Basis of presentation

12 Months Ended

Dec. 31, 2023

Basis of presentation

Basis of presentation

2. Basis of presentation:

(a) Going concern:

These consolidated financial statements have been in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and the basis of presentation outlined in note 2(b) on the assumption that the Company is a going concern and will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business for the next 12 months.

The Company has experienced losses since inception and has negative cash flow from operating activities of $35,912,722 for the year ended December 31, 2023 ($24,181,935 - year ended December 31, 2022). The Company’s cash balance, excluding restricted cash as at December 31, 2023 was $3,323,708 ($1,623,957 as at December 31, 2022) and negative working capital as at December 31, 2023 was $17,681,089 (negative working capital of $22,872,940 as at December 31, 2022).

On July 14, 2022, the Company entered into a credit agreement (the “Madryn Credit Agreement”), as amended, for a $75,000,000 secured credit facility (the “Madryn Credit Facility”) with Madryn Fund Administration, LLC and its affiliated entities (collectively, “Madryn”). Upon closing of the Madryn Credit Facility, the Company drew a $55,000,000 term loan under the Madryn Credit Facility. In addition, the Madryn Credit Facility permits the Company to draw up to an additional $20,000,000 in a single draw at any time on or prior to December 31, 2024 for purposes of funding future mergers and acquisition activity.

On March 23, 2023, the Company completed a non-brokered private placement (the “2023 Private Placement”), for aggregate gross proceeds to the Company of approximately $6,250,000. The 2023 Private Placement included investments by Madryn, together with certain of the Company’s other major shareholders, including Greybrook Health Inc. (“Greybrook Health”) and affiliates of Masters Special Situations LLC (“MSS”). See note 15.

On July 13, 2023, the Company entered into a purchase agreement (the “Alumni Purchase Agreement”) with Alumni Capital LP (“Alumni”). The Alumni Purchase Agreement provides equity line financing for sales from time to time of up to $4,458,156 of common shares. As at December 31, 2023, the Company has issued an aggregate of 1,761,538 Purchase Shares (as defined below) under the Alumni Purchase Agreement for gross proceeds of $481,437. See note 15.

2. Basis of presentation (continued):

(a) Going concern (continued):

During the year ended December 31, 2023, the Company received an aggregate of $36,426,638 in debt financing, of which $31,231,638 was financed by Madryn, while the remaining amount of $5,195,000 was funded by certain significant shareholders of the Company, and other investors, in order to satisfy short-term cash requirements. In addition, the amendments to the Madryn Credit Facility were also effected to amend the Company’s minimum liquidity covenant. See note 10 and note 11.

The terms of the Madryn Credit Facility require the Company to satisfy various financial covenants including a minimum liquidity and minimum consolidated revenue amounts that became effective on July 14, 2022 and September 30, 2022, respectively. A failure to comply with these covenants, or failure to obtain a waiver for any non-compliance, would result in an event of default under the Madryn Credit Agreement and would allow Madryn to accelerate repayment of the debt, which could materially and adversely affect the business, results of operations and financial condition of the Company. On February 21, 2023, March 20, 2023, June 14, 2023, July 3, 2023,  July 14, 2023, August 1, 2023, August 14,2023, September 15, 2023, September 29, 2023, October 12, 2023, November 15, 2023, December 14, 2023, January 19, 2024 , February 15, 2024, March 15, 2024 and March 29, 2024, the Company received waivers from Madryn with respect to the Company’s non-compliance with the minimum liquidity covenant which has been extended to April 30, 2024. In addition, the Company also received a waiver relating to the requirement to deliver financial statements within 90 days of each fiscal year end until April 26, 2024, and audited financial statements for such fiscal year, accompanied by a report and opinion of an independent certified public accountant which is not subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit. As at December 31, 2023, the Company was in compliance with the financial covenants of the Madryn Credit Agreement, as amended.

On January 19, 2024, February 5, 2024, February 15, 2024, March 1, 2024, March 15, 2024, March 19,2024 and April 15,2024, the Company received an aggregate of $14,543,148 in debt financings from Madryn in order to satisfy the Company’s short-term cash requirements. On February 26, 2024, the Company completed a registered direct offering of 2,828,249 common shares at a price of $0.20 per common share, for gross proceeds of approximately $565,649. See note 26.

On February, 22, 2024, the Company received the final delisting notice from the Listing Qualifications Department of the Nasdaq Stock Market LLC (“Nasdaq”) due to the continued failure to satisfy either the $1.00 minimum bid price listing requirement in Nasdaq Listing Rule 5550(a)(2) or the minimum stockholders’ equity requirements in Nasdaq Listing Rule 5550(b). Consequently, the trading of the Company’s common shares was suspended as of the open of trading on February 26, 2024. The Company determined that it was in the overall best interests of the Company not to appeal the decision. Subsequently, the Company’s shares have been quoted on OTC Markets.

2.Basis of presentation (continued):

(a) Going concern (continued):

Although the Company believes it will become cash flow positive in the future, the timing of this is uncertain given that the Company has historically not been able to meet its forecast, and is also dependent on the continued execution of the Restructuring Plan (as defined below) (see note 25), our ability to meet our debt obligations and remain in compliance with debt covenants and the outcome of the pending Delaware Complaint (as defined below) (see note 17). The Company will require additional financing in order to fund its operating and investing activities, including making timely payments to certain vendors, landlords, lenders (including shareholders) and similar other business partners. The delay in such payments may result in potential defaults under the terms of the agreements the Company has with various parties. As such, additional financing is required in order for the Company to repay its short-term obligations. The Company has historically been able to obtain financing from supportive shareholders, its lenders and other sources when required; however, the Company may not be able to access further equity or debt financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. If additional financing is not obtained, the Company may not be able to repay its short-term obligations and will need to obtain additional amendments from Madryn in order to remain compliant with the covenants or waivers from Madryn to

waive its rights to accelerate repayment of the debt; however, there can be no assurances that such amendments or waivers will be obtained, which may result in a requirement to file for bankruptcy protection.

The existence of the above-described conditions indicate substantial doubt as to the Company’s ability to continue as a going concern as of December 31, 2023.

These consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumptions were not appropriate. If the going concern basis was not appropriate for these consolidated financial statements, then adjustments would be necessary to the carrying value of assets and liabilities, the reported expenses, and the consolidated balance sheet classification used, and these adjustments may be material.

(b) Basis of measurement:

These consolidated financial statements have been prepared on a historic cost basis except for financial instruments classified as fair value through profit or loss, which are stated at their fair value. Other measurement bases are described in the applicable notes.

Presentation of the consolidated balance sheet differentiates between current and non - current assets and liabilities. The consolidated statements of comprehensive loss are presented using the function classification of expense.

Regional operating income (loss) presents regional operating income (loss) on an entity-wide basis and is calculated as total service revenue less direct center and patient care costs, other regional and center support costs, and depreciation. These costs encapsulate all costs (other than incentive compensation such as share-based compensation granted to senior regional employees) associated with the center and regional management infrastructure, including the cost of the delivery of treatments to patients and the cost of the Company’s regional patient acquisition strategy.

2.Basis of presentation (continued):

(c) Basis of consolidation:

The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity (VIE) or voting interest model (VOE). The Company is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. ASC 810, Consolidation ("ASC 810") defines the criteria for determining the existence of VIEs and provides guidance for consolidation.

An entity is considered to be a VIE if (i) the entity does not have enough equity to finance its own activities without additional support, (ii) the entity's at-risk equity holders lack the characteristics of a controlling financial interest, or (iii) the entity is structured with non-substantive voting rights. The primary beneficiary of a VIE is the party that has the power to direct the activities that most significantly impact the performance of the entity and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the entity. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. A VIE can have only one primary beneficiary but may not have a primary beneficiary if no party meets the criteria described above.

If the Company determines it does not hold a variable interest in a VIE, the Company applies the VOE model. To the extent the entity does not meet the definition of a VIE, the ASC 810 guidance for voting interest entities is applied. The usual condition for a controlling financial interest, and therefore consolidation by the Company, is ownership of a majority

voting interest of a corporation or a majority of kick-out rights for a limited partnership. The Company has determined that all its subsidiaries are VOEs primarily because it holds a majority voting interest in the entities.

All significant intercompany balances and transactions have been eliminated on consolidation.

(d) Use of estimates and judgments:

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting year. Actual results could differ from those estimates. As additional information becomes available or actual amounts are determinable, the recorded estimates are revised and reflected in operating results in the period in which they are determined.

Significant estimates in connection with these consolidated financial statements include the measurement and determination of the transaction price in the estimation of revenue and accounts receivable, estimated useful life of property, plant and equipment; estimated value and useful life of intangible assets; amounts recorded as accrued liabilities; amounts recorded as performance share units, convertible instruments, deferred income taxes provisions; goodwill; assessment of contingent consideration; inputs used in the valuation of warrants and stock options granted; and the estimate of lease terms.

Significant judgments in connection with these consolidated financial statements include assessment of control of subsidiaries; assessment of conditions relating to the Company’s ability to continue as a going concern; determination of functional currency; determination of the Company’s reporting units and asset groups; determination of whether a contract is or contains a lease; and determination of the incremental borrowing rate used to measure lease liabilities.

2.Basis of presentation (continued):

(e) Functional and reporting currency:

The functional and reporting currency of the Company and its subsidiaries is the U.S. dollar. Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the rates of exchange prevailing at the consolidated balance sheet dates. Non-monetary assets and liabilities are translated at rates prevailing at the dates of acquisition. Expenses are translated at the average rate of exchange in effect during the month the transaction occurred.

(f) Adoption of U.S. GAAP:

Until fiscal 2022, the Company prepared and presented its financial statements under International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board.

As of June 30, 2023, the Company lost its “foreign private issuer” status as a majority of the common shares in the Company (“Common Shares”) were held in the United States and the Company does not meet the additional requirements under the “business contacts” test. As a result, beginning January 1, 2024, the Company is required to follow SEC reporting standards of a U.S. domestic issuer, convert its financial statements to generally accepted accounting principles in the United States (“U.S. GAAP”) and will no longer be able to rely on foreign private issuer exemptions from U.S. proxy rules and Section 16 insider reporting or foreign private issuer exemptions under Nasdaq listing rules (including in respect of shareholder approval requirements for certain dilutive transactions). As a result, the Company has presented the financial statements as of December 31, 2023 and December 31, 2022 and for the two years ended December 31, 2023, in accordance with U.S. GAAP. Therefore, the amounts previously reported as of and for the year ended December 31, 2022, have been presented in these consolidated financial statements in accordance with the US GAAP.

These consolidated financial statements also incorporate the necessary corrections relating to errors in the previously issued consolidated financial statements in accordance with IFRS. These errors were the result of inappropriate application of variable consideration methodologies which resulted in an overstatement of revenue and understatement of loss in the amount of $2.3 million for Fiscal 2022 and overstatement of accounts receivable in the amount of $6.6 million as at December 31, 2022 as compared to the amounts in the previously issued consolidated financial statements in accordance with IFRS. There was also an understatement of total shareholders’ deficit in the amount of $4.3 million as at December 31, 2021, for like errors prior to December 31, 2021.