Item 2.02. Results of Operations and Financial Condition.
On November 14, 2022, Pear Therapeutics, Inc. (the "Company") issued a press release reporting the financial results of the Company for the third quarter ended September 30, 2022 and other business developments. A copy of the press release is attached to this Current Report as Exhibit 99.1.
The information in this Current Report, including Exhibit 99.1 attached hereto, is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 2.05. Costs Associated with Exit or Disposal Activities.
On November 14, 2022, due to the worsening macroeconomic environment, the Board of Directors of the Company approved a reduction in the Company's workforce by approximately 59 employees, representing approximately 22% of the Company's total workforce as of September 30, 2022. The reduction in workforce is intended to reduce operating expenses.
In connection with the reduction in force, the Company estimates it will incur approximately $2.6 million of cash based expenses related to employee severance, benefits, and related costs, primarily in the fourth quarter of 2022, when it anticipates that the reduction in workforce will be substantially complete. In addition, the Company expects to record a stock-based compensation charge of between $0.3 million and $0.9 million and corresponding payroll tax expense related to modifications of equity awards for employees impacted by the reduction in workforce, subject to local law and consultation requirements, which could extend the process into the first quarter of 2023. The Company's estimate of the stock-based compensation charge and the corresponding payroll tax expense related to equity compensation for employees is subject to several assumptions, including the future price of the Company's stock at the time of the award modifications. The charges the Company expects to incur are subject to assumptions, and actual charges may differ from the estimate disclosed above. The Company will file an amended report on Form 8-K if amounts differ materially from these estimates.
Pear greatly appreciates the contributions of the departing employees.
In the aggregate, over the next twelve months, the reduction in force is expected to result in approximately $10.7 million in cash operating expense savings related to foregone salaries and benefits. Each affected employee’s eligibility for severance benefits is contingent upon such employee’s execution of a separation agreement, which includes a general release of claims against the Company. The severance-related and non-cash charges that the Company expects to incur in connection with, or as a result of, the workforce reduction, are subject to a number of assumptions, and actual results may differ materially.
Cautionary Statement Regarding Forward-Looking Statements
The disclosure contained in this Current Report on Form 8-K contains certain forward-looking information about the Company that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are statements that are not historical facts. Words such as “expect(s),” “feel(s),” “believe(s),” “will,” “may,” “anticipate(s)” and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to, statements regarding the benefits of the proposed cost reductions including expected savings, the anticipated timing and details of the reduction in workforce, expected expenses, and costs associated with the reduction in workforce that the Company expects to incur in the fourth quarter of 2022. These statements are based on current expectations, estimates, and projections about the Company’s business based, in part, on assumptions made by management, and are subject to a number of risks and uncertainties. Factors that could cause actual results to differ materially from current expectations include possible changes in the expected costs and expenses associated with the reduction in workforce and risks associated with the Company’s ability to achieve the expected benefits of the reduction in workforce and realignment of its resources. Additionally, these forward-looking statements should be considered in conjunction with the cautionary statements and risk factors described in the Company’s Annual Report for the year ended December 31, 2021, as updated by the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, as amended, and its other filings with the SEC.