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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 15, 2024
GREENBROOK TMS INC.
(Exact name of registrant as specified in its
charter)
Ontario |
|
001-40199 |
|
98-1512724 |
(State or Other Jurisdiction
of Incorporation) |
|
(Commission
File No.) |
|
(IRS Employee
Identification No.) |
890 Yonge Street, 7th Floor
Toronto, Ontario Canada
M4W 3P4
(Address of Principal Executive Offices)
(866) 928-6076
(Registrant’s telephone number, including
area code)
(Former name or former address, if changed since
last report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
|
Trading
Symbol(s) |
|
Name of Each Exchange
on Which Registered |
Common Shares, without par value |
|
GBNH(1) |
|
***(1) |
(1) On February 26, 2024, the common shares (“Common Shares”)
of Greenbrook TMS Inc. (the “Company”) were suspended from trading on the Nasdaq Capital Market of the Nasdaq Stock
Market LLC (“Nasdaq”). On March 22, 2024, the Common Shares began trading on the OTCQB Market, operated by OTC Markets
Group Inc under the symbol “GBNHF”. On April 1, 2024, the Company filed a Form 25 with the Securities and Exchange Commission
(the “SEC”) to complete the delisting of the Common Shares from Nasdaq, with the delisting becoming effective 10 days
after such filing. The deregistration of the Common Shares under Section 12(b) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), will become effective 90 days after the filing of the Form 25, or such shorter period as the SEC may
determine.
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Exchange Act (§240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act.
| Item 1.01 | Entry into a Material Definitive Agreement. |
On
April 15, 2024, the Company entered into the thirtieth amendment (the “Amendment”) to the Company’s credit
agreement, dated as of July 14, 2022 (as previously amended and as amended by the Amendment, the “Credit Agreement”),
by and among the Company, certain of its subsidiaries party thereto as guarantors, Madryn Fund Administration, LLC, as administrative
agent (“Madryn”) and the lenders party thereto. Pursuant to the Amendment, the Company borrowed US$2,030,457 in senior
secured term loans (the “New Loan”), the proceeds of which are expected to be used by the Company for general corporate
and working capital purposes.
After
giving effect to the Amendment and the borrowing of the New Loan, the aggregate principal amount outstanding under the Credit Agreement
is approximately US$96 million (collectively, the “Loans”). The Loans accrue interest at a rate per annum equal to
9.0% plus the 3-month term Secured Overnight Financing Rate (subject to a floor of 1.5%) plus 0.10%. The Loans mature over 63 months and
provide for four years of interest-only payments. The outstanding principal balance is due in five equal quarterly installments beginning
on September 30, 2026. The Company has granted a lien on, and security interest in, all assets of the Company as security for the
performance and prompt payment of the obligations of the Loan Parties under the Credit Agreement.
The
Company separately received a waiver to the Credit Agreement on April 16, 2024 which waived the affirmative covenant that requires
the Company to deliver, within 90 days of the fiscal year ending December 31, 2023, a report and opinion of an independent certified
public accountant regarding the Company’s audited fiscal year-end financial statements 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 until April 26,
2024.
The
terms of the Credit Agreement require the Company to satisfy various affirmative and negative covenants and to meet certain financial
tests, including but not limited to, financial covenants that require the Company to (i) generate consolidated revenues for any 4
consecutive quarter period, measured quarterly for the 4 consecutive quarter period prior to the end of each quarter, in amounts that
represent a specified percentage of the Company’s projected consolidated revenues for such measurement periods, assuming modest
growth over time; and (ii) maintain minimum liquidity of US$300,000 until April 30, 2024 and US$3.0 million thereafter, tested
on a daily basis. In addition, the Credit Agreement contains affirmative and negative covenants that limit, among other things, the Company’s
ability to incur additional indebtedness, incur certain liens, declare certain dividends and engage in certain types of transactions.
The Credit Agreement also contains affirmative covenants that require the Company to deliver, within 90 days of each fiscal year end,
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 noted above, the delivery of the financial statements and auditors’ report has been waived for the fiscal year ended
December 31, 2023, until April 26, 2024.
The
Credit Agreement contains a number of events of default including, without limitation, (a) non-payment of principal when due; (b) failure
to pay interest, fees or repayment premiums within 3 business days after the same becomes due; (c) failure to pay other amounts under
the Credit Agreement and Investment Documents (as defined in the Credit Agreement) within 5 business days after the same becomes due;
(d) failure to comply with the covenants in the Credit Agreement (subject to specified grace periods); (e) cross-default to
indebtedness in an aggregate principal amount in excess of US$1,000,000; (f) the initiation of insolvency proceedings; (g) the
Company or any of its Subsidiaries (as defined in the Credit Agreement) becomes unable to, admits in writing its inability to, or fails
to pay, its debts as due; (h) the occurrence of specified events which may have a Material Adverse Effect (as defined in the Credit
Agreement), as further described in Section 9.01(l) of the Credit Agreement; and (i) entry into a final judgment against
the Company (or any subsidiary) for the payment of money in an aggregate amount exceeding US$1,000,000 or any non-monetary final judgment
that could reasonably be expected to have a Material Adverse Effect (as defined in the Credit Agreement) and, in either case, enforcement
proceedings are commenced by a creditor or there is a period of 30 consecutive days during which a stay of enforcement is not in effect.
Additionally,
affiliates of Madryn are collectively the Company’s largest shareholder. As reported in Madryn Asset Management, LP’s amended
Schedule 13D filed with the SEC on April 8, 2024, affiliates of Madryn beneficially own 63.4% of the Company’s Common Shares
upon full conversion of the convertible instruments held under both the terms of the Credit Agreement and the note purchase agreement
entered into by, among others, the Company and affiliates of Madryn on August 15, 2023.
The
foregoing is not a complete discussion of the Credit Agreement and is qualified in its entirety by reference to the full text of the Credit
Agreement. A copy of the seventh amended credit agreement, dated as of March 24, 2023 (the “Seventh Amended Credit Agreement”)
was filed as Exhibit 4.7 to the Company’s annual report on Form 20-F for the year ended December 31, 2022, and filed
with the SEC on April 18, 2023. Defined terms used herein that are not defined are as defined in the Seventh Amended Credit Agreement.
All such defined terms retain the same definition as in the current Credit Agreement, which will be filed as an exhibit to the Company’s
annual report on Form 10-K for the year ended December 31, 2023. Pursuant to Item 601(b)(10)(iv) of Regulation S-K, the
Company intends to redact from the filed copy of the Credit Agreement certain information that is both (i) not material and (ii) is
the type of information that the Company treats as private or confidential.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of
a Registrant. |
The
information provided in Item 1.01 is incorporated by reference herein.
| Item 4.02 | Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim
Review. |
(a) On
April 16, 2024, the Audit Committee of the Board of Directors of the Company concluded, after consultation with the Company’s
management and its independent auditors, that the Company’s previously-issued audited annual financial statements for the year ended
December 31, 2022 (“Fiscal 2022”), prepared in accordance with International Financial Reporting Standards as
issued by the International Accounting Statements (“IFRS”) contained errors which resulted in 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. There is also an understatement of total shareholders’ deficit in the amount of $4.3 million
as at December 31, 2021, and for similar amounts for the periods prior to December 31, 2021. Accordingly, the Audit Committee determined that the
Company’s previously issued financial statements for Fiscal 2022 should no longer be relied upon.
In
addition, on April 16, 2024, the Audit Committee also concluded that the Company’s quarterly condensed interim consolidated financial statements
previously filed in 2023 contained cumulative misstatements year to date for the quarter ended September 30, 2023, of an overstatement
of revenue and understatement of loss in the amount of $1.9 million and overstatement of accounts receivable of $8.5 million. Accordingly,
the Audit Committee determined that these previously issued quarterly condensed interim consolidated financial statements should no longer
be relied upon.
The
foregoing errors were the result of inappropriate application of variable consideration methodologies in the recognition of revenue
and the Company not having effectively designed and maintained controls over the effective preparation, review, and approval of its adjustment
to variable consideration.
The
Company intends to file its Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”),
containing annual audited financial statements prepared in accordance with U.S. GAAP that will reflect correction of the foregoing errors,
as soon as possible. As required under Canadian securities laws as a result of the Company’s change in financial reporting framework, the
Company also intends to re-file its quarterly financial statements, prepared in accordance with U.S. GAAP, for the first, second and third
quarters of 2023, which the Company plans to file on a Current Report on Form 8-K on or about the date of filing the Annual Report.
The Company’s management
and Audit Committee discussed the matters disclosed in this Current Report on Form 8-K with the Company’s independent registered
public accounting firm, KPMG LLP.
* * * * * * * * * * * * *
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements contained in this Current Report on Form 8-K, including statements relating to the New Loan and the expected use of proceeds
therefrom as well as the filing of the Annual Report, may constitute “forward-looking information” within the meaning of applicable
securities laws in Canada and “forward-looking statements” within the meaning of the United States Private Securities Litigation
Reform Act of 1995 (collectively, “forward-looking information”). Forward-looking information may relate to the Company’s
future financial and liquidity outlook and anticipated events or results and may include information regarding the Company’s business,
financial position, results of operations, business strategy, growth plans and strategies, technological development and implementation,
budgets, operations, financial results, taxes, dividend policy, plans and objectives. In some cases, forward-looking information can be
identified by the use of forward-looking terminology such as “plans”, “targets”, “expects” or “does
not expect”, “is expected”, “an opportunity exists”, “budget”, “scheduled”, “estimates”,
“outlook”, “forecasts”, “projection”, “prospects”, “strategy”, “intends”,
“anticipates”, “does not anticipate”, “believes”, or variations of such words and phrases or statements
that certain actions, events or results “may”, “should”, “could”, “would”, “might”,
“will”, “will be taken”, “occur” or “be achieved”. In addition, any statements that refer
to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information.
Statements containing forward-looking information are not facts but instead represent management’s expectations, estimates and projections
regarding future events or circumstances.
Forward-looking
information is necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by the Company as
of the date of this Current Report on Form 8-K, are subject to known and unknown risks, uncertainties, assumptions and other factors
that may cause the actual results, level of activity, performance or achievements or future events or developments to differ materially
from those expressed or implied by the forward-looking statements, including, without limitation: macroeconomic factors such as inflation
and recessionary conditions, substantial doubt regarding the Company’s ability to continue as a going concern due to recurring losses
from operations; inability to increase cash flow and/or raise sufficient capital to support the Company’s operating activities and
fund its cash obligations, repay indebtedness and satisfy the Company’s working capital needs and debt obligations; prolonged decline
in the price of the Company’s Common Shares reducing the Company’s ability to raise capital; inability to satisfy debt covenants
under the Credit Agreement and the potential acceleration of indebtedness; risks related to the resolution of the Company’s ongoing
litigation with Benjamin Klein and compliance with the terms of their settlement agreement; risks related to the ability to continue to
negotiate amendments to the Credit Agreement to prevent a default; risks relating to the Company’s ability to deliver and execute
on the previously-announced restructuring plan (the “Restructuring Plan”) and the possible failure to complete the
Restructuring Plan on terms acceptable to the Company or its suppliers (including Neuronetics, Inc.), or at all; risks relating to
maintaining an active, liquid and orderly trading market for Common Shares as a result of the delisting of the Common Shares from Nasdaq;
risks relating to the Company’s ability to realize expected cost-savings and other anticipated benefits from the Restructuring Plan;
risks related to the Company’s negative cash flows, liquidity and its ability to secure additional financing; increases in indebtedness
levels causing a reduction in financial flexibility; inability to achieve or sustain profitability in the future; inability to secure
additional financing to fund losses from operations and satisfy the Company’s debt obligations; risks relating to strategic alternatives,
including restructuring or refinancing of the Company’s debt, seeking additional debt or equity capital, reducing or delaying the
Company’s business activities and strategic initiatives, or selling assets, other strategic transactions and/or other measures,
including obtaining bankruptcy protection, and the terms, value and timing of any transaction resulting from that process; claims made
by or against the Company, which may be resolved unfavorably to us; risks relating to the Company’s dependence on Neuronetics, Inc.
as its exclusive supplier of TMS devices. Additional risks and uncertainties are discussed in the Company’s materials filed with
the Canadian securities regulatory authorities and the SEC from time to time, available at www.sedarplus.ca and www.sec.gov, respectively.
These factors are not intended to represent a complete list of the factors that could affect the Company; however, these factors should
be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. The forward-looking statements
contained in this Current Report on Form 8-K are made as of the date of this report, and the Company expressly disclaims any obligation
to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a
result of new information, future events or otherwise, except as required by law.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
Exhibit
Number |
|
Description |
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: April 19, 2024
|
Greenbrook TMS Inc. |
|
|
|
|
By: |
/s/ Bill Leonard |
|
Name: |
Bill Leonard |
|
Title: |
President & Chief Executive Officer |
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