Item 2.05 Costs Associated With Exit or Disposal Activities.
On April 8, 2020, Neuronetics, Inc. (the “Company”) adopted a plan to significantly reduce operating expenses in connection with theCOVID-19 pandemic and the resulting economic downturn (the “Plan”). The Plan included a significant reduction in force across all functions within the Company (the “RIF”).
In the second quarter of 2020, the Company will pay and recordone-time separation-related charges for the RIF equal to approximately $2.4 million. The Company estimates that the Plan will produce net savings of approximately $18 million through December 31, 2020. The separation-related charges and cost savings that the Company expects to incur or realize in connection with the Plan are subject to a number of assumptions, and actual results may differ materially. The Company may also incur other charges or cash expenditures not currently contemplated due to events that may occur as a result of, or associated with, the Plan.
This Current Report onForm 8-K contains forward-looking statements, including, without limitation, statements related to the estimated separation-related charges and cost savings in connection with the Plan. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management. Management believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results, events and developments to differ materially from the Company’s historical experience and its present expectations or projections. These risks and uncertainties include, without limitation, risks and uncertainties related to: the impact of theCOVID-19 pandemic on general political and economic conditions, including as a result of efforts by governmental authorities to mitigate theCOVID-19 pandemic, such as travel bans, shelter in place orders and third-party business closures and resource allocations, manufacturing and supply chains and patient access to commercial products; the Company’s ability to execute its business continuity, operational and budget plans in light of theCOVID-19 pandemic; the Company’s ability to achieve or sustain profitable operations due to its history of losses; the Company’s reliance on the sale and usage of its NeuroStar Advanced Therapy System to generate revenues; the scale and efficacy of the Company’s salesforce; availability of coverage and reimbursement from third-party payors for treatments using the Company’s products; physician and patient demand for treatments using the Company’s products; developments in respect of competing technologies and therapies for the indications that the Company’s products treat; product defects; the Company’s ability to obtain and maintain intellectual property protection for its technology; developments in clinical trials or regulatory review of NeuroStar Advanced Therapy System for additional indications; and developments in regulation in the United States and other applicable jurisdictions. For a discussion of these and other related risks, please refer to the Company’s recent United States Securities and Exchange Commission (“SEC”) filings which are available on the SEC’s website atwww.sec.gov. These forward-looking statements are based on the Company’s expectations and assumptions as of the date of this press release. Except as required by law, the Company undertakes no duty or obligation to update any forward-looking statements contained in this press release as a result of new information, future events or changes in the Company’s expectations.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Departure of Director. On April 8, 2020, Stephen Campe informed the board of directors (the “Board”) of his intent not to stand for reelection at the Company’s annual meeting of stockholders (the “Annual Meeting”) scheduled for May 26, 2020. Accordingly, Mr. Campe will retire from the Board, and his term as a director of the Company will end, at the conclusion of the Annual Meeting. Mr. Campe’s decision not to stand for reelection was not due to any disagreement with the Company. The Board has nominated John K. Bakewell to fill the Board seat to be vacated by Mr. Campe at the Annual Meeting. Information regarding Mr. Bakewell’s background and professional experience is set forth in the Company’s proxy statement filed with the SEC on April 13, 2020.
Transition Services Agreement. Effective on April 8, 2020, the Company and Christopher Thatcher, the Company’s former President and Chief Executive Officer, entered into a transition services agreement (the “Transition Services Agreement”), whereby Mr. Thatcher will provide transition services and advice as requested by the Company from time to time through May 1, 2020 (such period, the “Transition Period”). Following the Transition Period, Mr. Thatcher will cease to be employed by the Company.
Pursuant to the Transition Services Agreement, the Company will continue to pay Mr. Thatcher’s base salary at the rate of $535,000 per year, and Mr. Thatcher will continue to participate in the employee benefits for which he is eligible. Under the Transition Services Agreement, Mr. Thatcher has also agreed to a customary current release of claims against the Company and to execute a separation agreement and release in favor of the Company (the “Post-Employment Release”) following the Transition Period. The compensation to be paid to Mr. Thatcher under the Post-Employment Release is consistent with the compensation described in the Company’s Current Report on Form8-K filed with the SEC on March 6, 2020, except that the required payment in respect of the 2020 bonus program will be paid in the second quarter of 2020 rather than the first quarter of 2021.
