Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

Statements contained in this management discussion and analysis of financial condition and results of operations, 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.

P1an of Operation

During the next twelve months, the Company plans to continue to grow the Rehabilitation and detox business organically or through acquisitions, should any opportunities present themselves.

Acquisition of Edgewater Recovery Centers, LLC

On October 22, 2024, we, through a wholly owned subsidiary, Aria Kentucky, entered into an asset purchase agreement to acquire the business of Edgewater Recovery Centers, LLC ("ERC") from ERC and John Elam (the "Seller"), located in Morehead and Paducah, Kentucky through a purchase of the assets of ERC, 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 prop associated with the operations of 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, 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, we 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 results of ARIA Kentucky have been included in our unaudited condensed consolidated financial statements effective January 9, 2025.

Critical accounting policies and estimates

The significant accounting policies and estimates of the Company were described in Note 2 to the Audited Consolidated Financial Statements included in the Company's Form 10-K for the fiscal year ended December 31, 2024. There have been no material changes to our critical accounting policies and estimates from the information provided in Note 2 and Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2024 Form 10-K. The most recently adopted accounting pronouncements and accounting pronouncements to be adopted by the Company are described in Note 2 in the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Results of operations for the three months ended June 30, 2025 and 2024.

Revenues

Revenues were $4,905,420 and $1,490,100 for the three months ended June 30, 2025 and 2024, respectively, an increase of $3,415,320 or 229.2%. Revenues include $2,720,771 from the acquisition of the business of ERC. Revenue from existing business was $2,184,649 and $1,490,100 for the three months ended June 30, 2025 and 2024, respectively, an increase of $694,549 or 46.6%. The increase is primarily due to the increase in patient count at the West Palm Beach facility and the acquisition of the Boca Raton rehab and detox facility during June 2024, which commenced revenue generating operations in January 2025, after obtaining all necessary regulatory approvals.

Operating Expenses

Operating expenses were $4,695,952 and $1,767,610 for the three months ended June 30, 2025 and 2024, respectively, an increase of $2,928,342 or 165.7%. Operating expenses include $2,512,033 from the acquisition of the business of ERC. Operating expenses from existing operations was $2,183,919 and $1,767,610 for the three months ended June 30, 2025 and 2024, respectively, an increase of $416,309 or 23.6%. The increase is primarily due to the following:

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General and administrative expenses was $942,650 and $363,230 for the three months ended June 30, 2025 and 2024, respectively, an increase of $579,420 or 159.5%. General and administrative expenses include $504,404 from the acquisition of the business of ERC. General and administrative expenses from existing operations was $438,246 and $363,230 for the three months ended June 30, 2025 and 2024, respectively, an increase of $75,016 or 20.7%. The increase is primarily due to an increase in client cost related to an increased patient count and the additional client costs incurred in the Boca Cove facility.

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Salaries and wages were $2,243,222 and $717,032 for the three months ended June 30, 2025 and 2024, respectively, an increase of $1,526,190 or 212.8%. Salaries and wages includes $1,340,530 from the acquisition of the business of ERC. Salaries and wages from existing operations was $902,692 and $717,032 for the three months ended June 30, 2025 and 2024, respectively, an increase of $185,660 or 25.9% The increase is due to the acquisition of the Boca Raton facility which was fully staffed up and operational beginning January 2025.

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Rent expense was $767,114 and $274,130 for the three months ended June 30, 2025 and 2024, respectively, an increase of $492,984 or 179.8%. Rent expense includes $390,679 from the acquisition of the business of ERC. Rental expense from existing operations was $376,435 and $274,130 for the three months ended June 30, 2025 and 2024, respectively, an increase of $102,305 or 37.3%. The increase is primarily due to the additional rent incurred at the Boca Cove detox facility of $96,249 which was acquired in June 2024.

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Professional fees were $419,701 and $301,132 for the three months ended June 30, 2025 and 2024, respectively, an increase of $118,569 or 39.4%. Professional fees includes $196,484 from the acquisition of the business of ERC. Professional fees from existing operations was $223,217 and $301,132 for the three months ended June 30, 2025 and 2024, respectively, a decrease of $77,915 or 25.9%. The decrease is primarily due to the professional fees incurred in the prior year on the acquisition of the non-controlling shareholders interest and the assets of the Boca Cove detox center.

●	Management fees were $120,000 and $0 for the three months ended June 30, 2025 and 2024, respectively, an increase of $120,000 or 100.0%. In the prior year, due to the performance of the Company, the CEO forfeited his management fee of $20,000 per month.

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Depreciation and amortization expense was $203,265 and $112,086 for the three months ended June 30, 2025 and 2024, respectively, an increase of $91,179 or 81.3%. Depreciation and amortization includes depreciation and amortization from the acquisition of the business of ERC amounting to $79,936. Depreciation and amortization expense from existing operations was $123,329 and $112,086 for the three months ended June 30, 2025 and 2024, respectively, an increase of $11,243 or 10.0%. The increase is primarily due to additional deprecation incurred on assets acquired with the Boca Raton facility in June 2024.

Operating income (loss)

Operating income was $209,468 and operating (loss) was $277,510 for the three months ended June 30, 2025 and 2024, respectively, an increase of $486,978 or 175.5%. The increase is due to the increase in revenue, primarily due to the acquisition of ERC and the increased revenue in our Florida locations, offset by an increase in operating expenses, as discussed in detail above.

Other income

Other income was $91 and $0 for the three months ended June 30, 2025 and 2024, respectively, an increase of $91 or 100.0%.

Interest income

Interest income was $466 and $523 for the three months ended June 30, 2025 and 2024, a decrease of $57 or 10.9%. The interest income is interest earned on positive cash balances during the current period.

Interest expense

Interest expense was $324,846 and $106,914 for the three months ended June 30, 2025 and 2024, respectively, an increase of $217,932 or 203.8%. Included in interest expense is interest of $101,532 related to the acquisition of the business of ERC. Interest expense on the existing business was $223,314 and $106,914 for the three months ended June 30, 2025 and 2024, respectively, an increase of $116,400, primarily due to an increase in interest expense related to default interest on letter of credit funding, additional interest on Series R promissory notes which were entered into during the period March to May 2024, and interest on promissory notes issued to acquire the assets of the Boca Raton facility and the non-controlling shareholders interest in the prior year.

Amortization of debt discount

Amortization of debt discount was $160,088 and $75,240 for the three months ended June 30, 2025 and 2024, respectively, an increase of $84,848 or 112.8%. Included in amortization of debt discount is amortization of $48,523 related to funding arrangements in Aria Kentucky. Amortization of debt discount in the existing business was $111,565 and $75,240, an increase of $36,325 or 48.3%. The amortization of debt discount relates primarily to short-term funding arrangements. In the current period the Company increased its funding arrangements to fund working capital requirements in both the Aria Kentucky operation and our Florida operations.

Foreign exchange movements

Foreign exchange movements were $(34,053) and $(6,314) for the three months ended June 30, 2025 and 2024, respectively, representing the realized exchange gains and (losses) on monetary assets and liabilities settled during the current year as well as mark to market adjustments on monetary assets and liabilities reflected on the balance sheet and denominated in Canadian Dollars. The Dollar weakened against the Canadian Dollar during the current period, resulting in an unrealized loss on Canadian denominated assets.

Net loss before income taxes

Net loss before income taxes was $308,963 and $465,275 for the three months ended June 30, 2025 and 2024, respectively, a decrease of $156,312 or 33.6%. The decrease is primarily due to the increase in operating income discussed above offset by the increase in interest expense, amortization of debt discount and foreign exchange movements, all discussed in detail above.

Taxation

Taxation was a credit of $13,434 and $0 for the three months ended June 30, 2025 and 2024, respectively, an increase of $13,434 or 100.0%. The taxation charge represents the deferred tax movement on the value of certain identifiable intangibles acquired from Edgewater.

Net loss

Net loss was $295,529 and $465,275 for the three months ended June 30, 2025 and 2024, respectively, a decrease of $169,746 or 36.5%. The decrease was primarily due to the decrease in net loss before income taxes and the movement in taxation as discussed above.

Results of operations for the six months ended June 30, 2025 and June 30, 2024.

Revenues

Revenues were $8,423,195 and $2,790,200 for the six months ended June 30, 2025 and 2024, respectively, an increase of $5,632,995 or 201.9%. Revenues include $4,802,502 from the acquisition of the business of ERC. Revenue from existing business was $3,620,693 and $2,790,200 for the six months ended June 30, 2025 and 2024, respectively, an increase of $830,493 or 29.8%. The increase is primarily due to the increase in patient count at the West Palm Beach facility and the acquisition of the Boca Raton rehab and detox facility during June 2024, which commenced revenue generating operations in January 2025, after obtaining all necessary regulatory approvals.

Operating Expenses

Operating expenses were $8,861,129 and $3,296,785 for the six months ended June 30, 2025 and 2024, respectively, an increase of $5,564,344 or 168.8%. Operating expenses include $4,658,269 from the acquisition of the business of ERC. Operating expenses from existing operations was $4,202,860 and $3,296,785 for the six months ended June 30, 2025 and 2024, respectively, an increase of $906,075 or 27.5%. The increase is primarily due to the following:

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General and administrative expenses was $1,752,395 and $637,776 for the six months ended June 30, 2025 and 2024, respectively, an increase of $1,114,619 or 174.8%. General and administrative expenses include $919,678 from the acquisition of the business of ERC. General and administrative expenses from existing operations was $832,717 and $637,776 for the six months ended June 30, 2025 and 2024, respectively, an increase of $194,941 or 30.6%. The increase is primarily due to an increase in client costs related to an increased patient count and the additional client costs incurred in the Boca Cove facility.

●

Salaries and wages were $4,306,520 and $1,444,773 for the six months ended June 30, 2025 and 2024, respectively, an increase of $2,861,747 or 198.1%. Salaries and wages includes $2,518,854 from the acquisition of the business of ERC. Salaries and wages from existing operations was $1,787,666 and $1,444,773 for the six months ended June 30, 2025 and 2024, respectively, an increase of $342,893 or 23.7% The increase is due to the acquisition of the Boca Raton facility which was fully staffed up and operational beginning January 2025 and an increase in advertising expenditure to attract customers to our facilities.

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Rent expense was $1,506,915 and $539,262 for the six months ended June 30, 2025 and 2024, respectively, an increase of $967,653 or 179.4%. Rent expense includes $743,182 from the acquisition of the business of ERC. Rental expense from existing operations was $763,733 and $539,262 for the six months ended June 30, 2025 and 2024, respectively, an increase of $224,471 or 41.6%. The increase is primarily due to the additional rent incurred at the Boca Cove detox facility of $190,513 which was acquired in June 2024 and other rentals which escalated during the current period.

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Professional fees were $775,813 and $455,682 for the six months ended June 30, 2025 and 2024, respectively, an increase of $320,131 or 70.3%. Professional fees includes $322,927 from the acquisition of the business of ERC. Professional fees from existing operations was $452,886 and $455,682 for the six months ended June 30, 2025 and 2024, respectively, a decrease of $2,796 or 0.6%. Professional fees include fees incurred for the acquisition of the Edgewater facility and in the prior period due to the acquisition of the non-controlling shareholders interest and the assets of the Boca Cove detox center.

●	Management fees were $120,000 and $0 for the six months ended June 30, 2025 and 2024, respectively, an increase of $120,000 or 100.0%. In the prior year, due to the performance of the Company, the CEO forfeited his management fee of $20,000 per month.

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Depreciation and amortization expense was $399,486 and $223,292 for the six months ended June 30, 2025 and 2024, respectively, an increase of $176,194 or 78.9%. Depreciation and amortization includes depreciation and amortization from the acquisition of the business of ERC amounting to $153,628. Depreciation and amortization expense from existing operations was $245,858 and $223,292 for the six months ended June 30, 2025 and 2024, respectively, an increase of $22,566 or 10.1%. The increase is primarily due to additional deprecation incurred on assets acquired with the Boca Raton facility in June 2024.

Operating loss

The operating loss was $437,934 and $506,585 for the six months ended June 30, 2025 and 2024, respectively, a decrease of $68,651 or 13.6%. The decrease is due to the increase in revenue, primarily due to the acquisition of ARC and the increased revenue in our Florida locations, offset by an increase in operating expenses, as discussed in detail above.

Other income

Other income was $172,331 and $0 for the six months ended June 30, 2025 and 2024, respectively, an increase of $172,331 or 100.0%. The increase in other income was primarily related to management fees earned from Edgewater Recovery based on business profitability during the management period and an employee retention credit received from the federal government during the current period.

Interest income

Interest income was $1,685 and $1,098 for the six months ended June 30, 2025 and 2024, an increase of $587 or 53.5%. The interest income is interest earned on positive cash balances during the current period.

Interest expense

Interest expense was $617,703 and $200,100 for the six months ended June 30, 2025 and 2024, respectively, an increase of $417,603 or 208.7%. Included in interest expense is interest of $193,560 related to the acquisition of the business of ERC. Interest expense on the existing business was $424,143 and $200,100 for the six months ended June 30, 2025 and 2024, respectively, an increase of $224,043 or 112.0%, primarily due to an increase in interest expense related to default interest on letter of credit funding, additional interest on Series R promissory notes which were entered into during the period March to May 2024, and interest on promissory notes issued to acquire the assets of the Boca Raton facility and the non-controlling shareholders interest in the prior year.

Amortization of debt discount

Amortization of debt discount was $289,970 and $138,402 for the six months ended June 30, 2025 and 2024, respectively, an increase of $151,568 or 109.5%. Included in amortization of debt discount is amortization of $48,523 related to funding arrangements in Aria Kentucky. Amortization of debt discount in the existing business was $241,447 and $138,402, an increase of $103,045 or 74.5%. The amortization of debt discount relates primarily to short-term funding arrangements. In the current period the Company increased its funding arrangements to fund working capital requirements in both the Aria Kentucky operation and our Florida operations.

Foreign exchange movements

Foreign exchange movements were $(34,811) and $4,511 for the six months ended June 30, 2025 and 2024, respectively, representing the realized exchange gains and (losses) on monetary assets and liabilities settled during the current year as well as mark to market adjustments on monetary assets and liabilities reflected on the balance sheet and denominated in Canadian Dollars. The Dollar weakened against the Canadian Dollar during the current period, resulting in an unrealized loss on Canadian denominated assets.

Net loss before income taxes

Net loss before income taxes was $1,206,402 and $839,478 for the six months ended June 30, 2025 and 2024, respectively, an increase of $366,984 or 43.7%. The increase is primarily due to the increase in interest expense and amortization of debt discount, offset by the decrease in operating loss and other income, all discussed in detail above.

Taxation

Taxation was a credit of $25,766 and $0 for the six months ended June 30, 2025 and 2024, respectively, an increase of $25,766 or 100.0%. The taxation charge represents the deferred tax movement on the value of certain identifiable intangibles acquired from Edgewater.

Net loss

Net loss was $1,180,626 and $839,478 for the six months ended June 30, 2025 and 2024, respectively, an increase of $341,148 or 40.6%. The increase was primarily due to the increase in net loss before income taxes and the movement in taxation as discussed above.

Commitments and contingencies

The Company has commitments under operating and finance leases as follows:

Finance lease liability

The amount of future minimum lease payments under finance leases at June 30, 2025 is as follows:

		Amount
Remainder of 2025		$	4,915
2026			6,195
2027			1,707
			12,817

Operating lease liability

The amount of future minimum lease payments under operating leases are as follows:

		Amount
Remainder of 2025		$	1,340,124
2026			2,688,015
2027			2,553,337
2028			2,230,672
2029			2,230,672
2029 and thereafter			19,069,434
			30,112,254

The Company also has commitments under convertible loans and short-term loans. If the convertible loans, as disclosed in note 11, above are not converted they will need to be repaid.

Liquidity and Capital Resources

Cash used in operating activities was $462,759 and $269,920 for the six months ended June 30, 2025 and 2024, respectively, an increase of $192,839. Cash used in operating activities from the acquisition of the business of ERC was $191,638. The cash used in operating activities from the existing business was $271,121 and $269,920 for the six months ended June 30, 2025 and 2024, respectively, a decrease of $1,201.

The increase is primarily due to the following:

●	An increase in net loss of $341,148, as discussed under results of operations above.

●

Offset by an increase in the movement of non-cash items of $840,978, primarily due to the movement in the right of use asset of $435,980, the movement in provision for credit losses of $103,012, which relates to the acquisition of the business of ERC, the movement in depreciation and amortization of $176,194 and the movement in amortization of debt discount of $151,568.

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Working capital movements decreased by $(692,669) primarily due to an increase in the movements in accounts receivable of $(754,413), an increase in the movement of operating lease liabilities of $(401,437), offset by the increase in the movement of accounts payable and accrued liabilities of $384,513 and an increase in the movements of related party accruals of $50,344.

Cash used in investing activities was $54,759 and $1,007,273 for the six months ended June 30, 2025 and 2024, respectively. In the current period, we acquired the business of ERC for gross proceeds of $250,000 add back cash on acquisition of $299,492, resulting in a net cash generated on acquisition of $49,492. In the current period we invested in property and equipment post-acquisition of ERC of $78,820 and deposits related to properties leased from third parties and certain new utility deposits of $25,431. In the prior period we paid $625,000 for the acquisition of the minority interest in ATHI, a further $240,000 for the acquisition of the assets of Boca Cove Detox and a further $83,393 for the assumption of the real property deposit on the Boca Cove facility. Property and equipment purchased during the prior period was $58,880.

Cash provided by financing activities was $693,373 and $1,254,820 for the six months ended June 30, 2025 and 2024. During the current period, we raised $1,556,375 from funding arrangements and repaid $1,076,921, a net movement of $479,454, we received an additional bank loan of $300,000 and $240,000 from the issuance of two promissory notes to investors. We repaid assumed liabilities of $159,085, short term notes of $89,877, promissory notes of $70,000, and received proceeds from related parties of $31,000 during the current period. In the prior period the Company received $1,732,000 and repaid $(570,000) of short-term notes and received $295,000 and repaid $232,733 from funding arrangements, in addition $52,215 was received from related parties.

Over the next twelve months we estimate that the Company will require approximately $1.5 million in working capital as it continues to develop its Florida and Kentucky operations. We are also exploring several other treatment center options and sources of patients throughout the country. The Company may have to raise 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.

Going Concern

Our unaudited condensed consolidated financial statements have been prepared in accordance with US GAAP applicable to a going concern, which assumes that we will be able to meet our obligations and continue our operations in the normal course of business. At June 30, 2025, we had a working capital deficiency of $12.2 million, and total liabilities in excess of assets in the amount of $8.6 million. We believe that current available resources will not be sufficient to fund our planned expenditures over the next 12 months. Accordingly, we will be dependent upon the raising of additional capital through placement of common shares, and/or debt financing in order to implement our business plan and generate sufficient revenue in excess of costs. If we raise 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 we raise additional funds by issuing debt, we may be subject to limitations on our operations, through debt covenants or other restrictions. If we obtain additional funds through arrangements with collaborators or strategic partners, we may be required to relinquish our rights to certain geographical areas, or techniques that it might otherwise seek to retain. There is no assurance that we will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on our 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 we be unable to continue as a going concern.

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.