ETHEMA HEALTH Swings to Q3 Profit Amidst Aggressive Expansion

TL;DR

**GRST is growing revenue fast through acquisitions but its massive debt and low cash make it a high-risk bet; proceed with extreme caution.**

AI Summary

ETHEMA HEALTH Corp (GRST) reported a significant increase in revenue for the nine months ended September 30, 2025, reaching $13,952,597, a substantial rise from $4,550,200 in the same period of 2024. The company achieved a net income of $66,136 for the three months ended September 30, 2025, a notable turnaround from a net loss of $(1,000,714) in the prior year's comparable quarter. However, the nine-month period still showed a net loss of $(1,114,490), though an improvement from $(1,840,192) in 2024. Key business changes include the acquisition of the remaining 25% of ATHI for $1,100,000 on May 15, 2024, and the acquisition of Edgewater Recovery Centers, LLC (ERC) assets on January 9, 2025, which significantly expanded its addiction treatment operations in Kentucky. Total assets grew from $12,158,402 at December 31, 2024, to $30,267,418 at September 30, 2025, driven by increases in property and equipment, intangible assets, and goodwill from acquisitions. The company's total liabilities also surged from $19,616,969 to $38,840,475, primarily due to new bank loans, assumed liabilities, and operating lease liabilities, indicating a highly leveraged growth strategy. Cash decreased from $244,771 to $114,030 over the nine-month period, reflecting significant cash used in operating and investing activities, partially offset by financing activities.

Why It Matters

ETHEMA HEALTH's aggressive acquisition strategy, particularly the Edgewater Recovery Centers deal, signals a clear intent to expand its footprint in the addiction treatment market. While the Q3 net income is a positive sign, the substantial increase in liabilities and dwindling cash reserves present a significant risk for investors, especially in a competitive healthcare sector. The reliance on related-party transactions, such as the BH Properties lease agreements, warrants close scrutiny for potential conflicts of interest and fair valuation. Employees and customers of acquired entities like ERC will see operational changes and potential integration challenges, while the broader market will watch if GRST can successfully integrate these acquisitions and translate increased revenue into sustainable profitability amidst high debt.

Risk Assessment

Risk Level: high — ETHEMA HEALTH's total liabilities ballooned from $19,616,969 at December 31, 2024, to $38,840,475 at September 30, 2025, a 98% increase, indicating significant leverage. Concurrently, cash reserves plummeted from $244,771 to $114,030, a 53% decrease, suggesting liquidity concerns. The company also has a substantial accumulated deficit of $(45,533,962) as of September 30, 2025, highlighting a history of losses despite recent revenue growth.

Analyst Insight

Investors should exercise extreme caution and conduct thorough due diligence on ETHEMA HEALTH's debt structure and integration capabilities. Given the high leverage and low cash, consider this a speculative investment and monitor future cash flow statements closely for signs of improved liquidity and debt management.

Financial Highlights

debt To Equity

N/A

revenue

$13,952,597

operating Margin

N/A

total Assets

$30,267,418

total Debt

$38,840,475

net Income

$66,136

eps

N/A

gross Margin

N/A

cash Position

$114,030

revenue Growth

+206%

Revenue Breakdown

Key Numbers

• $13,952,597 — Revenue for nine months ended Sept 30, 2025 (Increased from $4,550,200 in 2024, a 206% increase)
• $66,136 — Net income for three months ended Sept 30, 2025 (Turnaround from a net loss of $(1,000,714) in 2024)
• $(1,114,490) — Net loss for nine months ended Sept 30, 2025 (Improved from $(1,840,192) in 2024)
• $30,267,418 — Total assets as of Sept 30, 2025 (Increased from $12,158,402 at Dec 31, 2024, a 149% increase)
• $38,840,475 — Total liabilities as of Sept 30, 2025 (Increased from $19,616,969 at Dec 31, 2024, a 98% increase)
• $114,030 — Cash as of Sept 30, 2025 (Decreased from $244,771 at Dec 31, 2024, a 53% decrease)
• 7,726,283,805 — Common shares outstanding as of Dec 2, 2025 (High share count indicating potential dilution)
• $1,100,000 — Acquisition cost for remaining 25% of ATHI (Completed on May 15, 2024)
• $250,000 — Cash payment for Edgewater Recovery Centers, LLC assets (Paid on January 9, 2025)
• $(45,533,962) — Accumulated deficit as of Sept 30, 2025 (Indicates historical losses)

Key Players & Entities

• ETHEMA HEALTH Corp (company) — registrant
• ATHI (company) — acquired entity
• Edgewater Recovery Centers, LLC (company) — acquired entity
• John Elam (person) — seller of ERC
• ARIA Kentucky LLC (company) — wholly owned subsidiary of ETHEMA HEALTH
• BH Properties Fund LLC (company) — company controlled by CEO Shawn Leon, related party
• Shawn Leon (person) — CEO of ETHEMA HEALTH and controller of BH Properties Fund LLC
• United States government (regulator) — party in settlement agreement with ERC
• State of Kentucky (regulator) — party in settlement agreement with ERC
• SEC (regulator) — Securities and Exchange Commission

FAQ

Risk Factors

• High Leverage and Cash Burn [high — financial]: The company's total liabilities surged by 98% to $38,840,475 as of September 30, 2025, driven by new bank loans and assumed liabilities. This high leverage, coupled with a decrease in cash from $244,771 to $114,030, indicates a significant reliance on debt financing for growth, posing financial risks.
• Collection of Accounts Receivable [medium — operational]: The company's ability to collect outstanding receivables is critical. Risks include overestimation of net revenues, non-payment by commercial insurance companies, patient non-remittance of insurance payments, and resource constraints in billing and collection.
• Accumulated Deficit [medium — financial]: ETHEMA HEALTH Corp has an accumulated deficit of $(45,533,962) as of September 30, 2025. While the company achieved net income in the latest quarter, the nine-month period still shows a net loss, indicating a history of unprofitability that needs to be overcome.
• Integration of Acquired Businesses [medium — operational]: The company has made significant acquisitions, including the remaining 25% of ATHI and Edgewater Recovery Centers, LLC assets. The successful integration of these operations and realization of synergies are crucial for future performance.
• Valuation of Intangible Assets [low — financial]: The valuation of intangible assets acquired in business combinations requires significant estimates and assumptions regarding future cash flows, useful lives, and discount rates. Actual results may differ from these estimates, impacting reported goodwill and future amortization.

Industry Context

ETHEMA HEALTH Corp operates within the healthcare sector, specifically focusing on addiction treatment services. This industry is characterized by increasing demand due to the ongoing opioid crisis and mental health challenges. However, it is also subject to stringent regulatory oversight, complex reimbursement structures from third-party payors (both governmental and commercial), and significant competition from other providers.

Regulatory Implications

The healthcare industry is heavily regulated. ETHEMA HEALTH Corp must comply with various federal and state regulations, including those related to patient privacy (HIPAA), billing and coding practices, and facility licensing. Non-compliance can lead to significant fines, penalties, and reputational damage.

What Investors Should Do

1. Monitor debt levels and cash flow generation closely.
2. Analyze the profitability and integration of acquired assets.
3. Evaluate the trend in accounts receivable and allowance for doubtful accounts.

Key Dates

• 2024-05-15: Acquisition of remaining 25% of ATHI — Increased ownership in a key subsidiary, potentially enhancing control and future earnings.
• 2025-01-09: Acquisition of Edgewater Recovery Centers, LLC assets — Significantly expanded the company's addiction treatment operations in Kentucky, a key growth area.
• 2025-09-30: End of Q3 2025 — Reporting period for the 10-Q, showing substantial revenue growth and a return to quarterly profitability.

Glossary

Goodwill

An intangible asset that arises when a company acquires another company for a price greater than the fair value of its identifiable net assets. It represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and recognized. (Goodwill increased significantly due to acquisitions, reflecting the premium paid over the fair value of acquired net assets.)

Accumulated Deficit

The cumulative net losses of a company since its inception that have not been offset by net income. It represents a reduction in stockholders' equity. (The company has a substantial accumulated deficit of $(45,533,962), indicating historical unprofitability.)

Intangible Assets

Non-physical assets that have value, such as patents, copyrights, trademarks, and customer lists. In the context of acquisitions, these can include acquired technology and trade names. (Intangible assets, along with goodwill, have grown substantially due to recent acquisitions, requiring careful valuation.)

Year-Over-Year Comparison

ETHEMA HEALTH Corp has demonstrated a dramatic increase in revenue for the nine months ended September 30, 2025, up 206% compared to the prior year, driven by strategic acquisitions. While the company achieved net income in the most recent quarter, a turnaround from a significant loss, the nine-month period still reflects a net loss, albeit reduced. Total assets and liabilities have both more than doubled, indicating a highly leveraged growth strategy. Cash reserves have decreased, highlighting the significant investment and operational cash burn during this period of expansion.

Key Financial Figures

• $299,492 — sition of Aria Kentucky, net of cash of $299,492 49,492 Acquisition of assets — ( 2
• $1,100,000 — ority stockholder for gross proceeds of $1,100,000. The Company paid an initial deposit of
• $25,000 — The Company paid an initial deposit of $25,000 and on closing an additional $600,000.
• $600,000 — of $25,000 and on closing an additional $600,000. The Company issued a non-interest-bear
• $475,000 — ssory note for the remaining balance of $475,000, which promissory note is repayable in
• $10,000 — ry note is repayable in installments of $10,000 a month on each monthly anniversary dat
• $157,500 — n (eight installments), and payments of $157,500 on month nine and month eighteen, for a
• $240,000 — ive Agreement. The purchase price was $240,000 which was settled by a deposit of $20,0
• $20,000 — 0,000 which was settled by a deposit of $20,000 and a cash payment of $220,000 and the
• $220,000 — eposit of $20,000 and a cash payment of $220,000 and the payment to the Seller of $83,39
• $83,393 — 20,000 and the payment to the Seller of $83,393 for the assumption of the security depo
• $250,000 — t closing ARIA Kentucky paid the Seller $250,000 and assumed certain liabilities related

Filing Documents

• grst_10q.htm (10-Q) — 1286KB
• ex31_1.htm (EX-31.1) — 12KB
• ex32_1.htm (EX-32.1) — 5KB
• 0001903596-25-000567.txt ( ) — 7500KB
• grst-20250930.xsd (EX-101.SCH) — 66KB
• grst-20250930_cal.xml (EX-101.CAL) — 70KB
• grst-20250930_def.xml (EX-101.DEF) — 171KB
• grst-20250930_lab.xml (EX-101.LAB) — 440KB
• grst-20250930_pre.xml (EX-101.PRE) — 356KB
• grst_10q_htm.xml (XML) — 1489KB

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 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, 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," "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. Therefore, actual results may differ materially and adversely from those expressed, projected or implied in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason. NOTE REGARDING COMPANY REFERENCES Throughout this Quarterly Report on Form 10-Q, "Ethema," the "Company," "we," "us" and "our" refer to Ethema Health Corporation. FORM 10-Q ETHEMA HEALTH CORPORATION TABLE OF CONTENTS Page

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION Item l.

Financial Statements

Financial Statements 1 Condensed Consolidated Balance Sheets as of September 30, 2025 (Unaudited) and December 31, 2024 2 Unaudited Condensed Consolidated 3 Unaudited Condensed Consolidated 4 Unaudited Condensed Consolidated 5 Notes to the Unaudited Condensed Consolidated Financial 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 34 Item 3.

Quantitative and Qualitative Disclosures About Market

Quantitative and Qualitative Disclosures About Market Risk 40 Item 4.

Controls and Procedures

Controls and Procedures 40

- OTHER INFORMATION

PART II - OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 41 Item 1A.

Risk Factors

Risk Factors 41 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 41 Item 3. Defaults Upon Senior Securities 41 Item 4. Mine Safety Disclosures 41 Item 5. Other Information 41 Item 6. Exhibits 41

SIGNATURES

SIGNATURES 42 1 ETHEMA HEALTH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2025 December 31, 2024 ASSETS (unaudited) Current assets Cash $ 114,030 $ 244,771 Accounts receivable, net 2,435,606 260,841 Prepaid expenses 58,931 23,146 Other current assets 19 — Total current assets 2,608,586 528,758 Non-current assets Property and equipment, net 1,323,766 699,688 Intangible assets, net 3,113,680 536,971 Goodwill 3,493,850 — Right of use assets 10,682,105 9,920,592 Right of use assets – related party 8,532,607 — Deposits paid 512,824 472,393 Total non-current assets 27,658,832 11,629,644 Total assets $ 30,267,418 $ 12,158,402 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities Accounts payable and accrued liabilities $ 1,425,921 $ 764,255 Bank loans 755,960 — Assumed liability 909,858 — Convertible notes, net of discounts 3,998,984 3,973,245 Short-term notes, net 3,092,765 2,575,123 Promissory note 295,000 405,000 Funding arrangements, net 1,105,214 516,247 Related party advance, net 273,461 264,966 Government assistance loans 21,395 15,088 Operating lease liability 524,292 299,102 Operating lease liability -related party 511,205 — Finance lease liability 7,645 9,829 Related party payables 1,640,012 633,318 Stock subscription liability 198,600 198,600 Total current liabilities 14,760,312 9,654,773 Non-current liabilities Bank loans 3,902,226 — Assumed liability 619,010 — Note payable – related party 86,017 — Government assistance loans — 6,149 Operating lease liability 10,647,157 9,949,454 Operating lease liability – related party 8,083,964 — Finance lease liability 2,039 6,593 Deferred taxation 739,750 — Total non-current liabilities 24,080,163 9,962,196 Total liabilities 38,840,475 19,616,969 Stockholders' deficit Preferred stock - Series A; $ 0.01 par value, 10,000,

Business

Business combinations The Company allocates the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed for business combinations with third parties based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. 7 ETHEMA HEALTH CORPORATION NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2. Summary of significant accounting policies (continued) d) Cash and cash equivalents For purposes of the statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents. The Company maintains cash and cash equivalents with several financial institution in the USA and Canada. There were no cash equivalents at September 30, 2025 and December 31, 2024. The Company primarily places cash balances in the United States with high-credit quality financial institutions located in the United States which are insured by the Federal Deposit Insurance Corporation up to a limit of $ 250,000 per institution. e) Accounts receivable Accounts receivable primarily consists of amounts due from third-party payors (non-governmental) and private pay patients and is recorded net of allowances for doubtful account

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