Greenbrook TMS Inc. [GBNH] Filings

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 20-F

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For the fiscal year ended December 31, 2021

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For the transition period from                      to

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Date of event requiring this shell company report

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For the transition period from ____________ to ____________________

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Commission file number: 001-40199

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Greenbrook TMS Inc.

(Exact name of Registrant as specified in its charter)

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Not Applicable

(Translation of Registrant’s name into English)

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Ontario, Canada

(Jurisdiction of incorporation or organization)

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890 Yonge Street, 7th Floor, Toronto, Ontario, Canada M4W 3P4

(Address of principal executive offices)

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Bill Leonard, Chief Executive Officer; Tel: (416) 322-9700

890 Yonge Street, 7th Floor, Toronto, Ontario, Canada M4W 3P4
(Name, Telephone, E-mail, and/or Facsimile number and Address of Company Contact Person)

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Securities registered or to be registered pursuant to Section 12(b) of the Act:

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Securities registered or to be registered pursuant to Section 12(g) of the Act: None

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Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

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Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 17,801,885 common shares as of December 31, 2021

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Indicate by check mark whether Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes     ☐   No    ☒

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If this report is an annual or transition report, indicate by check mark if Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.     Yes    ☐    No    ☒

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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes    ☒   No    ☐

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes   ☒    No   ☐

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Indicate by check mark whether Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “accelerated filer”, “large accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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. ☐

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Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing:

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If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item Registrant has elected to follow.    Item 17 ☐  Item 18 ☐

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If this is an annual report, indicate by check mark whether Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ☐   No   ☒

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GENERAL MATTERS

In this Annual Report on Form 20-F (this “Annual Report”), unless otherwise noted or the context requires: (a) all references to the “Company”, “Greenbrook”, “we”, “us” or “our” refer to Greenbrook TMS Inc. together with our subsidiaries, on a consolidated basis, as of the date hereof; (b) all references to “federal” refer to the departments and agencies of the federal government of the United States of America (“United States” or “U.S.”); and (c) the defined terms below shall have the following meanings, respectively:

“Fiscal 2019” means our financial year ended December 31, 2019.

“Fiscal 2020” means our financial year ended December 31, 2020.

“Fiscal 2021” means our financial year ended December 31, 2021.

“Q4 2021” means our financial quarter for the three-month period ended December 31, 2021.

“Q3 2021” means our financial quarter for the three-month period ended September 30, 2021.

“Q4 2020” means our financial quarter for the three-month period ended December 31, 2020.

We report under International Financial Reporting Standards, as issued by the International Accounting Standards Board (“IFRS”). None of our financial statements were prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).

We present our financial statements in United States dollars and disclose certain financial information in United States dollars. All references to “$”, “US$” or “U.S. dollars” are to United States dollars and references to “C$” are to Canadian dollars. Certain totals, subtotals and percentages throughout this Annual Report may not reconcile due to rounding.

On January 12, 2021, at a special meeting of shareholders, our shareholders approved a special resolution authorizing our board of directors (the “Board”) to amend our articles of incorporation (the “Articles”) to effect a consolidation (the “Share Consolidation”) of all of the issued and outstanding common shares of the Company (the “Common Shares”), such that the trading price of the Common Shares following the Share Consolidation would permit us to qualify for listing on the Nasdaq Capital Market of The Nasdaq Stock Market LLC (“Nasdaq”). On February 1, 2021, the Board effected the Share Consolidation on the basis of one post-consolidation Common Share for every five pre-consolidation Common Shares and on February 4, 2021, the Common Shares began trading on a post-consolidation basis on the Toronto Stock Exchange (“TSX”). The Common Shares began trading on Nasdaq on March 16, 2021 under the symbol “GBNH”. Unless otherwise indicated, all Common Share numbers in this Annual Report have been adjusted to give effect to the Share Consolidation.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the information contained in this Annual Report constitutes “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”).

Particularly, information regarding the impact of the COVID-19 (coronavirus) pandemic (“COVID-19”) and our response thereto, our expectations regarding the continued expansion of the Spravato® (esketamine nasal spray) offering (the “Spravato® Program”) and our potential to enhance profit margins and diversify total revenue, the impact of the Achieve TMS East/Central Acquisition (as defined below) on our business and the earn-out consideration payable in respect thereof, our anticipated expansion opportunities, our expectations regarding our liquidity and available financing, and our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate, is 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”, “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.

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Discussions containing forward-looking information may be found, among other places, under Item 3.D, “Key Information—Risk Factors,” Item 4.B, “Information on the Company—Business Overview—Industry Overview—Our Business Model,” Item 5, “Operating and Financial Review and Prospects,” and Item 8.A, “Financial Information—Consolidated Statements and Other Financial Information—Dividend Policy”.

This forward-looking information and other forward-looking information are based on our opinions, estimates and assumptions in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we currently believe are appropriate and reasonable in the circumstances. Despite a careful process to prepare and review the forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct.

The forward-looking information in this Annual Report is necessarily based on a number of opinions, estimates and assumptions that we considered appropriate and reasonable as of the date such statements were made. It is also subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including the following risk factors described in greater detail under the heading “Key Information—Risk Factors” in Item 3.D of this Annual Report:

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If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. The opinions, estimates or assumptions referred to above and described in greater detail in “Key Information—Risk Factors” in Item 3.D of this Annual Report should be considered carefully by readers.

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Various assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. Those assumptions and factors are based on information currently available to us, including information obtained from third-party industry analysts and other third-party sources. In some instances, material assumptions and factors are presented or discussed elsewhere in this Annual Report in connection with the statements or disclosure containing the forward-looking information. Readers are cautioned that the following list of material factors and assumptions is not exhaustive. The factors and assumptions include, but are not limited to:

Although we have attempted to identify important risk factors that could cause actual results or future events to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate. Accordingly, readers should not place undue reliance on forward-looking information, which speaks only to opinions, estimates and assumptions as of the date made. The forward-looking information contained in this Annual Report represents our expectations as of the date of this Annual Report (or as of the date they are otherwise stated to be made) and are subject to change after such date. We disclaim any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable laws in Canada and the United States.

All of the forward-looking information contained in this Annual Report is expressly qualified by the foregoing cautionary statements.

CAUTIONARY NOTE REGARDING

NON-IFRS MEASURES AND INDUSTRY METRICS

This Annual Report makes reference to certain non-IFRS measures including certain metrics specific to the industry in which we operate. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures are not intended to represent, and should not be considered as alternatives to, loss attributable to the common shareholders of Greenbrook or other performance measures derived in accordance with IFRS as measures of operating performance or operating cash flows or as a measure of liquidity. See Item 5, “Operating and Financial Review and Prospects” for further information regarding our use of non-IFRS measures in the preparation of our financial information.

TRADEMARKS

This Annual Report includes references to trademarks and trade names of other companies, which trademarks and trade names are the property of their respective owners. This Annual Report also includes references to certain of our trademarks and trade names which are protected under applicable intellectual property laws and are our property. See Item 4.B, “Information on the Company—Business Overview—Intellectual Property”. Solely for convenience, trademarks and trade names referred to in this Annual Report may appear without the ® or TM symbol, but such references are not intended to indicate, in any way, that we or the applicable owner of such intellectual property rights will not assert, to the fullest extent under applicable law, our or their rights to these trademarks and trade names.

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MARKET AND INDUSTRY DATA

Market and industry data presented throughout this Annual Report were obtained from third party sources, industry reports, journals, studies and publications, websites and other publicly available information, as well as industry and other data prepared by us or on our behalf on the basis of our knowledge of the health care industry, markets and economies (including our opinions, estimates and assumptions relating to such industry, markets and economies based on that knowledge). Certain statistical information and market research contained in this Annual Report, such as the results of studies or surveys, are based on surveys or studies conducted by independent third parties. We believe that the industry, market and economic data presented throughout this Annual Report is accurate and, with respect to data prepared by us or on our behalf, that our opinions, estimates and assumptions are currently appropriate and reasonable, but there can be no assurance as to the accuracy or completeness thereof. Actual outcomes may vary materially from those forecast in such reports or publications, and the prospect for material variation can be expected to increase as the length of the forecast period increases. Although we believe the market and industry data included in this Annual Report to be reliable, and we are responsible for all of the disclosure in this Annual Report, we caution you that we have not independently verified any of the data from third party sources referred to in this Annual Report, analyzed or verified the underlying studies or surveys relied upon or referred to by such sources, or ascertained the underlying industry, market, economic and other assumptions relied upon by such sources. Industry, market and economic data is subject to variations and cannot be verified due to limits on the availability and reliability of data inputs, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey.

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PART I

ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3 KEY INFORMATION

Not applicable.

Not applicable.

Not applicable.

The following factors could materially adversely affect us and should be considered when deciding whether to make an investment in us and our securities, including the Common Shares. Other risks and uncertainties that we do not presently consider to be material, or of which we are not presently aware, may become important factors that affect our future financial condition or results of operations. The occurrence of any of the risks discussed below could materially adversely affect our business, prospects, financial condition, results of operations or cash flows, and consequently, the trading price of our securities, could be materially and adversely affected. In all these cases, the trading price of the Common Shares and the market value of our other securities, as applicable, could decline, and prospective investors could lose all or part of their investment.

Summary of Risk Factors

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Risks Related to Our Business

The COVID-19 pandemic has had and may continue to have a material adverse effect on our business and future growth opportunities.

On January 30, 2020, the World Health Organization (the “WHO”) declared a global emergency with respect to the outbreak of COVID-19 and then characterized it as a pandemic on March 11, 2020. The outbreak has spread globally, causing public health authorities to impose restrictions, such as quarantines, closures, cancellations and travel restrictions. While these effects are expected to be temporary and may be relaxed or rolled back if and when the COVID-19 pandemic abates, the actions may be reinstated as the pandemic continues to evolve and in response to actual or potential resurgences. The duration of the resulting business disruptions and related financial impact cannot be reasonably estimated at this time. While all of our TMS Centers remain open, and are expected to remain open, during the pandemic, we experienced a temporary decline in both patient visits/treatments and new patient treatment starts during Fiscal 2020 and Fiscal 2021 as a result of the COVID-19 pandemic. In Fiscal 2021, the surge in the COVID-19 delta variant during the summer season created caution among patients, especially in late August and September. Volume levels began to normalize in October with strong momentum in patient starts and consultations going into Q4 2021. However, the surge in the COVID-19 omicron variant once again caused caution among patients, resulting in lower patient visits/treatments and new patient starts in late Q4 2021 as compared to management’s expectations. In addition, a significant number of staff members and affiliated clinicians were required to isolate as a result of having contracted COVID-19. Accordingly, COVID-19 related factors have negatively impacted our business, and in particular has negatively impacted our cash flows and liquidity during both Fiscal 2020 and Fiscal 2021, and has required us to obtain additional financing (see “—We have incurred losses in the past and may be unable to achieve or sustain profitability in the future and may not be able to secure additional financing to fund losses if we fail to achieve or maintain profitability.” below).

We rely on payors to make timely payments to us for services provided to their beneficiaries. If payors are negatively impacted by a decline or disruption in the economy, including staffing shortages as a result of the COVID-19 pandemic, we may experience slowdowns in collections and a reduction in the amounts we expect to collect.

We also rely on third-party suppliers and manufacturers for our TMS Devices. This outbreak has resulted in the extended shutdown of certain businesses around the globe, which may in turn result in disruptions or delays to our supply chain. These may include disruptions from the temporary closure of third-party supplier and manufacturer facilities, interruptions in TMS Device supply or restrictions on the export or shipment of TMS Devices. Any disruption to our suppliers and their contract manufacturers will likely impact our revenue and operating results. The outbreak of the COVID-19 pandemic may also, in the future, impact the availability of key TMS Device components, logistics flows and the availability of other resources to support critical operations.

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A local, regional, national or international outbreak of a contagious disease, including, but not limited to, COVID-19, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1 influenza virus, avian flu or any other similar illness, or a fear of any of the foregoing, could adversely impact us by causing operating delays and disruptions, labor shortages and shutdowns (including as a result of government regulation and prevention measures). If we are unable to mitigate the impacts of the COVID-19 pandemic on our operations, our costs may increase and revenue could decrease. It is unknown how we may be affected if such an epidemic persists for an extended period of time. A widespread health crisis could adversely affect the global economy, resulting in an economic downturn that could impact demand for the services we provide.

The future impact of the outbreak is highly uncertain and cannot be predicted, and there is no assurance that the outbreak will not have a material adverse impact on our future results. The extent of the impact will depend on future developments, including actions taken to contain COVID-19.

We have incurred losses in the past and may be unable to achieve or sustain profitability in the future and may not be able to secure additional financing to fund losses if we fail to achieve or maintain profitability.

We will need to generate significant additional revenues to achieve and sustain profitability. Furthermore, even if we achieve profitability, we cannot guarantee that we will remain profitable for any substantial period of time. Our failure to achieve or maintain profitability could negatively impact the value of our securities, including the Common Shares, and there can be no assurance that we will be able to raise the additional funding that we may require in order to carry out our business objectives and growth strategies.

During the year ended December 31, 2021, we had negative operating cash flow. Our cash and restricted cash as of December 31, 2021 was approximately US$11.9 million. As of March 31, 2022, we believe that we have sufficient capital to meet our future operating expenses, capital expenditures and future debt service requirements for approximately the next 6 to 9 months. We cannot guarantee that we will have positive cash flows in the future. As described under “—The COVID-19 pandemic has had and may continue to have a material adverse effect on our business and future growth opportunities” above, our cash flows and liquidity have been impacted by the COVID-19 pandemic. Although we anticipate that we will have positive cash flow from operating activities in the future, we anticipate that our overall cash flows may continue to be negatively impacted until the global economic impact of COVID-19 subsides. We expect we will require additional financing to fund our operating and investing activities and such additional financing is required in order for us to repay our short-term obligations. To the extent we have negative cash flow in any future period, we may use a portion of our working capital to fund such negative cash flow.

As discussed in Note 2(a) to our financial statements, we have generated operating losses since inception, and we had negative cash flow from operating activities for the year ended December 31, 2021, which together raises doubt about our ability to continue as a going concern. Our independent auditors therefore have added an explanatory paragraph to their audit opinion issued in connection with our audited consolidated financial statements for the three years ended December 31, 2021 with respect to the Company’s doubt about its ability to continue as a going concern.

In addition, we plan to continue our growth, including opening new TMS Center locations and expanding the Spravato® Program, and upgrading our information technology systems and other infrastructure as opportunities arise. Our plans to expand our network may not result in expected increases in our revenues, even though they increase our costs. Given that the growth initiatives that we intend to undertake will require significant capital investments over the near-to-medium-term, to the extent that we are unable to generate revenue growth at expected levels, our operating cash flow may not be sufficient to fund our operations and execute our growth strategies, which could have an adverse effect on our business and results of operations.

The development of our business depends, in part, upon prevailing capital market conditions, our business performance and our ability to obtain financing through equity and debt financing or other means. Although we have recently received additional financing from the 2021 Private Placement and the 2021 Public Equity Offering (each as defined below), we can provide no assurance that we will not be required to obtain additional financing in the future. If any such additional financing is not available to us, or is not available on satisfactory terms, our ability to operate and expand our business or respond to competitive pressures would be curtailed and we may need to delay, limit or eliminate expansion plans or operations or other elements of our growth strategies. There can be no assurance that we will be successful in obtaining additional financing, on acceptable terms, or at all.

The issuance of additional Common Shares under any equity financing may have a dilutive effect on the interests of shareholders. The number of Common Shares that we are authorized to issue is unlimited. We may, in our sole discretion, subject to applicable law and the rules of applicable stock exchanges, issue additional Common Shares from time to time (including pursuant to any equity-based compensation plans or upon exercise of outstanding warrants), and the interests of our shareholders may be diluted as a result.

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Our level of indebtedness may increase and reduce our financial flexibility.

We are currently indebted under our loan facilities, including pursuant to the Credit Agreement (as defined below), and we may incur additional indebtedness in the future. See Item 5.B, “Operating and Financial Review and Prospects—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” below. We are exposed to changes in interest rates on our cash, bank and controlling shareholder indebtedness and long-term debt. Debt issued at variable rates exposes us to cash flow interest rate risk. Debt issued at fixed rates exposes us to fair value interest rate risk. Our borrowings, current and future, will require interest payments and need to be repaid or refinanced, could require us to divert funds identified for other purposes to debt service and could create additional cash demands or impair our liquidity position and add financial risk for us.

The terms of the Credit Agreement require us to satisfy various affirmative and negative covenants and to meet certain financial tests. These covenants limit, among other things, our ability to incur additional indebtedness outside of what is permitted by the Credit Agreement, create certain liens on assets, declare dividends and engage in certain types of transactions. We can provide no assurances that, in the future, we will not be limited in our ability to respond to changes in our business or competitive activities or be restricted in our ability to engage in mergers, acquisitions or dispositions of assets. Furthermore, a failure to comply with these covenants, including a failure to meet the financial tests, would result in an event of default under the Credit Agreement and would allow the Lender (as defined below) to accelerate the debt, which could materially and adversely affect our business, results of operations and financial condition and the trading price of our Common Shares. For example, we obtained waivers from the Lender with respect to our obligations under the Credit Agreement to deliver annual audited financial statements that do not contain any “going concern” or similar qualification or exception for both Fiscal 2020 and Fiscal 2021. See Item 5.B, “Operating and Financial Review and Prospects—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” below.

Diverting funds identified for other purposes for debt service may adversely affect our business and growth prospects. If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets, reduce or delay expenditures or issue equity to obtain necessary funds. We do not know whether we would be able to take any of these actions on a timely basis, on terms satisfactory to us, or at all.

Our level of indebtedness could affect our operations in several ways, including the following:

In addition to our debt service obligations, our operations require material expenditures on a continuing basis. Our ability to make scheduled debt payments, to refinance our obligations with respect to our indebtedness and to fund capital and non-capital expenditures necessary to maintain the condition of our operating assets and properties, as well as to provide capacity for the growth of our business, depends on our financial and operating performance. General economic conditions and financial, business and other factors, including the ongoing COVID-19 pandemic, affect our operations and our future performance. Many of these factors are beyond our control. We may not be able to generate sufficient cash flows to pay the interest on our debt, and future working capital, borrowings or equity financing may not be available to pay or refinance such debt.

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Our strategy to grow our business through developing new TMS Centers and management regions is subject to significant risks.

A key component of our growth strategy is the development and building of additional outpatient mental health service centers that specialize in TMS treatment (each, a “TMS Center”) in order to expand our footprint and increase our revenues. Accordingly, we are dependent upon our ability to find appropriate opportunities to develop new TMS Centers and expand our footprint into new management regions. Risks associated with developing new TMS Centers include:

To the extent that we open new TMS Centers in regions where we already have existing TMS Centers, we may experience reduced revenues at those existing locations.

There is no guarantee that newly opened TMS Centers will be received as well as, or achieve profitability levels comparable to, our existing locations within our estimated time periods, or at all. If our TMS Centers fail to achieve, or are unable to sustain, acceptable profitability levels, our business may be materially adversely affected and we may incur significant costs associated with closing or relocating TMS Centers. In addition, our current expansion plans are only estimates, and the actual number of TMS Centers that we open, the timeline on which we do so and the actual number of suitable locations for our new TMS Centers could differ significantly from these estimates, particularly in light of the curtailment of our TMS Center development activity due to COVID-19. Our inability to complete the development of additional TMS Centers could limit or significantly delay the overall growth of, and have a material adverse effect on, our business.

Our strategy to grow our business through the expansion of the Spravato® Program is subject to significant risks.

In the first quarter of Fiscal 2021, we commenced offering Spravato® (esketamine nasal spray) at select TMS Centers to treat adults with treatment-resistant depression and depressive symptoms in adults with MDD with suicidal thoughts or actions. The roll-out of our Spravato® Program at select TMS Centers continued through Fiscal 2021 and into 2022 building on our long-term business plan of utilizing our TMS Centers as platforms for the delivery of innovative treatments to patients suffering from MDD and other mental health disorders. We may, however, be unsuccessful in growing our business through the expansion of the Spravato® Program into our existing TMS Center infrastructure.

The factors which may prevent us from successfully expanding the Spravato® Program include, among other things, (1) we may be unable to retain a sufficient number of clinicians/non-medical personnel to offer the service to our patients, including as a result of a general lack of qualified clinicians/non-medical personnel, (2) we may be unable to attract a sufficient number of patients willing to use Spravato® due to lack of awareness or otherwise, (3) we may be unable to implement the Spravato® Program into our existing TMS Center network on a timely basis (e.g., there may be insufficient space in our existing TMS Centers, and we may be unable to successfully implement systems or process changes in order to accommodate the Spravato® Program), (4) we may not generate revenues from the expanded roll-out of the Spravato® Program that meets our expectations, (5) we may be unable to negotiate attractive reimbursement for Spravato® services from third-party payors, and (6) we are currently reliant on Janssen Pharmaceuticals, Inc. as the marketer of Spravato®.

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In addition, the integration of the Spravato® Program or expansion of our existing facilities to accommodate the Spravato® Program may result in unforeseen operating difficulties and may require significant financial and managerial resources that would otherwise be used for our current operations. Any inability to manage growth related to the Spravato® Program could have a material adverse effect on our business, financial condition and results of operations.

Our inability to attract key managerial and other non-medical personnel such as qualified TMS technicians may adversely impact our ability to carry out our business operations and strategies as planned.

We are highly dependent on qualified managerial personnel. Our anticipated growth will require additional expertise and the addition of new qualified personnel. As a result of COVID-19, we have experienced shortages of qualified managerial and non-medical personnel due to labor shortages in the United States. In addition, there is intense competition for qualified personnel in the non-clinical healthcare management services space. Therefore, we may not be able to attract and retain the qualified personnel necessary for the development of our business. The loss of the services of existing personnel, as well as the failure to recruit additional key managerial personnel in a timely manner, could harm our business development and expansion plans as well as our ability to manage day-to-day operations, attract collaboration partners, attract and retain other employees and generate revenues, which could materially adversely affect our business, prospects, financial condition, results of operations or cash flows.

If commercial payor plans are subject to restriction in plan designs or the average rates that commercial payors pay us decline significantly, or if there are changes in Medicare or other non-Medicare government-based programs or payment rates, such occurrences would have a material adverse effect on our revenues, earnings and cash flows.

There is no guarantee that commercial, Medicare or other non-Medicare government payment rates will remain at existing levels as they could be subject to material decreases in the future. More than 98% of the patients that receive treatment at our TMS Centers are covered, to a certain extent, by commercial payors, Medicare or other non-Medicare government programs. If we experience downward pressure on reimbursement conditions in the market due to employers shifting to less expensive options for medical services or as a result of consolidations among commercial payors, or if state governments and other governmental organizations face increasing budgetary pressure or increased focus on TMS services resulting in decreases in the average reimbursement rates for TMS therapy, such occurrences would have a material adverse effect on our revenues, earnings and cash flows.

We may incur increased costs if third-party payors impose additional requirements related to the provision of services at our TMS Centers.

Commercial payors, Medicare and other non-Medicare government programs set requirements that must be met for services to be deemed reimbursable. The imposition of additional requirements related to the provision of TMS and/or esketamine nasal spray therapy by commercial insurance plans, Medicare and other non-Medicare government insurance plans that increase the cost or complexity of furnishing these therapies to patients may result in increased costs. For example, certain commercial payors are increasing the levels of clinician supervision that must be provided to patients receiving TMS therapy, thereby restraining our ability to provide patient care when these increased levels of clinician supervision are not available and/or resulting in the incurrence of additional clinician compensation costs for ensuring the requisite level of supervision as a result of these increased requirements. The imposition of such requirements and any additional requirements by third-party payors may impact our revenues and costs, which could materially adversely affect our business, prospects, financial condition, results of operations or cash flows.

If there is a reduction in reimbursement rates by higher-paying commercial insurance providers, our revenues, earnings and cash flows would be substantially reduced.

Our revenue levels are affected by the percentage of our patients with higher-paying commercial insurance coverage. A patient’s insurance coverage may change for a number of reasons, including changes in the patient’s or a family member’s employment status. If there is a significant change in our payor mix, resulting in a reduction in the number of patients with higher-paying commercial insurance plans declining, our revenues, earnings and cash flows could be substantially reduced.

Failure to timely or accurately bill for services could have a negative impact on our revenue, bad debt expense and cash flow.

Billing for healthcare services is an important and complex aspect of our business. If there are defects in the billing system, we may experience difficulties in our ability to successfully bill and collect for services rendered, including a delay in collections, a reduction in the amounts collected, increased risk of retractions from and refunds to commercial and government payors, an increase in uncollectible accounts receivable and noncompliance with reimbursement regulations, any or all of which could have a material adverse effect on our revenues, cash flows and operating results.

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We bill numerous and varied payors, such as Medicare, non-Medicare government insurance plans, commercial payors and self-pay patients. These different payors typically have different billing requirements that must be satisfied prior to receiving payment for services rendered. Reimbursement is typically conditioned on our documenting medical necessity, the appropriate level of service and correctly applying diagnosis codes. Incorrect or incomplete documentation and billing information could result in non-payment for services rendered.

Additional factors that could complicate our ability to timely or accurately bill payors include:

To the extent that the complexity associated with billing for healthcare services we provide causes delays in our cash collections, we may experience increased carrying costs associated with the aging of our accounts receivable, as well as increased potential for bad debt expense.

Regulatory and compliance requirements associated with our billing and collections system could have a material adverse effect on our revenues, cash flows and operating results.

We accept payments using a variety of methods, including credit cards and debit cards. For existing and future payment methods we offer to our customers, we may become subject to additional regulations and compliance requirements, as well as fraudulent activities. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time, raising our operating costs and lowering profitability. We rely on third party service providers for payment processing services, including the processing of credit and debit cards. Our business may be negatively affected if these third-party service providers become unwilling or unable to provide these services to us. We are also subject to payment card association operating rules, including data security and management rules, certification requirements and rules governing electronic funds transfers and if we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees and/or lose our ability to accept credit and debit card payments from our patients and process electronic funds transfers or facilitate other types of payments, and our business and operating results may be adversely affected.

There are significant risks associated with estimating the amount of revenues and related refund liabilities that we recognize, and if our estimates of revenues and related refund liabilities are materially inaccurate, it could impact the timing and the amount of our revenues recognition or have a material adverse effect on our business, results of operations, financial condition and cash flows.

There are significant risks associated with estimating the amount of service revenues and related refund liabilities that we recognize in a reporting period. The billing and collection process is complex due to ongoing insurance coverage changes, geographic coverage differences, differing interpretations of contract coverage and other payor issues, such as ensuring appropriate documentation. Determining applicable primary and secondary coverage for our patients, together with the changes in patient coverage that occur each month, requires complex, resource-intensive processes. Errors in determining the correct coordination of benefits may result in refunds to payors. Revenues associated with Medicare and non-Medicare government insurance plans are also subject to estimation risk related to the amounts not paid by the primary government payor that will ultimately be collectible from other government programs paying secondary coverage, the patient’s commercial health plan secondary coverage or the patient. Collections, refunds and payor retractions typically continue to occur for up to three years and longer after services are provided. If our estimates of services revenue and related refund liabilities are materially inaccurate, it could impact the timing and the amount of our revenues recognized and have a material adverse impact on our business, results of operations, financial condition and cash flows.

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Our ability to generate revenue depends in large part on our ability to attract new patients and if we fail to attract new patients, we may not be able to increase revenues.

Our success depends, in part, on our ability to attract new patients, particularly, in accordance with our growth strategy, within new management regions in the United States in markets in which we have limited or no TMS Centers or brand awareness. In order to expand our patient base in these new markets as well as our existing markets, we depend, for a substantial portion of the services we perform, on patient referrals from unaffiliated clinicians. As described above under “—The COVID-19 pandemic has had and may continue to have a material adverse effect on our business and future growth opportunities”, we experienced a temporary decline in both patient visits/treatments and new patient treatment starts in Fiscal 2020 and Fiscal 2021 as a result of the COVID-19 pandemic. In addition, if a significant number of clinicians and other third parties were to discontinue or significantly reduce the rate at which they refer patients to us, our treatment volume could materially decrease, which would reduce our revenue and operating margins, which could have a material adverse effect on our business and financial condition.

If our TMS practices lose a significant number of clinicians, our financial results could be adversely affected.

Against a backdrop of significant mental health and addiction issues in the United States and an increase in suicide rates, there is an unprecedented demand for clinicians. At times, there has been a shortage of qualified clinicians in some of the regional markets in which we serve. In addition, competition in recruiting clinicians may make it difficult for our contracted psychiatric practices to maintain adequate levels of clinicians. If a significant number of clinicians terminate their relationships with our practices and those practices are unable to recruit sufficient qualified clinicians to fulfill their obligations under our agreements with them, our ability to maximize the use of our TMS Centers and our financial results could be materially adversely affected. Neither we, nor our practices, maintain insurance on the lives of any affiliated clinicians.

Our ability to obtain TMS Devices from our suppliers on a timely basis at competitive costs could suffer as a result of any deterioration or changes in our supplier relationships or events that adversely affect our suppliers or cause disruptions in their businesses.

TMS treatments are delivered through FDA-regulated medical devices specifically manufactured to transmit the magnetic pulses required to stimulate the cortical areas in the brain, which is currently FDA cleared to effectively treat MDD and OCD, and to be used for smoking cessation. These devices are commonly referred to as TMS devices (a “TMS Device”). We and our suppliers of TMS Devices may be affected by, among other things, increases in labor and fuel costs, labor disputes and disruptions, regulatory changes, political or economic instability or civil unrest, including terrorist activities, military and domestic disturbances and conflicts, natural disasters, pandemics, trade restrictions, tariffs, currency exchange rates, transport capacity and costs and other factors relating to trade. These factors are beyond our control, may adversely affect us and our suppliers or cause disruptions to their and our businesses and may impact their ability to supply us with TMS Devices. Consequently, our ability to provide TMS treatment to our patients on acceptable terms and within acceptable timelines may be impacted, which could have a material adverse effect on our profitability and results of operations.

We have a number of important supplier relationships with respect to the supply of TMS Devices that we believe provide us with a competitive advantage. Most of our TMS Devices are leased from one of our third-party suppliers. We do not have long-term contracts with our suppliers and we generally operate without any contractual assurances of continued supply. Any of our suppliers could discontinue their relationship with us, or cease to provide equipment or services on a satisfactory basis for a variety of reasons.

The benefits we currently experience from our supplier relationships may be adversely affected if our suppliers:

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There can be no assurance that we will be able to obtain desired equipment from our suppliers in sufficient quantities on acceptable terms or at all in the future, especially if we need significantly greater amounts of equipment in connection with the growth of our business. We may need to develop relationships with new suppliers as our current suppliers may be unable to supply us with and produce needed quantities and we may not be able to obtain the same terms from new suppliers. If we are unable to obtain suitable equipment in sufficient quantities, at acceptable prices with adequate delivery times due to the loss of or a deterioration or change in our relationship with one or more of our key suppliers or events harmful to our suppliers occur, it may adversely affect our business and results of operations.

We may be unable to execute successfully on our acquisitions and other business initiatives.

Our growth through the successful acquisition and integration of complementary businesses is a critical component of our corporate strategy. For example, in Fiscal 2019, we completed the Achieve TMS West Acquisition (as defined below), which added 23 new TMS Centers to our business in California, Oregon and Alaska, and in Fiscal 2021, we completed the Achieve TMS East/Central Acquisition (as defined below), which added an additional 17 new TMS Centers in New England and the central United States. We plan to continue to pursue acquisitions that complement our existing business, represent a strong strategic fit and are consistent with our overall growth strategy and disciplined financial management. These activities create risks such as:

Such acquisitions or other business collaborations may involve significant commitments of financial and other resources of our Company. Any such activity may not be successful in generating revenues, income or other returns to us, and the resources committed to such activities will not be available to us for other purposes. In addition, while we conduct due diligence prior to consummating an acquisition or business collaboration, such diligence may not identify all material issues associated with such activities.

Historically, the senior management of the Company and the Board have from time to time considered, and may consider in the future, various transactions in the context of its long-term business plan, including mergers, acquisitions, divestitures, alliances, joint ventures, investments or other strategic transactions. We may experience unanticipated challenges or difficulties identifying and negotiating transactions with suitable new acquisition candidates that are available for purchase at reasonable prices. Even if we are able to identify and enter into agreements with such candidates, we may be unable to consummate any such acquisition on suitable terms, in a timely manner or at all, and we may not realize the anticipated benefits of such transactions. Moreover, if we are unable to access capital markets on acceptable terms or at all, we may not be able to consummate acquisitions, or may have to do so on the basis of a less than optimal capital structure.

Our inability to (i) take advantage of growth opportunities for our business, or (ii) address risks associated with acquisitions or business collaborations, may negatively affect our operating results and financial condition.

We may be unable to successfully integrate acquired businesses or do so within the intended timeframes, which could have an adverse effect on our financial condition, results of operations and business prospects.

Our ability to realize the anticipated benefits of acquired businesses, including the Achieve TMS West Acquisition and the Achieve TMS East/Central Acquisition, will depend, in part, on our ability to successfully and efficiently integrate acquired businesses and operations with our own. The integration of acquired operations with our existing business may be complex, costly and time-consuming, and may result in additional demands on our resources, systems, procedures and controls, disruption of our ongoing business, and diversion of management’s attention from other business concerns. Although we cannot be certain of the degree and scope of operational and integration problems that may arise, the difficulties and risks associated with the integration of acquired businesses may include, among others:

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As a result of these difficulties and risks, we may not accomplish the integration of acquired businesses smoothly, successfully or within our budgetary expectations and anticipated timetables, which may result in a failure to realize some or all of the anticipated benefits of our acquisitions.

In addition, we may have ongoing obligations and/or additional contingent consideration payable in connection with our acquisitions. For example, the Earn-Out (as defined below) was payable in connection with the Achieve TMS West Acquisition (see Item 5.A, “Operating and Financial Review and Prospects—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Components of Our Results of Operation—Earn-Out Consideration”), and contingent consideration may be payable in respect of the Achieve TMS East/Central Acquisition, subject to a capped earn-out of up to an additional $2.5 million based on the financial performance of Achieve TMS East during the twelve-month period following completion of the Achieve TMS East/Central Acquisition, payable following the calculation period. Any such ongoing obligations and contingent consideration that may be payable in connection with future acquisitions may require substantial cash expenditures by us, or may result in equity dilution in connection with the issuance by us of additional Common Shares.

Our ability to manage our operations at our current size and successfully execute on our growth strategies is subject to numerous risks and uncertainties.

The continued success of our growth strategies depends on, among other things, our ability to expand our network of TMS Centers and management regions within the United States, our ability to expand our Spravato® Program, as well as factors which are beyond our control, including general economic conditions and consumer confidence in future economic conditions. If we fail to execute on our growth initiatives, face delays in executing our growth initiatives or fail to fully realize the benefits expected to result from these initiatives, our results of operations and our ability to remain competitive may be materially adversely impacted, and the price of our securities, including the Common Shares, could decline. Our results to date are not an indication of future results, and there can be no assurance that our growth initiatives will generate increased revenues or improve operating margins even if we are able to successfully implement our growth strategies.

As we move forward, we expect our growth to bring new challenges and complexities that we have not faced before. Among other difficulties that we may encounter, this growth could place a strain on our existing infrastructure, information technology systems, real estate requirements and employee base and may make it more difficult for us to adequately forecast expenditures. Our budgeting will become more complex, and we may also place increased burdens on our suppliers, as we will likely increase the size of our TMS Device orders. The increased demands that our growth plans will place on our infrastructure and our management team may cause us to operate our business less efficiently, which could cause deterioration in our performance. Our growth may make it otherwise difficult for us to respond quickly to changing trends, preferences and other factors. This could result in deterioration of key affiliated clinician relationships, excess or deficient equipment, loss of market share and decreased revenues. We cannot anticipate all of the demands that our expanding operations will impose on our business, and our failure to appropriately address these demands could have an adverse effect on us.

In addition, we believe that an important contributor to our success has been our corporate culture, which we believe fosters innovation, teamwork and personalized customer service. As we continue to grow, we must effectively integrate, develop and motivate a growing number of new employees. As a result, we may find it difficult to maintain our corporate culture, which could limit our ability to innovate and operate effectively. Any failure to preserve our culture could also negatively affect our ability to retain and recruit personnel, continue to perform at current levels or execute on our growth strategies.

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A failure to reduce operating expenses and labor costs in a timely manner in response to changes in our business could adversely affect our results of operations.

Our business and results of operations are sensitive to a number of factors, both within and outside our control. In the event of a sustained reduction in revenues, for whatever reason, it may be necessary to implement an expense reduction plan. For example, in response to the COVID-19 pandemic approximately 20% of our employees were furloughed during a portion of Fiscal 2020, we implemented a temporary hiring freeze and we also reduced management salaries and reduced budgeted discretionary expenses. In December 2021, due to the COVID-19 omicron variant, we implemented a number of additional cost containment measures, including implementation of staffing reductions and a hiring freeze, and a reduction in discretionary spend (particularly in corporate, general and administrative expenses, travel & entertainment, and marketing spend). We can provide no assurance that we will not be required to implement further expense reduction measures in the future, or that any such measures will be effective.

The successful implementation of an expense reduction plan, if and when deemed advisable by management, depends on many factors, including our ability to identify the need for such a plan in a timely manner, to effectively implement such a plan, as well as certain factors which are beyond our control, including economic conditions, labor market conditions and the ability to maintain our management team to implement our plan. Any one of these factors, or other unforeseen factors, could have a material adverse effect on our ability to implement any targeted cost savings to stabilize our results of operations.

We do not independently own all of our TMS Centers.

We currently do not independently own all of our TMS Centers, and healthcare laws and regulations in the United States may impact our ability to operate or own our TMS Centers in the future, thereby necessitating the use of partnerships and other management services frameworks. Consequently, we may be required to deal with diverse operating or ownership frameworks. In addition, from time to time, we may decide to use cash to restructure our arrangements with fellow owners, managers or operators of certain of our TMS Centers.

We are subject to risks associated with leasing space and equipment, and are subject to a number of long-term non-cancelable leases with substantial lease payments. Any failure to make these lease payments when due, or the inability to extend, renew or continue to lease space and equipment in key locations, would likely harm our business, profitability and results of operations.

We do not own any real estate. Instead, we lease all of our retail TMS Center locations, as well as our head office and U.S. corporate headquarters. In accordance with our growth strategy, we also intend to expand into new geographic regions within the United States. Accordingly, we are subject to all of the risks associated with leasing, occupying and making tenant improvements to real property, including adverse demographic and competitive changes affecting the location of the property, changes in availability of and contractual terms for leasable space, credit risk in relation to tenant improvement allowances from landlords and potential liability for environmental conditions or personal injury claims.

The success of any TMS Center depends substantially upon its location. There can be no assurance that our current TMS Center locations will continue to be desirable in the future, or that we will be able to secure new desirable locations in the future on favorable terms or at all. TMS Center locations, patient conversion and revenues may be adversely affected by, among other things, social and economic conditions in a particular area, competition from nearby TMS treatment centers, out-of-pocket treatment costs, changes in stigma relating to mental health issues, and changing lifestyle choices of patients in a particular market. If we cannot obtain desirable locations at reasonable costs, our cost structure will increase and our revenues will be adversely affected.

Our existing TMS Centers are leased from third parties, with typical lease commitments ranging from “month-to-month” to seven years. Some of our lease agreements also have additional renewal options. However, there can be no assurances that we will be able to extend, renew or continue to lease our existing TMS Center locations, or identify and secure alternative suitable locations. In addition to fixed minimum lease payments, most of our leases provide for additional rental payments, including payment of common area maintenance charges, real property insurance, real estate taxes and other charges. Many of our lease agreements have defined escalating rent provisions over the initial term and any extensions. Increases in our occupancy costs and difficulty in identifying economically suitable new TMS Center locations could have significant negative consequences, which include:

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We depend on cash flow from operations to pay our lease expenses and to fulfill our other cash needs. If our business does not generate sufficient cash flow from operating activities to fund these expenses and sufficient funds are not otherwise available to us, we may not be able to service our lease expenses, grow our business, respond to competitive challenges or fund our other liquidity and capital needs, which could harm our business. Additional sites that we lease may be subject to long-term non-cancelable leases if we are unable to negotiate shorter terms. If an existing or future location is not profitable, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. In addition, if we are not able to enter into new leases or renew existing leases on terms acceptable to us, this could have an adverse effect on our results of operations and profitability.

Our new TMS Centers, once opened, may not be profitable initially, or at all, and may adversely impact our business.

Our new TMS Centers, once opened, may experience an initial ramp-up period during which they generate revenues below the levels we would otherwise expect. This is in part due to the time it takes to build a patient base in a new market, higher fixed costs relating to increased labor needs, other start-up inefficiencies that are typical of new locations and cash build-out costs of new TMS Centers that may be higher than our target cash build-out costs, development costs, additional features, and budgets. It may also be difficult for us to attract a patient base, or otherwise overcome the higher costs associated with new locations. New locations may not have results similar to existing locations or may not be profitable. If new TMS Centers remain unprofitable for a prolonged period of time, we may decide to close these TMS Centers, which could have a negative impact on our business and results of operations.

Our expansion into new geographic regions may present increased risks due to lower awareness of our brand or TMS therapy in general, our unfamiliarity with those regions and other factors.

Our long-term future growth depends, in part, on our expansion efforts into new geographic regions in the United States. As a primary component of our growth strategy, we intend to undertake a targeted expansion into new regions of the United States where we have little or no operating experience or brand awareness. While we have significant experience and awareness across many regions in the United States, we have significantly lower patient awareness outside of these regions and our operating experience with respect to our existing management regions may not be relevant or necessarily translate into similar results broadly in our target markets in the United States. In addition, any new markets that we enter in the future may have different competitive conditions and/or less familiarity with our brand or TMS therapy as a treatment option in general. As a result, new TMS Centers in these markets may be less successful than centers in our existing management regions. Accordingly, we cannot guarantee that we will be able to penetrate or successfully operate in any market outside of our current management regions. In order to build greater awareness surrounding Greenbrook and TMS therapy in these new markets, we will need to make greater investments in TMS Center openings, clinician reach-out, and advertising, with no guarantee of success, which could negatively impact the profitability of our operations in those markets.

We may also find it more difficult in these new markets to hire, motivate and retain qualified employees and technicians with familiarity of the TMS Devices used by us. In addition, labor costs may be higher and new locations could have higher construction and occupancy costs. Entering into new regions may also present challenges, as we may have limited experience with the different regulatory regimes, insurance environments and market practices in these new regions as compared to those in our current management regions. These regulations and market practices could subject us to significant additional expense or impact our ability to achieve compliance. In connection with any future expansion efforts outside of our existing management regions, we would expect to encounter many obstacles that we do not currently face in our current regions, including differences in regulatory environments and market practices, and difficulties in keeping abreast of market, business and technical developments. Each of these factors may have an adverse impact on our revenues or profitability in those markets, and could in turn adversely impact our revenues and results of operations. If we do not successfully execute our plans to enter new markets within in the broader United States, our business, financial condition and results of operations may be materially adversely affected.

We are dependent on the timely credentialing of our affiliated clinicians.

We are responsible for credentialing our existing and new clinicians with all third-party payors (including commercial insurance plans, Medicare and other non-Medicare government insurance), and all of our clinicians need to be credentialed in order to administer TMS therapy and Spravato® at our TMS Centers. This credentialing process is completed by us, or by a contracted third party, and requires the submission of a substantial amount of documentation necessary to satisfy third-party payors that our clinicians are qualified to performed services intended to be covered by insurance. The amount of time required to complete credentialing varies substantially between payor and region and is largely out of our control. Any delay in completing credentialing will result in a delay in clinicians seeing patients and a concomitant delay in generating revenue. Any failure of our clinicians to maintain credentials and licenses could result in delays in our ability to deliver care to patients, and therefore adversely affect our reputation and our business.

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We may engage in litigation with our clinical partners and contractors and there are claims made against us from time to time that can result in litigation that could distract management from our business activities and result in significant liability or damage to us.

The nature of our relationships with our clinical partners and contractors may give rise to litigation or disputes. In the ordinary course of our business, we are the subject of complaints or litigation. We may also engage in future litigation to enforce the terms of our agreements and compliance with our brand standards as determined necessary to protect our brand, the consistency of our services and the consumer experience. Engaging in such litigation may be costly and time-consuming and may distract management and materially adversely affect our relationships with our clinical partners and contractors or potential clinical partners and contractors and our ability to attract new clinical partners and contractors. Any negative outcome of these or any other claims could materially adversely affect our results of operations, as well as our ability to increase our number of clinical partners and contractors and may damage our reputation and brand and our ability to expand into new regions.

As a growing company with expanding operations, we increasingly face the risk of litigation and other claims against us. Litigation and other claims may arise in the ordinary course of our business and include employee and patient claims, commercial disputes, landlord-tenant disputes, intellectual property issues, product-oriented allegations and personal injury claims. These claims can raise complex factual and legal issues that are subject to risks and uncertainties and could require significant management time. Most of our equipment is manufactured and supplied by third party suppliers and some of these products may expose us to various claims, including class action claims relating to medical devices subject to a product recall or liability claim. Litigation and other claims against us could result in unexpected expenses and liabilities, which could materially adversely affect our operations and our reputation.

Although we maintain liability insurance to mitigate potential claims, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available on economically reasonable terms or at all.

We may become subject to professional malpractice liability, which could be costly and negatively impact our business.

The clinicians contracted or employed by us or our contracted practices could be subject to malpractice claims from time to time. Where required by law, we structure our relationships with the practices under our management services agreements in a manner that we believe does not constitute the practice of medicine by us or subject us to professional malpractice claims for acts or omissions of clinicians employed by the contracted practices. Nevertheless, claims, suits or complaints relating to services provided by the clinicians contracted or employed by us or our contracted practices may arise. In addition, we may be subject to professional liability claims, including, without limitation, for improper use or malfunction of our TMS Devices or the conduct of our TMS technicians. We may not be able to maintain adequate liability insurance to protect us against those claims at acceptable costs or at all. Any claim made against us that is not fully covered by insurance could be costly to defend, result in a substantial damage award against us and divert the attention of our management from our operations, all of which could have an adverse effect on our financial performance. In addition, successful claims against us may adversely affect our business or reputation.

Technological change in our industry or novel drug treatments for MDD or OCD could reduce the demand for our services or require us to incur significant cost to incorporate new technology into our centers.

Advances in technology or the development of novel drug treatments for MDD or OCD may reduce the demand for our services or result in significant cost to incorporate the new technology into our TMS Centers. If we are unable to effectively respond to technological advancement, our treatment volumes could decline, which could have a material adverse effect on our revenues, earnings and cash flows.

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The effect of the uncertainty relating to potential future changes to U.S. healthcare laws may increase our and our clinical partners’ and contractors’ healthcare costs, limit the ability of patients to obtain health insurance, increase patients’ share of healthcare costs and negatively impact our financial results.

The Biden Administration and the U.S. Congress are considering a number of legislative and regulatory proposals which could, if passed into law, impact the healthcare system, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”), and/or the Medicare and Medicaid programs. Congress may take up legislation to increase the number of individuals covered by the Medicare or Medicaid programs, reduce prescription drug costs, increase price transparency for consumers, restrict the sale of certain classes of drugs, and reform medication management practices, among others. While not all of the potential legislation, if enacted, would affect our business directly, many of these legislative proposals could impact some or many of our business arrangements directly or indirectly. In addition, regulatory agencies have separately enacted price transparency rules for hospitals and insurers which, while not impacting our business directly, could change the way we interact with these entities. Given that legislative and regulatory change is still evolving, we cannot predict with any certainty the outcome of any future legislation or regulation. However, we believe that many of the legislative items noted above enjoy bipartisan support.

The environment regarding the provisions of the ACA has somewhat stabilized, but specific outcomes are difficult to predict but Congress continues to consider modifications to the ACA. Any such legislation related to the ACA could have a material impact on our ability to conduct business and our operations.

Because of our U.S. operations, we could be adversely affected by violations of federal anti-kickback statute and/or other fraud and abuse laws. If our arrangements with physicians were found to violate the law, we could suffer consequences that would have a material adverse effect on our revenues, earnings, cash flows and reputation.

The federal anti-kickback statute and other fraud and abuse laws and regulations, both at the federal and state level, generally prohibit parties from giving remuneration to a physician or other person in a position to refer or generate business for a health care provider, such as the centers operated or managed by Greenbrook, with the intent to induce or reward such referrals. Notwithstanding our strict policies and procedures designed to ensure no violation of such laws, financial relationships within the Greenbrook organization involving physicians and other potential referral sources, including amounts paid under our management services agreements, distributions made to referring physicians who are also equity holders in our TMS Centers and all other financial arrangements involving Greenbrook may result in violations of such laws. We have sought to structure our arrangements to satisfy federal anti-kickback safe harbor requirements, but they remain susceptible to government scrutiny. If we were found to violate the law, we could suffer consequences, including fines, penalties, repayment obligations, criminal liability and exclusion for participation in federal health care programs, that would have a material adverse effect on our revenues, earnings, cash flows and reputation.

Our management services arrangements with practices and those practices’ professional services agreements with contracted or employed psychiatrists must be structured in compliance with state laws relating to the practice of medicine, including, without limitation, fee-splitting prohibitions.

The laws in certain states in which we operate prohibit us from owning physician practices, exercising control over the clinical judgment of physicians, and/or engaging in certain financial arrangements, such as splitting professional fees with physicians. These laws vary by state and are enforced by state courts and regulatory authorities, each with broad discretion, and often with limited precedent as to how challenges under these laws may be decided. One component of our business has been to enter into management services agreements with physician practices whereby we provide management, administrative, technical and other non-medical services to the physician practices in relation to TMS therapy in exchange for a service fee. We structure our relationships with these physician practices in a manner that we believe keeps us from engaging in the practice of medicine or exercising control over any physician’s medical judgment. However, there can be no assurance that our present arrangements with physicians providing medical services and medical supervision at the centers we manage will not be challenged in the future for violating these state laws and, if challenged, that they will not be found to violate applicable laws. Any such ruling against us could subject us to potential damages, injunctions and/or civil and criminal penalties or require us to restructure our arrangements in a way that would affect the non-medical control or quality of our services or change the amounts that we receive from the operation of these centers, which could have a material adverse effect on our business.

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The regulatory framework in which we operate is constantly evolving.

Healthcare laws and regulations are constantly evolving and could change significantly in the future. We closely monitor these developments and will modify our operations from time to time as the regulatory environment requires. There can be no assurances, however, that we will always be able to adapt our operations to address new laws or regulations or that new laws or regulations will not adversely affect our business. In addition, although we believe that we are operating in material compliance with applicable federal and state laws and regulations, neither our current or anticipated business operations nor the operations of our contracted physician practices have been the subject of judicial or regulatory interpretation. We cannot assure investors that a review of our business by courts or regulatory authorities will not result in a determination that could materially adversely affect our operations or that the healthcare regulatory environment will not change in a way that materially restricts our operations. Furthermore, governments, government agencies and industry self-regulatory bodies in the United States may, from time to time, adopt statutes, regulations and rulings that directly or indirectly affect the activities of the Company. These statutes, regulations and/or rulings could adversely impact our ability to execute our business strategy and generate revenues as planned.

Complying with U.S. federal and state regulations is an expensive and time-consuming process, and any failure to comply could result in penalties or repayments.

We are directly, or indirectly through the physician practices with which we contract, subject to extensive regulation by both the U.S. federal government and the state governments of those states in which we operate TMS Centers, including:

If our operations are found to be in violation of any of the laws and regulations to which we or the physician practices with which we contract are subject, we may be subject to penalties associated with the violation, including civil and criminal penalties, damages, fines, exclusion and the curtailment of our operations. Any penalties, damages, fines, exclusion or curtailment of our operations, individually or in the aggregate, could adversely affect our ability to operate our business and our financial results. The risks of our being found in violation of these laws and regulations is increased by the view that many of these laws and regulations are complex, have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action brought against us for violation of these laws or regulations, even if we successfully defend against it, could result in significant legal expenses and divert our management’s attention from the operation of our business, which could have a material adverse effect on our business, operations and prospects.

Furthermore, the Medicare reimbursement rules impose extensive requirements upon healthcare providers that furnish services to Medicare beneficiaries, including the Company. Moreover, additional laws and regulations potentially affecting healthcare providers participating in the Medicare program continue to be promulgated that may impact us in the future. From time to time, in the ordinary course of business, we may conduct internal compliance reviews, the results of which may involve the identification of errors in the manner in which we submit claims to the Medicare program. We may also be subject to periodic audits by insurance companies, including the Medicare program. These reviews may result in the identification of errors in the manner in which we bill such insurance programs for our services, which may result in our receiving incorrect payments from the insurance companies, including the Medicare program, that we are required to repay. Under U.S. law, the failure to report and return Medicare overpayments can lead to liability under the FCA and associated penalties, including exclusion from Medicare and other federal health care programs. In addition, private payors may on occasion amend their coverage policies in a way that may impact our operations.

As part of our ongoing compliance efforts with these regulatory requirements, we periodically conduct reviews of our TMS Centers’ past operations to assess our compliance with such requirements. If and when such reviews demonstrate that there may be a repayment obligation due to our failure to comply with certain regulatory requirements, the Company remedies the deficiency and returns and refunds any Medicare overpayments within the required time periods.

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We may be subject to additional taxes, which could affect our operating results.

We may be subject to assessments for additional taxes, including sales taxes, which could reduce our operating results. In accordance with current law, we pay, collect and/or remit taxes in those jurisdictions where we maintain a physical presence. In computing our tax obligations in these jurisdictions, we are required to take various tax accounting and reporting positions on matters that may not be entirely free from doubt and for which we have not received rulings from the governing authorities.

While we believe that we have appropriately remitted all taxes based on our interpretation of applicable law, it is possible that some taxing jurisdictions may attempt to assess additional taxes and penalties on us if the applicable authorities do not agree with our positions. A successful challenge by a tax authority, through asserting either an error in our calculation, or a change in the application of law or an interpretation of the law that differs from our own, could adversely affect our results of operations.

We experience competition from other TMS providers, providers of esketamine nasal spray therapy, hospitals and pharmaceutical and other companies, and this competition could adversely affect our business and revenue.

The market for TMS and esketamine nasal spray services is becoming increasingly competitive. We compete principally on the basis of our reputation and brand, the location of our centers, the quality of our services and the reputation of our affiliated clinicians. In the markets in which we are operating, or anticipate operating in the future, competition predominantly consists of individual clinicians that can offer TMS therapy and/or esketamine nasal spray therapy directly to their patients. We also face competition from a limited number of multi-location psychiatric practices or behavioral health groups that offer TMS therapy and/or esketamine nasal spray therapy as part of their overall practice, as well as a few other specialist TMS providers and esketamine nasal spray therapy or intravenous ketamine providers.

We also face indirect competition from pharmaceutical and other companies that develop competitive products, such as anti-depressant medications, with certain competitive advantages such as widespread market acceptance, ease of patient use and well-established reimbursement. Our commercial opportunity could be reduced or eliminated if these competitors develop and commercialize anti-depressant medications or other treatments that are safer or more effective than TMS or esketamine nasal spray therapy. At any time, these and other potential market entrants may develop treatment alternatives that may render our products uncompetitive or less competitive. We are also subject to competition from providers of invasive neuromodulation therapies such as electroconvulsive therapy and vagus nerve stimulation.

Many of our competitors are, and many of our potential competitors may be, larger and have access to greater financial, marketing and other resources. Therefore, these competitors may be able to devote greater resources to the marketing and sale of their products or adopt more aggressive pricing policies than we can. As a result, we may lose market share, which could reduce our revenues and adversely affect our results of operations.

Our competitors may seek to emulate facets of our business strategy, which could result in a reduction of any competitive advantage that we might possess. As a result, our current and future competitors, especially those with greater financial, marketing or other resources, may be able to duplicate or improve upon some or all of the elements of our business strategy that we believe are important in differentiating our patients’ treatment experience. If our competitors were to duplicate or improve upon some or all of the elements of our business strategy, our competitive position and our business could suffer. There can be no assurances that we will continue to be able to compete successfully against existing or future competitors. If we are unable to successfully compete, our business and financial condition would be adversely affected.

Our business is labor intensive and could be adversely affected if we are unable to maintain satisfactory relations with our employees or the occurrence of union attempts to organize our employees.

Our business is labor intensive, and our results are subject to variations in labor-related costs, productivity and the number of pending or potential claims against us related to labor and employment practices. If political efforts at the national and local level result in actions or proposals that increase the likelihood of increased labor costs, or if labor and employment claims, including the filing of class action lawsuits, or work stoppages, trend upwards, our operating costs could correspondingly increase and our employee relations, productivity, earnings and cash flows could be adversely affected.

None of our employees are currently subject to collective bargaining agreements. As we continue to grow and enter different management regions, unions may attempt to organize all or part of our employee base at certain TMS Centers or within certain management regions. Responding to such organization attempts may distract management and employees and may have a negative financial impact on individual locations, or on our business as a whole.

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The maintenance of a productive and efficient labor environment and, in the event of unionization of these employees, the successful negotiation of a collective bargaining agreement, cannot be assured. Protracted and extensive work stoppages or labor disruptions, such as strikes or lockouts, could have a material adverse effect on our business, financial condition and results of operations.

A significant portion of our employees are subject to federal or state laws governing such matters as minimum wage, working conditions and overtime. Changes in these laws in the markets in which we operate, particularly increases to minimum wage, could cause our operating expenses to increase. A significant increase in labor costs could have an adverse effect on our business, financial condition and results of operations.

We are subject to federal and state laws that govern our employment practices, including minimum wage and overtime payment. Failure to comply with labor and employment laws and regulations could subject us to legal liability and costs, including fines or penalties, as well as reputational damage that could harm our business.

We are subject to federal, state and local laws and regulations relating to the terms of employment, hiring, hours worked, wage and hour requirements, compensation, termination and treatment of employees. These laws and regulations cover financial compensation (including wage and hour standards), benefits (including insurance and 401(k) plans), discrimination, workplace safety and health, benefits, and workers’ compensation. For example, the Fair Labor Standards Act establishes a national minimum wage and guarantees overtime paid at “time-and-a-half” for employees in certain jobs. These laws can vary significantly among states, can be highly technical and costs and expenses related to these requirements may represent a significant operating expense that we may not be able to offset.

Any failure to comply with these laws, including even a minor infraction, could expose us to civil and, in some cases, criminal liability, including fines and penalties. Further, government or employee claims that we have violated any of these laws, even if ultimately disproven, could result in increased expense and management distraction, as well as have an adverse reputational impact on us and have a material adverse effect on our business.

A material disruption in or security breach affecting our information technology systems could significantly affect our business and lead to reduced sales, growth prospects and reputational damage.

The protection of patient, employee and company data is critical to us. We rely extensively on our computer systems to track treatment and patient data, manage our supply chain, record and process transactions, collect and summarize data and manage our business. While our systems are designed to operate without interruption, we may experience interruptions to the availability of our computer systems from time to time. The failure of our computer systems to operate effectively, keep pace with our growing capacity requirements, smoothly transition to upgraded or replacement systems or integrate with new systems could adversely affect our business. In addition, our computer systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, cyber-attacks, phishing attacks, denial-of-service attacks, social engineering attacks, ransomware attacks, security breaches, catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, acts of war or terrorism, public health emergencies and usage errors by our employees. If our computer systems are damaged or cease to function properly, we may have to make a significant investment to fix or replace them, and we may suffer loss of critical data, compromise to the integrity or confidentiality of patient and employee information in our systems or networks, disruption to the systems or networks of third parties on which we rely, and interruptions or delays in our operations. A lack of relevant and reliable information that enables management to effectively manage our business could preclude us from optimizing our overall performance. Any significant loss of data or failure to maintain reliable data could have a material adverse effect on our business and results of operations. A disruption to computer systems could reduce revenues, increase our costs, diminish our growth prospects, expose us to litigation, decrease patient confidence and damage our brand, which could adversely affect our business or results of operations and our reputation.

Experienced computer programmers and hackers, or even internal users, may be able to penetrate or create system disruptions or cause shutdowns of our network security or that of third-party companies with which we have contracted to provide services. We generally collect and store confidential medical information regarding our patients and any compromise of such information could subject us to patient or government litigation, which would harm our reputation and could adversely affect our business and growth. Moreover, we could incur significant expenses or disruptions of our operations in connection with system failures or data breaches. An increasing number of websites, including several large internet companies, have recently disclosed breaches of their security, some of which have involved sophisticated and highly targeted attacks on portions of their sites. Because the techniques used to obtain unauthorized access, disable or degrade services or sabotage systems, change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, sophisticated hardware and operating system software and applications that we buy or license from third parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the security and operation of the systems. The costs to us to eliminate or alleviate security problems, viruses and bugs could be significant, and efforts to address these problems could result in interruptions, delays or cessation of service that may impede our revenues or other critical functions.

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In addition, many jurisdictions in which we operate have adopted breach of privacy and data security laws or regulations that require notification to consumers if the security of their personal information is breached, among other requirements. Governmental focus on data security may lead to additional legislative action, and the increased emphasis on information security may lead patients to request that we take additional measures to enhance security or restrict the manner in which we collect and use patient information. As a result, we may have to modify our business systems and practices with the goal of further improving data security, which would result in increased expenditures and operating complexity. Any compromise of our security or accidental loss or theft of patient data in our possession could result in a violation of applicable privacy and other laws, significant legal and financial exposure and damage to our reputation, which could adversely impact our business, results of operations and the price of our securities, including the Common Shares.

Recently, data security breaches suffered by well-known companies and institutions have attracted a substantial amount of media attention, prompting new foreign, federal and state laws and legislative proposals addressing data privacy and security, as well as increased data protection obligations imposed on merchants by credit card issuers. As a result, we may become subject to more extensive requirements to protect the patient information that we process in connection with the payment for TMS treatment, resulting in increased compliance costs.

In addition, as a result of COVID-19, a signification portion of our corporate and head office operational functions are carried out by employees working from home or otherwise remotely. Remote working by employees, increased use of Wi-Fi and use of office equipment off-premises has become necessary for the foreseeable future and may make our business more vulnerable to cybersecurity breach attempts, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could have a material adverse effect on our business and results of operations. There is no guarantee that our disaster recovery procedures will be adequate in these circumstances. This period of uncertainty may also result in increases in phishing and social engineering attacks.

Many of our business functions are centralized at our head office locations. Disruptions to the operations at these locations could have an adverse effect on our business.

Our head office is located in Toronto, Ontario, and our U.S. corporate headquarters is located in Tysons Corner, Virginia. We have centralized a large number of business functions at these locations, including TMS Center design, patient support, marketing and management. Most of our senior management, our primary data center and critical resources dedicated to financial and administrative functions, are located at our head office and U.S. corporate headquarters. If we were required to shut down either one of these sites for any reason, including fire, earthquake or other natural disaster, civil disruption, or pandemic, our management and our operations staff would need to find an alternative location, causing significant disruption and expense to our business and operations.

As a result of the COVID-19 pandemic, an increasing number of our employees, including those working from our head office and U.S. corporate headquarters, have been working remotely. Employing a remote work environment could affect employee productivity, including due to a lower level of employee oversight, distractions caused by the pandemic and its impact on daily life, health conditions or illnesses, disruptions due to caregiving or child care obligations or slower or unreliable internet access. If our productivity is impacted as a result of the transition, we may incur additional costs to address such issues and our financial condition and results may be adversely impacted.

We recognize the need to enhance our disaster recovery, business continuity and document retention plans that would allow us to be operational despite unforeseen events impacting our head office or U.S. corporate headquarters, and intend to do so in the future. Without disaster recovery, business continuity and document retention plans, if we encounter difficulties or disasters at our head office or corporate headquarters, our critical systems, operations and information may not be restored in a timely manner, or at all, and may adversely impact our business operations.

Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our reported financial results or financial condition.

IFRS and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business, including revenue recognition, impairment of goodwill and intangible assets, prepaid expenses and other assets, income taxes and litigation, are highly complex and involve many subjective assumptions, estimates and judgments. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments could significantly change our reported financial performance or financial condition in accordance with generally accepted accounting principles.

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An inability to maintain effective internal controls over financial reporting could increase the risk of an error in our financial statements and/or call into question the reliability of our financial statements.

We are responsible for establishing and maintaining adequate internal controls over financial reporting, which is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Because of our inherent limitations and the fact that we are a relatively new public company and are implementing new financial control and management systems, internal controls over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A failure to prevent or detect errors or misstatements may result in a decline in the market price of our securities, including the Common Shares, and harm our ability to raise capital in the future.

In connection with the audit of our Fiscal 2020 consolidated financial statements that were prepared in accordance with IFRS, and audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), our management identified material weaknesses in our internal control over financial reporting. See Item 5.B, “Operating and Financial Review and Prospects—Management’s Discussion and Analysis of Financial Condition and Results of Operations— Disclosure Controls & Procedures and Internal Control Over Financial Reporting” below for further details. Although we remediated this material weakness during Fiscal 2021, we can provide no assurance that we will not identify material weaknesses in the future.

If our management is unable to certify the effectiveness of our internal controls or if material weaknesses in our internal controls are identified in the future, we could be subject to regulatory scrutiny and a loss of public confidence, which could harm our business and cause a decline in the price of our securities, including the Common Shares. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could cause a decline in the market price of our securities, including the Common Shares, and harm our ability to raise capital in the future.

We do not expect that our disclosure controls and procedures and internal controls over financial reporting will prevent all error or fraud. A control system, no matter how well-designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within an organization are detected. The inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by individual acts of certain persons, by collusion of two or more people or by management override of the controls. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results could be materially adversely affected, which could also cause investors to lose confidence in our reported financial information, which in turn could result in a reduction in the trading price of our securities, including the Common Shares.

We are subject to the requirements of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) since our Common Shares are listed on Nasdaq. Section 404 of Sarbanes-Oxley (“Section 404”) requires companies subject to the reporting requirements of the U.S. securities laws to complete a comprehensive evaluation of our internal controls over financial reporting. To comply with this statute, we will be required to document and test our internal control procedures and our management will be required to assess and issue a report concerning our internal controls over financial reporting. Pursuant to the Jumpstart Our Business Startups Act (“JOBS Act”), we are classified as an “emerging growth company”. Under the JOBS Act, emerging growth companies are exempt from certain reporting requirements, including the independent auditor attestation requirements of Section 404(b) of Sarbanes-Oxley. Under this exemption, our independent auditor will not be required to attest to and report on management’s assessment of our internal control over financial reporting during a transition period of up to five years from our initial registration with the United States Securities and Exchange Commission (the “SEC”). We will need to prepare for compliance with Section 404(b) by strengthening, assessing and testing our system of internal controls to provide the basis for our report. However, the continuous process of strengthening our internal controls and complying with Section 404(b) is complicated and time-consuming. Furthermore, we believe that our business will grow in the United States, in which case our internal controls will become more complex and will require significantly more resources and attention to ensure our internal controls remain effective overall. During the course of our testing, our management may identify material weaknesses or significant deficiencies, which may not be remedied in a timely manner to meet the deadline imposed by Sarbanes-Oxley. If our management cannot favorably assess the effectiveness of our internal controls over financial reporting, or our independent registered public accounting firm identifies material weaknesses in our internal controls, investor confidence in our financial results may weaken, and the market price of our securities may suffer.

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Risks Relating to Ownership of Common Shares

There are unexercised options and warrants outstanding and which may be issued from time to time. If these are exercised, an investor’s interest in Common Shares will be diluted.

As of March 31, 2022, there were 17,801,885 Common Shares issued and outstanding. If all of the Company’s options that were issued and outstanding as of March 31, 2022, including options that are not yet exercisable, were to be exercised, we would be required to issue up to an additional 894,500 Common Shares, or approximately 5.0% of the issued and outstanding Common Shares as of March 31, 2022. Furthermore, in connection with the financing under the Credit Agreement, we issued 51,307 Lender Warrants (as defined below) exercisable for an aggregate of 51,307 Common Shares at an exercise price of C$11.20 per Lender Warrant. If all of the Lender Warrants were to be exercised, we would be required to issue up to an additional 51,307 Common Shares, or approximately 0.3% of the issued and outstanding Common Shares as of March 31, 2022. In addition, to the extent that we draw down additional financing under the Credit Agreement, we will be required to issue additional Lender Warrants in an amount equal to 3% of the amounts drawn divided by the lesser of (i) the closing price of the Common Shares on the day prior to the issuance of such additional Lender Warrants and (ii) the average closing price of the Common Shares on the TSX for the 10 days prior to the issuance of such additional Lender Warrants, in each case subject to approval by the TSX. See Item 4.A, “Information on the Company—History and Development of the Company—Recent Developments in Our Business—Fiscal 2020 Highlights—Credit Facility” and our audited consolidated financial statements for the year ended December 31, 2021 in this Annual Report.

These issuances, to the extent they occur, would decrease the proportionate ownership and voting power of all shareholders. This dilution could cause the price of the Common Shares to decline and it could result in the creation of new control persons. In addition, our shareholders could suffer dilution in the net book value per Common Share.

A decline in the price of the Common Shares could affect our ability to raise further working capital and adversely impact our ability to continue operations.

A prolonged decline in the price of the Common Shares could result in a reduction in the liquidity of the Common Shares and a reduction in our ability to raise capital. Because a significant portion of our operations has been and may be financed through the sale of equity securities, a decline in the price of the Common Shares could be especially detrimental to our liquidity and our operations. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plan and operations, including our ability to implement the planned expansion of our Spravato® Program, our TMS Center expansion strategy or continue current operations. If our stock price declines, we can offer no assurance that we will be able to raise additional capital on acceptable terms or generate funds from operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not have the resources to continue our normal operations.

Greybrook Health Inc. and Greybrook Realty Partners (collectively, “Greybrook”) continues to have significant influence over us, including control over decisions that require the approval of shareholders, which could limit your ability to influence the outcome of matters submitted to shareholders for a vote.

As of December 31, 2021, Greybrook beneficially owns approximately 26.6% of the issued and outstanding Common Shares. As long as Greybrook owns or controls a significant number of the outstanding Common Shares, they will have the ability to exercise substantial control over all corporate actions requiring shareholder approval, irrespective of how our other shareholders may vote, including the election and removal of directors and the size of our Board, any amendments to our Articles, or the approval of any merger, acquisition or other significant corporate transaction, including a sale of all or substantially all of our assets.

In addition, Greybrook’s interests may not align with the interests of our other shareholders. Greybrook is in the business of making investments in companies and may acquire and hold, from time to time, interests in businesses that compete directly or indirectly with us. Greybrook may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.

Future sales of our securities by existing shareholders or by us could cause the market price for the Common Shares to decline.

Sales of a substantial number of the Common Shares in the public market could occur at any time. These sales, or the market perception that the holders of a large number of Common Shares intend to sell their Common Shares, could significantly reduce the market price of the Common Shares. We cannot predict the effect, if any, that future public sales of these securities or the availability of these securities for sale will have on the market price of the Common Shares. If the market price of the Common Shares was to drop as a result, this might impede our ability to raise additional capital and might cause remaining shareholders to lose all or part of their investment.

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As of March 31, 2022, there were 17,801,885 Common Shares issued and outstanding. There are also options to acquire 897,500 Common Shares and 51,307 Lender Warrants currently outstanding. In addition, to the extent that the Company draws down additional financing under the Credit Agreement, the Company will be required to issue additional Lender Warrants to the Lender. The Common Shares issuable upon the exercise of these options and Lender Warrants will, to the extent permitted by any applicable vesting requirements and restrictions under applicable securities laws, also become eligible for sale in the public market.

Further, we cannot predict the size of future issuances of Common Shares or the effect, if any, that future issuances and sales of Common Shares will have on the market price of the Common Shares. Sales of substantial amounts of Common Shares, or the perception that such sales could occur, may adversely affect prevailing market prices for the Common Shares.

Future offerings of debt securities, which would rank senior to the Common Shares upon our bankruptcy or liquidation, and future offerings of equity securities that may be senior to the Common Shares for the purposes of dividend and liquidating distributions, may adversely affect the market price of the Common Shares.

In the future, we may attempt to increase our capital resources by making offerings of debt securities or additional offerings of equity securities. Upon bankruptcy or liquidation, holders of our debt securities and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of Common Shares. Any offerings of convertible securities or additional equity offerings may dilute the holdings of our existing shareholders or reduce the market price of the Common Shares, or both. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control. As a result, we cannot predict or estimate the amount, timing or nature of our future offerings, and holders of Common Shares bear the risk of our future offerings reducing the market price of the Common Shares and diluting their ownership interest in the Company.

We do not expect to pay any cash dividends for the foreseeable future.

We currently expect to retain all available funds and future earnings, if any, for use in the operation and growth of our business and do not anticipate paying any cash dividends for the foreseeable future. Any future determination to pay dividends will be at the discretion of our Board, subject to compliance with applicable law and any contractual provisions, including under any existing or future agreements for indebtedness we may incur, that restrict or limit our ability to pay dividends, and will depend upon, among other factors, our results of operations, financial condition, earnings, capital requirements and other factors that our Board deems relevant. Accordingly, realization of a gain on your investment will depend on the appreciation of the price of the Common Shares, which may never occur. Investors seeking cash dividends in the foreseeable future should not invest in Common Shares.

We are a Canadian company and shareholder protections differ from shareholder protections in the United States and elsewhere.

We are organized under the laws of Ontario, Canada and, accordingly, are governed by the Business Corporations Act (Ontario) (the “OBCA”). The OBCA differs in certain material respects from laws generally applicable to United States corporations and shareholders, including the provisions relating to interested directors, mergers and similar arrangements, takeovers, shareholders’ suits, indemnification of directors and inspection of corporation records.

Our by-laws designate the Superior Court of Justice of the Province of Ontario, Canada, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could limit our shareholders’ ability to choose a favorable judicial forum for disputes with us or our directors or officers under U.S. securities laws.

Article 12 of our by-laws provides that, subject to our consent in writing to the selection of an alternative forum, the Superior Court of Justice of the Province of Ontario, Canada shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company; (ii) any action or proceeding asserting a claim of a fiduciary duty owed by any director, officer or other employee of the Company to the Company; (iii) any action or proceeding asserting a claim arising pursuant to any provision of the OBCA or the articles or the by-laws of the Company (as either may be amended from time to time); or (iv) any action or proceeding asserting a claim otherwise related to the “affairs”, as defined in the OBCA, of the Company. Under the terms of our by-laws, any investor purchasing any interest in our Common Shares shall be deemed to have notice of and consented to the foregoing forum selection provisions.

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The foregoing forum selection provisions would apply to all actions described above, which may include actions that arise under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) or the U.S. Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”). However, Section 27 of the U.S. Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the U.S. Exchange Act or the rules and regulations thereunder, and Section 22 of the U.S. Securities Act provides for concurrent U.S. federal and state court jurisdictions over actions under the U.S. Securities Act and the rules and regulations thereunder, subject to a limited exception for certain “covered class actions” as defined in Section 16 of the U.S. Securities Act and interpreted by U.S. courts. Accordingly, there is uncertainty whether a U.S. court would enforce our forum selection clause in a lawsuit that alleges violation of the U.S. Exchange Act and/or the U.S. Securities Act, and investors cannot waive compliance with U.S. federal securities laws and the rules and regulations thereunder.

As a result of the foregoing uncertainty, the forum selection provision in our by-laws may result in increased costs to a shareholder that seeks to bring a claim under the Exchange Act and/or Securities Act and otherwise limit any such shareholder’s ability to bring such a claim in a judicial forum that it finds favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us and our directors or officers under U.S. securities laws.

Certain adverse tax consequences may result from the treatment of the Company as a U.S. domestic corporation for U.S. federal income tax purposes.

Although the Company is organized as a corporation under the OBCA, the Company takes the position that it is treated as a U.S. domestic corporation for all U.S. federal income tax purposes under Section 7874 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”). As a result, the Company generally is subject to tax on its worldwide income by both Canada and the United States. This treatment is expected to continue indefinitely, which could have a material adverse effect on our financial condition and results of operations.

We do not currently anticipate paying dividends on the Common Shares. If we pay dividends on the Common Shares, any dividends received by shareholders that are not residents of Canada for purposes of the Income Tax Act (Canada) (the “Tax Act”) generally will be subject to Canadian withholding tax at the rate of 25%, except as reduced by an applicable income tax treaty. A U.S. Holder (as defined below) may not be permitted to claim a U.S. foreign tax credit for any such Canadian withholding tax, unless such U.S. Holder has sufficient foreign-source income from other sources and certain other conditions are met.

Dividends received by shareholders that are Non-U.S. Holders (as defined below) generally will be subject to U.S. federal withholding tax at the rate of 30%, except as reduced by an applicable income tax treaty. Shareholders that are residents of Canada for purposes of the Tax Act will not be permitted to claim a Canadian foreign tax credit for any such U.S. withholding tax. A shareholder who is neither a U.S. Holder nor a resident of Canada for purposes of the Tax Act generally will be subject to both U.S. withholding tax and Canadian withholding tax. Shareholders subject to both U.S. and Canadian withholding tax are urged to consult their own tax advisers regarding the availability of reduced withholding under an applicable income tax treaty.

Prospective investors are urged to consult their own tax advisers regarding the U.S. tax treatment of the Company and the tax consequences of owning Common Shares in light of their particular circumstances.

Any issuance of preferred shares could make it difficult for another company to acquire us or could otherwise adversely affect holders of the Common Shares, which could depress the price of the Common Shares.

Our Board has the authority to issue preferred shares and to determine the preferences, limitations and relative rights of preferred shares and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our shareholders. Our preferred shares may be issued with liquidation, dividend and other rights superior to the rights of the Common Shares. The potential issuance of preferred shares may delay or prevent a change in control of us, discourage bids for the Common Shares at a premium over the market price and adversely affect the market price and other rights of the holders of Common Shares.

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General Risk Factors

We are subject to insurance-related risks.

We maintain director and officer insurance, liability insurance, business interruption and property insurance and our insurance coverage includes deductibles, self-insured retentions, limits of liability and similar provisions. There is no guarantee, however, that our insurance coverage will be sufficient, or that insurance proceeds will be paid to us on a timely basis. In addition, there are types of losses we may incur but against which we cannot be insured or which we believe are not economically reasonable to insure, such as losses due to acts of war or certain natural disasters. If we incur these losses and they are material, our business, operating results and financial condition may be adversely affected. Also, certain material events may result in sizable losses for the insurance industry and materially adversely impact the availability of adequate insurance coverage or result in significant premium increases. Accordingly, we may elect to self-insure, accept higher deductibles or reduce the amount of coverage in response to such market changes.

Natural disasters and unusual weather could adversely affect our operations and financial results.

Extreme weather conditions, as a result of climate change or otherwise, in the areas in which our TMS Centers are located, could adversely affect our business. For example, frequent or unusually heavy snowfall, ice storms, rainstorms or other extreme weather conditions over a prolonged period could make it difficult for our patients to travel to our TMS Centers and thereby reduce the number of treatments we provide. Reduced treatments from extreme or prolonged unseasonable weather conditions could adversely affect our business.

In addition, natural disasters such as hurricanes, tornadoes and earthquakes, or a combination of these or other factors, could severely damage or destroy one or more of our TMS Centers located in the affected areas, thereby disrupting our business operations.

Furthermore, a significant portion of our business functions operate out of our head office in Toronto, Ontario, and our U.S. corporate headquarters in Tysons Corner, Virginia. As a result, our business is also vulnerable to disruptions due to local weather, economics and other factors in these regions.

We may upgrade or replace certain core information technology systems which could disrupt our operations and adversely affect our financial results.

The implementation of new information technology systems may cause delays or disruptions or may be used improperly, either of which might negatively impact our business, prospects, financial condition and results of operations.

The risks associated with information technology systems changes, as well as any failure of such systems to operate effectively, could adversely impact human capital management and the promptness and accuracy of our transaction processing and financial accounting and reporting capabilities. Internal controls over financial reporting, the efficiency of our operations and our ability to properly forecast earnings and cash requirements may be adversely affected, and we may be required to make significant additional capital expenditures to remediate any such failures or problems.

We believe that other companies have experienced significant delays and cost overruns in implementing similar system changes, and we may encounter problems as well. Our planned investments in maintenance capital expenditures and infrastructure are forward-looking information and are based on opinions, estimates and assumptions that may prove incorrect. Additionally, unforeseen costs in developing infrastructure and other information technology improvements may adversely impact our business operations. We may not be able to successfully implement these new systems or, if implemented, we may still face unexpected disruptions in the future. Any resulting delays or disruptions could harm our business, prospects, financial condition and results of operations.

The market price for the Common Shares may be volatile and your investment could suffer a decline in value.

The market price of the Common Shares may be subject to significant fluctuations. Some of the factors that may cause the market price of the Common Shares to fluctuate include:

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Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. As well, certain institutional investors may base their investment decisions on consideration of our environmental, governance and social practices and performance against such institutions’ respective investment guidelines and criteria, and failure to satisfy such criteria may result in limited or no investment in the Common Shares by those institutions, which could materially adversely affect the trading price of the Common Shares. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue for a protracted period of time, our operations and the trading price of the Common Shares may be materially adversely affected.

In addition, broad market and industry factors may harm the market price of the Common Shares. Consequently, the price of the Common Shares could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce the price of the Common Shares regardless of our operating performance. In the past, following a significant decline in the market price of a company’s securities, there have been instances of securities class action litigation having been instituted against that company. If we were involved in any similar litigation, we could incur substantial costs, our management’s attention and resources could be diverted and it could harm our business, results of operations and financial condition.

If securities or industry analysts cease to publish research or publish inaccurate or unfavorable research about us or our business, our trading price and our trading volume could decline.

The trading market for the Common Shares depends in part on the research and reports that industry or securities analysts publish about us or our business. If we obtain industry or securities analyst coverage and if one or more of the analysts who cover us downgrade the Common Shares, the trading price of the Common Shares may decline. If one or more of the analysts cease coverage of our Company or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the Common Share price or trading volume to decline. Moreover, if our results of operations do not meet the expectations of the investor community, or one or more of the analysts who cover our Company publishes inaccurate or unfavorable research about our business, the trading price of the Common Shares may decline.

As a foreign private issuer whose shares are listed on Nasdaq, we intend to follow certain home country corporate governance practices instead of certain Nasdaq requirements.

As a foreign private issuer whose shares are listed on Nasdaq, we are permitted to follow certain home country corporate governance practices instead of certain requirements of the Nasdaq rules. In addition, we intend to follow the TSX listing rules in respect of private placements instead of Nasdaq requirements to obtain shareholder approval for certain dilutive events (such as issuances that will result in a change of control, certain transactions other than a public offering involving issuances of a 20% or greater interest in us and certain acquisitions of the shares or assets of another company). Accordingly, our shareholders may not be afforded the same protection as provided under Nasdaq corporate governance rules for domestic issuers.

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We incur significantly increased costs and devote substantial management time as a result of operating as a U.S. public company.

As a U.S. public company, we incur significant legal, accounting and other expenses that we did not incur as a private company or as a Canadian public company. For example, we are subject to the reporting requirements of the U.S. Exchange Act, and are required to comply with the applicable requirements of Sarbanes-Oxley and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC and including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Compliance with these requirements has increased our legal and financial compliance costs and make some activities more time consuming and costly. In addition, we expect that management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, when the Company loses “emerging growth company” status, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404, which involve annual assessments of a company’s internal controls over financial reporting. We may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and may need to establish an internal audit function. We cannot predict or estimate the amount of additional costs we may incur as a result of SOX 404 compliance or the timing of such costs.

We may lose foreign private issuer status in the future, which could result in significant additional costs and expenses.

We may in the future lose foreign private issuer status if a majority of our Common Shares are held in the United States and we fail to meet the additional requirements necessary to avoid loss of foreign private issuer status, such as if: (i) a majority of our directors or executive officers are U.S. citizens or residents; (ii) a majority of our assets are located in the United States; or (iii) our business is administered principally in the United States. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer will be significantly more than the costs incurred as an SEC foreign private issuer. If we are not a foreign private issuer, we would be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are generally more detailed and extensive than the forms available to a foreign private issuer. In addition, we may lose the ability to rely upon exemptions from corporate governance requirements that are available to foreign private issuers. The loss of foreign private issuer status would result in significant costs and expenses which could have an adverse impact on our financial condition and cash flows.

It may be difficult for United States investors to effect service of process or enforcement of actions against us or certain of our directors and officers under U.S. federal securities laws.

We are incorporated under the laws of the Province of Ontario, Canada. A number of our directors and officers reside in Canada. Because certain of our assets and these persons are located outside the United States, it will be difficult for United States investors to effect service of process in the United States upon us or our directors or officers, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under the U.S. Exchange Act or other United States laws. It may also be difficult to have a judgment rendered in a U.S. court recognized or enforced against us in Canada.

ITEM 4 INFORMATION ON THE COMPANY

General Corporate Information

Greenbrook TMS Inc. was incorporated in Ontario, Canada, under the OBCA on February 9, 2018 as a wholly-owned subsidiary of our predecessor parent company, TMS NeuroHealth Inc. (now TMS NeuroHealth Centers Inc. (“TMS US”)), a corporation incorporated in 2011 under the laws of the State of Delaware. On March 29, 2018, the Company and TMS US completed a corporate reorganization pursuant to which all of the holders of common stock of TMS US exchanged their holdings of common stock of TMS US for our Common Shares, resulting in TMS US becoming a wholly-owned subsidiary of Greenbrook (the “Reorganization”). In connection with the Reorganization, a total of 7,504,875 shares of common stock of TMS US were exchanged for 7,504,875 Common Shares (in each case, on a post-Share Consolidation basis). On September 28, 2018 in connection with the Canadian IPO (as defined below), Greenbrook filed articles of amendment to increase the minimum and maximum size of the Board, to remove the transfer restrictions on the Common Shares and to remove certain other private company restrictions.

On October 3, 2018, we completed our initial public offering in Canada (the “Canadian IPO”) of 2,000,000 Common Shares in Canada (on a post-Share Consolidation basis) that were distributed by us upon the exercise or deemed exercise of 2,000,000 outstanding special warrants of the Company (on a post-Share Consolidation basis), which exercises required no additional payment to us by the applicable warrantholders.

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In conjunction with the Canadian IPO, the Common Shares were listed for trading on the TSX under the symbol “GTMS” on October 3, 2018.

On January 12, 2021, at a special meeting of shareholders, our shareholders approved a special resolution authorizing the Board to amend our Articles to effect a consolidation of all of the issued and outstanding Common Shares, such that the trading price of the Common Shares following the Share Consolidation would permit us to qualify for listing on the Nasdaq. On February 1, 2021, the Board effected the Share Consolidation on the basis of one post-consolidation Common Share for every five pre-consolidation Common Shares and on February 4, 2021, the Common Shares began trading on a post-consolidation basis on the TSX. In addition to the Share Consolidation, our shareholders also approved amendments to the Company’s by-laws to, among other things, increase the quorum requirement for shareholder meetings for purposes of satisfying Nasdaq’s minimum quorum requirement, as well as an amendment to the Company’s Articles to allow the Board to appoint additional directors not exceeding one third of the number of directors elected at the previous annual meeting of shareholders. On March 12, 2021, the Common Shares were certified for listing on the Nasdaq and on March 16, 2021, the Common Shares commenced trading on the Nasdaq under the symbol “GBNH”.

The following chart identifies our material subsidiaries, their governing jurisdictions and the percentage of their voting securities which are beneficially owned, or controlled or directed, directly or indirectly, by Greenbrook:

Note:

As at December 31, 2021, our network consisted of 149 TMS Center locations spanning 15 management regions in the Commonwealth of Virginia and the States of Maryland, Delaware, North Carolina, Missouri, Illinois, Ohio, Texas, Connecticut, Florida, South Carolina, Michigan, Alaska, Oregon, California, Iowa and Massachusetts.

Our head and registered office is located at 890 Yonge Street, 7^th Floor, Toronto, Ontario, Canada, M4W 3P4 and our telephone number is 416-915-9100. Our United States corporate headquarters is located at 8401 Greensboro Drive, Suite 425, Tysons Corner, Virginia, United States, 22102. We have designated TMS US as our agent for service of process in the United States and its address is 8401 Greensboro Drive, Suite 425, Tysons Corner, Virginia, USA, 22102.

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Recent Developments in Our Business

COVID-19

While our TMS Centers have remained open during the COVID-19 pandemic (including as an “essential business”), we experienced a temporary decline in both patient visits/treatments and new patient treatment starts during Fiscal 2020 and into Fiscal 2021 as a result of the COVID-19 pandemic. While operating conditions began to normalize during the first half of Fiscal 2021, the surge in the COVID-19 delta variant during the summer season of 2021 created caution among patients, especially in late August and September. Treatment volume levels began to normalize again in October 2021 with strong momentum in patient starts and consultations going into Q4 2021. However, in Q4 2021, the surge in the COVID-19 omicron variant once again caused caution among patients, resulting in a decline in both patient visits/treatments and new patient starts. In addition, a significant number of staff members and affiliated clinicians were required to isolate as a result of having contracted COVID-19. As a result, we implemented several cost containment measures, including implementation of staffing reductions and a hiring freeze effective in December 2021, and a reduction in discretionary spend (particularly in corporate, general and administrative expenses, travel & entertainment, and marketing spend). While the COVID-19 pandemic has resulted in certain operational challenges during Fiscal 2021, we believe that the COVID-19 pandemic has increased the demand for mental health services and we believe that we are well-positioned to serve this unmet demand.

Early 2022 and Fiscal 2021 Highlights

Spravato® Program

In the first quarter of Fiscal 2021, we commenced offering Spravato® (esketamine nasal spray) at select TMS Centers to treat adults with treatment-resistant depression and depressive symptoms in adults with MDD with suicidal thoughts or actions.

The roll-out of our Spravato® Program at select TMS Centers continued through Fiscal 2021 and into 2022, building on our long-term business plan of utilizing our TMS Centers as platforms for the delivery of innovative treatments to patients suffering from MDD and other mental health disorders. We have managed to leverage excess capacity in certain of our TMS Centers through the Spravato® Program which has effectively enhanced profit margins in these TMS Centers. As of March 25, 2022, we have expanded our offering of Spravato® to an additional 13 TMS Centers, bringing our total to 23 TMS Centers offering Spravato®.

The suitability of administration of Spravato® to patients will be determined by Greenbrook-affiliated clinicians based on clinical appropriateness, while ensuring regulatory compliance with FDA requirements. TMS therapy is not a requisite for Spravato® administration. Spravato® is marketed by Janssen Pharmaceuticals, Inc.

Achieve TMS East/Central Acquisition

On October 1, 2021, we completed the acquisition of Achieve TMS East, LLC (“Achieve TMS East”) and Achieve TMS Central, LLC (“Achieve TMS Central”, and together with Achieve TMS East, “Achieve TMS East/Central”). The initial aggregate purchase price for Achieve TMS East/Central was $7.9 million, excluding Achieve TMS East/Central’s cash and subject to customary working capital adjustments. In addition, contingent consideration for the acquisition of Achieve TMS East/Central (the “Achieve TMS East/Central Acquisition”) is subject to a capped earn-out of up to an additional $2.5 million based on the financial performance of Achieve TMS East during the twelve-month period following completion of the Achieve TMS East/Central Acquisition, payable following the calculation period. As at December 31, 2021, we estimated the fair value of the purchase price payable in respect to the earn out to be nil.

The Achieve TMS East/Central Acquisition added 17 new TMS Centers and we believe it strengthens our presence in New England and in the central United States. We anticipate that the Achieve TMS East/Central Acquisition will also serve as the foundation for future growth within these regions. We expect to realize operational synergies and to secure robust payor contracts, brand recognition, clinician reputation and a strong management team through the Achieve TMS East/Central Acquisition.

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2021 Public Equity Offering

On September 27, 2021, the Company completed a bought deal public offering of Common Shares in Canada and the United States (the “2021 Public Equity Offering”). Pursuant to the 2021 Public Equity Offering, an aggregate of 1,707,750 Common Shares were issued at a price of $7.75 per Common Share, for aggregate gross proceeds to the Company of $13.2 million. The 2021 Public Equity Offering was made pursuant to an underwriting agreement entered into among Stifel Nicolaus Canada Inc., Bloom Burton Securities Inc. and Lake Street Capital Markets, LLC. The Company used the net proceeds from the 2021 Public Equity Offering to satisfy the purchase price in respect of the Achieve TMS East/Central Acquisition as well as for working capital and general corporate purposes.

PPP Loan Forgiveness

On July 29, 2021, as authorized by Section 1106 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), the U.S. Small Business Administration forgave the loan amount of $3.1 million previously made to the Company under the United States Paycheck Protection Program (the “PPP Loan”) as well as all accrued and unpaid interest.

2021 Private Placement

On June 14, 2021, the Company completed a non-brokered private placement of Common Shares (the “2021 Private Placement”) in reliance upon Rule 506(c) under the U.S. Securities Act. Pursuant to the 2021 Private Placement, an aggregate of 2,353,347 Common Shares were issued at a price of $10.00 per Common Share, for aggregate gross proceeds to the Company of $23.5 million. The Company used the net proceeds from the 2021 Private Placement to fund operating activities and for working capital and general corporate purposes.

In connection with the 2021 Private Placement, Masters Special Situations, LLC (“MSS”), Greybrook Health and 1315 Capital II, LP (“1315 Capital” and, together with MSS and Greybrook Health, the “Investors”) each received the right to appoint a nominee to the Board as well as rights to participate in future equity issuances by the Company to maintain such investors’ pro rata ownership interest in the Company for so long as the applicable Investor (together with its affiliates) owns, controls or directs, directly or indirectly, at least 5% of the outstanding Common Shares (on a partially-diluted basis). In addition, each of the subscribers in the 2021 Private Placement received customary resale, demand and “piggy-back” registration rights.

On August 3, 2021, the Company appointed Robert Higgins to the Board following the exercise by MSS of its board nomination right granted in connection with the 2021 Private Placement. Adele C. Oliva and Sasha Cucuz, current members of the Board, represent 1315 Capital’s and Greybrook Health’s board nominees, respectively.

Participation on BrainsWay Smoking Cessation Trial

In August 2020, BrainsWay Ltd. (“BrainsWay”) was granted FDA clearance to use its deep TMS (“Deep TMS”) system as an aid in short-term smoking cessation in adults. The treatment will utilize BrainsWay’s H4 Deep TMS coil, which was designed to target addiction-related brain circuits. On April 29, 2021, our Richmond Heights, Missouri TMS Center was named as one of the participating centers in BrainsWay’s roll-out of its smoking cessation TMS therapy.

Nasdaq Listing

On March 12, 2021, the Common Shares were certified for listing on the Nasdaq and on March 16, 2021, the Common Shares commenced trading on the Nasdaq under the symbol “GBNH”.

Share Consolidation; Amendments to Articles and By-Laws

On January 12, 2021, we announced that our shareholders approved a special resolution for an amendment to the Company’s Articles and authorized the Share Consolidation of our outstanding Common Shares on the basis of a ratio that would permit us to qualify for a potential listing on Nasdaq. On February 1, 2021, the Board effected the Share Consolidation on the basis of one post-consolidation Common Share for every five pre-consolidation Common Shares and on February 4, 2021, the Common Shares began trading on a post-consolidation basis on the TSX under its current trading symbol “GTMS”.

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In addition to the Share Consolidation, our shareholders also approved amendments to the Company’s by-laws to, among other things, increase the quorum requirement for shareholder meetings for purposes of satisfying Nasdaq’s minimum quorum requirement, as well as an amendment to the Company’s Articles to allow the Board to appoint additional directors not exceeding one third of the number of directors elected at the previous annual meeting of shareholders.

Fiscal 2020 Highlights

Credit Facility

On December 31, 2020, we entered into a credit and security agreement (as amended by amendment no. 1 to the credit and security agreement effective October 1, 2021, the “Credit Agreement”) for a $30 million secured credit facility (the “Credit Facility”) with Oxford Finance LLC (the “Lender”). The Credit Facility provided a $15 million term loan that was funded at closing on December 31, 2020, with an option of drawing up to an additional $15 million in three $5 million delayed-draw term loan tranches within the 24 months following closing, subject to achieving specific financial milestones. All amounts borrowed under the Credit Facility will bear interest at a rate equal to 30-day LIBOR plus 7.75%, subject to a minimum interest rate of 8.75%. The Credit Facility has a five-year term and amortizes over the life of the Credit Facility with 1% of the principal amount outstanding amortized over years one to four with the remaining outstanding principal repaid in installments over the fifth year. As consideration for providing the Credit Facility, we issued 51,307 common share purchase warrants (the “Lender Warrants”) to the Lender, each exercisable for one Common Share at an exercise price of C$11.20 per Common Share. The Lender Warrants will expire on December 31, 2025. In addition, to the extent that we draw down additional financing under the Credit Facility, we will be required to issue additional Lender Warrants in an amount equal to 3% of the amounts drawn divided by the lesser of (i) the closing price for the Common Shares on the day prior to the issuance of such Lender Warrants and (ii) the average closing price of the Common Shares on the TSX for the 10 days prior to the issuance of such additional Lender Warrants, in either case subject to approval by the TSX.

The terms of the Credit Agreement require us to satisfy various affirmative and negative covenants and to meet certain financial milestones relating to the achievement of certain tiered EBITDA and revenue targets; debt-to-EBITDA ratio and debt-to-enterprise value ratio targets; and minimum unrestricted cash and daily average unrestricted cash requirements. As of the date of this Annual Report, the Company does not currently meet these financial milestones and is, therefore, unable to draw down on any of the delayed-draw term loan tranches under the Credit Facility at this time. The negative covenants limit, among other things, our ability to incur additional indebtedness outside of what is permitted under the Credit Agreement, create certain liens on assets, declare dividends and engage in certain types of transactions. The Credit Agreement includes customary events of default, including payment and covenant breaches, bankruptcy events and the occurrence of a change of control. See also Item 5.B, “Operating and Financial Review and Prospects—Management’s Discussion and Analysis of Financial Condition and Results of Operations——Liquidity and Capital Resources” below.

2020 Equity Offering

On May 21, 2020, we completed a public offering in Canada of Common Shares for gross proceeds of approximately C$15,000,000 (approximately US$10.8 million) (the “2020 Equity Offering”). The 2020 Equity Offering was completed pursuant to an agency agreement with a syndicate of underwriters.

Pursuant to the 2020 Equity Offering, we issued a total of 1,818,788 Common Shares at a price of C$8.25 per Common Share. We used the net proceeds from the 2020 Equity Offering to fund operating activities and for other working capital and general corporate purposes.

Fiscal 2019 Highlights

New Management Regions and TMS Center Network Expansion

The below bullets describe the five management regions we developed in 2019.

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Acquisition of Achieve TMS West

On September 26, 2019, the Company, through its wholly-owned subsidiary, TMS US, completed the acquisition of all of the issued and outstanding membership interests of each of Achieve TMS Centers, LLC and Achieve TMS Alaska, LLC (collectively, “Achieve TMS West”) pursuant to the terms of a membership interest purchase agreement with the sellers named therein (the “Vendors”) dated September 11, 2019 (the “Achieve TMS West Acquisition”). Achieve TMS West controls and operates a network of TMS Centers that specialize in the provision of TMS therapy for the treatment of depression and related psychiatric services at TMS Centers in California, Oregon and Alaska. We believe the Achieve TMS West Acquisition will allow us to accelerate our expansion in the western United States in future periods.

The total consideration for the acquisition was $10,596,912 (net of Achieve TMS West’s cash and subject to working capital adjustments), of which $2,611,044 was satisfied through the issuance of 286,348 Common Shares to the Vendors and $7,985,868 was satisfied by way of a cash payment to the Vendors, in each case, on the closing of the acquisition. The share consideration for the Achieve TMS West Acquisition was valued based on a price per Common Share equal to the volume-weighted average trading price of the Common Shares on the TSX for the five trading days ending two trading days prior to the closing of the Achieve TMS West Acquisition.

In addition, a portion of the purchase price payable in respect of the Achieve TMS West Acquisition was subject to an earn-out based on the earnings before interest, tax, depreciation and amortization achieved by Achieve TMS West during the twelve-month period following September 26, 2019, the closing date of the Achieve TMS West Acquisition (the “Earn-Out”). The Earn-Out was confirmed to be $10,319,429, of which $3,095,799 was settled through the issuance of an aggregate of 231,011 Common Shares to the vendors on March 26, 2021. Of the remaining $7,223,630 of Earn-Out consideration payable, $2,780,590 was paid in cash on March 26, 2021 and certain vendors agreed to defer $4,443,040 of the cash Earn-Out consideration due to them until June 30, 2021 in exchange for additional cash consideration in the aggregate amount of $300,000, which payment was made in full concurrently with the deferred cash payment on June 28, 2021.

2019 Equity Offerings

On May 17, 2019, we completed an underwritten bought deal public offering of 805,000 Common Shares (including 105,000 Common Shares issued pursuant to the full exercise of the underwriters’ over-allotment option) in Canada and a concurrent private placement to 1315 Capital of 1,076,800 Common Shares, in each case at a price of C$16.25 per Common Share, for total gross proceeds of C$30,579,250 (approximately US$22.8 million) (the “2019 Equity Offerings” and, together with the 2020 Equity Offering and the 2021 Public Equity Offering, the “Equity Offerings”). The 2019 Equity Offerings were both completed on a bought deal basis by a syndicate of underwriters.

The Company used the net proceeds from the 2019 Equity Offerings for the development of new TMS Centers, to fund the cash portion of the purchase price for the Achieve TMS West Acquisition (see “—Acquisition of Achieve TMS West” above) and for working capital and general corporate purposes.

In connection with the 2019 Equity Offerings, the Company issued 112,908 broker warrants (“Broker Warrants”) to the underwriters. Each Broker Warrant entitled the holder thereof to purchase one Common Share at an exercise price of C$16.25 for a period of 24 months following the date of issuance thereof. The Broker Warrants expired on May 17, 2021.

Capital Expenditures

We incur capital expenditures mainly in relation to the expansion of our TMS Centers, for leasehold improvements, office furniture and computer equipment in the operation of our business. See Item 5.B, “Operating and Financial Review and Prospects—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Analysis of Cash Flows”.

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Internet Availability of Company Information

The SEC maintains an Internet site (http://www.sec.gov) that makes available reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Company’s Internet site can be found at www.greenbrooktms.com. The information on our website is not incorporated by reference into this Annual Report and should not be considered a part of this Annual Report, and the reference to our website in this Annual Report is an inactive textual reference only.

B.Business Overview

Overview of Greenbrook

Through our TMS Centers, we are a leading provider of TMS therapy in the United States for the treatment of MDD and other mental health disorders. Our predecessor, TMS US, was established in 2011 to take advantage of the opportunity created through the paradigm-shifting technology of TMS, an FDA-cleared, non-invasive therapy for the treatment of MDD. In 2018, our TMS Centers began offering treatment for OCD. Our business model takes advantage of the opportunity for a new, differentiated service channel for the delivery of TMS – a patient-focused, centers-based service model to make TMS treatment easily accessible to all patients while maintaining a high standard of care. We have identified the following key opportunity drivers for our business:

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After opening our first TMS Center in 2011 in Tysons Corner in Northern Virginia, we have grown to operate a network of TMS Center’s across the United States. We establish TMS Centers in convenient locations to provide easy access to patients and clinicians. As at December 31, 2021, we owned and operated 149 TMS Centers spanning 15 management regions in the Commonwealth of Virginia, and the States of Maryland, Delaware, North Carolina, Missouri, Illinois, Ohio, Texas, Connecticut, Florida, South Carolina, Michigan, Alaska, Oregon, California, Iowa and Massachusetts.

Our regional model seeks to develop leading positions in key markets and to leverage operational efficiencies by combining smaller local TMS treatment centers within a region under a single shared regional management infrastructure. Management regions typically cover a specific metropolitan area that meets a requisite base population threshold. The management region is typically defined by a manageable geographic area which facilitates the use of regional staff working across the various TMS Center locations within the management region and creates a marketing capture area that allows for efficiencies in advertising costs. Management regions often have similar economic characteristics and are not necessarily defined by state lines, other geographic borders, or differentiating methods of services delivery, but rather are defined by a functional management area.

Industry Overview

Depression – Disease Overview

MDD is a mood disorder characterized by depressed mood and/or a loss of interest or pleasure from activities. Other common signs and symptoms that define the condition include feelings of worthlessness or guilt, sleep disturbance, changes in appetite or weight, psychomotor slowing or agitation, fatigue, concentration difficulties, and recurrent thoughts of death or suicide (Source: American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders, fifth edition, or DSM-5).

MDD is often a recurrent disease and follows a fluctuating course over an individual’s lifetime, with alternating periods of remission and relapse. Experiencing one episode of MDD places the individual at an estimated 50% risk of experiencing an additional episode of MDD in the future. Approximately 80% of individuals who have experienced two episodes of MDD will experience an additional episode in the future (Sources: American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders, fourth edition; Interpersonal Factors in the Origin and Course of Affective Disorders, 1996; American Journal of Psychiatry, 1992 Aug; 149(8)).

A clinical diagnosis of MDD is determined by conducting a clinical exam and interview to establish if the patient is experiencing the combination of symptoms as defined in the DSM-5. The severity of a patient’s symptom profile is typically measured using a standardized rating scale. These scales can be derived from a patient-driven, self-reported questionnaire, such as the Patient Health Questionnaire-9 (“PHQ-9”), or from an observer-dependent and interview-based scale, such as the Hamilton Depression Rating Scale (“HAMD”). These rating scales, among other diagnostic criteria, can be used to grade a patient’s MDD symptoms on a continuum from mild to severe. In addition to the depression symptoms and their negative impact on quality of life, MDD is also commonly associated with a number of serious co-morbidities, including other mental health disorders, with an estimated 65.8% of patients with recurrent MDD suffering from accompanying psychiatric conditions or substance abuse disorders (Source: American Journal of Psychiatry,1997 Dec; 154(2)). MDD patients also have a substantially increased risk of committing suicide and increased risk for other conditions, such as heart disease (Sources: Acta Psychiatrica Scandinavica, 2008 Mar, 117(3); Frontiers in Psychiatry, 2016 Jul; 33(7)). The common and most widely accepted clinical measurement threshold for determining whether there has been a positive response to treatment of MDD is a significant decrease in depressive symptoms as measured using a standardized ratings scale from certain baseline scores. Where a patient demonstrates few or no symptoms at all, the patient is commonly referred to as being “in remission”. The return of symptoms is commonly referred to as a “relapse”.

As with many psychiatric disorders, the direct causes of MDD and underlying pathophysiology remain to be fully elucidated. However, a variety of interrelated factors are known to likely be involved, including (i) the physical and neurochemical status of the brain, including specific brain regions, (ii) hormonal changes, (iii) genetics, (iv) acute life events, (v) chronic stress, (vi) childhood exposure to adversity, and (vii) a myriad of other environmental factors. A signaling network in the brain that is known to function in the regulation of mood, and is believed to play a significant role in the occurrence of MDD, is a circuit that includes the prefrontal cortex, the anterior cingulate cortex and the limbic brain structures (Source: CMAJ, 2009 Feb; 180(3)). This network, and all other networks and signaling structures in the brain, are created by connections between neurons, the individual nerve cells in the brain. A neuron is a specialized cell-type that responds to both chemical and electrical signals and is connected to other neurons through specialized cell-to-cell connections known as synapses. The release of chemical messengers, or neurotransmitters, in the brain occurs across these synapses and results in changes in the electrical properties of the receiving neuron and the further propagation of the signal in the brain to form neuronal circuits.

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This communication process between two neurons across individual synapses or between different regions of the brain is ordinarily regulated by feedback mechanisms that result in the decreased release of neurotransmitter signals through a process known as reabsorption or reuptake, in which the neurons actively reabsorb the neurotransmitters back into the cell once adequate signaling has occurred. In people with MDD, however, this complex system of neuronal communication is impaired and does not function properly. In MDD, a number of causes may underlie this impaired signaling. For example, specialized neurotransmitter receptors may be either oversensitive or insensitive to a specific neurotransmitter, causing their response to its release to be either excessive or inadequate, or the signal might also be weakened if the originating cell produces too little of a neurotransmitter or if the reuptake process is too active and reabsorbs too much of the neurotransmitter to allow for proper signaling.

It is now widely accepted in neuroscience that improper regulation of one or more of the three major neurotransmitters, serotonin, norepinephrine and dopamine, plays a role in the emergence of depression. This understanding has been essential to the development of psychiatric drugs and the treatment of depression based on targeting chemically-based mechanisms underlying mood regulation. In contrast to chemically-based treatment, TMS therapy is a newer treatment paradigm that instead uses a targeted, circuit-based approach that relies on the ability of electrical mechanisms to help restore and augment neurotransmitter signaling to help re-establish proper function to neuronal pathways to treat depression.

The images below illustrate brain activity as measured by positron emission tomography or PET imaging for patients suffering from MDD as compared to normal functioning brain activity (blue and green represents decreased brain activity) (Source: Mayo Foundation):

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Prevalence and Societal Cost

The WHO now ranks MDD as the single largest contributor to global disability and a major contributor to the occurrence of suicide worldwide (Source: Depression and Other Common Mental Disorders – Global Health Estimates (WHO 2017)). A study published in the Journal of Clinical Psychiatry estimated the economic burden of the disease at approximately US$210 billion annually in the United States alone, including outpatient and inpatient medical costs, pharmacy costs, suicide related costs and workplace costs (Source: Journal of Clinical Psychiatry, 2015 Feb; 76(2)). A study published in Psychological Medicine reported that the global point prevalence of MDD is approximately 4.7% (Source: Psychological Medicine, 2013 Mar; 43(3)) and the WHO estimates that there are approximately 300 million people in the world struggling with depression (Source: Depression and Other Common Mental Disorders – Global Health Estimates (WHO 2017)).

Traditional Treatment Options

In the United States, an initial diagnosis of MDD in adult patients is typically determined by the patient’s primary care physician. Upon diagnosis, the most common form of treatment for MDD is the prescribing of an initial course of antidepressant medication, which may or may not be accompanied by psychotherapy. The physician would typically discuss a number of different treatment options with the patient and then design a treatment plan tailored to the patient’s specific symptoms, personal preferences and the psychiatric services available in proximity to the patient’s home or workplace.

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The most commonly prescribed antidepressant medications are selective serotonin reuptake inhibitors (“SSRIs”). SSRIs primarily act to affect the levels and activity of serotonin in the brain and attempt to combat depression by blocking or inhibiting the reuptake of this particular neurotransmitter, thereby increasing the levels of available serotonin to promote proper signaling. Different classes of antidepressant medications also work on different combinations of underlying neurotransmitters. For example, serotonin norepinephrine reuptake inhibitors (“SNRIs”) work by blocking the reuptake of both serotonin and norepinephrine. Other medications may have more diverse effects on all three major neurotransmitters. During the initial treatment period, patients commonly suffer from negative side effects that may offset any benefits in symptoms experienced and result in discontinuing treatment. Therefore, it is common for a patient and their primary care physician to experiment with different antidepressant drugs and drug combinations before determining a medication regimen for the patient that provides both adequate symptom relief and is tolerable from a side effect perspective.

Depression-focused psychotherapy, or “talk therapy”, is also commonly recommended as a treatment option for patients suffering from MDD. Psychotherapy is generally implemented as part of a treatment plan in conjunction with the use of antidepressant medication. Two of the most well studied and commonly available psychotherapy techniques for MDD are cognitive behavioral therapy and interpersonal psychotherapy, both of which are interactive therapies conducted between a trained professional and the patient.

If initial treatment approaches do not sufficiently relieve a patient’s symptoms, a primary care physician will often refer the patient to a psychiatrist trained in psychopharmacology. There are a substantial number of drugs and drug combinations that a psychiatrist may consider as second line therapies for MDD after an initial treatment has failed. For example, a psychiatrist may recommend combining two or more antidepressant medications, which is referred to as “combination therapy”, or using a second medication such as an atypical antipsychotic drug that is not an antidepressant along with the initial antidepressant medication to potentially augment the efficacy of such antidepressant, which is referred to as “augmentation”.

Other, later-stage treatment options, such as electroconvulsive therapy (“ECT”) and vagus nerve stimulation (“VNS”), are associated with greater medical risk, and are usually only considered for patients with severe cases of MDD. ECT is a hospital-based, inpatient treatment approach that is typically reserved for patients exhibiting the most severe MDD symptoms and is implemented most commonly in patients that are experiencing catatonia, psychosis, or acute suicidality that necessitate inpatient hospitalization. ECT involves the direct application of high voltage electrical current to the surface of the head and must be administered under anesthesia. VNS is the most invasive treatment option currently approved by the FDA for MDD and is usually only considered for patients who have proven to be severely treatment resistant. VNS involves the surgical implantation of a stimulating electrode that is wrapped around the vagus nerve, which travels through the neck near the carotid artery, and a pulse generator that is separately implanted under the skin near the patient’s collarbone. The pulse generator sends electrical impulses to the electrode with the aim of stimulating the regions of the brain known to be directly associated with the regulation of mood.

Limitations of Traditional Treatment Options

Although a large number of antidepressant drugs have been approved and can be efficacious in subsets of patients in relieving depression symptoms, drug therapy has two primary limitations as it relates to the treatment of MDD:

The limitations of drug therapy in MDD were well demonstrated in the Sequenced Treatment Alternatives to Relieve Depression Study (the “STAR*D Study”) conducted by the U.S. National Institute of Mental Health that enrolled 4,041 adult patients (aged 18-75) suffering from MDD at 41 clinical sites in order to examine the outcome of a sequenced series of antidepressant medication attempts that replicated current views on best practices. In the STAR*D Study, the results of which were published in 2006, only approximately 49% of patients responded to their first course of medication, and 28% of patients achieved remission in their first course of medication. Only approximately 21% of patients achieved remission in their second course of medication.

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Many patients taking antidepressant medications experience negative and/or intolerable side effects to treatment that contribute to a delay or failure in attaining an effective or optimal antidepressant dose, poor patient treatment adherence or discontinuation of treatment altogether. Furthermore, the likelihood of achieving remission is limited and such likelihood declines with each successive medication attempt (Source: STAR*D Study). Antidepressant medication therapy for the treatment of MDD is often administered along with a recommendation for a depression-focused psychotherapy. While these treatment options have demonstrated efficacy in some clinical studies, they are also associated with limitations in practice. For instance, the experience level of the therapist may significantly affect the treatment outcome and access to such therapy can be limited for many patients.

The other treatments that offer patients alternatives where drugs and psychotherapy have failed, ECT and VNS, can have significant disadvantages when compared to TMS. ECT typically requires general anesthesia and must be administered in a controlled hospital setting with direct access to emergency resuscitation equipment. ECT is typically administered three times per week for up to 12 treatments, with some patients requiring as many as 20 treatments. Some patients experience a rapid return of symptoms after a course of ECT, requiring ongoing maintenance sessions to sustain benefit. The two most common side-effects ECT patients may experience are confusion and memory loss, each of which can occur immediately following a treatment session. Other side effects may include nausea, headache, jaw pain, muscle ache, hypertension and hypotension and life-threatening complications including adverse reactions to anesthesia, arrhythmias, ischemia or prolonged seizures. (Source: Psychiatric Clinics of North America, 2016 Sep; 39(3)). Despite the risks and potential side-effects of ECT, VNS is actually considered the most invasive treatment option currently approved by the FDA for MDD patients who have proven to be severely treatment resistant. The surgical implantation of the VNS device (both stimulating electrode and pulse generator) introduces risks including infection or local damage to the recurrent laryngeal nerve, which may lead to permanent voice alteration. Other significant potential adverse events associated with VNS include risk of developing cardiac arrhythmias and the need for repeated invasive procedures required to replace the pulse generator battery (Source: Psychiatry (Edgmont), 2006 May; 3(5)). VNS has a delayed onset of action, requiring up to a year to realize its full potential. Lastly, complications and delays relating to reimbursement for the implantation and ongoing monitoring of the VNS device results in limiting access to the procedure for many patients.

TMS as a Safe and Effective Treatment Alternative

Overview of TMS

TMS is differentiated from traditional drug therapy approaches for the treatment of MDD and represents a different paradigm for the treatment of depression. TMS uses a pulsed magnetic field to induce electrical currents in neural tissue designed to stimulate specific areas of the brain associated with mood. The target for stimulation and activation in TMS to treat MDD is the prefrontal cortex, which serves as a starting point to regulate the neuronal circuitry connected to this region of the brain. This stimulation triggers a cascading electro-chemical effect that can pass along the neuronal circuit and reach into the deeper structures of the brain that also serve to regulate mood. This process can change the level of excitability and neuronal connections among these structures in a manner that improves the overall activity of the neuronal circuit which is believed to underlie the improvement in MDD symptoms in responsive patients (Source: Frontiers in Human NeuroScience, 2013 Feb; 7(37)).

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TMS is most commonly performed as an office-based procedure using an FDA-cleared medical device specifically designed to deliver the magnetic pulses necessary to stimulate the neurons. A course of treatment typically requires treatment sessions five times per week, conducted over a four- to six-week period that can last from 19 to 45 minutes per session. Post-TMS treatment, patients can immediately return to their normal routine, including driving home or to the workplace.

TMS is considered to be an appropriate alternative and a potentially life-changing treatment for a patient suffering from MDD who has failed to achieve satisfactory improvement from prior antidepressant medications and psychotherapy in the current MDD episode. One of the main advantages of TMS therapy is that it has few side effects, with the most common side effect being short-lasting mild pain or discomfort around the treatment site which typically only lasts during the first week of treatment. Other adverse reactions such as jaw and face pain, muscle pain, spasm or twitching, and neck pain were reported as mild or moderate and were also resolved shortly after treatment, as well as seizures in certain patients. The less severe side effects associated with TMS therapy make it an attractive option for patients, particularly when compared with more aggressive treatment options, such as ECT, which may have significant and relatively severe side effects which may include nausea, headache, jaw pain, muscle ache, hypertension and hypotension and life-threatening complications including adverse reactions to anesthesia, arrhythmias, ischemia or prolonged seizures. The side effect profile of TMS therapy also compares favorably to VNS, which is considered to be the most invasive therapy option approved by the FDA for MDD patients who have proven to be severely treatment resistant. VNS is associated with surgical related risks, such as infection or local damage to the recurrent laryngeal nerve, which may lead to permanent voice alteration.

Safety and Efficacy of TMS Therapy for MDD

TMS is an FDA-cleared, safe and effective neurostimulation therapy for the treatment of patients suffering from MDD. The safety and efficacy of TMS therapy has been demonstrated through two large, sham-controlled trials. For real world outcomes, a clinical trial was conducted on patients who failed to achieve satisfactory improvement from antidepressant medication treatment, demonstrated that approximately 58% of patients responded positively to TMS therapy, and approximately 37% of patients achieved remission of their MDD symptoms (Source: Depression and Anxiety, July 2012; 29(7)). Another analysis of patients in a multi-site, naturalistic observational clinical trial who consented to 12 months of follow-up showed a response rate of approximately 62% and a remission rate of 42% at six weeks, and a response rate of 68% and a remission rate of 45% at 12 months (Source: Journal of Clinical Psychiatry, 2014 Dec; 75(12)). This is contrasted with the results from the STAR*D Study on MDD drug treatment outcomes where only approximately 28% of patients achieved remission in their first round of drug treatment. For patients failing the first-line drug therapy and undergoing a second round of drug treatment, approximately 21% of patients achieved remission in their second medication attempt (Source: STAR*D Study). In addition to the higher efficacy rates, as measured by remission of MDD symptoms versus medication therapy, the discontinuation rate in the sham-controlled TMS clinical studies were approximately 5% (Source: Journal of Clinical Psychiatry, 2008 Feb; 69(2)), which is a marked contrast to the single medication treatment in the STAR*D Study in which the adverse events discontinuation rate increased from 9% to 41% as additional alternative monotherapy treatment attempts were administered (Source: STAR*D Study). These study results demonstrate TMS to be better tolerated by patients than medication therapy, with the most common side effect being transient pain or discomfort around the treatment site, with a minimal risk of seizures.

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Sources:

TMS Delivery Systems

TMS treatments are delivered using TMS Devices, federally regulated medical devices specifically manufactured to transmit the magnetic pulses required to stimulate the cortical areas in the brain to effectively treat MDD. There are currently seven FDA-cleared TMS Devices on the market in the United States; these include NeuroStar Advanced Therapy Systems, BrainsWay Deep TMS, Magstim, Horizon, MagVentureTMS, Cloud TMS, Nexstim and Apollo TMS. We currently have ongoing supply relationships with four of the seven TMS Device manufacturers (Neuronetics, Inc., BrainsWay, Nexstim Plc and MagVenture, Inc.) and we actively use four different TMS Devices in our centers. By not limiting ourselves to exclusive relationships with any particular device vendor, we believe we are well positioned to ensure that the best-in-class TMS technology can always be made available to our clinicians and patients throughout our network of TMS Centers.

Key Benefits of TMS Therapy

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Market Opportunity for the Delivery of TMS

Based on U.S. Census Bureau data and the 2017 National Survey on Drug Use and Health, management estimates that approximately 17.3 million adults in the United States suffer from MDD annually. Of these people, we estimate that approximately 7.4 million of these individuals actively seek treatment and, based on applying data from the STAR*D Study, approximately 5.3 million of these patients are likely to have failed to achieve remission of their MDD from a course of antidepressant drug therapy.

Based on these figures and expected provider revenues for a standard course of TMS treatment generally ranging from US$6,500 to US$10,000, we believe that there exists a significant potential market for TMS treatment in the United States.

Expansion of Market Opportunity Through New Indications

TMS therapy gently modulates brain activity allowing for targeting interventions to restore normal function without the need for anesthesia, invasive procedures, or systemic medications. Beyond MDD, there has been a strong interest in finding methods of treating other neuropsychiatric conditions.

For example, in 2018, the FDA provided clearance for the use of a BrainsWay TMS Device in the treatment of OCD. This was followed in 2020 with the announcement that the FDA provided clearance for the use of a BrainsWay TMS Device in smoking cessation treatment.

TMS Device manufacturers are actively exploring utility in other medical conditions such as bipolar disorder, multiple sclerosis related fatigue, alcohol dependence, post-stroke rehabilitation, and opioid dependence. Our established footprint and proven service delivery model for TMS therapy makes us well-positioned to lead the delivery of treatment for any new indications if and when such treatments are approved by the FDA and eligible for reimbursement by insurance carriers. Management believes that the treatment of new indications can be rapidly incorporated into our TMS Center network with minimal incremental investment required.

Our Role as a Leading Provider of TMS Therapy

Despite the magnitude of the market opportunity, based on the proven safety and efficacy of TMS, and the fact that TMS is generally accepted by psychiatrists and neurologists as an effective treatment for patients suffering from MDD, the number of TMS procedures performed annually in the United States remains low relative to the addressable market. Key factors contributing to this discrepancy include a historical lack of insurance reimbursement for TMS, the social stigma attached to publicly seeking treatment for depression, the lack of awareness of TMS among both the general population and physicians as a viable treatment alternative for depression, and the overall poor alignment of TMS treatment with the traditional practice of psychiatry. Furthermore, the almost-daily nature of TMS treatment is one of the key challenges facing our patients in successfully completing their TMS treatment protocol and is generally a major obstacle to access to TMS therapy. Our TMS Center network is purpose-built in order to address this challenge through the implementation of multiple convenient locations within a given region and operating hours that allow our patients to easily and effectively incorporate TMS into their daily schedules (see “—Our Business Model—Our Focus on the Patient Experience” below).

There are some significant challenges involved in incorporating TMS into the existing model for the practice of psychiatric medicine or the provision of mental health treatment more generally. A typical psychiatrist office is simply not conducive to high patient throughput using device-oriented therapy such as TMS and psychiatrists have generally been slow to deviate from the more standard practices of talk therapy and the administration of antidepressant drugs.

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Our business model was developed to overcome all of these challenges and to take advantage of the opportunity for a new, differentiated service channel – a patient-focused, customer service model to make TMS therapy easily accessible to all patients while maintaining a high standard of patient care.

Our Business Model

A Regional Approach to Center-Based Delivery of Care

Our regional model seeks to develop leading positions in key markets and to leverage operational efficiencies by combining smaller local TMS treatment centers within a region under a single shared regional management infrastructure. Management regions typically cover a specific metropolitan area that meets a requisite base population threshold. The management region is typically defined by a manageable geographic area which facilitates the use of regional staff working across the various TMS Center locations within the management region and creates a marketing capture area that allows for efficiencies in advertising costs.

Our scale and density within selected geographies provides valuable and mutually beneficial long-term relationships with key payors, local clinicians and behavioral health groups. Our regional operations team is responsible for managing local clinicians, non-clinical staff and referral relationships to provide for a patient-centric, customer service model, which makes TMS easily accessible to patients.

We provide centralized support to management regions through corporate training programs, standardized policies and procedures, systems and business infrastructure support as well as the sharing of best practices among the clinicians and support staff across our regional networks. Centralized services include professional marketing management, call center support, centralized patient scheduling, legal and finance support and centralized medical billing services.

Our Patient-Focused Treatment Model

Our patient-focused, customer service model makes TMS therapy easily accessible to all patients through three core business processes supported by a centralized, scalable business infrastructure: (1) Patient Inquiry; (2) Patient Conversion; and (3) Treatment Delivery. Each of these core business processes are further described below:

Patient Inquiry

The patient inquiry process consists of utilizing several marketing channels in order to drive patient and clinician awareness of TMS and the Greenbrook brand. Direct to consumer marketing strategies (such as radio, web and digital) are combined with a regional account management sales team that develops relationships with local clinicians, clinician groups, primary care providers and behavioral health groups. We offer clinician groups the opportunity to offer access to TMS by referring their patients to one of our local TMS Centers or in partnership as an extension of their own practice. With our focus on the provision of TMS and not on the provision of general psychiatric services, we generally do not compete with our referral network.

We further support regional and corporate marketing strategies with local community events and sponsorships. Patient inquiries are directed to our technology-enabled call center, which gives call center administrators the ability to schedule patients centrally to a nearby local TMS Center for a free patient consultation to educate patients on the benefits of TMS, as further described below.

Patient Conversion

The process begins with our team of experienced consultants that operate regionally to conduct an initial free consultation at a TMS Center of the patient’s choice. The consultant introduces and explains TMS therapy to the patient and answers any initial questions the patient may have in order to determine whether TMS therapy might be an appropriate treatment option for the patient. Following this consultation process, the consultant assesses reimbursement support available to patients interested in proceeding with treatment, subject to the pre-assessment examination by a clinician (which may be a psychiatrist, physician, nurse practitioner or physician assistant). As part of the reimbursement support, an initial benefits review is conducted by the consultant to provisionally determine whether the patient will be covered by insurance for the TMS treatment as well as the extent of any out-of-pocket costs to be incurred by the patient in respect thereof. If a patient desires to proceed with treatment, the consultant or an administrative staff member will schedule a pre-assessment appointment with an on-site clinician to review the patient’s medical history and ultimately decide whether TMS is a clinically appropriate treatment option for the patient.

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Treatment Delivery

If it is determined by the clinician during the pre-assessment that TMS is clinically appropriate for the particular patient, and assuming the patient wishes to proceed with such treatment (which can occasionally be dependent on the outcome of the insurance eligibility investigation conducted by the billing and reimbursement support team), a course of TMS treatment is scheduled at a TMS Center of the patient’s choosing. The location selected is typically one that is most convenient relative to the patient’s home or workplace.

A treatment course typically consists of 36 individual treatment sessions, including an initial and repeated motor threshold determination to determine the TMS intensity level necessary to evoke a peripheral motor response, thereby optimizing the treatment protocol based on each individual patient. Treatment is then conducted by a trained and certified TMS technician and supervised by a clinician. A course of treatment typically requires treatment sessions that last from 19 to 38 minutes per session, five times per week, conducted over a four- to six-week period. Post-TMS treatment, patients can immediately return to their normal routine, including driving home or to the workplace.

We are not involved in the practice of medicine and do not interfere with, or exercise control over, the professional medical judgment of the clinicians involved in the provision of medical services at our TMS Centers. Rather, we are involved in the operation and administration of the medical practices operating at our TMS Centers in order to facilitate the successful delivery of TMS therapy.

Centralized, Scalable Business Infrastructure

Our three core business processes are supported by a robust, technology-enabled, corporate business infrastructure including information technology, medical billing, human resources, branding, training, regulatory and finance. Our custom end-to-end integrated systems enable a seamless process from the first patient interaction, through the patient treatment process until payment is received with the assistance of our centralized billing support team.

Our Focus on the Patient Experience

The almost-daily nature of TMS treatment is one of the key challenges facing our patients in successfully completing their TMS treatment protocol and is generally a major obstacle to access TMS therapy. Our TMS Center network is purpose-built in order to address this challenge through the implementation of multiple convenient locations within a given region and operating hours that allow our patients to easily and effectively incorporate TMS into their daily schedules.

Our regional model provides a seamless patient experience. The consultation with a TMS technician and the initial clinician visit can be attended at any of our regional locations. Our highly-trained technician team (under the supervision of a clinician) provides the treatment at a local TMS Center selected by the patient, which is typically in close proximity to the patient’s home or workplace.

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We aim to embed our TMS Centers within Class A office space that provides a comfortable and discrete experience for our patients, in an effort to counteract the stigma often associated with a mental health facility or a mental health in-patient clinic. Our standardized center design and color pallets provide for a relaxing and welcoming treatment environment that is designed to not feel like a hospital or medical office. Our highly-trained technician team and experienced clinical leadership are focused on delivering the highest standard of patient care while also delivering a pleasant and welcoming patient experience. Our TMS Devices are located in comfortable private treatment rooms where patients can relax while receiving treatment. The daily nature of the treatment allows our technicians to develop a relationship with many of our patients and we believe this relationship can be a supportive factor in the success of the treatment and a positive improvement in many of our patient’s lives.

Regional Development Strategy

As discussed above, our regional model seeks to develop leading positions in key markets and to leverage operational efficiencies by combining smaller local TMS treatment centers within a region under a single shared regional management infrastructure.

A new regional build-out is typically associated with a metropolitan area that meets a requisite base population threshold. The management region is typically defined by a manageable geographic area, which facilitates the use of regional staff working across the various TMS Center locations within the management region, and which resides within a marketing capture area that allows for efficiencies in advertising costs. Management regions are not strictly defined by state lines or other geographic borders, but rather a functional management area.

In order to maximize cost efficiencies, we focus on developing our clinic networks within metropolitan areas that can support multiple centers. We currently have 15 management regions, each of which has between 3 and 19 active or planned TMS Centers, all with additional opportunities to add density within the region. TMS Centers are placed in sub-populations within the metropolitan area that provides local treatment access to patients in order to alleviate the time and effort associated with the almost-daily nature of the treatment course. Convenient, local patient access is essential to attract patients suffering from MDD, as depression is a condition associated with low motivation, a lack of energy, and typically a reluctance to take action and travel to a medical facility. In establishing our regional footprint, we carefully evaluate elements such as traffic patterns, highway access and major regional employers to optimize accessibility and to ensure that the addition of new TMS Centers incrementally adds to the addressable patient population within the management region. We also sometimes engage in discussions with TMS Device manufacturers as part of our assessment of a potential region. Our current development focus for existing regions is on incrementally increasing the patient volume within the management region rather than assessing an individual TMS Center location in isolation. As a result, we will from time to time establish a TMS Center that may, over the short term, negatively impact the patient volume at another nearby TMS Center, but which adds incremental patient access and volume to the region as a whole in an economically beneficial manner.

Management regions are evaluated, assessed and ultimately selected for development through careful consideration of the following core factors, among others:

Once we are comfortable with the profitability of treatment delivery based on the factors highlighted above, we establish an initial single TMS Center as the regional hub for the management region, typically in partnership with an anchor physician partner. Additional TMS Centers are then added based on capacity utilization and required patient coverage areas which is monitored based on referral data and patient inquiry activity. Subsequent TMS Centers share allocations of regional and corporate overhead costs.

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Current Footprint and Expansion Plans

As at December 31, 2021, our footprint consisted of 149 TMS Center locations spanning 15 management regions in the Commonwealth of Virginia and the States of Maryland, Delaware, North Carolina, Missouri, Illinois, Ohio, Texas, Connecticut, Florida, South Carolina, Michigan, Alaska, Oregon, California, Iowa and Massachusetts. Our management regions consist of Virginia, Maryland and Delaware, North and South Carolina, the Greater St. Louis Region (Missouri and Illinois), the Cleveland Metropolitan Region (Ohio), the Greater Houston Region (Texas), the Austin Metropolitan Region (Texas), Connecticut, the Tampa-St. Petersburg Metropolitan Region (Florida), Michigan, California, Alaska and Oregon. See Item 4.D, “Information on the Company—Property, Plants and Equipment”. In certain circumstances, we partner with local clinicians, behavioral health groups or other strategic investors, which own minority interests in certain of our TMS Center Operating LLC subsidiaries. As at December 31, 2021, we have 94 wholly-owned TMS Centers and 55 TMS Centers in which we have a controlling interest. We are in various stages of discussion to establish several additional TMS Center locations and management regions across the United States. We also actively look to add density within our existing management regions, where appropriate.

Growth of the Spravato® Program

During January 2021, we implemented the Spravato® Program at select TMS Centers to enable our affiliated clinicians to provide Spravato® (esketamine nasal spray) therapy to their patients. Spravato® is a nasal spray marketed by Janssen Pharmaceuticals, Inc. which is currently approved by the FDA for use, in conjunction with an oral antidepressant, to treat treatment-resistant depression in adults and depressive symptoms in adults with MDD with acute suicidal ideation or behavior. The active ingredient in Spravato® is esketamine, which is the s-enantiomer of ketamine.

In its initial phase beginning in January 2021, the Spravato® Program began as a pilot program meant to provide us with the opportunity to assess the value of making this treatment option more widely available to patients at our TMS Centers. The factors that were assessed in making this determination included: (i) clinical outcomes, as determined by Greenbrook affiliated clinicians using validated rating scales collected from patients on a weekly basis as part of routine clinical care; (ii) confirmation that the subjective patient experience is compatible with the clinical care model at the Company’s TMS Centers; (iii) validation of payor reimbursement; and (iv) confirmation that operational requirements for delivery of the therapy can be met with our current infrastructure.

The roll-out of our Spravato® Program at select TMS Centers continued through Fiscal 2021, building on our long-term business plan of utilizing our TMS Centers as platforms for the delivery of innovative treatments to patients suffering from MDD and other mental health disorders. As of March 31, 2022, 23 of our TMS Centers currently offer Spravato®.

Efficacy and Safety of Spravato®

The efficacy of Spravato® for treatment resistant depression was evaluated in one short-term (four-week) (Am J Psychiatry. 2019 Jun 1;176(6)) and one long-term clinical trial (JAMA Psychiatry. 2019 Sep 1;76(9)). Efficacy for depressive symptoms in patients with major depressive disorder with acute suicidal ideation or behavior was evaluated in two short-term (four-week) trials (J Clin Psychiatry, 2020 May 12; 81(3); Int J Neuropsychopharmacol, 2021 Jan 20; 24(1)). The three short-term studies were randomized trials, were patients received Spravato® or a placebo nasal spray. The primary measure of efficacy in each of the short-term studies was the change from baseline on a scale used to assess the severity of depressive symptoms. Spravato® demonstrated a favorable statistically significant effect compared to placebo on the severity of depression in one of the three short-term studies. The pre-specified statistical tests for demonstrating effectiveness was not met in the two other short-term trials. In the longer-term maintenance-of-effect trial, patients in stable remission or with stable response who continued treatment with Spravato® plus an oral antidepressant experienced a statistically significantly longer time to relapse of depressive symptoms than patients on placebo nasal spray plus an oral antidepressant.

The most common side effects experienced by patients treated with Spravato® in the clinical trials were disassociation, dizziness, nausea, sedation, vertigo, decreased feeling or sensitivity (hypoesthesia), anxiety, lethargy, increased blood pressure, vomiting and intoxication.

The FDA-approved label for Spravato® contains a Boxed Warning that cautions that patients are at risk for sedation and difficulty with attention, judgment and thinking (dissociation), abuse and misuse, and suicidal thoughts and behaviors after administration of the drug.

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Administration of Spravato® Therapy

Due to the risk of serious adverse outcomes resulting from sedation and dissociation caused by Spravato® administration, and the potential for abuse and misuse of the drug, it is only available through a restricted distribution system, under a Risk Evaluation and Mitigation Strategy (“REMS”). The REMS includes several components, including requiring both prescribing clinicians and patients to sign a Patient Enrollment Form that states that the patient understands that they should make arrangements to safely leave the health care setting to return home and that the patient should not drive or use heavy machinery for the remainder of the day on which they received treatment. In addition, Spravato® must be dispensed with a patient medication guide that outlines the drug’s uses and risks. All of the TMS Centers at which we offer Spravato® are REMS-certified.

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Patients for whom Spravato® is medically indicated will self-administer the esketamine nasal spray under the supervision of a Greenbrook affiliated clinician. The clinician will instruct the patient on how to operate the nasal spray device and staff will observe the patient during and after each use of the nasal spray device. In addition, because of the risk of sedation and dissociation, patients must be monitored by a Greenbrook affiliated clinician for at least two hours after receiving their Spravato® dose.

Growth Strategy

We have a well-defined, long-term growth strategy, supported by multiple sources of projected cash flow growth, including the following four key drivers for sustained growth:

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Relationships with our TMS Device Suppliers and Cost Model

Our business model is focused on providing a differentiated service channel – a patient-focused, customer service-oriented model that strives to make TMS therapy easily accessible to as many patients as possible. We aim to make best-in-class TMS technology available to our patients and clinicians throughout our TMS Center network. We do not own the intellectual property associated with any TMS Device. Instead, we cultivate and foster relationships with TMS Device manufacturers (including Neuronetics, Inc., BrainsWay, Nexstim Plc and MagVenture, Inc). By not limiting ourselves to exclusive relationships with any particular device vendor, we believe we are better positioned to ensure that the best-in-class technology can always be made available at our TMS Centers to our clinicians and patients throughout our network. As at December 31, 2021, we had 234 TMS Devices throughout our TMS Center network. The majority of our TMS Devices currently in use at our TMS Centers are the “NeuroStar Advance Therapy Systems”, supplied by Neuronetics, Inc., making Neuronetics, Inc. currently our largest TMS Device supplier.

Neuronetics, Inc. has a market leading position in respect of TMS Devices and was the first TMS Device to receive FDA clearance in 2008. There are now seven FDA-cleared TMS Devices available in the United States, including NeuroStar Advanced Therapy Systems, BrainsWay Deep TMS, Magstim, MagVita TMS Therapy, Cloud TMS, Nexstim Plc and Apollo TMS. While we currently use the NeuroStar Advanced Therapy Systems, BrainsWay Deep TMS, Nexstim, and MagVita TMS Therapy devices in our TMS Centers throughout our network, we constantly monitor the TMS technology landscape and incorporate new technology into our TMS Centers where we believe doing so will add value to our patients and clinicians, provide a novel treatment modality or is approved to treat additional indications.

Our status as a leading provider of TMS therapy in the United States and centralized procurement of TMS Devices provides us with competitive buying power and opportunities for strategic partnerships with device manufacturers, including as it relates to priority pricing and supply. These factors, combined with the efficiencies gained through our regional model (as described above), enables us to lower our cost of delivery of TMS treatment and provide a competitive advantage as a lower cost provider.

TMS Devices are typically leased from the relevant device manufacturers, with certain device manufacturers providing an option to purchase the device at the end of the lease term. As of December 31, 2021, we had 140 leased TMS Devices and 94 owned TMS Devices. The cost structure in respect of a particular TMS Device is generally dependent on the specific pricing model for each device manufacturer. Our current pricing arrangements with device manufacturers are either structured as (i) an operating lease with only fixed periodic payments, or (ii) a lower fixed periodic payment structure as compared to the operating lease, but paired with a variable per treatment fee. Our blended TMS Device cost represented 20% of gross revenue in Fiscal 2021, as we optimized device usage and negotiated strategic partnerships and pricing arrangements with device manufacturers. TMS Device costs currently represent our largest operating expense.

We continuously evaluate our relationships with the device manufacturers to optimize pricing arrangements, after-sale support and reliability of TMS Device supply, while continuing to offer best-in-class technology in our TMS Centers throughout our network.

Revenue, Profit Model and Insurance Reimbursement for TMS Therapy

Revenue represents net patient fees received (or receivable), for TMS services and is billed on a per treatment basis by our centralized billing team. TMS provides a highly compelling value proposition to payors and is fully validated with reimbursement in all 50 states and from all major insurance providers (including Medicare), representing approximately 300 million covered lives, with over 98% of our patients having commercial insurance, Medicare or other non-Medicare government-based coverage for TMS. Approximately 84% of these patients are covered by commercial insurance plans while 16% are covered by Medicare or other non-Medicare government-based programs.

TMS therapy is billed under three Current Procedural Terminology (“CPT”) codes:

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A course of TMS typically consists of 36 treatments, with each treatment billed separately, with some patients returning for additional treatments when clinically appropriate. Insurance carriers typically reimburse 36 sessions per course of treatment. A typical course of treatment will consist of an initial cortical mapping and motor threshold determination and treatment (90867), various daily treatment sessions (90868), and a subsequent motor threshold re-determination and treatment (90869).

The Centers for Medicare & Medicaid Services (“CMS”) has not established a national coverage determination or centralized fee schedule for TMS. Instead, CMS leaves pricing discretion to the various Medicare Administrative Contractors (“MACs”). Commercial payors also individually exercise discretion over pricing and may establish a base fee schedule for TMS or negotiate a specific reimbursement rate with an individual TMS provider. Commercial payors are not bound by any CMS coverage policies or pay rates and have the option to tailor their individual payment policies.

Average revenue per treatment has varied between $182 and $245 since the beginning of 2015 and is dependent on various factors including timing of collections, payor mix and ruling reimbursement rates from commercial insurance plans, Medicare or other non-Medicare government-based programs. Depending on a patient’s specific insurance plan, secondary insurance plan (if any) and our enrollment status with the insurance provider, the patient may be responsible for a co-pay, coinsurance or deductible out-of-pocket cost. Approximately 3% of our payments received represent patients’ out-of-pocket cost, with the remainder paid directly to us by the applicable insurance provider.

Direct center and patient care costs, including device costs (as outlined in “—Relationships with our TMS Device Suppliers and Cost Model” above), the cost of clinical and non-clinical staff, the cost of the space lease for the TMS Center and other day-to-day running costs, represent approximately 45% of gross revenue in an established TMS Center. We currently target an average margin of 55% after direct center and patient care costs with the current actual margin at 53% as of December 31, 2021, as newly-developed centers scaled into their cost infrastructure. As we add TMS Center density in our respective management regions, the contribution margin after direct center and patient care costs from the various TMS Centers scale into the single shared regional management infrastructure to ultimately target a regional operating income margin of 30% in a mature region with an actual blended margin currently at -0.5% as of December 31, 2021 as we continue to add density in all regions.

Strengths and Investment Highlights

Management believes that the following describes the key strengths and investment highlights of Greenbrook and our business:

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Competition

The market for TMS and esketamine nasal spray services is becoming increasingly competitive. We compete principally on the basis of our reputation and brand, the location of our centers, the quality of our services and the reputation of our affiliated clinicians. In the markets in which we are operating, or anticipate operating in the future, competition predominantly consists of individual psychiatrists that can offer TMS therapy and/or esketamine nasal spray therapy directly to their patients. We also face competition from a limited number of multi-location psychiatric practices or behavioral health groups that offer TMS therapy and/or esketamine nasal spray therapy as part of their overall practice, as well as a few other specialist TMS providers and esketamine nasal spray therapy or intravenous ketamine providers.

We also face indirect competition from pharmaceutical and other companies that develop competitive products, such as anti-depressant medications, with certain competitive advantages such as widespread market acceptance, ease of patient use and well-established reimbursement. Our commercial opportunity could be reduced or eliminated if these competitors develop and commercialize anti-depressant medications or other treatments that are safer or more effective than TMS or esketamine nasal spray therapy. At any time, these and other potential market entrants may develop treatment alternatives that may render our products uncompetitive or less competitive. We are also subject to competition from providers of invasive neuromodulation therapies such as ECT and VNS.

Regulation

Overview

The healthcare industry is subject to numerous laws, regulations and rules including, among others, those related to government healthcare program participation requirements, various licensure and accreditation standards, reimbursement for patient services, health information privacy and security rules, and government healthcare program fraud and abuse provisions. Providers that are found to have violated any of these laws and regulations may be excluded from participating in government healthcare programs, subjected to loss or limitation of licenses to operate, subjected to significant fines or penalties and/or required to repay amounts received from the government for previously billed patient services.

The Anti-Kickback Statute and Stark Law

The Anti-Kickback Statute is a criminal statute that prohibits healthcare providers and others from directly or indirectly soliciting, receiving, offering or paying any remuneration, in cash or in kind, as an inducement or reward for using, referring, ordering, recommending or arranging for referrals or orders of services or other items paid for by a government healthcare program. The Anti-Kickback Statute may be found to have been violated if at least one purpose of the remuneration is to induce or reward referrals. A provider is not required to have actual knowledge or specific intent to commit a violation of the Anti-Kickback Statute to be found guilty of violating the law.

The Office of Inspector General of the United States Department of Health and Human Services has issued safe harbor regulations that protect certain types of common arrangements from prosecution or sanction under the Anti-Kickback Statute. Other types of arrangements may be protected under statutory exceptions. The fact that conduct or a business arrangement does not fall within a safe harbor does not automatically render the conduct or business arrangement illegal under the Anti-Kickback Statute. However, conduct and business arrangements falling outside the safe harbors may lead to increased scrutiny by government enforcement authorities.

Where the Anti-Kickback Statute has been violated, the government may proceed criminally or civilly. If the government proceeds criminally, a violation of the Anti-Kickback Statute is a felony that is punishable by up to ten years imprisonment, a fine, and mandatory exclusion from participation in all federal health care programs. If the government proceeds civilly, it may impose civil monetary penalties per violation, among other penalties. In addition, a claim that includes items or services resulting from a violation of the Anti-Kickback Statute constitutes a false claim for purposes of the FCA.

Although the Company believes that our arrangements with physicians and other referral sources comply with current law and available interpretative guidance, as a practical matter it is not always possible to structure our arrangements so as to fall squarely within an available safe harbor. Where that is the case, we cannot guarantee that applicable regulatory authorities will not assert and/or determine that these financial arrangements violate the Anti-Kickback Statute or other applicable laws, including state anti-kickback laws.

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In addition to the Anti-Kickback Statute, the federal Physician Self-Referral Law, also known as the Stark Law, prohibits physicians from referring Medicare and Medicaid patients to healthcare entities with which they or any of their immediate family members have a financial relationship for the furnishing of any “designated health services” unless certain exceptions apply. The Stark Law is a strict liability statute, meaning that no intent is required to violate the law, and even a technical violation may lead to significant penalties. A violation of the Stark Law, including schemes to circumvent the Stark Law, may result in a denial of Medicare or Medicaid payment, required refunds to the Medicare or Medicaid programs or the imposition of civil monetary penalties for each claim knowingly submitted in violation of the Stark Law. A violation of the Stark Law may also result in liability under the FCA. There are ownership and compensation arrangement exceptions for many customary financial arrangements between physicians and entities, including the employment exception, personal services exception, lease exception and certain recruitment exceptions. The Company believes that the TMS services furnished by the physician practices with which the Company contracts do not implicate the Stark Law because they do not constitute “designated health services.” However, it is possible that the federal government could designate TMS or additional service lines offered by the Company as “designated health services” in the future, which might require the Company to restructure its arrangements with physicians.

These laws and regulations are complex and, in many cases, we do not have the benefit of regulatory or judicial interpretation. It is possible that different interpretations or enforcement of these laws and regulations could subject our current or past practices to allegations of impropriety or illegality or could require us to make changes in our arrangements relating to facilities, equipment, personnel, services, capital expenditure programs and operating expenses. It is also possible that these laws and regulations are revised in such a way as to require the Company to change its business practices, which could have a material adverse effect on our business, operations and prospects. A determination that we have violated one or more of these laws, or a public announcement that we are being investigated for possible violations of one or more of these laws, could have a material adverse effect on our business, financial condition or results of operations. In addition, we cannot predict whether other federal or state legislation or regulations will be adopted, what form such legislation or regulations may take or what their impact on us may be.

If we are deemed to have failed to comply with the Anti-Kickback Statute, the Stark Law or other applicable laws and regulations, we could be subjected to liabilities, including criminal penalties, civil penalties and exclusion of one or more affiliated entities from participation in the government healthcare programs. The imposition of such penalties could have a material adverse effect on our business, financial condition or results of operations.

Federal False Claims Act and Other Fraud and Abuse Provisions

The FCA provides the government a tool to pursue healthcare providers for submitting false claims or requests for payment for healthcare items or services. Under the FCA, the government may fine any person or entity that, among other things, knowingly submits, or causes the submission of, false or fraudulent claims for payment to the federal government or knowingly and improperly avoids or decreases an obligation to pay money to the federal government. The federal government has widely used the FCA to prosecute Medicare and other federal health care program fraud, such as billing for services not provided or not supported by appropriate documentation, submitting false cost reports, and providing care that is not medically necessary or that is substandard in quality. Claims for services or items rendered in violation of the Anti-Kickback Statute are a basis for liability under the FCA, and claims submitted in violation of the Stark Law may also serve as a basis for liability under the FCA. The FCA is also implicated by the knowing failure to report and return an overpayment to the Medicare or Medicaid programs within 60 days of identifying the overpayment or by the date a corresponding cost report is due, whichever is later.

Violations of the FCA are punishable by significant monetary penalties for each fraudulent claim plus three times the amount of damages sustained by the government. In addition, under the qui tam, or whistleblower, provisions of the FCA, private parties may bring actions under the FCA on behalf of the federal government. These private parties, known as relators, are entitled to share in any amounts recovered by the government, and, as a result, whistleblower lawsuits have increased significantly in recent years. Even if federal enforcement authorities decide not to pursue a case brought by a relator, the relator may in certain circumstances continue to pursue the case on its own. Many states have similar false claims statutes that impose liability for the types of acts prohibited by the FCA or that otherwise prohibit the submission of false or fraudulent claims to the state government or Medicaid program.

In addition to the FCA, the federal government may use several criminal laws, such as the federal mail fraud, wire fraud or healthcare fraud statutes, to prosecute the submission of false or fraudulent claims for payment to the federal government.

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Most states have also adopted generally applicable insurance fraud statutes and regulations that prohibit healthcare providers from submitting inaccurate, incorrect or misleading claims to private insurance companies. Management believes that, working with the physician practices with which the Company contracts, we have implemented safeguards and procedures to complete claim forms and requests for payment in an accurate manner and to operate in compliance with applicable laws. However, the possibility of billing or other errors can never be completely eliminated, and we cannot guarantee that the federal government, a state government, or a qui tam relator, upon audit or review, would not take the position that billing or other errors, should they occur, are violations of the FCA.

HIPAA Administrative Simplification and Privacy and Security Requirements

The administrative simplification provisions of the Health Insurance Portability and Accountability Act (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), require the use of uniform electronic data transmission standards for healthcare claims and payment transactions submitted or received electronically. These provisions are intended to encourage electronic commerce in the healthcare industry. HIPAA, HITECH, and their respective implementing regulations also established federal rules relating to the privacy and security of individually identifiable protected health information (“PHI”). The HIPAA privacy regulations govern the use and disclosure of PHI and the rights of patients to be informed about and control how such PHI is used and disclosed. The HIPAA security regulations require healthcare providers to implement administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of electronic PHI. Concerns regarding compliance with the HIPAA privacy and security regulations have been an area of increased focus and enforcement by regulators in the Department of Health and Human Services Office for Civil Rights. Violations of HIPAA can result in both criminal and civil fines and penalties.

Among other things, HITECH strengthened certain HIPAA rules regarding the use and disclosure of PHI, extended certain HIPAA provisions to business associates and created security breach notification requirements, including notifications to the individuals affected by the breach, the Department of Health and Human Services, and in certain cases, the media. HITECH has also increased maximum civil and criminal penalties for violations of HIPAA. Management believes that we have been in material compliance with the HIPAA regulations and have developed our policies and procedures to ensure ongoing compliance, although we cannot guarantee that our affiliated practices will not be subject to fines or penalties as a result of erroneous disclosures, security incidents or breaches, each of which could have a material adverse effect on our business, financial condition or results of operations.

Corporate Practice of Medicine and Fee-Splitting

There are states in which we operate that have laws that prohibit business entities, such as our Company, from directly practicing medicine, employing physicians to practice medicine and/or exercising control over medical decisions by physicians (known generally as the prohibition on corporate practice of medicine). In addition, various state laws also prohibit entities from engaging in certain financial arrangements, such as splitting or sharing a physician’s professional fees. These laws are intended to avoid interference with or undue influence of a physician’s professional judgment. The laws of some other states do not prohibit non-physician entities from employing physicians to practice medicine but may retain a ban on some types of fee-splitting arrangements.

Corporate practice of medicine and fee splitting laws vary from state to state and are not always consistent among states. In some states these prohibitions are set forth in a statute or regulation, while in other states the prohibition is a matter of judicial or regulatory interpretation. Decisions and activities beyond those directly related to the delivery of healthcare, such as scheduling, contracting, setting rates and the hiring and management of non-clinical personnel, may also implicate the restrictions on the corporate practice of medicine in many states.

The consequences of violating the corporate practice of medicine laws vary by state and may result in physicians being subject to disciplinary action, as well as the forfeiture of revenues from payors for services rendered. For lay entities, violations may also bring both civil and, in more extreme cases, criminal liability for engaging in medical practice without a license. Some of the relevant laws, regulations and agency interpretations in states with corporate practice of medicine restrictions have been subject to limited judicial and regulatory interpretation. In limited cases, courts have required management services companies to divest or reorganize structures deemed to violate corporate practice restrictions. Moreover, these state laws are subject to change.

While we believe that we are in substantial compliance with state laws prohibiting the corporate practice of medicine and fee-splitting, other parties may assert that, despite the way we are structured, we could be engaged in the corporate practice of medicine or unlawful fee-splitting. In this event, failure to comply could lead to adverse judicial or administrative action against us and/or our affiliated providers, overpayment demands, civil or criminal penalties, receipt of cease and desist orders from state regulators, loss of provider licenses, and/or the need to make changes to the terms of engagement of our providers that interfere with our business, each of which could have a material adverse impact on our business, results of operations and financial condition.

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Employees

As at December 31, 2021, we had 430 employees, of which approximately 386 were employed as regional personnel at our TMS Centers or as part of the regional management infrastructure, and 44 were employed or contracted as corporate personnel to support our centralized business infrastructure. Of our 430 employees and contractors, 20 are located in Canada, and 410 are located in the United States. As part of our regional expansion strategy, we expect our employee headcount to continue to increase.

Information Systems

We focus on creating optimal workflows and processes by investing and continuously improving our technology-enabled centralized business infrastructure. Our custom integration of various best-in-class software applications includes call center, customer relationship and lead management, medical billing, electronic health records, financial reporting and analysis and human resources systems. This creates an end-to-end integrated platform, which enables a seamless process from the first patient interaction, through the patient treatment process until payment is received. We will continue to optimize our information systems to create standardized policies, procedures and cost efficiencies.

Management Services Agreement

On January 1, 2015, we entered into a management and consulting services agreement with Greybrook Health (the “MSA”) pursuant to which Greybrook Health provides us and our subsidiaries with certain incidental services, including financial advisory services, business development advisory services and business and operating consulting services (collectively, the “Services”). More specifically, these Services included (i) the provision of office space for our head office in Toronto, Ontario, and (ii) compensation for our chief financial officer, chief operating officer and twelve other employees consisting of our general counsel, ten full-time employees that provide customary administrative, finance and accounting services to the Company and one part-time employee that provides customary IT infrastructure services to the Company. All of the Services provided by Greybrook Health are provided on a cost basis whereby the Company reimburses Greybrook Health for costs incurred in connection with the provision of such Services. There is no mark-up charged by Greybrook Health for the provision of the Services. The MSA was terminated effective February 1, 2021.

Subsequent to September 30, 2019, compensation for all employees noted above, except for the former Chief Operating Officer and the part time contractor that provides customary IT infrastructure services to the Company, is no longer being provided by Greybrook Health and is being paid directly by the Company. Following the termination of the MSA on February 1, 2021, the compensation for the former Chief Operating Officer and the part time contractor that provides customary IT infrastructure services to the Company is being paid directly by the Company.

Following termination of the MSA, we entered into a license agreement with Greybrook Capital Inc., an affiliate of Greybrook Health, for the provision of office space for our head office in Toronto, Ontario, effective as of February 1, 2021. Under the agreement, we are required to pay approximately C$10,000 per month. The initial term of the license expired on December 31, 2021.

Intellectual Property

As of the date of this Annual Report, we own the Greenbrook service mark for psychiatric and neurological consultation and treatment services in the United States. We do not own the intellectual property associated with any TMS Device.

For the organizational structure of our Company, see Item 4.A, “Information on the Company—History and Development of the Company”.

As at December 31, 2021, we had 149 TMS Centers in the United States, all of which operate in leased or subleased office space. We also maintain a head office in Toronto, Ontario and a United States corporate headquarters located in Tysons Corner, Virginia, both of which are also leased. Following the expiration of our license agreement with Greybrook Capital Inc. on December 31, 2021, we moved our head office to another location in Toronto and have retained our former mailing address during the transition period. The majority of our TMS Centers are leased under non-cancelable leases ranging from “month-to-month” commitments to seven-year lease terms and are generally subject to periodic consumer price index increases or contain fixed escalation clauses. See also Item 4.B, “Business Outlook—Our Business Model—Current Footprint and Expansion Plans”.

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For certain TMS Centers, we lease or sublease space from the respective TMS Center minority partner. These leases or subleases are structured on a “month-to-month” basis with no set expiry date. As the minority partner has a vested interest in the operations of the TMS Center, there is limited risk with respect to having to re-locate the TMS Center unexpectedly. Furthermore, our TMS Centers are generally located in areas where we would be able to find alternative space on a timely basis (see Item 3.D, “Key Information—Risk Factors”).

Our TMS Centers range in size from approximately 145 sq. ft. to 3,847 sq. ft. and can accommodate treatment for between 1 and 5 patients at any given time, depending on the size of the TMS Center.

ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis (“MD&A”) provides information concerning the financial condition and results of operations of the Company and should be read in conjunction with our audited consolidated financial statements as at and for the fiscal years ended December 31, 2021, 2020 and 2019, in each case, together with the notes thereto. The financial information contained in this MD&A is derived from the financial statements prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”).

Basis of Presentation

Our audited consolidated financial statements have been prepared in accordance with IFRS. Our fiscal year is the 12-month period ending December 31.

On January 12, 2021, at a special meeting of shareholders, our shareholders approved a special resolution authorizing the Board to amend our Articles to effect a consolidation of all of the issued and outstanding Common Shares, such that the trading price of the Common Shares following the Share Consolidation would permit us to qualify for listing on the Nasdaq. On February 1, 2021, the Board effected the Share Consolidation on the basis of one post-consolidation Common Share for every five pre-consolidation Common Shares and on February 4, 2021, the Common Shares began trading on a post-consolidation basis on the TSX. Unless otherwise indicated, all Common Share numbers in this MD&A have been adjusted to give effect to the Share Consolidation.

Amounts stated in this MD&A are in United States dollars, unless otherwise indicated.

Cautionary Note Regarding Non-IFRS Measures and Industry Metrics

This MD&A makes reference to certain non-IFRS measures including certain metrics specific to the industry in which we operate. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures are not intended to represent, and should not be considered as alternatives to, loss attributable to the common shareholders of Greenbrook or other performance measures derived in accordance with IFRS as measures of operating performance or operating cash flows or as a measure of liquidity. In addition to our results determined in accordance with IFRS, we use non-IFRS measures including, “EBITDA”, “Adjusted EBITDA” and “Same-Region Sales Growth” (each as defined below). These non-IFRS measures and industry metrics are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures and industry metrics in the evaluation of issuers. However, we caution you that “Adjusted EBITDA” and “Same-Region Sales Growth” may be defined by us differently than by other companies. Our management also uses non-IFRS measures and industry metrics to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation.

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We define such non-IFRS measures and industry metrics as follows:

“Adjusted EBITDA” is a non-IFRS measure that is defined as net income (loss) before amortization, depreciation, interest expenses, interest income and income taxes, adjusted for share-based compensation expenses and one-time expenses. We believe our Adjusted EBITDA metric is a meaningful financial metric as it measures the ability of our current TMS Center operations to generate earnings while eliminating the impact of one-time expenses and share-based compensation expenses, which do not have an impact on the operating performance of our existing TMS Center network. The IFRS measurement most directly comparable to Adjusted EBITDA is loss attributable to common shareholders of Greenbrook. Beginning in Fiscal 2021, we no longer adjust for center development costs because a key component of our growth strategy is to grow our business and revenues through the development and building of additional TMS Centers. We have retrospectively calculated Adjusted EBITDA for Fiscal 2020 and Fiscal 2019 to reflect this change (see “—Reconciliation of Non-IFRS Measures” below).

“EBITDA” is a non-IFRS measure that is defined as net income (loss) before amortization, depreciation, interest expenses, interest income and income taxes. The IFRS measurement most directly comparable to EBITDA is loss attributable to common shareholders of Greenbrook.

“Same-Region Sales Growth” is a non-IFRS metric that we calculate as the percentage change in sales derived from our established management regions in a certain financial period as compared to the sales from the same management regions in the same period of the prior year. This metric reflects growth achieved through marketing and operational focus to increase volumes at existing TMS Centers as well as growth achieved through the opening of additional TMS Centers within established management regions. For information regarding how we define our management regions, see Item 4.B, “Information on the Company—Business Overview—Our Business Model—A Regional Approach to Center-Based Delivery of Care” in our Annual Report. Our established management regions are defined as management regions containing open TMS Centers all of which have performed billable TMS services for a period of at least one full year prior to the more recent period of the two financial periods that are compared in calculating Same-Region Sales Growth. Within a management region we focus on increasing patient volume in addition to assessing individual TMS Center locations on a standalone basis. As a result, we will from time to time establish a TMS Center that may, over the short term, negatively impact the patient volume at another TMS Center, but which is expected to add incremental patient volume to the management region as a whole in an economically beneficial manner. We believe Same-Region Sales Growth is a useful metric to investors because it helps quantify our sales growth within regional management areas and the growth achieved by adding TMS Center density within established management regions. Our Same-Region Sales Growth is unique to our financial management strategy and may not be comparable to non-IFRS measures used by other companies.

See “—Reconciliation of Non-IFRS Measures” below for a quantitative reconciliation of the foregoing non-IFRS measures to their most directly comparable measures calculated in accordance with IFRS.

Overview

We are a leading provider of TMS therapy in the United States for the treatment of MDD and other mental health disorders. Our predecessor, TMS US, was established in 2011 to take advantage of the opportunity created through the paradigm-shifting technology of TMS, an FDA-cleared, non-invasive therapy for the treatment of MDD. In 2018, our TMS Centers began offering treatment for obsessive compulsive disorder. Our business model takes advantage of the opportunity for a new, differentiated service channel for the delivery of TMS – a patient-focused, centers-based service model to make treatment easily accessible to all patients while maintaining a high standard of care.

After opening our first TMS Center in 2011 in Tysons Corner in Northern Virginia, we have grown to control and operate a network of outpatient mental health service centers that specialize in TMS treatment across the United States. We offer TMS treatment facilities in convenient locations to provide easy access to patients and clinicians. As at December 31, 2021, the Company owned and operated 149 TMS Centers in the Commonwealth of Virginia and the States of Maryland, Delaware, North Carolina, Missouri, Illinois, Ohio, Texas, Connecticut, Florida, South Carolina, Michigan, Alaska, Oregon, California, Iowa and Massachusetts.

Our regional model seeks to develop leading positions in key regional markets, leveraging operational efficiencies by combining smaller local TMS treatment centers that are strategically located within a single region for convenient patient and clinician access, with regional management infrastructure in place to support center operations. Management regions typically cover a specific metropolitan area that meets a requisite base population threshold. The management region is typically defined by a manageable geographic area in terms of size, which facilitates the use of regional staff working across the various TMS Center locations within the management region, and which resides within a marketing capture area that allows for efficiencies in advertising cost. Management regions often have similar economic characteristics and are not necessarily defined by state lines, other geographic borders, or differentiating methods of services delivery, but rather are defined by a functional management area.

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In the first quarter of Fiscal 2021 (“Q1 2021”), we commenced offering Spravato® (esketamine nasal spray) at select TMS Centers to treat adults with treatment-resistant depression and depressive symptoms in adults with MDD with suicidal thoughts or actions. See “—Key Highlights and Recent Developments—Spravato® Program” below.

Key Highlights and Recent Developments

COVID-19

Despite the significant impact of the COVID-19 pandemic on our business, operations and financial results over the past two years as discussed throughout this MD&A, the Company achieved 21% revenue growth in both Fiscal 2021 and Fiscal 2020. We also managed to maintain adequate capitalization to meet our financial requirement and to execute on our strategy through this challenging period. We believe that mental health remains a key focus in the United States, and the unmet demand for treatment is at an all-time high. With a 42% year-over-year Q4 2021 growth rate, we believe our business fundamentals remain sound and we believe our network of TMS Centers has the capacity to serve this unmet demand as we move into Fiscal 2022.

Spravato® Program

The roll-out of our Spravato® Program at select TMS Centers continued throughout Fiscal 2021, building on our long-term business plan of utilizing our TMS Centers as platforms for the delivery of innovative treatments to patients suffering from MDD and other mental health disorders. We have managed to leverage excess capacity in certain of our TMS Centers through the Spravato® Program which has effectively enhanced profit margins in these TMS Centers. As at December 31, 2021, we had 10 TMS Centers offering Spravato®. As of March 25, 2022, we have expanded our offering of Spravato® to an additional 13 TMS Centers, bringing our total to 23 TMS Centers offering Spravato®.

New Management Regions and TMS Center Network Expansion

Our development efforts have been focused on both optimizing our established regional footprints with added in-region density and expansion through acquisitions. During Fiscal 2021, we added 14 active TMS Centers through organic expansion and 17 TMS Centers as a result of the Achieve TMS East/Central Acquisition for a total of 31 active TMS Centers added during Fiscal 2021. As at December 31, 2021, our total TMS Center network was comprised of 149 TMS Centers.

Achieve TMS East/Central Acquisition

On October 1, 2021, we completed the Achieve TMS East/Central Acquisition. The initial aggregate purchase price for Achieve TMS East/Central was $7.8 million, excluding Achieve TMS East/Central’s cash and subject to customary working capital adjustments. In addition, contingent consideration for the Achieve TMS East/Central Acquisition is subject to a capped earn-out of up to an additional $2.5 million based on the financial performance of Achieve TMS East during the twelve-month period following completion of the Achieve TMS East/Central Acquisition, payable following the calculation period.

The Achieve TMS East/Central Acquisition added 17 new TMS Centers and we believe it strengthens our presence in New England and in the central United States. We anticipate that the Achieve TMS East/Central Acquisition will also serve as the foundation for future growth within these regions. We expect to realize operational synergies and to secure robust payor contracts, brand recognition, clinician reputation and a strong management team through the Achieve TMS East/Central Acquisition.

Company Capitalization

On January 12, 2021, our shareholders approved a special resolution for an amendment to our articles and authorized the Share Consolidation of our outstanding Common Shares on the basis of a ratio that would permit us to qualify for a potential listing on Nasdaq. On February 1, 2021, the Board effected the Share Consolidation on the basis of one post-consolidation Common Share for every five pre-consolidation Common Shares and on February 4, 2021, the Common Shares began trading on a post-consolidation basis on the TSX under its current trading symbol “GTMS”. On March 15, 2021, our Common Shares were approved for listing and trading in U.S. dollars on the Nasdaq (the “Nasdaq Listing”). Trading on the Nasdaq commenced at the start of trading on March 16, 2021 under the trading symbol “GBNH”.

On June 14, 2021, we completed the 2021 Private Placement in reliance upon Rule 506(c) under the U.S. Securities Act. Pursuant to the 2021 Private Placement, an aggregate of 2,353,347 Common Shares were issued at a price of $10.00 per Common Share, for aggregate gross proceeds to the Company of $23.5 million. The Company used the proceeds from the 2021 Private Placement to fund operating activities and for working capital and general corporate purposes.

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On July 29, 2021, as authorized by Section 1106 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), the U.S. Small Business Administration forgave the loan amount of $3.1 million previously made to the Company under the United States Paycheck Protection Program (the “PPP Loan”) as well as all accrued and unpaid interest. As a result, all previously accrued interest and the PPP Loan balance have been recorded as a gain on the audited consolidated statements of net loss and comprehensive loss.

On September 27, 2021, the Company completed a bought deal public offering of Common Shares in Canada and the United States. Pursuant to the 2021 Public Equity Offering, an aggregate of 1,707,750 Common Shares were issued at a price of $7.75 per Common Share, for aggregate gross proceeds to the Company of $13.2 million. The 2021 Public Equity Offering was made pursuant to an underwriting agreement entered into among Stifel Nicolaus Canada Inc., Bloom Burton Securities Inc. and Lake Street Capital Markets, LLC. The Company used the proceeds from the 2021 Public Equity Offering to satisfy the purchase price in respect of the Achieve TMS East/Central Acquisition as well as for working capital and general corporate purposes.

Factors Affecting Our Performance

We believe that our performance and future success depend on a number of factors that present significant opportunities for us. These factors are also subject to a number of inherent risks and challenges, some of which are discussed below. See also Item 5.B, “Operating and Financial Review and Prospects—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Risks and Uncertainties” below.

Number of TMS Centers

We believe we have a meaningful opportunity to continue to grow the number of our TMS Centers in the United States through organic in-region growth, establishing new regions and potential future acquisitions. The opening and success of new TMS Centers is subject to numerous factors, including our ability to locate the appropriate space, finance the operations, build relationships with clinicians, negotiate suitable lease terms and local payor arrangements, and other factors, some of which are beyond our control.

Competition

The market for TMS is becoming increasingly competitive. We compete principally on the basis of our reputation and brand, the location of our centers, the quality of our TMS services and the reputation of our partner clinicians. In the markets in which we are operating, or anticipate operating in the future, competition predominantly consists of individual clinicians that have a TMS Device, an FDA-regulated medical device specifically manufactured to transmit the magnetic pulses required to stimulate the cortical areas in the brain to effectively treat MDD and other mental health disorders, in their office and who can offer TMS therapy directly to their patients. We also face competition from a limited number of multi-location psychiatric practices or behavioral health groups that offer TMS therapy as part of their overall practice, as well as a few other specialist TMS providers. We also face indirect competition from pharmaceutical and other companies that develop competitive products, such as anti-depressant medications, with certain competitive advantages such as widespread market acceptance, ease of patient use and well-established reimbursement. Our commercial opportunity could be reduced or eliminated if these competitors develop and commercialize anti-depressant medications or other treatments that are safer or more effective than TMS or Spravato®. At any time, these and other potential market entrants may develop treatment alternatives that may render our products uncompetitive or less competitive.

We are also subject to competition from providers of invasive neuromodulation therapies such as ECT and VNS.

Capital Management

Our objective is to maintain a capital structure that supports our long-term growth strategy, maintain creditor and customer confidence, and maximize shareholder value. Our primary uses of capital are to finance operations, finance new center start-up costs, increase non-cash working capital and capital expenditures. We may also use capital to finance potential acquisitions. See “—Key Highlights and Recent Developments” above. We have experienced losses since inception and, although we completed a $23.5 million private placement in the second quarter of Fiscal 2021 (“Q2 2021”) and a $13.2 million public offering in Q3 2021, we expect that we will require additional financing to fund our operating, investing and acquisition activities and such additional financing is required in order for us to repay our short-term obligations. We have historically been able to obtain financing from supportive shareholders and other sources when required, however there can be no assurance that we will continue to receive financing support from our existing shareholders into the future (see Item 3.D, “Risk Factors—Risks Related to Our Business—We have incurred losses in the past and may be unable to achieve or sustain profitability in the future and may not be able to secure additional financing to fund losses if we fail to achieve or maintain profitability” above). See also Item 5.B, “Operating and Financial Review and Prospects—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” below.

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Industry Trends

Our revenue is impacted by changes to United States healthcare laws, our clinical partners’ and contractors’ healthcare costs, the ability to secure favorable pricing structures with device manufacturers and payors’ reimbursement criteria and associated rates.

Technology

Our revenues are affected by the availability of, and reimbursement for, new TMS indications, new technology or other novel treatment modalities and our ability to incorporate the new technology into our TMS Centers.

Segments

We evaluate our business and report our results based on organizational units used by management to monitor performance and make operating decisions on the basis of one operating and reportable segment: Outpatient Mental Health Service Centers. We currently measure this reportable operating segment’s performance based on total revenues and entity-wide regional operating income.

Components of Our Results of Operations

In assessing our results of operations, we consider a variety of financial and operating measures that affect our operating results.

Total Revenue

Total revenue consists of service revenue attributable to the performance of treatments. In circumstances where the net patient fees have not yet been received, the amount of revenue recognized is estimated based on an expected value approach. Due to the nature of the industry and complexity of our revenue arrangements, where price lists are subject to the discretion of payors, variable consideration exists that may result in price concessions and constraints to the transaction price for the services rendered.

In estimating this variable consideration, we consider various factors including, but not limited to, the following:

We update the estimated transaction price (including updating our assessment of whether an estimate of variable consideration is constrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period in which such variances become known.

Third-party payors include federal and state agencies (under the Medicare programs), managed care health plans and commercial insurance companies. Variable consideration also exists in the form of settlements with these third-party payors as a result of retroactive adjustments due to audits and reviews. We apply constraint to the transaction price, such that net revenues are recorded only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in the future.

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Entity-Wide Regional Operating Income (Loss) and Direct Center and Regional Costs

Regional operating income presents regional operating income on an entity-wide basis and is calculated as total revenue less direct center and regional costs. Direct center and regional costs consist of direct center and patient care costs, regional employee compensation, regional marketing expenses, and depreciation. These costs encapsulate all costs (other than incentive compensation such as share-based compensation granted to senior regional employees) associated with the center and regional management infrastructure, including the cost of the delivery of treatments to patients and the cost of our regional patient acquisition strategy. Beginning in the first quarter of Fiscal 2020 (“Q1 2020”), we have excluded amortization from entity-wide regional operating income (loss) based on the nature of the expense as it is not associated with center and regional infrastructure. We have retrospectively updated our annual and quarterly financial information below to reflect this change (see “—Results of Operations” and “—Quarterly Financial Information” below).

Center Development Costs

Center development costs represent direct expenses associated with developing new TMS Centers, including small furnishings and fittings, wiring and electrical and, in some cases, the cost of minor space alterations.

Corporate Employee Compensation

Corporate employee compensation represents compensation incurred to manage the centralized business infrastructure of the Company, including annual base salary, annual cash bonuses and other non-equity incentives.

Corporate Marketing Expenses

Corporate marketing expenses represent costs incurred that impact the Company on an overall basis including investments in website functionality and brand management activities.

Other Corporate, General and Administrative Expenses

Other corporate, general and administrative expenses represent expenses related to the corporate infrastructure required to support our ongoing business including insurance costs, professional and legal costs and costs incurred related to our corporate offices.

Transaction Costs

Transaction costs represent accounting, legal and professional fees incurred as part of significant transactions, including the Achieve TMS East/Central Acquisition in Fiscal 2021 and the Achieve TMS West Acquisition in Fiscal 2019. See Item 5.A, “Operating and Financial Review and Prospects—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Operating Results—Factors Affecting the Comparability of Our Results—Acquisition of Achieve TMS West” and “—Acquisition of Achieve TMS East/Central” below. See also “—Key Highlights and Recent Developments—Achieve TMS East/Central Acquisition” above.

Earn-Out Consideration

A portion of the purchase price payable in respect of the Achieve TMS West Acquisition was subject to an Earn-Out based on the earnings before interest, tax, depreciation and amortization achieved by Achieve TMS West during the twelve-month period following the September 26, 2019 closing date of the Achieve TMS West Acquisition. The Earn-Out was confirmed to be $10.3 million, of which $3.1 million was settled through the issuance of an aggregate of 0.2 million Common Shares to the vendors on March 26, 2021. Of the remaining $7.2 million of Earn-Out consideration payable, $2.8 million was paid in cash on March 26, 2021. Certain vendors agreed to defer $4.4 million of the cash Earn-Out consideration due to them until June 30, 2021 in exchange for additional cash consideration in the aggregate amount of $0.3 million, which payment was made in full concurrently with the deferred cash payment on June 28, 2021. In addition, earn-out consideration may be payable in connection with the Achieve TMS East/Central Acquisition. As at December 31, 2021, we estimated the fair value of the purchase price payable in respect to the earn out to be nil. See “—Key Highlights and Recent Developments—Achieve TMS East/Central Acquisition” above.

Share-Based Compensation

Share-based compensation represents stock options, restricted share units and performance share units granted as consideration in exchange for employee and similar services to align personnel performance with the Company’s long-term goals.

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Amortization

Amortization relates to the reduction in useful life of the Company’s intangible assets that were realized as part of the Achieve TMS West Acquisition and the Achieve TMS East/Central Acquisition.

Interest

Interest expense relates to interest incurred on loans and lease liabilities. Interest income relates to income realized as a result of investing excess funds into investment accounts.

Forgiveness of Loan Payable

Forgiveness of loan payable represents a one-time gain that we recorded in Fiscal 2021 due to the forgiveness by the U.S. Small Business Administration of the PPP Loan in the amount of $3.1 million previously made to us under the United States Paycheck Protection Program. See “—Key Highlights and Recent Developments—Company Capitalization” above.

Adjusted EBITDA

Adjusted EBITDA is a non-IFRS measure that deducts from EBITDA share-based compensation expenses and expenses that represent one-time costs incurred for purposes of enhancing the performance of the business and to achieve our TMS Center growth. See “—Cautionary Note Regarding Non-IFRS Measures and Industry Metrics” above. Beginning Fiscal 2021, we no longer adjust for center development costs because a key component of our growth strategy is to grow our business and revenues through the development and building of additional TMS Centers. We have retrospectively calculated Adjusted EBITDA for Fiscal 2020 and Fiscal 2019 to reflect this change (see “—Reconciliation of Non-IFRS Measures” below).

Factors Affecting the Comparability of Our Results

COVID-19

While all of our active TMS Centers are open, and are expected to remain open going forward, we experienced a temporary decline in both patient visits/treatments and new patient starts in Fiscal 2020 and Fiscal 2021 as a result of the ongoing restrictions imposed in response to the COVID-19 pandemic (see Item 3.D, “Key Information—Risk Factors—Risks Relating to Our Business”) in the Annual Report.

During Fiscal 2020, we took the a number of measures to control costs as a result of the COVID-19 pandemic, including: approximately 20% of the Company’s employees were furloughed as of May 1, 2020 (during the period of furlough, Greenbrook paid 100% of employer and employee medical premiums); a Company-wide hiring freeze was implemented; each member of the Company’s executive management team agreed to a 10% salary deferral; and budgeted discretionary expenses were reduced by approximately $2.0 million for Fiscal 2020.

As operating conditions and volumes of patient treatments began to normalize, we reinstated furloughed employees to match increased mental health treatment demand, removed the Company-wide hiring freeze and ended the salary deferral for our executive management team. We, however, continue to reduce discretionary spending. Our entire team continues to work tirelessly to deliver the highest quality of care at all of our TMS Centers, while at the same time taking all possible steps to safeguard the health and well-being of our patients, employees and clinician partners. We see these challenging operating conditions as temporary and we are starting to see a positive change in sentiment. However, as we navigate through this unprecedented and challenging period, we will continue to assess the need for additional measures to control costs. See Item 3.D, “Key Information—Risk Factors—Risks Relating to Our Business” in the Annual Report.

In Fiscal 2021, the surge in the COVID-19 delta variant during the summer season created caution among patients, especially in late August and September. Volume levels began to normalize in October with strong momentum in patient starts and consultations going into Q4 2021. However, in Q4 2021, the surge in the COVID-19 omicron variant once again caused caution among patients, resulting in a decline in both patient visits/treatments and new patient starts in late Q4 2021. In addition, a significant number of staff members and affiliated clinicians were required to isolate as a result of having contracted COVID-19. As a result, we implemented several cost containment measures, including implementation of staffing reductions and a hiring freeze effective in December 2021, a reduction in discretionary spend (particularly in corporate, general and administrative expenses, travel & entertainment, and marketing spend). While the COVID-19 pandemic has resulted in certain operational challenges during Fiscal 2021, we believe that the COVID-19 pandemic has increased the demand for mental health services and we believe that we are well-positioned to serve this unmet demand.

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Acquisition of Achieve TMS West

On September 26, 2019, we, through our wholly-owned subsidiary, TMS US, completed the acquisition of all of the issued and outstanding membership interests of each of Achieve TMS Centers, LLC and Achieve TMS Alaska, LLC for a purchase price of $10.8 million (excluding Achieve TMS West’s cash and subject to working capital adjustments), of which $2.6 million of the purchase price was satisfied through the issuance of an aggregate of 286,348 Common Shares to the vendors and the remainder was settled in cash, less deferred and contingent consideration of $1.3 million. The share consideration for the Achieve TMS West Acquisition was valued based on a price per Common Share equal to the volume-weighted average trading price of the Common Shares on the TSX for the five trading days ending two trading days prior to the closing of the Achieve TMS West Acquisition. Achieve TMS West controls and operates a network of TMS Centers that specialize in the provisions of TMS therapy for the treatment of depression and related psychiatric services at TMS Centers in California, Oregon and Alaska. We believe the Achieve TMS West Acquisition will allow us to accelerate our expansion in the western United States in future periods.

In addition, a portion of the purchase price payable in respect of the Achieve TMS West Acquisition was subject to the Earn-Out. See “—Components of Our Results of Operations—Earn-Out Consideration” above.

Acquisition of Achieve TMS East/Central

On October 1, 2021, we completed the Achieve TMS East/Central Acquisition. The initial aggregate purchase price for Achieve TMS East/Central was $7.9 million, excluding Achieve TMS East/Central’s cash and subject to customary working capital adjustments. In addition, contingent consideration for the Achieve TMS East/Central Acquisition is subject to a capped earn-out of up to an additional $2.5 million based on the financial performance of Achieve TMS East during the twelve-month period following completion of the Achieve TMS East/Central Acquisition, payable following the calculation period. As at December 31, 2021, we estimated the fair value of the purchase price payable in respect to the earn out to be nil.

Adjustment to Variable Consideration Estimate

In an effort to strengthen our billing relationship and rate negotiation position with payors, as well as optimize billing processes, including credentialling as we continue to scale our business, we decided to improve our collection practices by consolidating our billing structure to begin remitting claims on a statewide basis in Fiscal 2020. This process included multiple re-credentialling processes across our payor population and caused a temporary disruption in collections.

The COVID-19 pandemic negatively impacted payor processes through a lack of timely and accurate communication resulting in a greater chance of price concession. As a result, the following factors involved in estimating variable consideration further constrained the transaction price for services rendered:

During the initial onset of the COVID-19 pandemic, we expected a temporary impact to the payor processes, as described above, including the impact of our billing enhancements. However, when operations began to normalize in Q4 2020, management determined that additional price concessions were necessary based on the continued nature of the impact to payor processes at that time. These additional price concessions have persisted, but continued to decline as a percentage of revenue during Fiscal 2021. See “—Reconciliation of Accounts Receivable” below.

Regional Development Activity

Our regional model seeks to develop leading positions in key markets, and to leverage operational efficiencies by combining smaller local treatment centers within a region under a single shared regional management infrastructure. Part of our core strategy is to continue to develop new TMS Centers within our existing regions as well as in new management regions, in each case, organically or through acquisitions of existing centers or businesses, which may affect comparability of results. See “—Key Highlights and Recent Developments—Achieve TMS East/Central Acquisition” above.

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Seasonality

Typically, we experience seasonal factors in the first quarter of each fiscal year that result in reduced revenues in those quarters as compared to the other three quarters of the year. These seasonal factors include cold weather and the reset of deductibles during the first part of the year. We also typically experience a slowdown in new patient starts during the third quarter of each fiscal year as a result of summer holidays.

Results of Operations

Summary Financial Information

The following table summarizes our results of operations for the periods indicated. The selected consolidated financial information set out below has been derived from our audited consolidated financial statements, and should be read in conjunction with those financial statements and the related notes thereto.

Note:

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Selected Financial Position Data

The following table provides selected financial position data as at the dates indicated:

​

For further information regarding our liquidity and financial position, see Item 5.B, “Operating and Financial Review and Prospects—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” below. See also Item 3.D, “Risk Factors—Risks Related to Our Business—We have incurred losses in the past and may be unable to achieve or sustain profitability in the future and may not be able to secure additional financing to fund losses if we fail to achieve or maintain profitability” above.

Selected Operating Data

The following table provides selected operating data as at the dates indicated:

Notes:

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Comparison of Results for the Year Ended December 31, 2021 to the Year Ended December 31, 2020

Total Revenue

Consolidated revenue increased to $52.2 million in Fiscal 2021, a 21% increase compared to Fiscal 2020 (Fiscal 2020: $43.1 million). This was predominately due to increases in new patient starts and treatment volumes, as well as completion of the Achieve TMS East/Central Acquisition. New patient starts increased to 6,429 in Fiscal 2021, an 18% increase compared to Fiscal 2020 (Fiscal 2020: 5,445). Treatment volumes in Fiscal 2021 were 226,286, a 15% increase compared to Fiscal 2020 (Fiscal 2020: 195,992). Consultations performed were 14,108 in Fiscal 2021, a 25% increase compared to Fiscal 2020 (Fiscal 2020: 11,305). The increases in new patient starts, treatment volumes and consultations performed are predominantly due to stronger market growth within our mature regions as well as the Achieve TMS East/Central Acquisition, as compared to Fiscal 2020, which has allowed us to provide greater access for patients to seek and receive treatment.

Same-Region Sales Growth was 19.0% in Fiscal 2021 as compared to -1.5% in Fiscal 2020. This was predominately due to the increases in new patient starts and treatment volumes as described above (see “Cautionary Note Regarding Non-IFRS Measures and Industry Metrics” above).

Average revenue per treatment increased by 5% to $231 in Fiscal 2021 (Fiscal 2020: $220). The increase was primarily attributable to changes in the adjustment to variable consideration estimate (see “—Factors Affecting the Comparability of our Results—Adjustment to Variable Consideration Estimate” above and “—Reconciliation of Accounts Receivable” below) and an increase in reimbursement rates from certain payors with which we have had long-standing relationships in our established regions.

Accounts Receivable

Accounts receivable increased by $0.3 million to $11.0 million as at the end of Fiscal 2021 (Fiscal 2020: $10.7 million), primarily due to year-over-year revenue growth offset by continued strong cash collections as a result of billing enhancements implemented in Fiscal 2020 (see “—Factors Affecting the Comparability of our Results—Adjustments to Variable Consideration Estimate” above and “—Reconciliation of Accounts Receivable” below).

We continue to collect on services rendered in excess of 24 months from the date such services were rendered.

Entity-Wide Regional Operating Income (Loss) and Direct Center and Regional Costs

Direct center and regional costs increased by 20% to $52.5 million during Fiscal 2021 (Fiscal 2020: $43.7 million). The increase is predominantly due to operating 147 active TMS Centers as at December 31, 2021 as compared to 116 active TMS Centers as at December 31, 2020.

Entity-wide regional operating loss decreased by 51% to $0.3 million during Fiscal 2021 (Fiscal 2020: $0.6 million). The decreases in entity-wide regional operating loss in Fiscal 2021 as compared to Fiscal 2020 was primarily due to increased revenue, offset by the increase in direct center and regional costs described above.

Center Development Costs

Center development costs increased by 63% to $0.9 million during Fiscal 2021 (Fiscal 2020: $0.5 million) predominantly as a result of the increase in active TMS Centers during Fiscal 2021 as compared to Fiscal 2020.

Corporate Employee Compensation

Corporate employee compensation incurred to manage the centralized business infrastructure of the Company increased by 29% to $13.1 million during Fiscal 2021 (Fiscal 2020: $10.2 million). Corporate employee compensation in Fiscal 2020 was comparatively low due to measures put in place to control costs during the COVID-19 pandemic (see “—Factors Affecting the Comparability of our Results—COVID-19” above). As a result, the normalization of this spending in Fiscal 2021, coupled with the increase in corporate employee compensation due to key investment in our human resources, billing, operations and compliance capabilities, contributed to the increase in corporate employee compensation.

Corporate Marketing Expenses

Corporate marketing expenses decreased by 39% to $0.6 million during Fiscal 2021 (Fiscal 2020: $1.0 million). The decrease was primarily a result of our focus on optimizing the cost of patient acquisition.

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Transaction Costs

Transaction costs increased to $0.4 million during Fiscal 2021 (Fiscal 2020: nil). The increase was a result of accounting, legal and professional fees relating to the Achieve TMS East/Central Acquisition.

Other Corporate, General and Administrative Expenses

Other corporate, general and administrative expenses increased by 65% to $6.5 million during Fiscal 2021 (Fiscal 2020: $3.9 million). Other corporate, general and administrative expenses in Fiscal 2020 were comparatively low due to measures put in place to control costs during the COVID-19 pandemic (see “—Factors Affecting the Comparability of our Results—COVID-19” above). The normalization of this spending in Fiscal 2021, coupled with the one-time professional and legal fees related to the Nasdaq listing, the Withdrawn Public Offering (as defined below), the Achieve TMS East/Central Acquisition (see “—Adjusted EBITDA and One-Time Expenses” below) as well as the one-time deferred payment costs of $0.3 million with respect to the Earn-Out consideration in connection with the Achieve TMS West Acquisition, were primarily responsible for the increase in other corporate, general and administrative expenses in Fiscal 2021.

Earn-Out Consideration

The Earn-Out consideration decreased by $10.3 million to $nil in Fiscal 2021 (Fiscal 2020: $10.3 million). The decrease is a result of the Earn-Out amount confirmed during Q1 2021 and paid during Fiscal 2021. See “—Components of Our Results of Our Operations and Trends Affecting our Business—Earn-Out Consideration”.

Share-Based Compensation

Share-based compensation increased by 49% to $0.9 million during Fiscal 2021 (Fiscal 2020: $0.6 million), predominantly due to the timing and fair value of stock options and performance share units granted to key personnel to ensure retention and long-term alignment with the goals of the Company.

Amortization

Amortization increased by 20% to $0.6 million during Fiscal 2021 (Fiscal 2020: $0.5 million) as a result of the intangible assets acquired by the Company in connection with the Achieve TMS East/Central Acquisition.

Interest

Interest expense increased by 70% to $4.8 million during Fiscal 2021 (Fiscal 2020: $2.8 million). The increase in interest expense is primarily due to the addition of new lease liabilities in connection with the execution of our regional growth strategy and the Credit Agreement. See Item 5.B, “Operating and Financial Review and Prospects—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Indebtedness” below.

Interest income decreased by 30% to $0.01 million during Fiscal 2021 (Fiscal 2020: $0.02 million) as a result of a decrease in the amount of excess funds invested.

Forgiveness of Loan Payable

Forgiveness of loan payable was $3.1 million in Fiscal 2021 (Fiscal 2020: $nil) as a result of the forgiveness in full of the PPP Loan (see “—Key Highlights and Recent Developments—Company Capitalization” above).

Loss for the Period and Comprehensive Loss and Loss for the Period Attributable to the Common Shareholders of Greenbrook

The loss for the period and comprehensive loss decreased by 18% to $24.9 million during Fiscal 2021 (Fiscal 2020: $30.4 million). This was predominately due to the forgiveness of the PPP Loan (see “—Key Highlights and Recent Developments—Company Capitalization” above), partially offset by the recognition of one-time professional and legal fees related to the Nasdaq listing, the 2021 Private Placement, the 2021 Public Equity Offering and the Achieve TMS East/Central Acquisition (see “—Adjusted EBITDA and One-Time Expenses” below). In addition, the Company recognized Earn-Out consideration in connection with the Achieve TMS West Acquisition in Fiscal 2020 that did not recur in Fiscal 2021.

The loss attributable to the common shareholders of Greenbrook decreased by 17% to $24.8 million during Fiscal 2021 (Fiscal 2020: $29.7 million). This was predominantly due to the factors described above impacting net losses.

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Adjusted EBITDA and One-Time Expenses

The Adjusted EBITDA loss position increased by 54% to $13.8 million during Fiscal 2021 (Fiscal 2020: $9.0 million) (see “Cautionary Note Regarding Non-IFRS Measures and Industry Metrics” above). The increased spending in direct center and regional costs, corporate employee compensation and other corporate, general and administrative expenses eclipsed the increase in revenue during the period as a result of excess capacity within our network slightly offset by the roll-out of the Spravato® Program at select TMS Centers. See “—Factors Affecting the Comparability of our Results—Adjustment to Variable Consideration Estimate”, “—Key Highlights and Recent Developments—Spravato® Program”, “—Total Revenue”, “—Reconciliation of Accounts Receivable”, “—Entity-Wide Regional Operating Income (Loss) and Direct Center and Regional Costs”, “—Corporate Employee Compensation”, “—Other Corporate, General and Administrative Expenses” and “—Loss for the Period and Comprehensive Loss and Loss for the Period Attributable to the Common Shareholders of Greenbrook”.

Due to their nature, the deferred payment costs with respect to the Earn-Out consideration in connection with the Achieve TMS West Acquisition was a one-time expense incurred during Fiscal 2021 and was therefore excluded from Adjusted EBITDA. One-time professional and legal fees incurred in connection with the Nasdaq listing and the Achieve TMS East/Central Acquisition have also been excluded from Adjusted EBITDA.

Comparison of Results for the Year Ended December 31, 2020 to the Year Ended December 31, 2019

The following section provides an overview of our financial performance during Fiscal 2020 compared to Fiscal 2019.

Total Revenue

Despite the impact of the COVID-19 pandemic, annual consolidated revenue increased by 21% during Fiscal 2020 to $43.1 million (Fiscal 2019: $35.7 million). This growth was primarily attributable to resilient performance during the COVID-19 pandemic, enabled by efforts to provide greater access to patients virtually, through the expanded use of online platforms and focused marketing efforts on the safety and accessibility of our TMS Centers coupled with the Achieve TMS West Acquisition.

New patient starts increased by 33% to 5,445 in Fiscal 2020 (Fiscal 2019: 4,080) and TMS treatment volumes increased by 26% to 195,992 in Fiscal 2020 (Fiscal 2019: 155,343).

Same-Region Sales Growth was -1.5% in Fiscal 2020 as compared to Same-Region Sales Growth of 23.8% in Fiscal 2019. The decrease in Same-Region Sales Growth is predominantly due to changes in the adjustment to variable consideration estimate during Fiscal 2020. See “Cautionary Note Regarding Non-IFRS Measures and Industry Metrics” above, “—Factors Affecting the Comparability of our Results—Adjustment to Variable Consideration Estimate” above and “—Reconciliation of Accounts Receivable” below and “—Reconciliation of Non-IFRS Measures” below.

Average revenue per treatment decreased by 4% to $220 in during Fiscal 2020 (Fiscal 2019: $230). As part of billing enhancements, which included multiple re-credentialling processes across our payor population, we experienced aging to our accounts receivable which was further aggravated by the negative impact on payor processes as a result of the COVID-19 pandemic and resulted in lengthening of our revenue cycle. As a result, we have taken an increased adjustment to variable consideration against revenue, which affected our revenue realization rate in Q4 2020 (see “—Factors Affecting the Comparability of our Results—Adjustment to Variable Consideration Estimate” above and “—Reconciliation of Accounts Receivable” below). Excluding the impact of the adjustment to variable consideration estimate taken against aged receivables, our average reimbursement rates would have remained stable in Fiscal 2020.

Accounts Receivable

Accounts receivable increased by $0.6 million to $10.7 million in Fiscal 2020 (Fiscal 2019: $10.1 million).

In an effort to strengthen our billing relationship and rate negotiation position with payors, as well as optimize billing processes, including credentialling, as we continue to scale our business, we decided to improve our collection practices by consolidating our billing structure to begin remitting claims on a statewide basis. This, however, delayed collections, as the process included multiple re-credentialling processes across our payor population. The impact of the COVID-19 pandemic on payor processes was also detrimental with payor response times affected. As a result, the age of our accounts receivable was negatively impacted in Fiscal 2020, specifically in Q4 2020.

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Entity-Wide Regional Operating Income (Loss) and Direct Center and Regional Costs

Direct center and regional costs increased by 40% to $43.7 million during Fiscal 2020 (Fiscal 2019: $31.2 million). This increase is primarily due to operating 116 active TMS Centers as at December 31, 2020 compared to 102 active TMS Centers as at December 31, 2019, offset slightly by the cost containment measures implemented in response to the COVID-19 pandemic.

We incurred an entity-wide regional operating loss of $0.6 million during Fiscal 2020 compared to regional operating income of $4.5 million in Fiscal 2019. This was predominantly due to lower revenue associated with changes in the adjustment to variable consideration estimate, coupled with the inclusion of 14 newly active TMS Centers and nine TMS Centers in development during Fiscal 2020. The entity-wide regional operating income (loss) margin was -1.3% in Fiscal 2020 as compared to 12.5% in Fiscal 2019.

Center Development Costs

Center development costs decreased by 64% to $0.5 million during Fiscal 2020 (Fiscal 2019: $1.5 million) predominantly as a result of the curtailment of development activity, which started late in Q1 2020 as a result of the COVID-19 pandemic.

Corporate Employee Compensation

Corporate employee compensation incurred to manage the centralized business infrastructure of the Company increased by 44% to $10.2 million during Fiscal 2020 (Fiscal 2019: $7.1 million). The increase was primarily due to significant increases in staffing in respect of our shared-services functions in addition to employees inherited in connection with the Achieve TMS West Acquisition.

As anticipated by management, the Fiscal 2020 corporate employee compensation growth rate decreased significantly as compared to the Fiscal 2019 corporate employee compensation growth rate of 171% as we are starting to scale into our centralized business infrastructure and leverage these fixed costs as we continue to expand our TMS Center network.

Corporate Marketing Expenses

Corporate marketing expenses decreased by 47% to $1.0 million during Fiscal 2020 (Fiscal 2019: $1.9 million). The decrease was primarily a result of the cost containment measures implemented in response to the COVID-19 pandemic.

Other Corporate, General and Administrative Expenses

Other corporate, general and administrative expenses decreased by 44% to $3.9 million during Fiscal 2020 (Fiscal 2019: $7.0 million). The decrease was primarily a result of the cost containment measures implemented in response to the COVID-19 pandemic and the one-time costs and professional fees incurred in Fiscal 2019 associated with our billing and reimbursement system enhancements. As anticipated by management, the other corporate, general and administrative expenses growth rate decreased as compared to the Fiscal 2019 growth rate of 72% (after excluding one-time expenses).

Earn-Out Consideration

The Earn-Out consideration increased to $10.3 million in Fiscal 2020 (Fiscal 2019: $nil). The increase is a result of the Company finalizing the purchase price payable in respect of the Earn-Out, which increase was partially driven by strong performance from Achieve TMS West, specifically in Alaska. See “—Factors Affecting the Comparability of Our Results—Acquisition of Achieve TMS West” above.

Share-Based Compensation

Share-based compensation decreased by 14% to $0.6 million during Fiscal 2020 (Fiscal 2019: $0.7 million), predominantly due to the timing of stock options granted to key personnel to ensure retention and long-term alignment with the goals of the Company.

Amortization

Amortization increased by $0.3 million, to $0.5 million, during Fiscal 2020 (Fiscal 2019: $0.1 million). The increase was a result of the intangible assets acquired by the Company in connection with the Achieve TMS West Acquisition. See “—Factors Affecting the Comparability of Our Results—Acquisition of Achieve TMS West” above.

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Interest

Interest expense increased by 54% to $2.8 million during Fiscal 2020 (Fiscal 2019: $1.8 million). The increase in interest expense is primarily due to the addition of new lease liabilities in connection with the execution of our regional growth strategy.

Interest income decreased by 87% to $0.02 million during Fiscal 2020 (Fiscal 2019: $0.2 million) as a result of a decrease in the amount of excess funds invested.

Loss for the Period and Comprehensive Loss and Loss for the Period Attributable to the Common Shareholders of Greenbrook

The loss for the period and comprehensive loss, including the Earn-Out consideration, increased by 92% to $30.4 million during Fiscal 2020 (Fiscal 2019: $15.9 million). This increase was primarily a result of the increase in Earn-Out consideration with respect to the Achieve TMS West Acquisition and the impact of the adjustment to variable consideration on revenue (see “—Factors Affecting the Comparability of our Results—Adjustments to Variable Consideration Estimate” above and “—Reconciliation of Accounts Receivable” below). In addition, the inclusion of 14 newly active TMS Centers and nine TMS Centers in development during Fiscal 2020 (see “—Entity-Wide Regional Operating Income (Loss) and Direct Center and Regional Costs” and “—Corporate Employee Compensation” above) also contributed to the loss position.

The loss attributable to the common shareholders of Greenbrook, including the Earn-Out consideration, increased by 86% to $29.7 million during Fiscal 2020 (Fiscal 2019: $15.9 million). This increase is primarily a result of the increase in Earn-Out consideration with respect to the Achieve TMS West Acquisition and the impact of the adjustment to variable consideration on revenue (see “—Factors Affecting the Comparability of our Results—Adjustments to Variable Consideration Estimate” and “—Reconciliation of Accounts Receivable” below). In addition, the inclusion of 14 newly active TMS Centers and nine TMS Centers in development during Fiscal 2020 (see “—Entity-Wide Regional Operating Income (Loss) and Direct Center and Regional Costs” and “—Corporate Employee Compensation” above).

Adjusted EBITDA

The Adjusted EBITDA loss position increased by 61% to $9.0 million during Fiscal 2020 (Fiscal 2019: $5.6 million) predominately a result of the billing enhancements (see above), and the inclusion of 14 newly active TMS Centers and nine TMS Centers in development during Fiscal 2020 as outlined in “—Corporate Employee Compensation” above, “—Other Corporate, General and Administrative Expenses” above, “—Entity-Wide Regional Operating Income (Loss) and Direct Center and Regional Costs” above.

Due to their nature, the Earn-Out consideration with respect to the Achieve TMS West Acquisition as well as other one-time professional fees are one-time expenses incurred during Fiscal 2020 and were therefore excluded from Adjusted EBITDA. One-time professional and legal fees incurred in connection with the Nasdaq listing have also been excluded from Adjusted EBITDA. One-time expenses also include costs related to the development of our corporate compliance program, write-off of accounts receivable and related expenses during our billing system migration and one-time professional fees associated with the implementation of IFRS 16 – Leases (“IFRS 16”). See “—Cautionary Note Regarding Non-IFRS Measures and Industry Metrics” above.

EBITDA and Adjusted EBITDA

The table below illustrates our EBITDA and Adjusted EBITDA for the periods presented:

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Note:

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For a definition of EBITDA and Adjusted EBITDA, see “—Cautionary Note Regarding Non-IFRS Measures and Industry Metrics” above. For quantitative reconciliations of EBITDA and Adjusted EBITDA to loss attributable to the common shareholders of Greenbrook, see “—Reconciliation of Non-IFRS Measures” immediately below.

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Reconciliation of Non-IFRS Measures

The table below illustrates a reconciliation of loss attributable to the common shareholders of Greenbrook to EBITDA and Adjusted EBITDA for Fiscal 2021, Fiscal 2020 and Fiscal 2019: