8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 25, 2024

GREENBROOK TMS INC.

(Exact name of registrant as specified in its charter)

Ontario	001-40199	98-1512724
(State or Other Jurisdiction of Incorporation)	(Commission File No.)	(IRS Employee Identification No.)

890 Yonge Street, 7^th Floor

Toronto, Ontario Canada

M4W 3P4

(Address of Principal Executive Offices)

(866) 928-6076

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Shares, without par value	GBNH	***(1)

(1) On February 26, 2024, the common shares (“Common Shares”) of Greenbrook TMS Inc. (the “Company”) were suspended from trading on the Nasdaq Capital Market of the Nasdaq Stock Market LLC (“Nasdaq”). On March 22, 2024, the Common Shares began trading on the OTCQB Market, operated by OTC Markets Group Inc (the “OTCQB Market”) under the symbol “GBNHF”. On April 1, 2024, the Company filed a Form 25 with the Securities and Exchange Commission (the “SEC”) to complete the delisting of the Common Shares, with the delisting becoming effective on April 11, 2024, 10 days after such filing. The deregistration of the Common Shares under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will become effective 90 days after the filing of the Form 25, or such shorter period as the SEC may determine. 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Item 2.02 Results of Operations and Financial Condition.

On April 25, 2024, the Company issued a press release announcing its operational and financial results for its fiscal year ended December 31, 2023. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

The information contained in this Current Report on Form 8-K under Item 2.02, including Exhibit 99.1, is being furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. The information contained in this Current Report on Form 8-K under Item 2.02, including Exhibit 99.1, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference in such a filing.

Item 7.01 Regulation FD Disclosure.

The Company historically qualified as a “foreign private issuer” for purposes of reporting under the Exchange Act and filing registration statements under the Securities Act. As of the end of the Company’s second fiscal quarter in 2023, the Company ceased to qualify as a foreign private issuer and accordingly, effective as of January 1, 2024, the Company became obligated to file reports with the SEC as a “domestic issuer”. As a result of the Company’s status change, the Company was also required to change the accounting standards in which it prepares its financial statements from IFRS to generally accepted accounting principles in the United States, or “US GAAP”.

In accordance with Canadian securities laws, the Company restated and re-filed its unaudited condensed consolidated interim financial statements, now prepared in accordance with US GAAP rather than IFRS, for the three months ended March 31, 2023 and 2022, for the three and six months ended June 30, 2023 and 2022, and for the three and nine months ended September 30, 2023 and 2022. Copies of these restated financial statements are attached hereto as Exhibits 99.2, 99.3 and 99.4, respectively, and are incorporated herein by reference.

The information contained in this Current Report on Form 8-K under Item 7.01, including Exhibits 99.2, 99.3 and 99.4, is being furnished pursuant to Item 7.01 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. The information contained in this Current Report on Form 8-K under Item 7.01, including Exhibits 99.2, 99.3 and 99.4, shall not be incorporated by reference into any filing under the Securities Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit  Number	Description
99.1	Press Release dated April 25, 2024
99.2	Unaudited condensed consolidated interim financial statements, prepared in accordance with US GAAP, for the three months ended March 31, 2023 and 2022.
99.3	Unaudited condensed consolidated interim financial statements, prepared in accordance with US GAAP, for the three and six months ended June 30, 2023 and 2022.
99.4	Unaudited condensed consolidated interim financial statements, prepared in accordance with US GAAP, for the three and nine months ended September 30, 2023 and 2022.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: April 25, 2024

Greenbrook TMS Inc.
By:	/s/ Bill Leonard
Name:	Bill Leonard
Title:	President & Chief Executive Officer

EX-99.1

Exhibit 99.1

GREENBROOK TMS REPORTS FISCAL YEAR 2023 operational and FINANCIAL RESULTS

April 25, 2024 – Toronto, Ontario – Greenbrook TMS Inc. (OTCQB: GBNHF) (“Greenbrook” or the “Company”) today announced its fiscal year ended December 31, 2023 (“Fiscal 2023”) operational and financial results. All values in this news release are in United States dollars, unless otherwise stated.

FISCAL 2023 OPERATIONAL AND FINANCIAL HIGHLIGHTS

· Consolidated revenue increased by 10% in Fiscal 2023 to a record $73.8 million, up $7 million as compared to the fiscal year ended December 31, 2022 (“Fiscal 2022”) despite the closure of 53 treatment centers (approximately 29% of active treatment centers as at the end of Fiscal 2022) in connection with the Company’s previously-announced comprehensive restructuring plan (the “Restructuring Plan”) and significantly reduced marketing spend (marketing spend in Fiscal 2023 represented 12% of annualized marketing spend in the fourth quarter of 2022 (“Q4 2022”)).

· As a result of the Restructuring Plan, the Company achieved the following previously-announced targets:

o Revenue in Fiscal 2023 achieved the Company’s target of approximately 90% of the annualized total quarterly revenue generated in Q4 2022, while quarterly revenue in the fourth quarter of 2023 (“Q4 2023”) generated above 95% of quarterly Q4 2022 revenue.

o The Company has eliminated approximately $23 million of annualized costs from the business to date, achieving its previously-announced cost savings target of between $22 to $25 million.

o The Company incurred $1 million in restructuring and related charges associated with the Restructuring Plan, achieving its previously-announced associated charges target of between $1 million to $2 million.

 · Regional operating loss decreased by 56% in Fiscal 2023 to $2.7 million, down $3.5 million as compared to Fiscal 2022.

· Loss and comprehensive loss decreased by 44% in Fiscal 2023 to $49.3 million, down $39.1 million as compared to Fiscal 2022, primarily due to the decrease in impairment loss incurred in Fiscal 2023 as compared to Fiscal 2022.

· The Company continued its roll-out of its Spravato® (esketamine nasal spray) offering at select treatment centers to diversify its offering to patients, including our first Spravato® “buy & bill” program which will allow us to further enhance our access to patients in specific markets that require this program offering compared to our current “administer and observe” programs. The Company has expanded its Spravato® offering to 82 treatment centers to date.

· The Company began a pilot program to roll-out the facilitation of medication management at select treatment centers. We believe this program will allow us to reach patients earlier in their treatment journey, develop an internal patient pipeline for transcranial magnetic stimulation (“TMS”) and Spravato® treatments, while also further optimizing marketing costs. The Company has expanded its medication management offering to nine treatment centers to date.

Bill Leonard, President and Chief Executive Officer of Greenbrook, commented:

“We are pleased with the successful execution of the Restructuring Plan, which we believe provides a path to profitability once we are able to resume our investment in activities to support our revenue growth. We are excited to continue our roll-out of new treatment modalities, including our previously-announced medication management pilot and our newly-introduced Spravato® “buy & bill” program, which will complement our current “administer and observe” programs, allowing us to further enhance our access to patients. By becoming a comprehensive mental health provider and expanding our continuum of care, including talk therapy in January 2024, we believe we will be able to provide even greater access and quality of care to those suffering from MDD and other mental health disorders. We believe that mental health remains a key focus in the United States and the unmet demand for treatment remains at an all-time high. We continue to offer innovative solutions for this unmet need and our leadership position and nationwide footprint continues to serve as a valuable platform to bring the needed help to patients struggling with depression.”

- 2 -

SELECTED FISCAL 2023 FINANCIAL AND OPERATING RESULTS ⁽¹⁾

Selected Financial Results

(audited) ($)	Fiscal 2023			Fiscal 2022
Total revenue		73,786,778			66,825,959
Regional operating loss		(2,732,864	)		(6,281,165	)
Loss before income taxes		(49,254,817	)		(88,305,928	)
Loss for the year and comprehensive loss		(49,254,817	)		(88,305,928	)
Loss attributable to the common shareholders of Greenbrook		(48,914,062	)		(87,671,116	)
Net loss per share (basic and diluted)		(1.25	)		(3.77	)

Note:

(1) Please note that additional selected consolidated financial information can be found at the end of this press release.

Selected Operating Results

	As at December 31,		As at December 31,
(unaudited)	2023		2022
Number of active treatment centers(1)		130		183
Number of treatment centers-in-development(2)		0		0
Total Treatment Centers		130		183
Number of management regions		17		18
Number of TMS Devices installed		260		345
Number of regional personnel		391		495
Number of shared-services / corporate personnel(3)		98		134
Number of TMS treatment providers(4)		205		225
Number of consultations performed(5)		34,124		27,831
Number of patient starts(5)		10,401		9,253
Number of TMS treatments performed(5)		343,790		312,940
Average revenue per TMS treatment(5)	$	215	$	214

Notes:

(1) Active treatment centers represent treatment centers that have performed billable treatment services during the applicable period.

(2) Treatment centers-in-development represents treatment centers that have committed to a space lease agreement and the development process is substantially complete.

(3) Shared-services / corporate personnel is disclosed on a full-time equivalent basis. The Company utilizes part-time staff and consultants as a means of managing costs.

(4) Represents clinician partners that are involved in the provision of TMS therapy services from our treatment centers.

(5) Figure calculated for the applicable year ended December 31.

- 3 -

Selected Consolidated Financial Information

(audited) ($)	Fiscal 2023			Fiscal 2022
Total revenue		73,786,778			66,825,959
Direct center and patient care costs		53,765,678			42,137,465
Regional employee compensation		18,106,033			16,651,595
Regional marketing expenses		1,944,745			10,807,453
Depreciation		2,703,186			3,510,611
Total direct center and regional costs		76,519,642			73,107,124
Regional operating loss		(2,732,864	)		(6,281,165	)
Center development costs		525,782			660,356
Corporate employee compensation		15,941,141			16,185,688
Corporate marketing expenses		170,837			628,145
Financing costs		678,347			1,265,225
Other corporate, general and administrative expenses		12,769,567			7,445,166
Share-based compensation		726,679			347,787
Amortization		66,192			1,358,212
Interest expense		12,048,071			5,979,829
Interest income		(231	)		(12,250	)
Loss on extinguishment of loan		14,274			2,331,917
Loss on device contract termination		3,295,904			—
Impairment loss		285,390			45,834,688
Loss before income taxes		(49,254,817	)		(88,305,928	)
Income tax expense		—			—
Loss for the year and comprehensive loss		(49,254,817	)		(88,305,928	)
Income (loss) attributable to non-controlling interest		(340,755	)		(634,812	)
Loss attributable to the common shareholders of Greenbrook		(48,914,062	)		(87,671,116	)
Net loss per share (basic and diluted)		(1.25	)		(3.77	)

For more information, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”). The Annual Report will be available on the Company’s website at www.greenbrooktms.com, under the Company’s SEDAR+ profile at www.sedarplus.com and under the Company’s EDGAR profile at www.sec.gov.

About Greenbrook TMS Inc.

Operating through 130 Company-operated treatment centers, Greenbrook is a leading provider of TMS and Spravato® (esketamine nasal spray), FDA-cleared, non-invasive therapies for the treatment of Major Depressive Disorder (“MDD”) and other mental health disorders, in the United States. TMS therapy provides local electromagnetic stimulation to specific brain regions known to be directly associated with mood regulation. Spravato® is offered to treat adults with treatment-resistant depression and depressive symptoms in adults with MDD with suicidal thoughts or actions. Greenbrook has provided more than 1.45 million treatments to over 43,000 patients struggling with depression.

For further information please contact:

Glen Akselrod

Investor Relations

Greenbrook TMS Inc.

Contact Information:

investorrelations@greenbrooktms.com

1-855-797-4867

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Cautionary Note Regarding Forward-Looking Information

Certain information in this press release, including, but not limited to, information with respect to the Company’s future financial or operating performance, the Company’s expectations regarding the impact of the Restructuring Plan on our business, and the continued roll-out of the Spravato® and medication management offering at additional treatment centers and its potential to enhance profit margins and diversify total revenue, constitute forward-looking information within the meaning of applicable securities laws in Canada and the United States, including the United States Private Securities Litigation Reform Act of 1995. In some cases, but not necessarily in all 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”, “is positioned”, “estimates”, “intends”, “assumes”, “anticipates” or “does not anticipate” or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “will” or “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections regarding future events.

Forward-looking information is necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by the Company as of the date of this press release, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation: macroeconomic factors such as inflation and recessionary conditions, substantial doubt regarding the Company’s ability to continue as a going concern due to recurring losses from operations; inability to increase cash flow and/or raise sufficient capital to support the Company’s operating activities and fund its cash obligations, repay indebtedness and satisfy the Company’s working capital needs and debt obligations; prolonged decline in the price of the common shares of the Company (“Common Shares”) reducing the Company’s ability to raise capital; inability to satisfy debt covenants under the Company’s credit facility and the potential acceleration of indebtedness; including as a result of an unfavorable decision in respect of the litigation with Benjamin Klein; risks related to the ability to continue to negotiate amendments to the Company’s credit facility to prevent a default; risks relating to the Company’s ability to deliver and execute on the Restructuring Plan and the possible failure to complete the Restructuring Plan on terms acceptable to the Company or its suppliers (including Neuronetics, Inc.), or at all; risks relating to maintaining an active, liquid and orderly trading market for the Common Shares as a result of our delisting from trading on the Nasdaq Capital Market of the Nasdaq Stock Market LLC; risks relating to the Company’s ability to realize expected cost-savings and other anticipated benefits from the Restructuring Plan; risks related to the Company’s negative cash flows, liquidity and its ability to secure additional financing; increases in indebtedness levels causing a reduction in financial flexibility; inability to achieve or sustain profitability in the future; inability to secure additional financing to fund losses from operations and satisfy the Company’s debt obligations; risks relating to strategic alternatives, including restructuring or refinancing of the Company’s debt, seeking additional debt or equity capital, reducing or delaying the Company’s business activities and strategic initiatives, or selling assets, other strategic transactions and/or other measures, including obtaining bankruptcy protection, and the terms, value and timing of any transaction resulting from that process; claims made by or against the Company, which may be resolved unfavorably to us; risks relating to the Company’s dependence on Neuronetics, Inc. as its exclusive supplier of TMS devices; risks and uncertainties relating to the restatement of our financial statements for Fiscal 2022 and Fiscal Q3 2023, including any potential litigation and/or regulatory proceedings as well as any adverse effect on investor confidence and our reputation. Additional risks and uncertainties are discussed in the Annual Report and in the Company’s other materials filed with the Canadian securities regulatory authorities and the United States Securities and Exchange Commission from time to time, available at www.sedarplus.com and www.sec.gov, respectively. These factors are not intended to represent a complete list of the factors that could affect the Company; however, these factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. The forward-looking statements contained in this press release are made as of the date of this press release, and the Company expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law.

EX-99.2

Exhibit 99.2

Condensed Interim Consolidated Financial Statements

(Expressed in U.S. dollars)

Greenbrook TMS Inc.

Three months ended March 31, 2023 and 2022

(Unaudited)

NOTICE TO READER

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the condensed interim consolidated financial statements, they must be accompanied by a notice to this effect. The accompanying unaudited condensed interim consolidated financial statements of Greenbrook TMS Inc. have been prepared by, and are the responsibility of management of Greenbrook TMS Inc.

Greenbrook TMS Inc.’s independent auditor has not audited, reviewed or otherwise attempted to verify the accuracy or completeness of the accompanying condensed interim consolidated financial statements. Readers are cautioned that these financial statements may not be appropriate for their intended purposes.

1

Greenbrook TMS Inc.

Condensed Interim Consolidated Balance Sheets

(Expressed in U.S. dollars, unless otherwise stated)

(Unaudited)

	March 31,			December 31,
	2023			2022
Assets
Current assets:
Cash	$	7,050,994		$	1,623,957
Restricted cash		1,000,000			1,000,000
Accounts receivable, net (note 20(b))		7,615,156			7,348,846
Prepaid expenses and other		2,800,584			2,520,676
Total current assets		18,466,734			12,493,479
Property, plant and equipment (note 6)		3,974,221			3,719,621
Intangible assets (note 7)		671,701			688,249
Goodwill		–			–
Finance right-of-use assets (note 8(a))		14,291,596			19,348,091
Operating right-of-use assets (note 8(b))		33,702,706			34,890,554
Total assets	$	71,106,958		$	71,139,994
Liabilities and Shareholders’ Deficit
Current liabilities:
Accounts payable and accrued liabilities (note 9)	$	17,617,584		$	20,271,624
Current portion of loans payable (note 10(a))		3,547,992			2,200,892
Current portion of finance lease liabilities (note 8(a))		3,803,614			6,532,175
Current portion of operating lease liabilities (note 8(b))		4,580,721			4,591,216
Current portion of shareholder loan (note 11)		330,320			46,995
Other payables (note 12)		282,522			629,381
Non-controlling interest loans (note 10(b))		96,510			94,136
Provisions (note 13)		48,926			–
Deferred and contingent consideration (note 14)		1,000,000			1,000,000
Total current liabilities		31,308,189			35,366,419
Loans payable (note 10(a))		61,738,001			51,017,743
Finance lease liabilities (note 8(a))		7,869,804			10,449,725
Operating lease liabilities (note 8(b))		30,308,112			31,352,506
Shareholder loan (note 11)		3,392,834			2,065,443
Total liabilities		134,616,940			130,251,836
Shareholders’ deficit:
Common shares (note 15)		120,259,624			114,120,362
Contributed surplus (note 16)		4,674,801			4,552,067
Deficit		(185,716,506	)		(175,007,144	)
Total shareholders’ deficit excluding non-controlling interest		(60,782,081	)		(56,334,715	)
Non-controlling interest (note 24)		(2,727, 901	)		(2,777,127	)
Total shareholders’ deficit		(63,509,982	)		(59,111,842	)
Basis of preparation and going concern (note 2(a))
Contingencies (note 17)
Total liabilities and shareholders’ deficit	$	71,106,958		$	71,139,994

See accompanying notes to condensed interim consolidated financial statements.

2

Greenbrook TMS Inc.

Condensed Interim Consolidated Statements of Comprehensive Loss

(Expressed in U.S. dollars, unless otherwise stated)

(Unaudited)

	Three months ended
	March 31,			March 31,
	2023			2022
Revenue:
Service revenue	$	19,304,461		$	13,264,849
Expenses:
Direct center and patient care costs		13,758,220			8,563,252
Other regional and center support costs (note 25)		5,078,698			5,192,715
Depreciation (notes 6 and note 8)		965,048			695,231
		19,801,966			14,451,198
Regional operating income (loss)		(497,505	)		(1,186,349	)
Center development costs		112,191			159,446
Corporate, general and administrative expenses (note 25)		7,278,571			5,123,618
Share-based compensation (note 16)		62,948			249,322
Amortization (note 7)		16,548			207,500
Interest expense		2,692,418			764,392
Interest income		(45	)		(2,287	)
Loss before income taxes		(10,660,136	)		(7,688,340	)
Income tax expense (note 19)		–			–
Loss for the period and comprehensive loss	$	(10,660,136	)	$	(7,688,340	)
Non-controlling interest (note 24)		(68,826	)		(116,486	)
Loss for the period and comprehensive loss attributable to Greenbrook	$	(10,591,310	)	$	(7,571,854	)
Net loss per share (note 23):
Basic	$	(0.34	)	$	(0.43	)
Diluted		(0.34	)		(0.43	)

See accompanying notes to condensed interim consolidated financial statements.

3

Greenbrook tms Inc.

Condensed Interim Consolidated Statements of Changes in Equity (Deficit)

(Expressed in U.S. dollars, unless otherwise stated)

(Unaudited)

										Non-			Total
	Common shares				Contributed					controlling			equity
Three months ended March 31, 2022	Number		Amount		surplus		Deficit			interest			(deficit)
Balance, December 31, 2021		17,801,885	$	98,408,917	$	4,204,280	$	(87,332,687	)	$	(1,325,406	)	$	13,955,104
Net comprehensive loss for the period		–		–		–		(7,571,854	)		(116,486	)		(7,688,340	)
Share-based compensation (note 16)		–		–		249,322		–			–			249,322
Balance, March 31, 2022		17,801,885	$	98,408,917	$	4,453,602	$	(94,904,541	)	$	(1,441,892	)	$	6,516,086

										Non-			Total
	Common shares				Contributed					controlling			equity
Three months ended March 31, 2023	Number		Amount		surplus		Deficit			interest			(deficit)
Balance, December 31, 2022		29,436,545	$	114,120,362	$	4,552,067	$	(175,007,144	)	$	(2,777,127	)	$	(59,111,842	)
Net comprehensive loss for the period		–		–		–		(10,591,310	)		(68,826	)		(10,660,136	)
Share-based compensation (note 16)		–		–		62,948		–			–			62,948
Issuance of common shares (note 15)		11,363,635		6,139,262		–		–			–			6,139,262
Issuance of lender warrants		–		–		59,786		–			–			59,786
Acquisition of subsidiary non-controlling interest (note 24)		–		–		–		(118,052	)		118,052			–
Balance, March 31, 2023		40,800,180	$	120,259,624	$	4,674,801	$	(185,716,506	)	$	(2,727,901	)	$	(63,509,982	)

See accompanying notes to condensed interim consolidated financial statements.

4

Greenbrook TMS Inc.

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in U.S. dollars, unless otherwise stated)

(Unaudited)

	Three months ended
	March 31,			March 31,
	2023			2022
Cash provided by (used in)
Operating activities:
Loss for the period	$	(10,660,136	)	$	(7,688,340	)
Adjusted for:
Amortization		16,548			207,500
Depreciation		965,048			695,231
Operating lease expense		2,094,852			1,222,692
Interest expense		2,692,418			764,392
Interest income		(45	)		(2,287	)
Share-based compensation		62,948			249,322
Gain on lender warrants		(6,567	)		(9,544	)
Gain on deferred share units		(299,191	)		(22,361	)
Gain on performance share units		(41,100	)		(10,434	)
Change in non-cash operating working capital:
Accounts receivable		(266,310	)		130,464
Prepaid expenses and other		(279,908	)		(72,706	)
Accounts payable and accrued liabilities		3,345,961			1,488,877
Provision		48,926			–
Interest paid		(2,065,190	)		(682,993	)
Interest received		45			2,287
Payment of operating lease liabilities		(2,000,115	)		(1,208,341	)
		(6,391,816	)		(4,936,241	)
Financing activities:
Net proceeds on issuance of common shares (note 15)		6,139,262			–
Financing costs incurred		(647,471	)		–
Loans payable advanced (note 10(a))		6,000,000			–
Loans payable and promissory notes repaid (note 10(a))		(93,869	)		(52,300	)
Promissory notes advanced (note 10(a) and note 11)		1,750,000			–
Principal repayment of finance lease liabilities		(1,322,753	)		(1,009,652	)
Net non-controlling interest loans advanced		2,374			2,148
		11,827,543			(1,059,804	)
Investing activities:
Change in restricted cash		–			250,000
Deferred and contingent consideration paid (note 14)		–			(250,000	)
Purchase of property, plant and equipment		(8,690	)		–
		(8,690	)		–
Increase (decrease) in cash		5,427,037			(5,996,045	)
Cash, beginning of period		1,623,957			10,699,679
Cash, end of period	$	7,050,994		$	4,703,634

See accompanying notes to condensed interim consolidated financial statements.

5

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

1.            Reporting entity:

Greenbrook TMS Inc. (the “Company”), an Ontario corporation along with its subsidiaries, controls and operates a network of outpatient mental health services centers that specialize in the provision of Transcranial Magnetic Stimulation (“TMS”) therapy and other treatment modalities for the treatment of depression and related psychiatric services.

Our head and registered office is located at 890 Yonge Street, 7th Floor, Toronto, Ontario, Canada M4W 3P4. Our United States corporate headquarters is located at 8401 Greensboro Drive, Suite 425, Tysons Corner, Virginia, USA, 22102.

2. Basis of preparation:

(a) Going concern:

These condensed interim consolidated financial statements for the three months ended March 31, 2023 have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and the basis of presentation outlined in note 2(b) on the assumption that the Company is a going concern and will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

The Company has experienced losses since inception and has negative cash flow from operating activities of $6,391,816 for the three months ended March 31, 2023 ($4,936,241 – three months ended March 31, 2022). The Company’s cash balance, excluding restricted cash, as at March 31, 2023 was $7,050,994 ($1,623,957 as at December 31, 2022) and negative working capital as at March 31, 2023 was $12,819,662 (negative working capital of $5,100,477 as at December 31, 2022).

On December 31, 2020, the Company entered into a credit and security agreement, which was amended on October 29, 2021, for a $30,000,000 secured credit facility (the “Oxford Credit Facility”) with Oxford Finance LLC (“Oxford”). The Oxford Credit Facility funded the $15,000,000 term loan at closing on December 31, 2020. On July 14, 2022, the Company entered into a credit agreement (the “Madryn Credit Agreement”) for a $75,000,000 secured credit facility (the “Madryn Credit Facility”) with Madryn Asset Management, LP (“Madryn”) and its affiliated entities. Upon closing of the Madryn Credit Facility, the Company drew a $55,000,000 term loan under the Madryn Credit Facility. In addition, the Madryn Credit Facility permits the Company to draw up to an additional $20,000,000 in a single draw at any time on or prior to December 31, 2024 for purposes of funding future mergers and acquisition activity. On July 14, 2022, the Company used $15,446,546 of the proceeds from the Madryn Credit Facility to repay in full the outstanding balance owing under the Oxford Credit Facility and also used $15,154,845 of the proceeds from the Madryn Credit Facility to repay various loans previously held by Success TMS (as defined below).

6 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

2. Basis of preparation (continued):

During the three months ended March 31, 2023, the Company received an aggregate of $7,750,000 in debt financings from Madryn, certain significant shareholders and management of the Company, in order to satisfy short-term cash requirements, and the amendments to the Madryn Credit Facility were also effected to amend the Company’s minimum liquidity covenant. See note 10 and note 11.

The terms of the Madryn Credit Facility require the Company to satisfy various financial covenants including a minimum liquidity and minimum consolidated revenue amounts that became effective on July 14, 2022 and September 30, 2022, respectively. A failure to comply with these covenants, or failure to obtain a waiver for any non-compliance, would result in an event of default under the Madryn Credit Agreement and would allow Madryn to accelerate repayment of the debt, which could materially and adversely affect the business, results of operations and financial condition of the Company. On February 21, 2023 and March 20, 2023, the Company received waivers from Madryn with respect to the Company’s non-compliance with the minimum liquidity covenant until March 27, 2023. As at March 31, 2023, the Company was in compliance with the financial covenants of the Madryn Credit Agreement.

On March 23, 2023, the Company completed a non-brokered private placement (“Private Placement”), for aggregate gross proceeds to the Company of approximately $6,250,000. The Private Placement included investments by Madryn, together with certain of the Company’s other major shareholders, including Greybrook Health Inc. (“Greybrook Health”) and affiliates of Masters Special Situations LLC (“MSS”). See note 15.

Although the Company believes it will become cash flow positive in the future, the timing of this is uncertain and is also dependant on the execution of the Restructuring Plan (as defined below) (see note 13). The Company will require additional financing in order to fund its operating and investing activities, including making timely payments to certain vendors, landlords, lenders (including shareholders) and similar other business partners. The delay in such payments may result in potential defaults under the terms of the agreements the Company has with various parties. As such, additional financing is required in order for the Company to repay its short-term obligations. The Company has historically been able to obtain financing from supportive shareholders, its lenders and other sources when required; however, the Company may not be able to access further equity or debt financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. If additional financing is not obtained, the Company will need to obtain additional amendments from Madryn in order to remain compliant with the covenants or waivers from Madryn to waive its rights to accelerate repayment of the debt; however, there can be no assurances that such amendments or waivers will be obtained.

7 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

2. Basis of preparation (continued):

The existence of the above-described conditions indicate substantial doubt as to the Company’s ability to continue as a going concern as at March 31, 2023.

These condensed interim consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumptions were not appropriate. If the going concern basis was not appropriate for these condensed interim consolidated financial statements, then adjustments would be necessary to the carrying value of assets and liabilities, the reported expenses, and the condensed interim consolidated balance sheets classification used, and these adjustments may be material.

(b) Basis of measurement:

These condensed interim consolidated financial statements have been prepared on a historic cost basis except for financial instruments classified as fair value through profit or loss, which are stated at their fair value. Other measurement bases are described in the applicable notes.

Presentation of the condensed interim consolidated balance sheet differentiates between current and non-current assets and liabilities. The condensed interim consolidated statements of comprehensive loss are presented using the function classification of expense.

Regional operating income (loss) presents regional operating income (loss) on an entity-wide basis and is calculated as total service revenue less direct center and patient care costs, other regional and center support costs, 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 TMS treatments to patients and the cost of the Company’s regional patient acquisition strategy.

8 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

3. Material accounting policies:

These condensed interim consolidated financial statements have been prepared using the material accounting policies consistent with those applied in the Company’s December 31, 2022 audited consolidated financial statements.

4. Recent accounting pronouncements:

Recent accounting pronouncements adopted:

The SEC has issued the following amendments to the existing standards that became effective for periods beginning on or after January 1, 2023:

(i) Accounting Standards Update 2023-07—Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments were adopted on January 1, 2023.

The adoption of the amendments to the existing standards did not have a material impact on these consolidated financial statements.

The SEC has issued the following amendment to the existing standard that will become effective for periods beginning on or after January 1, 2024:

(i) Accounting Standards Update 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This standard introduces improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

5. Business acquisition:

Acquisition of Success TMS:

On July 14, 2022, the Company, through its wholly-owned U.S. subsidiary, TMS NeuroHealth Centers Inc., completed the acquisition of all of the issued and outstanding equity interests in Check Five LLC, a Delaware limited liability company (doing business as “Success TMS”) (“Success TMS”) from its parent company, Success Behavioral Holdings LLC (the “Success TMS Acquisition”) pursuant to a Membership Interest Purchase Agreement dated as of May 15, 2022 (the “Purchase Agreement”), by and among the Company, Success TMS and its direct and indirect owners, including Success Behavioral Holdings, LLC, Theragroup LLC, The Bereke Trust U/T/A Dated 2/10/03, Batya Klein and Benjamin Klein (collectively, the “Seller Parties”).

9 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

5. Business acquisition (continued):

As consideration for the purchase of Success TMS, the Seller Parties received, in the aggregate, 8,725,995 common shares of the Company valued at $11,783,584, and an additional 2,908,665 common shares of the Company, valued at $3,927,861, have been held back and deposited with an escrow agent, to be released to Benjamin Klein or the Company, as applicable, upon satisfaction of customary working capital and certain other adjustments, including to satisfy any indemnity claims against the Seller Parties (such common shares issued as consideration to the Seller Parties, including the common shares deposited in escrow, collectively, the “Consideration Shares”).

The purchase price consideration was determined based on the pro forma revenue contribution of the two companies and was fixed at an amount equal to approximately 40% of the total issued and outstanding common shares of the Company on a post-acquisition basis and subject to adjustments, as described above.

The Success TMS Acquisition represented the addition of 47 new Treatment Centers (as defined below), with a new presence in additional states, including Illinois, New Jersey, Nevada and Pennsylvania.

10 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

5. Business acquisition (continued):

The Success TMS Acquisition was accounted for using the acquisition method of accounting. The allocation of the purchase price consideration for the Success TMS Acquisition is preliminary, and is comprised as follows:

Purchase consideration
Share issuance	$	11,783,584
Share issuance, held in escrow		3,927,861
		15,711,445
Net assets acquired
Cash acquired		688,958
Accounts receivable, net		3,728,255
Prepaid expenses and other		804,416
Property, plant and equipment		829,049
Software		363,424
Management services agreements		15,850,000
Finance right-of-use assets		7,314,499
Operating right-of-use assets		16,336,366
Accounts payable and accrued liabilities		(4,890,405	)
Deferred grant income		(225,559	)
Loans payable		(14,836,324	)
Shareholder loan		(2,078,979	)
Finance lease liabilities		(7,314,499	)
Operating lease liabilities		(16,185,975	)
		383,226
Goodwill	$	15,328,219

As part of the Success TMS Acquisition, the Company acquired five management services agreements (the “Success TMS MSAs”) between Success TMS and professional entities owned by Success TMS physicians, under which it provides management, administrative, financial and other services in exchange for a fee. The Success TMS MSAs are the key intangible assets identified as part of the Success TMS Acquisition and drives the value of the business. The Success TMS MSAs are valued using the multi-period excess earnings method. The multi-period excess earnings method considers the present value of net cash flows expected to be generated by the Success TMS MSAs by excluding any cash flows related to contributory assets.

11 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

5. Business acquisition (continued):

Goodwill is primarily attributable to the ability to expand the Company’s national footprint and the synergies expected to result from combining Success TMS’ operations with the Company, and is allocated to the Success TMS cash generating unit. Goodwill is deductible for tax purposes.

6. Property, plant and equipment:

	Furniture and		Leasehold
	equipment		improvements		TMS devices		Total
Cost
Balance, December 31, 2022	$	115,604	$	344,336	$	4,656,273	$	5,116,213
Additions		-		8,690		445,522		454,212
Balance, March 31, 2023	$	115,604	$	353,026	$	5,101,795	$	5,570,425
Accumulated depreciation
Balance, December 31, 2022	$	103,474	$	95,541	$	1,197,577	$	1,396,592
Depreciation		5,780		14,785		179,047		199,612
Balance, March 31, 2023	$	109,254	$	110,326	$	1,376,624	$	1,596,204
Net book value
Balance, December 31, 2022	$	12,130	$	248,795	$	3,458,696	$	3,719,621
Balance, March 31, 2023		6,350		242,700		3,725,171		3,974,221

7. Intangible assets:

	Management		Covenants not
	services agreements		to compete		Software		Total
Cost
Balance, December 31, 2022	$	2,792,178	$	355,238	$	39,646	$	3,187,062
Additions		–		–		–		–
Balance, March 31, 2023	$	2,792,178	$	355,238	$	39,646	$	3,187,062
Accumulated amortization
Balance, December 31, 2022	$	2,119,306	$	339,861	$	39,646	$	2,498,813
Amortization		14,333		2,215		–		16,548
Balance, March 31, 2023	$	2,133,639	$	342,076	$	39,646	$	2,515,361
Net book value
Balance, December 31, 2022	$	672,872	$	15,377	$	–	$	688,249
Balance, March 31, 2023		658,539		13,162		–		671,701

12 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

8. Right-of-use assets and lease liabilities:

The Company enters into lease agreements related to TMS devices and mental health treatment centers (“Treatment Centers”). These lease agreements range from one year to seven years in length.

Right-of-use assets are initially measured at cost, which is comprised of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred.

Lease liabilities have been measured by discounting future lease payments using a rate implicit in the lease or the Company’s incremental borrowing rate. The Company’s incremental borrowing rate during the period ended March 31, 2023 is 12% (December 31, 2022 – 12%).

(a) Finance leases:

Finance leases include lease agreements relating to TMS devices.

	March 31,
	2023
Finance right-of-use assets, beginning of the year	$	19,348,091
Impact of lease additions, disposals and/or modifications		(3,845,537	)
Exercise of buy-out options into property, plant and equipment		(445,522	)
Depreciation on right-of-use assets		(765,436	)
Finance right-of-use assets, end of the period	$	14,291,596

13 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

8.            Right-of-use assets and lease liabilities (continued):

	March 31,
	2023
Finance lease liabilities, beginning of the year	$	16,981,900
Impact of lease additions, disposals and/or modifications		(3,985,729	)
Interest expense on lease liabilities		336,599
Payments of lease liabilities		(1,659,352	)
Finance lease liabilities, end of the period	$	11,673,418
Less current portion of finance lease liabilities		3,803,614
Long term portion of finance lease liabilities	$	7,869,804

(b) Operating leases:

Operating leases include lease agreements relating to Treatment Centers.

	March 31,
	2023
Operating right-of-use assets, beginning of the year	$	34,890,554
Impact of lease additions, disposals and/or modifications		34,600
Impairment of right-of-use assets		–
Right-of-use asset lease expense		(1,222,448	)
Operating right-of-use assets, end of the period	$	33,702,706

14 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

8.            Right-of-use assets and lease liabilities (continued):

	March 31,
	2023
Operating lease liabilities, beginning of the year	$	35,943,722
Impact of lease additions, disposals and/or modifications		72,822
Lease liability expense		872,404
Payments of lease liabilities		(2,000,115	)
Operating lease liabilities, end of the period		34,888,833
Less current portion of operating lease liabilities		4,580,721
Long term portion of operating lease liabilities	$	30,308,112

9.             Accounts payable and accrued liabilities:

The accounts payable and accrued liabilities are as follows:

	March 31,		December 31,
	2023		2022
Accounts payable	$	13,782,627	$	16,808,558
Accrued liabilities		3,834,957		3,463,066
Total	$	17,617,584	$	20,271,624

15 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

10. Loans Payable:

(a) Borrowings:

	TMS
	Device		Credit		Promissory		Neuronetics
	Loans (i)		Facility (ii)		notes (iii)		Note (iv)		Total
Short Term	$	126,373	$	2,263,399	$	30,920	$	1,127,300	$	3,547,992
Long Term		37,446		56,805,113		201,784		4,693,658		61,738,001
Total, net	$	163,819	$	59,068,512	$	232,704	$	5,820,958	$	65,285,993
Unamortized capitalized financing costs		–		2,364,136		–		–		2,364,136
Total, March 31, 2023	$	163,819	$	61,432,648	$	232,704	$	5,820,958	$	67,650,129

(i) TMS Device Loans:

During the year ended December 31, 2022, the Company assumed loans as part of the Success TMS Acquisition from three separate financing companies for the purchase of TMS devices. These TMS device loans bear an average interest rate of 9.3% with average monthly blended interest and capital payments of $1,538 and mature during the years ending December 31, 2023 to December 31, 2025. There are no covenants associated with these loans.

During the three months ended March 31, 2023, the Company repaid TMS device loans totalling $41,612 (March 31, 2022 – $14,800).

(ii) Credit Facility:

On July 14, 2022, the Company entered into the Madryn Credit Agreement in respect of the Madryn Credit Facility. The Madryn Credit Facility provided the Company with a $55,000,000 term loan (the “Existing Loan”) that was funded at closing on July 14, 2022, with an option to draw up to an additional $20,000,000 in a single draw at any time on or prior to December 31, 2024 for the purposes of funding future mergers and acquisition activity. As at December 31, 2022, all amounts borrowed under the Madryn Credit Facility bore interest at a rate equal to the three-month London Interbank Offered Rate (“LIBOR”) plus 9.0%, subject to a minimum three-month LIBOR floor of 1.5%. The Madryn Credit Facility matures over 63 months and provides for four years of interest-only payments. The initial principal balance of $55,000,000 is due in five equal 3 month installments beginning on September 30, 2026. The Company has granted general security over all assets of the Company in connection with the performance and prompt payment of all obligations of the Madryn Credit Facility.

16 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022 

(Unaudited)

10. Loans payable (continued):

On February 1, February 21, March 20 and March 24, 2023, the Company entered into amendments to the Madryn Credit Facility, whereby Madryn extended four additional tranches of debt financing to the Company in an aggregate principal amount of $6,000,000, each of which were fully funded at closing of the applicable tranche (the “New Loans”). The terms and conditions of the New Loans are consistent with the terms and conditions of the Existing Loan.

In addition, the Madryn Credit Facility was amended on February 21, 2023 to provide that, commencing March 31, 2023, all advances under the Madryn Credit Facility (including the New Loans) will cease to accrue interest using the LIBOR benchmark and instead will accrue interest using the 3-month Term Secured Overnight Financing Rate (“SOFR”) benchmark plus 0.10%.

The carrying amount of the Madryn Credit Facility as at March 31, 2023 is $ 59,068,512 (December 31, 2022 – $52,850,965). Financing costs of $3,307,459 were incurred and are deferred over the term of the Madryn Credit Facility, of which $233,000 was incurred during the three-month period associated with the various amendments. Amortization of deferred financing costs for the three months ended March 31, 2023 was $153,804 (three months ended March 31, 2022 – nil) at an effective interest rate of 1.12% (December 31, 2022 – 1.14%) and were included in interest expense.

In accordance with the terms of the Madryn Credit Agreement, the Company has issued conversion instruments (each, a “Conversion Instrument”) to Madryn and certain of its affiliated entities that provide the holders thereof with the option to convert up to $5,000,000 of the outstanding principal amount of the Madryn Credit Facility into common shares of the Company at a price per share equal to $1.90, subject to customary anti-dilution adjustments. The New Loans provide the holders with the option to convert up to $546,000 of the outstanding principal amount of the New Loans into common shares of the Company at a price per share equal to $1.90, subject to customary anti-dilution adjustments. The instrument is convertible into up to 2,631,579 common shares. The conversion instruments have been recorded utilizing the no proceeds allocated method, which results in all proceeds allocated to the financial liability.

The terms of the Madryn Credit Agreement require the Company to satisfy various affirmative and negative covenants and to meet certain financial tests, including but not limited to, consolidated minimum revenue and minimum liquidity covenants that became effective September 30, 2022 and July 14, 2022, respectively. In addition, the Madryn Credit Agreement contains affirmative and negative covenants that limit, among other things, the Company’s ability to incur additional indebtedness outside of what is permitted under the Madryn Credit Agreement, create certain liens on assets, declare dividends and engage in certain types of transactions. The Madryn Credit Agreement also includes customary events of default, including payment and covenant breaches, bankruptcy events and the occurrence of a change of control. The Madryn Credit Facility also requires the Company to deliver to Madryn annual audited financial statements that do not contain any going concern note, however the Company has obtained waivers from Madryn with respect to such obligation for fiscal 2022. As at March 31, 2023, the Company was in compliance with all covenants of the Madryn Credit Agreement.

17 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

10. Loans payable (continued):

Pursuant to the Private Placement completed on March 23, 2023, Madryn is now also a shareholder of the Company. See note 15.

(iii) Promissory notes:

On July 14, 2022, the Company assumed two promissory notes in connection with the Success TMS Acquisition totaling $200,000. The promissory notes bear interest at a rate of 5% per annum and have a maturity date of December 31, 2025. Upon acquisition, the two promissory notes were fair valued using an interest rate of 12%.

On February 3, 2023, the Company issued promissory notes to officers of the Company in an aggregate amount of $60,000. The promissory notes bear interest at a rate consistent with the Madryn Credit Facility and mature on the earlier of September 30, 2027, at the election of the noteholders upon a change of control, upon the occurrence of an event of default and acceleration by the noteholders, or the date on which the loans under the Madryn Credit Facility are repaid.

The carrying value of the promissory notes as at March 31, 2023 is $232,704 (December 31, 2022 – $166,325). Interest expense for the three months ended March 31, 2023 was $6,380 (three months ended March 31, 2022 – nil). During the three months ended March 31, 2023, the Company repaid promissory notes totalling nil (March 31, 2022 – nil).

18 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

10. Loans payable (continued):

(iv) Neuronetics Note:

On March 31, 2023, the Company entered into an agreement with Neuronetics to convert the Company’s outstanding account balance payable to Neuronetics of $5,883,644, together with Neuronetics’ out-of-pocket financing costs, into a $6,000,000 secured promissory note (the “Neuronetics Note”). All amounts borrowed under the Neuronetics Note will bear interest at a rate of SOFR plus 7.65%.

Pursuant to the terms of the Neuronetics Note, in the event of default under the Neuronetics Note, the Company will be required to issue common share purchase warrants (the “Neuronetics Warrants”) to Neuronetics equal to (i) 200% of the unpaid amount of any delinquent amount or payment due and payable under the Neuronetics Note, together with all outstanding and unpaid accrued interest, fees, charges and costs, divided by (ii) the exercise price of the Neuronetics Warrants, which will represent a 20% discount to the 30-day volume-weighted average closing price of the Company’s common shares traded on Nasdaq prior to the date of issuance (subject to any limitations required by Nasdaq). Under the Neuronetics Note, the Company has granted Neuronetics a security interest in all of the Company’s assets.

In connection with the entry into the Neuronetics Note, the Company concurrently entered into an amendment to the Madryn Credit Agreement pursuant to which the Company is permitted to incur the indebtedness under the Neuronetics Note.

The carrying value of the Neuronetics Note as at March 31, 2023 is $5,820,958 (December 31, 2022 – nil). Interest expense for the three months ended March 31, 2023 was nil (March 31, 2022 – nil). During the three months ended March 31, 2023, the Company repaid promissory notes totalling nil (March 31, 2022 – nil).

Financing costs of $179,042 were incurred and are deferred over the term of the Neuronetics Note. Amortization of deferred financing costs for the three months ended March 31, 2023 was nil (three months ended March 31, 2022 – nil).

19 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

10. Loans payable (continued):

(b) Non-controlling interest loans:

	March 31,		December 31,
	2023		2022
Non-controlling interest loans	$	96,510	$	94,136

The non-controlling interest holder partners of the Company, from time to time, provide additional capital contributions in the form of capital loans to the Company’s subsidiaries. These loans bear interest at a rate of 10%, compounded on a monthly basis. The loans are unsecured and are repayable subject to certain liquidity and solvency requirements and are classified as current liabilities.

11. Shareholder loan:

(a) 2022 Promissory Note:

On July 14, 2022, in connection with the Success TMS Acquisition, the Company assumed the obligation of Success TMS to repay a promissory note (the “2022 Promissory Note”) to Benjamin Klein, who is a significant shareholder and director of the Company. The 2022 Promissory Note totals $2,090,264 and bears interest at a rate of 10% per annum and matures on May 1, 2024. Upon acquisition, the 2022 Promissory Note was fair valued using an interest rate of 12%.

(b) 2023 Promissory Notes:

On February 3, 2023, the Company issued promissory notes (the “2023 Promissory Notes”) to certain shareholders of the Company in an aggregate amount of $1,690,000. The 2023 Promissory Notes bear interest at a rate consistent with the Madryn Credit Facility and mature on the earlier of September 30, 2027, at the election of the noteholders upon a change of control, upon the occurrence of an event of default and acceleration by the noteholders, or the date on which the loans under the Madryn Credit Facility are repaid.

Financing costs of $30,000 were incurred and are deferred over the term of the 2023 Promissory Notes. Amortization of deferred financing costs for the three months ended March 31, 2023 was $662 (three months ended March 31, 2022 – nil) and was included in interest expense.

20 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

11. Shareholder loan (continued):

On February 28, 2023, the Company issued a promissory note to Greybrook Health, who is a significant shareholder of the Company. The promissory note totals $1,000,000 and bears interest at a rate consistent with the Madryn Credit Facility and matures on the earlier of September 30, 2027, at the election of the noteholder upon a change of control, upon the occurrence of an event of default and acceleration by the noteholder, or the date on which the loans under the Madryn Credit Facility are repaid. In conjunction with the issuance of the unsecured note to Greybrook Health, the Company granted Greybrook Health an option to convert up to $1,000,000 of the outstanding principal amount of the note held by Greybrook Health into common shares of the Company at a conversion price per share equal to 85.0% of the volume-weighted average trading price of the common shares of the Company on the Nasdaq for the five trading days immediately preceding the date of conversion, subject to customary anti-dilution adjustments and conversion limitations required by Nasdaq. As additional consideration for the Greybrook Health promissory note issued on February 28, 2023, the Company issued 135,870 common share purchase warrants to Greybrook Health, each exercisable for one common share of the Company at an exercise price of $1.84 per common share, subject to customary anti-dilution adjustments, expiring on February 28, 2028. There is a cashless exercise option associated with the warrants, available to Greybrook Health.

On February 28, 2023, the fair value of the lender warrants at grant date was $63,587. Per ASC 815, the lender warrants meet the applicable criteria to qualify for equity classification. The warrants are initially recognized according to their relative fair value as compared to the host financial liability. The relative fair value of the lender warrants on the date of inception has been deducted from the carrying value of the promissory note as a financing cost.

Financing costs of $59,786 were incurred and are deferred over the term of the promissory note. Amortization of deferred financing costs and deferred loss for the three months ended March 31, 2023 was $787 (three months ended March 31, 2022 – nil) and was included in interest expense.

The carrying value of the shareholder loan as at March 31, 2023 is $3,753,108 (December 31, 2022 – 2,112,438). Interest expense for the three months ended March 31, 2023 was $91,262 (March 31, 2022 – nil). During the three months ended March 31, 2023, the Company repaid $52,257 of the shareholder loan (March 31, 2022 – nil).

21 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

12. Other payables:

(a) Lender warrants:

	March 31,		December 31,
	2023		2022
Lender warrants	$	—	$	6,567

As consideration for providing the Oxford Credit Facility, the Company issued 51,307 common share purchase warrants to Oxford, each exercisable for one common share of the Company at an exercise price of C$11.20 per common share, expiring on December 31, 2025.

As the exercise price is denoted in a different currency than the Company’s functional currency, the Oxford lender warrants are recorded as a financial liability on the condensed interim consolidated balance sheet. As at March 31, 2023, the value of the Oxford lender warrants was nil (December 31, 2022 – $6,567).

The change in fair value of the Oxford lender warrants during the three months ended March 31, 2023 was a decrease of $6,567 (March 31, 2022 – decrease of $9,544) and was recorded in corporate, general and administrative expenses.

(b) Deferred share units:

	March 31,		December 31,
	2023		2022
Deferred share units	$	278,870	$	578,061

On May 6, 2021, the Company adopted a deferred share unit plan (the “DSU Plan”) for non-employee directors (each, a “Non-Employee Director”). Each Non-Employee Director is required to take at least 50% of their annual retainer (other than annual committee Chair retainers) in deferred share units (“DSUs”) and may elect to take additional amounts in the form of DSUs. Discretionary DSUs may also be granted to Non-Employee Directors under the DSU Plan. The DSUs granted vest immediately.

22 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

12. Other payables (continued):

Following a Non-Employee Director ceasing to hold all positions with the Company, the Non-Employee Director will receive a payment in cash at the fair market value of the common shares represented by the Non-Employee Director’s DSUs generally within ten days of the Non-Employee Director’s elected redemption date.

As the DSUs are cash-settled, the DSUs are recorded as cash-settled share-based payments and a financial liability has been recognized on the condensed interim consolidated balance sheets. During the three months ended March 31, 2023, nil DSUs were granted (March 31, 2022 – nil). As at March 31, 2023, the value of the financial liability attributable to the DSUs was $278,870 (December 31, 2022 – $578,061). For the three months ended March 31, 2023, the Company recognized a recovery of $299,191 (March 31, 2022 – $22,361) in corporate, general and administrative expenses related to the DSUs.

(c) Performance share units:

	March 31,		December 31,
	2023		2022
Performance share units	$	3,653	$	44,753

On May 6, 2021, the Company’s Equity Incentive Plan was amended and restated to permit the Company to grant performance share units (“PSUs”) and restricted share units (“RSUs”), in addition to stock options. Under the Equity Incentive Plan, the Company pays equity instruments of the Company, or a cash payment equal to the fair market value thereof, as consideration in exchange for employee and similar services provided to the Company. The Equity Incentive Plan is open to employees, directors, officers and consultants of the Company and its affiliates; however, Non-Employee Directors are not entitled to receive grants of PSUs.

On August 5, 2021, 38,647 PSUs were granted under the Equity Incentive Plan. The performance period in respect of this award is August 5, 2021 to December 31, 2023. The PSUs will vest on December 31, 2023 (the “Vesting Date”) subject to the attainment of certain performance vesting conditions. Subject to all terms and conditions of the Equity Incentive Plan and the terms of the grant agreement, any vested and outstanding PSUs will be settled following the Vesting Date and, in any event, no later than March 15, 2024. Pursuant to the grant agreement, upon satisfaction of the performance vesting conditions, the PSUs will be settled in cash.

23 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

12. Other payables (continued):

Based on future projections with respect to the performance vesting conditions of the PSUs, the Company estimates that 3,865 PSUs will vest on the Vesting Date (December 31, 2022 – 23,188).

As at March 31, 2023, the value of the financial liability attributable to the PSUs is $-----3,653 (December 31, 2022 – $44,753).

As at March 31, 2023, the Company has not issued any RSUs under the Equity Incentive Plan (December 31, 2022 – nil).

13. Provisions:

On March 6, 2023, the Company announced that it is embarking on a comprehensive restructuring plan (the “Restructuring Plan”) that aims to strengthen the Company by leveraging its scale to further reduce complexity, streamlining its operating model and driving operational efficiencies to achieve profitability.

As part of this Restructuring Plan, the Company is decreasing its operating footprint. The remaining Treatment Centers will continue clinical TMS offerings and a select and growing number of Treatment Centers will continue offering Spravato® (esketamine nasal spray) therapy.

During the period ended March 31, 2023, the Company provided for $48,926 in corporate, general and administrative expenses related to the Restructuring Plan (March 31, 2022 – nil).

14. Deferred and contingent consideration:

	March 31,		December 31,
	2023		2022
Deferred and contingent consideration	$	1,000,000	$	1,000,000

The deferred and contingent consideration payable balance related to the acquisition of Achieve TMS East, LLC and Achieve TMS Central, LLC (the “Achieve TMS East/Central Acquisition”) as at December 31, 2021 was $1,250,000, made up of an estimated nil earn-out payable and $1,250,000 in restricted cash that was held in an escrow account, subject to finalization of the escrow conditions. During the year ended December 31, 2022, $250,000 of the restricted cash held in escrow was released to the vendors in accordance with the terms of the agreement.

24 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

14. Deferred and contingent consideration (continued):

As at March 31, 2023, the deferred and contingent consideration in relation to the of Achieve TMS East/Central Acquisition was $1,000,000 (December 31, 2022 – $1,000,000).

15. Common shares:

The Company is authorized to issue an unlimited number of common shares and an unlimited number of preferred shares, issuable in series. As at March 31, 2023 and December 31, 2022, there were nil preferred shares issued and outstanding.

			Total
	Number		amount
December 31, 2022		29,436,545	$	114,120,362
Issuance of common shares – Private Placement		11,363,635		6,139,262
March 31, 2023		40,800,180	$	120,259,624

On March 23, 2023, the Company completed a non-brokered private placement of Common Shares. Pursuant to the Private Placement, an aggregate of 11,363,635 Common Shares were issued at a price of $0.55 per Common Share, for aggregate gross proceeds to the Company of $6,250,000. The Company incurred financing costs of $110,738 which was recorded as a reduction in equity. The Private Placement included investments by Madryn, together with certain of the Company’s other major shareholders, including Greybrook Health and affiliates of MSS. In connection with the Private Placement, Greybrook Health, Madryn and MSS each received customary resale, demand and “piggy-back” registration rights pursuant to a registration rights agreement entered into among the parties on closing of the Private Placement (the “Registration Rights Agreement”).

16. Contributed surplus:

Contributed surplus is comprised of share-based compensation and lender warrants.

(a) Share-based compensation - options

Stock options granted under the Equity Incentive Plan are equity-settled. The fair value of the grant of the options is recognized as an expense in the condensed interim consolidated statements of comprehensive loss. The total amount to be expensed is determined by the fair value of the options granted. The total expense is recognized over the vesting period which is the period over which all of the service vesting conditions are satisfied. The vesting period is determined at the discretion of the Board and has ranged from immediate vesting to over three years.

25 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

16. Contributed surplus (continued):

The maximum number of common shares reserved for issuance, in the aggregate, under the Equity Incentive Plan is 10% of the aggregate number of common shares outstanding, provided that the maximum number of RSUs and PSUs shall not exceed 5% of the aggregate number of common shares outstanding. As at March 31, 2023, this represented 4,080,009 common shares (December 31, 2022 – 2,943,655).

As at March 31, 2023, 730,834 stock options are outstanding (December 31, 2022 – 764,667). The stock options have an expiry date of ten years from the applicable date of issue. The Company has not issued any RSUs or equity-settled PSUs under the Equity Incentive Plan.

	March 31, 2023					December 31, 2022
	Number of stock options			Weighted average exercise price		Number of stock options			Weighted average exercise price
Outstanding, beginning of period		764,667		$	8.15		897,500		$	8.66
Forfeited		(33,833	)		6.11		(132,833	)		(11.59	)
Outstanding, end of period		730,834		$	8.24		764,667		$	8.15

The weighted average contractual life of the outstanding options as at March 31, 2023 was 4.4 years (December 31, 2022 – 4.8 years).

The total number of stock options exercisable as at March 31, 2023 was 688,633 (December 31, 2022 – 642,466).

During the three months ended March 31, 2023, the Company recorded a total share-based options compensation expense of $62,948 (March 31, 2022 – $249,322).

There were no stock options granted during the three months ended March 31, 2023 and the year ended December 31, 2022.

As at March 31, 2023, the total compensation cost not yet recognized related to options granted is approximately $100,717 (December 31, 2022 – $190,536) and will be recognized over the remaining average vesting period of 0.41 years (December 31, 2022 – 0.69 years).

26 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

16. Contributed surplus (continued):

(b) Lender Warrants

As consideration for the purchase of the Greybrook Health promissory note issued on February 28, 2023, the Company issued 135,870 common share purchase warrants to Greybrook Health. Each Greybrook lender warrant will be exercisable for one Common Share at an exercise price of $1.84, subject to customary anti-dilution adjustments. The Greybrook lender warrants will expire five years from the date of issuance. Per ASC 815, the Greybrook lender warrants meet the applicable criteria to qualify for equity classification and therefore are included in contributed surplus.

The fair value of the Greybrook lender warrants was estimated to be $0.47 per warrant using the Black-Scholes option pricing model based on the following assumptions: volatility of 48.86% calculated based on a comparable company; remaining life of 5.0 years; expected dividend yield of 0%; forfeiture rate of 0% and an annual risk-free interest rate of 4.18%.

17. Contingencies:

The Company may be involved in certain legal matters arising from time to time in the normal course of business. The Company records provisions that reflect management’s best estimate of any potential liability relating to these matters.

18. Pensions:

The Company has adopted a defined contribution pension plan for its employees whereby the Company matches contributions made by participating employees up to a maximum of 3.5% of such employees’ annual salaries. During the three months ended March 31, 2023, contributions, which were recorded as expenses within direct center and patient care costs, other regional and center support costs and corporate, general and administrative expenses, amounted to $195,764 (March 31, 2022 – $118,417).

19. Income taxes:

During the three months ended March 31, 2023, there were no significant changes to the Company’s tax position.

27 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

20. Risk management arising from financial instruments:

In the normal course of business, the Company is exposed to risks related to financial instruments that can affect its operating performance. These risks, and the actions taken to manage them, are as follows:

(a) Fair value:

The Company has Level 1 financial instruments which consists of cash, restricted cash, accounts receivable and accounts payable and accrued liabilities which approximate their fair value given their short-term nature. The Company also has lender warrants, DSUs and PSUs that are considered Level 2 financial instruments (see note 12). The Company has deferred and contingent consideration that are considered Level 3 financial instruments.

The carrying value of the loans payable, shareholder loan and finance lease obligations approximates their fair value given the difference between the discount rates used to recognize the liabilities in the condensed interim consolidated balance sheet and the market rates of interest is insignificant.

Financial instruments are classified into one of the following categories: financial assets or financial liabilities.

(b) Credit risk:

Credit risk arises from the potential that a counterparty will fail to perform its obligations. The Company is exposed to credit risk from patients and third-party payors including federal and state agencies (under the Medicare programs), managed care health plans and commercial insurance companies. The Company’s exposure to credit risk is mitigated in large part due to the majority of the accounts receivable balance being receivable from large, creditworthy medical insurance companies and government-backed health plans.

28 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

20. Risk management arising from financial instruments (continued):

The Company’s aging schedule in respect of its accounts receivable balance as at March 31, 2023 and December 31, 2022 is provided below:

Days since service delivered	March 31, 2023		December 31, 2022
0-90	$	6,402,624	$	6,163,429
91-180		896,709		884,061
181-270		282,340		257,187
270+		33,483		44,169
Total accounts receivable	$	7,615,156	$	7,348,846

Based on the Company’s industry, none of the accounts receivable in the table above are considered “past due”. Furthermore, the payors have the ability and intent to pay, but price lists for the Company’s services are subject to the discretion of payors. As such, the timing of collections is not linked to increased credit risk. The Company continues to collect on services rendered in excess of 24 months from the date such services were rendered.

(c) Liquidity risk:

Liquidity risk is the risk that the Company may encounter difficulty in raising funds to meet its financial commitments or can only do so at excessive cost. The Company ensures there is sufficient liquidity to meet its short-term business requirements, taking into account its anticipated cash flows from operations, its holdings of cash and its ability to raise capital from existing or new investors and/or lenders (see note 2(a)).

(d) Currency risk:

Currency risk is the risk to the Company’s earnings that arises from fluctuations in foreign exchange rates and the degree of volatility of those rates. The Company has minimal exposure to currency risk as substantially all of the Company’s revenue, expenses, assets and liabilities are denominated in U.S. dollars. The Company pays certain vendors and payroll costs in Canadian dollars from time to time, but due to the limited size and nature of these payments it does not give rise to significant currency risk.

29 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

20. Risk management arising from financial instruments (continued):

(e) Interest rate risk:

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to changes in interest rates on its cash and long-term debt. Certain loans payable and shareholder loans (see note 10 and note 11) bear interest at a rate equal to 3-month Term Secured Overnight Financing Rate plus 9.1% or at a rate equal to 3-month Term Secured Overnight Financing Rate plus 7.65%. A 1% increase in interest rates would result in a $2,909,937 increase to interest expense on the condensed interim consolidated statements of comprehensive loss over the term of the loans payable and shareholder loans.

21. Capital management:

The Company’s objective is to maintain a capital structure that supports its long-term growth strategy, maintains creditor and customer confidence, and maximizes shareholder value.

The capital structure of the Company consists of its shareholders’ equity, including contributed surplus and deficit, as well as loans payable.

The Company’s primary uses of capital are to finance operations, finance new center start-up costs, increase non-cash working capital, capital expenditures and finance service debt obligations. The Company’s objectives when managing capital are to ensure the Company will continue to have enough liquidity so it can provide its services to its customers and returns to its shareholders. The Company, as part of its annual budgeting process and on an ongoing basis, periodically evaluates its estimated cash requirements to fund working capital requirements of existing operations. Based on this and taking into account its anticipated cash flows from operations and its holdings of cash, the Company validates whether it has the sufficient capital or needs to obtain additional capital.

22. Related party transactions:

(a) Transactions with significant shareholder – Greybrook Health

As at March 31, 2023, $1,365 is included in accounts payable and accrued liabilities for amounts payable for management services rendered and other overhead costs incurred by Greybrook Health in the ordinary course of business (December 31, 2022 – nil). These amounts were recorded at their exchange amount, being the amount agreed to by the parties.

30 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

22. Related party transactions (continued):

During the three months ended March 31, 2023, the Company recognized $1,556 in corporate, general and administrative expenses (March 31, 2022 – $323) related to transactions with Greybrook Health.

(b) Loan from shareholder – Greybrook Health

On February 3, 2023 and February 28, 2023, the Company received loans from and issued promissory notes to Greybrook Health, who is a significant shareholder of the Company. The promissory notes for the loans total $1,437,604 and bear interest at a rate consistent with the Madryn Credit Facility and mature on the earlier of September 30, 2027, at the election of Greybrook Health upon a change of control, upon the occurrence of an event of default and acceleration by Greybrook Health, or the date on which the loans under the Madryn Credit Facility are repaid. In conjunction with the issuance of the unsecured notes to Greybrook Health the Company granted Greybrook Health an option to convert up to $1,000,000 of the outstanding principal amount of the Greybrook Health promissory notes held by Greybrook Health into common shares of the Company at a conversion price per share equal to 85.0% of the volume-weighted average trading price of the common shares of the Company on the Nasdaq for the five trading days immediately preceding the date of conversion, subject to customary anti-dilution adjustments and conversion limitations required by Nasdaq. As additional consideration for the Greybrook Health promissory note issued on February 28, 2023, the Company issued 135,870 common share purchase warrants to Greybrook Health, each exercisable for one common share of the Company at an exercise price of $1.84 per common share, subject to customary anti-dilution adjustments, expiring on February 28, 2028. See note 11(b) and note 16.

During the three months ended March 31, 2023, the Company recognized $22,140 in interest expense (March 31, 2022 – nil) related to the Greybrook Health promissory notes.

(c) Transactions with the significant shareholder and director – Benjamin Klein

During the three months ended March 31, 2023, the Company recognized $94,215 in corporate, general and administrative expenses (December 31, 2022 – $10,801) for amounts payable for employment services rendered and other related costs incurred by Benjamin Klein in the ordinary course of business.

As at March 31, 2023, $19,397 is included in accounts payable and accrued liabilities for amounts payable for travel expenses and other related costs incurred by Benjamin Klein in the ordinary course of business.

31 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

22. Related party transactions (continued):

(d) Loan from significant shareholder and director – Benjamin Klein

On July 14, 2022, in connection with the Success TMS Acquisition, the Company assumed the obligation to repay a promissory note to Benjamin Klein, who is a significant shareholder and director of the Company. The promissory note totals $2,090,264 and bears interest at a rate of 10% per annum and matures on May 1, 2024. See note 11(a).

During the three months ended March 31, 2023, the Company recognized $62,885 in interest expense (March 31, 2022 – nil) related to this promissory note.

(e) Loans from shareholders and officers

On February 3, 2023, the Company received loans from and issued promissory notes to shareholders and officers of the Company. The promissory notes for the loans total $312,396 and bear interest at a rate consistent with the Madryn Credit Facility and mature on the earlier of September 30, 2027, at the election of the noteholders upon a change of control, upon the occurrence of an event of default and acceleration by the noteholders, or the date on which the loans under the Madryn Credit Facility are repaid. See note 10(a) and note 11(b).

During the three months ended March 31, 2023, the Company recognized $6,977 in interest expense (March 31, 2022 – nil) related to these promissory notes.

(f) Loan from significant shareholder – Madryn

On July 14, 2022, the Company entered into a credit agreement in respect of the Madryn Credit Facility, which was subsequently amended in the three months ended March 31, 2023, for a total principal balance of $61,000,000. Pursuant to the Private Placement completed on March 23, 2023, Madryn is now a significant shareholder of the Company. See note 10(a) and note 15.

During the three months ended March 31, 2023, the Company recognized $2,248,639 in interest expense (March 31, 2022 – nil) related to the Madryn Credit Facility.

32 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

23. Basic and diluted loss per share:

	Three months ended
	March 31,			March 31,
	2023			2022
Net loss attributable to the shareholders of:
Greenbrook TMS	$	(10,591,310	)	$	(7,571,854	)
Weighted average common shares outstanding:
Basic and diluted		30,825,434			17,801,885
Loss per share:
Basic and diluted	$	(0.34	)	$	(0.43	)

For the three months ended March 31, 2023, the effect of 730,834 options (March 31, 2022 – 894,500) and 187,177 lender warrants (March 31, 2022 – 51,307) have been excluded from the diluted calculation because this effect would be anti-dilutive.

24. Non-controlling interest:

As a result of operating agreements with non-wholly owned entities, the Company has control over these entities under U.S. GAAP, as the Company has power over all significant decisions made by these entities and thus 100% of the financial results of these subsidiaries are included in the Company’s consolidated financial results.

On February 27, 2023, the Company acquired a portion of the non-controlling ownership interest in Greenbrook TMS Connecticut LLC for the release of liabilities and losses. As at March 31, 2023, the Company has an ownership interest of 100% of Greenbrook TMS Connecticut LLC.

33 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

24. Non-controlling interest (continued):

The following table summarizes the aggregate financial information for the Company’s non-wholly owned entities as at March 31, 2023 and December 31, 2022:

	March 31,			December 31,
	2023			2022
Cash	$	777,329		$	580,057
Accounts receivable, net		2,349,204			2,087,763
Prepaid expenses and other		506,834			483,082
Property, plant and equipment		1,094,733			1,085,006
Finance right-of-use assets		2,045,268			2,349,699
Operating right-of-use assets		7,278,836			7,566,048
Accounts payable and accrued liabilities		2,037,471			1,666,756
Provisions		11,486			–
Finance lease liabilities		1,848,195			2,089,999
Operating lease liabilities		7,640,237			7,918,347
Loans payable		15,027,418			15,066,552
Shareholder’s deficit attributable to the shareholders of Greenbrook TMS		(8,266,570	)		(9,812,872	)
Shareholder’s deficit attributable to non - controlling interest		(5,686,475	)		(3,282,610	)
Distributions paid to non-controlling interest		–			(320,250	)
Partnership buyout		118,052			(496,659	)
Subsidiary investment by non-controlling interest		–			–
Historical subsidiary investment by non-controlling interest		1,322,392			1,322,392

The following table summarizes the aggregate financial information for the Company’s non-wholly owned entities for the three months ended March 31, 2023 and March 31, 2022:

	March 31,			March 31,
	2023			2022
Revenue	$	6,413,787		$	5,963,443
Net loss attributable to the shareholders of Greenbrook TMS		(549,361	)		(1,014,419	)
Net loss attributable to non-controlling interest		(68,826	)		(116,486	)

34 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three months ended March 31, 2023 and 2022

(Unaudited)

25. Expenses by nature:

The components of the Company’s other regional and center support costs include the following:

	Three months ended
	March 31,		March 31,
	2023		2022
Salaries and bonuses	$	4,665,645	$	3,475,551
Marketing expenses		413,053		1,717,164
Total	$	5,078,698	$	5,192,715

The components of the Company’s corporate, general and administrative expenses include the following:

	Three months ended
	March 31,		March 31,
	2023		2022
Salaries and bonuses	$	4,141,089	$	3,617,860
Professional and legal fees		1,049,505		653,361
Computer supplies and software		775,960		369,333
Marketing expenses		5,322		134,954
Insurance		213,453		179,712
Financing costs		235,094		–
Restructuring expense		301,839		–
Other		556,309		168,398
Total	$	7,278,571	$	5,123,618

35 

EX-99.3

Exhibit 99.3

Condensed Interim Consolidated Financial Statements 

(Expressed in U.S. dollars)

Greenbrook TMS Inc.

Three and six months ended June 30, 2023 and 2022 

(Unaudited)

NOTICE TO READER

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the condensed interim consolidated financial statements, they must be accompanied by a notice to this effect. The accompanying unaudited condensed interim consolidated financial statements of Greenbrook TMS Inc. have been prepared by, and are the responsibility of management of Greenbrook TMS Inc.

Greenbrook TMS Inc.’s independent auditor has not audited, reviewed or otherwise attempted to verify the accuracy or completeness of the accompanying condensed interim consolidated financial statements. Readers are cautioned that these financial statements may not be appropriate for their intended purposes.

Greenbrook TMS Inc. 

Condensed Interim Consolidated Balance Sheets 

(Expressed in U.S. dollars, unless otherwise stated) 

(Unaudited)

	June 30,			December 31,
	2023			2022
Assets
Current assets:
Cash	$	1,078,347		$	1,623,957
Restricted cash		1,000,000			1,000,000
Accounts receivable, net (note 19(b))		6,382,952			7,348,846
Prepaid expenses and other		3,839,633			2,520,676
Total current assets		12,300,932			12,493,479
Property, plant and equipment (note 6)		3,947,115			3,719,621
Intangible assets (note 7)		655,154			688,249
Goodwill		–			–
Finance right-of-use assets (note 8(a))		8,970,346			19,348,091
Operating right-of-use assets (note 8(b))		31,687,977			34,890,554
Total assets	$	57,561,524		$	71,139,994
Liabilities and Shareholders’ Deficit
Current liabilities:
Accounts payable and accrued liabilities (note 9)	$	22,127,826		$	20,271,624
Current portion of loans payable (note 10(a))		4,043,011			2,200,892
Current portion of finance lease liabilities (note 8(a))		3,718,595			6,532,175
Current portion of operating lease liabilities (note 8(b))		4,391,907			4,591,216
Current portion of shareholder loans (note 11)		2,426,001			46,995
Other payables (note 12)		457,719			629,381
Non-controlling interest loans (note 10(b))		98,943			94,136
Deferred and contingent consideration (note 13)		1,000,000			1,000,000
Total current liabilities		38,264,002			35,366,419
Loans payable (note 10(a))		62,950,055			51,017,743
Finance lease liabilities (note 8(a))		2,254,248			10,449,725
Operating lease liabilities (note 8(b))		28,573,160			31,352,506
Shareholder loans (note 11)		1,373,257			2,065,443
Total liabilities		133,414,722			130,251,836
Shareholders’ deficit:
Common shares (note 14)		120,259,624			114,120,362
Contributed surplus (note 15)		5,188,583			4,552,067
Deficit		(198,458,780	)		(175,007,144	)
Total shareholders’ deficit excluding non-controlling interest		(73,010,573	)		(56,334,715	)
Non-controlling interest (note 23)		(2,842,625	)		(2,777,127	)
Total shareholders’ deficit		(75,853,198	)		(59,111,842	)
Basis of preparation and going concern (note 2(a))
Contingencies (note 16)
Subsequent events (note 25)
Total liabilities and shareholders’ deficit	$	57,561,524		$	71,139,994

See accompanying notes to condensed interim consolidated financial statements.

1 

Greenbrook TMS Inc. 

Condensed Interim Consolidated Statements of Comprehensive Loss 

(Expressed in U.S. dollars, unless otherwise stated) 

(Unaudited)

	Three months ended						Six months ended
	June 30,			June 30,			June 30,			June 30,
	2023			2022			2023			2022
Revenue:
Service revenue	$	17,690,449		$	14,401,420		$	36,994,910		$	27,666,269
Expenses:
Direct center and patient care costs		13,504,507			8,875,985			27,262,727			17,439,237
Other regional and center support costs (note 24)		4,510,869			5,049,162			9,589,567			10,241,877
Depreciation (notes 6 and 8)		870,306			705,594			1,835,354			1,400,825
		18,885,682			14,630,741			38,687,648			29,081,939
Regional operating income (loss)		(1,195,233	)		(229,321	)		(1,692,738	)		(1,415,670	)
Center development costs		105,871			186,708			218,062			346,154
Corporate, general and administrative expenses (note 24)		8,140,490			5,612,617			15,419,061			10,736,235
Share-based compensation (note 15)		513,782			63,882			576,730			313,204
Amortization (note 7)		16,547			207,500			33,095			415,000
Interest expense		2,885,131			748,545			5,577,549			1,512,937
Interest income		(56	)		(9,943	)		(101	)		(12,230	)
Loss before income taxes		(12,856,998	)		(7,038,630	)		(23,517,134	)		(14,726,970	)
Income tax expense (note 18)		–			–			–			–
Loss for the period and comprehensive loss	$	(12,856,998	)	$	(7,038,630	)	$	(23,517,134	)	$	(14,726,970	)
Non-controlling interest (note 24)		(114,724	)		56,449			(183,550	)		(60,037	)
Loss for the period and comprehensive loss attributable to Greenbrook	$	(12,742,274	)	$	(7,095,079	)	$	(23,333,584	)	$	(14,666,933	)
Net loss per share (note 22):
Basic	$	(0.31	)	$	(0.40	)	$	(0.66	)	$	(0.82	)
Diluted		(0.31	)		(0.40	)		(0.66	)		(0.82	)

See accompanying notes to condensed interim consolidated financial statements.

2 

Greenbrook tms Inc. 

Condensed Interim Consolidated Statements of Changes in Equity (Deficit) 

(Expressed in U.S. dollars, unless otherwise stated) 

(Unaudited)

									Non-			Total
	Common shares			Contributed					controlling			equity
Six months ended June 30, 2022	Number	Amount		surplus		Deficit			interest			(deficit)
Balance, December 31, 2021	17,801,885	$	98,408,917	$	4,204,280	$	(87,332,687	)	$	(1,325,406	)	$	13,955,104
Net comprehensive loss for the period	–		–		–		(14,666,933	)		(60,037	)		(14,726,970	)
Share-based compensation (note 15)	–		–		313,204		–			–			313,204
Distributions to non-controlling interest	–		–		–		–			(296,250	)		(296,250	)
Balance, June 30, 2022	17,801,885	$	98,408,917	$	4,517,484	$	(101,999,620	)	$	(1,681,693	)	$	(754,912	)

									Non-			Total
	Common shares			Contributed					controlling			equity
Six months ended June 30, 2023	Number	Amount		surplus		Deficit			interest			(deficit)
Balance, December 31, 2022	29,436,545	$	114,120,362	$	4,552,067	$	(175,007,144	)	$	(2,777,127	)	$	(59,111,842	)
Net comprehensive loss for the period	–		–		–		(23,333,584	)		(183,550	)		(23,517,134	)
Share-based compensation (note 15)	–		–		576,730		–			–			576,730
Issuance of common shares (note 14)	11,363,635		6,139,262		–		–			–			6,139,262
Issuance of lender warrants	–		–		59,786		–			–			59,786
Acquisition of subsidiary non-controlling interest (note 23)	–		–		–		(118,052	)		118,052			–
Balance, June 30, 2023	40,800,180	$	120,259,624	$	5,188,583	$	(198,458,780	)	$	(2,842,625	)	$	(75,853,198	)

See accompanying notes to condensed interim consolidated financial statements.

3 

Greenbrook TMS Inc. 

Condensed Interim Consolidated Statements of Cash Flows 

(Expressed in U.S. dollars, unless otherwise stated) 

(Unaudited)

	Six months ended
	June 30,			June 30,
	2023			2022
Cash provided by (used in)
Operating activities:
Loss for the period	$	(23,517,134	)	$	(14,726,970	)
Adjusted for:
Amortization		33,095			415,000
Depreciation		1,835,354			1,400,825
Operating lease expense		4,162,487			2,445,003
Interest expense		5,577,549			1,512,937
Interest income		(101	)		(12,230	)
Share-based compensation		576,730			313,204
Credit facility amendment fee (note 10(a))		1,000,000			–
Neuronetics Note non-cash transaction costs (note 10(a))		116,356			–
Gain on lender warrants		(6,567	)		(43,098	)
(Gain) loss on deferred share units		(122,854	)		27,544
Gain on performance share units		(42,241	)		(67,014	)
Change in non-cash operating working capital:
Accounts receivable		965,894			801,480
Prepaid expenses and other		(1,318,957	)		(834,744	)
Accounts payable and accrued liabilities		6,037,826			5,159,227
Interest paid		(2,517,030	)		(1,348,737	)
Interest received		101			12,230
Payment of operating lease liabilities		(5,032,914	)		(2,407,214	)
		(12,252,406	)		(7,352,557	)
Financing activities:
Net proceeds on issuance of common shares (note 14)		6,139,262			–
Financing costs incurred		(584,784	)		–
Loans payable advanced (note 10(a))		6,000,000			–
Loans payable and promissory notes repaid (note 10(a))		(84,665	)		(98,771	)
Promissory notes advanced (note 10(a) and note 11)		1,750,000			–
Principal repayment of finance lease liabilities		(1,509,134	)		(1,895,057	)
Net non-controlling interest loans advanced		4,807			4,351
Distribution to non-controlling interest		–			(296,250	)
		11,715,486			(2,285,727	)
Investing activities:
Decrease in restricted cash		–			250,000
Deferred and contingent consideration paid (note 13)		–			(250,000	)
Purchase of property, plant and equipment		(8,690	)		–
		(8,690	)		–
Increase (decrease) in cash		(545,610	)		(9,638,284	)
Cash, beginning of period		1,623,957			10,699,679
Cash, end of period	$	1,078,347		$	1,061,395

See accompanying notes to condensed interim consolidated financial statements.

4 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

1. Reporting entity:

Greenbrook TMS Inc. (the “Company”), an Ontario corporation along with its subsidiaries, controls and operates a network of outpatient mental health services centers that specialize in the provision of Transcranial Magnetic Stimulation (“TMS”) therapy and other treatment modalities for the treatment of depression and related psychiatric services.

Our head and registered office is located at 890 Yonge Street, 7th Floor, Toronto, Ontario, Canada, M4W 3P4. Our United States corporate headquarters is located at 8401 Greensboro Drive, Suite 425, Tysons Corner, Virginia, USA, 22102.

2. Basis of preparation:

(a) Going concern:

These condensed interim consolidated financial statements for the three and six months ended June 30, 2023 have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and the basis of presentation outlined in note 2(b) on the assumption that the Company is a going concern and will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

The Company has experienced losses since inception and has negative cash flow from operating activities of $12,252,406 for the six months ended June 30, 2023 ($7,352,557 – six months ended June 30, 2022). The Company’s cash balance, excluding restricted cash, as at June 30, 2023 was $1,078,347 ($1,623,957 as at December 31, 2022) and negative working capital as at June 30, 2023 was $25,941,277 (negative working capital of $25,473,544 as at December 31, 2022).

On December 31, 2020, the Company entered into a credit and security agreement, which was amended on October 29, 2021, for a $30,000,000 secured credit facility (the “Oxford Credit Facility”) with Oxford Finance LLC (“Oxford”). The Oxford Credit Facility funded the $15,000,000 term loan at closing on December 31, 2020. On July 14, 2022, the Company entered into a credit agreement (the “Madryn Credit Agreement”) for a $75,000,000 secured credit facility (the “Madryn Credit Facility”) with Madryn Asset Management, LP (“Madryn”) and its affiliated entities. Upon closing of the Madryn Credit Facility, the Company drew a $55,000,000 term loan under the Madryn Credit Facility. In addition, the Madryn Credit Facility permits the Company to draw up to an additional $20,000,000 in a single draw at any time on or prior to December 31, 2024 for purposes of funding future mergers and acquisition activity. On July 14, 2022, the Company used $15,446,546 of the proceeds from the Madryn Credit Facility to repay in full the outstanding balance owing under the Oxford Credit Facility and also used $15,154,845 of the proceeds from the Madryn Credit Facility to repay various loans previously held by Success TMS (as defined below).

5 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

2. Basis of preparation (continued):

During the six months ended June 30, 2023, the Company received an aggregate of $7,750,000 in debt financings from Madryn, certain significant shareholders and management of the Company, in order to satisfy short-term cash requirements, and the amendments to the Madryn Credit Facility were also effected to amend the Company’s minimum liquidity covenant. See note 10 and note 11.

The terms of the Madryn Credit Facility require the Company to satisfy various financial covenants including a minimum liquidity and minimum consolidated revenue amounts that became effective on July 14, 2022 and September 30, 2022, respectively. A failure to comply with these covenants, or failure to obtain a waiver for any non-compliance, would result in an event of default under the Madryn Credit Agreement and would allow Madryn to accelerate repayment of the debt, which could materially and adversely affect the business, results of operations and financial condition of the Company. On February 21, 2023, March 20, 2023, June 14, 2023, July 3, 2023, July 14, 2023 and August 1, 2023, the Company received waivers from Madryn with respect to the Company’s non-compliance with the minimum liquidity covenant which has been extended to August 15, 2023. As at June 30, 2023, the Company was in compliance with the financial covenants of the Madryn Credit Agreement, as amended.

On March 23, 2023, the Company completed a non-brokered private placement (“Private Placement”), for aggregate gross proceeds to the Company of approximately $6,250,000. The Private Placement included investments by Madryn, together with certain of the Company’s other major shareholders, including Greybrook Health Inc. (“Greybrook Health”) and affiliates of Masters Special Situations LLC (“MSS”). See note 14.

On July 13, 2023, the Company entered into a purchase agreement (the “Alumni Purchase Agreement”) with Alumni Capital LP (“Alumni”). The Alumni Purchase Agreement provides equity line financing for sales from time to time of up to $4,458,156 of common shares. Subsequent to June 30, 2023, the Company has issued an aggregate of 1,461,538 Purchase Shares (as defined below) under the Alumni Purchase Agreement for gross proceeds of $403,024. See note 25.

6 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

2. Basis of preparation (continued):

On August 1, 2023, the Company received an aggregate of $3,000,000 in debt financings from Madryn and Greybrook Health in order to satisfy the Company’s short-term cash requirements. See note 25.

Although the Company believes it will become cash flow positive in the future, the timing of this is uncertain and is also dependent on the execution of the Restructuring Plan (as defined below) (see note 24). The Company will require additional financing in order to fund its operating and investing activities, including making timely payments to certain vendors, landlords, lenders (including shareholders) and similar other business partners. The delay in such payments may result in potential defaults under the terms of the agreements the Company has with various parties. As such, additional financing is required in order for the Company to repay its short-term obligations. The Company has historically been able to obtain financing from supportive shareholders, its lenders and other sources when required; however, the Company may not be able to access further equity or debt financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. If additional financing is not obtained, the Company will need to obtain additional amendments from Madryn in order to remain compliant with the covenants or waivers from Madryn to waive its rights to accelerate repayment of the debt; however, there can be no assurances that such amendments or waivers will be obtained.

The existence of the above-described conditions indicate substantial doubt as to the Company’s ability to continue as a going concern as at June 30, 2023.

These condensed interim consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumptions were not appropriate. If the going concern basis was not appropriate for these condensed interim consolidated balance sheets, then adjustments would be necessary to the carrying value of assets and liabilities, the reported expenses, and the condensed interim consolidated balance sheets classification used, and these adjustments may be material.

7 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

2. Basis of preparation (continued):

(b) Basis of measurement:

These condensed interim consolidated financial statements have been prepared on a historic cost basis except for financial instruments classified as fair value through profit or loss, which are stated at their fair value. Other measurement bases are described in the applicable notes.

Presentation of the condensed interim consolidated balance sheet differentiates between current and non-current assets and liabilities. The condensed interim consolidated statements comprehensive loss are presented using the function classification of expense.

Regional operating income (loss) presents regional operating income (loss) on an entity-wide basis and is calculated as total service revenue less direct center and patient care costs, other regional and center support costs, 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 TMS treatments to patients and the cost of the Company’s regional patient acquisition strategy.

3. Material accounting policies:

These condensed interim consolidated financial statements have been prepared using the material accounting policies consistent with those applied in the Company’s December 31, 2022 audited consolidated financial statements.

4. Recent accounting pronouncements:

Recent accounting pronouncements adopted:

The SEC has issued the following amendments to the existing standards that became effective for periods beginning on or after January 1, 2023:

(i) Accounting Standards Update 2023-07—Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments were adopted on January 1, 2023.

8 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

4. Recent accounting pronouncements (continued):

The adoption of the amendments to the existing standards did not have a material impact on these consolidated financial statements.

The SEC has issued the following amendment to the existing standard that will become effective for periods beginning on or after January 1, 2024:

(i) Accounting Standards Update 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This standard introduces improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

5. Business acquisition:

Acquisition of Success TMS:

On July 14, 2022, the Company, through its wholly-owned U.S. subsidiary, TMS NeuroHealth Centers Inc., completed the acquisition of all of the issued and outstanding equity interests in Check Five LLC, a Delaware limited liability company (doing business as “Success TMS”) (“Success TMS”) from its parent company, Success Behavioral Holdings LLC (the “Success TMS Acquisition”) pursuant to a Membership Interest Purchase Agreement dated as of May 15, 2022, by and among the Company, Success TMS and its direct and indirect owners, including Success Behavioral Holdings, LLC, Theragroup LLC, The Bereke Trust U/T/A Dated 2/10/03, Batya Klein and Benjamin Klein (collectively, the “Seller Parties”).

As consideration for the purchase of Success TMS, the Seller Parties received, in the aggregate, 8,725,995 common shares of the Company valued at $11,783,584, and an additional 2,908,665 common shares of the Company, valued at $3,927,861, have been held back and deposited with an escrow agent, to be released to Benjamin Klein or the Company, as applicable, upon satisfaction of customary working capital and certain other adjustments, including to satisfy any indemnity claims against the Seller Parties.

The purchase price consideration was determined based on the pro forma revenue contribution of the two companies and was fixed at an amount equal to approximately 40% of the total issued and outstanding common shares of the Company on a post-acquisition basis and subject to adjustments, as described above.

The Success TMS Acquisition represented the addition of 47 new Treatment Centers (as defined below), with a new presence in additional states, including Illinois, New Jersey, Nevada and Pennsylvania.

9 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

5. Business acquisitions (continued):

The Success TMS Acquisition was accounted for using the acquisition method of accounting. The allocation of the purchase price consideration for the Success TMS Acquisition is finalized, and is comprised as follows:

Purchase consideration
Share issuance	$	11,783,584
Share issuance, held in escrow		3,927,861
		15,711,445
Net assets acquired
Cash acquired		688,958
Accounts receivable, net		3,728,255
Prepaid expenses and other		804,416
Property, plant and equipment		829,049
Software		363,424
Management services agreements		15,850,000
Finance right-of-use assets		7,314,499
Operating right-of-use assets		16,336,366
Accounts payable and accrued liabilities		(4,890,405	)
Deferred grant income		(225,559	)
Loans payable		(14,836,324	)
Shareholder loan		(2,078,979	)
Finance lease liabilities		(7,314,499	)
Operating lease liabilities		(16,185,975	)
		383,226
Goodwill	$	15,328,219

As part of the Success TMS Acquisition, the Company acquired five management services agreements (the “Success TMS MSAs”) between Success TMS and professional entities owned by Success TMS physicians, under which it provides management, administrative, financial and other services in exchange for a fee. The Success TMS MSAs are the key intangible assets identified as part of the Success TMS Acquisition and drives the value of the business. The Success TMS MSAs are valued using the multi-period excess earnings method. The multi-period excess earnings method considers the present value of net cash flows expected to be generated by the Success TMS MSAs by excluding any cash flows related to contributory assets.

Goodwill is primarily attributable to the ability to expand the Company’s national footprint and the synergies expected to result from combining Success TMS’ operations with the Company, and is allocated to the Success TMS cash generating unit. Goodwill is deductible for tax purposes.

10 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

6. Property, plant and equipment:

	Furniture and		Leasehold
	equipment		improvements		TMS devices		Total
Cost
Balance, December 31, 2022	$	115,604	$	344,336	$	4,656,273	$	5,116,213
Additions		-		8,690		630,189		638,879
Balance, June 30, 2023	$	115,604	$	353,026	$	5,286,462	$	5,755,092
Accumulated depreciation
Balance, December 31, 2022	$	103,474	$	95,541	$	1,197,577	$	1,396,592
Depreciation		11,560		30,005		369,820		411,385
Balance, June 30, 2023	$	115,034	$	125,546	$	1,567,397	$	1,807,977
Net book value
Balance, December 31, 2022	$	12,130	$	248,795	$	3,458,696	$	3,719,621
Balance, June 30, 2023		570		227,480		3,719,065		3,947,115

7. Intangible assets:

	Management		Covenants not
	services agreements		to compete		Software		Total
Cost
Balance, December 31, 2022	$	2,792,178	$	355,238	$	39,646	$	3,187,062
Additions		-		-		-		-
Balance, June 30, 2023	$	2,792,178	$	355,238	$	39,646	$	3,187,062
Accumulated amortization
Balance, December 31, 2022	$	2,119,306	$	339,861	$	39,646	$	2,498,813
Amortization		28,666		4,429		-		33,095
Balance, June 30, 2023	$	2,147,972	$	344,290	$	39,646	$	2,531,908
Net book value
Balance, December 31, 2022	$	672,872	$	15,377	$	–	$	688,249
Balance, June 30, 2023		644,206		10,948		–		655,154

11 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

8. Right-of-use assets and lease liabilities:

The Company enters into lease agreements related to TMS devices and mental health treatment centers (“Treatment Centers”). These lease agreements range from one year to seven years in length.

Right-of-use assets are initially measured at cost, which is comprised of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred.

Lease liabilities have been measured by discounting future lease payments using a rate implicit in the lease or the Company’s incremental borrowing rate. The Company’s incremental borrowing rate during the period ended June 30, 2023 is 12% (December 31, 2022 – 12%).

(a) Finance leases:

Finance leases include lease agreements relating to TMS devices.

	June 30,
	2023
Finance right-of-use assets, beginning of the year	$	19,348,091
Impact of lease additions, disposals and/or modifications		(8,323,587	)
Exercise of buy-out options into property, plant and equipment		(630,189	)
Depreciation on right-of-use assets		(1,423,969	)
Finance right-of-use assets, end of the period	$	8,970,346

12 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

8. Right-of-use assets and lease liabilities (continued):

	June 30,
	2023
Finance lease liabilities, beginning of the year	$	16,981,900
Impact of lease additions, disposals and/or modification		(8,372,212	)
Interest expense on lease liabilities		494,961
Payments of lease liabilities		(3,131,806	)
Finance lease liabilities, end of the period	$	5,972,843
Less current portion of finance lease liabilities		3,718,595
Long term portion of finance lease liabilities	$	2,254,248

During the current period, certain device leases were amended from a fixed fee arrangement to a variable fee arrangement and the Company re-assessed the renewal option relating to certain device leases and concluded that it is not probable that the renewal options under those leases will be exercised, which resulted in a decrease in ROU asset and liability. In addition, certain facility leases were modified or disposed as a result of the Restructuring Plan. See note 10(iv) and note 24(a).

(b) Operating leases:

Operating leases include lease agreements relating to Treatment Centers.

	June 30,
	2023
Operating right-of-use assets, beginning of the year	$	34,890,554
Impact of lease additions, disposals and/or modifications		(769,370	)
Impairment of right-of-use assets		–
Right-of-use asset lease expense		(2,433,207	)
Operating right-of-use assets, end of the period		31,687,977

13 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

8. Right-of-use assets and lease liabilities (continued):

	June 30,
	2023
Operating lease liabilities, beginning of the year	$	35,943,722
Impact of lease additions, disposals and/or modifications		(647,678	)
Lease liability expense		1,729,280
Payments of lease liabilities		(4,060,257	)
Operating lease liabilities, end of the period		32,965,067
Less current portion of operating lease liabilities		4,391,907
Long term portion of operating lease liabilities	$	28,573,160

9. Accounts payable and accrued liabilities:

The accounts payable and accrued liabilities are as follows:

	June 30,		December 31,
	2023		2022
Accounts payable	$	18,560,582	$	16,808,558
Accrued liabilities		3,567,244		3,463,066
Total	$	22,127,826	$	20,271,624

14 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

10. Loans payable:

(a) Borrowings:

	TMS
	Device		Credit		Promissory		Neuronetics
	Loans (i)		Facility (ii)		notes (iii)		Note (iv)		Total
Short Term	$	105,066	$	2,306,151	$	31,794	$	1,600,000	$	4,043,011
Long Term		19,041		58,322,730		208,284		4,400,000		62,950,055
Total, net	$	124,107	$	60,628,881	$	240,078	$	6,000,000	$	66,993,066
Unamortized capitalized financing costs		–		2,366,251		–		–		2,366,251
Total, June 30, 2023	$	124,107	$	62,995,132	$	240,078	$	6,000,000	$	69,359,317

(i) TMS Device Loans:

During the year ended December 31, 2022, the Company assumed loans as part of the Success TMS Acquisition from three separate financing companies for the purchase of TMS devices. These TMS device loans bear an average interest rate of 9.3% with average monthly blended interest and capital payments of $1,538 and mature during the years ending December 31, 2023 to December 31, 2025. There are no covenants associated with these loans.

During the six months ended June 30, 2023, the Company repaid TMS device loans totalling $84,665 (June 30, 2022 – $23,771).

(ii) Credit Facility:

On July 14, 2022, the Company entered into the Madryn Credit Agreement in respect of the Madryn Credit Facility. The Madryn Credit Facility provided the Company with a $55,000,000 term loan (the “Existing Loan”) that was funded at closing on July 14, 2022, with an option to draw up to an additional $20,000,000 in a single draw at any time on or prior to December 31, 2024 for the purposes of funding future mergers and acquisition activity. As at December 31, 2022, all amounts borrowed under the Madryn Credit Facility bore interest at a rate equal to the three-month London Interbank Offered Rate (“LIBOR”) plus 9.0%, subject to a minimum three-month LIBOR floor of 1.5%. The Madryn Credit Facility matures over 63 months and provides for four years of interest-only payments. The initial principal balance of $55,000,000 is due in five equal 3 month installments beginning on September 30, 2026. The Company has granted general security over all assets of the Company in connection with the performance and prompt payment of all obligations of the Madryn Credit Facility.

15 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

10. Loans payable (continued):

On February 1, February 21, March 20 and March 24, 2023, the Company entered into amendments to the Madryn Credit Facility, whereby Madryn extended four additional tranches of debt financing to the Company in an aggregate principal amount of $6,000,000, each of which were fully funded at closing of the applicable tranche (the “New Loans”). The terms and conditions of the New Loans are consistent with the terms and conditions of the Existing Loan.

In addition, the Madryn Credit Facility was amended on February 21, 2023 to provide that, commencing March 31, 2023, all advances under the Madryn Credit Facility (including the New Loans) will cease to accrue interest using the LIBOR benchmark and instead will accrue interest at a rate equal to 9.0% plus the 3-month Term Secured Overnight Financing Rate (“SOFR”) benchmark (subject to a floor of 1.5%) plus 0.10%.

The carrying amount of the Madryn Credit Facility as at June 30, 2023 is $60,628,881 (December 31, 2022 – $52,850,965). Financing costs of $3,307,459 were incurred and are deferred over the term of the Madryn Credit Facility, of which $233,000 was incurred during the six month period associated with the various amendments. Amortization of deferred financing costs for the three and six months ended June 30, 2023 were $164,362 and $318,166, respectively (June 30, 2022 – nil and nil, respectively) at an effective interest rate of 1.10% (December 31, 2022 – 1.14%) and were included in interest expense.

In accordance with the terms of the Madryn Credit Agreement, the Company has issued conversion instruments (each, a “Conversion Instrument”) to Madryn and certain of its affiliated entities that provide the holders thereof with the option to convert up to $5,000,000 of the outstanding principal amount of the Madryn Credit Facility into common shares of the Company at a price per share equal to $1.90, subject to customary anti-dilution adjustments. The instrument is convertible into up to 2,631,579 common shares. The conversion instruments have been recorded utilizing the no proceeds allocated method, which results in all proceeds allocated to the financial liability.

The terms of the Madryn Credit Agreement require the Company to satisfy various affirmative and negative covenants and to meet certain financial tests, including but not limited to, consolidated minimum revenue and minimum liquidity covenants.

16 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

10. Loans payable (continued):

In addition, the Madryn Credit Agreement contains affirmative and negative covenants that limit, among other things, the Company’s ability to incur additional indebtedness outside of what is permitted under the Madryn Credit Agreement, create certain liens on assets, declare dividends and engage in certain types of transactions. The Madryn Credit Agreement also includes customary events of default, including payment and covenant breaches, bankruptcy events and the occurrence of a change of control. The Madryn Credit Facility also requires the Company to deliver to Madryn annual audited financial statements that do not contain any going concern note, however the Company has obtained waivers from Madryn with respect to such obligation for fiscal 2022.

On June 14, 2023, the Company received a waiver from Madryn under the Madryn Credit Agreement to temporarily reduce the Company’s minimum liquidity covenant. As consideration for the waiver, Madryn received an amendment fee in the amount of $1,000,000, which fee was paid-in-kind by adding such this amount to the outstanding principal balance of the loan and was recorded in corporate, general and administrative expenses. As at June 30, 2023, the Company was in compliance with the financial covenants (as amended on June 14, 2023) under the Madryn Credit Agreement.

Pursuant to the Private Placement completed on March 23, 2023, Madryn is now also a shareholder of the Company. See note 14.

(iii) Promissory notes:

On July 14, 2022, the Company assumed two promissory notes in connection with the Success TMS Acquisition totaling $200,000. The promissory notes bear interest at a rate of 5% per annum and have a maturity date of December 31, 2025. Upon acquisition, the two promissory notes were fair valued using an interest rate of 12%.

On February 3, 2023, the Company issued promissory notes to officers of the Company in an aggregate amount of $60,000. The promissory notes bear interest at a rate consistent with the Madryn Credit Facility and mature on the earlier of September 30, 2027, at the election of the noteholders upon a change of control, upon the occurrence of an event of default and acceleration by the noteholders, or the date on which the loans under the Madryn Credit Facility are repaid.

17 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

10. Loans payable (continued):

The carrying value of the promissory notes as at June 30, 2023 is $240,078 (December 31, 2022 – $166,325). Interest expense for the three and six months ended June 30, 2023 was $7,373 and $13,753, respectively (three and six months ended June 30, 2022 – nil and nil, respectively). During the three and six months ended June 30, 2023, the Company repaid promissory notes totalling nil and nil, respectively (three and six months ended June 30, 2022 – nil and nil, respectively).

(iv) Neuronetics Note:

On March 31, 2023, the Company entered into an agreement with Neuronetics, Inc. (“Neuronetics”) to convert the Company’s outstanding account balance payable to Neuronetics of $5,883,644, together with Neuronetics’ out-of-pocket financing costs, into a $6,000,000 secured promissory note (the “Neuronetics Note”). All amounts borrowed under the Neuronetics Note will bear interest at a rate of SOFR plus 7.65%.

Pursuant to the terms of the Neuronetics Note, in the event of default under the Neuronetics Note, the Company will be required to issue common share purchase warrants (the “Neuronetics Warrants”) to Neuronetics equal to (i) 200% of the unpaid amount of any delinquent amount or payment due and payable under the Neuronetics Note, together with all outstanding and unpaid accrued interest, fees, charges and costs, divided by (ii) the exercise price of the Neuronetics Warrants, which will represent a 20% discount to the 30-day volume-weighted average closing price of the Company’s common shares traded on Nasdaq prior to the date of issuance (subject to any limitations required by Nasdaq). Under the Neuronetics Note, the Company has granted Neuronetics a security interest in all of the Company’s assets.

In connection with the entry into the Neuronetics Note, the Company concurrently entered into an amendment to the Madryn Credit Agreement pursuant to which the Company is permitted to incur the indebtedness under the Neuronetics Note.

The carrying value of the Neuronetics Note as at June 30, 2023 is $6,000,000 (December 31, 2022 – nil). Interest expense for the three and six months ended June 30, 2023 was $190,075 and $190,075, respectively (three and six months ended June 30, 2022 – nil and nil, respectively). During the three and six months ended June 30, 2023, the Company repaid promissory notes totalling nil and nil, respectively (three and six months ended June 30, 2022 – nil and nil, respectively).

18 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

10. Loans payable (continued):

(b) Non-controlling interest loans:

	June 30,		December 31,
	2023		2022
Non-controlling interest loans	$	98,943	$	94,136

The non-controlling interest holder partners of the Company, from time to time, provide additional capital contributions in the form of capital loans to the Company’s subsidiaries. These loans bear interest at a rate of 10%, compounded on a monthly basis. The loans are unsecured and are repayable subject to certain liquidity and solvency requirements and are classified as current liabilities.

11. Shareholder loans:

(a) 2022 Promissory Note:

On July 14, 2022, in connection with the Success TMS Acquisition, the Company assumed the obligation of Success TMS to repay a promissory note (the “2022 Promissory Note”) to Benjamin Klein, who is a significant shareholder of the Company. The 2022 Promissory Note totals $2,090,264 and bears interest at a rate of 10% per annum and matures on May 1, 2024. Upon acquisition, the 2022 Promissory Note was fair valued using an interest rate of 12%. The carrying value of the 2022 Promissory Note at June 30, 2023 is $2,124,584 (December 31, 2022 – $2,112,438).

(b) 2023 Promissory Notes:

On February 3, 2023, the Company issued promissory notes (the “2023 Promissory Notes”) to certain shareholders of the Company in an aggregate amount of $1,690,000. The 2023 Promissory Notes bear interest at a rate consistent with the Madryn Credit Facility and mature on the earlier of September 30, 2027, at the election of the noteholders upon a change of control, upon the occurrence of an event of default and acceleration by the noteholders, or the date on which the loans under the Madryn Credit Facility are repaid.

Financing costs of $30,000 were incurred and are deferred over the term of the 2023 Promissory Notes. Amortization of deferred financing costs for the three and six months ended June 30, 2023 were $1,110 and $1,772, respectively (three and six months ended June 30, 2022 – nil and nil, respectively) and were included in interest expense.

19 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

11. Shareholder loans (continued):

On February 28, 2023, the Company issued a promissory note to Greybrook Health, who is a significant shareholder of the Company. The promissory note totals $1,000,000 and bears interest at a rate consistent with the Madryn Credit Facility and matures on the earlier of September 30, 2027, at the election of the noteholder upon a change of control, upon the occurrence of an event of default and acceleration by the noteholder, or the date on which the loans under the Madryn Credit Facility are repaid. In conjunction with the issuance of the unsecured note to Greybrook Health, the Company granted Greybrook Health an option to convert up to $1,000,000 of the outstanding principal amount of the note held by Greybrook Health into common shares of the Company at a conversion price per share equal to 85.0% of the volume-weighted average trading price of the common shares of the Company on the Nasdaq for the five trading days immediately preceding the date of conversion, subject to customary anti-dilution adjustments and conversion limitations required by Nasdaq. As additional consideration for the Greybrook Health promissory note issued on February 28, 2023, the Company issued 135,870 common share purchase warrants to Greybrook Health, each exercisable for one common share of the Company at an exercise price of $1.84 per common share, subject to customary anti-dilution adjustments, expiring on February 28, 2028. There is a cashless exercise option associated with the warrants, available to Greybrook Health.

On February 28, 2023, the fair value of the lender warrants at grant date was $63,587. Per ASC 815, the lender warrants meet the applicable criteria to qualify for equity classification. The warrants are initially recognized according to their relative fair value as compared to the host financial liability. The relative fair value of the lender warrants on the date of inception has been deducted from the carrying value of the promissory note as a financing cost.

Financing costs of $70,562 were incurred and are deferred over the term of the promissory note. Amortization of deferred financing costs and deferred loss for the three and six months ended June 30, 2023 were $2,887 and $3,674, respectively (three and six months ended June 30, 2022 – nil and nil, respectively) and were included in interest expense. The carrying value of the 2023 Promissory Notes at June 30, 2023 is $1,683,723 (December 31, 2022 – $2,112,438).

20 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

11. Shareholder loans (continued):

Interest expense for the three and six months ended June 30, 2023 were $112,576 and $216,148, respectively (three and six months ended June 30, 2022 – nil and nil, respectively).

During the three and six months ended June 30, 2023, the Company repaid $52,256 and $104,513 of the shareholder loans, respectively (three and six months ended June 30, 2022 – nil and nil, respectively).

12. Other payables:

(a) Lender warrants:

	June 30,		December 31,
	2023		2022
Lender warrants	$	–	$	6,567

As consideration for providing the Oxford Credit Facility, the Company issued 51,307 common share purchase warrants to Oxford, each exercisable for one common share of the Company at an exercise price of C$11.20 per common share, expiring on December 31, 2025.

As the exercise price is denoted in a different currency than the Company’s functional currency, the Oxford lender warrants are recorded as a financial liability on the condensed interim consolidated balance sheets. As at June 30, 2023, the value of the Oxford lender warrants was nil (December 31, 2022 – $6,567).

The change in fair value of the Oxford lender warrants during the three and six months ended June 30, 2023 was a decrease of nil and $6,567, respectively (three and six months ended June 30, 2022 – decrease of $33,554 and $43,098, respectively) and was recorded in corporate, general and administrative expenses.

(b) Deferred share units:

	June 30,		December 31,
	2023		2022
Deferred share units	$	455,207	$	578,061

21 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

12. Other payables (continued):

On May 6, 2021, the Company adopted a deferred share unit plan (the “DSU Plan”) for non-employee directors (each, a “Non-Employee Director”). Each Non-Employee Director is required to take at least 50% of their annual retainer (other than annual committee Chair retainers) in deferred share units (“DSUs”) and may elect to take additional amounts in the form of DSUs. Discretionary DSUs may also be granted to Non-Employee Directors under the DSU Plan. The DSUs granted vest immediately.

Following a Non-Employee Director ceasing to hold all positions with the Company, the Non-Employee Director will receive a payment in cash at the fair market value of the common shares represented by the Non-Employee Director’s DSUs generally within ten days of the Non-Employee Director’s elected redemption date.

As the DSUs are cash-settled, the DSUs are recorded as cash-settled share-based payments and a financial liability has been recognized on the condensed interim consolidated balance sheets. During the three and six months ended June 30, 2023, 405,217 and 405,217 DSUs were granted, respectively (three and six months ended June 30, 2022 – 129,173 and 129,173, respectively). As at June 30, 2023, the value of the financial liability attributable to the DSUs was $455,207 (December 31, 2022 – $578,061). For the three and six months ended June 30, 2023, the Company recognized an expense of $176,337 and a recovery of $122,854, respectively (three and six months ended June 30, 2022 – expense of $49,905 and $27,544, respectively) in corporate, general and administrative expenses related to the DSUs.

(c) Performance share units:

	June 30,		December 31,
	2023		2022
Performance share units	$	2,512	$	44,753

On May 6, 2021, the Company’s Equity Incentive Plan was amended and restated to permit the Company to grant performance share units (“PSUs”) and restricted share units (“RSUs”), in addition to stock options. Under the Equity Incentive Plan, the Company pays equity instruments of the Company, or a cash payment equal to the fair market value thereof, as consideration in exchange for employee and similar services provided to the Company. The Equity Incentive Plan is open to employees, directors, officers and consultants of the Company and its affiliates; however, Non-Employee Directors are not entitled to receive grants of PSUs.

22 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

12. Other payables (continued):

On August 5, 2021, 38,647 PSUs were granted under the Equity Incentive Plan. The performance period in respect of this award is August 5, 2021 to December 31, 2023. The PSUs will vest on December 31, 2023 (the “Vesting Date”) subject to the attainment of certain performance vesting conditions. Subject to all terms and conditions of the Equity Incentive Plan and the terms of the grant agreement, any vested and outstanding PSUs will be settled following the Vesting Date and, in any event, no later than March 15, 2024. Pursuant to the grant agreement, upon satisfaction of the performance vesting conditions, the PSUs will be settled in cash.

Based on future projections with respect to the performance vesting conditions of the PSUs, the Company estimates that 3,865 PSUs will vest on the Vesting Date (December 31, 2022 – 23,188).

As at June 30, 2023, the value of the financial liability attributable to the PSUs is $2,512 (December 31, 2022 – $44,753).

As at June 30, 2023, the Company has not issued any RSUs under the Equity Incentive Plan (December 31, 2022 – nil).

13. Deferred and contingent consideration:

	June 30,		December 31,
	2023		2022
Deferred and contingent consideration	$	1,000,000	$	1,000,000

The deferred and contingent consideration payable balance related to the acquisition of Achieve TMS East, LLC and Achieve TMS Central, LLC (the “Achieve TMS East/Central Acquisition”) as at December 31, 2021 was $1,250,000, made up of an estimated nil earn-out payable and $1,250,000 in restricted cash that was held in an escrow account, subject to finalization of the escrow conditions. During the year ended December 31, 2022, $250,000 of the restricted cash held in escrow was released to the vendors in accordance with the terms of the agreement.

23 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

13. Deferred and contingent consideration (continued):

As at June 30, 2023, the deferred and contingent consideration in relation to the of Achieve TMS East/Central Acquisition was $1,000,000 (December 31, 2022 – $1,000,000).

14. Common shares:

The Company is authorized to issue an unlimited number of common shares and an unlimited number of preferred shares, issuable in series. As at June 30, 2023 and December 31, 2022, there were nil preferred shares issued and outstanding.

			Total
	Number		amount
December 31, 2022		29,436,545	$	114,120,362
Issuance of common shares – Private Placement		11,363,635		6,139,262
June 30, 2023		40,800,180	$	120,259,624

On March 23, 2023, the Company completed the Private Placement. Pursuant to the Private Placement, an aggregate of 11,363,635 common shares were issued at a price of $0.55 per common share, for aggregate gross proceeds to the Company of $6,250,000. The Company incurred financing costs of $110,738 which were recorded as a reduction in equity. The Private Placement included investments by Madryn, together with certain of the Company’s other major shareholders, including Greybrook Health and affiliates of MSS. In connection with the Private Placement, Greybrook Health, Madryn and MSS each received customary resale, demand and “piggy-back” registration rights pursuant to a registration rights agreement entered into among the parties on closing of the Private Placement. See also note 25.

15. Contributed surplus:

Contributed surplus is comprised of share-based compensation and lender warrants.

(a) Share-based compensation - options

Stock options granted under the Equity Incentive Plan are equity-settled. The fair value of the grant of the options is recognized as an expense in the condensed interim consolidated statements of comprehensive loss. The total amount to be expensed is determined by the fair value of the options granted. The total expense is recognized over the vesting period which is the period over which all of the service vesting conditions are satisfied. The vesting period is determined at the discretion of the Board and has ranged from immediate vesting to over three years.

24 

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022

(Unaudited)

15. Contributed surplus (continued):

The maximum number of common shares reserved for issuance, in the aggregate, under the Equity Incentive Plan is 10% of the aggregate number of common shares outstanding, provided that the maximum number of RSUs and PSUs shall not exceed 5% of the aggregate number of common shares outstanding. As at June 30, 2023, this represented 4,080,018 common shares (December 31, 2022 – 2,943,655).

As at June 30, 2023, 1,702,500 stock options are outstanding (December 31, 2022 – 764,667). The stock options have an expiry date of ten years from the applicable date of issue. The Company has not issued any RSUs or equity-settled PSUs under the Equity Incentive Plan.

	June 30, 2023						December 31, 2022
				Weighted						Weighted
	Number			average			Number			average
	of stock			exercise			of stock			exercise
	options			price			options			price
Outstanding, beginning of period		764,667		$	8.15			897,500		$	8.66
Granted		980,000			0.75			–			–
Forfeited		(42,167	)		(8.57	)		(132,833	)		(11.59	)
Outstanding, end of period		1,702,500		$	3.88			764,667		$	8.15

The weighted average contractual life of the outstanding options as at June 30, 2023 was 7.7 years (December 31, 2022 – 4.8 years).

The total number of stock options exercisable as at June 30, 2023 was 1,174,167 (December 31, 2022 – 642,466).

During the three and six months ended June 30, 2023, the Company recorded a total share-based options compensation expense of $513,782 and $576,730, respectively (three and six months ended June 30, 2022 – $63,882 and $313,204, respectively).

25 

Greenbrook TMS Inc. 

Notes to Condensed Interim Consolidated Financial Statements (continued) 

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022 

(Unaudited)

15. Contributed surplus (continued):

The following stock options were granted during the six months ended June 30, 2023:

(i) On May 15, 2023, 980,000 stock options were granted at an estimated fair value of $0.66 per option using the Black-Scholes option pricing model based on the following assumptions: volatility of 93.09%; remaining life of ten years; expected dividend yield of 0%; forfeiture rate of 6.89% and an annual risk-free interest rate of 3.47%.

As at June 30, 2023, the total compensation cost not yet recognized related to options granted is approximately $333,856 (December 31, 2022 – $190,536) and will be recognized over the remaining average vesting period of 1.27 years (December 31, 2022 – 0.69 years).

(b) Lender Warrants

As consideration for the purchase of the Greybrook Health promissory note issued on February 28, 2023, the Company issued 135,870 common share purchase warrants to Greybrook Health. Each Greybrook lender warrant will be exercisable for one Common Share at an exercise price of $1.84, subject to customary anti-dilution adjustments. The Greybrook lender warrants will expire five years from the date of issuance. Per ASC 815, the Greybrook lender warrants meet the applicable criteria to qualify for equity classification and therefore are included in contributed surplus.

The fair value of the Greybrook lender warrants was estimated to be $0.47 per warrant using the Black-Scholes option pricing model based on the following assumptions: volatility of 48.86% calculated based on a comparable company; remaining life of 5.0 years; expected dividend yield of 0%; forfeiture rate of 0% and an annual risk-free interest rate of 4.18%.

16. Contingencies:

The Company may be involved in certain legal matters arising from time to time in the normal course of business. The Company records provisions that reflect management’s best estimate of any potential liability relating to these matters. The resolution of these matters is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

26 

Greenbrook TMS Inc. 

Notes to Condensed Interim Consolidated Financial Statements (continued) 

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022 

(Unaudited)

17. Pensions:

The Company has adopted a defined contribution pension plan for its employees whereby the Company matches contributions made by participating employees up to a maximum of 3.5% of such employees’ annual salaries. During the three and six months ended June 30, 2023, contributions, which were recorded as expenses within direct center and patient care costs, other regional and center support costs and corporate, general and administrative expenses, amounted to $180,145 and $375,909 (three and six months ended June 30, 2022 – $137,010 and $255,427, respectively).

18. Income taxes:

During the six months ended June 30, 2023, there were no significant changes to the Company’s tax position.

19. Risk management arising from financial instruments:

In the normal course of business, the Company is exposed to risks related to financial instruments that can affect its operating performance. These risks, and the actions taken to manage them, are as follows:

(a) Fair value:

The Company has Level 1 financial instruments which consists of cash, restricted cash, accounts receivable and accounts payable and accrued liabilities which approximate their fair value given their short-term nature. The Company also has lender warrants, DSUs and PSUs that are considered Level 2 financial instruments (see note 12). The Company has deferred and contingent consideration (note 13) that are considered Level 3 financial instruments.

The carrying value of the loans payable, shareholder loans and finance lease obligations approximates their fair value given the difference between the discount rates used to recognize the liabilities in the condensed interim consolidated balance sheets and the market rates of interest is insignificant.

Financial instruments are classified into one of the following categories: financial assets or financial liabilities.

27 

Greenbrook TMS Inc. 

Notes to Condensed Interim Consolidated Financial Statements (continued) 

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022 

(Unaudited)

19. Risk management arising from financial instruments (continued):

(b) Credit risk:

Credit risk arises from the potential that a counterparty will fail to perform its obligations. The Company is exposed to credit risk from patients and third-party payors including federal and state agencies (under the Medicare programs), managed care health plans and commercial insurance companies. The Company’s exposure to credit risk is mitigated in large part due to the majority of the accounts receivable balance being receivable from large, creditworthy medical insurance companies and government-backed health plans.

The Company’s aging schedule in respect of its accounts receivable balance as at June 30, 2023 and December 31, 2022 is provided below:

Days since service delivered	June 30, 2023		December 31, 2022
0-90	$	5,041,920	$	6,163,429
91-180		944,353		884,061
181-270		330,962		257,187
270+		65,717		44,169
Total accounts receivable	$	6,382,952	$	7,348,846

Based on the Company’s industry, none of the accounts receivable in the table above are considered “past due”. Furthermore, the payors have the ability and intent to pay, but price lists for the Company’s services are subject to the discretion of payors. As such, the timing of collections is not linked to increased credit risk. The Company continues to collect on services rendered in excess of 24 months from the date such services were rendered.

(c) Liquidity risk:

Liquidity risk is the risk that the Company may encounter difficulty in raising funds to meet its financial commitments or can only do so at excessive cost. The Company ensures there is sufficient liquidity to meet its short-term business requirements, taking into account its anticipated cash flows from operations, its holdings of cash and its ability to raise capital from existing or new investors and/or lenders (see note 2(a)).

28 

Greenbrook TMS Inc. 

Notes to Condensed Interim Consolidated Financial Statements (continued) 

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022 

(Unaudited)

19. Risk management arising from financial instruments (continued):

(d) Currency risk:

Currency risk is the risk to the Company’s earnings that arises from fluctuations in foreign exchange rates and the degree of volatility of those rates. The Company has minimal exposure to currency risk as substantially all of the Company’s revenue, expenses, assets and liabilities are denominated in U.S. dollars. The Company pays certain vendors and payroll costs in Canadian dollars from time to time, but due to the limited size and nature of these payments it does not give rise to significant currency risk.

(e) Interest rate risk:

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to changes in interest rates on its cash and long-term debt. Certain loans payable and shareholder loans (see note 10 and note 11) bear interest at a rate equal to the 3-month Term Secured Overnight Financing Rate plus 9.1% or at a rate equal to the 3-month Term Secured Overnight Financing Rate plus 7.65%. A 1% increase in interest rates would result in a $2,778,392 increase to interest expense on the condensed interim consolidated statements of comprehensive loss over the term of the loans payable and shareholder loans.

20. Capital management:

The Company’s objective is to maintain a capital structure that supports its long-term growth strategy, maintains creditor and customer confidence, and maximizes shareholder value.

The capital structure of the Company consists of its shareholders’ equity, including contributed surplus and deficit, as well as loans payable.

The Company’s primary uses of capital are to finance operations, finance new center start-up costs, increase non-cash working capital, capital expenditures and finance service debt obligations. The Company’s objectives when managing capital are to ensure the Company will continue to have enough liquidity so it can provide its services to its customers and returns to its shareholders. The Company, as part of its annual budgeting process and on an ongoing basis, periodically evaluates its estimated cash requirements to fund working capital requirements of existing operations. Based on this and taking into account its anticipated cash flows from operations and its holdings of cash, the Company validates whether it has the sufficient capital or needs to obtain additional capital.

29 

Greenbrook TMS Inc. 

Notes to Condensed Interim Consolidated Financial Statements (continued) 

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022 

(Unaudited)

21. Related party transactions:

(a) Transactions with significant shareholder – Greybrook Health

As at June 30, 2023, $1,897 is included in accounts payable and accrued liabilities for amounts payable for management services rendered and other overhead costs incurred by Greybrook Health in the ordinary course of business (December 31, 2022 – nil). These amounts were recorded at their exchange amount, being the amount agreed to by the parties.

During the three and six months ended June 30, 2023, the Company recognized $1,667 and $3,223 in corporate, general and administrative expenses (three and six months ended June 30, 2022 – $6 and $328, respectively) related to transactions with Greybrook Health.

(b) Loan from shareholder – Greybrook Health

On February 3, 2023 and February 28, 2023, the Company received loans from and issued promissory notes to Greybrook Health, who is a significant shareholder of the Company. The promissory notes for the loans total $1,437,604 and bear interest at a rate consistent with the Madryn Credit Facility and mature on the earlier of September 30, 2027, at the election of Greybrook Health upon a change of control, upon the occurrence of an event of default and acceleration by Greybrook Health, or the date on which the loans under the Madryn Credit Facility are repaid. In conjunction with the issuance of the unsecured notes to Greybrook Health, the Company granted Greybrook Health an option to convert up to $1,000,000 of the outstanding principal amount of the Greybrook Health promissory notes held by Greybrook Health into common shares of the Company at a conversion price per share equal to 85.0% of the volume-weighted average trading price of the common shares of the Company on the Nasdaq for the five trading days immediately preceding the date of conversion, subject to customary anti-dilution adjustments and conversion limitations required by Nasdaq. As additional consideration for the Greybrook Health promissory note issued on February 28, 2023, the Company issued 135,870 common share purchase warrants to Greybrook Health, each exercisable for one common share of the Company at an exercise price of $1.84 per common share, subject to customary anti-dilution adjustments, expiring on February 28, 2028. See note 11(b) and note 12(a).

During the three and six months ended June 30, 2023, the Company recognized $51,889 and $74,029 in interest expense (three and six months ended June 30, 2022 – nil and nil, respectively) related to the Greybrook Health promissory notes.

30 

Greenbrook TMS Inc. 

Notes to Condensed Interim Consolidated Financial Statements (continued) 

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022 

(Unaudited)

21. Related party transactions (continued):

(c) Transactions with the significant shareholder – Benjamin Klein

During the three and six months ended June 30, 2023, the Company recognized $58,042 and $152,257 in corporate, general and administrative expenses (three and six months ended June 30, 2022 – nil and nil, respectively) for amounts payable for employment services rendered and other related costs incurred by Benjamin Klein in the ordinary course of business.

As at June 30, 2023 nil is included in accounts payable and accrued liabilities for amounts payable for travel expenses and other related costs incurred by Benjamin Klein in the ordinary course of business.

(d) Loan from significant shareholder – Benjamin Klein

On July 14, 2022, in connection with the Success TMS Acquisition, the Company assumed the obligation to repay a promissory note to Benjamin Klein, who is a significant shareholder and director of the Company. The promissory note totals $2,090,264 and bears interest at a rate of 10% per annum and matures on May 1, 2024. The carrying amount of the promissory note to Benjamin Klein as at June 30, 2023 is $2,124,584 (December 31, 2022 – 2,112,438). See note 11(a).

During the three and six months ended June 30, 2023, the Company recognized $64,425 and $127,310 in interest expense (three and six months ended June 30, 2022 – nil and nil, respectively) related to this promissory note.

(e) Loans from shareholders and officers

On February 3, 2023, the Company received loans from and issued promissory notes to shareholders and officers of the Company. The promissory notes for the loans total $312,396 and bear interest at a rate consistent with the Madryn Credit Facility and mature on the earlier of September 30, 2027, at the election of the noteholders upon a change of control, upon the occurrence of an event of default and acceleration by the noteholders, or the date on which the loans under the Madryn Credit Facility are repaid. The carrying amount of the promissory notes issued to shareholders and officers as at June 30, 2023 is $302,499 (December 31, 2022 – nil). See note 10(a) and note 11(b).

31 

Greenbrook TMS Inc. 

Notes to Condensed Interim Consolidated Financial Statements (continued) 

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022 

(Unaudited)

21. Related party transactions (continued):

During the three and six months ended June 30, 2023, the Company recognized $11,354 and $18,331 in interest expense (three and six months ended June 30, 2022 – nil and nil, respectively) related to these promissory notes.

(f) Loan from significant shareholder – Madryn

On July 14, 2022, the Company entered into a credit agreement in respect of the Madryn Credit Facility, which was subsequently amended during the six months ended June 30, 2023, for a total principal balance of $62,000,000. Pursuant to the Private Placement completed on March 23, 2023, Madryn is now a significant shareholder of the Company. See note 10(a), note 14 and note 25.

During the three and six months ended June 30, 2023, the Company recognized $2,378,747 and $4,627,386 in interest expense, respectively (three and six months ended June 30, 2022 – nil and nil, respectively) related to the Madryn Credit Facility.

22. Basic and diluted loss per share:

	Three months ended						Six months ended
	June 30,			June 30,			June 30,			June 30,
	2023			2022			2023			2022
Net loss attributable to the shareholders of Greenbrook TMS	$	(12,742,274	)	$	(7,095,079	)	$	(23,333,584	)	$	(14,666,933	)
Weighted average common shares outstanding:
Basic and diluted		40,800,180			17,801,885			35,594,492			17,801,885
Loss per share:
Basic and diluted	$	(0.31	)	$	(0.40	)	$	(0.66	)	$	(0.82	)

32 

Greenbrook TMS Inc. 

Notes to Condensed Interim Consolidated Financial Statements (continued) 

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022 

(Unaudited)

22. Basic and diluted loss per share (continued):

For the three and six months ended June 30, 2023, the effect of 1,702,500 options (June 30, 2022 – 876,833) and 187,177 lender warrants (June 30, 2022 – 51,307) have been excluded from the diluted loss per share calculation because this effect would be anti-dilutive.

23. Non-controlling interest:

As a result of operating agreements with non-wholly owned entities, the Company has control over these entities under U.S. GAAP, as the Company has power over all significant decisions made by these entities and thus 100% of the financial results of these subsidiaries are included in the Company’s consolidated financial results.

On February 27, 2023, the Company acquired a portion of the non-controlling ownership interest in Greenbrook TMS Connecticut LLC for the release of liabilities and losses. As at June 30, 2023, the Company has an ownership interest of 100% of Greenbrook TMS Connecticut LLC.

The following table summarizes the aggregate financial information for the Company’s non-wholly owned entities as at June 30, 2023 and December 31, 2022:

	June 30,			December 31,
	2023			2022
Cash	$	406,389		$	580,057
Accounts receivable, net		2,414,916			2,087,763
Prepaid expenses and other		622,250			483,082
Property, plant and equipment		872,565			1,085,006
Finance right-of-use assets		1,331,686			2,349,699
Operating right-of-use assets		6,985,340			7,566,048
Accounts payable and accrued liabilities		2,223,473			1,666,756
Finance lease liabilities		1,111,413			2,089,999
Operating lease liabilities		7,373,887			7,918,347
Loans payable		15,019,815			15,066,552
Shareholder’s deficit attributable to the shareholders of Greenbrook TMS		(8,734,687	)		(9,812,872	)
Shareholder’s deficit attributable to non-controlling interest		(5,801,199	)		(3,282,610	)
Distributions paid to non-controlling interest		–			(320,250	)
Partnership buyout		118,052			(496,659	)
Historical subsidiary investment by non-controlling interest		1,322,392			1,322,392

33 

Greenbrook TMS Inc. 

Notes to Condensed Interim Consolidated Financial Statements (continued) 

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022 

(Unaudited)

23. Non-controlling interest (continued):

The following table summarizes the aggregate financial information for the Company’s non-wholly owned entities for the three and six months ended June 30, 2023 and June 30, 2022:

	Three months ended						Six months ended
	June 30,			June 30,			June 30,			June 30,
	2023			2022			2023			2022
Revenue	$	6,498,156		$	6,753,595		$	12,911,943		$	12,717,037
Net loss attributable to the shareholders of Greenbrook TMS		(492,842)			(731,700	)		(1,042,203	)		(1,746,119	)
Net loss attributable to non-controlling interest		(114,724	)		56,449			(183,550	)		(60,037	)

24. Expenses by nature:

The components of the Company’s other regional and center support costs include the following:

	Three months ended				Six months ended
	June 30,		June 30,		June 30,		June 30,
	2023		2022		2023		2022
Salaries and bonuses	$	4,107,321	$	3,361,426	$	8,772,966	$	6,836,977
Marketing expenses		403,548		1,687,736		816,601		3,404,900
Total	$	4,510,869	$	5,049,162	$	9,589,567	$	10,241,877

34 

Greenbrook TMS Inc. 

Notes to Condensed Interim Consolidated Financial Statements (continued) 

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022 

(Unaudited)

24. Expenses by nature (continued):

The components of the Company’s corporate, general and administrative expenses include the following:

	Three months ended				Six months ended
	June 30,		June 30,		June 30,		June 30,
	2023		2022		2023		2022
Salaries and bonuses	$	4,109,639	$	3,437,683	$	8,250,728	$	7,055,544
Professional and legal fees		1,577,808		1,131,377		2,627,313		1,784,738
Computer supplies and software		656,060		502,050		1,432,020		871,383
Marketing expenses		25,945		89,617		31,267		224,570
Financing costs		–		–		235,094		–
Restructuring expense		162,029		–		463,868		–
Insurance		149,325		249,107		362,778		428,819
Credit facility amendment fee (note 10(a))		1,000,000		–		1,000,000		–
Other		459,684		202,783		1,015,993		371,181
Total	$	8,140,490	$	5,612,617	$	15,419,061	$	10,736,235

On March 6, 2023, the Company announced that it is embarking on a comprehensive restructuring plan (the “Restructuring Plan”) that aims to strengthen the Company by leveraging its scale to further reduce complexity, streamlining its operating model and driving operational efficiencies to achieve profitability.

As part of this Restructuring Plan, the Company is decreasing its operating footprint. The remaining Treatment Centers will continue clinical TMS offerings and a select and growing number of Treatment Centers will continue offering Spravato® (esketamine nasal spray) therapy.

During the three and six months ended June 30, 2023, the Company recognized restructuring expenses of $162,029 and $463,868, respectively, in corporate, general and administrative expenses related to the Restructuring Plan (three and six months ended June 30, 2022 – nil and nil, respectively).

25. Subsequent events:

(a) Alumni Purchase Agreement

On July 13, 2023, the Company entered into the Alumni Purchase Agreement with Alumni, pursuant to which Alumni has agreed to provide equity line financing for sales from time to time of up to $4,458,156 of common shares (the “Maximum Commitment Amount”). The common shares will be issued from time to time (the “Purchase Shares”) in connection with the delivery of purchase notices delivered by the Company to Alumni, at variable prices set forth therein, in accordance with the terms of the Alumni Purchase Agreement. Each individual sale of Purchase Shares will be limited to no more than the number of common shares that would result in the direct or indirect beneficial ownership by Alumni of more than 9.99% of the then-outstanding common shares.

35 

Greenbrook TMS Inc. 

Notes to Condensed Interim Consolidated Financial Statements (continued) 

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022 

(Unaudited)

25. Subsequent events (continued):

In exchange for Alumni entering into the Alumni Purchase Agreement, the Company issued 212,293 common shares to Alumni (the “Commitment Shares” and together with the Purchase Shares, the “Offered Shares”). The Alumni Purchase Agreement expires upon the earlier of the aggregate offering amount of Offered Shares meeting the Maximum Commitment Amount or December 31, 2023. Subsequent to June 30, 2023, the Company has issued to date an aggregate of 1,461,538 Purchase Shares for aggregate gross proceeds to the Company of $403,024.

(b) Madryn Debt Financing

On August 1, 2023, the Company entered into an amendment to the Madryn Credit Facility, whereby certain affiliates of Madryn have extended an additional tranche of debt financing in an aggregate principal amount of $2,000,000. The terms and conditions of the loan are consistent with the Madryn Credit Facility in all material respects. The additional tranche provides Madryn with the option to convert up to an additional $182,000 of the outstanding principal amount into common shares of the Company at a price per share equal to $1.90, subject to customary anti-dilution adjustments. This conversion feature corresponds to the conversion provisions for its Existing Loan, which provide Madryn with the option to convert a portion of the outstanding principal amount of the Existing Loan into common shares at a price per share equal to $1.90.

The amendment to the Madryn Credit Facility also provides that the entire amount of the interest payment due on June 30, 2023, which was previously deferred under prior amendments to the Madryn Credit Facility, will be paid in-kind and be added to the outstanding principal amount of the Existing Loan. The amendment also extends the period during which the Company’s minimum liquidity covenant is reduced from $3,000,000 to $300,000 to August 15, 2023.

36 

Greenbrook TMS Inc. 

Notes to Condensed Interim Consolidated Financial Statements (continued) 

(Expressed in U.S. dollars, unless otherwise stated)

Three and six months ended June 30, 2023 and 2022 

(Unaudited)

25. Subsequent events (continued):

(c) Greybrook Health Debt Financing

On August 1, 2023, the Company entered into a note purchase agreement with Greybrook Health, whereby the Company has issued and sold $1,000,000 aggregate principal amount of an unsecured note to Greybrook Health, which bears interest consistent with the Madryn Credit Facility, matures on September 30, 2027 and is subordinated to the Madryn Credit Facility.

As additional consideration for entering into the note purchase agreement, the Company issued 250,000 common share purchase warrants to Greybrook Health. Each warrant will be exercisable for one common share of the Company at an exercise price equal to (a) if the common shares are listed on the Nasdaq or any other trading market at the time of exercise, 85.0% of the volume-weighted average trading price of the common shares on the Nasdaq (or, if not listed on Nasdaq, then such other trading market on which the common shares are principally traded, based upon daily share volume) for the five trading days immediately preceding the exercise date, or (b) if the common shares are not listed on any trading market at the time of exercise, a per share price based on fair market value, as determined by the Board, in each case subject to customary anti-dilution adjustments. The warrants will expire five years from the date of issuance.

37 

EX-99.4

Exhibit 99.4

Condensed Interim Consolidated Financial Statements

(Expressed in U.S. dollars)

Greenbrook TMS Inc.

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

NOTICE TO READER

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the condensed interim consolidated financial statements, they must be accompanied by a notice to this effect. The accompanying unaudited condensed interim consolidated financial statements of Greenbrook TMS Inc. have been prepared by, and are the responsibility of management of Greenbrook TMS Inc.

Greenbrook TMS Inc.’s independent auditor has not audited, reviewed or otherwise attempted to verify the accuracy or completeness of the accompanying condensed interim consolidated financial statements. Readers are cautioned that these financial statements may not be appropriate for their intended purposes.

Greenbrook TMS Inc.

Condensed Interim Consolidated Balance Sheets

(Expressed in U.S. dollars, unless otherwise stated)

(Unaudited)

	September 30,			December 31,
	2023			2022
Assets
Current assets:
Cash	$	812,286		$	1,623,957
Restricted cash		1,000,000			1,000,000
Accounts receivable, net (note 19(b))		6,216,972			7,348,846
Prepaid expenses and other		4,183,946			2,520,676
Total current assets		12,213, 204			12,493,479
Property, plant and equipment (note 6)		4,614,951			3,719,621
Intangible assets (note 7)		638,606			688,249
Goodwill		–			–
Finance right-of-use assets (note 8(a))		2,586,260			19,348,091
Operating right-of-use assets (note 8(b))		29,334,629			34,890,554
Total assets	$	49,387,650		$	71,139,994
Liabilities and Shareholders’ Deficit
Current liabilities:
Accounts payable and accrued liabilities (note 9)	$	17,382,940		$	20,271,624
Current portion of loans payable (note 10(a))		6,636,505			2,200,892
Current portion of finance lease liabilities (note 8(a))		728,149			6,532,175
Current portion of operating lease liabilities (note 8(b))		4,024,086			4,591,216
Current portion of shareholder loans (note 11)		2,645,544			46,995
Other payables (note 12)		6,155,128			629,381
Non-controlling interest loans (note 10(b))		61,621			94,136
Deferred and contingent consideration (note 13)		1,000,000			1,000,000
Total current liabilities		38,633,973			35,366,419
Loans payable (note 10(a))		70,085,813			51,017,743
Finance lease liabilities (note 8(a))		374,769			10,449,725
Operating lease liabilities (note 8(b))		26,485,037			31,352,506
Shareholder loans (note 11)		2,683,736			2,065,443
Total liabilities		138,263,328			130,251,836
Shareholders’ deficit:
Common shares (note 14)		120,741,061			114,120,362
Contributed surplus (note 15)		5,262,491			4,552,067
Deficit		(211,598,764	)		(175,007,144	)
Total shareholders’ deficit excluding non-controlling interest		(85,595,212	)		(56,334,715	)
Non-controlling interest (note 23)		(3,280,466	)		(2,777,127	)
Total shareholders’ deficit		(88,875,678	)		(59,111,842	)
Basis of preparation and going concern (note 2(a))
Contingencies (note 16)
Subsequent events (note 25)
Total liabilities and shareholders’ deficit	$	49,387,650		$	71,139,994

See accompanying notes to condensed interim consolidated financial statements.

1

GREENBROOK TMS INC.

Condensed Interim Consolidated Statements of Comprehensive Loss

(Expressed in U.S. dollars, unless otherwise stated)

(Unaudited)

	Three months ended						Nine months ended
	September 30,			September 30,			September 30,			September 30,
	2023			2022			2023			2022
Revenue:
Service revenue	$	17,364,264		$	18,765,566		$	54,359,174		$	46,431,835
Expenses:
Direct center and patient care costs		13,135,231			12,157,988			40,397,958			29,597,225
Other regional and center support costs (note 24)		4,764,130			8,257,804			14,353,697			18,499,681
Depreciation (notes 6 and 8)		583,388			1,750,539			2,418,742			3,151,364
		18,482,749			22,166,331			57,170,397			51,248,270
Regional operating income (loss)		(1,118,485	)		(3,400,765	)		(2,811,223	)		(4,816,435	)
Center development costs		137,770			215,954			355,832			562,108
Corporate, general and administrative expenses (note 24)		5,986,061			7,698,880			21,405,122			18,435,115
Share-based compensation (note 15)		14,740			2,762			591,470			315,966
Amortization (note 7)		16,548			570,648			49,643			985,648
Interest expense		3,088,382			2,315,209			8,665,931			3,828,146
Interest income		(64	)		–			(165	)		(12,230	)
Loss (gain) on extinguishment of loans (note 10(a) and 11)		14,274			2,331,917			14,274			2,331,917
Loss on device contract termination (note 12)		3,181,116			–			3,181,116			–
Loss before income taxes		(13,557,312	)		(16,536,135	)		(37,074,446	)		(31,263,105	)
Income tax expense (note 18)		–			–			–			–
Loss for the period and comprehensive loss	$	(13,557,312	)	$	(16,536,135	)	$	(37,074,446	)	$	(31,263,105	)
Non-controlling interest (note 24)		(66,025	)		(244,887	)		(249,575	)		(304,924	)
Loss for the period and comprehensive loss attributable to Greenbrook	$	(13,491,287	)	$	(16,291,248	)	$	(36,824,871	)	$	(30,958,181	)
Net loss per share (note 22):
Basic	$	(0.32	)	$	(0.59	)	$	(0.97	)	$	(1.46	)
Diluted		(0.32	)		(0.59	)		(0.97	)		(1.46	)

See accompanying notes to condensed interim consolidated financial statements.

2

Greenbrook tms Inc.

Condensed Interim Consolidated Statements of Changes in Equity (Deficit)

(Expressed in U.S. dollars, unless otherwise stated)

(Unaudited)

										Non-			Total
	Common shares				Contributed					controlling			equity
Nine months ended September 30, 2022	Number		Amount		surplus		Deficit			interest			(deficit)
Balance, December 31, 2021		17,801,885	$	98,408,917	$	4,204,280	$	(87,332,687	)	$	(1,325,406	)	$	13,955,104
Net comprehensive loss for the period		–		–		–		(30,958,181	)		(304,924	)		(31,263,105	)
Share-based compensation (note 15)		–		–		315,966		–			–			315,966
Issuance of common shares - acquisition (note 14)		11,634,660		15,711,445		–		–			–			15,711,445
Acquisition of subsidiary non-controlling interest (note 23)		–		–		–		(3,341	)		(496,659	)		(500,000	)
Distributions to non-controlling interest		–		–		–		–			(299,250	)		(299,250	)
Balance, September 30, 2022		29,436,545	$	114,120,362	$	4,520,246	$	(118,294,209	)	$	(2,426,239	)	$	(2,079,840	)

										Non-			Total
	Common shares				Contributed					controlling			equity
Nine months ended September 30, 2023	Number		Amount		surplus		Deficit			interest			(deficit)
Balance, December 31, 2022		29,436,545	$	114,120,362	$	4,552,067	$	(175,007,144	)	$	(2,777,127	)	$	(59,111,842	)
Net comprehensive loss for the period		–		–		–		(36,824,871	)		(249,575	)		(37,074,446	)
Share-based compensation (note 15)		–		–		591,470		–			–			591,470
Issuance of common shares (note 14)		13,337,466		6,620,699		–		–			–			6,620,699
Issuance of lender warrants		–		–		79,132		–			–			79,132
Gain on extinguishment of shareholder loan		–		–		39,822		–			–			39,822
Acquisition of subsidiary non-controlling interest (note 23)		–		–		–		253,251			(253,764	)		(513	)
Distribution to non-controlling interest		–		–		–		(20,000	)		–			(20,000	)
Balance, September 30, 2023		42,774,011	$	120,741,061	$	5,262,491	$	(211,598,764	)	$	(3,280,466	)	$	(88,875,678	)

See accompanying notes to condensed interim consolidated financial statements.

3

Greenbrook TMS Inc.

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in U.S. dollars, unless otherwise stated)

(Unaudited)

	Nine months ended
	September 30,			September 30,
	2023			2022
Cash provided by (used in)
Operating activities:
Loss for the period	$	(37,074,446	)	$	(31,263,105	)
Adjusted for:
Amortization		49,643			985,648
Depreciation		2,418,742			3,151,364
Operating lease expense		6,061,923			4,391,825
Interest expense		8,665,931			3,828,146
Interest income		(165	)		(12,230	)
Share-based compensation		591,470			315,966
Loss on extinguishment of loan		14,274			2,331,917
Loss on device contract termination (note 12(e))		3,181,116			–
Credit facility amendment fee (note 10(a))		1,000,000			–
Neuronetics Note non-cash transaction costs (note 10(a))		116,356			–
Gain on lender warrants (note 12(a))		(6,567	)		(28,886	)
Loss (gain) on deferred share units (note 12(b))		(273,938	)		402,226
Gain on performance share units (note 12(c))		(43,748	)		(37,306	)
Change in non-cash operating working capital:
Accounts receivable		1,131,874			1,713,626
Prepaid expenses and other		(1,663,270	)		(495,246	)
Accounts payable and accrued liabilities		7,286,486			3,841,055
Other payables		(750,000	)		–
Interest paid		(2,906,444	)		(2,038,958	)
Interest received		165			12,230
Payment of operating lease liabilities		(8,024,282	)		(4,131,670	)
		(20,224,880	)		(17,033,398	)
Financing activities:
Net proceeds on issuance of common shares (note 14)		6,620,699			–
Financing costs incurred		(702,403	)		(3,071,233	)
Bank loans advanced		9,299,000			55,000,000
Bank loans repaid		(655,343	)		(31,907,466	)
Promissory notes advanced (note 10(a) and note 11)		8,100,000			–
Principal repayment of finance lease liabilities		(3,168,061	)		(3,453,120	)
Non-controlling interest loans advanced		6,973			6,609
Non-controlling interest loans repaid		(24,000	)		–
Distribution to non-controlling interest		(20,000	)		(299,250	)
		19,456,865			16,275,540
Investing activities:
Acquisition, net of cash acquired		–			740,866
Decrease in restricted cash		–			250,000
Acquisition of subsidiary non-controlling interest (note 23)		(513	)		(500,000	)
Deferred and contingent consideration paid (note 13)		–			(250,000	)
Purchase of property, plant and equipment		(43,143	)		(33,868	)
		(43,656	)		206,998
Decrease in cash		(811,671	)		(550,860	)
Cash, beginning of period		1,623,957			10,699,679
Cash, end of period	$	812,286		$	10,148,819

See accompanying notes to condensed interim consolidated financial statements.

4

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

1. Reporting entity:

Greenbrook TMS Inc. (the “Company”), an Ontario corporation along with its subsidiaries, controls and operates a network of outpatient mental health services centers that specialize in the provision of Transcranial Magnetic Stimulation (“TMS”) therapy and other treatment modalities for the treatment of depression and related psychiatric services.

Our head and registered office is located at 890 Yonge Street, 7th Floor, Toronto, Ontario, Canada, M4W 3P4. Our United States corporate headquarters is located at 8401 Greensboro Drive, Suite 425, Tysons Corner, Virginia, USA, 22102.

2. Basis of preparation:

(a) Going concern:

These condensed interim consolidated financial statements for the three and nine months ended September 30, 2023 have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and the basis of presentation outlined in note 2(b) on the assumption that the Company is a going concern and will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

The Company has experienced losses since inception and has negative cash flow from operating activities of $20,224,880 for the nine months ended September 30, 2023 ($17,033,398 – nine months ended September 30, 2022). The Company’s cash balance, excluding restricted cash, as at September 30, 2023 was $812,286 ($1,623,957 as at December 31, 2022) and negative working capital as at September 30, 2023 was $26,420,769 (negative working capital of $12,337,198 as at December 31, 2022).

On December 31, 2020, the Company entered into a credit and security agreement, which was amended on October 29, 2021, for a $30,000,000 secured credit facility (the “Oxford Credit Facility”) with Oxford Finance LLC (“Oxford”). The Oxford Credit Facility funded the $15,000,000 term loan at closing on December 31, 2020. On July 14, 2022, the Company entered into a credit agreement (the “Madryn Credit Agreement”) for a $75,000,000 secured credit facility (the “Madryn Credit Facility”) with Madryn Fund Administration, LLC (“Madryn”) and its affiliated entities. Upon closing of the Madryn Credit Facility, the Company drew a $55,000,000 term loan under the Madryn Credit Facility. In addition, the Madryn Credit Facility permits the Company to draw up to an additional $20,000,000 in a single draw at any time on or prior to December 31, 2024 for purposes of funding future mergers and acquisition activity. On July 14, 2022, the Company used $15,446,546 of the proceeds from the Madryn Credit Facility to repay in full the outstanding balance owing under the Oxford Credit Facility and also used $15,154,845 of the proceeds from the Madryn Credit Facility to repay various loans previously held by Success TMS (as defined below).

5

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

2. Basis of preparation (continued):

On March 23, 2023, the Company completed a non-brokered private placement (the “2023 Private Placement”), for aggregate gross proceeds to the Company of approximately $6,250,000. The 2023 Private Placement included investments by Madryn, together with certain of the Company’s other major shareholders, including Greybrook Health Inc. (“Greybrook Health”) and affiliates of Masters Special Situations LLC (“MSS”). See note 14.

On July 13, 2023, the Company entered into a purchase agreement (the “Alumni Purchase Agreement”) with Alumni Capital LP (“Alumni”). The Alumni Purchase Agreement provides equity line financing for sales from time to time of up to $4,458,156 of common shares. As of September 30, 2023, the Company has issued an aggregate of 1,761,538 Purchase Shares (as defined below) under the Alumni Purchase Agreement for gross proceeds of $481,437. See note 14.

During the nine months ended September 30, 2023, the Company received an aggregate of $17,399,000 in debt financings from Madryn, certain significant shareholders and management of the Company, and other investors in order to satisfy short-term cash requirements, and the amendments to the Madryn Credit Facility were also effected to amend the Company’s minimum liquidity covenant. See note 10 and note 11.

The terms of the Madryn Credit Facility require the Company to satisfy various financial covenants including a minimum liquidity and minimum consolidated revenue amounts that became effective on July 14, 2022 and September 30, 2022, respectively. A failure to comply with these covenants, or failure to obtain a waiver for any non-compliance, would result in an event of default under the Madryn Credit Agreement and would allow Madryn to accelerate repayment of the debt, which could materially and adversely affect the business, results of operations and financial condition of the Company. On February 21, March 20, June 14, July 3, July 14, August 1, August 14, September 15, September 29 and October 12, 2023, the Company received waivers from Madryn with respect to the Company’s non-compliance with the minimum liquidity covenant which has been extended to November 15, 2023. As at September 30, 2023, the Company was in compliance with the financial covenants of the Madryn Credit Agreement, as amended.

6

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

2. Basis of preparation (continued):

On October 3, October 12, October 13, October 19 and November 2, 2023, the Company received an aggregate of $4,700,913 in debt financings from Madryn and other investors in order to satisfy the Company’s short-term cash requirements. See note 25.

Although the Company believes it will become cash flow positive in the future, the timing of this is uncertain and is also dependent on the continued execution of the Restructuring Plan (as defined below) (see note 24), our ability to meet our debt obligations and remain in compliance with debt covenants, our ability to remain listed on the Nasdaq Capital Market (“Nasdaq”) and the outcome of the pending Klein Matters (as defined below) (see note 16(b)). A default of the Klein Note (as defined below) (see note 11(a)) could trigger multiple defaults across the Company’s various indebtedness, including the Madryn Credit Facility and the Neuronetics Note (as defined below) (see note 10(a)(iv)) which would have material adverse effect on the Company’s financial position. The Company will require additional financing in order to fund its operating and investing activities, including making timely payments to certain vendors, landlords, lenders (including shareholders) and similar other business partners. The delay in such payments may result in potential defaults under the terms of the agreements the Company has with various parties. As such, additional financing is required in order for the Company to repay its short-term obligations. The Company has historically been able to obtain financing from supportive shareholders, its lenders and other sources when required; however, the Company may not be able to access further equity or debt financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. If additional financing is not obtained, the Company will need to obtain additional amendments from Madryn in order to remain compliant with the covenants or waivers from Madryn to waive its rights to accelerate repayment of the debt; however, there can be no assurances that such amendments or waivers will be obtained, which may result in a requirement to file for bankruptcy protection.

The existence of the above-described conditions indicate substantial doubt as to the Company’s ability to continue as a going concern as at September 30, 2023.

These condensed interim consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumptions were not appropriate. If the going concern basis was not appropriate for these condensed interim consolidated financial statements, then adjustments would be necessary to the carrying value of assets and liabilities, the reported expenses, and the condensed interim consolidated statements of financial position classification used, and these adjustments may be material.

7

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

2. Basis of preparation (continued):

(b) Basis of measurement:

These condensed interim consolidated financial statements have been prepared on a historic cost basis except for financial instruments classified as fair value through profit or loss, which are stated at their fair value. Other measurement bases are described in the applicable notes.

Presentation of the condensed interim consolidated statements of financial position differentiates between current and non-current assets and liabilities. The condensed interim consolidated statements of net loss and comprehensive loss are presented using the function classification of expense.

Regional operating income (loss) presents regional operating income (loss) on an entity-wide basis and is calculated as total service revenue less direct center and patient care costs, other regional and center support costs, 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 the Company’s regional patient acquisition strategy.

3. Material accounting policies:

These condensed interim consolidated financial statements have been prepared using the material accounting policies consistent with those applied in the Company’s December 31, 2022 audited consolidated financial statements.

8

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

4. Recent accounting pronouncements:

Recent accounting pronouncements adopted:

The SEC has issued the following amendments to the existing standards that became effective for periods beginning on or after January 1, 2023:

(i) Accounting Standards Update 2023-07—Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments were adopted on January 1, 2023.

The adoption of the amendments to the existing standards did not have a material impact on these consolidated financial statements.

The SEC has issued the following amendment to the existing standard that will become effective for periods beginning on or after January 1, 2024:

(i) Accounting Standards Update 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This standard introduces improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

5. Business acquisition:

On July 14, 2022, the Company, through its wholly-owned U.S. subsidiary, TMS NeuroHealth Centers Inc., completed the acquisition of all of the issued and outstanding equity interests in Check Five LLC, a Delaware limited liability company (doing business as “Success TMS”) (“Success TMS”) from its parent company, Success Behavioral Holdings LLC (the “Success TMS Acquisition”) pursuant to a Membership Interest Purchase Agreement dated as of May 15, 2022, by and among the Company, Success TMS and its direct and indirect owners, including Success Behavioral Holdings, LLC, Theragroup LLC, The Bereke Trust U/T/A Dated 2/10/03, Batya Klein and Benjamin Klein (collectively, the “Seller Parties”).

As consideration for the purchase of Success TMS, the Seller Parties received, in the aggregate, 8,725,995 common shares of the Company valued at $11,783,584, and an additional 2,908,665 common shares of the Company, valued at $3,927,861, have been held back and deposited with an escrow agent, to be released to Benjamin Klein or the Company, as applicable, upon satisfaction of customary working capital and certain other adjustments, including to satisfy any indemnity claims against the Seller Parties.

9

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

5. Business acquisition (continued):

The purchase price consideration was determined based on the pro forma revenue contribution of the two companies and was fixed at an amount equal to approximately 40% of the total issued and outstanding common shares of the Company on a post-acquisition basis and subject to adjustments, as described above.

The Success TMS Acquisition represented the addition of 47 new Treatment Centers (as defined below), with a new presence in additional states, including Illinois, New Jersey, Nevada and Pennsylvania.

The Success TMS Acquisition was accounted for using the acquisition method of accounting. The allocation of the purchase price consideration for the Success TMS Acquisition is final, and is comprised as follows:

Purchase consideration
Share issuance	$	11,783,584
Share issuance, held in escrow		3,927,861
		15,711,445
Net assets acquired
Cash acquired		688,958
Accounts receivable, net		3,728,255
Prepaid expenses and other		804,416
Property, plant and equipment		829,049
Software		363,424
Management services agreements		15,850,000
Finance right-of-use assets		7,314,499
Operating right-of-use assets		16,336,366
Accounts payable and accrued liabilities		(4,890,405	)
Deferred grant income		(225,559	)
Loans payable		(14,836,324	)
Shareholder loan		(2,078,979	)
Finance lease liabilities		(7,314,499	)
Operating lease liabilities		(16,185,975	)
		383,226
Goodwill	$	15,328,219

10

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

5. Business acquisition (continued):

As part of the Success TMS Acquisition, the Company acquired five management services agreements (the “Success TMS MSAs”) between Success TMS and professional entities owned by Success TMS physicians, under which it provides management, administrative, financial and other services in exchange for a fee. The Success TMS MSAs are the key intangible assets identified as part of the Success TMS Acquisition and drives the value of the business. The Success TMS MSAs are valued using the multi-period excess earnings method. The multi-period excess earnings method considers the present value of net cash flows expected to be generated by the Success TMS MSAs by excluding any cash flows related to contributory assets.

Goodwill is primarily attributable to the ability to expand the Company’s national footprint and the synergies expected to result from combining Success TMS’ operations with the Company, and is allocated to the Success TMS cash generating unit. Goodwill is deductible for tax purposes.

6. Property, plant and equipment:

	Furniture and equipment			Leasehold improvements		TMS devices		Total
Cost
Balance, December 31, 2022	$	115,604		$	344,336	$	4,656,273	$	5,116,213
Additions		–			15,326		1,526,038		1,541,364
Asset disposal		(115,604	)		–		–		(115,604	)
Balance, September 30, 2023	$	–		$	359,662	$	6,182,311	$	6,541,973
Accumulated depreciation
Balance, December 31, 2022	$	103,474		$	95,541	$	1,197,577	$	1,396,592
Depreciation		12,130			45,445		588,459		646,034
Asset disposal		(115,604	)		–		–		(115,604	)
Balance, September 30, 2023	$	–		$	140,986	$	1,786,036	$	1,927,022
Net book value
Balance, December 31, 2022	$	12,130		$	248,795	$	3,458,696	$	3,719,621
Balance, September 30, 2023		–			218,676		4,396,275		4,614,951

11

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

7. Intangible assets:

	Management services agreements		Covenants not to compete		Software		Total
Cost
Balance, December 31, 2022	$	2,792,178	$	355,238	$	39,646	$	3,187,062
Additions		–		–		–		–
Balance, September 30, 2023	$	2,792,178	$	355,238	$	39,646	$	3,187,062
Accumulated amortization
Balance, December 31, 2022	$	2,119,306	$	339,861	$	39,646	$	2,498,813
Amortization		43,000		6,643		–		49,643
Balance, September 30, 2023	$	2,162,306	$	346,504	$	39,646	$	2,548,456
Net book value
Balance, December 31, 2022	$	672,872	$	15,377	$	–	$	688,249
Balance, September 30, 2023		629,872		8,734		–		638,606

8. Right-of-use assets and lease liabilities:

The Company enters into lease agreements related to TMS devices and mental health treatment centers (“Treatment Centers”). These lease agreements range from one year to seven years in length.

Right-of-use assets are initially measured at cost, which is comprised of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred.

Lease liabilities have been measured by discounting future lease payments using a rate implicit in the lease or the Company’s incremental borrowing rate. The Company’s incremental borrowing rate during the period ended September 30, 2023 is 12% (December 31, 2022 – 12%).

12

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

8. Right-of-use assets and lease liabilities (continued):

(a) Finance leases:

Finance leases include lease agreements relating to TMS devices.

	September 30,
	2023
Finance right-of-use assets, beginning of the year	$	19,348,091
Impact of lease additions, disposals and/or modifications		(13,490,901	)
Exercise of buy-out options into property, plant and equipment		(1,498,222	)
Depreciation on right-of-use assets		(1,772,708	)
Finance right-of-use assets, end of the period	$	2,586,260

	September 30,
	2023
Finance lease liabilities, beginning of the year	$	16,981,900
Impact of lease additions, disposals and/or modifications		(12,710,921	)
Interest expense on lease liabilities		626,632
Payments of lease liabilities		(3,794,693	)
Finance lease liabilities, end of the period	$	1,102,918
Less current portion of finance lease liabilities		728,149
Long term portion of finance lease liabilities	$	374,769

During the current period, certain device leases were amended from a fixed fee arrangement to a variable fee arrangement and the Company re-assessed the renewal options relating to certain device leases and concluded that it is not probable that the renewal options under those leases will be exercised, which resulted in a decrease in right-of-use assets and liabilities. In addition, certain facility leases were modified or disposed as a result of the Restructuring Plan.

13

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

8. Right-of-use assets and leases liabilities (continued):

Certain device leases were also derecognized as a result of a settlement and mutual release with a device manufacturer. See note 10(a)(iv), note 12(e) and note 24.

(b) Operating leases:

Operating leases include lease agreements relating to Treatment Centers.

	September 30,
	2023
Operating right-of-use assets, beginning of the year	$	34,890,554
Impact of lease additions,disposals and/or modifications		(2,025,706	)
Impairment of right-of-use assets		–
Right-of-use asset lease expense		(3,530,219	)
Operating right-of-use assets, end of the period	$	29,334,629

	September 30,
	2023
Operating lease liabilities, beginning of the year	$	35,943,722
Impact of lease additions, disposals and/or modifications		(1,816,780	)
Lease liability expense		2,531,704
Payments of lease liabilities		(6,149,523	)
Operating lease liabilities, end of the period		30,509,123
Less current portion of operating lease liabilities		4,024,086
Long term portion of operating lease liabilities	$	26,485,037

14

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

9. Accounts payable and accrued liabilities:

The accounts payable and accrued liabilities are as follows:

	September 30,		December 31,
	2023		2022
Accounts payable	$	13,679,985	$	16,808,558
Accrued liabilities		3,702,955		3,463,066
Total	$	17,382,940	$	20,271,624

10. Loans payable:

(a) Borrowings:

	TMS
	device		Credit		Promissory		Neuronetics
	loans (i)		Facility (ii)		notes (iii)		Note (iv)		Total
Short Term	$	82,557	$	4,281,903	$	805,378	$	1,466,667	$	6,636,505
Long Term		6,696		61,919,389		4,159,728		4,000,000		70,085,813
Total, net	$	89,253	$	66,201,292	$	4,965,106	$	5,466,667	$	76,722,318
Unamortized capitalized financing costs		–		2,491,838		166,282		–		2,658,120
Total, September 30, 2023	$	89,253	$	68,693,130	$	5,131,388	$	5,466,667	$	79,380,438

(i) TMS Device Loans:

During the year ended December 31, 2022, the Company assumed loans as part of the Success TMS Acquisition from three separate financing companies for the purchase of TMS devices. These TMS device loans bear an average interest rate of 9.3% with average monthly blended interest and capital payments of $1,538 and mature during the years ending December 31, 2023 to December 31, 2025. There are no covenants associated with these loans.

During the nine months ended September 30, 2023, the Company repaid TMS device loans totalling $122,010 (nine months ended September 30, 2022 – $64,582).

15

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

10. Loans payable (continued):

(ii) Credit Facility:

On July 14, 2022, the Company entered into the Madryn Credit Agreement in respect of the Madryn Credit Facility. The Madryn Credit Facility provided the Company with a $55,000,000 term loan (the “Existing Loan”) that was funded at closing on July 14, 2022, with an option to draw up to an additional $20,000,000 in a single draw at any time on or prior to December 31, 2024 for the purposes of funding future mergers and acquisition activity. As at December 31, 2022, all amounts borrowed under the Madryn Credit Facility bore interest at a rate equal to the three-month London Interbank Offered Rate (“LIBOR”) plus 9.0%, subject to a minimum three-month LIBOR floor of 1.5%. The Madryn Credit Facility matures over 63 months and provides for four years of interest-only payments. The initial principal balance of $55,000,000 is due in five equal 3 month installments beginning on September 30, 2026. The Company has granted general security over all assets of the Company in connection with the performance and prompt payment of all obligations of the Madryn Credit Facility.

On February 1, February 21, March 20, March 24, August 1 and September 15, 2023, the Company entered into amendments to the Madryn Credit Facility, whereby Madryn extended six additional tranches of debt financing to the Company in an aggregate principal amount of $9,299,000, each of which were fully funded at closing of the applicable tranche (the “New Loans”). The terms and conditions of the New Loans are consistent with the terms and conditions of the Existing Loan.

In addition, the Madryn Credit Facility was amended on February 21, 2023 to provide that, commencing March 31, 2023, all advances under the Madryn Credit Facility (including the New Loans) will cease to accrue interest using the LIBOR benchmark and instead will accrue interest at a rate equal to 9.0% plus the 3-month Term Secured Overnight Financing Rate (“SOFR”) benchmark (subject to a floor of 1.5%) plus 0.10%.

The carrying amount of the Madryn Credit Facility as at September 30, 2023 is $66,201,292 (December 31, 2022 – $52,850,965). Financing costs of $3,446,459 were incurred and are deferred over the term of the Madryn Credit Facility, of which $372,000 was incurred during the nine month period associated with the various amendments. Amortization of deferred financing costs for the three and nine months ended September 30, 2023 were $174,838 and $493,004, respectively (three and nine months ended September 30, 2022 – $128,021 and $128,021, respectively) at an effective interest rate of 1.10% (December 31, 2022 – 1.14%) and were included in interest expense.

16

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

10. Loans payable (continued):

In accordance with the terms of the Madryn Credit Agreement, the Company has issued conversion instruments (each, a “Madryn Conversion Instrument”) to Madryn and certain of its affiliated entities that provide the holders thereof with the option to convert up to $5,000,000 of the outstanding principal amount of the Madryn Credit Facility into common shares of the Company at a price per share equal to $1.90, subject to customary anti-dilution adjustments. The New Loans provide the holders with the option to convert up to $845,364 of the outstanding principal amount of the New Loans into common shares of the Company at a price per share equal to $1.90, subject to customary anti-dilution adjustments. The conversion instruments have been recorded utilizing the no proceeds allocated method, which results in all proceeds allocated to the financial liability.

The terms of the Madryn Credit Agreement require the Company to satisfy various affirmative and negative covenants and to meet certain financial tests, including but not limited to, consolidated minimum revenue and minimum liquidity covenants. In addition, the Madryn Credit Agreement contains affirmative and negative covenants that limit, among other things, the Company’s ability to incur additional indebtedness outside of what is permitted under the Madryn Credit Agreement, create certain liens on assets, declare dividends and engage in certain types of transactions. The Madryn Credit Agreement also includes customary events of default, including payment and covenant breaches, bankruptcy events and the occurrence of a change of control. The Madryn Credit Facility also requires the Company to deliver to Madryn annual audited financial statements that do not contain any going concern note, however, the Company has obtained waivers from Madryn with respect to such obligation for fiscal 2022.

On June 14, 2023, the Company received a waiver from Madryn under the Madryn Credit Agreement to temporarily reduce the Company’s minimum liquidity covenant until June 30, 2023. As consideration for the waiver, Madryn received an amendment fee in the amount of $1,000,000, which was paid-in-kind by adding the amount to the outstanding principal balance of the loan and was recorded in corporate, general and administrative expenses. As at September 30, 2023, the Company was in compliance with the financial covenants (as amended on September 29, 2023) under the Madryn Credit Agreement. See note 25.

Pursuant to the 2023 Private Placement completed on March 23, 2023, Madryn is now also a shareholder of the Company. See note 14.

17

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

10. Loans payable (continued):

(iii) Promissory notes:

On July 14, 2022, the Company assumed two promissory notes in connection with the Success TMS Acquisition totaling $200,000. These promissory notes bear interest at a rate of 5% per annum and have a maturity date of December 31, 2025. Upon acquisition, these two promissory notes were fair valued using an interest rate of 12%.

On February 3, 2023, the Company issued additional promissory notes to certain officers of the Company, in the aggregate amount of $60,000. These promissory notes, along with the $690,000 issued to shareholders (see note 11(a)) on February 3, 2023, total $750,000 (the “February 2023 Notes”). The February 2023 Notes bear interest at a rate consistent with the Madryn Credit Facility and mature on the earlier of September 30, 2027, at the election of the noteholders upon a change of control, upon the occurrence of an event of default and acceleration by the noteholders, or the date on which the loans under the Madryn Credit Facility are repaid. On August 28, 2023, the total $60,000 par value of the February 2023 Notes issued to officers were subsequently exchanged for Subordinated Convertible Notes (as defined below). Interest accrued up to August 28, 2023 was forfeited upon exchange and a gain of $5,011 on loan extinguishment was recognized on the conversion of these February 2023 Notes to Subordinated Convertible Notes.

On August 15, September 1, September 25, September 26, September 27 and September 29, 2023, the Company issued subordinated convertible promissory notes (the “Subordinated Convertible Notes”) to Madryn, certain officers of the Company and various investors in an aggregate amount of $4,850,000 pursuant to a note purchase agreement (as amended or supplemented from time to time, the “Note Purchase Agreement”). All Subordinated Convertible Notes bear interest at a rate consistent with the Madryn Credit Facility and mature on the earlier of March 31, 2028, in the event of a change of control, acceleration of other indebtedness, or six months following repayment or refinancing of all loans under the Madryn Credit Facility.

In accordance with the terms of the Note Purchase Agreement, each holder of a Subordinated Convertible Note has the option to convert any amount up to the outstanding principal amount plus accrued interest into common shares of the Company at any time at the election of the holders of the Subordinated Convertible Notes or on a mandatory basis by all noteholders at the request of Madryn. The Subordinated Convertible Notes are convertible into common shares at a conversion price equal to the lesser of 85% of the closing price per common share on Nasdaq or any other market as of the closing date for such Subordinated Convertible Note, as adjusted from time to time, 85% of the 30-day volume weighted average trading price of the common shares prior to conversion, or if the common shares are not listed on any of Nasdaq or another trading market at the time of conversion, a per share price equal to 85% of the fair market value per common share as of such date, provided that, in any event, the conversion price shall not be lower than $0.078 and no more than 150,000,000 total common shares can be issued upon conversion. The conversion price is also subject to anti-dilution adjustments. The conversion instruments have been recorded utilizing the no proceeds allocated method, which results in all proceeds allocated to the financial liability.

18

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

10. Loans payable (continued):

In connection with the issuance of the Subordinated Convertible Notes, the Company concurrently entered into amendments to the Madryn Credit Agreement and the Neuronetics Note, pursuant to which the Company is permitted to incur the indebtedness under the Subordinated Convertible Notes.

Financing costs of $176,316 were incurred and are deferred over the term of the Subordinated Convertible Notes. Amortization of deferred financing costs for the three and nine months ended September 30, 2023 were $10,034 and $10,034, respectively (three and nine months ended September 30, 2022 – nil and nil, respectively) and were included in interest expense.

The carrying value of all promissory notes referenced in note 10(a)(iii) as at September 30, 2023 is $4,965,106 (December 31, 2022 – $166,325). Interest expense for the three and nine months ended September 30, 2023 was $56,354 and $70,107, respectively (three and nine months ended September 30, 2022 – $4,125 and $4,125, respectively). During the three and nine months ended September 30, 2023, the Company repaid promissory notes totalling nil and nil, respectively (three and nine months ended September 30, 2022 – nil and nil, respectively).

(iv) Neuronetics Note:

On March 31, 2023, the Company entered into an agreement with Neuronetics, Inc. (“Neuronetics”) to convert the Company’s outstanding account balance payable to Neuronetics of $5,883,644, together with Neuronetics’ out-of-pocket transaction costs, into a $6,000,000 secured promissory note (the “Neuronetics Note”). All amounts borrowed under the Neuronetics Note will bear interest at a rate of SOFR plus 7.65%.

19

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

10. Loans payable (continued):

Pursuant to the terms of the Neuronetics Note, in the event of default under the Neuronetics Note, the Company will be required to issue common share purchase warrants (the “Neuronetics Warrants”) to Neuronetics equal to (i) 200% of the unpaid amount of any delinquent amount or payment due and payable under the Neuronetics Note, together with all outstanding and unpaid accrued interest, fees, charges and costs, divided by (ii) the exercise price of the Neuronetics Warrants, which will represent a 20% discount to the 30-day volume-weighted average closing price of the Company’s common shares traded on Nasdaq prior to the date of issuance (subject to any limitations required by Nasdaq). Under the Neuronetics Note, the Company has granted Neuronetics a security interest in all of the Company’s assets.

In connection with the entry into the Neuronetics Note, the Company concurrently entered into an amendment to the Madryn Credit Agreement pursuant to which the Company is permitted to incur the indebtedness under the Neuronetics Note.

The carrying value of the Neuronetics Note as at September 30, 2023 is $5,466,667 (December 31, 2022 – nil). Interest expense for the three and nine months ended September 30, 2023 was $188,889 and $378,964, respectively (three and nine months ended September 30, 2022 – nil and nil, respectively). During the three and nine months ended September 30, 2023, the Company repaid promissory notes totalling $533,333 and $533,333, respectively (three and nine months ended September 30, 2022 – nil and nil, respectively).

(b) Non-controlling interest loans:

	September 30,		December 31,
	2023		2022
Non-controlling interest loans	$	61,621	$	94,136

20

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

10. Loans payable (continued):

The non-controlling interest holder partners of the Company, from time to time, provide additional capital contributions in the form of capital loans to the Company’s subsidiaries. These loans bear interest at an annual rate of 10%, compounded on a monthly basis. The loans are unsecured and are repayable subject to certain liquidity and solvency requirements and are classified as current liabilities. During the three and nine months ended September 30, 2023, the Company repaid non-controlling interest loans of $39,487 and $39,487, respectively, of which $24,000 relates to principal repayment (three and nine months ended September 30, 2022 – nil and nil, respectively). See note 23.

11. Shareholder loans:

(a) Klein Note:

On July 14, 2022, in connection with the Success TMS Acquisition, the Company assumed the obligation of Success TMS to repay a promissory note (the “Klein Note”) to Benjamin Klein, who is a significant shareholder of the Company. The Klein Note totals $2,090,264 and bears interest at a rate of 10% per annum and matures on May 1, 2024. Upon acquisition, the Klein Note was fair valued using an interest rate of 12%. The carrying value of the Klein Note as at September 30, 2023 is $2,147,153 (December 31, 2022 – $2,112,438).

(b) February 2023 Notes, February 2023 Greybrook Note and August 2023 Greybrook Note:

On February 3, 2023, the Company issued the February 2023 Notes to certain shareholders of the Company in an aggregate amount of $690,000. The February 2023 Notes bear interest at a rate consistent with the Madryn Credit Facility and mature on the earlier of September 30, 2027, at the election of the noteholders upon a change of control, upon the occurrence of an event of default and acceleration by the noteholders, or the date on which the loans under the Madryn Credit Facility are repaid.

On February 28, 2023, the Company issued a promissory note to Greybrook Health, who is a significant shareholder of the Company (the “February 2023 Greybrook Note”). The February 2023 Greybrook Note totals $1,000,000 and bears interest at a rate consistent with the Madryn Credit Facility and matures on the earlier of September 30, 2027, at the election of the noteholder upon a change of control, upon the occurrence of an event of default and acceleration by the noteholder, or the date on which the loans under the Madryn Credit Facility are repaid. In conjunction with the issuance of the February 2023 Greybrook Note, the Company granted Greybrook Health an option to convert up to $1,000,000 of the outstanding principal amount of the February 2023 Greybrook Note into common shares of the Company at a conversion price per share equal to 85.0% of the volume-weighted average trading price of the common shares of the Company on the Nasdaq for the five trading days immediately preceding the date of conversion, subject to customary anti-dilution adjustments and conversion limitations required by Nasdaq. The conversion instruments have been recorded utilizing the no proceeds allocated method, which results in all proceeds allocated to the financial liability. This conversion instrument was terminated on August 28, 2023 in connection with the exchange of the February 2023 Greybrook Note into Subordinated Convertible Notes. As additional consideration for the February 2023 Greybrook Note, the Company issued 135,870 common share purchase warrants to Greybrook Health (the “February 2023 Greybrook Warrants”), each exercisable for one common share of the Company at an exercise price of $1.84 per common share, subject to customary anti-dilution adjustments, expiring on February 28, 2028. There is a cashless exercise feature associated with the February 2023 Greybrook Warrants available to Greybrook Health.

21

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

11. Shareholder loans (continued):

On February 28, 2023, the fair value of the February 2023 Greybrook Warrants (as defined below) at grant date was $63,587. Per ASC 815, the February 2023 Greybrook Warrants meet the applicable criteria to qualify for equity classification. The warrants are initially recognized according to their relative fair value as compared to the host financial liability. The relative fair value of the February 2023 Greybrook Warrants on the date of inception has been deducted from the carrying value of the February 2023 Greybrook Note as a financing cost. See note 16(b) for February 2023 Greybrook Warrants.

On August 1, 2023, the Company issued an additional promissory note to Greybrook Health (the “August 2023 Greybrook Note”). The August 2023 Greybrook Note totals $1,000,000 and bears interest at a rate consistent with the Madryn Credit Facility and matures on the earlier of September 30, 2027, at the election of the noteholder upon a change of control, upon the occurrence of an event of default and acceleration by the noteholder, or the date on which the loans under the Madryn Credit Facility are repaid. In conjunction with the issuance of the August 2023 Greybrook Note, the Company granted Greybrook Health 250,000 common share purchase warrants, exercisable at 85% of the volume weighted average trading price of the common shares on the Nasdaq for the five trading days immediately preceding the exercise date, or if the common shares are not listed on any trading market at the time of exercise, a per share price based on fair market value, as determined by the Board, subject to customary anti-dilution adjustments, expiring on August 1, 2028 (the “August 2023 Greybrook Warrants" and together with the February 2023 Greybrook Warrants, the “Greybrook Warrants”). See note 16(b) for Greybrook Warrants.

On August 1, 2023, the fair value of the August 2023 Greybrook Warrants at grant date was $19,728. Per ASC 815, the August 2023 Greybrook Warrants meet the applicable criteria to qualify for equity classification. The warrants are initially recognized according to their relative fair value as compared to the host financial liability. The relative fair value of the August 2023 Greybrook Warrants on the date of inception has been deducted from the carrying value of the August 2023 Greybrook Note as a financing cost. See note 16(b) for August 2023 Greybrook Warrants.

22

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

11. Shareholder loans (continued):

Financing costs of $104,949 were incurred and are deferred over the term of the February 2023 Notes, the February 2023 Greybrook Note and the August 2023 Greybrook Note. Amortization of deferred financing costs and deferred losses for the three and nine months ended September 30, 2023 were $3,982 and $7,656, respectively (three and nine months ended September 30, 2022 – nil and nil, respectively) and were included in interest expense. On August 28, 2023, the February 2023 Notes, February 2023 Greybrook Note and August 2023 Greybrook Note were exchanged into Subordinated Convertible Notes. All unamortized financing costs and deferred losses were immediately expensed and interest accrued was forfeited upon exchange. A gain of $39,822 on loan extinguishment was recognized in equity in contributed surplus for the extinguishment of the February 2023 Notes, February 2023 Greybrook Note and August 2023 Greybrook Note as they resulted from a transaction with the owners in their capacity as the owners.

The carrying value of the February 2023 Notes, the February 2023 Greybrook Note and the August 2023 Greybrook Note as at September 30, 2023 is nil (December 31, 2022 – $2,112,438).

(c) Subordinated Convertible Notes:

On August 15, 2023, the Company issued Subordinated Convertible Notes to certain shareholders of the Company in an aggregate amount of $500,000, and on August 28, 2023, exchanged $3,690,000 of the February 2023 Notes, the February 2023 Greybrook Note and the August 2023 Greybrook Note for Subordinated Convertible Notes. The Subordinated Convertible Notes bear interest at a rate consistent with the Madryn Credit Facility, are convertible into common shares pursuant to the terms of the Note Purchase Agreement and mature on the earlier of March 31, 2028, in the event of a change of control, acceleration of other indebtedness, or six months following repayment or refinancing of all loans under the Madryn Credit Facility. The conversion instruments issued with the Subordinated Convertible Notes have been recorded utilizing the no proceeds allocated method, which results in all proceeds allocated to the financial liability.

23

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

11. Shareholder loans (continued):

In connection with the issuance of the Subordinated Convertible Notes, the Company concurrently entered into amendments to the Madryn Credit Agreement and the Neuronetics Note, pursuant to which the Company is permitted to incur the indebtedness under the Subordinated Convertible Notes.

The carrying value of the Subordinated Convertible Notes as at September 30, 2023 is $3,192,177 (December 31, 2022 – nil).

Interest expense for the three and nine months ended September 30, 2023 were $193,237 and $193,237, respectively (three and nine months ended September 30, 2022 – nil and nil, respectively). During the three and nine months ended September 30, 2023, the Company repaid nil and nil of the Subordinated Convertible Notes, respectively (three and nine months ended September 30, 2022 – nil and nil, respectively).

12. Other payables:

(a) Lender warrants:

	September 30,		December 31,
	2023		2022
Lender warrants	$	–	$	6,567

As consideration for providing the Oxford Credit Facility, the Company issued 51,307 common share purchase warrants to Oxford, each exercisable for one common share of the Company at an exercise price of C$11.20 per common share, expiring on December 31, 2025 (the “Oxford Warrants”).

As the exercise price is denoted in a different currency than the Company’s functional currency, the Oxford Warrants are recorded as a financial liability on the condensed interim consolidated statements of financial position. As at September 30, 2023, the value of the Oxford Warrants was nil (December 31, 2022 – $6,567).

The change in fair value of the Oxford Warrants during the three and nine months ended September 30, 2023 was a decrease of nil and $6,567, respectively (three and nine months ended September 30, 2022 – increase of $14,212 and decrease of $28,886, respectively) and was recorded in corporate, general and administrative expenses.

24

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

12. Other payables (continued):

(b) Deferred share units:

	September 30,		December 31,
	2023		2022
Deferred share units	$	304,123	$	578,061

On May 6, 2021, the Company adopted a deferred share unit plan (the “DSU Plan”) for non-employee directors (each, a “Non-Employee Director”). Each Non-Employee Director is required to take at least 50% of their annual retainer (other than annual committee Chair retainers) in deferred share units (“DSUs”) and may elect to take additional amounts in the form of DSUs. Discretionary DSUs may also be granted to Non-Employee Directors under the DSU Plan. The DSUs granted vest immediately.

Following a Non-Employee Director ceasing to hold all positions with the Company, the Non-Employee Director will receive a payment in cash at the fair market value of the common shares represented by the Non-Employee Director’s DSUs generally within ten days of the Non-Employee Director’s elected redemption date.

As the DSUs are cash-settled, the DSUs are recorded as cash-settled share-based payments and a financial liability has been recognized on the condensed interim consolidated balance sheets. During the three and nine months ended September 30, 2023, 469,384 and 874,601 DSUs were granted, respectively (three and nine months ended September 30, 2022 – 49,656 and 178,829, respectively). As at September 30, 2023, the value of the financial liability attributable to the DSUs was $304,123 (December 31, 2022 – $578,061). For the three and nine months ended September 30, 2023, the Company recognized a recovery of $151,084 and $273,938, respectively (three and nine months ended September 30, 2022 – expense of $374,682 and $402,226, respectively) in corporate, general and administrative expenses related to the DSUs.

25

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

12. Other payables (continued):

(c) Performance share units:

	September 30,		December 31,
	2023		2022
Performance share units	$	1,005	$	44,753

On May 6, 2021, the Company’s Equity Incentive Plan was amended and restated to permit the Company to grant performance share units (“PSUs”) and restricted share units (“RSUs”), in addition to stock options. Under the Equity Incentive Plan, the Company pays equity instruments of the Company, or a cash payment equal to the fair market value thereof, as consideration in exchange for employee and similar services provided to the Company. The Equity Incentive Plan is open to employees, directors, officers and consultants of the Company and its affiliates; however, Non-Employee Directors are not entitled to receive grants of PSUs.

On August 5, 2021, 38,647 PSUs were granted under the Equity Incentive Plan. The performance period in respect of this award is August 5, 2021 to December 31, 2023. The PSUs will vest on December 31, 2023 (the “Vesting Date”) subject to the attainment of certain performance vesting conditions. Subject to all terms and conditions of the Equity Incentive Plan and the terms of the grant agreement, any vested and outstanding PSUs will be settled following the Vesting Date and, in any event, no later than March 15, 2024. Pursuant to the grant agreement, upon satisfaction of the performance vesting conditions, the PSUs will be settled in cash.

Based on future projections with respect to the performance vesting conditions of the PSUs, the Company estimates that 3,865 PSUs will vest on the Vesting Date (December 31, 2022 – 23,188).

As at September 30, 2023, the value of the financial liability attributable to the PSUs is $1,005 (December 31, 2022 – $44,753).

As at September 30, 2023, the Company has not issued any RSUs under the Equity Incentive Plan (December 31, 2022 – nil).

26

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

12. Other payables (continued):

(d) Device contract termination:

	September 30,		December 31,
	2023		2022
Device contract termination	$	5,850,000	$	–

On August 21, 2023, the Company entered into a settlement and mutual release agreement with a device manufacturer for the termination of TMS device contracts. In accordance with the terms of the settlement, the Company recognized an amount payable of $6,600,000, due in equal instalments over 44 weeks. As a result of the settlement and mutual release agreement, the Company recognised a gain on extinguishment of liabilities totalling $2,030,635, offset by a loss on impairment of right-of-use assets totalling $5,211,751, resulting in a net loss on device contract termination of $3,181,116. During the three and nine months ended September 30, 2023, a loss of $3,181,116 and $3,181,116 on the settlement was recognized in the condensed interim consolidated statements of net loss and comprehensive loss, respectively (three and nine months ended September 30, 2022 – nil and nil, respectively). Pursuant to the terms of the mutual release, in the event of default, interest will accrue at a rate of 6% per annum on any unpaid portion. See note 8.

13. Deferred and contingent consideration:

	September 30,		December 31,
	2023		2022
Deferred and contingent consideration	$	1,000,000	$	1,000,000

The deferred and contingent consideration payable balance related to the acquisition of Achieve TMS East, LLC and Achieve TMS Central, LLC (the “Achieve TMS East/Central Acquisition”) as at December 31, 2021 was $1,250,000, made up of an estimated nil earn-out payable and $1,250,000 in restricted cash that was held in an escrow account, subject to finalization of the escrow conditions. During the year ended December 31, 2022, $250,000 of the restricted cash held in escrow was released to the vendors in accordance with the terms of the agreement.

27

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

13. Deferred and contingent consideration (continued):

As at September 30, 2023, the deferred and contingent consideration in relation to the of Achieve TMS East/Central Acquisition was $1,000,000 (December 31, 2022 – $1,000,000).

14. Common shares:

The Company is authorized to issue an unlimited number of common shares and an unlimited number of preferred shares, issuable in series. As at September 30, 2023 and December 31, 2022, there were nil preferred shares issued and outstanding.

	Number		Total amount
December 31, 2022		29,436,545	$	114,120,362
Issuance of common shares – 2023 Private Placement		11,363,635		6,139,262
Issuance of common shares – Alumni Purchase Agreement		1,973,831		481,437
September 30, 2023		42,774,011	$	120,741,061

(a)   2023 Private Placement:

On March 23, 2023, the Company completed the 2023 Private Placement. Pursuant to the 2023 Private Placement, an aggregate of 11,363,635 common shares were issued at a price of $0.55 per common share, for aggregate gross proceeds to the Company of $6,250,000. The Company incurred financing costs of $110,738 which were recorded as a reduction in equity. The 2023 Private Placement included investments by Madryn, together with certain of the Company’s other major shareholders, including Greybrook Health and affiliates of MSS. In connection with the 2023 Private Placement, Greybrook Health, Madryn and MSS each received customary resale, demand and “piggy-back” registration rights pursuant to a registration rights agreement entered into among the parties on closing of the 2023 Private Placement.

(b)   Alumni Purchase Agreement:

On July 13, 2023, the Company entered into the Alumni Purchase Agreement with Alumni, pursuant to which Alumni has agreed to provide equity line financing for sales from time to time of up to $4,458,156 of common shares (the “Maximum Commitment Amount”). The common shares will be issued from time to time (the “Purchase Shares”) in connection with the delivery of purchase notices delivered by the Company to Alumni, at variable prices set forth therein, in accordance with the terms of the Alumni Purchase Agreement. Each individual sale of Purchase Shares will be limited to no more than the number of common shares that would result in the direct or indirect beneficial ownership by Alumni of more than 9.99% of the then-outstanding common shares.

28

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

14. Common shares (continued):

In exchange for Alumni entering into the Alumni Purchase Agreement, the Company issued 212,293 common shares to Alumni (the “Commitment Shares” and together with the Purchase Shares, the “Offered Shares”). The Alumni Purchase Agreement expires upon the earlier of the aggregate offering amount of Offered Shares meeting the Maximum Commitment Amount or December 31, 2023. As of September 30, 2023, the Company has issued an aggregate of 1,761,538 Purchase Shares for aggregate gross proceeds to the Company of $481,437.

15. Contributed surplus:

Contributed surplus is comprised of share-based compensation and lender warrants.

(a) Share-based compensation - options

Stock options granted under the Equity Incentive Plan are equity-settled. The fair value of the grant of the options is recognized as an expense in the condensed interim consolidated statements of net loss and comprehensive loss. The total amount to be expensed is determined by the fair value of the options granted. The total expense is recognized over the vesting period which is the period over which all of the service vesting conditions are satisfied. The vesting period is determined at the discretion of the Board and has ranged from immediate vesting to over three years.

The maximum number of common shares reserved for issuance, in the aggregate, under the Equity Incentive Plan is 10% of the aggregate number of common shares outstanding, provided that the maximum number of RSUs and PSUs shall not exceed 5% of the aggregate number of common shares outstanding. As at September 30, 2023, this represented 4,277,401 common shares (December 31, 2022 – 2,943,655).

As at September 30, 2023, 1,661,500 stock options are outstanding (December 31, 2022 – 764,667). The stock options have an expiry date of ten years from the applicable date of issue. The Company has not issued any RSUs or equity-settled PSUs under the Equity Incentive Plan.

29

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

15. Contributed surplus (continued):

	September 30, 2023					December 31, 2022
				Weighted					Weighted
	Number			average		Number			average
	of stock			exercise		of stock			exercise
	options			price		options			price
Outstanding, beginning of period		764,667		$	8.15		897,500		$	8.66
Granted		980,000			0.75		–			–
Forfeited		(83,167	)		7.06		(132,833	)		(11.59	)
Outstanding, end of period		1,661,500		$	3.84		764,667		$	8.15

The weighted average contractual life of the outstanding options as at September 30, 2023 was 7.4 years (December 31, 2022 – 4.8 years).

The total number of stock options exercisable as at September 30, 2023 was 1,153,333 (December 31, 2022 – 642,466).

During the three and nine months ended September 30, 2023, the Company recorded a total share-based options compensation expense of $14,740 and $591,470, respectively (three and nine months ended September 30, 2022 – $2,762 and $315,966, respectively).

The following stock options were granted during the nine months ended September 30, 2023:

(i) On May 15, 2023, 980,000 stock options were granted at an estimated fair value of $0.66 per option using the Black-Scholes option pricing model based on the following assumptions: volatility of 93.09%; remaining life of ten years; expected dividend yield of 0%; forfeiture rate of 6.89% and an annual risk-free interest rate of 3.47%.

As at September 30, 2023, the total compensation cost not yet recognized related to options granted is approximately $244,078 (December 31, 2022 – $190,536) and will be recognized over the remaining average vesting period of 1.09 years (December 31, 2022 – 0.69 years).

(b) Greybrook Warrants

As consideration for the purchase of the February 2023 Greybrook Note, the Company issued 135,870 February 2023 Greybrook Warrants to Greybrook Health. Each February 2023 Greybrook Warrant is exercisable for one common share at an exercise price of $1.84, subject to customary anti-dilution adjustments. The February 2023 Greybrook Warrants will expire on February 28, 2028. Per ASC 815, the Greybrook Warrants meet the applicable criteria to qualify for equity classification and therefore are included in contributed surplus. See note 11(b).

30

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

15. Contributed surplus (continued):

The fair value of the February 2023 Greybrook Warrants granted on February 28, 2023 was estimated to be $0.47 per warrant using the Black-Scholes option pricing model based on the following assumptions: volatility of 48.86% calculated based on a comparable company; remaining life of 5.0 years; expected dividend yield of 0%; forfeiture rate of 0% and an annual risk-free interest rate of 4.18%.

As consideration for the purchase of the August 2023 Greybrook Note issued on August 1, 2023, the Company issued 250,000 August 2023 Greybrook Warrants. Each August 2023 Greybrook Warrant is exercisable for one common share at an exercise price equal to 85% of the volume weighted average trading price of the common shares on the Nasdaq for the five trading days immediately preceding the applicable exercise date, or if the common shares are not listed on any trading market at the time of exercise, a per share price based on fair market value, as determined by the Board, subject to customary anti-dilution adjustments, expiring on August 1, 2028. Per ASC 815, the Greybrook Warrants meet the applicable criteria to qualify for equity classification and therefore are included in contributed surplus. See note 11(b).

The fair value of the August 2023 Greybrook Warrants granted on August 1, 2023 were valued at $19,728 using a closing share price of $0.50 per share and 85% of the five trading days immediately preceding the exercise date of $0.49 per share.

The weighted average contractual life of the Greybrook Warrants as at September 30, 2023 was 4.4 years (December 31, 2022 - nil years).

The total number of the February Greybrook Warrants exercisable as at September 30, 2023 was 385,870 (December 31, 2022 - nil).

The aggregate fair value of the Greybrook Warrants granted during the nine months ended September 30, 2023 was $9,902 (December 31, 2022 - nil).

16. Contingencies:

The Company may be involved in certain legal matters arising from time to time in the normal course of business. The Company records provisions that reflect management’s best estimate of any potential liability relating to these matters.

31

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

16. Contingencies (continued):

(a) Purchase Agreement Claims

On May 24, 2023, the Seller Parties filed a complaint in the Superior Court of the State of Delaware against the Company and certain executive officers of the Company, and subsequently filed a first amended complaint on August 31, 2023 (the “Delaware Complaint”), concerning alleged disputes arising out of the Success TMS Acquisition (the “Purchase Agreement Claims”). The Purchase Agreement Claims allege contractual fraud, indemnification for breach of certain representations and warranties of the Company contained in the Purchase Agreement, other breaches of the Purchase Agreement and a registration rights agreement, and breach of the implied covenant of good faith and fair dealing. The Delaware Complaint seeks damages in an amount to be determined at trial, which are alleged to exceed $1 million. On October 2, 2023, the Company and the other defendants moved to dismiss the Purchase Agreement Claims. The motion is expected to be fully briefed by December 8, 2023.

(b) Klein Note Action

On April 25, 2023, Batya Klein, as trustee of the Marital Trust created by Kenneth S. Klein Revocable Trust U/A/D 10/20/80 (the “Klein Plaintiff”) filed a complaint against Success TMS in the Superior Court of New Jersey, Law Division (Bergen County) alleging a single claim for breach of contract of the Klein Note, in the principal amount of $2,090,264 (the “Klein Note Action” and together with the Delaware Complaint, the “Klein Matters”). Specifically, the complaint alleged that there was an event of default under the Klein Note and demanded acceleration of the indebtedness due thereunder. The Company moved to dismiss the Klein Note Action on the basis that there was no event of default and the demand for acceleration was defective, and that the New Jersey court lacked jurisdiction to hear the matter.

On August 18, 2023, the New Jersey court denied the motion to dismiss, ruling that it had jurisdiction to hear the matter and that, assuming the truth of the allegations in the complaint, the Klein Plaintiff had the right to seek legal remedy for the alleged default. The parties remain in discussions to seek a resolution to the Klein Note Action.

The Company believes that the resolution of these matters is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

32

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

17. Pensions:

The Company has adopted a defined contribution pension plan for its employees whereby the Company matches contributions made by participating employees up to a maximum of 3.5% of such employees’ annual salaries. During the three and nine months ended September 30, 2023, contributions, which were recorded as expenses within direct center and patient care costs, other regional and center support costs and corporate, general and administrative expenses, amounted to $177,391 and $553,300 (three and nine months ended September 30, 2022 – $160,087 and $415,514, respectively).

18. Income taxes:

During the nine months ended September 30, 2023, there were no significant changes to the Company’s tax position.

19. Risk management arising from financial instruments:

In the normal course of business, the Company is exposed to risks related to financial instruments that can affect its operating performance. These risks, and the actions taken to manage them, are as follows:

(a) Fair value:

The Company has Level 1 financial instruments which consists of cash, restricted cash, accounts receivable and accounts payable and accrued liabilities which approximate their fair value given their short-term nature. The Company also has lender warrants, DSUs and PSUs that are considered Level 2 financial instruments (see note 12). The Company has deferred and contingent consideration (note 13) that are considered Level 3 financial instruments.

The carrying value of the loans payable, shareholder loans and finance lease obligations approximates their fair value given the difference between the discount rates used to recognize the liabilities in the condensed interim consolidated balance sheets and the market rates of interest is insignificant.

Financial instruments are classified into one of the following categories: financial assets or financial liabilities.

33

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

19. Risk management arising from financial instruments (continued):

(b) Credit risk:

Credit risk arises from the potential that a counterparty will fail to perform its obligations. The Company is exposed to credit risk from patients and third-party payors including federal and state agencies (under the Medicare programs), managed care health plans and commercial insurance companies. The Company’s exposure to credit risk is mitigated in large part due to the majority of the accounts receivable balance being receivable from large, creditworthy medical insurance companies and government-backed health plans.

The Company’s aging schedule in respect of its accounts receivable balance as at September 30, 2023 and December 31, 2022 is provided below:

Days since service delivered	September 30, 2023		December 31, 2022
0-90	$	5,000,326	$	6,163,429
91-180		751,020		884,061
181-270		336,986		257,187
270+		128,640		44,169
Total accounts receivable	$	6,216,972	$	7,348,846

Based on the Company’s industry, none of the accounts receivable in the table above are considered “past due”. Furthermore, the payors have the ability and intent to pay, but price lists for the Company’s services are subject to the discretion of payors. As such, the timing of collections is not linked to increased credit risk. The Company continues to collect on services rendered in excess of 24 months from the date such services were rendered.

(c) Liquidity risk:

Liquidity risk is the risk that the Company may encounter difficulty in raising funds to meet its financial commitments or can only do so at excessive cost. The Company ensures there is sufficient liquidity to meet its short-term business requirements, taking into account its anticipated cash flows from operations, its holdings of cash and its ability to raise capital from existing or new investors and/or lenders (see note 2(a)).

34

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

19. Risk management arising from financial instruments (continued):

(d) Currency risk:

Currency risk is the risk to the Company’s earnings that arises from fluctuations in foreign exchange rates and the degree of volatility of those rates. The Company has minimal exposure to currency risk as substantially all of the Company’s revenue, expenses, assets and liabilities are denominated in U.S. dollars. The Company pays certain vendors and payroll costs in Canadian dollars from time to time, but due to the limited size and nature of these payments it does not give rise to significant currency risk.

(e) Interest rate risk:

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to changes in interest rates on its cash and long-term debt. Certain loans payable and shareholder loans (see note 10 and note 11) bear interest at a rate equal to the 3-month Term SOFR plus 9.1% or at a rate equal to the 3-month Term SOFR plus 7.65%. A 1% increase in interest rates would result in a $3,241,084 increase to interest expense on the condensed interim consolidated statements of comprehensive loss over the term of the loans payable and shareholder loans.

20. Capital management:

The Company’s objective is to maintain a capital structure that supports its long-term growth strategy, maintains creditor and customer confidence, and maximizes shareholder value.

The capital structure of the Company consists of its shareholders’ equity, including contributed surplus and deficit, as well as loans payable and shareholder loans.

The Company’s primary uses of capital are to finance operations, finance new center start-up costs, increase non-cash working capital, capital expenditures and finance service debt obligations. The Company’s objectives when managing capital are to ensure the Company will continue to have enough liquidity so it can provide its services to its customers and returns to its shareholders. The Company, as part of its annual budgeting process and on an ongoing basis, periodically evaluates its estimated cash requirements to fund working capital requirements of existing operations. Based on this and taking into account its anticipated cash flows from operations and its holdings of cash, the Company validates whether it has the sufficient capital or needs to obtain additional capital.

35

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

21. Related party transactions:

(a) Transactions with significant shareholder – Greybrook Health

As at September 30, 2023, $4,884 is included in accounts payable and accrued liabilities for amounts payable for management services rendered and other overhead costs incurred by Greybrook Health in the ordinary course of business (December 31, 2022 – nil). These amounts were recorded at their exchange amount, being the amount agreed to by the parties.

During the three and nine months ended September 30, 2023, the Company recognized $1,788 and $5,011 in corporate, general and administrative expenses (three and nine months ended September 30, 2022 – $6 and $328, respectively) related to transactions with Greybrook Health.

(b) Loans from shareholder – Greybrook Health

In connection with the February 2023 Notes, the February 2023 Greybrook Note and the August 2023 Greybrook Note, the Company received loans from and issued promissory notes to Greybrook Health, who is a significant shareholder of the Company. The February 2023 Notes, the February 2023 Greybrook Note and the August 2023 Greybrook Note total $2,437,604 and were exchanged on August 28, 2023 for Subordinated Convertible Notes with the same principal amount. The Subordinated Convertible Notes bear interest at a rate consistent with the Madryn Credit Facility and mature on the earlier of September 30, 2027, at the election of Greybrook Health upon a change of control, upon the occurrence of an event of default and acceleration by Greybrook Health, or the date on which the loans under the Madryn Credit Facility are repaid.

In conjunction with the February 2023 Greybrook Note, the Company granted Greybrook Health an option to convert up to $1,000,000 of the outstanding principal amount of the February 2023 Note into common shares of the Company at a conversion price per share equal to 85.0% of the volume-weighted average trading price of the common shares of the Company on the Nasdaq for the five trading days immediately preceding the date of conversion, subject to customary anti-dilution adjustments and conversion limitations required by Nasdaq. This conversion instrument was terminated on August 28, 2023 in connection with the exchange of the February 2023 Greybrook Note for Subordinated Convertible Notes. As additional consideration for the February 2023 Greybrook Note, the Company issued Greybrook 135,870 February 2023 Greybrook Warrants, each exercisable for one common share of the Company at an exercise price of $1.84 per common share, subject to customary anti-dilution adjustments, expiring on February 28, 2028.

36

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

21. Related party transactions (continued):

As consideration for the purchase of the August 2023 Greybrook Note the Company issued 250,000 August 2023 Greybrook Warrants to Greybrook Health. Each August 2023 Greybrook Warrant is exercisable for one common share of the Company at an exercise price equal to 85% of the volume weighted average trading price of the common shares on the Nasdaq for the five trading days immediately preceding the exercise date, or if the common shares are not listed on any trading market at the time of exercise, a per share price based on fair market value, as determined by the Board, subject to customary anti-dilution adjustments, expiring on August 1, 2028.

On August 15, 2023, the Company issued Subordinated Convertible Notes to Greybrook Health in an aggregate amount of $500,000. In addition, on August 28, 2023, the total par value of $2,437,604 of the previously issued February 2023 Notes, the February 2023 Greybrook Note, and the August 2023 Greybrook Note were exchanged for Subordinated Convertible Notes. The Subordinated Convertible Notes bear interest at a rate consistent with the Madryn Credit Facility, are convertible according to the terms of the Note Purchase Agreement and mature on the earlier of March 31, 2028, in the event of a change of control, acceleration of other indebtedness, or six months following repayment or refinancing of all loans under the Madryn Credit Facility. See note 11(b), note 11(c) and note 12(a).

During the three and nine months ended September 30, 2023, the Company recognized $92,333 and $166,362 in interest expense (three and nine months ended September 30, 2022 – nil and nil, respectively) related to the February 2023 Notes, the February 2023 Greybrook Note, the August 2023 Greybrook Note and the Subordinated Convertible Notes issued to Greybrook Health.

(c) Transactions with significant shareholder – Benjamin Klein

During the three and nine months ended September 30, 2023, the Company recognized $76,921 and $229,178 in corporate, general and administrative expenses (three and nine months ended September 30, 2022 – $10,801 and $10,801, respectively) for amounts payable for employment services rendered and other related costs incurred by Benjamin Klein in the ordinary course of business.

As at September 30, 2023, nil is included in accounts payable and accrued liabilities for amounts payable for travel expenses and other related costs incurred by Benjamin Klein in the ordinary course of business.

37

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

21. Related party transactions (continued):

(d) Loan from significant shareholder – Benjamin Klein

On July 14, 2022, in connection with the Success TMS Acquisition, the Company assumed the obligation to repay the Klein Note to Benjamin Klein, who is a significant shareholder of the Company. The Klein Note totals $2,090,264 and bears interest at a rate of 10% per annum and matures on May 1, 2024. The carrying amount of the Klein Note as at September 30, 2023 is $2,147,153 (December 31, 2022 – 2,112,438). See note 11(a).

During the three and nine months ended September 30, 2023, the Company recognized $64,175 and $191,485 in interest expense (three and nine months ended September 30, 2022 – nil and nil, respectively) related to the Klein Note.

(e) Loans from shareholders and officers

The February 2023 Notes (not including Greybrook Health’s contribution) total $312,396 and bear interest at a rate consistent with the Madryn Credit Facility and mature on the earlier of September 30, 2027, at the election of the noteholders upon a change of control, upon the occurrence of an event of default and acceleration by the noteholders, or the date on which the loans under the Madryn Credit Facility are repaid.

On August 28, 2023, the total par value of $312,396 of the February 2023 Notes (not including Greybrook Health’s contribution) were exchanged for Subordinated Convertible Notes. The Subordinated Convertible Notes bear interest at a rate consistent with the Madryn Credit Facility, are convertible according to the terms of the Note Purchase Agreement and mature on the earlier of March 31, 2028, in the event of a change of control, acceleration of other indebtedness, or six months following repayment or refinancing of all loans under the Madryn Credit Facility.

The carrying amount of the Subordinated Convertible Notes issued to shareholders and officers (excluding Greybrook Health and Madryn) as at September 30, 2023 is $316,399 (December 31, 2022 – nil). See note 10(a) and note 11(b).

During the three and nine months ended September 30, 2023, the Company recognized $14,323 and $32,654 in interest expense (three and nine months ended September 30, 2022 – nil and nil, respectively) related to these Subordinated Convertible Notes.

38

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

21. Related party transactions (continued):

(f) Loan from significant shareholder – Madryn

On July 14, 2022, the Company entered into the Madryn Credit Agreement in respect of the Madryn Credit Facility, which was subsequently amended during the nine months ended September 30, 2023, for a total principal balance of $65,299,000. Pursuant to the 2023 Private Placement completed on March 23, 2023, Madryn is now a significant shareholder of the Company. See note 10(a), note 14 and note 25.

On August 15 and September 1, 2023, the Company issued Subordinated Convertible Notes to Madryn in an aggregate amount of $3,000,000. The Subordinated Convertible Notes bear interest at a rate consistent with the Madryn Credit Facility, are convertible according to the terms of the Note Purchase Agreement and mature on the earlier of March 31, 2028, in the event of a change of control, acceleration of other indebtedness, or six months following repayment or refinancing of all loans under the Madryn Credit Facility. See note 10(a).

During the three and nine months ended September 30, 2023, the Company recognized $47,044 and $47,044 in interest expense, respectively (three and nine months ended September 30, 2022 – nil and nil, respectively) related to the Subordinated Convertible Notes issued to Madryn.

22. Basic and diluted loss per share:

	Three months ended						Nine months ended
	September 30,			September 30,			September 30,			September 30,
	2023			2022			2023			2022
Net loss attributable to the shareholders of Greenbrook TMS	$	(13,491,287	)	$	(16,291,248	)	$	(36,824,871	)	$	(30,958,181	)
Weighted average common shares outstanding:
Basic and diluted		42,232,942			27,774,451			37,810,209			21,138,295
Loss per share:
Basic and diluted	$	(0.32	)	$	(0.59	)	$	(0.97	)	$	(1.46	)

39

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

22. Basic and diluted loss per share (continued):

For the three and nine months ended September 30, 2023, the effect of 1,661,500 options (September 30, 2022 – 796,334) and 437,177 Greybrook Warrants and Oxford Warrants (September 30, 2022 – 51,307) have been excluded from the diluted loss per share calculation because this effect would be anti-dilutive.

23. Non-controlling interest:

As a result of operating agreements with non-wholly owned entities, the Company has control over these entities under U.S. GAAP, as the Company has power over all significant decisions made by these entities and thus 100% of the financial results of these subsidiaries are included in the Company’s consolidated financial results.

On February 27, 2023, the Company acquired a portion of the non-controlling ownership interest in Greenbrook TMS Connecticut LLC for the release of liabilities and losses. As at September 30, 2023, the Company has an ownership interest of 100% of Greenbrook TMS Connecticut LLC.

On September 29, 2023, the Company acquired a portion of the non-controlling ownership interest in Greenbrook TMS Arlington LLC for $513 for the release of liabilities and losses and repaid the non-controlling interest loan with the former minority party in an amount of $39,487, for total consideration of $40,000. As at September 30, 2023, the Company has an ownership interest of 100% of Greenbrook TMS Arlington LLC.

40

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

23. Non-controlling interest (continued):

The following table summarizes the aggregate financial information for the Company’s non-wholly owned entities as at September 30, 2023 and December 31, 2022:

	September 30,			December 31,
	2023			2022
Cash	$	103,092		$	580,057
Accounts receivable, net		2,328,499			2,087,763
Prepaid expenses and other		556,675			483,082
Property, plant and equipment		978,865			1,085,006
Finance right-of-use assets		87,126			2,349,699
Operating right-of-use assets		5,850,078			7,566,048
Accounts payable and accrued liabilities		1,255,038			1,666,756
Finance lease liabilities		90,979			2,089,999
Operating lease liabilities		6,108,814			7,918,347
Loans payable, net		15,666,428			15,066,552
Shareholder’s equity (deficit) attributable to the shareholders of Greenbrook TMS		(8,905,343	)		(9,812,872	)
Shareholder’s deficit attributable to non-controlling interest		(5,867,224	)		(3,282,610	)
Distributions paid to non-controlling interest		(20,000	)		(320,250	)
Partnership buyout		253,251			(496,659	)
Historical subsidiary investment by non-controlling interest		1,322,392			1,322,392

The following table summarizes the aggregate financial information for the Company’s non-wholly owned entities for the three and nine months ended September 30, 2023 and September 30, 2022:

	Three months ended						Nine months ended
	September 30,			September 30,			September 30,			September 30,
	2023			2022			2023			2022
Revenue	$	5,561,769		$	5,792,515		$	18,473,712		$	18,509,552
Net income (loss) attributable to the shareholders of Greenbrook TMS		(311,254	)		(1,056,315	)		(1,353,456	)		(2,802,434	)
Net income (loss) attributable to non-controlling interest		(66,025	)		(244,887	)		(249,575	)		(304,924	)

41

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

24. Expenses by nature:

The components of the Company’s other regional and center support costs include the following:

	Three months ended				Nine months ended
	September 30,		September 30,		September 30,		September 30,
	2023		2022		2023		2022
Salaries and bonuses	$	4,356,592	$	5,081,645	$	13,129,558	$	11,918,622
Marketing expenses		407,538		3,176,159		1,224,139		6,581,059
Total	$	4,764,130	$	8,257,804	$	14,353,697	$	18,499,681

The components of the Company’s corporate, general and administrative expenses include the following:

	Three months ended				Nine months ended
	September 30,		September 30,		September 30,		September 30,
	2023		2022		2023		2022
Salaries and bonuses	$	3,629,623	$	5,156,259	$	11,880,351	$	12,211,803
Professional and legal fees		937,735		1,133,652		3,565,048		2,918,390
Computer supplies and software		659,320		657,160		2,091,340		1,528,543
Marketing expenses		52,237		169,653		83,504		394,223
Financing costs		100,000		–		335,094		–
Restructuring expense		36,500		–		500,368		–
Insurance		113,909		242,178		476,687		670,997
Credit facility amendment fee (note 10(a))		–		–		1,000,000		–
Other		456,737		339,978		1,472,730		711,159
Total	$	5,986,061	$	7,698,880	$	21,405,122	$	18,435,115

On March 6, 2023, the Company announced that it is embarking on a comprehensive restructuring plan (the “Restructuring Plan”) that aims to strengthen the Company by leveraging its scale to further reduce complexity, streamlining its operating model and driving operational efficiencies to achieve profitability.

As part of this Restructuring Plan, the Company is decreasing its operating footprint. The remaining Treatment Centers will continue clinical TMS offerings and a select and growing number of Treatment Centers will continue offering Spravato® (esketamine nasal spray) therapy.

42

Greenbrook TMS Inc.

Notes to Condensed Interim Consolidated Financial Statements (continued)

(Expressed in U.S. dollars, unless otherwise stated)

Three and nine months ended September 30, 2023 and 2022

(Unaudited)

24. Expenses by nature (continued):

During the three and nine months ended September 30, 2023, the Company recognized restructuring expenses of $36,500 and $500,368, respectively, in corporate, general and administrative expenses related to the Restructuring Plan (three and nine months ended September 30, 2022 – nil and nil, respectively).

25. Subsequent events:

(a) Additional Loans under Madryn Credit Facility

On October 19 and November 2, 2023, the Company entered into amendments to the Madryn Credit Facility, whereby Madryn and its affiliated entities extended two additional tranches of debt financing to the Company in an aggregate principal amount of $3,105,913. The terms and conditions are consistent with the terms and conditions of the Company’s existing aggregate $65,299,000 term loan under the Madryn Credit Facility in all material respects.

The new tranches also provide Madryn with the option to convert approximately $282,356 of the outstanding principal into common shares of the Company at a conversion price per share equal to $1.90, subject to customary anti-dilution adjustments. The conversion instrument corresponds to the conversion provisions for the Madryn Conversion Instruments.

In addition, on October 12, 2023, the Company entered into an amendment to the Madryn Credit Facility to extend the period during which the Company’s minimum liquidity covenant is reduced from $3,000,000 to $300,000 to November 15, 2023.

(b) Subordinated Convertible Notes

On October 3, October 12 and October 13, 2023, the Company issued Subordinated Convertible Notes to Madryn and various investors in an aggregate amount of $1,595,000.

43

XML

Cover	Apr. 25, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Apr. 25, 2024
Entity File Number	001-40199
Entity Registrant Name	GREENBROOK TMS INC.
Entity Central Index Key	0001735948
Entity Tax Identification Number	98-1512724
Entity Incorporation, State or Country Code	A6
Entity Address, Address Line One	890 Yonge Street, 7th Floor
Entity Address, City or Town	Toronto
Entity Address, Country	CA
Entity Address, Postal Zip Code	M4W 3P4
City Area Code	866
Local Phone Number	928-6076
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Shares, without par value
Trading Symbol	GBNH
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false