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Greenbrook TMS Announces Settlement of Ongoing Litigation

PRNewswire 21-Nov-2023 5:00 PM

TORONTO, Nov. 21, 2023 /PRNewswire/ - Greenbrook TMS Inc. (NASDAQ:GBNH) ("Greenbrook" or the "Company") announced today that the Company has entered into a settlement agreement with the plaintiff regarding the previously-announced breach of contract claim in connection with an approximately $2 million promissory note that was issued to a lender associated with Mr. Benjamin Klein, a seller of Check Five LLC (doing business as "Success TMS"), that the Company acquired in July 2022 (the "Klein Note Action"). Under the terms of the settlement agreement, the Company will make payments to the plaintiff in the total amount of approximately $2.2 million, structured as an initial immediate payment of $250,000, weekly payments of $75,000 thereafter up to and until the May 1, 2024 maturity date of the promissory note, upon which the balance owing will be due. In exchange for entry into the settlement agreement, the plaintiffs will immediately dismiss, with prejudice, the Klein Note Action and both parties will provide a mutual release of claims.

Contemporaneous with, but not included in the settlement agreement, the parties have also agreed to stay the separate complaint concerning alleged disputes arising out of the purchase agreement for the acquisition of Success TMS and other related matters (the "Purchase Agreement Claims" and, collectively with the Klein Note Action, the "Klein Matters") for up to six months, subject to court approval.

Mr. Benjamin Klein, a seller of Success TMS and a plaintiff in the Klein Matters, is a former director and a significant shareholder of Greenbrook. Mr. Klein was also the Chief Operating Officer of Greenbrook from July 2022 until his termination by the Company effective May 4, 2023.

About Greenbrook TMS Inc.

Operating through 130 Company-operated treatment centers, Greenbrook is a leading provider of Transcranial Magnetic Stimulation ("TMS") and Spravato® (esketamine nasal spray), FDA-cleared, non-invasive therapies for the treatment of Major Depressive Disorder ("MDD") and other mental health disorders, in the United States. TMS therapy provides local electromagnetic stimulation to specific brain regions known to be directly associated with mood regulation. Spravato® is offered to treat adults with treatment-resistant depression and depressive symptoms in adults with MDD with suicidal thoughts or actions. Greenbrook has provided more than 1.3 million treatments to over 40,000 patients struggling with depression.

Cautionary Note Regarding Forward-Looking Information

Certain statements contained in this press release, including statements relating to the Klein Matters and the Settlement Agreement, 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. Particularly, information regarding the status of the Klein Matters and compliance with the terms of the settlement agreement, may be forward-looking information. 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 press release, 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 (the "Common Shares") reducing the Company's ability to raise capital; inability to satisfy debt covenants under the Company's credit facility with Madryn Asset Management, LP (the "Credit Facility") and the potential acceleration of indebtedness; risks related to resolution of the Purchase Agreement Claims and compliance with the terms of the settlement agreement; risks related to the ability to continue to negotiate amendments to the Credit Facility 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 Company's recent delisting notification and potential inability to regain compliance with the Nasdaq Stock Market's listing rules; 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 United States Securities and Exchange Commission from time to time, available at and, 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 press release are made as of the date of this press release, 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.

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SOURCE Greenbrook TMS Inc.