Item 2.05 Costs Associated with Exit or Disposal Activities.
On July 25, 2022, Pear Therapeutics, Inc. (the "Company") restructured its operations to narrow its near-term business focus and reduce its workforce due to the macroeconomic environment. The Company's restructuring includes external and internal cost reductions in almost all areas of the Company. The Company focused cost reductions on pipeline candidates, discovery programs, business development, and the Company's dual platform in order to prioritize certain of its commercial efforts. The reduction in workforce will decrease overall headcount by approximately 25 employees, which represents approximately 9% of full-time employees as of July 25, 2022. The reduction in workforce and cost reductions being implemented are expected to reduce operating expenses by approximately $28.0 million over the next 18 months and extend the Company's cash runway. All employees affected by the workforce reduction will be eligible to receive, among other things, severance payments based on the applicable employee’s level at the Company and the continuation of benefits for a specified time period post-termination. 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.
Pear greatly appreciates the contributions of the departing employees.
The Company expects to incur a one-time charge of approximately $0.9 million in the third quarter of 2022 related to the reduction in workforce, consisting primarily of one-time severance payments upon termination of the employees and continued benefits for a specific period of time with related cash payments expected to be substantially paid out by September 30, 2022. The Company expects such payments to be the only direct expense of the reduction in workforce. The Company does not expect to recognize a stock-based compensation expense for impacted employees related to vested awards and does not anticipate modifying the affected employees’ stock awards in a manner that would result in additional expenses. 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, 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 third 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 March 31, 2022, as amended, and its other filings with the SEC.