Acquisition of the business of Edgewater Recovery Center

3 Months Ended

Mar. 31, 2025

Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]

Acquisition of the business of Edgewater Recovery Center

4. Acquisition of the business of Edgewater Recovery Center

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

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

The provisional allocation of assets acquired and liabilities assumed is as follows:

	Amount
Purchase price
Cash	$	250,000
Allocation of purchase price
Current assets
Cash	$	299,492
Accounts receivable		786,672
Other current assets		35,479
		1,121,643
Non-current assets
Property and equipment		651,752
Customer relationships		2,944,000
Non-compete agreements		52,000
Goodwill		3,573,396
Deposits		15,000
		7,236,148
Total Assets acquired	$	8,357,791
Current liabilities
Accrued liabilities	$	373,920
Related party payables		867,820
		1,241,740
Non-current liabilities
Bank loans		4,354,044
Note payable – related party		66,741
Assumed liability		1,666,306
Deferred taxation		778,960
		6,866,051
Total liabilities assumed	$	8,107,791
Net assets acquired	$	250,000

The amount of pro forma revenue and earnings which would have been included in the Company’s unaudited condensed consolidated statement of operations for the period ended March 31, 2025, and the revenue and earnings of the combined entity had the acquisition date been January 1, 2024, is presented as follows:

	Revenue		Net loss
Actual for the period from acquisition to March 31, 2025	$	2,082,082	$	(142,488	)
2025 supplemental pro-forma from January 1, 2025 to March 31, 2025	$	3,693,467	$	(1,003,956	)
2024 supplemental pro-forma from January 1, 2024 to March 31, 2024	$	4,398,214	$	(768,018	)

The supplemental pro forma information for the three months ended March 31, 2025 was adjusted to exclude (i) non-recurring legal fees of $35,000 incurred on the acquisition of the business of Edgewater and (ii) amortization of intangibles of $4,530 and the tax effect thereon of $1,178.  

The supplemental pro forma information for the three months ended March 31, 2024 was adjusted to exclude (i) $2,249,633 related to a settlement reached with the Department of Justice by Edgewater and is unrelated to current and future operations and (ii) amortization of intangibles of $51,667 and the tax effect thereon of $13,433.