| Item 1.01. | Entry into a Material Definitive Agreement. |
On April 21, 2020, Neuronetics, Inc. (the “Company”) entered into a promissory note (the “Note”) with Silicon Valley Bank (the “Lender”), evidencing an unsecured loan (the “Loan”) in the amount of $6,360,327 made to the Company under the Paycheck Protection Program (the “PPP”). The PPP is a program of the U.S. Small Business Administration (the “SBA”) established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). On the date that the Company submitted its PPP application to the Lender and on the date that the Company entered into the Note, the Company had a good faith belief, after taking into account the disruptions to the Company’s then-current business activity and its inability to access other sources of liquidity sufficient to support its ongoing operations in a manner that would not be significantly detrimental to the Company’s business, that the then-current economic uncertainty made its loan request necessary to support its ongoing operations.
The interest rate on the Loan is 1.0% per annum. The Note matures on April 21, 2022. On November 21, 2020 (the “First Payment Date”), the Company is required to pay all accrued interest under the Loan that is not forgiven in accordance with the terms of the PPP. Additionally, on the First Payment Date and on the 21st day of each month thereafter until April 21, 2022, the Company must make equal monthly payments of the amount of principal under the Loan that is not forgiven in accordance with the terms of the PPP and related accrued interest thereon. The proceeds of the Loan may be used to pay payroll and make certain covered interest payments, lease payments and utility payments. The Note contains events of default and other conditions customary for a Note of this type.
Under the terms of the CARES Act, PPP loan recipients can be granted forgiveness for all or a portion of the loan granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds for payment of payroll costs and any payments of certain covered interest, lease and utility payments. The terms of any forgiveness also may be subject to further requirements in any regulations and guidelines the SBA may adopt. No assurance can be provided that the Company will obtain forgiveness of the Note in whole or in part.
The foregoing is a description of the material terms and conditions of the Note and is not a complete discussion of the Note. Accordingly, the foregoing is qualified in its entirety by reference to the full text of the Note, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
| Item 2.03. | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information provided in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.
Cautionary Statement Regarding Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from predicted or expected results. The inclusion of forward-looking statements should not be regarded as a representation by the Company that any of these results will be achieved. Actual results may differ from those contemplated by forward-looking statements in this Current Report on Form 8-K, such as statements regarding the Company’s use of proceeds from the Loan, the amount of the loan to the Company that will be eligible to be forgiven, any actual forgiveness of some or all of the amount of the Loan evidenced by the Note, the ability and legality of the Company retaining the proceeds from the Loan in light of regulatory requirements, related guidance and public opinion and sentiment and other risks inherent in the Company’s business including those described in the Company’s periodic filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on forward-looking statements, which are based on the Company’s current expectations and assumptions and speak only as of the date of this Current Report on Form 8-K. The Company does not intend to revise or update any forward-looking statement in this Current Report on Form 8-K to reflect events or circumstances arising after the date hereof, except as may be required by law. All forward-looking statements are qualified in their entirety by this cautionary statement.
