Greenbrook TMS Inc. (NASDAQ:GBNH) (“Greenbrook” or the “Company“) today announced the Company entered into a note purchase agreement (the “Note Purchase Agreement“) with Greybrook Health Inc. (“Greybrook Health“) and certain affiliates of Madryn Fund Administration, LLC (“Madryn“) whereby the Company issued and sold $2 million aggregate principal amount of unsecured subordinated convertible promissory notes (the “Subordinated Convertible Notes“) to Greybrook Health and certain affiliates of Madryn.
The Subordinated Convertible Notes bear interest at a rate consistent with the Company’s credit facility with Madryn (the “Madryn Credit Facility“) and mature on March 31, 2028, or earlier in the event of a change of control, acceleration of other indebtedness or six (6) months following repayment or refinancing of all loans under the Madryn Credit Facility (the “Madryn Loans“). The Subordinated Convertible Notes are subordinated to the Madryn Loans and to the obligations of the Company under the secured promissory note and guaranty agreement with Neuronetics, Inc.
The Subordinated Convertible Notes are convertible into common shares of the Company (“Common Shares“) at any time at the election of holders of the Subordinated Convertible Notes, or on a mandatory basis by all noteholders at the request of Madryn, at a conversion price (the “Conversion Price“) equal to the lesser of (a) 85% of the closing price per Common Share on Nasdaq or any other market as of the closing date for such Subordinated Convertible Notes (as adjusted from time to time in accordance with the note purchase agreement, the “Reference Conversion Price“), with the Reference Conversion Price in effect as of August 15, 2023 being $0.3315 and (b)(i) 85% of the 30-day volume weighted average trading price of the Common Shares prior to conversion, or (ii) if the Common Shares are not listed on any of Nasdaq or another trading market at the time of conversion, a per share price based equal to 85% of the fair market value per Common Share as of such date (for such purposes, determined in good faith by the Company’s board of directors, acting reasonably); provided, that, in any event, the Conversion Price shall not be lower than $0.078. The Conversion Price is also subject to customary anti-dilution adjustments.
The proceeds of the Subordinated Convertible Notes are expected to be used by the Company for general corporate and working capital purposes. The Company is also currently considering additional near-term financing options to address its future liquidity needs.
In addition, the Company entered into an amendment to the Madryn Credit Facility to extend the period during which the Company’s minimum liquidity covenant is reduced from $3,000,000 to $300,000 to August 31, 2023.
This press release does not constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of any of the Subordinated Convertible Notes or the Common Shares issuable upon conversion thereof (collectively, the “Securities“) in any jurisdiction in which such offer, solicitation or sale would be unlawful. The Securities have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act“) or any state securities laws and may not be offered or sold within the United States or to, or for account or benefit of, U.S. persons (as defined in Regulation S under the U.S. Securities Act) except pursuant to an available exemption under the U.S. Securities Act and compliance with, or exemption from, applicable U.S. state securities laws.
MI 61-101 Disclosure
Madryn and Greybrook Health are insiders of the Company. Accordingly, the foregoing transactions are considered “related party transactions” for purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101“). The Company is relying on exemptions from the formal valuation and minority shareholder approval requirements available under MI 61-101. The Company is exempt from the formal valuation requirement in section 5.4 of MI 61-101 in reliance on section 5.5(a) of MI 61-101 as the fair market value of the transaction, insofar as it involves interested parties, is not more than 25% of the Company’s market capitalization. Additionally, the Company is exempt from the minority shareholder approval requirement in section 5.6 of MI 61-101 in reliance on section 5.7(1)(a) as the fair market value of the transaction, insofar as it involves interested parties, is not more than 25% of the Company’s market capitalization.
