statements			5

	ETHEMA HEALTH CORPORATION
	SIX MONTHS ENDED JUNE 30, 2018 TABLEOF CONTENTS	Page
PART I.
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25	26

PART II.
Item 1	Legal Proceedings	30
Item 1A.	Risk factors	30
Item 2	Unregistered sale of equity securities and use of proceeds	30
Item 3	Defaults upon senior securities	30
Item 4	Mine Safety Disclosures	30
Item 5	Other Information	30
Item 6	Exhibits	31
SIGNATURES		32

	June 30, 2017			December 31, 2016
	(unaudited)
ASSETS

Current assets
Cash	$	30,683		$	4,779
Accounts receivable		468,826			—
Prepaid expenses		9,486			2,710
Discontinued operations		—			183,219
Related party Receivables		89,002			84,867
Total current assets		597,997			275,575
Non-current assets
Investment		—			110,000
Due on sale of subsidiary		1,253,747			—
Property, plant and equipment		12,019,227			—
Intangibles		1,438,525			—
Cash - Restricted		23,118			74,480
Total non-current assets		14,734,617			184,480
Total assets	$	15,332,614		$	460,055

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities
Bank overdraft	$	19,511		$	56,116
Accounts payable and accrued liabilities		420,743			374,317
Taxes payable		397,029			2,798,824
Convertible loans		516,201			250,258
Loans payable		3,234,684			—
Derivative liability		128,968			—
Related party payables		2,229,786			157,596
Total current liabilities		6,946,922			3,637,111
Non-current liabilities
Loans payable		2,989,937			—
Total liabilities		9,936,859			3,637,111

Stockholders' equity (deficit)
Preferred stock - Series A; $0.01 par value, 3,000,000 authorized, 0 outstanding as of June 30, 2017 and December 31, 2016		—			—
Preferred Stock - Series B; $0.01 par value, 10,000,000 authorized, 0 outstanding as of June 30, 2017 and December 31, 2016		—			—
Common stock; $0.01 par value, 500,000,000 shares authorized; 108,838,855 and 48,738,855 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively		1,088,389			487,389
Additional paid-in capital		18,201,699			16,509,906
Accumulated other comprehensive income		770,871			807,563
Accumulated deficit		(14,665,204	)		(20,981,914	)
Total stockholders' equity (deficit)		5,395,755			(3,177,056	)
Total liabilities and stockholders' equity (deficit)	$	15,332,614		$	460,055

		Three months ended June 30,			Three Months ended June			Six months ended June			Six Months ended June
		2017			30, 2016			30, 2017			30, 2016

Revenues	$	402,220		$	—		$	724,730		$	—

Operating expenses
General and administrative		57,905			102,970			408,442			110,197
Professional fees		66,403			53,545			399,204			75,045
Salaries and wages		173,451			15,000			382,695			21,000
Depreciation and amortization		125,340			—			182,406			—
Total operating expenses		423,099			171,515			1,372,747			206,242

Operating loss		(20,879	)		(171,515	)		(648,017	)		(206,242	)

Other income (expense)
Other income		63,960			12,508			568,309			12,508
Other expense		1,127,335			—			(392,539	)		—
Interest income		—			—			32,074			—
Interest expense		(93,603	)		(7,110	)		(156,620	)		(7,103	)
Debt discount		(241,666	)		(33,262	)		(429,325	)		(33,262	)
Derivative liability movement		167,580			—			94,532			—
Foreign exchange movements		(6,438	)		2,039			(164,347	)		2,734
Net income (loss) before taxation from continuing operations		996,289			(197,340	)		(1,095,933	)		(231,365	)
Taxation		—			—			—			—
Net income (loss) from continuing operations		996,289			(197,340	)		(1,095,933	)		(231,365	)
Gain on disposal of business		—			—			7,494,828			—
Operating (loss) income from discontinued operations, net of tax		(141,177	)		266,260			(82,185	)		443,779
Net (loss) income from discontinued operations		(141,477	)		266,260			7,412,643			443,779
Net income (loss)		855,112			68,920			6,316,710			212,414
Accumulated other comprehensive income (loss)
Foreign currency translation adjustment		154,255			7,789			(36,692	)		(215,276	)

Total comprehensive income (loss)	$	1,009,367		$	76,709		$	6,280,018		$	(2,862	)

Basic income (loss) per common share from continuing operations	$	0.01		$	—		$	(0.01	)	$	—
Basic income per share from discontinued operations	$	—		$	—		$	0.08		$	—
Basic income per common share	$	0.01		$	—		$	0.07		$	—
Diluted income (loss) per common share from continuing operations	$	0.01		$	—		$	(0.01	)	$	—
Diluted income per share from discontinued operations	$	—		$	—		$	0.07		$	—
Diluted income per common share	$	0.01		$	—		$	0.06		$	—
Weighted average common shares outstanding - Basic		108,772,921			47,991,602			93,838,855			47,865,229
Weighted average common shares outstanding - Diluted		119,908,308			49,192,552			104,974,243			49,066,179

					Additional
	Common				Paid in		Comprehensive			Accumulated
	Shares		Amount		Capital		Income			Deficit			Total
															��
Balance at January 1, 2017		48,738,855	$	487,389	$	16,509,906	$	807,563		$	(20,981,914	)	$	(3,177,056	)

Shares issued to acquire subsidiary		60,000,000		600,000		1,584,000		—			—			2,184,000
Shares issued for services		100,000		1,000		3,000		—			—			4,000
Fair value of warrants issued		—		—		104,793		—			—			104,793
Foreign currency translation		—		—		—		(36,692	)		—			(36,692	)
Net income		—		—		—		—			6,316,710			6,316,710
Balance as of June 30, 2017		108,838,855	$	1,088,389	$	18,201,699	$	770,871		$	(14,665,204	)	$	5,395,755

	Six months ended June 30, 2017			Six months ended June 30, 2016
Operating activities
Net income	$	6,316,710		$	212,414
Net income from discontinued operations	$	(7,412,643	)	$	(443,779	)
Net loss from continuing operations	$	(1,095,933	)	$	(231,365	)
Adjustment to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation		182,406			—
Non cash compensation expense on acquisition of subsidiary		373,274			—
Loss on mortgage sold		19,265
Non cash compensation for services		4,000			50,000
Other foreign exchange movements		(27,476	)		7,238
Amortization of debt discount		429,325			33,262
Derivative liability movements		(94,532	)		—
Provision against receivable on sale of subsidiary		(446,476	)		—
Changes in operating assets and liabilities
Accounts receivable		(327,351	)		—
Prepaid expenses		(6,776	)		(90,015	)
Accounts payable and accrued liabilities		(150,095	)		(292,787	)
Taxes payable		(2,401,665	)		231,588
Net cash used in operating activities - continuing operations		(3,542,034	)		(292,079	)
Net cash provided by operating activities - discontinued operations		101,033			423,018
		(3,441,001	)		130,939
Investing activities
Investments in Seastone		(2,960,000	)		—
Proceeds from restricted cash		51,362			—
Investment in deposits		—			(207,158	)
Purchase of fixed assets		(8,878	)		—
Net cash used in investing activities - continuing operations		(2,917,516	)		(207,158	)
Net cash provided by (used in) investing activities - discontinued operations		6,241,082			(1,053	)
		3,323,566			(208,211	)

Financing activities
(Decrease) Increase in bank overdraft		(36,605	)		15,834
Repayment of loan payable		—			(3,443	)
Proceeds from short-term notes		—			283,386
Repayment of short-term note		—			(107,639	)
Proceeds from mortgage sold		111,554			—
Repayment of mortgage		(85,613	)		—
Proceeds from convertible notes		294,500			—
Repayment of convertible notes		(130,000	)		—
Proceeds from related party notes		26,195			153,273
Net cash provided by financing activities		180,031			341,411

Effect of exchange rate on cash		(36,692	)		(215,276	)

Net change in cash		25,904			48,863
Beginning cash balance		4,779			174
Ending cash balance	$	30,683		$	49,037

Supplemental cash flow information
Cash paid for interest	$	153,817		$	7,548
Cash paid for income taxes	$	—		$	—

Non cash investing and financing activities
Common shares issued to acquire subsidiary	$	2,184,000		$	—
Assumption of mortgage liabilities on acquisition of subsidiary	$	3,145,549		$	—

	Amount

Proceeds on disposal	$	7,644,000

Assets sold:
Accounts receivable		113,896
Plant and equipment		109,075
		222,971
Liabilities assumed by purchaser
Deferred revenue		(73,799	)

Net assets and liabilities sold		149,172

Net profit realized on disposal	$	7,494,828

	Amount

Purchase price paid:
Common shares issued to Seller	$	2,184,000
Receivable assumed by the Seller		504,442
		2,688,442
Allocated as follows:

Assets acquired:
Property		7,644,000
Receivable from Ethema Health Corporation		299,743
		7,943,743
Liabilities assumed:
Accounts payable and other accruals		158,094
Related party payable to Leon Developments		2,057,392
Mortgage liability owing to Ethema Health Corporation		267,540
Mortgage liability		3,145,549
		5,628,575

Net assets acquired		2,315,168

Excess purchase consideration allocated to shareholders compensation	$	373,274

	Amount

Purchase price paid:
Cash paid to seller	$	2,960,000
Deposits previously paid to seller		110,000
Mortgage liability funds		3,000,000
		6,070,000
Assets acquired:
Property		4,410,000
Furniture and fixtures		80,000
Intangibles - to be classified		1,438,525
Receivables		141,475
	$	6,070,000

	December 31,
	2016
Current assets
Accounts receivable, net	$	123,358
Prepaid expenses and other current assets		11,253
Total current assets		134,611
Non-current assets
Plant and equipment, net		129,127
Deposits		—
Total assets		263,738

Current liabilities
Deferred revenues		80,519

Discontinued operation		183,219

	Three months			Three months			Six months			Six months
	ended June 30,			ended June 30,			ended June 30,			ended June 30,
	2017			2016			2017			2016

Revenues	$	(112	)	$	1,024,384		$	232,040		$	1,847,222

Operating expenses
Depreciation and amortization		—			15,412			4,196			30,746
General and administrative		31,330			187,589			118,706			343,480
Professional fees		33,466			—			32,818			6,144
Rent		2,975			105,721			47,493			180,112
Salaries and wages		(31,913	)		423,464			201,723			811,981
Total operating expenses		35,858			732,186			404,936			1,372,463

Operating (loss) income		(35,970	)		292,198			(172,896	)		474,759

Other Income
Profit on sale of business		—			—			7,494,828			—
Other income		—			21,042			—			21,042
Interest expense		(204	)		(38,547	)		(993	)		(76,743	)
Foreign exchange movements		(105,003	)		(8,433	)		91,704			24,721
Net income before taxation		(141,177	)		266,260			7,412,643			443,779
Taxation		—			—			—			—
Net income from discontinued operations	$	141,177		$	266,260		$	7,412,643		$	443,779

	Six months ended June 30, 2017

Calculated stock price	$0.03 to $0.06
Risk free interest rate	0.64% to 1.24%
Expected life of convertible notes	3 to 9 months
expected volatility of underlying stock	134.9% to 180.5%

The movement in derivative liability is as follows:

	Six months ended June 30, 2017

Opening balance	$	—
Derivative liability arising from convertible notes	$	223,500
Fair value adjustment to derivative liability		(94,532	)
	$	128,968

	Six months ended June 30, 2017
Calculated stock price	$	0.04
Risk free interest rate		1.48	%
Expected life of warrants (years)		3 years
expected volatility of underlying stock		398	%
Expected dividend rate		0	%

	No. of shares			Exercise price per share		Weighted average exercise price

Outstanding January 1, 2016		6,300,000			$0.0033 to $0.03	$	0.14
Granted		19,337,409			0.03		0.0300
Forfeited/cancelled		(6,000,000	)		0.15		0.1500
Exercised		—			—		—
Outstanding December 31, 2016		19,637,409			$0.0033 to $0.03		0.0300
Granted		2,366,666			0.03		0.0300
Forfeited/cancelled		—			—		—
Exercised		—			—		—
Outstanding June 30, 2017		22,004,075			$0.033 to $0.03	$	0.0300

	Six months ended June 30, 2017
	Rental			In-Patient
	Operations			services			Total

Revenue	$	120,125		$	604,605		$	724,730
Operating expenditure		135,865			1,236,882			1,372,747

Operating loss		(15,740	)		(632,277	)		(648,017	)

Other (expense) income
Other income		—			568,309			568,309
Other expense		(373,274	)		(19,265	)		(392,539	)
Interest income		—			32,074			32,074
Interest expense		(98,188	)		(58,432	)		(156,620	)
Amortization of debt discount		—			(429,325	)		(429,325	)
Derivative liability movement		—			94,532			94,532
Foreign exchange movements		—			(164,347	)		(164,347	)
Net loss before taxation		(487,202	)		(608,731	)		(1,095,933	)
Taxation		—			—			—
Net loss	$	(487,202	)	$	(608,731	)	$	(1,095,933	)

				Number of		Per share
	Amount			shares		amount

Basic earnings per share
Net income per share from continuing operations	$	996,289			108,772,921	$	0.01
Net loss per share from discontinued operations		(141,177	)		108,772,921	$	(0.00	)

Basic income per share		855,112			108,772,921		0.01

Effect of dilutive securities

Warrants					11,135,387
Options

Diluted earnings per share
Net loss per share from continuing operations		996,289			119,908,308		0.01
Net income per share from discontinued operations		(141,177	)		119,908,308		(0.00	)

Diluted income per share	$	855,112			119,908,308	$	0.01