Property and equipment

9 Months Ended

Sep. 30, 2023

Property, Plant and Equipment [Abstract]

Property and equipment

5.   Property and equipment

Acquisition and simultaneous disposition of property

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

On February 27, 2023 the Company signed a listing agreement with Stream Capital Partners listing 950 for sale at a price of $9,568,000 with the intention of identifying a buyer that would purchase and then potentially enter into a lease agreement with the Company.

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

Simultaneously with the closing of the purchase and sale agreements, on August 4, 2023, the Company entered into a long term lease for 950 with an initial term of twenty years, and two ten year extension options. The lessor is Pontus EHC Palm Beach, LLC , a Delaware limited liability company and a portfolio company of Pontus Net Lease Advisors, LLC. The lease is absolutely net and the lease cost for the initial year is $748,000 paid monthly. The lease increases at a rate of 2.75% per year for a total term lease obligation of $19,595,653 over the initial twenty-year term. The Lease is personally guaranteed by the Company President and the guarantee may be released after 5 years based on certain financial and performance metrics being met.

The Company paid gross proceeds of $1,449,000 to Leonite Capital and Leonite Fund I, LP in settlement of all amounts outstanding to both entities, disclosed in notes 8 and 9 above. In addition, $65,450 was paid to Ed Blasiak to settle the convertible promissory note disclosed in note 8 above, $179,474 was paid to Joshua Bauman to settle the convertible promissory note disclosed in note 8 above, and $260,548 was paid to Mirage Realty, LLC to settle the senior secured promissory note, disclosed in note 9 above.

The details of the property purchase and subsequent sale are as follows:

	Amount
Purchase of 950 Evernia Street property
Purchase price	$	5,500,000
Fees and expenses related to property purchase		109,276
Total acquisition cost		5,609,276
Proceeds on sale		8,500,000
Fees and expenses related to disposal of the property		(406,552	)
Net proceeds on disposal of property		8,093,448
Gain on sale of property	$	2,484,172

Property and equipment consists of the following:  

		September 30, 2023							December 31, 2022
	Useful lives	Cost		Accumulated depreciation			Net book value		Net book value
Land	Indefinite	$	—	$	—		$	—	$	158,742
Property	25 years		—		—			—		2,310,448
Leasehold improvements	Life of lease		456,547		(76,676	)		379,871		373,320
Furniture and fittings	6 years		149,260		(41,234	)		108,026		92,941
Vehicles	5 years		55,949		(26,263	)		29,686		38,079
Computer equipment	3 years		7,525		(1,409	)		6,116		865
		$	669,281	$	(145,582	)	$	523,699	$	2,974,395

Depreciation expense for the three months ended September 30, 2023 and 2022 was $20,690 and $47,113, respectively, and for the nine months ended September 30, 2023 and 2022 was $119,773 and $134,366, respectively.

On June 30, 2023, the Company sold its interest in Cranberry Cove Holdings to Leonite Capital, which includes the land and property and the associated mortgage loan as disclosed in Note 10. Refer Note 4 above.